SM QB

Question Bank - Chapter 1 Compiled by Neeraj Arora and TEAM
Chapter 1
Question Bank
This question bank is not for sale, this is compiled for the benefit of students and can also be used by the teachers.
All the questions are from ICAI Publications - Source ICAI Publications as uploaded on www.icai.org
1.1 Concept of Strategy
Q1. Strategy is partly proactive and partly reactive. Discuss.

(RTP, May 2018, NA) (SA, Nov 2018, 5 marks) (MTP 1, Nov 2019, 5 marks) (RTP, Nov 2020, NA) (MTP 1,
May 2021, 5 marks) (Study Material)
It is true that strategies are partly proactive and partly reactive. In proactive strategy, organizations
will analyze possible environmental scenarios and create strategic framework after proper planning
and set procedures and work on these strategies in a predetermined manner. However, in reality no
company can forecast both internal and external environment exactly. Everything cannot be planned
in advance. It is not possible to anticipate moves of rival firms, consumer behaviour, evolving
technologies and so on.
There can be significant deviations between what was visualized and what actually happens.
Strategies need to be attuned or modified in the light of possible environmental changes. There can
be significant or major strategic changes when the environment demands. Reactive strategy is
triggered by the changes in the environment and provides ways and means to cope with the
negative factors or take advantage of emerging opportunities.
Q2. Correct / Incorrect

Every strategic move is the result of proactive planning.
(MTP, May 2018, 2 marks)
The statement is incorrect.

In business, things happen that cannot be fully anticipated or planned for. When market and
competitive conditions take an unexpected turn or some aspect of a company's strategy hits a stone
wall, some kind of strategic reaction or adjustment is required.
Q3. Yummy Foods and Tasty Foods are successfully competing in the business of ready to eat snacks in
Patna. Yummy has been pioneer in introducing innovative products. These products will give them
good sale. However, Tasty Foods will introduce similar products in reaction to the products
introduced by the Yummy Foods taking away the advantage gained by the former.
Discuss the strategic approach of the two companies. Which is superior?
(RTP, Nov 2018, NA) (MTP 1, Nov 2021, 5 Marks) (Study Material)
Yummy foods is proactive in its approach. On the other hand Tasty Food is reactive. Proactive strategy
is planned strategy whereas reactive strategy is adaptive reaction to changing circumstances. A
company’s strategy is typically a blend of proactive actions on the part of managers to improve the
company’s market position and financial performance and reactions to unanticipated developments
and fresh market conditions.
If organisational resources permit, it is better to be proactive rather than reactive. Being proactive in
aspects such as introducing new products will give you advantage in the mind of customers.
Strategic Management QB C1- Page No 1 /17

At the same time, crafting a strategy involves stitching together a proactive/intended strategy and
then adapting first one piece and then another as circumstances surrounding the company’s
situation change or better options emerge-a reactive/adaptive strategy. This aspect can be
accomplished by Yummy Foods.
Q4. Which of the following statement is not true with regards to strategy?
(a) Strategy reduces uncertainty.
(b) Strategy is long range blueprint of desired position.
(c) Strategy relates organisations to the external environment.
(d) Strategy is perfect and flawless.
(RTP, May 2019, NA)
Correct answer: (d) Strategy is perfect and flawless.
Q5. Strategy helps in:

a. Unravelling complexity
b. Reduce uncertainty
c. Relate the goals with the resources.
d. All of Above.
(MTP 2, May 2019, 1 mark)
Correct answer: (d) All of the above
Q6. Strategy is-

(a) Proactive in action
(b) Reactive in action
(c) A blend of proactive and reactive actions
(d) None of the above
(RTP, May 2020, NA)
Correct answer: (c) A blend of proactive and reactive actions.
Q7. Which of the following is correct?

(a) Strategy is always pragmatic and not flexible
(b) Strategy is not always perfect, flawless and optimal
(c) Strategy is always perfect, flawless and optimal
(d) Strategy is always flexible but not pragmatic
(MTP 1, May 2021, 2 marks)
Correct answer: (b) Strategy is not always perfect, flawless and optimal
Q8. Kamal Sweets Corner, a very popular sweets shop in Ranchi, was facing tough competition from
branded stores of packaged sweets and imported goods. The owners realised that their business
reduced by 50% in the last six months, and this created a stressful business environment for them. To
find a solution, they consulted a business consultant to help them develop a strategy to fight
competition and sustain their century old family business. The business consultant advised them to
innovate a new snack for the public and market it as a traditional snack of the region. The owners
liked the idea and developed a new snack called Dahi Samosa, which very quickly became popular
amongst the public and it helped regain the lost business of Kamal Sweets Corner.

One of the very crucial importance of strategic management was used by the business consultant to
help the owners of Kamal Sweets Corner. Which one could it be? Also, was this strategy Reactive or
Proactive? According to you who are more beneficial in general parlance?
(MTP, May 2021, 5 marks) (Study Material)
The strategy used here was of developing a competitive advantage via product which helped Kamal
Sweets Corner regain their lost business. This is also one of the major importance cum advantage of
strategic management, that is helps to develop core competencies and competitive advantages to
overcome competition.
This strategy was a Reactive strategy. Wherein, the owners saw their business fall to 50% of revenue
and then seeking a strategic advisory. They did not plan proactively as to when the new shops were
already opening. They reacted only when the business started to lose up.
Generally, it is always beneficial to develop strategies proactively, so that the dip in businesses is small
and manageable, and even if they are huge, the management has ample time to fix it.
Q9. ALBELA' Foods and 'JustBE' Foods are successfully competing chain of restaurants in India. ALBELA' s
are known for their innovative approach, which has resulted in good revenues. On the other hand,
JustBE is slow in responding to environmental change. The initial stages of Covid-19 pandemic and
the ensuring strict lockdown had an adverse impact on both the companies. Realizing its severity and
future consequences. ALBELA, foods immediately chalked out its post lockdown strategies, which
include initiatives like:
(a) Contactless dinning
(b) New category of foods in the menu for boosting immunity
(c) Improving safety measures and hygiene standards
(d) Introducing online food delivery app
Seeing the positive buzz around these measures taken by ALBELA Food, JustBE Foods also thinks to
introduce these measures.
(i) Identify the strategic approach taken by 'ALBELA' Foods and 'JustBE' Foods.
(ii) Discuss these strategic· approach.
(iii) Which strategic approach is better and why?
(SA, May 2021, 5 marks)
(i) ‘ALBELA’ foods is proactive in its approach. On the other hand, ‘JustBE’ foods is reactive in its
approach.
(ii)
● Proactive strategy is planned strategy. While continuing with the previously initiated business
approaches that are working well, the newly launched managerial initiatives aim to
strengthen the company's overall position and performance. These are outcomes of
management's analysis and strategic thinking about the company's situation and its
conclusions about the positioning of the company in the marketplace. If done well, it helps
the company to effectively compete for buyer patronage.
● Reactive strategy is an adaptive reaction to changing circumstances. It is not always possible
for a company to fully anticipate or plan for changes in the market. There is also a need to
adapt strategy as new learnings emerge about which pieces of strategy are working well and
which aren't. By itself also, the management may hit upon new ideas for improving the
current strategy.
(iii) In reference to the given case, proactive strategy seems to be better because ALBELA foods had
been able to utilise available opportunities, reduce adverse impact, enhance the demand for product
and is also able to avail the first mover advantage.

Q10. An organisation during its strategy planning envisaged entire scenarios and created a strategy
framework. But in mean time after implementation, it realised that its framework is not effective in
certain unique scenarios. What is the reason for the same?
(a) Strategy is "partly proactive and Partly reactive”
(b) Lack of analysis and proper planning.
(c) Strategy is highly reactive and highly proactive.
(d) Improper creation of strategic framework
(RTP, Nov 2021, NA)
Correct answer: (a) Strategy is "partly proactive and Partly reactive”
1.2 Strategic Management
Q1. Define Strategic Management.

(RTP, May 2018, NA)
The term ‘strategic management’ refers to the managerial process of developing a strategic vision,
setting objectives, crafting a strategy, implementing and evaluating the strategy, and initiating
corrective adjustments where deemed appropriate.

Strategic management involves huge cost.
(RTP, May 2018, NA)
The statement is correct.

Strategic management is a costly process. Strategic management adds a lot of expenses to an
organization. Expert strategic planners need to be engaged. Efforts are made for analysis of external
and internal environments, devise strategies and properly implement them. These can be really costly
for organisations with limited resources particularly when small and medium organisation create
strategies to compete.
Q3. The presence of strategic management cannot counter all hindrances and always achieve success for
an organisation. What are the limitations attached to strategic management?
(RTP, May 2018, NA) (MTP 1, May 2019, 5 Marks) (MTP 2, May 2021, 5 Marks) (MTP 1, May 2022, 5
Marks) (Study Material)
Or
Are there any limitations attached to strategic management in organizations? Discuss.

(RTP, May 2019, NA) (MTP 1, May 2020, 5 Marks) (Study Material)
The presence of strategic management cannot counter all hindrances and always achieve success as
there are limitations attached to strategic management. These can be explained in the following
lines:
● Environment is highly complex and turbulent. It is difficult to understand the complex
environment and exactly pinpoint how it will shape-up in future. The organisational estimate

about its future shape may awfully go wrong and jeopardise all strategic plans. The
environment affects as the organisation has to deal with suppliers, customers, governments
and other external factors.
● Strategic Management is a time-consuming process. Organisations spend a lot of time in
preparing, communicating the strategies that may impede daily operations and negatively
impact the routine business.
● Strategic Management is a costly process. Strategic management adds a lot of expenses to an
organization. Expert strategic planners need to be engaged, efforts are made for analysis of
external and internal environments devise strategies and properly implement. These can be
really costly for organisations with limited resources particularly when small and medium
organisation create strategies to compete.
● In a competitive scenario, where all organisations are trying to move strategically, it is difficult
to clearly estimate the competitive responses to the strategies.
Q4. Briefly explain the importance of strategic management.

(MTP 1, May 2018, 5 marks) (RTP, Nov 2018, NA) (MTP 2, Nov 2018, 5 marks)
Or
"Each organization must build its competitive advantage keeping in mind the business warfare. This
can be done by following the process of strategic management". Considering its statement, explain
major benefits of strategic management.
(SA, Nov 2021, 5 Marks)
Each organization has to build its competitive advantage over the competitors in the business
warfare in order to win. This can be done only by following the process of strategic management.
Strategic Management is very important for the survival and growth of business organizations in
dynamic business environment. Other major benefits of strategic management are as follows:
● It helps organizations to be more proactive rather than reactive in dealing with its future. It
facilitates the organisations to work within vagaries of environment and remains adaptable
with the turbulence or uncertain future. Therefore, they are able to control their own destiny
in a better way.
● It provides better guidance to entire organization on the crucial point – what it is trying to do.
Also provides framework for all major business decisions of an enterprise such a decision on
businesses, products, markets, organization structures, etc.
● It facilitates to prepare the organization to face the future and act as pathfinder to various
business opportunities. Organizations are able to identify the available opportunities and
identify ways and means as how to reach them.
● It serves as a corporate defence mechanism against mistakes and pitfalls. It helps
organizations to avoid costly mistakes in product market choices or investments.
● Over a period of time, strategic management helps organizations to evolve certain core
competencies and competitive advantages that assist in the fight for survival and growth.
Q5. Is strategic management a bundle of tricks and magic? Elucidate the statement.
Strategic management is not a bundle of tricks and magic. The term strategic management refers to
the managerial process of forming a strategic vision, setting objectives, crafting a strategy,

implementing and executing the strategy, and then over a period of time initiating whatever
corrective adjustments in the vision, objectives, strategy, and execution are deemed appropriate.
Strategic Management is a deliberate managerial process that involves systematic and analytical
thinking. It involves systematic and analytical thinking and action. Although, the success or failure of
a strategy is dependent on several extraneous factors, it cannot be stated that a strategy is a trick or
magic.
Formation of strategy requires careful planning and requires strong conceptual, analytical, and
visionary skills.
Q6. Define Strategic Management. Also discuss the limitations of Strategic Management.
(SA, May 2018, 5 Marks) (RTP, May 2021, NA) (RTP, Nov 2021, NA)
The presence of strategic management cannot counter all hindrances and always achieve success as
there are limitations attached to strategic management. These can be explained in the following
lines:
about its future shape may awfully go wrong and jeopardise all strategic plans. The
environment affects as the organisation has to deal with suppliers, customers, governments
and other external factors.
● Strategic Management is a time-consuming process. Organisations spend a lot of time in
● Strategic Management is a costly process. Strategic management adds a lot of expenses to an
organization. Expert strategic planners need to be engaged, efforts are made for analysis of
external and internal environments devise strategies and properly implement. These can be
really costly for organisations with limited resources particularly when small and medium
organisation create strategies to compete.
● Competition is unpredictable. In a competitive scenario, where all organisations are trying to
move strategically, it is difficult to clearly estimate the competitive responses to the strategies.
Q7. What benefits accrue by following a strategic approach to managing?

(RTP, Nov 2018, NA) (MTP 1, Nov 2020, 5 Marks)
The following are the benefits of strategic approach to managing:

● Strategic management helps organisations to be more proactive instead of reactive in
shaping its future. Organisations are able to analyse and take actions instead of being mere
spectators. Thereby they are able to control their own destiny in a better manner. It helps
them in working within vagaries of environment and shaping it, instead of getting carried
away by its turbulence or uncertainties.
● Strategic management provides framework for all the major decisions of an enterprise such as
decisions on businesses, products, markets, manufacturing facilities, investments and
organisational structure. It provides better guidance to entire organisation on the crucial point
- what it is trying to do.
● Strategic management is concerned with ensuring a good future for the firm. It seeks to
prepare the corporation to face the future and act as pathfinder to various business

opportunities. Organisations are able to identify the available opportunities and identify ways
and means as how to reach them.
● Strategic management serves as a corporate defence mechanism against mistakes and
pitfalls. It help organisations to avoid costly mistakes in product market choices or
investments. Over a period of time strategic management helps organisation to evolve certain
core competencies and competitive advantages that assist in its fight for survival and growth.
Q8. What can be defined as the art and science of formulating, implementing and evaluating
cross-functional decisions that enable an organization to achieve its objectives?
a. Strategy formulation
b. Strategy evaluation
c. Strategy implementation
d. Strategic management
(MTP 1, MAY 2019, 1 Mark)
Correct answer: (d) Strategic management
Q9. Which of the following statements correctly explain strategic management?

(i) Strategic management provides framework for major decisions.
(ii) Strategic management helps to enhance the longevity of the business.
(iii) Strategic management is an inexpensive process.
(iv) Strategic management helps organisation to be more reactive than proactive.
(A) (i) and (ii)
(B) (i), (ii) and (iii)
(C) (i), (ii) and (iv)
(D) (i), (iii) and (iv)
(RTP, Nov 2019, NA)
Correct answer: (A) (i) and (ii)
Q10. Ramesh Sharma has fifteen stores selling consumer durables in Delhi Region. Four of these stores
were opened in last three years. He believes in managing strategically and enjoyed significant sales of
refrigerator, televisions, washing machines, air conditioners and like till four years back. With shift to
the purchases to online stores, the sales of his stores came down to about seventy per cent in last four
years.
Analyse the position of Ramesh Sharma in light of limitations of strategic management.
(RTP, Nov 2019, NA) (RTP, Nov 2020, NA) (Study Material)
Ramesh Sharma is facing declining sales on account of large scale shift of customers to online stores.
While he is using the tools of strategic management, they cannot counter all hindrances and always
achieve success. There are limitations attached to strategic management as follows:
● Environment under which strategies are made is highly complex and turbulent. Entry of
online stores, a new kind of competitor brought a different dimension to selling consumer
durables. Online stores with their size power could control the market and offer stiff
competition to traditional stores.
● Another limitation of strategic management is that it is difficult to predict how things will
shape-up in future. Ramesh Sharma, although managing strategically failed to see how online
stores will impact the sales.

● Although, strategic management is a time-consuming process, he should continue to

manage strategically. The challenging times require more efforts on his part.
● Strategic management is costly. Ramesh Sharma may consider engaging experts to find out
preferences of the customers and attune his strategies to better serve them in a customized
manner. Such customized offerings may be difficult to match by the online stores.
● The stores owned by Ramesh Sharma are much smaller than online stores. It is very difficult
for him to visualize how online stores will be moving strategically.
Q11. Strategic management helps an organization to work through changes in environment to gain
competitive advantage. In light of statement discuss its benefits.
Strategic management involves developing the company’s vision, environmental scanning, strategy
formulation, implementation, evaluation and control. It emphasises the monitoring and evaluation of
external opportunities and threats in the light of a company’s strengths and weaknesses and
designing strategies for the survival and growth. It helps in creation of competitive advantage to
outperform the competitors and also guide the company successfully through all changes in the
environment.
The major benefits of strategic management are:
● Strategic management gives a direction to the company to move ahead. It defines the goals
and mission.
● It helps organisations to be proactive instead of reactive in shaping its future.
● It provides framework for all major decisions of an enterprise such as decisions on businesses,
products, markets, manufacturing facilities, investments and organisational structure. It
provides better guidance to entire organisation on the crucial point - what it is trying to do.
● It helps organisations to identify the available opportunities and identify ways and means to
achieve them.
● It serves as a corporate defence mechanism against mistakes and pitfalls.
● It helps to enhance the longevity of the business.
● It helps the organisation to develop certain core competencies and competitive advantages
that would facilitate survival and growth.
Q12. Developing vision and mission, identifying an organisation’s external opportunities and threats, and
determining internal strengths and weaknesses are:
(a) SBU planning
(b) Strategy formulation
(c) Strategy implementation
(d) Business process reengineering
(MTP 1, MAY 2021, 2 Marks)
Correct answer: (b) Strategy formulation
Q13. ‘Strategic Management is not a panacea for all the corporate ills, it has its own pitfalls which can’t
counter all hindrances and always achieve success’.
Do you agree with this statement? Discuss.
(SA, May 2019, 5 Marks)
It is true that the strategic management is not a panacea for all corporate ills. This is on account of
complex multiple forces acting on business organization and limiting its success.

These limitations are on account of following factors:

about its future shape may awfully go wrong and jeopardise all strategic plans.
● Strategic management is a time-consuming process. Organisations spend a lot of time in
● Strategic management is a costly process. Strategic management adds a lot of expenses to an
organization – particularly to small and medium organisations. Expert strategic planners need
to be engaged, efforts are made for analysis of external and internal environments devise
strategies and properly implement.
● Competition is unpredictable. In a competitive scenario, where all organisations are trying to
move strategically, it is difficult to clearly estimate the competitive responses to the strategies.
Q14. What is Strategic Management? What benefits accrue by following a strategic approach to
managing?
(Study Material)
The overall objective of strategic management is two fold:
● To create competitive advantage , so that the company can outperform the competitors in
order to have dominance over the market.
● To guide the company successfully through all changes in the environment.
The following are the benefits of strategic approach to managing:
● Strategic management helps organisations to be more proactive instead of reactive in
shaping its future. Organisations are able to analyse and take actions instead of being mere
spectators. Thereby they are able to control their own destiny in a better manner. It helps
them in working within vagaries of environment and shaping it, instead of getting carried
away by its turbulence or uncertainties.
● Strategic management provides framework for all the major decisions of an enterprise such as
decisions on businesses, products, markets, manufacturing facilities, investments and
organisational structure. It provides better guidance to entire organisation on the crucial point
- what it is trying to do.
● Strategic management is concerned with ensuring a good future for the firm. It seeks to
prepare the corporation to face the future and act as pathfinder to various business
opportunities. Organisations are able to identify the available opportunities and identify ways
and means as how to reach them.
● Strategic management serves as a corporate defence mechanism against mistakes and
pitfalls. It help organisations to avoid costly mistakes in product market choices or
investments. Over a period of time strategic management helps organisation to evolve certain
core competencies and competitive advantages that assist in its fight for survival and growth.
1.3 Strategic levels in Organisation

Q1. Define the role of corporate level managers.

(RTP, Nov 2018, NA)
Corporate-level managers participate in strategic decision making within the organization. The role of
corporate-level managers is to oversee the development of strategies for the whole organization. This
role includes defining the mission and goals of the organization, determining what businesses it
should be in, allocating resources among the different businesses, formulating and implementing
strategies that span individual businesses, and providing leadership for the organization.
Q2. Correct / Incorrect.

Control systems run parallel with strategic levels.
(RTP, Nov 2018, NA)

There are three strategic levels in an organisation – corporate, business and functional. Control
systems are required at all the three levels. At the top level, strategic controls are built to check
whether the strategy is being implemented as planned and the results produced by the strategy are
those intended. Down the hierarchy management controls and operational controls are built in the
systems. Operational controls are required for day-to-day management of business.
Q3. Distinguish between the three levels of strategy formulation.

(MTP 1, Nov 2018, 5 marks)
Or
Explain the difference between three levels of strategy formulation.

(RTP, May 2020, NA) (Study Material)
A typical large organization is a multidivisional organisation that competes in several different

businesses. It has separate self-contained divisions to manage each of these. There are three levels of
strategy in management of business - corporate, business, and functional.
The corporate level of management consists of the chief executive officer and other top level
executives. These individuals occupy the apex of decision making within the organization. The role of
should be in, allocating resources among the different businesses and so on rests at the Corporate
Level.
The development of strategies for individual business areas is the responsibility of the general
managers in these different businesses or business level managers. A business unit is a self-
contained division with its own functions - for example, finance, production, and marketing. The
strategic role of business-level manager, head of the division, is to translate the general statements of
direction and intent that come from the corporate level into concrete strategies for individual
businesses.
Functional-level managers are responsible for the specific business functions or operations such as
human resources, purchasing, product development, customer service, and so on. Thus, a functional
manager’s sphere of responsibility is generally confined to one organizational activity, whereas
general managers oversee the operation of a whole company or division.
Q4. List the different strategic levels in an organisation.

( SA, Nov 2018, 2 marks)
There are three main strategic levels in an organisation:

• Corporate level – consisting of CEO, Board of Directors and other senior executives.
• Business level – Divisional Managers and staff.
• Functional level – Functional Managers – Marketing, Finance, Production, Human Resource.
Q5. Strategic decision making can take place at three common levels of an organisation as follows:
(a) Divisional, group and individual.
(b) Executive, leader and manager.
(c) Corporate, business and functional.
(d) Strategic, tactical and operational.
(RTP, May 2019, NA)
Correct answer: (c) Corporate, business and functional
Q6. Which of the following statement is not true:

a. Strategic environment is complex
b. Strategic environment is turbulent.
c. High cost of strategy makes them useless for charitable organization.
d. Public sector units should implement business strategy.
(MTP 2, May 2019, 1 mark)
Correct answer: (c) High cost of strategy makes them useless for charitable organization.
Q7. Enumerate the task to be performed as a strategic manager of a company.

The primary tasks of the strategic manager is conceptualizing, designing and executing company
strategies.
For this purpose, his tasks will include:
● Defining the mission and goals of the organization.
● Determining what businesses it should be in.
● Allocating resources among the different businesses.
● Formulating strategies.
● Implementing strategies.
● Providing leadership for the organization.
Q8. Which of the following are responsible for formulating and developing realistic and attainable
strategies?
(a) Corporate level and business level managers
(b) Corporate level and functional level managers
(c) Functional level managers and business level managers
(d) Corporate level managers, business level managers and functional level managers
(MTP 1, Nov 2019, 1 mark) (RTP, May 2020, NA)
Correct answer: (d) Corporate level managers, business level managers and functional level managers

Q9. ABC Limited is in a wide range of businesses which include apparels, lifestyle products, furniture, real
estate and electrical products. The company is looking to hire a suitable Chief Executive Officer.
Consider yourself as the HR consultant for ABC limited. You have been assigned the task to enlist the
activities involved with the role of the Chief Executive Officer. Name the strategic level that this role
belongs to and enlist the activities associated with it.
(SA, Jan 2021, 5 marks) (Study Material)
The role of Chief Executive Officer pertains to Corporate level.

The corporate level of management consists of the Chief Executive Officer (CEO) and other top-level
executives. These individuals occupy the apex of decision making within the organization.
The role of Chief Executive Officer is to:
1. oversee the development of strategies for the whole organization;
2. defining the mission and goals of the organization;
3. determining what businesses, it should be in;
4. allocating resources among the different businesses;
5. formulating, and implementing strategies that span individual businesses;
6. providing leadership for the organization;
7. ensuring that the corporate and business level strategies which company pursues are consistent
with maximizing shareholders wealth; and
8. managing the divestment and acquisition process.
Q10. Dharam Singh, the procurement department head of Cyclix, a mountain biking equipment company,
was recently promoted to look after sales department along with procurement department. His
seniors at the corporate level have always liked his way of leadership and are assures that he would
ensure the implementation of policies and strategies to the best of his capacity but have never
involved him in decision making for the company.
Do you think this is the right approach? Validate your answer with logical reasoning around
management levels and decision making.
Functional managers provide most of the information that makes it possible for business and
corporate level managers to formulate realistic and attainable strategies.
This is so because functional managers like Dharam Singh are closer to the customer than the typical
general manager is. A functional manager may generate important ideas that subsequently may
become major strategies for the company. Thus, it is important for general managers to listen closely
to the ideas of their functional managers and involve them in decision making.
An equally great responsibility for managers at the operational level is strategy implementation: the
execution of corporate and business level plans, and if they are involved in formulation, the clarity of
thoughts while implementation can benefit too.
Thus, the approach of Cylcix Corporate management is not right. They should involve Dharam Singh,
as well as other functional managers too in strategic management.
Q11. Mr. Mehta sharing with his friend in an informal discussion that he has to move very cautiously in his
organization as the decisions taken by him has organisation wide impact and involves large
commitments of resources. He also said that his decisions decide the future of his organisation.
Where will you place Mr. Mehta in the organizational hierarchy and explain his role in the
organization.
(RTP, Nov 2021, NA)

Mr. Mehta works in an organization at top level. He participates in strategic decision making within
the organization. The role of corporate-level managers is to oversee the development of strategies for
the whole organization. This role includes defining the mission and goals of the organization,
determining what businesses it should be in, allocating resources among the different businesses,
formulating and implementing strategies that span individual businesses, and providing leadership
for the organization.
Q12. ABC Ltd. currently sells its product in two major markets ± Europe and Asia. While it is a market leader
in Europe, ABC Ltd. has struggled to penetrate the more competitive Asian market. ABC Ltd. hired a
strategic consultant to analyze the situation and submit his report to them. After the report received
from the strategic consultant, it has therefore decided to pull out of Asia entirely and focus on its
European markets only. This decision relates to which level in ABC Ltd. and explain the role of
managers at this level in the organization.
(RTP, May 2022, NA)
Corporate level strategy relates to the markets and industries that the organization chooses to
operate in, as well as other decisions that affect the organization as a whole. The role of
should be in, allocating resources among the different businesses, formulating and implementing
strategies that span individual businesses, and providing leadership for the organization.
1.4 Strategic Management in Government and Not for Profit

Organisations
Q1. Health Wellnow is a Delhi based charitable organisation promoting healthy lifestyle amongst the
office-goers. It organises programmes to encourage and guide office-goers on matters related to
stress relief, yoga, exercises, healthy diet, weight management, work- life balance and so on. Many
business organisations and resident welfare associations like services of Health Wellnow. Its daily yoga
sessions are very popular in some of the big companies located in Delhi, Noida and Gurgaon. The
Health Wellnow has no commercial interest and does not charge any fees for its services. However,
the organisation is able to get good charities and has sufficient funds to meet its routine expenses.
Do you think the concepts of strategic management are relevant for Health Wellnow? Discuss.
(RTP, May 2018, NA) (RTP, May 2020, NA) (Study Material)
The concepts of strategic management are relevant for Health Wellnow.

Organizations can be classified as commercial and non-commercial on the basis of the interest they
have. Health Wellnow falls in the category of a non-commercial organisation. While non-commercial
organisations may have objectives that are different from the commercial organisations, they need to
employ the strategic management tools to efficiently use their resources, generate sufficient
surpluses to meet daily expenses and achieve their objectives. In fact, many non-profit and
governmental organizations outperform private firms and corporations on innovativeness,
motivation, productivity, and human relations.
The strategic management in Health Wellnow needs to cover aspects such as:
(i) Generate sufficient funds for meeting its objectives.
(ii) Efficiently reach office-goers and help them to have health in life.

(iii) Promote itself to cover more offices, resident welfare associations.

(iv) Have a deep collaboration with health experts, including dieticians, psychologist, fitness trainers,
yoga experts.

Non-profit organizations do not require Strategic Management.
(SA, May 2018, 2 marks)
The statement is Incorrect.

Strategic management applies equally to profit as well as non-profit organisations. Similar to
commercial organizations, ‘not-for-profit’ organizations must also have strategies, purpose, vision and
mission also. Strategic Management is required to give direction, focus and lead to efficient utilization
of resources. In many ‘not-for-profit’ organizations surpluses are important for their survival and
growth.
Q3. Do you agree with the statement that “Strategic Management concepts are of no use to Government
organizations and Medical organizations”? Explain with reasons.
(MTP 1, Nov 2018, 5 marks)
have. Typically, a government or medical organization may function without any commercial
objectives. A commercial organization has profit as its main aim. We can find many organizations
around us, which do not have any commercial objective of making profits. Their genesis may be for
social, charitable, or educational purposes.
The strategic-management process is being used effectively by countless non-profit governmental
organizations. Many non-profit and governmental organizations outperform private firms and
corporations on innovativeness, motivation, productivity, and human resource.
Compared to for-profit firms, non-profit and governmental organizations often function as a
monopoly, produce a product or service that offers little or no measurability of performance, and are
totally dependent on outside financing. Especially for these organizations, strategic management
provides an excellent vehicle for developing and justifying requests for needed financial support.
Q4. Helpbuddy is a not-for-profit organisation providing medical facilities to poor and needy at highly
affordable costs. The organisation is dependent on Government grants and donations to manage its
affairs. Rohit who is running the organization, believes in taking things as they come and will change
the level of activities based on the funds available.
Do you think Rohit is right in taking things as they come? What will you advise him?
(MTP 2, Nov 2018, 5 marks) (Study Material)
It is not advisable for any organisation to take things as they come. Organisations whether
commercial or non-commercial need proper planning. In fact, the strategic management process is
being used effectively by countless non-profit governmental organizations. Many non-profit and
governmental organizations outperform private firms and corporations on innovativeness,
motivation, productivity, and human relations.

Rohit needs to understand the importance of strategic management in his organisation. His
organisation is also depended on funds from government and donations. On one side, he needs to
maintain steady inflow of funds and on the other side he needs to ensure proper utilisation of funds.
He can plan to use funds in a manner to maintain similar similar level of continuous services. With
proper planning, resources can be better utilised, more funds can be generated and the quality of
services maintained.
Q5. `Do Good Group’ is a not-for-profit organization based in northern India working towards childcare.
The group educates people towards immunization, sanitation and works in coordination with local
hospitals or medical centers. Recently, a new team has taken over the management of its activities.
Explain whether tools of strategic Management are relevant for the group.
The tools of strategic management process are effectively being used by a number of not- for-profit
or charitable organizations. While ‘Do Good Group’ may have social and charitable existence, still it
has to generate resources and use them wisely to achieve organisational objectives. Organisation
needs to be managed strategically, irrespective whether they have profit motive. The strategic
Management at ‘Do Good Group’ should essentially cover:
● Analyzing and interpreting the strategic intent in terms of vision, mission and objectives.
● Generating required resources in terms of finance and manpower (volunteers, paid
employees).
● Undertaking SWOT analysis from time to time.
● Setting goals in the area of childcare. It can be in terms of geographical coverage and number
of children.
● Analyzing the desired future position with the past and present situation.
Q6. "Strategic Management concepts are useful for educational institutions." Explain with reasons.
(SA, Nov 2019, 5 marks)
Education is considered to be a noble profession. An educational institution often functions as a

not-for-profit organization managed by trusts and societies. They include schools, colleges and
universities. Being inherently non-commercial in nature, educational organisations do not have
cut-throat competition as in case of their commercial counterparts. However, as the number of
institutions belonging to both public and private sector are increasing, the competition is gradually
rising. Key reasons for use of strategic management techniques in educational institutes are as
follows:
● Getting better name and recognition.
● Adopt different strategies for attracting best students.
● Appointing and retaining quality faculty for teaching.
● Deliver education to make graduates more employable.
● Nurturing responsible citizens.
Q7. "There is a need for Strategic Management for government and medical organization too."
Comments.
(SA, Nov 2020, 5 marks)
Yes, there is a need of strategic management for government and medical organizations like the
commercial organizations because optimum utilization of resources in view of their scarcity, good

strategy formulation and its effective implementation & proper monitoring is needed equally in both
types of organizations.
Government Organizations: Central, state, municipal agencies, public sector units, department are
responsible for formulating, implementing and evaluating strategies that use taxpayers’ money in the
most cost-effective way to provide services and programs. Therefore, strategic management concepts
are required for them.
Medical Organizations: Modern hospitals quite often are using strategic management for creating
new strategy and implementing properly for diagnosis and treatment of different diseases at lower
price. Forward and Backward integration strategies are also required in hospitals for providing better
services at lower cost.
Q8. How concept of strategic management is useful in Government and medical organizations? Discuss.
(Study Material)
Q9. Discuss the challenges faced by public sector units while designing for their organisations..
(RTP, May 2022, NA)
Central, state, municipal agencies, Public Sector Units, departments are responsible for formulating,
implementing, and evaluating strategies that use taxpayers' money in the most cost-effective way to
provide services and programs. The Challenges faced by the public sector units while designing their
organizations are on account of basic nature of such organizations.
Public sector units face the following challenges while designing strategies for their organizations:
● Operating with less strategic autonomy.
● Cannot diversify into unrelated businesses or merge with other firms.

● Strategists usually enjoy little freedom while altering the organisation’s mission or redirecting
objectives when needed.
● Legislators and politicians control over major decisions and resources.
● Fear of media debate over the strategic issues.
● Chances of politicization of issues resulting fewer strategic choice.

Question Bank - Chapter 2 - Dynamics Compiled by Neeraj Arora and TEAM
Chapter 2
Question Bank
Q1. An organization that has a low relative market share position and competes in a slow-growth industry
is referred to as a _____.
(a) Dog
(b) Question Mark
(c) Star
(d) Cash Cows
(Sample MCQs)
Correct answer: (a) Dog
Q2. Which section of the SWOT Matrix involves matching internal strengths with external opportunities?
(a) The WT cell
(b) The SW cell
(c) The SO cell
(d) The ST cell
(Sample MCQs)
Correct answer: (c) The SO cell
Q3. Which of the following is not a limitation of SWOT (Strengths, Weaknesses, Opportunity, Threats) analysis?
(a) Organizational strengths may not lead to competitive advantage
(b) SWOT gives a one-shot view of a moving target
(c) SWOT's focus on the external environment is too broad and integrative
(d) SWOT overemphasizes a single dimension of strategy
(Sample MCQs)
Correct answer: (c) SWOT's focus on the external environment is too broad and integrative
Q4. The emphasis on product design is very high, the intensity of competition is low, and the market growth
rate is low in the ______ stage of the industry life cycle.
(a) Maturity
(b) Introduction
(c) Growth
(d) Decline
(Sample MCQs)
Correct answer: (b) Introduction
Q5. The most probable time to pursue a harvest strategy is in a situation of

(a) High growth
(b) Decline in the market life cycle
SM- Page No.C2/ QB 1 /25

(c) Strong competitive advantage

(d) Mergers and acquisitions
(Sample MCQs)
Correct answer: (b) Decline in the market life cycle
Q6. Competitive landscape requires the application of-

a) Competitive advantage
b) Competitive strategy
c) Competitive acumen
d) Competitive intelligence
(Sample MCQs) (MTP1, Nov 2019, 1 Mark)
Correct answer: (d) Competitive intelligence
Q7. ‘Determinants Anaysis’ falls in the purview of? -

a) External competitive strategy analysis
b) Internal competitive strategy analysis
c) Strategic risk
d) Competitive landscape
(Sample MCQs)
Correct answer: (a) External competitive strategy analysis
Q8. The concept of ‘core competence’ has been advocated by-

a) Gary Hamel and Peter Drucker
b) C.K. Prahlad and Gary Hamel
c) C.K. Prahlad and Michael Porter
d) C.K. Prahlad and Peter Drucker
(Sample MCQs)
Correct answer: (b) C.K. Prahlad and Gary Hamel
Q9. "‘Customer Analysis’ and ‘Market Analysis’ are the part of-
a) Internal analysis
b) Strategy identification and selection
c) External Analysis
d) None of the above"
(Sample MCQs)
Correct answer: (c) External Analysis
Q10. "‘Strategic group mapping’ involves-

a) Identifying the strongest rival companies
b) Identifying weakest rival companies
c) Identifying weakest and strongest rival companies

d) None of the above"

(Sample MCQs) (RTP, May 2020, NA) (MTP1, Nov 2020, 1 Mark)
Correct answer: (c) Identifying weakest and strongest rival companies
Q11. "‘Attractiveness of firms’ while conducting industry analysis should be seen in-
a) Relative terms
b) Absolute terms
c) Comparative terms
d) All of the above"
(Sample MCQs)
Correct answer: (a) Relative terms
Q12. "Which of the following is true of a transnational Corporation:

a) They have subsidiaries but do not have centralized management system
b) They have no subsidiaries but have centralized management system
c) They do not have subsidiaries and do not have centralized management system
d) They have subsidiaries and have a centralized management system"
(Sample MCQs)
Correct answer: (c) They do not have subsidiaries and do not have centralized management system
Q13. "A tool by which management identifies and evaluates the various businesses that make up a
company is termed as:
a) Value Chain Analysis
b) Portfolio Analysis
c) Competition Analysis
d) Strategic Analysis"
(Sample MCQs) (RTP, May 2020, NA)
Correct answer: (b) Portfolio Analysis
Q14. ‘Build,’ ‘Hold,’ ‘Harvest,’ and ‘Divest’ are the strategies pursued in
a) Boston Consulting Group Growth-Share Matrix
b) Value chain Analysis
c) Managerial Grid Matrix
d) Ansoff’s Product Matrix Growth Matrix
(Sample MCQs)
Correct answer: (a) Boston Consulting Group Growth Share Matrix
Q15. "The low growth, low share businesses in BCG matrix are:
a) Cows
b) Dogs

c) Cats
d) Question Marks"
(Sample MCQs)
Correct answer: (b) Dogs
Q16. "An advertisement says, ‘Have Roohafza with milk and lassi too’. Which strategy is the company trying
to use:
a) Market Development
b) Product Development
c) Market Penetration
(Sample MCQs)
Correct answer: (c) Market Penetration
Q17. "ADL matrix has been propounded by:

a) Arthur D. Lowey
b) Arthur D. Little
c) Arthur D. Levin
d) Arthur D. Louise"
(Sample MCQs)
Correct answer: (b) Arthur D. Little
Q18. "Which of the following bases of competitive advantage is/are more sustainable:
a) Benefit-based competitive advantage
b) Price-based competitive advantage
c) Cost-based competitive advantage
(Sample MCQs)
Correct answer: (a) Benefit-based competitive advantage
Q19. What is an opportunity?

(RTP, May 2018, NA)
An opportunity is a favourable condition in the organization's environment which enables it to

consolidate and strengthen its position. An example of opportunity is growing demand for the
products or services that are offered by the company.
Q20. Correct/Incorrect
Key success factors determine competitive success.
(RTP, May 2018, NA)

The purpose of identifying Key Success Factors is to make judgments about things that are more
important to competitive success and the things that are less important. To compile a list of every
factor that matters even a little bit defeats the purpose of concentrating management attention on
the factors truly critical to long- term competitive success.
Q21. "Suresh Singhania is the owner of an agri-based private company in Sangrur, Punjab. His unit is
producing puree, ketchups and sauces. While its products have significant market share in the
northern part of country, the sales are on decline in last couple of years. He seeks help of a
management expert who advises him to first understand the competitive landscape.
Explain the steps to be followed by Suresh Singhania to understand competitive landscape."
(RTP, May 2018, NA)
Steps to understand the competitive landscape

(i) Identify the competitor: The first step to understand the competitive landscape is to identify the
competitors in the firm’s industry and have actual data about their respective market share.
(ii) Understand the competitors: Once the competitors have been identified, the strategist can use
market research report, internet, newspapers, social media, industry reports, and various other
sources to understand the products and services offered by them in different markets.
(iii) Determine the strengths of the competitors: What are the strength of the competitors? What
do they do well? Do they offer great products? Do they utilize marketing in a way that comparatively
reaches out to more consumers. Why do customers give them their business?
(iv) Determine the weaknesses of the competitors: Weaknesses (and strengths) can be identified
by going through consumer reports and reviews appearing in various media. After all, consumers are
often willing to give their opinions, especially when the products or services are either great or very
poor.
(v) Put all of the information together: At this stage, the strategist should put together all
information about competitors and draw inference about what they are not offering and what the
firm can do to fill in the gaps. The strategist can also know the areas which need to be strengthen by
the firm.
Q22. Explain the concept of the experience curve and highlight its relevance in strategic management.
(RTP, May 2018, NA) (MTP2, Nov 2018, 5 Marks)
Experience curve is similar to learning curve which explains the efficiency gained by workers through
repetitive productive work. Experience curve is based on the commonly observed phenomenon that
unit costs decline as a firm accumulates experience in terms of a cumulative volume of production.
The implication is that larger firms in an industry would tend to have lower unit costs as compared to
those of smaller organizations, thereby gaining a competitive cost advantage. Experience curve
results from a variety of factors such as learning effects, economies of scale, product redesign and
technological improvements in production.
The concept of experience curve is relevant for a number of areas in strategic management. For
instance, experience curve is considered a barrier for new firms contemplating entry in an industry. It
is also used to build market share and discourage competition.
Q23. Explain competitive advantage.

(MTP1, May 2018, 2 Marks) (SA, May 2018, 2 Marks) (MTP2, Nov 2018, 3 Marks) (MTP1, May 2020, 5

Marks)
Competitive advantage is the position of a firm to maintain and sustain a favorable market position
when compared to the competitors. Competitive advantage is ability to offer buyers something
different and thereby providing more value for the money. It is the result of a successful strategy. This
position gets translated into higher market share, higher profits when compared to those that are
obtained by competitors operating in the same industry. Competitive advantage may also be in the
form of low cost relationship in the industry or being unique in the industry along dimensions that
are widely valued by the customers in particular and the society at large.
Q24. "Mr. Banerjee is head of marketing department of a manufacturing company. His company is in
direct competition with thirteen companies at national level. He wishes to study the market positions
of rival companies by grouping them into like positions.
Name the tool that may be used by Mr. Banerjee? Explain the procedure that may be used to
implement the technique."
(MTP1, May 2018, 5 Marks)
A tool to study the market positions of rival companies by grouping them into like positions is
strategic group mapping. Grouping competitors is useful when there are many competitors such that
it is not practical to examine each one in-depth. In the given scenario there are thirteen competitors.
A strategic group consists of those rival firms which have similar competitive approaches and
positions in the market.
The procedure for constructing a strategic group map and deciding which firms belong in which
strategic group is as follows:
● Identify the competitive characteristics that differentiate firms in the industry typical variables
that are price/quality range (high, medium, low); geographic coverage (local, regional,
national, global); degree of vertical integration (none, partial, full); product-line breadth (wide,
narrow); use of distribution channels (one, some, all); and degree of service offered (no-frills,
limited, full).
● Plot the firms on a two-variable map using pairs of these differentiating characteristics.
● Assign firms that fall in about the same strategy space to the same strategic group.
● Draw circles around each strategic group making the circles proportional to the size of the
group's respective share of total industry sales revenues.
Q25. Explain the steps to understand the competitive landscape?


competitors in the firm’s industry and have actual data about their respective market share. This
answers the question: Who are the competitors?
sources to understand the products and services offered by them in different markets. This answers
the question: What are their product and services?

reaches out to more consumers. Why do customers give them their business? This answers the
questions: What are their financial positions? What gives them cost and price advantage? What are
they likely to do next? How strong is their distribution network? What are their human resource
strengths?
poor. This answers the question Where are they lacking?
the firm. This answers the questions: What will the business do with this information? What
improvements does the firm need to make? How can the firm exploit the weakness of competitors?
Q26. Relevance of experience curve.

