NOTES ON STRATEGIC MANAGEMENT (BCOM B&I)

Q. 1 Define strategic management. Illustrate & explain the process of S.M. Ans. Defining Strategic Management : Strategic management can be defined as the art and science of formulating, implementing, and evaluating cross-functional decisions that enable an organization to achive its objectives. As this definition implies, strategic management focuses on integrating management, marketing, finance/ accounting, production/operations, research and development, and computer information systems to achieve organizational success. The term strategic management in this text is used synonymously with the term strategic planning. The latter term is more often used in academia. Sometimes the term strategic management is used to refer to strategy formulation, implementation, and evaluation, with strategic planning referring only to strategy formulation. The purpose of strategic management is to exploit and create new and different opportunities for tomorrow: long-range planning, in contrast, tries to optimize for tomorrow the trends of today. The term strategic planning orginiated in the 1950s and was very popular between the mid 1960 and the mid 1970s. During these years, strategic planning was widely believed to be the answer for all problems. At the time, much of corporate America was obsessed with strategic planning. Following that boom, however, strategic planning was cast aside during the 1980s as various planning models did not yield higher returns. The 1990s, however, brought the revival of strategic planning and the process is widely practiced today in the business world. A strategic plan is, in essence a companys game plan. Just as a football team needs a good game plan to have a chance for success, a company must have a good strategic plan to compete successfully. Profit margins among firm in most industries have been so reduced that there is little room for error in the overall strategic plan. A strategic plan results from tough managerial choice among numerous good alternatives, and it signals commitment to specific markets, policies, procedures, and operations in lieu of other, less desirable courses of action. The term strategic management is used at many colleges and universities as the subtitle for the capstone course in business administration Busines Policy which integrates material from all business courses. The Strategic Management Club Online at www.strategyclub.com offers many benefits for business policy and strategic management students. Stage 1 : Strategy formulation includes developing a vision an mission, identifying an organizations external opportunities and threats, determining internal strengths and weaknesses, establishing long-term objectives, generating alternative strategies, and choosing particular strategies to pursue. Strategy formulation issues include deciding what new businesses to enter, what businesses to abandon, how to allocate resources, whether to expand operations or diversify, whether to enter international markets, whether to merge or form a joint venture, and how to avoid a hostile takeover. Because no organization has unlimited resources, strategists must decide which alternative strategies will benefit the firm most. Strategy formulation decision commit an organization to specific products, markets, resources, and technologies over an extended period of time. Strategies determine long-term competitive advantages. For better or worse, strategic decision have major multifunction consequences and enduring effects on an organization. Top

managers have the best perspective to understand fully the ramifications of strategyformulation decisions; they have the authority to commit the resources necessary for implementation. Stage 2 : Strategy implementation requires a firm to establish annual objectives, devise policies, motivate employees, and allocate resources so that formulated strategies can be executed. Strategy implementation includes developing a strategy-supportive culture, creating an effective organizational structure, redirecting marketing efforts, preparing budgets, developing and utilizing information systems, and linking employee compensation to organizational performance. Strategy implementation often is called the action stage of strategic management. Implementing strategy means mobilizing employees and managers to put formulated strategies into action. Often considered to be the most difficult stage in strategic management, and sacrifice. Successful strategy implementation hinges upon managers ability to motivate employees, which is more an art than a science. Strategies formulated but not implemented serve no useful purpose. Stage 3 : Strategy evaluation is the final stage in strategic management. Managers desperately need to know when particular strategies are not working well; strategy evaluation is the primary means for obtaining this information. All strategies are subject to future modification because external and internal factors are constantly changing. Three fundamental strategy evaluation activities are (i) reviewing external and internal factors that are the bases for current strategies. (ii) measuring performance, and (iii) taking corrective actions. Strategy evaluation is needed because success today is no guarantee of success tomorrow! Success always creates new and different problems; complacent organizations experience demise. Q. 2 Define SM & its importance for an organization? Ans. The world strategy is derived from the Greek work Strategtia which was sued first around 400 B.C. This connotes the art and science of directing military forces. Simply put, strategy outlines how management plans to achieve its objectives. Strategy is the product of the strategic management process. In todays dynamic environment, an organization, whether large or small, must be managed strategically. The decisions in an organization cannot simply be based on long stranding rules, policies, or standard operating procedures. Instead the corporate management must look to the future, to plan organization wide objectives, initiate strategy, and set policies. Strategic management is a stream of decision and actions which lead to the development of an effective strategy or strategies process is the way in which strategists determine objectives and make strategic decision. Strategic management can be found in various types of organizations, business, service, co-operative, government, etc. Alfred Chandler defined strategy as the determination of the basic long-term goals and objectives of an enterprise, and the adoption of courses of action and the allocation of resources necessary for carrying out these goals. The organizations is depicted as choosing its goals, identifying the courses of action (or strategies) that best enable it to fulfill its goals and allocating resources accordingly. Borad-scope, large scale management processes became dramatically more sophisticated after World War Ii. These processes responded to increases in the

size and number of competing firms; to the expanded role of government as a buyer, seller, regulator, and competitor in the free enterprise system, and to greater business involvement in international trade. Perhaps, the most important in management processes came in the 1970s, when long range planning, new venture management, planning, programming, budgeting, and business policy were blended. At the same time, increased emphasis was placed on environmental forecasting and external considerations in formulating and implementing plans. This all encompassing approach is know as strategic management. Strategic management is defined as the set of decisions and actions that result in the formulation and implementation of plans designed to achieve a companys objectives. The environment is becoming more and more complex. Prediciting the future with accuracy is difficult. The number of variables to be considered in the decision making process are increasing. Production and other management systems and related technologies become obsolete within a short span of time. The number of events both dometic and world affecting the organization is increasing. With all these happening, over-reliance on experience may prove to be costly. More reliance has to be placed on creativity, innovation and new ways of looking at the organization in the world in which we exist. A rapidly changing environment requires that managers make a clear distinction between long range planning and strategic planning which is a the major directions for the organization i.e., mission, major products/ services to be offered and major market segments to be sereved. Without the major directions being set before, establishing objectives does not carry much sense. The strategic management is the major vechile for planning and implementing major changes an organization must make. It has often been seen that change comes through the implemention and not through a plan. Though strategic management beings with strategic planning, the other components are no less important. Especially, when we talk about the implementation of strategic plans, the need for proper corporate culture, organization structure, rewards and recognition, and appropriate policies regarding performance appraisal need to be stressed. Q. 3 What are the various levels of SM? Ans. Levels of Strategic Management : Strategies may exist at three levels in an organization. They are classified according to the scope of what they are intended to accomplish. The levels are corporate level, business level and operating level. 1. Corporate level : Strategies that address what businesses a multiple-business-unit organization will be in and how resources will be allocated among those businesses are referred to as corporate strategies. They are established at the highest levels of management and involve a long-range time horizon. The Board of Directors and the Chief Executive Officer are the primary groups involved in this level of strategy making. Corporate planners and consultants may also be involved. In small and family owned businesses the enterpeneur is both the general manage and chif strategic manager. Here the strategy is concerned with what sorts of business should the company as a whole be in. Decisions like spreading the range of business interest, the types of business the company should enter,

widening of range of products or services or geographic area to mode in are strategic decisions of the general sort. 2. Business level : Business strategies focus on how to compete in a given business. Narrower in scope than a corporate strategy, business strategy generally applies to a single business unit. Strategic Business Unit (SBU) managers are involved at this level in taking strategic decisions. Here strategies are about how to compete in particular product-markets. The strategies here are related to a unit within the organization. 3. Operating level (functional level): Functional strategies are narrower in scope than business trategies and deal with the activities of the functional areas production, finance, marketing, personnel and the like. This third level of strategy is at the operating end of the organization. Here, the strategies are concerned with how the different functions of the enterprise like marketing, finance, manufacturing, etc. contribute to the strategies of other levels. Their contributions are important in terms of how can an organization become competitive. Competitive strategy may depend to a large extent on decisions about market entry, price, product offer, financing, manpower, investment in plant, etc. In themselves, these are decisions of strategic importance but are made, or at least strongly influenced at operational levels. Q. 4 State the importance of Strategic Planning for a Business Firm? Ans. If you dont know where your business is going, any road will get you there. Entrepreneurs and business managers are often so preoccupied with immediate issues that they lose sight of their ultimate objectives. Thats why a business review or preparation of a strategic plan is a virtual necessity. This may not be a recipe for success, but without it a business is much more likely to fail. A sound plan should : (i) serve as a framework for decisions or for securing support/approval. (ii) Provide a basis for more detailed planning. (iii)explain the business to others in order to inform, motivate and involve. (iv) assist benchmarking and performance monitoring. (v) stimulate change and become building block for next plan. A strategic plan should not be confused with a business plan. The former is likely to be a (very) short document whereas a business plan is usually a much more sunbstantial and detailed document. A strategic plan can provide the foundation and framework for a business plan. For more information about business plans, refer to writing a Business plan, Insights into Business Planning and Free plan: Business Plan Guide and Template. A strategic plan is not the same thing as an operational plan. The former should be visionary, conceptual and directional in contrast to an operational plan which is likely to be of shorter term, tactical, focused, implemental and measurable. As an example, compare the process of planning a vacation (where, when, duration,

budget, who goes, how travel are all strategic issues) with the final preparations (tasks, deadlines, funding, weather, packing, transport and so on are all operational matters). A satisfactory strategic plan must be realistic and attainable so as to allow managers and entrepreneurs to think strategically and act operationally see Devising Business Strategies for further insights. BASIC APPROACH TO STRATEGIC PLANNING : A critical review of past performance by the owners and management of a business and the preparation of a plan beyond normal budgetary horizons require a certain attitude of mind and predisposition. Some essential points which should be observed during the review and planning process include the following : (i) Relate to the medium term i.e. 2/4 years (ii) Be undertaken by owners/directors. (iii)Focus on matters of strategic importance (iv) Be separated from day-to-day work (v) Be realistic, detached and critical. (vi) Distinguish between cause and effect. (vii)Be reviewed periodically (viii)Be written down. As the precursor to developing a strategic plan, it is desirable to clearly identify the current status, objectives and strategies of an existing business or the latest thinking in respect of a new venture. Correctly defined, these can be used as the basis for a critical examination to probe existing or perceived. SWOT ANALYSIS : It is an acronym to describe Strengths, Weaknesses, Opportunities and Threats that are important factors for a specific business. Strengths and weakness are internal to the organization and often relate to resources. For eg: The organization does not have people with the right skill, (a weakness); the organization is generally good profit (strength). Opportunities and threats relate to the external environment for e.g. Threat of a slow down in economy or development of new market (opportunity). Carrying on a SWOT analysis enables an organization to develop strategies for the future. We need to ask the following questions : (i) How can we best exploit our strengths in relation to our opportunities? (ii) What new markets and market segments might be suitable for our existing strengths and capabilities? (iii)How can we reduce or neutralize our critical weakness? (iv) How can we reduce or neutralize critical threat and turn them into opportunities? This then leads to strategy development covering the following issues discussed in more detail below : (i) Vision. (ii) Mission. (iii)Values. (iv) Objectives. (v) Strategies. (vi) Goals. (vii)Programs. KEY STEPS TOWARDS A STRATEGIC PLAN : The preparation of a strategic plan is a multi-step process covering vision, mission, objectives, values, strategies, goals and programs. These are discussed below. 1. Vision : Whenever an organization is set up there should be a very clear vision of how it is

going to contribute to the immediate community without harming the physical environment. The first task thus is to develop a realistic vision for the business, which would present a picture of the business in 3 to 5 years time in terms of its physical appearance, size and activities. Also define the companys markets, customers, processes, location, staffing, etc. Example : Shri JRD Tata is one of the greatest visionary, who became the chairman of Tata Sons Ltd. at the age of 34 and his visionary leadership and disciplined approach led the Tata Group to new heights. The Tata ventures grew from 13 to 80 diversified industries, encompassing steel, tea, powers generation. Engineering, hotels and IT to name a few. The name TATA bears trust in the workmanship all due to the vision of Shri J.R.D. Tata. 2. Mission Statement : The nature of a business is often expressed in terms of its mission the mission statement indicates the purpose of a business. For example: The mission statement of ICICI Bank. To be preferred provider of comprehensive and world class investment and banking soulutions to the Financial Institution Group (FIG) clients. Thus the focus of ICICI Bank would be to cater to the needs of the Domestic Financial Institutions and retail customers. The best example of a well spelt one mission statement is that of Sony Corporation, which was defined by the founding Chairman Mr. Akio Morita. He has made a mission statement upto year 2050. 3. The values : The next element is to address the Values governing the operation of the business and its conduct or relationship with society at large, customers, suppliers, employees, local community and other stakeholders. 4. The Objectives : The third key element is to explicitly state the businesss Objectives in terms of the results it needs/wants to achieve in the medium/long term. Aside from presumably indicating a necessity to achieve regular profits (expressed as return on shareholders funds), objectives should relate to the expectations and requirements of all the major stakeholders, including employees, and shoul reflect the underlying reasons for running the business. These objectives could cover growth, profitability, technology, offerings and markets. Q. 5 Explain the Advantages & Disadvantages of S.M. for a Business Organization. Ans. ADVANTAGES OF STRATEGIC MANAGEMENT : 1. Discharges Board Responsibility :

The first reason that most organizations state for having a strategic management process is that it discharges the responsibility of the Board of Directors. 2. Forces an Objective Assessment : Strategic management providers a discipline that enables the Board and senior management actually take a step back from the day-to day business to think about the future of the organization. Without this discipline, the organization can become solely consumed with working through the next issue or problem without consideration of the larger picture. 3. Provides a Framework for Decision - Making : Strategy provides a framework within which all staff can make day-to-day operational decisions and understand that those decisions are all moving the organization in a single direction. It is not possible (nor realistic or appropriate) for the Board to know all the decisions the executive director will have to make, nor is it possible(nor realistic or practical) for the executive director to know all the decisions the staff will make. Strategy provides a vision of the future, confirms the prupose and values of an organization, sets objectives, clarifies threats and opportunities, determines methods to leverage strengths, and mitigate weaknesses (at a minimum). As such, it sets a framework and clear boundaries within which decisions can be made. The cumulative effect of these decisions (which can add up to thousands over the year) an have a significant impact on the success of the organization. Providing a framework within which the executive director and staff can make these decisions helps them better focus their efforts on those things that will best support the organizations success. 4. Supports understanding and buy-in : Allowing the board and staff participation in the strategic discussion enables them to better understand the direction, why that direction was chosen, and the associated benefits. For some people simply knowing is enough: for many people, to gain their full support requires them to understand. 5. Enables measurement of progress : A strategic management process forces an organization to set objectives and measures of success. The setting of measures of success requires that the organization first determine what is critical to its ongoing success and then forces the establishment of objectives and keeps these critical measures in front of the board and senior management. 6. Provides an organizational perspective : Addressing operational issues rarely looks at the whole organization and the interrelatedness of its varying components. Strategic management takes an organizational perspective and looks at all the components and the interrelationship between those components in order to develop a strategy that is optimal for the whole organization and not a single component.

