Amity Campus

Uttar Pradesh
India 201303

ASSIGNMENTS
PROGRAM: MFC
SEMESTER-III
Subject Name
Study COUNTRY
Roll Number (Reg.No.)
Student Name

: STRATEGIC MANAGEMENT
: BOTSWANA
:MFC001112014-20160175
: MPHO PELOEWETSE TAU

INSTRUCTIONS
a) Students are required to submit all three assignment sets.
ASSIGNMENT
Assignment A
Assignment B
Assignment C

DETAILS
Five Subjective Questions
Three Subjective Questions + Case Study
Objective or one line Questions

MARKS
10
10
10

b)
c)
d)
e)

Total weightage given to these assignments is 30%. OR 30 Marks

All assignments are to be completed as typed in word/pdf.
All questions are required to be attempted.
All the three assignments are to be completed by due dates and need to be
submitted for evaluation by Amity University.
f) The students have to attached a scan signature in the form.

Signature :
Date
:

29/11/2015

( ) Tick mark in front of the assignments submitted

Assignment
Assignment B
Assignment C
A

STRATEGIC MANAGEMENT
SECTION A
1. A mission describes what the organization is now; a vision statement describes
what the organization would like to become. Differentiate between corporate
mission and strategic vision by taking corporate illustrations.

Corporate mission refers to a long-term commitment to a type of business and a place in the
market. It describes the scope of the firm and its dominant emphasis and values, based on a
firms history, current management preferences, resources, and distinctive competence
Corporate Mission is the essential purpose of the organization, concerning particularly why it is
in existence, the nature of business(es) it is in and the customers it seeks to serve and satisfy A
mission statement should be a short and concise statement of goals and priorities. It often focuses
on customers, market and business
Examples of mission statements:
"We are a dynamic, enterprising, and creative university committed to providing an excellent
education enriched by our focus on applied research." - Coventry University
Strategic vision on the other hand is a short, succinct and inspiring statement of what the
organization intends to become and to achieve at some point in the future, often stated in
competitive terms Vision is a long term view. It refers to the category of intentions that are broad,
all-inclusive and forward-thinking. It is the image that a business must have of its goals before it
sets out to reach them. It describes aspirations for the future without specifying the means that
will be used to achieve those desired ends A strategic vision describes the route a company
intends to take in developing and strengthening its business. It delineates managements
aspirations for the business, provides a panoramic view of where the company is going, captures
the motions of employees and steers them in a common direction. It gives the organization a
sense of direction, moulds organizational identity
2. Explain the concept of Porters generic strategies. Discuss cost leadership
strategy, differentiation strategy and focus strategy with examples.

Porter wrote in 1980 that strategy target either cost leadership, differentiation, or focus.[1] These
are known as Porter's three generic strategies and can be applied to any size or form of business.
Porter claimed that a company must only choose one of the three or risk that the business would
waste precious resources. Porter's generic strategies detail the interaction between cost
minimization strategies, product differentiation strategies, and market focus strategies. [1]
Porter described an industry as having multiple segments that can be targeted by a firm. The
breadth of its targeting refers to the competitive scope of the business. Porter defined two types

of competitive advantage: lower cost or differentiation relative to its rivals. Achieving

competitive advantage results from a firm's ability to cope with the five forces better than its
rivals. Porter wrote: "[A]achieving competitive advantage requires a firm to make a
choice...about the type of competitive advantage it seeks to attain and the scope within which it
will attain it." He also wrote: "The two basic types of competitive advantage [differentiation and
lower cost] combined with the scope of activities for which a firm seeks to achieve them lead to
three generic strategies for achieving above average performance in an industry: cost leadership,
differentiation and focus. The focus strategy has two variants, cost focus and differentiation
focus."[2] In general:

If a firm is targeting customers in most or all segments of an industry based on offering

the lowest price, it is following a cost leadership strategy;
If it targets customers in most or all segments based on attributes other than price (e.g.,
via higher product quality or service) to command a higher price, it is pursuing a
differentiation strategy. It is attempting to differentiate itself along these dimensions
favorably relative to its competition. It seeks to minimize costs in areas that do not
differentiate it, to remain cost competitive; or
If it is focusing on one or a few segments, it is following a focus strategy. A firm may be
attempting to offer a lower cost in that scope (cost focus) or differentiate itself in that
scope (differentiation focus).[2]

The concept of choice was a different perspective on strategy, as the 1970s paradigm was the
pursuit of market share (size and scale) influenced by the experience curve. Companies that
pursued the highest market share position to achieve cost advantages fit under Porter's cost
leadership generic strategy, but the concept of choice regarding differentiation and focus
represented a new perspective

Cost Leadership Strategy

This strategy involves the firm winning market share by appealing to cost-conscious or pricesensitive customers. This is achieved by having the lowest prices in the target market segment, or
at least the lowest price to value ratio (price compared to what customers receive). To succeed at
offering the lowest price while still achieving profitability and a high return on investment, the
firm must be able to operate at a lower cost than its rivals. There are three main ways to achieve
this.
The first approach is achieving a high asset utilization. In service industries, this may mean for
example a restaurant that turns tables around very quickly, or an airline that turns around flights
very fast. In manufacturing, it will involve production of high volumes of output. These
approaches mean fixed costs are spread over a larger number of units of the product or service,
resulting in a lower unit cost, i.e. the firm hopes to take advantage of economies of scale and
experience curve effects. For industrial firms, mass production becomes both a strategy and an
end in itself. Higher levels of output both require and result in high market share, and create an

