Q. Strategic management Process?

A. Strategic Management can be defined as the art and science of formulating, implementing, and evaluating cross functional decisions, that enable an organization to achieve its objectives.

Startegic Management Process consists of three stages:

1. Estabilishment of strategic intent,

2. Startegy Formilation,

3. Strategy Implementation,

4. Startegy Evaluation.

5. Strategic Control

(A) Estabilishing the hierarchy of Strategic Intent

- creating and commuinicating a vision,

- designing a mission statement,

- defining business,

- setting objectives.

(B) Formulation of Strategies:

- performing environmental appraisal,

-doing organizational appraisal,

- considering corporate level strategies,

- considering business level strategies,

- undertaking strategic analysis,

- exercising strategic choice,

- formulating strategies,

- preparing a strategic plan.

(C) Implementation of Strategies:

- activating strategies,

- designing structures and systems;

- managing behavioural implementation;

- managing functional implementation;

- operationalising strategies.

(D) Performing Strategic evaluation and control:

- performing strategic evaluation;

- execrcising strategic control;

- reforming strategies.

Q. Vision?

Vision has been defined by El Namaki as a "mental perception of the kind of environment an individual, or an organization aspires to create a within a broad time horizaon and the underluying conditions for the actualisation of this perception".

Benefits of having a Vision

Parikh and Neubauer point out the several benefits accruing to an organization having a vision.

a. Good visions are inspiring and exhilarating.

b. Visions represent discontinuity, a step function and a jump ahead so that the company knows what is to be done.

c. Good Vision helps in the creation of a common identity and a shared sense of purpose.

d. Good visions are competitive, original and unique. They make sense in the marketplace as they are practical.

e. Good visions foster risk-taking and experiementation.

f. Good visions foster long term thinking.

g. Good visions represent integrity, they are truely genuine and can be used for the benefit of people.

Q. Mission?

A. While the essence of vision is forward looking view of what an organization wishes to become, mission is what an organisation is and why it exists.

Understanding Mission

Mission is a statement which defines the role taht an organization plays in the society. It refers to the partcular needs of that society, for instance, its information needs.

Defining Mission

Thompson defines tyhe Mission as, "essential purpose of the organization, concerning particularly why it is in existence, the nature of business(es) it is in, and the customers it seeks to serve and satisfy." Hunger and Wheelen say that mission is the "purpose or reason for the organization's existence."

Features of a good Mission Statement

Mission should be clear, both in terms of intentions and words used;

1. It should be feasible, neither too high to be unachievable, nor too low to demotivate the people for work.

2. It should be precise but self-explanatory, neither too narrow so as to restrict the organization’s activities, nor too broad to make itself meaningless.

3. It should be distinctive, both in terms of the organization’s contributions to the society and how these contributions can be made.

Q. SWOT Analysis
SWOT analysis means analyzing strengths, weaknesses, opportunities and it is a useful strategic planning tool and is based on the assumption that if managers carefully review internal strengths and weaknesses and external threat and opportunities, a useful strategy for ensuring organisational success can be formulated. It is a simple technique for getting a
quick overview of a strategic situation so that such strategies can be formulated as to produce a good between the company’s internal competencies (strength and weaknesses) and environment
(opportunities and threats).

Strengths and Weaknesses

A “strength” is a positive characteristic that gives a company an important capability. It is an important organisational resource which enhances a company, competitive position. Some of the
internal strengths of an organisation are:
· Distinctive competence in key areas
· Manufacturing efficiency
· Skilled workforce, adequate financial resources Superior image and reputation
· Economies of scale
· Superior technological skills
· Insulation from strong competitive pressures
· Product or service differentiation
· Proprietary technology.

