You are on page 1of 49

BITS STRATEGIC MANAGEMENT NOTES

1. Explain Porters industry analysis briefly and conduct Porters industry analysis for the below given caselet? PDF 2. Conduct evaluation and control process, choosing your own example? 3. Make a strategic business plan for an entrepreneurial venture of your own? 4. Compare different types of organizational structures with the stages of growth? 5. Explain the relevance of ethical decision making in strategic management? 6. Analyse Porters approach to industry analysis taking IT sector in India as an example? pdf 7. Justify the importance of strategic marketing issues and strategic R&D issues to the success of strategic planning for the horizontal growth of the firm? 8. Explain advantages and disadvantages in going for collusive strategy? 9. Explain the phases in BCG matrix taking your own examples of any companys products? 10. Agency Theory Stewardship Theory in corporate governance 11. Carrolls 4 responsibilities of business 12. Difference between policy, programme, budget & procedure 13. Strategic management & different phases 14. External environment variables 15. TOWS matrix 16. 4 international entry options 17. Advantages & disadvantages for going for collusive strategy 18. BCG Matrix 19. Importance of strategic marketing issues & strategic R&D issues to success of strategic planning for horizontal growth of firm 20. Organization structure in strategic management with the stages of growth 21. SWOT analysis 22. Competitive advantage/ distinctive advantage in SM 23. Scope of SM 24. 8 step strategic decision making process. How does a business review its present position in order to make amends for any mistakes it might be making 25. Feedback mechanism in SM

ANSWERS
Answer 11. Corporate social responsibility, or CSR, is a corporation's obligation to its stakeholders, which are any groups/people that have a stake or interest in a company's success and products. This includes customers, employees, suppliers, investors and the communities surrounding the business. Stakeholders have varying needs to be met. Whereas a customer's greatest concern may be the safety of a company's products, an employee's need might be for a fair wage and safe working conditions. An investor may be concerned with profits and the bottom line, while the community may care about a business limiting the pollution it causes. Thus, corporate social responsibility means maximizing the good and minimizing the bad effects your company has on these stakeholders' diverse interests.

Facets of CSR
In his 1991 article "The Pyramid of Corporate Social Responsibility," Dr. Archie B. Carroll, a business management author and professor, identifies four areas that make up a corporate social responsibility pyramid: legal, economic, ethical and philanthropic. This pyramid has become widely used and is meant to explain the main areas that a business's duties to its stakeholders fall under.

Legal
Corporations must ensure that their business practices are legal. Obeying regulations helps protect consumers, who rely on a business to be truthful about the products it sells, and investors, who stand to lose profits if a company is penalized or shut down because of illegal practices.

Economic
According to the 2011 book "Business Ethics," a company's economic responsibilities include being profitable in order to provide a return on investment to owners and shareholders, to create jobs in their communities and to contribute useful products and services to society. Part of being economically responsible means streamlining processes to find the most efficient ways to run your business and innovating your product offerings and marketing to increase revenue.

Ethical
Beyond abiding by the letter of the law, an organization's ethical responsibilities include managing waste, recycling and consumption. These areas are sometimes regulated by city, state or federal governments, but often a company can go further than what the law requests and institute policies that help sustain the environment for future generations. Other ethical responsibilities come in the form of advertising, as in not stretching the truth to a customer just to get them to make a purchase, and treatment of employees. A company can provide more than minimum wage and minimum safety precautions for employees; it can provide excellent benefits, insurance and invest resources in building a clean and safe workplace where employees will be happy to come each day.

Philanthropic
The authors of the 2011 "Business Ethics" also suggest that part of the philanthropic responsibility corporations face is to promote the welfare of humans and to spread goodwill. An example of this is The Xerox Foundation's "Xerox Employee Matching Gifts Program" in which Xerox matches its employees' contributions to higher education institutions up to $1,000. Similarly, the PepsiCo Foundation has committed over $2 million to World Food Program USA, which helps fight hunger in "vulnerable communities around the globe."

Answer 10. Unlike agency theory, stewardship theory assumes that managers are stewards whose behaviors are aligned with the objectives of their principals. The theory argues and looks at a different form of motivation for managers drawn from organizational theory. Managers are viewed as loyal to the company and interested in

achieving high performance. The dominant motive, which directs managers to accomplish their job, is their desire to perform excellently. Specifically, managers are conceived as being motivated by a need to achieve, to gain intrinsic satisfaction through successfully performing inherently challenging work, to exercise responsibility and authority, and thereby to gain recognition from peers and bosses. Therefore, there are nonfinancial motivators for managers.

The theory also argues that an organization requires a structure that allows harmonization to be achieved most efficiently between managers and owners. In the context of firms leadership, this situation is attained more readily if the CEO is also the chairman of the board. This leadership structure will assist them to attain superior performance to the extent that the CEO exercises complete authority over the corporation and that their role is unambiguous and unchallenged. In this situation, power and authority are concentrated in a single person. Hence, the expectations about corporate leadership will be clearer and more consistent both for subordinate managers and for other members of the corporate board. Thus, there is no room for uncertainty as to who has authority or responsibility over a particular matter. The organization will enjoy the benefits of unity of direction and of strong command and control. Agency theory is a concept that explains why behavior or decisions vary when exhibited by members of a group. Specifically, it describes the relationship between one party, called the principal, that delegates work to another, called the agent. It explains their differences in behavior or decisions by noting that the two parties often have different goals and, independent of their respective goals, may have different attitudes toward risk. The concept originated from the work of Adolf Augustus Berle and Gardiner Coit Means, who were discussing the issues of the agent and principle as early as 1932. Berle and Means explored the concepts of agency and their applications toward the development of largecorporations. They saw how the interests of the directors and managers of a given firm differ from those of the owner of the firm, and used the concepts of agency and principal to explain the origins of those conflicts. The theory essentially acknowledges that different parties involved in a given situation with the same given goal will have different motivations, and that these different motivations can manifest in divergent ways. It states that there will always be partial goal conflict among parties, efficiency is inseparable from effectiveness, and information will always be somewhat asymmetric between principal and agent. The theory has been successfully applied to myriad disciplines including accounting, economics, politics, finance, marketing, and sociology. Research on agency theory has had several findings. Most notably, an agent is more likely to adopt the goals of the principal, and therefore behave in the interest of the principal, when the contract is outcome-based. Also, when the agent is aware of a mechanism in place that allows the principal to verify the behavior of the agent, he is more likely to comply with the goals of the principal. Furthermore, outcome uncertainty has a positive relationship to behavior-based contracts, while there is a negative relationship to outcome-based contracts. Goal conflict has a negative relationship to behavior-based contracts with a positive relationship toward outcome-based contracts. Outcome measurability is negatively related to behavior-based contracts; there is a positive relationship with respect to outcome-based contracts. Opponents to agency theory criticize it as being too general and claim that it is pseudo-scientific. They also claim that its interpretation is subjective and its validity is not testable. The ability to be empirically tested is a necessary component of any hypothesis.

Answer 12. A policy is a principle or protocol to guide decisions and achieve rational outcomes. A policy is a statement of intent, and is implemented as a procedure[1] or protocol. Policies are generally adopted by the Board of or senior governance body within an organization whereas procedures or protocols would be developed and adopted by senior executive officers. Policies can assist in both subjective and objective decision making. Policies to assist in subjective decision making would usually assist senior management with decisions that must consider the relative merits of a number of factors before making decisions and as a result are often hard to objectively test e.g. work-life balance policy. In contrast policies to assist in objective decision making are usually operational in nature and can be objectively tested e.g. password policy.[citation needed] The term may apply to government, private sector organizations and groups, and individuals. Presidential executive orders, corporate privacy policies, and parliamentary rules of order are all examples of policy. Policy differs from rules or law. While law can compel or prohibit behaviors (e.g. a law requiring the payment of taxes on income), policy merely guides actions toward those that are most likely to achieve a desired outcome.[citation needed] Policy or policy study may also refer to the process of making important organizational decisions, including the identification of different alternatives such as programs or spending priorities, and choosing among them on the basis of the impact they will have. Policies can be understood as political, management, financial, and administrative mechanisms arranged to reach explicit goals. In public corporate finance, a critical accounting policy is a policy for a firm/company or an industry which is considered to have a notably high subjective element, and that has a material impact on the financial statement A budget is a quantitative expression of a plan for a defined period of time. It may include planned sales volumes and revenues, resource quantities, costs and expenses, assets, liabilities and cash flows. It expresses strategic plans of business units, organizations, activities or events in measurable terms Budget helps to aid the planning of actual operations by forcing managers to consider how the conditions might change and what steps should be taken now and by encouraging managers to consider problems before they arise. It also helps co-ordinate the activities of the organization by compelling managers to examine relationships between their own operation and those of other departments. Other essentials of budget include: 1. 2. 3. 4. 5. To control resources To communicate plans to various responsibility center managers. To motivate managers to strive to achieve budget goals. To evaluate the performance of managers To provide visibility into the company's performance

For accountability In summary, the purpose of budgeting is tools: 1. tools provide a forecast of revenues and expenditures, that is, construct a model of how a business might perform financially if certain strategies, events and plans are carried out. 2. Tools enable the actual financial operation of the business to be measured against the forecast.

