CS -Executive

FSM
Theory & MCQ
(New Syllabus)

BY CMAPUSHKARAJ
BEDEKAR
9423337356
 INDEX
SR SUBJECT PAGE
NO. NO.
Introduction To Management 1 - 11
1
MCQ 12 - 28
Introduction to Strategic Management 29 - 45
2
MCQ 46 - 58
Business Policy and Formulation of 59 - 72
3 Functional Strategy
MCQ 73 - 83
Strategic Analysis and Planning 84 - 104
4
MCQ 105 - 115
Strategic Implementation and Control 116 - 133
5
MCQ 134 - 138
Analysing Strategic Edge 139 - 162
6
MCQ 163 - 165

BY CMA PUSHKARAJ
BEDEKAR
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Introduction To Management

INTRODUCTION TO MANAGEMENT
CONCEPT OF MANGEMENT
 A process of continuing and inter-related activities
 Concentrates on attaining organizational goals
 Focuses on working with and through human and other organizational resources

Definitions of Management

 Harold Koontz in his book "The Management Theory Jungle", defined management as "the art of getting
things done through and with people in formally organised groups."
 Henri Fayol in his book "Industrial and General Administration", deined management as "To manage is
to forecast and to plan, to organise, to command, to co-ordinate and to control."
 Similarly, Peter Drucker in his book "The Principles of Management" conceived management as
"Management is a multi-purpose organ that manages business and manages managers and manages
workers and work."
 According to George R. Terry, "Management is distinct process consisting of planning, organizing,
actuating and controlling performed to determine and accomplish the objectives by the use of people and
resources."
 According to American Management Association, "Management is getting things done through people."
 According to Mary Parker Follet, "Management is the art of getting things done through people."

Theories on the Functions of Management

Since, management is about getting the things done through and with people to attain the desired objectives
by making best utilization of the resources. With the passing times, scholars began studying and theorizing
the essence of management, which gave birth to diverse ideas and concepts of management. Here are some
the most influential theories outlined about the ideas about the functions of management.
• Frederick W. Taylor's Scientiic Management Theory.
• Henri Fayol's Administrative Theory
• Max Weber's Bureaucratic Theory
• Elton Mayo's Human Relations Theory
• Ludwig von Bertalanffy's Systems Theory
• Douglas McGregor's theory based on different types of workers.
• George R Terry propounded principles of management.
• Harold Kootz and Cyril O Donnel's systems and contingency analysis of management functions.
Let us briefly understand each of theories to have better understanding of functions of the management.

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Scientific theory by Frederick W. Taylor
F. W. Taylor proposed scientiic management theory, where various ways were devised to determine the
most efficient and effective ways to get tasks done.
Taylor created four principles of his scientific management theory.
1. Each task should be studied to determine the most efficient way to do the task. Rule of thumb should be
replaced by scientific analysis of work.
2. There should be complete harmony between workers and management towards each other. Both should
realise the importance of each other and aim to increase profits of the organisation.
3. Third, workers should be monitored closely to ensure they only follow best working practices.
4. Fourth, managers should spend time training employees and planning for future needs. Maximizing
efficiency is a great idea but the major flaw in this theory is to de-emphasis on team work.

Classical theory by Henri Fayol

At the beginning of the last century (1916), the French engineer Henri Fayol shelled out the first ever 14
principles of 'classical management theory' formally. Henri Fayol is classified as 'the founding father' of a
variety of concepts including the line and stafforganization. Based on his experience as a thriving director or
a mining company, he developed numerous theories which still ind their relevance in contemporary times.
At the time when Henry Fayol gave such principles, there was no formal training mechanism in existence
for managers; therefore, Fayol principles were ground breaking. However, the growing complexity of
organizations visibly generated a call for professional management.
Fayol's propounded the following 14 principles of management:-
• Division of work - Employees should have complementary skill sets that allow them to specialize in
certain areas. This will increase efficiency.
• Authority - Management needs authority to give employees orders. This authority must be agreed upon.
However, authority and responsibility must go together.
• Discipline - This gets to the idea of employees listening to commands and being disciplined in getting
work done. If a manager sets a deadline, an employee should have the discipline to meet it.
• Unity of command - There has to be unity of command for each employee. Each employee should be
under the command of the only one boss.
• Unity of direction - Teams should be striving for common goals. Teams with same objective should be
under the direction of one manager.
• Subordination of individual interests - The team comes before the individual.
• Remuneration - There are monetary and non-monetary versions of remuneration. Both are needed to
motivate employees.
• Centralization - There should be a balance between decision-making power. Employees should be closer
to decision making process.
• Scalar chain - Each company should have clear hierarchical structures and that should be known to
employees.
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• Order - This refers mostly to cleanliness and organization within a workplace.
• Equity - Employees should be treated well.
• Stability of tenure of personnel - This principle suggests that businesses should try to limit turnover and
keep employees around as they accumulate knowledge and improve. Proper personnel planning should be
given priority.
• Initiative - Employees should share ideas and be rewarded for innovative thinking and taking on new
tasks.
• Esprit de corps - Employee morale matters. This principle suggests that managers should work to keep
employees engaged and interested and they should promote team spirit and unity.
While developing fourteen principles of management, Fayol also defined the five core functions of
management, which are still used and form the basis of theories developed by other scholars later on.
The ive functions are as follows:
• Forecasting
• Planning
• Organizing
• Commanding
• Controlling
As per Fayol, management is a process, which includes functions such as forecasting, planning, organizing,
commanding and controlling. These functions are the fundamental foundation of setting the relationship
between the subordinates and the superior in tune and the five core functions help the managers to solve
troubles/ dilemmas in this relationship or within the organization in a creative and innovative manner.

Bureaucratic theory by Max Weber

Max Weber created the bureaucratic theory, which says an organization will be most efficient if it uses a
bureaucratic structure. Weber's ideal business uses standard rules and procedures to organize itself. He
believed this strategy was especially effective for large operations particularly governmental organisations.
The theory includes the following ive principles:
• Task specialization - Weber stressed the importance of each employee fulfilling a specific role within a
company.
• Hierarchy - Weber wanted each company to have a clear hierarchy within the organization.
• Formal selection - When selecting leaders, businesses view a person's qualifications. They should be
appointed to certain roles based on qualifications, which means they won't be elected by vote.
• Rules and requirements - These ensure everyone knows what's expected of them. Weber wanted business
to have uniform standards, and rules are essential to achieve this goal.
• Impersonal - The rules and regulations make a business structure impersonal. Promotions aren't about
emotions or personal ties, but rather performance.

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Human relations theory by Elton Mayo
Human relations theory by Elton Mayo
In stark contrast to Weber's bureaucratic theory of management, the human relations theory emphasizes
relationships. Mayo conducted a series of experiments known as Hawthorne Experiments, which focussed
on the study of behaviour of people at work. Mayo believed that productivity increases when people feel
like they are part of a team and valued by their co-workers.
Important features of Human Relations Theory are as follows:-
1. A manager must have basic understanding of human behaviour in the context of work groups and
organisations.
2. The informal groups have significant influence on morale and productivity of works.
3. Workers are motivated not only by money alone but total work situation including recognition,
participation etc.
4. Study of management must draw concepts and principles of behaviour sciences like Psychology,
Sociology etc.
The human relations theory emphasizes praise and teamwork as motivational factors.

Systems Theory by Ludwig von Bertalanffy

The systems theory of management believes that each business is anopen system, much like a living
organism.
An open system interacts with its environment by way of inputs, throughputs and outputs. There are
exchanges of energy, money, matter, people and information with external environment.

X&Y Theory by Douglas McGregor

The X&Y theory of management assumes there are two different types of workers. Theory X workers lack
ambition and drive and need to be ordered around by bosses to do anything. Theory Y workers, on the other
hand, enjoy work and strive for self-fulfillment.

George R. Terry
After Henry Fayol, the subject became a matter of interest for various theorists and which resulted in
analysis of the functions of management from various viewpoints and many more ideas emerged which
deviated only to some extent from Fayol's core functions of management. George R. Terry wrote a book
Principles of Management in the year 1968 and elaborated his viewpoint. Terry believed that there are
existed four core functions of management, each function addressing a specific problem/issue the
management must solve. The question, the fundamental function and the resulting action are outlined in the
below table :

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The Question The Function The Result
What is the need? Planning Objectives, goals, policies,
procedures and methods
Where should actions take Organizing Work division, work assignment,
place and who should do what and authority utilization
work?
Why and how should group Actuating/Directing Leadership, communication,
members perform their tasks? development, and incentives
Are the actions being performed Controlling Reports, comparisons, costs and
according to plan? budgets

Harold Koontz and Cyril O'Donnell

In the year 1976, Harold Koontz and Cyril O'Donnell published an essay 'Management: A Systems and
Contingency Analysis of Managerial Functions'. They were of the opinion that the preceding studies in the
past have been successful in describing the functions of management, but, they were of viewpoint that the
division of such functions needs to be more comprehensive. Koontz and O'Donnell believed that there ought
to be five key functions of management:
• Planning
• Organizing
• Staffing
• Directing/Leading
• Controlling
These ive functions of management have become perhaps the most cited ones and have been explained
further in the following section:

THE FIVE FUNCTIONS OF MANEGEMENT

• Planning
The first and foremost managerial function is ‘planning’.
Planning means looking ahead and chalking out future courses of action to be followed.
It is a preliminary step.
The function aims at developing a comprehensive sketch for achieving a explicit organizational objective.
Planning involves identification of tasks which are required to realize the desired goals, demarcation of
how such tasks should be performed, chalking out who, when and where such task will be performed.
It has been aptly said “well planned is half done”. Therefore, planning takes into consideration existing as
well as potential human and physical resources of the organization.
According to Koontz & O’Donell, “Planning is deciding in advance what to do, how to do and who is to
do it. Planning bridges the gap between where we are to, where we want to go.

Why is planning is significant?

Why planning occupies a significance? This is because, the planning provides the organization a better sense
of what it wants to achieve and how to achieve this.
In effect, planning ensures the proper utilization of the available resources and the capability to comprehend

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how these should be used in order to achieve the goal.

Steps in Planning Function

1. Establishment of objectives
• Planning requires a systematic approach and starts with the setting of goals and objectives.
• The objectives should be stated in a clear, precise and explicit language.
• As far as possible, the objectives should be stated in quantitative terms.
• The objectives should be practical, acceptable, feasible and realizable.

2. Establishment of planning premises

• Planning premises are the assumptions about the events in future and serve as a basis of planning.
• Establishment of planning premises is concerned with determining the possible deviations from the
actual plans and reasons of such deviations.
• Planning premises may be internal or external.

3. Choice of alternative courses of action

• When forecast are available and premises are established, a number of alternative course of actions
have to be considered.
For this purpose, each and every alternative will be evaluated by weighing its pros and cons in the light
of available resources and organisations requirements.
• After objective and systematic evaluation, the best alternative is chosen.
• The planners should take assistance of a number of quantitative techniques to judge the stability of an
alternative.
4. Formulation of derivative plans
• Derivative plans are the sub plans or secondary plans which aid in the accomplishment of master plan.
• Secondary plans will flow from the master plan.
• Derivative plans indicate time schedule and sequence of accomplishing a range of tasks.

5. Securing Co-operation
• After the plans have been determined, it is essential to take in confidence the subordinates or those
who have to execute these plans.
The rationale behind taking team into confidence are :-
 Subordinates may feel motivated as they have a say in the decision making process.
 Such involvement may result in valuable suggestions and improvement in formulation as well as
implementation of plans.
 The employees will be willingly ensuring that such plans see light of the day due to being attached
with these.

6. Follow up/Appraisal of plans

• After choosing a certain plan, it needs to be put into action and appraised for its effectiveness.
• Feedback enables the management to take corrective actions for rectifying deviations.
• Follow up establishes a link between planning and controlling function.

Organizing

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Organizing is the function of the management which follows the first function of management i.e. planning.
It is a function which brings together human, physical and financial resources of the organisation.
The synchronization of all three resources is essential to derive the results.
“Organizing is a function by which the concern is able to define the role positions, the jobs related and the co-
ordination between authority and responsibility. Hence, a manager always has to organize in order to get
results.”

Why is organizing essential?

[1] Benefits of Specialisation

While organising, every activity is subdivided into a host of sub-tasks.

For performing these sub tasks, competent people are appointed who eventually convert in to experts by
doing a specific job over and over.

[2] Clarity in Working Relationship

Organising makes a clear cut picture of the working relations among employees.
It specifies a clear line of reporting.
This in turn makes the communication clear, effective and productive.

[3] Optimum Utilisation of Resources

Under the process of organising the whole work is divided into a variety of miniature activities.
There is a certain employee deputed for performing a different job.

[4] Adaptation to Change

Organising process makes the organisation capable of adapting to any change associated with the
position of the employees.
Since every subordinate is well aware of the working of his senior, there is no difficulty for his taking up
the new position.

[5] Effective Administration

The process of organising makes a clear mention of each and every activity of every manager and also of
their extent of authority.
One and all also knows to whom they are accountable.

[6] Development of Personnel

Under the process of organising, delegation of authority is practiced.
This is done not because of the restricted capacity of any individual, but also to realize new techniques of
work.
It provides opportunities of taking decisions for the subordinates.

[7] Expansion and Growth

The process of organising allows the employees the freedom to take decisions which helps them to grow.

Steps in organizing
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1. All those activities which need to be performed in a concern shall have to be identified first.
2. In this step, the manager tries to combine and group similar and related activities into units, divisions or
departments.
3. Once the departments are made, the manager likes to classify the powers and its extent to the managers.
This activity of giving a rank in order to the managerial positions is called hierarchy.
4. Relationships are established among various groups to enable smooth interaction toward the achievement
of the organizational goal.

Staffing
“Staffing pertains to recruitment, selection, development and compensation of subordinates.”
The function aims to warrant the organization always has the right people in the right positions and
the organizational structure isn’t hindered by shortage and surplus of personnel.

Why is staffing essential?

Staffing is essential to guarantee the operational functionality of the organization.

Nature of Staffing
• Staffing is an inseparable managerial function along with planning, organizing, directing and controlling.
The operations of these four functions depend upon a strong team which is built through staffing
function.
• Staffing is a pervasive activity and is carried out by all mangers and in all types of organisations where
business activities are carried out.
• Staffing is a continuous activity- It continues throughout the life of an organization.
• The basis of staffing function is efficient management of personnel- Human resources can be efficiently
managed by a system or proper procedure, that is, recruitment, selection, placement, training and
development, providing remuneration, etc.
• Staffing helps in placing right men at the right job
• Staffing is performed by all managers depending upon the nature of business, size of the company,
qualifications and skills of managers, etc.

How to staff?
• The foremost step in staffing is to plan the manpower inventory required by a concern in order to match
them with the job requirements and demands.
• After knowing the requirements, the organisation invites people to apply for jobs.
The job requirement should unmistakably mention the desired candidate’s profile, so that only eligible
candidates apply for the job.
• Selection is the stage in staffing that can ‘make or break’ the entire process.
Scanning candidates for the right skills, experience, and qualification needs the hiring manager to be at
the best of his/her ability. Through test or interview or discussion, it may be judged that whether a
candidate is a fit for the job or not.
• During orientation, new employees are introduced to the existing ones and are made to feel comfortable
within the organization.

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• Training is a part of incentives given to the workers in order to develop and grow them within the
concern.
Training is generally given according to the nature of activities and scope of expansion in it.
• It is a kind of compensation provided monetarily to the employees for their work performances.
• In order to keep a track or record of the behaviour, attitudes as well as opinions of the workers towards
their jobs.
For this regular assessment is done to evaluate and supervise different work units in a concern.
• Promotion is said to be a non- monetary incentive in which the worker is shifted from a higher job
demanding bigger responsibilities as well as shifting the workers and transferring them to different work
units and branches of the same organization.

Directing
Directing is a process in which the managers instruct, guide and oversee the performance of the subordinates
to achieve predetermined goals.
“Directing consists of process or technique by which instruction can be issued and operations can be carried
out as originally planned”

• Directing is required at all levels of organization.

• Direction is a continuous activity as it continuous throughout the life of organization.
• Directing function is related to subordinates and therefore it is related to human factor.
Since human factor is complex and behaviour is unpredictable, direction function becomes important.
• Direction function helps in converting plans into performance.
• Direction function is carried out by all managers and executives at all levels throughout the working of
an enterprise,
• Direction is supposed to be a function dealing with human beings.
Termed as having delicacy in it to tackle human behaviour.

Why is directing essential?

Directing is important to strengthen the operational capability of the organization.
Directing is a bridge between the operational needs and the human requirements of its employees.

i] Supervision
Supervision is concerned with overseeing the subordinates at work and is done at all levels of
management. It refers to the direct and immediate guidance and control of subordinates in the
performance of their task.
ii] Communication
It is the process of telling, listening, understanding or passing information from one person to
another.
A manager has always to tell the subordinates what they are required to do, how to do it and when
to do it.
He has to create an understanding in the minds of the people at work.
iii] Leadership

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It can be defined as the process by which a manager guides and influences the work of his subordinates.
It isconcerned with influencing people for the achievement of common goals.
iv] Motivation
Motivation relates to a conscious attempt made by the executive to influence the direction and role
of individual and group behaviours.
A manager should understand the process of human-behaviour while performing his managerial
function of directing and leading.
He can get things done through other people willingly by motivation. Motivation inspires the subordinates
v] Commanding
Commanding refers to setting the business going to get the desired optimum results from the
subordinates.

Controlling
Controlling consists of verifying whether everything occurs in conformities with the plans adopted,
instructions issued and principles established.
Controlling ensures that there is effective and efficient utilization of organizational resources so as to
achieve the planned goals.
Controlling measures the deviation of actual performance from the standard performance, discovers the
causes of such deviations and helps in taking corrective actions

Features of Controlling Function

 Controlling is an end function- A function which comes once the performances are made in conformities
with plans.
 Controlling is a pervasive function
 Controlling is forward looking- because effective control is not possible without past being controlled.
 Controlling is a dynamic process
 Controlling is related with planning

Importance of Controlling
Controlling’s most important function is the risk-reduction ability. Since you are essentially monitoring the
performance of the team and comparing it against the objectives you’ve set, you can react to problems more
easily.
With controlling, you are reducing the risk of failure and the impact of failing to meet your objectives.
As mentioned, even if you happen to fail, you’re prepared for it and you can start analyzing the reasons
behind it immediately.
In the business world, measuring performance can be the difference between the successful and the failing
companies.

How to Control

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1. Standards are the plans or the targets which have to be achieved in the course of business function.
a] Measurable or tangible - Those standards which can be measured and expressed are called as
measurable standards.
b] Non-measurable or intangible- There are standards which cannot be measured monetarily.
For example- performance of a manager, deviation of workers

2. The second major step in controlling is to measure the performance.

a] Attitude of the workers,
b] Their morale to work,
c] The development in the attitudes regarding the physical environment, and
d] Their communication with the superiors.

3. Comparison of actual performance with the planned targets is very important.

Deviation can be defined as the gap between actual performance and the planned targets.
The manager has to find out two things here- extent of deviation and cause of deviation.
Once the deviation is identified, a manager has to think about various cause which has led to deviation.
The causes can be-
a] Erroneous planning,
b] Co-ordination loosens,
c] Implementation of plans is defective, and
d] Supervision and communication is ineffective, etc.

4. Once the causes and extent of deviations are known, the manager has to detect those errors and
take remedial measures for it.
There are two alternatives here-
a] Taking corrective measures for deviations which have occurred; and
b] After taking the corrective measures, if the actual performance is not in conformity with plans, the
manager can revise the targets.

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INTRODUCTION TO MANAGAMENT
[d] Manager, people

1. The word "management" derives its origin 7. Koontz &d O'Donnell state that management
from a word "Getting things done_______".
[a] Monos [a] Though people
[b] Konos [b] With people
[c] Nomos [c] Though or with people
[d] Lomos [d] Though and with people

2. Who stated that management means "Getting 8. According to Henry Fayol, "to manager
things done through and with people"? is_____ to organize to command, to
[a] James coordinate and to command"
[b] Koontz and O'Donnell [a] To forecast
[c] Haimann [b] To plan
[d] Henry Fayol [c] To budget and to control
[d] To forecast and to plan
3. According to whom "to manage is to forecast
and to plan, to organize to command, to
9. Haimann observes that "management is the
coordinate and to command"?
function of ______.
[a] Haimann
[a] Getting things done through people and
[b] Koontz and O' Donnell
directing the efforts of individuals towards
[c] Hick
a common objective.
[d] Henry Fayol
[b] Forecast and to plan, to organize to
4. The word "management" derives its origin command.
from______ word nomos. [c] The process of getting things done by the
[a] Roman people and through the people.
[b] Italian [d] Thinking and utilizing human, material &
[c] Greek financial resources in such a manner that
[d] Egyptian would result in best combination.

5. "Management is the function of getting things 10. Which of the following is importance of
done through people and direction the efforts management?
of individuals towards a common objective". 1] It arranges the factors of production,
It is observed by- assembles and organizes the resources.
[a] Haimann 2] It helps the country to keep balanced
[b] Koontz and O' Donnell approached in social order.
[c] Hick 3] It utilizes all the physical & humann
[d] Henry Fayol resources productively.
4] It helps the employees to get stronger trade
6. Hick define management as "the process of union.
getting things done by the______ and through
the______'. 5] It gets maximum results through minimum
[a] People, Manager input by proper planning and by using
[b] People, Employer minimum input.
[c] People, people
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Select the correct answer from the options 15. Management is -
given below. [a] Science
[a] (4), (2) & (1) [b] Art
[b] (3), (2) & (5) [c] Both science and art
[c] (1) & (3) [d] History
[d] (3), (1) & (5)
16. Management is an art. Which of the following
11. Importance of management:________ statement does not support that management is
[a] It enable the organization to survive in art?
changing environment. [a] The process of management involves the
[b] It improves standard of living and use of knowhow and skills.
increases the profit which is beneficial to [b] The process of management is directed
business and society. towards the accomplishment of concrete
[c] Management fills up various positions results.
with right persons, having right skills, [c] Management is personalized in the sense
training and qualification. that every manager has his own approach
[d] All of the above to problem.
[d] It deals with complex human phenomena
12. Which of the following statement is false? about which knowledge is still limited.
[a] Management can then well be described as
a science albeit a variable one if compared 17. Management qualifies all tests of a profession
with the nature of exact physical sciences. except________
[b] We can have the same kind of [a] Dominance of service motive
experimentation in management as is [b] Restricted entry
possible in natural sciences. [c] Systematic body of knowledge
[c] Management has now a theoretical base [d] Use of knowhow and skills
with a member of principles relating to
coordination, organization, decision- 18. Who is popularly known as the 'founder of
making so on. modern management theory'?
[d] Management is a vital function concerned [a] Frederick Taylor
with all aspect of the working of an [b] Luther Gulick
enterprise. [c] Newmann and Summer
[d] Henry Fayol
13. Management is_______ science.
[a] Exact 19. Henry Fayol the ______ industrialist and
[b] An inexact popularly known as the 'founder of modern
management theory'.
[c] Pure
[a] German
[d] Perfect [b] French
[c] Greek
14. Management is_____ science. [d] American
[a] Developed
[b] Developing 20. Planning is deciding in advance -
[c] Well settled [a] What is to be done
[d] Exact [b] How is to be done
[c] When it is to be done
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[d] All of above [b] Laying down of suitable selection and
placement procedures
21. Which of the following is the preparatory step [c] Guiding, counselling and instructing the
for actions and helps in bridging the gap subordinates about the proper way of
between the present and the future? doing the job
[a] Controlling [d] Measurement of actual performance
[b] Directing against the standard and recording
[c] Motivating deviations
[d] Planning
26. Division of work among people and
22. Which of the following comprises coordination of their efforts to achieve specific
determination and laying down of objectives, objectives are the fundamental aspects of -
policies, procedures, rules, programmes, [a] Forecasting
budget, and strategies? [b] Organization
[a] Motivating process [c] Motivation
[b] Planning process [d] None of above
[c] Controlling process
[d] Directing process 27. _______provides the organization with
adequate number of competent and qualified
23. Which of the following is fundamental personnel at all levels in the enterprise.
function of management and all other [a] Motivation process
functions of management are greatly [b] Directing process
influenced by it? [c] Forecasting process
[a] Controlling [d] HR process/staffing
[b] Directing
[c] Motivating 28. Which of the following function of
[d] Planning management starts issuing orders and
instructions to subordinates and ends with
24. ______ is concerned with both the "orderly" getting things done by satisfaction of various
assemblage of human and material resources need of subordinates?
as well as the process of development of a [a] Motivation
structure of formally identified and [b] Directing
distinguished tasks, roles and relationships [c] Forecasting
that may be attributable to the various [d] Staffing
members so that they may effectively work as
a group. 29. Directing the subordinates involves -
[a] Planning [a] Delegation of authority and fixing of
[b] Directing responsibility for carrying out the assigned
[c] Organizing dudes.
[d] Staffing [b] Guiding, counseling and instructing the
subordinates about the proper way of
25. Organizing as a function of management doing the job.
involves - [c] Co-ordination of activities and authority
[a] Determination of activities of the relations throughout the organization.
enterprise keeping in view its objectives.

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[d] Classification of activities into convenient 34. Which of the following is not one of the have
groups For the purpose of division. five elements of management?
[a] Planning
30. Control - [b] Co-ordination
[a] is closely related to the planning job of the [c] Centralization
manager. [d] Command
[b] should not be viewed merely as a
postmortem of past achievements and 35. Control is closely related to the ______ job of
performance. the manager.
[c] should suggest corrective measures so that [a] Planning
negative deviations may not re-occur in [b] Discipline
future. [c] Order
[d] All of the above [d] Motivation

31. Maintaining discipline and rewarding effective 36. Who is popularly known as the father of
performance is part of_____ function of 'scientific management?
management. [a] Luther Gulick
[a] Planning [b] Newmann
[b] Directing [c] Henry Fayol
[c] Forecasting [d] Frederick Taylor
[d] Staffing
37. The scientific management movement early in
32. Which of the Following consists in knowing the_______ century was hailed as a "second
the extent to which actions are in conformity industrial revolution".
with plans adopted and instructions issued so [a] Seventieth
that errors and deviations are promptly [b] Eightieth
reported and analyzed, and suitable corrective [c] Ninetieth
actions taken? [d] Twentieth
[a] Forecast
[b] Planning 38. Who is popularly known as the father of
[c] Controlling 'modern management theory?
[d] Decision [a] Luther Gulick
[b] Newmann
33. Controlling involves:_______ [c] Henry Fayol
[a] harmonizing the work relations and efforts [d] Frederick Taylor
at all levels for common purpose.
[b] Innovation because the manager not only 39. How many principles of management have
adjusts his organization according to future been suggested by the Henry Fayol?
conditions but also attempts to effect [a] Ten
changes in these conditions. [b] Twelve
[c] Measurement of actual performance [c] Fourteen
against the standard and recording [d] Fifteen
deviations.
[d] Issuing orders and instructions.

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40. Out of principles of management suggested by 45. As per Henry Fayol principle of
the Henry Fayol, 'Discipline' is necessary to "Subordination".
ensure obedience and respect for- [a] Organizational interest should be
[a] Juniors subordinate to individual interest.
[b] Society [b] Individual interest should be subordinate
[c] Superiors to general interest.
[d] Older people in society [c] Individual should not have any sort of
interest at all
41. "Unity of Command" means - [d] Organizational interest should be
[a] An employee shall give orders to one subordinate to national interest.
junior only.
[b] An employee shall receive orders from one 46. Which of the following principle of Henry
senior only. Fayol refers to superior-subordinate relations?
[c] An employee shall receive orders from as [a] Esprit de corps
much senior as possible. [b] Stability of tenure of personnel
[d] An employee shall have one plan for every [c] Division of work
action. [d] Scalar chain

42. "Unity of Direction" means - 47. Fayol's functions of management include:

[a] An employee shall receive orders from one [a] Planning, designating, completing,
senior only. corporating
[b] A group of activities with common [b] Punishing, commanding, organizing,
objectives shall have one head but coordinating controlling
different plans [c] Preparing, commanding, operating,
[c] A group of activities with common consulting, controlling
objectives shall have one head and one [d] Planning, commanding, organizing,
plan coordinating, controlling
[d] More than one manager should supervise
the employees. 48. Which of the following principle of Henry
Fayol emphasizes the need for teamwork?
43. A group of activities with common objectives [a] Esprit de corps
shall have one head and one plan. This [b] Stability of tenure of personnel
principle is known as - [c] Division of work
[a] Scalar chain [d] Scalar chain
[b] Unity of discipline
[c] Unity of command 49. Management is______ system.
[d] Unity of direction [a] Social
[b] Close
44. An employee shall receive orders from one [c] An open
senior only. This principle is known as - [d] None of the above
[a] Scalar chain
[b] Unity of discipline 50. Scientific management is based on the
[c] Unity of command assumption that -
[d] Unity of direction [a] Observation would reveal the workers
need to be multi-skilled.

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[b] Workers can decide their own methods of
performing tasks. 57. Management includes -
[c] The scientific observation of people at [a] Administrative management
work would reveal the one best way to do [b] Operative management
the task. [c] Either (A) or (B)
[d] Workers would receive a set wage [d] Both (A) & (B)
regardless of performance.
58. Administration can be viewed as:
51. Administration is concerned with - [a] Less important than management
[a] Policy implementation [b] The same thing as management
[b] Policy making [c] Part of management
[c] Both (A) and (B) [d] Separate from management
[d] Neither (A) nor (B)
59. Decision-making skills are required at -
52. Broadly speaking, administration is concerned [a] Top level management
with - [b] Middle level of management
[a] Planning [c] All levels of management
[b] Organizing [d] None of the above
[c] Motivating and controlling
[d] Planning and organizing 60. Managers require a combination of technical
competence, social and human skills and
53. Administration is done by - conceptual ability. Technical competence may
[a] Top level management be denned as:
[b] Middle level management [a] The ability to view the complexities of the
[c] Lower level management operations of the organization as a whole,
[d] None of above including environmental influences
[b] The ability to secure the effective use of
54. Board of directors of any company is normally human resources of the organization
concerned with - [c] The ability to apply specific knowledge,
[a] Management methods and skills to discrete tasks
[b] Administration [d] None of the above
[c] Health of managers
[d] None of the above 61. What type of approach is most frequently
identified with Human Capital Management
55. Administration is a process of - (HCM)?
[a] Laying down broad policies [a] Controlling
[b] Objectives of the organization [b] Interpersonal and technical
[c] Either (A) or (B) [c] Formalized, technical and manipulative
[d] Both(A)&{B) [d] Influencing and manipulative

56. It is also said that administration is______ 62. Which of the following is NOT a measure of a
[a] Lower level function manager's effectiveness?
[b] Middle level function [a] Absenteeism and sickness
[c] Top-level function [b] Level of staff turnover
[d] None of the above [c] Accidents at work

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[d] Speed of promotion through the [d] give employees fresh insights into their
organization own personalities and it can also help them
understand why others sometimes respond
63. How you will describe the planning as as they do.
function of management?
1] An all-pervasive function 67. Which qualities should a person possess to
2] Fundamental function succeed in planning?
Select the correct answer from the options i] Reflective thinking
given below - ii] Pondering
iii] Imagination
[a] 2 only iv] Farsightedness
[b] Neither 1 nor 2 v] Reflecting
[c] Both 1 and 2 Select the correct answer from the options
[d] 1 only given below-
[a] (I), (III) & (V)
64. Planning is deciding in advance - [b] (IV), (III) & (II)
i] What is to be done? [c] (II). (III), (I) & (V)
ii] How is to be done? [d] (IV), (I) & (III)
iii] When it is to be done?
iv] Who has to do it? 68, Limitations of planning:_______
Select the correct answer from the options [a] Planning is a continuous function of
given below - management.
[a] (I) [b] Since the Future cannot be predicted with
[b] (I),(II), absolute accuracy, premising is always
[c] (I), (II), (III) subject to a margin of error and guess-
[d] (I), (II), (III), (IV) work which are reflected in various plans
based on them.
65. Identify the best definition of planning. [c] Planning is an all-pervasive and a primary
[a] An integrated process, in which plans are function of management.
formulated, carried out and controlled. [d] Planning is the selecting and relating of
[b] Devising ways of achieving the objectives facts and the making and using of
of an organization. assumptions regarding the future in the
[c] The core activity of planners and planning visualization and formulation of proposed
departments, activities believed necessary to achieve
[d] Setting an organization's objectives and desired results.
the means of reaching them.
69. A_____ statement defines the company's
66. Planning - business, its objectives and its approach to
[a] involves identification and classification of reach those objectives.
activities of the enterprise [a] Planning
[b] involves choosing the proper course of [b] Mission
action from among alternatives [c] Forecasting
[c] is based upon individual incentives rather [d] Policy
than group incentives

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70. Planning process comprises determination and [b] VI,III,II,V,I,IV
laying down of - [c] III, IV, II, V,I, VI
i] Objectives [d] III, VI, II, V, I, IV
ii] Policies
iii] Procedures 75. Identify correct steps in forecasting.
iv] Rules i] Analysis of deviations
v] Remuneration ii] Forecasting future course of business
Select the correct answer from the options iii] Improving the existing forecasting
given below - procedure
[a] (I), (II), (III), (V) iv] Identifying and developing the structure
[b] (I), (II). (III). (IV) Select the correct answer from the options
[c] (I), (II), (IV), (V) given below -
[d] (I), (III), (IV), (V) [a] II, IV, I, III
[b] III,I,II,IV
71. The second step involved in planning process [c] I,III,IV,II
is the - [d] IV, II, I, III
[a] Evaluation of alternatives
[b] Formulating derivative plans 76. Statement I:
[c] Establishment of planning premises Forecasting does. not play any role in
[d] Establishing objectives planning.
Statement 2:
72. Which of the following can be treated as Forecasts are based on postulations and
internal planning premise? assumptions and, as such, are subject to some
[a] Politico-technological conditions amount of guess-work.
[b] Socio-economic conditions [a] Statement 1 and Statement 2 both are
[c] Sales forecast false.
[d] Technological changes [b] Statement 1 and Statement 2 both are true.
[c] Statement 1 is true but Statement 2 is false.
73. Which of the following can be treated as [d] Statement 2 is true but Statement 1 is false.
external planning premise?
[a] Politico-technological conditions 77. Risk cannot be managed unless it is first_____
[b] Marketing plans [a] Assessed
[c] Sales forecast [b] Identified
[d] Strategic Plans [c] Measured
[d] Evaluated
74. Identify the correct steps in planning.
i] Selecting a course of action 78. In decision making under different conditions,
ii] Determining alternative courses what is the difference between risk and
iii] Establishing objectives uncertainty?
iv] Formulating derivative plans [a] Under risk, information is reliable; under
v] Evaluation of alternatives uncertainly, it is not.
vi] Establishment of planning premises [b] Under risk, choices are clear and the
Select the correct answer from the options chances of different outcomes can be
given below- measured; under uncertainly, neither
[a] III, VI, II, IV, I, V applies

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[c] Under risk, there is a well defined [b] The reasons why they are believed
problem; under uncertainty, the definition attainable
is unclear. [c] The plan for reaching those goals
[d] Under risk, probabilities can be measured; [d] Changes in perception and branding
under uncertainly, they cannot
83. Which of the following best expresses the
79. Which of the following is not a principle of difference between programmed and non-
decision-making? programmed decisions?
[a] Principle of definition [a] Made by managers who prefer a thinking
[b] Principle of evidence or technocratic style; made by managers
[c] Principle of identity who use judgment and follow intuition
[d] Principle of prudence [b] Have computer routines developed for
them; are not computerized
[c] Handled with decision rules; decision rules
cannot be developed
80. In case of decision making, "diagnosing the [d] Occur under certainty or risk; occur under
real problem implies"............... uncertainty or ambiguity
[a] Analyzing the internal and external factors
and discovering relations between them 84. Identify correct sequence/steps in organizing
[b] Knowing the gap between what exists and function of management.
what is expected to happen, identifying the i] Delegation of authority and placing of
reasons for the gap, responsibility.
[c] Decentralizing routine matters so that top ii] Identification and classification of
management can concentrate on vital and activities of the enterprise consistent with
strategic decisions its objectives.
[d] Actual selection of a course of action from iii] Making provision for effective
among a number of alternatives coordination and establishment of definite
lines of supervision
81. Identify correct steps in decision making. iv] Establishing superior subordinate
i] Identifying the real problem relationship within the department
ii] Discovery of alternatives v] Grouping various activities into workable
iii] Analysis of available alternatives units or department
iv] Selection of alternatives Select the correct answer from the options
v] Communication of decision given below -
Select the correct answer from the options [a] II,IV.I.III&V
given below - [b] II,V,IV,I&III
[a] II,IV.I.III,V [c] II,I,V,IV&III
[b] III,I,II,IV,V [d] II,V,I,IV&III
[c] I,III,II,IV,V
[d] I,II,III,IV,V 85. Which of the following is one of the steps in
organizing function of management?
82. Which of the following is not related with [a] Identification of opportunities and
'business plans'? avoiding or mitigating losses.
[a] Largely enforced business goals [b] Grouping various activities into workable
units or departments

