Assignment No:- MB0052

Name Roll No Learning Centre

: SURESH G GURAV : 511110803 : PUNE

Subject : MB0052 (Strategic Management and Business Policy) Date of Submission :

Submitted By: Suresh Gurav

Assignment No:- MB0052

Question 1:

A well-formulated strategy is vital for growth and development of any organizationwhether it is a small business, a big private enterprise, a public sector company, a multinational corporation or a non-profit organization. But, the nature and focus of corporate strategy in these different types of organizations will be different, primarily because of the nature of their operations and Organizational objectives and priorities. Small businesses, for example, generally operate in a single market or a limited number of markets with a single product or a limited range of products. The nature and scope of operations are likely to be less of a strategic issue than in larger organizations. Not much of strategic planning may also be required or involved; and, the company may be content with making and selling existing product(s) and generating some profit. In many cases, the founder or the owner himself forms the senior/top management and his (her) wisdom gives direction to the company. In large businesses or companieswhether in the private sector, public sector or multinationalsthe situation is entirely different. Both the internal and the external environment and the organizational objectives and priorities are different. For all large private sector enterprises, there is a clear growth perspective, because the stakeholders want the companies to grow, increase Market share and generate more revenue and profit. For all such companies, both strategic planning and strategic management play dominant roles. Multinationals have a greater focus on growth and development, and also diversification in terms of both products and markets. This is necessary to remain internationally competitive and sustain their global presence. For example, multinational companies like General Motors, Honda and Toyota may have to decide about the most strategic locations or configurations of plants for manufacturing the cars. They are already operating multi location (country) strategies, and, in such companies, roles of strategic planning and management become more critical in optimizing manufacturing facilities, resource allocation and control. In public sector companies, objectives and priorities can be quite different from those in the private sector. Generation of employment and maximizing output may be more important objectives than maximizing profit. Stability rather than growth may be the priority many times. Accountability system is also very different in public sector from that in private sector. There is also greater focus on corporate social responsibility. The corporate planning system and management have to take into account all these factors and evolve more balancing strategies. In non-profit organizations, the focus on social responsibilities is even greater than in the public sector. In these organizations, ideology and underlying values are of central strategic significance. Many of these organizations have Multiple service objectives and the beneficiaries of service are not necessarily the contributors to revenue or resource. All these make strategic planning and management in these organizations quite different from all other organizations. Question 2: Businesses need to be planned not only for today, but also for tomorrow, that is, for the future. This implies business continuity and the need for sustainability. Sustainability requires understanding and analyzing the environment. Besides business fluctuations or business cycles, business interruptions occur because of natural disasters like floods, earthquakes, cyclones, etc. To safeguard against such threats or disasters, planning for business continuity is essential. Business continuity planning means proactively working out a means or method of preventing or mitigating the consequences of a disasternatural or manmade (sabotage or terrorism) and managing it to limit to the level or degree that a business unit can afford. Importance of Business Continuity Planning (BCP) As indicated in the definition, businesses today can be exposed to different
Submitted By: Suresh Gurav

Assignment No:- MB0052

types of threats natural or man-made. Major threats are: Natural disasters such as floods or earthquakes or accidents Man-made threats like sabotage or terrorism Financial crisis or disaster can be partly man-made and partly due to Environmental factors. BCP prepares companies to prevent or respond to such situations so that the damages or losses are minimized and the business or company survives. Thus, BCP plays a critical role in a businessits survival and sustainability Strategies for Business Continuity Planning: 1. Prevention Conventionally, prevention is the best strategy; this means taking steps or actions to prevent or minimize the chances of occurring of a disaster. Companies can adopt many preventive control measures as safeguards. Common preventive control measures are: (a) Security controls: These involve controls by setting up barriers to protect the site and prevent unauthorized entry into the premises. This means, in other words, manned surveillance at the location. (b) Infrastructure controls: These include appropriate infrastructural facilities like UPS/backup power, smoke/fire detectors, fire extinguishers, weather forecasting systems , etc. (c) Personnel controls: Skilled/trained personnel are posted to man sensitive zones where key or critical resources may be located. (d) Software controls: These involve modern methods of controls through computerized systems or software. These include authentication,encryption, firewall, intrusion detection systems, etc. 2. Response Prevention is a pre-emptive measure; response is a reactive step. If prevention is not possible, fast response is the next best alternative strategy. After an interruption or damage has taken place, the BCP team should immediately inform the management and the Damage Assessment Team. Two other teams would also be involved: the Technical Team and the Operations Team. The Damage Assessment Team would assess the nature and magnitude of the damage. More specifically, the team should investigate into: The cause of disruption or damage The scope for preventing additional damage What can be salvaged What repairs, restorations and replacements are required Based on the report of the Damage Assessment Team, the TechnicalTeam and Operations Team should get into action. The Technical Team is the key decision maker for further actions of the BCP and the Operations Team executes the actual damage control operations of BCP.

