Master of Business Administration- MBA Semester 4 MB0052 Strategic Management and Business Policy

Q-1. Explain the corporate strategy in different types of organization. Ans. The three main types of corporate strategies are growth, stability, and renewal. a. Growth - A growth strategy is when an organization expands the number of markets served or products offered, either through its current business(es) or through new business(es). Because of its growth strategy, an organization may increase revenues, number of employees, or market share. Organizations grow by using concentration, vertical integration, horizontal integration, or diversification. b. Stability - A stability strategy is a corporate strategy in which an organization continues to do what it is currently doing. Examples of this strategy include continuing to serve the same clients by offering the same product or service, maintaining market share, and sustaining the organization's current business operations. The organization does not grow, but does not fall behind, either. c. Renewal - When an organization is in trouble, something needs to be done. Managers need to develop strategies, called renewal strategies, that address declining performance. The two main types of renewal strategies are retrenchment and turnaround strategies. Product Differentiation Strategy Small companies will often use a product differentiation strategy when they have a competitive advantage, such as superior quality or service. For example, a small manufacturer or air purifiers may set themselves apart from competitors with their superior engineering design. Obviously, companies use a product differentiation strategy to set themselves apart from key competitors. However, a product differentiation strategy can also help a company build brand loyalty, according to the article "Porter's Generic Strategies" at QuickMBA.com. Price-Skimming Strategy A price-skimming strategy involves charging high prices for a product, particularly during the introductory phase. A small company will use a price-skimming strategy to quickly recover its production and advertising costs. However, there must be something special about the product for consumers to pay the exorbitant price. An example would be the introduction of a new technology. A small company may be the first to introduce a new type of solar panel. Because the company is the only one selling the product, customers that really want the solar panels may pay the higher price. One disadvantage of a price-skimming is that it tends to attract competition relatively quickly, according to the Small Business Administration. Enterprising individuals may see the profits the company is reaping and produce their own products, provided they have the technological know-how. Acquisition Strategy A small company with extra capital may use an acquisition strategy to gain a competitive advantage. An acquisition strategy entails purchasing another company, or one or more product lines of that company. For example, a small grocery retailer on the east coast may purchase a comparable grocery chain in the Midwest to expand its operations.

Q2. What is the role consultants play in the strategic planning and management process of a company? Is it an essential role?

Ans.

Business Consulting

Strategy is that part of management that defines the future of a business, including its business model, plans for growth, and ways of defending itself against external threats and competition. In recent years, many companies cut back or eliminated strategic planning. They rationalized that it was too difficult, given the rapid pace of change. But as many companies learned from the dot-com meltdown, a realistic business model and strategy are essential for survival. The challenge for most companies is to find the time, resources, and expertise to do strategic planning effectively. As a management consulting firm, we help clients meet the most demanding and complex business issues head-on developing, road mapping, and implementing strategic plans. Our business consulting services include assessing the current situation, making recommendations for restructuring, providing international expertise, identifying potential acquisitions/divestitures, offering competitive intelligence, developing new products, improving business processes, and measuring business performance. STRATEGIC PLANNING Strategic Planning Strategic planning is a management process for evaluating your current business, determining your strategic direction, and road mapping the strategic plan in practical actions. A strategic plan explains why an organization exists, what it is trying to accomplish, and the tactics it will take to achieve its goals and objectives. Using a variety of facilitation techniques, our consultants help organizations assess their business strategy and communicate it clearly. We also help business leaders implement strategic initiatives throughout the organization. Balanced Scorecard Strativa specializes in this strategic planning tool, which has been adopted by over half the Fortune 1000. Balanced Scorecard is more than a performance measurement systemit is a methodology for communicating and implementing strategy. The Scorecard consists of four dimensions: learning and growth, operations, marketing, and finance. By setting and linking key objectives into these four areas, an organization can significantly improve its ability to run the business and reach its goals. MARKETING STRATEGY Market Research In todays dynamic marketplace, the market research function has evolved from merely a data provider into a strategic management resource. Effective market research generates a steady stream of customer and competitive intelligence, links marketing variables such as product positioning, pricing, usage, and market segmentation with a targeted customer market. Through industry research, surveys, focus groups, and competitive analysis, our business consultants provide management with answers to critical questions regarding customers, competitors, and the environment. Product Development A well-designed product should link into the corporate strategy and support the companys mission. Our business consultants assist companies in developing new products, services, or lines of business, and in connecting product strategy with day-to-day development decisions, including operating principles and financing decisions. Market Strategy A successful marketing strategy not only requires a company to know its product or service but also to understand its customers. Our marketing consultants help companies focus on their target market through surveys, focus groups, predictive modeling, and test campaigns to determine the proper product features, distribution, and campaign alternatives. Our consultants specialize in turning an idea or vision into a profitable product or service.

