GCA BM Revision Kit PDF

30 January, 2013
Global Chartered Accountants - GCA

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Business Management Exam Kit
This kit is designed to help ICAP Module E business management students to get the following:
ICAP Syllabus Grid

Complete Revision Notes from PBP
Past Papers Analysis
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Final Examination Business Management
Module E
P AP ER E 16 : Bu s i ne s s M a n a g e m e n t (100 marks)
Introduction
The ob ject ive of t his p aper is t hat the ind ivid ual s hould b e ab le to:
Identify the principles and concepts in the theories and practices of strategic business
management;
Asses the impact of environmental forces such as global microeconomic forces, international trade
and financial system on organizational strategies and plans;
Understand the importance of linking information systems development and management to
business goals and needs;
Understand the interplay of marketing with other vital functional areas in business management and
to understand the accountants role in servicing the needs of marketing and other functions of
business;
Recognize the role of global marketing and international business;
Assess the importance of human resources development to organisations and identify methods of
managing people effectively;
Evaluate ways in which change can be managed successfully;
Appreciation of social and ethical implication of strategic policies in business;
Understand the aims of corporate codes of conduct and their role in improved corporate
governance; and
Understand the managers role and responsibilities in relation to the working environment.
Case studies / scenario based questions will be set in the examination.
Indicative Grid
Syllabus Content Area Weightage
1. Strategic management and planning
2. Corporate social responsibility and business ethics 30
3. Human resource management

4. Management of the working environment 30
5. Marketing Management 20
6. International Business 20
Total 100
Note: The weightages given above are for guidance purposes only and some deviations in setting
of papers could be expected.
The Institute of Chartered Accountants of Pakistan

Contents:
1. Strategic management and planning:
a. The purpose of strategic management and business planning and their inter relationship
b. The methods which organisations use to plan for the future including the role of information
technology
c. Pos ition ap prais al and analys is :
i. Identifying the organizations strengths and weaknesses, opportunities and threats

ii. Identification and quantification of the planning gap
iii. Closing the planning gap through the identification and evaluation of alternative courses
of action: improved efficiency; improved product(s);or service(s); introducing new
product; entering new markets; merging with or acquiring other organisations
iv. Use of alternative strategies
v. Quality and a strategic variable; its implementation and management
vi. Performance against operational and strategic targets; flexibility economy, efficiency and
effectiveness
vii. Performance against that of competitors; benchmarking; use of inter-firm comparisons;
the limitations of external data
viii. Performance of costs, profit and investment centres using financial and non-financial
measures
ix. Problems of measuring divisional and subsidiary company performance
x. International and multinational trading; transfer pricing of goods and services and their
impact on trading results
xi. Impact of changing price level on current performance and the future projections
xii. Customer outlets, including customer profitability analysis
d. The eff ect of ex ternal environm ent on st rateg y and p lans and ap prais ing t he env ironment :
i. Scanning the environment of the organisation and the context in which it is set for
changes, developments and opportunities
ii. Forecasting trends and developments in relevant areas through the use of relevant
quantitative and qualitative analysis
iii. Future basing (i.e Anticipating long-term prospects for the business and its likelihood of
survival) and other scenario-building techniques
iv. Impact on the organisation of changing national and international influences:
demography; technology (progressional alternative / acceptability); economic resources;
social attitudes and aspirations; legislation and regulation; political forces; government
and other agencies, including pressure groups
v. Competitive advantage:
w its meaning in different markets and industries of nations and the implications of this
for organisational success
w the different approaches used by organisations and management in different
countries and the lessons which can be applied to Pakistan
w the effect on organisations of working in an international environment, the key
aspects of that environment and methods of entry into it

vi. Use of renewable and non-renewable resources including the ethical implications of
such use; the effect of the environment on corporate performance
vii. External sources of information, including databases, both private and public, and their
usefulness to the organisation
viii. Impact of innovation, substitution and obsolescence on business process (including
marketing and production)
ix. Impact of international market integration on the transfer of goods, services and labour
x. Comparative organizational performance: market share production capacity
e. Methods of gaining support and commitment for strategies
f. Es tab lishing the corporat e object ives:
i. Organizational missions, aims, goals and objectives

ii. Long-term (strategic) and short-term (operational) objectives: quantitative and
qualitative evaluation
iii Application of decision theory
iv Problems of achieving balanced growth and development
v. Internal and external factors effecting decisions; implication of short-termism
g. Formulating and evaluating plans with an awareness of the various techniques available to
managers
h. Understanding and managing the risk of a proposed business plan for the plan itself and for
all the aspects of business which it will influence
i. Reviewing strategy for the effect it will have on the organisation and the local and global
community
2. Corporate social responsibility and business ethics

a. Understanding of obligation towards society by business organisations and the individuals
associated with it, in carrying out the business and professional activities
b. Understanding ethical and social implications of business strategic policies and decisions
and their impact on the stockholders; consideration thereof in the formulation and
implementation of strategic planning and management decisions
c. Disclosure and confidentiality
d. Profit motives versus other corporate objectives
e. Goal congruence and corporate performance measurement
f. The role of professional bodies in regulating the activities of members

3. Human resource management

a. The purpose and forms of personnel specifications in the recruitment of personnel
b. Methods of identifying competencies and other attributes required
c. Specifying personnel requirements
d. Evaluating and determining the benefits and costs of new or additional personnel
e. Identifying and determining suitable methods of recruitment
f. Selection methods and their use
g. Methods of motivating and supporting personnel
h. Staff appraisals and the assessment of competence
i. Warning and dismissing personnel: legal and organizational policies and procedures; the role
of internal and external specialists in the process
j. The role of employee group in promoting the welfare of personnel
k. National legislation which affects recruitment, selection, employment and dismissal of
personnel
l. The management of organizational and personal changes
m. Concep ts and princip les of hum an resource dev elopm ent
i. The role which individual and team development can play in growth and development
ii. The different concepts and models of competence
iii. Methods of encouraging and supporting individuals and teams to grow and develop
iv. The effect of internal and external factors on development
n. Human relations management
4. Management of the working environment

a. Interpretation, applying and monitoring best practices for managing the working environment
b. National Legislation which affects the working environment
c. The role and purpose of health , safety and security requirements, procedures and guidelines
d. Roles and responsibilities of management for managing and improving the working
environment
5. Marketing Management
An introduction to marketing principles, the purpose of marketing philosophy and concepts in
providing for customer needs. Areas include:
a. S trat egy in t he m arket place
i. Assessing threats and opportunities to the marketing plan; determining the need for
change in the planning area
ii. Development of marketing strategies to meet organisation objectives
iii. Assessing the nature and size of the market using internal records, market intelligence,
market research
iv. The process of creating, reviewing, selecting and marketing the right product in the right
place, to the right customer at the right time, while achieving the right price; relevance of
the product life cycle
v. The product portfolio; formulation, management, the relevance of
branded merchandise

vi. Consumer power within the marketing environment

vii. Strategic management of markets through mergers, acquisitions and divestments
viii. Problems associated with the acquisition of the foreign subsidiaries especially in respect
of performance appraisals
b. Analyzing the impact of globalization on marketing to assess competitive advantage
c. Techniques for analyzing the market, choosing the target market and the appropriate
marketing mix, distribution channels, promotions, and developing a marketing plan
6. International Business
a. The environment of global marketing, global opportunities and threats; difficulties in
International business and alternative approaches to managing the process
b. The development of multinational organisations and transnational corporations and their role
in the world economy
c. Int ernational f inancial m anagem ent d ecisions
i. Alternative methods of financing imports and exports

ii. The workings of international money and capital markets and the opportunities that they
offer to companies as a source of finance and as a repository for the investment of funds
iii. The management of financial resources within a group of companies including:
payments between companies

cash management
transfer pricing
judging the performance of companies within a group
the financial control of a group of companies
iv. The appraisal of international capital investments, applying the appropriate techniques,
and the consideration of the major issues in the decision-making process, including:
strategic objectives
the principle of foreign home country versus host country returns
the form of foreign investments, including the use of branches versus subsidiaries
the different methods of financing foreign investments
the effect of taxation on foreign investment decisions
repatriation of sales amounts, earnings and charges to foreign operating companies
political risk analysis

Recommended Reading
PAPER E 16: Business Management
Book Name & Author About the Book
1. Strategic Management Concepts and The book ensures concept building for the
Cases by Fred R. David. topics on strategic management.
2. Principles of Marketing by Kotler Armstrong. The book gives an in-depth knowledge of the
principles of marketing and a good explanation
of basic marketing concepts.
3. Human Resource Management by H. John The book is relevant for various syllabus topics
Bernardin. under the mentioned grid.
4. Management and Organizational Behaviour A comprehensive and detailed explanation of

by Laurie J. Mullins. managerial practices is given in this book. The
book is a good guide for concepts in the field
of organizational behavior.
}
5. Business Studies by Dave Hall Rob Jones
and Carlo Raffo. The books comprehensively cover the following
topics: Business Strategy and environment,
6. AS Level and A Level Business Studies by marketing and human resources.
Peter Stimpson.
Supplementary Study Material

1. Business Management Study Text and Revision Series by AT Foulks Lynch Pakistan.
2. Business Management Study Text and Revision Series by Professional Business Publications
(PBP).

Global Chart ered Accountants - GCA
Revision
Notes (An effort by Mr.Asif)
www.gcaoffici al.org
Chapter 1 : Objectives of Organisation

Introduction to Strategy
Strategy:
Course of actions, including specification of resources required, to achieve a specific objective
Influences on /Determinants of Strategy:

External
o Society
o Organized groups
Nature of business
o Market situation and conditions
o Products of company
o Technology used
Organizations Culture
o Organizational system and structure
o Leadership style
o Organizations history
o Organizations founder
Stakeholders powers (mapping) and Internal coalition
Economic objectives
Social responsibility
Environmental conditions affecting Strategic Planning:

1. Resources (mineral)
2. Disaster
3. Logistics
4. Government
Environmental M anagement Accounting is a solution: examples are
1. Eco Balance
2. Cleaner Technology
3. Lifecycle assessment
4. Performance appraisal
5. Budgetary planning and control
6. Corporate liabilities (a factor in PERT)
Characteristics of Strategic Decision:

Scope: Overall long-term direction.
Matching: Matches activities to environment & resources capability.
Affect: Affected by values, beliefs and powers of people in organization. & Affect operational decisions.
Implications for change.
Complex in nature.
Allocation or reallocation of resources.
Strategic Financial Management:

It is identification of strategies able to maximize NPV and to allocate scarce resources, and implementing and
monitoring of such strategy.
Financial management decision: (Also see end of chapter 9)

Investing decisions (merger, divestment etc.)
Financing decisions (Capital structure and Working Capital Management)
Dividend decisions (Cash or Bonus share)

Financial objectives: Non financial objectives:
Primary; to maximize wealth of shareholders Service provision.
Others are Fulfillment of responsibility to suppliers & customers.
o Decrease in debt. Welfare of Society
o Profit retention. Welfare of M anagement
o Sales growth. Welfare of Employees
Government organizations:
External Financing Limit.
To create Value for Money, funds must be applied Economically, Efficiently and Effectively.
Chapter 2 & 4 : Strategy Formulation and Choice

Strategy formulation/choice
1. How to gain competitive advantage?(question of survival)

i. Porters Generic Strategies (5 forces)
2. Which Direction to go
i. Growth direction
a. Organic growth
Ansoffs Product-Market Matrix
b. Joint development
ii. Defensive/Non growth strategies
a. Capital Restructure Scheme
b. Downsizing
c. Divestment
Porters Generic Competitive Strategies (to achieve competitive advantage):
Competitive position is the market share, costs, prices, quality and accumulated experiences of an organization/product
relative to competition.
Competitive strategy is taking offensive or defensive action to create a defendable position in an industry, and to cope
with competitive forces yielding superior ROI.
Competitive advantage is anything which gives one organization an edge over competitors.
There are following Competitive Strategies for companies to achieve Competitive Advantage.
Lower Cost Differentiation

Broad Target Cost Leadership Differentiation
Niche Focus Cost Focus Differentiation Focus

(for luxury goods)
Differentiation is creating value through uniqueness. It could be at following levels of product i.e.
1.Actual Product
a). Features.
b). Quality level.
c). Design.
d).Brand name
e). Packaging.
2. Augmented Product
i. Delivery and credit
ii. Warranty
iii. Installation
iv. After sale service
Cost Leadership is having lowest cost of producing. It could be achieved by:

Mass Production (economies of scale)
Latest Technologies
Favorable access to raw materials
Automation
Minimizing overhead by exploiting bargaining power
Constantly improving efficiency and economy e.g. through value chain analysis
Focus involves a restriction of activities to only part of the market (a segment) through
Providing goods/services at lower cost (Cost focus)
Providing a differentiated product/service (Differentiation focus)
Advantages/Comparison of Competitive Strategies:
Competitive Force Cost Leadership strategy Differentiation strategy

Rivalry Profitable even in price competition. Reduces direct competition.
New Entrants Low price is entry barrier. Customer loyalty is entry barrier.
Substitutes Firm is less vulnerable than competitors. Brand loyalty is weapon.
Customers Customers wont switch. Low price sensitivity.
Suppliers High bargaining power because of market Supplier may raise prices but higher
share. margin offsets it.
Ansoffs Product-Market Matrix:
Present Product New Product

Present Market Market Penetration Product Development
New Market Market Development Diversification
Market Penetration: (low risk; no capital investment)

To increase usage by existing customers or
To increase market share through Competitive pricing, Advertising, Sales promotion taking share of
competitors
Market Development: (low risk; less investment)

New geographical area
New segment
New packing size
Product Development: (riskier; requires investment)

Company can exploit followings
Existing marketing arrangements (e.g. Promotion, Distribution)
Knowledge of customers and habits
Cost of entry will go up for competitors.
Diversification (high risk; requires investments and new competence)

Related diversification is when product is new but still within broad confines of industry. e.g.
Vertical integration (control over supply chain)
Forward integration (control/ownership over distributors or retailers)
Backward integration (control/ownership over suppliers)
Horizontal integration (control/ownership over competitors)
Unrelated diversification is where development is beyond industry and product is entirely new having
no relation with existing technology, market or products.
Franchising Unrelated Forward
Diversification Vertical
Related Backward
Growth Horizontal
Organic Growth
Joint Development Strategi es
Take Over/ Acquisition

Mergers
Joint Ventures
Strategic Alliance
Licenses
Agency Agreement
Franchising
Chapter # 3 : Planning and Control
Planning
Planning:
Planning involves making choices between alternatives and is primarily a decision making activity
2 approaches to planning:
Top-down approach means strategic management starts from top management and flows down the structure.
Bottom-up approach means information is accumulated at lower level and presented to top management along with
summary and options available.
Planning cycle
1. Identify objectives
2. Identify available strategies
3. Evaluate each strategy
4. Choose strategy (course of action)
5. Implement long-term plan in the form of annual budgets
Risk factors in planning:
Types of risks:
Physical
Economical
Political
Financial
Business
Product lifecycle
Accounting for Risk:

Required rate of return, adjusted by
Return %age
Payback period
Finance (strict rules of financing i.e. out of profits)
Quantification risk:
Rule of Thumb (best estimate of value within worst to best possible range)
Probability Theory (likelihood of occurrence of a forecast result)
Standard Deviation (calculate Standard Deviation of Expected Value, the higher it is the higher risk is)
Budgetary Control
Control:
Control is comparing actual results with planned performance and taking appropriate actions
Control Cycle
1. Actual results are recorded and analyzed for each responsibility center.
2. Feedback is reported to management.
3. Management compares actual results with plans or targets.
4. Do one of three things
i. Decide to do nothing
ii. Take control actions
iii. Alter the plan or target
Feedback:
The process of reporting back control information to management and the control information itself
It may be Single Loop or Double Loop.
It may be Positive or Negative.
Feed forward Control:

Control actions taken in advance.
Actual results are compared with Budgeted (i.e. adjusted by past results)
Well organized system of control should have:

Hierarchy of budget center.
Clearly defined responsibilities.
Responsibilities for Cost, Revenue, and Capital Employed.
Budget Center:
Each section of the organization for which budget is prepared
Objectives of budgeted planning and control:

1. Motivates employees
2. Establish system of control
3. Responsibility accounting
4. Achievement of goals
5. Communication
6. Coordination
7. Compel planning
Responsibility Accounting:
Each manager has a clearly defined area of responsibility and authority to make decisions within that area. No
uncertainty as to who is responsible for what (sometimes dual responsibility exists).
There are 3 different areas of responsibility.
Type of responsibility center Cost Center Profit Center Investment Center

Manager has control over Controllable cost Controllable cost Controllable cost
Sales Price Sales prices
Sales volume Sales volume
Investment in fixed and
current assets
Principal performance Variance analysis Profit Return on investment and
measures residual income
Responsibility Center is a unit of organization headed by a manager who has a direct responsibility for its performance.
Controllable Cost is an item of expenditure which can be directly influences by a given manager within a given time
span.
Controllability of fixed cost:
Committed fixed cost (e.g. PPE-------non-controllable in short term)
Discretionary fixed cost ( e.g. R.&D. or Advertisement ---------- controllable in short term)
Role of IT in Strategic Management
IT as changing industry:
With Porters 5 forces model.
IT/IS as competitive advantage:

With Porters generic strategies for competitive advantage. &
With Peppards 9 ways
5 forces Generic strategies

1. Ensure competitive pricing 7. Differentiating Product/Service
2. Establish entry barrier (cost of entry) 8. Increasing Cost efficiency
3. Using information as a product 9. Decreasing Supply Cost.
4. Limiting access to distribution channel
5. Affecting cost of switching
6. Building close relationship with supplier and
customer.
Chapter 4 & 5 : Strategic Management : Traditional & other models
Traditional and other models of S trategic Management
Strategic Management:
Strategic M anagement is the analysis, choice, implementation and control of agreed strategies
Strategy is a course of action including the specification of resources required to meet a specific objective.
Tactics is the deployment of resources to execute an agreed strategy.
Policy is a general statement providing guidelines for management of decision-making.
Levels of strategy: (by Hofer and Schendel)
1. Corporate Strategy determines the overall purpose and scope of the organization. It is concerned with what types of
business the organization is in.
Defining aspects of corporate strategy:
Scope of activities (whole organization)
Faces environment (opportunities and threats)
Resources (how to obtain and allocate them)
Values (of people in power in organization affect it)
Time scale (long term)
Complexity (uncertainty of future)
2. Business Strategy is how an organization approaches a particular product market area (applied at SBU level).
3. Functional/Operational strategies deal with specialized area of activity within an SBU e.g. Production, Marketing,
HRM, Finance.
Traditional approach to make strategy: (through Planning in a systematic way)
o Strategic analysis
Analyzing Vision, M ission and Objectives (Strategic Direction)
Corporate appraisal (where we are)
o Analyzing external environment
i. SLEPT analysis
ii. Porters 5 forces model
iii. Scenarios
o Analyzing internal environment (Situation analysis/Position audit)
i. Resources Audit
ii. BCG and GEBS matrices
iii. Value chain
iv. System structure
o SWOT Analysis
o Gap analysis
o Strategy formulation/Choice (how we can go)
o Strategy implementation
o Strategy evaluation and Control
Favor of rational model: (Ansoff and Drucker support it)

1. Corporate level first
2. Strategies are best generated from Top -Down
3. Provide a common thread
4. Enables decision making in conditions where
i. Partial ignorance (Ansoff)
ii. Risk is inevitable (Drucker)
5. Basis for strategic control
6. Improves stakeholders perception
Problems with rational model: (M intzberg criticizes it)

1. Organizations are incapable of having objectives because
i. Objectives may conflict with each other.
ii. Objectives will change from time to time
iii. Objectives are unlikely to be directly related to economic benefits of shareholders.

2. Senior management should not be only strategy - setter.
3. In reality formulation is not a simple step by step process.
4. Strategies that firms follow are not the same as ones they set in plans.
5. Over reliance on formalization.
6. Predetermination
7. Failure in practice (suitable for only stable environment)
8. Hinders innovation and radical change.
Other models of(making strategy) Strategic Management
Mintzbergs emergent strategy model: (Considers random shocks)

It is unlikely that a firms environment is totally predictable.
Emergent strategy is a non-conscious strategy arising from patterns of behavior.
Strategic M anagement is to control and shape/craft these emergent strategies as they arise.
Intended Deliberat e
Strategies Strategies
Realized
Unrealized
Strategies
Strategies
Patterns of Unexpect ed Emergent

behavior Contingencies Strategies
Activities affecting Crafting Strategy:

Manage stability
o Implement, not just plan
o Obsession to change is dysfunctional; know when to change
Manage patterns
o Detect patterns and help them shape; grow positives and eliminate negatives.
Know the business operations
Detect discontinuing and significance of environmental changes.
Crafting strategy---- requires natural synthesis of past, present and future. (reconcile change and continuity)
Mintzbergs 8 styles of strategic management:

1. Planned strategies (imposed by central leadership, large no. of controls, precise intentions)
2. Imposed strategies (imposed by environment e.g. influential customers)
3. Ideological strategies (collective vision of organizations members, shared values)
4. Umbrella strategies (ends are defined, means are emergent, target based)
5. Disconnected strategies (members mind their own business, strategies are deliberate for sub-units but
emergent for organization)
6. Consensus strategies ( groups shares common patterns)
7. Entrepreneurial strategies (visioned from strong leadership)
8. Process strategies
Mintzbergs 5 ways to describe strategy:

1. Plan - consciously intended course of action
2. Ploy - a competitive game (e.g discouraging competitors to enter)
3. Pattern - ideas of emergent strategies
4. Position - environmentally fit & relationship with other organisations
5. Perspectives - approach towards world
Strategy and managerial intent: (Johnson and Scholes) not emergent
The Command view:

Strategy develops through the direction of an individual or group, but not necessarily through formal
planning.
Control of strategy direction is possessed by autocratic or charismatic leader.
Paradigm and Politics:

Paradigm (basic assumption and beliefs common in organizations decision makers) is inhabitant and
conservative than culture.
Politics is process of bargaining and negotiation of strategy among powerful stakeholders.
Process by which Paradigm and Politics influence process of strategy development.
o Issue awareness (by internal results, customer response or environmental change)
o Issue formulation (analysis of issue to get its root)
o Solution development
Summary:
Memory search (from past experience)
a) Managers do not take best
Passive search (time will tell)
decisions but satisfactory
o Solution selection
ones.
Eliminate unacceptable plans (politics)
b) Managers do not pursue the
Endorsement to junior management
whole rational model but take
Incrementalism: small-scale decisions.
Bounded Rationality Theory: (Herbert Simon)

Mangers are limited by time, information and skills.
They satisfice rather than maximize.
Incrementalism: (Lindblom)
It involves small-scale extension of past practices.
Organizations change incrementally, during which time, strategies form gradually.
Disadvantages of Incrementalism:
1. Not suitable where radical new approaches are needed.
2. Some changes are dramatic not incremental.
3. Ignores influence of corporate culture.
4. Applicable to stable environment only.
Logical Incrementalism: (mid way)

Managers have a vague notion as to where the organization should go, but strategies should be tested in small steps
because of uncertainty about future.
Knowledge as a source tacit knowledge
Learning based strategy:
Knowledge creation explicit knowledge
Strategy development is a learning process.

Learning organization will generate a flow of fresh ideas and insights, This will promote renewal and prevent
stagnation.
Learning organization is one which is skilled at creating, acquiring, and transferring knowledge, and at modifying
its behavior to reflect new knowledge and insights.
Double loop learning is where purpose is also reviewed. (derived from control theory)
Future will change incrementally
Future Orientation: (Hamel and Prahalad)
Future will be radically different
Future is not just something that happens to organization.

Organizations can create the future.
They offered a diagnostic to indicate how future oriented an organization is.
Diagnostic:
Diagnostic statement Protect the past Create the future
Senior management, view about future Reactive Distinctive
Senior management, spending most time on Re-engineering current practices Regenerating core strategies
Are managers Engineers of present Architect of future
Are employees.. Anxious Hopeful
The company is better at Operational efficiency Building new businesses
Within the industry, the company Follows the rules Makes the rules
Competitive advantage is pursued by Catching up with competitors Creating new sources of
competitive advantage
Agenda for change is set by Competitors Vision of future
How to cope with future:

- Simply more far-sightedness
- Imaging products and services that do not exist.
- Spend less time in positioning in competitive environment
- Future orientation is embodied in the corporate culture.
Environmental Fit: (Hofer and Schendel)
Strategy is a mediating force between organization and environment.

Fit or Suitability means Organizations are successful when they intentionally achieve internal harmony and
external adaptation.
Strategic logic requires that strategy must:
o Be consistent with objectives
o Match organizations capabilities with environment.
Survival and growth are process of adoptation :

Why : because environment gives physical resources and financial resources
Hence : choice of strategy must follow a strategic logic.
Ecology Model:
Organisations environment changes radically, it will only survivor if it adopts its environment and evolves i.e finding
niche areas which provide both demands for output and resources to be used as input to the system.
Pattern and Competencies: (Andrew)

Corporate strategy is the pattern of management decisions in a company
o That determines and reveals its objectives, purposes or goals,
o That produces the principal policies and plans to achieve those goals,
o Defines the range of business, and
o Kind of human and economic organization it is or intends to be.
Strategy is exploitation of competencies.
o The distinctive competence is what it does well, uniquely or better than rivals. It comes through
Experience
Quality of co-ordination
Talents and potentials of individuals
Strategic Thinking: (Kenichi & Ohmae)

Strategy is a creating process
Success business strategies result not from rigorous analysis but from a particular state of mind.
Aspects of strategic thinking
o Flexible thinking (what if ?questions)
o Keeping details in perspective (specially uncertain)
o Focus on key factors and distinctive competences)
How strategic thinking operates
o Ask right question
o Find solution of problem, not remedy or symptom.
o Observe the problem
o Group problems together (e.g. by brainstorming) to see key factors.
Competition: (Ohmae & Porter)
Competitive strategy is the taking of offensive or defensive actions to create a defendable position within an
industry------ and a superior return on investment.
Successful strategy is the interplay of 3 Cs (strategic triangle)

1. Competitor
2. Customer
3. Company
3 assumptions of theory: (focus: survival in competitive environment)

1. Survival of business is impossible without a competitive strategy.
2. Actual strategy will be unique.
3. Marketplace is a battlefield.
Competitive strategy:
A strategy by which a firm can have significant ground on its competitors at an acceptable costs
Competitive Advantage:
- Re-adjust current resources i.e identify key success factors
- Relative superiority i.e exploiting competitors weakness
- Challenge assumptions
- Degree of freedom i.e segmenting
How to create sustainable strategic position:

- operational effectiveness
- doing unique things
- doing trade-off
- combining good individual activities
- making own choices i.e not blindly imitating competitors
Realised Strategies
Intended or planned strategies Emergent strategies
- Senior management decisions - not planned

- Imposed from top - not fore throught
- Well planned - not the result of management intentions
- Well thought-out - caused by pattern of behavior
- Time consuming
- Deliberately planned
Implicit & Explicit S trategies

(Depends upon extent to which strategies are
deliberate or emergent)
Implicit Only in head of chief executive
Explicit Properly documented
Flaws:
- Purely deliberate strategy p revents
learning from experience.
- A purely emergent strategy defies
control
Descriptive and Prescriptive Strategies
Descriptive : what is actually happening in the organisations i.e paradigm, politics, pattern of decisions, incremental approach
Prescriptive : to prescribe something i.e rational model, strategic thinking, learning based environment, resource based
model
Chapter # 6 : SWOT Analysis ad gap analysis

Corporate Appraisal
Corporate appraisal (where we are)
o Analyzing external environment

iv. SLEPT analysis
v. Porters 5 forces model
vi. Scenarios
o Analyzing internal environment (Situation analysis/Position audit)
i. Resources audit
ii. BCG and GEBS matrices
iii. Value chain analysis
iv. System structure
o SWOT Analysis
o Gap analysis
Corporate appraisal is assessment of SWOT in relation to internal (SW) and external (OT) factors affecting
organization to establish long term plans.
OT Analysis---Analyzing external broad environment:

Social factors
Legal factors
Economic factors
Political factors
Technical factors
What Social factors affect:

Changing values and lifestyle
Changing pattern of work and leisure
Demographic change
Why social factors are considered:
Stakeholders are members of society --assessment of their values and beliefs
Good (ethical) reputation
Avoid restrictive legislation
Change = opportunities
Legal factors:
o Health and safety legislation
o Employment laws
o Environmental legislation
o Information about performance.
Economic key forces affecting organizations:

Economic Growth
Interest Rates and Tax rates
Availability of Credit
Inflation Rates
Govt. fiscal policies (taxation, govt. spending, borrowing and repayment) and monetary policies (control of
money demand and supply through rates)
Foreign Exchange Rates
Foreign Trade Balances
Consumer income, debt and spending
Govt. Subsidy
Unemployment rate
International economic issues:
o Extent of protectionist measures
o Comparative rates of growth, inflation, wages and taxation
o The freedom of capital movement
o Exchange rates
o Economic agreements
Exchange rate is the rate at which a national currency exchanges for other national currency.
Determinants are:
Demand and supply of currencies in foreign exchange market (Floating exchange rate)
Govt. (Fixed exchange rate)
Synthesis of above two (Managed exchange rate)
Types are:
Spot exchange rate (rate set for immediate delivery of a currency)
Forward exchange rate (rate set for future exchange of a currency)
Closing rate (Spot exchange rate at Balance Sheet date)
Political factors:
Type of Govt.
Stability of Govt.
Govt. attitude i.e. privatization or nationalization
Amount of bureaucracy
Pricing, dividend, tax, employment issues
Political risk is the risk that political factors will affect an organization e.g. war, corruption, nationalization, political
instability.
Jeannet and Hennessry developed a checklist to assess political risk:

1. How stable is Political system.
2. How long will govt. remain in power.
3. How strong is govt.s commitment to specific rules of game.
4. If present govt. is succeeded, how specific rules of games would change.
5. What would be the effect of change in specific rules of game.
6. In light of these effects, what decisions and actions should be taken now?
Technological factors:
o Change in production techniques
o Invention and innovation
OT Analysis ---Analyzing external specific and direct environment:
(Porters 5 forces model)
i) When costumers have powers:

Small number of cus tomers
T hey make high volume purchases
Products t hey are buy ing are undifferent iat ed
Alt ernat ive sources of supply are available (subs t it ut e or sw it ching)
ii) When Suppliers Have Power:

Small number of supp liers
Few subst itut es exist
Supp liers are not dep endent on t he buy er for a lot of t heir s ales
Supp liers have different iat ed t heir products
It is cost ly t o swit ch suppliers
iii) When Rivalry Among Existing Competitors Is Intense:

Slow industry growt h
High fixed costs (p lant s, machinery , out lets)
Undifferent iat ed products
A large number of comp et itors
High exit barriers (w hat y ou lose if y ou leave t he bus iness)
Small changes in market share have a big p ay -off
iv) Barriers That Block New Entrants

Economies of scale
Large cap it al requirements
Product different iat ion
High swit ching cost
Limit ed access to dist ribut ion channels
Some government policies and regulat ions
Other advant ages t hat are hard to dup licat e such as pat ents , great locat ions, subsidies, p artnerships, et c.
Hist ory of aggressive ret aliat ion t oward new entrant s
v) Indirect Competitors/Substitutes
Close subst it ut es place a ceiling on t he p rice t hat can be charged for a p roduct or service
Close subst it ut es also set indirect performance comp arisons
M ain p roduct is sens it ive t o price of s ubst it ut e.
Responding to the Organization/Marketing environment:

Companies can passively take environment as uncontrollable and they must adapt to.
Companies can take environmental management perspective i.e. actively working to change the
environment.
Wherever possible, companies should try to be proactive rather than reactive.
Strategic Intelligence:
Strategic Intelligence is the knowledge of business environment, which enables an organization to anticipate changes
and design appropriate strategies that will create business value for customers and profit for co.
Process of creating strategic intelligence:

Sensing (Identify appropriate external indications of change)
Collecting (Gather information in ways that ensure it is relevant and meaningful)
Organizing (Structure the information in the right format)
Processing (Analyze information for implication)
Communicating (Package and simplify information for users)
Using (Apply strategic intelligence)
Sources for strategic intelligence = Sources of information
S W Analysis ---Analyzing internal environment:
Internal analysis consists of:

Resources Audit
BCG Matrix
GEBS matrix
Value Chain analysis
Core Competence (critically underpins organizations competitive advantage)
Critical Success Factors (CSF are factors on which strategy is fundamentally dependent for its success.
Marketing Finance/Accounting Operation R&D HRM MIS

Is market and share Sufficient working Production capacity Adequate R&D Efficient Or Is IS updated
increasing? capital? facilities? experience regularly?
manpower
Segmented Can we raise capital Economies of scale Outsourcing is Recruitment and Contribution by all
effectively? or borrowings? cost effective? Training functional
managers?
Channel of Return on investment Inventory control Are R&D Communication Effective
distribution reliable & Cost of capital policies and resources allocated passwords for
and cost-effective? procedures, effectively? entry?
effective?
Conduct market Effective budgeting Is machinery Communication Labor relations User friendly IS?
research? process? technically updated? between R&S and
other units?
Product priced Accounting ratios, Is equipment in good Are present Turnover and Training provided?
appropriately? strong or weak? condition? products absenteeism
technologically
competitive?
Effective Quality control Under or over Continuous
promotion? policies and staffing? improvement?
procedures,
effective?
Brand strength How much
expensive?
Products Stocks
Product quality and brand reputation Sources of supply
Age and life of products Turnover periods
Price elasticity of demand Storage capacity
Margin and contribution Obsolescence and deterioration
Market share and growth
Miscellaneous concepts:
A Cruciform chart summarizes significant SWOT.

Critical Success Factors are those components of strategy in which organization must excel to outperform
competition.
Gap analysis (objects existing strategies = Gap) is a comparison between objectives and expected performance of
projects both planned and underway. E.g. Profit Gap (Target profit Forecast Profit)
Forecasting is the identification of factors and quantification of their effect on an entity as a basis for planning. It
includes judgment.
Projection an expected future trend pattern obtained by extrapolation. It includes quantitative factors.
Extrapolation is a technique of determining projection by statistical means.

Scenario Planning:
A scenario is an internally consistent view of what the future might turn out to be
An industry scenario is concerned with the future of industry.
Macro scenario uses macro economic or political factors, creating alternative ways of the future environment.
6 steps in planning scenarios:
1. Decide on the driver for change
i. Environmental analysis
ii. Important issues and degree of certainty (time horizon is 10 years)
2. Bring drivers together into a viable framework
3. Provide 7 to 9 mini scenarios.
4. Group mini scenarios into two or three larger scenarios containing all topics.
5. Write the scenario.
6. Identify issues arising.
Chapter 7 : Performance Appraisal & Analysis
Performance Appraisal
Measurement of Performance:
Measurement of Growth and effects of inflation: Costs:

1. Revenue - Fixed costs
2. Profits - Variable costs
3. Assets --------------------------------------
4. Cash Flow - Directly attributable costs
5. ROCE/ROI - Shared general overheads
6. Market share --------------------------------------
7. Number of employees - Controllable costs
8. Number of products - Uncontrollable costs
4 profit concepts to measure performance of divisions:

Contribution (sales variable cost)
Controllable profit ( sales - variable costs - Fixed cost controllable)
Controllable margin ( Controllable profit other costs directly traceable)
Net Profit/Margin ( Controllable margin allocated service center costs and general management overhead)
Value added is cost of material and bought in service.
Measuring performance of Profit Center:

1. ROI/ROCE
2. Residual Income (measure of centers profit after deducting notional or imputed interest cost)
Benchmarking: (adoption of best practices)

Benchmarking is establishment of targets and comparators (through data gathering) through which relative levels of
performance can be identified.
Types of Benchmarking:
Internal Benchmarking comparing one operating unit with another within same industry.
Functional Benchmarking internal functions compared with best external regardless of industry.
Competitive Benchmarking information about direct competitors is gathered through techniques e.g. reverse
engineering.
Strategic Benchmarking aimed at strategic action and organizational change.
Levels of Benchmarking:
1. Resources through resources audit
2. Competences in separate activities through analyzing activities
3. Competences in linked activities through analyzing overall performances.
Inflation:
- Effect of inflation on accounting system
- Effect of inflation on strategy in reference to operating in competitive market and exporting goods
overseas
Performance measurement and inflation:

i) Fixed asset values & depreciation historical costing problem
ii) Cost of sales and inflation increased profits but low stock turnover
(overstated profits)
iii) Need for working capital
iv) Borrowing benefits in period of inflation real value of loan decreases over times
v) Comparability of financial figures figures are ditorted
vi) Ratios for control ratios will be unaffected, as both side of balance
sheet will be inflated
Chapter 8 : Mission Goals and Objectives
Analyzing Vision, Mission and Objectives
Hierarchy
Vision--------M ission----------Goals (objectives and aims) at 3 levels----------strategy at 3 levels
Vision:
Where the organization wants to be
Advantages of vision:
- gives general directions to organisation
- gives hope and motivation
- establishes scope and boundaries
- enables flexibility in choice
Problems with vision

It ignores real, practical problems
It can degenerate into wishful thinking
Strategic intent:
Vision with an emotional core to energize and stretch
- similar to vision
- stretch current competencies
- gives sense of direction
- gives coherence to plans
Mission Statement:
This is a statement purpose of existence-What it wants to accomplish in the larger environment.
Mission statement includes Purpose, Competence, Strategic Scope, Product, Targeted customers, and Values of
various stakeholders.
It should be market oriented, specific, realistic, motivating and consistent with market environment.
e.g. To provide best satisfaction to customers and fair return on investment, keeping environment healthy and clean
and promising secure future to employees.
Place of mission statement:

- Annual reports
- Publicity materials
- In chairmans office
- Communal work area
Elements of mission statement:

- Purpose ( e.g creating wealth, satisfy shareholders)
- Strategy ( e.g logic, product, service)
- Scope
- Politics & behaviors
- Values & culture (e.g commitment)
Characteristics of mission statement:

- Bravity
- Flexibility
- Distinctiveness
Problems with mission statement:

- Ignorance in practice
- Only for public showment and not for internal decision making
- Only rationalising existence of organisation
- Wish list, full of generalisations
Functions/Importance of mission
1. Employee motivation
2. Contributes to profitability
3. Focus for strategic decision making
4. Replaces national or divisional subculture with a corporate culture
5. Communicates nature of organization to insiders and outsiders
Problems with mission = Problems with Rational model of Strategic Management
Goals:
Goals could be
Objectives (quantifiable)
Aims
A goal must be SMART.
Goals
S Specific
M Measurable Operational goals Non-operational goals
A Attainable
R result-oriented Measurable not measurable
T time-bounded
3 levels of goals/objectives and strategy:

Corporate level
SBU level
Operational level
Corporate level objectives: (trade off between objectives)

1. Profit (Accounting Profit = Economic Profit = Sale price Explicit Cost Implicit Cost i.e. Opportunity
Cost)
2. Market share and growth Objectives
3. Cash flow
4. Customer satisfaction Primary Secondary
5. Quality of product
6. Industrial relations Long-term Short-term
7. ROCE
8. EPS
Unit Objectives:
Commercial sector
Increase number of customer by 15% (sales department)
Decrease number of rejects by 50% (production department)
Public sector
To provide cheaper, subsidized bus traveling (local transport department)
Responding more quickly to calls (police, fire station, hospital)
Types of Goals:
1. System Goals [Derived from organizations existence]
2. Ideological Goals [Focus on organizations mission]
3. Formal Goals [Imposed goals; e.g. from Shareholders]
4. Shared Personal Goals [Consensus b/w individual and collective goals]
System goals (subverting Mission)

Survival
Efficiency
Control
Growth
Dealing with goal conflict (inter departmental):

Rational evaluation (financial criteria)
Satisficing (not aiming to maximize profit)
Bargaining (b/w different goals of managers)
Sequential attention (one by one)
Priority setting
Goal Congruence State of individuals to take actions which are in their own interest and also in
best interest of organization.
Trade off between objectives: [One at expense of other.]
Primary and secondary objectives: [Based on importance.]
Stakeholders
Stakeholders are Groups or Individuals whose interests are directly affected by activities of a firm or organization.
Stakeholder Objectives
Shareholders To maximize wealth
Increased by (dividend, capital gain of shares, EPS, ROCE)
Measured by (increase in Retained earnings, Market Value listed or non-listed)
Lenders Timely repayment of interest and principal
Trade creditors Timely payment
High prices
Continuing profitable relations
Employees High wages
Job security
Job satisfaction
Retailers and Continued supply
customers Quality products
Management Maximize own reward
Training and career development
Society SHE Issues
Level of employment
Govt. Taxes
Legislation compliance
2 approaches to stakeholders:
1. Strong view (To balance all stakeholders is important)
2. Weak view (Primary objective is profit, stakeholders are satisfied indirectly)
Stakeholders mapping: (Mendelow)

High Interest Low Interest
High Key Players Pessimist
Power Strategy must be acceptable for them Should be kept satisfied.
E.g. major customer E.g. large institutional stakeholders
Low Influence powerful stakeholders Negligible
Power Should be kept informed
E.g. Community representatives/Charities
Organizations Culture
Culture/Organizations Culture:
Culture is sum total of belief, knowledge, attitudes, norms, customs, values and peculiarities that prevail in a society/
an organization.
Influences on organizations culture:

Organizations founder
Organizations history
Leadership and management style
Structures and Systems
Levels of Culture:
There are 3 levels of culture in an organization:
1. Basic, underlying assumptions (guide the behavior of individuals and groups in organization)
2. Overt beliefs (expressed by organization and its members)
3. Visible artifacts (e.g. style of offices, display of trophies etc.)
Some Important concepts:
Belief is what we feel to be the case on the basis of objective and subjective information.
Values are beliefs which are relatively general and widely accepted as culturally appropriate behavior.
Customs is culturally accepted behavior in response to given situation.
Artifacts are physical tools designed by human beings for their physical and psychological well being including works
of arts and technology.
Rituals are activities which take on symbolic meanings.
Ethics is a set of moral principles to guide behavior.
McKinseys 7-S model

Explains relationship of different aspects of business: [Link b/w organizational & individual behavior]
3 Hard elements: [Formal Aspects]

1. Structure (division of tasks and hierarchy of authority)
2. System (technical system e.g. Accounting, HRM, MIS)
3. Strategy (org plans, tackling competitors, achieving objectives)
4 Soft elements: [Informal Aspects]

4. Shared values
5. Staff (own concerns and priorities)
6. Style (ways of working, attitude of management)
7. Skills
French and Bells iceberg:

Overt formal aspects (= 3 hard S)
i. Goals
ii. Structure
iii. Policies and procedures
iv. Products
v. Financial resources
Covert informal aspects ( = 4 soft S)
i. Attitude, belief, feelings, perception
ii. Value
iii. Informal interactions
iv. Group norms
Theories on Culture
Harrison and Handys Work: (gods of management)
There are 4 types of culture in organizations:
i) Power Culture (Zeus)

All decisions are centered on one person i.e. founder of business
For small entrepreneurial companies
ii) Task Culture (Athena)

No dominant leader
Principal concern is to get the job done
iii) Role Culture (Apollo)

Organization has formal structure and well established rules and procedures
People do their jobs as specified in their contracts
For large organizations where work is predictable
iv) Person/Existential Culture: (Dionysus)

Organizations purpose is to serve interest of individuals within it.
Miles and Snows Work: (models of strategic culture)

There are 4 approaches to strategy in organizational culture.
1. Defenders (doing things right)

Low risk, low profits
Secured niche market e.g. accountants, engineers etc
Tried and trusted solution
2. Prospectors (doing the right thing)

High risk, high profits
Move into new ways e.g. designers
Take initiatives
3. Analysers
Balance risk and profit
Using core stable products & markets e.g. managers
Follow the change, do not initiate change
4. Reactors
Do not have viable strategy
Denisions model:
Strategic orientation of firm towards environment

Focus on internal Focus on external
Stable environment Consistency Culture Mission Culture
Formal ways of behavior, predictability and Customer oriented. (hospital, church)
reliability(bureaucratic)
Changing Involvement Culture (satisfied employees give Adaptability Culture ( fashion co.)
environment performance e.g. Orchestra) Focus on external environment which is
changing.
Deal and Kennedys work: (Association of culture & risk)

Culture is function of willingness of employees to take risk and Their feedback
Slow feedback Fast feedback

High risk Bet your company Culture Hard Macho Culture
Slow and steady wins the race Find a mountain and climb it
Long decision cycles Entertainment,
Stamina required Advertisement, Consultancy
Oil company, Aircraft company, Architects
Low risk Process Culture Work hard/Play hard culture
It is not what you do, it is the way you do Find a need and fill it
Attention to excellence of technical detail. All action and fun
Risk management Team spirit
Procedures and Status symbol Computer companies
Banks, Financial services, Government
Peter and Watermans Excellence Culture:

Dominance and coherence of culture was an essential feature of excellent companies.
Employees are loyal and make efforts if:
Cause is great.
They are treated as winners.
They can satisfy dual needs of team and own interest.
Key attributes of excellence

1. Autonomy and Entrepreneurship
2. Bias for action
3. Customer orientation
4. Stick to core activities
5. Simple organizational structure
6. Simultaneous loose-tight properties (competition between individuals and group within organization)
Pumpins dynamic company (Cultural characteristics of dynamic companies)

Dynamic company is one that considerably increases the benefits for its stakeholders within a relatively short time
4 aspects of such a culture

Speed
Productivity
Expansion
Risk taking
Weak areas in a dynamic company

Customer service
Innovation
Technology
Attitude to workforce
Company spirit and loyalty
Strategic Excellence Position: (similar to excellence)

SEP will fall into 3 fields:
1. Product related
2. Market related
3. Functional
SEP can be developed only if culture supports it.
Chapter 9 : Mergers and Acquisitions

Take Overs:
Purchase by a company of a controlling interest in the voting share capital of another company
Mergers:
Merger is a business combination that results in the creation of a new reporting entity formed from the combining
parties (Mutual sharing of risks and benefits)
Reasons for Mergers/Take Overs:

1. Synergy (1+1=11)
2. Eliminating competition
3. Entry in new market
4. Spread risk (diversification)
5. Acquisition is cheaper than internal expansion
6. Assets backing
7. Management acquisition
8. Operating economies (by eliminating duplicate and competing facilities)
9. Improvement of liquidity and finance-raising ability
Deciding factors in a takeover decision:

1. Cost
2. Value
a. Earning basis
b. Assets basis
c. Prospects for sale and growth basis
d. Saving brought and additional expenditure basis
3. Will it be desirable for shareholders and stock market
4. What will be form of purchase consideration
a. Cash (borrowed)
b. Equity shares
c. Debentures
d. Convertible Loan Stock
5. How takeover would be reflected in published accounts
Risks for shareholders of acquiring company in takeover:

1. Decrease in EPS of own company
2. Decrease in Share Price of own company
3. Decrease in Assets backing per share (decrease in net assets)
4. Entry in risky industry
When takeover resisted by Target Company:

Unwilling to sell
Under bidding
Unattractive after tax value
Terms are poor
Opposed by employees
Founder appeals loyalty of shareholders
Counter steps by Target Company:

1. Issuing a forecast of attractive future profits and dividends.
2. Launching advertising campaign against the takeover bid.
3. Finding a White Knight, i.e. a company which will make a welcome takeover bid.
4. Making a counter bid for the predator company.
5. Arranging a management buyout
6. Introducing a Poison-Pill , i.e. anti takeover advice
Tactics by Acquiring company:

Persuading dissatisfied shareholders
High prices
Payment Methods
- Cash Purchase
- Share exchange
- Use of convertible loan stock
- Earn out arrangements
Methods are affected by

- Availability of cash
- Desired level of gearing
- Changes in control
- Changes in structure
Choice of Cash or Paper offer or Both for payment depends on view of parties:
Acquiring company and its shareholders:

If purchase consideration is in equity shares, EPS might fall.
If purchase consideration is in debentures (or cash borrowed elsewhere), it will be cheaper because Interest
will be allowable for tax purposes and earnings will not be diluted.
Issue of additional loan stock will be unacceptable for parties if company is highly geared.
Issuance of large new shares will significantly change controlling structure.
Payment in shares preserves cash available.
Company might have to increase authorized share capital or borrowing limits.
Target Company:
If Cash is received, tax on capital gain will become payable immediately.
If other consideration is received, it is to be ensured that
o Existing income is at least maintained, and
o Shares retain their value.
If shareholders want to have stake in business, they will prefer shares.
Mezzanine Finance: (by biding company; to pay for shares)

Lies between equity and debt finance.
It is short to medium term, unsecured, high rate of return loan
It has option to exchange loan for share after takeover.
It is also used in MBO.
Earn-out arrangement:
When consideration is payable upon the target company reaching certain performance targets.
EPS before and after a takeover:

Share purchased at higher P/E ratio will give fall in EPS, and vice versa.
Company may accept dilution of earnings on acquisition if:
There is increase in net assets backing.(from a company having more assets and less earnings)
Quality of earnings is superior.
Post acquisition integration: (Druckers 5 golden rules)

1. There must be common core of unity.
2. Acquirer must ask, What is in for us and What we can offer
3. Acquirer must treat product, market and customers of acquired company with respect.
4. Acquirer must provide top management with relevant skills within one year.
5. Cross company promotions should occur within one year.
5 steps of Integration sequence: (C S Jones)

1. Decide and communicate initial reporting relationships
2. Achieve rapid control of key factors which will require access to right, accurate information
3. Human and physical Resource audit to get a clear picture
4. Redefine corporate objectives and to develop strategic plans
5. Revise the organizational structure
Failure of mergers and takeovers:

