Rajasthan Technical University 2009 M.B.A Business Policy & Strategic Managment - Question Paper

4.    Corporate Governance seeks to bring efficiency and transparency yet corporations do not pursue high standards of corporate governance. Comment. Explain importance of corporate governance.    (5+9=14)

5.    What is external environment analysis? Discuss the elements of external environment which should be analyzed for strategy formulation. Give a few line examples also.

(14)

3M6302 / 6,300    (1)    [Contd..

wrne short noies : (any two)

i)    Strategic planning and operational planning.

ii)    BCG Matrix (Draw diagram also)

iii)    Porters five forces

iv)    GE I cell Matrix    (7+7=14)

Section - B Case study (Artos Industries Limited)

7. Analyse the case and answer the questions.

Artos Soft Drinks Limited. Ramachandrapuram was one of the leading soft drinks industrial unit during 1960s in Andhra Pradesh, In fact, the variety of soft drinks available in the market were a few. The market in Andhra Pradesh was rather unorganised during 1960s. The transport facilities and other infrastructural facilities for marketing soft drinks were not developed. The culture of the customers was not in favour of consumption of soft drinks. In fact consumption of soft drinks was a luxurious item for most of the consumers during this period in the region. Strategic themes of the company during this period include:

i)    Develop its brand as a major brand with market leadership.

ii)    Sophisticated, yet efficient, operating systems.

iii)    Create the awareness among consumers about soft drink consumption.

The company could implement the first strategy. It could become the leader in the area through its niche strategy with a few followers. The companys closest competitor was M/s Raju Soft Drinks Company, Vijayawada. This company could not perform well in the market due to low demand and as such offered a merger proposal with Artos Soft Drinks Limited in 1971. The management of Artos Soft Drinks Limited accepted the proposal and executed the merger in 1972. The new companys product range include.

i)    Artos Orange

ii)    Artos Lemon

iii)    Artos Grape and

iv)    Artos Pineapple

3M6302

3M6302    (2)    [Contd....

The companys capital went up from Rs. 1 lakh to Rs. 50 lakhs, the sales increased from Rs. 15 lakhs to Rs.10 crores per year during the period between 1960 and 1975. The return on investment has gone up from 18 percent to 24 percent during the period. Company also expanded its market to the neighbouring states during the period 1972 to 1975. During this period, environment was favourable to the company due to the economic growth, population growth, increased awareness of the soft drink consumption and the like. Moreover, the environment was marked by the negligible competition in the soft drink industry.

The new brands of soft drinks like Gold Spot (orange flavour), Lirnca (lemon flavour), Kismet (pineapple flavour) were introduced in 1976 in different sizes, attractive bottles and attractive flavour. Added to this, these new brands were advertised extensively. The high income bracket customers, who generally consume soft drinks frequently, shifted their loyalty to the new brands. The new company offered concessional price for bulk purchases for marriages and other functions.

These factors created threats to Artos Soft Drink Limited. The companys sales declined year by year and reached the lowest level of Rs. 2 lakhs during 1980. The cost of sales was more than the sales revenue. The company was unable to pay even the salaries of its employees during 1980. The management called for a^; meeting of its board of directors to decide upon the future strategy oflhe company. The board of directors considered several alternative strategies including.

i)    Conversion of soft drink manufacturing plant into beer manufacturing plant with additional investment.

ii)    Turnaround the existing company

iii)    Divesting the present company as it is

iv)    Merge with the new company.

The board of directors, after considering SWOT analysis of each of the above strategies, selected the strategy of converting the existing plant and facilities to produce beer as the competition in beer industry was significantly less. The company mobilised the additional capital through loans and advances from the banks and the board of directors. The process of conversion was completed in 1982. The company changed its name as Artos Industries Limited in 1982.

The company followed the strategy of penetration pricing policy for the Artos beer and advertised about the product extensively. The favourable marketing and environmental conditions and the companies strategies helped it to revive the 3M6302    (3)    [Contd....

K-iBpsffi- s I'nancv-i! no'-ee- vi by 1988. The eo;nn.n . , ;!!    generate surplus cash cv-'rv h hv ' ev-b - .,. em-?- bie ie;-. b drinks products, was

;in>on -e- e sl'n r-;ee lb, :> >    siness in its portfolio,

p .. .in :v.i;p;u >e n .be    .he board of directors

about a new business in its nonfolio. The b-> eb    directors met in April

19# am* discussed about the different portfolios i; e; i> :    related and unrelated teksssses,

Sri Kee U \nles. a loss-ir u nr >. oircpany, offered i .    for merger with Artos

latter e In : -.e-'. Sri Re n Te ; . mi;nucleated the >'!    offer to several profit-

;.::J aef;-eeee . n cer 1989 The b    i of directors of Artos

eei -h' ' rb. . ^:    >89. Sri Ram Textiles

*as a.:.ed-,v: . bide-e. ee    he shareholders of Sri

iben Tex , <    ies Limited of Rs. 10

bb y p'i;-: K'. . ee . oi >     by them in Sri Ram

: SXlbcii.

^,yb r i!u-. .eoieni ofAne, industries inveru-; .-b h sh surplus and turned enacdftvir n rib:-, busker, . T! ers'ne busine^;:>    , ed a number of changes

edi&fiag nee designs., improving the quality, e\    ed\ ertising and reducing

btc iWieafe T uese si.rtuen ^:es of the company liae . / r oducing the results in the Mmeiea:-*/ in sale-, gross profit and net re om su-ee 1991.

F/ue comp-. '. i.'-tness stari.-.b    e: from the year 1990. It

nebbed ?rs ?xeb. - ?nde;st:    .i.eted severely by the erviei-iL bn rbs beer unhh rdeclined drastically by

79b'5. bj:rtrn^,; e\p'ⁿ'^:' j_{n C}\ _{( c}e e;.e    nue. The companys

..jeageKe n iv.md run c>;un,e r- -hue- -e arre .    ;d not come out of the

fibeck. Bowever, the management calie*.- i-nr an ..    : meeting of the board of ikssxms to discuss the issue and formulate the fir - r strategies.

3) Analyse Che following .smiteeic option.- :

b) i urnaroe k ,e    r r > by in-.    aal finances generated ry ibetexb-- u

) bio; 7^:;.g -.)(    'e >;Mpetto;'    (9)

2) bxpibe;--v b, :    n.nn enb em    e e- 1 scenario. (5)