Contents Mgmt...Contents C-13. Operations 61 Human Resources 62 Research and Development 63 SWOT Analysis 63 SWOT Matrix 65 SO Strategies 66 WO Strategies 66 ST Strategies 66 WT Strategies

ContentsChapter heads C-9

Chapter One

OVERVIEW OF STRATEGIC MANAGEMENT

Strategy and Strategic Management : Meaning 3

Definition and Meaning of Strategy 3

Key Elements in Strategy 4

Strategic Management 6

Strategic Management Process 7

Strategic Inputs 8

Strategic Actions 9

Strategic Outcomes 9

Phases in Strategic Management Process 9

Evolution of Concept of Business Strategy 10

Evaluation of Strategy 11

Crafting a Strategy 11

Efficiency and Effectiveness 12

Tactics 12

Strategy and Game Plan : Comparison 12

Strategic Leadership and Management Styles 13

Strategic Leader 13

Basic Styles of Strategic Management 14

Functions and Importance 15

Functions of Strategic Management 15

Importance of Strategic Management 16

Pitfalls of Strategic Management 17

Operational Management 17

Strategic and Operational Management : Distinction 18

Business Forecasting 19

Meaning of Forecast and Forecasting 19

What Exactly Goes into Forecasting? 19

Business Forecasting Process 20

Short-term Forecasts 20

Problems in Business Forecasting 21

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Selection of Suitable Business Forecasting Technique 21