DISADVANTGES OF STRATEGIC MANAGEMENT : 1. The future doesnt unfold as anticipated : One of the major criticisms of strategic management is that it requires the organization to anticipate the future environment in order to develop plans, and as we all know, predicting the future is not an easy undertaking. The belief being that if the future does not unfold as anticipated then it may invalidate the strategy taken. Recent research conduted in the private sector has demonstrated that organizations that use planning process achieve better performance than those organizations who dont plan regardless of whether they actually achieved their intended objective. In addition, there are a variety of approaches to strategic planning that are not as dependent upon the prediction of the future. 2. It can be expensive : There is not doubt that in the not for-profit sector there are many organizations that cannot afford to hire an external consultant to help them develop their strategy. Today there are many volunteers that can help smaller organizations and also funding agencies that will support the cost of hiring external consultants in developing a strategy Regardless, it is important to ensure that the implementation of a strategic management process is consistent with the needs of the organization and that appropriate controls are implemented to allow the cost/benefit discussion to be undertaken, prior to the implementation of a strategic management process. 3. Long term benefit v/s immediate results : Strategic management processes are designed to provide an organization with long-term benefits. If you are looking at the strategic management process to address an at the strategic management process to address an immediate crisis within your organization, it wont. It always makes sense to address the immediate crises prior to allocating resources (time, money, people, opportunity cost) to the strategic management process. 4. Impedes flexibility : When you undertake a strategic management process, it will result in the organization saying no to some of the opportunities that may be available. This inability to choose all of the opportunities presented to an organization is sometimes frustrating. In addition, some organizations develop a strategic management process that become excessively formal. Processes that become this established lack innovation and creativity and can stifle the ability of the organization to develop creative strategies. In this scenario, the strategic

management process has become the very tool that now inhibits the organizations ability to change and adapt. Q. 6 What are the Advantages of Business especially with reference to Indian Economy & Finance Market? Ans. The liberalization of the domestic economy and the increasing integration of India with the global economy have helped step up GDP growth rates, which picked up from 5.6% in 1990-91 to a peak level of 77.8% in 1996-97. Growth rates have slowed down since the country has still bee able to achieve 5-6% growth rate in thre of the last six years. Though growth rates has slumped to the lowest level 4.3% in 2002-03 mainly because of the worst droughts in two decades the growth rates are expected to go up close to 70% in 2003-04. A Global comparision shows that India is now the faster growing just after china. This is major improvement given that India is growth rate in the 1970s was very low at 3% and GDP growth in countires like Brazil, Indonesia, Korea, and Mexico was more than twice that of India. Though Indias average annual growth rate almost doubled in the eighties to 5.9% it was still lower than the growth rate in China, Korea and Indonesia. The pick up in GDP growth has helped improve Indias global position. Consequently Indias position in the global economy has improved from the 8th position in 1991 to 4th place in 2001. When GDP is calculated on a purchasing power parity basis India weathered the perfect storm of 2008 rocketing oil prices, increasing food scarcity and hunger, accelerating climate change and the global financial meltdown as one of the worlds powerhouse economies. But how can India sustain and accelerate this growth? As many participants pointed out, sustainable, long-term growth is not a given. Myriad new challenges as well as new opportunities are on the horizon. Montek S. Ahluwalia, Deputy Chairamn, Planning Commission, India was optimistic about Indias potential : There are inherent strengths on the supply side, which make it possible for India to grow. We can handle the constraints. The moment you look at the supply side, India has all that is needed to take off. Growth accelerated from 5.6% in the 1980s to 9% in the five-year period preceding the financial crisis. The economy grew at a rate of 6.7% in 2008-2009 and, despite an inadequate monosoon and a slowdown in agriculture. Growth in 2009-2010 is predicted to be 6.5%. Most economic experts at the Summit predict a return to 9% growth post 2010. To keep his promise of inclusive growth, Prime Minister Singh needs to include those at the bottom of the pyramid in Indias success story and broaden the base of economic growth. The country faces serious constraints from defilencies in infrastructure, education, healthcare, the legal system and the financial sector. To overcome these, the government must keep reforms on track and work with the private sector to find effective models of public-private partnership. At the same time, India must increase its appeal to foreign investors. More investment vocational education and training is needed to bridge the widening skills gap. Q. 7 Explain the term environment with respect to Banking & Insurance Business Discuss the importance of Environmental Analysis in Strategic Management? Ans. WHY ENVIRONMENTAL ANALYSIS?

Managers do not like surprises and they dont like to be caught unaware. Hence, they have to develop an understanding of the environment which is a source of their surprise and uncertainties and should be able to use this understanding while making decisions. The purpose of the environmental analysis is to understand the forces, that affect the organizations performance. Unless the strategic manager understand the pressures and powers of all these fores, he cannot make appropriate strategic decisions for the uncertain future. Managers must systematically analyze the environment, since environmental factors are primary influencers of strategy. Environmental analysis gives strategic manager time to anticipate opportunities and to plan alternative responses to those opportunities. It also helps them to develop an early warning system to prevent threats or develop strategies which can turn a threat to the organizations advantages. In last few decades, almost half of the 100 largest American firms went out of business or became significantly less important to the society due to their failure in anticipating environmental changes. Often companies became convinced that they are invincible and need to examine what is happening in the market place. If the business ceases to adjust itself to the environmental by strategic change, the results would be reflected in less than satisfactory achievement of corporate objectives. Managers need to search the environment to determine (i) what factors the environment present threats to the companys present strategy and accomplishment of objectives; and (ii) what factors in the environment present opportunities for a greater accomplishment of objectives through an adjustment in the companys strategy. Firms which do environmental analysis are more effective than those which dont. Successful firms do more and better analysis than the failing firm. The extent and sophistication of the analysis must meet the demands of the environment. ENVIRONMENTAL ANALYSIS OF INDIAN BANKING SECTOR : Banking Industry in India has travelled a long path to assume its present status. It has undergone a major structural transformation after the independence including the assumption of social banking. The success in transformation has been achieved by overcoming hurdles and impediments, stresses and strains. Thus, the development in the banking industry covers the activities of money lenders with their limited resources and of large scale operations by banks with huge resources and diversified activities. OLDEST SYSTEM OF BANKING : The oldest banking institutions consisted of indigenous banks; money lenders, nidhis etc. They played significant role in the development of banking by meeting the needs of business people and others in the local area. Generally they charge exorbitant rates of interest by exploiting mercilessly illiterate and ignorant villagers and have limited resources. They could not survive successfully in the changing environment of highly technical and business development. They also lost their importance in the rural areas because of competition spread by the Co-operative Banks, Regional Rural Banks and the growing social and political consciousness amongst rural masses. MODERN BANKING SYSTEM : The earliest banking system played a significant role till the Mughal period. Their importance is reduced during the British period as they could not make much use of their services on account of difference in language and style. In order to meet their financial requirements and banking assistance, the English agency houses stared their own banking business in calcutta and Bombay. This was the beginning of the modern banking in India dates back to the last history of modern banking in India dates back to the last quarter of 18 th century. The earliest Europen Bank was started by the English agency houses along with their

trading activities in 1710 in the name of Bank of Hindustan. This was followed by setting up of the Bengal Bank in 1984, General Bank of India in 1786 etc. However, all these banks failed sooner or later due to various reasons. In order to meet the needs of the foreign rulers, a number of quasi banking institutions were established. They included Presidency Bank of Bangal (1806), Presidency Bank of Madras (1840) and the Presidency Bank of Calcutta and later by 1921 these three banks were amalgamated to constitute one bank called Imperial Bank of India. Q. 8 What are the Competitive Advantages of setting up a Business in India. Ans. SETUP BUSINESS IN INDIA : Indian economy is on the spree of encouraging foreign companies to penetrate India markets. Setting up of business in India has now become simpler compare to earlier, years of closed economy. The Indian markets are as on date rated a one of the most vibrant markets from expansion of business point of view. Setting up business in India requires an entrepreneur to streamline the line of thinking as to the ownership pattern. Depending thereon, the format of business is decided. The source of investment is also equally important that will deide the further benefits arising out of multi bilateral treaties with other countries. The Government of India offers many opportunities to multinational companies to venture in India be it software, retail, telecommunication, infrastructure. Investments in all these sectors are governed by the relevant rules and regulations promulgated from time to time. India market is most favoured because 70% of the population is still untapped which is a big number. India has become a favourite destination for business houses worldwide for the following reasons : 1. Large pool of educated low manpower cost in India. 2. Significant lifestyle and standard of living. 3. Cities with world class integrated infrastructure recognized as necessary drivers of Indian economys growth. 4. India has potential to attract more then US $ 100 billion over next five years. 5. Export Oriented Sectors alone to attract US $ 11 billion investments. 6. Increase in FDi will lead to increase in GDP. 7. Potential for creation of 1 million direct and indirect jobs each year. Q. 9 Evaluate the Historic Role & Emenging Role of Government on the Business in India. Ans. Historic Role and Emerging Role of Government : The Government is a political institution, but it has social purpose, it enacts and executes social policies, it exists with social consent, it provides the ways and means of maximizing social benefits and minimizing social costs. The Government has its own form, structure, style and philosophy. Depending on the nature of the Government at work, business has to organize its activity, the businessmen have to define their respective business strategy and business tactics. Starting with a particular ideology or philosophy, the Government of every country formulates and executes a set of policies and programs. Gone are the days of lanissez faire. Business is no longer left alone. Government intervention to some extent to business activity all over the world is a rule rather

than an exception. Therefore, the form and structure of the government is a very important and decisive factor for the business sector. In a democratic set up, the ideology of the ruling party influences ownership, management, structure and size of business. A ruling party, with a rightist inclination may formulate liberal pro-business policies, whereas ruling party with a leftist bias will go in for measures like nationalization and excessive centralization. The philosophy of the ruling party thus may help or hurt the course of business activity. In india, the government took to itself the responsibility of establishing heavy industries and played major role in industrialization of the country. The private sector was given only a minor role. The industrial policy reserved major industries to government in the area of power, petrochemicals, steal, heavy engineering, banking, telecommunication, insurance, railways, aviation, etc. Private sector playrf limited role since establishment of any new business needed the permission of the ministry and multifarious other regulators. This model did not encourage the major participation of private sector in capital intensive projects. This regime continued since independence till early 1980s. India adopted liberalization as a major policy initiative, for faster development of the economy and restrictive policies like entry barrier and licensing were ended. Private sector was allowed to participate in major industries and services which were reserved for government. Even entry of foreign entities to set up shops in India was permitted, throwing open the economy for free play. Only industries and service of strategic importance are still retained in the hands of the government. Hence, the role of government has come down drastically. Now, government is allowing private equity participation or selling most of its public sector undertakings. The government now plays the promotional role and monitors the functioning of the private sector and foreign players. Most of the sectors are now freed for private entry paving the way for competition. Its role is restricted to policy making, monitoring and guiding the industrial development by providing the regulatory framework and fair play. Q. 10 Brietesh explain the impact of Technological Environment on business. Give suitable examples related financial service sector. Ans. INTRODUCTION : Technological changes are having a great impact on the organization. Technological forces represent the major opportunities and threats that must be considered in formulating strategies. Technology can affect the organizations products, services markets, suppliers, competitors, customers and the manufacturing process. If we look at the banking industry technology has played an active role in bringing more business and dramatically changed the way banking was done a decade back. Technology has facilitated the concept of Automated Teller Machine (ATM) whereby the account holder can deposit or withdraw money at his or her convenience. The human interface at the various counters like Teller, clerks etc used to cost a bank over Rs. 8/- per transaction. However due to the technology of ATM, the transaction cost has reduced to less than Rs. 1.50 per transaction. The banks are in a better position to serve their account holders. Hence we have banks which work for 12 hours or even more. The other services which are facilitated by technology for a bank include : (i) Phone Banking. (ii) Credit Card.

