Directorate of Distance Education Swami

Vivekanand Subharti University

II Year

Course Code : MBA-301

Course Title : Strategic Management

Assignment No. : MBA-301/2023

Maximum Marks : 30

Attempt any 5 questions from the given 10 questions.

All questions carry equal marks.

Q1. Explain the Strategic Management Process and its benefits.

Q2. What are the internal components of business environment?

Q3. What is Corporate Renewal? Explain its scope in business.

Q4. Explain the strategies in management of culture in business.

Q5. Describe the FDI strategies in India.

Q6. What is outsourcing? Is outsourcing a good business exercise for developed countries.

Q7. Explain the Reengineering Business Process in detail.

Q8. “Telecommunication revolution is the boon to Indian economy” Explain.

Q9. Explain the Disaster Management issues and problems in brief.

Q10. Write a note on Turnaround Strategy.

Q1. Explain the Strategic Management Process and its benefits.

What is strategic management?

Strategic management is the ongoing planning, monitoring, analysis and
assessment of all necessities an organization needs to meet its goals and objectives.
Changes in business environments will require organizations to constantly assess
their strategies for success. The strategic management process helps organizations
take stock of their present situation, chalk out strategies, deploy them and analyze
the effectiveness of the implemented management strategies. Strategic management
strategies consist of five basic strategies and can differ in implementation depending
on the surrounding environment. Strategic management applies both to on-premise
and mobile platforms.

What are the benefits of strategic management?

Strategic management is generally thought to have financial and nonfinancial
benefits. A strategic management process helps an organization and its leadership to
think about and plan for its future existence, fulfilling a chief responsibility of a
board of directors. Strategic management sets a direction for the organization and its
employees. Unlike once-and-done strategic plans, effective strategic management
continuously plans, monitors and tests an organization's activities, resulting in
greater operational efficiency, market share and profitability.

Strategic management concepts

Strategic management is based around an organization's clear understanding of its
mission; its vision for where it wants to be in the future; and the values that will
guide its actions. The process requires a commitment to strategic planning, a subset
of business management that involves an organization's ability to set both short- and
long-term goals. Strategic planning also includes the planning of strategic decisions,
activities and resource allocation needed to achieve those goals.

Having a defined process for managing an institution's strategies will help

organizations make logical decisions and develop new goals quickly in order to keep
pace with evolving technology, market and business conditions. Strategic
management can, thus, help an organization gain competitive advantage, improve
market share and plan for its future.
Five stages of strategic management process
There are many schools of thought on how to do strategic management, and
academics and managers have developed numerous frameworks to guide
the strategic management process. In general, the process typically includes
five phases:

 assessing the organization's current strategic direction;

 identifying and analyzing internal and external strengths and

weaknesses;

 formulating action plans;

 executing action plans; and

 evaluating to what degree action plans have been successful and

making changes when desired results are not being produced.

Effective communication, data collection and organizational culture also play

an important part in the strategic management process -- especially at large,
complex companies. Lack of communication and a negative corporate
culture can result in a misalignment of the organization's strategic
management plan and the activities undertaken by its various business units
and departments. (See Value of organizational culture.) Thus, strategy
management includes analyzing cross-functional business decisions prior to
implementing them to ensure they are aligned with strategic plans.

Types of strategic management strategies

The types of strategic management strategies have changed over time. The
modern discipline of strategic management traces its roots to the 1950s and
1960s. Prominent thinkers in the field include Peter Drucker, sometimes
referred to as the founding father of management studies. Among his
contributions was the seminal idea that the purpose of a business is to
create a customer, and what the customer wants determines what a
business is. Management's main job is marshalling the resources and
enabling employees to efficiently address customers' evolving needs and
preferences.
SWOT analysis
A SWOT analysis is one of the types of strategic management frameworks
used by organizations to build and test their business strategies. A SWOT
analysis identifies and compares the strengths and weaknesses of an
organization with the external opportunities and threats of its environment.
The SWOT analysis clarifies the internal, external and other factors that can
have an impact on an organization's goals and objectives.

The SWOT process helps leaders determine whether the organization's

resources and abilities will be effective in the competitive environment within
which it has to function and to refine the strategies required to remain
successful in this environment.

Balanced scorecard in strategic management

The balanced scorecard is a management system that turns strategic goals into a
set of performance objectives that are measured, monitored and changed, if
necessary, to ensure the strategic goals are met.

The balanced scorecard takes a four-pronged approach to an organization's

performance. It incorporates traditional financial analysis, including metrics
such as operating income, sales growth and return on investment. It also
entails a customer analysis, including customer satisfaction and retention; an
internal analysis, including how business processes are linked to strategic
goals; and a learning and growth analysis, including employee satisfaction
and retention, as well as the performance of an organization's information
services.

As explained by the Balanced Scorecard Institute:

"The system connects the dots between big picture strategy elements such
as mission (our purpose), vision (what we aspire for), core values (what we
believe in), strategic focus areas (themes, results and/or goals) and the more
operational elements such as objectives (continuous improvement activities),
measures (or key performance indicators, or KPIs, which track strategic
performance), targets (our desired level of performance), and initiatives
(projects that help you reach your targets)."

Value of organizational culture

Organizational culture can determine the success and failure of a business
and is a key component that strategic leaders must consider in the strategic
management process. Culture is a major factor in the way people in an
organization outline objectives, execute tasks and organize resources. A
strong organizational culture will make it easier for leaders and managers to
motivate employees to execute their tasks in alignment with the outlined
strategies. At organizations where lower-level managers and employees are
expected to be involved in the decision-making and strategy, the strategic
management process should enable them to do so.

It is important to create strategies that are suitable for the organization's

culture. If a particular strategy does not match the organization's culture, it
will hinder the ability to accomplish the strategy's intended outcomes.

Q2. What are the internal components of business environment?

Meaning of Business Environment

The term “Business environment” represents the sum of all the individuals,
institutions, competing organisations, government, courts, media, investors,
and other factors outside the power of the business organisations but
affects the business performance. Hence, changes in government economic
policies, rapid changes in technology, changes in consumer tastes and
preferences, increasing market competition, etc. are outside the business
organisations' power but affect the business performance immensely.

