Strategy Implementation and Control – CA Inter SM Study Material

Strategy Implementation and Control – CA Inter SM Notes is designed strictly as per the latest syllabus and exam pattern.

Strategy Implementation and Control – CA Inter SM Study Material

Question 1.
HQ is a service company? Two years back the company hired a re-puted management consultant to formulate its strategy. The consultant recommended an aggressive expansion plan. Now in an internal review meeting the company finds that many of the suggestions are not even fully considered. Which part of strategic management process is missing in HQ? (RTP May 2019)
Answer:

1. Implementation is the managerial exercise of putting a chosen strategy into action which is missing in case of HQ.
2. It deals with the managerial exercise of supervising the ongoing quest of strategy, making it work, improving the ability with which it is executed and showing measurable progress in attaining the targeted % results.
3. Strategic implementation is concerned with translating a strategic decision into action, which pre-supposes that the decision itself (i.e., the strategic choice) was made with some thought being given to feasibility and acceptability.
4. The apportionment of resources to new courses of action will need to be undertaken, and there may be a need for familiarizing the organi-zation’s structure to handle new activities as well as training personnel and formulating appropriate systems.
5. It is crucial to realize the difference between the formulation and implementation because they both require very different skills.
6. Also, a company will be successful only when the strategy formulation is sound and implementation is excellent.

Question 2.
Write a short note on strategic change and explain the process of strategic change. (Alov 2018; 7 Marks)
OR
Specify the steps that is needed to initiate & bring changes in the strategic building of any organization.
OR
Write a short note on Steps for initiating a strategic change.
Answer:
Meaning Of Strategic Change:

Changes in the environmental forces require businesses to bring modifi-cations in existing strategies and bring out new strategies.
Strategic change is a complex process that involves a corporate strategy focused on new markets, products, services, etc.

Steps to initiate strategic change: For initiating strategic change, three steps can be identified as under:

1. Recognize the need for change:

• First step is to identify which facets of the present corporate culture are strategy supportive and which are not.
• This basically means going for environmental scanning involving appraisal of both internal and external capabilities may be through SWOT analysis and then deciding where the gap lies and scope for change exists.

2. Create a shared vision to manage change:

• Objectives of both individuals and organization should coincide. There should be no conflict between them.
• This is possible only if the management and the organization members follow a shared vision.
• Senior managers need to constantly and consistently communi-cate the vision to all the organizational members,
• They have to convince all those concerned that the change in business culture is not superficial or cosmetic.
• The actions taken have to be credible, highly visible and unmis-takably indicative of management’s seriousness to new strategic initiatives and associated changes.

3. Institutionalise the change:

• This is basically an action stage which requires implementation of changed strategy.
• Creating and sustaining a different attitude towards change is essential to ensure that the firm does not slip back into old ways of thinking or doing things.
• Capacity for self-renewal should be a fundamental anchor of the new culture of the firm. Besides, change process must be regularly monitored and reviewed to analyse the after effects of change.

Any discrepancy or deviation should be brought to the notice of per-sons concerned so that the necessary corrective actions are taken, ft takes time for the changed culture to prevail.

Question 3.
Distinguish between Strategy Formulation and Strategy Implementa-tion. (May 2019; 3 Marks)
Answer:
Strategy implementation is fundamentally different from strategy formulation in the following ways:

Strategy Formulation	Strategy Implementation
♦ Strategy formulation focuses on effectiveness. ♦ Strategy formulation is primarily an intellectual process. ♦ Strategy formulation requires conceptual intuitive and analytical skills. ♦ Strategy formulation requires co­ordination among the executives at the top level.	♦ Strategy implementation focuses on efficiency. ♦ Strategy implementation is primar­ily an operational process. ♦ Strategy implementation requires motivation and leadership skills. ♦ Strategy implementation requires coordination among the execu­tives at the middle and lower levels.

Question 4.
What is strategic change? Explain the change process proposed by Kurt Lewin that can be useful in implementing strategies?
OR
ABC Ltd. plans to introduce changes in its structure, technology and people Explain how Kurt Lewin’s change process can help this firm.
Answer:
The changes in the environmental forces frequently require businesses to make alterations in their current strategies and bring out new strategies, Strategic change is a complex process and it involves a corporate strategy focused on new markets, products, services and new ways of doing business.

