Higher National Diploma in Accountancy

First Year, First Semester Examination - 2019

HNDA 4102 – Strategic Management

Answer Script
Question 01

(i) Define the term ‘Strategic Management’ (03 Marks)

• Strategic Management is the Art & science of formulating, implementing, and
evaluating, cross-functional decisions that enable an organization to achieve its
objectives. (David. F.R)
• Strategic management is a set of managerial decisions and actions that determines the long
run Performance of a corporation. (Freelen and Hunger)
• It includes environmental scanning (both external and internal), strategy formulation
(strategic or long-range planning), strategy implementation, and evaluation and Control.
Strategy,
i. An action a company takes to attain superior performance.
ii. Strategies are means taken by management to achieve long-term objectives of
the organization. (02 Marks)

(ii) List four (04) differences between Goals and Objectives? (04 Marks)

• Goals are broad; objectives are narrow.

• Goals are general intentions; objectives are precise.
• Goals are intangible; objectives are tangible.
• Goals are abstract; objectives are concrete.
• Goals can't be validated as is; objectives can be validated.

(iii)Briefly explain why strategic decisions are challengeable in today’s business? (04Marks)
• It deals with the long term direction of an organization.
• It is so complex in nature and made in a situation uncertainty.
• Trying to achieve competitive advantages.
• It concerned with scope of an organization’s activities.
• It involving matching the activities of an organization to the environment in which
its operates (Integrative Approach: both inside and outside organization).

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 • It involves building on or stretching an organization’s resource and competencies
to create opportunities or capitalize them.
• Strategic decisions affect operational decisions and required integrated approach.
• It involves considerable change.
(Total 20 Marks)

Question 02

(ii)What are the elements of an effective mission statement? (04 Marks)

• Customers
• Products or services
• Markets
• Technology
• Concern for survival, growth and profitable
• Philosophy
• Self-concept
• Concern for public image
• Concern for employees

(iii)Explain the key criteria in terms of providing a basis for achieving sustainable
competitive advantage?
Definition of SCA-------03 Marks
The four key criteria by which capabilities can be assessed in terms of providing a basis for
achieving sustainable competitive advantage.
• Value
• Rare
• Inimitability
Non substitutability (02 Marks)
•
(iv)The nature of competitiveness in a given industry can be viewed as a composite of five forces.
Such as

1. Threat of new entrants;

2. Bargaining power of buyers;
3. Bargaining power of suppliers;
4. Threat of substitute products or services.
5. Rivalry among existing firms;

(Students select any industry as a choice and should explain each forces-06 Marks)

(Total 20 Marks)

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Question 03

(i)Explain the three levels of strategy in an organization with suitable examples. (06 Marks)
• Corporate Strategy - a corporation’s overall direction and the management of its
businesses.
• Business Strategy - emphasizes improving the competitive position of a corporation’s
products or services in a specific industry or market segment.
• Functional Strategy- concerned with developing a distinctive competence to provide
a company or business unit with a competitive advantage.

((ii)Discuss the ‘Directional strategy’ in corporate strategy and mention three types of Directional
Strategy. (02.5 Marks)

Directional strategy is the game plan a company decides on and implements to grow business,
increase profits, and accomplish goals and objectives. Small businesses to large corporations can
create their own types of directional strategies that work for the focus and scope of each individual
business.

Three types of Directional Strategy.

• Stability strategy.

• Growth Strategy.

• Retrenchment Strategy. (01.5 Marks)

(iii) What is meant by ‘Strategic Planning Gap’?

SGP is the gap between desired sales and the existing sales from current portfolio within a time
period. (02 Marks)
Three Strategies (02 Marks)

(iv)Briefly explain the Ansoff’s Growth Matrix that can be used to fill the Strategic Planning Gap
with practical examples?

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 (02 Marks)
Explanation. (04 Marks) (should mention strategies for each)

Market penetration

Market penetration is the name given to a growth strategy where the business focuses on selling
existing products into existing markets.

Market penetration seeks to achieve four main objectives:

• Maintain or increase the market share of current products – through combination of

competitive pricing strategies, advertising, sales promotion and perhaps more resources
dedicated to personal selling
• Secure dominance of growth markets
• Restructure a mature market by driving out competitors; require a much more aggressive
promotional campaign, supported by a pricing strategy designed to make the market
unattractive for competitors
• Increase usage by existing customers – for example by introducing loyalty schemes

Market development

Market development is the name given to a growth strategy where the business seeks to sell its
existing products into new markets.

There are many possible ways of approaching this strategy, including:

• New geographical markets; for example exporting the product to a new country
• New product dimensions or packaging: for example
• New distribution channels (e.g. moving from selling via retail to selling using e-commerce
and mail order)
• Different pricing policies to attract different customers or create new market segments
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Market development is a more risky strategy than market penetration because of the targeting of
new markets.

