Corporate Evolution N Strategic Implementation

By :
Expert Faculties
Publications
SCF-181, HUDA Complex,
Near New Telephone Exchange, Rohtak (Haryana)
CONTENTS
CORPORATE EVOLUTION & STRATEGIC IMPLEMENTATION
Syllabus.......................................................................................5 - 5
UNIT – I......................................................................................6 - 15
UNIT – II...................................................................................16 - 39
UNIT – III..................................................................................40 - 59
UNIT – IV..................................................................................60 - 75
Past Year Question Papers......................................................76 - 78
Worksheet................................................................................79 - 82
COMPUTER NETWORKS AND INTERNET

Syllabus...................................................................................83 - 83
UNIT – I..................................................................................84 - 104
UNIT – II...............................................................................105 - 120
UNIT – III..............................................................................121 - 136
UNIT – IV..............................................................................137 - 160
Past Year Question Papers..................................................161 - 163
Worksheet............................................................................164 - 168
ENTREPRENEURIAL DEVELOPMENT
Syllabus...............................................................................169 - 169
UNIT – I................................................................................170 - 180
UNIT – II...............................................................................181 - 196
UNIT – III..............................................................................197 - 212
UNIT – IV..............................................................................213 - 231
Past Year Question Papers..................................................232 - 234
Worksheet............................................................................235 - 240
SYLLABUS
CORPORATE EVOLUTION
AND STRATEGIC IMPLEMENTATION
MBA–4th SEMESTER, M.D.U., ROHTAK
External Marks : 70 Time : 3 hrs. Internal Marks : 30
UNIT - I
Introduction : Meaning and nature of strategy implementation, interdependence of
strategic formulation and implementation; operationalizing the strategy-annual
objectives, developing business and functional strategies; developing and
communicating concise policies.
UNIT - II
Detailed functional strategies : Developing key functional strategies in marketing in
relation to product, price, promotion and place; key functional strategies in finance in
relation to capital acquisition, capital allocation, dividened and working capital
management, mergers and acquisitional policy; issues involved in R & D and
production/ operations decision areas; functional strategies in personnel viz. employee
recruitment, selection and orientation, career development and counselling,
performance evaluation and training and development, compensation, labout/ union
relations, discipline control and evaluation.
UNIT - III
Institutionalizing the system : Structural considerations simple and functional
orgainisational structures, divisional organisational structure, strategic business units,
matrix organisation; role of structure-linking structure to strategy; organisational
leadership-role of CEO; organisational culture-the strategy-culture connections and its
managing; establishing strategic controls, operational control systems; monitoring
performance and evaluating deviations, reward systems, motivating execution and
control.
UNIT - IV
Strategic review and evaluation : Process and criteria of evaluation of strategy; the case
method of study meaning and kinds of cases; preparation and role of the instructor;
strategic management audit; strategy and corporate evolution in Indian context.
5
CORPORATE EVOLUTION
MBA 4th Semester (DDE)
UNIT – I
Q. What is Strategy Implementation? Explain the Process of Strategy
Implementation.
Ans. Meaning of Strategy Implementation : In simple words strategy implementation is
the process of chosen to strategy to action. Strategy implementation involves the design and
management of systems to achieve the best integration of people, structure, processes and
resources in an efficient and most optimum use.
The implementation tasks put to test the strategists' abilities to allocate resources,
design structures and systems, formulate functional policies, take into account the
leadership styles required, and plan for operational effectiveness, besides dealing with
various other issues.
Aspects of Strategy Implementation : The different aspects involved in strategy
implementation cover practically everything that is included in the discipline of management
studies. A strategist, therefore, has to bring to his or her task a wide range of knowledge,
skills, attitudes, and abilities.
The implementation tasks put to test the strategists' abilities to allocate resources,
design structures and systems, formulate functional policies, take into account the
leadership styles required, and plan for operational effectiveness, besides dealing with
various other issues.
The strategic plan devised by the organization proposes the manner in which the
strategies could be put into action. Strategies, by themselves, do not lead to action. They
are, in a sense, a statement of intent: implementation tasks are meant to realize the intent.
Strategies, therefore, have to be activated through implementation.
The implementation structure is somewhat like that depicted in the following exhibit.
(1) Strategies lead to several plans.
(2) Each plan leads to several programmes.
(3) Each programmes results in several projects.
(4) Projects are supported by funds through budgets
6
CORPORATE EVOLUTION AND STRATEGIC IMPLEMENTATION
(5) The administrative mechanism of policies, procedures, rules and regulations support
the working of the organization while it implements the projects, programmes, plans
and strategies.
In this manner, strategy sits at the top of a pyramid that has projects as its base.
Pyramid of Strategy Implementation :
Strategies
Plans
Programmes
Projects
Budgets
----------------------------------------------------------------
Policies, procedure, Rules and Regulations
Implementation of strategies is not limited to the formulation of plans, programmes,

and projects.
For the purpose of discussion and orderly presentation, we deal with the different
aspects of implementation in the sequence indicated below. But it should be noted that the
sequence does not mean that activities under each of the aspects are necessarily
performed one after another. Many activities can be performed simultaneously, certain other
activities may be repeated over time, and then there are activities which are performed only
once. The different aspects of implementations are:
(i) Project Implementation
(ii) Procedural Implementation
(iii) Resource Allocation
(iv) Structural Implementation
(v) Behavioral Implementation
(vi) Functional and Operational Implementation
7
Process of Strategy Implementation : Strategy implementation involves the following
process, routine or functions:
(1) Structuring and organizing the available resources in ways that are supportive of
strategic Accomplishment
(2) Exercising whatever leadership posture and managerial style is appropriate for the
situation.
(3) Developing functional policies for each critical functions
(4) Allocation of resources
(5) Developing appropriate information system
(6) Developing and implementing suitable management system.
(7) Evaluation and Review of strategy.
The above functions/activities of strategic implementation can be shown with the help
of following:
Implementation of Strategies
Determine Key managerial tasks Evaluate results, assess gaps

And provide feedback
Assign tasks to various parts of
Organization or restructure if
necessary Regularly as certain adequacy
of control mechanism
Delegate Authority relationship Develop manager talent and

And establish methods for educate manager in values
Coordination organization
Make provision for reward system
Allocate resources to SBU's & Deptts. Reinforcing desired behavior
State policies as guide for action Build MIS to provide adequate

And timely data useful for
Classify goals of various business evaluation.
Individual managers
Operationalize way to
measure performance
8
Role of Strategists in Strategy Implementation :
Strategists Resource allocation & Setting Policies and

organization administrative systems
Corporate top Decide Decide
managers
SBU top managers Decide for their units Decide for their units
Corporate Planners Advise manage Advise and help
planning systems
Board of Director Approves major changes Rarely involved
Consultant Occasionally hired to advise Often hired to advise
Q. Discuss the interrelationship that exists between the formulation and

implementation of strategies.
Ans. Strategy Formulation : Formulation of strategies involves the following elements:
1. Performing environmental appraisal,
2. Doing organizational appraisal
3. Considering corporate level strategies
4. Considering business level strategies
5. Undertaking strategic analysis
6. Exercising strategic choice
7. Formulating strategies
8. Preparing a strategic plan.
Strategy Implementation : In simple words strategy implementation is the process of
chosen to strategy to action. Strategy implementation involves the design and management
of systems to achieve the best integration of people, structure, processes and resources in
an efficient and most optimum use. Strategy implementation involves the following
elements:
1. Activating Strategies
2. Designing structures and systems
3. Managing behavioral implementation
4. Managing functional implementation
5. Operationalising strategies.
9
Interrelationship between Strategy Formulation and Strategy Implementation : The
task of strategic management is far from complete after strategies have been formulated
and a concrete strategies plan has been prepared. Then it is the job of strategists to put the
plan into action. It is important to consider the interrelationship between the formulation and
implementation of strategies.
It is to be noted that the division of strategic management into different phases is only
for the purpose of orderly study. In real life, the formulation and implementation process are
intertwined. Two types of linkages exist between these two phases of strategic
management. The forward linkages deal with the impact of the formulation on
implementation while the backward linkages are concerned with the impact in the opposite
direction.
(1) Forward Linkages : The forward linkages deal with the impact of the strategy
formulation on strategy implementation. The different elements in strategy formulation
starting with the various constituents of strategic intent through environmental and
organizational appraisal, strategic alternatives, Strategic Analysis and choice and
ending with the strategic plan, determine the course that an organization adopts for
itself. With the formulation of new strategies, or reformulation leading to modified
strategies, many changes have to be effected within the organization.
Example : For instance, the organizational structure has to undergo a change in light
of the requirements of a modified or new strategy. The style of leadership has to be
adapted to the formulation of strategies. A whole lot of changes have to be undertaken
in operationalising the formulated strategies. Clearly, the strategies formulated
provide the direction to implementation. In this way, the formulation of strategies has
forward linkages with their implementation.
(2) Backward Linkages : Just as implementation is determined by the formulation of
strategies, the formulation process is also affected by factors related with
implementation. While dealing with strategic choice we observed that past strategic
actions also determine the choice of strategy. Organizations tend to adopt those
strategies which can be implemented with the help of the present structure of
resources combined with some additional efforts. Such incremental changes, over a
period of time, take the organization from where it is to where it wishes to be.
It is to be noted that while strategy formulation is primarily an entrepreneurial activity, based
on strategic decision-making, the implementation of strategy is mainly an administrative
task based on strategic as well as operational decision-making. Looked at from another
angle, formulation is a managerial task requiring analysis and thinking, implementation
primarily rests on action and doing.
Q. Identify the roles that annual objectives play in operationalizing the strategy
OR
Q. Identify the roles that annual objectives play in strategic management.
10
Ans. Meaning of Goals : Goals denote what an organization hopes to accomplish in a

future period of time. They represent a future state or an outcome of the effort put in
now. A broad category of financial and non-financial issues are addressed by the goals
that a firm sets for itself.
Meaning of Objectives : Objectives are the ends that state specifically how the goals shall
be achieved. They are concrete and specific in contrast to goals which are generalized. In
this manner, objectives make the goals operational. While goals may be qualitative,
objectives tend to be mainly quantitative in specification. In this way they are measurable
and comparable.
Meaning of Annual Objectives : Annual objective translate long-range aspirations into this
year's budget. If annual objectives are well developed, they provide clarity, which is a
powerful, motivating facilitator of effective strategy implementation.
Characteristics of Annual Objectives:
(1) Annual objectives should be understandable : Because annual objectives play an

important role in strategic management and are put to use in a variety of ways, they
should be understandable to those who have to achieve them.
(2) Annual objectives should be concrete and specific : To say that 'our company
plans to achieve a 12 per cent increase its sales' are certainly better than stating that
'our company seeks to increase in sales'. The first statement implies a concrete and
specific objective and is more l to lead and motivate the managers.
(3) Annual objectives should be measurable and controllable : Annual objectives

should be measurable because annual objectives lay down the standards against
which organizational as well as individual performance could be judged.
(4) Annual Objectives should be challenging : Annual objectives that are too high or
too low are both demotivating and, therefore, should be set at challenging but not
unrealistic levels. To set a high sales targets in a declining market does not lead to
success
Role of Annual Objectives : Annual objectives play an important role in strategic

management.
(1) Annual objectives define the organization's relationship with its environment :
By stating its annual objectives, an organization commits itself to what it has to achieve
for its employees, customers and society at large.
(2) Annual objectives help an organization to pursue its vision and mission : By
defining the long term position that an organization wishes to attain, annual objectives
help an organization in pursuing its vision and mission.
11
(3) Annual objectives provide the basis for strategic decision-making : By directing
attention of strategists to those areas where strategic decision need to be taken,
annual objectives lead to desirable standards of behavior and, in this manner, help to
coordinate strategic decision-making.
(4) Annual objectives provide the Standards for Performance Appraisal : By stating
the targets to be achieved in a given time period, and the measures to be adopted to
achieve them, annual objectives lay down the standards against which organizational
as well as individual performance could be judged. In the absence of annual
objectives, an organization would have no clear and definite basis for evaluating its
performance.
Distinguish Between Long-Term Objectives and Annual Objectives : An annual
objective must be clearly linked to one or more long-term objectives of the business's grand
strategy. However, to accomplish this, it is essential to understand how the two types of
objectives differ. Four basic dimensions distinguish annual and long-term objectives
Sr. Basis of Difference Long-Term Objectives Annual Objectives

No.
1. Time Frame Long-term objectives are Annual objectives are more
focused usually five years immediate, usually involving
or more into the future. one year.
2. Focus Long-term objectives focus Annual objectives identify
on the future position of the specific accomplishments for
firm in its competitive the company, functional
environment. areas, or other subunits over
the next year.
3. Specificity Long-term objectives are Annual objectives are very
broadly stated specific and directly linked to
the company, a functional
area, or other subunit.
4. Measurement While long-term and annual Annual objectives are stated
objectives are quantifiable, in absolute terms.
long-term objectives are
measured in broad,
relative terms.
Q. Write a short note on Developing Business and Functional Strategies.