(iii)Debit Card. (iv) Dematerialisation (DP) for a Depository. (v) Electronic Transfers (ECS). (vi)Core Banking. (vii)Internet Banking. Technology has resulted in Customer Delight. Today Banking is a pleasure with a freedom to bank anytime, any where. Competition has intensified as everyone is using the same technology. According to Robert Kaplan technology is the outcome of innovations in a business. Technology impacts all organizations in an industry whereas innovation impacts a particular business. For instance ANZ Grindlays Bank was the first to introduce credit cards in India in 1956, followed by DINERS. Soon, this innovation was adopted by all banks in India. Technological change is the development of new artifacts. The artifacts are developed either through investion, innovation or re-innovation. Innovation is the transfer of ideas into artifacts. It I a sequence of activities by which knowledge is translated into a physical reality, and becomes used on a scale having substantial societal impact. It includes more than the act of invention. It includes initiation of the idea, acquisition of necessary knowledge, its transformation into usable products or services, its introduction into to society, and its diffusion and finally its adoption. Akio Marito, the founding Chairman of Sony Corporation, felt the need to hear music while traveling Initially it was just an idea, he pursue it, invented technology which could listen to music while traveling. In the beginning Japanese people did not understand WALKMAN. The first breakthrough came when youngsters in USA were fascinated by this product and the revenues went up. Soon the entire would was rocking with the WALKMAN. As one can see there is a clear cut distinction between Invention and Innovation. An invention is the practical and material embodiment of a concept or an idea. Whereas the commercial use of an invention is called innovation. Thus innovation starts where invention ends. Innovation results in standardized set of systems and procedures. The development and use of innovation is subject to a system of rules, laws, implementing institutions and requires many soft-skills. This combination of knowledge and system constitute technological change. These technological changes an originate in an organization from two sources: 1. Within the organization : This is called the Natural Technology Development process, where the organization through its research and development department develops new technologies, products, processes etc. Most of the pharmaceutical companies allocate huge funds for their R & D department to find a new breakthrough in drugs, and processes. Their competitive advantage depends on how many new formulations, drugs or processes they introduce in the market and capture a major share. 2. Acquired Technology : Wherever any organization hits upon a new product or a proess they normally patent it so that the technology benefit can accrue to them before the competitions start making ME TOO products and services. However, it is the sole discretion the organization who have invented this technology to transfer

it to other organization for a fee. An example can be cited here of the enterainment industry Shri Adhikari Bros Televisions Ltd. started its channel SAB in 2000 with Karishma Kappors advertising campaign Jab dekho Saab Dekho. Soon it became one of the popular channels for numerous programmes. They then sold it to Sony Entertainment Televisions Ltd. (SET) India for a fee. Q. 11 What are the emenging trends in social responsibility ? Ans. CORPORATE CITIZENSHIP : The corporation is viewed as a citizen because of the economic and social influences or forces it has on society. Various stakeholders demand that corporations take an active role in social, environmental, and community concerns as well as carrying out its economic responsibilities. Corporate citizenship is the process of serving a variety of stakeholders with a focus on both economic and social responsibilities. It is based on the nature and quality of various stakeholder inputs and the practices corporations use to develop relationships with stakeholders. Aspects of the multidisciplinary nature of corporate citizenship include : (i) The basic values, policies and practices of the corporation, for example, the development of values statements and codes of ethics, sustainability strategies, and governance practices. (ii) The management of social, ethical and environmental issues within the corporations value chain. (iii)The voluntary contributions made for the economic and social development of the community. (iv) The understanding of stakeholder relationships through social and environmental reporting, social auditing, and stakeholder consultation. CORPORATE SUSTAINABILITY : Corporate Sustainability is a business approach that creates long-term shareholder value by embracing opportunities and managing risks deriving from economic, environmental and social developments. Corporate sustainability leaders achieve long-term shareholder value creation by gearing their strategies and management to harness the markets potential for sustainability products and services while at the same time successfully reducing and avoiding sustainability costs and risks. The quality of a companys strategy and management and its performance in dealing with opportunities and risks derving from economic, economic, environmental and social developments can be quantified and used to identify an select leading companies for investment purposes. Leading sustainability companies lead their industries and strategy, innovation, governance, shareholders, employees and other stakeholders. TRIPLE E BOTTOM LINE (TBL) : The triple e (economic, ethical and environmental) bottom line evaluates a corporatios performance according to a summary of the economic, social and environmental value the corporation adds, or destroys. The marrowest meaning of the term is a framework for measuring and reporting corporate performance against economic, social and environmental indicators. Recently a broader meaning as been attributed to the term in that the concept is used to capture a

whole set of values, issues and processes that corporations must address in order to minimize any harm resulting from their value adding destroying activites. This includes clarifying the corporations purpose and taking into consideration all stakeholders. Q. 12 Businese must be run in a Socially responsible manner comment on the Statement in the Indian Contest. Ans. 1. Business should operate in such a way as to fulfil the public needs, or expectations. It should do so for a very pragmatic reason : Business functions with the consent of society and therefore must be sure to satify the needs of society. 2. A social responsibility role should be undertaken in order to prevent some public criticism and discourage further government involvement or regulation. This is a defensive approach designed to offset possible government action against those in the business system who use their power irresponsibly. 3. Business must realize that society is a system of which corporations are a part, ant that the system is interdependent. Therefore, if business institutions interact with others in society, there is a need for social participation in the complex system that exist in society. Along with increasing interdependence comes the need for mutual involvements among individuals, groups, and organizations in society, or among sub-sectors of society. Business is vunlnerable to the actions or events that occur in order sub-sectors. 4. Social responsibility is in the stockholders interest that is, being socially responsible will simply be profitable especially in the long term. A Harvard University study has found that stakeholder balance companies showed four times the growth rate and eight times employment growth when compared to companies that focused only on profit maximization. 5. A poor social responsibility role on the part of the corporation means poor management to some investors. They view failure to perform in societys interest in much the same way as they view the corporations failure to perform in financial matters. A company considered socially responsible an attract more capital from the public and business community and also attract trading partners. 6. Business must realize that social problems can become opportunities, or can lead to profits. Expenditures on pollution abatement may result in the retrieval of materials that were formerly diposed of as waste, or may allow for equipment to operate more efficiently, therefore generating more profits on future operations.

7. With regard to social responsibility matters, business should take a long as opposed to a short run as opposed to a short run view. Profits may increase in the long run s a result of actions taken at the present time. Companies that display a greater sense of soial responsibility, in many cases, are subject to fewer inspections by the regulatory authorities and may be given fast-track treatment while applying for governmental permits. 8. Business enterprises must be concerned with the public image and the good will generated by responsible soial actions. In 1997, a study by two Boston school of Management professors found that excellent public image earned the corporations a place on the Fortune Magazines annual Most admired Companies list. 9. Companies perceived to have strong CSR find it easier to recruit and retain employees in tight labour markets. 10.Business should be given an opportunity to solve some social problems. The logic behind this argument is that business an solve problems as well as government can and that it certainly cannot do any worse than government has in the past: business possesses the expertise, in its managers and executives, to develop plans to overcome social problems. Most of the governments are experiencing shortage of funds and shrinking resource base. Q. 13 What are the Social Responsibilities of Business? Explain with Examples. Ans. THE PYRAMID OF CORPORATE SOCIAL RESPONSIBILITY : One way to view corporate social responsibility is through Carrolls Pyramid (1991), which he claims presents the concept such that social responsibility will be accepted by a conscientious businessperson. There are four kinds of social responsibility : economic, legal, ethical, and philanthropic that can be depicted in pyramid, as presented in Figure 1. Carroll contends that all of these responsibilities have only become significant in recent years. Economic responsibilities relate to Businesss provision of goods and services in society. Profits result form this activity and are necessary for any other responsibilities to be carried out. It is assumed that corporations will be as profitable as possible, maintain a strong competitive position, and maintain a high level of operating efficiency. Society expects business to conform to laws and regulations, formulated by governments that act as the ground rules under which business must operate. Corporations are expected to pursue profits within the framework of the law, which establishes what are considered fair operations. Society expects that all goods and services and relationships with stakeholders will meet at least minimal legal requirements. Ethical responsibilities include those activities that are not expected or prohibited by society as economic or legal responsibilities. Standards, norms, or expectations that reflect concern for select stakeholder input is fair, just, or in keeping with their moral rights. Ethics or values may be reflected in laws or

regulations, but ethics or values may be reflected in laws or regulations, but ethical responsibilities are seen as embracing the emerging values and norms that society expects of business even if not required by law presently. Philanthropic responsibilities involve being a good corporate citizen and include active participation in acts or programs to promote human welfare or goodwill. Examples are contributions to the arts, charities, and education. Carroll views the pyramid as a basic building block structure with economic performance as a foundation. At the same time, business is expected to obey the law, behave ethically, and be a good corporate citizen. Although the responsibilities are portrayed as separate elements, in practice they are not mutually exclusive: however, the separation aids managers to appreciate the different obligations that are in a constant but dynamic tension with one another. In summary, Carroll views the total social responsibility of business as involving the simultanseous fulfillment of the four responsibilities, which stated in pragmatic terms means that the corporation should strive to make a profit, obey the law, be ethical, and be a good corporate citizen. The concept of corporate social responsibility has been challenged recently, by Freeman and Liedtka, as one that has failed to help create a good society. They claim that conversations about corporations and the good life have been hampered by the concept, and a new form of conversation is necessary. They propose the following propositions to emphasize the fact that the corporate social responsibility concept is still evolving. Carrolls Pyramid of Corporate Social Responsibility : Legal Responsibilit ies Obey the Law

Philanthropic Responsibilities Be a good Corporate citizen

Ethical Responsibiliti es Be ethical, Be profitable

The Pyramid of CSR toward the moral management of organisational Q. 14 What type of Corporate Stakeholders Social Responsibility Initiative has been undertaken by Financial Sector in India. Ans. CSR IN INDIA : A number of recent surveys have been conducted in India to understand what corporate social responsibility (CSR) means in the Indian context, what the expectations of different stakeholders are and the drivers and barriers facing companies. TERI in 2001 conducted a survey called Altered Images: the 2001 state of corporate responsibility in India poll. It traces back the history of CSR in India and suggested that there are four models. The ethical model as suggested by Mahatma Gandhi, where companies voluntarily committed to public welfare and participated in nation building. Then followed the statist model post Indias

independence. Propounded by Jawaharlal Nehru this model calls for state ownership and legal requirements of CSR. The liberal model by Milton Friedman talks about CSR being limited to private owners or shareholders. And the latest is the stakeholder model championed by R Edward Freeman, which calls for companies to respond to all stakeholders needs. All four models co-exist in India today even though a survey by Environics International in July 2001 concluded that India was last in the amount of CSR demanded of companies in a country. One of the weaknesses of the current system is that the agenda is set by industrialized world with little understanding of the diversity of approaches and track record on other parts of the world. Some of the main findings were : (i) Environmental pollution was regarded with great concern by all groups (ii) The main expectation of the companies by the public was that they provide good quality products at low prices, treat employees well without discrimination, protect the environment, help bridge the gap between the rich and the poor, and help in social and economic development. The survey by Partners in Change in 2002 showed that 86% of the companies surveyed mentioned that business has a role to play in social development. The focus of most of these company activities were purely philanthropic and no benefits were expected. Others expected an improved image in the general public and the local areas they operate in. Similarly Centre for Social Markets survey of 2001 describes what companies view as CSR and what they think are the main considerations in being socially and environmentally sustainable. The government was mentioned as a key barrier with unclear policies, bureaucracy, poor monitoring, complicated tax systems and poor infrastructure. Tata Group and information technology companies Infosys and Wipro were mentioned as the most admired companies. UNDP CII (2002) and Indian NGOs.com (2002, also have carried out organized study in the field of CSR in India. The UNDP CII research highlights that social responsibility is not the exclusive domain of the government and passive philanthropy alone no longer constitutes CSR, and companies are in the process of integrating it with strategic CSR. The survey confirm that the transition form the present compliance centic of an enabling environment and array of support measures. PIC and Indian NGOs research confirms that CSR in India is concerned as a standard philanthropic model of social development programmes. The research highlights that awareness of CSR in India is low and belief in Indian companies practicing CSR is even lower. These studies highlight that our present efforts on social responsibility continue to be traditionally in various formats to buy peace, appease people adversely affected in some way or more benevolently aim at earning the goodwill of the neighboring community providing in all some kind of social insurance! In fine print, businesses use these initiatives to seek community sanctions to make money. Corporate social initiatives are therefore suspect and there are doubts whether in this domain the business community can contribute towards sustainable human development. Social responsibility has still remained as an add-on to many corporates, and very few organizations have progressively moved from pure charity work into more focused social investment and areas of capacity building to assist the underprivileged to first become a part of the more developed markets. The UNDP Human Development Index, the UN Global Compact, Global Reporting Initiatives and other voluntary initiatives are encouraging governments and corporations alike to accept that business have are more responsibilities beyond profits. These studies further reveal that MNCs

