Introduction to Strategic Management – CA Inter SM Question Bank is designed strictly as per the latest syllabus and exam pattern.
Introduction to Strategic Management – CA Inter SM Question Bank
Question 1.
State with reasons which of the following statement is correctíincorrect:
Strategy is a substitute for Sound, Alert, and Responsible management. (Nov 2008, 2 marks)
Answer:
Incorrect: Strategy is no substitute for sound, alert and responsible management. Strategy can never be perfect, flawless, and optimal. It is in the very nature of strategy that it is flexible and pragmatic; It is art of the possible; It does not preclude second-best choices, trade-offs, sudden emergencies, pervasive pressures, failures, and frustrations. However, in a sound strategy, allowances are made for possible miscalculations and unanticipated events.
Question 2.
State with reasons which of the following statement Is correct/incorrect:
A company’s strategy has always to be proactive in nature. (Nov 2008, 2 marks)
Answer:
incorrect: Strategy is partly proactive and partly reactive. A company’s strategy is typically a blend of proactive actions on the part of managers to improve the company’s market position and financial performance and as-needed reactions to unanticipated developments and fresh market conditions.
Hence a portion of a company’s strategy is always developed on the fly, coming as a reasoned response to unforeseen developments-fresh strategic maneuver on the part of rival firms, shifting customer requirements and expectations, new technologies and market opportunities, a changing political or economic climate in the surrounding environment.
Question 3.
State with reason which of the following statement is correct or incorrect:
The process of strategy avoids matching potential of the organization with the environmental opportunities. (Nov 2011, 2 marks)
Answer:
Incorrect: In the process of strategic management an organisation continuously scans its relevant environment to identify various opportunities and threats. Organizations keen to grow and expand often look for promising opportunities that match their potential. Such opportunities become a good stepping stone for achieving the goals of the organisation.
Question 4.
State with reasons which of the following statement is correct or incorrect:
Developing annual objectives & short-term strategies that are compatible with the selected set of long-term objectives are one of the major tasks of strategic management. (May 2012,2 marks)
Answer:
Correct: A Companys set of strategic objectives should include both short-term and long terms performance targets. Short-term objectives help to focus attention on delivering immediate performance improvements. While long-term objectives represent the results expected from pursuing certain strategies.
Question 5.
Strategy is partly proactive and partly reactive. Do you agree? Give reasons for your answer. (Nov 2012, May 2016, 3 marks each)
Answer:
A Company’s Strategy Is basically a combination of
1. Pro-active actions of the managers and
2. Reactive actions.
Conclusion:
Thus, we can conclude that strategy Is partly proactive and partly reactive. Under proactive strategy, organisations will analyse possible environmental scenarios and create strategic framework after proper planning and set procedures and work on these strategies in a predetermined manner.
However, there can be significant deviations between wtat was visualised and wtiat actually happens. These deviations are then handled through reactive strategy. Reactive strategy is triggered by the changes In the environment and provides ways and means to cope with the competitive factors or threat factors and take advantage of emerging opportunities.
Question 6.
State with reasons which of the following statement is corrector Incorrect:
A company’s strategy has always to be proactive In nature. (Nov 2013, 2 marks)
Answer:
Incorrect- Strategic analysis seeks to determine alternative course of action that could best enable the firm to achieve Its mission and objectives in light of impact and influence of competitive environment.
Question 7.
Quite often strategies of most business organizations are a combination of planned strategies and reactive strategies. Explain with reasons. (May 2015,3 marks)
OR
Strategy is partly proactive and partly reactive. Elaborate. (Nov 2018,5 marks)
Answer:
- Strategy is partly proactive and partly reactive.
- In proactive strategy, organizations will analyze possible environmental scenarios and create strategic framework after proper planning and set procedures and work on these strategies in a predetermined manner.
- However, in reality, no company can forecast both internal and external environments exactly.
- Everything cannot be planned in advance.
- Strategies need to be attuned or modified in light of possible environmental changes.
- There can be significant or major strategic changes when the environment demands.
- Reactive strategy is triggered by the changes in the environment and provides ways and means to cope with the negative factors or take advantage of emerging opportunities.
