Q.1 Define the term strategic Management. Explain the importance of strategic management.

Strategic Management Strategic management is a systematic approach of analysing, planning and implementing the strategy in an organization to ensure a continued success. Strategic management is a long term procedure which helps the organization in achieving a long term goal and its overall responsibility lies with the general management team. It focuses on building a solid foundation that will be subsequently achieved by the combined efforts of each and every employee of the organization. Importance of strategic management A rapidly changing environment in organizations requires a greater awareness of changes and their impact on the organization. Hence strategic management plays an important role in an organization. Strategic management helps in building a stable organization. Strategic management controls the crises that are aroused due to rapid change in an organization. Strategic management considers the opportunities and threats as the strengths and weakness of the organization in the crucial environment for survival in a competitive market. Strategic management helps the top level management to examine the relevant factors before deciding their course of action that needs to implement in changing environment and thus aids them to better cope with uncertain situations. Changes rapidly happen in large organizations. Hence strategic management becomes necessary to develop appropriate responses to anticipate changes. The implementation of clear strategy enhances corporate harmony in the organization. The employees will be able to analyse the organizations ethics and rules and can tailor their contribution accordingly. Systematically formulated business activities helps in providing consistent financial performance in the organization. A well designed global strategy helps the organization to gain competitive advantages. It increases the economies of scale in the global market, exploits other countries resources, broadens learning opportunities, and provides reputation and brand identification.

Q2. Describe Porters five forces model. A vital task of a strategist is to anticipate and/or recognize the nature of competition and potential threat from competitors and to develop appropriate response strategies. The most difficult task in this is to properly assess the magnitude of existing competition and correctly foresee the threat from new and emerging competitors. Porter (1980) in his pioneering work on competitive strategy had identified five major types of competitive threats (Figure 11.5), which are valid even today. These are: Figure Threat of New entrants New Entrants Industry competitors Intensity of Rivalry

Bargaining Suppliers Power of Suppliers

Bargaining power of buyers Buyers

Substitutes

Threat of Substitutes

Source: M E Porter, Competitive Strategy: Techniques for Analysing Industries and Competitors (New York: The Free Press, 1980).
1. Industry (existing) competitors 2. Threat of substitutes 3. Bargaining power of buyers 4. Bargaining power of suppliers 5. Threat of new entrants

Industry competitors: Various degrees or intensities of competitive rivalry exist in the market for a
product. This is the battle for market share and is the most immediate concern of a company, particularly if it is a market leader or challenger. Ongoing battles between Coca-Cola and Pepsi, Surf and Ariel, Colgate and Peps dent are good examples. Competitive intensity or rivalry depends, to a large extent, on the stage of the product life cycle. Competition is practically non-existent at the introduction stage, then starts growing steadily and becomes significant till the product enters the decline stage.

Threat of substitutes: Substitute products reduce demand for a particular product or a category of
products because some customers switch over to the alternatives. Substitution depends on whether an alternative product offers higher perceived value to the customers. Substitution may take three different forms: product-for-product substitution, substitution of need and generic substitution, Product-for-product substitution or substitution for the same use are same; for example, e-mail substituting for postal service or mobile phones substituting for landlines. Substitution of need means that a new product or service makes an existing product or service redundant. For example, IT has provided e-Commerce as a tool which has generally made secretarial services or printing redundant to a large extent. Generic substitution takes place when different products or services compete for a share in the same family income or household income: for example, air conditioner manufacturers competing with color televisions or music systems or home theatres for snatching a share in fixed household income.

Bargaining power of buyers: Buyers are generally in a better bargaining position. But, they can become
stronger bargainers or create competition among suppliers under certain specific conditions. Some of these conditions are: i. the buyer purchases a very significant proportion of total output of the supplier can happen typically in industrial products; ii. The industry consists of a large number of small operators so that buyers can easily create competition among them; iii. Cost of switching a supplier is low, i.e., substitutes are available or there is no product differentiation, or, for industrial or service products, there is no long-term contract; IV. Backward integration into suppliers producta truck or car manufacturer beginning to make components or accessories likes Tata Motors or an air conditioner manufacturer also making compressors like Carrier Aircon or a color TV manufacturer also making picture tubes like Sony.