Ans. Meaning of Functional Strategies : Functional strategy deals with a relatively
restricted plan which provides the objectives for a specific function, for the allocation of
resources among different operations within that functional area and for enabling
coordination between them for an optimal contribution to the achievement of the business
12
and corporate level objectives. Functional strategies are derived from business and
corporate strategies and are implemented through functional and operational
implementation.
An example will serve to make you understand how functional strategies are derived
from business strategies. Suppose a firm adopts a cost-leadership strategy for one of its
businesses. All activities and resources should now be focused on developing a low-cost
structure and reducing costs. When all the functional areas of marketing, finance,
operations, personnel and information management contribute in their own special ways, to
the objectives of the development of a low-cost structure and cost reduction, then the
business strategy of cost-leadership can be successful. Again, if another firm follows a
differentiation business strategy then all the functional areas should focus on creating
differentiation in terms of the product or service that is valued by the customer.
A key task of strategy implementation is to align or fit the activities and capabilities of
an organization with its strategies. There are two types of fit:
(1) Vertical Fit : Strategies operate at different levels and there has to be congruence and
coordination among these strategies. Such congruence is the vertical fit. The
consideration of vertical fit leads us to define functional strategies in terms of their
capability to contribute to the creation of a strategic advantage for the organization.
Looked at this way, we have the following type of functional strategies:
(i) Strategic Marketing Management : It means focusing on the alignment of
marketing management within an organization with its corporate and business
strategies to gain a strategic advantage.
(ii) Strategic Financial Management : It means focusing on the alignment of
financial management within an organization with its corporate and business
(iii) Strategic Operations Management : If implies focusing on the alignment of
operations management within an organization with its corporate and business
(iv) Strategic Human Resource Management : It means focusing on the
alignment of human resource management within an organization with its
corporate and business strategies to gain a strategic advantage.
(v) Strategic Information Management : It means focusing on the alignment of
information management within an organization with its corporate and business
(2) Horizontal Fit : Congruence and coordination among the different activities taking
place at the same level is called horizontal fit. The consideration of horizontal fit means
that there has to be an integration of the operational activities undertaken to provide a
product or service to a customer. These have to take place in the course of operational
implementation
13
Operational implementation is the approach adopted by an organization to achieve
operational effectiveness. When an organization performs value creating activities
optimally and in a way which is better than its competitors, it results in operational
effectiveness.
The consideration of vertical fit and horizontal fit help to explain why integration is necessary
for the different subsets of functional strategies.
Functional strategies are not implemented directly. They have to be defined in terms of
plans and policies.
Functional Plans and Policies : For effective implementation, strategists have to provide
directions 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.
Nature of Functional Plans and Policies : Functional strategies, defined in terms of
functional plans and policies-plans or tactics to implement business strategies, are made
within the guidelines which have been set at higher levels. Plans are formulated to select a
course of action, while policies are required to act as guideline to those actions. Functional
plans and policies are therefore, in the nature of the tactics which make a strategy work.
Need for Functional Plans and Policies : Glueck has suggested five reasons to show why
functional plans and policies are needed. Functional plans and policies are developed to
ensure that:
(1) The strategic decisions are implemented by all the parts of an organization.
(2) There is a basis available for controlling activities in the different functional areas of a
business.
(3) The time spent by functional managers on decision-making may be reduced as the
plans lay down clearly what has to be done and the policies provide the discretionary
framework within which decisions need to be taken.
(4) Similar situations occurring in different functional areas are handled by the functional
managers in a consistent manner.
(5) Coordination across the different functions takes place where necessary.
Q. Write a short note on Developing and Communicating Concise Policies.
Ans. Introduction : Policies let both employees and manager know what is expected of
them, thereby increasing the likelihood that strategies will be implemented
successfully. They provide:
(i) A basis for management control
(ii) Allow coordination across Organizational Units
(iii) Reduce the amount of time managers spend making decisions.
14
Policies also clarify what work is to be done by whom. They promote delegation of
decision making to appropriate managerial levels where various problems usually arise.
Many organizations have a policy manual that serves to guide and direct behavior.
Policies can apply to all divisions and departments. Some policies apply to a single
department. Whatever their scope and form, policies serve as a mechanism for
implementing strategies and obtaining objectives. Policies should be stated in writing
whenever possible. They represent the means for carrying out strategic decision.
Some example issues that may require a management policy are as follows :
(i) To offer extensive or limited management-development workshops and seminars
(ii) To centralize or decentralize employee-training activities
(iii) To recruit through employment agencies, college campuses, and/or newspapers
(iv) To promote from within or hire from the outside
(v) To promote on the basis of merit or on the basis of seniority
(vi) To negotiate directly or indirectly with labor unions
(vii) To delegate authority for large expenditures or to retain this authority centrally
(viii) To allow much, some, or no overtime work
(ix) To establish a high or low-safety stock of inventory
(x) To use one or more suppliers
(xi) To buy, lease or rent new production equipment.
(xii) To establish many or only a few production standards
(xiii) To operate one, two or three shifts
(xiv) To discourage sexual harassment
(xv) To discourage smoking at work
15
CORPORATE EVOLUTION
UNIT – II
Q. Define Functional Strategies. What are the Key functional Strategies in
marketing in relation to Product, Price, Promotion and Place?
Ans. Meaning of Functional Strategies : Functional strategy deals with a relatively
restricted plan which provides the objectives for a specific function, for the allocation of
resources among different operations within that functional area and for enabling
coordination between them for an optimal contribution to the achievement of the business
and corporate level objectives. Functional strategies are derived from business and
corporate strategies and are implemented through functional and operational
implementation.
An example will serve to make you understand how functional strategies are derived
from business strategies. Suppose a firm adopts a cost-leadership strategy for one of its
businesses. All activities and resources should now be focused on developing a low-cost
structure and reducing costs. When all the functional areas of marketing, finance,
operations, personnel and information management contribute in their own special ways, to
the objectives of the development of a low-cost structure and cost reduction, then the
business strategy of cost-leadership can be successful. Again, if another firm follows a
differentiation business strategy then all the functional areas should focus on creating
differentiation in terms of the product or service that is valued by the customer.
Need of Functional Strategies : It is important that an organization periodically (at least
annually, usually as part of the medium-term planning process) review all functional
strategies to assure that they are:
1. Consistent with the business strategy
2. Supportive of the business strategy
3. Consistent with other functional strategies
4. Supportive of other functional strategies
5. Best utilize the organizations strengths
6. Lead to the level of efficiency and effectiveness desired
16
7. Create or maintain functional competitive advantages, if desired

8. Are within the organization's resource constraints
Types of Functional Strategies : Each organization may contain a variety of functional
areas, however, the following represent what are usually the most significant functional
areas of concern regarding strategy.
1. Finance and Accounting: Functional Strategies
2. Human Resources: Functional Strategies
3. Information Systems: Functional Strategies
4. Marketing: Functional Strategies
5. Production/Operations: Functional Strategies
6. Research & Development: Functional Strategies
Functional Strategies in Marketing : Below are some of the more important functional
strategies. It is important that functional strategies be supportive of the overall business
strategy and consistent between themselves.
(A) Product Strategy (Specifying the exact product or service to be offered) : A
product may be defined as a bundle of utilities consisting of various product features
and accompanying services. The bundle of utilities or the physical and psychological
satisfactions that the buyer receives is provided by the seller when he sells a particular
product. In other words, Product denotes the goods and services that an organization
offers to its target markets.
Plans and policies related to products and markets need to be formulated and
implemented on the basis of characteristics, such as, quality, features, choice of
models, brand names, packaging, and so on. Strategies dictate the manner in which
product and market characteristics would be defined.
Examples of Product Strategies :
1. Quality
2. Features and options
3. Styling
4. Brand name
5. Product line and related products
6. Warranties and guarantees
7. Service and after-sale items
17
Types of Product Strategies :
(1) Expansion of Product-Mix : Expanding the line may be a valid decision if it is an area
in which consumers traditionally enjoy a wide variety of brands to choose from and are
accustomed to switching from one to another; or if the competitors lack a comparable
product or if competitors have already expanded into this area themselves. However,
the main limitation in expansion is the availability of sufficient finance, time and
equipment.
Expansion in the present product-mix may be done by increasing the number of line
and/or the depth within a line. Such new line may be related or unrelated to the present
products.
(2) Contracting or Dropping the Product : This is rather more difficult, because much
money has already been invested. When contraction is decided upon, various
alternatives are available to the marketers. The product may be consolidated with
several others in the line so that fewer styles, sizes or added benefits are offered. Or,
the position can be simplified within a line. Even then if a product fails, the company
may stop it altogether.
(3) Alternation of Existing Products : Sometimes, experience may show that improving
an existing product may be more profitable and less risky than developing and
launching a new product. Alteration may be either in the designs, size, colour, or flavor,
or packaging, or in the use of raw materials or in the advertising appeal, or a quality
may be changed. This strategy has to be constantly followed regardless of the width
and depth of product-mix.
(4) Development of New Uses for Existing Products : The Company may find out new
uses for the existing products as when as when Surf may be used not only for washing
clothes but also for cleansing the floor, utensils and glass products.
(5) Trading Up and Trading Down : It involves expansion of the product lines as well as
the promotional strategies.
(i) Trading Up : Trading up refers to the adding of higher priced prestige product to
the existing lines with the intention of increasing sales of the existing low-priced
product. Under trading up, the seller continues to depend upon the older, low
priced product for the major portion of the sales. Ultimately he may shift the
promotional emphasis to the new product so that larger share of sales may go to
the new products.
(ii) Trading Down : Trading down refers to the adding of the low priced items to its
line of prestige product, with the expectation that the people who cannot buy the
original product may buy these new ones because these carry some of the
status of the higher priced goods.
18
The following table illustrates the types of questions that operating strategies must
address in terms of product:
Key Functional Strategies Typical questions that should be

answered by the functional strategy
Product or Service Which products do we emphasize?
Which products/services contribute most
to profitability?
What is the product/service image we
seek to project?
What changes should be influencing
our customer orientation?
(B) Pricing Strategies (Establishing a price for the product or service) : Every firm
has to take pricing decisions from time to time depending upon its pricing policies and
conditions prevailing in the market.
Example of Price Strategies :
1. What is included in the initial price
2. Price level
3. Discounts
4. Terms
Types of Pricing Strategies : Some of the important pricing strategies are discussed
below:
(1) Skimming Price Policy : The skimming price policy is adopted where close
substitutes of a new product are not available. In this pricing policy prices are decided
high. This policy succeeds for the following reasons:-
(a) First, in the initial stage of the introduction of product, demand is relatively
inelastic.
(b) Cross elasticity is usually very low for lack of a close substitute.
(c) High initial prices are helpful in recouping the development costs.
(2) Penetration Price Policy : In contrast to skimming price policy, the penetration price
policy involves a reverse strategy. This pricing policy is adopted generally in the case
of new products for which substitutes are available. This policy requires fixing a lower
initial price designed to penetrate the market as quickly as possible and is intended to
maximize the profits in the long-rum. This policy succeeds for the following reasons:-
19
(a) First, the short run demand for the product should have an elasticity greater than
unity.
(b) Second, the potential market for the product is fairly large and has a good deal of
future prospects.
(c) Third, the product should have a high cross-elasticity in relation to rival products
for the initial lower price to be effective.
(3) Pricing in Relation to Established Products : In pricing a product in relation to its
well established substitutes, generally three types of pricing strategies are adopted:-
(i) Pricing below the ongoing price.
(ii) Pricing at par with the prevailing market price
(iii) Pricing above the existing market price.
(4) Pricing at Prevailing Prices : The strategy is followed to stay in the market because a
price above the market price would sharply bring down sales while a lower price would
not significantly increase sales. The products offered by different producers are
substitutes of each other and there is no product differentiation. Pricing at the
prevailing price is aimed at avoiding price competition.
(5) Stay out Price : When a firm is not certain about the price at which it will be able to sell
its product, it starts with a very high price. If at this high price quotation it is not able to
sell, it then lowers the price of its product. It will keep on lowering the price till it is able to
sell the targeted amount of the product. This approach helps the firm to ascertain the
maximum possible price it can charge from its customers.
(6) Price Lining : Price lining is used extensively by the retailers. The retailers usually
offer a good, better and best assortment of merchandise at different price levels. For
example, a retailer of readymade shirts may sell shirts at three prices: Rs. 190, Rs. 360
and Rs. 750. The first price stands for the economy choice, the second for the medium
quality and the third for the super-fine quality.
(7) Psychological Pricing : Under this policy, prices are fixed in such a way that they
have some kind of psychological influence on the buyers. Odd pricing is a form of
psychological pricing i.e., prices are set at odd amounts such as Rs. 19, Rs. 49, Rs.99
etc.
(8) Limit Pricing : A firm may also try to establish a price that reduces or eliminates the
threat of entry of new firms into the industry. This is called limit pricing.
(9) Follow the Leader Pricing : The pricing policy is generally used under oligopolistic
competition where there are a small number of sellers and any on of them operates on
such a scale that an increase or decrease in his turnover will appreciably affect the
market price. They charge the prices which are charged by the major producer.
20
(10) Discriminatory Or Dual Pricing : Some business enterprises follow the policy of
charging different prices from different customers according to their ability to pay. This
policy is very popular with the service enterprises. E.g, legal and medical services.
(C) Promotion Strategies (How the product or service is to be communicated to
customers) : The purpose of any promotional activity is to inform, and to suggest to
act as per the communication that is dissected from the manufacturer, retailer or
marketer. The promotion can be directed in two ways- towards middlemen or towards
end-user. When promotion is directed at middlemen, it is known as push strategy and
when it is directed at end users it is known as pull strategy.
Example of Promotional Strategies :
1. Advertising 2. Personal selling
3. Promotion 4. Publicity
Types of Promotion Strategies : The marketing activities relevant for the two
promotional strategies are discussed below:
(1) Push Strategy : The product is pushed into the middlemen by carrying trade
promotion (quantity discounts, rebates, gifts, vacations, etc.) through field staff. Thus,
it primarily aims at benefiting the manufacturer and the retailer through increased
sales. However, this strategy has slow impact on the demand creation-particularly for
consumables and consumer goods.
(2) Pull Strategy : The strategy aims at the end users through advertising and sales
promotions. These also include sponsorships. The promotional strategy persuades
the customer to ask intermediaries to provide them with a particular product.
Marketing Marketing
Demand
Creation
Push Strategy Marketer Intermediary Consumer
Pull Strategy Marketer Intermediary Consumer
Marketing Communication
Diagram: Push and Pull Strategies
21
(D) Place Strategies (Selecting the method for distributing the product or service) :
Distribution of products constitutes an important element of marketing-mix of a firm.
After development of the product, the marketing manager has to decide channels or
routes through which the product will flow from the factory to the potential customers.
He has a number of alternatives available to him. The marketer may choose to
distribute the product directly to customers without using any intermediaries.
Alternatively, he may use one or more middlemen including wholesalers, selling
agents and retailers. But the important point that he has to keep in mind is that the
product should move efficiently and at minimum possible cost from the company's
production department to the ultimate customers.
Examples of Place Strategies :
1. Distribution channels
2. Distribution coverage
3. Inventory levels and locations
4. Transportation methods
Types of Place Strategies: Place Strategies are :
1. Distribute through dealer networks or through mass merchandisers : Under this
strategy following situations may be:
(i) Producer, Retailer and Consumer : This is one stage distribution channel
having one middleman i.e., retailer. Under this, the manufacturer sells to the
retailers who in turn sell to the ultimate consumers.
(ii) Producer, Wholesaler, Retailer and Consumer : This is a traditional channel
of distribution for the sale of consumer goods. There are two middlemen in this
channel, namely,
Ø Wholesaler
Ø Retailer
2. Sell directly to consumers through own stores or through internet : This is the
direct channel of distribution which implies direct sale of goods and services by the
producer to the consumer. No middlemen are present between the producers and the
consumers. Direct selling is gaining popularity these days because of high costs of
distributing the goods and services through middlemen. Direct selling is generally
employed to sell industrial goods of high value to the industrial users and to sell
consumer goods such as cloth, cosmetics, hosiery products and shoes. Small
producers and producers of perishable commodities also sell directly to local
consumers. Under direct selling, all the marketing activities are performed by the
producer or the manufacturer himself.
22
Q. What are the key Functional Strategies in finance in relation to capital

acquisition, capital allocation, dividend and working capital management,
mergers and acquisitional policy?
Ans. Functional Strategies in relation to finance : While most operating strategies guide
implementation in the immediate future, the time frame for financial functional strategies
varies because strategies in this area direct the use of financial resources in support of the
business strategy, long term goals and annual objectives. Financial operating strategies
with longer time perspective guide financial managers in long-term capital.
A. Functional Strategies in relation to Capital Acquisition : Plans and policies related
to the capital acquisitions deal with financing or capital-mix decisions. Plans and
policies have to be made for the following major factors:
1. Capital Structure : The term Capital structure refers to the proportion between the
various long-term sources of finance in the total capital of the firm. The major sources
of long term finance include
(i) Proprietor's Funds
(ii) Borrowed Funds.
In the capital structure decisions, it is determined as to what should be the proportion
of each of the above sources of finance in the total capital of the firm. In other words,
how much finance is to be raised from each of these sources. These sources differ
from each other in terms of risk and their cost to the enterprice.
2. Internal Financing Or Proprietor's Funds : Internal Financing include:
(i) Equity Share Capital
(ii) Preference Share Capital
(iii) Reserves and Surpluses
3. External financing OR Borrowed Funds : Borrowed Funds include long term debts
such as:
(i) Loans from Financial Institutions
(ii) Loan from Bank
(iii) Public Deposits
(iv) Debentures etc.
4. Procurement of capital and working capital borrowing
5. Reserves and surplus as sources of funds
6. Relationship with lenders, banks, and financial institutions.
23
These plans and policies are important since they determine how financial resources will be
made available for the implementation of strategies.
Key functional strategies in relation to capital acquisition can be shown in the following table:
Key Functional Typical questions that should be

