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USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
INTERNAL ASSESSMENT TEST – 1 Date : 01/03/2017 Max Marks : 40 marks Subject & Code : Strategic Management (16MBA25) Section : Core Name of faculty : Ravi Urs Time : 8:30 – 10:00 AM
Note: Answer all questions
1(a) Differentiate between vision and mission.
Vision Mission
A company’s vision is the top management's
views and conclusions about the company's
direction and the product-customer-market-
technology focus
A company's mission is defined by the buyer
needs it seeks to satisfy, the customer groups
and market segments it is endeavoring to
serve, and the resources and technologies
that it is deploying in trying to please its
customers
It is about providing a panoramic view of
"where we are going" and a convincing
rationale for why this makes good business
sense for the company
It deals with a company's present business
scope and purpose – “who we are, what we
do, and why we are here”
E.g. Nike’s vision - To be the number one
athletic company in the world
E.g. Nike’s mission - To bring inspiration and
innovation to every athlete in the World
(2marks)
(b) Explain the balanced score card approach.
The Balanced Scorecard approach is used for measuring company
performance by setting both financial and strategic objectives and tracking
their achievement.
(6marks)
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
It provide a clear prescriptions to what companies should measure in order
to "balance" the financial perspective with customer goals and operational
performance goals in implementation and control of strategic plans
It enables companies to clarify their strategies, translate them into action and
provide meaningful feedback
It provides feedback around both the internal business processes and
external outcomes in order to continuously improve strategic performance
and results
There are four perspectives which help in measuring the company’s performance:
1. The learning and growth perspective
How well are we continuously improving and creating value?
The scorecard insists on measures related to innovation and organizational
learning.
To gauge performance on this dimension the measures can be
Technological leadership
Product development cycle times
Operational process improvement, etc.
2. The business process perspective
What are our core competencies and areas of operational excellence?
Internal business processes and their effective execution as measured by
productivity, cycle time, quality measures, downtime, various cost measures
among others provide input
3. The customer perspective
How satisfied are our customers?
A customer satisfaction perspective typically adds measures related to defect
levels, on-time delivery, warranty support, product development, etc.
4. The financial perspective
How are we doing for our shareholders?
A financial perspective typically uses measures like cash flow, return on equity,
sales and income growth.
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
(c)
Describe in detail the strategic management process.
The stages of Strategic Management Process are as follows:
1. The Strategic Planner has to define what is needed to be accomplished, which helps in
defining the objectives, strategies and policies of the organization (Wipro has been one
of the top three software companies and it wants to be among the top three)
2. The results of the current performance of the organization are documented ( Wipro
documents its financial performance)
3. The Board of Directors and the top management will have to review the current
(8marks)
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
performance of the organization (Wipro analyzed that its growth is slower than
competitors during its strategy of having two CEOs).
4. After the review, the organization will have to scan the internal environment for
strengths and weaknesses and the external environment for opportunities and threats
(Wipro realized that it was not present in the fast growing sectors like finance, banking
and heath. It also realized that two CEOs strategy had failed)
5. The internal and external scan helps in selecting the strategic factors (Two CEO strategy,
verticals, quality of customers).
6. These selected factors have to be reviewed and redefined in relation to the mission and
objectives (Wipro’s objective was to perform better than rivals).
7. The review will generate a set of alternative strategies (Wipro also needed to increase
the number of customers giving more than $100 million annually, Two CEO policy needs
to be changed, focus on high growth vertical).
8. The best strategic alternative is selected and implemented through program budgets
and procedures (Wipro moved to having a single CEO, new verticals like Health Care
were added, focus on Telecom vertical reduced).
a) Monitoring, evaluation and review of the implementation can provide a feedback on the
changes in the implementation required.
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
2(a) What is PEST analysis?
PEST stands for Political, Economical, Social and Technological analysis.
Political Analysis
It entails knowing the type of political stability that exists in a particular market. A
stable political environment would be suitable for doing business. There should be
continuity in business policies for a conducive business environment.
Economic Analysis
The overall economy of the market affects the business sentiment. People would be
willing to buy only when the economy is looking healthy. Business investments will
happen only when there is confidence that there would be demand for their
products.
Social Analysis
(2marks)
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
It is about the culture that exists in the market. It defines the lifestyle of the people.
It is very important to businesses to know the culture as it decides the type of
products and services that would be in demand in the particular market.
Technological Analysis
Technology is very important as they bring about a drastic change in the way
products are manufactured and consumed. Consumers would be adopting the
technology for their convenience, hence it becomes imperative for businesses to
monitor and quickly adopt for the technical changes.