Bargaining power of suppliers: Suppliers, or sellers, generally in a weak bargaining position, can be strong bargainers under certain conditions. Such market conditions are: i. no close substitutes available for the product offered by the supplier; ii. The product(s) sold by the supplier(s) is an important or critical input

in the buyers product; for example, ICs and chips in electronic Products which can be bought only from few or selected suppliers; iii. High switching cost of changing a supplier may be because the supplier manufactures a special product or the product is clearly differentiated; iv. Forward integration into buyers product; for example, a carbon black producer entering into tyre manufacturing and competing with tyre manufacturers or TVS (earlier Lucas-TVS), traditionally a component or accessories maker, enters into production of motor cycles (TVS-Suzuki).

Threat of new entrants: Many times, new entrants pose a major threat to the existing market players.
Examples of entry of Toyota and Honda in the US car market (and also in the global market), Maruti Suzukis entry into the Indian car market, Vimal fabrics in the Indian textile market and Titan in the Indian watch market are well known. In fact, most of the established products and brands in consumer and industrial markets today were new entrants at some point of time. Forecasting the emergence of new entrants is very important for existing competitors and it is also one of the most difficult jobs. But, companies which fail to foresee the new entrants or ignore them may even face disastrous results. We have the examples of Padmini (earlier Fiat) cars, HMT watches, Weston TV, etc. Q3. Define the term Business policy. Explain its importance. Business Policy Business policies are the instructions laid by an organization to manage its activities. It identifies the range within which the subordinates can take decisions in an organization. It authorizes the lower level management to resolve their issues and take decisions without consulting the top level management repeatedly. The limits within which the decisions are made are well defined. Business policy involves the acquirement of resources through which the organizational goals can be achieved. Business policy analyses roles and responsibilities of top level management and the decisions affecting the organization in the long run. It also deals with major issues that affect the success of the organization. Importance of Business Policy A company operates consistently, both internally and externally when the policies are established. Business policies should be set up before hiring the first employee in the organization. It deals with the constraints of real life business. It is important to formulate policies to achieve the organizational objectives. The policies are articulated by the management. Policies serve as a guidance to administer activities that are repetitive in nature. It channels the thinking and action in decision making. It is a mechanism adopted by the top management to ensure that the activities are performed in the desired way. The complete process of management is organized by business policies. Business policies are important due to the following reasons: Coordination- Reliable policies coordinate the purpose by focusing on organizational activities. This helps in ensuring uniformity of action throughout the organization. Policies encourage cooperation and promote initiative. Quick decisions- policies help subordinates to take prompt action and quick decisions. They demarcate the section within which decisions are to be taken. They help subordinates to take decisions with confidence without consulting their superiors every time. Every policy is a guide to

activities that should be followed in a particular situation. It saves time by predicting frequent problems and providing ways to solve them. Effective control- policies provide logical basis for assessing performance. They ensure that the activities are synchronized with the objectives of the organization. It prevents divergence from the planned course of action. The management tends to deviate from the objective if policies are not defined precisely. This affects the overall efficiency of the organization. Policies are derived objectives and provide the outline for procedures. Decentralization- well defined policies help in decentralization as the executive roles and responsibility are clearly identified. Authority is delegated to the executives who refer the policies to work efficiently. The required managerial procedures can be derived from the given policies. Policies provide guidelines to the executives to help them in determining the suitable actions which are within the limits of the stated policies. Policies contribute in building coordination in larger organizations.