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[c] Structured approach in managing [d] Duties & obligations
uncertainty related to a threat.
[d] Promote greater openness in decision- 91. _______ is the obligation of a subordinate to
making and improves communication carry out duties assigned.
[a] Authority
86. Due to which function of management [b] Responsibility
superior subordinate relationships are [c] Delegation
established? [d] Power
[a] Planning
[b] Decision making 92. Which of the following denotes answerability
[c] Organizing for the accomplishment of the task assigned by
[d] Controlling the superior to his subordinate?
[a] Responsibility
87. The total activities of an individual industrial [b] Accountability
organization may be separated into major [c] Power
functions like production, purchasing, [d] Authority
marketing, and financing, and each such
function is further sub-divided into various 93. Which of the following can be delegated?
jobs. This is called as - [a] Power
[a] Developing relationships [b] Responsibility
[b] Determination of objectives [c] Accountability
[c] Identification and grouping of activities [d] Authority
[d] Risk management
94. Which of the following refers to capacity to
88. Which of the following refers to the influence the behaviour of others and secure
relationship attitudes prejudices, likes and obedience?
dislikes? [a] Power
[a] Formal organization [b] Responsibility
[b] Informal organization [c] Accountability
[c] Matrix organization [d] None of the above
[d] Project organization
95. Responsibility is exacted______ while
89. Authority may be described as the right of a authority flows_______
manager to command - [a] Downward; upward
[a] Superiors [b] Upward; upward
[b] Subordinates [c] Upward; downward
[c] Other manager [d] Downward; downward
[a] All of above
96. Arrange the process of delegation in proper
90. It is______ that makes the managerial position from.
real and vests in him the power to order his 1] Creation of accountability
subordinates and secure necessary compliance, 2] Allocation of duties
[a] Authority 3] Assignment of responsibility
[b] Responsibility 4] Delegation of authority
[c] Accountability

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Select the correct answer from the options [b] Whenever authority is delegated,
given below - responsibility steps in and is coextensive
[a] (3),(4),(2),(l) with authority.
[b] (2).(3),(4),(1) [c] It is expected that the recipient of authority
[c] (2),(4),(1), (3) shall make proper use of it and make all
[d] (2),(4),(3),(1) the decisions falling within the scope of
his authority.
97. "Principles of exception" relating to delegation [d] Subordinates must know who delegates
of authority requires that - authority to them and to whom matters
[a] When authority is delegated, responsibility beyond their own authority must be
steps in and is coextensive with authority. referred.
[b] Whether specific or general, written or 100. As per principle of unity of command of
unwritten, delegation of authority must be delegation -
very clear in terms of its contents, [a] subordinates must know who delegates
functional relations, scope and authority to them and to whom matters
assignments. beyond their own authority must be
[c] Problems involving unusual matters referred.
should be referred upward and decided by [b] in case of delegation, except for the
higher level executives. inevitable instances of splintered authority,
[d] Specific written delegations help both the the right of discretion over a particular
manager and the recipient of authority. activity will flow from a single superior to
98. Principle of "clarity of delegation" required a subordinate.
that - [c] larger number of decisions and more
[a] Only problems involving unusual matters important of them are made by those
should be referred upward and decided by occupying higher positions in the
higher level executives. organization.
[b] When authority is delegated, responsibility [d] delegation of authority is essential in as
steps in and is coextensive with authority. much as no organization is possible
[c] Whether specific or general, written or without delegation.
unwritten, delegation of authority must be
very clear in terms of its contents, 101. Which of the following refers to the
functional relations, scope and tendency to withhold a larger part of formal
assignments. authority at higher echelons of management
[d] If the manager is able to pass on obligation hierarchy?
along with delegation of authority to the [a] Delegation of authority
subordinates, the rule of single chain of [b] Decentralization
command will be violated. [c] Centralization
[d] Exception principle
99. As per scalar principal of delegation -
[a] The delegatee should also be given a clear 102. _______means partial dispersal of
idea about the tasks assigned, what is authority from central/top management to
expected of the recipient in his own job lower level.
and how his obligation fits into the general [a] Delegation of authority
plan. [b] Decentralization
[c] Centralization

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[d] All of above
108. Determining the number of people who are
103. Where larger part of the authority is accountable to a single manager refers to-
delegated down the levels of management so [a] Cham of command
that decisions are made a near the source of [b] Degree of centralization
action, such a tendency in the organization is [c] Span of control
described a - [d] Degree of specialization
[a] Delegation of authority
[b] Decentralization 109. "Span of management" is often referred to
[c] Centralization as -
[d] Principle of functional definition i] Span of control
ii] Span of supervision
104. The Principles of Unity of Command and iii] Span of authority
Unity of Direction was given by - iv] Span of responsibility
[a] W.F.Taylor Select the correct answer from the options
[b] Lyndall Urwick given below -
[c] Henry Fayol [a] I
[d] None of the above [b] I,II
[c] I,II,III
105. 'Each individual should be given a [d] I,II,III,IV
particular job to do according to his ability and
made responsible for that.' Which step in the 110. Human Resource Management (HRM) is
organizing process does the sentence relate to that part of management which is -
- [a] Concerned with how people at work use
[a] Allotment of duties the various resources available in
[b] Identification and grouping of activities organization.
[c] Developing relationships [b] Concerned with people at work and with
[d] Integration of activities their relationship with an enterprise.
[c] Concerned with how manger effectively
106. The framework of interrelationships use the various resources available in
among individuals and departments that organization.
describe relationships of reporting and [d] Concerned with how manger effectively
accountability is called - control the people in organization.
[a] chain of command
[b] functional arrangement 111. Human Resource Management is often
[c] specialization referred to as -
[d] organizational structure [a] Peoples Management
[b] Human Management
107. The formal channel that defines the lines [c] Resource Management
of authority and accountability in a [d] Personnel Management
hierarchical organizational structure is called -
[a] Line positions 112. Blue-collar workers are...........
[b] Chain of command [a] Working on machines and engaged in
[c] Staff positions loading, unloading
[d] Line and staff positions [b] Clerical employees

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[c] Executive employees [c] It improves the leadership quality of
[d] Contract employees employee.
[d] It gives employees fresh insights into their
113. White-collar workers are.......... own personalities and it can also help them
[a] Working on machines and engaged understand why others sometimes respond
uploading as they do.
[b] Clerical employees
[c] Executive employees 119. Direction starts with issuing______ to
[d] Contract employees subordinates and ends with getting things done
by satisfaction of various needs of
114. The process of searching for prospective subordinates.
employees and encouraging them to apply for [a] Orders
the jobs in an organization is known as- [b] Request
[a] Selection [c] Instructions
[b] Placement [d] (A)or(C)
[c] Recruitment
[d] Manpower planning 120. The most important characteristic of
direction is -
115. ______is the process by which candidates [a] Guiding
for employment are distinguished between [b] Procurement
those who are suitable and those who are not. [c] Planning
[a] Manpower planning [d] Thinking
[b] Selection
[c] Recruitment 121. Which of the following is essential of the
[d] Induction directing function of management?
116. Training is generally given to_____ in [a] Identifying the activities and grouping
organization. them into convenient classes
[a] Managers [b] Motivating the subordinates to direct their
[b] Middle and lower level people behaviour in a desired pattern.
[c] Executives [c] Revise the structure on the basis of
[d] None of the above assessment of personnel and other
resources
117. Development process is taken for - [d] None of the above
[a] Middle and lower level people
[b] Manager & executives 122. Essential of the directing function -
[c] Debtor & creditors [a] Delegation of authority to the executives
[d] Chairman & Directors of the departments
[b] Identifying and diagnosing the real
118. Which of the following is/are benefits of problem
training? [c] Analysis and evaluation of available
[a] It ensures long-term increase in the sales alternatives
of the organization. [d] Maintaining discipline and rewarding
[b] It helps to reduce the time and cost effective performance.
required to reach the acceptable level of
performance.

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123. Which of the following is not principle of [d] (2),(4),(3),(1)
direction?
[a] Principle of unity of command 128. Which of the following is essential of good
[b] Principle of evidence control system?
[c] Principle of unity of direction [a] Motivation
[d] Principle of democratic leadership [b] Feedback
[c] Self control
124. Which of the following is not principle of [d] M of above
direction?
[a] Principle of democratic leadership 129. Organizational control systems:
[b] Principle of navigational change [a] always penalize ethical decision making.
[c] Principle of unity of direction [b] rely entirely on formal controls
[d] Principle of unity of command [c] may help to embed corporate social
responsiveness
125. Which of the following statements about [d] are just another name for budgeting
leadership is false?
[a] Leadership does not necessarily take place 130. Consider the following statements:
within a hierarchical structure' of an Planning involves -
organization 1] Forecasting
[b] Not every leader is a manager 2] Choice among alternative courses of
[c] When people operate as leaders their role action.
is always clearly established and defined 3] Wishful thinking
[d] All of the above 4] Decision only by production manager Of
these statements:
126. ______is a voluntary collective action to [a] 1, 2, 3 and 4 are correct
serve a common purpose. Whereas ______ is [b] 1, 3 and 4 are correct
the orderly synchronization of group efforts so [c] 1 and 2 are correct
as to provide unity of action in the pursuit of [d] 2 and 3 are correct
common purpose. 131. If a general manager asks the sales
[a] Motivation, Co-operation manager to recruit some salesman on his
[b] Co-ordination, Co-operation behalf, it is an instance of-
[c] Co-operation, Direction [a] Division of authority
[d] Co-operation, Co-ordination [b] Decentralization of authority
[c] Delegation of authority
127. Arrange the process of control in proper [d] Delegation of responsibility
form.
1] Follow through 132. While delegating, a superior delegates -
2] Establishment of goals and standards [a] Only authority
3] Corrective action [b] Authority and responsibility
4] Measurement of actual performance [c] Authority, responsibility and
Select the correct answer from the option accountability
given below- [d] Authority and responsibility but not
[a] (4),(2),(3),(1) accountability
[b] (2), (3), (4), (1)
[c] (4),(1),(3),(2) 133. Directing function of management implies

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1] Planning 137. When management pays attention to more
2] Staffing important areas and when the day to day
3] Leadership routine problems are looked after by lower
4] Motivation level management, it is known as -
Choose the correct answer using the codes [a] Management by objectives
given below: [b] Management by Exception
[a] 1 and 2 [c] Participative Management
[b] 3 and 4 [d] Critical path method
[c] 2 and 4
[d] 2, 3 and 4 138. Staffing includes -
1] Training
134. Consider the following statements: 2] Appraisal
1] Decentralization and delegation are 3] Placement
closely interrelated. 4] Directing
2] Delegation and decentralization both [a] 1 and 3
are desirable. [b] 2 and 3
3] Decentralization is not suitable for [c] 1,2 and 3
large organization. [d] 1,2,3 and 4
4] Delegation is not possible in the case
of small organizations. 139. Span of controls means that -
Of these statements: [a] An organization consists of various
[a] 1 and 2 are correct departments.
[b] 2 and 3 are correct [b] Each person's authority is clearly defined.
[c] 1 and 4 are correct [c] Every subordinate has one superior.
[d] 1, 3 and 4 are correct
[d] A manager can supervise only a limited
135. Delegation of authority is linked to number of subordinates.
[a] Managerial planning
[b] Management coordination 140. Which one of the following statement is
[c] Management control correct?
[d] Scientific management [a] Planning and controlling are essentially
136. Decentralization of an organization is one and the same.
commanded on account of which of the [b] Controlling is a part of the planning
following advantages? process.
1] Reduced burden on top executives [c] Controlling is a substitute for planning
2] Development of employees [d] A control process is meaningless without
3] Improvement of morale pre-set goals.
4] Solves problems of coordination
Select the correct answer from the options 141. Assertion (A):
given below. One can have 'power' without having'
[a] 2 and 3 authority' Reason (R):
[b] 1,2 and 4 [a] (A) and (R) both are true, but (R) is no
[c] 1,2 and 3 explanation of (A)
[d] 3 and 4 [b] (A) and (R) both are true, (R) is the correct
explanation of (A)
[c] (A) is true and (R) is false

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[d] (A) is false and (R) is true [d] A is false but R is true

142. Assertion (A): 145. A strategy can be defined as -

Today managers with leadership qualities and [a] A plan designed to reach long-term
skill are preferred to managers with expertise objectives.
alone. Reason (R): [b] A specific, narrow plan designed to
The major organizational changes now achieve tactical planning.
emphasize managing people and processes. [c] Designed to be the end of tactical
Select the correct answer from the options planning.
given below. [d] None of the above
[a] Both A and R are true and R is correct
explanation of A 146. Assertion (A):
[b] Both A and R are true but R is not a Management is the development of people.
correct explanation of A Reason (R):
[c] A is true but R is false Management is not the direction of things.
[d] A is false and R is true Select the correct answer from the options
given below.
143. Match the following: [a] Both (A) and (R) are true
List-I List-II [b] (A) is false and (R) is true
[a] Forecasting (i) Controlling [c] (A) is true and (R) is false
[b] Communication (ii) Planning [d] Both (A) and (R) are false
[c] Selection of manager (iii) Leading
[d] Established performance (iv) Staffing 147. Assertion (A):
standard 'Plan' is a theoretical concept but 'planning' has
Select the correct answer from the options particular values.
given below. Reason (R):
(a) (b) (c) (d) 'Plans' are natural out growths of the planning
[a] (iv) (iii) (ii) (i) process.
[b] (iii) (iv) (ii) (i) [a] (A) is true and (R) is false
[c] (iii) (iv) (i) (ii) [b] (A) is false and (R) is true
[d] (ii) (iii) (iv) (i) [c] Both (A) and (R) are true
[d] Both (A) and (R) are false
144. Assertion (A):
Co-ordination implies the avoidance of all 148. Scalar principle of organization implies
splintering efforts. that -
Reason (R): [a] All subordinates have only one supervisor
One of the four benefits of coordination is [b] Line of authority is defined clearly
unity of direction. [c] Manager can directly supervise only a
Select the correct answer from the options limited number of persons
given below, [d] The subordinates need not necessarily
[a] Both A and R are true and R is correct have a superviso
explanation of A
[b] Both A and R are true but R is not a
correct explanation of A
[c] A is true but R is false

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Answers
1. C 21. D 41. B 61. C 81. D 101 C 121 B 141 B
2. B 22. B 42. C 62. D 82. D 102 B 122 D 142 A
3. D 23. D 43. D 63. C 83. C 103 B 123 B 143 D
4. C 24. C 44. C 64. D 84. D 104 C 124 B 144 B
5. A 25. A 45. B 65. D 85. B 105 A 125 C 145 A
6. C 26. B 46. D 66. B 86. C 106 D 126 D 146 A
7. D 27. D 47. D 67. D 87. C 107 B 127 D 147 C
8. D 28. B 48. A 68. B 88. B 108 C 128 B 148 B
9. A 29. B 49. C 69. B 89. B 109 D 129 C
10. D 30. D 50. C 70. B 90. A 110 B 130 C
11. D 31. B 51. B 71. C 91 B 111 D 131 C
12. B 32. C 52. D 72. C 92 B 112 A 132 A
13. B 33. C 53. A 73. A 93 D 113 B 133 B
14. B 34. C 54. B 74. D 94 A 114 C 134 A
15. C 35. A 55. D 75. D 95 C 115 B 135 C
16. D 36. D 56. C 76. D 96 D 116 B 136 C
17. D 37. D 57. D 77. B 97 C 117 B 137 B
18. D 38. C 58. C 78. B 98 C 118 B 138 C
19. B 39. C 59. C 79. D 99 D 119 D 139 D
20. D 40. C 60. C 80. B 100 B 120 A 140 D

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INTRODUCTION TO STRATEGIC MANAGEMENT

STRATEGIC MANAGEMENT : MEANING
Strategic Management is a discipline that deals with long-term development of an organisation with a clear-
cut vision about organisational purpose, scope of activities and objectives.
Chandler describes strategic management as the “determination of the basic long-term goals and objectives
of an enterprise and adoption of course of action and allocation of resources necessary to carry out these
goals.”
As per Glueck “That set of decisions and actions which leads to the development of an effective strategy or
strategies to help achieve corporate objectives.
According to Paine and Naumes, “Strategic management involves the decision-making and the activities in
an organisation which (1) have wider ramifications, (2) have a long time perspective, and (3) use critical
resources towards perceived opportunities or threats in a changing environment.”
Hambrick and Chen, “Strategic management is the formulation and implementation of the major goals and
initiatives taken by a company’s top management on behalf of owners, based on consideration of resources
and an assessment of the internal and external environments in which the organization competes.”

Strategic Management: Process

The strategic management process is defined as the process by which the managers’/decision makers’ are
able to make a choice of a set of strategies for the organization that will enable it to accomplish improved
performance.
Strategic management is not a static but continuous process as it involves continuous appraisal of the micro
and macro environment surrounding the organization and choosing between alternatives that meet the
objectives and thereafter re-assessment of such strategy.

Four Phases of Strategic management process

1. Environmental Scanning- The Board of Directors and the top management will have to review the
current performance of the documented.
In view of the review, the organization will have to scan the internal environment for the strengths and
weaknesses and the external environment for opportunities and threats.
The internal and external scan helps in selecting the strategic factors.

2. Strategy Formulation- Strategy formulation is the process of deciding about the best course of action for
accomplishing organizational objectives and therefore, attaining organizational purpose.

3. Strategy Implementation- Strategy implementation implies putting the chosen strategy into action.
Strategy implementation includes designing the organization’s structure, distributing resources,
developing decision making process, and managing the human resources.

4. Strategy Evaluation- Strategy evaluation is the final step of strategy management process.
The key strategy evaluation activities are: appraising internal and external factors that are the root of
present strategies, measuring performance, and taking remedial/corrective actions.

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These components are steps that are carried in sequential order, while creating a new strategic management
plan.
Present businesses that have already created a strategic management plan will revert to these steps as per the
situation’s requirement, so as to make essential changes.

ENVIRONMENT STRATEGY STRATEGY STRATEGY

SCANNING FORMULATION IMPLEMENTION EVALUATION

Components of Strategic Management Process

Strategic Leadership
As per May, “Strategic Leadership is the ability to influence others to voluntarily make decisions that
enhance the prospects for the organisation’s long-term success while maintaining long-term financial
stability.
Different leadership approaches impact the vision and direction of growth and the potential success of an
organization. To successfully deal with change, all executives need the skills and tools for both strategy
formulation and implementation.”

Strategic leadership refers to a manager’s potential to articulate the strategic vision for the organization, and
to motivate, guide and influence his subordinates to attain the objectives of that vision.
Strategic leadership can also be defined as utilizing strategy in the management of employees.
It is the ability to influence organizational members and to accomplish organizational change.
Strategic leaders generate organizational structure, assign resources and communicate strategic vision.
Strategic leaders have to work in an uncertain environment on various strategic issues.

The main purpose of strategic leadership is strategic productivity.

Another aim of strategic leadership is to generate an environment in which employees match the
organization’s needs in context of their individual job.
Strategic leaders instill confidence to the employees in an organization to follow their own ideas, yet,
moving in the direction of organisation’s overall goals.
Strategic leaders make better use of reward and incentive system for encouraging productive and quality
employees.
Functional strategic leadership is about creativity, resourcefulness, and preparing to assist an individual in
realizing his objectives and goals.

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Functions and Importance of a Strategic Leader
Following are the nine key strategic leadership roles and brief definitions of each.
 Navigator – Clearly and quickly works through the complexity of key issues, problems and
opportunities to affect actions (e.g., leverage opportunities and resolve issues).

 Strategist – Develops a long-range course of action or set of goals to align with the organization’s vision.
 Entrepreneur – Identifies and exploits opportunities for new products, services, and markets.
 Mobilizer – Proactively builds and aligns stakeholders, capabilities, and resources for getting things
done quickly and achieving complex objectives.
 Talent Advocate – Attracts, develops, and retains talent to ensure that people with the right skills and
motivations to meet business needs are in the right place at the right time.
 Captivator – Builds passion and commitment toward a common goal.
 Global Thinker – Integrates information from all sources to develop a well-informed, diverse perspective
that can be used to optimize organizational performance.
 Change Driver – Creates an environment that embraces change; makes change happen – even if the
change is radical – and helps others to accept new ideas.
 Enterprise Guardian – Ensures shareholder value through courageous decision-making that supports
enterprise – or unit-wide interests.

Strategic Management: Functions and Importance for Professionals like Company Secretaries
The ensuing paragraph makes an attempt to comprehend how a company secretary is also a part and parcel
of strategic management.

A company secretary in today’s era while discharging his or her professional obligations has to perform
several key roles which are also integral components of strategic management.
A brief discussion on some of the roles is as follows:

1] Advisory : As an advisor to the Board Members, the Company Secretary must build a good relationship
with them provide impartial or unbiased advice which is in the best interest of the company.
He is required to offer necessary assistance to the Chairman with all development processes including
board evaluation, induction and training.
This involves implementation of a rigorous plan for the assessment of the performance of Directors
and taking requisite measures based on the review report. Further, the company secretary should take
the lead in developing tailored induction plans for new directors and devising a training plan for
individual directors and the Board.
Although these tasks are ultimately the responsibility of the chairman, the company secretary can add
value by fulfilling, or procuring the fulfilment of, these best practice governance requirements on
behalf of the chairman.

2] Communication with Stakeholders: The company secretary is a distinctive interface between the Board
and management and as such they act as an important link between the Board and the business.
Through effective communication they can coach management to understanding the expectations of, and
value brought by the Board.
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The company secretary also has an important role in communicating with external stakeholders, such as
investors, and is often the first point of contact for queries.
The company secretary should work closely with the chairman and the Board to ensure that effective
shareholder relations are maintained.

3] Flawless Disclosure and Reporting : In recent years there has been increased emphasis in the quality
of corporate governance reporting and calls for increased transparency.
The company secretary usually has responsibility for drafting the governance section of the company’s
annual report and ensuring that all reports are made available to shareholders according to the relevant
regulatory or listing requirements.

4] Management of Board Meetings and Committees: The company secretary plays a leading role in
good governance by helping the Board and its committees function effectively and in accordance with
their terms of reference and best practice.
Providing support goes beyond scheduling meetings to proactively managing the agenda and ensuring
the presentation of high quality up-to-date information in advance of meetings.
This should enable directors to contribute fully in board discussions and debate and to enhance the
capability of the Board for good decision making.
Following meetings the company secretary should pursue and manage follow up actions and report on
matters arising.

5] Compliances: In current scenario a business has to adhere to various laws and regulations failing which
may invite various legal hassles.
A company secretary is required to ensure compliance with various laws and regulations and for doing
so he / she should be conversant with the laws as well as the amendments that take place.
For instance, in Indian context a company secretary has to ensure compliance of the following laws but
not limited to- Companies Act; SEBI Act, Securities Contracts (Regulation) Act and rules and
regulations made there under; Foreign Exchange Management Act; Consumer Protection Act;
Depositories Act; Environment and Pollution Control Laws; Labour and Industrial Laws etc.

6] Representation: A Company Secretary has to represent before various tribunals and courts in order to
present the legal issue of the company.
In India, a company secretary appears before the following legal bodies- National Company Law Tribunal
(NCLT); National Company Law Appellate Tribunal (NCLAT); Competition Commission of India
(CCI); Registrar of Companies; Tax Tribunals etc.

Conclusion
However, to be an effective player of strategic management, a company secretary needs to embrace the
following core competencies:
[a] Possessing a thorough knowledge of the company’s business.

[b] Sound knowledge of laws relating to company, capital markets, industry related etc.

[c] Must have strong Communication and Professional Skills; Legal Skills; Management Skills and
IT Skills.
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[d] Being intuitive and sensitive to the thoughts and feelings of board directors and the CEO.

[e] Staying current with changes in corporate governance and giving the board and managers a “heads
up” about new developments.

[f] Being able to work and achieve a consensus within multidisciplinary settings.

[g] Being flexible, creative and detailed.

[h] Remaining calm under pressure and not losing sight of perspective

Environmental Influences of Business

The term environment in context of business refers to all external forces or factors having a direct or indirect
bearing on events related to functioning of business.
According to Keith Davis, “Business environment is aggregate of all conditions, events and influences that
surround and affect the business”.
Bayord O. Wheeler defines business environment as “the total of all the things, external to a business firm,
which affect the organisation and its operations”.
As per Arthur M. Weimer, “Business environment encompasses the climate or set of conditions- economic,
social, political, or institutional- in which business is conducted”.
Therefore, business environment may be defined as:
“The sum total of all individuals, institutions and other forces that are outside the control of a business
enterprise but the business still depends upon them as they affect the overall performance and sustainability
of the business.”
The forces which compose the business environment are its suppliers, competitors, consumers, government,
bankers, customers, economic conditions, market conditions, investors, technologies, political parties,
international institutions and multiple other institutions working externally of a business constitute its
business environment.
These forces influence the business even though they are outside the business boundaries.

Importance of Environmental Study

The benefits of studying business environment are as follows:
 Development of strategies and long-term policies and objectives of the firm.

 Development of action plans to deal with changes in environment.

 To forecast the consequences of socio-economic changes at the national and global levels on the
company’s stability.

 Analysis of competitor’s strategies and formulation of effectual countermeasures.

 To keep the business dynamic and up-to-date.

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Characteristics and Components of Business Environment
The various components of business environment are–
(i) External Environment
(ii) Internal Environment

EXTERNAL ENVIRONMENT
External environment consists of all those factors that affect a business enterprise from outside its boundaries.
It consists of shareholders, legal, competitors, customers, society, government rules and regulations, policies
and technology etc.
These are uncontrollable factors and firms have to adapt to the components of this environment.
External environment is can be sub-divided into micro environment and macro environment.

A. External Micro- Environment

[a] Suppliers of inputs: These supply of resources (finances, raw materials, fuel, power and other factors of
production) and pave the way for smooth conduct of the business.
Firms should keep themselves updated about the policies of suppliers as rise in the cost of inputs will
influence their sales volume and profitability.
The scarcity of inputs also have a bearing on the production schedules. For smooth production and sales,
the business should have more than one supplier in their list to have an unhampered production
schedules.

[b] Customers: The people who buy and use products and services of business and are an important part of
external micro environment.
A business may have diverse customers such as households, producers, retailers, Government and
foreign buyers on its portfolio.
Since sales of a product or service is critical for a firm’s survival and growth, it is necessary to keep the
customers satisfied.

[c] Marketing intermediaries: In the firm’s external micro environment, marketing intermediaries play an
essential role of selling and distributing its products to the final customers.
They are the physical distribution firms (transport firm), service agencies (media firms), financial
intermediaries (banks, insurance companies) etc. that assist in production, marketing and insurance of the
goods against loss of theft, fire etc.
Business has to maintain healthy relations with them to carry their activities smoothly.
All these factors are largely controllable by the firms but they operate in the larger macro environment
beyond their control.

[d] Competitors: Different firms in an industry compete with each other for sale of their products.
This competition may be on the basis of pricing of their products and also non- price competition
through competitive advertising such as sponsoring some events to promote the sale of different
varieties and models of their products.
They constantly watch competitors’ policies and adjust their policies to gain customer confidence.

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[e] Public: Finally, publics are an important force in external micro environment. Public, according to Philip
Kotler, “is any group that has an actual or potential interest in or impact on the company’s ability to
achieve its objective.” A public is any group that has an actual or potential interest in or impact on an
organisation’s ability to achieve its interest.
Environmentalists, media groups, women’s associations, consumer protection groups, local groups,
citizens association are some important examples of publics which have an important bearing on the
business decisions of the firm. Companies observe the behaviour of these groups to make functional
policies.

B. External Micro- Environment

Apart from micro environment, business firms also come across some other external environmental forces
which are beyond their control and operate at macro level.
Because of the uncontrollable nature of such macro forces, a firm has to adjust or adapt itself to harness the
opportunities thrown by such forces and mitigate the threats.
These factors are:

[a] Economic Environment: Economic environment includes all those forces which have an economic
impact on business.
Accordingly, total economic environment consists of agriculture, industrial production, infrastructure,
and planning, basic economic philosophy, stages of economic development, trade cycles, national income,
per capita income, savings, money supply, price level, fiscal and monetary policies and population.
The economic environment has definitely an impact on the activities of business enterprises.
In the capitalist economies, the economic decisions concerning investment, production and sale are
driven by profit motives.
While in socialist economies, such decisions are taken by the public sector and driven by social welfare
motive rather than profit maximisation.
In a mixed economy, public and private sectors have a co-existence and they may individually or jointly
own the factors of production.
Choice of alternatives regarding allocation of resources such as what to produce, how to produce and for
whom to produce; nature of technology and the techniques of production, timing of production etc. will
be different in capitalist, social and mixed economies, therefore, the business firm has to keep in mind
the economic environment in which it operates.

[b] Political-legal Environment: The political- legal environment includes the activities of three political
institutions, namely, legislature, executive and judiciary which usually play a useful role in shaping,
directing, developing and controlling business activities.
In order to attain a meaningful business growth, a stable and dynamic political-legal environment is very
important.
Legal environment is also significant for functioning of the business as various laws are in force to
regulate the operations of the business enterprises.
They relate to standard of products, packaging, protection of environment and ecological balance, ban
on advertisement of (alcohol and medicines), advertisement of certain products with statutory warning
(cigarette) etc. Laws also exist to prevent restrictive trade practices (RTP) and monopoly.

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[c] Technological Environment: Technology implies systematic application of scientific or other organised
knowledge to practical tasks or activities. It includes innovations too.
As technology is changing fast, businessmen should keep a close look on those technological changes
for its adaptation in their business activities.
Not adopting technological changes and imitating innovation is not possible as technical threats from
external environment have to be converted into opportunities and gainfully employed in business
operations.

[d] Global or International Environment: The Global environment or ‘borderless world’ plays an important
role in shaping business activity.
With the liberalisation and globalisation of the Indian economy in 1991, there have been significant
economic and political changes and increasing role for the private sector to play since then.
The global business environment is radically affected by the principles and agreements of World Trade
Organisation (WTO) as it keeps a watch and regulates the business transacted in the international
environment.
[e] Socio-cultural Environment: The social environment consists of the social values; concern for social
problems like protection of environment against pollution, providing employment opportunities, health
care for the aged and old etc.; consumerism (indulging in fair trade practices) to satisfy human wants.
The cultural environment represents values and beliefs, norms and ethics of the society.
The buying habits, buying capacities, tastes, preferences and many other factors are dependent on the
cultural environment.
For example, in India, beef is not eaten by a majority of people as it is not part of their culture.
Similarly, white wedding dress is very less preferred in Hindu weddings.
Therefore, business has to offer socially acceptable goods to maintain its positive business image and
survive competition.
Every business has to keep in mind that the business operations successfully meet the ethical and value
system of the society and if not, making necessary changes?

[f] Demographic environment: The demographic environment includes the gender ratio, size and growth of
population, life expectancy of the people, rural-urban distribution of population, the technological skills
and educational levels, language skills of labour force.
All these demographic features have an important bearing on the functioning of business firms. For
example, huge populated countries such as Indian and China can adopt labour-intensive technologies
than capital intensive ones to give employment to its labour force. Similarly, the population of kids will
decide product range and space for such products to be offered in a mall while planning logistics.

[g] Natural Environment: The natural environment is the ultimate source of many inputs such as raw
materials and energy, which firms use in their productive activity.
The natural environment which includes geographical and ecological factors such as minerals and oil
reserves, water and forest resources, weather and climatic conditions and port facilities are all highly
significant for various business activities.
For example, steel producing industries are set up near the coal mines to save cost of transportion to
distant locations.
The natural environment also affects the demand for goods.
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For example, places with hot temperatures will have high demand for air conditioners.
Areas which are highly polluted will have more scope of selling air-purifiers. Similarly, weather and
climatic conditions influence the demand pattern for clothing, building materials for housing etc.
Natural calamities like
floods, droughts, earthquake etc. are devastating for business activities.

[h] Ecological environment: Though natural resources such as air, water and solar energy can be
replenished, yet, business organisation are polluting these resources by dumping chemical industrial
wastes in water and affecting the ozone layer.
The environment damage to water, earth and air caused by industrial activity of mankind is harmful for
future generations.
Business enterprises should understand their social responsibility and use these resources meticulously.
Legislative measures are also brought in by the Government (Pollution Control Board) to protect the
natural environment.
Even, as a part of self-accountability, the renewable resources should be used wisely so that rate of
consumption does not exceed the rate of replenishment.

INTERNAL ENVIRONMENT
Survival and growth of a business depends upon its strengths and adaptability to the external environment.
The internal strengths represent its internal environment.
These consist of financial, physical, human and technological resources.
The factors in internal environment of business are to a certain extent controllable because the firm can
change or modify these factors to improve its efficiency.
However, the firm may not be able to transform all the factors.

[a] Value system : The value system of an organisation means the ethical beliefs that guide the organisation in
achieving its mission and objectives.
The value system of a business organisation also determines its behaviour towards its employees,
customers and society at large.

[b] Mission and objectives: The business domain of the company, direction of development, business
philosophy, business policy etc are guided by the mission and objectives of the company.
The objective of all firms is assumed to be maximisation of profit.
Mission is defined as the overall purpose or reason for its existence which guides and influences its business
decision and economic activities.

[c] Organisation structure: The organisational structure, the composition of the board of directors, the
professionalism of management etc are important factors influencing business decisions.
An efficient working of a business organisation requires that the organisation structure should be conducive
for quick decision-making.
The board of directors is the highest decision making body in a business organisation.
For efficient and transparent working of the board of directors in India it has been suggested that the
number of independent directors be increased.

[d] Corporate culture: Corporate culture and style of functioning of top managers is important factor for
determining the internal environment of a company.

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In a closed and threatening type of corporate culture the business decisions are taken by top level
managers while the middle level and lower level managers have no say in business decision making.
This leads to lack of trust and confidence among subordinate officials of the company.
In an open and participating culture, business decisions are taken by the lower level managers and top
management has a high degree of confidence in the subordinates.
Free communication between the top level management and lower-level managers is the rule in this
open and participatory type of corporate culture.

[e] Quality of human resources: Quality of employees that is of human resources of a firm is an important
factor of internal environment of a firm.
The characteristics of the human resources like skill, quality, capabilities, attitude and commitment of its
employees etc could contribute to the strength and weaknesses of an organisation.

[f] Labour unions: Labour unions collectively bargains with the managers for better wages and better
working conditions of the different categories of workers etc.
For the smooth working of a business firm good relations between management and labour unions is
required.

[e] Physical resources and technological capabilities: Physical resources such as plant and equipment and
technological capabilities of a firm determine its competitive strength which is an important factor for
determining its efficiency and unit cost of production.
Research and development capabilities of a company determine its ability to introduce innovations
which enhances productivity of workers.

PORTER'S FIVE FORCES

Definition
The tool was created by Harvard Business School professor Michael Porter.
Porter’s five forces model is an analysis tool that uses five industry forces to determine the intensity of
competition in an industry and its profitability level.
Since its publication in 1979, it has turned into one of the most popular and highly regarded business
strategy tools.

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Threat of
entry

Bargaining Bargaining
Industry
power of power of
rivalry
suppliers buyers

Threat of
substitutes

These five forces establish an industry structure and the level of competition in that industry.
The stronger the competitive forces are in the industry, the less profitable it becomes ultimately.

Attractive Industry - High profit

 High barriers to enter

 Week suppliers bargaining power

 Week buyers bargaining power

 Few substitute products or services

 Low competition

Unattractive Industry - Low profit

 Low barriers to enter

 Strong suppliers bargaining power

 Strong buyers bargaining power

 Many substitute products or services

 Intense competition

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It is every strategic leader’s job to make an assessment of company’s competitive position in the industry
and to identify its strengths or weaknesses to make stronger that position.
The model is very valuable in formulating
firm’s strategy as it reveals the strength of each of these five key forces.

