1 What is strategy? Explain some of the major reasons for lack of strategic management insome companies?

Meaning of strategy: The word strategy comes from Greek strategies, which refers to a military general and combines stratus (the army) and ago (to lead). The concept and practiceof strategy and planning started in the military, and, over time, it entered business andmanagement. The key or common objective of both business strategy and military strategyis the same, i.e., to secure competitive advantage over the rivals or opponents. A well-formulated strategy is vital for growth and development of any organization whetherit isa small business, a big private enterprise, a public sector company, a multinationalcorporation or a non-profit organization. But, the nature and focus of corporate strategy inthese different types of organizations will be different, primarily because of the nature of theiroperations and organizational objectives and priorities.Small businesses, for example, generally operate in a single market or a limited number ofmarkets with a single product or a limited range of products.The nature and scope of operations are likely to be less of a strategic issue than in largerorganizations. Not much of strategic planning may also be required or involved; and, thecompany may be content with making and selling existing product(s) and generating someprofit. In many cases, the founder or the owner himself forms the senior/top managementand his (her) wisdom gives direction to the company.In large businesses or companies whether in the private sector, public sector ormultinationals the situation is entirely different. Both the internal and the externalenvironment and the organizational objectives and priorities are different. For all largeprivate sector enterprises, there is a clear growth perspective, because the stakeholderswant the companies to grow, increase market share and generate more revenue and profit.For all such companies, both strategic planning and strategic management play dominantroles.Multinationals have a greater focus on growth and development, and also diversification interms of both products and markets. This is necessary to remain internationally competitiveand sustain their global presence. For example, multinational companies like GeneralMotors, Honda and Toyota may have to decide about the most strategic locations orconfigurations of plants for manufacturing the cars. They are already operating multi location(country) strategies, and, in such companies, roles of strategic planning and managementbecome more critical in optimizing manufacturing facilities, resource allocation and control.In public sector companies, objectives and priorities can be quite different from those in theprivate sector. Generation of employment and maximizing output may be more importantobjectives than maximizing profit. Stability rather than growth may be the priority manytimes. Accountability system is also very different in public sector from that in private sector.

There is also greater focus on corporate social responsibility. The corporate planning systemand management have to take into account all these factors and evolve more balancingstrategies.In non-profit organizations, the focus on social responsibilities is even greater than in thepublic sector. In these organizations, ideology and underlying values are of central strategicsignificance. Many of these organizations have multiple service objectives, and thebeneficiaries of service are not necessarily the contributors to revenue or resource. All thesemake strategic planning and management in these organizations quite different from allother organizations.The evaluation criteria also become different. Lack of Strategic Management in Some CompaniesSome companies do not undertake strategic planning and management. Some othercompanies do strategic planning, but receive no support from managers and employees. Insome other cases, managers and employees do not get enough support from the topmanagement. A number of such and other reasons explain why certain companies do nottake to strategic planning and management. David (2003) has mentioned various reasons for poor or no strategic planning and management by companies. These are discussedbelow:1. Content with success: If an organization is generally successful, the top management orindividual managers may feel that there is no need to plan and strategize becauseeverything is fine. However, they forget that success today does not guarantee successtomorrow.2. Poor reward structure: When an organization achieves success, it often fails to reward itsmanagers or planners. But when failure occurs, the company may punish the managersconcerned. In such a situation, it is better for individual managers to do nothing than to risktrying to achieve something, fail and be punished.3. Overconfidence: As managers gain experience, they may rely less on formalized planningand more on individual initiative and decisions. But, this is not appropriate. Overconfidenceor overestimating experience leads to complacency and ultimately can bring downfall.Forethought and planning are the right virtues and are signs of professionalism.4. Fire-fighting: An organization may be so deeply engrossed in crisis management and firefighting that it may not have time to plan and strategize. This happens with many companiesand is a clear sign of nonprofessionalization.5. Waste of time: Some organizations view planning as a waste of time because no tangiblemarketable products are produced through planning.But they forget that time spent on planning is an investment, and there would be returns,both tangible and intangible, in due course.6. Too expensive: Some organizations are culturally opposed to spending resources onmatters like planning which do not produce instant or immediate results. They feel thatspending on planning is a wasteful expenditure.7. Previous bad experience: Managers may have had previous bad experience withplanning, that is, cases in which plans have been cumbersome, impractical or inflexible.There could be experience of failures also. They would like to avoid recurrence of this.8. Honest difference of opinion: Some managers may sincerely think that a plan is notcorrect. They may see the situation from a different viewpoint, or, they may have aspirationsfor themselves or the organization, which are different from those envisaged in the plan.Different people in different jobs in the same organization may have different perceptions ofthe same situation, and this may lead to difference of opinions among them and eventuallyto lack of planning due to lack of consensus.9. Self-interest: When management has achieved status, privilege or selfesteem througheffectively using an old system, it often sees a new plan or a new system as unnecessary ora threat.10. Fear of the unknown: Managers may not be sure of their abilities to learn new skills ortake on new roles or adapt to new system. This is basically inertia against change or fear forchange.11. Fear of failure: Whenever something new or different is attempted, there is a chance ofsuccess, but, there is also some risk of

