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ASSIGNMENT

Course Code : MS-11

Course Title : Strategic Management

Assignment No. : 11/TMA/SEM-II/2011

Coverage : All Blocks

Q1. Select a company of your choice. Explain how politico-legal factors have created an

opportunity as well as constraint for that particular industry or a business

organization.

The organization I am referring to, was facing a problem of declining sales/ market share

for 2 consecutive year.

A large manufacturer/ marketer of safety products.

The products are used as [personal protection safety] [ industrial safety]

The products are distributed through the distributors as well as sold directly

The products are sold to various industries like mining/fireservices/defence/as well as to various manufacturing companies.

The company employs about 235 people.

The company has the following functional departments

o Marketingo Manufacturingo Saleso finance/ administrationo human resourceo customer serviceo distributiono warehousing/ transportationo TQM

THE COMPANY ANALYSES THE FOLLOWING DATABASE AND APPLYS THE

PROBELM SOLVING/ DECISION MAKING APPROACH / FINALIZES THE PLAN.

-apply the pestel analysis with respect TO ITS BUSINESS

1.Political (incl. Legal)

-Environmental regulations and protection

ENFORCEMENT OF SAFETY /PROTECTION LAWS

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-Tax policies

TAX INCENTIVES FOR THE USE OF PERSONAL SAFETY PRODUCTS.

-International trade regulations and restrictions

REDUCTION IN TARIFFS ON IMPORTS OF PERSONAL SAFETY PRODUCTS.

-Contract enforcement law/Consumer protection. The government enforcement on consumer

protection

-Competition regulation. NO LIMITS ON COMPETITION-Safety regulations.the government adopted some of the modern safety regulations.

2.Economic

-Economic growth SOUND ECONOMIC GROWTH

-Interest rates & monetary policies interest rates under control / a sound monetary policies]

-Government spending government spending is significant and is it under control

-Taxation the taxation HAS encouraged the industry .

-Exchange rates there well managed exchange controls and is it helping the industry.

-Inflation rates[ THE inflation is well under control ]

3.SOCIAL-Health consciousness & welfare, feelings on safety the people are becoming safety / health

consciousness.

4.Technological

Industry focus on technological effort the industries focused on using improved

technology.

New inventions and development new inventions are being encouraged for developments.

THE NEWLY ADOPTED OBJECTIVES

-to increase sales volume by 20% every year over the next 5 years.

THE STRATEGIES ADOPTED BY THIS ORGANIZATION TO ACHIEVE ITS

OBJECTIVES.

1. Basic question: How is organizational direction determined? Every organization takes onsome direction, in terms of what customers/clients it serves and what functions it performs for

these customers. This direction is often called its purpose, Mission or realized strategy. An

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organization's mission is a set of statements that define the exchange relationship between the

organization and its stakeholders or claimants. More specifically a mission defines thepopulation served and the function it fulfills or the need it satisfies for that claimant. This

direction, or mission, may be the result of a deliberate planning process or it may emerge as the

result of a set of incremental decisions.

THIS ORGANIZATION Realized Strategies are the result of a combinations of Purely

Deliberate and Purely Emergent Strategies.

1.THIS ORGANIZATION'S Deliberate Strategy-

This process starts with an analysis of a company's current mission and strategies. The most

popular tool used in this process is the SWOT (Strengths, weaknesses, opportunities, threats)

model. The external environment in terms of opportunities and threats, is analyzed by examining

threats to the company's current position and new opportunities (new customers, newapplications, unfulfilled customers needs, etc.). The analysis proceeds by examining the

company's internal environment in terms of its strengths and weakness. A mission and

competitive strategy is formulated that matches opportunities with strengths and plans are madeto strengthen areas of weakness.

The next step is to develop functional strategies that support the overall business levelcompetitive strategy. Marketing, Human Resource, Financial, Operations, Information Systems,

and R & D strategies are developed that support the business unit strategy. Finally, a control

system (organizational structure) is designed to insure that operational decisions are made

consistent with the business and functional strategies.

2. Emergent Strategy

- Emergent Strategies are the result of incremental decision making that achieve some degree ofconsistency over time and launch the organization into a direction. When decisions are made or

problems are solved, they have potential strategic impact.

2. Levels of Strategy

1. Mission/Domain- Before identification of strategy can occur, one must clearly identify the

mission or domain of the organization. The domain of an organization consists of the populationit serves and the functions it performs (satisfies) for that population. Sometimes the domain is

defined in terms of products or services offered (rather than functions performed), but this tends

to be more limiting because it defines the mission more in terms of means rather than ends.

2. Corporate Level Strategy.

1. Market Penetration STRATEGY- Seeking increased market share for present products through greater marketing efforts

2. Market Development STRATEGY

- Introducing present products in new markets

3. Product Development STRATEGY- Seeking increased sales by improving present products

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4. Diversification STRATEGY

Concentric- Adding new or related product lines

2. Conglomerate- Adding new, but unrelated product lines

3. Competitive or Business Level Strategy- How should we compete in our chosen business(es)? Competitive strategies involve

determining the basis of costumer or client decision making. Generally, they are based on some

combination of quality, service, cost, time, and quality of the experience.

