MB0052

Strategic Management and Business Policy – MB0052 Assignment Fall – 2012 MBA – IV

Sudip Konar Roll No. 521135105, of 12

Q1. What do you understand by the term Strategy in the context of Business Management

and Policy? And what are the stages in the formulation of a Strategy?

Ans: The word strategy is derived from the Geek word “strategia”, and conventionally used

as a military term. It means a plan of action that is designed to achieve a particular goal.

Strategy is the method by which an organization systematically achieves its future objectives.

Strategy is a common direction set for the company and its various components to accomplish

a desired position in the future. A meticulous planning process results in strategy. The strategy

is advantageous to the organization through its configuration of resources within a challenging

environment. It helps to meet the requirements of market and stakeholder expectations.

Strategy is a plan that is aimed to give a competitive advantage to the organization over rivals

through differentiation. Creating a strategy begins with extensive research and analysis. It is a

process through which senior management concentrates on top priority issues tackled by the

company to be successful in a long term. Strategy is always improving and is amendable.

Business strategy is the method by which an organization achieves and maintains its success. If

an organization cannot identify its strategy clearly then it will struggle to survive in the

competitive market.

The main stages involved in strategy formulation are as follows:

� Stimulate the identification - Identifying useful information like planning for strategic

management, objectives to achieve the goals of the employees and the stakeholders.

� Utilization and transfer of useful information as per the business strategies - A number

of questions arising during utilization and transfer of information have to be solved The

questions that arise during utilization and transfer of information are the following:

� Who has the requested information?

� What is the relationship between the partners who holds the requested information?

� What is the nature of the requested information?

� How can we transfer the information?

We will learn about Henry Mintzberg’s contribution to strategic planning in this section. Henry

Mint berg is a well-known academician and generalist writer who has written about strategy

and organizational management. His approach is broad, involving the study of the actions of a

manager and the way the manager does it. He believes that management is about applying

human skills to systems, but not systems to people. Mint berg states certain factors as the

reason for planning failure. The factors are as follows:

� Processes - The elaborate processes used in the management such as creation of

bureaucracy and suppression of innovation leads to strategic planning failure.

� Data - According to Mint berg, hard data (the raw material of all strategists) provides

information whereas soft data (the data gathered from experience) provides wisdom

which means that soft data is more relevant than the hard data.

� Detachment – Mint berg says that effective strategists are people who do not distance

themselves from the details of a business. They are the ones who immerse themselves

into the details and are able to extract the strategic messages from it.



In 1993, Henry Mint berg concluded that planning is a formalized procedure to produce a

coherent result in the form of an integrated system of decisions. The objectives must be

explicitly labeled by words after being carefully decomposed into strategies and sub-strategies.

Strategic implementation plays a significant role in the smooth functioning of systematic

management. A task is not completed until it is implemented properly. We can define the

implementation process as a link between the projects or resources and their action plans. It

finally helps us in strategic evaluation.

A broad implementation plan drives the strategic implementation, which in turn, drives an

individual project action plan. The action plan follows a hierarchy of tasks, realistic time tables,

by means of identifying proper human resource, performance measures and evaluation

systems.

We will discuss strategy implementation in the following three aspects:

� Organizational structure and systems

� Resource procurement

� Functional and operational plans

Q2. What, in brief, are the types of Strategic Alliances and the purpose of each?

Supplement your answer with one real life example of each.

Ans: Strategic alliance is the process of mutual agreement between the organisations to

achieve objectives of common interest. They are obtained by the co-operation between the

companies. Strategic alliance involves the individual organisations to modify its basic business

activities and join in agreement with similar organisations to reduce duplication of

manufacturing products and improve performance. It is stronger when the organisations

involved have balancing strengths. Strategic alliances contribute in successful implementation

of strategic plan because it is strategic in nature. It provides relationship between organisations

to plan various strategies in achieving a common goal.

The mutual agreements between the organisations can take a number of forms and are

increasing their common goals to get upper hand over their competitors.

