MBAR Entrepreneurship and small business management

MBA-210                              ENTREPRENEURSHIP AND SMALL BUSINESS MANAGEMENT

Q. 1.        Answer all the questions:

(i)            Define Entrepreneurship.

ANS- Entrepreneurship is both the study of how new businesses are created as well as the actual process of starting a new business – the term is used interchangeably. An entrepreneur is someone who has an idea and who works to create a product or service that people will buy, by building an organization to support those sales.

Entrepreneurship is now a popular college major, with a focus on studying new venture creation.

(ii)           Write any two organizations name those are working for entrepreneurship development?

Ans- Ashoka- Founded in 1980, Ashoka is home to the largest network of social entrepreneurs on a global scale. Billy Drayton is the CEO and founder, and has been a social entrepreneur since he was an elementary-school student. Ashoka has nearly 3,000 members in 70 countries.

Vistage- Vistage is committed to CEO and executive coaching, leadership development and business mentoring. Those who are interested in giving back can also become a CEO coach with Vistage. The organization is made up of more than 20,000 business leaders worldwide with a members-only online network.

(iii)          Write any two types of entrepreneurial competencies?

Ans- Entrepreneurial competencies are the skills necessary for an entrepreneur to

• Venture into an enterprise
• Organize and manage an enterprise ably and competently
• Realize the goal for which the enterprise is established

(iv)          What is industrial sickness?

Ans- Industrial sickness usually refers to a situation when an industrial firm performs poorly, incurs losses for several years and often defaults in its debt repayment obligations. • A sick industrial unit may be defined as one when it fails to generate surplus on a continuous basis and depends on frequent infusion of external funds for its survival.

(v)           Write any two functions of entrepreneurship motivation training?

Ans-  1. Taking Initiative- Entrepreneurship is a pro-active activity that takes such actions, which others can’t even perceive.

2. Organizing Resources- Organizing entails identifying those resources that are required to transform a particular idea into reality. The resources include human and nonhuman resources.

Q. 2.       Discuss the various compositions of business plan.

Ans- A business plan can take many forms, depending on the venture. A four-person management consulting firm may produce a leaner plan focused on service expertise and industry experience compared to a 20-employee widget maker, which would also have to describe products, manufacturing techniques, competitive forces and marketing needs, among other details. But most plans will include the following main sections:

Executive summary

This is your five-minute elevator pitch. It may include a table of contents, company background, market opportunity, management overviews, competitive advantages, and financial highlights. It’s probably easiest to write the detailed sections first and then extract the cream to create the executive summary.

Business description and structure

This is where you explain why you're in business and what you're selling. If you sell products, describe your manufacturing process, availability of materials, how you handle inventory and fulfillment, and other operational details.

Market research and strategies

Spell out your market analysis and describe your marketing strategy, including sales forecasts, deadlines and milestones, advertising, public relations and how you stack up against your competition.

Management and personnel

Provide bios of your company executives and managers and explain how their expertise will help you meet business goals. Investors need to evaluate risk, and often, a management team with lots of experience may lower perceived risk.

Financial documents

This is where you provide the numbers that back up everything you described in your organizational and marketing sections. Include conservative projections of your profit and loss statements, balance sheet, and your cash flow statements for the next three years.

Q. 3.       Discuss the various functions of entrepreneurs.

Ans- The following points highlight the top five functions of an entrepreneur. The functions are: 1. Decision Making 2. Management Control 3. Division of Income 4. Risk-Taking and Uncertainty-Bearing 5. Innovation.

Function # 1. Decision Making:

The primary task of an entrepreneur is to decide the policy of production. An entrepreneur is to determine what to produce, how much to produce, how to produce, where to produce, how to sell and’ so forth. Moreover, he is to decide the scale of production and the proportion in which he combines the different factors he employs.

Function # 2. Management Control:

Earlier writers used to consider the manage­ment control one of the chief functions of the entrepreneur. Management and control of the business are conducted by the entrepreneur himself. So, the latter must possess a high degree of management ability to select the right type of persons to work with him.