(b) Explain the four levels of strategic management with examples.
a. Corporate Strategy
It is the kind of initiatives that the company uses to:
Establish business positions in different industries
o E.g. GE, HUL
Decide approaches to boost the combined performance of set of
businesses
o E.g. ITC
Means of capturing cross-business synergies and turn them to
competitive advantage
o E.g. Entering into FMCG and food industries from ITC
The decision of Pepsi to concentrate on health drinks
Decision of Airtel to enter South African market
Senior executives and key business unit heads have the responsibility of devising
corporate strategy
Major strategic decisions are usually reviewed and approved by the company's
Board of Directors
b. Business Strategy
It concerns the actions and approaches crafted to produce successful
performance in one specific line of business
E.g. The strategy of food division of ITC to focus on snacks (Bingo chips),
confectionary (Sunfeast biscuits), grains (Aashirwad atta), Ready-to-eat
(Yippee noodles)
(6marks)
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
It is the responsibility of the manager in charge of the business
The key focus is on
Crafting responses to changing market circumstances
Initiating actions to strengthening market position
Build competitive advantage and capabilities
o E.g. The competitive advantage and capabilities for ITC foods lies
in leveraging e-choupals for sourcing raw materials and using
strong distribution network developed for tobacco business
The business head also has the responsibility of:
Seeing that lower-level strategies are well conceived, consistent with
each other and adequately matched to the overall business strategy
Getting major business level strategic moves approved by corporate level
officers (sometimes board) and keeping them informed of market
developments and emerging strategic issues
Ensuring the business level objectives conform to corporate-level
objectives and strategy themes
c. Functional Strategy
It concerns the actions, approaches and practices to be employed in managing
particular functions or business processes or key initiatives within a business
E.g. Strategy of Sunfeast biscuits to focus on mid-market and premium
segments and less on glucose biscuits
To introduce multigrain attas
They add specifics to the how’s of business level strategies
They also aim at establishing a business unit's competencies and capabilities in
performing strategy-critical activities
The responsibility for functional-area strategies is normally delegated to the
heads of the respective functions
d. Operational Strategy
It concerns the strategic initiatives and approaches for managing key operating
units (plants, distribution centers, geographic units) and specific operating
activities with strategic significance (advertising campaign)
E.g. ITC Foods - To create the right differentiation through crazy ads for
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
Bingo, through giving facts for atta, and feature differentiation for
Sunfeast
They add further detail and completeness to functional area strategies and to the
overall business strategy
The lead responsibility is given to the frontline manager and should be approved
by the higher-ranking managers
(c)
Explain Porter’s Five Force Model.
According to Porter’s model the state of competition in an industry is a composite of
competitive pressures operating in five areas of the over all market.
1. Competitive pressures associated with the market maneuvering and
jockeying for buyer patronage that goes on among rival sellers in the
industry
2. Competitive pressures associated with the threat of new entrants into
the market
3. Competitive pressures coming from the attempts of companies in
other industries to win buyers over to their own substitute products
(8marks)
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
4. Competitive pressures stemming from supplier bargaining power and
supplier-seller collaboration
5. Competitive pressures stemming from buyer bargaining power and
seller-buyer collaboration
The rivalry among competing sellers
It is the strongest of all the competitive forces.
A market is a battlefield where it is expected that rival sellers will
employ whatever resources they have to improve their market
positions and performance.
When one firm makes a strategic move that produces good results, its
rivals often respond with offensive or defensive countermoves,
shifting their strategic emphasis from one combination of product
attributes, marketing tactics and competitive capabilities to another
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
Rivalry among competing sellers intensifies the more frequently and
more aggressively that industry members undertake fresh actions to
boost their market standing and performance against the rivals
Rivalry is usually stronger in slow-growing markets and weaker in fast
growing markets
Rivalry intensifies as the number of competitors increases and as
competitors become more equal in size and capability
Rivalry is usually weaker in industries comprised of so many rivals that
the impact of any one company's actions is spread thinly across all
industry members; likewise, it is often weak when there are fewer
than five competitors
Rivalry increases as the products of rival sellers become more
standardized
Rivalry increases as it becomes less costly for buyers to switch brands
Rivalry is more intense when industry conditions tempt competitors
to use price cuts or other competitive weapons to boost unit volume
A powerful, successful competitive strategy employed by one
company greatly intensifies the competitive pressures on its rivals to
develop effective strategic responses or be relegated to also-ran
status
The potential entry of new competitors
One of the important factors that affect the strength of the
competitive threat of a potential entry in a particular industry is the
number of candidates who enter and resources at their disposal
The strongest competitive pressures associated with potential entry is
often from the existing industry members entering market segments
or geographies where currently they do not have a market share.
