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1. Our understanding of how strategy development in organizations can be enhanced through employing different strategy lenses. Describe the design and experience lenses. Give examples to illustrate your understanding. Answer Strategic lenses provide four angles of strategy which can be viewed and implemented at corporate level. These strategic lenses help in approaching strategic problems from different perspectives. Looking at problems from different perspectives will raise new issues and provide new solutions. The four lenses of strategy are as follows: a) Strategy as a design – this takes the view that strategy development can be a logical process in which the forces and constraints on the organisation are weighed carefully through analytic and evaluative techniques to establish a clear strategic direction. This creates conditions in which carefully planned strategic implementation should occur. Apple- feasibility , stakeholders, b) Strategy as experience – here, the view is that future strategies of the organization are based heavily on the experience of managers and others in the organization based on their experience in previous strategies. c) Strategy as ideas – the ideas lens lays emphasis on the importance of promoting diversity in and around organizations, which can potentially generate genuinely new ideas. Here, strategy is seen as not so much planned from the top as emergent from within and around organizations as people respond to an uncertain and changing environment with a variety of initiatives. Google (Innovation) IBM

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1. Our understanding of how strategy development in organizations can be enhanced through

employing different strategy lenses. Describe the design and experience lenses.  Give examples

to illustrate your understanding.

Answer

Strategic lenses provide four angles of strategy which can be viewed and implemented at corporate

level. These strategic lenses help in approaching strategic problems from different perspectives.

Looking at problems from different perspectives will raise new issues and provide new solutions.

The four lenses of strategy are as follows:

a) Strategy as a design – this takes the view that strategy development can be a logical process in

which the forces and constraints on the organisation are weighed carefully through analytic and

evaluative techniques to establish a clear strategic direction. This creates conditions in which

carefully planned strategic implementation should occur. Apple- feasibility , stakeholders,

b) Strategy as experience – here, the view is that future strategies of the organization are based

heavily on the experience of managers and others in the organization based on their experience

in previous strategies.

c) Strategy as ideas – the ideas lens lays emphasis on the importance of promoting diversity in and

around organizations, which can potentially generate genuinely new ideas. Here, strategy is

seen as not so much planned from the top as emergent from within and around organizations as

people respond to an uncertain and changing environment with a variety of initiatives. Google

(Innovation) IBM

d) Strategy as discourse – this lens sees strategy in terms of language. Managers spend most of

their time communicating. Therefore, command of strategy language becomes a resource for

managers by which to shape objective strategic analyses to their personal views and to gain

influence, power and legitimacy. Approaching strategy as a discourse makes managers very

attentive to the language in which they frame strategic problems, make strategy proposals,

debate issues and then finally communicate strategic decisions. Infosys, General Electricals

Strategic Design Lens

A basic premise of the business is that companies have goals and customers have needs. Strategic

choice can be made logically and objectively on the basis of linear, analytic, evaluative procedures

driven by top managers or other managers working with them. This involves:

a) Establishing clear objectives developed to reflect stakeholder expectations and use them as a

basis for evaluating various options.

b) Making argued cases for explicit options on the basis of clear understanding of the strategic

position of the strategic position of the organization arrived at analytically.

c) Evaluating options by systematically examining their relative merits in terms of:

a. Whether the strategic options significantly address the strategic issues of the

organization.

b. Whether it is feasible to implement the strategic option

c. Whether the option is acceptable to stakeholders

This approach is high on rationality and legitimacy, but low on innovation as the process is pre-defined.

Apple:

Strategic Experience Lens

As per the strategic experience lens, the strategy develops incrementally on past strategy, past

experience and the culture of the organization within a political context. Hence, strategic choices made

are heavily influenced by past experience. Hence, such past experience may restrict innovation or

constraint innovation as it may not be in line with the existing corporate culture. As this approach relies

on past experience, managers have ready-made solutions on the basis of their experience and applying

them to circumstances which match such strategic actions.

The strategies that have been evolved have been done so on the basis of experimentation in the past,

hence it is possible that strategies of successful organizations will be imitated by new competitors.

This approach is high on legitimacy, but low on rationality and innovation.

Eg: low cost airlines,airtel

2. Describe the four criteria for an organization’s core competence.  Explain how core

competences can be identified and leveraged to develop strategies.  Give example(s) to

support your argument.

Key success factors in industry for survival- Support activities in a Value chain

Critical success factors for competitive advantage – on basis of primary activities, competitive

advantage can be derived.

Resource based –

Competences

Threshold- Minimum – find out with help of key success factors

Unique – VRHN – Critical success factors

Core competences are the skills and abilities by which resources are deployed through an

organization's activities and processes such as to achieve competitive advantage in ways that others

cannot imitate or obtain.

Core competencies are always a balance between the unique capabilities that we have already

demonstrated and those we need to acquire to maintain or gain competitive advantage. 

Core competencies serve as a source of competitive advantages. But core competencies create

competitive advantages on long-term. So, we can also look at Hanson’s model that uses 4 criteria to

identify long term competitive advantages:

- Valuable- it refers to swot analysis because it allows using opportunities and/or disabling threats.

- Rare

- Costly to imitate

- Non-substitutable

These 4 elements are equivalent to the previous points that describe core competencies.

Core competencies don’t only concern R&D and final products. It could also be a process, an

Organization evolution, and human resources methods and so on.

Core competency lead to competitive advantage when:

They relate to an activity that underpins the value in the product features

They lead to levels of performance that are significantly better than competitors

They are difficult for competitors to imitate

Strategic capability is the resources and the competency of a firm to survive and prosper.

