Que.: What is strategic management? Or, Why a firms need strategy? Ans.

: Strategic management can be used to determine mission, vision, values, goals, objectives, roles and responsibilities, timelines, etc. Strategy refers to a plan of action designed to achieve a particular goal. In other words it is about: 1. Where an organization is trying to get in long run? 2. In which market will it compete? 3. How can it out perform the competitors? 4. What resources will it use? Que.: Different level of strategy Ans.: Strategy can be formulated on three different levels: 1. Corporate Level Strategy: Corporate level strategy fundamentally is concerned with the selection of businesses in which the company should compete and with the development and coordination of that portfolio of businesses. 2. Business Unit Level Strategy: A strategic business unit may be a division, product line, or other profit center that can be planned independently from the other business units of the firm. 3. Operational/ Functional level strategy: The functional level of the organization is the level of the operating divisions and departments. The strategic issues at the functional level are related to business processes and the value chain. Functional level strategies in marketing, finance, operations, human resources, and R&D involve the development and coordination of resources through which business unit level strategies can be executed efficiently and effectively. Que.: What is competitive advantage? Ans.: An advantage that a firm has over its competitors, allowing it to generate greater sales or margins and/or retain more customers than its competition. There can be many types of competitive advantages including the firm's cost structure, product offerings, distribution network and customer support. Que.: How can achieve competitive advantage? Ans.: 1. Learn customers want: a. Survey b. Interview c. Data collection d. Internet 2. Analyzed competition: a. Industry type b. Competitors c. Product line offer d. Major strength of the competitors 3. Create product differentiation with creatively a. Superior service

b. c. d. e.

Greater product availability Technology leadership Satisfaction guarantee Greater durability

Que.: Main four types of strategy Ans.: There are four main strategies, which are as follows: 1. Differentiation strategy: This strategy involves selecting one or more criteria used by buyer in a market and than positioning the business uniquely to meet those criteria. Ex. Mercedes car, Raymond Taylor. 2. Cost leadership strategy: With this strategy, the objective is to be come lowest cost producer in the industry. Ex. Accer, Dell brand computer. 3. Differentiation focus: In differentiation focus strategy a business aims to differentiation with in just one or a small number of target market segment. Ex. Niche market, a good side of a company. 4. Cost focus: Here a business seeks a lower cost advantage in just one or a small number of market segments. Ex. MBA program of International University. Que.: What is strategic planning process? Ans.: Strategic planning is an organization's process of defining, often in hyperbolic terms, its strategy, or direction, and making decisions on allocating its resources to pursue this strategy, including its capital and people. [Graph down step by step]. Vision: A vision is sometimes called a picture of your company in the future but its so much more than that. Your vision statement is your inspiration, the framework for all your strategic planning. Mission: A mission statement is a brief description of a company's fundamental purpose. A mission statement answers the question, "Why do we exist?" Objective: Objectives are concrete goals than the organization seeks to reach. Situation analysis: A situational analysis often is called the foundation of a plan. A situational analysis includes a thorough examination of internal and external factors affecting a business. Strategy formulation: Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision. Strategy implementation: Strategy implementation is the translation of chosen strategy into organizational action so as to achieve strategic goals and objectives. Evaluation & control: The significance of strategy evaluation lies in its capacity to co-ordinate the task performed by managers, groups, departments etc, through control of performance. Que.: What are properties of a good vision? Ans.: 1. Mental model of a future state: It involves thinking about the future, and modeling possible future states. A vision doesnt exist in the present and may or may

not be reached in the future. When any person read the vision, in that time a pictorial view clear in his eyes. 2. Idealistic: One way of reconciling these apparently contradictory properties of a vision is that the vision is realistic enough so that people believe it is achievable. When people read the vision then they thing it is Wright. 3. Appropriate for the organization & time: A vision must be consistent with the organizations values and culture and its place I its environment. 4. Reflecting: A vision is mirror of organization. 5. Purpose & direction: A vision provides the rationale for both the mission and the goals the organization should pursue. This creates meaning in workers lives by clarifying purpose and making clear what the organization wants to achieve. 6. Enthusiasm & encourages commitment: An inspiring vision can help people in an organization get excited about what theyre doing and increase their commitment to the organization. 7. Easily understood: In order to motivate individuals and clearly point toward the future a vision must be articulated so people understand it. 8. Unique: A good vision must be separate from competitors. It sets us apart from others in our area of business. Que.: How to developing a vision? Ans.: Learn everything you can about the organization. There is no substitute for a thorough understanding of the organization as a foundation for my vision. 1. Understand the organization: To formulate a vision for an organization, you first must understand it. Essential questions to be answered include, what its mission, purpose, value it provides to society, character of the industry, framework etc? 2. Conduct a vision audit: Key questions to be answered include: Does the organization have clearly stated vision, current direction, structures, processes, personnel, incentives etc.? 3. Target the vision: This step involves starting to narrow in on a vision. Key questions: What are the boundaries or constraints, accomplish and critical issues must be addressed in the vision? 4. Set the vision context: Categorize future developments in the environment, expectations for the future in each category, determine which of these expectations is most likely to occur and probability of occurrence to each expectation. 5. Develop future scenarios: The scenarios should represent in the aggregate, the alternative futures the organization is likely to operate within. 6. Generate alternative visions: Just as there are several alternative futures for the environment, there are several directions the organization might take in the future. Do not evaluate possible visions at this point, but use a relatively unconstrained approach.