For example, an increase in taxes by the government makes everything

expensive in the market; technology changes may make the existing
product obsolete, political uncertainty creates fear in the mind of investors,
increase in competition in the market due to competitors may affect
business profit, and changing in demand and preferences may increase the
need for a new product and decrease the demand for old product.
Business Environment Definition
The term “Business environment " is the sum of all conditions, events, and
influences that surround and affect business activities and growth.

Components of Business Environment

Internal - It combines the factors that exist within the company. These are
–

 Human resources
 Value system
 Vision and mission
 Labour union
 Corporate culture

External - An external Environment includes those outside factors that

exercise an influence on a business’s operations. It is further classified into
two segments.

 Macro - Socio-cultural, political, legal, and global factors fall into

this category.
 Micro - This environment has a direct and immediate impact on
a business. It consists of customers, investors, suppliers, etc. 

Features of Business Environment

 The business environment is the sum of all external factors that affect
its growth.
 The business environment includes both general and specific forces.
Specific forces include investors, customers, competitors, and
suppliers. These factors affect individual enterprises directly and
immediately in their day-to-day working. General forces include
social, political, legal, and technological conditions. The general forces
affect the business environment individually.
 The business environment is dynamic.
 The business environment is highly uncertain.
 The business environment is a relative concept as it differs from
country to country and even region to region.

Dimensions of Business Environment

The dimension of the business environment refers to the sum of all factors,
enterprises, and forces that constitute direct or indirect influence over
business activities. Such five key elements are listed below. 
1. Social Environment 

It implies the tradition, culture, customs, and values of a society in

which the business exists. 

 Tradition: In India, festivals like Diwali, Christmas, and Holi

provide a financial opportunity for several market segments like
sweet manufacturers, gifting products suppliers, etc. 
 Value: A company that follows long-held values like social
justice, freedom, equal opportunities, gender equality, etc.
excels in that given society.
 Recurrent Trends: It refers to development or general changes
in a society like consumption habits, fitness awareness, literacy
rate, etc. which influence a business. For example, the demand
for organic vegetables and gluten-free food is increasing;
therefore, companies that manufacture food items keep this in
mind to attract more crowds. 

2. Legal Environment 

It includes the laws, rules, regulations, and acts passed by the

government. A company has to operate by abiding by the rules and
regulations of laws like the Consumer Protection Act 1986, Companies
Act 1956, etc. A proper understanding of these laws assists in the
smooth operations of a company. 
Example: A cigarette-selling company compulsorily has to put the
slogan “smoking is injurious to health” on every packaging.   

3. Economic Environment 
It involves market conditions, consumer needs, interest rate, inflation
rate, economic policies, etc. 

 Interest Rate - For example, interest rates of fixed-income

instruments prevalent in an economic environment impact the
interest rate it will offer on its debentures.
 Inflation Rate - A rise in the inflation rate leads to a price hike;
hence, it limits businesses. 
 Customer’s Income - If the income of customers increases, the
demand for goods and services will rise too. 
 Economic Policies - Policies like corporate tax rate, export duty,
and import duty influence a business.

4. Political Environment 
 It consists of forces like the government's attitudes towards
businesses, ease-of-doing-business policies, the stability of the
governing body, and peace within the country. All of these factors are
extremely crucial for a company to sustain itself.  If the central and
local government sanctions, policies, or acts are in favour of
businesses, the nation's overall economy strengthens due to
increasing employment, productivity, and import and export of
various products. 
Example - A pro-business government will make foreign investments
more attractive in that country.   

5. Technological Environment
It comprises the knowledge of the latest technological advancements
and scientific innovations to improve the quality and relevance of
goods and services. 
A company that regularly keeps track of these news can mould its
business strategies accordingly.
Example: A Watch Company that sells smartwatches and traditional
watches will prosper as smartwatches are trendy recently. 

Q3. What is Corporate Renewal? Explain its scope in business.

If there is one trend that has demonstrated staying power over the past decade, it is the
movement of strategy formulation out of corporate headquarters and into business
units. The reason is as obvious as it is sensible: business units are nearer to the famed
three Cs—customers, competitors, and costs. If headquarters sees the marketplace
from 20,000 feet, then the business unit’s managers see it from 2,000 feet—or from
200 if they’re smart. This bird’seye view allows them to get a keener look at
opportunity ahead, trouble alongside, and danger from below. Best of all, like a bird in
flight, a business unit can maneuver with more agility than a 300-ton airplane. No
wonder it’s getting hard to find companies that still try to make strategy from on high.

But just as headquarters did in the “old days,” business units can lose strategic focus.
Considering that business units today have the capacity to be highly attuned to the
marketplace, why does that happen? My experience suggests that business units are a
lot like people. People cannot be good at everything, yet some certainly die trying!
Business units succeed—they reach and surpass their potential—when managers rivet
their attention to what the organization does best. That may sound a bit like a pop-
business platitude. It is the opposite. In this article, I present a method for conducting
an orderly investigation of a business unit’s current health and welfare; the goal is to
help companies find strategic focus and thereby liberate their resources for growth.
The tool offered here is a process that evaluates customers, products, and services
along three dimensions: strategic importance, significance, and profitability. The
result of this exercise is a list of eight recommended actions or strategic imperatives—
both being a polite way of saying “marching orders.”
Perhaps the process of evaluation sounds straightforward or even simple. Again, the
opposite is true. It is not going too far to say that good strategy formulation is a
painstaking process. It takes more than common sense. It requires extensive data,
rigorous analysis, and the combined judgment of key decision makers. The outcome of
good strategy is both profit and growth. Far too often, growth plays second fiddle. At
other times, growth strategies fail the profit test. I’ve heard it suggested that the two
goals are mutually exclusive. They’re not—if the company removes all marginal
activities that divert resources from critical customers and products. The process
described in this article should be used at least every two years—once a year is better—
to clear out the underbrush that clutters the business unit landscape. In the process of
clearing, managers should rediscover those activities that must be not only preserved
but also cultivated.

