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February 2011

Master of Business Administration-MBA Semester 4

MB0036 –Strategic Management and Business Policy - 3 Credits

Assignment Set- 1 (60 Marks)

Note: Each question carries 10 Marks. Answer all the questions.

Q.1 Explain how strategies are formulated and implemented. (10 marks)

Q.2 Mr. Nandankumar wants to start a business of his own. He is seeking advice

from a consultancy firm on how to go about it. If you were an employee of this

consultancy firm, how would you guide him in preparing a business plan that

would suit Nandankumar’s business? (10 marks)

Q.3. a. What is the purpose of business continuity plan? (5 marks)

b. Give a short note on mitigation strategies. (5 marks)

Q.4. Distinguish between financial investor and strategic investor. (10 marks)

Q. 5 Give a note on enforcement of intellectual property rights. (10 marks)

Q. 6. Give a note on complex systems behaviour and creativity. (10 marks)


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for question no 2 see
Business Pan


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Q. 4 The Difference Between Being a Tactical Investor Vs Strategic Investor

So which group do you fall into? Are you a tactical or strategic investor? What’s more, do you know the difference between the two?

In reality it helps to be a bit of both, because the situation regarding the stock market could indicate that you are better off having and understanding both skills.

A tactical investor is someone who allows for shorter term changes and adjustments. For example if you spot the beginnings of a downturn in a certain stock that you hold, you might gauge whether to sell that stock and invest the money elsewhere instead. You might also hear of tactical investors being active investors, since they are constantly looking at the overall picture of their stocks and deciding where to go next.

In contrast, a strategic investor is one who looks purely to the long term. They look at the end game rather than all the situations that will occur between now and then. Because of this they manage to weather any short term losses without worrying too much, because they are always looking further down the road at the eventual outcome. They aren’t active in the same way that tactical investors are, because they have a different view of the stock market and their investments. They won’t constantly be changing from one stock to another.

Needless to say you could make or lose money with either method of investing in the stock market. The difference is that you are playing the game in a different way, either looking at short term results or long term ones.

The best thing to do if you are not sure which way to go is to explore both concepts and see which one suits your needs the best. Some people are naturally better disposed to a certain kind of investing, whereas other people will use both methods to help them realize the best return on their money.

So in essence then, we can see that tactical investors are short term thinkers. And strategic investors are long term thinkers. But you can see too that it helps to have skills from both camps. You might want to invest for the long term but if you have enough tactical skills you will know what to do if a situation comes up in the short term which could affect your plans.

And the ability to be strategic and tactical in your thinking could change everything.


