ADL 17 Strategic Management V4

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ADL 17 Strategic Management V4
Q1. “A mission describes what the organization is now; a vision statement
describes what the organization would like to become.” Differentiate between
corporate mission and strategic vision by taking corporate illustrations.
Q2. Explain the concept of Porter’s generic strategies. Discuss cost leadership
strategy, differentiation strategy and focus strategy with examples.
Q3. Discuss basic model of strategic management. Explain four basic elements:
• Environmental scanning
• Strategy formulation
• Strategy implementation
• Evaluation and Control
Q4. How are the following prepared?
• Strategic advantages profile (SAP).
• Environmental threat opportunity profile (ETOP). Take the case of a bicycle
company for discussion.
Q5. What is value-chain analysis? Consider the components of the value chain. Do
any provide the potential to generate competitive advantage?
Assignment B
Q1. Discuss the nature and scope of corporate management and its role in
non-business organisation giving examples.
Q2. Discuss Vertical and Horizontal Integrations with examples.
Q3. The Balanced scorecard is a management system (not only measurement system)
that enables organizations to clarify their vision strategy and translate them
into action. It provides a clear prescription to as to what companies should
measure in order to balance the financial perspective. Following the Balanced
Scorecard approach helps:
• Balance financial and non-financial measures
• Balance short and long-term measures
• Balance performance drivers (leading indicators) with outcome measures
(lagging indicators)
• Lead to strategic focus and organizational alignment.
Discuss the above statement.
Case Study
Read the following case carefully and answer the questions that follow:
The siege is over, and the time has come for the leader to sally forth into
greener pastures. Even as the paints industry is emerging from the shadow of
recession, the Rs. 560 crore Asian Paints (India) Limited (APIL) is mixing new
shades to emerge with winning colours.Says managing director Atul Choksey: “With
proper planning and a comprehensive approach to issues, we intend to keep pace
with the growth of the industry”.
APIL is actually targeting a growth rate that is higher than the 9 to 10 per
cent that the industry has been averaging recently. In the year to March 1994,
the company notched up a gross sales turnover of Rs. 559.96 crore (net sales:
Rs. 401.96 crore), a growth of 10.8 per cent over the previous year. Net profit
also registered a healthy growth of 31.5 percent to Rs. 25.61 crore. The results
have tidied up the company’s balance sheet, which had begun to look a bit
APIL’s approach is multipronged: expansion of its product range and introduction
of value added, niche products in the industrial paints area; line extensions of
existing products to target lower income market segments both in rural and urban
areas; expansions of production capacity and continuous modernisation to keep
pace with the growing demand; and diversification in to the unrelated but
synergistic area of ceramics.
All these strategies are part of what the company’s top management terms
“harnessing our full potential”, or the challenges that lie ahead. They are also
aimed at retaining leadership in a recession-free industry over the next few
years. APIL is the leader in the entire industry, comprising both organised as
well as unorganised players, with a market share of about 19 per cent. The
company is confident of the fact that its share of industry sales is twice as
much as that of its nearest competitor, Goodlass Nerolac. APIL also dwarfs the
others in size, its net sales nearly twice that of Goodlass Nerolac, well over
twice that of third-placed Berger Paints, and nearly four times that of
fourth-placed Jenson and Nicholson (see Exhibit-I).It is only wary of the
expanding unorganised sector which seems to be eating up the share of firms in
the organised sector. Nevertheless, given the multiplicity of shades it is
capable of, APIL reckons it can look forward to a compound growth in its market
Exhibit I
How They Compare
(Figures in Rs. crore for 1993 – 94)
Company Net sale Net Profit Net Profit/Sales (%)
Asian Paints 401.96 25.62 6.36
Goodlass Nerolac 205.88 8.05 3.91
Berger Paints 174.95 3.24 1.85
Jenson & Nicholson 110.33 1.97 1.72
Garware Paints* 106 2.57 2.33
Shalimar Paints** 102.59 1.60 1.56
Bombay Paints** 37.81 0.03 0.08

* 18 months to September 1993 **12 months to March 1993
But though the good times are back, the company is not content to sit back and
relax. The last three years, during which the paints industry went through a
trough, saw APIL taking a beating (though it remained the market leader all
through), with its paints division showing a negative growth of 3.5 per cent in
terms of volume.
With the rupee having been progressively devalued during the years 1989-92, and
with high rates of inflation also rampant over this period, excise duties and
other levies too exerted upward pressure on paint prices, and this served to
depress demand. An additional complication, reinforcing this trend, was created
by the difference in the selling prices of paints made by the organised and
unorganised sectors.
