Frequently Asked Questions

Q.1 Explain the strategic management process.

Answer= The strategic management process encompasses three phases which together involve a
number of systematic steps. These three phases are as follows:-
Strategy formulation,

Implementation

Evaluation and control,

a. Strategy Formulation
Strategic formulation involves four important steps-determination of mission and objectives,
analysis of strengths and weaknesses of the firm and the environmental opportunities and threats
(SWOT), generation of alternative strategies and choosing the most appropriate strategy.
Determination of Mission and Objectives: Strategic is a means to achieve the objectives.
It is, therefore, quite obvious that determining the mission (which influences objectives)
and objectives is the first step in strategy formulation.

SWOT analysis: The strengths and weaknesses of the firm and opportunities and threats
(SWOT) in the environment will indicate the portfolio strategy and other strategies it
should pursue. An organisation should address questions such as what are the changes,
including possible future changes, in the environment which have implications for us and
how should we respond to them? What are the opportunities in the environment; which
can be exploited utilizing our strength? What are the threats and do we have the strength
to combat the threats? How can we mass up our strength? What are our weaknesses? Can
we overcome or minimize the weaknesses?

Strategic Alternatives: Given the mission and objectives and having analyzed the
strengths and weaknesses of the firm and the environmental opportunities and threats, the
strategists should proceed to generate possible alternative strategies. There may be
different strategic options for accomplishing a particular objective. For example, growth
in business may be achieved by increasing the share in existing markets or by entering
new markets, by horizontal integration or by a combination of these. There are, thus, a
number of strategic options. It is necessary to consider all possible alternatives to make
the base for wider choice.

Evaluation and choice: The purpose of considering different strategic options is to adopt
the most appropriate strategy. This necessitate the evaluation of the strategic alternatives
with reference to certain criteria. Criteria such as suitability, feasibility and acceptability
are commonly employed to evaluate the strategic options.
 b. Implementation

Operationalizing the strategy requires transcending the various components of the strategy to
different levels; mobilization and allocation of resources; structuring authority, responsibility,
tasks and information flows; and establishing policies. In a multi-SBU enterprise, Strategies for
the SBUs, based on the corporate strategy, will also have to be formulated. Implementation of
strategy involves a number of administrative and operational decisions.
c. Evaluation and Control

Evaluation and Control is the last phase of the strategic management process. The objective is to
examine whether the strategy as implemented is meeting its objectives and if not take corrective
measures. Continuous monitoring of the environment and Implementation of the strategy is
essential. Strategic management is a continuous process, the evaluation providing the feedback
for modifications.
Q.2 What is the role of manager or strategist in strategic management?.
Answer=Strategy is defined as "a long term approach, based on a shared vision, to achieve
improved outcomes for Business and society, children, young people and families in one or more
geographical or operational areas. Strategy is not static but evolves in response to changing
needs." A Strategist is the one who is skilled in strategy.
The roles of the manager or strategist in strategic management are:
a. Interpersonal Role

The important Interpersonal roles of strategists are:

Figurehead Role: Managers perform the duties of a ceremonial nature as head of the
organisation or strategic business unit or department.

Leader Role: The manager, as in charge of the organisation/department, coordinates the

work of others and leads his subordinates.

Liaison Role: As the leader of the organisation or unit, the manager has to perform the
functions of motivation, communication, encouraging team spirit and the like.

b. Informational Role

The information roles of a manager include:

(i) Monitor Role: As a result of the network of contacts, the manager gets the information by
scanning his environment, subordinates, peers, and superiors.
(ii) Disseminator Role: Manager disseminates the information, he collects from different sources
and through various means. He passes some of the privileged Information directly to his
subordinates, who otherwise have no access to it.
(iii) Spokesman Role: The manager has to keep them Informed about the developments in his unit.
The manager has to keep his superior informed every development in his unit, who in turn inform the
Insiders and outsiders.
c. Decisional Roles

The decisional roles of the manager are:

(i) Entrepreneurial Role: As an entrepreneur, the manager is a creator and innovator. He seeks to
improve his department, adapt to the changing environmental factors.
(ii) Disturbance Handler Role: Entrepreneurial role describes the manager as the voluntary
initiator of change, the disturbance handler role presents the manager as the involuntarily
responding to pressures.
(iii) Resource Allocator Role: The most important resource that a manager allocates to his
subordinates is his time. The manager should have an open-door policy and allow the
subordinates to express their opinions and share their experiences.
(iv) Negotiator Role: Managers spend considerable time in the task of negotiations. He
negotiates with the subordinates for improved commitment and loyalty, with the peers for
cooperation, coordination and integrations, with workers and their unions regarding conditions of
employment, commitment, productivity, with the government about providing facilities for
business expansion etc.

