Question No.

-1
Illustrate the strategic management model (SMP). Explain the levels in SMP.

Answer
Strategic Management ModelThe strategic management process consist of four stages-

1. Defining organisational mission

2. Formulation of strategy
3. Implementation of strategy
4. Strategy evaluation and control

The strategic management process may best be illustrated in the form of a

model. We can call this strategic management model. Relationship among the
major components of the strategic management process is shown in the model.
Generally, application of SMP is more formal and model driven in large, well
structured organisations with many divisions, products, markets, different
priorities for investment, etc. Smaller businesses or companies tend to be less
formal. In other words, formality in SMP refers to the extent to which participants
in SMP, Their responsibilities, authority and roles/duties are clearly specified. Also

in practice, strategies may not always follow the strategic management model as
rigid steps or chains in the management process.
Levels in Strategic Management ModelHere are the following three levels of the strategic management levels as
follows1. Corporate Level
2. Strategic Business Unit (SBU) level
3. Functional level
Corporate level strategy sets the long term objectives of an organisations and
broad policies and controls within which a Strategic Business Unit (SBU)
operates. The corporate level strategies also help and SBU to define its scope of
operations and also limit or enhance SBUs operations through resources the
corporate management allocates for securing competitive advantage. Functional
level strategies follow from, and also support, SBU-level strategies. Strategies at
the functional level are often describes as tactical. Such strategies are guided
and controlled by overall SBU strategies. Functional strategies are more
concerned with implementation of corporate and SBU level strategies rather than
formulation of strategies. Strategic management process at three levels also
involves decision making. But, the types of decision making, their scope and
impact are different at different levels. The characteristics of decision making at
three levels may be more clearly understood in terms of major dimensions of
decision making.
A distinction can be made between functional level or functional area strategies
and operating strategies. Functional area strategies involves approaches, actions
and practices to be undertaken for managing particular functions or business
processes or key activities within a business marketing strategy. Operating
strategies in comparison are relatively narrow strategies for managing different
operating units (plants etc.) and specific operating activities of specific
significance. Operating strategies provide more specific details about functional
area strategies and render completeness to functional level strategies and also
to overall corporate strategy.
Hindustan Unilever (HUL) is a multi SBU fast moving consumer goods (FMCG)
company. It markets about 100 products/brands. It has grouped its big range of
products into three categories: home and personal care, foods and beverages
and, industrial and agricultural. In addition to domestic marketing, it is also
engaged in export which is a separate SBU. Like most organisations, strategies at
HUL also operate at three levels: corporate, SBU and functional. The strategic
management process in HUL is shown below as a model structure.

B
C
o
u
r
s
i
p
o
n
r
e
a
s
t
s
e
L
e
L
e
v
v
e
e
l
l
(
S
B
U
)

Question No.-2
Business needs to be planned not only for today but also for future this implies
the continuity and need for sustainability Enumerate.

Answer
Business need to be planned not only for today, but also for tomorrow, that is, for
future. This implies business continuity and the need for sustainability.
Sustainability requires understanding and analysing the environment. Besides
business fluctuations or business cycles, business interruptions occur business of
natural disaster like floods, earthquakes, cyclones, etc. To safeguard against such
threats or disasters, planning for business continuity is essential.
Business Continuity PlanningIt means proactively working out a means or method of preventing or mitigating
the consequences of a disaster-natural or manmade-and managing it to limit to
the level or degree that a business unit can afford.
Need or Importance of Business Continuity Planning (BCP)Business Continuity Planning (BCP) prepares companies to prevent or respond to
such situations so that the damage or looses are minimised and the business or
company survives. Thus, BCP plays a critical role in a business- its survival and
sustainability.
Business Impact AnalysisIt is the process of identifying major functions in an organisation which have
impacts of different degrees on the business of the organisation. The analysis is
usually done for each major function to determine its criticality for the business.
Strategies for Business Continuity PlanningBusiness of the possibility of different kinds of impacts, and depending on the
nature of damage or disaster, appropriate strategies should be developed and

used to deal with particular situations. Five different strategies should be

developed for five different situations. These ares-

Prevention- Conventionally it is the best strategy; this means taking steps or

actions to prevent or minimise the chances of occurring of a disaster.
Companies can adopt many preventive control measures as safeguards.

Response- Prevention is a pre emptive measure; response is a reactive step.

If prevention is not possible, fast response is the next best alternative
strategy. After an interruption or damage has taken place, the BCP team
should immediately inform the management and the damage assessment
team. Two other teams would also be involved: the technical team and the
operations team. The technical team is the key decision maker for further
actions of the BCP and the operations team executes the actual damage
control operations of BCP.

