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Q.1. What is strategy? Explain the various level of strategy in an organization.

Answer:
Strategy has been studied for years by business leaders and by business theorists. Yet, there is no
definitive answer about what strategy really is.
One reason for this is that people think about strategy in different ways.
For instance, some people believe that you must analyze the present carefully, anticipate changes in
your market or industry, and, from this, plan how you'll succeed in the future. Meanwhile, others think
that the future is just too difficult to predict, and they prefer to evolve their strategies organically.
Gerry Johnson and Kevan Scholes, authors of "Exploring Corporate Strategy," say that strategy
determines the direction and scope of an organization over the long term, and they say that it should
determine how resources should be configured to meet the needs of markets and stakeholders.
Michael Porter, a strategy expert and professor at Harvard Business School, emphasizes the need for
strategy to define and communicate an organization's unique position, and says that it should
determine how organizational resources, skills, and competencies should be combined to create
competitive advantage.
While there will always be some evolved element of strategy, at Mind Tools, we believe that planning
for success in the marketplace is important; and that, to take full advantage of the opportunities open
to them, organizations need to anticipate and prepare for the future at all levels.
For instance, many successful and productive organizations have a corporate strategy to guide the
big picture. Each business unit within the organization then has a business unit strategy, which its
leaders use to determine how they will compete in their individual markets.
In turn, each team should have its own strategy to ensure that its day-to-day activities help move the
organization in the right direction.
At each level, though, a simple definition of strategy can be: "Determining how we are going to win in
the period ahead."

Strategy may operate at different levels of an organization -corporate level, business level, and
functional level. The strategy changes based on the levels of strategy.
Corporate Level Strategy
Corporate level strategy occupies the highest level of strategic decision-making and covers actions
dealing with the objective of the firm, acquisition and allocation of resources and coordination of
strategies of various SBUs for optimal performance. Top management of the organization makes such
decisions. The nature of strategic decisions tends to be value-oriented, conceptual and less concrete
than decisions at the business or functional level.
Business-Level Strategy.
Business-level strategy is applicable in those organizations, which have different businesses-and
each business is treated as strategic business unit (SBU). The fundamental concept in SBU is to
identify the discrete independent product/market segments served by an organization. Since each
product/market segment has a distinct environment, a SBU is created for each such segment. For
example, Reliance Industries Limited operates in textile fabrics, yarns, fibers, and a variety of
petrochemical products. For each product group, the nature of market in terms of customers,
competition, and marketing channel differs.
There-fore, it requires different strategies for its different product groups. Thus, where SBU concept is
applied, each SBU sets its own strategies to make the best use of its resources (its strategic
advantages) given the environment it faces. At such a level, strategy is a comprehensive plan

providing objectives for SBUs, allocation of re-sources among functional areas and coordination
between them for making optimal contribution to the achievement of corporate-level objectives. Such
strategies operate within the overall strategies of the organization. The corporate strategy sets the
long-term objectives of the firm and the broad constraints and policies within which a SBU operates.
The corporate level will help the SBU define its scope of operations and also limit or enhance the SBUs
operations by the resources the corporate level assigns to it. There is a difference between corporatelevel and business-level strategies.
For example, Andrews says that in an organization of any size or diversity, corporate strategy usually
applies to the whole enterprise, while business strategy, less comprehensive, defines the choice of
product or service and market of individual business within the firm. In other words, business strategy
relates to the how and corporate strategy to the what. Corporate strategy defines the business in
which a company will compete preferably in a way that focuses resources to convert distinctive
competence into competitive advantage.
Functional-Level Strategy.
Functional strategy, as is suggested by the title, relates to a single functional operation and the
activities involved therein. Decisions at this level within the organization are often described as
tactical. Such decisions are guided and constrained by some overall strategic considerations.
Functional strategy deals with relatively restricted plan providing objectives for specific function,
allocation of resources among different operations within that functional area and coordi-nation
between them for optimal contribution to the achievement of the SBU and corporate-level objectives.
Below the functional-level strategy, there may be operations level strategies as each function may be
dividend into several sub functions. For example, marketing strategy, a functional strategy, can be
subdivided into promotion, sales, distribution, pricing strategies with each sub function strategy
contributing to functional strategy.