Reactive actions are the responses to the environmental changes In order to:
1. face unforeseen developments and changes.
2. adjust and adapt to unanticipated risks.
Reactive actions are the responses to the environmental changes In order to:
1. face unforeseen developments and changes.
2. adjust and adapt to unanticipated risks.
Question 8.
Yummy Foods and Tasty Foods are successfully competing in the business of ready-to-eat snacks in Patna. Yummy has been pioneer In introducing innovative products, These products will give them good sales. However, Tasty Foods will introduce similar products in reaction to the products introduced by the Yummy Foods taking away the advantage gained by the former. Discuss the strategic approach of the two companies. Which is superior?
Answer:
Yummy foods Is proactive In its approach.
On the other hand, Tasty Food is reactive. Proactive strategy is planned strategy whereas reactive strategy is adaptive reaction to changing circumstances. A company’s strategy is typically a blend of proactive actions on the part of managers to Improve the company’s market position and financial performance and reactions to unanticipated developments and fresh market conditions. If organizational resources permit, it is better to be proactive rather than reactive. Being proactive in aspects such as Introducing new products will give you advantage in the mind of customers.
At the same time, crafting a strategy involves stitching together a proactive/intended strategy and then adapting first one piece and then another as circumstances surrounding the company situation change or better options emerge-a reactive/adaptive strategy. This aspect can be accomplished by Yummy Foods.
Question 9.
What is Strategic Management? What benefits accrue by following a strategic approach to managing? (Nov 2007, 10 marks)
Answer:
Strategic Management:
Meaning Strategic Management is a multi-dimensional function. As a broad overall process It is defined as the set of decisions and actions resulting In formulation and implementation of strategies designed to cNeve the objectives of an organisation.
Strategic Management is interpreted in a wider sense as the process which deals with fundamental organizational renewal and growth with the development of the strategies, structures and systems necessary to achieve such renewal and growth, and with the organizational systems needed to effectively manage the strategy formulation and implementation processes.”
1. To Create a competitive advantage over the other competitor.
2. To Meet the opportunities and threats with challenges.
Question 10.
State with reason which of the following statement is correct/incorrect:
Efficiency and effectiveness mean the same in strategic management.” (May 2008, 2 marks)
Answer:
Incorrect: .
The two terms Effectiveness’ and ‘Efficiency’ mean different but they are related to each other.
‘Effectiveness’ alms to achieve the goals within time.
‘Efficiency focuses on optimum use of resources to achieve the goals.
Management is concerned not only with achieving goals effectively but also attaining them as efficiently as possible. For instance, it Is easier to be effective if one ignores efficiency. For example, some government organizations get their jobs done but at a very high cost. Usually, high efficiency is associated with high effectiveness, which is the aim of all managers. However, undue emphasis on high efficiency without being effective is also not desirable. Poor- management is due to both Inefficiency and ineffectiveness. So, management should be both effective and efficient.
Question 11.
State with reason which of the following statement is correct or Incorrect:
Strategic management is a bundle of tricks and magic. (May 2009, May 2017, 2 marks each)
Answer:
Incorrect: No, strategic management is not a bundle of tricks and magic. It is much more serious affair. it involves systematic and analytical thinking and action. Although the success or failure of a strategy is dependent on several extraneous factors, It cannot be stated that a strategy Is a trick or magic. Formation of strategy requires careful planning and requires strong conceptual, analytical, and visionary skills.
Question 12.
State with reason which of the following statements are correct or incorrect:
The rate and magnitude of changes that can affect organizations are decreasing dramatically. (May 2009, 2 marks)
Answer:
Incorrect: The rate and magnitude of changes that can affect organizations are increasing day by day because of change in business environment due to globalization and liberalization that are fast-paced and have far-reaching implications for business, as most of the organisations are dependent on the environmental factors.
Question 13.
