Introduction to Strategic Management – CA Inter SM Study Material

Introduction to Strategic Management – CA Inter SM Notes is designed strictly as per the latest syllabus and exam pattern.

Introduction to Strategic Management – CA Inter SM Study Material

Question 1.
What is Business Policy?
Answer:

  1. Christensen and other defined the Business Policy as study of:
    • the roles and responsibilities – of senior management,
    • the crucial problems – that affect achievements in the enterprise, and
    • the decisions – that shapes the future by determining the direction of the organization,
  2. Just like problems of policy in public affairs, policy in business have to do with the:
    • selection of purposes,
    • the shaping of organizational identity and character,
    • the continuously defining as to what needs to be done,
    • and in the face of competition or adverse circumstance, attaining goals by mobilizing resources.
  3. Business policy tends to emphasize on the rational-analytical aspect of strategic management.
  4. Understanding about organizational strategic decision making shall be done by frameworks presentation.

Introduction to Strategic Management – CA Inter EIS Study Material

Question 2.
“Strategy is partly proactive and partly reactive.” do you agree? Give reasons for your answer. (Nov. 2018, RTP Nov. 2020)
Answer:

  1. Strategy is partly proactive and partly reactive.
  2. Under proactive strategy, organizations will create strategic framework after proper planning and set procedures and work on the strategies in a pre-determined manner by analyzing possible environmental scenarios.
  3. However, in reality the exact prediction of both internal and external environment cannot be done. Everything’s advance planning cannot be done. It is not possible to foresee
    • moves of rival firms,
    • consumer behaviour,
    • Evolving technologies and so on.
  4. There can be significant deviations between what was imagined ans what happens in reality.
  5. Strategies need to be agreed or revised in the light of possible changes to the environment.
  6. Environment can demand strategic changes which are significant or major.
  7. Reactive strategy is activated by the changes in the environment and provides ways and means to handle with the negative factors or take advantage of emerging opportunities.

Introduction to Strategic Management – CA Inter EIS Study Material

Question 3.
Yummy Foods and Tasty Foods are successfully competing in the % business of ready to eat snacks in Patna. Yummy has been pioneer in ini’ troducing innovative products. These products will give them good sale. However, Tasty Foods will introduce similar products in reaction to the products introduced by the Yummy Foods taking away the advantage gained by the former.

Discuss the strategic approach of the two companies. Which is superior? (RTP Nov. 2018)
Answer:

  1. Yummy foods is proactive in its approach while Tasty Food is reactive.
  2. Proactive strategy is planned strategy while reactive strategy is adaptive reaction to changing situations.
  3. A company’s strategy is normally a combination 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.
  4. It is better to be proactive rather than reactive depending on permit of organizational resources. For creating advantage in the mind of the customers proactiveness is necessary in aspects like introducing new products.
  5. Creating a strategy involves stitching together a proactive/intended strategy and subsequently adapting pieces one after the other as and when situations of the company’s surroundings change or better alternatives develop a reactive/adaptive strategy.
    This aspect can be accomplished by Yummy Foods.

Introduction to Strategic Management – CA Inter EIS Study Material

Question 4.
What is Strategic Management? (May 2018; 1 Mark)
Answer:
The term ‘strategic management’ refers to the managerial process of:

  • developing a strategic vision,
  • setting objectives,
  • crafting a strategy,
  • implementing and evaluating the strategy, and
  • initiating corrective adjustment where deemed appropriate.

Question 5.
Write a short note on Importance of Strategic Management. (RTP Nov. 2018)
OR
What are the benefits accrue by following a Strategic approach to man-aging? (RTF Nov. 2018)
OR
Strategic management helps an organization to work through changes in environment to gain competitive advantage. In light of statement discuss its benefits. (RTP Nov. 2019)
Answer:
Competitive advantage needs to be built by every organization in order to win business rivalry over the competitors. This can be done only by following process of strategic management – strategic analysis, formulation and implementation, evaluation and control of strategies.

The major benefits of strategic management are:

  • Strategic management helps organization shaping its future proactively instead of being reactive enabling them to take control of their own destiny better way.
  • This can be done by analyzing and taking action and not being mere spectators.
  • Instead of getting carried away by uncertainty or instability, strategic management aids shaping and working within the desired environment.
  • Strategic management provides framework for all major decision of an enterprise such as decision on business, product, markets, manufacturing facilities, investments and organizational structure. It provides better supervision to entire organization on the critical points.
  • Certain core competencies and competitive advantage developed with the aid of strategic management helps the organization to fight for the survival and growth.
  • It serves as a corporate defense mechanism against mistake and pit- fails helping organization in avoiding costly mistake in product market choices or investments.
  • Strategic management acts as a pathfinder and strives to prepare the organization for various business opportunities and facing the future.
  • It is difficult for the organization to survive in long run due to the state of competition and dynamic environment. Strategic management helps to enhance the longevity of the business, making sure it is not just surviving on luck and helping the organization to take a clear stand in the related industry.
  • It enables the organization to recognize ways and means to reach the identified opportunities.
  • Strategic management helps management define goals, mission and realistic objectives of the company which are in line with the vision of the company giving it direction to move ahead.