The first signs of recovery came with the Union Budget of 1993 which cut excise
and custom duties, Excise duties were reduced to 30 per cent and customs duties
were cut from 85 to 65 per cent- This provided a respite to the industry by
facilitating a rolling back of prices, and it began to grow at about 2 per cent
a year. In spite of intermittent social disturbances in 1993, the industry
gradually responded and so did the demand for its products. Simultaneously, the
automobile industry, which is a major user industry for paints, also began to
emerge from the two-year recession.
A gradual revival of the industry brought along a new threat for the seven major
players from the organised segment. Uneven prices during the recession years had
the unorganised competitors grabbing at a significant chunk of the market.
Budget concessions brought relief to the organised sector, but its constituents
also found themselves having to compete with an unorganised sector that had
grown to become a significant threat, even as the prospect of competition from
imports began to worry the organized sector.
APIL’S largest new venture will be a diversification into ceramics, though the
project is still at the planning stage. The decision to enter a new field is
fuelled by the management’s perception that the ceramics industry has tremendous
potential for growth.
Even though the company has no experience in the production and technology
aspects of ceramic tiles manufacture, it has opted for ceramics because the
marketing will involve utilisation of its existing distribution network for
paints. The rationale is that since paints and ceramics are both building
materials, APIL’S existing customer base (which can serve as a ready-made
market) will be targeted for its ceramics products.
“With our extensive distribution network and stocking points, we can reach even
the remote markets. So marketing ceramics is not likely to be a problem,” says
Choksey. The plan is to penetrate the market as quickly as possible, and grab a
substantial chunk of industry sales. The company will initially start with
ceramic tiles, but there is no plan to restrict itself to any specific market
segment.The project involves a Rs. 70 crore initial investment in the first
phase, which involves installation of a capacity of 23,000 tonnes per year. This
will be followed in a couple of years by the second phase, which will see an
increase in the capacity to 50,000 tonnes.
The new project is scheduled for completion by the end of 1996, and it will, in
all probability, be located in Gujarat. This is because any location in that
state will have the advantage of proximity to the raw material supplying areas
in Gujarat and Rajasthan. APIL is currently negotiating with foreign
collaborators for the technology, which will have to be imported. The technology
will also have to be adapted to Indian conditions.
While putting a few eggs in a new basket to ensure that fluctuating fortunes in
the paint industry do not have the effect of hurting the company’s bottomline
yet again, APIL is not ignoring its bread-and-butter business – that of paints.
Over the past year, a variety of new brands have been added to its product
range. The company has made an attempt to extend its marketing and distribution
beyond the country’s major towns, to which its activities were hitherto
‘Utsav’, an economically priced brand, was launched last year and is targeted at
small households with limited budgets. This project concentrated mainly on
consumers in Tamil Nadu, Maharashtra and Gujarat, thus widening the
accessibility of its products to all consumer levels.General Manager Mr. P.M.
Murthy says that “the degree of penetration concentrates on how economical it is
to do business.” He says that though this new product has performed favourably,
it has not contributed much to the profits of the year. “Of course, it promises
to be a very good and attractive segment for future business,” he adds, when
asked about its future growth and profit potential.
Other new products also include powder paints to be used for both auto and
non-auto appliances. There are other products like wood finishings (Touch-wood)
that takes care of refinishings on furniture.To strengthen its industrial
product base, APIL has collaborated with PPG industries, an American firm, and
thus enjoys the use of cathode electro deposition primer (CED). The company has
concluded a tie-up with Nippon Paints for original equipment paint products and
with Sigma Coatings of Holland for corrosion coatings. The technology that has
been brought home as a result of these ventures is modified at the company’s
plant at Bhandup, so as to make it suitable for the Indian climate.With a better
product range on offer now, APIL is just waiting for a greater awareness of
industrial paint applications to develop in the Indian market; the presumption
is that the demand for this particular product is still latent. For its
decorative paints, the company has gone in for differential pricing to encourage
all segments of the market.
The company is intent on a continuous modernisation and upgradation of its
technology and its assets, so as to keep in tune with the changing requirements
of the marketplace. In addition, it is also working on plans to increase
production capacity owr the next few years.
Besides the activity on the domestic front, APIL is increasing its overseas
presence as well. One of the few Indian companies with overseas subsidiaries in
the South-Pacific region, APIL is now setting up a new subsidiary in Australia.
