Master of Business Management Semester IV MB0052 – Strategic Management and Business Policy (Book ID: B1314) Assignment Set- 1 (60 Marks)

1. What is meant by ‘Strategy’? Differentiate between goals and objectives.

ANS:Johnson and Scholes (Exploring Corporate Strategy) define strategy as follows:

"Strategy is the direction and scope of an organization over the long-term: which achieves advantage for the organization through its configuration of resources within a challenging environment, to meet the needs of markets and to fulfill stakeholder expectations".

In other words, strategy is about:

* Where is the business trying to get to in the long-term (direction)

* Which markets should a business compete in and what kind of activities are involved in such markets? (markets; scope)

* How can the business perform better than the competition in those markets? (advantage)?

* What resources (skills, assets, finance, relationships, technical competence, facilities) are required in order to be able to compete? (resources)?

* What external, environmental factors affect the businesses' ability to compete? (environment)?

* What are the values and expectations of those who have power in and around the business? (stakeholders)

Goals vs Objectives

When you have something you want to accomplish, it is important to set both goals

and objectives. Once you learn the difference between goals and objectives, you will

realize that how important it is that you have both of them. Goals without objectives

can never be accomplished while objectives without goals will never get you to

where you want to be. The two concepts are separate but related and will help you

to be who you want to be.

Definition of Goals and Objectives

Goals ‘“are long-term aims that you want to accomplished.

Objectives ‘“are concrete attainments that can be achieved by following a certain

number of steps.

Goals and objectives are often used interchangeably, but the main difference comes

in their level of concreteness. Objectives are very concrete, whereas goals are less

structured.

Remembering the Differences between Goals and Objectives

when you are giving a presentation to a potential or current employer, knowing the

difference between goals and objectives can be crucial to the acceptance of your

proposal. Here is an easy way to remember how they differ:

Goals ‘“ has the word ‘go’ in it. Your goals should go forward in a specific direction.

However, goals are more about everything you accomplish on your journey, rather

than getting to that distant point. Goals will often go into undiscovered territory and

you therefore can’t even know where the end will be.

Objectives ‘“have the word ‘object’ in it. Objects are concrete. They are something

that you can hold in your hand. Because of this, your objectives can be clearly

outlined with timelines, budgets, and personnel needs. Every area of each objective

should be firm.

Summary: 1. Goals and objectives are both tools for accomplishing what you want to achieve.2. Goals are long term and objectives are usually accomplished in the short or medium term.3. Goals are nebulous and you can’t definitively say you have accomplished one whereas the success of an objective can easily be measured.

4. Goals are hard to quantify or put in a timeline, but objectives should be given a timeline to be more effective.

2. Define the term “Strategic Management”. What are the types of strategies?

ANS:

The term ‘strategy’ proliferates in discussions of business. Scholars and consultantsHave provided myriad models and frameworks for analyzing strategic choice(Hambrick and Fredrickson, 2001). For us, the key issue that should unite all discussion of strategy is a clear sense of an organization’s objectives and a sense ofhow it will achieve these objectives. It is also important that the organization hasa clear sense of its distinctiveness. For the leading strategy guru, Michael Porter(1996), strategy is about achieving competitive advantage through being different– delivering a unique value added to the customer, having a clear and enactableView of how to position yourself uniquely in your industry, for example, in the Ways in which Southwest Airlines positions itself in the airline industry and IKEAIn furniture retailing, in the way that Marks & Spencer used to.

Marketing strategies may differ depending on the unique situation of the individual business. However there are a number of ways of categorizing some generic strategies. A brief description of the most common categorizing schemes is presented below:

Strategies based on market dominance - In this scheme, firms are classified based on their market share or dominance of an industry. Typically there are four types of market dominance strategies:

Leader

Challenger

Follower

Nicher Porter generic strategies  - strategy on the dimensions of strategic scope and

strategic strength. Strategic scope refers to the market penetration while strategic strength refers to the firm’s sustainable competitive advantage. The generic strategy framework (porter 1984) comprises two alternatives each with two alternative scopes. These are Differentiation and low-cost leadership each with a dimension of Focus-broad or narrow.

Product differentiation  (broad)

Cost leadership  (broad)

Market segmentation  (narrow)

Innovation strategies — This deals with the firm's rate of the new product development and business model innovation. It asks whether the company is on the cutting edge of technology and business innovation. There are three types:

Pioneers

Close followers

Late followers Growth strategies — In this scheme we ask the question, “How should the firm

grow?”. There are a number of different ways of answering that question, but the most common gives four answers:

Horizontal integration

Vertical integration

Diversification Intensification

3. Describe Porter’s five forces Model.

ANS:

Porter's five forces analysis is a framework for industry analysis and business strategy development formed by Michael E. Porter of Harvard Business School in 1979. It draws upon industrial organization (IO) economics to derive five forces that determine the competitive intensity and therefore attractiveness of a market. Attractiveness in this context refers to the overall industry profitability. An "unattractive" industry is one in which the combination of these five forces acts to drive down overall profitability. A very unattractive industry would be one approaching "pure competition", in which available profits for all firms are driven to normal profit.