Q. 3 "Many situational considerations enter into crafting strategy"-Elaborate or Explain

relationship between company strategy and its business model.
Answer=Many situational considerations enter into crafting strategy. The interplay of different
factors and the influence that each has on the strategy making process vary from situation to
situation. Very few strategic choices are made in the same context. Even within the same
industry, situational factors differ enough from company to company that the strategies of rivals
turn out to be quite distinguishable from one another rather than imitative. Hence, carefully
sizing up all the situational factors both internal and external, is the starting point in strategy
crafting.
I. Societal, Political Regulatory and Citizenship considerations: All organisations operate
within the broader community of society. What an enterprise can and cannot do strategy wise is
always constrained by what is legal, by what complies with government policies and regulatory
requirements, by what is considered ethical, and by what is in accord with societal expectations
and standards of good community citizenship. There are pressures from outside sources- special-
interest groups, the glare of investigative reporting, fear of unwanted political action, and the
stigma of negative opinion. Societal concerns over drug abuse, pollution, alcohol and smoking,
health and nutrition and the impact of plant closings on local communities have caused many
companies to revise certain aspects of their strategy.
II. Competitive conditions and overall Industry Attractiveness: A company's strategy has to
be tailored to the nature and mix of competitive factors in play-price, product quality,
performance features, service, warranties, and so on. When competitive conditions intensify
significantly, a company must respond with strategic actions to protect its position. Competitive
weakness on the part of one or more rivals presents opportunities for a strategic offensive.
Furthermore, fresh moves on the part of rival companies, changes in the industry's price-cost-
profit economics, shifting buyer needs and expectations, and new technological developments
often alter the requirements for competitive success and mandate reconsideration of strategy. The
industry environment, as it exists now and is expected to exist later, thus has a direct bearing on a
company's best competitive strategy option and where it should concentrate its efforts. A
company's strategy can't produce real market success unless it fits the industry and competitive
situation.
III. The Company's Market Opportunities and External Threats: The particular business
opportunities open to a company and the threatening external development that it faces are key
influences on strategy. Both point to the need for strategic action. A company's strategy needs to
be deliberately aimed at capturing its best growth opportunities, especially the ones that hold the
promise for building sustainable competitive advantage and enhancing profitability. Likewise,
strategy should provide a defense against external threats to the company's well being and future
performance.
IV. Company Resource Strengths, Competencies and Competitive Capabilities: One of the
most pivotal strategy-shaping internal considerations is whether a company has or can acquire
the resources, competencies and capabilities needed to execute a strategy proficiently. These are
the factors that can enable an enterprise to capitalize on a particular opportunity, give the firm a
competitive edge in the market -place, and become a cornerstone of the enterprise's strategy. The
best path to competitive advantage is found where a firm has competitively valuable resources
and competencies, where rivals do not have matching or offsetting resources and competencies,
and where rivals can't develop comparable capabilities except at high cost or over an extended
period of time.
V. The Personal Ambitions, Business Philosophies and Ethical Beliefs of Managers:
Manager's choice of strategy are typically influenced by their own vision of how to compete and
how to position the enterprise and what image and standing they want the company to have. Both
casual observation and formal studies indicate that manager's ambitions, values, business
philosophies, attitudes toward risk, and ethical beliefs have important influences on strategy.
Attitudes toward risk also have a big influence on strategy. Risk avoiders are inclined toward
"conservative" strategies that minimize downside risk, have a quick payback, and produce sure
short term profits. Risk takers lean more toward opportunistic strategies where visionary moves
can produce a b*g payoff over the long term.
VI. The influence of shared values and company culture on strategy: An organizations
policies practices, traditions, philosophical beliefs, and ways of doing things combine to create a
distinctive culture. The stronger a company's culture, the more that culture is likely to shape the
company's strategic actions sometimes even dominating the choice of strategic moves This is
because culture -related values arc beliefs are so embedded in management's strategic thinking
and actions that they condition how the enterprise does business and responds to external events.
Q.4 Discuss company's goals and company's philosophy.
Answer=A company's philosophy states how one will do business or how the company looks at
the world. It helps one figure out how one has to approach the work. The business philosophy
statement should include the following:
The type of environment that one wishes to create.

The type of experience that one wishes individuals to have with the company.

How one feels about the various sides of business issues.

It is equally important to have a set of written objectives and goals for the organization.

The features of good objectives are:

Objectives should be expressed and stated clearly and should be easy to understand.

Objectives must be time oriented i.e. they must specify the time limit within which they
should be accomplished.

Objectives should be specific and should be related to goals.

All the people responsible for accomplishment of objectives should participate in the
formulation of objectives.

Objectives must be realistic i.e. something that can be achieved.

Objectives should not be conflicting i.e. different objectives of various functional areas
should correlate with each other and must be in line with the overall company objectives.

Objectives should be capable of being measured.

Objectives should not be rigid. There should be some scope for flexibility.

An organisation with various multiple objectives should assign relative priorities and
indicate the time limit within which these must be attained.
 Objectives are an organisations performance targets- the results and outcomes it wants to
achieve. They function as yardsticks for tracking an organizations performance and
progress.

Importance of objectives:
Objectives indicate the purpose and aims of an organisation and thereby the social
justification for the existence of an organisation.

Objectives help an organisation to adjust to the prevailing environment.

Objectives provide directions for the functioning of an organisation.

Objectives promote coordination among employees, thus reducing conflicts.

Objectives provide the basis for control and assessment of organizations performance.

Objectives help decentralization by delegating decision making to lower level personnel.

Q.5 Discuss merging the strategic vision objectives and strategy into a strategic plan.
Answer=Strategic planning is a well-organized effort aiming at fulfilling business objectives in a
systematic manner. It is a forward looking exercise which determines the future posture of the
enterprise.
The strategic management process encompasses three phases which together involve a number of
systematic steps. These three phases are strategy formulation, Implementation, evaluation and
control.
I. Strategy Formulation
Strategic formulation Involves four Important steps, determination of mission and objectives,
analysis of strengths and weaknesses of the firm and the environmental opportunities and threats
(SWOT), generation of alternative strategies and choosing ,the most appropriate strategy.
Determination of Mission and Objectives: Strategy is a means to achieve the objectives. It is,
therefore, quite obvious that determining the mission (which influences objectives) and
objectives is the first step In strategy formulation.
SWOT analysis: The strengths and weaknesses of the firm and opportunities and threats (SWOT)
in the environment will indicate the portfolio strategy and other strategies it should pursue.
An organisation should address questions such as what are the changes, including possible future
changes, in the environment which have implications for us and how should we respond to them?
What are the opportunities in the environment; which can be exploited utilizing our strength?
What are the threats and do we have the strength to combat the threats? How can we mass up our
strength? What are our weaknesses? Can we overcome or minimize the weaknesses?
Strategic Alternatives: Given the mission and objectives and having analyzed the strengths and
weaknesses of the firm and the environmental opportunities and threats, the strategists should
proceed to generate possible alternative strategies. There may be different strategic options for
accomplishing a particular objective. For example, growth in business may be achieved by
increasing the share in existing markets or by entering new markets, by horizontal integration or
by a combination of these.
Evaluation and choice: The purpose of considering different strategic options is to adopt the most
appropriate strategy. This necessitates the evaluation of the strategic alternatives with reference
to certain criteria. Criteria such as suitability, feasibility and acceptability are commonly
employed to evaluate the strategic options.
II. Implementation
Operationalizing the strategy requires transcending the various components of the strategy to
different levels; mobilization and allocation of resources; structuring authority, responsibility,
tasks and information flows; and establishing policies.
Implementation of strategy involves a number of administrative and operational decisions.
III. Evaluation and Control
Evaluation and Control is the last phase of the strategic management process. The objective is to
examine whether the strategy as implemented is meeting its objectives and if not take corrective
measures. Continuous monitoring of the environment and implementation of the strategy is
essential. Strategic management is a continuous process, the evaluation providing the feedback
for modifications.
Q.6 Discuss Industry driving forces.
Answer=Driving forces are forces outside the firm that activate the change of strategy in an
organization. Industry conditions change because important forces are driving industry
participants to makes changes in their actions, and thus the driving forces in an industry are the
major underlying causes of changing industry and competitive conditions. The key driving forces
for any industry are as follows:
(i) Internet and new e-commerce opportunities, (ii) Globalization (iii) Changes in the long-run
industry growth rate (iv) Changes in customer needs and values (v) Product innovation (vi)
Technological change (vii) Market innovation (viii) Diffusion of technical know-how across
more companies and more countries (ix) Changes in cost and efficiency (x) Government
regulations and policies (xi) Changing societal concerns, attitudes, and lifestyles;