Selection of Right Forecasting Technique 22

Demand Forecasting Techniques 22

Delphi Method 22

Product Life Cycle Model 23

Time Series Analysis 23

Regression Analysis 23

Exponential Smoothing 24

Extrapolation 24

Independent Technological Comparisons 24

Barometric Forecasting 25

Econometric Models 25

Opinion Polling 26

Technological Forecasting 26

Meaning and Approaches 26

Techniques 26

Benefits 27

Key Terms 27

Review Questions 29

Chapter Two

EXTERNAL ENVIRONMENT ANALYSIS

Scanning of Business Environment 31

Business Environment 31

Environmental Scanning 33

PEST Analysis 35

Steps in PEST Analysis 35

Political and Legal Environment 36

Economic Environment 37

Socio-Cultural and Demographic Environment 38

Technological Environment 38

Government and Business 39

Government as Aid to Business 39

Government as Impediment to Business 40

Porter’s Five Competitive Forces 40

Threat of New Entrants 41

C-12 Strategic Management : Text & Cases


Threat of Substitute Products or Services 42

Bargaining Power of Customers 42

Bargaining Power of Suppliers 43

Rivalry among Existing Firms 43

EIC (Economy, Industry, Company) Model 45

Globalization 46

Definition and Meaning 46

Features of Globalization 46

Stages in Development of Firm into Global Corporation 47

Global Environmental Factors 48

Privatization 48

Meaning and Objectives 48

Methods of Privatization 48

Inflation 49

Demand-pull and Cost-push Inflation 50

Stagflation 50

Hyper Competition 50

Business and Competitive Intelligence 51

Close Competitor and Latent Competitor 51

Business Intelligence 51

Competitive Intelligence 52

Types of Intelligence Gathering 52

Elements of Competitive Intelligence 53

Objectives of Competitive Intelligence Programs 53

How to Introduce Competitive Intelligence ? 53

World Trade Organization 54

Uruguay Round and Setting up of WTO 54

General Principles and Objectives of WTO 55

Key Terms 55

Review Questions 57

Chapter Three

INTERNAL ORGANIZATION ANALYSIS

Functional Analysis 60

Finance 60

Marketing and Distribution 61

Contents C-13

Operations 61

Human Resources 62

Research and Development 63

SWOT Analysis 63

SWOT Matrix 65

SO Strategies 66

WO Strategies 66

ST Strategies 66

WT Strategies 66

Gap Analysis 67

Stages in Gap Analysis 68

Porter’s Value Chain Analysis 68

Value Chain Activities 69

Primary Activities 70

Support Activities 70

Methodology 72

Limitations of Value Chain Analysis 73

Product Life Cycle Analysis 73

Phases in PLC 73

Introduction Phase 74

Growth Phase 75

Maturity Phase 75

Decline Phase 76

Characteristics of PLC 77

Activities in PLC 77

Cost Control and PLC 78

Uses of PLC 78

Reasons for Short PLC 79

Extension of PLC 79

Information Required to Study PLC 80

Strategic Implications of PLC 80

Strategies at Maturity Stage of PLC 82

Marketing Strategies During PLC 83

Irregularity of PLC 83

Turning Point Indices in PLC 83

Experience Curve in PLC 84


ETOP and SAP 84

Environmental Threat and Opportunity Profile 84

Strategic Advantage Profile 85

Competitive Position Analysis 85

Competitor Analysis 86

Strategic Group Analysis 87

Steps in Strategic Grouping 88

Fundamental Analysis 88

Quantitative Analysis 89

Qualitative Analysis 91

Macro Economic Analysis 91

Industry Analysis 92

Other Aspects of Fundamental Analysis 93

Analysis for Credit Rating 93

Business Analysis 93

Financial Analysis 94

Management Evaluation 94

Fundamental Analysis 94

Key Success Factors 95

Strategic Positioning 95

Core Competency and Competitive Advantage 96

Generic Building Blocks of Competitive Advantage 99

Strengthening Company’s Position 100

Key Terms 101

Review Questions 104

Chapter Four

STRATEGIC PLANNING

Strategic Planning Process 107

Definition and Meaning of Strategic Planning 107

Formulating Strategic Plans 108

Stages in Strategic Planning 108

Steps in Strategic Planning 108

Approaches in Strategic Planning 110

Strategic Management and Strategic Planning : Distinction 110

Corporate Planning and Long-range Planning 111

Contents C-15


Contingency Planning 111

Steps in Contingency Planning 111

Benefits of Contingency Planning 111

Strengths of Strategic Planning 112

