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Question 1 Explain the concept of SBU in a Multi Business Organization. Identify the Three
levels of Strategy-Corporate,
Business and Functional. How do Goals and Objectives vary at each Level?
Answer-----Strategic business units are absolutely essential for multi product organizations.
These business units are basically known as profit centers. They are focused towards a set of
products and are responsible for each and every decision / strategy to be taken for that particular
set of products. Strategic business units can be best explained with an example.
Example of Strategic business units The best example of strategic business unit would be to
take organizations like HUL, P&G or LG in focus. These organizations are characterized by
multiple categories and multiple product lines. For example, HUL may have a line of products in
the shampoo category, Similarly LG might have a line of products in the television category.
Thus to track the investments against return, they may classify the category as a different SBU
itself.
There are several reasons SBUs are used in an organization and they are mentioned in my post
on the importance for using SBUs in a multi product organization. However, along with the
reasons for using SBUs there are also some powers which needs to be inferred on an SBU.
Planning independence, Empowerment and others are such powers which influence a SBU. 3 of
such features are discussed below.
1) Empowerment of the SBU manager Several times the empowerment of SBU managers is
crucial for the success of the SBU / products. This is mainly because this manager is the one who
is actually in touch with the market and knows the best strategies which can be used for optimum
returns. Thus several times, the SBU manager might need a higher investment for his products.
At such times the manager should be supported from the organization. Only this confidence will
help the manager in the progress of the SBU.
2) Degree of sharing of one SBU with another This point is directly connected to the first
one. What if one SBU needs some budget but the same is not offered because the budget is being
shared by 2 other SBUs and as it is the budget is short. Thus the first SBU does not get the
independence to implement some important strategies. Similarly there might be other restrictions
applied to one SBU as it is using some resources which are shared by another SBU. This might
not always be negative. Of one SBU gains more profit than usual, this revenue might also

become useful for the other SBU thereby promoting growth of both of them. This is where
sharing actually plays a positive role.
3) Changes in the market An SBU absolutely needs to be flexible because it needs to adapt
to any major changes in the market. For example if an LCD manager knows that LEDs are
more in demand now, he needs to communicate to the top management that he would also like a
range of LED products to make the SBU even more profitable. Thus by adding LED to its
portfolio, the SBU can immediately become double profitable. Thus by adjusting to change on
SBU levels, the organization as a whole can become profitable.
The key to Strategic business management is to have a strict watch on the investment and returns
from each SBU. The SBU manager too plays a crucial role in this and hence he is recruited from
the industry with extensive experience of that particular industry. Portfolio / Multi SBU
management and is done at the absolute top level of the management. Each and every change in
the market, and its affect on SBUs is anticipated which is then taken into consideration. Hence,
for a multi product organization, business management may actually mean product portfolio
management or SBU management.

Strategy may operate at different levels of an organization -corporate level, business level, and
functional level.
Corporate Level Strategy
Corporate level strategy occupies the highest level of strategic decision-making and covers
actions dealing with the objective of the firm, acquisition and allocation of resources and
coordination of strategies of various SBUs for optimal performance. Top management of the
organization makes such decisions. The nature of strategic decisions tends to be value-oriented,
conceptual and less concrete than decisions at the business or functional level.
Business-Level Strategy.
Business-level strategy is applicable in those organizations, which have different businessesand each business is treated as strategic business unit (SBU). The fundamental concept in SBU is
to identify the discrete independent product/market segments served by an organization. Since
each product/market segment has a distinct environment, a SBU is created for each such
segment. For example, Reliance Industries Limited operates in textile fabrics, yarns, fibers, and a

variety of petrochemical products. For each product group, the nature of market in terms of
customers, competition, and marketing channel differs.
There-fore, it requires different strategies for its different product groups. Thus, where SBU
concept is applied, each SBU sets its own strategies to make the best use of its resources (its
strategic advantages) given the environment it faces. At such a level, strategy is a comprehensive
plan providing objectives for SBUs, allocation of re-sources among functional areas and
coordination between them for making optimal contribution to the achievement of corporatelevel objectives. Such strategies operate within the overall strategies of the organization. The
corporate strategy sets the long-term objectives of the firm and the broad constraints and policies
within which a SBU operates. The corporate level will help the SBU define its scope of
operations and also limit or enhance the SBUs operations by the resources the corporate level
assigns to it. There is a difference between corporate-level and business-level strategies.
For example, Andrews says that in an organization of any size or diversity, corporate strategy
usually applies to the whole enterprise, while business strategy, less comprehensive, defines the
choice of product or service and market of individual business within the firm. In other words,
business strategy relates to the how and corporate strategy to the what. Corporate strategy
defines the business in which a company will compete preferably in a way that focuses resources
to convert distinctive competence into competitive advantage.
Corporate strategy is not the sum total of business strategies of the corporation but it deals with
different subject matter. While the corporation is concerned with and has impact on business
strategy, the former is concerned with the shape and balancing of growth and renewal rather than
in market execution.
Functional-Level Strategy.
Functional strategy, as is suggested by the title, relates to a single functional operation and the
activities involved therein. Decisions at this level within the organization are often described as
tactical. Such decisions are guided and constrained by some overall strategic considerations.
Functional strategy deals with relatively restricted plan providing objectives for specific
function, allocation of resources among different operations within that functional area and
coordi-nation between them for optimal contribution to the achievement of the SBU and
corporate-level objectives. Below the functional-level strategy, there may be operations level
strategies as each function may be dividend into several sub functions. For example, marketing

strategy, a functional strategy, can be subdivided into promotion, sales, distribution, pricing
strategies with each sub function strategy contributing to functional strategy.

Question 3 Discuss the various grand strategies at the Corporate Level i.e. Stability, Growth
and Retrenchment.
Answer ------Corporate Level Strategies
Kinds of Grand Strategies:
* Stability Strategies
* Growth Strategies
* Retrenchment Strategies
* Combination Strategies
Stability Strategies
The basic approach is maintain present course: steady as it goes.
In an effective stability strategy, companies will concentrate their resources where the company
presently has or can rapidly develop a meaningful competitive advantage in the narrowest
possible product-market scope consistent with the firms resources and market requirement's
Types of Stability Strategies
* No change strategy:
* Firms adopting this strategy maintain the same level of operations
* Small business firms desire satisfactory level of operations rather than growth
* Pause and proceed strategy:
* Slow growth is more desired rather than maintenance of status quo
* A sustainable growth strategy is more optimistic than the zero growth
Stability Strategy of Indian Companies
* Many companies in different industries have been forced to adopt stability strategy because of
over capacity in the industries concerned.
For Example:
Steel Authority of India has adopted stability strategy because of over capacity in steel sector.
Instead it has concentrated on increasing operational efficiency of its various plants rather than
going for expansion.
Others industries are heavy commercial vehicle, coal industry.
Example:
Apart from over capacity, regulatory restrictions in some industries have forced companies to
adopt stability strategy.
Cigarette, liquor industries fall in this category because of strict control over capacity expansion.
Both these industries require license under the provisions of Industries (Development and
regulations) Act, 1951.
Growth or expansion Strategies

If we look at the corporate performance in the recent years, we find how the various
organizations have grown both in terms of sales and profit as well as assets.

Question 4 . Describe the benefits of Good Strategic Planning? Define and give examples of key
terms of Strategic Management?
Answer----Strategic management allows and organization to be more proactive than reactive in
shaping its own future; it allows an organization to initiate and influence activities and thus to
exert control over its own destiny.Small business owners, chief executive officers,presidents and
managers of many for-profit and non-profit organizations have recognized and realized the
benefits of strategic management.
Historically, the principle benefit of strategic management has been to help organizations
formulate better strategies through the use of the more systematic,logical and rational approach
to strategic choice.
Financial Benefits:
1.Improvement in sales.
2.Improvement in profitability.
3.Improvement in productivity.
Non-Financial Benefits:
1.improved understanding of competitors strategies.
2.Enhanced awareness of threats.
3.Reduced resistance to change.
4.Enhanced problem-prevention capabilities.
Strategic planning is an involved, intricate, and complex process that takes an organization into
uncharted territory. It does not provide a ready-to-use prescription for success; instead, takes the
organization through a journey and offers a framework for addressing questions and solving
problems. Being aware of potential pitfalls and being prepared to address them is essential to
success.
Some pitfalls to watch for and avoid in strategic planning are these:
Using strategic planning to gain control over decisions and resources
Doing strategic planning only to satisfy accreditation or regulatory requirements
Too hastily moving from mission development to strategy formulation
Failing to communicate the plan to employees, who continue working in the dark
Top managers making many intuitive decisions that conflict with the formal plan
Top managers not actively supporting the strategic-planning process

Failing to use plans as a standard for measuring performance

Delegating planning to a planner rather than involving all managers
Failing to involve key employees in all phases of planning
Failing to create a collaborative climate supportive of change