Question 3: governed corporation The answer to problems of corporate failure in the managed corporation lies in the governed corporation. In the governed corporation, the focus is not on powernot monitoring or controlling the managersbut, on improving decision making. The objective is to minimize chances of mistakes; and, even if they occur, to mutually work out effective ways to rectify the mistake rather than fire the management. The result is a positive change in the way companies discuss, decide and review policy. Major differences in approach between the managed corporation and the governed corporation in terms of boards role, characteristics and policies are shown in Table 4.3. To create the governed corporation, companies should start rethinking about the role of directors, and, also, of shareholders. Both the directors and shareholders should be proactive, and, not reactive in the policymaking process. Managers will continue to play their roles. This means that there are three critical constituents of the governed corporation: the board or
Submitted By: Suresh Gurav

Assignment No:- MB0052

directors, the managers and shareholders. Directors should guide managers to take best possible decisions; major shareholders should be able to communicate directly with the senior managers/CEO and, also the directors about what they think of corporate policies and decisions. With shareholders and board/ directors participating in policy and decision making, and, the managers already involved, the corporation is governed rather than managed because all the three critical constituents (managers, directors and shareholders) have a voice in the governance of the company. The Managed Corporation Boards Role Boards role is to hire, monitor and, when necessary, change failed management. Board Characteristics Power sufficient to control the CEO and the performance-evaluation process. Independence to ensure that the CEO is impartially evaluated and that directors are not compromised or co-opted by management. Board methods and procedures to allow outside directors to evaluate managers independently and effectively. Policies Separate the CEO and chairman (or lead outside director). Board meeting may take place without CEO being present. Committee of independent directors to evaluate the CEO. Independent financial and legal advisors available to outside directors. Measurable norms or yardsticks for judging CEOs performance. The Governed Corporation Boards Role Boards role is to foster effective decisions and monitor and reverse failed policies. Board Characteristics Expertise sufficient to allow the board to add value to the decision-making process and performance. Incentives to ensure that the board is committed to create organizational value. Methods and procedures to foster open debate and keep the board apprised of shareholders concerns. Policies Vital areas of expertise must be represented on the board such as core industry and finance. Minimum time commitment by the board members (may be two days in a month). Designated committee to evaluate new policy proposals. Regular meetings shareholders with large shareholders. Board members free to ask for information from any employee.

Question 5: Good parenting can help SBUs to follow any strategy effectively including stability strategies. In large multi-business organizations, some SBUs may follow stability strategy; some other SBUs may have to adopt strategy for internal change and restructuring; other SBUs may pursue expansion strategy. Stability strategies are followed by organizations as corporatelevel strategy also. In fact, most organizations (single business or multi-business) follow stability strategies for a period of time; some organizations follow this for a longer period than others. It has been generally observed that as companies/corporations grow older, they get more rooted in structures and systems and, are more likely to follow a stability strategy. L&T is an example. We can also identity some specific situations when it is best to pursue stability strategy: (a) Perception of management about performance: If the management is satisfied with present performance and, is not willing to take market risks, they may like to adopt stability strategy and continue with it. The management may consider change of strategy only if results are not forthcoming. (b) Slowness to change: Some organizations are slow to change or resistant to change. This is particularly true of public sector companies. Many such companies are not organizationally
Submitted By: Suresh Gurav