1. Cost Leadership Strategies

- With this strategy you are competing on price. Your various functional strategies all

emphasize cost reduction. This is an effective strategy when the market is comprised of manyprice sensitive buyers, when there are few ways to achieve product differentiation, when buyers

do not care much about differences from brand to brand , or when there are a large number of

buyers with significant bargaining power.

2. Differentiation Strategies

- Differentiation strategies rely on some basis of product differentiation such asflexibility, specific features, service, time and availability, low maintenance, etc. as the basis for

competition. Product development and market research are generally necessary components of a

differentiation strategy. Generally, a successful differentiation strategy allows a firm to charge a

higher price for its product. Organizations generally need strong R & D departments with strongcoordination between R & D and marketing departments. Human Resource strategies must place

emphasis maintaining a competitive skill base and motivating employees toward the basis for

differentiation.

3. Focus or Niche Strategies

- A successful focus strategy depends upon an industry segment that is of sufficient size,

has good growth potential, and it not crucial to the success of other major competitors. Focus

strategies are pursued in limited markets in conjunction with cost leadership and/ordifferentiation strategies. Focus strategies are the most effective when consumers have

distinctive preferences or requirements and when rival firs are not attempting to specialize in the

same target segment.

4. Functional Strategies

- How do organizational functional units contribute to the business level strategies? Howcan functional strategies be integrated to achieve competitive advantage?

1. Marketing Strategies- How do we communicate our strengths to the customer? How do we

identify customer requirements and changes in customer requirements?

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2. Human Resource Strategies- How do we recruit, train, develop, motivate, compensate, and

place employees so that behavior is directed toward the competitive strategy and works to build

competitive advantage?

3. Financial Strategies- How do we secure financial resources necessary to carry our competitive

strategy?

4. Operations Strategies- How do we design our processes to produce products and/or service

that meet customer requirements as specified in our strategy?

5. Information System Strategies- How do we provide decision makers, at all levels, with

information necessary to make decisions consistent with strategy?

6. Technological (R & D) Strategies- How do we develop products consistent with customer

requirements as specified in strategy?

Q2. Choose an organization that has a mission statement. Evaluate the statement basedon the following criteria:

a. Does the statement define the organization in brief terms?b. Does it define the organizations geographical operations?c. Is it consistent for all its business units?d. Does it conform to the objectives of the organization?

SOLUTION: DO YOUR SELF

3. Select an organization and discuss its strategic profile. This should cover the type of

generic strategy chosen by the organization and why?

Definition of SWOT

SWOT analysis is a general technique which can be applied across diverse functions andactivities, but it is particularly appropriate to the early stages of planning for CORPORATE

STRATEGY . Performing SWOT analysis involves generating and recording the strengths,

weaknesses, opportunities, and threats relating to a given task. It is customary for the analysis to

take account of internal resources and capabilities (strengths and weaknesses) and factors

external to the organisation (opportunities and threats).

THE NECESSITY FOR SWOT

StrengthsStrengths usually describe things that the company excels at doing. All strengths listed should

support a competitive advantage that the corporation has over its rivals. These can be tangible

(fast delivery of products to customers) or intangible (excellent customer service promotes veryhigh customer satisfaction). As these are internal attributes they should all be within the

companys control. Ask questions such as:

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THE SWOT ANALYSIS --WEAKNESS

-helps to identify the weak points in terms of skills/manpower/resources etc

-how to improve / overcome these weak factors.

Opportunities

Opportunities are the external factors that will allow your business to succeed against its rivals.Since these are external factors, they may not be under control of the company. Ask questions

such as:

What opportunities for new products or services exist in your market?

Are new markets available that could provide opportunities for growth?

Have new technologies been developed that will allow us to compete more effectively?

Have consumer lifestyles, wants and desires shifted?

Are the target customers economically healthy?

Do previously resolved internal problems give the company a competitive edge?

Usually, opportunities reflect the areas where you can excel by changing the companysmarketing strategy. Should new products be launched? Should existing products be promoted to

new customer groups? If possible, identify the time frame for each opportunity. Is it something

the company must capitalize on by a certain date or will the opportunity last indefinitely?

Opportunities

Keeping in mind what you have listed as your Company Strengths, SWOT Analysis can now

influence the Opportunities for the business. These can be seen as targets to achieve and exploitin the future for example: Good financial position creating a good reputation for future bank

loans and borrowings Skilled workforce means that they can be moved and trained into other

areas of the businessCompetitor going bankrupt (Takeover opportunity?)Broadband technology has been installed in the area (useful for Internet users)

Increased spending power in the Local/National economy

Moving a product into a new market sectorTHE SWOT ANALYSIS -- OPPORTUNITIES

-helps to identify gaps in the market which can be converted into

opportunities.-helps to identify the gaps in performance , which can be exploited.

