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संजीवनीबू टी- Comprehensive Module for Strategic Management C7
Chapter 7
Reaching Strategic Edge
Blue Print for Chapter 7
1. Business Process Reengineering
a. Definition
b. What is Business Process
c. Reasons for BPR
d. Implementing BPR in organisation
e. Role of information technology in BPR
f. Central Thrust of BPR.
g. The basic and Distinguishing Features of BPR.
h. Problems in BPR
i. Past Year Questions on BPR.
2. Benchmarking (Homework topic)
3. Total Quality Management
a. Meaning
b. Principles guiding TQM.
c. TQM and Traditional Management Process.
d. Past Year Questions
4. Six Sigma
a. General note.
b. Meaning
c. Six Sigma Methodologies
i. DMAIC
ii. DMADV
d. What’s new about Six Sigma
e. Six Sigma as a system of Management
f. Six themes of Six Sigma
5. Strategies for internet economies.
6. Strategic management in non-profit and government organization
a. Educational Institutions.
b. Medical organisations.
c. Government agencies and departments
Business Process Reengineering

Definition of BPR
1. Refers to the analysis and redesign of workflows and processes both within and between
the organizations.
2. The orientation of the redesign effort is radical, i.e., it is a total deconstruction and
rethinking of a business process in its entirety, unconstrained by its existing structure and pattern.
CA Neeraj Arora Page 7. 1

3. Its objective is to obtain quantum gains in the performance of the process in terms of time,
cost, output, quality, and responsiveness to customers through the use of IT systems.
4. Business process reengineering means starting all over, starting from scratch.
5. Reengineering is about business reinvention - not business improvement, business

enhancement, or business modification.
Business Process
Reengineering
Total deconstruction &

Analysis & redesign It is not
rethinking of business Objective It is about-
workflows and business-
process
processes within
and b/w org
Means starting all over Obtain Business
Improvement
again from the scratch quantum gain Reinvention
In what? In terms of? How? Enhancement
Performance of Use of IT
Time Modification
process system
Cost
Output
Quality
Response to
customers
What is a Business Process?

1. A process is a set of logically related tasks or activities oriented towards achieving a
specified outcome and often go beyond departmental or functional boundaries.
2. For example, one common process found almost in every organization is the order.
3. A set of interconnected processes comprise a business system.
4. Some processes turn out to be extremely critical for the success and survival of the enterprise
and they are known as core business process.
5. BPR focuses on such critical business processes out of the many processes that go on in any
company.

6. While some core business processes are easily identifiable, some core Business processes may
not always be immediately apparent.
Reasons for BPR (Rationale of BPR – ICAI Study Material)
The operational excellence of a company is a major basis for its competitiveness.

Process need to managed, not functions.
Continuous improvement is a deficient approach when a company is far behind the industry
standards, and needs rapid quantum leaps in performance.
How to compete is more important than deciding about where to compete.
Over the last decade several factors have accelerated the need to improve business
processes.
1. Technology
The most obvious is technology. New technologies (like Information Technology) are rapidly bringing new
capabilities to businesses, thereby raising the strategic options and the need to improve business
processes dramatically.
2. Opening up of Indian economy

After opening up of Indian economy companies have been forced to improve their business processes
because of increased competition. More companies have entered the market place, and competition
has become harder and harder.
3. Customer Demand for better product and service

Customers are also demanding better products and services. If they do not receive what they want from
one supplier, they have many others to choose from. They are ready to try new brands.
Implementing BPR in organizations
Steps in BPR are as follows:

1. Determining scope, objectives and Framework (Builds sound foundation)
Objectives are the desired end results of the redesign process which the management and organization
attempts to realize. This will provide the required focus, direction, and motivation for the redesign
process.
2. Identify customers and determine their needs: (Undertaking research)

Designers of BPR have to understand customers - their profile, their steps in acquiring, using and disposing a
product.
3. Study the existing process (may be skipped by some companies) (Undertaking research)

The existing processes will provide an important base for the re-designers. The purpose is to gain an
understanding of the 'what', and 'why' of the targeted process.
4. Formulate a redesign process plan: (Creation of Vision)

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 the joint responsibility of the designers and management to operationalize the new process.
Steps to Implement BPR
STEP 1 STEP 2 STEP 3 STEP 4 STEP 5

Determine Identify & Study Formulate Implement
Determine
Study May be By
Scope Objectives Framework What? How? What? Why?
Identify existing skipped Whom?
Customers Process by some Inf.
Desired end result Redesign Redesign Joint
co.'s gained Operation
mgmt. attempt to Determine process responsabili
Why? via alise new
realise customer plan ty of mgmt.
earlier process
Provides focus, needs Provide imp. base steps & designers
direction, motivation for redesigners translate
for redesign process d into
Gain ideal
understanding of redesign
"what" "why" of process
target process
Alternate
process
consider
Best
alternative is
selected
The Role of Information Technology in BPR
Impact of IT-systems is 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.
Information technology (IT) is a critical factor in the success of bringing this change.
Central Thrust of BPR

Its thrust area may be identified as "the reduction of the total cycle time of a business process."
Total cycle may be explained in terms of

1. Customer Need
2. Time to manufacture product or provide service
3. Customer satisfaction
The basic and distinguishing features of BPR are as follows
1. No Partial Modification (Radical redesign)

Reengineering does not have any scope for any partial modification or marginal improvement in the existing
business processes. Its objective is to obtain quantum gains in the performance of the process in
terms of time, cost, output, quality, and responsiveness to customers through the use of IT
systems.
2. Obsolete Assumptions of Existing process

BPR approach recognizes that most of the existing rules and procedures of work methods are based
on certain assumptions about technology, people and the goals of the organization.
These assumptions may not be valid any more.
BPR aims at utilizing information technology for evolving a new process, instead of automating the
existing process.
3. Pervasive impact
The fundamental and radical changes that takes place while reengineering the process has its own
implication on other parts of the organization - almost on every part of it
Reengineering requires viewing a process from cross-functional perspective.
4. Involvement of Top Level Management

In view of the massive organizational changes involved in reengineering, it is important that a
reengineering drive is supported by the vision and commitment of the organizations top
leadership to see through its successful completion.
Problems in BPR
1. It disturbs established hierarchies and functional structures
2. Involves resistance among the work-force.
3. Reengineering takes time and expenditure, at least in the short run, many companies are
reluctant to go through the exercise. Even there can be loss in revenue during the transition
period.
4. Setting of targets is tricky and difficult.
5. If transformation not properly carried out, reengineering efforts may turn-out as a failure.
♥ The orientation of the redesign effort refers to a total ______and rethinking of entire business process.
♥ State with reasons which of the following statements is correct / incorrect:

a. Reengineering mean partial modification or marginal improvement in the existing work processes.
Incorrect: Reengineering does not mean any partial modification or marginal improvement in the existing work processes.
Reengineering is a revolutionary approach towards radical and total redesigning of the business processes.
b. BPR is an approach to maintain the existing growth of an organization.

