Section : A

OPERATIONS MANAGEMENT
BOOK

BY

DEEPAK SIR

Fully based on

CMA INSTITUTE STUDY

MATERIAL
&
PAST YEAR QUESTION
(SCANNER)

Whatsapp Us :- 8510933803
Email id :- Deepakclasses750@gmail.com
 Operations Planning
Demand Forecasting
Illustration 1.
From the following time series data of sale project the sales for the next three years

Year 2001 2002 2003 2004 2005 2006 2007

Sales (`000 units) 80 90 92 83 94 99 92

Illustration 2.
With the help of following data project the trend of sales for the next five years:

Years 2002 2003 2004 2005 2006 2007

Sales (in lakhs) 100 110 115 120 135 140

Illustration 3.
An investigation into the demand for colour TV sets in 5 towns has resulted in the following data:

Population of the town (in lakhs) X: 5 7 8 11 14

No of TV sets demanded (in thousands) Y: 9 13 11 15 19

Fit a linear regression of Y on X and estimate the demand for CTV sets for two towns with a population
of 10 lakhs and 20 lakhs

Illustration 4.
An investigation into the use of scooters in 5 towns has resulted in the following data: Population in
town

Population in town (in (X) 4 6 7 10 13

lakhs)
No. of scooters (Y) 4,400 6,600 5,700 8,000 10,300
Fit a linear regression of Y on X and estimate the number of scooters to be found in a town with a
population of 16 lakh

Capacity requirement
Illustration 5.
A department works on 8 hours shift, 250 days a year and has the usage data of a machine, as given
below
Product Annual demand (units) Processing time (standard time in hours)
X 300 4.0
Y 400 6.0
Z 500 3.0
Determine the number of machines required.

Illustration 6.
A steel plant has a design capacity of 50,000 tons of steel per day, effective capacity of 40,000
tons of steel per day and an actual output of 36,000 tons of steel per day. Compute the efficiency of
the plant and its utilization.

Illustration 7.
A firm has four work centres, A, B, C & D, in series with individual capacities in units per day shown
in the figure below
WORK CENTRE

Raw material A B C D actual output

(380) (360) (340) (400) (300)

Illustration 8.
A manager has to decide about the number of machines to be purchased. He has three options i.e.,
purchasing one, or two or three machines. The data are given below

Number of machine Annual fixed Corresponding range of

cost output
One ` 12,000 0 to 300
Two ` 15,000 301 to 600

Three ` 21,000 601 to 900

Variable cost is ` 20 per unit and revenue is ` 50 per unit
A; Determine the break-even point for each range
B; If projected demand is between 600 and 650 units how many machines should the manager
purchase?
 Facility Layout
Illustration 9.
The present layout is shown in the figure. The manager of the department is intending to
interchange the departments C and F in the present layout. The handling frequencies
between the departments is given. All the departments are of the same size and
configuration. The material handling cost per unit length travel between departments is
same. What will be the effect of interchange of departments C and F in the layout?

A C E
B D F

From / To A B C D E F
A – 0 90 160 50 0
B – – 70 0 100 130
C – – 20 0 0
D – – – _ 180 10
E – – – – 40
F – – – – – –
.

Illustration 10.
A defence contractor is evaluating its machine shops current process layout. The figure below
shows the current layout and the table shows the trip matrix for the facility. Health and safety
regulations require departments E and F to remain at their current positions.
E B F
A C D
Current layout

From / To A B C D E F
A 8 3 9 5
B - 3
C - 8 9
D - 3
E - 3
F -
Can layout be improved? Also evaluate using load distance (ld) score

RESOURCES AGGRGATE PLANNING

Illustration 11.
ABC. Co. has developed a forecast for the group of items that has the following demand pattern

Quarter Demand Cumulative demand

1 270 270
2 220 490
3 470 960
4 670 1630
5 450 2080
6 270 2350
7 200 2550
8 370 2920
The firm estimates that it costs ` 150 per unit to increase production rate ` 200 per unit to decrease
the production rate, ` 50 per unit per quarter to carry the items in inventory and `100 per unit if
subcontracted. Compare the costs of the pure strategies

Economic Batch Quantity

Illustration 12.
The monthly requirement of raw material for a company is 3000 units. The carrying cost is
estimated to be 20% of the purchase price per unit, in addition to ` 2 per unit. The purchase
price of raw material is ` 20 per unit. The ordering cost is ` 25 per order. (1) You are required
to find EOQ.(2) What is the total cost when the company gets a concession of 5% on the
purchase price if it orders 3000 units or more but less than 6000 units per month. (3) What
happens when the company gets a concession of 10% on the purchase price when it orders
6,000 units or more? (4) Which of the above three ways of orders the company should
adopt?

Illustration 13.
M/s. Tubes Ltd. are the manufacturers of picture tubes of T.V. The following are the
details of their operation during 2001:
Average monthly market demand 2,000 tubes
Ordering cost ` 100 per order
Inventory carrying cost 20% per annum
Cost of tubes ` 500 per tube
Normal usage 100 tubes per week
Minimum usage 50 tubes per week
Maximum usage 200 tubes per wee
Lead time to supply 6 – 8 weeks

(1) Economic order quantity. If the supplier is willing to supply quarterly 1,500 units at a discount of
5%, is it worth accepting?
(2) Maximum level of stock.
(3) Minimum level of stock.
(4) Re-order level of stock.

illustration 14.
M/s Kobo Bearings Ltd., is committed to supply 24,000 bearings per annum to M/s Deluxe
Fans on a steady daily basis. It is estimated that it costs 10 paisa as inventory holding cost
per bearing per month and that the setup cost per run of bearing manufacture is ` 324
(1)What is the optimum run size for bearing manufacture?
(2)What should be the interval between the consecutive optimum runs?
(3)Find out the minimum inventory holding cost.

Illustration 15.
A company planning to manufacture a household cooking range has to decide on the
location of the plant. Three locations are being considered viz., Patna, Ranchi, and
Dhanbad. The fixed costs of the three location are estimated to be `30 lakh, `50 lakh, and
`25 lakh per annum respectively. The variable costs are `300, `200 and
`350 per unit respectively

The expected sales price of the cooking range is `700 per unit Find out
(1)The range of annual production/sales volume for which each location is most suitable and
(2)Which one of the three locations is the best location at a production/sales volume of 18,000 units?

Illustration 16.
Monthly demand for a component is 1000 units. Setting-up cost per batch is ` 120. Cost of manufacture
per unit is
` 20. Rate of interest may be considered at 10% p.a. Calculate the EBQ.

