(Part - I) Strategic Management (Eng)
(Part - I) Strategic Management (Eng)
(Part - I) Strategic Management (Eng)
M.COM. PART I
STRATEGIC MANAGEMENT
Module 1
Module 2
Module 3
Module 4
Module 5
Module 6
Module7
Module 8
Module 9
MODULE 1
INTRODUCTION TO BUSINESS POLICY THEIR DEFINITIONS,
NATURE, SCOPE, SIGNIFICANCE, ELEMENTS AND PROCESSES
1.1 INTRODUCTION TO BUSINESS POLICY
1.2 NATURE, SCOPE AND SIGNIFICANCE OF BUSINESS POLICY
1.3 ELEMENTS AND PROCESSES OF BUSINESS POLICY
1.4 FACTORS DETERMINING BUSINESS POLICY
1.5 SCOPE OF BUSINESS POLICY
The greatest difficulty in the World is not for people to accept new ideas but
make them forget about old ideas John Maynard Keynes (Economist)
1.1 INTRODUCTION TO BUSINESS POLICY
The organization sets the objectives and works towards their achievement.
Once these objectives are defined and strategies determined, certain policies
have to be made to put them into action. Business policies act as a guide to
action. They provide the frame work within which an organization has to meet
its business objectives. The policy points out the direction in which the
company ought to go.
Decision making is the primary task of a manager. While making decisions, it is
common that managers consult the existing organizational policies relevant to
the decisions. Policies provide a basic framework within which managers
operate. Policies exist at all level in the organization. Some may be major
policies affecting the entire organization while others may be minor in nature
affecting the departments or sections in the organization. It has to be
remembered that a policy is also a decision. But it is an due time standing
decision, in the light of which, so many routine decisions are made. Following
are examples of business policies.
i) "We promote employees on the basis of experience"
ii) "We sell televisions only for cash"
From the above policies, one could understand that there is a problem and the
policies help as a guide for finding the solution.
Some policies are just broad guidelines while some can be more specific.
According to Koontz and O'Donnell, "Policies are plans in that they are general
statements of principles which guide the thinking, decision making and action
in an organization."
Policies aid in decision making and are the basis for procedures. They are
responsibilities of top management. Policies are applied in long range planning
and are directly related to goals. They are concerned with estimating
availability of resources, their procurement their augmentation and their
efficient utilization.
Types of Policies:
Policies come into being in any organization in different ways. Koontz and
Odonnel have classified policies on the basis of their source under the
following categories1. Original Policy: The top management formulates policies for the
important functional areas of business such as production, finance,
marketing etc. The objective is to help the concerned functional
managers in decision making in their respective areas. Thus originated
policies are the result of top management initiative. These policies are
formulated in the light of the enterprises objectives. They may be broad
or specific depending on the degree of centralization of authority. If they
are broad, they allow the manager some operational freedom. On the
other hand, if they are specific they are implemented as they are.
2. Appealed Policies: Managers often confront with particular situations as
to whether they have the authority to take a decision on a particular issue
or problem. The policies regarding some issues may be unclear or may be
totally absent. In such case, he appeals the matter to his superiors for
thinking. Appeals are taken upwards till they reach the appropriate level
in the hierarchy. After thorough examination of the issues involved,
policy decision would be taken at the appropriate level.
3. Implied Policies: In some cases there may not be specific policies.
Managers draw meaning from the actions and behaviour of their
superiors. Though there is no explicit policy, managers may assume it in
a particular way and go about in their day-to-day operations.
4. Externally Imposed Policies: These are the policies which are not
deliberately conceived by the managements. They are rather, imposed as
The first category holds the opinion that policy and strategy are
synonymous. Business policy has been defined by William Glueck as
"Management policy is long range planning. For all practical purposes,
management policy, long range planning and strategic management mean
the same thing." However, this view is quite controversial as strategy and
Business policy do not mean the same thing. Strategy includes awareness
of the mission, purpose and objectives. It has been defined as, "the
determination of basic long term goals and objectives of all enterprise, and
the allocation of resources necessary to carry out these goals", while
policies are statements or a commonly accepted understandings of
decision making and are thought oriented guidelines. Therefore, strategy
and Business policy cannot be used interchangeably as there is a clear line
of differentiation between the two terms. This view stress upon the
assumption that business strategy and policy are more or less the same.
However, this view did not receive much support from various authorities
in the area of business management.
2.
Supporting this view, Robert Mudric has defined Business policy as "A policy
establishes guidelines and limits for discretionary action by individuals
responsible for implementing the overall plan."
The view represents Business policy to be:
Restrictive
Laying stress only on the practical side and ignoring the strategic dimension.
3.
Robert J. Slockler defines Business policy as, "Strategic guidelines for action
and spells out what can and what cannot be done in all areas of a companys
operation."
According to the policy manual of General Electric Company, "Policy is
definition of common purpose for organization components of the company for
benefit of those responsible for implementation, exercise discretion and good
judgment in appraising and deciding among alternative courses of action."
The views of different management authorities differ because of following
reasons:
There is no clear differentiation of policy from other elements of planning.
There are different policies made at different levels of management for
directing executives.
Business policy encompasses and relates to the entire process of planning.
Thus, Business policy focusses on the guidelines used for decision making and
putting them into actions. It consists of principles along with rules of action
that provides for successful achievement of Business objectives.
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2.
3.
The Resources: The organization has to carry out its activities keeping in
mind the resources it has. The Business policy has to identify the various
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resources available and then only call it be made sound. The size of plants,
capital structure, liquidity position, personnel sk0is and expertise,
competitive position, nature of product etc. all help in the formulation of
Business policy.
4.
External Factors
These include the forces external to the firm. The external determinants of
Business policy are industry structure, economic environment and political
environment.
1.
2.
3.
4.
Social Environment: The firm affects various sections of the society. The
various sections ill turn influence the activities of the firm. The social
beliefs of the managers influence policies. The religious, cultural and
ethnic dimensions have to be dealt with while formulation policies of an
organization.
5.
Technology: Every now and then, new technologies are entering the
market. An organization has to change with the changes in the
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2.
3.
The minor policies are concerned with each segment of the Organization with
emphasis oil details and procedures. These policies are part of the major
policies. The operational control call be made possible only if the minor
policies are implemented efficiently. The minor policies are concerned with the
day to day operations and are decided at the departmental levels. The minor
policies may cover relations with dealers, discount rates, terms of credit etc.
Thus, Business policies cover wide range Of Subjects ranging from operational
level policies to the top level policies.
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MODULE 2
INTRODUCTION TO STRATEGIC MANAGEMENT THEIR
DEFINITIONS, NATURE, SCOPE, SIGNIFICANCE, ELEMENTS AND
PROCESSES
2.1 WHAT IS STRATEGY?
2.2 INTRODUCTION TO STRATEGIC MANAGEMENT
2.3 DEFINITIONS, NATURE, SCOPE, SIGNIFICANCE, ELEMENTS
AND PROCESSES OF STRATEGIC MANAGEMENT
2.4 COMPONENTS OF STRATEGIC MANAGEMENT
2.5 FUNCTIONS OF STRATEGIC MANAGEMENT
Five Ps Of Strategy
Strategy is a Plan
Strategy is a Ploy
Strategy is a Pattern
Strategy is a Position
Strategy is a Perspective
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Ans off (1984) "Basically a strategy is a set of decision making rules for the
guidance of organizational behavior.
William Glueek defines the term strategy as "the unified, comprehensive and
integrated plan that relates the strategic advantage of the firm to the challenges
of the environment and is designed to ensure that basic objectives of the
enterprise are achieved through implementation process"
Arthur Sharplin (/985) Strategic Management.
"A plan or course of action which is of vital, pervasive or continuing
importance to the organization as a whole".
From the definitions discussed above, we may identify the following
elements:
It is a plan or course of action or a set of decision rules.
It is derived from its policies, objectives and goals.
It is related to persue those activities which move an organization from its
current position to a desired future state.
It is concerned with the requisite resources to implement a plan.
The term "Strategic Management" is gaining importance in the era of
privatisation, globalization and liberalisation. A few aspects regarding the
nature of strategy are as follows:
Strategic Management is related mostly to external environment.
Strategic Management is being formulated at the higher level of
management. At operational level, operational strategies are also
formulated.
Strategic Management integrates three distinct and closely related activities
in strategy making. The activities are strategic planning, strategic
implementation and strategic evaluation and control.
Strategic Management is related to long term.
It requires systems and norms for its efficient adoption in any organization.
It provides overall frame work for guiding enterprise thinking and action.
It is concerned with a unified direction and efficient allocation of
organization resources.
Strategic Management provides an integrated approach for the organization
and aids in meeting the challenges posed by environment.
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2.
3.
4.
5.
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MODULE 3
STRATEGIC FORMULATION VISION, MISSION, BUSINESS
PURPOSE, OBJECTIVES AND GOALS
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Provides a road map to show where the company is going and how to
get there.
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to see the
7. Inability on the part of the top management to locate its competitive edge
may also lead to its ignoring strategy, planning altogether.
Strategies Comparing an Organizations Most Fundamental Ends
and Means
MEANS
PLANS
POLICIES
Strategic Intent
Vision
Mission
Goals
Objective
Intended Strategy
ACTION TAKEN
Results
Observed
Realized Strategy
Developing A
Company
philosophy
Planning Strategy
Establishing Goals
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Setting Objectives
Establishing Policies
Providing Personnel
Establishing
Procedure
Providing Facilities
10 Providing Capital
11 Setting Standards
12 Establishing
Management
Programs &
Operational Plans
13 To Provide Control
Information
14 Activating People
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3.
Fixing quantitative targets
In this state a firm may set quantitative target for some of its objectives. At this
stage, the purpose is not to set targets for comparison with future outcomes, but
to set global targets for the firm as a whole, so as to assess the contribution that
may be made by different product areas or operating divisions.
4.
Relating targets to divisional plans
This step of strategy formulation identifies the contribution that can be made by
each division or product group within the corporation and for this purpose, a
provisional strategic plan must be developed for each sub-unit. These plans
should be based upon the analysis of macro economic trends and the competitive
environment specific to the sub-unit. Corporate targets when related to
divisional plans ensure better chance of their attainment.
5.
Relating targets to divisional plans
This step of strategy formulation identifies the contribution that can be made by
each division or product group within the corporation and for this purpose, a
provisional strategic plan must be developed for each sub-unit. These plans
should be based upon the analysis of macro economic trends and the
competitive environment specific to the sub-unit. Corporate targets when
related to divisional plans ensure better chance of their attainment.
6.
Gap Analysis
Gap Analysis is the identification and analysis of a gap between planned or
desired performance. The organization must analyze critically its previous
performance, its present condition and the desired future conditions. Such an
analysis helps to reveal the extent of gap that exists between the present reality
and future aspirations of the organizations. The organization also tries to
estimate its likely future state if the present trends and activities continue.
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7.
Strategy formulation
Industry Environment
STRATEGY FORMULATION
Corporate Strategy Formulation
Business Unit Strategy Formulation
Functional Strategy Formulation
STRATEGY IMPLEMENTAION
Organizational structure
Leadership, Power, and Organizational Culture
TRATEGIC CONTROL
Strategic Control Process and Performance
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strategies are evaluated from different angles and the appropriate strategy is
chosen.
3.4 BUSINESS VISION
Vision is a descriptive image of what a company wants to be or want to be
known for. Vision reminds us of what the goals are. Without vision
performance of the business are likely to be affected. A vision is a statement for
where the organization is heading over the next five to ten years. It is the
statement that indicates mission to be accomplished by the management distant
future.
Warren Bennis and Burt Nanus described the role of vision as follows
To choose a direction, a leader must first have developed a mental image of a
possible and desirable future state of the organization. which we call
a vision. Vision articulates a view of a realistic / credible, attractive future for
the orgnaization. with a vision, the leader provides the all important
bridge from the present to the future of the organization.
BUSINESS MISSION
A Business organization can not set objectives without mission statement.
Therefore, it is of utmost importance to frame a mission statement. Many
organizations define the basic reason for their existence in terms of a mission
statement.
An organizations mission includes both a statement of organizational
philosophy and purpose. The mission can be seen as a link between performing
some social function and attaining objectives of the organization.
In military circles, the word Mission is used instead of objectives. It also
denotes and end point of the activities which doer wants to fulfill. In business
management terminology, a mission is an objectives that has been
psychologically accepted by the doer. A mission explains the reason for the
existence and operation of an enterprise. It is a key statement that provides
guidelines for the companys business objectives. Mission indicates what is the
companys business and what should it be. It reflects the companys philosophy
and values.
Organizations often commit their major goals and corporate philosophy to
writing in a Mission Statement or a statement of purpose. Though vaired in its
structure and form, the statement typically describes the companys reasons for
existing. If also simetimes outliens the core values on which the organization
is based and to which it expects corporate behaviour to confirm.
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Company
profile
External
Environment
Operating,industry,
and multinational
analysis
What is
possible
desired
Long-term objectives
Grand strategy
Annual objectives
Operating strategies
Policies
Institutionalization
Of strategy
Control and
evaluation
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2. Future Oriented
Objectives are future destinations which the organization wants to reach.
However these objectives are finalized after considering the past trends and the
past performance of the organization. This is necessary in order to formulate
realistic objectives.
3. Guides
Objectives, whether economic, social or human guide the organization in taking
relevant and quick decisions. Objectives guide in formulating the policies, the
programmes and the plans which in turn guide the employees while
implementing the plans in order to achieve the objectives
4. Complex
Business environment is very complex. Change in one environment may have
different impacts on the other environmental factors. Moreover these
environmental factors are uncontrollable. Objectives have to be modified
continuously in order to suit the changed environment. Thus dynamic
environment makes setting of objectives difficult.
5. Qualitative
There are certain objectives which are of qualitative nature, especially
advertising objectives. Advertising objectives can be creating awareness,
changing attitudes, perceptions, enabling recognition of the brand etc.
Qualitative objectives are therefore difficult to measure.
6. Quantitative
Quantitative objectives are those which can be measured in volume or value
terms. Marketing objectives are generally of quantitative in nature. Some of the
common marketing objectives are increasing sales, increasing market share,
increasing profits etc.
7. Hierarchical
All objectives may not be equally important at a given moment of time, for
instance if the organization is new, its objective generally is survival, rather
than growth or achieving prestige and recognition. However since many groups
are involved like shareholders, creditors, employees etc. identifying proper
hierarchy is difficult.
IMPORTANCE OF BUSINESS OBJECTIVES
1. Identity to the organization
Every organization must have an objective. In fact it is the objectives that
justifies an organizations existence. Outwardly all organizations may be
similar but what differentiates one organization from another is its objectives.
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2. Facilitates co-ordination
There are various departments in an organization. Success of any organization
depends upon the achievements of each department, which in turn depends
upon the proper co-ordination between people and functions of different
departments. This would enable the different department to work as a cohesive
unit.
3. Guides decision-making
The top management has to take number of decisions in different areas
everyday. Decisions can be relating to extending the product line or changing
the pricing structure or the place of sale. Decisions depend entirely upon the
objectives of the organization. So, it is the objectives that guide individual as
well as group decision making.
4. Motivation
Motivation is the simulation to work with zeal and enthusiasm. When
objectives are clear, the employees know what is expected of them and the
reward which they would earn on achieving those objectives. So clear
definition of business objectives motivates employees to put in their best efforts
as they are aware as to what to achieve.
5. Ensures planning
It is said that most people dont succeed in life because they dont know what
they want to achieve. One can plan properly only when one knows what one
wants to achieve. Moreover implementation would be effective only if it is
planned properly. Therefore objectives ensures proper planning.
6. Reduces wastage
Objectives facilitate preparing programmes and schedules for achieving the
predetermined goals. Men, money, materials etc. are scare. Success of a
business organization depends upon the effective utilization of the resources.
So to the extent possible wastage of resources should be avoided
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MODULE 4
ENVIRONMENTAL SCAN INTERNAL ENVIRONMENT AND
EXTERNAL ENVIRONMENT & SWOT ANALYSIS
4.1
4.2
4.3
4.4
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firm to find out whether the objectives are in line with the mission
statement and whether the objectives are accomplished or not.
3. Human Resources
The survival and success of the firm largely depends on the quality of
human resources.An analysis of internal environment in respect of
human resources would reveal the shortcomings of human resources
and as such measures can be taken to correct such weaknesses.
4. Physical Resources
Physical resources include machines, equipments, building, furniture etc.
A firm needs adequate and quality physical resources.An analysis of the
internal environment may reveal the weaknesses of the physical
resources and company can take appropriate measures to correct such
weaknesses.
5. Financial Resources
A firm needs adequate working capital as well a fixed capital. There is a
need to have proper management of working capital and fixed capital.An
analysis of the internal environment will help to make optimum use of
available funds as well as to raise additional funds.
6. Corporate Image
A firm should develop, maintain and enhance a good image in the
minds of the employees, investors, customers and others. Poor corporate
image is a weakness.An analysis of the internal environment enables the
firm to build good public image.
7. Research and Development facilities
If the organization has adequate research and development facilities, it is
in a position to innovate, introduce new products and services
continuously. This enable the firm to remain ahead of the competition
8. Internal Relationship
There should be a proper flow of vertical and horizontal communication
i.e. between superiors and subordinates and between colleagues at the
same level. A free flow of ideas enables a healthy relationship between
colleagues.
B. External Environment
External environment includes all those factors and forces which are external to
the business organization. These include factors such as economic, socio-
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cultural, legal, demographic etc. These factors are beyond the control the
company.
1. Demographic Environment
Demographic environment studies human population with reference to its
size, density, literacy rate, sex-ratio, age composition etc.
These factors affect the demand for good and services, quantity and
quality of production, distribution etc. e.g. a rapidly growing population
indicates growing demand for many products.
2. Natural Environment
Business firms use natural resources like water, land, iron, crude oil etc.
All business units are directly or indirectly dependent upon natural
environment. Business firms are responsible for ecological imbalance. So
they should take necessary measures to control pollution.
Business operations have caused considerable changes in ecological
balance and natural environment of the country. The applications of
modern technology in industry leads to rapid economic growth at a huge
social cost a measured by the deterioration of physical environment i.e.
air pollution, water pollution, noise pollution etc. So business enterprises
has to calculate net social cost of its venture.
3. Economic Environment
A business firm closely interact with its economic environment.
Economic environment is generally related to those external forces,
which have direct economic effect upon business.
Economic environment is a sum total of
a. Economic conditions in the market
b. Economic policies of the government
c. Economic system of the country.
a. Economic conditions
It includes nature of economy, the stage in economic development,
national income, per capita income etc. These operate in the market
and influence the demand and supply of goods and services.
b. Economic policies
Economic policies means policies formulated by the government
to shape the economy of the country. These include monetary and
fiscal policies, export-import policy, industrial policy, licensing
policy, budgetary policy etc. The economic policies of the
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6. Cultural Environment
Every society has a culture of its own. Culture includes knowledge,
belief, art, morals, laws, customs and other capabilities and habits
acquired by an individual as a member of society. Cultural values are
passed on from one generation to another. Culture thus determines the
types of goods and services a business should produce.Business
should realize the cultural differences and bring out products
accordingly.