Q4. What, in brief, are the types of strategic Alliances and the purpose of each? Supplement your answer with real life examples. Strategic alliance is the process of mutual agreement between the organizations to achieve objectives of common interest. They are obtained by the co-operation between the companies. Strategic alliance involves the individual organizations to modify its basic business activities and join in agreement with similar organizations to reduce duplication of manufacturing products and improve performance. Types of strategic alliance Joint Venture: - joint venture is the most powerful business concept that has the ability to pool two or more organizations in one project to achieve a common goal. In a joint venture, both the organizations invest on the resource like money, time and skills to achieve the objectives. Example:- the chine wireless Technologies, mobile handset maker is getting into an agreement with the Reliance Communications Ltd(RCOm) to launch its new mobile. Mergers and acquisitions Merger is the process of combining two or more organizations 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 organizations. Example: - Transocean and Global Santafe, the top oil drilling companies, merged to consolidate their position in a fast growing market. Acquisition is the process of purchasing an organization by another organization, either through the purchase of its shares or assets. Massive growth can only be achieved in less time by buying other organizations. Example: - Google acquired postini to introduce service of message security, archiving, encryption, and policy environment. Collaborations and Co-branding:- Collaborations is the process of cooperative agreement of two or more organizations which may or may not have previous relationship of working together to achieve common goal. Example: - the sportswear giant Nike formed co-branding agreements with Philips consumer electronic products.

Technological Partnering: - it is the process of associating the technologies of two different companies to achieve a common goal. The two organizations work as co-owners in business and share the profit and losses. Example: - The Software giant, Infosys Technologies Ltd. Has entered into partnership with US based NVIDIA, GPU inventor and the worlds visual technologies giant. Contractual agreements: - it is the process of agreement with specific terms between two or more organizations which guarantee in performing a specific task in return for a valuable benefit. Outsourcing: - it is the process of entering into a contract with an organizations or a person to perform a particular function. Most of the organizations outsource the work in numerous ways. The function being outsourced is considered as noncore to the organizations. Example:-Tatvasoft is an Indian outsourcing company that offers software development services to its clients in United States, Canada and Australia. Other Methods:Affiliate marketing: - it is the process of revenue sharing between the website owner and the online merchant. Technology Licensing: it is the contractual agreements where trademarks intellectual property and trade secrets are licensed to an external organization. Product Licensing: - this is similar to Technology Licensing Franchising: - it is a quick process of achieving a successful objective nationwide. Sharing R &D :- the organizations set up strategic alliances to venture into research field. Distributors:- most of the organizations market their products by outsourcing it to various companies. Q5. Explain the concept, need for and importance of a Decision support system. Following are the three components of a Decision Support System 1. Annual Budget: It is really a business plan. The budget allocates amounts of money to every activity and/or department of the firm. As time passes, the actual expenditures are compared to the budget in a feedback loop. During the year, or at the end of the fiscal year, the firm generates its financial statements: the income statement, the balance sheet, the cash flow statement. When putting together, these four documents are the formal edifice of the firms financ es. However, they cannot serve as day-to-day guides to the General Manager. 2. Daily Financial Statements: The Manager should have access to continuously updated statements of income, cash flow, and a balance sheet. The most important statement is that of the cash flow. The manager should be able to know, at each and every stage, what his real cash situation is as opposed to the theoretical cash situation which includes accounts payable and account receivable in the form of expenses and income.

3. The Daily Ratios Report: This is the most important part of the decision support system. It enables the Manager to instantly analyze dozens of important aspects of the functioning of his company. It allows him to compare the behavior of these parameters to historical data and to simulate the future functioning of his company under different scenarios. It also allows him to compare the performance of his company to the performance of his competitors, other firms in his branch and to the overall performance of the industry that he is operating in.The Manager can review these financial and production ratios. Where there is a strong deviation from historical patterns, or where the ratios warn about problems in the future management intervention may be required. Examples of the Ratios to be Included in the Decision System deviation of actual profits from expected profits the return on the adjusted equity capital

the return on the assets

the profit margin on the sales asset turnover, how efficiently assets are used

io, quick ratio, interest coverage ratio and other liquidity and coverage ratios

others decision system has great impact on the profits of the company. It forces the management to rationalize the depreciation, inventory and inflation policies. It warns the management against impending crises and problems in the company. It specially helps in following areas: a. The management knows exactly how much credit it could take, for how long (for which maturities) and in which interest rate. It has been proven that without proper feedback, managers tend to take too much credit and burden the cash flow of their companies. b. A decision system allows for careful financial planning and tax planning. Profits group, non-cash outlays are controlled, tax liabilities are minimized and cash flows are maintained positive throughout. The decision system is an integral part of financial management in the West. It is completely compatible with western accounting methods and derives all the data that it needs from information extant in the company. So, the establishment of a decision system does not hinder the functioning of