Incorrect: BPR is an approach to unusual enhancement in operating effectiveness through the redesigning of critical business
processes and supporting business systems. It is revolutionary redesign of key business processes that involve examination of the
basic processes.
c. Benchmarking and Business process Reengineering are one and the same.
Incorrect: Benchmarking relates to setting goals and measuring productivity based on best industry practices. The idea is to learn
from competitors and others to improve their own performance. On the other hand business process reengineering relates to
analysis and redesign of workflows and processes both within and between the organizations.
♥ Being a strategic professional, analyze and redesign the work flows in the context of business process reengineering.
Business Process Reengineering (BPR) refers to the analysis and redesign of workflows and processes both within and between the
organizations. The orientation of the redesign effort is radical. It involves total deconstruction and rethinking of a business process in its
entirety
The workflows are studied, appraised and improved in terms of time, cost, output, quality, and responsiveness to customers.
The redesign effort aims to simplify and streamline a process by eliminating all extra avoidable steps, activities, and transactions.
With the help of redesigning workflows, organizations can drastically reduce the number of stages of work, and improve their performance.
♥ Trace the role of information technology in business process reengineering.
The Role of IT in BPR: The accelerating pace at which information technology has developed during the past few years had a very
large impact in the transformation of business processes.
Various studies have conclusively established the role of information technology in the transformation of business processes.
Information technology is playing a significant role in changing the business processes.
A reengineered business process, characterized by IT-assisted speed, accuracy, adaptability and integration of data and service points,
is focused on meeting the customer needs and expectation quickly and adequately, thereby enhancing his/her satisfaction level.
With the help of tools of information technology organizations can modify their processes to make them automatic, simpler, time
saving. Thus IT can bring efficiency and effectiveness in the functioning of business.
♥ Define BPR
♥ Define Business Process Re-engineering. Briefly outline the steps therein.
Benchmarking (Homework Topic)

1. Benchmarking is an approach offsetting goals and measuring productivity based on best
industry practices.
2. It gives information against which performance can be measured.
3. Benchmarking help businesses in improving performance by learning from the best
practices and the processes by which they are achieved.
4. Thus, benchmarking is a process of continuous improvement in search for competitive
advantage.
5. It measures company's products, services and practices against those of its competitors or
other acknowledged leaders in the industry.
The Benchmarking Process: Some of the common elements of benchmarking process are
as under:

1. 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.
2. Clearly understanding existing decisions processes

The step will involve compiling information and data on current performance.
3. Identify best processes

Within the selected framework best processes are identified.
4. 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 analyzed to make further improvements.
5. 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.
6. Evaluation
Business organizations evaluate the results of the benchmarking process in terms of improvements vis-a-
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 is process of continuous improvement in search for_____ advantage.

♥ Benchmarking is a remedy for all problems faced by organizations.
Incorrect: Benchmarking is an approach of setting goals and measuring productivity based on best industry practices and is a process of
continuous improvement in search for competitive advantage. However, it is not panacea for all problems. Rather, it studies the
circumstances and processes that help in superior performance. Better processes are not merely copied. Efforts are made to learn, improve
and evolve them to suit the organizational circumstances.
♥ Define Benchmarking.
♥ What is Benchmarking? Explain briefly the elements involved in Benchmarking process.
♥ What is Benchmarking? What are the areas where benchmarking can help?
Benchmarking helps in improving performance by learning from best practices and the processes by which they are achieved. It 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. Benchmarking can help in almost all aspect of business that are amenable
to comparison and are significant to business. Typically, organisations can use benchmarking process to achieve improvement in diverse range of
management function like:
a. Maintenance operations
b. Assessment of total manufacturing costs
c. Product development
d. Product distribution
e. Customer services
f. Plant utilization levels
g. Human resource management

Total Quality Management (TQM)

What is TQM?
1. People-focused management system that aims at continual increase in customer
satisfaction at lower real cost.
2. CROSS FUNCTIONAL & ORGANISATIONAL APPROACH.

It works horizontally across functions and departments, involves all employees, top to
bottom, and extends backward and forward to include the supply chain and the customer
chain.
3. Simply sorting good products from bad was not the most efficient way to assure a quality
output.
4. A more effective management philosophy might focus on actions to prevent a defective

product from ever being created.
5. The concept of quality control need not be restricted only to manufacturing processes.
6. The idea of assuring quality could also be applied to administrative processes service
industries and all sphere of organization activity.
7. The TQM philosophy greatly emerged under Edward Deming's guidance, who is regarded by many
as the father of TQM.
8. (For Reading Only) - Interestingly, Deming's quality management philosophies were first developed in the years prior to World War II. Deming
believed quality management should be pervasive, and should not focus on merely sorting good products from bad. He believed that the
responsibility for quality should be shared by everyone in an organization. Perhaps most significantly, Deming recognized that most quality
problems were system-induced and were therefore not related to workmanship. But Deming's work only saw limited application in the United States
prior to World War II, Subsequently Deming was brought to Japan by General Douglas MacArthur to serve as a management consultant to the
Japanese as they rebuilt their industrial base.
9. Taguchi and Ishikawa contributed heavily to these disciplines.
"TQM is a management philosophy, an abstract entity!"

But TQM is not an overnight cure for an organization's quality problems. The TQM implementation process
is not a program. A TQM implementation effort has a beginning, but if implemented properly, it does not
have an ending. The continuous improvement process continues indefinitely in organizations that
successfully implement TQM. TQM requires patience when embarking on its journey.
TQM and Traditional Management Practices

1. Quite different from traditional management practices,
2. Requiring changes in organizational processes, beliefs and attitudes, and behaviors.

3. The nature of TQM differs from common management practices in many respects. Some of the key
differences are as follows:
Strategic Planning and Management:

TQM consider quality as performance parameter.
Quality planning and strategic business planning are indistinguishable in TQM.
Quality goals are the cornerstone of the business plan.
Measures such as customer satisfaction, defect rates, and process cycle times receive as much
attention in the strategic plan as financial and marketing objectives.
In other words, TQM Consider Quality as a measurable thing and consider that it should be part
of strategic planning and management
Changing Relationships with Customers and Suppliers:

Traditional management places customers outside of the enterprise and within the domain of
marketing and sales.
TQM views everyone inside the enterprise as a customer of an internal or external supplier, and a
supplier of an external or internal customer.
Organizational Structure:
TQM views the enterprise as a system of interdependent processes.
Each process is connected to the enterprise's mission and purpose.
TQM looks beyond the functional boundaries
Organizational Change:
TQM consider change as given.
In TQM the environment in which the enterprise interacts is considered to be changing constantly.
There is a strong need for continual improvement and innovation in processes and systems,
products, and services.
External change is inevitable, but a favorable future can be shaped.
Teamwork:
In TQM individuals cooperate in team structures such as quality circles, steering committees, and
self-directed work teams.
Departments work together toward system optimization through cross-functional teamwork.
Motivation and Job Design:

TQM managers provide leadership rather than intervention in the processes of their subordinates,
who
People are viewed as process managers rather than functional specialists.
People 'are motivated to make meaningful contributions.