The different types of strategic alliances are listed below:

1) Joint venture

Joint venture is the most powerful business concept that has the ability to pool two or more

organisations in one project to achieve a common goal. In a joint venture, both the

organisations invest on the resources like money, time and skills to achieve the objectives. Joint

venture has been the hallmark for most successful organisations in the world. An individual

partner in joint venture may offer time and services whereas the other focuses on investments.

This pools the resources among the organisations and helps each other in achieving the

objectives. An agreement is formed between the two parties and the nature of agreement is

truly beneficial with huge rewards such that the profits are shared by both the organisations.

The advantages of joint venture are:

• A long term relationship is built among the participating organisations

• It Increases integrity by teaming with other reputable and branded organisations



• Helps in gaining new customers

• It helps in investing little money or no money

• It provides the capability to compete in the market with other organisations

• Reduces production time as the organisations are into join venture

• More new products and services can be offered to the customers

The disadvantages of joint venture are:

• Sometimes the organisations deal with wrong people, thereby losing investments

• The organisations do not have the opportunity to take up decisions individuallyThere

are risks of disputes among the organisations that lead to poor performance

• If the organisation enters into joint venture agreement with unprofessional selfish

organisation, then it increases the risk of hurting business reputation and devastating

customer’s trust.

Example – The China Wireless Technologies, a mobile handset maker is getting into an

agreement with the Reliance Communications Ltd (RCom) to launch its new mobile. The joint

venture between the two companies is to gain profits and provide affordable mobile phones to

the market that consists of advanced features and aims to earn eight billion dollars in the next

five years. The new mobile consists of dual SIM smart phone with 3G technology at a cheaper

rate.

2) Mergers and acquisitions

Merger is the process of combining two or more organisations to form a single organisation and

achieve greater efficiencies of scale and productivity. The main reason to involve into mergers

is to join with other company and reap the rewards obtained by the combined strengths of two

organisations. A smart organisation’s merger helps to enter into new markets, acquire more

customers, and excel among the competitors in the market. The participating organisation can

help the active partner in acquiring products, distribution channel, technical knowledge,

infrastructure to drive into new levels of success.

With the perception of the organisation structure, here are a few types of mergers. The

different types of mergers are:

1. Horizontal merger – The horizontal merger takes place when two organisations

competing in the same market join together. This type of merger either has a maximum

or minimum effect on the market. The minimum effect could also be zero. They share

the same product line and markets. The results of the mergers are less noticeable if the

small organisations horizontally merge. Consider a small local drug store that

horizontally merges with another small local drug store, then the effect of this merger

on drug market would be minimal. But when the large organisations set up horizontal

merger, then higher profits are obtained in the market share providing advantages over

its competitors. Consider two large organisations that merge with twenty percent share

in the market. They achieve forty percent increase in the market share. This is an added

advantage of the organisations over its competitors in the market.

2. Vertical merger – This involves the union of a customer with the vendor. It is the

process of combining assets to capture a sector of the market that it fails to acquire as

an individual organisation. The participating organisations determine the intentions of

joining forces that will strengthen the current positions of both the organisations and

lay basis for expanding into other areas. The purpose of a vertical merger is to build the



strengths of the two organisations for an effective future growth. In order to explore

new methods of using existing products to create a new product line for wider markets,

it is also important to consider the assets like property, buildings, inventories and cash

assets. The vertical merger involves careful planning.

3. Market-extension merger – It is the process of merging two organisations that sell same

products in different geographical areas. The main purpose of this merger is to make the

merging organisations to achieve higher positions in bigger markets and ensure a bigger

base for client.

4. Product-extension merger – Most of the organisations execute product extension

merger to sell different products of a related category. They serve the common market.

This merger enables the new organisations to pool their products to serve a common

market.

