Master of Business Administration - MBA Semester IV MB0052 Strategic Management and Business Policy - 4 Credits (Book ID: B1314)

Assignment Set- 1 (60 Marks) Note: Each question carries 10 Marks. Answer all the questions. Q. 1 What do you understand by the term Strategy in the context of Business Management and Policy? And what are the stages in the formulation of a Strategy? (10 marks) Answer "Strategy is the direction and scope of an organisation over the long-term: which achieves advantage for the organisation through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfil stakeholder expectations". Strategy at Different Levels of a Business Strategies exist at several levels in any organisation - ranging from the overall business (or group of businesses) through to individuals working in it.

Corporate Strategy - is concerned with the overall purpose and scope of the business to meet stakeholder expectations. This is a crucial level since it is heavily influenced by investors in the business and acts to guide strategic decision-making throughout the business. Corporate strategy is often stated explicitly in a "mission statement".

Business Unit Strategy - is concerned more with how a business competes successfully in a particular market. It concerns strategic decisions about choice of products, meeting needs of customers, gaining advantage over competitors, exploiting or creating new opportunities etc.

Operational Strategy - is concerned with how each part of the business is organised to deliver the corporate and business-unit level strategic direction. Operational strategy therefore focuses on issues of resources, processes, people etc.

Strategy formation (Classical school)

The initial task in strategic management is typically the compilation and dissemination of the vision and the mission statement. This outlines, in essence, the raison d'etre of an organization. Additionally, it specifies the organization's scope of activities and the markets a firm wishes to serve. Follow-on strategy formation is a combination of three main processes which are as follows: Performing a situation analysis, self-evaluation and competitor analysis: both internal and external; both micro-environmental and macro-environmental.[clarification needed] Concurrent with this assessment, short- and long-term objectives are set. These objectives should include completion dates. Implementation plans then detail how the objectives are to be achieved.

Strategy evaluation and choice An environmental scan will highlight all pertinent aspects that affect an organization, whether external or sector/industry-based. Such an occurrence will also uncover areas to capitalise on, in addition to areas in which expansion may be unwise. These options, once identified, have to be vetted and screened by an organization. In addition to ascertaining the suitability, feasibility and acceptability of an option, the actual modes of progress have to be determined. These pertain to: The basis of competition Companies derive competitive advantage from how an organization produces its products, how it acts within a market relative to its competitors, or other aspects of the business. Specific approaches may include: Differentiation, in which products compete by offering a unique combination of features. Apple's products typically compete via differentiation. Cost, in which products compete to offer an acceptable list of features at the lowest possible cost. Segmentation, in which products are tailored for the unique needs of a specific market, instead of trying to serve all consumers. Evaluating strategy Johnson, Scholes and Whittington present a model in which strategic options are evaluated against three key success criteria:[4]

Suitability; does the strategy effectively address the mission? Feasibility; can it be made to work? Acceptability; will stakeholders accept the strategy? Suitability Suitability deals with the overall rationale of the strategy. Does the strategy address the mission? Does it reflect the organization's capabilities? Does it make economic sense? Evaluation tools include strength, weakness, opportunity, threat (SWOT) analysis.

Feasibility Feasibility is concerned with whether the organization has the resources required to implement the strategy. Resources include capital, people, time, market access and expertise. Evaluation tools include : cash flow analysis and forecasting break-even analysis resource deployment analysis

Acceptability Acceptability is concerned with the expectations of the identified stakeholders (shareholders, employees and customers, etc.) with the expected financial and non-financial outcomes. Return deals with stakeholder benefits. Risk deals with the probability and consequences of failure. Employees are particularly likely to have concerns about non-financial issues such as working conditions and outsourcing. Evaluation tools include: what-if analysis stakeholder mapping

Implementation While products and services that fit the strategy may receive additional investment, those that don't must also be addressed, either via consolidation with another product/service, divestment to another firm, immediate retirement or harvesting without further investment.

Additionally, the exact means of implementing a strategy needs to be considered. These points range from: Alliances with other firms to fill capability/technology/legal gaps Investment in internal development Mergers/acquisitions of products or firms to reduce time to market Countries such as India and China require market entrants to operate via partnerships with local firms.

