Business Policy and Strategic Management (Text and Cases)
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Business Policy and Strategic Management (Text and Cases) P. SUBBA RAO Professor and Convener, Executive MBA Program School of Business Administration University of Papua New Guinea Papua New Guinea (Australia) Formerly: Professor and Dean Faculty of Commerce and Management Sri Krishnadevaraya University Anantapur-515 003 (AP), India E-mail: [email protected] Assisted by: Hima Bindu Chandra President, Cybernit Software Solutions,USA MUMBAI z NEW DELHI z NAGPUR z BENGALURU z HYDERABAD z CHENNAI z PUNE LUCKNOW z AHMEDABAD z ERNAKULAM z BHUBANESWAR z KOLKATA © Author No part of this book shall be reproduced, reprinted or translated for any purpose whatsoever without prior permission of the Publisher in writing. First Edition : 1999 Edition : 2000, 2001, 2002, 2003, 2004 2005, 2006, 2007, 2008, 2009 Second Revised Edition : 2010 Edition : 2011, 2013, 2014 Edition : 2015 Edition : 2016 Published by : Mrs. Meena Pandey for Himalaya Publishing House Pvt. Ltd., “Ramdoot”, Dr. Bhalerao Marg, Girgaon, Mumbai - 400 004. Phone: 022-23860170/23863863, Fax: 022-23877178 E-mail: [email protected]; Website: www.himpub.com Branch Offices : New Delhi : “Pooja Apartments”, 4-B, Murari Lal Street, Ansari Road, Darya Ganj, New Delhi - 110 002. Phone: 011-23270392, 23278631; Fax: 011-23256286 Nagpur : Kundanlal Chandak Industrial Estate, Ghat Road, Nagpur - 440 018. Phone: 0712-2738731, 3296733; Telefax: 0712-2721216 Bengaluru : Plot No. 91-33, 2nd Main Road Seshadripuram, Behind Nataraja Theatre, Bengaluru-560020. Phone: 08041138821, 9379847017, 9379847005 Hyderabad : No. 3-4-184, Lingampally, Besides Raghavendra Swamy Matham, Kachiguda, Hyderabad - 500 027. Phone: 040-27560041, 27550139 Chennai : New-20, Old-59, Thirumalai Pillai Road, T. Nagar, Chennai - 600 017. Mobile: 9380460419 Pune : First Floor, "Laksha" Apartment, No. 527, Mehunpura, Shaniwarpeth (Near Prabhat Theatre), Pune - 411 030. Phone: 020-24496323/24496333; Mobile: 09370579333 Lucknow : House No 731, Shekhupura Colony, Near B.D. Convent School, Aliganj, Lucknow - 226 022. Phone: 0522-4012353; Mobile: 09307501549 Ahmedabad : 114, “SHAIL”, 1st Floor, Opp. Madhu Sudan House, C.G. Road, Navrang Pura, Ahmedabad - 380 009. Phone: 079-26560126; Mobile: 09377088847 Ernakulam : 39/176 (New No: 60/251) 1st Floor, Karikkamuri Road, Ernakulam, Kochi - 682011, Phone: 0484-2378012, 2378016; Mobile: 09344199799 Bhubaneswar : 5 Station Square, Bhubaneswar - 751 001 (Odisha). Phone: 0674-2532129, Mobile: 09338746007 Kolkata : 108/4, Beliaghata Main Road, Near ID Hospital, Opp. SBI Bank, Kolkata - 700 010, Phone: 033-32449649, Mobile: 09883055590, 07439040301 DTP by : HPH Editorial Office, Bhandup (Rajani Tambe) Printed at : Mudrashilp Offset Printer, Nagpur on behalf of HPH. Dedicated to The Lotus Feet of Sadguru Sainath Maharaj PREFACE Intensified competition among domestic private and public sector companies and multinational companies consequent upon globalisation along with strides in information technology brought paradigm shifts in strategic management of various companies. These shifts resulted in the emergence of new concepts like strategic intent, virtual organizations, strategic alliances, value chain analysis and the like. The overwhelming response from the students, Lecturers, Professors and heads of various Business Schools of various universities in India, Papua New Guinea and other countries to my earlier edition of the book inspired me and my publishers to bring out this second and enlarged edition of the book on ‘Business Policy and Strategic Management’. The current edition is endowed with latest information and developments including value chain analysis, strategic intent, emergent strategies, internal and external environment analysis and the like in multiple modes like up-dated text, Boxes, Figures, Tables, Exhibits and Cases. The current edition covers a number of latest developments, in addition to presenting the following new chapters: • Global Strategic Management • Functional Level Strategies • Social Responsibilities and Ethics of Business • Corporate Governance: A Strategy for Sustainable Development • Corporate Strategic Failures Many students particularly from Indian Universities, Business Schools and Management Institutes and the School of Business Administration, UPNG, Papua New Guinea and students from other universities across the developing countries provided on-line feedback for the earlier edition of the book. I, immensely thank them for their support and encouragement. Particularly, I would like to express my gratitude to Prof. Albert C. Mellam, Executive Dean and Prof. David Kavanamur, School of Business Administration, University of Papua New Guinea, Papua New Guinea and Prof M. Gangadhara