GM14
Strategic Management and Ethics
(For CNM Cases)
Assignment - I
Assignment Code: 2016GM14A1 Last Date of Submission: 30th April 2016
Maximum Marks: 100
Attempt all the questions. All questions are compulsory and carry equal marks.
Section A
1. (a) What do you understand by Strategic Management? Why should a student study
Strategic Management?
(b) Why do we need it and what are the benefits to the organization?
2. (a) What do you understand by Organizational Appraisal?
(b) What should the strategist look for in sizing up a company's strengths, weaknesses, opportunities and threats?
3. Elaborate the four grand strategies viz. stability, growth, retrenchment and combination to achieve the corporate objectives of the firm.
4. A firm should have an edge over competition in getting customers and defending against competitive forces to have competitive advantage. Discuss the statement with reference to –
a. Generic Strategies
b. Offensive Strategies
c. Defensive Strategies
Section B
Case Study - Suchi Hotels and Direct Marketing Limited
Mr. Pulapa hailed from a village near Rajahmundry whose hobby was travelling widely. During his extensive travel in 1950s and 1960s, he faced the problem of non-availability of good hotels in different parts of the country. He got an idea of bridging this gap in hotel industry at least in one town and he started a small hotel by name Suchi Hotel with his own capital of Rs. 50,000 in 1971. He became successful by 1973. His profits cross 30% of his investment. The number of customers went up by 200% between 1971 and 1973. Sales in monetary terms rose by 150% during the period. He was amazed by the progress of Suchi Hotel and started planning to expand the hotel to other towns particularly to Visakhapatnam and Vijayawada. He searched for a partner who can participate in equity, day to day administration and policy making. He could find Mr. Ram Krishna in 1975 and both of them started hotels in Visakhapatnam and Vijayawada after establishing a private limited company under the name of Suchi Hotels (Private) Limited in 1976. Their unit in Vijayawada was a successful project. In fact, they expanded the Vijayawada branch. The Visakhapatnam branch proved to be a failure one and the company harvested it in 1981. The money received from this source was invested in opening another branch in Vijayawada in 1982. The company had plans of opening its hotels in other cities like Hyderabad, New Delhi and Bombay. The company was converted into a public limited company in 1986 and issued share capital for public to the tune of Rs. 50 lakhs. The company was successful in this venture. The company started its branches in Hyderabad, and New Delhi in 1988 and could not start a branch in Bombay as it could not get the right place in Bombay; instead, the company opened its branch in Madras.
All the hotels of the company proved to be successful. The company's management in 1991 seriously considered the issue of supplying a lunch and dinner to the homes and/ or offices. This idea attracted the management from the view point of increasing number of working unmarried women and men. After a thorough discussion of this project, the management decided to implement this idea from janualy 1992. The company received an unexpected response from the customers. Therefore the company invested all its cash for purchasing vehicles, and other necessary equipment for this project. The company earned the profit as high as 30% in 1992 and declared dividend the highest percentage since its establishment i.e., 28%.
Pragathi Direct Marketing Limited was marketing the consumer durables like TVs, washing machines, kitchen appliances, ready-made garments in South India could not survive due to unsound financial position. The management of Suchi Hotels Limited and Pragathi Direct Marketing Limited agreed for merging the latter company with the former one. The name of the new company was decided as "Suchi Hotels and Direct Marketing Limited" and its was also agreed to offer one share of the new company for every three shares of Rs. 10 fully paid to the shareholders of the Pragathi Direct Marketing Limited. This new company of Suchi Hotels and Direct Marketing Limited came into being in April 1993. The management of the new company issued equity shares for the public to the tune of Rs. 200 crores in July 1993 and the company had an overwhelming response for this issue.
During this period there was a boom in the capital market. The number of new companies in the country was increasing. Added to this, a number of existing companies either expanded and/or diversified their activities. Almost all the companies went for public issue were successful. The growth of the traditional hotel industry reached a peak stage. In fact, there was cut-throat competition in this industry due to more number of firms in the industry. The new developments in this industry are the emergence of motels far from the busy places of the cities and the emergence of tiffin corners and lunch corners at all the places convenient to the customers. Even, many existing hotels started the home/office delivery of breakfast, lunch and dinners.
The Suchi Hotels and Direct Marketing Limited was affected severely by these environmental changes. The number of customers, sales and profits of all of its hotels started declining from 1995 and reached to their lowest level in 1997. The company viewed this problem very seriously as the sales level is 50% below the break-even level.
During the 1990s, there has been favourable conditions for the direct marketing industry. The industry's growth rate is nearly 20%. In fact, new items are added to the direct marketing by many companies. The Suchi Hotels and Direct Marketing Limited also expanded its operations of its direct marketing portfolio. Further, this portfolio's sales went up by 100% between 1995 and 1997, profit went up by 50% during the period. The General Manager of the company has been designing many new programmes which have been proving successful. The company could not approve some of the worthwhile projects proposed by the general manager of the Direct Marketing Portfolio of the company due to the cash crunch. The company also realised that it has been unable to exploit the opportunities offered by the direct marketing industry due to the setbacks from the hotel portfolio of the company. The general manager of the direct marketing wing threatened the management in September 1997, that he would leave the company by March 1998, if the company fails to make further investments.
Questions:
1. Discuss the strategic alternatives available in the company.
2. Should the company go for a public issue? Turn around programme of the hotel and expansion programme of direct marketing.