 Threat of new entrants: This force determines the ease of new entrants to enter a particular industry.
If an industry is profitable and there are hardly any barriers to enter, competition intensifies rapidly.
Therefore, with the entry of more rivals, firms begin to compete for the fixed market share, profits start to
decline. Hence, it is critical for existing organizations in the industry to build high barriers to enter to
discourage new entrants. Threat of new entrants is high when:
• Smaller capital is required to make an entry;
• Existing companies are not influential/dominant to prevent new entrants;
• Existing firms do not have patents, trademarks or do not strong brand value;
• There is no/little government regulation;
• Customer switching costs are low;
• There is low customer loyalty;
• Products are not being able to be differentiated; and
• Economies of scale can be effortlessly acquired.

 Bargaining power of suppliers: This is determined by the power of the suppliers to raise their prices.
It is also determined by the volume of potential suppliers in case existing supplier increase the price.
Bargaining power will also be lower in case suppliers are not supplying identical product/service but a
unique one.
And the cost of switching from one supplier to another.
Suppliers have dominant bargaining power when:
• There are a small number of suppliers but plenty of buyers;
• Suppliers are large in number and pose a threat to forward integrate;
• There are not many substitutes of raw materials;
• Suppliers hold scarce/unique resources;
• Cost of switching supplier is relatively high.

 Bargaining power of buyers: Bargaining power of the buyers would depend on the number of the
buyers and the volume of their order. It would also be a product of the cost of switching from company’s
products and services to products/services of the competitors. Buyers exert strong bargaining power
when:
• They buy in high volumes or control many access points to the final customer;
• There are only few buyers in the market;
• Switching costs to competitors are low;
• They threaten to backward integrate;

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• There are many close substitutes;
• Buyers are price sensitive.

 Threat of substitutes: This force is especially threatening when buyers can easily find substitute
products with attractive prices or better quality and when buyers can switch from one product or service to
another with little cost.
For example, if a company supplies a unique software product that automates data related to human
resource records , the buyer/client may substitute the software either by making the process manual or
outsourcing it.

 Rivalry among existing competitors: it refers to the number and strength of competitors in the
industry.
How does the quality of their products and services compare with the company? Where rivalry is intense,
companies can attract customers with aggressive price cuts and high-impact marketing campaigns.
On the other hand, where competitive rivalry is minimal, and the product is differentiated, there will be
high monopoly and steady profits for the company.
This force is the major determinant on how competitive and profitable an industry is.
In competitive industry, firms have to compete aggressively for a market share, which results in low profits.
Rivalry among competitors is intense when:
• There are several competitors;
• Exit barriers are high;
• Industry of growth is slow or negative;
• Products are not differentiated
• Products can be easily substituted;
• Low customer loyalty.

Although, Porter originally introduced five forces affecting an industry, scholars have suggested including
the sixth force: complements.
Complements increase the demand of the primary product with which they are used, thus, increasing firm’s
and industry’s profit potential.
For example, Amazon Prime complements Amazon and Jio TV complements Jio telecom business. As a
result, the sale of both products shot up as compared to competitors.

Implementing the model

The following steps are to be followed to implement the Porter’s Model:
 Step 1. Gather the information on each of the five forces
 Step 2. Analyze the results and display them on a diagram
 Step 3. Formulate strategies based on the conclusions

Step 1. Gather the information on each of the five forces.

What managers should do during this step

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is to gather information about their industry and to check it against each of the factors (such as “number of
competitors in the industry”) influencing the force.
We have already identified the most important factors in the table below.

Porter’s Five Forces Factors

Threat of new entry
 Amount of capital required
 Retaliation by existing companies
 Legal barriers (patents, copyrights, etc.)
 Brand reputation
 Product differentiation
 Access to suppliers and distributors
 Economies of scale
 Sunk costs
 Government regulation

Supplier power
 Number of suppliers
 Suppliers’ size
 Ability to find substitute materials
 Materials scarcity
 Cost of switching to alternative materials
 Threat of integrating forward

Buyer power
 Number of buyers
 Size of buyers
 Size of each order
 Buyers’ cost of switching suppliers
 There are many substitutes
 Price sensitivity
 Threat of integrating backward

Threat of substitutes
 Number of substitutes
 Performance of substitutes
 Cost of changing
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Rivalry among existing competitors
 Number of competitors
 Cost of leaving an industry
 Industry growth rate and size
 Product differentiation
 Competitors’ size
 Customer loyalty
 Threat of horizontal integration
 Level of advertising expense

Step 2. Analyze the results and display them on a diagram. After gathering all the information, you
should analyze it and determine how each force is affecting an industry.
For example, if there are many companies of equal size operating in the slow growth industry, it means that
rivalry between existing companies is strong.
Remember that five forces affect different industries differently so don’t use the same results of analysis for
even similar industries!

Step 3. Formulate strategies based on the conclusions. At this stage, managers should formulate firm’s
strategies using the results of the analysis For example, if it is hard to achieve economies of scale in the
market, the company should pursue cost leadership strategy.
Product development strategy should be used if the current market growth is slow and the market is
saturated.

Strategic Planning
As per Allison and Kaye (2005), "Strategic planning is an organization's process of defining its strategy, or
direction, and making decisions on allocating its resources to pursue this strategy. It may also extend to
control mechanisms for guiding the implementation of the strategy."
The concept of Strategic planning gained prominent in strategic management in corporate sector in the
1960s and it has maintained its importance in contemporary times too. It follows a cycle that is interpreted
below:

The Strategic Planning Cycle

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Formulate
Strategy

Summarize
Findings in a Propose
SWOT Mission
Analysis

Strategic
Planning
Cycle
Examine
Propose
External
Goals
Issues

Examine
Internal
Issues

Although, strategic planning process may be unique as per the specific requirements of any organisation, yet
the Strategic Planning process is modelled in cycle shown above contains the steps most commonly
followed by most of the organisations:
• Deliberating mission of the organisation
• Developing goals based on chosen mission
• Examining internal environment (strengths and weaknesses)
• Examine external environment (opportunities and threats)
• Summarize findings of SWOT analysis
• Formulate final strategy based on SWOT
Strategic planning is an iterative process; as a strategic planning process may begin with one mission and
end with another depending on the outcomes of the process.

Benefits of Strategic Planning

Strategic planning can help your organization in a number of critical ways:
• Improved results and confidence: A proper plan may positively influence organizational performance and
can contribute to a greater sense of purpose, progress and accountability among its team.
• Focus: Good strategic planning forces future thinking and can refocus and re-energise a disorientated
organization.
• Problem solving: Strategic planning focuses on an organization's most critical problems, choices and
opportunities.
• Teamwork: Strategic planning provides an excellent opportunity to build a sense of teamwork, to promote
learning, and to build commitment across the organization.
• Communication: All stakeholders have an interest in knowing the direction in which organisation is
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heading and also how their contribution will it in overall plan.
• Greater control: Strategic planning can provide an organisation greater control the environment inwhich it
operates

Limitations of Strategic Planning

• Costs can outweigh benefits: Strategic planning can consume a lot of time and money. This can be
wasteful if the strategic planning is not successful.
• Development of Poor plans: Faulty assumptions about the future, poor assessment of an organization's
capabilities, poor group dynamics and information overload can lead to the development of poor plans.
Implementation: if not implemented properly, whole planning exercise will go futile. Disillusionment,
cynicism and feelings of powerlessness often result if people have contributed energy for development of a
plan which is not implemented.

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INTRODUCTION TO STRATEGIC MANAGAMENT

1. We may define the term 'strategy' as a_____ [c] Corporate objectives
blueprint. [d] National objectives
[a] Long range
[b] Short range 5. According to Hambrick 'Strategic
[c] Short and medium range Management' Strategic management is the
[d] Unlimited rage formulation and implementation of the_____
taken by a company's top management on
2. Strategic management involves the decision- behalf of owners, based on consideration of
making and the activities in an organization resources and an assessment of the internal
which - and external environments in which the
[a] have wider ramifications organization competes.
[b] have a long time perspective [a] Major goals and initiatives
[c] use critical resources towards perceived [b] Major plans and process
opportunities or threats in a changing [c] Major decisions
environment [d] Product development
[d] all of the above
6. Strategic management involves developing the
3. According to Chandler 'Strategic Management' -
is - i] Company's vision
[a] That set of decisions and actions which ii] Training of personnel
lead to the development of an effective iii] Environmental scanning
strategy or strategies to help achieve iv] Strategy formulation
corporate objectives. v] New software
[b] The formulation and implementation of the vi] Strategy implementation
major goals and initiatives taken by a Select the correct answer from the options
company's top management. given below.
[c] Determination of the basic long-term goals [a] I, III & IV only
and objectives of an enterprise and [b] IV, III, I & VI
adoption of course of action and allocation [c] I and IV only
of resources necessary to carry out these [d] Except V all
goals.
[d] Developing the company's vision, 7. Strategic management emphasizes the
environmental scanning, strategy monitoring and evaluation of external
formulation, implementation and opportunities and threats in the light of a
evaluation and control. company's_____ and designing strategies for
the survival and growth of the company.
4. According to Hambrick 'Strategic [a] Plans and budget
Management' is set of decisions and actions [b] Asset and liabilities
which lead to the development of an effective [c] Strengths and weaknesses
strategy or strategies to help achieve - [d] Opportunities and plans
[a] Major objectives
[b] Planning objectives

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8. According to Chandler 'Strategic Management' [b] Means
is determination of the basic long-term goals [c] Ends
and objectives of an enterprise and adoption of [d] Beginning
course of action and allocation of_____
necessary to carry out these goals. 12. The strategic management process is denned
[a] Sources as the process by which the managers are able
[b] Resources to make a choice of a set of strategies for the
[c] Assets organization that will enable it to accomplish -
[d] Expenses [a] Targeted marketing plans
[b] Improved performance
9. Arrange the process of strategic management [c] Better debt equity ratio
in proper sequence - [d] Government help
P. Where we want to be?
Q. How can we ensure arrival? 13. Strategic management -
R. How might we get there? [a] is not a static
S. Where are we now? [b] is continuous process
T. Which way is best? [c] consists of different phases
Select the correct answer from the options [d] all of the above
given below.
[a] S.P.R.T.Q 14. There are ______ indispensable phases of
[b] S,T,R,P,Q every strategic management process.
[c] P,R.S,T,Q [a] Five
[d] R,S,P,Q,T [b] Four
[c] Six
10. Match the List I with List II with reference to [d] Three
strategic management process:
List I List II 15. Which of the following is first phase of
A. Where we want to be? 1. Means strategic management process?
B. Where are we now' 2. Control [a] Strategy Formulation
C. How can we ensure arrival? 3. Plans
[b] Strategy Evaluation
D. How might we get there? 4. Beginning
E. Which way is best? 5. Evaluation [c] Strategy Implementation
. 6. Ends [d] Environmental Scanning
Select the correct answer from the options
given below. 16. Environment scanning is careful monitoring of
A B C D E an organization's______ environments for
[a] 3 5 1 4 2 detecting early signs of opportunities and
[b] 2 4 1 5 6 threats that may influence its current and
[c] 6 4 1 5 2 future plans.
[d] 1 2 6 5 4 [a] Internal
[b] External
11. Out of all the alternatives generated in the [c] Internal and external
earlier stage the organization selects the best [d] Internal or external
suitable alterative. This stage in strategic
management process is called as - 17. Which of the following is/are NOT features of
[a] Evaluation business environment?

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i] Uncertainty
ii] Relat Relativity 22. According to Porter, what is usually the most
iii] Static Nature powerful of the five competitive forces?
[a] Rivalry among existing firms
Select the correct answer from the options
[b] Potential development of substitute
given below products
[a] (I) only [c] Bargaining power of buyers and suppliers
[b] (II) only [d] Potential entry of new competitor
[c] (III) only
[d] None of the above 23. Mission and Vision Statements are NOT
commonly used to:..................
[a] Guide management's thinking on
18. Which of the following describes the desired
strategic issues, especially during times
future position of the company? of significant change
[a] Vision statement [b] Create wider linkages with customers,
[b] Mission statement suppliers and alliance partners
[c] Planning statement [c] Help establish a framework for ethical
[d] Forecasting statement behaviour
[d] Inspire employees to work more
productively by providing focus and
19. Which of these basic questions should a vision
common goals
statement answer?
[a] What is our business? 24. A business has absolute control in
[b] Who are our competitors? the.............(X), whereas it has no control on
[c] Where we are to go? the..................(Y)
[d] Why do we exist? Select the correct answer from the options
given below.
20. Which of the following is beginning stage of (X) (Y)
strategic management process? [a] External External
[a] Process of goal setting for the environment environment
organization after it has finalized its [b] Internal Internal
vision and mission. environment environment
[b] The organization selects the best suitable [c] Internal External
alternative. environment environment
[c] Firm find out its relative market position, [d] External Internal
corporate image, its strength and environment environment
weakness and also threats and
opportunities. 25. What type of organizational structure do most
[d] The organization deals with the various small businesses follow?
strategic alternatives it has. [a] Divisional Structure
[b] Functional Structure
21. A_______ defines the company's business, its [c] Hour Glass Structure
objectives and its approach to reach those [d] Matrix Structure
objectives.
[a] Vision statement 26. Which of the following contains the owner of
[b] Mission statement the business, the shareholders, the managing
[c] Planning statement director, the non-managers, employees, the
[d] Forecasting statement customers, the infrastructure of the business

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organization, and the culture of the [b] Strategy Evaluation
organization? [c] Strategy Implementation
[a] Internal environment [d] Strategic Management
[b] External environment
[c] Outside environment 32. Match the List I with List II with reference to
[d] All of above strategic management process:
List I List II
27. We may define the term 'strategy' as a long A. Where we want to be? 1. Stage 4
range blueprint of an organization's desired - B. Where are we now? 2. Stage 1
A. Image C. How can we ensure 3. Stage 5
B. Direction arrival?
C. Destination D. How might we get 4. Stage 2
Select the correct answer from the options there?
given below. E. Which way is best? 5, Stage 3
[a] A&C Select the correct answer from the options
[b] B&C given below.
[c] A& B A B C D E
[d] All of the above [a] 1 2 3 4 5
[b] 4 2 3 5 1
28. In evaluating strategies, which one of Rumelt's [c] 5 4 3 2 1
criteria for evaluating strategies, refers to the [d] 4 3 2 1 5
need for strategists to examine sets of trends?
[a] Consistency 33. Where you want your business to be in 10
[b] Consonance years time. This can be termed as: ___
[c] Feasibility [a] Mission statement
[d] Advantage [b] Vision statement
[c] Statement of purpose
29. Your............is your ultimate goal, [d] Memorandum of understanding
your................. is how you will get there.
[a] Mission, Vision 34. The internal factors that contribute to the
[b] Vision, Mission business environment is/are:
[c] Vision, Vision 1. Research and Development
[d] Mission, Mission 2. Company Image
3. Brand Equity
30. Internal environment includes______ M's 4. Value System
[a] 3 Select the correct answer from the options
[b] 4 given below.
[c] 5 [a] 2, 1 & 3 only
[d] 6 [b] 4, 3 & 2 only
[c] 2&4only
31. What can be defined as the art and science of [d] 4, 1,2,3
formulating, implementing and evaluating
cross-functional decisions that enable an 35. The competencies or skills that a firm employs
organization to ' achieve its objectives? to transform inputs into outputs are:
[a] Strategy Formulation [a] Tangible resources

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[b] Intangible resources 40. An organization has little or no control over its
[c] Organizational capabilities -
[d] Reputational resources A. Internal environment
B. Inner environment
36. designing, producing and distributing C. External environment
products. Select the correct answer from the options
[a] Research and Development given below -
[b] Company Image and Brand Equity [a] A and B
[c] Value System [b] B and C
[d] All of above [c] A only
[d] C only
37. The principles of right and wrong that are
accepted by an individual or organization are 41. Change in company's_____ gives rise to
what comprise.......... problems necessitating a new_____ to be
[a] Research and Development made.
[b] Company Image and Brand Equity [a] Structure, Strategy
[c] Value System [b] Strategy, Structure
[d] All of above [c] Structure, Structure
[d] Strategy, Strategy
38. Individual investors are reliant on upon the
organization's managers to 42. To develop caliber professionals facilitating
[a] Maximize short-term returns in the form of good corporate governance is______ of ICSI.
dividends. [a] Mission
[b] Add value to then- investments in a way [b] Vision
that the stockholders could not accomplish [c] Both (A) and (B)
on their own. [d] None of above
[c] Achieve risk reduction at a lower cost than
stock-holders cloud obtain on their own. 43. To be a global leader in promoting good
[d] Diversify the stockholder's investments in corporate governance is...............of ICSI.
order to reduce risk. [a] Mission
[b] Vision
39. Competitor analysis involves; [c] Both (A) and (B)
1. Identifying the actual competitors [d] None of above
2. Assessing competitors' objectives,
strategies, strengths & weaknesses, and 44. The micro environment is also known as
reaction patterns the.............
3. Selecting the strategies to deal with [a] Task environment
competitors [b] Operation environment
Select the correct answer from the options [c] Task environment and operating
given below - environment
[a] (l)and(2) [d] None of the above
[b] (2) and (3)
[c] (l)and(3) 45. Feature(s) of strategy is/are:
[d] All of the above [a] It is a specialized planning to retaliate
competitors.

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[b] It explains how managers have to [c] A and R are true but R is not correct
respond to the subordinate in providing explanation of A
leadership. [d] A is true but R is false
[c] It is one of the way to manage the people
in organization 50. Assertion (A):
[d] All of above Strategy is a substitute for sound, alert and
responsible management.
46. Formulating strategies is the job of - Reason (R):
[a] Low level management Strategy can never be perfect, flawless and
[b] Top level management optimal. Strategies are goal-directed decision
[c] Middle level management and actions in which capabilities and resources
[d] All of above are matched with the opportunities and threats
in the environment. A good management at
47. Which of the following is concerned with the the top can steer the organizations by adjusting
overall purpose and scope of the business to its path on the basis of the changes in the
meet stakeholder expectations? environment.
[a] Operational strategy Select the correct answer from the options
[b] Corporate strategy given below,
[c] Business unit strategy [a] A and R are true and R is correct
[d] ()operation strategy explanation of A
[b] A is false but R is true
[c] A and R are true but R is not correct
48. Consider following two statements.
explanation of
i] Strategic management is a bundle of tricks [d] A is false and R is true; it explains how A
and magic is false
ii] Strategic management is not needed in
non-profit organizations. 51. _______ is the ability to influence others to
Select the correct answer from the options voluntarily make decisions that enhance the
given below. prospects for the organization's long-term
success while maintaining long-term financial
[a] Statement I is true and Statement II is false
stability.
[b] Statement II is true and Statement I is false [a] Marketing leadership
[c] Both Statement I and Statement II are true [b] Strategic leadership
[d] Both Statement I and Statement II are [c] Operational leadership
false. [d] Financial leadership

49. Assertion (A): 52. The______ consists of the factors in the

company's immediate environment that affects
Success or failure of a .strategy is dependent
the performance and working of the company,
on several extraneous factors. [a] Micro environment
Reason (R): [b] Macro environment
Strategic management is much more serious [c] Business environment
affair and requires some tricks or magic. [d] Outside environment
Select the coned answer front the options
53. _______is concerned more with how a
given below.
business competes successfully in a particular
[a] A is false but R is true market and often described as mission
[b] A and R are true and R is correct statement.
explanation of A [a] Operational strategy
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[b] Corporate strategy
[c] Business unit strategy 58. _______are generally more uncontrollable
[d] Mix strategy than micro environment factors.
[a] Macro factors
54. Strategic leadership refers to a manager's
potential to - [b] Micro factors
[a] Articulate the strategic vision for the [c] Estimated factors
organization [d] Non-business
[b] Motivate, guide and influence his
subordinates to attain the objectives of that 59. Strategic management facilitates to prepare the
vision. organization to face the future and act as -
[c] Both (A) and (B)
[a] Leader
[d] (B) but not (A)
[b] Pathfinder
55. Micro environmental factors can be described [c] Director
as_______ close to a business that have a [d] Friend
direct impact on its strategy.
[a] Employees relationship 60. Strategic management serves as a corporate
[b] Internal factors defense mechanism against -
[c] Media relation
[a] Right and wrong
[d] Competitive environment
[b] Choice and investment
56. Which of the following statement is true? [c] Mistakes and pitfalls
1. Strategic leaders generate organizational [d] Flawless and optimal
structure, assign resources and
communicate strategic vision. 61. Match the following:
2. Strategic leaders have to work in an certain
environment on various strategic issues. List I List II
3. The main purpose of strategic leadership is P. Process of eliminating unnec- 1.
strategic productivity, essary controls for smooth Global-
4. Strategist develops a short-range course of functioning of business enter- ization
action or set of goals to align with the prises
organization's vision. Q. Transfer of ownership of an 2.
Select the correct answer from the options enterprise from the public sector Liberal-
given below to the private sector ization
[a] 2 only R. Cross border transactions in 3.
[b] 3 and 4 only goods and services and inter- Privatiza-
[c] 1,2 and 3 only national capital flows tion
[d] 2 and 4 only 4.
Demone-
57. How you will classify a Strategic Leader who tization
clearly and quickly works through the Select the correct answer (runt the options
complexity of key issues problems and given below.
opportunities to affect actions? " (P) (O) (R)
[a] 3 2 1
[a] Global Thinker
[b] 1 2 4
[b] Enterprise Guardian [c] 2 1 3
[c] Navigator [d] 2 3 1
[d] Talent Advocate

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62. Assertion (A): [a] Government action, exchange rates,
Strategic management is not needed in non- competition and socio demographic
profit organizations. factors
Reason (R): [b] Market convergence, competition,
Though non-profit organizations are not exchange rates and cost advantages.
working for the profit, they have to have [c] Cost advantages, government action,
purpose, vision and mission. They also work economic cycles and competition
within the environmental forces and need to [d] Market, cost, competition and government
manage strategically to stay afloat to policies.
accomplish their objectives.
Select the correct answer from the options 65. Which of the following is concerned with how
given below. each part of the business is organized to
[a] Both A and Rare true and R is correct deliver the corporate and business-unit level
explanation of A. strategic direction and is concerned with
[b] Both A and R are true but R is correct strategic decisions about choice of products,
explanation meeting needs of customers etc?
of A [a] Operational strategy
[c] A is true and R is false [b] Corporate strategy
[d] A is false and R is true explaining how A [c] Business unit strategy
is false [d] All of above

63. Match the List I with List II with reference to 66. Strategic management helps organizations to
strategic management process: be more -
[a] Proactive
List I List II
[b] Reactive
W. Strategist 1. Builds passion & commit- [c] Turbulence
ment toward a common [d] Uncertain
goal.
X. Entrepre- 2. Identifies and exploits op- 67. Value system of an organization have an
neur portunities For new products impact on its: L Objectives
and markets. i] Policies
Y. Captivator 3. Develops a long-range ii] Practices
action or set of goals to align iii] Profit
with organization's vision. The correct option is -
Z. Mobilizer 4. Proactively builds and aligns [a] I and II only
stakeholders, capabilities [b] I, II and in only
and resources For getting [c] II, m and IV only
things done quickly and [d] I, II, m and IV
achieving complex objec-
tives. 68. Who attracts, develops, and retains talent to
Select the correct answer from the options ensure that people with the right skills and
given below. motivations to meet business needs are in the
(W) (X) (Y) (Z) right place at the right time is called as -
[a] 2 3 4 1 [a] Captivator
[b] 3 2 1 4 [b] Talent Advocate
[c] 2 3 1 4 [c] Change Driver
[d] 3 2 1 4 [d] Enterprise Guardian

69. Which of the following can be treated as

64. The following factoid are key drivers of
feature of strategy?
globalization:________
1. It reflects concern to effectively mobilize
resources.
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2. It maximizes chances to achieve [a] Navigator
objectives. [b] Entrepreneur
3. Formulating strategies is the job of top [c] Enterprise Guardian
management.
[d] Talent Advocate
Select the correct answer from the options
given below.
73. You are appointed as a Strategic Manager by
[a] (1) & (3) only
ABC Ltd. Being a strategic manager what
[b] (l),(2)&(3)
should be your tasks to perform?
[c] (2) & (3) only
i] Defining the mission and goals of the
[d] (1) & (3) only
organization.
ii] Determining what businesses it should be
70. Assertion (A):
in.
Developing annual objectives & short term
iii] To increase the production.
strategies that are compatible with the selected
iv] Allocating resources among the different
set of long term objectives are one of the
businesses.
major tasks of strategic management.
v] Discovering a new product method. Select
Reason (R):
the correct answer from the options given
A company's set of strategic objectives should
below.
include both short term and long term
[a] I, IV and III
performance target. Short term objectives help
[b] II and I only
to focus attention on delivering immediate
[c] IV, n and I
performance improvements. While long term
[d] V, II, IV and I only
objectives represent the results expected from
pursuing certain strategies.
74. A Company Secretary has to take care of the
Select the correct answer from the options
critical facets of the business i.e. -
given below.
[a] Risk management
[a] A is false and R is true explaining how A
[b] Assessing the sustainability of an
is false
organization
[b] Both A and R are true and R is correct
[c] Contribution towards corporate vision and
explanation of A.
mission
[c] A is true and R is false
[d] All of the above
[d] Both A and R are true but R is correct
explanation of A
75. Which core competencies are required for a
Company Secretary to become effective player
71. Change Driver -
of strategic management?
[a] Creates an environment that embraces
1. Thorough knowledge of the company's
change
business.
[b] Makes change happen - even if the change
2. Specialist as to mathematical and
is radical
statistical methods and calculation..
[c] Helps others to accept new ideas
3. Sound knowledge of laws relating to
[d] All of the above
company, capital markets, industry related
etc.
72. He ensures shareholder value through
4. Ability to read and write.
courageous decision-making that supports
Select the correct answer from the options
enterprise or unit-wide interest called as_____
given below.

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[a] 1,2 and 4 [c] Task environment
[b] 2 and 4 only [d] Matrix environment
[c] 2, 3 and 4 only
[d] 1 and 3 only 81. The Porter's______ Forces tool is a simple but
powerful tool to evaluate the power of
76. There are mainly two types of business business.
environment - [a] Four
[a] Internal and external [b] Five
[b] Internal and operational [c] Six
[c] Operational and external [d] Ten
[d] Matrix and diagonal
82. Micro environment has ______ influence on
77. Environment is complex. Which of the the business.
following supports this? [a] Indirect
[a] Customers are the people who pay money [b] Direct
to acquire an organization's products. [c] Negative
[b] The environment consists of a number of [d] Minor
factors, events, conditions and influences
arising from different sources and it is 83. According to Michael Porter, the essence of
somewhat easier to understand in parts but strategy formulation is
difficult to grasp in totality. [a] Mapping the Five Forces
[c] A study of the competitive scenario is [b] Developing core competences
essential for the marketer, particularly [c] Coping with competition
threats from competition. [d] Balancing stakeholder interests
[d] If a supplier provides a poor service, this
could increase timescales or lower product 84. Which of the following is element of micro
quality. environment?
[a] Demographic Environment
78. Operational strategy focuses on issues [b] Competitors
of______ [c] Socio-cultural factors
[a] Resources [d] Economic terms
[b] Processes
[c] People 85. The Porter's Five Forces tool1 is a simple but
[d] All of above powerful tool to evaluate the power of
business. Which of the following is not one of
79. Which of the following is a characteristic of the five?
business environment? [a] Bargaining power of suppliers
[a] Environment is complex. [b] Bargaining power of customer
[b] Environment is dynamic. [c] Rivalry among current players
[c] Environment is multi-faceted. [d] None of the above
[d] All of the above
86. Assertion (A):
80. Micro environment is also known as - Porter's five forces model considers new
[a] General Environment entrants as a significant source of competition.
[b] Global Environment Reason (R):

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New capacity and product range that the new [a] Identifying the competitive forces within
entrants bring in throw up new competitive an industry.
pressure. Bigger the new entrant, more severe [b] Advising firms on how to price their prod-
the competitive effect. New entrants also place ucts.
a limit on prices and affect the profitability of [c] Diagnosing and enhancing sources of
existing players. competitive advantage within an
Select the correct answer from the options organization.
given below. [d] Calculating what a firm is worth.
[a] A is false and R is true explaining how A
is false 91. In Porter's five forces model, conditions are
[b] Both A and R are true and R is correct more favourable for firms within an industry
explanation of A. if:
[c] A is true and R is false [a] Buyer power is high
[d] Both A and R are true [b] Supplier power is high
[c] Entry threat is low
87. Business strategy focuses on: [d] Substitute threat is high
[a] Strategies related to functional areas such
as Marketing, Production and HRM. 92. If a firm takes over a competitor then,
[b] Where a firm is going and the scope of its according to Porter's 5 forces model:
activities. [a] Buyer power is higher
[c] How a firm competes within a particular [b] Supplier power is higher
market or industry. [c] Substitute threat is higher
[d] How to allocate resources between [d] Rivalry is lower
different parts of the business
93. Which of the following is not a force in the
88. Porter's notion of a differentiation strategy is Porter Five Forces model?
best described as one in which firms seek a [a] Buyers
competitive advantage: [b] Suppliers
[a] Through having a lower cost than their [c] Complementary products
competitors. [d] Industry rivalry
[b] Through establishing their uniqueness.
[c] Through concentrating on a narrow market 94. According to Porter, suppliers are more able to
segment. exercise bargaining power over buyers when:
[d] Through achieving a match between their [a] The supply industry is dominated by a
internal and external environments few large firms.
[b] The supply industry is populated by a
89. Which of the following is not an element of large number of small firms.
Porter's 5 Forces Model? [c] When buyers have the ability to takeover
[a] The bargaining power of suppliers. suppliers.
[b] The firm's existing competition. [d] There are few buyers in the market
[c] The firm's macro-economic environment.
[d] The potential competition from new 95. Which core competencies are required for a
entrants. Company Secretary to become effective player
of strategic management?
90. Porter's Value Chain is essentially a tool for:

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[a] Communication and professional skills, [c] Threat of new entry
legal skills, management skills and IT [d] Supplier power
skills.
[b] Updated knowledge of legal environment, 99. What is likely to happen if many new
financial environment & business businesses enter a market?
environment. [a] Barriers to entry will rise.
[c] Ability to work and achieve a consensus [b] Industry capacity will fall.
within multidisciplinary settings. [c] Competitive rivalry will intensify.
[d] Remaining calm under pressure and not [d] Industry profits will increase.
losing sight of perspective.
Select the correct answer from the options 100. In Porter's five forces model, what is
given below. meant by the term 'substitute'?
[a] (a) and (ft) [a] A substitute refers loan alternative
[b] (b)and(c) manufacturing process.
[c] (a)and(c) [b] A substitute is an alternative product or
[d] All (a) to (d) service that performs the same function for
the consumer.
96. Potential rivals will not find it difficult to enter [c] A substitute is a rival firm offering the
a market where: same products.
[a] Existing firms have long-term contracts [d] A substitute is something else consumers
with the biggest customers. would rather spend their money on.
[b] Product differentiation is very strong.
[c] Existing firms have the ability to retaliate
strongly.
[d] Economies of scale are insignificant

97. According to Porter, which of the following is

most important to achieving a competitive
advantage?
[a] Serving all customers equally, rather than
targeting the most profitable.
[b] Operating at lower cost, commanding a
premium price, or both.
[c] Focusing on becoming the most
competitive business within the
sector/market,
[d] Outsourcing activities which
enhance/refine your competitive
advantage

98. Identify which of the following forces does

not form part of Porter's Competitive Position
Analysis?
[a] Buyer power
[b] Risk of losses

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Answers
1 A 16 C 31 D 46. B 61. D 76. A 91 C
2 D 17 C 32 B 47. B 62. D 77. B 92 D
3 C 18 A 33 B 48. D 63. D 78. D 93 C
4 C 19 C 34 D 49. D 64. D 79. D 94 A
5 A 20 C 35 C 50. D 65. A 80. C 95 D
6 B 21 B 36 A 51. B 66. A 81. B 96 D
7 C 22 A 37. C 52. A 67. D 82. B 97 B
8 B 23 B 38. B 53. C 68. B 83. C 98 B
9 A 24 C 39. D 54. C 69. B 84. B 99 C
10 C 25 D 40. D 55. B 70. B 85. D 100 B
11 A 26 A 41. B 56. D 71. D 86. B
12 B 27 D 42. A 57. C 72. C 87. C
13 D 28 B 43. B 58. A 73. C 88. B
14 B 29 B 44. C 59. B 74. D 89. C
15 D 30 D 45. A 60. C 75. D 90. C

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BUSINESS POLICY AND FORMULATION OF

FUNCTIONAL STRATEGY
BUSINESS POLICY - INTRODUCTION
Business policies are the guidelines developed by an organization to govern the actions of those who are a
part of it. They define the potential limits within which decisions must be made. Business policy also deals
with acquisition of resources with which organizational goals can be achieved. Business Policy defines the
scope within which decisions may be taken by the subordinates in an organization. It permits the lower level
management to deal with the routine problems and issues on their own without reverting back to top
management for the purpose of decision making.
Business policy is the study of the roles and responsibilities of top level management, significant issues
affecting organizational success and the decisions affecting organization in long-run. The top management
consists of those managers who are primarily responsible for long-term decisions and carry designations
such as Chief Executive, President, General Manager, or Executive Director. These are the persons who are
not concerned with the day-to-day problems but are expected to devote their time and energy for thinking
and deciding about the future course of action.

Features of Business Policy

Business Policy is "the study of the functions and responsibilities of senior management, the crucial
problems that affect success in the total enterprise and the decisions that determine the direction of the
organisation and shape its future. The problems of policy in business, like those of policy in public affairs,
have to do with the choice of purposes, the moldings of organizational identity and character, the continuous
definition of what needs to be done, and the mobilization of resources for the attainment of goals in the face
of competition or adverse circumstance". An effective business policy must have following features-
1. Specific - Every policy must have a basic feature of being specific/definite. If it is uncertain, then its
implementation will become difficult.
2. Clear - Policy must be unambiguous and as clear as possible in order to guide the subordinates
effectively. It should avoid frequent use of jargons and connotations to create any chaos.
3. Reliable and Uniform - Policy must be uniform and reliable enough to be efficiently followed by the
subordinates.
4. Appropriate - Policy should be appropriate to the represent the organizational goals.
5. Simple - A policy should be simple and easily understood by each and every person in the organization.
6. Inclusive/Comprehensive - In order to have a wide scope, a policy must be comprehensive.
7. Flexible - Policy should be flexible in application. It should be wide in scope so as to ensure that the line
managers use them in repetitive/routine scenarios.
8. Stable - Policy should be stable so as to avoid the scope of any indecisiveness and uncertainty in minds of
those who look into it for guidance.

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FRAMEWORK OF STRATEGIC MANAGEMENT

Vision
Vision serves the purpose of stating what an organization wishes to achieve in the long run. It articulates the
position that the organisation would like to occupy in future. The vision is about looking forward and about
formalizing where you, and the business, are going. It is a future aspiration that leads to an inspiration of
being the best in one's business sphere. It creates a common identity and a shared sense of purpose.
A vision statement is a company's road map, indicating both what the company wants to become and
guiding transformational initiatives by setting a defined direction for the company's growth. Vision
statements undergo minimal revisions during the life of a business, unlike operational goals which may be
updated from year-to-year.
A consensus does not exist on the characteristics of a "good" or "bad" vision statement. Features
• Concise : able to be easily remembered and repeated
• Clear : defines a prime goal
• Time horizon : deines a time horizon
• Future-oriented : describes where the company is going rather than the current state
• Stable : offers a long-term perspective and is unlikely to be impacted by market or technology changes
• Challenging : not something that can be easily met and discarded
• Abstract : general enough to encompass all of the organization's interests and strategic direction
• Inspiring : motivates employees and is something that employees view as desirable
Purpose
Vision statement may ill the following functions for a company:
• Serve as foundation for a broader strategic plan
• Motivate existing employees and attract potential employees by clearly categorizing the company's goals
and attracting like-minded individuals

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• Focus company efforts and facilitate the creation of core competencies by directing the company to only
focus on strategic opportunities that advance the company's vision
• Help companies differentiate from competitors. For example, profit is a common business goal, and vision
statements typically describe how a company will become profitable rather than list profit directly as the
long-term vision.