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Q.2 Mr. Nandankumar wants to start a business of his own. He is seeking advice from a consultancy firm on how to go about it. If you were an employee of this consultancy firm, how would you guide him in preparing a business plan that would suit Nandankumar’s business? (10 marks)
Creating Nandakumar’s Business Plan
It is also important to establish a timeline for completing the plan. A business plan can be completed by one staff member working full time in as little as a week, although a thorough market analysis will add several days at least. A committee will probably need much more time. Combinations of staff, volunteers, consultants and a board committee may lengthen or shorten the process depending on skill level, available time, experience with planning and research, and the group’s facilitation needs. Now that you have decided who will put together your business plan and have set a timeline for its completion, you are ready to begin assembling the elements of the plan. Your business plan should contain the following sections:
• Executive summary
• Company and product description
• Market description
• Operations
• Management and ownership
• Financial information and timeline
• Risks and their mitigation
A solid business plan will clearly explain the business concept, describe the market for your product or service, attract investment, and establish operating goals and guidelines.
Executive Summary
In this section of your business plan, provide a description of your company, the industry you will be competing in, and the product or service you plan to offer.
Sell your concept! The executive summary may be the first and only section of your business plan that most of your audience will read. Tell the audience why the business is a great idea. Some readers will look at this section to determine whether or not they want to learn more about a business. Other readers will look to the executive summary as a sample of the quality and professionalism of the overall plan. The executive summary should be no more than one to three pages long and should answer the following questions:
• Who are you? (describe your organization)
• What are you planning? (describe the service or product)
• Why are you planning it? (discuss the demand and market for the service or product)
• How will you operate your business?
• When will you be in operation? (overview of timeline)
• What is your expected net profit? (discuss your projected sales and costs)
Although the executive summary is the first part of your business plan, you should write it after you have written the other sections of the plan in order to include the most important points of each section.
Company and Product Description
In describing your company be sure to include what type of business you are planning (homeownership development, wholesale, retail, manufacturing
or service) and the legal structure (corporation or partnership). You should discuss why you are creating this new venture, referencing the goals you set at the beginning of the business planning process. Also include a description of your non-profit organization, the role it has played in developing this new venture and the on-going role, if any, it will play in operations. Give the reader a brief overview of the industry, describing historic and current growth trends.
Whenever possible, provide documentation or references supporting your trend analysis such as articles from business-oriented newspapers and magazines, research journals or other publications. Include these references in the attachments of your business plan.
Product or Service
After describing your company and its industry context, describe the products or services you plan to provide. Focus on what distinguishes your product or service from the rest of the market. Discuss what will attract consumers to your product or service. Provide as much detail as necessary to inform the reader about the particular characteristics of your product that distinguish it from its competition – many nonprofits, for example, expect to produce higher-quality housing than otherwise exists in the area. Mention any distinctive elements in the manufacture of the product, such as being “hand-made by a particular people from a specific area.” If you are providing a service, explain the steps you will take to provide a service that is better than your competition.
Price
Provide a realistic estimate of the price for your product or service, and discuss the rationale behind that price. An unrealistic price estimate may undermine the credibility of your plan and raise concerns that your product or service may not be of sufficient quality or that you will not be able to maintain profitability in the long run. Describe where this price positions you in the marketplace: at the high end, low end or in the middle of the existing range of prices for a similar product or service.
In other sections of the plan you will discuss the target market for your product or service and also provide additional details on how the price of your product fits into the overall financial projections for the enterprise.
Place
Describe the location where you will produce or distribute your product or provide your service. Discuss the advantages of the location, such as its accessibility, surrounding amenities and other characteristics that may enhance your business.
Depending on your anticipated customer base, accessibility to your location via public transportation could affect the marketability of your product or service.
Customers
In this section of your business plan, you will describe the customer base or market for your product or service. In addition to providing a detailed description of your customer base, you will also need to describe your competition (other local developers or nearby businesses providing a similar service to your potential customer base).
Who will purchase your product or use your service? How large is your customer base? Define the characteristics of your target market in terms of its:
• Demographics – Measures of age, gender, race, religion and family size.
• Geography – Measures based on location.
• Socioeconomic Status – Measures based on individual or household annual income.
Provide statistical data to describe the size of your target market. Sources for this information may include recent data from the Bureau of Statistics, state or local census data, or information gathered by your organization, such as membership lists, neighborhood surveys and group or individual interviews. Be sure to list the sources for your data, as this will further validate your market assumptions. Include any relevant information regarding the growth potential for your target market if your business is expected to rely on growth. Cite any research forecasting population increases in your target market or other trends and factors that may increase the demand for your product or service.
Competition
Discuss how people identified in your target market currently meet their need for your product or service. What other businesses exist in your area that are similar to your proposed venture? For example, for a housing business, what are the local markets for purchase and rental? How much are people currently paying for similar products or services? Briefly describe what differentiates your proposed venture from these existing businesses and discuss why you are entering this market.
Sales Projections
Present an estimate of how many people you expect will purchase your product or service. Your estimate should be based on the size of your market, the characteristics of your customers and the share of the market you will gain over your competition. Project how many units you will sell at a specified price over several years. The initial year should be broken down in monthly or quarterly increments. Account for initial presentation and market penetration of your product and any seasonal variations in sales, if appropriate.
Market Description
In this section, you will describe how you plan to operate the business. You will present information on how you plan to create your product or provide your service, describe the staff required to operate and manage the business, discuss the equipment and materials necessary, and define the site or facility requirements, if any. A key component of the operation of your business will be your sales and marketing strategy, so you must describe how you will inform your target market about your product or service and how you will convince customers to purchase it.
Production Description
Describe the steps for creating your product, from the raw material or initial stage to the finished product, packaged and ready for distribution and sale. If you plan to provide a service, describe the process of service deliver (such as the initial interview, for instance, if you are offering consulting services), assessment, research and design, and final presentation. Provide a description of any sub-contractors or external services you plan to use in the production process. The reader of the plan may be unfamiliar with the industry, so avoid using industry jargon to describe the production process.
Staffing
Describe the staff required to operate your business: discuss how many people you will need; describe the tasks they will carry out; and the skills they will need. Prepare a chart outlining the salaries and benefits you will provide to your workforce. Provide information on how you will recruit staff and provide initial and ongoing training of employees.
Equipment and Materials
To manufacture your product or provide your service, what type of equipment will you need? Describe any machinery and vehicles necessary in the production, packaging and distribution of your product, including any office equipment such as computers, copiers, furniture, fixtures and telephone systems. Also discuss the types of materials you will use in the production process and describe the source and cost of those materials.
Facility
