Q1).

Define strategy and strategic management.

Ans. Strategy - A plan of action designed to achieve a long-term or overall aim.

Strategic Management - Strategic Management is a stream of decisions and actions which lead to
the development of an effective strategy or strategies to help achieve corporate objectives.

The Strategic Management process is how strategists determine objectives and make strategic
decisions. Strategic Management can be found in various types of organizations, businesses,
services, cooperatives, governments, and the like.

Explain the following terms

1. Vision

Ans. Vision is a future-oriented concept of the business. Forming a strategic vision is an exercise in
thinking about where a company needs to head to be successful. A vision is a mental image of a
possible and desirable future state of the organization. A vision describes aspirations for the future –
a destination for the organization.

2. Mission

Ans. The mission is the core purpose of an organization or a company. It is a summary of the aims
and core values. A mission tells what you as an organization does for customers.

3. Objectives

Ans. An objective is a result that a company aims to achieve. It also includes the strategies that
people will use to get there. A business objective usually includes a time frame and lists the
resources available.

Q2).

a) Describe the BCG matrix.

Ans. BCG matrix is a framework created by Boston Consulting Group to evaluate the strategic
position of the business brand portfolio and its potential. It classifies a business portfolio into four
categories based on industry attractiveness (growth rate of that industry) and competitive
position (relative market share). These two dimensions reveal the likely profitability of the business
portfolio in terms of cash needed to support that unit and cash generated by it. The general purpose
of the analysis is to help understand, which brands the firm should invest in and which ones should
be divested.
Relative market share. One of the dimensions used to evaluate
business portfolio is relative market share. Higher corporate’s market
share results in higher cash returns. This is because a firm that
produces more, benefits from higher economies of scale and
experience curve, which results in higher profits. Nonetheless, it is
worth to note that some firms may experience the same benefits with
lower production outputs and lower market share.
Market growth rate. High market growth rate means higher earnings
and sometimes profits but it also consumes lots of cash, which is used
as investment to stimulate further growth. Therefore, business units
that operate in rapid growth industries are cash users and are worth
investing in only when they are expected to grow or maintain market
share in the future.
There are four quadrants into which a firm’s brands are classified:
Dogs. Dogs hold low market share compared to competitors and
operate in a slowly growing market. In general, they are not worth
investing in because they generate low or negative cash returns. But
this is not always the truth. Some dogs may be profitable for long
period of time, they may provide synergies for other brands or SBUs
or simple act as a defense to counter competitors moves. Therefore, it
is always important to perform deeper analysis of each brand or SBU
to make sure they are not worth investing in or have to be divested.
Strategic choices: Retrenchment, divestiture, liquidation
Cash cows. Cash cows are the most profitable brands and should be
“milked” to provide as much cash as possible. The cash gained from
“cows” should be invested into stars to support their further growth.
According to growth-share matrix, corporates should not invest into
cash cows to induce growth but only to support them so they can
maintain their current market share. Again, this is not always the truth.
Cash cows are usually large corporations or SBUs that are capable of
innovating new products or processes, which may become new stars.
If there would be no support for cash cows, they would not be capable
of such innovations.
Strategic choices: Product development, diversification, divestiture,
retrenchment
Stars. Stars operate in high growth industries and maintain high
market share. Stars are both cash generators and cash users. They are
the primary units in which the company should invest its money,
because stars are expected to become cash cows and generate
positive cash flows. Yet, not all stars become cash flows. This is
especially true in rapidly changing industries, where new innovative
products can soon be outcompeted by new technological
advancements, so a star instead of becoming a cash cow, becomes a
dog.
Strategic choices: Vertical integration, horizontal integration, market
penetration, market development, product development
Question marks. Question marks are the brands that require much
closer consideration. They hold low market share in fast growing
markets consuming large amount of cash and incurring losses. It has
potential to gain market share and become a star, which would later
become cash cow. Question marks do not always succeed and even
after large amount of investments they struggle to gain market share
and eventually become dogs. Therefore, they require very close
consideration to decide if they are worth investing in or not.
Strategic choices: Market penetration, market development, product
development, divestiture.
b) Explain the GE Nine Cell model. What is the advantage of GE Nine Cell over the BCG matrix?