Its existing ventures abroad too have reported healthy results: Asian Paints
(South Pacific) has registered a 12 per cent growth, Asian Paints (Tonga) grew
at a rate of five per cent, Asian Paints (Solomon Islands) at over 10 per cent
and Asian Paints (Nepal) at over 18 per cent.
With a new subsidiary at Vanuatu (New Hebrides) and a joint venture unit in
Townsville (Australia), APIL has established at least a foothold in the
international markets.When asked about the threats facing the company, Choksey
chuckles and says he prefers to call them challenges. “We need to meet the
demands of this growing organisation- of our workforce, our technology and our
assets. A major point to be tackled is to be able to meet the growing demand for
our product and to create a greater awareness for our newer products,” he says.
Over the first few months of the current financial year, sales volume has been
growing at a rate of 14 per cent, well above the industry average. With the
recession firmly behind it and government levies no longer inflating its prices,
the paint industry seem to be on an uptrend. But the APIL management has its
work cut out for it : it will not merely have to gear up to meet the burgeoning
demand, but will also have to work hard at retaining and then increasing its
market share.
(a) What corporate goal has the company adopted for the next few years and with
what strategies does the company propose to realise the above goal?
(b) What threats is the company facing or/and might face in future? What has it
done and/or what could it further do to safeguard itself from threat(s)?
(c) Evaluate the new strategies of Asian Paints (India) Limited, particularly
its proposed foray into ceramics.
(d) What action plans has the company proposed to strengthen its product base?
(e) Classify all the strategic plans or proposed strategic actions of the
company for
achieving growth against suitable headings, e.g., Diversification, Joint
Ventures, etc.,
NOTE: Rs.l crore = Rs. 100 Lakh = Rs. 10 million. For simplicity Rs. 50 = I US$
Rs. 1 crore = 0.2 million US$


Assignment C
Question 1 It is generally agreed that the role of strategy is to:
a) Make best use of resources
b) Achieve competitive advantage
c) Make profits for the organization
d) Make the best products and services
Question 2 According to Porter (1996) in his article ‘what is strategy?’
strategy is about being:
a) Different
b) Better
c) Bigger
d) Open minded
Question 3 An organization’s external environment consists of the general or
macro environment
a) The internal environment
b) The competitive environment
c) The specific environment
d) The micro-environment
Question 4 Alfred Chandler believed that:
a) Strategy should be developed first and the organization tailored to meet the
requirements of the strategy
b) Set the strategy according to the organization’s strengths and weaknesses
c) Strategy should be allowed to develop incrementally
d) Strategy should be allowed to evolve over time
Question 5 The key activities in the strategic management process are:
a) Analysis, formulation, review
b) Analysis, implementation, review
c) Analysis, formulation, implementation
d) Formulation, analysis, implementation
Question 6 Strategy analysis is also referred to as:
a) SWOT analysis
b) Strategy diagnosis
c) Rational analysis
d) Situation analysis
Question 7 Strategy formulation takes place at two levels. These are:
a) Conscious and sub-conscious
b) Implicit and explicit
c) Corporate and business
d) Business and operational
Question 8 The goals of an organization derive from its:
a) Strategy
b) Purpose
c) Objectives
d) Mission
Question 9 The statement of an organization’s aspirations can be found in the
a) Mission statement
b) Strategic objectives
c) Actions
d) Vision statement
Question 10 Decisions regarding which industries to compete in are the concern
a) Business level strategy
b) Corporate level strategy
c) Mergers and acquisitions
d) Functional level strategy
Question 11 Competitive strategy is also known as:
a) Competitive positioning
b) Corporate level strategy
c) Industry strategy
d) Business level strategy
Question 12 In the SWOT analysis, the ‘strengths’ and ‘weaknesses’ part refers
a) What the organization does internally in relation to competitors
b) The potential level of profits in the industry
c) The quality of the products and services in relation to competitors
d) The potential level of sales in the market
Question 13 A method for imagining alternative, possible futures is known as:
a) Scenario imagining
b) Scenario composition
c) Scenario planning
d) Scenario envisioning
Question 14 The general environment is also referred to as the:
a) Micro-environment
b) Macro-environment
c) Competitive environment
d) External environment
Question 15 The general environment can be broken down using a PEST analysis.
