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AEREN FOUNDATION

REG. NO.

F/11724

INDIAN SCHOOL OF BUSINESS MANAGEMENT &

ADMINISTRATION

MARKS: 80

SUB:
N. B.:

1.

COURSE: MBA 3rd sem

STRATEGIC MANAGEMENT
1)

Answer any Eight

Define strategic intent, vision and mission. Write major components of a

mission statement. How do you define corporate objectives? Distinguish
between purpose, mission, long-term objectives and goals.

Solution:
"Strategic" is mainly used with long term and "Intent" is basically related to "intentions"
that is "a plan to do something" is an intention. Mean that "a plan to do something in the
long term. STRATEGIC INTENT" is - what an organization plans to strive for in future
(long term), and it can be expressed in vague / broad terms as well as in specific terms. So,
vision & mission of an organization expresses the strategic intent of the organization in
broad terms and business definition, goals, objectives expresses the strategic intent of the
organization in relatively specific terms.
The company has to define its Vision Statement, Mission Statement, Business Definition,
and Objectives to form the Strategic Hierarchy. A business strategy cannot be formulated
unless the strategic hierarchy is clearly defined.
Vision serves the purpose of stating what an organization wishes to achieve in the long run.
It is at the top in the hierarchy of strategic intent. It is what the firm would ultimately like to
become.
Mission relates an organization to society. The mission statements stage the role that
organization plays in society. It is one of the popular philosophical issues which are being
looked into business managers since last two decades.
Business explains the business of an organization in terms of customer needs, customer
groups and alternative technologies. Defining business along the three dimensions of
customer groups. Customer functions and alternative technologies. They are developed as
follows:
i) Customer groups are created according to the identity of the customers.
ii) Customer functions are based on provision of goods/services to customers.
iii) Alternative Technologies describe the manner in which a particular function can
be performed for a customer.

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Objectives state what is to be achieved in a given time period. The strategic intent concept
also encompasses an active management process that includes focussing the organizations
attention on the essence of winning. The concept of stretch and leverage is relevant in this
context. Objectives refer to the ultimate end results which are to be accomplished by the
overall plan over a specified period of time. The vision, mission and business definition
determine the business philosophy to be adopted in the long run. The goals and objectives
are set to achieve them.
The strategy statement of a firm sets the firms long-term strategic direction and broad
policy directions. It gives the firm a clear sense of direction and a blueprint for the firms
activities for the upcoming years. The main constituents of a strategic statement are as
follows:
1. Strategic Intent
An organizations strategic intent is the purpose that it exists and why it will
continue to exist, providing it maintains a competitive advantage. Strategic intent
gives a picture about what an organization must get into immediately in order to
achieve the companys vision. It motivates the people. It clarifies the vision of the
vision of the company. Strategic intent helps management to emphasize and
concentrate on the priorities. Strategic intent is, nothing but, the influencing of an
organizations resource potential and core competencies to achieve what at first may
seem to be unachievable goals in the competitive environment. A well expressed
strategic intent should guide/steer the development of strategic intent or the setting
of goals and objectives that require that all of organizations competencies be
controlled to maximum value. Strategic intent includes directing organizations
attention on the need of winning; inspiring people by telling them that the targets are
valuable; encouraging individual and team participation as well as contribution; and
utilizing intent to direct allocation of resources. Strategic intent differs from strategic
fit in a way that while strategic fit deals with harmonizing available resources and
potentials to the external environment, strategic intent emphasizes on building new
resources and potentials so as to create and exploit future opportunities.
2. Mission Statement
Mission statement is the statement of the role by which an organization intends to
serve its stakeholders. It describes why an organization is operating and thus
provides a framework within which strategies are formulated. It describes what the
organization does (i.e., present capabilities), who all it serves (i.e., stakeholders) and
what makes an organization unique (i.e., reason for existence). A mission statement
differentiates an organization from others by explaining its broad scope of activities,
its products, and technologies it uses to achieve its goals and objectives. It talks
about an organizations present (i.e., about where we are).For instance,
Microsofts mission is to help people and businesses throughout the world to realize
their full potential. Wal-Marts mission is To give ordinary folk the chance to buy
the same thing as rich people. Mission statements always exist at top level of an
organization, but may also be made for various organizational levels. Chief
executive plays a significant role in formulation of mission statement. Once the
mission statement is formulated, it serves the organization in long run, but it may
become ambiguous with organizational growth and innovations. In todays dynamic
and competitive environment, mission may need to be redefined. However, care
must be taken that the redefined mission statement should have original
fundamentals/components. Mission statement has three main components-a

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statement of mission or vision of the company, a statement of the core values that
shape the acts and behaviour of the employees, and a statement of the goals and
objectives.
Features of a Mission
a. Mission must be feasible and attainable. It should be possible to achieve it.
b. Mission should be clear enough so that any action can be taken.
c. It should be inspiring for the management, staff and society at large.
d. It should be precise enough, i.e., it should be neither too broad nor too
narrow.
e. It should be unique and distinctive to leave an impact in everyones mind.
f. It should be analytical,i.e., it should analyze the key components of the
strategy.
g. It should be credible, i.e., all stakeholders should be able to believe it.
3. Vision
A vision statement identifies where the organization wants or intends to be in future
or where it should be to best meet the needs of the stakeholders. It describes dreams
and aspirations for future. For instance, Microsofts vision is to empower people
through great software, any time, any place, or any device. Wal-Marts vision is to
become worldwide leader in retailing. A vision is the potential to view things ahead
of themselves. It answers the question where we want to be. It gives us a reminder
about what we attempt to develop. A vision statement is for the organization and its
members, unlike the mission statement which is for the customers/clients. It
contributes in effective decision making as well as effective business planning. It
incorporates a shared understanding about the nature and aim of the organization
and utilizes this understanding to direct and guide the organization towards a better
purpose. It describes that on achieving the mission, how the organizational future
would appear to be.
An effective vision statement must have following featuresa.
b.
c.
d.
e.

