Semester II Examination Papers
IIBM Institute of Business Management
IIBM Institute of Business Management
Semester-II Examination Paper MM.100
Strategic Management
Section A: Objective Type (30 marks)
• This section consists of Multiple choice questions & Short Notes type questions.
• Answer all the questions.
• Part one questions carry 1 mark each & Part two questions carry 5 marks each.
Part one:
Multiple choices:
1. These are the plans formulated to achieve strategic goals.
a. Tactical plans
b. Strategic plans
c. Operational plans
d. Standing plans
2. This strategy facilities specialization by establishing a position of overall cost leadership,
differentiation, or both, but only within a particular segment, in an entire market.
a. Specific
b. Focus
c. Directive
d. Differentiation
3. This plan basically defines the actions of major departments and other sub-units that are required
in the execution of a strategic plan.
a. Tactical plan
b. Operational plan
c. Single-use plan
d. Long-term plan
4. This is a distinctive business or collection of related business, that can be managed relatively
independent of other businesses within the organization
a. Functional unit
b. Department unit
c. Organizational unit
d. Strategic business unit
5. These strategic plans of the organization have a time-frame exceeding five years.
a. Short-terms plans
b. Single-use plans
c. Long-term plans
d. Intermediate plans
Semester II Examination Papers
IIBM Institute of Business Management
6. Operational plans are mainly oriented towards issues that usually have a time horizon of
a. About five years
b. 3 to 5 years
c. 1 to 2 years
d. One year or less
7. These refer to the determination of the purpose and the basic long-term objectives of an
enterprise, and the adoption of courses of action and allocation of resources necessary to achieve
these aims.
a. Strategies
b. Plans
c. Policies
d. Procedures
8. These strategies provide guidelines for organizational growth
a. Organizational
b. Finance
c. Marketing
d. Growth
9. There are the three major kinds of standing plans: policies, rules, and
a. Projects
b. Programs
c. Procedures
d. Standards
10. This step in the planning process involves putting the plan into action.
a. Implementation
b. Selection
c. Evaluation
d. Review
Part Two:
1. Explain the ‘Adaptive mode’ of strategic management.
2. What is ‘Behavioral theory’?
3. Write about ‘Delphi technique’ of forecasting.
4. What are the basic steps one should follow for the ‘Value chain analysis’?
END OF SECTION A
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IIBM Institute of Business Management
Section B: Caselet (40 marks)
• This section consists of Caselets.
• Answer all the questions.
• Each caselet carries 20 marks.
• Detailed information should form the part of your answer (Word limit 200 to 250 words).
Caselet 1
Akash Engineering Ltd. (AEL) had achieved sales of Rs. 3440 lakhs during the year 2004-05 against
sales of Rs. 1209 lakhs previous year. The sales this year were highest ever achieved in the history of
the company. Profit before interest, depreciation and taxes were Rs. 642 lakhs as against Rs. 81
lakhs during the year 2003-04, which showed a tremendous increase (8 times) in profitability of the
company. Economic indicators were still positive in the coming year for the company.
COMPANY SNAPSHOT
AEL was established in the year 1963 at Dediyasan GIDC, Mehsana, Gujarat, India. The Golden
Mills Limited – a flagship company of the prominent Indian Business Group had acquired the
controlling interest of AEL since 1993. AEL, a mid-sized company, was one of the leading in
manufacturing companies process equipments for Chemicals, Petrochemicals, Pharmaceuticals,
Fertilizers, Drugs and allied industries. Attainment of the highest standard of quality and
enhancement of customer satisfaction had been the corporate philosophy of the company. In line
with corporate philosophy, the management reaffirmed its commitment for providing reliable quality
products and services through understanding and fulfilling customer’s requirements, use of prime
quality raw materials, defined process control at each stage of manufacturing, meeting national and
international standards defined by customers, training and motivating employees, professional
approach and implementation of international quality management system standards.AEL had been 7
producing Columns, Heat Echangers-Coolers-Chillers-Condensers, Pressure Vessels, Reactors,
Deaerators, Economizers, Oxygen / Nitrogen Storage Tanks, Dished Ends, Centrifuges, Chlorine and
other allied Gas Cylinders and Expansion Bellows. The product was highly of a technical nature and
AEL was well-known in the market for its prompt response and good quality products. They had
developed import substitute products like rocket buster and spherical pressure vessels. AEL was into
direct marketing and customized services. It had served various industrial sectors and prominent
buyers like ISRO, BARC, IOCL, Kochi Refineries, HPCL, BPCL, British Oxygen, Inox India,
Kirloskar Pneumatic, Reliance Petro, IPCL, Ranbaxy, NTPC, HILL, Godrej, BHEL and J.K.
Industries.
Issues
Till 1993, the top management had 20% stake in AEL and they never took active interest in its
management. In comparison with other companies of Indian Business Group, it was very small.