Assignment No:- MB0052

equipped for fast or sudden change and lack the ability to cope with risk and uncertainty inherent in such change. (c) Frequent past changes: If a company had made frequent strategic changes in the past, it should follow stability strategy for some period for more efficient management. In fact, it is always recommended that, after aperiod of internal change and restructuring or expansions, stability strategy should be pursued as a pause or rehabilitation. Otherwise, the organization may show signs of destabilization. (d) Strategic advantage: If an organizations strategic advantage lies in the present business and market, it should pursue stability strategy. If, for example, an organization has high market share, it can continue in the same business and defend its position through incremental strategic changes. (e) Profit objective/maximization: Every company has some profit objective which is commensurate with the level of investment, output level, market structure, willingness to take risk, etc. If the stability strategy helps the company achieve its profit objective, the company should stick to this.Sometimes, stability strategy may even help in profit maximization. (f) Stable environment: Given the organizational resources and capabilities, the nature of environment determines, to a large extent, the kind of strategy to be followed by a company. If the environment is generally stable in terms of macroeconomic situation, government policy regulations and competition, stability strategy may be the best. The particular strategy to be followed depends on the precise nature of the environmental impact. If the environment is hostile or volatile, stability strategy is not recommended. many companies in India and various other countries follow stability strategies. The reasons or situations can be those mentioned above. Such factors and circumstances relate to conditions in a particular country. In India, in addition to the situations mentioned above, reasons for pursuit of stability strategy by companies are of three types: 1. Overcapacity or underutilization of capacity; 2. Regulatory restrictions or controls; 3. Lack or withdrawal of budgetary support for expansion. The steel industry, cement industry and coal industry in India have overcapacity. This is one of the most important reasons why companies like SAIL, Coal India and ACC are adopting the stability strategy. Such companies cannot go for expansion strategies. Instead, they are concentrating on improving their operational efficiency. Cigarette and alcoholic beverages industries are subject to regulatory restrictions and there is strict control over expansion of these industries. Companies in the cigarette industry, like ITC, are going for growth and diversification in agri business, hospitality business and export. Many companies in the public sector are forced to adopt stability strategy because of governments policy of privatization or divestment and curtailing orstopping budgetary support for any expansion programme. Many public sector companies in India also adopt stability strategies because of their size, slowness to change, unwillingness to take risk and the accountability system. Examples are many: BHEL, BPCL, HPCL, IOC, HCL, RCF, STC, MMTC, etc., in addition to SAIL and Coal India. Example : Larsen and Toubro: Growth with Stability Larsen & Toubro (L&T), founded in 1938, is one of the largest engineering companies and one of the top five private sector companies in India. Over the years, L&T has acquired a very high reputation for its capabilities in executing engineering projects. In 1994, Kulkarni took over as the CEO of L&T and announced that the company would fulfil its mission of being a `10,000 crore entity by the end of the century. An independent survey named L&T to be one of the best managed companies in Asia and another by Business India mentioned L&T as one of the most transparent companies and a leader in corporate governance. The company adopts a combination business strategycombination of growth strategy and stability strategy or growth with stability. L&T has been setting new challenges in defining core capabilities and core competence. Generally speaking, core competence of the company lies in its ability to synthesize, integrate and harmonize its diverse world-class engineering, manufacturing, procurement, construction and fabrication skills around turnkey projects mostly in core sectors. This is backed by a world class vendor base, high quality technological alliances, excellent IT infrastructure, sophisticated fabrication
Submitted By: Suresh Gurav

