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Strategic Management

Assignment A
Question 1: Describe the benefits of Good Strategic Planning? Define and give examples of key terms
of Strategic Management? Answer:
Strategic planning provides a variety of benefits in the organization. Below are some of the
benefits:
1. Clearly define the purpose of the organization and to establish realistic goals and
objectives consistent with that of the mission in defined timeframe within the
organizations capacity for implementation.
2. Communicate those goals and objectives to the organizations employees.
3. Develop sense of ownership of the plan.
4. Ensure the most effective use is made of the organizations resources by focusing the
resources on key priorities.
5. Provides a base from which progress can be measured and establish a mechanism for
informed change when needed.
6. Brings everyones best and most reasoned efforts have an important value in building
a consensus about where an organization is going.
Key terms of Strategic Management
1. Purpose this includes the reason why an organization exists. It includes a description
of its current and future business. The purpose of an organization is its primary role in
society, a broadly defined aim (such as manufacturing electronic equipment) that it
may share with many other organizations of its type.
2. Mission it is the unique reason of an organization for its existence and what sets it
apart from all others. The organization's mission describes why the organization exists
and guides what it should be doing. Often, the organization's mission is defined in a
formal, written mission statement.
Decisions on mission are the most important strategic decisions, because the mission
is meant to guide the entire organization. Although the terms "purpose" and "mission"
are often used interchangeably, to distinguish between them may help in
understanding organizational goals.
3. Goals this is the desired future state that the organization attempts to realize. It is a
personal or organizational desired end-point in some sort of assumed development.
Many people endeavor to reach goals within afinite time by setting deadlines.
4. Objectives refers to specific targets for which measurable results can be obtained. It
also points out to the specific kinds of result the organization seeks to achieve through
its existence and operations. What the organization hopes to accomplish.
5. Strategy are means by which long term objectives will be achieved. Its role is to
identify the general approaches that the organization utilize to achieve its
organizational objectives.
6. Tactics are specific actions, sequences of actions and schedules an organization uses
to fulfil its strategy. It is also considered as game plan.
7. Policy - Policies include guidelines, procedures, rules, programs, and budgets
established to support efforts to achieve stated objectives. Therefore, policies become
important management tools for implementing them.
8. Strategists - are the individuals who are involved in the strategic management process
Several levels of management may be involved in strategic decision making. However, the
people responsible for major strategic decisions are the board of director, president, the chief
executive officer, the chief operating officer, and the division managers.

Question 2: Explain the concept of SBU in a Multi Business Organization. Identify the Three levels of
Strategy-Corporate, Business and Functional. How do Goals and Objectives vary at each Level?
Answer:
The concept is that a strategic business unit is a significant organization segment that is
analyzed to develop organizational strategy aimed at generating future business or revenue.
Corporate Strategy level is fundamentally concerned with the selection of businesses in
which the company should compete and with the development and coordination of that
portfolio of business. The primary items for this level are the following: reach, competitive
contact, managing activities and business interrelationships and management practices.
Business level on the other hand is a strategic business unit that may be a division, product
line or profit centre that can be planned independently from other business units of the
organization. In this level, the strategic issues are less about coordination of operating units
and more about developing and sustaining competitive advantage for the goods and services
they produced.
The third is Functional level, where it is the operating divisions and departments. The
strategic issues at the functional level are related to business processes and value chain. It
involves the development and coordination of resources through which business unit level
strategies can be executed effectively. Functional units of an organization are involved in
higher level strategies by providing input into the business unit level and corporate level
strategy such as providing information on resources and capabilities on which the higher
level can be based.
Goals and objectives are often interchanged at each level. Basically it is more geared towards
what the organization would want to be in the future and the means by which to get there.
The means are needed to be quantifiable to gather accurate interpretations.
Question 3: What should be the key Traits of a CEO? What are the forces that design the Strategic
Management Systems?
Answer:
It is noted that no two persons are alike this is also true with regards to their personality and
how they run their corporations/organizations. However, below are some of the traits a CEO
should possess to effectively run his/her organization.
1. Conveys strong sense of vision
2. Links compensation to performance
3. Communicates frequently with employees
4. Emphasizes ethics.
5. Plans for management succession.
6. Communicates frequently with customers.

7. Reassigns or Terminates.
8. Rewards loyalty.
9. Makes sound decisions.
Forces that design Strategic Management systems are as follows:
Organizations - based on their size are either gearing towards formality and more
details which speaks for large organizations while for small companies, they tend
towards less details and are not too formal.
Management styles how the top management conducts its business and style of
doing its business affects the design towards strategic management. Policy making is
part of the management style that most large and small scale organizations use in part
of designing their strategic management system.
Complexity of Environment is the organization in a stable environment? Are there
any competitions to the companys success? Is there a market for the type of service
offered? Some of these questions shape how systems are develop for the organization
as strategy will be determined by the answers of the said questions.
Complexity of Production process entails how effective is the process itself. Takes into
consideration the following factors: Production lead time
Capital intensive
Labor intensive
Manufacturing process
Technology
Market reaction time
Nature of problems determining nature of problems help in the design of the system as they
can come up with counter measures to solve the situation.

