Eis SM 100 Important Questions 1642741869 PDF
Eis SM 100 Important Questions 1642741869 PDF
Eis SM 100 Important Questions 1642741869 PDF
FINAL – EIS
FINAL & SM
AUDIT
DT
100 Important
PRACTICE
100 Questions
IMPORTANT
QUESTIONS
QUESTIONS
CHAPTER 2
(EIS-SM) 100 important questions
Answer: The various sub-processes that are involved in information Security are as follows:
Information Security Policies, Procedures and practices: This refers to the processes relating to
approval and implementation of information security. The security policy is basis on which
detailed procedures and practices are developed and implemented at various units/department
and layers of technology, as relevant.
These cover all key areas of securing information at various layers of information processing
and ensure that information is made available safely and securely. For example - Non-disclosure
agreement with employees, vendors etc., KYC procedures for security.
User Security Administration: This refers to security for various users of information systems.
The security administration policy documents define how users are created and granted access
as per organization structure and access matrix. It also covers the complete administration of
users right from creation to disabling of users is defined as part of security policy.
Database Security: This refers to various aspects of implementing security for the database
software. For example - Role based access privileges given to employees.
Network Security: This refers to how security is provided at various layers of network and
connectivity to the servers. For example - Use of virtual private networks for employees,
implementation of firewalls etc.
Physical Security: This refers to security implemented through physical access controls. For
example - Disabling the USB ports.
I. Quality and Consistency: Ensures that every action is performed identically - resulting in
high quality, reliable results and stakeholders will consistently experience the same level
of service.
II. Time Saving: Automation reduces the number of tasks employees would otherwise
need to do manually. It frees up time to work on items that add genuine value to the
business, allowing innovation and increasing employees’ levels of motivation.
III. Visibility: Automated processes are controlled and consistently operate accurately
within the defined timeline. It gives visibility of the process status to the organization.
Q 3- The increased availability of choice to customers about products / services makes it very
important for businesses to keep themselves updated to new technology and delivery
mechanisms. Being a consultant, briefly explain the steps involved in BPA implementation.
Answer: Various steps that are required while automating the Grievance Cell of the Airline
Industry are as follows:
The primary purpose for which an enterprise implements automation may vary from enterprise
to enterprise. In this case, to improve upon the Poor customer service is a major concern.
Step 2: Understand the rules / regulation under which enterprise needs to comply with?
At this step, all the documents that are currently being used need to be documented. The
questions emphasized upon are like - what documents need to be captured?; where do they
come from?; what format are they in?; who is involved in processing of the documents?; what
is the impact of regulations on processing of these documents?; can there be a better way to do
the same job? and how are exceptions in the process handled? etc.
Once the above steps have been completed; entity needs to determine the key objectives of
the process improvement activities. The goals need to be SMART - Specific: Clearly defined;
Measurable: Easily quantifiable in monetary terms; Attainable: Achievable through best efforts;
Relevant: Entity must need these, and Timely: Achieved within a given time frame.
To decide as to which company/ consultant to partner with, depends upon the following:
The right stakeholders need to be engaged and involved to ensure that the benefits of BPA are
clearly communicated and implementation becomes successful. A lot of meticulous effort
would be required to convince the senior management about need to implement the right
solution for BPA.
Once the requirements have been document, ROI has been computed and top management
approval to go ahead has been received, the consultant develops the requisite BPA. The
developed BPA needs to meet the objectives for which the same is being developed.
Once developed, it is important to test the new process to determine how well it works and
identify where additional “exception processing” steps need to be included. The process of
testing is an iterative process, the objective being to remove all problems during this phase.
Q 4- Describe the term “Internal Control System”? State its limitations as well.
Answer: Internal Control System: Internal Control System means all the policies and
procedures adopted by the management of an entity to assist in achieving management’s
objective of ensuring, as far as practicable, the orderly and efficient conduct of its business,
including adherence to management policies, the safeguarding of assets, the prevention and
detection of fraud and error, the accuracy and completeness of the accounting records, and the
timely preparation of reliable financial information. An Internal Control System:
I. The fact that most internal controls do not tend to be directed at transactions of
unusual nature. The potential for human error, such as, due to carelessness, distraction,
mistakes of judgment and misunderstanding of instructions.
II. The possibility of circumvention of internal controls through collusion with employees
or with parties outside the entity
III. The possibility that a person responsible for exercising an internal control could abuse
that responsibility, for example, a member of management overriding an internal
control.
IV. Manipulations by management with respect to transactions or estimates and judgments
required in the preparation of financial statements.
Q 5- Information Security is critical to mitigate the risks of information Technology and Security
should ensure Confidentiality, Integrity and Availability (CIA) of information. Determine all the
sub- processes that comprise of Information Security.
Q 6- General Controls are pervasive controls and apply to all the components of system,
processes and data for a given enterprise or systems environment. As an IT consultant, discuss
some of the controls covered under general controls which you would like to ensure for a given
enterprise.
Answer: General controls related to IT environment and Information Systems include the
following:
I. Information Security Policy: The security policy is approved by the senior management
and encompasses all areas of operations of bank and drives access to information across
the enterprise and other stakeholders.
Answer: a) Data Flow Diagrams (DFD) shows the flow of data or information from one place
to another. DFDs describe the processes showing how these processes link together through
data stores and how the processes relate to the users and the outside world. In other words,
DFD basically provides an overview of –
b) Flowcharts are used in designing and documenting simple processes or programs. They help
visualize what is going on and thereby help understand a process, and perhaps also find flaws,
bottlenecks, and other less-obvious features within it.
c) Risk Assessment t is one of the five components that define Internal Control under SA 315.
Every entity faces a variety of risks from external and internal resources. Risk assessment
involves a dynamic and iterative process for identifying and assessing risks to the achievement
of objectives. Thus, risk assessment forms the basis for determining how risks will be managed.
Q 8- Corporate Governance is defined as the framework of rules and practices by which Board
of Directors ensures accountability, fairness and transparency in a company’s relationship with
all its stakeholders. List the rules and procedures that constitute corporate governance
framework.
I. explicit and implicit contracts between the company and the stakeholders for
distribution of responsibilities, rights, and rewards;
II. procedures for reconciling the sometimes-conflicting interests of stakeholders in
accordance with their duties, privileges and roles; and
III. procedures for proper supervision, control, and information-flows to serve as a system
of checks-and balances.
Q 9- Determine the reasons for the importance of Business Reporting. Identify the global
standard for exchanging business information and discuss it in detail.
Answer: Business Reporting or Enterprise Reporting is the public reporting of operating and
financial data by a business enterprise or the regular provision of information to decision-
makers within an organization to support them in their work.
XBRL (eXtensible Business Reporting Language) is a freely available and global standard for
exchanging business information. XBRL is the open international standard for digital business
reporting, managed by a global not for profit consortium, XBRL International Inc. XBRL is used
around the world, in more than 50 countries.
In a nutshell, XBRL provides a language in which reporting terms can be authoritatively defined.
Those terms can then be used to uniquely represent the contents of financial statements or
other kinds of compliance, performance and business reports.
Answer: Business Intelligence (BI) is a technology-driven process for analysing data and
presenting actionable information to help corporate executives, business managers and other
end users make more informed business decisions.
BI data can include historical information, as well as new data gathered from source systems as
it is generated, enabling BI analysis to support both strategic and tactical decision-making
processes.
i) BI improves the overall performance of the company using it. The potential benefits of
business intelligence programs include –
a) accelerating and improving decision making;
b) optimizing internal business processes;
c) enhancing communication among departments while coordinating activities;
d) increasing operational efficiency;
e) driving new revenues; and
f) gaining competitive advantages over business rivals.
ii) BI systems can also help companies identify market trends and spot business problems that
need to be addressed.
iii) BI systems help in enhancing customer experience, allowing for the timely and appropriate
response to customer problems and priorities.
I. Lengthy implementation time: ERP projects are lengthy that takes anywhere between 1
to 4 years depending upon the size of the organization. Due to technological
developments happening every day, the business and technological environment during
the start and completion of the project will never be the same. Employee turnover is
another problem.
II. Insufficient Funding: The budget for ERP implementation is generally allocated without
consulting experts and then implementation is stopped along the way, due to lack of
funds.
III. Data Safety: As there is only one set of data, if this data is lost, whole business may
come to stand still.
IV. System Failure: As everybody is connected to a single system and central database, in
case of failure of system, the whole business may come to stand still may get affected
badly.
V. Data Access: Data is stored centrally and all the departments access the central data.
This creates a possibility of access to non-relevant data.
VI. Speed of Operation: As data is maintained centrally, gradually the data size becomes
more and more and it may reduce the speed of operation.
Answer: Key benefits of a Customer Relationship Management (CRM) module of ERP are
asunder:
I. Improved customer relations: One of the prime benefits of using a CRM is obtaining
better customer satisfaction. By using this strategy, all dealings involving servicing,
marketing, and selling out products to the customers can be carried out in an organized
and systematic way. Better services can be provided to customers through improved
understanding of their issues and this in turn helps in increasing customer loyalty and
decreasing customer agitation. In this way, continuous feedback from the customers
regarding the products and services can be received. It is also possible that the
customers may recommend the product to their acquaintances, when efficient and
satisfactory services are provided.
II. Increase customer revenues: By using a CRM strategy for any business, the revenue of
the company can be increased. Using the data collected, marketing campaigns can be
popularized in a more effective way. With the help of CRM software, it can be ensured
that the product promotions reach a different and brand-new set of customers, and not
the ones who had already purchased the product, and thus effectively increase the
customer revenue.