Strategic implementation and control Implementing a strategy involves organising, resourcing and employing change management procedures. Organizing Implementing a strategy may require organizational changes, such as creating new units, merging existing ones or even switching from a geographical structure to a functional one or vice versa. Resourcing Implementation may require significant budget shifts, impacting human resources and capital expenditure. Change management Implementing a strategy may have effects that ripple across an organization. Minimizing disruption can reduce costs and save time. One approach is to appoint an individual to champion the changes, address and eventually enlist opponents and proactively identify and mitigate problems. Alignment In 2010 the Rotterdam School of Management together with the Erasmus School of Economics introduced the S-ray Alignment Scan, which is a visual representation of strategy measured against the level of understanding and implementation of various parts of the organization. In 2011 Erasmus University of Rotterdam introduced S-ray Diagnostics, a spin-off of this cooperation, focused on measuring strategic alignment of organizations

Q. 2 What, in brief, are the types of Strategic Alliances and the purpose of each? Supplement your answer with one real life example of each (10 marks). Answer: Joint Ventures A joint venture is an agreement by two or more parties to form a single entity to undertake a certain project. Each of the businesses has an equity stake in the individual business and share revenues, expenses and profits. Joint Ventures are agreements between parties or firms for a particular purpose or venture. Their formation may be very informal, such as a handshake and an agreement for two firms to share a booth at a trade show. Other arrangements can be extremely complex, such as the consortium of major U.S. electronics firms to develop new microchips, says Charles P. Lickson in A Legal Guide for Small Business. Joint ventures between small firms are very rare, primarily because of the required commitment and costs involved. Outsourcing The 1980s was the decade where outsourcing really rose to prominence, and this trend continued throughout the 1990s to today, although to a slightly lesser extent. The early forecasts, such as the one from American Journalist Larry Elder, have been shown to not always be true: Outsourcing and globalization of manufacturing allows companies to reduce costs, benefits consumers with lower cost goods and services, causes economic expansion that reduces unemployment, and increases productivity and job creation. Affiliate Marketing Affiliate marketing has exploded over recent years, with the most successful online retailers using it to great effect. The nature of the internet means that referrals can be accurately tracked right through the order process. Amazon was the pioneer of affiliate marketing, and now has tens of thousands of websites promoting its products on a performance-based basis. Technology Licensing This is a contractual arrangement whereby trade marks, intellectual property and trade secrets are licensed to an external firm. Its used mainly as a low cost way to enter foreign markets. The

main downside of licensing is the loss of control over the technology as soon as it enters other hands the possibility of exploitation arises. Product Licensing This is similar to technology licensing except that the license provided is only to manufacture and sell a certain product. Usually each licensee will be given an exclusive geographic area to which they can sell to. Its a lower-risk way of expanding the reach of your product compared to building your manufacturing base and distribution reach. Franchising Franchising is an excellent way of quickly rolling out a successful concept nationwide. Franchisees pay a set-up fee and agree to ongoing payments so the process is financially risk-free for the company. However, downsides do exist, particularly with the loss of control over how franchisees run their franchise. R&D Strategic alliances based around R&D tend to fall into the joint venture category, where two or more businesses decide to embark on a research venture through forming a new entity. Distributors If you have a product one of the best ways to market it is to recruit distributors, where each one has its own geographical area or type of product. This ensures that each distributors success can be easily measured against other distributors. Distribution Relationships This is perhaps the most common form of alliance. Strategic alliances are usually formed because the businesses involved want more customers. The result is that cross-promotion agreements are established. Consider the case of a bank. They send out bank statements every month. A home insurance company may approach the bank and offer to make an exclusive available to their customers if they can include it along with the next bank statement that is sent out. Its a win-win agreement the bank gains through offering a great deal to their customers, the insurance company benefits through increased customer numbers, and customers gain through receiving an exclusive offer. EXAMPLES Bharti AXA Life eProtect