Function # 3. Division of Income:

The next major function of the entrepreneur is to make necessary arrangement for the division of total income among the different factors of production employed by him. Even if there is a loss in the business, he is to pay rent, interest, wages and other contractual incomes out of the realised sale proceeds.

Function # 4. Risk-Taking and Uncertainty-Bearing:

Risk-taking is perhaps the most important function of an entrepreneur. Modern production is very risky as an entrepreneur is required to produce goods or services in antici­pation of their future demand.

Function # 5. Innovation:

Another distinguishing function of the entrepreneur, as emphasised by Schumpeter, is to make frequent inventions — invention of new products, new techniques and discovering new markets — to improve his competitive position, and to increase earnings.

Internal Assignment No. 2

 (i)           What is the difference between entrepreneurship and intra-preneurship?

Ans- An entrepreneur is a person who takes a considerable amount of risk to own and operate the business, with an aim of earning returns and rewards, from that business. An intrapreneur is an employee of the organization who is paid 

remuneration according to the success of the business unit, for which he/she is hired or responsible.

(ii)           What is EDP?

Ans- Entrepreneurship Development Programme (EDP) is a programme which helps in developing the entrepreneurial abilities. The skills that are required to run a business successfully is developed among the people through this programme. Sometimes, people may have skills but it requires polishing and incubation. 

(iii)          What is business plan?

Ans- A business plan is a document that describes a new business, its products or services, how it will earn money, leadership and staffing, financing, operations model, and other details that are essential to both operation and success. Entrepreneurs create them as part of the start up process while existing businesses often write them when changing direction or strategy.

(iv)          Write any two types of business crisis?

Ans-  Following are the types of crisis:

Natural Crisis

Disturbances in the environment and nature lead to natural crisis.

Such events are generally beyond the control of human beings.

Tornadoes, Earthquakes, Hurricanes, Landslides, Tsunamis, Flood, Drought all result in natural disaster.

Technological Crisis

Technological crisis arises as a result of failure in technology. Problems in the overall systems lead to technological crisis.

Breakdown of machine, corrupted software and so on give rise to technological crisis.

(v)           What is SIDO?

Ans- Small Industries Development Organization (SIDO) is a subordinate office of the Department of SSI & Auxiliary and Rural Industry (ARI). It is an apex body and nodal agency for formulating, coordinating and monitoring the policies and programmes for promotion and development of small-scale industries.

Note: Answer any two questions. Each question carries 5 marks (Word limits 500)

Q. 1.        How small scale industries are helpful in economic development.

ANS- In a developing country like India, the role and importance of small-scale industries is very significant towards poverty eradication, employment generation, rural development and creating regional balance in promotion and growth of various development activities.

1. Employment generation:

The basic problem that is confronting the Indian economy is increasing pressure of population on the land and the need to create massive employment opportunities. This problem is solved to larger extent by small-scale industries because small- scale industries are labour intensive in character.

2. Mobilisation of resources and entrepreneurial skill:

Small-scale industries can mobilize a good amount of savings and entrepreneurial skill from rural and semi-urban areas remain untouched from the clutches of large industries and put them into productive use by investing in small-scale units. Small entrepreneurs also improve social welfare of a country by harnessing dormant, previously overlooked talent.

Thus, a huge amount of latent resources ;re being mobilised by the small-scale sector for the development of the economy.

3. Equitable distribution of income:

Small entrepreneurs stimulate a redistribution of wealth, income and political power within societies in ways that are economically positive and without being politically disruptive.

4. Regional dispersal of industries:

There has been massive concentration of industries m a few large cities of different states of Indian union. People migrate from rural and semi urban areas to these highly developed centres in search of employment and sometimes to earn a better living which ultimately leads to many evil consequences of over-crowding, pollution, creation of slums, etc.