Assignment No:- MB0052

facilities and its people. People L&Ts dedicated team of managers/employeesstand for one of the companys key capabiliti es. L&T implements its vision and business philosophy through effective management approaches. In terms of structure, the company adopts decentralized decision making and a less hierarchical system. The concept of SBUs is actively encouraged and implemented. Budget allocations are made in the beginning of a financial year and SBUs are assigned responsibilities, along with necessary delegation of powers to achieve the targets. The CEO directly gets involved only in matters like diversification, restructuring, business divestment, etc. Sikkim Manipal University Page No. 216 The company strongly believes in empowerment, teamwork and continuous training of employees. According to Kulkarni: Only through empowerment and decentralized decision making can a highly diversified company like L&T be managed. The TQM movement, initiated in 1993, has taken firm roots in L&T. Training of a large number of employees has facilitated the launch of many quality improvement programmes. A large number of managers and staff have participated in continuous improvement (Kaizen) and small group activities. Several cross-functional teams regularly operate in the area of design, manufacturing, marketing and services. The principles of TQM are applied to customer service also. The TQM Awareness Programmes have also been extended to the stockists and vendors to bring improvement in operations and customer service. L&T is consolidating its business in four major areasengineering, construction, cement and equipment manufacture. The company has identified Engineering Project Construction (EPC) as a thrust business for the future. In the EPC business, major domestic competitors are BHEL, Punj & Lloyd and RITES. The core infrastructure sectors such as power, telecom, and roads are the key focus areas for the country. Most players in project/construction business have specific competences which cater to specialized areas. L&T is perhaps the only company which competes in almost every sector by virtue of its diversified technical competence and expertise. L&Ts achievement so far has been highly impressive. It has set a good example of growth with stability. Its growth has hardly been unbalanced. However, there are some points of caution or concern. First is global competition. In international EPC business, the company faces tough competition from global majors, like Hyundai, Kematsu and Caterpillar. L&T has partially overcome this through strategic and technological alliances with major international players. Some of its alliances in certain countries are even with companies like Caterpillar and Marubeni, which are competitors in other countries. Another area of concern for L&T is its low productivity in certain businesses compared to international benchmarks. Lack of strong/ enough cost competitiveness or cost efficiency is another relatively weak area. The company needs to take necessary corrective measures to remain strong in its growth trajectory. Question 6: Business Ethics in Indian Companies In terms of ethical practices, companies in India, as in many other countries, can be classified as good and bad. We have just given the examples of Infosys, Amul, ICICI, etc., which are highly ethical. There are also companies which do not conform to strong ethical norms. We also have regulations like the MRTP Act and FEMA (earlier FERA) for curbing unethical business practices. KPMG India conducted a survey of 280 top Indian companies for ascertaining the level of business ethics in India. Study analysis and findings are contained in Business Ethics Survey Report: India, 1999. Major findings of the study are summarized below: (a) Mission statement: About 85 per cent of the companies surveyed are reported to have a mission statement. But, most of these statements focus on customer service and customer satisfaction. Very few companies emphasize ethical and moral issues such as organizational values, integrity in business, harassment in the workplace, etc. (b) Company policy on ethics: Many companies have a documented policy on ethics. But, implementation or reinforcement of a formal ethical system is weak in most of these companies. Some companies have a grievance cell; some companies conduct periodic workshop on business ethics, but nothing much beyond that. (c) Ethical risk in the workplace: Many companies express concern about lack of ethics in the workplace. Some of the major ethical concerns expressed by companies are: leakage or
Submitted By: Suresh Gurav

Assignment No:- MB0052

misuse of confidential information (77 per cent); insider trading (48 per cent); receiving gifts or favours from suppliers (48 per cent); promoting personal interest (47 per cent). (d) External factors in corporate ethics: Most Indian companies feel that ethical problems in business arise because of external or environmental factors. Two major external factors are government policies/regulations and political interference. (e) Training in business ethics: Majority of the companies feel that training in business ethics should be given high priority. Education in ethics should be incorporated in the formal management development programmes of companies. (f) Strengthening ethical practices: Most Indian companies are of the opinion that, for strengthening ethical business practices, two factors are important: first, professionalizing company management; and, second, minimizing state or governmental control and interference.

Submitted By: Suresh Gurav