BUSINESS PROCESS IMPROVEMENT Having the right strategy is the first step. However, execution of the strategy is crucial, and here many companies falter. Often, the problem is in business processes that do not serve the customer or are inefficient. Sometimes, the process is broken and needs to be completely reengineered or redesigned. In other cases, the process is sound, but it is inefficient and needs to be improved. In either case, our business consultants can help you analyze existing processes, identify problems and bottlenecks, and redesign or improve the processes to increase customer satisfaction and reduce costs. Our consultants bring an array of tools and methodologies to these consulting services, including process mapping, creative brainstorming, business process reengineering (BPR), business process management (BPM), best practices, benchmarking, change management, six sigma, and the theory of constraints. PROJECT AND PROGRAM MANAGEMENT Business success often depends on project and program successwhether in developing new products, responding to a major request for proposal, delivering on multi-year customer contracts, improving business processes, or implementing new IT systems. Yet many organizations do not have core competencies in program and project management. Business leaders may be skilled in managing day-to-day operations but lack the experience to effectively manage large or complex projects. And those few managers that do have the background or experience often dont have the time to focus on full-time project or program management. Strativa can provide experienced talent for project and program management. Our project managers have a track record of managing large-scale and complex projects in a variety of industries. They have the technical skills needed to plan and track complex projects with interrelated tasks and shared resources. And they have the soft skills needed to build and manage cohesive cross-functional project teams. Our project managers can come in to directly lead client projects or they can serve in an advisory and coaching role to the clients in-house project manager. In addition, we can assist the organization in developing those core competencies and processes needed to effectively manage such initiatives in-house in the future. Q3. What is strategic audit? Explain its relevance to corporate strategy and corporate governance. Ans. Internal audits serve various purposes. Some audits assess compliance with laws and regulations. Others measure compliance with the organization's internal policies and procedures. A strategic audit helps small-business owners assess whether internal processes move the needle toward their strategic goals. Based on audit results, management adjusts operations to maximize progress toward the goals. Corporate governance is an important part of strategic management that can improve firm performance. Despite its importance, many people are unclear about what corporate governance is precisely. Both managers and investors should understand what corporate governance is and the role that it plays in firms. Being aware of what corporate governance is will allow them to see how it affects their respective businesses. Corporate governance is a concept that emerged following the growth of corporations in the 20th century. In particular, following the stock market crash in 1929, scholars began to argue for corporate governance mechanisms that would allow shareholders to keep companies in check. In the latter half of the 20th century this continued, with corporate governance structures being introduced to control managers and to ensure that their actions are in line with shareholder interests. Purpose

The central purpose of corporate governance is to make managers accountable to shareholders. Without a corporate governance structure, managers would be free to make decisions that are in their own interest, but not necessarily in the interest of the firm. Corporate governance keeps managers in check by limiting their power and, often, by tying their pay to firm performance. Benefits