In business, where bigger is so often mixed up with better, it bears stating that
stripping away detritus does not diminish the company. Metaphors abound: Trees are
pruned for faster growth and better fruit. My wife pinches still-colorful blossoms from
her geraniums, but the new blossoms are healthier and even brighter. Danny Miller,
author of The Icarus Paradox, a book that examines some of the major corporate
failures of the past quarter century, has said that such pruning reminds him of the
sculptor who chips away excess stone to reveal an elegant figure. In a more practical
vein, Miller likens the process of strategic renewal to moving one’s office: it clears the
mind and redirects energy toward real priorities. In this sense, the process that follows
is more than addition and subtraction; it is multiplication and transformation.

The Strategic-Renewal Process in Action

Before looking at the reasons business units commonly lose focus and before
examining the strategic-renewal process in depth, let’s make the abstract concrete with
a real example of the tool at work. It involves the specialty-glass-products division of a
multibillion-dollar manufacturing concern that produced 4,000 stockkeeping units
(SKUs) for some 25 distributors, 500 original equipment manufacturers, and another
500 individual customers. Once the leading player in its industry, the company was
slowly but surely losing ground. Sales had been flat for three years, market share was
slipping, costs were rising, and inventory turns were alarmingly low. Management,
naturally, wanted to know why, and just about everyone in the unit had an opinion.
Finally, to cut through the noise, the business unit’s general manager ordered a
thorough analysis of product movement.

The Strategic-Renewal Process: A Road Map

What ensued was a mess. No sooner was a product found to be a slow mover than
someone would argue that it was important to a major customer. Some products were
sold to lots of not-so-important customers, and a few products went to customers that
made purchases only once every two years. Where did all this information leave
management? Exactly nowhere.

It was at this point that the company turned to the strategic-renewal process for help.
The fundamental premise of the process is that customers (or customer groups) must
be analyzed first because they should determine the product line, not vice versa, even
in technology-driven companies. Indeed, companies that have this equation backward
usually learn too late that they have been wasting time, energy, and money on
customers that are neither strategic nor significant. These undesirable customers not
only divert attention from the central mission of the company but also are unprofitable
in most cases. They complicate production, marketing, management information
systems (MIS), billing, customer service, accounts receivable, and distribution. In
short, they should be shown the door unless there is a darned good reason to keep
them. It is only after targeted customers (and undesirable ones, too) are identified that
decisions about product and service offerings can be made intelligently.

Over a period of several weeks, managers at the specialty glass company tackled the
first step of the renewal process: evaluating each customer’s strategic importance. (The
company grouped small and midsize customers by channel, then by revenues, and
then by industry. This grouping process will be examined later.) Then, taking one
customer or customer group at a time, the managers asked questions such as, Does the
customer truly value what we do well or does it require products and services that
introduce unnecessary complexity and strain our systems? Does the customer provide
an opportunity for us to grow? Can we learn from the customer, perhaps through its
technology, marketing skills, or management techniques? Does it provide a
springboard to other important customers or customer groups?

Next, the managers assessed each customer’s or customer group’s significance, asking,
Does the customer provide substantial revenue or have the potential to do so? Finally,
the analysis turned to customer profitability. Like most companies, the specialty-glass-
products division had only a rough idea of gross margin contribution from major
customer groups. The renewal process prompted the division to develop a method for
determining true profitability, accounting for those cash and accrual costs that are
sometimes ignored—management information, other administrative costs, and the
cost of capital.

Putting the three pieces together, the managers made a startling discovery: only four
customers—all distributors—met the test of strategic importance, significance, and
profitability. Armed with this insight, the managers moved to the second part of the
strategic-renewal process: analyzing each of their products, one by one, for strategic
importance, significance, and profitability. (This is a tedious but necessary step.) As in
most cases, the latter two measurements required quite a bit of data crunching, but the
outcomes were factual and noncontroversial. The analysis of strategic importance was
more complicated. Were the products a result of proprietary technology that provided
a competitive advantage? Did they fit well with the company’s core production and
distribution capabilities? Did they provide growth opportunities by serving the core
customers better than competitors’ products? Were they a springboard to other
important customers? These questions spawned some contentious debate, but
eventually the business unit’s general manager was able to draw the necessary (and
enlightened) conclusions and move forward.

Having completed the product analysis, the strategic-renewal team revisited their
customer analysis and came to a profound conclusion: their best hope for profitable
growth while meeting reasonable working-capital requirements was to reduce both the
customer and product base drastically. No longer would the company sell directly to
original equipment manufacturers and individual customers; instead, it would sell
only to four distributors—its sole customers. The company would discontinue 1,700 of
its 4,000 SKUs and outsource another 1,000 to suppliers with lower labor and utility
costs. Needless to say, costs and working capital requirements were reduced
dramatically.
The company concluded that its best hope for growth was to reduce both
the customer and product base drastically.

Today the business unit is back on track. Profitability has improved substantially
because costs associated with the discontinued items and former customers have been
eliminated. Market share has stabilized, and inventory turns have more than doubled.
And perhaps most important, its managers now have in their hands one of the most
powerful competitive tools of all: strategic focus.

Why Business Units Go Astray

Not all companies that undergo the strategic-renewal process will end up making
changes as radical as those the specialty glass company made. The clutter and
complexity facing that company were extreme. But that example is typical of what
happens when business units let their customers and products manage them instead of
the other way around—a common occurrence. Let’s consider the three main reasons
why business units lose focus.

Business units lose focus because of flawed notions about fixed costs
and incremental contributions.

As a turnaround manager, I have often heard the argument that a certain activity must
be continued to cover fixed costs. My reply may sound harsh, but it is intended to be
instructive: From this moment forward, no costs are fixed. And those who insist that
costs are fixed run the risk of finding themselves treated as a variable cost.

Manufacturing plants can be closed. Products and services can be discontinued.

Territories, divisions, and facilities can be abandoned. Survivors of turnarounds
recognize this unpleasant fact of life. Business units lose their focus when they do not.
So-called fixed costs should be challenged every day.

I take an equally dim view of arguments in favor of incremental contributions. The

problem is that contributions come in small pieces, a few dollars at a time, whereas
investments come in chunks. Here’s an example of what I mean:

A few years ago, the managers of the distribution arm of a manufacturing and
distribution company persuaded senior executives that the company should add
another manufacturer’s product line, even though the marginal contribution was only
7%. They justified their case by citing the need to reduce unit distribution costs. Six
months later, the same managers made a plea for a new warehouse and an upgrade to
the MIS because they were out of capacity. They supported their capital request
for $700,000—as I said, investments come in chunks—in part with the news that they
had found yet another product line, this time with a 10% margin, to help cover the new
fixed costs. This kind of thinking eventually led the company into Chapter 11 and,
ultimately, liquidation.