5. Provides opportunities for development of technology:

Small-scale industries have tremendous capacity to generate or absorb innovations. They provide ample opportunities for the development of technology and technology in return, creates an environment conducive to the development of small units.

6. Indigenisation:

Small-scale industries make better use of indigenous organisational and management capabilities by drawing on a pool of entrepreneurial talent that is limited in the early stages of economic development.

7. Promotes exports:

Small-scale industries have registered a phenomenal growth in export over the years. The value of exports of products of small-scale industries has increased to Rs. 393 crores in 1973-74 to Rs. 71, 244 crores in 2002-03. This contributes about 35% India's total export.

8. Supports the growth of large industries:

The small-scale industries play an important role in assisting bigger industries and projects so that the planned activity of development work is timely attended. They support the growth of large industries by providing, components, accessories and semi finished goods required by them.

9. Better industrial relations:

Better industrial relations between the employer and employees helps in increasing the efficiency of employees and reducing the frequency of industrial disputes. The loss of production and man-days are comparatively less in small- scale industries. There is hardly any strikes and lock out in these industries due to good employee-employer relationship.

Q. 2.        Write the process of feasibility study?

ANS- Feasibility is defined as the practical extent to which a project can be performed successfully. To evaluate feasibility, a feasibility study is performed, which determines whether the solution considered to accomplish the requirements is practical and workable in the software. Information such as resource availability, cost estimation for software development, benefits of the software to the organization after it is developed and cost to be incurred on its maintenance are considered during the feasibility study. The objective of the feasibility study is to establish the reasons for developing the software that is acceptable to users, adaptable to change and conformable to established standards. Various other objectives of feasibility study are listed below.

Feasibility Study Process

Feasibility study comprises the following steps.

1. Information assessment: Identifies information about whether the system helps in achieving the objectives of the organization. It also verifies that the system can be implemented using new technology and within the budget and whether the system can be integrated with the existing system.

2. Information collection: Specifies the sources from where information about software can be obtained. Generally, these sources include users (who will operate the software), organization (where the software will be used), and the software development team (which understands user requirements and knows how to fulfill them in software).

3. Report writing: Uses a feasibility report, which is the conclusion of the feasibility study by the software development team. It includes the recommendations whether the software development should continue. This report may also include information about changes in the software scope, budget, and schedule and suggestions of any requirements in the system.

4. General information: Describes the purpose and scope of feasibility study. It also describes system overview, project references, acronyms and abbreviations, and points of contact to be used.

5. Management summary: Provides the following information.

6. Environment: Identifies the individuals responsible for software development. It provides information about input and output requirements, processing requirements of the software and the interaction of the software with other software. It also identifies system security requirements and the system's processing requirements

7. Current functional procedures: Describes the current functional procedures of the existing system, whether automated or manual. It also ncludes the data-flow of the current system and the number of team members required to operate and maintain the software.

8. Functional objective: Provides information about functions of the system such as new services, increased capacity, and so on.

MBAR International Business

Paper Code: MBA- 209    Paper Title:         INTERNATIONAL BUSINESS

 (i)           What is the difference between global and international business?

ANS- Global marketing and international marketing aren't the same thing, even though many marketers treat them the same way, as I witness every day. International marketing means that marketing decisions are made in the individual countries, with staff who is the most knowledgeable about the target markets. Global marketing views the whole world as one, and creates products that will only require weeks to fit into any regional marketplace.

(ii)    State the difference between centralized and decentralized structure.

ANS-                 Centralized organizational structures rely on one individual to make decisions and provide direction for the company. Small businesses often use this structure since the owner is responsible for the company’s business operations.

Decentralized organizational structures often have several individuals responsible for making business decisions and running the business.

(iii)          What is balance of payment?

ANS- According to the RBI, balance of payment is a statistical statement that shows

1. The transaction in goods, services and income between an economy and the rest of the world,

2. Changes of ownership and other changes in that economy’s monetary gold, special drawing rights (SDRs), and financial claims on and liabilities to the rest of the world, and

3. Unrequited transfers

(iv)          Write any two barriers of international business?

