Strategic Management-2

Assignment – A

Question 1. Describe the benefits of Good Strategic Planning? Define and give examples of key terms of Strategic Management?

Question 2. Explain the concept of SBU in a Multi Business Organization. Identify the Three levels of Strategy-Corporate, Business and Functional. How do Goals and Objectives vary at each Level?

Question 3. What should be the key Traits of a CEO? What are the forces that design the Strategic Management Systems?

Question 4. Discuss the various grand strategies at the Corporate Level i.e. Stability, Growth and Retrenchment.

Question 5.Discuss the following Factors affecting Strategic Choices in brief:
Nature of environment -stable?
Firm’s internal realities
Ambition of CEO / owners
Company culture
Firm’s capacity to execute the strategy.
Resource allocation

Assignment – B

Question 1. Explain the concept of Porter’s five forces Model used for Industry Analysis? What are the major factors that become barriers to entry in the New Industry?

Question 2. What used to be national markets with local companies competing for business has become a global market with everyone competing for everyone’s business everywhere. Explain the 3 generic strategies by Porter for Competitive advantage in the light of above statement.

Question 3. What do you understand by the term Business Portfolio? How do BCG and GE matrix help a multi-business organization analyze its current business portfolio and decide which businesses should receive more or less investment.

Case Study

Haier and There

Walking down the aisles of one of its 22 factories in Qingdao, China, seeing rows of steel being converted into stylish front-loading washing machines, one couldn’t help but marvel that only 23 years ago, Haier, China’s largest and the world’s second largest consumer durables brand, was on the verge of bankruptcy. In fact, the ‘Haier Group’ – as it is known today – did not even exist. What existed was a bleeding company called Qingdao General Refrigerator Factory that produced sub-standard refrigerators for local consumption.

What caught the eye was the pin-drop silence among the workers. The company’s Indian head, Pranay Dhabhai, explains later: “Each factory consists of several lines. And each line has targets such as 450 pieces of whatever product to handle in a day, leaving no time for small talk. Also, the work culture is such that it is self-stimulatory and that of assuming individual accountability of one’s work.” Quite the opposite of India where daily banter forms an integral part of work.

Actually, this is all the doing of the Group’s Chairman and CEO, Zhang Ruimin, very often referred to as the Jack Welch (once Chairman and CEO of General Electric, known for his uncanny business instincts and unique leadership strategies) of China. Three of the most unique management practices that Ruimin instilled in the company’s culture were that of individual accountability, the OEC model and that of attracting the ‘stunned fish’.

Under individual accountability, if a product doesn’t sell in the market or sells very poorly, everyone from design to manufacturing to sales is responsible for it. In fact, the employees’ salaries are directly related to the product’s market performance. OEC is an abbreviation for ‘Overall’, ‘Everything, Everyone, Everyday’ and ‘Control’, meaning control over everyone’s everyday performance in the company. And attracting the ‘stunned fish’ is Ruimin’s unique theory of mergers and acquisitions where the company buys out the ‘stunned fish’ or companies that have good products, facilities, equipment and distribution channels but poor management.

Put together, these theories and management practices have today catapulted the company from a one-room facility manufacturing low-quality products, 76 of which Ruimin sledge hammered to death in 1984, thus marking a new beginning for the company, to now one with a global revenue of around $16.2 billion, 240 subsidiaries, over 50,000 employees, over 7,880 patented technologies, with operations and facilities in countries such as the US, Jordan and Pakistan and 30 overseas plants and manufacturing bases. In fact, the group’s headquarters in Qingdao is spread across two estates of 1,500 acres and 2,500 acres, consisting of several manufacturing units and facilities, the most noteworthy feature being the completely automated warehouse with 21-ft-long compartments, operated by machines.

India and Haier

What importance does all this hold for India? Well, as Diao Yunfeng, the Managing Director of the Group’s Overseas Business Division, says, “Currently, Indian revenues comprise 2 per cent of the global revenues. However, India is of great importance to us as a group, given its high potential in the markets today, and we want the country to have greater stake in the global group.” In fact, Haier, which set up shop on Indian soil three years ago, is moving fast to make India a manufacturing and exporting hub given the convenient geographical location of the country and its proximity to the global headquarters in China.

However, not everything has been hunky dory. It entered the currently over-Rs 35,000 crore durables market in India almost seven years after rivals LG and Samsung did, and had to deal with the whole notion of being a ‘Chinese’ company. Pranay Dhabhai, Wholetime Director and COO of the Group’s Indian subsidiary, Haier Applainces (India) Pvt Ltd, says, “Well, we at Haier like to do things differently. We consider ourselves a global brand with the right product offering and good quality as well. It will be unfair to compare us to other companies because what others took to achieve in nearly a century, Haier globally has done in merely 23 years.”