It must be unambiguous.
It must be clear.
It must harmonize with organizations culture and values.
The dreams and aspirations must be rational/realistic.
Vision statements should be shorter so that they are easier to memorize.

In order to realize the vision, it must be deeply instilled in the organization, being
owned and shared by everyone involved in the organization.
4. Goals and objectives
A goal is a desired future state or objective that an organization tries to achieve.
Goals specify in particular what must be done if an organization is to attain mission
or vision. Goals make mission more prominent and concrete. They co-ordinate and
integrate various functional and departmental areas in an organization. Well made
goals have following featuresa.
b.
c.
d.

These are precise and measurable.

These look after critical and significant issues.
These are realistic and challenging.
These must be achieved within a specific time frame.

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e. These include both financial as well as non-financial components.
Objectives are defined as goals that organization wants to achieve over a period of
time. These are the foundation of planning. Policies are developed in an organization
so as to achieve these objectives. Formulation of objectives is the task of top level
management. Effective objectives have following featuresf. These are not single for an organization, but multiple.
g. Objectives should be both short-term as well as long-term.
h. Objectives must respond and react to changes in environment, i.e., they must
be flexible.
i. These must be feasible, realistic and operational.

2.

Discuss the roles of the following in corporate governance.

a)

Top management

b)

Audit Committees

c)

Statutory Auditors

What are the recent trends in corporate governance?

Solution:
a)
Top management - The highest ranking executives (with titles such as
chairman/chairwoman, chief executive officer, managing director, president,
executive directors, executive vice-presidents, etc.) responsible for the entire
enterprise.
Top management translates the policy (formulated by the board-of-directors) into
goals, objectives, and strategies, and projects a shared-vision of the future. It makes
decisions that affect everyone in the organization, and is held entirely responsible for
the success or failure of the enterprise.
b)
Audit Committees - A committee of the Board of Directors whose role
typically focuses on aspects of financial reporting and on the entity's processes to
manage business and financial risk, and for compliance with significant applicable
legal, ethical, and regulatory requirements. The Audit Committee typically assists
the Board with the oversight of (a) the integrity of the entity's financial statements,
(b) the entity's compliance with legal and regulatory requirements, (c) the
independent auditors' qualifications and independence, (d) the performance of the
entity's internal audit function and that of the independent auditors and (e)
compensation of company executives (in absence of a remuneration committee)."

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An audit committee is an operating committee of the Board of Directors charged
with oversight of financial reporting and disclosure. Committee members are drawn
from members of the company's board of directors, with a Chairperson selected
from among the committee members. Boards of Directors and their committees rely
on management to run the daily operations of the business. The Board's role is better
described as oversight or monitoring, rather than execution. Responsibilities of the
audit committee typically include:
Overseeing the financial reporting and disclosure process.
A.
B.
C.
D.
E.

Monitoring choice of accounting policies and principles.

Overseeing hiring, performance and independence of the external auditors.
Oversight of regulatory compliance, ethics, and whistleblower hotlines.
Monitoring the internal control process.
Overseeing the performance of the internal audit function.

Discussing risk management policies and practices with management

c) Statutory Auditors - The external certified public accountant, i.e. external
auditors, in most countries. He is an external service supplier; in charge of certifying
the Financial Statements according to specific professional auditing standards.
Statutory Audit is a checking of accounts required by law. A municipality may be
required by its own law to have an annual audit of financial records or a company
which is governed by any Law, the Law may require the audit to be conducted and
the manner in which audit should be conducted and to whom the report of auditors
should be presented. Like in case of companies the Companies Act requires audit of
accounts, its reporting and manner of audit report.
One conducted to meet the particular requirements of a governmental agency. Where
such audits take place, the scope and audit programs are set by the governmental
body. Banks, insurance companies, and brokerage firms have statutory audits. Since
the auditor's report must conform to standards required by the governing agency, the
statements and other financial data generated from these audits may not conform to
Gaap.
The statutory auditors are elected by shareholders and hold a position in the
hierarchy alongside the board of directors. A company must have at least one
statutory auditor.

3.

The organizational resources and behavior exercise a significant

influence on the environment of an organization. Illustrate how strengths
and weaknesses create synergistic effects.

Solution:
Organizational Behaviour (OB) is the study and application of knowledge about how
people, individuals, and groups act in organizations. It does this by taking a system
approach. That is, it interprets people-organization relationships in terms of the
whole person, whole group, whole organization, and whole social system. Its
purpose is to build better relationships by achieving human objectives,
organizational objectives, and social objectives.
As you can see from the definition above, organizational behavior encompasses a
wide range of topics, such as human behavior, change, leadership, teams, etc. The
organization's base rests on management's philosophy, values, vision and goals. This
in turn drives the organizational culture which is composed of the formal
organization, informal organization, and the social environment. The culture
determines the type of leadership, communication, and group dynamics within the
organization. The workers perceive this as the quality of work life which directs
their degree of motivation. The final outcomes are performance, individual
satisfaction, and personal growth and development. All these elements combine to
build the model or framework that the organization operates from.
There are four major models or frameworks that organizations operate out of,
Autocratic, Custodial, Supportive, and Collegial