3. Lastly,tools establish the cost constraint for a project, program, or operation. A procedure is a document written to support a "Policy Directive". A Procedure is designed to describe Who, What, Where, When, and Why by means of establishing corporate accountability in support of the implementation of a "policy". The "How" is further documented by each organizational unit in the form of "Work Instructions" which aims to further support a procedure by providing greater detail. For example, a manufacturing facility established a policy that all overtime shall be approved. A procedure can be created to establish Who can approve overtime (ranks, roles & responsibilities), "What" forms/systems need to be used, "Where" they are located, "When" overtime is applicable. And the "Why" refers to the management directive established via a "Policy". The output of a procedures become input into a work instruction which is a set of actions or operations which have to be executed in the same manner in order to achieve intended results under the same circumstances.(for example, in the latter example, the "what" [output of procedure] could be further broken down into a work instruction to describe "how" a manager/employee access the systems for approving/reviewing overtime, i.e. click on this hyperlink, on this button, and choose these fields, and click approve/reject. In telecommunications, this is the premise under which a SOP (Standard Operating Procedure) is generated. A SOP is specifically designed to describe and guide multiple iterations of the same procedure over a broad number of locations, on multiple occasions, and over an open period of time until such SOP is updated for whatever reason, or discontinued. Used heavily in the telecommunications industry, a MOP (Method of Procedure) differs from a SOP in that it contains specific directives for that particular activity, on that particular date, for that specific location or piece of equipment. In today's business model, wherein telecom providers can be both "provider" and "user", most "user" organizations require a MOP from the service provider whenever an activity has the potential to cause a traffic-affecting outage. The industry standard is <50ms of traffic interruption. If a "switch hit" or traffic interruption is 50 ms or less, it is "transparent" to the bit stream carrying the traffic, and is therefore considered "hitless" and non-traffic affecting. A programme or program[1] is a booklet available for patrons attending a live event such as theatre performances, ftes, sports events, etc. It is a printed leaflet outlining the parts of the event scheduled to take place, principal performers and background information. In the case of theatrical performances, the term playbill is also used. It may be provided free of charge by the event organisers or a charge may be levied.

Answer 18. The BCG Growth-Share Matrix is a portfolio planning model developed by Bruce Henderson of the Boston Consulting Group in the early 1970's. It is based on the observation that a company's business units can be classified into four categories based on combinations of market growth and market share relative to the largest competitor, hence the name "growth-share". Market growth serves as a proxy for industry attractiveness, and relative market share serves as a proxy for competitive advantage. The growth-share matrix thus maps the business unit positions within these two important determinants of profitability

Henderson reasoned that the cash required by rapidly growing business units could be obtained from the firm's other business units that were at a more mature stage and generating significant cash. By investing to become the market share leader in a rapidly growing market, the business unit could move along the experience curve and develop a cost advantage. From this reasoning, the BCG Growth-Share Matrix was born.</p> The four categories are: Dogs have low market share and a low growth rate and thus neither generate nor consume a large amount of cash. However, dogs are cash traps because of the money tied up in a business that has little potential. Such businesses are candidates for divestiture. Question marks are growing rapidly and thus consume large amounts of cash, but because they have low market shares they do not generate much cash. The result is a large net cash comsumption. A question mark (also known as a "problem child") has the potential to gain market share and become a star, and eventually a cash cow when the market growth slows. If the question mark does not succeed in becoming the market leader, then after perhaps years of cash consumption it will degenerate into a dog when the market growth declines. Question marks must be analyzed carefully in order to determine whether they are worth the investment required to grow market share. Stars generate large amounts of cash because of their strong relative market share, but also consume large amounts of cash because of their high growth rate; therefore the cash in each direction approximately nets out. If a star can maintain its large market share, it will become a cash cow when the market growth rate declines. The portfolio of a diversified company always should have stars that will become the next cash cows and ensure future cash generation. Cash cows- As leaders in a mature market, cash cows exhibit a return on assets that is greater than the market growth rate, and thus generate more cash than they consume. Such business units should be "milked", extracting the profits and investing as little cash as possible. Cash cows provide the cash required to turn question marks into market leaders, to cover the administrative costs of the company, to fund research and development, to service the corporate debt, and to pay dividends to shareholders. Because the cash cow generates a relatively stable cash flow, its value can be determined with reasonable accuracy by calculating the present value of its cash stream using a discounted cash flow analysis. Under the growth-share matrix model, as an industry matures and its growth rate declines, a business unit will become either a cash cow or a dog, determined soley by whether it had become

the market leader during the period of high growth.</p> While originally developed as a model for resource allocation among the various business units in a corporation, the growth-share matrix also can be used for resource allocation among products within a single business unit. Its simplicity is its strength - the relative positions of the firm's entire business portfolio can be displayed in a single diagram. Limitations 1. The growth-share matrix once was used widely, but has since faded from popularity as more comprehensive models have been developed. Some of its weaknesses are: 2. Market growth rate is only one factor in industry attractiveness, and relative market share is only one factor in competitive advantage. The growth-share matrix overlooks many other factors in these two important determinants of profitability. 3. The framework assumes that each business unit is independent of the others. In some cases, a business unit that is a "dog" may be helping other business units gain a competitive advantage. 4. The matrix depends heavily upon the breadth of the definition of the market. A business unit may dominate its small niche, but have very low market share in the overall industry. In such a case, the definition of the market can make the difference between a dog and a cash cow. 5. While its importance has diminished, the BCG matrix still can serve as a simple tool for viewing a corporation's business portfolio at a glance, and may serve as a starting point for discussing resource allocation among strategic business units.

Answer 16. Strategic decision-making requires anticipation of and preparation for the future. One way to plan is through forecasting. Accurate forecasting of external environmental elements is essential for successful strategic management. To identify future environmental changes, opportunities, and threats, take the steps outlined below.

1. Select the environmental variables that are critical to your firm.


When analyzing environmental variables, try to select key variables that are most likely to foster sharp growth or decline in the marketplace. One such variable is population trends, which not only can cause disorder in the business environment but also can activate other major changes in the economic, social, and political environments.

2. Identify appropriate sources of data.


To make accurate forecasts, you need accurate and up-to-date information about your company's external environment. Although trade and scholarly publications are important sources, you also should obtain raw data from formal research if time and money permit.

3. Evaluate the available forecasting techniques and make forecasts.


There are five major techniques you can use to conduct environmental forecasting. When choosing a forecasting technique, you need to consider several factors, including the nature and importance of

the forecast, the cost and time involved, the amount and accuracy of available data, and the skills and concerns of people involved. The five forecasting techniques are: Economic forecasts, which are primarily concerned with remote factors, such as general economic conditions, the consumer price index, wage rates, and productivity Economic models, which employ complex simultaneous regression equations to relate economic events to areas of corporate activity Social forecasts, which involve analysis of population, housing, social security, health, education, income, and expendituresP Political forecasts, which take into account a broad range of political factors Technological forecasts, which attempt to predict changes in technology and estimate their impact on an organization's operation.

4. Integrate the results into the strategic management process.


If the forecast identifies any gaps or inconsistencies between your company's desired position and its present position, you can respond with plans and actions.

5. Monitor the forecasts.


To ensure that you are on the right track with strategic planning, continue to monitor those environmental variables you identified in Step 1, and note any dramatic shifts that can provide opportunities or threats to your company. By forecasting elements of your company's external environment, you will be able to identify those factors that may be necessary for your company's future success, to formulate or reformulate your company's basic mission, and to design strategies that can help your company achieve its goals and objectives.

Answer 16.There are a number ways businesses can sell their products in international markets. The most appropriate method will depend on the business, its products, the outcome of its Marketing Environment analysis and its Marketing Plan. This article talks you through market entry options.

Direct Export The organisation produces their product in their home market and then sells them to customers overseas. Indirect Export The organisations sells their product to a third party who then sells it on within the foreign market. Licensing Another less risky market entry method is licensing. Here the Licensor will grant an organisation in the foreign market a license to produce the product, use the brand name etc in return that they will receive a royalty payment. Franchising Franchising is another form of licensing. Here the organisation puts together a package of the successful ingredients that made them a success in their home market and then franchise this package to oversea investors. The Franchise holder may help out by providing training and marketing the services or product. McDonalds is a popular example of a Franchising option for expanding in international markets. Contracting Another of form on market entry in an overseas market which involves the exchange of ideas is contracting. The manufacturer of the product will contract out the production of the product to another organisation to produce the product on their behalf. Clearly contracting out saves the organisation exporting to the foreign market. Manufacturing Abroad

The ultimate decision to sell abroad is the decision to establish a manufacturing plant in the host country. The government of the host country may give the organisation some form of tax advantage because they wish to attract inward investment to help create employment for their economy. Joint Venture To share the risk of market entry into a foreign market, two organisations may come together to form a company to operate in the host country. The two companies may share knowledge and expertise to assist them in the development of company, of course profits will have to be shared between the two firms. There are a variety of ways in which a company can enter a foreign market. No one market entry strategy works for all international markets. Direct exporting may be the most appropriate strategy in one market while in another you may need to set up a joint venture and in another you may well license your manufacturing. There will be a number of factors that will influence your choice of strategy, including, but not limited to, tariff rates, the degree of adaptation of your product required, marketing and transportation costs. While these factors may well increase your costs it is expected the increase in sales will offset these costs. The following strategies are the main entry options open to you. Direct Exporting Direct exporting is selling directly into the market you have chosen using in the first instance you own resources. Many companies, once they have established a sales program turn to agents and/or distributors to represent them further in that market. Agents and distributors work closely with you in representing your interests. They become the face of your company and thus it is important that your choice of agents and distributors is handled in much the same way you would hire a key staff person. Licensing Licensing is a relatively sophisticated arrangement where a firm transfers the rights to the use of a product or service to another firm. It is a particularly useful strategy if the purchaser of the license has a relatively large market share in the market you want to enter. Licenses can be for marketing or production. licensing). Franchising Franchising is a typical North American process for rapid market expansion but it is gaining traction in other parts of the world. Franchising works well for firms that have a repeatable business model (eg. food outlets) that can be easily transferred into other markets. Two caveats are required when considering using the franchise model. The first is that your business model should either be very unique or have strong brand recognition that can be utilized internationally and secondly you may be creating your future competition in your franchisee. Partnering Partnering is almost a necessity when entering foreign markets and in some parts of the world (e.g. Asia) it may be required. Partnering can take a variety of forms from a simple co-marketing arrangement to a sophisticated strategic alliance for manufacturing. Partnering is a particularly useful strategy in those markets where the culture, both business and social, is substantively different than your own as local partners bring local market knowledge, contacts and if chosen wisely customers.