7. Technological Environment
Technology is the systematic application of scientific or other
organized knowledge to practical tasks. Technological advancement
make it possible to improve the quality of products, increase the
output and decrease the cost of product.
Technological changes are rapid and to keep pace with it,
businessmen need to be alert and flexible in order to quickly
incorporate them in their business organization so as to survive and
succeed in the competitive business world.
8. International Environment
The international environment is an outcome of political and
economic conditions in the international market. Business firms
engaged in the foreign trade are more affected by the changes in the
international environment factors like war, civil disturbances, political
instability, changes in trade policies in other countries with which
India has trading links do affect Indian exporters and importers.
Therefore, business firms, which cater to foreign trade must
constantly monitor implications of international environment on their
business.
The components of international environment are
o Import and Export policy of a country.
o Rules and regulations laid down by International Institutions like
IMF, World Bank etc.
o The policies of trading blocks like SAARC, EEC, ASEAN etc.
o Foreign exchange regulations like tariffs, quotas.
o Trade cycle like boom, recession at world level
4.3 ENVIRONMENTAL SCANNING
Environmental Scanning means an examination and study of the environment
of a business unit in order to identify its survival and prosperity chances. It
means observing the business environment both external and internal and
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5) Modelling - There are many types of modeling that can be used to scan
the environment. E.g. Regression analysis or probability tables are also
used in more complex types of modeling.
6) Industrial espionage It is used for 2 purposes
o To gather vital information from government department
o To collect clues from the competitors
A spy can be a government employee or an employee of a competitor, a
competitors supplier or customer. E.g. Japanese visitors to American
factories, plants and facilities gather information. Research students working
in laboratories may take up vacation jobs with companies as a part of spying
assignments.
4.4 SWOT ANALYSIS
In order to survive and grow in this competitive environment, it is essential for
every business organization to undertake SWOT analysis. The process by
which the enterprises monitor their relevant environment to identify their
business opportunities and threats affecting their business is known as
environment analysis or SWOT analysis. In other words analyzing the
surrounding environment before framing policies and taking business decisions
is called as SWOT analysis.
Strengths
Weaknesses
Opportunities
Threats
Name recognition
Proprietory technology
Cost advantages
Skilled employees
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MODULE 5
FORMULATING STRATEGIC ALTERNATIVES, STRATEGIC
CHOICE
5.1 STRATEGIC ALTERNATIVES
5.2 GENERATING STRATEGIC ALTERNATIVES
5.3 CLASSIFYING STRATEGIC ALTERNATIVES
5.4 HORIZONTAL EXPANSION AND DIVERSIFICATION
5.5 CLASSIFICATION
GROWTH
BASED
ON
THE
DESIRED
RATE
OF
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organization should withdraw from the textile business. Sometimes there may
be obstacles if the organization wishes to withdraw. The most serious
opposition may come from the Government in its anxiety to protect workers
likely to be rendered unemployed. This kind of a situation is being faced by the
DCM Limited, a highly diversified group. Any organization contemplating to
withdraw from a particular business should attempt to foresee the constraints
and evolve ways to overcome them. Some obvious alternatives include:
i) offering alternative jobs to workers in other units;
ii) providing attractive retrenchment terms to workers so that they would not
easily turn down the offer (the golden handshake).
The Strategic Management Process Tasks
Strategy Formulation
Personal Values
Of Major
Decision
Makers
Including Social
Responsibility
Corporat
e
Mission
Environmental
Analysis
Resources
Analysis
Strategic
Objective
s
Longterm
Plan and
Program
s
Substrategie
s
Organizati
on
Culture
Organizati
on
Structure
Managing
People
Managing
Systems
Operatin
g
Plans
and
Controls
Evaluatio
n
Decision
s
Actions
Policies
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Small Organizations
In a small organization all decisions are made by the owner himself or by the
chief executive. These decisions deal with what an organization should do
under alternative situations. What new businesses should be added or what
existing businesses should be done away with the success or failure of the
organization depends upon the experience and technical competence of the
chief executive. Thus, in small organizations strategic alternatives are identified
by the owner-manager. Of course his decision may he influenced by some
bureaucrats, industrialists, etc. with whom he interacts. The procedure used for
identifying alternatives may be intuitive rather than based on a well-defined
procedure. The process of implementing alternatives in small business is
however reasonably fast.
Large Organizations
In organizations of medium to large size, the following mechanisms may be
employed for identifying strategic alternatives.
brain-storming sessions;
special meetings for the purpose;
services of outside consultant;
joint meetings of the consultant and the senior employees of the
organization.
Brain Storming Session
In most organizations strategic alternatives are identified during the
brain-storming sessions. In such meetings participants are encouraged to come
out with any course of action which they feel is possible. At this stage no
importance is attached to relative merits and demerits of the alternatives. In the
next stage each alternative is reviewed and subjected to a close scrutiny. The
alternatives which are considered fairly appealing are further examined and
analysed for final selection of one or more alternatives.
Consider the case of power shortage in an organization which produces an
energy -intensive product such as aluminum. What should the organization do?
Since the decision is, bound to affect the organization crucially, the alternatives
are of crittical, importance. These may include:
i) buy a generator,
ii) start producing those products which are not very energy intensive,
iii) have a stand-by generator for meeting part of the, requirements;
iv) introduce a change in, the product-mix, with an emphasis on; those products
which, have a higher contribution per unit of investment.
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The few alternatives listed above have their own: implications in, terms of
financial, physical facilities, manpower requirements, etc. The chief executive
has to select the alternative which is, the most appropriate in his opinion. The
current resource position of the organization with be a major influencing factor
in this decision.
Special Meetings
Large organizations, recognizing the significant of generating strategic
alternatives, hold special meetings away from the place of their work in a hotel
or a holiday resort. This is to ensure that the process of thinking, is, not
disturbed by interruptions during the course of deliberations. The participants
present alternative scenarios along with their recommended courses of action.
Alternative scenarios- may be based upon: assumptions regarding.
i. rate of growth of the economy
ii. position, regarding foreign exchange
iii. rate of inflation
iv. rate of unemployment
v. ideology of the political party in power
vi. rate of change in technology
vii. socio-cultural factor having a bearing on the profitability of the
organization
Depending on the assumptions, regarding the values and future trends of the
above parameters, alternative courses of action, are often recommended. An
attempt is made through the discussions to arrive at a consensus. The
turnaround, strategy of a leading pharmaceutical company Brurroughs Well
come was conceived in. a series of meetings the Chief Executive had with his
senior managers.
Outside Consultants
This procedure of identifying strategic alternatives is based on the premise that
an outsider can observe the phenomenon in an objective manner. It is
recognised that the executive's who have been actively associated with, a
particular project, are often so involved with it that they tend to, be subjective
and over look its shortcomings. Others, from within the organization may also
be unable to see its limitations. Under such conditions, engaging outside
consultant may be a more effective way to generate, strategic alternatives on an
objective basis. The outside viewpoint is expected to, be new and fresh, and
thus, can show, up many new opportunities, to the organization.
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Joint Meeting
Another desired way of generating alternatives is to hire the services of a,
consultant but also associate some internal members in the process. This
method, is able to combine the advantages of the new ideas contributed by
outsiders being blended with workable solutions from within the organisalion.
In, any case, an, outside consultant may like tot seek the opinion of the internal
members on his proposals.
5.3 CLASSIFYING STRATEGIC ALTERNATIVES
From the point of view of an organization, strategic alternatives may be
classified on the basis of degree of risk involved. Thus we have:
High risk strategic alternatives
Moderate risk strategic alternatives
Low risk strategic alternatives;
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Vertical Integration: This can assume two forms: backward and forward.
Backward integration means inhouse production of critical inputs for the main
business or going in for marketing of products by opening retail outlets. The
company may also add to the existing products/processes by taking up the
production of intermediate goods. In the case of forward integration the
companies try to reach customers through their own distributional network.
Organizations follow forward integration to take advantage of the closer
contact with the customers and to ensure a control over retail price of their
products. Reliance company has pursued this strategy very effectively.
Integration is a moderate risk alternative.
5.4 HORIZONTAL EXPANSION AND DIVERSIFICATION
Horizontal expansion results when a firm adds new products or enters into new
markets.
Most pharmaceutical companies follow this strategy.
In diversification, an enterprise takes up new products or business which may
related or unrelated to its existing business.
Diversification, in particular, involves high degree of risk as it amounts to
manufacturing new products or entering into new-markets unfamiliar to the
organization. There are two broad categories of organizations that follow
diversification. The first category includes those which are not doing too well
in the traditional lines and are exploring the possibility of other products or
markets. The second category would include organizations which enjoy
considerable resource strength and would like to expand operation by looking
at new businesses.
Companies in India have followed both vertical integration and diversification.
For instance, Walchand Group's activities cover mainly large construction
projects, heavy engineering, specialised automobiles, Sugar, concrete pipes,
confectionary, machine tools castings, and fabrication etc. Hindustan Lever has
pursued a strategy of vertical integration for soaps and toiletory business. It has
also followed diversification in basic chemicals. Some business houses have
gone in for large scale diversification i.e., DCM, Tatas Group, Birla Group,
Thapar Group, ITC, etc. Larsen and Toubro has had major diversifications in
recent. times by entering into cement and shipping industry.
5.5 CLASSIFICATION
GROWTH
BASED
ON
THE
DESIRED
RATE
OF
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b)
c)
d)
e)
f)
49
Modi Xerox, since its inception, has followed a stable growth strategy in India.
It has concentrated on a narrow range of products and quality aspect of
after-sales service.
The second alternative is followed when the main aim of the strategic business
unit is to generate surplus. In the process other objectives may be sacrificed.
This aspect may get considerable importance during the phase of recession.
The stable growth alternative applies in those situations where a firm
deliberately slows down to improve efficiency. Such a behavior is observed
among organizations who find it difficult to manage growth. This difficulty is
usually experienced by organizations of small to medium size. But
unmanageable growth has been experienced by large organizations too. A very
large number of television manufacturers in India are f6rced to control their
growth inspite of large market opportunities that exist before them. Since most
of the TV manufacturers are small or medium sized firms lacking substantial
resources, they follow a stable growth strategy by focussing their efforts in
certain geographical markets and around few products.
The sustainable growth alternative includes a modified incremental growth to
take one of the unfavorable external conditions. These include:
a)
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in common with the existing business. The RPG Enterprises have pursued this
alternative within the scope of its limited resources.
Merger is all alternative where two firms join. There are different objectives of
mergers including the need-to tide over the finan6al crisis. The objectives of
mergers and the procedures followed in negotiating a merger are discussed in
detail in another unit in this block.
Joint venture is an alternative which can meet a number of needs such as rapid
rate of growth desired by the firm, maintaining the risk within reasonable limit,
and to tide over the constraint of resources. Thus a firm having constraint of
production capacity can have a joint venture with a firm having surplus
production capacity. Pepsi Cola (a US multi-national company), Voltas and
Punjab Agro have recently joined hands to promote a joint venture in the area
of agro industries.
Liquidation indicates a situation where the firm -finds the business unattractive.
There may be a dearth of people who have interest in the proposition. Neither
the employees nor do outside parties find it an attractive proposition to be
revived. Obsolete equipment is the usual cause. Disinvestment may be
considered attractive when the present worth of expected earnings is less than
its present worth.
5.7 MERGERS AND ACQUISITIONS
Merger:
In merger, a firm may acquire another firm or two or more firm may combine
together to improve their competitive strength or to gain control over additional
facilities. Merger may be of two types:
1. A firm merges with other firms in the same industry having similar or
related products, using similar processes and distributing through similar
channels. Such a merger creates problems of co-ordination between the
merged units.
2. Under this type of merger, firms merging together are engaged in
altogether different lines of business and have little common in their
products, processes and distribution channel. They are known as
conglomerate merger.
Acquisition or take-over:
Acquisition generally refers to buying another firm, either its assets or as an
operating company. In a take over, or acquisition, one company gets control
over the acquired company. Takeover involves a change in ownership and
management of the acquired company. In pre 1991 India, the MRTP Act,
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Industrial Licensing Policy and the companies Act, 1956 etc. made take-overs
difficult to accomplish. The post 1991 scenario 15, of course, very different.
There are several instances of take-overs, both friendly and hostile are reported
since 1992.
5.7 THE LEGAL POSITION ABOUT MERGER is contained in sections
394 to 396 of the Companies Act. But these sections have to be interpreted in
conjunction with section 94 (Power of limited companies to alter share capital)
95, 97 (dealing with special resolution for reduction of capital), 101, 102, 104
and 107. Some of the important provisions of the Companies Act deal with the
power of the court, with whom an application for amalgamation has been
pending, to make any alternation or modification in the scheme for
amalgamation. I he most important aspect is the protection of the interests of
the dissenting shareholders. Any scheme for transfer of whole or any part of an
undertaking requires the approval of the r4ne-tenths in value and three-fourths
in number of share holders of the company. Probably the most important
section is 396 dealing with the power of the Central Government to provide for
amalgamation of companies in public interest. The sick units are being
amalgamated with other companies or are being taken over by the Government.
In actual practice it is difficult to draw a distinction between mergers and
acquisitions. Strictly speaking, in case of mergers, the existing companies lose
their identity and a new company is formed, while in the case of acquisitions it
is the purchase of a company by another company. Madura Coats is a company
born out of the merger of Madura Mills and Coats India Limited in early
seventies.
At times it is profitable to diversify through mergers. The process of mergers
gives the advantage of not having to start from scratch. Amalgamations enable
the companies to have advantage of fast changing technologies: the underlying
assumption in this case is that one of the merged companies enjoys distinct
strength in the area of R&D. Mergers may also enable reduction in
administrative costs. Given the indivisibility of certain expenditure on
personnel, the merger will result in better utilisation of their time. Further, the
merger may facilitate the process of linking the products and may amount to
vertical integration. This could be undertaken where for various reasons the
merging companies individually would not have been able to implement
vertical integration. The process often results in providing a complete product
line. It goes without saying that some companies undertake merger as a means
to plan their tax liability. (The most amusing example is provided by an
advertisement which appeared in a reputed newspaper stating 'wanted
companies which may have incurred a loss upto a specified amount).
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Ans off and Ors have presented a detailed procedure for screening projects for
diversification based on merger. The sequential steps are: (i) define the
objective of merger (to reflect how better utilisation of resources is to be
achieved and the manner in which the adaptability to the changing environment
is going to take place), (ii) review the strengths and weaknesses, (iii) develop
criteria to identify the most advantageous merger prospects, (iv) find out the
financial resources available, and (v) develop strategies for choosing among the
industries.
Desirably, the management of the buying company should be aware of the
extent of its need for the other company because the price payable (or the
exchange ratio) depends dpon the bargaining power of the two managements.
Management of the buying company has to convince the management of the
selling company that the sale is in the latter's interests. One has to look to the
alternative offers the selling company may be having. If the forecasts of
resources generated after merger show a brighter picture, a generous price offer
can be made. Nierenberg has discussed the steps in defining (i) the range within
which the terms may be offered and (ii) other party's position. The steps
involved in defining one's own position are:
Study of relevant information and forecasts to identify the maximum price
and the mode of payment.
Incorporation of non-price terms in the final contract.
Formulation of alternative course of actions and their implications with
contingency
provisions.
Awareness of company's stand on ethics. integrity and honesty.
Review of the related factors like timing of the negotiations, the person to
negotiate and so on.
Steps in estimating the selling company's position are:
Identify the alternatives that may be open to this company regarding price
and the mode of payment.
Substantiate or cross-check the information.
Review the assumptions by approaching the problem from the seller's point
of view.
Identify the factors that could be important to the other company.
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MODULE 6
STRATEGIC FORMULATION - INPUT STAGE, MATCHING STAGE
AND DECISION STAGE, CULTURAL ASPECT OF STRATEGIC
CHOICE AND FUNCTIONAL STRATEGIES
6.1 SELECTION OF STRATEGY
6.2 PRODUCT LIFE CYCLE APPROACH
6.3 MANAGERIAL FACTORS AND STRATEGY.
6.4 STRATEGIC CHOICE
6.5 GLOBAL STRATEGY
6.6 CULTURAL ASPECTS OF STRATEGIC CHOICE
6.1 SELECTION OF STRATEGY
Once the analysis of current and projected performance of the company based
on existing strategies and the assessment of desired performance is done, the
strategic gap is identified. Strategic alternatives are then generated to bridge the
gap if the projected performance in future falls short of the expected or desired
performance. A number of alternatives may be possible but only one or a few of
them may finally be accepted as a strategy or strategies for future. "Strategic
choice is the decision to select from among the alternative strategies
considered, the strategy that will meet the enterprise's objectives. The decision
involves focussing on few alternatives, considering the selection factors,
evaluating the alternatives against these criteria, and making the actual choice".
The process of narrowing down a large number of possible strategic
alternatives starts with the consideration of strategic gap. Strategic gap is the
perceived difference between the targeted performance and projected
performance following the present strategies. Strategic gap could be very
narrow or quite large. If the perceived gap is narrow or the projected
performance is likely to be better than targeted, one would expect that the
stability strategy would be followed. A large gap could be caused by increase in
targeted level of performance or the adverse changes in the environment which
would lead to poor performance in future from the present strategies. In the
former case the strategic gap may be said to be positive while in the latter it is
negative. One would expect the growth strategy to be followed in case of large
positive strategic gap and retrenchment strategy in case the strategic gap is
negative and 1arge. A large positive gap is likely to occur due to environmental
opportunities and a large negative gap due to environmental threats. It must be
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Product life cycle is a useful concept in the selection of a strategy. The business
strategy at different stages of the product life cycle would be different. For
instance, in the growth phase huge investment in plant and machinery would be
required. While in the decline phase it would be otherwise. In the embryonic
stage the R&D requires significant attention and resources while in the maturity
phase low cost efficient process requires more emphasis. Besides the
appropriate functional strategies, the product life cycle approach also suggests
appropriate overall strategy, It also helps us in timing the change in strategy
and in assessing whether the corporate portfolio is balanced so that new
products would be introduced while others pass through growth to maturity
phase.
6.3 MANAGERIAL FACTORS AND STRATEGY.
In previous sections we have discussed how a firm could reduce the number of
possible alternatives to a reasonable level. The choice of strategy as emerging
from the process of narrowing down the alternatives is moderated by several
managerial factors discussed below.