Threats

Threats are factors beyond the control of the company that reduces its competitiveness in themarketplace, adversely affect marketing strategy, or in a worst case scenario, potentially lead to

the total demise of the business (think buggy whip manufacturers when automobiles became

popular). Although the company has no control over external factors, the key is to identify thethreats and draw up contingency plans to negate the threat or soften the impact should an event

arise. Ask questions such as:

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Are consumer preferences shifting away from company business lines?

Is price competition from competitors affecting company profit margins?

Are new technologies making the companys products or processes obsolete or unaffordable?

Are new competitors entering the market space?

Are suppliers increasing prices?

Are raw material costs going up due to scarcity or catastrophic events? Is the general economy on the downswing?

Classifying threats by the degree of impact and the likelihood of their occurrence is often usefulto help identify which threats need to be planned for immediately.

ThreatsThe final part of the analysis will also be seen as the most feared- the Threats. It has to be done

and therefore taking into account what you have listed as your weaknesses, the threats will now

all seem too clear. Examples

Large and increasing competition

Rising cost of Wages (Basic wage, etc)Possible relocation costs due to poor location currently held

Local authority refusing plans for future building expansionIncreasing interest rates (increases borrowing repayments, etc)

End of season approaching (if you depend on hot weather, etc)

Existing product becoming unfashionable or unpopular

THE SWOT ANALYSIS --THREAT-helps to identify the various threats like

competition/social /political/economic/technological etc

and to take preventive action.THE SWOT ANALYSIS --STRENGTHS

-helps to identify the core compentences

-helps how to maximize the strengths to gain the maximum results --sales/profit/market

share/competitive position.THE SWOT ANALYSIS --WEAKNESS

-helps to identify the weak points in terms of skills/manpower/resources etc

-how to improve / overcome these weak factors.THE SWOT ANALYSIS -- OPPORTUNITIES

-helps to identify gaps in the market which can be converted intoopportunities.

-helps to identify the gaps in performance , which can be exploitedTHE SWOT ANALYSIS --THREAT

-helps to identify the various threats likecompetition/social /political/economic/technological

etcand to take preventive action.

The Benefits of these FOUR SWOT Analyses

The main thrust of the exercise is to determine how the companys strengths can be used to takeadvantage of opportunities and minimize critical threats. Eliminating weaknesses can also

provide resources to capitalize on opportunities or ward off threats. Identifying the most critical

issues provides a game plan for the business to follow based on an honest assessment of the

firms potential.

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THIS HELPS TO DEVISE THE MOST EFFECTIVE CORPORATE STRATEGY.WHICH IN TURN HELPS TO DEVELOP THE MOST EFFECTIVE

STRATEGIC PLANNING.

SWOT analysis can provide:

A framework for identifying and analysing strengths, weaknesses, opportunities and threats.

The impetus to analyse a situation and develop suitable strategies and tactics.

A basis for assessing core capabilities and competences.The evidence for, and cultural key to, change.

Benefits of Strategy / its associated plan.

Strategic planning serves a variety of purposes in organization, including to:1. Clearly define the purpose of the organization and to establish realistic goals and objectives

consistent with that mission in a defined time frame within the organizations capacity for

implementation.

2. Communicate those goals and objectives to the organizations constituents.3. Develop a sense of ownership of the plan.

4. Ensure the most effective use is made of the organizations resources by focusing theresources on the key priorities.5. Provide a base from which progress can be measured and establish a mechanism for informed

change when needed.

6. Bring together of everyones best and most reasoned efforts have important value in building aconsensus about where an organization is going.

7. Provides clearer focus of organization, producing more efficiency and effectiveness

8. Bridges staff and board of directors (in the case of corporations)

9. Builds strong teams in the board and the staff (in the case of corporations)

10. Provides the glue that keeps the board together (in the case of corporations)11.Produces great satisfaction among planners around a common vision

12. Increases productivity from increased efficiency and effectiveness13. Solves major problems

Business SWOT Analysis

What makes SWOT particularly powerful is that, with a little thought, it can help you uncoveropportunities that you are well placed to take advantage of. And by understanding the

weaknesses of your business, you can manage and eliminate threats that would otherwise catch

you unawares.

More than this, by looking at yourself and your competitors using the SWOT framework, youcan start to craft a strategy that helps you distinguish yourself from your competitors, so that you

can compete successfully in your market.

How to use the tool:To carry out a SWOT Analysis, , and write down answers to the following questions:

Strengths:

What advantages does your company have?

What do you do better than anyone else?

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What unique or lowest-cost resources do you have access to?

What do people in your market see as your strengths?Consider this from an internal perspective, and from the point of view of your customers and

people in your market. And be realistic: It's far too easy to fall prey to "not invented here

syndrome". Also, if you are having any difficulty with this, try writing down a list of your

characteristics. Some of these will hopefully be strengths!In looking at your strengths, think about them in relation to your competitors - for example, if all

your competitors provide high quality products, then a high quality production process is not a

strength in the market, it is a necessity.