Q.2 Specify the interrelationship between strategic planning and strategic


management. Which comes first?
Answer:
Strategic Planning and Strategic Management
Plan or planning should precede action. And, strategic planning should precede strategic
management. Strategic planning (also called corporate planning) provides the framework
(some call it a tool) for all major decisions of an enterprisedecisions on products, markets,
investments and organizational structure. In a successful organization, strategic planning or
strategic planning division acts as the nerve centre of business opportunities and growth. It
also acts as a restraint or defence mechanism that helps an organization foresee and avoid
major mistakes in product, market, or investment decisions. A strategic plan, also called a
corporate plan or perspective plan, is a blueprint or document which incorporates details
regarding different elements of strategic management. This includes vision/mission, goals,
organizational appraisal, environmental analysis, resource allocation and the manner in which
an organization proposes to put the strategies into action. The concept and role of strategic

planning would be clear if we mention the major areas of strategic planning in an


organization.
First, strategic planning is concerned with environment or rather, the fit between the
environment, the internal competencies and business (es) of a company.
Second, it is concerned with the portfolio of businesses a company should have. More
specifically, it is concerned with changesadditions or deletionsin a companys productmarket postures.
Third, strategic planning is mostly concerned with the future or the long-term dynamics of an
organization rather than its day-to-day tasks or operations.
Fourth, strategic planning is concerned with growthdirection, pattern and timing of growth.
Fifth, strategy is the concern of strategic planning. Growth priorities and choice of corporate
strategy are also its concerns.
Finally, strategic planning is intended to suggest to an organization, measures or capabilities
required to face uncertainties to the extent possible.
All large organizations formulate strategic plans. In 1997, All India Management Association
(AlMA) conducted a study to find out about business plans, strategies, techniques and tools
adopted by various Indian companies. The study results were published in Business Today.
The study showed that 56 per cent of the total number of companies (160) surveyed had
published strategy. In terms of planning horizon, the period covered in the strategic plan was
less than 3 years by 44 per cent of the companies, 35 years by 40 per cent of the companies
and more than 5 years by 16 per cent. Analysed in terms of company size, bigger companies
planned for a longer period. For 45 per cent of the large companies, the planning period was
more than 5 years, but for 70 per cent of the small companies, the period was less than 3
years. A characteristic feature of the starting plans of many large Indian companies is that
the long-term planning horizons of these companies generally coincide with the national
planning period. This means that many of these companies follow a five-year planning period
which synchronizes with the 5- year plans of the country. This is particularly true of public
sector enterprises in the core sector.

