Q2. Differentiate between mission and vision of a company? Explain with examples.
Ans: - A business is not defined by its name, statutes or articles of incorporation. It is defined by the business mission. Only a clear definition of the mission and the purpose of the organization make possible clear and realistic business objectives.
This emphasizes the need for organizations to take their mission statement seriously and formulate it properly. The mission statement of a company is variously called a statement of philosophy, a statement of beliefs, a statement of purpose and, a statement of business principles. A mission statement is many in one. It embodies the business philosophy of a company’s decision makers, implies the image the company wishes to project for itself, reflects the company’s self-concept; indicates the company’s principal product or service areas and, the customer needs the company seeks to satisfy.
Mission statement should serve seven different purposes or objectives are:
1. To ensure unanimity of purposes within the organization
2. To develop a basis or standard for allocating organizational resources
3. To provide a basis for motivating the use of the organization’s resources
4. To establish a general culture or organizational climate; for example, to suggest a business-like approach
5. To facilitate the translation of objectives and goals into jobs and responsibilities and assignment of tasks to responsible segments within the organization
6. To serve as a focal point for those who can identify themselves with the organization’s purpose and business
7. To specify organizational purposes and inspire translation of these purposes into goals in such a way that cost, time and performance parameters can be assessed and controlled.
A clear distinction exists between the two. Mission is concerned more with the present; the vision more with the future. The mission statement answers the question: ‘What is our business?’ The vision statement answers the question: ‘What do we want to become or, which way should we be going?’ The mission statement focuses on the present strategic thrust, while the vision statement outlines the strategic path. All visionary companies have a vision statement.
Most progressive companies develop both a mission statement and a vision statement. Indian Oil Corporation (IOC) is a good example. Vision and mission statements of IOC4 are:
• Vision: Indian Oil aims to achieve international standards of excellence in all aspects of energy and diversified business with focus on customer delight through quality products and services.
• Mission: Maintaining national leadership in oil refining, marketing and pipeline transportation.
Q3. Explain in detail Porter’s four generic strategies.
Ans: - Porter (1985) evolved the theory that there are four
generic strategic options available to companies. These are:
1. Cost leadership strategy
Cost leadership strategy is based on exploiting some aspects of the production process, which can be executed at a cost significantly lower than that of competitors. There can be various sources of this cost advantage:
i. lower input costs, (e.g., the price paid by New Zealand timber
mills for the logs produced by the country’s highly efficient
forestry industry or cheap source of high quality bauxite for
National Aluminum Company (NALCO) in India from its mines);
ii. In-plant production costs, (e.g., lower labor costs enjoyed
by Japanese companies locating their video assembly operations in Thailand);
iii. lower delivery cost because of proximity of key markets, (e.g., the practice of major beer producers in Europe to locate micro-breweries in or around major metropolitan cities).
2. Focused cost leadership
Focused cost leadership exploits the same advantages as in cost leadership strategy, but the company occupies a specific niche or niches serving only a part of the total market. For example horticulture enterprise, which operates an onsite farm shop, offers low-priced fresh vegetables to the inhabitants in the
immediate neighborhood area. Porter has mentioned that cost leadership and focused cost leadership represent a ‘low scale advantage’ because it is quite likely that eventually a company’s capabilities will be eroded by rising costs (labour cost in particular) or its market position will be challenged by an even lower cost producer of goods, (e.g., Russia’s post-Perestroika entry in the world arms market offering
extremely competitive prices).
3. Differentiation strategy
Differentiation strategy is based on offering superior performance, and Porter argues that this is a ‘high scale
advantage’ because, first, the producer can usually command a premium price for its product and, second, competitors are less of a threat, because to be successful, they must be able to offer an even higher performance product.
4. Focused differentiation strategy
Focused differentiation, which is typically a strategy of smaller and most specialist companies, is also based on superior performance. The only difference is that in this strategy, a company specializes in serving the needs of a specific market or markets. For, e.g., the Cray Corporation supplies ‘super computers’ to the aerospace and defense industries.
Q4. Coming Soon.
Q5. Define the term ‘industry’. List the types of industries. How do you an industry analysis?
Ans: - An industry can be broadly defined as ‘the group of firms producing products that are close substitutes for each other’.1 There is, however, a great deal of controversy over an appropriate definition of industry. The debate or controversy mostly centers on ‘how close substitutability needs to be in terms of product, process or geographic market boundaries’.
Definition of an industry should not be thought to be same as definition of the business in which a company wants to compete. Industry may be broadly defined or narrowly defined. If industry is broadly defined, it does not follow that business should also be broadly defined without focus.