The four criteria for core-competency are:

Resources

Competency

Threshold capabilities

Capabilities for competitive advantage

Competitive advantage and strategic capabilities:

Resources:

This includes tangible and intangible resources of the company. Tangible resources are the physical

assets of the company like the labor, plant etc. intangible includes the intellectual properties, reputation

etc.

Again, the resources can be classified in four categories:

Physical resources- eg: plant

Financial resources- eg: cash

Human resources- eg: people in the firm

Intellectual capital- eg: patents

Competences:

Competency means the skills and abilities by which resources are deployed effectively through an

organization’s activities and resources.

Threshold capabilities:

These are those capabilities needed for an organization to meet the necessary requirements to compete

in a given market.

Identifying and managing threshold capabilities raises at least two significant challenges:

Threshold levels of capability changes as critical success factors change or through the activities

of competitors and new entrants.

Trade-offs may need to be made to achieve the threshold capability required for different sorts

of customers.

Packages by sun DTH

Threshold Resources:

Set up box, antenna, firm infrastructure, and logistics.

Capabilities for competitive advantage include:

Unique resources

Core competences

Unique resources:

This includes those resources that strengthen the competitive advantage and those that cannot be

imitated by others.

HD Services

Core competences:

Core competences includes the skills and capabilities by which resources are deployed through an

organization’s activities and processes, so as to achieve competitive advantage in ways that others

cannot imitate and obtain.

Putting these concepts together, to survive in the changing environment the firm has to address the

challenges that it faces. The strategic capabilities to face these challenges are dependent on the

resources and the competencies a firm has. The further challenge is to achieve competitive advantage

and this can be achieved by developing strategic capabilities that the competitors find difficult to obtain

or imitate. This could be attained through the unique resources that the firm has.

Low cost, Understanding market and needs of people. In different languages

Sun DTH:

Resources – Set Top Box, Antenna, Firm Infrastructure, Logistics, Channels, Radio Stations

Threshold – Set Top Box, Antenna, Firm Infrastructure, Channels, Radio Stations

Unique – HD Set Top Box, Logistics, Strategic Alliance and Bundling of products

3. Describe the concepts of organizational culture and the cultural web.  Explain how these

concepts can influence the process of strategic management. Give example to support your

argument. (page – 194 – 203)

The culture of an organization is often conceived as consisting of 4 layers:

Values – which include statements about an organization’s mission statement, objectives or

strategies; basic

Beliefs – these are more specific, in that they can be distinguished in how people talk about issues

in the organization, not possible to understand culture fully.

Behaviours – these are the day to day in which an organization operates and can be seen by people

both inside and outside the organization. This includes the work routines, how the organization is

structured and controlled and softer issues around symbolic behaviours

Taken for granted assumptions – they are the core of an organization’s culture. They are the

aspects of the organizational life, which people find difficult to explain. It is also referred to as

paradigm, which is a set of assumptions held in common and taken for granted within an

organization. Like- same for middle management & top management- like place for sitting

The cultural web is a means of understanding the existing culture and its effects on the performance of

the organization. The various elements of cultural web include:

Paradigm – these are the collective experiences applied to a particular situation to make sense of

it and inform a particular course of action. Trying to identify a paradigm is difficult as these are

assumed to exist within an organization. The insiders within the organization cannot view these

taken for granted assumptions and hence, a pattern can be understood by taking into

consideration other aspects of the culture. Assumptions about company

Rituals and Routines – They are the ways things are done on a day to day basis and which have

been followed for a long period of time within the organization. An instance of routine may be

long working hours because of the nature of work, weekly meetings, focus on process rather

than outcomes and so on. How many working days

Stories – Stories told by members of the organization to each other, to new recruits and so on,

may act to implant organizational history and also flag up important events and personalities.

This is a way of letting people know what is important in an organization. When go for

interview can be get view about company

Symbols – They are objects, events and acts, that convey, maintain or create meaning over and

above their functional purpose. For example, office layout, offices, cars and titles have a

functional purpose but are also about maintaining status and hierarchy. The form of language

used in an organization may also be particularly revealing.

Power Structures – the most powerful groupings within an organization are likely to be closely

associated with core assumptions and beliefs. If there is high power distance, then it will be

difficult for employees to address their grievances with the top management. Power distance is

high

Organizational structure – organizational structure is likely to reflect power and show important

roles and relationships. For instance a hierarchical structure will reveal that taking orders is

mandatory within an organization.

Control Systems – Measurements and reward systems emphasize what is important to monitor

within the organization. For instance, a performance management central system will help the

managers in effectively appraising their employees by measuring standards with actual

performance and so on.

4. Consider Porter’s three generic strategies. In your opinion, how cost-based advantages can

be sustained? Give example to support your argument.

Porters Generic Strategies - These three generic strategies are defined along two dimensions:

strategic scope and strategic strength. Strategic scope is a demand-side dimension and looks at the size

and composition of the market you intend to target. Strategic strength is a supply-side dimension and

looks at the strength or core competency of the firm. In particular he identified two competencies that

he felt were most important: product differentiation and product cost (efficiency).

1. Cost Leadership Strategy

Air Deccan, Tata Nano

This strategy involves the firm winning market share by appealing to cost-conscious or price-sensitive

customers. This is achieved by having the lowest prices in the target market segment, or at least the

lowest price to value ratio. 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 turnover. 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 supply/procurement chain to ensure low costs. 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. Wal-Mart is famous for squeezing its suppliers to ensure low prices for its

goods. Dell Computer initially achieved market share by keeping inventories low and only building

computers to order. Other procurement advantages could come from preferential access to raw

materials, or backward integration.