Weaknesses:

What could you improve?What should you avoid?

What are people in your market likely to see as weaknesses?

Again, consider this from an internal and external basis: Do other people seem to perceive

weaknesses that you do not see? Are your competitors doing any better than you? It is best to be

realistic now, and face any unpleasant truths as soon as possible.

Opportunities:Where are the good opportunities facing you?

What are the interesting trends you are aware of?

Useful opportunities can come from such things as:

Changes in technology and markets on both a broad and narrow scaleChanges in government policy related to your field

Changes in social patterns, population profiles, lifestyle changes, etc.

Local EventsA useful approach to looking at opportunities is to look at your strengths and ask yourself

whether these open up any opportunities.

Alternatively, look at your weaknesses and ask yourself whether you could open up opportunities

by eliminating them.

Threats:

What obstacles do you face?What is your competition doing?

Are the required specifications for your job, products or services changing?

Is changing technology threatening your position?Do you have bad debt or cash-flow problems?

Could any of your weaknesses seriously threaten your business?

Carrying out this analysis will often be illuminating - both in terms of pointing out what needs to

be done, and in putting problems into perspective.Strengths and weaknesses are often internal to your organization. Opportunities and threats often

relate to external factors. For this reason the SWOT Analysis is sometimes called Internal-

External Analysis and the SWOT Matrix is sometimes called an IE Matrix Analysis Tool.

If a clear objective has been identified, SWOT analysis can be used to help in the pursuit of thatobjective. In this case, SWOTs are:

Strengths: attributes of the organization that are helpful to achieving the objective.

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Weaknesses: attributes of the organization that are harmful to achieving the objective.

Opportunities: external conditions that are helpful to achieving the objective.Threats: external conditions that are harmful to achieving the objective.

Creative Use of SWOTs.--- If, on the other hand, the objective seems attainable, the SWOTs are

used as inputs to the creative generation of possible strategies, by asking and answering each ofthe following four questions, many times:

1. How can we Use each Strength?

2. How can we Stop each Weakness?3. How can we Exploit each Opportunity?

4. How can we Defend against each Threat?

Examples of SWOTs

Strengths and weaknesses

Resources: financial, intellectual, location

Customer serviceEfficiency

Infrastructure

Quality

StaffManagement

Price

Delivery timeCost

Capacity

Relationships with customers

Brand strengthLocal language knowledge

Ethics

principlespatents

strong brand names

good reputation among customerscost advantages from proprietary know-how

exclusive access to high grade natural resources

favorable access to distribution networks

Opportunities and threatsPolitical/Legal

Market Trends

Economic conditionExpectations of stakeholders

Technology

Public expectationsCompetitors and competitive actions

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Bad PR

Criticism (Editorial)Global Markets

Errors to be avoided

The following errors have been observed in published accounts of SWOT analysis:1. Conducting a SWOT analysis before defining and agreeing upon an objective (a desired end

state). SWOTs should not exist in the abstract. They can exist only with reference to an

objective. If the desired end state is not openly defined and agreed upon, the participants mayhave different end states in mind and the results will be ineffective.

2. Opportunities external to the company are often confused with strengths internal to the

company. They should be kept separate.3. SWOTs are sometimes confused with possible strategies. SWOTs are descriptions of

conditions, while possible strategies define actions. This error is made especially with reference

to opportunity analysis. To avoid this error, it may be useful to think of opportunities as

"auspicious conditions".

4. "Make your points long enough, and include enough detail, to make it plain why a particularfactor is important, and why it can be considered as a strength, weakness, opportunity or threat.

Include precise evidence, and cite figures, where possible.

5. Be as specific as you can about the precise nature of a firms strength and weakness. Do not

build content with general factors like economies of scale.

6. Avoid vague, general opportunities and threats that could be put forward for just about any

organisation under any circumstances.7. Do not mistake the outcomes of strength (such as profits and market share) for strengths in

their own right.

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Q4. Using the published information, select an organization which has gone for a

strategic alliance. Explain the reasons because of which the organization chose to

form a strategic alliance.

Development of strategic alliances

Viewed from an international perspective, the number of alliances between companies has risen

sharply in the eighties. Although in the early eighties the question was regularly posed as to

whether this was a temporary phenomenon, in the meantime it is increasingly often concluded

that the alliance boom possesses a more structural character than initially presumed. Walker

remarks on this: "For many of the world's major companies, alliance strategies are becoming

fundamental to their way of competing. Already, it is hard to think of a global competitor in any

industry without a portfolio of alliances3." Traditionally, the multi-national Unilever focused on

acquisitions in its expansion strategy. In the last few years however, there appears to have been a

change of attitude with regard to alliances; now Unilever also enters into alliances. The

importance of alliances as a means of competition, is thus underlined. Or, as the then chairmanof the board, Floris Maljers phrased it: "as a matter of principle, alliances will play a more

important role in the future"4. Strategic alliances are fueled by a number of global developments.

