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
C-14 Strategic Management : Text & Cases
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
C-16 Strategic Management : Text & Cases
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
Review Questions 137
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
Contents C-17
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
C-18 Strategic Management : Text & Cases
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
Review Questions 177
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
Definition and Meaning 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
C-20 Strategic Management : Text & Cases
Key Terms 210
Review Questions 211
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
Review Questions 238
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
C-22 Strategic Management : Text & Cases
Corporate Governance 248
Definition and Meaning 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
Review Questions 260
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
Review Questions 292
Chapter Ten
REACHING STRATEGIC EDGE
Business Process Re-engineering 295
Definition and Meaning 295
Process Prototype 297
Process Types 297
BPR Methodology 299
Pitfalls in BPR 302
Benchmarking 302
Definition and Meaning 302
Evolution of Benchmarking Concept 303
Methodology in Implementation 304
Types of Benchmarking 305
Merits and Demerits of Benchmarking 306
C-24 Strategic Management : Text & Cases
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
Definition and Meaning 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
Review Questions 330
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
C-26 Strategic Management : Text & Cases
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
Contents C-27
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
C-28 Strategic Management : Text & Cases
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
C-30 Strategic Management : Text & Cases
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
Review questions 447
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
C-32 Strategic Management : Text & Cases
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
Review questions 484
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
Definition and meaning 494
Features of JIT philosophy 494
Benefits of JIT 495
Techniques of JIT system 495
Supply chain management 501
Definition and meaning 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
Review questions 513
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
Review questions 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
Definition and meaning 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
Review questions 547
C-34 Strategic Management : Text & Cases