ANS- Cultural and social barriers:

  A nation’s cultural and social forces can restrict international business. Culture consists of a country’s general concept and values and

tangible items such as food, clothing, building etc. Social forces include family, education, religion and custom. Selling products from one country to another country is sometimes difficult when the culture of two countries differ significantly. 2.

Political barriers:

The political climate of a country plays a major impact on international trade. Political violence may change the attitudes towards the foreign firms at any time. And this impact can create an unfavorable atmosphere for international business.

(v)           Write any two importance of logistic management?

ANS- An effective logistics management operation should yield 4 key results:

1. Increase revenue
2. Improve operating cost structure
3. Reduce overall transportation costs
4. Improve customer service

When the stars align and all of your logistics processes are streamlined, you should expect to see these results where they matter most: your bottom line.  

Q. 2.        Explain the economic and political environment which effect international business.

ECONOMIC ENVIRONMENT

Consumer Confidence

Consumer confidence is an economic indicator that measures overall consumer optimism about the state of the economy. Confident consumers tend to be more willing to spend money than consumers with low confidence, which means businesses are more likely to prosper when consumer confidence is high. Periods of high consumer confidence can present opportunities for new businesses to enter the market, while period of low confidence may force companies to cut costs to maintain profits.

Employment

The economy tends to follow a business cycle of economic booms followed by periods of stagnation or decline. During boom periods, jobs tend to be plentiful, since companies need workers to keep up with demand. When unemployment is low, consumer spending tends to be high because most people have income to spend, which is good for businesses and helps drive growth. When unemployment is high, consumer spending tends to be low because unemployed people don't have excess income to spend.

Interest Rates

An interest rate is the amount that a lender charges an individual or business to borrow money. Some small businesses rely on loans from banks or other financial institutions as a source of financing. Higher interest rates result in higher total business expenses for companies with debt. High interest rates can also reduce consumer spending, because high rates make it more expensive for consumers to take out loans to buy things like cars and homes.

Inflation

Inflation is the rate at which prices in the economy are increasing. Inflation causes increases in business expenses such as rent, utilities, and cost of materials used in production

 POLITICAL ENVIRONMENT

There are many external environmental factors that can affect your business. It is common for managers to assess each of these factors closely. The aim is always to take better decisions for the firm’s progress. Some common factors are political, economic, social and technological (known as PEST analysis). Companies also study environmental, legal, ethical and demographical factors.

The political factors affecting business are often given a lot of importance. Several aspects of government policy can affect business. All firms must follow the law. Managers must find how upcoming legislations can affect their activities.

The political environment can impact business organizations in many ways. It could add a risk factor and lead to a major loss.  You should understand that the political factors have the power to change results. It can also affect government policies at local to federal level. Companies should be ready to deal with the local and international outcomes of politics.

Q. 3.        Explain global business planning system in detail.

Global business plans resemble local and regional business plans in format. Global business plans differ from other business plans by serving as a company's communications vehicle for its global operations. Components of a global business plan, which differ from other focus on global customers, global pricing and currency issues, and international market legal factors, to name a few distinctions listed by Allegro Invest. The University of Houston Small Business Development Center offers workshops and seminars on all aspects of small business development, including creating business plans (See References). Executive Summary Component

An executive summary describes the owner's goals and targets. An executive summary includes components, including but not limited to, a business overview, which describes the company, the projected market and the intended product or service. Include financial results, such as capital growth and profits, advises Allegro Invest. Provide any investment requirements for business operations. In an example offered by the website, BPlansWest, Pacific Marketing opens its Executive Summary, "West Pacific Marketing Consultants aims to provide marketing services to targeted business environments in Indonesia, Asia, and the west Pacific region."

Market Description

A market description for a global business reflects an in-depth international market study and offers analysis of the study findings. Key factors in a market description for an international company include "market size, share positioning of products, and competition, explains Allegro Invest. Allegro Invest advises entrepreneurs and executives to energetically research their targeted international market (See References).