Huyzer cites as the most important: the internationalisation of markets, the increasing complexity

of technologies and the increasing speed with which innovations take place5. As a consequence

of these three trends, companies are subjected to increasingly competitive demands. In the

Personal Computer industry, for example, new models succeed each other in periods of a few

months. Due to increased competition, however, strong pressure on retail prices has arisen. New

models not only have to be technologically innovative, they also have to be developed and

produced at lower costs. Rapid access to the largest possible market is essential, in order to

recoup the often high development costs. In this respect, the traditional home market is often too

confined, certainly for many European companies. A few quantitative studies, carried out in the

late eighties (by Harrigan6, Hergert and Morris7and Kogut8 among others), show a

concentration of alliances in a limited number of sectors, such as telecommunications and the

computer industry.

Decision-making around strategic alliances

A number of phases can be determined in the alliance process. In general this is, initially, about

the strategic choice process of the individual partners; they must decide whether co-operation is a

good option for realising their own objectives (vis vis autonomous development or acquisition).Secondly, there is the search for suitable partners and the approach to the potential alliance

partner. The third phase concerns the collective decision-making process, in which it must be

determined whether co-operation between the partners involved is desirable and feasible. The

last phase concerns the implementation of the alliance. This study is focussed on the third phase,

i.e. collective decision-making. This restriction has not only been chosen for pragmatic reasons.

It is apparent from a number of studies, that the most complex problems occur during this phase

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in particular. Quite often, such processes are strongly influenced by emotional considerations,

opportunistic plans, conflicting interests and the struggle for power ("who will be in charge").

Particularly in this sort of process, there is a need to objectify the real basis and potential of the

alliance. In principle, the individual strategy of the partners is considered to be a given factor in

this study. Although it should be noted, that this does not alter the fact that the quality of

individual decision making will partly determine the course of the alliance process. Indeed, if

two partners have entered into alliance negotiations, without having considered the rationale

behind their co-operation, then the chances of success are extremely slim. Although the

framework is aimed at the collective decision-making, the influence of the individual strategies

upon the alliance process is taken into account during its development (see chapter 3 and

further). The research area is reproduced in the figure below.

A strategic alliance is a contractual, temporary relationship between a limited number of

companies remaining independent, aimed at reducing the uncertainty around the realisation of

the partners' strategic objectives (for which the partners are mutually dependent), by means of

co-ordinating or jointly executing one or several of the companies' activities. Each of the

partners is able to exert considerable influence upon the management or policy of the alliance.

The partners are financially involved, although not by definition through equity participation,

and share the costs, profits and risks of the strategic alliance

Effectiveness of strategic alliances

The framework that will be presented in the following chapters has the objective of increasing

the alliance's effectiveness (read the chance of success). Thus, while carrying out the case

studies, the way in which the factors, defined on the basis of the literature study, influence the

ultimate success of the alliance concerned must be evaluated. In order to make this evaluation, itis important to be clear about what is understood by alliance success. Clearly defining success is

further relevant, in that the definition chosen will influence the final framework. Success of a

strategic alliance may be determined in different ways. Three possibilities come to the fore in the

literature: the status of the alliance, the synergy gained, and the degree of goal realisation. In the

context of this research, it was ultimately chosen to define success as the degree of goal

realisation, whereby use was made of the Multiple Constituency approach. Justice is thereby

done to the fact that in an alliance, different parties are involved, with often different interests.

Justice is also done to the dynamic of alliances.

Effectiveness as alliance status

The status of the alliance (operational or not) would probably be the simplest measure of success.

Not every operational alliance, however, will actually yield advantages to the partners. Among

other things, this is apparent from Harrigan's comprehensive study9. She researched 895

alliances as to whether they were still operational and whether the alliances were viewed as

successful. For the latter she relied on the judgement of the managers responsible for the

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alliance. At the time, 45% of the alliances researched were still operational. Of these, however,

40% were not considered successful. At the same time it was apparent that, of the terminated

alliances (55%), more than 30% were still experienced as successful by the managers involved.

That terminated alliances are still successful, may be simply explained. In section the fact was

referred to that alliances are entered into for a specific objective, and have by definition a

temporary nature. It is therefore quite natural that alliances end when the intended objective is

realised. Ending then certainly does not mean failing, for the co-operation has met expectations.

On the other hand, it is also true that when the stated objective can not be reasonably

accomplished, co-operation must be stopped. Harrigan's research, however, shows that this

certainly does not always happen. This picture also emerged in interviews conducted in the

context of this research with different companies (in addition to the case studies). In general,

there seems to be a certain exit barrier, if co-operation is no longer advantageous. The above

discussion shows, that the status of the alliance is indeed a simple measure for the success of

analliance, but definitely not a trustworthy one.