MISSION
A mission statement defines the basic reason for the existence of that organization. Such a statement reflects
the corporate philosophy, identity, character, and image of an organization. It may be defined explicitly or
could be deduced from the management's actions, decisions, or the chief executive's press statements.
A mission statement is a short statement of an organization's purpose, identifying the goal of its operations:
what kind of product or service it provides, its primary customers or market, and its geographical region of
operation.
It communicates primarily to the people who make up the organization—its members or employees—giving
them a shared understanding of the organization's intended direction.
There are no hard and fast rules to developing a mission - what matters most is that is generally be
considered to be an accurate reflection and useful summary of UH Hilo and 'speaks' to our stakeholders.
What follows though are some general principles that we could bear-in-mind:
1. Make it as succinct as possible. A mission statement should be as short and snappy as possible -
preferably brief enough to be printed on the back of a business card. The detail which underpins it should be
mapped out elsewhere.
2. Make it memorable. Obviously partially linked to the above, but try to make it something that people will
be able to remember the key elements of, even if not the exact wording
3. Make it unique to you. It's easy to fall into the 'motherhood and apple pie' trap with generic statements
that could equally apply to any institution. Focus on what it is that you strive to do differently: how you
achieve excellence, why you value your staff or what it is about the quality of the student experience that
sets you apart from the rest.
4. Make it realistic. Remember, your mission statement is supposed to be a summary of why you exist and
what you do. It is a description of the present, not a vision for the future. If it bears little or no resemblance
to the organization that your staff know it will achieve little 5. Make sure it's current. Though it is not
something which should be changed regularly, neither should it be set in stone.

Comparison Chart

Someone has rightly said, "A man without eyes is blind, but a man without a vision is dead".
Comparison
Mission Statement versus Vision Statement

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Mission Statement Vision Statement
About A Mission statement talks about A Vision statement outlines
HOW you will get to where you WHERE you want to be.
want to be. Defines the purpose Communicates both the purpose
and primary objectives related to and values of your business.
your customer needs and team
values.
Answer It answers the question, "What do It answers the question, "Where
we do? What makes us different?" do we aim to be?"
Time A mission statement talks about A vision statement talks about
the present leading to its future. your future.
Function It lists the broad goals for which It lists where you see yourself
the organization is formed. Its some years from now. It inspires
prime function is internal; to you to give your best. It shapes
define the key measure or your understanding of why you
measures of the organization's are working here.
success and its prime audience is
the leadership, team and
stockholders.
Change Your mission statement may As your organization evolves, you
change, but it should still tie back might feel tempted to change your
to your core values, customer vision. However, mission or
needs and vision. vision statements explain your
organization's foundation, so
change should be kept to a
minimum.
Developing a statement What do we do today? For whom Where do we want to be going
do we do it? What is the benefit? forward? When do we want to
In other words, Why we do what reach that stage? How do we want
we do? What, For Whom and to do it?
Why?
Features of an effective Purpose and values of the Clarity and lack of ambiguity:
statement organization: Who are the Describing a bright future (hope);
organization's primary "clients" Memorable and engaging
(stakeholders)? What are the expression; realistic aspirations,
responsibilities of the organization achievable; alignment with
towards the clients? organizational values and culture.

STRATEGIC LEVELS OF THE ORGANIZATION

1. Corporate Level Strategy:-

Corporate Strategy is the essence of strategic planning process. It determines the growth objective of the
company, i.e. direction, timing, extent and pace of the firm's growth. It highlights the pattern of business
moves and goals concerning strategic interest, in different business units, product lines, customer groups,
etc. It defines how the firm will remain sustainable in the long run.
Corporate level strategy occupies the highest level of strategic decision making and covers actions dealing
with the objective of the firm, acquisition and allocation of resources and coordination of strategies of
various SBUs for optimal performance.

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Corporate Strategy can be explained as the management plan formulated by the highest level of organization
echelon, to direct and operate the entire business organization. It alludes to the master plan that leads the
firm towards the success. So the more the aptness in the degree of the corporate level strategy, the higher
will be the chances of firm's success in the market.
According to Andrews: "the corporate strategy is the pattern of decisions in a company that determines and
reveals its objectives, purposes or goals, produces the principal policies and plans for achieving those goals
and defines the range of business the company pursues, the kind of economic and noneconomic contribution
it intends to make for its shareholders, employees, customers and communities. " (Andrews, 1997, p.245)
Johnson et al (2009), been describing corporate strategy, highlighted the choices of markets and products as
a first step, and how a company is planning to operate on those markets or with particular products. They
have also discussed the corporate strategy from overall scope of an organization and how value should be
added to the different parts (business units) of an organization.
2. Business-Level Strategy:-
Business level strategy is applicable in those organizations, which have different businesses-and each
business is treated as Strategic Business Unit (SBU). The fundamental concept in SBU is to identify the
discrete independent product / market segments served by an organization.
Since each product/market segment has a distinct environment, a SBU is created for each such segment. For
example, Reliance Industries Limited operates in textile fabrics, yarns, fibers, and a variety of petrochemical
products. For each product group, the nature of market in terms of customers, competition, and marketing
channel differs.
Therefore, it requires different strategies for its different product groups. Thus, where SBU concept is
applied, each SBU sets its own strategies to make the best use of its resources (its strategic advantages)
given the environment it faces. At such a level, strategy is a comprehensive plan providing objectives for
SBUs, allocation of resources among functional areas and coordination between them for making optimal
contribution to the achievement of corporate-level objectives.
Such strategies operate within the overall strategies of the organization. The corporate strategy sets the long-
term objectives of the firm and the broad constraints and policies within which a SBU operates. The
corporate level will help the SBU deine its scope of operations and also limit or enhance the SBUs
operations by the resources the corporate level assigns to it. There is a difference between corporate-level
and business-level strategies.
For example, Andrews says that in an organization of any size or diversity, corporate strategy usually
applies to the whole enterprise, while business strategy, less comprehensive, defines the choice of product or
service and market of individual business within the firm. In other words, business strategy relates to the
'how' and corporate strategy to the 'what'. Corporate strategy defines the business in which a company will
compete preferably in a way that focuses resources to convert distinctive competence into competitive
advantage.'
Corporate strategy is not the sum total of business strategies of the corporation but it deals with different
subject matter. While the corporation is concerned with and has impact on business strategy, the former is
concerned with the shape and balancing of growth and renewal rather than in market execution.
Michael Porter (1998) has identified business-level strategies which are cost leadership, differentiation, and

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focus to achieve a sustainable competitive advantage. The strategy of cost leadership was common in 1970s.
This strategy requires construction of efficient-scale facilities, cost reductions, control over expenses, and
cost minimization etc. The low-cost strategy gives several advantages before rivals. It may be explained by
the possibility to be more efficient than competitors. (Porter, 1998)
Hill and Jones (2007) have developed the curve which connects together the three issues in developing a
successful business model.

Brown and Blackmon (2005) have deined business-unit strategy as a process of decision making at the
strategic business unit (SBU) level. According to them, primarily it identifies how SBU supports
organizational goals. Furthermore, business-unit strategy refers to aggregated strategies of single firms or
SBU within one diversified corporation (Brown, Blackmon, 2005). While corporate strategy deals with the
question in what businesses the company should compete in, business unit level strategy decides on how to
compete in these particular businesses. (Beard, Dess, 1981)
3. Functional-Level Strategy:-
Functional strategy, as is suggested by the title, relates to a single functional operation and the activities
involved therein. Decisions at this level within the organization are often described as tactical. Such
decisions are guided and constrained by some overall strategic considerations.
Functional strategy deals with relatively restricted plan providing objectives for specific function, allocation
of resources among different operations within that functional area and coordination between them for
optimal contribution to the achievement of the SBU and corporate-level objectives.
Below the functional-level strategy, there may be operations level strategies as each function may be
divided into several sub functions. For example, marketing strategy, a functional strategy, can be subdivided
into promotion, sales, distribution, pricing strategies with each sub function strategy contributing to
functional strategy.

FORMULATION OF FUNCTIONAL STRATEGY

Finance Strategy
Financial metrics have long been the standard for assessing a firm’s performance.
Financial goals and metrics are established based on benchmarking the “best-in-industry” and
include:

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1. Free Cash Flow

This is a measure of the firm’s financial soundness and shows how efficiently its financial resources are being
utilized to generate additional cash for future investments.
It represents the net cash available after deducting the investments and working capital increases from the
firm’s operating cash flow.

2. Economic Value-Added
This is the bottom-line contribution on a risk-adjusted basis and helps management to make effective, timely
decisions to expand businesses that increase the firm’s economic value and to implement corrective actions in
those that are destroying its value.
It is determined by deducting the operating capital cost from the net income.

3. Asset Management
This calls for the efficient management of current assets (cash, receivables, inventory) and current liabilities
(payables, accruals) turnovers and the enhanced management of its working capital and cash conversion cycle.

4. Financing Decisions and Capital Structure

Here, financing is limited to the optimal capital structure (debt ratio or leverage), which is the level that
minimizes the firm’s cost of capital.

5. Profitability Ratios
This is a measure of the operational efficiency of a firm.
Profitability ratios also indicate inefficient areas thatrequire corrective actions by management;

6. Growth Indices
Growth indices evaluate sales and market share growth and determine the acceptable trade-off of growth
with respect to reductions in cash flows, profit margins, and returns on investment.

7. Risk Assessment and Management

A firm must address its key uncertainties by identifying, measuring, and controlling its existing risks in
corporate governance and regulatory compliance, the likelihood of their occurrence, and their economic
impact.
8. Tax Optimization
Many functional areas and business units need to manage the level of tax liability undertaken in conducting
business and to understand that mitigating risk also reduces expected taxes.

Formulation of Finance Strategy

Strategic Financial Management (SFM) SFM is concerned with development of a finance strategy by
identification of some key strategic alternatives which are capable of maximizing entity’s Net Present Value
(NPV) and by allocation of scarce capital resources among the competing opportunities.

INVESTMENT DECISION
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It is the first and foremost important component of financial strategy.
In the course of business, the available finance with business is usually limited but the opportunities to
invest are plenty.
Hence the finance manager is required to access the profitability or return of various individual investment
decisions and choose a policy which ensures high liquidity, profitably of an organization.

 Capital Budgeting - It is the process of making investment decisions in capital expenditure, benefits of
which are expected over a long period of time exceeding one year.

 Short Term Investment Decision - It relates to allocation of funds among cash and equivalents,
receivables and inventories.

FINANCING DECISION
Once the requirement of funds has been estimated, the next important step is to determine the sources of
finance.
The manager should try to maintain a balance between debt and equity so as to ensure minimized risk and
maximum profitability to business.

DIVIDEND DECISION
The third and last function of finance includes dividend decisions.
Dividend is that part of profit, which is distributed to shareholders as a reward to high risk investment in
business.
It is basically concerned with deciding as to how much part of profit will be retained for the future
investments and how much part of profit will be distributed among shareholders.
High rate of dividend ensures higher wealth of shareholders and also increase market price of shares.

Marketing Strategy
Formulation of marketing Strategic Marketing is the means by which a firm is effectively able to differentiate
itself from its competitors by capitalising on its strengths (both existing as well as potential) to provide
consistently better value to its customers than its competitors.

Definitions of Marketing Strategy

 “The marketing strategy lays out target markets and the value proposition that will be offered based on an
analysis of the best market opportunities.”

In short, the Strategic Marketing answers three ‘W’s:

1. Which markets to compete in

2. What is the basis of the firm’s competitive,
3. When to compete

Market Position and Strategy

 Market leader - The market leader is the one who controls significant market share.

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The goal of a market leader is to reinforce their prominent position through the use of branding to develop
and maintain their corporate image and to restrict the competitors brand.

 Market challenger - The market challenger holds the next highest market share in the industry, following
closely the most dominant player.
Their market posture is generally offensive because they have less to lose and more to gain by taking
risks.

 Market follower - Followers are generally content by taking a backseat and follow the policy of wait
and watch.
They rarely invest in their own funds in R&D and sit and relax to watch market leaders to bring out
novel and innovative products and afterwards adopt a “me-too” approach.
 Market nicher - The market nicher occupies a small niche in the market in order to avoid ‘neck to neck’
competition. Their objective is to build strong ties with the existing customer base and develop strong
loyalty with them.

Entry Strategies

 Pioneers
Market pioneers are known for innovative product development, resulting into some early entry market-
share advantages than the followers as they have the first-mover advantage, pioneers must ensure that
they are having at least one or more of three primary sources: Technological Leadership, Pre-emption of
assets or buyer switching costs.
Technological Leadership means gaining an advantage through either Research and Development or the
“learning curve” for using the research and development as a key point of selling.
Pre-emption of Assets can help gain an advantage through acquiring scarce assets within a certain
market, allowing the first-mover to be able to have control of existing assets rather than those that are
created through new technology.
 Close followers
If there is a profit potential in the innovation introduced by marker pioneer, many businesses would step
in offering the same product.
Such people are more commonly known as Close Followers.
These entrants into the market can also be seen as challengers to the Market Pioneers and the Late
Followers.
This is because early followers are more than likely to invest a significant amount in Product Research
and Development than later entrants.

 Late Entrants
Those who follow after the Close Followers are known as the Late Entrants.
Late entrant has certain advantages such as ability to learn from their early competitors and improving
the benefits or reducing the total costs.
This allows them to create a strategy that could essentially mean gaining market share and most
importantly, staying in the market.
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FORMULATION OF HUMAN RESOURCE STRATEGIES
Human resource planning is a process that identifies current and future human resources needs for an
organization to achieve its goals.
Ageing workers population in most western countries and growing demands for qualified workers in
developing economies have underscored the importance of effective human resource planning.
‘A process in which an organization attempts to estimate the demand for labour and evaluate the size, nature
and sources of supply which will be required to meet the demand.

IMPLEMENTING HR STRATEGY

1. Assessing the current HR capacity

This includes taking stock of the skills of the existing human resources of the organisation to have a clear
understanding of the current skill set of the company.
This will help in forecasting future HR requirements.

2. Forecasting HR requirements
Some questions to ask during this
 The positions to be filled in the future period
 The number of staff will be required to meet the strategic goals of the organization
 Effect of external environmental forces in getting new human resources

3. Gap analysis

In this stage, one will make a comparison between existing and desired position of the organisation in terms
of strategic.
During this phase you should also review your current HR practices and if these require any amendments.

4. Developing HR strategies to support the strategies of the organization

 Restructuring strategies
This includes reducing staff, regrouping tasks to create well-designed jobs, and reorganizing work
groups to perform more efficiently.
 Training and development strategies
This includes providing the current staff with training and development opportunities to encompass new
roles in the organization
 Recruitment strategies
This includes recruiting new hires that already have the skills the organization will need in the future.
 Outsourcing strategies
This includes outreaching to external individuals or organizations to complete certain tasks.
 Collaboration strategies
This includes collaborating with other organizations to learn from how others do things, allow employees

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to gain skills and knowledge not previously available in their own organization.
 Retention strategy
Every area of the employer-employee relationship in your organization deserves your attention.
Embrace these key strategies to improve your organization’s employee retention and boost employee
satisfaction:
 Onboarding and orientation -
The job orientation is just one component of on boarding, aim to develop an on boarding process where
new staff members not only learn about the job but also the company culture and how they can
contribute
 Mentorship programs - Pairing a new employee with a mentor is a great for retention.
New team members can learn from the experience of a senior.
 Employee compensation -
The organisation should offer competitive compensation packages which include salaries, bonuses, paid
time off, health benefits, retirement plans and all the other perks.
 Recognition and rewards systems - Every person wants to feel appreciated for what they do.
When they go the extra mile, they should be recognized.
Some companies set up rewards systems that incentivize great ideas and innovation.
 Work-life balance - A healthy work-life balance is essential.
Companies should give a serious thought for offering telecommuting or flexible schedules to improve
work-life balance for their employees.
 Training and development -
Smart managers invest in their workers professional development and seek opportunities for them to
grow.
 Communication and Feedback - Lines of communication should be kept open for ensuring employee
retention.
Their ideas, questions and concerns must be welcomed.
 Dealing with change -
If the organization is going through a merger, layoffs or other big changes, the employees must be taken
into confidence beforehand to maintain their trust.
 Fostering teamwork -
When people work together, they can achieve more than they would have individually.
 Team celebration - Celebrate major milestones for individuals and for the team.
Whether the team just finished that huge quarterly project

Formulation of Production strategy

1. Differentiation strategy
Under a differentiation strategy, the company tries to be make a product different and unique from that
offered by its competitors in the market.
Such a differentiation may be done in terms of enhanced quality, quantity, pricing, appearance, and after
sales-service than its rivals. Such a uniqueness and divergence in its product quality and customer service
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may lead to fetching higher prices by the company in the same market.

2. Cost leadership strategy

Under a cost leadership strategy, the company tries to diminish its cost of production by reaping
economies of the scale on a larger volume of production in a single batch.
Higher the scale of production, lower will be the cost of production due to reduction in fixed costs per unit
of production be it raw materials, labour, advertising, sales promotion, R & D, etc.

3. Market segmentation strategy

In market segmentation strategy, the company divides the market according to the type of customers it has
to focus and target.
It sells different products and services to different types of customers.
To achieve this goal, it produces and sells goods and services as per the needs of the customers.
Therefore, market segmentation strategy is also called Focus Strategy.

4. Price or cost strategy

Under price or cost strategy, the company sells its product at a very small price.
This strategy is used when the products are homogeneous in nature and company is not able to differentiate
that.
That is, when the customers cannot distinguish the company’s product from the competitors’ products.
Match sticks; the customer will not care much about brand while buying this and will easily switch to
other brand, if his current company tries to raise the price.

5. Quality strategy
Under quality strategy, the company produces and sells ‘premium’ goods and services.
The prices of such goods and services are naturally very high such as luxury cars and bikes.
However, this strategy attracts those customers who have huge incomes
To gain success in the market, the company must smartly invest to make quality innovative products that
are free from any defects.

6. Delivery strategy
Under delivery strategy, the company delivers its product and services to their customers as early as
possible within a fixed time period.
The company gives top priority to fast delivery of products and providing quickest accessibility of
services.

7. Product mix or flexibility strategy

Under this strategy, the company produces and sells a product mix.
A product mix is a group of products, which are sold by the same company for example Hindustan Lever.
Here, the company does not depend only on a single product for its survival and growth.

8. Service strategy
Under this strategy, the company uses a service to attract the customers.
It gives quicker and better after- sales service.

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It gives around the clock, i.e. 24-hour customer service.
Call centres.

9. Eco-friendly products
Under eco-friendly strategy, the company produces and sells environment-friendly products also
called as Green Products. For e.g. producing and selling lead-free petrol to reduce pollution,
This is a new type of production strategy.
It is used to reduce pollution and protect the biosphere.
Companies may also recycle certain materials like plastic, metals and papers.
The company informs the public about their environment-friendly manufacturing approach through
advertisements.

10. Flexible response strategy

Flexible response strategy is said to be used when a company makes required changes in its production
plans in accordance with the emerging changes in the market.
Here, focus is given to speed and reliability.

11. Low cost strategy

Under low cost strategy, the company fights massive market competition by selling its products at very
lower prices.
Simultaneously, it must also maintain the quality of its products.
A company can only sell its goods at minimum prices if it maintains a low cost of production and
distribution.
This can be done by producing and distributing goods on a large scale.

FORMULATION OF LOGISTICS STRATEGY

Logistics strategy is defined as “the set of guiding principles, driving forces and ingrained attitudes that help
to coordinate goals, plans and policies between partners across a given supply chain.”

Elements of the Logistics strategy plan

1. Customer service policy - The appropriate level of service for customers, by product group or market
segment; considering: order fulfilment requirements, enquiry and investigation capability and the
available information.

2. Inventory location policy (Supply Network nodes) - Centralised or decentralised inventory; whether
to differentiate facilities by fast and slow moving stock; location of sites; use of specific technologies
and layouts; company-owned or contracted facilities

3. Inventory policy - Form and function of inventory by location; the appropriate amount of stock to hold
for various groups of inventory;

4. Cost plan - Trade-off analysis between cost and service level requirements; cost of Logistics operations

5. Transport and distribution (Supply Network links) policy - Affected by whether enterprise imports
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or exports and the size and structure of conurbations being served.

6. IT and Communications capability - Technologies (including software) that will be internally

developed; buy planning and scheduling applications from single supplier or obtain ‘best of breed’
applications

7. Logistics organisation structure - Function or flow based; allocation of responsibilities;

managed or self- managed teams

8. Logistics Targets and metrics - Measures of performance and achievement targets; operations
improvements process and management

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Business Policy and Formulation of Functional Strategy

STRATEGY
1. Business Policy permits the______ 6. Business policy also deals with -
management to deal with the problems and
issues without consulting ______management [a] Process of conducting research on a
every lime for decisions.
company and its operating environment.
[a] Top level; Lower level
[b] Lower level; Top level [b] The process that is conducted periodically
[c] Lower level; Subordinate to keep the strategies up to date
[d] Middle management; Lower level [c] Acquisition of resources with which
organizational goals can be achieved.
2. At the corporate level, a organization starts the [d] Products being offered by the business at
strategic planning process by defining its
present
overall purpose and_______
[a] Mission 7. Which of the following statement is TRUE
[b] Values about a Vision statement of a company?
[c] Vision [a] It concentrates on future
[d] All the above [b] It defines the customers
[c] It identify critical processes
3. Business policies are the______ developed by [d] It informs about the desired level of
an organization to govern its actions. performance
[a] Ethics
[b] Roadmap 8. What does a market-oriented mission
[c] Guidelines statement define about the business?
[d] Actions [a] Satisfying basic supplier needs
[b] Satisfying basic customer needs
4. A clear mission statement acts as an invisible [c] Satisfying basic stockholder needs
hand that guides people in the firm. It is a [d] Satisfying basic owner needs
statement of_______.
[a] Fact 9. Every policy must have a basic feature of
[b] Value being -
[c] Purpose [a] Tailor-made
[d] Financial goals [b] Specific and definite
[c] Complex and stable
5. Which of the following is best identified as a [d] Flexible and stable
statement that presents "a firm's big picture
statement, describing a desired end-state, 10. _______serves the purpose of stating what an
general in scope, and not restrictive"? organization wishes to achieve in the long run.
[a] Corporate philosophy statement [a] Mission
[b] Company creed [b] Value
[c] Vision statement [c] Vision
[d] Mission statement [d] Rule

11. "To be a global leader in promoting good

corporate governance" is______ of ICSI.
[a] Vision

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[b] Mission [d] undergo maximum revisions during the
[c] Rule life of a business.
[d] Destination
17. Which of the following describes the desired
12. An effective business policy - future position of the company?
[a] Must be unambiguous and as clear as [a] Vision statement
possible in order to guide the subordinates [b] Mission statement
effectively. [c] Planning statement
[b] Must be uniform and reliable enough to be [d] Forecasting statement
efficiently followed by the subordinates.
[c] Should be appropriate to the represent the 18. Assertion (A):
organizational goals. Strategic vision and mission statements are not
[d] All of the above needed in small business bouses.
Reason (R):
13. A vision statement is a company's - Organizations irrespective of their size face
[a] Profitability statement similar business environment and have to
[b] Road map work through competition. Small
[c] Ethical thinking organizations have to plan strategies for their
[d] Policy statement survival in the market where large
organizations are also present
14. Which of the following is feature of vision Select the correct answer from the options
statement? given below.
[a] it motivates employees and is something [a] A is true but R is false
that employees view as desirable [b] A and R both are true
[b] It describes where the company is going [c] A and R both are true and R is correct
from the current level. explanation of A.
[c] It offers a long-term perspective and is [d] A is false R is true and R correctly
unlikely to be impacted by market or explains how A is false.
technology changes.
[d] All of the above 19. A narrow market focus is to a differentiation-
based strategy as a -
15. Policy should be_____ in application. [a] Broadly-defined target market is to a cost
[a] Rigid leadership strategy
[b] Complex [b] Growth market is to a cost-based strategy
[c] Flexible [c] Technological innovation is 1o a cost-
[d] Indecisive based strategy
[d] Growth market is to a differentiation-
16. Vision statement - based strategy
[a] is something that can be easily met and
discarded. 20. Vision Statement answers the question -
[b] is general enough to encompass all of the [a] What do we do?
organization's interests and strategic [b] What makes us different?
direction. [c] Where do we aim to be?
[c] likely to be impacted by market or [d] Whether is it possible to make growth?
technology changes.

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21. A ______defines the company's business, its [a] Vision statement
objectives and its approach to reach those [b] Mission statement
objectives. [c] Philosophy
[a] Vision statement [d] Statement of Philosophy
[b] Mission statement
[c] Planning statement 26. Horizontal integration is concerned with
[d] Forecasting statement [a] Production
[b] Quality
22. One of the primary advantages of [c] Product planning
diversification is sharing core competencies. [d] All of the above
In order for diversification to be most
successful, it is important that - 27. Corporate level of management consists of •
[a] The target market is the same, even if the [a] The Chief Executive Officer (CEO), other
products are very different. senior executives, the board of directors,
[b] The products use similar distribution and corporate staff
channel. [b] General managers are concerned with
[c] The methods of production are the same. strategies that are specific to a particular
[d] The similarity required for sharing core business
com potencies must be in the value chain, [c] Managers are responsible for the specific
not in the product. business functions or operations (human
resources, purchasing, product
23. ________is a force (hat creates a sense of development, customer sets we. and so on)
commonality that permeates the organization [d] None of the above
and gives coherence to diverse activities
[a] Right mission 28. Competitive rivalry has the most effect on the
[b] Shared Vision firm's______ strategies than the firm's other
[c] Purpose statement strategies.
[d] Shares views [a] Business, level
[b] Corporate level
24. Mission and Vision Statements are not [c] Functional level
commonly used to:.................. [d] All of these
[a] Guide management s thinking on
strategic reuses especially during lime* of 29. Match the List I with List II
significant change List I List II
[b] Create wider linkages with customers A. Strength 1. Shortage of fund
suppliers and alliance partners B. Weakness 2. Cost advantage
[c] Help establish a framework for ethical C. Opportunity 3. Sound capital structure
behaviour D. Threat 4. Cut throat competition
[d] Inspire employees to work more Select the correct answer from the options
productively by providing focus and given below.
common goals A B C D
[a] 1 2 3 4
25. _______of a company focuses on the [b] 3 1 4 2
question: [c] 4 3 2 1
"Who we are' and 'What we do'. [d] 3 1 2 4
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[d] Make planning
30. Your............is your ultimate goal,
your................. is how you will get there 35. Conglomerate diversification is another name
[a] Mission, Vision for which of the following?
[b] Vision, Mission [a] Related diversification
[c] Vision, Vision [b] Unrelated diversification
[d] Mission, Mission [c] Portfolio diversification
[d] Acquisition diversification
31. A firm successfully implementing a
differentiation strategy would expect: 36. Mission statement reflects the -
[a] Customers to be sensitive to price [a] Corporate philosophy
increases. [b] Identity of an organization
[b] To charge premium prices. [c] Image of an organization.
[c] Customers to perceive the product as [d] All of the above
standard.
[d] To automatically have high levels of 37. Corporate Strategy is -
power over suppliers. [a] Decisive and legislative
[b] Executive and governing
32. Match the List-I with List-II: [c] Growth and profitability
List I List II [d] Focus and Differentiation
i] Inbound 1. Raw Material
logistics 38. Internal______ are activities in an
ii] Procurement 2. Machinery organization that are performed especially
iii] Operations 3. Production well.
iv] HRM 4. Training and Develop- [a] Opportunities
ment [b] Competencies
5. Accounting [c] Strengths
Select the correct answer from the options [d] Management
given below.
A B C D 39. Corporate Strategy deals with -
[a] 3 1 2 4 [a] Particular business unit or division
[b] 3 1 4 2
[b] Entire business organization
[c] 4 3 2 1
[d] 1 2 3 4 [c] Profitable product segment
[d] All of the above
33. In the case where an organization acquires its 40. Corporate Strategy uses -
supplier, this is an example of - [a] Introverted approach
[a] Horizontal integration [b] Complicated approach
[b] Forwards vertical integration
[c] Extroverted approach
[c] Backwards vertical integration
[d] None of the above [d] Value approach

34. The strategic management process is the way 41. A mission statement is a______ of an
in which strategists determine objectives organization's purpose, identifying the goal of
and______ its operations
[a] Make recording [a] Long statement
[b] Make coordinating
[b] Short statement
[c] Make strategic decisions
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[c] Complex statement [d] Michel Shawn & Co.
[d] None of the above
46. Risk management is responsibility of the -
42. Assertion (A): [a] Customer
Functional level constitutes the lowest [b] Investor
hierarchical level of strategic management. [c] Developer
Reason (R): [d] Project team
Functional level is responsible for the specific
business functions or operations (human 47. Where you want your business to be in 10
resources, purchasing, product development, years time. This can be termed as: ___
customer service, and so on) that constitute a [a] Mission statement
company or one of its divisions. [b] Vision statement
Select the correct answer from the options [c] Statement of purpose
given below. [d] Memorandum of understanding
[a] A is true and R is False
[b] Both A and R are False 48. What are the key decisions falling within the
[c] A is true but R is not correct explanation scope of financial strategy?
of A [a] Investment Decisions
[d] A and R both are true and R is correct [b] Finance Decisions
explanation of A [c] Dividend Decisions
[d] All of the above
43. A Financing strategy is integral to an
organization's - 49. Aim of financial strategy is to achieve -
[a] Value system [a] Profit maximization
[b] Strategic plan [b] Wealth maximization
[c] Operational efficiency [c] Profit and wealth maximization
[d] Ratio analysis [d] Distribute maximum dividend

44. Net worth is the - 50. Similar to Mission and Vision Statements,
[a] Always equal to economic value added. Corporate Values Statements provide three of
[b] Sum of Free cash flow generated by the the following. Which is not true?
organization [a] A vision for the future.
[c] Total assets minus total outside liabilities [b] Strategies that zero in on key success
of an individual or a company. approaches.
[d] Effective management of current assets [c] Values that shape actions.
and current liabilities and the enhanced [d] Directions for promotional planning
management of its working capital and
cash conversion cycle. 51. ______is concerned more with how a business
competes successfully in a particular market
45. The New York based financial advisory and often described as mission statement.
______ postulated a concept of economic [a] Operational strategy
value added. [b] Corporate strategy
[a] Stern Stewart & Co. [c] Business unit strategy
[b] Shawn Stewart & Co. [d] All of above
[c] Stern Porter & Co.

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52. Which of the following is said to be the 57. Which of the following is concerned with the
lifeblood of an organization? overall purpose and scope of the business to
[a] Cash meet stakeholder expectations?
[b] Finance [a] Operational strategy
[c] Material [b] Corporate strategy
[d] Goodwill [c] Business unit strategy
[d] Operation strategy
53. Which of the following is concerned with how
each part of the business is organized to 58. Concept through which life is brought up in
deliver the corporate and business-unit level message of advertising strategy in memorable
strategic direction and is concerned with and distinctive way is classified as -
strategic decisions about choice of products, [a] Rational concept
meeting needs of customers etc.? [b] Reminder concept
[a] Operational strategy [c] Creative concept
[b] Corporate strategy [d] Persuasive concept
[c] Business unit strategy
[d] All of above 59. Customer driven marketing strategy is another
name of the -
54. Financial Management is concerned with - [a] Selling concept
A. Investment decisions [b] Marketing concept
B. Labour turnover decisions [c] Product concept
C. Financing decisions [d] Societal marketing concept
D. Personnel policy decisions E Dividend
decisions 60. Marketing strategy in which a firm sells
Select the correct answer from the options different segments and offers different product
given below. is classified as
[a] D,B&C [a] Individual marketing
[b] A, C.B&E [b] Differentiated marketing
[c] A and C only [c] Mass marketing
[d] E, C & A [d] Niche marketing

55. Operational strategy focuses on issues 61. Adapting the firm to take advantage of
of______ opportunities in its constant changing
[a] Resources environment is called -
[b] Processes [a] Long-range planning
[c] People [b] Annual planning
[d] All of above [c] Strategic planning
[d] Environmental scanning
56. Which of the following business function
more focus on customer 62. All of the following are accurate descriptions
[a] Selling of a company's mission statement, except
[b] Marketing which one?
[c] Purchasing [a] Mission statement should be realistic.
[d] Accounting [b] Mission statement should be broad.