operating in India are more under scrutiny because they are part of a global supply chain. A report by the India Committee of the Netherlands (2004)has highlighted lack of awareness and substance on corporate social responsibility in supplier relations between Dutch and Indian companies. The report looked at how successfully Dutch companies working in India were able to implement and monitor extraterritoriality programmes in relations to their Indian subcontractors. The 100 Dutch companies in India constituted the fifth highest source of direct foreign investment in India in 2003. Forty companies were approached for the report, on the condition that they were not named. On human rights, for example, the report found that Dutch companies failed to speak out on largescale violations in the region of their operations, and did not have active policies on caste discrimination in employment and other areas. While Dutch companies commonly practice some form of environmental sustainability management, the report concluded that these systems were not manifested further down the supply chain in India. The research highlights that CSR standards and practies are very weakly developed. Even many labour and environmental laws are either insufficiently implemented or not at all. The report has stressed that government should take legal action against such companies and governments need to play a much more pro-active role in CSR and should work toward internationally binding regulation. However on the other hand, many leading foreign MNCs and domestic titans, pre-eminently members of the Tata Group, have been standard-setters on core CSR issues such as labour conditions, health and safety, environmental management, corporate governance and integrity. One of the Tata Group Company, Tata Steel, is the first in the country to produce a corporate sustainability report and administers the only industry town in the world, Jameshedpur, which has received ISO 14001 environmental quality certification. A handful of Indian companies and MNCs operating in India have begun to produce environmental and social reports. These companies include, Infosys, the Tata Group, Ballarpur Industries Limited, Paharpur Business Park, Ford India, Samsung India Electronics, and Cadburys India companies have strated signing up to voluntary international CSR initiatives. There are now some 87 Indian companies, which have signed up to the UN Global Compacts (www.unglobalcompact.org) nine principles on human rights, labour and the environment. As ever, however, the proof of such voluntary commitments will lie in performance being commensurate with promises. Organizations like CSM are involved in the UN Global Compact with the explicit purpose of promoting not only the aims of the Compact, but also meaningful domestic compliance with its objectives. Given the increasing importance given to CSR in corporate circles world-wide, and attendant public pressure for corporate probity, many leading Indian corporates have exhibited their keenness to broadcast their CSR credentials. Regrettably this is to often more a public relations exercise relying on slick advertising, rather than a true reflection of a well-thought out committed business strategy and corporate culture predicated on CSR values. In India, as elsewhere, verification of corporate commitment to voluntary efforts is still a long way off and will require both stakeholder partnership and independent oversight. The Conferderation of Indian Industry (CII) (www.ciionline.org) Indias largest industry body has taken a noteworthy lead in promoting CSR amongst its membership. It has adopt a set of Social Principles with UNDP India and has appointed CSR officers in its regional offices. This has set a positive example to

other industry bodies in India such as FICCI (Federation of Indian Chambers of Commerce & Industry), which have also held CSR-related events. There is a need, however, to move beyond one-off events towards the development of a more systematic and inclusive approach by industry bodies in partnership with NGOs, trade unions and other stakeholders. This will be critical to the successful mainstreaming of CSR in Indian business and industry especially in the absence of a vibrant consumer movement as a key driver. Q. 15 What are the Five Generic Strategies suggested by Michael Porter? Explain with example. Ans.

FOR BANKING INDUSTRY Low Cost leadership Strategy Broad cost Provider Strategy Focused Low Cost Strategy Focused Differentiatio n Strategy Broad Differentiation Strategy

1. Low Cost Provider : Appealing to a broad spectrum of customers based on the overall low cost provides of product or service example from Banking Sector Bank of Mharashtra attracts depositors for savings account by asking them retain only Rs. 100 per cheque book and Rs. 50 for individual cheque (loose). 2. Focused Low-cost Strategy : Concentrating on a narrow buyer segment and driving among the rivals by serving which members at a lower cost e.g. NKGSB co-operative Bank is mainly targeting a very select community of North Kanara GSB exclusively and others and giving them tailor made schemes. 3. Broad Differentiation Strategy : Seeking to differentiation the companys products from its rivals in ways that will appeal to a broad spectrum of buyers. E.g. ICICI Bank has given many unique

products services whereby different customers would bank with them. This includes the Home Loans, consumer Finance. Corporate Finance, etc. 4. Focused Differentiation Strategy : Concentrating on a narrow buyer segment and out-competing rivals by offering which members customized attributes that meet there tests and requirements. For example the HSBC Banking corp. focused on the executives of the major metors and have given them many products/services chief among themcredit card @ 2.25% charges which is the lowest any Bank is giving. 5. Best Cost Provider Strategy : Giving customers more value for money for the company from rivals by incorporating very good attributes e.g. State Bank of India, one of the oldest, largest Bank of India, which is considered in this segment due to its commitment to customer care. Q. 16 Explain the Competitive Advantage Model of Michael Porter. With its Advantages & Disadvantages. Ans. MICHAEL PORTERS FIVE FORCE MODEL : The Porters five forces analysis is a framework for business management developed by Michael Porter in 1979. It uses concepts developed in Industrial Organization (IO) to derive five forces that determine the attractiveness of a market. Porter referred to these forces as the micro environment, to contrast it with the more general term macro-environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally requires a company to re-assess the marketplace. Five Forces Analysis assumes that there are five important forces that determine competitive power in a situation. These are : Force 1 : The Degree of Rivalry among Existing firms : The intensity of rivalry, which is the most obvious of the five forces in an industry, helps determine the extent to which the value created by an industry will be dissipated through head-to-head competition. The most valuable contribution of Porters five forces framework in this issue may be its suggestion that rivalry, while important, is only one of several forces that determine industry attractiveness. Competitive Rivalry : What is important here is the number and capability of your competitors if you have many competitors, and they offer equally attractive products and services, then youll most likely have little power in the situation. If suppliers and buyers dont get a good deal from situation. If suppliers and buyers dont get a good deal from you, theyll go elsewhere. On the other hand, if no-one else can do what you do, then you can often have tremendous strength. This force is located at the centre of the diagram; is most likely to be high in those industries where there is a threat of substitute products; and existing power of suppliers and buyers in the market. Generally competitive rivalry will be high if : (i) There is little differentiation between the products sold between customers. There

is not much differentiation in the branded iodised salt, e.g. TATA and Annapurna. (ii) Competitors are approximately the same size of each other, e.g. Hyundai and General Motors operating in India. (iii)If the competitors all have similar strategies, e.g. Coke v/s Pepsi. (iv) It is costly to leave the industry hence they fight to just stay in (exit barriers) BPCL v/s HPCL. We consider the following points to study the degree of rivalry : (i) Competitive Rivalry. (ii) This is most likely to be high where entry is likely; there is a threat of substitute products, (iii)There is a high competitive power of supplier and buyer in the market place then also there is a threat of rivalry. Force 2 : Bargaining Power of Supplier : Here one has to assess how easy it is for suppliers to drive up prices. This is driven by the number of suppliers of each key input, the uniqueness of their product or service, their strength and control over you, the cost of switching from one to another, and so on. The fewer the supplier choices you have, and the more you need suppliers help, the more powerful your suppliers are. Suppliers are also essential for the success of an organization. Raw materials are needed to another, and so on. The fewer the supplier choices you have, and the more you need suppliers help, the more powerful your suppliers are. Suppliers are also essential for the success of an organization. Raw materials are needed to complete the finished product of the organization. Suppliers do have power. This power comes from : (i) If they are the only supplier or one of few suppliers who supply that particular raw material, e.g. Cotton bails to Textile Industry. (ii) If it is costly for the organization to move from one suppliers to another (known also as switching cost) (iii)If there is no other substitute for their product. Following points have to be considered to know the competitive position of the supplier : (i) There is a possibility of the supplier integrating forward e.g. Brewers buying bars. (ii) Customers are fragmented (not in clusters) so that they have litile bargaining power e.g. Gas/Petrol stations in remote places. (iii)The bargaining power of supplier is high when they are the major and sole supplier of one of the raw material which is crucial to the industry. Eg: Cotton bales for textiles. Force 3 : Bargaining Power of the Buyer : Here one has to ask how easy it is for buysers to drive prices down. Again, this is driven by the number of buyers, the importance of each individual buyer to your business, the cost to them of switching from your products and services to those of someone else, and so on. If you deal with few, powerful buyers, they are often able to dictate terms to you.

Buyers or customers can exert influence and control over an industry in certain circumstances. This happens when: (i) There is little differentiation over the product and substitutes can be found easily. Example : Matchbox - We have Ship and many other brands which are local brands. (ii) Customers are sensitive to price. Example Mobile Subscriber (iii)Switching to another product is not costly. Free SIM card in above case. We consider the following points to access the buying power : (i) This is high where there are few, large players in a market e.g. the large grocery chains. (ii) If there are a large number of undifferentiated, small suppliers e.g. small farming businesses supplying the large grocery chains. (iii)The cost of switching between suppliers is low e.g. from one fleet supplier of trucks to another. (iv) The power of suppliers. (v) The power of suppliers tends to be a reversal of the power of buyers. (vi) Where switching costs are high e.g. Switching from one software supplier To another. Power is high where the brand is powerful e.g. Cadillac Pizza Hut, Microsoft. Force 4 : Threat of Substitution : This is affected by the ability of your customers to find a different way of doing what you do for example, if you supply a unique software product that automates an important process, people may substitute by doing the process manually or by outsourcing it. If substitution is easy and substitution is viable, then this weakens your power. Are there alternative products that customers can purchase over your product that offer the same benefit for the same or less price? The threat of substitution is high when : (i) Price of that substitution product falls. Example, if in comparison to Coke the price of Pepsi falls then people would prefer a Pepsi. (ii) It is easy for consumers to switch from one substitute product to another. (iii)Buyer are willing to substitute. Force 5 : Threat of new Entry : Power is also affected by the ability of companies to enter your market. If is costs little in time or money to enter your market and compete effectively, if there are few economies of scale in place, or of you have little protection for your key technologies, then new competitors can quickly enter your market and weaken your position. If you have strong and durable barriers to entry, then you can preserve a favourable position and take fair advantage of it. The threat of entry is directly affected by the following factors : 1. Economies of scale e.g. the benefits associated with bulk purchasing. The high or low cost of entry e.g. how much will it cost for the latest technology? (i) Ease of access to distribution channels e.g. Do our competitors have distribution channels sewn up? (ii) Cost advantages not related to the size of the company e.g. personal contacts or knowledge that larger companies do not own or learning curve effects. (iii)Will competitors retaliate?

(iv) Government action e.g. will new laws be introduced that will weaken our competitive position? (v) How important is differentiation? E.g. The Champagne brand cannot be copied. ADVANTAGES OF PORTERS FIVE FORCE MODEL : 1. Assessment of the competitive forces by studying the following : (i) Market Size. (ii) Growth Rate. (iii)The number of Rivals and their Unique Selling Position. (USP) 2. To understand the profitability of an business enterprise and its ability to earn superior profits based on the advantage it has in any one on more forces which impact the profits. 3. To know the dominant force which intervenes industrys structure. For example, in Indian Banking especially the private banks dominant face is its investment in Technology which is paying heavy dividends. 4. To know what strategic moves our rivals are making and how to counter attack them. LIMITATIONS OF PORTERS FIVE FORCE MODEL : Porters model is a strategic tool used to identify whether new products, services or businesses have the potential to be profitable. However, it can also be very illuminating when used to understand the balance of power in other situations. Porter argues that five forces determine the profitability of an industry. At the heart of industry are rivals and their competitive strategies linked to, for example, pricing or advertising; but, he contends, it is important to look beyond ones immediate competitors as there are other determinants of profitability. Specifically, there might be competition from substitute products or services. These alternatives may be perceived as substitutes by buyers even though they are part of a different industry. An example would be plastic bottles, cans and glass bottle for packaging soft drinks. There may also be potential threat of new entrants, although some competitors will see this as an opportunity to strengthen their position in the market by ensuring, as far as they can, customer loyalty. Finally, it is important to appreciate that companies purchase from suppliers and sell to buyers. If they are powerful they are in a position to bargain profits away through reduced margins, by forcing either cost increases or price decreases. This relates to the strategic option of vertical integration when the company acquires, or mergers with, a supplier or customer and thereby gains greater control over the chain of activities which leads from basic materials through to final consumption (Luffman and et al., 1996; Wheelen and Hunger, 1998). It is important to be aware that this model has further limitations in todays market environment; as it assumes relatively static market structures. Based originally on the economic situation in the eighties with its strong competition and relatively stable market structures, it is not able to take into account new business models and the dynamism of the industries, such as technological innovations and dynamic market entrants from start-ups that will completely change business models within short times. For instance, the computer and software industry is often considered as being highly competitive. The industry structure is constantly being revolutionized by innovation that indicates Five Forces model being of limited value since it represents no morethan snapshots of a moving picture. Therefore, it is not advisable to develop a strategy solely on

the basis of Porters models (Kippenberger, 1998; Haberberg and Riple, 2001), but to examine it in addition to other strategic frameworks of SWOT and PEST analysis. Nevertheless, that does not mean that Porters theories became invalid. What needs to be done is to adopt the model with the knowledge of their limitations and to use them as a part of a larger framework of management tools, techniques and theories. Q. 17 Illustrate & Explain GE planning Grid. How GE Planning grid is useful in Strategy Formulation? OR Compare BCA & GE grid? Ans. The GE/ McKinsey matrix is more sophisticated than the BCG Matrix in three important aspects : 1. Industry Attractiveness replaces market growth as the dimension of industry attractiveness. Market attractiveness includes a broader range of factors other than just the market growth rate that can be determined by the attractiveness of an industry/market. 2. Competitive Strength replaces market share as the dimension by which competitive strength likewise includes a broader range of factors other than just the market share that can determine the competitive strength of a Strategy. 3. This has a three Dimension GRID. This allows for more sophistication. Factors that Affect Market Attractiveness : Whilst any assessment of market attractiveness is necessarily subjective, there are several factors which can help determine attractiveness. These are listed below : (i) Market Size (ii) Market growth (iii)Market profitability (iv) Pricing trends (v) Competitive intensity (vi) Entry Barriers (vii)Opportunity to differentiate products (viii)Overall risk of returns in the industry (xi) Segmentation (x) Distribution structure (e.g. retail, direct, wholesale) Factors to consider include : (i) Strength of assets and competencies (ii) Relative brand strength (iii)Market share (iv) Customer loyalty (v) Relative cost position (cost structure compared with competitors) (vi) Distribution strength (vii)Record of technological or other innovation (viii)Access to financial and other investment resources (xi) Access to financial and other investment resources (x) Quality of the product/service (ix) Management Strength The business portfolio is the collection of businesses and products that make up the company. The best business portfolio is one that fits the companys strengths and helps exploit the most attractive opportunities. The Company must : (i) Analyse its current business portfolio and decide which businesses should receive more or less investment, and