Managerial attitudes towards risk vary from ' 'high risk to, risk-aversion. If the
attitude is that cif risk aversion then the stability strategy is likely to be
accepted. If it is that of high risk taking, the growth strategy even with external
change (acquisitions & mergers) may be pursued. Balanced attitudes are likely
to favour combination strategies. The attitude towards risk also depends upon
the stakes involved. If the whole of the firm is at stake, the risk assessment,
would be different than if only a part was at stake.
Another factor that influences managerial choice is the awareness about how
strategies have worked in the past. The development of strategy builds up on
past strategy. According to Mintzberg 1, the past strategies tend to become
programmed and bureaucratic momentum keeps it going, and when the
strategies begin to fail due to changing conditions, there is a tendency to graft
new strategies onto the old ones. In many cases, therefore, more strategic
changes are likely to come when the new chief executive or top management
takes over.
Perceived external dependence too has an effect on the strategy. Many
company's product lines are restricted by the technology e.g., most Indian
companies bank on foreign collaboration. Aggressive growth strategies,
therefore, depend technology available for import. Indeed, the very choice of
business by a firm in India at any time is determined by the technology it could
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International Strategy
Companies that pursue an international strategy create value by transferring
valuable skills and products to foreign markets where local competitors lack
those skills and products. Most international companies have created value by
transferring differentiated product offerings developed at home to new markets
overseas. Consequently, they tend to centralise product development functions
in their home country. However, they also tend to establish manufacturing and
marketing functions in each major country in which they do business. Although
they may undertake some local custornisation of product offering and
marketing strategy, this tends to be limited in scope. Ultimately, in most
international companies the head quarters retains tight control over marketing
and product strategy.
An international strategy makes sense if a company has valuable unique
competencies that local competitors in foreign markets lack and if the company
faces relatively weak pressures for local responsiveness and cost reductions. In
such situations, an international strategy can be very profitable. However, when
pressures for local responsiveness are high, companies pursuing this strategy
lose out to companies that place a greater emphasis on custornising the product
offering and market strategy to local conditions. Furthermore, because of the
duplication of manufacturing facilities, companies that pursue an international
strategy tend to incur high operating costs. Therefore, this strategy is often
unsuitable for industries in which cost pressures are high.
Multidomestic Strategy
Companies pursuing a multidomestic strategy orient themselves toward
achieving maximum local responsiveness. As with companies pursuing an
international strategy they tend to transfer skills and products developed at
home to foreign markets. However, unlike international companies,
multidomestic companies extensively customise both their product offering and
their marketing strategy to different national environments. Consistent with this
approach, they also tend to establish a complete set of activities - including
production, marketing, and R&D in each major national market in which they
do business. As a result, they generally do not realise value from
experience-curve effects and location advantages and, therefore, often have a
high cost structure.
A multidornestic, strategy makes most sense when there are high pressures for
local responsiveness and low pressures for cost reductions. The high cost
structure associated with the replication of production facilities makes this
strategy inappropriate in industries in which cost pressures are intense. Another
limitation of this strategy is that many multidomestic companies have
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they can strongly affect a corporation's ability to shift its strategic direction. A
strong culture should not only promote -survival, but it should also create the
basis for a superior. competitive position. For example, a culture emphasizing
constant renewal may help a company adapt to a changing, hypercompetitive
environment. To the extent that a corporation's distinctive competence is
embedded in an organizations culture, it will be a form of tacit knowledge and
very difficult for a competitor to imitate.
A change in mission, objectives, strategies, or policies is not likely to be
successful if it is in opposition to the accepted culture of the firm.
Foot-dragging and even sabotage may result as employees fight to resist a
radical change in corporate philosophy. Like structure, if an organization's
culture is compatible with a new strategy, it is an internal strength. But if the
corporate culture is not compatible with the proposed strategy, it is a serious
weakness.
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MODULE 7
H.R. STRATEGIES, MARKETING STRATEGIES, FINANCIAL
STRATEGIES, OPERATIONAL STRATEGIES, MAKING STRATEGIC
CHOICE
7.1 STRATEGIC HUMAN RESOURCE MANAGEMENT (HRM)
STRATEGIES
7.2 MARKETING STRATEGIES
7.3 MARKETING AND PRICING STRATEGIES
7.4 MARKETING AND PRODUCT DEVELOPMENT STRATEGY
7.5 STRATEGIC MARKETING ISSUES
7.6 FINANCIAL STRATEGY
7.1 STRATEGIC HUMAN RESOURCE MANAGEMENT (HRM)
STRATEGIES
The primary task of the manager of human resources is to improve the match
between individuals and jobs. A good HRM department should know how to
use attitude surveys and other feedback devices to assess employees'
satisfaction with their jobs and with the corporation as a whole. HRM managers
should also use job analysis to obtain job description information about what
each job needs to accomplish in terms of quality and quantity. Up-to-date job
descriptions are essential not only for proper employee selection, appraisal,
training, and development for wage and salary administration, and for labor
negotiations, but also for summarizing the corporate wide human resources in
terms of employee-skill categories. Just as a company must know the number,
type, and quality of its manufacturing facilities, it must also know the kinds of
people it employs and the skills they possess. The best strategies are
meaningless if employees do not have the skills to carry them out or if jobs
cannot be designed to accommodate the available workers. Hewlett-Packard,
for example, uses employee profiles to ensure that it has the right mix of talents
to implement its planned strategies.
Evolution of H.R. Functions
1930s
1940s
1950s
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1960s & 1970s Legal issues, compensation systems, pay for performance,
flexi- systems.
1980s
1990s
2000s
Use of Teams
Management is beginning to realize that it must be more flexible in its
utilization of employees in order for human resources to be a strength. Human
resource managers, therefore, need to be knowledgeable about work options
such as part-time work, job sharing, flex-time, extended leaves, contract work,
and especially about the proper use of teams. Over two-thirds of large U.S.
companies are successfully using autonomous (self-managing) work teams in
which a group of people work together without a supervisor to plan, coordinate,
and evaluate their own work.16 Northern Telecom found productivity and
quality to increase with work teams to such an extent that it was able to reduce
the number of quality inspectors by 40%.
As a way to move a product more quickly through its development stage,
companies like Motorola, Chrysler, NCR, Boeing, and General Electric are
using cross-functional work teams. Instead of developing products in a series of
steps-beginning with a request from sales, which leads to design, then to
engineering and on to purchasing, and finally to manufacturing (and often
resulting in a costly product rejected by the customer) - companies are tearing
down the traditional walls separating the departments so that people from each
discipline can get involved in projects early on. In a process called concurrent
engineering, the once--isolated specialists now work side by side and compare
notes constantly in an effort to design cost-effective products with features
customers want. Taking this approach enabled Chrysler Corporation to reduce
its product development cycle from 60 to 36 months. For such cross-functional
work teams to be successful, the groups must receive training and coaching.
Otherwise, poorly implemented teams may worsen morale, create divisiveness,
and raise the level of cynicism among workers.
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The successful organizations will be those that are able to quickly turn
strategy into action; to manage processes intelligently and efficiently; to
maximize employee contribution and commitment - Dave Ulrich.
Quality of Work Life and Human Diversity
Human resource departments have found that to reduce employee
dissatisfaction and unionization efforts (or, conversely, to improve employee
satisfaction and existing union relations), they must consider the quality of
work life in the design of jobs. Partially a reaction to the traditionally heavy
emphasis on technical and economic factors in job design, quality of work life
emphasizes improving the human dimension of work. The knowledgeable
human resource manager, therefore, should be able to improve the corporation's
quality of work life by adopting the following techniques(1) introducing participative problem solving,
(2) restructuring work,
(3) introducing innovative reward systems, and
(4) improving the work environment. It is hoped that these improvements will
lead to a more participative corporate culture and thus higher productivity and
quality products.
Human diversity refers to the mix in the workplace of people from different
races, cultures, and backgrounds. This is a hot issue in HRM. Realizing that the
demographics are changing toward an increasing percentage of minorities and
women in the U.S-workforce, companies are now concerned with hiring and
promoting people without regard to ethnic background. According to a study
reported by Fortune magazine, companies that pursue diversity outperform the
S&P 500. Good human resource managers should be working to ensure that
people are treated fairly on the job and not harassed by prejudiced coworkers or
managers. Otherwise, they may find themselves subject to lawsuits. Coca-Cola
Company, for example, agreed to pay $192.5 million because of discrimination
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price is in 100s rather than in 200s. This strategy may influence sales
sometimes. In monopolistic competition, this alternative may give better
results.
5) Skimming Price
This strategy could be used in a market with sufficiently large segment whose
demand is relatively inelastic i.e. not sensitive to a high price. Another
condition for this strategy is that high price is unlikely to invite competition and
unit costs are relatively unaffected by small volume. The strategy implies
skimming the cream by taking advantage of the target markets willingness to
pay a high price. This strategy is discriminatory. It enhances the quality image.
In monopolistic competition and monopoly, this pricing strategy gives results.
6) Penetration Price
This strategy requires a highly price sensitive market with high price elasticity.
It is characterised by low price which is likely to discourage competition. The
policy is to charge low price so as to stimulate demand and capture large share
of the market.
There are various other strategies as well like sliding down the demand curve,
premium pricing, fraction below competition, price discrimination and put-out
pricing. A firm can use any of these strategies to compete in the market.
Different strategies could be used at different time periods by the same firm as
per the conditions.
7.4 MARKETING AND PRODUCT DEVELOPMENT STRATEGY
Marketing strategy deals with pricing, selling, and distributing a product. Using
a market development strategy, a company or business unit can (1) capture a
larger share of an existing market for current products through market
saturation and market penetration or (2) develop new markets for current
products. Consumer product giants such as Procter & Gamble,
Colgate-Palmolive, and Unilever are experts at using advertising and promotion
to implement a market saturation/penetration strategy to gain the dominant
market share in a product category. As seeming masters of the product life
cycle, these companies are able to extend product life almost indefinitely
through "new and improved" variations of product and packaging that appeal to
most market niches. These companies also follow the second market
development strategy by taking a successful product they market in one part of
the world and marketing it elsewhere. Noting the success of their presoak
detergents in Europe, for example, both P&G and Colgate successfully
68
introduced this type of laundry product to North America under the trade names
of Biz and Axion.
Using the product development strategy, a company or unit can (1) develop
new products for existing markets or (2) develop new products for new
markets. Gujarat Cooperative Milk Marketing Federation (GCMMF) has had
great success following the first product development strategy by developing
new products to sell to its current customers. Acknowledging the widespread
appeal of its Amul brand dairy products, the company generated new uses for
its dairy business by introducing ice-cream and Desserts, health drinks, soups
etc. Using a successful brand name to market other products is called line
extension and is a good way to appeal to a company's current customers.
There are numerous other marketing strategies. For advertising and promotion,
for example, a company or business unit can choose between a "push" or a
"pull" marketing strategy. Many large food and consumer products companies
in India have followed a push strategy by spending a large amount of money on
trade promotion in order to gain or hold shelf space in retail outlets. Trade
promotion includes discounts, in-store speci4l offers, and advertising
allowances designed to "push" products through the distribution system. The
Kellogg Company recently decided to change its emphasis from a push to a pull
strategy, in which advertising "pulls" the products through the distribution
channels. The company now spends more money on consumer advertising
designed to build brand awareness so that shoppers will ask for the products.
Research has indicated that a high level of advertising (a key part of a pull
strategy) is most beneficial to leading brands in a market.
Other marketing strategies deal with distribution and pricing. Should a
company use distributors and dealers to sell its products or should it sell
directly to mass merchandisers? Using both channels simultaneously can lead
to problems. In order to increase the sales of its lawn tractors and mowers, for
example, John Deere decided to sell the products not only through its current
dealer network, but also through mass merchandisers like Home Depot. Deere's
dealers,. however, were furious. They considered Home Depot to be a key
competitor. The dealers were concerned that Home Depot's ability to under
price them would eventually l6d to their becoming little more than repair
facilities for their competition and left with insufficient sales to stay in
business. Most of the leading consumer durable firms in India follow this
strategy of using simultaneous channels.
When pricing a new product, a company or business unit can follow one of two
strategies. For new product pioneers, skim pricing offers the opportunity to
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"skim the cream" from the top of the demand curve with a high price while the
product is novel and competitors are few. Penetration pricing, in contrast,
attempts to hasten market development and offers the pioneer the opportunity
to use the experience curve to gain market share with a low price and dominate
the industry. Depending on corporate and business unit objectives and
strategies, either of these choices may be desirable to a particular company or
unit. Penetration pricing is, however, more likely than skim pricing to raise a
unit's operating profit in the long term.
7.5 STRATEGIC MARKETING ISSUES
The marketing manager is the company's primary link to the customer and the
competition. The manager, therefore, must be especially concerned with the
market position and marketing mix of the firm.
Market Position and Segmentation
Market position deals with the question, "Who are our customers?" It refers to
the selection of specific areas for marketing concentration and can be expressed
in terms of market, product, and geographical locations. Through market
research, corporations are able to practice market segmentation with various
products or services so that managers can discover what niches to seek, which
new types of products to develop, and how to ensure that a company's many
products do not directly compete with one another.
MARKET SEGMENTATION MODEL
1
2
3
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Geographic Segmentation
Demographic Segmentation
Socio-graphic Segmentation
Psychographic Segmentation
Behaviouristic Segmentation
Product Segmentation
Benefit Segmentation
Status Segmentation
Marketing Mix
The marketing mix refers to the particular combination of key variables under
the corporation's control that can be used to affect demand and to gain
competitive advantage. These variables are product, place, promotion, and
price. Within each of these four variables and several subvariables, that should
be analyzed in terms of their effects on divisional and corporate performance.
Product Mix
Physical
Distribution
Mix
CUSTOMER
Price
Mix
Promotion Mix
1.
2.
3.
4.
5.
6.
7.
Tangible components
Size
Features
Colours
Durability
Package
Taste
Others
1.
2.
3.
4.
5.
6.
7.
Intangible components
Style
Quality
Image
Prestige
Warranty
Brand Name
Others
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Unfortunately the huge amount of debt on the acquired company's books may
actually cause its eventual decline by focusing management's attention on
short-term matters. One study of LBOs (also called MBOs-Management Buy
Outs) revealed that the financial performance of the typical LBO usually falls
below the industry average in the fourth year after the buy out. The firm
declines because of inflated expectations, utilization of all slack, management
burnout, and a lack of strategic management. Often the only solution is to go
public once again by selling stock to finance growth.
The management of dividends to shareholders is an important part of a
corporations financial strategy. Corporations in fast-growing industries such as
computers and computer software often do not declare dividends. They use the
money they might have spent on dividends to finance rapid growth. If the
company is successful, its growth in sales and profits is reflected in a higher
stock price-eventually resulting in a hefty capital gain when shareholders sell
their common stock. Other corporations that do not face rapid growth must
support the value of their stock by offering generous and consistent dividends.
A financial strategy being used by large established corporations to highlight a
high-growth business unit in a popular sector of ihe stock market is to establish
a tracking stock. A tracking stock is a type of common stock tied to one portion
of a corporations business. This strategy allows established companies to
highlight a high-growth business without selling the business. By keeping the
unit as a subsidiary with its common stock separately identified, the corporation
is able to keep control of the subsidiary and yet allow the subsidiary the ability
to fund its own growth with outside money. It goes public as an IPO and pays
dividends based on the unit's performance. Because the tracking stock is
actually an equity interest in the parent company (not the subsidiary), another
company cannot acquire the subsidiary by buying its shares.
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MODULE 8
MATCHING THE ORGANIZATIONAL STRUCTURE WITH
STRATEGIES
8.1 ORGANIZATIONAL STRUCTURE
8.2 MATCHING ORGANIZATIONAL STRUCTURE WITH BUSINESS
STRATEGY
8.3 STAGES OF DEVELOPMENT OF ORGANIZATIONAL
STRUCTURE
8.1 ORGANIZATIONAL STRUCTURE
The organization structure refers to established pattern of relationship among
the components or parts of an organization. It is through the structure that the
various parts of an organization are interrelated or interlinked. Organization
structure involves issues such as division of work among various units or
departments, and the coordination of activities to accomplish organizational
objectives.
A SIMPLE STRUCTURE OF ORGANIZATION
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companies those managers who are responsible for the achievement of the
goals are also part of the formulation of plans. This is essential as they alone
will know which plan / goal is feasible and will try their best to achieve their
targets. Thus when these managers are consulted in the formulation of
targets and plans the successful implementation of these targets enchanced.
Planning systems can work in a centralized manger in the case of an
entrepreneurial firm but in case of a very large organization a decentralized
one will be more successful with the active participation of all the divisional
leads
Thus it is important to adapt the planning system according to the strategy
being implemented.
6. Development Systems
Development of skills, knowledge of top management is a must in todays
fast competitive world. Here the systematic improvement of the attitude,
skills, knowledge, performance of top managers is done systematically
through class sessions, seminar and out stations trips. Career planning of
managers to prepare them for future strategic tasks. This is required as if the
managers are unhappy, then their unhappiness can percolate to those in his
section also. These managers should also be updated with the latest
development in the organization. This is done through training and
education of managers through internal and external training programme.
8.2 MATCHING ORGANIZATIONAL STRUCTURE WITH BUSINESS
STRATEGY
Changes in strategy often require changes in the way an organization is
structured for two major reasons. First, structure largely dictates how objectives
and policies will be established. For example, objectives and policies
established under a geographical organizational structure are couched in
geographic terms. Objectives and policies are stated largely in terms of
products in an organization whose structure is based on product groups. The
structural format for developing objectives and policies can significantly impact
all other strategy-implementation activities.
The second major reason why changes in strategy often require changes in
structure is that structure dictates how resources will be allocated. If an
organization structure is based on customer groups, then resources will be
allocated in that manner. Similarly, if an organizations structure is set up along
functional business lines, then resources are allocated for functional areas.
Unless new or revised strategies place emphasis in the same areas as old
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OF
DEVELOPMENT
OF
ORGANIZATIONAL
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Production
Marketing
Finance
Manager
Manager
Manager
Area wise Division of Structure
General Manager
Mumbai
Kolkatta
Madras
Personnel
Manager
Delhi
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Product A
Product B
Prouct C
Product D
Weaving
Spinning
Dyeing
Finishing
In 1970s and 1980s divisions of large organizations have been developed into
Strategic Business Units (SBU) to better reflect product marker considerations.
Each SBU may look after the production and marketing of a particular product
/ brand or a group of products / brands. The units are not tightly controlled but
are held responsible for the their own performance. The greatest advantages of
a Stage III firm is its almost unlimited resources. Its greatest weakness is that
it is usually so large and complex that it tends to become relatively inflexible.
General Motors, Ford Motors, and DuPont are Stage III corporations. The
strategies adopted may range from stability and expansion.
The advantages of such firms are :
This structure encourages the grouping of various functions which are
required for the performance of activities with respect to a particular
division.
Here the top management can concentrate on strategic business policies
and decisions while the day to day operations are conducted by those in
the lower rung of the ladder.