Fallacies in Strategic Planning 112

Pitfalls in Strategic Planning 113

Strategic Option, Strategic Choice and Strategic Focus 113

Strategic Option 113

Strategic Choice 113

Strategic Focus 114

Strategic Intent 115

Vision 116

Mission 116

Major Elements of Meaningful Mission Statement 117

Components of Mission Statement 118

Benefits of Mission Statement 118

Objectives 119

Wide and Narrow Objectives 119

Long-run and Short-run Objectives 119

Primary and Secondary Objectives 119

Economic and Social Objectives 120

Official and Operative Objectives 120

Goals, Targets, Plans and Policies 121

Goals and Targets 121

Plans and Policies 121

Evaluation of Strategy 121

Other Aspects 122

Freewheeling Opportunism 122

Milking Policy 122

Position Audit 122

Miles and Snow’s Organization Typology 123

Defenders 123

Prospectors 123

Analyzers 123

Reactors 123


Sustainability 123

Sustainable Growth 124

Sustainable Competitive Advantage 124

Situation Audit 124

Strategic Plan Model 125

Key Performance Areas 126

Models of Superior Returns 126

Industry Organization Model 126

Resource Based Model 126

Strategic Position and Action Evaluation (SPACE) Matrix 127

Steps in Developing SPACE Matrix 128

External Factor Analysis Summary (EFAS) 129

Internal Factor Analysis Summary (IFAS) 131

Strategic Factor Analysis Summary 132

Impact Analysis 133

Issue Priority Matrix 133

Situational Analysis 134

Key Terms 135


Chapter Five

STRATEGY FORMULATION

Phases in Strategy Formulation 139

Master Strategy 140

Corporate Level Strategy 140

Business Unit Level Strategy 141

Functional Level Strategy 141

Porter’s Generic Competitive Strategies 142

Overall Cost Leadership Strategy 143

Differentiation Strategy 145

Focus Strategy 146

Grand Strategies 147

Stability Strategies 147

Pause/Proceed Strategy 148

No Change Strategy 148

Profit Strategy 148

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Growth Strategies 148

Internal Growth Strategies 149

Intensive Growth Strategies 149

Market Penetration Strategy 150

Market Development Strategy 151

Product Development Strategy 151

Integrative Growth Strategies 152

Horizontal Integration 152

Vertical Integration 152

Backward Integration 153

Forward Integration 153

Diversification Growth Strategies 153

Ground Rules for Diversification 153

Types of Diversification 154

Reasons for Diversification 154

Situations suitable for Diversification 154

Risk of Diversification 155

Tests for Diversification 155

Concentric Diversification 155

Conglomerate Diversification 156

Internal Diversification 157

Internal New Venture 157

Diversified Major 157

Conglomerate Diversified 157

External Growth Strategies 157

Merger 157

Motives for Merger 158

Strategic Motives 158

Financial Motives 159

Organizational Motives 160

Motives for Cross Border Merger 161

Takeover 162

Kinds of Takeover 162

Joint Venture 163

Forms of Joint Venture 164

Advantages of Joint Venture 164

Joint Venture Strategies 164


Strategic Alliances 165

Franchising 165

Licensing Agreement 165

Retrenchment Strategies 166

Turnaround 167

Divestiture 168

Sell-off or Hive-off 169

Spin-off 169

Split-off 170

Liquidation 170

Captive Company 170

Harvest 170

Transformation 171

Leadership 171

Niche 171

Combination Strategies 172

Other Strategies 172

Concentration Strategy 172

Programmed Strategy 173

Contingency Strategy 173

Key Terms 173


Chapter Six

ORGANIZATION REDESIGN

Forms of Organization 180

Functional Form of Organization 180

Matrix Form of Organization 180

McKinsey 7-S Framework 181

MBO and MBE 183

Management by Objectives 183

Guidelines for Setting Objectives 183

Management by Exception 184

Delegation and Decentralization 184

Delegation 184

Guidelines for Successful Delegation 184

Contents C-19


Decentralization 185

Arguments in favour of Decentralized Profit Responsibility 186

Arguments against Decentralized Profit Responsibility 186

Cost of Decentralization 187

Cost-Benefit Analysis for Decentralization 187

Responsibility Accounting System 188


Basic Principles 189

Benefits 190

Implementation Process 190

Difficulties in Implementation 192

Centres of Control 192

Cost Centre 192