Three of Porter's five forces refer to competition from external sources. The remainder is internal threats.

Porter referred to these forces as the micro environment, to contrast it with the more general term macro environment. They consist of those forces close to a company that affect its ability to serve its customers and make a profit. A change in any of the forces normally, requires a business unit to re-assess the marketplace given the overall change in industry information. The overall industry attractiveness does not imply that every firm in the industry will return the same profitability. Firms are able to apply their core competencies, business model or network to achieve a profit above the industry average. A clear example of this is the airline industry. As an industry, profitability is low and yet individual companies, by applying unique business models, have been able to make a return in excess of the industry average.

Porter's five forces include - three forces from 'horizontal' competition: threat of substitute products, the threat of established rivals, and the threat of new entrants;

and two forces from 'vertical' competition: the bargaining power of suppliers and the bargaining power of customers.

This five forces analysis is just one part of the complete Porter strategic models. The other elements are the value chain and the generic strategies.

Porter developed his Five Forces analysis in reaction to the then-popular SWOT analysis, which he found unrigorous and ad hoc. Porter's five forces is based on the Structure-Conduct-Performance paradigm in industrial organizational economics. It has been applied to a diverse range of problems, from helping businesses become more profitable to helping governments stabilize industries

Five forces

Threat of new competition

Threat of substitute products or services

Bargaining power of customers (buyers)

Bargaining power of suppliers

Intensity of competitive rivalry

4. What is strategic formulation and what are its processes?

ANS:

Strategy formulation refers to the process of choosing the most appropriate course of action for the realization of organizational goals and objectives and thereby achieving the organizational vision. The process of strategy formulation basically involves six main steps. Though these steps do not follow a rigid chronological order, however they are very rational and can be easily followed in this order.

1. Setting Organizations’ objectives - The key component of any strategy statement is to set the long-term objectives of the organization. It is known that strategy is generally a medium for realization of organizational objectives. Objectives stress the state of being there whereas Strategy stresses upon the process of reaching there. Strategy includes both the fixation of objectives as well the medium to be used to realize those objectives. Thus, strategy is a wider term which believes in the manner of deployment of resources so as to achieve the objectives.

While fixing the organizational objectives, it is essential that the factors which influence the selection of objectives must be analyzed before the selection of objectives. Once the objectives and the factors influencing strategic decisions have been determined, it is easy to take strategic decisions.

2. Evaluating the Organizational Environment - The next step is to evaluate the general economic and industrial environment in which the

organization operates. This includes a review of the organizations competitive position. It is essential to conduct a qualitative and quantitative review of an organizations existing product line. The purpose of such a review is to make sure that the factors important for competitive success in the market can be discovered so that the management can identify their own strengths and weaknesses as well as their competitors’ strengths and weaknesses.

After identifying its strengths and weaknesses, an organization must keep a track of competitors’ moves and actions so as to discover probable opportunities of threats to its market or supply sources.

3. Setting Quantitative Targets - In this step, an organization must practically fix the quantitative target values for some of the organizational objectives. The idea behind this is to compare with long term customers, so as to evaluate the contribution that might be made by various product zones or operating departments.

4. Aiming in context with the divisional plans - In this step, the contributions made by each department or division or product category within the organization is identified and accordingly strategic planning is done for each sub-unit. This requires a careful analysis of macroeconomic trends.

5. Performance Analysis - Performance analysis includes discovering and analyzing the gap between the planned or desired performance. A critical evaluation of the organizations past performance, present condition and the desired future conditions must be done by the organization. This critical evaluation identifies the degree of gap that persists between the actual reality and the long-term aspirations of the organization. An attempt is made by the organization to estimate its probable future condition if the current trends persist.

6. Choice of Strategy - This is the ultimate step in Strategy Formulation. The best course of action is actually chosen after considering organizational goals, organizational strengths, potential and limitations as well as the external opportunities.

5. Explain strategic evaluation and its significance.

ANS:

Each organization has its own approach to evaluation. There are not absolute answers as to the proper evaluation standards. However, there are three basic questions to ask in strategy evaluation:

1. Is the existing strategy any good?2. Will the existing strategy be good in the future?3. Is there a need to change a strategy?

The first question may need additional detailing to indicate whether the current strategy is useful and beneficial to the organization.

Seymour Tilles has written a classic article on the qualitative assessment of organizational performance. This article serves several particular questions to be asked for evaluation. These questions are:

1. Is the strategy internally consistent? Internal consistency refers to the cumulative impact of various strategies on the organizations. According to Tilles, a strategy must be judged not only in relationships to other strategies.