7. Choose the final vision: The final vision should e the one which best meets the criteria of a good vision, is compatible with the organizations culture and values and applies to a broad range of alternative scenarios. Que.: What makes a decision strategic? Ans.: Unlike may other decisions, strategic decisions deal with the long run future of the entire organization and have three characteristics: 1. Rare: Strategic decisions are unusual and typically have no precedent to follow, totally unique. 2. Consequential: Strategic decisions commit substantial resources and demand a great deal of commitment from people at all levels. 3. Directive: Strategic decisions set precedents for lesser decisions and future actions throughout the organization. Que.: What are strategic planning/formulation? Ans.: Strategic planning is that clearly defiance objective and assesses both the internal and external situation to formulate strategy, implement the strategy, evaluate the process and make necessary adjustment to stay on track.

Mission & objective: A mission statement tells you the fundamental purpose of the organization. A vision statement outlines what the organization wants to be or how it wants the world in which it operates to be. Environmental scan: It is monitoring evaluation and disseminating of information from the external and internal environment to the key people with in the organization. Strategy formulation: The firm should match its strengths to the opportunities that it has identified, while addressing its weaknesses and external threats. Strategy implementation: The selected strategy is implemented by means of programs, budgets and procedures. Implementation involves organization of the firms resources and motivation of the staff to achieve objective. Evaluation & control: define parameter to evaluate target standard value of the parameter measure performance measure performance take corrective action

Que.: Why strategic planning fails? Ans.: There are many reasons, why strategy fails, especially: 1. Failure to execute by overcoming the key organizational hurdles a. Motivational hurdle b. Resource hurdle c. Political hurdle 2. Failure to understand the customer a. Why do they buy b. Is there a real need for the product c. Inadequate or incorrect marketing research 3. Inability to predict environmental reaction a. What will competitors do i. Fighting brands ii. Price wars b. Will government intervene 4. Over-estimation of resource competence a. Can the staff, equipment and processes handle the new strategy b. Failure to develop new employee and management skills 5. Failure to coordinate a. Reporting and control relationships not adequate b. Organizational structure not flexible enough 6. Failure to obtain senior management commitment a. Failure to get management involved right from the start b. Failure to obtain sufficient company resources to accomplish task 7. Failure to obtain employee commitment a. New strategy not well explained to employees b. No incentives given to workers to embrace the new strategy Que.: What is porter model of industry analysis? Ans.: Michael Porter provided a framework that models an industry as being influenced by five forces. The strategic business manager seeking to develop an edge over rival firms can use this model to better understand the industry context in which the firm operates.

Supplier power:

 Supplier concentration Importance of volume to supplier Differentiation of inputs Impact of inputs on cost or differentiation Switching costs of firms in the industry Presence of substitute inputs Threat of forward integration Cost relative to total purchases in industry A producing industry requires raw materials - labor, components, and other supplies. This requirement leads to buyer-supplier relationships between the industry and the firms that provide it the raw materials used to create products. Suppliers are Powerful if:
Credible forward integration threat by suppliers Significant cost to switch suppliers

Example
Nasir Glass, manufacturer of glass suppliers, to construction companies. Microsoft's relationship with PC manufacturers

Suppliers are Weak if:

Many competitive standardized suppliers product is

Example
Tire industry relationship to automobile manufacturers Grocery store brand label products

Purchase commodity products

BUYER POWER Bargaining leverage Buyer volume Buyer information Brand identity Price sensitivity Threat of backward integration Product differentiation Buyer concentration vs. industry Substitutes available Buyers' incentives The power of buyers is the impact that customers have on a producing industry. In general, when buyer power is strong, the relationship to the producing industry is near to what an economist terms a monopsony - a market in which there are many suppliers and one buyer. Buyers are Powerful if: Example
Buyers are concentrated - there are a few buyers Purchases from defense contractors

with significant market share Buyers possess a credible backward integration Large auto manufacturers' purchases of tires threat - can threaten to buy producing firm or rival

Buyers are Weak if:

Example

Buyers are fragmented (many, different) - no buyer has any particular influence on product or Most consumer products price Producers supply critical portions of buyers' input Intel's relationship with PC manufacturers - distribution of purchases

THREAT OF NEW ENTRANTS Barriers to Entry Absolute cost advantages Proprietary learning curve Access to inputs Government policy Economies of scale Capital requirements Brand identity Switching costs Access to distribution Expected retaliation Proprietary products The possibility that new firms may enter the industry also affects competition. In theory, any firm should be able to enter and exit a market, and if free entry and exit exists, then profits always should be nominal. In reality, however, industries possess characteristics that protect the high profit levels of firms in the market and inhibit additional rivals from entering the market. These are barriers to entry. Easy to Enter if there is:

Difficult to Enter if there is:

Common technology Little brand franchise Access to distribution channels Low scale threshold

Patented or proprietary know-how Difficulty in brand switching Restricted distribution channels High scale threshold

Easy to Exit if there are:

Difficult to Exit if there are:

Salable assets

Specialized assets

Low exit costs Independent businesses

High exit costs Interrelated businesses

THREAT OF SUBSTITUTES -Switching costs -Buyer inclination to substitute -Price-performance trade-off of substitutes In Porter's model, substitute products refer to products in other industries. To the economist, a threat of substitutes exists when a product's demand is affected by the price change of a substitute product. A product's price elasticity is affected by substitute products - as more substitutes become available, the demand becomes more elastic since customers have more alternatives. A close substitute product constrains the ability of firms in an industry to raise prices. DEGREE OF RIVALRY -Exit barriers -Industry concentration -Fixed costs/Value added -Industry growth -Intermittent overcapacity -Product differences -Switching costs -Brand identity -Diversity of rivals -Corporate stakes In the traditional economic model, competition among rival firms drives profits to zero. But competition is not perfect and firms are not unsophisticated passive price takers. Rather, firms strive for a competitive advantage over their rivals. The intensity of rivalry among firms varies across industries, and strategic analysts are interested in these differences. The intensity of rivalry is influenced by the following industry characteristics: 1. A larger number of firms increase rivalry because more firms must compete for the same customers and resources. The rivalry intensifies if the firms have similar market share, leading to a struggle for market leadership. 2. Slow market growth causes firms to fight for market share. In a growing market, firms are able to improve revenues simply because of the expanding market. 3. High fixed costs result in an economy of scale effect that increases rivalry.

4. High storage costs or highly perishable products cause a producer to sell goods as soon as possible. If other producers are attempting to unload at the same time, competition for customers intensifies. 5. Low switching costs increases rivalry. When a customer can freely switch from one product to another there is a greater struggle to capture customers. 6. Low levels of product differentiation are associated with higher levels of rivalry. Brand identification, on the other hand, tends to constrain rivalry. 7. Strategic stakes are high when a firm is losing market position or has potential for great gains. This intensifies rivalry. 8. High exit barriers place a high cost on abandoning the product. Que.: What is strategic group? Ans.: A strategic group is a set of business units or firms that pursue similar strategic with similar resources. A strategic group is a concept used in strategic management that groups companies within an industry that have similar business models or similar combinations of strategic. For example, the restaurant industry can be divided into several strategic groups including fast-food and fine dining based on variables such as preparation time, pricing and presentation. The number of groups within an industry and their composition depends on the dimensions used to define the groups. Que.: What are types of strategic group? Ans.: There are four types of strategic group, which are as follows: 1. Defender: A mature type of company in a mature industry that seeks to protect its market position through efficient production, strong control mechanisms, continuity and reliability. 2. Prospector: A type of company that seeks to exploit new opportunities, to develop new products and/ or services and to create new markets. Typically its core skills lie in marketing and R&D and it will tend to have a broad range of technologies and product types. Ex. Unilever, GP. 3. Analyser: A type of company that avoids excessive risks but excels in the delivery of new products and/ or services. Typically it concentrates on a limited range of products and technologies and seeks to outperform other companies on the basis of quality enhancement. Ex. Bonoful & co. 4. Reactor: A type of company which have little control over their external environment, lacking the ability to adapt to external competition and lacking in effective internal control mechanisms. They do not have a systematic strategy, design or structure. Ex. Teletalk. Que.: What are mobility barriers? Ans.: Mobility barriers are factors which impede the ability of firms to enter or exit an industry, or to move from one segment of an industry to another.