entry barrier to potential competitors, who may be unable to achieve the scale necessary to match
the firms low costs and prices.
The second dimension is achieving low direct and indirect operating costs. This is achieved by
offering high volumes of standardized products, offering basic no-frills products and limiting
customization and personalization of service. Production costs are kept low by using fewer
components, using standard components, and limiting the number of models produced to ensure
larger production runs. Overheads are kept low by paying low wages, locating premises in low
rent areas, establishing a cost-conscious culture, etc. Maintaining this strategy requires a
continuous search for cost reductions in all aspects of the business. This will include outsourcing,
controlling production costs, increasing asset capacity utilization, and minimizing other costs
including distribution, R&D and advertising. The associated distribution strategy is to obtain the
most extensive distribution possible. Promotional strategy often involves trying to make a virtue
out of low cost product features.
The third dimension is control over the value chain encompassing all functional groups (finance,
supply/procurement, marketing, inventory, information technology etc..) to ensure low costs.[5]
For supply/procurement chain this could be achieved by bulk buying to enjoy quantity discounts,
squeezing suppliers on price, instituting competitive bidding for contracts, working with vendors
to keep inventories low using methods such as Just-in-Time purchasing or Vendor-Managed
Inventory. Wal-Mart is famous for squeezing its suppliers to ensure low prices for its goods.
Other procurement advantages could come from preferential access to raw materials, or
backward integration. Keep in mind that if you are in control of all functional groups this is
suitable for cost leadership; if you are only in control of one functional group this is
differentiation. For example Dell Computer initially achieved market share by keeping
inventories low and only building computers to order via applying Differentiation strategies in
supply/procurement chain. This will be clarified in other sections.
Cost leadership strategies are only viable for large firms with the opportunity to enjoy economies
of scale and large production volumes and big market share. Small businesses can be cost focus
not cost leaders if they enjoy any advantages conducive to low costs. For example, a local
restaurant in a low rent location can attract price-sensitive customers if it offers a limited menu,
rapid table turnover and employs staff on minimum wage. Innovation of products or processes
may also enable a startup or small company to offer a cheaper product or service where
incumbents' costs and prices have become too high. An example is the success of low-cost
budget airlines who despite having fewer planes than the major airlines, were able to achieve
market share growth by offering cheap, no-frills services at prices much cheaper than those of
the larger incumbents. At the beginning for low-cost budget airlines choose acting in cost focus
strategies but later when the market grow, big airlines started to offer same low-cost attributes,
cost focus became cost leadership! [5]
A cost leadership strategy may have the disadvantage of lower customer loyalty, as pricesensitive customers will switch once a lower-priced substitute is available. A reputation as a cost
leader may also result in a reputation for low quality, which may make it difficult for a firm to
rebrand itself or its products if it chooses to shift to a differentiation strategy in future.

Differentiation Strategy
Differentiate the products/services in some way in order to compete successfully. Examples of
the successful use of a differentiation strategy are Hero, Honda, Asian Paints, HUL, Nike athletic
shoes (image and brand mark), BMW Group Automobiles, Perstorp BioProducts, Apple
Computer (product's design), Mercedes-Benz automobiles, and Renault-Nissan Alliance.
A differentiation strategy is appropriate where the target customer segment is not price-sensitive,
the market is competitive or saturated, customers have very specific needs which are possibly
under-served, and the firm has unique resources and capabilities which enable it to satisfy these
needs in ways that are difficult to copy. These could include patents or other Intellectual Property
(IP), unique technical expertise (e.g. Apple's design skills or Pixar's animation prowess), talented
personnel (e.g. a sports team's star players or a brokerage firm's star traders), or innovative
processes. Successful differentiation is displayed when a company accomplishes either a
premium price for the product or service, increased revenue per unit, or the consumers' loyalty to
purchase the company's product or service (brand loyalty). Differentiation drives profitability
when the added price of the product outweighs the added expense to acquire the product or
service but is ineffective when its uniqueness is easily replicated by its competitors. Successful
brand management also results in perceived uniqueness even when the physical product is the
same as competitors. This way, Chiquita was able to brand bananas, Starbucks could brand
coffee, and Nike could brand sneakers. Fashion brands rely heavily on this form of image
differentiation.
Differentiation strategy is not suitable for small companies. It is more appropriate for big
companies. To apply differentiation with attributes throughout predominant intensity in any one
or several of the functional groups (finance, purchase, marketing, inventory etc..).[ This point is
critical. For example GE uses finance function to make a difference. You may do so in isolation
of other strategies or in conjunction with focus strategies (requires more initial investment). ]It
provides great advantage to use differentiation strategy (for big companies) in conjunction with
focus cost strategies or focus differentiation strategies. Case for Coca Cola and Royal Crown
beverages is good sample for this.

Focus strategies
This dimension is not a separate strategy for big companies due to small market conditions. Big
companies which chose applying differentiation strategies may also choose to apply in
conjunction with focus strategies (either cost or differentiation). On the other hand, this is
definitely appropriate strategies for small companies especially for those wanting to avoid
competition with big ones.
In adopting a narrow focus, the company ideally focuses on a few target markets (also called a
segmentation strategy or niche strategy). These should be distinct groups with specialized needs.

The choice of offering low prices or differentiated products/services should depend on the needs
of the selected segment and the resources and capabilities of the firm. It is hoped that by focusing
your marketing efforts on one or two narrow market segments and tailoring your marketing mix
to these specialized markets, you can better meet the needs of that target market. The firm
typically looks to gain a competitive advantage through product innovation and/or brand
marketing rather than efficiency. A focused strategy should target market segments that are less
vulnerable to substitutes or where a competition is weakest to earn above-average return on
investment.
Examples of firm using a focus strategy include Southwest Airlines, which provides short-haul
point-to-point flights in contrast to the hub-and-spoke model of mainstream carriers, United, and
American Airlines

3. Discuss basic model of strategic management. Explain four basic elements:

Environmental scanning
Environmental scanning is the monitoring, evaluating and disseminating of
information from the external and internal environments to keep people
within the corporation. It is a tool that a corporation uses to avoid strategic
surprise and to ensure long-term health.