This structure generates quick response to environmental changes
affecting the businesses of different divisions.
The Disadvantages are:
Company overheads increase duplication of work in each unit is also
there.
Policy inconsistencies between the different divisions.
The divisional structure can be organized in one of 4 ways :
By Geographic Area
By Customer
By Product or Service
By Process
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who reports directly to the chief executive officer. This change in strategy can
facilitate strategy implementation by improving coordination between similar
divisions and channeling accountability to distinct business units.
An SBU has three characteristics:
It is a single business or collection of related business that can be
planned separately from the rest of the company.
It has its own set of competition.
It has a manager who is responsible for strategic planning and profit
performance and who controls most of the factors affecting profit.
The purpose of identifying the companys strategic business units is to assign to
these units strategic planning goals and appropriate tending. These units send
their plans to company headquarters which approves them and sends them back
for revision. The head office reviews these plans in order to decide which of its
SBU to BUILD , MAINTAIN , HARVEST and DIVEST.
Sharplin explains SBU as any part of a business organization which is treated
separately for strategic management purpose. When companies face difficulty
due to its high complexity of operations size, different areas of operation etc.
the top management cannot control the whole company. Here the concept of
SBU is helpful in creating an SBU organizational structure.
The advantages of SBU are :
Establishes co-ordination between divisions having common strategic
interests.
Facilitates strategic management and control of large , diverse
organizations.
Fixes accountability at very distinct business units.
The Disadvantages are:
There are too many different SBUs to handle affectively in a large
diverse organizations.
Difficulty in assigning responsibility and defining autonomy for SBU
heads.
By adding another layer of management it means it takes longer to take a
corporate decision.
Stage V : Matrix Structure:
This type of organization structure was first developed in the United States in
the early 1960s to solve management problems emerging in the aerospace
industry. It uses two or more co-existing structures. It can combine project
organization with functional organization structure. In such a structure the
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Dept.
Project
Project
Manager
Dept B
Manager
Dept C
Manager
Dept D
Manager
Project
Manager
Project
Manager
Project
Manager
Project
Manager
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Disadvantage
Dual accountability creates confusion and thus difficulty to individual
team members
This system is costly and conflictual
There are questions about where authority and responsibility should
reside. Shared authority creates communication problem
Requires a high level of vertical and horizontal co-ordination.
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MODULE 9
STAGES IN ORGANIZATIONAL DEVELOPMENT AND STRATEGY
STRUCTURE, RESTRUCTURING AND REENGINEERING
9.1 FUNCTIONAL STRATEGIES
9.2 INTEGRATION OF FUNCTIONAL PLANS AND POLICIES
9.3 RESTRUCTURING AND REENGINEERING
9.1 FUNCTIONAL STRATEGIES
The strategies should give direction to the managers who will use and
implement the plans and policies the best and proper method, way to adopt it.
The selection of the best strategy alternative is not the end of strategy
formulation. Policies define the ground rule for implementation. A policy
defines the area in which decisions are to be made, but it does not give the
decision. It spells out the sanctioned general direction and areas to be followed.
Functional strategies operate below the Strategic Business unit or business
level strategies. Functional strategies or functional plans and policies are made
within the guidelines set at higher levels. Plans are made to select a course of
action while policies are required to act as guidelines to action.
Environmental factors relevant to each function area have an impact on the
choice of plans and policies. Functional areas are traditionally divided into
finance, marketing, production and personnel.
Strategies can be divided as basic, general, departmental. Another way to
classify policy is Human Resource Strategies, Marketing Strategies, Financial
Strategies and Operational Strategies.
A. Financial Strategies
The financial strategies aims to achieve the following functions in the
management of finance of an organization.
1.
2.
3.
4.
5.
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B. Marketing strategies
Marketing is an important aspect of an organization. The success of the
organization is largely attributed to the performance of the marketing.
Therefore there must be suitable marketing policies in respect of the following
marketing mix.
1. Product
Product include tangible and intangible features offered by the firm to the
market to satisfy wants of customers. Specific plans and policies should be
clearly laid down regarding characteristic of product e g. quality, types of
models, brand name, packaging etc.
Each company should undertake SWOT analysis ( Strength, Weakness,
Opportunities and Threats ) for its product. Similarly USP ( Unique Selling
Point ) of the product should be found out. Based on this the company can
implement its competitive strategies based on better quality, features,
perception etc.
2. Price
Price plays an important role to the sale of the product /service. Price is nothing
but the perceived value of the goods /service. It denotes the amount of money
the customer is willing to give an exchange for the goods/services. To the
company this is important since this represent the income of the company for its
efforts.
Price is attached to various facilities like : discount, mode of payment,
allowances. payment period, credit terms. The use of high price or low price is
used as a competitive tool by the company.
Prices are used as a basis for market segmentation which in turn becomes the
basis for creating different models of the same product. Thus the market is
divided into premium and popular segments depending upon the prices
charged. Company may adopt Skimming Pricing Strategy or Penetration
Pricing Strategy depending upon the market environment.
3. Place
Distribution system is very essential to reach the product /service to the
customer. The physical distribution objectives of many companies is getting the
right goods to the right places at the right time for the least cost. No physical
distribution system can simultaneously maximize customer service and
minimize distribution cost. Maximum customer service implies large
inventories, premium transportation, and multiple warehouses all of which raise
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MODULE 10
INTRODUCTION TO CORPORATE LEVEL STRATEGIES
MODERNIZATION, INTEGRATION, DIVERSIFICATION.
10.1
10.2
10.3
10.4
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2.
3.
Those many companies are adopting modernization strategy, but all in India all
companies are not modernized. They do not have advanced techniques of
operations. Many Companies are still operating with outdated techniques due to
lack of capital. So they can not produce quality goods and can not give better
services to the customers. Our exports are also getting affected due low quality
goods supplied by Indian exporters.
So Indian companies should adopt modernization techniques on necessary
basis. But any schemes of modernization must also consider the social aspects
e.g. employees satisfaction and welfare, consumers expectation, communitys
need and the need for economic stability. Similarly ecological balance has to be
maintained by the businessmen while implementing modernization strategies.
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Advantages of Modernisation
Modernisation is required because it serves following purposes.
a. It helps the company to survive in the competitive market
b. It improves the efficiency of the company, reduces the cost of production
and improves the quality of products.
c. It ensures stability of the business in the long run.
d. It increases profitability of the company.
e. Modernisation is essential for advancement and expansion.
f. With upto date technology, company can serve the customers in a better
way. It enhances customer satisfaction.
g. Company can maintain pace with the changing business environment
10.3 INTEGRATION
Meaning
Integration means combination of business units that are separate but
complementary
to one another. It may also refer to coming together of business units that are
competing with one another. When business units join hand to accomplish
certain well defined goals or objectives, it is called as integration. It may
between the firms from the same industry or from different industries.
Features
1. Association of Business
Integration is an association of business units from the same or different
industries with a view to accomplish certain well defined objectives like :
to control market, eliminate competition, create monopoly or any other
agreed objectives.
2. Risk Factor
From the point of view integrations minimizes risk and uncertainties and
ensures survival and growth of combining units
3. Negative Side
Integration reflect association of firms to meet their personal goals of
survival, growth and prestige at the cost of consumers. In fact, it reflects
the negative side of the business i.e. it is against the interests of
consumers and other market functionaries. Business integration are
considered as well planned conspiracy to create monopoly like situation
in the market and exploit consumers.
4. Mode of working
Integration aims at ensuring survival and growth by regulating or
controlling production and supply of goods and price.
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TYPES OF INTEGRATION
Types of Integration
Horizontal
Integration
Vertical
Integration
Backward Integration
Lateral
Integration
Diagonal
Integration
Mixed
Integration
Forward
Integration
1. Horizontal Integration
Under this method, business firms from the same type of business or
producing same product come together to form a group .It is an integration of
two or more units engaged in the same activity. Thus, two producers may
combine in order to reduce competition. Associated Cement Companies ( ACC
) is a good example of horizontal integration, which brought under its control
many small cement manufacturing units.
Every member of horizontal combination is expected to follow certain
guidelines and jointly the group controls the market. It is called as horizontal
integration because all the units are from the same industry. Another example
was when Proctor and Gamble and Godrej Soaps came together in 1992 in a
marketing alliance in India. It was a horizontal integration.
The main objectives underlying horizontal integration are a) to reduce the
degree of competition and to improve the position in the market, b) to follow
common policies relating to production, distribution and pricing so as to
control market c) to secure benefits of large scale production and reduce cost
of production d) to acquire control over market and thereby, make higher
profits , e) to adjust supply according to demand in the market by adjusting or
regulating production of goods.
2. Vertical Integration
This is also called as process or industry integration. Under this method
business units from the same industry but carrying on different processes or
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product come together to form a group to acquire control over all stages of
production and distribution of goods.
It is a type of integration in which a firm combines with another firm that
supplies raw materials to it or some components of its finished products.
Vertical integration may be backward or forward
a. Backward Vertical Integration
Here the manufactuer join hands with supplier of raw materials having a tie up
with a manufactuer. For example, a ready made garment unit can associate with
cloth manufacturer to supply cloth at reasonable rates and of standard quality.
Like-wise Bata Shoe Co. has association with raw leather suppliers.
b. Forward Integration
In order to have control over distribution, a manufacturer may integrate with
retailers or open his own retail outlets to ensure control over distribution and to
reduce dependence on distributors. Many reputed firms like Raymonds Texthe,
Bata etc. have tied up with retailers and also have their own chain of retail
outlet all over the country.
3. Lateral or Allied Integration
It refers to the combination of firms from different industries, manufacturing all
together different product, but are related to each other in some way. For
example, suppliers of building materials can join hands together with a building
contractor to supply its requirements for building construction. Lateral
integration is of 2 types.
a. Convergent Lateral Integration
In this type, firms manufacturing or supplying raw material or finished product
are tied up with a bigger firm to supply its requirements of raw material.
Convergent integration benefits to all parties concerned because individual
supplier is assured of fix order and the major firm gets raw material at
concessional rates.
E.g. a building contractor need cement, sand, steel, electrical equipments,
sanitary equipments and Architects services to construct a building. He joins
with various suppliers who are independent and not related to each other but
they are related to each other through the final product.
b. Divergent Integration
This is exactly opposite to convergent combination. In this method, firms
producing different product but using the same raw material join together. The
combining unit can jointly place order for raw material, negotiate price, ask for
discount and liberal payment terms with the suppliers. Divergent combinations
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is unique in the sense that users come together and bargain with the main
supplier.
E.g. paper is used as raw material by many firms. Therefore, instead of placing
order individually, users like newspapers and magazine publishers, book
makers, join hand they can collectively bargain and ensure supply of paper at
cheaper rates.
4. Divergent Integration
It is a combination of two firms, the main firm engaged in one line of
production and the other in the supportive or auxiliary services required by the
main firm. Jointly both the units provide required services. For example, a
combination of car dealer with service station. Car dealers main business is to
sell cars and provide after sales service, repairs and maintenance. In absence of
supportive service, car dealing has no value. Therefore, a car-dealer like to
associate with service provider so the main service is complete.
5. Circular or Mixed Integration
It is a combination of firms with different industries and producing different
products. The combining units are not related to each other in any way. For
example, a
combination of Cloth Manufacturing unit with the firm
manufacturing electronic equipments. The object of such hybrid combination
is to bring more business units under one management and control.
Advantages of Integration
a) It gives a firm better control over its raw materials, processes or finished
products as well as marketing , depending upon the type and extent of
integration.
b) It leads to economical operations.
c) It also helps in having efficient working.
d) It improves corporate image
e) It lowers the level of competition
f) It ensures better utilization of Resources
g) It help to spread the business risks
Limitations of integration
a) Any dislocation at any state in one unit may hamper the speed of
production or quality of product.
b) A very high degree of coordination is required to keep the activity flow
smooth. It is likely that snags may develop in the level of co-ordination.
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10.4 DIVERSIFICATION
Meaning
Diversification means spreading investment over several enterprises or
products, especially to reduce the risk. Here the manufacturer expands his
operations to products and those areas which may or may not have any
connection, direct and indirect, to the existing product or products. Nowadays
competition has intensified tremendously, so relying on one product and one
brand for survival and growth is very risky. So the companies nowadays prefer
to diversify their operations. E.g. HLL has diversified into soaps, cosmetics,
washing powder tea, salt, toothpaste etc. It is Indias largest FMCG company. It
has around 100 toothpaste etc. It has around 100 products out of which 30 are
doing exceedingly well. Therefore the risk gets diversified which facilitates
survival.
Following are the Features of diversification
1. Variety of business
Diversification involves starting those activities or venturing into those areas
which are totally different from the existing line of business. It leads to variety
of activities undertaken by the organization e.g. a company manufacturing
cement may diversify in into texthes, to petrochemicals etc. Reliance group is a
classic example of a diversified company.
2. Internal or external
Diversification can take place internally or externally, internally by using its
own resources. External diversification is through amalgamations, absorptions,
joint ventures. Internal diversification is a smooth affair as internal people are
involved. However external diversification involves takeovers, acquisitions
which can be volathe.
3. Suitable for big companies
Diversification is suitable for big companies. Acquiring land, installing new
machinery, finding new markets, appointing people etc. is quite costly affairs.
So big companies like the Tatas, the Birlas, the Reliance etc . with huge
financial and physical resources at their disposal find it convenient to diversify
their operations. By diversifying, their resources are also used in optimum
manner.
4. Suitable for dynamic environment
Environmental factors like economic, social, technological etc. are very
dynamic. They keep on changing very fast, thereby creating a lot of
opportunities and posing a lot of threats. Success would depend upon making
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most of the given opportunities. This would be possible only if the company
has diversified its operations in order to make the most of the changes that have
taken place in different sectors.
5. Preferred option after expansion
If the company desires to grow then generally it opts for expansion i.e. increase
the production capacity of the same product or produce allied products as it is
relatively easy. Only when the market reaches a saturation level making further
expansion impossible, the company generally contemplates of diversification.
5. Cater to different markets
Diversification involves selling different products, which automatically
involves different segments of the society e.g. HLL cosmetics is for young
ladies, while its Kissan Jam is targeted at children. Thus not only the area of
sale may be different but also diversified customers are approached.
6. Increase in activities
Diversification ultimately results in increase in the activities of the business
unit. Production, distribution, promotion, after sales service etc. increases. The
organization should contemplate of increasing the activities only if it has the
resources : physical, financial and technical at its disposal.
Need for diversification of business
1. Spread risk
Here the company diversifies into different brands and different products. It is
possible that brand fatigue and even product fatigue may enter the minds of the
customers e.g. ink pens are hardly used nowadays as product fatigue has
entered in the minds of most of consumers in case of ink pens. So those
companies which did not diversify their operations has to close their business.
2. Accelerated growth
Every organization wants to have rapid growth. But the economy passes
through boom and depression. Similarly during different times, different sectors
grow rapidly. Nowadays information technology products are having rapid
growth. Thus most of the companies like Tatas, Larsen & Toubro etc. have
diversified their operations in the information technology technology sector.
3. Capture market
Every company is desirous of expanding its share in the market. There is
intense competition in any sector. So it becomes very difficult to increase its
market share. Samsung electronics has targeted the premium end of the market
with the launch of the worlds first multifunctional monitor.
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2. Horizontal diversification
Here the two companies are at par i.e. they are manufacturing and marketing
the same products to the same customers. So instead of competing with each
other these firms come together either by way of joint venture or collaboration
or merger e.g. Merger of TOMCO Ltd. with Hindustan Lever Ltd. is a good
example of horizontal integration.
3. Lateral or Conglomerative diversification
Conglomerative means a group or corporation formed by the merging of
separate and diverse companies. A company on its own may also diversify into
different fields like oil, iron and steel, cars etc. or it may tie up with some other
firm for diversifying into new area. In other words conglomerative
diversification involves entering into those areas which have no relation with
the existing line of business. For example, the Essel Group of companies was
founded as a trading company. Over the years company has diversified into
areas of packaging, exports, property development and recreation ( Essel World
). The latest addition to the companys diversified field is Zee Telefilms.
4. Concentric diversification
Concentric means having a common centre especially of a circle. Here the core
business is in the centre and other businesses revolve around it, in a sense they
are not directly related to it but are indirectly related e.g. Great Eastern
Shipping Company ( GE Shipping ) has floated a joint venture company
United Helicharters with Qatar General Petroleum Corporation and UB Air.
The new company will charter helicopters and lease it to offshore operators in
India.
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MODULE 11
INTRODUCTION TO CORPORATE LEVEL STRATEGIES
TURNAROUND, LIQUIDATION AND DISINVESTMENT
11.1 TURNAROUND
11.2 LIQUIDATION
11.3 DIVESTMENT
11.1 TURNAROUND
Meaning
Turnaround is a technique applied to loss making unit with a view to bring it
back on profitable track. Turnaround simple means turning the enterprise from
loss making to profit making, from the path of decline to the path of progress,
from negative to positive action in the different areas like cash-flows,
marketing, profit-making etc. Strategies adopted by the management to reverse
the deteriorating trends of the performance of a business are termed as
Turnaround Strategy . It is a type of strategy specifically developed by the
management to improve operational efficiency and productivity with a view to
increase overall profitability of business. Management has to adopt several trial
and error techniques in order to reduce the negative impact of such forces
which are considered detrimental to the growth of business.
The main objective of turnaround is to improve the performance of the business
enterprise. Turnaround bring about a change in the trends of an undertaking
from downwards to upwards, from negative to positive and from loss making
to profit making enterprise. Turnaround involves taking an U turn to the
declining fortunes of the company and making it viable again.
Turnaround means turning the loss making unit back into profitability. It is
nothing but retrieving the business unit back to prosperity e.g Indian Bank
posted a net profit of Rs. 33.22 crores in 2001-02. This seems creditable as it
has come after six years of continuous loss. This was possible because the
Banks new focus on retail lending and on housing loans. Moreover they
adhered to the restructuring plan which included VRS despite of misgivings
that the additional expenses would cripple the bank.
Definition
According to Dictionary of Marketing ( edited by P. Collin ) Turnaround
means making the company profitable again.
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Features of Turnaround
1. Objective
The strategy does not aim at selling or disposing of loss making unit but works
to improve the performance of the unit by re-arranging the available resources.
2. Long Term Strategy
Turnaround is one type of long term strategy and does not aim at providing
temporary relief or short cut method to company problems. It studies the
problem in- depth and tries to solve it forever.
3. Scope of Turnaround
The scope of turnaround is confined to sick or loss making industrial units. It is
a type of crisis management. Turnaround is not short cut or magical formula. It
can not work on all sick units under all circumstances. It is effective in case of
loss making units but having growth or future prospects.