Operations And Management Component

An Operations and Management Plan discusses operation factors. Operations components include, but are not limited to supply, production, marketing and distribution. This section will distinguish itself from a non-global business plan. You will discuss your research into the complexities of the global markets you are targeting, including how you plan to supply your product or service in targeted countries. If you plan to produce your product overseas, explain that dynamic here. Explain how you plan to market to the countries you will initially introduce your company. 

Internal Assignment No. 2

Q. 1.        Answer all the questions:

(i)            Write any two motivating factors of international business.

Growth and Profitability - A lot of companies turn to global markets for growth. 

Economics of Scale - Expanding size and scope of markets help to achieve economies of scale. International approaches give economies of scale while sharing of costs and risks between markets. Economies of scale occur when the unit cost of a product declines as production volume increases

(ii)           Define small scale industry?

Small scale industries (SSIs) also known as MSMEs are defined & categorized by the Micro, Small & Medium Enterprises Development Act, 2006. The act categorizes different scale of industries on the basis of investment in plant & machinery in case of manufacturing industries and on the basis of investment in equipment in case of service sector industries. Small Scale Enterprise: Manufacturing enterprises in which investment in plant & machineries is more than Rs 25.00 lakhs but does not exceed Rs 5.00 crores and service sector industries in which investment in equipment is more than Rs 10.00 lakhs but does not exceed Rs 2.00 crores are termed as small-scale enterprises.

(iii)          What is FDI?

Foreign direct investment (FDI) is an investment made by a firm or individual in one country into business interests located in another country. Generally, FDI takes place when an investor establishes foreign business operations or acquires foreign business assets, including establishing ownership or controlling interest in a foreign company. Foreign direct investments are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies.

(iv)          Write any two characteristics of ethnocentrism.

Ethnocentrism is judging another culture solely by the values and standards of one's own culture. Ethnocentric individuals judge other groups relative to their own ethnic group or culture, especially with concern for language, behavior, customs, and religion. These ethnic distinctions and subdivisions serve to define each ethnicity's unique cultural identity. William G. Summer defined it as "the technical name for the view of things in which one's own group is the center of everything, and all others are scaled and rated with reference to it.

He further characterized ethnocentrism as often leading to pride, vanity, belief in one's own group's superiority, and contempt of outsiders.This may occur because of the differences of people between in-groups and out-groups. Ethnocentrism is explained in the social sciences and the genetics

(v)           What is trade block?

Historic trading blocs include the Hanseatic League, a Northern European economic alliance between the 12th and 17th centuries, and the German Customs Union, formed on the basis of the German Confederation and subsequently the German Empire from 1871. Surges of trade bloc formation occurred in the 1960s and 1970s, as well as in the 1990s after the collapse of Communism. By 1997, more than 50% of all world commerce was conducted within regional trade blocs. Economist Jeffrey J. Schott of the Peterson Institute for International Economics notes that members of successful trade blocs usually share four common traits: similar levels of per capita GNP, geographic proximity, similar or compatible trading regimes, and political commitment to regional organization.

Note: Answer any two questions. Each question carries 5 marks (Word limits 500)

Q. 2.        Explain various stages of international business.

Stage 1: 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.

Stage 2: 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.

Stage 3: 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.

Stage 4: 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.

Stage 5: 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.

Q. 3.        Explain the problems and remedial measures of small scale industry.

Small Scale Industries do not enjoy much of the advantages enjoyed by large scale enterprises because of their nature and size. Though they have made significant contribution to economic development, they have not realized their full potential. They face many problems in their functioning and many Small Scale Industries are sick.

The government had reserved certain items for exclusive production by Small Scale Industries. Large scale enterprises were not allowed to produce the items which were reserved for the SSI sector. With the opening up of the economy and following the principles of liberalization and globalization, many items have been successively De-reserved. Therefore Small Scale Industries have to now counter the twin forces of competition from Indian large scale enterprises as well as foreign competitors.