Strategies answered by the functional strategy
Capital Acquisition What is an acceptable cost of capital?
What is the desired proportion of short and long-term
debt; preferred and common equity?
What balance is between internal and external funding?
What risk and ownership restrictions are appropriate?
What level and forms of leasing should be used in
providing assets?
Long term financial strategies usually guide capital acquisition in the sense that
priorities change infrequently over time. The desired level of debt versus equity versus
internal long-term financing of business activities is a common issue in capital acquisition
strategy.
Organizations have a range of alternatives regarding the sources of funds. While one
company may relay on external borrowing, another may follow a policy of internal financing.
B. Functional Strategies in relation to Capital Allocation : Another financial strategy
of major importance is capital allocation. Plans and policies for capital allocation deal
with investment or asset-mix decisions. The important factors that are relevant here
are:
(1) Capital Investment : This type of investment decisions related to long-term assets.
These are widely known as capital budgeting or capital; expenditure decisions.
Capital Budgeting is the technique of making decisions for investment in long-term
assets. It is a process of deciding whether or not to invest the funds in a particular
asset, the benefit of which will be available over a period of time longer than one year.
The strategies are made for deciding the ratio of investment in each of the long term
assets.
These decisions are made on the basis of following technique:
24
Techniques of Capital Budgeting
Accounting Profit Criteria Cash Flow Criteria
1. Average Rate of
Return Method
1. Non-Discounting 2. Discounting
Methods Methods
(i) Pay Back Method

(i) Net Present Value Method
(ii) Profitability Index Method
(iii) Internal Rate of Return
Method
2. Current Assets : Current assets include those assets which can be converted into
cash within a year's time. The strategies are made for deciding the ratio of investment
in each of the following assets:
CONSTITUENTS OF CURRENT ASSETS
1. Cash-in-hand and Bank balances
2. Bills Receivables
3. Sundry Debtors (less provision for bad debts)
4. Short-term Loans and Advances
5. Inventories of Stock, as :
(a) Raw materials,
(b) Work-in process
(c) Stores and spares
(d) Finished goods
7. Prepaid Expenses
8. Accrued Incomes
25
3. Relationship with shareholders.
Capital allocation is important since it relates to the efficiency and effectiveness of resource
utilization in the process of strategy implementation.
Key Functional Typical questions that should be answered

Strategies by the functional strategy
Capital Allocation What are the priorities for capital allocation projects?
On what basis is final selection of projects to be made
What level of capital allocation can be made by operating
managers without higher approval.
C. Functional Strategies in relation to Dividend and Working Capital Management :

1. Dividend Strategies : Dividend refers to that part of net profits of a company which is
distributed among the shareholders as a return on their investment in the company. A
settled approach for the payment of dividend is known as dividend policy. Therefore,
dividend policy means the broad approach according to which every year it is
determined how much of the net profits are to be distributed as dividend and how much
are to be retained in the business. Thus, the dividend policy divide the net profits after
taxes into two parts:
(i) Earning to be distributed as dividend
(ii) Earnings retained in the business.
There cannot be a single dividend policy which will be suitable to all types of companies.
Hecne a dividend policy will have to be designed in the light of the factors affecting a
particular company. There are various types of dividend policies and every company select
his own dividend policy and strategy.
Types of dividend policy :
(a) Stable Dividend Policy : a company can frame a policy of paying a fixed
dividend regularly. Under such a policy shareholders are assumed of fixed
dividend per share. Stable dividend may be declared (i) at the present level or (ii)
at a lower level, or (iii) at a higher level.
(i) Stable dividend at a present level : Under this policy, a fixed rate of
dividend as was paid last year is maintained. During periods of prosperity
the firms withholds all the surplus income of the business to use them to
maintain the rate of dividend during lean year. This policy meets the
expectations of the shareholders for the current income and does not
affect the market price of company's share.
26
(ii) Stable dividend at a Lower level : In case a company has favorable

investment opportunities and requires fund for taking advantages of
these, it fixes a new lower level of dividends assures the shareholders that
the dividends will be maintain at this level in future. This policy reduces the
current earning of the shareholders and may also cause a reduction in the
market price of its shares.
(iii) Stable dividend at a High level : Regular dividends may be raised to a
higher level through a policy decision of the management. Such a decision
is taken when the management feels that the earnings of the company
have increased on a permanent basis and the increased earning will
support an increase in dividend rate permanently. The increase in the
fixed rate of dividend causes an increase in the market price of its shares.
(b) Low Regular Dividends Plus extra Dividends Policy : Under this policy, a low
rate of dividend is fixed which is paid regularly but in the years of extra-ordinary
earnings, it also pays extra dividends. This policy is pursued by those company
whose income is considerably fluctuates from year to year.
(c) Dividend Fluctuating with Earning Policy : Under this policy, the dividends
are changed according to the fluctuations in the earnings of the companies and
hence the dividends fluctuate year to year. Shareholders get higher dividends if
company has higher earnings and vice versa. Such a policy allows grater
flexibility to management in respects of retaining earnings to finance the
profitable opportunities but at the same time, the uncertainty of dividends
adversely affects the market price of company's shares.
(d) Policy of No Dividend at Present : Such a policy is pursued due to two
reasons:
Ø When the company is not in a position to pay dividends due to lower
profits,
Ø When the firms needs tidy amount of funds to finance its expansion
programmes and hence it decides to retain all of its profits.
2. Working Capital Strategies : working capital refers to the difference between current
assets and current liabilities. Plans and policies for working capital deal with the
following factors:
(a) To Determine the Adequate or Optimum Quantum of Investment in
Working Capital : As discussed, a firm should maintain adequate or reasonable
investment in working capital. Investment in working capital should neither be
excessive nor inadequate.
(b) To Determine the Composition or Structure of Current Assets : The
financial management is required to determine the composition of current
27
assets. It should decide how much amount should be invested in each individual
current asset. For this purpose, it should fix the average amount invested in
stock, debtors, marketable securities and the level of cash balance.
(c) To Maintain a Proper Balance between Liquidity and Profitability : While
managing working capital, management will have to reconcile two conflicting
aspects. The conflicting aspects are liquidity and profitability. If the quantum of
working capital is relatively large, it will increase the liquidity but decrease the
profitability. The reason is that a considerable amount of firm's funds will be tied
up in current assets, and to the extent this investment id idle, the firm will have to
forego profits. On the other hand, if the quantum of working capital is relatively
small, it will decrease liquidity but will result in increase in the profitability. This is
because the fewer funds are tied up in idle current assets.
(d) To Determine the Policy or Means of Finance for Current Assets : Another
important aspect of working capital management is determining the financing
mix i.e. what will be the sources of financing the current assets. There are mainly
two sources from which funds can be raised for current assets financing:
Ø Short-term Sources: Such as short-term bank loans and other current
Liabilities such as creditors, bills payable etc.
Ø Long-term Sources: Such as share capital, long-term borrowings,
retained earnings etc.
D. Functional Strategies in relation to Mergers & Acquisitions :
1. Merger Strategies : A merger is a combination of two or more organizations in which
one acquires assets and liabilities of the other in exchange for shares or cash, or both
the organization are dissolved, and the assets and liabilities are combined and new
stock is issued. For the organization which acquires another, it is an acquisition. For
the organization which is acquired, it is a merger. If both organizations dissolve their
identity to create a new organization, it is consolidation.
Types of Mergers : Mergers may often be of different types.
(a) Horizontal Mergers : Horizontal mergers take place when there is a
combination of two or more organizations in the same business, or of
organization engaged in certain aspects of the production or marketing
processes. For instance a company making footwear combines with another
footwear company.
(b) Vertical Mergers : Vertical mergers take place when there is a combination of
two or more organizations, not necessarily in the same business,
complementarily either in terms of supply of material so marketing of goods and
services. For instance a footwear company combines with a leather tannery or
with a chain of shoe retail stores.
28
(c) Concentric Mergers : Concentric mergers take place when there is a

combination of two or more organizations related to each other either in terms of
customer functions, customer groups, or the alternative technologies used. For
instance, a footwear company combining with a hosiery firm making socks or
another specialty company.
(d) Conglomerate Mergers : Conglomerate mergers take place when there is a
combination of two or more organizations unrelated to each other in terms of
customer functions, customer groups, or the alternative technologies used.
2. Acquisition Strategies : Acquisition is a popular strategic alternative adopted by
Indian companies. Acquisition may be defined as "the attempt of one firm to acquire
ownership or control over another firm". Acquisitions may be of two types:
(i) Friendly,
(ii) Hostile.
Q. What are the functional Strategies in Research and Development?
Ans. Introduction : R&D is used in strategy implementation as a foundation for
implementing strategies like product development and diversification. R&D is also used as a
competitive strategic tool. Research and Development occupies an important position in
operations management in the Indian context as companies have access to multiple
sources of technology, including foreign sources from developed countries.
Plans and policies for R&D deal with :
(i) Product Development
(ii) Personnel facilities
(iii) Level of technology used.
(iv) Technology transfer and absorption
(v) Technological collaboration and support and so on.
Functional Strategies : Below are some of the more important functional strategies. It is
important that functional strategies be supportive of the overall business strategy and
consistent between themselves.
1. Which level(s) of R&D to support and emphasis between them
(a) Basic research
(b) Applied research
(c) Development
Ø New product type
Ø New product of existing type
Ø Improvement of existing product
29
2. Centralization/decentralization of R&D
3. Emphasis between product and process R&D
4. Innovate versus imitate strategies
5. Where to have R&D done
Internal
Private outside R&D contractor
University
The following types of questions addressed by an R&D operating strategy Firstly, R&D
strategy should clarify whether basic research or product development research will be
emphasized.
R&D decision area Typical questions that should be

Basic research versus To what extent should innovation and break-
commercial development through research be emphasized? In relation
to the emphasis on product development,
refinement and modification? What new
projects are necessary to support growth?
Time horizon Is the emphasis short term or long term?
Which orientation best supports the business
strategy? Marketing and production strategy?
Organizational Fit Should R&D be done in-house or contracted
out? Should it be centralized or
decentralized?
What should be the relationship between the
R&D units and product managers? Marketing
Managers? Production Manager?
Basic R&D posture Should the firm maintain an offensive posture,
seeking to lead innovation and development
in the industry?
Should the firm adapt a defensive posture,
responding quickly to competitors
developments?
Place of R&D Where to have R&D done?
Internal
Private outside R&D contractor University
30
Q. What are the Decision Areas in Production/Operations? Also explain the

functional Strategies in Production/operations.
Ans. Meaning and Definition of Production : Production may be defined as conversion of
inputs-men, machine, materials, money, methods and management (6Ms) into output
through a transformation process. Output may be goods produced or services rendered.
Types of decisions in Production/Operations : In any organization, the following types of
decisions are taken:
1) Strategic Decisions : Strategic decisions are taken at top level management. Some
example of strategic decisions are:
(i) Warehouse Location.
(ii) Distribution systems
(iii) Building a new plant
(iv) Mergers and Acquisitions
(v) New Product Planning.
(vi) Compensation planning
(vii) Quality assurance planning
(viii) R&D planning
(ix) Forming new technology department
(x) Dropping a product from the existing product mix.
(xi) Social Responsibility planning, etc.
The type of decision taken at this level is often highly unstructured in nature.
2) Tactical Decisions : Tactical decisions are taken at middle level management. Some
examples of tactical decisions are:
(i) Pricing a product
(ii) Product improvement through value analysis.
(iii) Preventive maintenance policy
(iv) Budget analysis
(v) Short term forecasting
(vi) Make or buy Analysis
(vii) Credit evaluation
(viii) Plant layout
(ix) Project scheduling
(x) Reward system design.
(xi) Buying equipments etc.
31
The type of decision taken at this level is mostly semi-structured in nature.
3) Operational Decisions : Operational decisions are taken at bottom level
management. Some examples of operational level decisions are:
(i) Designing sampling plan to inspect the raw materials at stores while receiving
materials from vendors
(ii) Deciding price discount at salesman level in the field
(iii) Scheduling of maintenance manpower.
(iv) Machine loading
(v) Daily operator scheduling
(vi) Order Entry
(vii) Production scheduling
(viii) Inventory Control
(ix) Buying software
(x) Approving loans etc.
The type of decision taken at this level is mostly structured in nature.
Functional Strategies in Production/Operations : Below are some of the more important
functional strategies. It is important that functional strategies be supportive of the overall
business strategy and consistent between themselves.
1. Size of facility
2. Location of facility
3. Product design
4. Type of equipment
5. Type of tooling
6. Inventory size and strategy
7. Quality control methods
8. Degree and types of cost controls
9. Use of standards
10. Level of specialization
11. Degree and approach towards technological innovation
12. Focus between product and process
Functional strategies for the planning and control component of POM provide guidelines for
ongoing production operations. They are meant to encourage efficient organization of
production/operations resources to match long-range, overall demand. Often this
component dictates whether production/operations will be demand oriented, inventory
oriented, or sun contracting oriented.
32
Key Operating Strategies Typical questions that should be

Facilities and Equipment How centralized should the facilities be (one
big facility or several small facilities?)
How integrated should the separate
processes be?
To what extent will further mechanization or
automation be pursued?
Should size and capacity be oriented toward
peak or normal operating levels?
Purchasing How many sources are needed?
How do we select suppliers and manage
relationships over time?
What level of forward buying is appropriate?
Operations planning Should work be scheduled to order or to stock
and control What level of inventory is appropriate?
How should inventory be used, controlled and
replenished?
What are the key control efforts?
Should maintenance efforts be preventive or
breakdown oriented?
What emphasis should be placed on job
specialization? Plant Safety? Use of
standards?
Q. What are the functional Strategies in Personnel?