III. Maximize up-selling and cross-selling: A CRM system allows up-selling which is the
practice of giving customers premium products that fall in the same category of their
purchase. The strategy also facilitates cross selling which is the practice of offering
complementary products to customers, based on their previous purchases. This is done
by interacting with the customers and getting an idea about their wants, needs, and
patterns of purchase. The details thus obtained will be stored in a central database,
which is accessible to all company executives. So, when an opportunity is spotted, the
executives can promote their products to the customers, thus maximizing up-selling and
cross selling.
Answer: (a) An Ideal ERP System is that system which caters all types of needs of an
organization and provides right data at right point of time to right users for their purpose.
Hence, definition of ideal ERP system may change per organization. But generally, an ideal ERP
system is that system where a single database is utilized and contains all data for various
software modules. These software modules can include Manufacturing, Financials, Human
Resources, Supply Chain Management and Projects etc.
(b) Inventory/Stores Management: The inventory management system is designed with a view
to keeping the track of materials in the stores. The system is used to regulate the maximum and
minimum level of stocks, raise alarm at danger level stock of any material, give timely alert for
re - ordering of materials with optimal re-order quantity and facilitate various queries about
(c) Functional Audit: This includes testing of different functions / features in the system and
testing of the overall process or part of process in the system and its comparison with the
actual process. Example - Purchase Process, Sales Process, Salary Calculation Process,
Recruitment Process etc. Auditor may check this process in the system and compare it with
actual process. It is quite possible that all the aspect present in the actual process may not be
integrated in the ERP system. There may be some manual intervention.
Q 14- Discuss the peculiarities that must be considered while allotting a voucher number to a
voucher.
The peculiarities that must be considered while allotting a voucher number to a voucher are
as follows:
Answer: MIS Report: Business managers at all levels of an organization, from assistant
managers to executives, rely on reports generated from these systems to help them evaluate
their business’ daily activities or problems that arise, make decisions, and track progress. MIS
system reporting is used by businesses of all sizes and in every industry.
MIS systems automatically collect data from various areas within a business. These systems can
produce daily reports that can be sent to key members throughout the organization. Most MIS
systems can also generate ondemand reports that allow managers and other users of the
system to generate an MIS report whenever they need it.
Many large businesses have specialized MIS departments, whose only job is to gather business
information and create MIS reports. Some of these businesses use sophisticated computing
technology and software to gather information. Smaller businesses often use simple software
programs and spreadsheets for their MIS reporting needs. There can be as many types of MIS
reports as there are divisions within a business.
For example, information about sales revenue and business expenses would be useful in MIS
reports for finance and accounting managers. Warehouse managers would benefit from MIS
reports about product inventory and shipping information. Total sales from the past year could
go into an MIS report for marketing and sales managers.
Q 16- Cloud based applications are now taking over Installed applications. What are the major
differences between Cloud based Applications and Installed Applications? Explain any four.
Answer: Information Systems are networks of hardware and software that people and
organizations use to create, collect, filter, process and distribute data.
Information Systems are interrelated components working together to collect, process, and
store and disseminate information to support decision-making, coordination, control, analysis
and visualization in an organization.
An Information System comprise of People, Hardware, Software, Data and Network for
communication support
i) People mean all those who operate, manage, maintain and use the system i.e.,
system administrator, IS personnel, programmers and end users i.e., the persons,
who can use hardware and software for retrieving the desired information.
ii) Hardware means the physical components of the computers i.e., server or smart
terminals with different configurations like corei3/corei5/corei7/corei9 processors
etc. and software means the system software (operating systems), application
software (different type of computer programs designed to perform specific task)
and utility software (e.g., tools).
iii) Data is the raw fact which is input to the system. It may be alphanumeric, text,
image, video, audio, and other forms.
iv) Network means communication media (Internet, Intranet, Extranet etc.).
i) Snapshots
ii) Audit Hooks
iii) Cryptography
(ii) Audit Hooks: There are audit routines that flag suspicious transactions. For example,
internal auditors at Insurance Company determined that their policyholder system was
vulnerable to fraud every time a policyholder changed his or her name or address and then
subsequently withdrew funds from the policy. They devised a system of audit hooks to tag
records with a name or address change. The internal audit department will investigate these
tagged records for detecting fraud. When audit hooks are employed, auditors can be informed
of questionable transactions as soon as they occur. This approach of real-time notification
displays a message on the auditor’s terminal.
(iii) Cryptography: It deals with programs for transforming data into cipher text that are
meaningless to anyone, who does not possess the authentication to access the respective
system resource or file. A cryptographic technique encrypts data (clear text) into cryptograms
(cipher text) and its strength depends on the time and cost to decipher the cipher text by a
cryptanalyst.
Three techniques of cryptography are Transposition (permute the order of characters within a
set of data), Substitution (replace text with a key-text) and Product Cipher (combination of
Transposition and Substitution).
Answer: Auditing the user access provisioning process requires attention to several key
activities that include the following:
i) Access request processes: The IS auditor should identify all user access request
processes and determine if these processes are used consistently throughout the
organization.
ii) Access approvals: The IS auditor needs to determine how requests are approved
and by what authority they are approved. The auditor should determine if system or
data owners approve access requests, or if any accesses are ever denied.
iii) New employee provisioning: The IS auditor should examine the new employee
provisioning process to see how a new employee’s user accounts are initially set up.
The auditor should determine if new employees’ managers are aware of the access
requests that their employees are given and if they are excessive.
iv) Segregation of Duties (SoD): The IS auditor should determine if the organization
makes any effort to identify segregation of duties. This may include whether there
are any SoD matrices in existence and if they are actively used to make user access
request decisions.
v) Access reviews: The IS auditor should determine if there are any periodic access
reviews and what aspects of user accounts are reviewed; this may include
termination reviews, internal transfer reviews, SoD reviews and dormant account
reviews.
Answer: a) Line Error Control: Whenever data is transmitted over a communication line
in a telecommunication network, an error may occur because of attenuation distortion or
noise that occurs on the line. These line errors must be detected and corrected.
Error Detection: The errors can be detected by either using a loop (echo) check or building
some form of redundancy into the message transmitted.
Error Correction: When line errors have been detected, they must then be corrected using
either forward error correcting codes or backward error correcting codes.
b) Audit trail: Audit Trail controls attempt to ensure that a chronological record of all events
that have occurred in a system is maintained. This record is needed to answer queries, fulfil
statutory requirements, detect the consequences of error and allow system monitoring and
tuning.
The Accounting Audit Trail shows the source and nature of data and processes that
update the database.
The Operations Audit Trail maintains a record of attempted or actual resource
consumption within a system.
Q 21- Recognize the activities that deal with the System Development Controls in an IT Setup.
Answer: The activities that deal with system development controls in IT setup are as follows:
i) System Authorization Activities: All systems must be properly and formally that
each new system request be submitted in written form by users to systems
professionals who have both the expertise and authority to evaluate and approve
(or reject) the request.
Q 22- Nowadays, many industries like hospitality, healthcare and public service agencies deal
with massively large data sets that conventional database tools can’t process. Big data has
ii) Improved customer service Traditional customer feedback systems are getting replaced
by new systems designed with Big Data technologies. In these new systems, Big Data and
natural language processing technologies are being used to read and evaluate consumer
responses.
Integration of Big Data technologies and data warehouse helps an organization to offload
infrequently accessed data, this leading to better operational efficiency.
Q 23- Elaborate the control activities performed by any business organization to mitigate the
risks related to financial statement audit.
Answer: Control Activities are the actions established through policies and procedures that
help ensure that management’s directives to mitigate risks related to financial statement audit
and to the achievement of objectives are carried out. Control activities are performed at all
levels of the entity, at various stages within business processes, and over the technology
The control activities include the elements that operate to ensure transactions are authorized,
duties are segregated, adequate documents and records are maintained, assets and records are
safeguarded, and independent checks on performance and valuation of records. Internal
auditors are also concerned with administrative controls to achieve effectiveness and efficiency
objectives. Control activities must be developed to manage, mitigate, and reduce the risks
associated with each business process. It is unrealistic to expect to eliminate risks completely.
The concept of the data warehouse includes the process of extraction of data from one or more
of the organization’s databases, its transformation into an appropriate form using different
techniques like smoothing, aggregation, normalization etc. and loading into the data warehouse
which is itself another database for storage and analysis.
For ETL to be performed on a data, a data warehouse should be designed so that it meets the
following criteria:
I. It uses non-operational data which means that the data warehouse is using a copy of
data from the active databases that the company uses in its day-to-day operations.
II. The data is time-variant which means a time-stamp is received whenever data is loaded
into the data warehouse
III. The data is to be standardized in case the data in a data warehouse comes from
different sources and does not use the same definitions or units.
a. E- Commerce
b. M-Commerce
c. Machine learning
d. Bring Your Own Device (BYOD)
e. Grid Computing Security
Answer: a. E-Commerce: It is the process of doing business electronically. It refers to the use
of technology in the form of Computers, Desktops, Mobile Applications, etc. to enhance the
processing of commercial transactions between a company, its customers and its business
partners.
b. M-commerce (mobile commerce): It is the buying and selling of goods and services
through wireless handheld devices such as cellular telephone and Personal Digital Assistants
(PDAs). M-commerce enables users to access the Internet without needing to find a place to
plug in.
c. Machine Learning: It is the learning in which machine can learn by its own without being
explicitly programmed. It is an application of AI that provides system the ability to automatically
learn without being explicitly programmed. Machine learning is the science and art of
programming computers so that they can learn from data.
For example, spam filter is a machine learning program that can learn to flag spam e-mails and
regular emails by automatically learning the words or phrases which are good predicators of
spam by detecting unusually frequent pattern of words in the spam.
d. BYOD (Bring Your Own Device): It refers to business policy that allows employees to use
their preferred computing devices, like smart phones and laptops for business purposes.
