(a) (i) How do companies scan the environment and analyse the same to reset the objectives and formulate strategies ? Explain. 5…

(a)(i) Environmental scanning and its use in resetting objectives

Environmental scanning is the systematic collection of information on external forces, and analysis turns it into insight about opportunities and threats. Firms scan the general environment by PESTLE (political, economic, social, technological, legal, environmental) factors and the industry environment by Porter's five forces, along with customers, suppliers and competitors. Sources include trade data, market research, government reports, the press and customer feedback. The firm then monitors trends, forecasts their direction, sometimes through scenarios, and assesses their effect, usually in a SWOT matrix against its own strengths and weaknesses. The findings are used to reset objectives and choose strategies. For example, Tata Motors, scanning the policy push for electric mobility and falling battery costs, set an objective of leadership in Indian electric passenger vehicles and invested in that line.

(a)(ii) Entering a market through mergers and acquisitions rather than a new venture

An acquisition is preferable under these considerations. Speed: it gives immediate presence, while a new venture takes years to build. Barriers to entry: where economies of scale, brands, licences, distribution or technology make start-up hard, buying an existing player avoids them. Capabilities: it brings in skills, patents, talent and customer relationships that cannot be built quickly, as Tata Motors gained premium-car design and global brands by acquiring Jaguar Land Rover in 2008. Competition: it removes a rival and avoids adding capacity to a crowded market. Scale and synergy: cost and revenue synergies may justify the premium. Risk: an operating business has a track record, so uncertainty is lower. Zomato's purchase of Blinkit in 2022 gave quick entry into quick commerce. Financial and tax gains, and access to resources such as land or raw materials, may also count.

An own venture is better when the premium is high, no suitable target exists, the firm has the needed skills, or integration and cultural clash would be costly, as many failed mergers show.

(b)(i) Core competencies and sustainable competitive advantage

The statement holds when the competencies meet certain tests. Prahalad and Hamel define a core competence as a collective learning in the organisation that gives access to a wide variety of markets, adds real value for customers and is hard for rivals to copy. Honda's skill in engines carried it from motorcycles to cars, generators and lawn mowers. 3M's adhesives expertise gave a stream of products and Sony's miniaturisation produced a series of portable devices.

Because they are difficult to imitate, such competencies give lasting advantage. But the claim needs care: a competency that is not renewed becomes a rigidity, as with Kodak's film chemistry when digital imaging arrived. Advantage is sustainable only if the competency is valuable, rare, hard to imitate and organised for use, and if it is kept current.

(b)(ii) Value chain analysis and competitive advantage

I agree. Porter's value chain divides a firm into primary activities (inbound logistics, operations, outbound logistics, marketing and sales, service) and support activities (firm infrastructure, human resources, technology, procurement). Advantage comes from performing these activities at lower cost or in a way that creates unique value. Analysing the chain shows where cost is incurred and where value is added, so the firm can redesign, outsource or strengthen specific activities, and compare itself with rivals.

Linkages matter because advantage often lies between activities, not within them. Better product design may reduce production and after-sales cost, and just-in-time links to suppliers cut inventory. Coordinating linkages demands trade-offs, such as higher spend on quality inspection to cut service cost. Vertical linkages with suppliers and distributors extend the chain outside the firm. Linkages are hard for competitors to copy because they depend on systems and culture. Zara links design, small-batch manufacture and store feedback to turn fashion in weeks, and Dell's direct model linked ordering to assembly and supplier delivery.

(c)(i) Strategic intent, stretch, leverage and fit

Strategic intent is a long-term ambition that sets a stretching and consistent direction, such as Komatsu's aim to encircle Caterpillar or Canon's to beat Xerox. It focuses effort, guides priorities across years and gives a sense of purpose, so it helps understand why firms act as they do and what they will do next.

Stretch, in Hamel and Prahalad's view, is the deliberate gap between a firm's ambitions and its resources. Instead of fitting goals to available resources, firms set aspirations beyond them, as Honda did against bigger rivals, and then build capability to reach them. It explains how small challengers outgrow larger firms.

Leverage is the way of getting more from limited resources: concentrating them on key goals, accumulating knowledge, complementing resources by blending different ones, conserving them by reuse, and recovering them quickly through speed. Reliance Jio used the leverage of scale and a single digital network to take large market share.

Fit is the match between a firm's resources and its environment, the traditional logic of strategy. Stretch and leverage extend it: the firm must fit its market and also stretch beyond its present position, and so fit is both a test and a goal.

(c)(ii) Low-cost leadership, price wars and choice of generic strategy

The statement is right in many industries. A cost leader wins through scale, efficiency and low prices. Where products are close substitutes and buyers are price-sensitive, rivals may match price cuts, which erodes margins for all and hurts the weaker firms. Indian telecom after Jio's 2016 entry and the low-cost airline market show such wars. But a cost leader with a real cost advantage can survive them and gain share, as Walmart and DMart have done, so the claim holds only where cost advantage is not real or others match it.

Porter's generic strategies are cost leadership, differentiation and focus. A firm should choose by considering the industry, such as price sensitivity and scope for differentiation, its own resources, such as scale, technology and brand, the strategy of competitors, and the risk of being stuck in the middle. Cost leadership suits standard products and large scale, as with DMart. Differentiation suits customers who pay for quality or brand, as with Titan or Apple, and focus suits a narrow segment, as with Fabindia.