Rao, my teacher and the Vice-Chancellor, GITAM University. Mr. Niraj Pandey, Mrs. Ujjwale Pandey, Mr. Anuj Pandey, Mr. Vijay Pandey, Mrs. Poopathi and Mrs. Nimisha of Himalaya Publishing House have provided immense support in bringing out this revised edition. I thank all of them immensely. My wife Mrs. Pulapa Rama Devi and my little friends Master Nitin Sai and Rohan Sai were put in inconvenience during the period of revising this book. I express my gratitude to them. I request the students, teachers and other readers to write to me with their comments and suggestions via e-mail. Port Moresby, Papua New Guinea Pulapa Subba Rao 27th November 2009 [email protected] CONTENTS 1. THE STRATEGIC MANAGEMENT PROCESS 1 – 30 (A) Why Strategy? (B) What is Strategy? (C) Why is Strategy More Complex? (D) Strategic Management (E) Strategic Management Process: Strategic Fit vs. Strategic Intent Points to be Remembered-Key Words- Questions for Discussion-References 2. THE STRATEGIST AND STRATEGIC DECISION-MAKING 31 – 48 (A) The Manager: Tasks and Roles (B) The Strategist: Shareholders, Board of Directors and the CEO, Role of Executives in Strategic Management (C) Strategic Decision-Making: Drivers of Success in, and Approaches to. Points to be Remembered-Key Words- Questions for Discussion-References 3. ESTABLISHING CORPORATE DIRECTION 49 – 83 (A) Introduction (B) Vision (C) Mission (D) Business Definition (E) Objectives Points to be Remembered-Key Words- Questions for Discussion-References 4. EXTERNAL ENVIRONMENT SCANNING AND INDUSTRY ANALYSIS 84 – 128 (A) Introduction (B) International Environment (C) Social and Cultural Environment (D) Technological Environment (E) Economic Environment (F) Political Environment (G) Natural Environment (H) Industry Analysis Points to be Remembered-Key Words- Questions for Discussion-References 5. INTERNAL ENVIRONMENT: CAPABILITIES AND COMPETENCIES 129 – 162 (A) Resources and Capabilities (B) Core Competencies (C) Value Chain Analysis and Outsourcing (D) Strengths and Weaknesses Analysis (E) Competitive Strength Assessment (F) Corporate Capability Factors (G) Diagnosing Corporate Capabilities Points to be Remembered-Key Words- Questions for Discussion-References 6. GLOBAL STRATEGIC MANAGEMENT 163 – 190 (A) Introduction (B) Peculiarities of Global Strategic Management (C) Value Creation (D) Global Strategic Management Process (E) Collaborative Strategies Points to be Remembered-Key Words- Questions for Discussion-References 7. CORPORATE LEVEL STRATEGIC ALTERNATIVES 191 – 224 (A) Strategy Formulation: Situational Analysis (B) Stability Strategies (C) Growth Strategies (D) Retrenchment Strategies (E) Strategic Alliances (F) Combination Strategy/Portfolio Restructuring Points to be Remembered-Key Words- Questions for Discussion-References 8. BUSINESS UNIT LEVEL STRATEGIES 225 – 260 (A) Introduction • Customer Needs (B) Generic Strategies • Low Cost Leadership, Differentiation, Focus (C) Generic Strategies (D) Offensive Strategies and Competitive Advantage (E) Defensive Strategies and Competitive Advantage (F) Matching Strategy to Situation (G) Thirteen Commandments for Formulating Successful Business Strategies Points to be Remembered-Key Words- Questions for Discussion-References 9. FUNCTIONAL LEVEL STRATEGIES 261 – 293 (A) Functional Level Strategies: An Introduction (B) Production/Operations Strategies (C) Marketing Strategies (D) Financial Strategies (E) Human Resource Strategies (F) Research and Development Strategies (G) Information Strategies (H) Integrated Functional Strategies Points to be Remembered-Key Words-Questions for Discussion-References 10. STRATEGIC ANALYSIS AND CHOICE 294 – 327 (A) Introduction (B) Criteria for Evaluating Strategic Alternatives (C) The Input Stage (D) The Matching Stage Corporate Portfolio Analysis (E) Selection of the Matrix (F) The Decision Stage Points to be Remembered-Key Words- Questions for Discussion-References 11. STRUCTURAL IMPLEMENTATION 328 – 358 (A) Analysing Strategic Change (B) Managing Strategic Change (C) Issues in Strategy Implementation (D) Organisational Structure (E) Approaches to Organisation Structure (F) Matching Structure and Strategy (G) Assessment of Organisational Structure (H) Perspectives on the Methods of Organising Points to be Remembered-Key Words- Questions for Discussion-References 12. BEHAVIOURAL IMPLEMENTATION 359 – 389 (A) Positive Attitude and Mindset (B) Leadership (C) Corporate Culture (D) Values (E) Power (F) Organisational Changes (G) Organisational Development Points to be Remembered-Key Words- Questions for Discussion-References 13. FUNCTIONAL IMPLEMENTATION: FUNCTIONAL ISSUES 390 – 427 (A) Operational/Production Policies (B) Marketing Policies (C) Financial Policies (D) Human Resource Policies (E) Management Information System Points to be Remembered-Key Words-