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1 (a) What do you mean by environmental scanning?
Monitoring the variables outside the organization that are relevant and have an influence on the survival and growth of an organization is called environmental scanning. It has a bearing on the decisions the company makes about its strategy, objectives and business. The relevant environmental variables within the industry are called micro-variables and the variables outside the industry are called macro-variables.
(b) Discuss the characteristics of an effective vision statement.
 Graphic - A well-stated vision paints a picture of the kind of company that management is
(3 marks)
(7 marks) trying to create and the market position the company is striving to stake out o E.g. McDonald’s - to be the world's best quick service restaurant experience.
Being the best means providing outstanding quality, service, cleanliness, and value, so that we make every customer in every restaurant smile
 Flexible - It is not a once-and-for-all-time pronouncement. Visions about a company's future path may need to change as events unfold and circumstances change o E.g. Nike - 1960s: Crush Adidas o Current: To be the number one athletic company in the world
 Directional - It says something about the company's journey or destination and signals the kind of business and strategic changes that will be forthcoming. o E.g. Infosys - We will be a globally respected corporation
 Focused - It is specific enough to provide managers with guidance in making decisions and allocating resources. o GE - Become the number one or number two in every market we serve and revolutionize this company to have the strength of a big company combined with the leanness and agility of a small company
 Feasible - It is within the realm of what the company can reasonably expect to achieve in due time. o Volkswagen – To be the largest seller of passenger cars by 2018
 Desirable - It appeals to the long-term interests of stakeholders, particularly shareholders,

employees and customers. o GE - Become the number one or number two in every market we serve and revolutionize this company to have the strength of a big company combined with the leanness and agility of a small company
 Easy to communicate - It is explainable in less than 10 minutes and ideally can be reduced to a simple, memorable slogan.
(c)
E.g. Infosys - We will be a globally respected corporation
With the help of the strategic management model, explain the steps in the strategic management process.
1.
The Strategic Planner has to define what is needed to be accomplished, which helps in defining the objectives, strategies and policies of the organization (Wipro has been one of the top three software companies and it wants to be among the top three)
2.
The results of the current performance of the organization are documented (Wipro documents its financial performance)
3.
The Board of Directors and the top management will have to review the current performance of the organization (Wipro analyzed that its growth is slower than competitors during its strategy of having two CEOs).
4.
After the review, the organization will have to scan the internal environment for strengths and weaknesses and the external environment for opportunities and threats (Wipro realized that it was not present in the fast growing sectors like finance, banking and heath. It also realized that two
CEOs strategy had failed)
5.
The internal and external scan helps in selecting the strategic factors (Wipro moved to single CEO strategy and need for focus on fast growing sectors).
6.
These selected factors have to be reviewed and redefined in relation to the mission and objectives
(Wipro’s objective was to perform better than rivals).
7.
The review will generate a set of alternative strategies (Wipro also needed to increase the number of customers giving more than $100 million annually).
8.
The best strategic alternative is selected and implemented through programme budgets and procedures.
9.
Monitoring, evaluation and review of the implementation can provide a feedback on the changes in the implementation required.
(10 marks)

2 (a) Distinguish between corporate and business strategies with examples.
Corporate Strategies
Decided by CEO
Needs to be approved by the board of directors
Business Strategies
Decided by business head
Needs to b approved by CEO
Is derived from the vision and mission statements Is derived from the corporate strategy
Effects the overall organization Effects a particular business unit
Relatively more important than business strategy Relatively less important than corporate strategy
E.g. Entering into FMCG and food industries from
ITC
E.g. The strategy of food division of ITC to focus on snacks (Bingo chips), confectionary (Sunfeast biscuits), grains (Aashirwad atta), Ready-to-eat
(Yippee noodles)
(3 marks)
(b) Balanced score card is an approach to measure the company’s performance. Explain
 The Balanced Scorecard approach is used for measuring company performance by setting both financial and strategic objectives and tracking their achievement.
 It provide a clear prescriptions to what companies should measure in order to "balance" the financial perspective with customer goals and operational performance goals in implementation and control of strategic plans
 It enables companies to clarify their strategies, translate them into action and provide meaningful feedback
 It provides feedback around both the internal business processes and external outcomes in order to continuously improve strategic performance and results
There are four perspectives which help in measuring the company’s performance:
1.
The learning and growth perspective
 How well are we continuously improving and creating value?
 The scorecard insists on measures related to innovation and organizational learning.
 To gauge performance on this dimension the measures can be
 Technological leadership
 Product development cycle times
 Operational process improvement, etc.
(7 marks)

2.
The business process perspective
 What are our core competencies and areas of operational excellence?
 Internal business processes and their effective execution as measured by productivity, cycle time, quality measures, downtime, various cost measures among others provide input
3.
The customer perspective
 How satisfied are our customers?
 A customer satisfaction perspective typically adds measures related to defect levels, on-time delivery, warranty support, product development, etc.
4.
The financial perspective
 How are we doing for our shareholders?
A financial perspective typically uses measures like cash flow, return on equity, sales and income growth.