Write short note on the following:
Importance of Strategic Management. (May 2011, May 2013, 4 marks)
OR
Briefly explain the Importance of Strategic Management. (May 2012, 3 marks)
Answer:
importance of Strategic Management
1. Financial benefits
On the basis of empirical studies and logical analysis, it may be claimed that the impact of strategic management is primarily that of improved financial performance in terms of profit and growth of firms with a developed strategic management system having major impact on both planning and implementation of strategies.
2. Enhanced capability of problem prevention
This is likely to result from encouraging and rewarding subordinate attention to planning considerations and managers being assisted in their monitoring and forecasting role by employees who are alerted to the needs of strategic planning.
3. Improved quality strategic decisions through group Interaction
The process of group interaction for decision-making facilitates generation of alternative strategies and better screening of options due to specialized perspectives of group members. The best alternatives are thus likely to be chosen and acted upon.
4. Greater employee motivation
Participation of employees or their representatives in strategy formulation leads to a better understanding of the priorities and operation of the reward system. Also, there is better appreciation on their part of the productivity-reward linkage inherent in the strategic plan. Hence goal-directed behaviour is likely to follow the incentives.
5. Reduction of gaps and overlaps activities
With strategy formulation undertaken through the participative process, there is better In understanding of the responsibilities of individuals and groups. Role differentiation which is thereby clarified should reduce the gaps and over1ps in the activities of groups and individuals.
Question 14.
Fill in the blanks in the following statement with the most appropriate word:
Strategic Management is not a box of tricks or a bundle of techniques. It is analytical thinking and of resources to action. (Nov 2011, 1 mark)
Answer:
(i) Commitment.
Question 15.
Write a Short note on the following:
Family Managed Enterprises – Challenges & issues. (Nov 2017, 4 marks)
Answer:
Cooperation on account of family ownership:
Theoretically, cooperation generates automatically in businesses owned by a same family. The ownership, groups are engaged In the management of their enterprise in a direct manner. Commonly, the ownership group is nothing but a family and its Kith and Kin. In India, a very large number of business enterprises, big, medium, and small are family managed
enterprises. These include large business houses such as Tata, Bina, Godrej Reliance, Modi, Escorts and etc. Major decisions and sometimes even minor decisions are made by members of the family who manage the enterprise.
The interest of the family, largely influences the managerial decisions and activities of the enterprise. There is a total Identity between the needs and goals of the family and of the enterprise. Sometimes, quarrels and conflicts among the managing members of the family on family matters tend to distort their behaviour In managing the enterprise also and thereby damage its functioning. Succession remains a tricky and conflicting issue in businesses. Be It the Arnbanis of Reliance Industries, the Bajajs or Bajaj Auto, the Nandas of Escorts, or the Modis of Modi Rubber- each family has, in the recent past, faced succession and ownership issues and found them tough resolve. However, one can count several counter-examples of family-run businesses that have resolved these issues amicably. The Murugappa group In the south, the Burmans of Dabur India and the Thapars have settled succession issues without coming into the public eye.
Question 16.
Which of the following statement is ‘correct’ and which is ‘In Correct’? Give reason, in brief, for your answer:
profit organizations do not require Strategic Management. (May 2018, 2 marks)
Answer:
Incorrect
Strategic Management applies equally to profit as well as non-profit organizations. Though non-profit organizations are not working for the profit, they have to purpose, vision and mission. They also work within the environmental forces and need to manage strategically to stay a float to accomplish their objectives. For the purpose of continuity and meeting their goals, they also need to have and manage funds and other resources just like any other for-profit organization.
Question 17.
Define Strategic Management. Also discuss the limitations of Strategic Management. (May 2018, 5 marks)
Answer:
Meaning ot Strategic Management:
Strategic Management is a multi-dimensional function. As a broad overall process, it is defined as the set of decisions and actions resulting in formulation and implementation of strategies designed to achieve the objectives of an organization.
Strategic Management is interpreted In a wider sense as “the process which deals with fundamental organizational renewal and growth with the development of the strategies, structures, and systems necessary to achieve such renewal and growth, and with the organizational systems needed to effectively manage the strategy formulation and Implementation processes.