Strategic Management and Ethics
(For CNM Cases)
Assignment - I
Assignment Code: 2016GM14A1 Last Date of Submission: 30th April 2016
Maximum Marks: 100
Attempt all the questions. All questions are compulsory and carry equal marks.
Section A
1. (a) What do you understand by Strategic Management? Why should a student study
Strategic Management?
(b) Why do we need it and what are the benefits to the organization?
2. (a) What do you understand by Organizational Appraisal?
(b) What should the strategist look for in sizing up a company's strengths, weaknesses, opportunities and threats?
3. Elaborate the four grand strategies viz. stability, growth, retrenchment and combination to achieve the corporate objectives of the firm.
4. A firm should have an edge over competition in getting customers and defending against competitive forces to have competitive advantage. Discuss the statement with reference to –
a. Generic Strategies
b. Offensive Strategies
c. Defensive Strategies
Section B
Case Study - Suchi Hotels and Direct Marketing Limited
Mr. Pulapa hailed from a village near Rajahmundry whose hobby was travelling widely. During his extensive travel in 1950s and 1960s, he faced the problem of non-availability of good hotels in different parts of the country. He got an idea of bridging this gap in hotel industry at least in one town and he started a small hotel by name Suchi Hotel with his own capital of Rs. 50,000 in 1971. He became successful by 1973. His profits cross 30% of his investment. The number of customers went up by 200% between 1971 and 1973. Sales in monetary terms rose by 150% during the period. He was amazed by the progress of Suchi Hotel and started planning to expand the hotel to other towns particularly to Visakhapatnam and Vijayawada. He searched for a partner who can participate in equity, day to day administration and policy making. He could find Mr. Ram Krishna in 1975 and both of them started hotels in Visakhapatnam and Vijayawada after establishing a private limited company under the name of Suchi Hotels (Private) Limited in 1976. Their unit in Vijayawada was a successful project. In fact, they expanded the Vijayawada branch. The Visakhapatnam branch proved to be a failure one and the company harvested it in 1981. The money received from this source was invested in opening another branch in Vijayawada in 1982. The company had plans of opening its hotels in other cities like Hyderabad, New Delhi and Bombay. The company was converted into a public limited company in 1986 and issued share capital for public to the tune of Rs. 50 lakhs. The company was successful in this venture. The company started its branches in Hyderabad, and New Delhi in 1988 and could not start a branch in Bombay as it could not get the right place in Bombay; instead, the company opened its branch in Madras.
All the hotels of the company proved to be successful. The company's management in 1991 seriously considered the issue of supplying a lunch and dinner to the homes and/ or offices. This idea attracted the management from the view point of increasing number of working unmarried women and men. After a thorough discussion of this project, the management decided to implement this idea from janualy 1992. The company received an unexpected response from the customers. Therefore the company invested all its cash for purchasing vehicles, and other necessary equipment for this project. The company earned the profit as high as 30% in 1992 and declared dividend the highest percentage since its establishment i.e., 28%.
Pragathi Direct Marketing Limited was marketing the consumer durables like TVs, washing machines, kitchen appliances, ready-made garments in South India could not survive due to unsound financial position. The management of Suchi Hotels Limited and Pragathi Direct Marketing Limited agreed for merging the latter company with the former one. The name of the new company was decided as "Suchi Hotels and Direct Marketing Limited" and its was also agreed to offer one share of the new company for every three shares of Rs. 10 fully paid to the shareholders of the Pragathi Direct Marketing Limited. This new company of Suchi Hotels and Direct Marketing Limited came into being in April 1993. The management of the new company issued equity shares for the public to the tune of Rs. 200 crores in July 1993 and the company had an overwhelming response for this issue.
During this period there was a boom in the capital market. The number of new companies in the country was increasing. Added to this, a number of existing companies either expanded and/or diversified their activities. Almost all the companies went for public issue were successful. The growth of the traditional hotel industry reached a peak stage. In fact, there was cut-throat competition in this industry due to more number of firms in the industry. The new developments in this industry are the emergence of motels far from the busy places of the cities and the emergence of tiffin corners and lunch corners at all the places convenient to the customers. Even, many existing hotels started the home/office delivery of breakfast, lunch and dinners.
The Suchi Hotels and Direct Marketing Limited was affected severely by these environmental changes. The number of customers, sales and profits of all of its hotels started declining from 1995 and reached to their lowest level in 1997. The company viewed this problem very seriously as the sales level is 50% below the break-even level.
During the 1990s, there has been favourable conditions for the direct marketing industry. The industry's growth rate is nearly 20%. In fact, new items are added to the direct marketing by many companies. The Suchi Hotels and Direct Marketing Limited also expanded its operations of its direct marketing portfolio. Further, this portfolio's sales went up by 100% between 1995 and 1997, profit went up by 50% during the period. The General Manager of the company has been designing many new programmes which have been proving successful. The company could not approve some of the worthwhile projects proposed by the general manager of the Direct Marketing Portfolio of the company due to the cash crunch. The company also realised that it has been unable to exploit the opportunities offered by the direct marketing industry due to the setbacks from the hotel portfolio of the company. The general manager of the direct marketing wing threatened the management in September 1997, that he would leave the company by March 1998, if the company fails to make further investments.
Questions:
1. Discuss the strategic alternatives available in the company.
2. Should the company go for a public issue? Turn around programme of the hotel and expansion programme of direct marketing.
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