Ans. Functional Strategies in Personnel : Below are some of the more important
functional strategies. It is important that functional strategies be supportive of the overall
business strategy and consistent between themselves.
1. Job design
2. Job specifications
3. Recruiting
4. Selection approaches and criteria
5. Hiring methods
6. Compensation systems and level
7. Evaluation systems and criteria
8. Training and development
9. Promotion criteria
33
(A) Functional Strategies in Employee Recruitment, Selection and Orientation :
Operational strategy for recruitment, selection, and orientation guides personnel
management decisions for attracting and retaining motivated, productive employees.
This involves such questions as:
(i) What are the key human resources needs to support a chosen strategy?
(ii) How do we recruit for these needs?
(iii) How sophisticated should the selection process be?
(iv) How should new employees be introduced to the organization?
The recruitment, selection and orientation component of personnel strategy should provide
basic parameters for answering these questions
(1) Recruitment Strategies : Recruitment is the process of locating and encouraging
potential applicants to apply for existing or anticipated job openings. It is actually a
linking function, joining together those with jobs to fill and those seeking jobs.
Recruitment, logically aims at
(i) attracting a large number of qualified applicants who are ready to take up the join
if it's offered and
(ii) offering enough information for unqualified persons to self-select themselves
Sources of Recruitment : The sources of recruitment may be broadly divided into
two categories:
(a) Internal Sources : Persons who are already working in an organization
constitute the 'internal sources'. Internal Sources are:
(i) Retrenched Employees
(ii) Retired Employees
(iii) Dependents of deceased employees
(b) External Sources : External sources lie outside an organization. The external
sources are:
(i) Employees working in other organization.
(ii) Job aspirants registered with employment exchanges
(iii) Students from reputed educational institutions
(iv) Candidates referred by unions, friends, relatives and existing employees
(v) Candidates forwarded by search firms and contractors.
(vi) Candidates responding to the advertisements, issued by the organization
(2) Selection Strategies : To select means to choose. Selection is the process of picking
individuals who have relevant qualifications to fill jobs in an organization. The basic
purpose is to choose the individual who can most successfully perform the job, from
the pool of qualified candidates.
34
Selection Process : The steps of selection process are:
Hiring Decision Step 8

Reference Checks Step 7
Medical Examination Step 6
Selection Interview Step 5
Selection Tests Step 4
Application Blank Step 3
Screening Interview Step 2
Reception Step 1
(3) Orientation Strategies : Orientation is the task of introducing the new employees to
the organization and its policies, procedures and rules. A typical formal orientation
programme lay last a day or less in most organization. During this time, the new
employee is provided with information about the company, its history, its current
position, the benefits for which he is eligible, leave rules, rest periods, etc.
Orientation Programme : Steps
(i) Welcome to the organization
(ii) Explain about the company
(iii) Show the location/department where the new recruit will work.
(iv) Give the company's manual to the new recruit
(v) Provide details about various work groups
(vi) Give details about pay, benefits, holidays, leave, etc.
(vii) Explain about future training opportunities and career prospects.
(viii) Clarify doubts, by encouraging the employee to come out with questions.
(ix) Take the employee on a guided tour of building, facilities, etc. Hand him over to
his supervisor.
(B) Functional Strategies in Career Development and Counseling, Performance
Evaluation, and training and development:
(1) Career Development Strategies : Career development consists of the personal
actions one undertakes to achieve a career plan. Career development looks at the
long-term career effectiveness of employees. The actions for career development
may be initiated by the individual himself or by the organization.
(a) Individual Career Development : Career progress and development is largely
the outcome of actions on the part of an individual. Some of the important steps
that could help and individual cross the hurdles on the way 'up' may include:
35
(i) Performance
(ii) Exposure
(iii) Networking
(iv) Loyalty to Career
(v) Expand Ability
(b) Organizational Career Development : The assistance from managers and

HR department is equally important in achieving individual career goals and
meeting organizational needs. A variety for this purpose:
(i) Self-Assessment tools
(ii) Individual Counselling
(iii) Information Services
(iv) Employee assessment programmes
(v) Employee development programmes
(vi) Career programmes for special groups
(2) Performance Evaluation Strategies : After an employee has been selected for a job,
has been trained to do it and has worked out on it for a period of time, his performance
should be evaluated. Performance evaluation is the process of deciding how
employees do their jobs. Performance here refers to the degree of accomplishment of
the tasks that make up an individual's jobs. It indicates how well an individual is
fulfilling the job requirements.
Performance Evaluation Process :

(i) Establish Performance Standards: Evaluation systems require performance
standards, which serve as benchmarks against which performance is measured.
(ii) Communicate the Standards: Performance standards must be communicated to
appraisees and their reactions should be noted down right away. If necessary, these
standards must be revised or modified.
(iii) Measure actual performance: After the performance standards are set and accepted,
the next step is to measure actual performance.
(iv) Compare the actual performance with standards and discuss the appraisal: Actual
performance may be better than expected and sometimes it may go off the track.
Whatever be consequences, there is a way to communicate and discuss the final
outcome.
(v) Taking corrective action, if necessary: Corrective action is of two types: one puts out
the fires immediately, while the others destroys the root of the problem permanently.
36
(3) Training and Development Strategies :

(a) Training Strategies : After employees have been selected for various positions in an
organization, training them for the specific tasks to which they have been assigned
assumes great importance. It is true in many organizations that before an employee
fitted into a harmonious working relationship with other employees, he is given
adequate training. Training is the act of increasing the knowledge and skills of an
employee for performing a particular job. The major outcome of training is learning.]
Approaches to Training :
(i) Skills Training : This type of training is most common in organizations. The
process here is fairly simple. The need for training in basic skills such as reading,
writing, computing, speaking, listening, problem solving, etc. is identified
through assessment.
(ii) Refresher Training : Rapid changes in technology may force companies to go
in for this kind of training. By organizing short-term courses which incorporate
the latest developments in a particular field, the company may keep its
employees up-to-date and ready to take on emerging challenges.
(iii) Cross-functional Training : Cross-functional training involves training
employees to perform operations in areas other than their assigned job.
(iv) Team Training : Team training generally covers two areas: content tasks and
group processes. Content tasks specify the team's goals such as cost control
and problem solving. Group processes reflect the way members function as a
team-for example how they interact with each other, how they sort out
differences, how they participate etc.
Selection of Methods of Training : There are various methods of training:
(i) JIT : JIT stands for Job Instruction Trainings. The JIT method is a four-step
instructional process involving preparation, presentation, performance try out
and follow up. It is used primarily to teach workers how to do their current jobs. A
trainer, supervisor acts as the coach. The four steps followed in the JIT methods
are:
(a) The trainee receives an overview of the job, its purpose and its desired
outcomes.
(b) The trainer shows a right way to handle the job.
(c) Next, the employee is permitted to copy the trainer's way.
(d) Finally, the employee does the job independently without supervision.
(ii) Coaching : Coaching is a kind of daily training and feedback given to
employees by immediate supervisors. It involves a continuous process of
learning by doing.
37
(iii) Mentoring : Mentoring is a relationship in which a senior manager in an
organization assumes the responsibility for grooming a junior person. Technical,
interpersonal and political skills are generally conveyed in such a relationship
from the more experienced person.
(iv) Job Rotation : This kind of training involves the movement of trainee from one
job to another. This helps him to have a general understanding of how the
organization functions.
(v) Role Playingn : It is defined as a method of human interaction that involves
realistic behavior in imaginary situations. This method of training involves
action, doing and practice.
(b) Development Strategies : Development in contrast is considered to be more general
than training and more oriented to individual needs in addition to organizational needs
and it is most often aimed toward management people. Methods of Development are:
1. Decision-Making Skills (a) In-basket

(b) Business Game
(c) Case Study
2. Interpersonal Skills (a) Role Play
(b) Sensitivity Training
(c) Behavior Modelling
3. Job Knowledge (a) On-the-job Experience
(b) Coaching
(c) Understudy
4. Organisational Knowledge (a) Job Rotation
(b) Multiple Management
5. General Knowledge (a) Special Courses
(b) Special Meetings
(c) Specific readings
6. Specific Individual Needs (a) Special Projects
(b) Committee Assignments
(C) Functional Strategies in Compensation, Labour/Union Relations, Discipline

control and Evaluation : Functional strategies in the personnel area are needed to
guide decisions regarding compensation, labour relations, EEOC requirements,
discipline, and control to enhance the productivity and motivation of the work force.
Involved are such concerns as:
(i) What are the standards for promotion?
38
(ii) How should payment, incentive plans benefits, and seniority policies be
interpreted?
(iii) Should there be hiring preference?
(iv) What are appropriate disciplinary steps?
(1) Compensation Strategies : Compensation is what employees receive in exchange
for their contribution to the organization. Generally, employees offer their services for
three types of rewards. Different types of compensation include:
(i) Base Pay
(ii) Commissions
(iii) Overtime Pay
(iv) Bonuses, Profit Sharing, Merit Pay
(v) Stock Options
(vi) Travel/Meal/Housing Allowance
(vii) Benefits including: dental, insurance, medical, vacation, leaves, retirement,
taxes...
Compensation Strategies include the following :
(a) Fixed or Variable Pay System
(b) Job-Based or Individual Pay
(c) Seniority based or Performance Based System
(d) Centralize or Decentralize Pay Decisions
(2) Labour /Union Relations Strategies : Plans and policies related to industrial
relations deal with issues such as:
(i) Union-Management Relationship
(ii) Collective Bargaining
(iii) Safety
(iv) Welfare and Security
(v) Employee Satisfaction and Moral and so on.
(vi) Top-Down or Bottom-Up Communications
(vii) Interactions with Labour Union
(viii) Adversarial or Cooperative Relationship
(3) Discipline Control and Evaluation Strategies :
(a) Use Discipline as Control or Learning
(b) Labour /Union Relations Strategies:
39
CORPORATE EVOLUTION
UNIT – III
Q. What is Structure? Explain the Approaches of designing Organizational
Structure.
Ans. Introduction : A structure stands for the parts that are held together as a single whole
on the basis of some relationship. In the context of strategic management, the term
"Structure" signifies a design that helps him to formulate and implement the strategies is an
effective way.
Meaning of Structure : An organization structure is the way in which the tasks and subtasks
required to implement a strategy are arranged. It is the mechanism or the frame-work
whereby people function and facilities are integrated to achieve preset goals. It is a group of
people working together towards attaining the given goals.
Definition :
"Organisational structure is the formal or quasi-formal net-work of reporting or
controlling relationships in an organization and the powers and duties associated with each
role in this net-work".
The organizations are structured or designed in order to:
(1) Divide and allocate the work, authority and responsibility
(2) Establishing working relationships and operating mechanism
(3) Establishing the pattern of managerial supervision and control.
(4) Indicating the areas of responsibility, authority and accountability
(5) Provide the basis for fair and justified reward system.
(6) Meeting the aspiration of people involved in it.
Designing Organizational Structure : Dr. P.F. Drucker, the management guru, identifies
three types of analysis to be used while designing the corporate structure. Other way is to
talk in terms of approaches to organizational structure designing. These are:
(1) Process Approach : The emphasis laid under process approach while designing an
organization structure, on:
(i) Identification of various activities for implementing strategy.
(ii) Avoiding duplication in performance of activities
(iii) Synchronised performance of all activities.
40
The process approach helps in improving the coordination of the functions that cut across
several departments namely planning, and budgeting etc.
(2) Result Approach : Under conditions where strategy innovation is the basic need, this
is the most suitable approach. This approach involves four steps in designing an
organisatonal structure. These are:
(i) Business definition on the basis of potential areas of market opportunities.
(ii) The objectives that are to be attained are to be established
(iii) Determining the requirements of skills that lead to success.
(iv) Determining the degree of authority depending on the degree of
decentralization needed in decision-making.
(3) Decision Approach : This approach seeks answers to certain unique set of questions
on the basis of which a structure can be designed. These questions for which answers
are sought are:
(i) What decisions are needed to arrive at results in the light of organisatonal
goals?
(ii) What is the nature of such decisions?
(iii) What is the decision level in the organisation?
(iv) What activities are involved in such decisions?
For answers to these question prepare a base that helps in determining the degree of
authority for a particular positions, its interface with other positions and the placement of
[positions in an organizational hierarchy.
Structures for Strategies : There are several types of structures that are found in
organizations. Here, some major types of 'pure' structures are described, with a special
emphasis on their appropriateness for the different types of strategies. In practice, the actual
organizational structure may be a combination of these 'pure' structures.
(1) Entrepreneurial Structure
(2) Functional Structure
(3) Divisional Structure
(4) Strategic Business Unit
(5) Matrix Organization
(6) Network Structure
(7) Product Based Structures
(8) Customer Based Structure
(9) Geographic Structure
Q. Define Simple Organizational Structure OR Entrepreneurial Structure. Also
Explain its Merits and Demerits.
Ans. Meaning of Simple Organizational Structure : Entrepreneurial or the simple
structure is the most elementary form of structure which is quite matching to the needs of
one-man show- businesses. Typically, these organizations are single-business, product, or
41
service firms that serve local markets. The owner-manager looks after all decisions, whether
they are day-to-day operational matters or strategic in nature.
Suitability : This simple structure is generally used:
(i) When the size of the organization is small,
(ii) When Product differentiation is of low order
(iii) When the market segments are limited.
Entrepreneurial Structure :
Owner-Manager
Employees
Merits : Merits of entrepreneurial structure are:

(1) Quick Decisions and Prompt Action : As owner s the supreme judge to take all the
business decisions, he wastes no time as there is none to be consulted. Hence, it s
possible to take quick decisions and prompt action mainly because of centralized
power to do so.
(2) Ease of Control : The business affairs can be controlled easily and effectively as all
the employees are under his direct supervision and control. The limited number of
employees gives a better spectrum of control.
(3) Close Relations : The greatest advantage is that, the employer employee relations
are very close and, therefore sweet.. It is because, both the employer and employees
understand the problems of each other and act accordingly.
(4) Timely response to Environmental Changes : This simple structure makes it quite
handy to swell and gauge the environmental changes-technological, competitive,
political, socio-economic, that can be addressed very quickly without much loss of
time.
(5) Simple Reward System : The employee efforts are well rewarded in terms of their
earnings. These can be time or result based. This is possible because the employees
involved are least and the tasks that perform are not very much distinctive.
(6) Informal and Simple Information System : In entrepreneurial structure, there is
informal and simple information system because the employer-employee relations
are very close.
42
Demerits : Demerits of Entrepreneurial Structure are:

(1) It Proves to be very much demanding : All the powers are vested in the owner-
manager and this makes ever employee to look to what the boss wants. Employees
are to do and die but not to reason why? The owner expects from these to concentrate
on their tasks.
(2) More Focus on Routine than Strategic Matters : Bing a one man show the owner is
the manager and he bags down in the mire of day today work of routine type where he
finds very little time left for strategic matters. One cannot ignore the strategic decisions
at the cost of routine decisions
(3) Not Capable of Meeting Expansion Possibilities : This simple structure works well
so long as business s of small size. However, one can not remain small when there are
better opportunities of the possible growth and expansion. The structure renders
inadequate to accommodate the changes for higher levels.
(4) No Scope for Managerial Development : In case of owner-manager type
organizations, there is no scope for managerial development.
Q. Define Functional Organizational Structure. Also Explain its Merits and
Demerits.
Ans. Meaning of Functional Organizational Structure : As the volume of business
expands, the entrepreneurial structure outlives its usefulness. The need arises for
specialized skills and delegation of authority to managers who can look after different
functional areas. Specialization of skills is both according to the line and staff functions. The
functional structure seeks to distribute decision-making and operational authority along
functional lines.
Functional Organizational Structure :
CEO
Departments Marketing Finance Materials Research