Resumption- In this the strategy is for resumption of normal or pre damage

activities of the organisation. Activities now shift to the command centre. The
command centre is different from the location of the normal business activity.
Both resumption and recovery actions are planned and coordinated from the
command centre. The centre should have required, communication facilities,
systems and equipments for effective functioning of the BCP/ Technical team.

Recovery- Along with the resumption of critical operations either at the

original site or an alternative location, the recovery process also begins.
Recovery essentiality means reinstallation of the operating and control
system. Naturally critical operations are restored. As this happens,
information restoration from back-up tapes or offsite storage also begins. As
soon as information/ data restoration is complete, critical business functions
can resume.

Restoration- Restoration means restoration of the original site for normal

functioning. The restoration process is initiated simultaneously with the
recovery work. Infect recovery and restoration teams are often common.

Developing a Business Continuity Plan and ImplementationPlans and strategies work together. A plan is also essential for implementation of
a strategy. A separate plan can be made for each of the five strategies. i.e.
prevention, response, resumption, recovery and restoration or an integrated plan
can be prepared incorporating or dealing with all the strategies. In either case
plan would have four important aspects or elements. These are:

Objectives: What exactly is to be done?

Assumptions: These indicate availability of back up services, trained
team to handle operations vendors, etc.
Team: The BCP team entrusted with the project Their sub teams roles
and responsibilities should be specified.

Scope and Limitations: The role of the BCP team should be clearly
defined. Any limitation in their functioning, including resources, are to
be mentioned.

ImplementationImplementation of business continuity plans are mostly technology driven.

Implementation involves development and testing of IT system or solution. The
software and hardware elements are built into the system. Implementations of
the mechanical and physical process of restoration/recovery also take place
simultaneously. Infect technology and other systems have to be harmonised for
the proper implementation of a business continuity plan. During continuity
planning and implementation care should also be takes to ensure that the
organisations business process does not come into a complete halt when there
is a disruption of the process flow. This is ensured through planning or building
redundancy. i.e. incorporating back up service elements which may be redundant
during normal course of business.
An example will make this clear. A bank may be selling fixed deposits to its
account holders or customers through net banking. But the bank can also keep
phone banking facility ready as a standby so that this can be availed of by the
customers if net services break down. There can also be emergency phone
numbers which consumers can use in case of failure of normal communication
services.

Question No.-3
Explain the following(a) Core competence
(b) Value chain analysis

Answer
(a) Core Competence
Core competence of the company is one of its spatial or unique internal
competence. Core competence is not just a single strength or skill or capability of
a company. It is interwoven resources, technology and skill. Core competence
gives a company a clear competitive advantage over its competitors. Sony has
core competence in miniaturization, Xerox core competence is in photocopying.
To achieve core competence, a particular competence level of a company should
satisfy three criteria:

It should relate to an activity or process that inherently underlies the

value in the product or service as perceived by the customer. This is
important because managers often take an internal view of the value
and either miss or deliberately overlook the customer perspective.
It should lead to a level of a performance in a product or process which
is significantly better than those of competitors. Benchmarking is a
good way and is generally recommended for undertaking performance

standard and also for differentiating between good and bad

performance.
It should be robust i.e. difficult for competitors to imitate. In a fast
changing world many advantages gained in different ways (like a
superior product feature, a new benchmarking campaign or an
innovative price policy/strategy) are not robust and are likely to be
short lived. Core competence is not about such incremental changes or
improvements, but about the whole process through which continuous
change and improvement take place which lead to or sustain clearly
differentiated advantage.

(b)Value Chain AnalysisVarious competences and resources of an organisation can be integrated into a
chain of activities which an organisation performs to meet customer demand.
Since of these activities is expected to create value when it is performed, the
chain can appropriable be called a value chain. Michael porter introduced the
concept of value chain analysis. Now it has become common for professional
companies to do this analysis.
Value chain analysis helps in understanding how value is created in organizations
through various activities. These activities can be divided into two broad
categories: primary activities and secondary activities. Primary activities are
directly concerned with the creation or delivery of a product or service or
customer value. Support activities, as the name indicates, support the primary
activities, or, more, correctly, help to improve the effectiveness of efficiency of
primary activities.
Primary activities can be divided into five major areas as follows

Inbound logistics- These are activities concerned with the receiving,

storing and disturbing raw materials and inputs to the production or
service division.
Operations- These are activities involved in transforming various inputs
into final product or service.
Outbound Logistics- These include collecting, storing and distributing or
delivering final products to customers.
Marketing and Sales- These comprise activities such as advertising,
sales, promotion, selling, sales force management, pricing, channel
section, channel management etc.
Service- These include activities which maintain or enhance value of a
product or service such as installation, repair, training, supply of spares
and prompts after sales service, etc.