A “weakness” is a condition or a characteristic, which puts the company at disadvantage. Weaknesses make the organisation vulnerable to competitive pressures. These are competitive
liabilities and strategic managers must evaluate their impact on the organization’s strategic position when formulating strategic policies and plans. Weaknesses require a close scrutiny because some of them can prove to be fatal. Some of the weaknesses to
be reviewed are:
· No clear strategic direction
· Outdated facilities
. Lack of innovation is Complacency
· Poor research and developmental programs
· Lack of management vision, depth and skills
· Inability to raise capital
· Weaker distribution network
· Obsolete technology
· Low employee morale
· Poor track record in implementing strategy
· Too narrow a product line
· Poor market image
· Higher overall unit costs relative to competition.

Opportunities and Threats

An “opportunity” is considered as a favourable circumstance, which can be utilized for beneficial purposes. it is offered by outside environment and the management can decide as to how
to make the best use of it. Such an opportunity may be the result of a favourable change in any one or more of the elements that constitute the external environment. It may also
be created by a proactive approach by the management in moulding the environment to its own benefit. Some of the opportunities are:
· Strong economy
· Possible new markets
· Emerging new technologies
· Complacency among competing organizations
· Vertical or horizontal integration
· Expansion of product line to meet broader range of customer needs
· Falling trade barriers in attractive foreign markets

A “threat” is a characteristic of the external environment, which is hostile to the organisation. Management should anticipate such possible threats and prepare its strategies in such a manner
that any such threat is neutralized. Some of the elements that can pose a threat are:
· Entry of lower cost foreign competitors cheaper technology adopted by rivals
· Rising sales of substitute products
· Shortages of resources
· Changing buyer needs and preferences
· Recession in economy
· Adverse shifts in trade policies of foreign governments
· Adverse demographic changes

SWOT analysis involves evaluating a company’s internal environment in terms Of strengths and weaknesses and the external environment in terms of opportunities and threats and
formulating strategies that take advantage of all these factors. Such analysis is an essential component of thinking strategically about a company’s situation.

Management
1. Does the company use strategic management concepts?
2. Are company objectives and goals measurable and well communicated?
3. Do managers at all hierarchical levels plan effectively?
4. Do managers delegate authority well?
5. Is the organization’s structure appropriate?
6. Are job description and job specifications clear?
7. Is employee morale high?
8. Is employee turnover and absenteeism low?
9. Are organisational reward and control mechanisms effective?

Marketing
1 . Are markets segmented effectively?
2. Is the organisation positioned well among competitors?
3. Has the company’s market share been increasing?
4. Are present channels of distribution reliable and costeffective?
5, Does the company have an effective sales organisation?
6. Does the company conduct market research?
7. Is product quality and customer service good?
8. Are the company’s products and services priced appropriately?
9. Does the company have an effective promotion, advertising, and publicity strategy?
10. Is marketing planning and budgeting effective?
11. Do the company’s marketing managers have adequate experience and training?

Research and Development
1 . Does the company have R&D facilities? Are they adequate?
2. If outside R&D companies are used, are they cost-effective?
3. Are the organization’s R&D personnel well qualified?
4. Are R&D resources allocated effectively?
5. Are management information and computer systems adequate?
6. Is communication between R&D and other organisational units effective?
7. Are present products technologically competitive?

Computer Information Systems
1 Do all managers in the company use the information system to make decisions?
2. Is there a chief information officer or director of information systems position in the company?
3. Are data in the information system updated regularly?
4. Do managers from all functional areas of the company contribute input to the information system?
5. Are there effective passwords for entry into the company’s information system?
6. Are strategies of the company familiar with the information systems of rival companies?
7. Is the information system user friendly?
8. Do all users of the information system understand the competitive advantages that information can provide companies?
9. Are computer training workshops provided for users of the information system?
10.Is the company’s information system continually being improved in content and user friendliness?