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Autocratic the basis of this model is power with a managerial orientation of
authority. The employees in turn are oriented towards obedience and dependence on
the boss. The employee need that is met is subsistence. The performance result is
minimal.
Custodial the basis of this model is economic resources with a managerial
orientation of money. The employees in turn are oriented towards security and
benefits and dependence on the organization. The employee need that is met is
security. The performance result is passive cooperation.
Supportive the basis of this model is leadership with a managerial orientation of
support. The employees in turn are oriented towards job performance and
participation. The employee need that is met is status and recognition. The
performance result is awakened drives.
Collegial the basis of this model is partnership with a managerial orientation of
teamwork. The employees in turn are oriented towards responsible behavior and
self-discipline. The employee need that is met is self-actualization. The performance
result is moderate enthusiasm.
Organization Development (OD) is the systematic application of behavioural science
knowledge at various levels, such as group, inter-group, organization, etc., to bring
about planned change. ). Its objectives are a higher quality of work-life, productivity,
adaptability, and effectiveness. It accomplishes this by changing attitudes,
behaviours, values, strategies, procedures, and structures so that the organization can
adapt to competitive actions, technological advances, and the fast pace of change
within the environment.
There are seven characteristics of Organization Development (OD):
1. Humanistic Values: Positive beliefs about the potential of employees
2. Systems Orientation: All parts of the organization, to include structure,
technology, and people, must work together.
3. Experiential Learning: The learners' experiences in the training environment
should be the kind of human problems they encounter at work. The training
should NOT be all theory and lecture.
4. Problem Solving: Problems are identified, data is gathered, corrective action
is taken, progress is assessed, and adjustments in the problem solving
process are made as needed. This process is known as Action Research.
5. Contingency Orientation: Actions are selected and adapted to fit the need.
6. Change Agent: Stimulate, facilitate, and coordinate change.
7. Levels of Interventions: Problems can occur at one or more level in the
organization so the strategy will require one or more interventions.
Synergistic approach can be used as a means for generating competitive advantage
to an organisation if the managers are sufficiently aware about how synergistic effect
is developed. Concept of synergy and its effect has been derived from systems
approach which deals with the phenomenon of putting various elements of a system
in such a way that each element contributes positively to other elements. The net
result is that the sum total of combined contribution is greater than what the
individual elements could have contributed independently. An off has made
invaluable contribution by demonstrating how a company can generate competitive
advantage by creating synergistic effect.14 Synergy can be defined as follows:

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Synergy is the process of putting two or more elements together to achieve a sum
total greater than the sum total of individual elements separately. This effect is
described as 2 + 2 = 5 effect.
Synergistic effect does not generate automatically by putting different elements
together but depends on the complementarity of these elements. Thus, synergistic
effect in the process of strategy formulation refers to the degree of complementarity
between present skills and resources and the future skills and resources- which
would be required for a strategy. The higher the degree of complementarity that
exists between the present strategic posture and the contemplated posture, the
greater is the opportunity for realising positive synergy. A simple example of
synergistic effect may be of opening of a restaurant by motel owner in side-by area.
In this case, the joint income of motel and restaurant may be much more than what
they can earn individually if located at different places.
Areas of Synergistic Effect
There may be many possible areas of synergistic effect of an organisation depending on its
strengths and weaknesses. Since the synergy depends on the complementarily of present
and future strategic postures, this can best be understood by analyzing an organisation's
strengths and taking suitable strategic actions in order to effect the result of the strengths.
For this purpose, different types of synergistic effects in various functional areas of
operations may be analyzed.
1. Production Synergy
Production synergy can be achieved if the present production facilities, processes, and
skills can be used to produce the contemplated products. In this situation, some existing
excess capacity can obviously result in decreased unit production costs because factory
overhead will be spread over a larger volume. Moreover, the quality and efficiency will
not be hampered as the existing work-force is capable of handling new product because of
transferability of skills from the existing product to new one.
The production synergy may best be achieved by merging the firms manufacturing
same or substantially similar products. For example, many textile units have merged other
textile units in order to take advantages of production synergy. The merger of Sidhpur
Textiles with Reliance Textiles is a case in this context. In the case of internal growth,
production synergy will occur to the extent the new products developed are compatible
with existing skills and resources. For example, production synergy can best be identified
in the cere of Associated Cement Company which operates many cement plants in the
country using similar technology which provides the company greater flexibility in using
its present capabilities. On the other hand, there is little chance for production synergy, if
the .organisation takes over dissimilar product because the present production strength
does not contribute in any way in the future product. For example, taking up of production
of bearings by Metal Box which was primarily known as metal packaging manufacturer
could not generate any synergistic effect. The result is that the company has lost
substantial amount in its bearing division. Thus, it can be emphasised that production
synergy can occur only when some 'common thread' between two operations can be found
regardless of the degree of market congruence in so far as end uses of products are
concerned. For example, this is reflected in the product range of an electronic
manufacturing unit which produces electronic goods for entertainment as well as for
commercial purpose. Though in botli these cases the end users are quite different and in
complementary, the company enjoys the common threads of production facilities.