Scanning of external environmental variables

The social environment includes general forces that do not directly touch on
the short-run activities of the organization but those can, and often do,
influence its long-run decisions. These forces are
Economic forces
Technological forces
Political-legal forces
Sociocultural forces
Scanning of social environment
The social environment contains many possible strategic factors. The number
of factors becomes enormous when one realize that each country in the world
can be represented by its own unique set of societal forces, some of which
are very similar to neighboring countries and some of which are very
different.
Monitoring of social trends
Large corporations categorized the social environment in any one geographic
region into four areas and focus their scanning in each area on trends with
corporate-wide relevance. Trends in any area may be very important to the
firms in other industries.

Trends in economic part of societal environment can have an obvious impact

on business activity. Changes in the technological part of the societal
environment have a significant impact on business firms. Demographic trends
are part of sociocultural aspects of the societal environment.

International society consideration

For each countries or group of countries in which a company operates,
management must face a whole new societal environment having different
economic, technological, political-legal, and Sociocultural variables. This is
especially an issue for a multinational corporation, a company having
significant manufacturing and marketing operations in multiple countries.
International society environments vary so widely that a corporations
internal environment and strategic

Strategy Formulation
Strategy formulation is the development of long-range plans for they
effective management of environmental opportunities and threats, taking
into consideration corporate strengths and weakness. It includes defining the
corporate mission, specifying achievable objectives, developing strategies
and setting policy guidelines.
Mission
An organizations mission is its purpose, or the reason for its existence. It
states what it is providing to society .A well conceived mission statement
defines the fundamental , unique purpose that sets a company apart from
other firms of its types and identifies the scope of the company s operation
in terms of products offered and markets served
Objectives
Objectives are the end results of planned activity; they state what is to be
accomplished by when and should be quantified if possible. The achievement
of corporate objectives should result in fulfillment of the corporations
mission.
Strategies
A strategy of a corporation is a comprehensive master plan stating how
corporation will achieve its mission and its objectives. It maximizes
competitive advantage and minimizes competitive disadvantage. The typical
business firm usually considers three types of strategy: corporate, business
and functional.
Policies
A policy is a broad guideline for decision making that links the formulation of
strategy with its implementation. Companies use policies to make sure that
the employees throughout the firm make decisions and take actions that
support the corporations mission, its objectives and its strategies.

Strategy implementation

Strategy implementation is the sum total of the activities and choices

required for the execution of strategic plan by which strategies and policies are put
into action through the development of programs , budgets and procedures.
Although implementation is usually considered after strategy has been formulated,
implementation is a key part of strategic management. Thus strategy formulation
and strategy implementation are the two sides of same coin.
Implementing strategy
Depending on how the corporation is organized those who implements strategy will
probably be a much more divorced group of people than those who formulate it.
Most of the people in the organization who are crucial to successful strategy
implementation probably had little to do with the development of corporate and
even business strategy. Therefore they might be entirely ignorant of vast amount of
data and work into formulation process. This is one reason why involving middle
managers in the formulation as well as in the implementation of strategy tends to
result
in
better
organizational
performance.
Developing programs, budgets and procedures
The managers of divisions and functional areas worked with their fellow
managers to develop programs, budgets and procedures for implementation of
strategy. They also work to achieve synergy among the divisions and functional
areas in order to establish and maintain a companys distinctive competence.
Programs
A program is a statement of the activities or steps needed to accomplish a
single use plan. The purpose of program is to make a strategy action oriented.
Budgets
A budget is a statement of corporations program in monitory terms. After
programs are developed, the budget process begins. Planning a budget is the last
real check a corporation has on the feasibility of its selected strategy. An ideal
strategy might found to be completely impractical only after specific
implementation programs are costed in detail.
Procedures
Procedures are system of sequential steps or techniques that describe in detail how
a particular task or job is to be done.

Evaluation and Control

4. How are the following prepared?

Strategic advantages profile (SAP).

Every firm has strategic advantages and disadvantages. For example, large firms have financial
strength but they tend to move slowly, compared to smaller firms, and often cannot react to
changes quickly. No firm is equally strong in all its functions. In other words, every firm has
strengths as well as weaknesses Strategists must be aware of the strategic advantages or strengths
of the firm to be able to choose the best opportunity for the firm. On the other hand they must
regularly analyze their strategic disadvantages or weaknesses in order to face environmental
threats effectively.

In this session, we shall examine the strategic advantage factors that management analyses and
diagnoses to determine the internal strengths and weaknesses with which it must face the
opportunities and threats from the environment.
In the discussion of these factors, it is not possible to consider in detail, subject matter which are
covered by courses on Marketing, Human Resources, Finance Management etc. Only a listing
of these factors will be presented. Students should refer to books and courses that they have
attended for details. The order of discussion does not indicate importance of the subjects. It is
just a convenient ordering of line and staff factors. These factors will be covered under the
following broad headings:
4.2.1 Marketing and Distribution
4.2.2 R & D and Engineering
4.2.3 Production and Operations Management
4.2.4 Corporate Resources and Personnel
4.2.5 Finance and Accounting
Examples: The Strategist should look to see if the firm is stronger in these factors than its
competitors. When a firm is strong in the market, it has a strategic advantage in launching new
products or services and increasing market share of present products and services.
Strategic Advantage Factors: Marketing and Distribution
1. Competitive structure and market share: To what extent has the firm established a strong mark
share in the total market or its key sub markets?
2. Efficient and effective market research system.
3. The product-service mix: quality of products and services.
4. Product-service line: completeness of product-service line and product-service mix; phase of
life-cycle the main products and services are in.
5. Strong new-product and new-service leadership.
6. Patent protection (or equivalent legal protection for services).
7. Positive feelings about the firm and its products and services on the part of the ultimate
consumer.
8. Efficient and effective packaging of products (or the equivalent for services).
9. Effective pricing strategy for products and services.
10. Efficient and effective sales force: close ties with key customers. How vulnerable are we in

terms of concentrating on sales to a few customers?