Experience curve is similar to learning curve which explains the efficiency gained by workers through
repetitive productive work. Experience curve is based on the commonly observed phenomenon that
unit costs decline as a firm accumulates experience in terms of a cumulative volume of production.
The implication is that larger firms in an industry would tend to have lower unit costs as compared to
those of smaller organizations, thereby gaining a competitive cost advantage. Experience curve
results from a variety of factors such as learning effects, economies of scale, product redesign and
technological improvements in production.
The concept of experience curve is relevant for a number of areas in strategic management. For
instance, experience curve is considered a barrier for new firms contemplating entry in an industry. It
is also used to build market share and discourage competition.
Q27. Explain the meaning of core competencies.

A core competence is a unique strength of an organization which may not be shared by others. It is
defined as a combination of skills and techniques rather than individual skill or separate technique.
Core competencies are those capabilities that are critical to a business achieving competitive
advantage. In order to qualify as a core competence, the competency should differentiate the
business from any other similar businesses.
Q28. Write a short note on SWOT analysis.

(SA, May 2018, 3 Marks) (RTP, Nov 2018, NA) (RTP, May 2021, NA)
SWOT analysis is a tool used by organizations for evolving strategic options for the future. The term
SWOT refers to the analysis of strengths, weaknesses, opportunities and threats facing a company.
Strengths and weaknesses are identified in the internal environment, whereas opportunities and
threats are located in the external environment.
(a) Strength: Strength is an inherent capability of the organization which it can use to gain strategic
advantage over its competitor.

(b) Weakness: A weakness is an inherent limitation or constraint of the organisation which creates
strategic disadvantage to it.
(c) Opportunity: An opportunity is a favourable condition in the external environment which enables
it to strengthen its position.
(d) Threat: An unfavourable condition in the external environment which causes a risk for, or damage
to the organisation’s position.
The major purpose of SWOT analysis is to enable the management to create a firm-specific business
model that will best align, fit or match an organisational resources and capabilities to the demands
for environment in which it operates.
Q29. Define key success factors (KSFs).

(RTP, Nov 2018, NA)
An industry’s key success factors (KSFs) are those things or strategic elements that affect industry
members’ ability to prosper in a market place. For a business organization within an industry, it may
include, cost structure, technology, distribution system and so on. It is correct to state that the KSFs
help to shape whether a company will be financially and competitively successful.
Q30. Competitive strategy is designed to help firms achieve competitive advantage.

(RTP, Nov 2018, NA)

Competitive strategy is designed to help firms achieve competitive advantage. Having a competitive
advantage is necessary for a firm to compete in the market. Competitive advantage comes from a
firm’s ability to perform activities more effectively than its rivals.
Q31. ‘Value for Money’ is a leading retail chain, on account of its ability to operate its business at low costs. The
retail chain aims to further strengthen its top position in the retail industry. Marshal, the CEO of the retail
chain is of the view that to achieve the goals they should focus on lowering the costs of procurement of
products.
Highlight and explain the core competence of the ‘Value for Money’ retail chain.
(RTP, Nov 2018, NA)
A core competence is a unique strength of an organization which may not be shared by others. It is
defined as a combination of skills and techniques rather than individual skill or separate technique.
Core competencies are those capabilities that are critical to a business achieving competitive
advantage. In order to qualify as a core competence, the competency should differentiate the
business from any other similar businesses. A core competency for a firm is whatever it does is highly
beneficial to the organisation.
‘Value for Money’ is the leader on account of its ability to keep costs low. The cost advantage that
‘Value for Money’ has created for itself has allowed the retailer to price goods lower than competitors.
The core competency in this case is derived from the company’s ability to generate large sales
volume, allowing the company to remain profitable with low profit margin.

Q32. How Ansoff’s Product-Market Growth Matrix is a useful tool for business organizations?
(RTP, Nov 2018, NA) (MTP2, May 2019, 5 Marks) (MTP1, Nov 2021, 5 Marks)
The Ansoff’s product market growth matrix (proposed by Igor Ansoff) is a useful tool that helps
businesses decide their product and market growth strategy. With the use of this matrix a business
can get a fair idea about how its growth depends in new or existing products in both new and
existing markets.
Companies should always be looking to the future. Businesses that use the Ansoff matrix can
determine the best strategy. The matrix can help them to decide how to do this by demonstrating
their options clearly, breaking them down into four strategies, viz., Market Penetration, Market
Development, Product Development, Diversification. Determining which of these is best for their
business will depend on a number of variables including available resources, infrastructure, market
position, location and budget.
“B” in BCG Matrix stands for balance.
(MTP1, Nov 2018, 2 Marks)

The acronym BCG stands for Boston Consulting Group, an organization that developed a matrix to
portray an organizational corporate portfolio of investment. This matrix depicts growth of business
and the business share enjoyed by an organization. The matrix is also known for its cow and dog
metaphors and is popularly used for resource allocation in a diversified company.
A core competence is a unique strength of an organization which may not be shared by others.

A core competence is a unique strength of an organization which may not be shared by others. If
business is organized on the basis of core competence, it is likely to generate competitive advantage.
A core competence provides potential access to a wide variety of markets. Core competencies should
be such that it is difficult for competitors to imitate them.
Q35. Why is it necessary to do a SWOT analysis before selecting a particular strategy for a business organization?
An important component of strategic thinking requires the generation of a series of strategic

alternatives, or choices of future strategies to pursue, given the company's internal strengths and
weaknesses and its external opportunities and threats. The comparison of strengths, weaknesses,
opportunities, and threats is normally referred to as SWOT analysis.


SWOT analysis helps managers to craft a business model (or models) that will allow a company to
gain a competitive advantage in its industry (or industries). Competitive advantage leads to increased
profitability, and this maximizes a company's chances of surviving in the fast-changing, competitive
environment. Key reasons for SWOT analyses are:
● It provides a logical framework.
● It presents a comparative account.
● It guides the strategist in strategy identification.
Q36. Examine the significance of KSFs (Key Success Factors) for competitive success.
(SA, Nov 2018, 3 Marks) (MTP1, May 2021, 5 Marks)
An industry’s Key Success Factors (KSFs) are those things that most affect industry members’ ability
to prosper in the market place – the particular strategy elements, product attributes, resources,
competencies, competitive capabilities and business outcomes that spell the difference between
profit & loss and ultimately, between competitive success or failure. KSFs by their very nature are so
important that all firms in the industry must pay close attention to them. They are the prerequisites
for industry success, or, to put it in another way, KSFs are the rules that shape whether a company will
be financially and competitively successful.
Q37. A __________ consists of those rival firms which have similar competitive approaches and positions in the
market.
(a) BCG Matrix.
(b) Strategic group.
(c) Strategy Map.
(d) Industry.
(RTP, May 2019, NA)
Correct answer: (b) Strategic group
Q38. According to C.K. Prahalad and Gary Hamel, major core competencies are identified in three areas -
________, ____________, and application to other markets.
(a) Competitor differentiation, customer value.
(b) Competitor differentiation, focus.
(c) Cost leadership, differentiation.
(d) Profits, growth.
(RTP, May 2019, NA)
Correct answer: (a) Competitor differentiation, customer value
Q39. A thing that a firm does especially well in comparison to the rival firms is:
(a) Opportunity availed.
(b) Successful leadership.
(c) Competitive advantage.

(d) Comparative advantage.

(RTP, May 2019, NA)
Correct answer: (c) Competitive advantage
Q40. Under BCG an SBU with products having little market share but in an attractive industry is referred to as:
(a) Cash cow.
(b) Star.
(c) Dog.
(d) Question mark.
(RTP, May 2019, NA)
Correct answer: (d) Question Mark
Q41. Rohit Patel is having a small chemist shop in the central part of Ahmedabad. What kind of competencies
Rohit can build to gain competitive advantage over online medicine sellers?
(RTP, May 2019, NA)
Capabilities that are valuable, rare, costly to imitate, and non-substitutable are core competencies. A
small chemist shop has a local presence and functions within a limited geographical area. Still it can
build its own competencies to gain competitive advantage.
Rohit Patel can build competencies in the areas of:
(i) Developing personal and cordial relations with the customers.
(ii) Providing home delivery with no additional cost.
(iii) Developing a system of speedy delivery that can be difficult to match by online sellers. Being in
central part of city, he can create a network to supply at wider locations in the city.
(iv) Having extended working hours for convenience of buyers.
(v) Providing easy credit or a system of monthly payments to the patients consuming regular
medicines.
Q42. What is a Strategic Group? Discuss the procedure for constructing a strategic group map.
(RTP, May 2019, NA) (MTP2, May 2021, 5 Marks)
A strategic group consists of those rival firms which have similar competitive approaches and
positions in the market. Companies in the same strategic group can resemble one another in any of
the several ways – have comparable product-line breadth, same price/quality range, same distribution
channels, same product attributes, identical technological approaches, offer similar services and
technical assistance and so on.
strategic group is as follows:
● Identify the competitive characteristics that differentiate firms in the industry typical variables
are price/quality range (high, medium, low); geographic coverage (local, regional, national,
global); degree of vertical integration (none, partial, full); product- line breadth (wide, narrow);
use of distribution channels (one, some, all); and degree of service offered (no-frills, limited,
full).
● Plot the firms on a two-variable map using pairs of these differentiating characteristics.

● Assign firms that fall in about the same strategy space to the same strategic group.
● Draw circles around each strategic group making the circles proportional to the size of the
group’s respective share of total industry sales revenues.
Q43. What does Dogs symbolize in BCG matrix?

a. Invest
b. Harvest
c. Build
d. Divest
(MTP1, May 2019, 1 Mark)
Correct answer: (d) Divest
Q44. Internal __________ are activities in an organization that are performed especially well.
a. Opportunities
b. Competencies
c. Strengths
d. Management
Correct answer: (c) Strengths
Q45. Anything that a firm does especially well compared to rival firms is referred to as _____.
a. Competitive advantage
b. Comparative advantage
c. Opportunity cost
d. Sustainable advantage
(MTP1, May 2019, 1 Mark) (MTP1, Nov 2019, 1 Mark)
Correct answer: (a) Competitive advantage
Q46. Dinesh Yadav is the owner of a beverage-based private company in Sonipat, Haryana. His unit is producing
fruit juices, cold drinks, soda and lime. While its products have significant market share in the northern part
of country, the sales are on decline in last couple of years. He seeks help of a management expert who
advises him to first understand the competitive landscape. Explain the steps to be followed by Dinesh
Yadav to understand competitive landscape.


poor.
the firm.
Q47. Which of the following is not part of external analysis:

a. Customer segments.
b. Organizational constraints.
c. Entry barriers.
d. Competitors.
Correct answer: (b) Organizational constraints
Q48. A core competence is all except?

a. Valuable
b. Rare
c. Impossible to imitate
d. Non-substitutable
Correct answer: (c) Impossible to imitate
Q49. ‘Speed’ is a leading retail chain, on account of its ability to operate its business at low costs. The retail chain
aims to further strengthen its top position in the retail industry. The Chief executive of the retail chain is of
the view that to achieve the goals they should focus on lowering the costs of procurement of products.
Highlight and explain the core competence of the retail chain.
(MTP2, May 2019, 5 Marks) (RTP, Nov 2020, NA)
A core competence is a unique strength of an organization which may not be shared by others. Core
competencies are those capabilities that are critical to a business achieving competitive advantage.
In order to qualify as a core competence, the competency should differentiate the business from any
other similar businesses. A core competency for a firm is whatever it does is highly beneficial to the
organisation. ‘Speed’ is the leader on account of its ability to keep costs low.
The cost advantage that ‘Value for Money’ has created for itself has allowed the retailer to price goods
lower than competitors. The core competency in this case is derived from the company’s ability to
generate large sales volume, allowing the company to remain profitable with low profit margin.
Q50. What do you understand by ‘Competitive Landscape’? What are the steps to understand the competitive
landscape?
Competitive landscape is a business analysis which identifies competitors, either direct or indirect.

Competitive landscape is about identifying and understanding the competitors and at the same
time, it permits the comprehension of their vision, mission, core values, niche market, strengths and
weaknesses.
poor.
the firm.
Q51. Which of the following is not true for core competency:

A. It distinguishes a company competitively.
B. It is a source of competitive advantage.
C. It is an individual skill and separate technique.
D. It is often visible in the form of organizational functions.
(RTP, Nov 2019, NA)
Correct answer: (c) It is an individual skill and separate technique
Q52. Shridhar who is running a medium size cloth manufacturing business in Panipat wishes to understand the
driving forces that trigger change. He has sought advice from you and wishes to know common driving
forces.
(RTP, Nov 2019, NA)
Industry and competitive conditions of organisation change as environmental forces are in motion.
The most dominant forces are called driving forces because they have the biggest influence on what
kinds of changes will take place in the industry's structure and competitive environment. Analyzing
driving forces has two steps: identifying what the driving forces are and assessing the impact they will
have on the industry.
Many events can affect an industry powerfully enough to qualify as driving forces. Some are unique
and specific to a particular industry situation, but many drivers of change fall into general category
affecting different industries simultaneously. Some of the categories/examples of drivers are:
● The internet and the new e-commerce opportunities and threats it breeds in the industry.
● Increasing globalization.
● Changes in the long-term industry growth rate.

● Product innovation.
● Marketing innovation.
● Entry or exit of major forms.
● Diffusion of technical know-how across more companies and more countries.
● Changes in cost and efficiency.
Q53. Major core competencies are identified in three areas - competitor differentiation, customer value and
application to other markets. Discuss.
(RTP, Nov 2019, NA)
According to C.K. Prahalad and Gary Hamel, major core competencies are identified in three areas -
competitor differentiation, customer value, and application to other markets.
● Competitor differentiation: The company can consider having a core competence if the
competence is unique and it is difficult for competitors to imitate. This can provide a company
an edge compared to competitors. It allows the company to provide better products or
services to market with no fear that competitors can copy it.
● Customer value: When purchasing a product or service it has to deliver a fundamental
benefit for the end customer in order to be a core competence. It will include all the skills
needed to provide fundamental benefits. The service or the product has to have real impact
on the customer as the reason to choose to purchase them. If customer has chosen the
company without this impact, then competence is not a core competence.
● Application of competencies to other markets: Core competence must be applicable to the
whole organization; it cannot be only one particular skill or specified area of expertise.
Therefore, although some special capability would be essential or crucial for the success of
business activity, it will not be considered as core competence, if it is not fundamental from
the whole organization’s point of view. Thus, a core competence is a unique set of skills and
expertise, which will be used through out the organisation to open up potential markets to be
exploited.
Q54. Telecom industry is growing at a rapid speed in India. There is a cut throat competition among the service
providers in the industry. Identify the capabilities that will best serve as a source of competitive advantage
for a firm over its rivals?
Core competencies are capabilities that serve as a source of competitive advantage for a firm over its
rivals. Core competency as the collective learning in the organization, especially coordinating diverse
production skills and integrating multiple streams of technologies. An organization’s combination of
technological and managerial know-how, wisdom and experience are a complex set of capabilities
and resources that can lead to a competitive advantage compared to a competitor.
Q55. "Industry and competitive analysis begins with an overview of the industry's dominant economic features."
Explain and also narrate the factors to be considered in profiling in industry's economic features.
Industry is “a group of firms whose products have same and similar attributes such that they
compete for the same buyers.” Industries differ significantly in their basic character and structure.
Industry and competitive analysis begins with an overview of the industry’s dominant economic
features. The factors to be considered while profiling an industry’s economic features are fairly
standard and are given as under:
● Size and nature of market.

● Scope of competitive rivalry.

● Market growth rate and position in the business life.
● Number of rivals and their relative market share.
● The number of buyers and their relative sizes.
● The types of distribution channels used to access consumers.
● The pace of technological change in both production process innovation and new product
introductions.
● Whether the products and services of rival firms are highly differentiated, weakly
differentiated, or essentially identical?
Q56. Capabilities that are valuable, rare, costly to imitate, and non-substitutable are core competencies. Explain
these four specific criteria of sustainable competitive advantage that firms can use to determine those
capabilities that are core competencies.
(RTP, May 2020, NA)
Four specific criteria of sustainable competitive advantage that firms can use to determine those
capabilities that are core competencies. Capabilities that are valuable, rare, costly to imitate, and
non-substitutable are core competencies.
(i) Valuable: Valuable capabilities are the ones that allow the firm to exploit opportunities or avert the
threats in its external environment. A firm created value for customers by effectively using capabilities
to exploit opportunities. Finance companies build a valuable competence in financial services. In
addition, to make such competencies as financial services highly successful require placing the right
people in the right jobs. Human capital is important in creating value for customers.
(ii) Rare: Core competencies are very rare capabilities and very few of the competitors possess this.
Capabilities possessed by many rivals are unlikely to be sources of competitive advantage for any one
of them. Competitive advantage results only when firms develop and exploit valuable capabilities that
differ from those shared with competitors.
(iii) Costly to imitate: Costly to imitate means such capabilities that competing firms are unable to
develop easily. For example: Intel has enjoyed a first-mover advantage more than once because of its
rare fast R&D cycle time capability that brought SRAM and DRAM integrated circuit technology, and
brought microprocessors to market well ahead of the competitor. The product could be imitated in
due course of time, but it was much more difficult to imitate the R&D cycle time capability.
(iv) Non-substitutable: Capabilities that do not have strategic equivalents are called non-
substitutable capabilities. This final criterion for a capability to be a source of competitive advantage is
that there must be no strategically equivalent valuable resources that are themselves either not rare
or imitable.
Q57. What is the purpose of SWOT analysis? Why is it necessary to do a SWOT analysis before selecting a
particular strategy for a business organisation?
(RTP, May 2020, NA)
An important component of strategic thinking requires the generation of a series of strategic

alternatives, or choices of future strategies to pursue, given the company's internal strengths and
weaknesses and its external opportunities and threats. The comparison of strengths, weaknesses,
opportunities, and threats is normally referred to as SWOT analysis.


SWOT analysis helps managers to craft a business model (or models) that will allow a company to
gain a competitive advantage in its industry (or industries). Competitive advantage leads to increased
profitability, and this maximizes a company's chances of surviving in the fast-changing, competitive
environment. Key reasons for SWOT analyses are:
● It provides a logical framework.
● It presents a comparative account.
● It guides the strategist in strategy identification.
Q58. Write a short note on the role of ADL Matrix in assessing competitive position of a firm.
(RTP, Nov 2020, NA) (RTP, May 2022, NA)
The ADL matrix has derived its name from Arthur D. Little which is a portfolio analysis method based
on product life cycle. The approach forms a two dimensional matrix based on stage of industry
maturity and the firm’s competitive position, environmental assessment and business strength
assessment. The role of ADL matrix is to assess the competitive position of a firm based on an
assessment of the following criteria:
● Dominant: This is a comparatively rare position and in many cases is attributable either to a
monopoly or a strong and protected technological leadership.
● Strong: By virtue of this position, the firm has a considerable degree of freedom over its
choice of strategies and is often able to act without its market position being unduly
threatened by its competitors.
● Favourable: This position, which generally comes about when the industry is fragmented and
no one competitor stand out clearly, results in the market leaders a reasonable degree of
freedom.
● Tenable: Although the firms within this category are able to perform satisfactorily and can
justify staying in the industry, they are generally vulnerable in the face of increased
competition from stronger and more proactive companies in the market.
● Weak: The performance of firms in this category is generally unsatisfactory although the
opportunities for improvement do exist.
Q59. Why companies should go global? Mention any five reasons.

There are several reasons why companies go global. These are discussed as follows:
● One reason could be the rapid shrinking of time and distance across the globe - thanks to
faster communication, speedier transportation, growing financial flows and rapid
technological changes.
● It is being realized that the domestic markets are no longer adequate and rich. Companies
globalize to take advantage of opportunities available elsewhere.
● A new product may gradually get acceptance and grow locally and then globally. This may
initially be in form of exports and then later production facilities may begin in other countries.
● Organizations may go global to take advantage of cheaper raw material and labour costs.
● Companies often set up overseas plants to reduce high transportation costs.
● The motivation to go global in high-tech industries is slightly different. Companies in

electronics and telecommunications must spend large sums on research and development
for new products and thus may be compelled to seek ways to improve sales volume to
support high overhead expenses.
● The companies may also go global to take advantage of local taxation laws.
● To form strategic alliances to ward off economic and technological threats and leverage their
respective comparative and competitive advantages.
Q60. Mohan has joined as the new CEO of XYZ Corporation and aims to make it a dominant technology
company in the next five years. He aims to develop competencies for managers for achieving better
performance and a competitive advantage for XYZ Corporation. Mohan is well aware of the importance of
resources and capabilities in generating competitive advantage.
Discuss the four major characteristics of resources and capabilities required by XYZ Corporation to sustain
the competitive advantage and its ability to earn profits from it.
(SA, Jan 2021, 5 Marks)
XYZ Corporation is aiming to transform into a dominant technology company under the leadership of
Mohan, the new CEO. He aims to develop competencies for managers for achieving better
performance and a competitive advantage for the corporation. Mohan is also well aware of the
importance of resources and capabilities in generating and sustaining the competitive advantage.
Therefore he must focus on characteristics of resources and capabilities of the corporation.
The sustainability of competitive advantage and a firm’s ability to earn profits from it depends, to a
great extent, upon four major characteristics of resources and capabilities which are as follows:
1. Durability: The period over which a competitive advantage is sustained depends in part on the rate
at which a firm’s resources and capabilities deteriorate. In industries where the rate of product
innovation is fast, product patents are quite likely to become obsolete. Similarly, capabilities which are
the result of the management expertise of the CEO are also vulnerable to his or her retirement or
departure. On the other hand, many consumer brand names have a highly durable appeal.
2. Transferability: Even if the resources and capabilities on which a competitive advantage is based
are durable, it is likely to be eroded by competition from rivals. The ability of rivals to attack position of
competitive advantage relies on their gaining access to the necessary resources and capabilities. The
easier it is to transfer resources and capabilities between companies, the less sustainable will be the
competitive advantage which is based on them.
3. Imitability: If resources and capabilities cannot be purchased by a would-be imitator, then they
must be built from scratch. How easily and quickly can the competitors build the resources and
capabilities on which a firm’s competitive advantage is based? This is the true test of imitability.
Where capabilities require networks of organizational routines, whose effectiveness depends on the
corporate culture, imitation is difficult.
4. Appropriability: Appropriability refers to the ability of the firm’s owners to appropriate the returns
on its resource base. Even where resources and capabilities are capable of offering sustainable
advantage, there is an issue as to who receives the returns on these resources.
Q61. Core competencies provide an edge to a business over its competitors. Discuss. Also, briefly state the three
areas in which major core competencies are identified.

other similar businesses. An organization’s combination of technological and managerial know-how,
wisdom and experience are a complex set of capabilities and resources that can lead to a competitive
advantage compared to a competitor.
According to C.K. Prahalad and Gary Hamel, major core competencies are identified in following three
areas:
1. Competitor differentiation: The Company can consider having a core competence if the
competence is unique and it is difficult for competitors to imitate. This can provide a company an
edge compared to competitors. It allows the company to provide better products and services to
market with no fear that competitors can copy it.
2. Customer value: When purchasing a product or service it has to deliver a fundamental benefit for
the end customer in order to be a core competence. It will include all the skills needed to provide
fundamental benefits. The service or the product has to have a real impact on the customer as the
reason to choose to purchase them. If a customer has chosen the company without this impact, then
competence is not a core competence and it will not affect the company’s market position.
3. Application of competencies to other markets: Core competence must be applicable to the
whole organisation; it cannot be only one particular skill or specified area of expertise. Therefore,
although some special capability would be essential or crucial for the success of business activity, it
will not be considered as core competence if it is not fundamental from the whole organisation’s
point of view. Thus, a core competence is a unique set of skills and expertise, which will be used
throughout the organisation to open up potential markets to be exploited.
Q62. ABC Ltd. manufactures and sells air purifier ‘Fresh Breath’. The ‘Fresh Breath’ has seen sales growth of
around 1% for the last two years, after strong growth in the previous five years. This is due to new products
entering the market in competition with the ‘Fresh Breath’. ABC Ltd. is therefore considering cutting its
prices to be in line with its major rivals with a hope to maintain the market share. Market research indicates
that this will now cause a significant increase in the level of sales, even though in previous years price cuts
have had little effect on demand. ABC ltd. is also planning to launch a promotional campaign to highlight
the benefits of the ‘Fresh Breath’ against its rival products.
Identify and explain the stage of the product life cycle in which ‘Fresh Breath’ falls.
(RTP, May 2021, NA)
Product Life Cycle is a useful concept for guiding strategic choice. PLC is an S-shaped curve which
exhibits the relationship of sales with respect of time for a product that passes through the four
successive stages of introduction (slow sales growth), growth (rapid market acceptance) maturity
(slowdown in growth rate) and decline (sharp downward drift).
The product ‘Fresh Breath’ of ABC Ltd. falls under Maturity stage of product life cycle. In this stage, the
competition gets tough and market gets stabilised. Profit comes down because of stiff competition.
At this stage, ABC Ltd. have to work for maintaining stability by cutting the prices to be in line with its
major rivals with a hope to maintain the market share and by launching a promotional campaign to
highlight the benefits of the ‘Fresh Breath’ against its rival products.
Q63. The Specialist Clothing Company (SCC) is a manufacturer of a wide range of clothing. Fashion is one of the
five divisions of SCC. Fashion is operating in a market with high growth and is a market leader. By the next
year, it is predicted to have 10% of the market share in a growing market. Fashion should be classified as
which of the following according to the BCG matrix.

(a) Star
(b) Dog
(c) Cash cow
(d) Question mark
Correct answer: (a) Star
Q64. A beverage company has more than 500 soft drink brands, but none of them is anywhere close to its
premium brand One Sip in awareness, revenue and profits. As per BCG's Matrix, One Sip brand for the
beverage company is?
(a) Star
(b) Dog
(c) Cash cow
(d) Question Mark
Correct answer: (c) Cash cow
Q65. A manufacturing company is in direct competition with fifteen companies at national level. Head of
marketing department of this company wishes to study the market position of rival companies by
grouping them into like positions. Name the tool that may be used by him/her. Explain the procedure that
may be used to implement the techniques.
A tool to identify the market positions of rival companies by grouping them into like positions is
strategic group mapping. A strategic group consists of those rival firms which have similar
competitive approaches and positions in the market.
strategic group are as follows:
1. Identify the competitive characteristics that differentiate firms in the industry typical variables
that are price/quality range (high, medium, low); geographic coverage (local, regional, national,
global); degree of vertical integration (none, partial, full); product-line breadth (wide, narrow); use of
distribution channels (one, some, all); and degree of service offered (no-frills, limited, full).
2. Plot the firms on a two-variable map using pairs of these differentiating characteristics.
3. Assign firms that fall in about the same strategy space to the same strategic group.
4. Draw circles around each strategic group making the circles proportional to the size of the
group's respective share of total industry sales revenues.
Q66. "Understanding the competitive landscape is important to build upon a competitive advantage". Explain.
Competitive landscape is a business analysis which identifies competitors, either direct or indirect.
Competitive landscape is about identifying and understanding the competitors and at the same
time, it permits the comprehension of their vision, mission, core values, niche market, strengths and
weaknesses.

An in-depth investigation and analysis of a firm’s competition allows it to assess the

Competitor’s strength and weaknesses in the marketplace and helps it to choose
and implement effective strategies that will improve its competitive advantage.
Steps to understand the competitive landscape for building competitive advantage are:
competitors in the firm’s industry and have actual idea about their respective market share.
(ii) Understand the competitors: Once the competitors have been identified, the
strategist can use market research report, internet, newspapers, social media, industry reports, and
various other sources to understand the products and services offered by them in different markets.
(iii) Determine the strengths of the competitors: What are the strengths of the competitors? What
reaches out to more consumers? Why do customers give them their business?
poor.
the firm.
Q67. "ABC is a marketing consultancy business. ABC's most recent corporate analysis has identified that three
new businesses have recently entered its market and started aggresively targeting ABC's key client. As part
of ABC's corporate analysis, these three new businesses would be a
(a) Strength
(b) Opportunity
(c) Weakness
(d) Threat"
(RTP, Nov 2021, NA)
Correct answer: (b) Opportunity
Q68. "Ajanta & Sons Limited are manufacturers of domestic household security alarms for high-income group
homeowners in India. The company is currently reviewing two strategic options.
Option 1: Selling the same alarms although with different coverings to smaller and low-income group
households at a lower price.
Option 2: Development of new, more sophisticated alarms and a wide range of security
services (guards and surveillance) for sale to industrial clients for higher prices.
The senior management team of Ajanta & Sons Limited are keen to analyse the two options using Ansoff's
Matrix."
(RTP, Nov 2021, NA)
Selling the same alarms with different coverings to smaller and low income group households at a
lower price represents Market Development as the same products are being sold into a new market.

Market development refers to a growth strategy where the business seeks to sell its existing products
into new markets. It is a strategy for company growth by identifying and developing new markets for
the existing products of the Company.
While the development of new and more sophisticated alarms and a wide range of security services
(guards and surveillance) for sale to industrial clients for higher prices is classified as Diversification
because it involves a new product, being sold in a new market. Diversification refers to a growth
strategy where a business markets new products in new markets. It is a strategy by starting up or
acquiring businesses outside the company’s current products and markets.
Q69. Core competencies provide an edge to a business over its competitors.

(RTP, Nov 2021, NA)
other similar businesses. An organization’s combination of technological and managerial know-how,
wisdom and experience are a complex set of capabilities and resources that can lead to a competitive
advantage compared to a competitor.
According to C.K. Prahalad and Gary Hamel, major core competencies are identified in following three
areas:
1. Competitor differentiation: The Company can consider having a core competence if the
competence is unique and it is difficult for competitors to imitate. This can provide a company an
edge compared to competitors. It allows the company to provide better products and services to
market with no fear that competitors can copy it.
2. Customer value: When purchasing a product or service it has to deliver a fundamental benefit for
the end customer in order to be a core competence. It will include all the skills needed to provide
fundamental benefits. The service or the product has to have real impact on the customer as the
reason to choose to purchase them. If customer has chosen the company without this impact, then
Competence is not a core competence and it will not affect the company’s position.
3. Application of competencies to other markets: Core competence must be applicable to the

whole organisation; it cannot be only one particular skill or specified area of expertise. Therefore,
although some special capability would be essential or crucial for the success of business activity, it
will not be considered as Core competence if it is not fundamental from the whole organization’ s
point of view.
Thus, a core competence is a unique set of skills and expertise, which will be used throughout the
organisation to open up potential markets to be exploited.
Q70. Baba Pvt Ltd has seventeen factories, nine of which they recently gave to other producers on lease. This has
increased their cash inflows to a great extent, and they are enjoying this surplus by investing the same in
financial assets. Such a strategy can be termed as which of the following?
(a) Divest
(b) Harvest

(c) Hold
(d) Build
Correct answer: (b) Harvest
Q71. Shreya, the owner of Kalakaari boutiques, wanted to reduce uncertainty of their business strategy for which
she gathered a lot of information from peers, groups, industry reports and experts. But it did not give her
comfort to take up new strategies. What tool can help her in this regard?
(a) Risk Analysis
(b) BCG Analysis
(c) ADL Matrix
(d) Scenario Analysis
Correct answer: (d) Scenario Analysis
Q72. DMart sells fast-moving consumer goods at wholesale prices to retail customers, is a strategy of?
(a) Market Penetration
(b) Cost Differentiation
(c) Cost Leadership
(d) Market Development
(MTP1, Nov 2021, 1 Mark)
Correct answer: (a) Market Penetration
Q73. During which stage of the Product Life Cycle will marketing strategies need to concentrate on
differentiating a product from competing products, building brand loyalty and offering incentives
to attract competitor’s customers to switch?
(a) Decline
(b) Growth
(c) Maturity
(d) Introduction
Correct answer: (c) Maturity
Q74. In context to BCG matrix, which of the following statements is not correct?
(a) The BCG assumes that all products will grow and mature.
(b) The BCG can be used to examine a company’s current product portfolio.
(c) A company with only cash cows and dogs has limited long-term prospects.
(d) All of the above
Correct answer: (a) The BCG assumes that all products will grow and mature
Q75. Marketing and Sales of Hindustan Unilever Limited and lowering of operating cost by Walmart

are examples of what?

(a) Competitive Advantage
(b) Core Competency
(c) Strategic Planning
(d) Key Performance Indicators (KPIs)
Correct answer: (b) Core competency
Q76. The strategic landscape of healthcare sector around the world is changing rapidly because of-
(a) Doctors Educational Interests
(b) Indian Nurses going to abroad
(c) Internet and Technological advancement
(d) Patients being more aware
Correct answer: (c) Internet and Technological advancement
Q77. STU's Association with India goes back to 1967, when it played a key role in constructing a very long
highway in India spreading over multiple states. Since then, it is contributing in many ways to the country's
growth story. Now it is looking at playing an active role in the key projects taken up by the central
government. Suggest a few opportunities and Threats that the company should consider.
Q78. Nom-Nom is a fast-food brand and has been facing a lot of competition from American
brands and has decided to NOT go very aggressive but to just preserve market share?
Which of the strategy Nom-Nom is following?
(a) Build
(b) Hold
(c) Harvest
(d) Divest
(RTP, May 2022, NA)
Correct answer: (a) Build
Q79. Halder & Sons have invested in latest technology in terms of latest printing machines from Germany and
Israel. But recent advent of internet has posed a big threat to their printing business as majority of their
clients have now turned to more environment friendly options. They are not able to sell off their machines
which are now redundant. What condition are they facing right now?
(a) Improper market analysis
(b) Exit Barriers
(c) Paralysis of Strategic Vision
(d) Weak SWOT Analysis
(RTP, May 2022, NA)

Correct answer: (b) Exit Barriers
Q80. Explain the strategic implications of each of the following types of business in a corporate portfolio: (a) Stars
(b) Question Marks
(c) Cash Cows
(d) Dogs
(RTP, May 2022, NA)
In the BCG growth-share matrix portfolio of investments are represented in two dimensional space.
The vertical axis represents market growth rate, and the horizontal axis represents relative market
share. The strategic implications for various business types under BCG in the corporate portfolio are:
Stars are products or businesses that are growing rapidly and are the best opportunity for expansion.
Stars may follow a build strategy. They need heavy investments to maintain their position and finance
their rapid growth potential.
Cash Cows are low-growth, high market share businesses or products. They generate cash and have
low costs. They are established, successful, and need less investment to maintain their market share.
Strategic alternative advocated for cash cows is harvest.
Question Marks are low market share business in high-growth markets. Strategic option for them is
hold for which they need heavy investments. Question marks if left unattended are capable of
becoming cash traps.
Dogs are low-growth, low-share businesses and products. Relevant strategy is divest. Dogs may
generate enough cash to maintain themselves, but do not have much future. Dogs should be
minimized by means of divestment or liquidation.

Chapter 3
Question Bank
3.1 Strategic Decision Making
Q1. Rohit Seth in an informal discussion with his friend shared that he has to move very cautiously in his
organisation as the decisions taken by him have organisation-wide impact and involve large
commitments of resources. He also said that his decisions decide the future of his organisation.
Where will you place Rohit Seth in the organisational hierarchy? What are the dimensions of the
decisions being taken by him?
(RTP, May 2018, NA) (RTP, May 2020, NA) (Study material)
As the decisions taken by Rohit Seth have organisation wide impact, involves large commitments and
have implication on the future, he is at the top level in organisational hierarchy. These characteristics
also indicate that he is taking strategic decisions in the organisation. The major dimensions of
strategic decisions are as follows:
● Strategic decisions require top-management involvement: Strategic decisions involve
thinking in totality of the organization. Hence, problems calling for strategic decisions require
to be considered by the top management.
● Strategic decisions involve commitment of organisational resources: For example,

Strategic decisions to launch a new project by a firm requires allocation of huge funds and
assignment of a large number of employees.
● Strategic decisions necessitate consideration of factors in the firm’s external

environment: Strategic focus in organization involves orienting its internal environment to
the changes of external environment.
● Strategic decisions are likely to have a significant impact on the long-term prosperity of
the firm: Generally, the results of strategic implementation are seen on a long-term basis and
not immediately.
● Strategic decisions are future oriented: Strategic thinking involves predicting the future
environmental conditions and how to orient for the changed conditions.
● Strategic decisions usually have major multifunctional or multi-business consequences:

As they involve organization in totality they affect different sections of the organization with
varying degree.
Q2. What is strategic decision making? What are its major dimensions?
(MTP 1, May 2018, 5 Marks)
Strategic Management QB C3 - Page No 1 /22

Decision making is a managerial process of selecting the best course of action out of several
alternative courses for the purpose of accomplishment of the organizational goals. Decisions may be
operational i.e., which relate to general day-to-day operations. They may also be strategic in nature.
According to Jauch and Glueck “Strategic decisions encompass the definition of the business,
products to be handled, markets to be served, functions to be performed and major policies needed
for the organisation to execute these decisions to achieve the strategic objectives.”
The major dimensions of strategic decisions are as follows:


not immediately.

varying degree.
Q3. What is Strategic Decision Making? Briefly explain the major dimensions of strategic decisions.
(MTP 2, Nov 2018, 7 Marks)
The major dimensions of strategic decisions are as follows:




not immediately.

varying degree.
Q4. Which of the following statement is not true about strategic decisions?
(a) They need top-management involvement.
(b) Involve commitment of organisational resources.
(c) They are based on external environment
(d) They have insignificant impact on the long-term prosperity
(RTP, May 2019, NA)
Correct answer: (d) They have insignificant impact on the long-term prosperity
Q5. Shri Alok Kumar is having his own medium size factory in Aligarh manufacturing hardware consisting
handles, hinges, tower bolts and so on. He has a staff of more than 220 in his organisation. One of the
leading brand of Hardware seller in India is rebranding and selling the material from his factory. Shri
Alok Kumar, believes in close supervision and takes all major and minor decisions in the organisation.
Do you think Shri Alok should take all decisions himself? What should be nature of decisions that
should be taken by him.
(RTP, May 2019, NA) (MTP 1, May 2021, 5 Marks) (MTP 2, Nov 2021, 5 Marks) (Study material)
alternative courses for the purpose of accomplishment of the organizational goals.Decisions may be
operational, i.e., which relate to general day-to-day operations. They may also be strategic in nature.
As owner manager at the top level in the company, Shri Alok Kumar should concentrate on strategic
decisions. These are higher level decisions having organisation wide implications. The major
dimensions of strategic decisions are as follows:
● Strategic decisions require top-management involvement as they involve thinking in totality

of the organization.
● Strategic decisions involve significant commitment of organisational resources.
● Strategic decisions necessitate consideration of factors in the firm’s external environment.

● Strategic decisions are likely to have a significant impact on the long-term prosperity of the
firm.
● Strategic decisions are future oriented.
● Strategic decisions usually have major multifunctional or multi-business consequences.
Q6. A owner of medium size factory in Aligarh manufacturing hardware consisting handles, hinges, tower
bolts and so on has a staff of about 200 in his organisation. One of the leading brand of Hardware
seller in India is rebranding and selling the material from his factory. The owner believes in close
supervision and takes all major and minor decisions in the organisation.
Do you think the owner should take all decisions himself? What kind of decisions should be taken by
person at the level of owner of a medium size factory.
alternative courses for the purpose of accomplishment of the organizational goals. Decisions may
be operational, i.e., which relate to general day-to-day operations. They may also be strategic in
nature.
A owner manager at the top level should concentrate on strategic decisions. These are higher level
decisions having organisation wide implications. The major dimensions of strategic decisions are
as follows:
● Strategic decisions require top-management involvement as they involve thinking in totality

of the organization.
● Strategic decisions involve significant commitment of organisational resources.
● Strategic decisions necessitate consideration of factors in the firm’s external environment.
● Strategic decisions are likely to have a significant impact on the long-term prosperity of the
firm.
● Strategic decisions are future oriented.
● Strategic decisions usually have major multifunctional or multi-business consequences.
Q7. What is strategic decision making? What tasks are performed by a strategic Manager?
(MTP 1, Nov 2019, 5 Marks) (RTP, Nov 2020, NA) (Study material)

The primary task of the strategic manager is conceptualizing, designing and executing company
strategies. For this purpose, his tasks include:
● Defining the mission and goals of the organization.

● Determining what businesses it should be in.
● Allocating resources among the different businesses.
● Formulating and implementing strategies that span individual businesses.
● Providing leadership for the organization.
Q8. “Strategic decisions are different in nature than all other decisions.” In the light of this statement,
explain any three major dimensions of strategic decisions.
(RTP, May 2020, NA) (SA, May 2021, 5 Marks)
Decision-making is a managerial process and a function of choosing a particular course of action out
of several alternative courses for the purpose of accomplishment of the organizational goals. Strategic
decisions are different in nature than all other decisions which are taken at various levels of the
organization during their day-to-day working. The major dimensions of strategic decisions are given
below:
1. Strategic issues require top-management decisions. Strategic issues involve thinking in totality of
the organizations and there is lot of risk involved.
2. Strategic issues involve the allocation of large amounts of company resources - financial, technical,
human etc.
3. Strategic issues are likely to have a significant impact on the long-term prosperity of the firm.
4. Strategic issues are future oriented.
5. Strategic issues usually have major multifunctional or multi-business consequences.
6. Strategic issues necessitate consideration of factors in the firm’s external environment.
Q9. How strategic decisions differ in nature from other routine decisions taken in day-to-day working of
an organization? Explain.
(RTP, Nov 2021, NA)
Strategic decisions are different in nature than all other decisions which are taken at various levels of
the organization during day-to-day working of the organizations. The major dimensions of strategic
decisions are given below:
● Strategic issues require top management decisions.
● Strategic issues involve the allocation of large amounts of company resources.
● Strategic issues are likely to have a significant impact on the long term prosperity of the
organisation.
● Strategic issues are future oriented.
● Strategic issues usually have major multifunctional or multi-business consequences.