0bectives of Strategic Management:
1. To Create a competitive advantage over the other competitor.
2. To Meet the opportunities and threats with challenges.
Limitations of Strategic Management:
The environment is highly complex and turbulent. It is difficult to understand the complex environment and exactly pinpoint how It will shape up in future. The organizational estimate about its future shape may awfully go wrong and jeopardize all strategic plans. The environment affects, as the organization has to deal with suppliers, customers, governments and other external factors.
Strategic management is a time-consuming process. Organizations spend a lot of time In preparing, communicating the strategies that may impede daily operations and negatively Impact the routine business.
Strategic management is a costly process. Strategic management adds a lot of expenses to an organization. Expert strategic planners need to be engaged, efforts are made for analysis of external and internal environments devise strategies and properly implement.
These can be really costly 1o organizations with limited resources particularly when small and medium organization create strategies to compete.
In a competitive scenario, where all organizations are trying to move strategically, it is difficult to clearly estimate the competitive responses to a firm’s strategies.
Question 18.
Strategic Management is not a panacea for all the corporate ills, it has its own pitfalls which can’t counter all hindrances and always achieve success’. Do you agree with this statement? Discuss. (May 2019, 5 marks)
Answer:
‘Strategic Management is not a panacea for all the corporate ills, It has Its own pitfalls which can’t counter all hindrances and always achieve success’ This Statement is correct and can be agreed because there are limitations attached to strategic management and can be explained as follows:
1. Environment is
It is difficult to understand the complex highly complex and environment and exactly pinpoint how It will turbulent shape up in future. The organizational estimate about its future shape may awfully go wrong and jeopardize all strategic plans. The environment affects as the organization has to deal with Suppliers, customers, governments, and other external factors.
2. Strategic management is a time-consuming process
Organizations spend a lot of time preparing, communicating the strategies that may impede daily operations and negatively impact the routine business.
3. Strategic management is a costly process
Strategic management adds a lot of expenses to an organization. Expert strategic planners need to be engaged, efforts are made for analysis of external and internal environments devise strategies and properly Implement. These can be really costly for organisations with limited resources particularly when small and medium organisation create strategies to complete.
4. Competition is unpredictable
In a competitive scenario, where all organsatlons are trying to move strategically, it is difficult to clearly estimate the competitive responses to a firm’s strategies.
Question 19.
State with reasons which of the following statements are correct or incorrect.
Control systems run parallel with strategic levels. (Nov 2010, 2 marks)
Answer:
Correct: There are three strategic levels – corporate, business, and functional. Control systems are required at all the three levels. At the top level, strategic controls are built to check whether the strategy ¡s being implemented as planned and the results produced by the strategy are those intended. Down the hierarchy management controls and operational controls are built In the systems. Operational controls are required for the day-to-day management of business.
Question 20.
Distinguish between the following:
The Three Levels of Strategy Formulation. (Nov 2010, 3 marks)
OR
List the different strategic levels in an organization. (Nov 2018, 2 marks)
Answer:
Strategic Level in an Organisation:
In case of multidivisional and multilocational organization that competes in several different businesses. it has separate self-contained divisions to manage each of these. There are three levels of strategy In management of business – corporate, business, and functional
Question 21.
In your view, what is the role of Corporate level managers in Strategic management? (May 2015, 3 marks)
Answer:
Corporate level
The corporate level of management consists of the Chief Executive Officer (CEO), other Senior Executives, the Board of Directors, and Corporate Staff. These Individuals are the main decision-making body within the organization.
The Role of Corporate Level Manager includes:
- Defining the corporate vision, mission, and goals.
- Determining what business It should be In.
- Allocating resources among the different businesses.
- Formulating and implementing strategies that span individual businesses.
- Providing leadership for the organization.
Question 22.
ABC Limited is in a wide range of businesses which include apparels, ‘lifestyle products, furniture, real estate, and electrical products. The company is looking to hire a suitable Chiot Executive Officer. Consider yourself as the HR consultant for ABC Limited. You have been assigned the task to enlist the activities involved with the role of the Chief Executive Officer. Name the strategic level that this role belongs to and enlist the activities associated with it. (Jan 2021, 5 marks)
Question 23.