Business units lose focus when they fail to determine whether a contribution is truly
incremental and when they fail to account for all associated costs. Almost every
incremental activity adds to administrative costs, which have to be covered by the
gross margin. Yet administrative and operational costs are rarely assigned properly.
Even when they are, they are usually higher than they seem in black and white because
the incremental activities add complexity that diverts attention from the core business.
In this way, incremental contributions can subvert from within, bit by bit, until a
business unit has nowhere to go but down.

Business units lose focus when managers pursue nonstrategic growth

targets.

Economic growth is vital for business enterprises. But forced growth—that is, growth
not rooted in sound strategy—is a siren song beckoning unwary business leaders. For
example, a global food-and-spirits conglomerate required its business unit managers
to increase sales by 15% per year when price inflation in their products worldwide
averaged only 1%. The attempt to reach those targets created havoc. Many senior
managers, including those who set the goals, are no longer with the company. The
stock price, which was in the mid-thirties in 1992, is now trading in the mid-twenties.
Tough goals are appropriate only when tied to the real world of customers and
competitors, challenges and opportunities. Otherwise, they spell trouble.

Growth is vital, but forced growth is a siren song beckoning unwary

business leaders.

Nonstrategic growth has many guises. I confess that my experience has made me
skeptical about diversification, acquisitions, and “stretch” budgets. I’ll explain my
skepticism about each in turn.

By definition, diversification is neither good nor bad, or perhaps I should say it can be
either. But one thing is certain: business units can lose their focus quickly when they
diversify based on one of two popular theories—first, that it pays to own some
countercyclical protection, and second, that a good manager can manage anything. The
countercyclical theory has worked for some but is not foolproof. It was the primary
argument advanced by the conglomerate Allegheny International as it bought more
companies before eventually seeking bankruptcy in 1988. Diversified oil companies
were shocked in 1991 when exploration, refining, and the chemical businesses all
tanked together.

As for the good-manager theory, only a few companies have proved it right. General
Electric Company and, more recently, AlliedSignal have demonstrated that
diversification on this basis can be very sound indeed. These companies have elevated
management to an art form, but even GE has stumbled. Its acquisition of Kidder,
Peabody & Company was a clear loss, and it has taken GE almost a decade to get NBC
on the right track.

Perhaps most troubling about diversification, particularly at the business unit level, is
that it can lessen the impact of scarce resources—human, financial, and technical.
Diversification, with its bold promise at the outset, can easily deteriorate into a
situation in which the core business loses its strength and weakens the whole
organization.

Acquisitions often steer business units into the same trap. If a business unit buys
another company to gain new technologies, customers, or channels related to the core
business, so be it. But very often managers overreach. Strategic fit is tenuous. The
acquired technologies, customers, and channels are not always congruent; sometimes
they’re not even parallel. The scorecard over the past 30 years suggests that
boardroom discussions should be thorough and fierce before acquisitions are
approved. Boards of directors should be especially wary if one of the arguments is that
the acquisition will reduce overhead as a percentage of revenues. My analysis of
troubled companies over the past decade shows that selling, general, and
administrative (SG&A) expenses have risen at a higher rate than revenues. Only a few
truly lean management companies, such as the Swiss conglomerate ABB Asea Brown
Boveri, have been successful in reducing and retaining lower overhead rates through
acquisition.

Another problem is stretch budgets. There are legitimate arguments for and against
stretch budgets. However, my experience with troubled companies indicates that while
goals should be high, budgets should be realistic. When high goals are expressed in
stretch budgets, expenses and working capital requirements tend to rise more quickly
than revenues and margins. Moreover, managers are often lulled into the sense that
budget numbers are real, so they delay taking corrective action until late in the budget
year. Perhaps most damaging, stretch budgets encourage nonstrategic growth.
Managers desperate to “make the numbers” may take on business that seems to shore
up the company in the short term but can damage it in the long. Moreover, stretch
budgets militate against divestiture of customers, products, and services that are not
strategic, significant, or truly profitable.

Finally, stretch budgets can cause an organizational nervous breakdown, as happened

in the case of the food and spirits company I mentioned earlier. In short, stretch
budgets, which make some managers feel so virtuous, are one of the main ways
business units lose their focus and eventually their value. Managers would fare much
better if they did the hard work of setting realistically ambitious budget targets and
then beat them.

Business units lose focus because they are ignorant of the true
profitability of customers, products, and services.

A manufacturer whose distribution system was designed to ship full truckloads also
used UPS to ship one or two items at a time upon customer demand. The way the
company figured it, such sales weren’t as profitable, but they were still worthwhile. A
more careful analysis quickly showed they weren’t. Indeed, the direct labor and
material cost was $27 to ship a $23 order, which carried a gross margin of $5.60. The
direct costs, which included order entry and billing, understated the true costs because
they did not register customer-service and MIS fees. Using a drop-ship program like
this one could be justified if it took care of emergency orders for important customers.
But the program was for everyone and had been justified because it showed a profit on
the books.

I wish I could say this example was an exception to the rule, but it is not. Indeed, I
have found that many—perhaps even most—businesses do not know the true accrual
profits of their products and services, and fewer still know the profitability of
customers. Even fewer companies track product or service costs through the
distribution process. Distribution as well as SG&A costs are rarely assigned to specific
products, product groups, or services. Simply put, companies have no system in place
for gathering and processing these data, even though activity-based costing has been
around for more than a decade. But without fairly accurate information about profits,
managers eventually come to learn that the more they sell, the more they lose. Then
they scramble to fix problems with solutions that will not contribute significantly to
the company’s future.
If accrual accounting is often neglected, cash accounting gets even shorter shrift. Cash
from operations is required for survival and growth. Sooner or later, debt and equity
will dry up if a business does not produce cash profits from operations. Even so, cash
can get tied up in slow-moving inventory for small or nonstrategic customers when it is
sorely needed to support new-product development or to acquire inventory that not
only turns faster but is also important to the company’s core strategy. Marketing
expenses for some customers can soak up more cash than the customers produce.