4. Requires Cooperative effort
Turnaround strategy can be effective only when there is co-operation from all
parties concerned. The parties involves :
1. Employees
3. Bank and FIs
2. Shareholders
4. Other concerned parties
5. Involves restructuring
Turnaround is possible only when the company decides to restructure its
operations. It may include marketing restructuring whereby marketing of loss
making products are stopped or when the outdated machinery is replaced i.e.
technological restructuring and so on. These steps are necessary in order to stop
the closure of the enterprise.
6. Internally or externally
Turnaround can be undertaken by companys own experts or by outside
consultants. Both have their advantages and limitations e.g. internal experts are
aware of the companys culture, resources, level of technology better, however
they may be biased as their interest are involved. External experts may unbiased
but their suggestions may not be practical and the sentiments of the employees
may not be considered. So an organization must strike a proper balance
between using internal and external experts.
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7. Involves replanning
Turnaround necessitates replanning. It involves rearranging the structure to
convert a loss making unit into profitable one. Since environmental factors are
dynamic, it would make the company sick and unless resources are rearranged
and replanned, turnaround is not possible.
8. Involves money
When product become obsolete, there is decline in its demand e.g. Pagers. Here
in order to have a turnaround, technological restructuring, marketing
restructuring etc. is necessary which may involve a lot of money. Thus
turnaround is not possible for all companies, especially if they do not have
extra resources at their disposal.
9. Permanent effect
Turnaround involves a permanent effect on the structure and operations of the
company. This is because the company may close its unviable product out of
the existing range of product or may change the technology from labour
intensive to capital intensive thereby reducing the workers or even amalgamate
with some other company thereby forming a totally new entity.
10. Optimum utilization of resources
The company which is suffering losses, is not is a position to make an optimum
utilization of human, physical and financial resources. Turnaround involves
restructuring and reorganizing these resources. It tries to focus the resources on
profitable ventures and to discontinue the non-profitable ones.
Approaches of Turnaround
The following are the two main approaches of turnaround strategy
1. Surgical Approach
2. Human Approach
1. Surgical Approach This approach is stricter in its nature. The new chief
executive has to issues strict orders of change and keep strict control on all
operations of the enterprise. If certain plants are uneconomic and showing
constant losses should be closed down mercilessly. If some employees are
required to be retrenched the chief executive has to do it without any hesitation.
All operations and activities need to be watched till they show the sign of
improvement i.e. turnaround. The fear is expected of its opposition from some
subordinate personnel. But the chief executive should not yield to this type of
pressure and continue with the approach. If the approach is given up in the
middle it will bring disastrous result to the business enterprise.
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2.
3.
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Effect of liquidation
Liquidation affects shareholder, employees, consumers, government and
society at large. The immediate effect of closure is one employees who lose
their jobs, salary and other benefits. It creates unemployment and indirectly the
family members of employees also suffer. Shareholders or investors fund get
blocked without appreciation in value, no bonus or dividend and there is
possibility of investment turning bad debts.
The government in general and society is particular is also affected by
liquidation. There is shortage of goods in the market, consumers have to pay
higher price, government revenues is reduced, social unrest increases, national
resources are wasted, financial institutions so fail to receive back loan amount
and finally the economic development is affected.
11.3 DIVESTMENT
Meaning
This strategy involves dropping some of the products, markets or functions.
The dropping of activities or businesses can be attained under through sale or
liquidation. Selling a division or part of an organization is called divestment. It
is often used to raise additional capital for further strategic acquisitions or
investment. It can be a part of an overall retrenchment strategy to rid an
organization of businesses that are unprofitable, that require too much capital,
or that do not fit well with the firms other activities.
It can involve liquidation, sell-off to another party, or spinning off the business
to the corporate stockholders as a separate entity with its own stock. All have
the objective of bringing in cash or reducing cash outlay by one transaction.
Normally, the business is in poor competitive position but may be viable with
cash infusion at some level of risk beyond the corporate threshold.
Reasons for divestment
1. Obsolescence of products, which no longer brings good returns to the
firm, and therefore, they can be divested
2. A business that has been acquired by the firm proves to a mismatch and
cannot be integrated within the company
3. High competition in the market and the liability of the firm to cope up
with the competition pressures.
4. Negative cash flows from a particular business create financial problem
for the entire organization, thus creating a need to divest that business.
5. Technological up gradation is required for survival of the business, but
the cost of up gradation is quite high, and the firm may not be in a
position to invest in such technological up gradation.
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MODULE 12
INTRODUCTION TO CORPORATE LEVEL STRATEGIES
MERGERS, TAKEOVERS, JOINT VENTURES.
12.1
12.2
12.3
12.1
MERGER
TAKEOVER
JOINT VENTURES
MERGER
Meaning
In merger a firm may acquire another firm or two or more firms may combine
together to improve their competitive strength or to gain control over additional
facilities. It is a combination of two or more companies into one company,
wherein only one company survives and the other company ceases to exist. The
merger takes place for a consideration, which the acquiring company pays
either in cash or by offering its share. E.g. the merger of Reliance Petroleum
with Reliance Industries.
External growth or merger can be of two types :
b. under the first category, a firm merges with another firms in the
same industry having similar or related products, using similar
processes and distributing through similar channels. Such a merger
creates problem of coordination between the merged units.
c. In the second type of merger known as conglomerate, firms
merging together are engaged in altogether different lines of
business and have little common in their products, processes and
distribution channel.
Reason for mergers
1. To undertake diversification
This follows the need of a narrowly based business to reduce the risks by
broadening its activities. To reduce the risks effectively, the acquired firm must
not be subject to the same risk promoting factors as a parent firms even though
its may operate in a different fields.
2. To secure scare sources of supply
Where any of the resources which the business needs are in short supply or
subject to other difficulties, one solution for it is to acquire its own sources. By
mergering the different resources available with two or more units can be
pooled together.
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b. Open market or hosthe takeover, where the acquiring firm buys shares of
the other firm from the open market normally at a higher price than the
marketing price.
c. Bail-out, where a profit making firm takes over a sick or weak firm so as
to bail it out from financial crisis.
There are several reasons for takeover. The most obvious reasons for takeover
are :
a. Quick growth
b. Diversification
c. Establishing oneself as industrialist
d. Reducing competition
e. Increasing the market share or even creating goodwill. Takeover have
become commonplace in the Indian corporate world. Many foreign
MNCs are taking over existing Indian firms so as to facilitate easy entry
in the Indian market.
12.3 JOINT VENTURES
Meaning
Joint ventures are common in international business. In simple words, joint
ventures is a temporary partnership between two or more companies to achieve
certain objectives. It is an agreement entered into for a specific purpose or
period. After the purpose is served, joint venture ceases to exist. It is a legal
organization which takes the form of a short-term partnership in which the
companies jointly undertake a project or an assignment for mutual benefit.
It has been observed that joint ventures are widely used by companies to gain
entrance into foreign markets. Foreign companies form joint ventures with
domestic companies already present in the markets the foreign companies
would like to enter. This is because the domestic company is well versed with
the conditions prevailing in the local market.
Definitions
According to J.G. Thomas , Joint ventures are a special case of consolidation
where two or more companies form a temporary partnership for a special
purpose .
A joint venture agreement can be defined as an agreement where two or more
firms hold equity capital in a venture over which has some degree or control.
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6. International market
Companies can use joint ventures to penetrate international markets that are
otherwise beyond their capacity e.g. some governments require foreign
companies to share ownership with local companies. This situation is common
among governments of developing countries.
Forms / Types of Joint Venture
Joint venture can be entered into for a specific purpose or period to transfer
technology, joint production or marketing of goods or even for management
consultancy. Accordingly, the following are important kinds of joint venture
1. Technical Joint Venture
The concerned partners agree to provide technical assistance through
procurement of equipments, personnel, training, technical know-how, patents,
trade marks etc. to the local partner. Technical know-how can transferred
through
a. By grant of license under this type of agreement the licencee is allowed to
use patents, trademarks design in return for royalty payment.
b. Transfer of Technical Know-how It involves transfer of technical
information relating to the use and application of technology. It also involves
transfer of confidential information and support services by technical personnel
for installation and maintenance of plant or operation.
2. Management Consultancy
Consultancy agreements are entered into in connection with :
a. Project report preparation
b. Preparation of Feasibility Report
c. Preparation of Financial and Marketing Feasibility of a product
d. Construction of plant and equipments.
3. Marketing Joint venture
Such joint venture are established to produce or import products from foreign
partner and sell in the local marker or in any other third country.
4. Financial Joint Venture
The object of financial Joint Venture is to provide services and expertise
relating to finance like study of financial feasibility of a new company,
raising of finance, equity participation, loans and borrowings.
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MODULE 13
STRATEGY IMPLEMENTATION ISSUES IN IMPLEMENTATION,
PROJECT IMPLEMENTATION AND CONTROL PROCEDURES,
RESOURCE ALLOCATION
13.1 ISSUES IN IMPLEMENTATION
13.2 ISSUES INVOLVED IN STRATEGY IMPLEMENTATION
13.3 STAGES IN IMPLEMENTING STRATEGY / ACTIVATING
STRATEGY
13.4 PROJECT IMPLEMENTATION
13.5 PROCEDURAL IMPLEMENTATION
13.1 ISSUES IN IMPLEMENTATION
The strategic-management process does not end when the firm decides what
strategy or strategies to pursue. There must be a translation of strategic thought
into strategic action. This translation is much easier if managers and employees
of the firm understand the business, feel a part of the company, and through
involvement in strategy formulation activities have become committed to
helping the organization succeed. Without understanding and commitment,
strategy implementation efforts face major problems.
Implementation strategy affects an organization from top to bottom; it affects
all the functional and divisional areas of business. Even the most technically
perfect strategic plan will serve little purpose if it is not implemented. Many
organizations tend to spend an inordinate amount of time money, and effort on
developing the strategic plan, treating the means and circumstances under
which it will be implemented as afterthoughts ! Change comes through
implementation and evaluation, not through plan. A technically imperfect plan
that is, implemented well will achieve more than the perfect plan that never gets
off the paper on which it is typed.
Concept of Strategy Implementation
Strategy formulation is not in itself sufficient for an organization. It is
important to ensure that the strategy is implemented effectively, Strategy
implementation is an important aspect of strategic management.
Strategic implementation is the sum total of all the activities and choices
required for the execution of a strategic plan. It is the process by which
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strategies and policies are put into action through the development of programs,
budgets and procedures.
Definition
Daniel McCarthy Robert Minichiello and Joseph Curran in their book '
Business Policy and Strategy ' have defined strategy implementation as:
Strategy implementation may be said to consist of securing resources,
organizing these resources and directing the use of these resources within
and outside the organization.
Nature of Strategy Implementation
Successful strategy formulation does not guarantee successful strategy
implementation. It is always more difficult to do something ( strategy
implementation ) than to say you are going to do it ( strategy formulation ) !
Although inextricably linked , strategy implementation is fundamentally
different from strategy formulation. Strategy formulation and implementation
can be contrasted in the following ways:
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such actions as ignoring the problem in hopes that the conflict will resolve
itself or physically separating the conflicting individuals (or groups). Defusion
can include playing down differences between conflicting parties while
accentuating similarities and common interest, compromising so that there is
neither a clear winner or loser. Confrontation is exemplified by exchanging
members of conflicting parties so that each can gain an appreciation of the
other's point of view.
5. Matching structure with strategy
Change in strategy often require changes in the way an organization is
structured for two major reasons. First structure largely dictates how objectives
and policies will be established. For example, objectives and policies
established under geographic organizational structure are couched in
geographic terms. The structural format for developing objectives and policies
can significantly impact all other strategy implementation activities and
structures dictates how resources will be allocated. A more important concern is
determining what types of structural changes are needed to implement new
strategies and how these changes can best be accomplished.
6. Managing resistance to change
No organization or individual can escape change. But the thought of change
raises anxieties because people feat of economic loss, inconvenience,
uncertainty, and a break in normal social pattern. The strategic management
process itself can impose major changes on individuals and processes.
Resistance to change can be considered the single greatest threat to successful
strategy implementation. People often resist strategy implementation because
they do not understand what is happening or why changes are taking place. In
that case , employees may simply need accurate information. Successful
strategy implementation hinges upon manager's ability to develop an
organizational climate conducive to change. Change must be viewed as an
opportunity rather than as a threat by managers and employees.
7. Creating a Strategy-Supportive Culture
Strategists should strive to pressure, emphasize and build upon aspects of an
existing culture that support proposed new strategies. Aspects of an existing
culture that are antagonistic to a proposed strategy should be identified and
changed, Substantial research indicates that new strategies are often
market-driven and dictated by competitive forces. For this reason, changing a
firm's culture to fit a new strategy is usually more effective than changing a
strategy to fit an existing culture. Numerous techniques are available to alter an
organization's culture, including recruitment, training, transfer, promotion,
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(b) Programmes - The manager must also decide about the programmes in
respect of the strategy. A programme is a single use plan designed to
accomplish a specific objective. It clearly indicates the steps to be taken, the
resources to be used, and the time period within which the task is to be
completed.
3. Translating General Objectives into Specific Objectives - The top
management frames the general objectives. In order to make these objective
operative, functional managers must set specific objectives within the
framework of the general objectives. Most of the specific objectives are of
short-term in nature, with a definite time period for their accomplishment.
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TECHNOLOGY EXCHANGE
In todays world, technology decides lot of things such as how we write letters,
how we treat ourselves, how we entertain ourselves, how we educate ourselves
and finally how we do business
Cost
Advantage
Differentiation
Pioneer
a
unique
product that increases
buyer value
Innovate in other
activities to increase
buyer value
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Breakthrough
technologies
Technology
advancement
Transfer
Labs
Product
organizations
Next Generation
products
Labs
Current products
2. MRTP Regulations
The Monopolies and Restrictive Trade Practices (MRTP) Act 1969 seeks to
prevent monopolistic and restrictive trade practices conducted by a single
company. This is done so as to prevent the concentration of the economic
power.
The MRTP Act also covers mergers, amalgamations, and turnovers.
3. FERA Regulations
The Foreign Exchange Regulation Act (FERA) 1973 is with respect to the
control of foreign companies on Indian companies. If a non-Indian residents
equity holding in the company is 40 % and above, the prior permission of the
Reserve Bank of India is required.
4. Capital Issue Control Regulation
The issue of capital by companies is regulated through Capital Issues Control
Act, 1956 and the Securities Contracts Regulations Act, 1956 mainly to ensure
that investments are made in priority areas and for the promotion of capital
markets and also for the protection of the company's shareholders.
The Act will also be in force in case of mergers, amalgamation. Before the
company issues any fresh shares whether public issue or right issue, even
debentures, it has to be cleared by the Controller of Capital Issues (CCI) under
the Department of Economies Affairs, Ministry of Finance.
The clearance from CCI is required before any strategy can be implemented.
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MODULE 14
STRATEGY IMPLEMENTATION RESOURCE ALLOCATION
14.1 RESOURCE ALLOCATION
14.2 PROBLEMS IN RESOURCE ALLOCATION
14.1 RESOURCE ALLOCATION
Resource allocation is an important activity in strategy implementation.
Resource allocation requires procurement and commitment of financial, human
and physical resources to the various activities required for the accomplishment
of objectives. The success of the organization depends upon the quality and
quantity of resources and their utilization.
Resource allocation is a central management activity that allows for strategy
execution. In organization that do not use a strategic-management approach to
decision making, resource allocation is often based on political or personal
factors. Strategic management enables resources to be allocated accordingly to
priorities established by annual objectives.
All organizations have at least 4 types of resources that can be used to achieve
desired objectives: financial, physical, human and technological resources.
Allocating resources to particular divisions and departments does not mean that
strategies will be successfully implemented. A number of factors commonly
prohibit effective resource allocation, including an overprotection of resources,
too great an emphasis on short-run financial criteria, organizational politics,
vague strategy targets, a reluctance to take risks, and a lack of sufficient
knowledge.
The real value of any resource allocation program lies in the resulting
accomplishment of an organization's objectives. Effective resource allocation
does not guarantee successful strategy implementation because programs,
personnel, controls, and commitment must breathe life into the resources
provided. Strategic management itself is sometimes referred to as a resource
allocation process
Steps involved in Resource Allocation
The following are the important steps involved in resource allocation
1. Determining the type and the amount of resources
The first step involved in resource allocation is to determine the type and
amount of resources required to implement the strategy.
A firm may require various types of resources such as human, financial,
physical and informational or technological resources. At times, a firm may
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require only the financial resources, as human and informational resources are
already available with the firm, and that the physical resources such as
machinery or equipments can be purchased with the financial resources. A firm
should also decide the amount of resources required. For example
modernization strategy would require more resources that the integration
strategy.
2. Determining the sources of resources The next step is to find out the sources of resources. The sources of resources
depends upon the type of resources. The human resources can be obtained from
both internal and external sources. For example mangers can be promoted from
within the organization or can be selected from external sources for the purpose
of strategy implementation. Financial resources can be obtained from internal
or external sources. For example retained earnings can be used to finance
strategy implementation or additional loan can be taken or capital can be issued
to finance strategy implementation.
3. Mobilisation of resources After determining the amount and the type of resources, the next step is to make
arrangement to obtain the resources. Necessary procedure is required to be
followed to obtain the resources. For instance , if financial resources are to be
obtained by way of issue of shares , the following steps have to be followed.
Preparation of draft Prospectus
Vetting of Prospectus
Appointment of Intermediaries - Bankers Underwriters,
Advertising Agency etc.
Filing of Prospectus with Registrar of Companies
Printing and Dispatch of Prospectus and Application forms
Filing of Initial Listing Application
Establishing the liability of Underwriters
Allotment of shares
Listing of the Issue
Brokers,
4. Resource Allocation
After obtaining the resources, the resources must be properly allocated for the
purpose of strategy implementation. The required physical resources can be
purchased with the help of financial resources. If required, additional human
resources can be selected for the purpose of strategy implementation. In any
case, there must be proper allocation of all the resources.
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5. Utilization of Resources The allocated resources need to be utilized in respect of various activities. For
example, the funds allocated for market development strategy need to be
utilized for various activities in connection with market development activities
such as marketing research, advertising, sales promotion, dealers incentives,
etc. The funds must be utilized for productive activities, and care must be taken
to see to it that the funds are not misused or poorly utlilized.
6. Monitoring the Resources Allocation The management should monitor the resource allocation to find out whether or
not the allocated are properly utilized. The management should also find out
whether the resources allocated are sufficient enough to undertake the various
activities efficiently and effectively. If required, management may make
necessary changes in resource allocation, i.e. , additional funds may be
mobilized, if required or the resource allocation-mix can be modified
depending upon the importance of activities.
Factors affecting Resource Allocation
There are several factors which affects resource allocation, they are as follow.
1. Objectives of the organizationThe aims and objectives of the organization affects resource allocation. An
organization has various objectives to be accomplished- some are very
important, some are least important to the organization. For example increasing
market share is given more importance than other objectives. So accordingly,
resources have to be allocated. Normally resources are allocated to accomplish
important objectives.