Industries broadly classified into five categories are as follows:
1. Fragmented industry
2. Emerging industry
3. Mature industry
4. Declining industry
5. Global industry
Understanding industry structure and formulating competitive strategies imply industry analysis. But, conducting a proper industry analysis is a very big task. To conduct such an analysis, the industry analyst has to find answers too many important questions:
• What should be the starting point?
• Which types of data one looks for?
• Should one look for only published or secondary data?
• Or, should one also generate primary data from industry observers (participants)?
• What are the analytical techniques to be used for data processing and analysis?
Industry analysis should follow a number of logical or strategic steps. These are shown below:
Step 1: Determine or specify the objective or objectives so that there is no lack of focus.
Step 2: Collect and scan through available published or secondary data.
Step 3: Identify data or information gaps for generation of primary data.
Step 4: Generate primary data (through survey, interviews, meetings, etc.,) to fill the data information gap.
Step 5: Process/tabulate various data
Step 6: Prepare a general overview of the industry using the processed/ tabulated data/information.
Step 7: Prepare specific sect oral analysis—technology, product, marketing pattern, competition analysis.
Step 8: Draw inferences or conclusions to complete the analysis.
Q6. What is meant by ‘structure of an organization’? Describe the five major structural types or forms of an organization.
Ans: - Structure of an organization defines the levels and roles of management in a hierarchical way. One can also say that an organizational structure spells out the way tasks, functions and responsibilities are allocated for implementing a policy or strategy. These also imply that an organizational structure facilitates or constrains how processes and relationships work. Major structural types or forms are:
1. Entrepreneurial structure
This is the most elementary form of structure. The entrepreneurial structure represents an organization which is owned and managed by a single individual—the entrepreneur. Some call it a simple structure and contend that this is no formal structure at all. This is the way most small businesses operate. The owner-entrepreneur assumes/discharges most of the responsibilities of management with some manager(s)/staff assisting him/her.
2. Functional structure
As an organization increases in size with expansion of business, the simple entrepreneurial system outlives its utility as a structural form. A functional structure is based on differentiation and allocation of primary functions such as production, marketing, finance, and HR along with certain delegation of powers. The functional structure is most commonly used by medium and large organizations with narrow or limited product range.
3. Divisional structure
A divisional structure arises primarily because of inadequacy of a simple functional structure to deal with the complexities of business as an organization grows very large. The more common form of divisionalization is on the basis of product or business. Divisionalization gives focus on different divisions with separate product/market strategies.
4. SBU structure
Divisions closely approximate strategic business units (SBUs) in all large multi-business organizations. The fundamental factor in the SBU structure is to identify independent product/market segment which requires distinct strategies. Each of these product/market segments also face a different environment, and, therefore, more is the need for separate strategies. In many companies, particularly in the public sector, the earlier divisional structure has been replaced by an SBU structure to give more focus on individual business and clearly define the role of corporate parents.
5. Matrix structure
Matrix structure is a need-based or project-based structure which does not follow the conventional lines of hierarchy or control. We can call it a combination structure—combination of different divisions or functions—designed to form a project team for launching a new product, development of a new market or geographical operations. In the matrix structure, a project manager is appointed to coordinate and manage project activities. Matrix structures need not be adopted only by very large complex organizations; these can be used by many professional organizations, like construction companies, consultancy organizations, etc.
6. Project-based structure
Some strategic analysts make a distinction between a matrix structure and a purely project-based structure. Most matrix structures are also project based, but, many of these structures have indefinite life like international trading operations of multinational companies. A project structure is one in which teams are created for specific purposes or projects, the project team undertakes the assigned work, and immediately on completion, the team is dissolved. Project based structures are more temporary than matrix structures.
mills for the logs produced by the country’s highly efficient
forestry industry or cheap source of high quality bauxite for
National Aluminum Company (NALCO) in India from its mines);
ii. In-plant production costs, (e.g., lower labor costs enjoyed
by Japanese companies locating their video assembly operations in Thailand);
iii. lower delivery cost because of proximity of key markets, (e.g., the practice of major beer producers in Europe to locate micro-breweries in or around major metropolitan cities).
2. Focused cost leadership
Focused cost leadership exploits the same advantages as in cost leadership strategy, but the company occupies a specific niche or niches serving only a part of the total market. For example horticulture enterprise, which operates an onsite farm shop, offers low-priced fresh vegetables to the inhabitants in the
immediate neighborhood area. Porter has mentioned that cost leadership and focused cost leadership represent a ‘low scale advantage’ because it is quite likely that eventually a company’s capabilities will be eroded by rising costs (labour cost in particular) or its market position will be challenged by an even lower cost producer of goods, (e.g., Russia’s post-Perestroika entry in the world arms market offering
extremely competitive prices).