● Strategic issues necessitate consideration of factors in the organisation’s external

environment.
3.2 Strategic Intent
Q1. Define strategic intent. Briefly explain the elements of strategic intent.
(RTP, May 2018, NA)
Strategic Management is defined as a dynamic process of formulation, implementation, evaluation,

and control of strategies to realise the organization’s strategic intent. Strategic intent refers to
purposes for what organization strives for. Top management must define “what they want to do” and
“why they want to do”. “Why they want to do” represents strategic intent of the firm. Clarity in
strategic intent is extremely important for the future success and growth of the enterprise,
irrespective of its nature and size.
Strategic intent can be understood as the philosophical base of strategic management. It implies the
purposes, which an organization endeavours to achieve. It is a statement that provides a perspective
of the means, which will lead the organization, reach its vision in the long run. Strategic intent gives
an idea of what the organization desires to attain in future.
Strategic intent provides the framework within which the firm would adopt a predetermined
direction and would operate to achieve strategic objectives. Strategic intent could be in the form of
vision and mission statements for the organisation at the corporate level. It could be expressed as the
business definition and business model at the business level of the organisation.
Strategic intent is generally stated in broad terms but when stated in precise terms it is an expression
of aims to be achieved operationally i.e., goals and objectives.
Elements of Strategic Intent
(i) Vision: Vision implies the blueprint of the company’s future position. It describes where the
organisation wants to land. It depicts the organisation’s aspirations and provides a glimpse of what
the organization would like to become in future. Every sub system of the organization is required to
follow its vision.
(ii) Mission: Mission delineates the firm’s business, its goals and ways to reach the goals. It explains
the reason for the existence of the firm in the society. It is designed to help potential shareholders and
investors understand the purpose of the company. A mission statement helps to identify, ‘what
business the company undertakes.’ It defines the present capabilities, activities, customer focus and
business makeup.
(iii) Business definition: It seeks to explain the business undertaken by the firm, with respect to the
customer needs, target markets, and alternative technologies. With the help of business definition,

one can ascertain the strategic business choices. Organisational restructuring also depends upon the
business definition.
(iv) Business model: Business model, as the name implies is a strategy for the effective operation of
the business, ascertaining sources of income, desired customer base, and financial details. Rival firms,
operating in the same industry rely on the different business model due to their strategic choice.
(v) Goals and objectives: These are the base of measurement. Goals are the end results, that the
organization attempts to achieve. On the other hand, objectives are time-based measurable targets,
which help in the accomplishment of goals. These are the end results which are to be attained with
the help of an overall plan, over the particular period. However, in practice no distinction is made
between goals and objectives and both terms are used interchangeably.
The vision, mission, business definition, and business model explain the philosophy of the
organisation but the goals and objectives represent the results to be achieved in multiple areas of
business.
Q2. What are the elements in strategic intent of organisation?

(RTP, May 2019, NA) (RTP, May 2020, NA)
Strategic intent can be understood as the philosophical base of strategic management. It implies the
purposes, which an organization endeavours to achieve. It is a statement that provides a perspective.
Strategic intent gives an idea of what the organization desires to attain in future. Strategic intent
provides the framework within which the firm would adopt a predetermined direction and would
operate to achieve strategic objectives. Elements of strategic management are as follows:
(i) Vision: Vision implies the blueprint of the company’s future position. It describes where the
organisation wants to land. It depicts the organisation’s aspirations and provides a glimpse of what
the organization would like to become in future. Every sub system of the organization is required to
follow its vision.
(ii) Mission: Mission delineates the firm’s business, its goals and ways to reach the goals. It explains
the reason for the existence of the firm in the society. It is designed to help potential shareholders and
investors understand the purpose of the company. A mission statement helps to identify, ‘what
business the company undertakes.’ It defines the present capabilities, activities, customer focus and
business makeup.
(iii) Business definition: It seeks to explain the business undertaken by the firm, with respect to the
customer needs, target markets, and alternative technologies. With the help of business definition,
one can ascertain the strategic business choices. Organisational restructuring also depends upon the
business definition.
(iv) Business model: Business model, as the name implies is a strategy for the effective operation of
the business, ascertaining sources of income, desired customer base, and financial details. Rival firms,
operating in the same industry rely on the different business model due to their strategic choice.
(v) Goals and objectives: These are the base of measurement. Goals are the end results, that the
organization attempts to achieve. On the other hand, objectives are time-based measurable targets,
which help in the accomplishment of goals. These are the end results which are to be attained with

the help of an overall plan, over the particular period. However, in practice no distinction is made
between goals and objectives and both terms are used interchangeably.
Q3. Which one is not the element of strategic intent?

(a) Business model
(b) Vision
(c) Business definition
(d) Business standard
(MTP 1, Nov 2019, 1 Mark) (RTP, May 2020, NA)
Correct answer: (d) Business standard
Q4. Members of Infinite Care, an NGO, have met and determined that they need to formulate a
philosophical basis for their activities. Thereby they have come up with a statement:“Provide children
till age 12, living in homeless or low-income situations, with the essential items they need to thrive – at
home, at school and at play” Identify the area of strategic intent, which the members have stated?
(a) Vision
(b) Business Definition
(c) Goal and Objective
(d) Mission
Correct answer: (d) Mission
Q5. The philosophical base of strategic management falls within the concept of-
(a) Strategic Intent
(b) Portfolio Analysis
(c) Globalisation
(d) Vision statement
(MTP 1, Nov 2021, 1 Mark)
Correct answer: (a) Strategic Intent
3.3 Vision, Mission & Objectives
Q1. Which of these basic questions should a vision statement answer?

(a) What is our business?
(b) Who are our competitors?
(c) Where we are to go?
(d) Why do we exist?
(Sample MCQs) (MTP 1, May 2019, 1 Mark)
Correct answer: (c) Where we are to go?

Q2. Distinguish between the following:

Vision and Mission
(RTP, May 2018, NA)
The vision describes a future identity while the Mission serves as an on-going and time-independent
guide.
The vision statement can galvanize the people to achieve defined objectives, even if they are stretch
objectives, provided the vision is specific, measurable, achievable, and relevant and time bound. A
mission statement provides a path to realize the vision in line with its values. These statements have a
direct bearing on the bottom line and success of the organization.
A mission statement defines the purpose or broader goal for being in existence or in the business and
can remain the same for decades if crafted well while a vision statement is more specific in terms of
both the future state and the time frame. Vision describes what will be achieved if the organization is
successful.
Q3. What is strategic vision?

(MTP 1, May 2018, 2 Marks) (RTP, Nov 2018, NA)
A strategic vision delineates organisation’s aspirations for the business, providing a panoramic view of
the position where the organisation is going. A strategic vision points an organization in a particular
direction, charts a strategic path for it to follow in preparing for the future, and moulds organizational
identity.
A Strategic vision is a road map of a company’s future – providing specifics about technology and
customer focus, the geographic and product markets to be pursued, the capabilities it plans to
develop, and the kind of company that management is trying to create.
Q4. Distinguish between vision statement and mission statement.

(MTP 2, May 2018, 5 Marks) (MTP 1, Nov 2018, 5 Marks)
A Mission statement tells you the fundamental purpose of the organization. It concentrates on the
present. It defines the customer and the critical processes. It informs you of the desired level of
performance. On the other hand, a Vision statement outlines what the organization wants to be. It
concentrates on the future. It is a source of inspiration. It provides clear decision -making criteria.
A mission statement can resemble a vision statement in a few companies, but that can be a grave
mistake. It can confuse people. Following are the major differences between vision and mission:
1. The vision describes a future direction while the mission serves as ongoing intent.
2. The vision statement can galvanize the people to achieve defined objectives, even if they are stretch
objectives, provided the vision is specific, measurable, achievable, relevant and time bound. A mission
statement provides a path to realize the vision in line with its values. These statements have a direct
bearing on the bottom line and success of the organization.

3. A vision statement defines the purpose or broader goal for being in existence or in the business and
can remain the same for decades if crafted well while a mission statement is more specific in terms of
both the future state and the time frame. Mission describes what will be achieved if the organization
is successful.
Q5. Describe the term 'Strategic Vision'.

A strategic vision delineates organisation’s aspirations for the business, providing a panoramic view of
the position where the organisation is going. A strategic vision points an organization in a particular
direction, charts a strategic path for it to follow in preparing for the future, and moulds organizational
identity.
A Strategic vision is a road map of a company’s future – providing specifics about technology and
develop, and the kind of company that management is trying to create.
Q6. Correct/Incorrect.
For a small entrepreneur vision and mission are irrelevant.
(RTP, Nov 2018, NA)
Entrepreneur, big or small has to function within several influences from external forces. Competition
in different form and different degree is present in all kind and sizes of business. Even entrepreneur
with small businesses can have complicated environment. To grow and prosper they need to have
clear vision and mission.
Q7. Essentials of a strategic vision.

(RTP, Nov 2018, NA)
Essentials of a strategic vision:
● The entrepreneurial challenge in developing a strategic vision is to think creatively about how
to prepare a company for the future.
● Forming a strategic vision is an exercise in intelligent entrepreneurship.
● A well-articulated strategic vision creates enthusiasm among the members of the
organisation.
● The best-worded vision statement clearly illuminates the direction in which organization is
headed.
Q8. ‘Objectives’ and ‘Goals’ provide meaning and sense of direction to organizational endeavour. Explain.
(RTP, Nov 2018, NA)
Business organization translates their vision and mission into objectives. Objectives are open-ended
attributes that denote the future states or outcomes. Goals are close -ended attributes which are
precise and expressed in specific terms. Thus, the goals are more specific and translate to objectives
to short term perspective.

All organizations have objectives. The pursuit of objectives is an unending process such that
organizations sustain themselves. They provide meaning and sense of direction to organizational
endeavour. Organizational structure and activities are designed and resources are allocated around
the objectives to facilitate their achievement. They also act as benchmarks for guiding organizational
activity and for evaluating how the organization is performing.
Vision is one of the key elements of Strategic Intent.
The statement is Correct.

Vision implies the blueprint of the company’s future position. It describes where the organisation
wants to land. It depicts the organisation’s aspirations and provides a glimpse of what the
organisation would like to become in future. Every sub system of the organisation is required to follow
its vision.
Q10. Mission:
(a) is an internally-focused definition of the organization's societal goals.
(b) is a statement of a firms unique purpose and scope of operations.
(c) does not relate to the industry in which the firm intends to compete.
(d) is developed by a firm before the firm develops its strategic intent.
(RTP, May 2019, NA) (MTP 2, May 2019, 1 Mark)
Correct answer: (b) is a statement of a firms unique purpose and scope of operations.
Q11. Objectives should be:

(i) Concrete and specific.
(ii) Related to time frame.
(iii) Standards for performance appraisal.
Which of the above statements are true:

a. (i) & (ii).
b. (ii) & (iii).
c. (i) & (iii).
d. (i), (ii) and (iii)
(MTP 2, May 2019, 1 Mark)
Correct answer: (d) (i), (ii) and (iii)
Q12. What are the characteristics which must be possess by objectives, to be meaningful to serve the
intended role?
Objectives with strategic focus relate to outcomes that strengthen an organization’s overall business
position and competitive vitality. Objectives, to be meaningful to serve the intended role, must
possess the following characteristics:

● Objectives should define the organization’s relationship with its environment.
● Objectives should be facilitative towards achievement of mission and purpose.
● Objectives should provide the basis for strategic decision-making.
● Objectives should provide standards for performance appraisal.
● Objectives should be understandable.
● Objectives should be concrete and specific.
● Objectives should be related to a time frame.
● Objectives should be measurable and controllable.
● Objectives should be challenging.
● Different objectives should correlate with each other.
● Objectives should be set within constraints.
Q13. Statement that is typically focused on present business scope and broadly describes an organizations
present capabilities, customer focus, activities, and business makeup is:
A. Vision
B. Mission
C. Strategy
D. Goals
(RTP, Nov 2019, NA)
Correct answer: (b) Mission
Q14. Mr Raj has been hired as a CEO by XYZ ltd a FMCG company that has diversified into affordable
cosmetics. The company intends to launch Feelgood brand of cosmetics. XYZ wishes to enrich the
lives of people with its products that are good for skin and are produced in ecologically beneficial
manner using herbal ingredients. Draft vision and mission statement that may be formulated by Raj.
(RTP, Nov 2019, NA) (RTP, Nov 2020, NA) (Study material)
Feelgood brand of cosmetics may have following vision and mission:
Vision: Vision implies the blueprint of the company’s future position. It describes where the
organisation wants to land. Mr Raj should aim to position “Feelgood cosmetics” as India’s beauty care
company. It may have vision to be India’ largest beauty care company that improves looks, give
extraordinary feeling and bring happiness to people.
Mission: Mission delineates the firm’s business, its goals and ways to reach the goals. It explains the
reason for the existence of the firm in the society. It is designed to help potential shareholders and
investors understand the purpose of the company.
Mr Raj may identify mission in the following lines:

● To be in the business of cosmetics to enhance the lives of people, give them confidence to
lead.
● To protect skin from harmful elements in environment and sun rays.
● To produce herbal cosmetics using natural ingredients.
Q15. Why an organisation should have a mission? What considerations are to be kept in mind while
writing a good mission statement of a company?
Organization should have a mission on account of the following reasons:
● To ensure unanimity of purpose within the organization.
● To develop a basis, or standard, for allocating organizational resources.
● To provide a basis for motivating the use of the organization’s resources.
● To establish a general tone or organizational climate.
● To serve as a focal point for those who can identify with the organization’s purpose and
direction.
● To facilitate the translation of objective and goals into a work structure involving the
assignment of tasks to responsible elements within the organization.
● To specify organizational purposes and the translation of these purposes into goals in such a
way that cost, time, and performance parameters can be assessed and controlled.
The following points must be considered while writing a good mission statement of a company:
(i) To establish the special identity of the business - one that typically distinct it from other similarly
positioned companies.
(ii) Good mission statements should be unique to the organisation for which they are developed.
(iii) Needs which business tries to satisfy, customer groups it wishes to target and the technologies
and competencies it uses and the activities it performs.
Q16. What is strategic vision? Describe the essentials of strategic vision.

A strategic vision is a roadmap of a company’s future – providing specifics about technology and
develop, and the kind of company that management is trying to create. It helps the company to
answer the question “where we are to go” and provides a convincing rationale for why this makes
good business sense for the company.
A strategic vision delineates organization’s aspirations for the business, providing a panoramic view of
the position where the organization is going. A strategic vision points an organization in a particular
direction, charts a strategic path for it to follow in preparing for the future, and molds organizational
identity.

Essentials of a strategic vision
● The entrepreneurial challenge in developing a strategic vision is to think creatively about how
to prepare a company for the future.
● Forming a strategic vision is an exercise in intelligent entrepreneurship.
● A well-articulated strategic vision creates enthusiasm among the members of the

organization.
● The best-worded vision statement clearly illuminates the direction in which organization is
headed.
Q17. What are 'objectives'? What characteristics must it possess to be meaningful?

(RTP, May 2021, NA) (RTP, May 2022, NA)
Objectives are organizations performance targets – the results and outcomes it wants to achieve.
They function as yardstick for tracking an organization’s performance and progress.
Objectives with strategic focus relate to outcomes that strengthen an organization’s overall business
position and competitive vitality. Objectives, to be meaningful to serve the intended role, must
possess the following characteristics:
● Objectives should define the organization’s relationship with its environment.
● Objectives should be facilitative towards achievement of mission and purpose.
● Objectives should provide the basis for strategic decision-making.
● Objectives should provide standards for performance appraisal.
● Objectives should be understandable.
● Objectives should be concrete and specific.
● Objectives should be related to a time frame.
● Objectives should be measurable and controllable.
● Objectives should be challenging.
● Different objectives should correlate with each other.
● Objectives should be set within constraints.
Q18. What is the first step in the comprehensive strategic-management model?

(a) Developing vision and mission statements
(b) Performing external audits
(c) Measuring and evaluating performance
(d) Establishing long-term objectives
(MTP 1, Nov 2019, 1 Mark) (MTP 2, May 2021, 1 Mark)

Correct answer: (a) Developing vision and mission statements
Q19. Mission statement of a company focuses on the question: ‘who we are’ and ‘what we do’. Explain
briefly.
A company’s mission statement is typically focused on its present business scope — “who we are and
what we do”; mission statements broadly describe an organizations present capabilities, customer
focus activities and business makeup. An organisation’s mission states what customers it serves, what
need it satisfies, and what type of product it offers. It is an expression of the growth ambition of the
organisation. It helps organisation to set its own special identity, business emphasis and path for
development. Mission amplifies what brings the organisation to this business or why it is there, what
existence it seeks and what purpose it seeks to achieve as a business organisation.
In other words, the mission serves as a justification for the firm's very presence and existence; it
legitimizes the firm's presence.
Q20. Drishti Care is a not-for profit eye hospital and research centre. Which one of the following statements
is likely to relate to Drishti Care's vision, rather than its mission statement?
(a) Drishti Care places patient care before all else.
(b) Drishti Care will be the global leader in cutting edge eye surgery.
(c) Drishti Care offers the highest level of patient care throughout country.
(d) Drishti Care consultants strive to continually improve surgical techniques.
(RTP, Nov 2021, NA)
Correct answer: (b) Drishti Care will be the global leader in cutting edge eye surgery.
Q21. Meba Ltd. had a huge capacity of 40,000 Kilo Litres production of Kerosene Oil, and they were
able to achieve 90% of it almost always, while the teams were also aware that they can achieve
100% capacity with very less efforts, but always kept margins. Further, the business team was
planning to setup two more plants of 20,000 Kilo Litre capacity each in the next five years. This
was a welcomed move from state governments as well. From the above, which of the following
aspects of objectives is missing by production team?
(a) They should be clear and quantifiable.
(b) They should be concise.
(c) They should be challenging.
(d) They should provide standard for comparative appraisal.
Correct answer: (c) They should be challenging.
3.4 Strategic Management Model

Q1. Describe the principal aspects of strategy-execution process, which are included in most situations.
Implementation or execution is an operations-oriented activity aimed at shaping the performance of

core business activities in a strategy-supportive manner. To convert strategic plans into actions and
results, a manager must be able to direct organizational change, motivate people, build and
strengthen company’s competencies and competitive capabilities, create a strategy-supportive work
culture, and meet or beat performance targets. Good strategy execution involves creating strong “fits”
between strategy and organizational capabilities, structure, climate & culture.
In most situations, strategy-execution process includes the following principal aspects:
● Developing budgets that steer ample resources into those activities that are critical to
strategic success.
● Staffing the organization with the needed skills and expertise, consciously building and
strengthening strategy-supportive competencies and competitive capabilities, and
organizing the work effort.
● Ensuring that policies and operating procedures facilitate rather than impede effective
execution.
● Using the best-known practices to perform core business activities and pushing for
continuous improvement.
● Installing information and operating systems that enable company personnel to better carry
out their strategic roles day in and day out.
● Motivating people to pursue the target objectives energetically.
● Creating culture and climate conducive to successful strategy implementation and execution.
● Exerting the internal leadership needed to drive implementation forward and keep improving
strategy execution. When the organization encounters stumbling blocks or weaknesses,
management has to see that they are addressed and rectified quickly.
Q2. To convert strategic plans into actions and results, a manager must be able to direct organizational
change, motivate people, build and strengthen company competencies and competitive capabilities,
create a strategy-supportive work climate, and meet or beat performance targets.
Explain the principal aspects of strategy-execution process.

(RTP, Nov 2018, NA) (MTP 1, May 2019, 5 Marks)
Implementation or execution is an operations-oriented activity aimed at shaping the performance of

core business activities in a strategy-supportive manner. To convert strategic plans into actions and
results, a manager must be able to direct organizational change, motivate people, build and
strengthen company’s competencies and competitive capabilities, create a strategy-supportive work
culture, and meet or beat performance targets. Good strategy execution involves creating strong “fits”
between strategy and organizational capabilities, structure, climate & culture.

● Developing budgets that steer ample resources into those activities that are critical to
strategic success.
● Staffing the organization with the needed skills and expertise, consciously building and
execution.
● Creating culture and climate conducive to successful strategy implementation and execution.
strategy execution. When the organization encounters stumbling blocks or weaknesses,
Q3. Present a diagrammatic representation of a Strategic Management model.

Strategic Management Model
Analysis Implementation Evaluation

Q4. The strategic management process is:

(a) a solution that guarantees prevention of organizational failure.
(b) concerned with a resources, capabilities, and competencies, but not the conditions in its external
environment.
(c) not to be used in the not-for-profit organisations.
(d) full set of commitments, decisions, and actions related to the firm.
(RTP, May 2019, NA)
Correct answer: (d) full set of commitments, decisions, and actions related to the firm.
Q5. During what stage of strategic management are a firm’s specific internal strengths and weaknesses
determined?
a. Formulation
b. Implementation
c. Evaluation
d. Feedback
Correct answer: (a) Formulation
Q6. With the help of a model explain strategic management process.

(RTP, Nov 2019, NA)
The strategic management process can best be studied and applied using a model. Identifying an
organization’s vision, mission, goals and objectives, is the starting point for strategic management
process. The strategic management process is dynamic and continuous. A change in any one of the
major components in the model can necessitate a change in any or all of the other components.
Therefore, strategy formulation, implementation, and evaluation activities should be performed on a
continual basis, not just at the end of the year or semi-annually.
Formulating, implementing, and evaluating strategies are the major components of the strategic
management that are represented in the following model:
Strategic Management Model

Analysis Implementation Evaluation
The strategic management process is not as cleanly divided and neatly performed in practice.
Strategists do not go through the process in lockstep fashion. Generally, there is give-and-take among
hierarchical levels of an organization. Many organizations conduct formal meetings semi-annually to
discuss and update the firm’s vision/mission, opportunities/threats, strengths/weaknesses, strategies,
objectives, policies, and performance. Creativity from participants is encouraged in meeting. Good
communication and feedback are needed throughout the strategic management process.
Q7. What is the first step in the comprehensive strategic-management model?

(a) Developing vision and mission statements
(b) Performing external audits
(c) Measuring and evaluating performance
(d) Establishing long-term objectives
Correct answer: (a) Developing vision and mission statements
Q8. In which phase of strategic management are annual objectives especially important?
(a) Formulation
(b) Control
(c) Evaluation
(d) Implementation
(RTP, May 2020, NA)
Correct answer: (d) Implementation

Q9. Strategy execution is an operations-oriented activity which involves a good fit between strategy and
organizational capabilities, structure, climate & culture. Enumerate the principal aspects of strategy
execution process which are used in most of the situations.
(SA, Jan 2021, 5 Marks) (Study Material)
Implementation and execution are an operations-oriented activity aimed at shaping the

performance of core business activities in a strategy-supportive manner. To convert
strategic plans into actions and results, a manager must be able to direct organizational
change, motivate people, build and strengthen company’s competencies and competitive
capabilities, create a strategy-supportive work culture, and meet or beat performance
targets. Good strategy execution involves creating strong “fits” between strategy and
organizational capabilities, structure, climate & culture.
In most situations, strategy-execution process includes the following principal

Aspects:
1. Developing budgets that steer ample resources into those activities critical to
strategic success.
2. Staffing the organization with the needed skills and expertise, consciously
building and strengthening strategy-supportive competencies and competitive
capabilities and organizing the work effort.
3. Ensuring that policies and operating procedures facilitate rather than impede
effective execution.
4. Using the best-known practices to perform core business activities and pushing
for continuous improvement.
5. Installing information and operating systems that enable company personnel to

better carry out their strategic roles day in and day out.
6. Motivating people to pursue the target objectives energetically.
7. Creating a company culture and work climate conducive to successful strategy

implementation and execution.
8. Exerting the internal leadership needed to drive implementation forward and

keep improving strategy execution. When the organization encounters stumbling
blocks or weaknesses, management has to see that they are addressed and
rectified quickly.
Q10. Explain briefly the key areas in which the strategic planner should concentrate his mind to achieve
desired results.
(RTP, May 2021, NA)
A strategic manager defines the strategic intent of the organisation and take it on the path of
achieving the organisational objectives. There can be a number of areas that a strategic manager
should concentrate on to achieve desired results. They commonly establish long-term objectives in
seven areas as follows:

● Profitability.
● Productivity.
● Competitive Position.
● Employee Development.
● Employee Relations.
● Technological Leadership.
● Public Responsibility.
Q11. Explain the principal aspects of strategy-execution process.

(RTP, Nov 2021, NA)
● Developing budgets that steer ample resources into those activities critical to strategic
success.
● Staffing the organisation with the needed skills and expertise, consciously building and
execution.
● Creating a company culture and work climate conducive to successful strategy

implementation and execution.
strategy execution. When the organisation encounters stumbling blocks or weaknesses,
3.5 Strategic Planning
Q1. How a company can deal with strategic uncertainty?

(RTP, May 2018, NA) (MTP 1, Nov 2018, 3 Marks)
Strategic uncertainty denotes the uncertainty that has crucial implications for the organisation. An
approach to deal with strategic uncertainty is by grouping them into logical clusters or themes. It is
then useful to assess the importance of each cluster in order to set priorities with respect to
Information gathering and analysis.

Q2. Correct/ Incorrect.

Information gathering and deep analysis can eliminate uncertainty.
(RTP, May 2018, NA)

Strategic uncertainty is often represented by a future trend or event that has inherent
unpredictability. Information gathering and additional analysis is not able to eliminate uncertainty.
Q3. Differentiation between Strategic Planning and Operational Planning.

(RTP, May 2022, NA)
Strategic Planning Operational planning
Strategic planning shapes the organisation and Operational planning deals with current
its resources. deployment of resources.
Strategic planning assesses the impact of Operational planning develops tactics rather
environmental variables. than strategy.
Strategic planning takes a holistic view of the Operational planning projects current
organisation. operations into the future.
Strategic planning develops overall objectives Operational planning makes modifications to

and strategies. the business functions but not fundamental
changes.
Strategic planning is concerned with the Operational planning is concerned with the
long-term success of the organisation. short-term success of the organisation.
Strategic planning is a senior management Operational planning is the responsibility of

responsibility. functional managers.

Chapter 4
Question Bank
3.1 Stability
Stability strategy is not a ‘do-nothing’ strategy.
(RTP, Nov 2018, NA)

Stability strategies are implemented by approaches wherein few functional changes are made in the
products or markets. It is not a ‘do nothing’ strategy. It involves keeping track of new developments to
ensure that the strategy continues to make sense. This strategy is typical for mature business
organizations. Some small organizations will also frequently use stability as a strategic focus to
maintain comfortable market or profit position.
Q2. Stability strategy is a ____________ strategy.

(a) Functional level.
(b) Business level
(c) Corporate level.
(d) implementation.
(RTP, May 2019, NA)
Correct answer: (c) Corporate level
Q3. What is stability strategy? What are the reasons to pursue stability strategy?
(RTP, Nov 2019, NA)
One of the important goals of a business enterprise is stability - to safeguard its existing interests and
strengths, to pursue well established and tested objectives, to continue in the chosen business path,
to maintain operational efficiency on a sustained basis, to consolidate the commanding position
already reached, and to optimise returns on the resources committed in the business. A stability
strategy is pursued by a firm when:
● It continues to serve in the same or similar markets and deals in same or similar products and
services.
● The strategic decisions focus on incremental improvement of functional performance.
Major reasons for stability strategy are as follows:
● A product has reached the maturity stage of the product life cycle.
● It is less risky as it involves less changes and the staff feels comfortable with things as they are.

● The environment faced is relatively stable.

● Expansion may be perceived as being threatening.
● Consolidation is sought through stabilizing after a period of rapid expansion.
Q4. Justify the statement "Stability strategy is opposite of Expansion strategy".

(RTP, May 2021, NA) (MTP 1, May 2021, 5 Marks)
Stability Strategies, as name suggests, are intended to safeguard the existing interests and strengths
of business. It involves organisations to pursue established and tested objectives, continue on the
chosen path, maintain operational efficiency and so on. A stability strategy is pursued when a firm
continues to serve in the same or similar markets and deals in same products and services. In stability
strategy, few functional changes are made in the products or markets, however, it is not a ‘do nothing’
s trategy. This strategy is typical for mature business organizations. Some small organizations also
frequently use stability as a strategic focus to maintain comfortable market or profit position.
On the other hand, expansion strategy is aggressive strategy as it involves redefining the business by
adding the scope of business substantially, increasing efforts of the current business. In this sense, it
becomes opposite to stability strategy. Expansion is a promising and popular strategy that tends to be
equated with dynamism, vigor, promise and success. Expansion also includes diversifying, acquiring
and merging businesses. This strategy may take the enterprise along relatively unknown and risky
paths, full of promises and pitfalls.
3.2 Expansion
Q1. Vertical integration may be beneficial when

(a) Lower transaction costs and improved coordination are vital and achievable through vertical
integration.
(b) Flexibility is reduced, providing a more stationary position in the competitive environment.
(c) Various segregated specializations will be combined.
(d) The minimum efficient scales of two corporations are different.
(Sample MCQs) (MTP 1, May 2019, 1 Mark) (RTP, May 2020, NA)
Correct answer: (a) Lower transaction costs and improved coordination are vital and achievable
through vertical integration
Q2. One of the primary advantages of diversification is sharing core competencies. In order for
diversification to be most successful, it is important that
(a) The target market is the same, even if the products are very different.
(b) The products use similar distribution channels.
(c) The methods of production are the same.
(d) The similarity required for sharing core competencies must be in the value chain, not in the
product.
(Sample MCQs)

Correct answer: (d) The similarity required for sharing core competencies must be in the value chain,
not in the product
Q3. Horizontal integration is concerned with

(a) Production
(b) Quality
(c) Product planning
(d) All of the above
(Sample MCQs)
Correct answer: (a) Production
Q4. The reasons for acquisition are

(a) Increased market power
(b) Increased diversification
(c) Increased speed to market
(d) All of the these
(Sample MCQs)
Correct answer: (d) All of these
Q5. Conglomerate diversification is another name for which of the following?

(a) Related diversification
(b) Unrelated diversification
(c) Portfolio diversification
(d) Acquisition diversification
Correct answer: (b) Unrelated diversification
Q6. When two organisations combine to increase their strength and financial gains along with breaking
the trade barriers is called-----------
(a) Hostile takeover
(b) Liquidation
(c) Merger
(d) Acquisition
(Sample MCQs) (MTP 1, Nov 2020, 1 Mark)
Correct answer: (c) Merger
Q7. Entering into a ‘contract’ by MNCs is an example of:

a) Partial Ownership Alliance
b) Joint Venture Alliance

c) Non-Equity Alliance
d) Joint Ownership Alliance
(Sample MCQs)
Correct answer: (c) Non-Equity Alliance

Mergers and acquisitions
(RTP, May 2018, NA)
Merger and acquisition in simple words are defined as a process of combining two or more
organizations together.
Some organizations prefer to grow through mergers. Merger is considered to be a process when two
or more companies come together to expand their business operations. In such a case the deal gets
finalized on friendly terms and both the organizations share profits in the newly created entity. In a
merger two organizations combine to increase their strength and financial gains along with breaking
the trade barriers.
When one organization takes over the other organization and controls all its business operations, it is
known as acquisitions. In this process of acquisition, one financially strong organization overpowers
the weaker one. Acquisitions often happen during recession in economy or during declining profit
margins. In this process, one that is financially stronger and bigger establishes it power. The
combined operations then run under the name of the powerful entity. A deal in case of an acquisition
is often done in an unfriendly manner, it is more or less a forced association.
Q9. Swift Insurance is a company engaged in the business of providing medical insurance maintaining a
market share of 25 to 30 per cent in last five years. Recently, the company decided to enter into the
business of auto insurance by having foreign collaboration. Identify the strategy being followed by the
Swift Insurance with its advantages.
Overall Swift Insurance is following growth or expansion strategy as it is redefining the business and
enlarging its scope. The step will also substantially increase investment in the business.
The new business is related and at the same time caters to a different segment and accordingly can
be termed as related diversification. The new business falls within the scope of general insurance and
horizontally related to the existing business.
In the process of expansion, the company will be able to exploit:
● Its brand name.
● The marketing skills available.
● The existing sales and distribution infrastructure.
● Research and development.
● Economies of scale
Q10. Strategic alliances are formed if they provide an advantage to all the parties in the alliance.
Do you agree? Explain in brief the advantages of a strategic alliance.
(RTP, May 2018, NA)

Or
What are the advantages of a strategic alliance?

A strategic alliance is a relationship between two or more businesses that enables each to achieve
certain strategic objectives which neither would be able to achieve on its own. The strategic partners
maintain their status as independent and separate entities, share the benefits and control over the
partnership, and continue to make contributions to the alliance until it is terminated. Strategic
alliances are formed if they provide an advantage to all the parties in the alliance. These advantages
can be broadly categorised as follows:
(i) Organizational: Strategic alliances may be formed to learn necessary skills and obtain certain
capabilities from the strategic partner. Strategic partners may also help to enhance productive
capacity, provide a distribution system, or extend supply chain. A strategic partner may provide a
good or service that complements each other, thereby creating a synergy. If one partner is relatively
new or untried in a certain industry, having a strategic partner who is well-known and respected will
help add legitimacy and creditability to the venture.
(ii) Economic: Alliances can reduce costs and risks by distributing them across the members of the
alliance. Partners can obtain greater economies of scale in an alliance, as production volume increase,
causing the cost per unit to decline. Finally, partners can take advantage of co-specialization, where
specializations are bundled together, creating additional value.
(iii) Strategic: Organizations may join to cooperate instead of compete. Alliances may also create
vertical integration where partners are part of supply chain. Strategic alliances may also be useful to
create a competitive advantage by the pooling of resources and skills. This may also help with future
business opportunities and the development of new products and technologies. Strategic alliances
may also be used to get access to new technologies or to pursue joint research and development.
(iv) Political: Sometimes there is need to form a strategic alliance with a local foreign business to gain
entry into a foreign market either because of local prejudices or legal barriers to entry. Forming
strategic alliances with politically-influential partners may also help improve overall influence and
position.
Q11. What do you understand by co-generic merger?

Or
Describe the term 'Co-generic merger'.

In co-generic merger two or more merging organizations are associated in some way or the other
related to the production processes, business markets, or basic required technologies. Such merger
include the extension of the product line or acquiring components that are required in the daily
operations. It offers great opportunities to business to diversify around a common set of resources
and strategic requirements.

Q12. Shoaib and Salim, two brothers are the owners of a cloth manufacturing unit located in Lucknow.
They are doing well and have substantial surplus funds available within the business. Shoaib is
interested in acquiring another industrial unit located in Lucknow manufacturing tableware such as
dinner sets, cups and saucers, bowls. etc. On the other hand , Salim desires to start another unit to
produce readymade garments. Discuss the nature of corporate strategies being suggested by two
brothers. Which one is better?
Shoaib wishes to diversify in a business that is not related to their existing line of product and can be
termed as conglomerate diversification. He is interested in acquiring another industrial unit located in
Lucknow manufacturing tableware such as dinner sets, cups and saucers, bowls, which is not related
to their existing product. In conglomerate diversification, the new businesses/ products are disjointed
from the existing businesses/products in every way; it is a totally unrelated diversification. In process/
technology/ function, there is no connection between the new products and the existing ones.
Conglomerate diversification has no common thread at all with the firm's present position.
On the other hand, Salim seeks to move forward in the chain of existing product by adopting
vertically integrated diversification. The cloth being manufactured by the existing processes can be
used as raw material of garments manufacturing business. In such diversification, firms opt to engage
in businesses that are related to the existing business of the firm. The firm remains vertically within
the same process and moves forward or backward in the chain. It enters specific product/process
steps with the intention of making them into new businesses for the firm. The characteristic feature
of vertically integrated diversification is that here, the firm does not jump outside the vertically linked
product-process chain.
Both types of diversifications have their own benefits. While vertically integrated diversification brings
synergy, a conglomerate diversification helps in diversifying the risk. It is possible that a downturn in
one business is offset by upswing in other business. In the vertically integrated diversification firms
can take advantage of their existing competence that in turn will improve chances of success.
Q13. Write short note on Conglomerate merger.

Merger is considered to be a process when two or more companies come together to expand their
business operations. In such a case the deal gets finalized on friendly terms and both the
organizations share profits in the newly created entity.
Conglomerate merger happens in case of organizations that are unrelated to each other combine
together. There are no linkages with respect to customer groups, customer functions and
technologies being used. There are no important common factors between the organizations in
production, marketing, research and development and technology. In practice, however, there is
some degree of overlap in one or more of these factors.

Forward integration and backward integration.
(RTP, Nov 2018, NA)
Forward and backward integration form part of vertically integrated diversification. In vertically
integrated diversification, firms opt to engage in businesses that are vertically related to the existing

business of the firm. The firm remains vertically within the same process. While diversifying, firms opt
to engage in businesses that are linked forward or backward in the chain and enters specific
product/process steps with the intention of making them into new businesses for the firm.
Backward integration is a step towards creation of effective supply by entering business of input
providers. Strategy employed to expand profits and gain greater control over production of a product
whereby a company will purchase or build a business that will increase its own supply capability or
lower its cost of production. On the other hand, forward integration is moving forward in the value
chain and entering business lines that use existing products. Forward integration will also take place
where organisations enter into businesses of distribution channels.
Q15. Vastralok Ltd., was started as a textile company to manufacture cloth. Currently, they are in the
manufacturing of silk cloth. The top management desires to expand the business in the cloth
manufacturing. To expand they decided to purchase more machines to manufacture cotton cloth.
Identify and explain the strategy opted by the top management of Vastralok Ltd.
(RTP, Nov 2018, NA) (Study Material)
Vastralok Ltd. is currently manufacturing silk cloth and its top management has decided to expand its
business by manufacturing cotton cloth. Both the products are similar in nature within the same
industry. The strategic diversification that the top management of Vastralok Ltd. has opted is
concentric in nature. They were in business of manufacturing silk and now they will manufacture
cotton as well. They wil be able to use existing infrastructure and distribution channel. Concentric
diversification amounts to related diversification.
In concentric diversification, the new business is linked to the existing businesses through process,
technology or marketing. The new product is a spin-off from the existing facilities and
products/processes. This means that in concentric diversification too, there are benefits of synergy
with the current operations.
Q16. List the advantages of Strategic Alliances.

(SA, Nov 2018, 2 Marks) (RTP, May 2019, NA)
Advantages of strategic alliance are:

(i) Organisational: learn skills and obtain capabilities from strategic partners.
(ii) Economic: Sharing of costs and risks by members ofalliance.
(iii) Strategic: Rivals can join together to cooperate rather than compete.
(iv) Political: Alliance with partners with political influence improve overall power position of the
organisation.
Acquiring of ambulance services by a hospital is an example of forward integration strategy.

Acquiring of ambulance services by a hospital is an example of backward integration strategy.
Backward integration is a step towards creation of effective supply by entering business of input
providers. Forward integration is moving forward in the value chain.

There is no such thing as backward integration.

Organisations may diversify into new businesses that are vertically integrated with their existing
business. Backward integration firms create effective supply by entering business of input providers.
This strategy is employed to expand profits and gain greater control over production.
Q19. Which of the following is not a type of diversification strategy?

(a) Vertical diversification.
(b) Concentric diversification.
(c) Conglomerate diversification.
(d) Co-generic diversification.
(RTP, May 2019, NA)
Correct answer: (d) Co-generic diversification
Q20. An organization acquires its supplier is an example of:

(a) Horizontal integrated diversification.
(b) Forward integrated diversification.
(c) Backward integrated diversification.
(d) Conglomerate diversification.
(RTP, May 2019, NA)
Correct answer: (c) Backward integrated diversification
Q21. Leatherite Ltd., was started as a leather company to manufacture footwear. Currently, they are in the
manufacturing of footwears for males and females. The top management desires to expand the
business in the leather manufacturing goods. To expand they decided to purchase more machines to
manufacture leather bags for males and females. Identify and explain the strategy opted by the top
management of Leatherite Ltd.
Leatherite Ltd. is currently manufacturing footwears for males and females and its top management
has decided to expand its business by manufacturing leather bags for males and females. Both the
products are similar in nature within the same industry. The strategic diversification that the top
management of Leatherite Ltd. has opted is concentric in nature. They were in business of
manufacturing leather footwears and now they will manufacture leather bags as well. They will be
able to use existing infrastructure and distribution channel. Concentric diversification amounts to
related diversification.
technology or marketing. The new product is a spin-off from the existing facilities and

products/processes. This means that in concentric diversification too, there are benefits of synergy
with the current operations.
Q22. Acquision of a company producing readymade garments by a company manufacturing yarn is.
a. Horizontal integration
b. Horizontal Diversification
c. Forward integration
d. Backward integration
Correct answer: (c) Forward integration
Q23. Conglomerate diversification can also be explained as:

a. Merger
b. Combination strategy
c. Related diversification
d. Unrelated diversification
Correct answer: (d) Unrelated diversification
Q24. Gautam and Siddhartha two brothers are the owners of a cloth manufacturing unit located in
Faridabad. They are doing well and have substantial surplus funds available within the business. They
have different approaches regarding corporate strategies to be followed to be more competitive and
profitable in future.
Gautam is interested in acquiring another industrial unit located in Faridabad manufacturing
stationery items such as permanent markers, notebooks, pencils and pencil sharpeners, envelopes
and other office supplies. On the other hand, Siddhartha desires to start another unit to produce
readymade garments.
Discuss the nature of corporate strategies being suggested by two brothers and risks involved in it.
(SA, May 2019, 5 Marks) (Study Material)
Gautam wishes to diversify in a business that is not related to their existing line of product and can be
termed as conglomerate diversification. He is interested in acquiring another industrial unit located in
Faridabad manufacturing stationery items such as permanent markers, notebooks, pencils and
pencil sharpeners, envelopes and other office supplies, which is not related to their existing product.
In conglomerate diversification, the new businesses/ products are disjointed from the existing
businesses/products in every way; it is a unrelated diversification. In process/ technology/ function,
there is no connection between the new products and the existing ones. Conglomerate
diversification has no common thread at all with the firm's present position.
On the other hand, Siddhartha seeks to move forward in the chain of existing product by adopting
vertically integrated diversification/ forward integration. The cloth being manufactured by the existing
processes can be used as raw material of garments manufacturing business. In such diversification,
firms opt to engage in businesses that are related to the existing business of the firm. The firm
remains vertically within the same process and moves forward or backward in the chain. It enters

specific product/process steps with the intention of making them into new businesses for the firm.
The characteristic feature of vertically integrated diversification is that here, the firm does not jump
outside the vertically linked product-process chain.
Both types of diversifications have their own risks. In conglomerate diversification, there are no
linkages with customer group, customer marketing functions and technology used, which is a risk. In
the case of vertical integrated diversification, there is a risk of lack of continued focus on the original
business.
Q25. Acquisition of another organisation that was using your product in their manufacturing is:
A. Horizontal integrated diversification
B. Forward integrated diversification
C. Backward integrated diversification
D. conglomerate diversification
(RTP, Nov 2019, NA)
Correct answer: (b) Forward integrated diversification
Q26. If suppliers are unreliable or too costly, which of these strategies may be appropriate?
(a) Horizontal integration
(b) Backward integration
(c) Market penetration
(d) Forward integration
Correct answer: (b) Backward integration
Q27. Organo is a large supermarket chain. It is considering the purchase of a number of farms that
provides Organo with a significant amount of its fresh produce. Organo feels that by purchasing the
farms, it will have greater control over its supply chain. Identify and explain the type of diversification
opted by Organo?
Organo is a large supermarket chain. By opting backward integration and purchase a number of
farms, it will have greater control over its supply chain. Backward integration is a step towards,
creation of effective supply by entering business of input providers. Strategy employed to expand
profits and gain greater control over production of a product whereby a company will purchase or
build a business that will increase its own supply capability or lessen its cost of production.
Q28. Write short note on expansion through acquisitions and mergers.