Problems faced by Small Scale Industries

The following are the problems faced by Small Scale Industries:

1. Poor capacity utilization

In many of the Small Scale Industries, the capacity utilization is not even 50% of the installed capacity.

2. Incompetent management

Many Small Scale Industries are run in an incompetent manner by poorly qualified entrepreneurs without much skill or experience.

3. Inadequate Finance

Many Small Scale Industries face the problem of scarcity of funds. They are not able to access the domestic capital market to raise resources. 

4. Raw material shortages

Raw materials are not available at the required quantity and quality. Since demand for raw materials is more than the supply, the prices of raw materials are quite high which pushes up the cost.

5. Lack of marketing support

Small Scale Industries lack market knowledge with regard to competitors, consumer preferences, market trends. Since their production volume is small and cannot meet demand for large quantities their market is very restricted

In this connection, the following measures may be suggested:

1. Equitable allocation of raw materials, imported components and equipment.

2. Improvement in the methods and techniques of production.

3. Provision for adequate finance.

4. Marketing assistance.

5. Provision for industrial education and training.

6. Demarcating spheres for large-scale and small-scale units.

MBAR Strategic Management

Internal Assignment No. 1

MBA– 208                            Strategic Management

1.Define the term business policy.

Business Policy defines the scope or spheres within which decisions can be taken by the subordinates in an organization. It permits the lower level management to deal with the problems and issues without consulting top level management every time for decisions.Business policies are the guidelines developed by an organization to govern its actions.

2.State the primary activities of a value chain.

The primary activities of Michael Porter's value chain are inbound logistics, operations, outbound logistics, marketing and sales, and service. The primary activities within Michael Porter's value chain are used to provide a company with a competitive advantage in any one of the five activities so it has an advantage in the industry in which it operates.The goal of the five activities are to create value that exceeds the cost of conducting that activity, therefore generating a higher profit.Inbound logistics includes the receiving, warehousing and inventory control of a company's raw materials.

3.What do you mean by strategic control?

“ It is the process by which managers monitor the ongoing activities of an organization and its members to evaluate whether activities are being performed efficiently and effectively and to take corrective action to improve performance if they are not” -Sam Walton

4.Name any two external environment appraisal tools

External environment appriasal techniques are generally accepted methods of inquiry to (a)assess the opportunities and threat an organization or entity has given the emerging environment as well as (b) the impact that organizational decisions/ actions can have on other organizations in the external environment. For business / corporate planning,

5.Mention any two factors affecting organizational design.

Although many things can affect the choice of an appropriate structure for an organization, the following five factors are the most common: size, life cycle, strategy, environment, and technology The larger an organization becomes, the more complicated its structure. When an organization is small — such as a single retail store, a two‐person consulting firm, or a restaurant — its structure can be simple.

In reality, if the organization is very small, it may not even have a formal structure. Instead of following an organizational chart.

Note: Answer any two questions. Each question carries 5 marks (Word limits 500)

Q. 2.        Discuss various steps involved in the process of strategic management.

Clarify Your Vision

The purpose of goal-setting is to clarify the vision for your business. This stage consists of identifying three key facets: First, define both short- and long-term objectives. Second, identify the process of how to accomplish your objective. 

Gather and Analyze Information

Analysis is a key stage because the information gained in this stage will shape the next two stages. In this stage, gather as much information and data relevant to accomplishing your vision. The focus of the analysis should be on understanding the needs of the business as a sustainable entity, its strategic direction and identifying initiatives that will help your business grow.

Implement Your Strategy

Successful strategy implementation is critical to the success of the business venture. This is the action stage of the strategic management process. If the overall strategy does not work with the business' current structure, a new structure should be installed at the beginning of this stage. 