However, the most important forces that drive an industry are as follows:
 Bargaining power of the buyers: Buying power provides customers the chance to
negotiate for cheaper prices, ask for better quality on the products they are buying or ask
for better and more services they are receiving. All these will lead to reduced margins of
companies in an industry. Buyers can gain higher bargaining power when, they are few in
number, product is undifferentiated, the buyers can easily switch from one product to
another, the buyer is concerned with cost cutting, buyer is not very concerned about the
quality of the product, and the buyers have good information about the market and
industry.

Bargaining power of suppliers: The suppliers can have a good bargaining power over
their buyers when, there is concentration of sellers, the product is unique, the product
supplied is of great importance to the buyer, the cost of switching is high for the buyers.

Threats from potential entrants: Potential competitors are companies that are currently
not competing in the industry but have the capability to do so. New entry into an industry
expands supply. This in turn depressed prices and profits. Thus a high risk of new entry
constitutes a strategic threat. Firms could have high amount of threat from potential
entrants when customers are not loyal, companies lack economies of scale etc.

The degree of rivalry among established companies: Strong rivalry constitutes a threat
to established companies, whereas weak rivalry constitutes an opportunity to raise prices
and earn greater returns. Extent of rivalry amongst firms depends on demand conditions,
exit barriers, and industry competitive structure.

Threat from substitute products and services: Substitute products limit the price that
companies in an industry can charge without losing their customers to makers of
substitutes. The closer the substitutes, the greater the threat they pose.

Q.7 Discuss the strategically relevant components of a company's external environment.

Answer=The survival and success of a business firm depends on its innate strength resources at
its command, including physical resources, financial resources, human resources, skills and
organization and its adaptability to the environment and the extent to which the environment is
favorable to the development of the organization. The survival and success of a firm depends on
its external and internal environment and their components. The various strategically relevant
components of a company's external environment are as follows:
Micro Environment (also referred as the task environment): These forces have a
direct effect on the operating of a firm. The Micro Environment consists of

Suppliers: The supplier environment refers to all those who supply any kind of material
to the business for its smooth functioning.
 Customers: The customer environment refers to those buyers and ultimate consumers
needs relating to the product or services it is intended to meet.

Competitors: A firm's competitors include not only the other firms which market the
same or similar products but also all those who compete for the discretionary Income of
the consumer.

Marketing intermediaries: Marketing intermediaries are the firms which aid the
company in promoting, placing, selling and distributing its products/services to the final
consumers.

Financiers: Financiers are the people who have financial capabilities and their attitudes
towards risk.

Public: A public is any group that has an actual or potential Interest in or impact on an
organizations ability to achieve its interests.

Macro Environment: A company operates in a large macro environment of forces that

shape opportunities and pose threats to the company. These are usually uncontrollable
factors. Important macro environment factors include economic environment, political
and regulatory environment, social / cultural environment, demographic environment,
technological environment, natural environment and global environment.

Economic environment refers to all those economic factors, which have effect on the
functioning of a business unit.
Political Environment: Political Environment has far stretching influence on
business. The political system prevailing in a country decides, promotes, fosters, and
encourages, shelters, objects and controls the activities of that country.

Technological Environment : Improvement in technology and up gradation of the

same has considerable influence on the business environment.

Natural Environment: The natural environment is the source of everything used by

business i.e. every raw material, every energy source, every life-sustaining factor, even
every waste disposal site.

Global Environment: Businessmen are expanding their horizons and seeing beyond
the physical boundaries of the country. Globalization refers to the process of integration
of the world into one huge market. Global environment refers to those global factors
which are relevant to business, such as the WTO principles and agreements, other
international conventions, agreements, declarations, protocols, etc.
Other than the one mentioned earlier, other factors that affect a business are the legal
environment, socio cultural environment, demographic environment, geo-physical environment
etc. These factors are beyond the control of a company.
Q. 8 Explain Porters generic strategies in details.
Answer =According to Porter, In order to cope up with competition, firms adopt three generic
strategic approaches to gain advantage. These have to be used along with the five forces of
competition. The three generic strategies are:
Overall Cost Leadership: Striving to be the industry's overall low cost provider is a powerful
competitive approach in markets with many price sensitive buyers. The aim is to operate the
business in a highly cost effective manner and open up a sustainable cost advantage over
competitors. A low cost provider's strategic target is low cost relative to competitors, not the
absolutely lowest possible cost. A strategy of trying to be the low cost provider works well in
situations where the industry's product is essentially the same from seller to seller ( brand
differences are minor) many buyers are price sensitive and shop for the lowest price. There are
only a few ways to achieve product differentiation that have much value to buyers. Most buyers
use the product in the same ways and thus have common user requirements. Buyers' costs in
switching from one seller or brand to another are low or even zero, buyers are large and have
significant power to negotiate pricing terms. To achieve a low cost advantage, a company must
become more skilled than rivals in controlling structural and executional cost drivers and/or it
must find innovative cost savings ways to revamp its value chain.
Differentiation strategies: Differentiation strategies are an attractive competitive approach
whenever buyers' needs and preferences are too diverse to be fully satisfied by a standardized
product or by sellers with identical capabilities. Differentiation strategies seek to produce a competitive
edge by incorporating attributes and features into company's product/service offering that rivals don't
have. Anything a firm can do to create buyer value represents a potential basis for differentiation.
Successful differentiation is usually keyed to lower the buyer's cost of using the item, raise the
performance the buyer gets, or boost a buyer's psychological satisfaction. To be sustainable,
differentiation usually has to be linked to unique internal expertise, core competencies, and
resources that give company capabilities, its rivals can't easily match.
Differentiation strategies tend to work best in market circumstances where:
There are many ways to differentiate the product/service and many buyers perceive these
differences as having value.

Buyer needs and uses are diverse

Few rival firms are following a similar differentiation approach

Technological change and product innovation are fast paced and competition revolves
around rapidly evolving product features.
 A low cost provider strategy can defeat a differentiation strategy when buyers are
satisfied with I basic product and don't think "extra" attributes are worth a higher price.

Focused (or Market Niche) Strategies: What sets focused strategies apart from low cost or
differentiation strategies is concentrated attention on a narrow piece of the total market. The aim
of 9 focused strategy is to do a better job of serving buyers in the target market niche than rival
competitors. A focusers basis for competitive advantage is either (i) lower costs than competitors
in serving the market niche or (ii) an ability to offer niche members something they perceive is
better suited to their own unique tastes and preferences. A focused strategy based on low cost
depends on there being a buyer segment whose requirements are less costly to satisfy compared to
the rest of the market. A focused strategy based on differentiation depends on there being a buyer
segment that is looking for special product attributes or seller capabilities. A focused strategy based
either on low cost or differentiation becomes increasingly attractive as more of the following conditions are
met:
The target market niche is big enough to be profitable and offers good growth potential.

Industry leaders do not see that having a presence in the niche is crucial to their own success- a
condition that reduces rivalry from major competitors.

It is costly or difficult for multisegment competitors to put capabilities in place to meet the
specialized needs of the target market niche and, at the same time, satisfy the expectations of their
mainstream customers.

The industry has many different niches and segments, thereby allowing a focuser to pick a
competitively attractive niche suited to its resource strengths and capabilities.

Few, if any, other rivals are attempting to specialize in the same target segment-a condition that reduces the
risk of segment overcrowding. The focuser can compete effectively against challengers based on the
capabilities and resources it has to serve the targeted niche and the customer goodwill it may have built up.
Q.9 What are the strategic options for achieving cost competitiveness?
Answer=Value Chain analysis and benchmarking can reveal a great deal about a firm's cost
competitiveness. Examining the makeup of a company's own value chain and comparing it with rivals
indicates who has how much of a cost advantages or disadvantages and which cost components are
responsible. Such information is vital in crafting strategies to eliminate a cost disadvantage or create a cost
advantage.
There are three main areas in a company's overall value chain where important differences in the cost of
competing firms can occur: in the supplier's part of the industry value chain; in a company's own activity
segments; or in the forward channel portion of the industry chain. If a firm's lack of cost competitiveness lies
either in the backward (upstream) or forward (downstream) sections of the value chain, then reestablishing
cost competitiveness may have to be extended beyond the firm's own in-house operations.
 Attacking the high costs of Items Purchased from Suppliers: When a firm's cost disadvantage is
principally associated with the costs of items purchased from suppliers, company managers can
pursue any of several strategic actions to correct the problem.

Negotiate more favorable prices with suppliers.

Work with suppliers on the design and specifications for what it being supplied to identify cost
savings that will allow them to lower their prices.

Switch to lower priced substitute inputs.

Collaborate closely with suppliers to identify mutual cost saving opportunities.

Integrate backward to gain control over the costs of purchased items- seldom an attractive option.

Try to make up the difference by cutting costs elsewhere in the chain usually a last resort.

Attacking Cost Disadvantages in the Forward Portion of the Industry value chain:

A Company's strategic options for eliminating cost disadvantages in the forward end of the value
chain system include:

Pushing distributors and other forward channel allies to reduce their markups

Working closely with forward channel allies to identify win-win opportunities to reduce costs

Changing to a more economical distribution strategy, including switching to cheaper distribution

channels or perhaps integrating forward into downstream businesses.

Trying to make up the difference by cutting costs earlier in the cost chain-usually a last resort.

Attacking the High Costs of Internally Performed Activities: When the sources of a firm's cost
disadvantages are internal, managers can use any of the following strategies to restore cost parity:

Implement the use of best practices throughout the company, particularly for high cost activities.

Try to eliminate some cost producing activities altogether by revamping the value chain. Examples
include cutting out low-value-added activities, shifting to a different business model, bypassing the
value chains and associated costs of distribution allies and marketing directly to end users.

Relocate high cost activities to geographic areas where they can be performed more cheaply.

Search out activities that can be outsourced from vendors or performed by contractors more cheaply
than they can be done internally.

Invest in productivity enhancing, cost-saving technological improvements.

 Innovate around the troublesome cost components.

Simplify the product design so that it can be manufactured or assembled quickly and more
economically.

Try to make up the internal cost disadvantage by achieving savings in the backward and forward
portions of the value chain system-usually a last resort.

Q. 10 How do cooperative strategies lend competitive advantage to a firm? Discuss

Answer=Marty companies are turning to strategic alliances and collaborative partnerships which will help
them in the global race to build a market presence in many different national markets and in the technology
race to capitalize on today's technological and information age revolution.
Strategic alliances are cooperative agreements between firms that go beyond normal company-to-
company dealings but fall short of merger or full joint venture partnership with forma) ownership ties. But
the value of alliance stems not from the agreement or deal itself but rather from the capacity of the
partners to defuse organizational frictions, collaborate effectively over time, and work their way through
the maze of changes that lie in front of them - technological and competitive surprises, new market
developments, and changes in their own priorities and competitive circumstances.
Collaborative alliances nearly always entail an evolving relationship, with the benefits and competitive
value ultimately depending on mutual learning, effect of cooperation over time, and successfully adapting
to change. Competitive advantage emerges when a company acquires valuable resources and capabilities
through alliances that it could not otherwise obtain en its own and that give It an edge over rivals. This
requires real in-the-trenches collaboration between the partners to create new value together. The
most common reason why companies enter no strategic stances is to collaborate on technology or the
development of promising new products, to overcome deficits In their technical and manufacturing
expertise to acquire altogether new competencies, to improve supply chain efficiencies, to gain
economies of scale in production and/or marketing, and to acquire or improve market access through
joint marketing agreements. A company that is racing for global market leadership needs alliances to
help it do what i cannot easily do alone:
(I) Get into critical country markets quickly and accelerate the process of building a potent global
market presence, (ii) Gain inside knowledge about unfamiliar markets and cultures through alliances
with local partners, (iii) Access valuable skills and competences that are concentrated In particular
geographic locations
A company that is racing to stake out a strong position in an industry of the future needs alliances to:
Establish a beachhead for participating in the target industry (ii) Master new technologies and build new
expertise and competencies faster (iii) Open up expanded opportunities in the target industry by melding
the firm's own capabilities with the expertise and resources of partners.
Allies can learn much from one another in performing joint research, sharing technological know- how, and
collaborating on complementary new technologies and products - sometimes enough to enable them to
pursue other new opportunities on their own. Not only can alliances offset competitive disadvantages or
create competitive advantages but they also can result in the allied companies' directing their competitive
energies more toward mutual rivals and less toward one another. Potential rivals can sometimes be
effectively neutralized by engaging them in a collaborative alliance.
The competitive attraction of alliance is to bundle competencies and resources that are more valuable in a
joint effort than when kept separate.

Q.11 Discuss planning for a large and diversified company.

Answer=Planning is the process of selecting a suitable course of action from various alternatives
available. It is the beginning process of management. Planning helps in arriving at a decision for
future course of action with the help of forecasting. It involves decision making. In smaller
companies, strategic planning is a less formal, almost continuous process. The president and his
handful of managers get together frequently to resolve strategic issues and outline their next
steps. They need no elaborate, formalized planning system. Even in relatively large but
undiversified corporations, the functional structure permits executives to evaluate strategic
alternatives and their action implications on an ad hoc basis. Large, diversified corporations,
however, offer a different setting for planning. Most of them use the product/market division
form of organizational structure to permit decentralized decision making involving many
responsibility-center managers. Because many managers must be involved in decisions requiring
coordinated action, informal planning is almost impossible. Planning in larger and diversified
organizations takes place in three basic levels. These include:
Corporate Strategy:
It is the overall managerial game plan for a diversified company. It extends companywide. It
concerns how a diversified company intends to establish business positions in different industries
and the actions and approaches employed to improve the performance of the group of businesses
the company has diversified into.
Corporate level strategy is concerned with:
Making the moves to establish positions in different businesses and achieve
diversification.

Initiating actions to boost the combined performance of the businesses the company has
diversified into.

Pursuing ways to capture valuable cross-business strategic fits and turn them into
competitive advantage.

Establishing investment priorities and steering corporate resources into the most
attractive business units.

Corporate strategy is crafted at the highest levels of management.

Business strategy:
The term business strategy refers to the managerial game plan for a single business. It concerns
the actions and approaches crafted by management to produce successful performance in one
specific line of business; the central business strategy issue is how to build a stronger long term
competitive position. For a single business company, corporate strategy and business strategy are
one and the same. A business strategy is powerful if produces a sizable and sustainable
competitive advantage; it is weak if it results in competitive disadvantage. The most successful
business strategies typically aim at building uniquely strong or distinctive competencies in one or
more areas crucial to strategic success and then using them as a basis for winning a competitive
edge over rivals. Distinctive competencies can relate to leading-edge product innovation, better
mastery of a technological process, expertise in defect-free manufacturing, specialized marketing
and merchandising know-how, potent global sales and distribution capability, better customer
service , or anything else that constitutes a competitively valuable strength in creating,
producing, distributing, or marketing the company's product or service. Lead responsibility for
business strategy falls in the lap of whoever is in charge of the business.
Functional strategy:
Functional strategy concerns the managerial game plan for running a major functional activity or
process within a business- R&D, production, marketing, customer service, distribution, finance
and so on. A business needs as many functional strategies as it has major activities. Lead
responsibility for conceiving strategies for each of the various important business functions and
processes is normally delegated to the respective functional department heads and process
managers unless the business unit head decides to exert a. strong influence.
Operating strategy:
Operating strategy concerns how to manage front-line organizational units within a business
(plants, sales districts, distribution centers) and how to perform strategically significant operating
tasks (materials purchasing, inventory control, maintenance, shipping, -advertising campaigns).
Lead responsibility for operating strategies is usually delegated to front-line managers, subject to
review and approval by higher-ranking managers. Operating level strategies provide valuable
support to higher level strategies. Front-line managers are an important part of an. Organizations
strategy making team because many operating units have strategy critical, performance targets
and need to have strategic action plans in place to achieve them.
Q.12 Explain various structures of strategy.
Answer=The job of strategy execution is to convert strategic plans into actions and good results. For this, a
suitable organizational structure is required. All organisation structures have strategic advantages and
disadvantages, there is no one best way to organize. Some of the commonly used structures are given
below:
Entrepreneurial structure: This structure is suitable for very small organisations. The owner and
the manager are one and the same and all the power vests with him. Such a structure facilitates
quick decision making. The owner-manager can completely devote his time and knowledge for the
absolute development of the organisation. The structure is simple to understand. However, it is a
one man show and the structure becomes unsuitable when the organisation grows.

Functional structure: Functionally specialized organisation structures have traditionally been the
most popular way to organize single business companies. Functional organisation works well
where strategy critical activities closely match discipline specific activities and minimal inter-
departmental cooperation is needed.

This kind of structure has significant drawbacks: functional myopia, empire building, interdepartmental
rivalries, excessive process fragmentation, and vertically layered management hierarchies.
Product based structure: Under this kind of structure, all functions important for the production of
a product or service are grouped together. The organisation is split into product division. This kind
of structure is well suited for an organisation manufacturing multiple products and having distinct
manufacturing and marketing facilities. Performance evaluation of each unit is simple and easy,
quicker decision making is possible and responsibility for profit can be fixed at divisional levels.
However, this structure gives rise to divisional conflicts and coordination becomes difficult if there
are too many divisions.

SBU organizational structure: Under this structure, each SBU operates as a separate organisation.
Each SBU has the responsibility of achieving the best results in their business units within the
facilities and resources provided, freedom sanctioned and under the overall corporate objectives.
This kind of organizational structure has the advantages of in-depth business planning and easy
accountability. However, too many SBUs may cause difficulty in efficient management and this
structure may create unhealthy competition for corporate resources.

Geographical organisation structure: This kind of structure is adopted by organisations that

operate in various geographical regions. Each geographical division performs all the functions
required to produce and market the products in the geographical area under consideration. Such a
structure has the advantage of serving the needs of customers in different regions. Products can be
designed to suit each geographical region and responsibility for profit can be fixed for each region.
However, this kind of structure leads to co-ordination problems and duplication of equipment and
facilities.
 Matrix structure: The matrix structure operates on a dual channel of authority, performance,
responsibility, evaluation and control. Subordinates report to functional area managers as well as
project/ product managers. Matrix structure is a conflict resolution system through which strategic
and operating priorities are negotiated, power is shared and resources are. Allocated internally. The
matrix structure has the capacity of accomplishing a wide variety of project oriented business
activity. It helps in optimum utilization of resources. It makes an organization more dynamic and
result oriented. However, the dual authority system leads to confusion and greater administrative
cost.

Q.13 Explain the different leadership roles that managers play in executing good strategy.
Answer=Managers have five leadership roles to play in pushing for good strategy execution.
Staying on top of how well things are going: Managers keep a finger on the organization's pulse by
spending considerable time outside their offices, listening end talking to organization members,
coaching, cheerleading and picking up important information They have to conform whether things
are an track identify problems, team what obstacles lie in the path of good strategy execution, and
develop a basis for determining what, if anything, they can personally do to move the process along.

Leading the effort to establish a strategy Supportive Culture: Successful managers take cans to
reinforce the corporate culture through the things they say end do. The single most visible factor
that distinguishes successful culture change efforts from failed attempts is competent leadership at
the toe.

Keeping the Internal organisation responsive and innovative: They encourage people to be creative
and innovative in order to keep organisation responsive to changing conditions, alert to new
opportunities, and anxious to pursue fresh initiatives. They support champions of new approaches
or ideas who are willing to stick their necks out end try something innovative.

Effective company managers try to anticipate changes fan customer market requirements and
proactively build new competencies and capabilities that offer a competitive edge over rivals. They
work Hard at building consensus on how to proceed, what to change, and what to change, and what
not to change.

Exercising Ethics leadership and good corporate citizenship: They enforce high ethical standards
and insist on socially responsible, corporate decision making. High ethical standards cannot be
enforced without the open and unequivocal commitment of the chief executive.

Companies with socially conscious strategy leaders and with cultures where corporate social
responsibility is a core value, are the most likely to conduct their affairs in a manner befitting a good
corporate citizen. Corporate citizenship and socially responsible decision making are demonstrated
in a number of ways: having family friendly employment practices, operating a safe workspace,
 protection of the environment, interacting with community, officials to minimize the impact of
layoffs, generous supporter of charitable causes, and the like.

Leading the process of Making Corrective Adjustments: Successful managers actively push
corrective actions to improve strategy execution and overall strategic performance. The process of
making corrective adjustments varies according to the situation. In crisis, the typical' leadership
approach is to have key subordinates gather information, identify and evaluate options, and perhaps
prepare a preliminary set of recommended actions for consideration. The best tests of good strategic
leadership are whether the company has a good strategy and whether that strategy is being
competently executed. If these two conditions exist, the chances are excellent that the company is
improving its financial and strategic performance, is capable of adapting to multiple changes, and is
a good place to work.

Q.14 What do you mean by operational control system?

Answer=According to Henri Fayol, management control consists of "verifying whether
everything occurs in conformity with the adopted plans, the instructions issued and the principles
established - the objective being to identify weaknesses and errors so that' they can be rectified
and prevented from recurring.'
Operational control systems are systems that are designed to ensure that day-to-day actions me
consistent with established plans and objectives. It focuses on events in a recent period.
Operational control systems are derived from the requirements of the management control
system.
The different evaluation techniques for operational control are:
Value chain Analysis: A company's value chain identifies the primary activities that create
value for customers and the related support activities. It is a primary analytical tool of strategic
Cost analysis. It is expected that each activity undertaken in an organisation should add some
value to the overall accomplishment. Value chain helps the organisation to improve its
capabilities to attain competitive advantage by using resources for a better cause.
Benchmarking: Benchmarking is a tool that allows a company to determine whether the manner
in which it performs particular functions and activities represents industry "best practices" when
both cost and effectiveness are taken into account. The objectives of benchmarking are to
identify the best practices in performing an activity, to learn how other companies have actually
achieved lower costs or better results in performing bench marking activities, and to take action
to improve a company's competitiveness whenever benchmarking reveals that Its costs and
results of performing an activity do not match those of other companies.
Balanced Score Card: The balanced Score card method takes into consideration four important
key performance measures. These are: Customer perspective, internal business perspective,
Innovation and learning perspective and financial perspective.
Customer Perspective involves evaluating the company from the customer's point of view i.e. how do
the customers view the performance of the organisation. If customers have a positive opinion, steps
should be taken to maintain the same. If, however, customers have a negative opinion, action
should be taken to restore positive perception in the minds of customers.
Internal business perspective involves evaluating the internal capabilities of the organisations
expressed in terms of its core competency.
Innovation and learning perspective involves evaluating the attitude of the company and its people
towards innovation and learning new things. Innovation leads to improved product, service,
process, work simplification, cost reduction, etc. Learning on the other hand, changes the outlook
of individuals working in the organisation and makes them more open and accepting to changes.
Financial perspective involves evaluating the performance of the company in terms of growth and
profits. The ultimate goal of any company is to maximise its earnings and this needs to be
checked.
Quantitative Performance Measures: Quantitative performance Measures involves ratio analysis,
ROI, ROE, Profit Margin, EPS etc used for comparing the actual performance with the
predetermined standards. Qualitative Performance Measures takes into consideration the following
qualitative considerations.
Internal consistency of strategy

Environmental consistency of strategy

Consistency of strategy in line with the available resources

Degree of acceptability of strategy

Workability of the strategy

time horizon of the strategy

Social responsibility coverage of the strategy

Q.15 Write note on: Monitoring performance and evaluating deviations.

Answer=In strategic management, performance is monitored and deviations are evaluated
through a process called strategic evaluation.
Strategic evaluation is the process of determining the effectiveness of a given strategy in
accomplishing organizational objectives and taking corrective action, whenever necessary.
Business environment is constantly changing. This calls for a revision of the existing strategies
in accordance with the new environment. Hence, it becomes necessary to evaluate strategies and
understand their effectiveness in realizing organizational goals.
Strategic evaluation takes into account the following aspects:
 The attainment of organizational objectives with the given resources.

The matching of policies and strategies with the corporate objectives.

Measurement of actual performance as against the standards.

Importance of strategic evaluation: Strategy evaluation is important due to the following reasons:
Strategic evaluation provides the much needed feedback regarding the progress of plans and
policies. This helps in determining whether the strategy accepted earlier is relevant or not.

Strategic evaluation helps in assessing the effectiveness of existing policy. Thus, the existing
policy can be modified, if needed, and a new policy can be introduced in its place.

Strategic evaluation also aids in evaluating the performance of the employees and
consequently in the formulation of rewards and promotions.

It also helps the managers to know the appropriateness of the decisions taken and whether the
decisions are In line with the strategic requirements of the organisation.

The following aspects need to be taken into consideration while evaluating strategy:
Internal consistency: The strategy formulated should be in line with the organizational
objectives. Frequent changes and inconsistent functional strategies results into a wasteful
affair.

Environmental consistency: The policies and strategies formulated should be in line with
the environmental requirements. The organisation should be in a position to make the
best use of the environmental resources. It should be able to further strengthen its core
competency and gain a competitive edge over its rivals.

Optimal use of resources: There must be an optimal use of the organizational resources.
No resource should be idled away. Idle resource indicates inefficiency on the part of
management. Strategies must match opportunities and the available resources.

Time factor: To achieve the corporate objectives, each functional unit is required to
formulate its respective strategy. It is expected to prepare short term as well as long term
strategies in alignment with the corporate strategies.

Risk factor: The strategy should be evaluated for its capability to combat threats and
minimize risks.

Workability: The strategy should be finally evaluated to see whether it is realistic,

practical and contributing to the objectives of the organisation in a positive manner.
Q.16 Discuss challenges of strategic implementation.
Answer=Strategic implementation is the process by which strategies and policies are put to
action through the development of programme, budgets and procedures. The various challenges
to strategic implementation are:
Managing Resistance to change: An organisation functions in an ever changing external
environment which has a significant impact on the activities of the organisation. The
changing environment may either create opportunities or pose threats. Organizational
change is the response of the organisation to the changes in environment by way of
altering the organizational structure. Various factors resist change.

Resistance to change may be from inside the organization due to various factors such as
fear of the unknown, fear of economic loss, discomfort using new technology, etc. People
often resist strategy implementation because they do not understand what is happening or
why changes are taking place. In that case, employees may simply need accurate
information. Successful strategy implementation hinges upon managers' ability to
develop an organizational climate conducive to change.

Managing the Natural Environment: Another challenge that a firm may face while
strategic implementation is managing the natural environment. Various laws have been
implemented in order to protect the natural environment and firms are constantly taking
up green, activities in order to stay in the market and develop a positive image in the
society. Firms should formulate and implement strategies from an environmental
perspective.

Creating a strategy supportive culture: An organization's culture is either an important

contributor or an obstacle to successful strategy execution. A culture grounded in values,
practices and behavioral norms that match what is needed for good strategy execution
helps to energize people throughout the company to do their jobs. A work environment
where the culture matches the conditions for good strategy execution provides a system
of informal rules and peer pressure regarding how to conduct business internally and how
to go about doing one's job. A strong strategy supportive culture, nurtures and motivates
people to do their jobs in ways conducive to effective strategy execution.

Production and operation decisions: Production and operation decisions relating to

location of a firm or plant, product design, size of inventory, cost and quality controls etc.
All have an impact on the success and failure of a strategy. Training and development of
the employees is very important for successful strategic implementation.
Q.17 State the objectives of corporate governance.
Answer=Corporate Governance may be defined as a set of systems, processes and principles
which ensure that a company is governed in the best interest of all stakeholders. It is the system
by which companies are directed and controlled. It is about promoting corporate fairness,
transparency and accountability. In other words, 'good corporate governance' is simply 'good
business'. It ensures:
Adequate disclosures and effective decision making to achieve corporate objectives;
Transparency in business transactions;

Statutory and legal compliances;

Protection of shareholder interests;

Commitment to values and ethical conduct of business.

The aim of "Good Corporate Governance" is to ensure commitment of the board in managing the
company in a transparent manner for maximizing long-term value of the company for its
shareholders and all other partners. It integrates all the participants involved in a process, which
is economic, and at the same time social.
The fundamental objective of corporate governance is to enhance shareholders' value and protect
the interests of other stakeholders by improving the corporate performance and accountability.
Hence it harmonizes the need for a company to strike a balance at all times between the need to
enhance shareholders' wealth whilst not in any way being detrimental to the interests of the other
stakeholders in the company.
Further, its objective is to generate an environment of trust and confidence amongst those having
competing and conflicting interests.
It is integral to the very existence of a company and strengthens investor's confidence by
ensuring company's commitment to higher growth and profits. Broadly, it seeks to achieve the
following objectives:
A properly structured board capable of taking independent and objective decisions is in
place at the helm of affairs;

The board is balance as regards the representation of adequate number of non-executive

and independent directors who will take care of their interests and well-being of all the
stakeholders;
 The board adopts transparent procedures and practices and arrives at decisions on the
strength adequate information;

The board has an effective machinery to serve the concerns of stakeholders;

The board keeps the shareholders informed of relevant developments impacting the
company

The board effectively and regularly monitors the functioning of the management team

The board remains in effective control of the affairs of the company at all times.

The overall endeavor of the board should be to take the organisation forward so as to
maximize long term value and shareholders' wealth.

Q.18 Explain various issues in corporate governance.

Answer=Major issues in corporate governance reports have included the role of board, the
quality of financial reporting and auditing, directors' remuneration, risk management and
corporate social responsibility. The various issues in corporate governance are as follows:
Duties of Directors: The corporate governance reports have aimed to build on the
directors' duties as defined in statutory and case law duties of directors. These include the
fiduciary duties to act in the best interests of the company, use their powers for a purpose,
avoid conflicts of interest and exercise a duty of care.

Composition and Balance of the Board: A feature of many corporate governance scandals
has been boards dominated by a single senior executive or small 'cabinet of kitchen' with
other member of board who are working just as a robot toy. It is possible that a single
person may bypass the board directions to meet his own personal interests. The report on
the UK Guinness case suggested that the Earnest Saunders' chief executive paid himself a
reward of 3mlllion without the consent of other directors.