2. Is organizations strategy consistent with its environment? An important test of strategy is whether the chosen strategy in consistent with environment (constituent demands, competition, economy, product / industry life cycle, suppliers, customers) - whether the really make sense with respect to what is going on outside.

3. Is the strategy appropriate in view of available resources? Resources are those things that company is or has and that help it to achieve its corporate objectives. Included are money, competence, facilities and other. Without appropriate resources, organization simply cannot make strategic work.

4. Does the strategy involve an acceptable degree of risk? Strategy and resources, taken together, determine the degree of risk which the company is undertaken. Each company must determine the amount of risk it wishes to incur. This is a critical managerial choice. In attempting to assess the degree of risk associated with a particular strategy, management must assess such issues as the total amount of resources a strategy requires, the proportion of the organization's resources that a strategy will consume, and the amount of time that must be committed.

5. Does the strategy have an appropriate time horizon? A significant part of every strategy is the time horizon on which it is based. For example, a new product developed, a plant put on stream, a degree of market penetration, become significant strategic objectives only if accomplished by a certain time. Management must ensure that the time necessary to implement the strategy is consistent. Inconsistency between these two variables can make it impossible to reach goals in a satisfactory way.

6. Is the strategy workable?

E. P. Learned and others, building on the Tilles model, suggest that the following are also proper evaluative questions:

7. Is the strategy identifiable? Has it been clearly and consistently identified and are people aware of it?

8. Is the strategy appropriate to the personal values and aspirations of key managers?

9. Does strategy constitute a clear stimulus to organizational effort and commitment?

10.Is the strategy socially responsible?11.Are there early indications of the responsiveness of markets and market

segments to the strategy?

J. Argenti adds:

12.Does the strategy rely on weakness or do anything to reduce them?13.Does the strategy exploit major opportunities?14.Does it avoid, reduce, or mitigate the major threats? If not, are there

adequate contingency plans?

All these questions can by applied as the strategy progresses through its various stages, including implementation. The answers can provide guidelines as to how the strategy should be altered or changed.

The second basic question "Will the existing strategy be good in the future?" seeks to ascertain if the strategy would continue to satisfy the firm's objective in the future. The answer to this is based upon unforeseeable changes in the organization's environment or resources, or changes in its mission, goals, or objectives.

The answer to the third question "Is there a need to change the strategy?" will provide direction toward a strategy formation task.

Qualitative measurements methods can be very useful, but their application involves significant amounts of human judgment. Thus, conclusions based on such methods must be drawn carefully.

6. Define the term “Business policy”. Explain its importance.

ANS:

Definition of Business Policy

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

Features of Business Policy

An effective business policy must have following features-

1. Specific- Policy should be specific/definite. If it is uncertain, then the implementation will become difficult.

2. Clear- Policy must be unambiguous. It should avoid use of jargons and connotations. There should be no misunderstandings in following the policy.

3. Reliable/Uniform- Policy must be uniform enough so that it can be efficiently followed by the subordinates.

4. Appropriate- Policy should be appropriate to the present organizational goal.

5. Simple- A policy should be simple and easily understood by all in the organization.

6. Inclusive/Comprehensive- In order to have a wide scope, a policy must be comprehensive.

7. Flexible- Policy should be flexible in operation/application. This does not imply that a policy should be altered always, but it should be wide in scope so as to ensure that the line managers use them in repetitive/routine scenarios.

8. Stable- Policy should be stable else it will lead to indecisiveness and uncertainty in minds of those who look into it for guidance.

Master of Business Management Semester IV MB0052 – Strategic Management and Business Policy Assignment Set- 2 (60 Marks)

1. What is meant by “Business Continuity Plan” (BCP)? Discuss the steps involved in BCP.

ANS.

Business continuity planning (BCP) “identifies [an] organization's exposure to internal and external threats and synthesizes hard and soft assets to provide effective prevention and recovery for the organization, whilst maintaining competitive advantage and value system integrity”.It is also called business continuity and resiliency planning (BCRP). A business continuity plan is a roadmap for continuing operations under adverse conditions (i.e. interruption from natural or man-made hazards). BCP is an ongoing state or methodology governing how business is conducted. In the US, governmental entities refer to the process as continuity of operations planning (COOP).

BCP is working out how to continue operations under adverse conditions that include local events like building fires, theft, and vandalism, regional incidents like earthquakes and floods, and national incidents like pandemic illnesses. In fact, any event that could impact operations should be considered, such as supply chain interruption, loss of or damage to critical infrastructure (major machinery or computing/network resource). As such, risk management must be incorporated as part of BCP.

BCP may be a part of an organizational learning effort that helps reduce operational risk. Backup plan to run any business event uninterrupted is a part of business continuity plan. BCP for specified organization is to be implemented for the organizational level in large scale however backup plan at individual level is to be implemented at small unit scale. Organizational management team is accountable for large scale BCP for any particular firm while respective individual management team is accountable for their BCP at small unit scale. This process may be

integrated with improving security and corporate reputationrisk management practices.