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[c] Mission statement should fit the market [b] Which markets to compete in?
environment. [c] When to compete?
[d] Mission statement should be written for [d] All of the above
"public relations" purpose.
67. ______is a company that has the largest
63. The original framework of marketing mix market share in an industry and which can use
comprises of 4Ps -. its dominance to affect the competitive
[a] product, price, place and promotion landscape and direction the market takes
[b] product, price, profit and plan [a] Market Challenger
[c] profit, price, place and policy [b] Market Follower
[d] policy, price, place and promotion [c] Market Nicher
[d] Market leader
64. Match List-I with List-II:
List I List II 68. Market challengers are known as -
A. Product 1. Money customers have to pay [a] Winner firms
to obtain the product [b] Runner-up firms
B. Price 2. Communicate the merits of [c] Challenging firms
the product and persuade [d] Followers
target consumers to buy it
C. Place 3. Make the product available to 69. ______generally follows the policy of wait
target consumers and watch. They rarely invest in their own
D. Promotion 4. "Goods-arid-service" combi- funds in R&D and sit and relax to watch
nation the company offers to market leaders to bring out novel and
the target market innovative products and afterwards adopt a
Select the correct answer from the options "me-too" approach.
given below. [a] Challenging firms
A B C D [b] Market leader
[c] Market Challenger
[a] 4 1 2 3
[d] Market Follower
[b] 3 1 4 2
[c] 4 3 2 1 70. _______will compete neck to neck' with the
[d] 1 2 3 4 market leader in an effort to grab their market
65. Marketing strategy is a - share.
[a] careful selection of viable and profitable [a] Market Follower
investment proposals [b] Market Challenger
[c] Market Nicher
[b] business's overall game plan for reaching [d] Market maker
people and turning them into customers of
the product or service that the business 71. In terms of market position, firms may be
provides. classified as -
[c] mix of a firm's capitalization i] Market Nichers
[d] process that set out how the organization ii] Market Challengers
iii] Market Leaders
plans to finance its overall operations to
iv] Market Followers
meet its objectives now and in future Arrange in proper sequence.
[a] (iii)t(ii),(i),(iv)
66. The Strategic Marketing answers three 'W's: [b] (iii), (ii), (iv), (i)
[a] Which markets to compete in? [c] (ii),(iv),(iiil(i)
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[d] (i), (ii), (iv), (iii) [b] People
[c] Assets
72. According to_______, every entrant into a [d] All of the above
market whether it is new or not is classified
under a Market Pioneer, Close Follower or a 78. Which of the following activity is not included
Late follower in human resource management?
[a] Koontz and O'Donnell [a] Training and development
[b] Haimann and Hick [b] Appraisal of performance of employees
[c] Lieberman and Montgomery [c] Resistance management
[d] Lieberman and Hick [d] Motivation of workforce

73. _______ are known to often open a new 79. The human resource management functions
market to consumers based on major aim at -
innovation. [a] Ensuring that the human resources possess
[a] Late Followers adequate capital, tool, equipment and
[b] Market Pioneers material to perform the job successfully
[c] Close Followers [b] Helping the organization deal with its
[d] All of the above employees in different stages of
employment
74. According to Lieberman and Montgomery [c] Improving an organization's
who have the first-mover advantage? creditworthiness among financial
[a] Passionate institutions
[b] Followers [d] None of the above
[c] Pioneers
[d] Seller 80. Which of the following statement is true?
1. Human resource management aids in
75. Technological Leadership means - strategic management.
[a] Gaining an advantage through research 2. The human resource management helps
and development. the organization to effectively deal with
[b] Acquiring scarce assets within a certain the external environmental challenges.
market. Select the correct answer from the options
[c] Allowing pre-existing information to be given Mow.
used. [a] (I) only
[d] Bearing in mind customer preference [b] (2) only
[c] Both (1) and (2)
76. Human Resource strategy is that pan of [d] Neither (I) nor (2)
management which is -
[a] Concerned will) how people at work use 81. Prominent area where Human Resource
(lie various resources available in Manager can play a strategic role -
organization. [a] Providing purposeful direction
[b] Concerned with people at work arid with [b] Building core competency
their relationship with an enterprise. [c] Creating competitive advantage
[c] Concerned with how manger effectively [d] All of the above
use the various resources available in
organization, 82. Prominent area where Human Resource
[d] Concerned with how manger effectively Manager can play a strategic role -
control the people in organization. [a] Managing workforce diversity
[b] Empowerment of human resources
77. Human resource strategy is concerned with the
________employed in an organization. [c] Development of works ethic and culture
[a] Resources [d] All of the above

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83. In relation Human Resource management, 87. Under a_______, the company tries to be
'Empowerment' means - different and unique from its competitors.
[a] Accomplishments rather than active [a] Low Cost Strategy
[b] Management of diverse workforce [b] Product Mix Strategy
[c] Authorizing every member of an [c] Differentiation strategy
organization to lake up his own destiny [d] Quality Strategy
realizing his full potential.
[d] All of the above 88. Under a cost leadership strategy -
[a] The company divides the market
84. Restructuring Strategies relating to Human according cost associated with marketing.
Resource includes - [b] The company tries to reduce its cost of
[a] Providing the current staff with training production.
and development opportunities to [c] The company sells its product below cost.
encompass new roles in the organization [d] The company reduces cost by scarifying
[b] Reducing staff, regrouping tasks to create quality.
well-designed jobs, and reorganizing work
groups to perform more efficiently. 89. Under_______, the company produces and
[c] Outreaching to external individuals or sells high-quality goods and services.
organizations to complete certain tasks. [a] Profit strategy
[d] Area of the employer-employee [b] Quality strategy
relationship in your organization deserves [c] Delivery Strategy
your attention. [d] Quantity Strategy

85. Retention Strategy relating to Human 90. Under eco-friendly strategy -

Resource includes - [a] The company keeps friendly approach
[a] Every area of the employer-employee with its customers.
relationship in your organization deserves [b] The company keeps friendly approach
your attention. with its customers and suppliers.
[b] Providing the current staff with training [c] The company produces and sells
and development opportunities to agricultural products.
encompass new roles in the organization [d] The company produces and sells environ-
[c] Collaborating with other organizations to ment-friendly products also called as
learn from how others do things, allow Green Products.
employees to gain skills and knowledge
not previously available in their own 91. In______ importance is given to speed and
organization. reliability.
[d] None of the above [a] Flexible response strategy
86. Which of the following cannot be classified as [b] Service Strategy
Business Strategies - [c] Response strategy
[a] Differentiation Strategy [d] Low Cost Strategy
[b] Delivery Strategy
[c] Cost Leadership Strategy 92. Purpose of supply chain management is -
[d] Market Segmentation Strategy [a] Provide customer satisfaction
[b] Improve quality of a product

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[c] Integrating supply and demand [a] Functional Strategy
management [b] Business Strategy
[d] Increase production [c] Corporate Strategy
[d] All of the Above
93. The term supply chain refers to the linkages
between - 98. An advertisement says, Have Roohafza with
[a] Seller, debtor and creditor milk and lassi too'. Which strategy is the
[b] Issuer, investor and broker company trying to use:
[c] Suppliers, manufacturers and customers. [a] Market Development
[d] Purchaser and supplier [b] Product Development
[c] Mark el Penetration
94. ______is an extension of______ [d] All of I he above
[a] Supply chain management; logistic
management. 99. A tool by which management identifies and
[b] Logistic management; Supply chain evaluates the various businesses that make tip
management; logistic management a company is termed as:
[c] Supply chain management; purchase [a] Value Chain Analysis
management [b] Portfolio Analysis
[d] Purchase management; Logistic [c] Competition Analysis
management [d] Strategic Analysis

95. Which of the following statement is true?

1. Logistic Management is an extension of 100. A campaign advocating the message of
Supply Chain Management. 'SAVE WATER' is:
2. Supply chain management is a tool of [a] Services Marketing
business transformation and involves [b] Holistic marketing
delivering the right product at the right [c] Social Marketing
time to the right place and at the right [d] Direct Marketing
price.
Select the correct answer f mm the options
given below.
[a] 2 only
[b] 1 only
[c] Both 1 and 2
[d] Neither 1 nor 2

96. Inbound and Outbound logistics" arc related

to:
[a] Supply Chain Management
[b] Logistics Management
[c] Value Chain Analysis
[d] All of the above

97. Geographical Diversification, Product

diversification and Entry Mode are the
domains of:
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Answers
1 B 16 B 31 B 46. D 61. C 76. B 91 A
2 D 17 A 32 D 47. B 62. B 77. B 92 C
3 C 18 D 33 C 48. D 63. A 78. C 93 C
4 C 19 A 34 C 49. C 64. A 79. B 94 A
5 C 20 C 35 B 50. D 65. B 80. C 95 A
6 C 21 B 36 D 51. C 66. D 81. D 96 D
7 A 22 D 37. A 52. B 67. D 82. D 97 C
8 B 23 B 38. C 53. A 68. B 83. C 98 C
9 B 24 B 39. B 54. D 69. D 84. B 99 B
10 C 25 B 40. C 55. D 70. B 85. A 100 C
11 A 26 A 41. B 56. B 71. B 86. B
12 D 27 A 42. D 57. B 72. C 87. C
13 B 28 A 43. B 58. C 73. B 88. B
14 D 29 D 44. C 59. B 74. C 89. B
15 C 30 B 45. A 60. B 75. A 90. D

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STRATEGIC ANALYSIS AND PLANNING

STRATEGIC ANALYSIS AND PLANNING

Situation Analysis
A Situation analysis or environmental analysis is an essential component of any strategy formulation and it
has to be assured that such analysis is conducted periodically to keep the strategies up to date.

 The problem (its severity and its causes)

 The people (potential stakeholders)
 The broad context (in which the problem prevails)
 Factors (facilitating behavior change)

A situational analysis takes into account the internal and external environment of an entity or organization
and clearly identifies its own capabilities, customers, potential customers, competitors and the business
environment and the impact they are going to have on the entity or organization.
It can also help in identifying strengths, weakness, opportunities and threats to the organization or business
which can help in forecasting the choices required to be made keeping in view the environmental
developments.

Need of Situation Analysis

Bringing out a clear, detailed and realistic picture of the opportunities, resources, challenges and barriers
regarding a formulating a business plan.

Suitability of Situation Analysis

A small, well knitted and focused team from different functional areas of the organisation should conduct
the situation analysis.
Throughout the data collection process, team members should also consider about engagement of concerned
stakeholders including opinion leaders, service providers, policy makers, partners, and potential
beneficiaries to reap maximum output.

Timing of Conducting Situation Analysis

A situation analysis should be conducted at the beginning of any program or project but before developing
a strategy.

Elements of Situation Analysis

It relates with the products being offered by the business at present.
It may further be sub-divided into the core product and any secondary/ancillary or supporting
products/services.
While doing so, the needs of the customers should be taken into.

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 Competitive situation
This involves analysis of the competitive forces to identify the closest competitors.
It involves finding out core competencies of the competitors as compared to our own organization

 Distribution Situation
Review your distribution and logistics network.

 Environmental Factors
The external and internal environmental factors which need to be taken into account.
This includes economic or sociological factors that impact performance.

Carrying out a SWOT analysis (Strengths, Weaknesses, Opportunity and Threats).

Current opportunities available in the market, the main threats that business is facing and may face in the
future, the strengths that the business can rely on and any weaknesses that may affect the business
performance.

SWOT/TOWS ANALYSIS
SWOT is a tool for strategic analysis of any organization, which takes into account both examination of the
company’s internal as well as of its external environment.

SWOT may be expanded as:

S – Strengths
W – Weaknesses
O – Opportunities
T – Threats.
The origin of the SWOT analysis is supposed to be rooted in the concept of ‘Force Field Analysis’
pronounced by K. Levin in 1950s.

TOWN
Though TOWS was created through rearrangement of the letters of SWOT analysis, yet, it may not be
considered as just reversal of sequence of the SWOT analysis.
This is so because, while in the SWOT analysis, one starts with evaluation of internal strengths and
weaknesses and seeks the manner of the their best application taking into account the external business
environments, TOWS analysis scans opportunities and threats existing in external environment of any
organization, and then generates, compares and selects strategies based on internal strengths and weakness
to utilize such opportunities and reduce threats.

 Who can use SWOT/TOWS

The SWOT/TOWS Matrix is not just meant for the top levels of management in an organisation.
Rather, these two can be very useful tool for divisions, products, functions as well as departments.
These can also be used for individual employees on an operational level. (Campbell, 2017).

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 Why SWOT/TOWS
The SWOT/TOWS analysis is a very simple yet valuable technique which aids in identifying
opportunities and threats from an external environment, and analyzing its own strengths and weakness.
Such a review helps in establishing the relationship between threats, opportunities, weaknesses, and
strengths for developing strategies and making decisions.
Further, use of TOWS by examining threats and opportunities before analyzing strengths and weaknesses
can further allow for more productive analysis and interpretation of external environment leading to more
informed decisions

Four TOWN Strategies: Product of Trade -off between Internal and External factors

Strategies In TOWN

External Opportunities (O) External Threats (T)

1. 1.
2. 2.
3. 3.
Internal Strengths (S) SO ST
1. 'Maxi-Maxi' Strategy 'Maxi-Mini' Strategy
2.
3. Strategies that use strengths to Strategies that use strengths to
maximise opportunities manimise threats
Internal Weaknesses (W) WO WT
1. 'Mani-Maxi' Strategy 'Mani-Mini' Strategy
2.
3. Strategies that manimise Strategies that manimise
weaknesses by taking advantage weaknesses and avoid threats
of opportunities

Aggressive Strategy (Maxi-Maxi)

According to Krzysztof Obłój (2007) “the aggressive strategy (maxi-maxi) consists in maximum
exploitation of the synergy effect present between the strong sides of the organization and opportunities
generated by the environment. It is a strategy of strong expansion and diversified development

Therefore, maxi-maxi refers to an organization, within which the synergy effect is present and opportunities
are dominating in the environment.
It consists in strong expansion and development, with maximum application of strengths and available
opportunities.

The aggressive strategy embraces actions such as: capturing opportunities, strengthening position on the
market, taking over organizations of the same profile, concentration of resources on competitive products.

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Conservative Strategy (Maxi-Mini)
It is present in an organization in a situation, when with high internal potential, it undergoes unfavorable
system of external conditions or threats.
The threats need to overcome with use of the strengths, e.g. the competitors should be bought and its shares
taken over
The conservative strategy embraces such actions as: selection of products, market segmentation, reduction of
costs, improvement of competitive products, development of new products, searching for new markets.

Conservative Strategy (Mini-Maxi)

It is present in an organization, where weaknesses dominate over the strengths still there are opportunities
prevailing in the environment.
The competitive strategy consists in “(…) elimination of weak sides of company’s operation and construction
of its competitive strength through maximal exploitation of the existing opportunities that support
development”
The competitive strategy embrace such actions as: expansion of financial resources, improvement of commercial
resources, improvement of a line of products, improvement of productivity, reduction of costs, maintenance
of competitive advantage.

Defensive Strategy (Mini-Mini)

This strategy enables survival in a situation, when an organization works in an unfavorable environment, it
is deprived of strengths.
It may lead to take maximal benefits from the company before its liquidation, or to combine it with another
enterprise.
The defensive strategy encompasses such actions as: gradual withdrawal, reduction of costs, reduction of
productive ability, ceasing the investment process.

PERT (Programme evaluation Review Technique) and PM (Critical Path Method): Techniques of
project Management
One of the most challenging jobs that any manager can take on is the management of a large-scale project that
requires coordinating numerous activities throughout the organization.

Therefore, the managers have to rely on Project management techniques to handle such large scale projects.
Project Management is a systematic way of planning, scheduling, executing, monitoring, controlling the
different aspects of the project, in order to attain the goal made at the time of project formulation.

PERT and CPM two complementary statistical techniques utilized in Project management.
These two are network based scheduling methods that exhibit the flow and sequence of the activities and
events.
These techniques make heavy use of networks to help plan and display the coordination of all the activities.

PERT and CPM have been used for a variety of projects, including the following types.
 Construction of a new plant
 Research and development of a new product
 NASA space exploration projects
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 Movie productions
 Building a ship
 Government-sponsored projects for developing a new weapons system
 Relocation of a major facility
 Maintenance of a nuclear reactor
 Installation of a management information system
 Conducting an advertising campaign

PERT/CPM identify the time required to complete the activities in a project, and the order of the steps.
Each activity is assigned an earliest and latest start time and end time.
Activities with no slack time are said to lie along the critical path–the path that must stay on time for the
project to remain on schedule.

CPM: Key Points

CPM computes the longest path of planned jobs/ activities to logical end points/the end of the project, and the
earliest and latest time by which each activity can start and finish without making the project longer. This
process determines the activities that are “critical” or on the longest path and having “total float” (i.e., can be
delayed without making the project longer).
 What jobs/activities must be carried out.
 Where parallel activities can be performed.
 The shortest time to complete a project.
 Resources needed for a project.
 The sequence of activities, scheduling and timings.
 Task priorities.
 The most efficient way of shortening time on urgent projects.

Steps in PERT and CPM

(i) Each project consists of numerous independent jobs/activities.
It is vital to identify and distinguish the various activities required for the completion of the project and
list them separately.

(ii) After listing, the order of precedence for these jobs needs to be determined.
Certain jobs will have to be done first.
Therefore, jobs have to be completed before others should be determined.
Also, a number of jobs may be carried out simultaneously.
All such these relationships between the different jobs need to be clearly laid down.

(iii)Then, a picture/graph portraying each of these jobs should be drawn showing the predecessor and
successor relations among them.
This graph shows the time required for completion of each job.
This is known as the project graph or the arrow diagram.
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Advantages of PERT
1. Compels managers to plan their projects critically in considerable detail from beginning to the end and
analyse all factors affecting the progress of the plan.

2. Provides management a tool for forecasting the impact of schedule changes.

The likely trouble spots are located early enough to take preventive measures or corrective actions.

3. A considerable amount of data may be presented in a precise manner.

The task relationships are presented graphically for easier evaluation.

4. The PERT time is based upon 3-way estimate and hence is the most objective time in the light of
uncertainties and results in greater degree of accuracy in time forecasting.

5. Results in improved communication with all concerned parties such as designers, contractors, project
managers etc.
The network will highlight areas that require attention of higher priority to the key jobs without ignoring
the lower priority tasks.

Limitations of PERT
1. Uncertainly about the estimate of time and resources due to being based on assumptions.

2. The costs may be higher than the conventional methods of planning and as it needs a high
degree of planning skill and minute details resulting in rise in time and manpower resources.

3. Not suitable for relatively simple and repetitive processes such as assembly line work which are
fixed- sequence jobs.

Comparison Chart

BASIS FOR PERT CPM

COMPARISON
Meaning PERT is a project management CPM is a statistical technique of
technique, used to manage project management that manages
uncertain activities of a project. well defined activities of a project.
What is it? A technique of planning and control A method to control cost and time
of time
Orientation Event-oriented Activity-oriented
Evolution Evolved as Research & Development Evolved as Construction project
project
Model Probabilistic Model Deterministic Model
Focuses on Time Time-cost trade-off
Estimates Three time estimate One time estimate
Appropriate for High precision time estimate Reasonable time estimate

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Management of Unpredictable Activities Predictable activities
Nature of jobs Non-repetitive nature Repetitive nature
Critical and Non- No differentiation Differentiated
critical activities
Suitable for Research and Development Project Non-research projects like civil
construction, ship building etc.
Crashing concept Not Applicable Applicable

BCG MATRIX
Function of market share.”—Bruce Henderson, “The Product Portfolio,”

The BCG Matrix was developed by the Boston Consulting Group (BCG)
BCG analysis is mainly used for Multi-Category/ Multi Product companies.
It aims to evaluate each product, i.e. the goods and services of the business in two dimensions:
 Market growth
 Market share

1. Cash Cows
Cash cows are products which have a high market share in a low growing market.

As the business growth rate of market is low, cash cow gains the maximum advantage by generating
maximum revenue due to its higher market share.
Therefore, for any company, the cash cows is the category of products which require minimal investment
but ensure higher returns.
These higher returns raise the level of overall profitability of the firm because such excess revenue generation
can be used in other businesses which carry products falling in the category of Stars, Dogs or Question marks.

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Strategies for cash cow – Cash cows are the most stable product/service line for any business and hence the
strategy includes retention of the market share for such category.
Thus, customer satisfaction programs, loyalty programs and other such promotional methods form the core of
the marketing plan for a cash cow product.

2. Stars
The products/services falling in this category are best products/services in the product portfolio of any
company.
This is so because, for such category of products, both market share as well as growth rate is high.
If the strategies are successful, a Star can become a cash cow in the long run.
Strategies for Stars – All types of marketing, sales promotion and advertising strategies are used for Stars.
Similarly in Stars, because of the high competition and rising market share, the concentration and
investment needs to be high in marketing activities so as to increase and retain market share.

3. Question Marks
Thus Question marks are products which may give high returns but at the same time may also flop and may
have to be taken out of the market.
This uncertainty gives the quadrant the name “Question Mark”.
The major problem associated with having Question marks is the amount of investment which it might need
and whether the investment will give returns in the end or whether it will be completely wasted.
Strategies for Question marks – As they are new entry products with high growth rate, the growth rate
needs to be capitalized in such a manner that question marks turn into high market share products.
New Customer acquisition strategies are the best strategies for converting Question marks to Stars or Cash
cows.
Furthermore, time to time market research also helps in determining consumer psychology for the product
as well as the possible future of the product and a hard decision might have to be taken if the product goes
into negative profitability.

4. Dogs
Products are classified as dogs when they have low market share and low growth rate.
Thus these products neither generate high amount of cash nor require higher investments.
However, they are considered as negative profitability products mainly because the money already invested
in the product can be used somewhere else.
Thus over here businesses have to take a decision whether they should divest these products or they can
revamp them and thereby make them saleable again which will subsequently increase the market share of the
product.
Strategies for Dogs – Depending on the amount of cash which is already invested in this quadrant, the
company can either divest the product altogether or it can revamp the product through rebranding / innovation
/ adding features etc.

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Sequences in BCG Matrix

Relative Market Share

High Low
Stars Question
Market growth rate
High
Marks

Cash Dogs
Low

Cows

Success Sequence
Disaster Sequence

Success Sequence in BCG Matrix – The Success sequence of BCG matrix happens when a question mark
becomes a Star and finally it becomes a cash cow.
The success sequence unlike the disaster sequence is entirely dependent on the right decision
making.
Disaster sequence in BCG Matrix – Disaster sequence of BCG matrix happens when a product which is a
cash cow, due to competitive pressure might be moved to a star.
It fails out from the competition and it is moved to a question mark and finally it may have to be divested
because of its low market share and low growth rate.
Thus the disaster sequence might happen because of wrong decision making.

Steps in BCG Matrix

Step 1. Choose the unit. BCG matrix can be used to analyze SBUs, separate brands, products or a firm as a
unit itself.
Which unit will be chosen will have an impact on the whole analysis.
Therefore, it is essential to define the unit for which you’ll do the analysis.

Step 2. Define the market. Defining the market is one of the most important things to do in this analysis.
This isbecause incorrectly defined market may lead to poor classification.
For example, if we would do the analysis for the Daimler’s Mercedes-Benz car brand in the passenger vehicle
market it would end up as a dog (it holds less than 20% relative market share), but it would be a cash cow in
the luxury car market.
It is important to clearly define the market to better understand firm’s portfolio position.

Step 3. Calculate relative market share. Relative market share can be calculated in terms of revenues
or market share.

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It is calculated by dividing your own brand’s market share (revenues) by the market share (or revenues) of
your largest competitor in that industry.

our firm s market share (or revenues)

Relative Market Share = argest competitor s market share (or revenues)

Step 4. Find out market growth rate. The industry growth rate can be found in industry reports, which are
usually available online for free.
It can also be calculated by looking at average revenue growth of the leading industry firms.

Step 5. Draw the circles on a matrix. After calculating all the measures, you should be able to plot your
brands on the matrix.
You should do this by drawing a circle for each brand.
The size of the circle should correspond to the proportion of business revenue generated by that brand.

Strategies based on the BCG Matrix.

1. Build – By increasing investment, the product is given an impetus such that the product increases its
market share.

2. Hold – The company cannot investor it has other investment commitments due to which it holds the
product in the same quadrant.

3. Harvest – Best observed in the Cash cow scenario, wherein the company reduces the amount of
investment and tries to take out maximum cash flow from the said product which increases the overall
profitability.

4. Divest – Best observed in case of Dog quadrant products which are generally divested to release the
amount of money already stuck in the business.

ANSOFF GROWTH MATRIX - FOUR WAYS TO GROW A BUSINESS

This matrix is also known as the Ansoff Product-Market Growth matrix or the Four Ways To Grow A
Business model.

What is the Ansoff Growth Matrix?

It first appeared in the Harvard Business Review in 1957 and was created by strategist Igor Ansoff to help
management teams to focus on the options for business growth.
In common with other popular strategy models, it is build around a two by two matrix.
 current products or new products
 current markets or new markets

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New Markets
The Ansoff Matrix

Market Development Diversification

Existing Markets

Market Penetration Product Development

Existing Products New Products

Option 1 Market Penetration

Market penetration strategy is the preferred route to growth for many businesses because its focus is on
selling more of the existing products to:
 Current customers
 Customers similar to current customer base but who are buying competitors products
 Customers similar to current customer base who have need of product but aren’t buying it yet.

The emphasis is on escalating market share by making some rigorous marketing promotions, or by creating
more customer value.

The market penetration option within Ansoff’s growth matrix uses existing resources and capabilities and
can be thought of as “business as usual but on steroids”.

The downsides of the market penetration strategy are:

 If a firm has already high market share, the opportunities for growth may be limited.
Some markets logically limit the share of the leading player because they feature the concentration of
market power.

 Aggressive market penetration strategies will add to competitive rivalries in the industry and may
provoke a price war which shrinks industry profitability.
To make significant increases in market share, the business must be willing to throw the competitors out
of the market.

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 Increasing exposure to one product-market segment can make the business more susceptible to future
changes in competition by keeping “all the eggs in one basket”.

Option 2 Product Development

In product development, businesses continue to focus on the needs of existing customer base and also the
widen customer market they represent but they seek to understand their underlying needs so they can see
opportunities for new products:
 To replace present product profile with new and better products.
 To provide products which complement the main product sold by the business.
 To provide “one stop shop” by adding new products to value chain to strengthen or leverage the
relationship and to provide added convenience.

You may attract new competitors into your market as a respond to you offering the products they
traditionally sell.
Competition has shifted up a level from coexistence selling your specific products to active competition
selling the same broader range.

Option 3 In the Ansoff Growth Strategy Matrix - Market Development

The third option suggested by Ansoff is to take the current products and find new markets for them.

There are different ways to do this

 Opening up previously excluded market segments through pricing policies e.g. discounts for students
and old age pensioners at theatres.

 New marketing and distribution channels.

Making a product available on the Internet with the necessary search engine optimisation means that
anyone looking can find it, rather than rely on your marketing message to reach them by convention
means.
The supermarkets sell financial services to people who wouldn’t contact a broker or agent.

 Entering new geographic markets by moving from local to regional to national and finally international.
This may require the business to acquire new capabilities including exporting, understanding different
cultures and language skills.

The strength of this option from the Ansoff Growth matrix is that it puts the pressure on the marketing and
sales functions of the business and leaves the operations/supply side to concentrate on what it does best.
Some product development may be inevitable as there are few global products that don’t make any
concessions to local market needs.
Success depends on being able to identify the best markets to develop which offer a genuine opportunity
and where you have an effective competitive advantage.
It also requires knowing which markets to avoid either because they are too difficult, too different or risk
competitive reaction.

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Again your action to expand your market may attract the attention of competitors who currently only trade
in zones where you don’t.

Option 4 In the Ansoff Growth Matrix - Diversification

This option is the most controversial since diversification involves taking new products to new customers.
There are three levels of diversification:

 Diversification into related markets – while the customers and products are both new, there is a logic
about the move that makes sense to the outside world.

 Diversification into unrelated markets using existing resources and capabilities – while the customers
and products are different, they all rely on the existing strengths of the business.
Metal fabricators and plastic extrusion manufacturers are able to move across markets and produce
custom designed products relatively easily because customers are buying access to the core
competences.
 Diversification into unrelated markets which require new resources and capabilities.
 Diversification is the most risky growth strategy in Ansoff’s growth matrix and especially if it
requires the development of new resources and capabilities.
It has even been referred to as the “suicide cell”.
The big advantage of diversification is that while each move is risky, if it is successful it reduces the
overall risk of the business to factors outside of the control of the business like the wider economic
environment, climate change etc.
It may also make the business much less seasonal – think bikinis and other swimwear for the
summer, umbrellas for the spring and autumn and heavy overcoats for the winter.

How to Use Ansoff Growth Matrix

There are two ways to use the Ansoff Growth Matrix
1. As a tool for brainstorming to help identify possible strategic options.

2. As a tool for assessing preferred strategic options to check for some kind of balance. there aren’t right or
wrong answers but you might be shocked to discover that all six growth strategies you intend to follow
fall into the diversification box.

ADL MATRIX
The Arthur D. Little provides with the ADL matrix that is a portfolio management method based on
thought of product life cycle.
The ADL portfolio management involves the dimensions of environmental assessment and business strength
assessment.
The environmental assessment approaches to industry maturity whereas business strength assessment leads
to competitive position.
In determining both assessments, the matrix helps out the firms in analyzing their business role in the market
place (Porter, 2008).

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ADL Matrix (Portfolio Management)

Industry Life Cycle Stage
Embryonic Growth Mature Aging
Dominant All out push for Hold Position. Hold Position. Hold Position
share hold Hold Share Grow with
Position Industry
Strong Attempt to Attempt to Hold Position. Hold position or
improve position. improve Grow with Harvest
Competitive Position

All out push for position. Push Industry.

share. for share
Favorable Selective or all Attempt to Custodial or Harvest, or phase
out push for share. improve maintenance. out withdrawal
Selectively position. Push Find niche and
attempt to for share attempt to
improve position protect it.
Tenable Selectively push Find niche and Find niche and Phased out
for position protect it. hang on, or withdrawal, or
phased out abandon
withdrawal.
Weak Up or out Turnaround or Turnaround Abandon
abandon. orphaned out
withdrawal.

Industry Maturity or Life Cycle stage

In ADL portfolio management, industry maturity is very close to the product life cycle or it could be
renamed as industry life cycle, though with the industry segments are also considered. Industry maturity is
classified in four following divisions;
 Embryonic: It involves the introduction stage by following rapid market growth, no or little
competition, high prices and investments and new technology.

 Growth: In this stage, market is strengthening as the sales increases, few competitors make an
appearance and company achieves excellence in bringing up a new product.

 Mature: At maturity stage the market is completely stable with well established base of customers and
market shares are also stable.
Customers are making repeated orders, but, with a lot of competitors, the company has to make efforts
in differentiating their product from competitors.

 Aging: The last stage of the market in which market volume shrinks as the demand declines, snatching
market shares from the competitors becomes difficult, then company requires innovating or modifying
the product or to make an exit.
The assessments of the industry life cycle are based on the facts like business market share, investment,
profitability and cash flow.

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Competitive Position
Competitive position is derived from different segments in which Strategic Business Unit operates.
It is more focused on the organization’s competitive position which involves the strong strength of the
product and the dispersed geographical factors means that it works in the area of product and place (Peter,
2008). Competitive position comprises of five categories that are:

Dominant: this is a rare phenomenon , as it is a near monopoly situation, appears in results of innovative
out of the box product/technology is introduced in the market by a very strong brand

Strong: market share is higher as the position of company is comparably powerful although the competitors
are working aggressively.

Favorable: Company has an strong edge in certain limited segments of its competitive strengths.
Strength of the product and geographical advantages are taken into consideration at this stage and need to be
constantly protected.

Tenable: - The company keeps strong position in small niche, specific geographic location or very focused
product differences.
The force of competitors strengthens and causes difficulties for the company.

Weak: The profitability is not satisfactory making position of the company unattractive, the market share is
declining though they have opportunities in order to enhance their potion in the market and becoming
favorable.

How to use ADL Matrix?

Following are the steps that are involved in using the ADL Matrix (Herman, 2006);
 Identify the industry maturity category
 Determining competitive position
 Plot the position of the matrix

GE McKinsey Matrix
GE McKinsey Matrix is a strategy tool for a multi business corporation used in brand marketing and product
management that assists a company to decide about the products to be added to its portfolio and opportunities
to be prioritized in the market for investment. It is a framework that evaluates business portfolio, provides
further strategic implications and helps to prioritize the investment needed for each business unit (BU).
Though it is conceptually similar to BCG analysis, but somewhat more complicated that BCG Matrix.
This is so because, in BCG analysis, a two-dimensional portfolio matrix is created, while, with the GE
model the dimensions are multi-factorial.
One dimension comprises industry attractiveness measures; the other comprises of internal business strength
measures.
The GE matrix helps a strategic business unit (SBU) to evaluate its overall strength.

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Understanding the tool
In the practical business world, the problem of resource scarcity has a bearing on the decisions made by any
business organisation.
Among such limited resources, as there are plenty of avenues to use such resources for many opportunities
available, the crucial question remains how to use their cash best.
Such a tussle takes place at every level in the company i.e. between teams, functional departments, divisions
or business units.
This decision of resource allocation becomes even more crucial for a diversified businesses which are supposed
to manage complex business portfolios involving as much as 50 to 100 products and services
simultaneously.
The products or business units are diverse in characteristics and future prospects. This makes it a tough
decision to choose products/services for allocating resources.
Keeping this in mind, the BCG matrix and its improved version GE-McKinsey matrix was developed.
In 1970s, General Electric was managing a huge and complex portfolio of unrelated products and was
unsatisfied about the returns from its investments in the products.
At the time, companies usually relied on projections of future cash flows, future market growth or some
other future projections to make investment decisions, which was an unreliable method to allocate the
resources.
Therefore, GE consulted the McKinsey & Company and designed the nine-box framework.
The nine-box matrix plots the Business Units on 9 cells that indicate whether the company should invest in a
product, harvest/divest it or do a further research on the product and invest in it if there’re still some
resources left.
Both these tools have served the purpose by comparing the business units and dividing them in suitable
groups as per their worth.

Invest/ Invest/ Hold/

Industry / Attractiveness

High Grow Grow Selective

Invest/ Hold/ Divest/

Medium Grow Selective Harvest

Hold/ Divest/ Divest/

Low Selective Harvest Harvest

High Medium Low

Business Unit Strength

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Industry Attractiveness
Industry attractiveness indicates how hard or easy it will be for a company to compete in the market and
earn profits.
The more profitable the industry is the more attractive it becomes.
When evaluating the industry attractiveness, analysts should look how an industry will change in the long
run rather than in the near future, because the investments needed for the product usually require long
lasting commitment.
Industry attractiveness consists of many factors that collectively determine the competition level in it.
There’s no definite list of which factors should be included to determine industry attractiveness, but the
following are the most common: [1]
 Long run growth rate
 Industry size
 Industry profitability (by using Porter’s Five Forces)
 Industry structure (by using Structure-Conduct-Performance framework)
 Product life cycle changes
 Changes in demand
 Trend of prices
 Macro environment factors (through use of PEST or PESTEL )
 Seasonality
 Availability of labor
 Market segmentation

Competitive strength of a Strategic business unit or a product

Along the X axis, the matrix measures how strong, in terms of competition, a particular business unit is
against its rivals. In other words, managers try to determine whether a business unit has a sustainable
competitive advantage (or at least temporary competitive advantage) or not. If the company has a
sustainable competitive advantage, the next question is: “For how long it will be sustained?”
The following factors determine the competitive strength of a business unit:
 Total market share
 Market share growth compared to rivals
 Brand strength
 Profitability of the company
 Customer loyalty
 VRIO resources or capabilities
 business unit strength in meeting industry’s critical success factors
 Strength of a value chain

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 Level of product differentiation
 Production flexibility

GLUECK & JAUCH GENERIC SRATEGIC ALTERNATIVE

Four grand strategic alternatives:
 Stability;
 Internal growth;
 External acquisitive growth;
 Retrenchment.

The stability strategy involves the maintenance of the current business definition any safeguarding the
existing interests and strengths.
It continues to puruse its well established and tested objectives and goals and optimizes the resources
committed to attain such goals.
 Implemented wherein few functional changes are made in the products/markets
 A business continues to serve existing customers in the same or similar market segment with same
portfolio of products

 Not a “do nothing” strategy, but a “do nothing new” strategy

 It has its sharp focus on incremental improvement of functional performance;
 It continues to pursue same set of objectives and goals; and
 The business adjusts the level of improvement he equivalent proportion every year.
 Involves keeping track of new developments to ensure that strategy continues to make sense

The strategy is an substitute to growth or retrenchment strategy as goals such as profit or growth are not
dumped, rather, returns can actually be increased, for instance by improving efficiency.

An internal growth (expansion) strategy

An internal growth strategy involves re-defining of business definition by substantially scaling the level of
operations through internal development and not taking help of other corporations or businesses.
Market penetration, market development and product development are emphasised to develop new products,
enter new markets and embracing new technology.
 Implemented by redefining the business by adding business scope substantially, which increases the
efforts of current business
 Promising and famous strategy, which may take company along relatively risky untraveled paths
 Includes diversification, acquisition and mergers

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External expansion
Glueck and Jauch (1984) note that there are a number of terms used for external expansion.
These include acquisitions, mergers (one business loses its identity), consolidations (both businesses lose
their identity, and a new business arises) and joint ventures.
The distinguishing feature of all external growth strategies, though, is that they involve another company or
business.

Retrenchment
Operationalise a retrenchment strategy along three dimensions: improvement in performance by scaling
down the level and/or scope of product/market objectives; cut back in costs; and reduction of the scale of
operations through the divestment of some units or divisions.
Glueck and Jauch (1984) also suggest that retrenchment also involves a reduction in functions.
Internal retrenchment is, labelled as an operating turnaround strategy where the emphasis is on reducing
costs, increasing revenues, reducing assets, and reorganising products and/or markets to achieve greater
efficiency.
External retrenchment constitutes a more serious form of strategic turnaround, including such measures as
divestiture and liquidation.
 Redefinition of business by divesting a major product line/market
 Not always bad proposition as it saves org’s vital interests, minimise certain adverse effects, regroup
resources before launching a rise on growth ladder
 For temporary setbacks, cut on its capital & revenue expenditure, advertising, executive perks, employee
welfare subsidies, community development projects

 In second stage, cut on inventory levels, manpower, dividend, interest on deposits

 In third stage, withdraw marginal markets, some brands, product sizes, etc.
 In fourth stage, go for sale of some manufacturing facilities, product divisions, retirement either from
production or marketing stage, may offer itself for take over

 At last option, org may seek for liquidation which means corporate death

Combination Strategies
The above discussed strategies are not mutually exclusive but can be used in a combination to suit the needs
of the organisation.

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PORTER'S GENERIC STRATEGIES

Competitive Advantage
Lower Cost Higher Cost
Overall Cost Differentiation
Broad Leadership
Competitive Scope

Cost Focus Differentiation

Narrow

Focus

Porter's Genetic Strategies

The Cost Leadership Strategy

This strategy also involves the firm winning market share by appealing to cost-conscious or price-sensitive
customers.
This is achieved by having the lowest prices in the target market segment, or at least the lowest price to
value ratio (price compared to what customers receive).
To succeed at offering the lowest price while still achieving profitability and a high return on investment, the
firm must be able to operate at a lower cost than its rivals.
There are three main ways to achieve this:
The first approach is achieving higher asset utilization.
In manufacturing, it will involve production of high volumes of output.
These approaches mean fixed costs are spread over a larger number of units of the product or service, resulting
in a lower unit cost, i.e. the firm hopes to take advantage of economies of scale and experience curve effects.
The second dimension is achieving low direct and indirect operating costs.
This is achieved by offering high volumes of standardized products, offering basic no-frills products and
limiting customization and personalization of service.
The third dimension is control over the value chain including all functional groups (finance,
supply/procurement, marketing, inventory, information technology etc.) to ensure low costs.
Wal-Mart is known for squeezing its suppliers to price its products reasonably low.
The greatest risk in pursuing a Cost Leadership strategy is that the competitors may follow the same cost
reduction strategies.

The Differentiation Strategy

A differentiation strategy is appropriate where the target customer segment is not price-sensitive, the market
is competitive or saturated, customers have very specific needs which are possibly under-served, and the
firm has unique resources and capabilities which enable it to satisfy these needs in ways that are difficult to
copy.
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Differentiation is deemed to be successful when a company is able to fetch a premium price for its products
or services, has increased revenue per unit, or is able to retain loyalty of its customers.
It can be achieved by excellent brand management which creates uniqueness in the image of the product/
service even when the actual product is the identical to competitors.
Adopting this strategy, Apple could brand its i-phones, computers and i-pads; Mercedes-Benz C-Class could
sell its cars as most expensive ones.