Q. Value Chain Analysis
The second framework that companies can use to identify and evaluate the ways in which their resources and capabilities can add value is value chain analysis. This framework is useful
because it enables companies to understand which parts of their operations or activities create value by segmenting the value chain into primary and secondary activities as illustrated in the
figure. The figure illustrates how the valuecreating activities performed by the company can be separated into primary and secondary activities. Primary activities, shown vertically, represent traditional line activities such as inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities, shown horizontally, are represented by a company’s
staff activities and include its financial infrastructure, human resource management practices, technological development, and procurement activities.

The first step in value chain analysis is to carefully examine each of the company’s primary activities to determine the potential for creating or adding value.

· Inbound Logistics
Examine all activities related to the receipt, control, warehousing, inventory, and distribution of raw materials or component parts into the production process.

· Operations
Activities to be examined are all those necessary to convert the inputs (raw materials or components) available as a result of inbound logistics into finished products. Examples include machining, assembly, equipment maintenance, and packaging.

· Outbound Logistics
This category represents the company’s activities involved with the collection, storage, and physical distribution of products to customers. Examples include warehousing or storage of
finished products, material handling, and order processing.

· Marketing and Sales
Several marketing and sales activities must be completed to both induce customers to purchase products and ensure that products are available. Activities include developing advertising
and promotion campaigns; selecting and developing distribution channels; and selecting, training, developing, and supporting a sales force.

· Service
These are the activities that a company offers to enhance or maintain a product’s value, including installation, product use training, adjustment, repair, and warranty services.
The next step in the value chain analysis process is an examination of the company’s support activities to determine any value creating potential in those activities.

· Procurement
These are activities that are completed to purchase the inputs needed to produce a company’s products, including items consumed or used in the manufacturing process (such as raw
materials or component parts), supplies, and fixed assets (machinery, equipment and facilities).

· Technological Development
All activities that are completed to either improve a company’s products or its production processes. This includes basic research, process and equipment design, product design, and
servicing procedures.

· Human Resource Management
These activities are related to the recruiting, hiring, training, developing, and compensating (including performance assessment and reward systems) of a company’s employees.

· Company Infrastructure
These activities support the activities performed in the company’s value chain, including general management practices, planning, finance, accounting, legal, and government relations.
By performing its infrastructure related activities, a company identifies external opportunities and threats, and internal strengths and weaknesses related to company resources and
capabilities, and supports or nurtures its core competencies. Using the value chain framework enables managers to study the company’s resources and capabilities in relationship to the
primary and support activities performed to design, manufacture, and distribute products, and to assess them relative to competitors’ capabilities. For these activities to be sources of
competitive advantage, a company must be able to perform primary or support activities in a manner that is superior to the ways that competitors perform them. Also perform a primary
or support activity that no competitor is able to perform to create superior value for customers and achieve a competitive advantage.

This implies that, given that individual companies are comprised of unique or heterogeneous bundles of activities, reconfiguring the value chain, or rebundling resources and
capabilities, may enable a company to develop unique valuecreating activities. The managerial challenge is that the value creation process is difficult and there is no one best way to
assess a company’s primary and support activities or to evaluate the value creating potential of those activities either within the company or relative to competitors, because of incomplete or
ambiguous data. However, by being objective, managers may be able to use the
value chain framework to identify new, unique ways to combine resources and capabilities to create value that are difficult for competitors to recognize, understand, or imitate. The longer a
company is able to keep competitors “in the dark,” as to how resources and capabilities have been combined to create value, the longer a company will be able to sustain a competitive
advantage. Companies can use outsourcing as an alternative to identify
primary or support activities for which its resources and capabilities are not core competencies and do not enable the company to add superior value and achieve competitive
advantage.

Outsourcing
Outsourcing describes a company’s decision to purchase a valuecreating activity from an external supplier. Outsourcing has become important, and may become more important in the
future, for two reasons:

· First, there are limits to the abilities of companies to possess all of the bundles of resources and capabilities that are required to achieve superior performance (relative to
competitors) in all of its primary and support activities.