11. Effective advertising: Has it established the company's product or brand image to develop
loyal customers?
12. Efficient and effective marketing promotion activities other than advertising.
13. Efficient and effective service after purchase.14. Efficient and effective channels of
distribution and geographic coverage, including internal efforts
R & D (Research and Development) and Engineering function can be a strategic
advantagefor two reasons:
1. It can lead to new or improved products for marketing
2. It can lead to the development of improved manufacturing or material processes to gain
costadvantages through efficiency.
Strategic Advantage Factors: R&D and Engineering
1. Basic research capabilities within the firm
2. Development capability for product engineering
3. Excellence in product design
4. Excellence in process design and improvements
5. Superior packaging developments being created
6. Improvements in the use of old or new materials
7. Ability to meet design goals and customer requirements
8. Well-equipped laboratories and testing facilities
9. Trained and experienced technicians and scientists
10. Work environment suited to creativity and innovation
11. Managers who can explain goals to researchers and research results to higher managers
12. Ability of unit to perform effective technological forecasting.
DIFFERENT APPROACHES TO DEVELOP AN COMPETITIVE ADVANTAGE:

1.The first approach is to compete based on existing strengths. This approach is called KFS,
abbreviated from Key Success Factors. The firm can gain strategic advantage if it focuses
resources on one crucial point
2. The second approach is still based on existing strengths but avoids head-on competition. The
firm must look at its own strengths which are different or superior to that of the competition and
exploit this relative superiority to the fullest. For example, the strategist either (a) makes use of
the technology, sales network, and so on, of those of its products which are not directly
competing with the products of competitors or (b) makes use of other differences in the
composition of assets. This avoids head-on competition.
3. The third approach is used for example to compete directly with a competitor in a wellestablished, stagnant industry. Here an unconventional approach may be needed to upset the key
factors for success that the competitor has used to build an advantage. The starting point is to
challenge accepted assumptions about the way business is done and gain a novel advantage by
creating new success factors.
4. Finally, a competitive advantage may be obtained by means of innovations which open new
markets or result in new products. This approach avoids head-on competition but requires the
firm to find new and creative strengths. Innovation often involves market segmentation and
finding new ways of satisfying the customer's utility function.
5. In each of these approaches the principal point is to avoid doing the same thing as the
competition on the same battleground. So the analyst needs to decide which of these approaches
might be pursued to develop a sustainable distinctive competence

Environmental threat opportunity profile (ETOP). Take the case of a bicycle

company for discussion.

Environmental threats to a business are those that originate outside of the organization. They are
things that the business cannot control. The two most common environmental threats are
economic and competition. In the case of a bicycle company, competitors are a key
environmental threat. Cycling is a recreational activity and is not a basic necessity of life. In a
bad economy, luxuries such as bicycles may experience economic downturns. Another threat is
that cycling is seasonal in some climates. Business may take a downturn during the winter. The
availability of bike trails and local ordinances regarding bicycles may also post a threat or an
opportunity, depending on the case

5. What is value-chain analysis? Consider the components of the value chain. Do

any provide the potential to generate competitive advantage?

Value Chain Analysis describes the activities that take place in a business and relates them to an
analysis of the competitive strength of the business.
Work by Michael Porter suggested that the activities of a business could be grouped under two
headings:

(1) Primary Activities - those that are directly concerned with creating and delivering a product
(e.g. component assembly); and
(2) Support Activities, which whilst they are not directly involved in production, may increase
effectiveness or efficiency (e.g. human resource management). It is rare for a business to
undertake all primary and support activities.
Value Chain Analysis is one way of identifying which activities are best undertaken by a
business and which are best provided by others ("out sourced").
Linking Value Chain Analysis to Competitive Advantage
What activities a business undertakes is directly linked to achieving competitive advantage. For
example, a business which wishes to outperform its competitors through differentiating itself
through higher quality will have to perform its value chain activities better than the opposition.
By contrast, a strategy based on seeking cost leadership will require a reduction in the costs
associated with the value chain activities, or a reduction in the total amount of resources used.
Primary Activities
Primary value chain activities include:

Secondary Activities
Secondary value chain activities include

Steps in Value Chain Analysis

Value chain analysis can be broken down into a three sequential steps:
(1) Break down a market/organisation into its key activities under each of the major headings in
the model;
(2) Assess the potential for adding value via cost advantage or differentiation, or identify current
activities where a business appears to be at a competitive disadvantage;
(3) Determine strategies built around focusing on activities where competitive advantage can be
sustained

SECTION B
1. Discuss the nature and scope of corporate management and its role in nonbusiness organisation, giving examples.

The study and application of Management techniques in managing the affairs of the
organization have changed its nature over the period of time. The nature of Management
can be described as
1. Multi disciplinary
Management integrates the ideas and concepts taken from disciplines
such as psychology, sociology, anthropology, economics, ecology,
statistics, operation research, history etc. and presents newer concepts
which can be put in practice for managing the organizations.
Contributions to the field of management can be expected from any
discipline which deals with some aspects of human beings.
2. Dynamic Nature of Principles

Principles are a fundamental truth which establish cause and effect relationship of a
function. Based on practical evidences, management has framed certain principles, but
these principles are flexible in nature and change with the changes in the environment in
which an organization exists. In the field of Management, organization researches are
being carried on to establish principles in changing society and no principles can be
regarded as a final truth.
3. Relative, Not Absolute Principles
Management Principles are relative, not absolute and they should be applied according to
the need of the organization. Each organization may be different from others. The
difference may exist because of time, place, socio-cultural factors etc. A particular
management Principles has different strength in different conditions and therefore
Principles of Management should be applied in the light of the prevailing conditions.
4. Management, science or Art
Science is based on logical consistency, systematic explanation, critical evaluation and
experimental analysis. It is a systematized body of knowledge. Management, being a
social science may be called as an inexact or pseudo science. The meaning of art is
related with the bringing of desired result through the application of skills. It has to do
with applying of knowledge or science or of expertness in performance. Management can
be considered as an art and a better manager is one who knows how to apply the
knowledge in solving a particular problem.
5. Management as a Profession
The word profession may perhaps be defined as an occupation based upon specialized
intellectual study and training, the purpose of which is to supply skilled service or advice
to others for a definite fee or salary. Profession is an occupation for which specialized
knowledge, skills and training are required and the use of these skills is not meant for self
satisfaction , but these are used for the larger interests of the society and the success of
these skills is measured not in terms of money alone. Management possess certain
characteristics of profession, while others are missing. Therefore, it cannot be said to be a
profession, though it is emerging as a profession and the move is towards management as
a profession.
6. Universality of Management
There are arguments in favour and against the concept of universality. The arguments in
favour of universality are:[a]management as a process and the various process of management are universal for all
organizations
[b]distinction between management fundamentals and techniques
[c]distinction between management fundamentals and practices.
The arguments against universality are:[a]management is culture bound
[b]management depends upon the objectives of an enterprise
[c]management depends upon the differences in philosophies of organization