Illustration 17.
Based on the following data on the exports of an item by a company during the various
years fit a straight line, (for the time being, assume that a straight line gives a good fit).
Give a forecast for the years 2013 and 2014.
Year No. of items (‘000)
2004 13
2005 20
2006 20
2007 28
2008 30
2009 32
2010 33
2011 38
2012 43
Scanner Questions
1- A and M are two fierce competitors. N, a leading manufacturer of mobile phones approaches them
separately to share what they can offer for outsourcing the manufacture of mobile phone components on a
standardised machine whose operating cost is ` 40/- per hour. N requests you to evaluate and advice
based on following offers made by A and M as to which of the two should be chosen?
2008 - Dec [2] (a)

Company A Company M
Production Rate/hour 20 pieces 30 pieces
Mobile components / set up 8,000 pieces 6,000 pieces
Set up Costs ` 600 ` 3,000
(4 marks)

2- Mr. X is considering an interchange of departments B and C in the present layout. The present layout and
the handling frequencies between the departments are given. What would be the effect of interchange
assuming that the departments are of the same size? Also assume that the material handling cost per
unit length travel between departments is same. 2008 - Dec [2] (d)

A C E
B D F

From / To A B C D E F
A ) 20 70 0 40 0
B ) ) 50 200 0 10
C ) ) ) 30 120 40
D ) ) ) ) 50 220
E ) ) ) ) ) 30
F ) ) ) ) ) )
(6 marks)

3- The following is the demand for Product A in 5 towns: 2008 - Dec [3] (b)

Population (in lacs): X 9 5 8 5 3

Demand: Y 12 20 15 10 5

Estimate the demand for Product A for a town with a population of 10 lacs. (4 marks)

4- 2008 - Dec [4] (b)

The fixed cost for the production of a particular item is 200 per month. Its variable cost being ` 3 per unit
and its sale price being 7 per unit, determine its break-even volume. What would be the profit if 2,000 such
units were sold in a month? How many such units should be sold to earn a profit of ` 3,000 per month?
(5 marks)

(c) A shaft 1,200 mm in length is being machined on a lathe.

If the spindle rotates 600 r.p.m and the feed is 0.25 mm per revolution, how long will it take the
cutter to pass down the entire length of the shaft?
(3 marks)
5- The annual sales of TV sets by a dealer in Delhi are as under: 2009 - June [2] (c)
Year 2004 2005 2006 2007 2008
Sales (thousand units) 3 14 36 4 33
Fit a linear trend equation to the sales figure and estimate the sales for the year 2009. (4 marks)

6- A company is planning to undertake the production of medical testing equipment and has to decide on
the location of the plant. Two locations are being considered, namely, A and B. The fixed costs of two
locations are estimated to be ` 25 lakhs and ` 30 lakhs respectively. The variable costs are ` 300 and `
250 per unit respectively. The average sale price of the equipment is ` 550 per unit.
Find the range of annual production/sales volume for which each location is most suitable.
2009 - June [3] (d)
(4 marks)
7- From the following time series data of sales of refrigerators, project the sales for the year 2010:
2009 - Dec [2] (a)
Year 2002 2003 2004 2005 2006 2007 2008
Sales (thousand units) 90 100 102 93 104 109 102
(6 marks)
(d) A manufacturer requires 10,000 components for use during the next year which is assumed to consist
of 250 working days. The cost of storing one component for one year is ` 40 and the cost of placing
order is ` 320.

There must always be a safety stock of two working days usage and the lead time from the supplier will
be 5 working days. Assume that usage takes place steadily throughout the working days, delivery takes
place at the end of the day and the orders are placed at the end of the working day. (2 + 2 = 4 marks)
Compute
(i) EOQ and (ii) Re-order Point.

8- A shaft of 3000 mm in length requires machining on a lathe. If the spindle executes 1500 r.p.m. and the
feed is 0.20 mm per revolution, how long does it take the cutter to pass down the entire length of the
shaft? 2009 - June [4] (a) (2 MARKS)

(b) Requirement of raw materials for a company is 250 units per month. The carrying cost for the same is
10% of its purchase price which is ` 10 per unit. The ordering cost is ` 15 per order. Compute EOQ and
related total cost (4 marks)

9- A company planning to start an assembly unit of television sets has to decide on the location of its plant
at any of the three cities viz. Kolkata, Delhi or Mumbai. The extent of fixed and variable costs for each of
these locations are estimated to be as under: 2009 - Dec [3] (a)
Locations Kolkata Delhi Mumbai Fixed Costs per
annum ` lakhs 30 50 25
Variable cost per unit ` 300 200 350
The expected selling price is ` 700 per unit.
Calculate:

1) The range of annual production/sales volume for which each location is most suitable.
2) Which one of the three locations is most suitable for a production/sales volume of 18000 units ?
3) BEP for each location
(4 + 3 + 3 = 10 marks)
10- It is observed that there exists a relationship between Expenditure on Advertising and the Annual Sales.
The details for last six years are as follows: 2010 - June [2] (a)
Year Expenditure on Annual Sales
Advertising (` Crore)
(` Crore)
2004 1 18
2005 2 23
2006 4 32
2007 3 28
 2008 10 38
2009 4 29
Estimate the Annual Sales when Expenditure on Advertising is ` 5 Crore. (6marks)

11- A manager has to decide about the number of machines to be purchased. He has three options i.e.
purchasing one, or two, or three machines. The data is given below:
Number of Annual Fixed cost Corresponding range machines(`) of output (units)
1 10,000 0 to 400
2 12,000 401 to 700
3 20,000 701 to 1000
Variable cost is ` 20 and revenue is ` 40 per unit.
I. Determine the break-even point for each range;
2. If projected demand is between 600 and 750 units, how many machines should the manager
purchase?

12- A manufacturer`s study of various locations has found that the following costs vary from one location
to another. The firm will finance the new plant from deposits bearing 5% interest. Determine the most
suitable location for a sales volume of 20,000 units/year. 2010 - June [4] (a)
Location A B C
Revenue (` per unit) 16.00 25.00 12.00
Labour (` per unit) 0.50 1.00 0.80
Plant (` crore) 0.25 0.35 0.45
Material & Equipment* 0.20 0.50 0.25
(` per unit)
Electricity (` p.a.’000) 25.00 28.00 30.00
Water (` p.a.’000) 7.00 5.00 4.00
Transportation (` per unit) 0.01 0.05 0.10
Taxes (` p.a. ‘000) 22.00 15.00 30.00
*This cost includes a projected depreciation, but no interest. (6 marks)

(c) A SSI unit is engaged in manufacturing fuel nozzles for engines. The operations are performed on a
CNC vertical drilling cum tapping centre. The operation cycle time is as follows:
Drilling time: 50 secs. Tapping time: 95 secs.
Tool change time of ATC: 25 secs.