Effectiveness as synergy gained

A second point of view that could be chosen, concerns the measurement (or estimation) of the

synergy gained. Synergy is an abstract concept, often deployed in alliance negotiations. Just as

with the concept of strategic alliance, everybody has an image of what synergy is. In

practice,however, synergy is difficult to identify, let alone to measure quantitively (see Spitholt

for example21). In 1965, Ansoff already gave the initial impulse to this discussion by

distinguishing four forms of (functional) synergy, to wit sales synergy, operational synergy,

investment synergy and management.

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Q5. Why is strategic control important to organizations? Explain with the help of an

illustration.

Strategic control is concerned with tracking the strategy as it is being implemented, detecting anyproblems areas or potential problem areas, and making any necessary adjustments.

Newman and Logan use the term "steering control" to highlight some important characteristics ofstrategic control Ordinarily, a significant time span occurs between initial implementation of a

strategy and achievement of its intended results. During that time, numerous projects areundertaken, investments are made, and actions are undertaken to implement the new strategy.

Also the environmental situation and the firm's internal situation are developing and evolving.

Strategic controls are necessary to steer the firm through these events. They must provide somemeans of correcting the directions on the basis of intermediate performance and new

information.

IMPORTANCE OF STRATEGIC CONTROL

Henry Mintzberg, one of the foremost theorists in the area of strategic management, tells us thatno matter how well the organization plans its strategy, a different strategy may emerge.Starting with the intended or planned strategies, he related the five types of strategies in the

following manner:

Intended strategies that get realized; these may be called deliberate strategies.

Intended strategies that do get realized; these may be called unrealized strategies.

Realized strategies that were never intended; these may be called emergent strategies.Recognizing the number of different ways that intended and realized strategies may differ

underscores the importance of evaluation and control systems so that the firm can

monitor its performance and take corrective action if the actual performance differs from

the intended strategies and planned results.information.

STRATEGIC CONTROL

The managers focused on todays decisions for todays business in earlier times.

However the rapid changes experienced by companies have made the managers to anticipate thefuture and prepare for it. They have prepared systems, procedures and manuals and evolved

budgets and planning and control systems, which included capital budgeting and management by

objectives. The inadequacy of these techniques has led to the emergence of long range planning

which in turn gives rise to strategic planning and subsequently to strategic management.

Strategic control deals with decision making and actions which determine an enterprisesability to excel, survive or die by making the best use of a firms resources in a dynamic

environment. The main purpose of study of strategic management is to examine why someorganizations succeed while fail and yet others completely change.

Most of the firms were happly focusing attention on their day-to-day, short-term

activities, till 1930s. In an environment characterized by very little competition, a functionalorientation supported by budgeting and control systems guided the fortunes of firms. The adhoc

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policy making yielded ground to planned policy formulation and by 1940 the emphasis shifted to

the integration of functional areas in the context of environmental demands. The period between1960s and 1980s, was characterized by rapid environmental changes and increased complexity of

business functions necessitating long range planning and comprehensive business policies aimed

at placing a firm in an advantageous relationship to its environment. During the 1980s and early

1990s, interest in the role of strategy in building competitive advantage resulted in a shift ofinterest toward the internal aspects of the firm. Strategic management is currently the core of

business policy discipline everywhere.

Strategic control is the process by which organizations try to determine what needs to be

done to achieve corporate objectives and more importantly, how these objectives are to be met.

Ideally, it is a process by which senior management examines the organization and the

environment in which it operates and attempts to establish an appropriate and optimal fit between

the two to ensure the organisations success. Strategic planning is usually done over three to fivetime horizons by senior management or when some important event impacts the organization,

such as a merger or acquisition, or its environment.

There is no consensus about the concept of strategic management. Strategic management is thecontinuous process of relating the organization with its environment by suitable course of action

involving strategy formulation, its implementation and mobilizing organizational resources for

the purpose.

Strategic control is concerned with deciding on strategy and planning how that strategy is to be

put to be into effect.

According to Samuel C. Certo and J. Paul Peter, Strtegic management is a continuous, iterative,

cross-functional process aimed at keeping an organization as a whole appropriately matched to

its environment. A series of steps that a manager must take are identified by this definition.

These steps include performing an environmental analysis, establishing organizational direction,

formulating organizational strategy, implementing organizational strategy and exercisingstrategic control.

Schellenberger and Bosenan define the term Strategic management as, the continuous processof effectively relating the organizations objectives and resources to the opportunities in theenvironment. Strategic management is primarily concerned with relating the orgnisation to its

environment, formulating strategies to adapt to the environment and assuring thatimplementation of strategies taken place.

The following are the features of this definition.

Strategic control is basically a process. Strategic management involves establishing a framework

to perform various processes.Various processes of management are:

[a]. Surveillance of environment;

[b]. Identification of various opportunities;

[c]. Evaluation of the organizations strengths and weaknesses;

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[d]. Formulation of various strategies for achieving these objectives; [e]. Implementation of these

strategies and

[f]. Evaluation and monitoring of the outcome of these strategies.