(c) Why strategic management is an ongoing process and not a start-stop event?
Strategic Management is always aimed at providing a competitive advantage for the organization.
Organization is continuously challenged in providing this competitive advantage. These challenges are ever changing and hence any strategy cannot be static but a dynamic one.
Following are the reasons for the strategy to be an ongoing process and not a start–stop event.
1.
Ever changing marco-environment
The macro-environment influences the working of an organization and a organization does not have any control over the macro-variables. Some of the macro-variables are: a.
Government policies
The government changes its policies depending on the needs of the society and the demands of the people. Since an organization has to comply with the rules of the government, it may be necessary for the organization to change its strategy to meet the government regulations.
E.g. When the Indian economy opened in 1991 organizations like Mahindra and Mahindra changed their strategy to become more competitive and take advantage of the liberalized economy. b.
Demographic variables
The variations in the demographic variables provide an opportunity for organizations to design new products and services. The increase in the spending power seen in the recent years in India has made many organizations to offer higher priced products for their customers. The young population of India has attracted many MNCs who can offer their products to this young population. The increase in nuclear families has also been tapped by many organizations.
E.g. Pleasure scooter by Hero, Scooty by TVS which are aimed at young female riders;
Myntra.com is tapping into the desire of town B and C customers to buy genuine branded products c.
Technology
It has become important for organizations to use technology for survival and for improving their efficiency. The fact that customers are adopting the technology very fast has forced organizations to use technology. The rise of many internet companies is a proof of the important technology plays in an organization. Many Brick & Mortar companies have started online operations. Technology is also used extensively to improve operations efficiency and reduce cost.
E.g. Technology is used by Toyota for its JIT program; Tata used technology is develop its
(10 marks)

low cost car Nano; Makemytrip.com used internet technology for its operations d.
Economy
Economy has one of the major impacts on the buying behavior of customers.
Organizations have to monitor their expansion strategy continuously to be aligned with the economy. The growth gets hampered due to economy. Capital investments are held back when the economy is not doing well. Economy also affects the buying sentiments of the customers.
E.g. Many software companies have changed their recruitment strategy due to the ongoing economy problem
2.
Ever changing micro-variables
The micro variables have a more direct impact on the functioning of an organization. These organizations have to respond faster for the changes in these variables. Some of the microvariables that are constantly changing prompting the organization to alter strategic dynamically are as follows. a.
Competitors
The competitors would be having their own strategy and trying to get competitive edge. This process may entail them introducing new products, improving their distribution network, more advertisements and promotions and building better relation with suppliers. Since there will be a number of customers and each will be active with their strategy, an organization is continuously under pressure to counter the activities of the competitors. This will ensure that the organizational strategy is a continuously evolving one.
E.g. Introduction of Wheel as a competitor to Nirma b.
Buyers
Buyers are very powerful because of the choices they have. Large number of competitors vying for their attention make the buyers very powerful. The demands and needs of the buyers keep changing. Organizations have to be constantly monitoring the changing needs of the buyers to ensure that their products and services are relevant to the buyers. The constant endeavor of the organization to satisfy the customer’s needs make its strategy a ever changing one and not a start-stop type.
E.g. Introduction of sachet was a result to sell a lower quantity to the rural customers c.
Suppliers