2. Discuss Vertical and Horizontal Integrations with examples.

Horizontal integration is a strategy where a company creates or acquires production units for
outputs which are alike - either complementary or competitive. One example would be when a
company acquires competitors in the same industry doing the same stage of production for the
creation of a monopoly.[1] Another example is the management of a group of products which are
alike, yet at different price points, complexities, and qualities. This strategy may reduce
competition and increase market share by using economies of scale. For example, a car
manufacturer acquiring its competitor who does exactly the same thing.
Horizontal integration is orthogonal to vertical integration, where companies integrate multiple
stages of production of a small number of production units.
An example of horizontal integration would be McDonalds buying out Burger King.
Obviously, this has not happened, but is an example of what a horizontal integration would be
like. Another example that actually did happen was the Heinz and Kraft Foods merger. On March
25th, 2015, Heinz and Kraft merged into one company
Vertical integration is an arrangement in which the supply chain of a company is owned by that
company. Usually each member of the supply chain produces a different product or (marketspecific) service, and the products combine to satisfy a common need. It is contrasted with
horizontal integration, wherein a company produces several items which are related to oneanother. Vertical integration has also described management styles that bring large portions of
the supply chain not only under a common ownership, but also into one corporation (as in the
1920s when the Ford River Rouge Complex began making much of its own steel rather than
buying it from suppliers).
Vertical integration is one method of avoiding the hold-up problem. A monopoly produced
through vertical integration is called a vertical monopoly.

3. The Balanced scorecard is a management system (not only measurement

system) that enables organizations to clarify their vision strategy and translate
them into action. It provides a clear prescription to as to what companies should

measure in order to balance the financial perspective. Following the Balanced

Scorecard approach helps:

Balance financial and non-financial measures

Balance short and long-term measures
Balance performance drivers (leading indicators) with outcome measures
(lagging indicators)
Lead to strategic focus and organizational alignment.

Discuss the above statement.

It provides feedback around both the internal business processes and external outcomes in
order to continuously improve strategic performance and results. It captures both the
financial and non-financial aspects of a company's strategy and discusses the cause and
effect relationship that drives business results. It is a proven tool to translate a company's
strategy into action. Thousands of Organizations from Fortune 1000 have been harnessing
the scorecard benefits for many years. Kaplan and Norton describe the innovation of the
balanced scorecard as follows:
"The balanced scorecard retains traditional financial measures. But financial measures tell
the story of past events, an adequate story for industrial age companies for which
investments in long-term capabilities and customer relationships were not critical for
success. These financial measures are inadequate, however, for guiding and evaluating the
journey that information age companies must make to create future value through
investment in customers, suppliers, employees, processes, technology, and innovation."
The balanced scorecard suggests that we view the organization from four perspectives, and
develop metrics, collect data and analyze it relative to each of these perspectives:
1. The Learning and Growth Perspective This perspective includes employee training and
corporate cultural attitudes related to both individual and corporate self-improvement. In a
knowledge economy, Human resources are the main resource. In the current climate of
rapid technological change, it is becoming necessary for knowledge workers to be in a
continuous learning mode. The Organisation has to identify the infrastructure that must be
built in order to create long term growth and improvement. The objective is to build up
mechanism to fill up the existing gaps in knowledge and processes and to be continually
innovative. Kaplan and Norton emphasize that 'learning' is more than 'training'; it also
includes things like mentors and tutors within the organization, as well as that ease of
communication among workers that allows them to readily get help on a problem when it is
needed.
2. The Business Process Perspective This perspective refers to internal business processes.
This perspective allows the managers to know how well their business is running, and
whether its products and services conform to customer requirements. It should be carefully
analyzed by those who know these processes most intimately. The main focus of this
perspective is on defining the critical business processes in which the organization seeks to
excel. The company must understand its value chain. In addition to the strategic
management process, two kinds of business processes may be identified: a) missionoriented processes, and b) support processes.
3. The Customer Perspective Current business philosophy has shown an increasing
realization of the importance of customer focus and customer satisfaction in any business.
These are leading indicators: if customers are not satisfied, they will eventually find other
suppliers that will meet their needs. Poor performance from this perspective is thus a
leading indicator of future decline, even though the current financial picture may look good.
Key parameters in this perspective to be analyzed are customer satisfaction, customer
retention, new customer acquisition and market share in targeted segments. Major
Dimension's affecting customer response and profitability are product and service attributes,
customer relations and image and reputation.
4. The Financial Perspective These measures do not disregard the traditional need for
financial data. Timely and accurate financial data will always be a priority, and managers will