They possess the resources, competencies and competitive
capabilities to overcome the challenges of entering a new market
segment or geography
The second factor that affect the likely candidates is the entry barriers
Some of the entry barriers are:
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
o The presence of sizable economics of scale in production or
other areas of operation
o Cost and resource disadvantages not to size. Like learning
curve, patents, partnerships, cheap raw materials, proprietary
technology, low fixed cost
o Brand preference and customer loyalty
o Capital requirements
o Access to distribution channels
o Regulatory policies
o Tariffs and international trade restrictions
Substitute products
There is competitive pressure when products from other industries are
looked upon as substitute products by the customers
Competitive pressure from substitutes are weaker when:
o Good substitutes are not readily available or don't exist
o Substitutes are higher priced relative to the performance they deliver
o End users have high costs in switching to substitutes
Competitive pressure from substitutes are stronger when:
o Good substitutes are readily available
o Substitutes are attractively priced
o Substitutes have comparable or better performance features
o End users have low costs in switching to substitutes
o End users grow more comfortable with using substitutes
Competitive pressures stemming from supplier bargaining power and supplier -
seller collaboration
When major suppliers determine terms and conditions of supply in an
industry then they exert competitive pressure on rival sellers
Supplier bargaining power is stronger when:
o Industry members incur high costs in switching their purchases
to alternative suppliers
o Needed inputs are in short supply
o A supplier has a differentiated input that enhances the quality
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
or performance of sellers products or is a valuable or critical
part of sellers' production process
o There are only a few suppliers of a particular input
o Some suppliers threaten to integrate forward into the business
of industry members and perhaps become a powerful rival
Supplier bargaining power is weaker when:
o The item being supplied is a commodity that is readily
available from many suppliers at the going market price
o Seller switching costs to alternative suppliers are low
o Good substitute inputs exist or new ones emerge
o There is a surge in the availability of supplies
o Industry members account for a big fraction of suppliers' total
sales and continued high volume purchase are important to
the well-being of suppliers
o Industry members are a threat to integrate backward into the
business of suppliers and to self-manufacture their own
requirements
o Seller collaboration or partnering with selected suppliers
provides attractive win-win opportunities
Competitive pressures stemming from buyer bargaining power and seller-buyer
collaboration
1) Large retailers have considerable negotiating leverage in purchasing
products from manufactures because of manufacturer's need for
broad retail exposure and the most appealing shelf locations
2) The buyers have a bargaining power in the following circumstances:
o If buyers' cost of switching to competing brands or substitutes
is relatively low.
o If the number of buyers is small or if a customer is particularly
important to seller.
o If buyer demand is weak and sellers are scrambling to secure
additional sales of their products
o If buyers are well informed about sellers' products, prices and
costs.
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
o If buyers pose a credible threat of integrating backward into
the business of sellers.
o If buyers have discretion in whether and when they purchase
the product
3 Case Study
(a)
(b)
(c)
JetBlue, founded in 1999, followed other domestic airlines approach of offering low-cost travel. But it sought to distinguish itself by its services, such as in-flight entertainment, TV on every seat, satellite radio, use of new aircrafts and leather seats instead of cloth seats. However, no meals were provided during flights. Other strategies included use of more fuel-efficient and less maintenance cost Airbus, initially less routes, Point-to-point flight, use of secondary airports which did not handle too much traffic, reduction in the turnaround time by efficient ground staff, use of electronic ticketing, paperless cockpit and use of e-manuals by crew, customer-oriented approach, picking the right people and creating fun. 2000-04 saw rapid growth and 18 consecutive quarters of profit. Expansion continued with increase in network by adding 6 more destinations and more spending on providing quality services. It won 2002 Air Transport World Market Development Award and also won best airline award in 2002. Operating revenue continued to increase in 2005 and 2006 but airline suffered losses. It suffered loss of US$ 42 million. Losses suffered were due to rapid increase in fuel price, political situation and war, heavy Interest expense and repayment of debt. By end 2006 JetBlue slowed down growth by delaying deliveries of aircrafts, eliminating low profit routes and cutoff destinations from 75 to 47. Cutting of destinations was done to preserve cash & remain stable. JetBlue came under strong criticism due to delay of flights in February 2007. Questions: Give a suitable vision statement to JetBlue. Students have to give suitable vision statement. Give a suitable mission statement for JetBlue. Students have to give suitable mission statement. What new strategies can JetBlue create to overcome its current problems? Work on improving image of airline as superior customer service provider Offer pre flight and during flight free snacks and optional lunch / dinner on payment Create simple to use reservation system Booking agents should be allowed work from home Pre assigned seating and ticketless travel to be made possible Establish Customer Advisory Council to focus on customer needs Provide additional space of leg room All passengers to be provided with comfort kit for a healthy sleep
(1mark)
(1mark)
(3marks)
USN
PESIT Bangalore South Campus Hosur road, 1km before Electronic City, Bengaluru -100
Department of MBA
MBA II SEMESTER
(d)
Make single class travel for all passengers Double the loyalty points for true blue members Mention the macro variables which caused the losses for JetBlue. Increase in fuel price - Political/legal variable Political situation and war - Political variable Heavy Interest expense and repayment of debt – Economic variable Need to preserve cash - Economic variable
(3marks)