Describe the type of facility in which you will house your business. Indicate the amount of building space you will need for production and administration. Also discuss any building features required for the production process such as high ceilings, specialized ventilation and heating systems, sanitized laboratory space or vehicular accessibility. If you have already identified a location and a facility that meets your requirements, describe its features. Even if you are planning to provide a service instead of manufacturing a product, you need to demonstrate that you will have adequate space for administrative functions and other activities related to the service you plan to provide.
Market Description
Describe your strategy for locating your target market, informing or educating customers about your product or service and convincing them to purchase it. Provide details on the methods you will use to advertise your product, such as print media (advertisements in newspapers, magazines or trade journals), electronic media (television, radio and the Internet), direct mail, telemarketing, individual sales agents or representatives, or other approaches. Discuss the product’s or service’s features you plan to emphasize to gain the attention of your target market. Also detail how you will distribute and sell your product or service. Will you use sales agents or existing retail outlets, or directly distribute your product through a delivery service such as United Parcel Service, Federal Express or independent trucking company?
Operations
In this section of your business plan, describe the senior managers responsible for overseeing the start-up and operation of your business, their background and their responsibilities in the business. Be sure to highlight your management team’s experience in managing the production, marketing and administration of similar businesses or within the selected industry and attach the resumes of each member to the plan. Be sure to provide a complete job description of any vacancies in your management team. Describe the responsibilities, the skills, the background required and the steps you plan to take to fill that key position.
Ownership
What is its relationship to your existing organization? Who is on the board of directors / board of advisors of the new business and what are their backgrounds and areas of expertise? Potential investors or lenders will be interested in the ownership stake of the board of directors and also in what portion of the company’s equity is available. Success is often due to one’s contacts, so fully describe your business relationships with attorneys, accountants and advertising or public relations agencies, and any industry-specific services such as suppliers and distributors.
Management and Ownership
In this section you will describe the financial feasibility of your planned venture and provide several financial reports and statements to document why your business will be a viable enterprise and a sound investment. At a minimum, you should provide a brief descriptive narrative for each of the following financial statements and include a copy in the attachments to your plan:
• Start-up budget
• Cash flow projection
• Income statement
• Balance sheet
In preparing these statements, you may want to seek the advice of a certified public accountant (CPA).
Start-up Budget
Describe the initial expenses you will incur to get your business up and running. Some items you might include in your start-up budget research and product design and development expenses, legal incorporation and licensing expenses, facility purchase or rental, equipment and vehicle purchase or rental, and initial material or supply purchase. You can use Worksheet B as a sample format for preparing your start-up budget.
Cash Flow Projection
This statement presents a month-to-month schedule of the estimated cash inflows and outflows of your business for the first year. This schedule should indicate how much money your business will have or need and when you will need it. You should describe your sources of income and capital, detailing your projected sales revenue and indicating your own or investor equity contribution, lenders, investors and other sources of capital. Itemize your projected expenses, distinguishing between the cost of goods sold (materials, supplies, production labor), overhead expenses (rent, utilities, insurance, maintenance, interest, insurance, administrative costs and salaries, legal and accounting services, marketing, taxes, fees and other ongoing operating expenses) and capital expenditures (land and buildings, equipment, furniture, vehicles, and building repair or renovation expenses). In preparing this statement, account for a gradual increase in sales from initial product introduction and any expected seasonal fluctuations in revenue projections.
Income Statement
Prepare a multiyear (three- to five – year) statement of projected revenue, expenses, capital expenditures and cost of goods sold. If you make assumptions about the growth of your business, provide supporting documentation such as growth patterns of similar companies or studies that forecast an industry-wide growth rate. This statement should indicate to the reader the potential of your business to generate cash and its profitability over time. For an existing business, also submit an income statement for at least three prior consecutive years. Lenders may look at this statement to determine whether your business can support the additional debt you are requesting.
Balance Sheet
A start-up business probably will not have any assets or liabilities at the time you are drafting the business plan. Provide a copy of the balance sheet of the business’s sponsoring organization or individual. Describe in your narrative any assets that will be allocated to the start-up of the business.
Financial Information and Start up Timeline
Capital Requirements
Describe the amount and type of financing you are seeking for your business. Are you looking for debt from a lender or equity from an investor? Refer to your start up budget and cash flow statement presented earlier. Discuss how and when you will draw on these funds and how they will affect the bottom line. Also describe any commitments or investments that you may have already secured.
If you are seeking investors, such as venture capitalists, describe what they will receive in return for their capital. What is the repayment period and the expected return on investment? Also discuss the nature of their ownership share and how it may change with future investments. Equity investors are looking for rates of return higher than rates offered by banks or other business lenders. The level of risk in your business and industry will help to determine the actual market rate, as will the availability of equity dollars. Check with other businesses (although not direct competitors) to see what return on investment their investors demanded. Be prepared to negotiate. And make sure you research the investment market carefully; several socially minded investment pools exist and more are in development. or lenders, describe the type of financing you are seeking:
• Seed Capital – Short-term financing to cover start-up costs.
• Fixed Asset Financing – Longer-term financing for property, building improvements, equipment or vehicles. The asset being purchased is usually pledged as security for the loan.
• Working Capital – Short-term financing to cover operating expenses and to bridge gaps in cash flow.
Initial Start-up Timeline
Provide a timeline of tasks and events necessary to get your business operational. Be sure to describe the current stage you are in and what steps you have taken to date. Include deadlines for task completion. Set realistic deadlines according to your capacity to complete these tasks. The following is a list of some of the steps you may wish to include:
• Filing legal incorporation documents
• Identifying and securing suitable space
• Designing and developing the product
• Obtaining required licenses or permits
• Securing necessary financing
• Leasing or purchasing equipment
• Hiring key staff
• Hiring and training of production or support staff
• Purchasing materials and production supplies
• Beginning marketing activities
• Opening
Although it is impossible to know exactly what will go wrong in starting and running your business, thinking about different challenges will strengthen your plan. Potential problems could include:
• Insufficient public subsidy available to new home owners or residents
• The competition drops its prices
• Not enough customers
• Production costs exceed estimates
• Difficulty in finding qualified employees
• Environmental or governmental changes such as tax increases, additional regulations or population changes
For each potential problem, discuss its likelihood and describe possible solutions or actions you might undertake to mitigate the problem.
Risks and their Mitigation
Although it is impossible to know exactly what will go wrong in starting and running your business, thinking about different challenges will strengthen your plan.
After you have completed all of the elements of your business plan, you should focus its presentation. A well-organized plan will assist you in communicating the most important elements of your business plan to the reader, and a persuasive plan will help you to convince the reader to invest in your business.
Executive Summary
As mentioned earlier, this section should be written last. However, if you have already written the executive summary, review it to make sure it embodies the following characteristics. Because it is the first and possibly the only section of the plan that many readers may see, the executive summary should provide an overview of the plan and entice the reader to read the whole plan or to agree to meet with you. The executive summary should be no more than three pages and should briefly describe the most important elements of the plan. Review the Executive Summary section of this manual for more tips on this critical introduction to your business.