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2. Marketing Synergy
Marketing synergy refers to the situation when the organisation can take the advantages of
its present marketing facilities sales force, distribution channel, physical'facilities,
promotional techniques for the ensuing product though the product may be substantially
different from the present one. For example, a soap manufacturer may take the marketing of
hair oil. In this case, the company can take the advantages of its present marketing facilities
because, in both the cases, the same type of marketing facilities will be required although
there is no production synergy if the production of hair oil is taken up because of the
difference in production process and consequently the requirement of different production
facilities.
Thus, in this case, there is marketing synergy because of the overlap in marketing
efforts but the same overlap is not available so far as production is concerned. In order to
take the advantages of marketing synergy, Colgate Palmolive India Limited decided to enter
the new field of toilet soap though it is better known for toothpaste, toothbrush, shaving
cream, and shampoo. Since the company can utilise its present marketing facilities for
soaps, it can take the advantage of its marketing, synergy.
3. Research and Development Synergy
The research and\ development synergy will be achieved if the company's technologies
supporting the development of both the present and the contemplated product lines are
substantially similar. The potential in this area usually emanates either from similar research
skills or from similar functional characteristics of the products. For example, the research
and development at Hindustan Lever Limited offers unique synergy because it contributes
to the development of chemical products of different types for different end users. It has
discovered the raw materials from minor seed oils for synthetic detergent which is claimed
to be much cheaper and effective than the present raw material linear alkyl benzene (LAB).
In its research and development efforts, the company has undertaken simultaneous functions
of developing hea\y chemicals also which has enabled the company to enter in this field too.
Since the basic research and development facilities are common for bo minor seed oils and
heavy chemicals, the company enjoys the research and development synergy.
4. Financial Synergy
The financial synergy is virtually unrelated to the degree of similarity between the present
and the contemplated strategic postures because the skills and techniques of financial
management have a high degree of transferability across both industry and organisational
lines. The possible synergy which lies in this area is the extent to which the organisation
can raise the funds for investment through larger capital base, increased borrowing power,
and greater earning through the spreading of administration overheads over a larger
volume of operations. In fact, this synergy has been used by several companies to take
over other companies or diversify in those areas which were unknown to them. However,
the success of such strategy may be doubtful if other considerations are not taken into
account.
5. General Management Synergy
General management synergy occurs when the skills, experience, and knowledge of
managers are transferable from the present strategy to the contemplated one. The
transferability of these elements of management depends on how these elements are
acquired. Basically knowledge requirements for managers are twofold: (i) general

11
knowledge of the processes and techniques of management which can be learned
through management education; and (ii) technical knowledge about the specific
industry or organisation which can be learned through experience in a particular
industry or organisation. The first category of knowledge is easily transferable to all
types of organisations and industries as these are methodological. The second type
of knowledge, however, is not as freely transferable because it requires certain
learning period on the part of the managers, Thus, while moving from one
organisation to another or from one industry to another, managers have to devote
time for learning the requirements of those which may be different from what they
must have learned previously. Thus, if the movement is from one organisation to
another which is similar, the knowledge can be transferred easily. However, if the
movement is from one industry to another, the transferability is limited in that it
requires more time in understanding the requirements of the new industry. Thus,
further away a manager moves in terms of organisation and industry characteristics,
the longer is the learning period and lower is the synergy. This aspect is very
important for achieving growth through.

4.

Define strategic management and bring out the main elements of

strategic management. Explain with appropriate diagram the strategic
management model and its major components.

Solution:
Strategic management is a field that deals with the major intended and emergent
initiatives taken by general managers on behalf of owners, involving utilization of
resources, to enhance the performance of rms in their external environments. It
entails specifying the organization's mission, vision and objectives, developing
policies and plans, often in terms of projects and programs, which are designed to
achieve these objectives, and then allocating resources to implement the policies and
plans, projects and programs. A balanced scorecard is often used to evaluate the
overall performance of the business and its progress towards objectives. Recent
studies and leading management theorists have advocated that strategy needs to start
with stakeholders expectations and use a modified balanced scorecard which
includes all stakeholders.
Strategic management is a level of managerial activity under setting goals and over
Tactics. Strategic management provides overall direction to the enterprise and is
closely related to the field of Organization Studies. In the field of business
administration it is useful to talk about "strategic alignment" between the
organization and its environment or "strategic consistency." According to Arieu ,
"there is strategic consistency when the actions of an organization are consistent
with the expectations of management, and these in turn are with the market and the
context." Strategic management includes not only the management team but can also

12
include the Board of Directors and other stakeholders of the organization. It depends
on the organizational structure.
Strategic management is an ongoing process that evaluates and controls the
business and the industries in which the company is involved; assesses its
competitors and sets goals and strategies to meet all existing and potential
competitors; and then reassesses each strategy annually or quarterly [i.e. regularly]
to determine how it has been implemented and whether it has succeeded or needs
replacement by a new strategy to meet changed circumstances, new technology, new
competitors, a new economic environment., or a new social, financial, or political
environment.
The strategic management process is made up of four elements: situation analysis,
strategy formulation, strategy implementation, and strategy evaluation. These
elements are steps that are performed, in order, when developing a new strategic
management plan. Existing businesses that have already developed a strategic
management plan will revisit these steps as the need arises, in order to make
necessary changes and improvements.
1- Situation Analysis - Situation analysis is the first step in the strategic management
process. The situation analysis provides the information necessary to create a
company mission statement. Situation analysis involves "scanning and evaluating
the organizational context, the external environment, and the organizational
environment" (Coulter, 2005, p. 6). This analysis can be performed using several
techniques. Observation and communication are two very effective methods.
To begin this process, organizations should observe the internal company
environment. This includes employee interaction with other employees, employee
interaction with management, manager interaction with other managers, and
management interaction with shareholders. In addition, discussions, interviews, and
surveys can be used to analyze the internal environment.
Organizations also need to analyze the external environment. This would include
customers, suppliers, creditors, and competitors. Several questions can be asked
which may help analyze the external environment. What is the relationship between
the company and its customers? What is the relationship between the company and
its suppliers? Does the company have a good rapport with its creditors? Is the
company actively trying to increase the value of the business for its shareholders?
Who is the competition? What advantages do competitors have over the company?
2. Strategy Formulation - Strategy formulation involves designing and developing
the company strategies. Determining company strengths aids in the formulation of
strategies. Strategy formulation is generally broken down into three organizational
levels: operational, competitive, and corporate.

