Strategic management

Prepared By: Ch Muhammad Irfan +92-345-4426176 Facebook.com/chmuhammedirfan Skype Id: ch.irfan786
Prepared by:
Ch Muhammad Irfan 1632-414001
+92-345-4426176
MBA (Accounting & Finance)
8th
Quarter
Under Supervision of:
Prof: Sajjad Mohsin

Topic: What is core assumption of resource base model? Briefly discuss its five
segments:
The Resource-Based Model:
This model adopts an internal perspective to explain how a firm's unique internal resources and
capabilities serves as a basis for earning above average returns. The model is based on three
assumptions:
1. Each firm is a collection of unique resources and capabilities that provides the basis for its
strategy and is the primary source of firm returns (i.e. characteristics of the firm itself
constrains or limits the scope of strategies that might be appropriate).
2. Over time, firms acquire different resources and develop different or unique capabilities.
Firms therefore are likely to adopt and implement different strategies in their attempts to
achieve strategic competitiveness.
3. Resources may not be highly mobile across firms. (Once example of an exception to this is
people skills, e.g., computer industry).
Following are the five segments of this model:
1) Resources:
 Identify the firm’s resources. Study its strengths and weaknesses compared with those of
competitors.
 Inputs into a firm’s production process
2) Capabilities:
 Determine the firm’s capabilities. What do the capabilities allow the firm to do better than its
competitors?
 Capacity of an integrated set of resources to integratively perform a task or activity
3) Competitive Advantages:
 Determine the potential of the firm’s resources and capabilities in terms of a competitive
advantage.
 Ability of a firm to outperform its rivals
4) An Attractive Industry:
 Locate an attractive industry.
 An industry with opportunities that can be exploited by the firm’s resources and capabilities
5) Strategy Implementation:
 Select a strategy that best allow the firm to utilize its resources and capabilities relative to
opportunities in the external environment.
 Strategic actions taken to earn above-average returns

Topic: What is core assumption of I/O model of average return? Briefly discuss
its five segments:
I/O Model
The I/O (Industrial Organization) Model adopts an external perspective to explain that forces
outside of the organization represent the dominate influences on a firm's strategic actions and is
based on the following four assumptions:
1. The external Environment The general, industry, and competitive environments impose
pressures and constraints on firms and determines strategies that will result in superior
returns. (External Environment à Organization)
2. Most firms competing in an industry or an industry segment control similar sets of
strategically-relevant resources and thus pursue similar strategies.
3. Resources used to implement strategies are highly mobile across firms.
4. Organizational decision-makers are assumed to be rational and committed to acting only in
the best interests of the firm.
Following are the five segments of this model:
1) The External Environment
— Study the external environment, especially the industry environment.
— The general environment
— The industry environment
— The competitor environment
2) An Attractive Industry
— Locate an attractive industry with a high potential for above-average returns.
— An industry whose structural characteristics suggest above-average returns
3) Strategy Formulation
— Identify the strategy called for by the attractive industry to earn above-average returns
— Selection of a strategy linked with above-average returns in a particular industry
4) Assets and Skills
— Develop or acquire assets and skills needed to implement the strategy.
— Assets and skills required to implement a chosen strategy
5) Strategy Implementation
— Use the firm’s strengths (its developed or acquired assets and skills) to implement the
strategy.
— Selection of strategic actions linked with effective implementation of the chosen strategy
Topic: Define strategic management process and briefly discuss its three stages:
The strategic management process represents a logical, systematic, and objective approach for
determining an enterprise's future direction. However, a clear separation is needed between the