Firms with good corporate governance models perform better because their managers are more inclined to make decisions that favor the business. They also will tend to have higher stock prices because investors are more confident that they can control the firm. Firms with good corporate governance models also will find it easier to attract financing because they are perceived as being more accountable. Q4. What is Corporate Social Responsibility(CSR) ? Which are the issues involved in analysis of CSR? Name three companies with high CSR rating. Ans. Corporate social responsibility (CSR) promotes a vision of business accountability to a wide range of stakeholders, besides shareholders and investors. Key areas of concern are environmental protection and the wellbeing of employees, the community and civil society in general, both now and in the future. Corporate social responsibility is basically a concept whereby companies decide voluntarily to contribute to a better society and a cleaner environment. Corporate social responsibility is represented by the contributions undertaken by companies to society through its business activities and its social investment. This is also to connect the Concept of sustainable development to the companys level. Over the last years an increasing number of companies worldwide started promoting their Corporate Social Responsibility strategies because the customers, the public and the investors expect them to act sustainable as well as responsible. In most cases CSR is a result of a variety of social, environmental and economic pressures. The Term Corporate Social Responsibility is imprecise and its application differs. CSR can not only refer to the compliance of human right standards, labor and social security arrangements, but also to the fight against climate change, sustainable management of natural resources and consumer protection. The concept of Corporate Social Responsibility was first mentioned 1953 in the publication Social Responsibilities of the Businessman by William J. Bowen. However, the term CSR became only popular in the 1990s, when the German Betapharm, a generic pharmaceutical company decided to implement CSR. The generic market is characterized by an interchangeability of products. In 1997 a halt in sales growth led the company to the realization that in the generic drugs market companies could not differentiate on price or quality. This was the prelude for the company to adopt CSR as an expression of the companys values and as a part of its corporate strategies. By using strategic and social commitment for families with chronically ill children children, Betapharm took a strategic advantage. In July 2001, the European Commission decided to launch a consultative paper on Corporate Social Responsibility with the title Promoting a European Framework for Corporate Social Responsibility. This paper aimed to launch a debate on how the European Union could promote Corporate Social Responsibility at both the European and international level. The paper further aimed to promote CSR practices, to ensure the credibility of CSR claims as well as to provide coherence in public policy on CSR. Responsible Companies in the age of globalization How a company perceives its societal responsibility depends on various factors such as the markets in which it operates, its business line and its size. In recent years CSR has become a fundamental business practice and has gained much attention from the management of large international companies. They understand that a strong CSR program is an essential element in achieving good business practices and effective leadership. Companies have explored that their impact on the economic, social and environmental sector directly affects their relationships with investors, employees and

customers. Whilst so far Corporate Social Responsibility was mainly promoted by a number of large or multinational companies, it is now also becoming important to small national companies. Teflon Companies. Shell was one of first companies which made the experience, that early responsible acting is better than later crisis management. Shell was taken by complete surprise when the Greenpeace campaign against sinking the former drill platform Brent Spar achieved its goals. There was a widespread boycott of Shell service stations. The Brent Spar affair has brought quite some change of attitude to Shell. As companies face themselves in the context of globalization, they are increasingly aware that Corporate Social Responsibility can be of direct economic value. Although the prime goal of a company is to generate profits, companies can at the same time contribute to social and environmental objectives by integrating corporate social responsibility as a strategic investment into their business strategy. A number of companies with good social and environmental records indicate that CSR activities can result in a better performance and can generate more profits and growth. Research hast shown that company CSR programs influence to an extensive degree consumer purchasing decisions, with many investors and employees also being swayed in their choice of companies. A major challenge for companies today is attracting and retaining skilled workers. There is not only an image gain for the companies using CSR, but it is also important for the employees. Within the company, socially responsible practices primarily involve employees and relate to issues such as investing in human capital, health and safety and managing change. In India there are an existent but small number of companies which practice CSR. This engagement of the Indian economy concentrates mainly on a few old family owned companies, and corporate giants such as the Tata and Birla group companies which have led the way in making corporate social responsibility an intrinsic part of their business plans. These companies have been deeply involved with social development initiatives in the communities surrounding their facilities. Jamshedpur, one of the prominent cities in the northeastern state of Bihar in India, is also known as Tata Nagar and stands out at a beacon for other companies to follow. Jamshedpur was carved out from the jungle a century ago. TATAs CSR activities in Jamshedpur include the provision of full health and education expenses for all employees and the management of schools and hospitals. In spite of having such life size successful examples, CSR in India is in a very nascent stage. In the informal sector of the Indian economy, which contributes to almost the half of the GNP and where approximately 93% of the Indian workforce is employed, the application of CSR is rare. On the contrary, the fight against poverty, the development of education, as well as the conservation of the environment are not existent in most of the Indian enterprises. India has an advantage as far as labor is concerned. To some extent, business and capital go to those places where costs are less or standards are lower like the ones in India. But also in India, the demand for responsible and ethical goods is constantly increasing. To guarantee the supply of responsible and ethical goods, it is especially important to implement a nationwide system of CSR standards. How "social responsible" are Companies in reality? Due to the lack of international CSR guidelines, the practical application of CSR differs and CSR Strategies within most companies still show major deficiencies. There are still complaints about multinational companies wasting the environment and NGOs still denouncing human rights abuses in companies.