Ans. This matrix was developed in the 1970s by the General Electric Company with the
assistance of the consulting firm, McKinsey & Co, USA. This is also called GE multifactor
portfolio matrix.

The GE matrix has been developed to overcome the obvious limitations of the BCG
matrix. This matrix consists of nine cells (3X3) based on two key variables:

i)             business strength

ii)           industry attractiveness

The horizontal axis represents business strength and the vertical axis represents
industry attractiveness

The business strength is measured by considering such factors as:

relative market share

profit margins

ability to compete on price and quality

knowledge of customer and market

competitive strengths and weaknesses

technological capacity

caliber of management

Industry attractiveness is measured considering such factors as:

market size and growth rate

industry profit margin

competitive intensity
economies of scale

technology

social, environmental, legal, and human aspects

The industry product lines or business units are plotted as circles. The area of each
circle is proportionate to industry sales. The pie within the circles represents the
market share of the product line or business unit.

The nine cells of the GE matrix represent various degrees of industry attractiveness
(high, medium, or low) and business strength (strong, average, and weak). After
plotting each product line or business unit on the nine-cell matrix, strategic choices
are made depending on their position in the matrix.

The advantage of GE Nine Cell over the BCG matrix:-

BCG is only a four-cell matrix, while GE McKinsey is a nine-cell matrix.

Nine cells provide a better visual portrait of where business units
stand in the matrix. It also separates the invest/grow cells from
harvest/divest cells that are much closer to each other in the BCG
matrix and may confuse others about what investment decisions to
make.
1)   It used 9 cells instead of 4 cells of BCG

2)   It considers many variables and does not lead to simplistic conclusions
3)   High/medium/low and strong/average/low classification enables a finer
distinction among business portfolio

4)   It uses multiple factors to assess industry attractiveness and business strength,
which allows users to select criteria appropriate to their situation.

Q3). What do you understand by Mergers & Acquisitions? What are various types of mergers?
What are the issues in implementing a ‘merger strategy’ successfully? Cite the latest Indian &
Global examples relevant to the merger strategy.

Ans. Mergers and acquisitions (M&A) are defined as the consolidation of companies.
Differentiating the two terms, Mergers is the combination of two companies to form
one, while Acquisitions are one company taken over by the other. M&A is one of the
major aspects of the 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.

Types of Mergers and Acquisitions:

Merger or amalgamation may take two forms: merger through
absorption or merger through consolidation. Mergers can also be
classified into three types from an economic perspective depending
on the business combinations, whether in the same industry or not,
horizontal (two firms are in the same industry), vertical (at different
production stages or value chain), and conglomerate (unrelated
industries). From a legal perspective, there are different types of
mergers like short-form mergers, statutory mergers, subsidiary
mergers, and mergers of equals.
Merger & Acquisition Strategy is the process undertaken in which one
corporate buys, sells, or combines with the other corporate to achieve
certain specific goals of the market or to attain rapid growth in the
competitive market, taking into consideration different factors like the
market value of corporate’s stock, the financial health of both the
companies, threats of both the companies, new opportunities that can
arise along with market conditions.
Generally, the bigger companies in the market hunt for smaller
companies for the acquisition process. Companies have different
policies for mergers & acquisitions like expanding an existing business,
research, development, etc. All these policies should be kept in mind
while entering the M&A Strategy by both companies. Failure to
implement proper planning, study, and lack of strategies, also
fails the merger & acquisition strategy. The resulting company
formed cannot survive in the long run. Hence, proper planning,
understanding of the market and the business of both the
companies, and proper strategies should be done well in advance
before implementing merger & acquisition strategies.

 Indian & Global examples of the merger strategy: -

1. Zee Entertainment – Sony India Merger

2. Indus Tower – Bharti Infratel Merger
3. Vodafone Idea Merger
4. Arcelor Mittal
5. Tata and Corus Steel
6. Walmart Acquisition of Flipkart
7. Vodafone Hutch-Essar