do whatever necessary to provide it. In fact, often there is more than enough handling and
processing of financial data. With the implementation of a corporate database, it is hoped
that more of the processing can be centralized and automated. But the point is that the
current emphasis on financials leads to the "unbalanced" situation with regard to other
perspectives. A Balanced Scorecard must be balanced. In this context, the internal auditor
may prove helpful to create and monitor the scorecard since he has access to company wide
measure of performance.
SECTION B
Read the following case carefully and answer the questions that follow:
ASIAN PAINTS (INDIA) LIMITED
The siege is over, and the time has come for the leader to sally forth into greener
pastures. Even as the paints industry is emerging from the shadow of recession,
the Rs. 560 crore Asian Paints (India) Limited (APIL) is mixing new shades to
emerge with winning colours.
Says managing director Atul Choksey: "With proper planning and a comprehensive
approach to issues, we intend to keep pace with the growth of the industry".
APIL is actually targeting a growth rate that is higher than the 9 to 10 per cent
that the industry has been averaging recently. In the year to March 1994, the
company notched up a gross sales turnover of Rs. 559.96 crore (net sales: Rs.
401.96 crore), a growth of 10.8 per cent over the previous year. Net profit also
registered a healthy growth of 31.5 percent to Rs. 25.61 crore. The results have
tidied up the company's balance sheet, which had begun to look a bit ragged.
APIL's approach is multipronged: expansion of its product range and introduction
of value added, niche products in the industrial paints area; line extensions of
existing products to target lower income market segments both in rural and urban
areas; expansions of production capacity and continuous modernisation to keep
pace with the growing demand; and diversification in to the unrelated but
synergistic area of ceramics.
All these strategies are part of what the company's top management terms
"harnessing our full potential", or the challenges that lie ahead. They are also
aimed at retaining leadership in a recession-free industry over the next few years.
APIL is the leader in the entire industry, comprising both organised as well as
unorganised players, with a market share of about 19 per cent. The company is
confident of the fact that its share of industry sales is twice as much as that of its
nearest competitor, Goodlass Nerolac. APIL also dwarfs the others in size, its net
sales nearly twice that of Goodlass Nerolac, well over twice that of third-placed
Berger Paints, and nearly four times that of fourth-placed Jenson and Nicholson
(see Exhibit-I).
It is only wary of the expanding unorganised sector which seems to be eating up
the share of firms in the organised sector. Nevertheless, given the multiplicity of

shades it is capable of, APIL reckons it can look forward to a compound growth in
its market share.
Exhibit I
How They Compare
(Figures in Rs. crore for 1993 - 94)
Net sale Net Profit

Net Profit/Sales
(%)

Asian Paints

401.96

25.62

6.36

Goodlass Nerolac

205.88

8.05

3.91

Berger Paints

174.95

3.24

1.85

Jenson & Nicholson 110.33

1.97

1.72

Garware Paints

106

2.57

2.33

102.59

1.60

1.56

37.81

0.03

0.08

Company

Shalimar Paints
Bombay Paints

**

**

* 18 months to September 1993

**12 months to March 1993
But though the good times are back, the company is not content to sit back and
relax. The last three years, during which the paints industry went through a
trough, saw APIL taking a beating (though it remained the market leader all
through), with its paints division showing a negative growth of 3.5 per cent in
terms of volume.
With the rupee having been progressively devalued during the years 1989-92, and
with high rates of inflation also rampant over this period, excise duties and other
levies too exerted upward pressure on paint prices, and this served to depress
demand. An additional complication, reinforcing this trend, was created by the
difference in the selling prices of paints made by the organised and unorganised
sectors.
The first signs of recovery came with the Union Budget of 1993 which cut excise
and custom duties, Excise duties were reduced to 30 per cent and customs duties
were cut from 85 to 65 per cent- This provided a respite to the industry by
facilitating a rolling back of prices, and it began to grow at about 2 per cent a year.
In spite of intermittent social disturbances in 1993, the industry gradually
responded and so did the demand for its products. Simultaneously, the automobile
industry, which is a major user industry for paints, also began to emerge from the
two-year recession.
A gradual revival of the industry brought along a new threat for the seven major
players from the organised segment. Uneven prices during the recession years had
the unorganised competitors grabbing at a significant chunk of the market.

Budget concessions brought relief to the organised sector, but its constituents
also found themselves having to compete with an unorganised sector that had
grown to become a significant threat, even as the prospect of competition from
imports began to worry the organised sector.
APIL'S largest new venture will be a diversification into ceramics, though the
project is still at the planning stage. The decision to enter a new field is fuelled by
the management's perception that the ceramics industry has tremendous potential
for growth.
Even though the company has no experience in the production and technology
aspects of ceramic tiles manufacture, it has opted for ceramics because the
marketing will involve utilisation of its existing distribution network for paints.
The rationale is that since paints and ceramics are both building materials, APIL'S
existing customer base (which can serve as a ready-made market) will be targeted
for its ceramics products.
"With our extensive distribution network and stocking points, we can reach even
the remote markets. So marketing ceramics is not likely to be a problem," says
Choksey. The plan is to penetrate the market as quickly as possible, and grab a
substantial chunk of industry sales. The company will initially start with ceramic
tiles, but there is no plan to restrict itself to any specific market segment.
The project involves a Rs. 70 crore initial investment in the first phase, which
involves installation of a capacity of 23,000 tonnes per year. This will be followed
in a couple of years by the second phase, which will see an increase in the
capacity to 50,000 tonnes.
The new project is scheduled for completion by the end of 1996, and it will, in all
probability, be located in Gujarat. This is because any location in that state will
have the advantage of proximity to the raw material supplying areas in Gujarat
and Rajasthan. APIL is currently negotiating with foreign collaborators for the
technology, which will have to be imported. The technology will also have to be
adapted to Indian conditions.
While putting a few eggs in a new basket to ensure that fluctuating fortunes in the
paint industry do not have the effect of hurting the company's bottomline yet
again, APIL is not ignoring its bread-and-butter business - that of paints. Over the
past year, a variety of new brands have been added to its product range. The
company has made an attempt to extend its marketing and distribution beyond the
country's major towns, to which its activities were hitherto confined.
'Utsav', an economically priced brand, was launched last year and is targeted at
small households with limited budgets. This project concentrated mainly on
consumers in Tamil Nadu, Maharashtra and Gujarat, thus widening the
accessibility of its products to all consumer levels.
General Manager Mr. P.M. Murthy says that "the degree of penetration
concentrates on how economical it is to do business." He says that though this
new product has performed favourably, it has not contributed much to the profits
of the year. "Of course, it promises to be a very good and attractive segment for