To make the change lasting, Kurt Lewin proposed three phases of the change process namely unfreezing, changing and refreezing for moving the organization from the present to the future explained as follows:

(a) Unfreezing the situation: The process of unfreezing simply makes the individuals or organizations conscious of the need for change and pre-pares them for such a change. Lewin suggests that the changes must not come as a surprise to the members of the organization. Abrupt and unexpected change would be socially destructive and morale lowering. The management must pave the way for the change by first “unfreezing the situation”, so that members would be organized and prepared to accept the change.

Unfreezing is the procedure of breaking down the old attitudes and behaviours, customs and traditions so that they start with a clean slate. This can be achieved by making announcements, holding meetings and promoting the ideas throughout the organization.

(b) Changing to New situation: Once the unfreezing process has been accomplished and the members of the organization identify the need for change and have been completely prepared to accept such change, their behaviour patterns is required to be redefined.

H.C. Kellman has proposed three methods for reassigning new patterns of behaviour. These are, internalization, identification and compliance.

Internalization: Internalization includes some internal changing of the individual’s thought processes in order to adjust to a new environment. They have given freedom to learn and adopt new behaviour in order ® to succeed in the new set of circumstances.

Identification: Identification occurs when members are psychologically impressed upon to recognize themselves with some given role models whose behaviour they would like to adopt and try to become like them.

Compliance: It is attained by stringently imposing the reward and punishment strategy for good or bad behaviour. Fear of punishment, actual punishment or actual reward appears to change behaviour for the better.

(c) Refreezing: Refreezing occurs when the new behaviour becomes a normal way of life. The new behaviour must swap the previous be-haviour entirely for successful and permanent change to take place. In order for the new behaviour to become permanent, it must be continuously strengthened so that this new acquired behaviour does not diminish or extinguish.

Change process is not a one-time application but a continuous process due to dynamism and ever changing environment. The process of unfreezing, changing and refreezing is a cyclical one and remains continuously in action.

Question 5.
What is strategic control? Briefly explain the different types of strategic control. (May 2018; 5 Marks)
OR
What is implementation control? Discuss its basic forms. (RTPNov 2019)
Answer:
Strategic control concentrates on the twin questions of whether:
(1) the strategy is being implemented as planned; and
(2) the results produced by the strategy are those intended.
There are four types of strategic control as follows:

* PREMISE CONTROL: A strategy is designed on the basis of certain as-sumptions or premises about the complex and unstable organizational environment. Over a period of time these premises may not remain effective. Premise control is a device for methodical and non-stop monitoring of the environment to confirm the validity and correctness of the premises on which the strategy has been built. It mainly includes monitoring two types of factors:

1. Environmental factors such as economic (inflation, liquidity, interest rates), technology, social and legal-regulatory.
2. Industry factors such as competitors, suppliers, substitutes.

STRATEGIC SURVEILLANCE: Opposing to the premise control, the strategic surveillance is unfocussed. It involves over-all monitoring of various sources of information to uncover unexpected information having a bearing on the organizational strategy. It involves informal environmental browsing. Reading financial and other newspapers, business magazines, attending meetings, conferences, discussions and so on can help in strategic surveillance.
Strategic surveillance may be free form of strategic control, but is capable of exposure to information relevant to the strategy.

SPECIAL ALERT CONTROL: At times, unpredicted events may force or-ganizations to reassess their strategy. Abrupt changes in Government, natural calamities, terrorist attacks, unexpected merger/acquisition by competitors, industrial disasters and other such events may cause an immediate and vigorous assessment of strategy. To manage with such possibilities, the organisations form crisis management teams to process the situation.

IMPLEMENTATION CONTROL:
Managers implement strategy by translating major plans into concrete, chronological actions that form incremental steps. Implementation control is focused towards assessing the need for changes in the overall strategy in light of disclosing events and results connected with incremental steps and actions.

Strategic implementation control is not a replacement to operational control. Unlike operational control, it endlessly monitors the basic direction of the strategy. The two basic forms of implementation control are:

1. Monitoring strategic thrusts: Monitoring strategic thrusts helps managers to determine whether the overall strategy is developing as desired or whether there is need for modifications.
2. Milestone Reviews: All key activities essential to implement strategy are separated in terms of time, events or major resource apportionment. It typically includes a complete reconsideration of the strategy. It also measures the requirement to continue or refocus the direction of an organization.