For feeding the nozzles the unit designed a fixture holding 10 nozzles at a time and set up time for the 10
nozzles in the fixture is 90 secs. The unit recently received an additional order to the extent of 1 lakh nozzles per
year. Assuming the manpower is no constraint, how many additional drilling cum tapping center the unit
should install under capacity augmentation plan? Average rejection is 2.5% of the produced nozzles. Assume
300 working days per year of 8 hours per day shift, 20% time the drilling tapping centres are not available due
to preventive maintenance and utilization is 70% of the available time due to power and services line shut-
down. (6marks)

13- Given below is the existing process layout of a factory manufacturing toys: 2010 - Dec [3] (a)

C B D
E A F
The following table gives the trip matrix for the unit. Arrive at an improved layout using the Load
Distance matrix assuming that E and F should remain at their current positions:

From/To A B C D E F
A 2 2 1
B 1 6 5
C 1 4
D 5
 E 1
F
(6 marks)

C- A tool manufacturing SSI Unit requires about 900 nos. of HSS bars of size 2 cm square and 10 cms length in
machined and annealed condition. The unit can get the input as above in two ways

(1) Purchase un-machined HSS bars of standard size of 2.5 cm square and 10 cms length from market
at a price of ` 60.00 per piece and then machine in its machine shop with shapers to size 2 cms
square and 10 cms length and anneal it further in its heat treatment shop. The cost of shapers is ` 6
per cubic centimeter of metal removed. The annealing cost is ` 900 for a batch size of upto 200 nos.
maximum and if the batch size is smaller the same cost will be incurred. The HSS scrap produced
after machined can be sold in scrap market at the rate of ` 4 per cubic cm.
(2) The unit has got an offer from another firm for supply of machined and annealed HSS bars @ ` 115 per
piece.
Which alternative should the unit adopt? (5 marks)

14- M/s HMT Bearings Ltd. is committed to supply 24,000 bearings per annum to M/s Lokesh Machines on
a steady daily basis. It is estimated that it costs Re. 1.00 as inventory holding cost per bearing per month
and that the setup cost per run of bearing manufacture is ` 3240. 2010 - Dec [4] (a)
a. What is the optimum run size for bearing manufacture?
b. What should be the interval between the consecutive optimum runs?
C What is the minimum inventory holding cost? (2+1+2=5 marks)

15- Two alternative set-ups, A and B are available for the

manufacture of a component on a particular machine, where the operating
cost per hour is ` 25/-.
Set-up A Set-up B
Components/Set-up 20,000 pieces 30,000 pieces
Set-up cost per year ` 500 ` 600
Production rate/hour 20 pieces 40 pieces
Find out the manufacturing cost/piece under each set-up. Which of these set- ups
should be used for long range and economic production, assuming 3000 hours of
working in a year ? 2011 - June [3] (a) (3+5 = 8 marks)

16- An article is processed on three machines A, B and C as shown below : 2011 - June [4] (a)
Machine Machine operation Preparation time Cleaning
time (min/day) time
(minutes) (min/day)
Time Processing Total
A 2 2.5 4.5 15 10
B 3 10 13 30 10
C 2 5 7 25 10
A study revealed that if the jigs for machines B and C were to be redesigned, loading and unloading times could
be reduced to 2 minutes and 1 minute respectively

(i) Find the number of pieces produced per day (single shift of 8 hrs.)
(ii) Costing has shown that unless production is increased by 20 percent, the installation of new jigs
would not be worthwhile. Would you recommend redesign of jigs ?
(iii) If the number to be produced is large, suggest changes in present arrangement and estimate
new production rate. (3+3+3 = 9 marks)

(C)- A manufacturing company has a product line consisting of five work stations in series. The individual
work station capacities are given. The actual output of the line is 540 units per shift.
Work station No. 1 2 3 4 5
Capacity/shift 700 650 700 650 600
Calculate (i) System capacity (ii) Efficiency of the production line. (1+2 = 3 marks)

17- (6marks) A lathe machine is used for turning operation and it takes 40 minutes to process the component.
Efficiency of the lathe is 90 percent and scrap is 20 percent. The desired output is 600 pieces per week.
Consider 48 hour per week and 50 weeks in a year. Determine the number of lathes required.
2011 - Dec [3] (a)
18- A small manufacturing firm produces two types of gadgets, A and B, which are first processed in the
foundry, then sent to the machine for finishing. The number of man-hours of labour required in each shop
for the production of each unit of A and B and the number of man-hours the firm has available per week are
as follows:
Foundry Machine Shop
Product A: Man-hours/unit 10 5
Product B: Man-hours/unit 6 4
Firm’s capacity per week (in hours) 1,000 600

Construct the objective function and the corresponding equations for calculating how many units should
be produced per week so that the profit is maximum. The profit on the sale of A is ` 30 per unit as
compared to B’s 20 per unit. (3 marks)

(d) A company which is planning to undertake the production of medical testing equipments has to
decide on the location of the plant. Three locations are being considered, namely, A, B and C. The
fixed costs of three locations are estimated to be ` 300 lakhs, ` 500 lakhs and ` 250 lakhs
respectively. The variable costs are ` 3,000, ` 2,000 and ` 3,500 per unit respectively. The average
sales price of the equipment is ` 7,000 per unit.
Find:
(i) The range of annual production/sales volume for which each location is most suitable.
(ii) Select the best location, if the sales volume is of 18,000 units.
(2 + 2 = 4 marks)
19- Location A would result in annual fixed costs of
` 3,00,000, variable costs of ` 63 per unit and revenues ` 68 per unit. Annual fixed costs at Location B are `
8,00,000, variable costs are ` 32 per unit and revenues are ` 68 per unit. Sales volume is estimated to be 25,000
units/year. Calculate BEP for each location and determine which location will be attractive. 2012 - June [2] (a)
(2 + 3 = 5 marks)

20- M/s Kambu Ltd. are the manufacturers of Lamps. The following are the details of their operation during
2011: 2012 - June [3] (a)
Average monthly market demand 2,000 lamps Ordering cost ` 200 per
order Inventory carrying cost 20% per annum Cost of lamps ` 1000 per
lamp
Normal usage 100 lamps per week Minimum usage 50 lamps per week Maximum usage 200 lamps per week
Lead time to supply 4 - 6 weeks Compute from the above
I. Economic order quantity.
II. If the supplier is willing to supply quarterly 1,500 units at a discount of 10%, is it worth accepting?
III. Maximum level of stock.
IV. Minimum level of stock.
V. Re-order level of stock (2 × 5 = 10 marks)
21- 2012 - Dec [2] (a) A defence contractor is evaluating its machine shops current process layout. The figure
below shows the current layout and the table shows the trip matrix for the facility. Health and safety
regulations require departments E and F to remain at their current positions.
E B F
A C D
Current Layout
From/To A B C D E F
A 8 3 9 5
B — 3
 C — 8 9
D — 3
E — 3
F —
Can layout be improved? Also evaluate using load distance (Id) score (5Marks).
22- 2012 - Dec [4] (c) A manufacturing company has a product line consisting of five work stations in series.
The individual workstation capacities are given. The actual output of the line is 440 units per shift.
Workstation No. 1 2 3 4 5
Capacity/shift 550 650 700 650 600
Calculate (i) System capacity (ii) Efficiency of the production line. (1+2= 3Marks)

23- 2013 - June [2] (d) Location A would result in annual fixed cost of 3,00,000, variable costs of ` 63 per
unit and revenue ` 68 per unit. Annual fixed cost at Location B is ` 8,00,000, variable costs are ` 32 per unit
and revenues are ` 68 per unit. Sales volume is estimated to be 25,000 units/year. Which location is
attractive? (3 marks)

24- 2013 - June [3] (c) Empire Glass Company can produce a certain insulator on any three machines which
have the following charges shown below. The firm has an opportunity to accept an order for either (1)
50 units at ` 20/unit or (2) 150 units at ` 12/unit.
Machine Fixed cost (`) Variable cost (`)
A 50 4/unit
B 200 2/unit
C 400 1/unit
(i) Which machine should be used if 50 units order is accepted and how much profit will result?
(ii) Which machine should be used if the 150 units order is accepted and what will be the resultant
profit?
(iii) What is the break even volume for machine B when the price is
` 12/unit?
(iv) Suppose the fixed cost for machine A is a stepped function with ` 50 up to 40 units and ` 100
thereafter. Will the answers to (i) and (ii) above vary? If so, what will be the revised answer?
(2×4= 8Marks)