failure. Many companies and managers may like toavoid strategic planning and management for fear of failure.12. Suspicion: Employees may not trust management, or, the management may not haveenough confidence in the managers. This gives rise to mutual suspicion.

2 Explain the following:(a) Core competence: are those capabilities that are critical to a business achievingcompetitive advantage. The starting point for analyzing core competencies is recognizingthat competition between businesses is as much a race for competence mastery as it is formarket position and market power. Senior management cannot focus on all activities of abusiness and the competencies required undertaking them. Core competence is amanagement tool that enables an organization to deliver a unique value to its customers.Building up core competency becomes essential to gain competitive advantage becauseadvantages originating from the product-price-performance -tradeoffs are almost short-term especially when technology keeps on changing. The profits earned by the various businessunits can only last through competencies.(b) Value chain analysis: Value Chain Analysis is a useful tool for working out how you cancreate the greatest possible value for your customers. In business, were paid to take raw inputs, and to add value to t hem by turning them intosomething of worth to other people. This is easy to see in manufacturing, where the manufacturer adds value by taking a raw material of little use to the end -user (for example,wood pulp) and converting it into something that people are prepared to pay money for (e.g.paper). But this idea is just as important in service industries, where people use inputs oftime, knowledge, equipment and systems to create services of real value to the How to perform the analysis? There are two different approaches on how to perform the analysis, which depend on what typeof competitive advantage wants to create (cost or differentiation advantage). The table below lists all thesteps needed to achieve cost or differentiation advantage using VCA. Cost advantage Differentiation advantage This approach is used when organizations try tocompete on costs and want to understand thesources of their cost advantage or disadvantageand what factors drive those costs.The firms that strive to create superior products orservices use differentiation advantage approach. Step 1. Identify the firms primary and support activities. Step 2.

Establish the relative importance of eachactivity in the total cost of the product. Step 3. Identify cost drivers for each activity. Step 4. Identify links between activities. Step 5. Identify opportunities for reducing costs. Step 1. Identify the customers value -creatingactivities. Step 2. Evaluate the differentiation strategies forimproving customer value. Step 3. Identify the best sustainable differentiation. 3 Describe in brief the following environmental factors which a business strategist considers:(a) Political factors: Political factors impact the organizations in many ways. Political factorscan create benefits and opportunities for the organizations. The political environment has animportant impact on the business. There is a large field with many factors which thecompanies have to consider if they want to expand overseas Political environment is notstable and can change quickly. Monitoring, understanding and adapting to the politicalenvironment is absolutely essential for any(b) Technology: The technology plays a major role in the concept of new economy. Thetechnology has two dimensions; one is the shift from manufacturing to services and secondis the shift from physical resources to the knowledge resources. There are so manymechanisms for technology innovation and diffusion, both within and outside the countries.Many of the organisations will include different technologies both for quantitative andqualitative terms.Small scale enterprises play a vital role in the implementation of new technologies. Theyhave added more value in terms of population, employment, and services that they are offering. Internet also plays a vital role as it helps the small and medium enterprises inproviding the cost effective possibilities to advertise their products. Internet also provides thecontacts to buyers and suppliers on a global basis. E-business is helps the radicaltransformation in the way that the business is done. The introduction of technologies like thecommon database, electronic networks and value added services are helpful for speedingup the transactions and these are fundamental at the industrial level. The e-business has toundergo lot of challenges in implementing the technologies that are helpful for theorganisation since many of the people in the organisation will not be interested to shift to thenew technology and learn the new skills. 4 Write a brief note on Turnaround strategy. 10The definition of turnaround strategy w.r.t different senses is depicted below.definition of turnaround strategyIn general, the definition of turnaround strategy can be stated as follows. Turnaround strategy is a corporate practice designed and planned to protect (save) a loss-making company and transform it into a profitmaking one. In financial, commercial, corporate or from a business perspective, the turnaround strategycan be defined as follows. Turnaround Strategy is a corporate action that is taken (performed) to deal with issues of alossmaking (sick) company like increasing losses, lower return on capital employed, and