Joint Ventures Joint ventures are a particular form of partnership that involves the creation of a third independently managed company. It is the 1+1=3 process. Two companies agree to work together in a particular market, either geographic or product, and create a third company to undertake this. Risks and profits are normally shared equally. The best example of a joint venture is Sony/Ericsson Cell Phone. Buying a Company In some markets buying an existing local company may be the most appropriate entry strategy. This may be because the company has substantial market share, are a direct competitor to you or due to government regulations this is the only option for your firm to enter the market. It is certainly the most costly and determining the true value of a firm in a foreign market will require substantial due diligence. On the plus side this entry strategy will immediately provide you the status of being a local company and you will receive the benefits of local market knowledge, an established customer base and be treated by the local government as a local firm. Piggybacking Piggybacking is a particularly unique way of entering the international arena. If you have a particularly interesting and unique product or service that you sell to large domestic firms that are currently involved in foreign markets you may want to approach them to see if your product or service can be included in their inventory for international markets. This reduces your risk and costs because you are essentially selling domestically and the larger firm is marketing your product or service for you internationally. Turnkey Projects Turnkey projects are particular to companies that provide services such as environmental consulting, architecture, construction and engineering. A turnkey project is where the facility is built from the ground up and turned over to the client ready to go turn the key and the plant is operational. This is a very good way to enter foreign markets as the client is normally a government and often the project is being financed by an international financial agency such as the World Bank so the risk of not being paid is eliminated. Greenfield Investments Greenfield investments require the greatest involvement in international business. A greenfield investment is where you buy the land, build the facility and operate the business on an ongoing basis in a foreign market. It is certainly the most costly and holds the highest risk but some markets may require you to undertake the cost and risk due to government regulations, transportation costs, and the ability to access technology or skilled labour.

Answer 13. The Five Stages of the Strategic Management Process


The strategic management process is more than just a set of rules to follow. It is a philosophical approach to business. Upper management must think strategically first, then apply that thought to a process. The strategic management process is best implemented when everyone within the business understands the strategy. The five stages of the process are goal-setting, analysis, strategy formation, strategy implementation and strategy monitoring.

Goal-Setting
The purpose of goal-setting is to clarify the vision for your business. This stage consists of identifying three key facets: First, define both short- and long-term objectives. Second, identify the process of how to accomplish

your objective. Finally, customize the process for your staff, give each person a task with which he can succeed. Keep in mind during this process your goals to be detailed, realistic and match the values of your vision. Typically, the final step in this stage is to write a mission statement that succinctly communicates your goals to both your shareholders and your staff.

Analysis
Analysis is a key stage because the information gained in this stage will shape the next two stages. In this stage, gather as much information and data relevant to accomplishing your vision. The focus of the analysis should be on understanding the needs of the business as a sustainable entity, its strategic direction and identifying initiatives that will help your business grow. Examine any external or internal issues that can affect your goals and objectives. Make sure to identify both the strengths and weaknesses of your organization as well as any threats and opportunities that may arise along the path.

Strategy Formulation
The first step in forming a strategy is to review the information gleaned from completing the analysis. Determine what resources the business currently has that can help reach the defined goals and objectives. Identify any areas of which the business must seek external resources. The issues facing the company should be prioritized by their importance to your success. Once prioritized, begin formulating the strategy. Because business and economic situations are fluid, it is critical in this stage to develop alternative approaches that target each step of the plan.

Strategy Implementation
Successful strategy implementation is critical to the success of the business venture. This is the action stage of the strategic management process. If the overall strategy does not work with the business' current structure, a new structure should be installed at the beginning of this stage. Everyone within the organization must be made clear of their responsibilities and duties, and how that fits in with the overall goal. Additionally, any resources or funding for the venture must be secured at this point. Once the funding is in place and the employees are ready, execute the plan.

Evaluation and Control


Strategy evaluation and control actions include performance measurements, consistent review of internal and external issues and making corrective actions when necessary. Any successful evaluation of the strategy begins with defining the parameters to be measured. These parameters should mirror the goals set in Stage 1. Determine your progress by measuring the actual results versus the plan. Monitoring internal and external issues will also enable you to react to any substantial change in your business environment. If you determine that the strategy is not moving the company toward its goal, take corrective actions. If those actions are not successful, then repeat the strategic management process. Because internal and external issues are constantly evolving, any data gained in this stage should be retained to help with any future strategies.

Answer 5. Research has shown that while competitive advantage is also driven by exceptional resource management, ethical conduct is an important factor in sustained superior financial performance. The capacity to consider the ethical implications of a decision is critical to an organisations success, and is a skill for managers so fundamental that it underpins all the other key management competency areas. While professional ethics are not driven by a literal and straight-forward set of rules, an array of techniques can provide support for managers and professionals in their ethical decision-making at the strategic and operational levels.

This guide provides APESMA members with advice on some of the more commmon ethical dilemmas, help with how to approach ethical reasoning in a structured way, and a checklist as a practical reference tool to use in day-to-day management decision-making. Few engineers, scientists and managers have formal ethics training. A lack of education and training in the discipline of ethics means that professionals may (a) not recognise an ethical problem before or even when it arises, (b) not know how to consider the issues of the problem in an effective and consistent way, and (c) not reach a strong and defensible position in regard to addressing the ethical problem. This can result in a serious misstep for managers and the potential for substantial legal and social costs for the organisation they work for. The aim of this Guide is to help APESMA members overcome some of these limitations. The Guide is intended for technology management professionals in roles with Managerial responsibilities but is likely to also be useful for professionals in their day-to-day activities which inevitably involve ethical considerations and making decisions with reference to ethical standards and principles. Most of us would agree that it is ethics in practice that makes sense; just having it carefully drafted and redrafted in books may not serve the purpose. Of course all of us want businesses to be fair, clean and beneficial to the society. For that to happen, organizations need to abide by ethics or rule of law, engage themselves in fair practices and competition; all of which will benefit the consumer, the society and organization. Primarily it is the individual, the consumer, the employee or the human social unit of the society who benefits from ethics. In addition ethics is important because of the following: 1. Satisfying Basic Human Needs: Being fair, honest and ethical is one the basic human needs. Every employee desires to be such himself and to work for an organization that is fair and ethical in its practices. 2. Creating Credibility: An organization that is believed to be driven by moral values is respected in the society even by those who may have no information about the working and the businesses or an organization. Infosys, for example is perceived as an organization for good corporate governance and social responsibility initiatives. This perception is held far and wide even by those who do not even know what business the organization is into. 3. Uniting People and Leadership: An organization driven by values is revered by its employees also. They are the common thread that brings the employees and the decision makers on a common platform. This goes a long way in aligning behaviors within the organization towards achievement of one common goal or mission. 4. Improving Decision Making: A mans destiny is the sum total of all the decisions that he/she takes in course of his life. The same holds true for organizations. Decisions are driven by values. For example an organization that does not value competition will be fierce in its operations aiming to wipe out its competitors and establish a monopoly in the market. 5. Long Term Gains: Organizations guided by ethics and values are profitable in the long run, though in the short run they may seem to lose money. Tata group, one of the largest business conglomerates in India was seen on the verge of decline at the beginning of 1990s, which soon turned out to be otherwise. The same companys Tata NANO car was predicted as a failure, and failed to do well but the same is picking up fast now. 6. Securing the Society: Often ethics succeeds law in safeguarding the society. The law machinery is often found acting as a mute spectator, unable to save the society and the environment. Technology, for example is growing at such a fast pace that the by the time law comes up with a regulation we have a newer technology with new threats replacing the older one. Lawyers and public interest litigations may not help a great deal but ethics can. Ethics tries to create a sense of right and wrong in the organizations and often when the law fails, it is the ethics that may stop organizations from harming the society or environment.

Answer 8. Joint licensing, supply and distribution contracts, joint ventures, collaborations, and collusion agreements all play significant importance with cooperative strategies. Collusive strategies and strategic alliances are two main forms of cooperation businesses instill. According to Jay Barney (2011), a Collusive Strategy exists when several firms in an industry cooperate to reduce industry competitiveness and raise prices above the full competitive level. Explicit collusion exists when firms negotiate production output and pricing agreements directly, in order to reduce competition. Tacit Collusion exists when firms coordinate their production and pricing strategies indirectly by observing the ouput and pricing decisions of other firms (p. 246). Tacit collusion exists when companies with similar products adjust their pricing point strategy in order to maintain competitiveness. With Stryker and the medical technology industry, similar products are often created. As a result, they price indirectly according to other competitors. However, with certain products, Stryker creates differentiated products that are more highly technological. Therefore, they can create a first-entry product price where other firms may follow or incorporate tacit collusion.