25- 2013 - June [4] (d) S. K. Timber Workshops use forklift trucks to transport lumber from factory to a storage
area 0.3 km away. The lift trucks can move three loaded pallets per trip and travel at an average speed of 8
km. per hour (allowing for loading, unloading, delays and travel). If 640 pallet loads must be moved during 8
hours shift, how many lift trucks are required? Assume single shift working and 300 working days in a year
(2 marks)

26- 2013 - Dec [1] {C} (c) A department of a company has to process a large number of components/month.
The process equipment time required is 30 minutes/component and the manual skilled manpower
required is 10 minutes/component. The following additional data is available:

availability/month efficiency of utilization

Equipment hour 400 80%
Skilled manpower hours 250 65%
What is the maximum possible production under the current conditions?
( d ) In a firm, there are four workstations: A, B, C, & D working in series and their individual capacities in units
per day are 400, 380,350 and 410 respectively. The raw materials are fed to Machine A and the system output
is obtained from Machine D. If the actual output is 320 units per day, what is the system efficiency?

(e) Solve the game by dominance property:

9 2
8 6
6 4
(H) Calculate EBQ from the details: Monthly demand - 2000 units, Setting up costs per batch ` 100, cost of
manufacture per unit ` 30, rateofinterest 10% p.a. (4 marks)
27- 2013 - Dec [3] (b) A solicitor’s firm employs typists on hourly piece-rate basis for daily work. There are four
typists and their charges and speed are different. It has been agreed that only one job will be given to
one typist and the typist is paid for a full hour even when he works for a fraction of an hour. Find the least
cost allocation for the following data: (10 marks)
Typist Rate/hour Number of pages Job No. of pages
typed/hour
A 4 8 P 102
B 3 10 Q 135
C 5 11 R 110
D 3 9 S 8

28- 2013 - Dec [4] (c)

If a firm sells 5000 units, its loss is ` 10,000. But if it sells 9000 units, its profit is `10,000. Calculate its
(i)Fixed Cost; (ii) BEP2. (2 Marks)

29- 2014 - June [2] (e) A steel plant has a design capacity of 50,000 tons of steel per day, effective capacity
of 40,000 tons of steel per day and an actual output of 36,000 tons of steel per day. Compute the
efficiency of the plant and its utilization (2 marks)

30- 2014 - June [3] (c) Two alternative set-ups, A and B are available for the manufacture of a component
on a particular machine, where the operating cost per hour is ` 20.

Particulars Set up A Set up B Components

/ Set up 4000 pieces 3000 pieces
Set up cost / year ` 300 ` 1500
Production rate / hour 10 pieces 15 pieces
Which of these set-ups should be used for long range and economic production? (6marks)

31- 2014 - June [4] (b) Monthly demand for a component is 1000 units. Setting- up cost per batch is ` 120. Cost of
manufacture per unit is ` 20. Rate of interest may be considered at 10% p.a. Calculate the EBQ
(2 marks)

32- 2014 - June [5] (a) The following data on the exports of an item by a company during the various years
fit a straight line, (for the time being, assume that a straight line gives a good fit). Give a forecast for the
years 2013 and 2014.
Year No. of items (‘000)
2004 13
2005 20
2006 20
2007 28
2008 30
2009 32
2010 33
2011 38
2012 43 (6marks)

33- 2014 - Dec [2] (b) Answer the question:

(i) XYZ manufacturing company planning to start its production activities has to decide on the
location of the plant. Three locations are being considered:
 Location A, B and C. The following data are available:

LocationA Location B Location C

Fixed costs (` Lakhs per 35 55 30
annum)
Variable cost (` per annum) 350 250 400

The expected sales price of the product is ` 750 per unit. Find out:
(A) The range of annual production/sales volume for which each location is most suitable, and
(B) Which one of the three is the best location at the production/sales volume of 22,000 units?
Clearly mention the assumptions, if any (8 marks)

34- 2015 - June [1] (b) Calculate the number of components that can be produced in a month when available
equipment hours are 480 per month, efficiency of utilization is 85%, and it takes 36 minutes of processing
time in the equipment for each component (2 marks)

35- 2015 - June [2] (b) (ii) A department works on 8 hours shift, 288 days a year and has the usage data of a
machine, as given below:
Product Annual Demand (units) Processing time
(Standard time a hours)
A 325 5.0
B 450 4.0
C 550 6.0

Calculate (a) Processing time needed in hours to produce products A, B and C, (b) Annual production capacity
of one machine in standard hours, and (c) Number of machines required. (3 + 2 + 2 = 7 marks)

36- 2016 - June [II] Answer the questions:

1. (a) A department works on 8 hours per day, 250 days a year and has the usage data of a
machine, as given below:
Product Annual demand Processing time
(units) (standard time in hours)
X 200 4.0
Y 300 6.0
Z 400 3.0
Determine the number of machines required (6 marks)

37- 2016 - Dec [1] (a) Calculate the break-even point for the following: Production Manager of a unit wants to
know, from what quantity he can use automatic machine against semi-automatic machine
Data Automatic Semi-Automatic
Time for the job 2 minutes 5 minutes
Set-up time 2 hours 1.5 hours
Cost per hour ` 20 ` 12
(7 marks) [Sec. B]

38- 2018 - June [2] (b) The monthly requirement of raw material for a company is 3200 units. The carrying
cost is estimated to be 25% of the purchase price per unit, in addition to ` 2.5 per unit. The purchase price
of raw material is
` 24 per unit.
The ordering cost is ` 28 per order.
(i) You are required to find EOQ and Total cost.
(ii) What is the total cost when the company gets a concession of 6% on the purchase price if it orders
3,200 units or more but less than 6,200 units per month?
(iii) What happens when the company gets a concession of 15% on the purchase price when it orders
6,200 units or more?
 (iv) Which of the above three ways of orders the company should adopt?
(4 + 2 + 2 +2 = 10 marks)

39- 2018 - Dec [2] Answer the following:

With the help of following data, project the trend of sales for the next 5 years:

Years 2002 2003 2004 2005 2006 2007

Sales in Lakhs of 120 130 135 140 150 165
Rupees
 PRODUCTION PLANNING AND CONTROL

Job Allocation-Assignment Technique

Illustration 1.
Six men are available for different jobs. From past records the time in hours taken by different persons
for different jobs are given below
Jobs
1 2 3 4 5 6
1 2 9 2 7 9 1
2 6 8 7 6 14 1
Men
3 4 6 5 3 8 1
4 4 2 7 3 10 1
5 5 3 9 5 12 1
6 9 8 12 13 9 1
Find out an allocation of men to different jobs which will lead to minimum operation time

Illustration 2.
A captain of a cricket team has to allot five middle batting positions to five batsmen. The
average runs scored by each batsman at these positions are as follows:
Batting Position
III IV V VI VII
A 40 40 35 25 50
B 42 30 16 25 27
Batsmen
C 50 48 40 60 50
D 20 19 20 18 25
E 58 60 59 55 53

Make the assignment so that the expected total average runs scored by these batsmen are
maximum.