Question 4: Discuss the various grand strategies at the Corporate Level i.e.Stability, Growth and
Retrenchment.Answer:
In Growth, the company seeking growth faces different subgroups for it: horizontalgrowth
(concentration), diversification and vertical growth.
Horizontal growth there are 3 components to horizontal growth. First accompany may decide
to look for new customers. Second, a company may decide to pursue new product. Third, the
company may pursue new locations.

Vertical Integration it is an integration along a supply chain. An example would be if a


retailer now manufactures the products it sells, that is considered as increasing its level of
vertical integration.
Diversification there are 2 types of diversification. First is related diversification, which is a
common core of ones resources and capabilities. With this, synergy rises because the related
activity can increase the value and economies of scale can save money. Second is the
unrelated
diversification where it is used to lower the relative risk. Basically it is like a portfolio, the
more different each portfolio is to each other the better. Another example is that when a
product is released. It is done so over several markets to hedge risk of failure. In Stability,
when a company is seeking slow growth or stagnation, management usually seeks strategies
geared towards stability. There are 3 elements to which stability is used to strategize.
Pause
if the internal resources are already stretched thin, organizations will often scale down a bit
and focus on control. Proceeding with caution if there are problems in the macro
environment ,the company may opt for a strategy that goes for a formidable growth..
Profit
if the company has loyal customers, solid base, the strategy is to go for research and
development.
Retrenchment this strategy revolves around cutting sales. It is also a strategy that seeks to
reduce size or diversity of an organizations operations. Expenditures are also cut off or
minimize to become financially stable. Manpower headcount is also
affected when there is retrenchment. As the size of manpower is lowered to meet viable
financial stability.

Question 5: Discuss the following Factors affecting Strategic Choices inbrief:


Nature of environment stable?Firms internal realitiesAmbition of CEO /
ownersCompany cultureFirms capacity to execute the strategy.Resource allocation
Answer:Nature of environment stable?
Organizations conduct an environmental analysis to determine if thebusiness they intend to
operate is going to be stable given the present environment. This will also be an avenue to
determine what are thestrength, opportunities, weakness and threats present in
the environmentbeing planned for.
Firms internal realities
Top management of every organization has its inbound realities that generallyinfluence how
they conduct their businesses. Its in this that they come upwith strategies to strengthen said
realities and bolster to the success of the organization as a whole.
Ambition of CEO / owners
CEOs ambition towards their business is for it to be a profitable and verysuccessful venture.
They are the ones who are very active in formulating themission and vision of the
organization and how it should be ran. Theyvisualize their products to have an impact on the
desired market and forsome to diversify to other markets so as to increase profits and make
theorganization grow.
Company culture

Strategic choices are normally grounded on the culture of the company. Thisis brought about
by the types of people presently employed or involved in theorganization. Any strategy to be
undertaken has to take into consideration if it is acceptable to the whole organization or it will
spell doom as this will not progress.
Firms capacity to execute the strategy.
Planning strategies is very different from acting on them. This will require commitment from
personnel of all levels in the organization. The capacity to enact planned strategies is a
testament to the organizations internal relations making it simple and effortless.
Resource allocation
Resources are very important in planning for strategic choices as this will be considered as
the organizations lifeline. Without resources the organization cannot come up or manufacture
products they intend to release to a specific market. Most strategies are centered on what
is the current resource allocation and is it enough to meet the needs of the organization for
production of goods
Section - B
Question: Explain the concept of Porters five forces Model used for Industry Analysis? What are the
major factors that become barriers to entry in the New Industry? Answer:
Porters model draws upon the 5 forces to determine the competitive intensity and
attractiveness of a market. The term attractiveness is descriptive towards the overall
profitability of an industry or organization.
Major factors that become barriers to entry by new players are as follows:
Government Policies with the onset of different government regulations, this poses as a sort
of control over companies that can cause as barriers. Organizations are required to apply for
licenses and permits to operate which also asks them to pay a rather large sum of money.
Capital
considered being one of the important factors that a company/organization must have for
its business to succeed. Capital is already included prior to coming up with the rest of the
organization. This includes: resources to facilities, manpower, inventory, salaries, and
benefits among others. Capital investments differ on the type of business being planned or
put up.
Switching cost
this is a cost wherein a customer changes from one supplier or market place to another. The
higher these costs are, the more difficult it is to execute change. Since most of the consumers
are bent straight on a product they have grown accustomed to, when a new product comes
along almost the same features, they tend not to switch as they think it is more costly to learn
the basics of the new product and that it will lead to more time spent on figuring out the new
product.
Economies of Scale
this comes as a barrier for new entrants because established companies can produce large
scale quantities of their products and sell them much cheaper than new entrants. In this case,
new entrant produces the same product ata smaller quantity but of higher cost. Suppliers and
customers will not do business with the new entrant due to high cost per product.
Product Differentiation

