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Summer 2014 Exam Oct/Nov 2014

Masters of Business Administration

MBA Semester 4

MB0052 Strategic Management and Business Policy Assignments

Q 1. What is strategy? Explain some of the major reasons for lack of strategic management in

some companies?

Answer.

Definition of Strategy:

In business, corporate strategy refers to the overall strategy of an organization that is made up of

multiple business units, operating in multiple markets. It determines how the corporation as a

whole supports and enhances the value of the business units within it; and it answers the question,

"How do we structure the overall business, so that all of its parts create more value together than

they would individually?

Strategy at the business unit level is concerned with competing successfully in individual markets,

and it addresses the question, "How do we win in this market?" However, this strategy needs to be

linked to the objectives identified in the corporate level strategy.

Major reasons for lack of strategic management in some companies:

The importance of new ventures to the economy is substantial in terms of innovation, employment,

and sales and effective planning can help these new firms survive and grow. Unfortunately,

research has shown a distinct lack of planning on the part of new ventures. Five reasons for the lack

of strategic planning have been found:

1. Time scarcity. Managers report that their time is scarce and difficult to allocate to planning in

the face of day-to-day operating schedules.

2. Lack of knowledge. Small firm owners/managers have minimal exposure to, and knowledge of,

the planning process. They are uncertain of the components of the process and the sequence of

those components. The entrepreneurs are also unfamiliar with many planning information sources

and how they can be used.

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3. Lack of expertise/skills. Small-business managers typically are generalists, and they often lack

the specialized expertise necessary for the planning process.

4. Lack of trust and openness. Small firm owners/managers are highly sensitive and guarded

about their businesses and the decisions that affect them. Consequently, they are hesitant to

formulate a strategic plan that requires participation by employees or outside consultants.

5. Perception of high cost. Small-business owners perceive the cost associated with planning to be

very high. This fear of expensive planning causes many business owners to avoid or ignore planning

as a viable process.

In addition to these reasons, other factors have been reported as difficulties of the plan-

ning process. For example, both high-performing and low-performing small ventures have

problems with long-range planning. Both time and expense are major obstacles.

Additionally, low-performing firms report that a poor planning climate, inexperienced

managers, and unfavorable economic conditions are problems.

Q 2 Explain the following:

(a) Core competence

(b) Value chain analysis

Answer.

Explanation of Core competence:

Core competence is a management tool that enables an organization to deliver a unique value to its

customers. Building up core competency becomes essential to gain competitive advantage because

advantages originating from the product-price-performance-tradeoffs are almost short-term

especially when technology keeps on changing. The profits earned by the various business units can

only last through competencies.

Example in a small town called Vellore in the south Indian state of Tamil Nadu, there is a famous deemed university called the Vellore Institute of Technology (VIT). Its founder, Mr. Vishwanathan,

has adopted a unique model of building formidable core competencies. He has made huge

investments in creating world-class infrastructure, which has attracted the best minds as students

not only from various parts of India, but also from other countries of the world, including developed

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countries like Canada, and several African nations. What has really mattered is that, the quality of

teaching has improved, as VIT has been able to attract high-calibre teachers from all over the

country.

Value chain analysis: Michael Porter introduced the concept of value chain analysis in his book, The Competitive Advantage. Each organization has its own internal value chain of activities. Michael Porter suggested that the value chain of an organization can be split into primary activities and support

activities.

Primary activities are those that are concerned with creating and delivering the end product.

Operations The raw goods acquired are converted into the final product. Value is added to the product at this phase as it moves through the production line.

Outbound logistics Once the products have been produced, they are ready for distribution to distribution centers, wholesalers, and retailers.

Marketing and sales Marketing ensures that the end product is targeted to the right customer group. The marketing process establishes an effective strategy.

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Services After the products are sold, the organization has to offer support services. This may be in the form of customer support, guarantees and warranties.

Procurement This section supplies raw material for the organization and obtains the best price and quality.

Technology development An organization should be technology driven. The organization uses technology to reduce production cost, which in turn adds value, and to develop new products

through research and development.

Human resources The organization has to recruit and train the right people to succeed in their objectives.

Firm infrastructure The organization needs to ensure that its financial structure, legal structure and management structure works efficiently and helps the organization move forward.

Q 3. Describe in brief the following environmental factors which a business strategist

considers:

(a) Political factors

(b) Technology

Answer.

Political factors:

Political factors impact the organizations in many ways. Political factors can create benefits and

opportunities for the organizations. The political environment has an important impact on the

business. There is a large field with many factors which the companies have to consider if they want

to expand overseas Political environment is not stable and can change quickly. Monitoring,

understanding and adapting to the political environment is absolutely essential for any business,

because it significantly affects every business.

Political factors are basically to what degree the government intervenes in

the economy. Specifically, political factors include areas such as tax policy, labor law, environmental

law, trade restrictions, tariffs, and political stability. Political factors may also include goods and

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services which the government wants to provide or be provided (merit goods) and those that the

government does not want to be provided.

Political factors can be:

1) Stability of the government

2) Fair-trade laws

3) Antitrust laws

4) Tax laws

5) Minimum wage legislation and Economic policy of the government pollution laws as cited in

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6) Defense and military policy Diplomatic events in surrounding countries

These factors can be restrictive or beneficial. Restrictive factors are those factors that limit profits

Technology:

Technological factors include technological aspects such as R&D activity, automation, technology

incentives and the rate of technological change. They can determine barriers to entry, minimum

efficient production level and influence outsourcing decisions. Furthermore, technological shifts

can affect costs, quality, and lead to innovation.

Technology Do you need an Enterprise Content Management (ECM) Solution? Your information management program is going to rely on technology to enable your organization

to comply with your policies and execute your information management processes. The right

application of technology can provide your program with a great degree of control over your organizations information while having a minimal impact on daily activities of your staff. Technology Your users love Collaboration Tools What do you do with those? Controlling the creation phase of the information lifecycle is one of the most complicated

information management issues you face. Striking a balance between controlling information and

allowing your staff to be creative and innovative requires imagination and collaboration.

Technology What about your Enterprise Systems and Business Applications? The business applications (e.g., ERP, Human Resources Information System, Accounting, etc.) within

your enterprise support your business processes and enable your organization to run efficiently. Often, these applications are repositories of your corporations information assets. Whether stored as content in a transactional system or as rows of data in a database table, the information stored in

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your business applications is a key component of your institutional knowledge and intellectual

capital.

Remaining answers are available in the full assignments.............

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