the company in any way and does not interfere with the authority and functioning of the financial department, but in fact helps the manager to take quick decisions and make profit to the company. Q6. Write Short Notes on: Corporate Social responsibility Business Plan Corporate Social Responsibility As mentioned above, external stakeholders of an organization are too many and varied and many of them represent different sections or social groups. This implies that organizations should be socially responsible; that is, in addition to the interests of the shareholders, businesses or companies should also serve the society. This is corporate social responsibility (CSR). Corporate social responsibility can be defined as the alignment of business operations with social values. The conflict between internal and external stakeholders can go much further than mentioned so far. Some feel that this is the most problematic issue in deciding company responsibility. External stakeholders argue that internal stakeholders demand be made secondary to the greater need of the society; that is, greater good of the external stakeholders. Many of them feel that issues like pollution, waste disposals, environmental safety and conservation of natural resources should be the overriding considerations for formulation of policy and strategic decision making. Internal stakeholders, on the other hand, think that the competing or social claims of external stakeholders should be balanced in such a way that it protects the company mission, objectives and profitability. The debate continues. Strong exponents of CSR also talk of social policy for companies. They feel that social responsibilities of companies should be clearly enunciated and declared as social policy. Social policies may directly affect a companys products and services, technology, markets, customers and self -image. According to these thinkers, an organizations social policy should be integrated into all management activities including the mission statement and objectives. Many feel that corporate social policy should be articulated during strategy formulation, administered during strategy implementation and reaffirmed or changed during strategy evaluation. Business Plan A business plan is a detailed description of how an organization intends to produce market and sell a product or service. Whether the business is housing, commercial or some other enterprise, a good business plan describes to others and to your own board of directors, management and staff the details of how you intend to operate and expand your business. A solid business plan describes who you are, what you do, how you will do it, your capacity to do it, what financial resources are necessary to carry it out, and how you intend to secure those resources. A well-written plan will serve as a guide through the start-up phase of the business. It can also establish benchmarks to measure the performance of your business venture in comparison with expectations and industry standards. And most important, a good business plan will help to attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. A well-written plan will serve as a guide through the start-up phase of the business. It can also establish benchmarks to measure the performance of your business venture in comparison with expectations and industry standards. And most important, a good business plan will help to attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you

bring to the task. A good business plan will help attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. A good business plan serves the following purposes: 1. Revenue Generation Your organization may hope to create a business that will generate sufficient net income or profit to finance other programs, activities or services provided by your organization. 2. Employment Creation A new business venture may create job opportunities for community residents or the constituency served by your organization. 3. Neighborhood Development Strategy A new business venture might serve asan anchor to a deteriorating neighborhood commercial area, attract additional businesses to the area and fill a gap in existing retail services. 4. Establish Goals: Once you have identified goals for a new business venture, the next step in the business planning process is to identify and select the right business. Many organizations may find themselves starting at this point in the process. Business opportunities may have been dropped at your doorstep. 5. Local Market Study: Whether your goal is to revitalize or fill space in a neighborhood commercial district or to rehabilitate vacant housing stock, you should conduct a local market study. A good market study will measure the level of existing goods and services provided in the area, and assess the capacity of the area to support existing and additional commercial or home-ownership activity. A bad or insufficient market study could encourage your organization to pursue a business destined to fail, with potentially disastrous results for the organization as a whole. 6. Analysis of Local and Regional Industry Trends: Another method of investigating potential business opportunities is to research local and regional business and industry trends. You may be able to identify which business or industrial sectors are growing or declining in your city, metropolitan area or region. 7. Internal Capacity: The board, staff or membership of your organization may possess knowledge and skills in a particular business sector or industry. Your organization may wish to draw upon this internal expertise in selecting potential business opportunities. 8. Internal purchasing needs / Collaborative Procurement: Perhaps, the organization frequently purchases a particular service or product. If nearby affiliate organizations also use this service or product, this may present a business opportunity.

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