In other cases, cash can be tied up by customers with overdue accounts receivable.
Fixed assets that are either cash losers or nonstrategic also detract from the company’s
ability to support its core strategies. These poor practices involving cash can be
insidious. Little by little, cash is diverted away from customers, products, and services
that are strategic, significant, and profitable. In extreme cases, misallocation of cash
leads to crisis: companies can’t pay suppliers or meet the payroll. Finally, promising
opportunities sometimes are forgone because both debt and equity have become
difficult to raise. In all these events, strategic focus—and any running chance for
success—is lost.

Why Business Units Don’t Refocus

Now, it sometimes happens that business units that lose strategic focus for the above
three reasons wake up to the fact that something is wrong. Customers start defecting,
market share keeps slipping, good employees jump ship: eventually, clues like these
cannot be explained away any longer, and management decides to get to the bottom of
the matter. A task force is formed, consultants are brought in, TQM or some other
newfangled technique is installed. But then…nothing changes. Why not? My
experience suggests that there are three primary reasons.

Business units fail to refocus because they are preoccupied with the
present or the past.

Success is a double-edged sword. Although sometimes a catalyst for continued

improvement, it can just as easily lull a company into complacency and sometimes
spawn arrogance. The irony, of course, is that today’s successes can rarely be
replicated. Basking in their glow can be fun, but it is a relatively pointless exercise and
can even be dangerous to a company’s well-being.

The main focus of both leaders and managers should be the future. Certainly, they
should have in place the people, policies, and procedures to take care of today, but
today was yesterday’s tomorrow. Even when a company isn’t resting on its laurels,
there is a completely human tendency to escape from the future’s uncertainties by
hunkering down in the details of the present or past. Some managers seem to welcome
daily nuisance distractions—they keep them busy. Others spend their time poking
around in history, studying financial statements and operating ratios. These matter,
but history is a compass, not a map. It is important to learn from the successes and
mistakes of the past, but managers’ primary role is to keep the organization focused on
the future. In so doing, they not only secure a place in it, they also take a bold step
toward capturing the entrepreneurial profits that market leaders deserve.

Business units fail to refocus because they misunderstand the future.

Occasionally the problem is not that the future is neglected but that it is
misunderstood. Future does not mean futuristic. Some companies lose their way when
their strategies get so far ahead of reality that it becomes impossible for managers to
evaluate strategic importance, significance, and profitability intelligently.

For example, promoters of the “Chunnel” between England and France did not
properly assess the gap between cash outflows and inflows. They couldn’t—there was
no crystal ball handy to predict the problems that cropped up. But the absence of a
crystal ball makes it even more important to plan for contingencies. In this case,
strategy was not enough. Cash was also important. Because the Chunnel is strategic
and significant, it will survive, but most likely with a different capital structure and a
different mix of creditors and owners. Along the way, the project’s investors have paid
a steep price.

Consider also ventures in solar, geothermal, and wind energy. Those enterprises
probably will be viable only when the cost of fossil fuel intersects with their costs.
Dozens of companies have failed waiting for this day, which is unlikely to dawn in my
lifetime or even in my six-year-old grandson’s.

These examples are not meant to be critical of visionaries; rather, they make the point
that a company that gets too far ahead of itself fails to restore its strategic focus just as
much as one mired in the present or fixated on the past.

Companies fail to refocus because they have no formal procedure for

pruning, only for planting.

The scarcest resources in any enterprise are people who are knowledgeable,
experienced, forward-looking, and able to lead. What a shame when these resources
are wasted on customers, products, services, and employees that are not strategically
important, significant, or profitable. You have to admire managers who are gung ho
about seizing new markets, landing new customers, and launching new products. But
when I hear their plans, I always ask, “What are you going to quit doing to free up the
resources for your new ventures?” The fact is, companies motivate and reward
managers to build, expand, and grow. They typically do not motivate and reward for
the cutting back that makes all that possible. The result is a confusion and tension that
is not strategic in the slightest.

The Strategic-Renewal Process: Building the Matrices Step-by-Step

Perhaps you’re inclined by now to give the strategic-renewal process a go. What next?
The first step is to be clear about who will be involved in the process. In my experience,
the business unit’s most senior manager must run the show—but it is not something he
or she should do alone. The process benefits from diversity of opinion and even from
dissension. For instance, when it comes to evaluating a customer’s strategic
importance, the more spirited the debate, the more informed the ultimate decision will
be.

Occasionally, the discussion of strategic importance can become intensely political.

One manager might argue that a customer is strategic to protect his or her job or
sphere of influence. Or managers may engage in contentious debate because no one
has full knowledge about a customer’s current status or its future. Sometimes
assessing strategic importance requires intuition, but intuition must be coupled with
as much hard data as possible. That is why the entire strategic-renewal process should
be conducted by a management team that intentionally includes contrarians and
members from various parts of the organization. And it should be conducted in as
open a forum as possible. One caveat, however. The strategic-renewal process
shouldn’t be driven by consensus. Decisions about a customer’s strategic importance,
for instance, should not be subject to a vote. Instead, every evaluation should have the
best thinking of colleagues behind it. But someone has to make the final call. The
nature of the process should be made explicit at the outset, along with who will have
the final word.

When a team and its leader are in place, it is time to turn to the first target of the
evaluation process: customers. As I noted above, this step may involve some grouping
of customers. After all, Coca-Cola’s business units are not going to look one by one at
the thousands of consumers who pop open a soft drink each day. But they would do
well to define their customers as the channels through which they reach those
consumers. As you may recall, the specialty glass company first described in this article
—the one that went from 1,000 customers to 4—grouped it customers first by channel
and then within those groups by size and industry. This is not as complex as it sounds;
the logic of how to group customers often flows easily out of the logic of the business.
Thus a bank might group its customers by size—Fortune 1,000 companies, midsize
companies, and so forth down to individuals—and then by location or by the types of
services customers frequently use.

When it comes to grouping products and services, the same credo applies: Use
business logic. Thus a bank might group its products and services by type: mortgages,
check processing, investment instruments, and so on. A cosmetics manufacturer may
group its various products by channel, such as department store, drugstore, and mail
order. At the same time, it may also make sense not to group at all. The team at the
specialty glass manufacturer examined each of the company’s 4,000 SKUs one by one.
In situations where complexity is high, information is in dispute, and leading
indicators are dire, this painstaking exercise may be entirely necessary to get a handle
on the facts. Ordinarily, however, a commonsense grouping of products and services
will do.