The system enables people to feel like winners.
♥ Distinguish between the TQM and Traditional Management Practices.

♥ Define TQM.
♥ Fill in the blank Total Quality Management is a people focused management system that at continual increase in ______
at continually lower real cost. (Customer Satisfaction)
Six Sigma
What is Six Sigma?
1. Six Sigma means maintenance of the desired quality in processes and end products.
2. It means taking systematic and integrated efforts toward improving quality and reducing cost.
3. It is a highly disciplined process that helps in developing and delivering near-perfect products
and services.
4. Six Sigma strives that99.99966% of products manufactured are defect free.
5. Six Sigma is a total management commitment and philosophy of excellence, customer focus,
process improvement, and the rule of measurement rather than gut feel.
Six Sigma Methodologies

For implementing six sigma there are two separate key methodologies for existing and new processes.
Conceptually there is some overlapping between the two. The two methodologies as follows:
DMAIC: DMAIC methodology is an acronym for five different steps used in six sigma directed towards
improvement of existing product, process or service. The five steps are as follows:
1. Define: To begin with six sigma experts define the process improvement goals that are
consistent with the strategy of the organization and customer demands. They discuss different
issues with the senior managers so as to define what needs to done.
2. Measure: The existing processes are measured to facilitate future comparison. Six sigma
experts collect process data by mapping and measuring relevant processes.
3. Analyze: Verify cause-and-effect relationship between the factors in the processes. Experts
need to identify the relationship between the factors. They have to make an comprehensive
analyses to identify hidden or not so obvious factor.
4. Improve: On the basis of the analysis experts make a detailed plan to improve.
5. Control: Initial trial or pilots are run to establish process capabilities. Afterwards
continuously measure the process to ensure that variances are identified and corrected
before they result in defects.

Six Sigma Methodologies
For Existing Process, Product or Service
DMAIC
Define Measure Analyze Improve Control
Process On basis of analysis

Existing process Verify cause & Run initial trial to
improvement goals experts make
measured for effect relation b/w establish process
consistent with detail plan to
future comparison factors in process capabilities
org. startegy & improve
customer demands
experts collect
data by mapping & Continously
measure relevant measure process
process
Identify variances
& correct before it
result in defects
DMADV: DMADV is again acronym for the steps followed in implementing six sigma. It is a strategy for
designing new products, processes and services.
1. Define: As in case of DMAIC six sigma experts have to formally define goals of the design activity
that are consistent with strategy of the organization and the demands of the customer.
2. Measure: Next identify the factors that are critical to quality (CTQs). Measure factors such
as product capabilities and production process capability. Also assess the risks involved.
3. Analyze: Develop and design alternatives. Create high-level design and evaluate to select the best
design.
4. Design: Develop details of design and optimize (improve) it.

5. Verify: Verify designs through simulations or pilot runs. Verified and implemented processes are
handed over to the process owners. Verify designs may require using techniques such as simulations.
Six Sigma
Methodologies
For New Process, Product or Service
DMADV
Define Measure Analyze Design Verify
Identify factors Develop & Verify design

Measure factors Assess risk Develop details
Same as DMAIC critical to design through pilot
like- involved of design &
quality alternatives runs
improve it
Product Create high- Hand over

capabilities level design verified design
to process
owners
Production
Select best
process
design
capability
♥ What is Six Sigma? How is it different from other quality programs? Explain in brief themes of Six Sigma.
Six sigma and other quality programs
Six sigma is improvement over other quality programmes:
a. Six Sigma is customer focused. It strives to provide better satisfaction to the customer owning the product.
b. Six Sigma is a total management commitment and philosophy of excellence, process improvement and the rule of measurement.
c. Six Sigma induces changes in management operations - new approaches to thinking, planning and executing to achieve results.
d. Six Sigma combines both leadership (Top management) and grassroots energy (People who are actually dealing with customers)
and involvement for its success.
Principles guiding TQM

(Read them twice – No Need to Mug Up)
There are several principles that guide success of TQM. Various principles that guide the total quality
management philosophy are as follows:
A sustained management commitment to quality

1. The commitment to do so has to start at the top.
2. Almost any organization's senior managers will claim they are committed to quality, but how they
act at the end sets the tone for the entire organization.

3. If management is willing to take a sales hit if quality levels are not up to requirements, the rest of
the organization will understand the commitment to quality is real.
Focusing on the customer

According to Lee lacocca there are only three rules: Satisfy the customer, satisfy the customer, and
satisfy the customer. This sums up the importance of customer focus in the TQM philosophy. Ultimately
it is the satisfaction of the customers that determines the success of an organisation.
Preventing rather than detecting defects

TQM is a management philosophy that seeks to prevent poor quality in products and services, rather than
simply to detect and sort out defects. "An ounce of prevention is worth a pound of cure." This also saves
cost and time.
Universal quality responsibility

Another basic TQM precept is that the responsibility for quality is a guiding philosophy shared by everyone
in an organization.
As quality improves, the quality assurance department gets smaller.
In fact, world over, a few companies fully committed to TQM have done' away completely with their quality
assurance organizations.
Quality measurement
The quality measurement aspect of TQM asks the question: Where are we and where are we going? A
basic TQM concept is that quality is a measurable commodity, and in order to improve, we need to know
where we are (or stated differently, what the current quality levels are), and we need to have some idea
where we are going (or what quality levels we aspire to). This is an extremely important concept
Continuous improvement and learning

Continuous improvement is part of the management of all systems and processes. "Continuous
improvement" refers to both incremental and "breakthrough" improvement. Improvements may be of
several types:
Enhancing value to the customer through new and improved products and services;
Developing new business opportunities;
Reducing errors, defects, and waste;
Improving responsiveness and cycle time performance; and
Improving productivity and effectiveness in the use of all resources.
"Learning" refers to adaptation to change, leading to new goals or approaches. They should be a regular
part of daily work, seek to eliminate problems at their source, and be driven by opportunities to do better
as well as by problems that need to be corrected.