It means employees are welcome to use personal devices (laptops, smart phones, tablets etc.)
to connect to the corporate network to access information and application.
e. Grid Computing Security Grid Computing is highly collaborative and distributed computing
model. It involves various inter-connected domains with each domain consisting of its own
computational, storage and communication resources. Each domain is independently
administered and free to deploy different technologies.
i) Secured Single Sign-on: A user should authenticate once (e.g., at the point of
starting a computation) and they should be able to acquire resources, use them, and
release them and to communicate internally without any further authentication.
ii) Resource Management: Grid resources are from different administrative domains
that have their own local resource managers and a grid does not have full control of
Q 26- What are the ways of protecting your e-Commerce business from intrusion?
Answer: E-Commerce business can be protected from intrusion using following methods:
Answer: The Cloud Computing environment can consist of multiple types of clouds based on
their deployment and usage.
i) Private Cloud: This cloud computing environment resides within the boundaries of an
organization and is used exclusively for the organization’s benefits. These are also called
Internal Clouds or Corporate Clouds.
Private Clouds can either be private to the organization and managed by the single organization
(OnPremise Private Cloud) or can be managed by third party (Outsourced Private Cloud).
They are built primarily by IT departments within enterprises, who seek to optimize utilization
of infrastructure resources within the enterprise by provisioning the infrastructure with
applications using the concepts of grid and virtualization.
Typically, public clouds are administrated by third parties or vendors over the Internet, and the
services are offered on pay-per-use basis.
These are also called Provider Clouds. Public cloud consists of users from all over the world
wherein a user can simply purchase resources on an hourly basis and work with the resources
which are available in the cloud provider’s premises.
iii) Hybrid Cloud: This is a combination of both at least one private (internal) and at least one
public (external) cloud computing environments - usually, consisting of infrastructure, platforms
and applications. The usual method of using the hybrid cloud is to have a private cloud initially,
and then for additional resources, the public cloud is used.
The hybrid cloud can be regarded as a private cloud extended to the public cloud and aims at
utilizing the power of the public cloud by retaining the properties of the private cloud
iv) Community Cloud: The community cloud is the cloud infrastructure that is provisioned for
exclusive use by a specific community of consumers from organizations that have shared
concerns (e.g., mission security requirements, policy, and compliance considerations). It may be
owned, managed, and operated by one or more of the organizations in the community, a third
party or some combination of them, and it may exist on or off premises.
In this, a private cloud is shared between several organizations. This model is suitable for
organizations that cannot afford a private cloud and cannot rely on the public cloud either.
Answer: a) Digital Library: A Digital Library is a special library with a focused collection of
digital objects that can include text, visual material, audio material, video material, stored as
electronic media formats, along with means for organizing, storing, and retrieving the files and
media contained in the library collection. Digital libraries can vary immensely in size and scope,
and can be maintained by individuals, organizations, or affiliated with established physical
library buildings or institutions, or with academic institutions. The digital content may be
stored locally, or accessed remotely via computer networks. An electronic library is a type of
information retrieval system.
b) Web Portal: This shall provide the interface through which an individual / organization shall
perform ecommerce transactions. Web Portal is the application through which user interacts
with the e-commerce vendor. The front end through which user interacts for an e-commerce
transaction. These web portals can be accessed through desktops / laptops / PDA / hand- held
computing devices / mobiles and now through smart TVs also.
Answer: Some of the applications areas of Internet of Things (IoT) are as follows:
i) All home appliances to be connected and that shall create a virtual home.
Home owners can keep track of all activities in house through their hand-held devices.
Home security CCTV is also monitored through hand held devices.
iii) Governments can keep track of resource utilizations/extra support needed. For example-
under SWACHH mission, government can tag all dustbins with IoT sensors. They (dustbins)
generate a message once they are full. Being connected to wi-fi, they can intimate the cleaning
supervisor of Municipal Corporation so that BIN can be emptied.
iv) Washing machines with Wi-Fi networking capabilities can connect themselves to home Wi-
Fi. Once these machines are so connected, they can be controlled through machine
manufacturer mobile APP from anywhere in the world.
v) India’s living legend of cricket appearing in an Advertisement for water purifier informs that,
the water purifier is Wi-Fi enabled. When the purifying agents deplete in the machine, it
connects to home Wi-Fi and informs the service agents of the company.
Q 30- ABC university wants to conduct online exams for its different courses for which a
contract is given to vendor XYZ. The vendor provides computing resources such as processing
power, memory, storage, and networks to ABC university users to run their online exam
application on-demand. Identify the Service Model of Cloud Computing that vendor XYZ is
providing to ABC university and also describe its characteristics.
Answer: The Service Model provided by vendor XYZ to ABC university is Infrastructure as a
Service (IaaS).
ii) Centralized Management: The resources distributed across different parts are controlled
from any management console that ensures effective resource management and effective
resource utilization.
iii) Elasticity and Dynamic Scaling: Depending on the load, IaaS services can provide the
resources and elastic services where the usage of resources can be increased or decreased
according to the requirements.
iv) Shared infrastructure: IaaS follows a one-to-many delivery model and allows multiple IT
users to share the same physical infrastructure and thus ensure high resource utilization.
v) Metered Services: IaaS allows the IT users to rent the computing resources instead of buying
it. The services consumed by the IT user will be measured, and the users will be charged by the
IaaS providers based on the amount of usage.
Q 31- Explain the traditional methods of Digital Payments used in e-commerce transactions.
i) Cards: Cards are provided by banks to their account holders. These have been the most used
digital payment modes till now. Various types of cards are as follows:
a. Credit Cards: A small plastic card issued by a bank, or issuer etc., allowing the holder to
purchase goods or services on credit. In this mode of payment, the buyer’s cash flow is not
immediately impacted. User of the card makes payment to card issuer at end of billing cycle
b. Debits Cards: A small plastic card issued by a bank. Allowing the holder to purchase goods or
services on credit. In this mode of payment, the buyer’s cash flow is immediately affected that
as soon as payment is authorized buyers account is debited.
c. Smart Card: Smart card is a prepaid card similar to credit card and debit card in appearance,
but it has a small microprocessor chip embedded in it. It has capacity to store customer’s
personal information such as financial facts, private encryption keys, credit card information,
account information, and so on.
Moreover, these are not linked to any bank account. For this reason, smart card holder is not
mandated to have a bank account. It is also used to store money which is reduced as per usage.
Mondex and Visa Cash cards are examples of smart cards. The smart card holder has to load
money onto the card by paying cash or through transfer from his/her bank account. After
loading the money onto the card, the cardholder can use the card to spend money up to the
limit of loaded amount in the same way as using a credit or debit card. Once the loaded amount
is spent, the cardholder may reload money onto the card.
ii) Net Banking: In this mode, the customers log to his / her bank account and makes payments.
All public sectors, large private sector banks allow net banking facilities to their customers.
Q 32- Public cloud is the cloud infrastructure that is provisioned for open use by the general
public. Explain any four characteristics of public cloud.
i) Highly Scalable: The resources in the public cloud are large in number and the service
providers make sure that all requests are granted. Hence public clouds are scalable.
iii) Less Secure: Since it is offered by a third party and they have full control over the cloud, the
public cloud is less secure out of all the other deployment models.
iv) Highly Available: It is highly available because anybody from any part of the world can
access the public cloud with proper permission, and this is not possible in other models as
geographical or other access restrictions might be there.
v) Stringent Service Level Agreements (SLAs): As the service provider’s business reputation and
customer strength are totally dependent on the cloud services, they follow the SLAs strictly and
violations are avoided.
All the transactions of the customer are processed by the data center. The Application Server
performs necessary operations and this update the account of the customer ‘A’ in the database
server.
The customer may do some other operation in branch “Y”. The process is validated at branch
“Y” and the data is transmitted to the application software at the data center. The results are
updated in the database server at the centralized data center.
Database Server
The Database Server of the Bank contains the entire data of the Bank. The data would consist of
various accounts of the customers and master data (e.g., of master data are customer data,
employee data, base rates for advances, FD rates, the rate for loans, penalty to be levied under
different circumstances, etc.).
a) Proxy Server
b) Key functions of RBI
Answer: a) Proxy Server: A Proxy Server is a computer that offers a computer network
service to allow clients to make indirect network connections to other network services. A
client connects to the proxy server, and then requests a connection, file, or other resource
available on a different server. The proxy provides the resource either by connecting to the
specified server or by serving it from a cache. In some cases, the proxy may alter the client’s
request or the server’s response for various purposes.
ii) Regulator and supervisor of the financial system: It prescribes broad parameters of banking
operations within which the country’s banking and financial system functions with the objective
of maintaining public confidence in the system, protect depositors’ interest and provide cost-
effective banking services to the public.
iii) Issuer of currency: It deals with issuing and exchanging or destroying currency and coins not
it for circulation with the objective to give the public adequate quantity of supplies of currency
notes and coins and in good quality.
Q 35- Analyse new set of IT risks and challenges associated with the businesses and standards
that the banks should consider?
Answer: Once the complete business is captured by technology and processes are automated
in CBS; the Data Centre (DC) of the bank, customers, management and staff are completely
dependent on the DC.
i) Ownership of Data/ process: Data resides at the Data Centre. Establish clear ownership.
ii) Authorization process: Anybody with access to the CBS, including the customer himself, can
enter data directly. What is the authorization process? If the process is not robust, it can lead to
unauthorized access to the customer information.
iv) Several software interfaces across diverse networks: A Data Centre can have as many as
75-100 different interfaces and application software. A data center must also contain adequate
infrastructure, such as uninterruptable power supplies; backup generators and so on. Lapse in
any of these may lead to realtime data loss.
v) Maintaining response time: Maintaining the interfacing software and ensuring optimum
response time and up time can be challenging
vi) User Identity Management: This could be a serious issue. Some Banks may have more than
5000 users interacting with the CBS at once.
vii) Access Controls: Designing and monitoring access control is an extremely challenging task.
viii) Incident handling procedures: Incident handling procedures are used to address and
manage the aftermath of a security breach or cyberattack.
ix) Change Management: Though Change management reduces the risk that a new system or
other change will be rejected by the users; however, at the same time, it requires changes at
application level and data level of the database- Master files, transaction files and reporting
software.