Having grouped customers, products, and services, it is time to get down to the nitty-
gritty of the strategic-renewal process by evaluating them individually for their
strategic importance, significance, and profitability.

What do these terms mean exactly? We have briefly described all three, but now let’s
look at them in more depth.

Strategic importance is a measure of a customer’s, product’s, or service’s long-term

contribution to the business, which includes but also supersedes the financial meaning
of the term. Strategic importance reflects a customer’s, product’s, or service’s place in
the universe of the company’s mission, goals, and purpose. The closer to the center of
gravity, the better.

Perhaps the best way for a business unit’s managers to get at strategic importance is
through a series of questions, the first of which is fundamental: What does our
organization do best? Does it provide personalized service, cost leadership, a particular
technology, or other expertise? When that question has been answered—and have no
doubt, finding agreement may require some rough sledding—the strategic-renewal
team must then consider whether there is a match between the area of superior
performance and the customer, product, or service under discussion. For instance, say
a strategic-renewal team determines that the company truly excels at personalized
service. The company may do a lot of other things well, but that’s its strongest
capability. The question then becomes, Does a particular customer value personalized
service? Or does a given product give us a chance to flaunt our service? The answers to
these questions often spark discussion about whether such a capability is the right one
given the other players in the field and their capabilities. Similarly, an examination of
these issues also opens the door to discussions about organizational structure: Are we
set up correctly to deliver what we’re good at? Do we have the right people,
information systems, and distribution channels in place, or can we get them there
within a reasonable amount of time and a reasonable budget? Ultimately, the
discussion of what a company is best at gets to the heart of who its target customers
should be in order to allow it to gain a sustainable competitive advantage.
Q4. Explain the strategies in management of culture in business

The corporate cultural values and behaviors, typically set by leadership,

support a social and psychological environment that is unique to that
organization. The corporate culture provides its employees with a shared
meaning that not only defines the organization but also serves to govern how
the employees are expected to behave within the organization. Ultimately,
the corporate culture shapes and perpetuates employee perceptions,
behaviors and performance.

In addition to the central corporate culture, many organizations, especially

global organizations, can have a mix of subcultures within the organization.
Employees working in different functions or geographic locations within the
organization may be operating in silos and following separate sets of cultural
norms. These subcultures evolve based on the nuances of their function
within the organizations or the geographic location of a particular division.

How can leaders address the issue of subcultures within the organization, or
should they?

The answer is somewhat complex. In my experience in organizational

development roles as an internal and external consultant, I have been
involved with numerous initiatives and strategies designed to manage
corporate cultures. Here are five strategies I believe leaders should use when
managing a corporate culture at large while allowing for the natural
phenomenon of subcultures.

1. Create cultural balance. Create a healthy balance within the

organization of respecting and appreciating diversity of thought, workstyles
and cultural practices with defining corporate cultural boundaries. Leaders
should understand that ethnic and national culture may have a greater effect
on employees than the culture of the organization. Therefore, valuing and
integrating specific cultural activities and practices with corporate values and
behaviors serves to create a balance between encouraging and respecting
diversity and staying within the standards that the organizational leaders
deem as ethical and responsible.

2. Support local community responsibly. A function of an

organization’s culture is to provide a sense of identity for its employees, not
only as it relates to the organization, but also the local community. A
corporate culture feeds that sense of identity by providing principles and
guiding behaviors that pertain to ethics, safety and commitment to the
organization’s corporate citizenship and social responsibility. This means
developing a detailed understanding of local environments. It also means
establishing protocols and practices that support the community in which
the organization is located or conducts business, while maintaining
appropriate legal and moral practices.

3. Foster a sense of belonging. When employees feel they belong to a

team, group or cause, it can enhance individual engagement and help fulfill
the human need for meaning and purpose in the work one does. Fostering an
environment where employees can share with their co-workers their
genuineness, ideas and attributes contributes to the natural bond that
develops within teams. Leaders should support a healthy mix of personal,
team and organizational ways employees can find connections with others.
The sense of belonging is what allows employees to be their authentic selves
and validate their worth, which can have a positive impact on performance.

4. Actively engage subcultures in organizational change. Enlisting

input from subcultures when planning organization-wide change is a way to
anchor the subcultures to the larger organization and its goals.
Understanding the overarching goal while being a part of the change
initiative will reinforce common values and link subcultures throughout the
organization. Since change can affect subdivisions differently, actively
engaging subcultures to address potential change pitfalls and ways to
implement change can result in a change management process that is better
suited for the unique subcultures.

5. Be aware of and prevent counter subcultures. A counter subculture

happens when a group of employees goes rogue. There are a number of
reasons that can cause a group to splinter off into a direction that does not
align with the central culture of the organization. Leaders need to pay
attention and conduct periodic check-ins and course corrections as necessary
to ensure behavior in a subculture is not counter or destructive to the central
culture.

Corporate leaders should instill a leading central culture that provides their
employees with boundaries and guidelines that support the vision and values
of the brand. However, leaders should also recognize, respect and support
the subcultures that develop within organizations. These subcultures
represent diversity in workstyles, ethnicity, values and norms that naturally
exist throughout the organization when a group of people share a common
situation. Some of the common situations that form subcultures include
geographic separation, functional specialties, different business units or
status within the organization, such as job type, hierarchy or tenure.

Recognizing, acknowledging and supporting subcultures can enhance the

primary goal of a culture, which is to create a sense of commitment,
belongingness and identity while adhering to the standards of the
overarching principles set by the leadership.
Q.5 Describe the FDI strategies in India

Foreign Direct Investment (FDI)

Any investment from an individual or firm that is located in a foreign country into a country is called
Foreign Direct Investment. 