Question 6.
Explain the concept and need of Strategy Audit. (May 2018; 4 Marks)

Kewal Kapadia is the Managing Director of KK industries located in Kan-pur. In a review meeting with the head of finance, Kuldeep Khaitan he said that in the first five years of last decade the company grew between 8-10 per cent every year, then the growth rate started falling and in previous year the company managed 1 per cent. Kuldeep replied that the company is facing twin issues, one the strategy is not being implemented as planned; and two the results produced by the strategy are not in conformity with the intended goals. There is mismatch between strategy formulation and implementation. Kewal disagreed and stated that he takes personal care in implementing all strategic plans.

You have been hired as a strategy consultant by the KK Industries. Advise way forward for the company to identify problem areas and correct the strategic approaches that have not been effective. (RTP May 2018)
Answer:
MEANING OF STRATEGY AUDIT:
A strategy audit is an examination and evaluation of areas affected by the operation of a strategic management process within an organization. The audit of management performance with regard to its strategies helps an organization identify problem areas and correct the strategic approaches that have not been effective.

A strategy audit is needed under the following conditions:

• When the performance indicators reflect that a strategy is not working properly or is not producing chosen outcomes.
• When the goals and objectives of the strategy are not being achieved.
• When a main change takes place in the external environment of the organization.
• When the top management plans:

(a) to adjust the current strategies and present new strategies and
(b) to confirm that a strategy that has operated in the past continues to be in-tune with slight internal and external changes that may have happened since the construction of strategies.
Tolerable and timely feedback is the foundation of actual strategy audit. Strategy audit can be no better than the information on which it is built.

Strategy Audit includes three basic activities:

1. Examining the underlying bases of a firm’s strategy,
2. Comparing expected results with actual results, and Taking corrective actions to ensure that performance conforms to plans.

Question 7.
What is Strategy Audit? Explain briefly the criteria for strategy audit given by Richard Rumelt’s. (RTP Nov 2018)
Answer:
A strategy audit is an examination and assessment of areas affected g by the operation of a strategic management process within an organization.

Richard Rumelt’S Criteria For Strategy Audit

A. Consistency: A strategy should not present irregular goals and policies. Organizational struggle and interdepartmental disputes are often symptoms of managerial disorder, but these problems may also be a sign of strategic inconsistency. (Bickering means: Argue about petty matters)

Three guidelines help determine if organizational problems are due to inconsistencies in strategy:

• If managerial problems continue in spite of change in personnel and if they manage to be issue-based instead of people-based, then strategies may be unreliable.
• If success for one organizational department means, or is inter-preted to mean, failure for another department, then strategies may be inconsistent.
• If policy problems and issues continue to be brought to the top for resolution, then strategies may be inconsistent.

B. Consonance: Consonance refers to the need for strategists to examine sets of trends, as well as individual trends, in auditing strategies. A strategy must represent an adaptive response to the external envi-ronment and to the critical changes occurring within it.

One trouble in matching a firm’s key internal and external factors in the preparation of strategy is that most trends are the outcome of interactions among other trends. For example, the day-care school/ centre came about as a combined result of many trends that included a growth in the average level of education, need for different education training, increase in income, inflation, and an increase in women in the workforce. Even though single economic or demographic trends might appear stable for many years, there are waves of change going on at the interaction level.

C. Feasibility: A strategy must neither over tax available resources nor create unsolvable sub-problems. The final broad test of strategy is its feasibility; that is, can the strategy be attempted within the physical, human, and financial resources of the enterprise? The financial re-sources of a business are the easiest to quantify and are normally the first constraint against which strategy is reviewed. It is occasionally overlooked, however, that innovative approaches to financing are every so often possible.

Devices, such as captive subsidiaries, sale-leaseback arrangements, and tying plant mortgages to long-term contracts, have all been used well to help win key positions in unexpectedly expanding industries. A less measurable, but actually more rigid, limitation on strategic choice is that executed by individual and organizational capabilities. In auditing a strategy, it is important to examine whether an organization has demonstrated in the past that it possesses the abilities, competencies, skills, and talents needed to carry out a given strategy.