Q 36- Differentiate between Internet Banking Channel Server (IBCS) and Internet Banking
Application Server (IBAS) used in Core Banking Systems (CBS).
Internet Banking Application Server (IBAS): The Internet Banking Software which is stored in
the IBAS (Internet Banking Application Server) authenticates the customer with the login details
stored in the IBCS. Authentication process is the method by which the details provided by the
customer are compared with the data already stored in the data server to make sure that the
customer is genuine and has been provided with internet banking facilities.
Q 37- Current and Savings Account (CASA) is a unique feature which banks offer to their
customers to make them keep their money in their banks. Discuss its business process flow.
Answer: The Business Process flow of Current and Saving Account (CASA) is as follows:
I. Either the customer approaches the relationship manager to apply for a CASA facility or
will apply the same through internet banking, the charges/ rates for the facility are
provided by the relationship manager on basis of the request made by the customer.
II. Once the potential customer agrees for availing the facilities/products of the bank, the
relationship manager request for the relevant documents i.e., KYC and other relevant
documents of the customer depending upon the facility/product. KYC (Know Your
Customer) is a process by which banks obtain information about the identity and
address of the customers. KYC documents can be Passport, Driving License, etc.
III. The documents received from the customers are handed over to the Credit team / Risk
team for sanctioning of the facilities/limits of the customers.
IV. Credit team verifies the document’s, assess the financial and credit worthiness of the
borrowers and updates facilities in the customer account.
Q 38- Discuss any two risks and their corresponding controls related to the process of Mortgage
involved in CBS.
Q 39- A bank PQR has many branches all over India. However, the competent authority intends
to bring all the branches together under one umbrella and make it centralized. For that, identify
most prominently available Core Banking Software in t he market.
Answer: Core Banking Solution (CBS) refers to a common IT solution wherein a central shared
database supports the entire banking application. Business processes in all the branches of a
bank update a common database in a central server located at a Data Center, which gives a
consolidated view of the bank’s operations.
Some examples of CBS software are given below. These are only illustrative and not exhaustive.
i) Finacle: Core banking software suite developed by Infosys that provides universal banking
functionality covering all modules for banks covering all banking services.
ii) FinnOne: Web-based global banking product designed to support banks and financial
solution companies in dealing with assets, liabilities, core financial accounting and customer
service.
iii) Flexcube: Comprehensive, integrated, interoperable, and modular solution that enables
banks to manage evolving customer expectations.
iv) BaNCS: A customer-centric business model which offers simplified operations comprising
loans, deposits, wealth management, digital channels and risk and compliance components.
Further, there are many CBS software developed by vendors which are used by smaller and co-
operative banks. Some of the banks have also developed in-house CBS software. However, the
trend is for using high-end CBS developed by vendors depending on cost-benefit analysis and
needs.
Q 39- Explain the working of Automated Teller Machines (ATM) Channel Server?
Answer: Automated Teller Machines (ATM) Channel Server: This server contains the details
of ATM account holders. Soon after the facility of using the ATM is created by the Bank, the
details of such customers are loaded on to the ATM server.
When the Central Database is busy with central end - of- day activities or for any other reason,
the file containing the account balance of the customer is sent to the ATM switch. Such a file is
called Positive Balance File (PBF). Till the central database becomes accessible, the ATM
transactions are passed and the balance available in the ATM server. Once the central database
server becomes accessible, all the transactions that took place till such time as the central
database became un-accessible would be updated in the central
Q 40 - Explain various key aspects in-built into the architecture of a Core Banking System.
i) Information flow: Facilitates information flow within the bank and improves the speed and
accuracy of decision-making. It deploys systems that streamline integration and unite corporate
information to create a comprehensive analytical infrastructure.
ii) Customer centric: A holistic core banking architecture enables banks to target customers
with the right offers at the right time with the right channel to increase profitability.
iii) Regulatory compliance: Compliance in case of banks is complex and expensive. CBS has
built-in and regularly updated regulatory platform which will ensure compliance.
iv) Resource optimization: Optimizes utilization of information and resources of banks and
lowers costs through improved asset reusability, faster turnaround times, faster processing and
increased accuracy.
Answer: The tools of strategic management process are effectively being used by a number of
not-for-profit or charitable organizations. While ‘Do Good Group’ may have social and
charitable existence, still it has to generate resources and use them wisely to achieve
organizational objectives. Organization needs to be managed strategically, irrespective whether
i) Analyzing and interpreting the strategic intent in terms of vision, mission and objectives.
ii) Generating required resources in terms of finance and manpower (volunteers, paid
employees).
iv) Setting goals in the area of childcare. It can be in terms of geographical coverage and
number of children.
v) Analyzing the desired future position with the past and present situation.
The corporate level of management consists of the chief executive officer and other top-level
executives. These individuals occupy the apex of decision making within the organization. The
role of corporate-level managers is to oversee the development of strategies for the whole
organization. This role includes defining the mission and goals of the organization, determining
what businesses it should be in, allocating resources among the different businesses and so on
rests at the Corporate Level.
The development of strategies for individual business areas is the responsibility of the general
managers in these different businesses or business level managers. A business unit is a self-
contained division with its own functions - for example, finance, production, and marketing.
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 sphere of responsibility is generally confined to one organizational
activity, whereas general managers oversee the operation of a whole company or division.
Answer: Need for strategic management for government and medical organization
Yes, there is a need of strategic management for government and medical organizations like the
commercial organizations because optimum utilization of resources in view of their scarcity,
good strategy formulation and its effective implementation & proper monitoring is needed
equally in both types of organizations.
Organizations can be classified as commercial and non-commercial on the basis of the interest
they have. Typically, a government or medical organization may function without any
commercial objectives. A commercial organization has profit as its main aim. We can find many
organizations around us, which do not have any commercial objective of making profits. Their
genesis may be for social, charitable, or educational purposes.
Government Organizations: Central, state, municipal agencies, public sector units, department
are responsible for formulating, implementing and evaluating strategies that use taxpayers’
money in the most cost-effective way to provide services & programs. Therefore, strategic
management concepts are required for them.
Medical Organizations: Modern hospitals quite often are using strategic management for
creating new strategy and implementing properly for diagnosis and treatment of different
diseases at lower price. Forward and Backward integration strategies are also required in
hospitals for providing better services at lower cost.
Q 44- State with reason which of the following statements is correct / incorrect:
Answer: i) Incorrect: strategy is not a substitute for sound, alert and responsible
management. Strategy can never be perfect, flawless and optimal. Strategies are goal-directed
decision and actions in which capabilities and resources are matched with the opportunities
and threats in the environment. A good management at the top can steer the organizations by
adjusting its path on the basis of the changes in the environment.
ii) Incorrect: Strategy can never be perfect, flawless and optimal. It is 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 external events
iii) Incorrect: No, Strategic management is not a bundle of tricks and magic. It is a deliberate
managerial process that involves systematic and analytical thinking. 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.
iv) Correct: There are three strategic levels in an organization – corporate, business and
functional. Control systems are required at all the three levels. At the top levels, strategic
controls are built to check whether the strategy is 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
day- to- day management of business
v) Incorrect: A company’s strategy is a blend of proactive actions and reactive actions by the
management. Reactive actions are required to address unanticipated developments and
vi) 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
have purpose, vision and mission. They also work within the environmental forces and need to
manage strategically to stay afloat 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 organizations.
vii) Incorrect: In business, things happen that cannot be fully anticipated or planned for. When
market and competitive conditions take an unexpected turn or some aspect of a company's
strategy hits a stone wall, some kind of strategic reaction or adjustment is required.
viii) Correct: 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 them.
These can be really costly for organizations with limited resources particularly when small and
medium organisation create strategies to compete.
Q 45- “Strategic Management concepts are useful for educational institutions.” Explain with
reasons.
Q 46- 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 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.
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.
Q 47- Is strategic management a bundle of tricks and magic? Elucidate the statement.
Answer: Strategic management is not a bundle of tricks and magic. The term strategic
management refers to the managerial process of forming a strategic vision, setting objectives,
crafting a strategy, implementing and executing the strategy, and then over a period of time
initiating whatever corrective adjustments in the vision, objectives, strategy, and execution are
deemed appropriate.
Formation of strategy requires careful planning and requires strong conceptual, analytical, and
visionary skills.
Q 48- ‘Value for Money’ is a leading retail chain, on account of its ability to operate its business
at low costs. The retail chain aims to further strengthen its top position in the retail industry.
Marshal, the CEO of the retail chain is of the view that to achieve the goals they should focus on
lowering the costs of procurement of products.
Answer: A core competence is a unique strength of an organization which may not be shared
by others. Core competencies are those capabilities that are critical to a business achieving
competitive advantage. In order to qualify as a core competence, the competency should
differentiate the business from any other similar businesses. A core competency for a firm is
whatever it does is highly beneficial to the organization.
‘Value for Money’ is the leader on account of its ability to keep costs low. The cost advantage
that ‘Value for Money’ has created for itself has allowed the retailer to price goods lower than
competitors. The core competency in this case is derived from the company’s ability to
generate large sales volume, allowing the company to remain profitable with low profit margin.
Q 49- Atrix Ltd. is a company engaged in the designing, manufacturing, and marketing of
mechanical instruments like speed meters, oil pressure gauges, and so on. Their products are
fitted into two and four wheelers. During the last couple of years, the company has been
observing a fall in the market share. This is on account of shift to the new range of electronic
instruments. The customers are switching away mechanical instruments that have been the
backbone of Atrix Ltd.