2. The nature of strategies There are various types of strategies of a firm. Some strategies may require
huge capital or some may require less capital. Some may require more human
resources or some may require less human resources. Accordingly the strategies
which requires more capital or more human resources are allocated with more
resources than other strategies. Therefore modernization strategy is allocated
with more resources than product introduction strategy.
3. Availability of Resources
The availability of funds affect resources allocation. When a firm has adequate
funds or when a firm is in a position to obtain funds easily, then it can
adequately allocate funds for various resources. But if the firm has a problem of
obtaining additional funds, the certain activities may be dropped out or there
may be distribution of resources according to the importance of activities.
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4. Internal Politics
Sometimes, internal politics in an organization can affect resource allocation.
Some departmental heads are in a position to get more funds for their
departments. This may be due to their power or influence they have over top
management. For example, if HRD manager has good terms with the top
management, his department may be allocated with more funds.
5. External factors There are various external factors which influence resource allocation for
example, financial institutions, local community, shareholders, government
policies and others etc. For example, the financial institutions , which have
provided long term loans may restrict allocation of resources in form of
dividend to shareholder, organizational expenditure etc. Some times due to
government policies, firm may have to allocate to employees welfare fund,
environment protection fund etc.
14.2 PROBLEMS IN RESOURCE ALLOCATION
There are several problems faced in resources allocation. Some problems can
not be avoided. Some problems can be avoided with the efforts on the part of
management.
1. Scarcity of Resources
The major problem arises due to scarcity of resources. Due to scarcity of
resources, it would be difficult for the management to obtain right type and
right amount of resources. Some times due to scarcity, management may have
to pay high price to obtain required resources.
2. Over-estimation of Resource need
The resource allocation problem may arise due to over-estimation of resource
needs. Normally each department may try to obtain maximum amount of
resources. This may be to avoid shortage of resources in future. Higher the
demand of resources from all the department makes it difficult to allocate
resources properly. Sometimes department gets used to overestimating resource
needs.
3. Organization's Past allocation of resources
Some units may be allocated with more resources in the past as their activities
were more important than other activities. Sometimes same allocation is
followed in the present situations, even though now their activities are not so
important. On the other hand other department's activities may be more
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important at present, but they do not get required amount of resources due to
past allocation . So top management should consider relative importance of the
activities and the allocate the resources.
4. Problem of internal politics
Some manager may involve the internal politics. They may try to influence top
management and may try to get more funds than other departments. As a result
those departments who actually deserve more funds do not get required amount
of resources.
5. Poor financial climate Due to financial climate, may investors do not invest in the shares issued by the
company. So company finds it difficult to raise additional finance. This affects
the resource allocation for strategy implementation. Sometimes company may
have to go for additional loans from financial institutions at higher cost.
6. Conflicts of interest
There may be problem of conflict of interest between management and various
other parties for example, shareholders, trader unions, employees , government,
society etc. For example trade union may insist to allocate resources to
employee's welfare, management may like to allocate resources for
modernization. This conflict can be solved with proper discussion between
management and various parties and proper planning of resource allocation.
7. Problem of Resistance to Change Sometimes management may resist to change its own resource allocation
strategy. For example there may be some unprofitable products in the company,
but management may continue to allocate more resources to that unprofitable
product than the other promising products of the company. So management
should try to review market success of each product and try to allocate the
resources.
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MODULE 15
CORPORATE ETHOS, CULTURE AND ETHICS, MANAGEMENT OF
CHANGE.
15.1 CONCEPT OF CORPORATE CULTURE
15.2 PERSONAL VALUES AND BUSINESS ETHICS
15.3 IMPACT OF VALUES AND ETHICS ON CORPORATE
STRATEGY
15.4 SOCIAL RESPONSIVENESS AND STRATEGIC MANAGEMENT
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Culture,
Style and
values
Strategy
Structure
And
systems
Structure
and
systems
Skills and
resources
PRESENT
SITUATION
Skills
And
resources
FUTURE
SITUATION
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Such analysis may help the executives to do way with certain values and
preferences, which are not conducive for the growth of the organization. For
instance, in one the organizations, a new chief executive was appointed, who
was born and brought in posh environment, wanted rich interiors and exteriors
of the company's head office, involving huge sum of money, was finally
convinced by the finance director that such heavy spending would drain
company's funds and that the company may face acute cash crunch.
Reconciliation of conflicts among individual values and preferences for the
formulation and implementation of strategy needs imagination, and cooperative
spirit on the part of executives. They must sort out their differences, and modify
their values and preferences in the interest of the organization. One of the best
alternatives is to appoint an external expert to frame sound economic strategy
with the support of the top executives of the organization, and the top
executives should not unduly influence upon the external expert of their
personal values and preferences. However, it is to be noted that if personal
values and preferences are vital to the interest of the organization, then such
values must considered in framing and implementing the strategy of the
organization.
15.4 SOCIAL RESPONSIVENESS AND STRATEGIC MANAGEMENT
Business is basically an economic activity, but in modem world it cannot
concentrate only on profit maximization. It is a group effort, as there is
participation, directly or indirectly, of the employees, customers, society,
government, shareholders etc. Business can not function independently and
depend on the society for supply of raw materials, capital, labour, and other
requirements. Business is a part of society and has to follow and operate within
the limits of the environment, and, rules and regulations prescribed by the
society.
There is a need to have social responsiveness in strategic management. This is
because greater social responsiveness means good business. Normally the top
management takes the major decisions in respect of social responsibility. The
decisions in respect of social responsibility are based on the personal values,
views, opinions and business ethics of the top management. Having decided to
adopt social responsibility , the top management should involve social
responsiveness in all the phases of implementation and strategy evaluation will
be affected by social responsiveness. The strategist must consider the social
responsibility towards various group in strategic management.
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MODULE 16
STRATEGY IMPLEMENTATION MANAGEMENT OF CHANGE
16.1 INTRODUCTION
16.2 ORGANIZATIONAL CHANGE
16.3 CAUSES OR FACTORS OF RESISTANCE TO CHANGE
16.4 MANAGING RESISTANCE TO CHANGE
16.1 INTRODUCTION
No organization or individual can escape change. But the thought of change
raises anxieties because people fear economic loss, inconvenience, uncertainty,
and a break in normal social patterns. Almost any change in structure,
technology, people, or strategies has the potential to disrupt comfortable
interaction patterns. For this reason, people resist change. The strategic
management process itself can impose major changes on individuals and
processes. Reorienting an organization to get people to think and act
strategically is not an easy task.
16.2 ORGANIZATIONAL CHANGE
Organizational change is any alteration that occurs in the environment of
organization. It means alternation is aim and objectives, strategies, procedures,
technology, structural arrangement, job design, and people. It means changes in
any aspects of organization. It may be small one or big one. It also includes
restructuring,
mergers,
amalgamations,
expansion,
modernization,
diversification etc. A change does bring about subsequent change in the
organizational set up or management.
Any organization goes through two types of changes : the structural change and
/ or the behavioural change. In the structural change the whole organization
goes through some or a drastic change in the whole structure. Here some new
divisions or departments may be formed or some may be completely shut down
or modified to some extent. Some may even be merged with others.
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change its marketing strategies, similarly company has to make changes in its
marketing strategies. This is reactive change. Some change may be planned and
proactive. These changes are outcome of deliberate planning on the part of
organization
5. Change and Innovation
Change is different from innovation. All innovations are change but all changes
are not innovations. Innovations takes place when an organization makes first
use of idea to introduce the product, to develop new techniques, method or
process etc. But change means any alterations or modifications in organization's
existing set-up.
6. Several factors
An organizational change takes place due to several factors. These factors can
be internal or external. The internal factors include management, workers, job
design, strategies etc. External factors include competition, government,
customers, suppliers, dealers etc.
Process of Management of Changes
A change does not occur immediately. It goes through different stages, they are
as follows.
1. Identify need for a changes
The first step in the process of management of change is to identify the need for
change in the organization. One should not introduce any change just for the
sake of doing it. Any change should bring out desired change in the
organization.
Many times a changes arises due to internal or external factors. External factors
include technological development, change in competitors strategies, change in
government policies, change in the customer's taste or preference etc.
Internal factors include fall in sales or profit, high cost of production, increase
in labour turnover, high maintenance cost etc. These factors force the
management to bring out necessary changes in the organizational set-up.
The management has to identify the need for change. It depends upon the gap
between the actual results and the desired results. This gap can be identified by
comparing the actual performance with the planned performance.
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High Price
Low Quality of the products
Poor advertising campaign
Defective marketing strategy
Poor distribution strategy
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The management should find out impact of change on the external factors such
competitors, government, customers, dealers, suppliers etc. If organization is
going to change its pricing strategy, then it must find out how would a change
in price affect competitors, customers ? Whether customers would react
positively or negatively ?
5. Introducing a change
After communicating the change to the organization people and securing their
active support, management has to introduce the change. For introducing the
change sometimes, management may have to keep old ideas, views, methods,
activities aside because old ides or methods have failed to bring desired results.
News ideas and practices are accepted and leamt by the employees and put into
action.
6. Review
There must proper review to find out whether the change has been successful to
bring desired results. Management should try to understand whether the
introduction of change bring out positive effects in the company's performance.
If not, management has to handle the situation, it should rethink the whole
situation and should bring out new changes in the activities of the management.
Reasons for organizational change
There are various causes or reasons for organizational change, they are as
follows
1. Technological and Organizational change
There is always development in existing technology. Hence technology is the
most important factor responsible for organizational change. Development in
technology bring out changes in production, communication and various
management activities. To succeed in the market, an organization to up-grade
itself with the developing technology.
2. Change in management philosophy
Sometimes management philosophy may change from traditional management
philosophy to professional management philosophy. Subsequently change has
to introduced in strategies, decision making process, communication,
production activities etc. Change in philosophy of the management can have
major impact on the organizational activities.
3. Management personnel
There may be change in management personnel. For example, the Chief
Executive Officer or Departmental Head may be changed. As each person has
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its own perspective, the change in personnel may bring out changes in
organizational structures, policies, aim and objectives etc.
4. Business cycle
Every business passes through different phases such introduction phase, growth
phase, maturity phase and decline phase etc. Due to changes in business cycle,
necessary changes has to be introduced. For example in decline phase,
organization may concentrate only on profitable products and may drop
unprofitable products, it may change its marketing strategy by reducing its
promotional expenditure etc.
5. Environmental forces
There may be changes in the environmental forces such competitor's strategies,
change in customers taste and preference, change in government policies etc.
Any change in the environmental forces require a change in the business
organization so as to adjust with the changing environmental forces. For
example due to change in customer's taste and preference, company has to
change its product quality, pricing strategy, marketing appeal etc.
6. Problem in the Organization
There may be problems in the organization. For example, the technology may
be old and obsolete, employees may not be trained and expert, problem in
organizational strategies etc. In order to survive in the market and to face the
competition organization have to change its existing defective setup, otherwise
organization may have closed down.
7. Growth and Expansion
When organization plan for its growth and expansion, it has to bring out
necessary changes in the organizational activities. With the existing
organizational set up it is not possible to achieve growth and expansion of the
organization.
8. Entry in new business or new market
Sometimes organization may enter in new business or new market. For
example, a company presenting dealing in consumer durables, may plan to
enter in customer finance, company operating at national level may enter in
international market. For such new business and new market company has to
introduce changes in its policies, structures, strategies etc.
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6. Redundancy of Jobs
Employees may feel that a change can make their jobs redundant and as such
they may lose their jobs, which in turn would affect their economic security.
For instance, when computers were first introduced in between 1970s and
1990s in several organizations in India, employees including managers resisted
the changes for the fear of losing jobs and consequently their economic security
7. Problem of Incentives
At times, a change would reduce incentives of employees such as over-time pay
and as such they resist change. For instance, automation in the industry reduces
the need for over-time of employees, and therefore, they may resist introduction
of labour saving devices in the organization.
8. Inconvenience
Individuals may resist change, which is likely to cause inconvenience, make the
life more difficult, reduce freedom of action or result in increased workload.
9. Fear of unknown
Individuals may resist change for the fear of unknown. For instance, a firm may
introduce new technology, and an individual employee may resist such changes
may be because of the fear of non exposure to new technology. He/she may feel
that the new technology may be difficult to handle and as such he/she may
avoid accepting the new technology.
10. Problem of Ego
Some individuals enjoy present status in the organization. They satisfy their ego
needs with the present position or status in the organization. A change in the
organization may affect their position or expose their weakness. As such,
individuals may resist change in the organization.
16.4 MANAGING RESISTANCE TO CHANGE
Management has to manage resistance to change. It is real challenge to
overcome resistance to change. Strategists can take a number of positive
actions to minimize manager's and employees resistance to change. For
example, individuals who will be affected by a change should be involved in
the decision to make the change and in decisions about how to implement the
change. Strategist should anticipate changes and develop and offer training and
development workshops so that managers and employees can adapt to those
changes. They also need to communicate the need for change effectively.
The following are the various ways to overcome resistance to change.
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familiar with change, and it's working. At times, management may provide
psychological counseling to develop a positive attitude towards change.
7. Union Consultations
Management should consult the worker's union in introducing the change in the
organization. Union representatives should be involved before the change is
introduced in the organization. Such involvement is required not only to avoid
resistance but also secure willing cooperation and commitment of the workers
towards the changes in the organization.
8. Group Dynamics
A change not only affects individuals members but also the groups in the
organization. Therefore, the management should understand the impact of
group dynamics. The management may find out the important and influencing
members of the group, and through them may introduce the change in the
organization. The influencing members of the group, the so-called group
representative can exert strong pressure on the group members to accept the
change.
Organizational change should be viewed today as a continuous process rather
than as a project or event. The most successful organization today continuously
adapt to changes in the competitive environment, which themselves continue to
change at an accelerating rate.
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MODULE 17
STRATEGIC EVALUATION MONITORING AND CONTROL OF
STRATEGIC FORMULATION AND IMPLEMENTATION
17.1 NATURE OF STRATEGY EVALUATION
17.2 IMPORTANCE OF STRATEGIC EVALUATION AND CONTROL
17.3 STRATEGIC EVALUATION AND CONTROL PROCESS
17.4 HIERARCHY OF CONTROL ACTIVITIES
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both long run and short- run focus. Strategies often do not affect short-term
operating results until it is too late to make needed changes.
It is impossible to demonstrate conclusively that a particular strategy is optimal
or even to guarantee that it will work. One can, however, evaluate it for critical
flaws.
Strategy evaluation is important because organizations face dynamic
environments in which key external and internal factors often change quickly
and dramatically. Success today is no guarantee of success tomorrow ! An
organization should never be lulled into complacency with success. Countless
firms have thrived one year only to struggle for survival the following year.
Strategy evaluation is becoming increasing difficult with the passage of time,
for many reasons. Domestic and world economies were more stable in years
past, product life cycles were longer, product development cycles were longer,
technological advancement was slower, change occurred less frequently, there
were fewer competitors, foreign companies were weak, and there were more
regulated industries. Other reasons why strategy evaluation is more difficult
today include the following trends :
A dramatic increase in the environments complexity
The increasing difficulty of predicting the future with accuracy
The increasing number of variables
The rapid rate of obsolescence of even the best plans
The increase in the number of both domestic and world events affecting
organizations
The decreasing time span for which planning can be done with any
degree of certainty.
Richard Rumelt offered four criteria that could be used to evaluate a strategy :
a. Consistency
b. Consonance
c. Feasibility
d. Advantage
1. Consistency
A strategy should not present inconsistent goals and policies. Organizational
conflict and interdepartmental bickering are often symptoms of managerial
disorder, but these problems may also be a sign of strategic inconsistency.
There are three guidelines to help determine if organizational problems are due
to inconsistencies in strategy :
If managerial problems continue despite changes in personnel and if they
tend to be issue-based rather than people-based, then strategies may be
inconsistent.
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are deterred from full-scale attacks. Positional advantage tends to be selfsustaining as long as the key internal and environmental factors that underlie it
remain stable. This is why entrenched firms can be almost impossible to unseat,
even if their raw skill level are only average. The principle characteristic of
good position is that it permits the firm to obtain advantage from policies that
would not similarly benefit rivals without the same position. Therefore, in
evaluating strategy, organizations should examine the nature of positional
advantages associated with a given strategy.
17.2 IMPORTANCE OF STRATEGIC EVALUATION AND CONTROL
The purpose of strategic evaluation and control is to ensure that the objectives
are accomplished For, this purpose strategic are formulated implemented, and
then evaluated and if necessary control measures are taken. The need and
importance of strategic evaluation and control is briefly stated follows.
1. Facilitates coordination : Strategic evaluation and control facilitates
coordination among the various departments of the organization.
Whenever, there are any deviations the activities of the concerned
departments are coordinated so as to take collective and corrective
measures. The collectives efforts on the part of concerned departments
enable to correct the deviations and to accomplish the objective.
2. Facilitates optimum use of resources : Evaluation and control enables
optimum use of resources physical, financial and human resources. The
resources are properly allocated and utilized which in turn generates
higher productivity and efficiency.
3. Guide to operations : Evaluation and control guides the actions of the
individuals and departments in the
organization. Activities are
undertaken in the right direction and as such the organization would not
be able to accomplish its objectives.
4. Check on validity of strategic choice : Evaluation and control helps the
management to keep a check on the validity of the strategic choice. The
process of evaluation and control would provides feedback on the
relevance of the strategic choice made during the formulation stage. This
is due to the efficacy of the strategic evaluation to determine the
effectiveness of the strategy.
5. Facilitates performance appraisal : Evaluation and control facilitates
employees appraisal. The actual performance is measured in the light of
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Board of Directors
Audit Committee
Manager observation
Internal audit
Operational controls
Internal accounting
controls
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MODULE 18
TECHNIQUES OF EVALUATION AND CONTROL STRATEGIC
CONTROL AND OPERATIONAL CONTROL, BUDGETARY
CONTROL
18.1 STRATEGIC CONTROL AND OPERATIONAL CONTROL
18.2 TECHNIQUES OF EVALUATION AND CONTROL
18.3 BUDGETARY CONTROL
18.1 STRATEGIC CONTROL AND OPERATIONAL CONTROL
From time to time , companies need to undertake a critical review of their
overall marketing goals to effectiveness. In this world, there is rapid
obsolescence of objectives, policies , strategies and programmes. Each
company should therefore periodically reassess its strategic approach to the
market place ( within and outside the organization )
Strategic control takes into account the changing assumptions that determine
the strategy by continuously evaluating the strategy during the process of
implementation and it also takes the required corrective action as and when
needed. Thus strategic control is like an alarm long before the calamity can
happen.