Illustration 3.
Average time taken by an operator on a specific machine is tabulated below. The
management is considering replacing one of the old machines by a new one and the
estimated time for operation by each operator on the new machine is also indicated.

Operator Machines
M1 M2 M3 M4 M5 M6 New
01 2 3 2 1 4 5 6
02 4 4 6 3 2 5 1
03 6 10 8 4 7 6 1
04 8 7 6 5 3 9 4
05 7 3 4 5 4 3 12
06 5 5 6 7 8 1 6
1. Find out an allocation of operators to the old machines to achieve a minimum operation
time.
2. Reset the problem with the new machine and find out the allocation of the
operators to each machine and comment on whether it is advantageous to replace
an old machine to achieve a reduction in operating time only.
3. How will the operators be reallocated to the machines after replacement?
Illustration 4.
Six salesmen are to be allocated to six sales regions so that the cost of allocation of the job will be
minimum. Each
salesman is capable of doing the job at different cost in each region. The cost matrix is given below:

Region
I II III IV V VI
A 15 35 0 25 10 45
B 40 5 45 20 15 20
C 25 60 10 65 25 10
Salesmen
D 25 20 35 10 25 60
E 30 70 40 5 40 50
F 10 25 30 40 50 15
(a)Find the allocation to give minimum cost. What is the minimum cost?
(b)Now suppose the above table gives earning of each salesman at each region. How can you find
an allocationso that the earning will be maximum? Determine the solution with optimum earning.
(c)There are restrictions for commercial reasons that A cannot be posted to region V and E cannot be
posted to region II. Write down the cost matrix suitably after imposing the restrictions.

Illustration 5
Four jobs can be processed on four different machines, with one job on one machine.
Resulting profits vary with assignments. They are given:
Machines
A B C D
I 42 35 28 21
II 30 25 20 15
Jobs
III 30 25 20 15
IV 24 20 16 12
Find the optimum assignment of jobs to machines and the corresponding profit

Illustration 6.
The processing times (tj) in hrs for the five jobs of a single machine scheduling is given. Find
the optimal sequence which will minimise the mean flow time and find the mean flow time.
Determine the sequence which will minimise the weighted mean flow time and also find the mean
flow time

Job (j) 1 2 3 4 5
Processing time (tj) hrs 30 8 10 28 16
Weight (Wj) 1 2 1 2 3

Illustration7.
Customers arrive at a bakery at an average rate of 16 per hour on weekday mornings. The
arrival can be described by a Poisson distribution with a mean of 16. Each clerk can serve
a customer in an average of three minutes; This time can be described by an exponential
distribution with a mean of 3.0 minutes.
(1)What are the arrival and service rates?
(2)Compute the average number of customers being served at any time.
(3)Suppose it has been determined that the average number of customers waiting in line
is 3.2. compute the average number of customers in the system (i.e., waiting in line or
being served), the average time customers wait in line, and the average time in the
system.Determine the system utilization for M = 1, 2, and 3 servers
(4)Determine the system utilization for M = 1, 2, and 3 server

Illustration 8.
An airline is planning to open a satellite ticket desk in a new shopping plaza, staffed by one
ticket agent. It is estimated that requests for tickets and information will average 15 per
hour, and requests will have a Poisson distribution. Service time is assumed to be
exponentially distributed. Previous experience with similar satellite operations suggests
that mean service time should average about three minutes per request.
Determine each of the following:
(a)System utilization
(b)Percentage of time the server (agent) will be idle.
(c)The expected number of customers waiting to be served.
(d)The average time customers will spend in the system
The probability of zero customers in the system and the probability of four customers in the system

Illustration 9.
As a tool service centre the arrival rate is two per hour and the service potential is three per hour. Simple
queue
conditions exist.
Wanda’s Car Wash & dry is an automatic, five-minute operation with a single bay. On a typical
Saturday morning,cars arrive at a mean rate of eight per hour, with arrivals tending to follow a
Poisson distribution. Find
(a)The average number of cars in line.
(b)The average time cars spend in line and service.
Illustration 10.
A departmental store has one cashier. During the rush hours, customers arrive at a rate of
20 per hour. The average number of customers that can be handled by the cashier is 24
per hour. Assume the conditions for use of the single
– channel queuing model. Find out average time a customer spends in the system.

Illustration 11.
As a tool service centre the arrival rate is two per hour and the service potential is three per hour. Simple
queueconditions exist.
The hourly wage paid to the attendant at the service centre is `1.50 per hour and the
hourly cost of a machinist away from his work is ` 4.
Calculate
(1)The average number of machinists being served or waiting to be served at any given time.
(2)The average time a machinist spends waiting for service.
(3)The total cost of operating the system for an eight – hour day.
(4)The cost of the system if there were two attendants working together as a team,
each paid ` 1.50 per hour and each able to service on average 2 per hour.

Illustration 12.
Workers come to tool store room to enquire about special tools (required by them) for
accomplishing a particular project assigned to them. The average time between two arrivals is 60
seconds and the arrivals are assumed to be in Poisson distribution. The average service time (of the
tool room attendant) is 40 seconds
Determine:
(1)average queue length,
(2)average length of non-empty queues,
(3)average number of workers in system including the worker being attended
(4)mean waiting time of an arrival,
(5)average waiting time of an arrival who waits.

Simulation
Illustration 13.
State the major two reasons for using simulation to solve a problem
A confectioner sells confectionery items. Past data of demand per week in hundred kilograms with
frequency is given below

Demand/Week 0 5 10 15 20 25
Frequency 2 11 8 21 5 3

Using the following sequence of random numbers, generate the demand for the next 10 weeks. Also
find out the average demand per week.

Random 35 52 13 90 23 73 34 57
numbers
35 83 94 56 67 66 60

Illustration 14.
The manager of a book store has to decide the number of copies of a particular tax law book to
order. A book costs ` 60 and is sold for ` 80. Since some of the tax laws change year after year, any
copies unsold while the edition is not current must be sold for ` 30. From past records, the
distribution of demand for this book has been obtained as follows
Demand (No of 15 16 17 18 19 20 21 22
copies)
Proportion 0.05 0.0 0.2 0.4 0.1 0.07 0.0 0.0
8 0 5 0 3 2
Using the following sequence of random numbers, generate the demand for 20 time
periods(years). Calculate the average profit obtainable under each of the courses of
action open to the manager. What is the optimal policy?
14 02 93 99 18 71 37 30 12 10
88 13 00 57 69 32 18 08 92 73

Illustration 15.
A Small retailer has studied the weekly receipts and payments over the past 200 weeks and has
developed the following set of information
Weekly Receipts (`) Probability Weekly Payments (`) Probability

3000 0.20 4000 0.30

5000 0.30 6000 0.40
7000 0.40 8000 0.20
12000 0.10 10000 0.10
Using the following set of random numbers, simulate the weekly pattern of receipts and
payments for the 12 weeks of the next quarter, assuming further that the beginning bank
balance is ` 8000. What is the estimated balance at the end of the 12 weekly period?
What is the highest weekly balance during the quarter? What is the average weekly
balance for the quarter?
Random Numbers

For Receipts 03 91 38 55 17 46 32 43 69 72 24 22
For payments 61 96 30 32 03 88 48 28 88 18 71 99

According to the given information, the random number interval is assigned to both the receipts and
the payments.