managerial process by which an organization formulates, evaluates, implements, and controls the
relationships between its objectives, its strategies, and its environment.
Following are its three stages:
— Strategy Formulation
Strategy formulation is the process of establishing the organization's mission, objectives, and
choosing among alternative strategies. Sometimes strategy formulation is called "strategic
planning."
— Strategy Implementation
Strategy implementation is the action stage of strategic management. It refers to decisions that are
made to install new strategy or reinforce existing strategy. The basic strategy - implementation
activities are establishing annual objectives, devising policies, and allocated resources. Strategy
implementation also includes the making of decisions with regard to matching strategy and
organizational structure; developing budgets, and motivational systems.
— Strategy Evaluation and Control
The final stage in strategic management is strategy evaluation and control. All strategies are subject
to future modification because internal and external factors are constantly changing. In the strategy
evaluation and control process managers determine whether the chosen strategy is achieving the
organization's objectives. The fundamental strategy evaluation and control activities are: reviewing
internal and external factors that are the bases for current strategies, measuring performance, and
taking corrective actions.
Topic: Explain five forces of competition in an industry. How does it affect industry
profit potential?
Five forces if competition in industry is also known as porter’s five forces of competition.
— Threat of new entrants:
This force determines how easy (or not) it is to enter a particular industry. If an industry is profitable
and there are few barriers to enter, rivalry soon intensifies. When more organizations compete for
the same market share, profits start to fall. It is essential for existing organizations to create high
barriers to enter to deter new entrant.
— Bargaining power of suppliers:
Strong bargaining power allows suppliers to sell higher priced or low quality raw materials to their
buyers. This directly affects the buying firms’ profits because it has to pay more for materials.
— Bargaining power of buyers:
Buyers have the power to demand lower price or higher product quality from industry producers
when their bargaining power is strong. Lower price means lower revenues for the producer, while
higher quality products usually raise production costs. Both scenarios result in lower profits for
producers.
— Threat of substitutes:

This force is especially threatening when buyers can easily find substitute products with attractive
prices or better quality and when buyers can switch from one product or service to another with
little cost. For example, to switch from coffee to tea doesn’t cost anything, unlike switching from
car to bicycle.
— Rivalry among existing competitors:
This force is the major determinant on how competitive and profitable an industry is. In competitive
industry, firms have to compete aggressively for a market share, which results in low profits
How it affects industry profit potential:
The competitive environment of an industry has a strong influence on the performance of
businesses within that industry. An attractive industry is one which offers the potential for
profitability. If a company uses Porter’s 5 forces industry analysis and concludes that the
competitive structure of the industry is such that there is an opportunity for high profits, the
company can elect to enter that industry or market. Or, if the company is already competing in that
industry or market, it can use the competitive forces Porter created to determine its optimal
position within the marketplace.
Topic: Discuss the external environmental analysis:
Most firms face external environments that are highly turbulent, complex, and global conditions
that make interpreting those environments difficult. To cope with often ambiguous and incomplete
environmental data and to increase understanding of the general environment, firms engage in
external environmental analysis. This analysis has four parts: scanning, monitoring, forecasting, and
assessing.
— Scanning
Scanning entails the study of all segments in the general environment. Through scanning, firms
identify early signals of potential changes in the general environment and detect changes that are
already under way. Scanning often reveals ambiguous, incomplete, or unconnected data and
information. Thus, environmental scanning is challenging but critically important for firms,
especially those competing in highly volatile environments.
— Monitoring
When monitoring, analysts observe environmental changes to see if an important trend is emerging
from among those spotted through scanning. Critical to successful monitoring is the firm’s ability to
detect meaning in different environmental events and trends. For example, the buying power of
Hispanics is projected to increase to $1.3 trillion by 2013 (up from $984 billion in 2008).
— Forecasting
Scanning and monitoring are concerned with events and trends in the general environment at a
point in time. When forecasting, analysts develop feasible projections of what might happen, and
how quickly, as a result of the changes and trends detected through scanning and monitoring.

— Assessing
The objective of assessing is to determine the timing and significance of the effects of
environmental changes and trends that have been identified.34 Through scanning, monitoring, and
forecasting, analysts are able to understand the general environment. Going a step further, the
intent of assessment is to specify the implications of that understanding. Without assessment, the
firm is left with data that may be interesting but are of unknown competitive relevance. Even if
formal assessment is inadequate, the appropriate interpretation of that information is important.
Topic: Why understanding environmental analysis is necessary? Discuss its
seven segments.
Environmental business analysis is a catchall term given to the systematic process by which
environmental factors in a business are identified, their impact is assessed and a strategy is
developed to mitigate and/or take advantage of them. While frameworks do exist to aid in
environmental analysis, it is important to understand that they are simply frameworks to orient the
user toward a more precise understanding of the business environment; they are by no means
necessary. Rather, it is important to understand the business environment, the universal processes
used in analysis and how analysis is converted into strategy.
Segments of Environmental Analysis:
— The Demographic Segment:
The demographic segment is concerned with a population’s size, age structure, geographic
distribution, ethnic mix, and income distribution. Demographic segments are commonly analyzed
on a global basis because of their potential effects across countries’ borders and because many
firms compete in global markets.
— The Economic Segment
The economic environment refers to the nature and direction of the economy in which a firm
competes or may compete. In general, firms seek to compete in relatively stable economies with
strong growth potential. Because nations are interconnected as a result of the global economy,
firms must scan, monitor, forecast, and assess the health of their host nation and the health of the
economies outside their host nation.
— The Political/Legal Segment
The political/legal segment is the arena in which organizations and interest groups compete for
attention, resources, and a voice in overseeing the body of laws and regulations guiding
interactions among nations as well as between firms and various local governmental agencies.
Essentially, this segment represents how organizations try to influence governments and how they
try to understand the influences (current and projected) of those governments on their strategic
actions.
— The Sociocultural Segment