 Generally, FDI is when a foreign entity acquires ownership or controlling stake in the shares
of a company in one country, or establishes businesses there.
 It is different from foreign portfolio investment where the foreign entity merely buys equity
shares of a company.
 In FDI, the foreign entity has a say in the day-to-day operations of the company.
 FDI is not just the inflow of money, but also the inflow of technology, knowledge, skills and
expertise/know-how.
 It is a major source of non-debt financial resources for the economic development of a
country.
 FDI generally takes place in an economy which has the prospect of growth and also a
skilled workforce.
 FDI has developed radically as a major form of international capital transfer since the last
many years.
 The advantages of FDI are not evenly distributed. It depends on the host country’s systems
and infrastructure. 
 The determinants of FDI in host countries are:

 Policy framework

 Rules with respect to entry and operations/functioning (mergers/acquisitions and

competition)

 Political, economic and social stability

 Treatment standards of foreign affiliates

 International agreements

 Trade policy (tariff and non-tariff barriers)

 Privatisation policy

Foreign Direct Investment (FDI) in India – Latest update

1. From April to August 2020, total Foreign Direct Investment inflow of USD 35.73 billion was
received. It is the highest ever for the first 5 months of a financial year. FDI inflow has
increased despite Gross Domestic Product (GDP) growth contracted 23.9% in the first
quarter (April-June 2020).
2. FDI received in the first 5 months of 2020-21 (USD 35.73 billion) is 13% higher as compared
to the first five months of 2019-20 (USD 31.60 billion).
FDI in India
The investment climate in India has improved tremendously since 1991 when the government
opened up the economy and initiated the LPG strategies.

 The improvement in this regard is commonly attributed to the easing of FDI norms.
 Many sectors have opened up for foreign investment partially or wholly since the economic
liberalization of the country.
 Currently, India ranks in the list of the top 100 countries in ease of doing business. 
 In 2019, India was among the top ten receivers of FDI, totalling $49 billion inflows, as per a
UN report. This is a 16% increase from 2018.
 In February 2020, the DPIIT notifies policy to allow 100% FDI in insurance intermediaries.
 In April 2020, the DPIIT  came out with a new rule, which stated that the entity of nay
company that shares a land border with India or where the beneficial owner of investment
into India is situated in or is a citizen of such a country can invest only under the
Government route. In other words, such entities can only invest following the approval of
the Government of India
 In early 2020, the government decided to sell a 100% stake in the national airline’s Air India.
Find more about this in the video below:

FDI Routes in India

There are three routes through which FDI flows into India. They are described in the following table:

Category 1 Category 2 Category 3

100% FDI permitted Up to 100% FDI permitted Up to 100% FDI permitted

through Automatic Route through Government Route through Automatic + Government
Route

Automatic Route FDI

In the automatic route, the foreign entity does not require the prior approval of the government or
the RBI.

Examples:

 Medical devices: up to 100%

 Thermal power: up to 100%
 Services under Civil Aviation Services such as Maintenance & Repair Organizations
 Insurance: up to 49%
 Infrastructure company in the securities market: up to 49%
 Ports and shipping
 Railway infrastructure
 Pension: up to 49%
 Power exchanges: up to 49%
  Petroleum Refining (By PSUs): up to 49%
Government Route FDI

Under the government route, the foreign entity should compulsorily take the approval of the
government. It should file an application through the Foreign Investment Facilitation Portal, which
facilitates single-window clearance. This application is then forwarded to the respective ministry or
department, which then approves or rejects the application after consultation with the DPIIT.

Examples:

 Broadcasting Content Services: 49%

 Banking & Public sector: 20%
 Food Products Retail Trading: 100%
 Core Investment Company: 100%
 Multi-Brand Retail Trading: 51%
 Mining & Minerals separations of titanium bearing minerals and ores: 100%
 Print Media (publications/printing of scientific and technical magazines/speciality
journals/periodicals and a facsimile edition of foreign newspapers): 100%
 Satellite (Establishment and operations): 100%
 Print Media (publishing of newspaper, periodicals and Indian editions of foreign magazines
dealing with news & current affairs): 26%
Sectors where FDI is prohibited 

There are some sectors where any FDI is completely prohibited. They are:

 Agricultural or Plantation Activities (although there are many exceptions like horticulture,
fisheries, tea plantations, Pisciculture, animal husbandry, etc.)
 Atomic Energy Generation
 Nidhi Company
 Lotteries (online, private, government, etc.)
 Investment in Chit Funds
 Trading in TDR’s
 Any Gambling or Betting businesses
 Cigars, Cigarettes, or any related tobacco industry
 Housing and Real Estate (except townships, commercial projects, etc.)
Read more on FDI in retail here.

New FDI Policy

According to the new FDI policy, an entity of a country, which shares a land border with India or
where the beneficial owner of investment into India is situated in or is a citizen of any such country,
can invest only under the Government route.

A transfer of ownership in an FDI deal that benefits any country that shares a border with India will
also need government approval.

Investors from countries not covered by the new policy only have to inform the RBI after a
transaction rather than asking for prior permission from the relevant government department.
The earlier FDI policy was limited to allowing only Bangladesh and Pakistan via the government
route in all sectors. The revised rule has now brought companies from China under the government
route filter.

Benefits of FDI
FDI brings in many advantages to the country. Some of them are discussed below.

1. Brings in financial resources for economic development.

2. Brings in new technologies, skills, knowledge, etc.
3. Generates more employment opportunities for the people.
4. Brings in a more competitive business environment in the country.
5. Improves the quality of products and services in sectors.

Disadvantages of FDI
However, there are also some disadvantages associated with foreign direct investment. Some of
them are:

1. It can affect domestic investment, and domestic companies adversely.

2. Small companies in a country may not be able to withstand the onslaught of MNCs in their
sector. There is the risk of many domestic firms shutting shop as a result of increased FDI.
3. FDI may also adversely affect the exchange rates of a country.

Government Measures to increase FDI in India

1. Government schemes like production-linked incentive (PLI) scheme in 2020 for electronics
manufacturing, have been notified to attract foreign investments.
2. In 2019, the amendment of FDI Policy 2017 by the government, to permit 100% FDI under
automatic route in coal mining activities enhanced FDI inflow.
3. FDI in manufacturing was already under the 100% automatic route, however, in 2019, the
government clarified that investments in Indian entities engaged in contract manufacturing
is also permitted under the 100% automatic route provided it is undertaken through a
legitimate contract.
4. Further, the government permitted 26% FDI in digital sectors. The sector has particularly
high return capabilities in India as favourable demographics, substantial mobile and
internet penetration, massive consumption along technology uptake provides great market
opportunity for a foreign investor.
5. Foreign Investment Facilitation Portal (FIFP) is the online single point interface of the
Government of India with investors to facilitate FDI. It is administered by the Department
for Promotion of Industry and Internal Trade, Ministry of Commerce and Industry.
6. FDI inflow is further expected to increase –

 as foreign investors have shown interest in the government’s moves to allow

private train operations and bid out airports.