In December 2006, the British Standards Institution (BSI) released a new independent standard for BCP — BS 25999-1. Prior to the introduction of BS 25999, BCP professionals relied on BSI information security standard BS 7799, which only peripherally addressed BCP to improve an organization's information security compliance. BS 25999's applicability extends to organizations of all types, sizes, and missions whether governmental or private, profit or non-profit, large or small, or industry sector.

In 2007, the BSI published the second part, BS 25999-2 "Specification for Business Continuity Management", that specifies requirements for implementing, operating and improving a documented business continuity management system (BCMS).

In 2004, the United Kingdom enacted the Civil Contingencies Act 2004, a statute that instructs all emergency services and local authorities to actively prepare and plan for emergencies. Local authorities also have the legal obligation under this act to actively lead promotion of business continuity practices in their respective geographical areas.

– Identification of top risks and mitigating strategies. – Considerations for resource reallocation e.g. skills matrix for larger organizations.

Simple exercises A simple exercise is often called a ‘desktop’ or ‘workshop’. It typically involves a small number of people, perhaps 5–20, and concentrates on a specific aspect of a business continuity plan or a specific subject area. (For example, Human Resources, Information Technology or Media) However, the beauty of a Simple exercise is that it can easily accommodate complete teams from various areas of a business. The numbers may increase and with it the logistics but the objectives will remain the same. Alternatively it could involve a single representative from several teams rather than needing the whole team to attend. It will seldom involve the provision of a Virtual World environment or the need for other than everyday resources. Typically, participants will be given a simple scenario and then be invited to discuss specific aspects of a company’s BCP. For example, a fire is discovered out of working hours – what are the current call out procedures – how is the incident management team activated – where does it meet – do the current documented procedures cover all eventualities? It will probably last no more than three hours and is often split into two or three sessions, each concentrating on a different theme. In this case either two or three different scenarios can be used or one scenario can be progressively developed to introduce themes that need to be addressed. Real time pressure is not usually an element of Simple exercises. Questions will need to be crafted ahead of time so that facilitators ensure discussions are productive and germane to the objectives of the event.

Medium exercises A medium exercise will invariably be conducted within a Virtual World and will usually bring together several departments, teams or disciplines. It will typically concentrate on more than one aspect of the BCP prompting interaction between teams. The scope of a medium exercise can range from a small number of teams from one organisation being co-located in one building to multiple teams operating from dispersed locations. Attempts should be made to create as realistic an environment as practicable and the numbers of participants should reflect a realistic situation. Depending on the degree of realism required it may be necessary to produce simulated news broadcasts, together with simulated websites. A medium exercise will normally last between two and three hours, though they can take place over several days. They typically involve a Scenario Cell who feed in pre-scripted injects throughout the exercise to give information and prompt actions.

Complex exercises A Complex exercise is perhaps the hardest to define as it aims to have as few boundaries as possible. It will probably incorporate all the aspects of a medium exercise and many more. Elements of the exercise will inevitably have to remain within a virtual world, but every attempt should be made to achieve realism. This might include a no-notice activation, actual evacuation and actual invocation of a disaster recovery site. While a start and cut off time will have to be agreed, the actual duration of the exercise might be unknown if events are allowed to run their course in real time. If it takes two hours to get to the DR site instead of the expected forty-five minutes, the exercise must be flexible enough to cater for this. If a key player is unavailable a deputy must be prepared to step in.

Definitions These definitions provide broad guidance as to the types of available exercise but it should be recognized that there can be considerable ‘blurring of the edges’. It is possible to conduct a Simple exercise at a Recovery Site thereby adding a different dimension but this would not necessarily make it a Medium exercise. Regardless of the category, the importance of an exercise is that it achieves its defined objectives.

2. What is meant by “Business plan”? Describe the strategies to create a business plan.

ANS:

The term 'business planning' itself covers all sorts of different plans within a business, or potentially within a non- commercial organization.

The words 'strategy' and 'strategic' arise often in the subject of business planning, although there is no actual difference between a 'business plan' and a 'strategic business plan'. Every business plan is arguably 'strategic'. Everyone involved in planning arguably adopts a 'strategic' approach.

Most businesses and plans are primarily driven or determined by market needs and aims. This increasingly applies to many non-commercial activities (government services, education, health, charities, etc), whose planning processes

may also be described as 'business planning', even though such organizations may not be businesses in the way we normally imagine. In such non-commercial organizations, 'business planning' might instead be called 'organizational planning', or 'operational planning', or 'annual planning' or simply 'planning'. Essentially all these terms mean the same, and increasingly the tendency is for 'business planning' to become a generic (general) term to refer to them.