Introduction to Strategic Management – CA Inter EIS Study Material

Question 6.
Organizations sustain superior performance over a long period of time, inspite of the rapid changes taking place continually in its competitive environment if they implement strategic management successfully.’ Discuss.
Answer:

  • From being conducive to hostile, business organizations function within dynamic environment. Survival and growth of the business organization is mainly dependent on the conditions in which the strategies are implemented.
  • Due to strategy implementation the organization puts up a superior performance improving the competence with which it is executed in following manner:
    1. Strategic management helps organization shaping its future proactively instead of being reactive enabling them to take control of their own destiny better way.
    2. Certain core competencies and competitive advantage developed with the aid of strategic management helps the organization to fight for the survival and growth
    3. It serves as a corporate defense mechanism against mistake and pitfalls helping organization in avoiding costly mistake in product market choices or investments.
    4. Strategic management acts as a pathfinder and strives to prepare the organization for various business opportunities and facing the future.
    5. It provides better guidance to entire organization on the crucial point – what it is trying to do.

Question 7.
The presence of strategic management cannot counter all hindrances and always achieve success for an organisation. What are the limitations attached to strategic management? (RTP May 2018)
OR
Ramesh Sharma has fifteen stores selling consumer durables in Delhi Region. Four of these stores were opened in last three years. He believes in managing strategically and enjoyed significant sales of refrigerator, televisions, washing machines, air conditioners and like till four years back. With shift to the purchases to online stores, the sales of his stores came down to about seventy per cent in last four years. Analyse the position of Ramesh Sharma in light of limitations of strategic management. (RTP Nov. 2019, Nov. 2020)
OR
‘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 19; 5 Marks)
Answer:
Not all the limitations can be challenged with the presence of strategic management and success be achieved. There are limitations attached to strategic management. These can be explained in the following lines:

  1. Environment is highly complex and turbulent.
    • There is difficulty in understanding the complex environment and identify how exactly this will shape up in future.
    • The strategic plans may be endangered and go awfully wrong based on organizational estimate about its future shape.
    • 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.
    Preparing and communicating the strategies consume a lot of time impacting routine business impeding (preventing) daily operations.
  3. Strategic management is a costly process.
    • Strategic management adds a lot of expenses to an organization.
    • Properly formulating and implementing strategies requires engagement of expert strategic planners along with putting efforts for analysis of external and internal environment for the same.
    • These can be really expensive particularly for small and medium organizations creating strategies with inadequate resources.
  4. Difficult to clearly estimate the competitive responses:
    It is difficult to clearly estimate the competitive responses to a firms strategies in a competitive scenario where in all the organizations are trying to move strategically.

Introduction to Strategic Management – CA Inter EIS Study Material

Question 8.
List the different strategic levels in an organization (Nov 2018; 2 Marks)
Answer:
There are three main strategic levels in an organization:

  • Corporate level – consisting of CEO, Board of Directors and other senior executives.
  • Business level – Divisional Managers and staff.
  • Functional level – Functional Managers – Marketing, Finance, Production, Human Resource.

Question 9.
Distinguish between The Levels of Strategy Formulation. (RTP May 2020)
Answer:

  1. A typical large organization is a multi-divisional organization which has separate self-contained divisions to manage and compete in several different businesses.
  2. There are three levels of strategy in management of business – corporate, business, and functional.
  3. The Corporate Level of Management consists of the chief executive officer and other top level executives.
    • These individuals are at the top most of decision making within the organization.
    • Their role is to oversee the development of strategies for the entire organization.
    • Defining the mission and goals of the organization, determining what businesses it should be in, allocating resources at the corporate level and among the different businesses are included in role of corporate level managers.
  4. Business level managers or the General Managers in the different businesses are responsible for development of strategies for each business area.
    • A business unit is a self-contained division with its own functions – for example, finance, production, and marketing.
    • The strategic role of Business-Level Manager, head of the division for individual business are responsible to translate the general statements of direction and intent that come from the corporate level into concrete strategies.
  5. Functional-level managers are responsible for the specific business functions or operations such as:
    • human resources,
    • purchasing,
    • product development,
    • customer service, and so on.