The sociocultural segment is concerned with a society’s attitudes and cultural values. Because
attitudes and values form the cornerstone of a society, they often drive demographic, economic,
political/legal, and technological conditions and changes
— The Technological segment:
The technological segment includes the institutions and activities involved with creating new
knowledge and translating that knowledge into new outputs, products, processes, and materials.
— The Global Segment
The global segment includes relevant new global markets, existing markets that are changing,
important international political events, and critical cultural and institutional characteristics of
global markets.
— The physical environment segment:
The physical environment segment refers to potential and actual changes in the physical
environment and business practices that are intended to positively respond to and deal with those
changes.
Topic: What are the capabilities? What are the four criteria used to determine
which of a firm’s capabilities are the core competence:
Capabilities
Measure of the ability of an entity (department, organization, person, system)
to achieve its objectives, especially in relation to its overall mission.
— Valuable capabilities:
Allow companies to improve their efficiency and effectiveness. Unfortunately, changes in customer
demand and preferences, competitors' actions, and technology can make once-valuable resources
much less valuable. For sustained competitive advantage, valuable resources must also be RARE
resources
— Rare capabilities:
Resources that are not controlled or possessed by many competing firms, are necessary to sustain a
competitive advantage. Other firms must be unable to imitate or find substitutes
— Imperfectly imitable capabilities:
Impossible or extremely costly or difficult to duplicate
Non substitutable capabilities:
Are valuable, rare, imperfectly imitable resources. No other resources can replace them and
produce similar value or competitive advantage.

Topic: Discuss the components of internal analysis leading to competitive
advantage and strategic competitiveness:
“Global Economy” The traditional sources of advantages can be overcome by competitors’
international strategies and by the flow of resources throughout the global economy.
Global mindset
The ability to study an internal environment in ways that are not dependent on the assumptions of
a single country, culture or context.
Analysis Outcome
Understanding how to leverage the firm’s bundle of heterogeneous resources and capabilities
Creating value
By innovatively bundling and leveraging their resources and capabilities by exploiting their core
competencies or competitive advantages, firms create value is measured by: Product performance
characteristic. Product attributes for which customers Superior value above average returns.
Topic: Briefly discuss various techniques used to carry out the environmental
analysis:
Environmental analysis is a strategic tool. It is a process to identify all the external and internal
elements, which can affect the organization's performance. The analysis entails assessing the level
of threat or opportunity the factors might present.
Following are the tools carried out for environmental analysis:
— SWOT ANALYSIS:
A SWOT analysis is a tool that identifies the strengths, weaknesses, opportunities and threats of an
organization. Specifically, SWOT is a basic, straightforward model that measures what an
organization can and cannot do as well as its potential opportunities and threats. The method of
SWOT analysis is to take the information from an environmental analysis and separate it into
internal (strengths and weaknesses) and
external issues (opportunities and
threats). Once this is completed, SWOT
analysis determines what may assist the
firm in accomplishing its objectives, and
what obstacles must be overcome or
minimized to achieve desired results.
— Environmental Scanning