(ii) Develop growth strategies for adding new products and businesses to the portfolio, whilst at the same time deciding when products and businesses should no longer be retained. The two best-known portfolio planning methods are the Boston Consulting Group Portfolio Matrix and the McKinsey / General Electric Matrix. In both methods, the first step is to identify the various Strategic Business Units (SBUs) in a company portfolio. An SBU is a unit of the company that has a separate mission and objectives and that can be a company division, a product liner or even individual brands it all depends on how the company is organized. Q. 18 Explain McKnisey 7s Framework SM? Ans. According to Waterman et al., organizational change is not simple a matter of structure, although structure is a significant variable in the management of change. Again it is also not a simple relationship between strategy and structure, although strategy is also a critical aspect. In their view effective organizational change may be understood to be a complex relationship between strategy, structure, system, style, skill, staff, and super ordinate goals. The complex relationship is diagrammatically presented in Figure Structure Strategy Super Ordinate goal Skills System

Style

Staff Structure : The design of organizational structure is a critical task of the top management of an organizational. It is the skeleton of the whole organizational edifice. Organisational structure refers to the relatively more durable organizational arrangements and relationships. It prescribes the formal relationships among various positions and activities. Arrangements about reporting relationships, how an organizational member is to communicate with other members, what roles he is to perform and what rules and procedures exist to guide the various activities performed by members are all part of the organizational structure. Organisational structure performs three major functions : (i) It reduces external uncertainty through forecasting research and planning in the organization; (ii) It reduces internal uncertainty arising out of variables, unpredictable, random human behavior within the organization through control mechanism; (iii)It undertakes a wide variety of activities through devices such as departmentalization, specialization, division of labour and delegation of authority:

(iv) it enables the organization to keep its activities coordinated and to have a focus in the midst of diversity in the pursuit of it objectives. Organizational structure as described in the 7-S framework may be compared with superstructure of an organization. The other component of structure, is infrastructure. The design of the superstructure involves such issues as division of organizational tasks and allocation of responsibilities among various positions, relationship between different departments. The superstructure of an organization indicates how differentiated it is or in other words, to what extent the activities of the organization are specialized. One organization may have an engineering department, a manufacturing department and a quality control department. Another may have an engineering department, a manufacturing department, a production planning and control department, a materials planning department and a research and development department. The superstructure also indicates some of the ways in which an organizations tasks are integrated or coordinated. The superstructure is commonly depicted by the organizational chart. Organizational infrastructure refers to the network of information and controls, rules and procedures, decision making mechanisms, authority relationships, etc. These are the less visible aspects of organizations. Infrastructure also enables an organization to undertake a number of diverse tasks and keep them coordinated for the achievement of organizational goals. Organizational structure must be designed in accordance with the needs of the strategy. According to Chandler, changes in an organizations strategy give rise to administrative problems which cannot be resolved with the help of the existing structure, thus necessitating a new structure. According to proponents of the 7-S framework the relationship between strategy and structure, though an important addition to the organizational tool kit, it rarely provides unique structural solutions. Quite often the main problem in strategy relates to execution. System : Systems in the 7-S framework refer to all the rules, regulations, and procedures, both formal and informal that complement the organization structure. In other words, it is the equivalent of the term infrastructure, which was used in the earlier section. It includes production planning and control systems, cost accounting procedures, capital budgeting systems, recruitment, training and development systems, planning and budgeting strategy may be implemented with some changes in strategy may be implemented with some changes in systems rather than in the organisations structure. Changes in organizational structure, for instance from functional to divisional of functional to matrix or divisional to matrix would also necessitate changes in the systems in various degree. The significance of systems in the functioning of organizations is aptly expressed in the following words : To many businessmen, the world systems has a dull, plodding middlemanagement sound. Yet it is astonishing how powerfully systems changes can enhance organizational effectiveness without the disruptive side effects that so often ensue from changes in structures. Style : Style is one of the levers which top managers can use to bring about organizational change. It is one of the so-called soft Ss. Organizations differ from each other in their style of working. The style of an organization, according to the McKinsey framework, becomes evident through the patterns of actions

taken by members of the top management team over a period of time. The aspects of business most emphasized by members of the top management tend to give more attention by people down in the organization. Reporting relationships may also convey the style of the organization. In some organizations the quality control function is embedded in the manufacturing function, but in others it is separate function directly under the chief executive officer. In some organizations, an R&D department may exist as a part of an engineering department, but in others it may be a separate one under the top man. Within the same organization reporting relationships may change as a part of the evolutionary process thus conveying changes in the style of the management. The McKinsey framework considers style as more than the style of top management. Giving the example of an organization which acquires another company after a thorough analysis but failed to make it successful, Waterman, et al., contended that the failure was due to the mismatch of the corporate culture of the acquired organization with that of the parent. Staff : Staffing is the process of acquiring human resources for the organization and assuring that they have the potential to contribute to the achievement of the organizations goals. Staffing is defined as the selection, placement, training and development of appropriately qualified employees, which implies that it includes two fundamentally different processes : selecting people for specific organizational positions and developing in them the abilities and skills that they would need to be effective in those and subsequent assignment. The staffing function applies to the whole organization, i.e., it cuts across all organizational levels is though the processes may be different for different kinds of jobs. In the McKinsey 7-S framework the term staff has a specific connotation. According to Waterman and his colleagues the term staff refers to the way organizations introduce young recruits into the mainstream of their activities and the manner in which they manage their careers as the new entrants develop into future managers. They found that superbly performing companies paid attention to the development of managers. During the period of training programmes on a variety of management related subject Skills : Waterman, et al., consider skill as one of the most crucial attributes or capabilities of an organization. The term skills include those characteristics which most people use to describe a company. Hindustan Lever is known for its marketing skills; Larsen and Toubro for its engineering skills. These are developed over a period of time and are a result of the interaction of a number of factors; performing certain tasks successfully over a period of time, the kind of people in the organization, the top management style, the organization structure, the management systems, the eternal environmental influences, etc. Hence, when organizations make a strategic shift it becomes necessary to consciously build new skills. Skills in the McKinsey framework are the equivalent to the concept of distinctive competence put forth by Selznick. The dominant skills or distinctive competence of an organization are part of the organizational character. Review of the Framework : The successful implementation of a strategy requires the right alignment of various activities and processes within the organization, viz., structure, resource allocation, staffing (both managerial and technical), skills, styles and competences reqards and incentives, polices and procedures, shared values and beliefs. The McKinsey consultants call strategy and structure the hardware

of the organization and suggest that the other five-Ss i.e., systems, style staff, skills and shared values are the software and are often ignored by corporate strategists. While strategy and structure are important to the organization, they by themselves cannot assure success which comes about by corporate commitment. The better the alignment between and among all the seven levers of the organization, the better are likely to be the results. Shared values, the central core of the framework, give rise to a certain spirit among organizational members regarding who we organization in turn is reflected in the values, attitudes and philosophy and give rise to a particular culture. The virtue 0 the 7-S framework is that it highlights some important organizational interconnections and their role in effecting change. Whether and to what extent the organization will be able to bring about the needed shifts in strategy would depend upon the extent of and pace of accomplishment of action plans in the spheres of seven Ss into harmony. When the seven-Ss are in good alignment, an organization is poised and energized to execute strategy to the best of its ability. The McKinesy model provides a convenient checklist for judging whether organization is ripe for implementing strategy. It also helps in diagnosing why the results emanating from the implementation of a strategy fell short of expectations and therefore what new fits would be required. The framework helps strategists in evaluating their organizations along each of the seven dimensions, thereby identifying organizational strengths and weaknesses. Thus, 7-S framework is a powerful expository tool. However, it may be stated that changing the culture of the organization which is pivotal to the McKinsey model is a difficult task. Even after prolonged efforts spanning a period of 5-7 years, the organization may achieve only partial success. Nonetheless, the organization must endeavour to recreate its culture if it is regarded as an important determinant of its success, as is envisaged in the 7-S model. To sum up, the successful execution of a strategy depends on the right alignment of all the Seven Ss. The shared values (a component of culture) play a crucial role in creating a climate of commitment among the members of the organization. The 7-S framework highlights the importance of some interconnections within the organization. The 7-S framework highlights the importance of some inter-connections within the organization and their role in successful execution of strategy. Changing the culture of the organization however is not an easy task. Q. 19 Illustrate & Explain the life Cycle Concept. Explain its utility in Strategic Management. Ans. DIFFERENT STAGES IN PLC : The different stages in a product life cycle are : 1. Market Introduction Stage : (i) cost high. (ii) Sales volume low. (iii)No\little competition competitive manufactures watch for acceptance / segment growth losses. (iv) demand has to be created. (v) customers have to be prompted to try the product. 2. Growth Stage : (i) costs reduced sue to economic of scale. (ii) sales volume increases significantly. (iii)profitability.

(iv) public awareness. (v) competition begins to increase with a few new players in establishing market. (vi) prices to maximize market share. 3. Mature Stage : (i) Costs are very low as you are well established in market and no need for publicity. (ii) sales volume peaks. (iii)increase in competitive offerings. (iv) prices tend to drop due to the proliferation of competing products. (v) brand differentiation, feature diversification, as each player seeks to differentiate from competition with how much product is offered. (vi) Industrial profits go down. 4. Saturation and Decline Stage : (i) costs become counter optimal. (ii) sales volume decline or diminish. (iii)prices, profitability diminish. (iv) profit becomes more a challenge of production / distribution efficiency than increased sales. After a period of development it is introduced or launched into the market; it gains more and more customers as it grows; eventually the market stabilizes and the product becomes mature; then after a period of time the product is overtaken by development and the introduction of superior competitors, it goes into decline and is eventually withdrawn. However, most products fail in the introduction phase. Others have very cyclical maturity phases where declines see thje product promoted to regain customers. STRATEGIES FOR THE DIFFERING STAGES OF THE PLC. 1. Introduction Stage of PLC : The need for immediate profit is not a pressure. The product is promoted to create awareness. If the product has no or few competitors, a skimming price strategy is employed. Limited numbers of product are available in few channels of distribution. Advertising differentiates the product. 2. Growth Stage of PLC : Competitors are attracted into the market with very similar offerings. Products become more profitable and companies form alliances, joint ventures and take each other over. Advertising spend is high and focuses upon building brand. Market share tends to stabilize. Advertising establishes participation with the marketplace. 3. Maturity Stage of PLC : Those products that survive the earlier stages tend to spend longest in this phase. Sales grow at a decreasing rate and then stabilize. Producers attempt to differentiate products and brands are key to this. Price wars and intense competition occur. At this point the market reaches saturation. Producers begin to leave the market due to poor margins. Promotion becomes more widespread and use a greater variety of media. Advertising puts price ahead of the competition. 4. Decline Stage of PLC :

At this point there is a downturn in the market. For example, more innovative products are introduced or consumer tastes have changed. There is intense price-cutting market. Profit can be improved by reducing marketing spend and cost cutting. Defensive advertising or for revitalization. The product life cycle goes through many phases, involves many professional disciplines, and requires many skills, tools and processes. Product Life Cycle (PLC) has to do with the life of a product in the market with respect to business/commercial costs and sales measures; whereas product Lifecycle Management (PLM) has more to do with managing descriptions and properties of a product through its development and useful life, mainly from a business/ engineering point of view. To say that a product has a life cycle is to assert four things : (i) that products have a limited life. (ii) Product sales pass through distinct stages, each posing different challenges, opportunities, and problems to the seller, (iii) Profits rise and fail at different stages of product life cycle, and (iv) Products require different marketing, financial manufacturing, purchasing, and human resource strategies in each life cycle stage. Example : PLC of MARUTI SUZUKI INDIA LTD. Maruti Suzuki is the leader in car segment in India, both in terms of volumes of vehicles sold and revenues earned. 18.28 of the company is owned by Indian Government and 54.2% by Suzuki Motor Corporation, Japan. 1. Introduction Stage : A STAR : (i) Market share and growth is growing. (ii) Substantial cost has been increased on R&D. (iii)Marketing costs are HIGH. 2. Growth Stage : SWIFT, DESIRE, ZEN ESTILO. (i) Rapid growth in sales and profits. (ii) Profits arise due to economies of scale. (iii)Investments are profitable. 3. Maturity Stage : ESTEEM< ZEN< OMNI< Wagon-R (i) Competition is most intense as company fights to maintain their market share. (ii) Most of their moves copied by competitor. (iii)Expense on R & D will improve product efficiency and quality. 4. Decline Stage :VERSA : MARUTI 800 (production stopped) (i) Market is shrinking, reducing the overall amount of profits. (ii) Able to break even. (iii)Transfer production to cheaper markets. CONCLUSION : It is claimed that every product has a life cycle. It is launched it grows, and at some point, may die. A fair comment is that at least in the short term not all products or services die. Jeans may die but clothes probably will not. Legal services or medical services may die, but depending on the social and political climate probably will not. Even though its validity is questionable, it can offer a useful model for managers to keep at the back of their mind. Indeed, if their products are in the

introductory or growth phases, or in that of decline, it perhaps should be at the front of their mind; for the predominant features of these phases may be those revolving around such life and death. Between these two extremes, it is salutary for them to have that vision of mortality in front of them. However, the most important aspect of product life cycles is that, even under normal conditions, to all practical intents and purposes they often do not exist practical intents and purposes they often do not exist (hence, there needs to be more emphasis on model/reality mappings). In most markets the majority of the major brands have held their position for at least two decades. The dominant product life-cycle, that of the brand leaders which almost monopolize many markets, is therefore one of countinuity. Q. 20 How can all Resources of the Company be utilized using varison Functional Strategies? Ans. FUNCTIONAL STRATEGIES : Functional strategies include marketing strategies, new product development strategies, human resource strategies, financial strategies, legal strategies, and information technology management strategies. The emphasis is on short and medium term plans and is limited to the domain of each departments functional responsibility. Each functional department attempts to do its part in meeting overall corporate objectives, and hence to some extent their strategies are derived from broader corporate strategies. Let us look at the various functional strategies : 1. Financial Strategies (Money as a Resource) : It is impossible to control the market, but remaining a success in todays everchanging economy can be achieved with the use of successful corporate financial strategies. This involves making long-term goals and devising a business plan that will see those goals come to fruition. To do this, a business must be flexible and ready for change. Unfortunately, change is not always good. Without a secure plan in place, many businesses can become saddled with debt. One must anticipate changes and adjust there corporate business strategies accordingly. This means examining cash flow, accounts receivable, and evaluating all assets and debts. Maintaining control of your finances can make you aware of any warning signs for trouble. Capital investment decision are long-term choices about which projects receive investment, whether to finance that investment with equity or debt, and when or whether to pay dividends to shareholders. Working capital management deals with the short-term balance of current assets and current liabilities; the focus here is on managing cash, inventories, and short-term borrowing and lending (such as the credit terms extended to customers). Corporate value is enhance when return on capital, a function of working capital management, exceeds cost of capital, a function of capital investment.