1. Strategic plan fails to produce expected benefits
2. Over optimism about future market conditions
3. Poor integration management
4. Cultural differences
5. Little or no post acquisition planning

6. Lack of knowledge of target company or industry
7. Little or no experience of acquisition.
Impact of mergers and takeovers on stakeholders:
On acquiring companys shareholders

EPS may fall especially in equity -financed bids and first time players
Cost of mergers exceeds gains.
On target companys share holders
Greatest benefit through significant premium over market price.
Acquiring company management
Increased status and influence
Increased salary and benefits
Target company management
Key personnel will be kept others will be fired
Other employees
Economies of scale will be achieved by loss of job and eliminating duplication of services.
Financial institution
Outright winners
The more complex, longer and problematic the deal is, the greater their fee income regardless of result.
Joint Ventures
Joint ventures: (1st step of acquisition)

It is an arrangement where two or more firms join forces for manufacturing, financial and marketing purposes and
each has a share in both equity and management of business
Advantages:
Joint contribution of
o Production technology
o Corporate expertise
o Market knowledge
Access to foreign markets
Eliminating competition
Cheaper than internal expansion
Spread risk
Suitable for smaller companies
Problems:
Conflict of interests
Where profits will go (in resident company or shareholders of foreign company)
Local partners may wish to export to other countries where foreigner is already supplying.
Transfer pricing issues (on transfer of expertise, technology and components)
Cultural differences e.g.
Equal employment opportunity
Commercial practices
Short term and long term planning
Lack of smooth coordination, control and decision making
Who will lead
Who is responsible
Confidentiality issues
Strategic Alliances
Strategic Alliance:
When two or more firms agree to work together to exploit common advantages
e.g. alliance between national airlines to cross-book passengers.
Licenses
Licenses are very similar to Franchising in their financial aspects, however degree of central control and support is
usually less.
Franchising
This gives limited right to franchisee (e.g. in a geographical area) to exploit patent product or production process,
brands, manufacturing know how and/or technical advice and assistance. e.g. KFC, McDonald
Mechanism:
Franchiser grants permission.
Franchisee pays for permission and assistance.
Franchisee is responsible for day to day running of franchise.
Franchiser may impose Quality Control M easures to ensure that goodwill is not damaged.
Franchisee supplies capital, personal involvement and local market knowledge.
Benefits to Franchiser:
Rapid expansion (franchisee provides capital).
Local knowledge.
Economies of scale.
Problems to Franchiser:
Limited control over quality.
Conflicts of interest.
Franchisee may become competitor.
Key Financial management decisions:
Investment Financing Dividend

Selection of products and markets Target debt/equity mix Capital growth or
Strategic Required level of profitability high dividend payout
Fundamental fixed assets
Tactical Efficient and effective use of Lease Vs. Buy Scrip or cash
resources dividend
Pricing
Operational Working capital management Working capital ------
management
Chapter 10 : Corporate Reorganisation
De fe nsive Strate gie s
Capital Restructuring Scheme

A capital reconstruction scheme is a scheme whereby a company reorganizes its capital structure.
Procedure of designing a capital restructuring scheme:

1. Calculate what each partys position would be in a liquidation
2. Assess possible sources of finance
3. Design the reconstruction
4. Assess each partys position as a result of the reconstruction
5. Check that the company is financially viable.
Exit strategies for a venture capitalist:

1. Sale of shares to public or institutional investors following a flotation
2. Sale of shares to another company
3. Sale to company itself or its owners
4. Sale to institution management
Downs izing
Divestment- (selling of business)

Divestment is a proportional or complete reduction in ownership stake of an organization e.g.
Demerger
Sell off
Liquidation
Spin off
Management Buy Out (MBO)
Privatization
Reasons for Divestment:

To concentrate on a particular part of business
Selling a loss making unit
Liquidity problems
Selling a subsidiary with high risk
Selling a subsidiary at profits
Provide an exit route for investors
Remove value gaps to avoid takeover
Demerger is splitting up of a corporate body into two or more separate and independent bodies.
Sell off is a form of divestment involving the sale of a part of a company to third party usually another company.
Liquidation is extreme form of liquidation where the entire business is sold and funds are distributed to shareholders in
their proportion.
Management Buy Out. (MBO) management buyout is the purchase of all or part of a business from its owners by its
managers.
Management Buy Out.(MBI) where purchase of a business is made by group of managers from outside the business.
Spin Off : a new company is created whose shares are owned by the shareholders of the original company which is
making the distribution of assets.
Management Buy Out:
Possible reasons for MBO:

All reasons of Divestment
Best offer from management
Sale can be arranged quickly
Group can still maintain relations
Success factors of MBOs: (Advantages)

Favorable buyout price
Personal motivation and determination
Quicker decision making and more flexibility
Saving in overheads
Healthy relationship with subsidiary
Questions in evaluating MBOs for investment:

Does management has full range of skills?
Why is the company for sale?
Projected benefits and cash flows?
What is being bought?
Price?
Fund availability?
Exit routes?
Problems faced by MBOs: (Disadvantages)

Little experience of financial management
Tax and other legal complications
Changing the attitude of employees
Deciding the bid price
Cash for maintenance of fixed assets
Change in HR (loss of key employees)
Maintenance of relations with suppliers/customers
Going Private
A public company goes Private when a small group of individuals buys all of the companys shares (possibly
including existing shareholders)
Advantages:
Cost saving (cost of meeting statutory requirements are saved)
Limited number of members
Similar objectives of shareholders
Shareholders are close to management
Protection against volatility in share price
Disadvantages:
No trading of shares on stock exchange
Loss of repute
Loss of some value of share
Disadvantages of De-Merger
Loosing economies of scale
Lower turnover
Higher overhead cost
Less ability to raise finance
Chapter # 11 : Ethics and Social Responsibility

Ethics
Ethics:
Ethics is a set of moral principles to guide behavior. It concerns with what is right and what is wrong.
Individual Organisation
Levels of
Practicing ethics Personal ethics professional ethics Org. culture Org. System
Ethical problems faced by organization:

While achieving a higher ROI, an organization faces following problems:
SHE Issues (Safety, Health, Environment)
Extra payments to govt. officials
Extortion (when officials threaten company with complete closure)
Bribery (where organization is not entitled to services)
Grease money ( where organization is entitled but unable to receive services)
Gifts
Honesty in advertisement (e.g M arketing ethics)
Competitive behavior (e.g putting others to competitive disadvantage)
Ethical systems in an organization:

Personal ethics (e.g religious, political, personality ethics)
Professional ethics (e.g CA code of ethics, medical ethics, fit and proper criteria)
Organization culture (e.g. customers first)
Organization system (ethics must be contained in formal code e.g part of ethical sys. and mission
statement)
2 approaches to manage ethics:
Compliance based approach aims to remain within letter of law by establishing system of audit and review so that
violations are prevented, detected and punished. It works from outside the system.
Integrity based approach combines a concern for the law with an emphasis on managerial responsibility. This
approach incorporates ethics in organizations culture in which managers will do the right thing e.g shared
accountability, sound behavior, defining values. It works from within the system
Whistle blowing:
It is the disclosure by an employee of illegal, immoral or illegitimate practices on part of the organization.
Four types of ethical leaderships in organisations:

i) Creative :- reflecting founder, such leaders create ethical style.
ii) Protective :- they sustain value of customer services
iii) Integrative :- aim through consensus through people
iv) Adaptive :- changing culture as per new environment
Social Responsibility
Objectives of a company:
Economic objectives
Social/Ethical objectives
Boundaries (Imposed rules; they restrict managements freedom of action)
Responsibilities (Voluntarily undertaken obligations e.g. charities)
Social/Ethical objectives of a company:

SHE Issues (e.g minimum wages, job security)
Good employer (e.g good working environment, job satisfaction)
Good Public image (e.g good quality products)
Society well being (e.g regular order and timely payments to suppliers)
Pollution
Financial assistance (e.g. Charity, Sports)
(For other objectives see Stakeholders objectives)
Arguments against and favoring Social Responsibility recognition:

Social responsibility is expected from all types of organizations.
AGAINST:
Organizations should concern wealth only because
Shareholders own assets.
Shareholders are part of society.
Taxes on revenues are given to build society.
Businesses exist for profit.
FAVOUR: (by M intzberg)

Most shareholders are passive.
Ultimately consumer pays taxes via higher prices.
Govt. support
Firms produces 2 outputs:
Goods and services
Social consequences of activities e.g. Pollution
Responsibility recognition (e.g. charity) improves:
Public relations.
Business success and development as part of society.
Decisions by organization affects society
Externality is a social/environmental cost of organizations activities not borne by organization.
Boundary Management:
- Good public image - securing political environment

- Protect environment from pollution - improving quality of life
- Good employer - protecting minorities
- Welfare of local community
Compliance Based Approach Integrity Based Approach
e.g - Audit e.g - Internal commitment

- Review - Guiding values
- Questioning - Pattern of thoughts
- System for employees - Share accountability (managers)
- Disciplinary procedures (lawyers)
Chapter 12 : Corporate Governance

Corporate Governance is the system by which companies are directed and controlled.
Patterns of share ownership: (Who are shareholders of company)

Types of institutional investors:
Pension funds
Insurance companies
Investment trusts
Unit trust
Venture capital organizations
Range of shareholders:
Advantages:
Greater activity in firms shares
No individual controlling whole firm
Less effect on share price if anyone sells
No threat of takeover
Disadvantages:
Administrative cost is high.
Various objectives in holding shares.
Why knowing shareholders:

To get support by exchanging views.
Knowledge of shareholders preference about Dividend Policy.
To explain recent share price movement.
Shareholders attitude to risk and gearing.
Key shareholders to consult in the event of takeover bid.
Agency Theory:
Although individual members of the business team act in their own self-interest, the well being of each individual
depends on the well being of other team members and on performance of the team in competition with ot her teams
Assumptions of theory:
Behavioral
Individual welfare maximization.
Individual rationality.
Individuals are risk-averse.
Structural
Investments are not infinitely divisible.
Individuals vary in their access to funds and their entrepreneurial ability.
Agency Problem:
Arises from separation of ownership from management.
Goal Congruence: (solution for agency problem)

It is accordance between objectives of agents (acting within organization) and objectives of organization as a whole.
Via (e.g.)
Profits related pay e.g. bonuses, commission, incentive etc.
Rewarding managers with shares
Executives Share Option Plans
Non-executive directors are directors not running the day to day operations of the company.
Chapter 13 : Human Resource Management

Human Resource Management-Introduction
Human Resources Management is concerned with people at work and their relationship as they arise in working
environment.
Roles/S cope of HR Manager:
Staffing:
Job Analysis
HR Planning
Recruitment
Selection
Retirement, Resignation, Redundancy
HR Development:
Performance Appraisal
Career Planning
Training
Development
Motivation/ (Individuals):
Job Analysis and Design
Pay and Promotion
Leadership and Groups:

Creating effective teams
Managing conflicts between teams
Other Aspects:
Health and Safety
Workforce diversity (Equal Employment Opportunity)
Maternity
Compliance with legal and other standards
Personnel record and Information System
Necessity of separate HR Department depends on Size and Activities of organization.
Objectives of HRM:
Cooperative Relationships
Development of motivated employees
Effective response to change
Fulfilling social and legal requirements
Advantages of HRM:
Decrease in Staff Turnover
Increase in Productivity
Increase in Group learning
Increase in initiative
Decrease Absenteeism
Lesser conflicts
Increase quality
Increased co-operation
Increased commitment
HRM Theories
Scientific management [Clearly defined principals]
Human Relation [Fulfillment of needs]
Rational [Division of authority]
Contingency theory [Change according to situation]
4 Roles/Areas of HR Planning: (by Tyson as per new strategic viewpoint)

To represent organizations central value system
To maintain boundaries of organization

To provide stability and continuity
To adapt the organization to change
Views of HRM:
Traditional Odd Job view New Strategic Viewpoint

It is a collection of incidental techniques without much
internal cohesion (Drucker)
Manager was partly a Clerk, housekeeper, social worker
and fire fighter.
It dealt mainly with Hiring and Firing. It is concerned about Organization, Motivation,
Employees relations and service.
Reactive and defensive role Proactive and constructive role
Employees Consent was obtained. Employees Commitment is obtained.
HR Planning
Human Resource Planning:

HR Planning is forecasting demand of human resources, forecasting its supply and closing gap between demand and
supply
It considers When employees needed. How many employees needed. So basically HR Plan deals with recruitment,
retention, downsizing & training of workforce.
Process of Human Resource Planning

1. Strategic Analysis (of)
a. Environment
b. Organizations objectives
c. Manpowers SWOT
2. Job Analysis
a. Job description
b. Job specification
c. Employee specification
3. Forecasting of
a. Internal Demand and Supply
b. External Supply
4. Implementation
a. HR Plan
Job Analysis
The process of collecting, analyzing & setting out information about the contents of job in order to provide basis for job
description and data for recruitment, training, job evaluation & performance management.
Systematic way to gather and analyze information about the
Content
Context
Human requirements of the job.
Type of information needed

Purpose of the job
Content of the job
Relations to other job
Performance criteria
Responsibility
Accountabilities
Organizational factors
Development factors
Environmental factors
Job analysis results in:

Job description
Job specification
Employee specification
Job Description
A written statement of duties, responsibilities and tasks of job.
It should be written in outputs and performance levels.
Purpose of Job description:

Organizational--------- Defines jobs place in organizational structure (job evaluation).
Recruitment------------ Provides person specification
Legal-------------------- Provides basis for contract of employment
Performance----------- Performance objectives can be set.
Contents of Job description:

A job description should be a formal, written document, usually from one to three pages long. It should include t he
following:
Date written.
Job Status (full-time or part-time; salary or wage).
Position title.
Job summary (a synopsis of the job responsibilities).
Detailed list of duties and responsibilities.
Supervision received (to whom the jobholder reports).
Supervision exercised, if any (who reports to this employee).
Principal contacts (in and outside the organization).
Related meetings to be attended and reports to be filed.
Competency or position requirements.
Required education and experience.
Career mobility (position[s] for which job holder may qualify next).
Alternative to Job Description is Role Definition. (wider)
Job Specification
Minimum acceptable qualification (i.e. knowledge, skills, abilities, experience and other characteristics needed to do a
particular job.)
Person Specification
Identifies the type of person needed to do a particular job.
Following characteristics are assessed: (Frasers 5 point to assess pattern of personality)
1. Impact on other
2. Motivation
3. Acquired knowledge or qualification
4. Innate ability (initiative, innovative)
5. Adjustment and emotional balance
Competencies
Capacity of a person that leads to behavior that meets the job demands.
Intellectual Competence (Strategic, judgment, planning)
Interpersonal Competence (managing staff)
Adaptability (flexibility with change)
Results
Methods of Job Analysis:

Logos/Diaries
Interviews
Observations
Questionnaires
HR managers write job description & specification for review by managers
Managers identify performance standards based on job analysis information.
Forecasting Demand and Supply of manpower:
Demand is estimated from:

New markets
New product/service
New technology
Divestment
Organizational restructuring
Supply is estimated from:

Current workers Stocks and Flow analysis
External labor market
A Position Survey compares demand and supply. (Grade, skills, location etc)
Closing the gap between Demand and Supply- HR Plan: (along with subsidiary plans of HR Plan)
HR Plan is prepared on the basis of personnel requirements, productivity and cost.
Meeting Shortage of HR (Less supply More Demand)

Internal Promotions, Transfers (Redevelopment Plan) and Training (Training Plan) etc.
Reducing Labor turnover (Retention Plan)
Overtime (Productivity Plan)
External recruitment (Recruitment Plan)
Meeting Surplus of HR (Less Demand More supply)

Restricting recruitment
Part-time working
Redundancies (Redundancy Plan)
Recruitment(a part of HR plan)
Definition:
Recruitment is the process of generating a pool of qualified applicants for organizations job
Strategic Recruitment Decisions:

1. Organization based Vs. Outsourcing
2. Regular Vs. Contractual Vs. Leased
3. Internal Vs. External recruitment
4. EEO and Diversity issues
Systematic approach to recruitment and selection:

HR Planning
Job analysis
Identification whether employee is to be recruited from outside or promoted inside (from HR Plan)
Evaluation and use of Sources of Recruitment
Selection
Notification of result
Induction training
Sources of Recruitment:
Internal Search:
1. Organizational database (HRIS) to sort employee data according to job requirement.
2. Employee referrals
3. Promotion and Transfers
Advantages:
Good employee relations
Encourages ambitious individuals
Less costly
No adjustment or orientation time required, because already familiar
i. Individual with organization and policies
ii. Organization with individual
Disadvantages:
No new blood, no innovation and new perspectives
Political fight for promotion
Morale problems of those not promoted
Diversity lacking
Requires training
External Search:
1. Advertisement (method depends on organization and nature of job)

Newspaper
T.V.
Net
2. Agencies and Professional organization
3. Blind Box ads
4. Schools, Colleges and Universities
5. Unsolicited applications
6. Creative recruitment methods
Banners
Announcing prizes for
Referee
Applicants
What must be included in job advertisement:

Information about organization
Primary business
EEO Employer
Information about job and application process
Title and responsibility
Job location
Starting pay range
Contact address
Closing date for application
Desired qualification of candidate
Experience
3----5 Characteristics needed
Internet Search:
1. Employer website
2. Professional career websites
Advantages:
Cost saving
Time saving
Global in nature
Disadvantages:
Non-serious application
Difficult to process large number of application
Not accessible to all
Selection: (part of Recruitment)
The process of choosing individuals who have needed qualification to fill job in an organization
Purpose of selection:
Filling a right person to the job ensuring
Person fits job (matching people with job characteristics)
Person fits organization (Objectives, culture, values etc. of organization)
Steps in selection process:

Initial screening
Complete application (on specific form)
Employment tests
Comprehensive interview (keeping in mind job description & job specification)
Background information (depends on nature and sensitivity of job)
Medical examination
Conditional job offer
Permanent job offer
Why and What tests are conducted

Cognitive ability tests
o Thinking, memory, reasoning
o Mathematical abilities
o Communication abilities
Physical ability tests
Writing analysis
Performance simulation test (requiring to perform actually a small segment of the job)
Advantages of interview
Most valid to determine applicants
Organization fit
Level of motivation
Interpersonal skills
Limitations of Interviews
Unreliable assessment (wrong decision)
Fail to provide accurate prediction (error of judgment)
Halo and Horns Effect (based upon single attribute)
Stereotyping candidates on the basis of dress, hairstyle, accent etc.
Discrimination in selection is justified only if required by law.
Induction Training:
Identify area for later learning or training (e.g. detailed technical knowledge)
Explain nature of job and goal of each task
Explain working hours
Explain structure of organization hierarchy and his position
Introduce with people in office.
Plan and implement training program.
Appraise after 3,6 or 12 months.
Chapter 14 : Motivation and Performance

Individuals
Variables affecting Job performance:

Organizational and Social variables
Social environment
Type of Incentives
Type of Training and Supervision
Situational variables
Characteristics of Organization
Physical environment
Physical and Job variables

Methods of work
Work space and arrangements
Designing and condition of work equipment
Individual (non work) variables

Age
Sex
Physique
Education
Experience
Intelligence
Aptitude
Motivation
Personality
Personality and individual Development:

(Individuals are different because their personality is difference and personality differences affect work behavior).
Personality is the total patterns of thinking; feeling and behaving that constitute the individuals distinctive method of
relating to the environment.
According to Chris Argyris, as people mature they display certain characteristics:

1. Increasing self awareness
2. Acceptance of equal or superior relationship to others
3. A tendency to move from dependence towards independence
4. Diversification of behavior patterns
5. An increasing tendency to activity, rather than passivity
6. Deepening and more stable interests
Factors affecting personality differences:

- Authoritarinism - Need of achievement
- Self-esteem - Attitude
- Feedback on performance - controls and standard
- Moderately difficult tasks - levels of risk taking
- Psychological success - challenging goals and achievement
- Commitment - willingness
Moti vation (Content theories VS Process Theories)
Moti vational Theories
McGregors theory X and theory Y:

Theory X---People dislike work and responsibility, they have to be controlled, threatened, punished to
get work done.
Theory Y---Work is as natural as play and rest, they accept responsibility, they give way to consultation
and self growth.
Maslows hierarchy of needs:

( A ranked structure of behavior stimulating within individual which explains motivation)
Self actualization (fulfillment of personal potential, freedom, fairness, justice)
Esteem needs (Independence, status, respect, gaining knowledge)
Social needs (relationship, affection, belonging)
Safety needs (security, threat)
Physiological needs (food, cloth, shelter)
Alderfers ERG theory:

E-----Existence
R---Relatedness
G---Growth
McClellands needs:
Need for achievement, Need for power, Need for affiliation Top management Power
Entrepreneur
These needs could be taught from top to lower managers.
Achievement
Employees Affiliation
Herzbergs two factor theory:
There are 2 groups of work related factors.
Hygiene factors (remove dissatisfaction e.g. Salary, Job security, Working conditions, Interpersonal
relations)
Motivators (creates satisfaction e.g. Status, growth in job, power authority and responsibility)
Vrooms expectancy theory:

Motivation shall depend upon expected results of his efforts i.e value attached to an outcome.
F (Force i.e. motivation) = V (valence i.e. strength for preference of outcome) * E (Expectancy i.e. expectation that
performance will lead to outcomes)
Porter and lawlers model: (extension of expectancy theory)
Valence Force Expectancy
Ability Understanding
Satisfaction Actual Performance
Importance of Success/Failure
reward
Intrinsic rewards Extrinsic rewards

(interest, enjoyment) (pay, bonus)
Equity theory:
Reward of 1/Output of 2 = Reward of 2/ Output of 2
Satisfaction = (atleast fair reward, not maximum reward)
- people compare results and rewards
- people get upset if inequity in rewards
Goal theory:
Goals can motivate.
Psychological contracts
Members will expend efforts and organization will reward them in exchange
Coercive contract (returns are inadequate compensation; involuntary contribution)
Calculative contract (returns are defined; voluntary contribution)

Cooperative contract (employees participate also in decision making)
Pay and Job satisfaction
Under Herzbergs theory, Pay is the most important of all hygiene factors.
Under Expectancy theory, Pay motivates if pay is linked with performance and is valued by individual.
Difficulties in incentive schemes:

No motivation if employee already enjoys good package.
External factors may affect output and reward.
Not suitable in groups
Assessment of satisfaction and moral:

Through Productivity, Absenteeism and Turnover.
Types of incentive schemes:

- performance related pay (PRP) i.e commission
- bonus schemes
- profit sharing e.g opportunity of being member of the company.
Job Design (with parameters of Mintzberg)
Job design is the process of

determining the specific tasks to be performed (Job specialization),
methods used in performing these tasks (training and indoctrination in organizational values), and
how job relates to other works in organization (regulation of behavior).
Change in job design may be :

Job enrichment
Vertical expansion of responsibilities
Change in the content and responsibility of job to provide greater challenge
Job enlargement
Horizontal expansion of duties
Provides greater variety of tasks
Job Components:
Occupation------Jobs-----------Position----------Duties------------Tasks (Responsibilities)
Job restructuring and redesign:

Job redesign suiting of jobs according to motivational factors.
Job rotation allowing variety and understanding, development of extra skills
Job enlargement adding extra and related tasks to current job
Job enrichment increases depth of responsibility by adding planning and control of current job.
Working arrangements:
attitude and values flexible working arrangement
high performance work systems multi-skilling
empowerment flexitime
compressed week job sharing
part-time work home-working (distant working)
i) Numerical flexibility
ii) Financial flexibility
iii) Task flexibility
Employee Appraisal
Appraisal is a systematic review and assessment of an employees performance
Why:
Employee Development:
Specific Job performance feed back
Career opportunity information
Assessing employee potential
Decision Making for Action by Administration: (Results of appraisal)

Promotion
Demotion
Transfer
Termination
Organizational Research: (Importance of appraisal)

HR Planning (Promotability and Potential)
Evaluation of Selection and Training methods
To motivate employees giving feedback
Inventory assessment for planning
To assess training needs
Purpose of appraisal:
Reward review for deserving employees
Performance review to confirm whether any training is required or not
Potential review to confirm whether any management career planning is required or not.
Objectives:
Achieving objectives
Performance levels
Training needs
Identifying lacking areas
Communication
360-degree feedback -Sources:

Self
Senior
Peers
Juniors
Assessment centers
Customers
[Upward appraisal is better.]
Types: (What could be assessed)

Traits
Behavior
Performance
Methods:
1. Check list appraisal (yes/no)
2. Forced choice appraisal (MCQs)
3. Essay appraisal/ Overall assessment (paragraph)
4. Grading, result oriented schemes, and self appraisals
An appraisal system:
i) Identify criteria for assessment
ii) Preparation of appraisal report
iii) Appraisal interview
iv) Review assessment
v) Action/plan preparation
vi) Monitoring progress (follow-up)
Methods of appraisal:
i) Upward appraisal sub-ordinates upraise their seniors
ii) Customer appraisal internal & external
iii) 360 degree appraisal
Mairs 3 approaches to appraisal interview:

The tell and sell method
The tell and listen method
The problem solving approach
Effective Appraisal:
Job related criteria
Standardization
Trained appraisers
Employee access
Purpose must be understood by both
It must be participative, problem solving activity
Regularly conducted.
Effort, integrity and ability of line managers.
Locketts appraisal barriers:

Lack of agreement on performance level
Rater is biased.
Recency effect (weighting recent events)
Disagreement on long term prospects
One sided process
Central tendency
Many targets at annual meeting become out of date.
Central tendency (giving average rating to anyone)
Sampling Error (available information is insufficient or inaccurate)
Interview and counseling:

1) Tell and sell method (manager tells, and then try to gain acceptance)
2) Tell and listen method (manager tells, the subordinates responds, and consensus is achieved)
3) Problem solving approach (manage becomes counseller, and ask work problems)
Managing Careers:
Career management is a technique whereby the progress of individuals within an organization from job to job is
planned keeping organization needs and individual capacity in mind.
Difference between Functional Manager and General Manager:
Functional Manager General Manager

Goals Short term Long term
Orientation Task oriented Goal oriented
Role Organizer Facilitator
Coordinating interdepartmental
activities
Obtaining and allocating resources
Information Defined sources Poorly defined sources
Formal channels Informal channels
Chapter 15 : Training Appraisal and Career Management

Training and Development
HR Development:
The process of extending personal abilities and qualities through development activities e.g. training, appraisal, career
planning, job rotation etc.
Training:
The process of providing employees with specific skills to carry out work effectively or to correct deficiencies in their
performance
Development:
An effort to enhance a persons abilities that organization will need in future.
Development purpose:
Ensures firm meet current and future performance objectives by
Maximizing peoples potential
Continuous improvement
Development activities:
Training (on job and off the job)
Career planning
Job rotation
Appraisal
Other learning opportunities
Benefits of training and development:
For Organization
Training supports business strategy
Higher productivity
Management of SHE issues
Less need for detailed supervision
Multi skilled people
Succession planning
Increased commitment
For employees:
Enhanced skills
Psychological benefits (valuable)
Social benefits (e.g. contact)
Job management
When training does not work:

Bad management
Poor Job design
Poor equipment
Motivation
Poor recruitment
Other characteristics of employee (e.g. intelligence)
Types of training courses:

Day release
Distant learning
Evening classes
Revision courses
Sandwich course
Full time course
Learning organization:
An organization that facilitates the learning of all its members and continuously transforms itself.
A learning organization creates, exploits and shares knowledge.
Characteristics of learning organization:
Learning approach to strategy

Participation in decision making
Information is used as a resource
Formative accounting
Reward flexibility
Enabling structural responsiveness to external changes
All employees are environmental scanners
Intercompany learning
Learning climate
Training Process:
Step 1. Training needs are identified:

Training need analysis
Current state Desired state
Existing knowledge and skills Required knowledge and skills
Individual performance Required standard
Organizations current results Desired results
Difference between two columns is Training Gap.
Training surveys
Corporate strategy
Appraisal and performance review
Attitude surveys
Evaluation of existing training programs
Job analysis
Step 2. Specify knowledge, skills and competence required:
Step 3. Define training objectives:

These objectives should be clear, specific, measurable, and observable.
Step 4. Plan training program
Step 5. Implement the training

Methods of training
Formal training
Course training (lectures, discussions, exercises, role-plays, case studies)
Computer based training
On Job Training
Instructions/Demonstrations
Coaching
Job rotation
Temporary promotion
Assistant to Positions
Action learning
Committees
Project work
Step 6. Evaluate the training

Ways to evaluate.
Organizational changes as a result of training
Trainees learning test
Trainees reaction to experience
Changes in job behavior following training
Impact of training on organizations goals
Validation of training means observing results of training and measuring whether training objectives have been
achieved.
Evaluation of training means comparing costs incurred with benefits obtained to redesign/withdraw scheme.
Personnel Development Plan:

Development plan for individual
Skill analysis:
Aim is to put interest into actual role.
Performance
High Low
Liking of skills High Likes and does well Likes but does not do well
(M otivated) (Requires training)
Low Dislikes but does well Dislikes and does not do well
Learning cycle by Kolb:
Concrete experi ence
Applying/testing
the implications Observation
of concepts in and refl ection
new situations
Formation of
abstract concepts
and generalizations
Learning styles of individuals by Honey and Mumford:
Theorists
Understand underlying concepts
Preference for concepts or analysis
Take intellectual hand-off approach based on logical argument
Reflectors
Observe phenomena, think about them and then choose how to act
Find learning difficult if forced into hurried program.
Tend to be fairly slow, non participative and cautious.
Activists
Require training on hand-on
Excited by participation and pressure e.g. new projects
Flexible, optimistic, rush without preparation, take risks and get bored.
Pragmatists
Good at learning new techniques in OJT
Aim is to implement action plans and/or do the task better
May discard as impractical good ideas which require development.
Competence
Capacity that leads to behavior that meets job demands within organizational environment and brings desired results
Types of competence:
1. Personal/Behavioral (Personal characteristics and behavior required for successful performance).
2. Work based/Occupational competence: (expectation of work performance and outputs and standards that are
expected by people in specific roles)
3. Generic competence can apply to all people in an occupation.
Competence of managers:
Intellectual
i. Strategic Perspective
ii. Analytical Judgment
iii. Planning and Organizing
Interpersonal
i. Managing staff
ii. Persuasiveness
iii. Assertiveness and Decisiveness
iv. Interpersonal sensitivity
v. Oral communication
Adaptability results
i. Initiative
ii. Motivated
iii. Business sense
Chapter 16 : Management and Human Resource

Leadership
Trait Theories:
Leaders have certain qualities (Inborn or Acquired) e.g. Helicopter factor i.e certain traits makes a person good leader.
Style theories:
A managers style is the way in which the manager handles his relationship with the task and with subordinates.
Leadership is an interpersonal process and is affected by behavior. To create an effective group, characteristics of
followers should match with characteristics of leader.
Huneryager and Heckman:
Dictatorial
Manager makes decisions and enforces them
Manager makes decisions and announces them
Autocratic
Manager sells his decisions
Manager suggests own ideas and asks comments
Democratic
Manager suggests his idea and amends as per comments
Manager presents problem, asks for ideas and makes a decision
Laissez-faire
Manager presents a problem and asks to solve it.
Manager allows his subordinates to act freely within prescribed limits.
Leadership:
- Definition
- Management vs Leadership
- Manager VS Leader
- Key leadership skills
- Developing managers as leaders
- Theories of leadership
i) Trait theory
ii) Style theory
iii) Contingency theory
Leadership skills:
- Entrepreneurship
- Interpersonal skills
- Decision making
- Time management
- Self development skills
- Competitive
- Goal oriented
- Team empowering
- motivated
Wholly task oriented

Leaders
Wholly people oriented
Lickerts 4 elements presented in effective managers:

1. Expect high level of performance
2. Employee centered
3. No close supervision
4. Participative style
4 styles of leadership:
Style Characteristics Strengths Weaknesses

Tell Manager makes decisions Quick decision making No initiative and
(autocratic) and enforces them Suitable for routine work. commitment
One way communication
Sell Manager makes decisions Reasons are told to staff. No initiative and
(persuasive) but convince staff to They have better idea of commitment
motivate them. what to do One way communication
Consults Manager presents Employees contribute Slow decision making
problem, asks for ideas knowledge and Staff may not be mature.
and makes a decision experience.
Initiative and commitment
Joins Leader and followers High motivation and Slow decision making
(democratic) make decisions on commitment Staff may not be mature.
consensus. Shares knowledge and Conflict may arise.
experience
Blake and Moutons managerial grid:
High
Country club Team
Concern for people Middle road
Low Impoverished Task

Low High
Concern for production
Contingency approach to leadership: (by Charles Handy)

Factors which contribute to the success of leader:
Leaders personality
Subordinates
Task
Environment
Power, authority and responsibility:
Power is ability to do.
Following are different forms of powers in an organization:

Position power/legitimate power
Enjoyed by senior management.
It is associated with particular job, almost authority.
Resource power (reward power)
Enjoyed by senior management
Control over resources and power to grant them e.g. promotion
Physical power (coercive power)
Enjoyed by senior/middle management
Power of superior force but mostly absent.
Expert power
Enjoyed by middle/low management
Power based on expertise
Negative power
Enjoyed by middle/low management
Use of disruptive attitude to stop things, it may be destructive.
Personal power
Power in personality of individuals
Authority is right to do. (decision-making power)

Responsibility is obligation to do.
Influence is ability to change behavior of others.

Accountability managers are accountable for their action.
Delegation of authority sharing of decision making power.
Discipline
Discipline promotes good order and behavior in an organization by enforcing acceptable standards of conduct.
Disciplinary problems:
Absenteeism
Poor punctuality
Poor job performance
Poor attitudes
Breaches of safety regulations
Refusal to carry out legitimate instructions
Disciplinary actions:
Informal talk
Oral warning Warning
Written or official warning
Disciplinary lay-offs or suspension
Demotion Action
Discharge
Retirement, Resignation, Redundancy
Why retirement is encouraged:

Promotion opportunities for younger.
Early retirement is an alternative to Redundancy.
Age structure may become unbalanced.
Cost of pension rise with age.
Resignation:
Exit interview
Period of notice.
Fair grounds for dismissal:

Redundancy
o Employer has ceased to carry on business all or in part
o Requirements of employees have ceased or diminished.
o No compensation if
Suitable alternative offer made.
Employee is of pension-able age or has less than 20 years of continues service.
Legal impediment
Non-capability
Misconduct
Other substantial reasons
Unfair Dismissal (See PBP)
Discrimination and Equal opportunities
Discrimination could be
Direct
Indirect
Positive (law protected)
Measures to address underlying problems of equal opportunity:

Support from the top
Appoint equal opportunity managers
Encourage disadvantaged groups to apply
Monitoring of minority
Maternity leaves, Maternity Pay, Work place nurseries
Flexible hours
Career break
Accommodate wheelchair users
Health and Safety
Importance of Health and Safety at work:

1. Legal obligation
2. Accidents cost money
i. Compensation + Repair cost + Increased insurance premium
ii. Time lost
iii. Subsequent performance is reduced.
iv. Recruitment and training of replacement has cost.
3. Corporate image is improved.
Employers Duties:
Work environment must be safe and healthy.
Plant and equipment must be maintained to standard.
Work practices must be safe.
Health and Safety Policy should be communicated to all employees.
Statement of principles
Detail of safety procedures
Detailed instruction of how to use equipment
Training requirement
Compliance with law
Risk assessment should be made.
Hazard and risk information should be shared.
Identify employees who are especially at risk.
Controls must be introduced to reduce risks.
There must be safety and health advisors.
Employees duties:
Take reasonable care of themselves and others.
Allow the employer to carry out his duties.
Inform the employer of any situation which may cause danger.
Use all equipment properly.
National legislation on important labor matters

1. Industrial and Commercial Employment (Standing Orders) Ordinance 1968
i. Appointment, transfer, promotion
ii. Leaves
iii. Insurance
iv. Bonus
v. Termination
vi. Gratuity
2. Industrial Relations Ordinance 1969.
3. Employee Social Security Ordinance 1965
i. Medial expenses
ii. Compensation in lieu of wages during illness
4. Employee Old age Benefits Act 1976
i. Rules for pension
5. Company Profit (Workers Participation) Act 1968.
i. 5% of net profit + adjustments
ii. Fund could be maintained.
6. Workers Welfare Fund Ordinance 1971.
Chapter 17 : Groups in Organisation

Groups:
A group is any collection of people who perceives themselves to be a group.
Sense of identity
Loyalty to group
Purpose & Leadership
Team:
A team is a small number of people with complementary skills who are committed to a common purpose,
performance goals for which they hold themselves accountable
A team could be:

Multi-disciplinary teams
Contains specialists in different areas
Freer and faster communication between disciplines in organization
Multi skilled teams
Contains people who possess many skills
Tasks can be shared in flexible way.
Development of team: (by Tuckman)

Forming (collection of individuals)
Storming (targets are set and trust increases)
Norming (work sharing, individual requirements and expectations)
Performing (execution of task)
Members/Roles of team: (by Belbin)

Coordinator (presides and coordinates)
Shaper (dominant, extrovert, task oriented)
Plant (introverted, source of ideas)
Monitor evaluator (analytical rather than creative)
Resource investigator
Implementer (administrator not leader, scheduling, planning)
Team worker (supportive, noticed in absence)
Finisher
Problems with team:

Group norms restrict individual personality.
Conflict in roles and relationship
Personality problems
Rigid leadership
Not suitable for all jobs
Too much harmony (group think) or differences of opinion
Creating an effective team work: (A contingency approach by Handy)
The Given
Groups members
Groups task
Groups environment
Intervening factors
Motivation
Leadership
Process
Procedure
The Outcomes
Productivity
Effectivity
Objective is met within time
Group satisfaction
Management can operate on both givens and intervening factors to affect the outcomes.
Indications of Effective Team:

Quantitative factors
Productivity
Absenteeism
Turnover rate
Accident rate
Targets
Interruption to work rate
Qualitative factors
Commitment
Understanding
Communication
Feed back
Job satisfaction
Motivation
Conflict in organizations: (Indi vidual / Group level)
Different views conflict in organizations:
The happy family view:

Organizations are essentially harmonious.
There are cooperative structures to achieve common goals with no systematic conflict of interest.
The conflict view:
Organizations have conflict on individual and group level.
Members battle for limited resources, status and reward.
Conflict could be destructive if not handled carefully.
The evolutionary view:
Conflict is seen as a useful basis for evolutionary change and not for revolutionary change.
Could be constructive if handled by arguments or competition(Handy).
Causes and tactics of conflicts between departments:

Operative goal incompatibility
Personality differences
Task interdependence (if managed badly)
Scarcity of resources
Power distribution (Boundaries of authority)
Uncertainty (in change)
Reward systems (not being fair)
Conflict constructive and destructive
How constructive How destructive

Different solutions Distract attention from task.
Creativity and testing of ideas Objectives may be subverted for secondary goals.
Attention on individual Disintegration of the group
contribution
Brings emotions into open Emotional/ Win-lose conflicts may arise. (Close
Motivational factors brings out competition)
Effects of Conflicts within groups: (Sherif and Sherif) PTCL vs. Union
Within a group:
Group becomes more structured and organized.
Members eliminate their differences, get close and demand loyalty.
Climate becomes task oriented.
Members individual needs are subordinated to achievement.
Leadership moves from democratic to autocratic with groups acceptance.
Winning group:
Cohesion
Relaxation
Return to group maintenance and concern for members needs.

Assertion for group self-concept with little reevaluation.
Losing group:
It may deny defeat or blames on others.
Loses cohesion.
Turn to regrouping.
Reevaluates perception of itself and other group.
Might become cohesive and effective unit if defeat is accepted.
Managerial response to conflicts: (by Hunt)

Denial/Withdrawal (if conflict is trivial)
Suppression (preserve working relations despite minor conflicts)
Dominance (application of power to settle the conflict)
Compromise (bargaining, negotiating, conciliating)
Integration/Collaboration (emphasis must be put on task and individuals must modify behavior)
To reduce conflict behavior:

Limited communication
Structural separation
Bureaucratic authority (use of)
To encourage cooperative behavior:

Job rotation
Inter-group training
Integration devices (e.g. problem solving teams, force to work together)
Group think: (IL Janis)

Psychological drive for consensus at any cost, that suppresses dissent and appraisal of alternatives in cohesive
decision making groups
Symptoms of group think:

Moral blindness (might is right)
Perception of unanimity
Strong group pressure to quit dissent
Rationalization for inconsistent facts.
Mutual support to guard the decision.
Group subculture:
Subcultures are cultures which exist within cultures.
Characteristics:
Group share distinctive way of life, beliefs.
Learned from others in the group.
Way of life has somehow become traditional.
Political behavior:
Organizations are political systems because people within them have their own objectives and priorities.
Political behavior is concerned with competition, conflict, rivalry and power relationships in organization.
Political Game:
Mintzberg identifies various Political Games played in organization which can be useful or harmful.
Game resist authority
Game to counter this resistance
Game to build power basis (control over resources and superiors, colleagues, subordinates etc.)
Game to defeat rivals (interdepartmental)
Game to change the organization
At senior level political activities occur in following cases
Allocation of resources.
Management Succession
Interdepartmental coordination
Structural change
Chapter 18 : Strategies for Critical Periods

Large Vs. Small organizations
Issues/problems in large organizations:
Organizations structure:
Sharing roles and responsibilities (who does what?)
How much specialization
How many levels of management
Delegation of authority (centralized or decentralized)
Planning and control:
Vague accountability
MIS should be in place
Coordination
Reward
Slow adoption to change
Motivation is down
No self-esteem
Slow decision-making
Solutions:
Decentralized and delegation of authority
Fair pay policies with bonus, awards and rewards
MIS
Delayering in hierarchy
Job design
Issues/problems in small organizations:

Over reliance on a few key persons
No economies of scale
Small market area/ restricted range of products
Low bargaining power
Cannot raise money
Can not afford help (from experts)
Solutions:
Growth
Specialist servicing
Key persons insurance
Corporate decline
3 types of decline:
1. Declining industries (i.e. Environment entropy; environment is no longer supportive)

Temporary decline (product revitalization)
Permanent decline (end game)
2. Vulnerability
SLEPT
Porters 5 forces
3. Declining company (i.e. organization atrophy)
Symptoms (by Stuart Slatter)

Decrease in sales revenue
Decrease in profitability
Decrease in liquidity
Decrease in market share
Lack of planning
Increase in gearing
Top management fear
Change in senior executive
Financial engineering (change in accounting policies, auditors etc.)
Restriction on dividend policy
4 stages in the crisis (by Stuart Slatter)

Blind stage/Crisis denial
Inaction/Hidden crisis
Faulty action/Disintegration
Crisis/Collapse/Dissolution
Causes of decline and strategies to overcome:
Causes Strategies
Poor management New management + restructuring
Poor financial controls Tighter controls + delegation of responsibilities
High cost structure Cost focus strategy + Ansoffs matrix
Poor marketing Redevelop marketing mix + motivate sales
Competitive weakness force
Big projects/acquisition Porters generic strategies
Escalation of commitment of bad decisions Feasibility reports
Reasons for escalation:

They think decision was right; implementation was wrong.
Humiliation of climb down.
Consistency is valued.
Mistakes are viewed as failure not learning
Outcomes are uncertain.
Failure to understand principle of relevant cost.
Turnaround of decline:
Visionary leader required.
Contraction and cost cutting.
Reinvestment in organizations capability.
Rebuilding with innovation.
Chapter 19 & 20 : Change Management and Changing Environment

Change
Types of change:
Changes in environment (Cause)

Changes in organization (Effect)
Changes in products/services
Changes in technology and working conditions
Changes in management and working relations
Changes in organizational structure and size
Change is small and gradual whereas Transformation is crucial and significant.
Factors forcing change: Changes may occur due to

- Threat of new entrants
Environmental factors: - Bargaining power of suppliers
SLEPT - Bargaining power of customers
Porters 5 competitive forces - Threat of substitutes
Changes in Technology: - Rivalry between competitors
Computerization
New products
Better MIS
Change in Working conditions: Nature of strategic change:
New offices Incremental
Change may be
Varied work times
Transformational
Emphasis on health
Govt. regulations
Reactive
Change in M anagement: Management may
New style of leadership Be Pro-active
Participation in decision making
Collaboration between management staff & unions Step change
Change in Personal policies: Types of Planned change
Change in rules and procedures (e.g. smoking) Changes
Promotion, transfer, training , development Emergent change
Change in structure and size:
Due to Takeovers
Delegation of authority
Centralization
Downsizing
Model for change:

Determine need/desire for change in a particular area.
Prepare tentative plan (via Brainstorming)
Analyze probable reactions to change.
Make a final decision (Coercive or Adaptive)
Establish time table for change. Speed of implementation will depend on:
Type of change (Coercive, Adaptive or Managed resistance change)
Reaction of people (Acceptance, Indifference, Passive resistance, Active resistance)
Driving and Restraining forces (Force Field Analysis)
Communicate the plan for change
Implement, review and modify change.
Review the change
Approaches to change:
Resistance to change
i) Unfreeze Move /Shake Refreeze
ii) Adaptive change approach
iii) Coercive change approach Active resistance passive resistance
iv) Using Change agent
v) Integrative VS segmentalist
vi) Theory E & Theory O
Force Field Analysis: (Lewin)

It is an interplay of restraining and driving forces that keeps things in equilibrium.
Introducing change:
3 factors to consider to minimize resistance.

Pace of change:
Adapt strategy according to time available.
Manner of change:
Resistance should be welcomed.
Reasons and results of change should be circulated.
Change must be sold to people concerned.
Individuals must be helped to learn.
Scope of change:
Small or Transformation.
Change process: (by Lewin/Schein)
Unfreeze existing behavior:

Most difficult and neglected stage.
Selling the change.
Give motive for change.
Behavior change:
Identify new behavior.
Encourage individuals to own change.
Refreeze new behavior:
Through positive or negative reinforcement
Effect of change on People:

Physiological effect (e.g. pattern of shift working affect eating, walking and sleeping habits)
Circumstantial effect (e.g. working environment and working relations)
Psychological effect (e.g. feeling of disorientation, Insecurity, risk of rejection, feeling of misfit)
Effect on Self concept (New psychological contract, Uncertainty affects sense of competence)
Changing culture:
Hamper Turner suggests 6 modes of intervention:
1. Find the dangers (locate black sheeps)
2. Brings conflicts in open.
3. Discuss culture with members (play out corporate drama)
4. Reinterpret the corporate myths.
5. Look at symbols, images, rituals.
6. Create a new learning system.
Pattern of unhealthy culture: (by Edwin Baker)

Flourished initially by founder.
Founder retired, employees become rigid and insular.
Speed, innovation, flexibility, concern for survival and customer disappeared.
Formalization
Departmentalism/ Sub optimization
Coercive actions needed to compete.
Organizational life cycle:

Handys sigmoid curve:
Application of concept of lifecycle to organization with 4 broad stages:
1. The organization is established.
2. Organization grows in size and scope.
3. Period of maturity
4. Organization begins to decline.
Such a lifecycle is not inevitable, if organization is able to adapt.
Greiners growth model: (Growth & Organisational Development)

As an organization ages, it grows in size.
This growth takes place in 5 discrete phases.
Each phase has 2 characteristics i.e.
Evolution (distinctive factor that directs growth) and Growth (Move Stage)
Revolution. (crisis to pass to enter next phase) Crisis (Unfreeze Stage)
Phase 1: (Focus)
Evolution (Small organization focusing on operations, personnel issues and innovation)
Revolution (Need for leadership skills)
Phase 2: (Management/group)
Evolution (Management is professionalized, there are more employees but less enthusiasm)
Revolution (delegation is problem; lack of detailed control; no initiation)
Phase 3: (System)
Evolution (decentralized decision making)
Revolution (no coordination between departments, sub optimization occurs)
Phase 4: (Internal Controls)

Evolution (Internal control systems and procedures are developed for coordination and optimal use of
resources)
Revolution (new procedure inhibits useful actions)
Phase 5: (Communication / collaboration)

Evolution (Increased informal collaboration; control is cultural rather than formal)
Revolution (Crisis of psychological saturation in which individuals become exhausted by teamwork)
Criticism on lifecycle models:

Formation could also be by Merger or Joint venture. i.e not always founded by visionary ppl.
Too many issues for growth and control. (i.e org. structure, org. culture)
Growth is not the same as effectiveness. (i.e not a normal state of affair)
No idea of time scale involved in any stage. (i.e Linear development)
Growth seen as linear development over time; there might be different rates of growth at
different times and even loss.
Model does not clearly indicate relationship with environment. (i.e it ignores environment)
Effect of competition in market is also ignored.
Measurement of Growth: (how Adamjee is the largest insurance co.)