The focus of Strategic Management is on relating the organisation to its external environment;

Strategic management is basically a top management function. The environment is constantlychanging providing new opportunities and threats, top management must spend more time on

this aspect. There is a shift from operational management to strategic management.

strategic control is required in the complexity and sophistication of business decisionmaking. Managing various and multifaceted internal activities is only part of the modern

executives responsibilities. Strategic management may be defined as the set of decisions and

actions resulting in formulation and implementation of strategies designed to achieve the

objectives of an organisation. It covers the following nine critical areas;

Determining the mission of the company;

Developing a company profile that reflects internal conditions and capabilities;Assessment of the companys external environment

Analysis of various options in matching the company profile with external environment;

Identifying the desired option in light of the company mission;

Strategic choice of a particular set of long term objectives;Development of annual objectives and short term strategies in tune with long term and grand

strategies;

Implementing strategic choice decisions based on budgeted resources. andReview and evaluation of the success of the strategic process to serve as a basis for control.

Thus, strategic control involves the planning, directing, organising and controlling of the strategyrelated decisions and actions of the business.

strategic decisions is the basic emphasis of strategic management. An operational decision is

related with day-to-day operation of the organisation. Such decisions are taken at lower levels inthe organisation.What is operational decision in one organisation may be a strategic decision in

another organisation.Strategic decision can be defined as a major choice of actions concerning

allocation of resources and contribution to the achievement of organisational objectives.

Decision is a major one, which affects the whole or part; Contributes directly towards the

realisation of organisational objectives; Strategic decision may involve major departure from the

earlier ones; Strategic decision is likely to include a wide range of available alternatives to cope

up with environmental demands.

Strategic decision is a major choice of actions concerning allocation of resources and

contribution to the achievement of organisational objectives directly. The following are the

elements of a strategic decision;

Organisations are goal directed and any organisational process should be goal directed to meet

the organisational objectives. The value of a decision and the associated action is related with

which the goal is achieved. The result element of strategic decision is a specifically defined

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objective or statement of desired future accomplishment, which will contribute to the companys

overall purpose.The result element of strategic decision must specify what specific result is to beachieved. It is quite common to express the result in quantitative terms such as sales volume,

market share, and profit margin, expense reduction etc. It can also be expressed in the form of

technological leadership, market leadership, profitability, social contribution, employment,

strengthening the economy etc.A stated result or objective does not become useful until it is accompanied with an action

programme. Strategic decisions are action oriented and directed towards the controlling aspectsof the environment. The action element specifies what work must be done and how to get the

results.

A decision is not strategic unless it has been translated into a set of actions whereby the

organizations resources are committed for a particular course of action. Commitment ofresources includes the allocation of resources on various actions and since these resources are

utilized for the actions concerned, these can be back in the form of their result. Decisions

regarding who will be taking action are an important aspect of commitment element of strategic

decision. The commitment decision should also specify where and under what circumstanceimplementation is to be effected.

Timing element is the most important element of commitment principle and development andimplementation of strategy.

The Strategic issues have been identified into six dimensions. Strategic issues require top

management decisions- top management involvement is imperative. There is perspective forunderstanding and anticipating broad implications and ramifications at this level.

Allocation of large amounts of company resources are required for involve strategic issues.

Strategic issues are likely to have a significant impact of the long termrosperity of the firm

Strategic issues are future oriented based on what managers anticipate or forecast rather onwhat they know. Strategic issues usually have major multifunctional or multi-business

consequences- A strategic decision is co-ordinate. Strategic issues necessitate considering factors

in the firms external environment.

In business organizations the decision-making hierarchy typically contains three levels. At the

top is the corporate level, composed principally of members of the board of directors and the

chief executive and administrative officers. They are responsible for the financial performance ofthe corporation as a whole for achieving the non-financial goals of the firm.

The second rung of the decision-making hierarchy is the business level, composed principally of

business and corporate managers. These managers must translate the general statements of

direction and intent generated at the corporate level into concrete, functional objectives andstrategies for individual business divisions of SBUs.

The third rung is the functional level, composed principally of managers of products, geographic

and functional areas. It is their responsibility to develop annual objectives and short termstrategies in such areas as production, operations and research and development, finance,

marketing and human relations. Companies, which are in only one business, are concentrated in

a single group of directors and managers.

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Some of the companies, which have a corporate structure, comprise of three fully operative

levels. The superstructure is provided at the corporate level, with the superstructure at thebusiness level giving direction and support for functional level activities.

Type

Conceptual

MixedOperational

MeasurabilityValue judgements

Semiquantifiable

Quantifiable

FrequencyPeriodic/Sporadic

Periodic/Sporadic

Periodic

Adaptability

LowMedium

HighRelation to present activities

Innovative

MixedSupplementary

Risk

Wide range

ModerateLow

Profit potentialLargeMedium

Small

Cost

MajorMedium

Modest

Time HorizonLong range

Medium range

Short rangeFlexibilityHigh

Medium

LowCo-operation

Considerable

Moderate

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Little

ITC is a board-managed professional company, committed to creating enduring value for theshareholder and for the nation. It has a rich organisational culture rooted in its core values of

respect for people and belief in empowerment. Its philosophy of all-round value creation is

backed by strong corporate governance policies and systems.