(RTP, May 2020, NA) (MTP 1, Nov 2020, 5 Marks) (Study Material)
Acquisitions and mergers are basically combination strategies. Some organizations prefer to grow
through mergers. Merger is considered to be a process when two or more companies come together
to expand their business operations. In such a case the deal gets finalized on friendly terms and both

the organizations share profits in the newly created entity. In a merger two organizations combine to
increase their strength and financial gains along with breaking the trade barriers.
When one organization takes over the other organization and controls all its business operations, it is
known as acquisition. In this process of acquisition, one financially strong organization overpowers
the weaker one. Acquisitions often happen during recession in economy or during declining profit
margins. In this process, one that is financially stronger and bigger establishes it power. The
combined operations then run under the name of the powerful entity. A deal in case of an acquisition
is often done in an unfriendly manner, it is more or less a forced association where the powerful
organization either consumes the operation or a company in loss is forced to sell its entity.
Q29. Explain the term Merger and Acquisition as a growth strategy. Differentiate between both of them.
State the situations in which such strategies are considered by any organization.
(RTP, Nov 2021, NA)
Acquisition or merger with an existing concern is an instant means of achieving expansion. It is an

attractive and tempting proposition in the sense that it circumvents the time, risks and skills involved
in screening internal growth opportunities, seizing them and building up the necessary resource
base required to materialise growth.
Apart from the urge to grow, acquisitions and mergers are resorted to for purposes of achieving a
measure of synergy between the parent and the acquired enterprises. Synergy may result from such
bases as physical facilities, technical and managerial skills, distribution channels, general
administration, research and development and so on.
Many organizations in order to achieve quick growth, expand or diversify with the use of mergers and
acquisitions strategies. Merger and acquisition in simple words are d efined as a process of combining
two or more organizations together. There is a thin line of difference between the two terms but the
impact of combination is completely different in both the cases.
Merger is considered to be a process when two or more organizations join together to expand their
business operations. In such a case the deal gets finalized on friendly terms. Owners of pre-merged
entities have right over the profits of new entity. In a merger two organizations combine to increase
their strength and financial gains.
While, when one organization takes over the other organization and controls all its business
operations, it is known as acquisition. In the process of acquisition, one financially strong organization
overpowers the weaker one. Acquisitions often happen during economic recession or during
declining profit margins. In this process, one that is financially stronger and bigger establishes it
power. The combined operations then run under the name of the powerful entity. A deal in case of an
acquisition is often done in an unfriendly manner, it is more or less a forced association.
Q30. A rubber manufacturer starts making shoe soles and gum can be termed as?
(a) Conglomerate Diversification
(b) Concentric Diversification
(c) Horizontal Integration
(d) Vertical Integration
Correct answer: (b) Concentric Diversification

Q31. GWA, a leading Japan based automobile company decides to make India a hub for the company's
250 cc motor cycle to be manufactured in collaboration with the TPR Group, a leading Indian
motorcycle manufacturer. The production is to be exported to the company's home market as well as
to other African countries.
What is this growth strategy called? Point out the most important advantages both the companies
expect from such strategy/ collaboration.
GWA of Japan and TRP group of India opted for strategic alliance as their growth strategy. A strategic
alliance is a relationship between two or more businesses that enables each to achieve certain
strategic objectives which neither would be able to achieve on its own. Strategic alliances are often
formed in the global marketplace between businesses that are based in different regions of the
world.
Advantages of Strategic Alliance
Strategic alliance usually is only formed if they provide an advantage to all the parties in the alliance.
These advantages can be broadly categorised as follows:
1. Organizational: Strategic alliance helps to learn necessary skills and obtain certain capabilities from
strategic partners. Strategic partners may also help to enhance productive capacity, provide a
distribution system, or extend supply chain. Having a strategic partner who is well-known and
respected also helps add legitimacy and creditability to a new venture.
2. Economic: There can be reduction in costs and risks by distributing them across the members of
the alliance. Greater economies of scale can be obtained in an alliance, as production volume can
increase, causing the cost per unit to decline. Finally, partners can take advantage of
co-specialization, creating additional value, such as when a leading computer manufacturer bundles
its desktop with a leading monitor manufacturer’s monitor.
3. Strategic: Rivals can join together to cooperate instead of competing with each other. Vertical
integration can be created where partners are part of supply chain. Strategic alliances may also be
useful to create a competitive advantage by the pooling of resources and skills. This may also help
with future business opportunities and the development of new products and technologies. Strategic
alliances may also be used to get access to new technologies or to pursue joint research and
development.
4. Political: Sometimes strategic alliances are formed with a local foreign business to gain entry into a
foreign market either because of local prejudices or legal barriers to entry. Forming strategic alliances
with politically influential partners may also help improve your own influence and position.
Q32. A tea farm owners plan to open tea cafes in tourist spots and to sell their own premium tea to build a
brand. Which of the following can this be termed as?
(a) Backward Integration
(b) Forward Integration
(c) Diversification
(d) Horizontal Integration
(RTP, May 2022, NA)
Correct answer: (b) Forward Integration

Q33. Diversification endeavours can be categorized into four broad classifications. State the basis for this
classification and name the four categories. How is concentric diversification different from vertically
diversification? Explain.
(RTP, May 2022, NA)
Diversification strategy involves expansion into new businesses that are outside the current business
and markets of an organisation. Based on the nature and extent of their relationship to existing
businesses, diversification can be classified into four broad categories:
(i) Vertically integrated diversification
(ii) Horizontally integrated diversification
(iii) Concentric diversification
(iv) Conglomerate diversification
Concentric diversification takes place when the products are related. The new product is a spin-off
from the existing facilities and products/processes. This means that in concentric diversification too,
there are benefits of synergy with the current operations. However, concentric diversification differs
from vertically integrated diversification in the nature of the linkage the new product has with the
existing ones.
In vertically integrated diversification, firms opt to engage in businesses that are related to the
existing business of the firm. The firm remains vertically within the same process. Sequence moves
forward or backward in the chain and enters specific product/process steps with the intention of
making them into new businesses for the firm. The new product fall within the firm’s current
process-product chain. In concentric diversification, there is a departure from this vertical linkage, a
new related product is added to the existing business. The new product is only connected in a
loop-like manner at one or more points in the firm’s existing process/ technology/ product chain.
Q34. There has been fierce demand for both Gecko and FlyBee for the last 3 years. Gecko makes mass
consumption pens while FlyBee is a notebook and diary brand - both being complementary goods of
each other. But to grow further, FlyBee decided to take up competition with Gecko in pens segment
and thereby launched, FlyPens. Identify and explain the growth strategy opted by FlyBee?
FlyBee is a notebook and diary brand. But to grow further, FlyBee decided to take up competition
with Gecko in pens segment and thereby launched, FlyPens. FlyBee that is hitherto not into
producing pens starts producing them and other similar products is following concentric
diversification which is basically related diversification.
In this form of diversification, the new business is linked to the existing businesses through existing
systems such as processes, technology or marketing. The new product is a spin-off from the existing
facilities and products/processes. There are benefits of synergy with the current operations. The most
common reasons for pursuing a concentric diversification are that opportunities in existing line of
business are available.
Q35. XYZ Co. was formed by the merger between a number of chemical companies. Since, it amed at
expanding its presence in a large number of value added specialty chemical operations; within a few
years, the company involved in activities like bulk chemicals, explosives, fertilizers, paints and
commodity plastics. But expanding the scope of business to so many businesses; little it did for the
bottom line. On analyzing, the top management found that although many of the businesses were

linked in some way to the chemical industry, but there was little commonality between bulk
chemicals and fertilizers, between plastics and paints, between explosives and plastic materials. In
other words, the value created by the diversification was questionable. After reading this scenario,
what do you think has gone wrong in this case? How do you think this problem can be rectified?
(Study Material)
In the present scenario, the problem is related to diversification strategy to expand and mark its
presence. Diversification can be either related or unrelated. Related diversification is when the new
business is linked to the existing business through process, technology or marketing. The new
product is a spin-off from the existing facilities and products/processes. This means that in related
diversification there are benefits of synergy with the current operations as the new product is only
connected in a loop-like manner at one or more points in the firm’s existing
process/technology/product chain.
Whereas, in unrelated diversification, no such linkages exist; the new businesses/ products are
disjointed from the existing businesses/ products in every way. In process/technology/function, there
is no connection between the new products and the existing ones. Conglomerate diversification has
no common thread at all with the firm’s present position.
In the present case, the company tried to diversify in products like bulk chemicals, explosives,
fertilizers, paints and commodity plastics thinking that the diversification is linked in some way to the
chemical industry. But when the bottom line did not improve with this diversification; the top
management explored and found that there were far fewer synergies among the company’s
operations that it had initially thought. There was little commonality between bulk chemicals and
fertilizers, between plastics and paints, between explosives and advanced materials which means that
the company made a dire mistake in understanding whether the diversification was related or
unrelated.
The probable solution for this would be breaking up the company into constituent parts; may be two
or three and put the related business into the relevant SBUs and consider selling off the businesses
that are totally unrelated or totally get into unrelated diversification and form a structure accordingly.
Q36. Distinguish between concentric and conglomerate diversification.

(Study Material)
Concentric diversification occurs when a firm adds related products or markets. On the other hand,
conglomerate diversification occurs when a firm diversifies into areas that are unrelated to its current
line of business.
technology or marketing. In conglomerate diversification, no such linkages exist; the new business/
product is disjointed from the existing bussinesses/products.
The most common reasons for pursuing a concentric diversification are that opportunities in a firm’s
existing line of business are available. However, common reasons for pursuing a conglomerate
growth strategy is that opportunities in a firm’s current line of business are limited or opportunities
outside are highly lucrative.
Q37. What are acquisitions? Discuss with examples of two companies resorting to this strategy.
(Study Material)

Acquisition of or merger with existing concern is an instant means of achieving the expansion. It is an
attractive and tempting proposition in the sense that it circumvents the time, risks, and skills involved
in screening internal growth opportunities, seizing them and building up the necessary resource
base required to materialise growth. Organisations consider merger and acquisition proposals in a
systematic manner, so that the marriage will be mutually beneficial, a happy and lasting affair.
Apart from the urge to grow, acquisitions and mergers are resorted to for purposes of achieving a
measure of synergy between the parent and the acquired enterprises. Synergy may result from such
bases as physical facilities, technical and managerial skills, distribution channels, general
administration, research and development and so on. Only positive synergetic effects are relevant in
this connection which denote that the positive effects of the merged resources are greater than the
sum of the effects of the individual resources before merger or acquisition.
Some of the recent/ popular instances of acquisition are listed below:
● Tata digital acquires online grocery Bigbasket.
● HUL’s acquisition of GSK Consumers.
● Tata’s acquisition of Anglo Dutch steelmaker Corus
● Tata’s acquisition of British Jaguar Land Rover
● Mittal Steel’s takeover of Arcelor
3.3 Retrenchment
Turnaround should succeed liquidation strategy.
(RTP, May 2018, NA)

A retrenchment strategy considered the most extreme and unattractive is liquidation strategy, which
involves closing down a firm and selling its assets. It is considered as the last resort because it leads to
serious consequences such as loss of employment for workers and other employees, termination of
opportunities where a firm could pursue any future activities, and the stigma of failure. In an ideal
scenario, turnaround should be attempted first and should precede option of liquidation.
Q2. XYZ Ltd. is a multi-product company, suffering from continuous losses since last few years and has
accumulated heavy losses which have eroded its net worth.
What strategic option is available to the management of this sick company? Advise with reasons.
XYZ Ltd. is a sick company with accumulated losses that have eroded its net worth. The multi-product
company may analyse its various products to take decisions on the viability of each. The company
may consider retrenchment strategy. Retrenchment becomes necessary for coping with hostile and
adverse situations in the environment and when any other strategy is likely to be suicidal.
Retrenchment strategy is adopted because of continuous losses and unviability and stability can be
ensured by reallocation of resources from unprofitable to profitable businesses.

Retrenchment strategy is followed when an organization substantially reduces the scope of its
activity. This is done through an attempt to find out the problem areas and diagnose the causes of
the problems. Next, steps are taken to solve the problems. These steps result in different kinds of
retrenchment strategies as follows:
Turnaround strategy: If the organization chooses to transform itself into a leaner structure and
focuses on ways and means to reverse the process of decline, it adopts a turnaround strategy. It may
try to reduce costs, eliminate unprofitable outputs, generate revenue, improve coordination, better
control, and so on.
Divestment Strategy: Divestment strategy involves the sale or liquidation of a portion of business, or
a major division, profit centre or SBU. Divestment is usually a part of rehabilitation or restructuring
plan and is adopted when a turnaround has been attempted but has proved to be unsuccessful.
Liquidation Strategy: In the retrenchment strategy, the most extreme and unattractive is liquidation
strategy. It involves closing down a firm and selling its assets. It is considered as the last resort
because it leads to serious consequences such as loss of employment for workers and other
employees, termination of opportunities where a firm could pursue any future activities, and the
stigma of failure.
The management of multiproduct sick company manufacturing various items need to understand
pros and cons of each strategic option. The decision will depend upon the specific circumstances of
each product and management goals of the company.
Q3. What is Divestment strategy? When is it adopted?

Divestment strategy involves the sale or liquidation of a portion of business, or a major division, profit
centre or SBU. For a multiple product company, divestment could be a part of rehabilitating or
restructuring plan called turnaround.
A divestment strategy may be adopted due to various reasons:
● When a turnaround has been attempted but has proved to be unsuccessful.
● A business that had been acquired proves to be a mismatch and cannot be integrated within
the company.
● Persistent negative cash flows from a particular business create financial problems for the
whole company.
● Severity of competition and the inability of a firm to cope with it.
● Technological upgradation is required if the business is to survive but where it is not possible
for the firm to invest in it.
● A better alternative may be available for investment.
Q4. Why a Turnaround Strategy is required for a business?

Or
Write a short note on need for turnaround strategy.


Turnaround is needed when an enterprise's performance deteriorates to a point that it needs a radical
change of direction in strategy, and possibly in structure and culture as well. It is a highly - targeted
effort to return an organization to profitability and increase positive cash flows to a sufficient level. It is
used when both threats and weaknesses adversely affect the health of an organization so much that
its basic survival is difficult.
The overall goal of turnaround strategy is to transorm an underperforming or distressed company to
normalcy in terms of acceptable levels of profitability, solvency, liquidity and cash flow. To achieve its
objectives, turnaround strategy must reverse causes of distress, resolve the financial crisis, achieve a
rapid improvement in financial performance, regain stakeholder support, and overcome internal
constraints and unfavourable industry characteristics.
Q5. With the global economic recession Soft Cloth Ltd. incurred significant losses in all its previous five
financial years. Currently, they are into manufacturing of cloth made of cotton, silk, polyster, rayon,
lycra and blends. Competition is also intense on account of cheap imports. The company is facing
cash crunch and has not been able to pay the salaries to its employees in the current month.
Suggest a grand strategy that can be opted by Soft Cloth Ltd.
Soft Cloth Ltd. is facing internal as well as external challenges. The external environment is in
economic recession and the organization is facing cash crunch. The company needs to work on
retrenchment / turnaround strategy. The strategy is suitable in case of issues such as:
● Persistent negative cash flow.
● Uncompetitive products or services
● Declining market share
● Deterioration in physical facilities
● Overstaffing, high turnover of employees, and low morale
● Mismanagement
The company may consider to substantially reduce the scope of its activity. This is done through an
attempt to find out the problem areas and diagnose the causes of the problems. Next, steps are taken
to solve the problems.
These steps result in different kinds of retrenchment strategies. If the organization chooses to focus
on ways and means to reverse the process of decline, it adopts at turnaround strategy. If it cuts off the
loss-making units, divisions, or SBUs, curtails its product line, or reduces the functions performed, it
adopts a divestment strategy. If none of these actions work, then it may choose to abandon the
activities totally, resulting in a liquidation strategy.
Q6. Which of the following can be used in retrenchment strategy?

a. Reducing assets.
b. Operational improvement.
c. Cutting cost.
d. All of the above.

Q7. A company manufactures computers that are of low in production cost, competitive price, and
quality to their competitor’s product. Profits and market share are declining day by day. Shree, a
senior executive realizes that drastic strategies have to be created for the survival of a company. After
SWOT analysis by assessing the strengths and weaknesses, they come up with the conclusion that
they cannot compete in the computers with the competitors. The management directs Shree to act
quick and develop a suitable strategic plan.
Discuss the strategy which can be opted by Shree.
Shree can opt for turnaround strategy which is a highly-targeted effort to return the company to
profitability and increase positive cash flows to a sufficient level. Organizations those have faced a
significant crisis that has negatively affected operations require turnaround strategy. Once
turnaround is successful the organization may turn to focus on growth.
Conditions for turnaround strategies
When firms are losing their grips over market, profits due to several internal and external factors, and
if they have to survive under the competitive environment they have to identify danger signals as
early as possible and undertake rectification steps immediately. These conditions may be, inter alia
cash flow problems, lower profit margins, high employee turnover and decline in market share,
capacity underutilization, low morale of employees, recessionary conditions, mismanagement, raw
material supply problems and so on.
Action plan for turnaround strategy
Stage One – Assessment of current problems
Stage Two – Analyze the situation and develop a strategic plan
Stage Three – Implementing an emergency action plan
Stage Four – Restructuring the business
Stage Five – Returning to normal
Q8. Pizza Galleria was India's first pizza delivery chain enjoying monopoly for several years. However, after
entry of Modino and Uncle Jack it is struggling to compete. Both Modino and Uncle Jack have
opened several eateries and priced the product aggressively. In last four years the chain has suffered
significant losses. The chain wishes to know whether they should go for turnaround strategy. List out
components of action plan for turnaround strategy.
Pizza Chain may choose to have turnaround strategy if there are:

● Persistent negative cash flow from business.
● Uncompetitive products or services.
● Declining market share.
● Deterioration in physical facilities.
● Over-staffing, high turnover of employees, and low morale.
● Mismanagement.
For turnaround strategies to be successful, it is imperative to focus on the short and long- term
financing needs as well as on strategic issues. The chain may attempt to leverage the potential Indian
market by engaging a new logistics partner. It may bring innovation in food items, as well as quality

and improvements in the overall dine-in and delivery experience. During the turnaround, the
“product mix” may be changed, requiring the organization to do some repositioning.
A workable action plan for turnaround would involve:
Stage One – Assessment of current problems: The first step is to assess the current problems and
get to the root causes and the extent of damage the problem has caused.
Stage Two – Analyze the situation and develop a strategic plan: Before making any major changes;
determine the chances of the business’s survival. Identify appropriate strategies and develop a
preliminary action plan.
Stage Three – Implementing an emergency action plan: If the organization is in a critical stage, an
appropriate action plan must be developed to stop the bleeding and enable the organization to
survive. A positive operating cash flow must be established as quickly as possible and enough funds
to implement the turnaround strategies must be raised.
Stage Four – Restructuring the business: The financial state of the organization’s core business is
particularly important. If the core business is irreparably damaged, then the outlook for the entire
organization may be bleak. Efforts to be made to position the organization for rapid improvement.
Stage Five – Returning to normal: In the final stage of turnaround strategy process, the organization
should begin to show signs of profitability, return on investments and enhancing economic
value-added. Emphasis is placed on a number of strategic efforts such as carefully adding new
products and improving customer service, creating alliances with other organizations, increasing the
market share, etc.
Q9. Which strategy is implemented after the failure of turnaround strategy?

(a) Expansion strategy
(b) Diversification strategy
(c) Divestment strategy
(d) Growth strategy
Correct answer: (c) Divestment strategy
Q10. Differentiate between divestment and liquidation strategy.

(MTP 1, Nov 2019, 5 Marks) (MTP 2, May 2021, 5 Marks) (MTP 2, Nov 2021, 5 Marks) (Study Material)
Divestment Strategy Liquidation Strategy
Divestment strategy involves the sale or It involves closing down a firm and selling its
liquidation of a portion of business, or a major assets.
division, profit center or SBU.
Divestment is usually a part of rehabilitation or Liquidation becomes only option in case of

restructuring plan and is adopted when a severe and critical conditions where either
turnaround has been attempted but has proved turnaround and divestment are not seen as
to be unsuccessful. Option of a turnaround may solution or have been attempted but failed.
even be ignored if it is obvious that divestment
is the only answer.
Efforts are made for the survival of Liquidation as a form of retrenchment strategy

organization. is considered as the most extreme and

unattractive.
Survival of organization helps in retaining There is loss of employment with stigma of

personnel, at least to some extent. failure.
Q11. An XYZ Company is facing continuous losses. There is decline in sales and product market share. The
products of the company became uncompetitive and there is persistent negative cash flow. The
physical facilities are deteriorating and employees have low morale. At the board meeting, the board
members decided that they should continue the organization and adopt such measures that the
company functions properly. The board has decided to hire young executive Shayamli for improving
the functions of the organization. What corporate strategy should Shayamli adopt for this company
and what steps to be taken to implement the corporate strategy adopted by Shayamli?
(SA, Nov 2019, 5 Marks) (Study Material)
XYZ Company is facing continuous losses, decline in sales and product market share, persistent
negative cash flow, uncompetitive products, declining market share, deterioration in physical
facilities, low morale of employees. In such a scenario, Shayamli may choose turnaround strategy as
this strategy attempts to reverse the process of decline and bring improvement in organizational
health. This is also important as Board has decided to continue the company and adopt measures for
its proper functioning.
For success, Shayamli needs to focus on the short and long-term financing needs as well as on
strategic issues. During the turnaround, the “product mix” may be changed, requiring the
organization to do some repositioning. A workable action plan for turnaround would involve:
Stage One – Assessment of current problems: In the first step, assess the current problems and get
to the root causes and the extent of damage.
Stage Two – Analyze the situation and develop a strategic plan: Identify major problems and
opportunities, develop a strategic plan with specific goals and detailed functional actions.
survive.
Stage Four – Restructuring the business: If the core business is irreparably damaged, then the
outlook for the entire organization may be bleak. Efforts to be made to position the organization for
rapid improvement.
value-added.
Q12. Retrenchment strategy in the organization can be explained as

(a) Reducing trenches (gaps) created between individuals.
(b) Divesting a major product line or market.
(c) Removal of employees from job through the process of reorganization.
(d) Removal of employees from job in one business to relocate them in other business.
(RTP, May 2020, NA)

Correct answer: (b) Divesting a major product line or market
Q13. Explain in brief the reasons to adopt turnaround strategy.

Reasons to adopt Turnaround Strategy:

1. Turnaround is needed when an enterprise's performance deteriorates to a point that it needs a
radical change of direction in strategy, and possibly in structure and culture as well.
2. It is a highly targeted effort to return an organization to profitability and increase positive cash flows
to a sufficient level.
3. It is used when both threats and weaknesses adversely affect the health of an organization so
much that its basic survival is difficult.
4. The overall goal of turnaround strategy is to return an underperforming or distressed company to
normalcy in terms of acceptable levels of profitability, solvency, liquidity and cash flow.
5. To achieve its objectives, turnaround strategy must reverse causes of distress, resolve the financial
crisis, achieve a rapid improvement in financial performance, regain stakeholder support, and
overcome internal constraints and unfavourable industry characteristics.
Q14. General public is discerning from buying air conditioning units based on the Health Ministry
guidelines regarding emergence of a contagious viral pandemic. Consequently, Nebula Pvt. Ltd, a
manufacturer of evaporation coils used in air conditioning units has faced significant loss in working
capital due to sharp fall in demand. The company conducted financial assessment and developed a
workable action plan based on short and long term financial needs. But for immediate needs, an
emergency plan has been implemented. It includes selling scrap, asset liquidation and overheads
cost reduction. Further, to avoid any such untoward event in future, they plan to diversify into newer
business areas along with its core business. Identify and explain the strategy opted by M/s. Nebula
Pvt. Ltd.?
(RTP, Nov 2020, NA)
M/s. Nebula Pvt Ltd has opted Turnaround Strategy as the company while facing serious working
capital crunch persistently conducted an assessment of current problem and developed a workable
action plan based on short and long term financial needs and strategic issues. A workable action plan
for turnaround would involve:
Stage One – Assessment of current problems: In the first step, assess the current problems and get
to the root causes and the extent of damage.
Stage Two – Analyze the situation and develop a strategic plan: Identify major problems and
opportunities, develop a strategic plan with specific goals and detailed functional actions.
survive.
Stage Four – Restructuring the business: If the core business is irreparably damaged, then the
outlook for the entire organization may be bleak. Efforts to be made to position the organization for
rapid improvement.

Q15. Briefly describe the meaning of divestment and liquidation strategy and establish difference between
the two.
centre or SBU. Divestment is usually a part of rehabilitation or restructuring plan and is adopted
when a turnaround has been attempted but has proved to be unsuccessful.
Liquidation strategy is a retrenchment strategy considered the most extreme and unattractive
strategy, which involves closing down a firm and selling its assets.
Difference between Divestment strategy and Liquidation strategy:
Basis of Difference Divestment Strategy Liquidation Strategy
Meaning Divestment strategy involves sale Liquidation strategy

or liquidation of a portion of involves closing down a firm
business. and selling its business.
Policy option Divestment is usually a part of Liquidation becomes only

rehabilitation or restructuring plan option in case of severe and
and is adopted when a turnaround critical conditions where either
has been attempted but has turnaround or divestment are
proved to be unsuccessful. Option not seen as solution or have
of a turnaround may even be been attempted but failed.
ignored if it is obvious that
divestment is the only answer.
Purpose Efforts are made for survival of the Liquidation as a form of

organization. retrenchment strategy is
unattractive and considered as
the last resort.
Consequences Survival of organization helps in There is loss of employment

retaining personnel, at least to and opportunities with stigma
some extent. of failure.
Q16. X Pvt. Ltd. had recently ventured into the business of co-working spaces when the global pandemic
struck.. This has resulted in the business line becoming unprofitable and unviable, and a failure of the
existing strategy. However, the other businesses of X Pvt. Ltd. are relatively less affected by the
pandemic as compared to the recent co-working spaces. Suggest a strategy for X Pvt. Ltd. with
reasons to justify your answer.
It is advisable that divestment strategy should be adopted by X Pvt. Ltd.

In the given situation where the business of co-working spaces became unprofitable and unviable
due to Global pandemic, the best option for the company is to divest the loss making business.
Retrenchment may be done either internally or externally. Turnaround strategy is adopted in case of
internal retrenchment where emphasis is laid on improving internal efficiency of the organization,
while divestment strategy is adopted when a business turns unprofitable and unviable due to some
external factors. In view of the above, the company should go for divestment strategy.

Further, divestment helps address issues like:

1. Persistent cash flows from loss making segment could affect other profit-making segments, which
is the case in the given scenario.
2. Inability to cope from the losses, which again is uncertain due to pandemic.
3. Better investment opportunity, which could be the case if X Pvt. Ltd. can invest the money it
generates from divestment.
Q17. Mini theatre Ltd. was a startup venture of three young IIM graduates. They developed an application
to watch web-based content like web series, TV Shows, theatre shows, etc. after purchasing their
exclusive rights. They were successful in getting many consumers enrolled with them. After a certain
span of time, the company realized that some regional content like ‘bangla movies’, ‘Gujarati shows’
etc. were having high cost and less viewership. The leadership team of Mini theatre Ltd. decided to
sell the rights and curtail any further content development in these areas.
Identify and explain the corporate strategy adopted by the leadership team of Mini theatre Ltd.
(RTP, May 2021, NA)
The leadership team of Mini theatre Ltd. decided to cuts off the loss -making units, reduces the
functions performed that some of regional content like ‘bangla movies’, ‘Gujarati shows’ etc. were
having high cost and less viewership, it adopts a divestment strategy. The leadership team of Mini
theatre Ltd. decided to sell the rights and curtail any further content development in these areas.
centre or SBU. Divestment is usually a part of rehabilitation or restructuring plan and is adopted
when a turnaround has been attempted but has proved to be unsuccessful. The option of a
turnaround may even be ignored if it is obvious that divestment is the only answer.
Q18. The CEO of a textile mill is convinced that his loss making company can be turned around. Suggest
an action plan for a turnaround to the CEO.
A workable action plan for turnaround of the textile mill would involve:
● Stage One - Assessment of current problems: In the first step, assess the current problems
and get to the root causes and the extent of damage.
● Stage Two - Analyze the situation and develop a strategic plan: Identify major problems
and opportunities, develop a strategic plan with specific goals and detailed functional actions
after analyzing strengths and weaknesses in the areas of competitive position.
● Stage Three - Implementing an emergency action plan: If the organization is in a critical
stage, an appropriate action plan must be developed to stop the bleeding and enable the
organization to survive.
● Stage Four - Restructuring the business: If the core business is irreparably damaged, then
the outlook for the entire organization may be bleak. Efforts to be made to position the
organization for rapid improvement.
● Stage Five - Returning to normal: In the final stage of turnaround strategy process, the
organization should begin to show signs of profitability, return on investments and enhancing
economic value-added.

Q19. Mixfix was having a tough time with its operations and wanting to restructure itself from scratch. For
this, they consult a veteran in business strategy, Mrs. Sunita K, who post analysis of their business said,
" your dead business is worth more than alive". What did Mrs. Sunita hint at?
(a) Restructuring Business
(b) Liquidation
(c) Business Process Re-engineering
(d) Divestment
Correct answer: (b) Liquidation
Q20. "There are certain conditions or indicators which point out that a turnaround is needed if the
company has to survive." Discuss.
Rising competition, business cycles and economic volatility have created a climate where no business
can take viability for granted. Turnaround strategy is a highly targeted effort to return an organization
to profitability and increase positive cash flows to a sufficient level. Organizations that have faced a
significant crisis that has negatively affected operations requires turnaround strategy. Turnaround
strategy is used when both threats and weaknesses adversely affect the health of an organization so
much that its basic survival is a question. When organization is facing both internal and external
pressures making things difficult then it has to find something which is entirely new, innovative and
different. Being organization’s first objective is to survive and then grow in the market; turnaround
strategy is used when organization’s survival is under threat. Once turnaround is successful the
organization may turn to focus on growth.
Conditions for turnaround strategies: When firms are losing their grips over market, profits due to
several internal and external factors, and if they have to survive under the competitive environment,
they have to identify danger signals as early as possible and undertake rectification steps
immediately. These are certain conditions or indicators which point out that a turnaround is needed if
the company has to survive. These danger signals are:
● Persistent negative cash flow from business.
● Uncompetitive products or services.
● Declining market share.
● Deterioration in physical facilities.
● Over-staffing, high turnover of employees, and low morale.
● Mismanagement.
Q21. Racers Ltd. manufactures bicycles. Until recently it has adopted a differentiation strategy, offering
high quality bicycles which Racers Ltd. sells at a high profit margin.
In recent years, Racers Ltd. has entered a period of decline due to the market becoming flooded with
cheaper, high quality bicycles from abroad, where labour costs are lower.
Racers Ltd. has therefore decided to adjust its strategy and adopt a focus approach, targeting its
bicycles towards professional athletes. This will allow Racers Ltd. to continue earning high margins,
though the size of its potential market will likely fall.
Identify and explain the need of adopting this strategy by Racers Ltd. to manage decline?
(RTP, May 2022, NA)

Racers Ltd. has adopted Turnaround strategy. This involves Racers Ltd. repositioning itself in the
market in an attempt to once again gain competitive advantage.
Turnaround is needed when an enterprise's performance deteriorates to a point that it needs a radical
change of direction in strategy, and possibly in structure and culture as well. It is a highly targeted
effort to return an organization to profitability and increase positive cash flows to a sufficient level. It is
used when both threats and weaknesses adversely affect the health of an organization so much that
its basic survival is difficult.
The overall goal of turnaround strategy is to return an underperforming or distressed company to
normalcy in terms of acceptable levels of profitability, solvency, liquidity and cash flow. To achieve its
objectives, turnaround strategy must reverse causes of distress, resolve the financial crisis, achieve a
rapid improvement in financial performance, regain stakeholder support, and overcome internal
constraints and unfavourable industry characteristics.
Q22. Under what conditions would you recommend the use of Turnaround strategy in an organization?
What could be a suitable work plan for this?
(Study Material)
Rising competitions, business cycles and economic volatility have created a climate where no
business can take viability for granted. Turnaround strategy is a highly targeted effort to return an
organization to profitability and increase positive cash flows to a sufficient level. Organisations that
have faced a significant crisis that has negatively affected operations requires turnaround strategy.
Turnaround strategy is used when both threats ans weaknesses adversely affects the health of an
organization so much that its basic survival is a question. When organization is facing both internal
and external pressures making things difficult then it has to find something which is entirely new,
innovative and different. Being organisation’s first objective is to survive and then grow in the market;
turnaround strategy is used when organisation’s survival is under threat. Once turnaround is
succesful, the organization may turn to focus on growth.
Conditions for turnaround strategies: When firms are losing their grips over market, profits due to
several internal and external factors, and if they have to survive under the competitive environment
they have to identify danger signals as early as possible and undertake rectification steps
immediately. These conditions may be, inter alia cash flow problems, lower profit margins, high
employee turnover and decline in market share, capacity underutilization, low morale of employees,
recessionary conditions, mismanagement, raw material supply problems and so on.

Stage One – Assessment of current problems: The first step is to assess the current problems and
get to the root causes and the extent of damage the problem has caused. Once the problems are
identified, the resources should be focused towards those areas essential to efficiently work on
correcting and repairing any immediate issues.
Stage Two – Analyze the situation and develop a strategic plan: Before making any major changes;
determine the chances of the business’s survival. Identify appropriate strategies and develop a
preliminary action plan. For this, one should look for the viable core businesses, adequate bridge
financing and available organizational resources. Analyze the strength and weaknesses in the areas of
competitive position. Once major problems and opportunities are identified, develop a strategic plan
with specific goals and detailed functional actions.
survive. The plan typically include human resource, financial, marketing and operations actions to

restructure debts, improve working capital, reduce costs, improve budgeting practices, prune
product lines and accelerate high potential products. A positive operating cash flow must be
established as quickly as possible and enough funds to implement the turnaround strategies must
be raised.
Stage Four – Restructuring the business: The financial state of the organization’s core business is
particularly important. If the core business is irreparably damaged, then the outlook for the entire
organization may be bleak. Efforts to be made to position the organization for rapid improvement.
During the turnaround, the “product mix” may be changed, requiring the organization to do some
repositioning. Core products neglected over time may require immediate attention to remain
competitive. Some facilities might be closed; the organizations may even withdraw from certain
markets to make organization leaner or target its products toward a different niche.
The ‘people mix’ is another important ingredient in the organization’s competitive effectiveness.
Reward and compensation systems that encourage dedication and creatively encourage employees
to think profits and return on investments.
value-added. Emphasis is placed on a number of strategic efforts such as carefully adding new
products and improving customer service, creating alliances with other organizations, increasing the
market share, etc.
Q23. What strategic option is available to the management of a sick company dealing in an electronic
home appliance? Give reasons for your answer.
(Study Material)
A sick company has huge accumulated losses that has eroded its net worth. The electronic home
appliance company may analyse its various products to take decisions on the viability of each.
Retrenchment becomes necessary to cope with hostile and adverse situations in the environment
and when any other strategy is likely to be suicidal. The nature, extent and timing of retrenchment
are matters to be carefully decided by management, depending upon each contingency.
Retrenchment strategy is adopted because:
● The management no longer wishes to remain in business either partly or wholly due to
continuous losses and unviability.
● The environment faced is threatening.
● Stability can be ensured by reallocation of resources from unprofitable to profitable
businesses.
Retrenchment strategy is followed when an organization substantially reduces the scope of its
activity. This is done through an attempt to find out the problem arear and diagnose the causes of the
problems. These steps result in different kinds of retrenchment strategies.
Turnaround strategy: If the organization chooses to transform itself into a leaner structure and
focuses on ways and means to reverse the process of decline, it adopts a turnaround strategy. It may
try to reduce costs, eliminate unprofitable outputs, generate revenue, improve coordination, better
control, and so on. It may also involve changes in top management and reorienting leadership.
Divestment Strategy: Divestment strategy involves the sale or liquidation of a portion of business, or
a major division, profit centre or SBU. Divestment is usually a part of rehabilitation or restructuring
plan and is adopted when a turnaround has been attempted but has proved to be unsuccessful.

Liquidation Strategy: In the retrenchment strategy, the most extreme and unattractive is liquidation
strategy. It involves closing down a firm and selling its assets.
It is considered as the last resort because it leads to serious consequences such as loss of
employment for workers and other employees, termination of opportunities where a firm could
pursue any future activities, and the stigma of failure. Many small scale units, proprietorship firms,
and partnership ventures liquidate frequently but medium and large sized companies rarely liquidate
in India. The company management, government, banks and financial institutions, trade unions,
suppliers and creditors and other agencies are extremely reluctant to take a decision, or ask, for
liquidation.
Liquidation strategy may be unpleasant as a strategic alternative but when a “dead business is worth
more than alive”, it is a good proposition.
The management of multiproduct sick company manufacturing various electrical home appliances
be explained about each of the above three options of retrenchment strategy with their pros and
cons. But the appropriate advice with respect to a particular option of retrenchment strategy will
depend on the specific circumstances of each electrical home appliances and management goals of
the company.
3.4 Combination
Q1. Explain the meaning of the Combination strategies.

(RTP, May 2018, NA) (RTP, Nov 2018, NA)
Combination Strategies refer to a mix of different strategies like stability; expansion, diversification or
retrenchment to suit particular situations that an enterprise is facing. For instance, a strategy of
diversification/acquisition may call for retrenchment in some obsolete product lines.
3.5 Generic Topics
Q1. Corporate level strategy is concerned with the following-

a) How do we want to compete?
b) Where do we want to compete?
c) How to support the strategy implementation?
d) All of the above
(Sample MCQs)
Correct answer: (b) Where do we want to compete?
Q2. Geographical Diversification, Product diversification and Entry Mode are the domains of:
a) Functional Strategy

b) Business Strategy
c) Corporate Strategy
d) All of the Above
(Sample MCQs)
Correct answer: (c) Corporate Strategy
Q3. Arena Ltd. manufactures computers that are of low in production cost, competitive price, and quality
to their competitor’s product. Profits and market share are declining day by day. Shreekanth, a senior
executive realizes that drastic strategies have to be created for the survival of a company. After SWOT
analysis by assessing the strengths and weaknesses, they come up with the conclusion that they
cannot compete in the computers with the competitors. The management directs Shreekanth to act
quick and develop a suitable strategic plan.
Discuss the strategy which can be opted by Shreekanth.
(MTP 1, May 2018, 5 Marks) (Study Material)
Shreekant opt for turnaround strategy which is a highly-targeted effort to return Arena Ltd. to
profitability and increase positive cash flows to a sufficient level. Organizations those have faced a
significant crisis that has negatively affected operations require turnaround strategy. Once
turnaround is successful the organization may turn to focus on growth.
Conditions for turnaround strategies
When firms are losing their grips over market, profits due to several internal and external factors,
and if they have to survive under the competitive environment they have to identify danger signals
as early as possible and undertake rectification steps immediately. These conditions may be, inter
alia cash flow problems, lower profit margins, high employee turnover and decline in market share,
capacity underutilization, low morale of employees, recessionary conditions, mismanagement, raw
material supply problems and so on.
● Stage One – Assessment of current problems
● Stage Two – Analyze the situation and develop a strategic plan
● Stage Three – Implementing an emergency action plan
● Stage Four – Restructuring the business
● Stage Five – Returning to normal
Q4. Explain the meaning of Directional Strategy.

Directional strategies, also called grand strategies, provide basic directions for strategic actions
towards achieving strategic goals. Such strategies are formulated at the corporate level so are also
known as corporate strategies. The corporate strategies a firm can adopt have been classified into four
broad categories: stability, expansion, retrenchment, and combination.
Q5. Atrix Ltd. is a company engaged in the designing, manufacturing, and marketing of mechanical
instruments like speed meters, oil pressure gauges, and so on. Their products are fitted into two and
four wheelers. During the last couple of years, the company has been observing a fall in the market

share. This is on account of shift to the new range of electronic instruments. The customers are
switching away mechanical instruments that have been the backbone of Atrix Ltd. As a CEO of Atrix
Ltd., what can be the strategic options available with you.
Atrix is having a product portfolio that is evidently in the decline stage. The product is being replaced
with the technologically superior product. Strategically the company should minimize their
dependence on the existing products and identify other avenues for the survival and growth. As a
CEO of Atrix Ltd., following can be the strategic options available with the CEO:
● Invest in new product development and switchover to the new technology. Atrix Ltd. also
need time to invest in emerging new technology.
● They can acquire or takeover a competitor, provided they have or are able to generate enough
financial resources.
● They may also consider unrelated growth and identify other areas for expansion. This will
enable Atrix Ltd. to spread their risks.
● In longer run, they should divest the existing products. However, they may continue with the
existing products in a limited manner for such time there is demand for the product.
Q6. Arrange divestment, liquidation, stability and turnaround strategies in order of preference for
adoption by a typical organisation.
A. Turnaround, stability, liquidation and divestment.
B. Divestment, liquidation, stability and turnaround.
C. Stability, turnaround, liquidation and divestment.
D. Stability, turnaround, divestment and liquidation.
(RTP, Nov 2019, NA)
Correct answer: (d) Stability, turnaround, divestment and liquidation

Chapter 5
Question Bank
5.1 Porter’s Five Forces Model - Competitive Analysis
Q1. According to Porter, what is usually the most powerful of the five competitive forces?
(a) Rivalry among existing firms
(b) Potential development of substitute products
(c) Bargaining power of buyers and suppliers
(d) Potential entry of new competitors
(Sample MCQs)
Correct answer: (a) Rivalry among existing firms
Q2. Competitive rivalry has the most effect on the firm's ____ strategies than the firm's other strategies.
(a) Business level
(b) Corporate level
(c) Functional level
(d) All of these
(Sample MCQs)
Correct answer: (a) Business level
Substitutes can also exert significant competitive pressures.
(RTP, May 2018, NA)

According to porter’s five forces model, a final force that can influence industry profitability is the
availability of substitutes for an industry’s product. To predict profit pressure from this source, firms
must search for products that perform the same, or nearly the same, function as their existing
products.
Q4. What are the common barriers that are faced by new entrants when an existing firm earns higher
profits?
(RTP, May 2018, NA)
Or
Rahul Sharma is Managing Director of a company which is manufacturing trucks. He is worried about
the entry of new businesses. What kind of barriers will help Rahul against such a threat?