Illustration 16.
An automobile production line turns out about 100 cars a day, but deviations occur owing to many
causes. The production is more accurately described by the probability distribution given below:
Production/Day Prob. Production/Day Prob.
95 0.03 101 0.15
96 0.05 102 0.10
97 0.07 103 0.07
98 0.10 104 0.05
99 0.15 105 0.03
100 0.20
Total 1.00

Finished cars are transported across the bay, at the end of each day, by ferry. If the ferry
has space for only 101 cars, what will be the average number of cars waiting to be
shipped, and what will be the average number of empty space on the boat? Use following
Random Numbers to simulate the data provided above - 20, 63, 46, 16, 45, 41, 44, 66, 87,
26, 78, 40, 29, 92, 21
Illustration 17.
A book store wishes to carry ‘Ramayana’ in stock. Demand is probabilistic and
replenishment of stock takes 2 days (i.e. if an order is placed on March 1, it will be
delivered at the end of the day on March 3). The probabilities of demand are given below:
Demand (daily) 0 1 2 3 4
Probability 0.05 0.10 0.30 0.45 0.10

Each time an order is placed, the store incurs an ordering cost of ` 10 per order. The store
also incurs a carrying cost of ` 0.50 per book per day. The inventory carrying cost in
calculated on the basis of stock at the end of each day.
The manager of the bookstore wishes to compare two options for his inventory decision.
A- Order 5 books when the inventory at the beginning of the day plus order outstanding is less
than 8 books.
B- Order 8 books when the inventory at the beginning of the day plus order outstanding is less than
8
Currently (beginning 1st day) the store has a stock of 8 books plus 6 books ordered two
days ago and expected to arrive next day.
Using Monte-Carlo Simulation for 10 cycles, recommend, which option the manager, should choose.
The two digit random numbers are given below:
 89 34 70 63 61 81 39 16 13 73

Illustration 18.
After observing heavy congestion of customers over a period of time in a petrol station, Mr. Petro has
decided to set up a petrol pump facility on his own in a nearby site. He has compiled statistics relating
to the potential customer arrival pattern and service pattern as given below. He has also decided to
evaluate the operations by using the simulation technique
Arrivals Services
Inter-arrival time Probabili Service time Probability
(minutes) ty (minutes)
2 0.22 4 0.28
4 0.30 6 0.40
6 0.24 8 0.22
8 0.14 10 0.10
10 0.10
Assume:
(1)The clock starts at 8:00 hours
(2)Only one pump is set up.
(3)The following12 Random Numbers are to be used to depict the customer arrival pattern:
78, 26, 94, 08, 46, 63, 18, 35, 59, 12, 97 and 82.
(4)The following 12 Random Numbers are to be used to depict the service pattern:
44, 21, 73, 96, 63, 35, 57, 31, 84, 24, 05, 37
You are required to find out the

(5)probability of the pump being idle, and

(6)Average time spent by a customer waiting in queue.

Illustration 19.
A retailer deals in a perishable commodity. The daily demand and supply are variables. The data for
the past 500 days show the following demand and supply
Availability (Kg.) Supply (No. of days) Demand (Kg.) Demand (No. of days)
10 40 10 50
20 50 20 110
30 190 30 200
40 150 40 100
50 70 50 40
The retailer buys the commodity at ` 20 per kg. and sells at ` 30 per kg. Any commodity
remains at the end of the day, has no sales value. Moreover the loss on unsatisfied demand
is ` 8 per Kg. Given the following pair of random numbers, simulate 6 days sales, demand
and profit: (31, 18) (63, 84) (15, 79) (07, 32) (43, 75) (81, 27). The first random number in the
pair is that of supply and the second random number is for demand
 Line Balancing
Illustration 20:
Table shows the time remaining (number of days until due date) and the work remaining (number of day’s
still required to finish the work) for 5 jobs which were assigned the letters A to E as they arrived to the
shop. Sequence these jobs by priority rules viz., (a) FCFS, (b) EDD, (c) LS, (d) SPT and (e) LPT

Job Number days until due date Number of day’s of work

remaining
A 8 7
B 3 4
C 7 5
D 9 2
E 6 6

Illustration 21:
The following jobs have to be shipped a week from now (week has 5 working days)

Job A B C D E F

Number of days of 2 4 7 6 5 3
work remaining

Sequence the jobs according to priority established by (a) least slack rule (b) critical ratio rule

Illustration 22:
In a factory, there are six jobs to perform, each of which should go through two machines A
and B, in the order AB. The processing timings (in hours) for the jobs are given here. You are
required to determine the sequence for performing the jobs that would minimise the total
elapsed time, T. What is the value of T?

Job Machine A Machine B

1 7 3
2 4 8
3 2 6
4 5 6
5 9 4
6 8 1

Illustration 23:
The cost conscious company requires for the next month 300, 260 and 180 tonnes of
stone chips for its three constructions C1, C2 and C3 respectively. Stone chips are
produced by the company at three mineral fields taken on short lease by the company. All
the available boulders must be crushed into chips. Any excess chips over the demands at
sites C1, C2 and C3 will be sold ex-fields.
The fields are M1, M2 and M3 which will yield 250, 320 and 280 tones of stone chips respectively.
Transportation costs from mineral fields to construction sites vary according to distances, which are
given below in monetary unit (MU).

To C1 C2 C3
M1 8 7 6
From
M2 5 4 9
M3 7 5 5

(1)Determine the optimal economic transportation plan for the company and the
overall transportation cost in MU.
(2)What are the quantities to be sold from M1, M2 and M3 respectively?

Illustration 24:
Ladies fashion shop wishes to purchase the following quantity of summer dresses:
Dress size I II III IV

Quantity 100 200 450 150

Three manufacturers are willing to supply dresses.

The quantities given below are the maximum that they are able to supply of any given
combination of orders for dresses:
Manufacturers A B C

Total quantity 150 450 250

The shop expects the profit per dress to vary with the manufacturer as given below:

I II III IV
A `2.5 `4.0 `5.0 `2.0
B `3.0 `3.5 `5.5 `1.5
C `2.0 `4.5 `4.5 `2.5
Required:
(1)Use the transportation technique to solve the problem of how the orders should be placed
with the manufacturers by the fashion shop is order to maximise profit.
(2)Explain how you know there is no further improvement possible

Illustration 25:
The products of three plants F1, F2 and F3 are to be transported to 5 warehouses W1, W2,
W3, W4 and W5. The capacities of plants, demand of warehouses and the cost of
transportation from one plant to various warehouses are indicated in the following table:
W1 W2 W3 W4 W5 Plant Capacity
F1 74 56 54 62 68 400
F2 58 64 62 58 54 500
F3 66 70 52 60 60 600
Warehouse 200 280 240 360 320 1500/1400
Demand

(A) Find out a distribution plan of products from plants to the warehouses at a minimum
cost. What is the minimum cost?
(B) Is there any surplus capacity of the plants? If so, in which plant should we associate that surplus
capacity?
(C) Is there any alternate solution for the optimum solution achieved in