Support services can be divided into four categories as follows

Procurement- This relates to the processes for acquiring or purchasing

various resource inputs like raw materials, intermediate inputs, equipment
machinery, etc. Procurement primarily supports inbound logistics and
operations.

Technology Development- Technology is involved in all value creation

key technologies are concerned directly with the product or with
processes. Technology development is fundamental to the innovative
capacity of an organisation. Technology mainly supports operations.
Human Resource management- This provides supports to all primary
activities in the values chain. More specifically, HRM is concerned with
training, managing, recruiting and developing people within the
organisation.
Infrastructure- This is the organisational system including finance, MIS,
general management, strategic planning, etc. Infrastructure also
comprises organizational structures, values and culture. Infrastructure,
directly or indirectly, supports all primary activities.

Competences or activities in the value chain can contribute to customer value in

two ways. First in competences in individual activities. Second is the competence
in linking activities together. This includes the ability to integrate all the separate
activities to deliver some customer value, and, thereby ensure that they do not
contribute to conflicting goals. An organization may have core competence in
manufacturing processes that produce engineering products of unique
specifications very difficult for competitors to match or imitate. But, the company
may not be able to gain competitive advantage from this unless it is able to take
care of its inbound logistics, outbound logistics and marketing and sales. It is the
combined effect of all these activities which creates or destroys value.
Organizations can effectively use value chain analysis to identify the weak links
in the chain for further analysis, review and necessary action. In using the value
chain, an organization should concentrate on two aspects. First, it should
ascertain how different activities, both primary and support, are being performed
so that contribution of each activity to organizational objectives or goals can be
measured. If a particular activity is not contributing satisfactorily, required
changes can be made in that. This is the job of strategic management. The
second aspect is the coordination or integration of various activities into a
cohesive value chain.

Question No.-4
Write a brief note on turnaround strategy.

Answer
Turnaround StrategyCorporate turnaround may be defined as organizational recovery from business
decline or crisis. Business decline for a company means continues fall in turnover
or revenue, eroding profit, or accrual or accumulation of losses. So business or
organisational decline, like business performance, is understood in relative terms
that are compared with the past. But some strategy analysis describe business
decline in terms of current comparisons also.
Turnaround strategies are usually required for crisis situations. If organisational
decline is not continuous or severe, corporate restructuring can provide the
solutions. That is why turnaround strategy may be said to be an extension of

restructuring strategy. When restructuring is very comprehensive and leads to

corporate recovery, it almost becomes a turnaround strategy.
Corporate or business decline manifests itself in many forms or symptoms,
including profitability. These symptoms are actually different performance criteria
of companies. Major systems or criteria or situations which signals towards the
need for a turnaround strategy are:

Steadily declining market share

Continuous negative cash flow
Negative profit or accumulating losses
Accumulation of debt
Falling share price in a steady market
Mismanagement or low moral

With some or all these symptoms becoming clearly visible for a company, a
turnaround strategy or recovery becomes highly imperative. But the situation
should be carefully reviewed to assess the extent or recovery possible before
undertaking any such program. Given a strategy, in some situations, recovery
may be more or less successful than others. Slatter contends that there are four
situations in terms of feasibility or success. These situations are

Realistically non recoverable situation- It is one in which chances of

survival are very little, because the company is not competitive, the
potential for improvement is low, clear cost disadvantages exists and
demand for the companys product is in decline stage. In such situations
divestment may be a better option.

Temporary Recovery- This situation exists when there can be initial

successful recovery but sustained turnaround is not possible. This can
happen because repositioning of the product is not possible.

Sustained survival situation- It means that recovery is possible but

potential for future growth does not exist. This may happen primarily
because the industry is in a declining phase.

Sustain recovery situation- It is the situation in which successful

turnaround is possible for sustained growth. In such cases business decline
might have been caused by internal organizational factors or external or
environmental conditions which the company is able to deal with
effectively. Inherently the company is strong in terms of competence.