Answer 4. Types of Organizational Structures Need to set up a structure for your organization? This article will give you information about the different types of organizational structures along with their advantages and disadvantages.

"Every company has two organizational structures: The formal one is written on the charts; the other is the everyday relationship of the men and women in the organization." - Harold S. Geneen Every organization, to be effective, must have a structure. Let us first understand what an organization structure is. It is the setup that determines the hierarchy and reporting structure in an organization. It is represented by a drawing known as an organizational chart. There are different types of organizational structures that companies follow, depending on a variety of factors like leadership style, type of organization, geographical regions, work flow and hierarchy. To put it simply, an organizational structure is the plan of the hierarchy and arrangement of work. Here is a list of the different types of organizational structures. Traditional Structures These structures are based on functional division and departments. They are the kind of structures that follow the organization's rules and procedures to the T. They are characterized by having precise authority lines for all levels in the management. The various types of structures that fall under traditional structures are: Line Structure This is the kind of structure that has a specific line of command. The approvals and orders in this kind of structure come from top to bottom in a line. Hence it is known as a line structure. This kind of structure is suitable for smaller organizations like small accounting firms and law offices. This structure allows easy decision-making and is informal in nature.

Merits It is the simplest kind of organizational structure. Strict authority results in a stronger discipline. Prompt decisions result in quick and effective actions. There is clarity in the structures of authority and responsibility. As the control rests with one superior, it accords him the flexibility to adjust the department. There are good career advancement prospects for individuals who deliver quality work. Demerits There are chances of the department head being biased. Lack of specialization is a persistent problem. The department head may be burdened with lots of work. Communication only happens from top to bottom. Superiors with authority can misuse it for their benefit. Decisions are taken by a single person and can go wrong. Line and Staff Structure Though a line structure is suitable for most organizations, especially the small ones, it is not effective for larger companies. This is where the line and staff organizational structure comes into play. Line and staff structure combines the line structure where information and approvals come from top to bottom, with staff departments for support and specialization. Line and staff organizational structures are more centralized. Managers of line and staff have authority over their subordinates, but staff managers have no authority over line managers and their subordinates. The decisionmaking process becomes slower in this type of organizational structure because of several layers and guidelines. Also, there is formality involved. Merits It enables the employees to perform at a faster rate. It helps employees to accept responsible jobs and specialize in a particular area. It helps line managers to concentrate on the task at hand. Little or no resistance is met when organizational changes take place. It results in less operational wastage and increases productivity. Employees feel that they are given the due credit for their contribution. Demerits Confusion may be created among employees. Employees lack operational knowledge to give result-oriented suggestions. There are too many levels of hierarchy. Employees may have differences of opinions and this may slow down the work. As staff specialists exist, it is costlier than a simple line organization. Decision-making may be time-consuming.

Functional Structure This kind of organizational structure classifies people according to the function they perform in their professional life or according to the functions performed by them in the organization. The organization chart for a functional organization consists of a Vice President, a Sales Department, a Customer Service Department, an Engineering or Production Department, an Accounting Department, an Administration Department, etc. Merits It has high degrees of specialization. It has clear lines of authority. It facilitates easy accountability for the work. It accords a high level of speed and efficiency. The need for duplication of work is eliminated. All the functions command equal importance. Demerits Communication has several barriers which makes coordination difficult. More focus is laid on individuals rather than the organization. The decisions taken by a single person may not always work in favor of the organization. As the organization expands, it gets difficult to exercise control on its operations. There may be lack of teamwork between different departments or units. As all the functions are separated, employees may not gain knowledge about other specializations. Divisional Structure These are the kinds of structures that are based on different divisions in the organization. They group together employees based on the products, markets and geographical locations covered. Here is a detailed description of a divisional structure. Product Structure A product structure is based on organizing employees and work on the basis of the different products. If the company produces three different products, they will have three different divisions for these products. This type of structure can be best utilized for retail stores with a number of products. Merits Units which are not working can be closed down easily. Each unit can be operated and treated as a separate profit center. It accords rapid and easy decision-making. It also gives a lot of independence to the decision makers. Individual products get separate attention as per the problems they face. It enables the organization to have a high productivity and efficiency quotient.

Demerits As each unit operates on its own, organizational goals may not be achieved. Unhealthy competition may exist among internal business units. As it has too many managerial levels, it may hamper the business. Accounting work and taxes may increase considerably. All the units may not be considered as equal. Marketing individual products may add up to the cost significantly. Market Structure Market structure is used to group employees on the basis of the specific market the company sells in. A company could have five different markets they use and according to this structure, each would be a separate division. Merits Employees can communicate with customers in the local language. They are available for the customers, if need is felt. The problems in a particular market can be isolated and dealt with separately. As individuals are responsible for a particular market, tasks are completed on time. Employees are specialized in catering to a particular market. New products for niche markets can be introduced. Demerits There can be intense competition among the employees. Decision-making can cause conflicts. It is difficult to determine the productivity and efficiency. All the markets may not be considered as equal. There may be lack of communication between the superiors and the employees. Employees may misuse their authority. Geographic Structure Large organizations have offices at different places, for example, there could be a north zone, south zone, west zone and east zone. The organizational structure, in such a case, follows a zonal structure. Merits There is better communication among the employees at the same location. Locals are familiar with the local business environment and can cater to geographical and cultural differences. Customers feel a better connection with local managers who can speak their language. A record of the work of individual markets and groups can be maintained. Decisions are taken thoughtfully and work when implemented. New products or product modifications catering to a specific area can be introduced.

Demerits It may give rise to a feeling of division among the employees of the organization. There may be unhealthy competition among different zones. Core company ethics, beliefs and practices may differ from location to location. Tracing the performance and profits of each region may be time-consuming and tedious. There may be poor communication among the employees at different locations. Collaboration and cooperation between employees at different locations may not work out. Matrix Structure This structure is a combination of function and product structures. It combines the best of both worlds to make an efficient organizational structure. This structure is the most complex structure. It uses teams of employees to accomplish work by capitalizing on their strengths while creating weaknesses which are of functional form. The different types of matrix structures are: Weak/Functional Matrix In this type of matrix structure, a project manager is assigned to look over the cross-functional aspects of the project. However, he has a very limited authority and it is the functional manager who actually controls the inventory, resources and the project. Merits Employees are not attached to temporary staff or temporary work. The functional manager controls the project. The functional manager is responsible in case anything goes wrong. The more the project manager communicates with the employees, the better are the results. The project manager can make things happen without being in control. The decision-making rests in the hands of the functional manager. Demerits The project manager may face strong apathy from his workers. The project manager does not have complete authority. If not supervised, workers can reduce the productivity of the entire unit. The project manager is a weak authority who has no control over the employees. He has no control over workload management and task prioritization. He cannot even give a performance review. There are two more structures namely balanced/functional matrix and strong/project matrix. In the balanced/functional matrix, the responsibility and power is shared equally by both the project manager and the functional head. This may create a power struggle between them. In the strong/project matrix, the project manager is primarily responsible for the work while the functional head gives technical advice and allocates resources. Other Organizational Structures

Bureaucratic Structure This kind of structure can be seen in tall organizations where tasks, processes and procedures are all standardized. This type of structure is suitable for huge enterprises that involve complex operations and require smooth administration of the same. It is highly recommended for industries like food, beverage, etc. as they have to adhere to stringent rules and regulations. Merits As the complete control rests in the hands of one person, it is easy to achieve organizational goals. Strict hierarchies ensure timely completion of tasks and quality. It helps in easy cooperation and coordination among the employees. Standardization and the best practices can be implemented easily. Employees have to adhere to policies and procedures. Production takes place efficiently and effectively. Demerits A centralized authority can discourage employees. It does not encourage innovative ideas. It can lead to employee dissatisfaction and attrition. It cannot adapt to changes in the business environment. One person cannot be responsible for coming up with creative ideas every time. It can trigger a power struggle in the organization. Pre-bureaucratic Structure This structural form is best-exemplified in organizations where administration and control are centralized, and there is very little, if any, standardization of tasks. This structure is highly recommended for small-scale industries and start-ups. Merits It has a centralized structure with only one decision maker. The founder has complete control on decisions and their implementation. Communication mostly happens on a one-on-one basis. Decisions are made and implemented quickly. Productivity and profits are closely monitored. If an employee works hard, he gets noticed. Demerits Decisions taken by one person stand the risk of going wrong. It is only applicable to small businesses and cannot sustain once they expand. Lack of standardization can lead to inconsistencies. Employees are not part of the decision-making process and this can demoralize them.

Effective communication may not take place as people do not open up in front of the authority. Due to lack of flexibility, employees may feel frustrated. Network Structure In this structure, organization managers are required to maintain and coordinate business/professional relations with third parties such as clients, vendors and associates in order to achieve a collective goal of profitability and growth. Most of the time, these relations are maintained and tasks are coordinated via telecommunication and electronic media and, hence this structure is also known as a virtual structure. Merits The employees can be closer to the location of the customer. It helps in optimizing the knowledge potential of the organization. Even if something like a natural disaster occurs, the work of network employees can continue. It can be dynamic and easily adaptive to changes in the business environment. There is a certain level of flexibility for the employees. There can be a collaborative relationship between the supervisor and the employee. Demerits An employee may have to report to too many supervisors and this may affect his work. As a formal hierarchy is missing, it can lead to conflicts. Too much dependence on technologies like the Internet, phone, etc. can cause problems. As there is no physical place for employees, it affects communication. It can lead to increased work stress among the employees. An intense competition exists among the supervisors, to get a high-performing employee. Team Structure Organizations with team structures can have both vertical as well as horizontal process flows. The most distinct feature of such an organizational structure is that different tasks and processes are allotted to specialized teams of personnel in such a way that a harmonious coordination is struck among the various teams. Merits It facilitates practical decision-making and implementation. Decisions are taken unanimously and not by an individual. It eliminates traditional scalar chains of command for getting approvals. The relationships and communication between employees improve. If one employee in the team fails to work, the other can take his place. It enables the heads to staff resources which complement each other. Demerits There is very less contact with teams of other functions. If teams undergo constant changes and alterations, it can affect work.

Each team contributes on its own and may not be in alignment with the organizational goals. Team members need to be proactive and incorporate better project management. The need for an effective leader can be felt. As decisions are given by many people, they may take a long time. A Few More Organizational Structures Entrepreneurial Structure The authority of such organizations oftentimes is heavily centralized and lies with one person. It only comprises two to three vertical levels and the duties of the employees overlap. It is suitable for small or new organizations where the decision of one person matters the most. It also exhibits easy responsiveness and adaptability to change in the business environment. Horizontal Organization Structure It is also known as a flat structure. In this type, there is absolutely nil or very less interference from the senior management which allows the employees to conduct their tasks smoothly. Employees are also involved in the decision-making process. As it eliminates the need for middle management, it contributes towards giving a quick response to customer feedback. However, it may not be applicable and practical for big organizations. Vertical Organization Structure It relies on the middle management to monitor and control the work of the employees. These structures have well-defined roles and responsibilities for the employees. Hence, delegating tasks to the employees becomes easier. It requires a strong leader at the top of the hierarchy as he is the one to take all the decisions. As a hierarchy exists, it ensures that the work is done in a disciplined manner. Mechanistic Structure This is the most formal and the strictest kind of structure with a clear distinction in the hierarchy and roles. Hence, these structures are vertically oriented. The hierarchy of the authority is well-defined. Decision-making rests in the hands of the senior management. As a lot of bureaucracy is involved in these structures, the leaders find it difficult to deal with competition. Also, innovation oftentimes is hampered due to red-tapeism. Employees work separately and are specialists of a task. Organic Structure It is the exact opposite of a mechanistic organizational structure. In an organization following the organic structure, the authority is delegated and is decentralized. Hence, communication takes place laterally. There is a lot of flexibility in this type of an organization. Employees generally work together and coordinate different tasks. They are highly flexible to adapt to the changes in the external business environment. Post-bureaucratic Structure This is a structure that is not bureaucratic in nature. While bureaucratic organizations are too controlled, post-bureaucratic ones offer more freedom to the employees. Though there is hierarchy, the leaders are open to new ideas. The decisions are taken after discussion and consensus is not

dependent on hierarchy. This encourages employee participation, trust, personal treatment, responsibility and empowerment. This type of structure is often used in housing cooperatives and non-profit organizations. It also incorporates techniques like total quality management (TQM) and culture management. Now that you know about the various organizational structures, implement the right one based on its applicability, advantages and disadvantages. It is important to find an organizational structure that works best for the organization as a wrong setup can hamper functioning and be detrimental to organizational success.

Organizational Structures
Talking Points There are two main types of organizational structures: centralized and decentralized These two main types divide into several hybrid types, depending on the organizations needs The hybrid types include: team, matrix, functional and divisional In practice, a manager will struggle to manage more than 7 +/- 2 direct reports Reorganizations seem to always happen when another company gets acquired or new management gets put in place.

Discussion Debates rage about the best way to organize a company for success. Some say that the decentralized, push the power to the individual worker is the most efficient why while others stress the need for a broad strategic vision that can be acted upon. No matter which side you come down on, the way you organize your company will play a vital role it its success. The other thing to remember is an organizational structure needs to evolve as the business needs evolve. What worked as a five person startup does not work for a 10,000 person company. Many an organization has made the fatal mistake of not evolving when it made sense. The other extreme is the constant changing organization that struggles to find its way. Thats bad as well. Types of Organizational Structures There are several different types of organizational structures that spawn from the centralized/decentralized continuum. These structures all have pluses and minuses depending on the stage your company is in. In broad terms, organizations can be categories as follows:

Team: A small group of people that solely focus on one thing. Teams have leaders because someone has to reign in the chaos. Think of a sports team with a captain. The team performs when they work together and the captain keeps them motivated while contributing.

Functional: An organizational is functional when the common functions (e.g. Engineering, accounting, manufacturing) are all managed in the same group. Things get done by farming out the resources to who needs it.

Divisional: Aligns all the necessary resources to go after a particular market or set of markets. A divisional structure contains all of the necessary functional areas to stand on its own. Its like a mini-business.

Matrix: is a hybrid between a functional and a divisional organization wherein some resources are functional (e.g. Engineering and sales) while others are divisional (e.g. Marketing and management). These organizations try to gain efficiencies by having the functional groups work for many different divisional entities.

Hierarchical/Bureaucratic: Can be either functional, divisional or matrix but share a common trait that decisions are typically made at the top and trickle down. These structures rely heavily on process and systems to ensure compliance with all the rules. The bigger an organization gets, the more hierarchical and bureaucratic it will become.

Flat: These organizations try and remove layers of management so that, ideally, everyone would report to the boss (or CEO). In practice, this is harder and harder to do as the company grows. The benefits of a flat organization is that everyone knows exactly what management wants since they all report to the highest level.

Entrepreneurial: Considers all opportunities like a mini business. Thrives on creating products and services not just selling the same old stuff. Formal structures are lacking and things tend to chaos quickly when scaled.

Virtual: No formal office or people in the same state or country. These types are the collaboration environments where people come together for specific projects and then fade away. Several consulting firms use this model since talent can be anywhere. and the Internet has made it easy to collaborate.

Stages of an Organization Organizations go through many stages. These stages require different structures in order for the organization to be successful. There is really no magic formulas here but you do need to understand when you are moving between each stage and what stage you are at. These stages include:

Start-Up: This stage begins the organization. Its the spark that ignited a small group of people to come together and figure out how to change the world. The official end of the start-up stage is somewhat nebulous. Some consider product launch, first sale or being profitable as the sign that the organization is moving to the next level.

Growth: At this stage, the organization has a product and its selling it into the marketplace at an accelerating rate. This rate is challenging to keep up with and it feels like things are happening so fast that no one knows what to do. At this point, companies hire like crazy. The official end of growth seems to be when your sales growth slows to your industry average or the organization starts to feel comfortable.

Expansion: Once growth ends, management will look to expand into additional markets to kick start growth again. This expansion phase will be riddled with mergers, new divisions or business units. It can be as chaotic as the growth stage because of managements overwhelming desire to restart growth by any means necessary. In some organizations, expansion never ends but when it does end, maturity sets in.

Maturity: At some point, a company will stop growing and expanding. At this stage, the company will look to make systems and processes that focus solely on reducing costs and improving efficiency. Maturity feels comfortable and the creative spark that might have existed has been extinguished.

Destruction: There are very few companies that stand the test of time. If you look at the Dow Jones of 100 years ago, there is only one company that is still on it. This means that all those other companies either merged with others or went out of business. This phase is pretty obvious when you are living it. Sales are slowing or sluggish, the company is losing money and employees are just waiting for the hammer to fall.

One complexity to this is that organizations can be at two stages at the same time. During these times, its always challenging to maintain a stable organizational structure since each stage tends to have conflicting requirements. Signs You May Need to Change The stages above are broad enough that it might not seem obvious which organizational structure is the best one to choose. In general, there are several signs that the organization you are presently in needs to change. Consider some of the more obvious situations like:

New businesses are fighting with old ones: There will always be a healthy tension between the people who make the money now and the ones working on making money later. If it gets too out of hand, it will create silos that will fight each other to the death at the expense of making the company successful.

Systems and procedures are constantly breaking down: One sure sign of growing pains is when the old systems (or lack of them) your organization had in place start to break down under the strain of growth. When this starts to happen, you need to take a look at your structure and see how it can change to overcome this.

Morale is low and people are leaving: Organizational change or lack of change can make your talented staff leave. This is a sure sign that whatever structure you are presently under needs to change.

No new products are being released: New products drive growth. Without them, a company will fad away. So if your innovation pipeline is drying up or you have not released something in a while, then you need to rethink your companies structure to support more new products.

Revenue or profit accelerating or decelerating: Revenue and profit will drive your organizational decisions either way they go. During highly accelerated revenue times, there will be a mad dash to grow and expand. During a deceleration, the organization will want to shed cost (read people) as fast as they can.

