ASSIGNMENT

Name Roll No Course Sem. Subject Sub. Code L.C. L.C. Code

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Kunal Garg 521146107 MBA (Marketing) 4th Strategic Management and Business Policy MB0052 Vishwakarma Computer Academy 2103

Q1. Explain the corporate strategy in different types of organization? Ans. A well-formulated strategy is vital for growth and development of any organizationwhether it is a small business, a big private enterprise, a public sector company, a multinational corporation or a non-profit organization. But, the nature and focus of corporate strategy in these different types of organizations will be different, primarily because of the nature of their operations and organizational objectives and priorities. Small businesses, for example, generally operate in a single market or a limited number of markets with a single product or a limited range of products. The nature and scope of operations are likely to be less of a strategic issue than in larger organizations. Not much of strategic planning may also be required or involved; and, the company may be content with making and selling existing product(s) and generating some profit. In many cases, the founder or the owner himself forms the senior/top management and his (her) wisdom gives direction to the company. In large businesses or companieswhether in the private sector, public sector or multinationalsthe situation is entirely different. Both the internal and the external environment and the organizational objectives and priorities are different. For all large private sector enterprises, there is a clear growth perspective, because the stakeholders want the companies to grow, increase market share and generate more revenue and profit. For all such companies, both strategic planning and strategic management play dominant roles. Multinationals have a greater focus on growth and development, and also diversification in terms of both products and markets. This is necessary to remain internationally competitive and sustain their global presence. For example, multinational companies like General Motors, Honda and Toyota may have to decide about the most strategic locations or configurations of plants for manufacturing the cars. They are already operating multi location (country) strategies, and, in such companies, roles of strategic planning and management become more critical in optimizing manufacturing facilities, resource allocation and control. In public sector companies, objectives and priorities can be quite different from those in the private sector. Generation of employment and maximizing output may be more important objectives than maximizing profit. Stability rather than growth may be the priority many times. Accountability system is also very different in public sector from that in private sector. There is also greater focus on corporate social responsibility. The corporate planning system and management have to take into account all these factors and evolve more balancing strategies. In non-profit organizations, the focus on social responsibilities is even greater than in the public sector. In these organizations, ideology and underlying values are of central strategic significance. Many of these organizations have multiple service objectives, and the beneficiaries of service are 2

not necessarily the contributors to revenue or resource. All these make strategic planning and management in these organizations quite different from all other organizations. The evaluation criteria also become different. Johnson and Scholes (2005) have given a good and detailed exposition of strategic management in various types of organizations mentioned above. Q2. What is the role consultants play in the strategic planning and management process of a company? Is it an essential role? Ans. Management consultants can play very useful roles in the strategic planning process of a company. Consultants render services in different functional areas of management including the strategic planning and management process. In companies with no separate planning division or unit, consultants can fill that gap. They can undertake planning and strategy exercises as and when the company management feels the need for such exercises or consultancies. Even in companies with a corporate planning division/unit, consultants may provide specialized inputs or insights into identified management or strategy areas. Top strategic consultants like McKinsey & Company use or develop latest tools, techniques or models to work out solutions to specific strategic management problems or issuesbe it productivity, cost efficiency, restructuring, long-term growth or diversification. Consultants bring with them diversified skills (most of the consulting companies are multidisciplinary) and experience from various companies which may not be available internally in a single company. This is the reason why even large multinational companies hire consultants for achieving their goals or objectives. There are many international consultants who are in demand in different countries. There are also national consultants. Leading international consultants, in addition to McKinsey & Company, are Boston Consulting Group (BCG), Arthur D Little and Accenture (formerly Anderson Consulting). Prominent Indian consulting companies are A F Ferguson, Tata Consultancy Services (TCS) and ABC Consultants. Consultants, sometimes have a difficult or delicate role to play. In many companies, a situation develops when the chief executive or the top management needs to bank upon the support of an external agency like a consultant to push through a strategic change in the organizational structure or management system of the company. It may be for growth and development or downsizing. In both cases, many companies face internal resistance to change. The resistance is more if it is downsizing even when it is required for turning around a company. This happens particularly in public sector companies where implementing change is always difficult. Consultants are engaged to support or substantiate the companys point of view (in the form of their recommendations) so that change is more easily acceptable to the internal stakeholders of the company. Consultants role may 3