Pay only Rs. 17/day for 1cr cover Longest cover upto age 75Bharti-AxaLife.com/eProtect Starbucks According to Rebecca Larson, assistant Professor of Business at Liberty University, Starbucks partnered with Barnes and Nobles bookstores in 1993 to provide in-house coffee shops, benefiting both retailers. In 1996, Starbucks partnered with Pepsico to bottle, distribute and sell the popular coffee-based drink, Frappacino. A Starbucks-United Airlines alliance has resulted in their coffee being offered on flights with the Starbucks logo on the cups and a partnership with Kraft foods has resulted in Starbucks coffee being marketed in grocery stores. In 2006, Starbucks formed an alliance with the NAACP, the sole purpose of which was to advance the company's and the NAACP's goals of social and economic justice. Apple According to "An Overview of Strategic Alliances," Apple has partnered with Sony, Motorola, Phillips, and AT&T in the past. Apple has also partnered more recently with Clearwell in order to jointly develop Clearwell's E-Discovery platform for the Apple iPad. E-Discovery is used by enterprises and legal entities to obtain documents and information in a "legally defensible" manner, according to a 2010 press release. Hewlett Packard and Disney Hewlett-Packard and Disney have a long-standing alliance, starting back in 1938, when Disney purchased eight oscillators to use in the sound design of Fantasia from HP founders Bill Hewlett and Dave Packard. When Disney wanted to develop a virtual attraction called Mission: SPACE, Disney Imagineers and HP engineers relied on HP's IT architecture, servers and workstations to create Disney's most technologically advanced attraction. Eli Lilly Pharmaceutical giant Eli Lilly has been forming alliances for nearly a century, according to its brochure, Power in Partnerships, and was the first in their industry to establish an office devoted to alliance management. Lilly currently has over one hundred partnerships around the world devoted to discovery, development, and marketing. For example, Lilly partners with the Belgium-based company Galapagos to develop treatments for osteoporosis. Lilly also partners with Canada's BioMS medical group in a licensing and development agreement for a novel treatment for multiple sclerosis. In Japan, Lilly is partnering with Kyowa Hakko Kogyo Co., Ltd., to bring a targeted cancer treatment to market. Lilly will have the exclusive license to develop and sell the product worldwide except in Japan, and the two companies will share rights in certain Asian countries.

Q.3What is a Business Plan? What purpose does it serve? Ans. 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 boardof directors, management and staff the details of how you intend to operate and expandyour 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 youintend to secure those resources. A wellwritten plan will serve as a guide through thestart-up phase of the business. It can also establish benchmarks to measure theperformance of your business venture in comparison with expectations and industrystandards. And most important, a good business plan will help to attract necessaryfinancing by demonstrating the feasibility of your venture and the level of thought andprofessionalism you bring to the task.A well-written plan will serve as a guide through the start-up phase of the business. Itcan also establish benchmarks to measure the performance of your business venture incomparison with expectations and industry standards. And most important, a goodbusiness 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 goodbusiness 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 goodbusiness plan serves the following purposes: 1. Revenue Generation: Your organization may hope to create a business that willgenerate sufficient net income or profit to finance other programs, activities or services provided by your organization. 2. Employment Creation: A new business venture may create job opportunities for community residents or the constituency served by your organization. 3. Neighborhood Development Strategy: A new business venture might serve asan anchor to a deteriorating neighborhood commercial area, attract additionalbusinesses to the area and fill a gap in existing retail services. You may need to finda use for a vacant commercial property that blights a strategic area of your neighborhood. Or your business might focus on the rehabilitation of dilapidatedsingle family homes in the community. 4. Establish Goals: Once you have identified goals for a new business venture, thenext step in the business planning process is to identify and select the rightbusiness. Many organizations may find themselves starting at this point in theprocess. 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.

