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  Strategic Management Assignment –  A Question 1: Describe the benefits of Good Strategic Planning? Define and give examples of key terms of Strategic Management? Answer: Strategic planning provides a variety of benefits in the organization. Below are some of the benefits: 1.   Clearly define the purpose of the organization and to establish realistic goals and objectives consistent with that of the mission in defined time frame within the organization’s capacity for implementation. 2.Communicate those goals and objectives t o the organization’s employees.  3.Develop sense of ownership of the plan. 4.Ensure the most effective use is made of the organization’s resources by focusing t he resources on key priorities. 5.Provides a base from which progress can be measured and establish a mechanism for informed change when needed. 6.Brings everyone’s best and most reasoned efforts have an important value in building a consensus about where an organization is going. Key terms of Strategic Management 1.Purpose –  this includes the reason why an organization exists. It includes a description of its current and future business. The purpose of an organization is its primary role in society, a broadly defined aim (such as manufacturing electronic equipment) that it may share with many other organizations of its type. 2.Mission –  it is the unique reason of an organization for its existence and what sets it apart from all others. The organization's mission describes why the organization exists and guides what it should be doing. Often, the organization's mission is defined in a formal, written mission statement. Decisions on Mission   are the most important strategic decisions, because the mission is meant to guide the entire organization. Although the terms   purpose   and   mission   are often used interchangeably, to distinguish between them may help in understanding organizational goals. 3.Goals –  this is the desired future state that the organization attempts to realize. It is a personal or organizational desired end-point in some sort of assumed development. Many people endeavor to reach goals within a finite time by setting deadlines. 4.Objectives –  refers to specific targets for which measurable results can be obtained. It also points out to the specific kinds of result the organization 2   seeks to achieve through its existence and operations. What the organization hopes to accomplish. 5.Strategy –  are means by which long term objectives will be achieved. Its role is to identify the general approaches that the organization utilize to achieve its organizational objectives. 6.Tactics –  are specific actions, sequences of actions and schedules an organization uses to fulfill its strategy. It is also considered as game plan. 7.Policy - Policies include guidelines, procedures, rules, programs, and budgets established to support efforts to achieve stated objectives. Therefore, policies become important management tools for implementing them. 8.Strategists - are the individuals who are involved in the strategic management process    . Several levels of management may be involved in strategic decision making. However, the people responsible for major strategic decisions are the board of director, president, the chief executive officer, the chief operating officer, and the division managers. Question 2: Explain the concept of SBU in a Multi Business Organization. Identify the Three levels of Strategy-Corporate, Business and Functional. How do Goals and Objectives vary at each Level? Answer: The concept is that a strategic business unit is a significant organization segment that is analyzed to develop organizational strategy aimed at generating future business or revenue. Corporate Strategy level is fundamentally concerned with the selection of businesses in which the company should compete and with the development and coordination of that portfolio of business. The primary items for this level are the following: reach, competitive contact, managing activities and business interrelationships and management practices. Business level on the other hand is a strategic business unit that may be a division, product line or profit center that can be planned independently from other business units of the organization. In this level, the strategic issues are less about coordination of operating units and more about developing and sustaining competitive advantage for the goods and services they produced. The third is Functional level, where it is the operating divisions and departments. The strategic issues at the functional level are related to business processes and value chain. It involves the development and coordination of resources through which business unit level strategies can be executed effectively. Functional units of an organization are involved in higher level strategies by providing input into the business unit level and corporate level strategy such as providing information on resources and capabilities on which the higher level can be based. Goals and objectives are often interchanged at each level. Basically it is more geared towards what the organization would want to be in the future and the means by which to get there. The means are needed to be quantifiable to gather accurate interpretations. Question 3: What should be the key Traits of a CEO? What are the forces that design the Strategic Management Systems? Answer: It is noted that no two persons are alike this is also true with regards to their personality and how they run their corporations/organizations. However, below are some of the traits a CEO should possess to effectively run his/her organization. 1.Conveys strong sense of vision 2.Links compensation to performance 3.Communicates frequently with employees 4.Emphasizes ethics 5.Plans for management succession 6.Communicates frequently with customers 7.Reassigns or Terminates 8.Rewards loyalty 9.Makes sound decisions Forces that design Strategic Management systems are as follows: Organizations - based on their size are either gearing towards formality and more details which speaks for large organizations while for small companies, they tend towards less details and are not too formal. Management styles –  how the top management conducts its business and style of doing its business affects the design towards strategic management. Policy making is part of the management style that most large and small scale organizations use in part of designing their strategic management system. Complexity of Environment –  is the organization in a stable environment? Are there any competitions to the company’s success? Iis there a market for the type of service offered? Some of these questions shape how systems are develop for the organization as strategy will be determined by the answers of the said questions. Complexity of Production process –  entails how effective is the process itself. Takes into consideration the following factors: o   Production lead time o   Capital intensive o   Labor intensive o    Manufacturing process 4   o   Technology o   Market reaction time Nature of problems –  determining nature of problems help in the design of the system as they can come up with counter measures to solve the situation. Question 4: Discuss the various grand strategies at the Corporate Level i.e. Stability, Growth and Retrenchment. Answer: In Growth, the company seeking growth faces different subgroups for it: horizontal growth (concentration), diversification and vertical growth. Horizontal growth   –  there are 3 components to horizontal growth. First a companymay decide to look for new customers. Second, a company may decide to pursue new product. Third, the company may pursue new locations. Vertical Integration   –  it is an integration along a supply chain. An example would be if a retailer now manufactures the products it sells, that is considered as increasing its level of vertical integration. Diversification   –  there are 2 types of diversification. First is related diversification, which is a common core of one’s resources and capabilities. With this, synergy rises because the related activity can increase the