continuous decrease in the value of its shares. Finally, from an academic point of view, its definition can be stated as under. Turnaround strategy is an analytical approach to solve the root cause failure of a loss-making company to decide the most crucial reasons behind its failure. Here, a longtermstrategic plan and restructuring plans are designed and implemented to solve the issues of a sick company. Some examples of turnaround strategy are depicted below.Consider following examples of turnaround strategy: Financial Institution, for example, some bank A is suffering from losses due to nonperforming assets (NPA). NPA is loan given but not yet recovered. This bank A will follow turnaround strategy and try to recover its loans by appointing recovery agents. Manufacturing company say XYZ is suffering from losses due to excess idle time taken by labour to complete their jobs. The manufacturing company XYZ will follow turnaroundstrategy to reduce labour inactivity by installing modern machines (automation) to carry onthe same work or job.Educational institution, f or example, C is suffering from losses due to non -registration ofstudents in their courses. This institution C will follow turnaround strategy to reduce losses by providing facilities like e-Registration, conducting online classes, etc. to attract students. 5 Define the term strategic alliance. What are its characteristics and objectives? Strategic alliance is the process of mutual agreement between the organisations to achieveobjectives of common interest. They are obtained by the co-operation between thecompanies. Strategic alliance involves the individual organisations to modify its basicbusiness activities and join in agreement with similar organisations to reduce duplication ofmanufacturing products and improve performance. It is stronger when the organisationsinvolved have balancing strengths. Strategic alliances contribute in successfulimplementation of strategic plan because it is strategic in nature. It provides relationshipbetween organisations to plan various strategies in achieving a common goal.The various characteristics of strategic alliances are: The two independent organisations involving in agreement have a similar idea ofachieving objectives with respect to alliances. The organisations share the advantages and organise the management of alliance untilthe agreement lasts. To develop more areas in alliances, the organisations contribute their own resources liketechnology, production, R&D, marketing etc to increase the performance. According to Faulkner (1995) Strategic alliance is the inter-organisational relationship inwhich the partners make substantial investment in developing a long-term collaborativeeffort, and obtain common orientation.Objective of strategic alliance are below:1. Critical to the success of a core business goal or objective.2. Critical to the development or maintenance of a core competency or other source ofcompetitive advantage.3. Blocks a competitive threat.4. Creates or maintains strategic choices for the firm.5. Mitigates a significant risk to the business.

6 Write short notes on the following:a) Competitive advantage Answer : Competitive advantage is the favorable position an organization seeks in order tobe more profitable than its competitors.The challenge for a marketing strategy is to find a way of achieving a sustainablecompetitive advantage over the other competing products and firms in a market. A competitive advantage is an advantage over competitors gained by offering consumersgreater value, either by means of lower prices or by providing b) Porters Competitive threat model Answer : Porter suggests that there are five basic competitive forces, which influence the state of competition in an industry. He calls the structural determinants of the intensity ofcompetition, which collectively determine the profit potential of the industry as a whole. Some industries have a bigger profit potential than others, since keener competition meanslower profits.Porters model of competitive forces assumes that there are five competitive forces thatidentifies the competitive power in a business situation. These five competitive forcesidentified by the Michael Porter are:Threat of substitute productsThreat of new entrantsIntense rivalry among existing playersBargaining power of suppliersBargaining power of Buyers