Some critics believe that CSR programs are undertaken by especially multinational companies to distract the public from ethical questions posed by their core operations. That meanwhile even multinational companies such as Microsoft or Pepsi confess to their social responsibility, is discussed quite controversial. While companies increasingly recognize their social responsibility, many of them have yet to adopt management practices that reflect it: company employees and managers need training in order to acquire the necessary skills and competence.

Pioneering companies can help to implement socially responsible practices by guiding the processes. The Copenhagen Centre and CSR Europe have recently launched a program to bring the business and academic community together with the aim to identify and address the training needs of the business sector on Corporate Social Responsibility. While corporate social responsibility can only be taken on by the companies themselves, employees, consumers and investors can also play a decisive role in areas such as working conditions, environment or human rights, in the purchasing of products from companies which already adopted CSR or in prompting companies to adopt socially responsible practices.

Critics suggest that better governmental and international regulation and enforcement, rather than voluntary measures are necessary to ensure that companies behave in a socially responsible manner. Corporate social responsibility should therefore not be seen as a substitute to regulation concerning social rights or environmental standards. In countries where such regulations do not exist, efforts should focus on putting the proper regulatory framework in place on the basis of which socially responsible practices can be developed. Q5. Distinguish between core competence, distinctive competence, strategic competence and threshold competence. Use examples. Ans. Competency refers to the ability of a firm to carry out an activity well. It is built and developed by firms consciously through experience and learning. A competency reside in people in the firm and not in physical assets. Competency refers to the ability of a firm to carry out an activity well. It is built and developed by firms consciously through experience and learning. A competency reside in people in the firm and not in physical assets. A Core competency is an activity central to a firm's profitability and competitiveness that is performed well by the firm. Core competencies create and sustain firm's ability to meet the critical success factors of particular customer groups. A distinctive competency is a competitively valuable activity that a firm performs better than its competitors. These provide the basis for competitive advantage. These are cornerstone of strategy. They provide sustainable competitive advantage because these are hard to copy. Acquisition of any competency is process that requires sustained and deliberate effort over extended periods to gradually build up real proficiency in performing an activity. It often entails:

Selection of people with required knowledge and skills. Improving and expanding the knowledge and skill of the people in the organization through various human resources development initiatives. Developing effective collaborative working culture and systems among groups of people. Making conscious effort to build intellectual capital. Among others. this includes developing and introducing effective knowledge management systems. Competency

A competency is anything a business does well. A business may have numerous competencies. For example, an advertising firm might do a great job of managing internal talent and developing leaders from within. Or a manufacturing company might be extremely successful in keeping its number of defects per thousand units produced extremely low. Core Competency