Environmental scanning is defined as the process that seeks information about events and
relationships in a firm's environment, the knowledge of which help top management chart the
firm's future. Environmental scanning is used to gather information from the environment.
— PEST Analysis
PEST analysis identifies the external forces that affect the organization such as Political, Economic,
Social and Technological drivers. It is very useful for the organization when used together with
other tools such as the SWOT analysis.
a) Political Factors
b) Economic Factors
c) Sociological Factors
d) Technology Factors
— Porter's Five Forces Model Analysis:
Michael Porter is credited for his five forces model of competitive strategy. The power of each of
these forces varies from industry to industry, but taken together they determine long-term
profitability. These five factors will affect the strategies which will be adopted by the organization
and hence should be carefully analyzed. To be successful, the organization must respond in an
effective manner to the environmental pressures exerted on it.
— Internal environmental analysis:
The resources, strengths, behaviors, weakness and distinctive competences are major components
of the internal environment of an organization. An organization uses different types of resources
which help them achieve their objectives and the way in which they utilize their resources can be
the source of their strengths or weaknesses. This can also be defined as organizational capability.
— Conclusion: It can be seen that the analysis of the environment is critical to the success of
the decisions that managers have to make which have widespread impact on the functions
and processes of the business.
Topic: What is market commonality and resource similarity? Under which
conditions competitions become intense?
 Market Commonality
 The number of markets with which the firm and a competitor are jointly involved and
the degree of importance of the individual markets to each
 Each industry composed of various markets which can be subdivided into segments
 Example: Automobile industry
 Greater market commonality results in greater rivalry
 Firms may also compete against one another in several or many product and
geographic markets
 Multimarket Competition
 Firms with greater multimarket contact are less likely to attack but more likely to
respond when attacked
 Resource Similarity

 Extent to which firm’s tangible/intangible resources are comparable to competitor’s in
type and amount.
 Can result in similar strengths and weaknesses and similar strategies being pursued.
 The more similar the types and amounts of resources the more direct the competition
is between two firms.
Topic: Who are competitors Define competitive rivalry, why firms take
competitive actions and discuss their types:
Competitors:
Any person or entity which is a rival against another. In business, a company in the same industry or
a similar industry which offers a similar product or service. The presence of one or
more competitors can reduce the prices of goods and services as the companies attempt to gain a
larger market share.
Competitive Rivalry:
Industry rivalry—or rivalry among existing firms—is one of Porter's five forces used to determine
the intensity of competition in an industry. Other factors in this competitive analysis are: Barriers to
entry. Bargaining power of buyer.
I. Types and effectiveness of the competitive action
a. Strategic actions
i. Receive strategic responses
ii. Elicit fewer responses due to resources committed and required
b. Tactical actions
i. Receive tactical responses
ii. Elicit much faster responses
II. Dependence on the Market
a. Extent to which a firm's revenues or profits are derived from a particular market
b. High market dependence = more likely to respond.
III. Actor’s Reputation
i. Actor: Firm taking an action or response (in the context of competitive rivalry)
ii. Reputation: positive or negative attribute ascribed by one rival to another based
on past competitive behavior
b. Firms are more likely to respond to market leaders (firms with good reputations)
c. Past behavior is also a useful predictor of future behavior
d. Firms are less likely to respond to a company with a reputation for risky, complex, and
unpredictable behavior

Topic: Discuss drivers of competitive action and responses:
 Awareness
o Extent competitors recognize degree of mutual interdependence that results from
market commonality and resource similarity
o Greatest when firms have highly similar resources
o Affects the extent to which the firm understands the consequences of its competitive
actions and responses
o A lack of awareness can lead to excessive competition
 Motivation
o Firm's incentive to take action, or to respond to a competitor's attack, as it relates to
perceived gains and losses
o A firm is more likely to attack a rival with whom it has low market commonality
o Responses are more likely to occur when market commonality is high
 Ability
o Firm's resources that allow competitive action and flexibility to respond
o Without available resources a firm lacks the ability to respond
Topic: Cost leadership strategy is considered to be the most successful business
level strategy. Wal Mart is considered to be most successful firm which has
implemented cost leadership strategy is an effective manner. How is cost
leadership strategy evolved and implemented by Wal mart? Discuss quoting
examples.
When it comes to marketing your business, there are three generic strategies you can use: focus,
differentiation and cost leadership. While the cost leadership strategy can be highly successful, it
can be can be difficult to employ. It involves marketing your company as the cheapest source for a
good or service. This means that you need to minimize your costs and pass the savings on to your
customers. By looking at examples of firms that have employed this strategy successfully, you can
see how it can benefit your own business.
 Wal-Mart
Wal-Mart Stores Inc. has been successful using its strategy of everyday low prices to attract
customers. The idea of everyday low prices is to offer products at a cheaper rate than competitors
on a consistent basis, rather than relying on sales. Wal-Mart is able to achieve this due to its large
scale and efficient supply chain. They source products from cheap domestic suppliers and from low-
wage foreign markets. This allows the company to sell their items at low prices and to profit off thin
margins at a high volume.