I should clarify that finance is of course a major and unavoidable aspect of business and organizational activities, but in terms of planning, finance is a limiting or enabling factor; finance is a means to an end, or a restriction; finance in itself is not a basis for growth or strategy. Markets/customers, product/service development, and sales, provide the only true basis for businesses to define direction, development, growth, etc., and thereby business strategy and planning.

Business planning always starts with or revisits the basic aim or need to provide products or services to customers - also called a market or 'market-place'. Consequently business plans tend first to look outwards, at a market, before they look inwards, at finance and production, etc.

This means that most business plans are driven by marketing, since marketing is the function which addresses market opportunity and need, and how to fulfil it.

Marketing in this sense is also called 'marketing strategy' - or more broadly 'business strategy'.

In many simple, small, and/or old traditional businesses, 'marketing' is often seen instead to be 'sales' or 'selling' (usually because in such businesses selling is the only marketing activity), in which case a 'sales plan' may be the main driver of strategy and the business plan.

Many people use the words 'sales' or 'selling' and 'marketing' to mean the same thing - basically selling products or services to customers, in the broadest sense. In fact, marketing refers to much wider issues than sales and selling. Marketing involves the strategic planning of a business (or other organizational provider) through to every aspect of customer engagement, including market research, product development, branding, advertising and promotion, methods of selling, customer service, and extending to the acquisition or development of new businesses. Sales or selling is an activity within marketing, referring to the methods and processes of communicating and agreeing and completing the transaction (sale) with the customer.

Given all this, it is hopefully easier to understand why, depending on a person's role or standpoint or the department in which they work, 'business planning' may be referred to in many and various ways, for example as 'sales planning', 'marketing planning', 'strategic planning', etc., and that all these terms might mean slightly different things, according to the situation.

If there is a technically correct definition of 'business planning', then perhaps we can best say that 'business planning' refers to the plan of the overall organization, or to a unit or division within an organization with responsibility for a trade or profit. A business plan technically contains and reflects the individual plans for the different functions within the whole operation, each of which may have its own detailed 'business plans', which might be called business plans, or more correctly

departmental or functional plans according to their purpose, such as a marketing plan, sales plan, production plan, financial plan, etc.

Strategy - originally a military term, in a business planning context strategy/strategic means/pertains to why and how the plan will work, in relation to all factors of influence upon the business entity and activity, particularly including competitors (thus the use of a military combative term), customers and demographics, technology and communications.

marketing - believed by many to mean the same as advertising or sales promotion, marketing actually means and covers everything from company culture and positioning, through market research, new business/product development, advertising and promotion, PR (public/press relations), and arguably all of the sales functions as well. Marketing is the process by which a business decides what it will sell, to whom, when and how, and then does it.

Marketing plan - logically a plan which details what a business will sell, to whom, when and how, implicitly including the business/marketing strategy. The extent to which financial and commercial numerical data is included depends on the needs of the business. The extent to which this details the sales plan also depends on the needs of the business.

Sales - the transactions between the business and its customers whereby services and/or products are provided in return for payment. Sales (sales department/sales team) also describe the activities and resources that enable this process, and sales also describe the revenues that the business derives from the sales activities.

sales plan - a plan describing, quantifying and phased over time, how the the sales will be made and to whom. Some organizations interpret this to be the same as a business plan or a marketing plan.

Business strategy - see 'strategy' - it's the same.

Marketing strategy - see 'strategy' - it's the same.

Service contract - a formal document usually drawn up by the supplier by which the trading arrangement is agreed with the customer. See the section on service contracts and trading agreements.

Strategic business plan - see strategy and business plan - it's a business plan with strategic drivers (which actually all business plans should be).

Strategic business planning - developing and writing a strategic business plan.

Philosophy, values, ethics, vision - these are the fundamentals of business planning, and determine the spirit and integrity of the business or organization - see the guide to how philosophical and ethical factors fit into the planning process, and also the principles and materials relating to corporate.

You can see that many of these terms are interchangeable, so it's important to clarify what needs to be planned for rather than assuming or inferring a meaning from the name given to the task. That said, the principles explained here can be applied to business plans of all sorts. Business plans are often called different names - especially by senior managers and directors delegating a planning exercise that they do not understand well enough to explain. For example: sales plans, operational plans, organizational/organizational plans, marketing plans, marketing strategy plans, strategic business plans, department business plans, etc. Typically these names reflect the department doing the planning, despite which, the planning process and content required in the document is broadly similar.

3. What are the benefits of MNCs?

Ans:

Benefits of MNCs

Multinational corporations (MNCs) are firms that export their goods to other countries and they also have established production and marketing operations in other countries apart from their home base. Good examples of MNCs include car manufacturers like Toyota, Ford and Honda, oil companies like BP and Shell, technology companies like Microsoft and Dell as well as food and beverage companies like McDonalds and Coca Cola.