Focus on What Makes Sense Organizations evolve over time. This is an inevitable fact of life. You need to be able to adjust your organizations to meet there needs but not adjust them so much that you loose the soul of your company. The desire to change will always be present no matter what stage you are in. This desire is rooted in managements need to build a better organization. Resist the urge of constant change because that will just create chaos. What you should focus on is what makes sense for your organization at the stage that its in. Things To Ponder
Determine the type of organization you are presently in. Write 2 paragraphs on how its organized. How would you reorganize your group or division to be more effective? Which organization do you like to work in? Write a paragraph on why you like the one you choose. Take a look at a recent merger. How did the two companies sort out their organizational structure? Write a paragraph or two on the challenges they faced and how they solved them. What stage is your organization in? How will you transition to the next level? Write a paragraph or two about your plan

Answer 3 .

Business Plan

[Click here and type your business name]

[Click here and type your address] [Click here and type your phone number]

[Click here and type the date]

[Click here and type the people on the management team]

Table of Contents

Table of Contents .............................................................................................................. 26 Executive Summary .......................................................................................................... 28 Vision/Mission Statement and Goals ................................................................................ 29 A. Vision Statement ...................................................................................................... 29 B. Goals and Objectives ................................................................................................ 29 C. Keys to Success ........................................................................................................ 29

Company Summary .......................................................................................................... 29 A. Company Background.............................................................................................. 29 B. Resources, Facilities and Equipment ....................................................................... 29 C. Marketing Methods .................................................................................................. 29 D. Management and Organization ................................................................................ 30 E. Ownership Structure ................................................................................................. 30 G. Internal Analysis ...................................................................................................... 30 Products and/or Services ................................................................................................... 32 Market Assessment ........................................................................................................... 32 A. External Analysis ..................................................................................................... 32 B. Customers ................................................................................................................. 32 C. Strategic Alternatives ............................................................................................... 32 Strategic Implementation .................................................................................................. 33 Financial Plan.................................................................................................................... 34 A. Financial Projections ................................................................................................ 34 B. Contingency Plan ..................................................................................................... 34 Monitoring .........................................................................Error! Bookmark not defined.

Executive Summary
This section is a summary of the information from the pages that follow. Prepare it last, after the business plan has been written. It should not exceed two pages. Headings to use in the Executive Summary:
A. B. C. D. E. F. Vision/Mission Statement Company Summary Products/Services Market Assessment Strategic Implementation Expected Outcomes

Vision/Mission Statement and Goals


A. Vision Statement The vision/mission statements are clear summaries of where the business is headed. It describes what the business produces, who products are produced for, and unique business characteristics. It will reflect the values of the management team and the type of business culture you are trying to create.

B. Goals and Objectives What do you want your business to achieve? Be specific in terms of financial performance, resource commitments (time and money) and risk. When will various milestones be achieved?

C. Keys to Success What do you need, or must happen, for you to succeed? Company Summary The material in this section is an introduction to the firm.

A. Company Background What does your business do? Who were the founders of the business? What were the important milestones in the development of the business?

B. Resources, Facilities and Equipment With what do you produce your products or services? What are the land, equipment, human and financial resources? Who provides them? How are resource providers rewarded?

C. Marketing Methods What is your annual sales volume in dollars and units?

Explain how you work with others to improve returns. This may include a strategic alliance with suppliers or customers that you can leverage. Do you use forward contracting, options, or futures? If so, how? How much does it cost to produce and deliver your products and services? How is contracting used?

D. Management and Organization Who is currently on the management team? How have management responsibilities been divided among the management team? What are the lines of authority? Who acts as the president/CEO? spokesperson? Chief Financial Officer? Who determines employees salaries and conducts performance reviews? What is the educational background of the management team members? What is the management teams reputation in the community? What special skills and abilities does the management team have? What additional skills does the management team need? Who are the key people and personnel that make your business run? Who do you go to for advice and support? Do management and employees have avenues for personal development? Sketch a diagram of lines of authority for your operation.

E. Ownership Structure Who are the primary stakeholders in your business? Describe the legal form of your company, such as partnership, proprietorship, or corporation. Do you need special permits to operate, or a record for inspections? If you do, please describe them. F. Social Responsibility What environmental practices do you follow? What procedures do you use for handling chemicals? What noise/dust/timing/odor policies do you have? What will be the roles of management and employees in community organizations? What will be your involvement at the local/state/national level in commodity organizations? What training and new employee orientation practices will you offer to insure proper handling of hazardous materials and safe operation of equipment?

G. Internal Analysis What are the strengths and weaknesses of your firm? What are the relative strengths of each enterprise or business unit within the firm? What are the core competencies (things you are doing better than others) of your firm? What things can you build on? Think only about the things that you can control. Suggested areas to consider: knowledge and work

financial position productivity family lifestyle location resources What enterprise or business unit should be exited? What enterprise or business unit shows promise?

Products and/or Services Describe the products and services you plan to sell. How is your product or service unique? Are you producing a commodity or a differentiated product? How does your product or service compare to other products in Quality? Price? Location? What experience do you have with this product/service? Market Assessment

A. Examining the General Market How is the market characterized? Are there clear segments in the market? Describe them. What important customer need(s) is the market not currently fulfilling? What is the growth potential for each segment of the market? What opportunities and threats does your firm face? What does an analysis using the Five Forces model suggest about your industry? Who is your competition (in light of the Five Forces)? What trends, relevant to your business, do you see? What are the drivers of change? What political and legal issues do you face, such as zoning, environmental laws, inspections, etc?

B. Customer Analysis Who will be your customers? What do you sell to each of the customers? How does your product/service solve a key customer problem? How difficult is it to retain a customer? How much does it cost to support a customer?

C. Industry Analysis

D. Strategic Alternatives

Strategic Implementation

A. Production How will you produce your product? What value will you create and capture with your product? What is your competitive advantage? What technology will you use, i.e. reduced tillage, GPS systems, etc.? What processes will you use to produce products? What growth options will you use to develop the business unit? Enterprise Expansion Replicate Integrate Network What is the anticipated timeline? B. Resource Needs In order to effectively organize your business you need to insure the resources are available. Assess those needs here. a) Human What skills are needed? How will human resources be acquired? b) Financial What level of financial resources will be needed? c) Physical What type, quantity and quality of physical resources will be required? C. Sourcing/Procurement Strategy On what do you base a decision to buy products or services? Price? Quality? Convenience? Extra service? A combination? By what venue will you find suppliers local dealer, Internet, direct from manufacturer, etc.? D. Marketing Strategy What is your sales plan? What advertising and promotion will be used to increase sales/awareness? Where will you sell products/services? Will you use the open market or contracts? Do you have a preferred market outlet? Are you a qualified supplier for a specific processor or buyer? How will you price the product? a) Hedging, forward pricing, options How will you use these to mitigate your risk?

b) Contracting Will you use production or marketing contracting to reduce risk? c) Insurance How will you use crop, liability and other insurance? E. Performance Standards What performance standards will be used to monitor this enterprise or business unit? What are acceptable performance standards? What yield or output levels could you attain? What efficiency levels will you reach? What procedures will be used to monitor performance? Who is responsible for monitoring performance? What industry benchmarks will be used to assess performance?

Financial Plan

A. Financial Projections How will you fund the business? What is your desired debt and equity position? Who will provide capital debt funds? What role will leasing play in your financial strategy? Will you use outside investors for equity capital? How will you manage the financial risks your business faces? What operating procedures, such as developing cash flow budgets or spending limits, will you have to ensure adequate money for debt repayment? What are the important assumptions that underlie your projections? These assumptions may be associated with both external or internal factors. What financial aspects of your business (equity, asset growth, ROA, ROE, etc.) will you monitor? What procedures will be used for monitoring overall business performance? What level of performance will your business shoot for? These should be targets for next year and in five years. They should be financial performance standards used to monitor the overall business. What yield and output levels could you attain? What efficiency levels will you reach?

B. Contingency Plan What will you do if you cant follow through with your primary plan? How are you preparing for an emergency in your business? How will the business function if something happens to one of the key members of the management team?

Answer 24. Decisions are a part and parcel of the life of every human being. In every area, be it
personal or professional life, we need to take decisions. There are various types of decisionmaking, which can vary in importance. There could also be some instances where decisions may need to be taken very quickly. But when we are faced with problems or dilemmas where our decision has the ability to affect not only us, but others around us as well, then they have to be made very carefully. Many people take decisions depending just on their gut feeling. However, if the decision involves money or someone's life, it is important to analyze the situation carefully before making the final decision. The steps can help us make significant decisions thoughtfully. What are the Steps Involved in Decision-making? Step 1: The first step is to understand the importance of making the decision. You would have to make a list of some important factors like Time required to make the decision Result of making a good and a bad decision People who would help you Who will face the consequences of the decision? Affect of the decision on you and the people around you What will happen if the decision is not made? Step 2: Every decision is made to achieve some kind of goal or objective. So, the next step would involve charting down the goals that you want your decision to achieve. At this stage, it is also necessary to make a note of the consequences that are not desirable once the decision is made. Step 3: For a person to make a decision, he or she has to be confronted with two or more options. If there is no option, making a decision would be impossible. So, the third step requires you to make a draft stating the options that are available to you. One can also create some options that do not exist in reality. Doing this may help you find some solution to your problem and make the decision process a little easier. Once you have listed the available options, you have to examine each option and make a section for options that sound to be very promising and those that seem not so relevant. However, you have to be careful not to take out any option from your list before it is analyzed in detail. Step 4: Step 4 is where you have to analyze the different options in detail. Your analysis would be on the basis of what would be the result of each option available to you. You can take the help of different people at this stage, asking them to give their opinion on each option. Here, you would be able to recognize certain options that require more research or contemplation. This stage is a filtration process where the options that seem to be irrelevant should be taken out of the list and only the best possible ones retained. Step 5: At this step, you have to develop some criteria, according to which you have to compare the various options available to you. These criteria are conditions that would help you in evaluating the different options and would aid you in taking the decision. Step 6: Once you have decided on the criteria, it is time for analysis of each option according to the set conditions. Make a table, where the criteria appears in columns and options appear in rows. Rate each option with a numerical digit, as per how it would be beneficial for each criterion. Step 7: After rating the available options according to criteria, at the seventh step, try to combine different options that are available to you and see whether you can come up with a better solution, instead of just choosing one option. You also have to summarize the results you got for each option to make the final decision. Step 8: This is the final stage, where you have to make the ultimate decision. Before you do this it is important to go through all the steps and recheck all the information. This would be beneficial for delaying the time of taking the final decision, if you find any missing information. One very

important thing that you have to keep in mind is that every decision you take would have some level of risk. Knowing the potential risk involved in the decision one makes would aid in preparing for the problem that arises with the decision. These are essential decision-making techniques that would prevent one from choosing the wrong option. This is also an important way of learning proper judgment skills that would assist you in every decision you make.