Surgical Turnaround and Non-surgical TurnaroundGenerally these are the two methods for corporate turnaround. The surgical
method more commonly practiced in the west, involves sweeping changes like
firing of staff, managers, wholesales reshuffling of portfolios closing down
operations etc. Some call it bloodbath. Non surgical turnaround adopts the
opposite approach, that is peaceful means revamping of recovery through
meetings, discussions etc.

The operations in surgical turnaround are like this, the first step is to replace
chief executive of the ailing company by a new iron chief. The new chief promptly
gets into action; he asserts his authority. He issue pre-emptory orders,
centralises functions and spears some convenient scapegoats. Then he goes
about firing employees en masse and auctioning/ selling whole plants and
divisions until the fat is satisfactorily cut to the bone. The bloodbath over the
product mix is revamped, obsolete machinery is replaced, marketing is
strengthened, controls are toughened, and accountability for performance is
focused and so on.
Turnaround management of the humane type may involve negotiated and
humane layoffs and divestiture but not a bloodbath. This type of turnaround also
is generally brought about by the new helmsman. But he spends a great deal of
time in trying to understand organisational problems and deliberating on them.
He takes all the stakeholders including unions into confidence; forms group
within the organisation to brainstorm together on what needs to be done to get
over the crises; tries to create a new work culture; and generally infuses a strong
sense of participation among the employees and many critical decisions become
participative decisions. There are many examples of successful turnarounds of
the humane type including Enfield, Volkswagen, Lucas, Air India, SPIC, BHEL and
SAIL.

Question No.-5
What is stability strategy?
Explain the BCG (Boston Consulting Group) portfolio model.

Answer
(a) Stability StrategyStability strategy is the most commonly used by the organizations. But the
nomenclature stability strategy often creates confusion, among managers,
planners and strategies. Stability does not mean static. Most organizations which
follow the strategy look for growth and do not remain stable or static for a long
period of time. Therefore some prefer to call it stable growth strategy. The basic
approach In stability is to remain present course; steady as it goes. Stability
strategy can be defined as
In an effective stability strategy, companies will concentrate their resources
where the company presently has or can rapidly develop a meaningful
competitive advantage in the narrowest possible product market scope
consistent with the firms resources and market requirements.
As the definition indicates, stability strategy implies that an organisation will
continue in the same or similar business as it currently pursues with the same or
similar objectives and resource base. Three distinctive features of a stability
strategy are:

No major changes take place in the product, market, service or functions

Focus is on developing and maintaining competitive advantage consistent
with present resources and market requirements.

The strategy thrust is not only on maintenance of the present level of

performance, but also on ensuring that the rate of improvement achieved in
the past is sustained

In following strategy strategies, companies pursue same objectives which are

consistent overall corporate stability. Companies generally have one or more of
the four objectives in view:

Incremental Growth- Small incremental growth in sales or market share,

sometimes to offset the inflation, is quite consistent with general corporate
stability. This is different from quantum or discontinuous growth targeted in
expansion strategies.
Profitability- The purpose is to sustain portability if it is tending to drift. The
objective is to achieve stability, if not increase in profit.
Sustainability in growth- Past growth in sales or revenue should be
maintained so that the company does not become static.
Pause or caution- Stability in a phase of caution or consolidation before an
organisation embarks on expansion strategies. This can be also be a period of
pause or rest after a blistering pace of extension.

Organisations follow stability strategies because they neither go for any major
internal changes or restricting nor embark upon any ambitious expansion
strategies. But, stability or sustenance also is neither simple nor to be taken for
granted. It is often said, and correctly too, that if an organization aims to growth,
it may be least achieved stability, but, if it aims at stability, it is most likely to slip
into deceleration. Companies have therefore to regularly review there
competence level, resource level, customer structure or cost management
levels, react or respond timely to market developments.
(b)BCG (Boston Consulting Group) portfolio modelBCG (Boston Consulting Group) portfolio model is a growth market share matrix,
depicting a companys competiveness in terms of market growth rate and its
relative market share. This model is also knows as portfolio matrix because on
the basis of BCG matrix a company can determine its optimal product portfolio
on the basis of cash flow or profitability analysis of each of its products or
product groups in terms of two dimensions i.e. market growth and market share.
The BCG model based on the assumption that relative market share is a good
indicator of profitability of a product or product group.
The BCG model was originally conceived and developed in the early 1970s for
analysis of performance or cash flow generation of strategic business unit of a
company. A strategic business unit is a division or a product/product group unit
which operates as a separate profit centre that has its own set of market and
competitors and its own business strategies. The company or the corporate unit
consist of related businesses and/or product group into SBUs which are
homogeneous enough to manage and controls most factors which affect their
performance. Resources are allocated to the SBUs in relation to their contribution
to the corporate objectives, growth and profitability.

The original BCG formulation has used cash use for growth rate cash
generation for market share. Four performance situation of the product groups
of SBUs were identified as four quadrants in the matrix as follows

Stars- Stars are high market share products or SBUs operating in high growth
markets. The model predicts that stars will have very strong need to support
their growth. But, because they are in a strong competitive position they are
in fact the highest share competitors- it is assumed that they will produce
high margin and generate large amounts of cash. Therefore they will be both
users and generators of large cash flows. On balance they should generally
be self supporting with respect to their cash needs.

Cash Flows- Cash flows are high share products or SBUs operating in a low
growth market. Because of their market position their cash generation should
be high but because the market is assumed to be mature their cash
investment needs to be small. And these products and businesses should be a
source of substantial amounts of cash which can be channelled to other areas
or businesses.

Question marks/problems children- These are the low share businesses in

high growth markets. They are assumed to have cash needs because they
need to finance growth. But they generate little cash. If a question
marks/problem childs market share cannot be changed, it will continue to
absorb cash. If however market share can be adequately improved, a
question mark/problem child can be converted into a star. Usually such a
strategy will require heavy investment in the short run. Improved position
should enable it to generate cash, become a star and ultimately a cash cow.

Dogs- Dogs are low share businesses in low growth markets. Because of their
low share, it is assumed that their progress is low and therefore their profits
will also to be low. Since growth is low, expansion of share is assumed to be
very costly. Dogs are cash users and probably even cash traps products or
businesses that perpetually absorb cash.

Question No.-6
Define the term Strategic alliance
Enumerate its characteristics and objectives.

Answer
Strategic AllianceStrategic alliance may be defined as cooperation between two or more
organisations with a common objective, shared control and contribution by the
partners for mutual benefits. This definition may be expanded and made more
comprehensive in term of essential features or characteristics of strategic
alliance.
Characteristics of Strategic Alliance-

Two or more organisations join together to pursue a defined objective or goal

during a specified period but remain organisationally independent entities.
The organisations pool their resources and investments and also share risks
for their mutual interest/benefit.
The alliance partners contribute on a continuing basis in one or more
strategic areas like technology, process, design etc.
The relationship among the partners is reciprocal with partners sharing
specific individual strengths or capabilities to render power to the alliance.
The partners jointly exercise control over the performance or progress of the
arrangement with regard to the defined goal or objective and share the
benefits or results collectively.

Objectives of strategic allianceThe basic objective behind all strategic alliance is to secure competitive or
strategic advantage in the market. All strategic alliances have long term
objective or purpose. Many companies realise that they do not possess adequate
resources financial and managerial to pursue an innovation, developed a new
product or technology. They look towards other organizations to supplement or
augment their resources or capabilities for the fulfilment of their objectives. It
can also be functional area where they have very little expertise. Different
authors have analysed the purpose or objectives or reasons of strategic alliance.
Six objectives or purposes are more commonly observed

Development of a new product- In the pharmaceutical industry, new

product development takes place on a continuous basis and in this many
strategic alliances are formed between pharmaceutical companies and
research laboratories and institutions for R&D. We have already given the
example of boeing and their Japanese partners.

Reducing Manufacturing Cost- Co production common in the

pharmaceutical industry is a good form of strategic alliance to reduce
manufacturing cost through economies of scale.

Development of a New Technology- Development of technology is a long

term process and also many times involves considerable cost. Collaboration
leverages the resources and technical expertise of two or more companies.

Entering new markets- This is often the objective in international business.

Many foreign companies enter into strategic alliance with some local
companies to enter into and establish themselves in that country.

Market and Sales- This is common in both national and international

business. Many manufacturers in India have marketing and sales
arrangements with companies like MMTC and Tata Exports for both domestic
and international marketing.

Distribution- In pharmaceutical and other industries where distribution

represents high fixed cost, potential competitors swap their products for
distribution in the respective markets where they have well established
distribution system. Many such alliances exists between the US and Japanese
pharmaceutical companies.

Strategic alliances are non equity based i.e. none of parties invest any equity
capitals in such alliances. But funding in not involved and funding can be by one
of the parties or all of them. The nature of funding depends on the type of
strategic alliances, i.e. whether new product development, technology
development and transfer, marketing or sales etc and also the parties involved.
For examples if research laboratories or institutes are involved most of the
funding is done by the corporate concerned.