Q1. What Is Strategy?

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Q1. What is Strategy?

The word “strategy” is derived from the Greek word “strategtia”, which was first used
around 400 BC. This word connotes the art and science of directing military forces.
Mintzberg (1979) Strategy is a mediating force between the organization and its environment:
consistent patterns in streams of organizational decisions to deal with the environment.
Prahlad (1993) Strategy is more then just fit and allocation of resources. It is stretch and
leveraging of resources

TABLE 1.1 - INDIA’S TOP TEN STRATEGISTS


Name of the company Position in the
industry
1. Infosys Technologies 1
2. Reliance Industries 2
3. Wipro 3
4. Hindustan Lever 4
5. Maruti Udyog 5
6. Dr. Reddy’s Laboratories 6
7. HDFC Bank 7
8. Jet Airways 8
9. ICICI Bank 9
10. Ranbaxy Laboratories 10

Q2. A competitive advantage : is an advantage over competitors gained by offering


consumers greater value, either by means of lower prices or by providing greater benefits and
service that justifies higher prices. Competitive advantage is, in very basic words, how a firm
manages to keep making money and sustain its position against its competitors. Competitive
advantage, also known as strategic advantage, is essentially a position of superiority on the part
of an organisation in relation to its competitors
According to Michael Porter in his theory of generic strategies, the three methods for
creating a sustainable competitive advantage are through:
1. Cost leadership – Cost advantage occurs when a firm delivers the same services as its
competitors but at a lower cost;
2. Differentiation - Differentiation advantage occurs when a firm delivers greater services for the
same price of its competitors. They are collectively known as positional advantages because they
denote the firm's position in its industry as a leader in either superior services or cost;
3. Focus (economics) - A focused approach requires the firm to concentrate on a narrow,
exclusive competitive segment (market niche), hoping to achieve a local rather than industry
wide competitive advantage. There are cost focus seekers, who aim to obtain a local cost
advantage over competition and differentiation focuser, who are looking for a local
difference.
Q3. Significance of Strategy
 Universal
 Keeping pace with changing environment
 Minimizes competitive disadvantage
 Clear sense of strategic vision and sharper focus on goals and objectives
 Motivating employees
 Efficient and effective way of implementing actions for results
 Strengthening Decision-Making
 Improved understanding of internal and external environments of business

Q5. Vision
Ans : Vision is short , inspiring statement of what your organization intends to become and to
achieve at some point in the future. Corporate vision may contain commitment to :
 Creating an outstanding value for customers and other stakeholders.
 Developing a great new product & service
 Developing a great company.
“What do we want to become?
Ford Motor Vision
'to become the world's leading consumer company for automotive products and services'.

Q6. Mission :
Ans : Mission is a statement that defines the role that an organization plays in the society.
Purpose is anything that organization strives for.
Mission is essential purpose of the organization ,concerning particularly why it is in existence.,
the nature of business. E.g. of mission statement
 Maruti: building trust worldwide
 HCL: world class competitor
“What is our business?”
Infosys' Mission Statement :
"To achieve our objectives in an environment of fairness, honesty, and courtesy towards
our clients, employees, vendors and society at large.

Q7. Objectives
Ans: Objectives are operational definitions of the organization’s goals. They provide the
measurable parameters for monitoring / evaluating the performance of the organization.
objectives include a time dimension . Thus objectives are measurable & comparable. An
organization may pursue multiple objectives.

Q8. Goal
Ans: Goal are financial or non financial and specifies the route the organization takes to achieve
the vision or mission. Goals are qualitative ,objectives are mainly quantitative

Q9.Strategic Intent :
Ans : Strategic intent is a high-level statement of the means by which your organization will
achieve its vision. It is a statement of design for creating a desirable future (stated in present
terms).

CK Prahald and Hamel coined the term ‘strategic intent’ to indicate an obsession of an
organization, some times having ambitions that may even be out of proportion to their resources
and capabilities.Simply put, a strategic intent is your company's vision of what it wants to
achieve in the long term.
Q10. Strategic Competitiveness
Ans: Achieved when a firm successfully formulates and implements a value-creating strategy
Q11 .Above-Average Returns
Ans: Occurs when a firm develops a strategy that competitors are not simultaneously
implementing Provides benefits which current and potential competitors are unable to duplicate.