Root cause corrective action:

TQM seeks to prevent this by identifying the root causes of problems, and by implementing corrective
actions that address problems at the root cause level.
Employee involvement and empowerment:

Employee involvement means every employee is involved in running the business and plays an active role in
helping the organization meet its goals.
Employee empowerment means employees and management recognize that many obstacles to achieving
organizational goals can be overcome by employees who are provided with the necessary tools and authority
to do so.
The synergy of teams:

Taking advantage of the synergy of teams is an effective way to address the problems and challenges of
continuous improvement.
Dr. Ishikawa first formalized the team’s concept as part of the TQM philosophy by developing quality
circles in Japan.
Thinking statistically:
Statistical thinking is another basic TQM philosophy. Quality efforts often require reducing process or
product-design variation, and statistical methods are ideally suited to support this objective.
Inventory reduction:
This management philosophy became known as Just-in- Time (or JIT, for short) inventory management.
The Japanese JIT inventory management concepts caught on in the United States and other nations. As
inventories grew smaller, quality improved.
Value improvement
The linkage between continuous improvement and value improvement is simultaneously obvious and subtle.
The essence of value improvement is the ability to meet or exceed customer expectations while removing
unnecessary cost.
But simply cutting costs, however, will not improve value if the focus does not remain on satisfying
customer requirements and expectations.
Supplier teaming
Another principle of the TQM philosophy is to develop long-term relationships with a few high-quality
suppliers, rather than simply selecting those suppliers with the lowest initial cost.
Training
Training is basic to the TQM process. The concept is based on of empowering employees by providing the
tools necessary for continuous improvement. One of the most basic tools is training.

Six Themes of Six Sigma

((Read them twice – No Need to Mug Up))
The critical elements of Six Sigma can be put into six themes as follows:
Theme one - genuine focus on the customer:

In Six Sigma, customer focus becomes the top priority. For example, the measures of Six Sigma
performance begin with the customer. Six Sigma improvements are defined by their impact on customer
satisfaction and value.
Theme two - data and fact-driven management:

Six Sigma takes the concept 'of "management by fact" to a new, more powerful level.
It Measures business performance and then analyze key variables.
At a more down-to-earth level, Six Sigma helps managers answer two essential questions to support data-
driven decisions and solutions.
♦ What data/information do I really need?
♦ How do we use that data/information to maximum benefit?
Theme three - processes are where the action is:

Six Sigma positions the process as the key vehicle of success. Everything else including customer
satisfaction is secondary. Mastering processes is a way to build competitive advantage in delivering value
to customers.
Theme four - proactive management: Being proactive means acting in advance of events rather than
reacting to them. It focuses on setting clear priorities, problem prevention rather than fire-fighting.
Six Sigma, encompasses tools and practices that replace reactive habits with a dynamic, responsive,
proactive style of management.
Theme five –boundary less collaboration: The opportunities available through improved collaboration
within companies and with vendors and customers are huge. Billions of dollars are lost every day because
of disconnects and outright competition between groups that should be working for a common cause:
providing value to customers.
Theme six - drives for perfection; tolerate failure: No company will get even close to Six Sigma
without launching new ideas and approaches-which always involve some risk. If people who see possible
ways to be closer to perfect are too afraid of the consequences of mistakes, they'll never try.
Finally, we must bear in mind that Six Sigma is a gradual process. It starts with a dream or a vision

♥ Explain the meaning of Six Sigma

Six sigma: Six sigma is a highly disciplined process that helps in developing and delivering near-perfect products and services. It strives to meet and
improve organizational outputs in terms of quality, cost, scheduling, manpower, new products and so on. It works continuously towards revising the
current standards and establishing higher ones. It means taking systemic and integrated efforts towards improving quality and reducing cost.
♥ The main focus of six sigma is on the shareholders. T/F with reason.
Incorrect: Although any business action may result directly or indirectly in creation/erosion of shareholder’s wealth, the main focus of six sigma is on
delivering value to the customers. Six sigma aims in improving customer satisfaction. Primarily, six sigma means maintenance of the desired quality
in processes and end products. It also means taking systematic and integrated efforts toward improving quality and reducing cost.
♥ The focus of six sigma is on customers. T/F with reason.

Correct: Six sigma puts the customer first and uses facts and data to derive better solutions and products. Six sigma focus on three main areas:
improving customer satisfaction, reducing cycle time and reducing defects.
♥ Distinguish between DMAIC and DMADV Methodology of Six Sigma.

DMAIC methodology is directed towards improvement of existing product, process or service.
DMADV is a strategy for designing new products, processes and services.
Strategic management for Different organizations.

Governmental agencies and departments
Strategies help Governmental agencies and departments in using taxpayers' money in the most cost-
effective way to provide services and programs.
1. Features of Government Organization
a. Less strategic autonomy
b. Little freedom in altering the organizations' missions or redirecting objectives.
c. Legislators and politicians often have direct or indirect control over major decisions and
resources.
d. Strategic issues get discussed and debated in the media and legislatures. Issues
become politicized, resulting in fewer strategic choice alternatives.
e. Their employees get excited about the opportunity to participate in the strategic-
management process and thereby have an effect on the organization's mission, objectives,
strategies, and policies.
2. In addition, government agencies are using a strategic management approach to develop and
substantiate formal requests for additional funding.
♥ Describe briefly the use of Strategic Management techniques in Educational Institutions. (Important)
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. Through the use of strategic management techniques such institutions are expected to concentrate
attention towards:
• Getting better name and recognition.
• Attracting talented students.
• Designing better curriculum
• Appointing and retaining quality faculty for teaching.
• Preparing students for the future challenges by capacity building (public speaking, interview skills, personality development).

♥ Not-for-profit organizations are not required to have a strategy.

Incorrect: Similar to commercial organizations, 'not-for-profit' organizations must also have a strategy. It is required to give it direction, focus
and efficient utilization of resources. In many 'not-for-profit' organizations surpluses are important for their survival and growth.
♥ Explain the role of strategic management in Medical Organizations.
Medical organizations such as hospitals are often not-for-profit organizations. At the same time there is existence of medical
organizations that have commercial interest. Whether they in for profit or are in charitable nature, the tools and techniques of
strategic management are equally important. The role of strategic management can be expressed as follows.
Medical organizations need to follow the process of strategic management. They work under complex and turbulent
environment with changes in macroeconomic factors covering economic, social, legal, technological factors. They need to set
their mission, look for strategic alternatives and implement their chosen strategies, etc. In fact, all the steps in the process of
strategic management are relevant for them. Medical organizations may also have survival and growth strategies. Hospitals
may diversify to form chain of pathological labs or open pharmaceutical shops. Strategic management can also help in providing
better services to the patients.
Like any organization, medical organizations also compete with each other. Strategic management helps to function and
succeed within the competitive pressures.
Thus the role of strategic management in medical organizations is similar to any other organization. In fact, Hospitals are
creating new strategies today with advances in the diagnosis and treatment methods. Hospitals are bringing services to the
patient as much as bringing the patient to the hospital. Pathological laboratories have started collecting door-to- door samples.
Providing day-treatment facilities, electronic monitoring at home, user-friendly ambulatory services, and laboratory testing.
For Your Reading
Strategies for Internet Economy

The Internet economy presents opportunities and threats that demand strategic response and that require
managers to craft bold new strategies.
What is Internet Technology?