5.Local Market Study: Whether your goal is to revitalize or fill space in aneighborhood commercial district or to rehabilitate vacant housing stock, you shouldconduct a local market study. A good market study will measure the level of existinggoods and services provided in the area, and assess the capacity of the area tosupport existing and additional commercial or homeownership activity. A bad or insufficient market study could encourage your organization to pursue a businessdestined 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 andservices and unsatisfied demand for additional or expanded products and services. 6. Analysis of Local and Regional Industry Trends: Another method of investigatingpotential business opportunities is to research local and regional business andindustry trends. You may be able to identify which business or industrial sectors aregrowing 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 industrytrends. 7. Internal Capacity: The board, staff or membership of your organization maypossess knowledge and skills in a particular business sector or industry. Your organization may wish to draw upon this internal expertise in selecting potentialbusiness opportunities. 8. Internal Purchasing Needs / Collaborative Procurement: Perhaps,theorganization frequently purchases a particular service or product. If nearbyaffiliate organizations also use this service or product, this may present a businessopportunity. Examples of such products or services include printing or copyingservices, travel, services, transportation services, property management services,office supplies, catering services, and other products.

4. What is the chief purpose of a Business Continuity Plan and what are itscomponents for effective implementation. Explain in a sentence or two as to howit is different from a Business Plan. Ans. The Business Continuity Plan is a tool to allow organizations to consider the factors andsteps necessary to prepare for a crisis (disaster or emergency) so that it can manageand survive the crisis and take all appropriate actions to help ensure the organizationscontinued viability. The advisory portion of the plan is divided into two parts: Planning process : It provides step-by-step Business Continuity Plan preparationand activation guidance, including readiness, prevention, response, and recovery/ resumption. Implementation and maintenance: It gives the details of tasks required for theBusiness Continuity Plan to be maintained as a living document, changing andgrowing with the organization and remaining relevant and executable.The purpose of the business continuity plan

is to prepare to face the unthinkablesituations that may threaten an organizations future. This new challenge goes beyondthe mere emergency response plan or disaster management activities that wepreviously employed. Organizations now must engage in a comprehensive process bestdescribed generically as Business Continuity. It is no longer enough to draft a responseplan that anticipates naturally, accidentally, or intentionally caused disaster or emergency scenarios.Todays threats require the creation of an on-going, interactive process that serves toassure the continuation of an organizations core activities before, during, and mostimportantly, after a major crisis event.In the simplest of terms, it is good business for a company to secure its assets. CEOsand shareholders must be prepared to budget for and secure the necessary resourcesto make this happen. It is necessary that an appropriate administrative structure be putin place to effectively deal with crisis management. Following steps are required to fulfilled for effective implementation of the businesscontinuity plan: 1. Educate and Train: The BCP is only as valuable as the knowledge that othershave of it. Education and training are necessary components of the BCP process.They require a time commitment from the Crisis Management Team, the ResponseTeams, and the general employee population. 2. Educate and Train Teams : The Crisis Management and Response Teams shouldbe educated about their responsibilities and duties. Check lists of critical actionsand information to be gathered are valuable tools in the education and responseprocesses. 3. Educate and Train All Personnel: All personnel should be trained to perform their individual responsibilities in case of a crisis. Such training could include proceduresfor evacuation, shelter-in-place, check-in processes to account for employees,arrangements at alternate worksites, and the handling of media inquiries by the company. 4. Review of BCP: The BCP should be regularly reviewed and evaluated. Reviewsshould occur according to a pre-determined schedule, and documentation of thereview should be maintained as necessary. The following factors can trigger areview and should otherwise be examined once a review is scheduled: Risk Assessment Sector/Industry Trends Regulatory Requirements Event Experience Test/Exercise Results 5. Maintenance of BCP : Regular maintenance of the BCP cannot beoveremphasized. Clear responsibility for BCP maintenance should be assigned.Maintenance can be either

planned or unplanned and should reflect changes in theoperation of the organization that will affect the BCP. Difference between a Business plan & Business continuity Plan A Business plan is a detailed description of how an organisation intends toproduce, market and sale a product or service. A Business continuity plan is anongoing process supported by senior management and funded to ensure that thenecessary steps are taken to identify the impact of potential losses, maintainviable recovery strategies and plans, and ensure the continuity of operationsthrough personnel training, plan ,testing and maintenance. A Business continuity plan is a tool which allows organisations to consider thefactors and steps necessary to prepare for a crisis.(disaster or emergency).Whereas a business plan is not prepared for such type of disaster or emergency. In a business continuity plan, a necessary Administrative structure is put in placeto effectively deal with crisis management, whereas,in a business plan, no suchadministrative structure is available.