Illustration 26:
A manufacturer has distribution centres X, Y, and Z. These centres have 40,20 and 40 units of
his product. His retail outlets at A, B, C, D and E require 25,10,20,30 and 15 units respectively.
The transport cost in (Rupees/Unit) between each centre and each outlet is given in the
following table:

Distribution Centre Retail outlets

A B C D E
X 55 30 40 50 40
Y 35 30 100 45 60
Z 40 60 95 35 30

We have to find out the optimum distribution cost

Illustration 27:
Priyanshu enterprise has three factories at locations A, B and C which supply three warehouses located
at D,E and
F. Monthly factory capacities are 10,80 and 15 units respectively. Monthly warehouse requirements
are 75,20 and
50 units respectively. Unit shipping costs (in `) are given in the following table:

To D E F
A 5 1 7
From B 6 4 6
C 3 2 5
The penalty costs for not satisfying demand at the warehouses D, E and F are ` 5, ` 3 and ` 2 per unit
respectively. Determine the optimum distribution for Priyanshu, using any of the known algorithms

Illustration 28:
The products of two plants A and B are to be transported to 3 warehousesW1, W2 and W3. The cost
of transportationof each unit from plants to the warehouses are indicated below:

Warehouses
Plants (W1) (W2) (W3) Capacities
A 25 17 25 300
B 15 10 18 500
Demand 300 300 500 800/1100

Find the optimum distribution and the optimum cost

Illustration 29:
A Chemical Company produces two compounds A and B. The following table gives the units of
ingredients C and D per kg of compounds A and B as well as minimum requirements of C and D and
costs/kg of A and B. Write drawn the problem mathematically for minimisation of cost

Table Compound Minimum

requirement
A B
 Ingredient C 1 2 80
D 3 1 75
Cost per kg. 4 6

Illustration 30:
A pension fund manager is considering investing in two shares A and B. It is estimated that:
(1)Share A will earn a dividend of 12% per annum and share B 4% per annum
(2) Growth in the market value in one year of share A will be 10 paise per Rs.1 invested
and in B 40 paise per Rs.1 invested.

He requires investing the minimum total sum which will give Dividend income of at least `600 per
annum and growth in one year of at least `1,000 on the initial investment.

Illustration 31:
A company possesses two manufacturing plants each of which can produce three
products x, Y and Z from a common raw material. However, the proportions in which the
products are produced are different in each plant and so are the plant’s operating costs
per hour. Data on production per hour costs are given below, together with current orders
in hand for each product.

Product Operating
cost/
hour in `
X Y Z
Plant A 2 4 3 9
Plant B 4 3 2 10
Orders on 5 2 6
hand 0 4 0
You are required to formulate the problem to find the number of production hours needed to
fulfill the orders on hand at minimum cost

Illustration 32:
The products P, Q and R are being produced in a plant having profit margin as ` 3, ` 5 and ` 4 respectively.
The raw materials A, B and C are of scarce supply and the availability is limited to 8, 15 and 10 units
respectively. Specific consumption is indicated in the table below
P Q R Available
units
A 2 3 - 8
B 3 2 4 15
C - 2 5 10
3/ 5/- 4/-
-
Write down the problem mathematically for maximization of profit margin .

Illustration 33:
A Bank is in the process of formulating its loan policy. Involving a maximum of Rs.600
Million. Table below gives the relevant types of loans. Bad debts are not recoverable and
produce no interest receive. To meet competition from other Banks the following policy
guidelines have been set. At least 40% of the funds must be allocated to the agricultural
and commercial loans. Funds allocated to housing must be at least 50% of all loans given to
personal, car, Housing. The overall bad debts on all loans may not exceed 0.06.
Formulate a linear program Model to determine optimal loan allocations.

Type of loan Interest rate % Bad debts (Probability)

Personal 17 0.10
Car 14 0.07
Housing 11 0.05
Agricultural 10 0.08
Commercial 13 0.06

Illustration 34.
The annual hand-made furniture show and sales occurs next month and the school of
vocational studies is planning to make furnitures for sale. There are three wood working
classes – I year,
II year, III year at the school and they have decided to make three styles of chairs A, B and
C. Each chair must receive work in each class and the time in hours for each chair in each
class is given.

Chair I year II year III year

A 2 4 3
B 3 3 2
C 2 1 4
In the next month there will be 120 hours available in first year class, 160 hours in the
second year class and 100 hours in the third year class to produce chairs. The teacher of
the wood working class feels that a maximum of 40 chairs can be sold at the show. The
teacher has determined that the profit from each type of chair will be A – `40, B – `35 and
C – `30.
Formulate a linear programming model to determine how many chairs should be produced to
maximize profit

Illustration 35.
A company produces three products P, Q and R from three raw materials A, B and C. One unit
of product P requires 2 units of A and 3 units of B. One unit of product Q requires 2 units of B
and 5 units of C and one unit of product R requires 3 units of A, 2 units of B and 4 units of C.
The company has 8 units of material A, 10 units of material B and 15 units of material C
available to it. Profits per unit of products P, Q and R are Rs. 3, Rs. 5 and Rs. 4 respectively.
Formulate the question mathematically to maximize the profit

Illustration 36.
A city hospital has the following minimal daily requirement for nurses:

Period Clock time (24 hours day) Minimal Number of Nurses

Required
1 6 a.m. - 10 a.m. 2
2 10 a.m. - 2 p.m. 7
3 2 p.m. - 6 p.m. 75
4 6 p.m. - 10 p.m. 8
 5 10 p.m. - 2 a.m. 20
6 2 a.m. - 6 a.m. 6

Nurses report to the hospital at the beginning of each period and work for 8 consecutive
hours. The hospital wants to determine the minimal number of nurses to be employed so
that there will be sufficient number of nurses available for each period.

Formulate this as a Linear Programming question by setting up appropriate constraints and

objective function.

Illustration 37.
A marketing manager wishes to allocate his annual advertising budget of ` 20,000 in two media
vehicles A and
B. The unit cost of a message in media A is ` 1,000 and that of B is ` 1,500. Media A is a monthly
magazine and not more than one insertion is desired in one issue. At least 5 messages should
appear in media B. The expected effective audience for unit messages in the media A is 40,000
and for media B is 55,000.
(!) Develop a mathematical model

Illustration 38.
Calculate the standard time per article produced form the following data obtained by a work
sampling study:
Total No. of Observations

= 2597

No. of working

observations = 2,000

No. of units produced in 100 hours duration =

5,000 numbers Proportion of manual labour = ¾

Proportion of machine

time = ¼ Observed rating

factor = 120%
Total allowances = 15% of normal time

Illustration 39.
A Company produces the products P, Q and R from three raw materials A, B and C. One unit
of product P requires 2 units of A and 3 units of B. A unit of product Q requires 2 units of
B and 5 units of C and one unit of product R requires 3 units of A, 2 unit of B and 4 units of
C. The Company has 8 units of material A, 10 units of B and 15 units of C available to it.
Profits/unit of products P, Q and R are Rs.3, Rs.5 and Rs.4 respectively.
(A)Formulate the problem mathematically
(B)Write the Dual problem.