State with reasons which of the following statement is correct/incorrect:
Strategic management is not needed in non-profit Organisations. (Nov 2008, 2 marks)
Answer:
Incorrect: Strategic management refers to the managerial process of forming a strategic vision, setting objectives, crafting a strategy Implementing and executing the strategy, and then overtimes Initiating whatever corrective adjustments in the vision, objectives, strategy, and execution are deemed appropriate therefore, the steps are required in all types of organization whether profit oriented or not as profit is not the sole motive of strategic management.
Question 24.
State with reasons which of the following statement is correct or incorrect. Not-for-profit organizations are not required to have a strategy. (Nov 2010, 2 marks)
Answer:
Incorrect: Strategic management refers to the managerial process of forming a strategic vision, setting objectives, crafting a strategy implementing and executing the strategy, and then overtimes initiating whatever corrective adjustments in the vision, objectives, strategy, and execution are deemed appropriate therefore, the steps are required in all types of organization whether profit oriented or not as profit is not the sole motive of strategic management. Similar to commercial organizations, ‘not-for-profit’ organizations must also have a strategy. It is required to give it direction, focus, and efficient utilization of resources. In many ‘not-for-profit’ organizations surpluses are Important for their survival and growth.
Question 25.
Describe briefly the use of Strategic Management techniques in Educational Institutions. (Nov 2011, 3 marks)
Answer:
Education is considered to be a noble profession. An educational institution often functions as a not-for-profit organization managed by trusts and societies. They include schools, colleges, and universities. Being inherently non-commercial in nature, educational organizations do not have cut-throat competition as in case of their commercial counterparts.
However, as the number of institutions belonging to both public and private sector are increasing, the competition is gradually flying. Through the use of strategic management techniques such institutions are expected to concentrate attention towards:
- Appointing and retaining quality faculty for teaching.
- Getting better name and recognition.
- Designing the curriculum in such a way to provide better citizenry and employability.
- Attracting talented students.
- Preparing students for the future challenges by capacity building.
Question 26.
Explain the role of Strategic Management In non-profit organizations. (May 2013,3 marks)
Answer:
Meaning of Strategic management refers to the managerial process Strategic of forming a strategic vision, setting objectives, crafting Management a strategy implementing and executing the strategy, and then overtimes initiating what ever corrective adjustments In the vision, objectives, strategy, and execution are deemed appropriate, therefore, the steps are required in all types of organisation whether profit oriented or not as profit is not the sole motive of strategic management.
Role of Strategic Management in Non-Profit Organisation
- Developing mission of the organization
- Strategic Management then helps in defining objectives and goals.
- Strategic Management structures the business portfolio and incorporates the functional goals.
- Helps meet opportunities and threats with challenge.
Conclusion
Thus strategic management is the process which helps Not for Profit Organisation to deal with fundamental organisational renewal and growth with the development of the strategies, structures and systems necessary to achieve sudi renewal and growth, and with the organisational systems needed to effectively manage the strategy formulation and implementation processes.
Question 27.
“There is a need for Strategic Management for government and medical organizations too. Comments”. (Nov 2020, 5 marks)
Question 28.
State with reason which of the following statement Is correct/incorrect:
Prof it may not be a universal objective but business efficiency is definitely an objective common to all business. (2 marks)
Answer:
Correct: The primary objective of business is to earn adequate profit but not maximum profit. Profit serves as a yardstick to measure the success of the business. To facilitate and sustain profit earning, certain other objectives are also pursued by business and efficiency is one of them.
Question 29.
Can a business succeed in the long run by focusing only on profit as its primary objective? Wiat are other objectives of a business? (Nov 2015, 4 marks)
Answer:
The primary objective of business is to earn adequate profit but not maximum profit. Profit serves as a yardstick to measure the success of the business. To facilitate and sustain profit earning, certain other objectives are also pursued by business and efficiency is one of them.