Management and
Development
Functional
Managers
Support Staff Support Staff Support Staff Support Staff
43
Merits : Merits of Functional Structure are:
(1) Benefits of Specialization : t is the system that gives fullest scope for specialization.
Each is to do a part of the work which s divided and sub-divided down the bottom line.
(2) Expert Knowledge : Planning and training of policies and strategies will be more
scientific because of expert and experienced officers. There is scope for initiative.
(3) Reduced Pressure of Work : The person incharge of various positions are not over
loaded with too many tasks. This gives scope for a detailed training and development
of employees. This emphasis is on specialization.
(4) Encourage Large-Scale Operations : To reap the benefits of minute division of labor,
the firm must be organized on large-scale. Large-scale organization implies
advantages of standardization operations n terms of quality, quantity and costs. This
also means improvement in operational efficiency.
(5) Guaranteed Internal Discipline : The workers at the floor level are accountable to
not only to one but all higher officers. They will be always under the fear of being
caught for their mistakes.
Demerits : Demerits of Functional Structure are:
(1) No Unity of Command : Since the workers are to obey the orders of too man
supervisors, it is impossible to locate the responsibility.
(2) Problems of Co-ordination : It creates difficulty in coordination among different
functional areas.
(3) Unsuitable for Trading Units : The theory of functional foremanship is applicable to
all the manufacturing organization Trading involves the activities of buying and selling
where there s no scope for manufacturing and hence we can not make use of
functional type.
(4) It s complicated in Operation : Functional type sounds well in theory. In practice, it s
very difficult to implement and get the benefits. It creates more problems and loosens
the control over the employees at lower level.
(5) Misuse of Authority : As there is a panel of experts in each area, the persons
concerned are the superman and his thinking cannot be questioned. This may lead to
misuse of authority vested in the persons concerned.
Q. Define Divisional Organizational Structure. Also Explain its Merits and
Demerits.
Ans. Meaning of Divisional Organizational Structure : The structural needs of
expansion and growth are satisfied by the functional structure but only up to a limit. There
comes a time in the life of organizations when growth and increasing complexity in terms of
geographic expansion, market segmentation, and diversification make the functional
44
structure inadequate. Some form of divisional structure is necessary to deal with such
situations. Basically, work is divided on the basis of product lines, type of customers served,
or geographic area covered, and then separate divisions or groups are created and placed
under the divisional level management. Within divisions, the functional structure may still
operate.
Divisional Organizational Structure :
CEO
Corporate Finance Corporate Legal
General Manager General Manager
Marketing Marketing
Division A Division B
Operations Operations
Personnel Personnel
Merits: Merits of Divisional Structure are:

(1) Strengthens Corporate Financial Control : Each division is a self-contained block
generating a sense of competitive performance making every one to contribute to
profitability. Each division has to prove its best for justifying its existence.
(2) Management b Exception : As each division has the full freedom, there is good
scope for its growth and expansion. It allows management by exception. That the
General Manager takes care and stock of those divisions that are not dong will.
(3) It Motivates and Boosts the Morale : The employees are enjoying full freedom to
work hard and smart. This leads to employee empowerment and development.
45
(4) Enables the top management to focus on strategic matters : By making each
division self contained, the General Manager does not waste his valuable time on day
today matters or decisions. He uses his valuable time only on strategic decision
making.
(5) The Efficiency Level s at its Peak : Each functional manager and his men are having
the full liberty and they work together for each function and for each division as
interdependent department. This raises the efficiency of the division and hence the
entire organization.
Demerits : Demerits of Divisional Organizational Structure are:
(1) Costly System : Each division has its own set of functional departments and attached
staff which implies a duplicacy of efforts, adding extra overheads.
(2) Competition between Divisions : Divisionalisation and further
compartmentalization forces each division to compete for more resources and each
department with the division concerned. To get marginally higher allocation of
resources, the divisions and hence departments may play a foul play. As a result, one
department suffers at the cost of another and one division at the cost of another.
(3) Adds to the Problem of Co-ordination : More the divisions and hence departments,
it becomes unwieldy to manage. It is because; a failure or success is surroundings the
head of the institutions. Fault finders go straight attacking the organization head
though h has empowered the employees.
(4) Policy inconsistencies between the different divisions
(5) Inconsistency arising from the sharing of authority between the corporate and
divisional levels
Q. Define Strategic Business Unit Structure (SBU). Also Explain its Merits and
Demerits.
Ans. Meaning of Strategic Business Unit (SBU) : When organizations face difficulty in
managing divisional operations due to an increasing diversity, size, and number of divisions,
it becomes difficult for the top management to exercise strategic control. Here, the concept
of an SBU is helpful in creating an SBU-organizational structure.
Definition :
Strategic business unit has been defined by Sharplin as "any part of a business
organization which is treated separately for strategic management purposes".
Conceptually, an SBU is "a discrete element of the business serving specific products-
markets with readily identifiable competitors and for which strategic planning can be
conducted". Essentially, SBUs can be created by adding another level of management in a
divisional structure after the divisions have been grouped under a divisional top
management authority on the basis of common strategic interests.
46
SBU-Organisational Structure :
CEO
Group Head SBU 1 Group Head SBU 2 Group Head SBU 3
Divisions Divisions Divisions

A B C D E F G H I
Merits : Merits of SBU Structure are:
(1) Decentralization of Authority : Decentralization of authority is caused because t
reduces the span of control. Decentralization has its own effect on the organizational
effectiveness and motivation system. The juniors feel more honoured and
empowered.
(2) Better Coordination : There is perfect coordination between different divisions
because they are similar strategic units.
(3) Fast Formulation and Effective Implementation of Strategies : The strategy
formulation is rendered easier as similar SBUs are under one manager who reports
back to General Manager and the CEO. The message that comes from CEO leads to
effective implementation.
(4) Assured Accountability : Each division that comes under a SBU manager is
accountable for its performance-under, normal or over. Similarly each SBU is
accountable to the General Manager and so on.
Demerits : Demerits of SBU Structure are:
(1) Increase in Operating Costs : The operation costs increase because this structure
increases one more layer in the organizational structure.
(2) Gap between Divisions and Head Offices : This gap is created because extra layer
that comes in between the head office and the SBUs. This gap direct link with the
divisions. This delays the communication process which is a must for two way flow of
information for decision making, and assessing the performance.
(3) Reduced Flexibility : In order to achieve one thing another is to be sacrificed in part if
not in total. The decentralization dilutes the degree of flexibility which encourages slow
movement of information.
(4) Difficulty in assigning responsibility and defining autonomy for SBU heads.
47
Q. Define Matrix Organization Structure. Also Explain its Merits and Demerits.
Ans. Meaning of Matrix Structure : In large organizations, there is often a need to work on
major products or projects, each of which is strategically significant. The result is the
requirement of a matrix type of organization structure. Essentially, such a type of structure is
created by assigning functional specialists to work on a special project or a new product or
service. For the duration of the project, the specialists from different areas from a group or
team and report to a team leader. Simultaneously, they may also work in their respective
parent departments. Once the project is complete, the team members revert to their parent
departments.
Matrix Organizational Structure :
CEO
Finance Marketing Personnel Operations
Project
Manager
A
Functional
Specialists
Project
Manager
B
Project
Manager
C
Merits : Merits of Matrix Structure are:

(1) Creation of Direct Relations : Matrix organization structure is making use of dual
authority and accountability. As a result it dismisses the bureaucratic system and
welcomes direct relationships.
(2) Better Quality Decisions : As there is inter play of line and functional officers, the
quality of decisions undergoes a change for better especially when conflicts crop-up.
(3) Participative Management : It encourages empowerment resulting in high morale
and motivation adding to quality decisions and implementation.
48
(4) Integration of Merits of Different Structures : It combines the merits of different

structures such as flexibility, better communication, quick response and greater
coordination.
Demerits : Demerits of Matrix Structure are:
(1) Possible Conflicts and Confusion : The principle of "Unity of Command" is violated
as the manager has dual role as an individual and as a member of team that confuses
the juniors. These lead to conflicts.
(2) Delayed Decisions : Dual reporting system results in uncertainty with regard to
accountability. Though, there is participative decision making, it is time consuming. It
broadens the exposure of middle level managers increasing their responsibilities.
(3) It is Costly : In comparison with a functional structure, this structure is costly to
operate as employees are highly skilled or specialized.
Q. How does Strategy affect Structure?
Ans. Introduction : The prescription for consciously matching an organisation's structure
to the particular needs and requirements of strategy has arisen out of research done by
Chandler. A particular strategy creates special requirements that should be fulfilled by the
structure. If it does not, then the structure will have to be redesigned. What shape the
structure should take if a particular strategy is to be implemented successfully is difficult to
answer. But here again, theory offer alternatives. One such alternative is to link structure to
the stage of development that an organization exists in at a given point of time.
Stages of Development : The life cycle of organizations could be divided into four stages
that are not distinct and may overlap.
Stage I : Stage I Organisations are small-scale enterprises usually managed by a single
person who is the entrepreneur-owner-manager. These organizations are characterized by
the simplicity of objectives, operations and management. The form of the organization is
also simple and could be termed as entrepreneurial. The strategies adopted are generally of
the expansion type.
Stage II : Stage II Organisations are bigger than Stage I organizations in terms of size and
have a wider scope of operations. They are characterized by functional specialisation or
process orientation. The organizational form is simple functional or process-oriented. The
strategies adopted may range from stability to expansion.
Stage III : Stage III Organisations are large and widely scattered organizations generally
having units or plants at different places. Each division is semi-autonomous and linked to the
headquarters but functionally independent. The divisions may have a simple functional form
depending on their particular needs. The strategies adopted may be either stability or
expansion.
49
Stage IV : Stage IV organizations are more complex. They are generally multiplant,
multiproduct organizations that result from the adoption of related and unrelated
diversification strategies. The organizational form is divisional. The corporate head-quarters
assume the responsibility of providing strategic direction and policy guidelines through the
formulation of corporate-level strategies. The divisions may formulate their business-level
strategies and may adopt Stage I, II or III type of structures.
The stages of development theories present a convenient way to understand the way
the structure may evolve as the organization moves from one stage to the next. But, in
practice, man variations may occur. It is nor necessary that al organizations should pass
through every stage of development. Nor does every organization exhibit the characteristics
of exclusively one stage.
Q. Identify the roles that CEOs play in strategic Management.
Ans. CEO : The CEO is the most important strategist who is responsible for all aspects of
strategic management, from, the formulation to the evaluation of strategy The CEO is the
person who is overall incharge of the management.
CEO is a person who is to shoulder responsibility in respect of strategic management
Stated strictly he is the architect of organizational purpose, strategist or a planner. He is a
leader, organisor or builder of organization He is the chief administrator, implementor and
coordinator. He is a communicator, motivator and a mentor He is a decision-maker for the
organization as a whole. He is expected to perform the following functions:
(1) Formulating Long-Term Plans : Chief executive is the brain behind the design of
long-term plans and decision-making. He is said to involve himself in long range
planning by making decisions about these plans and presenting the higher authorities
the relevant information in arriving at strategic decisions He is assisted by planning
staff and other personnel he thinks appropriate.
(2) Formulation of Strategy : As the chief strategist, the CEO plays a major role n
strategic decision-making. CEOs formulate the strategies in strategic management
process.
(3) Guiding and Directing : He provides his valuable guidance and direction to different
functionaries in the organization in the areas of :
(a) Explaining and interpreting the policies, programs formulated by the Board of
Directors.
(b) Executing plans by giving necessary orders to his subordinates and
(c) Correcting the programmes of on gong departmental managers to attain
organisatonal goals.
(4) Integrating : Integration is an essential part of coordination as it deals with integration

of interest, timing the operating and balancing of efforts. His integration functions are:
50
(a) Bringing together all departmental heads b prescribing organizational

relationships
(b) Defining and refining the departmental authorities and responsibilities.
(c) Generating very conductive environment in the organization for efficient and
effective functioning
(d) Providing able and effective leadership for the entire organization.
(5) Staffing : he contributes a good deal in staffing the organization. He appoints senior
cadre. He is all in all for fixing the pay-packet, transfer, promotion, demotions and
discharge of personnel at higher levels.
(6) Reviewing and Controlling : Reviewing becomes very important task of his in seeing
whether every thing is going according to his plans. In case of any variations, he takes
a corrective action if need, there be. Review and control function together are
performed by him by:
(a) Holding meetings of different functionaries to have consultation and review.
(b) Suggesting corrective action
(c) Preparing and presenting progress and control reports for the perusal of the
Board and
(d) Informing the Board about the functioning of the organization in broder
perspective and his seniors managers so that necessary action can be taken to
have smooth sailing.
(7) Public Relations : He s not only responsible for internal management, but has to
maintain good rapport with the publics of the society in which he works. The most
important publics are:
(a) Government
(b) Trade Associations
(c) Trade Unions
(d) Financial Institutions.
(8) Coordinating Activities : Chief Executive acts as a coordinator among different

departments. He helps various departments n reconciling their objectives with one
another.
(9) To maintain a link between the Board of Directors and the entire organisation
(10) The role of CEO s basically to manage the external environment relationship in
order to create conditions for growth.
51
Q. What does corporate culture consist of?
Ans. Introduction : The phenomenon which often distinguishes good organizations from
bad ones could be summed up as 'corporate culture'. The well-managed organizations
apparently have distinctive cultures that are, in some way, responsible for their ability to
successfully implement strategies. "It has been clearly demonstrated that ever corporate
has a culture (which often includes several subculture) that exerts powerful influences on
the behaviour of managers".
Composition of Corporate Culture : "Organisational (or corporate) culture s the set of
important assumptions- often unstated-that members of an organization share in common".
There are two major assumptions in common:
(i) Beliefs : Beliefs are assumptions about reality and are derived and reinforced b
experience.
(ii) Values : Values are assumptions about ideas that are desirable and worth striving for.
When beliefs and values are shared in an organisation, they create a corporate culture.
The manifestation of corporate culture in an organisation is evident in :
Ø Shared things (e.g. the way people dress).
Ø Shared sayings (e.g. "let's get down to work")
Ø Shared Action (e.g. service-oriented approach)
Ø Shared Feelings (e.g. 'hard work is not rewarded here')
These shared assumptions can help to decipher the composition of the corporate culture of
any organisation.
Impact of Culture on Corporate Life : The fact that organisations may have a strong or
weak culture their ability to perform strategic management. "Culture affects not only the way
managers behave within an organisation but also the decisions they make about the
organisation's relationship with its environment and its strategy". Culture is a strength that
can also be a weakness.
(i) As a strength, culture can facilitate communication, decision-making and control, and
create cooperations and commitment. An organisation's culture could be strong when
it conducts its business according to a clear and explicit set of principles and values,
which the management devotes considerable time to communicating to employees,
and which values are shared widely across the organisation. There are three factors
that seem to contribute to the building up of a strong culture These are:
(a) A founder or an influential leader who established desirable values.
(b) A sincere and dedicated commitment to operate the business of the
organisation according to these desirable values.
(c) A genuine concern for the well-being of the organisation's stakeholders.
52
(ii) As a weakness, culture may obstruct the smooth implementation of strategy by