1. Creates employment opportunitiesThe main of multinational corporations is to bring investments to other countries aside from their home base. This investment provides a boost to both the local economy   as well as the national economy. For example, building a new factory requires certain resources like land, capital and labor. The local people will therefore provide the manpower required for building the new factory. As a result, MNCs assist to reduce under-employment in a certain country through creating new job opportunities in their factories.

2. New skills and ideas

The other key advantage of MNCs is that they usually bring about new techniques as well as new ideas that can assist in improving the overall quality of production. Most of the MNCs do more than employ the local labor; they also provide them new skills through training in order to improve efficiency and productivity. This can lead to an increase in the standard of human capital present in the host nation.

3. Easier access to raw materials

In certain cases, production in the host countries mainly targets the export market since the raw materials can be easily found. Through investing in another country, a multinational corporation can also be able to by-pass trade barriers. This is highly

beneficial as it will likely lead to the production of high quality products at low cost prices.

However, employment may not be as widespread as hoped since most jobs might require skilled workers from another country rather than the domestic workers.

Tax competition

Multinational corporations are important factors in processes of globalization. National and local governments often compete against one another to attract MNC facilities, with the expectation of increased tax revenue, employment, and economic activity. To compete, political entities may offer MNCs incentives such as tax breaks, pledges of governmental assistance or subsidized infrastructure, or lax environmental and labor regulations. These ways of attracting foreign investment may be criticized as a race to the bottom, a push towards greater autonomy for corporations, or both.

On the other hand, economist Jagdish Bhagwati has argued that in countries with comparatively low labor costs and weak environmental and social protection, multinationals actually bring about a 'race to the top.' While multinationals will certainly see a low tax burden or low labor costs as an element of comparative advantage, Bhagwati disputes the existence of evidence suggesting that MNCs deliberately avail themselves of lax environmental regulation or poor labor standards. As Bhagwati has pointed out, MNC profits are tied to operational efficiency, which includes a high degree of standardisation. Thus, MNCs are likely to adapt production processes in many of their operations to conform to the standards of the most rigorous jurisdiction in which they operate (this tends to be either the USA, Japan, or the EU). As for labor costs, while MNCs clearly pay workers in developing countries far below levels in countries where labor productivity is high (and accordingly, will adopt more labor-intensive production processes), they also tend to pay a premium over local labor rates of 10 to 100 percent. [2] Finally, depending on the nature of the MNC, investment in any country reflects a desire for a medium- to long-term return, as establishing plant, training workers, etc., can be costly. Once established in a jurisdiction, therefore, MNCs are potentially vulnerable to arbitrary government intervention such as expropriation, sudden contract renegotiation, the arbitrary withdrawal or compulsory purchase of licenses, etc. Thus, both the negotiating power of MNCs and the 'race to the bottom' critique may be overstated, while understating the benefits (besides tax revenue) of MNCs becoming established in a jurisdiction.

4. Define the term “Strategic Alliance”. Differentiate between Joint ventures and Mergers.

ANS:

A Strategic Alliance is a relationship between two or more parties to pursue a set of agreed upon goals or to meet a critical business need while remaining independent organizations. This form of cooperation lies between M&A and organic growth.

Partners may provide the strategic alliance with resources such as products, distribution channels, manufacturing capability, project funding, capital equipment, knowledge, expertise, or intellectual property. The alliance is a cooperation or collaboration which aims for a synergy where each partner hopes that the benefits from the alliance will be greater than those from individual efforts. The alliance often involves technology transfer (access to knowledge and expertise), economic specialization,[ shared expenses and shared risk.

Types of strategic alliances

Various terms have been used to describe forms of strategic partnering. These include ‘international coalitions’ (Porter and Fuller, 1986), ‘strategic networks’ (Jarillo, 1988) and, most commonly, ‘strategic alliances’. Definitions are equally varied. An alliance may be seen as the ‘joining of forces and resources, for a specified or indefinite period, to achieve a common objective’.

There are seven general areas in which profit can be made from building alliances.

Stages of Alliance Formation

A typical strategic alliance formation process involves these steps:

Strategy Development: Strategy development involves studying the alliance’s feasibility, objectives and rationale, focusing on the major issues and challenges and development of resource strategies for production, technology, and people. It requires aligning alliance objectives with the overall corporate strategy.

Partner Assessment: Partner assessment involves analyzing a potential partner’s strengths and weaknesses, creating strategies for accommodating all partners’ management styles, preparing appropriate partner selection criteria, understanding a partner’s motives for joining the alliance and addressing resource capability gaps that may exist for a partner.

Contract Negotiation: Contract negotiations involves determining whether all parties have realistic objectives, forming high calibre negotiating teams, defining each partner’s contributions and rewards as well as protect any proprietary information, addressing termination clauses, penalties for poor performance, and highlighting the degree to which arbitration procedures are clearly stated and understood.