Thus, the business organization cannot succeed In long run by focusing only on profit as a primary objective. It has to consider all other objectives which are as follows:
| 1. Survival | Survival is the will and anxiety to perpetuate in future as long as possible, It is a basic, implicit objective of most organizations. The ability to survive is the function of the nature of ownership, nature of business, competencies of management, general and industry conditions, financial strength of organization and so on. |
| 2. Stability | It is least expensive and risky objective In terms of managerial time arid talent and other resources. A stable and steady enterprise minimises managerial tension and demands less dynamism. |
| 3. Growth | It is very promising and popular objective which, with dynamism, vigour, promise, and success. Enterprise growth may take into one or more forms like increase in assets, manufacturing facilities, increase in sales volume in existing products or through new products. improvement in profit and market share, increase In manpower employment, acquisition of other firms, and so on. |
| 4. Efficiency | Business organizations seek efficiency in rationally choosing appropriate means to achieve their goals, doing the thing In best possible manner, utilizing the resources in most suitable combination to get highest productivity. |
| 5. Profitability | Profit is sole motive of all business. All other objective are facilitative objectives but business should also concentrate on other objectives to prosper in long run. |
Multiple Choice Questions
Question 1.
“Evaluation of business policy arose from the developments in the use of planning techniques by managers” detines by.
(a) Christensen
(b) William F. Glueck
(c) Harvard S. Smith
(d) Igor H. Ansoff
Answer:
(b) William F. Glueck
Question 2.
Business policy tends to emphasise on the rational analytical aspect of ………………… .
(a) Management
(b) Human Resource Management
(c) Strategic Management
(d) All of the above.
Answer:
(c) Strategic Management
Question 3.
Management is a/an ………………… to make things happen, to gain command over phenomena, to induce and direct events and people in a particular manner.
(a) Planning process
(b) Organisation process
(c) Influence process
(d) Strategic process
Answer:
(c) Influence process
Question 4.
Influence process is backed by ………………….. .
(a) Power
(b) Competence
(c) Knowledge and resources
(d) All of the above
Answer:
(d) All of the above
Question 5.
Strategy is define as “A unified, comprehensive and integrated plan designed to assure that the basic objectives of the enterprise are achieved, by ………………….. .
(a) William F. Ghjeck
(b) Ignor H. Ansotf
(c) Christénsen
(d) Harvard S. Smith
Answer:
(a) William F. Ghjeck
Question 6.
In large organisations strategies are formulated at the ……………….. .
(a) Corporate Level
(b) Divisional Level
(c) Functional Level
(d) All of the above
Answer:
(d) All of the above
Question 7.
Company’s strategy is …………………. action
(a) Proactive
(b) Reactive
(c) Subjective
(d) Partly proactive and partly reactive.
Answer:
(d) Partly proactive and partly reactive.
Question 8.
Objectives of strategic management are:
(a) To guide the company successfully through all changes in the environment.
(b) To create competitive advantage, so that the company can out perform the competitors in order to have dominance over the market
(c) Changes in the environment and strategy to relate the goals of the organisation to the means of achieving them.
(d) Both (a) and (b)
Answer:
(d) Both (a) and (b)
Question 9.
Strategic management involves developing the company’s vision ………………. .
(a) Environmental scanning
(b) Strategy formulation
(c) Strategy implementation
(d) All of the above
Answer:
(d) All of the above
Question 10.
Strategic Levels involves in a business organisation.
(a) Corporate Level
(b) Business Level
(c) Functional Level
(d) All of the above.
Answer:
(d) All of the above.
Question 11.
Functional managers provides most of the information that makes it possible for business and corporate level general manager to formulate …………………… .
(a) Overall strategies
(b) Comprehensive Functional strategies
(c) Realistic Strategies
(d) Realistic and attainable strategies
Answer:
(d) Realistic and attainable strategies
Question 12.
“Strategic management is not needed in non-profit organisations” statement is ………………. .
(a) Correct
(b) Incorrect
(c) Partially correct
(d) None
Answer:
(b) Incorrect
Question 13.
“I believe we do a far better job of strategic management than any company I kwon” said by ………………. .
(a) Richard Cyert
(b) Christensen
(C) William F. Glueck
(d) Igor H. Ansoff
Answer:
(a) Richard Cyert