2. Differentiation Strategy

Can be in Product Differentiation &

Differentiation is aimed at the broad market that involves the creation of a product or services that is

perceived throughout its industry as unique. The company or business unit may then charge a premium

for its product. This specialty can be associated with design, brand image, technology, features, dealers,

network, or customers service. Differentiation is a viable strategy for earning above average returns in a

specific business because the resulting brand loyalty lowers customers' sensitivity to price. Increased

costs can usually be passed on to the buyers. Buyers loyalty can also serve as an entry barrier-new

firms must develop their own distinctive competence to differentiate their products in some way in

order to compete successfully. Examples of the successful use of a differentiation strategy are Hero

Honda, Asian Paints, HLL, Nike athletic shoes, Perstorp BioProducts, Apple Computer, and Mercedes-

Benz automobiles.

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 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.

Variants on the Differentiation Strategy

The shareholder value model holds that the timing of the use of specialized knowledge can create a

differentiation advantage as long as the knowledge remains unique. This model suggests that customers

buy products or services from an organization to have access to its unique knowledge. The advantage is

static, rather than dynamic, because the purchase is a one-time event.

The unlimited resources model utilizes a large base of resources that allows an organization to outlast

competitors by practicing a differentiation strategy. An organization with greater resources can manage

risk and sustain losses more easily than one with fewer resources. This deep-pocket strategy provides a

short-term advantage only. If a firm lacks the capacity for continual innovation, it will not sustain its

competitive position is over time.

3. Focus or Strategic Scope

Can target mass market- broad market-

Can target niche – narrow - BMW

This dimension is not a separate strategy per se, but describes the scope over which the company

should compete based on cost leadership or differentiation. The firm can choose to compete in the mass

market (like Wal-Mart) with a broad scope, or in a defined, focused market segment with a narrow

scope. In either case, the basis of competition will still be either cost leadership or differentiation.

In adopting a narrow focus, the company ideally focuses on a few target markets (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 or brand marketing rather than efficiency. It is most suitable for relatively small firms but

can be used by any company. 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, with provides short-haul point-to-

point flights in contrast to the hub-and-spoke model of mainstream carriers, and Family Dollar, which

targets poor urban American families who cannot drive to Wall-Marts in the suburbs because they do

not own a car.

How cost-based advantages can be sustained?

Cost leadership strategies are only viable for large firms with the opportunity to enjoy economies of

scale and large production volumes. However, this takes a limited industrial view of strategy. Small

businesses can also be 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.

5. People are at the heart of strategy.  In your opinion, how human resources can enable the

success of strategy?  And how human resources should be managed to enable the strategic

success for a business organization? (Page – 475 – 481)

Knowledge and the experiences of the people in the organization are the two very crucial factors

that can influence the success of the strategy because of this the people related issues should be the

focal part for the managers of the organizations not only the HR manager. Though the role of formal

HR structures and systems is quite important in supporting the successful strategies but sometimes they

might obstruct the strategy if they are not adapted to the types of strategies being pursued.

People element of the strategy has three related issues:

1) People as resources

2) People and behaviour

3) Need to organize people

People as resource

Use full knowledge of employees

Right person at right place

It is important to note that the ownership of resources whether human resource or any other kind of

resource does not ensures the strategic capability rather the strategic capability is concerned with the

deployment, management and the control of these resources. And for the human resources it is

particularly important that a climate is created wherein the people strive towards achieving success.

This hard side of HR management is concerned with the issues related to performance management.

HR activities can ensure that the strategies employed are successful in following ways:

I. Audit to assess HR requirements to support strategies

II. Goal setting and performance assessment of the individuals working in the organization.

III. Recruitment and retention are the means of improving the strategic capability and also

succession planning is also to be considered properly so as to ensure that sufficient numbers of

talented people are there in the organization to meet the future leadership requirements.

It is important to link the HR strategies with the organizations strategy

People – hard and behaviour- Soft

Culture can be core competency- Google, Infosys

People in the organization influence strategy through their competence and their collective behaviour

which forms the culture. This is the soft side of HR which is concerned with the behaviour of the

people both individually and collectively. The softer changes may include the understanding of the way

the idea or the paradigm of the organization needs to change in case of rapidly changing business

environment, understanding the relationship between the culture and the strategic choices as sometimes

the culture of the organization can itself be the core competency, being realistic about the difficulty and

the time scales in achieving the change in the culture because the process of changing the culture is a

long process by itself and finally being able to change the management style with the magnitude of

change and as well as with the organizational context.

Need to organizing people

An organization can ensure the successful business strategies with the help of HR functions, Line

managers and through its own structures and processes. For the HR function to contribute towards the

successful strategy it is imperative that the HR managers are clear about the strategy of the organization

and once that is done the HR functions can help in achieving the strategic success in following ways:

I. As a service provider by recruiting and arranging training sessions.

II. As a regulator setting the rules within which the line managers operate.

III. As a change agent

IV. As an advisor on issues of the HR strategy to the line managers.

It is crucial to recognise the crucial influence of middle managers on the day to day performance and

behaviour of people in the organization. This implies that it is necessary for the top managers to include

the line managers in the strategy development process otherwise the strategy may not be successfully

stick with the people in the organization.

Driver conference-

Structures and processes

Strategic success may be hampered if the traditional structures and roles do not match with the future

strategies. Furthermore the structures and processes have to be changed with the changing

circumstances. Another challenge is that whether the HR issues should be kept within the organization

or should be out sourced to the external consultants. The advantage of outsourcing is that wide

expertise is available but the disadvantage is that the external consultant may not be familiar with the

circumstances of the organization.

The various points about the relationships between the business strategies and people can be

summarised as:

I. There must be activities to ensure the maintenance of competitiveness like objective setting and

performance appraisal.