 Valuable sectors such as defence manufacturing where the government enhanced

the FDI limit under the automatic route from 49% to 74% in May 2020, is also
expected to attract large investments going forward.

Regulatory Framework for FDI in India

In India, there are several laws regulating FDI inflows. They are:

 Companies Act
 Securities and Exchange Board of India Act, 1992 and SEBI Regulations
 Foreign Exchange Management Act (FEMA)
 Foreign Trade (Development and Regulation) Act, 1992
 Civil Procedure Code, 1908
 Indian Contract Act, 1872
 Arbitration and Conciliation Act, 1996
 Competition Act, 2002
 Income Tax Act, 1961
 Foreign Direct Investment Policy (FDI Policy)
Important Government Authorities in India concerning FDI

 Foreign Investment Promotion Board (FIPB)

 Department for Promotion of Industry and Internal Trade (DPIIT)
 Reserve Bank of India (RBI)
 Directorate General of Foreign Trade (DGFT)
 Ministry of Corporate Affairs, Government of India
 Securities and Exchange Board of India (SEBI)
 Income Tax Department
 Several Ministries of the GOI such as Power, Information & Communication, Energy, etc.

Way Forward with FDI

1. FDI is a major driver of economic growth and an important source of non-debt finance for
the economic development of India. A robust and easily accessible FDI regime, thus,
should be ensured.
2. Economic growth in the post-pandemic period and India’s large market shall continue to
attract market-seeking investments to the country.

What is Foreign Direct Investment (FDI) :

Foreign direct investment (FDI) is when a company takes controlling ownership in a business
entity in another country. With FDI, foreign companies are directly involved with day-to-day
operations in the other country. This means they aren’t just bringing money with them, but also
knowledge, skills and technology.
 
Generally, FDI takes place when an investor establishes foreign business operations or acquires
foreign business assets, including establishing ownership or controlling interest in a foreign
company.  
 
Where is FDI made?
 
Foreign Direct Investments are commonly made in open economies that have skilled workforce
and growth prospect. FDIs not only bring money with them but also skills, technology and
knowledge.
 
FDI in India
 
FDI is an important monetary source for India's economic development. Economic
liberalisation started in India in the wake of the 1991 crisis and since then, FDI has steadily
increased in the country. India, today is a part of top 100-club on Ease of Doing Business
(EoDB) and globally ranks number 1 in the greenfield FDI ranking.
 
Routes through which India gets FDI
 
Automatic route: The non-resident or Indian company does not require prior nod of the RBI
or government of India for FDI.
 
Govt route: The government's approval is mandatory. The company will have to file an
application through Foreign Investment Facilitation Portal, which facilitates single-window
clearance. The application is then forwarded to the respective ministry, which will
approve/reject the application in consultation with the Department for Promotion of Industry
and Internal Trade (DPIIT), Ministry of Commerce. DPIIT will issue the Standard Operating
Procedure (SOP) for processing of applications under the existing FDI policy.
 
Sectors which come under the ' 100% Automatic Route' category are
 
Agriculture & Animal Husbandry, Air-Transport Services (non-scheduled and other services
under civil aviation sector), Airports (Greenfield + Brownfield), Asset Reconstruction
Companies, Auto-components, Automobiles, Biotechnology (Greenfield), Broadcast Content
Services (Up-linking & down-linking of TV channels, Broadcasting Carriage Services, Capital
Goods, Cash & Carry Wholesale Trading (including sourcing from MSEs), Chemicals, Coal &
Lignite, Construction Development, Construction of Hospitals, Credit Information Companies,
Duty Free Shops, E-commerce Activities, Electronic Systems, Food Processing, Gems &
Jewellery, Healthcare, Industrial Parks, IT & BPM, Leather, Manufacturing, Mining &
Exploration of metals & non-metal ores, Other Financial Services, Services under Civil
Aviation Services such as Maintenance & Repair Organizations, Petroleum & Natural gas,
Pharmaceuticals, Plantation sector, Ports & Shipping, Railway Infrastructure, Renewable
Energy, Roads & Highways, Single Brand Retail Trading, Textiles & Garments, Thermal
Power, Tourism & Hospitality and White Label ATM Operations.
 
Sectors which come under up to 100% Automatic Route' category are
 
 Infrastructure Company in the Securities Market: 49%
 Insurance: up to 49%
 Medical Devices:up to 100%
 Pension: 49%
 Petroleum Refining (By PSUs): 49%
 Power Exchanges: 49%
 
Government route
 
Sectors which come under the 'up to 100% Government Route' category are
 
  Banking & Public sector: 20%
 Broadcasting Content Services: 49%
 Core Investment Company: 100%
 Food Products Retail Trading: 100%
 Mining & Minerals separations of titanium bearing minerals and ores: 100%
 Multi-Brand Retail Trading: 51%
 Print Media (publications/ printing of scientific and technical magazines/ specialty
journals/ periodicals and facsimile edition of foreign newspapers): 100%
 Print Media (publishing of newspaper, periodicals and Indian editions of foreign
magazines dealing with news & current affairs): 26%
 Satellite (Establishment and operations): 100%
 
FDI prohibition
 
There are a few industries where FDI is strictly prohibited under any route. These industries are
 
 Atomic Energy Generation
 Any Gambling or Betting businesses
 Lotteries (online, private, government, etc)
 Investment in Chit Funds
 Nidhi Company
 Agricultural or Plantation Activities (although there are many exceptions like
horticulture, fisheries, tea plantations, Pisciculture, animal husbandry, etc.)
 Housing and Real Estate (except townships, commercial projects, etc)
 Trading in TDR’s
 Cigars, Cigarettes, or any related tobacco industry
 
FDI inflow
 
During the fiscal ended March 2019, India received the highest-ever FDI inflow of $64.37
billion. The FDI inflows were $45.14 billion during 2014-15 and $55.55 billion in the
following year.