Corporate finance is closely related to managerial finance, which is slightly broader in scope, describing the financial techniques available to all forms of business enterprise, corporate or not. Questions which need to be asked for formulating financial strategies of a company are : (i) How much capital would be needed by the company? (ii) Where will this money come from (e.g. equity or debt) ? (iii)How can the company meet its short term financial needs? (iv) How can the company fund the long term financial needs? (v) How do taxes (tax subsidies or penalties) affect corporate financial decisions? Al these lead to the Following Financial Strategies : (i) Capital Structure : Capital structure of the company is the Mix of Equity v/s Debt which should be such that it brings the greatest returns to the shareholders of the company. (ii) Capital Acquisition : Capital acquisition deals with the cost of capitl and one has to weigh the cost of equity with that of debt and a good combination of both so that the overall cost is reduced. (iii)Dividend Management : A company which pays a consistent and good dividend is much sought after by the investor and the company must as policy retains a certain percentage of the profits and declare a good dividend every year. (iv) Capital Allocation : Capital allocation between the long term needs and the short term needs is done through a capital expenditure budget which is very important for a company. 2. Marketing Strategies (Market as a Resource) : Marketing strategy is most effective when it is an integral component of corporate strategy, defining how the organization will engage customers, prospects and the competition in the market arena for success. A marketing strategy also serves as the foundation of a marketing plan. A marketing plan contains a set of specific actions required to successfully implement a marketing strategy. For example: Use a low cost product to attract consumers. Once an organization has established a relationship with consumers, via our low cost product our organization will sell additional, higher-margin products and services that enhance the consumers interaction with the lowcost product or service. A strategy consists of well thought out series of tactics. (While it is possible to write a tactical marketing plan without a sound, well-considered strategy, it is not recommended). Without a sound marketing strategy, a marketing plan has no foundation. Marketing strategies serve as the fundamental underpinning of

marketing plans designed to reach marketing objectives. It is important that these objectives have measurable results. A good marketing strategy should integrate an organizations marketing goals, policies, and action sequences (tactics) into a cohesive whole. Many companies cascade a strategy throughout an organization, by creating strategy tactics that then become strategy goals for the next level or group. Each group is expected to take that strategy goal and develop a set of tactics to achieve that goal. This is why it is important to make each strategy goal measurable. Marketing strategies are partially derived from broader corporate strategies, corporate missions, and corporate goals. They should flow from the firms mission statement. They are also influenced by a range of microenvironmental factors. Marketing strategies are dynamic and interactive. They are partially planned unplanned. See strategy dynamics. TYPES OF MARKETING STRATEGIES : Every marketing strategy is unique, but if we abstract from the individualizing details, each can be reduced into a generic marketing strategy. There are a number of ways of categorizing these generic strategies. A brief description of the most common categorizing schemes is presented below : (Please refer to Chapter on Types of Strategy for further details.) 1. Strategies based on market dominance : In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are three types of market dominance strategies : (i) Leader (ii) Challenger (iii)Follower 2. Porter Generic Strategies : Strategy on the dimensions of stratefic scope and strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firms sustainable competitive advantage. (i) Cost leadership (ii) Product differentiation (iii)Market segmentation 3. Innovation Strategies : This deals with the firms rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types : (i) Pioneers (ii) Close followers (iii)Late followers 4. Growth Strategies : In this scheme we ask the question, How should the firm? There are a number of different ways of answering that question, but the most common gives four answers : (i) Horizontal integration (ii) Vertical integration (iii)Diversification (iv) Intensification A more detailed schemes uses the categories : (i) Prospector (ii) Analyzer (iii)Defender (iv) Reactor 5. Marketing warfare Strategies :

Warfare based strategies This scheme draws parallels between marketing strategies and military strategies. Some of the other common marketing strategies are : (i) Product/Market Positioning. (ii) Timing/Market Entry Mechanism. (iii)Marketing Mix Tactics. (i) Product/Market Positioning : This would decide which customers we want to cater to and whether we want to cater to and whether we want to be a cost leader or differentiation leader. Depending on this one can position ones products in the market so as to utilize the opportunities present in the market. State Bank of India has positioned itself as Number 1 public Sector Bank having the largest number of branches in India. (ii) Time of Entry in Market/Market Mechanism : Timing of entry in a market is also very crucial for utilizing all the relevant opportunities and gains. Example of 23 private players in the Indian Insurance business so as to cater to the Insurance needs of the people once the Insurance sector was opened for private sector. (iii)Marketing Mix Tactis : A judicial mix of all the 5 Ps Product, Place, Promotion, Price and Place would definitely be useful to capture a bigger market share in the market. 3. OPERATIONAL STRATEGIES (MACHINE AND MATERIAL AS A RESOURCE : Operational Strategy has its origin in Military strategy which is a collective name for planning the conduct of warfare. Derived from the Greek strategos, strategy was seen as the art of the general. Military strategy deals with the planning and conduct of campaigns, the movement and disposition of forces, and the deception of the enemy. The father of modern strategic study, Carl von Clausewitz, defined military strategy as the the employment of battles to gain the end of war. Hence, he gave the preeminence to political aims over military goals, ensuring civilian control of the military. Military strategy was one of a triumvirate of arts or sciences that govern the conduct of warfare; the others being tactics, the execution of plans and maneuvering of forces in battle, and logistics, the maintenance of an army. The border line between strategy and tactics is blurred and sometimes categorization of a decision is a matter of almost personal opinion. Some of the time tested Operational Strategies are : (i) Capacity Utilisation : Capacity utilization is the key to optimum use of production facilities so that there is no idle capacity and there is no wastage of man and machine hours. (ii) Location of plant : Location of plant needs to be either near its main raw material or the market so that the cost reduces considerably.

Equipment Investment and Maintenance : It is prudent to invest a big amount in the latest equipment and their timely maintenance so that the overall cost reduces and there is a smooth flow of uninterrupted work. (iv) Production processes : Production process should be such that there is the least handing and through the assembly line there is a logical and methodical process whereby the raw material gets processed through various stages so as to hace the final product. 4. HRM STRATEGIES (MAN AS A RESOURCE) : The bsis, preparation and implementation of strategic HRM, Human resource management is closely identified with business strategy by many authors. In fact, HRM is typically distinguished from traditional personnel management by its concern with meeting business objectives in a strategic fashion. The essence of a HRM strategy is a sustained focus on the people who do the work of an organization. A HRM strategy is essential for maintaining quality customer care, attracting and retaining high quality staff and ensuring continued commitment from staff to continuously improving the organization. It entails the development of strategies to attract the right people to the organization with appropriate skills and competencies and strategies to retain them, once recruited. These represent new challenges for the HR professional. Key issues in attracting and retaining staff are our recruitment and selection procedures, promotions policies, training and development opportunities, rewards and pay structures, equality policies, health and safety policies and structures, equality policies, health and safety policies and our terms and conditions of employment. Most of these issues and others, too, are addressed in this HRM strategy. Another important aspect of a HRM strategy is the development of people management skills in line managers at all levels within the Organization. As previously mentioned, PMDS is already helping to bring this new dimension to the work of managers by giving them a specific role in identifying the competencies and skills of their staff their training and development needs. A key challenge for the Organisation is to ensure that these people management skills are valued, recognized and rewarded along with the more traditional and technical competencies of the job. We also have to recognize that we will be faced with constant staff turnover particularly at executive and clerical level. This is because of competition with private sector. Here again, an effective HRM strategy has a crucial role to play. If it operates effectively it can make the Organization a more attractive place to work by comparison with other departments and offices. This can have the effect of attracting staff to the Organisation and, perhaps, providing an incentive for others to stay who might otherwise be attracted to a career, particularly in the private sector. To mention just one example, the manner in which the Orgainzation operates family-friendly policies could give it a competitive advantage from a staff perspective. Some of the HRM Strategies are : (i) Quality of performance : Quality of individuals performance has to be acknowledged and duly rewarded so that they put in their very best towards meeting the organisations goals. (ii) Promotion System : Promotional system which promotes merit v/s experience is also to be encouraged if fresh relent and enthusiasm and vigor of the youth are to be

(iii)

tapped. (iii)Recruitment : Recruitment policy should be such that we have the right man on the right job. (iv) Payment Terms : Payment terms should duly reward the sincere efforts of the employees and their present and future needs should be taken care of be the company. Q. 21 Explain various grand Strategies adopted by varios Sectors. Ans. INTRODUCTION : Through the implementation of strategic management, we are able to set the organizations priorities, operations, pace and also lead the way to wherever the organization wants to position itself. Wherever it wants to position itself as a market leader or a cost leader. Whether it wants to become a stronger player by either forward or backward integration. Whether it wushes to hire-off the unproductive business unit and yet carry on its operations or whether it wishes to completely merge with another company. The wishes to completely merge with another company. The company has many options and we would look at the different types of strategies that are available to an organization, after it has answered the important question where to go? 1. INTEGRATION STRATEGIES : Which comprise of the following : (i) Forward Integration : It involves gaining ownership or increased control over distributors or retailers. This would give the company more presence in the market place, and reaching as many customers as possible. The company does not totally depend on its retailers to market but also uses other channels of reaching the final consumer. For instance E Commerce is a new way of reaching global customers and marketing through its website. Example : BATA shoes has its company outlet in the remotest village if India. In case of banking and insurance-though due to regulatory framework banking business cannot be mixed with insurance-banks have set up sunsidiary to solicit insurance business from their key customers. E.g. State Bank of India-SBI Life. HDFC-HDFC Standard Life. Shamro Vithal Co-op Bank has entered into Banassurance agreement with BAJAJ Allianz to market its insurance policies to its accountholders. (ii) Backward Integration : In this strategy one seeks ownership and increased control on a companys suppliers. This strategy is used when a companys current suppliers are unreliable, too costly and cannot meet the firms needs. For example financial investment firms like J. P. Morgan have a tie up with computer firms

like IBM for providing techno savvy solutions. Similarly in the field or reinsurance the Indian to its foreign partners. This gives them edge over the local players. (iii)Horizontal Integration : This refers to a strategy of seeking ownership of or increased control over a companys competitors. This is facilitated by mergers, acquisitions and friendly takeovers among competitors which allows for greater economies of stall and enhanced transfer or resources and competencies. 2. INTENSIVE STRATEGIES : They are called intensive as the company has to put in intensive efforts to improve its competitive position. (i) Market penetration : This strategy seeks to increase market share through its intensive marketing efforts which could be through (a) increasing number of sales representatives. In case of LIC by appointing more LIC agents. (b) Increasing advertisement expenditure. COKE v/s PEPSI. (c) Offering sales promotional items or increasing publicity efforts. (d) By reducing the price substantially with that of its competitors so as to penetrate and capture a larger share of the market. For instance ICICI Prudential Life has become one of the biggest private insurance company by doing all the above and challenging established player, LIC. (ii) Market Development : This involves introducing the present products and services of the company into new geographical area and thereby increase the revenue by reaching new customers. This strategy is effective when an organization is very successful at what it does and hemce can use this success formula. Example : McDonalds, Coke, Wal Mart all have global presence today as they are good in which they do. In case of banking industry setting up branches in foreign countries and having their presence world wide. Example State Bank of India (SBI). (iii)Product Development : This seeks to increase sales by improving or modifying present product or service. This strategy is useful when a company has products and services that are in the maturity stage of product life cycle. This also is used when there is rapid technological change and old technology becomes obsolete. For example, Microsoft Company constantly innovates new products or services. 3. DIVERSIFICATION STRATEGIES : In the early 70s, there was a growing trend amongst the business houses to acquire and manage diverse and unrelated business so as to generate better profitability. However, with 1990s the organizations found it extremely

difficult to manage these unrelated business units and now the trend is in hiving off or selling them and concentrating on their main business, and core competencies. However it is for academic reasons that we need to study these strategies : (i) Concentric Diversification : Adding new, but related products and services is widely called concentric diversification. Let us take the example of ICICI Bank it has diversified into related products and services to make it a One Stop Financial super Hub. It has ICICI direct a broking house to do broking, for its account holders. It has ICICI home finance to finance real estate and home for its account holders. It has ICICI prudential life, the insurance company to take case of all the insurance aspects of their account holders. (ii) Conglomerate Diversification : In this strategy adding new, unrelated products or services for increasing revenue customers is called horizontal diversification. This strategy is useful when revenues would significantly increase for an organization by adding a new unrelated product/service. For example Mahindra and Mahindra was essentially known as a automobile company and hiving achieved its successfully forayed into unrelated business like Mahiendra Finance Ltd. (financial services), Tech Mahindra Ltd. (a joint venture with British Telecommunication in the area of telecom). Mahindra Holidays (selling time shares). (iii)Horizontal Diversification : Adding new, unrelated products or services for its present customers is called horizontal diversification. For example automobile companies have added subsidiary to finance their customers. Example BAJAJ Auto Ltd-BAJAJ Capital and BAJAJ Allianz. TATA Motors and TATA Finance. This is used for facilitating the customer do better business. 4. DEFENSIVE STRATEGIES : Where a company wants to defend its position, it can use the following Strategies : (i) Downsizing / Retrenchment : This strategy is used when an organization regroups through cost and asset reduction to reverse declining sales and profits. This involves selling off companys real estate, laying off employees, closing down loss making business, factories thereby reducing expenses of the company and also generating sufficient cash for carrying on the day to day operations. This strategy is used as it is one of the weakest competitors in a given industry. When an organization becomes inefficient, loss making and when the employee morale is very low. However, the trade unions and organized labour protest against this strategy.