The Internet is an integrated
network of servers and high-speed computers, digital switches and routers, telecommunications equipment
and lines, and individual users' computers.
Impact of Internet on Business Environment. The following features stand out:

1. The Internet makes it feasible for companies everywhere to compete in global markets:
2. Competition in an industry is greatly intensified by the new e-commerce strategic initiatives of existing rivals
and by the entry of new, enterprising e-commerce rivals
3. Entry barriers into the e-commerce world are relatively low
4. Online buyers gain bargaining power.
5. The Internet makes it feasible for companies to reach beyond their borders to find the best suppliers.
6. The Internet can be an economical means of delivering customer service.
7. The capital for funding potentially profitable e-commerce businesses is readily available.
8. The needed e-commerce resource in short supply is human talent-in the form of both technological expertise
and managerial know-how

♥ How internet has helped business?

The Internet is an integrated network of high-speed computers and servers, digital switches and routers, telecommunications equipment and
lines and individual computers of users. The Internet has provided a very fast means of communication to business with no geographic
limitations. Internet also makes it feasible for companies to find, negotiate and deal across the world with suppliers on one hand and
customers on the other. The evolving Internet technology is altering industry value chains, spawning substantial opportunities for increasing
efficiency and reducing costs, and affecting strengths and weaknesses of business organisations.
♥ Write a short note on Internet Technology.

♥ E-commerce technology opens up a host of opportunities for reconfiguring industry and company value chains. T/F with reason
Correct: The impact of e-commerce technology on industry and company value chains is profound, paving the way for fundamental changes
in the ways business is conducted both internally, and with suppliers and customers. Using the network to link the customers and the suppliers
enables just-in-time delivery, reducing inventory costs and allowing production to match demand.

QUESTIONS
1. ___________________________ refers to the analysis and redesign of workflows and processes both within and
between the organizations. It involves total ___________________ and ______________ of a business process.
2. Reengineering is about business reinvention, NOT: _________________________, _____________________
_______________ or __________________________.
3. A process is a set of __________________________or activities oriented towards achieving a ____________
_____________ and often go beyond __________________or _________________boundaries.
4. The objective of BPR is to obtain quantum gains
In: __________________________________________
In terms of: _________, __________, _____________, ______________, ____________________________
How: _______________________________________
5. Some processes turn out to be extremely critical for the success and survival of the enterprise and they are
known as ____________________________. These are the focus of BPR.
6. The generic business processes of a firm needing redesign may be classified into 3 broad categories as follows:
(1) (2) (3)
7. The ____________________________of a company is a major basis for its competitiveness.

8. _______________________________is a deficient approach when a company is far behind the industry
standards, and needs rapid quantum leaps in performance.
9. State 3 factors that have accelerated over the last decade to improve business processes:
(1) (2) (3)
10. List down the steps that are followed to implement BPR in organizations:
1. 1.
2. 2.
3. 3.
4. 4.
5. 5.
(1) (2)

1.
2.
3.
4.
5.
(3)
11. IT initiatives provide business values in 3 distinct areas. They are:
(1) (2) (3)
12. The thrust area of BPR is reduction of the total cycle time of a business process. Total cycle here comprises of?
(1) (2) (3)
13. State the basic and distinguishing features of BPR:
(1) (2) (3)
14. List down the problems that arise while implementing BPR:
1. 1.
2. 2.
3. 3.
4. 4.
5. 5.
(1) (2)

1.
2.
3.
4.
(3)
5.
15. State with reasons which of the following statements is correct / incorrect:
a) Reengineering mean partial modification or marginal improvement in the existing work processes.
b) BPR is an approach to maintain the existing growth of an organization.
c) Benchmarking and Business process Reengineering are one and the same.
16. ___________________is an approach of setting goals and measuring productivity based on best industry
practices.
17. Some of the common elements of benchmarking process are:
(1) (2) (3)
18. Benchmarking is process of continuous improvement in search for__________________ advantage.

19. Benchmarking is a remedy for all problems faced by organizations. True/False? _____________
20. State some of the areas where benchmarking can help:
(1) (2) (3)
21. TQM is a ___________ focused management system that aims at continual increase in __________________
satisfaction at lower _________________. It is a cross _______________ & _________________ approach.

22. The TQM philosophy greatly emerged under the guidance of _________________, who is regarded by many as
the father of TQM.
23. Six Sigma means __________________________________________________________________________. It
is a highly disciplined process that helps in ____________________________________________________
_____________________.
24. Six Sigma has its base in the concept of ______________________________________________ in statistics. It
strives that _________% of products manufactured are defect free.
25. Distinguish between TQM and Traditional Management Practices.
Basis TQM Traditional Management
Practices
26. For implementing six sigma there are two separate key methodologies for existing and new processes. Name
them and state the steps under each:
Name: Name: Name:
Steps: Steps: Steps:
1. 1. 1.
2. 2. 2.
3. 3. 3.
4. 4. 4.
5. 5. 5.
Name: Name: Name:
Steps: Steps: Steps:
1. 1. 1.
2. 2. 2.
3. 3. 3.
4. 4. 4.
5. 5. 5.
(1) (2) (3)
27. Root cause corrective action is one of the six themes of Six Sigma. True/False? ____________
28. The management philosophy of inventory reduction became known as _____________________.
29. The main focus of six sigma is on the shareholders. True/False? ____________

30. The focus of six sigma is on customers. True/False? ____________

31. List some of the principles guiding TQM: (10-12 points)
(1) (2) (3)
32. List the six themes (Critical elements) of Six Sigma:
(1) (2) (3)

33. State if Strategic management is useful for the following organizations: (Yes/No)
a) Governmental agencies & departments ___________
b) Educational Institutions ___________
c) Not-for-profit organizations ___________
d) Medical Organizations ___________
34. E-commerce technology opens up a host of opportunities for reconfiguring industry and company value chains.
True/False? ___________

Question Bank
PLEASE NOTE Answers are given only for new questions, many questions (with answers) are already
covered in the relevant chapter and topics
♥ What are the different responsibilities of a strategic leader? (3 Marks)
Answer
A strategic leader has several responsibilities, including the following:
Environment Scanning.
Dealing with the diverse and cognitively competitive situations.
Managing human capital.
Effectively managing the company's operations.
Sustaining high performance over time.
Willing to make candid, courageous, and yet pragmatic decisions.
Decision-making responsibilities that cannot be delegated.
Seeking feedback through face-to-face communications.
Being spokesman of the organisation.
♥ A global company has three characteristics. Explain. (3 Marks)
Answer
The global company views the world as one market minimizing the importance of national boundaries. It has three attributes:
(i). It is a conglomerate of multiple units located in different parts of the globe but all linked with common ownership.
(ii). Multiple units draw a common pool of resources such as money, credit, patents, trade name, etc.
(iii). The units respond to common strategy.
♥ From the following information relating to X Ltd. Company, prepare BCG Matrix and also analyse it.
Product Revenues (in Rs.) Percent Profit (in Rs.) Percent Percentage Percentage Industry
Revenues Profit Market Share Growth Rate
A 60 Crore 48 1200 Lakh 48 80 + 15
B 40 Crore 32 500 Lakh 20 40 + 10
C 20 Crore 16 750 Lakh 30 60 -20
D 05 Crore 04 50 Lakh 02 05 -10
Total 125 Crore 100 2500 Lakh 100
♥ Identify the Generic Strategy used in the following examples:

I. Bell Computer has decided to rely exclusively on direct marketing.
II. Our basic strategy was to charge a price so low that micro computer makers couldn't do the software
internally for that cheaply.
III. 'MDTV', a TV channel has identified a profitable audience niche in the electronic media. It has further
exploited that niche through the addition of new channels like 'MD TV' Profit and Image. (3 Marks)
Answer
In the given examples the generic strategies that are being followed are given as under:
(i) Differentiation: Bell Computers is differentiating on product delivery as computer market is highly competitive and
the products are very similar.
(ii) Cost Leadership: Keeping the prices low so that microcomputer makers acquire the software rather than developing
themselves is a case of cost leadership.
(iii) Focus: MDTV has identified a profitable area (audience niche) and is focusing on it.
♥ What do you mean by Logistic Strategy? What are the different areas to examine while developing a logistic
strategy?
♥ Distinguish between Operational Control and Management Control. (3 marks)
Difference between Operational Control and Management Control is 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 a most effective and efficient manner.
♥ State with reasons which of the following statements are correct/incorrect:

a. PESTLE analysis is used to monitoring the micro environmental factors. (I)
b. Growth share matrix is popularly used for resource allocation. (C)
c. For a small entrepreneur vision and mission are irrelevant. (I)
d. Vertical diversification integrates firms forward or backward in the product chain. (C)
e. Production strategy implements, supports and drives higher strategies. (C)
f. SBU concepts facilitate multi-business operations. (C)
g. Strategies may require changes in organizational structure. (C)
h. Benchmarking is a remedy for all problems faced by organizations. (I)
i. The thrust of operational control is on individual tasks or transactions. (C)
♥ Explain the meaning of the following concepts:

(a) Demographic environment
(b) ADL Matrix
(c) Directional Strategies (Hint: stability, expansion, retrenchment and combination known as
directional/grand strategies.)
(d) Synchro-marketing
♥ Distinguish between the following:

(a) SWOT and TOWS Matrix
(b) Mergers and acquisitions
Answer (a)
TOWS Analysis is a variant of the classic business tool, SWOT Analysis. TOWS and SWOT are acronyms for different arrangements
of the words Strengths, Weaknesses, Opportunities and Threats. By analyzing the external environment (threats and
opportunities), and internal environment (weaknesses and strengths), we can use these techniques to think about the strategy
of a company. Following are some basic differences between TOWS and SWOT matrix:
TOWS emphasizes on external environment whereas SWOT emphasizes on internal environment.
TOWS matrix is about the combinations of SO, ST, WO, WT whereas SWOT matrix is about S, W, 0, T.
TOWS analysis is an action tool whereas SWOT analysis is a planning tool.
TOWS are particularly useful in evaluating the potential impact of sudden events or developments while SWOT is
usually employed in evaluating a company's business plan.
Answer (b)
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.
♥ Write short notes on the following:

(a) Co-generic merger
Answer (a)
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 includes the extension of the product line or

acquiring components that are required in the daily operations. It offers great opportunities to businesses to diversify around
a common set of resources and strategic requirements. For example, organization in the white goods categories such as
refrigerators can diversify by merging with another organization having business in kitchen appliances.
♥ Explain the model which has been inspired from traffic control lights. (Hint – Explain GE Model) (Imp)
♥ An organization wants to start a new business and would like to understand the structure of competition in the industry.
Identify the factors that an organization should analyze.
Answer - Industry and competitive analysis can be done using a set of concepts and techniques to get a clear
understanding of key industry traits, the intensity of competition, the drivers of industry change, the market positions
and strategies of rival companies, the keys to competitive success, and the industry's profit outlook. The factors that
can be analyzed are:
Dominant economic features of the industry

Nature and strength of competition
Triggers of change
Identifying the companies that are in the strongest/weakest positions
Likely strategic moves of rivals
Key factors for competitive success
Prospects and financial attractiveness of industry
♥ Answer the following

Assume that you are an entrepreneur who has an intense desire to get into the business. What types of information
elating to macro environment would you need to determine external opportunities and threats? (3 Marks)
Answer 3 from above questions
Macro environment mainly consists of economic, technological, political, legal and socio- cultural elements. For an
entrepreneur it is important to identify those factors that are likely to affect the new business. Each of the elements
can have a bearing on the opportunities and the threats.
Particularly, he should scan the relevant changes that have happened in recent past that can provide competitive
edge. For example, a technological innovation in the production process can be opportunity. Incentives such as
cheaper land, tax free periods can be other form of opportunities. Entrepreneur has to identify such opportunities
that can be capitalized to enter markets or provide an edge over the competitors. Entrepreneur has to also take
care as these opportunities can also act as threats when competitors are able to exploit them.
♥ What are the major stages in the strategic management process? (3 Marks)
The major stages in the strategic management process are:
(i) Develop vision and mission statements

(ii) Perform internal and external audit
(iii) Establish long-term objectives
(iv) Generate, evaluate, and select strategies
(v) Implement strategies considering management issues
(vi) Implement strategies marketing, finance, accounting, R&D, MIS issues
(vii) Measure and evaluate performance
♥ Discuss the leadership role played by the managers in pushing for good strategy execution.
Answer
A strategy manager 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, policy enforcer, and head cheerleader. 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.
♥ How would you argue that modern enterprises pursue multiple objectives and not a single objective?
Answer
Objectives are organizations performance targets - the results and outcomes it wants to achieve. They function as yardstick
for tracking an organizations performance and progress.
Today, organizations are capable of achieving multiple objectives and they focus on different objectives rather than a single
objective. In general, we may identify a set of business objectives being pursued by the business. These may relate to
profitability, productive efficiency, growth, technological dynamism, stability, self-reliance, survival, competitive strength,
customer service, financial solvency, product quality, diversification, employee satisfaction and welfare, and so on.
Organizations need to balance these objectives in an appropriate manner.
♥ Distinguish between the following:

(a) Cost Leadership and Differentiation Strategies (4 Marks)
Answer
(a) According to Porter, strategies allow organizations to gain competitive advantage from three different bases: cost
leadership, differentiation, and focus. 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.
♥ State with reasons which of the following statements are correct/incorrect:
1. Diversity in environment makes it difficult to understand.

2. An organization with intense competition is unlucky.
3. The technology and business are highly interrelated and interdependent.
4. A sound strategy does not leave any scope for miscalculations.
5. The strategic management process ends with implementation.
6. Strategy formulation heavily relies on intuition and hunch.
7. One or two key success factors may outrank others.
8. Strategic planning always flows from top to bottom.
9. Stability strategies are do-nothing approach to manage
10. Cost-plus pricing ensures profits in competition. - Incorrect
11. Network structure creates virtual organisations.
♥ Briefly answer the following questions:
(a) How production strategy implements, supports and drives higher strategies?