A core competency is a competency of the business that is essential or central to its overall performance and success. For example, a manufacturing company with a low defect rate may not rely heavily on this low-defect rate as part of its primary business strategy. If this were the case, this low-defect rate would not be a core competency. If, on the other hand, this company held itself out to the market as a reliable manufacturer of quality products, this could easily be a core competency, because the ability to consistently provide quality products is a key to its business model. Distinctive Competency

A distinctive competency is any competency that distinguishes a company from its competitors. While a distinctive competency can be any competency, core or otherwise, it is typically a core competency that truly distinguishes a company from the rest of the competition. For example, one of Google's distinctive competencies is its name recognition and status as the most notable search engine. This competency is hard for competitors to imitate and sets Google apart from the rest of the market. Competitive Advantage When a company possesses distinctive competencies, it can transform these attributes into a competitive advantage. A competitive advantage is an advantage a firm has over its competitors that allows it to be more profitable or capture more market share. Competitive advantage is crucial for a company to be successful in the long term. Without sufficient competitive advantages, a company would eventually be overtaken by companies that could compete more efficiently or more effectively. Q6. What is global industry? Explain with examples, international strategy, multi-domestic strategy, global strategy and transnational strategy. Ans. With the onset of globalization and liberalization encompassing almost every industry of the world, industries are gradually opening up on the
world stage from the narrow confines of its national boundaries. The firms operating in the industries now have to take production decisions depending on global demand and market conditions and depending on the economic scenario in world markets.

With the onset of globalization and liberalization encompassing almost every industry of the world, industries are gradually opening up on the world stage from the narrow confines of its national boundaries. The firms operating in the industries now have to take production decisions depending on global demand and market conditions and depending on the economic scenario in world markets. The term global industry specifically means an industry where a firms competitive position in one country is affected by its position in other countries and the reverse is also true. The industries exhibiting global pattern in todays world include automobiles, television sets, commercial aircrafts and boats, sporting equipment, watches, clothing, semiconductors, copiers and also the transfer of funds. The basic features of the global industry include the interconnection of communication networks and databases around the world, which in turn, leads to the Global Information Infrastructure or GII. The fast spreading of information regarding supply and demand in one market quickly gets transferred to the other world markets using the computers and satellites of today. The key industries where the marks of global industry behaviour are felt include: The Energy Sector: With increasing world oil prices having a decelerating effect on the prospects of growth of both the developing and the developed countries, the nations are looking for alternative and renewable sources of energy. Wind energy, tidal energy as well as solar energy are some of the viable options which can be checked out. It should be noted that after the oil price rise of 1973, global oil prices once again showed an upward trend recently reaching up to $70 a barrel. Financial services: and are going global these days. Many multinational and foreign banks as well as insurance companies have opened their branches in less developed countries in East and South Asia. Automobiles: The automobile industry has been a global industry for sometime now. Germany remains one of the prime exporters of automobiles across the world as is also the USA and UK. Developing nations and many East European countries are ready importers of these vehicles and the position of the automobile industry is significantly affected by their market shares in the different countries.

Education: With foreign universities opening shop in less developed countries like India and China, there has been a globalization of world education in many ways. The education sector in many of these less developed economies is being improved as a result of competition from these institutions. Retail and consumer goods: This is probably the biggest sector which can define the globalization of industry. Shopping malls with consumer-packaged goods from abroad are flooding the domestic of any country. That the retail sector going the global way is evident from imported textiles readily available and various packed foods marketed throughout the world. In addition, the transport sector is taking the shape of a global industry. Apart from the automobile industry, various novel transportation facilities are being introduced in the third world of which Light Rail Transit system is an example. Lastly, with the rise of the BPO (Business Process Outsourcing) as well as the KPO or the Knowledge Process Outsourcing, the world is getting smaller. BPO companies operating in the less developed economies as an operational branch of the parent concern in the developed world are helping the industries to attain a global character. Globalization of industry or a Global Industry can help in the comprehensive development and growth of the world as a whole and integrate it by transferring technological invention or innovation in a transparent and cost-effective manner.