Q12. Synergy
Derived form the Greek word “synergos,” which means “working together” exceeds the value
those units could create working independently.

Q Strategic fit
is central to the strategy school of positioning . Stretch refers to misfit between resources and
aspirations. It is positioning the organization by matching its organization resources to its
environment.
Q Leverage refers to concentrating , accumulating , complementing , conserving and recovering
resources in such a manner that resource base is stretched to meet the aspirations of the
organizations.

Q Process of Strategic Management


Strategic management consists of four basic elements.
 Environmental scanning
 Strategy formulation
 Strategy implementation
 Evaluation and control
Environmental Strategy Strategy Evaluation
Formulation Implementation & Control
Scanning

 Social Programs
Environment Mission
Reason Activities
 General
for needed to
forces
existence accomplish
External plans
Objectives Budgets
 Task What
Cost of the
Environment results to
accomplish Program
 Industry
Analysis by when Performance
Procedures
Sequence Actual Results
Strategies of steps
Internal Plans to needed
Achieve to do
 Structure mission &
 Chain of the job
objectives
command
 Culture
 Beliefs, Policies
expectation
 Resources Broad
Assets , skills. guidelines
for decision
Knowledge,
making
competence

Feedback/ learning
Environmental scanning is the monitoring, evaluating, and disseminating of information from
the external and internal environments to key people within the corporation. Its purpose is to
identity strategic factors – those external and internal elements that will determine the future of
the corporation.
The external environment consists of variables (Opportunities and Threats) that are
outside the organization and not typically within the short-run control of top management. These
variables form the context within which the corporation exists.
The internal environment of a corporation consist of variables (Strengths and Weakness)
that are within the organization itself and are not usually within the short run control of top
management. These variables form the context in which work is done. They include the
corporation’s structure, culture, and resources.

The simplest way to conduct environmental scanning is through SWOT analysis . SWOT
is an acronym used to describe those particular Strengths, Weakness, Opportunities, and Threats
that are strategic factors for a specific company
Strategy formulation is the development of long-range plans for the effective management of
environmental opportunities and threats, in light of corporate strengths and weaknesses. It
includes defining the corporate mission, specifying achievable objectives, developing strategies
and setting policy guidelines.

Strategy implementation is the process by which strategies and polices are put into action
through the development of programs, budgets and procedures. This process might involve
changes within the overall culture, structure, and/or management system of the entire
organization. Most of the times strategy implementation is carried out by middle and lower level
managers with top management’s review. Some times refereed to as operational planning,
strategy implementation often involves day-to-day decisions in resource allocation. It includes
programs, budgets and procedures.
Evaluation and control is the process in which corporate activities and performance results are
monitored so that actual performance can be compared with desired performance. Managers at
all levels use the resulting information to take corrective action and resolve problems. Although
evaluation and control is the final major element of strategic management, it also can pinpoint
weaknesses in previously implemented strategic plans and thus stimulate the entire process to
begin again.
Q 5 . Different Levels of Strategy