Answer
For effective implementation of higher level strategies, strategists need to provide direction to functional managers, including
production, regarding the plans and policies to be adopted. Production strategy provides a path for transmitting corporate
and business level strategy to the production systems and makes it operational. It may relate to production planning,
operational system, control and research & development.
♥ Discuss how mergers and acquisitions are used for business growth. What are the various types of mergers?
Answers
Types of Mergers
a) Horizontal merger: Horizontal mergers are combinations of firms engaged in the same industry. It is a merger with a
direct competitor. The principal objective behind this type of mergers is to achieve economies of scale in the
production process by shedding duplication of installations and functions, widening the line of products, decrease
in working capital and fixed assets investment, getting rid of competition and so on. For example, formation of Brook
Bond Lipton India Ltd. through the merger of Lipton India and Brook Bond.
b) Vertical merger: It is a merger of two organizations that are operating in the same industry but at different stages of
production or distribution system. This often leads to increased synergies with the merging firms. If an organization
takes over its supplier/producers of raw material, then it leads to backward integration. On the other hand, forward
integration happens when an organization decides to take over its buyer organizations or distribution channels.
Vertical merger results in operating and financial economies. Vertical mergers help to create an advantageous
position by restricting the supply of inputs or by providing them at a higher cost to other players.
c) 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 includes
the extension of the product line or acquiring components that are required in the daily operations. It offers great
opportunities to businesses to diversify around a common set of resources and strategic requirements. For example,
an organization manufacturing refrigerators can diversify by merging with another organization having business in
kitchen appliances.
d) Conglomerate merger: Conglomerate mergers are the combination of organizations that are unrelated to each
other. 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.
November 2014 Suggested Answers

SECTION - B
Question No. 8 is compulsory
Answer any five questions from the rest
♥ You have been hired as a consultant by a company to advise it on factors it need to consider for environmental
scanning. Explain briefly these factors. (3 Marks)
Organizational environment consists of both external and internal factors. Environment must be scanned so as to
determine development and forecasts of factors that will influence organizational success. The factors that need to
be considered are explained below:
Events: Events are important and specific happenings in the internal or external organizational environment
which can be observed and tracked.
Trends: Trends are grouping of similar or related events that tend to move in a given direction, increasing or
decreasing in strength of frequency of observation.
Issues are the current concerns that arise in response to events and trends. Identifying an emerging issue is
more difficult.
Expectations are the demands made by interested groups in the light of their concern for issues.
♥ "A strategic vision is a road map of a company's future." Comment. Draft a strategic vision statement of any well-
known national level Educational Institution you are familiar with. (3 Marks)

A Strategic vision is a roadmap 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.
The vision of ICAI is - World's leading accounting body, a regulator and developer of trusted and independent
professionals with world class competencies in accounting, assurance, taxation, finance and business advisory
services.
♥ In your view what are the Key Success Factors for operating in a competitive market place? (3 Marks)
KSFs are the rules that shape whether a company will be financially and competitively successful. Important key
success factors for operating in competitive markets are:
Cost structure of the market.
The price sensitivity of the market.
Technological structure of the market.
The existing distribution system of the market.
Is the market mature?
♥ How would you argue that Research and Development Personnel are important for effectively strategy
implementation? (3 Marks)
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.
♥ What steps would you suggest to change a company's problem culture? (3 Marks)
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 instill 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.
The menu of culture-changing actions includes revising policies and procedures, altering incentive compensation,
recruiting and hiring new managers and employees, replacing key executives, communication on need and basis
to employees and so on.
♥ State with reasons which of the following statements is correct or incorrect:
(i) Strategic vision and mission statements are needed only by large business houses. (IC)
(ii) An industry can have more than one strategic group. (C)
(2x2=4 Marks)
♥ What is meant by backward integration? Name any two backward integration strategies that hospitals may pursue.
(1 + 2 = 3 Marks)
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.

In case of hospitals there can be number of businesses that can be entered. Following are indicative list of backward
integration strategies that hospitals may pursue:
Drugs and pharmaceuticals - Specific drugs can be manufactured or traded.
Business of gases required in hospitals - oxygen.
Pathology labs / diagnostic services. This can be created in-house if not available already. Alternatively, a
chain can be started.
Blood Banks.
Ambulance services.
♥ "Management of internal linkages in the value chain could create competitive advantage in a number of ways".
Briefly explain. (4Marks)
The management of internal linkages in the value chain could create competitive advantage in a number of ways:
There may be important linkages between the primary activities. For example, a decision to hold high levels
of finished stock might ease production scheduling problems and provide for a faster response time to the
customer. However, an assessment needs to be made whether the value added to the customer by this
faster response through holding stocks is greater than the added cost.
It is easy to miss this issue of managing linkages between primary activities in an analysis if, for example, the
organization's competences in marketing activities and operations are assessed separately. The operations
may look good because they are geared to high-volume, low-variety, low-unit-cost production. However, at
the same time, the marketing team may be selling speed, flexibility and variety to the customers. So
competence in separate activities needs to be compatible.
The management of the linkages between a primary activity and a support activity may be the basis of a
core competence. It may be key investments in systems or infrastructure which provides the basis on which
the company outperforms competition. Computer-based systems have been exploited in many different
types of service organization and have fundamentally transformed the customer experience.
Linkages between different support activities may also be the basis of core competences. For example, the
extent to which human resource development is in tune with new technologies has been a key feature in
the implementation of new production and office technologies. Many companies have failed to become
competent in managing this linkage properly and have lost out competitively.
♥ In the context of Ansoff’s Product-Market Growth Matrix, identify with reasons, the type of growth strategies followed
in the following cases:
(i) A leading producer of tooth paste, advises its customers to brush teeth twice a day to keep breath fresh.
(ii) A business giant in hotel industry decides to enter into dairy business.
(iii) One of India's premier utility vehicles manufacturing company ventures to foray into foreign markets.
(iv) A renowned auto manufacturing company launches ungeared scooters in the
(4 Marks)
♥ To which industries the following developments offer opportunities and threats?
"Increasing trend in India to organize IPL (Cricket) type of tournaments in other sports also (3 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. This matrix further helps to analyze different strategic directions. According to
Ansoff there are four strategies that organization might follow.
(i) Market Penetration: A leading producer of toothpaste, advises its customers to brush teeth twice a day to
keep breath fresh. It refers to a growth strategy where the business focuses on selling existing products into
existing markets.
(ii) Diversification: A business giant in hotel industry decides to enter into dairy business. It refers to a growth
strategy where a business markets new products in new markets.
(iii) Market Development: One of India's premier utility vehicles manufacturing company ventures to foray into
foreign markets. It refers to a growth strategy where the business seeks to sell its existing products into new
markets.