Product development

Product development is the growth strategy where a business aims to introduce new products into
existing markets. This strategy may require the development of new competencies and requires
the business to develop modified products which can appeal to existing markets.

A strategy of product development is particularly suitable for a business where the product needs
to be differentiated in order to remain competitive. A successful product development strategy
places the marketing emphasis on:

• Research & development and innovation

• Detailed insights into customer needs (and how they change)
• Being first to market

Question 03

(i) Description-04 Marks

Limitation—01 Marks

• Cash Cow: a business unit that has a large market share in a mature, slow growing industry.
Cash cows require little investment and generate cash that can be used to invest in other
business units.
• Star: a business unit that has large market share in a fast growing industry. -Stars may generate
cash, but because the market is growing rapidly they require investment to maintain their lead.
If successful, a star will become a cash cow when its industry matures.

• Question Mark (problem Child): a business unit that has a small market share in a high
growth market. Those business units require resources to grow market share, but whether they
will succeed and become stars is unknown.

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• Dog: a business unit that has a small market share in a mature industry. A dog may not require
substantial cash, but it ties up capital that could better be deployed elsewhere. Unless dog has
some other strategic purpose, it should be liquidated if there is little prospect for it to gain
market share.

(iii)

Strategic Business Strategy

Unit. Position
Sporting goods. Star

Industrial paints. Cash cow

Electric items Dog

Office supplies. Cash cow

Office furniture Question Mark

Star position.
Invest to grow and increase market share.
Have to invest substantial funds for attract the market growth rate.
By increasing market share star will become CASH COW.
- Question Marks.
• Question Mark is also known as Problem Child
• Most businesses start of as question marks.
• They will absorb great amounts of cash if the market share remains low.
o Question marks have potential to become star and eventually cash
cow but can also become a dog.
o Investments should be high for this question marks. (Sales-350
million)

Electrical items- Dogs position. -Divest Strategy

Cash cow position-HOLD Strategy. There are two cash cows. So company can
invest stars and question marks. (01.5 marks*four strategy)
(iv)Yes. After merging ABC (pvt) LTD can develop their business by investing money from two
cash cows. (03 Marks)

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Question 04

(i) Strategy implementation is more difficult than strategy formulation. Discuss?

(03 Marks)
• Strategy implementation is managing forces during the action but strategy formulation
is positioning forces before the action
• Strategy implementation focuses on efficiency but strategy formulation focuses of
effectiveness.
• Strategic Implementation is mainly an Administrative Task based on strategic and
operational decisions but strategy formulation is an Entrepreneurial Activity based on
strategic decision-making.
• Strategic Implementation primarily an operational process but strategy formulation an
intellectual process.
• Strategic Implementation requires coordination among many individuals but strategy
formulation requires coordination among a few individuals.
• Strategic Implementation requires special motivation and leadership skills but strategy
formulation requires good intuitive and analytical skills.

(ii) McKinsey 7S Framework is used as a tool to assess and monitor changes in the
internal aspects of an organization. Explain hard skills and soft skills of this model?
(07Marks)

(02 for Diagram) (05 for Description)

Hard Elements
• Strategy: the plan devised to maintain and build competitive advantage over the
competition.
• Structure: the way the organization is structured and who reports to whom.
• Systems: the daily activities and procedures that staff members engage in to get the job
done.

Soft Elements
• Shared Values: called “super ordinate goals” when the model was first developed. These
are the core values of the company that are evidenced in the corporate culture and the
general work ethic.
• Style: the style of leadership adopted.
• Staff: the employees and their general capabilities.
• Skills: the actual skills and competencies of the employees working for the company.

(Total 20 Marks)

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(iii)Explain the steps in strategic evaluation process? (05 Marks)

Basic 3 steps:

• Reviewing Bases of Strategy

• Measuring Organizational Performance
• Taking Corrective Action

Student should explain steps

(iv)“Balance Score card as a framework for evaluating financial and non financial
situation which plays vital role”. (05 Marks)

The Balance Scorecard is a stratégic planning and management system used to align
business activites to the vision and strategy of the organization by monitoring performance
against strategic goals"

Four Perspectives-Financial,Internal business process, Customer, Innovation and

Learning.

• Clarifying and updating strategy.

• Communicating strategy throughout the company.
• Aligning unit and individual goals with the strategy.
• Linking strategic objectives to long-term targets and annual budgets.
• Identifying and aligning strategic initiatives.
• Conducting periodic performance reviews to learn about and improve strategy.
• (Total 20 Marks)

Question 06

(i) Strength-01 Marks

Weakness-01 Marks
Opportunities- 02 Marks.
Threats- 01 Marks.
(ii) Differentiation Strategy. (02 Marks)
How to Differentiate-(04 Marks)
Customer service, opening hours, interest rates, Introducing mini branches at their
own supermarkets, Using Technology (Any relevant answer.)
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