creating resistance to change. An organization's culture could be characterized as
weak when many subcultures exist, few values and behavioral norms are shared and
traditions are rare. In such organizations, employees do not have a sense of
commitment, loyalty and a sense of identity.
Strategy-Culture Relationship : Having discussed what constitutes corporate culture and
how t affects corporate life, it is important to understand its relationship with strategy. Since
each strategy creates its own unique set of managerial tasks, strategy implementation has
to consider the behavioral aspects and ensure that these tasks are performed in an efficient
and effective manner. The basic question before strategies, therefore, s how to create a
strategy-supportive corporate culture. In other words, a major role of the leadership within
an organisation is to create an appropriate strategy-culture fit.
The strategists have four approaches to create a strategy-supportive culture:
(1) To Ignore Corporate Culture : The first approach may be followed when it is nearly
impossible to change culture. This is advisable because it is really difficult to change a
nebulous phenomenon such as corporate culture. Besides, culture changes, when
enforced in a short duration, ma be traumatic for members of an organisation.
(2) To adapt Strategy Implementation to suit corporate Culture : It is easier to change
implementation to suit the requirements of corporate culture. This is possible because
the behavioural aspects of implementation offer a range of flexible alternatives to
strategists in terms of structure, systems and processes. These variables could be
manipulated to subserve the interests of corporate culture. However, each situation in
the organisation would call for an innovative solution and would test the capabilities of
managers as strategies.
(3) To Change the Corporate Culture to suit Strategic Requirements : As said earlier,
it is extremely difficult to change corporate culture. But in some cases it may be
imperative.
(4) To change the Strategy to fit the Corporate Culture : Rather than changing culture
to suit strategy, it is better and more economical to consider the cultural dimension
while formulating strategy in the first place.
Q. How will a comprehensive system of strategic control operate in a large-sized
business organisation?
OR
Q. Explain the Strategic Control in Detail.
Ans. Strategic Control : The process of strategic management makes it clear that a
strategy is formulated on the basis of several assumptions. These relates to the
environmental and organizational factors, which are dynamic and eventful. There is a
considerable gap between the time when a strategy is formulated and the time when it is
53
implemented. The process of implementation is itself time-consuming. During this
intervening period, there is a possibility that the assumptions made while formulating a
strategy will not remain valid or, at least, are no longer so relevant. Strategic controls take
into account the changing assumptions that determine a strategy, continually evaluate the
strategy as it is being implemented, and take the necessary steps to adjust the strategy to
the new requirements. The four basic types of Strategic Controls are:
(1) Premise Control.
(2) Implementation Control
(3) Strategic Surveillance
(4) Special Alert Control.
(1) Premise Control : Every Strategy is based on certain assumptions about
environmental and organizational factors. Some of these factors are highly significant
and any change in them can affect the strategy to a large extent. Premise control is
necessary to identify the key assumptions, and keep track of any change in them so as
to assess their impact on strategy and its implementation. For instance, a company
may base its strategy on important assumptions related to environmental factors,
industrial factors and organisational factors. Premise control serves the purpose of
continually testing the assumptions to find out whether they are still valid or not. This
enables the strategists to take corrective action at the right time rather than continuing
with a strategy which is based on erroneous assumptions. The responsibility for
premise control can be assigned to the corporate planning staff who can identify key
assumptions and keep a regular check on their validity.
(2) Implementation Control : The implementation of a strategy results in a series of
plans, programmes and projects. Resource allocation is done to implement these.
Implementation control is aimed at evaluating whether the plans, programmes and
projects are actually guiding the organisation towards its predetermined objectives or
not. If, at any time, it is felt that the commitment of resources to a plan, programme or
project would not benefit the organisation, they have to be revised. In this manner,
implementation control may lead to strategic rethinking.
(3) Strategic Surveillance : The premise and implementation types of strategic controls
are specific in nature. Strategic surveillance, on the other hand, is aimed at a more
generalized and overarching control "designed to monitor a broad range of events
inside and outside the company that are likely to threaten the course of a firm's
strategy". Strategic surveillance can be done through a broad-based, general
monitoring on the basis of selected information sources to uncover events that are
likely to affect the strategy of an organisation.
(4) Special Alert Control : The last of the strategic control systems is the special alert
control, which is based on a trigger mechanism for rapid response and immediate
reassessment of strategy in the light of sudden and unexpected events. Special alert
54
control can be exercised through the formulation of contingency strategies and

assigning the responsibility of handling unforeseen events to crisis management
teams.
Crises are critical situations that occur unexpectedly and threaten the course of a
strategy. Crisis management follows certain steps, such as:
(i) Signal detection
(ii) Preparation/prevention
(iii) Damage Limitation
(iv) Recovery leading to organizational learning.
Q. Describe the different elements that constitute the evaluation process for
operational control.
OR
Q. Explain the Operational Control System in detail.
Ans. Operational Control : Operational control is aimed at the allocation and use of
organizational resources through an evaluation of the performance of organizational units,
such as, division, SBUs, and so on, to assess their contribution to the achievement of
organizational objectives. Operational control is concerned with action or performance, and
this is probably the reason why it is used so extensively in organisations.
Evaluation Process for Operational Control System : The process of evaluation
basically delas with four steps:
(1) Setting Standards of Performance.
(2) Measurement of Performance
(3) Analysing Variances
(4) Taking Corrective Action.
Evaluation process for Operational Control :
Staretegy/Plan/ Setting Standards Actual Measurement
Objectives of Performance Performance of Performance
Check Check
Standards Performance
Reformulate Analysing
Variance
Feedback
55
(1) Setting of Standards : Strategists encounter the following three questions while
dealing with standard setting:
(i) What Standards to set?
(ii) How to set these standards? And in
(iii) What terms do we express these standards?
A three-pronged basic approach to standard-setting could be used to settle these issues, as
given below:
(i) The key managerial tasks.
(ii) The special requirements for the performance of the key tasks can help to
determine the type of standards to set.
(iii) Performance indicators that best express the special requirements could then
be decided upon to be used for evaluation.
Applying this approach in the case of a company which has adopted a market
development strategy, it can be said that on of the key managerial tasks is to expand market
presence and enhance market visibility. A special requirement is to raise the overall market
share, and the two indicators, for instance, which could satisfy the requirements could be:
increase in sales revenue and efficiency of sales force.
(2) Measurement of Performance : The evaluation process operates at the
performance level as action takes place. Standards of performance act as the
benchmark against which the actual performance is to be compared. It is important,
however, to understand how the measurement of performance can take place. The
information system is the key element in any measurement exercise. Operationally,
measuring is done through the accounting, reporting, and communicating systems. A
variety of evaluation techniques are used for measurement Apart from the methods of
measuring performance, the other important aspects of measurement relate to the
difficulties, timing and periodicity in measuring.
(i) Difficulties in Measurement : If standards are appropriately set, and if means
are available for measuring performance, evaluation is a fairly easy task. But
there are several activities for which it is difficult to set standards and measure
performance. The solution lies in developing verifiable objectives, stated in
quantitative and qualitative terms, against which performance can be
measured.
(ii) Timing of Measurement : Timing relates to the point of time at which evaluation
has to take place. In general, it could be said that a delay in measurement can
defeat the purpose of evaluation itself. On the other hand, measuring before
time cannot serve the purpose either.
56
(iii) Periodicity in Measurement : A related issue to timing is periodicity, which

deals with the issue of "how often to measure" Normally financial statements like
budgets, balance sheets, and profit and loss accounts are prepared every year
so the periodicity is on an annual basis.
(3) Analysing Variances : The measurement of actual performance and its comparison
with standard or budgeted performance leads to an analysis of variances. Broadly, the
following three situations may arise:
(i) The actual performance matches the budgeted performance
(ii) The actual performance deviates positively over the budgeted performance.
(iii) The actual performance deviates negatively from the budgeted performance.
When actual performance deviates negatively from the budgeted performance then it
indicates a shortfall in achievement. The strategists need to pinpoint the areas where
performance is below standard and go into the causes of deviation.
(4) Taking Corrective Action : Corrective action is taken on the basis of the analysis of
the causes of deviation. There are three courses for corrective action:
(i) Checking of Performance
(ii) Checking of Standards
(iii) Reformulating Strategies, plans and objectives.
Q. Write a short note on Monitoring Performance and Evaluating Deviations
Ans. Introduction : Operating control system required the establishment of performance
standards In addition, progress must be monitored and deviations from standards evaluated
as the strategy is implemented. Timely information must be obtained so that deviations can
be identified, the underling cause determined, and actions taken to correct or exploit them.
(A) Monitoring Performance : The evaluation process operates at the performance level
as action takes place. Standards of performance act as the benchmark against which
the actual performance is to be compared. It is important, however, to understand how
the measurement of performance can take place. The information system is the key
element in any measurement exercise. Operationally, measuring is done through the
accounting, reporting, and communicating systems. A variety of evaluation
techniques are used for measurement Apart from the methods of measuring
performance, the other important aspects of measurement relate to the difficulties,
timing and periodicity in measuring.
measured.
57
(B) Analyzing Variances : The measurement of actual performance and its comparison
(i) The actual performance matches the budgeted performance : This
situation is ideal but not realistic. In practice, the actual performance rarely
matches the budgeted performance. Here, the strategists would have to specify
a range of tolerance limits between which the results may be accepted
satisfactorily. So, actual performance which deviates from the budgeted
performance within the established tolerance limits can be acceptable and the
variance is considered as not significant.
(ii) The actual performance deviates positively over the budgeted
performance : This situation is welcome as it is an indication of superior
performance. But exceeding the target continually should be considered as
unusual and a check needs to be made to test the validity of standards and the
efficacy of the measurement system.
(iii) The actual performance deviates negatively from the budgeted
performance : When actual performance deviates negatively from the
budgeted performance then it indicates a shortfall in achievement. The
strategists need to pinpoint the areas where performance is below standard and
go into the causes of deviation. Corrective action is taken on the basis of the
analysis of the causes of deviation.
After noting the deviation, it is now time to find the causes of deviations. The
following questions can be helpful in determining the causes:
Ø Is the cause of deviations internal or external?
Ø Is the cause random or was it expected?
Ø Is the deviation temporary or permanent?
Ø Are the strategies still valid?
Ø Does the organization have the capacity to respond to the change
needed?
Analysis of variances leads to a plan for corrective action which we shall discuss
next.
58
Q. Briefly review the role of organizational systems in strategic evaluation.

Ans. The process of strategic evaluation and control does not operate in isolation; it works
on the basis of the different organizational systems that are used to implement strategies.
There are six organizational systems:
(1) Information System : Evaluation is done by comparing actual performance with
standards. The measurement of performance is done on the basis of reports
generated through the information system. In fact the purpose of information
management system is to enable managers to keep track of performance through
control reports.
(2) Control System : The control system , of course, is at the heart of any evaluation
process, and is used for
(i) Setting Standards of Performance.
(ii) Measurement of Performance
(iii) Analyzing Variances
(iv) Taking Corrective Action.
(3) Appraisal System or Reward System : The appraisal system actually evaluates
performance and so is a part of the wider control system. However, its significant role
in evaluation, is yet to be acknowledged. When the performance of managers is
appraisal, it is their contribution to the organizational objectives which is sought to be
measured. In practice, it is difficult to differentiate strictly between the performance of
individuals and that of the organizational units the belong to. The evaluation process,
through the appraisal system, measures the actual performance and provides the
basis for the control system to work.
(4) Motivation System : The central role of the motivation system is to induce
strategically desirable behavior so that managers are encouraged to work towards the
achievement of organizational objectives Now; if we look at the way the evaluation
process works; we will observe that its efficacy depends on the extent to which it is
able to bring actual performance to the level of the standards ;In other words ; the
lesser the deviation of actual performance from standards ; the higher is the efficacy of
the evaluation process .The motivation system plays a significant role in ensuring that
deviations do not occur ;or if they do ; then they are corrected by the means of rewards
and penalties. Incentive systems are directly related to the amount of deviation .
Performance checks ;which are a feedback in the evaluation process ;are done
through the motivation system
(5) Development System : the development system prepares the managers for
performing strategic and operational tasks . Among the several aims of development
;the most important is to match a person with the job to be performed .This in other
words ;is matching actual.
59
CORPORATE EVOLUTION
UNIT – IV
Q. What is Strategic Evaluation? Discuss its nature and Importance.
Ans. Introduction : The purpose of strategic evaluation is to evaluate the effectiveness of
strategy in achieving organizational objectives. Thus, strategic evaluation and control could
be defined as the process of determining the effectiveness of a given strategy in achieving
the organizational objectives and taking corrective action wherever required. Strategic
evaluation operates at two levels:
(i) Strategic Level : At the strategic level, we concerned more with the consistency of
strategy with the environment.
(ii) Operational Level : At the operational level, the effort is directed at assessing how
well the organization is pursuing a given strategy.
Nature of Strategic Evaluation : From this discussion, we can infer that the nature of the
strategic evaluation and control process is to test the effectiveness of strategy. The strategic
evaluation and control is a process of determining the effectiveness of a given strategy in
achieving organizational goals and suggest action when variance occurred.
Why Evaluation?
(1) Are the decisions being made consistent with policy?
(2) Are there sufficient resources to get the job done?
(3) Are the resources being used wisely?
(4) Are events in the environment occurring as anticipated?
(5) Are goals and targets being met?
(6) Should we proceed with the plan as we originally formulated or it needs some revision.
What is to be evaluated?
(1) Objectives
(2) Environmental objectives
(3) Internal conditions
(4) Resource capabilities
60
(5) Risk presence