5. Conglomerate merger – This merger involves organisations alliance with unrelated type

of business activities. The organisations under conglomerate merger are not related

either horizontally or vertically. There are no important common factors among the

organisations in terms of production, marketing, research, development and

technology. It is the union of different kinds of businesses under one management

organisation. The main purpose of this merger is to utilise financial resources; enlarge

debt capacity and obtaining synergy of managerial functions. The organisations do not

share the resources; instead it focuses on the process of acquiring stability and using

resources in a better way to generate additional revenue.

Acquisition is the process of purchasing an organisation by another organisation, either through

the purchase of its shares or assets.

Massive growth can only be achieved in less time by buying other organisations. Acquisitions

have become the major entity for growth in market these days. Most of the organisations

choose to grow by acquiring other organisations to increase market share, gain access to new

technologies, achieve synergies in the operations, to develop distribution channels, and to

obtain control of undervalued assets. There are many risks in acquisition like clashes in the

culture of organisation, key employees may leave, synergies may fail to emerge, assets may be

less valued than perceived etc.

6. Collaborations and co-branding - Collaboration is the process of cooperative agreement

of two or more organisations which may or may not have previous relationship of

working together to achieve a common goal. It is the beginning to pool resources like

knowledge, experience and sharing skills of team members to effectively contribute to

the development of a product rather working on narrow tasks as an individual team

member in support to the development. Such collaborations are the foundation for

concepts like concurrent engineering or integrated product development. Collaboration

is a win-win methodology. It means that both the organisations insist upon each other

to gain equal profits with no negative attitude of acquiring each other’s possessions.

Effective collaboration can be obtained by the following actions:

The organisations must get involve in the process from the beginning and avail the

necessary resources for collaboration.

a. The work culture in the organisation must encourage teamwork, cooperation

and collaboration.

b. There must be effective team work and cooperation among the employees of

both the organisations to achieve the goal.



c. Systematic approach of product development process must be based on sharing

of information, technology etc.

Co-branding involves the process of combining two or more brands into a single product or

service. It is becoming a positive way to associate different brands and develop a strong

brand in the market. It creates synergy among the various brands. An organised co-branding

strategy leads the co brand partners to a win-win situation and helps in realising large

demands in the market.

The co-branding agreement includes the important aspects such as rights, obligations, and

restrictions that are abiding to both the organisations. It also includes important provisions

and the needs must be carefully drafted to provide clear guidelines to the involved

organisations. The organisations form co-branding to accomplish many goals which include

expansion of customers, obtain financial benefits, respond to the needs of customers,

strengthening its competitive position, introducing new product with strong image and to

gain operational benefits.

It is more frequently used in the field of fashion and apparels. It can also be used for

promoting campaigns, using cartoons on T-shirts, logos, distributing through branded

retailer etc.

Example – The sportswear giant Nike formed co-branding agreements with Philips

consumer electronic products. The Philips electronic products will contain Nike’s logos and

it is mainly marketed in United States since the market share of Philips is not much

impressive. The newly introduced digital audio player and portable CD players of Philips will

be unveiled with the Nike logo to enhance profits in the market share in United States.

7. Technological partnering - It is the process of associating the technologies of two

different companies to achieve a common goal. The two organisations work as co-

owners in business and share the profits and losses. The technologies of individual

organisations are shared to achieve desired outcome. The required resources like

knowledge, machinery, and expertise are collaborated between the organisations.

Example – The software giant, Infosys Technologies Ltd. has entered into partnership with

US based NVIDIA, GPU inventor and the world's visual technologies giant. The purpose of

this partnering is to develop NVIDIA CUDA (Compute Unified Device Architecture). This

technology is viewed as the next big revolution in the field of technology in lending high

performance in computing. The software helps the developers of various applications to tap

into the previously uncultivated power of the GPU. This will enable certain applications to

achieve high performance. The capacity of CUDA is expected to multiply fifty times the

performance of existing computing and reduce the run time to advance the user enterprise.

Q3. What is a Business Plan? What purpose does it serve?