II. There must be activities to provide a platform on which new strategies can be built in long term.

For example leadership, competencies and culture.

III. The above mentioned points should be linked so as to ensure that the long term goals do not get

overshadowed by the short term goals. For example using the short term success incentives like

bonuses may compromise the ability to take strategic interventions such as creating new roles

and responsibilities.

The organizations that are able to manage these processes are most likely to gain competitive

advantage whereas others face the risk of failure because the HR strategies are not in line with

the organizational strategies or the people competencies and culture are out of line either with

the HR or the organizational strategies or because of the fact that business strategies fail to build

on the organizational capabilities.

6. Logical incrementalism is widely used by organizations to develop its strategy. Explain the

term “logical incrementalism” and describe the major steps (or characteristics) involved

when it is used for strategy development. Give an example to illustrate your understanding.

Logical Incrementalism is the development of strategy by experimentation and ‘learning from

partial commitments rather than through global formulations of total strategies’. Incrementalism in the

study of rationality it can be seen as a stealthy way to bring about radical changes that were not initially

wanted.

OR

Logical Incrementalism is a philosophy of achieving broad organizational goals by making strategic

decisions in small steps. The small steps to resolve conflicting views of participants and reduce risk by

capitalizing on knowledge that is gained during the process. Logical Incrementalism benefits from

flexibility, but is likely to be time-consuming and inefficient.

4 Characteristics of Logical Incrementalism

Environmental uncertainty: The Managers realise that they cannot do away with the uncertainty

of their environment by relying on analysis of historical data or predicting how it will change.

Rather, they try to be sensitive to environmental signals by encouraging constant environmental

scanning through the organization. It can be also said that it is a situation where the management of

a firm has little information about its external environment that is in a state of flux and, hence,

largely unpredictably.

Generalised views of strategy: Managers have a generalised rather than specific view of where

they want the organization to be in the future and try to move towards this position incrementally.

There is also a reluctance to specify precise objectives too early as this might stifle ideas and

prevent innovation and experimentation. Objectives may therefore be general in nature.

Experimentation: Managers may seek to develop strong secure, but flexible core business. They

will then build on the experience gained in that business to inform decisions both about its

development and experimentation with ‘side-bet’ bet ventures. Commitment to strategic options

may therefore be tentative to the early stages of strategy development. Such experiments are not the

sole responsibility of top management.

Coordinating emergent strategies: Top managers may then utilise a mix of formal and informal

social and political process to draw together an emerging pattern of strategies from these

subsystems. These may then be formed into coherent statements of strategy for stakeholders that

need to understand the organisation’s strategy.

Pros and Cons of Logical Incrementalism

The advantages of incrementalism over other formal systems is that no time is wasted planning

for outcomes which may not occur. Disadvantages are that time may be wasted dealing with the

immediate problems and no overall strategy is developed.

IKEA using Logical Incrementalism

IKEA has been using logical incrementalism since its very first store opened for business. IKEA’s

founder, Ingvar Kamprad, had a strong but very general vision. From that, IKEA’s strategy gradually

took shape as Kamprad both proactively took action and reactively adapted to the situation as it

extended. Even the decision to sell furniture was an adaptation to the market, not a deliberate strategy.

Because of this “short-term scepticism,” whenever the company stumbled across an obstacle, it could

quickly turn the obstacle into an opportunity.  IKEA’s approach is incredibly refreshing. Its strategy

stated that business could succeed without predicting the future and wasting time writing strategy

roadmaps that are obsolete.

HP using Logical Incrementalism

Hewlett Packard is another company which follows Logical Incrementalism. A core technology in test

and measurement lead them to improve things for the customer that led them to begin to develop

computer capabilities, information processing capabilities, because that was part of building better test

and measurement organizations. And then they began to apply those same ideas in other ways into the

computer business, the server business and the printing business, which was an offshoot of that whole

approach.

7. Strategic alliance and acquisitions are two different methods of strategic development.

Compare and contrast the motives of these two development methods. Discuss factors that

can influence the success of strategic alliances/acquisition. (Page 357 – 365)

Strategic Alliances:

The company goes for strategic alliances in order to reach its goals in more efficient way, where they

can share their resources to be more competent in producing a product and engage in business activities

for mutual economic gain. This is mainly undertaken to support one another in terms of:

Material skills

Innovation

Finance

Access to different markets.

Motives:

Take advantage of partner’s local market knowledge and working relationships with key

government officials in host country. It is very important to get working relationship with local

government officials, (social capitals).

Capture economies of scale in production and/or marketing, when they operate together, they

can use the same machine or equipment to produce products and use the same marketing

channel for both products.

Fill gaps in technical expertise or knowledge of local market; they will learn technical

knowledge from each other.

Share distribution facilities and dealer networks, they can use the same agent or retailers to

reduce the logistic cost and penetrate the market more easily; they can use the put-together

technical and financial resources to attack the rivals.

Direct combined competitive energies toward defeating mutual rivals

Can reduce the cost and more efficient to penetrate the market by doing the followings

1) Joint research efforts

2) Technology-sharing

3) Joint use of production and distribution facilities

4) Marketing/promoting one another’s products.

CRITICAL FACTORS OF STRATEGIC ALLIANCES

Partner Congruity

Difficulties may arise because partners are not in complete agreement about the purpose of an alliance

and the process by which its goals can be achieved. It is also possible that the short- and long-term

objectives of partners are misunderstood, so the direction of the alliance may be rather fuzzy.

Government policies:

Governmental policies may create structural impediments or facilitate the operation of cooperative

arrangements. In countries where economic nationalism is high, alliances often have to be approved at

the governmental level. For example, the IBM-Groupe Bull alliance was approved by the French

government. Alliances that have the support of governments in such environments may actually

perform better because access may be opened to resources that are otherwise highly controlled and

centralized.