Aggressive plans

Haier and there: Left: A Haier store in Shanghai

Having established the distribution network and understood the requirements of the Indian market over the past three years, it is now ready to get more aggressive. Dhabhai says, “So far we have been spending around 10 per cent of our revenues on promotions and brand building initiatives. We will be spending a lot more beginning this year.” The company will also start consolidating its distribution network, Dhabhai says. Industry watchers say it has spent around Rs 200 crore in India so far, having recently acquired the 40-acre Anchor Daewoo facility in Pune for manufacture of refrigerators, to be followed by televisions and washing machines.

Says Dhabhai, “Rather than expanding our distribution network, we will focus on consolidating it in such a way as to get more visibility in each of the outlets that we are present in. We want the brand to be a profitable proposition not only for us but also for our trade partners. Haier globally has been growing at 65 per cent on a yearly basis and we want to be able to do the same.”

Haier, as part of its expansion strategy in India, plans to not only launch new ranges of its televisions, air-conditioners, refrigerators and washing machines, but advertising campaigns also.

“We are already working on different campaigns that will run on TV as well as the print medium. Besides doing holistic range campaigns, we will also do season-specific campaigns,” says Dhabhai.

Haier is also going to invest substantially in R&D. According to the company, innovation based on localizations is one of the key strengths that it would continue to focus on.

Meanwhile, industry analysts who have been tracking the growth in the durables sector as well as in individual companies say Haier is a global company that has a very good reputation in terms of product quality and technology, but has low market share, similar to other big companies such as Sony and Sharp.

However, what Haier could do with right now is some aggressive marketing to catapult itself into more prominence, they add. That would not be very difficult to do considering the Chairman’s mission statement in 1984, soon after the company was created, comparing it to a sea.

He said in the statement: “Haier is like a sea. Like the sea it has no boundaries, it is a blue ambition. Haier wants to attract talent from the five lakes and the four seas to make it a success both in China and the overseas.”

Question 1. The Company foresees continued growth and expansion in the coming few years globally driven by it’s operations in India and hopes to realign India’s strengths and world-class market capabilities to deliver services to its customers. Conduct the SWOT Analysis of Haier’s foray in to Indian market in light of facts given in the narration.

Assignment – C

1. Which approach to the study of leadership emphasizes the role of situational factors and how these moderate the relationship between leader traits or leadership behaviors and leadership effectiveness?
(a) Leader-oriented approach.
(b) Contingency approach.
(c) Transactional approach.
(d) Transformational approach

2. Porter has designed a framework to help understand why certain countries achieve global competitive advantage in certain industries. It also helps internationalizing firms to make location decisions. The framework is called:
(a) Porter’s value chain
(b) Porter’s Five Forces
(c) Porter’s Generic Strategies
(d) Porter’s Diamond

3. It is generally agreed that the role of strategy is to:
(a) Make best use of resources
(b) Make profits for the organization
(c) Make the best products and services
(d) Achieve competitive advantage

4. Kay (1993) sees the strategy of an organization as matching internal capabilities with:
(a) Its external relationships
(b) Its customer needs
(c) The industry life cycle
(d) The external environment

5. An organization’s external environment consists of the general or macro environment and:
(a) The internal environment
(b) The competitive environment
(c) The specific environment
(d) The micro-environment

6. The term ‘corporate strategy’ concerns strategy and strategic decisions
(a) In the private sector only.
(b) Developed by the senior management in an organization.
(c) In certain types of organizations.
(d) At all levels in an organization.

7. A key characteristic of strategic decisions is:
(a) They are normally definite decisions about the future of the organization.
(b) They identify specific areas of strategic interest for the management of an organization.
(c) They result in better organizational performance.
(d) They are likely to be concerned with, or affect, the long-term direction of an organization.

8. It is possible to identify different levels of strategy in an organization, these are:
(a) Corporate and functional.
(b) Corporate and Business
(c) Strategic and tactical.
(d) Corporate; strategic business unit; operational.

9. An organisation’s mission can be defined as:
(a) The overriding purpose in line with the values or expectations of stakeholders.
(b) The overriding purpose regardless of the values or expectations of stakeholders.
(c) The organisation’s business plan.
(d) The desired future state of the organisation.

10. Strategic choices require an understanding of:
(a) the business environment, the competition and the strategic capability of the organisation.
(b) The key drivers of change.
(c) The organisational strengths and weaknesses.
(d) The underlying bases for future strategy at business unit and corporate levels; the options for developing strategy in terms of directions and methods of development.