Ans: A business plan is a complete internal document that summarises the operational and

financial objectives of a business. It also contains the detailed plans which show how the

objectives are being accomplished.

An accurately made business plan helps to allocate resources properly, to handle unforeseen

complications like financial crisis and to make good business decisions.

On the other hand, business venture is a start-up enterprise which is formed with expectations

and plans of achieving financial gain. Once the need of the organisation is identified, it can be

started by a small investor that has valuable resources and time. Other investors involve



themselves by providing support for further development of the venture once the business is

created. In the case of establishing a business venture, a formal business plan is written to

outline the purpose and mission of the business for the future use.

Every entrepreneur creates a business plan and its completion will determine the feasibility of

the plan. The strategies for creating a business plan are as follows:

� Define your business vision – You must clear the following queries while defining the

business vision:

o Who is the customer?

o What business are you in?

o What do you sell (product/service)?

o What is your plan for growth?

o What is your primary competitive advantage?

� Make a list of your goals – You must create a list of goals after proper research. In case

of a start up business, more effort must be put on the short-term goals.

� Certain things must be kept clear before setting up your goal. They are listed below:

o What do you want to achieve?

o How much growth you want to achieve?

o Describe the quality and quantity of the service and the customer satisfaction

levels?

o How would you describe your primary competitive advantages?

� Understanding the customer – Understanding the customer is essential for a perfect

business plan. You must understand the customer in terms of the following factors:

o Needs – The following customer requirements should be understood clearly:

� What unmet needs do your customers have?

� How does your business meet those needs?

o Problems – Customers buy things to solve their specific problems. Always be

specific about the advantages of the product/services of your business which

resolve the customer’s problems.

o Perceptions – Always try to know the perception of the customer. Clarify the

doubts of the customer regarding your profession and the products/services of

your business.

� Learn from your competitors – You can learn a lot about the business and the customers

by looking at the business of your competitors. Always get the answers of the following

questions which will assist you in learning from your competitor and focusing on your

customer.

o What do you know about your target market?

o What competitors do you have?

o How are competitors approaching the market?

o What are the competitor’s weaknesses and strengths?

o How can you improve upon the competition’s approach?

� Resolving financial matters – Several questions might arise when we need to make

financial decisions. They are as follows:

o How will you make money?

o What is the profit potential of your business?

o You can resolve the financial issues by taking smart strategic investment

decisions.



� Identify your marketing strategy – Identifying the marketing strategy is another essential

skill which you must have. The following are the four steps to create a marketing

strategy for your business:

o Identify all the target markets

o Qualify the best target markets

o Identify the tools, strategies and methods

o Test the marketing strategy and tools

Q4. What is the chief purpose of a Business Continuity Plan and what are its components

for effective implementation. Explain in a sentence or two as to how it is different from a

Business Plan.

Ans: The Business Continuity Plan is a tool to allow organizations to consider the factors and

steps necessary to prepare for a crisis (disaster or emergency) so that it can manage and survive

the crisis and take all appropriate actions to help ensure the organization’s continued viability.

The advisory portion of the plan is divided into two parts:

� Planning process: It provides step-by-step Business Continuity Plan preparation and

activation guidance, including readiness, prevention, response, and recovery/ resumption.

� Implementation and maintenance: It gives the details of tasks required for the Business

Continuity Plan to be maintained as a living document, changing and growing with the

organization and remaining relevant and executable.

The purpose of the business continuity plan is to prepare to face the unthinkable situations that

may threaten an organization’s future. This new challenge goes beyond the mere emergency

response plan or disaster management activities that we previously employed. Organizations

now must engage in a comprehensive process best described generically as Business Continuity.

It is no longer enough to draft a response plan that anticipates naturally, accidentally, or

intentionally caused disaster or emergency scenarios.

Today’s threats require the creation of an on-going, interactive process that serves to assure

the continuation of an organization’s core activities before, during, and most importantly, after

a major crisis event.

In the simplest of terms, it is good business for a company to secure its assets. CEOs and

shareholders must be prepared to budget for and secure the necessary resources to make this

happen. It is necessary that an appropriate administrative structure be put in place to

effectively deal with crisis management.

Following steps are required to fulfilled for effective implementation of the business continuity

plan:



1. Educate and Train: The BCP is only as valuable as the knowledge that others have of it.

Education and training are necessary components of the BCP process. They require a time

commitment from the Crisis Management Team, the Response Teams, and the general

employee population.

2. Educate and Train Teams: The Crisis Management and Response Teams should be

educated about their responsibilities and duties. Check lists of critical actions and

information to be gathered are valuable tools in the education and response processes.

3. Educate and Train All Personnel: All personnel should be trained to perform their

individual responsibilities in case of a crisis. Such training could include procedures for

evacuation, shelter-in-place, check-in processes to account for employees, arrangements

at alternate worksites, and the handling of media inquiries by the company.

4. Review of BCP: The BCP should be regularly reviewed and evaluated. Reviews should occur

according to a pre-determined schedule, and documentation of the review should be

maintained as necessary. The following factors can trigger a review and should otherwise

be examined once a review is scheduled:

� Risk Assessment

� Sector/Industry Trends

� Regulatory Requirements

� Event Experience

� Test/Exercise Results

5. Maintenance of BCP: Regular maintenance of the BCP cannot be overemphasized. Clear

responsibility for BCP maintenance should be assigned. Maintenance can be either planned

or unplanned and should reflect changes in the operation of the organization that will affect

the BCP.

Difference between a Business plan & Business continuity Plan

a. A Business plan is a detailed description of how an organisation intends to produce,

market and sale a product or service. A Business continuity plan is an ongoing process

supported by senior management and funded to ensure that the necessary steps are

taken to identify the impact of potential losses, maintain viable recovery strategies and

plans, and ensure the continuity of operations through personnel training, plan ,testing

and maintenance.



b. A Business continuity plan is a tool which allows organisations to consider the factors

and steps necessary to prepare for a crisis.(disaster or emergency). Whereas a business

plan is not prepared for such type of disaster or emergency.

In a business continuity plan, a necessary Administrative structure is put in place to effectively

deal with crisis management, whereas, in a business plan, no such administrative structure is

available.

Q5. Take any three examples of the components of a Decision Support System and explain

how they help decision making.

Ans: Following are the three components of a Decision Support System.

1. Annual Budget: It is really a business plan. The budget allocates amounts of money to every

activity and/or department of the firm. As time passes, the actual expenditures are

compared to the budget in a feedback loop. During the year, or at the end of the fiscal year,

the firm generates its financial statements: the income statement, the balance sheet, the

cash flow statement. When putting together, these four documents are the formal edifice

of the firm’s finances. However, they can not serve as day-to-day guides to the General

Manager.

2. Daily Financial Statements: The Manager should have access to continuously updated

statements of income, cash flow, and a balance sheet. The most important statement is that

of the cash flow. The manager should be able to know, at each and every stage, what his

real cash situation is – as opposed to the theoretical cash situation which includes accounts

payable and account receivable in the form of expenses and income.

3. The Daily Ratios Report: This is the most important part of the decision support system. It

enables the Manager to instantly analyse dozens of important aspects of the functioning of

his company. It allows him to compare the behaviour of these parameters to historical data

and to simulate the future functioning of his company under different scenarios. It also

allows him to compare the performance of his company to the performance of his

competitors, other firms in his branch and to the overall performance of the industry that he

is operating in.

The Manager can review these financial and production ratios. Where there is a strong

deviation from historical patterns, or where the ratios warn about problems in the future –

management intervention may be required.