Formulate a Strategy

The first step in forming a strategy is to review the information gleaned from completing the analysis. Determine what resources the business currently has that can help reach the defined goals and objectives. Identify any areas of which the business must seek external resources

Evaluate and Control

Strategy evaluation and control actions include performance measurements, consistent review of internal and external issues and making corrective actions when necessary. Any successful evaluation of the strategy begins with defining the parameters to be measured. These parameters should mirror the goals set in Stage 1. Determine your progress by measuring the actual results versus the plan. Monitoring internal and external issues will also enable you to react to any substantial change in your business environment. 

Q. 3.        Explain various types of mergers along with examples.

1. Horizontal mergers: It refers to two firms operating in same industry or producing ideal products combining together. For e.g., in the banking industry in India, acquisition of Times Bank by HDFC Bank, Bank of Madura by ICICI Bank, Nedungadi Bank by Punjab National Bank etc. in consumer electronics, acquisition of Electrolux’s Indian operations by Videocon International Ltd., in BPO sector, acquisition of Daksh by IBM, Spectramind by Wipro etc.

2. Vertical merger: A vertical merger can happen in two ways. One is when a firm acquires another firm which produces raw materials used by it. For e.g., a tyre manufacturer acquires a rubber manufacturer, a car manufacturer acquires a steel company, a textile company acquires a cotton yarn manufacturer etc.

3. Conglomerate merger: It refers to the combination of two firms operating in industries unrelated to each other. In this case, the business of the target company is entirely different from those of the acquiring company. For e.g., a watch manufacturer acquiring a cement manufacturer, a steel manufacturer acquiring a software company etc.

4. Concentric merger: It refers to combination of two or more firms which are related to each other in terms of customer groups, functions or technology. For eg., combination of a computer system manufacturer with a UPS manufacturer.

5. Forward merger: In a forward merger, the target merges into the buyer. For e.g., when ICICI Bank acquired Bank of Madura, Bank of Madura which was the target, merged with the acquirer, ICICI Bank.

6. Reverse merger: In this case, the buyer merges into the target and the shareholders of the buyer get stock in the target. This is treated as a stock acquisition by the buyer.

7. Subsidiary merger: A subsidiary merger is said to occur when the buyer sets up an acquisition subsidiary which merges into the target.

                                            Internal Assignment No. 2

Q. 1.        Answer all the questions:

(i)                  What were the two dimensions used under BCG matrix?

The BCG Matrix was developed by the Boston Consulting Group (BCG) and is used for the evaluation of the organization's product portfolio in marketing and sales planning. It aims to evaluate each product, i.e. the goods and services of the business in two dimensions.

The BCG Matrix (Growth-share matrix) is a method that comes from the consulting company Boston Consulting Group (BCG), thus the name BCG matrix or Boston matrix. The BCG matrix is used for the evaluation of a organization’s product portfolio in marketing and sales planning.

(ii)                What do you mean by turnaround strategy?

A turnaround is the financial recovery of a company that has been performing poorly for an extended time. To effect a turnaround, a company must acknowledge and identify its problems, consider changes in management, and develop and implement a problem-solving strategy. In some cases, the best strategy may be to cut losses by liquidating the company rather than trying to turn it around.

(iii)              Define core competence

Core competencies are the resources and/or strategic advantages of a business, including the combination of pooled knowledge and technical capacities, that allow it to be competitive in the marketplace. They are what the company does best and consist of the combined activities, operations, and resources that distinguish the company from competitors.

(iv)               Distinguish between joint venture and strategic alliance.

Joint ventures and strategic alliances allow companies with complementary skills to benefit from one another's strengths. They are common in technology, manufacturing and commercial real estate development, and whenever a company wants to expand its sales or operations into a foreign country. In a joint venture, the companies start and invest in a new company that's jointly owned by both of the parent companies. A strategic alliance is a legal agreement between two or more companies to share access to their technology, trademarks or other assets. A strategic alliance does not create a new company.

(v)                 What is SWOT Analysis?

SWOT analysis is a framework used to evaluate a company's competitive position by identifying its strengths, weaknesses, opportunities and threats. Specifically, SWOT analysis is a foundational assessment model that measures what an organization can and cannot do, and its potential opportunities and threats.
When using SWOT analysis, an organization needs to be realistic about its good and bad points.