Answer 23.

Scope of strategic management


J. Constable has defined the area addressed by strategic management as " the management processes and decisions which determine the long-term structure and activities of the organization". This definition incorporates five key themes: * Management process. Management process as relate to how strategies are created and changed. * Management decisions. The decisions must relate clearly to a solution of perceived problems (how to avoid a threat; how to capitalize on an opportunity). * Time scales. The strategic time horizon is long. However, it for company in real trouble can be very short. * Structure of the organization. An organization is managed by people within a structure. The decisions which result from the way that managers work together within the structure can result in strategic change. * Activities of the organization. This is a potentially limitless area of study and we normally shall centre upon all activities which affect the organization. These all five themes are fundamental to a study of the strategic management field and are discussed further in this chapter and other part of this thesis.

Definition of Business Policy


Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an organization. It permits the lower level management to deal with the problems and issues without consulting top level management every time for decisions. Business policies are the guidelines developed by an organization to govern its actions. They define the limits within which decisions must be made. Business policy also deals with acquisition of resources with which organizational goals can be achieved. Business policy is the study of the roles and responsibilities of top level management, the significant issues affecting organizational success and the decisions affecting organization in long-run.

Features of Business Policy

An effective business policy must have following features-

1. Specific- Policy should be specific/definite. If it is uncertain, then the implementation will become difficult. 2. Clear- Policy must be unambiguous. It should avoid use of jargons and connotations. There should be no misunderstandings in following the policy.

3. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the subordinates. 4.
Appropriate- Policy should be appropriate to the present organizational goal.

5. Simple- A policy should be simple and easily understood by all in the organization. 6. Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive. 7. Flexible- Policy should be flexible in operation/application. This does not imply that a policy should be altered always, but it should be wide in scope so as to ensure that the line managers use them in repetitive/routine scenarios. 8. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance.
Difference between Policy and Strategy

The term policy should not be considered as synonymous to the term strategy. Thedifference between policy and strategy can be summarized as follows1. Policy is a blueprint of the organizational activities which are repetitive/routine in nature. While strategy is concerned with those organizational decisions which have not been dealt/faced before in same form.

2. Policy formulation is responsibility of top level management. While strategy formulation is basically done by middle level management. 3. Policy deals with routine/daily activities essential for effective and efficient running of an organization. While strategy deals with strategic decisions. 4. Policy is concerned with both thought and actions. While strategy is concerned mostly with action. 5. A policy is what is, or what is not done. While a strategy is the methodology used to achieve a target as prescribed by a policy.

Strategic Decision Making Process:


What are the major categories or processes of Decision Making? Researchers have found it difficult to spell or specify any one strategy for Decision Making Process. Decision making is both intuitive and analytical. A rational decision making is based on several assumptions. Greater inputs of information lower ambiguity and uncertainty can be minimized. The decision making process has to be objective. Criteria must be established and weighted mathematically and factors are added up, thus reducing the chances for subjectivity to drive the right decision. Different management gurus and writers have propounded different theories for decision making. Let us view a few here: In any situation confronting an organization, the decision makers go through a cycle of defining moments -

observe the situation recognize the problem orient on the situation make estimate, value judgment and analysis make a decision act on decision that affects the situation feedback to observe the situation.

A linear model of an example of rational decision making steps is set organizational goals and objectives

develop alternatives

compare/evaluate alternatives using objective criteria and weights based on the leaders guidance. choose among alternatives the one that best matches the criteria implement the decision command, lead and manage feedback loop-observe results and begin process again as required.

In 1976, Mintzberg, Raisinghani and Theoret provided a model for strategic decision making process with sub-routines and sub-phases within each. These are:The Identification Phase: the decision recognition routine: opportunities, problems and crises are recognized and evoke decisional activity.

the diagnosis routine: information relevant to opportunities, problems and crises is collected and problems are more clearly identified. The Development Phase: the search routines: organizational decision maker goes through a number of activities to generate alternative solutions to problems.

the decision routine: ready made solutions which have been identified are modified to suit the particular problem or new solutions are designed. The Selection Phase: the screen routine: the routine is activated when the search routine identifies

more alternatives that can be intensively evaluated. Alternatives are quickly analyzed and most obviously infeasible ones are eliminated.

`The Strategic Decision Making Process` is analytic, deliberate, systemic and rational approach because time is available to do it right.

19. Importance of strategic marketing issues & strategic R&D issues to success of strategic planning for horizontal growth of firm

The importance of a strategic marketing plan


Whether you are running a large or small organization, Mainstream Marketing can help you prosper by applying our experience, skill-sets and creative approaches to everyday marketing by developing a highly effective and results driven marketing plan.

When we develop a comprehensive marketing plan, we can objectively assess the current status of your marketing efforts with regard to Product, Pricing, Distribution, and Promotional strategies; assess their relationship with all external business factors including (but not limited to), your competition and target market; develop measurable sales objectives; and outline product, pricing, distribution, and promotion strategies designed to achieve those objectives.

It doesn't matter if you are running an existing business or starting a new business it is critical to the success of any business that the business operator understands the importance of a strategic marketing plan. Ensuring that your business is guided by a strategic plan will determine the difference between successful growth and flat line growth.

When consulting with a new client our first focus is to establish a clear understanding with our client, the importance of a strategic marketing plan. A strategic plan will include initiatives that are measureable and targeted. Examining and finding all the possible initiatives that can be utilized is what we are trained to do. We have been successful at consulting with our clients and uncovering what their business needs are, who their target audience is and what initiatives will best satisfy all of the organizations revenue goals.

Marketing and advertising are critical elements that should reflect and compliment the exact financial goals of the organization. The path to reaching those financial goals is through carefully plotted strategies that directly target the desired consumers. We encourage every business to view their marketing and advertising plans as a tree that bears fruit. When the plan is originally developed you should design "a tree" that has strong and sturdy roots, has healthy leaves and bares a bounty of healthy fruit. When sales in the company are healthy and finances allow you to maintain your strategic plan as established you will continue to enjoy the bounty of fruits the tree has to bare. However, a strong and strategic plan will be prepared for unexpected changes in the business environment and/or financial situations. This is when you need a strong and strategic plan more than ever, as it will be able to accommodate the unexpected changes in the environment and should be able to adjust to ensure the proper execution of the strategic plan even during unexpected situations. Going back to our "tree" concept you should view your plan as such, if you need to cut back on some of your initiatives or make adjustments it is critical to ensure that you know the

difference between trunk items; these being initiatives that cannot or should not be pruned, cut or eliminated. If you adjust any of these "trunk" items you must be cautioned that you most likely have destroyed your plan from being effective. However, if you do trim the areas that will allow the tree to continue to grow and flourish such as the limbs and the leaves you will find your plan will also continue to sustain. This is the importance of a strategic marketing plan.

When you embrace the importance of a strategic marketing plan you will begin to experience the security that a strategic plan will offer and which will guide you and your organization through both good times and hard times. Now, understanding the importance of a strategic marketing plan will give you the power to control the destiny of your company. Also, this plan will help you to smoothly navigate around any current competitors or new competitors that may threaten to potentially take away market-share from you. When your plan is strategic so are all your reactions to threats that enter into the marketplace. In our experience of developing and understanding the importance of a strategic marketing plan, we have been fortunate to see many organizations prosper from following our recommendations and from organizations that have come to us to help them critique their existing plans.

We encourage our clients to get involved with the development and the execution of their strategic plans, afterall, YOU are the true "expert" in your own business, so why shouldn't you be intimately involved in the entire process of developing your strategic plan. Your knowledge combined with our skills will guarantee your success in business. Don't waste your time, money or that next great new business idea or concept because you underestimated the importance of a strategic marketing plan.

Are you still unsure if your business needs a strategic plan? Than we would highly encourage you to contact us and setup a free consultation to discuss your new or existing business and why developing or critiquing your strategic plan may mean the difference between mediocre success and reaching your businesses full potential.