Revenue Centre 193

Responsibility Centre 193

Profit Centre 193

Investment Centre 195

Organizational Aspects 197

Transfer Pricing System 198

Meaning 198

Objectives of Transfer Pricing 198

Benefits of Transfer Pricing Policy 199

Requisites of Sound Transfer Pricing System 199

General Conflicts in Transfer Pricing 200

Management Information Systems 200

Definition and Scope 200

Planned and Unplanned MIS 202

Top-down and Bottom-up Information Systems 203

MIS Information : Time Scale 203

Transaction Processing 204

MIS and Levels of Management 204

Operational Level MIS 204

Tactical Level MIS 205

Strategic Level MIS 206

Programmed and Non-programmed Decisions 208

Decision Support Systems 208

Decision Support Packages 209


Key Terms 210


Chapter Seven

STRATEGY IMPLEMENTATION AND CONTROL

Strategy Implementation 213

Strategy Evaluation and Control 214

Standards for Evaluation and Control of Strategy 215

Decision-making Process 215

Nature of Decisions 216

Reasons for Complexity in Decision-making 216

Behavioural Characteristics of Decision-maker 216

Problem-solving Process 217

Steps in Processing of Decision-making 218

Heuristics 219

Management Control System 220

Characteristics 220

Process 220

Problems in Designing and Managing Control System 221

Feed Back Control System 221

Basic Components 222

Basic Principles 222

Measuring Divisional Performance 222

Return on Investment Method 222

Residual Income Method 224

Other Measures of Divisional Performance 225

Zero Base Budgeting 226

Requisites for Implementation of ZBB 226

Features of ZBB 227

ZBB and Traditional Budgeting : Distinction 227

ZBB and Incremental Budgeting 228

ZBB and Decision Packages 228

Types of Decision Packages 229

ZBB and Feedback Control 229

Benefits of ZBB 230

Criticism of ZBB 230

Contents C-21

Program Budgeting 231

PPBS and Conventional Budgeting : Distinction 232

Stages in PPBS 232

Procedure for Developing PPBS 233

Advantages of PPBS 234

Performance Budgeting 234

Requisites 235

Performance Budgeting vs. Traditional Budgeting 235

Performance Budgeting vs. Program Budgeting 235

Steps in Implementation 235

Purposes 236

Requirements for Introduction 236

Key Terms 237


Chapter Eight

SOCIAL RESPONSIBILITY, CORPORATE GOVERNANCE AND SYNERGY

Social Accounting 240

Meaning 240

Key Terms 240

Objectives of Social Accounting 241

Corporate Social Responsibility (CSR) 241

Scope of Corporate Social Responsibility 243

Limitations of Social Reporting and Social Auditing 244

Social Cost Benefit Analysis 244

Indicators of Social Desirability of a Project 245

Environmental Accounting 245

Meaning of Environment 245

Meaning of Environmental Accounting 246

Environmental Reporting 246

Objectives of Environmental Reporting 246

Environmental Audit 247

Benefits of Environmental Audit 247

Environmental Impact Assessment 248



Corporate Governance 248


Tests for Effective Corporate Governance 250

Knowledge Management 251

Meaning and Types of Knowledge 251

Meaning and Process of Knowledge Management 251

Principles, Values and Ethics 252

Principles and Values 252

Ethics 252

Corporate Culture 253

Management of Change 253

Synergy 253

Characteristics of Synergy 253

Negative Synergy 254

Synergy as a part of Management 254

Synergistic Effect of Organization 254

Types of Synergy 255

Start-up and Operating Synergy 255

Possible Opportunities for Synergy 256

Key Terms 259


Chapter Nine

BUSINESS PORTFOLIO ANALYSIS

Business Portfolio 263

Meaning of Business Portfolio 263

Strategic Business Units (SBUs) 263

Management of an SBU 264

Portfolio Planning 264

Need for Focusing 265

Aim of Portfolio Analysis 265

Advantages of Portfolio Analysis 266

Limitations of Portfolio Analysis 266

Steps in Portfolio Approach 267

Factors Influencing Portfolio Strategy 267

Contents C-23


BCG Growth - Share Matrix 268

High Growth - High Market Share : Stars 269

Low Growth - High Market Share : Cash Cows 270

High Growth - Low Market Share : Question Marks 270

Low Growth - Low Market Share : Dogs 271

Other Classification of SBUs 271

Strategic Alternatives 271

Problems in using BCG Matrix 272

GE Multifactor Portfolio Matrix 273