Marico Industries, the maker of Parachute coconut oil, had prepared a strategic business plan
for the period, 199196. For the preparation of the plan, a strategic planning team was
formed consisting of six managers from different functional areas/disciplines. The planning
team made some forecasts about the general macroeconomic environment during 199196
and how the Indian economy would perform during the period in terms of aggregate demand,
technology development and availability of raw materials. In addition to these, the company
had considered other environmental factors also. Based on an analysis of the major strengths
and weaknesses of the company and the environmental factors (opportunities and threats), a
detailed SWOT analysis of the company was undertaken. The objective of SWOT analysis was
to identify growth and expansion possibilities in existing and new products/businesses. These
were finally translated into projected volumes, turnover and profitability.
Once a strategic plan is prepared, the same is submitted to the senior management/top
management for their consideration and approval. In Marico Industries also, the strategic
business plan prepared by the planning group was submitted to the senior management and
finally to the top management (CEO). Deliberations took place at different levels and the
business plan was finalized. This became more like an annual plan which was to be revised
and updated every year during the reference period (199196) as per the strategic business
plan. Maricos target was to increase its turnover to `300 crore by 199596. The business
plan also stipulated that Marico should add a new product to its portfolio every year and seek
technology tie-up for introduction of new products. Strategic planning and strategic
management are intimately related to each other. Where strategic planning ends, strategic
management takes over; but, both are complementary to each other. They form vital links in
an integrated chain in corporate management. Both are continuous processes. Strategic
management may be more continuous, because it involves implementation and monitoring
also.
Q.3 What is a mission statement? Differentiate between a mission statement and a vision
statement.
Answer:
Mission Statement
The reason why your business exists and what it does at present is at the core of a mission statement.
Mission statements are a clever ploy used by leaders of organizations as they reflect the uniqueness
of the company and carry the message across to a broad category of stakeholders. Mission
statements describe what an organization does today along with the line of products being made or
services being offered. These statements work as a guiding light for vendors and employees as they
know the goals and the quality commitments of the organization. In short, if a photo of a business can
be taken, mission statement is just that, a snapshot of an organization as it stands today.

Comparison chart
Mission Statement versus Vision Statement comparison chart
Mission Statement

Vision Statement

About

A Mission statement talks about


HOW you will get to where you want
to be. Defines the purpose and
primary objectives related to your
customer needs and team values.

A Vision statement outlines


WHERE you want to be.
Communicates both the purpose
and values of your business.

Answer

It answers the question, What do


we do? What makes us different?

It answers the question, Where


do we aim to be?

Time

A mission statement talks about the


present leading to its future.

A vision statement talks about


your future.

Function

It lists the broad goals for which the


organization is formed. Its prime
function is internal; to define the key
measure or measures of the
organization's success and its prime
audience is the leadership, team and
stockholders.

It lists where you see yourself


some years from now. It inspires
you to give your best. It shapes
your understanding of why you
are working here.

Change

Your mission statement may change,


but it should still tie back to your
core values, customer needs and
vision.

As your organization evolves, you


might feel tempted to change
your vision. However, mission or
vision statements explain your
organization's foundation, so
change should be kept to a
minimum.

Developin
ga
statement

What do we do today? For whom do


we do it? What is the benefit? In
other words, Why we do what we do?
What, For Whom and Why?

Where do we want to be going


forward? When do we want to
reach that stage? How do we
want to do it?

Features
of an
effective
statement

Purpose and values of the


organization: Who are the
organization's primary "clients"
(stakeholders)? What are the
responsibilities of the organization
towards the clients?

Clarity and lack of ambiguity:


Describing a bright future (hope);
Memorable and engaging
expression; realistic aspirations,
achievable; alignment with
organizational values and culture.

Q.4. What is SWOT analysis? Explain SWOT analysis in the form of a matrix.
Answer:

A SWOT analysis is a tool that identifies the strengths, weaknesses, opportunities and threats of an
organization. Specifically, SWOT is a basic, straightforward model that assesses what an organization
can and cannot do as well as its potential opportunities and threats. The method of SWOT analysis is
to take the information from an environmental analysis and separate it into internal (strengths and
weaknesses) and external issues (opportunities and threats). Once this is completed, SWOT analysis
determines what may assist the firm in accomplishing its objectives, and what obstacles must be
overcome or minimized to achieve desired results.
SWOT analysis or SWOT Matrix was developed by the middle of the 1960s for large organizations to
determine the strategic fit between an organization's internal, distinctive capabilities and external
possibilities and to prioritize actions. SWOT stands for Strengths, Weaknesses, Opportunities and
Threats.
SWOT analysis is a process of situational analysis. Evaluating a firms strengths, weaknesses,
opportunities, and threats through a SWOT analysis is an easy process that provides valuable insights
relating to critical issues affecting an organization.