As a CEO of Atrix Ltd., what can be the strategic options available with you.
Answer: Atrix is having a product portfolio that is evidently in the decline stage. The product is
being replaced with the technologically superior product. Strategically the company should
minimize their dependence on the existing products and identify other avenues for the survival
a) Invest in new product development and switchover to the new technology. Atrix Ltd. also
need time to invest in emerging new technology.
b) They can acquire or takeover a competitor provided they have or are able to generate
enough financial resources.
c) They may also consider unrelated growth and identify other areas for expansion. This will
enable Atrix Ltd. to spread their risks.
d) In longer run, they should divest the existing products. However, they may continue with the
existing products in a limited manner for such time there is demand for the product.
Q 50- What is the purpose of SWOT analysis? Why is it necessary to do a SWOT analysis before
selecting a particular strategy for a business organization?
▪ Strength: Strength is an inherent capability of the organization which it can use to gain
strategic advantage over its competitors.
SWOT analysis helps managers to craft a business model (or models) that will allow a company
to gain a competitive advantage in its industry (or industries). Competitive advantage leads to
increased profitability, and this maximizes a company’s chances of surviving in the fast-
changing, competitive environment. Key reasons for SWOT analyses are:
Q 51- In the context of Ansoff’s Product-Market Growth Matrix, identify with reasons, the type
of growth strategies followed in the following cases:
i) A leading producer of tooth paste, advises its customers to brush teeth twice a day to keep
breath fresh.
ii) A business giant in hotel industry decides to enter into dairy business.
iii) One of India’s premier utility vehicles manufacturing company ventures to foray into foreign
markets.
iv) A renowned auto manufacturing company launches ungeared scooters in the market.
Answer: The Ansoff’s product market growth matrix (proposed by Igor Ansoff) is an useful tool
that helps businesses decide their product and market growth strategy. This matrix further
i) Market Penetration: A leading producer of toothpaste, advises its customers to brush teeth
twice a day to keep breath fresh. It refers to a growth strategy where the business focuses on
selling existing products into existing markets.
ii) Diversification: A business giant in hotel industry decides to enter into dairy business. It
refers to a growth strategy where a business markets new product in new markets.
iii) Market Development: One of India’s premier utility vehicles manufacturing company
ventures to foray into foreign markets. It refers to a growth strategy where the business seeks
to sell its existing products into new markets.
Q 52- State with reasons which of the following statements is correct / incorrect:
ii) Correct: Strength is an inherent capacity which an organization can use to gain strategic
advantage over its competitors. An example of strength is superior research and development
skill which can be used for continuous product innovation or for new product development so
that the company gains competitive advantage.
iii) Incorrect: SWOT analysis stands for the analysis of strengths, weaknesses opportunities, and
threats. It is not used for ranking of organizations. It is a tool for organizational and
environmental appraisal necessary for formulating effective strategies.
iv) Incorrect: SWOT analysis presents the information about both external and internal
environment in a structured form to compare external opportunities and threats with internal
strengths and weaknesses. This helps in matching external and internal environments so that
strategic decision makers in an organisation can come out with suitable strategies by identifying
patterns of relationship and develop suitable strategies.
v) Incorrect: The acronym BCG stands for Boston Consulting Group, an organization that
developed a matrix to portray an organizational corporate portfolio of investment. This matrix
depicts growth of business and the business share enjoyed by an organization. The matrix is
also known for its cow and dog metaphors and is popularly used for resource allocation in a
diversified company.
vii) Correct: A core competence is a unique strength of an organization which may not be
shared by others. If business is organized on the basis of core competence, it is likely to
generate competitive advantage. A core competence provides potential access to a wide
variety of markets. Core competencies should be such that it is difficult for competitors to
imitate them.
viii) Correct: Economies of scale refer to the decline in the per-unit cost of production (or other
activity) as volume grows. A large firm that enjoys economies of scale can produce high
volumes of goods at successively lower costs. This tends to discourage new entrants.
Answer: The TOWS matrix illustrates how the external opportunities and threats facing a
particular corporation can be matched with company's internal strengths and weaknesses to
result in possible strategic alternatives to be competitive. It is a good way to use brainstorming
and to create alternative strategies that might not otherwise be considered. It forces strategic
managers to design various growth, stability or retrenchment strategies. It can be used to
generate corporate as well as business strategies.
Moreover, TOWS Matrix is very useful for generating a series of alternatives that the decision
makers of a company or business unit might not otherwise have considered. Nevertheless, the
TOWS Matrix is only one of the many ways to generate alternative strategies. In a way TOWS is
considered to be an improvement over the SWOT. However, it does not undermine the utility
of SWOT analysis.
Market Development and Product Development under Ansoff’s Product Market Growth
Matrix.
Answer: Following are the differences between the market development and product
development:
i) One reason could be the rapid shrinking of time and distance across the globe - thanks to
faster communication, speedier transportation, growing financial flows and rapid technological
changes.
ii) It is being realized that the domestic markets are no longer adequate and rich. Companies
globalize to take advantage of opportunities available elsewhere.
iii) A new product may gradually get acceptance and grow locally and then globally. This may
initially be in form of exports and then later production facilities may begin in other countries.
iv) Organizations may go global to take advantage of cheaper raw material and labour costs. v)
Companies often set up overseas plants to reduce high transportation costs.
vii) The companies may also go global to take advantage of local taxation laws.
viii) To form strategic alliances to ward off economic and technological threats and leverage
their respective comparative and competitive advantages.
Q 56- Shri Alok Kumar is having his own medium size factory in Aligarh manufacturing hardware
consisting handles, hinges, tower bolts and so on. He has a staff of more than 220 in his
organization. One of the leading brands of Hardware seller in India is rebranding and selling the
material from his factory. Shri Alok Kumar, believes in close supervision and takes all major and
minor decisions in the organization.
Answer: Decision making is a managerial process of selecting the best course of action out of
several alternative courses for the purpose of accomplishment of the organizational goals.
Decisions may be operational, i.e., which relate to general day-to-day operations. They may
also be strategic in nature.
As owner manager at the top level in the company, Shri Alok Kumar should concentrate on
strategic decisions. These are higher level decisions having organization wide implications. The
major dimensions of strategic decisions are as follows:
iii) Strategic decisions necessitate consideration of factors in the firm’s external environment.
iv) Strategic decisions are likely to have a significant impact on the long-term prosperity of the
firm.
Answer: Objectives are organizations performance targets – the results and outcomes it wants
to achieve. They function as yardstick for tracking an organization’s performance and progress.
Objectives with strategic focus relate to outcomes that strengthen an organization’s overall
Q 58- What tips can you offer to write a 'right' mission statements?
ii) One of the roles of a mission statement is to give the organization its own special identity,
business emphasis and path for development.
iii) A company's business is defined by what needs it is trying to satisfy, customer groups it is
targeting, technologies and competencies it uses and the activities it performs.
iv) Technology, competencies and activities are important in defining a company's business
because they indicate the boundaries on its operation.
Q 59- 'Objectives' and 'Goals' provide meaning and sense of direction to organizational
endeavour. Explain
Answer: Business organization translates their vision and mission into objectives. Objectives are
open-ended attributes that denote the future states or outcomes. Goals are close-ended
attributes which are precise and expressed in specific terms. Thus, the goals are more specific
and translate to objectives to short term perspective. All organizations have objectives. The
pursuit of objectives is an unending process such that organizations sustain themselves. They
provide meaning and sense of direction to organizational endeavour. Organizational structure
and activities are designed and resources are allocated around the objectives to facilitate their
achievement. They also act as benchmarks for guiding organizational activity and for evaluating
how the organization is performing.
b) The first step of strategy formulation in strategic management model is to undertake internal
analysis.
d) Incorrect: Entrepreneur, big or small has to function within several influences’ external
forces. Competition in different form and different degree is present in all kind and sizes of
Q 61- What is strategic decision making? What tasks are performed by a strategic Manager?
Answer: Decision making is a managerial process of selecting the best course of action out of
several alternative courses for the purpose of accomplishment of the organizational goals.
Decisions may be operational i.e., which relate to general day-to-day operations. They may also
be strategic in nature. According to Jauch and Glueck “Strategic decisions encompass the
definition of the business, products to be handled, markets to be served, functions to be
performed and major policies needed for the organization to execute these decisions to achieve
the strategic objectives.”
The primary task of the strategic manager is conceptualizing, designing and executing company
strategies. For this purpose, his tasks include:
A mission statement can resemble a vision statement in a few companies, but that can be a
grave mistake. It can confuse people. Following are the major differences between vision and
mission:
i) The vision states the future direction while the mission states the ongoing activities of the
organization.
ii) The vision statement can galvanize the people to achieve defined objectives, even if they are
stretch objectives, provided the vision is specific, measurable, achievable, relevant and time
bound. A mission statement provides a path to realize the vision in line with its values. These
statements have a direct bearing on the bottom line and success of the organization.
iii) A vision statement defines the purpose or broader goal for being in existence or in the
business and can remain the same for decades if crafted well while a mission statement is more
specific in terms of both the future state and the time frame. Mission describes what will be
achieved if the organization is successful.
Q 63- An XYZ Company is facing continuous losses. There is decline in sales and product market
share. The products of the company became uncompetitive and there is persistent negative
cash flow. The physical facilities are deteriorating and employees have low morale. At the board
meeting, the board members decided that they should continue the organization and adopt
such measures that the company functions properly. The board has decided to hire young
Answer: XYZ Company is facing continuous losses, decline in sales and product market share,
persistent negative cash flow, uncompetitive products, declining market share, deterioration in
physical facilities, low morale of employees. In such a scenario, Shayamli may choose
turnaround strategy as this strategy attempts to reverse the process of decline and bring
improvement in organizational health. This is also important as Board has decided to continue
the company and adopt measures for its proper functioning.
For success, Shayamli needs to focus on the short and long-term financing needs as well as on
strategic issues. During the turnaround, the “product mix” may be changed, requiring the
organization to do some repositioning.
Stage One - Assessment of current problems: The first step is to assess the current problems
and get to the root causes and the extent of damage the problem has caused.
Stage Two - Analyze the situation and develop a strategic plan: Before making any major
changes; determine the chances of business’s survival. Identify appropriate strategies and
develop a preliminary action plan.
Stage Three - Implementing an emergency action plan: If the organization is in a critical stage,
an appropriate action plan must be developed to stop the bleeding and enable the organization
to survive. A positive operating cash flow must be established as quickly as possible and enough
funds to implement the turnaround strategies must be raised.
Stage Four - Restructuring the business: The financial state of the organization’s core business
is particularly important. If the core business is irreparably damaged, then the outlook for the
Stage Five - Returning to normal: In the final stage of turnaround strategy process, the
organization should begin to show signs of profitability, return on investments and enhancing
economic value-added. Emphasis is placed on a number of strategic efforts such as carefully
adding new products and improving customer service, creating alliances with other
organizations, increasing the market share, etc.
Q 64- Swift Insurance is a company engaged in the business of providing medical insurance
maintaining a market share of 25 to 30 per cent in last five years. Recently, the company
decided to enter into the business of auto insurance by having foreign collaboration. Identify
the strategy being followed by the Swift Insurance with its advantages.
Answer: Overall Swift Insurance is following growth or expansion strategy as it is redefining the
business and enlarging its scope. The step will also substantially increase investment in the
business.
The new business is related and at the same time caters to a different segment and accordingly
can be termed as related diversification. The new business falls within the scope of general
insurance and horizontally related to the existing business.
v) Economies of scale
Answer: Divestment strategy involves the sale or liquidation of a portion of business, or a major
division, profit center or SBU. For a multiple product company, divestment could be a part of
rehabilitating or restructuring plan called turnaround.
ii) A business that had been acquired proves to be a mismatch and cannot be integrated within
the company.
iii) Persistent negative cash flows from a particular business create financial problems for the
whole company.
iv) Severity of competition and the inability of a firm to cope with it.
v) Technological upgradation is required if the business is to survive but where it is not possible
for the firm to invest in it.
Divestment strategy involves the sale or It involves closing down a firm and selling its
liquidation of a portion of business, or a major assets.
division, profit center or SBU.
Efforts are made for the survival of Liquidation as a form of retrenchment strategy
organization. is considered as the most extreme and
unattractive.
Q 67- State with reasons which of the following statements is correct / incorrect:
iii) Diversification only involves entering in new businesses that are related to the existing
business of an organization
iv) Vertical diversification integrates firms forward or backward in the product chain
Answer: i) Correct: An organization can redefine its business by divesting a major product line
or market. The divesting can be termed as retrenchment strategy. The enterprise may withdraw
from marginal markets, withdraw some brands or sizes of products. It may also withdraw some
of slow-moving products. In an extreme manner it may seek retirement either from the
production or the marketing activity.
ii) Correct: An acquisition is a type of growth strategy through which one firm buys a controlling
or complete interest in another firm. Acquisition of an existing concern is an instant means of
achieving growth through expansion and/or diversification. Ideally, acquisition strategy should
be used when the acquiring firm is able to enhance its economic value through ownership and
the use of the assets that are acquired.
iv) Correct: In vertically integrated diversification, firms opt to engage in businesses that are
related to the existing business of the firm. It moves forward or backward in the chain and
enters specific product with the intention of making them part of new businesses for the firm.
vi) Correct: Liquidation as a form of retrenchment strategy is considered as the most extreme
and unattractive. It involves closing down a firm and selling its assets. It is considered as the last
resort because it leads to serious consequences such as loss of employment for workers and
other employees, termination of opportunities a firm could pursue, and the stigma of failure.
The company management, government, banks and financial institutions, trade unions,
suppliers, creditors, and other agencies are extremely reluctant to take a decision, or ask for
liquidation.
vii) Incorrect: In the context of strategic management, retrenchment implies giving up certain
products and reducing the level of business as a compulsive measure to cope up with certain
adverse developments on which the firm has little control. Downsizing (or rightsizing) is
planned elimination of positions or jobs. Retrenchment does not imply downsizing; however,
the latter is often used to implement a retrenchment strategy.
viii) Correct: Stability strategies are implemented by approaches wherein few functional
changes are made in the products or markets. It is not a 'do nothing' strategy. It involves
ix) Incorrect: Organisations may diversify into new businesses that are vertically integrated with
their existing business. Backward integration firms create effective supply by entering business
of input providers. This strategy is employed to expand profits and gain greater control over
production.
Q 68- Strategic alliances are formed if they provide an advantage to all the parties in the
alliance. Do you agree? Explain in brief the advantages of a strategic alliance.
Answer: Strategic alliances are formed if they provide an advantage to all the parties in the
alliance. These advantages can be broadly categorized as follows:
a) Organizational: Strategic alliances may be formed to learn necessary skills and obtain certain
capabilities from the strategic partner. Strategic partners may also help to enhance productive
capacity, provide a distribution system, or extend supply chain. A strategic partner may provide
a good or service that complements each other, thereby creating a synergy. If one partner is
relatively new or untried in a certain industry, having a strategic partner who is well-known and
respected will help add legitimacy and creditability to the venture.
c) Strategic: Organizations may join to cooperate instead of compete. Alliances may also create
vertical integration where partners are part of supply chain. Strategic alliances may also be
useful to create a competitive advantage by the pooling of resources and skills. This may also
help with future business opportunities and the development of new products and
technologies. Strategic alliances may also be used to get access to new technologies or to
pursue joint research and development
d) Political: Sometimes there is need to form a strategic alliance with a local foreign business to
gain entry into a foreign market either because of local prejudices or legal barriers to entry.
Forming strategic alliances with politically-influential partners may also help improve overall
influence and position.’
Answer: Stability strategies, as name suggests, are intended to safeguard the existing interests
and strengths of business. It involves organizations to pursue established and tested objectives,
continue on the chosen path, maintain operational efficiency and so on. A stability strategy is
pursued when a firm continues to serve in the same or similar markets and deals in same
products and services. In stability strategy, few functional changes are made in the products or
markets, however, it is not a ‘do nothing’ strategy. This strategy is typical for mature business
organizations. Some small organizations also frequently use stability as a strategic focus to
maintain comfortable market or profit position.
Q 70 - X Pvt. Ltd. had recently ventured into the business of co-working spaces when the global
pandemic struck. This has resulted in the business line becoming unprofitable and unviable, and
a failure of the existing strategy. However, the other businesses of X Pvt. Ltd. are relatively less
affected by the pandemic as compared to the recent co-working spaces. Suggest a strategy for
X Pvt. Ltd. with reasons to justify your answer.
Ltd. In the given situation where the business of co-working spaces became unprofitable and
unviable due to Global pandemic, the best option for the company is to divest the loss-making
business. Retrenchment may be done either internally or externally. Turnaround strategy is
adopted in case of internal retrenchment where emphasis is laid on improving internal
efficiency of the organization, while divestment strategy is adopted when a business turns
unprofitable and unviable due to some external factors. In view of the above, the company
should go for divestment strategy.
a) Persistent cash flows from loss making segment could affect other profit-making segments,
which is the case in the given scenario.
c) Better investment opportunity, which could be the case if X Pvt. Ltd. can invest the money it
generates from divestment.
Q 71- Gennex is a company that designs, manufactures and sells computer hardware and
software. Gennex is well known for its innovative products that has helped the company to
have advantage over its competitors. It also spends on research and development and
concerned with innovative software. Often the unique features of their product, that are not
available with their competitors helps them to gain competitive advantage. Gennex using the
strategy is consistently gaining its position in the industry over its competitors.
Identify and explain the Porter’s generic strategy which Gennex has opted to gain the
competitive advantage.
Answer: According to Porter, strategies allow organizations to gain competitive advantage from
three different bases: cost leadership, differentiation, and focus. Porter called these base
generic strategies.
Gennex has opted differentiation strategy. Its products are designed and produced to give the
customer value and quality. They are unique and serve specific customer needs that are not
met by other companies in the industry. Highly differentiated and unique hardware and
software enables Gennex to charge premium prices for its products hence making higher profits
and maintain its competitive position in the market.
Differentiation strategy is aimed at broad mass market and involves the creation of a product
or service that is perceived by the customers as unique. The uniqueness can be associated with
product design, brand image, features, technology, dealer network or customer service.
What kind of Michael Porter business level strategy is being used by “Mota Shoe company”?
State its advantages.
Answer: Mota shoes is trying to use differentiation. This strategy is aimed at broad mass
market and involves the creation of a product or service that is perceived by the customers as
unique. The uniqueness can be associated with product design, brand image, features,
technology, dealer network or customer service. Because of differentiation, the business can
charge a premium for its product.
A differentiation strategy has definite advantages as it may help to remain profitable even with
rivalry, new entrants, suppliers’ power, substitute products, and buyers’ power.
1) Rivalry: Brand loyalty acts as a safeguard against competitors. It means that customers will
be less sensitive to price increases, as long as the firm can satisfy the needs of its customers
2) Buyers: They do not negotiate for price as they get special features and also, they have fewer
options in the market
3) Suppliers: Because differentiators charge a premium price, they can afford to absorb higher
costs of supplies and customers are willing to pay extra too.
5) Substitutes: Substitute products can’t replace differentiated products which have high brand
value and enjoy customer loyalty
Q 73- What are the five competitive forces in an industry as identified by Michael Porter?
Answer: Five forces model of Michael Porter is a powerful and widely used tool for
systematically diagnosing the significant competitive pressures in the market and assessing
their strength and importance. The model holds that the state of competition in an industry is a
composite of competitive pressures operating in five areas of the overall market.
1) Threat of new entrants: New entrants are always a powerful source of competition. The new
capacity and product range they bring in throw up new competitive pressure. And the bigger
the new entrant, the more severe the competitive effect. New entrants also place a limit on
prices and affect the profitability of existing players.
2) Bargaining power of customers: This is another force that influences the competitive
condition of the industry. This force will become heavier depending on the possibilities of the
buyers forming groups or cartels. Mostly, this is a phenomenon seen in industrial products.
Quite often, users of industrial products come together formally or informally and exert
pressure on the producer. The bargaining power of the buyers influences not only the prices
that the producer can charge but also influences in many cases, costs and investments of the
producer because powerful buyers usually bargain for better services which involve costs and
investment on the part of the producer.
4) Rivalry among current players: The rivalry among existing players is quite obvious. This is
what is normally understood as competition. For any player, the competitors influence strategic
decisions at different strategic levels. The impact is evident more at functional level in the
prices being charged, advertising, and pressures on costs, product and so on.
The five forces together determine industry attractiveness/profitability. This is so because these
forces influence the causes that underlie industry attractiveness/ profitability. For example,
elements such as cost and investment needed for being a player in the industry decide industry
profitability, and all such elements are governed by these forces. The collective strength of
these five competitive forces determines the scope to earn attractive profits. The strength of
the forces may vary from industry to industry.
1. Rivalry – Competitors are likely to avoid a price war, since the low-cost firm will continue to
earn profits after competitors compete away their profits
2. Buyers – Powerful buyers/customers would not be able to exploit the cost leader firm and
will continue to buy its product
3. Suppliers – Cost leaders are able to absorb greater price increases before it must raise price
to customers.
4. Entrants – Low-cost leaders create barriers to market entry through its continuous focus on
efficiency and reducing costs.
5. Substitutes – Low-cost leaders are more likely to lower costs to induce customers to stay
with their product, invest to develop substitutes, purchase patents.
Q 75- Discuss in what conditions rivalry among competitors tends to be cut-throat and
profitability of the industry goes down.
Q 76- Analyse the following cases in the context of Michael Porter's Five Forces Model:
Answer: a) Large base of customers of an organization (supplier) may increase its bargaining
power in comparison to the bargaining power of the customer.
b) The manufacturer of sports goods would be in better position amongst existing competitors
since it has advantage of economies of scale. Even the threat of new entrants gets reduced.
c) Similar products will reduce the bargaining power of the rivals, i.e., competitors, in other
words the bargaining power of the customers will be more.
Q 77- Spacetek Pvt. Ltd. is an IT company. Although there is cut throat competition in the IT
sector, Spacetek deals with distinctive niche clients and is generating high efficiencies for
serving such niche market. Other rival firms are not attempting to specialize in the same target
market. Identify the strategy adopted by Spacetek Pvt. Ltd. and also explain the advantages and
disadvantages of that strategy
a) Premium prices can be charged by the organizations for their focused product/services.
b) Due to the tremendous expertise about the goods and services that organizations following
focus strategy offer, rivals and new entrants may find it difficult to compete.
a) The firms lacking in distinctive competencies may not be able to pursue focus strategy.
b) Due to the limited demand of product/services, costs are high which can cause problems.
c) In the long run, the niche could disappear or be taken over by larger competitors by acquiring
the same distinctive competencies.
Q 78- ABC Ltd is a company that has grown eleven times its size in last five years. With the
increase in size the company is facing difficulty in managing things. Many a times functional
level is not in sync with the corporate level. What will you like to advise to the company and
why?
Answer: The higher-level corporate strategies need to be segregated into viable plans and
policies that are compatible with each other and communicated down the line. The higher-level
i) Functional strategies lay down clearly what is to be done at the functional level. They provide
a sense of direction to the functional staff.
ii) They are aimed at facilitating the implementation of corporate strategies and the business
strategies formulation at the business level.
iii) They act as basis for controlling activities in the different functional areas of business.
iv) They help in bringing harmony and coordination as they are formulated to achieve major
strategies.
v) Similar situations occurring in different functional areas are handled in a consistent manner
by the functional managers.
Q 79- Ronit Roy has started a new business of manufacturing washing powder. Make a plan for
him to promote his product.
Answer: Promotion stands for activities that communicate the merits of the product and
persuade target consumers to buy it. Strategies are needed to combine individual methods
such as advertising, personal selling, and sales promotion into a coordinated campaign. Modern
marketing is highly promotional oriented.
Ronit needs to cover four major direct promotional methods or tools – personal selling,
advertising, publicity and sales promotion. They are briefly explained as follows:
d) Sales promotion: Sales promotion is an omnibus term that includes all activities that are
undertaken to promote the business but are not specifically included under personal selling,
advertising or publicity. Activities like discounts, contests, money refunds, installments, kiosks,
exhibitions and fairs constitute sales promotion. All these are meant to give a boost to the
sales.
Answer: Human resource management has been accepted as a strategic partner in the
formulation of organization’s strategies and in the implementation of such strategies through
human resource planning, employment, training, appraisal and reward systems. The following
points should be kept in mind as they can have a strong influence on employee competence:
a) Recruitment and selection: The workforce will be more competent if a firm can successfully
identify, attract, and select highly competent applicants.
b) Training: The workforce will be more competent if employees are well trained to perform
their jobs properly.
d) Compensation: A firm can usually increase the competency of its workforce by offering pay,
benefits and rewards that are not only attractive than those of their competitors but also
recognizes merit
Q 81- What do you understand by the term marketing mix? Briefly explain its various
components.
Answer: Marketing mix is a systematic way of classifying the key decision areas of marketing
management. It is the set of controllable marketing variables that the firm blends to produce
the response it wants in the target market. The original framework of marketing mix comprises
a) Product: It stands for the “goods-and-service” combination the company offers to the target
market.
b) Price: It stands for the amount of money customers have to pay to obtain the product.
c) Place: It stands for company activities that make the product available to target consumers
and include marketing channel, distribution policies and geographical availability.
d) Promotion: It stands for activities that communicate the merits of the product and persuade
target consumers to buy it.
Expanded Marketing Mix: Typically, all organizations use a combination of 4 Ps in some form or
the other. However, the above elements of marketing mix are not exhaustive as there are a few
more elements that may form part of marketing mix strategy as follows:
i. People: All human actors who play a part in delivery of the market offering and thus influence
the buyer’s perception, namely the firm’s personnel and the customer.
ii. Physical evidence: The environment in which the market offering is delivered and where the
firm and customer interact.
iii. Process: The actual procedures, mechanisms and flow of activities by which the product /
service is delivered.
Q 82- State with reasons which of the following statements is correct / incorrect:
vii) Production strategy implements, supports and drives higher level strategies
ix) The role of human resource manager is significant in building up core competency of the
firm.
Answer: i) Correct: Functional-level managers and strategies operate at the lowest hierarchical
level of strategic management. Functional level is responsible for the specific business functions
or operations (human resources, purchasing, product development, customer service, and so
on) that constitute a company or one of its divisions. Although they are not responsible for the
overall performance of the organisation, functional managers nevertheless have a major
strategic role to develop functional strategies in their area that help to fulfil the strategic
objectives set by business and corporate-level managers
iii) Correct: Augmented marketing refers to deliberate and accelerated efforts to get better
marketing returns through additional means. It includes provision of additional customer
services and benefits built around the care and actual products that relate to introduction of hi-
tech services like movies on demand, on-line computer repair services, secretarial services, etc.
Such innovative offerings provide a set of benefits that promise to elevate customer service to
unprecedented levels
iv) Correct: Direct marketing is done through various advertising media that interact directly
with customer. Teleshopping is a form of direct marketing which operates without conventional
intermediaries and employs television and other IT devices for reaching the customer. The
communication between the marketer and the customer is direct through third party interfaces
such as telecom or postal systems.
vi) Correct: The human resource management helps the organization to effectively deal with
the external environmental challenges. The function has been accepted as a partner in the
formulation of organization's strategies and in the implementation of such strategies through
human resource planning, employment, training, appraisal and rewarding of personnel.
vii) Correct: For effective implementation of higher-level strategies, strategists need to provide
direction to functional managers, including production, regarding the plans and policies to be
adopted. Production strategy provides a path for transmitting corporate and business level
viii) Incorrect: A marketer alone cannot deliver superior value to the customers. It needs to
work in coordination with other departments to accomplish this. It is important to be part of
organization chain and marketer needs to work in coordination with other departments in the
search for competitive advantages. Organizations need to look at the value chain network along
with its own chain of activities and the chain of suppliers, distributors and ultimately customers.
ix) Correct: The human resource manager has a significant role to play in developing core
competency of the firm. A core competence is a unique strength of an organization which may
not be shared by others. Corecompetencies can be generated and maintained only through the
effective management of human resources and their skills.
xi) Incorrect: Marketing function and production function complement each other. They need
to work in tandem to produce goods as per the needs and preferences of the customers.
Marketing links the production with the customers.
a. Facilitation of change
Answer: a. Facilitation of change: The Human resource will be more concerned with
substance rather than form, accomplishments rather than activities, and practice rather than
theory. The personnel function will be responsible for furthering the organization not just
maintaining it. Human resource management will have to devote more time to promote
changes than to maintain the status quote
b. Building core competency: The human resource manager has a great role to play in
developing core competency by the firm. A core competence is a unique strength of an
organization which may not be shared by others. If the business is organized on the basis of
core competency, it is likely to generate competitive advantage. Because of this reason, many
organizations have restructured their businesses by divesting those businesses which do not
match core competence.
c. Development of works ethics and culture: As changing work ethic requires increasing
emphasis on individuals, jobs will have to be redesigned to provide challenge. Flexible starting
and quitting times for employees may be necessary. Focus will shift from extrinsic to intrinsic
motivation. A vibrant work culture will have to be developed in the organizations to create an
atmosphere of trust among people and to encourage creative ideas by the people. Far reaching
changes with the help of technical knowledge will be required for this purpose.
Q 84- Discuss the guidelines for selection of Research & Development expertise by an
organization.
i) If the rate of technical progress is slow, the rate of market growth is moderate, and there are
significant barriers to possible new entrants, then in-house R&D is the preferred solution. The
reason is that R&D, if successful, will result in a temporary product or process monopoly that
the company can exploit.
ii) If technology is changing rapidly and the market is growing slowly, then a major effort in R&D
may be very risky, because it may lead to the development of an ultimately obsolete
technology or one for which there is no market.
iii) If technology is changing slowly but the market is growing quickly, there generally is not
enough time for in-house development. The prescribed approach is to obtain R&D expertise on
an exclusive or nonexclusive basis from an outside firm.
iv) If both technical progress and market growth are fast, R&D expertise should be obtained
through acquisition of a well-established firm in the industry.
Answer: The role of human resources in enabling the organization to effectively deal with the
external environmental challenges, the human resource management function has been
accepted as a strategic partner in the formulation of organization's strategies and in the
implementation of such strategies through human resource planning, employment, training,
appraisal and rewarding of personnel. An organization's recruitment, selection, training,
performance appraisal, and compensation practices can have a strong influence on employee
competence is very important.
Answer: The scenario being referred to is culture in Jupiter Electronics. Strong culture promotes
good strategy execution when there’s fit and impels execution when there’s negligible fit. A
culture grounded in values, practices, and behavioural norms that match what is needed for
good strategy execution helps energize people throughout the organization to do their jobs in a
strategy-supportive manner. A culture built around such business principles as listening to
customers, encouraging employees to take pride in their work, and giving employees a high
degree of decision-making responsibility. This is very conducive to successful execution of a
strategy of delivering superior customer service.
A strong strategy-supportive culture makes employees feel genuinely better about their jobs
and work environment and the merits of what the company is trying to accomplish. Employees
are stimulated to take on the challenge of realizing the organizational vision, do their jobs
competently and with enthusiasm, and collaborate with others.
Q 87- Suresh Sinha has been recently appointed as the head of a strategic business unit of a
large multiproduct company. Advise Mr Sinha about the leadership role to be played by him in
execution of strategy.
i) Staying on top of what is happening, closely monitoring progress, solving out issues, and
learning what obstacles lie in the path of good execution.
ii) Promoting a culture of esprit de corps that mobilizes and energizes organizational members
to execute strategy in a competent fashion and perform at a high level.
iii) Keeping the organization responsive to changing conditions, alert for new opportunities,
bubbling with innovative ideas, and ahead of rivals in developing competitively valuable
competencies and capabilities.
iv) Exercising ethical leadership and insisting that the company conduct its affairs like a model
corporate citizen.
v) Pushing corrective actions to improve strategy execution and overall strategic performance.
Q 88- How can you differentiate between transformational and transactional leaders?
i) Transformational leadership style uses charisma and enthusiasm to inspire people to exert
them for the good of organization. Transactional leadership style uses the authority of its office
to exchange rewards such as pay, status symbols etc.
Answer: The terms Entrepreneur and the Intrapreneur might seem the same words to hear, but
both the terms have much differences including their spelling and characteristics. The
differences between these two terms have been shortly gleaned below: -
According to the above table, anyone can differentiate between the entrepreneur and
intrapreneur as both the terms are heterogeneous.
Answer: A culture where creativity, embracing change, and challenging the status quo are
pervasive is very conducive to successful execution of a product innovation and technological
leadership strategy. A culture built around such business principles as listening to customers,
encouraging employees to take pride in their work, and giving employees a high degree of
decision-making responsibility is very conducive to successful execution of a strategy of
delivering superior customer service. A strong strategy-supportive culture nurtures and
motivates people to do their jobs in ways conducive to effective strategy execution; it provides
structure, standards, and a value system in which to operate; and it promotes strong employee
identification with the company's vision, performance targets, and strategy. All this makes
employees feel genuinely better about their jobs and work environment and the merits of what
the company is trying to accomplish. Employees are stimulated to take on the challenge of
realizing the company's vision, do their jobs competently and with enthusiasm, and collaborate
with others as needed to bring the strategy to success.
Q 91- What steps would you suggest to change a company's problem culture?
i) The first step is to diagnose which facets of the present culture are strategy supportive and
which are not
ii) Then, managers have to talk openly and forthrightly to all concerned about those aspects of
the culture that have to be changed
iii) The talk has to be followed swiftly by visible, aggressive actions to modify the culture-actions
that everyone will understand are intended to establish a new culture more in tune with the
strategy
The menu of culture-changing actions includes revising policies and procedures, altering
incentive compensation, recruiting and hiring new managers and employees, replacing key
executives, communication on need and benefit to employees and so on.
Answer: An entrepreneur is an individual who conceives the idea of starting a new venture,
takes all types of risks, not only to put the product or service into reality but also to make it an
extremely demanding one. An entrepreneur is one who:
iii) Arranges and coordinates resources such as man, material, machine and capital.
Q 93- Davis and Lawrence have proposed three distinct phases to develop matrix structure.
Explain.
Answer: For development of matrix structure; Davis and Lawrence have proposed three distinct
phases:
a) Cross-functional task forces: Temporary cross-functional task forces are initially used when a
new product line is being introduced. A project manager is in charge as the key horizontal link
c) Mature matrix: The third and final phase of matrix development involves a true dual-
authority structure. Both the functional and product structures are permanent. All employees
are connected to both a vertical functional superior and a horizontal product manager.
Q 94- 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
Answer: The top management of quick tool 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.
i) Identifying the need for benchmarking: This step will define the objectives of the
benchmarking exercise. It will also involve selecting the type of benchmarking. Organizations
identify realistic opportunities for improvements.
ii) Clearly understanding existing business processes: This step will involve compiling
information and data on performance. This will include mapping processes.
iii) Identify best processes: Within the selected framework, best processes are identified. These
may be within the same organization or external to it.
iv) Compare own processes and performance with that of others: While comparing gaps in
performance between the organization and better performers is identified. Further, gaps in
performance are analysed to seek explanations. Feasibility of making the improvements is also
examined.
vi) Evaluation: A business organization must evaluate the results of the benchmarking process
in terms of improvements vis-à-vis objectives and other criteria set for the purpose. It should
also periodically evaluate and reset the benchmarks in the light of changes in the conditions
that impact its performance
Answer: Managers implement strategy by converting major plans into concrete, sequential
actions that form incremental steps. Implementation control is directed towards assessing the
need for changes in the overall strategy in light of unfolding events and results associated with
incremental steps and actions.
ii) Milestone Reviews: All key activities necessary to implement strategy are segregated in
terms of time, events or major resource allocation. It normally involves a complete
reassessment of the strategy. It also assesses the need to continue or refocus the direction of
an organization.
Q 97- Specify the steps that are needed to introduce strategic change in an organization.
Answer: The changes in the environmental forces often require businesses to make
modifications in their existing strategies and bring out new strategies. For initiating strategic
change, three steps can be identified as under:
ii) Create a shared vision to manage the change: Objectives and vision of both individuals and
organization should coincide. Senior managers need to constantly and consistently
communicate the vision not only to inform but also to overcome resistance.
iii) Institutionalize the change: 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. All
these changes should be set up as a practice to be followed by the organization and be able to
transfer from one level to another as a well settled practice.
Q 98- “Firms can use benchmarking process to achieve improvement in diverse range of
management functions.” Elucidate.
Answer: Benchmarking is a process of finding the best practices within and outside the
industry to which an organisation belongs. Knowledge of the best practices helps in setting
standards and finding ways to match or even surpass own performances with the best
performances.
▪ Maintenance operations,
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▪ Assessment of total manufacturing costs,
▪ Product development,
▪ Product distribution,
▪ Customer services,
Q 99- India's luxurious domestic airline Indijet in an attempt to retain its leadership in aviation
sector has 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.
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The orientation of redesigning efforts involves total deconstruction and rethinking of business
process BPR involves the following steps:
a) Determining objectives: Objectives are the desired end results of the redesign process. They
will provide the required focus, direction, and motivation for the redesign process and help in
building a comprehensive foundation for the reengineering process.
b) Identify customers and determine their needs: The process designers have to understand
customers. The purpose is to redesign business process that clearly provides value addition to
the customer.
c) Study the existing processes: The study of existing processes will provide an important base
for the process designers. The purpose is to gain an understanding of the ‘what’, and ‘why’ of
the targeted process.
d) Formulate a redesign process plan: Formulation of redesign plan is the real crux of the
reengineering efforts. Customer focussed redesign concepts are identified and formulated. In
this step alternative processes are considered and the best is selected.
e) Implement the redesigned process: 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.
Q 100- What is strategic control? Kindly explain the statement that "premise control is a tool
for systematic and continuous monitoring of the environment".
Answer: Strategic control is the process of evaluating formulated and implemented strategy.
It is directed towards identifying changes in the internal and external environments of the
organization and making necessary adjustments accordingly.
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Strategic Control focuses on the dual questions of whether: (1) the strategy is being
implemented as planned; and (2) the results produced by the strategy are those intended.
Yes, Premise control is a tool for systematic and continuous monitoring of the environment to
verify the validity and accuracy of the premises on which the strategy has been built. It
primarily involves monitoring two types of factors:
i) Environmental factors such as economic (inflation, liquidity, interest rates), technology, social
and legal-regulatory.
It is neither feasible nor desirable to control all types of premises in the same manner.
Different premises may require different amount of control. Thus, managers are required to
select those premises that are likely to change and would severely impact the functioning of the
organization and its strategy.
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