Alliance Operation: Alliance operations involves addressing senior management’s commitment, finding the calibre of resources devoted to the alliance, linking of budgets and resources with strategic priorities, measuring and rewarding alliance performance, and assessing the performance and results of the alliance.

Alliance Termination: Alliance termination involves winding down the alliance, for instance when its objectives have been met or cannot be met, or when a partner adjusts priorities or re-allocates resources elsewhere.

The advantages of strategic alliance include:

1. Allowing each partner to concentrate on activities that best match their capabilities.

2. Learning from partners & developing competences that may be more widely exploited elsewhere.

3. Adequate suitability of the resources & competencies of an organization for it to survive.

There are four types of strategic alliances: joint venture, equity strategic alliance, non-equity strategic alliance, and global strategic alliances.

Joint venture is a strategic alliance in which two or more firms create a legally independent company to share some of their resources and capabilities to develop a competitive advantage.

Equity strategic alliance is an alliance in which two or more firms own different percentages of the company they have formed by combining some of their resources and capabilities to create a competitive advantage.

Non-equity strategic alliance is an alliance in which two or more firms develop a contractual-relationship to share some of their unique resources and capabilities to create a competitive advantage.

Global Strategic Alliances working partnerships between companies (often more than two) across national boundaries and increasingly across industries, sometimes formed between company and a foreign government, or among companies and governments.

Mergers and Acquisitions:

Mergers and acquisitions are more popular form of partnerships which is more simple to understand. Two companies together are more valuable than two separate companies - at least, that's the reasoning behind M&A. When one company takes over another and clearly established itself as the new owner, the purchase is called an acquisition. From a legal point of view, the target company ceases to exist, the buyer "swallows" the business and the buyer's stock continues to be traded. A merger happens when two firms, often of about the same size, agree to go forward as a single new company rather than remain separately owned and operated. This kind of action is more precisely referred to as a "merger of equals." Both companies' stocks are surrendered and new company stock is issued in its place. For example, Oracle Corporation is very famous for its acquisitions. Oracle acquires

companies and not merges with them. Oracle acquired Siebel, BEA, PeopleSoft and more recently SUN through friendly or hostile take overs.

Joint Venture:

A joint venture is a legal partnership between two(or more) companies where in they both make a new (third) entity for competitive advantage. With a JV you will have something more than simple governance; you'll have a completely new entity with a board, officers, and an executive team. Effectively a JV is a completely new organization, but owned by the founding participants. The board of directors generally is constructed with representatives of the founding organizations. This new company will "do business" with the founding entities-usually as suppliers.e.g. Uninor was a joint venture between Unitech(India) and Telenor(France) and KPIT Cummins is a joint venture between KPIT and Cummins Infosystems. In both the above cases, the resulting company is a new independent company with its own set of executives and even name.

5. What do you mean by ‘innovation’? What are the types of innovation?

ANS:

Innovation is the creation of better or more effective products, processes, services, technologies, or ideas that are accepted by markets, governments, and society. Innovation differs from invention in that innovation refers to the use of a new idea or method, whereas invention refers more directly to the creation of the idea or method itself.

Types of InnovationThe Innovation Spectrum

Incremental

Breakthrough

Transformational

There are three types of innovation that an organization can choose to pursue: incremental, breakthrough, transformational. On type is not better or worse than another but they may require different processes to achieve success.

1. Transformational is the most difficult because it changes the way we live and often makes big companies, even whole industries, obsolete in a short period of time. Most organizations are loath to pursue ideas that will make themselves obsolete. Unfortunately, this is one of the reasons that they die. The computer and entertainment electronics industries have been prime examples of this. How many of us have audio 8-track machines, cassette players, videotape cameras, recorders and players, bag phones, clunker desktop computers, etc. sitting in our basements? In most cases transformational innovation starts in someone's "garage;" by a visionary outsider. It rarely happens within the walls of an organizational structure.2. Incremental Innovation - If transformational innovation sits at one end of the innovation spectrum, then the opposite end is Incremental Innovation. This is the kind that most of us are used to pursuing. It focuses on the kinds of improvement that keep a product, brand or company in the game. They tend to be line or brand extensions, new bells & whistles, new packaging, new improved ingredients, etc. In fact, an Advertising Age innovation study several years ago concluded that over 60% of innovations claimed by the consumer products industry were nothing more than packaging improvements. Nevertheless, it is instrumentalism that fuels most of the competition experienced in any industry. And it is this type of innovation that requires:

Multi-disciplined, cross-functional collaboration

Strong, definable metrics at each decision-making point (i.e. A Process like Stage Gate see the Process Module under this topic)

Consensus-based decision making between multiple stakeholder functions

Internal competition for people, money, and operational resources, such as:

R&D

Packaging development

Qualitative and quantitative market research

The interruption of production lines for short, unprofitable test market runs

Distribution channel support in small test market geographies where channel competition is fierce enough for the established brands (who has the bandwidth to push the new ones [sales] or hear about them [buyers]?)