The organization will be trying to maximize its competitiveness in every manner including its suppliers. They will be trying to build relations with suppliers to get advantages of new inventions from the suppliers. Since many organizations and trying to build relation with the suppliers the strategy of the organization with respect to suppliers will also be constantly changing.
E.g. Maruti expects its suppliers to invest in R&D and share the benefits of the research with it d.
New entrants
Any industry always has the challenge of a new entrant. The new entrants will be looking to disturb the existing equilibrium in the industry with aggressive product launches, promotions and retailer sops. The existing players always need to have flexibility in their strategy to accommodate the new entrant. Since any company from any industry can be the new entrant, the strategy or the organization has to a continuously varying one and not a start-stop one.
E.g. Entry of ITC into packaged foods industry made the existing players to change their strategy e.
Substitute products
Any industry will have substitute products challenging their products. Since these substitute products are being introduced by other industry the players will not be aware of the type of competition that will be posed by the substitute product. An organization will have to respond to the challenges of the substitute products. The uncertainty related to substitute products make the organization strategy an ongoing process and not a start-stop type.
E. g. The Indian railways had to reduce the price of the first class travel due to challenge from the low cost airlines
3
Nokia, the Finnish phone giant sold an amazing 208 million handsets in 2004, up 16% from 2003. Fierce competition and sagging prices pushed mobile-phone revenues down 3%, to $30 billion. Garden-variety handsets are becoming commodities. Nokia also had a wretched first half in 2004, when a stale product portfolio and strained relationships with mobile operators cost it nearly a fifth of its hard-won 35% global market share and pushed revenue growth into reverse.
To get Nokia back on track, chief executive Jorma Ollila has cranked up the introduction of new phones, especially "clamshell" models that hinge at the top -- a popular category where the Finns were missing in action. He has also wooed operators, agreeing to tailor phones to their specifications as never before. And to regain lost share, Nokia slashed prices on certain models by up to 25%, at the expense of operating earnings, which fell 15% in 2004, to $5.6 billion. By year`end, Nokia had managed to claw back nearly all its lost market share.
But the company still faces a fundamental problem -- no growth. To get Nokia's engines revving again, Ollila

is redirecting research and development to areas where Nokia stands apart, especially radio technology and mobile-phone software. Nokia spent more than $4.8 billion last year on R&D, 60% of that for software.
As basic mobile phones become more cookie-cutter and barriers to entry fall, Nokia has to pile on more features. That's why Ollila has created two new business units. One handles multimedia devices -- camera phones, game machines, and mobile TVs -- and the other sells devices aimed at businesses. Ollila has farmed out basic cell phones to a division whose main job is to deliver mass-market units at the lowest possible price. That group still represents 63% of revenues and 87% of operating profits. Another division, accounting for 22% of revenues, sells wireless networks to operators.
Because of market saturation in the developed world, analysts expect total handset shipments to grow only in the single digits for the next few years. Meanwhile, price-cutting could keep industry revenues nearly flat.
In search of growth, Nokia is diving deep into developing countries like China, India, Brazil, and Russia. They demand less-expensive phones but are growing much faster than Europe or North America.
Ollila is casting a wide net for high-margin opportunities outside conventional handsets, especially in the hotly contested "convergence" arena. Nokia's new multimedia group, for instance, offers gadgets that take pictures, play games and music, and will eventually show digital TV. The group booked revenues of $4.7 billion last year, up 46%, and earned its first operating profit of $232 million.
To court corporate users, Ollila has also established an "enterprise solutions" group. The goal: persuading companies to outfit their workers with voice-and-data gizmos. The enterprise group topped $1 billion in revenues last year, up 57%, but will likely continue losing money through 2005.
The next step in Ollila’s plan is to exploit Nokia's technology assets to revamp the way it builds phones. The idea is to turn the handset from hardware into software by adding flexible, easily customized software.
Questions:
1.
What went wrong with Nokia’s strategy in the beginning of 2004? What steps were taken to overcome the problem?
Things that went wrong with Nokia during early 2004:
 Fierce competition and sagging prices pushed mobile-phone revenues down 3%
 Garden-variety handsets are becoming commodities
 It had a stale product portfolio
 It had strained relationships with mobile operators
 It nearly lost a fifth of its market share
 Revenue growth became negative
 Customers believed that they were not heard
Steps taken for correction:
 Introduced new models to cater to the top end of the market
 The phones were tailor made to the specifications of the operators
 Prices were slashed up to 25% for some models
2.
What strategy was followed by Nokia post 2004 recovery?
Strategies post 2004:
 Redirected R&D towards radio technology and mobile-phone software which were strong areas for
Nokia
 60% of R&D investment was in software
 Two new businesses were created to handle multimedia and to sell devices aimed at businesses
 A division from basic cell phones was created to deliver mass market units at lowest possible price
 Moving towards developing countries like China, India, Brazil and Russia
 "Enterprise Solution" group was established to focus on corporate users
Exploiting Nokia's technology competence to revamp its phone building process with focus on flexible and customized software
(5 marks)
(5 marks)