Ans 25. Feedback mechanism in SM

Continuous Improvement through Feedback If you want to enjoy success year after year as an entrepreneur you need to pay attention to your customers and your operations. Feedback mechanisms are the best way to gauge objective feedback from clients and from your staff. Feedback from surveying will shape how you can improve operations to build and retain customers and revenue. Continuous improvement is a must in this competitive world. Feedback Mechanisms Whether customers are satisfied or not with your service or product, ensure you havefeedback mechanisms such as surveying as part of your service operation. You need to analyze a cross-section of feedback from all customers. Even the happy customers will make note of things that can make the experience, product or service better. Remember that you should not think your business is at 100% optimization in your product or service delivery. Don`t fall into the trap of thinking everything is perfect and you never have to change. Business environments and industries constantly change, and with that, you need to stay competitive with continuous improvements. Take that valuable information from your customers and revise your operations, customer experience, product or service accordingly. Ensure that you provide a message around your survey process that they are helping shape better products and services. Continuous Improvement Encourage a continuous improvement environment in your business, and empower your staff to take the lead and charge of recommended improvements. As a leader, engage with your staff and units and survey them for their valued feedback. Employee buy-in can occur if you make them a part of the valued process, and allow them to take ownership of the piece of action. It helps as a leader to recognize unit and project leaders for their efforts. If the improvement recommendations result in significant operational or profitability improvements, compensation incentives may be appropriate. A whole organization that is

engaged in a continuous improvement process will definitely build a continuous competitive firm. Ensure you pay ultimate attention to your customer base and to your internal members of your business for feedback to make your business better and more competitive.
Feedback Mechanisms One of the most important steps in strategic management is to reevaluate the organization on a continuous basis. This can help to identify any additional objectives and how previous objects paid off. One could consider this an on going cycle of tweaking and adjusting. A mechanism that I thought of for gauging the impacts of the strategic impacts is simply looking at market share in the power tool segments. If we gained and/or held our market shares in the various segments than the objectives were a success. Another mechanism that can be utilized for feedback is organizational profits. If Able begins making more profit than previous years this can be a definite sign that things are improving.

The mechanism of feedback has a very simple definition: "the return to the input of a part of the output" [1].

This simplicity should however not undermine the importance of feedback mechanisms and their ubiquitousness in our life, both on macro- and micro-scales. In order to further present the concept of feedback mechanisms I introduce a simplifying division between the systemic view of feedback and the decision making view of feedback. 2. Systemic view From the point of view of a system (understood as "a regularly interacting or interdependent group of items forming a unified whole" [2]), feedback mechanisms have a very important role to

play. Through "feeding back" a part of output again into the system, we obtain a perfect regulatory mechanism. This regulation is based on two basic kinds of feedback, namely: positive and negative feedback. Positive feedback mechanisms We call a feedback mechanism positive if the resulting action goes in the same direction as the condition that triggers it. A good example of positive feedback is a turbo-charger fitted to the engines of vehicles. As we accelerate, increasing revolutions of the engine (after crossing some threshold), set the turbo-charger on, that in fact increases the speed even further. Summarizing, a part of output (acceleration) was "fed back" to the process again, causing action going in the same direction (further acceleration). Negative feedback mechanisms A feedback mechanism is called negative if the resulting action opposes the condition that triggers it. To name an example, one might think of the heating systems we use at homes. Very often we set our heaters to maintain constant temperature while we are at home. So the heaters turn on and off as a function of the interior temperature. If the temperature drops below some threshold, the heating system is being switched on, compensating and increasing the temperature again. In other words, a part of output (falling temperature) was "fed back" to the system again, causing action going in the opposite direction (increasing temperature). These two above mentioned mechanisms of positive and negative feedback constitute a basis for system controlling. Furthermore they can be put together in different configurations composing "feedback loops". Feedback loops We may divide feedback loops into negative and positive. If positive and negative feedback mechanisms are alternatingin one system, we talk about the negative feedback loop.

This kind of feedback loop has stabilizing properties. As an example one might think of some biological (food-chain) mechanisms. Increasing population of storks causes a decrease in the population of frogs, which in turn causes thedecrease in the number of storks until the moment that the number of frogs is up again. In this sense, negative feedback loops are (ceteris paribus) auto-regulating.

Positive feedback loops can go into two directions: they can be either "exploding" or "imploding". If only positive feedback mechanisms are governing a system, this kind of positive loop is called "exploding".

As an example we might mention a positive feedback loop between income and consumption. The bigger the income per capita in an economy, the more people consume, therefore further increasing their income per capita, and so on.Ceteris paribus, this mechanism will continue infinitely. In many industries, success feeds success, i.e. a successful firm makes money (output) which is partly used to improve the same reasons of its success (input factors). Costly innovation, if successful, give rise to profits which allows for further Research and Development, as you can experience with this business game. In consumption, positive to imitation phenomena. feedbacks can be linked

External funding (e.g. from banks) is positively linked to own capital commitment, so that loans are given only to healthy firms, boosting them to even higher levels. For the system effects of financial fragility see this paper. Similarly, rich families are usually able to assure to their children a good level of education (e.g. by buying more books, by travelling, by additional education resources), which in turn positively affect the employability and family income.

If only negative feedback mechanisms are governing a system, we call this loop "imploding". For a rather exaggerated example, think of a person who loses appetite when preoccupied. Once she starts to worry, she loses weight, therefore being even more preoccupied seeing her state and losing even more weight, and so on. If nothing else stops this vicious circle (e.g. a societal help), imploding positive feedback loop leads to the selfdestruction of the system.

This is the dramatic case of denutrition and low individual productivity (thus, income) in many areas of the Thirld World. From the stance of a system, feedback mechanisms are very important for mutual interaction of the system's elements. However this point of view is in a sense very "endogenous", i.e. treating the parts of the system as being inert and not able to vary their behavior depending on the state of the environment. In order to further analyze the complexity of feedback we have to allow for the decision making feature of the system's parts. 3. Decision Making view From the decision making stance, feedback is specifically defined as "the transmission of evaluative or corrective information to the original or controlling source about an action, event, or process" [3]. From now on, I will focus more in detail on the

processes controlled by humans (as opposed to the processes controlled by the artificial intelligence, i.e. computers). Human decision making is largely based on the concept of feedback. To mention an example on the individual dimension, managers try to estimate the correctness of their past actions by observing the output of these decisions or managerial indicators (like Balanced Score Cards) and introduce necessary corrections. On the group decision making dimension, democratic government is also an example of a controlling body trying to incorporate information from the past into the process of decision-making in the future. Having said that, we have to notice the qualitative change in the weight of the positive and negative feedback. From now on, feedback is not only a piece of information "fed back" to the system again. Critical consequences of feedback must be now included into the system: its role in motivation, consistency and learning. The most important consequence of feedback information is its influence on the motivation and consistency of decision makers. It is generally agreed that a decision maker receiving positive feedback tends to be motivated and to continue with the previously chosen course of action only slightly modifying it. If provided with the negative feedbackshe has a tendency to feel demotivated and search for other alternatives of solving the problem. For instance, the consumer's behaviour could be interpreted as a trial-and-error process: to buy a good - say because of a hint of possible use - to try it, to judge the experience and to renew the purchase in case it is pleasant or search for new brands in the opposite case. Brand loyalty is often explained in these terms. It should be however noted that this simplified and generally accepted view of interactions between feedback, motivation and consistency in decision making has been lately seriously challenged on the academic grounds. Explore by your own this issue by playing this business game.

The second, equally important, consequence of feedback is its relation with learning. Generally experts (but also simple examples from everyone's life) indicate that no learning would occur if some kind of feedback was not available. One can easily imagine that a driving lesson with driver's eyes closed and ears plugged would almost certainly result in an accident. In our life, feedback seems to be an inseparable part of learning. However, recently some researchers stated that people may learn rules without any feedback whatsoever; they only need more time to do so. For a discussion about the relationship between learning and feedback see this paper. 4. Further dimensions of feedback There are many ways to divide feedback. Below I propose just a few, basing on the: 1. simplicity of the feedback; simple feedback is generally based only on one cue and complex feedback on multiple cues. 2. timing when feedback is given; generally, feedback can be obtained either immediately after the decision making orbe delayed (shortly after the decision), or be postponed (delivered much time after the decision making action), or not be delivered at all; for a discussion see this paper. 3. source of the feedback; feedback might either be extrinsic, i.e. coming from an external source (e.g. tennis coach giving you instructions) or intrinsic, i.e. coming from the inside (e.g. continuous feedback to your brain from muscular proprioceptors while practicing your back-hand). 4. "explanatory power" of the feedback; if feedback mirrors only the dynamic development of a problem (e.g. providing only the result of your previous decision), it is called output feedback. If feedback describes why the problem develops in particular way, it is called cognitive feedback. 5. trustworthiness of the learning environment; some sources of information are more trustworthy for the decision maker, therefore the feedback from them are going to be considered to a

bigger extent and totally disregarded.

some

sources

of

feedback

might

be

5. Time horizon and situational awareness: feedback and feedforward From the systemic stance as well as from the decision making point of view, feedback has a crucial disadvantage: it refers to the past, or at best, to the present. Feedback control allows the selection of actions on the basis of past or current information about the system. A control system referring to the future is called feedforward. It requires higher situational awareness, in order to choose an action on the basis of the predictions of the future state of the system. Feedforward control is superior to feedback control because of its focus on avoiding problems rather than fixing them, but requires more adequate knowledge and cognitive effort. Neoclassical theory has based much of its interpretation of human choice process in terms of feedforward mechanisms, also in the form of inter-personal game theoretic interaction. Now, a fully new strand of empirical experiments is sheding light on the complexity of this issue.

You might also like