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Q.3. a. What is the purpose of business continuity plan? (5 marks)
Purpose of Business Continuity Plan

Recent world events have challenged us to prepare to manage previously unthinkable situations that may threaten an organization’s future. This new challenge goes beyond the mere emergency response plan or disaster management activities that we previously employed. Organizations now must engage in a comprehensive process best described generically as Business Continuity. It is no longer enough to draft a response plan that anticipates naturally, accidentally, or intentionally caused disaster or emergency scenarios.
Today’s threats require the creation of an on-going, interactive process that serves to assure the continuation of an organization’s core activities before, during, and most importantly, after a major crisis event.
In the simplest of terms, it is good business for a company to secure its assets. CEOs and shareholders must be prepared to budget for and secure the necessary resources to make this happen. It is necessary that an appropriate administrative structure be put in place to effectively deal with crisis management. This will ensure that all concerned understand who makes decisions, how the decisions are implemented, and what the roles and responsibilities of participants are. Personnel used for crisis management should be assigned to perform these roles as part of their normal duties and not be expected to perform them on a voluntary basis. Regardless of the organization – for profit, not for profit, faith-based, non-governmental – its leadership has a duty to stakeholders to plan for its survival. The vast majority of the national critical infrastructure is owned and operated by private sector organizations, and it is largely for these organizations that this guideline is intended. ASIS, the world’s largest organization of security professionals, recognizes these facts and believes the BC Guideline offers the reader a user-friendly method to enhance infrastructure protection.