Note: Answer any two questions. Each question carries 5 marks (Word limits 500)

Q. 2.        Discuss the types of generic strategies given by Michael Porter.

Which do you prefer when you fly: a cheap, no-frills airline, or a more expensive operator with fantastic service levels and maximum comfort? And would you ever consider a small company with just a few routes?

The choice is up to you, of course. But the point we're making here is that when you come to book a flight, there are some very different options available. Why is this so? The answer is that each of these airlines has chosen a different way of achieving competitive advantage in a crowded marketplace.

The no-frills operators have opted to cut costs to a minimum and pass their savings on to customers in lower prices. This helps them grab market share and ensure their planes are as full as possible, further driving down cost. The luxury airlines, on the other hand, focus their efforts on making their service as wonderful as possible, and the higher prices they can command as a result make up for their higher costs.

Meanwhile, smaller airlines try to make the most of their detailed knowledge of just a few routes to provide better or cheaper services than their larger, international rivals.

These three approaches are examples of "generic strategies," because they can be applied to products or services in all industries, and to organizations of all sizes. They were first set out by Michael Porter in 1985 in his book, "Competitive Advantage: Creating and Sustaining Superior Performance."

Porter called the generic strategies "Cost Leadership" (no frills), "Differentiation" (creating uniquely desirable products and services) and "Focus" (offering a specialized service in a niche market). He then subdivided the Focus strategy into two parts: "Cost Focus" and "Differentiation Focus." These are shown in Figure 1 below.

These three approaches are examples of "generic strategies," because they can be applied to products or services in all industries, and to organizations of all sizes. They were first set out by Michael Porter in 1985 in his book, "Competitive Advantage: Creating and Sustaining Superior Performance."

Porter called the generic strategies "Cost Leadership" (no frills), "Differentiation" (creating uniquely desirable products and services) and "Focus" (offering a specialized service in a niche market). He then subdivided the Focus strategy into two parts: "Cost Focus" and "Differentiation Focus."

Q. 3.        Critically explain the GE Nine Cell matrix.

Another popular “Corporate Portfolio Analysis” technique is the result of pioneering effort of General Electric Company along with McKinsey Consultants which is1 known as the GE NINE CELL MATRIX.

GE nine-box matrix is a strategy tool that offers a systematic approach for the multi business enterprises to prioritize their investments among the various business units. It is a framework that evaluates business portfolio and  provides further strategic implications.

Each business is appraised in terms of two major dimensions – Market Attractiveness and Business Strength. If one of these factors is missing, then the business will not produce desired results. Neither a strong company operating in an unattractive market, nor a weak company operating in an attractive market will do very well.

The vertical axis denotes industry attractiveness, which is a weighted composite rating based on eight different factors. They are:

1.       Market size and growth rate

2.       Industry profit margins
3.       Intensity of Competition4.       Seasonality
5.       Product Life Cycle Changes
6.       Economies of scale
7.       Technology
8.       Social, Environmental, Legal and Human Impacts

horizontal axis represent?

It indicates business strength or in other words competitive position, which is again a weighted composite rating based on seven factors as listed below:

1.       Relative market share
2.       Profit margins
3.       Ability to compete on price and quality
4.       Knowledge of customer and market
5.       Competitive strength and weakness
6.       Technological capability
7.       Caliber of management

The two composite values for industry attractiveness and competitive position are plotted for each strategic business unit (SBU) in a COMPANY’S PORTFOLIO. The PIE chart (circles) denotes the proportional size of the industry and the dark segments denote the company’s respective market share.

The nine cells of the GE matrix are grouped on the basis of low to high industry attractiveness, and weak to strong business strength. Three zones of three cells each are made, indicating different combinations represented by green, yellow and red colors. So it is also called ‘Stoplight Strategy Matrix’, similar to the traffic signal.