Operational control is the process of ensuring that specific tasks are carried out
effectively and efficiently. The operational control aims at evaluating the
performance of the organization. Most of the control system in organization are
operational in nature. Some examples of operational control are : Budgetary
control, Quality control, Inventory control, Production Control, Cost control
etc.
Operational control are programmed or decided in advance. They are selfregulatory in nature. They are impersonal in nature. Techniques, tools,
procedures are used as means of control. Considerations of environmental
influences and adapting accordingly play little role in operational control
system.
Strategic Control
Operational Control
1. Aim
The main aim of strategic control is The main aim of operational control is
continuously questioning of the basic allocation and use of organizational
direction of strategy. Its aim is find out resources
whether or not strategy is being
implemented properly
2. Environment
It is concerned with internal as well as It considers only the internal
environment.
external environmental factors.
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3. Techniques used
The main techniques involved are
environmental scanning, information
gathering, questioning and review.
4. Time period
The strategic control considers longterm impact of strategy on the
organization.
5. Exercise control
The strategic control is exercised only
by top management
6. Database
The database for strategic control is
both historical and future oriented
7. Main concern
The main concern of strategic control
is pushing the company in the correct
future direction.
8. Flexibility
The strategic control is flexible in
nature, depending upon the situation.
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1. Premise Control
Strategies are based on certain premises, on certain assumptions with respect to
the organization as well as the environment. Any change in either of them
affect the strategy itself to a very large extent. For this reason one must keep
watch and control over these premises /assumptions. Premise control is
required to identify the main assumptions on which the strategy is based and
keep a close watch on them, to see if there is any change in the assumptions and
if these changes are making an impact on the strategy to be adopted. The
corporate planning staff are kept responsible for the supervision and control of
the premises, they are thus required to regularly check the validity of the
premises constantly.
2. Implementation control
Only strategy implementation gives result to plans, projects and programmes
being set up. The strategist has to lay down the resources to be allocated all
every stage. Implementation control deals with the evaluation whether the
plans, projects and programmes one leading the organization towards its
predetermined goal. This is done through identification and close monitoring of
each plan.
3. Strategic Surveillance
Strategic surveillance is done to oversee the organization as a whole. It sees
whether any event either within or outside the company threatens the strategies
course of action in any way.
4. Special alert control
In case of emergencies the company needs to take quick and correct decision in
order to save the strategy in operation. Special alert control can be exercised
through the formulation of contingency strategies by giving the job
immediately to the crisis management teams who is capable and experienced in
handling such emergencies e.g. unfortunate floods , share prices crash or real
estate prices crash etc.
5. Strategic leap control
Today modern industry is highly competitive, volathe and unstable. Companies
are required to make strategies leaps so that they can make significant changes.
Strategic lead control can assist companies by helping to define the new
strategic requirements and to cope with emerging environmental realities. There
are four different techniques used in ensuring strategic leap control in the
organization.
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b. Revenue Centres
Production in terms of units or rupee sales, is measured without consideration
of resource costs (e.g. salaries ). The centre is thus judged in terms of
effectiveness rather than efficiency. The effectiveness of a sales region is
determined by the comparison of its actual sales to its projected years sales.
c. Expense centres
Resources are measured in rupees without consideration of service or product
costs. Thus, budgets will have been prepared for engineered expenses ( those
costs that can be calculated ) and for discretionary expenses ( those costs that
can only be estimated ).
d. Profit centres
Performance is measured in terms of the difference between revenues ( which
measure production ) and expenditures ( which measure resources ). A profit
centre is typically established whenever an organizational unit has control over
both resources and its products or services.
e. Investment centres
Investment centres is measured in terms of the differences between its resources
and its services or products. Investment centres can also be measured in terms
of its contribution to shareholder value.
B. Operational Control
Operational control is the process of ensuring that specific tasks are carried out
effectively and efficiently. The operational control aims at evaluating the
performance of the organization. Most of the control system in organization are
operational in nature.
1. Internal Analysis
The internal analysis deals with the strengths and weakness of the firm. It
involves following techniques.
a. Value chain analysis
It places emphasis on inter-related activities performed in a sequence for
production and marketing of a product or service. It divided the total task of a
firm into identifiable activities, which can then be evaluated for judging their
effectiveness.
b. Quantitative analysis
It considers the financial and non-financial quantitative parameters such as
physical units or volume for the purpose of judging effectiveness. The
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quantitative analysis techniques are widely used for evaluation , as they are
easy to administer. Some of quantitative techniques are ratio analysis, market
ranking, advertising recall rate etc.
c. Qualitative analysis
They support the quantitative analysis by including those factors, which are not
measurable in terms of numbers. Some of the qualitative techniques are
market surveys, experimentation and observation etc.
2. Comprehensive Analysis
This analysis adopts a total approach of judging the performance of a firm and
it does not focus on a specific area or function.. It includes following
techniques
a. Key factor rating
In this case, the key areas of the organization are identified and then the
performance in such areas is evaluated.
b. Balanced scoreboard
In this techniques, the four key performance measures are identified customer
perspective, internal business perspective, innovation and learning perspective
and the financial perspective. This techniques adopts a balanced approach to
evaluate performance of the organization as a whole as a wide range of
parameters are considered.
c. Network techniques
In this normally PERT ( Programme Evaluation Review Technique ) and CPM
( Critical Path Method ) are used for the purpose of planning and scheduling
activities. This techniques focus on the critical path or the sequence of events,
which requires the maximum possible time, so that the critical path can be
properly monitored for the purpose of completion of the project or activities in
time.
d. Management by Objectives ( MBO )
It involves subordinate managers in planning and controlling activities. In this
case the superior and subordinate managers jointly decide common goals, and
jointly frame plans. The subordinate then implements the plan, and finally the
performance of the plan is jointly reviewed by the superior and subordinate
managers.
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MODULE 19
TECHNIQUES OF EVALUATION AND CONTROL PERT / CPM,
VARIANCE ANALYSIS, MEASURING ORGANIZATIONAL
PERFORMANCE, TAKING CORRECTIVE ACTION
19.1 ROLE OF PERT AND CPM IN STRATEGIC MANAGEMENT
19.2 VARIANCE ANALYSIS
19.3 MEASURING ORGANIZATIONAL PERFORMANCE
19.1 ROLE OF PERT AND CPM IN STRATEGIC MANAGEMENT
The techniques of PERT and CPM were developed in USA during the late
1950s in order to plan and control activities. These are two widely used
networking techniques.
PERT- Programme Evaluation Review Technique was developed by the
Special Projects Office of the U.S. Navy, was first formally applied to the
planning and control of the Polaris Weapon System in 1958. This technique
worked well in expediting the successful completion of that programme.
PERT helps the management to answer the following questions, when they face
with huge projects :
1. When will project be completed ?
2. When will each individual part of the project start and finish ?
3. Of the many parts in a project, which ones must be finished on time to avoid
delaying the project ?
4. Can resources be shifted to critical parts of the project from the non-critical
parts without affecting the overall completion time of the project ?
5. Among the hundreds of the parts of the project, where should the
management concentrate its efforts at a given time ?
CPM- Critical Path Method was developed by Du Pont Company for the
purpose of scheduling.
CPM is concerned with the reconciliation enumerates the relationship between
applying more men or other resources to shorten the duration of a given project
and the increased cost of these resources.
Both the PERT and CPM techniques are based on the same principles. The
only difference is that CPM is based on a single estimate of time required for the completion of
activities. The CPM technique is used for projects like construction and
maintenance projects.
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MODULE 20
GLOBAL ISSUES IN STRATEGIC MANAGEMENT THE GLOBAL
CHALLENGES, STRATEGIES FOR COMPETING IN GLOBAL
MARKETS, LOCAL MARKETS AND CULTURAL VARIATIONS.
20.1 INTRODUCTION
20.2 IMPACT OF GLOBALIZATION
20.3 IMPACT OF ELECTRONIC COMMERCE
20.4 GLOBAL CHALLENGES IN STRATEGY IMPLEMENTATION
20.5 STAGES OF INTERNATIONAL DEVELOPMENT
20.6 CENTRALIZATION VERSUS DECENTRALIZATION
20.1 INTRODUCTION
Globalization is the process of linking a nations economy with the global
economy. The policy initiated by the Government of India in the form of
structural reforms through liberalization, privatization and globalization will
enable the country to become an active participant in the global market. The
business community particularly the large business houses concerned with
exporting, how to understand the message of globalization in the right
perspective.
Definitions of Globalization:
1. Rhodes (1996) Globalization is the functional integration of national
economies within the circuits of industrial and financial capital.
2. Walters (1995) Globalization as a social process in which the constraints of
geography on social and cultural arrangements precede and in which people
become increasingly aware that they are.
3. McGrew and Lewis Globalization as a set of processes which embrace most
of the globe or which operate world wide; the concept therefore has a special
cannotation.. On the other hand it also implies an intensification in the
levels of interaction, interconnectedness or interdependence between the state
and societies which constitute the world community.
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many industries. Instead of the traditional focus on product features and costs,
the Internet is shifting the basis for competition to a more strategic level in
which the traditional value chain of an industry is drastically altered. A 1999
report by AMR Research indicated that industry leaders are in the process of
moving 60 to 100% of their business to business (B2B) transactions to the
Internet. The net B213 marketplace includes (a) Trading Exchange Platforms
like VerticalNet and i2 Technologies's TradeMatrix, which support trading
communities in multiple markets; (b) Industry Sponsored Exchanges, such as
the one being built by major automakers; and (c) Net Market Makers, like
e-Steel, NECX, and BuildPoint, which focus on a specific industry's value
chain or business processes to mediate multiple transactions among businesses.
The Garner Group predicts that the worldwide B2B market will grow from
$145 billion in 1999 to $7.29 trillion in 2004, at which time it will represent 7%
of the total global sales transactions.
The above mentioned survey of top executives identified the following seven
trends, due at least in part, to the rise of the Internet:
1.
2.
3.
4.
5.
6.
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7.
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and at the same time decentralize authority so that local managers can make the
decisions necessary to meet the demands of the local market or host
government.3'To deal with this problem, MNCs tend to structure themselves
either along product groups or geographic areas. They may even combine both
in a matrix structure-the design chosen by 3M Corporation and Asea Brown
Boveri (ABB), among others.31 One side of 3M's matrix represents the
company's product divisions; the other side includes the company's
international country and regional subsidiaries.
The PRODUCT-GROUP STRUCTURE of American Cyanamid enables the
company to introduce and manage a similar line of products around the world.
This enables the corporation to centralize decision making along product lines
and to reduce costs. The geographic-area structure of Nestl6, in contrast, allows
the company to tailor products to regional differences and to achieve regional
coordination. This decentralizes decision making to the local subsidiaries. As
industries move from being multidomestic to more globally integrated,
multinational corporations are increasingly switching from the geographic-area
to the product-group structure. Texaco, Inc., for example, changed to a
product-group structure by consolidating its international, U.S., and new
business opportunities under each line of business at its White Plains, New
York, headquarters. According to Chairman Peter Bijur, "By placing groups
which will perform similar work in the same location, they will be able to share
information, ideas, and resources more readily-and move critical information
throughout the organization.
Simultaneous pressures for decentralization to be locally responsive and
centralization to be maximally efficient are causing interesting structural
adjustments in most large corporations. Companies are attempting to
decentralize those operations that are culturally oriented and closest to the
customers -manufacturing, marketing, and human resources. At the same time,
the companies are consolidating less visible internal functions, such as research
and development, finance, and information systems, where there can be
significant economies of scale.
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MODULE 21
EXPORT STRATEGIES, LICENCE STRATEGIES, FRANCHISING
STRATEGIES.
21.1 EXPORT - DEFINED
21.2 STRATEGIES TO GLOBAL ENTRY
21.3 EXPORT STRATEGIES
21.4 LICENSING STRATEGIES
21.5 FRANCHISING
21.6 JOINT VENTURES
21.1 EXPORT DEFINED
Hess and Cateora defined, Export Marketing is the performance of business
activities that direct the flow of companys goods and services to the consumers
or users in more than one nation.
B.S. Rathor defined, Export Marketing includes the management of
marketing activities for products which cross the national boundaries of a
country.
Issues concerning Export Business
Export marketing is a very complex and time-consuming process as it is subject
to rules and regulations of both exporting as well as importing country. At the
same time, there are other problems such as long distance, currency fluctuations
and high degree of competition.
(a) Long Distance :- International trade is spread over the world and therefore,
goods are to be transported over a considerable distance. During transportation goods are exposed to risk and uncertainties of transportation and
perils of sea. Again delay is caused due to lengthy customs formalities.
However, risk during transportation can be insured by taking suitable marine
insurance policies.
(b)High Risks and Uncertainties :- International trade is subject to political as
well as commercial risks. Political risks arise due to the political actions of
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the government (s). For example, war and internal aggression. Commercial
risks arise due to insolvency of buyer or buyer's failure to accept goods.
However, these risks can be insured by taking suitable policies from the
Export Credit and Guarantee Corporation of India (ECGC).
(c) Customs Formalities :- Customs formalities are different in different countries. Again, these formalities are very lengthy, time consuming and complicated. Sometimes, these formalities act as barriers to the free flow of trade
between countries of the world.
In order to solve the difficulties created by customs formalities, an exporter
can obtain assistance of the Clearing and Forwarding (C&F) agents.
(d)Trade Barriers :- Trade barriers are the artificial restrictions on the free
movement of goods from one country to other. These barriers are of two
types, viz., tariff and non-tariff. Tariff barriers are in the form of taxes and
customs duties. Non-tariff barriers are in the form of quotas and licences.
However, efforts are being made by the World Trade Organization (WTO)
to eliminate and simplify trade barriers.
(e) Threefaced Competition :- An exporter faces competition from three angles
:
Exporters from his own country.
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b) Licensing :- Under international licensing, a firm in one country (the licensor) permits a firm in another country (the licensee) to use its assets such as
patents, trademarks, copyrights, technology, technical know-how, marketing
skills or some other specific skills. The monetary benefit to the licensor is the
royalty or fees, which the licensee pays.
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21.5 FRANCHISING
Franchising is a strategy employed mainly by service companies. The
advantages of franchising are similar to those of licensing. The franchiser does
not bear the development costs and risks of commencing the operations in a
foreign market on its own since the franchisee typically assumes those costs
and risks. Thus, a service company can build up a global presence quickly and
at a low cost, using a franchising strategy. The disadvantages, however, are less
prominent than in the case of licensing. Since franchising is a strategy used by
service companies, a franchiser need not coordinate manufacturing activities in
order to realise experience curve effects and location advantages. McDonald
Restaurants have entered India through the franchising and so is Kentucky
Fried Chicken of US.
A major disadvantage of franchising is the lack of quality control. A basic
notion of franchising arrangements is that the company's brand name conveys a
message of quality to the consumers. The geographic distance from the
franchisees and the large number of franchisees make it difficult for the
franchiser to maintain quality and hence quality problems generally persevere.
To overcome this handicap, companies set up a subsidiary, which is wholly
owned or a joint venture with a foreign partner in each country and region in
which they plan to operate. Closeness and the limited number of independent
franchisees to be monitored reduce the problem of quality control. This type of
arrangement is well accepted in franchising.
21.6 JOINT VENTURES
Joint Venture is also called as joint deal or consortium. In joint venture, two
companies form two countries come together and conduct some new business
activity for mutual benefit. Joint ventures is a popular method of entering into
the global market. Besides sharing ownership and control, companies may
share technology or other specialized inputs. Two or more companies each can
provide specialized technology to one project, in a situation where no one
company, has access to all of the technologies required for a project.
Indian Joint Ventures Abroad:
A noteworthy feature of international market in recent times has been the
emergence of the Third World Multinationals. India has taken a big leap in
foreign trade through joint ventures and collaborations. The first Indian Joint
Venture was established in 1959 when the Birlas established a textile mill in
Ethopia. In 1962 Jaya Engineering Works set up a sewing machine and electric
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fan assembly unit in Sri Lanka. The success stories of these entrepreneurs
encouraged other Indian business to set up their units abroad either through
Joint Ventures or in collaborations with foreign companies. Today many Indian
companies have successfully launched several projects abroad in service, trade
and manufacturing sectors. Most successful among them are Kirloskars, Birlas,
Singhanias, Tatas, L&T, Hirachand and Walchand, Apte Group, Propack Ltd.
etc. Today there are 524 Joint Ventures abroad out of which 177 are in
operating stage and 347 under implementation.
Joint ventures have a number of advantages, the first one being the benefit a
company can derive from a local partner's knowledge of a host country's
business ecosystem. .Second, a company might gain by sharing high costs and
risks associated with opening of a new market with a local partner. Finally,
political considerations in some countries make joint ventures the only practical
way of entering those markets.
Despite these advantages, joint ventures are difficult to establish and run
because of two reasons. First, as in the case of licensing, a company risks losing
control over its technology to its venture partner. To minimize this risk, the
dominant company can seek a majority ownership stake in the joint venture to
exercise greater control over its technology provided the foreign partner is
willing to accept a minority ownership. The second disadvantage is that a joint
venture does not give a company the tight control over its subsidiaries needed
to realise experience curve effects or location advantages or to engage in
coordinated global attacks against its rivals.
Wholly Owned Subsidiary
A wholly owned subsidiary offers three advantages. First, when a company's
competitive advantage is based on its technological superiority, a wholly owned
subsidiary makes sense, since it reduces the company's risk of losing control
over this critical aspect. For this reason, many high-tech companies prefer
wholly owned subsidiaries to joint ventures or licensing arrangements. Second,
a wholly owned subsidiary gives a company the kind of tight control over
operations required for global coordination to take profits from one country to
support competitive strategy in another. Finally, a wholly owned subsidiary
may be the best choice if a company has to realise location advantages and
experience-curve effects. The entry of a number of South Korean companies
such as LG, Samsung, Hyundai into India by setting up subsidiaries without a
local partner are examples of wholly owned subsidiaries.
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MODULE 22
MULTI COUNTRY ORGANIZATION GLOBAL
STRATEGIES, GUIDANCE FOR SUCCESS AS A GLOBAL
COMPETITOR
22.1 INTRODUCTION
22.2 FEATURES OF MULTI COUNTRY ORGANIZATION
22.3 NEED FOR GLOBAL EXPANSION
22.4 SOME USEFUL TIPS TO GLOBAL COMPETITORS
22.1 INTRODUCTION
Different strategies that the multi country organizations adopt when they
expand outside their domestic market place and start to compete on a global
scale. One alternative available for companies is to follow the same strategy
worldwide, which is referred to as a global strategy. Selling the same product
the same way in every nation (standardisation) allows a company to realise
substantial cost savings from greater economies of scale. These cost savings
can then be passed on to consumers in the form of lower prices, enabling firms
to gain market share from competitors. However, to succeed in a new
marketplace, it may have to customise its product offering to cater to the tastes
and preferences of local consumers. While this may help, the shorter production
runs associated with such a strategy sometimes raise the costs of competing and
lower a firm's profit margins.