(ii) Disinvestment / Divestiture : Selling a division or a point of the business unit is called divestiture. This strategy can be used when an organization has pursued a retrenchment strategy and has failed to accomplish the needed improvements. This strategy can also be used when a large account of cash is needed immediately by an organization. (iii)Liquidation : Selling of companys assets for their tangible worth is called liquidation. This strategy can be pursued when an organization has purused both retrenchment strategy and divestiture strategy and divestiture strategy and neither has been successful. It is also used when it is better to cease operating rather than continue to make losses. 5. GENERIC STRATEGIES OF MICHAEL PORTER : (i) Cost Leadership Strategies : According to Michael Porter a number of cost elements affect the relative attractiveness of generic strategies including economies of scale, learning and experience curve effect, the percentage of capacity utilization achieved and the strong alliance with supply chain. Striving to be the how cost producer in an industry can be effective especially when industry is price sensitive, and there are very few ways to achieve product differentiation. For example, Wal-Mart, Colgate, MTNLs Dolphin and Trump card etc. (ii) Differentiation Strategies : Differentiating the products and services from the Me Too product range. This will lead to changing a price premium for a unique product service or experience. There is alos a risk of competitors copying and following up with a similar product. For example, BMW, Mercedes Benz, Revlon, they spell class and elegance. (iii)Focus Strategy : A successful strategy depends on an industry segment that is of sufficient size has good growth potential and is not crucial to the success of other major competitors. This is most effective when consumers have distinctive preference or requirements and when other firms are not attempting to specialize in the same. For instance in banking industry, some banks focused on corporate finance example HSBC, ABN Amro while others on NRI IndusInd Bank, while still others on auto finance Kotak Mahindra Bank Ltd ect. (iv) The Value Chain : According to Michael Porter, the business of a firm can be best described as a Value Chain in which total revenue minus total costs of all activities undertaken to develop and market a product or service yields value.

Q. 22 Explain the Concept Downsize & Explain the Impact of Downsizing in an Organization? Ans. Downsizing : Downsizing is a restructuring strategy wherein, managers attempt to recast their organization. The companys structure, leadership, culture, and reward systems may all be changed to ensure cost competitiveness and quality demanded by unique requirements of its strategies. Outsourcing, or the use of a source other than internal capacity to accomplish some task or process, has become a major tactic in todays down sizing-oriented firms. Downsizing is eliminating the number of employees, particulary the middle management, in a company. The arrival of a global market place, information technology, and intense competition caused many companies to reevaluate middle management activities to determine just what value was really being added to the companys products and services. The result of this scrutiny, along with continuous improvements in information processing technology, has been widespread downsizing in the number of management personnel in thousands of companies worldwide. One of the outcomes of downsizing was increased self-management at operating levels of the company. Cutbacks in the number of management people left those that remained with more work to do. The result was that they had to give up a good measure of control to workers, and they had to rely on those workers to help out. Spans of control, traditionally thought to maximize under 10 people have become much larger due to information technology, running lean and mean, and delegation to lower levels. The delegation also known as emprowerment, is accomplished through concepts like self-managed work groups, reengineering, and automation. It is also seen through efforts to create distinct business within a business-conceving a business as a confederation of many small business, rather than one large, interconnected business. The result is often the elimination of upto half the level of management previously existing in an organizational structure. Q. 23 Explain the Role of Creativity & Innovation. Ans. Creativity : Human beings are relentlessly creative. The crucial issue is that creativity must have some tangible outcome in products, in service, in a new structure or strategy, or more diffusely in a pervasive shift in corporate culture. All human progress is based on creativity, because creativity is the source of positive change. Creativity is only possible to an independent thinker. Creativity is not about just doing something different. It is about doing something better. To be better, the new method/process must be judged by its impact on the whole organization, and as to whether it contributes to the accomplishment of our mission. A significant aspect of the self-fulfillment which work can provide comes from creative through and action. Change demands ongoing creativity. Strategic planning which precede any change, requires the fuel of creativity for devising its engine. Any creativity can thrive only when backed by a stream of innovations. Therefore, it is imperative for any organization, which wishes to keep an edge over others, to internalize creativity and innovation in its regular reflexes. It is reativity that throws up newer needs, newer uses, a higher quality in life.

In business and industry, creativity coupled with innovations translates itself into new products and newer ways of doing things; and these are the life lines of successful enterprises. Creativity, implies bringing together things that were considered unrelated by conventional thinking into unprecedented and dynamic relationships. It leads to improvement in products, processes, inventions, which opens up efficiencies, savings in cost and efforts and new opportunities. Innovation : Definition : innovation can be defined as anything new or novel about the way the company operates or the products it produces. The innovation includes advances in the products, production processes, management systems, organizational structures and strategies developed by a company. Innovation is perhaps the single most important building block of competitive advantage. In the long run, competition can be viewed as a process driven by innovation. Although not all innovations succeed, those that do, can be a major source of competitive advantage. The reson is that is that, by definition, successful innovation gives a company something unique something that its competitors lack. This uniqueness may allow a company to differentiate itself from its rivals and charge a premium price for its product. Alternatively, it may allow a company to reduce its unit costs far below those of competitors. An invention is a solution to a problem, often a technical one, whereas innovation is the commercially successful use of the solution. Innovation strats after examining the market need, technical, mproduction, and marketing requirements. Successful innovations result from a conscious, purposeful search for innovation opportunities, Innovations arise out of : (i) Unexpected occurrences (ii) Incongruities. (iii)Process needs (iv) Industry and market changes (v) Demographic changes (vi) Changes in perception (vii)New knowledge. Innovation means change. Such change can be incremental or radical, evolutionary or revolutionary. They can have different effects upon producers and users. Innovation is not a technical term. Innovation creates new weather or new potential of action rather than new knowledge. The measure of innovation is the impact on the environment. Innovation in a business enterprise therefore will always be market focused. Q. 24 Structure follows Strategy. Criticaly examine the Statement. Ans. Structure : The design of organizational structure is a critical task of the top management of an organization. It is the skeleton of the whole organizational edifice. Organizational structure refers to the relatively more durable organizational arrangements and relationships. It prescribes the formal relationships among various positions and activities. Arrangements about reporting relationships, how an organizational member is to communicate with other members, what roles he is to perform and what rules and procedures exist to guide the various activities performed by members are all part of the organizational structure. Organisational structure performs three major functions : (i) It reduces external uncertainty through forecasting research and planning in the organization; (ii) It reduces internal uncertainty arising out of variables, unpredictable, random human behaviour within the organization through control mechanism;

(iii)It undertakes a wide variety of activities through devices such as departmentalization, specialization, division of labour and authority; (iv) It enables the organization to keep its activities coordinated and to have a focus in the midst of diversity in the pursuit of it objectives. STRUCTURE AND STRATEGY TO CREATE SYNERGY : 1. Structure spells out very clearly objectives and policies. For example, in Banking Industry, there is a convention to have an organization structure which is spelled in geographical terms. Like Northern Zone, Western Zone etc. Under that, one can further classify product group-wise like corporate finance, consumer finance etc. 2. Structure dictates how resources will be allocated. 3. Changes in strategy had to changes in organizational structure. Therefore structure follows strategy. FMCG companies normally have a dividion structure, for example, Soap Division, Detergent Division etc. If the strategy changes to functional then the organisational structure would be functional say Marketing Division, (All products) Finance Division etc. 4. As firms grow, their structure generally changes from simple to complex structure. For instance small firms are functionally structured. As they grow in size and are medium sized they tend to be divisionally structured. Whereas large organization are matrix structured. 5. There are many internal and external factors that affect an organization structure. However, the basic aim of a organization structure is to facilitate corporate objectives effectively and efficiently. Q. 25 Explain & Illustrate the Organizational Structure Suitable for a Single Product Company Supplying its Entire Product Hindustan Lever Limited. Ans. There are some wel-known forms or approaches to organizational structuring : functional, product division, holding company and matrix. There are other variants of these basic forms. Functional structure : Functional organizational structures is most widely used structure. Each functional department consists of those job in which employees perform similar jobs at different levels. The commonly used functions are : marketing, finance and accounting, human resources, manufacturing, research and development and engineering. A functional structure tends to be effective in a single business unit where key activities revolve around well defined skills and areas of specialization. Concentration on performing functional area tasks increases specialization lending to, greater operating efficiency and development of distinctive skills. The functional structure is commonly found in small companies and also in large companies with single product line or narrow product range companies with single product line or narroe product ranges. A typical functional structure is shown in figure 10.3. The functional specialization promotes fuller utilization of capacity or resources, including technical skills manpower, considerations for single business organizations, dominant product enterprises and vertically integrated firms. Chief Executive

Production Department

Finance & Accounts

Marketing Department

Personnel Department

Functional

What form the functional specialization will take varies according to customerproduct-technology considerations. For instance, a hospital is often compartmentalized according to the needs of its clients, i.e., outdoor and indoor divisions which are further departmentalized into pedeatrics; orthopaedics; cardiology; ENT etc. The problem with he functional structure is that it may not be easy to keep strategic co-ordination across different functional units. The functional specialists tend to have their own perspectives on how the task can be accomplished and this creates specialists often develop their own mind-sets and are more loyal to their own functional goals rather than to goal of the organization as whole. Q. 26 Would you recommend a divisional Structure for a Medium sized Bank? Why? Explain with example. Ans. The Divisional Structure : This structure is suitable when the organization gorws geographically and through product diversification. As the small business grow, it has more difficult managing different functions in different geographical markets. This requires a structure that controls operations, competes successfully in various locations. This is called the divisional structure which can be formed on the following basics for a Bank. State Bank of India Western Zone

SBI Regional Office Mumbai

SBI Regional Office Ahmedabad

SBI Regional office Nagpure

SBI Regional Office Panaji

Branches Branches Branches Branches Every division has its own manufacturing, marketing research unit Thus every division is relatively self-contained and has a Divisional Head/Branch Manager who is responsible for all its operations. Departmentalization by Product : For a diversified enterprise producing a variety of products belonging to different industry groups, using different technologies and with plants at different locations, functional structure makes the job of the manager increadibly complex. In such an enterprise the needs of the strategy virtually dictate that different businesses be organized into different business divisions which may then be organized along functional lines. Putting all activities belonging to the same business under one roof facilitates implementation of strategies. With appropriate authority delegated to the general managers of the divisions, accountability for results can be stressed in such an arrangement. Reward system can be geared to motivate managers for

improve performance by providing incentives. If entrepreneurially oriented and experienced persons are appointed as general managers of divisions, the performance of the entire organization may improve on account of better responsiveness and quick decision-making. The departmentalization by product places all the responsibility and authority under one manager to get the product produced and marketed. This is common with muliti-product companies with diverse business lines. Figure. illustrates a product based organization structure. CEO

Vice President (Consumer Finance) Car Finance Personal Finance

Vice President (Corporate Finance)

Bills Finance

Project Finance

Q. 27 Explain the role of Leadership in Strategic Management. Ans. Role of Leader : First transformational leaser must recognize the need for change and by able to persuade key managers in the organization of that change. Once the need for change is recognized the leader must inspire organizational members with a vision of what the organization can become. Then, the change should be institutionalized. Role of leader can be summarized as under: 1. Networking with the field : To know how well the implementation process is going on, the leader should develop a broad network of contacts. The leaders normally attach great importance to informal communication to gain quick and easy access to information. The leaders tend to become isolated if stay in their offices. 2. Fostering a Strategy-Supportive Climate and Culture : The leader should spend much his time in personally leading the major strategic changes. The leaders should play a leading role in pushing ahead and prodding for continuous improvements in values and culture in tune with the strategy. The leaders should convince people that the selected strategy is right and it should be implemented to the best of the companys ability. 3. Keeping the Internal Organization Responsive and Innovative : Though the strategy implementation is the responsibility of the leader, it is difficult for one person to generate fresh ideas, identify new ideas, identify new opportunities, and respond to changing conditions etc. Therefore, the leader should develop dependable supply of fresh ideas from rank-and-file, managers at different levels, entrepreneurs etc. 4. Dealing with company politics : A leader cannot formulate and implement strategy successfully in view of organizational politics. The leader should be perceptive about company

politics and adopt to political manoeuvring. Organisational politics play a dominant role in strategy formulation and implementation. 5. Enforcing ethical behaviour : Strategic manager must exercise ethical leadership in different aspects. 6. Leader choice and assignment : After selecting the strategies at different levels, the top management should place the right strategists at right places including at SBU levels. Q. 28 Illustrate & Explain life cycle concept. Ans. Life Cycle Concept : Arthur D. Little Companys matrix links the stage of the product life cycle with the business strength. On the vertical axis, the businesses are classified with respect to their business strength: Weak, Tenable, Favourable, Strong or Dominant. Along the horizontal axis four states in the life-cycle, Embryonic, Growth, Mature and Decline are marked as shown in Figure.

Dominant

Strength Strong

Harvest

Build

Hold

Weak

Busines s Tanabe

Unacceptable ROI Embryonic Growth Growth Decline

In the Embryonic and Growth stages the businesses are recommended for Build strategy, except when the Business Strength is weak. For Mature stage businesses with Dominant to favourable strength, Hold strategy is recommended. Harvest strategy is proposed for business in Decline stage, with Strong or Dominant position. For weaker business in Mature / decline stage unacceptable ROI is marked. Q. 29 Explain the need of Strategic Control. Ans. Once the strategy is implemented , there is no guarantee that the strategy generates the results as aimed at. Therefore, the strategist has to evaluate the strategy to assess whether the implementation of the strategy is as per strategic pla. Further, a number of deviations either in the external environment or in organizational environment may take place. These deviatons, may necessitate a change in the strategy. Theses changes may require a strategic evaluation and control. Strategic control is the process of establishing the appropriate types of control system at the corporate, business, and functional levels in a company, which allows strategic managers to evaluate whether a company is achieving superior efficiency, quality, innovation and customer responsiveness and implementing its strategy successfully. The strategic control process should alert management to a problem or potential problem before it becomes critical. Control is accomplished by comparing actual performance to objectives and then taking action to control any deviations from the objectives. The need for control is essential. Manager must remember that control is only phase in the strategic management process and is not an end in itself. Contorl systems must be designed to provide information that facilitates the accomplishment of organisational objectives. The strategic control and strategic formulation processes are closely interrelated as depicted in Figure 14.1. Figure illustrates the relationship. The desired results (long and short-range objectives) of an organization are established during the strategy formulationprocess. Control systems measure outputs from functional areas of the organization. Evaluation of performance occurs when the output of the control systems is compared to the long term and short term objectives. Finally, feedback occurs when the results of the comparison are used to make adjustments in the objectives of the organization, changes in strategy, changes in organizational structure, or changes in the management team. Diagram Control systems can be devised to monitor organizational functions or organizational projects. Controlling a function involves making sure that specified activity (such as production or sales) is properly carried out. Controlling a project involves making sure that a specified end result is achieved. Q. 30 How return on Investment can be used as a tool of Strategic Control. Ans. FINANCIAL EVALUATION : This is done more objectively as it is one of the best measure, which can be quantified of a companys success. Determining an organizations financial strengths and weakness is essential to formulating strategies effectively. A firms liquidity, financial leverage, its investment decisions, its equality of assets all have an important bearing on the success of the company. One of the key elements in this check list is ratio analysis, which we would briefly examine later. Financial check list consists of : (i) Does the company list have the ability to raise and deploy short term capital?

(ii) What is the gearing of the company? Is it equity based or debt based? (iii)Does the company have a effective capital expenditure budget? (iv) What does the fund flow and cash flow of the company reveal? (v) Does the company pay consistent dividends to its shareholders? 1. Return on Investment : This ratio measures the firms ability to perform (operating profits) as a rate of return on the total assets employed. It is stated as : EBIT(Earning Before Interest and T ax T otal assets This is an indication of a companys operating success translated as earnings before interest and taxes or gross profits. This ratio is not affected by financial charges it is the pure profit ability of the core business. This ratio is of great importance from the investors point of new. DEFINING CSR IN THE PRESENT CONTEXT : Various definition have been offered by EU, World Bank and others. There is no accepted definition of Corporate Social Responsibility. However we have two extreme views on this subject : (i) A company that complies with the laws of the land in which it operates is being socially responsible. (ii) A socially responsible company is one that is purely philanthropic in that it gives without expecting a return or a benefit. Increasingly, there seems to be a convergence that neither of these two extreme positions adequately describes CSR. Why To quote from UNCTADs 1999 report on, The Social Responsibility of Transnational Corporations (UNCTAD, 1999), an external programme of good deeds will not protect a firm whose actual operations harm its surrounding society. Thus, just being purely philanthropic externally is not enough. At the same time, complying with the law is just the minimum behaviour to do with societys expectations, which is essential for the social in CSR to have any meaning (UNCTAD 1999). Organizations like the Prince of Wales Business Leaders Forum (PWBLF), The London Benchmarkeing Group and other organizations like Corporate Citizenship Company of the UK and the Asian Institute of Management, Indicates a broad convergence in the description of what constitutes socially responsible behaviour by companies. A socially responsible company is responsible to all its internal and external stakeholders. This implies: (i) Social responsibilities for core business activites, should look at its policies, operations and production activities (in terms of safety, quality, employee welfare, environment implications etc.). both within the business as well as its backward and forward linkages such as suppliers, distributors and customers and customer relations. (ii) Social Responsibility should also redesign its social investments and philanthropy i.e. moving from ad hoc giving to strategic approaches to building community partnerships, looking for win-win solutions, applying core competenices to such investments and business strategy. It should differentiate between pure philanthropy issues and strategic issues for community support. (iii)Public policy dialogue wherein business advocates with the state for changes in public policy that may benefit the business but its core motivation is public interest.

It is important to note that though corporate social responsibility is synonymously and interchangeably used with either corporate philanthropy or corporate citizenship. In theoretical sense corporate philanthropy has to do with a businesss societal contribution that may or may not bring it direct returns, whereas corporate philanthropy has to do with a businesss societal contribution that may or may not bring it direct returns, whereas corporate social responsibility is all about fulfilling the basic responsibility of good business without which the bisiness and society would not be able to enter into a mutually beneficial virtuous cycle. In this context CSR in broader terns can be defied as Operating a business in a manner that meets or exceeds the ethical, legal, commercial and public expectations that the society has of business. Hence, while dealing with the subject matter of social responsibilities of business it is important to understand what constitutes to responsible conduct of corporate at Market Place, Work Place, Environment and Communities. There are many situations in which managers, and indeed shareholders too, may need to consider what it would be right to do as well as what is both legal and profitable. For instance absence of effective legislation should not excuse a soft drink company to use pesticides in the drink. Both shareholders and boards of directors should be willing, to risk or forgo profits at the margin for such causes as ensuring product safety, disclosing possible safety risks, reducing harmful pollution, eschewing bribery, or dealing fairly with other parties, even where no legal obligations are in question. Laws and official regulations may lag behind events, and in any case cannot be expected to cover all contingencies, the range of debatable issues and problems, and the need for companies to make their own assessments and judgements, become grater. Everywhere there may be episodes and situations where the issue of what constitutes responsible conduct on the part of a business has to be faced, and cannot be left to government alone to review, decide and pronounce on. Q. 31 How does the Process of Evaluation & Control Strategy Managed? Ans. There are various evaluation and control tools like : (i) Standard (ii) Bench marketing (iii)Cost benefit analysis (iv) Performance gap analysis (v) Responsibility centre (vi) Return on investments (vii)Budgeting. Let us briefly understand each of these : Standards : Standards are the basis for evaluation of performance and are related to the goal of an enterprise. They are the specific criteria which are required to be fulfilled by the workers. A standard is desired outcome or expected event with which managers can compare subdequent activities, performance or change. Setting of standard is useful for an enterprise for the following reasons : (i) They enable the employees to know their limitations of work and the expectations that the managers have from them, (ii) They enable the employees to knows to whether or not they possess the necessary ability to perform the work according to standards. If not, necessary training can increase the employee potential, (iii)They co-ordinate the individual goals with the organizational goals. A company may set the following standards : (i) Time standard :

These relate to the time that an employee should take to perform a particular activity; it may be a product produced or service rendered. (ii) Cost standards : The products produced or services rendered must be cost effective so as to generate maximum profits for the firm. The cost standards specify the cost per unit of the products produced. (iii)Production standard : Production standard specifies the number of units of a product that should be produced within the time standard. For within the time specified in the time standards. For example, the company can set production standards that each employee should produce 10 units of product A in one hour. (iv) Quality standards : The quality standard aims at maintaining the quality of products. Not only should the goods be cost effective, they must also be qualitative in nature. Once the standards have been set, the workers perform their activities according to these standards. The activities having been performed, how many units have actually been produced, at what cost, within what period is moinitored by the managers. Standards of performance are really a logical development from the concept of goals. They can be used as a method of motivating a wide range of employees who are not directly responsible for the achievement of the goals, but whose personal performance will influence the companys success or failure. Not only do they motivate, but they provide a management tool which can be used to judge the success or failure of a person in his job. They provide an early warning system when things are going wrong, and they can spot light the area in which the failure is occurring. Standards can be set for much shorter intervals of times than goals, for example, be a monthly standard. As for goals, performance standards must be for some thing which the company intends to measure, and which it can in fact measure. The standards can be established for any sector of the company and should be set for the key areas.

Q. 32 Write a Note on Benchmarking . Ans. Benchmarking : Benchmarking is the process of measuring a firms performance against that of the top performers in its industry. After determining the appropriate benchmark, firms managers then set goals to meet or exceed the performance of the firms top competitors. Taken to its logical conclusion, competitive benchmaking if practiced by all the firms in an industry, would result in increased industry-wide performance. One of the best ways to develop distinctive competencies that contribute towards superior efficiency, quality, innovation, and customer responsiveness is to identify best industrial practices and to adopt it. Identifying best industrial practice involves tracking the practice of other companies, and perhaps the best ways to do so is through benchmarking. This is the process of measuring the company against the products, practices, and services of some of the most efficient global competitors. A major focus in determining a firms resources and competencies is comparison with existing and potential competitors. Firms in the industry often have different marketing skills, financial resources, operating facilities and locations, technical know-how, brand images, levels of integration and so on. These different internal resources, can become relative strengths or weaknesses depending on the

strategy the strategy the firm chooses. In choosing a strategy, managers should compare the firms key internal capabilities with those of its rivals, thereby isolating its key strengths and weaknesses. Benchmarking, has become a central concern of managers in quality commercial companies worldwide. In structuring the internal analysis, managers seek to systematically benchmark the costs and results of the smaller value activities against relevant competitors or other useful standards because it has proven to be an effective way to continuously improve that activity. The ultimate objective in benchmarking is to identify the best practices in performing an activity, to learn how to lower costs, fewer defects, or excellence are achieved. Companies committed to bench marking attempt to isolate and identify where their costs or outcomes are out of line with what the best practices of the particular activity experience and then attempt to change their activities to achieve the new best standard practices. Q. 33 Write a note on cost benefit Analysis. Ans. COST BENEFIT ANALYSIS : Cost benefit analysis is a term that refers both to : (i) A formal discipline used to help appraise, or assess, the case for a project or proposal, which itself is a process known as project appraisal ; and (ii) An informal approach to making decisions of any kind. Under both definitions the process involves, whether explixitly or implicitly, weighing the total expected costs against the total expected benefits of one or more actions in order to choose the best or most profitable option. The formal process is often referred to as CBA, or Benefit Cost analysis. The process involves monetary calculations of initial and ongoing expenses vs. expected return. Constructing plausible measures of the costs and benefits of specific actions is often very difficult. In practice, analysts try to estimate costs and benefits either by using surevey methods or by drawing inferences from market behavior. For example, a product manager may compare manufacturing and marketing expenses to projected sales for a proposed product, and only decide to produce if it he expects the revenues to eventually recoup the costs. Cost-benefit analysis attempts to put all relevant costs and benefits on a common temporal footing. A discount rate is chosen, which is then used to compute all relevant costs and benefits on a common temporal footing. A discount rate is chosen, which is then used to compute all relevant future costs and benefits in present-value terms. Most commonly, the discount rate used for present-value calculations is an interest rate taken from financial markets like either the Yield of Government Securities or Treasury Bills. During cost-benefit analysis, monetary values may also be assigned to less tangible effects such as the various risks which could contribute to partial or total project failure; loss of reputation, market penetration, long-term enterprise strategy alignments, etc. A value must be put on human life or the environment, often causing great controversy. The cost-benefit principle says, for example, that the implicit Rupee value of the injuries, deaths, and property damage thus prevented. Cost-benefit analysis is mainly, but not exclusively, used to assess the value for money of very large private and public sector projects. This is because such projects tend to include costs and benefits that are less amenable to being expressed in financial or monetary terms (e.g. environmental damage), as well as those that can be expressed in monetary terms. Private sector organizations tend to make much more use of other project appraisal techniques, such as rate of return, where feasible.

Q. 34 What do you mean by responsibility centre? Ans. RESPONSIBILITY CENTER : Responsibility accounting is an underlying concept of accounting performance measurement systems. The basic idea is that large diversified organizations are difficult, if not impossible to manage as a single segment, thus they must be decentralized or separated into manageable parts. Theses parts, or segments are referred to as responsibility centers that include : (i) Revenue centers (ii) Cost centers (iii)Profit centers (iv) Investment centers. This approach allows responsibility to be assigned to the segment managers that have the greatest amount of influence over the key elements to be managed. These elements include revenue for a revenue center (a segment that mainly generates revenue with relatively little costs), costs for a cost center (a segment that generates costs, but no revenue), a measure of profitability for a profit center (a segment that generates both revenue and costs) and return on investment (ROI) for an investment center ( a segment such as a division of a company where the manager controls the acquisition and utilization of assets, as well as revenue and costs).