Operational strategies are short-term and are associated with the various operational
departments of the company, such as human resources, finance, marketing, and
production (Coulter, 2005, p. 7). These strategies are department specific. For
example, human resource strategies would be concerned with the act of hiring and
training employees with the goal of increasing human capital.

13
Competitive strategies are those associated with methods of competing in a certain
business or industry. Knowledge of competitors is required in order to formulate a
competitive strategy. The company must learn who its competitors are and how they
operate, as well as identify the strengths and weaknesses of the competition. With
this information, the company can develop a strategy to gain a competitive
advantage over these competitors.
3. Strategy Implementation - Strategy implementation involves putting the strategy
into practice. This includes developing steps, methods, and procedures to execute
the strategy. It also includes determining which strategies should be implemented
first. The strategies should be prioritized based on the seriousness of underlying
issues. The company should first focus on the worst problems, then move onto the
other problems once those have been addressed.
The approaches to implementing the various strategies should be considered as the
strategies are formulated" (Coulter, 2005, p. 8). The company should consider how
the strategies will be put into effect at the same time that they are being created. For
example, while developing the human resources strategy involving employee
training, things that must be considered include how the training will be delivered,
when the training will take place, and how the cost of training will be covered.

4. Strategy Evaluation - Strategy evaluation involves "examining how the strategy

has been implemented as well as the outcomes of the strategy" (Coulter, 2005, p. 8).
This includes determining whether deadlines have been met, whether the
implementation steps and processes are working correctly, and whether the expected
results have been achieved. If it is determined that deadlines are not being met,
processes are not working, or results are not in line with the actual goal, then the
strategy can and should be modified or reformulated.
Both management and employees are involved in strategy evaluation, because each
is able to view the implemented strategy from different perspectives. An employee
may recognize a problem in a specific implementation step that management would
not be able to identify.
The strategy evaluation should include challenging metrics and timetables that are
achievable. If it is impossible to achieve the metrics and timetables, then the
expectations are unrealistic and the strategy is certain to fail.

14

5.

Discuss the global challenge facing Indian firms. Explain important

techniques for environmental analysis.

Solution:
The challenges facing the Indian organized retail sector are various and these are
stopping the Indian retail industry from reaching its full potential. The behaviour
pattern of the Indian consumer has undergone a major change. This has happened for
the Indian consumer is earning more now, western influences, women working force
is increasing, desire for luxury items and better quality. He now wants to eat, shop,
and get entertained under the same roof. All these have lead the Indian organized
retail sector to give more in order to satisfy the Indian customer.
The biggest challenge facing the Indian organized retail sector is the lack of retail
space. With real estate prices escalating due to increase in demand from the Indian
organized retail sector, it is posing a challenge to its growth. With Indian retailers

15
having to shell out more for retail space it is effecting there overall profitability in
retail.
Trained manpower shortage is a challenge facing the organized retail sector in India.
The Indian retailers have difficulty in finding trained person and also have to pay
more in order to retain them. This again brings down the Indian retailers profit
levels.
The Indian government have allowed 51% foreign direct investment (FDI) in the
India retail sector to one brand shops only. This has made the entry of global retail
giants to organized retail sector in India difficult. This is a challenge being faced by
the Indian organized retail sector. But the global retail giants like Tesco, Wal-Mart,
and Metro AG are entering the organized retail sector in India indirectly through
franchisee agreement and cash and carry wholesale trading. Many Indian companies
are also entering the Indian organized retail sector like Reliance Industries Limited,
Pantaloons, and Bharti Telecoms. But they are facing stiff competition from these
global retail giants. As a result discounting is becoming an accepted practice. This
too bring down the profit of the Indian retailers. All these are posing as challenges
facing the Indian organized retail sector.
The challenges facing the Indian organized retail sector are there but it will have to
be dealt with and only then this sector can prosper.
Business analysis as a discipline has a heavy overlap with requirements analysis
sometimes also called requirements engineering, but focuses on identifying the
changes to an organization that are required for it to achieve strategic goals. These
changes include changes to strategies, structures, policies, processes, and
information systems. Examples of business analysis include:
Enterprise analysis or company analysis - Focuses on understanding the needs of the
business as a whole, its strategic direction, and identifying initiatives that will allow
a business to meet those strategic goals. It also includes:
Creating and maintaining the business architecture
Conducting feasibility studies
Identifying new business opportunities
Scoping and defining new business opportunities
Preparing the business case
Conducting the initial risk assessment
There are a number of generic business techniques that a Business Analyst will use
when facilitating business change. Some of these techniques include:
PESTLE
This is used to perform an external environmental analysis by examining the many
different external factors affecting an organization.
The six attributes of PESTLE:

Political (Current and potential influences from political pressures)

Economic (The local, national and world economy impact)

16

Sociological (The ways in which a society can affect an organization)