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Q.3.b. Give a short note on mitigation strategies. (5 marks)
---Mitigation Strategies
Devise Mitigation Strategies
Cost effective mitigation strategies should be employed to prevent or lessen the impact of potential crises. For example, securing equipment to walls or desks with strapping can mitigate damage from an earthquake; sprinkler systems can lessen the risk of a fire; a strong records management and technology disaster recovery program can mitigate the loss of key documents and data.
Resources Needed for Mitigation
The various resources that would contribute to the mitigation process should be identified. These resources, including essential personnel and their roles and responsibilities, facilities, technology, and equipment should be documented in the plan and become part of ‘‘business as usual.’’
Monitoring Systems and Resources
Systems and resources should be monitored continually as part of mitigation strategies. Such monitoring can be likened to simple inventory management.
The resources that will support the organization to mitigate the crisis should also be monitored continually to ensure that they will be available and able to perform as planned during the crisis. Examples of such systems and resources include, but are not limited to:
• Emergency equipment
• Fire alarms and suppression systems
• Local resources and vendors
• Alternate worksites
• Maps and floor plans updated/changed due to construction and internal moves
• System backups and offsite storage.


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Q. 5 Give a note on enforcement of intellectual property rights. (10 marks)
Enforcement of Intellectual Property Rights
Intellectual property rights are of limited value unless they are effectively enforced. Without enforcement, there are no real deterrents for infringers or
remedies for those whose rights are infringed. The legal authorities do have some role in enforcing intellectual property rights, but this is often limited, and for infringement of rights such as patents, plant breeders rights and trade secrets, you would normally have to take action yourself to take the infringing party to court. The same practical commercial considerations that apply to obtaining and managing IP rights also apply to enforcement – in some cases, the possibility of taking court action could act to encourage the infringing party to take out a licence to use your technology. This would save you the expense and the uncertainty of a protracted court case, and could provide you with a good financial return.
The procedures for enforcement of IP rights differ widely between countries, because they have much more to do with the general legal system than other aspects of IP rights, such as examination and grant of rights by a patent office. The TRIPS Agreement has established some general principles for IP enforcement which are reflected in the laws of many countries, so this discussion will focus on the TRIPS provisions to give an overall picture of how enforcement operates.
One basic distinction in enforcement lies between more those IP infringements which tend to be infringed widely, potentially by many different people and on a large commercial scale, and general IP rights. In the first category are pirated copyright works and counterfeit trade mark goods.
TRIPS, for instance, specifies that the government or legal authorities need to have a more active role in dealing with these infringements than, say, for patents and plant breeders’ rights. So the state often has an active role in tracking down and prosecuting those who infringe copyright and trademark rights on a commercial scale, whereas for patents it is normally up to the patent holder or licensee to take an infringer to court.
Enforcement Measures Required by TRIPS
The TRIPS Agreement differs from earlier international intellectual property treaties in several ways; this includes having specific provisions for effective enforcement of IP rights in national laws. The main enforcement provisions in TRIPS include:
• The general obligations under the TRIPS Agreement, which relate to the provision of fair enforcement procedures.
• Civil remedies, including injunctions, damages and provisional measures.
• Criminal procedures, which are compulsory for intentional trade mark and copyright piracy on a commercial scale and optional for other kinds of intellectual property, such as patents.
• Special border enforcement measures to stop counterfeit trade mark and pirated copyright material coming into a country, border enforcement measures are optional for other kinds of intellectual property, such as patents.
General Enforcement Obligations under Trips
The TRIPS Agreement provides for a range of general obligations in relation to the enforcement of intellectual property rights. The purpose of these obligations is to ensure that the enforcement measures are effective, and that certain basic principles of due process are met, so that enforcement is fair and balanced, and does not impede legitimate trade.
Remedies must be timely and deter further infringements
TRIPS requires that enforcement procedures permit effective action against any infringement of intellectual property rights, and that the remedies available are expeditious in order to prevent infringements. A legal system that enables timely initiation and execution of legal processes is particularly important for effective enforcement of intellectual property rights because the information that intellectual property protects is often easy to copy and spread quickly. The remedies available must also be severe enough to deter further infringements. These procedures must be applied in a way that avoids the creation of barriers to legitimate trade and to provide for safeguards against their abuse.
Enforcement procedures must be fair.
TRIPS provides that enforcement procedures must be fair and equitable, and may not be unnecessarily complicated or costly, or entail unreasonable time-limits or delays. Decisions in enforcement cases must be based on the merits of a case. Decisions should preferably be in writing and reasoned, and be made available to the parties without undue delay. Decisions on the merits of a case must be based only on evidence in respect of which the parties were offered the opportunity to be heard.
Parties to a proceeding must have an avenue of appeal, unless the case was criminal in nature and the accused was acquitted. TRIPS does not require a special judicial system for the enforcement of intellectual property rights distinct from the normal court system. Finally, TRIPS creates no obligations with respect to the distribution of resources as between enforcement of intellectual property rights and the enforcement of law in general.
Example – enforcing a patented invention for making house paint.
For example, imagine that you own a patent for house paint that dries very quickly. It took you 8 years to develop the process and cost you thousands of dollars to patent your invention in Australia, the US and Indonesia. Just as you started to distribute the paint yourself in Australia you found out that your paint is being sold cheaply to the painting trade in Sydney by a company trading as Cheap Paints. You also suspect that Cheap Paints are exporting tins of infringing paint overseas. Obviously you need to take legal action against Cheap Paints to enforce your rights, otherwise, there would be no market left for you to get any financial return on your invention. The kinds of remedies you could take against Cheap Paints are set out in this unit.