Topic:
Define business level strategy and discuss its purpose. Enumerate the types of
business level strategies and discuss in detail any one of the following strategy,
with risk associated with this strategy (i) Cost Leadership Strategy (ii) Differentiation
strategy
Business level strategies detail actions taken to provide value to customers and gain a competitive
advantage by exploiting core competencies in specific, individual product or service markets.
I. Purpose:
To create differences between position of a firm and its competitors
Types of business level strategies:
 Cost Leadership
 Differentiation
 Focused cost leadership
 Focused differentiation

 Cost Leadership:
This generic strategy calls for being the low cost producer in an industry for a given level of
quality. The firm sells its products either at average industry prices to earn a profit higher than
that of rivals, or below the average industry prices to gain market share. In the event of a price
war, the firm can maintain some profitability while the competition suffers losses. Even without
a price war, as the industry matures and prices decline, the firms that can produce more cheaply
will remain profitable for a longer period of time. The cost leadership strategy usually targets a
broad market.
 Differentiation Strategy
A differentiation strategy calls for the development of a product or service that offers unique
attributes that are valued by customers and that customers perceive to be better than or
different from the products of the competition. The value added by the uniqueness of the
product may allow the firm to charge a premium price for it. The firm hopes that the higher price
will more than cover the extra costs incurred in offering the unique product. Because of the
product's unique attributes, if suppliers increase their prices the firm may be able to pass along
the costs to its customers who cannot find substitute products easily.
Topic: What are the problems in achieving acquisition success? Explain it in
the context of integration difficulties:
Acquisition strategies based on reasons described in this chapter can increase strategic
competitiveness and help firms earn above-average returns. However, even when pursued for
value-creating reasons, acquisition strategies are not problem-free. Reasons for the use of
acquisition strategies and potential problems with such strategies.
Integration difficulties:
The importance of a successful integration should not be underestimated. As suggested by a
researcher studying the process, “Managerial practice and academic writings show that the post-
acquisition integration phase is probably the single most important determinant of shareholder
value creation (and equally of value destruction) in mergers and acquisitions.” Integration is
complex and involves a large number of activities, which if overlooked can lead to significant
difficulties. For example, when United Parcel Service (UPS) acquired Mail Boxes Etc., a large
retail shipping chain, it appeared to be a merger that would generate benefits for both firms.
The problem is that most of the Mail Boxes Etc.
Topic: Discuss the popular approaches or methods used to restructure a
firm:
Types of Restructuring

Business firms engage in a wide range of activities that include expansion, diversification,
collaboration, spinning off, hiving off, mergers and acquisitions. Privatization also forms an
important part of the restructuring process. The different forms of restructuring may include:
 Expansion:
Expansions may include mergers, acquisitions, tender offers and joint ventures. Mergers per se,
may either be horizontal mergers, vertical mergers or conglomerate mergers. In a tender offer,
the acquiring firm seeks controlling interest in the firm to be acquired and requests the
shareholders of the firm to be acquired, to tender their shares or stock to it. Joint ventures
involve only a small part of the activities of the companies involved.
 Sell-Off:
Sell-Off may either be through a spin-off or divestiture. Spin-Off creates a new entity with shares
being distributed on a pro rata basis to existing shareholders of the parent company. Split-Off is
a variation of Sell-Off. Divestiture involves sale of a portion of a firm/company to a third party.
 Corporate Control:
Corporate control includes buy-backs and greenmail where the management of the firm wishes
to have complete control and ownership.
 Change in Ownership:
Change in ownership may either be through an exchange offer, share repurchase or going public.
An example: Essar Steel Announces Restructuring Plans
Essar Steel Limited recently announced its restructuring plan through which the company plans
to reduce its interest burden. The company has also initiated several other steps including
increasing production and lowering operating costs as a part of its restructuring program. The
company also announced the development of a strategy addressing its debt burden-reduction
and lengthening the maturity period.
Other restructuring programs initiated by the company included:
 Raising equity through rights issue
 Reduction in usage of power
The company, subsequent to its restructuring program, expects to be in a position to make net
profits, declare dividends and enhance shareholder value.
Topic: Discuss different level of diversification. Support your answer with
examples
— Low Levels of Diversification:
A firm pursing a low level of diversification uses either a single- or a dominant-business
corporate-level diversification strategy.
A single-business diversification strategy is a corporate-level strategy wherein the firm generates
95% or more of its sales revenue from its core business area. With the dominant-business
diversification strategy, the firm generates between 70% and 95% of its total revenue within a
single business area. United Parcel Service (UPS) uses this strategy.
Examples:
For example, Wm. Wrigley Jr. Company, the world’s largest producer of chewing and bubble
gums, historically used a single-business strategy while operating in relatively few product
markets. Wrigley’s trademark chewing gum brands include Spearmint, Double mint, and Juicy

Fruit, although the firm produces other products as well. Sugar-free Extra, which currently holds
the largest share of the U.S. chewing gum market, was introduced in 1984.
— Moderate and High Levels of Diversification:
A firm generating more than 30 percent of its revenue outside a dominant business and whose
businesses are related to each other in some manner uses a related diversification corporate-
level strategy. When the links between the diversified firm’s businesses are rather direct, a
related constrained diversification strategy is being used.
Examples:
Campbell Soup, Procter & Gamble, and Merck & Company all use a related constrained strategy,
as do some large cable companies. With a related constrained strategy, a firm shares resources
and activities between its businesses.
— Very High Levels of Diversification:
A highly diversified firm that has no relationships between its businesses follows an unrelated
diversification strategy. Less than 70% of revenue comes from the dominant business, and there
are no common links between businesses.
Topic: Why merger and acquisition strategies popular among firms
competing globally. Enumerate the reasons why firms decide to use
acquisition strategies:
Mergers and acquisitions (M&A) are defined as consolidation of companies. Differentiating the
two terms, Mergers is the combination of two companies to form one, while Acquisitions is one
company taken over by the other. M&A is one of the major aspects of corporate finance world.
The reasoning behind M&A generally given is that two separate companies together create more
value compared to being on an individual stand. With the objective of wealth maximization,
companies keep evaluating different opportunities through the route of merger or acquisition.
— Synergy:
The most used word in M&A is synergy, which is the idea that by combining business activities,
performance will increase and costs will decrease. Essentially, a business will attempt to merge
with another business that has complementary strengths and weaknesses.
— Diversification / Sharpening Business Focus:
These two conflicting goals have been used to describe thousands of M&A transactions. A
company that merges to diversify may acquire another company in a seemingly unrelated
industry in order to reduce the impact of a particular industry's performance on its profitability.
Companies seeking to sharpen focus often merge with companies that have deeper market
penetration in a key area of operations.
— Growth:
Mergers can give the acquiring company an opportunity to grow market share without having to
really earn it by doing the work themselves - instead, they buy a competitor's business for a
price. Usually, these are called horizontal mergers. For example, a beer company may choose to
buy out a smaller competing brewery, enabling the smaller company to make more beer and sell
more to its brand-loyal customers.
— Increase Supply-Chain Pricing Power:

By buying out one of its suppliers or one of the distributors, a business can eliminate a level of
costs. If a company buys out one of its suppliers, it is able to save on the margins that the
supplier was previously adding to its costs; this is known as a vertical merger. If a company buys
out a distributor, it may be able to ship its products at a lower cost.
— Eliminate Competition:
Many M&A deals allow the acquirer to eliminate future competition and gain a larger market
share in its product's market. The downside of this is that a large premium is usually required to
convince the target company's shareholders to accept the offer. It is not uncommon for the
acquiring company's shareholders to sell their shares and push the price lower in response to
the company paying too much for the target company.
Topic: What is the restructuring strategy and what are its common
forms:
 Restructuring strategy
Restructuring is the corporate management term for the act of reorganizing the legal,
ownership, operational, or other structures of a company for the purpose of making it more
profitable, or better organized for its present needs.
Following are the common forms of restructuring firms:
 Downsizing
Call it downsizing, layoff, rightsizing or smart sizing; in essence, it is all one and the same thing.
This restructuring strategy is about reducing the manpower to keep employee costs under
control. Take the case of auto-giant General Motors, which in 1991 decided to shut down 21
plants and lay off 74,000 employees to counter its losses.
 Starburst
This restructuring strategy involves breaking a company into smaller independent business units
for increasing flexibility and productivity. This may be done either to dissect the business into
manageable chunks or when the business wants to diversify and foray into unrelated areas. One
of the latest examples of this strategy is Pfizer’s decision to spin off four non-pharmaceutical
firms this year.
 De-layering
De-layering involves breaking down the classical pyramid setup into a flat organization. The main
objective of this type of restructuring is to thin out the top layer of unproductive and highly paid
‘white collar’ staff. General Electric has reduced the number of management levels from ten to
four in some of its work facilities in order to improve overall productivity.
Hewlett Packard, on the other hand, has de-layered to promote innovation, build customer
intimacy and increase consumer satisfaction. The major advantage of de-layering is that the
decision making process becomes shorter and more effective.
 Business Process Reengineering
This type of restructuring is carried out for making operational improvements. It begins with
identifying how things are being done currently and then it moves on to re-engineering the tasks
to improve productivity.

Business process re-engineering usually results in changing roles. While at times BPR may lead to
layoffs, it can also create new employment opportunities.
When Ford Motor was trying to reduce its cost, it found that the process at its accounts payable
department needed to be re-engineered. The reengineering helped in simplifying the controls
and maintaining the financial information more accurately, that too after laying off 75 percent of
the staff from the accounts payable department.
 Outsourcing
Today’s businesses prefer to outsource some of their processes to other firms. There are two
ways outsourcing benefits a business; first, it helps in reducing costs and second, it allows the
business to concentrate on its core business and leave the remaining tasks to outsourcing firms.
Whenever a business plans to outsource one of its processes, it will cause some major
restructuring and reshuffling within the company. Downsizing is common when a business
outsources its processes. For instance, Nokia plans to lay off 4000 of its employees by the year
end 2012, as it will be outsourcing the production of its Symbian operating system.
 Virtualization
Virtualization is the last on our list of restructuring strategies. This strategy involves pushing
employees outside the office to places where they are more needed like at the client’s site. It
also involves upgrading to technology, which allows unmanned virtual offices to be set up. For
example, the ATMs offered by banks are their virtual units.
Topic: What is the strategic leaderships? In what ways are top executives
considered important resources for an organization.
 Strategic leadership
Strategic leadership is a complex form of leadership in organizations. It means that the leader
must have the ability to manage through others. Being a strategic leader requires the ability to
anticipate, envision, maintain flexibility, and empower others to create strategic change as
necessary.
Top executives considered important resources for an organization in the
following was:
Top executives are important to effective strategy formulation and implementation. A key
reason for this is that the strategic decisions made by top managers influence the firm’s design
and performance outcomes. Thus, having a top management team with superior managerial
skills is a critical element of organizational success.
In addition to determining new strategic initiatives, top-level managers also develop the
appropriate organizational structure and reward systems of a firm. Furthermore, top executives
have a major effect on a firm’s culture. Research suggests that managers’ values are critical in
shaping a firm’s cultural values—i.e., top executives have an important effect on organizational
activities and performance. The significance of this effect should not be underestimated.
Topic: What are the available five models of international expansion and
what is the normal sequence of their use:

Commercial transactions are the ultimate goal of international trade and, indeed, trade of any
kind. The pattern of international market development often follows a series of stages:
 Domestic-market establishment
The domestic market is often an appropriate place to test products and fine-tune performance
before tackling the complexities of international trade. It can also give a good indication of
performance. However, in some instances, this stage of the export process doesn’t serve any
purpose at all. This may be the case for a Canadian software company, for example, that has
developed a product specifically for a foreign market.
 Export research and planning
When companies begin trading abroad, they often target a country similar to their own in
language, financial structures, legal and economic systems or culture. For example, Canadians
entering the international marketplace usually address the U.S. market first.
Initial export sales
When implementing an export plan, it’s advisable to begin modestly by testing the market. A
graduated strategy enables the novice exporter to acquire practical experience in a market
without incurring unnecessary or unmanageable risk.
Expansion of international sales
If initial sales have been good, planning for larger orders and expanded activity should follow.
This stage is usually accompanied by intensified market research, more aggressive participation
in international trade shows and other marketing activities and greater emphasis on
strengthening networks and contacts in the target market.
 Investment abroad
If sales are brisk, profits encouraging and opportunities promising, the company may choose to
expand its presence in the target market. It can, for example, open a local office, tighten
relations with local partners, buy an existing local company, form a joint venture or invest in
R&D or production facilities.
OR
 Start with a clear and deliberate strategy
New markets can represent a significant opportunity for mid-market businesses, but it is
important to be considered in your approach. For example, emerging markets, while attractive
from a growth perspective, can be highly complex from a regulatory and employment
perspective, and necessitate relevant management expertise which is often not present in mid-
sized businesses.
 Sell products or services tailored to the local market
A killer product in your domestic market may not necessarily translate well into a new market.
Each country has its idiosyncrasies; commercial and cultural variances between regions are often
more difficult to grasp than the obvious legal or regulatory differences, but they are equally
important.
 Choose the right structure

Having defined your target countries and relevant products or services, the next step is to
choose which legal structure is most appropriate. Is it best to access a new market directly by
placing a new sales team in the region? Or would it be more appropriate to test the market
through a third-party distributor or are you confident enough in the market’s appeal to access it
through a bolt-on acquisition?
 Allocate the requisite financial and human resources
Internationalization is not a shortcut to growth; expanding with a clear and deliberate strategy
takes time and can incur costs which should be viewed as an investment in the business for
medium to long-term growth. These costs and the management time required for success are
often underestimated and, therefore, shareholder support is critical if the company is to realize
its full potential.
 Choose a good financial partner
Given the time and investment needed for international expansion, mid-sized businesses
succeed when they are supported by a financial partner that not only has the capital required,
but also the experience and network of people in international markets.
Topic: Discuss Porter’s Model of Nations Competitiveness. How it can be
sustained
Economist Michael Porter, a Harvard University professor and advisor for both the public and
private sectors, first defined national competitive advantage (NCA) in his 1990 book “The
Competitive Advantage of Nations.” Also known as the Porter Competitive Advantage
 Factor Conditions.
The nation’s position in factors of production, such as skilled labor or infrastructure, necessary to
compete in a given industry.
 Demand Conditions.
The nature of home-market demand for the industry’s product or service.
 Related and Supporting Industries.
The presence or absence in the nation of
supplier industries and other related
industries that are internationally
competitive.
 Firm Strategy, Structure, and
Rivalry.
The conditions in the nation governing how
companies are created, organized, and
managed, as well as the nature of domestic
rivalry.

Topic: What are the three international corporate level strategies? How
they differ with each other
 MULTIDOMESTIC STRATEGY
A firm using a multi domestic strategy sacrifices efficiency in favor of emphasizing
responsiveness to local requirements within each of its markets. Rather than trying to force all of
its American-made shows on viewers around the globe, MTV customizes the programming that
is shown on its channels within dozens of countries, including New Zealand, Portugal, Pakistan,
and India. Similarly, food company H. J. Heinz adapts its products to match local preferences.
Because some Indians will not eat garlic and onion, for example, Heinz offers them a version of
its signature ketchup that does not include these two ingredients.
 GLOBAL STRATEGY
A firm using a global strategy sacrifices responsiveness to local requirements within each of its
markets in favor of emphasizing efficiency. This strategy is the complete opposite of a multi
domestic strategy. Some minor modifications to products and services may be made in various
markets, but a global strategy stresses the need to gain economies of scale by offering
essentially the same products or services in each market.
 TRANSNATIONAL STRATEGY
A firm using a transnational strategy seeks a middle ground between a multi domestic strategy
and a global strategy. Such a firm tries to balance the desire for efficiency with the need to
adjust to local preferences within various countries. For example, large fast-food chains such as
McDonald’s and KFC rely on the same brand names and the same core menu items around the
world. These firms make some concessions to local tastes too. In France, for example, wine can
be purchased at McDonald’s. This approach makes sense for McDonald’s because wine is a
central element of French diets.

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