Mobility barriers is therefore a general term which includes barriers to entry, barriers to exit and barriers to intra-industry changes in market position. More specifically, mobility barriers may refer to barriers to movement from one strategic group of firms within an industry to another group. Que.: What is forecasting techniques? Ans.: There are six types of forecasting technique, which are as follows: 1. Extrapolation: It is the extension of present train into the future. 2. Brainstorming: Its came from brain. It starts to address different ideas from brain. Brainstorming is a non-quantitative approach requiring simply the presence of people with some knowledge of the situation. 3. Expert opinion: in the opinion of an expert or someone who knows a lot about said situation. 4. Delphi technique: forecast is developed by a panel of experts who anonymously answer a series of questions; responses are fed back to panel members who then may change their original responses - Very time consuming and expensive - New groupware makes this process much more feasible 5. Statistical modeling: Estimating the likelihood of an event taking place in the future, based on available data. 6. Scenario writing: A scenario is a short story in which one possible outcome of the future is developed through character(s) and plot. Que.: What is hyper competition? Ans.: Often a characteristic of new markets and industries, hyper competition occurs when technologies or offerings are so new that standards and rules are in flux, resulting in competitive advantages that cannot be sustained. In response, companies must constantly compete in price or quality, or innovate in, supply chain management, new value creation, or have enough financial capital to outlast other competitors. In hyper competition market stability is threaten by: 1. Short product life cycle 2. Short product design cycle 3. New technologies 4. Frequent entry of unexpected outsider 5. Diverse industry merged

Resources based organization analysis

The organization is actually conducted to check the strength and weakness of the internal environment there in the organization. Matter should be considered conduction organizational analyses, which are as follows: 1. Organizational structure: There are some structure: a. Simple structure: It has no functional or product categories and is appropriate for a small, entrepreneur dominated company with one or two product lines that

operates in a reasonably small, easily identifiable market niche. Employees tend to

be generalists and jacks of all trades. b. Functional structure: It is appropriate for a medium sized firm with several related product lines in one industry. Employees tend to be specialists in the business functions important to that industry, such as manufacturing, marketing, finance and human resources.

c. Divisional structure: It is appropriate for a large corporation with many product lines in several related industries. Employees tend to be functional specialists organized according to product/market distinctions. Ex. General Motors.

d. Conglomerate structure: It is appropriate for a large corporation with many product lines in several unrelated industries. A variant of the divisional structure, the conglomerate structure is typically an assemblage of legally independent firms operation under one corporate umbrella but controlled through the subsidiaries boards of directors. 2. Corporate culture: There are three ways to do any job the right way, the wrong way, and the company way. Around here, we always do things the company way. It is the collection of beliefs, expectation, and values, learn & share by a corporations members and transmitted from one generation of employees to another. Ex. Dress of an office. 3. Strategic marketing issues: a. Market position and segmentation: Market position deals with the question, Who is our customers? It refers to the selection of specific areas for marketing concentration and can be expressed in terms of market, product and geographical locations. Market segmentation with various products or services so that managers

b.

c. 4. a.

b.

5. a. b.

c.

6. a. b.

can discover what niches to seed, which new types of products to develop and how to ensure that a companys many products do not directly compete with one another. Marketing Mix: It refers to the particular combination of key variables under the corporations control that can be used to affect demand and to gain competitive advantage. These variables are product, place, promotion and price. Product life cycle: One of the most useful concepts in marketing, insofar as strategic management is concerned, is that of the product life cycle. Strategic financial issues: Financial leverage: It is helpful in describing how debt is used to increase the earnings available to common shareholders. Leverage acts to magnify the effect on earnings per share of an increase or decrease in dollar sales. Capital Budgeting: It is the analyzing and ranking of possible investments in fixed assets such as land, buildings and equipment in terms of the additional outlays and additional receipts that will result from each investment. Research and development issues: R&D intensity: It is a principal means of gaining market share in global competition. Technological competence: It should the corporation make ad consistent research effort and proficient in managing research personnel and integrating their innovations into its day-to-day operations. Technology transfer: The process of taking a new technology from the laboratory to the market place, it will not gain much advantage from new technological advances. HR issues: Recruitment & Selection: Union relation & HR diversity: A good human resource manger should be able to work closely with the union. Human diversity refers to the mix in the workplace of people from different races, cultures and backgrounds.

Que.: What are key points resources based analysis? Ans.: There are three main key points of resources based analysis, which are as follows: 1. Identify the firms potential key resources: It is main supporting materials of a enterprise. 2. Evaluate whether these resources fulfill the following (VRIN) criteria: a. Valuable: A resource must enable a firm to employ a value-creating strategy, by either outperforming its competitors or reduce its own weaknesses. b. Rare: To be of value, a resource must be by definition rare. c. In-imitable: If a valuable resource is controlled by only one firm it could be a source of a competitive advantage.