· Second, with limits to their resources and capabilities, companies can increase their ability to develop resources and capabilities to develop core competencies and achieve competitive advantage by nurturing only a few core competencies. However, outsourcing is yet to pick up in India in a major way. When outsourcing, a company seeks the greatest value. In other
words, a company wants to outsource only to companies possessing a core competence in terms of performing the primary or support activity that is being outsourced. When
evaluating resources and capabilities, companies must be careful not to outsource activities in which they can create and capture value. Additionally, companies should not outsource primary
and support activities that are used to neutralize environmental threats or complete necessary ongoing organisational tasks.

Q. BCG Matrix

Description of the BCG Matrix To ensure long-term value creation, a company should have a
portfolio of products that contains both high-growth products in need of cash inputs and low-growth products that generate a lot of cash. The BCG matrix is a tool that can be used to
determine what priorities should be given in the product portfolio of a business unit. It has 2 dimensions: market share and market growth. The basic idea behind it is that the bigger
the market share a product has or the faster the product’s market grows the better it is for the company. product portfolio method

Placing products in the BCG matrix results in 4 categories in a portfolio of a company:

1. Stars
(=high growth, high market share)
· use large amounts of cash and are leaders in the business so they should also generate large amounts of cash.
· frequently roughly in balance on net cash flow. However if needed any attempt should be made to hold share, because the rewards will be a cash cow if market share is kept.

For instance, petrochemicals, electronics and telecommunications, fast foods, ceramic tiles, among others are some of the industries which have very high growth rate.

2. Cash Cows
(=low growth, high market share)
· profits and cash generation should be high , and because of the low growth, investments needed should be low. Keep profits high

· Foundation of a company

Scooters for Bajaj Auto, toothpaste for Colgate, decorative paints for Asian Paints, moulded luggage for blowplast, and India Today for Living Media are some of the cash cows in the contemporary Indian markets.

3. Dogs
(=low growth, low market share)
· avoid and minimize the number of dogs in a company.
· beware of expensive ‘turn around plans’.
· deliver cash, otherwise liquidate

For instance, cotton textiles, jute, shipping, leasing, photocopiers are some of the products and services that have become dogs for quite a few companies.

4. Question Marks
(= high growth, low market share)
· have the worst cash characteristics of all, because high demands and low returns due to low market share
· if nothing is done to change the market share, question marks will simply absorb great amounts of cash and later, as the growth stops, a dog.
· either invest heavily or sell off or invest nothing and generate whatever cash it can. Increase market share or deliver cash.

. Holiday resorts, light commercial vehicles, home improvement products ae some of the examples.

Using the BCG Matrix can help understand a frequently made strategy mistake: having a one-size-fits-all-approach to strategy, such as a generic growth target (9 percent per year)
or a generic return on capital of say 9,5% for an entire corporation.
In such a scenario:

A. Cash Cows Business Units will beat their profit target easily; their management has an easy job and is often praised anyhow. Even worse, they are often allowed to reinves
substantial cash amounts in their businesses, which are mature, and not growing anymore.
B. Dogs Business Units fight an impossible battle and, even worse, investments are made now and then in hopeless attempts to ‘turn the business around.
C. As a result (all) Question Marks and Stars Business Units get mediocre size investment funds. In this way they are unable to ever become cash cows. These inadequate invested sums
of money are a waste of money. Either these SBUs should receive enough investment funds to enable them to achieve a real market dominance and become a cash cow (or star), or
otherwise companies are advised to disinvest and try to get whatever possible cash out of the question marks that were not selected.

Q. Grand Strategy

- Corporate level strategies are basically about the choice of direction taht a firm adopts in order to achieve its objectives.

- Abell has suggested defining a business along three dimensions- Customer groups, Customer functions and alternative choices. - Strategies alternative revolve around the question of whether to continue or change the business the enterprise is currently in or improve the efficiency and effectiveness with which the firm achieves its corporate objectives in its chosen business sector.