future business," he adds, when asked about its future growth and profit
potential.
Other new products also include powder paints to be used for both auto and nonauto appliances. There are other products like wood finishings (Touch-wood) that
takes care of refinishings on furniture.
To strengthen its industrial product base, APIL has collaborated with PPG
industries, an American firm, and thus enjoys the use of cathode electro
deposition primer (CED). The company has concluded a tie-up with Nippon Paints
for original equipment paint products and with Sigma Coatings of Holland for
corrosion coatings. The technology that has been brought home as a result of
these ventures is modified at the company's plant at Bhandup, so as to make it
suitable for the Indian climate.
With a better product range on offer now, APIL is just waiting for a greater
awareness of industrial paint applications to develop in the Indian market; the
presumption is that the demand for this particular product is still latent. For its
decorative paints, the company has gone in for differential pricing to encourage all
segments of the market.
The company is intent on a continuous modernisation and upgradation of its
technology and its assets, so as to keep in tune with the changing requirements of
the marketplace. In addition, it is also working on plans to increase production
capacity owr the next few years.
Besides the activity on the domestic front, APIL is increasing its overseas presence
as well. One of the few Indian companies with overseas subsidiaries in the SouthPacific region, APIL is now setting up a new subsidiary in Australia. Its existing
ventures abroad too have reported healthy results: Asian Paints (South Pacific)
has registered a 12 per cent growth, Asian Paints (Tonga) grew at a rate of five
per cent, Asian Paints (Solomon Islands) at over 10 per cent and Asian Paints
(Nepal) at over 18 per cent.
With a new subsidiary at Vanuatu (New Hebrides) and a joint venture unit in
Townsville (Australia), APIL has established at least a foothold in the international
markets.
When asked about the threats facing the company, Choksey chuckles and says he
prefers to call them challenges. "We need to meet the demands of this growing
organisation- of our workforce, our technology and our assets. A major point to be
tackled is to be able to meet the growing demand for our product and to create a
greater awareness for our newer products," he says.
Over the first few months of the current financial year, sales volume has been
growing at a rate of 14 per cent, well above the industry average. With the
recession firmly behind it and government levies no longer inflating its prices, the
paint industry seem to be on an uptrend. But the APIL management has its work
cut out for it : it will not merely have to gear up to meet the burgeoning demand,
but will also have to work hard at retaining and then increasing its market share.

Questions:
(a) What corporate goal has the company adopted for the next few years
and with what strategies does the company propose to realise the above
goal?
The corporate goal of the company is to achieve the growth rate that is
higher than 9 to 10 percent that the industry is averaging.
1.
2.
3.
4.

Expansion of the product range.

Introduction of niche products in industrial paints area.
Line extensions.
Expansion of production capacity and continuous modernization of
technology.
5. Diversification into unrelated area of ceramics.
6. Increasing its presence in overseas market with its various subsidiaries.

a) (b) What threats is the company facing or/and might face in future? What
has it done and/or what could it further do to safeguard itself from
threat(s)?
Threats the company may face in future:
Company is facing major threat from the unorganized sector.
Growing demand of the products .
Awareness for newer products.
The growing demand of the organization in terms of the workforce,
technology and also the assets.
b) The ways the company is trying to safeguard its interest from threat are:
Collaborations with foreign firms for modernization and up gradation of
technology and assets .
Entry into lower end segments in order to grab large market share.
Company is focusing at increasing its market share, and working hard in
order to retain it.
Company has entered into the industrial paint applications, where demand
for product is still latent.

(c) Evaluate the new strategies of Asian Paints (India) Limited, particularly
its proposed foray into ceramics.
Utilization of existing distribution network .
Serve an existing customer base.

Paints and ceramics are quite related products.

Foreign collaborators for the technology.
Rs. 70 crore investment in the first phase
Plant location near Gujarat and Rajasthan.
Collaborations with foreign players.

(d) What action plans has the company proposed to strengthen its product
base?
The action plans proposed by the company to strengthen its product base
are :

Line extensions.
Expansion of the product range
Expansion and modernization of production capacity.
Diversification.

(e) Classify all the strategic plans or proposed strategic actions of the company for
achieving growth against suitable headings, e.g., Diversification, Joint Ventures,
etc.,

NOTE: Rs.1 crore = Rs. 100 Lakh = Rs. 10 million.

For simplicity Rs. 50 = I US$
Rs. 1 crore = 0.2 million US$

Assignment C
Question 1
It is generally agreed that the role of strategy is to:
a) Make best use of resources
b) Achieve competitive advantage
c) Make profits for the organization
d) Make the best products and services
Question 2

According to Porter (1996) in his article what is strategy? strategy is about being:
a) Different
b) Better
c) Bigger
d) Open

minded

Question 3

An organization's external environment consists of the general or macro environment

and:
a) The

internal environment
b) The competitive environment
c) The specific environment
d) The micro-environment

Question 4

Alfred Chandler believed that:

a) Strategy

should be developed first and the organization tailored to meet the requirements
of the strategy
b) Set the strategy according to the organization's strengths and weaknesses
c) Strategy should be allowed to develop incrementally
d) Strategy should be allowed to evolve over time

Question 5

The key activities in the strategic management process are:

a) Analysis,

formulation, review
b) Analysis, implementation, review
c) Analysis, formulation, implementation
d) Formulation, analysis, implementation

Question 6

Strategy analysis is also referred to as:

a) SWOT

analysis
b) Strategy diagnosis
c) Rational analysis
d) Situation analysis

Question 7

Strategy formulation takes place at two levels. These are:

a) Conscious

and sub-conscious
b) Implicit and explicit
c) Corporate and business
d) Business and operational