brand loyalty plays a factor to this barrier. Many customers who have already accepted a
specific product as unique tends to cling toit. New entrants who try to penetrate the market of
the said specific product has to spend more in terms of advertising and enticing the loyal
customers to try their product and hope to get them aboard. This is difficult for new entrants
as they need to have extra resources and capital to make this possible.
Cost disadvantages independent of scale
a barrier for new entrants as the materials needed for the production of a specific goods are
either patented to an organization or the raw materials are exclusive to its competitors. Also,
the technology to produce commodities is also inherent to an organization.
Access to Distribution channels
new entrants are finding it hard to look for ways to distribute their products as the
established organizations already had their distribution channels identified and has
exclusivity. Additional costs will be needed to look for alternative ways to distribute
the products to its expected markets.
Question 2: What used to be national markets with local companies competing for business has
become a global market with everyone competing for everyone's business everywhere. Explain the 3
generic strategies by Porter for Competitive advantage in the light of above statement. Answer:
Globalization has hit firms harder as they now compete with products that can be considered
as of more durability and cheap. The mind set of most of the consumers is that if its foreign
made or made from a 1st world country it must be durable. In addition that if sold alongside
its local competitor, the foreign one is much cheaper. To pursue an advantage over an
organizations rivals, drastic measures have to be set up to challenge globalization and the
entry of competitors. Changing prices will provide a temporary advantage towards the
competitors. By improving product differentiation, features, implementing innovations in the
manufacturing process provides a positive advantage as well. Using vertical integration or a
well known distribution channel to corner other market brackets is a sound strategy to
combat globalization Exploiting relationship with suppliers is another way to compete
wherein the organization can set quality standards and thus requiring its suppliers to follow
suit. This increases the credibility and increases the reputation of the organization as one who
sells high quality goods. Local companies need to step up and come up with revolutionary
and innovative ideas to rival other competitors from other countries. Advertising and rethinking the supplier and customers buying power is a way to help take advantage over a big
market. Diversification can also be done so as to make the organization survive on different
types of market rather than concentrate on one.
Question 3: What do you understand by the term Business Portfolio? How do BCG and GE matrix
help a multi-business organization analyze its current business portfolio and decide which businesses
should receive more or less investment. Answer:
Business portfolio is an appropriate mix or collection of investments held by an institution or
an individual. BCG Matrix is based on the product life cycle theory that can used to
determine what priorities should be given in a portfolio of a business unit. It can help
understand frequently made strategy mistake of having a one-size-fits-all approach. To
ensure long term value creation, the company should have a portfolio of products that
contains both high-growth products in need of cash inputs and low growth products that
generate lots of cash. The idea behind BCG is that the bigger the market share a product has
or the faster the products market grows the better it is for the company. The practical use of
the BCG matrix is that it offers a very useful map of the organizations product or service
strengths and weaknesses at least in terms of current profitability as well as the likely cash

flows. The GE Matrix is an alternative technique used in brand marketing and


productmanagement to help the company decide what product/s to add to its portfolioand
which market opportunities are worthy of continued investment. It is plotted ona 2dimensional grid wherein the Y-axis makes up the attractive measures while the X-axis
contains business strength measures. Its strategic implications can lead to resource allocation
recommendations to help grow, harvest or hold a business unit. The planning of the company
should invest in the opportunities or segments that are both attractive and in which it has
established some measure of competitive advantage. It cross references market attractiveness
and business position using three criteria for each: high, medium and low.
The market attractiveness considers variables relating to the market itself, including the rate
of market growth, market size, potential barriers to entering the market, the number and size
of competitors, the actual profit margins currently enjoyed, and the technological implications
of involvement in the market. The business position criteria look at the businesss strengths
and weaknesses in a variety of fields. These include its position in relation to its competitors,
and the businesss ability to handle product research, development and ultimate production. It
also considers how well placed the management is to deploy these resources
Case Study
Question 1: The Company foresees continued growth and expansion in thecoming few years globally
driven by its operations in India and hopes torealign Indias strengths and world-class market
capabilities to deliver services to its customers. Conduct the SWOT Analysis of Haiers foray in to
Indian market in light of facts given in the narration .Answer: Strength Weaknesses
Convenient geographic location Established distribution channel Understanding of Indian
market Diversification Huge cash flow Innovative Strong mission and vision Not yet well
known in India unlike its competitors.
Opportunities Threats
Research and Development Consolidation of other distribution channels Aggressive
marketing and brand management Discrimination the company is identified as a Chinese
company. Low market share

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