- Glueck has identified four grand strategyic alternative, Stability, Expansion, retrenchment, and any combination of these three.

Q. Resource Allocatio
After resource mobilization, resource allocation activity is undertaken. This involves allocation of different resourcesfinancial and human-among various organizational units and
subunits. In order to understand the rationality of resource allocation, it is essential to understand commitment principle because resource allocation is a kind of commitment.
Commitment Principle. Commitment involves adhering to a thing for which a person is committed. In the context of planning, commitment principle implies planning for the future
impact of today’s decisions. Since the futurity of different decisions varies, risk involved in respective decisions also varies. Applying the concept of commitment principle in resource allocation implies that when resources are committed to a unit or a project, the organization takes a risk. The risk involved depends on the time taken to recover resource cost. Since a unit
requires resources for varying periods-long-term for creation of physical assets; short-term for inventory, debtors, etc., cost recovery period also varies. Therefore, while allocating resources,
commitment principle should be taken into consideration.

Basis For Resource Allocation
While allocating the resources, an organization may take two alternative steps
i Resources should be allocated at a place where these have their maximum contributions, or
ii Resources should be put according to the needs of various
organizational units/subunits. Both these alternatives may become complementary to each other if there is an objective evaluation of the resource requirement of various units.
Budgeting is the means through which resources ‘are allocated to various organizational units. However, the traditional budgeting which focuses just on the past resource allocation as
the basis is not useful for resource allocation in any way because the conditions, both external as well internal, change making the past practices of resource allocation meaningless. Therefore,
when budgeting is used as a tool for resource allocation, it has to be oriented to the objectives of the organization and the way each unit of the organization will contribute to the achievement
of these objectives. From this point of view, following types of budgeting are more relevant:
1. Capital budgeting
2. Performance budgeting
3. Zero-base budgeting
4. Strategic budgeting.

Capital Budgeting
Capital budgeting is the planning of deployment of financial resources of an organization for the purpose of maximizing the long-term profit ability of the organization. In this
budgeting, various techniques like average rate of return, payback period, internal rate of return, and net present value, are used to determine where a rupee put will earn maximum profit. This method, however, is more useful at the stage of considering
the various alternative project proposals. From strategic management point if view, it does not offer much help. at the strategy implementation level. Also if does not consider the
allocation of human resources who’ really matter in making a project successful.

Performance Budgeting A performance budgeting is an input/output or cost/result budgeting: It emphasizes non-financial measurement of performance, which can be related to financial measurement in explaining changes and deviations from planned performance. Historical comparisons of non-financial measurements of an vity are particularly helpful in justifying budget proposals and in showing how resources are being used. These measurements are useful for evaluating past performance and for planning future activities.

Zero-base Budgeting
Zero-base budgeting (ZBB) is based on a system where each function, irrespective of the fact whether it is old or new, must be justified in its entirety each time a new budget is formulated.
It requires each manager to justify his entire budget in detail from scratch, that is zero base. Each manager states why he should spend any money at all. The process’ of ZBB involves
the four basic steps: i Identification of decision units, that is cluster of activities or
assignments within a manager’s operations for which he is accountable;
ii Analysis of each decision unit in the context of total decisi0n package;
iii Evaluation and ranking of all decision units to dev-clop the budget request; and
iv Allocation of resources to each unit based upon ranking. Thus, emphasis is placed upon resource allocation according to the contributions of each decision unit.
ZBB results into a number of benefits over traditional budgeting. Such benefits may be in the form of
i Effective allocation of resources,
ii Improvement in productivity and cost effectiveness
iii Effective means to control costs
iv Elimination of unnecessary activities
v Better focus on organizational objectives, and
vi Saving time of top management.

However, ZBB may result into some problems if not followed properly. For example, it may result into extra paper work, difficulty in identifying
decision packages, tendency to establish minimum level of efforts, etc. However, these problems can be overcome when an organization gains experience of ZBB.