Promotional and advertising development

Etc.

The amount of resources that are made available for this type of innovation are almost always tied to current business performance; available in the good times and one of the first things to be cut in the bad times (right after the ad budget).

4. Breakthrough innovation falls between incremental and transformational on the innovation spectrum. It requires significant change on the part of the innovating organization, both in terms of cultural and systems support. It creates true competitive advantage for a sustainable although increasing shorter period of time and it involves significantly more risk-taking, which is why the decision-making that results in true breakthroughs must in many ways be the opposite of the decision-making that supports incremental innovation. It must be sponsored at the top. Breakthrough ideas create new markets and business opportunities that did not exist before. Therefore, there is no "frame of reference" upon which to deliver the metrics called for by a

Stage Gate process. Customers don't have a frame of reference by which to easily judge the idea, business analysts have no track records - no sales numbers, no relevant trial or repeat data, etc. upon which to build volumetric. For this reason breakthrough needs the higher level of consideration and judgment.

6. Describe Corporate Social Responsibility.

Ans:

Corporate social responsibility (CSR, also called corporate conscience, corporate citizenship, social performance, or sustainable responsible business/ Responsible Business) is a form of corporate self-regulation integrated into a business model. CSR policy functions as a built-in, self-regulating mechanism whereby businesses monitors and ensures its active compliance with the spirit of the law, ethical standards, and international norms. The goal of CSR is to embrace responsibility for the company's actions and encourage a positive impact through its activities on the environment, consumers, employees, communities, stakeholders and all other members of the public sphere.

The term "corporate social responsibility" came into common use in the late 1960s and early 1970s after many multinational corporations formed the term stakeholder, meaning those on whom an organization's activities have an impact. It was used to describe corporate owners beyond shareholders as a result of an influential book by R. Edward Freeman, Strategic management: a stakeholder approach in 1984. Proponents argue that corporations make more long term profits by operating with a perspective, while critics argue that CSR distracts from the economic role of businesses. Others argue CSR is merely window-dressing, or an attempt to pre-empt the role of governments as a watchdog over powerful multinational corporations.

CSR is titled to aid an organization's mission as well as a guide to what the company stands for and will uphold to its consumers. Development business ethics is one of the forms of applied ethics that examines ethical principles and moral or ethical problems that can arise in a business environment. ISO 26000 is the recognized international standard for CSR. Public sector organizations (the United Nations for example) adhere to the triple bottom line (TBL). It is widely accepted that CSR adheres to similar principles but with no formal act of legislation. The UN has developed the Principles for Responsible Investment as guidelines for investing entities.

 more common approach of CSR is philanthropy. This includes monetary donations and aid given to local organizations and impoverished communities in developing countries. Some organizations do not like this approach as it does not help build on

the skills of the local people, whereas community-based development generally leads to more sustainable development.

Another approach to CSR is to incorporate the CSR strategy directly into the business strategy of an organization. For instance, procurement of Fair Trade tea and coffee has been adopted by various businesses including KPMG. Its CSR manager commented, "Fairtrade fits very strongly into our commitment to our communities."

Another approach is garnering increasing corporate responsibility interest. This is called Creating Shared Value, or CSV. The shared value model is based on the idea that corporate success and social welfare are interdependent. A business needs a healthy, educated workforce, sustainable resources and adept government to compete effectively. For society to thrive, profitable and competitive businesses must be developed and supported to create income, wealth, tax revenues, and opportunities for philanthropy. CSV received global attention in the Harvard Business Review article Strategy & Society: The Link between Competitive Advantage and Corporate Social Responsibility  by Michael E. Porter, a leading authority on competitive strategy and head of the Institute for Strategy and Competitiveness at Harvard Business School; and Mark R. Kramer, Senior Fellow at the Kennedy School at Harvard University and co-founder of FSG Social Impact Advisors. The article provides insights and relevant examples of companies that have developed deep linkages between their business strategies and corporate social responsibility. Many approaches to CSR pit businesses against society, emphasizing the costs and limitations of compliance with externally imposed social and environmental standards. CSV acknowledges trade-offs between short-term profitability and social or environmental goals, but focuses more on the opportunities for competitive advantage from building a social value proposition into corporate strategy.

Many companies use the strategy of benchmarking to compete within their respective industries in CSR policy, implementation, and effectiveness. Benchmarking involves reviewing competitor CSR initiatives, as well as measuring and evaluating the impact that those policies have on society and the environment, and how customers perceive competitor CSR strategy. After a comprehensive study of competitor strategy and an internal policy review performed, a comparison can be drawn and a strategy developed for competition with CSR initiatives.