(6) Time Horizon
(7) Feasibility
(8) Stimulation
Importance of Strategic Evaluation :
(1) The importance of strategic evaluation lies in its ability to coordinate the tasks
performed by individual managers and also groups, division or SBUs, through the
control of performance.
(2) Need for feedback: Within an organization, there is a need to receive feedback on
current performance, so that appraisal can be done and good performance rewarded.
This is essential for motivating employees.
(3) Appraisal and Reward
(4) Check on the validity of strategic choice: Strategic evaluation helps to keep a check on
the validity of a strategic choice.
Strategic evaluation, through its process of control, feedback, rewards, and review,
helps in a successful culmination of the strategic management process.
Q. Which individuals and groups participate in the process of evaluation? What
difficulties do they face, and how do they overcome them?
Ans. Participants in Strategic Evaluation : It is important to know who the participants are
and what role they will play in strategic evaluation and control. The various participants in
strategic evaluation and control and their respective roles are described below:
(1) Shareholders : Theoretically, every organization is ultimately responsible to its
shareholders-lenders and the public in the case of private companies, and the
government in the public sector companies. The role of shareholders, in practice,
however, is limited. This is specially true of the general public where the individual
holding is too small to be of any effective value in strategic evaluation. Lenders such as
financial institutions and banks which have an equity stake are typically concerned
about the security and returns on their shareholding rather than in the long-term
assessment of strategic success. The government, through its different agencies,
does play a significant role in the strategic evaluation and control of public sector
companies.
(2) Board of Directors : The Board of Directors enacts the formal role of reviewing and
screening executive decisions in the light of their environmental, business and
organizational implications. In this way, the Board is required to perform the functions
of strategic evaluation in more generalized terms.
(3) Chief Executives : Chief executives are ultimately responsible for all the
administrative aspects of strategic evaluation and control.
61
(4) SBU : The SBU or profit-centre heads may be involved in performance evaluation at
their levels and may facilitate evaluation by corporate-level executives.
(5) Financial Controllers, Company Secretaries and External and Internal Auditors
: All these form the groups of persons who are primarily responsible for operational
control based on financial analysis, budgeting, and reporting.
(6) Audit and Executive committees : These committees set up by the Board or the
CEO may be charged with the responsibility of continuous screening of performance.
(7) Middle-level Managers : Middle-level managers may participate in strategic
evaluation and control as providers of information and feedback, and as the recipients
of directions from above, to take corrective actions.
Barriers in Evaluation :
(1) Limits of Controls : By its very nature, any control mechanism presents the dilemma
of too much versus too little control It is never an easy task for strategists to decide the
limits of control. Too much control may impair the ability of managers' adversely affect
initiative and creativity, and create unnecessary impediments to efficient
performance. On the other hand, too less control may make the strategic evaluation
process ineffective.
(2) Difficulties in Measurement : These mainly relate to the reliability and validity of the
measurement techniques used for evaluation, lack of quantifiable objectives or
performance standards, and the inability of the information system to provide timely
and valid information.
(3) Resistance to Evaluation : The evaluation process involves controlling the behavior
of individual and like any other similar organizational mechanism, is likely to be
resisted by managers.
(4) Short-termism : Managers often tend to rely on short-term implications of activities
and try to measure the immediate results. Often, the long-term impact of performance
on strategy and the extended effect of strategy on performance is ignored.
Requirements for Effective Evaluation :
(1) Control should involve only the minimum amount of information as too much
information tends to clutter up the control system and creates confusion.
(2) Control should monitor only managerial activities and results even if the evaluation is
difficult to perform.
(3) Controls should be timely so that corrective action can be taken quickly.
(4) Long-term and short-term controls should be used that a balanced approach to
evaluation can be adopted.
62
(5) Rewards for meeting or exceeding standards should be emphasized so that

managers are motivated to perform.
Q. Explain the criteria of evaluation of strategy.
Ans. Introduction : Before proceeding for any evaluation it is necessary that we have a
criteria for evaluation. That is against what we are going to evaluate the performance. What
has to be the standard with which the actual performance to be compared. We need alteast
two things for the purpose.
(1) Performance targets or/and standards
(2) Tolerance limits-because exact achievement is never possible. We should have a
range of permissible performance.
Now these targets and standards can be of two types :
(i) Quantitative : Criteria as is clear from the name, are the targets and standards
specified in numeric terms. For example, Dividend 35%, EPS Rs. 40, ROI 55% even
employee turnover, absenteeism, stock quotation, etc.
(ii) Qualitative : Criteria is a bit difficult to determine as well as difficult to compare
against. However qualitative criteria is best in case of whole examination i.e.
examining a plan in totality and most useful for pre implementation evaluation of a new
plan. Following standards are normally used for the purpose:
(a) Consistency : Is the plan consistent with:
i) Objectives of the organization
ii) Environmental assumptions
iii) Internal Conditions
(b) Appropriateness : Is the plan appropriate given our
i) Resource capabilities
ii) Risk preference
iii) Time Horizon
(c) Workability : is it workable, in the sense
i) Feasible- is it workable, in the sense,
ii) Stimulation- will it stimulate our manager to perform.
Q. Write a note on the techniques of strategic evaluation and control.
Ans. Introduction : It is necessary for strategists to have an idea about the techniques of
strategic evaluation and control in order to make a choice from among the many available
and to use those. Several of the techniques of evaluation are traditional and have been in
usage for long, while there are some other techniques which are of recent origin. These
techniques are classified into two sections:
63
(A) Evaluation Technique for Strategic Control : These are classified are as under:
(1) Strategic Momentum Control : These type of evaluation techniques are aimed at
assuring that the assumptions on whose basis strategies were formulated are still
valid, and finding out what needs to be done in order to allow the organization to
maintain its existing strategic momentum.
There are three techniques which could be used to achieve these aims:
(a) Responsibility Control Centres : Responsibility control centres form the core
of management control systems and are of four types:
Ø Revenue Ø Expense
Ø Profit Ø Investment Centres.
Each of these centres is designed on the basis of the measurement of inputs and
outputs. The study and application of responsibility centres is done under the
discipline of management control systems.
(b) Success Factors : Success factors enable organizations to focus on those
factors that contribute to the success of strategies. The strategists can
continually evaluate the strategies to assess whether or not these are helping
the organization to achieve its objectives.
(c) Generic Strategies : The generic strategies approach to strategic control is
based on the assumption that the strategies adopted by a firm similar to another
firm are comparable. Based on such a comparison, a firm can study why and
how other firms are implementing strategies and assess whether or not its own
strategy is following a similar path.
(2) Strategic Leap Control : Where the environment is relatively unstable, organizations
are required to make strategic leaps in order to make significant changes. Strategic
leap control can assist such organizations by helping to define the new strategic
requirements and to cope with emerging environmental realities. There are four
techniques of evaluation used to exercise strategic leap control:
(a) Strategic Issue Management : Strategic issue management is aimed at
identifying one or more strategic issues and assessing their impact on the
organization. A strategic issue is a forthcoming development, either inside or
outside of the organization, which is likely to have an important impact on the
ability of the enterprise to meet its objectives.
(b) Strategic Field Analysis : Strategic field analysis is a way of examining the
nature and extent of synergies that exist or are lacking between the components
of an organization. Whenever synergies exist the strategists can assess the
ability of the firm to take advantage of those. Alternatively, the strategists can
evaluate the firm's ability to generate synergies where they do not exist.
64
(c) Systems Modelling : System modeling is based on computer based models

that stimulate the essential features of the organization and its environment.
Through systems modeling, organizations may exercise pre-action control by
assessing the impact of the environment on organization because of the
adoption of a particular strategy.
(d) Scenarios : Scenarios are perceptions about the likely environment a firm
would face in the future. Its uses could be extended to evaluation by enabling
organizations to focus strategies on the basis of forthcoming developments in
the environment.
(B) Evaluation Techniques for Operational Control : These techniques are divided into
three sections:
(1) Internal Analysis : Internal analysis, which consists of value-chain analysis,
quantitative analysis, and qualitative analysis deals with the identification of the
strengths and weaknesses of a firm in absolute terms.
(a) Value Chain Analysis : Value chain analysis focuses on a set of inter-related
activities performed in a value-chain analysis for the purpose of operational
evaluation lies in its ability to segregate the total tasks of a firm into identifiable
activities which can then be evaluated for effectiveness.
(b) Quantitative Analysis : Quantitative analysis takes up the financial parameters
and the non-financial quantitative parameters, such as, physical units or time, in
order to assess performance. The obvious benefit of using quantitative factors is
the ease of evaluation and the verifiability of the assessment done. The various
techniques are:
Ø Ratio Analysis
Ø Economic Value Added
Ø Activity Based Costing.
(c) Qualitative Analysis : Qualitative analysis supplements the quantitative
analysis by including those aspects which it is not feasible to measure on the
basis of figures and numbers. The methods that could be used for qualitative
analysis are based on :
Ø Intuition
Ø Judgment
Ø Informed Opinion
(2) Comparative Analysis : This consists of historical analysis, industry norms and
benchmarking. It compares the performance of a firm with its own past performance or
with other firms.
65
(a) Historical Analysis : Historical analysis is a frequently used method for
comparing the performance of a firm over a given period of time. This method
has the added benefit of enabling a firm to note how the performance has taken
place over a period of time and to analyse the trend or pattern. Such an analysis
can offer the firm a better perception of its performance as compared to an
absolute assessment.
(b) Industry Norms : Industry norms are a comparative method for analyzing
performance that has the advantage of making a firm competitive in comparison
to its peers in the same industry. Being a comparative assessment, evaluation
on the basis of industry norms enables a firm to bring its performance at least up
to the level of other firms and then attempt to surpass it.
(c) Benchmarking : Benchmarking is a comparative method where a firm finds the
best practices in an area and then attempts to bring its own performance in that
area in line with the best practice. Best practices are the benchmarks that should
be adopted by a firm as the standards to exercise operational control. Through
this method, performance can be evaluated continually till it reaches the best
practice level. In order to excel, a firm shall have to exceed the benchmarks.
(3) Comprehensive Analysis : This includes balanced scorecard and key factor rating.
This analysis adopts a total approach rather than focusing on one area of activity, or a
function or department.
(a) Balanced Scorecard : This method is based on the identification of four key
performance measures of customer perspective, internal business perspective,
innovation and learning perspective, and the financial perspective. This method
is a balanced approach to performance measurement as a range of parameters
are taken into account for evaluation.
(b) Key Factor Rating : This is a method that takes into account the key factors in
several areas and then sets out to evaluate performance on the basis of these.
This is quite a comprehensive method as it takes wholistic view of the
performance areas in an organization.
Q. Explain the Process of Strategic Evaluation.
Ans. Process of Evaluation : The process of control itself covers the valuation aspect too.
The control process is not different from the basic control process allowed almost in every
area. Four basic steps have been identified as under:
1. Developing Criteria for Evaluation
2. Measuring Actual Performance
3. Analyzing deviations from acceptable tolerance limits
4. Feedback and modifications.
66
Evaluation process for Operational Control :
Staretegy/Plan/ Setting Standards Actual Measurement

Objectives of Performance Performance of Performance
Check Check
Standards Performance
Reformulate Analysing
Variance
Feedback
(1) Setting of Standards : Strategists encounter the following three questions while
dealing with standard setting:
(i) What Standards to set?
(ii) How to set these standards? And in
(iii) What terms do we express these standards?
A three-pronged basic approach to standard-setting could be used to settle these issues, as
given below:
(i) The key managerial tasks.
(ii) The special requirements for the performance of the key tasks can help to
determine the type of standards to set.
(iii) Performance indicators that best express the special requirements could then
be decided upon to be used for evaluation.
Applying this approach in the case of a company which has adopted a market development
strategy, it can be said that on of the key managerial tasks is to expand market presence and
enhance market visibility. A special requirement is to raise the overall market share, and the
two indicators, for instance, which could satisfy the requirements, could be: increase in sales
revenue and efficiency of sales force.
(2) Measurement of Performance : The evaluation process operates at the
performance level as action takes place. Standards of performance act as the
benchmark against which the actual performance is to be compared. It is important,
however, to understand how the measurement of performance can take place. The
information system is the key element in any measurement exercise. Operationally,
67
measuring is done through the accounting, reporting, and communicating systems. A
variety of evaluation techniques are used for measurement Apart from the methods of
measuring performance, the other important aspects of measurement relate to the
difficulties, timing and periodicity in measuring.
measured.
(3) Analysing Variances : The measurement of actual performance and its comparison
(i) The actual performance matches the budgeted performance
(ii) The actual performance deviates positively over the budgeted performance.
(iii) The actual performance deviates negatively from the budgeted performance.
When actual performance deviates negatively from the budgeted performance then it
indicates a shortfall in achievement. The strategists need to pinpoint the areas where
performance is below standard and go into the causes of deviation.
(4) Taking Corrective Action : Corrective action is taken on the basis of the analysis of
the causes of deviation. There are three courses for corrective action:
(i) Checking of Performance
(ii) Checking of Standards
(iii) Reformulating Strategies, plans and objectives.
Q. What is Case Study Method? Explain its Importance & Types.
Ans. Meaning : A case study is a written description of actual managerial problems,
situations and events, giving factual information about an industry, an organization, its
products, markets, its competitive position, financial position, structure and managerial
style. In essence, a case study gives a simulation of various organizational problems faced
68
by managers at all levels on a daily basis. In short, a case study is a short or detailed
description of facts, in words and numbers, of an organizational situation.
The origin of case study method is attributed to lawyers at Harward University. The
Harward University Graduate School of Business Administration continued this work of ice
cutting by introducing the case study method of teaching management courses. This
method of imparting knowledge has been supported by stalwarts in management and have
strongly advocated this that management course is incomplete without this technique.
Why Case Studies? : Case study as a unique technique of learning has its own features
that make it as an effective tool of learning. The basic reasons that support case studies are:
(1) Search for and Identification of Information : Case study approach makes the
learner to search for information which is coherent and relevant to the objectives from
the heap of information. It develops an ability of the learner to distinguish clearly
between relevant and irrelevant information. This distinction is an important mile-
stone in learning.
(2) Ability to make Valid Assumption : It is almost impossible to have all the
information needed for a learner whether he is a student or a manager. The data
available are insufficient and calls for making valid and realistic assumptions or
postulations that helps in identifying a problem or objective in right perspective. It is
because a learner is not to go by symptoms but by objectives. This skill of focusing on
the real issue is possible through case studies where he separates symptoms and
comes to the roots of causes by reacting the real problem.
(3) Develops Analytical Skills : The learner develops the ability of analyzing and
evaluating the facts got from the narrative and assigning these their due weightage. In
other words, he is able to establish cause and effect relations. This leads to developing
skills that are needed to make decisions.
(4) Improves Communication Skills : Learner is at an advantage as his communication
skills improve both oral and written. After mastering the case, he is expected to present
it orally or in report from to a group or his teacher. At times, he or she is to play a role to
demonstrate his ability that he has understood the entire matter. This develops his or
her confidence and his ability to communicate effectively. Role-playing makes him or
her to do good deal of home work before he or she acts in presence of target audience
who may be his superiors. His accent, articulation all improve for his own benefit.
(5) Understanding of Management Concepts and Problems : Case studies bring to
the surface the possible problems faced by the learner may be a student or manager.
He or she is able to appreciate the issues involved and how new situations arise. He
tries to apply management principles and practices to solve day to day problems
under ground realities. In the course, he develops his own idea or concept of what is
exposed to management principles.
69
(6) Emphasis on Time Management : Every manager must master the art and science
of managing the time. Time is more than money; it is an opportunity on which he can
encash. Case study approach makes the learners more time-conscious, because a
given case is to be studied and problems to be identified and matching solutions are to
be arrived at. Hence, the learner develops time management skills both industrial or
as a member of team. Hence, the decision are not only sound but time bound.
(7) It is Both Instructive and Interesting : The age old methods of learning are more
conventional, dry and dreaded. Case study is a novel approach that converts the
same dry theory into fluid, easy to percolate and intensifying the desire for learning.
There is a positive motivation where the learner learns himself and whatever he
contributes is his or her own brain child. This self assertion and standing on own legs
build confidence.
Types of Case Studies : There are different ways of classifying the case studies on the
basis of coverage, purpose.
(A) On the basis of Purpose : Accordingly there are two types namely:
(i) The case studies that contain the situations which are meant for the managers
who have the ability to come to matching solutions.
(ii) The other type is the cases which are to be studied and analyzed to arrive at
conclusions by the participants may be students or trainees or even practicing
managers. These are mostly for managers in making.
(B) On the basis of Coverage : Another way of classification is the coverage. That is it
can be
(i) Micro-Level Study : It is the study of a particular company in depth at unit level.
Such cases give unit level profiles.
(ii) Macro-Level Study : Macro-level studies cover the entire industry where
profiles are given of a particular industry.
(C) Other Classification :
(i) Individual Presentation : Under this approach, the trainer or teacher allows
each student to present his case study with analysis and conclusions or possible
solutions. It is like a seminar presentation. Once each student presents his case
study and the relevant analysis and conclusion, the class is asked to participate
in class discussion.
(ii) Group Discussion : The students are divided into teams. Here, the students
are left alone to present different specialized areas, problems and solutions.
That is, it is participative approach where teams play vital role. These different
groups or teams hear one another's investigations, analyses and conclusion. As
a result, each student is benefited by specialized touch.
70
Q. What steps are involved in Solving Case Studies?