ITCs corporate strategies are aimed at matching its core capabilities with market opportunitiesto produce superior shareholder value. The key corporate strategies are:

Continue to focus of the core businesses of Cigarettes & Tobacco, Hotels, Packaging andPaperboard.Ensure that each of its businesses meets the three criteria of sustainability namely

Market Standing, Profitability and Internal Vitality. Exit from businesses which do not meet

these criteria with an agreed time frame.Ensure that each business is internationally competitivein the Indian global market.Create distributed leadership within the organisation by nrturing

talented and focused top management teams for each of the businesses.Institute and practice a

system of corporate governance appropriate to ITCs character and constitution. Such a system

of governance must achieve a wholesome balance between the need for executive freedom for

management and the requirement of a framework for effective accountability.Secure the futuregrowth of the Company by creating new businesses which leverage the strength of its core

competencies, residing in various businesses.

The ideal strategic management process is developed and governed by a strategic managementteam. The team consists principally of decision-makers at all three levels, the chief executive

officer, the product managers and the heads of functional areas.

The team relies on input from two types of support personnel: Company planning staff and lowerlevel managers and supervisors. The latter provide data for strategic decision making and are

responsible for implementing strategies.

Strategic decisions have such a tremendous impact on a firm and because they require large

commitments of company resources, top managers can only make them in the organizational

hierarchy.The strategic management approach emphasises interaction by managers at all levels of the

organizational hierarchy. As a result, strategic management has certain behaviouralconsequences.

Strategy formulation activities should enhance the problem prevention capabilities of the firm.

Group based strategic decisions are most likely to reflect the best available alternatives.Employee motivation should improve as employees better appreciate the productivity-reward

relationships in every strategic plan.

Gaps and overlaps in activities among diverse individuals and groups should be reduced.

Resistance to change should be reduced.

Managers must be trained to guard against three types of unintended negative consequences.Managers must be trained to schedule their duties to provide the necessary time for strategic

activities while minimising any negative impact on organisational/ operational responsibilities.

If the formulators of strategy are not intimately involved in implementation, individual

responsibility for input to the decision process and subsequent conclusions can be shirked.

Strategic managers must be trained to anticipate, minimise or constructively respond whenparticipating subordinates become disappointed or frustrated over unattained expectations.

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The logic of management process is that particular functions are performed in a sequence

through time. The term process refers to an identifiable flow of information through interrelatedstages of analysis directed towards the achievement of an objective. Thus, strategic management

as a process may involve a number of various elements of strategic management process and the

way they interact among themselves. The process becomes quite complex in practice because of

the type of interaction among these elements.Since organisations are deliberate creations, they have some specific mission towards which all

efforts are directed. The mission of an organisation is the fundamental unique purpose that sets it

apart from other organisations and identifies the scope of its operation in product and marketterms. Corporate objectives are other factor, which determine the strategy. The choice of the

objectives for an organization is a strategic decision because by choosing its objectives, the

organization commits itself for these.

Since an organization is a social system, it operates within the environment which consists of

many factors, such as, society, competitors, technology, legal framework, political framework,

psychological and cultural framework. An organisation has to interact continuously with these

factors.

Opportunities or threats posed by the environment and how the organisation can takeadvantages will depend greatly on the organisations strengths and weaknesses. Corporate

analysis brings these strengths and weaknesses.

Interaction of organisation with its environment in the light of its strengths and weaknesses

will result into various strategic alternatives. All alternatives cannot be chosen even if all of them

produce the same results. Therefore, the strategic alternatives should be identified in the light of

strategic threats and opportunities generated through environmental analysis, and organisationalmission and objectives.

The identification of various strategic alternatives leads to the level when managers can

consider some alternatives seriously. The chosen alternative should be acceptable in the light oforganisational objectives. it is not necessary that the chosen alternative is the best one.

The organisation tries to convert the strategy into something operationally effective. The

strategy should be put to action because mere choice of the soundest strategy will not affect

organisational activities and achievement of its objectives.

Review and control may be treated as the last stage of strategic management process. This is an

on-going process and review and control should be taken as the process for future course of

action.Strategic Management is the continuous process of relating the organisation with its environment

by suitable course of action involving strategy formulation, its implementation and mobilising

organisational resources for the purpose. Thus, strategic management involves the planning,directing, organising and controlling of the strategy related decisions and actions of the business.

The decision-making hierarchy of business firms contains three levels, at the top is the corporate

level and in the second rung of the hierarchy is the business level and in the third rung is the

functional level. For a new business or reformulating direction for an ongoing company, thebasic goals, characteristics and philosophies that will shape a firms strategic posture must bedetermined. It is here that the company mission will guide future executive action. Strategic

management process comprises of functions that are performed in a sequence through time.