D. Advantage: A strategy must provide for the creation and/or main-tenance of a competitive advantage in a selected area of activity. Competitive advantages normally are the result of superiority in one of three areas:

1. resources,
2. skills, or
3. position.

The idea that the positioning of firm’s resources that enhance their combined effectiveness is familiar to military theorists and chess players. Position can also play a crucial role in an organization’s strategy. Once gained, a good position is defensible—meaning that it is so costly to capture that rivals are deterred from full- scale attacks. Positional advantage tends to be self-sustaining as long as the key internal and environmental factors that inspire it to remain stable. This is why entrenched firms can be almost impossible to unseat, even if their skill levels are only average.

Although not all positional advantages are related with size, it is true that bigger organizations have a tendency to operate in markets and use procedures that turn their size into advantage, while smaller firms seek product/market positions that exploit other types of advantage. The main characteristic of good position is that it authorizes the firm to obtain advantage from policies that would not similarly benefit rivals without the same position. Therefore, in auditing strategy, organizations should examine the nature of positional advantages associated with a given strategy.

Question 8.
Why Strategy Audit is more difficult in present scenario? (May 2018; 3 Marks)
Answer:
Reasons why strategy evaluation is more difficult today include the following trends:

• A spectacular increase in the environment’s complexity.
• The increasing difficulty of predicting the future with accuracy.
• The increasing number of variables in the environment.
• The rapid rate of obsolescence of even the best plans.
• The increase in the number of both domestic and world events affect-ing organizations.
• The decreasing time span for which planning can be done with any degree of certainty.

Question 9.
Explain concept and nature of BPR. (Nov. 2019; 5 Marks)
Answer:
BPR stands for business process re-engineering which means starting all over again from scratch. It refers to the analysis and redesign of workflows and processes both within and between the organisations. Its objective is to improve performance in terms of time, cost, quality, and responsiveness to customers. It implies giving up old practices and adopting the improved ones. It is an effective tool of realising new strategies.

Improving business processes is paramount for businesses to stay compet-itive in today’s marketplace. New technologies are rapidly bringing new capabilities to businesses, thereby raising the strategical options and the need to improve business processes dramatically. Even the competition has become harder. In today’s marketplace, major changes are required to just stay even.

Question 10.
India’s luxurious domestic airline Indijet in an attempt to retain its leadership in aviation sector lias hired J S Dutta as its Chief Executive. Mr Dutta wishes to reorient company to make it a domestic discount carrier.

He desires to introduce no frills business model by offering extremely low fares and improve margins by cutting down traditional amenities such as reclining seats and complimentary meals. At the same time setting the stage for a new air revolution, he wishes to brand itself as on-time airlines having proper systems in place and removing additional and wasteful activities and processes.
What steps will you advise to Mr Dutta? (RTP Nov 2019)
Answer:
[Mr Dutta should adopt business process reengineering (BPR).]

1. Business Process Reengineering (BPR) is an approach to unusual improvement in operating effectiveness through the redesigning of critical business processes and supporting business systems.
2. It is revolutionary redesign of key business processes that involves examination of the basic process itself.
3.  It looks at the minute details of the process, such as why the work is done, who does it, where is it done and when it is done.
4. BPR refers to the analysis and redesign of workflows and processes both within the organization and between the organization and the external entities like suppliers, distributors, and service providers.
5.  The orientation of redesigning efforts is basically radical. In other words, it is a total deconstruction and rethinking of business process in its entirety, unconstrained by its existing structure and pattern.
   6. Its objective is to obtain quantum jump in process performance in terms of time, cost, output, quality, and responsiveness to customers.