3. Differentiation strategy
Differentiation strategy is based on offering superior performance, and Porter argues that this is a ‘high scale
advantage’ because, first, the producer can usually command a premium price for its product and, second, competitors are less of a threat, because to be successful, they must be able to offer an even higher performance product.
4. Focused differentiation strategy
Focused differentiation, which is typically a strategy of smaller and most specialist companies, is also based on superior performance. The only difference is that in this strategy, a company specializes in serving the needs of a specific market or markets. For, e.g., the Cray Corporation supplies ‘super computers’ to the aerospace and defense industries.
Q4. Coming Soon.
Q5. Define the term ‘industry’. List the types of industries. How do you an industry analysis?
Ans: - An industry can be broadly defined as ‘the group of firms producing products that are close substitutes for each other’.1 There is, however, a great deal of controversy over an appropriate definition of industry. The debate or controversy mostly centers on ‘how close substitutability needs to be in terms of product, process or geographic market boundaries’.
Definition of an industry should not be thought to be same as definition of the business in which a company wants to compete. Industry may be broadly defined or narrowly defined. If industry is broadly defined, it does not follow that business should also be broadly defined without focus.
Industries broadly classified into five categories are as follows:
1. Fragmented industry
2. Emerging industry
3. Mature industry
4. Declining industry
5. Global industry
Understanding industry structure and formulating competitive strategies imply industry analysis. But, conducting a proper industry analysis is a very big task. To conduct such an analysis, the industry analyst has to find answers too many important questions:
• What should be the starting point?
• Which types of data one looks for?
• Should one look for only published or secondary data?
• Or, should one also generate primary data from industry observers (participants)?
• What are the analytical techniques to be used for data processing and analysis?
Industry analysis should follow a number of logical or strategic steps. These are shown below:
Step 1: Determine or specify the objective or objectives so that there is no lack of focus.
Step 2: Collect and scan through available published or secondary data.
Step 3: Identify data or information gaps for generation of primary data.
Step 4: Generate primary data (through survey, interviews, meetings, etc.,) to fill the data information gap.
Step 5: Process/tabulate various data
Step 6: Prepare a general overview of the industry using the processed/ tabulated data/information.
Step 7: Prepare specific sect oral analysis—technology, product, marketing pattern, competition analysis.
Step 8: Draw inferences or conclusions to complete the analysis.
Q6. What is meant by ‘structure of an organization’? Describe the five major structural types or forms of an organization.
Ans: - Structure of an organization defines the levels and roles of management in a hierarchical way. One can also say that an organizational structure spells out the way tasks, functions and responsibilities are allocated for implementing a policy or strategy. These also imply that an organizational structure facilitates or constrains how processes and relationships work. Major structural types or forms are:
1. Entrepreneurial structure
This is the most elementary form of structure. The entrepreneurial structure represents an organization which is owned and managed by a single individual—the entrepreneur. Some call it a simple structure and contend that this is no formal structure at all. This is the way most small businesses operate. The owner-entrepreneur assumes/discharges most of the responsibilities of management with some manager(s)/staff assisting him/her.
2. Functional structure
As an organization increases in size with expansion of business, the simple entrepreneurial system outlives its utility as a structural form. A functional structure is based on differentiation and allocation of primary functions such as production, marketing, finance, and HR along with certain delegation of powers. The functional structure is most commonly used by medium and large organizations with narrow or limited product range.
3. Divisional structure
A divisional structure arises primarily because of inadequacy of a simple functional structure to deal with the complexities of business as an organization grows very large. The more common form of divisionalization is on the basis of product or business. Divisionalization gives focus on different divisions with separate product/market strategies.
4. SBU structure
Divisions closely approximate strategic business units (SBUs) in all large multi-business organizations. The fundamental factor in the SBU structure is to identify independent product/market segment which requires distinct strategies. Each of these product/market segments also face a different environment, and, therefore, more is the need for separate strategies. In many companies, particularly in the public sector, the earlier divisional structure has been replaced by an SBU structure to give more focus on individual business and clearly define the role of corporate parents.
5. Matrix structure
Matrix structure is a need-based or project-based structure which does not follow the conventional lines of hierarchy or control. We can call it a combination structure—combination of different divisions or functions—designed to form a project team for launching a new product, development of a new market or geographical operations. In the matrix structure, a project manager is appointed to coordinate and manage project activities. Matrix structures need not be adopted only by very large complex organizations; these can be used by many professional organizations, like construction companies, consultancy organizations, etc.
6. Project-based structure
Some strategic analysts make a distinction between a matrix structure and a purely project-based structure. Most matrix structures are also project based, but, many of these structures have indefinite life like international trading operations of multinational companies. A project structure is one in which teams are created for specific purposes or projects, the project team undertakes the assigned work, and immediately on completion, the team is dissolved. Project based structures are more temporary than matrix structures.
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