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Q. 6. Give a note on complex systems behaviour and creativity. (10 marks)
A Complex System is a system that has more than one possible future. In other words, it is ‘free’ enough to take more than a single pre-determined path into the future, and therefore cannot be purely ‘mechanical’. Clearly, we are all complex systems by this definition, and so are the organizations, communities, economic sectors, regional economies, ecologies and global systems to which we belong and interact with. Indeed, mechanical systems really only exist as abstractions in our minds, and the systems we inhabit and try to manage are not mechanical. Yet all our science and our way of thinking about problems is based on the assumption that a company or organization comprises a set of functional components with connecting flows of goods and information. In this view, better management is often seen as simply running the ‘machine’ faster or more efficiently.
But that was when life was simple and the ‘product’ or ‘service’ to be produced and delivered only needed to be made at a competitive cost with adequate quality. Today, we must constantly create new products and services, with additional and novel attributes, and this creative, adaptive capacity will be more important to our survival than our level of efficiency, particularly if, as Complex Systems thinking suggests, efficiency reduces creativity.
Traditionally, decision making and strategy have been based on a rational set of assumptions such as:
• We know our options.
• We know and can evaluate the (single) outcome of implementing each of them.
• We can ignore effects that we do not know.
• The environment in the future ‘after’ the decision is known.
• There was a situation ‘before’ our decision, and that there will be a situation ‘after’ our decision, and that we can therefore examine the differences between them.
Such reflections are typical of a cost/benefit analysis, for example, by which the outcomes of different possible decisions are compared. Yet, in a world of rapid change and uncertainty, the assumptions relied upon by this kind of ‘reasonable’ behaviour are simply not true. In reality, we do not necessarily know all our options, the path the system may take, the possible dimensions that might be affected by resulting changes, or how circumstances may have changed in the mean time. In short, our view of our organisation as a machine, sitting in a fixed or at any rate predictable environment, is totally inadequate. We must instead turn to new ideas – we must harness the ideas arising from Complex Systems.
Complex Systems Behaviour
In studying Complex Systems, initially in physics and chemistry, it became clear that the key properties of ‘open’ systems, where flows of matter, energy and information can occur across their boundaries, were that they could undergo spontaneous transformations of structure and functionality. Instead of a ‘fixed’ mechanical system, this showed how systems came into being, and evolved over time, changing structurally, gaining, and sometimes shedding, complexity and qualities.
The study of Complex Systems therefore revealed a co-evolutionary process of a system and its environment in which successive change and adaptation each involved two separate steps:
• Discovering what to do (exploration and evaluation).
• Doing what has been decided (implementation).
And these two steps are radically different in nature.
In Complex Systems, the first step is ‘taken’ by the ‘non-average’ underlying elements within the system, while the second – the emergence of a transformed, functioning system – concerns new, effective ‘average’ behaviour of the elements. The successful co-evolution of a system with its environment therefore occurs through the dynamic interplay of the average and non-average behaviours within it. Successive instabilities occur each time that existing structure and organisation fail to withstand the impact of some new circumstance or behaviour. When this occurs, the system re-structures and becomes a different system, subjected in its turn to the disturbances from its own non-average individuals and situations. It is this dialogue between successive ‘systems’ and their own inner ‘richness’ that provides the capacity for continuous adaptation and change.