BPR is a revolutionary redesigning of key business processes. BPR involves the following steps:

1. Determining objectives and framework: Objectives are the desired end results of the redesign process which the management and organization attempts to achieve. This will provide the required focus, direction, and motivation for the redesign process. It helps in building a comprehensive foundation for the reengineering process.
2. Identify customers and determine their needs: The designers have to understand customers – their profile, their steps in acquiring, using and disposing a product. The purpose is to redesign business process that clearly provides added value to the customer.
3. Study the existing process: The existing processes will provide an important base for the redesigners. The purpose is to gain an under-standing of the ‘what’, and ‘why’ of the targeted process. However, some companies go through the reengineering process with clean perspective without laying emphasis on the past processes.
4. Formulate a redesign process plan: The information obtained through the earlier steps is translated into an ideal redesign process. Formu-lation of redesign plan is the real crux of the reengineering efforts. Customer focused redesign concepts are identified and formulated. In this step alternative processes are considered and the best is selected.
5. Implement the redesign: It is easier to formulate new process than to implement them. Implementation of the redesigned process and application of other knowledge gained from the previous steps is key to achieve dramatic improvements. It is the joint responsibility of the designers and management to operationalize the new process.

Question 11.
Identify three aspects of impact of IT Systems on Business Process Reengineering and list three areas where it provides business value. (Nov 2018; 3 Marks)
Answer:
Impact of IT-systems are identified as:

• Compression of time
• Overcoming restrictions of geography and/or distance
• Restructuring of relationships.

IT-initiatives, thus, provide business values in three distinct areas:

• Efficiency – by way of increased productivity,
• Effectiveness – by way of better management,
• Innovation – by way of improved products and services

All these can bring about a fundamental change in the quality of products and services, thereby improving the competitiveness and customer satis-faction. Information technology (IT) is a critical factor in the success of bringing this change.

Question 12.
What is Benchmarking? Explain briefly the elements involved in Benchmarking process. (RTP May 2018; RTP May 2019)
OR
What is Benchmarking? Explain the various steps in Benchmarking pro-cess. (May 2019; 7 Marks)
OR
Swift Ltd and Quick Ltd are two companies that are in the business of light industrial machines. While Swift is the market leader the sales of Quick has been falling. In the year 2017-18 the market share of the two companies was forty per cent and five per cent respectively. During the last five years the market share of quick reduced from third to sixth position.

As an immediate corrective measure top management of Quick decided to emulate the successful standards of Swift Ltd and set them as their own yardsticks. With the help of standards they intended to compare, measure and judge their performance.
What is the strategic tool Quick Ltd is adopting? How is it implemented? (RTP Nov 2018)
Answer:

• It is a process of finding the best practices within and outside the in-dustry to which an organisation belongs. Knowledge of the best helps in standards setting and finding ways to match or even surpass own performances with the best performances.
• Benchmarking is an approach of setting goals and measuring produc-tivity of firms based on best industry practices or against the products, services and practices of its competitors or other acknowledged leaders in the industry.
• It developed out of need to have information against which perfor-mance can be measured.
• Benchmarking helps businesses in improving performance by learning from the best practices and the processes by which they are achieved.
• Thus, benchmarking is a process of continuous improvement in search for competitive advantage.
• Firms can use benchmarking practices to achieve improvements in diverse range of management functions like product development, customer services, human resources management, etc.
• The top management of Quick Ltd is doing benchmarking.
• The benchmarking helps an organization to get ahead of competition.
• A benchmark may be defined as a standard or a point of reference against which things may be compared and by which something can be measured and judged.
• In simple words, benchmarking is an approach of setting goals and measuring productivity based on best industry practices. In recent years, different commercial and non-commercial organizations are discovering the value of benchmarking and are applying it to improve their processes and systems.]

The various steps in Benchmarking Process are as under:

1. Identifying the need for benchmarking: This step will define the ob-jectives of the benchmarking exercise. It will also involve selecting the type of benchmarking. Organizations identify realistic opportunities j for improvements.
2. Clearly understanding existing decisions processes: The step will con-tain compiling information and data on performance.
3. Identify best processes: Within the selected framework best processes are identified. These may be within the same organization or external to them.
4. Comparison of own process and performance with that of others: Benchmarking process also includes comparison of performance of the organization with performance of other organization. Any deviation between the two is analyzed to make additional improvements.
5. Prepare a report and implement the steps necessary to close the performance gap: A report on benchmarking initiatives containing recommendations is prepared. Such a report also contains the action plans for implementation.
6. Evaluation: Business organizations evaluate the results of the bench-marking process in terms of improvements vis-a-vis objectives and other criteria set for the purpose. It also periodically evaluates and reset the benchmarks in the light of changes in the conditions that impact the performance.