Organizational Issues

Organizations may not have shared mental maps on business assumptions, criticality of events, and

operating procedures [15]. An alliance between IBM and Motorola was almost dissolved because of

disagreements on security inspection procedures.

Human Resource Management (HRM) Practices

Staffing and selection of key personnel for the alliance, performance appraisal, maintaining continuity

of key personnel, and reward and compensation systems have been recognized as important HRM

issues for strategic alliances. The differences in pay for individuals in the same position may lead to an

problem. A recent alliance between HP and a computer firm in India almost got derailed due to

compensation-related issues.

Mergers and Acquisitions:

An Acquisition is where organization takes ownership of another organization and Merger Implies

Mutually agreed decisions for joint ownership between organizations. Here in case of both managers of

one organization exert strategic influence over other.

Acquisition can be

Horizontal- Takes place between firms in same line of business.

Vertical -A merger between two companies producing different goods or services for one

specific finished product. Eg- A car manufacturer purchasing a tire company.

Conglomerate- Formed through combination of unrelated business.

Motives

Economies of Scale –This generally refers to a method in which average cost per unit is

decreased through increased production since fixed cost is shared over an increased number of

goods.

Increased market share/ Increase revenue – This motives assumes that the company will be

absorbing the major competitor and thus increase its power (by capturing increased market

share) to set prices.

Taxes – In order to have tax advantage benefit the giant company may acquire small so that tax

can be set off against the losses of the acquiring company.

Improved market reach and Industry visibility – Company buys companies in order to have

a access over the new markets and increase its revenue and earnings through reaching more

markets. It helps them to expand marketing and distribution channels, giving them new sales

opportunities.

Plugging a gap in the market - Business may feel that its product portfolio is not sufficient to

cater for different customer needs in its market. Acquiring another firm that is already in that

market enables it to plug that gap. It may be the case that a firm has a seasonal sales trend.

Buying a business that has its predominant sales in a different season of the year will also be an

example of how the firm's product portfolio might be enhanced through a merger and

acquisition. The example of Fuller's and Gales is an excellent example of this.

Accessing technology or skills

A firm may be targeted for acquisition because it has specific skills within its staff or has a

particular technology that would be useful to another business. Businesses that are relatively

new and might have hit upon a new idea or who have developed specific skills in a certain area

might be ripe targets for acquisition.

Value Maximization.

Critical factors drive for mergers and Acquisitions.

Inadequate capital

Lack of brand Images

To survive in the market

To expand market share

To achieve economies of scale.

8. Strategic control, financial control, and strategic planning are three ways of dividing

responsibilities between corporate centre and its business units. Discuss these three ways and

contrast them.

The responsibilities for strategic decision making between business units and corporate centre are

divided in the following three ways;

Strategic planning: It refers to the particular style of relationship between the centre and business

units. This is the most centralised form in among all the three styles. The centre is the master planner

recommending detailed roles for departments and business units, whose roe is basically limited to the

operational delivery of the plan. The centre orchestrates, coordinates and controls all of business unit

activities through the extensive use of the formal planning and control system. The centre also directly

manages the infrastructure and provides many corporate services.

Financial control: It is the most extreme form of decentralization, dissolving the organisation into

highly independent business units. In this style, the role of the centre is limited to setting financial

targets, allocating resources, appraising performance and dominant to avoid or correct poor

performance. These involvements would usually be replacing business unit managers rather than

dictating changes in strategies. Therefore, the dominant processes are performance targets and business

unit managers are held strictly responsible for meeting these targets.

Strategic control: This style is mostly operates in the organisations. It lies between the two extremes

of the strategic planning and financial control styles. The relationship between the centre and the

business units is one of a parent who behaves as a strategic shaper, influencing the behaviour in

business units and forming the context within which manages are operating.

Contrast

Strategic planning is more appropriate where corporate managers have a detailed working

knowledge of each business units whereas financial control is more appropriate to organisations

operating in stable markets with mature technologies. Similarly Strategic control is more

suitable where the centre has little knowledge about business unit strategies and operations.

Strategic planning is more suitable where business unit strategies are of a size or sensitivity that

can have major implication for the whole corporate whereas financial control is only a short

time lag between management decisions and the financial consequences. Similarly strategic

control is built through the processes of supportive strategies with business units but within

central boundaries and guidelines.

In strategic planning, there are bureaucratic costs of centralisation and de-motivating effects on

business unit manager who may feel little commitment to strategies handed down from the

centres but in financial control, the business units are focussed on meeting tough short term

target set by a centre that does not have the resources or the competences to manage the

knowledge creations and integration process. In strategic control the biggest risk would be the

centre which tries to shape strategies without being clear about the corporate logic or having the

competences essentially to add value in these ways.

9. Describe the concept of corporate social responsibility and four possible corporate stances on

social responsibility. Explain the rationale under each stance and the leadership and

stakeholder relationship required for each of these four stances.

Corporate social responsibility (CSR), the European Commission presented CSR as: “a concept

whereby companies integrate social and environmental concerns in their business operations and in

their interaction with their stakeholders on a voluntary basis.” It is concerned with the ways in which an

organization exceeds its minimum obligation to its stakeholders specified through regulation. It is a

form of corporate self-regulation integrated in the business model of the company which is used as the

framework for measuring an organization’s performance against economic, social and environmental

parameters. However the legal regulatory frameworks under which business operate pay uneven

attention to the rights of different stakeholders. For example-

Contractual stakeholders- such as customers (in general), suppliers or employees- have legal

relationship with an organization.

Community stakeholders-such as local communities, consumers (in general) and pressure groups that

do not have protection for the law

Different organizations take different stances on social responsibility. These different stances will also

be reflected I how they manage their responsibilities. Furthermore, CSR-focused businesses

would proactively promote the public interest by encouraging community growth and development,

and voluntarily eliminating practices that harm the public sphere, regardless of legality. Essentially,

CSR is the deliberate inclusion of public interest into corporate decision-making, and the honoring of

a triple bottom line: People, Planet, Profit. Below are the examples of some organizations which are

following CSR:

Shell Foundation's involvement in the Flower Valley, South Africa. In Flower Valley they set

up an Early Learning Centre to help educate the community's children as well as develop new

skills for the adults. 

Marks and Spencer is also active in this community through the building of a trade network

with the community - guaranteeing regular fair trade purchases. Often activities companies

participate in are establishing education facilities for adults and HIV/AIDS education

programmes. The majority of these CSR projects are established in Africa. JIDF For You is an

attempt to promote these activities in India.

Stances of Corporate Social Responsibilities:

The Laissez-faire view:

Rationale: It represents an extreme stance where organizations take the view that the

only responsibility of the business is short term interest of shareholders and to make

profit, pay taxes and provide jobs. They mainly focus towards maximization of profit

because in they not only serve the society but also help in the economic development of

the country.

Leadership: leadership under this stance is peripheral. This stance is taken by the

executives who are persuaded of it ideologically or by smaller businesses that do not

have resources other than minimally comply with the regulations. Insofar as social good

is persuade, this is justified in terms of improving profitability.

Stakeholder Relationship: relationships with stakeholders are likely to be largely

unilateral. And one way rather than interactive. The danger here is, of course that this

may not be how society expects organization to act.

Enlightened self-interest:

Rationale: It is tempered with the recognition of the long term benefit to the

shareholders of well managed relationship with other stakeholders. The justification for

social action is that it makes good business sense.

Leadership: leadership in this case is supportive because an organization’s reputation is

important to its long term financials success and there is a business case to be made

more proactive stance on social issues in order to recruit or retain staff.

Stakeholder relationship: managers here would take the view that organizations not only

have responsibility to their shareholders but also a responsibility or relationship with

stakeholders likely to be more interactive.

Forum for stakeholders interactions:

Rationale: it explicitly incorporates multiple stakeholders’ interests and expectations

rather than just shareholders as influences on organizational purpose and strategy. It

emphasize that the performance of organization should be measured in pluralistic way

rather than just through financial bottom line.

Leadership: companies in this category might retain uneconomic units to preserve jobs,

avoid manufacturing or selling ‘anti-social’ products and prepared to bear reductions in

the profitability for social good. Therefore the leadership in this stance is champion.

Stakeholder relationship: organization in this category inevitably take longer over the

development of new strategies as they are committed to wide consultation with

stakeholders and with managing the difficult political trade-offs between conflicting

stakeholder’s expectation.

Shapers of Society:

Rationale: regard financial considerations as of secondary importance or a constraint.

These are activists, seeking to change society and social norms. The firm may have

been founded for this purpose, as in the case of body shop. They may see their strategic

purpose as “changing rules of the game” through which they may benefit but by which

they wish to assure that society benefit.

Leadership: the leadership in this stance is visionary. It is fundamental to their existence

that organizations have zeal to improve the interest of the society but they also need to

remain financially viable which can lead to them being seen as over-commercial and

spending too much on administration or promotional activities.

Stakeholder relationship: in this stance organization have multi-organization alliances.

10. The competitive (positioning) and competence (resource-based) views are two dominant

theoretical perspectives in strategic management. Compare and contrast these two

perspectives. Give examples to support your arguments.

When a firm sustains profits that exceed the average for its industry, the firm is said to possess a

competitive advantage over its rivals. The goal of business strategy is to achieve sustainable

competitive advantage.

There are two basic types of competitive advantage:

1. Cost advantage

2. Differentiation advantage

A resource based view emphasizes that a firm utilizes its resources and capabilities to create a

competitive advantage that ultimately results in superior value creation.

In order to develop distinctive capabilities a firm should have both resources and capabilities. In

absence of any one of them the competitors can replicate and any prevailing advantage would

disappear.

Resources can be described as the firm’s specific assets which are useful for creating a cost or

differentiation advantage which only few competitors can acquire, whereas capabilities are the firms

ability to utilize the available resources in an effective manner. Capabilities are not documented; indeed

they are embedded in the routine process of the organisation which makes it difficult for the

competitors to replicate. E.g. the ability of the organisation is to bring a product to the market faster

than the competitors. The competitive advantage usually is a fall out of the resource based

competencies held by the organisation.

A firm is said to be in a competitive position when it implements a value creating strategy which is

simultaneously not being implemented by its competitors and also is Valuable, Rare, Hard to Imitate

and Non Substitutable.

Further, an organisation can position itself in the market on the basis of cost or differentiation strategy.

A cost advantage can be created by the effective use of available resources in order to reduce the cost

of the product so as to compete in the market with the products of the competitors on the basis of low

cost. Whereas, the competitive edge can also be achieved by differentiation strategy, where the product

is differentiated by a competitors product on certain features which are not easily replicable.

A competitive edge or a competence cannot add value to an organisation alone. This is due to the fact

that a competitive positioning of an organisation is completely dependent on the resource based

competence possessed by the firm.

11. Strategy of an enterprise is defined by answers of two questions:

a) Where does the firm compete (Domain selection)

b) How does it compete (Domain navigation)

Explain this statement from perspective of corporate level and business level strategy with

examples?

Answer:

1) Domain Selection:

a) Mission:

Mission statement aims to provide employees and stakeholders with clarity about overall

purpose. Strategy should be according to mission statement and it has to according to fulfilment

of mission of organization.

Vision: to set out a view for future

Objectives: a quantified term which explain how an organization will achieve its vision.

b) Deliberate Chosen Direction

I would like to explain different directions that can an organization choose through Ansoff Matrix.

Existing New

Market Penetration

An organization can choose market

penetration if it wants to go with its

existing products in existing

market. This can be done due to

achieve market share. This means

increasing our revenue by

promoting the product,

repositioning the brand, and so on.

Other ways include attracting non-

users of your product or convincing

current clients to use more of your

product/service, with advertising or

other promotions. Market

penetration is the least risky way

for a company to grow.

Example

Product Development

An organization will come under

product development segment if it will

choose to go with new product in

existing market. For example,

McDonald's is always within the fast-

food industry, but frequently markets

new burgers. Frequently, when a firm

creates new products, it can gain new

customers for these products. Hence,

new product development can be a

crucial business development strategy

for firms to stay competitive.

Market Development

If a company is going with existing

product in new market, this option

called market development. This is

for existing customers. For

example, Lucozade was first

Diversification

If a company choose to go with new

product in new market, it will come

under diversification. Two types of

diversifications are:

a) Related diversification means

New

M

arke

ts

Exi

sting

Products New

marketed for sick children and then

rebranded to target athletes. This is

a good example of developing a

new market for an existing product.

Again, the market need not be new

in itself, the point is that the market

is new to the company.

Example:

that we remain in a market or

industry with which we are

familiar. For example, a soup

manufacturer diversifies into

cake manufacture (i.e. the food

industry).

b) Unrelated diversification is

where we have neither

previous industry nor market

experience. For example a

soup manufacturer invests in

the rail business.

Virgin Cola, Virgin Megastores,

Virgin Airlines, Virgin

Telecommunications are examples of

new products created by the Virgin

Group of UK, to leverage the Virgin

brand. This resulted in the company

entering new markets where it had no

presence before.

Corporate Level Strategy:

It is strategy which will be made according to whole organization. This strategy could include

geographical expansion, diversity of products/services or business units. For instance Yahoo can sell its

SBU Yahoo Music if it wants. So on basis of whole organization which strategy will be made that will

be corporate level strategy. While preparing this strategy organization has to keep in mind that it will

not affect even its single SBU. It also concerned with shareholders and can affect stock market of that

company.

Corporate level strategy is concerned with:

Reach – Defining the issues that are corporate responsibilities. These might include identifying

the overall vision, mission, and goals of the corporation, the type of business your corporation

should be involved, and the way in which businesses will be integrated and managed.

Competitive Contact – defining where in your corporation competition is to be localized.

Managing Activities and Business Interrelationships – corporate strategy seeks to develop

synergies by sharing and coordinating staff and other resources across business units,

investing financial resources across business units, and using business units to complement

other corporate business activities.

Management Practices – corporations decide how business units are to be governed: through

direct corporate intervention (centralization) or through autonomous government

(decentralization).

Domain Navigation:

BUSINESS LEVEL STRATEGY:

This strategy is made by SBU’s of an organization for themselves individually. This is called

competitive strategy also. How SBU’s can provide best services is a decision under business level

strategy. SBU will make strategy according to its internal and external environment. SBU’ business

level strategy should not affect the other SBU’s of same organization and corporate level strategy

should be according to SBU’s.

Porter generic strategies

OR

1) RED OCEAN STRATEGY

In red ocean strategy a firm compete in existing market space with the exiting competitors and focus on

the existing customers and the firm is catering to the same demand and does not create new demand. To

survive in this environment the firm needs to create greater value for the customers at a higher cost or

create reasonable value at a lower cost.

Compete in existing market space

Beat the competition

Focus on existing customers

Exploit existing demand

Make the value-cost trade off

Align the whole system of a firm’s activities with its strategic choice of differentiation or low cost

Tata Doccomo

2) BLUE OCEAN STRATEGY

In blue ocean strategy a firm compete in new market by offering a product/service that is unique in

market, where there is no competitor, thus making competition irrelevant. This is to create and develop

new demand for its products and services.

Create uncontested market space

Make the competition irrelevant

Focus on non-customers

Create and capture new demand

Break the value-cost trade off

(Seek greater value to customers and low cost simultaneously)

Align the whole system of a firm’s activities in pursuit of differentiation and low cost.

Airtel, Sun DTH, Air Deccan

Example:

Corporate Level strategy:

Moser Baer is working on strategy of hybrid for corporate level. In this strategy it is providing quality

products at fewer prices. Like CD’s, DVD’s. It is working on strategy of combination of differential

products at fewer prices. It is putting itself different from competitors by giving quality and with low

prices.

Business level Strategy:

Moser Baer corporate level Strategy

Moser Baer business Level strategy for photovoltaic

It is working on differentiation strategy for its SBU Moser Baer Photovoltaic. It is providing quality

products to its customers. It is working for quality and for increasing efficiency. Due to its quality it has

got a contract from BSNL worth Rs. 111.9 millions on 23-2 2010. So this is business level strategy to

centre on quality.

12. Explain the following statement: “The styles of management in managing change need to

match to the scale of change and the organisational context.”

A change agent is the individual or the group that helps affect strategic change in the organization. The

creator of the strategy may not be the change agent, as he may need to rely on others to take a lead in

affecting changes to strategy. Leadership is the process of influencing the organization and it is not

necessary that top management are the leaders in an organization. Furthermore, the leadership style will

affect the outcome, given the strategic objectives of the organization.