The internal and external situations can provide valuable information which can come in handy at
times. The SWOT analysis categorizes the internal organizational factors as strengths and weaknesses
and the external situational aspects as opportunities or threats. The strengths can be used for
building a competitive advantage, whereas weakness may hinder the process. With a clear
understanding of these four aspects, any organization can increase its strength, overcome weakness,
cash on good opportunities and put aside the potential threats.
The purpose of SWOT analysis is to identify crucial factors for realizing the goals. The internal
factors of an organization can be considered as strengths or weaknesses depending upon their impact
on the organization. These may include all 4P's, personnel, manufacturing capabilities, finance, etc,
whereas external factors are technological changes, macroeconomic factors, socio-cultural changes
and legislation, as well as changes occurring in the marketplace.
Strengths
An organization's strengths are its resources that lie in:

Cost advantages from proprietary know how

Patents

Influential brand names

Access to natural resources

Accessible distribution network

Weakness
The weakness can be lack of certain strengths that include:

Lack of patent protection

Deprived of access to main distribution channels

Weak brand name

Poor customer reputation

High cost structure

Inaccessible natural resources

Opportunities
The assessment of external environment may bring forth certain new opportunities which are as
follows:

Technologies innovations

Elimination of international trade barriers

An untapped market need

Threats
Unfavorable changes in external environment may pose threat to the organization. Some of them are
as follows:

Consumers shift to different brand

Arrival of substitutes

Strict regulations

Growing trade barriers

The steps in the common three phase SWOT analysis process are
Phase 1: Detect strategic issues

Identify external issues relevant to the firm's strategic position in the industry and the general
environment at large with the understanding that opportunities and threats are factors that
management cannot directly influence.

Identify internal issues relevant to the firm's strategic position.

Analyze and rank the external issues according to probability and impact.

List the key strategic issues factors inside or outside the organization that significantly impact
the long-term competitive position in the SWOT matrix.

Phase 2: Determine the strategy

Identify firm's strategic fit given its internal capabilities and external environment.

Formulate alternative strategies to address key issues.

Place the alternative strategies in one of the four quadrants in the SWOT matrix. Strategies that
combine:

internal strengths with external opportunities are the most ideal mix, but require understanding
how the internal strengths can support weaknesses in other areas;

internal weaknesses with opportunities must be judged on investment effectiveness to


determine if the gain is worth the effort to buy or develop the internal capability,

internal strengths with external threats demand knowing the worth of adapting the organization
to change the threat into opportunity;

internal weaknesses with threats create an organization's worst-case scenario. Radical changes
such as divestment are required.

Develop additional strategies for any remaining "blind spots" in SWOT matrix. Select an
appropriate strategy.

Phase 3: Implement and monitor strategy

Develop action plan to implement strategy;

Assign responsibilities and budgets;

Monitor progress;

Start review process from beginning.

Q.5. Define Corporate turnaround? Distinguish between surgical and nonsurgical turnaround. Explain
with some examples.

Answer:
Corporate turnaround may be defined as organizational recovery from business decline or crisis.
Business decline for a company means continuous fall in turnover or revenue, eroding profit, or
accrual or accumulation of losses. So, business or organizational decline, like business performance, is
understood in relative terms, that are, compared with the past. But, some strategy analysts describe
business decline in terms of current comparisons also; for example, relative to industry rates or
averages or even relative to economic growth of the country. Corporate crisis means deepening or
perpetuation of a decline. Turnaround strategies are usually required for crisis situations
b) Surgical Turnaround and Non-Surgical Turnaround:
Generally, there are two methods of corporate turnaround:

Surgical and

Nonsurgical.