Q.5. Take any three examples of the components of a Decision Support System andexplain how they help decision making. Ans. Following are the three components of a Decision Support System 1.Annual Budget: It is really a business plan. The budget allocates amounts of money to every activity and/or department of the firm. As time passes, the actualexpenditures are compared to the budget in a feedback loop. During the year, or atthe end of the fiscal year, the firm generates its financial statements: the income statement, the balance sheet, the cash flow statement. When putting together,these four documents are the formal edifice of the firms finances. However, they cannot serve as day-to-day guides to the General Manager. 2. Daily Financial Statements: The Manager should have access to continuouslyupdated statements of income, cash flow, and a balance sheet. The most importantstatement is that of the cash flow. The manager should be able to know, at each andevery stage, what his real cash situation is as opposed to the theoretical cashsituation which includes accounts payable and account receivable in the form of expenses and income. 3. The Daily Ratios Report:

This is the most important part of the decision supportsystem. It enables the Manager to instantly analyse dozens of important aspects of the functioning of his company. It allows him to compare the behaviour of theseparameters to historical data and to simulate the future functioning of his companyunder different scenarios. It also allows him to compare the performance of hiscompany to the performance of his competitors, other firms in his branch and to theoverall performance of the industry that he is operating in.The Manager can review these financial and production ratios. Where there is astrong deviation from historical patterns, or where the ratios warn about problems inthe future management intervention may be required. Q.6.Name and explain any three ways in which a Companys CSR can be expressed. Ans. CSR is a concept whereby companies integrate social and environmental concerns intheir business operations and in their interaction with their stakeholders on a voluntarybasis as they are increasingly aware that responsible behaviour leads to sustainablebusiness success.CSR is also about managing change at company level in a socially responsible manner.This happens when a company seeks to set the trade-offs between the requirementsand the needs of the various stakeholders into a balance, which is acceptable to allparties. If companies succeed in managing change in a socially responsible manner,this will have a positive impact at the macro-economic level.Following are the different ways in which company's CSR can be expressed. 1.Employment and Social Affairs Policy Within a business CSR relates to quality employment, life-long learning, information,consultation and participation of workers, equal opportunities, integration of people withdisabilities anticipation of industrial change and restructuring. Social dialogue is seen asa powerful instrument to address employment-related issues.Employment and social policy integrates the principles of CSR, in particular, through theEuropean Employment Strategy, an initiative on socially responsible restructuring, theEuropean Social Inclusion Strategy, initiatives to promote equality and diversity in theworkplace, the EU Disability Strategy and the Health and Safety Strategy.In its document "Anticipating and managing change: a dynamic approach to the socialaspects of corporate restructuring", the Commission has stressed that properly takinginto account and addressing the social impact of restructuring contributes to itsacceptance and to enhance its positive potential. The Commission has called upon thesocial partners to give their opinion in relation to the usefulness of establishing atCommunity level a number of principles for action, which would support business goodpractice in restructuring situations.Deeply rooted societal changes such as increasing participation of women in the labour market should be reflected in CSR, adapting structural changes and changing the workenvironment in order to create more balanced conditions for both gendersacknowledging the valuable contribution of women as strategies which will benefit thesociety as well as the enterprise itself. 2. Enterprise policy

Only competitive and profitable enterprises are able to make a long-term contribution tosustainable development by generating wealth and jobs without compromising thesocial and environmental needs of society. In fact, only profitable firms are sustainableand have better chances to adopt/develop responsible practices.The role of enterprise policy is to help create a business environment, which supportsthe Lisbon objective of becoming the worlds most dynamic knowledge-driven economy,supports entrepreneurship and a sustainable economic growth. Its objective is to ensurea balanced approach to sustainable development, which maximises synergies betweenits economic, social and environmental dimensions. 3. Consumer Policy CSR has partly evolved in response to consumer demands and expectations.Consumers, in their purchasing behaviour, increasingly require information and reassurance that their wider interests, such as environmental and social concerns, arebeing taken into account.Consumers and their representative organisations have an important role to play in theevolution of CSR. If CSR is therefore to continue to serve its purpose, strong lines of communication between enterprises and consumers need to be created.