Technological (The effect of new and emerging technology)
Legal (The effect of national and world legislation)
Environmental (The local, national and world environmental issues)

HEPTALYSIS
This is used to perform an in-depth analysis of early stage businesses/ventures on
seven important categories:

Market Opportunity
Product/Solution
Execution Plan
Financial Engine
Human Capital
Potential Return
Margin of Safety

MOST
This is used to perform an internal environmental analysis by defining the attributes
of MOST to ensure that the project you are working on is aligned to each of the 4
attributes.
The four attributes of MOST

Mission (where the business intends to go)

Objectives (the key goals which will help achieve the mission)
Strategies (options for moving forward)
Tactics (how strategies are put into action)

SWOT
This is used to help focus activities into areas of strength and where the greatest
opportunities lie. This is used to identify the dangers that take the form of
weaknesses
and
both
internal
and
external
threats.
The four attributes of SWOT:

Strengths - What are the advantages? What is currently done well?

(e.g. key area of best-performing activities of your company)
Weaknesses - What could be improved? What is done badly? (e.g.
key area where you are performing poorly)
Opportunities - What good opportunities face the organization? (e.g.
key area where your competitors are performing poorly)
Threats - What obstacles does the organization face? (e.g. key area
where your competitor will perform well)

CATWOE
This is used to prompt thinking about what the business is trying to achieve.
Business perspectives help the business analyst to consider the impact of any

17
proposed
solution
on
There are six elements of CATWOE

the

people

involved.

Customers - Who are the beneficiaries of the highest level business

process and how does the issue affect them?
Actors - Who is involved in the situation, who will be involved in
implementing solutions and what will impact their success?
Transformation Process - What processes or systems are affected by
the issue?
World View - What is the big picture and what are the wider impacts
of the issue?
Owner - Who owns the process or situation being investigated and
what role will they play in the solution?
Environmental Constraints - What are the constraints and limitations
that will impact the solution and its success?

A business process improvement (BPI) typically involves six steps:

1. Selection of process teams and leader - Process teams, comprising 2-4 employees
from various departments that are involved in the particular process, are set up. Each
team selects a process team leader, typically the person who is responsible for
running the respective process.
2. Process analysis training - The selected process team members are trained in
process analysis and documentation techniques.
3. Process analysis interview - The members of the process teams conduct several
interviews with people working along the processes. During the interview, they
gather information about process structure, as well as process performance data.
4. Process documentation - The interview results are used to draw a first process
map. Previously existing process descriptions are reviewed and integrated, wherever
possible. Possible process improvements, discussed during the interview, are
integrated into the process maps.
5. Review cycle - The draft documentation is then reviewed by the employees
working in the process. Additional review cycles may be necessary in order to
achieve a common view (mental image) of the process with all concerned
employees. This stage is an iterative process.
6. Problem analysis - A thorough analysis of process problems can then be
conducted, based on the process map, and information gathered about the process.
At this time of the project, process goal information from the strategy audit is
available as well, and is used to derive measures for process improvement.

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19
6.

What are generic Strategies? Discuss the reasons for adopting stability
and expansion strategies.

Solution:

Generic strategies were used initially in the early 1980s, and seem to be even more
popular today. They outline the three main strategic options open to organization
that wish to achieve a sustainable competitive advantage. Each of the three options
are considered within the context of two aspects of the competitive environment:
Sources of competitive advantage - are the products differentiated in any way, or are
they the lowest cost producer in an industry? Competitive scope of the market does the company target a wide market, or does it focus on a very narrow, niche
market?
The generic strategies are:
1. Cost leadership,
2. Differentiation, and
3. Focus.
Cost leadership - The companies that attempt to become the lowest-cost producers
in an industry can be referred to as those following a cost leadership strategy. The
company with the lowest costs would earn the highest profits in the event when the
competing products are essentially undifferentiated, and selling at a standard market
price. Companies following this strategy place emphasis on cost reduction in every
activity in the value chain. It is important to note that a company might be a cost
leader but that does not necessarily imply that the company's products would have a
low price. In certain instances, the company can for instance charge an average price
while following the low cost leadership strategy and reinvest the extra profits into
the business (Lynch, 2003). Examples of companies following a cost leadership
strategy include RyanAir, and easyJet, in airlines, and ASDA and Tesco, in
superstores.
The risk of following the cost leadership strategy is that the company's focus on
reducing costs, even sometimes at the expense of other vital factors, may become so
dominant that the company loses vision of why it embarked on one such strategy in
the first place.
Differentiation - When a company differentiates its products, it is often able to
charge a premium price for its products or services in the market. Some general
examples of differentiation include better service levels to customers, better product
performance etc. in comparison with the existing competitors. Porter (1980) has
argued that for a company employing a differentiation strategy, there would be extra
costs that the company would have to incur. Such extra costs may include high
advertising spending to promote a differentiated brand image for the product, which
in fact can be considered as a cost and an investment. McDonalds , for example, is