Since inception, its products were highly technical in nature and AEL was well known in the market
for its prompt response and good quality products. They had also developed import substitute
products like rocket buster and spherical pressure vessels. For initial years, AEL made profits. Then
also, from 1985 to the year 2002, AEL was in trouble because sales declined continuously. During
those years, the company was making losses. It had been, therefore, registered as a sick unit by BIFR
(Board of Industrial and Financial Reconstruction) in the year 2001 under the provisions of the Sick
Industrial Companies (Special Provisions) Act, 1965. Other major issues were related to Human
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IIBM Institute of Business Management
Resources. Conventionally, many workers joined through relations in the organization. There was no
performance measurement system for workers and managerial staff in the organization, which had
made them dull and lethargic. Moreover, there was no training program for labors to improve their
efficiency. The company needed to sharpen the skills of the workers. The competition had
intensified with big companies like laser and Toubro Ltd., ISAAC, Vadodara, GMM (Gujarat
Machinery Manufacturer), Vadodara, making their presence felt through their focused approach by
importing the manufacturing machineries from the developed countries. This made machineries of
AEL outdated. Moreover, many small fabricators also had ventured into this area. The research and
development in the company was always lop-sided. The company had never focused on reinvesting
in this area. Its capital investment in R & D was almost nil and recurring expenditure was only Rs.6
lakhs during the Year 2004-05. The profitable customers like, ISRO, BARC had already withdrawn.
Increase in prices of steel and other major raw materials, rise in other input costs, had squeezed
margins. Under tough competition and working capital shortage, the company had become almost
non-performing. The economic downfall, continued recession in the country and the world over had
further added fuel to the fire, making it difficult for the company to survive.
Steps taken by Management
As a measure towards labor problems, the management decided to give the option of Voluntary
Retirement Scheme (VRS) to all its employees. As a result, 278 labors and 34 staff members opted
for voluntary retirement under the VRS facilitating the company to decrease overheads to a large
extent. To fulfill the skilled workers were called back on a contractual basis. Since there was not any
performance measurement and incentive plan, AEL had to lose 3 to 4 good people to its competitors.
The company had now started the performance link bonus scheme wherein monetary benefit of 25
percent hike in the wages and salaries was given. It also started a training program, for its
contractual labors and appointed full time CEO from Arvind Mills. The company also hired a
consultant (who was an employee for more than 20 years at a senior level in Larsen & Toubro Ltd.)
for textile machinery and air handling system. It also made strategic alliances with few of the
renowned consultants, like, Engineers India Limited, Jacob H&G limited, UHDE India Limited,
Toyo Engineering Limited, Linde – West Germany, Monsanto – U.S.A., Kvaerner Powergas India
Limited, Tecnmont ICB India, Dalal Mott McDonald, Project Development India Limited, Chemtex
Engineering Ltd., Tata Consultant Engineers.AEL also developed in house R&D Laboratory –
approved by the Govt. of India and authorized to issue Certificate of Testing carries out. For this, it
imported technology for the manufacture of Industrial Centrifuges from West Germany and through
continuous interaction with R&D, company was able to fully absorb and adopt this technology. The
boost exports in developed countries like US, UK ad other European countries. With this quality
certification, the company felt that they had reaped the result in that very year by getting good orders
from HINDALCO and BHEL,. As a result, the profitability in 2004-05 reached an all time high.
PRESENT SCENARIO AND FUTURE PLAN
AEL’s turnover had reached the level of Rs. 34.4 crores, which helped them to recover all the debts.
The organizational structure was flat and there were no second line managers. Even the existing
managers were reluctant to pass the information and share their experiences with the new recruiters.
The image of AEL regarding the quality had to be reregistered in the minds of customers.AEL’s
short-term goal was to increase the turnover from current Rs. 34.3 crores to Rs. 150crores. The new
target was set Rs. 500 crores. And for this the management had identified new business divisions
like Textile Machineries, Air Handling System, Duplex Stainless Steel and Super Duplex Stainless
Steel, Aluminium and its alloys, Consulting Division Specialized in Power Plant and Waste water
Treatment and Non-conventional Energy System. Of which, textile machineries, power plan and airhandling
system would work as backward linkage to other companies of Indian business group. The
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IIBM Institute of Business Management
management planned to convert the design department as an individual responsible profit centre, to
develop the designs for own business as well as providing consultancy to other businesses. Although
the CEO had a great pleasure in announcing that the company had reached a turnover of Rs. 34.4
crores but was a little bit apprehensive about the bumpy roads towards the Rs. 150 crores target.