Ans. Steps in Solving Case Studies : The most commonly accepted steps are given
below:
(1) Step One : Understanding the Case: Perfect understating of a given case is a must to
analyse and arrive at definite conclusions or solutions. Comprehend the case is a
must to identify the problems and to suggest matching solutions. To understand the
case, there is need for three time reading:
(i) The first reading is to read with full concentration to size up what the case study
contains both explicit and implicit. This enables the learner to get the back-drop
of the case or the environment which helps to form as to what a learner is
supposed to.
(ii) Second reading involves under-lining the key words or sentences or phrases
that under-score the bearing on the possible solution expected.
(iii) The third and final reading is reinforcing as to know exactly what the learner is
expected to do. By now, with clear cut idea, learner is able to arrive at most fitting
caption for the solution or solutions to be given reinforcing as to know exactly
what the learner is expected to do.
(2) Step Two : Identify Case Limits: Limit is limit which does not permit. The second step
is to identify external limits or the span of the case. These limits are boundaries which
may be expressed in terms of
Ø Area
Ø Age-brackets
Ø Income Groups
Ø Educational Level
Ø Time Horizon
Ø Personnel involved.
These limits may be expressed directly or indirectly via hints so that the case
investigator and the evaluator are coming to more or less outcomes.
(3) Step Three : Make Clear the Postulations: There is no such thing as a complete case
study. It means that the case presented may not give all the information needed for
easy analysis. It is quite possible that data given are either having more than one
interpretation or are given in a covert form. Even in real life situation of a manager
might have good deal of information of which very little may be relevant Therefore, to
proceed on scientific and sound lines, there is a need for making certain postulations
to fill in the lacuna of desired or expected information. A good postulation is one which
is normally done by any normal person under normal circumstances. Each
assumption made is based on reasoning by the case analyst.
71
(4) Step Four : Find the Solutions: With the complete mastery over the first three steps,
the case analyst has to apply his mind; use his or her mental faculties of perception,
conception and sound judgment to arrive at the possible solutions as he or she thinks
fit.
(5) Step Five : Arrange and Write the Solution: The solutions arrived are to be arranged in
order of merit, listing comparative merits and demerits of each alternative solution In
this process, two thing may happen:
(i) As one proceeds from what he considers the worst solution towards what
appeared to be the best solution, the number of demerits should go on
diminishing and merits go on incrementing. That is, the demerits are least and
merits are most.
(ii) It is equally true that what the analyst thinks the best solution is also having its
relative merits and demerits. Possibly it may have its demerits along with merits.
However, the proportion of merits will be much higher.
(6) Step Six : Selection of the Best Solution Supported by the Criterion or Criteria: Once
perfect or logical evolution is made, it should lead to selection of the best solution
possible among the number of solutions available.
(7) Step Seven : Implementation of the Selected Solution: Each problem has a solution or
solution and the best and the most suitable one has to be implemented. Successful
implementation calls for splitting their solution into sequential steps. These steps are
nothing but series of actions which are to be listed and there should a phased out
program that is founded on logic.
(8) Step Eight : Have a Viable Feed back System: The analyst of a case study should not
halt at only implementation. Some gaps will be appearing on surface only after
implementation and evaluation. This needs a feed back system to suggest some
corrective action or actions. A good feed back system is one that suggests very clearly
that supports monitoring so that the implementation goes well as per the planned
activities.
(9) Step Nine : End Summary: This is the final step in the series of the overall process of
case study solution. It is nothing but a summarizing what the case study is about, what
is expected of the analyst and how he or she has done it by applying his mental faculty
and what are his solutions with an emphasis on what is the best of all including the
ways of implementing it for better results.
Q. What are the roles of the Instructor?
Ans. Role of Instructor : The instructor plays a key role in the course development process
and is expected to:
1) Act as the content expert
2) Become a learner by participating in relevant professional development activities
72
3) Have a clear understanding of the expectations of the program chair or Dean

regarding course development
4) Become a team member by utilizing the resources provided by technical staff, by
communicating to team members, and by asking questions
5) Help establish and follow time lines for course development
Q. Write a note on Strategic Management Audit.
Ans. Strategic Management Audit : In our introduction to business strategy, we
emphasized the role of the "business environment" in shaping strategic thinking and
decision-making.
The external environment in which a business operates can create opportunities
which a business can exploit, as well as threats which could damage a business. However,
to be in a position to exploit opportunities or respond to threats, a business needs to have
the right resources and capabilities in place.
An important part of business strategy is concerned with ensuring that these
resources and competencies are understood and evaluated - a process that is often known
as a "Strategic Audit".
Process of Strategic Audit : The process of conducting a strategic audit can be
summarized into the following stages:
1. Resource Audit : The resource audit identifies the resources available to a business.
Some of these can be owned (e.g. plant and machinery, trademarks, retail outlets)
whereas other resources can be obtained through partnerships, joint ventures or
simply supplier arrangements with other businesses.
2. Value Chain Analysis : Value Chain Analysis describes the activities that take place
in a business and relates them to an analysis of the competitive strength of the
business. Influential work by Michael Porter suggested that the activities of a business
could be grouped under two headings:
(i) Primary Activities - those that are directly concerned with creating and
delivering a product (e.g. component assembly); and
(ii) Support Activities, which whilst they are not directly involved in production,
may increase effectiveness or efficiency (e.g. human resource management). It
is rare for a business to undertake all primary and support activities.
Value Chain Analysis is one way of identifying which activities are best undertaken by
a business and which are best provided by others ("outsourced").
3. Core Competence Analysis : Core competencies are those capabilities that are
critical to a business achieving competitive advantage. The starting point for analyzing
core competencies is recognizing that competition between businesses is as much a
73
race for competence mastery as it is for market position and market power. Senior
management cannot focus on all activities of a business and the competencies
required to undertake them. So the goal is for management to focus attention on
competencies that really affect competitive advantage.
4. Performance Analysis : The resource audit, value chain analysis and core
competence analysis help to define the strategic capabilities of a business. After
completing such analysis, questions that can be asked that evaluate the overall
performance of the business. These questions include:
Ø Historical Analysis : How have the resources deployed in the business
changed over time
Ø Industry Norm Analysis : How do the resources and capabilities of the
business compare with others in the industry?
Ø Benchmarking : How do the resources and capabilities of the business
compare with "best-in-class" - wherever that is to be found.
Ø Ratio Analysis : How has the financial performance of the business changed
over time and how does it compare with key competitors and the industry as a
whole.
5. Portfolio Analysis : Portfolio Analysis analyses the overall balance of the strategic
business units of a business. Most large businesses have operations in more than one
market segment, and often in different geographical markets. Larger, diversified
groups often have several divisions (each containing many business units) operating
in quite distinct industries.
An important objective of a strategic audit is to ensure that the business portfolio
is strong and that business units requiring investment and management attention are
highlighted. This is important -a business should always consider which markets are
most attractive and which business units have the potential to achieve advantage in
the most attractive markets.
Traditionally, two analytical models have been widely used to undertake portfolio
analysis:
Ø The Boston Consulting Group Portfolio Matrix;
Ø The McKinsey/General Electric Growth Share Matrix
6. SWOT Analysis : SWOT is an abbreviation for Strengths, Weaknesses,
Opportunities and Threats. SWOT analysis is an important tool for auditing the overall
strategic position of a business and its environment.
Areas to Consider :
Some of the key areas to consider when identifying and evaluating Strengths,
Weaknesses, Opportunities and Threats are listed in the example SWOT analysis below:
74
Positive Negative
Strengths: Weaknesses:
Ø Technological Skills Ø Absence of Important skills

Ø Leading Brands Ø Weak Brands
Ø Distribution Channels Ø Poor access to distribution
Ø Customer Loyalty/Relationship Ø Low customer Retention
Ø Product Quality Ø Unreliable Product/Service
Ø Management Ø Management
Opportunities: Threats:
Ø Changing customer tastes Ø Changing customer tastes

Ø Liberalization of geographic Market Ø Closing of geographic market
Ø Technological advances Ø Technological advances
Ø Change in Government Policies Ø Change in Government Policies
Ø Lower Personal Taxes Ø Tax Increases
Ø Change in Population age structure Ø Change in Population age structure
Ø New Distribution Channel Ø New Distribution Channel
75
CORPORATE EVOLUTION
Past Year Question Papers
JAN 2009
UNIT - I
1. What are the nature of inter relationship between strategy formulation and strategy
implementation? Explain the issues involved in allocation of resources for strategy
implementation.
2. Describe various type of business level strategies which can be developed by a
business corporate. Explain the circumstances under which each of these business
level strategies can be implemented.
UNIT - II
1. Describe various marketing strategies which are available to business house as its
product moves into various stages of its product life cycle.
2. Discuss key functional strategies in the area of personnel in relation to performance
evaluation training and development and compensation.
UNIT - III
1. What is the distinction strategies control and operational control? Describe various
operational control system which can be implemented in an organization.
2. In what ways structure and strategy are linked with each other. Explain various
structural consideration and structural options available for strategy implementation.
UNIT - IV
1. Write a detailed note on Strategy and corporate evolution in India context.
2. Describe the process and criteria for evaluation of Strategy. What do you understand
by strategic Management Audit?
JULY 2008
UNIT - I
1. What do you understand by forward linkages and backward linkages? Explain various
aspects of strategy implementation.
2. There are three alternative business level strategies (a) cost leadership (b)
differentiation, and (c) focus. Describe how these are used, under which conditions
these are used and their associated benefits and risks.
76
UNIT - II
1. Explain key functional strategies in finance in relation to capital acquisition, capital
allocation and mergers and acquisitions.
2. Describe the key functional strategies in marketing in relation to product, price and
promotion.
UNIT - III
3. What does corporate culture consist of? How can a manager make an assessment of
the impact of culture? what approaches can strategists adopt to create strategy
supportive culture?
4. Discuss the major structures that could be used as building blocks in creating an
organization structure. Mention the advantage and disadvantage of each type of
structure. discussed from the view point of strategic implementation.
UNIT - IV
1. What is the process and criteria for evaluation of strategy? Discuss various technique
of strategy evaluation.
2. Short note :
(a) Strategic management audit.
(b) Strategy and corporate evaluation in India context.
JAN 2008
UNIT - I
1. What is strategy implementation? Discuss the process of operating strategy?
UNIT - II
1 Discuss the independence of strategic formulation and implementation. How will you
develop functional strategies?
2 Discuss briefly the key functional strategies in personnel and finance areas?
3 Discuss the strategic issue involved in production and R & D decision areas.
UNIT - III
1 What is strategic business unit? Discuss structure-strategy relationship also.
2 Write notes on the following :
(a) Strategic controls establishment.
(b) Motivation, Execution, and controls.
UNIT - IV
1 Write a detailed note on the case method of teaching.
77
2 Write notes on the following :
(a) Strategic management audit :
(b) Criteria of evaluation of strategy.
JAN 2007
UNIT - I
1 Discuss the interdependence of strategy formaulation and strategy formaulation?
2 Short Notes on
(a) Developing and communicating concise policies.
UNIT - II
1 Discuss functional strategy regarding employee recruitment, selection, carreer
development, compensation and union relation.
2 Discuss key functional strategy in Marketing with respect to product and price.
UNIT - III
3 Define various types of organizational structures? How are they influencing the
strategy?
4 How will you establish strategic control? Discuss operational control system and
strategic control systems.
UNIT - IV
1 Short Note :
(a) Strategic Management Audit
(b) Evaluation Strategy
2 Write detail note on strategy and corporate strategy in india context.
78

Corporate Evolution N Strategic Implementation

Uploaded by

Document Information

Original Title

Copyright

Available Formats

Share this document

Share or Embed Document

Sharing Options

Did you find this document useful?

Is this content inappropriate?

Copyright:

Available Formats

Corporate Evolution N Strategic Implementation

Uploaded by

Copyright:

Available Formats

By :

COMPUTER NETWORKS AND INTERNET

Implementation of strategies is not limited to the formulation of plans, programmes,

Determine Key managerial tasks Evaluate results, assess gaps

Delegate Authority relationship Develop manager talent and

State policies as guide for action Build MIS to provide adequate

Role of Strategists in Strategy Implementation :

Strategists Resource allocation & Setting Policies and

Q. Discuss the interrelationship that exists between the formulation and

Ans. Meaning of Goals : Goals denote what an organization hopes to accomplish in a

Characteristics of Annual Objectives:

(1) Annual objectives should be understandable : Because annual objectives play an

(3) Annual objectives should be measurable and controllable : Annual objectives

Role of Annual Objectives : Annual objectives play an important role in strategic

Sr. Basis of Difference Long-Term Objectives Annual Objectives

Q. Write a short note on Developing Business and Functional Strategies.

7. Create or maintain functional competitive advantages, if desired

Key Functional Strategies Typical questions that should be

Push Strategy Marketer Intermediary Consumer

Pull Strategy Marketer Intermediary Consumer

Diagram: Push and Pull Strategies

Q. What are the key Functional Strategies in finance in relation to capital

Key Functional Typical questions that should be

Techniques of Capital Budgeting

Accounting Profit Criteria Cash Flow Criteria

(i) Pay Back Method

Key Functional Typical questions that should be answered

C. Functional Strategies in relation to Dividend and Working Capital Management :

(ii) Stable dividend at a Lower level : In case a company has favorable

(c) Concentric Mergers : Concentric mergers take place when there is a

R&D decision area Typical questions that should be

Q. What are the Decision Areas in Production/Operations? Also explain the

Key Operating Strategies Typical questions that should be

Q. What are the functional Strategies in Personnel?

Selection Process : The steps of selection process are:

Hiring Decision Step 8

(b) Organizational Career Development : The assistance from managers and

Performance Evaluation Process :

(3) Training and Development Strategies :

1. Decision-Making Skills (a) In-basket

(C) Functional Strategies in Compensation, Labour/Union Relations, Discipline

Merits : Merits of entrepreneurial structure are:

Demerits : Demerits of Entrepreneurial Structure are:

Departments Marketing Finance Materials Research

Support Staff Support Staff Support Staff Support Staff

Corporate Finance Corporate Legal

General Manager General Manager

Merits: Merits of Divisional Structure are:

Group Head SBU 1 Group Head SBU 2 Group Head SBU 3

Divisions Divisions Divisions

Finance Marketing Personnel Operations

Merits : Merits of Matrix Structure are:

(4) Integration of Merits of Different Structures : It combines the merits of different

(4) Integrating : Integration is an essential part of coordination as it deals with integration

(a) Bringing together all departmental heads b prescribing organizational

(8) Coordinating Activities : Chief Executive acts as a coordinator among different

(ii) As a weakness, culture may obstruct the smooth implementation of strategy by

control can be exercised through the formulation of contingency strategies and

(iii) Periodicity in Measurement : A related issue to timing is periodicity, which

Q. Briefly review the role of organizational systems in strategic evaluation.

(5) Risk presence

(5) Rewards for meeting or exceeding standards should be emphasized so that

(c) Systems Modelling : System modeling is based on computer based models