20
differentiated by its very brand name and brand images of Big Mac and Ronald
McDonald.
Differentiation has many advantages for the firm which makes use of the strategy.
Some problematic areas include the difficulty on part of the firm to estimate if the
extra costs entailed in differentiation can actually be recovered from the customer
through premium pricing. Moreover, successful differentiation strategy of a firm
may attract competitors to enter the company's market segment and copy the
differentiated product (Lynch, 2003).
Focus - Porter initially presented focus as one of the three generic strategies, but
later identified focus as a moderator of the two strategies. Companies employ this
strategy by focusing on the areas in a market where there is the least amount of
competition (Pearson, 1999). Organisations can make use of the focus strategy by
focusing on a specific niche in the market and offering specialised products for that
niche. This is why the focus strategy is also sometimes referred to as the niche
strategy (Lynch, 2003). Therefore, competitive advantage can be achieved only in
the company's target segments by employing the focus strategy. The company can
make use of the cost leadership or differentiation approach with regard to the focus
strategy. In that, a company using the cost focus approach would aim for a cost
advantage in its target segment only. If a company is using the differentiation focus
approach, it would aim for differentiation in its target segment only, and not the
overall market.
This strategy provides the company the possibility to charge a premium price for
superior quality (differentiation focus) or by offering a low price product to a small
and specialised group of buyers (cost focus). Ferrari and Rolls-Royce are classic
examples of niche players in the automobile industry. Both these companies have a
niche of premium products available at a premium price. Moreover, they have a
small percentage of the worldwide market, which is a trait characteristic of niche
players. The downside of the focus strategy, however, is that the niche
characteristically is small and may not be significant or large enough to justify a
company's attention. The focus on costs can be difficult in industries where
economies of scale play an important role. There is the evident danger that the niche
may disappear over time, as the business environment and customer preferences
change over time.
According to Porter (1980), a company's failure to make a choice between cost
leadership and differentiation essentially implies that the company is stuck in the
middle. There is no competitive advantage for a company that is stuck in the middle
and the result is often poor financial performance (Porter, 1980). However, there is
disagreement between scholars on this aspect of the analysis. Kay (1993) and Miller
(1992) have cited empirical examples of successful companies like Toyota and
Benetton, which have adopted more than one generic strategy. Both these companies
used the generic strategies of differentiation and low cost simultaneously, which led
to the success of the companies.
Choosing the Right Generic Strategy - Your choice of which generic strategy to
pursue underpins every other strategic decision you make, so it's worth spending
time to get it right.
But you do need to make a decision: Porter specifically warns against trying to
"hedge your bets" by following more than one strategy. One of the most important

21
reasons why this is wise advice is that the things you need to do to make each type
of strategy work appeal to different types of people. Cost Leadership requires a very
detailed internal focus on processes. Differentiation, on the other hand, demands an
outward-facing, highly creative approach.
So, when you come to choose which of the three generic strategies is for you, it's
vital that you take your organization's competencies and strengths into account.
Use the following steps to help you choose.
Step 1: For each generic strategy, carry out a SWOT Analysis of your strengths and
weaknesses, and the opportunities and threats you would face, if you adopted that
strategy.
Having done this, it may be clear that your organization is unlikely to be able to
make a success of some of the generic strategies.
Step 2: Use Five Forces Analysis to understand the nature of the industry you are in.
Step 3: Compare the SWOT Analyses of the viable strategic options with the results
of your Five Forces analysis. For each strategic option, ask yourself how you could
use that strategy to:

Reduce or manage supplier power.

Reduce or manage buyer/customer power.
Come out on top of the competitive rivalry.
Reduce or eliminate the threat of substitution.
Reduce or eliminate the threat of new entry.

Select the generic strategy that gives you the strongest set of options.

22

7.

What do you understand by industry environment? Discuss main

components of industry environment.

Solution:
Strategic Management is a systematic process of achieving desired objectives of an
organization by proper allocation of its resources.
Strategic Management process starts with deciding objectives, allocating resources,
and implementing planned programme to achieve desired objective. Environmental
scanning is preliminary step for effective implementation of strategy. Environmental
Scanning is the process of accessing the influence environmental factors in which
organization is operating. One must prepare strategy keeping in mind these factors.
For Example, if someone is planning to develop a production plant, he must choose
the site in legislative permissible area, where access to raw materials, market is easy
and other infrastructure like power, transport, labor are available.
Environment in which an organization is operating can be broadly divided into two
categories, viz., Micro Environment (Industry) and Macro Environment. Macro
environment is broader concept. It represents Political, Economical, Social,
Technological, Legal factors acting in the environment of organizational setup.
Micro Environment deals with Industry specific environment of an organization
which includes labor supply, material supply and other infrastructure.
MACRO ENVIRONMENT:- Let us discuss how Macro environment factors
affecting organizational strategies.
Political Factors: Changes in political scenario of an area (say, country or state) like
change in governing party where an organization is working may result in changes
in certain policies regulating the organization as every political party have its own
views regarding economic development and they tend to change the policies as per
their views when they get governing position, and thus it affect the strategy of an
organization.
Economic Factors: Economic trends in the country, business cycles are the economic
factors which may affect organization. For Example, during depression demand for
products may fall which will affect organizational production. Hence, strategy
should be made keeping in mind such economic trends and tools to cope with them.
Social Factors: Educational level, population size, income levels, etc. are some of
the social factors which affect the business strategies. Higher income level shows
high potential of consumption.

23
Technological Factors: Now a day, technology is very volatile. Technological
development may make organizational process outdated which may cause less
production capacity in comparison to new technology and thus affect business
strategy.
Legal Factors: Changes in Laws governing organization, changes in labor laws can
increase organizational expenses, may change working hours, etc. affecting its
strategy.

8.

Discuss the nature and significance of strategic evaluation. Bring out the
role different participants play in strategic evaluation. Discuss different
types of obstacles faced in strategic evaluation. Explain premise control
and strategic surveillance.

9.

What role an organizational structure plays in the implementation of

strategy of a firm. Explain the interrelationship of strategy and
structure. Distinguish between vertical and horizontal differentiation.

24

10.