(iv) Product Development: A renowned auto manufacturing company launches ungeared scooters in the
market. It refers to a growth strategy where business aims to introduce new products into existing markets.
An opportunity is a favorable condition in the organization's environment which enables it to strengthen its position.
On the other hand, a threat is an unfavorable condition in the organization's environment which causes a risk for, or
damage to, the organization's position. An opportunity is also a threat in case internal weaknesses do not allow
organization to take their advantage in a manner rivals can.
The IPL (Cricket) tournament is highly profit and entertainment driven. A number of entities and process are involved
in this IPL type tournament. So financial opportunity is for:
Stadiums.
Sports Industry.
Manufactures of sports items.
Media Industry - Sports channels / television, advertisers. It is also threat to entertainment industry as
competitors will be fighting for same viewers.
Tourism and hotel Industry.
Event Management.
♥ Correct/Incorrect with reasoning

State with reasons which of the following statements are correct/incorrect:
(a) Substitute products are latent source of competition. (C)
(b) Enterprises pursue multiple objectives rather than a single objective. (C)
(c) The management of funds can play a pivotal role in strategy implementation. (C)
(d) Not-for-profit organizations are not required to have a strategy. (IC)
(e) The process of strategy avoids matching potential of the organization with the environment opportunities. (C)
(f) There is both opportunity and challenge in 'Change'.(C)
(g) Efficiency and effectiveness mean the same in strategic management. (IC)
(h) Production strategy implements, supports and drives higher strategies. (C)
(i) E-commerce technology opens up a host of opportunities for reconfiguring industry and company value
chains. (C)
(j) A company's strategy has always to be proactive in nature. (IC)
♥ Concept of strategic Intent

A company exhibits strategic intent when it relentlessly pursues an ambitious strategic objective and concentrates its
full resources and competitive actions on achieving that objective. A company's objectives sometimes play another
role - that of signaling unmistakable strategic intent to make quantum gains in competing against key rivals and
establish itself as a clear-cut winner in the marketplace, often against long odds. A company's strategic intent can
entail becoming the dominant company in the industry, unseating the existing industry leader, delivering the best
customer service of any company in the industry (or the world), or turning a new technology into products capable
of changing the way people work and live. Ambitious companies almost invariably begin with strategic intents that
are out of proportion to their immediate capabilities and market positions. They set aggressive objectives and pursue
them relentlessly, sometimes even obsessively.

Analysis of November 2015 Exam of CA IPCC SM
Q.No. Questions Marks C.No. Comments

The environment has many different influences, but it is very difficult for the managers
8(a) 3 1
to make sense of these influences. Why?
Key Success Factors (KSFs) are the rules that shape whether a company will be financially
8(b) and competitively successful? Do you agree with this statement? How to identify an 3 3
industry's key success factors?
"A company should focus on external perspective to define its mission". Support this
8(c) 3 2
statement with reasons.
A Bakery starts producing pastries and other similar products. What type of
8(d) 3 4
diversification strategy is being following by it and why?
Explain any three prominent areas where Human Resource Manager can play a strategic
8(e) 3 5
role.
9(a) State with reasons which of the following statement is correct or incorrect:
(i)Business Process Reengineering (BPR) means partial modification or marginal
2 7
improvement in the existing work processes.
(ii) Portfolio analysis helps the strategists in identifying and evaluating various businesses
2 3
of a company.
9(b) "Supply Chain Management is conceptually wider than Logistic Management". Explain. 3 5
10 What is Benchmarking? Explain the various steps in Benchmarking process. 7 7
Identify with reasons the type of growth strategies followed in the following cases:
(i) A leading producer of confectionery products advertising the new uses of its
product 'Chokoo Mix' aggressively.
11(a) (ii) A Company in publishing industry deciding to revise college text books.
(iii) A renowned company in textile industry starting to manufacture PFY and PSF,
critical raw materials for textiles.
(iv) A business giant in auto manufacturing enters into edible oils, hotels, financial
services and dairy businesses. 4 3
'To coordinate more complex organizational functions, companies should abandon the
11(b) 3 6
simple structure in favour of the functional structure' Discuss.
Can a business succeed in the long run by focusing only on profit as its primary objective?
12(a) 4 1
What are other objectives of a business?
'Organizations sustain superior performance over a long period of time, in spite of the
12(b) rapid changes taking place continually in its competitive environment if they implement 3 2
strategic management successfully.' Discuss.
13 Distinguish between the following:
(a) Transformational Leadership Style and Transactional Leadership Style. 4 6
(b) Micro and Macro Environment 3 1
14 Write short notes on the following:
(a) Strategic Decision-making 4 2
(b) Implementation Control 3 6
OR
(b) Situational Analysis 3 3

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Business Process Reengineering

CA Neeraj Arora Page 7. 1

5. Reengineering is about business reinvention - not business improvement, business

Total deconstruction &

In what? In terms of? How? Enhancement

What is a Business Process?

CA Neeraj Arora Page 7. 2

Reasons for BPR (Rationale of BPR – ICAI Study Material)

The operational excellence of a company is a major basis for its competitiveness.

2. Opening up of Indian economy

3. Customer Demand for better product and service

Implementing BPR in organizations

Steps in BPR are as follows:

2. Identify customers and determine their needs: (Undertaking research)

CA Neeraj Arora Page 7. 3

4. Formulate a redesign process plan: (Creation of Vision)

5. Implement the redesign:

Steps to Implement BPR

STEP 1 STEP 2 STEP 3 STEP 4 STEP 5

Impact of IT-systems is identified as:

Central Thrust of BPR

CA Neeraj Arora Page 7. 4

The basic and distinguishing features of BPR are as follows

1. No Partial Modification (Radical redesign)

2. Obsolete Assumptions of Existing process

4. Involvement of Top Level Management

CA Neeraj Arora Page 7. 5

b. BPR is an approach to maintain the existing growth of an organization.

♥ Trace the role of information technology in business process reengineering.

Benchmarking (Homework Topic)

CA Neeraj Arora Page 7. 6

1. Identifying the need for benchmarking:

2. Clearly understanding existing decisions processes

3. Identify best processes

4. Comparison of own process and performance with that of others:

♥ Benchmarking is process of continuous improvement in search for_____ advantage.

CA Neeraj Arora Page 7. 7

Total Quality Management (TQM)

2. CROSS FUNCTIONAL & ORGANISATIONAL APPROACH.

4. A more effective management philosophy might focus on actions to prevent a defective

"TQM is a management philosophy, an abstract entity!"

TQM and Traditional Management Practices

CA Neeraj Arora Page 7. 8

Strategic Planning and Management:

Changing Relationships with Customers and Suppliers:

Motivation and Job Design:

CA Neeraj Arora Page 7. 9

The system enables people to feel like winners.

♥ Distinguish between the TQM and Traditional Management Practices.

Six Sigma Methodologies

CA Neeraj Arora Page 7. 10

Six Sigma Methodologies

For Existing Process, Product or Service

Define Measure Analyze Improve Control

Process On basis of analysis

CA Neeraj Arora Page 7. 11

For New Process, Product or Service

Define Measure Analyze Design Verify

Identify factors Develop & Verify design

Product Create high- Hand over

Principles guiding TQM