become delicate and, sometimes, tricky in such cases, and they should carefully weigh the ethical implication of their participation. Q3. What is strategic audit? Explain its relevance to corporate strategy and corporate governance. Ans. A holistic management audit that is extremely useful as a diagnostic tool to assess the present situation, highlight organizational strengths and weaknesses, opportunities and threats, pinpoint corporate-wide problem areas and evaluate the appropriateness of the strategies for the future. Donaldson has specified five elements of strategic audit. These are: 1. Establishing criteria for performance 2. Database design and maintenance 3. Strategic audit committee 4. Relationship with the CEO 5. Alert to duty (by board members) Relevance to Corporate Strategy and Corporate Governance: The performance criteria should be simple, well-understood and well accepted measures of financial performance. A number of measures of financial performance are available. One common measure, used by many companies, is return on investment (ROI). The ROI can be analysed like this: profit per unit of sales (profit margin); sales per unit of capital employed (asset turnover); and, capital employed per unit of equity invested (leverage). If these three ratios are multiplied together, the resultant ratio will give profit per unit of equity. This criterion would fulfil two objectives: first, sustainable rate of return on shareholder investment, and, second, to decide whether the return is less, or equal to or more than returns on alternative investments with comparable risk, i.e., whether the companys chosen strategy is justifiable or not. To calculate different performance ratios and monitor performance criteria, a proper database is essential. This involves both database design and maintenance. This has to be a regular and an ongoing process. Data on financial performance can sometimes be sensitive to the managers/ employees of a company. It is, therefore, suggested that financial and related data design, maintenance and analyses should be entrusted to the auditors of the company or outside consultants. For effective strategic audit, a strategic audit committee should be constituted. According to Donaldson, outside directors should select three of their own members to form the committee. This will impart regularity and more commitment to the strategic audit process. The committee would decide on the frequency of their meeting, periodicity of interaction

with the CEO or top management of the company and, also when they should make presentation to or hold discussion with the full board. Q4. What is Corporate Social Responsibility (CSR)? Which are the issues involved in analysis of CSR? Name three companies with high CSR rating. Ans. Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby a business monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. In some models, a firm's implementation of CSR goes beyond compliance and engages in "actions that appear to further some social good, beyond the interests of the firm and that which is required by law." CSR is a process with the aim to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere who may also be considered as stakeholders. Issues involved in analysis of CSR: CSR Practices in Corporate:

Worldwide, companies are trying to integrate corporate social responsibility into their business operations and strategies. Microsoft, Coca-Cola, McDonalds, FedEx, IBM and Johnson & Johnson are some of the leading companies. In India also, many companies are integrating CSR into their business practices and making significant contributions to society. Companies like Infosys, Wipro, Hero Honda, ITC, Dr. Reddys, Godrej, Mahindra & Mahindra and Tata Steel are the foremost among them. Some of these companies have also established foundations to cater to the needs of society. Corporate Social Responsibility and Profitability Milton Friedman said in 1962: Few trends could so thoroughly undermine the very foundations of our free society as the acceptance by corporate officials of a social responsibility other than to make as much money for their stockholders as possible. Even after four decades since Friedman said this, corporate social responsibility has remained a contentious issue. Managers are struggling to decide to what extent they should adopt CSR in their strategy-building process. The debate or dichotomy is clear: Should a company behave in a socially responsible manner and make the profitability policy follow from this; or, should a company aim at profit maximization and try to be as socially responsible as possible. Exponents of CSR argue that 5

business depends on, exists to serve and, cannot be separated from the environment; the environment is represented by external stakeholders like customers, competitors, suppliers, government agencies, local communities and society in general. Proponents of profit maximization like Friedman, on the other hand, think that a company has responsibility only for the financial well-being of its stockholders; and other objective or policy may threaten the health and prosperity of the company. At the global level, CSR initiatives of companies are observed with interest. The Wall Street Journal has rated top 03 companies in terms of their social responsibility. These companies are: 1. Johnson & Johnson 2. Coca-Cola 3. Wal-Mart Q5. Distinguish between core competence, distinctive competence, strategic competence and threshold competence. Use examples. Ans. Core Competence: A core competency is a concept in management theory that originally advocated by C. K. Prahalad and Gary Hamel, two business authors. In their view a core competency is a specific factor that a business sees as being central to the way the company or its employees work. It fulfills three key criteria: 1. It is not easy for competitors to imitate. 2. It can be reused widely for many products and markets. 3. It must contribute to the end consumer's experienced benefits. The importance of the product/service to its customers.