However, for ensuring success of its Differentiation strategy, a company must:

 Undertake high-quality research, development and innovation.
 Be able to deliver premium products/services.
 Rigorous branding and marketing about differentiated offerings.
 Need to stay agile with their new product development processes.

The Focus Strategy

The focus strategy is also known as ‘niche’ strategy.
This is so because, companies adopting focus strategies focus on niche markets and, by get hold of the
dynamics of such niche market and unique requirements of its customers.
Based on such understanding, they develop exclusively low-cost products particularly for such niche market.
Due to this, a strong brand loyalty is developed with its customers making it difficult for competitors to
enter.
Such a strategy is often used by small firms/companies.
Further, such companies may either use a ‘cost focus’ or a ‘differentiation focus’.
While cost focus makes the firm the lowest cost producer in such niche or segment, differentiation focus
creates competitive advantage through differentiation within the niche or segment.

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STRATEGIC ANALYSIS & PLANNING
1. _______refers to the process of conducting
research on a company and its operating [a] IV.II, I,III
environment to formulate a strategy. [b] IV,III.I,II
[a] Strategic management [c] II,III,I,IV
[b] Strategic analysis [d] IV,I,III,II
[c] Sensitive analysis
[d] Simulation analysis 6. _______is the process we use to gain
understanding and insight into our present
2. Strategic analysis involves: situation.
[a] Identifying and evaluating data relevant to [a] Situational analysis
the company's strategy. [b] Sensitive analysis
[b] Defining the internal and external [c] Simulation analysts
environments to be analyzed. [d] All of the above
[c] Using several analytic methods such as
Porter's five forces analysis, SWOT 7. Which of the following is NOT 'internal
analysis etc. environment considerations'?
[d] All of the above [a] Operational inefficiencies
[b] Changes in consumer taste
3. ADL matrix has been propounded by: [c] Employee morale
[a] Arthur D. Lowey [d] Constraints from financial issues
[b] Arthur D. Little
[c] Arthur D. Levin 8. Which of the following is NOT 'external
[d] Arthur D. Louise environment considerations'?
[a] Political trends
4. Purpose of a strategic analysis is to - [b] Economic shifts
[a] Analyze an organization's external and [c] Operational inefficiencies
internal environment [d] Changes in consumer taste
[b] Assess current strategies
[c] Generate and evaluate the most 9. Strategists must ask themselves question such
successful strategic alternatives. as:
[d] All of the above [a] Is our strategy failing or succeeding?
[b] Will we meet our stated goals?
5. Arrange the Strategic Analysis Process in [c] Does our strategy align with our vision,
proper sequence: mission, and values
i] Formulate plans. [d] All of the above
ii] Recommend and implement the most
viable strategy. 10. Potential strategic alternatives include -
iii] Determine the effectiveness of existing [a] Changes in capital structure
strategies. [b] Changes in supply chain management
iv] Perform an environmental analysis of [c] Changes in business process
current strategies. [d] All of the above
Select the correct answer from the options
given below.

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11. 'Build,' 'Hold,' 'Harvest,' and 'Divest' are the [c] Both 1 and 3
strategies pursued in: [d] 1 only
[a] Boston Consulting Group Growth Share
Matrix 17. In SWOT analysis the 'O' stands for -
[b] Value chain Analysis [a] Objections
[c] Managerial Grid Matrix [b] Openings
[d] Ansoff's Product Matrix Growth Matrix [c] Opportunities
[d] Obstacles
12. A situation analysis should be conducted -
[a] After developing a strategy. 18. SWOT analysis Originated by -
[b] At the beginning of any program or [a] Heinz Weirich
project [b] United States Navy
[c] Before company is incorporated [c] Albert S Humphrey
[d] At a later stage in quality management [d] James E. Kelley

13. Which of the following is NOT element of 19. An organization that has a low relative market
Situation Analysis? share position and competes in a slow growth
[a] Product Situation industry is referred to as a_______
[b] Competitive Situation [a] Dog
[c] Distribution Situation [b] Question Mark
[d] Profit Situation [c] Star
[d] Cash Cows
14. The low growth, low share businesses in BCG
matrix are: 20. Which of the following SWOT elements are
[a] Cows internal factors for a business?
[b] Dogs [a] Strengths and Weaknesses
[c] Cats [b] Opportunities and Threats
[d] Question Marks [c] Strengths and Opportunities
[d] Weaknesses and Threats
15. Identification of opportunities and avoiding or
mitigating losses is called - 21. _______generally relate to external factors.
[a] Risk management [a] Strengths and weaknesses
[b] Stress management [b] Opportunities and threats
[c] Change management [c] "Weaknesses and Threats
[d] Co-ordination [d] Strengths and Opportunities

16. Environment scanning applies to - 22. Which section of the SWOT Matrix involves
1. External scanning processes matching internal strengths with external
2. Motivational scanning processes opportunities?
3. Internal scanning processes [a] The WT cell
4. Lead scanning processes [b] The SW cell
Select the correct answer from the options [c] The SO cell
given below- [d] The ST cell
[a] None of the given
[b] Except 4 all other

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23. The process by which an organization deals
with a major event that threatens to harm the 28. The most probable time to pursue a harvest
organization, its stakeholders, or the general strategy is in a situation of
public is known as - [a] High growth
[a] Stress management [b] Decline in the market life cycle
[b] Crisis management [c] Strong competitive advantage
[c] TQM [d] Mergers and acquisitions
[d] None of the above
29. Which of the following is first step in market
24. Which of the following is element of Situation assessment?
Analysis? [a] Analysis of the situation
[a] Environmental Factors [b] Competitive rivalry
[b] Distribution Situation [c] Suppliers power
[c] Both (A) and (B) [d] Defining the problem
[d] Neither (A) nor (B)
30. Which of the following is FALSE regarding
25. Which of the following is not a limitation of why a SWOT Analysis is used?
SWOT (Strengths, Weaknesses, Opportunity, [a] To build on the strengths of a business
Threats) analysis? [b] To minimize the weaknesses of a business
[a] Organizational strengths may not lead to [c] To reduce opportunities available to a
competitive advantage business
[b] SWOT gives a one-shot view of a [d] To counteract threats to a business
moving target
[c] SWOT's focus on the external 31. Assertion (A):
environment is too broad and integrative SWOT analysis is not used for ranking of
[d] SWOT over emphasizes a single organizations. Reason (R):
dimension of strategy SWOT analysis is a tool for organizational and
environmental appraisal necessary for
26. In the PESTEL framework for environmental formulating effective strategies.
analysis what does the letter S stand for? Select the correct answer from options given
[a] Superior below,
[b] Surroundings [a] A is true but R is false
[c] Society [b] A is false but R is true
[d] Socio cultural [c] Both A and R are true
[d] Both A and R are false
27. Assessment of competitive rivalry does NOT
include an understanding of:........... 32. Geographical Diversification, Product
[a] The extent to which competitors are in diversification and Entry Mode are the
balance domains of:
[b] Market growth rates [a] Functional Strategy
[c] Fixed costs, exit barriers and operational [b] Business Strategy
efficiency [c] Corporate Strategy
[d] The management structure of an [d] All of the Above
organization

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33. Which of the following is a detailing process [c] James E. Keiley
in the mission, objectives, strategies, and [d] United States Navy
policies?
[a] Strategy formulation 39. 'Determinants Analysis' falls in the purview of
[b] Strategy implementation -
[c] Strategic strategy [a] External competitive strategy analysis
[d] Strategy achievement [b] Internal competitive strategy analysis
[c] Strategic risk
34. ______widely is used for the evaluation of the [d] Competitive landscape
organization's product portfolio in marketing 40. SWOT Analysis starts with______, the TOWS
and sales planning. Matrix starts with______
[a] SWOT analysis [a] external environment analysis; internal
[b] BCG Matrix analysis
[c] Ansoff's matrix [b] internal analysis; Strategy identification
[d] TOWS matrix [c] internal analysis; external environment
analysis
35. As per BCG Matrix, 'Stars' are - [d] Strategy identification; internal analysis
[a] Low-growth, high market share
businesses or products. 41. Project Evaluation & Review Technique
[b] Sometimes called problem children or (PERT developed by the_____ in the 1950s.
wildcats. [a] Gary Hamel
[c] Generates enough cash to maintain [b] United States Navy
themselves, but do not have much Future [c] Heinz Weirich
[d] Products or Strategic Business Units that [d] James E. Kelley
are growing rapidly.
42. The concept of core competence' has been
36. Competitive landscape requires the application advocated by-
of- [a] Gary Hamel and Peter Drucker
[a] Competitive advantage [b] C. K. Prahlad and Gary Hamel
[b] Competitive strategy [c] C. K. Prahlad and Michael Porter
[c] Competitive acumen [d] C. K. Prahlad and Peter Druck
[d] Competitive intelligence
43. Which of the following could be a weakness
37. Which of the following could be strength as as per SWOT Analysis?
per SWOT Analysis? [a] A developing market such as the Internet
[a] Weather [b] Competitors with access to better channels
[b] A new international market of distribution
[c] A price that is too high [c] Poor quality of goods and services
[d] The location of a business [d] Special marketing expertise

38. The acronym TOWS was developed by the 44. ______is the minimum possible time required
American international business to accomplish an activity or a path, assuming
professor_______ everything proceeds better than is normally
[a] Albert S Humphrey expected
[b] Heinz Weirich [a] Expected Time

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[b] Most Likely Time [c] Stars, Cash cows, Question marks, Doors
[c] Pessimistic Time [d] Stars, Computer clouds, Question marks.
[d] Optimistic Time Dogs

45. Corporate level strategy is concerned with the 50. Which of the following could be an
following - opportunity as per SWOT Analysis?
[a] How do we want to compete? [a] Having quality processes and procedures
[b] Where do we want to compete? [b] Moving into new market segments that
[c] How to support the strategy offer improved profits
implementation? [c] Damaged reputation
[d] All of the above [d] A new competitor in your home market

46. As per BCG Matrix, 'Cash Cows' - 51. 'Strategic group mapping' involves -
[a] are low-growth, high market share [a] Identifying the strongest rival companies
businesses or products. [b] Identifying weakest rival companies
[b] need heavy investment to maintain their [c] Identifying weakest and strongest rival
position and finance their rapid growth companies
potential. [d] None of the above
[c] represent best opportunities for expansion
[d] are low-growth, low-share businesses and 52. BCG in BCG matrix stands for
products. [a] Boston Chalmette Group
[b] British Consulting Group
47. The BCG growth-share matrix - [c] Boston Corporate Group
[a] is a project technique used to manage [d] Boston Consulting Group
uncertain activities.
[b] is an analytical tool that helps build over 53. What does Dog symbolize in BCG matrix?
your strengths and make the best use of [a] Introduction
available opportunities while also [b] Growth
minimizing the threats. [c] Maturity
[c] is the simplest way to portray a [d] Decline
corporation's portfolio of investments.
[d] is an algorithm for scheduling a set of 54. 'Attractiveness of firms while conducting
project activities. industry analysis should be seen in -
[a] Relative terms
48. 'Customer Analysis' and 'Market Analysis' are [b] Absolute terms
the part of - [c] Comparative terms
[a] Internal analysis [d] All of the above
[b] Strategy identification and selection
[c] External Analysis 55. ______is the maximum possible time required
[d] None of the above to accomplish an activity or a path, assuming
everything goes wrong.
49. The BCG Growth-Share Matrix consists of the [a] Optimistic Time
following four major elements? [b] Pessimistic Time
[a] Sales, Cash cows, Question marks, Dogs [c] Most Likely Time
[b] Stars, Cash cows, Question marks, Dogs [d] Expected Time

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61. PERT is technique -
56. The Critical Path Method (CPM) is a project [a] of planning and control of time.
modelling technique developed in the late [b] to control cost and time
1950s by - [c] used in profit analysis
[a] Morgan R. Walker & James E. Keiley. [d] of controlling losses
[b] C. K Prahlad and Gary Hamel
[c] Gary Hamel and Peter Drucker 62. In BCG Matrix,______ are low-growth, low-
[d] All of the above share businesses and products.
57. Which of the following is true of a [a] Cows
transnational Corporation? [b] Lion
[a] They have subsidiaries but do not have [c] Dogs
centralized management system [d] Hen
[b] They have no subsidiaries but have
centralized management system 63. "Competitor's Differentiation', Customer
[c] They do not have subsidiaries and do not Value' and 'Application of Competitiveness'
have centralized management system are the three important areas of:
[d] They have subsidiaries and have a [a] Value Chain Analysis
centralized management system [b] Business Process Re-engineering
[c] Competitor Analysis
58. Consider following two statements: [d] Core Competence Concept
i] A strength is an inherent capacity of an 64. What does "Question Mark (?)" symbolize in
organization. BCG matrix?
ii] A core competence is a unique strength of [a] Remain Diversified
an organization which may not be shared [b] Invest
by others. [c] Stable
Select false statement from the above [d] Liquidate
statements.
[a] (I) only 65. Which of the following could be a Threat as
[b] (II)only per SWOT Analysis?
[c] Both (I) and (II) [a] Changes in technology
[d] Neither (I) nor (II) [b] A market vacated by an ineffective
competitor
59. PERT is - [c] Location of your business
[a] Activity oriented [d] Lack of marketing expertise
[b] Event oriented
[c] Profit oriented 66. Arrange the steps in BCG Matrix in proper
[d] System oriented sequence:
1. Choose the Unit
60. Entering into a 'contract' by MNCs is an 2. Define the Market
example of: 3. Calculate Relative Market Share
[a] Partial Ownership Alliance 4. Calculate Market Growth Rate
[b] Joint Venture Alliance 5. Draw Circles on the Matrix
[c] Non-Equity Alliance Select the correct answer from options given
[d] Joint Ownership Alliance below.
[a] 1,3,2,4,5

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[b] 1,4,3,2,5 [b] dominant, growth, favourable, tenable and
[c] 1,2,3,4,5 decline
[d] 1,4,3,2.5 [c] dominant, strong, favourable, tenable and
weak
67. Brand extension strategies are often used to [d] embryonic, mature, strong, favourable and
delay the onset of the: aging
[a] Decline phase of the product life cycle
[b] Introduction phase of the product life 72. A leading producer of tooth paste, advises its
cycle customers to brush teeth twice a day to keep
[c] 'Cash Cow' phase of the Boston Matrix breath fresh.
[d] Maturity phase of the product life cycle In the context of Ansoff's Product-Market
growth phase of the product life cycle Growth Matrix, identify, the type of growth
68. Which of the following bases of competitive strategies followed for the given case.
advantage is/are more sustainable? [a] Market Development
[a] Benefit-based competitive advantage [b] Diversification
[b] Price-based competitive advantage [c] Market Penetration
[c] Cost-based competitive advantage [d] Product Development
[d] All of the above
73. In consulting engagement with General
69. The Boston Matrix essentially supports: Electric Company in the 1970's McKinsey &
[a] An unbalanced portfolio of product Company developed a______ cell portfolio
[b] A concentration on question marks matrix as a tool for screening- GE's large
[c] Product specialization portfolio of strategic business units (SBU).
[d] A balanced portfolio of products [a] Ten
[b] Nine
70. As per Ansoff Growth Matrix, market [c] Twelve
penetration refers to - [d] Six
[a] A growth strategy where the business
seeks to sell its existing products into new 74. The BCG Matrix is based on -
markets. [a] Industry attractiveness & Business
[b] A growth strategy where the business Strength
focuses on selling existing products into [b] Industry Growth rate & Business strength
existing markets. [c] Industry Attractiveness & Relative market
[c] A growth strategy where business aims to share
introduce new products into existing [d] Industry Growth rate & Relative market
markets. share
[d] A growth strategy where a business
markets new products in new markets. 75. GE Matrix was developed by -
[a] General Motor Company
71. The ADL matrix categorizes every segment of [b] General Product Company
company according to its position which can [c] General Electric Company
be - [d] General Tube Company
[a] embryonic, growth, strong, mature and
aging 76. Active scanning involves the_____ of
continuous resources and, from time to time,

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supplementing them with existing resources as [d] Divest
needed.
[a] Conscious selection 82. The ADL Matrix or Arthur D Little Strategic
[b] Sub-conscious selection Condition Matrix is a Portfolio Management
[c] Analysis of threats to the business technique that is based on the -
[d] None of the above [a] Market Growth Strategy (MGS)
[b] Corporate Portfolio Investment (CPI)
77. Which of the following executes strategy into [c] Product Life Cycle (PLC)
everyday executions tactics? [d] Strategic Business Units (SBU)
[a] Goal setting
[b] Technical planning 83. One of India's premier utility vehicles
[c] Operational planning manufacturing company ventures to foray into
[d] None of the above foreign markets.
In the context of Ansoff's Product-Market
78. Which of the following refers to a situation Growth Matrix, identify, the type of growth
where a product generates high profits which strategies followed for the given case.
can then be invested in developing new [a] Market Development
products? [b] Product Development
[a] Dogs [c] Market Penetration
[b] Cash cows [d] Market improvement
[c] Question marks 84. What is shown in the Arthur D. Little (ADL)
[d] Growth sage Matrix?
[a] It classifies strategy options according to
79. A business giant in hotel industry decides to market coverage and competitive
enter into dairy business. advantage dimensions.
In the context of Ansoff's Product-Market [b] This 5X4 model offers strategy
Growth Matrix identify, the type of growth prescriptions according to the competitive
strategies followed [or the given case. position of an organization and stage of
[a] Market Development maturity of its market.
[b] Product Development [c] It relates an organization's competitive
[c] Diversification position and industry attractiveness to
[d] Market Penetration determine appropriate strategies.
[d] It shows the relative market share and
80. As per ADL Matrix, company's competitive market growth rates of the organization's
position is determined by - portfolio of SBUs
[a] Cash Cows & Growth Stage
[b] Market Improvement & Strategic Actions 85. There are four categories of industry maturity
[c] Strategic Actions & Competitor's as per ADL Matrix:
Strategies [a] strong, favourable, mature and decline
[d] Strong & Stable Strategies [b] strong, favourable, tenable and weak
[c] embryonic, growth, mature and aging
81. What docs Dogs symbolize in BCG matrix? [d] embryonic, growth, tenable and weak
[a] Invest
[b] Harvest 86. If Industry Attractiveness is 'High' and
[c] Build Business Unit Strength is Medium', then

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which of the following strategy should be [b] Differentiation Strategy
followed as per GE Matrix - [c] Retrenchment Strategy
[a] Invest/grow [d] Cost Leadership Strategy
[b] Hold/selective
[c] Divest/harvest 91. Dell Computer has decided to rely exclusively
[d] Invest/selective on direct marketing. This is example of-
[a] Differentiation Strategy
[b] Focus Strategy
87. A renowned auto manufacturing company [c] Cost Leadership Strategy
launches un geared scooters in the market. [d] Diversification Strategy
In the context of Ansoff's Product-Market
Growth Matrix, identify, the type of growth 92. NDTV', a TV Channel has identified a
strategies followed for the given case. profitable audience niche in the electronic
[a] Market Development media. It has further exploited that niche
[b] Product Development through the addition of new channels like
[c] Diversification 'NDTV Profit and Image'. According to Porter,
[d] Market Penetration this is example of -
[a] Differentiation Strategy
88. Four generic strategies as discussed by Glueck [b] Focus Strategy
and Jauch are - [c] Cost Leadership Strategy
[a] Stability Strategies, Expansion Strategies, [d] Diversification Strategy
Retrenchment Strategy & Combination
Strategies 93. In BCG matrix, what is the label of the
[b] Growth Strategies, Stable Strategies, horizontal axis?
Retrenchment Strategy & Combination [a] Relative Market share
Strategies [b] Business Strength
[c] Stability Strategies, Expansion Strategies, [c] Industry Growth Rate
Decline Strategy & Divest Strategies [d] Market Growth Rate
[d] Corporate Strategies, Business Strategies,
Operational Strategies & Functional 94. If Industry Attractiveness is 'Low' and
Strategies Business Unit Strength is 'High', then which of
the following strategy should be followed as
89. If the organization chooses to transform itself per GE Matrix -
into a leaner structure and focuses on ways [a] Hold/selective
and means to reverse the process of decline, it [b] Divest/harvest
adopts a - [c] Invest/selective
[a] Turnaround Strategy [d] Invest/grow
[b] Liquidation Strategy
[c] Divestment Strategy 95. Car manufacturers 'Maruti' and 'Tata Motors'
[d] Differentiation Strategy work on reducing their costs to sell their cars
in popular segment at attractive prices. This is
90. _______is implemented by redefining the example of -
business by adding the scope of business [a] Growth Strategy
substantially increasing the efforts of the [b] Turnaround Strategy
current business. [c] Cost Leadership Strategy
[a] Expansion Strategy [d] Unique Strategy
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96. Another name for GE/McKinsey Matrix is -

[a] Business Making Matrix
[b] Business Planning Matrix
[c] Business Portfolio Matrix
[d] Business Grow Matrix

97. A business organization can redefine its

business by divesting a major product line or
market. This is supported by -
[a] Retrenchment Strategy
[b] Combination Strategy
[c] Growth Strategy
[d] Incline Strategy

98. Statement I:
Stability strategy is not a 'do-nothing' strategy.
Statement II:
Third step in BCG Matrix is to calculate
relative market share.
Select the correct answer from options given
below.
[a] Statement I is true and II is false
[b] Statement II is true and I is false
[c] Both Statements are true
[d] Both Statements are false

99. In BCG Matrix, what is the label of the

Vertical axis?
[a] Relative Market share
[b] Business Strength
[c] National Growth Rate
[d] Market Growth Rate

100. TOWS Matrix is an analytical tool that

helps build over your______ and make the
best use of available______ while also
minimizing the______
[a] Threats; Opportunities; Strengths
[b] Strengths; Opportunities; Threats
[c] Opportunities; Strength; Threats
[d] Strengths; Threats; Opportunities

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Answers
1 B 16 C 31 C 46. A 61. A 76. A 91 A
2 D 17 C 32 C 47. C 62. C 77. C 92 B
3 B 18 C 33 A 48. C 63. D 78. B 93 A
4 D 19 A 34 B 49. B 64. A 79. C 94 A
5 B 20 A 35 D 50. B 65. A 80. C 95 C
6 A 21 B 36 D 51. C 66. D 81. D 96 B
7 B 22 C 37. D 52. D 67. A 82. C 97 A
8 C 23 B 38. B 53. D 68. A 83. A 98 B
9 D 24 C 39. A 54. A 69. D 84. B 99 D
10 D 25 C 40. C 55. B 70. B 85. C 100 B
11 A 26 D 41. B 56. A 71. C 86. A
12 B 27 D 42. B 57. C 72. C 87. B
13 D 28 B 43. C 58. D 73. B 88. A
14 B 29 D 44. D 59. B 74. D 89. A
15 A 30 C 45. B 60. C 75. C 90. A

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STRATEGIC IMPLEMENTATION AND CONTROL

STRATEGIC IMPLEMENTATION CONCEPT
Strategy implementation is a process through which a strategy is put into action.
Strategies are only ‘means’ to an ‘end’ i.e. accomplishment of organization’s objectives which have to be
activated through implementation.
A good strategy without effective implementation is futile for success of an organization.

The implementation of policies and strategies is concerned with the design and management of systems to
achieve the best integration of people, structures, processes and resources in reaching organization objectives.
Strategy implementation may also consist of securing resources, organizing these resources and directing the
use of these resources within and outside the organization.
Generally two types of fits needs to be created.

i) Fits between the strategy and functional policies; and

ii) Fits between the strategy and the organizational structure, process and systems.

STRATEGY FORMULATION AND IMPLEMENTATION

Strategy formulation is largely an intellectual process whereas strategy implementation is more operational
in character.
Strategy formulation requires good conceptual, integrative and analytical skills but strategy implementation
requires special skills in motivating and managing others.
Strategy formulation occurs primarily at the corporate level of an organization while strategy
implementation permeates all hierarchy levels. In fact.
The relation between strategy formulation and implementation can be best understood by their inter-
dependence.
There are two types of linkages between strategy formulation and implementation i.e. forward linkage and
backward linkage.
Forward linkage is concerned with the influence of the formulation on implementation.
Strategy formulation has forward linkage with implementation in the sense that total implementation
activities are geared according to strategy chosen for implementation.
Backward linkage, on the other hand, deals with the influence in the opposite direction.
Strategy formulation has backward linkage with implementation as organization tends to adopt those strategies
which can be implemented with the help of existing structure of resources joined with some additional efforts.

Strategy Implementation - Supporting Factors

(i) Action Planning

Organizations to be successful in strategy implementation need to develop a detailed action plan i.e.,
chronological lists of action steps (tactics) which add the necessary detail to strategies and assign
responsibility to specific individual or group for accomplishing those actions.

(ii) Organizational Structure

Successful strategists should also give proper thought to their organizational structure and see whether
the current structure is appropriate for their intended strategy because different structures suit the
implementation of different strategies
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(iii)Human Resource Factors
Human Resource factors through framing strategic plan play a vital role in successful implementation of
strategies in an organization.

(iv) Annual Business Plan

Organizations successful at implementation are well aware of their need to fund their intended strategies.
They think about necessary financial commitment in the planning process.

(v) Monitoring and Control

Monitoring and controlling the plan covers a list of options to get back on course if company should
veer off.
Those options include changing the schedule, changing the action steps, changing the strategy or
changing the objective.
Monitoring the implementation of strategic plan is justified on the following grounds:
i) It helps to assure the organization efforts conform to the plan.
ii) It enables the organization to ensure that the results achieved correspond to our quantified objectives.
iii) Further monitoring allows for corrective action.
iv) Since monitoring is part of control process, it encourages improved performance.
v) Monitoring provides the essential link between the written plan and the day-to-day operation of the
business.

To set functional area goals, the following steps should be taken:

1. For each functional area, compare present functional goals with new enterprise, corporate and
business- level goals.

2. Decide what new goal areas (functional variables) are needed for each function.

3. Set new goal levels (values for each functional area’s variables).

Issues in Strategy Implementation

(i) Project implementation
Project is a highly specific program for which time schedule and specific cause are determined in
advance. Projects create all necessary conditions and facilities required for the strategy implementation,
the discipline of project management.

(ii) Procedural implementation

Strategy implementation also requires executing the strategy based on the rules, regulations and
procedures formulated by the Government.

(iii)Organisational Structure and Strategies

Organizational structure is a means for achieving organization mission and objectives.
Thus, it is an important source of strategic implementation.
Organizational structure refers to the method of allocating duties and responsibilities to individuals, and
the ways these individuals are grouped together into units, departments and divisions.
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(iv) Resource Allocation
Resource allocation involves the process of allocating organizational resources to various divisions,
departments and strategic business units.

(v) Functional Policies

Functional policies describes functional guidelines to operating managers so that coordination across
functional units can take place.

(vi) Communication Strategy

Communication strategy covering the mission, objectives, market scope, technology and all the issues
related to implementation,

(vii) Leadership
Appropriate leadership is necessary for developing effective structure and systems for the success of
strategy.

(viii) Challenges to Change

The strategy implementation process generally involves a change.
The change can be minor or major.
The process of change may cover in freezing, moving and refreezing.

(ix) Pre-implementation Evaluation Strategy

Before the implementation of the strategy, it is advisable to go for a final scrutiny so as to avoid failure
due to weaknesses in the analysis,

ACTIVATING STRATEGY
Activation is the process of stimulating an activity so that it can be performed successfully.

(i) Institutionalization of strategy

Strategists role in the implementation of strategy is its institutionalization.
A successful implementation of strategy requires that the manager should act as its promoter or defender.

[a] Strategy Communication: The role of the strategists is to make the fundamental, analytical and
entrepreneurial decisions and present these to the members of the organization to bring their support.
Therefore, in order to get the strategy accepted and consequently effectively implemented requires
proper communication.
[b] Strategy Acceptance: Strategy acceptance makes organizational members to develop a positive
attitude towards the strategy.
This facilitates them to make commitment to strategy by treating it as their own strategy than
imposed by others.

(ii) Formulation of Action Plans and Programs

Once the strategy is institutionalized, the organization may proceed to formulate action plans and
programs.
Action plans are the targets for the effective utilization of resources in an organization so as to achieve
the set objectives. It may be plan for procuring a new plant, developing a new product,
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(iii)Translating General Objectives into Specific Objectives
Some times objectives are too general and intangible to be transformed into action.
In order to make these objectives operational, managers determine specific objective

 It should be tangible, meaningful and easily measurable as organizational performance

 It should contribute to the achievement of the general objectives.

(iv) Resource Mobilization and Allocation

In order to implement a strategy, an organization should have resources i.e., financial or human and
these resources should be committed and allocated to various units to have maximum utilization.
Financial resources are the means by which an organization produces goods and services.
These resources are used to procure various physical resources such as land, building, machinery, raw
material,
Resource mobilization process involves procurement of resources which may be required to implement a
strategy.

i] Power play: In an organization each and every department tries to have larger share of the resources
at its disposal.
The department feels relatively stronger than others if it has more resources than other departments.
Further, each department wants to have more flexibility in operations in order to hide its inefficiency.

ii] Commitments of past: Past commitment on the part of the organization with regard to resource
which acts as a hurdle in the optimal resource.
The managers in-charge of departments where the resources are not used properly opposes the
transfer of resources as they feel that they are neglected.

iii] Resistance to changes: The organization may turn resistance to change even though it is a loser under
changing circumstances because of false ideology.
The organization put best managers to manage a product which are fast declining because of false
prestige and sentimental ways of approach.

Functional Structure
Functional structure is created by grouping the activities on the basis of functions required for implementing
strategy.
The basic functions are those
Includes production, marketing, finance, personnel,
Marketing department may be classified into advertising, sales, research etc.
Thus, the process of functional differentiation would continue through successive levels in the hierarchy.

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Chief Executive

Finance Production Personnel Marketing

Plant I Plant II Plant III Branch I Branch II Branch III

The structure is suitable to firms operating single or related business.

Limitations

(i) Lack of responsibility: No one in the organization is responsible for the project cost and profit.
There is always lack of coordination and control because functional department managers are expected
to discharge their responsibility within the budget.

(ii) Complex activity: Complex and different activity in the organization require faster decision-making due
to time factor which is of prime importance.
Functional structure provides slow decision making process because the problem requiring a decision has
to pass through various departments and all of them may have a divergent view on the matter.

(iii)Lack of responsiveness: Functional structure lacks responsiveness necessary to cope with new and
rapidly changing work requirements.

(iv) Line and staff conflicts: Functional structure suffers from usual line and staff conflicts, interdepartmental
conflicts

Divisional Structure

In divisional structure, the activities are grouped according to the types of products manufactured or
different market territories as the organizations began to grow by expanding variety of functions performed.
The organizational units so structured are treated as autonomous segments of the business and the managers
heading these segments or divisions are the functional authority in relation to all the matters pertaining to
divisions.

Chief Executive

Production I Production II Production III Production IV

Finance Manufacturing Personnel Marketing

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There are different bases on which various divisions in an organization can be created.
The two traditional bases are product and territory. Later,
Each unit has its own functional structure for various activities necessary for the product.
Advantages
(i) Strict financial control: Under this form of structure, there is strict finance control in the sense each
division is a self-contained block generating a sense of competitive performance making everyone to
contribute to profitability.

(ii) Management by exception: It enables to apply management by exception as each division has the full
freedom.
There is good scope for its growth and expansion.

(iii)Enhancement of morale: It also enhances employees’ morale because they enjoy full freedom to work
hard which leads to their empowerment and development.

(iv) Care for strategic task: It enables the senior managers’ to use their energy on strategic decision making
and not waste their valuable time on day to day matters or decisions.

(v) High efficiency level: It brings high level of efficiency since each functional manager and his team have
full liberty and they work together for each function/each division as inter-dependent department which
raises the efficiency in the division and for the entire organization.

Disadvantages
(i) Costly affair: It incurs extra costs since each division has its own set of functional departments and
attached staff.

(ii) Competition between divisions: Divisionalisation and compartmentalization leads each division to
compete for more resources leading to competition among the divisions due to which one department
suffers at the cost of another.

(iii)Coordination problem: It becomes proposition to manage as a result of more divisions and departments

(iv) Change of priorities: The service departments such as research and development in order to get higher
and quick returns on investments.

Matrix Organization Structure

It is the realization of two dimensional structure which emanates from two dimensions authority i.e. pure
project structure and functional structure.
Authority flows vertically within functional department while authority of project manager flows
horizontally crossing the vertical lines.

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Chief Executive

Project Marketing Personnel Production Finance

Management

Project I Project II Project III

This organizational structure is based on dual channels of authority and accountability and therefore, uses
two forms of horizontal differentiations i.e. on vertical axis, the grouping of activities on the basis of
functions and on horizontal axis on the basis of products and projects.
Further, under this structure, people have to report to two bosses, one being the functional head of the
department in which they are working and other being the leader or co-ordinator of the project on which
they are working.

Advantages
1. Direct relations: It enhances the direct relationship because matrix organization structure makes use of
dual authority and accountability.

2. Quality decision: The quality of decisions undergoes a change for better as there is interrelation of line
and functional officers.

3. Participative management: It encourages empowerment which results in high morale and motivation
adding to quality decisions and implementation.

Disadvantages
1. Conflicts and confusions: Under this form of organization structure the principle of unity of command is
violated. This leads to confusion and conflicts for the smooth working of managers.

2. Delayed decisions: Dual reporting system results in uncertainty with regard to accountability.

3. High degree of integration: The coordination is the biggest problem in this type of organization structure
because of duality in responsibility

Free From Organization

Free form organization is a rapidly changing, adaptive, temporary system organized around problems to be
solved by groups of relative strangers with diverse professional skills.
This form of organization reduces the emphasis on positions, departments, and other formal units and on the
organizational hierarchy.

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In this the traditional man boss relationship disappears.
This form of organization is suitable for those industries which have to work in highly dynamic
environments.
Such environments are characterized by high flexibility and ever changing character.
From above, it is clear, that there does not exist best form of organization structure.
Any organization structure is considered best which fits in organizations environment and internal
characteristics which are affected by strategy.

BEHAVIOURAL IMPLEMENTATION
Behavioural implementation is concerned with those aspects of strategy implementation which have
influence on the behaviour of the people in the organization.

Leadership

Leaders are the vital aspect of an organization which helps to cope the change by ensuring that plans and
policies formulation are implemented as planned.
Leadership is basically the ability to persuade others to achieve the defined objectives willingly and
enthusiastically.
A strategic leadership involves the process of transforming an organization with the help of its people so as
to put it in a unique position.
Thus, strategic leadership transforms the organization which involves changing all faces that is size,
management practices, culture and values etc.
Strategic leadership may be summarized as under:
(i) It deals with vision keeping the mission insight and with effectiveness and results.

(ii) It emphasises on transformational aspects which leads to emergence of leaders in the organization.

(iii)It inspires and motivates people to work together with a common vision and purpose.

(iv) Strategic leadership has external focus rather than internal focus which helps the organization to
relate it with its environment.

A leader should adopt the following initiative for implementing the leadership strategy:
[a] Developing new qualities to perform effectively

[b] Be a visionary, willing to take task and highly adaptable to change

[c] Exemplifying the values, culture and goals of the organization

[d] Paying attention to strategic thinking and intellectual activities

[e] Adopting a collective view of leadership in which the leaders’ role is highlighted at all levels of
the organization

[f] Empowering others and emphasising on statesmanship

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[g] Adopting a perspective to build subordinate skills and confidence to make them change agents

[h] Delegating authority and emphasizing on innovation.

Merely understanding the role of leadership in strategy implementation is not enough.

The leader should match his styles according to the requirements of the strategy.
Leadership styles are the pattern of behavior which a leader adopts in influencing the behavior of his
subordinates in the organizational context.
There are various dimensions for describing leadership styles such as use of power in influencing the
behavior, employee task orientation and emphasis on reward or punishment in influencing the behavior.
Each of these dimensions have varying degrees of orientation.

Organizational Culture

Organizational culture affects strategy implementation as it provides a framework within which the behavior
of the members takes place.
It is defined as a set of assumptions, beliefs, values and norms which are shared by people and groups in the
organization and control the way they interact with each other and with stakeholder outside the organization.