1. If you were appointed as a CEO of AEL, Would you like to go for a separate design division?
2. Critically evaluate the future plans of AEL.
3. Do you think the target set by AEL was realistic? Comment.
4. Comment on the management strategies adopted by AEL.
Caselet 2
Alloys and Metals Pvt. Ltd., Indore was established by Kartik Jain in the year 2000, with the vision
to cater to the needs of the booming Steel Industry. The company started with the manufacturing of
Ingots – a steel product, which served as an input for production process in Hot Rolling Mills. The
manufacturing unit was situated at Pithampur, an industrial zone where the government offered
several incentives, rebates and subsidized electricity. Over 20 years of experience in steel trading
business prompted Kartik and his brother to invest their own capital to set up this unit. Later on, they
took financial assistance from Indian Overseas Bank. His brother supervised production at the
manufacturing unit whereas he concentrated on acquiring suppliers, marketing and distribution of
the product. Initially, when they entered into the business, the demand far exceeded the supply, and
this attracted those to enter the market. The manufacturing unit employed 150 workers; out of which
80 percent were on contract basis while the rest were wage holders. They worked in two shifts of
nine hours each, and the plant was shut down for six hours daily. The company had introduced a
number of innovative HR policies to keep motivation and morale of its workers high. They paid
overtime for extra hours put in by the employees. This considerably reduced employee absenteeism
and turnover. The company provided group insurance under the Employee State Insurance Scheme
(ESI) and all other safety measures for their benefits. The production capacity was 80 tones per day.
The company manufactured Ingots of various sizes (3”- 4”, 3.25” – 4.25”, 3.50” – 4.50”) as per the
requirement of the customers. The manufacturing unit was prone to accidents as the Ingots were
manufactured at temperatures as high as 17000c. Maintenance of such high temperature required
heavy power consumption and the expenditure on power was only approx. rs.50-60 Lakhs per
months. The company had also ser up a waste recycling plant at Pithampur as on an average 10
percent of the material was wasted. The recycled product was then further used as raw material.
Steel scrap, used to produce Ingots was purchased locally from Shree Gears Pvt. Ltd., Dewas Steel
India Ltd., Dewas, and T-Tee Industries Pvt. Ltd. Dewas. They also imported the same from various
countries like South Africa, Britain and Thailand. The firm had big cost disadvantage when it came
to procurement of raw materials. Due to the quality nature of the supplier base, the firm funds it
extremely difficult to maintain the quality and consistency of raw material. The finished product was
supplied to companies like Gowardhan Saria, Richa Steel;s Pvt. Ltd. and Shivam Ispact Pvt. Ltd.,
Indian Metal Industries (IMI), Indian Rolling Mills, Saathi Steels Pvt. Ltd., Central Steels Pvt. Ltd.
and Shivam Ispact Pvt. Ltd. and to other steel units in Rajasthan, Gujarat and Punjab. The
distribution channel of the company was not very complex. It was primarily through direct selling or
intermediate brokers in certain cases. The firm did not have a very well-developed marketing
department because of the fixed clientele. Ingot being a commodity product was quoted on the
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IIBM Institute of Business Management
NCDX (National Commodities Exchange) and its rates varied between Rs. 1000-2000 per Ton.
Selling price was also dependent on the rates prevailing in Ghaziabad, Mandi Govindgarh, Raipur
and Calcutta as well as upon the various competitors’ rates prevailing in the market. Competition
was faced from Mayura Steels, Anand Steels, Sarkar Ispat, Shivani Estates Re-rolling Mills and
Sliver Ingots and other national manufacturers. The company used to purchase raw materials in cash
and kept at least 10 days of inventory. On the other hand, the company’s sale was mostly on credit,
with a time limit of 15-30 days. The company had a long list of defaulters – both buyers and sellers.
An incident involving a vendor who had defaulted with the supply of raw material was a matter of
growing concern for Kartik. A consignment due from Anna Enterprises, Thailand never reached
Alloys & Metals Pvt. Ltd., even though an advanced payment of $40,000 had been made at the time
of placing the order. The material was supposed to have arrived within 10 days, but in spite of
repeated reminders – telephone calls, fax and e-mails – delivery was not received even after a period
of two months. He then began to contact the person who had referred the particular supplier, but did
not get any satisfactory response from his end. He also contacted the Reserve Bank of India for
further course of action but he received no reply from them also. Being a member of the National
Steel Association, Mumbai he tried to seek their assistance for dealing with the matter but here also
he faced dejection. Neither the defaulters not the increasing competition deterred him from
visualizing a better future for the company. Disparity in demand and supply, increase in competition
and competitors’ diversification strategies, technological advances and the continuing boom in the
steel industry further motivated him to expand and diversify. In a period of two years, the company’s
turnover had reached over Rs. 45 crores. Encouraged by such a tremendous growth, Kartik was
planning to install a new Blast furnace to double its production capacity. As an initiative for future
development and expansion, they were also looking into the avenues of diversification into
manufacturing products like Channels, Angels and Rounds with plans to enter the retailing sector.
Now, he was at crossroads thinking whether and how to go about this diversification process.
1. As Kartik, what would have been your strategies to deal with the defaulters?
2. What steps should Kartik adopt before expansion and diversification? Would it be a wise decision
to diversify at this stage?
END OF SECTION B
Section C: Applied Theory (30 marks)
• This section consists of Long Questions.
• Answer all the questions.
• Each question carries15 marks.
1. Strategic planning involves both, the development of organizational objectives and the
laying down of specifications about how they will be accomplished. In this context,
outline the major steps in the strategic planning process.
2. Implementing strategies effectively is of great importance. The success of a strategy
depends on how effectively it is implemented. Elucidate.
END OF SECTION C