Sales revenue
Profit (in absolute term or ROCE)
No. of goods/services sold.
No. of outlets
No. of employees
No. of countries reached.
No. of markets served.
Chapter 22 : The evolution of marketing concept

the right product or service to the right customer, at the right price, at the right time and right place
Marketing Department: Functions (Research, Demand, Design, Selling)
Marketing Environment: PES TEL (Political, Economical, Social, Technological, Ecological, Legal)
Chapter 1- Introduction
Marketing, :
Managerial definition: Managing profitable customer relationships, by delivering superior value to customers.
Social definition: a social and managerial process by which individuals and groups obtain what they need and want
through creating and exchanging products and value with others.
Core Marketing concepts:
Market:
A market is the set of actual and potential buyers of a product.
Needs, wants and demands:

Needs are fulfilled : a state of felt deprivation.
Wants are satisfied : the form taken by a human need as shaped by culture and individual personality.
Demands are extinguished : Human wants that are backed by buying power.
Marketing Offer:
Combination of good-service offered to market to satisfy need or want.
Value and Satisfaction

Customers perceived value is the difference between the values that the customer gains from owning and using a
product and the costs of obtaining the product.
Satisfaction is whether performance meets or exceeds expectations.
Exchange, Transaction and relationship:

Exchange is an act of obtaining a desired object from someone by offering something in return.
Transaction is a trade of value between two parties.
Elements of Marketing:
Company
Supplier Market Intermediaries End user
Competitors
ENVIORNMENT
Customers life time value:
Value of entire stream of purchases by customer over his lifetime.
Customer Equity:
Total lifetime value of all of companys customers.
Marketing Management:
Marketing management has four functions: Analysis, Planning, Implementation and control.
Demarketings aim is to reduce demand temporarily or permanently. It is done when product is not feasible from
supplier or customers point of view. i.e intentional and non-intentional reduction in demand.
Marketing Management Orientations

The production concept holds that consumers will favor products that are available and highly affordable and that
management should, therefore, focus on improving production and distribution efficiency.
The product concept states that consumers will favor products that offer the most quality, performance, and features,
and that the organization should, therefore, devote its energy to making continuous product improvements.
The selling concept is the idea that consumers will not buy enough of the organizations products unless the
organization undertakes a large-scale selling and promotion effort.
The marketing concept holds that achieving organizational goals depends on determining the needs and wants of target
markets and delivering the desired satisfactions more effectively and efficiently than competitors do.
The societal marketing concept holds that the organization should determine the needs, wants, and interests of target
markets. It should then deliver the desired satisfactions more effectively and efficiently than competitors in a way that
maintains or improves the consumers and the societys well-being.
CONCEPT CUS TOMER WANTS COMPANY SHOULD

Production concept Availability and affordability Improve production, distribution
efforts
Product concept Quality, performance, features Continues product improvement
Selling concept No feelings to purchase Large scale selling, promotion
Marketing concept Needs & wants of target market Effective & efficient than competitor
Two S teps of marketing:

Determine Need, Wants And Interest Of Target Market
Then Satisfy Them Effectively And Efficiently
Marketing Vs. Selling:

Starting point Focus Means Ends
Selling concept Factory Existing products How to increase Profits through sales volume
demand
Marketing concept Market Customer needs How to satisfy Profits through customer
demand satisfaction
Despite adoption of market oriented approach; there is need for sales force:
To create awareness
To convince to buy from company, not from competitors
To reassess benefits to customers
To convince that average customers requirements are met
Problems in introducing the marketing approach:

Understand what marketing orientation actually means
Organizational, structural and cultural changes are required.
Assessment of Product, logistic, level of services and marketing techniques
Organization wide dedication
Working together as whole Types of Marketing
Strategic Marketing Tactical Marketing
Scope of Marketing = Marketing Planning Tied with corporate strategy Short term, and focuses
e.g which product of market to choose on place, promotion,
price
Marketing Vs. R&D department:
Marketing has commercial and competitive atmosphere whereas R&D has University atmosphere with open-end work
and consumption of substantial resources.
Customers needs and change in product specification tighten them.
Consumerism is a term describing importance and power of consumers.

Customer Database
Customer Relationship Management:
Customer Portfolio
Defined narrowly as a customer database management activity.

CRM is managing detailed information about individual customers and carefully managing customer touch points to
maximize customer loyalty.
Companies look for touch points. These includes customer purchases, sales force contact, service, and support calls,
Web site visits, satisfaction surveys, credit and payment interactions, market research studies, etc.
To be effective in CRM, the marketer must forego short-term profit maximization on individual transactions.
Elements of Marketing Mix: How to Get Customer Touch Points:

- Purchasing trend
Controllable: - Payment trend
Product - Service obtaining trend
Price - Family trend
Place - History
Promotion - Support calls
- Website visits
Uncontrollable: (Marketing environment) - Emotional attachments
SLEPT Analysis
Porters 5 forces model

i) Threat of new entrants
ii) Threat of substitutes
iii) Bargaining power of customers
iv) Bargaining power of suppliers
v) Rivalry among competitors
Service industry:
People
Processes
Physical evidence
Important Points for discussion questions:

1. Expectation = Perceived value
2. Customers often do not judge products value and cost accurately and objectively.
3. A Customer buys the highest perceived value.
4. Satisfied customers give benefits of
i. Loyal
ii. Being less price sensitive
iii. Talk favorably
5. Two fold object of marketing
i. Retain existing customer by providing satisfaction
ii. Attract and grow new customers by promising superior value
Marketing Approaches
Push Approach Pull Approach

Focused on pushing goods to Focused on pulling resellers
Reseller and customer. The focus and customers by satisfying them,
Is on sale volumes. Fulfilling their demands to attract
Them to the company
Three Important Concepts:

Value-Chain : How activities of organisation contributes towards creating value in goods or services.
Internal Customer Concept: Department in an organisation treat each other as customers, it encourages service-
oriented attitude. Hence when every department is satisfied ultimately the quality will be
enhanced.
Relationship Marketing: To build long term relationship with existing customers, rather than focusing on products,
focus is on relationship i.e selling more products to same customer, rather than to new
customers.
Model of Consumer behavior:
A model of consumer behavior helps managers answer questions about what, where, how and how much, when and
why they buy.
The stimulus-response model of buyer behavior shows that marketing (made up of the four Psproduct, price, place,
and promotion) and other environmental stimuli (Micro and M acro) center on the consumers black box and
produce certain responses.
Marketers must figure out what is in the consumers black box.
Marketing and other environmental stimuli: (i.e Stimulus response model)

Already discussed
Consumers Black box:

The black box has two parts.
1). The buyers characteristics influence how he or she perceive and react to
stimuli. (Uncontrollable)
2). The buyers decision process itself affects the buyers behavior. (Semi-controllable)
Characteristics affecting consumer behavior:

Marketer can not control them but should learn them.
Cultural
o Culture
o Subculture
o Social class
Social
o Reference group
o Family
o Roles and status
Personal
o Age and lifecycle stage
o Occupation
o Economic situation
o Lifestyle
o Personality and self concept
Psychological
o Motivation
o Perception
o Learning
o Beliefs and attitudes
Culture is the set of basic values, perceptions, wants, and behaviors learned by a member of society from family and
other important institutions.
Subculture is a group of people with shared value systems based on common life experiences and situations.
Subcultures might be nationality groups, religious groups, racial groups, or geographic area groups.
Social classes are societys relatively permanent and ordered divisions whose members share similar values, interests
and behaviors.
Reference group has a direct (face to face) or indirect points of comparison or reference in forming a persons attitudes
or behavior.
Aspirational group is one to which an individual wishes to belong.
Opinion leader is a person within a reference group who, because of special skills, knowledge, personality or other
characteristics, exerts influence on others.
Personality is a persons unique psychological characteristics that lead to relatively consistent and lasting responses to
his or her own environment.
A motive (drive) is a need that is sufficiently pressing to direct the person to seek satisfaction.
Perception is the process by which people select, organize, and interpret information to form a meaningful picture of
the world.
Learning is changes in an individuals behavior arising from experience.
Belief is a descriptive thought that a person holds about something.
Attitude is a persons consistently favorable or unfavorable evaluations, feelings, and tendencies toward an object or
idea.
Purchase Decision Process
i) Problem Recognition:
Perceiving a need.
It can be stimulated by:
Consumers depleted assortment (e.g. empty paste) or
Marketing efforts
ii) Information Search:

To clarify options available to consumers.
o Internal search: Scanning of memory (experience) or knowledge about solution of problem/need sufficient
For frequent/regular purchases.
o External search:
Personal sources (family, friends, neighbors, acquaintances)
Commercial sources (advertisement, dealers, websites, salesmen)
Public sources ( M ass media, consumer rating organizations)
For new products.
Word of Mouth or Personal sources has 2 major advantages (through satisfied customers):
1. Convincing, i.e. of consumers by consumers for consumers
2. Costs are low.
At the end of this stage, customer arrives at a set of final brand choices.
iii) Evaluation of alternatives:

Assessing value.
Customer may be interested in many attributes. E.g. for Camera
Picture tube
Ease of use
Size
Price
However sometimes consumer has to base his decision only on one attribute.
iv) Purchase Decision: [The best rated camera will be bought.]
v) Post-Purchase behavior:
Dissatisfied
Satisfied
Delighted
A policy by firms is to understate performance because customers are delighted with better-than-expected performance.
Why satisfaction of Customer/study of this stage is important:

1. To attract new customers cost more than to retain current customers.
2. Satisfied customers are less price sensitive.
3. Satisfied customers tell others (words of mouth). Bad words travel farther and faster.
Decision process for new product i.e. stages in adoption process (from hearing to adoption):
1. Awareness:
2. Interests: seek information i.e. through external sources
3. Evaluation: whether to try or not
4. Trial: on small scale to improve estimate of value
5. Adoption: decides to make full and regular use
Chapter 2 Company and marketing strategy
Strategic Planning Process:

Strategic Planning is the process of developing and maintaining a strategic fit between organizations goals and
capabilities and its changing marketing environment.
Following are steps of strategic planning:
1. Defining mission
2. Analysis of Business Portfolio
3. Setting strategic objectives and goals
4. Developing Competitive strategies
i. Porters 5 forces
ii. Cost-Differentiation-Focus Triangle
iii. Growth Strategies (product/market expansion grid)
5. Developing detailed marketing and departmental plans and strategies
Mission Statement:
This is a statement of organizations purposes- What it wants to accomplish in the larger environment.
It should be market oriented, specific, realistic, motivating and consistent with market environment.
e.g. To provide best satisfaction to customers and fair return on investment, keeping environment healthy and clean
and promising secure future to employees
Designing the business portfolio:

Business portfolio is the collection of businesses and products that make up the company.
Business portfolio planning involves 2 steps:
1. Analysis of current business portfolio.
2. Developing strategies
1. Portfolio Analysis:
A tool by which management identifies and evaluates SBUs to determine which business should receive more, less or
no investment.
BCG growth-share matrix is used to evaluate a companys SBUs in terms of market growth rate and relative market
share.
SBU is a unit of company that has a separate mission and objectives and that can be planned independently from other
company businesses.
2.Developing strategies for growth and downsizing:

The product/market expansion grid is a portfolio-planning tool for identifying company growth opportunities through:
Existing Product New Product

Existing Market Market Penetration Product Development
New Market Market Development Diversification
Downsizing:
When a firm reduces business portfolio by eliminating products or business that is not profitable or no longer fit its
overall strategy..
Setting strategic objectives and goals:

Firms mission is translated into set of objectives for the current period for each SBU.
Developing plans and strategies
Marketing Process:
The marketing process is the process of
1. segmenting the market,
2. selecting target markets,
3. marketing positioning
4. developing the marketing mix, and
5. managing the marketing effort.
Marketing mix:
The marketing mix is the set of controllable factors that the firm blends to produce the response it wants in the target
market. i.e. Product, Price, Place, Promotion
Managing the Marketing Effort:

Marketing M anagement has four functions of analysis, planning, implementation, and control..
1. Marketing Analysis
o Analysis of companys Strength and Weakness [Internal]
o Analysis of environments Opportunities and Threats. [External]
2. Marketing Planning involves deciding on marketing strategies to attain its overall strategic objectives of company.
3. Marketing Implementation is the process that turns marketing strategies and plan into marketing actions in order to
accomplish strategic marketing objectives. Implementation addresses the who, where, when, and how.
4. Marketing control is the process of evaluating the results of marketing planning and its implementation, and taking
corrective action to ensure that marketing objectives are attained.
Two broad forms of control are important:
1). Operating control involves checking ongoing performance against the annual plan and taking corrective
action when necessary.
2). Strategic control involves looking at whether the companys basic strategies are well matched to its
opportunities. The major tool for accomplishing this form of control is the marketing audit.
The marketing audit is a systematic analysis and evaluation of organizations marketing position and performance. It
may cover all marketing activities or some of them.
Audit will focus on 3 things:
1. Marketing capabilities
2. Performance evaluation (are sales meeting forecasts?)
3. Competitive effectiveness (competitive advantage, product differentiation)
Partnership relationship management:

Working closely and jointly with
Other departments of company
Other companies
to bring greater value.
Value Chain and Value delivery network:

Value Chain is series of departments within the company carrying out value-adding activities e.g.
Designing
Producing
Marketing
Delivery
Supporting
Value delivery network is network of suppliers, company, intermediaries, and consumers who partner with each other
to improve performance of entire system.
Chapter 23 : Strategic Marketing & Planning

1. Market Segmentation
Market segmentation is dividing a market into smaller group of distinct buyers who have different needs,
characteristics or behavior and might require different marketing mixes.
Market segment is a group of buyers who respond in a similar way to a given set of marketing mix.
Basis of segmenting markets:
Segmenting consumer market
Geographic segmentation calls for dividing the market into different geographical units such as states, regions,
counties, cities, or neighborhoods.
Demographic segmentation calls for dividing the market into groups based on variables like age, gender, family size,
family life cycle, income, occupation, education, religion, race, generation, and nationality.
Psychographic segmentation calls for dividing a market into different groups based on social class, lifestyle, or
personality characteristics.
There are four possible lifestyle categories:

1. Upward mobile, ambitious
i. Seek better or more affluent lifestyle
ii. Higher standard of living
iii. Will try new products
2. Traditional and sociable
i. Compliant and conform to group norms
ii. Purchasing pattern will be conformist
3. Security and Status seeking
i. Stresses security and ego-defensive needs
ii. Purchase of known and established products and brands e.g. Insurance
4. Hedonistic preference
i. Emphasis on enjoying life now
ii. Immediate satisfaction of needs and wants
Behavioral segmentation involves dividing a market into groups based on consumer knowledge, attitudes, uses, or
responses to a product. E.g.
Occasion segmentation: dividing market according into groups according to occasions when buyers get the
idea to buy, actually make their purchase, or use purchased item.
Benefit sought: Dividing market into groups according to different benefits that consumers seek from the
product. Consumers seek unique combination of benefits e.g. for a laundry detergent, from cleaning and
bleaching to economy, fresh smell, strength or mildness etc.
User status and user rate
Loyalty status
Segmenting Business Markets
Demographic segmentation
Industry (which industry)
Company size (what size)
Location
Operating variables
Technology (what technology to focus)
User- nonuser status (heavy, medium or light user)
Customer capabilities (many services or few services)
Purchasing approaches
Purchasing function organization (centralized or decentralized)
Power structure
Nature of existing relationship
General purchasing policies (leasing, service contracts, or sealed bidding)

Purchasing criteria (quality, service or price)
Situational factors
Urgency (quick delivery/service?)
Specific application
Size of order
Personal characteristics
Buyer-seller similarity of values
Attitude towards risk (risk taking or averse)
Loyalty (to companies who show high loyalty to suppliers)
Segmenting International Markets

Companies can segment international markets using one or more of a combination of variables. The chief factors that
can be used are:
1). Geographic location: location or region
2). Economic factors: Population income or level of economic development
3). Political and legal factors: Type / stability of government, monetary regulations, amount of bureaucracy, etc.
4). Cultural factors: Language, religion, values, attitudes, customs, behavioral patterns.
Requirements for Effective Segmentation
Substantialsegment must be substantially large or profitable.

Accessiblesegment must be reached and served easily.
DifferentiableIt must be conceptually distinguished and should have the ability to respond differently to different
marketing mix elements and programs.
ActionableIt should be possible to design effective programs for attracting and serving market segment.
MeasurableSize, purchasing power, and profiles of a market segment should be measurable.
2. Target Marketing
Target market is a set of buyers sharing common needs or characteristics that the company decides to serve.
Target marketing strategies: (Product affecting Promotion)

The firm can adopt one of four target marketing strategies:
A. Undifferentiated marketing (or mass marketing) a market-coverage strategy in which a firm decides to ignore
market segment differences and go after the whole market with one offer
B. Differentiated marketing (or segmented marketing) a market-coverage strategy in which a firm decides to target
several market segments and designs a separate offer for each.
C. Concentrated marketing (or niche marketing) a market-coverage strategy in which a firm goes after a large
share of one or a few segments or niches.
D. Micromarketing is the practice of tailoring products and marketing programs to suit the tastes of specific
individuals (individual marketing) and local customer groups (Local marketing).
Market offers can be differentiated along the lines of:

Product
Service
Channels
People
Image
Considerations while choosing strategy:

Company, resources and objectives
Competitor, strategies
Product
o stage in the life cycle
o variability
Market, variability
Evaluating Market Segments

Segment size and growth
Segment structural attractiveness
Level of competition
Substitute products
Power of buyers
Power of suppliers
Company objectives and resources
3. Product Positioning
Product positioning is imaging the product in the minds of consumers relative to competing products.
Positioning task (or choosing a positioning strategy) consists of following four steps:
1. Identifying possible competitive advantages
2. Choosing right competitive advantages
3. Selecting an overall positioning strategy
4. Developing a positioning statement
1) Identifying possible competitive advantages:

Competitive advantage (making a difference) is an advantage over competitors gained by offering consumers greater
value, either through lower prices or by providing more benefits that justify higher prices.
2) Choosing the right competitive advantages:

How many to promote:
Only one difference. Aggressive approach
More than one differences. Where more than one firms are claiming to be the best at same attribute. However it risks
disbelief and a loss of clear positioning.
Which ones to promote:
Important for buyers
Distinctive than competitors offer
Superior
Communicable and visible difference
Competitors can not copy easily
Affordable for buyers
Profitable for company
3) Selecting an overall competitive positioning strategy:

What offer to make in relation to competitors offer (Use 2x2 or 3x3 Grid)
Price
More Same Less
More Premium brand Super bargain brand
Quality Same Average Bargain brand
Less Cow bow brand Economy brand
Other strategies are:

More for same (Penetration)
Same for less
Less for much less
4) Developing positioning statement:

Positioning statement is a statement that summarizes company or brand positioning, it takes following form:
To (target segment and need) our (brand) is (concept) that (point of difference)
e.g.
To young, active, soft-drink consumers who have little time for sleep, M ountain Dew is the soft drink that gives you
more energy than any other brand because it has the highest level of caffeine.
Chapter 24 : Marketing Research

Marketing Research
Marketing Research:
It is the objective gathering, recording, and analyzing of all facts about problems relating to the transfer and sales of
goods and services from producer to consumer or user
Marketing research helps in

a. Regulating systems
b. Reducing risks
c. Decision making
Types of Marketing Research:
Market research:
Study and analysis of
Characteristics of market
Market share
Market trends
Sales forecasting for all products
Market potential for existing products
Likely demand for new products
Product research:
Comparative study between competitive products
Studies into packaging and design
Forecasting new uses for existing products
Customer acceptance of proposed new products
Development of new product lines
Test marketing
Price research:
Analysis of elasticity of demand
Analysis of cost and profit margins
Effect of change in credit policy on demand
Customers perception of price and quality
Place (Distribution) research:

The location and design of distribution centers
Analyzing the packaging for transportation and shelving
Cost of different methods of transportation and warehousing
Dealer supply requirements
Dealer advertisement requirements
Promotion research:
Analyzing the effectiveness of sales force
Analyzing the effectiveness of advertising on sales demand
Establishing sales territories
Research procedure:
The marketing research process consists of following steps:
1. Defining the problem
2. Designing the research (basis of research objectives)
3. Collection of data
4. Analysis of data (Pre and Post testing etc)
5. Presentation of report
6. Management decision
Defining the problem and designing the research

After the problem has been defined carefully, the manager and researcher must set the research objectives.
Collection of data (Research work)

Marketing Research data comprises of
Primary Data (Field search)
Secondary Data (Desk Search)
Researchers usually start from secondary data.
1. Collecting secondary data: (Desk research)
Secondary data collection is information that is neither direct nor specific.

Sources of secondary data:
Internal databases: (i.e. MkIS)

Advantages Disadvantages
Quick access Incomplete
Cheaper Wrong form
Regular & Reliable Ages quickly
Confidentiality Not expert
External sources:
Information about Competitors (annual reports, press releases, web pages, business publications,
advertisements etc.)
Analyzing competing products
Rival companies personnel (executives, engineers, sales force, purchasing agents)
Trade suppliers
Outside suppliers
Online databases
New patents or applications for patents
2. Collecting primary data:( Field research)
Primary data is information collected for the specific purpose at hand.
A plan for primary data collection calls for a number of decisions on
Research approaches,
Observational research
Survey research
Experimental research
Research methods
EPOS (Electronic Point of Sale system)
DSS (Decision Support system)
Data Warehousing
Internet
Contact methods,
Mail questionnaires
Telephone interviewing
Personal interviewing
Individual interviews
Group interviews (including focus-group interviews)
Online (Internet) marketing research
Mechanical instruments
i. People meters
ii. Supermarket scanners
iii. A galvanometer measures strength of interest or emotions aroused by a subjects
exposure to different stimuli, such as an ad or picture.
iv. Eye cameras are used to study respondents eye movements to determine at what points
their eyes focus first and how long they linger on a given item.
Sampling plans
As surveying the whole population would be too expensive & time consuming, so a sample is selected.
Sample is a segment of population selected for marketing research to represent population as a whole.
Sample should be a true representative of population and should not be biased
Types of samples:
Random sampling:
Every member has a known and equal chance of selection)
Non-random sampling:
1. Systematic (Every nth item is selected)
2. Stratified (Population is divided into mutually exclusive groups e.g. age groups and selecting random samples
from each group.
3. Multistage (Process of subdividing population and selecting sample again and again till a suitable selection is
made)
4. Quota (Different categories of populations are made and a specific quota from each category is selected)
5. Cluster (Investigators are told to examine every item in a small population that fits the required definition)
Potential faults in sampling:

Insufficient data
Unrepresentative data
Bias (where chance of occurrence is not equal)
Omission of an important item in questionnaire
Carelessness
Misinterpretation of data
3Implementing the Research Plan

This involves processing, and analyzing the information.
4Interpreting and Reporting the Findings
Distributing the information:
MkIS :
Marketing Information System represent a systematic attempt to supply continuous, useful, usable marketing
information within an organization to decision makers often in the form of a database.
Audits:
Trade audits: count of stock at wholesalers and retailers
Retail audits: count of stock at retailers only
Marketing in the Digital age
E.Business is the all electronic based information exchange within company or between companies and consumers
using following platforms:
Intranet
Extranet
Internet
Intranet is a network that connects people within a company to each other and to the company network.
Extranet connects a company with its suppliers, distributors, and other outside partners.
Internet is a vast public web of computer networks, which connects users of all types all around the world to each
other.
E.Commerce is more specific than E.Business. It is the ability to buy and sell goods and services electronically
primarily by internet.
E. Marketing is the marketing side of E.Commerce. Company efforts to communicate about, promote and sell
products and services over internet. It includes only Business and Consumers.
Advantages:
Geographical reach
Speed
Information sharing of any kind e.g. text, audio, video, animation, graphics
Shopping at home (Consumer)
No physical barriers (Consumer)
Doing business 24 hours (Business)

Paperless business (Business)
Disadvantages:
Security concerns (consumer)
Whom to complaint (consumer)
What you see is sometimes not what you get (consumer)
Sometimes physical presence is necessary e.g. smelling a perfume or fitting clothes (consumers)
Logistic, shipping, distribution and delivery challenges (business)
Availability of secure and affordable communication network
E.Business Models:
Government Business Consumer Employee
Government G2G G2B G2C G2E
Business B2G B2B B2C B2E
Consumer C2G C2B C2C X
B2C E.Commerce occurs when an average citizen interacts with a company (like Bata Pakistan or amazon.com)
through a website to buy shoes or books online or making inquiries.
B2B E.Commerce is companies doing business electronically with other businesses e.g. a business selling up, down or
across the supply chain involving business partners. Such as All Pakistan Textile Association Mills
B2E E.Commerce is use of intranet technology to handle activities that take place within a business. Using B2E
E.Commerce employees collaborate with each other, exchange data and information and access in-house database,
sales information, market news and competitive analysis.
Its need arises when branching out and spreading business across geographical areas. E.g. H/O receiving and
processing Timesheets, Expense Claims, and Absent forms.
C2C E.Commerce is consumers selling goods directly to consumers in an auction process. E.g.
EBay
Chat rooms for information and advertisement
Over personal websites
Advertisement on E.news papers
G2C E.Commerce is the use of E.Commerce technology by the government to handle activities electronically in
which govt. is involved with. E.g.
To publish and disseminate information by Govt.
Change in address, marital or family status
Submission of tax returns
To cast vote
Customization and Customerization:

Customization is individualizing the marketing offer. E.g. taking measurement of jeans for a customer.
Customerization is leaving it to individual customers to design the marketing offer, allowing customers to be
prosumers rather than consumers. E.g. adding specific features to jeans like colorful patches.
New technology in Distribution:

DRTV
Internet (B2C)
o Websites
o Email
Chapter 25 : Product
Product
A product is anything that can be offered to a market for use, or consumption and that might satisfy a want or need
such as soap.
Product includes:
Goods
Services
Other entities e.g. People, idea, places, organizations
Services are a form of product that consist of activities, benefits offered for sale that are essentially intangible and do
not result in the ownership of anything. such as a doctors exam.
Levels of Products and services:
The core product, What is the buyer really buying?

The actual product may have as many as five characteristics that combine to deliver core product benefits. They are:
Quality level..
Features
Style and design.
A brand name.
Packaging.
The augmented product includes any additional consumer services and benefits built around the core and actual
products.
b. Delivery and credit
c. Warranty
d. Installation
e. After sale service
Classification of products:
1. Consumer Products
i. Convenience
ii. Shopping
iii. Specialty
iv. Unsought
Types of consumer products

Marketing Convenience Shopping S pecialty Unsought
Consideration
Consumer buying Frequent purchase Less frequent Special effort Either no awareness
behavior Little planning purchase Little comparison or no interest
Little effort and involvement Much planning Strong brand loyalty
Little comparison Much effort & Low price sensitivity
involvement
Much comparison
Price Low Higher Very high Varies
Place Intensive distribution at Selective distribution in Exclusive distribution in only Varies
convenient locations fewer outlets one or few outlets per market
area
Promotion Mass promotion Advertising and Targeted promotion by Aggressive
personal selling producer and reseller advertising and
personal selling
Examples Tooth pastes Televisions Luxury goods e.g. Rolex Life insurance
Magazines Furniture watches Red cross blood
Clothing donation
2. Industrial (Business) Products,:

i. Material and parts
ii. Capital items
iii. Supplies and Services
Key Decisions about product:
Individual product
o Standardized or adapted Market offers can be differentiated along the lines of:
Product
Service
Channels
People
Image
o Product attributes
Tangible
Quality
Features
Style and design
Brand name
Packaging
Intangible
Image
Perceived value
o Packaging & Labeling
o Product support service
Product Line Decisions
o Product line length
Product M ix/Assortment/Portfolio Decisions
o Width (No. of product lines of a company)
o Depth (No. of items per product line)
o Consistency (how closely related the various product lines are in end use, product ion requirements,
distribution channels, or in some other way.
A brand is a name, sign, symbol, or design, or a combination of those that identifies the maker or seller of a product or
service.
Packaging is the activity of designing and producing the container or wrapper for a product.
Labeling is also part of packaging and consists of printed information appearing on or with the package
Product support services are the services that augment actual products.
A product line is a group of products that are closely related because they function in a similar manner, are sold to the
same customer group, are marketed through the same types of outlets, or fall within given price ranges.
Product line length is the number of items in the product line. Long/short depends on increase of profit by
adding/deleting items.
An organization with several product lines has a product mix.
Product-Market Matrices:
It is a simple technique used to classify a Product/Business according to the features of the product and market to
determine the
Relative positions of Businesses/Products and
Strategies for resources allocation between them.
There are 2 commonly used techniques:
1. Boston Consulting Groups Growth-Share M atrix
2. General Electric Business Screen (GEBS)
1) BCG growth-share matrix is used to evaluate a companys SBUs/Product in terms of market growth rate and
relative market share.
Star Question Mark

Needs heavy investment to Requires a lot of cash
Growth rate (%age) finance rapid growth potential (Problem Child)
Cash Cow Dog

Established, successful Enough to maintain themselves
Needs less investment No future
Relative market share
After determination of position of a SBU in BCG matrix, following strategies are available:
Build
Hold
Harvest
Divest
The BCG and other formal methods revolutionized strategic planning. Such approaches, however, have limitations:
1). They can be difficult.
2). They can be time consuming.
3). They can be costly to implement.
4). Management may find it difficult to define SBUs and measure market share
and growth.
5). The approaches focus on classifying current businesses but provide little
advice for future planning.
SBU is a unit of company that has a separate mission and objectives and that can be planned independently from other
company businesses.
2) General Electric Business Screen (GEBS):

This approach is like BCG matrix but includes a broader range of company and market factors.
Matrix classifies products according to:
Industry attractiveness (market size, market growth, competitive climate, stability of demand, ease of
market entry, industry capacity, level of investment, nature of regulation, profitability)
Company strength (market share, company image, production capacity, production costs, financial
strengths, product quality, distribution systems, control over prices/margins, benefits of patent
protection)
Classification is highly subjective assessment. Strategy for an individual SBU/Product is then suggested on the basis of
the position of the matrix.
Market attractiveness
Attractive Average Unattractive
Invest for growth Invest selectively for Develop for income
Strong growth
Business
Strength Average Invest selectively Develop selectively Harvest or Divest
and build for income
Weak Develop selectively; Harvest Divest
build on strength
Nature and Characteristics of a Service

1). Service intangibility (cannot be touched)
2). Service inseparability (from provider)
3). Service variability (standard will vary each time)
4). Service perishability (cannot be stored)
5). Service ownership (not transferred to service taker)
Marketing mix of services:

Along with 4 normal Ps, 4 extra Ps are also required i.e.
1. Personal selling (greater reassurance, information and reliance required)
2. Process
3. People (sometimes people and services are inseparable; first line importance)
4. Physical evidence ( remedy for intangibility)
Service Profit Chain:

Profit of service firm is linked with satisfaction of employees and customers
i. Internal service quality
ii. Satisfied and productive service employees
iii. Greater service value
iv. Satisfied and loyal customers
v. Healthy service profits and growth
It requires more than just traditional external marketing:
External marketing (B2C)
Internal marketing (B2E)
Interactive marketing (E2C)
Product Development: (New Product)
What is a new product:

That opens up an entirely new market
That replaces an existing product
That broadens the market of an existing product.
When an old product can be new:

Introduced into a new market
Packaged in different way
Different marketing approach is used
Mix variable is changed.
Degree of newness:
Unquestionably new product
Partially new product
Major product change
Minor product change
Sources for new products:

Licensing
Internal product development
Customers
External innovators
Competition
Acquisition
Academic institutions
Patent agents
Why so many new products fail:

1). Overestimated market size.
2). Poorly designed product.
3). Poorly priced, placed, promoted or positioned.
4). Result based on poor market research findings.
5). The costs of producing the product may have been higher than expected.
6). Sometimes competitors fight back harder than expected.
5 product characteristics affecting rate of adoption for new product:

Relative advantage i.e. new technology making it superior
Compatible with values and experience of potential consumers
Ease of understand and use
Trial option
Communicability of results of using product.
Product Development Process
1. Idea generation
which is the systematic search for new product ideas rather than haphazard?
a. Internal sources (R&D)
b. External sources (customers, competitors, distributors, suppliers)
2. Idea screening
Evaluation against criteria to spot good ideas and drop poor
3. Concept development and testing
Product concept is a detailed version of the new-product idea stated in meaningful consumer terms.
Concept testing involves testing the concepts with a group of target consumers to find out if the concepts have
strong consumer appeal.
4. Marketing strategy development
A marketing strategy statement should be produced. This is a statement of the planned strategy for a new product
that outlines the target market, positioning, market mix and market share, long term sales, profit goals and
marketing budget for the first few years.
5. Business analysis
Review of the sales, costs, and profit projections for a new product to find out whether these factors satisfy the
companys objectives
6. Product development
Developing the product concept into a physical product in order to ensure that the product idea can be turned into
a workable product
7. Test marketing
The basic purpose is to test the product itself in real markets.
8. Commercialization
Introducing a new product into the market.
Stages of Product Life Cycle (PLC)

1. Introduction
2. Growth
3. Maturity
4. Decline
Exceptions are Fad, Style, and Fashions.
Strategies change with change in stage of PLC.
Product life cycle- Characteristics, objectives and strategies: [very nice table]
Introduction Growth Maturity Decline

Characteristics
Sales Low Rapidly rising Peak sales Declining sales
Cost High per customer Average cost per Low cost per Low cost per
customer customer customer
Profit Negative Rising High profit Declining profit
Customers Innovators Early adopters Middle majority Laggards
Competitors Few Growing Stable number Declining number
beginning to decline
Marketing objectives Create product Maximize market Maximize profit Reduce expenditure
awareness and trial share defending market and milk the brand
share
Strategies
Product Offer Basic product Offer product Diversify brand and Phase out weak
extensions, service, model items or
quality Repositioning
Price Use cost-plus Price to Price to match or Cut price
penetrate/skim beat competitors
market
Place Selective distribution Intensive distribution More intensive Go selective; phase
distribution out unprofitable
Promotion Use heavy sales Reduce to take Increase to Reduce to minimal
promotion advantage of heavy encourage brand level
demand switching
Targeting Early adopters (build Mass market (build Stress brand Reduce to level
awareness) awareness) differences and needed to retain
benefits core-loyals
Assessment of PLC:
Regular review of existing products
Analysis of past trends
History of other products
Market research
Analysis of competitors
Estimate of future life and profitability should be discussed with experts
R&D Deptt. ----------------------Product life
Marketing staff-------------------Price and demand
Management accountant------- Cost
Decide to continue, stop or change strategy.
Criticism on PLC approach:

Relevant only for products where consumer demand is high
Underlying stage of PLC is determined by marketing actions.
Stages can not be easily defined.
S shape does not always occur in PLC

Strategic decisions can change PLC
Packaging:
Functions of packaging:
Protection
Quality standard (e.g. expiry)
Distribution
Selling (Advertising, attractive, motivating,)
User convenience (value depicting)
Conforms to govt. regulations (e.g. ingredients, price, expiry etc.)
Usually goods are packaged in more than one layer.
Qualities required of a packing:

Size and variety should be minimized.
Attractive and distinctive to target consumer.
All functions of packing are also required.
Cost effective
Fitting for storage purposes
Product Portfolio Planning

All product lines and items that company offer for sale [Overall product range of organization]
Width (No of product lines carried by Company)
Depth (No of items carried divided by No of product lines)
Consistency (closeness of items in range in terms of marketing/production characteristics)
Chapter 26 : Price
PRICING CONSIDERATIONS AND APPROACHES

Price is the sum of the values that consumer exchange for the benefits of having or using the product.
Only element to produce revenues
Most flexible element
Could be Fixed or Dynamic
Price Setting
Cost
Competition
Demand (Elastic / Inelastic)
Common Pricing Mistakes

1). Pricing is too cost-oriented.
2). Prices are not revised often enough to reflect market changes.
3). Prices do not take into account the other elements of the marketing mix.
4). Prices are not varied for different products, market segments, and purchase occasions.
Internal Factors Affecting Pricing Decisions

1. Marketing objectives
2. Marketing mix strategies
3. Costs
4. Organizational considerations
1. Marketing objectives:
Survival
Current profit maximization
Market share leadership
Product quality leadership
Other objectives
To prevent competitors
To keep loyalty and support of reseller
To avoid govt. intervention
To create excitement or draw attention of new customers
To help the sale of other product in product line
2. Marketing mix strategy:

Price decisions must be coordinated with product design, place, and promotion decisions to form a consistent and
effective marketing program.
Companies often make their pricing decisions first and then base other marketing-mix decisions on the prices that they
want to charge.
Target costing is positioning of product on price and then tailoring other marketing decisions to the price they want to
charge.
But remember that consumers rarely buy on price alone.
3. Costs
Set the floor for the price that the company can charge. (price below this is not acceptable)
Companies want to charge a price that covers all its costs for producing, distributing, and selling the product, and
provides a fair rate of return for its effort and risk.
To price wisely, management needs to know how its costs vary with levels of production.
The experience curve (or the learning curve) indicates that average cost drops with accumulated production
experience
4. Organizational considerations.
Management must decide within the organization who should set prices.
Small companies: CEO or top management
Large companies: Divisional or product line managers
Some companies have pricing departments
External Factors Affecting Pricing Decisions

1) Nature of market and demand
2) Competitors costs, prices, and offers
3) Other environmental elements
1) Nature of market and demand

Pure competition No single buyer or seller has much effect on the going market price.
Monopolistic competition M arket consists of many buyers and sellers who trade over a range of prices because they
can differentiate their products.
Oligopolistic competition Market consists of a few sellers who are highly sensitive to each others pricing and
marketing strategies.
Pure monopoly Monopolists do not always charge a full price because:
1]. They do not want to attract competition.
2]. They want to penetrate the market faster.
3]. They fear government regulation.
Price-demand relationship
Demand curve
Price elasticity of demand
Factors affecting Demand / Price elasticity of demand/ Consumer choice
Price
Price of substitute and complementary goods
Consumer income
Taste and fashion
Advertisement and Training
After sale services and grant of credit
2) Competitors costs, prices, and offers
3) Other environmental elements

a). Economic conditions (such as boom or recession, inflation, or interest rates).
b). Resellers policies (reactions) must be considered especially if they do not match the suppliers.
c). The government (because of its regulatory power) must be considered.
d). Social concerns may affect the firms short-term sales, market share, and profit goals.
General Pricing Approaches/Methods

Price will be set between 2 extremes.
Roof / Ceiling i.e. Customers value
Floor i.e. Cost
Price will be set between these 2 levels after consideration of
Competitors prices and
Other internal and external factors
Approaches
Cost based pricing
Cost plus pricing
Break even or target profit pricing
Customer value based pricing (i.e. demand based )
Competitive based pricing
Going rate pricing
Sealed bid pricing
Why Cost based pricing is popular

1. Sellers are more certain about cost than demand
2. Price is simplified being tied to cost.
3. Fairer to both buyer and seller
4. Price competition is minimized
New-Product Pricing Strategies
Market-Skimming Pricing
Setting a high price for a new product to skim maximum revenues layer by layer from segments
willing to pay the high price.
Product image must support price
Competitors must not be able to enter the market
Prices are lowered when demand falls
Market-Penetration Pricing
Setting a low price for a new product to attract a large number of buyers and a large market
share.
High volume reduces cost
Spare resources are utilized
Eliminates competition
May promote related products.
Product Mix Pricing Strategies
Product Line Pricing

Setting price steps between product line items.
Kodak prices different types of films at different level.
Optional-Product Pricing
Pricing optional or accessory products sold with the main product
Car buyer may choose to order power windows, cruise control, and a CD changer.
Captive- product pricing.
Setting a price for products that must be used along with a main product.
Examples of captive products are blade with razors, game cassettes with system.
By-Product Pricing
Pricing low-value by-products to get rid of them
Product Bundle Pricing
Pricing bundles of products sold together
Theater and support teams sell season tickets.
Price adjustment strategies:

To account for various customer differences and situation differences
Discount and allowance pricing Reduction in price to reward customer response for paying or promoting product.
Segmented pricing Adjusting prices to allow for differences in customers, products, or locations.
Psychological pricing Seller considers the psychology of prices and not simply the economics e.g. consumers usually
perceive higher priced products as having higher quality in the absence of past experience
or information.
Promotional pricing Temporarily reducing pricing to promote short term sales.
Geographical pricing Adjusting prices to account for the geographic location of customers.
International pricing Adjusting prices for international markets.
Assessing and responding to competitors price changes
Has competitor cut prices?

N
Hold current Y
price and Will lower price negatively affect our market share and profit?
continue to N
Y
monitor Can/Should affective action be taken?
competitors Y
prices N
Reduce price
Raise perceived quality
Improve quality and reduce price
Launch low-pri ce fighting brand
Some other concepts that could not be covered here in Details

Price Leadership
Price elasticity of demand
Absorption & M arginal Costing and breakeven analysis
Chapter 27 : Place
Place / Distribution Channels / Delivery System
Place is selection of distribution channels to deliver goods to consumers.
Key issues in Distribution Channel::

Coverage and density (Exclusive, Selective, Intensive)
Channel length (no. of intermediaries between consumer and producer)
Power and alignment of different elements
Logistic and physical distribution
Support and after sale service
Channel design decision (Customer, Product characteristics, Distributor characteristics, Channel
choosed by competitors, Suppliers own characteristics)
Nature and Importance and Functions of Marketing Channels:
Marketing Channel (distribution channel) is a set of interdependent organizations (intermediaries) involved in the
process of making a product or service available for use or consumption by consumer or business user. Each
organization performs a specialized and specified role.
Importance includes:
1. Channel decisions affect other marketing decisions
2. Competitive advantage could be gained.
3. Involves long term commitments to other firms
4. Channel members add value through
a. Their contacts, experience, specialization and scale (economies) of operation.
b. Matching supply and demand
c. Bridging Time, Place and Possession gap
Functions performed by members of marketing channel:
Functions that help to complete transactions:

1. Information (Marketing research and intelligence information)
2. Promotion (Developing and spreading persuasive communication)
3. Reselling (Finding and communicating with prospective buyers)
4. Matching (shaping and fitting to the buyers needs e.g. assembling, packing)
5. Negotiation
Functions that help to fulfill the completed transactions:

6. Physical distribution (Transportation, storing and Inventory management)
7. Financing (Acquiring and using funds)
8. Risk taking (Assuming the risk of carrying out the channel work)
You can eliminate middle man, but not middle mans functions
Types of Distribution channels:
Direct distribution channel has no intermediary.

Intermediaries dont get their share.
Intermediaries dont get dominant
Own sales force is best for geographically centered buyers.
Indirect distribution channel has one or more intermediaries.

Where resources are insufficient to finance large sales force.
Where no local knowledge of market
Suitable for geographically spread buyers.
Types of Distributors:
a) Franchisees:
Trade in name of parent in exchange of initial fee + share of sales volume
b) Distributors/Dealers:
Buy and resell at profit
Dealing in narrow range of products;
Sometimes exclusive distribution or dealing only one manufacturer;
Also provide after sale services.
c) Agents: (vs. Dealers)

Consigned for commission on sale)
d) Wholesaling:
Selling goods to business buyers
e) Retailing:
Selling goods to consumer buyers
f) Multiple Stores:
Sell under the own label brand name
How do channel firms interact and organize to do the work of the channel:
Channel Conflict is disagreement among marketing channel members on goals, roles and rewards (who should do
what for what reward). It may be
Horizontal, conflict among firms at same level of channel e.g. dealers may complain that others are
pricing too low or selling beyond their territory.
Vertical, conflict among firms at different level of channel e.g. conflict with dealers when opening
online stores even though for hard to reach customers.
Disintermediation is eliminating or replacing intermediaries. e.g. opening online stores
Marketing logistic and Supply Chain Management (SCM):
Marketing logistic (or physical distribution) involves planning, implementing and controlling the physical flows of
goods, services form points of origin to points of consumption.
Marketing logistic addresses whole Supply Chain Management i.e.
Outbound distribution (moving product form factory to reseller and ultimately to consumers)
Downstream
Inbound distribution (moving products from supplier to factory) Upstream
Revere distribution (moving broken, unwanted or excess products returned by consumers or
resellers)
Major logistic functions/ Functions in distribution process:

Warehousing
o Production and consumption cycles rarely match.
o A company must decide, how many, what types and where
o Company might use either storage ware house or distribution centers.
Inventory management
o Managers must maintain balance between too little and too much inventory.
o Just in time requires accurate forecasting along with fast, frequent and flexible delivery
o Just in time substantial cost saving in carrying and handling cost and low obsolescence.
Logistic information management, In VMI (Vendor Managed Inventory) customer share real-time
data on sales and current inventory levels with supplier and supplier then takes full responsibility
for managing inventories and deliveries.
Transportation
Promotion
Display
New technology in Distribution:

DRTV
Internet (B2C)
o Websites
o Email
Chapter 28 : Promotion
Two basic strategies of Promotion:
Push strategy using sales force to push the product through the channels, the producer promotes the product to
wholesalers, the wholesalers promote to the retailers, and the retailers promote to the final consumers.
Pull strategy spending a lot on advertising and consumer promotion to build up consumer demand; if successful,
consumers will ask their retailers for the product, the retailers will ask the wholesalers, and the wholesalers will ask the
producers.
Communication media
1. Personal communication channels, through which people communicate directly with each other.
i. Face to face
ii. Person to audience
iii. Over telephone
iv. Through mail
v. Through internet chat
2. Nonpersonal communication channels, media that carry messages without personal contact or feedback.
i. Print media (newspapers, magazines)
ii. Broadcast media (radio, television)
iii. Display media (signs, posters)
iv. Online media (online services, Websites)
Marketing communication mix or Promotional mix

It is a blend of
A. Advertising
B. Personal selling
C. Sales promotion
D. Direct Marketing and
E. Public relations tools
That a company uses to communicate with its customers.
A range is better than only one.
A) Advertising:
Any paid form of nonpersonal presentation and promotion of ideas, goods, or services by an identified sponsor
Advertising objectives (AIDA) are as follows:

1. Informative advertising
a. To communicate information
b. To create awareness
c. In Early stage of PLC or on modification
2. Persuasive advertising
a. To create a desire for a product and to stimulate actual purchase
b. In growth stage of PLC
3. Reminder advertising
a. Reinforcing knowledge and
b. Reminding of benefits
c. In M aturity stage of PLC
Advertising media
Above the line (Press, Radio, TV, Cinema)
Below the line (Direct mail, Exhibition, Package design, M erchandizing)
Advantages (Vs. Personal selling):

Mass communication
Expressive advertisement
Standardization and legitimacy
Seller is able to repeat a message many times
Disadvantages (Vs. Personal selling)

Costly
One way communication
Impersonal
Not so persuasive
B) Personal Selling (face to face via sales force):

Personal presentation by the firms sales force for the purpose of making sales and building customer relationships
i.e. paid form of personal communication
Sales force structures:
1. Salary only
2. Salary with bonus
3. Commission only
C) Sales Promotion:
Marketing activities other than personal, selling & advertising that stimulates customer purchasing
Short-term incentives to encourage the purchase or sale of a product or service.
Major tools are:
1. Samples
2. Coupons
3. Rebates
4. Premiums (buy 2 get 1 free)
5. Contests, sweepstakes, and games
6. Free gifts
Objectives of sales promotion:

To increase in sales revenue
To launch a new product
To attract new customers
To attract resellers to stock
To clear out old stock
Counteraction for competitors
D) Direct Marketing: (one to one marketing)

Direct connections with carefully targeted individual consumers to obtain and immediate response and cultivate
lasting customer relationships
It is the use of mail, telephone, fax, email, internet and other tools to communicate directly with specific consumers.
Characteristics of Direct marketing:

Non public
Immediate and customized
Interactive
Forms of direct marketing:

1. Face to face selling
2. Telephone marketing
i. Outbound calls
ii. Inbound calls (toll free numbers)
3. Catalog marketing
4. Direct mail marketing
e) Public relations:
Building good relations with the companys various publics by obtaining favorable publicity, and building up a good
corporate image
Publicity is non-paid, non-personal communication dealing mass audience.
Planning a Promotion campaign:

Identify the target audience
Specify the promotional message
Select media
Schedule media
Set the promotional budget
Evaluate promotional effectiveness
Branding:
Expenditures on promotion gives rise to brands.
A Brand is a name, term, sign, symbol or design intended to identify the product of a seller to differentiate it from
those of competitors.
Reasons for branding:

Product differentiation
Conveying lot of information quickly and concisely
Advertisement needs a brand name.
The more similar a product is to competing goods; the more branding is necessary.
It facilitates self selection.
It reduces price sensitivity.
Brand loyalty gives control over marketing strategy.
Other products (i.e. new flavors/sizes) can be introduced into brand name/range. (Brand extension)
Eases personal selling
Eases market segmentation
Brand strategies:
Brand extension
Multi branding (different names for similar nature goods serving similar consumer habits)
Product----------------Names----------------Brands in each name
Family branding
Relationship Marketing: (Keeping customers; not getting customers)

Sale is not end of process; but start of relationship.
It is easy, cheaper and profitable to retain old customers than to make new customers because:
Old are valuable
Old have trust in company
Old are satisfied.
Key account management: (Key Customer Database)

Like relationship marketing but more specific
It refers to how an organization manages its relationship with those customers identified as key to the
organization in achieving its objectives.
Factors used to identify a key account:
Historic value of purchases
Expected future purchases
Other competitive factors
o Status within the marketplace
o Personal relationship of people
o To prevent a competitor getting a hold in market
Extra services given to key account
Time
Finance
Procedure
Hospitality
Auditing Customer satisfaction: (why customers are not satisfied ? )

Customer satisfaction surveys
Work won and lost
Changes in market shares
Revenue from newly released products
Rude and unhelpful staff
A policy is to encourage customers to complain( 96% do not)
Technology Development Interactive marketing:

Interactive marketing in instant communication and responses between promoter and customers. It may be called
sometimes as Computerized Personal Selling e.g.
DRTV (Direct Response Television)
Interactive Internet websites
Interactive Kiosk
Part F : International Business

Theories on International Trade
Scarce resource is a resource for which the quantity demanded at a nil price would exceed the available supply.
4 scarce resources are Land, Labor, Capital and Enterprise.
Scarcity is the excess of human wants over what can be produced.
Production Possibility Curve illustrates limits of possible production of two products within given resources.
Opportunity Cost is the cost of sacrificed alternative.
Mercantilism:
Export > Import
Zero-sum game (benefit at the expense of other)
Absolute advantage:
Absolute advantage is producing goods more efficiently than any other country.
Country should produce goods for which they have an absolute advantage and then trade these goods for
other goods produced by other countries.
Comparative advantage:
One step further than absolute theory introducing concept of opportunity cost.
Country should specialize in the production of those goods in which it has lowest opportunity cost.
Why countries avoid specialization