Q4 . Role of strategists

Ans Strategists are individuals or groups who are primarily involved in the formulation,
implementation, and evaluation of strategy. In a limited sense, all managers are strategists.
There are persons outside the organization who are also involved in various aspects of strategic
management. They too are referred to as strategists. We can identify nine strategists who, as
individuals or in groups, are concerned with and play a role in strategic management.
1. Consultants
2. Entrepreneurs
3. Board of Directors
4. Chief Executive Officer
5. Senior management
6. Corporate planning staff
7. Strategic business unit (SBU) level executives
8. Middle level managers
9. Executive Assistant
A brief description of how the different strategists approach the process is outlined here.
1) Consultants: Many organizations which do not have a corporate planning department
owing to reasons like small size, infrequent requirements, financial constraints, and so on,
take the help of external consultants in strategic management. Besides the Indian
consultancy firms, such as, . They offer a variety of services. McKinsey and Company,
specializes in offering consultancy in the areas of fundamental change management and strategic
visioning; Andreson Consulting, is in business restructuring, and info tech and systems; Boston
Consulting helps in building competitive advantage; and KPMG Peat Marwick is in strategic
financial management and feasibility studies for strategy implementation.
2) Entrepreneurs are promoters who conceive the idea of starting a business enterprise for
getting maximum returns on their investment. They are awaiting for an environment
change and thereby for an opportunity to exploit the situation in their best interest. Thus
they start playing their role right from the promotion of the proposed venture. So, their
strategic role to make the venture a success is very conspicuous in a new business enterprise.
Therefore, it is expected of an entrepreneur that he should posses foresight, sense of
responsibility, desire to work hard and dashing spirit to bear any future contingencies. According
to Drucker, “the entrepreneur always searches for change, responds to it and exploits it as an
opportunity”. Here is an example of a successful women entrepreneur.
Kiran Mazumdar Shaw, a young entrepreneur, set up an export-oriented unit manufacturing a
range of enzymes. As an expert in brewing technology, Mazumdur entered the field of
biotechnology after experiencing problems in getting a job. Later she set up another plant for
manufacturing two new enzymes created by her own research and development (R&D)
department. As managing director, Mazumdar was actively
involved in all aspects of policy formulation and implementation for her companies.
3) Board of Directors are professionals elected on the Board of Directors (BOD) by the
shareholders of the company as per rules and regulations of the Companies Act, 1956.
They are responsible for the general administration of the organization. They are
supposed to guide the top management in framing business strategies for accomplishing
predetermined objectives. It is also the responsibility of the Board to review and evaluate
organizational performance whether it is as per the strategy laid down or not. The Board
is also empowered to make appointments of senior executives. In this connection, it
should be noted that the success of strategies much depends on the relative strength in
terms of power held by the Board and the Chief Executive (CE).

4) Chief Executive Officer : In the management circle, the chief executive is the top man,
next to the directors of the Board. He occupies the most sensitive post, being held responsible for
all aspects of strategic management right from formulation to evaluation of strategy. He is
designated in some companies as the managing director, executive director or as a general
manager.
5) Senior Management Starting from the chief executive to the level of functional or profit
centre heads, these managers are involved in various aspects of strategic management.
Some of the members of the senior management act as directors on the board usually on a
rotational basis. All of them serve on different top-level committees set up by the board
to look after matters of strategic importance and other policy issues . Strategic planning at MRF
Ltd. used senior management expertise by dividing them into five groups dealing with products
and markets, environment, technology, resources, and manpower. Each group had a leader who
helped to prepare position papers for presentation to the board. The executive directors in the
company were actively involved in SWOT analysis through the help of managers and assistant
managers.
6) SBU level executives “SBU” stands for strategic business unit. Under this approach, the
main business unit is divided into different independent units and is allowed to form their
own respective strategies. In fact, the business is diversified and thus the departmental
heads are supposed to act as the main strategist, keeping an eye on optimum benefit for
their departments. Hence strategists i.e., the departmental heads enjoy the maximum
amount of authority and responsibility within their strategic business units.

7) Corporate-planning staff plays a supporting role in strategic management. It assists the


management in all aspects of strategy formulation, implementation and evaluation.
Besides this, they are responsible for the preparation and communication of strategic
plans, and for conducting special studies and research pertaining to strategic
management.
8) Middle level managers: They are basically operational planners they may, at best, be
involved as ‘sounding boards’ for departmental plans, as implementers of the decisions
taken above, followers of policy guidelines, and passive receivers of communication
about functional strategic plans. As they are basically involved in the implementation of
functional strategies, the middle-level mangers are rarely employed for any other purpose
in strategic management.
9) Executive Assistant: An executive assistant is a person who assists the chief executive in
the performance of his duties in various ways. These could be : to assist the chief
executive in data collection and analysis, suggesting alternatives where decisions are
required, preparing briefs of various proposals, projects and reports, helping in public
relations and liaison functions, coordinating activities with the internal staff and
outsiders, and acting as a filter for the information coming from different sources.
Among these “the most important and what one manager labels the “bread and butter
role” of EA (executive assistant) could be that of corporate planner”.
Environmental Analysis
Q what is Environment
Ans : Prof. Keith Davis defines business environment as, “the aggregate of all conditions events
and
influences that surround and affect it.” These surroundings are constantly changing and
uncertain.
The total environment can be classified into two broad categories
 Internal environment
 External environment
The internal environment includes the goals and value system, the hierarchical authority
structure, the technological equipment and processes, the social groups and teams, the
management groups, organizational climate and culture,etc.
The external environment can be classified into two segments.
 Macro environment or Mega environment, or
 Micro environment or task environment
Technological environment
Technology is knowledge to create new things. Mangers need technology to design, produce,
distribute and sell goods and services. Impact of technology is mixed. Positive benefits are seen
in new products, new machines, new tools, new materials and services. Benefits include greater
productivity, higher living standards, more leisure time and greater variety of products. Ex:
Range of cars – subcompacts, compacts, intermediates, sports, specialty, variations in engine
power, steering A/c, speed control, roof etc. Negative effects include pollution, energy shortage,
loss of privacy, traffic jam etc. A balanced approach is therefore needed.
Technological change is of two types
Convergent change - where incremental innovation and improvement optimizes the ability of
the organization to succeed in the existing environment. In India this change occurs in 10-12
years,in western firms five to six years and in Japan it is four years. Presently some Japanese
firms like Nissan make changes from 14 months to 2 years time.
Divergent change – Involves changes where the framework of the organization undergoes
discontinuities. Whether it is in response to events over which the corporation has no control,
like deregulation, major shift in economic policies, nationalization or events related to radical
changes in technology like product life cycle shifts, new process technologies, radical
innovations, etc., these changes involve organizational re-formation or transformation. Example
includes replacement of Swiss mechanical watches with high innovation by simple battery
operated electronic watches.
Economic environment
The various forces of economic environment can be explained as follows.
Capital –machinery, buildings, investments office equipment, tools and cash. Business
organizations issue shares and debentures and borrow from commercial banks. Labour –
availability of skilled labor at affordable wage rates. US companies are outsourcing from India
because labor is very cheap here.
Prices – The price changes caused by business cycles are a major concern. The price raise in one
industry affects the other ones. It is like a chain reaction. It reduces the buying power of
consumers and reduces demand.
Government Fiscal and tax policies – Government’s control on availability of credit through
fiscal policy has considerable impact on business. If business profit taxes are high, the interest to
go into business gets marginalized. If sale, tax is high people don’t buy.
Customers- Customers are the foundation of business. Business must serve the public. People
want value for the money they pay and service that satisfy their needs. Companies are
customizing products to specific groups or individuals. Refrigerator companies are introducing
bare bone models for the low income groups. Auto companies are opening up service centers.
Also thee are CRM (customer relationship management) programs in many organizations today.
General Economic Conditions - The general economic conditions like national income, per
capita income, economic resources, distribution of income and assets, economic development,
etc. are important determinants of the business strategies. In countries and regions where income
of people is low, the demand for the product will be low. It discourages the companies to enter
the market. However in economies where the income of people is rising and hence business
prospects will be brighter; investment will get automatic attraction. Recently growing income of
middle class in India, encouraged foreign investors to operate in India.
Economic Systems. All business organizations operate in at least one type of economic system-
socialist, communist and capitalistic. In capitalistic type of economic system, free play of market
mechanism takes place, whereas in state controlled economies, there are restrictions, on the
private sector’s role. It has been noticed that with the collapse of communist Soviet Union
multinational corporations are searching their market in East European Countries.
Economic Policies. The economic policies of the government have tremendous impact on the
business. For example, in India, before July 1991 public sectors were encouraged to play
dominant role to achieve commanding heights of the economy; as a result competition was not
there. With the new economic policies of liberalization and globalization, the era of
protectionism and preferential treatment is giving way to competition and cost-consciousness.
Economic Growth : The general economic growth in the economy has direct impact on the
business strategies. Increased economic growth rate, leading to increase in consumptions,
expenditure, lowers the general pressure within an industry and offers more opportunities than
threats. On the other hand, decline in economic growth reduces consumer expenditure , that leads
to competitive pressures and threatens the profitability.

Interest rates.: The rate of interest affects the demand for the products in the economy,
particularly when general goods are to be purchased through borrowed finance. If the interest
rate is low, the demand for certain products like autos, appliances, capital equipments, housing
materials, etc. will rise. This provides good opportunity for these industries to expand whereas
rising interest rates pose a threat to these industries. Interest rates also determine the cost of
capital of the company. When rates of interests are lower, companies can adopt ambitious
strategy with borrowed funds.
Politico- legal environment
The various forces in political and legal environment direct and restrict business decisionmaking.
Political environment – Attitudes of Government and legislators change with social demands and
beliefs. Government affects every aspect of life. For instance, strong pollution norms many result
in closure of a company. Government not only promotes but also constrains business. Promotion
is possible by stimulating economic extension and development, by providing subsidies to SSIs,
tax advantages, support to R&D and protecting business in priority sector. Also, government can
be the biggest customer. The public announcements of government, the observations in plan
documents indicate government policies. E.g.: Industrial policy resolution, 1948 and the
economic policy, 1991. Several European Countries restrain the use of children in commercial
advertisements. In India advertisement of cigarettes must carry the statutory warning that
“Cigarette smoking is injurious to health.”
The prevalence of political uncertainty has effect on the business strategies. In the presence of
political uncertainty, no business likes to commit itself for long term strategies or investments
while the uncertainty countries. Therefore the companies focus more on preparing alternative
plans for different emerging situations.
Legal environment – It consists of judiciary and legislation. It constrains and regulates
business. There are several legislation like the Company act 1956, the Payment of wages Act,
1936 and Factories Act 1948. There are judiciary arrangements like courts and tribunals.

Techniques of Environment Scanning


Environmental threats and opportunities Profile (ETOP )
Assessment of the environmental information and determining the relative significance of
threats and opportunities require a systematic evaluation of the information developed in
the course of environmental analysis. For this purpose, preparation of a profile of
environmental threat and opportunity (ETOP) is considered to be a useful device.
An illustrative profile is given in Figure 8-2 on the basic of environmental analysis
carried out by Bharat Heavy Electricals Ltd.
SWOT Analysis
SWOT is an acronym for the internal Strengths and Weaknesses of a business and environmental
Opportunities and Threats facing that business. SWOT analysis is a systematic identification of
these factors and the strategy that reflects the best match between them. It is based on the logic
that an effective strategy maximizes a business’s strengths and opportunities but at the same time
minimizes its weaknesses and threats. This simple assumption, if accurately applied, has
powerful implications for successfully choosing and designing an effective strategy.
Opportunities
An opportunity is a major favorable situation in the firm’s environment. Key trends represent
one source of opportunity. Identification of a previously overlooked market segment, changes in
competitive or regulatory circumstances, technological changes, and improved buyer or supplier
relationships could represent opportunities for the firm.
Threats
A threat is a major unfavorable situation in the firm’s environment. It is a key impediment to
the firm’s current and / or desired future position. The entrance of a new competitor, slow
market growth, increased bargaining power of key buyers or supplier, major technologies
change, and changing regulations could represent major threats to a firm’s future success.
Consumer acceptance of home computers was a major opportunity for IBM. The second
fundamental focus in SWOT analysis is identifying key strengths and weakness based on
examination of the company profile. Strengths and weaknesses can be defined as follows:
Strengths
A strength is a resource, skill, or other advantage relative to competitors and the needs of
markets a firm serves or anticipates serving. a strength is a distinctive competence that gives the
firm a comparative advantage in the marketplace. Financial resources, image, market leadership,
and buyer / supplier relations are examples.
Weaknesses
A weakness is a limitation (or) deficiency in resources, skills, and capabilities that seriously
Impact the effective performance. Facilities, financial resources, management capabilities,
marketing skills, and brand image could be sources of weaknesses.

PEST Analysis
The Political, Economic, Social, and Technological (PEST)
Analysis is a useful framework that can contribute to strategic analysis in the following
ways:

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