value and economies of scale can save money. Second is the unrelated diversification where it is used to lower the relative risk. Basically it is like a portfolio, the more different each portfolio is to each other the better. Another example is that when a product is released. It is done so over several markets to hedge risk of failure. In Stability, when a company is seeking slow growth or stagnation, management usually seeks strategies geared towards stability. There are 3 elements to which stability is used to strategize. Pause   –  if the internal resources are already stretched thin, organizations will often scale down a bit and focus on control. Proceeding with caution –  if there are problems in the macro environment, the company may opt for a strategy that goes for a formidable growth.. Profit –  if the company has loyal customers, solid base, the strategy is to go for research and development. Retrenchment –  this strategy revolves around cutting sales. It is also a strategy that seeks to reduce size or diversity of an organization’s operations. Expenditures are also cut off or minimize to become financially stable. Manpower headcount is also 5   affected when there is retrenchment. As the size of manpower is lowered to meet viable financial stability. Question 5 : Explain the concept of Porter’s five forces Model used for Industry Analysis? What are the major factors that become barriers to entry in the New Industry? Answer: Porter’s model draws upon the 5 forces to determine the competitive intensity and attracti veness of a market. The term attractiveness is descriptive towards the overall profitability of an industry or organization. Major factors that become barriers to entry by new players are as follows: Government Policies –  with the onset of different government regulations, this poses as a sort of control over companies that can cause as barriers. Organizations are required to apply for licenses and permits to operate which also asks them to pay a rather large sum of money. Capital   –  considered being one of the important factors that a company/organization must have for its business to succeed. Capital is already included prior to coming up with the rest of the organization. This includes: resources to facilities, manpower, inventory, salaries, and benefits among others. Capital investments differ on the type of business being planned or put up. Switching cost   –  this is a cost wherein a customer changes from one supplier or marketplace to another. The higher these costs are, the more difficult it is to execute change. Since most of the consumers are bent straight on a product they have grown accustomed to, when a new product comes along almost the same features, they tend not to switch as they think it is more costly to learn the basics of the new product and that it will lead to more time spent on figuring out the new product. Economies of Scale      –  this comes as a barrier for new entrants because established companies can produce large scale quantities of their products and sell them much cheaper than new entrants. In this case, new entrant produces the same product at a smaller quantity but of higher cost. Suppliers and customers will not do business with the new entrant due to high cost per product. Product Differentiation   –  brand loyalty plays a factor to this barrier. Many customers who have already accepted a specific product as unique tends to cling to it. New entrants who try to penetrate the market of the said specific product has to spend more in terms of advertising and enticing the loyal customers to try their product and hope to get them aboard. This is difficult for new entrants as they need to have extra resources and capital to make this possible. 8   Cost disadvantages independent of scale   –  a barrier for new entrants as the materials needed for the production of a specific goods are either patented to an organization or the raw materials are exclusive to its competitors. Also, the technology to produce commodities is also inherent to an organization. Access to Distribution channels   –  new entrants are finding it hard to look for ways to distribute their products as the established organizations already had their distribution channels identified and has exclusivity. Additional costs will be needed to look for alternative ways to distribute the products to its expected markets.  Question 6: What used to be national markets with local companies competing for business has become a global market with everyone competing for everyone's business everywhere. Explain the 3 generic strategies by Porter for Competitive advantage in the light of above statement. Answer: Globalization has hit firms harder as they now compete with products that can be considered as of more durability and cheap. The mindse t of most of the consumers is that if it’s foreign made or made from a 1   st   world country it must be durable. In addition that if sold alongside its local competitor, the foreign one is much cheaper. To pursue an advantage over an organization’s rivals, d rastic measures have to be set up to challenge globalization and the entry of competitors. Changing prices will provide a temporary advantage towards the competitors. By improving product differentiation, features, implementing innovations in the manufacturing process provides a positive advantage as well. Using vertical integration or a well known distribution channel to corner other market brackets is a sound strategy to combat globalization Exploiting relationship with suppliers is another way to compete wherein the organization can set quality standards and thus requiring its suppliers to follow suit. This increases the credibility and increases the reputation of the organization as one who sells high quality goods. Local companies need to step up and come up with revolutionary and innovative ideas to rival other competitors from other countries. Advertising and re-thinking the supplier and customers buying power is a way to help take advantage over a big market. Diversification can also be done so as to make the organization survive on different types of market rather than concentrate on one.  Question 7: What do you understand by the term Business Portfolio? How do BCG and GE matrix help a multi-business organization analyze its current business portfolio and decide which businesses should receive more or less investment. Answer: Business portfolio is an appropriate mix or collection of investments held by an institution or an individual. BCG Matrix is based on the product life cycle theory that can used to determine what priorities should be given in a portfolio of a business unit. It can help understand frequently made strategy mistake of having a “one -size-fits- all” approach. To ensure long term value creation, the company should have a portfolio of products that contains both high-growth products in need of cash inputs and low growth products that generate lots of cash. The idea behind BCG is that the bigger the market share a product has or the faster the product’s market grows the better it is for the company. The practical use of the BCG matrix is that it offers a very useful map of the organization’s product or service strengths and weaknesses at least in terms of current profitability as well as the likely cash flows. The GE Matrix is an alternative technique used in brand marketing and product management to help the company decide what product/s to add to its portfolio and which market opportunities are worthy of continued investment. It is plotted on a 2-dimensional grid wherein the Y-axis makes up the attractive measures while the X-axis contains business strength measures. Its strategic implications can lead to resource allocation recommendations to help grow, harvest or hold a business unit. The planning of the company should invest in the opportunities or segments that are both attractive and in which it has established some measure of competitive advantage. It cross references market attractiveness and business position using three criteria for each: high, medium and low.  


Jul 23, 2017
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