As an example of core competencies, Walt Disney World Parks and Resorts has three main core competencies:

Animatronics and Show Design Storytelling, Story Creation and Themed Atmospheric Attractions Efficient operation of theme parks

Distinctive Competence: A distinctive competency is a competency unique to a business organization, a competency superior in some aspect than the competencies of other organizations, which enables the production of a unique value proposition in the function of the business. A distinctive competency is the basis for the development of an unassailable competitive advantage. The uniqueness differentiates this competency from all others, whether a core competency or simply a competency. 6

Examples: Toyota has a distinctive competency in lean manufacturing. GE has a distinctive competency in management development. These companies also have core competencies, core to their particular lines of business. They also have competencies necessary to operate their business but of not of strategic significance, such as payroll, the processes used to pay their employees. On the other hand, a company like ADP, which provides payroll and benefits services, certainly has payroll processing as a core competency, if not a distinctive competency. Strategic competence: Strategic competence refers to a speakers ability to adapt their use of verbal and nonverbal language to compensate for communication problems caused by the speakers lack of understanding of proper grammar use and/or insufficient knowledge of social behavioral and communication norms. Strategic competence, along with grammatical competence and sociolinguistic competence constitute a framework for determining a language learners proficiency in communication as posited by Michael Canale and Merrill Swain in 1980 (Canale & Swain, 1980). A fourth component, discourse competence, was later added by Canale in 1983 (Canale, 1983). Together, these four competencies are considered mainstays of modern theory on secondlanguage acquisition. Threshold competence: Threshold competence is the competence level required just for survival in the market or business. The competence level of a company may be weaker than many of its competitors. Threshold competence may be adopted by No. 5 or No. 6 player in the market or those struggling to survive. Companies with threshold competence can, over time, graduate to a higher level of competence. But, continued threshold competence can also lead to closure of business. Multi-product or multi-SBU companies may often possess a portfolio of competences. In some product or business, they may have core competence, but, not in all. ITCs core competence is in tobacco and cigarettes, but, they have distinctive competence in hospitality business and agri-business. Hindustan Unilever has distinctive competence and strategic competence in many businesses. But, they had been surviving with threshold competence in vanaspati business (Dalda) for some time, and finally, they exited from that business. Q6. What is global industry? Explain with examples, international strategy, multi-domestic strategy, global strategy and transnational strategy. Ans. In global industry, the strategic position of companies in different countries or national markets are governed by their overall global positions. For example, IBMs 7

strategic position in competing for computer sales in France and Germany has improved significantly because of technology and marketing skills developedin other countries, and a worldwide manufacturing system which is well coordinated. To be called a global industry, an industrys economics and competitors in different national markets should be considered jointly rather than individually. International strategy can be adopted for those products and services which are not available in some countries and can be transferred from other countries. These are standard products with little or no differentiation. International strategies are not very common or popular. Some examples are: Kelloggs, Indian software, and Indian handicrafts. Multi-domestic strategy is almost opposite of international strategy. Multi-domestic strategy involves high degree of local responsiveness or local content. Products are highly customized to suit local requirements or conditions. Because of high customization, cost pressure is less; cost effectiveness may be also difficult to achieve because of lack of scale economies. Examples: Asian Paints (paints in general), Indian garments. Global strategy suits companies which make highly standardized sophisticated products, and, are in a position to reap benefits of economies of scale and experience effects. These also include high technology products which have universal applicability and hardly require any local adaptation. Examples are: Intel, Motorola, Microsoft, Texas Instruments. Global retail chains like Walmart and Marks & Spencer also come under this category. Transnational strategy is the most difficult strategy to follow because this is based on a combination of two apparently contradictory factors, i.e., cost effectiveness and local adaptation. But, this may be a true global strategy because, in global business, there is always a price pressure or cost pressure; and, also the need to make the product as close to a particular countrys expectation as possible to maximize value offerings. In fact, many, including Bartlett and Ghoshal (1989), feel that the transnational strategy is the only viable competitive strategy in global business. Many companies are adopting this approach to become successful. Some good examples are : Caterpillar (taking on Komatsu and Hitachi), McDonalds, Coca-Cola, Pepsi and Dominos Pizza. Many multinational FMCG companies like Unilever and Procter & Gamble follow transnational strategies through their fully owned subsidiaries in different countries.