The decision to standardise or customise is a classic dilemma that confronts
global companies. In this unit, we consider the different strategies that
companies use to compete in the global marketplace and discuss the advantages
and disadvantages of each. In this unit we also examine the different
approaches that companies employ to enter foreign markets-including
exporting, licensing, setting up a joint venture, and setting up a wholly owned
ubsidiary. The unit ends with a discussion of the benefits and costs of entering
into strategic alliances with global competitors.
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quickly will have a cost advantage over its competitors. Most of the sources of
experience-based cost economies are generally found at the plant level.
Dispersing the fixed costs of building productive capacity over a large output
reduces the cost of producing a product. Hence the answer to riding down the
experience curve as rapidly as possible is to increase the accumulated volume
produced by a plant as quickly as possible. Global markets are larger than
domestic markets and, therefore, companies that serve a global market from a
single location are likely to build up accumulated volume faster than companies
that focus primarily on serving their home market or on serving multiple
markets from multiple production locations.
RESPONSIVENESS TO LOCAL NEEDS
Pressures for local responsiveness crop up due to differences in consumers'
tastes and preferences, differences in infrastructure, differences in distribution
channels, and the demands of the host government. Consumers' tastes and
preferences differ significantly between countries due to historic or cultural
reasons. Hence, the product and marketing messages have to be customised to
appeal to the tastes and preferences of local consumers in such cases. This
typically requires entrusting the production and marketing decisions to local
subsidiaries. Pressures for local responsiveness also crop up due to differences
in infrastructure and/or traditional practices among countries, creating a need to
customise products suitably. This may again require the delegation of
manufacturing and production functions to local subsidiaries.
Differences in distribution channels among countries may require adopting
different strategies. This may necessitate the delegation of marketing functions
to national subsidiaries. Finally, economic and political demands imposed by
host governments may necessitate a degree of local responsiveness. Generally,
threats of protectionism, economic nationalism, and local content rules all
dictate that international businesses manufacture locally. Pressures for local
responsiveness restrict a firm from realizing full benefits from experience-curve
effects and location advantages. In addition, pressures for local responsiveness
imply that it may not be possible to transfer from one nation to another the
skills and products associated with a company's distinctive competencies.
22.4 SOME USEFUL TIPS TO GLOBAL COMPETITORS
General Agreement on Tariff and Trade (GATT) - Background
The Great Depression of 1929 -made nations of the world to realise that the
wide gap between the economic theory and practice in determination of internal
trade policy was the major cause of worldwide economic disaster. Once again
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the need was felt of reviving the Classical Theory of Trade by adhering to free
trade policy.
The Brettonwoods Conference of 1944, which recommended the establishment
of International Monetary Fund (IMF) and the World Bank, had also recommended the establishment of an International Trade Organization (ITO). Although, the IMF and the World Bank were established in 1946, the proposal for
ITO did not materialise. Instead, the General Agreement on Tariff and Trade
(GATT), a less ambitious institution, was formed in 1948.
The primary objective of GATT is to expand international trade by liberalising
trade so as to bring about all-round economic prosperity. The preamble of the
GATT mentions the following as its important objectives
(a) Raising the standard of living.
(b) Ensuring full employment and a large and steadily growing volume of real
incorne and effective demand.
(c) Better utilisation of the resources of the world.
(d) Expansion of production of goods and services and international trade.
World Trade Organization (WTO) - Objectives
TheUruguay Round negotiations concluded on 15th April 1994 at Marrakech,
Morocco. According to the Marrakech declaration - the results of the Uruguay
Round would strengthen the world economy and would lead to more trade, in
vestment, employment and income growth throughout the world. In order to
implement the final act of Uruguay Round agreement of GATT, the World
Trade Organization (WTO) was established on Ist January 1995 with the
following objectives :(a) To raise the standards of living.
(b) To ensure full employment and a large and steadily growing volume of real
income and effective demand.
(c) To expand production of goods and services and international trade.
(d) To allow for the optimal use of the world's resources in accordance with the
objective of sustainable development.
(e) To protect and preserve the environment.
(f) To ensure that developing countries secure a share in the growth in interna
tional trade commensurate with the needs of their economic development.
(g) To effect substantial reduction in tariffs and other barriers to trade and to t
the discriminatory treatment in international trade relations and;
(h) To develop an integrated, more viable and durable multilateral trading
system.
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WTO Functions
The main functions of the wTO as set out in Article III are:
(a) To facilitate the implementation, administration and operation of the Multi
lateral Trade Agreement and the Plurilateral Trade Agreements.
(b) To secure implementation of the significant tariff cuts and also reduction of
non-tariff measures agreed in the trade negotiations.
(c) To provide for Dispute Settlement Mechanism in order to adjudicate the
trade disputes which could not be solved through bilateral talks between the
member countries.
(d) To co-operate with other international institutions like the International
Monetary Fund (IMF) and the International Bank for Reconstruction and
Development (IBRD) and its affiliated agencies to achieve greater coherence
in global economic policy making.
(e) To act as a watchdog of international trade.
(f) To act as a management consultant for the promotion of international trade.
The GATT Negotiation Rounds
So far, eight rounds of negotiations are over. Each-round took several years.
(a) The Geneva Round, 1947.
(b) The Annecy Round, 1949.
(c) The Torquay Round, 1950-51.
(d) The Geneva Round 1956.
(e) The Dillon Round 1960-61.
(f) The Kennedy Round, 1964-67.
(g) The Tokyo Round, 1973-79.
(h) The Uruguay Round, 1986-1993.
The first six rounds of Multilateral Trade Negotiations were concentrated almost exclusively on reducing tariffs.
The VIIth Round, the Tokyo Round, tackled non-tariff barriers also.
The VIIIth Round, the Uruguay Round, tackled trade in services, Trade Related
Aspects of Intellectual Property Rights (TRIPS) and Trade Related Investment
Measures (TRIMS).
WTO - The Uruguay Round
The VIIIth and the latest round of Multilateral Trade Negotiations is known as
Uruguay Round because it was held in Pantadel Este in Uruguay in September
1986. Because of the complexities of the issues involved and conflict of interests among the participating countries, the Uruguay Round could not be concluded in December 1990 as it was originally scheduled. This round concluded
in 1993.
The major highlights of the Uruguay Round are: -
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MODULE 23
APPLYING THE STRATEGIC MANAGEMENT PROCESS THROUGH
CASE STUDY METHOD THE CASE PREPARATION PROCESS,
ANALYZING CASES, REPORTING RECOMMENDATIONS.
23.1 WHAT IS A CASE ?
23.2 OBJECTIVES OF CASE METHOD
23.3 ANALYTICAL TOOLS
23.4 CASE STUDY OF KEMTRIT INDUSTRIES
23.1 WHAT IS A CASE ?
A case is written description of an organization (or any of its parts) covering all
or some of its aspects for a certain period of time. It sets forth the events and
organizational circumstances surrounding a particular managerial situation.
Most cases contain information about the organization's history, its internal
operations and its external environment. Though there is no standard order of
presentation, many cases include information about the industry, the
competitive conditions, the products and markets, the physical facilities, the
work climate, the skills and personality of,managers, the organizational
structure, together with the financial and quantitative data relating to
production, marketing, personnel, and so forth. Cases may relate to profit
seeking government or public service organizations.
Despite its known deficiencies, the case method is widely used by universities
and professional institutes throughout the world, especially for imparting
knowledge and developing skills in the area of corporate strategy or strategic
management.
A good case places students in a realistic situation where they can practise
making decisions. Though a case may contain plenty of information, in some
cases running into several pages, there is no such thing as a truly complete case.
Students often say (or complain) that they have too little information in the
case. While this may be true, it should be, appreciated that, many a time,
managers in the real world too have information which can hardly be described
as sufficient. In fact, a manager has far less opportunity for study and
interaction with others as a student has. The managers cannot afford to delay
making decisions until they are satisfied with the quality and quantity of
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available information. Such a time perhaps may never arrive. Like a real world
manager, a student of corporate strategy must make a decision, making best use
of whatever information is available and making assumptions about whatever is
unknown or is not available.
23.2 OBJECTIVES OF CASE METHOD
The objectives of the case method are to:
help you to acquire the skills of putting text book knowledge about
management into practice. Managers succeed not so much because of what
they know but because of what they do.
get you out of the habit of being a receiver of facts, concepts and techniques
and get into the habit of diagnosing problems, analysing and evaluating
alternatives, and formulating workable plans of action.
train you to work out answers and solutions for yourselves, as opposed to
relying upon the authoritative crutch of the teacher/counsellor or a text
book.
provide you exposure to a range of organizations and managerial situations
(which might take a life time to experience personally), thus offering you a
basis for comparison in your working as a career manager.
Reading books, articles and listening to lectures alone cannot develop
managerial skills. For most managerial problems, readymade answers do not
exist, or perhaps cannot exist. Each situation is different, requiring its own
diagnosis and evaluation before action can be initiated. Case studies allow
learning by doing to occur. They stimulate the reality of a managerial situation
and a manager's job. In a sense, cases are laboratory materials and offer a
reasonable substitute for actual experience by bringing a variety of management
problems and opportunities into the class room.
Students often ask their teacher/counsellor, "What is the right
answer/solution?" If the discussion in the class concludes without clear answers
or a clear consensus on what actually happened or what should/ought to be
done, some students feel frustrated. While in some cases it would be possible
for you and the counsellor to develop a consensus, in other cases it may perhaps
not be possible. As in real world, hard answers to cases do not exist. Therefore,
issues are discussed and various alternatives and approaches are evaluated.
Usually, a good argument can be made for more than one course of action. The
important thing for students to understand in case analysis is that it is the
exercise of identifying, diagnosing, and recommending that counts rather than
discovering the "right answer". The essence of case analysis is to become
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some opportunity to the students to relate their viewpoints with those of the
others. While defending his own viewpoint, a student has also to develop an
appreciation for the viewpoints held by others. Table-1.1 lists the management
skills which are improved by case analysis.
Action Skills Reinforced by Cases
1. Think clearly in complex ambiguous situations:- Successful experiences
with cases give students the practice and confidence necessary for clear
intensive thinking in ambiguous situ4fions where no one right answer
exists. Since problems in management and administration are full of these
situations. The skills are valuable to acquire.
2. Devise reasonable, consistent, creative action plans:- Most cases require
the student to detail a course of future action.
3. Apply quantitative tools:- The management of modem organization
demands the use of such quantitative tools and theory as net present value,
ratio analysis, and decision tree analysis. Active employment of these techniques in actual situations requires more knowledge than one typically gains
by introductory theory and problems. Cases give the student practice in
using quantitative tools in these realistic situations.
4. Recognize the significance of information:- Theories and observations of
modern management have shown that managers sift through large masses of
information, both formal reports and informal channels (the "grapevine").
The manager's task of defining problems and their solutions demands. the
ability to classify information.
5. Determine vital missing information:- Successful decision makers must
know where and be able to determine when to seek more information. Cases
give the student practice in solving problems with the information at hand in
the case. In researching standard industry sources, and in identifying the
missing information that is vital to the formulation of an action plan.
6.Communicate orally in groups:- Both the in-class discussions of cases and
small group discussions preceding class are an integral part of learning by
cases. The ability to listen carefully to others, to articulate one's views, and to
rapidly incorporate the views of others into one's position are all important
skills for managers.
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7.Write clear, forceful, convincing reports:- Managers and their staffs have to
express themselves in writing. The best way to improve one's writing skills is to
write; hence, the usefulness of the case report.
8.Guide students' careers:-Many students would benefit from a greater
awareness of the day-to-day tasks and responsibilities of managers. The wide
variety of actual situations described in cases gives students valuable
knowledge about the functions of many job positions.
9.Apply personal values to organizational decisions:- Modem industrial
society forces managers to make decigions which trade among business profits,
government expenses, and the welfare of individuals and the public. This area
of ethics and social responsibility is important and problematic in a
professional education. The 'process of stating and defending positions in case
discussions sharpens a student's awareness and maturity in the subjective area
of value and moral judgements.
23.3 ANALYTICAL TOOLS
There are a number of tools which have been found to be useful, both
academically and professionally. These tools have been discussed in the various
units of MS-11 (Corporate Policies and Practices). Among the more important
ones are:
SWOT Analysis
Ratio Analysis
Portfolio Analysis
Checklist (Strategic audit)
SWOT Analysis
The first thing that an analyst should do in SWOT (strengths, weaknesses,
opportunities and threats) analysis is to define the business of the organization
and identify the key factors for success, The student must evaluate the strengths
and weaknesses in terms of the skills, resources and competencies of the
persons within the company in the light of the key factors. The analyst then
should see whether the internal capabilities match with the demands of the key
factors so that the company will be able to exploit the opportunities and fight
off the threats.
The SWOT analysis stands at the core of the strategic management.
Threats And weaknesses are relative rather than absolute. Opportunities seldom
simply arise. Many a time they exist in the environment and only need to be
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Weaknesses
Opportunities
Threats
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associated with his three friends Rakesh, Raj and Udhav. Rakesh (an engineer
cum MBA), Raj (a Chartered Accountant) and Udhav (an ex-captain of the
Indian Army). He was hopeful that the background of his friends would not
only provide an image of a professional company, but would also help in
creating a professional work culture from day one.
All the four partners had excellent rapport and very old social ties. Formation
of Kemtrit Industries was seen as a reinforcement of their past relationship. But
within two years, the poor performance of Kemtrit Industries surfaced the
differences in their view points for managing Kemtrit Industries. At the root,
was the relationship between Kemtrit Industries and Metrit Corporation. The
three partners Rakesh, Raj & Udhav felt that Kemtrit Industries has always
been considered as, a group of outsiders by the executives of Metrit
Corporation. It was their feeling that only Mukesh was genuinely interested in
the welfare of Kemtrit Industries. In their own assessment, Mukesh, by virtue of
the business relationships, was under the influence of people who were not
interested in the growth and prosperity of Kemtrit Industries. The fear was that
one day this may affect Kemtrit Industries adversely. It was their feeling that in
spite of no business relationship, Kemtrit Industries was seen as a charitable
organization of MC and was being forced to perform many activities of no
direct interest to Kemtrit Industries. When a family member of Mukesh (who
was Mukesh's business associate in Metrit Corporation) wanted to see the
monthly reports of Kemtrit Industries, the partners felt encroachment in Kemtrit
Industries affairs by the outsiders.
Unfavourable terms of sharing the profits between Metrit Corporation and
Kemtrit Industries, misperception on the part of the Metrit Corporation's
executives that partners of Kemtrit Industries do not believe in being part of the
Metrit Corporation family, also created an environment of suspicion and
mistrust. In short, the business relationship and distortions in perceptions had
become major demotivators, preventing the three partners to contribute their
best.
In spite of the differences with Metrit Corporation, all the three partners were
unanimous in their opinion towards Mukesh. He was indispensable. Kemtrit
Industries without an active involvement of Mukesh was not acceptable to them
either.
Mukesh was of the view that there were both "pluses" and "negatives" in
Kemtrit Industries relationship with Metrit Corporation some negative points
were:
lack of ego gratification of other partners
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at times, it may cramp the working style of others, as it has to conform to the
work culture of Metrit Corporation
Kemtrit Industries growth plans may have to be sacrificed in the larger interest
of Metrit Corporation. For examples Kemtrit Industries would never be allowed
to manufacture sodium dichromate; a chemical needed in leather tanning as
Metrit Corporation was thinking of setting, up 4 similar manufacturing facility,
The partners of Kemtrit Industries had to accept this and Metrit Corporation
had already decided to be in the business of chrome chemicals, even though, it
was not in the leather business.
On the positive side, according to Mukesh, were the benefits of a larger
organizationai base, easy and timely availability of finances, risk minimisation
as Kemtrit Industries could always lean on Metrit Corporation, and reaping of
benefits through Metrit Corporation 's goodwill in the market place.
Mukesh felt that instead of questioning, the partners of Kemtrit Industries could
play a major role in the growth of Metrit Corporation. A healthy and larger
Metrit Corporation was in their own interest. Working for Metrit Corporation 's
growth could provide them with challenges and excitement of creating a
professional organization.
Besides the tricky issue of the 'partnership', the performance of Kemtrit
Industries was disturbing. The company was facing working capital shortages.
The shortage prevented the achievement of the sales targets of Rs.300 lakh for
the year 1987. The company had borrowed nearly Rs. 25 lakh, out of the total
requirement of Rs. 30 lakh, at a very high interest rate of 20% per annum. On
the other hand, the company had failed to utilise its full limits granted by the
bank. The three partners were of the view that the present tie up with Metrit
Corporation has deprived them or availing the limits against hypothecation of
the finished goods. Kemtrit Industries could not apply for this facility as Metrit
Corporation had obtained the same for the gloves. This, however, allowed
Metrit Corporation to borrow money against the finished leather gloves. This
money, however, was never paid in time, Metrit Corporation. according to the
partners was at the root of the working funds crises.
The growth alternatives and the aspirations
In spite of low morals and motivation, the partners were keen for the growth of
Kemtrit Industries. Considerable thought and energy were being spent in
clarifying their growth objectives and plans. Their keenness was obvious from
the fact that except for Mukesh, the other three were completely dependent on
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Threats
For Gloves
Raw material subject to constant price rises.
Demand for gloves may rise or fall without any explicable trends.
Poor and erratic. availability of raw material (leather).
Changing government policies and export restrictions (quotas) by 'importing'
countries.
Buyers may change their loyalty towards India.
Product substitution possible through other kinds of leather.
Constant labour trouble on Indian scene.
Only high volume can sustain the business as profitability is very low.
Calcium Carbonate
Risk is high or low as it is a function of the whims of the Principal.
Being a by-product, the principal does not seem to pay proper attention to its
marketing. This is affecting Kemtrit Industries performance.
Irregular supplies of the material.
Only one grade available as compared to many grades of competitors.
Opportunities for Kemtrit Industries
Since it has both entrepreneurial and physical resources, Kemtrit Industries
can both expand and diversify in any line related to gloves or Calcium
Carbonate.
For leather goods, tremendous opportunities exist in both domestic and
international markets.
In case regular supplies are available for Calcium Carbonate, Kemtrit
Industries can generate much needed surpluses. Assuming a net profit of
6%, Kemtrit Industries can each year generate nearly Rs.3 lakh as surplus on
a sale of Rs.50 lakh. The main problem was the fluctuating market
conditions, affecting the price and hence the profitability.
It can enter into trading of another line of the Principal i.e., papers. Kemtrit
Industries would need to develop some strengths at least in terms of market
knowledge and marketing practices of trade etc.
Since Kemtrit Industries has a knowledge of Calcium Carbonate and since
today its operations are constrained because of only one grade, Kemtrit
Industries should explore the possibility of adding few more lines for the
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