d. Non-substitutable: Even if a resource is rare, potentially value-creating and imperfectly imitable, an equally important aspect is lack of substitutability. 3. Care for and protect resources that possess these evaluations because doing so can improve organizational performance. Que.: What is value chain analysis? Ans.: Value chain analysis way of identifying which activities are best undertaken by a business and which activities are provided by other. It describes the activities that takes place in a business organization and relates them to an analysis of the competitive strengths of the business. If however includes the analysis of two group heads: 1. Primary activities: The activities directly concern with creating & delivery of the product. If includes inbound logistic, operations, out bound logistic, marketing, sales and service. 2. Supporting activities: Procurement, HRM, technology development, infrastructure development. Que.: Steps in value chain analysis Ans.: Value chain analysis can be broken down into a three sequential steps: 1. Break down a market/organization into its key activities under each of the major headings in the model. 2. Assess the potential for adding value via cost advantage or differentiation, or identify current activities where a business appears to be at a competitive disadvantage. 3. Determine strategies built around focusing on activities where competitive advantage can be sustained. Que.: How to conduct competitor analysis? Ans.: such as focus groups and questionnaires, can provide you with valuable information about our competition: a. Who are our competitors? b. What threats do they pose? c. What is their size? Revenues? d. What is their percentage of market share? e. What is their total sales volume? f. What is their growth rate? g. What is the profile of our competitors? h. What are the objectives of our competitors? i. What strategies are our competitors pursuing and how successful are these strategies? j. What are the strengths and weaknesses of our competitors? k. How are our competitors likely to respond to any changes to the way we do business?

l. m. n. o.

What is their size? Revenues? What is their percentage of market share? What is their total sales volume? What is their growth rate? Etc.

Que.: Sources of information for competitor analysis Ans.: Davidson (1997) described how the sources of competitor information can be neatly grouped into three categories: Recorded data: this is easily available in published form either internally or externally. Good examples include competitor annual reports and product brochures; Ex. Annual report & accounts, Press releases, Government reports. Observable data: this has to be actively sought and often assembled from several sources. A good example is competitor pricing; Ex. Advertising campaigns, Pricing / price lists. Opportunistic data: to get hold of this kind of data requires a lot of planning and organization. Much of it is anecdotal, coming from discussions with suppliers, customers and, perhaps, previous management of competitors. Ex. Meetings with suppliers, Trade shows. Que.: Corporate Level Strategy Ans.: Corporate-level strategies address the entire strategic scope of the enterprise. This is the "big picture" view of the organization and includes deciding in which product or service markets to compete and in which geographic regions to operate. For multi-business firms, the resource allocation processhow cash, staffing, equipment and other resources are distributedis typically established at the corporate level. It deals with choose of direction for the firm as a hold. It however includes the following three key issues: 1. Directional strategy: The firms overall orientation toward growth, stability or retrenchment. 2. Portfolio Strategy: The industries or markets in which the firm competes through its products and business unit. 3. Parenting Strategy: The manner in which management coordinates activities, transfers resources, and cultivates capabilities among product lines and business units. Que.: What is directional Strategy? Ans.: A course of action that leads to the achievement of the goals of an organization's strategy. Every product or business unit must follow a business strategy to improve its competitive position. Directional strategy is composed of three general orientations. 1. Growth strategy 2. Stability strategy 3. Retrenchment strategy Que.: What is Growth strategy?

Ans.: Strategy aimed at winning larger market share, even at the expense of shortterm earnings. Four broad growth strategies are diversification, product development, market penetration, and market development. Que.: What is Exporting? Ans.: A function of international trade whereby goods produced in one country are shipped to another country for future sale or trade. The sale of such goods adds to the producing nation's gross output. If used for trade, exports are exchanged for other products or services. Exports are one of the oldest forms of economic transfer, and occur on a large scale between nations that have fewer restrictions on trade, Que.: What is licensing? Ans.: Written contract under which the owner of a copyright, know how, patent, service-mark, trademark, or other intellectual property, allows a licensee to use, make, or sell copies of the original. While licensing agreements are mainly used in commercialization of a technology, they are also used by franchisers to promote sales of goods and services. Que.: What is franchising? Ans.: Arrangement where one party (the franchiser) grants another party (the franchisee) the right to use its trademark or trade-name as well as certain business systems and processes, to produce and market a good or service according to certain specifications. Que.: What is Joint Ventures? Ans.: A joint venture is a business agreement in which parties agree to develop, for a finite time, a new entity and new assets by contributing equity. They exercise control over the enterprise and consequently share revenues, expenses and assets. Que.: What is Acquisitions? Ans.: A merger or acquisition is a combination of two companies where one corporation is completely absorbed by another corporation. The less important company loses its identity and becomes part of the more important corporation, which retains its identity. A merger extinguishes the merged corporation, and the surviving corporation assumes all the rights, privileges, and liabilities of the merged corporation. Que.: What is Green-field development? Ans.: No compound wants to purchases another companys problem along with its assets. They tend to purchases the successful area of other company. This concept is regard at Green-field development. Que.: What is production Sharing?