11. In Porter’s Five Forces, the ‘threat of new entrants’ relates to:
(a) Substitutes
(b) Switching costs
(c) Buyer power
(d) Barriers to entry

12. Brandenburg and Nalebuff added a sixth force to Porter’s Five Forces. It is known as:
(a) Seller power
(b) Complementors
(c) Substitutes
(d) Government regulation

13. Barriers to entry into an industry are likely to be high if:
(a) Switching costs are low
(b) Differentiation is low
(c) Access to distribution channels is high
(d) Requirement for economies of scale is high

14. Buyer power is high if:
(a) They have little information
(b) The buyer requires a high quality product for their own production
(c) Differentiation is low
(d) Switching costs are low

15. Competitive rivalry will be high if:
(a) There are a few strong players in the industry
(b) There is a high degree of differentiation
(c) The industry is in its infancy
(d) The industry is fragmented

16. A strategic group can be defined as:
(a) A group of key resources and competences that are necessary to achieve competitive advantage
(b) A group of customers that have similar characteristics
(c) An industry recipe
(d) A group of firms in an industry following the same or a similar strategy

17. The key activities in the strategic management process are:
(a) Analysis, formulation, review
(b) Analysis, implementation, review
(c) Formulation, analysis, implementation
(d) Analysis, formulation, implementation

18. Strategy analysis is also referred to as:
(a) Strategy diagnosis
(b) Rational analysis
(c) Situation analysis
(d) SWOT analysis

19. Strategy formulation takes place at two levels. These are:
(a) Conscious and sub-conscious
(b) Implicit and explicit
(c) Values and operational
(d) Corporate and business

20. The Policies of an organization derive from its:
(a) Purpose
(b) Vision
(c) Objectives
(d) Strategy

21. The statement of an organization’s aspirations can be found in the organization’s:
(a) Policies
(b) Mission
(c) Strategy
(d) Vision

22. A substitute product or service is:
(a) A new entrant into the industry
(b) A competitor’s product or service
(c) A less attractive way of meeting the same need
(d) An alternative way of meeting the same need

23. Cross-functional teams are:
(a) The representative voice of senior management.
(b) A small group of specialists who collaborate on a task force.
(c) A small group of people who come together to resolve business unit issues.
(d) A small group of people from different departments who are mutually accountable to a common set of performance goals.

24. The business unit strategy has three major components:
(a) business mission, department mission, and daily plans
(b) competencies, abilities, and problem statements
(c) marketing, advertising and pricing objectives
(d) mission, business unit goals, and competencies

25. Disney is in the business of:
(a) Building theme parks.
(b) Designing new imaginative characters.
(c) Making money.
(d) Creating entertainment, fun and fantasy.

26. A useful framework used to assess a company’s investments/divisions is called:
(a) corporate insight analysis
(b) company productivity analysis
(c) SBU knowledge analysis
(d) business portfolio analysis
e)

27. Cash cows are SBU’s that typically generate:
(a) large awareness levels but few sales
(b) paper losses in the long run
(c) problems for product managers
(d) large amounts of cash

28. Business unit competencies should be distinctive enough to provide
(a) clear understanding of who you want to lead the company
(b) opportunity to compete on a productivity basis
(c) additional strategic mission
(d) competitive advantage

29. TQM is a strategy that is designed to change the quality of a product to satisfy customer needs by using the concept of
(a) reverse brainstorming
(b) brainstorming
(c) product life cycle analysis
(d) benchmarking

30. Firms may view growth opportunities in these terms:
(a) New markets, and current and new products
(b) New markets and new products
(c) Current markets and current products
(d) Current and new markets, and current and new products

31. The strategic marketing process is how an organization allocates its marketing mix resources to reach its:
(a) target markets
(b) area of expertise
(c) competition
(d) stated business ideas

32. An effective short-hand summary of the situation analysis is a:
(a) SWOT analysis
(b) SBU analysis
(c) BCG analysis
(d) Competition analysis

33. In the strategic marketing process, once you get results you go into the:
(a) control phase
(b) marketing plan
(c) planning phase
(d) marketing program

34. Ansoff had four market-product strategies to expand sales. They included
(1) market penetration, (2) product development, (3) market development and:
(a) diversification
(b) current customer retention
(c) distribution enhancement
(d) product simplification

35. Aggregating prospective buyers into groups is called:
(a) market segmentation
(b) BCG matrix analysis
(c) grouping
(d) market categorization

36. One key to effective implementation is setting:
(a) schedule of events
(b) milestones
(c) good managers in motion
(d) goals

37. When actual performance results are better than what the plan called for, managers should:
(a) Find creative ways to exploit the situation.
(b) Issue more stock options to employees.
(c) Increase prices.
(d) Ignore it.

38. Value for shareholders of a firm is measured by:
(a) stock performance and profitability
(b) sales revenue
(c) satisfactory employee targets
(d) profitable year-end balance sheet

39. The _____ for PepsiCo is “We believe our commercial success depends upon offering quality and value to our consumers and customers; providing products that are safe, wholesome, economically efficient and environmentally sound; and providing a fair return to our investors while adhering to the highest standards of quality.”
(a) mission
(b) organizational code of conduct
(c) functional code
(d) benefits statement

40. A firm can acknowledge the critical importance of its _____, by having explicit goals that state its intention to improve work conditions by adding more lighting and providing the workers with more and better safety equipment.
(a) employee welfare
(b) market share
(c) sales revenue
(d) satisfaction