Values and Ethics

Strategy implementation is, thus, mostly affected by instrumental values of people in the organization.
From strategic management point of view, people in the organization are divided into–Board of Directors,
Chief Executives, managers and corporate planning staff. Of these groups, Chief Executive and managers
under him are mostly responsible for strategy implementation.
However, values are held by individuals which are part of their personality.
Therefore, it is quite likely that values of different individuals do not match each other.

FUNCTIONAL IMPLEMENTATION
The implementation of strategy also requires development of functional policies which provide the direction
to middle management on how to make the optimal use of allocated resources.
They guide the middle level executives in framing operational plans and tactics to make strategy
implementable.
Policies are basically general guidelines to help executives to make certain choices.
They are developed in order to ensure that strategic decisions are implemented.

STRATEGIC CONTROL
Strategic control is concerned with that aspect of strategic management through which an organization ensures
whether it is achieving its objectives contemplated in the strategic action.
Strategic control involves the monitoring and evaluation of plans, activities, and results with a view towards
future action, providing a warning signal through diagnosis of data, and triggering appropriate intervention,
be they tactical adjustments or strategic re-orientation.
Strategic management is basically divided into two distinct part i.e. strategic evaluation and strategic
control.

Role of Strategic Control

(i) Measurement of Organizational Progress: Strategic control determines organizational progress

towards achievement of its objectives.
When a strategy is chosen, it specifies the likely outcomes which are significant for achieving the
organizational objectives.
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(ii) Feedback for Future Actions: Strategic control activities are undertaken in the light of criteria set by a
strategic plan.
But at the same time control provides inputs either for adjusting the same strategic plan or taking future
strategic plan.

(iii)Linking Performance and Rewards: Many organizations fail in linking performance and rewards.
Linking performance and rewards is a big strategic issue.
If taken objectively, control provides inputs for relating performance and rewards.
Linking performance rewards is very important for motivating people in the organization so that the
human talent can be reaped.

Control Process

(i) Setting Performance Standards: All functions in the organization begin with plans which specify the
objectives and goals to be achieved.
Based on this, standards are established which are criteria against which actual results are measured.
For setting standards for control purpose it is necessary to identify clearly and precisely the results which
are to be attained.

(ii) Measuring Actual Performance: The next stage in control process is the measurement of actual
performance against the standards already set.
This involves measuring the performance in respect of a work in terms of control standards.
The measurement of performance against its standards would be on a continuous basis so that deviations
may be ascertained in advance of their actual performance and avoided by appropriate actions.

(iii)Comparison of Actual Performance against Standards: This stage involves measuring actual key
variable performance, comparing results against standards, and informing the appropriate people so that
deviations can be detected and corrections made or reinforcement given.

(iv) Analysing Variance: Analysis of variance involves finding out the extent of variations and identifying
the causes of such variations.
When adequate standards are developed and actual performance is measured correctly the variations, if
any, can be clearly identified.
In case the standards are achieved no further managerial action is necessary and control process is
complete.
However, in many cases the actual performance achieved may vary from the standards fixed and
variations may differ from case to case.
When the variation between standard and actual performance is exceeded the prescribed level, an
evaluation is made to find out the causes of such variations.

(v) Re-enforcement of Corrective Action: This step in the control process requires that action
should be taken to maintain the decided degree of control into system or operation.
The following actions are taken to maintain the control system:

[a] Improvement in the performance by taking suitable measures if the result is not upto the
desired level.
[b] Resetting the standard of performance, if the standards are too high and unrealistic.
[c] Change the strategies, objectives and plans, if they are not suitable.

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STRATEGIC CONTROL TECHNIQUES
Strategy formulation is based on certain assumptions. In fact, there is a time gap between strategy
formulation and its implementation. Sometimes the strategy formulated may not work effectively as devised
by the strategists. In order to overcome this situation the following strategic control techniques are followed:
1. Premise Control: Premise control is designed to check systematically whether the assumptions set during
strategy formulation and implementation process are still valid. Premises include assumptions or forecast of
the future and known conditions that effect the operations of a strategy. Premises are usually concerned with
environmental and industry factors. Environmental factors are-economic, political - legal, technological,
socio-culture and global, which affect the operation of business organization. Any major change in these
factors between the time of strategy formulation and its implementation necessitates a change in strategy.
An industry factor affects the operation of business directly while formulating a strategy. So every
organization makes assumptions about industry structure and the nature of competition it faces.
For effective premise control an organization may take into account the following measures such as:
(i) Identify the key premises which are vital to strategy implementation.
(ii) People in the organization who are likely to have access to the relevant information about the premises
should be entrusted the responsibility for monitoring premises.
(iii) Identify the trigger points at which a change in strategy is required.
2. Strategic Momentum Control: These techniques are suitable for organizations working in a relatively
stable environment. The major assumptions made at the time of strategic formulation remain valid for quite
long time. There may be change in the environmental factors but such change is gradual and on predicted
lines. There are three approaches for strategic momentum control as under:
(a) Responsibility Control Centers: Responsibility control centers are created on the basis of control criteria
used and termed as revenue centers, expense centers, profit centers and investment centers.
(b) Underlying Success Factors: The organization can achieve its objectives by focusing continuously on the
success factors.
(c) Generic Strategies: Generic strategic approach to strategic control is based on the assumption that an
organization's strategy should be comparable with others in the same industry. Based on this, the
organization can adjust its strategy.
3. Strategic Leap Control: Strategic leap control enables the organizations operating in a relatively unstable
and turbulent environment in defining new strategic requirements and to cope with environmental realities.
The following techniques are generally used for exercising strategic leap control.
(a) Strategic Issue Management: It involves identifying strategy issues and assessing their impact on the
organization. By managing strategic issues in time, the organization can avoid the adverse impact on
environmental surprises.
(b) Strategic Filed Analysis: It involves examining the nature and extent of synergies that can be developed
in changing environment.
(c) Systems Modeling: It refers to simulated technique of decision making in which various organizational
features and environmental scenarios are analyzed on simulated basis.

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4. Implementation Control: This is designed to assess whether the overall strategy should be changed in the
light of unfolding events and the results associated with incremental steps and actions to implement the
overall strategy. In designing implementation control, the following two aspects are taken in to
consideration:
(a) Monitoring Strategic Thrusts: For the implementation of strategy, actions are divided into different
identifiable new thrusts. These thrusts provide information which can be used as basis for subsequent
actions.
(b) Milestone Review: It is an identifiable segment of a strategy which may be in the form of crucial events,
major resource allocation over a passage of certain time. Each milestone requires critical assessment in
terms of time and cost.
5. Strategic Surveillance: This is a non-focused control and is designed to monitor a broad range of events
inside and outside the organization which are likely to threaten the course of strategy. The idea behind the
strategy surveillance is that some form of general monitoring of multiple information sources should be
encouraged with the objective to reveal unanticipated situations.
6. Special Alert Control: This measure is undertaken to asses the impact of any major environmental events
such as technological invention, regional disturbance between countries affecting the business, strategic
actions taken by a country or countries together in controlling some critical issues. For example, a sudden
increase in critical resources may invite an immediate reassessment of the organization strategy.

Balance Scorecard
The balance scorecard is used as a strategic planning and a management technique. This is widely used in
many organizations, regardless of their scale, to align the organization's performance to its vision and
objectives.
The scorecard is also used as a tool, which improves the communication and feedback process between the
employees and management and to monitor performance of the organizational objectives. As the name
depicts, the balanced scorecard concept was developed not only to evaluate the inancial performance of a
business organization, but also to address customer concerns, business process optimization, and
enhancement of learning tools and mechanisms.

The Basics of Balanced Scorecard

Following is the simplest illustration of the concept of balanced scorecard. The four boxes represent the
main areas of consideration under balanced scorecard. All four main areas of consideration are bound by the
business organization's vision and strategy.

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Financial
Perspective

Vision & Business

Customer
Process
Perspective Strategy Perspective

Learning
and Growth
Perspective

The balanced scorecard is divided into four main areas and a successful organization is one that finds the
right balance between these areas.
Each area (perspective) represents a different aspect of the business organization in order to operate at
optimal capacity.
• Financial Perspective - This consists of costs or measurement involved, in terms of rate of return on capital
(ROI) employed and operating income of the organization.
• Customer Perspective - Measures the level of customer satisfaction, customer retention and market share
held by the organization.
• Business Process Perspective - This consists of measures such as cost and quality related to the business
processes.
• Learning and Growth Perspective - Consists of measures such as employee satisfaction, employee
retention and knowledge management.
The four perspectives are interrelated. Therefore, they do not function independently. In real-world
situations, organizations need one or more perspectives combined together to achieve its business
objectives.
For example, Customer Perspective is needed to determine the Financial Perspective, which in turn can be
used to improve the Learning and Growth Perspective.

Features of Balanced Scorecard

From the above diagram, you will see that there are four perspectives on a balanced scorecard. Each of these
four perspectives should be considered with respect to the following factors.
When it comes to defining and assessing the four perspectives, following factors are used:
• Objectives - This reflects the organization's objectives such as profitability or market share.
• Measures - Based on the objectives, measures will be put in place to gauge the progress of achieving
objectives.
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• Targets - This could be department based or overall as a company. There will be specific targets that have
been set to achieve the measures.
• Initiatives - These could be classified as actions that are taken to meet the objectives.

A Tool of Strategic Management

The objective of the balanced scorecard was to create a system, which could measure the performance of an
organization and to improve any back lags that occur.
The popularity of the balanced scorecard increased over time due to its logical process and methods. Hence,
it became a management strategy, which could be used across various functions within an organization.
The balanced scorecard helped the management to understand its objectives and roles in the bigger picture.
It also helps management team to measure the performance in terms of quantity. The balanced scorecard
also plays a vital role when it comes to communication of strategic objectives.
One of the main reasons for many organizations to be unsuccessful is that they fail to understand and adhere
to the objectives that have been set for the organization.
The balanced scorecard provides a solution for this by breaking down objectives and making it easier for
management and employees to understand.
Planning, setting targets and aligning strategy are two of the key areas where the balanced scorecard can
contribute. Targets are set out for each of the four perspectives in terms of long-term objectives. However,
these targets are mostly achievable even in the short run. Measures are taken in align with achieving the
targets.
Strategic feedback and learning is the next area, where the balanced scorecard plays a role. In strategic
feedback and learning, the management gets up-to-date reviews regarding the success of the plan and the
performance of the strategy.
The Need for a Balanced Scorecard
Following are some of the points that describe the need for implementing a balanced scorecard:
• Increases the focus on the business strategy and its outcomes.
• Leads to improvised organizational performance through measurements.
• Align the workforce to meet the organization's strategy on a day-to-day basis.
• Targeting the key determinants or drivers of future performance.
• Improves the level of communication in relation to the organization's strategy and vision.
• Helps to prioritize projects according to the timeframe and other priority factors.
As the name denotes, balanced scorecard creates a right balance between the components of organization's
objectives and vision. It's a mechanism that helps the management to track down the performance of the
organization and can be used as a management strategy. It provides an extensive overview of a company's
objectives rather than limiting itself only to financial values. This creates a strong brand name amongst its
existing and potential customers and a reputation amongst the organization's workforce.

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STRATEGIC CHANGE MANAGEMENT
Organisations are always involved in a variety of change, and this is not just confined to internal projects.
For example, it could also encompass interaction with suppliers and customers. The change being
undertaken by organizations now is inherently complex and often impacts diverse stakeholder groups both
internally and externally. As the change portfolio grows the level of complexity grows with it. With many
organizations now find it difficult to understand and track the plethora of change initiatives underway. An
added complexity is a reduction in manpower and the availability of skilled resources.
Strategic change management is the process of delivering the strategy of an organisation in a controlled,
efficient and effective manner. It is not about the delivery of a single project or monitoring business as usual
activities. It is basically the process of governing a portfolio of programmes, projects and initiatives within
the context of a wider strategy for the organisation. The purpose of the whole exercise is to deliver value to
the organization.
The term change refers to an alteration in a system whether physical, biological or social. Thus organization
change is the alternation of work environment in the organization. It implies a new equilibrium between
different components of the organization i.e., technology, structural arrangement, job design, and people. An
organization change may have following features:
(i) Any change may effect the whole organization;
(ii) When change occurs in any part of the organization, it disturbs the old equilibrium necessitating
development of a new equilibrium;
(iii) Organization change is a continuous process.
A strategic change is the movement of the company away from its present state towards some desired future
state to increase its competitive advantage. There are three kinds of strategic changes that most of the
companies pursue:
(i) Re-engineering
(ii) Restructuring; and
Innovation.
Business process re-engineering is the redesign of the business processes and the associated systems and
organizational structures to achieve a dramatic improvement in business performance. The business reasons
for making such changes could include poor financial performance, external competition, and erosion of
market share of emerging market opportunities. Business process re-engineering is the examination and
change of the business components such as: strategy, processes, technology, organization culture etc.
Strategic managers may need to develop a new strategy and structure to revise the level of their performance
in the light of sudden changes taking place in the environment. They focus on business process, which is an
activity that is vital to delivering goods and services to the customers.
Restructuring is another kind of change that strategic management use to implement strategic change to
improve the performance. It may be: (i) reducing the level of differentiation and integration by reducing
divisions, departments or hierarchy levels; (ii) by reducing the number of employees to bring the operating
cost. Restructuring also involves changes in relationships between divisions or functions. Restructuring and
downsizing becomes necessary due to:

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- Unforeseen changes in business environment;
- New technological development;
- Reduction in demand;
- Excess production capacity;
- High bureaucratic and operating costs;
- Improving the competitive advantage;

MCKINSEYS 7-S FRAMEWORK

McKinsey developed the 7-S framework management model which organize seven factors to organize a
company in an holistic and effective way with the objective to diagnose the causes of organization problem
and formulate program for improvement due to the implementation of the strategy which are associated with
change in the organization.
The organizational change is not simply a matter of structure although the structure is a significant variable
in the management change. Effective organizational change may be understood to be a complex relationship
between the 7-S i.e. strategy, structure, systems, style, skills, staff and shared values (super ordinate goals).
The relationship is diagrammatically presented as follows:

The above framework shows that there is a multiplicity of factors which influence an organization's ability
to change and understand as to how the 7-S model mechanism works. It is imperative to know what each 'S'
means and what is its implication. The 3S's across the top of the model are described as Hard S's and 4S's
across the bottom of the model are less tangible, more cultural in nature and some time neglected in major
change efforts and mergers and were termed as soft Ss by McKinsey.
(i) Strategy
Strategy means to achieve objectives. It provides the direction and the scope of the organization over the
long-term. Strategy refers to actions the organization plans or undertakes in response to or in anticipation of
external environment. It includes purposes, missions, objectives, goals and major action plans and policies.

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A strategy targets at gaining competitive advantage over rivals.
(ii) Structure
It is a basic framework to designate responsibilities and functions. Organization structures prefers relatively
more durable organizational arrangements and relationship. It prescribes the formal relationship among
various positions and activities. Organizational structure performs the following functions:
(a) Dividing the whole organization into activities, departments, setting division of labour and delegation of
authority.
(b) Facilitating coordination and control of various activities in the framework of organizational mission,
purposes and goals.
(c) Reduction of uncertainty through forecasting research and planning in the organization.
(d) Prediction of future and designing the future course of action.
(iii) System
It is, management tool for planning, decision-making, communication control and the procedures and
processes regularly followed by an organization. Systems in the 7-S framework signifies all the rules and
regulations, procedures both formal and informal that complement the organizational structure. It includes
production, planning and control system, budgeting and budgetary control system, financial and cost
account system, training and development system, performance evaluation system and so on. Change in a
strategy is implemented through changes in the system.
(iv) Style
Style stands for the patterns of behaviour and managerial style of top management over a period of time. It
is visible through relationship among the three levels of management or managers, organizational culture
which is a reflection of value system. The style has to change with the change in strategy, system and
structure.
(v) Staff
It is the human resources of the organization i.e., the kind of specialties or professions represented in an
organization such as engineers, specialist in different areas: finance, personnel, legal etc. Staffing is the
process of recruiting and selecting persons for the organization, training and developing them, placing them
in their post so as to reap the potential from each of them. According to 7-S framework the term 'staff' refers
to the way organizations introduce young recruits into the main streams of their activities and the manner in
which they manage their careers as the new entrants develop into future managers.
(vi) Skills
It means organization and individual capabilities. Skill is an ability or proficiency in performing a particular
task. It includes those characteristics which most people use to describe a company. Skills are developed
over a period of time and as a result of interaction of a number of factors, performing certain tasks
successfully over a period of time, kind of people in the organization, top management style, the
organizational structure, the external influences etc. Skills are the dominant capabilities and competencies
possessed by the organization through its people.
(vii) Shared Values (Super Ordinate Goals)

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Super ordinate goals stands for company's mission, vision, values, philosophy in the backdrop of which
organizational goals and objectives are set and strategies are formulated. It's a set of values and aspirations
that goes beyond a conventional formal statement of corporate objectives. These are essential as they inspire
the members of the organization and provide a definite direction to its operations.
Some of the important benefits of McKinsey's 7-S Framework Model are as follows:
(i) It is a diagnostic tool for understanding the organization which are non-effective.
(ii) It helps to guide organization change.
(iii) It combines rational and hard elements with emotional and soft elements;
(iv) Managers must act on all Ss in parallel and all S's are interrelated.

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STRATEGIC IMPLEMENTATION & CONTROL
[a] Structure

1. _______refers to the process of conducting [b] Shared values

research on a company and its operating [c] Staff
environment to formulate a strategy. [d] Shared plan
[a] SWOT analysis
[b] Strategic implementation 7. _______means crafting a combination of
[c] Strategic analysis strategies and picking out the best one to
[d] Strategic turnaround achieve the organizational goals and
objectives and thereby reaching the vision of
2. ________is a process through which a strategy the organization.
is put into action. [a] Strategy implementation
[a] Strategic analysis [b] Strategic analysis
[b] Strategy implementation [c] Strategy formulation
[c] SWOT analysis [d] Strategic management
[d] Strategic turnaround
8. The way the organization is structured and
3. Strategic implementation is - who reports to whom
[a] Concerned with translating a strategic [a] Strategy
decision into action. [b] Structure
[b] Crafting a combination of strategies and [c] Staff
picking out the best one. [d] System
[c] Primarily an intellectual process.
[d] Considered easier and less time 9. Strategy implementation focuses on -
consuming. [a] Efficiency
[b] Co-ordination
4. The critical 7S model was developed and [c] Crafting of strategies
created by reputed consulting firm: [d] Supporting factors
[a] McKinsey
[b] Bain & Co 10. The plan devised to maintain and build
[c] A. T. Kearney competitive advantage over the competition -
[d] Accenture [a] Strategy
[b] Style
5. _______focuses on whether the strategy is [c] Skills
being implemented as planned and the results [d] Systems
produced are those intended.
[a] Strategic analysis 11. Which of the following is NOT included in
[b] Strategic control McKinsey 7S framework?
[c] Strategy formulation [a] Strategy
[d] Strategy implementation [b] Structure
[c] System
[d] Safety

6. Which of the following is NOT one 'S' as per 12. Strategy formulation is primarily -
McKinsey 7-S framework? [a] An operational process

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[b] An intellectual process
[c] Profit making activity
[d] Activity undertaken to fulfil needs 18. Which of the following is correct statement?
[a] Primarily, strategy formulation is an
13. McKinsey's 7S framework helps analyze operational process and strategy
organizations and improve their effectiveness. implementation is an intellectual process.
The seven elements to be coordinated are: [b] An organization's culture is always an
shared values, structure, systems, style and obstacle to successful strategy
what? implementation.
[a] strategy, service levels and specialization [c] Resistance to change is an impediment in
[b] strategy, staff and skills building of strategic supportive corporate
[c] service levels, stock and staff culture.
[d] specialization, skills and standards [d] A corporate culture is always identical in
all the organizations.
14. What does SBU stand for?
[a] Significant business undertaking 19. An important activity in is taking corrective
[b] Special bureaucratic use action.
[c] Standard business usage [a] Strategy evaluation
[d] Strategic business unit [b] Strategy implementation
[c] Strategy formulation
15. Strategy formulation requires - [d] Strategy leadership
[a] Conceptual intuitive and analytical skills.
[b] Motivation and leadership skills. 20. Which of the following is Soft 'S' as per
[c] An operational process. McKinsey Model?
[d] None of the above [a] Strategy
[b] Shared Values
16. Maria is the Marketing Manager for Whole [c] Structure
foods Ltd. She is working on the firm's [d] Systems
marketing plan. Her forecasts show that, if
they carry on as they have been doing, they 21. _______are at the core of McKinsey 7s model.
are likely to miss their sales revenue targets by [a] Skills
`5,00,000. She needs some new ideas. What [b] Staff
kind of analysis has Maria undertaken? [c] Shared Values
[a] PRESTCOM analysis [d] System
[b] SWOT analysis
[c] Strategic gap analysis 22. The emphasis on product design is very high,
[d] Ratio analysis the intensity of competition is low, and the
market growth rate is low in the_____ stage of
17. Which of the following is Hard 'S' as per the industry life cycle.
McKinsey Model? [a] Maturity
[a] Style [b] Introduction
[b] Strategy [c] Growth
[c] Staff [d] Decline
[d] Skills

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23. Which of the following is benefit of [b] Commitments of past
McKinsey's 7-S Framework Model? [c] Resistance to changes
[a] It is a diagnostic tool for understanding the [d] All of the above
organizations which are non-effective. 28. When to organizations combine to increase
[b] It also enhances employees' morale their strength and financial gains along with
because they enjoy full freedom to work breaking the trade barriers is called -
hard which leads to their empowerment [a] Hostile takeover
and development. [b] Liquidation
[c] It becomes proposition to manage as a [c] Merger
result of more divisions and departments. [d] Acquisition
[d] It is useful in those organizations where
activities are geographically spread such 29. ______, e.g., production, selling, finance, etc.,
as transport, insurance, banking, etc. is the most widely used basis for grouping
activities into administrative units and found
24. Change in culture, attitude, and mindset calls in almost every business enterprise at some
for: level or the other.
[a] Engagement, involvement and motivation [a] Departmentation by product & equipment
of employees [b] Departmentation by products or service
[b] Rigorous performance appraisal [c] Departmentation by process & equipment
[c] Performance benchmarking [d] Departmentation by functions
[d] Organization design change
30. The functional structure would be found in
25. Vertical integration may be beneficial when: which type of business?
[a] Lower transaction costs and improved [a] A business producing a single product or
coordination are vital and achievable limited range of products
through vertical integration. [b] A business producing a diverse range of
[b] Flexibility is reduced, providing a more products
stationary position in the competitive [c] A business owning several subsidiary
environment. companies
[c] Various segregated specializations will be [d] Both (A) and (B)
combined.
[d] The minimum efficient scales of two 31. Financial objectives involve all of the
corporations are different following except:
[a] Growth in revenues
26. ______is the process of stimulating an activity [b] Larger market share
so that it can be performed successfully. [c] Higher dividends
[a] Communication [d] Greater return on investment
[b] Activation
[c] Acceptance 32. In a matrix organization, the functional
[d] Offer departments like manufacturing, marketing,
accounting and personnel constitute the
27. Which types of problem is encountered in the _____. while the project organization or
process of resource allocation while activating product divisions form the______.
the strategy? [a] Vertical chains of command, Horizontal
[a] Power Play chains of command

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[b] Horizontal chains of command, Vertical [b] Culture, as a weakness can obstruct the
chains of command smooth implementation of strategy by
[c] Vertical chains of command, Vertical creating resistance to change.
chains of command [c] Both (A) and (B)
[d] Horizontal chains of command, Horizontal [d] Neither (A) nor (B)
chains of command 38. ______involves general monitoring of various
sources of information to uncover
33. ______is defined as a set of assumptions, unanticipated information having a bearing on
beliefs, values and norms which are shared by the organizational strategy.
people and groups in the organization and [a] Strategic Surveillance
control the way they interact with each other [b] Appraisal System
and with stakeholder outside the organization. [c] Strategy formulation
[a] Strategy execution [d] Strategy implementation
[b] Organizational Culture
[c] Resistance to change 39. ______ may be defined as a variation in the
[d] Strategic control established way of life to which people are
accustomed to in the organization.
34. Strategic leadership facilitates strategy [a] Change
execution through - [b] Resistance
[a] Exploitation of core competencies [c] Decision
[b] Elimination of non-core competencies [d] Planning
[c] Non cohesive functioning
[d] Business integration 40. Overt, implicit, immediate or deferred such
words are used in relation to -
35. Specialization is a feature of which [a] Total quality management (TQM)
organizational structure? [b] Motivation
[a] Matrix [c] Resistance to change
[b] Divisional [d] Morale
[c] Multi-divisional
[d] Functional 41. Transformational change in an organization
refers to -
36. What is a strategic alliance? [a] Complete change in almost all aspects of
[a] Any form of partnership between one firm the organization
and another [b] Incremental change in which necessary
[b] Formal agreement committing two or more improvements are made in the existing
firms to exchange resources to produce organization
products or services [c] No change in any aspect of the
[c] Formal agreement to share profits from a organization
shared investment [d] None of the above
[d] Formal agreement to share knowledge
42. What do we mean by the term 'strategic
37. Select true statement. change?
[a] Culture can facilitate communication, [a] The changes that inevitably result in
decision making and control and promotes organizations as they evolve in a changing
co-operation and commitment. environment

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[b] Planned change
[c] The proactive management of change to
achieve strategic objectives
[d] An important organizational change

43. _____is basically the ability to persuade others

to achieve the defined objectives willingly and
enthusiastically.
[a] Leadership
[b] Motivation
[c] Transactional Analysis
[d] Planning

44. What are the major procedural requirements

involved in the strategy implementation
process?
[a] Licensing Requirements
[b] Company law Requirements
[c] FEMA Requirements
[d] All of the above

45. Strategies may require changes in -

[a] Structure
[b] Motivation
[c] Resistance
[d] Sale price

Answers
1 C 11 D 21 C 31 D 41 A
2 B 12 B 22 B 32 A 42 C
3 A 13 B 23 A 33 B 43 A
4 A 14 D 24 D 34 A 44 D
5 B 15 A 25 A 35 D 45 A
6 D 16 C 26 B 36 B
7 C 17 B 27 D 37 C
8 B 18 C 28 C 38 A
9 A 19 A 29 D 39 A
10 A 20 B 30 A 40 C

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ANALYSING STRATEGIC EDGE

BUSINESS PROCESS RE-ENGINEERING (BPR)
Also known as Business Process Redesign, Business Transformation, or Business Process Change
Management, Business Process Reengineering (BPR) is an endeavour to fabricate the operations of the
business on an extensive scale and the act of recreating a core business process with the goal of improving
product output, quality, or reducing costs.

The primary objective of BPR is to:

 Eliminate redundancies or futile layers in the whole process
 Eliminate enterprise costs.

BPR: Definition
As per Hammer and Champy (1993): “Business Process Re-Engineering (BPR) is the fundamental
rethinking and radical redesign of business processes aimed at achieving radical improvements in essential
contemporary measures of performance, such as cost, quality, service and speed.”
Hammer and Champy (1993) further stress “Reengineering is about business reinvention- not business
improvement, business enhancement, or business modification.”Business process is another core concept.
Thus, reengineering should not be about making marginal changes but ensuring quantum leaps in
performance.
In other words, BPR is another form of process innovation because it attempts to re-create processes.

Objectives of Business Process Reengineering

 Boost effectiveness and produce higher quality products for end customer
 Improve efficiency in the production processes
 Cost saving in the long run
 Providing more meaningful work to employees
 To be more adaptable and flexible towards future changes.
 Enable new business growth and expansion

Typology of BPR Projects

 Core Processes: Core processes are central to business functioning and represent the primary value-
chain activities which relate directly to external customers.
Examples being order fulfillment processes.

 Support Processes: Support processes are back office processes which reinforce the core processes.
These are typically secondary value-chain activities and relate more to internal customers.
Typical examples being information technology, financial systems, and human resources systems.

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 Business Network Processes: Business network processes are the processes which extend beyond the
boundaries of the organization into other organizations such as suppliers and customers.

 Management Processes: those processes through which firms plan, organize and control resources.
Examples include strategy development, direction setting, and managing the organization.

Factors for Successful Implementation of BPR

 Change in management
 Management competencies
 Organizational structure
 BPR project management
 IT sub-structures

Reasons for failure of BPR may be:

 Employees’ resistance against change
 Communication breakdown
 Personnel turnover during transition

Steps for Business Process Reengineering

 Define : Objectives and Framework
There must be a clear definition of the objectives of choosing BPR.
Such objectives must be clearly laid out in qualitative and quantitative terms.
After defining such objectives, the requirement for change must be communicated to the employees to
apprise them about the upcoming processes.
This becomes important as the willingness of the employees to adopt the change is a key for the success
of BPR.

 Identify : Customer Needs

The requirements and feedback of the customers must be given due importance while designing the
BPR. It must be ensured that the new process are able to deliver the added value to the customer.

 Study: the Existing Process

In order to re-engineer, the company must has to analyze its existing business process.
A SWOT should be carried out to have a clear view of the strengths and weaknesses of the existing
processes.

 Formulate: a Redesigned Business Plan

After an analysis of the prevailing business process, the modifications to be made are chalked down.
These modifications form a base for the re-designing of process.
Then, a plan is laid down by selecting the best alternative.

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 Implement: the Redesign
The last step is to implement the redesigned plan.
Management should make sure that the new process is operational and adopted by the team.
Such a support from the team is indeed critical to the success of BPR.

BENCHMARKING

Benchmarking: Definition
According to Camp, benchmarking is simply “Finding and implementing the best business practices”.
Benchmarking is a strategy tool of comparison.
It is used to compare the performance of the business processes and products of a company with that of the
best performances of other companies inside and outside the industry which the company is a part of.
Managers use the tool to identify the best practices in other companies and apply those practices to their own
processes in order to improve the company’s performance.
Improving company’s performance is, without a doubt, the most important goal of benchmarking.

Types of Benchmarking
 Strategic benchmarking: This type of benchmarking is used to identify the best way to compete in the
market. In this type of benchmarking, the companies identify the winning strategies (typically outside
the boundaries of their own industry) used by successful companies and thereafter adopt them in their
own strategic processes.
 Performance benchmarking: Performance benchmarking determines how strong a company’s products
and services are when compared to competition.
According to Bogan and English, the tool mainly focuses on product and service quality, features, price,
speed, reliability, design and customer satisfaction.
 Process benchmarking: It requires to look at other companies that engage in similar activities and to
identify the best practices that can be applied to your own processes in order to improve them.

Approaches

 Internal benchmarking: In large organizations that have operations in multiple geographic locations
within or outside national and regional boundaries, or organsations managing plentiful products and
services, duplicating functions and processes are usually performed among different teams, business
units or divisions of the same organsation.

Internal benchmarking is used to compare the work of such teams, units or divisions to identify the
ones that are best performing and share the knowledge throughout the company to other teams to
achieve higher performance.

 External or competitive benchmarking: Competitive benchmarking refers to a process when a

company compares itself with the competitors inside its industry itself.
External benchmarking looks both inside and outside the industry to find the best practices, thus, including
competitive benchmarking.

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 Functional benchmarking: Managers of functional departments find it useful to analyze how well their
functional area performs compared to functional areas of other companies.
It is quite easy to identify the best marketing, finance, human resources or operations departments, in
other companies, that excel in what they do and to apply their practices to one’s own functional area.

 Generic benchmarking: General benchmarking refers to comparisons which “focus on excellent work
processes rather than on the business practices of a particular organization”.
For example, a company tries to improve its marketing capabilities and benchmarks itself against
company ‘X’.
While observing company’s ‘X’s’ marketing processes, it also notices the efficiency in management of
its human resources by using ‘big data’ analytics.
This gives it an idea to implement such analytics in its own HR department to significantly improve its
overall performance.

Advantages
 Easy to understand and use.
 If done properly, it’s a low cost activity that offers huge gains.
 Brings innovative ideas to the company.
 Provides with insight of how other companies organize their operations and processes.
 Increases the awareness of costs and level of performance compared to rivals.
 Facilitates cooperation between teams, units and divisions.

Disadvantages
 Requires identification of a benchmarking partner.
 Sometimes impossible to assign a metric to measure a process.
 Might need to hire a consultant.
 The initial costs could be huge.
 Managers often resist the changes.

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Benchmarking Wheel

BENCHMARKING WHEEL

1. Plan

5. Improve 2. Find

4. Finalyze 3. Collect

1. Plan: Clearly define what you want to compare and assign metrics to it.

2. Find: Identify benchmarking partners or sources of information.

3. Collect: Choose the methods and gather the data for the metrics defined.

4. Analyze: Compare the metrics to identify the gap in performance between your company and the
benchmarking partner.
Provide the results and recommendations.

5. Improve: Implement the changes to your own products, services, processes or strategy.

Total Quality Management

Total Quality Management (TQM) is a concept given by W. Edwards Deming.
Total Quality Management is a management approach that originated in the 1950s and has steadily become
more popular since the early 1980s.
It was originally introduced in Japan after World War II to assist the Japanese companies to re-build their
economy.
The main focus of TQM was and is continuous quality improvement in the areas of product or service,
employer-employee relations and consumer-business relations.
Total Quality is a description of the culture, attitude and organization of a company that strives to provide
customers with products and services that satisfy their needs.
The culture requires quality in all aspects of the company’s operations, with processes being done right for
the first time to eradicate defects waste from operations.

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TQM Defined
“Quality” is “a degree of excellence”, it is a degree to which a product lives up to its performance,
endurance, maintainability, and other attributes expected by a customer while buying that specific product.
For meeting such expectations of the customer, one must instil the concept of TQM in product development
process.
The word “total” means the sum total of every process, every job, every resource, every output, every person,
every time and every place.
American Society for Quality Control (ASQC) defines Total Quality Management (TQM) as “a management
approach to long-term success through customer satisfaction.
TQM is based on the participation of all members of an organization to improving processes, products,
services, and the culture they work in.
The simple objective of TQM is “Do the right things, right the first time, every time.” Although originally
applied to manufacturing operations, TQM is now becoming recognized as a Generic Management tool
and is being widely applied in a number of service and public sector organizations all over the world.

TQM is the foundation for activities, which include:

 Commitment by senior management and all employees
 Meeting customer requirements
 Reducing development cycle times
 Just in time/demand flow manufacturing
 Improvement teams
 Reducing product and service costs
 Systems to facilitate improvement
 Line management ownership
 Employee involvement and empowerment
 Recognition and celebration
 Challenging quantified goals and benchmarking
 Focus on processes / improvement plans
 Specific incorporation in strategic planning

Characteristics of Total Quality Management

 Total involvement of employees: The most fundamental characteristic of TQM is total employee
involvement.
Only empowered and valiant employees who can take a stand for their work and understand the
mechanism of operations of their organization operates as a whole can achieve desired level of
performance by improving their efficiency.
Further, employee involvement can also be attained by adopting a culture of continuous improvement
and team empowerment.

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 Customer focus: TQM views end customers as the sole measure of quality and success.
Any effort, including employee training, infrastructure upgrades, software investments, or product
releases, is worthwhile only if it aims at benefitting customers.

 Continual improvement: Organizations who practice TQM believe that merely maintaining the same
level of quality and customer satisfaction is not enough to outperform competition.
Rather, top management has the responsibility for promotion of culture of innovation and creativity to
customers’ expectations and maintain competitiveness.

 Process approach: it calls for breaking all processes into a series of steps, be it internal or external.
The rationale of this is that each such step can be analyzed, measured and improved upon to attain
desired results.

 System Approach to Management: All inter-related processes should be managed as a system to

ensure that improvement efforts are focused on ‘key’ processes and integrated to achieve the desired
results.

 Fact-based decisions: TQM requires organizations to collect data to improve decision-making, reach
agreements on key business directions and make predictions based on historical data.

 Leadership/strategy definition: a strategic plan should be developed to achieve organization’s vision,

objectives and goals with ‘quality’ as a key component.
Leadership is a key attribute as it establishes the direction of the organization.
TQM advocates that leaders create an enabling environment for achieving business objectives.

 Mutually beneficial relationship with suppliers: An organization depends on its suppliers and this
relationship should be strengthened to ensure that a mutually beneficial relationship is sustained.

Principles of Total Quality Management

There are the 8 principles of Total Quality Management:
 Customer-focused
The customer ultimately determines the level of quality.
No matter what an organization does to foster quality improvement – training employees, integrating
quality into the design process, upgrading computers or software, or buying new measuring tools – the
customer determines whether the efforts were worthwhile.