The different styles of management are as follows:

Education – It involves the explanation of the reasons for and means of strategic change. Under

this process, group briefings are conducted to provide detailed information on the strategic

objectives of the organization. This type of change management is usually adopted when there

is a clear lack of misunderstanding or lack of communication of the objectives amongst the

subordinates. While it does provide clarity, it is a time consuming process.

Collaboration /participative– It is the involvement of those who will be affected by the strategic

change in the organization. These people affected will be invited to form focus groups and ask

to provide solutions to the extent of avoiding negative effects of such change. While it increases

responsibility amongst the employees, it is a time consuming process.

Intervention – It involves the change manager retaining the authority of change while delegating

the elements of change to different teams. These teams are not responsible for the overall

change, but they are responsible to the extent of their role in the change process. The people,

who are intervention managers, are a part of the organization and will warrant higher level of

commitment from them. However, while delegation of work will ensure speedy process of

implementation, there are chances of manipulation taking place.

Direction – it involves the use of personal managerial authority to establish a clear strategy and

how change will occur. The top management has a clear vision or strategic intent and may also

be accompanied by similar clarity about critical success factors and priorities. The direction is

provided to the subordinates with regards to achievement of their objectives.

Coercion – It is the imposition of change or the issuing of edicts about change. This is an

explicit use of power and may be necessary if the organization is facing a crisis. Eg – Air India

and Indian Airlines Merger.

The management style adopted depends on a number of factors, which include:

Different stages of the organization growth – Here, the management style will vary according to

the stage of growth in the organization. For instance, in the introduction stage, direction style or

education style is followed.

Time and Scope – under the incremental stage, direction style is more appropriate style of

change management because there is a requirement for transformational change.

Power – In organizations with hierarchical power structures, a directive power may be common

but in a flatter organization, collaboration and education styles of change management are more

desirable.

13. Explain the three corporate rationales and discuss their logic, strategic requirements and

organisational requirements. Can more than one rationale co-exist in a particular

corporation? Why?

Diversification is a strategy that takes the organizations into the new markets, products or services it

offers. The main need of a diversification analysis is to demonstrate that the business will be able to

achieve a return on the investment that more than compensates for the risk. A business owner needs to

consider efficient diversification strategies to build competitive advantage in order to achieve

economies of scale and to take advantage of the financial opportunities that align with the business s

strategic plan.

Diversification can be segmented into related diversification and unrelated diversification.

Related diversification -when a business expands or adds its existing product lines or markets. An

example to this would be a phone company which adds or expands its wireless products and services by

purchasing another wireless company is engaging is called as related diversification. The advantage of

going in for a related diversification is that the understanding of the business and knowing the industry

opportunities and the threats. However numbers of related acquisitions fail to provide the benefits or

the returns that are originally predicted. The reason for this is that the diversification analysis

underestimates the cost of some of the softer issues like the change management, integration of the two

cultures, handling of the employees, layoffs and terminations, promotions and even recruitment. On the

other hand the diversification analysis might over estimates the benefits to be gained in synergies.

Vertical integration is describing either backward or forward integration into adjacent activities in the

value network. Backward integration refers to development into activities concerned with inputs into

company’s current business. For example the acquisitions by the car manufacture of component

suppliers would be related diversification through backward integration. Forward integration refers to

development into activities which are concerned with a company’s output. For example car

manufacturer acquire distribution, repair and servicing.

Horizontal integration is the development into activities which are complementary or adjacent to the

present activities. For example the internet search company Google has spread horizontally into news,

images, and maps.

It is important to recognise the capabilities and value links are distinct. A link though a value network

does not necessarily imply the existence of capabilities.

Unrelated Diversification

When a business adds new or unrelated product lines or markets it is called as unrelated diversification.

For example the same company can go into the business of television business. This is unrelated

diversification since there is no direct fit with the existing business. The companies go in for an

unrelated diversification as there can be cost efficiencies. Another reason can be that it can provide an

offsetting cash flow during a seasonal full. The main driver for this type of acquisition decisions is

profit which needs to be a low risk investment with a high potential of returns.

Efficient Diversification:

Ensure that you review the costs and benefits of investment

In new equipment;

In labor saving costs;

In improving productivity and/or workflow;

In serving existing customers better and more profitably;

In diversifying by adding new products and services and/or new markets;

By addressing safety and/or environmental issues and more. Does your capital investment plan

leverage diversification?

Assess the Opportunity for a Good Return:

New markets and new products or services are usually good diversification opportunities; but consider

these opportunities in the context of integrating benefits into a much stronger overall unique value

proposition.

Does adding the new products or services provide you with a leveraged opportunity?

For example, if you are a commercial printer and you add basic graphic design services and packaging

services to your product line, you will have a leveraged diversification opportunit`y. Why? Because

your print services can be combined with graphic design services upstream (same end client) and be

combined with packaging services downstream (same end client and/or same destination). You will

have saved your client time and money by enabling the client to 'shop' in one-stop (providing you can

excel at delivering those services). If you are prepared (and able) to invest in your business during

either good or challenging times, make sure that you develop business performance measures to track

the costs and the benefits expected? You need to ensure that the advantages of diversification and the

expected benefits from investment are met as you planned. Ensure that you build those business

measures, set up reporting (even if it's a manual process), and make sure that someone is accountable

for the planned results. Understanding the advantages and disadvantages of unrelated or related

diversification strategies is important to the growth of your business

Diversification and performance Today many corporations have been diversified where it acts in the

managements self interest in order to gain advantage than the undiversified companies. The

diversification tends to follow an inverted (upside down) U shape .this tells us that diversification is

good but to a certain extent. Diversification is usually undertaken by large corporations in order to

spread the risk through a portfolio in order to preserve the image of the growth of the company.