Question 8

The goals of an organization derive from its:

a) Strategy
b) Purpose
c) Objectives
d) Mission

Question 9

The statement of an organization's aspirations can be found in the organization's:

a) Mission

statement
b) Strategic objectives
c) Actions
d) Vision statement

Question 10

Decisions regarding which industries to compete in are the concern of:

a) Business

level strategy
b) Corporate level strategy
c) Mergers and acquisitions
d) Functional level strategy

Question 11

Competitive strategy is also known as:

a) Competitive

positioning
level strategy
c) Industry strategy
d) Business level strategy
b) Corporate

Question 12

In the SWOT analysis, the 'strengths' and 'weaknesses' part refers to:
a) What

the organization does internally in relation to competitors

potential level of profits in the industry
c) The quality of the products and services in relation to competitors
d) The potential level of sales in the market
b) The

Question 13

A method for imagining alternative, possible futures is known as:

a) Scenario

imagining
composition
c) Scenario planning
d) Scenario envisioning
b) Scenario

Question 14

The general environment is also referred to as the:

a)

Micro-environment

b) Macro-environment
c) Competitive

environment
d) External environment

Question 15

The general environment can be broken down using a PEST analysis. Conventionally the
PEST analysis consists of:
a) Political,

economic, scientific, technological

environmental, social, technological
c) Political, economic, social, technical
d) Political, economic, social, technological
b) Political,

Question 16

Competitive rivalry will be high if:

a) The

industry is fragmented
b) There are a few strong players in the industry
c) There is a high degree of differentiation
d) The industry is in its infancy

Question 17

A substitute product or service is:

a) A competitor's

product or service
b) An alternative way of meeting the same need
c) A new entrant into the industry
d) A less attractive way of meeting the same need

Question 18

Buyer power is high if:

a) Differentiation

is low
b) Switching costs are low
c) They have little information
d) The buyer requires a high quality product for their own production

Question 19

In Porter's Five Forces, the 'threat of new entrants' relates to:

a) Barriers

to entry
b) Substitutes
c) Switching costs
d) Buyer power

Question 20

The value chain is subdivided into two main headings. These are primary activities and:
Peripheral activities
b) Support activities
c) Secondary activities
d) Outsourced activities
a)

Question 21

The decision regarding whether to do manufacturing within the organization or to subcontract it to someone else is popularly known as:
a) An

'in or out' decision

b) A 'make or buy' decision
c) A 'do-it-yourself' decision
d) A 'vertical-integration' decision

Question 22

WH-Smith the stationer and bookseller has a store on most high streets in the UK. In
terms of the SWOT analysis, this could be considered a:
a) Strength
b) Weakness
c) Strength

and a weakness
d) Neither strength nor a weakness

Question 23

A market is defined by:

a) Demand

conditions and customers

b) Demand conditions and suppliers
c) Supply conditions and production technology
d) Supply conditions and customers

Question 24

Porter's generic strategies are:

a) Low

price, differentiation, focus

b) Cost leadership, differentiation, cost focus, focus differentiation

c) Price

leadership, differentiation, focus

d) Low cost, differentiation, focus differentiation

Question 25

According to Porter, if an organization does not follow either a cost reduction strategy or
a differentiation strategy they are:
a) Hybrid
b) Stuck

in the middle

c) Typical
d) No

frills

Question 25

In Porter's Generic Strategies model, a focus strategy involves:

a) Selling

a limited range of products

b) Selling to a narrow customer segment
c) Selling to one region only
d) Selling simple products that are cheap to produce

Question 26

A differentiation strategy offers:

a) A broad

segment something unique

b) A narrow segment something unique
c) A broad segment something more expensive
d) A narrow segment something more expensive

Question 27

Kim and Mauborgne (2005) argue that organizations should try to capture uncontested
market space. These uncontested markets are known as:
a) Blue

skies
b) Blue oceans
c) White skies
d) Fresh snows

Question 28

In Ansoff's matrix, 'product development' involves going in the direction of:

a) Present

products to present markets

b) Present products to new markets
c) New products to present markets
d) New products to new markets

Question 29

Horizontal integration is where:

a) A firm

takes over a supplier

takes over a distributor
c) A firm takes over a competitor
d) A firm takes over a manufacturer
b) A firm

Question 30

reduces uncertainty
a) Negotiating
b) Planning
c) Organizing
d) Leading

Question 31

are those plans that are extended beyond three years

a) Short-term

plans
Long-term plans
c) Specific plan
d) Strategic plan
b)

Question 32

Value Chain is an effective tool for..................................

a) External

Analysis

b) Internal Analysis
c) Self

analysis
analysis

d) Systematic

Question 33

The preparation of ETOP involves:

a) Dividing

environment into sectors, sub factors, analyze impact of each sector & sub
factor on organization, description of impact of each sub factor into a statement which is
positive, neutral or negative.
b)

Description of impact of each sub factor into a statement which is positive, neutral or

negative. , dividing environment into sectors, sub factors, analyze impact of each sector & sub
factor on organization

Question 34

Make or buy decision is related with ________strategy

a) Vertical

(forward) integration

b)

Vertical (backward) integration

c)

Horizontal integration

c)

Diversification

Question 35

Strategic management is mainly the responsibility of

a) Top

Management

b)

Senior Management

c)

General Management

c)

Middle Management

Question 36

A hardware manufacture enters into software is an example of ________integration

a) Vertical

(forward) integration

b)

Vertical (backward) integration

c)

Horizontal integration

c)

Diversification

Question 37

True/False
Question: Scheduling is a part of strategic management.
Correct Answer
a)

False

b) True

Question 38

Factors to be considered in political- legal environmental scanning are

a)

govt. policies, stability, philosophy of govt. , legal system, implementation,

infrastructure , import-export
b) govt. policies, stability, philosophy of govt. , legal system, implementation, infrastructure

Question 39

True/False
Micro environment is the internal environment of a company.
Correct Answer
a)

False

b) True

Question 40

Perspective which does not belong to four Balanced Scorecard perspectives is:
a) The

Business Process Perspective

b)

The Customer Perspective

c)

The Learning & Growth Perspective

d)

The Business Reengineering Perspective