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SHORT QUESTIONS
FOUNDATION OF BUSINESS POLICY/STRATEGIC MGMT
FOUNDATION OF BUSINESS POLICY/STRATEGIC MGMT
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SHORT
QUESTIONS
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Business
policy
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Mission
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Process of
performing external audit
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Gap analysis
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Matching
stage
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Backward
integration
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Market
penetration
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Unrelated
diversification
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Acquisition
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Four benefits
of strategic mgmt.
Ø BUSINESS POLICY
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Defines the
boundary in which decisions are to be taken. It guides the lower mgmt. to deal
with the problems and issues without consulting top level mgmt. every time for
decisions.
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Business
policy deals with the getting of the resources for the achievement of the
organization goals. It is the study of role and responsibilities of top level
of mgmt.
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Blue print of
the organizational activities which are repetitive
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FEATURES OF
BUSINESS POLICY
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Specific
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Clear
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Reliable
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Relevant
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Comprehensive
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Flexible
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Stable
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Mission
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Mission is
what an organization and why it exist?
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Thompson
defines mission as” essential purpose of the organization, concerning
particularly why it is in existence, nature of the business it is in and the
customers it seeks to serve and satisfy.
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Hunger and Wheelen”,
mission is the purpose or reason for the organization’s existence.
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MISSION
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A mission
statement is a short statement of an organization’s purpose, identifying the
scope of its operations, what kind of product or service it provides. Its
primary customers or market and its geographical region of operation.
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According to
chris bart a mission statement consists of three essential components:-
I.
Key market
II.
Contribution
III.
Distinction
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GAP ANALYSIS
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Process of
identifying the gap between the optimized allocation and integration of inputs
and current level of allocation
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Done by comparing
current level of performance of the organization with desired level of
performance
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Provide
insight into area that have opportunities for improvement
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Formulation
of suitable strategy to bridge the gap.
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MATCHING
STAGE
The swot matrix is an important matching tool
that helps manager develop four types of strategies:-
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SO strategies:-use
a firm’s internal strength to take advantage of external opportunities
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WO strategies:
improving internal weaknesses by taking benefit of external opportunities
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ST
strategies:-use a firm’s strength to avoid or reduce the impact of external
threats
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WT strategies
are defensive tactics directed at reducing internal weaknesses and avoiding
external threats
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BACKWARD
INTEGRATION
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Vertical
integration refers to the integration of firms in successive stages in the same
industry. The integration of different level of the industry.
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In case of
backward integration it extends to the suppliers of raw material. A company
expands backward by diversification into supplying raw materials.
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Permits the
smooth flow of production, reduced inventory, and reduction in operating costs,
increasing economies and removing obstacles.
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Unrelated
diversification
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Diversification
means going into operation which is either totally or partially unrelated to
the present operations.
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Unrelated or conglomerate
diversification is a type of diversification which a firm established into one
industry diversifies into another business which is unrelated industry.
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For example
steel manufacturing diversifies into textiles.
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REASONS FOR
UNRELATED DIVERSIFICATION
- • Decline of sale and profits in existing business
- • When the company has capital and managerial talent to compete successfully
- • Attractive opportunity in unrelated field
- • More financial synergy
- • For achieving more growth rate
• ACQUISITION
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An acquisition
is a situation whereby one company purchase most or all of another company’s
shares in order to take control.
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It occurs
when a buying company obtains more than 50% ownership in target company
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As part of
the exchange the acquiring company often purchase the target company’s stock
and assets which allows the acquiring company to make decisions regarding the
newly acquired assets without the approval of the target company’s
shareholders.
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Four benefits
of strategic mgmt
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It helps in
integrating the behavior of individual into total efforts
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Sense of long
direction and provides a framework for guidance short term and medium term
planning
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It allows for
identification, prioritization and exploitation of opportunities
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Minimizing
the effect of adverse conditions and change
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