Conventionally the
PEST analysis consists of:
a) Political, economic, scientific, technological
b) Political, environmental, social, technological
c) Political, economic, social, technical
d) Political, economic, social, technological
Question 16 Competitive rivalry will be high if:
a) The industry is fragmented
b) There are a few strong players in the industry
c) There is a high degree of differentiation
d) The industry is in its infancy
Question 17 A substitute product or service is:
a) A competitor’s product or service
b) An alternative way of meeting the same need
c) A new entrant into the industry
d) A less attractive way of meeting the same need
Question 18 Buyer power is high if:
a) Differentiation is low
b) Switching costs are low
c) They have little information
d) The buyer requires a high quality product for their own production
Question 19 In Porter’s Five Forces, the ‘threat of new entrants’ relates to:
a) Barriers to entry
b) Substitutes
c) Switching costs
d) Buyer power
Question 20 The value chain is subdivided into two main headings. These are
primary activities and:
a) Peripheral activities
b) Support activities
c) Secondary activities
d) Outsourced activities
Question 21 The decision regarding whether to do manufacturing within the
organization or to sub­contract it to someone else is popularly known as:
a) An ‘in or out’ decision
b) A ‘make or buy’ decision
c) A ‘do-it-yourself decision
d) A ‘vertical-integration’ decision
Question 22 WH-Smith the stationer and bookseller has a store on most high
streets in the UK. In
terms of the SWOT analysis, this could be considered a:
a) Strength
b) Weakness
c) Strength and a weakness
d) Neither strength nor a weakness
Question 23 A market is defined by:
a) Demand conditions and customers
b) Demand conditions and suppliers
c) Supply conditions and production technology
d) Supply conditions and customers
Question 24 Porter’s generic strategies are:
a) Low price, differentiation, focus
b) Cost leadership, differentiation, cost focus, focus differentiation
c) Price leadership, differentiation, focus
d) Low cost, differentiation, focus differentiation
Question 25 According to Porter, if an organization does not follow either a
cost reduction strategy or
a differentiation strategy they are:
a) Hybrid
b) Stuck in the middle
c) Typical
d) No frills
Question 25 In Porter’s Generic Strategies model, a focus strategy involves:
a) Selling a limited range of products
b) Selling to a narrow customer segment
c) Selling to one region only
d) Selling simple products that are cheap to produce
Question 26 A differentiation strategy offers:
a) A broad segment something unique
b) A narrow segment something unique
c) A broad segment something more expensive
d) A narrow segment something more expensive
Question 27 Kim and Mauborgne (2005) argue that organizations should try to
capture uncontested
market space. These uncontested markets are known as:
a) Blue skies
b) Blue oceans
c) White skies
d) Fresh snows
Question 28 In Ansoff s matrix, ‘product development’ involves going in the
direction of:
a) Present products to present markets
b) Present products to new markets
c) New products to present markets
d) New products to new markets
Question 29 Horizontal integration is where:
a) A firm takes over a supplier
b) A firm takes over a distributor
c) A firm takes over a competitor
d) A firm takes over a manufacturer
Question 30 …………………… reduces uncertainty
a) Negotiating
b) Planning
c) Organizing
d) Leading
Question 31 …………………… are those plans that are extended beyond
three years
a) Short-term plans
b) Long-term plans
c) Specific plan
d) Strategic plan
Question 32 Value Chain is an effective tool
a) External Analysis
b) Internal Analysis
c) Self analysis
d) Systematic analysis
Question 33 The preparation of ETOP involves:
a) Dividing environment into sectors, sub factors, analyze impact of each sector
& sub factor on organization, description of impact of each sub factor into a
statement which is positive, neutral or negative.
b) Description of impact of each sub factor into a statement which is positive,
neutral or negative. , dividing environment into sectors, sub factors, analyze
impact of each sector & sub factor on organization
Question 34 Make or buy decision is related with___________ strategy
a) Vertical (forward) integration
b) Vertical (backward) integration
c) Horizontal integration c) Diversification
Question 35 Strategic management is mainly the responsibility of
a) Top Management
b) Senior Management
c) General Management c) Middle Management
Question 36 A hardware manufacture enters into software is an example
of_____________ integration
a) Vertical (forward) integration
b) Vertical (backward) integration
c) Horizontal integration c) Diversification
Question 37 True/False
Question: Scheduling is a part of strategic management.
Correct Answer
a) False
Question 38 Factors to be considered in political- legal environmental scanning
a) govt. policies, stability, philosophy of govt. , legal system,
implementation, infrastructure ,
b)govt. policies, stability, philosophy of govt. , legal system, implementation,
Question 39 True/False
Micro environment is the internal environment of a company.
Correct Answer
a) False
Question 40 Perspective which does not belong to four Balanced Scorecard
perspectives is:
a) The Business Process Perspective
b) The Customer Perspective
c) The Learning & Growth Perspective
d) The Business Reengineering Perspective

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