Comparative advantage is never stable.
Diversification protects fall in world demand.
Agriculture industry is subject to uncertainties of climate.
Import restrictions are possible by other governments to develop self sufficiency.
Multi nationals may assemble or manufacture in different countries for political or logistic reasons.
Competitive advantage (national):

Porter states that Comparative Advantage is too general concept to explain success of individual companies and
industries.
He believes 4 conditions (diamonds) within a country help firms to compete.i.e.
1. Factor conditions
2. Demand conditions
3. Firm strategy, structure and rivalry
4. Related and supported industries
Orientations of International Business Management (by Perlmutter)
Ethnocentrism:
Company focuses on domestic market and export is secondary.
No local research, marketing mix is standardized.
Same products with same market programs.
Polycentrism:
Each country is unique and requires customization.
Product and market programs must match with local environment.
Company establishes independent local subsidiaries and decentralizes marketing management.
Geocentrism:
Synthesis of two approaches.
Think globally, act locally.
Integrated approach to create a global strategy that is fully responsive to local market.
Regiocentrism:
It is Geocentricism but that it recognizes regional differences.
Evolution and Reasons of Global Business (by Ohmae)
Evolution:
Ethnocentrism
1. Export (extension of home sales)
2. Overseas branches (when turnover is large, greater investment)
3. Overseas production (exploits cheap labor and reduces exporting cost)
Polycentrism
4. Insiderisation (full functional organization having production and distribution system is set -up overseas,
company is multinational)
Geocentrism
5. The Global Company
Reasons:
5 Cs
1. Customer (market convergence)
2. Company (economies of scale)
3. Competition (Keeping up)
4. Currency (exchange rate risk)
5. Country (Absolute and comparative advantage, local orientation)
Other reasons:
For Govt. For Company

Surplus deficit balance Large market encouraging economies of scale.
Political advantages Increased competition at home market
To support govt. policies (e.g. Balance of Payment) Mature or declining home market
To dispose excessive/discontinued products.
Exchange rate:
Purchasing Power Parity theory calculates exchange rate based on relative cost of purchasing same basket of goods in
two countries.
A currencys exchange rate is also determined by Demand and Supply. They in turn are determined by Inflation,
Speculation, Interest rates, Govt. policies and Balance of Payment.
Exchange rate risk is the risk that foreign currency will exchange in smaller amount of domestic currency in future.
Types:
This can arise under any of three Exchange Rate Systems i.e.
1. Fixed (Central bank interferes to fix the rate)
2. Managed (Like fixed but allowed to vary between preset limits)
3. Floating (depends on supply and demand)
Managing exchange risk:

Hedging devices
Flow of money in both direction
Design for global business (by Bartlett and Ghoshal )
Low requirement for local adaptation High requirement for local adaptation and
and responsiveness responsiveness
High pressure to Global environment Transitional environment
Globalize Geocentric orientation Polycentric orientation
Global product divisions Integrated system and structure
Chemicals, Construction Pharmaceutical, motor vehicles
(focus of organization is heteroarchy)
Low Pressure to International Environment Multinational environment
Globalize Ethnocentric orientation Polycentric orientation
International division National or regional divisions
Paper, textile Fast food, tobacco
Planning to enter Foreign Market
Phase 1: Preliminary analysis and screening:

Evaluation of available markets (to exclude obvious unfit)
Applying screening criteria to evaluate remaining markets (criteria might include Profit, Market Share,
Quality)
Analysis of environment conditions in each country
Porters 5 forces analysis
Choosing country (i.e. Target Market)
Screening Process consists of : (by Jeannet and Hennessy)
Marco level research

Environmental analysis
Climate and demographic
General M arket factors
Size of market
Regulations
Culture
Micro level research
Competition
Transportation
Healthcare
Education
Labor
Target Market
Phase 2: Adapting the marketing mix to target markets:

Deciding Adaptation or Standardization
Phase 3: Developing the marketing plan:

Situation analysis
Objectives
Strategic options
Budgets
Action programs
Phase 4: Implementation and Control

Objectives and Standards
Assign responsibilities
Measure performance
Corrective actions
Problems in International Planning:

Foreigners dont know local culture, feelings, attitudes
Local level problems
Different attitude to product and marketing task
Lack of strategic outlook and marketing expertise
Resentment at being bossed around
Unclear goals
Inadequate control
HR considerations to be managed at local level
Poor IS and Communication
Diversification of countries over population, income, development, education etc.
Time horizon
International Marketing Research
Objectives:
Availability and quality of information is enhanced for planning.
Change in customers needs and preferences is timely observed.
Competitors plan and strategy
Finding of new markets

Opportunities and Threats
Trends of market
SLEPT analysis
Technology Quality of information
Information sources for International Markets:

Human sources
Managers of subsidiaries, associates, branches (relevant + unpublished + biased)
Consumers, Customers, Distributors, Suppliers and even Competitors
Documentary sources (Publications etc., not to the point)
Direct sources
Direct observation and specialist knowledge
Direct observation and background information
Personal experience supporting indirect information
Export publications
Export Market Information Centers
IMR Process:
Monitoring
Passive information gathering (M arket not yet targeted)
Identification of market for which information needs to be gathered.
Investigation (accurate assessment of market opportunities)
Existing demand; where customers needs are already being served.
Latent demand; where potential customers are currently recognized but are not being
served.
Incipient demand; where there is foreseeable, but not a present, market for products.
Research
Define scope of project
Define projects, information needs
Evaluate available sources for required information
Undertake desk research
Undertake field research
Using IMR data:

To estimate patterns of demand/consumption in individual markets by
Demand pattern analysis
Income elasticity of demand
To compare patterns of demand/consumption in different markets by
Comparative analysis
Intermarket timing differences
To identify clusters of markets with similar characteristics
To identify strategically equivalent segments
Problems in IMR:
Secondary data problems
Lack of data
Not timely, out of date information gathered on unpredictable schedules
Not comparable, different data definitions in different countries
Lack of reliability
Response problems (Peoples unwillingness to provide info)
Tax evasion and avoidance of responsibilities
Wish to preserve secrecy
Cultural taboos and norms
General problems (developed vs. undeveloped)
No suitable list (sampling frame)
Inadequate communication infrastructure
Low level of literacy
Problems of language and comprehension
Entry in International Market

Entry in International Market could be through:
Foreign Direct Investment/Overseas production
100% owned subsidiary
Joint venture
o Industrial cooperation/Contractual (fixed period)
o Joint-equity venture (continued)
Export
Direct (greater control but lesser market knowledge)
o To Branch office
o To Agents between importer and exporter
o To Wholesaler, Retailer or Consumers
Indirect (greater market knowledge but lesser control)
o Through Export houses
o Through Specialist export management firms
o Through UK buying offices of foreign stores and government
o Through Complimentary Export (i.e. Piggy back export)
Licensing
Giving right to use production process for Royalty.
Critical analysis of entries
Foreign Direct Investment is direct investment in business operations in a foreign country. It may be:
1. Horizontal FDI (investment in same industry abroad)
2. Vertical FDI (investment in an industry abroad which provides input to firms domestic operations.
i. Backward Integration (to acquire raw material)
ii. Forward Integration (to establish final product)
Selection criteria for entry mode: (Factors to be considered)
Mode varies among firms, according to markets and over time.
Firms marketing objectives (in relation to volume, time scale and coverage)
Low ----------export
High----------produce locally
Firms size
Small--------export
Mode availability
Govt. may restrict modes
Mode quality
Qualified, trained staff is necessary for export of high technology goods.
Human Resource Requirement
If staff is suitable---------Direct export
If staff is not suitable----Indirect export (agent based)
Market information feedback
Is received in case of Direct export.
Learning curve requirement
Heavy investment calls for learning curve i.e. close observation through direct export before
investment.
Political risks
Control needs
FDI vs. Export vs. License:
FDI(Foreign Direct Investment) Export License
Lower production cost Concentration on Avoids costs and hassle of
Better understanding of production setting up overseas.
Market and Customers. Economies of scale Rapid penetration
Lower transportation cost. Consistency of product No investment
Overcomes tariff and non- quality No Political risk, No
tariff barriers. International experiment on Protectionism
Advantages
small scale
Easiest, cheapest, most
common
Political risks are avoided.
Political risks. Protectionism Small cash inflows

Partnership Exchange rates Quality standards issues
Managing overseas Usually less involvement Indirect competition where
Key Issues
facilities both export
Usually more involvement Licensee may become
but subsidiary may act competitor (by transfer of
independent. knowledge and technology)
If FDI, 100% owned subsidiary or Joint venture:
Wholly owned subsidiary (as compared to Joint venture)

Advantages: Key Issues:
No sharing in profit Heavy investment needed
No sharing in decision making Suitable managers not available
No communication problem Govt. discourages 100% ownership
Operation of integrated international No local knowledge
systems
Varied experience
Protectionism (discouraging imports) by Govt.

Government and Local producers get benefit not consumers.
1. Tariff (tax on imports)
2. Non-tariff barriers
a. Official
i. Subsidy
ii. Import Quotas/ Export Restraint
iii. Local Content Requirement (specific fraction must be produced locally)
iv. Anti-dumping policies (e.g. special duty)
v. Administrative policies (informal instruments or bureaucratic rules)
vi. Embargo (total ban)
b. Un-Official
i. Quality and inspection procedures
ii. Packing safety and documentation standards
iii. Restriction of distribution
3. Exchange control (making difficult to obtain required currency)
4. Exchange rate policies (e.g. competitive devaluation of currency)
Dumping is selling goods in foreign market below cost or market value to:
Unload excessive production
Capture market.
Political risk in FDI for multinationals

Political risk is the risk that political actions will affect the position and value of a company.
How Political actions can affect:

1. Tariff and non-tariff barriers e.g. Quotas
2. Govt. interference in contracts
3. Imposition of
i. Increased tax rates
ii. Price controls
iii. Exchange controls through
a. Rationing supply of foreign exchange
b. Blocking funds of foreign parent (counter ways)
Dividend
Selling goods/services (volume and transfer pricing)
Royalty
Loan and high interest rates
Management charges
4. Nationalization
How to cope with political risk:

1. Negotiation (agreement) with Government
i. Transfer of capital
ii. Access to local finance

iii. Govt. interference
iv. Taxation
v. Transfer policy
2. Insurance
3. Contacts with markets
4. Management structure (joint venture or giving control to local)
5. Financial management (obtain finance locally)
6. Production strategies (giving control to local to produce Or to supply chain management)
Regional trading groups/blocks--- A way to overcome Protectionism and Political risks

Regional trading group promotes trading between members of group. Following are common types:
Free trade area:
Internal barriers to trade are removed.
Each company determines its own external trade policy.
Customs Union:
Internal barriers to trade are removed.
Common external trade policy is adopted.
Common Market:
Similar to customs union except it allows factors of production to move freely between countries.
Economic Union:
It is Common market but more closer integration including establishment of common currency and tax rates.
Taxation issues in FDI

By structuring the group, tax advantages could be availed.
Foreign tax credit avoids double taxation in both countries.
Tax havens is a country with exceptionally low or even no income tax but there should be:
Stable currency and Govt.
Adequate financial services support facilities.
Capital S tructure Decisions

Equity or borrowing
If equity, Parents or Subsidiarys
If externally, from host or other country
What Currency (same to avoid fluctuation and symmetry)
How much and what period
Factors influencing choice of financing:
1. Local finance cost
2. Taxation system
3. Restriction on dividend remittance
4. Flexibility in repayment
Global Capital M arket

International banks (provide financial and other services)
Factors affecting development of international banks:
1. Globalization (Trade of securities world wide e.g. Euro equity)
2. Securitization (Debt via issuance of securities e.g. Euro bonds, Euro commercial papers)
3. Deregulation (national barriers)
4. Disintermediation (directly from investor)
5. Increased foreign exchange and interest rate volatility
Benefits of international banks:

1. Financing of foreign trade
2. Financing of capital projects
3. Provision for advice and information
4. Providing full local banking services in different countries
5. International Cash M anagement services
6. Trading in foreign exchange and currency options
7. Participation in syndicated loan facility
8. Lending and borrowing in foreign and euro currency markets
9. Underwriting of euro bonds
Borrowing in Euro market Vs. Domestic market

Domestic banking is subject to tighter regulation
Domestic banking is subject to security requirements
Euro finance may have
i. Flexibility in draw-down dates
ii. Early redemption penalties
iii. Commitment fee
Euro is suitable for very large finance requirements
Euro Currency:
Following types of currency is available in Euro Markets:
1. Euro equity
2. Euro bond
3. Euro currency
4. Euro Currency loan
5. Euro credits
6. Commercial papers
7. Syndicated credits
8. MOFs
Euro equity issue:

Issue of equity in a market outside the companys own domestic market.
Not developed like Euro bonds, hence sweeteners are added e.g. Rolling Put Option
Euro bond:
Currency differs country of issue (underwritten by international syndicate of banks and sold internationally)
Euro bonds are suitable when:
Large organization with excellent credit rating
Requires long term loan for capital expansion
Requires borrowing not subject to national exchange control
Interest rates are fixed or floating with minimum.
Investors of Eurobonds will be concerned about:

Marketability
Anonymity
Return on Investment
Security
Euro currency:
Eurocurrency is any currency banked outside of its country of origin e.g. Eurodollars are dollars banked outside United
States.
Euro Currency loan:

UK company borrows in US $ from a UK bank, it is a Euro Dollar loan.
Euro credits: like Euro currency loan
Commercial papers:
An example of Securitization.
Short term financial instruments
Issued in the form of unsecured promissory notes with a fixed maturity date.
Issued in bearer form
Issued on discount basis
Companies with net capital of 25 million can issue it.
Syndicated credit market:

Provides credit at high rates over LIBOR.
Suitable for
Takeover bids
Govt. borrowings
Project financing
Credit is a facility whereas Loan is a transaction.
MOFs:
Multiple Options Facilities (MOF) comprise variety of instruments through which company can raise funds and
include:
Note Issuance Facilities (NIF)
Revolving Underwriting Facilities (RUF)
Counter Trade
Counter trade is a trade of goods and services for other goods and services.
Types/arrangements of Counter Trade:

Barter (direct exchange of goods/services between two parties without a cash transaction)
Counter purchase (A reciprocal buying agreement between two parties whereby seller also undertakes to
purchase a certain amount of merchandize from other country)
Offset (like counter purchase but party can purchase from any firm in the country)
Switch Trading (A third party trading house buys the firms counter purchase credits and sells them to
another firm that can better use them)
Buyback (One country supplies capital goods and receives its output as partial/full payment)
Advantages of Counter Trade:

1. A mode to finance exports when other modes are not available.
2. Competitive advantage over parties preferring cash transactions.
Disadvantages of Counter Trade:

1. Goods received may be unusable, poor quality, or unprofitable.
2. Expensive and time consuming to develop a separate in-house trading department to dispose those goods
3. Unrealistically high value may be impose on goods.
4. Cost may exceed expectation. (Cost includes Consultancy fee, Discount, Bank fee, Insurance, Any fee paid to
third party)
Why Countries do Counter trade:

Countries lack commercial credit or convertible FCY.
Countries use it as an instrument of political, economical policies (e.g. Balance of Trade, relationships)
To boost developing manufacturing industries
To obtain more trade or new technology
Which Countries do Counter trade:

Oil exporting companies.
Less developed and developing countries.
Unusual in industrial countries with exception of defense, aviation and big advanced technology.
Financial problems in Foreign Trade

Foreign Trade raises special financial problems i.e.
Bad debts risk is greater
Large investment appears in receivable and stocks
Reducing bad debts risk:

1. Export factoring
2. Forfeiting
3. Documentary Credit (L/C)
4. International Credit Unions
5. Export Credit Guarantee Schemes
Export factoring:
Factoring company provides administration of:
Client invoicing
Sales accounting
Debt collection
Credit protection
Forfeiting: (providing medium term export finance)

Exporter sends Capital goods to overseas buyer who wants medium term loan.
Buyer makes down payment and issues notes/ accepts draft.

Notes/drafts are guaranteed by Availising bank.
Exporter discounts them from Forfeiting bank.
Documentary Credit (L/C):

1. Importer orders.
2. Exporter accepts.
3. Importers bank issues L/C to exporters bank.
4. Exporters bank authorizes exporter to ship merchandize.
5. Exporter ships and gives documents and draft to own bank.
6. Exporters bank sends documents to importers bank and gets the draft accepted.
7. Importers bank informs importer about arrival of documents and merchandize.
8. Importer pays (or not pays) his bank.
9. On maturity, importers bank pays to exporters bank who pays to exporter.
International Credit Unions:

These are organizations/associations of finance houses/banks in different countries having reciprocal arrangements for
providing installment credit finance.
Export Credit Guarantee Scheme: (where L/C is not acceptable by strong importer)
Preshipment Facility:
Guarantee is issued to banks to indemnify them against losses on finance given to exporters to manufacture
and process goods for export.
Risks covered are:
o Insolvency of exporter
o Inability to repay or deliver on due date
Postshipment Facility:
Exporter submits application with required particulars to ECGS.
ECGS will issue a guarantee specifying maximum amount covered and rate of premium.
Risks covered are:
o Insolvency of buyer
o Political and Economic risks
o Risks of refusal to take delivery
o Risk of any loss (beyond control of buyer or exporter)
Reducing large investment in Receivables and Stocks:
Advance against collection
Documentary credit
Negotiation of bills or cheques
International Marketing Mix Policies
International place policies:

Exclusive
Selective
Intensive
International product policies:

Standardized/Undifferentiated marketing (same product, price, marketing program for all markets)
Adapted/Differentiated marketing
Concentrated marketing
Standardization Vs. Adaptation: whether to adopt or not is linked with promotional issues.
Product Standardization Product Adapted
Occasional exporters Single product meets the same
Communication Also major companies need in all markets but need to be
Standardization seeking economies of adapted.
scale
Communication Adaptation Same product for Costly
different uses in Required to exploit market fully
different countries
Barriers to International Standardization:

Law
Price control
Product regulation
Distribution restrictions
Advertising and media restrictions
Competition
Nature of existing products
Competitors prices
Culture
Consumers tastes and habits
Language and attitude differences
Economy
Income level
Media availability
Domestic business as compared to International business:

Social factors:
No language problem.
Homogenous market.
Rules of game are understood.
Similar purchasing habits.
Economic factors:
Single currency
Uniform financial climate
Stable business environment
Competitive factors:
Data collection is easy and accurate.
Political factors:
Relatively unimportant
Technological factors:
Standard production and measurement systems
Motivating international agents:

Communication
Assuring long term business relationships
Regular and frequent personal contacts
Exclusivity
Hofstedes model of national culture:

Hofstede pointed out that countries differ on following dimensions:
1. Power distance how for superiors are expected to exercise power
2. Uncertainty avoidance some cultures prefer clarity and order while others prefer novelty
3. Individualism in some cultures, it is individual achievement what matters.
4. Masculinity in such culture, roles of sexes are clearly differentiated.
Hofstede grouped countries into eight clusters:

1. More developed Latin
2. Less developed Latin
3. More developed Asian
4. Less developed Asian
5. Near Eastern
6. Germanic
7. Anglo
8. Nordic
Type of industry and size of company is also important.
Finance in International Business

Treasureship:
Treasureship is the function used with provision and use of finance. It covers
Provision of short term borrowings/ capital
Foreign Currency management
Banking
Collection
Money market investment
Treasury department should be cost center or profit center?
Cash Management:
Centralized Cash Management:

1. Avoids mix of cash Surplus and overdraft.
2. Large volumes of cash are available to invest
3. Any borrowing could be arranged in bulk at lower rates.
4. Foreign currency risk management in improved.
5. Specialist Treasury Department will employ experts.
Decentralized Cash Management:
1. Great autonomy
2. Quick and more response to needs of individual operating units
3. More opportunities to invest on short-term basis.
Float is amount of money tied up between initialization and finalization of payment.
Measures to reduce Float include:
Lodgment delay should be minimum
BACS
CHAPS
Standing orders/ direct debit for regular payments
Lock boxes for international payments
Cash Pooling is netting of Debit and Credit balances with same bank to reduce interest cost.
How Cash surplus arises

By profitability
By low capital expenditures
By receipt from selling part of business
How Cash surplus is utilized

Takeover bids
Buy back of shares
Short term investments
o Banks
o Investment in listed shares
o Investment in debt instruments
Certificate of Deposits (certificates by bank acknowledging deposit for specified
time)
Treasury bills (IOUs by govt. issued weekly for 91 days to finance govt. projects)
Eligible bank bills (IOUs by those top rated banks whose bill Bank of England
agrees to buy)
Bills of exchange
Local authority bonds
Commercial papers
Certificate of Deposits, Treasury bills and Eligible bank bills are Negotiable and Resalable.
International payment modes:

Cheque
Lock boxes (speeds up payment by cheque)
Bills of exchange
Bank draft (cheque by a bank drawn on one of its own account)
Mail Transfer
It is a written payment order authenticated by official in sending bank which
Instructs by Airmail to pay a certain sum of money to a beneficiary.
Telegraphic Transfer
Like mail transfer but instructions are sent by cable or telex instead of by airmail.
Speeder, Costly and Confidentiality than M ail Transfer.
SWIFT (Society for Worldwide Interbank Financial Telecommunication)
Provides rapid electronic fund transfer
In addition to banks, users include Security houses, Exchanges, Money brokers, Fund
managers etc.
International M oney Orders
Transfer pricing:
Basis include
Standard Cost
Marginal Cost/ Full Cost/ Opportunity Cost
Market Price
Market Price discount
Negotiated Price (any other basis)
Advantages of having Market Price as Transfer Price Disadvantages of having Market Price as Transfer Price
1. For buying department 1. Market prices may be temporary.
i. Better quality of services 2. Disincentive to use spare resources as
ii. Greater flexibility compared to incremental cost approach.
iii. Dependability of supply 3. Buying department may enforce discount.
2. For both departments 4. Many products dont have equivalent market
i. Lower cost of administration, selling prices.
and transportation
HRM in International Business
HRM issues in International Business:

1. Expatriate or local management
Expatriate (as compared to local)

Advantages: Key Issues:
Poor educational/technical Costs more
opportunities in local market Lesser local knowledge
Greater control Culture shock
Better central communication Language/Communication
Corporate picture is clear training required
2. Recruitment and Training

3. Career management within firm
4. Appraisal schemes
5. Communication with staff (e-mails, conferences and news letters etc.)
Changes in World marketplace: (by Jerry Wind)

Globalization of businesses
Science and Technology development
Strategic alliances
Changing customer value and behavior
Increased scrutiny of business decisions by govt. and public.
Increased deregulation
Changing business practices (e.g. outsourcing,, downsizing, reengineering)
Changing social and business relationship between companies, employees, customers and other
stakeholders.
Porters national competitive advantage:
There are 4 determinants of national competitive advantage.
Factor conditions
These are a countrys endowment of inputs to production e.g. Human Resources, Physical resources, Capital,
Knowledge and infrastructure.
These factors could be
Basic (inherited and creation involves less investment e.g. natural resources) or
Advanced (include modern digital communications, highly educated people and research laboratories
etc.)
Demand conditions
The home market determines how firms perceive, interpret and respond to buyer needs.
Related and supported industries
Competitive success in one industry in liked to success in related industries.
Firm strategy, structure and rivalry
Annexure A
Topic PBP Reference Topic PBP Reference

Chapter 4 & 5 : Strategic Management : Chapter 22 : The Evolution of Marketing
Traditional and other models Concept
Levels of strategy Figure Marketing management Explanation
Traditional approach to make strategy Explanation Elements of marketing mix Promotion Details
Activities affecting Crafting strategy Explanation Value-chain Explanation & examples
Learning bas ed strategy Explanation Marketing process Details
Competitive strategy Overview Chapter 23 : Strategi c Marketing &
Planning
Chapter 6 : SWOT Analysis and Gap Analysis Development in segment ation Details
Porters 5 Forces model Figure & Benefits of market segm entation Details
Explanation
Chapter 7 : Performan ce Appraisal & Target Market Explanation
Analysis
Measuring perform ance of profit center. Explanation & Evaluating market segm ents porters 5 forces Explanation
exampl es
Inflation Detail Competitive strategy options Details
Chapter 9 : Mergers and Acquisition Identi fying gap in market through positioning Explanation
Strategic alliances benefits to franchis er Details & Chapter 24 : Marketing Research
exampl es
Chapter 10 : Corporate Re-organi zation Research procedures - Analysis of data Explanation
Management buy-out Details Collecting secondary data internal and Details
external databas es
Chapter 11 : Ethics and Social Responsibility Questionnaires Details
Social responsibility Favors - Externality Explanation Marketing Information System (MkIS) Explanation
Chapter 13 :Human Res ource Management Marketing Decision Support System Explanation
Di fferent concepts - Pg : 298 Market Sensing Explanation
Termination Details Service Quality (SERVQUAL) Explanation
Chapter 14 : Measurement and Performan ce Sales Forecasting [Forecasting demands ] Explanation
Factors affecting personality di fferences Concepts Marketing Communication Explanation
Job restructuring & redesign Details Chapter 25 : Product
Employee appraisal working arrangem ents and Explanation & Nature and charact eristics of a service Explanation
types o f organi zations exampl es
Types of incentive schemes Details Stages of product life cycl e Details
Employee appraisal Methods of apprais al Details Product Port folio Planning Explanation
Chapter : 15 Training, Appraisal and Career Chapter 26 : Pri ce
Management
Competence Details Price leadership Explanation & Exampl e
Chapter 16 : Management and Human Price Elasticity of Demand Explanation & Exampl e
Resource`
Trait theory Explanation Absorption and Marginal costing, and Explanation
breakeven analysis
Leadership Explanation & Chapter 27 : Place
exampl es
Discipline Disciplinary problems in Details Channel conflict Horizontal and Vertical Explanation
organi zations Confli ct
Retirement, Resignation, Redundancy Unfair Details Consideration in distribution Details
Dismissal
Chapter 17 : Groups in Organization Channel design decision Explanation
Effects of conflicts within groups Groups & Details Benefits of direct and indirect sales Details
Departments
Chapter 18 : Strategi es for Critical periods Distribution strategy Explanation
Corporat e Decline 3 types of decline Explanation Marketing and Information System Details
Chapter 19 & 20 : Change Management and Customer Dynami cs and internet as Details
Changing Environment distribution channel
Nature of strat egic change Explanation Chapter 28 : Promotion
Model for change Explanation Push and Pull Strategy Details
Approaches to implement change Explanation Merchandising Explanation
Force Field Analysis Explanation Planning a promotion campaign Details
Change process Details Relationship Marketing Details
Pressure groups Explanation & Chapter : International Business
exampl es
Chap 20 : Strategic intelligence Details Competitive advant age Details
Chap 20 : Environmental dat a Details Protectionism Explanation
*Details Topic included in these notes and needs further detail from PBP
*Explanation Topic not included in these notes at all so needs to be read from PBP
*Example For examples relating to the topic, see PBP
*Figure For graphical representation relating to the topic, see PBP

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Business Managemnt Past Papers Analysis
Management of CSR & Strategic

International
www.gcaofficial.org Marketing
(Marks)
Chapter of
PBP
HRM (Marks)
Chapter
of PBP
the working
environment
Chapter
of PBP
Business
Chapter
of PBP
Business
Ethics
Chapter Mangament Chapter General
of PBP & Planning of PBP (Marks)
Total
Marks
(Marks)
(Marks) (Marks) ( Marks)
Summer 2008 21 21 26 13 10 26 7 9 23 6,4 13 100
Winter 2008 27 21,18 29 11 3 16 23 22,24 11 9 7 6 100
Summer 2009 38.5 Mainly 21 33 13,11,12 16 22,24 2.5 9 10 3 100
Winter 2009
Summer 2010
Weighted Average for 5 attempts
Winter 2010
Summer 2011
Winter 2011
30
24
28.1
26
19.5
42
21,19,20
19,21
21,18
20,21
21,19,20
33
32
30.6
31
26
28
13,11
13
11
13,11
13,11
GCA 0.6
11.5 16,17
17
26
18.4
13
21
19
24,23
22,24,26
24,26
23,24,26
22,23,24
4.1
6
2.5
3.5
9
9
9
14
10.8
15
19.5
4.5
6,2
1,3
3,5
6
6
18
7.4
9
3
100
100
100
100
100
Summer 2012 19 21 28 11,12,13,15 10 17 20 26,22 5 9 18 8,3 100
Winter 2012 35 20,21 29 11,13 6 17 16 22 10 4 4 100
Weighted Average for 5 attempts 28.3 28.4 5.5 17.8 3.4 13.4 3.2
Chapters of PBP shown infront of marks are for the guidance purposes.Its explanation is as follows like in summer 2012 there are 19 marks from the marketing and the reference of chapter 21 is given infront of
it, this chapter reference does not mean that all 19 marks questions are from ch 21. In most of the cases a concept of question tested belongs to one chapter but characterisitics or merits ,demerits or any other
thing enquired in the question is of general nature which cannot be found in the book and the student have to generate answer at its own based on the knowledge.
So the point to be noted is that selective study should not be done at all, however the chapters from which there is frequent testing must be focused well.
As it can be seen from the above done analysis that marketing and HRM accounts upto around 60% of the paper in each attempt, so while peparing for BM these two areas should be prepared first. And
students must try to refer the supplementary books recommended in the syllabus.
Similarly international business accounts upto almost 20 % of the paper and it has four main chapters in the PBP which should be prepared vey well and the rest of its chapter just need reading as it can be seen
from the above analysis.
Past papers , their suggested answers and the examiner comments are the keys for the effective preparation without which paper cannot be passed, so these are given in next working sheets for the
convenience of the students , so that they can find all these things at one place and their precious time could be save.
Topic wise past paper question BM
Marketing
Summer 2008
Q1 The sponsors of Seaside Resorts Limited (SRL) are considering to set up a major
project on the sea coast at a distance of 85 kilometers east of Karachi. The project
would have facilities of guest houses, swimming pools, golf courses, tennis and squash
courts and scuba diving. It would also have modern facilities of conference rooms and
auditoriums for holding business meetings, training courses, conferences and
symposia.
This first-of-its-kind project in Pakistan would involve substantial capital investment
and also require well-planned physical facilities and selection of state-of-the-art
specialized equipment. A cadre of highly trained and dedicated work force having
diversified skills would be crucial for the successful operations of the project. The
sponsors who were seized with these overwhelming problems were considering
acquiring the services of an expatriate executive to implement this project and operate
it in the initial years. However, the uncertainties associated with the hiring of an
individual on contract basis and entrusting him with such far-reaching authorities and
responsibilities was a source of grave apprehension for the sponsors.
In the meantime, Oriental Resorts Inc, a Thailand-based company with experience of
managing of similar high profile luxury resort projects in several far-eastern countries
has approached SRL and offered to provide guidance and expertise for implementation
and operation of the proposed project under a franchise arrangement.
Explain what is a Franchise Arrangement? Also identify four advantages that would
accrue to SRL by entering into a Franchise Arrangement with Oriental Resorts Inc. (09)
Q2 Lazzat Foods Limited is engaged in the business of manufacture of packaged

masalas, jellies and jams. The Companys sales have been stagnant since the past
two years due to intense competition and aggressive promotion by the
competitors in the domestic market. The Management has proposed to explore
new markets abroad and has suggested that the Company consider participation
in a Trade Fair to be held in Colombo. Give four advantages which are expected
to be achieved by the Companys participation in the Trade Fair. (04)
Q3 State six reasons why companies enter into international alliances. Give two
examples of industries in which international alliances are most common and
identify a logical reason for such an alliance. (08)
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Winter 2008
Q4 It is widely realized that companies pass through various stages of growth during the
different periods of their existence. State four dominant characteristics which would be
apparent in a company which is in:
(a) the start-up or initial stage of its business;
(b) the rapid and dynamic growth stage of its existing business. (06)
Q5 Corporate and Business Strategies of marketing-focused organizations operating in

different product lines pursue entirely different approaches depending on customer,
competitor and inter-functional orientations. The features of each of the different
types of orientations are:
Customer Orientation: Entire focus on customer e.g. Jeweler boutique selling
expensive designer jewelry to a select niche market.
Competitor Orientation: Emphasis on plans and actions of competitors as only few
competitors dominate the market e.g. branded edible oil.
Inter-functional
Coordination:
Marketing is considered to be an all-encompassing
company-wide responsibility and all the departments are
geared to contribute towards the marketing efforts e.g. a
shipyard manufacturing ocean-going vessels for major
foreign buyers.
List four characteristics which, in your opinion, would determine the direction of
marketing policies and efforts in each of the above three types of business orientations. (09)
Q6 Strategists involved in the marketing of Fast Moving Consumer Goods (FMCG) keep a
close watch on the various stages of the Life Cycle of their products and adjust their
strategies accordingly.
List the type of marketing-mix strategies of Products, Pricing, Distribution and Sales
Promotion which should be pursued to meet the requirements of the products which are
in the introduction, growth, maturity and decline stages of their product life cycle. (12)
Summer 2009
Q7 Euro Motors Limited is engaged in the business of manufacturing and marketing of an

extended line of motor cars catering to the varied needs of a wide segment of the
automobile market. The Company operates in a dynamic market environment dominated
by four well-entrenched and strong companies competing aggressively to achieve
leadership status and expand their respective share of the market.
List six performance indicators, which in your opinion, would help to measure the success
of marketing strategy of Euro Motors Limited. (06)
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Q8 Companies which seek expansion of business can achieve their objectives either through
organic/internal expansion or by pursuing acquisition strategies.
(a) Explain the key differences between strategies of expansion by organic/internal
growth and by acquisition. (06)
(b) Give any four reasons why organizations generally prefer to achieve expansion
through internal growth and not through policies of acquisition. (06)
Q9 Companies which pursue market-driven business strategies consider that sponsorship of

high profile and attractive events are communication techniques to create awareness and
affiliation of their companies and brands with the target market. These companies enter
into agreements and provide financial and non-financial support for social, cultural,
literary and sports events to a group, organization or an individual celebrity in anticipation
of creation of a lasting awareness of the companys name or its brand among the
audience. Sponsorship by leading companies, as a promotional alternative, has gained
world-wide prominence in recent years.
Briefly describe six main objectives which are envisaged to be achieved through
sponsorship of such high profile and attractive events? (09)
Q 10 Briefly explain the following

Pull Strategy of Promotion
Licensing
Benchmarking (7.5)
Winter 2009
Q 11 Red Balloon Clothing Limited (RBCL) is engaged in the business of manufacturing a wide
range of children clothing since the past six years. The Company has built a reputation for
good quality products of latest designs and its brand name is very popular in the middle
class segment of the market. The Company strongly believes in a policy of giving value
for the customers money. At present, RBCL markets its products through a widely
dispersed network of independent retailers who sell the companys brands along with the
products of other manufacturers.
RBCL is considering a proposal of forward integration and establishing its own chain of
retail outlets for sale of its products. RBCL would however, continue to sell its products
through the network of existing retailers also.
You are required to identify and explain briefly the different factors which RBCL should
examine while evaluating the proposal for establishing its own network of retail outlets. (10)
Q 12 Although Strategies of Cost Leadership and Product/Service Differentiation appear to be

highly attractive, many companies are often not able to achieve much success because they
lack the necessary capabilities to implement these strategies successfully.
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(a) Explain what do you understand by the term Cost Leadership Strategy. (02)
(b) What is meant by Product/Service Differentiation Strategy? (02)
(c) In your opinion what kind of capabilities are of crucial importance for the successful
implementation of a Product/Service Differentiation Strategy? (04)
Q 13 (a) List and explain briefly any four important packaging features which would
influence the decision of a consumer to purchase an edible consumer product. (06)
(b) Market researchers often place reliance on external databases as the information can
be obtained readily with minimum of effort and at a low cost. However, experienced
market researchers are aware of the limitations of the external databases and use them
discreetly on a selective basis realizing fully the shortcomings of the information.
(i) State four limitations of using external databases.
(ii) Identify one specific situation in which it may not be advisable to use external
databases. Give reason for your selection of the particular example. (06)
Summer 2010
Q 14 Dandy Candies Limited (DCL) are manufacturers of a wide range of chocolates, candies and
sweets catering primarily to the market segment comprising of children in the age group of
6-15 years. DCLs products are well accepted in the market in Karachi and its adjoining
metropolitan areas and two of its main brands are quite popular in the middle class segment
of the market.
The management has now realized that in spite of substantial capital investment in fixed
assets and good quality of its products, DCL has not been able to exploit the full potential of
the rapidly growing size of the market and achieve high level of operating capacity.
The Board has recently appointed a new Marketing Director and has given him a target to
increase DCLs annual sales from the current level of Rs. 600 million approximately in each
of the preceding 2 years to Rs. 1200 million in the next 3 years. Achievement of this target
would launch DCL in the league of key market players and also significantly increase its
profitability. The incoming Marketing Director has a track record of good performance in
the consumer goods industry and achieving high sales targets by pursuing aggressive
marketing policies through deep insight of the market dynamics. The Marketing Director is
confident that he would be able to achieve the sales target set by the Board of DCL.
Briefly explain the Marketing Penetration Strategies which the Marketing Director should
pursue to achieve the sales target set by the Board. (10)
Q 15 State five different situations in which it would be advisable for a firm to pursue
policies of Unrelated Diversification. (05)
Q 16 In any market of significant size for products which have a widely diversified and dispersed
customer base there are a large number of firms, each, competing for its respective share of
the market by pursuing different competitive marketing strategies. In such a market
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environment, an individual firm has to identify its distinctive role and positioning which
then determines the type of marketing strategy which it would pursue to achieve its
objectives.
You are required to list the distinctive characteristics of a firm which pursues Competitive
Marketing Strategies of:
(a) A Market Leader
(b) A Market Challenger
(c) A Market Follower and
(d) A Niche Marketer. (09)
Winter 2010
Q 17 List and explain briefly four factors which in your opinion create Exit Barriers and prevent
existing participants from quitting a loss-incurring industry. (08 marks)
Q 18 (a) A well-established and successful Chinese company engaged in the business of manufacturing
of a wide range of home appliances such as refrigerators, washing machines, microwave
ovens and assorted juicers and blenders intends to launch its products in Pakistan. The
Companys management is of the opinion that its products have significant cost and quality
advantages and can capture 4-5 percent share of Pakistans market in 5 years.
Identify and list at least twelve key parameters which should be considered by the company
for an objective evaluation of the Export Market Potential. (06 marks)
Note: Only list the key parameters explanations are not required.
(b) Some companies enter into Licensing arrangements with the overseas companies as an
alternative to direct exporting. Identify the advantages that such companies seek to achieve by
following this strategy. (05 marks)
Q 19 (a) Explain the meaning of Brand Equity. (02 marks)
(b) Silkfinish Paints Limited (SPL) are manufacturers of a wide variety of superior quality paints
which are used in interior and exterior finishing of residential, commercial and industrial
buildings. SPL intends to launch an aggressive Pull Strategy to counter competition from
new entrants who are offering lucrative margins to the retailers to promote their products
which are inferior in quality and priced much below the prices of SPLs products.
(i) What is meant by Pull Strategy? (02 marks)
(ii) Explain briefly what advantages SPL is seeking to achieve by launching an aggressive
Pull Strategy. (03 marks)
Summer 2011
Q 20 Identify the force of competition which is relevant in the context of Michael Porters Five
Forces Model of Competition in each of the scenarios presented below. Substantiate your
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answer by highlighting the salient features of the Model of Competition selected by you in
each of these scenarios.
(i) Four companies of similar size and strength are engaged in the manufacture of
detergent powder for washing clothes. These companies are key market players and
jointly share 95% of the aggregate market which is not expected to witness any
significant growth in the foreseeable future.
(ii) Soundhealth Pharmaceuticals and Goodcare Pharmaceuticals are manufacturers of
two new medicines for treatment of cancer. The medicines have been developed after a
long period of research at a very substantial R&D cost and are highly effective.
Both the existing manufacturers are earning exceptionally high profits in a market
which is expected to witness growth in the future.
(iii) Lucky Coal Mines Limited is the sole supplier of coal to a cement plant located in close
proximity to the mines. The cement plant requires substantial quantities of coal for
firing of its kilns. Quality of this coal is most suitable for the cement plant and also costeffective
due to low transportation costs. Lucky Coal Mines has several buyers who are
willing to purchase the coal because of its high calorific value. (09 marks)
Q 21 (a) What is meant by Market Research? (02 marks)

(b) Give four basic reasons why companies conduct market research. (04 marks)
Q 22 (a) What is Market Penetration Policy? Identify the conditions in which Market Penetration
Policy may be pursued to achieve optimum results. (06 marks)
(b) Explain briefly what you understand by the term Market Segmentation. State the criteria
which are essential for classification of markets in different segments. (05 marks)
Q 23 Briefly discuss the following:

Backward Integration Strategy (2.5 marks)
Winter 2011
Q 24 Explain briefly the following types of Growth Strategies pursued by Business Organisations. Give
one example of each of these types of strategies.
(a) Horizontal Integration Strategy (04 marks)
(b) Forward Integration Strategy (04 marks)
(c) Conglomerate Growth Strategy (04 marks)
Q 25 (i) Briefly explain what is meant by a Differentiation Strategy. (02 marks)

(ii) List six types of skills and resources which are critical for the pursuance of a successful
Differentiation Strategy. (03 marks)
Q 26 In highly competitive business environments dominated by relatively few equally powerful

players, the participants make concerted efforts to implement effective Marketing Intelligence
Systems.
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(i) What is meant by the term Marketing Intelligence System? (03 marks)
(ii) List five different sources which help in the creation of an effective Marketing Intelligence
System. (05 marks)
Q 27 (a) Foresight Electronics is a knowledge-based company and is known for its ability to
manufacture innovative and new-to-the-market electronic products and sell them in specifically
identified niche markets. The company follows a Market Skimming Strategy to achieve its
profitability objectives.
Narrate four conditions which are essential for Foresight Electronics to be able to successfully
adopt its Market Skimming strategy. (06 marks)
(b) Household Furniture Co. are manufacturers of a wide range of furniture products used
primarily by customers in the middle income group.
Identify four different types of conditions in which it would be advantageous for the firm to
pursue Market Penetration Strategy. (04 marks)
Q 28 Horizon Limited (HL) is engaged in the business of manufacturing and marketing of a wide range of
consumer durable products. The companys products are in different stages of their Product Life
Cycles. Consequently, HL pursues different promotional strategies for products depending on the
stage of their Product Life Cycles.
State the types of Promotional Strategies which HL may pursue for marketing of its wide range of
products in the (i) Introduction, (ii) Growth, (iii) Maturity and (iv) Declining stages of their Product
Life Cycle. (07 marks)
Summer 2012
Q 29 Consumer Products are classified by marketers in different categories as follows:

(i) Convenience Products detergents, packaged milk, newspapers, soft drinks, etc
(ii) Shopping Products readymade clothes, furniture, carpets, shoes, etc
(iii) Speciality Products televisions, refrigerators, branded watches, etc
The marketing mix of each category of Consumer Products comprises of the following ingredients:
Price Customer Buying Behaviour

less frequent purchase/keen comparison of price,
expensive quality and style
low price special purchase effort/brand loyalty
high price frequent purchase/less planning
Distribution Promotion
distribution in few outlets advertising and personal selling by producer/resellers
widespread distribution at convenient
locations mass promotion/advertising by producer
outlets in specialised markets/shopping malls carefully targeted promotion by producer/resellers
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You are required to identify the most appropriate characteristics of each ingredient of the marketing
mix for the above categories of Consumer Products. (09 marks)
Q 30 Firms ranking in second and third positions in highly competitive industries demonstrate significant
business strengths and hold a sizeable share of the aggregate market. Often these firms have to make
strategic marketing decisions whether to challenge the Market Leader to achieve the top position or
to continue to hold on to their Market Follower status.
Discuss the concepts of Market Challenger Strategy and Market Follower Strategy and briefly
explain the circumstances in which a firm would prefer to pursue a particular market strategy.
(10 marks)
Q 31 Winter 2012
(a) What is meant by the term Customer Database? (02)

(b) Why, in your opinion, it is useful for a commercial bank planning to launch its credit card
marketing scheme to create, maintain and update the database of its existing and prospective
customers? (07)
Q Identify the strategies/policies/objectives which are being pursued in each of the following cases:
(i) Poshak Fashions (PF) are designers and manufacturers of superfine cotton garments and
have their two outlets in Karachi and Lahore. PF produces only limited quantities of their
exclusive designs of garments for the narrow niche market of the most fashion-conscious
customers. PF introduces new designs of garments for the coming season and the unsold
inventory at the end of the previous season is sold at lower prices to other retailers in the
country after removing PFs prestigious labels.
PF is pursuing a __________ market strategy.
(ii) Super Beverages believes that the world is one big market for its products and its various
subsidiaries and divisions pursue a uniform marketing strategy for sale of its products in
different countries.
Super Beverages has adopted a __________ strategy for marketing its products in different
countries.
(iii) Sarmad Group is a pioneer in the textile industry in the country. The second generation
entrepreneurs of this Group have ambitious plans to launch new ventures in
telecommunications, electronic media and real estate development.
The Group is now seeking to follow __________ strategy.
(iv) To press for their demands, employees of Citizens Bank Limited have decided to work
strictly according to the terms of their contract of employment and refuse to perform any
extra tasks, resulting in slow down of banking services and causing inconvenience to
customers.
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The employees of Citizens Bank Limited are pursuing __________ policy.
(v) Good Meats has recently established several retail outlets to sell selected cuts of choice meats
and establish its own brand name in a high growth market before new competitors enter this
market and set up their business on similar lines.
Good Meats wants to seize the __________ advantage of this market.
(vi) Neptune Chemicals, a manufacturer of industrial chemicals, has established independent

units who would be responsible for development of their own marketing strategies within the
companys overall market and customer focus to be able to serve the needs of the various
categories of customers more efficiently.
The independent units are __________ of Neptune Chemicals. (06)
Q 32 Briefly explain the salient features of the terms which are usually incorporated in a typical
Franchising Agreement. Give one example of a Franchise Relationship between an
international company and a Pakistani enterprise. (05)
Q 33 Progressive business organizations, which have substantial share of the market, are
continuously engaged in the planning of their marketing strategies to achieve specific
objectives in their existing markets and also to identify and seize opportunities in new
markets.
Explain briefly the various objectives which these organizations aim to achieve through their
marketing strategies in their existing markets as well as in the new markets. (07)
Q 34 Zest Dairy Company Limited intends to launch a new line of frozen fruit yogurts in the major
cities which would cater to the tastes of the customers for packaged food products. Assume that
you are their advertising media advisor and have to give a presentation on the advantages and
disadvantages/limitations of placing advertisements for the new yogurt products on each of the
following media channels:
(i) Television
(ii) Widely Circulated Newspapers and
(iii) Billboards (Hoardings)
Identify and list three advantages and disadvantages/limitations of placement of advertisements of
each of these different types of media. Explanations and illustrations are not required. ( 0 8 )
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HRM
Summer 2008
Q1 As a Senior Manager in the Human Resources Department of Apex Bank Limited, you
have been entrusted with the task of conducting a Disciplinary Enquiry against
Mr. Hameed Khan, an Assistant Manager in the Bank Square Branch. The Branch
Manager, who is a highly respected senior officer with considerable experience, has
leveled charges of aggressive attitude and gross misbehavior against the Assistant
Manager in dealings with his colleagues. What steps would you take to ensure that the
Disciplinary Enquiry is conducted in a fair and impartial manner and the final outcome
is based on principles of equity? (12)
Q2 The governments generally promulgate comprehensive laws for health, safety

and security of the workers. State five objectives which are expected to be
achieved through these laws. (05)
Q3 Safety Engineers are convinced that industrial accidents are attributable to

inadequate Human, Environmental and Mechanical/Technical security factors.
How can responsible management effectively reduce the risks of accidents in
each of these categories? (09)
Winter 2008
Q4 Orient Cement Limited (OCL) aspires to be included in the category of a select group of
progressive companies in the country and is considering a proposal for introducing
significant changes in its labour welfare policies which would offer tangible benefits to
the workers. This would include construction of a housing colony, provision of medical
benefits, subsidized canteen facilities, besides payment of partial fees for dependent
children of the employees.
In your opinion what important benefits would accrue to OCL by introducing welfare
oriented labour policies? (06)
Q5 Shakeel Ahmed, a competent and hard working young officer, is at the initial stage of
his professional career in a leading insurance company. He has an ambitious goal to
reach senior management position within a period of seven years. He intends to plan his
career path well in advance and pursue a Personal Development Plan (PDP) with a high
degree of zeal and commitment.
(a) What do you understand by Personal Development Plan? (03)
(b) What are the principal advantages of adopting and pursuing a well-formulated
Personal Development Plan? (04)
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Q6 New Age Automobile Company Limited intends to diversify its operations by

establishing a separate division for manufacture of a less-expensive brand of tractors.
The tractors would be used primarily by agriculturists having small farm-holdings. The
Management is contemplating whether to promote personnel from the automobile
division for certain middle-level technical positions in the tractor division and induct
new entry level personnel in the automobile division, or alternatively recruit foremen
level personnel from external sources for the tractor division by advertising for the
positions in the news media.
Narrate and explain briefly the advantages and disadvantages of internal promotion and
transfer of foremen level personnel for the tractor division from the automobile division. (10)
Q7 Briefly Explain
(b) Core Competence (3)
(d) Job Description (3)
Summer 2009
Q8 Apollo Mining Company Limited owns and operates integrated facilities of mining of
coal and iron ore along with power generation and distribution facilities. Although these
facilities have been developed at a substantial investment cost, the management has been
indifferent to the conditions of its workforce of 1500 employees. A major accident in the
coal mines, which occurred recently, resulting in the death of 120 workers, has triggered
wide-spread resentment and agitation among the workers due to the poor safety conditions
and they have demanded strict compliance with the Mine Safety Rules and Regulations.
Due to the aggressive attitude of the striking workers and to safeguard its assets, the
Company has deployed private armed guards at a considerable cost. After 28 days of
complete closure of all mining and other business activities due to stand-off and strikes,
the management and the Workers Union have agreed to enter into negotiations through a
process of collective bargaining.
(a) State four factors which, in your opinion, are responsible for the indifferent attitude
of the management of Apollo Mining Company Limited towards its workers.
(b) Briefly describe five different measures that the management should take to satisfy
the demands of the workers and help to achieve a conducive working environment. (09)
Q9 You have been entrusted with the task of hiring an individual for the position of General
Manager Marketing for Good Health Dairies Limited. The company has been established
recently and is in the process of establishing marketing network for distribution of its
products throughout the country.
Identify and explain briefly, what kinds of managerial competencies would you examine
and seek in the prospective candidates for the position. (09)
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Q 10 (a) Rapidly changing economic, technology and social environment along with the
pressures to produce more value-added products and services at lower costs compel
organizations to adopt measures to utilize their resources in the most efficient
manner. Although Human Resources are not reflected as assets in the Financial
Statements, they play a critical role in the achievement of the Companys business
strategies.
Explain how sound Human Resource Management and Planning policies can play
an important role to enable a Company to successfully achieve its business
objectives. (08)
(b) Although managers at various levels are frequently involved in the Performance
Appraisal of their subordinates, there are certain weaknesses in this process.
Knowledgeable Human Resource Managers are aware of these weaknesses and take
measures to minimize their adverse impact.
In your opinion what kind of limitations should be kept in perspective by Human
Resource Manger while reviewing Performance Appraisal Reports? (06)
Q 11 According to Maslows Theory of Hierarchy of Human Needs, all human beings have
different kinds of needs. Competent marketing managers must have insight in the
Hierarchy of Needs to be able to create appropriate promotional strategies for successful
marketing of their products.
In the context of Maslows Theory of Human Needs, which type of human needs would
be satisfied by the following:
(i) health insurance (ii) cosmetics
(iii) flowers for a sick friend (iv) tandoori nan
(v) burglar alarm system in a bungalow (vi) rare and expensive work of art
(vii) membership of an exclusive golf club (viii) wages received by a daily worker
(ix) sponsoring of a charitable hospital (x) a luxury car (05)
Winter 2009
Q 12 It is observed that work-related stress often pose a heavy burden in organizations and is
manifested by frequent absenteeism, late-coming, accidents and decline in the ability of
employees to perform in an efficient manner. In these situations, Employee Counseling can
help to create a secure and an enabling environment for mitigating the adverse effects of
stress on employees and enabling them to perform at peak levels of efficiency.
Identify the scope of Employee Counseling and explain briefly how such counseling
sessions can help employees to reduce work stress. (08)
Q 13 Excel Chemicals Limited (ECL) owns and operates facilities for the manufacture of
industrial chemicals, including various types of highly corrosive acids. The Companys
operations involve processes of procurement, production, packaging, storage and
transportation of chemicals which can result in serious fire, physical injuries and other
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environmental and health hazards in the event of any lapses in the safety procedures.
Identify and explain briefly six safety steps which should be adopted and implemented by
the management of ECL as a responsible employer. (06)
Q 14 The pursuit of goals of achieving cost economies and operating with lean and more flat
organizational structures has resulted in creation of an environment in which the staff at the
managerial levels are required to perform with greater business competencies and
responsibilities. Consequently, managers at various levels have to acquire all-round
competencies of external business environment awareness as well as deep understanding of
the concepts of internal business management to be able to fulfill their responsibilities and
perform in an intensely challenging and rapidly changing business environment.
You are required to identify four different types of competencies each of external business
environment and internal business management which in your opinion are most important
for the present-day managers to enable them to perform successfully in the prevailing
corporate environment. (08)
Q 14 A Capital Bank Limited is a leading financial institution and is well-known for its strength in
rendering highly efficient professional services to its customers and keeping ahead of the
competitors. The Bank follows a policy of recruiting staff at the entry level after careful
evaluation of the qualifications of the candidates, their potential for advancement,
professional aptitude and career objectives. The staff is groomed and entrusted with
increasing responsibilities after careful career-path planning for each employee. The Bank
operates in a highly competitive environment where the skills, knowledge and commitment
of its human resources are of critical importance for the success of its business. The
competitors are always on the lookout to identify professional staff and hire them at more
attractive compensation packages.
Required:
(a) What do you understand by the term Employee Compensation Package? (02)
(b) List and explain the essential steps involved in the formulation and implementation of
a well-conceived Employee Compensation Strategy which the Bank should
incorporate in developing its overall HR strategy. (09)
Summer 2010
Q 15 (a) Identify the important functions which have to be performed by the Human Resources
Department of a commercial bank which has a strength of 17,500 employees deployed
in a network of 800 branches located throughout the country. The commercial bank is a
well-reputed organization known for its fair business policies, progressive outlook and
concern for development of a competent and well motivated cadre of employees. (06)
(b) Research Studies by Human Resource experts have shown that successful organizations
create internal work environments in which the employees are able to operate at their
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optimal levels of productivity.
What are the important Human Resource Management practices which, in your opinion,
contribute towards workforce optimization in a manufacturing plant with several
integrated workshops and departments? (09)
Q 16 What are the four main types of information that a properly designed Job Application
Form is expected to provide to the recruiter in the preliminary process of screening of a
prospective candidate? (04)
Q 17 a) Describe briefly the following methods of selection of candidates:

(i) Group/Panel Interview
(ii) Structured Interview (05)
(b) State two advantages of each of the above methods of interviews. (04)
Q 18 List eight Health and Safety hazards which are often faced by workers in a typical
manufacturing environment. (04)
Winter 2010
Q 19 (a) Recruitment of the right type of staff is of critical importance for the short term as well as the
long-term success of an organisation. Induction of unsuitable employees creates difficulties
for an organization in the achievement of its goals, undermines the morale of other
employees and has adverse effects on the individuals themselves as they are misfit and unable
to make worthwhile contribution towards the organization.
Briefly describe qualities that a skilled recruiter should possess in order to be able to evaluate
prospective candidates for recruitment in a performanceoriented organization. (06 marks)
(b) A leading hospital which has a network of facilities at several locations in Karachi and also in
other cities intends to invite applications for the posts of Laboratory Technicians at its various
facilities.
List six important items that should be contained in an advertisement to be placed by the
hospital in a newspaper having wide circulation in several cities in the country. (03 marks)
Q 20 (a)The role of Human Resource Managers in companies which have a very large workforce has
assumed increasing importance and they are now more closely involved and proactive in the
Formulation and Implementation of Strategies at the corporate level.
State the areas of specific responsibilities which fall in the domain of a Senior Human
Resource Manager involved in the Formulation and Implementation of overall Corporate
Strategy of an integrated textile mill having over 15,000 employees in various cadres. (1
(b) What is meant by a Strategic Business Unit (SBU)? (03 marks)
Q 21 One common factor which distinguishes well-managed and highly profitable service-oriented
companies from their competitors is the competence and commitment of their human resources.
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The top companies assign very high priority towards the training and development of their staff
and genuinely consider their human resources as their key strategic assets. In these companies,
training and up-gradation of the quality of human resources, at all levels, is a continuous
endeavour with active involvement of the senior management.
Explain what competitive advantages these service-oriented companies expect to derive by
committing resources towards training and development of a competent and committed
workforce. (09 marks)
Summer 2011
Q 22 Employee Participation is often considered to be vital for the growth and development of
individuals and teams to enable them to make effective contribution towards achievement of
the goals of the organisation. List five advantages which employers seek to achieve by
encouraging Employee Participation in the affairs of the organisation. (05 marks)
Q 23 Symco Bank Limited has introduced significant changes in its organizational structure and
downsized its operations so that it may be able to provide more efficient services to its customers
and meet intense competition from other banks.
(a) Define Downsizing and very briefly describe its impact on the Banks organizational structure.
(03 marks)
(b) List the important considerations which should be kept in perspective by the HR Manager of
the bank while pursuing a policy of downsizing. (05 marks)
Q 24 You have recently been appointed as Human Resource Manager of Fine Electrical Company
Limited (FECL), a leading manufacturer of a wide range of household appliances. The company
has over 800 employees working in the various departments involved in the manufacture of its
different product lines. You have observed that FECL does not have a system of Formal
Succession Planning Scheme in the company.
Required:
(a) Explain briefly what is meant by Formal Succession Planning. (03 marks)
(b) Briefly explain to the management of FECL the advantages of introducing a Formal
Succession Planning Scheme in the company. (05 marks)
Q 25 List ten responsibilities/obligations which employers must fulfill to ensure that the issues of Health
and Safety are addressed adequately in a manufacturing environment. (05 marks)
Note: Explanations are not required
Winter 2011
Q 26 Sound Health Pharmaceuticals Limited (SHPL) is a reputable international company engaged in the
business of manufacture of a wide range of medicines with facilities located in several countries.
SHPLs products have been developed after long periods of research at considerable costs and are
prescribed by medical consultants for patients suffering from life-threatening diseases. As Director of
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Human Resources, you have to recruit Director Public Relations and Media Affairs to replace the
incumbent official who is expected to retire shortly.
Identify and explain briefly eight critical skills and competencies you would seek in the prospective
candidates for this high-profile position in SHPLs senior management hierarchy. (08 marks)
Q 27 State five important factors which should be included in developing an effective Accident
Prevention and Reporting System for a company involved in heavy mechanical and engineering
operations. (05 marks)
Q 28 Accurate Engineering Limited is engaged in the business of manufacturing precision earth

drilling tools used by the oil exploration industry. The Company employs a high proportion of
skilled and experienced workers for the smooth and efficient manufacture of its quality-sensitive
high-value products. Recently, the company has been facing an unusually High Rate of
Employee Turnover which is a matter of serious concern for the management.
Identify five disadvantages which Accurate Engineering Limited would experience due to the
unusually High Rate of Employee Turnover. (05 marks)
Q 29 Selection and recruitment of candidates requires careful assessment of the diversified attributes of
the prospective candidates. Besides interviews, different types of tests are administered to ascertain
the suitability of candidates for the positions for which they are being considered for appointment.
(a) Explain briefly the purpose of each of the following types of tests which are administered to
candidates in the selection process.
(i) Intelligence Tests
(ii) Proficiency Tests
(iii) Aptitude Tests (03 marks)
(b) State two qualities of a well-conceived Selection Test and indicate why they are important.
(02 marks)
(c) Identify the different situations in which it may be considered necessary for an organisation to
dismiss an employee. (05 marks)
Summer 2012
Q 30 (a) Employee Training is an important function of Human Resource Department of Apollo

Engineering Limited, a company which considers workers skills at the factory floor level to be
critical for achieving the overall strategic objectives. The HR Department classifies the factory
employees in 3 categories as follows:
(i) Competent to perform in the present position.
(ii) More than competent to perform in the present position.
(iii) Not yet competent to perform in the present position.*
*Note: These employees are not incompetent
Briefly discuss the Training Needs of employees in each of the above categories and explain
how they would help Apollo Engineering Limited to improve motivation amongst the
employees at all levels. (08 marks)
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(b) Appropriate Employee Compensation and Reward Packages are central to a healthy and
enduring relationship between the employer and the employees. These Compensation and
Reward Packages comprise of salaries and fringe benefits, pleasant working environment,
career growth opportunities, challenging work, self-respect and sense of achievement, etc.
What principal objectives should an employer seek to achieve through a well-formulated
Employee Compensation and Reward system for a service-oriented company operating in a
competitive business environment? (06 marks)
Q 31 Research in a number of organisational settings shows that efforts to introduce major changes
for achieving the objectives of corporate turn-around and improvements invariably meet with
strong resistance from employees at various levels.
Identify the reasons why employees offer strong resistance to major organisational changes and
prefer to continue with the existing status. (05 marks)
Winter 2012
Q 32 (a) Sitara Limited is a well-known manufacturer of a wide range of chromium plated sanitary
fittings in Pakistan. The company has recently negotiated several long-term contracts for
export of various items of sanitary fittings. Consequently, the work force would have to be
increased significantly in a short period to expand the production. Prior to recruiting the new
workers, Adnan Khan, the Human Resources Manager, intends to prepare a HR Skills
Information Database of the existing employees.
Briefly discuss the purpose, usefulness and relevance of compilation of HR Skills
Information Database in the areas of recruitment, training and development and succession
planning of Sitara Limited (06)
(b) A number of firms prefer to conduct Performance Appraisal of their skilled workers on a
quarterly basis rather than as an annual exercise.
Identify three advantages of pursuing this policy of quarterly Performance Appraisal of
skilled workers. (03)
(c) Although companies experiencing high rate of employee turnover are in a position to recruit
new workers quickly to replace the outgoing employees, most of them are not aware of the
real costs of the high rate of turnover of their employees.
Briefly describe the different types of costs which are associated with high rate of turnover of
employees. (04)
Q 33 HR Managers often deal with delinquent employees and encourage them to change their
attitude and behaviour and adopt a positive approach towards their responsibilities to the
organisation. Consequently, HR Managers have to exercise considerable discretion and
provide proper guidance to the employees, rather than resort to immediate extreme punitive
measures.
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Identify and explain briefly the various stages of dealing in a fair and equitable manner with
employees involved in wrongful behavior/actions. (08)
Q 34 (a) Blue Transport Company (BTC) operates a fleet of 150 buses which provides inter-city
transport services. The company takes considerable pride in the superior quality of its
services. BTC accords a high degree of importance to the human relationship management of
its employees, comprising of the ticketing staff, drivers and maintenance crew as it believes
that the commitment of its staff is a critical factor for the success of its business.
Describe the benefits that BTC expects to derive by pursuing a well-conceived policy of good
human relations management between the employer and the employees. (05)
(b) What is meant by Competencybased Job Descriptions? (03)
International Business
Summer 2008
Q1 Tameer Construction Company, a UAE-based entity, has ambitious plans to develop
major real estate projects in Pakistan through a subsidiary company. The parent
companys principal office in Dubai is largely managed by expatriate executives who
are committed to a policy of highly centralized control of the Companys financial
resources and are reluctant to delegate financial powers to the overseas subsidiary.
As the Chief Executive Officer of the subsidiary, you are required to advise the parent
company of the disadvantages of pursuing a highly centralized financial policy.
Identify four disadvantages of pursuing such a centralized policy. (06)
Q2 What do you understand by transfer pricing in the context of multinational companies.

List two advantages of adopting market-based transfer pricing policies. (04)
Winter 2008
Q3 (a) Governments in developing countries are often concerned that global companies
with substantial financial and technical resources are in a position to exploit the
opportunities in a manner which are detrimental to the interests of the host
countries. It is also feared that the domestic industries which are in the infant
stages of their development may face grave problems due to the highly
aggressive policies of the global companies.
Identify and briefly explain six types of policy decisions which governments in
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the developing countries may take to meet the threats from the global companies. (09)
(b) Multinational Enterprises are classified as Ethnocentric, Polycentric and
Geocentric companies depending on the strategies and policies pursued by their
top management.
List the distinguishing characteristics of each of the above types of international
companies. (06)
Q4 Paragon Polyester Company Limited (PPCL), a Korean company, is considering a

proposal for a substantial investment to establish a polyester plant in a foreign country.
PPCL has considerable technology and expertise in its particular line of business which
is available in only a few countries. PPCL is examining the pros and cons of setting the
project as a wholly-owned subsidiary company or entering into a joint venture with one
of the local entrepreneurs.
In your opinion, what are the distinctive advantages and disadvantages of undertaking
overseas manufacturing operations through a wholly-owned subsidiary company? (08)
\ Summer 2009
Q5 In the preceding five decades, a significant number of companies have pursued wellconceived
strategies of Globalization in order to seize the immense business opportunities
by operating on a worldwide basis. These companies have achieved notable success in the
expansion of their business globally and have manufacturing facilities and marketing
networks spread in several countries.
State and briefly explain six significant objectives of multinational companies in pursuing
policies of Globalization. (09)
Q6 Competition for attracting direct foreign investments among countries has always been
intense. Countries such as Singapore, Malaysia and Cyprus have been able to
satisfactorily fulfill the requirements of the foreign investors and achieve
significant growth through these investments. However, a large number of third world
countries have not been so successful in attracting direct foreign investments mainly due
to the high level of Political Risks perceived by the prospective investors.
(a) Explain what is meant by the term Political Risk in the above context.
(b) What are the different types of Political Risks which have to be considered by a
prospective investor while evaluating opportunities of direct foreign investment in a
third world country? (07)
Winter 2009
Q7 In your opinion, what types of complexities are generally encountered by parent companies
in the planning and control of operations of their foreign subsidiaries? (06)
Q8 (a) List the following steps involved in the operation of a typical Letter of Credit in their
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logical order of sequence.
(i) The exporters bank endorses the documents (bill of lading/airway bill) and
delivers them to the importers bank.
(ii) The importers bank pays the proceeds to the exporters bank.
(iii) The importer obtains the banks promise to pay the specified amount on behalf
of the importer.
(iv) The exporter ships the goods and obtains the Bill of Lading/Airway Bill.
(v) The exporter delivers the documents to his banker.
(vi) The importers banker promises the exporter to pay the specified amount on
behalf of the importer. (06)
(b) Identify five advantages which a multinational corporation expects to achieve by

establishing manufacturing facilities in foreign countries. (05)
Summer 2010
Q9 (a) Identify and explain briefly six factors which have contributed to the significant
increase in importance of International Trade in the preceding 3-4 decades. (09)
(b) According to Michael Porter the nature of competitiveness in any industry is a
composite of Five Forces. The Competitive Analysis model developed by Porter is
widely followed for formulating business strategies in many industries. List the five
Competitive Forces stated by Michael Porter. (05)
Q 10 (a) Accurate Engineering Limited is a company located in Europe and is engaged in the
business of manufacturing a wide range of high precision metallurgical components for
the automobile, medical equipment and miscellaneous engineering industries. The
Companys customers are sensitive to quality and require components conforming to
most stringent tolerance standards. The Company is presently incurring high labour
costs and is considering a proposal to locate a portion of its facilities in Asia to achieve
cost economies.
Narrate at least six different types of Political Risks which should be considered by
Accurate Engineering Limited while evaluating an investment involving substantial
capital with long-term implications. (06)
(b) A Multinational Corporation has subsidiaries in several developing countries with

majority shareholdings in each of them. The MNC pursues a policy of centralized
financial decision making and the subsidiary companies are required to retain only
minimum balances to meet their immediate operating requirements and transfer surplus
funds to the parent company.
List various advantages the MNC seeks to achieve by pursing such a centralized
financial decision making policy. (06)
Winter 2010
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Q 11 State the situations in which an MNC would prefer to operate in a foreign country as a branch
instead of establishing a subsidiary company. (04 marks)
Q 12 (a) List the following methods of payment for the imported products which are most
advantageous from the perspective of an importer in descending order.
(i) Open Account
(ii) Sight Letter of Credit
(iii) Consignment
(iv) Usance Letter of Credit (02 marks)
(b) State six constraints which in your opinion act as impediments towards attracting foreign
investments in an underdeveloped country. (03 marks)
(c) List four advantages of adopting market-based transfer pricing policies. (04 marks)
Summer 2011
Q 13 (a) Distinguish between a global business strategy and a multi-domestic/adaptive business

strategy. Identify a real life example of each strategy and give reason for your choice.
(06 marks)
(b) What are the key financial decisions which should be made by the management while
contemplating direct investment in a foreign country by formation of a subsidiary company?
(05 marks)
Q 14 A multinational company which has its headquarters in the UK pursues a strategy of exercising
very close control and centralization of all important decision-making processes of all of its four
overseas subsidiary companies.
Identify four factors which in your opinion may have influenced the MNCs strategy of
implementing highly centralized decision making policies for its subsidiary companies. (10 marks)
Winter 2011
Q 15 (a) Explain what is meant by Geocentric Orientation in the context of global business companies.
(05 marks)
(b) Alpha Equipments is a Taiwanese manufacturer of various types of photocopiers and has
recently decided to export its products to Pakistan. Alpha Equipments is considering to appoint
a Single Distributor in Pakistan who would represent the exporter and would be responsible for
the entire marketing operations in this country.
State six different advantages that Alpha Equipments would achieve through the appointment
of a Single Distributor for import and distribution of its products in Pakistan. (06 marks)
Q 16 (a) In your opinion what important factors have led leading Japanese companies to establish
automobile assembling/manufacturing plants in selected developing countries?
Identify five factors and substantiate them with brief explanations. (05 marks)
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(b) Describe briefly the Political Factors which should be taken into consideration by a
multinational corporation while evaluating a decision to make substantial direct investment in a
foreign country. (03 marks)
Summer 2012
Q 17 All leading global business organisations possess certain distinctive capabilities and competitive
advantages which set them apart from those companies whose operations are confined within their
limited geographical areas.
Describe at least six core capabilities which are observed in leading global organisations regardless
of their special lines of business. (09 marks)
Q 18 Multinational Corporations (MNCs) which have widely dispersed operations in several

countries often prefer to centralise their cash management functions and conduct all their
major cash operations from pools located in internationally recognised financial centres. This
policy requires each subsidiary to retain minimum cash for its own transaction purposes and
remit all excess funds to a central cash depository.
Explain the advantages which MNCs seek to achieve through centralised cash management
policies and pooling of all excess cash balances at prominent international financial centres.
(06 marks)
Q 19 Give five reasons why the process of Globalization has assumed great importance in the
present business environment.
Winter 2012
Q 20 Explain briefly the factors which have contributed to the creation and significant expansion
of Global Markets during the preceding 20-25 years. (06)
Q 21 (a) Eagle Limited (EL) is a large conglomerate. The company is planning to establish a joint
venture in Centralia, a country which has several untapped sectors. EL foresees attractive
opportunities for development of its business in Centralia. EL is therefore, keen to pursue
corporate and business policies which would be perceived favourably, not only by the joint
venture partner but also by the government and other stakeholders. Adoption of these
policies would facilitate EL to expand its business in future.
Briefly describe four policies which, in your opinion, EL may pursue for achieving its long
term business objectives. (06)
(b) State the main reasons why leading companies obtain cross-border financing including
equity, debt and bank financing in different countries. (04)
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CSR & Business Ethics
Summer 2008
Q1 What do you understand by Code of Ethics in the context of a business organization?
State four advantages which in your opinion are important for adopting a Code of
Ethics? (07)
Winter 2008
Q2 (a) Currently, a large number of progressive companies are in the various stages of
adopting policies of Corporate Social Responsibility. Explain what do you
understand by the term Corporate Social Responsibility. (03)
(b) In your opinion what are the major concerns which prevent organizations from
adopting and implementing comprehensive policies of Corporate Social
Responsibility? (05)
Q3 Briefly explain
(a) Business Ethics (3)
Summer 2009
Q4 Briefly explain the following

(a) Business Ethics
Winter 2010
Q5 Dental Equipments Limited (DEL) is engaged in the business of manufacture of a wide range
of equipments used by private dentists as well as leading hospitals. The Company strives hard
to achieve sustainable growth and meet the requirements of highly demanding dentists who
want the very best and the latest equipments to serve their patients.
DEL has recently observed a trend of unethical practices followed by its sales representatives.
The sales representatives who are not able to meet their targets, book fictitious sales at year
ends and later record them as sales returns. They also share a portion of their commissions
with the purchase representatives of the major hospitals.
State what policy measures should DEL adopt to eliminate the unethical practices of the sales
representatives. (06 marks)
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Summer 2011
Q6 Briefly discuss the following:

(a) Business Ethics (2.5 marks)
Winter 2011
Q7 What is meant by the term Corporate Social Responsibility? (3.5 marks)
Summer 2012
Q8 Explain the term Business Ethics and discuss its increasing significance in the present business
environment. (05 marks)
Management of the working environment
Q1 Briefly explain
(c) Environment Management (3)
Summer 2011
Q Environmental Scanning
Summer 2012
Q2 Fintex Company Limited (FCL) is in the advanced stage of implementing facilities for manufacture
of home textile products such as curtain draperies, sofa cloth, bed linen, towels, table covers, etc.
FCL intends to market its products to customers through 20 company-owned retail outlets to be
established in the major cities. FCLs Institutional Marketing Division (IMD) would sell the
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companys products, as well as workers uniforms to be procured from external vendors, to
institutional customers such as hotels, hospitals, industrial companies and government
organisations.
FCLs principal corporate objectives are to create a sustainable competitive advantage and obtain a
firm foothold in the substantial and fast growing target market of middle class customers. These
customers are keen shoppers who want quality products at affordable prices. FCLs IMD also wants
to aggressively pursue marketing strategies to cater to the requirements of the institutional customers
who are a source of repeat business.
Identify and explain briefly four Critical Success Factors which in your opinion would create
sustainable long-term competitive advantage for FCL. (10 marks)
Winter 2012
Q3 Successful companies make concerted efforts to retain their competitive advantages vis--vis
their competitors as an ongoing exercise encompassing all spheres of their business
operations.
Narrate six measures which these companies usually take to retain and further consolidate
their competitive advantages. (06)
Strategic Mangament & Planning
Summer 2008
Q1 East-West Centre of Diabetes (EWCD), a non-profit organization has recently received
substantial donations from a group of overseas Pakistani philanthropists. EWCD has
ambitious plans to develop the institution into an absolutely world-class research and
teaching university-cum-hospital in the country. The Hospital would provide
infrastructure facilities and medical care by a team of highly reputable consultants. It is
envisaged to provide treatment for diabetes which is growing at an alarming rate and
adversely affecting the health of a large segment of the population in all age groups.
The University would also help to produce qualified doctors who would specialize in
the treatment of patients suffering from this highly debilitating disease.
You are required to prepare a Mission Statement for EWCD stating its purpose and
identifying its core values. The Mission Statement should be brief, simple and clearly
highlight the important purpose, intent and aspirations of EWCD. (06)
Q2 In the current economic scenario, business organizations are under continuous stress to
achieve economies in their production and operating costs. The pressures for cost
reduction emanate from the management as well as the competitors and customers.
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Identify eight operational and strategic areas which must be scanned continuously by
an industry leader to achieve cost economies and maintain its competitive advantage. (08)
Q3 Union Group of Companies has diversified interests in fertilizer, sugar, cement

and steel industries. Each entity operates as a strategic business unit and
executives in the individual companies have powers to take all decisions at the
operational level and only limited decisions at the tactical level. The Group
Management Team which monitors and controls the performance of the different
strategic business units has retained for itself the powers to make all strategic
decisions.
Describe the distinguishing features of decision making process at Operating,
Tactical and Strategic levels. (09)
Winter 2008
Q4 (a) What are the distinctive ingredients of Vision and Mission Statements? (03)
(b) It has been observed that certain companies adopt, with minor modifications and
changes in emphasis, the basic ingredients of Vision and Mission Statements of
the more successful rival companies in an attempt to achieve similar results.
Describe the drawbacks of adopting such an approach in formulation of Vision
and Mission Statements. (04)
Summer 2009
Q5 Pan Pacific Steel Mills Limited was established in 1960 to manufacture steel products
such as iron bars, wire rods, girders and steel sheets. In 2006, a team of professional
management assumed charge of the Companys operations. The new management team
made ambitious plans to increase the rated capacity, diversify the product-mix and
upgrade the quality of the products to bring the Companys operations at par with the
leading players in the countrys steel industry. In spite of formulation of Corporate and
Business Strategy on sound lines by the multi-disciplinary management team, the
Company is experiencing serious problems in achieving its objectives due to lack of
cohesion between the formulation of strategic plans and their actual implementation.
(a) Explain the relationship between Strategy Formulation and Strategy Implementation.
(b) What essential elements should the management of Pan Pacific Steel Mills Limited
consider for creating an environment of good relationship between Strategy
Formulation and Strategy Implementation? (10)
Winter 2009
Q6 (a) Why missionoriented business strategists do not view the Short-termism approach
favourably? (02)
(b) Give two examples of typical business situations to highlight the defects of pursuing a
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policy of short-termism. (03)
Q7 Strategic Planning and Management is an exercise undertaken at the highest levels of the
management hierarchy and involves decisions concerning formulation, implementation and
evaluation of cross-functional activities which would enable an organization to achieve its
stated objectives. In spite of the cumulative skills and considerable experience of the senior
management team, it has been observed that a number of organizations are not able to
achieve significant success and the actual performance often falls short of the set goals.
Explain the key factors, which in your opinion, are responsible for the managements
inability to achieve all of the goals envisaged in the Strategic Plans. (09)
Winter 2010
Q8 Management has to expend considerable efforts in devising business strategies to achieve corporate
objectives and goals effectively.
(a) Why do companies accord importance to the pursuance of a formal Strategic Planning
Process? (06 marks)
(b) Explain the different steps which the management has to undertake in the formulation and
implementation of a well-considered business strategy. (09 marks)
Summer 2011
Q9 A leading manufacturer of automobiles attaches high degree of importance to the

competencies and skills of its front-line operational managers in the manufacturing and
assembly lines.
Identify and briefly explain the different types of competencies and skills required for
effective performance by these managers. (05 marks)
Q 10 Unique Textile Mills are leaders in the designing and manufacturing of cotton fabrics for
ladies fashion clothing. Identify four Strategic Objectives which in your opinion may be
included in the strategic planning process of Unique Textile Mills. (03 marks)
Q 11 Highly Creative Strategic Planners in progressive organizations have innovative mindsets and do
not merely project past strategies in the future but are continuously engaged in out of the box
thinking to explore new opportunities beyond the existing strategy framework.
Identify the distinguishing characteristics of organizations which pursue innovative corporate
strategies. (09 marks)
Q 12 Briefly discuss the following:

Tactical Planning (2.5 marks)
Backward Integration Strategy (2.5 marks)
Winter 2011
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Q 13 Business firms, at times, place excessive emphasis on Cost Reduction and Austerity policies to
achieve their profit objectives. These policies may be in conflict with the interests of customers,
employees and the society as a whole.
Identify any three adverse effects of introduction of stringent Cost Reduction and Austerity
policies on each of the above stakeholders. (4.5 marks)
Summer 2012
Q 14 According to the Boston Consulting Group Matrix, business organisations which have multidivisions
and compete in different industries pursue separate strategies for their various business
divisions. The BCG Matrix describes the characteristics of the markets and the relative competitive
position of the various business divisions as Stars, Cash Cows and Dogs.
Explain the distinctive characteristics of each of these types of business divisions in terms of their
relative market positions. Also mention the types of business strategies which should be pursued by
each of these types of business divisions. (09 marks)
Q 15 In the past two decades a number of Mergers and Acquisitions have been witnessed between
some of the most prestigious and financially strong international corporations in a wide range
of businesses such as pharmaceutical and automobile manufacturing companies, financial
institutions, supermarkets, etc.
Narrate the principal objectives behind the mergers and acquisitions of companies which are
considered to be financially sound and well-established in their own spheres of business.
(05 marks)
Q 16 Differentiate between the characteristics of Strategic Decisions and Tactical Decisions.

(04 marks)
Winter 2012
Q 17 A sound system of Environment Scanning is of critical importance in the formulation of Strategic

Plans of any progressive company operating in a fast-changing and competitive business
environment.
Hawk Engineering Limited (HEL) is engaged in the business of manufacturing of small motors
which are installed in printers. HEL has made substantial investments in manufacturing facilities
and R&D and has developed its own in-house technology and manufacturing processes. This gives
HEL competitive advantage over its rivals in terms of meeting the stringent requirements of its
quality conscious customers. Important customers of HEL are the original equipment
manufacturers of precision laser printers. Although motors account for a nominal proportion of the
cost of the laser printers, their efficient and reliable performance are of crucial importance for
HELs customers who provide performance guarantees for their products. HEL is one of the few
firms who manufacture these types of small motors. It is able to achieve high profit margins and
returns on its investments because of the superior quality of its products for which its customers are
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willing to pay premium prices.
Identify and explain briefly four factors which HEL should monitor closely to anticipate the
emerging business environment in which it operates and its impact in the formulation of its
Strategic Plans. (10)
General
Summer 2008
Q1 All leading global business organizations possess certain distinctive marketing
capabilities and competitive advantages which set them apart from those companies
whose operations are confined within their limited geographical areas.
Describe five core capabilities which are observed in leading global organizations
regardless of special lines of business. (10)
Q2 Narrate important points that should be considered in the decision making

process. (03)
Winter 2009
Q3 Superb Engineering Limited (SEL) manufactures parts and components for

assembly/manufacture of automobiles. During the past few years, the company has
witnessed phenomenal growth in its product lines and sales revenues have registered
significant growth. However, the overall profitability has not shown a corresponding
increase. SEL considers that a substantial proportion of the efforts and energies of the
management and staff at various levels are expended in handling a very wide range of
diversified activities. SEL is, therefore, examining the feasibility of outsourcing certain
activities of its operations to outside parties.
You are required to identify four advantages and disadvantages each of Business Process
Outsourcing in the above situation for SEL. (06)
Summer 2010
Q4 Fine Sugar Mills Limited (FSML) owns and operates a sugar cane crushing plant for
manufacture of refined sugar. The affairs of FSML are looked after by a team of
professional management and the company ranks third amongst all the sugar mills in the
country in terms of its sales and profitability. The Company has developed an extensive
network of growers spread over a wide area who deliver cane at the factory site which is
then crushed in the minimum possible time to achieve high rates of sucrose recoveries.
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Identify the key stakeholders of FSML and explain briefly why you consider each of these
constituent stakeholders to be of vital importance for the sustainable and long-term
profitable operations of the Company. (09)
Q5 Management of Business Organizations are invariably seized with numerous problems and
expend a considerable proportion of their energy and time in making decisions to solve these
problems.
Explain briefly the various stages involved in the Decision Making Process. (09)
Winter 2010
Q6 Identify the business strategy/policy/tool which an organisation is pursuing in each of the

following situations:
(a) In 1990, Sony launched the first High Definition (HD) TV in the market at a price of $43,000
per set. These TV sets were purchased by customers who could afford to pay the high price
for the new technology. After reaping the maximum profits and recovery of the sunk R&D
costs, the price was gradually reduced in 1993 to $ 6,000 for a 28 TV set to attract new
customers. This strategy is called __________.
(b) The management tool that enables a firm to classify its range of products according to their
current market share and expected growth is called __________.
(c) The assessment tool used to compare and identify the variance between a firm's current
market coverage and potential market opportunities for its products is called __________.
(d) A company which has capabilities to manufacture a complete line of superior quality ball
bearings for a wide range of original equipment manufacturers and industrial users is
pursuing a strategy of __________.
(e) If a company engaged in the textile manufacturing business acquires majority holdings in a
sugar mill, a motor car manufacturing plant and a private airline; it is pursuing a __________
strategy.
(f) The chief executive officer who makes alternative plans to deal with emergencies or
unexpected situations prior to their occurrence is pursuing a __________ strategy.
(g) A firm uses different brands of essentially the same product to target different market
segments is pursuing a __________strategy.
(h) A bank which strives to develop better understanding of the customers needs and satisfy
them to create customer loyalty is adopting a policy of __________.
(i) A method of demand forecasting in which a firm markets its new products in a limited
geographical area to ascertain consumer response and from this sample develops projections
of the size of market over a larger area is called __________. (09 mark)
Winter 2011
Q7 Explain what is meant by Scenario Planning. (03 marks)
Winter 2012
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Q8 The trend of outsourcing of certain activities by business firms to external entities has gained
considerable momentum in the past few years.
Identify four advantages which, in your opinion, these firms expect to derive from
outsourcing of selected business activities to external entities. ( 04)
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Suggested Answers BM Past Papers Topic wise
Marketing
Summer 2008
In a Franchise Arrangement, one business entity who is the franchisor grants a license to another business entity called the
Q1 franchisee to use the name and brand/trademark of the franchisor and conduct the business according to the tested processes,
methods, administration and marketing techniques developed by the franchisor.
SRL would be able to gain the following advantages of entering into a franchise arrangement with Oriental Resorts Inc. :
(i) The franchisee is able to make investment in a proven business format and can eliminate the risks and difficulties of
establishing a completely a new business.
(ii) The franchisee can use a well-known brand name which is promoted aggressively and has wide customer acceptance.
(iii) The franchisee receives guidance and advice on selection of a suitable project design and equipment according to the
pre-tested specifications of the franchisor.
(iv) The franchisee can concentrate wholly on the day-to-day operations of the business as the responsibilities of
purchasing stocks, staff training, marketing and advertising are handled by the franchisor.
(v) The franchisee can seek managerial advice and guidance to overcome any problems which he may encounter in the
business.
The expected advantages of participation in the Trade Fair are:
The Trade Fair can serve as a vehicle for securing orders for the Companys products.
Q2 The Trade Fair can create awareness of the products among the prospective customers.
The participants in the Trade Fair from other countries may show interest in the products which may lead to sales and
joint ventures in these countries.
The Trade Fair may lead to contacts and opportunities for appointment of agents and distributors in Sri Lanka.
Q3 The reasons for entering into international alliances are:
To gain access to foreign markets.

To effectively utilize complementary technologies.
To co-operate to reduce research costs.
To minimize risk for any individual participant.
To take advantages of firms with different skills and abilities.
To avoid ownership of overseas operations.
Examples of industries in which International Alliances are common:
Pharmaceutical Industry --- to reduce research costs and use complementary skills.
Manufacture of computers and electronics --- to utilize complementary manufacturing facilities and skills.
Airline Industry ---to share passenger load and utilize available capacity.
Winter 2008
Q4 The dominant characteristics of a company which is in the start-up stage of its business
are:
(i) High financial costs.
(ii) Limited cohesiveness in the senior management team.
(iii) Organizations systems and procedures are not in place.
(iv) Extremely high workload for key personnel with conflicting and multiple priorities.
(v) Resources are not sufficient to meet multiple demands.
(vi) Relationships with suppliers, customers and other stakeholders are in the developing stage.
The dominant characteristics of a company which is witnessing rapid and dynamic growth
of its existing business are:
(i) New markets, products and technology are being introduced.
(ii) Multiple and conflicting demands for allocation of management, technical and financial
resources.
(iii) Rapidly expanding organizational structure.
(iv) Unequal growth in various sectors within the organization.
(v) Shift in power structures as the organization witnesses expansion in business.
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(vi) Constant dilemma between doing current work and building support systems for the future.
Q5 The determinants of competitive policies and efforts in the different categories of business
are :
Customer orientation
Customer commitment.
Creation of customer value.
Understanding of customer needs and objectives.
Measure customer satisfaction.
After-sales service.
Competitor orientation
Sales force shares competitors information among themselves.
Individual organizations respond rapidly to competitors actions.
Senior managers frequently discuss competitors strategies and tactics.
Keen to seize opportunities for competitive advantage.
Constant struggle to achieve market leader status.
Inter-functional coordination
Inter-functional calls on customers.
Technical, procurement, customer and market information is shared closely among
different functions/departments.
Close integration among different functions and departments in implementation of
strategy.
Functions are geared towards creation and satisfaction of individual customer needs.
Resources are shared frequently among the various business units.
The marketing-mix strategies in different stages of Product Life Cycle should be pursued on
the
following lines:
Marketing- Stages
mix Introduction Growth Maturity Decline
Product
extension,
Diversification Phasing out of
Product Basic Product aftersales
of products weak products
service and
warranties
Price to
Q 6: Price to meet
Price Unit cost, plus penetrate Reduce price
competition
market
Build selected Build intensive Strengthen Eliminate

Distribution distribution distribution distribution unprofitable
channels channels network outlets
Reduce effort
Increase efforts
Sales Heavy sales due to increase Reduce cost to
to promote
Promotion promotion in consumer minimum level
brand
demand
Summer
2009
Q7 The performance indicators to measure the success of marketing strategy of Euro Motors Limited
which is engaged in the business of manufacturing and marketing of automobiles in a dynamic and
highly competitive business environment may be as follows:
(a) Growth in sales revenue
(b) Increase in market share.
(c) Percentage increase in sales achieved through customer retention/brand loyal customers.
(d) Product development speed time i.e. time to develop, manufacture and market a new product.
(e) Number of customer complaints lodged. Percent increase/decrease in number of customer
complaints.
(f) Number of new distributorships appointed in the year.
(g) Sales of new products / models lodged in the year as a proportion of the Companys annual
turnover.
Q 8 (a) Organic/internal growth is a strategy to achieve growth by expansion in the companys own
line of products and market portfolio. It relates to increasing the market share in the existing
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market or entering new markets by bringing high value products.
Acquisition strategies involve expansion by way of purchase of controlling interest in another
existing companies.
The key differences between the two strategies are as follows:
(i) In internal growth strategy, expansion is achieved in a steady and planned manner
extending over a phase-wise schedule, whereas in an acquisition strategy, rapid
expansion is achieved through acquisition of existing assets of another company.
(ii) In expansion by internal growth, the success of the strategy is dependent, to a
considerable extent, on the managements ability to formulate and implement sound
plans, whereas in growth by acquisition, the success of the strategy is also linked with
achievement of corporate, business and operational level synergies.
(iii) In a strategy of internal growth, the level of competition can become more intense,
particularly if there are relatively few strong players, but in expansion by acquisition
the level of competition may be reduced by acquiring a rival competitor.
Q 8 (b) A company may pursue a policy of growth by organic/internal expansion and not through
acquisition for the following reasons:
(i) Expansion of its physical infrastructure and facilities can be planned more efficiently to
fulfill the organizational requirements. In case of acquisition, the company would have
to utilize the existing sites and facilities which may not be the most suitable option for
its requirements.
(ii) The cost of acquisition of an existing company may be much higher than the cost of
expansion of assets through internal growth.
(iii) Often, acquisitions require substantial investment outlays and the acquiring companies
resort to heavy borrowings which may extend financial leverage beyond prudent limits.
(iv) In acquisitions, a company acquires functions of other companies which may result in
duplication of facilities or redundancies which ultimately results in lowering of
employees morale.
(v) Human Resources can be utilized more effectively and with a greater degree of cohesion
of corporate culture by adopting strategies of organic growth. Also, in the case of
organic growth, better career development opportunities are provided to the employees.
In case of expansion by acquisition of other businesses, the company usually has to
acquire and assimilate the staff of those businesses.
Q (9) Companies which pursue market-driven business strategies consider sponsorship of attractive and
high profile events to achieve the following objectives:
(a) Increased Visibility
The wide exposure such events receive in both the electronic and print media provides
sponsors with vast publicity opportunities.
(b) Business-to-business Promotion:
Competition for prominent positioning of products in the shelf-spaces of popular retail outlets
is a big challenge for companies. Various types of sponsorships e.g. paid overseas holidays or
complimentary tickets/passes for popular events can be used to attract retailers, dealers and
other intermediaries in the distribution channel to promote the companys products.
(c) Differentiate Product from Competitors
Sponsorship provides companies a competitive selling advantage because it offers
opportunities for category exclusiveness which can be used as product differentiation strategy
for creating greater acceptability amongst the customers. Sponsorships help companies to
create exclusive attributes for their products in the minds of the customers to fulfill their needs
and objectives.
(d) Active Display of Product Attributes
Sponsorship allows companies to draw special attention of the audience to the advantages and
unique attributes of their product by promoting special events e.g. tyre manufacturers may
sponsor car-racing events to demonstrate their products in action.
(e) Cost Effectiveness
Sponsorships are usually more cost effective specially when a specific category of audience is
to be targeted.
(f) Targeted Sponsorship
Properly planned sponsorship programs integrated with predetermined objectives and focused
on specific audience targets can create lasting impact.
(g) Captive Viewership
Advertisements on TV are often avoided by the viewers, for example by changing the
channels. In case of popular programs/shows, it is possible to retain the attention of the captive
viewership.
Q 10 Pull Strategy of Promotion is a promotional strategy based on aggressive advertising of brands to

build-up consumer demand. In a successful Pull Strategy, the customers ask for the brand by name,
inducing retailers or distributors to acquire stocks of the companys goods.
Licensing is a technique of entering a specific market in which the licensor enters into an agreement
with a licensee, by offering the licensee the right to use the manufacturing process, trade mark,
patent, trade secret or any other item of value for a fee or royalty.
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Benchmarking is the process of comparing the companys products and processes with those of the
competitors or leading firms in other industries or any other accepted standards against which the
performance of the company is measured.
Q 11 RBCL should consider the following factors while evaluating the decision to establish its own network of retail outlets:
(i) Examine the existing network of retailers of RBCL to ascertain the extent to which they have advantages of location
of their shops in important shopping centers.
(ii) Compare the capital expenditure involved in the establishment of retail stores and their recurring operating expenses
and inventory carrying costs with the costs incurred under the existing set-up.
(iii) Estimate the envisaged number of RBCLs own retail stores to be established to cater to the requirements of the target
segment of the market.
(iv) Determine the ability of RBCL to mobilise sufficient financial resources required to establish and operate the business
of retail marketing of its products
(v) Examine whether sufficiently experienced and trained staff at various levels would be available to manage and operate
the retail outlets.
(vi) Ascertain the profit margins currently earned by the independent retailers on the Companys products and the impact
of the self-owned retail outlets on the companys profitability.
(vii) Consider the impact of the decision to establish own retail outlets on the Companys future relationships with the
independent retailers.
(viii) Examine the need to revise the terms and conditions relating to sales to be offered to the independent retail outlets.
(ix) Enquire into the business policies of competitors who have their own retail network and whether RBCL would be able
to enjoy a competitive advantage over the independent retailers.
(x) Examine the extent to which the availability of more reliable information of future market and fashions trends would be
an advantage after RBCL establishes its own retail outlets.
(xi) Analysis of the industry growth expected and the market share to be captured, carry out a viability study of the share
of market available
(xii) Analyze the value addition by gaining ownership of retail outlets; evaluate the possibility of brand dilution in
independent retail houses.
Cost Leadership is a strategy that seeks to establish long-term competitive advantages by emphasizing that value chain
activities can be achieved at costs which are substantially below what competitors are able to match on a sustained basis.
Q 12 (a)
This allows a firm to compete primarily by charging a price lower than the competitors and still earn satisfactory levels of
profits.
A Product/Service Differentiation Strategy is a strategy which promotes and emphasizes that the product/service offered
Q 12 (b) by the firm is different from other available products/services of a similar nature. The differences are based on certain
desirable features and performance attributes and therefore the high prices are justified.
Q 12 The capabilities which are most important for the success of a Product/Service Differentiation Strategy are:
(i) Strong and functional research and development department, able to correctly anticipate and assess the consumer
behavior and desire.
(ii) Strong coordination between research and development, Marketing and Technical departments.
(iii) Innovative Management allowing better ideas to be cultivated.
(iv) Deep insight of the market and close association with the distribution channels.
(v) Strong brand name.
(vi) Strong connection and cooperation from well-established vendor network.
(vii) Capital Allocated for attracting technical and creative human resources enabling ability to create a unique
value/attribute that is hard to copy by competitors.
(viii) Protection of research should be available in order to ensure that resources are not imitated.
Q 13 (a) The packaging features which would influence a consumers decision to purchase an edible consumer product are:
(i) Convenience of the Size of the Package The consumer should be able to chose from a range of sizes available, that is, a
sachet for a single use, or a size which would meet the requirements for a period of say, one month or an economy
package for a large family.
(ii) Preserve the Quality of the ProductThe packaging should be capable of preserving the quality of the edible product
from the elements e.g. sunlight, humidity or moisture.
(iii) Product InformationThe packaging should provide vital information regarding the ingredients of the food item, their
nutritional value and expiry date
(iv) Attractiveness of the PackageThe packaging should be attractive in its presentation and colour scheme to draw the
attention and interest of the customer at the point of display of the product on the shelves in the retail outlets. The design
and color should be in line with the brand and brand name should be displayed prominently
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(v) Convenience of Handling the Package The packaging should make it easy to take out the edible product for use and
also close the package easily after use.
(vi) Convenience of StorageThe package containing the edible product can be stored conveniently and occupy minimum
storage space.
(vii) Disposal of the PackageThe package, after consumption of the contents, can be disposed of safely from the
environmental viewpoint
Q 13 (b) The limitations of external databases are:

(i) The external database may not be accurate and it may not be possible for the user to determine the extent to which the
database is inaccurate.
(ii) The external database may not be current for the purpose of arriving at the decision in the present changed
circumstances.
(iii) The external data may not be impartial and may have been prepared with a bias for a particular purpose.
(iv) The information required to reach reliable and rational conclusions may not be available in the external databases.
(v) The data might be unrepresentative as every research has a different criteria for the target segment depending on the
in its objectives.
Examples: Launching of a new food product in which reliable feedback and consumer reactions for taste, eating habits,
price considerations, type of packaging, etc are very important information. The external database may not be able to
address to the issues required to evaluate these factors for the particular type of food product.
OR
Obtaining information of prospective subscribers and circulation of existing magazines for launching a new high fashion
magazine. Information regarding income, age, educational profiles of the prospective subscribers may be available but
information regarding their particular interests would not be available in the external databases.
The incoming Marketing Director of DCL may pursue the following Marketing Penetration Strategies to increase the
Q 14
Companys annual sales from Rs 600 million to Rs 1200 million in the next 3 years.
(a)
Pricing: DCL should reduce its prices to achieve a larger share of the growing market. This strategy would be particularly
rewarding as the target market for children is assumed to be highly price sensitive and will result in substantial increase in
the sales revenue. Besides, DCLs average cost would decline with increase in production and better utilization of existing
capacity. Pursuance of this pricing policy would therefore contribute towards increase in sales revenue as well as overall
profitability of DCL.
(b)
Increase in Promotion and Distribution Support: DCL should launch well-conceived advertising and promotion campaigns
to attract those segments of the market in which its products are not consumed at present. It would also be necessary to
identify and appoint competent new distributors who would aggressively promote DCLs products. DCL should provide
support to the retailers by way of prizes and gifts for distribution among the children and also sponsor special events to
increase awareness of its products in the target market.
DCL might have to explore both the push and pull marketing strategy along with media advertising
(c)
Product Modifications: DCL should introduce further product improvements and change design features from time to time
to make the products more attractive for the children. This strategy would enable DCL to gain a larger share of the market
as the consumers would increase the frequency of their purchases.
(d)
Incentives to Marketing Staff: DCL should offer performance related incentives and special benefits to the marketing staff
who are able to achieve and exceed the sales targets given to them.
(e)
Market Development: DCL should introduce its products in new geographic areas besides Karachi which offer good
opportunities of achieving larger share of the market and increase in sales revenue.
Q 15 It would be advisable for a firm to pursue policies of Unrelated Diversification in the following situations:
(i)
The firm operates in an extremely competitive market or in a no-growth industry characterized by declining industry-wide
profitability and low returns on investments.
(ii)
The firm considers it advantageous to control sources of supplies or marketing channels by backward or forward
integration.
(iii)
The firms existing channels of distribution can be gainfully utilized to market the new products and services.
(iv)
The firm has an opportunity to purchase an unrelated business at a very low cost with prospects of attractive rate of return
on investment.
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(v)
The new products offer counter cyclical sales patterns compared to the firms existing product lines.
Q 16 A Market Leader
(a)
develops strategies to expand the total size of the market
(b)
pursues strategies to expand its own current market share
(c)
defends its own market share vigorously
(d) Is customer driven and innovative
(e) Flexible and adaptive
(f) It tends to be on the cutting edge of new technologies and new production processes. It sometimes has some market
power in determining either price or output
A Market Challenger
(a)
retains a substantial portion of the market share
(b)
launches direct and indirect attacks on the Market Leader in areas in which there are apparent signs of weakness of the
Market Leader
(c)
attacks firms other than the Market Leader to increase its own share of the market ]
(d) Offers price discounts and reduces own cost.
(e) Chooses only one target at a time, assesses the strength of the target competitor. Considers the amount of support that
the target might muster from allies
A Market Follower
(a)
imitates and attempts to adopt the policies of the Market Leader
(b)
adopts a secondary or runner-up position as it lacks the resources to challenge the Market Leader
(c)
follows its particular strengths and skills to maintain its market share and profitability as it considers that pursuing any
other strategy would result in a less favourable outcome.
(d)
no expensive R&D failures as best practices are already established.
(e)
Employ play it safe strategy, the rationale is that by developing strategies that are parallel to those of the market leader,
they will gain much of the market from the leader while being exposed to very little risk.
A Niche Marketer
(a)
is a relatively small or a medium-sized firm
(b)
specializes in a narrow segment of the market according to customer size or fulfilling specific customer requirements
(c)
meets the requirements of a particular geographical area.
(d)
They tend to market high end products or services, and are able to use a premium pricing strategy
(e)
They tend to keep their operating expenses down by spending less on R&D, advertising, and personal selling.
(f)
The firm typically looks to gain a competitive advantage through effectiveness rather than efficiency.
Q 17 The factors which create Exit Barriers and prevent existing participants from quitting a loss-incurring industry are:
Substantial Investment in Highly Specialized Fixed Assets:
This is particularly relevant in capital-intensive industries which require very large investments in specific-purpose building
and machinery. These assets do not have alternative uses and their salvation value is usually low. The substantial initial
capital costs and low salvation value of the assets would result in heavy losses and create exit barriers.
High Redundancy Costs:

Organizations having a large workforce with high salaries or contracts that stipulate high redundancy payments have to
incur substantial costs by way of severance payments to its employees to exit from the industry. These payments require
heavy cash outflows and act as exit barriers.
Ancillary Costs of Closure of Business:
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The organization may have entered into long-term contractual agreements with important suppliers or buyers and tenancy
agreements carrying substantial penalties in the event of premature termination of these agreements. The high costs of
premature termination of agreements are exit barriers as the closure of business would cause huge losses.
High Fixed Operating Costs :

An organization which has very high fixed operating costs and is faced with unfavourable business conditions may continue
operations if it is able to recover its variable costs fully and a portion of its fixed costs. This is particularly relevant if the
unfavourable conditions are considered to be of a temporary nature and the firm is optimistic about the prospects of an
upturn and recovery from its current difficulties. This type of composition of preponderance of fixed costs acts as an exit
barrier.
Current
Q 18 Market Economic
(a) Size: Stability:
(i) (xi)
Balance of Payments
Population Size and Growth Position
(ii) (xii)
GDP Size and Growth Taxation Policy
(iii) (xiii)
Monetary and Trade Policy
Domestic Production of Appliances Regulations
(iv)
Volume of Import of Appliances
(v)
Sources of Import of Appliances
Market Accessibility: Miscellaneous :

(vi) (xiv)
Non-tariff
Import duties and tariffs barriers
(vii) (xv)
Existing distribution channels Attitude towards Chinese products
(viii) (xvi)
Pricing methods and credit terms Political stability
(ix) (xvii)
Promotional and advertising Cultural differences within the
practices country
(x) (xviii)
Resourcefulness of potential Level of
distributors education
Companies enter into Licensing Arrangements with overseas companies instead of direct exporting to obtain the
Q 18 (b)
following advantages:
(i)
Direct Exporting may be unattractive because of tariffs, quotas or other import restrictions in overseas markets.
(ii)
Licensing may allow fairly rapid penetration of overseas markets.
(iii)
Licensing does not require substantial financial resources.
(iv)
Political risks are reduced since the licensee is likely to be a local company.
(v)
Local production may be the only feasible option in the case of bulky products such as cement and flat glass.
Brand Equity is the differential effect of awareness and familiarity of the brand name on the customer response to the
quality of a product or service. It is a measure of the brands ability to capture and retain the preference and loyalty of the
Q 19 (a)
consumers. A brand has positive brand equity when consumers react more favourably to it than to any generic or other
branded versions of the same product.
Q 19 (b) (i)
A Pull Strategy is a promotional strategy in which considerable expenses are incurred in advertising and customer
promotion to attract the final consumers who seek to purchase the products on the strength of its brand name.
(ii)
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SPL intends to launch an aggressive Pull Strategy to achieve the following advantages:
Further strengthen the brand image for its products and create greater brand awareness among the quality conscious
customers.
Differentiate its products from those of the competitors and create value for the customers who would be willing to pay a
premium price for the products.
Create customer loyalty by emphasizing that the long-term advantages of superior quality paints far outweigh the
apparent savings offered by competitors by way of lower prices.
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Q 20 (i)
Rivalry among Existing Firms
Since companies of equal size and strength are involved in competition in a market which is not expected to show any
growth, the strategies pursued by any one company can be successful to the extent that it has competitive advantage over
the strategies of its rivals.
Price competition, campaigns for creation of perceptions of quality differentiation, more convenient and attractive
packaging features and aggressive promotion would be observed among the competing firms.
(ii)
Potential Threat of Entry of New Competitors
Since the market has significant growth prospects and present firms are earning lucrative profits, there would be a strong
attraction for other resourceful companies to enter this market. Although a new entrant would have to incur huge
research and development costs to develop the specialized products, yet threats from successful and experienced
companies would always be present.
(iii)
Bargaining Power of the Supplier
Lucky Coal Mines is in a strong bargaining position. It can sell its coal to many other buyers whereas the cement plant
would have to incur high transportation costs - switching costs - if it were to procure coal from other mines which are
located at a considerable distance. Furthermore, the quality of coal from other sources may not be as suitable for the
cement plant. Lucky Coal Mines can therefore dictate its terms e.g. price, advance payments on placement of orders and
recovery of transportation costs from the cement plant.
Q 21 (a) (a)
Market Research is the systematic designing, collection, analysis and reporting of data relevant to distribution and selling
of goods and services in a specific marketing environment facing an organization.
Q 21 (b) (b)
The basic reasons for undertaking market research are as follows:
(i)
to identify market opportunities and problems and determine the need for changes in marketing plans;
(ii)
to evaluate and predict consumers behavior which may influence their decisions for purchase of various goods and
services;
(iii)
to analyse the marketing strategies of competitors and their impact on the firms business;
(iv)
to formulate product development, pricing, promotion and distribution strategies to achieve optimal results.
Market Penetration Policy aims to charge low prices of the product to capture a large share of the market or achieve large
Q 22 (a)
volume of sales.
Market Penetration Policy may be pursued to achieve optimal results under the following conditions:
(i)
Discourage existing and potential competition in a highly competitive market.
(ii)
Sufficient production capacity exists and the firm is prepared to sacrifice short- term profits to capture a major share of the
market.
(iii)
Market is price sensitive and a low price would result in rapid growth of the market.
(iv)
Manufacturing and distribution costs would show a downward trend with increase in production and the size of the
market.
Marketing Segmentation is a process of dividing the total market into several distinct groups with each group having
Q 22 (b) certain homogeneous characteristics. The groups can be formed on the basis of their geographic locations, income levels,
age groups , educational qualifications, psychological behavior, buying habits and cultural backgrounds, etc.
The markets can be divided into segments if the segment fulfill the following criterion:
(i)
The market segment must be capable of classification as a distinctly identifiable and measurable group having common
characteristics.
(ii)
The market segment must be of a size which is sufficiently large to elicit interest of the seller in term of its sales revenue
and profit potential.
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Backward Integration Strategy seeks the ownership or increased control of the firms sources of important raw materials
and other critical inputs and supplies. Backward integration strategies are pursued in situations where the suppliers are
Q 23 unable to adhere to the buyers specifications of quality, or are unreliable in meeting their commitments or are few in
number and dictate unreasonable terms or charge exorbitantly high prices to take advantage of the buyers who are
heavily dependent on the inputs from these suppliers.
Q 24 (a)
Horizontal Integration Strategy:
This strategy seeks to achieve growth by ownership/acquisition or merging of functions of organisations which operate on
a similar level. It is characterized by integration of firms producing the same kind of goods or operating at the same stage
of the supply /value chain. This strategy is pursued to achieve economies of scale by sharing of resources and
competencies to gain significant competitive advantages.
Example:
A profitable cement company acquiring another cement manufacturing unit.
(b)
Forward Integration Strategy:
It is a strategy which envisages gaining ownership or taking control of distribution channels when the existing external
distribution channels insist on unduly high profit margins or are unreliable or are unable of meeting the firms distribution
objectives. Forward Integration strategy is most beneficial when significant competitive advantages can be achieved
through ownership or effective control of the distribution channels. The firm must have sufficient capital and human
resources for pursuing a successful forward integration strategy.
Example:
A leading manufacturer of branded fashion clothing establishing its own network of retail outlets.
(c)
Conglomerate Growth Strategy:
This strategy seeks to create diversified business units/entities, each of which is capable of achieving excellent financial
performance in its respective line of business. Firms which pursue conglomerate growth strategies search across different
industries for opportunities for expansion and purchase of companies whose assets are undervalued and therefore can be
acquired at low prices, yet have the potential to offer high returns on the investment. Firms which have excellent top
management capabilities and can effectively plan, manage and control individual units in different industries pursue
conglomerate growth industries.
Example:
A prominent textile group establishing or making acquisition of a power generation unit.
Q 25 (i)
In a Differentiation Strategy, the firm is in a position to provide a product or service which the customer perceives to be of
a higher value than those offered by other competitors. The customer considers that the additional cost of purchasing the
particular product or service is well below what the product or service is worth as compared to the other available
alternatives.
(ii)
The types of skills and resources which are critical for the pursuance of a successful Differentiation Strategy are:

Strong marketing capabilities, including support of marketing channels.

Sound capabilities for research and product engineering.

Corporate reputation for technical and professional leadership.

Good reputation for high standard of products and consistent quality.

Strong relations with the suppliers of major inputs and services.

Tradition of positive and prompt response to customers queries.

incentives based on subjective measures
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stress continuous improvement and innovation
Q 26 (i)
Marketing Intelligence System is an ongoing and organised procedure to generate, organise, store, disseminate, analyse
and retrieve large amount of data from internal as well as external sources for use in making marketing decisions.
(ii)
The different sources would facilitate in the creation of an effective Marketing Intelligence System are:
a.
Well trained and motivated sales force to provide inputs on the improvements required in the companys current
marketing mix as well as identify new market opportunities.
b.
Motivated distributors, retailers and other intermediaries who would obtain important information and pass it on to the
company to improve the overall quality of products and consumer services.
c.
Obtain feedback from customers regularly to improve the quality of the products and services in order to offer more value
to the customers.
d.
Participation in trade shows and examination of competitors products and their advertisements etc.
e.
Collect information from competitors published reports, suppliers, couriers and transporters.
f.
Published government statistics relating to population, agricultural production, manufacturing data, etc. to extract
information which can be incorporated usefully in the Marketing Intelligence System.
g.
Purchase of information from professional suppliers of data and information. These external firms have access to useful
data and sell them to the interested parties.
Q 27 (a) Foresight Electronics would be able to adopt its Market Skimming Strategy successfully in the following conditions:
(i)
when the niche market for its products comprises of customers who can afford and are willing to buy the product at the
high prices.
(ii)
when the firm is in a position to obtain the advantage of initial high price of its products for the duration that it intends to
pursue its market skimming pricing strategy.
(iii)
when the high price would create and convey an image of superior quality products among the buyers.
(iv)
when the unit cost of manufacturing a small quantity of output is not so high so as to offset the advantage of selling the
product at the high price.
(v)
there should be a high entry barrier of the industry.
It would be advantageous for Household Furniture Company to pursue a Market Penetration Strategy in the following
Q 27 (b)
situations:
(i)
when the demand for household furniture is price elastic.
(ii)
when the firm is in a position to achieve significant economies of scale by producing and selling a large volume of output.
(iii)
when the quality of the furniture sold by Household Furniture Company and its promotional strategies are designed to
capture a large share of the expanding market.
(iv)
when there is intense competition in the market and Household Furniture Company wants to retain/expand its share of
the market to derive benefits in future.
Horizon Limited may pursue Promotion Strategies in the marketing of its consumer durable products in their different
Q 28
stages of Product Life Cycles as follows:
(a)
Introduction Stage
(i)
inform and educate the potential customers of the existence of the product
(ii)
encourage trial of product and create awareness of the benefits that would accrue to the customers by using the product
and how it should be used
(iii)
secure distribution in leading retail outlets
(iv)
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place heavy emphasis on personal selling and promotion in trade shows and exhibitions.
(b)
Growth Stage
(i)
stimulate demand in selected market segments and promote the particular brand as competition increases
(ii)
increase emphasis on advertising to capture a large share of the growing market.
(iii)
enter new markets and expand coverage
(iv)
identify new distribution channels
(v)
shift emphasis from product awareness to the individual firms brand preference through aggressive advertising.
(vi)
Promote differentiation
(c)
Maturity Stage
(i)
focus on promotion and advertising to persuade the customers to purchase the particular brand rather than to provide
information about the product
(ii)
selective promotion only as intense competition and increase in promotion expenditures would result in lower profits
(iii)
increase R&D budgets to improve product quality vis-a-vis competitors
(iv)
extend product lines to meet niche customer demand.
(d)
Declining Stage
(i)
reduce promotion expenses as the size of the market is shrinking
(ii)
focus of promotion towards reminding remaining customers.
(iii)
Rejuvenate old products to make them look new.
Q 29: Identification of appropriate characteristics of each category of the Marketing Mix for the different categories of
Consumer Products are as follows:
Convenience Shopping Specialty

Products Products Products
(i) Price Low price High price Expensive
Less frequent
Consumer Frequent purchase/keen Special purchase
(ii) Buying purchase/ comparison of effort/brand
Behaviour less planning price, quality and loyalty
style
Widespread
Outlets in
distribution
Distribution Distribution in few specialised
(iii) at
Channels outlets markets/shopping
convenient
malls
locations
Promotion Mass Advertising and Carefully targeted

(iv) / promotion personal selling by promotion by
Advertising by producer producer/resellers producer/resellers
Market Challenger Strategy - In this strategy, firms which are placed in second and third positions launch aggressive
marketing campaigns to capture a larger share of the market to dislodge the market leader from its number one position.
A market challenger must have substantial resources and sustaining capability to challenge the market leader. A
resourceful market challenger may launch a full frontal attack to match the market leaders main strengths, i.e. product,
Q 30 pricing, advertising and distribution efforts. The outcome of the challenge would depend on the relative strengths of each
of the firms. Alternatively a market challenger may pursue a strategy of indirect attack on the competitors weaknesses
and gradually make inroads in the market to achieve the top position. A market challenger may also pursue a strategy of
acquisition of smaller companies to eliminate competition and steadily increase its share of the market to achieve top
position.
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Market Follower Strategy - In a market follower strategy, a firm prefers to retain its runner-up position in the industry
rather than to attack and dislodge the market leader. When the market follower realizes that the market leader would put
up strong resistance and not yield easily from its well-entrenched position or the market follower lacks the resources to
meet the capabilities of the market leader, it decides to maintain its existing status.
A market follower may be satisfied with its existing runner-up position as it would not have to incur the high expenditure
on developing new products and educating the consumers of the new product in the market. A market follower learns
from the market leaders products and programs usually with less investment. A market follower retains the current
customers and plans to achieve a fair share of the market expansion and also avoids retaliation from the market leader. A
market follower strives to keep its manufacturing costs and prices low and maintain the quality of its products to meet its
targets of market share, sales revenue and profitability without inviting retaliation from the market leader.
A Customer Database is an organized and updated collection of comprehensive information of existing and prospective
Q 31 (a) customers names and addresses, telephone numbers, demographic information of age, income, number of family
members, business activities, interests, purchases and other useful information.
Q 31 (b) (i)
Identify prospective customers The customer database would help the bank to identify prospective customers and
contact them by telephone calls, personal visits and promotion letters to convince them of the advantages of acquiring the
banks credit card facilities.
(ii)
Formulation of marketing policies Credit Cards have different features e.g. platinum cards, gold cards, etc. with varying
credit limits, bonus points, payment or waiver of initial and annual fees, etc. Information obtained from the customer
database can help the bank to formulate policies for the different needs of customers and offerings of types of credit cards
which best serve their needs.
(iii)
Provide vital information of high-value customers Information from the customer database can enable the bank to
create a profile of privileged customers and cater to the special needs of these customers.
(iv)
Negotiate Terms with suppliers to benefit high-value customers Information from the customer database can be used
by the bank to seek concessional special terms for its customers from relevant institutions such as hotels, travels agents,
selected retail outlets, etc.
(v)
Adopt proactive competitive strategies The bank can use the information from the customer database to upgrade the
cards and enhance the credit limits of customers who have shown good performance in terms of customer profitability
and timely payments of their dues to compete effectively with the products offered by the competitors.
Q (i)
Market skimming
(ii)
Global
(iii)
Conglomerate or Diversification
(iv)
Work-to-rule
(v)
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First mover advantage
(vi)
Strategic Business Units
Q 32 The terms which are incorporated in a typical Franchise Agreement are:

(i)
The franchisor authorizes the franchisee to use the franchisors complete brand concept, goodwill and business operating
systems and methods to conduct business as defined in the franchise agreement.
(ii)
The franchisee undertakes to make investment of a specified amount in the business and operate within a defined
territory.
(iii)
The franchisee undertakes to achieve predetermined sales targets.
(iv)
The franchisee is entitled to benefit from the promotion and advertising campaigns of the franchisor to facilitate the
franchisee to achieve the sales targets in the defined territory.
(v)
The franchisee makes an initial payment of the stated amount and further commission or royalties on the amount of sales.
(vi)
The franchisee undertakes to purchase selected material inputs from the franchisor or a specified supplier.
Examples: McDonald, Burger King, Dunkin Doughnut, Marriot Hotel, etc.
Q 33 Progressive organizations aim to achieve the following objectives by pursuing various marketing strategies:
(i)
They pursue marketing strategies to achieve maximum market penetration and increase their share of the existing and
expanding market.
(ii)
They plan their strategies to achieve market leadership status or to hold on to their second or third tier positions in the
market depending upon their own resourcefulness and objectives and the relative strengths and competitive advantages
of the market leader.
(iii)
They pursue marketing strategies to overcome competitive pressures by special price offers and more aggressive
promotion and advertising campaigns and modifications in product specifications to create differentiation advantages.
(iv)
They create market acceptability for their products and pursue marketing strategies to consolidate their position through
aggressive promotion,
more efficient distribution and creating stronger linkages with the distribution channels.
(v)
They pursue marketing strategies to maintain market visibility, create goodwill and strengthen relations with their
stakeholders to improve their business reputation in order to counter threats from competitors.
(vi)
They also pursue marketing strategies to explore new markets to diversify into those markets which offer higher
profitability prospects
and to identify and seize new opportunities which would create synergy effects with the existing product mix.
The advantages and disadvantages/limitations of placement of advertisements by Zest Diary Company for introducing
Q 34
their frozen fruit yoghurt products on the various types of media are:
Advantages
Television
offers combined effects of highly attractive sights, sound and motion to appeal to the audience.
captures high attention of the audience.
reaches a large segment of the prospective market.
qualities of the product can be highlighted more effectively.
Widely circulated newspapers
extensive coverage of different categories of the prospective audience.
a large part of the audience may read the newspaper in their free time or when required when it is more easier to
respond.
customers can refer back to the newspaper whenever there is a need for the product.
captures attention of the audience for a relatively longer duration.
Billboards(Hoardings)
high repeated exposure to the passing traffic.
can be installed at most strategic locations.
colourful digital graphic billboards attract attention of large audience.
Disadvantages/Limitations
TV:entails high cost.
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TV:has very short exposure.
TV:has minimum audience selectivity.
TV:audience can move away from the TV sets during advertisement breaks.
Newspaper: have a very short life and advertisements are effective only if they are repeated frequently
Newspaper:quality of the advertisements are generally not audience attention captivating type.
Newspaper:newspapers have a very restricted pass-on or secondary audience.
Newspaper:busy readers glance through the newspapers to read the headlines and ignore the advertisements.
Bill Borad:limited audience selectivity.
Bill Borad:ignored by the fast moving traffic on busy roads.
Bill Borad:billboards placed too closely are eyesore for the audience and are ignored.
Bill Borad:audience often find the similar colours on billboard boring and therefore avoid looking at them.
Bill Borad:high costs are involved in the maintenance and upkeep of the billboards.
HRM
Summer 2008
In order to conduct the Disciplinary Enquiry in a fair and impartial manner, I would adopt the following steps:
(i) Obtain complete written evidence from the Branch Manager stating the specific nature of the Assistant Managers
misconduct, their dates and timings and the names of colleagues with whom the Assistant Manager was involved in the
offensive conduct.
(ii) Make efforts to obtain specific information from the complaints as well as other colleagues regarding any special
circumstances inside the office or outside which may help to explain the source of the problem.
(iii) Investigate into the Assistant Managers personal record to ascertain if there is any evidence of indiscipline, aggressive
behaviour or misconduct in the past.
(iv) Study the Banks disciplinary rules bearing in mind the Assistant Managers past record and the nature and intensity of
the offence.
Q1 (v) Direct the Assistant Manager to give a written reply to the various allegations of aggressive conduct and misbehaviour
offering his explanations to the charges made by the Branch Manager.
(vi) A meeting would be held with the Assistant Manager in which he would be provided an opportunity to explain his
viewpoint and circumstances leading to the Branch Managers complaint. Structure the enquiry and make noting of the
important points to be covered in the enquiry. The Assistant Manager would be informed of the date, time and place of
the enquiry and the reason why he has to appear for the enquiry.
(vii) Examine similar cases in the past and the nature of punishment meted to the defaulters.
(viii) After hearing of the Assistant Managers explanation in an objective, fair and consistent manner, I would draw my
conclusions regarding the nature of the allegations and the intensity of the misconduct.
(ix) Prepare a comprehensive report on the allegations leveled by the Branch Manager, written and verbal replies of the
Assistant Manager and my findings along with the course of proposed line of action and rationale for my
recommendations.
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The objectives of promulgating comprehensive laws for the health, safety and security of the workers are:
(i) To encourage employers and employees to reduce hazards in the work place and to strengthen the health, safety and
security programs.
(ii) To establish minimum safety and health standards, particularly in hazardous industries such as steel, mining and
Q2
construction.
(iii) To create an effective framework for enforcement of the regulations.
(iv) To frame procedures for reporting of job related accidents, injuries, illnesses and deaths.
(v) To prevent employment of child workers.
(vi) To provide special facilities for female workers.
Responsible Management can reduce the risks of industrial accidents by adopting the following measures:
Human Factors:
Strict compliance with safety rules
Proper operation of equipment
Avoid excessive overtime
Environmental Factors:
Q3
Good housekeeping
Proper ventilation
Adequate lighting
Mechanical/Technical Factors:
Safe storage and handling of inflammable materials
Proper tools and equipment
Adequate protective equipment or mechanical guards
Winter 2008
Q4 The introduction of welfare-oriented labour policies would offer significant benefits to

OCL by way of:
(i) Improvement in goodwill, image and reputation of the Company.
(ii) Increase in efficiency and productivity of the workers.
(iii) More congenial working relationship and better harmony with the workers union.
(iv) Ability to attract and retain competent and more committed work force.
Q5 (a) Personal Development Plan is a plan which outlines the process of improving and
upgrading ones work skills, knowledge and capabilities in order to enhance its
effectiveness and adaptability. Personal Development Planning is a continuous
process to improve and utilize ones full potential at each stage of the chosen career
path.
(b) The principal advantages of adopting and pursuing a well-formulated Personal
Development Plan are:
(i) continuous appraisal of the individuals career path and upgrading of skills.
(ii) acquisition and accumulation of new skills thus minimizing the chances of
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the existing skills becoming obsolete or redundant.
(iii) continuous monitoring of progress in ones career to ensure that it is on the
right path and taking timely corrective measures, if considered necessary.
(iv) creating a sense of achievement and commitment to reach the set targets
within specified time-limits.
Q6 The advantages of promotion from internal sources, for the tractor division are:
(i) Improvement of Morale The internal transfers and promotions would provide an
impetus to the morale of the workers. They would feel assured that the company has a
policy to provide opportunities to the existing employees rather than to outsiders.
(ii) Proper Evaluation of Employees - The management is in a better position to evaluate
the performance of existing employees before considering them for higher positions.
The past performance of existing employees is a better guide to their skills, competency
levels and commitment as compared to interviews with outsiders.
(iii) More effective team work - Since the existing employees know the middle and senior
level managers, they would be motivated to put in their maximum efforts leading to
more effective team work.
(iv) Cost-effective - Internal transfer from within the organization is less costly than
recruitment from external sources.
The disadvantages of transfer and promotion from the automobile division are:
(i) Absence of Fresh Ideas - Transfer from internal sources prevents introduction of fresh
blood and new ideas which are essential for innovations.
(ii) Biases and Personal Preferences of Managers- The managers may not necessarily
promote deserving employees strictly on merit because of their personal likes and
dislikes for certain individuals.
(iii) Limitations on the number of employees to be transferred Since the transfer has to be
made from within the organization, the number of individuals who are eligible to apply
would be restricted. The individuals outside the organization who are more talented
would not be given an opportunity to serve the organization.
(iv) Rather than being motivated to work hard, employees may become complacent because
of their assured promotion and seniority.
Q7 (b) Core Competence

Core Competence is the key ability or strength that an organization has acquired which
differentiates it from others, gives it competitive advantage and contributes to its long
term success. Core competence accrues due to its favourable location, access to superior
quality raw materials, unique capabilities of equipment, acumen of management, skills
and competence of workers and marketing insight . Core competence is valuable, rare
and difficult for competitors to imitate.
(d) Job Description

Job Description is a structured and factual statement of a jobs functions and objectives.
It defines the boundaries of the job-holders authority and responsibility and includes the
job title, department, job site, and reporting channels.
Q 8 (a) The indifferent attitude of management of Apollo Mining Company Limited towards the
workers may be attributed to:
(i) Abundance of workers seeking jobs and comparatively few opportunities for
employment in the area.
(ii) Unsatisfactory enforcement of Mining Rules and Regulations by the concerned
regulatory authority.
(iii) The Management does not believe in ethics, justice and fair play in its dealings with the
workers.
(iv) The Workers and their Union is not fully aware of the rights of the workers and their
bargaining strength.
Q 8 (b) The management of Apollo Mining Company Limited should take the following measures to
satisfy the demands of the striking workers:
(i) Compensation for the Affected Workers: Management should pay compensation to
the dependents of the workers who have lost their lives in the accident. Proper
arrangements should be made for treatment, including hospitalization, of workers who
have been injured in the accident.
(ii) Safety Equipment: Management should install proper safety equipment in the mines
and protective personal gear for ensuring safe working conditions in the mines.
(iii) Formal Safety Training of the Workers: Management should introduce Safety
Training Programs and educate the workers of the positive results achieved through the
introduction and implementation of these programs.
(iv) Provide Medical Facilities to the Workers: Management should provide adequate
medical facilities, including hospitalization for the workers and their families.
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(v) Group Life Insurance: Management should provide Group Life Insurance coverage for
the workers.
(vi) Social Needs of the Workers: Management should sponsor recreational and social
activities for the workers and their families.
Q9 In order to recruit a suitable candidate for the position of General Manager, Marketing, I will
examine and seek the following managerial competencies:
(i) Communication Competency: The ability to effectively transfer and exchange information
with senior management and subordinates as well as other stakeholders.
(ii) Planning and Administrative Competency: The ability to plan and organize activities and
make decisions especially related to resource allocation, costs, etc.
(iii) Teamwork Competency: The ability to complete the tasks through individuals who have to
work collectively in a team environment.
(iv) Strategic Action Competency: The ability to understand the overall mission and strategies of
the organization and be able to achieve the objectives of the company.
(v) Global Awareness Competency: Ability to explore and seize business opportunities. The
Marketing Manager should have knowledge of different cultures and a receptive and open
mind.
(vi) Self-management Competency: The General Manager should have a sense of integrity and
good ethics and be willing to accept responsibilities.
Q 10 (a) The Human Resource Management and Planning policies can play an important role in the
achievement of business objectives by:
(i) Determining Requirements of Human Resources: an essential element of HR
Management and Planning function is to ascertain accurately HR requirements to avoid
problems of manpower shortages, wastages, mismatch of work skills with the job
requirements and redundancies due to over staffing.
(ii) Ascertaining Training Needs: an important HR planning function pertains to
preparation and conduct of training programs to ensure that a cadre of skilled workforce
is available to meet the requirements of the organization.
(iii) Career Path Planning for Managers: Career path planning of trained and experienced
officers/managers is essential in order to retain them and keep them motivated to meet
the present and future requirements of personnel in all management positions.
(iv) Fair Compensation: Fair compensation plans, including fringe benefits are essential
for inducting and retaining a motivated and performanceoriented team and work force
at all levels.
(v) Industrial Relations: Properly conceived industrial relations strategies are essential for
maintaining a skilled and motivated work force and ensure continuity of smooth
operations.
Q 10 (b) The limitations of Performance Appraisal are:

(i) Performance Appraisals often focus on employees efforts for short-term rewards rather
than on issues that are important to the long-term success of the organization.
(ii) Supervisors involved in Performance Appraisal often consider them in the context of
reward-punishment exercises and not on the overall skills and potential of the employee.
(iii) Performance Appraisal is often considered as a routine paperwork exercise rather than
conducting an objective critique of the individuals performance.
(iv) Individuals being appraised consider the exercise as being biased or unfair.
(v) Subordinates react negatively when evaluators offer unfavorable comments.
(vi) Personal biases and inconsistencies of the individual conducting the Performance
Appraisal may undermine the efficacy of the entire exercise.
Q 11 The products / services would satisfy the following types of Human Needs:
Product/Service
(i) health insurance
(ii) cosmetics
(iii) flowers for a sick friend
(iv) tandoori nan
(v) burglar alarm system in a bungalow
(vi) rare and expensive work of art
(vii) membership of an exclusive golf club
(viii) wages of a daily worker
(ix) sponsoring of a charitable hospital
(x) a luxury car
Type of Need
security
social//friendship/love
social/friendship/love
physiological
security
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self-actualization
esteem
physiological
self-actualization
esteem
Employee-Counseling includes working with individuals to promote and nurture relationships which are supportive,
Q 12 psychotherapeutic, providing guidance for dispelling fears and apprehensions and resolving of work-related problems.
The scope of Employee Counseling could be to:
1. help the employee identify areas that need improvement.

2. support the psychological equilibrium of employee
3. Bring in focus the nature of problem
4. explore the impact of the problems and exploring all possible solutions.
5. Create a constructive environment mutually beneficial to employees and organization.
Functions of Counseling:
(i)
Provide Reassurance:
Offering reassurance to employees by inspiring them and giving confidence to handle problems and inculcating in them a
sense of direction and purpose in the discharge of their responsibilities and duties.
(ii)
Help to release of Emotional Tensions:
Employee Counselor can help to create a conductive non-critical and objective attitude by providing suitable opportunities
to employees to communicate and explain their problems to counselors who are receptive and sympathetic to the
problems faced by the employees so that the tensions are released.
(iii)
Clarification of Thought Process:
Enable employees to clarify their thought process and motivate them to accept responsibilities and adopt a realistic
approach in dealing with work-stress. It revives the employees level of aspirations and motivates them to high levels of
actual achievement.
The management of ECL should take the following Safety Policy measures to minimize the risks of accidents in the plant
Q 13
for the manufacture of industrial chemicals:
(i) Involvement and active supervision by the top management and participation of the employees in introducing effective
safety policies in the entire premises.
(ii) Creation of a Safety Committee to review the safety measures and monitor the implementation of the safety rules and
procedures periodically to create a safe and secure working environment.
(iii) Preparation of Safety Rules and Instruction Manuals for strict compliance by employees at all levels.
(iv) Education and training of the workers on a continuous basis and dissemination of information by posting of safety
charts, posters and installation of safety equipment at all sensitive areas in the premises.
(v) Creation of an environment where the equipment and machines which are properly maintained and the workers are
provided protective uniforms.
(vi) Installation of proper warning/alarm systems and conduct of regular safety drills and exercises.
(vii) Adoption of a policy which ensures that the workers are not required to work for very long hours which may adversely
affect their concentration and result in performance lapses.
The different types of external business environment and internal business management competencies requirements of
Q 14
managers to perform in the prevailing corporate environment are:
External Business Environment Competencies:
(i) Capable of evaluating external environment and be able to see the whole picture.
(ii) Capable of quick thinking and be able to make timely decisions regarding changes in the external environment.
(iii) Being proactive in anticipating the changing environment.
(iv) Being sensitive to the interests and concerns of the different stakeholders in the organization in which new complex
business relationships such as partnerships, alliances, joint ventures are prevalent.
(v) Ability to take and manage external business threats.

Internal Business Management Competencies:
(i) Awareness of the overall organizational objectives, rather than being limited to the day-to-day operations of the
organization.
(ii) Capable of handling increased workloads and pressures.
(iii) Responsible for building effective work groups and developing teams.
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(iv) Flexible in handling human relations and in managing internal challenges of group work performance.
(v) Initiative for self-development, learning and acquiring financial and information management and IT skills.
Q 14 A (a)
Employee Compensation Package refers to all forms of pay and rewards received by the employees for the performance of
their jobs, including cash, bonuses, benefits, facilities and perquisites.
(b)
The steps which should have been followed in the formulation and implementation of a well-conceived Employee
Compensation Strategy are:
(i)
Identification of the Objectives of the Employee Compensation Strategy
Compensation objectives should have been identified and articulated as part of the Banks
overall planning process. The objectives should be in line with the organization's overall corporate strategy and lead to the
creation of a work force that is capable of implementing its plans.
(ii)
Review of Compensation Plan
Examination of the strengths and weaknesses of the existing compensation policies should have been carried on a regular
basis to enable the management to formulate new or improved compensation package.
(iii)
Identification of the Positions and Prepare their Job Descriptions
Identification of the positions at various levels and precisely defined job descriptions are essential for the development of
a meaningful compensation program. Job descriptions should be reviewed periodically to ensure that they are in
conformity with the employee skill requirements, assignments and responsibilities.
(iv)
Evaluation of the relative importance of the Positions and their significance for achieving the objectives of the Bank
Evaluation and comparison of the positions is necessary to establish their relative importance and the relationship
between the compensation for different positions. The standards must be well-defined and applied specifically to the
positions rather to the individuals in these positions.
(v)
Comparison of the Compensation Packages with the packages offered by the competitors.
Development of a rational compensation program in accordance with the competitive environment by collecting relevant
data of compensation packages offered by the competitors. The Bank should identify the competitors and offer
competitive compensation packages to attract and retain skilled and motivated employees.
(vi)
Administration of the Compensation Program
Administration of a comprehensive compensation program to be applied uniformly for all employees. By adopting formal
procedures and standards, arbitrary or unfair personnel decisions can be avoided.
(vii)
Communication of the Compensation Package
Communication of all aspects of the compensation package to the concerned parties including the employees, supervisors,
administrators and management who must have a thorough knowledge of the program to avoid any misunderstandings.
Q 15 (a) The important functions which have to be performed by the Human Resources Department of the commercial bank are:
(i) Human Resource Planning
(ii) Recruitment, selection and induction of employees
(iii) Organisation of departments and design of work flows
(iv) Preparation of job specifications and job descriptions of employees
(v) Salary and wage administration, including reward systems
(vi) Planning for posting and transfers of suitable staff in the various branches
(vii) Training and development of staff
(viii) Measuring and monitoring of staff performance
(ix) Instituting measures for improving motivation and morale of employees
(x) Succession planning of competent staff
(xi) Handling of employee grievances and complaints
(xii) Employee welfare, health and safety
(xiii) Compliance with employment legislation and other legal requirements.
(xiv) Maintenance of centralised records of all the branches.
(xv) Ensuring equality amongst all the branches, policies should be made at central level with equal remuneration and
training opportunities for all the 17500 employees.
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The important Human Resource Management practices which contribute towards workforce optimization in a
Q 15 (b)
manufacturing plant with several integrated workshops and departments are:
(i)
Hiring of Workers: Workers are selected carefully on the basis of their skills to undertake the specialized jobs they are
required to perform.
(ii)
Workforce Planning : The strength of workers in various categories are determined in anticipation of the expected
workload and measures are taken for ensuring their availability at the required point of time
(iii)
Work Processes: Work processes are well-defined and training is provided to the employees to enable them to perform
their tasks in an efficient manner.
(iv)
Working Conditions: The internal working conditions are conducive for maximum achievement and the management
supports high levels of performance.
(v)
Performance Management Systems: Well-designed employee performance systems are instituted in the organizations
which are communicated and accepted by all the concerned employees.
(vi)
Conflict Management: Conflicts due to differences in perceptions, role ambiguities and competition for resources must be
contained and resolved by management in a fair and equitable manner to promote team effort for the achieving the
organizational objectives.
(vii)
Reward System: High level of performance is expected from the workers and they are adequately rewarded in a
transparent manner for their good performance. Also reduce Staff turnover rate by providing adequate compensation and
support.
(viii)Employee Service: Make sure that the staff is provided with healthcare incentives, proper maintenance of records and
information system
A properly designed Job Application Form is expected to provide the following information to the recruiter in the process
Q 16
of preliminary screening of a prospective candidate:
(i)
Enable the recruiter to assess whether the applicant has the basic educational qualifications, and technical skills to meet
the requirements of the job.
(ii)
Enable the recruiter to evaluate whether the applicant has relevant work experience to meet the requirement of the job.
(iii)
Enable the recruiter to draw tentative conclusions about the applicants suitability for the position under consideration on
the basis of previous work record.
(iv)
Enable the recruiter to predict whether the applicant would fit in the cultural and social structure of the organization.
(v)
Enable the recruiter to reach a decision whether it would be worthwhile to process the application further and call the
applicant for test or interview.
Group/Panel Interview consists of multiple interviewers who independently record and rate the applicants responses
Q 17 (a) during the interview session. The panel normally includes the immediate supervisor, a representative of the HR
Department and a Job Expert.
Structured Interview is a procedure in which interviewers ask the same set of questions in the same order to all the
candidates. The questions are based on job analysis of the position and the responses from the candidates are reviewed
for their relevance, accuracy and bias
Q 17 (b) The advantages of Group/Panel Interview are:

(i)
Reduces the biases of an interview conducted by a single interviewer.
(ii)
Increases the reliability and validity of the interview.
(iii)
The candidate is simultaneously evaluated by all those individuals who are relevant to the appointment.
(iv)
Less time consuming and can provide the candidate insight of how the staff works together and interacts
The advantages of Structured Interview are:
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(i)
The interview is highly focused and all the candidates are assessed according to their responses to the specific job related
questions.
(ii)
It is easy to ensure that all relevant information has been collected.
(iii)
Ensures that answers can be reliably aggregated and that comparisons can be made with confidence between subgroups
or between different survey periods.
Q 18 The Health and Safety hazards which are faced by workers in typical manufacturing environment are:
(a)
Contact with chemicals and other harmful materials.
(b)
Excessive noise and vibrations of heavy machines.
(c)
Extreme temperatures.
(d)
Poorly designed equipment which affect postures of workers.
(e)
Slippery floors and passage ways.
(f)
Absence of safety guards on moving parts of equipment.
(g)
Poor illumination e.g. light glare, insufficient light.
(h)
Improper ventilation.
(i)
Lack of safety rules and regulations
(j)
Faulty /Outdated safety equipment
(K)
Improper machine maintenance
(l)
Excessive humidity
Q 19 (a) A skilled recruiter should:

(i)
Possess knowledge about the job to be filled The recruiter should have a clear understanding of the job and be able to
ascertain whether it is necessary to induct a new employee or the work can be handled adequately by reorganizing or
reallocating other jobs. If the job is necessary then the duties and responsibilities attached to the job should be clearly
spelt out.
(ii)
Possess insight in the attributes and qualities of the individuals to perform the job The recruiter should be aware of the
qualifications, experience and skills necessary to perform the job.
(iii)
Have knowledge of the sources and the means of attracting a range of suitable candidates In case it is necessary to
recruit from external sources, the recruiter should be aware of the sources where suitable applicants are available, identify
the potential candidates and adopt appropriate methods of recruitment.
(iv)
Possess skills to evaluate the candidates who are most suitable for the job The recruiter should have insight in the
methods of obtaining information about the candidates and be able to apply the appropriate methods for selection of the
right candidate.
Q 19 (b) The advertisement should contain the following information:

(i)
Requirements of the job specifications stating main tasks to be performed and the responsibilities associated with the
position.
(ii)
Outline of the hospitals network and its reputation, working conditions, the facilities available in the hospital and
professional capabilities of the staff.
(iii)
Location(s) at which the technicians would be posted.
(iv)
Compensation package including fringe benefits.
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(v)
Specifications of job requirements such as education, professional training, particular skills and experience.
(vi)
Name /designation of the individual to whom the application should be sent and last date for receipt of applications.
A Senior Human Resource Manager involved in the Formulation and Implementation of Strategy at the corporate level of a
Q 20 (a)
textile mill having 15,000 employees should have responsibilities to achieve the following objectives :
(i)
The organizational structure should be appropriately designed to achieve the overall corporate objectives. The
organizational structure should capitalize on internal strengths and strive to remove internal weaknesses which may be
impediments to the achievement of the objectives.
(ii)
The companys objectives and goals should be communicated and well understood by the employees at all levels.
(iii)
The various divisions and departments should work in close coordination to achieve the main goals and objectives of the
company. Areas of friction and conflict which may undermine performance should be identified and rectified at
appropriate levels.
(iv)
The managers at all hierarchical levels should make effective plans to achieve the business and operational goals and
targets entrusted to their respective departments.
(v)
The job descriptions and job specifications should be precisely defined and clearly understood by the employees at all
levels.
(vi)
The organizations reward system, including benefits and policies of promotion should be fair and equitable and designed
to achieve optimum employee performance at all levels.
(vii)
The policy issues of training, job rotations, career path and succession planning should be accorded the necessary degree
of importance and be implemented in an objective and fair manner.
(viii)
The employees should be kept fully motivated and their morale and commitment should be high at all times. The
employees should take pride in their association with the company.
A Strategic Business Unit (SBU) is an independent unit within a large organization and has its own staff, financial resources
and products. A separate SBU pursues its own marketing strategy and is established on the premise that a single strategic
Q 20 (b)
approach is not always appropriate in a large diversified organisation which markets different products to serve the needs
of a wide range of customers.
The well-managed serviceoriented companies give high importance to staff training and development and create a
Q 21
cadre of competent and committed employees to derive the following advantages:
(i)
The cadre of properly trained and competent staff who are fully knowledgeable of their duties and responsibilities can
handle customers in a highly professional and courteous manner The competent staff inspires confidence in the customers
and helps to retain their loyalty which brings repeat business.
(ii)
Success of even the well-conceived corporate and business strategies of service-oriented companies depend to a
considerable extent on the competence of their staff at various levels to deal with a variety of situations where proper
handling is of vital importance towards the achievement of the corporate goals.
(iii)
Properly trained and competent employees are able to avoid and handle accidents and mishaps and contribute towards
the safety and security of customers, other members of the staff as well as the valuable physical assets.
(iv)
A well-trained and competent work force at all levels requires less directions and supervision and is able to handle the
various day-to-day issues promptly in a responsible manner to the satisfaction of the management. These companies can
operate efficiently with relatively flat organization structures and lower operating costs.
(v)
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A competent, committed and motivated workforce is able to create a high degree of cohesion and team effort among the
staff at various levels.
(vi)
A well-trained and competent workforce with multi-skilled capabilities is able to handle varied and different assignments.
(vii)
The new inductees who undergo formal training programs are better absorbed in the culture of the organization.
Q 22 The advantages of Employee Participation in the affairs of the organization are:

(i)
Employee Participation would improve decision making as the employees would acquire the necessary knowledge and
insight to contribute effectively in this process.
(ii)
Employee Participation would make the workers more willing to implement the decisions in which they have also been
involved.
(iii)
Employee Participation would help to improve internal communication and coordination and contribute towards better
working relationships at all levels.
(iv)
Employee Participation would tend to reduce the extent of supervision as the workers would be more conversant with the
actual work because of their close involvement.
(v)
Employee Participation would enable the employees at all levels to acquire new skills and develop leadership qualities.
(vi)
Create an attitude change and ownership of the organization and tasks improving the productivity.
Downsizing is the process of reducing the number of employees with the purpose of making the organization more
efficient and responsive to the changes in its business environment. It results in more flat organizational structures,
Q 23 (a)
greater delegation of authority and responsibilities, improved communication within the bank and more functions being
performed at the lower echelons in the organization, close to the points of interaction with the customers.
HR Manager of the bank should keep the following considerations in perspective while pursuing a policy of downsizing
Q 23 (b)
and laying off of employees:
(i)
The downsizing process should be transparent and objective and not convey any impression of favouritism or create a
feeling of victimization.
(ii)
The laying off of employees should not demoralize the surviving employees or pose a threat to their job security concerns
which would affect their morale and performance.
(iii)
The layoffs should not result in loss of all employees who are performing important functions and are conversant with the
internal procedures of the bank.
(iv)
The remaining staff should not be excessively overburdened as they would have to carry the additional workload which
was handled by the employees who have been laid off.
(v)
The downsizing should not lead towards excessive consolidation of duties and responsibilities which may result in
compromising the important controls and security aspects of the banks operations.
(vi)
The bank should not have negative image in the financial circles nor should the customers have any apprehensions about
the goodwill and long-term financial standing of the bank and its ability to continue to render good service to the
customers.
(vii)
Before downsizing there should be a fresh appraisal / performance competence done and results taken in consideration
Formal Succession Planning is an important HR function as it ensures availability of sufficient number of appropriately
qualified and competent employees from internal sources to meet the future HR needs of the organization. Suitable
Q 24 (a) employees are identified in the early stages of their careers and are groomed through a process of job rotation and
training, to assume more responsible positions in the organization arising due to promotions, transfers, retirement or
death of key employees.
Q 24 (b) The main advantages which would accrue to FECL by introducing a Formal Succession Planning Scheme are as follows:
(i)
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It would enable FECL to anticipate HR requirements in advance and avoid awkward problems arising due to delays in
identifying and recruiting suitable employees from external sources to fill in key vacancies.
(ii)
It would enable the company to identify high-potential employees at an early stage whose career paths can be planned for
promotion to higher levels in the organization hierarchy.
(iii)
It would align the HR function of career path planning of employees with the overall corporate and strategic planning
objectives.
(iv)
It would increase the managerial depth within the organization which can readily fill in the positions when necessary.
(v)
It would provide internal promotion opportunities for the employees to increase their level of motivation and commitment
towards the company.
(vi)
It would reduce the risk of inducting employees from external sources at higher levels who may not be able to assimilate in
the corporate culture of FECL and work in a cohesive team environment.
(vii)
Positive goals for key personnel, which will help keep them with the company and will help assure the continuing supply of
capable successors for each of the important positions included in the succession plan.
(viii)
Defined career paths, which will help the company recruit and retain better people.
Q 25 (i)
The plant and equipment must be maintained according to the specified standards.
(ii)
The employees must be provided training for compliance with the safety procedures.
(iii)
The Safety Policy should be communicated to all the employees
(iv)
Instructions for proper handling of equipment should be displayed prominently in the work areas.
(v)
Employees who are exposed to risks should be provided proper safety gear.
(vi)
All moving parts which may cause injuries to the workers should have protective fencing.
(vii)
All slippery floors areas should display adequate warning signs.
(viii)
First aid boxes with necessary supplies should be provided at various points.
(ix)
Fire Alarms and fire fighting facilities should be provided and checked and refilled at regular intervals.
(x)
Health and Safety Advisors should conduct Workshops and Seminars at regular intervals.
(xi)
Employees should immediately report all accidents on the prescribed Accident Reporting Forms.
Q 26 The critical Skills and Competencies required for the position of Director Public Relations and Media Affairs of SHPL are:
(a)
good understanding of SHPLs mission, goals and objectives and the ability to communicate them to all the stakeholders
(b)
deep understanding and insight of the role of the various media channels in projecting a positive image of the reputation
and standing of SHPL
(c)
demonstrable track record and experience in media relations and media contacts to handle unforeseen situations which
may affect SHPLs reputation and image
(d)
excellent interpersonal and communication skills with ability to deliver messages by adopting appropriate styles, tools and
techniques depending on the type of information and the intended recipients
(e)
good management and organisational skills and be able to prioritize and plan activities taking into account factors such as
deadlines and resources
(f)
work closely with senior level executives as an effective member of the top management.
(g)
assimilate complex information and take independent action where necessary and handle multiple projects and work
demands at a time
(h)
excellent writing skills with a high level of capability to attend to details
(i)
qualities of leadership and a positive frame of mind
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(j)
proficient in developing web-site content ,maintenance and supporting the in-house broadcasting department
The following important factors should be included in developing an effective Accident Prevention and Reporting
Q 27
System for a company involved in heavy mechanical and engineering operations:
(i)
All accidents should be reported on Accident Reporting Forms and proper records should be maintained of accidents
resulting in death and major injuries.
(ii)
Identification of particularly more risky activities and adopting special precautionary measures such as installation of safety
grills to prevent accidents.
(iii)
Periodic training of employees for compliance with the safety rules and procedures so that they are fully aware of the
accident hazards while performing their duties.
(iv)
Regular maintenance of plant and machinery to ensure that all the parts and components are repaired/ replaced promptly
so that they do not cause injuries to the workers due to malfunction or breakdown of the equipment.
(v)
Periodical review of the safety conditions should be carried out by an independent person.
(vi)
Statistical trends of recurring accidents must be monitored closely to identify and examine the need for introduction of
special measures.
(vii)
Procedures for reporting near-misses should be laid down: anonymously, if necessary to encourage timely corrective
actions and openness in reporting of such incidents.
Accurate Engineering Limited would experience the following disadvantages due to the exceptionally High Rate of
Q 28
Employee Turnover:
(i)
Loss of important confidential and proprietary information and knowledge of work processes to competitors.
(ii)
Disruptions and delays in manufacturing operations as new workers would have to be recruited and would require training
to learn the work processes.
(iii)
Deterioration and inconsistency in the quality of the products as the new workers would require time and hands-on
experience to acquire the levels of proficiency and skills necessary to manufacture precision earth drilling tools.
(iv)
Effort and cost incurred in training of employees who leave the organisation are irrecoverable losses. Additional effort and
costs would be involved in the training of new workers who would replace the outgoing workers.
(v)
The new workers would require time to assimilate in the Companys organisation culture.
(vi)
Additional costs of placement of advertisements, background verification, medical examination and conducting interviews
would have to be incurred in the hiring of new workers.
(vii)
Staff morale and motivation would be adversely affected which would create a sense of insecurity among the remaining
workers and result in low employee productivity.
Q 29 (a) The purpose of different types of tests administered to the prospective candidates are:
(i)
Intelligence Tests: Intelligence Tests are administered to measure the candidates ability to think logically, analyse the pros
and cons of problems and make rational decisions. Intelligence Tests may also be used to determine the candidates
understanding of social values and customs
(ii)
Proficiency Tests: Proficiency Tests are designed to evaluate the candidates level of skills, expertise and competence to
perform the particular task for which the individual is being considered for recruitment.
(iii)
Aptitude Tests: Aptitude Tests are conducted to ascertain the candidates ability to work with others in a team
environment, handle work-related stress and cope with the various demands of the job.
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Q 29 (b) A well-conceived Selection Test should have the following qualities:

(i)
a high degree of validity - that is it should be capable of measuring attributes which it seeks to evaluate in the candidate
(ii)
a high degree of reliability that is should provide results which have a high degree of consistency among the various
candidates.
Q 29 It may be necessary for an organisation to dismiss an employee in the following situations:

(i)
The abilities of the employee have been impaired and it is not possible for the individual to continue to perform the
assigned duties satisfactorily.
(ii)
The employee has indulged in serious misbehaviour/indiscipline with the supervisor or peers and this conduct is not
conducive to the good working environment of the organisation.
(iii)
The employee cannot continue to work as it would be in contravention of the legal requirements/ laws of the country.
(iv)
The employee is involved in corruption/misappropriation of the employers properties.
(v)
The employee has divulged companys confidential/proprietary information to competitors.
(vi)
The employee has attempted or made unauthorized access in the companys confidential information network with
malicious intent.
Q 30 (a) Training Needs of employees of Apollo Engineering Limited in the different categories are:
(i)
Competent to perform in the present position: These employees should be provided training by way of lecture sessions
and skills enhancement programs to enable them to be able to handle assignments in the next stage of competence.
Appropriate training programs for these employees would upgrade their work skills and retain their motivation levels.
(ii)
More than competent to perform in their present positions: These employees should be provided training opportunities
through participation in seminars, job enrichment and job rotation to assume greater challenges and to facilitate them to
move to higher positions. In case it is not possible to promote such employees, their job satisfaction level can be increased
by delegation of authority and responsibilities and redesigning their jobs. Such measures will increase their level of
motivation and deter them from seeking job opportunities elsewhere.
(iii)
Not yet competent to perform in the present position: The specific areas of weaknesses of these employees should be
identified and on the job training should be provided to enable them to overcome their weaknesses and perform
efficiently. Since employees in this category are not incompetent, providing proper training through lecture sessions,
workshops and on the job training would improve their skills and help them to achieve competency in their present
positions.
The Employee Compensation and Reward system for a service-oriented company operating in a competitive business
Q 30 (b)
environment should be designed to achieve the following objectives:
(i)
Obtaining support of employees for the main strategic objectives of the service-oriented company for innovation,
efficiency, teamwork and high standards of customer service.
(ii)
Building of a durable and mutually beneficial long-term relationship between the employer and the employees.
(iii)
Deriving significant value-addition at all the stages of customer service chain because human resources are strategic assets
of a service-oriented company and personnel costs account for a substantial portion of the total administration costs.
(iv)
Inducting and retaining a pool of suitably skilled and motivated work force.
(v)
Inculcating a sense of financial transparency and fairness of the compensation and reward system among the employees.
(vi)
Articulating in precise terms the organizations expectations of employee performance and service standards to create a
competitive business advantage.
(vii)
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Aligning the compensation and reward packages with the comparative packages offered by the competitors.
Employees offer strong resistance to major organisational changes and prefer to continue with the existing status
Q 31
because of the following reasons:
(i)
The employees may have concerns of financial insecurity due to loss of their jobs or decline in their existing level of
compensation.
(ii)
The employees fear that they may lose their present position/status, power and authority.
(iii)
The employees may anticipate that changes in work assignments, alterations in work processes and transfers would
threaten their present work routines, patterns of social-on-the-job interactions and friendships.
(iv)
The employees may fear uncertainties in the new organizational design, attitudes and working styles of new supervisors
and their own status in the organisation in the revised set-up.
(v)
The failure of management to communicate to the employees in a convincing manner the reasons and need for change
which gives rise to suspicions and apprehensions and results in resistance to change.
(vi)
The fear of dissonance because employees may have to confront with new and different process, systems, technology or
expectations. The dissonance or discomfort created by what is new or different is a psychological process which causes
resistance to change.
The compilation of Human Resource Skills Information Database has relevance and usefulness in the recruitment,
Q 32 (a)
training and development and succession planning in Sitara Limited in the following areas:
(i)
Recruitment Compilation of HR Skills Information Database in a systematic manner would help Sitara Limited to identify
the pool of skills and experiences of the employees currently available within the organization and fill in the skill gaps by
induction of new employees for the expansion of the facilities and efficient functioning of the organization to meet its
corporate objectives. This is necessary to ensure recruitment of only such skilled employees who can contribute to the
companys requirements for expansion of its manufacturing capabilities.
(ii)
Training and Development HR Skills Information Database would help to identify the deficiencies and weaknesses
among the existing workers and adopt appropriate training and skills development programs to enable them to perform
their work more effectively and strengthen the HR capabilities of Sitara Limited.
(iii)
Succession Planning HR Skills Information Database would help to identify employees who are most suitable for
promotion to higher levels in the organization hierarchy due to the creation of new openings in the firm and also in the
event of retirement or death of an employee. A proper HR Skills Information Database would help to match these
individuals with the HR requirements at various levels and fill in the vacant position promptly without causing any
disruptions or delays.
Q 32 (b) The advantages of a policy of Quarterly Performance Appraisal of skilled workers by such firms are:
(i)
Employees efforts and capabilities are recognised promptly and they are suitably rewarded for their performance resulting
in enhanced performance level of the individual employees in terms of productivity and low material losses due to defects
in workmanship.
(ii)
The employer can ensure that the quality specifications of its products are strictly adhered to.
(iii)
The employer is able to identify and retain the highly skilled workers and promptly replace those workers who are unable
to meet the quality standards
(iv)
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Employees make sustained efforts throughout the year, rather than strive to achieve high levels of performance close to
the year end to earn good appraisal rating.
Q 32 The costs associated with a high rate of turnover of employees include:

(i)
Hiring Costs comprising of recruiting and advertising expenses, salaries of interviewers, employee testing costs,
verification and reference checking time and expenses.
(ii)
Training Costs including cost of orientation time of new workers, staff time and salaries of trainers, cost of training
materials, supervisors and co-workers coaching time and salaries.
(iii)
Productivity Costs including lost productivity due to break-in time of new employees and lack of awareness of the
companys products and services.
(iv)
Separation Costs such as HR staff and time of supervisors and salaries to process separation formalities and exit
interview time and costs.
(v)
Disclosure of Confidential Information former employees may pass on expert knowledge or disclose important
confidential information to competitors.
A competent HR Manager should pursue the following stages in handling employees who have been involved in
Q 33
behavior/actions which are contrary to the rules of company discipline :
(i)
Investigation A thorough investigation should be undertaken of the nature of the delinquent behavior of the employee
and the factors which have led the employee to behave and conduct himself in a manner which is contrary to the accepted
norms of the firms rules and discipline.
(ii)
Counseling The objective in this phase is to create awareness among the employees of organizational policies and rules.
Often, creating awareness of rules and knowledge of disciplinary actions may prevent violations by the employees.
Counseling by the immediate supervisor can have positive effects.
(iii)
Written documentation If change in behavior is not achieved, then a second session of meeting with the concerned
employee would become necessary. Whereas, the first phase took place as a conversation between the supervisor and
employee, the proceedings of this meeting are documented in written form in which the employee and the supervisor
prepare written solutions to prevent further continuation of the problem.
(iv)
Final warning When the employee does not follow the written solutions noted in the second step, a final warning
meeting is held. In this session, the HR official emphasizes to the employee the importance of rectifying the inappropriate
behavior/actions. Employers may also demote employees or temporarily suspend their services for a limited period with
pay. The demotion/suspension period is used to demonstrate the seriousness of the problem and the organisations
determination to bring a change in the behavior of the employee.
(v)
Discharge If the employee fails to follow the action plan that was developed and the problem continues to persist, then
the services of the employee are terminated after giving notice and keeping all the legal implications of the action in
perspective.
BTC expects to derive the following benefits by pursing a well-conceived policy of good human relations management
Q 34 (a)
between the employer and the employees:
(i)
The employees at all levels would be committed to achieve high levels of performance in providing good service resulting
in customer satisfaction.
(ii)
A more co-operative work environment would encourage better team work among the various cadres of employees
leading to safety of the passengers, vehicles and staff.
(iii)
The reduced lost time due to good maintenance of the vehicles and more efficient handling of customers would result in
low operating costs and higher profitability.
(iv)
The staff would be satisfied with the managements good relations policy which would result in low absenteeism and
minimum employee turnover rate.
(v)
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There would be open communication between the management and the staff and sharing of information to achieve
positive results.
(vi)
The good human relations policy would encourage training and development of the staff at all levels.
Competencybased job descriptions define observable and measurable behaviour traits of skills and performance that
individuals must exhibit to do the job efficiently. Competencybased job descriptions are primarily worker performance-
Q 34 (b) focused rather than work description-focused and place high degree of emphasis on achievements. Competencybased
job descriptions specify that the employees must be capable of achieving high levels of performance and commitment in
demanding and highly challenging work environments.
International Business
Summer 2008
The major difficulties expected to be faced by the parent and subsidiary companies in pursuing a highly centralized
financial policy are:
(i) The staff at the parent company would not be fully conversant with the local rules and regulations in Pakistan.
(ii) The operations of the subsidiary may suffer due to delays in the decisions by the parent company resulting in higher
Q1 costs and inefficiencies.
(iii) The executives at the parent company would be overburdened as they would have to take numerous decisions
pertaining to the subsidiary.
(iv) The morale and initiative of the local staff may be affected as they would have to obtain approvals for decisions which
can be taken here readily by responsible officers.
(v) The overall costs would increase considerably due to duplication of work and additional traveling and incidental costs.
International transfer pricing is the price at which products or services are transacted between units of the same company
which are located in different countries.
The advantages of market-based transfer pricing are:
Q2 (i) The individual units would achieve high level of efficiency as they can negotiate most favourable market-based prices as
if they were independent units.
(ii) The selling unit would make efforts to improve the quality of the products in accordance with the requirements of the
purchasing unit.
(iii) The performance of the individual units can be evaluated more objectively.
Winter 2008
Q3 (a) The Governments in developing countries may take the following policy decisions to
protect their interests in the face of threats from global companies:
(i) Impose quotas which would prescribe limits on the quantities and values of raw
materials that the global company may import from its affiliated/parent companies.
(ii) An import tariff structure may be imposed which may make the imported goods
expensive and enable the domestic manufacturers to compete in the local market.
(iii) The government may place restrictions on the ability of global companies to
acquire domestic companies, especially those which are engaged in business of a
sensitive nature such as defense, utilities, etc.
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(iv) The government may impose restrictions on the maximum per cent of shares that a
global company can hold in a domestic business entity.
(v) Legal standards of safety and quality of imported goods may be imposed to prevent
global companies from importing goods which are considered to be of a substandard
or inferior quality.
(vi) Impose stringent conditions of deletion programs.
(vii) Stipulate that a certain proportion of the local personnel should be hired by the
global company.
(b) Ethnocentric oriented companies follow policies that are primarily home-grown and the
management assumes that the practices which work in the headquarters or in the home
country are most suitable and should be adopted and pursued in all their international
operations.
Polycentric oriented companies follow the philosophy that the organization located in
the host country should be staffed by local individuals to the maximum extent as they are
expected to understand more closely their culture, work ethics and markets. Consequently,
subsidiaries in various countries operate under the directions of locals and are controlled
by the parent company through well-conceived financial reporting systems.
Geocentric orientation is an approach in which the management considers that a worldwide
focus, both at the headquarters and also in the host countries, offers optimal
advantages. The best people, regardless of their home or host country origin, should be
used to solve company problems. Major issues of headquarters and subsidiaries, such as
raising of funds, building of plants, research and development are viewed in the entire
global perspective.
Q4 The advantages and disadvantages of undertaking overseas manufacturing operations through a

wholly-owned subsidiary company are:
Advantages
(i) The Korean company would not have to share its profits with any other entity.
(ii) The Korean company would not have to share its technology and know-how with any
foreign entity.
(iii) The Korean company would not have communication problems which are frequently
experienced in joint venture operations.
(iv) The overseas manufacturing operations of the Korean company would be fully integrated
and aligned with its overall international operations.
Disadvantages
(i) The substantial amount of investment may prevent or discourage the Korean company
from undertaking wholly-owned overseas manufacturing operations.
(ii) The risks of nationalization and losses are much greater in the event the host government
introduces major changes in its policies towards foreign investments.
(iii) It may be difficult to recruit suitable high-level technical and management personnel in
the host country in the absence of benefits of equity ownership.
(iv) The wholly-owned subsidiary may not be able to avail the benefits of the overseas
partners valuable knowledge and expertise of the domestic conditions, local markets and
distribution channels etc.
Q5 The significant objectives of multinational companies in pursuing strategies of globalization are:

(i) To achieve significant economies of scale in management and other functional operations of
the global companies.
(ii) To recover extremely high Research and Development expenditures required in the
manufacturing of knowledge-based products from widely dispersed target markets located in
(iii) To gain access to wide global markets without incurring substantial expenditures on product
development in different markets.
(iv) To seize the advantages offered by growing economies, such as dismantling of trade
restrictions, growth of free trade zones and relaxation of regulations regarding direct foreign
investments.
(v) To enter into widely diversified markets and achieve maximum profits through transfer
pricing and tax concessions.
(vi) To derive maximum advantages of access to cheap sources of labour, raw materials and
energy.
Q 6 (a) Political risk is the probability that political decisions or events would negatively affect the
long-term security and profitability of an investment in a foreign country.
Q 6 (b) The different types of Political Risks which would adversely affect the security and long-term
profitability of direct foreign investment in a third world country are:
(i) Domestic Instability Domestic instability relates to the risks of subversion, revolution,
internal conflict and government crisis.
(ii) Foreign Conflict Foreign conflict pertains to the extent of hostility and disputes that a
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country has with other country(ies).
(iii) Political Climate Political climate can be affected by radical shifts in government
policies and can be influenced by the number of political parties, their level of maturity,
political and economic agenda and approaches towards free or restrictive foreign
investment policies.
(iv) Economic Culture Economic culture refers to the risks of significant shifts in policies
concerning government involvement and control of economic activities as well as
financial markets, including currency fluctuations, inflation, repatriation of capital and
dividends, regulation of prices of essential inputs and development and maintenance of
infrastructure.
(v) Level of Corruption Level of corruption refers to the degree to which the various
institutions, including the government, are perceived to be untrustworthy, open to bribes
and involved in various types of fraudulent and unethical practices.
The types of complexities generally encountered by parent companies in the planning and control of operations of their
Q7
foreign subsidiaries are:
Physical and Cultural Distances
The geographical and cultural distances separating the parent company increases the duration, expenses and barriers in
communications between the headquarters and their foreign subsidiary companies and creates difficulties in the planning
and control process.
Diverse Economic Conditions

The parent company has to adjust operations to the situations prevailing in the countries in which the subsidiary
companies are located. Differences in size of the market, nature of competition, type of the products, labor costs and
currency implications render the tasks of setting standards and evaluating performance of foreign subsidiaries extremely
complicated.
Uncontrollable Factors
Planning and control is effective only in situations when timely corrective actions can be taken in the event of deviations in
performances. Corrective action may not produce positive results because many foreign subsidiaries operate in conditions
which are very different from those of the parent company.
Q 8 (a) The steps involved in the operation of a letter of credit in their logical sequence are:
(i) The importer obtains the banks promise to pay the specified amount on behalf of the importer.
(ii) The importers banker promises the exporter to pay the specified amount on behalf of the importer.
(iii) The exporter ships the goods and obtains the Bill of Lading / Airway Bill.
(iv) The exporter delivers the documents to his banker.
(v) The importers bank pays the proceeds to the exporters bank.
(vi) The exporters bank endorses the documents (bill of lading/airway bill) and delivers them to the importers bank.
Q 8 (b) The major advantages of establishing manufacturing facilities in foreign countries are:
(i) To utilize cheap raw materials, energy and human resources.
(ii) To achieve economies of large-large production opportunities available in certain countries.
(iii) To eliminate or achieve economies in costs of transportation of raw materials and finished goods.
(iv) To overcome high tariff rates and various non-tariff barriers.
(v) To obtain available tax concessions and tax holidays.
(vi) To achieve advantages of lower financial costs in certain countries.
The factors which have contributed to the increase in importance of International Trade in the preceding 3-4 decades
Q 9 (a)
are:
(i)
Reduction in tariffs, quotas, exchange controls and liberalization of trade and investments have resulted in making the
imported products competitive in local markets.
(ii)
Phenomenal improvement in communication and transportation technologies have resulted in rapid movement of goods
and consequent reduction in transportation costs.
(iii)
Development of free-trade zones such as European Union and North American Free Trade Agreement have resulted in
increase in international trade owing to preferential movement of goods and dismantling of high tariff regimes.
(iv)
Global standardization and worldwide brand building with local adaption have created significant market opportunities in
(v)
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Substantial expenditures have been incurred on R&D and standardization of manufacturing and marketing techniques by
global companies in industries such as manufacturing of pharmaceutical products, energy development,
telecommunications, fast food, etc and such companies seek opportunities to apportion these costs to markets in different
countries.
(vi)
Important raw material exporting countries now have a growing class of affluent citizens and foreign residents which have
resulted in the creation of substantial markets for import of vehicles, construction materials, equipment, edible products
and luxury goods.
Q 9 (b) The Competitive Forces stated by Michael Porter are:

(i)
Potential threat of entry of new competitors
(ii)
Potential threat of substitutes
(iii)
Bargaining power of buyers
(iv)
Bargaining power of suppliers
(v)
Rivalry among existing competitors
Q 10 (a) The different types of Political Risks which should be evaluated by Accurate Engineering Limited are:
(i) The assets may be nationalized or expropriated by the government of the host country.
(ii) The Asian country may impose stringent exchange control restrictions which would make it difficult to repatriate the
profits and investments.
(iii) The country may face domestic instability such as revolution, social and political unrest and terrorist activities which
would be detrimental to the interests of Accurate Engineering Limited.
(iv) The country may be involved in conflict, disputes and war with other countries which would cause disruptions in
business.
(v) Deterioration of relationships between the investor country and the country in which the investment is proposed
would pose difficulties in the business operations of Accurate Engineering Limited.
(vi) Frequent changes in the government with far reaching shifts in its policies.
(vii) Risk of sovereign default by the host country.
(viii) Maintenance of the tolerance standards, relaxation in any way could impact the demand.
Q 10 (b) The MNC seeks to obtain the following advantages by pursuing a centralized financial decision making policy:
(i) The parent Company has superior fund management skills which are not available in the subsidiaries.
(ii) The risks of losses on account of devaluation in the currency of the host countries are minimized.
(iii) The funds can be promptly invested in avenues which offer optimal returns.
(iv) The risks of expropriation of funds by the governments of the host countries are reduced considerably.
(v) The pooling of funds can help to implement a more coordinated and effective overall fund management strategy.
(vi) The parent company can obtain facilities on more favourable terms from the bankers due to the substantial size of the
pooling of funds.
It would be advantageous to establish branch operations in a foreign country instead of an overseas subsidiary company
Q 11
in the following situations:
(i)
If the foreign business is not expected to be profitable in the initial years and therefore the losses of the subsidiary
company can have a negative effect on the image of the MNC.
(ii)
If the legal and accounting formalities of the branch operations are more simple vis--vis those involved in a subsidiary
company.
(iii)
If the MNC does not intend to have a long term presence in the foreign country, it would prefer to establish branch
operations.
(iv)
If the amount of investment involved in the foreign country is of a nominal amount and it may be advisable to set up
branch operations instead of a subsidiary company.
(v)
If it is advisable to have a low operating profile to achieve the business objectives.
Q 12 (a) The methods of payment in the order of preference for the importers are:
(i)
Consignment
(ii)
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Open Account
(iii)
Usance Letter of Credit
(iv)
Sight Letter of Credit
Q 12 (b) The constraints which act as impediments towards attracting foreign investment in an underdeveloped country are:
(i)
Poor infrastructure facilities of roads and communications.
(ii)
Currency depreciation of the underdeveloped country.
(iii)
High costs of energy inputs and their unreliable availability.
(iv)
Absence of laws relating to patents, copyrights and intellectual properties.
(v)
High Risk of political instability in the country.
(vi)
Widespread corruption in the government and other social sectors.
(vii)
Lack of education and non-availability of a skilled and competent work force.
(viii)
Absence of generally accepted accounting principles.
(ix)
Uncertain long-term economic and financial policies.
Q 12 The advantages of market-based transfer pricing policies are:

(i)
The individual units would achieve high level of efficiency as they can negotiate most favourable market-based prices as if
they were independent units.
(ii)
The selling unit would make efforts to improve the quality of the products in accordance with the requirements of the
purchasing unit.
(iii)
The performance of the individual units can be evaluated more objectively.
(iv)
The tax authorities would accept more favourably a market-based transfer pricing policy.
A global business strategy specifies a standardized worldwide product and marketing strategy by which a firm sells the
Q 13(a) same product in essentially the same manner throughout the world by highlighting its main features such as quality,
specifications, warranty, packaging, etc.
A multi-domestic or adaptive business strategy is one in which the firm treats each market in a different manner and
develops products and marketing strategies which appeal to the varying customs, tastes and buying habits in the different
national markets.
Real Life Example of a Global Business Strategy - photocopiers, medical equipments, chemicals, cement, steel, etc are not
sensitive to differences in cultures and are sold in different markets highlighting similar features and attributes such as
quality and convenience, etc.
Real Life Example of Multi-domestic or Adaptive Products strategy - Food products such as fast foods, apparel and
clothing, cosmetics, etc. which are adapted to meet the consumption habits, tastes and cultural sensitivities and unique
requirements of the different markets.
The key financial decisions which should be made by the management while contemplating investment in a foreign
Q 13 (b)
subsidiary company are:
(i)
Should the parent company invest in the subsidiary as a wholly owned company or should the parent company retain only
a majority interest in the subsidiary?
(ii)
If the parent company decides to retain only a majority interest, then should the subsidiary raise equity through a
resourceful local investor in the host country or should it make a public offering of its shares?
(iii)
Should the subsidiary be financed substantially through equity investment or should it raise debt financing to meet a large
proportion of its capital costs?
(iv)
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Should the subsidiary make the borrowings in the local currency of the host country or in any other currency to avail
benefits of exchange fluctuations?
(v)
Should the subsidiary distribute a large portion of its profits as high dividends or should it retain a substantial portion of its
earnings to meet the cost of its expansion strategy?
(vi)
Should the subsidiary raise the bulk of its working capital requirements through borrowings from banks or should it place
heavy reliance on trade credit?
The factors responsible for the MNCs policy of close control and centralized decision making for the subsidiary
Q 14
companies are:
(i)
Large size of the subsidiary companies and Substantial Capital Investment - Due to the large size of the individual entities
and substantial investment of the MNC in the subsidiary companies, their performance can have far-reaching implications
on the financial standing and profitability of the MNC.
(ii)
Access to technology and manufacturing process - The manufacturing process in the subsidiary companies involves
sophisticated technology which has been developed by the MNC at a very high R&D cost. The technology is closely-
guarded and the parent company wants to ensure maximum security and confidentiality of this technology.
(iii)
Operations of the subsidiary companies are closely integrated and inter-dependent - The operations of the subsidiaries
are closely integrated and interdependent and unsatisfactory performance of any one company can have adverse impact
on the performance of other group companies, including the MNC itself. There is therefore the need for more centralized
control and supervision of the subsidiaries .
(iv)
Stringent Targets - If the products manufactured by the subsidiaries have to conform to stringent quality control
requirements stipulated by the parent company or if the operations are of a highly environmentally sensitive nature, then
the parent company would want to exercise more close control of the subsidiary companies. Any lapse or mishap by the
subsidiary can have far-reaching adverse impact on the standing and reputation of the parent company.
A Geocentric orientation is an approach followed by companies having global scale of operations. The management of
such companies considers a worldwide focus both at the headquarters and also in the host countries to obtain optimal
Q 15(a) advantages. Major issues such as raising of funds, building of plants, research and development are centralised in the
entire global perspective. At the same time, the company also considers designing its products and services to cater to the
local differences in tastes and cultures to add maximum customer value and achieve optimal results.
Q 15 (b) The advantages of appointment of a Single Distributer in Pakistan by Alpha Equipments are:
(i)
The large volume of business would attract a competent and resourceful distributor who would wield considerable
influence in the local business community in Pakistan.
(ii)
The appointment of a knowledgeable Single Distributor who is conversant with the local business practices, culture and
marketing channels would ensure smooth handling of all marketing operations in a more professional and purposeful
manner.
(iii)
The Single Distributor would be able to coordinate promotional efforts and exchange vital information with Alpha
Equipments on a continuous basis and in a purposeful manner.
(iv)
Training and marketing efforts of the retailers located in the various cities in Pakistan would be coordinated in a much
more effective manner.
(v)
The Single Distributor would be able to maintain sufficient level of inventories as he would have a better perception of the
market demand and as a result make prompt dispatches of supplies to the retailers as and when required.
(vi)
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The Single Distributor would have high stakes in the business which would lead to greater effort and a better principal
distributor relationship.
(vii)
The logistics of exports including transportation costs would be less cumbersome and more economical.
The leading Japanese companies have established automobile assembling or manufacturing plants in selected
Q 16 (a)
developing countries due to the following reasons:
(i)
The developing countries are witnessing significant economic growth and increase in population which have created very
large markets for various types of vehicles. Establishment of automobile assembly/manufacturing plants locally would fulfil
the demand/supply gaps in these countries.
(ii)
Labour and other manufacturing costs are on the high side in Japan and the high prices of imported vehicles from Japan
would be beyond the reach of a large segment of the market.
(iii)
The strong Japanese Yen makes the price of imported vehicles very expensive in the developing countries and would
restrict the size of the market
(iv)
Transfer of technology and creation of job opportunities are viewed favourably by the governments in the developing
countries and they offer liberal tax concessions to the Japanese companies to establish assembling/manufacturing facilities
in their countries
(v)
The domestically assembled/manufactured vehicles of various types and models are adapted to meet the local
requirements in terms of prices and their suitability for the particular developing countries.
The following Political Factors should be taken into consideration by a multinational company while evaluating a
Q 16 (b)
decision to make substantial direct investment in a foreign country:
(i)
Form of the Government and its Stability - a government having the support of its citizens and enjoying political stability
would provide continuity to its economic and financial policies which would be beneficial for MNC.
(ii)
Attitude towards Private and Foreign investment - a government which pursues policies of encouragement towards
private investment, including foreign investment, would be considered favourably as against policies which pursue
government ownership of business enterprises.
(iii)
Relations with other countries - a country which has good relations with other countries would be considered favourably
as it would provide stability and sustained long-term operations for MNCs business
Q 17 The core capabilities which are commonly observed in leading global business organizations are:
(i)
In-depth knowledge of the organisations products/services, their strengths and special customer service skills.
(ii)
Highly developed marketing skills by way of insight of consumer behavior, market segments, share of the market and
distributions channels.
(iii)
Capacity for continuous innovation and research which is a prerequisite for maintaining and consolidating of their global
leadership status in a highly competitive business environment.
(iv)
Creation and retention of a pool of talented and motivated management team and work force aligned with the strategic
objectives of the organisation.
(v)
Financial resourcefulness with the capability to utilize the funds effectively with sound planning and control structures.
(vi)
Assessment of the strengths and weaknesses of the competitors in the different territories in terms of their market share,
competitive advantages and anticipated business strategies.
Multinational Corporations seek to achieve the following advantages through policies of centralised cash management
Q 18
and establishment of cash pools at prominent financial centers:
(i)
Security and Convenience: Centralised cash pools are maintained at major financial centers which offer advantages of
political and economic stability, convertibility of currencies, access to international communication facilities and well
defined legal procedures. The pooling of cash funds at such locations provides security and convenience of prompt
transfer of funds from and to the subsidiaries.
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(ii)
Availability of Information: Location of cash pools at major financial centers provide advantages of immediate access to
latest information of the relative strengths and weaknesses of various currencies, fluctuations in rates of return on
financial instruments in various currencies and ease of execution of financial transactions.
(iii)
Holding of Minimum Surplus Funds for Precautionary Purposes: The pooling of funds at centralised locations in excess of
the transaction requirements of the subsidiaries enables the MNCs to reduce the overall size of the cash pool without any
loss of level of protection to any individual subsidiary.
(iv)
Reduction in Interest Costs: The large size of the pooled funds enables financial managers to negotiate borrowings most
effectively and thus reduce borrowing costs.
(v)
Acquisition of Services of Competent Personnel: The funds can be managed by highly competent financial managers
whereas individual subsidiaries may not be in a position to acquire the services of such executives.
Q 19 Globalization has assumed great importance in the present business environment due to the following reasons:
(i)
Adoption of free market economic policies by increasing number of countries has created opportunities for capital
investment and significant economic growth.
(ii)
Rapid improvement in communications have reduced costs of transportation and facilitated quick movement of goods,
services and financial resources.
(iii)
Technological advances have made it possible to manage and control business operations in different countries through
electronic mail, internet and frequent travel by key management and other professional staff.
(iv)
The development of the emerging markets has expanded the demand for products and services worldwide.
(v)
Global companies seek competitive advantages by locating production facilities of components and parts in those
countries where the costs are the lowest.
Q 20 The factors which have contributed to the creation and significant expansion of the Global Markets are:
(i)
Specialisation of Products Certain countries have achieved high degrees of specialisation in the manufacturing of specific
types of goods which have worldwide demand. These products are promoted on a worldwide scale through aggressive
advertising campaigns to create and expand their global markets.
(ii)
Reduction in tariff barriers and relaxation of direct foreign investment regulations MNCs have been able to increase
their exports significantly and expand global markets as policies of liberalisation of trade restrictions and relaxation of
foreign investment regulations have received worldwide acceptance.
(iii)
Economies of Scale Access to global markets allow MNCs to obtain benefits of economies of scale which are achieved by
manufacturing large quantities that can be sold in several markets in different countries.
(iv)
High R&D expenditures on Products A number of knowledge-based products involve exceptionally large R&D costs
which can be incurred only in countries with substantial financial resources and technical human resource base.
Worldwide demand for such R&D-intensive products is responsible for creation of global markets for these types of
products.
(v)
Reduction in Communication and Transportation Costs Efficient and fast means of communications and reduction in
transportation costs have provided considerable impetus to the growth of global markets for a large number of products
Pursuance of the following policies by Eagle Limited would be perceived favourably by the joint venture partner and
Q 21 (a)
other stakeholders and also contribute towards the industrial development objectives of Centralia:
(i)
Eagle Limited should act as a good corporate citizen and respect the culture, customs, traditions and values of the host
country.
(ii)
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Eagle Limited should offer its best manufacturing technologies and practices to the joint venture in the host country.
(iii)
Eagle Limited should allow the local partners to set their own rules and regulations and adjust the manufacturing
processes to match the skills of the local workers.
(iv)
Eagle Limited should keep the expatriate employees to the minimum strength and provide training to the local managers
to enable them to acquire skills and assume responsibilities at all levels.
(v)
The joint venture should be encouraged to develop local R&D which would help to reduce dependence on imported
inputs.
Leading MNCs engage in international or cross-border financing and raising funds, including equity, debt and bank
Q 21 (b)
financing in different countries:
(i)
to obtain financing at overall lower costs, comprising of interest costs and impact of any adverse fluctuations in exchange
rates.
(ii)
because of liberalization of foreign exchange regulations which allows easy and free movement of capital in the important
financial centers.
(iii)
because financing can be obtained conveniently in different countries in which MNCs conduct significant business
operations.
(iv)
fund raising in certain countries is easier because the debt and equity markets there are broad-based and have greater
market depth.
(v)
to seize strategic advantages of their presence and relationships in important financial centers in many countries.
CSR & Business Ethics
Summer 2008
Code of Ethics provides a guideline to the moral principles or values by which an organization conducts its business with
respect to what is right or wrong.
The Code of Ethics applies both to the organization as well as its employees in all their business dealings.
Q1 The advantages of adopting a formal code of ethics are:

Provides an explicit guidance to employees so that they know what is expected from them in terms of ethical behavior.
Enhances the organisations reputation and inspires public confidence.
Creates an awareness of the organisations expectations of proper conduct among all the stakeholders, including the
management.
Promotes a culture of excellence by demonstrating the organisations commitment to ethical behavior.
Winter 2008
Q2 (a) Corporate Social Responsibility involves an organizations obligation to provide benefits

to society in ways that protect and improve the welfare of the society, along with
pursuance of the organizations own business interests.
(b) The major concerns which prevent organizations from adopting and implementing
comprehensive policies of CSR are:
(i) Concerns that they may adopt a comprehensive CSR policy while their competitors
may not do so with the result that they may incur costs which may place them at a
competitive disadvantage.
(ii) Organizations may not feel a sense of commitment and urgency to address to the
various issues which are of a societal nature.
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(iii) There are no accepted standards on CSR issues.
(iv) At times it may be difficult to identify the stakeholders and the audience for the
CSR reports which may be ambiguous and could undermine the quality of the
reports.
(v) Belief that efforts of the traditional philanthropists are sufficient to take care of the
social needs of the society.
(vi) Reporting on the entire scope of a companys impact upon the society and the
environment is a complex exercise which is beyond an individual organizations
capabilities and scope of activities.
Q3 Business Ethics
(a) Business Ethics refers to the code of moral principles and values which are applied by
individuals and organizations in their dealings in the commercial world. Business ethics
provide guidelines for acceptable behaviour by organizations in their strategy
formulation and day-to-day operations.
Q4 Business Ethics is a code of moral principles that the employees follow with respect to what is right
or wrong from the viewpoint of the organizations dealings and interactions with its stakeholders.
The organizational culture and internal policies and systems have far-reaching ethical implications
and reinforce the set of values to be upheld by the employees in all their business dealings. The
standards of ethical conduct may be embodied in the Companys Formal Code of Ethics.
DEL should adopt the following policy measures to eliminate the unethical practices followed by the sales
Q5
representatives:
(i)
Create a written Company Code of Ethics and circulate it to each member of the sales department. This would eliminate
the ambiguities and help the employees to differentiate between what is considered to be acceptable behaviour and what
is unethical behavior.
(ii)
Issue clear and specific instructions, requiring adherence to the norms of ethical behaviour. These instructions would be
deterrent for the sales representatives and dissuade them from engaging in unethical practices.
(iii)
The consequences of indulging in unethical behavior should be stated clearly in the Code of Ethics.
(iv)
Sales Representatives who are unable to achieve their allocated targets fully should also be rewarded on an appropriate
basis.
(v)
DEL should sponsor and organize seminars and workshops on Ethics to emphasize the importance of ethical behaviour.
Business Ethics is a code of moral principles that management and employees follow with respect to what is right and
what is wrong from the standpoint of the organizations dealings and interactions with its stakeholders. Besides generally
Q6 acceptable values and norms, the organizational culture and internal policies of individual organizations play a very
important role in determining the ethical policies that are followed in the company. The guidelines for proper ethical
conduct are embodied in the companys Formal Code of Ethics.
Corporate Social Responsibility is a form of voluntary business approach that a business firm pursues to meet or exceed
Q7 the expectations of its stakeholders by adopting social, ethical and environmental measures. The goal of CSR is to make a
positive impact through its activities on the environment as well as all its stakeholders.
Business Ethics are the moral principles of conduct applied in the commercial world. Business ethics provide guidelines to
individuals and organizations to determine whether a particular action is right or wrong. Good business ethics are essential
Q8
for good strategic management as issues of ethics permeate in all areas of strategy formulation, implementation and
evaluation.
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An ethical approach has become increasingly necessary both for corporate success and a positive corporate image. The
rapid expansion of information technology has created awareness and enhanced the importance of ethical behaviour in
business all over the world. Pressures from employees, consumers and other stakeholders for adherence to ethical and
responsible business practices have led many organizations to make public commitment of their ethical business
standards. An increasing number of organizations now adopt concepts of personal and corporate accountability in all
aspects of their business conduct.Misleading advertisements, poor employee health and safety procedures, causing harm
to the natural environment, poor product or service safety standards, insider trading and discrimination in dealing with
employees are considered to be violation of acceptable ethical behavior.
Management of the working environment
Q1 Environment Management
Environment Management is a systematic approach to minimize the damage caused by
an organization to the environment in which it operates. Environment management has
assumed considerable importance because all the stakeholders expect organizations to be
responsible for the preservation of the environment and management are increasingly
being held responsible and liable for their organizations environmental performance.
Environment management involves reducing pollution/waste and consumption of natural
resources in judicious manner.
Environmental Scanning is the process of collecting information about the external marketing environment in order to
identify and interpret potential trends. It includes analysis of collected information to anticipate whether the trends
Q2
represent opportunities or threats. Environmental scanning includes assessment of political developments, economic
trends and social and cultural influences which would affect the organization.
The Critical Success Factors which would create sustainable long term competitive advantage for FCL and enable the
Q2
company to obtain a firm foothold in the target market are:
(i)
Management and Organizational Competence:
The knowledge, skills and attitude of the management relating to understanding of the home textile industry, the
objectives and role of FCL, including insight in FCLs strengths and weakness and pursuance of appropriate corporate and
business strategies to achieve the objectives would be critical success factors .The management of FCL would have to
develop necessary competence for identifying opportunities, formulating, implementing and monitoring sound corporate
strategies, creating a supporting organizational structure and mobilizing resources.
(ii)
Manufacturing Capability and Production Process:
FCL should acquire and develop the best manufacturing capabilities and introduce sound technical processes. It needs to
manufacture products which would satisfy the needs of its customers who want new and better products at affordable
prices.
(iii)
Skilled and Motivated Employees:
FCL must adopt sound policies relating to hiring, training, development, performance evaluation, working environment
and compensation of its employees. These policies would promote motivation and commitment of the employees at all
levels towards the achievement of the objectives of the company.
(iv)
Marketing Know-how and Promotion Strategies:
Market research and knowledge of the target market is essential for sustained growth in sales. Marketing programs would
have to be developed to meet the needs of the customer groups. Company-owned retail outlets would enable FCL to
achieve high rates of sales turnover through finely tuned marketing policies and also retain high profit margins which
otherwise would be demanded by prominent retailers. Ability of the Institutional Marketing Division to develop a supply
chain of reliable vendors who can manufacture products of the required specifications to be sold to the institutional
customers would also be a critical success factor for FCL.
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Successful companies must take the following measures to retain and consolidate their competitive advantages vis--vis
Q3
their competitors by:
(i)
Developing, retaining and motivating a cadre of corporate leadership which has a strong value-driven vision of the
companys mission.
(ii)
Creating an efficient and flexible organizational structure to achieve the objectives of the company in changing business
environments.
(iii)
Making continuous efforts to improve their performance capabilities in all spheres of their business activities and achieve
competitive advantage.
(iv)
Providing superior and value-added products/services to their customers as compared to the competitors.
(v)
Protecting their intellectual property rights and ensuring that they are not infringed by any unscrupulous competitors.
(vi)
Training and development of employees and empowering them to achieve the companys objectives and share the
companys values.
(vii)
Stating clear performance standards and fair and equitable reward systems to the employees to obtain high levels of
motivation.
Strategic Mangament & Planning
Summer 2008
Mission Statement
EWCD is committed to the development of human capabilities through the sharing of knowledge and application through
Q1
service. It seeks to prepare individuals who would be exemplary doctors and nurses, through excellence in research and
education, all dedicated to provide meaningful contribution to society in the treatment of diabetes.
The economies in production and operating costs can be achieved by focusing in the following areas:
(i) exploring alternate sources of cheaper raw materials and components.
(ii) negotiating with existing suppliers of raw materials and components for more favourable terms.
(iii) relocating facilities to areas which have lower costs.
(iv) improving capacity utilization to achieve economies in costs.
(v) introducing modifications in production designs to reduce costs.
Q2
(vi) improving machine and worker efficiencies.
(vii) re-engineering processes to eliminate activities and bring cost reductions.
(viii) hiring contract workers with the objective to reduce labour costs.
(ix) outsourcing processes/ manufacturing of components to low cost suppliers if quality control measures can be
implemented.
(x) adopting efficient inventory management practices such as just-in-time inventory management techniques.
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Operational Level Decisions

decisions are concerned with day-to-day systems and procedures.
decisions are more structured and are of a routine nature.
outcomes of decisions are immediate and of short term nature.
decisions involve fewer risks.
Tactical Level Decisions

decisions are concerned with short to medium term objectives.
Q3 decisions are often related with implementation and success of strategic decisions.
decisions are concerned with overseeing and handling of budgets, personnel, schedules and resources.
risks of failure of decisions are moderate.
Strategic Level Decisions

decisions are concerned with long-term goals and future direction of business.
decisions are more conceptual and have elements of uncertainty.
decisions have far-reaching consequences and are therefore of considerable importance.
decisions are taken at the highest management and board levels.
Q4 (a) Vision and Mission Statements are manifestations of the unique identities of an
organization. They are enduring statements containing:
business philosophy
unique purpose
goals of business
The above are inter-twined with the competitive advantages which distinguishes it and sets
it apart from others.
(b) The drawbacks of adopting Vision and Mission Statements of more successful rival
companies, with certain changes and modifications, are as follows:
(i) Vision and Mission Statement of a firm is inextricably inter-linked with its
management philosophy, purpose of business and distinctive capabilities which
cannot be replicated in their entirety by other firms.
(ii) The imitated version of a Vision and Mission Statement cannot be an enduring or
permanent feature and frequent lapses or deviations in actual performance are
bound to create resentment and suspicion among the internal and external
stakeholders.
Q 5 (a) Strategy formulation policies can be successful only if the strategic plans are implemented
effectively by converting the plans into well-conceived actions designed to achieve the
objectives of the organization. Strategic plans and strategy implementation have to be
synchronized to perform in close interaction to achieve optimum results.
Q 5 (b) The essential elements which should be considered by the management of PPSML for creating
good relationship between formulation of strategic plans and strategy implementation are:
(i) Organizational Structure: Organizational structure creates the formal pattern of
interactions and coordination amongst the management, supervisors and workers to link
the tasks and efforts of the individuals and groups to implement and achieve the
strategic plans. The management should ensure that the Organization Structure is
suitably integrated for achieving harmony among the various functions and greater
co-ordination at all levels.
(ii) Human Resources: Human resources with necessary skills should be deployed in
appropriate positions, for effective strategy implementation.
(iii) Technology: Technology comprises the knowledge, equipment and work techniques
necessary to deliver the products or services. Technology is an important factor in
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strategy implementation. The management should ensure that appropriate and adequate
technological inputs are available to support the performance necessary to achieve the
objectives of the strategic plans.
(iv) Decision Process: Decision processes are required for the resolution of problems
encountered in the operations of the business and achievement of the objectives of the
strategic plan. Decisions relating to allocation of resources are particularly important for
strategy implementation because timely availability of resources are crucial for the
success of strategic plans. Sound policies and processes should be developed to ensure
that all significant decisions are taken on a timely basis and in a co-ordinated manner.
(v) Monitoring and Control Systems: Appropriate system should be established to ensure
that progress is monitored against the established standards on a continuous basis and
deviations if any, are identified for taking timely corrective actions.
(vi) Reward System: A well-conceived reward system comprising salaries, benefits,
promotions and recognition should be developed to provide necessary motivation to the
workforce for successful implementation of the strategic plans.
Mission-oriented business strategists do not view the strategy of short-termism outlook favourably because it ignores the
Q 6 (a) principle that long-term economic maximization of wealth and pursuit of objectives on a sustainable basis cannot be
achieved by maximizing economic wealth in each of the individual short-term periods.
Q 6 (b) Examples:
A pharmaceutical company may not incur expensive R&D costs and be satisfied with its existing line of products which are
popular. Although this would result in high profits in the short-term, the long-term performance would suffer as new and
more effective medicines are introduced in the market by the competitors.
A beverage company may prefer to defer advertising expenditures to reduce the costs and report high profits. However, in
the long-run, the company may lose the efficacy of its brands and competitive advantage to other more aggressive
competitors.
The key factors which contribute towards the achievement of only a limited number of goals envisaged in the Strategic
Q7
Plans are:
(i) Inadequate understanding of the strategic plans and failure at the business and functional levels to realize that
sustained and coordinated efforts are required to achieve the goals.
(ii) Poor allocation of resources, organizational as well as human. Lack of support from the management in providing
adequate resources for the achievement of the goals set in the strategic plans.
(iii) Weak organizational culture, leading to lack of involvement of the management at the business and operational levels
who feel that they are not on board in the strategic planning exercise and therefore there is lack of ownership of the
plans and goals from their side.
(iv) Consideration of the strategic planning as a ritual exercise and not as a day-to-day sustained effort for achievement of
the objectives of the plan, indifferent attitude and lack of commitment and motivation on the part of the line managers
towards the achievement of the goals.
(v) Poor Communication and lack of coordination between the top, middle and operational level of management leading
to poor goal definitions and unawareness of the departments role in achieving the goal.
(vi) Pre-occupation of the operational level managers with the achievement of their short-term targets and lack of
awareness of the contribution of their own efforts towards achievement of the overall objectives.
(vii) Inability to integrate and coordinate the various functions of research and development, HR management,
procurement, production, marketing and finance with the result that these activities are working independently and at
cross purposes.
(viii) Absence of a proper system to measure actual performance from time-to-time and compare the results with the
targets to take timely corrective measures in the event of any new development or unfavorable variances.
Q 8 (a) Companies accord importance to the pursuance of a formal Strategic Planning Process to achieve the following
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objectives:
(i)
A formal Strategic Planning Process helps to indentify the opportunities and risks involved in the companys business. The
company can make well-considered strategies and adopt measures to seize the opportunities accruing from its internal
and external strengths and also reduce the various business risks.
(ii)
A formal Strategic Planning Process enables the companys top management to be involved in proactive thinking of the
business objectives and taking coordinated actions relating to deployment of resources to achieve its strategic goals.
(iii)
A formal Strategic Planning Process ensures the participation of management and the staff who are seized with the task of
achievement of the business objectives. The staff at all levels develop understanding of the productivity-reward
relationship in the strategic plans which increases their motivation and reduces the adverse impact of resistance to
change.
(iv)
A formal Strategic Planning Process is essential to create alignment of the companys short-term, medium-term and long-
term targets for achievement of the companys objectives.
(v)
A formal Strategic Planning Process is essential for optimum coordination of the corporate, business and functional
strategies for achievement of the Companys objectives.
In the formulation of a well-considered Business Strategy, the management conducts an Appraisal of the companys
internal and external environment. For this purpose SWOT Analysis may be carried out in order to find ways for (a)
Q 8(b)
exploiting the companys strengths to help achieve short-term and long-term objectives and (b) reviewing the weakness
and threats faced by the company from the following standpoints.
The steps in the implementation of a well-considered Business Strategy are:

(i)
Organizational Structure: Organization Structure is suitably integrated for achieving harmony among the various
departments and functions and co-ordination at all levels.
(ii)
Human Resources: Human resources with necessary skills and proper motivation are deployed in appropriate positions for
effective implementation of strategy.
(iii)
Availability of Financial Resources: Adequate financial resources should be made available in time for implementation of
the strategy.
(iv)
Technology: Appropriate technological inputs are made available to support the performance necessary to achieve the
objectives of the strategic plans.
(v)
Decision Process: Sound policies and processes are developed to ensure that all significant decisions are taken on time and
in a coordinated manner.
(vi)
Monitoring and Control Systems: Appropriate systems are established to ensure that progress is monitored against the
established standards on a continuous basis and deviations if any are identified for taking timely corrective actions for
implementation of the strategic plans.
The different types of competencies and skills required by front-line operational managers of an automobile
Q9
manufacturing and assembly unit are:
Technical Competencies and Skills: Technical competencies and skills are necessary for knowledge of procedures and
rules, performance and management of day-to-day activities and for understanding the manufacturing operations.
Technical skills are essential for applying the procedures for routine work, such as setting work priorities, quality control,
meeting schedules and conserving resources at the floor level. These skills are important for the front-line managers
because they have to guide and supervise the production workers.
Human Competencies and Skills: These are interpersonal competencies and skills which enable managers to work
effectively with other employees as team players. Human competencies and skills also include communication skills and
the ability to motivate and lead subordinates and ensure discipline. Human Skills are important for front-line managers
because they have to liaise with the workers as well as with other managers.
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Q 10 Unique Textile Mills should include the following objectives in its strategic planning process:
(i)
Maintain and consolidate its leadership status as designers and manufacturers of high fashion fabrics.
(ii)
Innovate; Bring new designs in the market well in advance of the competitors.
(iii)
Minimize the time involved in the stages of Designing, Manufacturing and Marketing of the products.
(iv)
Play a pioneering role in introducing the latest technologies and textile machinery in the country.
(v)
New distribution channels: Create a network of company-owned retail outlets for distribution of exclusive high-value
fabrics.
(vi)
Reduce the cost of manufacturing and venture into vertical integration
Q 11 The distinguishing characteristics of organizations which pursue innovative corporate strategies are:
(a)
they compete in the market on the basis of their differentiated superior products/services as compared to the offerings of
other companies;
(b)
they are continuously searching for new growth platforms for their business and are several steps ahead of their
competitors;
(c)
they are able to anticipate threats from competitors and seek to respond with new or better products/services to sustain
their competitive advantage;
(d)
they are always making efforts to develop new and innovative products to provide greater customer value;
(e)
they are forward looking visionaries and are continuously searching for means to change their strategic direction;
(f)
they value management cohesiveness at all levels and both the strategy planners and those involved in implementation of
the strategy work in close collaboration.
Q 12 (c)
Tactical Planning refers to the day-to-day plans regarding implementation of the different work activities required to
achieve the objectives of the strategic plans. Tactical Plans pertain to the current and short-term activities performed by
low-level managers which are nevertheless of vital importance for implementation and achievement of the objectives of
the overall strategic plans.
(d)
Backward Integration Strategy seeks the ownership or increased control of the firms sources of important raw materials
and other critical inputs and supplies. Backward integration strategies are pursued in situations where the suppliers are
unable to adhere to the buyers specifications of quality, or are unreliable in meeting their commitments or are few in
number and dictate unreasonable terms or charge exorbitantly high prices to take advantage of the buyers who are
heavily dependent on the inputs from these suppliers.
Stringent Cost Reduction and Austerity policies may be in conflict with the interests of the stakeholders in the following
Q 13
situations:
(i)
Customers

the products may be of an inferior quality and perform unsatisfactorily

the products may have a very limited useful life

sub-standard quality of raw material inputs and packaging may be harmful for the health of the customers
(ii)
Employees

working conditions may not be conducive for the health of the workers

poor maintenance of machinery and equipment may cause injuries and accidents

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inadequate compensation may result in financial difficulties for the workers
(iii)
Society as a whole

cause pollution and create environmental hazard

lack of interest in charities, sports and community activities

impose social cost on the society by making improper use of public assets
The distinctive characteristics of the different types of business divisions in terms of their relative market positions and
Q 14
pursuit of business strategies are as follows:
(i)
Stars -- Star business divisions have a relatively large share of the market in high-growth industries and offer lucrative
opportunities for growth and profitability in the long-run. Substantial investment should be made in Star business divisions
to maintain and strengthen their dominant positions. Strategies of vertical and horizontal integration, market penetration
and product development may be considered to further consolidate the well-entrenched position of the Star business
divisions and to compete aggressively in the market.
(ii)
Cash Cows -- Cash Cows are business divisions which have a relatively large market share but compete in a low-growth
industry. The Cash Cows are in a position to generate substantial funds because of their strong competitive position.
However, their requirements of funds for expansion are minimal and they are therefore in a position to generate funds
which are in excess of their requirements. The Cash Cows are milked as a source of corporate resources for utilization of
funds in other business divisions which offer long-term growth prospects and in which competitive advantages can be
achieved. Quite often the Star divisions with the passage of time are relegated to the position of Cash Cows.
(iii)
Dogs -- Dogs are those business divisions which have a relatively small share of the market and compete in a slow or no-
growth industry. Dog business divisions are not able to earn fair profits and generally incur losses. Therefore such divisions
are often liquidated or divested or subjected to policies of retrenchment to curtail expenditures on salaries and other
associated costs. It may not always be advisable to liquidate or divest the Dog divisions as their assets can be disposed of
only at throwaway prices because of the companys weak bargaining position. This strategy may pay off if there is a
business turnaround at a later stage.
The principal objectives of mergers and acquisitions of financially strong and well-established international corporations
Q 15
are as follows:
(i)
To gain access to strategic proprietary assets/technical know-how and exploit these strengths with greater effectiveness.
(ii)
To gain market power and dominance, including access to strong distribution channels in expanding and lucrative markets.
(iii)
To achieve synergies in domestic and global operations across different industries which offer complementary advantages.
(iv)
To expand the size of operations to obtain advantages of economies of scale and achieve competitive advantages in
negotiations with suppliers, customers and financial institutions from a position of greater strength.
(v)
To diversify operations and spread risks over a more wide area.
Q 16 The distinguishing characteristics of Strategic Decisions and Tactical Decisions are:

(i)
Strategic Decisions determine the course and define the contours of the companys main objectives, whereas the Tactical
Decisions are concerned with the achievement of targets within the framework of the main strategic objectives of the
company.
(ii)
Strategic Decisions are made at the board of directors/senior management level, whereas Tactical Decisions are taken by
middle-level managers.
(iii)
Strategic Decisions have long-term implications, whereas Tactical Decisions have consequences which are of medium-term
nature.
(iv)
Strategic Decisions have far-reaching financial repercussions, whereas Tactical Decisions have relatively less financial
bearing on the companys results.
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HEL should closely monitor the following factors in the emerging business environment in which it operates and its
Q 17
impact in the formulation of its strategic plans:
(i)
Projection of future demand for laser printers in the international market The demand for motors by the original
equipment manufacturers of laser printers is a derived demand and changes in the demand for these printers can have
considerable impact on the business prospects of HEL. HEL would have to expand its manufacturing capacity if it
anticipates increase in the demand for laser printers or alternatively explore new markets for its products if it foresees
decline in demand for these printers in its existing markets.
(ii)
Technological changes Changes in models and designs of laser printers due to variations in customers requirements can
have considerable impact on HELs business prospects. HEL would have to keep abreast of these changes, continuously
enhance its R&D capabilities and introduce necessary modifications in its manufacturing processes, designs and tooling.
This would involve substantial R&D expenditures and investments in additional equipment which would have to be
incorporated in its strategic planning process.
(iii)
Threat of entry of new competitors HEL is presently earning high profit margins and realizing attractive returns on
investments. Therefore, the threat of new entrants who may pose competitive challenges to HEL is always present. HEL
should be prepared to meet the threat of new entrants and adopt appropriate measures to maintain its competitive
advantages and face threats posed by potential competitors by interacting closely with its important customers and
creating barriers of high switching costs. This would involve continuous upgrading of technology and improvement of
manufacturing process to retain its competitive advantage.
(iv)
Competitive rivalry and prices of Competing Products Although HEL has significant competitive advantages in terms of
quality of its products over its competitors, it should take cognizance of the strategies of its rivals who would want to
improve the quality of their products and may offer competitive prices to attract HELs customers. HEL should adopt
appropriate strategies to monitor these threats and counter them effectively.
(v)
Diversification HELs present customer base and product range is considered to be quite narrow. It may like to explore
the prospects of marketing its products to other original equipement manufacturers such as manufacturers of
photocopiers, computers, etc. and also introduce related products (other than small motors).
General
Summer 2008
The core capabilities which are commonly observed in leading global business organizations are:
(i) in-depth knowledge of the organisations products, their strengths and special customer service skills.
(ii) highly developed marketing skills by way of insight of consumer behaviour, market segments, share of the market and
distributions channels.
(iii) capacity for continuous innovation and research which is a prerequisite for maintaining and consolidating of their
Q1
global leadership status in a highly competitive business environment.
(iv) creation and retention of a pool of talented and motivated management team and work force aligned with the
strategic objectives of the organization.
(v) financial resourcefulness with the capability to utilize the funds effectively with sound planning and control structures.
(vi) assessment of the strengths and weaknesses of the competitors in the different territories in terms of their market
share, competitive advantages and anticipated business strategies.
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The following important points should be considered when one is involved in the decision making process:
(i) have a clear perspective of the goals to be achieved.
(ii) develop the timeframe for reaching the final decision.
Q2
(iii) analyse the nature of the problem in sufficient detail according to the importance of the final outcome of the decision.
(iv) examine the various available options.
(v) weigh the possible consequences of selecting any one or combination of actions.
Q3 The advantages of Business Process Outsourcing are:

(i) Outsourcing would enable the managers and the staff to concentrate in activities which are of critical importance for
the achievement of the corporate mission, thus improving their core competencies and the overall productivity.
(ii) Outsourcing may help to reduce the operating costs of SEL.

(iii) Outsourcing would enable SEL to reduce the amount of capital investment that it would otherwise have to incur in the
facilities which would be provided by the outsourced agency. Also enable SEL to improve core activities performance.
(iv) Careful selection of outsourcing companies would help to acquire new know-how and expertise from the outsource
agencies as they would be providing similar services to their several customers.
The disadvantages of Business Process Outsourcing are:
(i) Outsourcing involves loss of some control and places excessive reliance on outsiders.
(ii) Outsourcing can result in loss of valuable in-house skills.
(iii) Outsourcing may result in creation of competition in future.
(iv) Outsourcing may result in disclosure of critical confidential information to outsiders.
(v) If the level of the performance is not the same then it might result in brand dilution and shift in brand loyalty.
Key stakeholders of FSML and their importance for the sustainable and long-term profitable operations of the Company
Q4
are :
(a)
Shareholders: The shareholders are the ultimate owners of the Company and it is important to maximize their wealth
through sustained growth in real earnings and profitable expansion of the business.
(b)
Distributors and Customers: The distributors and customers are important as the Company can operate profitably only if it
is able to build long-term relationship with the distributors and the ultimate customers by offering quality products and
value for money.
(c)
Cane Growers: The sugar cane farmers are critical stakeholders as the Company has to build ongoing relationship with
them for supply of good quality cane according to the pre-determined delivery schedules.
(d)
Employees: The employees are important as the staff have to be trained and motivated to enable the Company to
maintain and strengthen its reputation as a progressive company and be able to continue to operate as a profitable entity.
(e)
Creditors: The creditors, including the banks, are important stakeholders as substantial amounts of finances are required
by FSML for making payments to the cane growers, financing of stocks of sugar manufactured during the crushing season,
purchase of components, parts and spares, etc The creditors are important stakeholders as they have to provide funds to
meet FSMLs requirements.
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(f)
Government: The government officials at various levels play an effective role for the smooth operations of FSML for
movement of heavy traffic, maintaining law and order particularly during the crushing season, its role for fair pricing of
sugar and ensuring its availability for the consumers throughout the country.
(g)
Community: The neighbouring community has to accept the Company as a socially responsible and conscientious
corporate citizen mindful of its obligations to the community and its overall welfare.
Q5 The various stages of the Decision Making Process are:

(a)
Identification of the objectives: The first stage in the decision making process involves identification of the objectives
which may vary considerably. It is important at this stage to specify the criteria for measuring the extent to which the
objective has been achieved.
(b)
Collection of information and ideas: The importance of outcome of the decision would determine the extent of the efforts
that should be made to collect the information and ideas and the degree of accuracy of the input data required to reach a
well-considered decision.
(c)
Analyses of information and ideas: The information and ideas collected have to be analyzed to assess the alternative
courses of action. Decisions which cannot be reversed readily and have serious long-term consequences require more in-
depth and accurate analysis of the data and evaluation of the ideas obtained from the different sources.
(d)
Making of the Decision: This is the most important stage of the decision making process as the decision maker has to
select a particular course of action. Reaching the right decision is important because this process involves selection of a
particular course of action to the exclusion of the various other alternatives. At times the decision maker may require
additional information to reach a well-considered decision.
(e)
Communication of the Decision: Quite often the persons making the decision are different from those who have to
implement the decision. Consequently it is necessary to issue instructions to all individuals who would be affected by the
decision or who would be required to implement the decisions.
(f)
Evaluation of the results of the decision: Decision makers have to evaluate the outcome of the decision. It enables them
to modify the course of action or revise the objectives etc.
Q6 The business strategy/policy in each of these situations is:

(a)
Market Skimming Pricing Strategy
(b)
BCG Matrix
(c)
Gap Analysis
(d)
Product Specialization
(e)
Conglomerate Diversification or Conglomerate Expansion Strategy
(f)
Contingency Planning Strategy
(g)
Multi-brand Strategy
(h)
Relationship Marketing
(i)
Test Marketing
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Scenario Planning is a technique which involves the process of identifying alternative scenarios in the future, and on the
basis of different assumptions that the strategists may anticipate in the future, formulate corporate strategy. The process
of scenario planning on the basis of different assumptions enables the company to realign its corporate strategy quickly in
Q7
the changing business conditions. The purpose of scenario planning is to avoid formulating corporate strategy on the basis
of a single future outcome which may not materialise.Rather, the objective is to re-evaluate the relevance of the strategic
objectives which would be valid for different outcomes/events as they unfold from time to time.
Business firms expect to derive the following advantages by outsourcing of selected business activities to external
Q8
entities:
(i)
Reduce requirements of capital investment and human resources as the facilities and services are provided by the external
entities to whom these activities have been outsourced.
(ii)
Place greater focus on core value-added activities of the business as the ancillary activities are outsourced to external
suppliers.
(iii)
Achieve cost economies as the suppliers of the outsourced activities are able to obtain the advantages of economies of
scale.
(iv)
Derive benefits of the particular expertise and innovations of the external entities who provide these services.
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Global Chartered accountants GCA
BM Examiner Comments
Final Examination - Winter 2010

General: the paper was well designed and comprehensive. All important topics were included and the questions were simply worded so
as to help the students in understanding what exactly is being asked. It is suggested that students consult reference books and improve
their understanding of the concepts so that they are able to tackle questions in a better way. It is reiterated that marks allotted next to
each part of each question are checked so that the time to be spent on answering each may be gauged.
Q.1 (a)
This common ethical dilemma was given to test the candidates personal ethical and moral judgment. Students were required to give
measures that DEL should adopt, in order to eliminate unethical practices by sales representatives. Most candidates mentioned
measures like:
Sales reps should be given written instructions about acceptable behaviour and norms.
Consequences of indulging in unethical practices should be made clear.
Training workshops should be held.
Sales targets should not be superficially high as that may demoralize the employees.
Very few touched on the important point of circulating a written Code of ethics. Some candidates mentioned that surveys of hospitals
and feedback from doctors, etc. should be sought, which was completely irrelevant as an organization would not degrade its employees
by secretly seeking feedback from customers.
Q.1 (b)
Establishment of branch operations instead of an overseas subsidiary:
Students need to understand the difference between incorporating a branch in a foreign country and an overseas subsidiary. A branch is
simply a part, division or section of an entity that is set apart to undertake certain tasks or responsibilities in order to carry on business
and derive revenues in a foreign country. An overseas subsidiary however, has a separate legal and corporate existence and is not a part
of a larger entity with at least 50% shareholding of the parent company.
Students were unable to score high marks in this part as they mostly mentioned benefits like cost savings and lesser legal formalities in
case of establishing a branch. The tax implications and long term benefits were not touched upon.
Q.2 In this question exit barriers that prevent going concerns from quitting the business were to be explained. Answers were mostly good
however, at this level it is expected that terms like severance payments, redundancy costs and ancillary costs associated with closure of
business etc. are understood and mentioned. Some candidates were unable to understand the question and in haste mentioned reasons
that would lead a corporation to wind up and leave.
Q.3 Students knowledge of various business strategies was tested through this question. This style of testing the knowledge should be
encouraged. Few students scored well, others just did guess work. This shows that concepts are just skimmed through and students do
not make any effort to practically understand the strategies.
Q.4 (a & b)
Both the parts of this question were generally attempted nicely and show that recruitment is a topic that is commonly liked and
understood. However, it is suggested that extensive reading should be done and reference books should be consulted to improve the
quality of responses. Some of the students seemed to be in a hurry and missed to mention some very mandatory points like required
qualification or job description.
Q.5 (a)
Four methods of payment against imports were given. These had to be arranged in order of preference for the importer in descending
order. It was felt that students were not sure about the meaning of descending; so many answers were given in reverse order which
resulted in loss of easy marks.
Q.5 (b)
Students had to list the obstacles in attracting foreign investment in underdeveloped countries. There are so many factors that make up
this answer, some are: corruption, instability of government & its policies, inflation, lawlessness etc. The question was mostly attempted
well.
Q.5 (c)
The advantages of market based transfer pricing, asked in this question are: fair pricing, competition between depts., resulting in
improved efficiency, tax benefits, easy performance evaluation etc. Most students could mention one or two points only.
Q.6 (a)
The easiest question of this paper and a golden opportunity to score quick marks. There are numerous factors which a Chinese company
would reflect on before going ahead with the decision of whether or not to export. Almost all students secured atleast passing marks in
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this part of the question.
Q.6 (b)
This question asked the benefits availed by the licensor by entering into a Licensing Arrangement. Most common error here was that
students gave the benefits availed by the Licensee instead of the Licensor. This usually happens when students hurry to answer after
reading two three words of the question. It is advisable to take at least the initial five minutes to just read the paper CAREFULLY before
attempting to answer it.
Q.7 (a)
Brand Equity is a well-known concept in management studies but most students gave wrong answers. Equity was mistaken for
equality, students thought that it meant having equal value or same name of many products launched under one brand.
Q.7 (b)
The Pull Strategy is not an alien concept for anyone having some knowledge of product management. It is a strategy in which
promotional expenses are incurred with the aim of attracting potential consumers and reduce reliance on sales persons. The response
was generally satisfactory.
Q.8 (a)
The objectives to be achieved by Human Resource Managers are several including fair compensation management, recruiting the most
suitable workforce, updating the skills of Employees through training & development, maintaining a peaceful environment by conflict
management etc. There are several more of them but most candidates could mention not more than four.
Despite the fact that this question pertained to basics of Business Management, students not being able to do well shows a lack of
commitment on their part. Many students did not understand that HR managers duties of strategy formulation and implementation are
being discussed and included points such as maintenance of personal records etc.
Q.8 (b)
The basic definition of SBU is an independent unit which has its own resources and products and strategy and because SBUs have
independent objectives they allow the owning conglomerate to respond quickly to changing economic or market situations. Many
students incorrectly mentioned that SBU is a department of the organization which plays an important role in achieving its strategy.
Q.9 (a)
Students were lost whilst attempting this question. Some had no grip on the concept of strategic planning. Those who had a fair idea
could not express themselves due to lack of reading. Mostly, vague and general answers were given.
Q.9 (b)
Steps in the implementation of a well considered business strategy were required in this part. It seemed like students had difficulty in
organizing their responses and hastily tried to get over this part. Students ignored important areas like policies, systems and resource
allocation. Most answers left a lot to be desired.
Q.10 This question again did not require any text book learning just some logical, knowledge & wit. It just required students to give a point-
wise enumeration of advantages of conducting training. The same points were repeated in many different ways. 3-4 points were created
out of one. This manifested in the form of a lengthy answer but not the one which was desired.
It was observed that students talked only about the benefits to the employees like higher prospects for promotion etc. Benefits to the
organization, clients and overall business were often ignored. Competitive advantage in service-oriented companies was touched upon
by some. However, the true essence of distinguishing oneself on the basis of good quality service did not come out.
Final Examination - Summer 2011

General:
Question Paper was interesting and covered almost all the major topics. As for the students performance, it was below average;
although most students attempted all questions but the usual problem of hazy answers led to failing grades. As observed in the past,
inadequate preparation, selective study, failure to read and understand the requirements of the questions and weak expression power
were the major reasons for below standard performance.
Q.1 (a)
The question pertained to skills essential for frontline operational managers. Very few actually knew the difference between skill and
function, although both of these are basic topics of business management. Most students emphasized on achieving objectives and
crafting strategies. These can not be categorized as skills. Skills essential for frontline operational managers include resource allocation,
conflict resolution, motivating employees, communicating effectively etc. Some of the students discussed strategic level decision-making;
which is not the responsibility of frontline managers.
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Q.1 (b)
A very basic yet interesting question. What benefits do organizations reap by Employee Participation? Most candidates mentioned
Employee motivation and commitment as the main benefits. These points were rephrased and broken down into 3-4 points with the
same matter being repeated in different words. Advantages like better working relationship, greater willingness to implement the
decisions, reducing the need for supervision etc. were missed out.
Q.2 (a)
Porters Five Forces Model of Competition: in this question, students were given three different scenarios and they had to identify and
highlight the salient features of the model of competition that would be appropriate in each scenario. Most candidates were able to
identify the model that would be apt in each scenario. However, the reasons to support their choice were brief, incomplete and weak.
Some students mentioned 2 or 3 models under each scenario which were contradictory and defeated the purpose of the question. Many
students confused Threat of New Entrant with Threat of Substitute Product.
Q.2 (b)
Four strategic objectives of a leading cotton fabric manufacturer were required. Most candidates were not aware of the difference
between strategies, tactics and goals. Majority of the students referred to generic objectives irrespective of whether they were strategic,
operational or tactical. Students didnt realize that leading firms/companies capitalize on their established reputation and premium
quality of their products/services. Hence, objectives like cost cutting, price reduction, discounts etc. were not of much relevance.
Q.3
This question required the students to define downsizing, its effects on the organization and then explain what considerations should a
HR manager keep in perspective while pursuing a policy of downsizing.
Most students could write that downsizing means reducing the number of employees and it results in a flatter hierarchical structure.
However, while discussing matters requiring consideration of the HR manager, hardly anyone did justice to the question. Most students
emphasized on payment of due compensations and the legal and social consequences. Important considerations like employee morale,
effect on workload, transparency, objectivity and image of the bank etc. were less frequently mentioned.
Q.4 (a)
Students did have a fair idea about market research but definitions lacked substance and it was apparent that many students had
difficulty expressing themselves.
Q.4 (b)
Most of the students mentioned the basic reasons for undertaking market research and scored good marks. Performance in this part was
good as most of the students could frame answers based on their general knowledge and such answers did fit in.
Q.5 (a)
Unfortunately, majority of the examinees were not clear about the concept of Succession Planning. Many students wrote that it is the
taking over and handing over of duties by a new employee when the old employee resigns or retires. Wholly irrelevant answers were
given, like formulating plans for making the employees successful. Some of the better replies simply discussed fulfillment of future
requirements but missed out key points such as identification, grooming, training etc.
Q.5 (b)
This part of the question required mentioning advantages of formal succession planning. As discussed in part (a), those who were not
aware of the basic concept, ended up stating wholly irrelevant points. However, this part was better handled; although it is felt that
students have to thoroughly read and understand these topics to be able to produce good answers in a specific scenario and to express
themselves better.
Q.6 (a)
Market Penetration proved to be a difficult topic as very few students were able to define this simple term which means increasing
market share/sales volume by lowering prices. Some students confused Market Penetration Policy with Market Skimming Policy. Very
few students could specify that this policy is adopted when a firm has excess capacity and is in a position to achieve economies of scale
or when cost reduction is possible by using new technology, etc.
Q.6 (b)
The concept of Market Segmentation was better understood as the students were able to produce average, if not good answers. Many
students knew the basic concept and the bases on which the markets are divided.
Q.7 In this question, distinguishing characteristics of organizations which pursue innovative corporate strategies were required to be
identified. Innovative and forward looking companies are continuously coming up with new products, better services and technological
advancements. They focus their strategies on the future and are able to anticipate the threats and opportunities to better handle market
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requirements, combat competition and avoid being obsolete. Some of the students were well prepared and produced really good
answers. However, the majority seemed to rely on their general knowledge and could produce only two or three valid points. Most of
them emphasized on R & D and new products. Some students offered long winded explanations, although the requirement was only to
identify the characteristics of organizations which pursue innovative corporate strategies.
Q.8 (a)
Majority of the students appeared to be confused while distinguishing between a global business strategy and a multi-domestic/adaptive
business strategy. Most of them wrote that companies pursuing global business strategies think globally and act locally! Multi-domestic
strategy was defined as a firm that serves the local market only and does not do business globally. All such students were apparently
placing reliance on guesswork and need to consult good books.
Q.8 (b)
In this question, the students were required to list the key financial decisions that need to be made by MNCs contemplating direct
investment in a foreign country through a subsidiary company. Most of the students did not appreciate that their answers should be
limited to financial considerations only. Consequently, many irrelevant points were mentioned, whereas relevant points were missed.
Q.9 This was one of the most poorly attempted question. Most students mentioned that an MNC adopts a policy of centralized decision-
making only when it wishes to exercise close control over the subsidiary companies. Other important points like safeguarding access to
specialized technology and highly interdependent nature of operations were mentioned by very few candidates.
Q.10 Students were fairly able to list the responsibilities which employers must fulfill in order to ensure that issues of Health and Safety are
addressed adequately in a manufacturing environment. Some students advised about buying health and life insurance policies and
bearing medical expenses, which were not relevant for this question. Many students wrote 4 to 5 points, where a single point would
have been sufficient. For example, a student wrote that health policy should be crafted, implemented, monitored and reviewed as four
different points.
Q.11 Short notes were to be written on four different topics. The comments are as under:
Business Ethics: Some students confused this concept with that of corporate social responsibility. Majority of the candidates emphasized
on rules and regulations. A reference to values and culture would have been more appropriate.
Environmental Scanning: Most of the students were not clear about this concept and described it as an exercise to control
environmental pollution and keeping the world clean!
Tactical Planning: Many candidates defined it as strategic level decision making and planning and implementation at management level,
although it is quite the contrary. A number of students incorrectly described it as a medium term plan.
Backward Integration Strategy: Most of the students gave appropriate definition of the concept with relevant examples. However, very
few students explained the situations in which this strategy is pursued.

General:
The question paper was quite easy and interesting but unfortunately many students had resorted to selective study and were therefore
inadequately prepared. The students lacked conceptual understanding of the terms and gave vague answers, without understanding the
precise demand of the questions.
Question-wise comments are given below:

Q.1
The Public Relations job means moving people to action by creating credible and meaningful relationships between an organization and
the people and groups important to its success. This question required the candidates to specify the critical skills required for the
position of Director Public Relations. Skills like problem solving, experience and knowledge of the business, interpersonal and
communication skills, multi-tasking, leadership, writing skills, coordination with senior level executives, and good management skills
were mentioned by most of the students but appropriate explanations were often missing. Moreover, since the question required eight
critical skills and competencies many candidates repeated similar skills using different words. The students must understand that such
techniques cannot impress the examiner and simply result in wastage of time.
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Q.2
In this question the candidates were required to explain three types of Growth Strategies. Most of the students were able to define them
and were able to give relevant examples. However, the explanations were mostly incomplete or inappropriate. While explaining Forward
Integration, many students confused it with Backward Integration which is the acquisition of source of raw material.
Q.3 (a)
The performance in this easy question was good as most of the candidates were able to identify the harmful effects of an Austerity Policy
on various stakeholders i.e. employees and society.
Q.3 (b)
This part required definition of Corporate Social Responsibility. CSR is a well-known concept in business management, but many
candidates performed poorly. Many candidates included all sort of responsibilities in CSR. For example, many students also stated the
responsibility to pay the salaries and taxes on time as a CSR.
Q.3 (c)
This part of the question required five factors which should be included in developing an Effective Accident Prevention and Reporting
System for a company. Students attempted this question fairly well. However, many candidates also indulged in repetition to complete
the five factors. In some cases, the fact that the company was involved in heavy engineering operations was ignored.
Q.4 (a)
Overall performance in this question was good. Students were able to correctly point out the disadvantages that Accurate Engineering
Limited would experience due to High Employee Turnover. Some students tried to repeat the same points which was a sheer waste of
time.
Q.4 (b)
A very basic marketing term, Differentiation was to be explained here. A large number of students confused differentiation with
segmentation. Many students picked up the word differentiation and elaborated its dictionary meaning in different contexts without
addressing the concept in its marketing parlance. While identifying the skills and resources required to pursue a differentiation strategy,
the students generally gave a long list of relevant as well as irrelevant points.
Q.5 Both parts of this question were challenging as these topics had not been tested in the past many examinations. The answers to this
question strengthened the viewpoint that the vast majority of students resort to selective studies.
Q.5 (a)
Only few students produced appropriate answers and lack of clarity in the understanding of this topic was visible.
Q.5 (b)
(i)
The performance in this part was average. Most of the students had vague ideas of Marketing Intelligence System and believed it to be
an informal system of collecting information about competitors. In identification of sources which help in creating an effective Market
Intelligence System, the performance was comparatively better probably because most students were able to respond on the basis of
their general understanding and experience.
(ii)
Some students talked about concepts such as decision support system etc., which were not relevant.
Q.6 (a)
In this question on Geocentric Orientation, most of the students wrote think globally and act locally but the explanations that followed
this sentence were mostly incorrect, irrelevant or vague. Some students got totally confused and discussed the concept of ethnocentric
orientation.
Q.6 (b)
This part required identification of advantages of appointment of a single distributor in Pakistan, by a Taiwanese company manufacturing
photocopier machines. Approximately fifty percent of the candidates were able to identify most of the points correctly. However, a
common mistake observed in many answer scripts was that candidates compared appointment of distributor against opening a
subsidiary in Pakistan. Some of the students just mentioned advantages of having distributors and missed the actual question. Such basic
mistakes are not expected at this level of examinations.
Q.7 The major issue with answering this question was that a number of students were unable to understand the precise requirements of the
question and defined what skimming and penetration is, instead of listing the situations in which the respective strategy can be
beneficially adopted. Further, there were a number of students who had no idea about the concepts of skimming and penetration.
Q.8 The result of this question was very poor. The candidates are familiar with the basic features of Product Life Cycle. This time they were
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asked to suggest the types of promotional strategies required in different stages of the Product Life Cycle. Most candidates had no clue.
Majority of them mentioned more or less the same promotional strategies in the introduction, growth and maturity stages. Many
students repeated the same points with variations in emphasis and usage of words. Some of the candidates were so confused that they
suggested Price Skimming Strategy for the Declining Stage of the product life cycle.
Q.9 (a)
This was a very easy question and most students were able to secure high marks. However, many students ignored the fact that each
factor consisted of one mark only and offered very detailed explanations.
Q.9 (b)
This part required description of political factors to be taken into consideration by a multinational, while making direct investment in a
foreign country. The performance was reasonable although many students also included financial/commercial factors. Again, a lot of
duplication of points was also witnessed in both parts of this question.
Q.10 (a)
Purpose of Intelligence, Proficiency and Aptitude tests was required to be explained. Unfortunately almost all the examinees had no idea
about the exact purpose of these tests and just played around the words, especially in the case of Intelligence and Aptitude tests.
Q.10 (b)
Two qualities of a well conceived selection test were required. In this part also, the students lacked specific knowledge and mostly tried
to mention generic points.
Q.10 (c)
In which situation does it become necessary for an organization to dismiss an employee, was the question. The overall performance was
reasonable because on the basis of the practical experiences, most students were able to discuss the relevant points. However, many
students wrote incorrect points and then tried to repeat them in different words. For instance not obeying instructions and not
following orders of seniors were listed as two separate points.
Final Examination - Summer 2012

General:
Overall performance of the students in this paper was not satisfactory. Students not only displayed lack of proper knowledge of the
subject but also poor comprehension. It is quite apparent that intrinsic motivation is lacking in students and appropriate measures
should be taken to create interest in this subject. Students have a cursory understanding of the major topics but lack in-depth
knowledge.
This was a balanced paper with enough margin for students to grab good marks. But majority of students do not appear to cover the
Syllabus comprehensively; clear examples were Q. 1 on Critical Success Factors and Q. 2 on characteristics and business strategies of
Stars, Cash Cows and Dogs.
Another most common observation is that students answer the questions by repeating the text written in questions or by reiterating the
same point in different ways, which should be avoided.
Q.1 This question required identification of four critical success factors which would create sustainable long-term competitive advantage for
a company that is in advanced stage of implementing its facilities for manufacture of home textile products. Most students limited
themselves to good quality of products and low prices but could not identify other important points. Many students just provided the
points and gave no or inadequate explanation, ignoring the fact that it was a 10 mark question and only four points were required.
Q.2 This question required the students to explain the characteristics of the markets and the relative competitive positions of Stars, Cash
Cows and Dogs. This should be a very familiar topic for anyone studying or related to management/business studies. Most of the
students mentioned market growth and market share but did not mention the appropriate business strategies to be pursued in each
case. Many students emphasized quality as a descriptive characteristic of these business units whereas there was no mention of quality
in the entire matrix analysis. Many students gave explanation of Problem Child which was not required. One wonders whether it was lack
of thorough reading of the question or flaunting of their knowledge. This exhibit of their knowledge, however, did not gain them any
extra marks! Students are advised to use the allotted time wisely, and avoid giving irrelevant material.
Q.3 (a)
The Training Needs of employees in three categories namely competent, more than competent and not yet competent to perform in
their present positions were to be discussed in this question. Also how this training would enhance motivation at all levels was required.
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Training and learning and development are common and usual organizational activities aimed at improving the performance of
individuals. Therefore, it was expected that students would give apt answers from their cognitive awareness and observations if not from
text book learning. Quite regrettably, the answers did not meet the examiners expectations. Most of the students could not differentiate
between the training needs of the different categories of employees, mentioned in the question.
A number of students stated that training is not required for competent employees and extensive training is required for not so
competent ones. There was no mention of how specifically to train them or which skills should be provided.
Q.3 (b)
A very important issue in Human Resource Management is Reward and Compensation System. The aims and objectives of rewards were
the issues to be analyzed here. The performance in this part was good as the students were able to mention at least some of the points.
However, some of the students gave entirely irrelevant answers like types of rewards and basis or criteria on which rewards should be
based, etc.
Q.4 (a)
Wilful Misconduct was to be explained and situations where an individual was guilty of the same were to be identified. Most students
were able to correctly explain the term and also quoted the four situations in which an employee would be guilty of wilful misconduct.
However, many students gave incorrect examples also. It must be noted that late coming and absenteeism would not be considered as
wilful misconduct unless it is done with the malicious intent of foul play and to hamper/paralyze the working of the organization. An
important point which many students ignored is that any explanation of Wilful Misconduct would be incomplete unless it is mentioned
that the misconduct was done on purpose. Just stating that an employee committed a misconduct or an act which harmed the
organization is not adequate.
Q.4 (b)
Five security measures were to be identified which the Chief Security Officer should adopt for the security of the employees of a Sugar
Mill which is located at the outskirts of a small rural town. Implicitly it is a remote, deserted and isolated region. The most prevalent and
common error here was that security was confused with health and safety, presumably because these have been asked several times in
the previous examinations.
Q.5 This was a very interestingly designed question. Students were required to identify the most appropriate characteristic of each ingredient
of the marketing mix for the given category of Consumer Products. The four categories were: Price, Consumer Buying Behavior,
Distribution and Promotion. Since the question was framed differently from the questions which are normally asked, only those with
good conceptual understanding were able to do well and score high marks.
Q.6 This question pertaining to core capabilities of leading global organizations was not as well answered as it should have been. Students
incorrectly perceive global organizations as trouble-free and limitless entities, whereas practically every organization has its strengths
and weaknesses. Other observations are as follows:
Most of the students gave the difference between local companies and global companies which was not asked in the question.
Many students listed a large number of Capabilities supposed to be possessed by good organizations, whereas they were required to
mention the Core Capabilities.
Q.7 (a)
Most of the students had a clear idea of the reasons why Employees offer strong resistance to major organizational changes and prefer
to continue with the existing status.
Q.7 (b)
Quite a number of students confused the concept of Business Ethics with Corporate Social Responsibility. Corporate Social Responsibility
is not the same as Business Ethics although there are some common grounds between the two, such as the need to combat corruption.
Corporate Social Responsibility refers to the responsibilities of an organization on social and environmental issues, whereas Business
Ethics relates to matters such as honesty, trust and integrity.
Q.8 (a)
The principal objectives behind merger and acquisition were required to be narrated. Being students of accountancy, most candidates
had a clear idea of the concept of mergers and acquisition. Most of them were able to narrate the objectives such as synergies, profit
maximization, combating competition, cost saving, taking advantage of the strengths of the other company, achieving economies of scale
and diversification of risks, etc. However, many students wasted time and left a bad impression by quoting whatever benefit they could
think of.
Q.8 (b)
This part required the candidates to differentiate between strategic and tactical decisions. Most students had a clear idea of the concept
of Strategic Decisions which determine the course and define the contours of the companys main objectives. These decisions are taken
by the top management and have far reaching financial repercussions. However, majority of the students confused the concept of
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Tactical decisions with Operational decisions. Tactical or Business strategy is concerned with achieving overall success in particular
business markets and allocation of resources whereas operational or functional strategy is concerned with the contribution of the
particular function or operation towards achievement of the business and corporate strategies.
Q.9 Performance in this question was below average. Most of the students did not have a clear idea of the difference between a Market
Challenger and a Market Follower. Most of them gave very brief answers. Many of them described the two concepts by repeating the
words as were given in the question and offered very little discussion about when and why does a firm decide to pursue a particular
strategy. Many students were of the erroneous view-point that a firm would always like to challenge the Market Leader to acquire that
position. In fact, quite often firms are satisfied as market followers, specially when they lack the resources to challenge the market leader
or when they do not want to provoke retaliation from the market leader.
Q.10 (a)
Highly centralized treasury function allows automation of basic processes and information flows, sophisticated risk management
techniques and highly specialized functional competencies. Most of the students seemed to possess only basic understanding of the
issue. Instead of mentioning the key strategic factors, most answers revolved round earning interest and saving financial costs.
Q.10 (b)
Performance in this question was extremely poor. Instead of providing reasons why globalization has assumed importance in the present
environment a great number of students mentioned the advantages of globalization, which were not required.

General:
The overall performance in this paper was quite below expectations as has been the case in the past many sessions. It was quite a normal
paper as most of the concepts that were tested were the same and remote areas of study were avoided. The most important reason for
such a lackluster performance seemed to be selective study. Insufficient proficiency of the subject, imprecise articulation and reliance on
rote learning and bookishness were also responsible for the below average result.
The students are advised to adhere to the following guidelines if they really desire to improve their performances:
Cover the whole syllabus;
Develop reading habit and try to read books and magazines other than the prescribed books on relevant topics. This will enhance their
knowledge base and allow them to quickly recall the relevant points rather than wasting time in thinking them over;
Do not try to deceive the markers by repeating the same points again and again or by producing irrelevant stuff. It would not yield any
additional marks and would result in wastage of precious time.
A short scenario was given which pertained to a company which is a leading supplier of a small motor which is installed in printers. The
Q1 candidates were required to identify and explain the factors which the company should strictly monitor to anticipate the emerging
business environment (challenges) and which can have a profound impact on its Strategic Plans. General understanding of the business
environment was required to answer the question. Unfortunately, most of the candidates did not read the question carefully. They were
more focused on social, political and environmental factors and overlooked important points like projection of future demand,
competitive rivalry and diversification. Some students also included internal factors like skilled human resources which was not required.
Some of them discussed SWOT, PESTEL, Porter & Ansoff analysis which were entirely irrelevant.
Q 2 (a) This question pertained to HR Skills Information Database and its usefulness in the areas of Recruiting, Training and Succession Planning
especially with reference to an organization which is about to recruit new workers, to expand production. Generally, the students
performed well. However, some of them confused it with normal HR database rather than HR Skills database.
Q 2 (b) This part required identification of advantages of quarterly performance appraisal of skilled workers rather than as an annual exercise.
Majority of the answers were quite satisfactory. However, some students did not read the question carefully and mentioned advantages
of performance appraisal without discussing the main issue, i.e. how often should appraisal be carried out. Some students discussed the
advantages from the point of view of employees instead of discussing from the employers point of view.
Q 2 (c) This part required the students to describe the different types of costs that are associated with high rate of employee turnover. These
costs may be enormous but are quite often ignored. The students generally performed well and identified and described the relevant
costs such as training and recruitment costs, cost of lost productivity/sales and the loss of competitive advantage, etc.
Q 3 (a) This 2 mark question was rather easy and almost all the students met the requirement i.e. to portray the correct meaning of the term
Customer Database.
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Q 3 (b) This question required a very focused answer i.e. usefulness of a customer database for a bank, which is about to launch its credit card.
Instead, most students gave general answers where usefulness of the database for a bank was discussed with little or no reference to the
specific situation i.e. launching of credit card.
Q4 In this question, six brief situations were given and the students were required to identify the types of strategies, policies or objectives
which the organization was pursuing, in each of the given situations.
An average response was seen as most students were able to give 3 or 4 correct answers. In response to part (ii) the appropriate answer
was Global; but Geocentric was also acceptable. However, many students wrote ethnocentric. Majority of the students had no idea of
the concepts of Work to rule and First mover advantage.
Many students probably tried to use write what you know approach and just identified whether the given situation reflected a policy, a
strategy or an objective. Most students were not familiar with the technical business terminology or jargons. Specialized terms capture
the complexity and specificity of business concepts. No other words can encapsulate their meaning and if they are replaced by normal
transliterated words, then that meaning is lost. Many students gave explanatory footnotes in support of their answers which were not
required and resulted in wastage of precious time. There were some students who generated multiple answers; such answers are not
acceptable.
Q 5 (a) Students displayed lack of knowledge of the issue namely the stages of dealing with employees involved in serious offences or gross
misconduct. The question specifically required identification and brief explanation of the various stages. However, many students
patched all the stages together in one long point. They generalized their answers stating that after oral and written warning if the
behavior does not show signs of improvement, the employee should be discharged. Some of them only listed down possible actions
against such employees with few even concluding that HR should try to be polite. In many cases, the stages identified by the students
were unorganized and indistinguishable.
Some students broke down the initial stage of investigation into multiple points, each describing the different ways the matter should be
investigated. So much detail was not required.
While discussing the last stage of Discharge or Termination, many students ignored a very important point i.e. that the legal formalities
should be complied with while terminating an employee; otherwise it may have serious implications for the employer.
After describing the various stages many students stated that the process should be fair, equitable and confidential which was not really
required as it was mentioned in the question itself.
Q 5 (b) Outsourcing is the buzz word in business these days and hence very relevant. Its advantages were asked and most students seemed to
have a good idea and answered fairly well.
Q 6 (a) Most of the students had fair idea of the factors which have contributed to the creation and significant expansion of Global Markets.
Usually they mentioned the correct points. However, some of them also included points which were not relevant such as cheap labour
and raw material, growing competition, absolute and comparative advantage, increase in demand and increase in number of wealthy
people in the developing countries, etc. Many students mentioned the relevant points such as greater specialization but were unable to
clearly spell out as to how it results in greater globalization.
Q 6 (b) This part required the salient features of the terms of a franchising agreement with brief explanation and an example of a franchise
relationship. Since the students do come across various agreements, during their training, many of them jotted down a long list of
general clauses instead of those pertaining specifically to franchising agreements. Some of the important clauses that form part of such
agreements are those relating to achievement of desired sales in the defined territory and the undertaking to purchase input materials
from the franchisor or a specified supplier. These were generally missed.
Q 7 (a) A below average performance was seen in this part of the question in which the requirement was to provide the objectives that
progressive organizations aim to achieve through their marketing strategies. Most students wrote any and every thing about marketing
that they knew, repeating the same things again and again. Quite often the answers were equivocal and mostly mentioned that through
marketing, the firms introduce new products, enter new markets, increase sales and profitability, promote brand extension etc.
Objectives such as market penetration, overcoming competitive pressure, creating goodwill and strengthening relationship with
customers were covered by few candidates.
Q 7 (b) This part required the measures which companies take to retain and further consolidate their competitive advantage. The performance
was quite reasonable as majority of the students were able to cover the main points specially those relating to marketing and HR.
However, efficient organizational structure and capable leadership was touched upon by very few students.
Q 8 (a) Students performed well in this question as almost all the students could mention the benefits which BTC (name of company) expects to
derive by pursuing a well-conceived policy of good human relations management between the employers and the employees.
Q 8 (b) Very few students could appropriately explain as to what is meant by a Competency Based Job Description. Most students could not
mention the most important distinguishing factor i.e. that Competency Based Job Descriptions are primarily worker-performance
focused rather than work-description focused.
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Q9 This question required Advantages and Disadvantages of advertising in TV, Newspapers and Billboards. It was quite easy but majority of
the students could only mention one or two advantages and disadvantages in each case. They mostly discussed costs, reach to the
audience/customers and attractiveness of the advertisement. Other areas were rarely covered.
Q 10 (a) This question enquired about the policies which a large conglomerate should pursue while entering the market in a country for the first
time, by way of a joint venture and which would be perceived favorably by the joint venture partner, the government and other
stakeholders in that country. The students didnt seem to appreciate the essence of this question. They struggled with explaining
marketing and production policies rather than getting to the gist of this question and identifying policies which would be looked upon
favourably in that country or in other words which would enable the company to gain popularity. Some of them wrote that the company
should pursue a policy of CSR but did not explain any further.
Q 10 (b) The candidates were supposed to identify the main reasons why leading companies obtain cross-border financing. The performance was
quite poor. Most of the students could identify low interest cost as the only reason. Other reasons such as exchange liberalization, broad
based debt and equity markets, etc. were rarely covered. Surprisingly, some students also mentioned reasons on account of which cross-
border financing is discouraged such as risk of exchange fluctuations and exchange controls.
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30 January, 2013

Global Chartered Accountants - GCA

ICAP Syllabus Grid

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Case studies / scenario based questions will be set in the examination.

3. Human resource management

The Institute of Chartered Accountants of Pakistan

i. Identifying the organizations strengths and weaknesses, opportunities and threats

The Institute of Chartered Accountants of Pakistan

e. Methods of gaining support and commitment for strategies

f. Es tab lishing the corporat e object ives:

i. Organizational missions, aims, goals and objectives

2. Corporate social responsibility and business ethics

c. Disclosure and confidentiality

d. Profit motives versus other corporate objectives

e. Goal congruence and corporate performance measurement

f. The role of professional bodies in regulating the activities of members

The Institute of Chartered Accountants of Pakistan

3. Human resource management

n. Human relations management

4. Management of the working environment

a. S trat egy in t he m arket place

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vi. Consumer power within the marketing environment

b. Analyzing the impact of globalization on marketing to assess competitive advantage

c. Int ernational f inancial m anagem ent d ecisions

i. Alternative methods of financing imports and exports

payments between companies

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4. Management and Organizational Behaviour A comprehensive and detailed explanation of

Supplementary Study Material

The Institute of Chartered Accountants of Pakistan

Chapter 1 : Objectives of Organisation

Influences on /Determinants of Strategy:

Environmental conditions affecting Strategic Planning:

Characteristics of Strategic Decision:

Strategic Financial Management:

Financial management decision: (Also see end of chapter 9)

Chapter 2 & 4 : Strategy Formulation and Choice

1. How to gain competitive advantage?(question of survival)

Porters Generic Competitive Strategies (to achieve competitive advantage):

Lower Cost Differentiation

Niche Focus Cost Focus Differentiation Focus

Cost Leadership is having lowest cost of producing. It could be achieved by:

Advantages/Comparison of Competitive Strategies:

Competitive Force Cost Leadership strategy Differentiation strategy

Ansoffs Product-Market Matrix:

Present Product New Product

Market Penetration: (low risk; no capital investment)

Market Development: (low risk; less investment)

Product Development: (riskier; requires investment)

Diversification (high risk; requires investments and new competence)

Franchising Unrelated Forward

Joint Development Strategi es

Take Over/ Acquisition

Chapter # 3 : Planning and Control

Risk factors in planning:

Accounting for Risk:

Feed forward Control:

Well organized system of control should have:

Objectives of budgeted planning and control: