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SIKKIM MANIPAL UNIVERSITY INTERNAL ASSIGNMENT MBA (MB0052 Strategic Management and Business Policy)
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1) Define the term Strategic Management. Explain the importance of strategic management.
Strategic management is a systematic approach of analyzing, planning and implementing the strategy in an organization to ensure a continued success. Strategic management is a long term procedure which helps the organization in achieving a long term goal and its overall responsibility lies with the general management team. It focuses on building a solid foundation that will be subsequently achieved by the combined efforts of each and every employee of the organization. Types of Strategies 1. Corporate level The board of directors and chief executive officers are involved in developing strategies at corporate level. Corporate level strategies are innovative, pervasive and futuristic in nature. The four grand strategies in a corporate level are: Stability and expansion strategy Retrenchment Corporate restructuring Combination strategies concept of synergy Stability strategy The basic approach of the stability strategy is to maintain the present status of the organization. In an effective stability strategy, the organization tries to maintain consistency by concentrating on their present resources and rapidly develops a meaningful competitiveness with the market requirements. Further classifications of stability strategy are as follows: No change strategy No change strategy is the process of continuing the current operation and creating nothing new. Usually small business organizations follow no change strategy with an intention to maintain the same level of operations for a long period. Pause/Proceed with caution strategy Pause/Proceed with caution strategy provides an opportunity to halt the growth strategy. It analyses the advantages and disadvantages before processing the growth strategy. Hence it is termed as pause/proceed with caution strategy. Profit strategy Profit strategy is the process of reducing the amount of investments and short term discretionary expenditures in the organization. Expansion strategy The organizations adopt expansion strategy when it increases its level of objectives much higher than the past achievement level. Organizations select expansion strategy to increase their profit, sales and market share. Expansion strategy also provides a significant increase in the performance of the organization. Many organizations pursue expansion strategy to reduce the cost production per unit. Expansion strategy also broadens the scope of customer groups, and customer functions. Example Prior to 1960s most of the furniture industry did not venture into expanding their industry globally. This was because furniture got damaged easily while shipping and the cost of transport was high. Later in 1970s a Swedish furniture company, IKEA, pioneered towards expanding the industry to other geographical areas. The new idea of transporting unassembled furniture parts lead to minimizing the costs of transport. The customers were able to easily assemble the furniture. IKEA also lowered the costs by involving customer in the value chain. IKEA successfully expanded in many European countries since customers were willing to purchase similar furniture.
4) What, in brief, are the types of Strategic Alliances and the purpose of each? Supplement your answer with real life examples.
Strategic alliances constitute a viable alternative in addition to Strategic Alternatives. Companies can develop alliances with the members of the strategic group and perform more effectively. These alliances may take any of the following forms. Following are the different types of strategic Alliances:
Product and/or service alliance: Two or more companies may get together to synergies their
operations, seeking alliance for their products and/or services. A manufacturing company may grant license to another company to produce its products. The necessary market and product support, including technical know-how, is provided as part of the alliance. Example: - Cocacola initially provided such support to Thumb Up. Two companies may jointly market their products which are complementary in nature. Example: - 1) Chocolate companies more often tie up with toy companies. 2) TV Channels tieup with Cricket boards to telecast entire series of cricket matches live. Two companies, who come together in such an alliance, may produce a new product altogether. Example: - Sony Music created a retail corner for itself in the ice-cream parlors of Baskin-Robbins.
Promotional alliance: Two or more companies may come together to promote their products
and services. A company may agree to carry out a promotion campaign during a given period for the products and/or services of another company. Example: - The Cricket Board may permit Cokes products to be displayed during the cricket matches for a period of one year.
company extends logistics support for another companys products and services. Example:The outlets of Pizza Hut, Kolkata entered into a logistic alliance with TDK Logistics Ltd., Hyderabad, to outsource the requirements of these outlets from more than 30 vendors all over India for instance, meat and eggs from Hyderabad etc.
Pricing collaborations: Companies may join together for special pricing collaborations.
Example: - It is customary to find that hardware and software companies in information technology sector offer each other price discounts. Companies should be very careful in selecting strategic partners. The strategy should be to select such a partner who has complementary strengths and who can offset the present weaknesses.
5) Explain the concept, need for and importance of a Decision Support System.
Decision support systems constitute a class of computer-based information systems including knowledge-based systems that support decision-making activities. It is also explained as a class of information systems (including but not limited to computerized systems) that support business and organizational decision-making activities. A properly designed DSS is an interactive software-based system intended to help decision makers compile useful information from a combination of raw data, documents, personal knowledge, or business models to identify and solve problems and make decisions. Typical information that a decision support application might gather and present are:
an inventory of all of your current information assets (including legacy and relational data sources,
Need: Many companies in developing countries have a very detailed reporting system going down to the level of a single product, a single supplier, a single day. However, these reports which are normally provided to the General Manager should not be used by them at all. They are too detailed and, thus, tend to obscure the true picture. A General Manager must have a birds eye view of his company. He must be alerted to unusual happenings, disturbing financial data and other irregularities. As things stand now, the following phenomena could happen:
(even to dangerous) decisions. Importance: A decision system has great impact on the profits of the company. It forces the management to rationalize the depreciation, inventory and inflation policies. It warns the management against impending crises and problems in the company. It specially helps in following areas: The management knows exactly how much credit it could take, for how long (for which maturities) and in which interest rate. It has been proven that without proper feedback, managers tend to take too much credit and burden the cash flow of their companies. A decision system allows for careful financial planning and tax planning. Profits go up, non cash outlays are controlled, tax liabilities are minimized and cash flows are maintained positive throughout. The decision system is an integral part of financial management in the West. It is completely compatible with western accounting methods and derives all the data that it needs from information extant in the company. So, the establishment of a decision system does not hinder the functioning of the company in any way and does not interfere with the authority and functioning of the financial department
Furthermore, business would proactively promote the public interest by encouraging community growth and development, and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially, CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of a triple bottom line: People, Planet and Profit. The practice of CSR is subject to much debate and criticism. Proponents argue that there is a strong business case for CSR, in that corporations benefit in multiple ways by operating with a perspective broader and longer than their own immediate, short-term profits. Critics argue that CSR distracts from the fundamental economic role of businesses; others argue that it is nothing more than superficial window-dressing; others yet argue that it is an attempt to preempt the role of governments as a watchdog over powerful multinational corporations. Corporate Social Responsibility has been redefined throughout the years. However, it essentially is titled to aid to an organization's mission as well as a guide to what the company stands for and will uphold to its consumers.
Business plan:
A business plan is a detailed description of how an organization intends to produce market and sell a product or service. Whether the business is housing, commercial or some other enterprise, a good business plan describes to others and to your own board of directors, management and staff the details of how you intend to operate and expand your business. A solid business plan describes who you are, what you do, how you will do it, your capacity to do it, what financial resources are necessary to carry it out, and how you intend to secure those resources. A well-written plan will serve as a guide through the start-up phase of the business. It can also establish benchmarks to measure the performance of your business venture in comparison with expectations and industry standards. And most important, a good business plan will help to attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. A well-written plan will serve as a guide through the start-up phase of the business. It can also establish benchmarks to measure the performance of your business venture in comparison with expectations and industry standards. And most important, a good business plan will help to attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. A good business plan will help attract necessary financing by demonstrating the feasibility of your venture and the level of thought and professionalism you bring to the task. A good business plan serves the following purposes:
sufficient net income or profit to finance other programs, activities or services provided by your organization.
Employment Creation A new business venture may create job opportunities for community
a deteriorating neighborhood commercial area, attract additional businesses to the area and fill a gap in existing retail services. You may need to find a use for a vacant commercial property that blights a strategic area of your neighborhood. Or your business might focus on the rehabilitation of dilapidated single family homes in the community.
Establish Goals- Once you have identified goals for a new business venture, the next step in
the business planning process is to identify and select the right business. Many organizations may find themselves starting at this point in the process. Business opportunities may have been dropped at your doorstep. Depending on the goals you have set, you might take several approaches to identify potential business opportunities.
Local Market Study- Whether your goal is to revitalize or fill space in a neighborhood
commercial district or to rehabilitate vacant housing stock; you should conduct a local market study. A good market study will measure the level of existing goods and services provided in the area, and assess the capacity of the area to support existing and additional commercial or home-ownership activity. A bad or insufficient market study could encourage your organization to pursue a business destined to fail, with potentially disastrous results for the organization as a whole. Through a market study you will be able to identify gaps in existing products and services and unsatisfied demand for additional or expanded products and services.
Analysis of Local and Regional Industry Trends- Another method of investigating potential
business opportunities is to research local and regional business and industry trends. You may be able to identify which business or industrial sectors are growing or declining in your city, metropolitan area or region. The regional or metropolitan area planning agency for your area is a good source of data on industry trends.
Internal Capacity- The board, staff or membership of your organization may possess
knowledge and skills in a particular business sector or industry. Your organization may wish to draw upon this internal expertise in selecting potential business opportunities.
Internal purchasing needs / Collaborative Procurement- Perhaps, the organization
frequently purchases a particular service or product. If nearby affiliate organizations also use this service or product, this may present a business opportunity. Examples of such products or
services include printing or copying services, travel services, transportation services, property management services, office supplies, catering services, and other products.