Thus, a functional manager’s scope of responsibility is generally restricted to one organizational activity, whereas general managers manage the operation of a whole company or division.

Introduction to Strategic Management – CA Inter EIS Study Material

Question 10.
Do you agree with the statement that “Strategic Management concepts are of no use to Government organizations and Medical organizations”? Explain with reasons.
Answer:

  1. Typically, organizations can be classified as commercial and non-commercial on the basis of the interest they have.
  2. A commercial organization has profit as its main aim whereas Government or Medical organization may function without any commercial objectives.
  3. We can find many organizations around us, which do not have any commercial objective of making profits.
    (a) Their purpose for their origin may be for social, charitable, or educational.
    (b) The strategic-management process is being used effectively by countless non-profit governmental organizations.
    (c) Many non-profit and governmental organizations outperform private firms and corporations on:

    • innovativeness,
    • motivation,
    • productivity, and
    • human resource
      compared to for-profit firms, non-profit and governmental organizations often function as a monopoly, produce a product or service that offers little or no measurability of performance, and are totally dependent on outside financing.
      (d) Especially for these organizations, strategic management provides an excellent vehicle for developing and justifying requests for needed financial support.

Introduction to Strategic Management – CA Inter EIS Study Material

Question 11.
Health Wellnow is a Delhi based charitable organisation promoting healthy lifestyle amongst the office-goers. It organises programmes to encourage and guide office-goers on matters related to stress relief, yoga, exercises, healthy diet, weight management, work- life balance and so on. Many business organisations and resident welfare associations take services of Health Wellnow. Its daily yoga sessions are very popular in some of the big companies located in Delhi, Noida and Gurgaon. The Health Wellnow has no commercial interest and does not charge any fees for its services. However, the organisation is able to get good charities and has sufficient funds to meet its routine expenses.

Do you think the concepts of strategic management are relevant for Health Wellnow? Discuss. (RTP May 2018; RTP May 2020)
Answer:

  • The concepts of strategic management are relevant for Health Well now.
  • Organizations can be classified as commercial and non-commercial on the basis of the interest they have.
  • Health Wellnow falls in the category of a non-commercial organisation.
  • While non-commercial organisations may have objectives that are different from the commercial organisations, they need to employ the strategic management tools to:
    • efficiently use their resources,
    • a generate sufficient surpluses to meet daily expenses and
    • achieve their objectives.
  • In fact, private firms and corporations are outperformed by many non-profit and governmental organizations with respect to
    • innovativeness,
    • motivation,
    • productivity, and
    • human relations.
  • Following aspects needs to be covered in Health Wellnow by strategic management such as:
    1. Generation of adequate funds for meeting its objectives.
    2. Efficiently guide office-goers and help them to have health in life.
    3. Promoting self to cover more offices, resident welfare associations.
    4. Collaborate with health experts, including dieticians, psychologist, fitness trainers, yoga experts at a deeper level.

Introduction to Strategic Management – CA Inter EIS Study Material

Question 12.
Do Good Group’ is a not-for-profit organization based in northern India working towards childcare. The group educates people towards immunization, sanitation and works in co-ordination with local hospitals or medical centers. Recently, a new team has taken over the management of its activities.

Explain whether tools of strategic Management are relevant for the group. (RTP May 2019)
Answer:

  1. A number of not-for-profit or charitable organisations use strategic management tools effectively
  2. For achieving organizational objectives ‘Do Good Group’ will have to generate resources and use them wisely irrespective of the fact whether they have a charitable existence or commercial; organization needs to be managed strategically.
  3. The strategic Management at Do Good Group’ should essentially cover:
    • Analyzing and interpreting the STRATEGIC INTENT in terms of vision, mission and objectives.
    • GENERATING REQUIRED RESOURCES in terms of finance and manpower (volunteers, paid employees).
    • UNDERTAKING SWOT ANALYSIS from time to time.
    • SETTING GOALS in the area of childcare. It can be in terms of geographical coverage and number of children.
    • ANALYZING THE DESIRED FUTURE POSITION with the past and present situation.

Introduction to Strategic Management – CA Inter EIS Study Material

Question 13.
“Strategic Management concepts are useful for educational institutions.” Explain with reasons. (Nov. 2019; 5 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 organisations do not have cut-throat competition as in case of their commercial counterparts. However, as the number of institutions belonging to both public and private sector are increasing, the competition is gradually rising.

Key reasons for use of strategic management techniques in educational I institutes are as follows:

  • Getting better name and recognition.
  • Adopt different strategies for attracting best students.
  • Appointing and retaining quality faculty for teaching.
  • Deliver education to make graduates more employable.
  • Nurturing responsible citizens.

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