The surgical method, more commonly practiced in the West, involves sweeping changes like firing of
staff, managers, wholesale reshuffling of portfolios, closing down operations, etc. Some call it
bloodbath or bloodshed. Non-surgical turnaround adopts the opposite approach, that is, peaceful
meansrevamping or recovery through meetings, discussions, persuasions, consensus, etc.
The operations in surgical turnaround are like this: the first step is to replace the chief executive of the
ailing company by a new iron chief. The new chief promptly gets into action; he asserts his authority.
He issues pre-emptory orders, centralizes functions and spears some convenient scapegoats. Then he
goes about firing employees en masse and auctioning/selling whole plants and divisions until the fat
is satisfactorily cut to the bone. The bloodbath over, the product mix is revamped, obsolete
machinery is replaced, marketing is strengthened, controls are toughened, accountability for
performance is focused and so on.
Example of Surgical Turnaround Strategy:

At GE, 1,00, 000 of a workforce of 4,00, 000 lost their jobs; at Imperial Chemical
Industries (ICI), the labor force was reduced from 90,000 to 59, 000; half the staff at
Chrysler Corporation disappeared; at British Steel, half the companys production
capacity and 80 per cent of workforce were gone.
Non- Surgical Turnaround Strategy:
Turnaround management of the humane type may involve negotiated and humane
layoffs and divestiture, but, not a bloodbath. This type of turnaround also is
generally brought about by the new helmsman. But, he spends a great deal of time
in trying to understand organizational problems and deliberating on them. He takes
all the stakeholders including unions into confidence; forms groups within the
organization to brainstorm together on what needs to be done to get over the crisis;
tries to create a new work culture; and, generally infuses a strong sense of
participation among the employees and many critical decisions become
participative decisions.
Example: There are many examples of successful turnarounds of the humane type
including Enfield, Volkswagen, Lucas, Air India, SPIC, BHEL and SAIL.

Q.6. What are the major characteristics of an effective strategy evaluation system?
Analyze these characteristics.
Answer:
Strategy evaluation must meet several basic requirements to be effective. First,
strategy-evaluation activities must be economical; too much information can be just
as bad as too little information and too many controls can do more harm than good.
Strategy evaluation activities also should be meaningful they should specifically
relate to a firms objectives. They should provide managers with useful information
about tasks over which they have control and influence. Strategy-evaluation
activities should provide timely information on occasion and in some areas,
managers may daily need information. For example, when affirm has diversified by
acquiring another firm, evaluative information may be needed frequently. However,
in an R&D department, daily or even weekly evaluative information could be
dysfunctional. Approximate information that is timely is generally more desirable as
a basis for strategy evaluation than accurate information that doses not edict the
present. Frequent measurement and rapid reporting may frustrate control rather
than give better control. The time dimension of control must coincide with the time
span of the event being measured.

Strategy evaluation should be designed to provide a true picture of what is


happening. For example, in an ever economic downturn, productivity and
profitability ratios may drop alarmingly, although employees and managers are
actually working harder. Strategy evaluations should fairly portray this type of
situation. Information derived from the strategy-evaluation process should facilitate

action and should be directed to those individuals in the organizations who need to
take action based on it. Managers commonly ignore evaluative reports that are
provided only or informational purposes; not all managers need to receive all
reports. Controls need to action-oriented rather than information-oriented.

The strategy-evaluation process should not dominate decisions; it should foster


mutual understanding, trust, and common sense. No department should fail to
cooperate with another in evaluating strategies. Strategy evaluations should be
simple, not too cumbersome, and not too restrictive. Complex strategy-evaluation
system is its usefulness, not its complexity.

Large organizations require a more elaborate and detailed strategy-evaluation


system because it is more difficult to coordinate efforts among different divisions
and functional areas. Managers in small companies often communicate daily with
each other and their employees and do not need expensive evaluative reporting
systems. Familiarity with local environments usually makes gathering and
evaluating information much easier for small organizations than for large
businesses. But the key to an effective strategy-evaluation system may be the
ability to convince participants that failure to accomplish certain objectives within a
prescribed time is not necessarily a reflection of their performance.

There is no one ideal strategy-evaluation system. The unique characteristics of an


organization, including fits size, management style, purpose, problems, and
strengths, can determine a strategy-evaluation and control systems final design