 Total Employee Involvement

All employees participate in working toward common goals.
Total employee commitment can only be obtained after fear has been driven from the workplace, when
empowerment has occurred, and management has provided the proper environment.
High-performance work systems integrate continuous improvement efforts with normal business
operations.
Self-managed work teams are one form of empowerment.
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 Process-centered
A fundamental part of TQM is a focus on process thinking.
A process is a series of steps that take inputs from suppliers (internal or external) and transforms them
into outputs that are delivered to customers (again, either internal or external).
The steps required to carry out the process are defined, and performance measures are continuously
monitored in order to detect unexpected variation.

 Integrated System
Although an organization may consist of many different functional specialties often organized into
vertically structured departments, it is the horizontal processes interconnecting these functions that are the
focus of TQM.

 Strategic and Systematic Approach

A critical part of the management of quality is the strategic and systematic approach to achieving an
organization’s vision, mission, and goals.
This process, called strategic planning or strategic management, includes the formulation of a strategic
plan that integrates quality as a core component.

 Continual Improvement
A major thrust of TQM is continual process improvement.
Continual improvement drives an organization to be both analytical and creative in finding ways to
become more competitive and more effective at meeting stakeholder expectations.

 Fact-based Decision Making

In order to know how well an organization is performing, data on performance measures are necessary.
TQM requires that an organization continually collect and analyze data in order to improve decision
making accuracy, achieve consensus, and allow prediction based on past history.

 Communications
During times of organizational change, as well as part of day-to-day operation, effective communications
plays a large part in maintaining morale and in motivating employees at all levels.
Communications involve strategies, method, and timeliness.

The Concepts of Continuous Improvement by TQM

The five major areas of focus for capability improvement are
 Demand generation
 Supply generation
 Technology
 Operations and
 People capability

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SIX SIGMA
Six Sigma is a disciplined, statistical-based, data-driven quality control program.
It is a methodology for continuous cycle time improvement (the reduction of manufacturing defects to a
level of no more than 3.4 per million) by eliminating defects in any product, process or service.
Developed by Motorola in middle 1980’s, Six Sigma is based on quality management fundamentals.
Due to its accuracy and merits, the approach became popular at General Electric (GE) in the early 1990’s.
Today.
 A Business Strategy: Using Six Sigma Methodology, a business can strategize its plan of action and
drive revenue increase, cost reduction and process improvements in all parts of the organization.

 A Vision: Six Sigma Methodology helps the Senior Management create a vision to provide defect free,
positive environment to the organization.

 A Benchmark: Six Sigma Methodology helps in improving process metrics. Once the improved process
metrics achieve stability; we can use Six Sigma methodology again to improve the newly stabilized
process metrics.
For example: The Cycle Time of Pizza Delivery is improved from 60 minutes to 45 minutes in a Pizza
Delivery process by using Six Sigma methodology.
Once the Pizza Delivery process stabilizes at 45 minutes, we could carry out another Six Sigma project to
improve its cycle time from 45 minutes to 30 minutes.
Thus, it is a benchmark.

 A Goal: Using Six Sigma methodology, organizations can keep a stringent goal for themselves and
work towards achieving them during the course of the year.
Right use of the methodology often leads these organizations to achieve these goals.

 A Statistical Measure: Six Sigma is a data driven methodology. Statistical Analysis is used to identify
root-causes of the problem.
Additionally, Six Sigma methodology calculates the process performance using its own unit known as
Sigma unit.

 A Robust Methodology: Six Sigma is the only methodology available in the market today which is a
documented methodology for problem solving.
If used in the right manner, Six Sigma improvements are bullet-proof and they give high yielding returns.

PROCESS SIGMA TABLE

SIGMA LEVEL DEFECT RATE YIELD

2σ 308,770 dpmo 69.10000%
3σ 66,811 dpmo 93.33000%
4σ 6,210 dpmo 99.38000%
5σ 233 dpmo 99.97700%
6σ 3.44 dpmo 99.99966%
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Why Six Sigma
 Decrease in process cycle time
 Decrease of scrap generated by a process
 Growing customer satisfaction
 Decline in the number of factory defects
 Decrease or elimination of costly reworks

How does 6 Sigma work?

Situation 1: The process already existing but it is not working “reasonably” well.
This scenario focuses on use of DMAIC (which stands for Define, Measure, Analyze, Improve and Control):

1. Define problem statement process goals in terms of key critical parameters on the basis of customer
requirements or Voice Of Customer (VOC) and setting project boundaries.

2. Measure a complete picture of the current state of the process and establishes a baseline through
measurement of the existing system in context of goals and collecting the data regarding possible causal
factors.

3. Analyze the current scenario in terms of causes of variations and defects and determining the root cause.

4. Improve the process by systematically reducing variation and eliminating defects and root causes.

5. Control future performance of the process and support and maintain the gains realized.

Situation 2: This is the situation when there is no process in existence at all and it has to be
designed using Design For Six Sigma (DFSS) approach.
DFSS approach typically requires IDOV:

1. Identify process goals in terms of critical parameters, industry & competitor benchmarks, Voice Of
Customer (VOC)

2. Design involves enumeration of potential solutions and selection of the best

3. Optimize performance by using advanced statistical modeling and simulation techniques and design
refinements

4. Validate that design works in accordance to the process goals

The Six Sigma Training and Certification Levels

The Six Sigma training and certification levels are emulated from the martial arts.
“Six Sigma” management has several levels of certification i.e. Champion, Yellow Belt, Green Belt, Black
Belt, and Master Black Belt. Each level of certification is described below.

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Champion
A Six Sigma Champion is the most basic form of Six Sigma certification.
A Champion understands the theory of Six Sigma management, but does not yet have the quantitative skills
to function as an active Six Sigma project team member.

A Yellow Belt
A Six Sigma Yellow Belt is an individual who has passed the Green Belt certification examination but has
not yet completed a Six Sigma project.
A Yellow Belt should have a basic understanding of Six Sigma, statistical tools and DMAIC methodology.
However, executives in Six Sigma organizations function as champions of Six Sigma projects.

Green Belt
A Six Sigma Green Belt is an individual who works on projects part-time either as a team member for
complex projects, or as a project leader for simpler projects.
Green belts are the “work horses” of Six Sigma projects.
Green Belts receive training on DMAIC methodology, statistical tools, proper data collection and analysis of
the data collected.
Most managers in a mature Six Sigma organization are green belts.

Black Belt
A Black Belt receives the highest level of training in the statistical tools of Six Sigma.
Black Belts, as a rule, develop the plans for Six Sigma project implementation.
Their responsibilities include creating project plans, leading cross-functional projects and directing team
members, including Green and Yellow Belts. Black Belts usually train other team members on the proper use
of Six Sigma tools and techniques, such as control charts, histograms and Root Cause Analysis (RCA).

Master Black Belt

A Master Black Belt is classically trained in statistical tools, Six Sigma methodology and management
processes.
Master Black Belts mentor and direct groups of Black Belts and Six Sigma teams through various problems
that need to be reviewed.

Six Sigma Implementation in Ford Motor Company

Ford Motor Company, an American Multinational automaker considered as the world's, largest and most
successful automakers is famous for introducing revolutionary products. The company is known for its
innovative and dynamic approach to manufacturing by using Total Quality Management approach to
achieve its vision "Quality Is Job 1". It has employed such manufacturing concepts as standardization,
assembly lines, which came to be known as Fordism. Ford was ranked 'seventh' in terms of quality in
automobile world in 2001, the position which was soon elevated to third in the year 2003, which was
viewed as a remarkable improvement over this two-year period. The credit of such improvement was
awarded to quality initiatives taken by Ford in 1999, significant among which was the Six Sigma techniques
such as a data-driven problem-solving process, to devise solutions to waste issues. Six Sigma saved Ford
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from its deep-rooted problems. These issues include inadequate productivity, poor use of resources, low
customer satisfaction, and environmental unfriendliness.

Carrying Out the Six Sigma Approach

To actualize the vision of becoming a consumer products company, Ford Motor Company implemented Six
Sigma in late 1990s with the twin goals of enhancing vehicle quality and improving the level of customer
satisfaction. The initiative was called 'Consumer-driven Six Sigma'. Ford was the first major automobile
company in the world to go for Six Sigma initiative in a big way. In Ford's view, there existed about 20,000
opportunities for defects in manufacturing a car. Through Six Sigma, Ford aimed at attaining its defect rate
to just one for every 14.8 vehicles.

Reasons to adopt Six Sigma in Ford Motor Company

• Cost Reduction
• Quality Improvement
• Improve Customer Satisfaction
• Reduce solvent consumption to lower the environment impact

Roadblocks in Implementing Six Sigma

• Employee Commitment
• Resource challenge (time, money and productivity)
• Infrastructure to fully run the Six Sigma Initiative as it required enormous data and internal measures.

FORD's improvement after implementation of Six Sigma

• Elimination of more than $2.19 billion of wastage of resources since 2001.
• An increasingly dramatic impact on operations of the enterprise. After adopting six sigma, Ford has
completed more than 9,500 projects savings $1.7 billion worldwide, including $731 million in 2003.
• Increase in customer satisfaction to five percentage points as disclosed by company's internal customer
satisfaction survey.

Enterprise Resource Planning

ERP, or enterprise resource planning, is a modular software system designed to integrate the main
functional areas of an organization's business processes into a unified system.
An ERP system includes core software components, often called modules, that focus on essential business
areas, such as finance and accounting, HR, production and materials management, customer relationship
management (CRM) and supply chain management. Organizations choose which core modules to use based
on which are most important to their particular business.
What primarily distinguishes ERP software from stand-alone targeted software -- which many vendors and
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industry analysts refer to as best-of-breed solutions -- is a common central database from which the various
ERP software modules access information, some of which is shared with the other modules involved in a
given business process. This means that companies using ERP are largely saved from having to make
double entries to update information because the system shares the data, in turn enabling greater accuracy
and collaboration between the organization's departments.
ERP implementation options include on premises, cloud and a mix of the two, called hybrid, such as with
platform as a service (PaaS) and infrastructure as a service (IaaS). Although ERP has historically been
associated with expensive, monolithic, end-to-end implementations, cloud versions now enable easier
deployments, which SMBs are taking advantage of in greater numbers.
Some ERP systems also offer next-generation capabilities, such as AI, loT and advanced analytics, to foster
digital transformation. Businesses typically turn to an ERP system when they outgrow spreadsheets and
disparate, often siloed software systems and need the unifying capabilities of an ERP system to enable
growth. As with many technology products, the specific definition of what constitutes ERP can vary widely
from vendor to vendor.

History of ERP
Gartner coined the term "enterprise resource planning" in 1990. ERP is preceded by Material Requirements
Planning (MRP), developed by IBM engineer Joseph Orlicky as a system for calculating the materials and
components needed to manufacture a product
In 1983, management expert Oliver Wight developed an extension of MRP called MRP II, which broadened
the planning process using a method that integrated operational and financial planning. MRP II added other
production processes, such as product design and capacity planning.
ERP emerged as an expansion of MRP II, extending its scope beyond manufacturing to cover business
processes such as accounting, human resources and supply chain management, all managed from a single,
centralized database.
ERP has expanded to encompass a growing set of business-critical applications, such as business
intelligence, sales force automation (SFA) and marketing automation. While MRP and MRP II applied to
the manufacturing industry, ERP is used by a wide range of industries today.

How ERP works

ERP systems rely on a centralized relational database, which collects business information and stores them
in tables. Having the data stored centrally allows end users, such as from finance, sales and other
departments, to quickly access the desired information for analysis.
Instead of employees in different departments managing their own spreadsheets and reports, ERP systems
allow for reporting to be generated from a single, centralized system. Information updated in one ERP
module, such as CRM, HR and finance, is sent to a central, shared database. The appropriate information in
the central database is then shared with the other modules.

Importance of ERP
Experts list four important business benefits of ERP:

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• IT cost savings
• Business process efficiency
• A business process platform for process standardization
• A catalyst for business innovation
While businesses often focus on the first two areas because they're easy to quantify, the latter two areas can
create greater impact for businesses.
ERP makes real-time business data available throughout the organization, which enables businesses to adapt
quickly and respond to changes. The business data available in ERP systems provides for more informed
decision making within an enterprise. ERP systems can also share data with third party partners and vendors
to improve efficiencies in the supply chain.

Benefits of ERP systems

ERP offers a plethora of benefits, most of which come from information sharing and standardization.
Because ERP components can share data more easily than disparate systems, they can make cross-
departmental business processes easier to manage on a daily basis. They can also enable better insights from
data, especially with the newer technologies that many ERP systems are including, such as powerful
analytics, machine learning and industrial IoT capabilities.
In addition, ERP software:
• boosts efficiencies by automating data collection;
• enables business growth by managing increasingly complex business processes;
• helps lower risk by enabling better compliance;
• fosters collaboration using data sharing and integrated information;
• provides better business intelligence and customer service capabilities; and
• improves supply chain management.

Advantages and disadvantages

Advantages and disadvantages
Many consider ERP software to be a requirement for enterprises -- especially for core business functions
such as finance -- and the same is arguably true for growing SMBs. The sheer volume of data that
companies generate, along with the complexity of the global business landscape and modern consumer
demands, has made streamlining business processes and managing and optimizing data increasingly critical.
An ERP software system is typically at the core of such capabilities.
That said, there are advantages and disadvantages to implementing ERP. Advantages:
• Can save money over the long run by streamlining processes.
• Provides a unified system that can lower IT-related expenses and end-user training costs.
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• Enables greater visibility into myriad areas of the business, such as inventory, that are critical for meeting
customer needs.
• Enables better reporting and planning due to better data.
• Offers better compliance and data security, along with improved data, backup and the ability to control
user rights.
Disadvantages:
• Can have a high upfront cost.
• Can be difficult to implement.
• Requires change management during and after implementation.
• Basic, core ERP modules may be less sophisticated compared to targeted, stand-alone software.
Companies may require additional modules for more control and better management of specific areas, such
as the supply chain or customer relationship capabilities.

Industry 4.0
McKinsey defines Industry 4.0 as the "digitization of the manufacturing sector, with embedded sensors in
virtually all product components and manufacturing equipment, ubiquitous cyber physical systems and
analysis of all relevant data." It is driven by four clusters of disruptive technologies:
1. Data, computational power and connectivity - i.e., low-power, wide-area networks, for example
2. Analytics and intelligence
3. Human-machine interaction - i.e., touch interfaces and augmented reality
4. Digital-to-physical conversion - i.e., advanced robotics and 3-D printing
With these clusters currently at a tipping point, the time is now for manufacturing companies to figure out a
response to them. As Industry 4.0 influences mission-critical applications in business processes, the digital
transformation is extensive, but it will come at a slower pace than the digital disruption of the Internet.
Because of their long investment cycles, companies are often conservative when deciding on how to address
fundamental disruption. However, manufacturing companies that take the risk and are early adopters of new
technology will be rewarded for their progressive decision-making. Digitization helps to ensure product
quality and safety, as well as faster service delivery, which goes a long way with customers.
For a manufacturing company to be considered Industry 4.0, it must include:
• Interoperability - Having machines, devices, sensors and people that connect and communicate with one
another.
• Information transparency - Having systems that create a virtual copy of physical things through sensor
data in order to put information in context.
• Technical assistance - Having systems with the ability to help people in decision-making and problem-
solving, and to assist people with tasks that are too difficult or unsafe for humans to do.
• Decentralized decision-making - Having cyber-physical systems (i.e., smart grid, autonomous automobile

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systems, medical monitoring, process control systems, robotics systems, etc.) with the ability to directly
make simple decisions and become as autonomous as possible.
While many manufacturers may continue to be in denial about Industry 4.0 and its impact on their
businesses, or are having difficulty in finding the talent or knowledge to know the best ways to adopt it,
many others are already implementing changes now and preparing for a future where smart machines
improve their businesses.
Indeed, Industry 4.0 is still evolving, and we may not know the complete picture for a while. However,
companies that are adopting the technologies understand Industry 4.0's potential and want to harness it.

Artificial Intelligence
Artificial Intelligence (AI), or machine intelligence, is the field developing computers and robots capable of
parsing data contextually to provide requested information, supply analysis, or trigger events based on
findings. Through techniques like machine learning and neural networks, companies globally are investing
in teaching machines to 'think' more like humans.
Artificial Intelligence, or simply AI, is the term used to describe a machine's ability to simulate human
intelligence. Actions like learning, logic, reasoning, perception, creativity, that were once considered unique
to humans, is now being replicated by technology and used in every industry. A common example of AI in
today's world is chatbots, specifically the "live chat" versions that handle basic customer service requests on
company websites. As technology evolves, so does our benchmark for what constitutes AI.
The Artificial Intelligence and Business Strategy initiative explores the growing use of artificial intelligence
in the business landscape. The exploration looks specifically at how AI is affecting the development and
execution of strategy in organizations.T he initiative researches and reports on how AI is spurring workforce
change, data management, privacy, cross-entity collaboration, and generating new ethical challenges for
business. It looks at new risks and threats in dependency, job loss, and security. And it seeks to help
managers understand and act on the tremendous opportunity from the combination of human and machine
intelligence.

Nine Areas for developing AI Business Strategy:

1. Business strategy
Creating an AI strategy for the sake of it won't produce great results. To get the most out of AI, it must be
tied to your business strategy and your big-picture strategic goals. That's why the first step in any AI
strategy is to review your business strategy. (After all, you don't want to go to all this trouble and apply AI
to an outdated strategy or irrelevant business goals.)
In this step, ask yourself questions such as:
• Is our business strategy still right for us?
• Is our strategy still current in this world of smarter products and services?
• Have our business priorities changed?
2. Strategic AI priorities
Now that you're absolutely clear on where your business is headed, you can begin to identify how AI can
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help you get there.
In other words:
• What are our top business priorities?
• What problems do we want or need to solve?
• How can AI help us deliver our strategic goals?
The AI priorities that you identify in this phase are your use cases. To ensure your AI strategy is focused
and achievable, I'd stick to no more than 3-5 AI use cases.
Examples of AI priorities or use cases include:
• Developing smarter products and services
• Making business processes and functions (such as accounts, sales and HR) more intelligent
• Automating repetitive or mundane tasks to free people up for more value-adding activities
• Automating manufacturing processes
3. Short-term AI adoption priorities
Transforming products, services or processes is never going to be an overnight task. It may take some time
to deliver the use cases you've identified. For that reason, I find it helps to also identify a few (as in, no more
than three) AI quick wins - short-term AI priorities that will help you demonstrate value and gain buy-in for
bigger AI projects.
Ask yourself:
• Are there any opportunities to optimise processes in a quick, relatively inexpensive way?
• What smaller steps and projects could help us gather information or lay the groundwork for our bigger AI
priorities?
4. Data strategy
AI needs data to work. Lots and lots of data. Therefore, you need to review your data strategy in relation to
each AI use case and pinpoint the key data issues.
This includes:
• Do we have the right sort of data to achieve our AI priorities?
• Do we have enough of that data?
• If we don't have the right type or volume of data, how will we get the data we need?
• Do we have to set up new data collection methods, or will we use third-party data?
• Going forward, how can we begin to acquire data in a more strategic way?\
5. Ethical and legal issues
Let's not beat around the bush: the idea of super-intelligent machines freaks people out. It's therefore crucial
that you apply AI in a way that's ethical and above board.

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Here, you'll need to ask yourself questions like:
• How can we avoid invading people's privacy?
• Are there any legal implications of using AI in this way?
• What sort of consent do we need from customers/users/employees?
• How can we ensure our AI is free of bias and discrimination?
The ethical implications of AI is a huge topic right now. Notably, tech giants including Google, Microsoft,
IBM, Facebook and Amazon have formed the Partnership on AI, a group that's dedicated to researching and
advocating for the ethical use of AI.
6. Technology issues
Here you identify the technology and infrastructure implications of the decisions you've made so far.
Consider:
• What technology is required to achieve our AI priorities (for example, machine learning, deep learning,
reinforcement learning, etc.)?
• Do we have the right technology in place already?
• If not, what systems do we need to put in place?
7. Skills and capacity
For those companies who aren't Facebook or Google, accessing AI skills can be a real challenge. Therefore,
this step is about reviewing your in-house AI skills and capabilities, and working out where you need a
skills injection.
For example:
• Where are our skills gaps?
• To fill those gaps, do we need to hire new talent, train existing staff, work with an external AI provider or
acquire a new business?
• Do we have awareness and buy-in for AI from leadership and at other levels in the business?
• What can we do to raise awareness and promote buy-in?
8. Implementation
Here you need to think about how you'll turn your AI strategy into reality. This might surface questions such
as:
• How will we deliver our AI projects?
• What are the key next steps?
• Who is responsible for delivering each action?
• Which actions or projects will need to be outsourced?
9. Change management issues

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Because people are so wary of AI, particularly what it might mean for their jobs, change management is a
really important part of any AI project.
Example questions include:
• Which employees and teams will be impacted by this AI project?
• How can we communicate effectively with those people about the change?
• How should the change process be managed?
• How will AI change our company culture, and how will we manage that culture change?
In conclusion, Artificial intelligence (AI) has the potential to transform every business - in the same way
(and possibly more) as the internet has utterly transformed the way we do business. From smarter products
and services to better business decisions and optimised (or even automated) business processes, AI has the
power to change almost everything. Those businesses that don't capitalise on the transformative power of AI
risk being left behind.

Fintech

Financial technology (Fintech) is used to describe new tech that seeks to improve and automate the delivery
and use of financial services. At its core, fintech is utilized to help companies, business owners and
consumers better manage their financial operations, processes, and lives by utilizing specialized software
and algorithms that are used on computers and, increasingly, smartphones. Fintech, the word, is a
combination of "financial technology".
Broadly, the term "financial technology" can apply to any innovation in how people transact business, from
the invention of digital money to double-entry bookkeeping. Since the internet revolution and the mobile
internet/ smartphone revolution, however, financial technology has grown explosively, and fintech, which
originally referred to computer technology applied to the back office of banks or trading firms, now
describes a broad variety of technological interventions into personal and commercial finance.

History
When fintech emerged in the 21st Century, the term was initially applied to the technology employed at the
back-end systems of established financial institutions. Since then, however, there has been a shift to more
consumer-oriented services and therefore a more consumer-oriented definition. Fintech now includes
different sectors and industries such as education, retail banking, fundraising and nonprofit, and investment
management to name a few.
Fintech now describes a variety of financial activities, such as money transfers, depositing a check with your
smartphone, bypassing a bank branch to apply for credit, raising money for a business startup, or managing
your investments, generally without the assistance of a person. According to EY's 2017 Fintech Adoption
Index, one-third of consumers utilize at least two or more fintech services and those consumers are also
increasingly aware of fintech as a part of their daily lives. Fintech also includes the development and use of
crypto-currencies such as bitcoin. That segment of fintech may see the most headlines, the big money still
lies in the traditional global banking industry and its multi-trillion-dollar market capitalization.
Some of the most active areas of fintech innovation include or revolve around the following areas:
• Cryptocurrency and digital cash.
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• Blockchain technology, including Ethereum, a distributed ledger technology (DLT) that maintain records
on a network of computers, but has no central ledger.
• Smart contracts, which utilize computer programs (often utilizing the blockchain) to automatically execute
contracts between buyers and sellers.
• Open banking, a concept that leans on the blockchain and posits that third-parties should have access to
bank data to build applications that create a connected network of financial institutions and third-party
providers. An example is the all-in-one money management tool Mint.
• Insurtech, which seeks to use technology to simplify and streamline the insurance industry.
• Regtech, which seeks to help financial service firms meet industry compliance rules, especially those
covering Anti-Money Laundering and Know Your Customer protocols which fight fraud.
• Robo-advisors, such as Betterment, utilize algorithms to automate investment advice to lower its cost and
increase accessibility.
• Unbanked/underbanked, services that seek to serve disadvantaged or low-income individuals who are
ignored or underserved by traditional banks or mainstream financial services companies.
• Cybersecurity, given the proliferation of cybercrime and the decentralized storage of data, cybersecurity
and fintech are intertwined.

Fintech Users
There are four broad categories of users for fintech:
1) B2B for banks,
2) their business clients,
3) B2C for small businesses, and
4) consumers.
Trends toward mobile banking, increased information, data, and more accurate analytics and
decentralization of access will create opportunities for all four groups to interact in heretofore
unprecedented ways. As for consumers, as with most technology, the younger you are the more likely it will
be that you are aware of and can accurately describe what fintech is. The fact is that consumer-oriented
fintech is mostly targeted toward millennials given the huge size and rising earning (and inheritance)
potential of that much-talked-about segment. Some fintech watchers believe that this focus on millennials
has more to do with the size of that marketplace than the ability and interest of Gen Xers and Baby Boomers
in using fintech. Rather, fintech tends to offer little to older consumers because it fails to address their
problems. When it comes to businesses, before the advent and adoption of fintech, a business owner or
startup would have gone to a bank to secure financing or startup capital. If they intended to accept credit
card payments they would have to establish a relationship with a credit provider and even install
infrastructure, such as a landline-connected card reader. Now, with mobile technology, those hurdles are a
thing of the past.

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Regulation and Fintech
Financial services are among the most heavily regulated sectors in the world. Not surprisingly, regulation
has emerged as the number one concern among governments as fintech companies take off.
As technology is integrated into financial services processes, regulatory problems for such companies have
multiplied. In some instances, the problems are a function of technology. In others, they are a reflection of
the tech industry's impatience to disrupt finance.
For example, automation of processes and digitization of data makes fintech systems vulnerable to attacks
from hackers.
Recent instances of hacks at credit card companies and banks are illustrations of the ease with which bad
actors can gain access to systems and cause irreparable damage. The most important questions for
consumers in such cases will pertain to the responsibility for such attacks as well as misuse of personal
information and important financial data.
There have also been instances where the collision of a technology culture that believes in a "Move fast and
break things" philosophy with the conservative and risk-averse world of finance has produced undesirable
results.
Regulation is also a problem in the emerging world of cryptocurrencies. Initial coin offerings (ICOs) are a
new form of fundraising that allows startups to raise capital directly from lay investors. In most countries,
they are unregulated and have become fertile ground for scams and frauds. Regulatory uncertainty for ICOs
has also allowed entrepreneurs to slip security tokens disguised as utility tokens past the SEC to avoid fees
and compliance costs.
Because of the diversity of offerings in fintech and the disparate industries it touches, it is difficult to
formulate a single and comprehensive approach to these problems. For the most part, governments have
used existing regulations and, in some cases, customized them to regulate fintech. They have established
fintech sandboxes to evaluate the implications of technology in the sector. The passing of General Data
Protection Regulation, a framework for collecting and using personal data, in the EU is another attempt to
limit the amount of personal data available to banks. Several countries where ICOs are popular, such as
Japan and South Korea, have also taken the lead in developing regulations for such offerings to protect
investors.

Blockchain Technology
Blockchain is a series of data linked together. Every single transaction is linked to the chain using
cryptographic principles in batches, making blocks. The blocks are connected to each other and have unique
identifier codes (called hashes) that connect them to the previous and the subsequent blocks. This forms a
blockchain, usually in the form of a continuous ledger of transactions. It isn't owned by any one individual.
The series is managed and stored across several computer systems. Each ledger is shared, copied and stored
on every computer connected in the system.
This decentralised nature of storage provides security, since changing the details of one record will cause
the hash of that block to change, disconnecting it from the next one and causing the latter's hash to change,
and further such disruptions. Since the data is stored on multiple systems, any person looking to change the
details on one system will have to do it for every other system as well.

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Importance of Blockchain
Blockchain technology has been the backbone of bitcoin and other cryptocurrencies. The transparency and
the security offered by the technology are some of the main reasons why cryptocurrency has become so
popular. This technology is increasingly being adopted in the retail, manufacturing and banking sectors due
to its benefits, like eliminating middlemen, providing data security, reducing corruption and improving the
speed of service delivery. It can be particularly useful in maintaining government data related to public
transactions. For instance, if all land records are moved on a blockchain, with each subsequent buying and
selling of a property being recorded as a block that can be publicly accessed, corruption can be arrested and
governing will be made so much easier. Similarly, hallmarked gold jewellery can be moved on an open-
source blockchain ledger, which can be maintained by jewellers and viewed by consumers.
However, blockchain technology must be adopted in a gradual manner. Bitcoin and other cryptocurrencies
have seen wild fluctuations in value, due to the lack of regulatory supervision. The open nature of the
technology implies that anyone can adopt it, which is partly why the government is hesitant to go ahead and
use it. Scalability, transaction speed and data protection are key technological hurdles, along with the
difficulty of integrating the technology into existing financial systems. Many legal and regulatory challenges
are also involved.
Blockchain is a developing field and its practical uses are being explored in many areas. You may want to
adopt this technology in your business, if you are a B2C company and want to improve user experience or
enhance transparency. There is a possibility of some data, such as banking transactions, land records and
vehicle registration details, moving on the blockchain platform in the future. Example: Even recent entrants
like Uber and Airbnb are threatened by blockchain technology. All you need to do is encode the
transactional information for a car ride or an overnight stay, and again you have a perfectly safe way that
disrupts the business model of the companies which have just begun to challenge the traditional economy.
We are not just cutting out the fee-processing middle man, we are also eliminating the need for the match-
making platform.

The Three Pillars of Blockchain Technology

The three main properties of Blockchain Technology which have helped it gain widespread acclaim are as
follows:
• Decentralization
• Transparency
• Immutability

Pillar #1: Decentralization

Before Bitcoin and BitTorrent came along, we were more used to centralized services. The idea is very
simple. You have a centralized entity that stored all the data and you'd have to interact solely with this entity
to get whatever information you required.
Another example of a centralized system is the banks. They store all your money, and the only way that you
can pay someone is by going through the bank.
In a decentralized system, the information is not stored by one single entity. In fact, everyone in the network
owns the information.In a decentralized network, if you wanted to interact with your friend then you can do

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so directly without going through a third party. That was the main ideology behind Bitcoins. You and only
you alone are in charge of your money. You can send your money to anyone you want without having to go
through a bank.

Pillar #2: Transparency

One of the most interesting and misunderstood concepts in blockchain technology is "transparency." Some
people say that blockchain gives you privacy while some say that it is transparent.
A person's identity is hidden via complex cryptography and represented only by their public address. So, if
you were to look up a person's transaction history, you will not see "Bob sent 1 BTC" instead you will see
"1MF1bhsFLkBzzz9vpFYEmvwT2TbyCt7NZJ sent 1 BTC".So, while the person's real identity is secure,
you will still see all the transactions that were done by their public address. This level of transparency has
never existed before within a financial system. It adds that extra, and much needed, level of accountability
which is required by some of these biggest institutions.

Pillar #3: Immutability

Immutability, in the context of the blockchain, means that once something has been entered into the
blockchain, it cannot be tampered with.
The reason why the blockchain gets this property is that of the cryptographic hash function.
In simple terms, hashing means taking an input string of any length and giving out an output of a fixed
length.
In the context of cryptocurrencies like bitcoin, the transactions are taken as input and run through a hashing
algorithm (Bitcoin uses SHA-256) which gives an output of a fixed length. So basically, instead of
remembering the input data which could be huge, you can just remember the hash and keep track.
The blockchain gives internet users the ability to create value and authenticates digital information.
Folowing new business applications will result from this:
1 Smart contracts
2 The sharing economy
3 Crowdfunding
4 Governance
5 Supply chain auditing
6 Decentralizing file storage
7 Prediction markets
8 Protection of intellectual property9 Internet of Things (IoT)
10 NeighbourhoodMicrogrids
11 Identity management
12 Anti-money laundering (AML) and know your customer (KYC)

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13 Data management
14 Land title registration
15 Stock trading
As revolutionary as it sounds, Blockchain truly is a mechanism to bring everyone to the highest degree of
accountability. No more missed transactions, human or machine errors, or even an exchange that was not
done with the consent of the parties involved. Above anything else, the most critical area where Blockchain
helps is to guarantee the validity of a transaction by recording it not only on the main register but a
connected distributed system of registers, all of which are connected through a secure validation
mechanism.

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ANALYZING STRATEGIC EDGE Analysing Strategic Edge

1. What is the term for the act of recreating a

industry practices or against the products,
core business process with the goat of
services and practices of its competitors or
improving product output, quality or reducing
other acknowledged leaders in the industry.
costs?
[a] Benchmarking
[a] Business Process Improvement
[b] Bench parking
[b] Business Process Reengineering
[c] Object marking
[c] Business Process Change
[d] Quality marking
[d] Business Process Advance
6. Benchmarking -
2. Which of the following is objective of
[a] Helps businesses in improving
Business Process Reengineering (BPR)?
performance by learning from the best
[a] Boost effectiveness and produce higher
practices and the processes by which they
quality products for end customer.
are achieved.
[b] Improve efficiency in the production
[b] Is a process of continuous improvement in
processes.
search for competitive advantage.
[c] Providing more meaningful work to
[c] Is an approach of set ting goals and
employees.
measuring productivity of firms based on
[d] All of the above
best industry practices or against the
products, services and practices of its
3. Which of the following is not one of the steps
competitors or other acknowledged leaders
of the Business Process Reengineering (BPR)?
in the industry.
[a] Identify customers and determine their
[d] All of the above
needs
[b] Determining objectives and framework
7. Consider following two statements.
[c] Formulation of a redesign process plan
1. It refers to the analysis and redesign of
[d] Partial modification or marginal
workflows both within and between the
improvement in the existing work
organization and the external entities.
processes.
2. Benchmarking is a process of finding the
best practices within and outside the
4. Which of the following is NOT a principle
industry to which an organization belongs.
underlying business process reengineering
Select true statement.
(BPR)?
[a] 1 only
[a] Business process must be managed end to
[b] 2 only
end
[c] Both 1 and 2
[b] Business processes should be agile.
[d] Neither 1 nor 2
[c] Business processes should use prototype
technology
8. Consider following two statements.
[d] Business processes must be aligned with
i] Benchmarking and Business Process
organizational strategy and needs
Reengineering are one and the same.
[e] None of the above
ii] Benchmarking is a remedy for all
problems faced by organizations.
5. ______is an approach of setting goals and
Select true statement.
measuring productivity of firms based on best
[a] 1 only

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[b] 2 only [c] Establishing clear specifications
[c] Both 1 and 2 [d] Teamwork, trust and empowerment
[d] Neither 1 nor 2
15. ______collectively established a common set
9. Managers use this type of benchmarking to of quality standards known as ISO 9000.
identify the best way to compete in the market [a] European Economic Community
- [b] American Economic Community
[a] Performance Benchmarking [c] Italian Economic Community
[b] Process Benchmarking [d] Indian Economic Community
[c] Strategic Benchmarking
[d] Internal Benchmarking 16. As per TQM principles which of the following
is problem -
10. ______refers to a process when a company [a] Process
compares itself with the competitors inside its [b] People
industry. [c] Both process and people
[a] Functional Benchmarking [d] Government policy
[b] Competitive benchmarking
[c] Generic Benchmarking 17. Which of the following does not correctly
[d] Strategic Benchmarking depict the TQM principle?
[a] Every employee is responsible for quality.
11. Benchmarking Wheel is a______ stage [b] Quality is a long-term investment.
process. [c] People, not Processes, are the problem.
[a] Four [d] All of the above
[b] Five
[c] Six 18. ______is also considered as a structured
[d] Seven approach in managing uncertainty related to a
threat.
12. Which of the following is not Benchmarking [a] Crises management
Wheel stage process? [b] Risk management
[a] Plan [c] Crises of organizational misdeeds
[b] Find [d] None of above
[c] Analyze
[d] Repeat 19. ______is a defined and disciplined business
methodology to increase customer satisfaction
13. TQM owes its genesis to post war research of and profitability by streamlining operations,
American management consultants like - improving quality and eliminating defects in
[a] Drs. Joseph Juran & W. Edwards Dening every organization-wide process.
[b] Dr. Eric Penfield & Dr. Wilder Penfield [a] Six Sigma
[c] Dr. Eric Berne & W. Edwards Dening [b] TQM
[d] Drs. Joseph Juran & Dr. Wilder Penfield [c] Five Alpha
[d] Six Beta
14. Which of the following is not a key feature of
Total Quality Management?
[a] Continuous improvement
[b] Identifying customers and their needs

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20. The reasons for acquisition are -
[a] Increased market power
[b] Increased diversification
[c] Increased speed to market
[d] All of the these

Answers
1 B 11 B
2 D 12 D
3 D 13 A
4 C 14 C
5 A 15 A
6 D 16 A
7 C 17 C
8 D 18 B
9 C 19 A
10 B 20 D

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