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Q.1 Explain how strategies are formulated and implemented. (10 marks)
Strategy Formulation and Implementation
It is the crux of the strategic management process. Strategy refers to the course of action desired to achieve the objectives of the enterprise. Formulation, together with its implementation, constitutes an integral part of the management activity. Managers use strategies for different purposes such as to overcome competition, to increase sales, to increase production, to motivate the employees to provide their best, and so on. Implementation of a strategy is a crucial task as the formulation of it. There may be a lot of resistance during the implementation process. It is necessary for the manager to be very tactful to involve the members of his group in the formulation of strategy to facilitate the implementation process.
Stages in Strategy Formulation and Implementation

Generic Strategy Alternatives
They refer to the strategy alternatives in broader terms. After the nature of the business of the firm is defined, the next task is to focus on the type of strategic alternative, in general, the firm should pursue. The strategist seeks to identify the right alternative through questions such as:
1. Should we get out of this business entirely?
2. Should we try to expand?
There are four strategy alternatives available to a firm or business:
a. To expand
b. To wind up or retrench
c. To stabilize, and
d. To continue its operations pertaining to its products, markets or functions.
Strategic Alliances
Strategic alliances constitute another viable alternative. Companies can develop alliances with the members of the strategic group and perform more effectively. These alliances may take any of the following forms:
a) Product and/or service alliance: Two or more companies may get together to synergise their operations, seeking alliance for their products and/or services. The product or service alliance may take any of the following forms:
b) Promotional alliance: Two or more companies may come together to promote their products and services. A company may agree to carry out a promotion campaign during a given period for the products and/or services of another company. The Cricket Board may permit Coke’s products to be displayed during the cricket matches for a period of one year.
c) Logistic alliance: Here the focus is on developing or extending logistics support. One company extends logistics support for another company’s products and services.
d) Pricing collaborations: Companies may join together for special pricing collaborations. It is customary to find that hardware and software companies in information technology sector offer each other price discounts.
Considering Strategy Variations
There can be a number of variations of the generic strategy alternatives. For instance, if the strategy is to expand, then the alternatives are internal expansion or external expansion.
Internal expansion can be achieved through any of the following approaches:
• Penetrate existing markets
• Add new markets
• Add new products, and so on
Similarly, external expansion can be achieved through mergers or acquisitions.
Selection of the Best Alternative
The best alternative is one that can improve overall performance. Its selection depends upon:
• Particular configuration of objectives
• Environmental threat and opportunity profile
• Strategic advantage profile
• The generic strategy itself
If a company has a higher growth as its objective, it is better to expand from a base of proven or time-tested competence (e.g. cost leadership or market leadership) and organise the departments to provide new opportunities while taking moderate risks.
Every company must tailor an appropriate strategy for achieving its goals. The most generic types to initiate strategic thinking, as suggested by Michael Porter, are ( a ) Overall cost leadership, ( b ) Differentiation and ( c ) Focus.
Strategic Choice
It involves the decision to select from among alternatives, the best strategy which effectively contributes to the business objectives. The spade work before making a strategic choice consists of:
• Identifying the few viable alternative courses of action.
• Considering the parameters for selection of best alternative.
• Evaluating each alternative on its own merits and in relation to other alternatives.
• Making the final choice.
• Keeping the next best alternative as stand by ( to take care of contingencies )


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