A firm’s profitability tends to be higher when other firms are blocked from entering the industry. New
entrants can reduce industry profitability because they add new production capacity leading to
increase supply of the product even at a lower price and can substantially erode existing firm’s
market share. Barriers to entry represent economic forces (or ‘hurdles’) that slow down or impede
entry by other firms. Common barriers to entry include:
(i) Capital requirements: When a large amount of capital is required to enter an industry, firms
lacking funds are effectively barred from the industry, thus enhancing the profitability of existing
firms in the industry.
(ii) Economies of scale: Many industries are characterized by economic activities driven by
economies of scale. Economies of scale refer to the decline in the per-unit cost of production (or other
activity) as volume grows. A large firm that enjoys economies of scale can produce high volumes of
goods at successively lower costs. This tends to discourage new entrants.
(iii) Product differentiation: Production differentiation refers to the physical or perceptual
differences, or enhancements, that make a product special or unique in the eyes of customers. Firms
in the personal care products and cosmetics industries actively engage in product differentiation to
enhance their products’ features. Differentiation works to reinforce entry barriers because the cost of
creating genuine product differences may be too high for the new entrants.
(iv) Switching costs: To succeed in an industry, new entrant must be able to persuade existing
customers of other companies to switch to its products. To make a switch, buyers may need to test a
new firm’s product, negotiate new purchase contracts, and train personnel to use the equipment, or
modify facilities for product use. Buyers often incur substantial financial (and psychological) costs in
switching between firms. When such switching costs are high, buyers are often reluctant to change.
(v) Brand identity: The brand identity of products or services offered by existing firms can serve as
another entry barrier. Brand identity is particularly important for infrequently purchased products
that carry a high unit cost to the buyer. New entrants often encounter significant difficulties in
building up the brand identity, because to do so they must commit substantial resources over a long
period.
(vi) Access to distribution channels: The unavailability of distribution channels for new entrants
poses another significant entry barrier. Despite the growing power of the internet, many firms may
continue to rely on their control of physical distribution channels to sustain a barrier to entry to rivals.
Often, existing firms have significant influence over the distribution channels and can retard or
impede their use by new firms.
(vii) Possibility of aggressive retaliation: Sometimes the mere threat of aggressive retaliation by
incumbents can deter entry by other firms into an existing industry. For example, introduction of
products by a new firm may lead existing firms to reduce their product prices and increase their
advertising budgets.
Economies of scale discourages new entrants.
(MTP 1, May 2018, 2 Marks) (SA, May 2018, 2 Marks)

Economies of scale refer to the decline in the per-unit cost of production (or other activity) as volume
grows. A large firm that enjoys economies of scale can produce high volumes of goods at successively
lower costs. This tends to discourage new entrants.
Q6. Explain Porter’s five forces model as to how businesses can deal with the competition.
(MTP 2, May 2018, 6 Marks) (RTP, Nov 2018, NA) (MTP 1, May 2019, 5 Marks) (Study Material)

To gain a deep understanding of a company’s industry and competitive environment, managers do

not need to gather all the information they can find and waste a lot of time digesting it. Rather, the
task is much more focused. A powerful and widely used tool for systematically diagnosing the
significant competitive pressures in a market and assessing the strength and importance of each is
the Porter’s five-forces model of competition. This model holds that the state of competition in an
industry is a composite of competitive pressures operating in five areas of the overall market:
● Competitive pressures associated with the market manoeuvring and jockeying for buyer
patronage that goes on among rival sellers in the industry.
● Competitive pressures associated with the threat of new entrants into the market.
● Competitive pressures coming from the attempts of companies in other industries to win
buyers over to their own substitute products.
● Competitive pressures stemming from supplier bargaining power and supplier-seller
collaboration.
● Competitive pressures stemming from buyer bargaining power and seller-buyer
Collaboration.
Q7. Explain briefly the competitive forces in any industry as identified by Michael Porter.
Or
What are the five competitive forces in an industry as identified by Michael Porter?
Five forces model of Michael Porter is a popular tool for systematically diagnosing the significant
competitive pressures in the market and assessing their strength and importance. The model holds
that the state of competition in an industry is a composite of competitive pressures operating in five
forces as follows:
1. Threat of new entrants: New entrants place a limit on prices and affect the profitability of existing
players. The new capacity and product range the new entrants bring increases competitive pressure.
bigger the new entrant, the more severe the competitive effect.
2. Bargaining power of customers: The bargaining power of the buyers influences not only the
prices that the producer can charge but also influence costs and investments of the producer. This
force will become heavier depending on the possibilities of the buyers forming groups or cartels,
particularly in case of industrial products.
3. Bargaining power of suppliers: Often suppliers can exercise considerable bargaining power. If the
suppliers are also limited in number they stand a still better chance to exhibit their bargaining power.
The bargaining power of suppliers determines the cost of raw materials and other inputs of the
industry and, therefore, can affect industry attractiveness and profitability.
4. Rivalry among current players: The rivalry among existing players is quite obvious. This is what is
normally understood as competition. The impact is evident more at functional level in the prices
being charged, advertising, and pressures on costs, product and so on.
5. Threats from substitutes: Substitute products are a latent source of competition in an industry.
Substitute products offering a price advantage and/or performance improvement to the consumer
can have significant impact.
The five forces together determine industry attractiveness/profitability. This is so because these forces
influence the causes that underlie industry attractiveness/ profitability.

Porter’s five forces model considers new entrants as a significant source of competition.
(RTP, Nov 2018, NA)

Porter’s five forces model considers new entrants as major source of competition. The new capacity
and product range that the new entrants bring in throw up new competitive pressure. The bigger the
new entrant, the more severe the competitive effect. New entrants also place a limit on prices and
affect the profitability of existing players.
Q9. According to Porter, which of the following is important to achieve competitive advantage?
(a) Differentiation and cost advantage.
(b) Outsourcing activities.
(c) Having strong relationship with buyer and sellers.
(d) Focus on most competitive businesses.
(RTP, May 2019, NA)
Correct answer: (a) Differentiation and cost advantage
Q10. What will happen in case many new businesses enter a market?
(a) Barriers to entry will rise.
(b) Competitive rivalry will intensify.
(c) Capacity of industry will fall.
(d) Industry will become more lucrative.
(RTP, May 2019, NA)
Correct answer: (b) Competitive rivalry will intensify
Q11. Buyers can exert considerable pressure on business. Do you agree? Discuss.
(RTP, Nov 2019, NA)
Buyers of an industry’s products or services can exert considerable pressure on existing firms to
secure lower prices or better services. This is evident in situations where buyers enjoy superior
position than the seller of product. This leverage is particularly evident when:
(i) Buyers have full knowledge of the sources of products and their substitutes.
(ii) They spend a lot of money on the industry’s products, i.e., they are big buyers.
(iii) The industry’s product is not perceived as critical to the buyer’s needs and buyers are more
concentrated than firms supplying the product. They can easily switch to the substitutes available.
Q12. Discuss in what conditions rivalry among competitors tends to be cut-throat and profitability of the
industry goes down.
The intensity of rivalry in an industry is a significant determinant of industry attractiveness and

profitability. The intensity of rivalry can influence the costs of suppliers, distribution, and of attracting
customers and thus directly affect the profitability. The more intensive the rivalry, the less attractive is
the industry. Rivalry among competitors tends to be cutthroat and industry profitability low when
(i) An industry has no clear leader.
(ii) Competitors in the industry are numerous.
(iii) Competitors operate with high fixed costs.

(iv) Competitors face high exit barriers.

(v) Competitors have little opportunity to differentiate their offerings.
(vi) The industry faces slow or diminished growth.
Q13. Eco-carry bags Ltd., a recyclable plastic bags manufacturing and trading company has seen a
potential in the ever-growing awareness around hazards of plastics and the positive outlook of the
society towards recycling and reusing plastics.
A major concern for Eco-carry bags Ltd. are paper bags and old cloth bags. Even though they are
costlier than recyclable plastic bags, irrespective, they are being welcomed positively by the
consumers.
Identify and explain that competition from paper bags and old cloth bags fall under which category
of Porter’s Five Forces Model for Competitive Analysis?
Eco-carry bags Ltd. faces competition from paper bags and old cloth bags and falls under Threat of
Substitutes force categories in Porter’s Five Forces Model for Competitive Analysis. Paper and cloth
bags are substitutes of recyclable plastic bags as they perform the same function as plastic bags.
Substitute products are a latent source of competition in an industry. In many cases, they become a
major constituent of competition. Substitute products offering a price advantage and/or performance
improvement to the consumer can drastically alter the competitive character of an industry.
Q14. Competitive pressures operate as a composite in five areas of the overall market.
Elaborate.
(RTP, May 2021, NA)
Competition makes organizations work harder, however, it is neither a coincidence nor bad luck. All
organizations have competition and its benefit are enjoyed by the markets. The customers are able to
get better products at lower costs. They get better value for their money because of competition. A
powerful and widely used tool for systematically diagnosing the significant competitive pressures in a
market and assessing the strength and importance of each is the Porter’s five-forces model of
competition. This model holds that the state of competition in an industry is a composite of
competitive pressures operating in five areas of the overall market as follows:
(i) Rivalry among current players: Competitive pressures associated with the market manoeuvring
and jockeying for buyer patronage that goes on among rival sellers in the industry.
(ii) Threat of new entrants: Competitive pressures associated with the threat of new entrants into the
market.
(iii) Threats from substitutes: Competitive pressures coming from the attempts of companies in
other industries to win buyers over to their own substitute products.
(iv) Bargaining power of suppliers: Competitive pressures stemming from supplier bargaining
power and supplier-seller collaboration.
Q15. There are many companies in the market offering COVID vaccine. Analyse the product in terms of
threat of new entrants.
There are three companies offering a vaccine for COVID-19 in India and a fourth company is awaiting
approval from authorities.
This product involves huge capital requirements and hence not every existing pharma company is
likely to get into the competition. However, once approved for use, the entire world is the target

market. This would lead to economies of scale helping the company to recover the investments
made. The product differentiation is in terms of the low after effect of the vaccine and the
effectiveness of the vaccine in controlling COVID-19. Brand identity is becoming very important with
people preferring international brands compared to a home ± grown company. Factors like switching
cost, access to distribution channels and possibility of aggressive retaliation do not apply at present
because governments across the world are controlling these factors and the vaccine has not entered
the phase of free competition.
Q16. Easy Access is a marketing services company providing consultancy to a range of business clients.
Easy Access and its rivals have managed to persuade the Government to require all marketing
services companies to complete a time-consuming and bureaucratic registration process and to
comply with an industry code of conduct. Do you think that by doing this Easy Access and its rivals
has an advantage in some way to fight off competitors? Explain.
(RTP, Nov 2021, NA)
Yes, Easy Access and its rivals get advantage by this move. The new bureaucratic process is making it
more complicated for organizations to start up and enter in Easy Access market, increasing barriers to
entry and thereby reducing the threat of new entrants. New entrants can reduce an industry’s
profitability, because they add new production capacity, leading to increase in supply of the product,
sometimes even at a lower price and can substantially erode existing firm’s market share position.
However, New entrants are always a powerful source of competition. The new capacity and product
range they bring in throws up a new competitive pressure. The bigger the new entrant, the more
severe the competitive effect. New entrants also place a limit on prices and affect the profitability of
existing players, which is known as Price War.
Q17. What are the factors which determine the nature of rivalry in an industry?
The intensity of rivalry in an industry is a significant determinant of an industry’s attractiveness and

profitability. The intensity of rivalry can influence the costs of suppliers, distribution, and of attracting
customers and thus, can directly affect the profitability. “The more intensive the rivalry, the less
attractive is the industry”. Rivalry among competitors tends to be cutthroat and an industry’s
profitability is low when;
(i) An industry has no clear leader. Therefore, continuous war for leadership.
(ii) Competitors in the industry are numerous.
(iii) Competitors operate with high fixed costs. Thus, aiming for better Return on Investment with
more fierce tactics.
(iv) Competitors face high exit barriers, and therefore, continue to fight for market share.
(v) Competitors have little opportunity to differentiate their offerings.
(vi) The industry faces slow or diminished growth.
Q18. Baby Turtle is a children’s clothing brand that has been created a new age demand for washable
diapers. The major benefit for the brand has been that not many companies have shown interest in
the product, thinking it is not viable, however customers majorly working mothers are loving their
product. The core material needed for production is also used in many other water proofing products
in various industries. Baby Turtle sources this material from a renowned supplier at comparatively low

prices. Which of the five forces of competitive pressure would Baby Turtle experience due to above
setup and what are major factors that create such pressure for a product? Do you think Baby Turtle
has an advantage in some way to fight off this pressure?
(Study Material)
Baby Turtle would experience, Bargaining Power of Suppliers, as a competitive pressure for their
washable diaper product. This is because the core material for production is sourced from a single
supplier, who is renowned and in a position to create pressure in terms of prices.
Further, other factors that lead to such pressure are:
1. Their products are crucial to the buyer and substitutes to the material required for production
are not available.
2. Suppliers can manipulate switching cost as the brand is in inception stage and making
margins are important.
An advantage that Baby Turtle has is even though the material required has no substitutes but it
used to make many other products and thus there are many other suppliers who can provide that
material. It might affect operations in short term but will help to fight off the pressure created by
existing supplier.
5.2 Michael Porter’s Generic Strategies
Q1. A narrow market focus is to a differentiation-based strategy as a

(a) Broadly-defined target market is to a cost leadership strategy
(b) Growth market is to a cost-based strategy
(c) Technological innovation is to a cost-based strategy
(d) Growth market is to a differentiation-based strategy
(Sample MCQs)
Correct answer: (a) Broadly-defined target market is to a cost leadership strategy
Q2. A firm successfully implementing a differentiation strategy would expect:

(a) Customers to be sensitive to price increases.
(b) To charge premium prices..
(c) Customers to perceive the product as standard.
(d) To automatically have high level of power over suppliers.
(Sample MCQs) (MTP 1, May 2019, 1 Mark) (MTP 2, May 2021, 1 Mark)
Correct answer: (b) To charge premium prices.
Q3. The Niche strategy is the best way to enter a:

a) New market
b) Growing market
c) Matured market
d) None of the above
(Sample MCQs)

Correct answer: (c) Matured market
Q4. Advantages of Cost leadership strategy.

(RTP, May 2018, NA) (MTP 1, Nov 2018, 5 Marks)
A cost leadership strategy may help to remain profitable in the presence of rivalry, new entrants,
suppliers' power, substitute products, and buyers' power.
(i) Rivalry – Competitors are likely to avoid a price war, since the low cost firm will continue to earn
profits after competitors compete away their profits.
(ii) Buyers – Powerful buyers/customers would not be able to exploit the cost leader firm and will
continue to buy its product.
(iii) Suppliers – Cost leaders are able to absorb greater price increases before it must raise price to
customers.
(iv) Entrants – Low cost leaders create barriers to market entry through its continuous focus on
efficiency and reducing costs.
(v) Substitutes – Low cost leaders are more likely to lower costs to induce customers to stay with their
product, invest to develop substitutes, purchase patents.
Q5. Airlines industry in India is highly competitive with several players. Businesses face severe
competition and aggressively market themselves with each other. Luxury Jet is a private Delhi based
company with a fleet size of 9 small aircrafts with seating capacity ranging between 6 seats to 9 seats.
There aircrafts are chartered by big business houses and high net worth individuals for their
personalised use. With customised tourism packages their aircrafts are also often hired by foreigners.
Identify and explain the Michael Porter’s Generic Strategy followed by Luxury Jet.
(RTP, May 2018, NA) (RTP, Nov 2020, NA) (Study Material)
The Airlines industry faces stiff competition. However, Luxury Jet has attempted to create a niche
market by adopting focused differentiation strategy. A focused differentiation strategy requires
offering unique features that fulfil the demands of a narrow market.
Luxury Jet compete in the market based on uniqueness and target a narrow market which provides
business houses, high net worth individuals to maintain strict schedules. The option of charter flights
provided several advantages including, flexibility, privacy, luxury and many a times cost saving. Apart
from conveniences, the facility will provide time flexibility. Travelling by private jet is the most
comfortable, safe and secure way of flying your company’s senior business personnel.
Chartered services in airlines can have both business and private use. Personalized tourism packages
can be provided to those who can afford it.
Q6. Distinguish between cost leadership and differentiation strategies.

(MTP 1, May 2018, 5 Marks) (RTP, Nov 2018, NA) (MTP 1, May 2020, 5 Marks) (RTP, Nov 2020, NA)
(MTP 1, Nov 2020, 5 Marks) (Study Material)
Cost leadership emphasizes producing standardized products at a very low per-unit cost for
consumers who are price-sensitive. Differentiation is a strategy aimed at producing products and
services considered unique industry wide and directed at consumers who are relatively price -
insensitive.
A primary reason for pursuing forward, backward, and horizontal integration strategies is to gain cost
leadership benefits. But cost leadership generally must be pursued in conjunction with
differentiation. Different strategies offer different degrees of differentiation. A differentiation strategy
should be pursued only after a careful study of buyers’ needs and preferences to determine the
feasibility of incorporating one or more differentiating features into a unique product. A successful

differentiation strategy allows a firm to charge a higher price for its product and to gain customer
loyalty.
Q7. Discuss differentiation strategy? How is it achieved?

Differentiation strategy is aimed at broad mass market and involves the creation of a product or
service that is perceived by the customers as unique. The uniqueness can be associated with product
design, brand image, features, technology, dealer network or customer service. Because of
differentiation, the business can charge a premium for its product.
Differentiation strategy should be pursued only after a careful study of buyers’ needs and preferences
to determine the feasibility of incorporating one or more differentiating features into a unique
product that features the desired attributes.
To achieve differentiation, following measures can be adopted by an organization:
1. Offer utility for the customers and match the products with their tastes and preferences.
2. Elevate the performance of the product.
3. Offer the promise of high quality product/service for buyer satisfaction.
4. Rapid product innovation.
5. Taking steps for enhancing image and its brand value.
6. Fixing product prices based on the unique features of the product and buying capacity of the
customer.
Q8. Explain the meaning of cost leadership strategy.

(RTP, Nov 2018, NA)
A number of cost elements affect the relative attractiveness of generic strategies. A successful cost
leadership strategy usually permeates the entire firm, as evidenced by high efficiency, low overhead
cost, and waste reduction. The low cost leadership should be such that no competitors are able to
imitate so that it can result in sustainable competitive advantage to the cost leader firm.
Q9. Gennex is a company that designs, manufactures and sells computer hardware and software. Gennex
is well known for its innovative products that has helped the company to have advantage over its
competitors. It also spends on research and development and concerned with innovative softwares.
Often the unique features of their product, that are not available with their competitors helps them to
gain competitive advantage. Gennex using the strategy is consistently gaining its position in the
industry over its competitors.
Identify and explain the Porter’s generic strategy which Gennex has opted to gain the competitive
advantage.
(RTP, Nov 2018, NA) (MTP 2, May 2019, 5 Marks) (Study Material)
According to Porter, strategies allow organizations to gain competitive advantage from three
different bases: cost leadership, differentiation, and focus. Porter called these base generic strategies.
Gennex has opted differentiation strategy. Its products are designed and produced to give the
customer value and quality. They are unique and serve specific customer needs that are not met by
other companies in the industry. Highly differentiated and unique hardware and software enables
Gennex to charge premium prices for its products hence making higher profits and maintain its
competitive position in the market.

design, brand image, features, technology, dealer network or customer service.
Q10. Sohan and Ramesh are two friends who are partners in their business of making biscuits. Sohan
believe in making profits through selling more volume of products. Hence, he believes in charging
lesser price to the customers. Ramesh, however of the opinion that higher price should be charged to
create an image of exclusivity and for this, he proposes that the product to undergo some change.
Analyse the nature of generic strategy used by Sohan and Ramesh.
Considering the generic strategies of Porter there are three different bases: cost leadership,
differentiation and focus. Sohan and Ramesh are contemplating pricing for their product.
Sohan is trying to have a low price and high volume are thereby trying for cost leadership. Cost
leadership emphasizes producing standardised products at a very low per unit cost for consumers
who are price sensitive.
Ramesh desires to create perceived value for the product and charge higher prices. He is trying to
adopt differentiation. Differentiation is aimed at producing products and services considered unique
industry wide and directed at consumers who are relatively price insensitive.
Q11. What do you understand by cost leadership? How is it achieved?

(RTP, May 2019, NA)
Or
Write a short note on the concept of cost leadership strategy and how to achieve it.
(SA, Nov 2019, 5 Marks) (RTP, May 2021, NA)
Cost leadership is a low cost competitive strategy that aims at broad mass market. It requires
vigorous pursuit of cost reduction in the areas of procurement, production, storage and distribution
of product or service and also economies in overhead costs. Because of its lower costs, the cost leader
is able to charge a lower price for its products than its competitors and still make satisfactory profits.
A primary reason for pursuing forward, backward, and horizontal integration strategies is to gain cost
leadership benefits.
A successful cost leadership strategy usually permeates the entire firm, as evidenced by high
efficiency, low overhead, limited perks, intolerance of waste, intensive screening of budget requests,
wide spans of control, rewards linked to cost containment, and broad employee participation in cost
control efforts. Some risks of pursuing cost leadership are that competitors may imitate the strategy.
To achieve cost leadership, following are the actions that could be taken:
(a) Forecast the demand of a product or service promptly.
(b) Optimum utilization of the resources to get cost advantages.
(c) Achieving economies of scale leads to lower per unit cost of product/service.
(d) Standardisation of products for mass production to yield lower cost per unit.
(e) Invest in cost saving technologies and try using advance technology for smart working.
(f) Resistance to differentiation till it becomes essential.
Q12. Infant care is a successful store chain that caters products for expectant mothers and new moms.
They offer everything from nursing classes to strollers, toys, infant clothes, diapers and baby furniture.

Due to a one-stop shop for infants, they are charging a premium for its products. Identify and explain
how the strategy adopted by infant care.
Infant care is opting for differentiation strategy. A one-stop shop is a benefit for this type of customers,
seeking convenience in a time. Infant care is catering the products only related to infants that is
perceived by the customers as unique. Because of differentiation, the Infant care is charging a
premium for its product.
Q13. Michael Porter Generic strategies to gain competitive advantage include all except:
a. Cost leadership
b. Differentiation
c. Focus
d. Revenue generation
Correct answer: (d) Revenue generation
Q14. Porter’ cost leadership is a ____________ strategy

A. Functional level
B. Business level
C. Corporate level
D. Implementation
(RTP, Nov 2019, NA)
Correct answer: (b) Business level
Q15. A century-old footwear company “Mota Shoes” had an image of being the footwear choice for formal
occasions. In an attempt to reinvent its brand, it tied up with a foreign footwear giant “Buffrine” to
manufacture and sell its Hideseek brand in the country. Putting its best foot forward, it launched
extra soft, casual and relaxed footwear for young. Aiming at a brand and image makeover the “Mota
Shoes” decided to price the Hide Seek products at premium. What kind of Michael Porter business
level strategy is being used by “Mota Shoe company”? State its advantages.
Mota shoes is trying to use differentiation. This strategy is aimed at broad mass market and involves
the creation of a product or service that is perceived by the customers as unique. The uniqueness can
be associated with product design, brand image, features,technology, dealer network or customer
service. Because of differentiation, the business can charge a premium for its product.
A differentiation strategy has definite advantages as it may help to remain profitable even with rivalry,
new entrants, suppliers’ power, substitute products, and buyers’ power.
i. Rivalry: Brand loyalty acts as a safeguard against competitors. It means that customers will be less
sensitive to price increases, as long as the firm can satisfy the needs of its customers.
ii. Buyers: They do not negotiate for price as they get special features and also they have fewer
options in the market.
iii. Suppliers: Because differentiators charge a premium price, they can afford to absorb higher costs
of supplies and customers are willing to pay extra too.

iv. New entrants: Innovative features are expensive to copy. So, new entrants generally avoid these
features because it is tough for them to provide the same product with special features at a
comparable price.
v. Substitutes: Substitute products can’t replace differentiated products which have high brand value
and enjoy customer loyalty.
Q16. In Michael Porter’s generic strategy _____________ emphasizes producing standardized products at a
very low per unit-cost for consumers who are price sensitive.
(a) Cheap leadership
(b) Inferior product leadership
(c) Cost leadership
(d) Cost benefit
Correct answer: (c) Cost leadership
Q17. ‘Coffee Beans’ is a coffeehouse chain that operates across the globe in different countries. ‘Coffee
Beans’ has adopted a strategy to build business by establishing product uniqueness or qualities and
gain competitive advantage based on features of its offerings in coffee business. Which type of
strategy ‘Coffee Beans’ has adopted?
Coffee Beans is opting for differentiation strategy. This strategy is aimed at broad mass market and
involves the creation of a product or service that is perceived by the customers as unique. The
uniqueness can be associated with product design, brand image, features, technology, dealer
network or customer service. Because of differentiation, Coffee Beans can charge a premium for its
product.
Q18. Differentiation Strategy can be achieved by following measures:

1. Match products with tastes and preferences of customers.
2. Elevate the performance of the product.
3. Rapid product innovation
Which of the above is true?
(a) (1) and (2)
(b) (1) and (3)
(c) (2) and (3)
(d) (1), (2) and (3)
(RTP, May 2020, NA)
Correct answer: (d) (1), (2) and (3)
Q19. A differentiation strategy may help to remain profitable even with rivalry, new entrants, suppliers’
power, substitute products, and buyers’ power. Explain.
(RTP, May 2020, NA)
A differentiation strategy may help to remain profitable even with: rivalry, new entrants, suppliers’
power, substitute products, and buyers’ power.
1. Rivalry - Brand loyalty acts as a safeguard against competitors. It means that customers will be less

2. Buyers – They do not negotiate for price as they get special features and also they have fewer
options in the market.
3. Suppliers – Because differentiators charge a premium price, they can afford to absorb higher costs
of supplies and customers are willing to pay extra too.
4. Entrants – Innovative features are an expensive offer. So, new entrants generally avoid these
comparable price.
5. Substitutes – Substitute products can’t replace differentiated products which have high brand
value and enjoy customer loyalty.
Q20. Low cost, differentiation and focus are:

(a) SBU level strategies
(b) Corporate level strategies
(c) Business level strategies
(d) Functional level strategies
Correct answer: (c) Business level strategies
Q21. ABC Ltd. is a beverage manufacturing company. It chiefly manufactures soft drinks. The products are
priced on the lower side which has made the company a leader in the business. Currently it is holding
35 percent market share. The R & D of company developed a formula for manufacturing sugar free
beverages. On successful trial and approval by the competent authorities, company was granted to
manufacture sugar free beverages. This company is the pioneer to launch sugar free beverages which
are sold at a relatively higher price. This new product has been accepted widely by a class of
customers. These products have proved profitable for the company. Identify the strategy employed by
the company ABC Ltd. and mention what measures could be adopted by the company to achieve the
employed strategy.
ABC Ltd. has opted Differentiation Strategy. The company has invested huge amount in R & D and
developed a formula for manufacturing sugar free beverages to give the customer value and quality.
They are pioneer and serve specific customer needs that are not met by other companies in the
industry. The new product has been accepted by a class of customers. Differentiated and unique
sugar free beverages enable ABC Ltd. to charge relatively higher for its products hence making
higher profits and maintain its competitive position in the market.
Sugar free beverage of ABC Ltd. is being accepted widely by a class of customers. Differentiation
strategy is aimed at broad mass market and involves the creation of a product or service that is
perceived by the customers as unique. The uniqueness can be associated with product design, brand
image, features, technology, and dealer network or customer service.
Achieving Differentiation Strategy
To achieve differentiation, following strategies are generally adopted by an organization:
1. Offer utility to the customers and match products with their tastes and preferences.
2. Elevate/Improve performance of the product.
3. Offer the high-quality product/service for buyer satisfaction.
4. Rapid product innovation to keep up with dynamic environment.
5. Taking steps for enhancing brand image and brand value.

6. Fixing product prices based on the unique features of product and buying capacity of the
customer.
Q22. Spacetek Pvt. Ltd. is an IT company. Although there is cut throat competition in the IT sector,
Spacetek deals with distinctive niche clients and is generating high efficiencies for serving such niche
market. Other rival firms are not attempting to specialize in the same target market. Identify the
strategy adopted by Spacetek Pvt. Ltd. and also explain the advantages and disadvantages of that
strategy.
(SA, Jan 2021, 5 Marks) (MTP 1, Nov 2021, 5 Marks) (Study Material)
Spacetek Pvt. Ltd. company has adopted Focus strategy which is one of the Michael Porter’s Generic
strategies. Focus strategies are most effective when consumers have distinctive preferences or
requirements and when rival firms are not attempting to specialize in the same target segment. An
organization using a focus strategy may concentrate on a particular group of customers, geographic
markets, or on particular product-line segments in order to serve a well-defined but narrow market
better than competitors who serve a broader market.
Advantages of Focus Strategy
1. Premium prices can be charged by the organizations for their focused product/services.
2. Due to the tremendous expertise about the goods and services that organizations following focus
strategy offer, rivals and new entrants may find it difficult to compete.
Disadvantages of Focus Strategy
1. The firms lacking in distinctive competencies may not be able to pursue focus strategy.
2. Due to the limited demand of product/services, costs are high which can cause problems.
3. In the long run, the niche could disappear or be taken over by larger competitors by acquiring the
same distinctive competencies.
Q23. X-Olympus is a gaming software company specializing in developing games for ZBox and
GameStation-4. The company is facing stiff competition due to saturation of market and price wars,
which has excessively favor and highlight their dependence on gaming console manufacturers.
Thereby, the company desires to establish a competitive advantage over industry rivals by enhancing
the gaming experience by expanding into Edge-Cloud Gaming Service on a monthly subscription
basis. This service offering does not require dedicated gaming consoles yet provide customers game
streaming in 4K resolution with an ample range of games to select from. This move is expected to
insulate X-Olympus from price wars and provide a competitive advantage. Identify and explain the
generic strategies adopted by X-Olympus?
X-Olympus is facing cutthroat competition due to saturation of market and price wars as there is no
clear leader out of the numerous competitors. For this, the strategy adopted by X-Olympus is Product
Differentiation by introducing a unique product to cater the customer needs at a lesser cost which
would insulate it from the fierce competition and never-ending price wars.
Q24. Domolo is a premium cycles and cycling equipments brand which targets high spending customer
with a liking for quality and brand name. Their cycles range from rupees fifteen thousand to rupees
one lac. The recent trend of fitness through cycling has created humongous demand for cycles and
peripherals like helmets, lights, braking systems, fitness applications, etc. The customer base has
grown 150% in the last three months. Mr. Vijay, who is an investor wants to tap in this industry and
bring about cheaper options to people who cannot spend so much. Which business level strategy

would best suit for Mr. Vijay’s idea and what are the major substrategies that can be implemented to
capture maximum market?
The Best Cost Provider strategy would ensure a better reach to the not so affluent customers and
provide them with good quality cycles and equipments, thus tapping in on the increasing trend of
cycling.
Two sub-strategies that can be implemented are:
1. Offering lower prices than rivals for the same quality of products
2. Charging same prices for better quality of products
The idea of Mr. Vijay is to provide almost same quality of products in terms of functionality if not so in
terms of branding, to customer who do not have huge sums of money to pay. Thus, sub- strategy
number one, offering lower prices for almost same quality should be implemented to become the
best cost provider of cycles and related equipments in the market.
Q25. Trekking Poles is a small company based in the Himalayan ranges in India. It is known in the region
for its hill walking sticks. Trekking Poles sell specialist walking equipment in their small shop at the
foot of the mountains. They do not have a website yet are able to sell their products at premium
prices. Which of the following one of Porter’s generic strategies best fits Trekking Poles?
(a) Cost leadership
(b) Differentiation
(c) Focused cost leadership
(d) Focused differentiation
(RTP, Nov 2021, NA)
Correct answer: (d) Focused differentiation
Q26. Explain in brief the various basis of differentiation strategy.

(RTP, Nov 2021, NA)
There are several basis of differentiation, major being: Product, Pricing and Organization.
Product: Innovative products that meet customer needs can be an area where a company has an
advantage over competitors. However, the pursuit of a new product offering can be costly ± research
and development, as well as production and marketing costs can all add to the cost of production
and distribution. The payoff, however, can be great as customer’s flock to be among the first to have
the new product.
Pricing: It fluctuates based on its supply and demand and may also be influenced by the customer’s
ideal value for a product. Companies that differentiate based on product price can either determine
to offer the lowest price or can attempt to establish superiority through higher prices.
Organisation: Organisational differentiation is yet another form of differentiation. Maximizing the
power of a brand or using the specific advantages that an organization possesses can be
instrumental to a company’s success. Location advantage, name recognition and customer loyalty
can all provide additional ways for a company differentiate itself from the competition.
Q27. BHAVNAV is a business which makes and sells laptop computers in France. In recent years it has been
struggling to compete with its rivals and has seen a significant fall in its market share. BHAVNAV’s

managers identify that majority of its products launched by BHAVNAV’s rivals were high specification,
with good quality materials and many innovative design features. Products with inferior quality, such
as those sold by BHAVNAV have not sold well in France. This information led BHAVNAV’s
management team to decide to select a new business strategy based on Porter’s Generic Strategic
Model. Identify and suggest the best business strategy BHAVNAV’s management has to opt for?
According to Porter, the three different business strategies are: cost leadership, differentiation, and
focus. Porter called these base generic strategies.
The information about competitor activities indicates that the market is uninterested in low-cost
items, so a cost leadership approach is unlikely to be successful for BHAVNAV. It is suggested to adopt
a differentiation strategy and find some way of enabling its laptops to stand out from its rivals.
design, brand image, features, technology, dealer network or customer service.
Q28. Inspite of high commodity inflation, shortage of components and the threat of a third wave of
Covid-19 pandemic in India, manufacturers of packaged goods, home appliances and consumer
electronics are expecting the business to grow by 12 to 25 percent in the coming months. After one
and a half years of disruption, manufacturers are now confident about managing their inventories
better, keeping their supply channels well stocked and preparing themselves to minimalize the
impact of any covid related restrictions even as they gear up for the festive season, which usually
accounts for 25 to 30 percent of their yearly sales.
The home appliances sector could be an example. After a dismal April-June quarter in the year 2021,
producers of air conditioners, refrigerators and washing machines are expecting their business to
grow by 15-20 percent in the months to come. All the companies operating in the sector have geared
up to grab the opportunities available in the market.
A leading company in the home appliances domain, XXP India, is planning to launch various
innovative product designs and offer loyalty programmes to lure cusumers.
With reference to Michael Porter's Generic strategies, identify which strategies XXP India has planned
for? Explain how this strategy wil be advantageous to the company to remain profitable?
According to Michael Porter, strategies allow organizations to gain competitive advantage from three
XXP India Ltd. has planned for Differentiation Strategy. The company is planning to launch various
innovative product designs and offer loyalty programmes to lure customers.
Differentiation strategy should be pursued only after a careful study of buyers’ needs and preferences
to determine the feasibility of incorporating one or more differentiating features into a unique
product that features the desired attributes. A successful differentiation strategy allows a firm to
charge a higher price for its product and to gain customer loyalty, because consumers may become
strongly attached to the differentiated features.
Advantages of Differentiation Strategy
A differentiation strategy may help an organisation to remain profitable even with rivalry, new
entrants, suppliers’ power, substitute products, and buyers’ power.

1. Rivalry - Brand loyalty acts as a safeguard against competitors. It means that customers will be less
2. Buyers – They do not negotiate for price as they get special features, and they have fewer options
in the market.
3. Suppliers – Because differentiators charge a premium price, they can afford to absorb higher costs
of supplies as the customers are willing to pay extra too.
4. Entrants – Innovative features are an expensive offer. So, new entrants generally avoid these
comparable price.
5. Substitutes – Substitute products can’t replace differentiated products which have high brand
value and enjoy customer loyalty.
Q29. A business consultancy firm specializes in environment management consultancy. It advises client
companies on how to set up environmental management accounting systems. For measuring
recording and analyzing environmental costs. A large part of its business involves performing
environmental audits to check whether companies have achieved an international assurance
standard in environmental management; this is something that rival consultancy firms do not do. The
firm also carries out other management consultancy projects for client, but these make up only a
small proportion of its total annual fee income.
Identify the strategy categories by Michael Porter which best describes the strategy of this firm.
(RTP, May 2022, NA)
By concentrating mainly on the ‘market’ for consultancy services in environmental management, the
firm is pursuing a focus strategy. By offering audit services, which rival firms do not, this indicates a
differentiation strategy within this chosen market niche. Hence, the firm is following Focus
differentiation strategy.
A focused differentiation strategy requires offering unique features that fulfil the demands of a
narrow market. Similar to focused low-cost strategy, narrow markets are defined in different ways in
different settings. Some firms using a focused differentiation strategy concentrate their efforts on a
particular sales channel, such as selling over the internet only. Others target particular demographic
groups. Firms that compete based on uniqueness and target a narrow market are following a focused
differentiations strategy.
Q30. A private Moneyload Ltd. Bank that targets high worth individuals. They offer a premium service with
many additional and personal services not normally available through other banks. They charge a
significant annual fee for these services. The company makes full use of information technology
throughout its operations in order to minimize costs. Identify and explain the generic strategy
adopted by Moneyload Ltd. Bank?
Moneyland Ltd. Bank targets a narrow segment of the market, offering unique and desirable
products. The bank will want to keep its costs under control, but it will not reduce costs at the
expenses of reducing the quality levels of the customer service it offers. By maintaining high quality

levels, it will still be able to charge a premium for its services. Thus, the strategy adopted by
Moneyland Ltd. Bank is Focused Differentiation.
A focused differentiation strategy requires offering unique features that fulfil the demands of a
narrow market. Some firms using a focused differentiation strategy concentrate their efforts on a
particular sales channel, such as selling over the internet only. Others target particular demographic
groups. Firms that compete based on uniqueness and target a narrow market are following a focused
differentiations strategy.
5.3 Best Cost Provider Strategy
Q1. Explain Best-cost provider strategy.

(RTP, May 2018, NA)
Best-cost provider strategy involves providing customers more value for the money by emphasizing
low cost and better quality difference. It can be done:
(a) through offering products at lower price than what is being offered by rivals for products with
comparable quality and features or
(b) charging similar price as by the rivals for products with much higher quality and better features.
Q2. Best-cost provider strategy is related to providing customers more value for money by:
A. Highlighting low cost and low quality difference.
B. Emphasizing low cost and better quality difference.
C. Producing high cost and low quality difference.
D. Managing high cost and low quality difference.
(RTP, Nov 2019, NA)
Or
Best-cost provider strategy involves providing customers more value for the money by emphasizing:
(a) Low cost and low quality difference
(b) Low cost and better quality difference
(c) High cost and low quality difference
(d) High cost and better quality difference
Correct answer: (b) Emphasizing low cost and better quality difference
Q3. Best Cost provider strategies

(a) Seek to attract buyers on the basis of charging low price for low quality
(b) Aim at giving customers less value for more money
(c) Seek to attract buyers on the basis of charging high price for high quality
(d) Aim to giving customers low cost and better quality

Correct answer: (d) Aim to giving customers low cost and better quality

Chapter 6
Question Bank
6.1 Functional strategies
Q1. Rohit Bhargava is the Managing Director of Smooth and Simple Pvt Ltd. The company established in
2011, with 35 employees grew very fast to become an organisation with 335 employees in the year
2016. With the increase in size Rohit started facing difficulty in managing things. Many a times he
finds that personnel at the functional level are not in sync with the strategies of the top. He felt that
strategies need to be segregated into viable plans and policies that are compatible with each other
and communicated down the line.
Why does Rohit need to segregate the strategies into functional plans? Discuss.
(RTP, Nov 2018, NA) (MTP 2, May 2019, 5 Marks) (Study Material)
Rohit Bhargava needs to break higher level strategies into functional strategies for implementation.
These functional strategies, in form of Marketing, Finance, Human Resource, Production, Research
and Development help in achieving the organisational objective. The reasons why functional
strategies are needed can be enumerated as follows:
● Functional strategies lay down clearly what is to be done at the functional level. They provide a
sense of direction to the functional staff.
● They are aimed at facilitating the implementation of corporate strategies and the business
strategies formulation at the business level.
● They act as basis for controlling activities in the different functional areas of business.
● They help in bringing harmony and coordination as they are formulated to achieve major
strategies.
● Similar situations occurring in different functional areas are handled in a consistent manner
by the functional managers.
Q2. Marketing Strategy is the following type of strategy:

(a) Business Strategy.
(b) Functional Strategy.
(c) Growth Strategy.
(d) Product Strategy.
(RTP, May 2019, NA)
Correct answer: (b) Functional Strategy
Q3. ABC Ltd is a company that has grown eleven times its size in last five years. With the increase in size
the company is facing difficulty in managing things. Many a times functional level is not in sync with
the corporate level. What will you like to advise to the company and why?
(RTP, May 2019, NA) (RTP, May 2020, NA) (RTP, May 2021, NA) (Study Material)

The higher-level corporate strategies need to be segregated into viable plans and policies that are
compatible with each other and communicated down the line. The higher-level strategies need to be
broken into functional strategies for implementation. These functional strategies, in form of
marketing, finance, human resource, production, research and development help in achieving the
organisational objective. The reasons why functional strategies are needed can be enumerated as
follows:
● Functional strategies lay down clearly what is to be done at the functional level. They provide a
sense of direction to the functional staff.
● They are aimed at facilitating the implementation of corporate strategies and the business
strategies formulation at the business level.
● They help in bringing harmony and coordination as they are formulated to achieve major
strategies.
Q4. A Ltd. has recently decided to install a new IT system to improve the efficiency of its payroll function. A
ltd. believes this will reduce the cost of running the payroll system by 20%. Which one of the following
levels of strategy is the above IT system most closely linked to?
(a) Corporate level
(b) Functional level
(c) Business level
(d) Strategic level
(RTP, Nov 2021, NA)
Correct answer: (b) Functional level
Q5. Functional level managers are concerned with_________

(a) Strategies that are responsible for the operations of specific business
(b) Strategies that span multiple businesses
(c) Strategies that are specific to particular country
(d) Strategies that encourage a favourable attitude toward change
Correct answer: (a) Strategies that are responsible for the operations of specific business
Q6. What is meant by Functional strategies? In term of level, where will you put them? Are functional
strategies really important for business?
(Study Material)
Once higher level corporate and business strategies are developed, management has to formulate
and implement strategies for each functional area. For effective implementation, strategists have to
provide direction to functional managers regarding the plans and policies to be adopted. In fact, the
effectiveness of strategic management depends critically on the manner in which strategies are
implemented. Strategy of one functional area cannot be looked at in isolation, because it is the extent
to which all the functional tasks are interwoven that determines the effectiveness of the major
strategy.
Functional area strategy such as marketing, financial, production and human resource are based on
the functional capabilities of an organisation. For each functional area, first the major sub areas are

identified and then for each of these sub functional areas, contents of functional strategies, important
factors, and their importance in the process of strategy implementation is identified.
In terms of the level of strategy formulation, functional strategies operate below the SBU or business-
level strategies. Within functional strategies, there might be several sub-functional areas. Functional
strategies are made within the higher level strategies and guidelines therein that are set at higher
levels of an organisation. Functional managers need guidance from the business strategy in order to
make decisions. Operational plans tell the functional managers what has to be done while policies
state how the plans are to be implemented.
Major strategies must be translated to lower levels to give holistic strategic direction to an
organisation. Functional strategies provide details to business strategy and govern as to how key
activities of the business will be managed. Functional strategies play two important roles. Firstly, they
provide support to the overall business strategy. Secondly, they spell out as to how functional
managers will work so as to ensure better performance in their respective functional areas. The
reasons why functional strategies are really important and needed for business can be enumerated as
follows:
● The development of functional strategies is aimed at making the strategies - formulated at
the top management level practically feasible at the functional level.
● Functional strategies facilitate flow of strategic decisions to the different parts of an
organisation.
● The time spent by functional managers in decision making is reduced as plans lay down
clearly what is to be done and policies provide the discretionary framework within which
decisions need to be taken.
● Functional strategies help in bringing harmony and coordination as they remain part of major
strategies.
6.2 Marketing Strategy
Q1. A campaign advocating the message of ‘SAVE WATER’ is:

a) Services Marketing
b) Holistic marketing
c) Social Marketing
d) Direct Marketing
(Sample MCQs) (MTP 1, Nov 2019, 1 Mark)
Correct answer: (c) Social Marketing

Publicity is personal form of promotion.
(RTP, May 2018, NA)

Publicity is a non-personal form of promotion similar to advertising. However, no payments are made
to the media as in case of advertising. Organizations skilfully seek to promote themselves and their

products without payment. Publicity is communication of a product, brand or business by placing

information about it in the media without paying for the time or media space directly.
Q3. Ronit Roy has started a new business of manufacturing washing powder. Make a plan for him to
promote his product.
Promotion stands for activities that communicate the merits of the product and persuade target
consumers to buy it. Strategies are needed to combine individual methods such as advertising,
personal selling, and sales promotion into a coordinated campaign. Modern marketing is highly
promotional oriented.
Ronit needs to cover four major direct promotional methods or tools – personal selling, advertising,
publicity and sales promotion. They are briefly explained as follows:
(i) Personal selling: Personal Selling involves face-to-face interaction of sales force with the
prospective customers and provides a high degree of personal attention to them. In personal selling,
oral communication is made with potential buyers of a product with the intention of making a sale.
Ronit may engage a sales team to reach potential customers, explain the benefits of the product and
make a sale.
While personal selling is highly effective it suffers from very high costs as sales personnel are
expensive. Considering the product is a new launch in a competitive environment having a sales
team would be essential.
(ii) Advertising: Advertising is a non-personal, highly flexible and dynamic promotional method.
Ronit needs to advertise washing powder through hoardings, display boards particularly near the
point of sale. He may also consider having advertisements through handouts, newspapers,
magazines and internet. Television and radio are costly alternatives that may be considered according
to his budget.
(iii) Publicity: Publicity is also a non-personal form of promotion similar to advertising. He may
organize a launch party where journalists are invited. It is way of reaching customers with negligible
cost. Basic tools for publicity are press releases, press conferences, reports, stories, and internet
releases. These releases must be of interest to the public.
(iv) Sales promotion: Sales promotion is an omnibus term that includes all activities that are
undertaken to promote the business but are not specifically included under personal selling,
advertising or publicity. Ronit may offer free trial packs to generate interest in the product. Activities
like discounts, contests, money refunds, instalments, kiosks, exhibitions and fairs constitute sales
promotion. All these are meant to give a boost to the sales. Sales promotion done periodically may
help in getting a larger market share.

Marketing function has no relation with production function.

Marketing function and production function complement each other. They need to work in tandem
to produce goods as per the needs and preferences of the customers. Marketing links the production
with the customers.
Q5. Define the term 'Marketing'. Distinguish between social marketing and service marketing.

In general, marketing is an activity performed by business organizations. In the present day for
business, it is considered to be the activities related to identifying the needs of customers and taking
such actions to satisfy them in return of some consideration. The term marketing constitutes different
processes, functions, exchanges and activities that create perceived value by satisfying needs of
individuals.
Social marketing and service marketing are marketing strategies primarily with different orientations.
Social Marketing refers to the design, implementation, and control of programs seeking to increase
the acceptability of a social ideas, cause, or practice among a target group. For instance, the publicity
campaign for prohibition of smoking or encouraging girl child, etc.
On the other hand, service marketing is applying the concepts, tools, and techniques, of marketing to
services. Service is any activity or benefit that one party can offer to another that is essentially
intangible and non-perishing. These may be from business to consumer and from business to
business.

Tele-shopping is an instance of direct marketing.
(RTP, Nov 2018, NA)

Direct marketing is done through various advertising media that interact directly with customer.
Teleshopping is a form of direct marketing which operates without conventional intermediaries and
employs television and other IT devices for reaching the customer. The communication between the
marketer and the customer is direct through third party interfaces such as telecom or postal systems.
Q7. What are the objectives that must be kept in mind while designing a pricing strategy of a new
product?
For a new product pricing strategies for entering a market needs to be designed. In pricing a really
new product at least three objectives must be kept in mind.
i. Making the product acceptable to the customers.
ii. Producing a reasonable margin over cost.
iii. Achieving a market that helps in developing market share.
For a new product an organization may either choose to skim or penetrate the market. In skimming
prices are set at a very high level. The product is directed to those buyers who are relatively price
insensitive but sensitive to the novelty of the new product. For example call rates of mobile telephony
were set very high initially. Even the incoming calls were charged. Since the initial off take of the
product is low, high price, in a way, helps in rationing of supply in favour of those who can afford it.
In penetration pricing firm keeps a temptingly low price for a new product which itself is selling point.
A very large number of the potential customers may be able to afford and willing to try the product.

Marketers alone can deliver superior value to customers.

A marketer alone cannot deliver superior value to the customers. It needs to work in coordination
with other departments to accomplish this. It is important to be part of organization chain and
marketer needs to work in coordination with other departments in the search for competitive

advantages. Organisations need to look at the value chain network along with its own chain of
activities and the chain of suppliers, distributors and ultimately customers.
Q9. Define Augmented Marketing. Give two examples.

Augmented Marketing is provision of additional customer services and benefits built around the core
and actual products that relate to introduction of hi-tech services like movies on demand, online
computer repair services, etc. Such innovative offerings provide a set of benefits that promise to
elevate customer service to unprecedented levels.
Q10. Explain the marketing mix in the context of modern marketing.

Marketing mix is a set of controllable marketing variables that the firm blends to produce the
response that it wants in the target market. Marketing mix consists of everything that the firm can do
to influence the demand for its product. The original framework of marketing mix comprises of
product, price, place and promotion.
Modern marketing is highly promotional oriented and include personal selling, advertising, publicity
and sales promotion.
Personal selling – involves face to face interaction of sales persons with the prospective customers
and provides a high degree of personal attention. It involves working with one customer at a time and
hence not cost effective. The intention of oral communication is sale.
Advertising – is a non-personal, flexible and dynamic promotion method. The media for advertising
are several and choice of an appropriate one is important for effectiveness of message. Sale of the
product and the amount of expenditure cannot be directly measured.
Publicity – is also non-personal but no payments are made to the media. Publicity is communication
of a product, brand or business by placing information about it in the media without paying for the
time or media space directly. It could be through press releases, press conferences, reports, etc.
Sales promotion – includes all activities that are undertaken to promote the business but are not
specifically included under personal selling, advertising or publicity. Activities like discounts, contests,
money refunds, exhibitions etc. are included.
Q11. Decisions with regards to marketing mix are related to:

a. Growth Strategy
b. Business level strategy
c. Functional strategy
d. Corporate decisions
Correct answer: (c) Functional strategy
Q12. For a new product, an organization may choose:

(a) Skimming pricing strategy
(b) Penetration pricing strategy
(c) Both (a) and (b)
(d) None of these

Correct answer: (c) Both (a) and (b)
Q13. The marketing strategy which is used to reduce or shift the demand is:
(a) Enlightened Marketing
(b) Synchro-Marketing
(c) Place Marketing
(d) Demarketing
(RTP, May 2020, NA)
Correct answer: (d) Demarketing
Q14. Mr. Vicky Verma, a Gwalior based entrepreneur, has entered into an exclusive-retail deal with an
Italian company selling ‘Fantasy-3D’, a Hologram LED Fan, which is being used for advertising at
public places. Mr. Verma procured a total of 500 units of the product and paid upfront as per the
seller’s policy. This resulted in blocking of his working capital significantly and the shipment is
expected in a month. Meanwhile his continued efforts of establishing relations with the marketing
heads of corporates resulted in a series of meetings, where he demonstrated his specialist product
knowledge by changing the hologram images to personalise basis specifications of the customer. The
management of a big automative company was impressed with the quality and adaptability of the
product, and awarded a contract of 125 units to be displayed in the auto-maker’s showrooms. Identify
and explain the product promotion strategy adopted by Mr. Verma.
(RTP, Nov 2020, NA)
Mr. Vicky Verma established personal contacts with potential buyers of the product and persuaded
the marketing department over several physical meetings, and was finally able to make sales. The
personal relation establishment and physical demonstration, indicates that Mr. Verma used the
Personal Selling method of Promotion. Modern marketing is highly promotional oriented and include
personal selling, advertising, publicity and sales promotion. Personal selling involves face to face
interaction of sales persons with the prospective customers and provides a high degree of personal
attention. It involves working with one customer at a time and hence not cost effective. The intention
of oral communication is sale.
Q15. Elucidate Expanded Marketing Mix

Typically, all organizations use a combination of 4 Ps in some form or the other that is product, price,
place, and promotion. However, the above elements of marketing mix are not exhaustive. There are a
few more elements that may form part of an organizational marketing mix strategy as follows:
1. People: all human actors who play a part in delivery of the market offering and thus influence the
buyer’s perception, namely the firm’s personnel and the customer.
2. Physical evidence: the environment in which the market offering is delivered and where the firm
and customer interact.
3. Process: the actual procedures, mechanisms and flow of activities by which the product/ service is
delivered.
Q16. Write short note on Publicity and Sales Promotion.

Or

Distinguish between the following: Publicity & Sales Promotion.

Publicity and Sales promotion are adopted by organizations when they are undertaking promotion in
the overall marketing mix.
Publicity is a non-personal form of promotion similar to advertising. However, no payments are made
to the media as in case of advertising. Organizations skillfully seek to promote themselves and their
product without payment. Publicity is communication of a product, brand or business by placing
information about it in the media without paying for the time or media space directly.
Thus, it is way of reaching customers with negligible cost. Basic tools for publicity are press releases,
press conferences, reports, stories, and internet releases. These releases must be of interest to the
public.
Sales promotion is an omnibus term that includes all activities that are undertaken to promote the
business but are not specifically included under personal selling, advertising or publicity. Activities
like discounts, contests, money refunds, installments, kiosks, exhibitions and fairs constitute sales
promotion. All these are meant to give a boost to the sales. Sales promotion done periodically may
help in getting a larger market share to an organization.
Q17. A famous restaurant enjoys full occupancy during the lunch and dinner time for last few months. In
fact, many customers go back as they have to wait for their turn. Between 15:00 hours to 18:00 hours,
the occupancy rate is near to nil. To raise the footfalls of customers during this lean time, the owner
offers a discount of 20% on total bill if a customer comes in these 3 hours. Whic type of marketing
strategy does the restaurant follow to attract the customers in the lean period?
(a) Differential Marketing
(b)Synchro-marketing
(c) Place Marketing
(d) Concentrated Marketing
Correct answer: (b) Synchro-marketing
Q18. "Business organizations face countless marketing challenges that affect the success or failure of
strategy implementation". In light of this statement, discuss some marketing decisions that require
special attention.
A business organization faces countless marketing challenges that affect the success or failure of
strategy implementation. Some examples of marketing decisions that may require special attention
are as follows:
1. The amount and the extent of advertising to be done. Whether to use heavy or light advertising.
What should be the amount of advertising in print media, television or internet?
2. Decisions regarding distribution network to be used. Whether to use exclusive dealerships or
multiple channels of distribution.
3. Whether to be a price leader or a price follower?
4. Whether to offer a complete or limited warranty?
5. Whether to limit or enhance the share of business done with a single or a few customers?
6. Whether to reward sales people based on straight salary, straight commission, or on a combination
of salary and commission?

Q19. Airlines providing special lounge access to loyal customers is a type of which marketing?
(a) Augmented Marketing
(b) Direct Marketing
(c) Relationship Marketing
(d) Services Marketing
(RTP, May 2022, NA)
Correct answer: (c) Relationship Marketing
Q20. What do you understand by the term marketing mix? Briefly explain its various components.
(Study Material)
Marketing mix is a systematic way of classifying the key decision areas of marketing management. It
is the set of controllable marketing variables that the firm blends to produce the response that it
wants in the target market. The original framework of marketing mix comprises of 4 P’s - product,
price, place and promotion. These are subsequently expanded to highlight certain other key decision
areas especially in case of services like people, processes, and physical evidence. The elements of
original framework are:
● Product: It stands for the “goods-and-service” combination the company offers to the target
market.
● Price: It stands for the amount of money customers have to pay to obtain the product.
● Place: It stands for company activities that make the product available to target consumers
and includes marketing channel, distribution policies and geographical availabilty.
● Promotion: It stands for activities that communicate the merits of the product and persuade
target consumers to buy it.
Expanded marketing mix: Typically, all organizations use a combination of 4 Ps in some form or the
other that is product, price, place, and promotion. However, the above elements of marketing mix are
not exhaustive. There are a few more elements that may form part of an organizational marketing
mix strategy as follows:
People: all human actors who play a part in delivery of the market offering and thus influence the
buyer’s perception, namely the firm’s personnel and the customer.
Physical evidence: the environment in which the market offering is delivered and where the firm
and customer interact.
Process: the actual procedures, mechanisms and flow of activities by which the product/ service is
delivered.
Q21. What do you understand by promotion? What are various promotion tools adopted by organization?
(Study Material)
Promotion stands for activities that communicate the merits of the product and persuade target
consumers to buy it. Strategies are needed to combine individual methods such as advertising,
personal selling, and sales promotion into a coordinated campaign. In addition, promotional
strategies must be adjusted as a product move from an earlier stage to a later stage of its life.
Modern marketing is highly promotional oriented. Organisations strive to push their sales and market
standing on a sustained basis and in a profitable manner under conditions of complex direct and
indirect competitive situations.
Promotion is communication, persuasion and conditioning process. There are at least four major
direct promotional methods or tools briefly explained as follows:

(i) Personal selling: Personal Selling is one of the oldest forms of promotion. It involves face-to-face
interaction of sales force with the prospective customers and provides a high degree of personal
attention to them. In personal selling, oral communication is made with potential buyers of a product
with the intention of making a sale. Personal selling suffers from very high costs as sales personnel
attend one customer at a time.
(ii) Advertising: Advertising is a non-personal, highly flexible and dynamic promotional method. The
media for advertisings are several such as pamphlets, brochures, newspapers, magazines, hoardings,
display boards, radio, television and internet. Choice of appropriate media is important for
effectiveness of the message. The media may be local, regional, or national. The type of the message,
copy, and illustration are a matter of choice and creativity. Advertising may be directed towards
consumers, middlemen or opinion leaders. Advertising is likely to succeed in promoting the sales of
an organisation but its effectiveness in respect to the expenditure cannot be directly measured. Sales
is a function of several variables out of which advertising is only one.
(iii) Publicity: Publicity is also a non-personal form of promotion similar to advertising. However, No
payments are made to the media as in case of advertising. Organisations skillfully seeks to promote
themselves and their product with negligible cost. Publicity is a communication of a product, brand
or business by placing information about it in the media. Basic tools for publicity are press releases,
press conferences, reports, stories, and internet releases. These releases must be of interest to the
public.
(iv) Sales promotion: Sales promotion includes all activities that are undertaken to promote the
business but are not specifically included under personal selling, advertising or publicity. Activities
like discounts, contests, money refunds, instalments, kiosks, exhibitions and fairs constitute sales
promotion. All these are meant to give a boost to the sales.
6.3 Financial Strategy
Q1. Financial objectives involve all of the following except:

a. Growth in revenues
b. Larger market share
c. Higher dividends
d. Greater return on investment
Correct answer: (b) Larger market share
Q2. “Evaluating the worth of a business is central to strategy implementation.” In the light of this
statement, explain the methods that can be used for determining the worth of a business.
Or
Discuss the various approaches for evaluating the worth of a business.

It is true that evaluating the worth of a business is central to strategy implementation. There are
circumstances where it is important to evaluate the actual worth of the business. These

circumstances can be wide and varied. At a higher level they may include acquisition, merges or
diversification. They may also include other situations such as fixing of share price in an issue.
Acquisition, merger, retrenchment may require establishing the financial worth or cash value of a
business to successfully implement such strategies.
Various methods for determining a business’s worth can be grouped into three main approaches.
(i) Net worth or stockholders’ equity: Net worth is the total assets minus total outside liabilities of an
organisation.
(ii) Future benefits to owners through net profits: These benefits are considered to be much
greater than the amount of profits. A conservative rule of thumb is to establish a business’s worth as
five times the firm’s current annual profit. A five-year average profit level could also be used.
(iii) Market-determined business worth: This, in turn, involves three methods. First, the firm’s worth
may be based on the selling price of a similar company. The second approach is called the
price-earnings ratio method whereby the market price of the firm’s equity shares is divided by the
annual earnings per share and multiplied by the firm’s average net income for the preceding years.
The third approach can be called the outstanding shares method whereby one has to simply multiply
the number of shares outstanding by the market price per share and add a premium.
Q3. A web company initially started as an online marketplace for books. From “biggest E - Bookstore,” its
owners wants to expand into an e commerce platform selling electronic goods. Implementation of
this needs additional funds.
What are the different sources of raising funds and their impact on the financial strategy which you as
a financial manager will consider?
Or
Successful implementation of any project needs additional funds. What are the different sources of
raising funds and their impact on the financial strategy which you as a financial manager will
consider?
(Study Material)
Successful strategy implementation often requires additional capital. Besides net profit from
operations and the sale of assets, two basic sources of capital for an organization are debt and equity.
Being a financial manager to determine an appropriate mix of debt and equity in a firm’s capital
structure can be vital to successful strategy implementation. Fixed debt obligations generally must
be met, regardless of circumstances. This does not mean that stock issuances are always better than
debt for raising capital. If ordinary stock is issued to finance strategy implementation; ownership and
control of the enterprise are diluted. This can be a serious concern in today’s business environment of
hostile takeovers, mergers, and acquisitions.
The major factors regarding which strategies have to be made by a financial manager are: capital
structure; procurement of capital and working capital borrowings; reserves and surplus as sources of
funds; and relationship with lenders, banks and financial institutions. Strategies related to the sources
of funds are important since they determine how financial resources will be made available for the
implementation of strategies. Organizations have a range of alternatives regarding the sources of
funds. While one company may rely on external borrowings, another may follow a policy of internal
financing.
Q4. What do you mean by financial strategy of an organization? How the worth of a business is
evaluated?

The financial strategies of an organization are related to several finance/ accounting concepts
considered to be central to strategy implementation. These are: acquiring needed capital/sources of
fund, developing projected financial statements/budgets, management/usage of funds, and
evaluating the worth of a business.
Various methods for determining a business’s worth can be grouped into three main approaches
which are as follows:
(i) Net worth or stockholders’ equity: Net worth is the total assets minus total outside liabilities of an
organisation.
(ii) Future benefits to owners through net profits: These benefits are considered to be much
greater than the amount of profits. A conservative rule of thumb is to establish a business’s worth as
five times the firm’s current annual profit. A five-year average profit level could also be used.
(iii) Market-determined business worth: This, in turn, involves three methods. First, the firm’s worth
may be based on the selling price of a similar company. The second approach is called the
price-earnings ratio method whereby the market price of the firm’s equity shares is divided by the
annual earnings per share and multiplied by the firm’s average net income for the preceding years.
The third approach can be called the outstanding shares method whereby one has to simply multiply
the number of shares outstanding by the market price per share and add a premium.
Q5. You are a manager of a firm, and you have to raise funds for a business project. From which sources
can you raise the funds for your company?
(RTP, May 2022, NA)
Strategies related to the source of fund are important since they determine how financial resources
will be available for the implementation of the financial strategies. Companies may rely on internal
and external sources of financing for their short term and long term requirement of their funds. The
funds may be raised from national and international money and capital markets.
Following are some important sources for raising funds:
i. Net profit from the operations: Using retained earnings to reinvest in the business, either in new
projects or to scale up existing operations.
ii. Sale of assets: The purpose of an asset sale is generally to increase cash flow, reduce bad debt risk
and liquidation of assets.
iii. Debt: Debt is an amount of money borrowed by one party from another. It is used by many
corporations as a method of making large purchases that they could not afford under normal
circumstances. It could be applied to boost organizations return on investment. During low earning
periods, too much debt in the capital structure of an organisation can endanger stockholder’s return
and jeopardize company survival. Debt can be in the form of debentures, bonds, loans from financial
institutions and deposits from public/fixed deposits.
iv. Issuance of share capital to the public: Equity can be of two type - ordinary Shares and
preference shares.
6.4 Production/Operations Strategy
Q1. Write short note on Production system

(RTP, May 2018, NA)
Production System is concerned with the capacity, location, layout, product or service design, work
systems, degree of automation, extent of vertical integration, and such factors. Strategies related to

production system are significant as they deal with vital issues affecting the capability of the
organisation to achieve its objectives.
Strategy implementation would have to take into account the production system factors as they
involve decisions which are long-term in nature and influence not only the operations capability of an
organisation but also its ability to implement strategies and achieve objectives.
6.5 Logistics Management
Q1. ‘‘Inbound and Outbound logistics” are related to:

a) Supply Chain Management
b) Logistics Management
c) Value Chain Analysis
d) All of the above
(Sample MCQs)
Q2. Define logistics strategy.

Logistics is a process that integrates the flow of supplies into, through and out of an organization to
achieve a level of service that facilitate movement and availability of materials in a proper manner.
When a company creates a logistics strategy, it is defining the service levels at which its logistics is
smooth and is cost effective.

Inbound logistics and outbound logistics
(RTP, May 2018, NA)
Inbound logistics are the activities concerned with receiving, storing and distributing the inputs to
the product/service. It includes all activities such as materials handling, stock control, transport, etc.
Outbound logistics relate to collection, storage and distribution of the product to customers. It
includes all activities such as storage/warehousing of finished goods, order processing, scheduling
deliveries, operation of delivery vehicles, etc.
Q4. Distinguish between logistic management and supply chain management.

(MTP 2, May 2018, 5 Marks) (RTP, Nov 2018, NA) (MTP 2, Nov 2018, 5 Marks) (MTP 1, May 2019, 5
Marks) (MTP 2, Nov 2021, 5 Marks)
Supply chain management is an extension of logistic management. However, there are differences
between the two. Logistical activities typically include management of inbound and outbound goods,
transportation, warehousing, handling of material, fulfillment of orders, inventory management and
supply/demand planning. Although these activities also form part of supply chain management, the
latter is much broader. Logistic management can be termed as one of its part that is related to
planning, implementing, and controlling the movement and storage of goods, services and related
information between the point of origin and the point of consumption.

Supply chain management is an integrating function of all the major business activities and business
processes within and across organisations. Supply Chain Management is a systems view of the
linkages in the chain consisting of different channel partners – suppliers, intermediaries, third-party
service providers and customers. Different elements in the chain work together in a collaborative and
coordinated manner. Often it is used as a tool of business transformation and involves delivering the
right product at the right time to the right place and at the right price.
Q5. What steps are to be considered for implementing the supply chain management in a business
organization? Explain.
Or
Discuss the major steps in implementing supply chain management system in a business
organization.
(Study Material)
Or
Implementing supply chain management in a business organization has several steps. Discuss.
(RTP, Nov 2019, NA)
Successful implementing supply management systems requires a change from managing individual
functions to integrating activities into key supply chain processes. It involves collaborative work
between buyers and suppliers, joint product development, common systems and shared information.
A key requirement for successfully implementing supply chain will be network of information sharing
and management. Implementing and successfully running supply chain management system will
involve:
(i) Product development – Customers and suppliers must work together in the product
development process. Products are developed and launched in shorter time and help organisations
to remain competitive.
(ii) Procurement – requires careful resource planning, quality issues, identifying sources, negotiation,
order placement, inbound transportation and storage. Organisations coordinate with suppliers in
scheduling without interruption.
(iii) Manufacturing – Flexible manufacturing process is required to respond to market changes like
accommodate customisation and changes in tastes and preferences. Manufacturing is done on the
basis of just in time and minimum lot sizes.
(iv) Physical Distribution – Delivery of final product to customers is the last position in a marketing
channel. To ensure right place at right time is important for each channel participant. So supply chain
management links a marketing channel with customers.
(v) Outsourcing – is not limited to the procurement of materials and components but also includes
outsourcing of services that traditionally have been provided within an organisation. The company
will focus on the core competency areas alone and outsource rest.
(vi) Customer Service – Organisations work with customers to determine mutually satisfying goals,
establish and maintain relationships. This produces positive feelings in the organisation and among
customers.
(vii) Performance Measurement – Supplier capabilities and customer relationships can be corrected
with a firm’s performance. Performance is measured in different parameters such as costs, customer
services, productivity and quality.

Q6. The purpose of logistics management is

a. Provide customer satisfaction
b. Create automation
c. Procure better quality raw material
d. Manage inward and outward movement of goods
Correct answer: (d) Manage inward and outward movement of goods
Q7. Supply chain refers to the linkages between:

(a) Suppliers
(b) Customers
(c) Manufacturers
(d) All the above
(RTP, May 2020, NA) (MTP 1, Nov 2020, 1 Mark)
Correct answer: (d) All the above
Q8. What are the issues to· be resolved by a business enterprise to have an effective logistic strategy?
Management of logistics is a process which integrates the flow of supplies into, through and out of an
organisation to achieve a level of service which ensures that the right materials are available at the
right place, at the right time, of the right quality and at the right cost.
For a business enterprise, effective logistic strategy will involve raising and finding
solutions to the following questions:
● Which sources of raw materials and components are available?
● How many manufacturing locations are there?
● What products are being made at each manufacturing location?
● What modes of transportation should be used for various products?
● What is the nature of distribution facilities?
● What is the nature of materials handling equipment possessed? Is it ideal?
● What is the method for deploying inventory in the logistics network?
● Should the business firm own the transport vehicles or hire?
Q9. What is supply chain management? Is it same as logistics management? Discuss.

(Study Material)
Meaning of supply chain management: The term supply chain refers to the linkages between
suppliers, manufacturers and customers. Supply chain involve all activities like sourcing and
procurement of material, conversion, and logistics. Planning and control of supply chains are
important components of its management. Naturally, management of supply chains include closely
working with channel partners - suppliers, intermediaries, other service providers and customers.
Supply chain management is defined as the process of planning, implementing, and controlling the
supply chain operations. It is a cross-functional approach to managing the movement of raw
materials into an organization and the movement of finished goods out of the organization toward
the end-consumer who are to be satisfied as efficiently as possible. It encompasses all movement and
storage of raw materials, workin- process inventory, and finished goods from point-of-origin to

point-of-consumption. Organizations are finding that they must rely on the chain to successfully
compete in the global market.
Modern organizations are striving to focus on core competencies and reduce their ownership of
sources of raw materials and distribution channels. These functions can be outsourced to other
business organizations that specialize in those activities and can perform in better and cost-effective
manner. In a way organization in the supply chain do tasks according to their core-competencies.
Working in the supply chain improve trust and collaboration amongst partners and thus improve
flow and management of inventory.
Is logistic management same as supply chain management? Supply chain management is an
extension of logistic management. However, there is difference between the two. Logistical activities
typically include management of inbound and outbound goods, transportation, warehousing,
handling of material, fulfilment of orders, inventory management, supply/demand planning.
Although these activities also form part of Supply chain management, the latter has different
components. Logistic management can be termed as one of its part that is related to planning,
implementing, and controlling the movement and storage of goods, services and related information
between the point of origin and the point of consumption.
Supply chain management includes more aspects apart from the logistics function. It is a tool of
business transformation and involves delivering the right product at the right time to the right place
and at the right price. It reduces costs of organizations and enhances customer service.
6.6 Research and Development Strategy
Q1. How would you argue that Research and Development Personnel are important for effective strategy
implementation?
Research and Development (R&D) personnel can play an integral part in strategy implementation.
These individuals are generally charged with developing new products and improving old products in
a way that will allow effective strategy implementation. R&D employees and managers perform tasks
that include transferring complex technology, adjusting processes to local raw materials, adapting
processes to local markets, and altering products to particular tastes and specifications.
Strategies such as product development, market penetration, and concentric diversification require
that new products be successfully developed and that old products be significantly improved. But the
level of management support for R&D is often constrained by resource availability.
Q2. Discuss the guidelines for selection of Research & Development expertise by an organization.
A critical question is whether a firm should develop research and development expertise internally or
outside to external agencies. The answer to this critical question mainly depends on rate of
technology progress and rate of market growth. The following guidelines can be used to help make
this decision:
● If the rate of technical progress is slow, the rate of market growth is moderate, and there are
significant barriers to possible new entrants, then in-house R&D is the preferred solution. The
reason is that R&D, if successful, will result in a temporary product or process monopoly that
the company can exploit.

● If technology is changing rapidly and the market is growing slowly, then a major effort in R&D
may be very risky, because it may lead to the development of an ultimately obsolete
technology or one for which there is no market.
● If technology is changing slowly but the market is growing quickly, there generally is not
enough time for in-house development. The prescribed approach is to obtain R&D expertise
on an exclusive or non-exclusive basis from an outside firm.
● If both technical progress and market growth are fast, R&D expertise should be obtained
through acquisition of a well-established firm in the industry.
Q3. Explain the three major R & D approaches to implement strategic decisions.
There are at least three major R&D approaches for implementing strategies.
i. Be the leader: The first strategy is to be the first firm to market new technological products. This is a
glamorous and exciting strategy but also a dangerous one. Firms such as 3M and General Electric
have been successful with this approach, but many other pioneering firms have fallen, with rival firms
seizing the initiative.
ii. Be an innovative imitator: A second R&D approach is to be an innovative imitator of successful
products, thus minimizing the risks and costs of startup. This approach entails allowing a pioneer firm
to develop the first version of the new product and to demonstrate that a market exists. Then, laggard
firms develop a similar product. This strategy requires excellent R&D personnel and an excellent
marketing department.
iii. Be a low cost producer: A third R&D strategy is to be a low-cost producer by mass-producing
products similar to but less expensive than products recently introduced. As a new product accepted
by customers, price becomes increasingly important in the buying decision. Also, mass marketing
replaces personal selling as the dominant selling strategy. This R&D strategy requires substantial
investment in plant and equipment, but fewer expenditures in R&D than the two approaches
described earlier.
Q4. ABC Ltd was facing problems in achieving efficiency and improving results. The functional managers
were called for a meeting to address the issue. After a lot of brain storming, it was decided to go for a
redesigning of the set systems by making the processes innovative. Hence, the redesigning of its
infrared sighting mechanism that it supplied to another company was undertaken. It was observed
that ABC Ltd. had reduced its number of parts from 37 to 10, the number of assembly steps from 27 to
12, the time spent fabricating metal on fabricating metal from 525 minutes per unit to 150 minutes
per unit, and the unit assembly time from 129 minutes to 20 minutes. As a result, a substantial decline
in manufacturing costs occurs. This helped the company in attaining better sales and bigger market
share. To achieve the operational efficiency, which of functional areas must have been involved and
why?
(Study Material)
To achieve this kind of operational efficiency, the functional areas that must have been majorly
involved are Production department and R & D department. The main aim of production department
in the strategic implementation is concerned with the capacity, location, layout, product or service
design, work systems, degree of automation, extent of vertical integration, and such factors.
Strategies related to production system are significant as they deal with vital issues affecting the
capability of the organisation in achieving production related strategical goals such as using efficient
production strategies like Just-in-Time technique and flexible manufacturing processes that aim at
building efficiency in operational matters.
The strategies related to operations planning and control also come under the purview of production
manager. These are concerned with aggregate production planning, materials supply, inventory, cost,

and quality management; and maintenance of plant and equipment. Here, the aim of strategy
implementation is to see how efficiently resources are utilized and in what manner the day-to-day
operations can be managed in the light of long-term objectives. Operations planning and control
provides an example of an organizational activity that is aimed at translating objectives into reality
and has been used as an efficient strategic tool.
In this case every effort at every level was made to reduce the cost of production by redesigning its
products and streamline production processes. They also thought in terms of making production
processes innovative and this can be achieved by the cross-functional involvement as it involves
working on production processes, quality management and applying innovative techniques. This
brings in the role of R&D department too in this process of redesigning and improving efficiency.
R & D department performs tasks that include transferring complex technology, adjusting processes
to local raw materials, adapting processes to local markets, and altering products to particular tastes
and specifications and improve the old products be significantly. R&D strategy to be effective need to
tie external opportunities to internal strengths and is linked with attainment of objectives as it
emphasizes on product or process improvements, on applied research.
Hence, in the above case, both production and R&D department were involved in redesigning of its
infrared sighting mechanism, reduced its number of parts, the number of assembly steps, the time
spent fabricating metal on fabricating metal and the unit assembly time. This led to their achieving
their functional strategic goal of achieving efficiency and cutting costs and thereby improving their
production processes.
6.7 Human Resource Strategy
Q1. State the factors of human resource that have influence on employee’s competence.
(RTP, May 2018, NA) (MTP 1, Nov 2019, 5 Marks) (SA, Nov 2020, 5 Marks) (MTP 2, May 2021, 5 Marks)
(RTP, Nov 2021, NA) (MTP 2, Nov 2021, 5 Marks) (Study Material)
Human resource management has been accepted as a strategic partner in the formulation of
organization’s strategies and in the implementation of such strategies through human resource
planning, employment, training, appraisal and reward systems. The following points should be kept in
mind as they can have a strong influence on employee competence:
i. Recruitment and selection: The workforce will be more competent if a firm can successfully
identify, attract, and select highly competent applicants.
ii. Training: The workforce will be more competent if employees are well trained to perform their jobs
properly.
iii. Appraisal of performance: The performance appraisal is to identify any performance deficiencies
experienced by employees due to lack of competence. Such deficiencies, once identified, can often be
solved through counselling, coaching or training.
iv. Compensation: A firm can usually increase the competency of its workforce by offering pay,
benefits and rewards that are not only attractive than those of their competitors but also recognizes
merit.

Human resource management aids in strategic management.

The human resource management helps the organization to effectively deal with the external
environmental challenges. The function has been accepted as a partner in the formulation of
organization’s strategies and in the implementation of such strategies through human resource
planning, employment, training, appraisal and rewarding of personnel.

Human Resource Manager's role is significant in building up core competency of the firm.

The human resource manager has a significant role to play in developing core competency of the
firm. A core competence is a unique strength of an organization which may not be shared by others.
Core-competencies can be generated and maintained only through the effective management of
human resources and their skills.
Q4. Explain the prominent areas where human resource manager can play a strategic role.
(MTP 1, Nov 2018, 6 Marks) (RTP, May 2019, NA) (SA, May 2019, 5 Marks) (MTP 1, May 2020, 5 Marks)
Or
Explain any three prominent areas where human resource manager can play a strategic role.
(Study Material)
Or
You are the Human Resource Manager of a Company. What are the prominent areas where you can
play strategic role?
(RTP, May 2022, NA)
The prominent areas where the human resource manager can play strategic role are as follows:
1. Providing purposeful direction: The human resource manager must be able to lead people and
the organization towards the desired direction involving people right from the beginning. The most
important task of a HR manager is to ensure that the objectives of an organization are internalized by
each individual working in the organization. Objectives of an organization state the very purpose and
justification of its existence.
2. Building core competency: The human resource manager has a great role to play in developing
core competency by the firm. A core competence is a unique strength of an organization which may
not be shared by others. This may be in the form of human resources, marketing capability, or
technological capability. If the business is organized on the basis of core competency, it is likely to
generate competitive advantage. Because of this reason, many organizations have restructured their
businesses by divesting those businesses which do not match core competence. Organization of
business around core competence implies leveraging the limited resources of a firm. It needs creative,
courageous and dynamic leadership having faith in organization’s human resources.
3. Creating competitive advantage: Creating and maintaining a competitive advantage in the
globalized market is the object of any organization. There are two important ways a business can
achieve a competitive advantage over the others. The first is cost leadership which means the firm
aims to become a low cost leader in the industry. The second competitive strategy is differentiation
under which the firm seeks to be unique in the industry in terms of dimensions that are highly valued

by the customers. Putting these strategies into effect carries a heavy premium on having a highly
committed and competent workforce.
4. Facilitation of change: The human resource manager will be more concerned with substance
rather than form, accomplishments rather than activities, and practice rather than theory. The HR
function will be responsible for furthering the organization not just maintaining it. Human resource
manager will have to devote more time to promote changes than to maintain the status quo.
5. Managing workforce diversity: In modern organizations, management of diverse workforce is a
great challenge. Workforce diversity can be observed in terms of male and female workers, young and
old workers, educated and uneducated workers, unskilled and professional employee, etc. Moreover,
many organizations also have people of different castes, religious and nationalities. The workforce in
future will comprise more of educated and self conscious workers. They will ask for higher degree of
participation and avenues for fulfilment. Money will no longer be the sole motivating force for
majority of the workers. Non - financial incentives will also play an important role in motivating the
workforce.
6. Empowerment of human resources: Empowerment means authorizing every member of an
organization to take up his/her own destiny realizing his/her full potential. It involves giving
more power to those who, at present, have little control what they do and little ability to
influence the decisions being made around them.
7. Development of works ethic and culture: Greater efforts will be needed to achieve cohesiveness
because employees will have transient commitment to groups. As changing work ethic requires
increasing emphasis on individuals, jobs will have to be redesigned to provide challenge. Flexible
starting and quitting times for employees may be necessary. Focus will shift from extrinsic to intrinsic
motivation. A vibrant work culture will have to be developed in the organizations to create an
atmosphere of trust among the employees and to encourage creative ideas by them.
Q5. Sport Spirit (SS) is a medium sized sports retailer. It currently operates three shops in the city at centre
locations. The management of Sport Spirit (SS) has a very careful recruitment policy; any applicant
must have a ‘passion for sport’. Which one of the following functional strategies would best describe
by SS?
(a) Human Resource Strategy
(b) Financial Strategy
(c) Operation Strategy
(d) Marketing Strategy
Correct answer: (a) Human Resource Strategy

Chapter 7
Question Bank
7.1 Organization structure
Q1. What type of organizational structure do most small businesses follow?

(a) Divisional structure
(b) Functional structure
(c) Hour Glass structure
(d) Matrix structure
Correct answer: (d) Matrix structure
Q2. Change in company’s ----------------- gives rise to problems necessitating a new --------------- to be
made.
(a) Structure, Strategy
(b) Strategy, Structure
(c) Structure, Structure
(d) Strategy, Strategy
(Sample MCQs)
Correct answer: (b) Strategy, Structure
Q3. Explain the concept of Network structure.

(RTP, May 2018, NA)
Network structure is a newer and somewhat more radical organizational design. The network
structure could be termed as ‘non-structure’ as it virtually eliminates in-house business functions and
outsource many of them. A corporation organized in this manner is a virtual organization because it is
composed of a series of project groups or collaborations linked by constantly changing
non-hierarchical, cobweb-like networks.
Q4. Write short note on Characteristics of strategic business unit (SBU).

Strategic Business Unit (SBU) is a unit of the company that has a separate mission and objectives and
which can be planned independently from other businesses of the orgnanisation. The three most
important characteristics of SBU are:

● It is a single business or a collection of related businesses which offer scope for independent
planning and which might feasibly stand alone from the rest of the organization.
● It has its own set of competitors.
● It has a manager who has responsibility for strategic planning and profit performance. He has
control of profit-influencing factors.
Q5. Explain strategic business unit (SBUs).

(RTP, Nov 2018, NA)
A strategic business unit (SBU) is a unit of the company that has a separate mission and objectives
which can be planned independently from other company businesses. SBU can be a company
division, a product line within a division or even a single product/brand, specific group of customers or
geographical location. The SBU is given the authority to make its own strategic decisions within
corporate guidelines as long as it meets corporate objectives.

Strategies may require changes in organizational structure.
(RTP, Nov 2018, NA)

Strategies may require changes in structure as the structure dictates how resources will be allocated.
Structure should be designed to facilitate the strategic pursuit of a firm and, therefore, should follow
strategy. Without a strategy or reasons for being, companies find it difficult to design an effective
structure.
Q7. Davis and Lawrence have proposed three distinct phases to develop matrix structure. Explain.
(RTP, Nov 2018, NA)
For development of matrix structure; Davis and Lawrence have proposed three distinct phases:
● Cross-functional task forces: Temporary cross-functional task forces are initially used when a
new product line is being introduced. A project manager is in charge as the key horizontal
link.
● Product/brand management: If the cross-functional task forces become more permanent,
the project manager becomes a product or brand manager and a second phase begins. In
this arrangement, function is still the primary organizational structure, but product or brand
managers act as the integrators of semi-permanent products or brands.
● Mature matrix: The third and final phase of matrix development involves a true dual-
authority structure. Both the functional and product structures are permanent. All employees
are connected to both a vertical functional superior and a horizontal product manager.

Structure has no impact on the strategy of the organization.

Structures are designed to facilitate the strategic pursuit of a firm and, therefore, follows strategy.
Without a strategy or reason for being, it will be difficult to design an effective structure. Strategic
developments may require allocation of resources and there may be a need for adapting the
organisation’s structure to handle new activities as well as training personnel and devising
appropriate systems.
Q9. Manoj started his telecom business in 2010. Over next five years, he gradual ly hired fifty people for
various activities such as to keep his accounts, administration, sell his products in the market, create
more customers, provide after sales service, coordinate with vendors.
Draw the organization structure Manoj should implement in his organization and name it.
Manoj has started a telecom business. Accounts, Administration, Marketing (customer creation, after
sales service, vendor coordination) are the functional areas that are desired in the organisational
structure. Further there is inherent need to have a department for the management of telecom
services/ operations.
Thus, the functional structure in the telecom business of Manoj can be as follows:
Q10. Discuss the concept of Multi Divisional Structure.

(RTP, May 2019, NA) (MTP 2, May 2019)
Multidivisional (M-form) structure is composed of operating divisions where each division represents
a separate business to which the top corporate officer delegates responsibility for day-to-day
operations and business unit strategy to division managers. By such delegation, the corporate office is
responsible for formulating and implementing overall corporate strategy and manages divisions
through strategic and financial controls.
Multidivisional or M-form structure was developed in the 1920s, in response to coordination- and
control-related problems in large firms. Functional departments often had difficulty dealing with
distinct product lines and markets, especially in coordinating conflicting priorities among the
products.

Costs were not allocated to individual products, so it was not possible to assess an individual product’s
profit contribution. Loss of control meant that optimal allocation of firm resources between products
was difficult (if not impossible). Top managers became over - involved in solving short-run problems
(such as coordination, communications, conflict resolution) and neglected long-term strategic issues.
Multidivisional structure calls for:
● Creating separate divisions, each representing a distinct business.
● Each division would house its functional hierarchy.
● Division managers would be given responsibility for managing day-to-day operations.
● A small corporate office that would determine the long-term strategic direction of the firm
and exercise overall financial control over the semi-autonomous divisions.
Q11. What is an Hourglass structure? How is it beneficial for an organization?

Or
Discuss the concept of Hourglass Structure

(RTP, Nov 2019, NA)
In the recent years information technology and communications have significantly altered the
functioning of organizations. The role played by middle management is diminishing as the tasks
performed by them are increasingly being replaced by the technological tools. Hourglass
organization structure consists of three layers in an organisation structure with constricted middle
layer. The structure has a short and narrow middle management level.
Information technology links the top and bottom levels in the organization taking away many tasks
that are performed by the middle level managers. A shrunken middle layer coordinates diverse lower
level activities.
Hourglass structure has obvious benefit of reduced costs. It also helps in enhancing responsiveness
by simplifying decision making. Decision making authority is shifted close to the source of
information so that it is faster. However, with the reduced size of middle management, the promotion
opportunities for the lower levels diminish significantly.
Q12. Which of the following is not true for SBUs

A. It is relevant for multi-product, multi-business enterprises.

B. It provides for more control at enterprise level with centralised strategic planning.
C. A SBU has its own set of competitors.
D. SBUs can be created for units at distant geographical locations.
(RTP, Nov 2019, NA)
Correct answer: (b) It provides for more control at enterprise level with centralised strategic planning
Q13. What is a strategic business unit? What are its advantages?

A strategic business unit (SBU) is any part of a business organization which is treated separately for
strategic management purposes. The concept of SBU is helpful in creating an SBU organizational
structure. It is discrete element of the business serving product markets with readily identifiable
competitors and for which strategic planning can be concluded. It is created by adding another level
of management in a divisional structure after the divisions have been grouped under a divisional top
management authority based on the common strategic interests.
Advantages of SBU are:
● Establishing coordination between divisions having common strategic interests.
● Facilitates strategic management and control on large and diverse organizations.
● Fixes accountabilities at the level of distinct business units.
● Allows strategic planning to be done at the most relevant level within the total enterprise.
● Makes the task of strategic review by top executives more objective and more effective.
● Helps allocate corporate resources to areas with greatest growth opportunities.
Q14. Delta is an organization specializing in Information Technology enables Services (ITeS) and
Communications business. Previous year the organization had successfully integrated an Artificial
Intelligence (AI) tool named ‘Zeus’ into the existing ERP system. The AI tool using Deep Learning
technique provided a digital leap transformation in various business processes and operations. It has
significantly diminished the role played by specialist managers of the middle management. This
technological tool in addition to saving organisational costs by replacing many tasks of the middle
management, has also served as a link between top and bottom levels in the organization and assists
in faster decision making. The skewed middle level managers now perform cross-functional duties.
Which type of organisational structure is the company transitioning into?
The company Delta is transitioning into the Hourglass organization structure because it has used
technological tools to transform various business processes and operations and has significantly
diminished the role played by specialist managers of the middle management. The technological tool
in addition to savings organisational costs by replacing many tasks of the middle management has
also served as a link between top and bottom levels in the organization and assists in faster decision
making. The skewed middle level managers now perform cross-functional duties. All these factors
indicate towards Hourglass organization structure.

Q15. Moonlight Private Limited deals in multi-products and multi-businesses. It has its own set of
competitors. It seems impractical for the company to provide separate strategic planning treatment
to each one of its product or businesses. As a strategic manager, suggest the type of structure best
suitable for Moonlight Private Limited and state its benefits.
It is advisable for Moonlight Private Limited to follow the strategic business unit (SBU) structure.
Moonlight Private Limited has a multi-product and multi-business structure where, each of these
businesses has its own set of competitors. In the given case, Strategic Business Unit (SBU) structure
would best suit the interests of the company.
SBU is a part of a large business organization that is treated separately for strategic management
purposes. It is separate part of large business serving product markets with readily identifiable
competitors. It is created by adding another level of management in a divisional structure after the
divisions have been grouped under a divisional top management authority based on the common
strategic interests.
Very large organizations, particularly those running into several products, or operating at distant
geographical locations that are extremely diverse in terms of environmental factors, can be better
managed by creating strategic business units, just as is the case for Moonlight Private Limited. SBU
structure becomes imperative in an organization with increase in number, size and diversity.
Benefits of SBUs:
1. Establishing coordination between divisions having common strategic interest.
2. Facilitate strategic management and control.
3. Determine accountability at the level of distinct business units.
4. Allow strategic planning to be done at the most relevant level within the total enterprise.
5. Make the task of strategic review by top executives more objective and more effective.
6. Help to allocate resources to areas with better opportunities.

Thus, an SBU structure with its set of advantages would be most suitable for the company with the
given diverse businesses having separate identifiable competitors, but a common organizational goal.
Q16. Elucidate Matrix Structure

In matrix structure, functional and product forms are combined simultaneously at the same level of
the organization. Employees have two superiors, a product / project manager and a functional
manager. The “home” department - that is, engineering, manufacturing, or marketing - is usually
functional and is reasonably permanent. People from these functional units are often assigned
temporarily to one or more product units or Projects.
The product units / projects are usually temporary and act like divisions in that they are differentiated
on a product-market basis. The matrix structure may be very appropriate when organizations
conclude that neither functional nor divisional forms, even when combined with horizontal linking
mechanisms like strategic business units, are right for the implementation of their strategies. Matrix
structure was developed to combine the stability of the functional structure with flexibility of the
product form. It is very useful when the external environment (especially its technological and market
aspects) is very complex and changeable.
Q17. A corporation organized in network structure is often called

(a) Virtual organization
(b) Hierarchical organization
(c) Structured organization
(d) Simple organization
Correct answer: (a) Virtual organization
Q18. Davis and Lawrence have proposed three distinct phases for development of matrix structure. These
phases are (1) Cross-functional task forces (2) Product/brand management and (3) ______.
(a) Market/external management
(b) Functional matrix
(c) Mature matrix
(d) Internal management
Correct answer: (c) Mature matrix
Q19. Bunch Pvt Ltd is dealing in multiproduct like electronics and FMCG and are having outlets in different
cities and markets across India. Due to scale of operation, it is having technical difficulty in dealing
with distinct product line and markets especially in coordination and control related problems.
Identify and suggest an ideal organizational structure for Bunch Pvt Ltd in resolving the problem?
(RTP, Nov 2021, NA)

To deal with the problems facing by the Bunch Pvt Ltd., we suggest Multi divisional structure for the
organisation. Multidivisional (M-form) structure is composed of operating divisions where each
division represents a separate business to which the top corporate officer delegates responsibility for
day-to-day operations and business unit strategy to division managers. By such delegation, the
corporate office is responsible for formulating and implementing overall corporate strategy and
manages divisions through strategic and financial controls.
Multidivisional or M-form structure was developed in the 1920s, in response to coordination- and
control-related problems in large firms. Functional departments often had difficulty dealing with
distinct product lines and markets, especially in coordinating conflicting priorities among the
products. Costs were not allocated to individual products, so it was not possible to assess an individual
product’s profit contribution. Loss of control meant that optimal allocation of firm resources between
products was difficult (if not impossible). Top managers became over-involved in solving short-run
problems (such as coordination, communications, conflict resolution) and neglected long-term
strategic issues.
Q20. Maadhyam, a hearing aid manufacturer recently introduced an AI based management tool in its
organization which are having the qualities and capabilities of managing teams across functions. This
technological tool in addition to saving organisational costs by replacing many tasks of the middle
management has also served as a link between top and bottom levels in the organisation and assists
in quick decision making. The skewed middle level managers now perform cross -functional duties.
What could be their new organizational structure post implementation of AI based management
tool? How can this structure benefit the organization?
In the recent years information technology and communications have significantly altered the
functioning of organizations. The role played by middle management is diminishing as the tasks
performed by them are increasingly being replaced by the technological tools. Hourglass
organization structure consists of three layers in an organisation structure with constricted middle
layer. The structure has a short and narrow middle management level.
Information technology links the top and bottom levels in the organization taking away many tasks
that are performed by the middle level managers. A shrunken middle layer coordinates diverse lower
level activities.

Hourglass structure has obvious benefit of reduced costs. It also helps in enhancing responsiveness
by simplifying decision making. Decision making authority is shifted close to the source of
information so that it is faster. However, with the reduced size of middle management, the promotion
opportunities for the lower levels diminish significantly.
Q21. ABC Pvt Ltd is dealing in multiproduct like electronics and FMCG and are having outlets in different
cities and markets across India. Due to scale of operation, it is having technical difficulty in dealing
with distinct product line and Markets especially in coordination and control related problems. Which
of following technique which was introduced in 1920 can be used to resolve the problem?
Multi divisional structure is composed of operating divisions where each division represents a
separate business to which the top corporate officer delegates responsibility for day-to-day operations
and business unit strategy to division managers. Multi divisional structure was developed in the 1920,
in response to coordination and control related problems in large firms where functional
departments often had difficulty dealing with distinct product lines and Markets.
Q22. A chennai based fast moving consumer goods (FMCG) major CDE Ltd. recently announced
restructuring its business. The company indicated that the business would be split into mainly four
different streams- FMCG, E-commerce, Retail and Reasearch and development. The company
management has decided that these four units will operate as separate businesses. The top corporate
officer shall delegate responsibilty for day to day operations and business unit strategy to the
concerned managers.
Identify the organization structure that CDE Ltd. has planned to implement. Discuss any four
attributes and the benefits the firm may derive by using this organization structure.

CDE Ltd. has planned to implement Strategic Business Unit (SBU) structure. Very large organisations,
particularly those running into several products, or operating at distant geographical locations that
are extremely diverse in terms of environmental factors, can be better managed by creating strategic
business units. SBU structure becomes imperative in an organisation with increase in number, size
and diversity.
The attributes of an SBU and the benefits a firm may derive by using the SBU Structure are as follows:
● A scientific method of grouping the businesses of a multi – business corporation which helps
the firm in strategic planning.
● An improvement over the territorial grouping of businesses and strategic planning based on
territorial units.
● Strategic planning for SBU is distinct from rest of businesses. Products/ businesses within an
SBU receive same strategic planning treatment and priorities.
● Each SBU will have its own distinct set of competitors and its own distinct strategy.
● The CEO of SBU will be responsible for strategic planning for SBU and its profit performance.
● Products/businesses that are related from the stand point of function are assembled together
as a distinct SBU.
● Unrelated products/ businesses in any group are separated into separate SBUs.
● Grouping the businesses on SBU lines helps in strategic planning by removing the vagueness
and confusion.
● Each SBU is a separate business and will be distinct from one another on the basis of mission,
objectives etc.
Q23. Maadhyam, a hearing aid manufacturer recently introduced an AI based management tool that has
the capabilities of managing teams across functions. What could be their new organisational
structure post this implementation?
(a) Divisional Structure
(b) Matrix Structure
(c) Hourglass Structure
(d) Network Structure
(RTP, May 2022, NA)
Correct answer: (c) Hourglass Structure
Q24. How the 'Strategic Business Unit (SBU), structure becomes imperative in an organization with
increase in number, size and diversity of divisions?
(RTP, May 2022, NA)
SBU is a part of a large business organization that is treated separately for strategic management
purposes. The concept of SBU is helpful in creating an SBU organizational structure. It is separate part
of large business serving product markets with readily identifiable competitors. It is created by
adding another level of management in a divisional structure after the divisions have been grouped
under a divisional top management authority based on the common strategic interests.
Very large organisations, particularly those running into several products, or operating at distant
geographical locations that are extremely diverse in terms of environmental factors, can be better
managed by creating strategic business units. SBU structure becomes imperative in an organisation
with increase in number, size and diversity. SBUs helps such organisations by:

● Establishing coordination between divisions having common strategic interest.

● Facilitate strategic management and control.
● Determine accountability at the level of distinct business units.
● Allow strategic planning to be done at the most relevant level within the total enterprise.
● Make the task of strategic review by top executives more objective and more effective.
● Help to allocate resources to areas with better opportunities
Q25. "A network structure is suited to unstable environment." Elucidate this statement
(RTP, May 2022, NA)
Network structure is a newer and somewhat more radical organizational design. The network
structure could be termed a "non-structure" as it virtually eliminates in-house business functions and
outsource many of them. An organization organized in this manner is often called a virtual
organization because it is composed of a series of project groups or collaborations linked by
constantly changing non-hierarchical, cobweb-like networks.
The network structure becomes most useful when the environment of a firm is unstable and is
expected to remain so. Under such conditions, there is usually a strong need for innovation and quick
response. Instead of having salaried employees, it may contract with people for a specific project or
length of time. Long-term contracts with suppliers and distributors replace services that the
company could provide for itself through vertical integration. The network structure provides
organization with increased flexibility and adaptability to cope with rapid technological change and
shifting pattern of international trade and competition.
Q26. J&P, a western wear brand has contracted Pee Kaw marketing firm from Singapore, product design
team working as an outsource company from Mexico and Humans branding company taking care of
its people’s operations. What kind of structure is this?
(a) Hourglass Structure
(b) Outsourcing
(c) Network Structure
(d) Tree Branch Structure
Correct answer: (c) Network Structure
Q27. What do you understand by functional structure?

Functional structure is widely used because of its simplicity and low cost. A functional structure
groups tasks and activities by business function.
The functional structure consists of a chief executive officer or a managing director and limited
corporate staff with functional line managers in dominant functions such as production, accounting,
marketing, R&D, engineering, and human resources. Disadvantages of a functional structure are that
it forces accountability to the top, minimizes career development opportunities, etc.

Network Structures eliminate many in-house functions.

(RTP, May 2018, NA)

The network structure can be termed a “non-structure” by its virtual elimination of in-house business
functions. Many activities are outsourced. A corporation organized in this manner is often called a
virtual organization because it is composed of a series of project groups or collaborations linked by
constantly changing non-hierarchical, cobweb-like networks.
Q29. Draw 'Divisional Structure' with the help of a diagram. Also, give advantages and disadvantages of this
structure in brief.
Divisional structure is that organizational structure which is based on extensive delegation of

authority and built on division basis. The divisional structure can be organized in one of the four ways:
by geographic area, by product or service, by customer, or by process. With a divisional structure,
functional activities are performed both centrally and in each division separately.
Advantages of divisional structure
● Accountability is clear: Divisional managers can be held responsible for sales and profit
levels. Because a divisional structure is based on extensive delegation of authority, managers
and employees can easily see the results of their good or bad performances and thus their
morale is high.
● Other advantages: It creates career development opportunities for managers, allows local
control of local situations, leads to a competitive climate within an organization, and allows
new businesses and products to be added easily.
Disadvantages of divisional structure
● Higher cost: Owing to following reasons: (i). requires qualified functional specialist at different
divisions and needed centrally (at headquarters); (ii). It requires an elaborate, headquarters
–driven control system.

● Conflicts between divisional managers: Certain regions, products, or customers may

sometimes receive special treatment, and it may be difficult to maintain consistent,
company-wide practices.
7.2 Strategic Leadership

Transformational and transactional leadership
(RTP, May 2018, NA) (SA, Nov 2019, 5 Marks) (MTP 1, Nov 2021, 5 Marks)
Transformational leadership style use charisma and enthusiasm to inspire people to exert them for
the good of the organization. Transformational leadership style may be appropriate in turbulent
environments, in industries at the very start or end of their life-cycles, in poorly performing
organizations when there is a need to inspire a company to embrace major changes.
Transformational leaders offer excitement, vision, intellectual stimulation and personal satisfaction.
Such a leadership motivates followers to do more than originally affected to do by stretching their
abilities and increasing their self-confidence, and also promote innovation throughout the
Organization.
On the other hand, transactional leadership style focus more on designing systems and controlling
the organization’s activities and are more likely to be associated with improving the current situation.
Transactional leaders try to build on the existing culture and enhance current practices. Transactional
leadership style uses the authority of its office to exchange rewards, such as pay and status. They
prefer a more formalized approach to motivation, setting clear goals with explicit rewards or penalties
for achievement or non-achievement. Transactional leadership style is more suitable in settled
environment, in growing or mature industries, and in organizations that are performing well.
Q2. Suresh Sinha has been recently appointed as the head of a strategic business unit of a large
multiproduct company. Advise Mr Sinha about the leadership role to be played by him in execution of
strategy.
Leading change has to start with diagnosing the situation and then deciding which of several ways to
handle it. Managers have five leadership roles to play in pushing for good strategy execution:
(i) Staying on top of what is happening, closely monitoring progress, solving out issues, and learning
what obstacles lie in the path of good execution.
(ii) Promoting a culture of esprit de corps that mobilizes and energizes organizational members to
execute strategy in a competent fashion and perform at a high level.
(iii) Keeping the organization responsive to changing conditions, alert for new opportunities,
bubbling with innovative ideas, and ahead of rivals in developing competitively valuable
competencies and capabilities.
(iv) Exercising ethical leadership and insisting that the company conduct its affairs like a model
corporate citizen.

(v) Pushing corrective actions to improve strategy execution and overall strategic performance.
Q3. Ritchwick, located in Mumbai, Maharashtra, is owner of a popular brand of ready to eat snack ‘Trendy’.
Yash, his son after completing Chartered Accountancy started assisting his father in running of
business. The approaches followed by father and son in management were very different. While
Ritchwick preferred to use authority and having a formal system of defining goals and motivation
with explicit rewards and punishments, Yash believed in involving employees and generating
enthusiasm to inspire people to deliver in the organization. Discuss the leadership style of Ritchwick
and Yash.
Ritchwick is a follower of transactional leadership style that focuses on designing systems and
controlling the organization’s activities. Such a leader believes in using authority of its office to
exchange rewards, such as pay and status. They prefer a more formalized approach to motivation,
setting clear goals with explicit rewards or penalties for achievement or non-achievement.
Transactional leaders try to build on the existing culture and enhance current practices. The style is
better suited in persuading people to work efficiently and run operations smoothly.
On the other hand, Yash is follower of transformational leadership style. The style uses charisma and
enthusiasm to inspire people to exert them for the good of the organization. Transformational leaders
offer excitement, vision, intellectual stimulation and personal satisfaction. They inspire involvement in
a mission, giving followers a ‘dream’ or ‘vision’ of a higher calling so as to elicit more dramatic changes
in organizational performance. Such a leadership motivates followers to do more than originally
affected to do by stretching their abilities and increasing their self- confidence, and also promote
innovation throughout the organization.
Q4. Ram and Shyam are two brothers engaged in the business of spices. Both have different approaches
to management. Ram prefers the conventional and formal approach in which authority is used for
explicit rewards and punishment. While, on the other hand, Shyam believes in democratic
participative management approach, involving employees to give their best.
Analyse the leadership style followed by Ram and Shyam.
Ram is a follower of transactional leadership style that focuses on designing systems and controlling
the organization’s activities. Such a leader believes in using authority of its office to exchange rewards,
such as pay and status. They prefer a more formalized approach to motivation, setting clear goals
with explicit rewards or penalties for achievement or non-achievement. Transactional leaders try to
build on the existing culture and enhance current practices. The style is better suited in persuading
people to work efficiently and run operations smoothly.
On the other hand, Shyam is a follower of transformational leadership style. The style uses charisma
and enthusiasm to inspire people to exert them for the good of the organization. Transformational
leaders offer excitement, vision, intellectual stimulation and personal satisfaction. They inspire
involvement in a mission, giving followers a ‘dream’ or ‘vision’ of a higher calling so as to elicit more
dramatic changes in organizational performance. Such a leadership motivates followers to do more
than originally affected to do by stretching their abilities and increasing their self-confidence, and also
promote innovation throughout the organization.

Q5. KaAthens Ltd., a diversified business entity having business operations across the globe. The company
leadership has just changed as Mr. D. Bandopadhyay handed over the The company leadership has
just changed as Mr. D. Bandopadhyay handed over the pedals to his son Aditya Bandopadhyay, due
to his poor health. Aditya is a highly educated with an engineering degree from IIT, Delhi. However,
being very young he is not clear about his role and responsibilities,
In your view, what are the responsibilities of Aditya Bandopadhyay as CEO of the company.
(RTP, Nov 2018, NA) (RTP, May 2020, NA) (Study Material)
Aditya Bandopadhyay, an effective strategic leader of KaAthens Ltd. must be able to deal with the
diverse and cognitively complex competitive situations that are characteristic of today’s competitive
landscape.
A Strategic leader has several responsibilities, including the following:

● Making strategic decisions.
● Formulating policies and action plans to implement strategic decision.
● Ensuring effective communication in the organisation.
● Managing human capital (perhaps the most critical of the strategic leader’s skills).
● Managing change in the organisation.
● Creating and sustaining strong corporate culture.
● Sustaining high performance over time.
Q6. Mathew & Sons Ltd. is a diversified business entity having business operations across the globe.
Presently, Mr. Mathew is the CEO of Mathew & Sons Ltd. He is going to retire in next 4 months, so he
has decided to change the company’s leadership and hand over the pedals to his elder son Marshal.
Marshal is a highly educated with an engineering degree from USA. However, being very young he is
not clear about his role and responsibilities.
In your view, what are the responsibilities of Marshal as CEO of Mathew & Sons Ltd.
Marshal, to be an effective strategic leader of Mathew & Sons Ltd. must be able to deal with the
diverse and cognitively complex competitive situations that are characteristic of today’s competitive
landscape. He has several responsibilities, including the following:
● Making strategic decisions.
● Formulating policies and action plans to implement strategic decision.
● Ensuring effective communication in the organisation.
● Managing human capital (perhaps the most critical of the strategic leader’s skills).
● Managing change in the organisation.
● Creating and sustaining strong corporate culture.
● Sustaining high performance over time.
Q7. Which of the following situation will most likely suit a transformational leader?
(a) An organization that is in trouble.
(b) A growing organization.
(c) An organization in a stable environment.
(d) An organization at maturity stage of product life cycle.
(RTP, May 2019, NA)

Correct answer: (a) An organization that is in trouble
Q8. Ramesh, is owner of a popular brand of Breads. Yashpal, his son after completing Chartered
Accountancy started assisting his father in running of business. The approaches Chartered
Accountancy started assisting his father in running of business. The approaches followed by father
and son in management were very different. While Ramesh preferred to use authority and having a
formal system of defining goals and motivation with explicit rewards and punishments, Yashpal
believed in involving employees and generating enthusiasm to inspire people to deliver in the
organization.
Discuss the difference in leadership style of father and son.
Ramesh is a follower of transactional leadership style that focuses on designing systems and
On the other hand, Yashpal is follower of transformational leadership style. The style uses charisma
and enthusiasm to inspire people to exert them for the good of the organization. Transformational
leaders offer excitement, vision, intellectual stimulation and personal satisfaction. They inspire
involvement in a mission, giving followers a ‘dream’ or ‘vision’ of a higher calling so as to elicit more
dramatic changes in organizational performance. Such a leadership motivates followers to do more
than originally affected to do by stretching their abilities and increasing their self-confidence, and also
promote innovation throughout the organization.
Q9. Who is a transformational leader?

a. Someone who is involved in organizational change.
b. A leader, who provides new ways of carrying out management.
c. A leader who inspires the workers to new levels by offering them a vision of a better future.
d. A leader who tries to transform their staff by giving them rewards for what they do.
Correct answer: (c) A leader who inspires the workers to new levels by offering them a vision of a
better future
Q10. Discuss the leadership roles played by the managers in pushing for good strategy execution.
A manager as a strategic leader has many different leadership roles to play: visionary, chief
entrepreneur and strategist, chief administrator, culture builder, resource acquirer and allocator,
capabilities builder, process integrator, crisis solver, spokesperson, negotiator, motivator, arbitrator,
policy maker an so on. Managers have five leadership roles to play in pushing for good strategy
execution:
1. Staying on top of what is happening, closely monitoring progress, working through issues and
obstacles.

2. Promoting a culture that mobilizes and energizes organizational members to execute strategy and
perform at a high level.
3. Keeping the organization responsive to changing conditions, alert for new opportunities and
remain ahead of rivals in developing competitively valuable competencies and capabilities.
4. Ethical leadership and insisting that the organization conduct its affairs like a model corporate
citizen.
5. Pushing corrective actions to improve strategy execution and overall strategic performance.
Q11. ______________ leadership style may be appropriate in turbulent environment.

(a) Transactional
(b) Transformational
(c) Autocratic
(d) None of these
Correct answer: (b) Transformational
Q12. In strategic management, there are two main styles of leadership. These are transformational and:
(a) Transparent
(b) Transitional
(c) Translational
(d) Transactional
(RTP, May 2020, NA)
Correct answer: (d) Transactional
Q13. How can you differentiate between transformational and transactional leaders?
Difference between transformational and transactional leadership:

1. Transformational leadership style uses charisma and enthusiasm to inspire people to exert them for
the good of organization. Transactional leadership style uses the authority of its office to exchange
rewards such as pay, status symbols etc.
2. Transformational leadership style may be appropriate in turbulent environment, in industries at the
very start or end of their cycles, poorly performing organisations, when there is a need to inspire a
company to embrace major changes. Transactional leadership style can be appropriate in static
environment, in growing or mature industries and in organisations that are performing well.
3. Transformational leaders inspire employees by offering excitement, vision, intellectual stimulation
and personal satisfaction. Transactional leaders prefer a more formalized approach to motivation,
setting clear goals with explicit rewards or penalties for achievement and non-achievement.
Transactional leaders focus mainly to build on existing culture and enhance current practices.
Q14. Suraj Prakash and Chander Prakash are two brothers engaged in the business of spices. Both have
different approaches to management. Suraj Prakash prefers the conventional and formal approach in
which authority is used for explicit rewards and punishment. While, on the other hand, Chander

Prakash believes in democratic participative management approach, involving employees to give

their best.
Analyse the leadership style followed by Suraj Prakash and Chander Prakash.
(RTP, May 2021, NA)
Suraj Prakesh is a follower of transactional leadership style that focuses on designing systems and
On the other hand, Chander Prakash is a follower of transformational leadership style. The style uses
charisma and enthusiasm to inspire people to exert them for the good of the organization.
Transformational leaders offer excitement, vision, intellec tual stimulation and personal satisfaction.
They inspire involvement in a mission, giving followers a ‘dream’ or ‘vision’ of a higher calling so as to
elicit more dramatic changes in organizational performance. Such a leadership motivates followers to
do more than originally affected to do by stretching their abilities and increasing their
self-confidence, and also promote innovation throughout the organization.
Q15. Greg was heading the Global Biscuits SBU for Jonky’s Ltd. and he got an email congratulating him for
being promoted as the head of entire business of Jonky’s in India. Which of the following statements
is true about Greg’s position?
(a) Greg was a business level manager but now he is a corporate level manager
(b) Greg was a functional level manager but now he is a corporate level manager
(c) Greg was a business level manager and now also he is a business level manager
(d) Greg was a corporate level manager and now also he is a corporate level manager
Correct answer: (a) Greg was a business level manager but now he is a corporate level manager
Q16. What do you mean by strategic leadership? What are two approaches to leadership style?
(Study Material)
Strategic leadership is the ability of influencing others to voluntarily make decisions that enhance
prospects for the organization’s long-term success while maintaining short-term financial stability. It
includes determining the firm’s strategic direction, aligning the firm’s strategy with its culture,
modelling and communicating high ethical standards, and initiating changes in the firm’s strategy,
when necessary. Strategic leadership sets the firm’s direction by developing and communicating a
vision of future and inspire organization members to move in that direction. Unlike strategic
leadership, managerial leadership is generally concerned with the short-term, day-to-day activities.
Two basic approaches to leadership can be transformational leadership style and transactional
leadership style.
Transformational leadership style use charisma and enthusiasm to inspire people to exert them for
the good of the organization. Transformational leadership style may be appropriate in turbulent
environments, in industries at the very start or end of their life-cycles, in poorly performing

organizations when there is a need to inspire a company to embrace major changes.

Transformational leaders offer excitement, vision, intellectual stimulation and personal satisfaction.
They inspire involvement in a mission, giving followers a ‘‘dream’ or ‘vision’ of a higher calling so as to
elicit more dramatic changes in organizational performance. Such a leadership motivates followers to
do more than originally affected to do by stretching their abilities and increasing their
self-confidence, and also promote innovation throughout the organization.
Transactional leadership style focuses more on designing systems and controlling the organization’s
activities and are more likely to be associated with improving the current situation. Transactional
leaders try to build on the existing culture and enhance current practices. Transactional leadership
style uses the authority of its office to exchange rewards, such as pay and status. They prefer a more
formalized approach to motivation, setting clear goals with explicit rewards or penalties for
achievement or non-achievement.
Transactional leadership style may be appropriate in static environment, in growing or mature
industries, and in organizations that are performing well. The style is better suited in persuading
people to work efficiently and run operations smoothly.
7.3 Strategy Supportive Culture
Q1. Write short note on Importance of corporate culture.

(RTP, Nov 2018, NA)
A culture where creativity, embracing change, and challenging the status quo are pervasive is very
conducive to successful execution of a product innovation and technological leadership strategy. A
culture built around such business principles as listening to customers, encouraging employees to
take pride in their work, and giving employees a high degree of decision-making responsibility is very
conducive to successful execution of a strategy of delivering superior customer service.
A strong strategy-supportive culture nurtures and motivates people to do their jobs in ways
conducive to effective strategy execution; it provides structure, standards, and a value system in
which to operate; and it promotes strong employee identification with the company’s vision,
performance targets, and strategy. All this makes employees feel genuinely better about their jobs
and work environment and the merits of what the company is trying to accomplish. Employees are
stimulated to take on the challenge of realizing the company’s vision, do their jobs competently and
with enthusiasm, and collaborate with others as needed to bring the strategy to success.
Q2. Describe corporate culture. Elaborate the statement "Culture is a strength that can also be a
weakness".
Or
How can a corporate culture be both strength and weakness of an organisation?


Or
What is corporate culture? How is it both strength and weakness of an organisation?

(Study Material)
Corporate culture refers to a company’s values, beliefs, business principles, traditions, way of operating
and internal work environment. Every corporation has a culture that exerts powerful influences on the
behaviour of managers.
Culture as a strength – Culture can facilitate communication, decision making and control and
create cooperation and commitment. An organisation’s culture could be strong and cohesive when it
conducts its business according to clear and explicit set of principles and values. The management
devotes considerable time in communicating values & principles to employees and sharing them
widely across the organisation.
Culture as a weakness – can obstruct the smooth implementation of strategy by creating resistance
to change. An organisation’s culture can be characterised as weak when many sub cultures exist, few
values and behavioural norms are shared and traditions are rare. In such organisations, employees do
not have a sense of commitment, loyalty and a sense of identity.
Q3. Jupiter Electronics Ltd. is known for its ability to come out with path-breaking products. Though the
work environment at Jupiters is relaxed and casual, yet, there is a very strong commitment to
deadlines. The employees believe in ""work hard play hard"" ethic. The organisation has moved away
from formal and hierarchical set up to a more results-driven approach. Employees are committed to
strategies and work towards achieving them. They guard innovations, maintain confidentiality and
secrecy in their working. They are closely related to values, practices, and norms of organisations.
What aspects of an organization that are being discussed? Explain.
The scenario being referred to is culture in Jupiter Electronics. Strong culture promotes good strategy
execution when there’s fit and impels execution when there’s negligible fit. A culture grounded in
values, practices, and behavioral norms that match what is needed for good strategy execution helps
energize people throughout the organization to do their jobs in a strategy-supportive manner. A
culture built around such business principles as listening to customers, encouraging employees to
take pride in their work, and giving employees a high degree of decision-making responsibility. This is
very conducive to successful execution of a strategy of delivering superior customer service.
A strong strategy-supportive culture makes employees feel genuinely better about their jobs and
work environment and the merits of what the company is trying to accomplish. Employees are
stimulated to take on the challenge of realizing the organizational vision, do their jobs competently
and with enthusiasm, and collaborate with others.
Q4. How can management communicate that it is committed to creating a new culture assuming that
the old culture was problematic and not aligned with the company strategy?
Corporate culture refers to company’s values, beliefs, business principles, traditions, ways of operating
and internal work environment. Changing problem cultures is very difficult because of deeply held

values and habits. It takes concerted management action over a period of time to replace an
unhealthy culture with a healthy culture or to root out certain unwanted cultural obstacles and instil
ones that are more strategy -supportive.
● The first step is to diagnose which facets of the present culture are strategy supportive and
which are not.
● Then, managers have to talk openly and forthrightly to all concerned about those aspects of
the culture that have to be changed.
● The talk has to be followed swiftly by visible, aggressive actions to modify the culture-actions
that everyone will understand are intended to establish a new culture more in tune with the
strategy.
Management through communication has to create a shared vision to manage changes. The menu
of culture-changing actions includes revising policies and procedures, altering incentive
compensation, shifting budgetary allocations for substantial resources to new strategy projects,
recruiting and hiring new managers and employees, replacing key executives, communication on
need and benefit to employees and so on.

Corporate culture is always identical in all the business organizations.

Every company has its own organisational culture. Each has its own business philosophy and
principles, its own ways of approaching to the problems and making decisions, its own work climate,
work ethics, etc. Therefore, corporate culture is not identical in all organisations. Organisations over a
period of time inherit and percolate down its own specific work ethos and approaches.
7.4 Entrepreneurship and Intrapreneurship
Q1. Define Entrepreneur. What are the characteristics of an entrepreneur?

(RTP, May 2018, NA)
Or
Write short note on Entrepreneur

Or
"Entrepreneur is an individual who conceives the idea of starting a new venture." In light of this
statement discuss who is an entrepreneur.

Entrepreneurship is an attitude of mind to seek opportunities, take calculated risk and drive benefits
by starting and running a venture. It comprises of numerous activities involved in conception,
creation and running an enterprise. An entrepreneur is an individual who conceives the idea of
starting a new venture, takes all types of risks, not only to put the product or service into reality but
also to make it an extremely demanding one. An entrepreneur is one who:
● Initiates and innovates a new concept.
● Recognises and utilises opportunity.
● Arranges and coordinates resources such as man, material, machine and capital.
● Faces risks and uncertainties.
● Establishes a startup company.
● Adds value to the product or service.
● Takes decisions to make the product or service a profitable one.
● Is responsible for the profits or losses of the company.
Q2. Always Fit is a company that operates in pharmacy store chain s. Its stores are specialized in providing
prescribed medicines, health and wellness products etc . in the country . The store chain is having
surplus space which can be utilized for other purposes. Azad, a senior executive of the research and
development wing in the company conceives an idea to manufacture and sell the cosmetic products
for utilizing the surplus space available i n the pharmacy stores.
Identify and explain the role of Azad in company.
Azad plays role as an intrapreneur who operates within the boundaries of an organisation. He is an
employee of Always Fit, who is vested with authority of initiating creativity and innovation in the
company’s products, services and projects, redesigning the processes, workflows and systems.
Azad believes in change and do not fear failure. He discovers a new idea which can benefit the whole
organization by utilizing the surplus space in the stores. The job of Azad is extremely challenging. He
gets recognition and reward for the success achieved.
Q3. Distinguish between Entrepreneurs and Intrapreneurs.

The terms Entrepreneur and the Intrapreneur might seem the same words to hear, but both the
terms have much differences including their spelling and characteristics. The differences between
these two terms have been shortly gleaned below:-
Entrepreneur Intrapreneur
Dependency An entrepreneur is independent in An intraprenuer is dependent on the

his operations. entrepreneur, i.e. the owner.
Raising of Funds An entrepreneur himself raises Funds are not raised by the
funds required for the enterprise. Intrapreneur.
Risk Entrepreneur bears the risk An intraprenuer does not fully bear
involved in the business. the risk involved in the enterprise.
Operation An entrepreneur operates from On the contrary, an intraprenuer

outside. operates from within the
organization itself.

Orientation An entrepreneur begins his An intrapreneur sets up his

business with a newly set up enterprise after working someone
enterprise. else’s organization.
Experience As an entrepreneur establishes An intrapreneur establishes his

new business, so he does not business after gathering experiences
possess any experience over through working in the other
the business. organizations.
According to the above table, anyone can differentiate between the entrepreneur and intrapreneur as
both the terms are heterogeneous.
Q4. A person who searched for business opportunity and starts a new enterprise to make use of that
opportunity is called
(a) Employee
(b) Entrepreneur
(c) Intrapreneur
(d) Investor
Correct answer: (b) Entrepreneur
Q5. An entrepreneur is one who:

(a) Initiates and innovates a new concept.
(b) Does not recognize and utilizes opportunities.
(c) Does not want to face risks and uncertainties.
(d) None of these.
(RTP, May 2020, NA)
Correct answer: (a) Initiates and innovates a new concept

Chapter 8
Question Bank
8.1 Strategy Formulation and Implementation
Q1. What can be defined as the art and science of formulating, implementing and evaluating
cross-functional decisions that enable an organization to achieve its objectives?
(a) Strategy formulation
(b) Strategy evaluation
(c) Strategy implementation
(d) Strategic management
(Sample MCQs)
Correct answer: (d) Strategic management
Q2. An important activity in __________ is taking corrective action.

(a) Strategy evaluation
(b) Strategy implementation
(c) Strategy formulation
(d) Strategy leadership
Correct answer: (a) Strategy evaluation
Q3. Write a short note on Implementation Control.

Implementation Control: Managers implement strategy by converting major plans into concrete,
sequential actions that form incremental steps. Implementation control is directed towards assessing
the need for changes in the overall strategy in light of unfolding events and results associated with
incremental steps and actions.
Strategic implementation control is not a replacement to operational control. Strategic
implementation control, unlike operational controls continuously monitors the basic direction of the
strategy. The two basic forms of implementation control are:
(i) Monitoring strategic thrusts: Monitoring strategic thrusts help managers to determine whether
the overall strategy is progressing as desired or whether there is need for readjustments.
(ii) Milestone Reviews. All key activities necessary to implement strategy are segregated in terms of
time, events or major resource allocation. It normally involves a complete reassessment of the
strategy. It also assesses the need to continue or refocus the direction of an organization.
Q4. HQ is a service company. Two years back the company hired a reputed management consultant to
formulate its strategy. The consultant recommended an aggressive expansion plan. Now in an

internal review meeting the company finds that many of the suggestions are not even fully
considered.
Which part of strategic management process is missing in HQ?
Strategy implementation is missing in HQ. Implementation is the managerial exercise of putting a

chosen strategy into action. It deals with the managerial exercise of supervising the ongoing pursuit
of strategy, making it work, improving the competence with which it is executed and showing
measurable progress in achieving the targeted results.
Strategic implementation is concerned with translating a strategic decision into action, which
presupposes that the decision itself (i.e., the strategic choice) was made with some thought being
given to feasibility and acceptability. The allocation of resources to new courses of action will need to
be undertaken, and there may be a need for adapting the organization’s structure to handle new
activities as well as training personnel and devising appropriate systems.
It is crucial to realize the difference between the formulation and implementation because they both
require very different skills. Also, a company will be successful only when the strategy formulation is
sound and implementation is excellent.
Q5. Distinguish between Strategy Formulation and Strategy Implementation.

(SA, May 2019, 3 Marks) (MTP 1, May 2021, 5 Marks) (MTP 1, Nov 2021, 5 Marks)
Or
Is strategy formulation an intellectual process? How is it different from strategy implementation?

(Study Material)
Yes, strategy formulation is primarily an intellectual process. It is based on strategic decision-making

which requires analysis and thinking. Although inextricably linked, strategy implementation is
fundamentally different from strategy formulation in the following ways:
Strategy Formulation Strategy Implementation
Strategy formulation focuses on effectiveness. Strategy implementation focuses on efficiency.
Strategy formulation is primarily an intellectual Strategy implementation is primarily an

process. operational process.
Strategy formulation requires conceptual Strategy implementation requires motivation

intuitive and analytical skills. and leadership skills.
Strategy formulation requires coordination Strategy implementation requires coordination

among the executives at the top level. among the executives at the middle and lower
levels.
Q6. After an earnest attempt to bring in a strategic change in your organization, you the operational head
of XYZ ltd, succeeded but still your organization couldn’t achieve the desired competitive position in
the market. Out of the following what could be the reason?
(a) Strategy Formulation
(b) Strategy Model

(c) Strategy Implementation

(d) Strategy Decision
(RTP, May 2020, NA)
Correct answer: (c) Strategy Implementation
Q7. When there is impact of strategy implementation on strategy formulation it can be referred as?
(a) Backward Linkages
(b) Forward Linkages
(c) Vertical Linkages
(d) Horizontal Linkages
Correct answer: (a) Backward Linkages
8.2 Strategic Change
Q1. Define Refreezing in Kurt Lewin’s change process.

(RTP, May 2018, NA)
Kurt Lewin proposed three phases of the change process – Unfreezing, changing and then refreezing.
Refreezing occurs when the new behaviour becomes a normal way of life. The new behaviour must
replace the former behaviour completely for successful and permanent change to take place. It may
be achieved through continuous reinforcement.
Q2. Define strategic change. Explain the various stages/phases of change process as propounded by Kurt
Lewin.
Or
What is strategic change. Explain the change process proposed by Kurt Lewin that can be useful in
implementing strategies.
(Study Material)
The changes in the environmental forces often require businesses to make modifications in their
existing strategies and bring out new strategies. Strategic change is a complex process and it involves
a corporate strategy focused on new markets, products, services and new ways of doing business.
To make the change lasting, Kurt Lewin proposed three phases of the change process for moving the
organization from the present to the future. These stages are unfreezing, changing and refreezing.
(i) Unfreezing the situation: The process of unfreezing simply makes the individuals or organizations
aware of the necessity for change and prepares them for such a change. Lewin proposes that the
changes should not come as a surprise to the members of the organization. Sudden and
unannounced change would be socially destructive and morale lowering. The management must
pave the way for the change by first “unfreezing the situation”, so that members would be willing and
ready to accept the change.