In the case where the organization is not dominated by a single person, there may be other
problem in the composition of board of directors. The organization may be run by a minority
group revolve around CEO or CFO and recruitment and appointments may be done by personal
recommendations rather than formal system. So in order to run a smooth business a board must
be balanced in sense of talents, skills, and competence from numerous specialism related to the
organization's situation and also In term* of age (in order to ensure that senior directors are
bringing on newer ones to assist In the planning of succession).
Remuneration and Reward of Directors: Directors being paid excessive bonuses and
salaries have been identified as significant corporate abuses for a large number of years.
It is, however, unavoidable that the corporate governance codes have been targeted this
significant issue.
 Reliability of Financial Reporting and External Auditors: Financial reporting and auditing
issue are seen more critical to corporate governance by the investors because of their
main consideration in ensuring management accountability. It is the reason that they have
been must debated and the focus of serious litigation. Whilst considering the corporate
governance debate only on reporting and accounting issues is insufficient, the greater
regulation of practices such as off-balance sheet financing has directed to greater
transparency and a reduction in risks faced by investors. The necessary questioning may
not be carried out by external auditor from senior management because the auditors may
have threat of losing audit assignment. In the same way internal auditor may not ask an
alien question to senior member because their employment matters are determined by the
CFO. But generally the external auditors become the reason of corporate collapse, for
instance in the case of Barlow Clowes that was poorly focused and planned audit failed to
determine the illegal usage of monies from clients.

Board's Responsibility for Risk Management and Internal Control: If the board does not
arrange the regular meetings in order to consider the organizational activities
systematically show that the board is not meeting their responsibilities. But this thing also
occurred sometime when the board is not provided by full information to properly
oversight on business activities. All this mess results in the poor system that may unable
to report and measure the risks associated with business.

Shareholders' Rights and Responsibilities: Shareholders' role and rights is subject of

particular importance. They should be informed about all those information that are
material to them because this information may irifluence their amount of investment.
They should also be given the right to vote on policies affecting the governance of
organization.

Q.19 Explain various role of corporate governance.

Answer=The main requirements for a good corporate governance are:-
Role and powers of Board: the foremost requirement of good corporate governance is the
clear identification of powers, roles, responsibilities and accountability of the Board,
CEO and the Chairman of the board.

Legislation: a clear and unambiguous legislative and regulatory framework is

fundamental to effective corporate governance.

Code of Conduct: it is essential that an organization's explicitly prescribed codes of

conduct are communicated to all stakeholders and are clearly understood by them. There
should be some system in place to periodically measure and evaluate the adherence to
such code of conduct by each member of the organization.
 Board Independence: an independent board is essential for sound corporate governance.
It means that the board is capable of assessing the performance of managers with an
objective perspective. Hence, the majority of board members should be independent of
both the management team and any commercial dealings with the company. Such
independence ensures the effectiveness of the board in supervising the activities of
management as well as make sure that there are no actual or perceived conflicts of
interests.

Board Skills: in order to be able to undertake its functions effectively, the board must
possess the necessary blend of qualities, skills, knowledge and experience so as to make
quality contribution. It includes operational or technical expertise, financial skills, legal
skills as well as knowledge of government and regulatory requirements.

Management Environment: includes setting up of clear objectives and appropriate ethical

framework, establishing due processes, providing for transparency and clear enunciation
of responsibility and accountability, implementing sound business planning, encouraging
business risk assessment, having right people and right skill for jobs, establishing clear
boundaries for acceptable behavior, establishing performance evaluation measures and
evaluating performance and sufficiently recognizing individual and group contribution.

Board Appointments: to ensure that the most competent people are appointed in the
board, the board positions must be filled through the process of extensive search..A well
defined and open procedure must be in place for reappointments as well as for
appointment of new directors.

Board Induction and Training: is essential to ensure that directors remain abreast of all
development, which are or may impact corporate governance and other related issues.

Board Meetings: are the forums for board decision making. These meetings enable
directors to discharge their responsibilities. The effectiveness of board meetings is.
dependent on carefully planned agendas and providing relevant papers and materials to
directors sufficiently prior to board meetings.

Strategy Setting: the objective of the company must be clearly documented in a long term
corporate strategy including an annual business plan together with achievable and
measurable performance targets and milestones.

Business and Community Obligations: though the basic activity of a business entity is
inherently commercial yet it must also take care of community's obligations. The
stakeholders must be informed about the approval by the proposed and on going
initiatives taken to meet the community obligations.
 Financial and Operational Reporting: the board requires comprehensive, regular, reliable,
timely, correct and relevant information in a form and of a quality that is appropriate to
discharge Its function of monitoring corporate performance.

Monitoring the Board Performance: the board must monitor and evaluate its combined
performance and also that of individual directors at periodic intervals, using key
performance indicators besides peer review.

Audit Committee: is inter alia responsible for liaison with management, internal and
statutory auditors, reviewing the adequacy of internal control and compliance with
significant policies and procedures, reporting to the board on the key issues.

Risk Management: Risk is an important element of corporate functioning and

governance. There should be a clearly established process of identifying, analyzing and
treating risks, which could prevent the company from effectively achieving its objectives.
The board has the ultimate responsibility for identifying major risks to the organization,
setting acceptable levels of risks and ensuring that senior management takes steps to
detect, monitor and control these risks.

A good corporate governance recognizes the diverse interests of shareholders, lenders,

employees, government, etc.- The new concept of governance to bring about quality
corporate governance is not only a necessity to serve the divergent corporate interests, but
also is a key requirement in the best interests of the corporates themselves and the
economy.

Q 20. Give reasons for resorting to Growth or expansion Strategy.

Answer=Companies often resort to growth strategy due to the following reasons.
The existing business may be volatile or unstable

The existing business may not fully utilize available resources and capabilities.

It may be necessary to spread business risk by going in for new products or new markets.

A competition may enter the existing business.

Imitation of growth strategies followed by competitors to maintain the same level of

competition.

To expand into foreign markets.

Unexploited current market

To increase existing profits

 For survival of business and to break even

Emergence of new opportunities

To motivate the employees and offer them new challenging roles.

Personal reasons in case of family owned business.