Ans.: It means the process of combining the higher labor skills and technology available in the developed countries with the lower cost labor available in developing countries. Que.: What is Turnkey Operations? Ans.: Turn-key refers to something that is ready for immediate use, generally used in the sale or supply of goods or services. Turnkey is often used to describe a home built on the developer's land with the developer's financing ready for the customer to move in. If a contractor builds a "turnkey home" they frame the structure and finish the interior. Que.: What is BOT concept? Ans.: The (Build, Operate, Transfer) Bot entails building the project in company's expenses, operating it for profit and then transferring it to the Government after an agreed upon period. The concept is a variation of the turnkey operation. Instead of turning the facility over to the host country when completed, the company operates the facility for a fixed period of time during which it earns back its investment, plus a profit. Que.: What is a Management contract? Ans.: A management contract is an arrangement under which operational control of an enterprise is vested by contract in a separate enterprise which performs the necessary managerial functions in return for a fee. Que.: What is Stability strategy? Ans.: Stability strategy implies continuing the current activities of the firm without any significant change in direction. If the environment is unstable and the firm is doing well, then it may believe that it is better to make no changes. The strategy is three types: 1. Pause/Proceed with caution strategy 2. No change strategy 3. Profit strategy Que.: What is Pause/Proceed with caution strategy? Ans.: some organizations pursue stability strategy for a temporary period of time until the particular environmental situation changes, especially if they have been growing too fast in the previous period. Stability strategies enable a company to consolidate its resources after prolonged rapid growth. Sometimes, firms that wish to test the ground before moving ahead with a full-fledged grand strategy employ stability strategy first. Que.: What is no change strategy? Ans.: a no change strategy is a decision to do nothing new i.e continue current operations and policies for the foreseeable future. If there are no significant opportunities or threats operating in the environment, or if there are no major new

strengths and weaknesses within the organization or if there are no new competitors or threat of substitutes, the firm may decide not to do anything new. Que.: What is profit strategy? Ans.: the profit strategy is an attempt to artificially maintain profits by reducing investments and short-term expenditures. Rather than announcing the companys poor position to shareholders and other investors at large, top management may be tempted to follow this strategy. Obviously, the profit strategy is useful to get over a temporary difficulty, but if continued for long, it will lead to a serious deterioration in the companys position. Que.: What is Retrenchment Strategies? Ans.: A strategy used by corporations to reduce the diversity or the overall size of the operations of the company. This strategy is often used in order to cut expenses with the goal of becoming a more financial stable business. Typically the strategy involves withdrawing from certain markets or the discontinuation of selling certain products or service in order to make a beneficial turnaround. Que.: What is turnaround strategy? Ans.: The overall goal of turnaround strategy is to return an underperforming or distressed company to normal in terms of acceptable levels of profitability, solvency, liquidity and cash flow. Turnaround strategy is described in terms of how the turnaround strategy components of managing, stabilizing, funding and fixing an underperforming or distressed company are applied over the natural stages of a turnaround. Que.: What is Sell-out/Divestment Strategy? Ans.: Sell-Out strategy-makes sense if managementcan still obtain a good price for its shareholdersand the employees can keep their jobs by sellingthe entire company to another firm. Exa m p l e : Marginal performance in a troubled industry wasone reason Northwest airlines was willing to beacquired by Delta Airlines in 2008. Que.: What is Bankruptcy/Liquidation Strategy? Ans.: Bankruptcy or insolvency is a legal status of a person or an organisation that cannot repay the debts it owes to its creditors. Creditors may file a bankruptcy petition against a business or corporate debtor in an effort to recoup a portion of what they are owed or initiate a restructuring. Que.: What is Portfolio Analysis? Ans.: Portfolio analysis top management views its product lines and business units as a series of investments from which it expects a profitable return. Portfolio analysis is the process of looking at every investment held within a portfolio and evaluating how it affects the overall performance. Portfolio analysis seeks to determine the variance

of each security, the overall beta of the portfolio, the amount of diversification and the asset allocation within the portfolio. Que.: BCG Matrix? Ans.: BCG matrix has four cells, with the horizontal axis representing relative market share and the vertical axis denoting market growth rate. Resources are allocated to the business units according to their situation on the grid. The four cells of this matrix have been called as stars, cash cows, question marks and dogs. Each of these cells represents a particular type of business.

1.

2.

3.

4.

Figure: BCG Matrix Stars- Stars represent business units having large market share in a fast growing industry. They may generate cash but because of fast growing market, stars require huge investments to maintain their lead. Cash Cows- Cash Cows represents business units having a large market share in a mature, slow growing industry. Cash cows require little investment and generate cash that can be utilized for investment in other business units. Question Marks- Question marks represent business units having low relative market share and located in a high growth industry. They require huge amount of cash to maintain or gain market share. They require attention to determine if the venture can be viable. Question marks are generally new goods and services which have a good commercial prospective. Dogs- Dogs represent businesses having weak market shares in low-growth markets. They neither generate cash nor require huge amount of cash. Due to low market share, these business units face cost disadvantages.

Que.: Limitations of BCG Matrix

The BCG Matrix produces a framework for allocating resources among different business units and makes it possible to compare many business units at a glance. But BCG Matrix is not free from limitations, such as-

1. BCG matrix classifies businesses as low and high, but generally businesses can be medium also. Thus, the true nature of business may not be reflected. 2. Market is not clearly defined in this model. 3. High market share does not always leads to high profits. There are high costs also involved with high market share. 4. Growth rate and relative market share are not the only indicators of profitability. This model ignores and overlooks other indicators of profitability. 5. At times, dogs may help other businesses in gaining competitive advantage. They can earn even more than cash cows sometimes. 6. This four-celled approach is considered as to be too simplistic.

Que.: What is Functional Level Strategy? Ans.: Functional Strategy is the approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resources productivity. It is Organizational plan for human resources, marketing, research and development and other functional areas. The functional strategy of a company is customized to a specific industry and is used to back up other corporate and business strategies. There are many types of functional strategy: 1. Marketing Strategy 2. Financial Strategy 3. Research and Development Strategy 4. Operations Strategy 5. Purchasing Strategy 6. Logistics Strategy 7. HRM Strategy 8. Information Strategy 9. ICT Strategy 1. Marketing Strategy: A strategy that integrates an organization's marketing goals into a cohesive whole. Ideally drawn from market research, it focuses on the ideal product mix to achieve maximum profit potential. The marketing strategy is set out in a marketing plan. It include some strategy, which are as follows: a. Market Development Strategy: The process of growing sales by offering existing products (or new versions of them) to new customer groups (as opposed to simply attempting to increase the company's share of current markets). b. Market penetration Strategy: This is a strategy to stay in current market with existing product. To penetration the market place, here the company does the following thing: i. Increase rate of purchase/consumption ii. Attract rivals customers iii. By out rivals

iv. Convert non users into current users c. Push Strategy: In push strategy a high promotional tool is used or a big amount of money is spending to gain a big space in the market place. d. Pull Strategy: In pull strategy the company sale its product with a high efficient distribution channel. 2. Financial Strategy: This strategy examines the financial implications of corporate and business level strategic options and identifies the best financial course of action. Common financial strategy includes: a. Leveraged buy out: A company is acquired in a transaction financed largely by debt usually obtained from a third party, such as an insurance company or an investment banker. b. Tracking Stock: It is a type of common stock tied to one portion of a corporations business. 3. Research & Development (R&D) Strategy: Investigative activities that a business chooses to conduct with the intention of making a discovery that can either lead to the development of new products or procedures, or to improvement of existing products or procedures. Research and development is one of the means by which business can experience future growth by developing new products or processes to improve and expand their operations. It includes; a. Technological leader: A technological leader in which one pioneers an innovation. b. Technological follower: A technological follower in which one imitates the products of competitors.

Que.: Link between R&D technology strategy and Competitive advantage: Ans.: Technological Leadership Technological followership Cost advantage Pioneer the lowest cost product Lower the cost of the product or design. Be the first firm down value activities by learning from the learning curve. Create low- the leaders experience. cost ways of performing value activities. Differentiation Pioneer a unique product that Adapt the product or delivery increases buyer value. Innovate system more closely to buyer

in other activities to increase needs by learning from the buyer value. leaders experience. 4. Operation Strategy: It determines how and where a product or service is to be manufactured the level of vertical integration in the production process. Companies and organizations making products and delivering, be it for profit or not for profit rely on a handful of processes to get their products manufactured properly and delivered on time. Each of the process acts as an operation for the company. To the company this is essential. It includes; a. Job shop production: A manufacturing facility that produces several different products in smaller batches. A machine shop is a type of job shop. Producing will be skill labour. b. Mass Production: The manufacture of goods in large quantities, often using standardized designs and assembly-line techniques. c. Continuous improvement: To support continuous improvement, business professionals continually examine their processes to discover and eliminate problems. d. Mass customization: Mass customization, in marketing, manufacturing, call centres and management, is the use of flexible computer-aided manufacturing systems to produce custom output. Those systems combine the low unit costs of mass production processes with the flexibility of individual customization. e. Madular manufacturing: A method of manufacturing that uses small groups of people who work together to produce a finished garment. f. Out source sing: Outsourcing often refers to the process of subcontracting to a third-party. g. Jit Production: A strategy for inventory management in which raw materials and components are delivered from the vendor or supplier immediately before they are needed in the manufacturing process. 5. Purchases Strategy: It deals obtaining the raw materials, parts and supplies needed to perform the operations function. It includes, a. Multiple sourcing: The purchasing company orders a particular part from several vendors. Multiple sourcing has traditionally been considered superior to other purchasing approaches because (1) it forces suppliers to compete for the business of an important buyer, thus reducing purchasing costs; and (2) if one supplier could not deliver, another usually could, thus guaranteeing that parts and supplies would always be on hand when needed. b. Sole sourcing: It is the only manageable way to obtain high supplier quality. Sole sourcing relies on only one supplier for a particular part. c. JIT: The JIT concept of the purchased parts arriving at the plant just when they are needed rater than keeping inventories. The concept which vendor sales representatives actually have desks next to the purchasing. d. Parallel sourcing: Two suppliers are the sole suppliers of two different parts, but they are also backup suppliers for each others parts. In case one vendor