(ii) Changing to New situation: Once the unfreezing process has been completed and the members
of the organization recognise the need for change and have been fully prepared to accept such
change, their behaviour patterns need to be redefined. H.C. Kellman has proposed three methods for
reassigning new patterns of behaviour. These are compliance, identification and internalisation.
(iii) Refreezing: Refreezing occurs when the new behaviour becomes a normal way of life. The new
behaviour must replace the former behaviour completely for successful and permanent change to
take place. In order for the new behaviour to become permanent, it must be continuously reinforced
so that this new acquired behaviour does not diminish or extinguish.
Q3. Write a short note on strategic change and explain the process of strategic change.
existing strategies and bring out new strategies. Strategic change is a complex process that involves a
corporate strategy focused on new markets, products, services and new ways of doing business.
Three steps for initiating strategic change are:
(i) Recognise the need for change – The first step is to diagnose the which facets of the present
corporate culture are strategy supportive and which are not.
(ii) Create a shared vision to manage change – Objectives of both individuals and organisation
should coincide. There should be no conflict between them. This is possible only if the management
and the organisation members follow a shared vision.
(iii) Institutionalise the change – This is an action stage which requires the implementation of the
changed strategy. Creating and sustaining a different attitude towards change is essential to ensure
that the firm does not slip back into old ways of doing things.
Kurt Lewin proposed three phases of the change process for moving the organization from the
present to the future.
(i) Unfreezing the situation – The process of unfreezing makes the individuals or organisations aware
of the necessity for change and prepares them for it. The change should not come as a surprise to the
members of the organisation. Sudden and unannounced change would be socially destructive and
morale lowering,
(ii) Changing to new situation – once unfreezing is complete and members of the organisation
recognize the need for change, then their behaviour patterns need to be redefined as:
i. Compliance– enforcing reward and punishment strategy for good or bad behaviour
ii. Identification–members are psychologically impressed to identify themselves with some given role
models whose behaviour they would like to adopt.
iii. Internalisation - involves some internal changing of the individual’s thought process. They are
given the freedom to learn and adopt new behaviour.
(iii) Refreezing – occurs when the new behaviour becomes a normal way of life. The new behaviour
must replace the former behaviour completely for successful and permanent change. This can be
achieved by continuously reinforcing the newly acquired behaviour.
Change process is not a one-time application but a continuous process due to dynamism and
ever-changing environment.
Q4. Which of the following is not a phase in Kurt Lewin’s Model of Change?
(a) Changing.
(b) Deep freezing.
(c) Refreezing.
(d) Unfreezing.
(RTP, May 2019, NA) (MTP 2, May 2019, 1 Mark)

Correct answer: (b) Deep freezing.
Q5. You being the core strategist of your company, entrusted with bringing about strategic change in
your company, how will you initiate “unfreezing of the situation”?
(a) Promoting new ideas throughout the organization
(b) Promoting compliance throughout the organization
(c) Promoting change in process throughout the organization
(d) None of the above
(RTP, May 2020, NA)
Correct answer: (a) Promoting new ideas throughout the organization
Q6. Dr. Raman has been running a nursing home for about twenty two years now, and has gained
enormous name for his benevolence in Balram district of Chhattisgarh. Recently, his daughter, Dr.
Radhika completed her medicine degree from the United States of America and returned to her
hometown to be a part of her father’s practice. She has been given the baton to promote modern
medicine and retain the local skilled youth in their practice. However, their nursing home’s skilled
youth has been more inclined to E-Commerce employment opportunities. Dr. Radhika has taken it as
a challenge to imbibe the very essence of service in them, by being employed as nurses and
caretakers of the ill. This shall be very crucial in growing the practice as desired. Which of the
following phases of Kurt Lewin’s Model of Change will be most challenging for Dr. Radhika to
strategically positioning her father’s nursing home?
Kurt Lewin’s Model of Change proposes three phases of change process to make the change lasting.
They are Compliance, Identification and Internalization.
For Dr. Radhika, Compliance and Identification will not a big challenge, as her father has been one of
the most sort after personalities serving the ill in their district. And her return from the USA to serve
her country, especially her district, will help the workforce identify her as a role model and there
would actually be no need for compliance, i.e. Reward and Punishment for bringing about a change.
However, the new lucrative E-Commerce employment opportunities will have to be fought through
Internalization, i.e. internal changing of the individual’s thought process, to give them freedom to
learn and succeed. Thus, Internalization will be the most challenging phase.
Q7. Discuss three methods for reassigning new patterns of behavior as proposed by H.C. Kellman.
H.C. Kellman has proposed three methods for reassigning new patterns of behaviour. These are
compliance, identification and internalisation.
Compliance: It is achieved by strictly enforcing the reward and punishment strategy for good or bad
behaviour. Fear of punishment, actual punishment or actual reward seems to change behaviour for
the better.
Identification: Identification occurs when members are psychologically impressed upon to identify
themselves with some given role models whose behaviour they would like to adopt and try to
become like them.
Internalization: Internalization involves some internal changing of the individual’s thought processes
in order to adjust to a new environment. They have given freedom to learn and adopt new behaviour
in order to succeed in the new set of circumstances.

Q8. Connect Group was one of the leading makers of the mobile handsets till a few years ago and which
went at the bottom of the heap. Connect Group didn't adapt to the current market trends which
eventually lead to its downfall. Which would have helped Connect Group to change, adapt and
survive? Explain the steps to initiate the change.
(RTP, Nov 2021, NA)
Connect Group has to do strategic change for its survival. The changes in the environmental forces
often require businesses to make modifications in their existing strategies and bring out new
strategies. Strategic change is a complex process that involves a corporate strategy focused on new
markets, products, services and new ways of doing business. Unless companies embrace change,
they are likely to be freeze and unless companies prepare to deal with sudden, unpredictable,
discontinuous, and radical change, they are likely to be extinct.
Q9. Glassware Ltd. is about to go through a significant restructuring. The strategic change involves
moving from a decentralized to a centralized structure. This will help Glassware avoid duplication of
support activities and lower its costs.
The management have held the first staff briefing in which they went to great lengths to explain that
the change was necessary to equip the company to face future competitive challenges. Identify and
explain the current stage of Glassware Ltd. from the Lewin's three-stage model of change?
(RTP, May 2022, NA)
Glassware Ltd. is currently in the ‘unfreezing’ stage, where management is attempting to explain the
need for change in an attempt to maximize buy-in by employees and reduce the amount of
resistance.
Unfreezing the situation: The process of unfreezing simply makes the individuals aware of the
necessity for change and prepares them for such a change. Lewin proposes that the changes should
not come as a surprise to the members of the organization. Sudden and unannounced change would
be socially destructive and morale lowering. The management must pave the way for the change by
first “unfreezing the situation”, so that members would be willing and ready to accept the change.
Unfreezing is the process of breaking down the old attitudes and behaviours, customs and traditions
so that they start with a clean slate. This can be achieved by making announcements, holding
meetings and promoting the new ideas throughout the organization.
Q10. Explain the steps for initiating strategic change.

existing strategies and bring out new strategies. Strategic change is a complex process that involves a
corporate strategy focused on new markets, products, services and new ways of doing business.

8.3 Strategic Control

Strategic surveillance is highly focussed and organised control activity.
(RTP, May 2018, NA)

The strategic surveillance is unfocussed. It involves general monitoring of various sources of
information to uncover unanticipated information having a bearing on the organizational strategy. It
involves casual environmental browsing. Reading financial and other newspapers, business
magazines, attending meetings, conferences, discussions and so on. Strategic surveillance, a loose
form of strategic control, is capable of uncovering information relevant to strategy.
Q2. Write short note on Implementation control.

Or
What is implementation control? Discuss its basic forms.

Managers implement strategy by converting major plans into concrete, sequential actions that form
incremental steps. Implementation control is directed towards assessing the need for changes in the
overall strategy in light of unfolding events and results associated with incremental steps and actions.
Strategic implementation control is not a replacement to operational control. Strategic
implementation control, unlike operational controls continuously monitors the basic direction of the
strategy. The two basic forms of implementation control are:
(i) Monitoring strategic thrusts: Monitoring strategic thrusts help managers to determine whether
the overall strategy is progressing as desired or whether there is need for readjustments.
(ii) Milestone reviews: All key activities necessary to implement strategy are segregated in terms of
time, events or major resource allocation. It normally involves a complete reassessment of the
strategy. It also assesses the need to continue or refocus the direction of an organization.
Q3. Explain different types of strategic control in brief.

Or

What is strategic control? Briefly explain the different types of strategic control?
Strategic Control focuses on the dual questions of whether: (1) the strategy is being implemented as
planned; and (2) the results produced by the strategy are those intended .
There are four types of strategic control:
(a) Premise control: A strategy is formed on the basis of certain assumptions or premises about the
environment. Premise control is a tool for systematic and continuous monitoring of the environment
to verify the validity and accuracy of the premises on which the strategy has been built.
(b) Strategic surveillance: Strategic surveillance is unfocussed. It involves general monitoring of
various sources of information to uncover unanticipated information having a bearing on the
organizational strategy.
(c) Special alert control: At times, unexpected events may force organizations to reconsider their
strategy. Sudden changes in government, natural calamities, unexpected merger/acquisition by
competitors, industrial disasters and other such events may trigger an immediate and intense review
of strategy.
(d) Implementation control: managers implement strategy by converting major plans into concrete,
sequential actions that form incremental steps. Implementation control is directed towards assessing
the need for changes in the overall strategy in light of unfolding events and result.
Q4. Differentiate between Operational control and management control.

(RTP, Nov 2018, NA)
Or
What are the differences between Operational control and management control.
(Study Material)
Differences between operational control and management control are as under:

(i) The thrust of operational control is on individual tasks or transactions as against total or more
aggregative management functions. When compared with operational, management control is more
inclusive and more aggregative, in the sense of embracing the integrated activities of a complete
department, division or even entire organisation, instead or mere narrowly circumscribed activities of
sub-units. For example, procuring specific items for inventory is a matter of operational control, in
contrast to inventory management as a whole.
(ii) Many of the control systems in organisations are operational and mechanistic in nature. A set of
standards, plans and instructions are formulated. On the other hand, the basic purpose of
management control is the achievement of enterprise goals – short range and long range – in an
effective and efficient manner.
Q5. Explain premise control.

(RTP, Nov 2018, NA)
A strategy is formed on the basis of certain assumptions or premises about the complex and
turbulent organizational environment. Premise control is a tool for systematic and continuous
monitoring of the environment to verify the validity and accuracy of the premises on which the
strategy has been built. It primarily involves monitoring two types of factors:

(i) Environmental factors such as economic (inflation, liquidity, interest rates), technology, social and
regulatory.
(ii) Industry factors such as competitors, suppliers, substitutes.
Q6. Which of the following would be chosen by the core strategist to implement operational control?
(a) Premise Control
(b) Special Alert Control
(c) Implementation Control
(d) Budgetary Control
Correct answer: (d) Budgetary Control
Q7. What is strategic control? Kindly explain the statement that "premise control is a tool for systematic
and continuous monitoring of the environment".
Strategic Control
Strategic control is the process of evaluating formulated and implemented strategy. It is directed
towards identifying changes in the internal and external environments of the organization and
making necessary adjustments accordingly.
Strategic Control focuses on the dual questions of whether: (1) the strategy is being implemented as
planned; and (2) the results produced by the strategy are those intended.
Yes, Premise control is a tool for systematic and continuous monitoring of the environment to verify
the validity and accuracy of the premises on which the strategy has been built. It primarily involves
monitoring two types of factors:
(i) Environmental factors such as economic (inflation, liquidity, interest rates), technology, social and
legal-regulatory.
(ii) Industry factors such as competitors, suppliers, substitutes.
It is neither feasible nor desirable to control all types of premises in the same manner. Different
premises may require different amount of control. Thus, managers are required to select those
premises that are likely to change and would severely impact the functioning of the organization and
its strategy.
Q8. Sanya Private Limited is an automobile company. For the past few years, it has been observed that
the progress of the company has become stagnant.. When scrutinized, it was found that the planning
department was performing fairly well but the plans could not be implemented due to improper use
of resources, undesirable tendencies of workers and non-conformance to norms and standards. You
are hired as a Strategic Manager. Suggest the elements of process of control to overcome the
problem.
Sanya Private Limited deteriorating performance due to poor implementation of plans that is
improper use of resources, undesirable tendencies of the workers, and non- conformance to norms
and standards, all point towards weak controls in the organization.
Implementation of plans cannot assure results unless strong and sufficient controls are put in place.
The management of the company should focus diligently on developing controls especially in the
identified problem areas.
The process of control has the following elements:

(a) Objectives of the business system which could be operationalized into measurable and
controllable standards.
(b) A mechanism for monitoring and measuring the performance of the system.
(c) A mechanism (i) for comparing the actual results with reference to the standards (ii) for detecting
deviations from standards and (iii) for learning new insights on standards themselves.
(d) A mechanism for feeding back corrective and adaptive information and instructions to the system,
for effecting the desired changes to set right the system to keep it on course.
Above elements of control would ensure a proper check on improper use of resources, undesirable
tendencies of the workers, and non-conformance to norms and standards and ensure a result
oriented implementation of plans.
Q9. Why is Strategic Control important for organizations? Discuss briefly 4 types of strategic control that
can be implemented to achieve the enterprise goals
(RTP, May 2021, NA)
Importance of strategic control: Strategic control is an important process that keeps organisation on
its desired path. It involves evaluating strategy as it is formulated and implemented. It is directed
towards identifying problems and changes in premises and making necessary adjustments. Strategic
control focuses on the dual questions of whether: (1) the strategy is being implemented as planned;
and (2) the results produced by the strategy are those intended.
There are four types of strategic control:
● Premise control: A strategy is formed on the basis of certain assumptions or premises about
the environment. Premise control is a tool for systematic and continuous monitoring of the
environment to verify the validity and accuracy of the premises on which the strategy has
been built.
● Strategic surveillance: Strategic surveillance is unfocussed. It involves general monitoring of
various sources of information to uncover unanticipated information having a bearing on the
organizational strategy.
● Special alert control: At times, unexpected events may force organizations to reconsider their
strategy. Sudden changes in government, natural calamities, unexpected merger/acquisition
by competitors, industrial disasters and other such events may trigger an immediate and
intense review of strategy.
● Implementation control: Managers implement strategy by converting major plans into
concrete, sequential actions that form incremental steps. Implementation control is directed
towards assessing the need for changes in the overall strategy in light of unfolding events and
results.
Q10. Which one is NOT a type of strategic control?

(a) Operational control
(b) Strategic surveillance
(c) Special alert control
(d) Premise control
Correct answer: (a) Operational control
Q11. Systematic and continuous monitoring of the business environment to verify the accuracy of
assumptions on which strategy is built is achieved by?
(a) Premise Control

(b) Special Alert Control

(c) Implementation Control
(d) Strategic Surveillance
Correct answer: (a) Premise Control
8.4 Strategy Audit
Q1. In evaluating strategies, which one of Rumelt’s criteria for evaluating strategies, refers to the need for
strategists to examine sets of trends?
(a) Consistency
(b) Consonance
(c) Feasibility
(d) Advantage
Correct answer: (b) Consonance
Q2. Kewal Kapadia is the Managing Director of KK industries located in Kanpur. In a review meeting with
the head of finance, Kuldeep Khaitan he said that in the first five years of last decade the company
grew between 8-10 percent every year, then the growth rate started falling and in previous year the
company managed 1 per cent. Kuldeep replied that the company is facing twin issues, one the
strategy is not being implemented as planned; and two the results produced by the strategy are not
in conformity with the intended goals. There is mismatch between strategy formulation and
implementation. Kewal disagreed and stated that he takes personal care in implementing all
strategic plans.
You have been hired as a strategy consultant by the KK Industries. Advise way forward for the
company to identify problem areas and correct the strategic approaches that have not been effective.
(RTP, May 2018, NA) (RTP, May 2020, NA) (Study Material)
The company needs to conduct strategy audit.

A strategy audit is needed under the following conditions:
● When the performance indicators reflect that a strategy is not working properly or is not
producing desired outcomes.
● When the goals and objectives of the strategy are not being accomplished.
● When a major change takes place in the external environment of the organization.
● When the top management plans:
- to fine-tune the existing strategies and introduce new strategies and
- to ensure that a strategy that has worked in the past continues to be in-tune with subtle
internal and external changes that may have occurred since the formulation of strategies.
Adequate and timely feedback is the cornerstone of effective strategy audit. Strategy audit can be no
better than the information on which it is based.
Strategy Audit includes three basic activities:
(i) Examining the underlying bases of a firm’s strategy,

(ii) Comparing expected results with actual results, and

(iii) Taking corrective actions to ensure that performance conforms to plans.
Q3. What is strategy audit? Explain the criteria for strategy audit as given by Richard Rumelt.
A strategy audit is an examination and evaluation of areas affected by the operation of a strategic
management process within an organization. The audit of management performance with regard to
external strategies helps an organization identify problem areas and correct the strategic approaches
that have not been effective so far. It is a process for taking an objective look at the existing strategies
of the organization. It involves assessing the direction of a business and comparing that to the course
required to succeed in a changing environment.”
Companies review their business plans and strategies on regular basis to identify weaknesses and
shortcomings to enable a successful development plan. The strategy audit secures that all necessary
information for the development of the company are included in the business plan and that the
management supports it.
Richard Rumelt’s Criteria for Strategy Audit
a. Consistency: A strategy should not present inconsistent goals and policies which can lead to
organizational problems and conflicts. Three guidelines to identify are:
● Strategies may be inconsistent if managerial problems tend to be issue-based rather than
people-based.
● If success for one organizational department means, or is interpreted to mean, failure for
another department, then strategies may be inconsistent.
● If policy problems and issues continue to be brought to the top for resolution, then strategies
may be inconsistent.
b. Consonance: Consonance refers to the need for strategists to examine sets of trends, as well as
individual trends, in auditing strategies. A strategy must represent an adaptive response to the
external environment and to the critical changes occurring within it. One difficulty in matching a
firm’s key internal and external factors in the formulation of strategy is that most trends ar e the result
of interactions among other trends.
c. Feasibility: A strategy must neither overtax available resources nor create unsolvable sub-
problems. The final broad test of strategy is its feasibility; that is, can the strategy be attempted within
the physical, human, and financial resources of the enterprise? In auditing a strategy, it is important
to examine whether an organization has demonstrated in the past that it possesses the abilities,
competencies, skills, and talents needed to carry out a given strategy.
d. Advantage: A strategy must provide for the creation and/or maintenance of a competitive
advantage in a selected area of activity. Competitive advantages normally are the result of superiority
in one of three areas:
(1) resources, (2) skills, or (3) position.

Consonance in strategy audit refers to the need for strategists to examine sets of trends.
The statement is Correct.

Consonance refers to the need for strategists to examine sets of trends, as well as individual trends, in
auditing strategies. A strategy must represent an adaptive response to the external environment and
to the critical changes occurring within it. One difficulty in matching a firm’s key internal and external

factors in the formulation of strategy is that most trends are the result of interactions among other
trends.
Q5. Explain the concept and need of Strategy Audit. Why is it more difficult in present scenario?
management process within an organization. The audit of management performance with regard to
its strategies helps an organization identify problem areas and correct the strategic approaches that
have not been effective.
Strategy audit is needed under the following conditions:
(a) When the performance indicators reflect that a strategy is not working properly or is not
(b) When the goals and objectives of the strategy are not being accomplished.
(c) When a major change takes place in the external environment of the organization.
(d) When the top management plans:
i. to fine-tune the existing strategies and introduce new strategies and
ii. to ensure that a strategy that has worked in the past continues to be in-tune with
subtle internal and external changes that may have occurred since the formulation
of strategies.
The difficulties in strategy audit can be explained in terms of following trends:
● A dramatic increase in the environment’s complexity.
● The increasing difficulty of predicting the future with accuracy.
● The increasing number of variables in the environment.
● The rapid rate of obsolescence of even the best plans.
● The increase in the number of both domestic and world events affecting organizations.
● The decreasing time span for which planning can be done with any degree of certainty.
Q6. The following are part of Richard Rumelt’s criteria for strategy audit, except:
a. Adaptation
b. Consistency
c. Consonance
d. Feasibility
Correct answer: (a) Adaptation
Q7. Strategy evaluation is difficult on account of following trends, except:

A. There is dramatic increase in the environment’s complexity.
B. It is difficult to predict future.
C. Firms have unlimited resources.
D. Obsolescence is rapid.
(RTP, Nov 2019, NA)
Correct answer: (c) Firms have unlimited resources.
Q8. Zumba Robots, an electronic robot manufacturing company is a leader in its business segment.Over
a period of time, it started losing its grip on the market as its overall position started to weaken.

Discuss the type of audit that you would like to suggest to analyse the situation of the company?
The audit of management performance with regard to its strategies helps ‘Zumba Robots’ identify
problem areas and correct the strategic approaches that have not been effective so far. A strategy
audit is a review of a company's business plan and strategies to identify weaknesses and
shortcomings and enable a successful development of the company. An assessment of the external
environment shows where changes happen and where organization’s strategic management no
longer match the demands of the marketplace. Based on such analysis, Zumba Robots can improve
business performance by periodically conducting such an audit.
Q9. The purpose of strategy evaluation is to:

(a) increase the budget annually
(b) alert management to problems or potential problems
(c) make budget changes
(d) evaluate employees’ performance
Correct answer: (b) alert management to problems or potential problems
Q10. The Audit Committee of Theta Ltd on observing a sluggish growth has advised a radical internal
digital transformation. A strategy audit was proposed to identify problem areas and correct the
strategic approaches that have not been effective so far. The strategy auditor while measuring
organisational performance has identified gaps in flow between order booking by the sales
department and the dispatch of product by the delivery department, which amounts to success of
one department means failure for another. With reference to Richard Rumelt’s criteria for strategy
audit, identify and explain the correct evaluation criteria to be adopted.
(RTP, Nov 2020, NA)
Richard Rumelt’s criteria for strategy audit proposes four criteria namely, consistency, consonance,
feasibility and advantage. In the present scenario, the strategy auditor while measuring organisational
performance has identified a gap which amounts to success of one department means failure for
another. This can be clearly identified as a consistency criterion as the current organisational
strategies are inconsistent.
Three guidelines help determine if organizational problems are due to inconsistencies in strategy:
● If managerial problems continue despite changes in personnel and if they tend to be
issue-based rather than people-based, then strategies may be inconsistent.
● If success for one organizational department means, or is interpreted to mean, failure for
another department, then strategies may be inconsistent.
● If policy problems and issues continue to be brought to the top for resolution, then strategies
may be inconsistent.
Q11. Write a short note on requirement of strategy audit. What are the basic activities of strategic audit?
Need of Strategy Audit

management process within an organization.
A strategy audit is required under the following conditions:

● When the performance indicators reflect that a strategy is not working properly or is not
● When the goals and objectives of the strategy are not being accomplished.
● When a major change takes place in the external environment of the organization.
● When the top management plans:
(a) To fine-tune the existing strategies and introduce new strategies; and
(b) To ensure that a strategy that has worked in the past continues to be in-tune with subtle internal
and external changes that may have occurred since the formulation of strategies.
Adequate and timely feedback is the cornerstone of effective strategy audit. Strategy audit can be no
better than the information on which it is based.
Strategy Audit includes three basic activities:
1. Examining the underlying bases of a firm’s strategy,
2. Comparing expected results with actual results, and
3. Taking corrective actions to ensure that performance conforms to plans.
Q12. Write short note on Richard Rumelt's criteria for strategy audit
Richard Rumelt’s Criteria for Strategy Audit

(i) Consistency: A strategy should not present inconsistent goals and policies which can lead to
organizational problems and conflicts. Inconsistencies in strategy are indicated if
(a) the cause of organizational problems is issue based;
(b) success for one department implies failure for another;
(c) the top management is expected to resolve policy problems and issues everytime.
(ii) Consonance: Consonance refers to the need for strategists to examine sets of trends, as well as
individual trends, in auditing strategies. The difficulty is that most trends are the result of interactions
among other trends. A strategy must represent an adaptive response to the external environment
and to the critical changes occurring within it.
(iii) Feasibility: A strategy must neither overtax available resources nor create unsolvable
sub-problems. The final broad test of strategy is its feasibility; that is, can the strategy be attempted
within the physical, human, and financial resources of the enterprise?
(iv) Advantage: A strategy must provide for the creation and/or maintenance of a competitive
advantage in a selected area of activity. The advantage may reflect superiority in any one or
combination of: resources, skills and position.
Q13. Why is strategy evaluation more difficult? Give reasons.

Strategic evaluation involves measuring and evaluating performance. The goals achieved are
compared with the desired goals to identify deviations and make necessary adjustments in strategies
or in the efforts being put to achieve those strategies.
Reasons why strategy evaluation is more difficult today include the following trends:
● A dramatic increase in the environment’s complexity.
● The increasing difficulty of predicting the future with accuracy.
● The increasing number of variables in the environment.
● The rapid rate of obsolescence of even the best plans.
● The increase in the number of both domestic and world events affecting organizations.
● The decreasing time span for which planning can be done with any degree of certainty.

8.5 Business Process Reengineering
Q1. What is the rationale behind Business Process Reengineering (BPR)? What steps would you
recommend to implement BPR in an organization?
Business Process Reengineering (BPR) is an approach to unusual improvement in operating

effectiveness through the redesigning of critical business processes and supporting business
systems. It is revolutionary redesign of key business processes that involves examination of the basic
process itself. It looks at the minute details of the process, such as why the work is done, who does it,
where is it done and when it is done. BPR refers to the analysis and redesign of workflows and
processes both within the organization and between the organization and the external entities like
suppliers, distributors, and service providers.
The orientation of redesigning efforts is basically radical. In other words, it is a total deconstruction
and rethinking of business process in its entirety, unconstrained by its existing structure and pattern.
Its objective is to obtain quantum jump in process performance in terms of time, cost, output, quality,
and responsiveness to customers. BPR is a revolutionary redesigning of key business processes. BPR
involves the following steps:
1. Determining objectives and framework: Objectives are the desired end results of the redesign
process which the management and organization attempts to achieve. This will provide the required
focus, direction, and motivation for the redesign process. It helps in building a comprehensive
foundation for the reengineering process.
2. Identify customers and determine their needs: The designers have to understand customers –
their profile, their steps in acquiring, using and disposing a product. The purpose is to redesign
business process that clearly provides added value to the customer.
3. Study the existing process: The existing processes will provide an important base for the
redesigners. The purpose is to gain an understanding of the ‘what’, and ‘why’ of the targeted process.
However, some companies go through the reengineering process with clean perspective without
laying emphasis on the past processes.
4. Formulate a redesign process plan: The information gained through the earlier steps is translated
into an ideal redesign process. Formulation of redesign plan is the real crux of the reengineering
efforts. Customer focused redesign concepts are identified and formulated. In this step alternative
processes are considered and the best is selected.
5. Implement the redesign: It is easier to formulate new process than to implement them.
Implementation of the redesigned process and application of other knowledge gained from the
previous steps is key to achieve dramatic improvements. It is the joint responsibility of the designers
and management to operationalise the new process.
Q2. Slow Ltd. is a fifty year old organisation engaged in manufacturing of consumer products. Over a
time, its processes have lengthened making it very slow in decision making, production, product and
service delivery.
As a manager, you have been asked to suggest how the processes of Slow Ltd. can be improved?
Any organisation has a number of processes. Typically, a business process involves a number of steps
performed by different people in different departments. Slow Ltd. needs to identify and change the

processes improve the speed and quality. The tool that can be employed is Business Process
Reengineering. Steps are as follows:
i. Determining objectives: Objectives are the desired end results of the redesign process which the
management and organization attempts to realise.
ii. Identify customers and determine their needs: The process designers have to understand
customers - their profile, their steps in acquiring, using and disposing a product. The purpose is to
redesign business process that clearly provides value addition to the customer.
iii. Study the existing processes: The study of existing processes will provide an important base for
the process designers. However, some organisation go through the reengineering process with clean
perspective without laying emphasis on the past processes.
iv. Formulate a redesign process plan: Formulation of redesign plan is the real crux of the
reengineering efforts. Customer focussed redesign concepts are identified and formulated. In this
step alternative processes are considered and the best is selected.
v. Implement the redesigned process: Implementation of the redesigned process and application of
other knowledge gained from the previous steps is key to achieve dramatic improvements.
Q3. Identify three aspects of impact of IT Systems on Business Process Reengineering and list three areas
where it provides business value.
(SA, Nov 2018, 3 Marks) (RTP, Nov 2020, NA) (MTP 1, Nov 2020, 5 Marks)
Impact of IT Systems on Business Process Reengineering are identified as:

● Compression of time
● Overcoming restrictions of geography and/or distance
● Restructuring of relationships
IT initiatives, thus, provide business values in three distinct areas:
● Efficiency – by way of increased productivity
● Effectiveness – by way of better management
● Innovation – by way of improved products and services
As industry’s Key Success Factors (KSFs) are those things that most affect industry members’ ability
to prosper in the market place – the particular strategy elements, product attributes, resources,
competencies, competitive capabilities and business outcomes that spell the difference between
profit & loss and ultimately, between competitive success or failure. KSFs by their very nature are so
important that all firms in the industry must pay close attention to them. They are the prerequisites
for industry success, or, to put it in another way, KSFs are the rules that shape whether a company will
be financially and competitively successful.
Q4. India's luxurious domestic airline Indijet in an attempt to retain its leadership in aviation sector has
hired J S Dutta as its Chief Executive. Mr Dutta wishes to reorient company to make it a domestic
discount carrier. He desires to introduce no frills business model by offering extremely low fares and
improve margins by cutting down traditional amenities such as reclining seats and complimentary
meals. At the same time setting the stage for a new air revolution, he wishes to brand itself as on-time
airlines having proper systems in place and removing additional and wasteful activities and
processes.
What steps will you advise to Mr Dutta?
Mr Dutta should adopt business process reengineering (BPR). It is an approach to unusual

improvement in operating effectiveness through the redesigning of critical business processes and
supporting business systems. It is revolutionary redesign of key business processes that involves

examination of the basic process itself. BPR refers to the analysis and redesign of workflows and
processes both within the organization and between the organization and the external entities like
suppliers, distributors, and service providers.
The orientation of redesigning efforts involves total deconstruction and rethinking of business
process BPR involves the following steps:
i. Determining objectives: Objectives are the desired end results of the redesign process. They will
provide the required focus, direction, and motivation for the redesign process and help in building a
comprehensive foundation for the reengineering process.
ii. Identify customers and determine their needs: The process designers have to understand
customers. The purpose is to redesign business process that clearly provides value addition to the
customer.
iii. Study the existing processes: The study of existing processes will provide an important base for
the process designers. The purpose is to gain an understanding of the ‘what’, and ‘why’ of the
targeted process.
iv. Formulate a redesign process plan: Formulation of redesign plan is the real crux of the
reengineering efforts. Customer focussed redesign concepts are identified and formulated. In this
step alternative processes are considered and the best is selected.
v. Implement the redesigned process: It is easier to formulate new process than to implement
them. Implementation of the redesigned process and application of other knowledge gained from
the previous steps is key to achieve dramatic improvements.
Q5. Explain concept and nature of BPR.

BPR stands for business process reengineering which means starting all over again from scratch. It
refers to the analysis and redesign of workflows and processes both within and between the
organisations. Its objective is to improve performance in terms of time, cost, quality, and
responsiveness to customers. It implies giving up old practices and adopting the improved ones. It is
an effective tool of realising new strategies.
Improving business processes is paramount for businesses to stay competitive in today’s
marketplace. New technologies are rapidly bringing new capabilities to businesses, thereby raising
the strategical options and the need to improve business processes dramatically. Even the
competition has become harder. In today’s market place, major changes are required to just stay
even.
Q6. As the head of an MNC, you have been asked to bring in radical changes in your organisation
through BPR. Which of these is the thrust area you would focus on reducing:
(a) Total cycle time
(b) Total order time
(c) Total inventory time
(d) None
Correct answer: (a) Total cycle time
Q7. Discuss various steps involved in Business Process Reengineering (BPR) while implementing in an
organization.

Or
What steps would you recommend implementing BPR in an organisation?

(Study Material)
BPR is an approach to unusual improvement in operating effectiveness through the redesigning of

critical business processes and supporting business systems. BPR is a revolutionary redesigning of
key business processes.
BPR involves the following steps:
(i) Determining objectives and framework: Objectives are the desired end results of the redesign
process which the management and organization attempts to achieve. This will provide the required
focus, direction, and motivation for the redesign process.
(ii) Identify customers and determine their needs: The designers have to understand customers –
their profile, their steps in acquiring, using and disposing a product. The purpose is to redesign
business process that clearly provides added value to the customer.
(iii) Study the existing process: The existing processes will provide an important base for the
redesigners. The purpose is to gain an understanding of the ‘what’, and ‘why’ of the targeted process.
However, some companies go through the reengineering process with clean perspective without
laying emphasis on the past processes.
(iv) Formulate a redesign process plan: Formulation of redesign plan is the real crux of the
reengineering efforts. Customer focused redesign concepts are identified and formulated. Alternative
processes are considered, and the optimum is selected.
(v) Implement the redesign: It is easier to formulate new process than to implement them. It is the
joint responsibility of the designers and management to operationalise the new processes.
Q8. Explain the various categories in which generic business process of a firm requires redesigning.
(RTP, May 2022, NA)
The generic business processes of a firm that require redesign may be classified into three broad
categories as follows:
● Processes pertaining to development and delivery of product(s) and / or services
- These may include research, design, engineering, manufacturing, and logistics,
besides purchasing / procurement and materials management.
● Process involving interface(s) with customers - These usually include marketing, advertising,
order fulfilment, and service.
● Process comprising management activities - These include strategy formulation, planning
and budgeting, performance measurement and reporting, human resource management,
and building infrastructure.
In the context of these generic business processes, BPR may be viewed as a means of solving
business problem through IT capabilities.
Q9. What is Business Process Reengineering (BPR)?

(Study Material)
Business Process Reengineering (BPR) is an approach to unusual improvement in operating

effectiveness through the redesigning of critical business processes and supporting business
systems. It is revolutionary redesign of key business processes that involves examination of the basic
process itself. BPR refers to the analysis and redesign of workflows and processes both within the
organization and between the organization and the external entities like suppliers, distributors, and

service providers. The orientation of redesigning efforts is basically radical. In other words, it is a total
deconstruction and rethinking of business process in its entirety, unconstrained by its existing
structure and pattern.
Q10. ABC Ltd an automaker company analysed its current accounts payable system and found that when
purchasing department writes a purchasing order, they sent a copy to accounts payable. Then
material control would receive the goods and send the copy of documents for the related goods to
accounts payable. At the same time vendor also sends the receipt for the goods to accounts payable.
ABC Ltd realized that accounts payable department was not as efficient as it should be and it had too
many employees than required.
ABC LTD is looking forward to transform its business process of accounts payable. What advice would
you give? Explain with the role of Information technology in this transformation.
(Study Material)
Information technology has developed during the past few years had a very large impact in the
transformation of business processes.
Impact of IT-systems are identified as:
a) Compression of time
b) Overcoming restrictions of geography and/or distance
c) Restructuring of relationships.
IT-initiatives, thus, provide business values in three distinct areas:
a) Efficiency – by way of increased productivity,
b) Effectiveness – by way of better management,
c) Innovation – by way of improved products and services
ABC Ltd can transform by using IT-assisted purchasing process. Purchasing department issues as
order and inputs it into online database. Material control receives the goods and cross references it
with the database to make sure it matches with the order. If it matches material control accepts the
order on the computer.
8.6 Benchmarking
Q1. What is Benchmarking? Explain briefly the elements involved in Benchmarking process.
(RTP, May 2018, NA) (MTP 2, May 2018, 7 Marks) (RTP, May 2019, NA) (Study Material)
Or
What is Benchmarking? Explain the various steps in Benchmarking process.

Or
Explain the various steps in Benchmarking process.


Benchmarking is an approach of setting goals and measuring productivity of firms based on best
industry practices or against the products, services and practices of its competitors or other
acknowledged leaders in the industry. It developed out of need to have information against which
performance can be measured. Benchmarking helps businesses in improving performance by
learning from the best practices and the processes by which they are achieved. Thus, benchmarking
is a process of continuous improvement in search for competitive advantage. Firms can use
benchmarking practices to achieve improvements in diverse range of managerial functions like
product development, customer services, human resources management, etc.
The various steps in Benchmarking Process are as under:
(i) Identifying the need for benchmarking: This step will define the objectives of the benchmarking
exercise. It will also involve selecting the type of benchmarking. Organizations identify realistic
opportunities for improvements.
(ii) Clearly understanding existing decisions processes: The step will involve compiling information
and data on performance.
(iii) Identify best processes: Within the selected framework best processes are identified. These may
be within the same organization or external to them.
(iv) Comparison of own process and performance with that of others: Benchmarking process also
involves comparison of performance of the organization with performance of other organization. Any
deviation between the two is analysed to make further improvements.
(v) Prepare a report and implement the steps necessary to close the performance gap: A report
on benchmarking initiatives containing recommendations is prepared. Such a report also contains
the action plans for implementation.
(vi) Evaluation: Business organizations evaluate the results of the benchmarking process in terms of
improvements vis-à-vis objectives and other criteria set for the purpose. It also periodically evaluates
and reset the benchmarks in the light of changes in the conditions that impact the performance.

Benchmarking and business process reengineering are one and the same.
(RTP, Nov 2018, NA)
Or
Correct/ Incorrect.
There is no distinction between Benchmarking and Business Process Reengineering.

Benchmarking relates to setting goals and measuring productivity based on best industry practices.
The idea is to learn from the practices of competitors and others to improve the firm’s performance.
On the other hand, business process reengineering relates to analysis and redesign of workflows and
processes both within and between the organizations.
Q3. Swift Ltd and Quick Ltd are two companies that are in the business of light industrial machines. While
Swift is the market leader the sales of Quick has been falling. In the year 2017-18 the market share of
the two companies was forty per cent and five per cent respectively. During the last five years the
market share of quick reduced from third to sixth position. As an immediate corrective measure top
management of Quick decided to emulate the successful standards of Swift Ltd and set them as their
own yardsticks. With the help of standards they intended to compare, measure and judge their
performance.What is the strategic tool Quick Ltd is adopting? How is it implemented?

The top management of Quick Ltd is doing benchmarking. The benchmarking helps an organization
to get ahead of competition. A benchmark may be defined as a standard or a point of reference
against which things may be compared and by which something can be measured and judged. In
simple words, benchmarking is an approach of setting goals and measuring productivity based on
best industry practices. In recent years, different commercial and non-commercial organizations are
discovering the value of benchmarking and are applying it to improve their processes and systems.
Benchmarking processes used by different organisations lack standardization. However, common
elements are as follows:
I. Identifying the need for benchmarking: This step will define the objectives of the benchmarking
exercise. It will also involve selecting the type of benchmarking. Organizations identify realistic
opportunities for improvements.
II. Clearly understanding existing business processes: This step will involve compiling information
and data on performance. This will include mapping processes.
III. Identify best processes: Within the selected framework, best processes are identified. These may
be within the same organization or external to it.
IV. Compare own processes and performance with that of others: While comparing gaps in
performance between the organization and better performers is identified. Further, gaps in
performance are analysed to seek explanations. Feasibility of making the improvements is also
examined.
V. Prepare a report and Implement the steps necessary to close the performance gap: A report on
the Benchmarking initiatives containing recommendations is prepared. Such a report includes the
action plan(s) for implementation.
VI. Evaluation: A business organization must evaluate the results of the benchmarking process in
terms of improvements vis-à-vis objectives and other criteria set for the purpose. It should also
periodically evaluate and reset the benchmarks in the light of changes in the conditions that impact
its performance.
Q4. “Firms can use benchmarking process to achieve improvement in diverse range of management
functions.” Elucidate.
Benchmarking is a process of finding the best practices within and outside the industry to which an
organisation belongs. Knowledge of the best practices helps in setting standards and finding ways to
match or even surpass own performances with the best performances.
Benchmarking is a process of continuous improvement in search for competitive advantage. Firms
can use benchmarking process to achieve improvement in diverse range of management function
such as mentioned below:
● Maintenance operations,
● Assessment of total manufacturing costs,
● Product development,
● Product distribution,
● Customer services,
● Plant utilisation levels; and
● Human resource management.
Q5. Do you agree with the statement that 'Benchmarking is a process of continuous improvement in
search of competitive advantage'? Discuss.

(RTP, May 2021, NA)
Yes, benchmarking is a process of continuous improvement in search for competitive advantage. It

measures factors related to products, services and practices against those of its competitors or other
acknowledged leaders in their field.
Benchmarking is an approach of setting goals and measuring productivity based on best industry
practices. It developed out of need to have information against which performances can be
measured. It helps in improving performance by learning from best practices and the processes by
which they are achieved.
Benchmarking involves regularly comparing different aspects of performance with the best practices,
identifying gaps and finding out novel methods to not only reduce the gaps but to improve the
situations so that the gaps are positive for the organization. Better processes are not merely copied.
Efforts are made to learn, improve and evolve them to suit the organizational circumstances. Further,
benchmarking exercises are also repeated periodically so that the organization does not lag behind in
the dynamic environment.
Firms can use benchmarking process to achieve improvement in diverse range of management
function like maintenance operations, assessment of total manufacturing costs, product
development, product distribution, customer services, plant utilisation levels and human resource
management.

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Question Bank - Chapter 1 Compiled by Neeraj Arora and TEAM

1.1 Concept of Strategy

Q1. Strategy is partly proactive and partly reactive. Discuss.

Q2. Correct / Incorrect

The statement is incorrect.

Strategic Management QB C1- Page No 1 /17

Correct answer: (d) Strategy is perfect and flawless.

Q5. Strategy helps in:

Correct answer: (d) All of the above

Q6. Strategy is-

Correct answer: (c) A blend of proactive and reactive actions.

Q7. Which of the following is correct?

Strategic Management QB C1- Page No 2 /17

Strategic Management QB C1- Page No 3 /17

Correct answer: (a) Strategy is "partly proactive and Partly reactive”

1.2 Strategic Management

Q1. Define Strategic Management.

Q2. Correct / Incorrect

The statement is correct.

Are there any limitations attached to strategic management in organizations? Discuss.

Strategic Management QB C1- Page No 4 /17

Q4. Briefly explain the importance of strategic management.

Strategic Management QB C1- Page No 5 /17

Q7. What benefits accrue by following a strategic approach to managing?

The following are the benefits of strategic approach to managing:

Strategic Management QB C1- Page No 6 /17

Correct answer: (d) Strategic management

Q9. Which of the following statements correctly explain strategic management?

Correct answer: (A) (i) and (ii)

Strategic Management QB C1- Page No 7 /17

● Although, strategic management is a time-consuming process, he should continue to

Correct answer: (b) Strategy formulation

Strategic Management QB C1- Page No 8 /17

These limitations are on account of following factors:

1.3 Strategic levels in Organisation

Strategic Management QB C1- Page No 9 /17

Q1. Define the role of corporate level managers.

Q2. Correct / Incorrect.

The statement is correct.

Q3. Distinguish between the three levels of strategy formulation.

Explain the difference between three levels of strategy formulation.

A typical large organization is a multidivisional organisation that competes in several different

Q4. List the different strategic levels in an organisation.

Strategic Management QB C1- Page No 10 /17

( SA, Nov 2018, 2 marks)

There are three main strategic levels in an organisation:

Correct answer: (c) Corporate, business and functional

Q6. Which of the following statement is not true:

Q7. Enumerate the task to be performed as a strategic manager of a company.

Strategic Management QB C1- Page No 11 /17

The role of Chief Executive Officer pertains to Corporate level.

Strategic Management QB C1- Page No 12 /17

1.4 Strategic Management in Government and Not for Profit

The concepts of strategic management are relevant for Health Wellnow.

Strategic Management QB C1- Page No 13 /17

(iii) Promote itself to cover more offices, resident welfare associations.

Q2. Correct / Incorrect

The statement is Incorrect.

Strategic Management QB C1- Page No 14 /17

Education is considered to be a noble profession. An educational institution often functions as a

Strategic Management QB C1- Page No 15 /17

Strategic Management QB C1- Page No 16 /17

Strategic Management QB C1- Page No 17 /17