Examples of the Ratios to be Included in the Decision System



� SUE measure – deviation of actual profits from expected profits

� ROE – the return on the adjusted equity capital

� Debt to equity ratios

� ROA – the return on the assets

� The financial average

� ROS – the profit margin on the sales

� ATO – asset turnover, how efficiently assets are used

� Tax burden and interest burden ratios

� Compounded leverage

� Sales to fixed assets ratios

� Inventory turnover ratios

� Days receivable and days payable

� Current ratio, quick ratio, interest coverage ratio and other liquidity and coverage ratios

� Valuation price ratios

� And many others

A decision system has great impact on the profits of the company. It forces the management to

rationalize the depreciation, inventory and inflation policies. It warns the management against

impending crises and problems in the company. It specially helps in following areas:

a. The management knows exactly how much credit it could take, for how long (for which

maturities) and in which interest rate. It has been proven that without proper feedback,

managers tend to take too much credit and burden the cash flow of their companies.

b. A decision system allows for careful financial planning and tax planning. Profits go up, non

cash outlays are controlled, tax liabilities are minimized and cash flows are maintained

positive throughout.

The decision system is an integral part of financial management in the West. It is completely

compatible with western accounting methods and derives all the data that it needs from

information extant in the company.

So, the establishment of a decision system does not hinder the functioning of the company in

any way and does not interfere with the authority and functioning of the financial department,

but infact helps the manager to take quick decisions and make profit to the company.



Q6. Name and explain any three ways in which a Company’s CSR can be expressed.

Ans: It CSR is “a concept whereby companies integrate social and environmental concerns in

their business operations and in their interaction with their stakeholders on a voluntary basis”

as they are increasingly aware that responsible behavior leads to sustainable business success.

CSR is also about managing change at company level in a socially responsible manner. This

happens when a company seeks to set the trade-offs between the requirements and the needs

of the various stakeholders into a balance, which is acceptable to all parties. If companies

succeed in managing change in a socially responsible manner, this will have a positive impact at

the macro-economic level.

Following are the different ways in which company's CSR can be expressed.

1. Employment and Social Affairs Policy

Within a business CSR relates to quality employment, life-long learning, information,

consultation and participation of workers, equal opportunities, integration of people with

disabilities anticipation of industrial change and restructuring. Social dialogue is seen as a

powerful instrument to address employment-related issues.

Employment and social policy integrates the principles of CSR, in particular, through the

European Employment Strategy, an initiative on socially responsible restructuring, the

European Social Inclusion Strategy, initiatives to promote equality and diversity in the

workplace, the EU Disability Strategy and the Health and Safety Strategy.

In its document "Anticipating and managing change: a dynamic approach to the social aspects

of corporate restructuring", the Commission has stressed that properly taking into account and

addressing the social impact of restructuring contributes to its acceptance and to enhance its

positive potential. The Commission has called upon the social partners to give their opinion in

relation to the usefulness of establishing at Community level a number of principles for action,

which would support business good practice in restructuring situations.

Deeply rooted societal changes such as increasing participation of women in the labour market

should be reflected in CSR, adapting structural changes and changing the work environment in

order to create more balanced conditions for both genders acknowledging the valuable

contribution of women as strategies which will benefit the society as well as the enterprise

itself.

2. Enterprise policy



Only competitive and profitable enterprises are able to make a long-term contribution to

sustainable development by generating wealth and jobs without compromising the social and

environmental needs of society. In fact, only profitable firms are sustainable and have better

chances to adopt/develop responsible practices.

The role of enterprise policy is to help create a business environment, which supports the

Lisbon objective of becoming the world’s most dynamic knowledge-driven economy, supports

entrepreneurship and a sustainable economic growth. Its objective is to ensure a balanced

approach to sustainable development, which maximizes synergies between its economic, social

and environmental dimensions.

3. Consumer Policy

CSR has partly evolved in response to consumer demands and expectations. Consumers, in their

purchasing behavior, increasingly require information and reassurance that their wider

interests, such as environmental and social concerns, are being taken into account.

Consumers and their representative organisations have an important role to play in the

evolution of CSR. If CSR is therefore to continue to serve its purpose, strong lines of

communication between enterprises and consumers need to be created.

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