cannot supply all of its parts on time, the other vendor would be asked to make up the difference. 6. Logistics Strategy: It deals with the flow of products into and out of the manufacturing process. It includes three trends are event: a. Centralization: In this strategy, no won transportation, other transportation carries our goods according to our schedule. b. Out sourcing: In this strategy, no won transportation, other transportation carries our goods according to his schedule. Ex. S.A. Porihohan, Sundorban Poribohan etc. c. Internet issues: In this strategy, an organization received order from customer, then collect this product and sent to customer. Ex. www.amazon.com 7. HR Strategy: a. 360 degree appraisal: 360 degree feedback, also known as 'multi-rater feedback', is the most comprehensive appraisal where the feedback about the employees performance comes from all the sources that come in contact with the employee on his job. 360 degree respondents for an employee can be his/her peers, managers (i.e. superior), subordinates, team members, customers, suppliers/ vendors - anyone who comes into contact with the employee and can provide valuable insights and information or feedback regarding the "on-the-job" performance of the employee. 8. Information System Strategy: It in that they are turning to information systems technology to provide business units with competitive advantage. a. Sun management: in which project team members living in one country can pass their work to team members in another country in which the work day is just beginning. Thus, night shifts are no longer needed. The development of instant translation software is also enabling workers to have online communication with coworkers in other countries who use a different language. Que.: Strategies to Avoid Ans.: Several strategies, which could be considered corporate, business or functional are very dangerous, so that some strategies are avoid. 1. Follow the Leader: a leading competitors competitor strategy might seem to be a good idea, but it ignores a firms particular strengths and weaknesses and the possibility that the deader may be wrong. 2. Hit another home run: If a company is successful because it pioneered an extremely successful product, it tends to search for another super product that will ensure growth and prosperity. 3. Arms Race: Entering into a spirited battle with another firm for increased market share might increase sales revenue, but that increase will probably be more than offset by increases in advertising, promotion, R&D and manufacturing costs.

4. Do everything: When faced with several interesting opportunities, management might tend to leap at all of them. Mainly all programs are not running at a time, it will accept one by one. 5. Losing Hand: A corporation might have invested so much in a particular strategy that top management is unwilling to accept its failure. Believing that it has too much invested to quit, the corporation continues to throw good money after bad. Short Note: High exit barriers place a high cost on abandoning the product. The firm must compete. High exit barriers cause a firm to remain in an industry, even when the venture is not profitable. A common exit barrier is asset specificity. When the plant and equipment required for manufacturing a product is highly specialized, these assets cannot easily be sold to other buyers in another industry. Litton Industries' acquisition of Ingalls Shipbuilding facilities illustrates this concept. Litton was successful in the 1960's with its contracts to build Navy ships. But when the Vietnam war ended, defense spending declined and Litton saw a sudden decline in its earnings. As the firm restructured, divesting from the shipbuilding plant was not feasible since such a large and highly specialized investment could not be sold easily, and Litton was forced to stay in a declining shipbuilding market. A diversity of rivals with different cultures, histories, and philosophies make an industry unstable. There is greater possibility for mavericks and for misjudging rival's moves. Rivalry is volatile and can be intense. The hospital industry, for example, is populated by hospitals that historically are community or charitable institutions, by hospitals that are associated with religious organizations or universities, and by hospitals that are for-profit enterprises. This mix of philosophies about mission has lead occasionally to fierce local struggles by hospitals over who will get expensive diagnostic and therapeutic services. At other times, local hospitals are highly cooperative with one another on issues such as community disaster planning. Industry Shakeout. A growing market and the potential for high profits induces new firms to enter a market and incumbent firms to increase production. A point is reached where the industry becomes crowded with competitors, and demand cannot support the new entrants and the resulting increased supply. The industry may become crowded if its growth rate slows and the market becomes saturated, creating a situation of excess capacity with too many goods chasing too few buyers. A shakeout ensues, with intense competition, price wars, and company failures.