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MS -91

MANAGEMENT PROGRAMME

Term-End Examination

December, 2009

MS-91 : ADVANCED STRATEGICMANAGEMENT

Time : 3 hours Maximum Marks : 100

(Weightage 70%)

Note :

There are two sections — A and B.

Attempt any three questions from Section A which carry

20 marks each.

(iii) Section B is compulsory and carries 40 marks.

SECTION - A

Explain in detail the concept and meaning ofcorporate policy. Discuss the internal and externaldeterminants of corporate policy.

Discuss in detail the initiatives taken by thegovernment to promote good governance

practices.

3. Analyse various market structures and discuss thekey issues involved in terms of :

Market Structure and Competition.Market Structure and SustainableCompetitive Advantage.

(iii) Market Structure Pricing Strategies.

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Explain the benefits of Knowledge Management(KM) and discuss the challenges in theimplementation of KM system.

Write short notes on any four.

Competitive Advantage and R & D

Dynamic Environment

Evaluation of Corporate Plan

Business Ethics

(e) Social Audit

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SECTION - B

6. Read and analyse the following case and answer

the questions given at the end.

PRICING THE AIRLINE INDUSTRYFor the first 15 years after deregulation in 1978,the U.S. airline industry was plagued by frequentprice wars and large financial losses. The airlineswere particularly hard hit by the recession of theearly 1990s, and several nearly went bankrupt.U.S. airlines enjoyed soaring profits during theeconomic recovery of the mid-to late 1990s, onlyto suffer record losses during the 2001 recessionand the aftermath of the terrorist attacks ofSeptember 11. These trends are partly due tofluctuations in demand, but are exacerbated bythe industry cost structure and the nature ofcompetition among carriers.Airline costs fall into three broad categories :

Flight-sensitive costs, which vary with thenumber of flights the airline offers. Theseinclude the costs associated with crews,aircraft servicing, and fuel. Once the airlinesets its schedule, these costs are fixed.Traffic-sensitive costs, which vary with thenumber of passengers. These include thecosts associated with items such as ticketingagents and food. Airlines plan theirexpenditures on these items in anticipationof the level of traffic, but in the short run,these costs are also fixed.

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(c) Fixed overhead costs, which include generaland administrative expenses, advertisingand marketing, and interest expenses.

Once an airline has set its schedule, flight-sensitiveand overhead costs are fixed. Traffic-sensitivecosts, which make up only a small percentage oftotal costs, are the only variable costs. This meansthat the airline is better off selling a seat at a lowprice-near marginal cost but well below average

total cost-than not selling the seat at all. Thus, ifairlines are operating well short of capacity, asthey were in the early 1990s and early 2000s, theyhave tremendous incentives to reduce prices.Because marginal costs are so far below averagecosts, the airlines lost staggering sums during theseprice wars. The airlines covered their marginalcosts, but failed to make appreciable contributionstoward fixed costs. On the other hand, if airlinesare at or near capacity, as they were during theeconomic expansion of the mid-to late 1990s, theycan raise prices substantially above average costswithout losing customers to competitors. In 2000,American Airlines recognized this closeconnection between capacity utilization, pricing,and profits. Anticipating the recession, Americanremoved seats from all of its planes. Marketed asa quality enhancement, the strategy was alsodesigned to prevent excess capacity and associatedprice reductions. Other carriers failed to follow

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suit, however, and the recession set the industryback on its heels.

Many other factors affect airline pricing. In somecases, such as when a carrier dominates a hub,an airline faces little competition on certain routesand may raise price accordingly. Even when twoor three carriers compete on a route, they may beable to price at or near the monopoly level.Finally, although airlines seem to sellhomogeneous products, there are a number ofsources of differentiation among them. Businesstravellers prefer carriers that offer frequentservice, which gives them flexibility to schedulemeetings. Many travellers accumulate frequent-flier miles, which encourages them to use the samecarrier for all their flights.

Questions :Why is it so that many firms avoid pricecompetition ? Explain.

When two or three carriers compete on thesame route, they usually keep the price ator near monopoly level. Why ? Givereasons for your answer.

7. What is SWOT Analysis. Do the SWOT Analysisof Indian Pharma Industry, by giving suitableexamples.

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