Limitations of GE/McKinsey Matrix 279

Hofer’s Product - Market Evolution Matrix 279

Market Life Cycle - Competitive Strength Matrix 283

Arthur D. Little Portfolio Matrix 284

Ansoff’s Product - Market Growth Matrix 286

Directional Policy Matrix 288

Profit Impact on Marketing Strategies (PIMS) 290

Limitations of PIMS Study 291

Key Terms 292


Chapter Ten

REACHING STRATEGIC EDGE

Business Process Re-engineering 295


Process Prototype 297

Process Types 297

BPR Methodology 299

Pitfalls in BPR 302

Benchmarking 302


Evolution of Benchmarking Concept 303

Methodology in Implementation 304

Types of Benchmarking 305

Merits and Demerits of Benchmarking 306


Total Quality Management 307

Definitions and Meaning 308

Core Concepts of TQM 309

Benefits of TQM 311

Kaizen 311

Philosophy of Kaizen 312

Procedure for Implementation of Kaizen 313

Evaluation 313

Benefits and Drawbacks of Kaizen System 314

Reasons for Failure 314

Kaizen Costing 314

World Class Manufacturing 315

Six Sigma 317

Meaning 317

How to Calculate Six Sigma ? 318

Implementation of Six Sigma 319

Balanced Scorecard 319


Four Perspectives of BSC 319

Steps in Developing BSC 321

Types of Information Required for BSC 322

Benefits and Limitations of BSC 323

Business Process Outsourcing 323

Definition and Meaning of BPO 323

Areas for Outsourcing 324

Types of Outsourcing 325

Outsourcing and Contracting : Distinction 326

Outsourcing and BPO : Distinction 326

Advantages and Drawbacks of Outsourcing 327

Pareto Analysis 328

Key Terms 329


Contents C-25

Chapter Eleven

MARKETING MANAGEMENT STRATEGIES

Marketing Management : Scope and objectives 332

Definition and Meaning of Marketing 332

Marketing objectives 333

Tasks of Marketing Manager 334

Marketing Mix 334

Elements of Marketing Mix 335

Service Marketing 336

Problems in Rural Marketing 336

Societal Marketing 337

Marketing : Activities and costs 337

Meaning of marketing cost 337

Marketing cost analysis 337

Benefits of marketing cost analysis 338

Reasons for inaccuracy of marketing cost 338

Production costs vs. Marketing costs 338

Approaches in marketing cost analysis 339

Difficulties in marketing cost analysis 340

Distribution : Activities and costs 340

Meaning of distribution function 340

Activities of distribution function 341

Distribution costs 341

Distribution cost analysis 341

Benefits of distribution cost analysis 342

Ratios in marketing and distribution cost analysis 342

Techniques in marketing and distribution cost analysis 344

Market segmentation 344

Physical distribution management 347

Cost benefit analysis of advertising 349

Channel decisions 350

Warehouse decisions 351

Transport decisions 352

Cost of credit 353

Cost of salesman 353

Evaluation of salesman’s performance 354

Depot numbers and depot location decisions 355

Setting an advertising budget 356



Pricing : Decisions and strategies 357

Pricing policy 357

Pricing objectives 358

Pricing methods 359

Skimming pricing 364

Penetration pricing 365

Pricing established products 366

Product lifecycle in pricing established products 366

Symptoms of competitive degeneration 367

Price discrimination 367

Target pricing 368

Product line pricing 369

Range of products 369

Related optional products 369

Captive products 369

Price cutting 370

Experience curve in product pricing 370

Discounts 371

Quantity discount/rebates 371

Trade discounts 371

Pitfalls in product pricing 371

Non-financial factors in pricing 372

Branding 373

Definition and meaning of brand 373

Meaning of brand equity 374

Objectives of branding 374

Brand management activities 375

Identification of brands as an asset 376

Product lifecycle and brand lifecycle : Distinction 376

Brand as a barrier to entry 376

Advertising and sales promotion 377

Meaning of advertising and sales promotion 377

Objectives of advertising and sales promotion 377

Difficulties in effectiveness of advertising and sales promotion 378

Evaluation of effectiveness of advertising campaign 378

Marketing research 379

Definition and meaning of marketing research 379

Scope of marketing research 379

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Steps in marketing research 380