Explain Cost leadership strategy, its strategic choices, and advantages

and disadvantages of cost leadership. Define

Differentiation Strategy.

Discuss is advantages and disadvantages.

Solution:
The Cost Leadership Strategy - Porter's generic strategies are ways of gaining
competitive advantage in other words, developing the "edge" that gets you the sale
and takes it away from your competitors. There are two main ways of achieving this
within a Cost Leadership strategy:
-

Increasing profits by reducing costs, while charging industry-average prices.

Increasing market share through charging lower prices, while still making a
reasonable profit on each sale because you've reduced costs.

The Cost Leadership strategy is exactly that it involves being the leader in terms of
cost in your industry or market. Simply being amongst the lowest-cost producers is
not good enough, as you leave yourself wide open to attack by other low cost
producers who may undercut your prices and therefore block your attempts to
increase market share.
You therefore need to be confident that you can achieve and maintain the number
one position before choosing the Cost Leadership route. Companies that are
successful in achieving Cost Leadership usually have:
-

Access to the capital needed to invest in technology that will bring costs down.
Very efficient logistics.

25
-

A low cost base (labor, materials, facilities), and a way of sustainably cutting
costs below those of other competitors.

The greatest risk in pursuing a Cost Leadership strategy is that these sources of cost
reduction are not unique to you, and that other competitors copy your cost reduction
strategies. This is why it's important to continuously find ways of reducing every
cost. One successful way of doing this is by adopting the Japanese Kaizen
philosophy of "continuous improvement".
Overall cost leadership strategy is based on a company's position as the industry's
least cost producer in broadly defined markets or a wide mix of products. There are
two essential features of overall cost leadership:
1. The company pursuing overall cost leadership must aggressively pursue a
position of cost leadership by constructing the rnost efficient Sc~ate" tacilities and
must be godoTin engineering, manufacturing, and physical distribution.
2. The company has a large market share so that its per unit cost is the lowest.
Overall cost leadership generates competitive advantage in the form of offering
products to customers at lower prices which helps in achieving large market share.
For example, Reliance Industries has created huge capacity in polyster, polymers,
and fibre intermediaries and in all these segments, it is the lowest cost producer
thereby capturing the largest market share. In fact, in the present competitive
environment, most companies adopt cost as the basis of competition. Though many
of them may be low cost producing companies, but everyone may not enjoy cost
leadership. Those with the least cost enjoy cost leadership. For example, in detergent
and toilet soap, Hindustan Lever and Nirma, both emphasize on low cost but Nirma
enjoys the cost leadership position. While Nirma competes on price basis due to low
cost, Hindustan Lever competes on product differentiation basis coupled with cost.
A basic question in adopting overall cost leadership strategy without some kind of
differentiation is: is it a sustainable source of competitive advantage? It can be
sustained only if barriers exist that prevents competitors from achieving the same
low cost. However, in an era of technological development, manufacturers
constantly leapfrog over one other in pursuit of lower cost. With decreasing national
and international barriers to entry, sustaining overall cost leadership strategy requires
continuous efforts for being cost effective.
The Differentiation Strategy - Differentiation involves making your products or
services different from and more attractive those of your competitors. How you do
this depends on the exact nature of your industry and of the products and services
themselves, but will typically involve features, functionality, durability, support and
also brand image that your customers value.
-

To make a success of a Differentiation strategy, organizations need:

Good research, development and innovation.
The ability to deliver high-quality products or services.

Effective sales and marketing, so that the market understands the benefits offered by
the differentiated offerings.

26
Large organizations pursuing a differentiation strategy need to stay agile with their
new product development processes. Otherwise, they risk attack on several fronts by
competitors pursuing Focus Differentiation strategies in different market segments.
generic strategies may be developed on the basis of differentiation. Kotler has
defined differentiation as "the act of designing a set of meaningful differences to
distinguish the company's offerings from competitors' offerings."7 Thus, the product
offered by a company is perceived by customers as being different from other
companies offering the similar product. The product, being perceived as distinct,
may attract higher price which results into higher profitability. For example, shaving
blades offered by Gillette India Limited command much higher prices as compared
to its competitors' blades. In differentiation, perception of customers about a product
being unique is important and not the officers perception. A product can be
differentiated on several bases: product characteristics form, features,
performance quality, conformance quality, durability, reliability, reparability, style,
design; servicesordering ease, delivery, installation, customer training, customer
consulting, maintenance and repair, etc.; personnelcompetence, courtesy,
credibility, reliability, responsiveness and communication; channelcoverage,
expertise, and performance; imagesymbols, media, atmosphere, and events.8
Since there are several bases of differentiation, the question arises; which differences
should be pronounced? The answer lies in the competitors' analysis which will
reveal their competitive differentiation. A company can differentiate those areas
which are weak points of the competitors, particularly the nearest one or the areas
which have been left by them. Differentiation strategy is comparatively more
sustainable as compared to overall cost leadership. However, it requires constant
analysis of competitors and their likely moves for differentiation.
Focused Differentiation - While differentiation of general nature has width, focused
differentiation is undertaken to achieve advantage in a narrowly defined
market/customer segment. This strategy generates advantage based on the ability to
create more customer value for a narrowly targeted segment and results from a better
understanding of customer near. For example, various types of hotels adopt focused
differentiation strategies as each class of hotels has different customer segments.
Further, depending on the class of hotels, each of them emphasizes on some specific
but few bases of differentiation. Unlike toothpaste market or other personal
products, customer segmentation for hotel industry is narrowly focused.