Importance of marketing research 381

Marketing warfare 381

Defensive warfare 381

Offensive warfare 381

Flanking warfare 382

Guerrilla warfare 382

New products : Development and Failure 382

Methods of generating new product ideas 382

New product development 383

Reasons for failure of new products 384

Pioneers, imitators and Late Entrants 384

Strategies of Imitators and Late Entrants 385

Diffusion theory 385

Factors influencing retailing 385

Macro-environmental influences 386

Micro-environmental influences 386

Other important topics in marketing management 386

Market potential 386

Market espionage 386

Merchandising 387

Unsought goods 387

Economic advantage of intermediaries 387

Factors affecting logistics choice 387

Marketing audit 387

Market data base 388

Markov analysis 388

Target market 388

Product line 388

Product differentiation 388

Customer differentiation 388

Product positioning 389

Market signals 389

Consumer psychographies 389

Marketing communication 389

Marketing strategy 390

Key terms 390

Review questions 392


Chapter Twelve

FINANCIAL MANAGEMENT STRATEGIES

Strategic focus of financial management 398

Strategic financial planning and objectives 398

Strategic objectives of a business firm 399

Financial objectives of a business firm 400

Profit maximization objective 400

Wealth maximization objective 401

Value maximization objective 402

Other maximization objectives 403

Risk and return in financial planning 404

Costing and risk 404

Risk-return trade off 405

Financial forcasting 405

Meaning of forecast 405

Techniques of financial forecasting 406

Benefits of financial forecasting 407

Financial engineering 408

Meaning 408

Features of financial engineering 409

Shares buyback 410

Meaning of buyback 410

Reasons for buyback 410

Financing aspects of buyback 411

Impact of buyback decision 412

Benefits and drawbacks of buyback 412

Working capital management Strategies 413

Conservative approach 413

Aggressive approach 414

Matching approach 415

Zero working capital approach 415

Working capital policies 415

Cash assets management 417

Meaning 417

Cost benefit analysis of cash management 417

Management of liquidity 418

Inventory management 418

Meaning of inventory 418

Contents C-29

Classification of inventory 418

Features of ideal inventory policy 419

Receivables management 419

Meaning of receivables 419

Establish credit policy 420

Establish credit standards 420

Establish policy on bad debts 420

Capital investment decisions 421

Capital budgeting 421

Capital rationing 422

Factors leading to capital rationing 422

Dividend decisions 423

Determinants of dividend 423

Dividend policies 426

Constant dividend payout policy 426

Constant dividend rate policy 426

Optimum dividend policy 427

Bonus shares 427

Meaning 427

Purpose of bonus issue 428

Advantages and disadvantages of bonus issue 428

Cost of capital 429

Definition and meaning 429

Investment appraisal and WACC 430

Capital structure 431

Meaning and definition 431

Financial structure vs. capital structure 432

Optimum capital structure 432

Factors determining capital structure 433

Impact of debt and equity in capital structure 435

Distinction between debt and equity 435

Trading on equity 436

Economic value added 437

Meaning of EVA 437

How to measure EVA 437

Suggestions to improve EVA 438

Steps in implementing EVA 438

Superiority of EVA 439

Drawbacks of EVA 440


Market value added 440

Shareholder value analysis 441

Value based management (VBM) 442

VBM Methods 442

Benefits of VBM 443

Limitations of VBM 443

Du Pont analysis 444

Key terms 445


Chapter Thirteen

COST MANAGEMENT STRATEGIES

Need for cost management 451

Types of cost accounting systems 451

Cost control and cost reduction 451

Importance of cost control and cost reduction 451

Cost control and cost reduction : Distinction 452

Cost control process 453

Cost reduction process 453

Precautions in implementation 455

Cost reduction programs 456

Value engineering and value analysis 457

Impact of value engineering on profit 457

Value engineering vs. value analysis 458

Value engineering program 458

Benefits of value analysis 460

Target costing 460

Definition and meaning of target costing 460

Steps in target costing 463

Target costing methodology 464

Methods of establishment of target costs 466

Strategic cost management (SCM) 467

Components of SCM 468

Costing product characteristics or attributes 468

Importance of strategic cost and management accountant 468

Strategic cost analysis 469

Learning and experience effects 470

Contents C-31


Learning effect 470

Experience effect 471

Cost leadership strategy 471

Materials requirement planning (MRP) 472

Aims of MRP 473

Features of MRP 473

Implementation methodology 474

Method of operation 475

Manufacturing resource planning (MRP-II) 476

Essential elements 476

Enterprise resource planning (ERP) 477

Evaluation of ERP package 478

ERP applications 479

Benefits from ERP 480

Reasons for failure of ERP 480

Strategic management accounting 481

What information should strategic management accounting provide? 482

Key terms 483


Chapter Fourteen

OPERATIONS MANAGEMENT STRATEGIES

Meaning of operations management 487

Capacity management 488

Need for capacity management 488

Capacity planning 488

Economics of scale 489

Productivity 490

Meaning of productivity 490

Measurement of productivity 492

Misconceptions in measuring productivity 492

Formulation of productivity objectives 492

Productivity plan 493

Productivity audit 493

Just in time 494


Features of JIT philosophy 494

Benefits of JIT 495

Techniques of JIT system 495

Supply chain management 501


Features of SCM 502

Basic concepts of SCM 503

SCM process 503

Benefits of SCM 504

Supply chain Activities 505

Information technology and SCM 506

Total solution contract 506

Meaning 506

Advantages 507

Vendor managed inventory system 508

Meaning 508

Benefits 508

Value chain management 509

Meaning 509

VCM methodology 509

Advantages 509

Vendor development 510

Definition 510

Methodology in implementation 510

Strategies 511

Advantages 511

Key terms 511


Chapter Fifteen

HUMAN RESOURCES MANAGEMENT STRATEGIES

Strategic importance of HRM 514

Human Resources Planning 515

Human resources planning process 515

Estimation of human resources requirement 517

Estimates of staff losses 517

Employee motivation theories 518

Maslow’s theory of Motivation 518

Contents C-33


McGregor’s Theory 519

Herzberg’s two factor theory 519

Agency theory of employment 519

Meaning 519

Agency costs 520

Constituents of agency theory 520

Criticism of agency theory 521

Economics of training and development 521

Key terms 523


Chapter Sixteen

RISK MANAGEMENT STRATEGIES

Risk and uncertainty 525

Meaning of risk and uncertainty 525

Risk management 526

Objectives of risk management 526

Risk management process 526

Risk management strategies 527

Types of risk 528

Project risk management 532

Enterprise risk management 533


Need for implementation of ERM 533

Risk reporting 534

Risk reduction through diversification 534

Utility function and risk taking 535

Indifference curves and attitudes to risk 537

Concept of certainty equivalent 538

Risk and required return 538

Risk-return relationship 539

Risk management models 541

Sensitivity analysis 541

Simulation 542

Steps in simulation 543

Advantages and disadvantages of simulation 544

Other risk management models 544

Key terms 546



Contents Mgmt...Contents C-13. Operations 61 Human Resources 62 Research and Development 63 SWOT Analysis 63 SWOT Matrix 65 SO Strategies 66 WO Strategies 66 ST Strategies 66 WT Strategies

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