Illustration 40.
Four Products A,B,C and D have ` 5, ` 7, ` 3 and ` 0 profitability respectively. First type of material (limited
supply of 800 kgs.) is required by A,B,C and D at 4 kgs., 3 kgs, 8 kgs, and 2 kgs. respectively per unit.
Second type of material has a limited supply of 300 kgs. and is for A,B,C and D at 1 kg, 2
kgs, 0 kgs, and 1 kg per unit. Supply of the other type of materials consumed is not limited.
Machine hrs. available are 500 hours and the requirements are 8,5,0 and 4 hours for A,B,C
and D each per unit.

Labour hours are limited to 900 hours and requirements are 3,2,1 and 5 hours for A,B,C and D
respectively
How should the firm approach so as to maximize its profitability? Formulate this as a linear
programming problem. You are not required to solve the LPP.

Illustration 41.
Mutual Fund has cash resources of ` 200 million for investment in a diversified portfolio. Table
below shows the
opportunities available, their estimated annual yields, risk factor and term period details.
Formulate a Linear Program Model to find the optimal portfolio that will maximize return,
considering the following policy guidelines:
•All the funds available may be invested
•Weighted average period of at least five years as planning horizon.
•Weighted average risk factor not to exceed 0.20.
•Investment in real estate and speculative stocks to be not more than 25% of the monies invested
in total.

Investment type Annual yield Risk factor Term period (years)

(percentage)
Bank deposit 9.5 0.02 6
Treasury notes 8.5 0.01 4
Corporate deposit 12.0 0.08 3
Blue-chip stock 15.0 0.25 5
Speculative stocks 32.5 0.45 3
Real estate 35.0 0.40 10

Illustration 42.
A salesman has to visit five cities A, B, C, D and E. The inter-city distances are tabulated below. Note
the distance between two cities need not be same both ways

From / To A B C D E
A - 12 24 25 15
B 6 -- 16 18 7
C 10 11 -- 18 12
D 14 17 22 -- 16
E 12 13 23 25 --

Note further that the distances are in km.

Illustration 43.
Departmental store wishes to purchase the following quantities of Sprees:
Types of sprees A B C D E
Quantity 15 10 7 25 20
0 0 5 0 0
Tenders are submitted by 4 different manufacturers who undertake to supply not more
than the quantities mentioned below (all types of sprees combined):
Manufacturer W X Y Z
Total quantity 30 25 15 20
 0 0 0 0
The store estimates that its profit/spree will vary with the manufacturer as shown in the following matrix

Sprees
Manufacturers A B C D E
W 27 35 42 22 15
5 0 5 5 0
X 30 32 45 17 10
0 5 0 5 0
Y 25 35 47 20 12
0 0 5 0 5
Z 32 27 40 25 17
5 5 0 0 5

How should the order be placed

Illustration 44.
The Bombay Transport Company has trucks available at four different sites in the following
numbers:
Site A 5 Trucks
Site B 10 Trucks
Site C 7 Trucks
Site D 3 Trucks

Customers – W, X and Y require trucks as shown below.

Customer W 5 Trucks
Customer X 8 Trucks
Customer Y 10 Trucks

Variable Costs of getting trucks to the Customers are given below:

From A to W ` 7, to X ` 3, to Y `6
From B to W ` 4, to X ` 6 to Y `8
From C to W ` 5, to X ` 8 to Y `4
From D to W ` 8 to X ` 4 to Y `3

Solve the above transportation problem

Illustration 45.
A company has 3 plants located at different places but producing an identical product.
The cost of production, distribution cost of each plant to the 3 different warehouses,
the sale price at each warehouse and the individual capacities for both the plant and
warehouse are given below:
Plants F1 F2 F3
Raw material 15 18 14
Other expenses 10 9 12

Distribution cost to warehouse Sales Price in (`) Warehouse

Capacity (No)
W1 3 9 5 3 80
4
W2 1 7 4 3 110
2
 W3 5 8 3 3 150
1
Capacity of Plant 150 100 130
(No.)
Establish a suitable table giving net profit/loss for a unit produced at different plants and distributed
at different
locations.
(A)Introduce a suitable dummy warehouse / plant so as to match the capacities of plants and
warehouses.
(B)Find distribution pattern so as to maximise profit / minimise loss.
(C)Interpret zero value of square evaluation of an empty cell and find alternative solutions.

Illustration 46.
The Tit-Fit Scientific Laboratories is engaged in producing different types of high class
equipment for use in science laboratories. The company has two different assembly lines to
produce its most popular product ‘Pressure’. The processing time for each of the assembly
lines is regarded as a random variable and is described by the following distributions.
Process Time Assembly A1 Assembly
(minutes) A2
10 0.10 0.20
11 0.15 0.40
12 0.40 0.20
13 0.25 0.15
14 0.10 0.05

Using the following random numbers, generate data on the process times for 15 units of
the item and compute the expected process time for the product. For the purpose, read
the numbers vertically taking the first two digits for the processing time on assembly A1
and the last two digits for processing time on assembly A2.
4134 8343 3602 7505 7428
7476 1183 9445 0089 3424
4943 1915 5415 0880 9309
In the first stage, we assign random number intervals to the processing times on each of the
assemblies.

Illustration 47.
A businessman is considering taking over a certain new business. Based on past information and his
own knowledge of the business, he works out the probability distribution of the monthly costs and
sales revenues, as given here:
Cost (in `) Probability Sales Revenue (`) Probability
17000 0.10 19000 0.10
18000 0.10 20000 0.10
19000 0.40 21000 0.20
20000 0.20 22000 0.40
21000 0.20 23000 0.15
24000 0.05
Use the following sequences of random numbers to be used for estimating costs and revenues.
Obtain the probability distribution of the monthly net revenue.

Sequence 82 84 28 82 36 92 73 91 63 29
1
 27 26 92 63 83 02 10 39 10 10

Sequence 39 72 38 29 71 83 19 72 92 59
2
49 39 72 94 04 92 72 18 09 00

b. Repeat the analysis in (a) by using the following random number streams:
Sequence 20 63 46 16 45 41 44 66 87 26
1
78 40 29 92 21 36 57 03 28 08
Sequence 23 57 99 84 51 29 41 11 66 30
2
41 80 62 74 64 26 41 40 97 15
Scanner Questions
1- 2009 - June [2] (b) A company manufactures items X1 and X2 which are sold at a profit of ` 35 per
unit of X1 and ` 25 per unit of X2.
X1 requires 3 kgs. of materials, 4 man-hours and 2 machine-hours per unit. X2 requires 2 kgs. of materials, 3
man-hours and 2 machine-hours per unit. During each production run, there are 350 kgs, of materials
available, 600 man-hours and 550 machine-hours for use
Formulate under Simplex method of linear programming:
I. the objective function and the linear constraints, and
II. the equations after introducing slack variables.
III. What are the various methods of solving a linear programming. problem? (2 + 2 + 2 = 6 marks)

2- 2009 - June [3] (a) As on August 1, the following jobs are to be processed. Their processing times and
due dates are given:
Job A B C D
Processing time (days) 2 6 7 12
Due date August 12 August 7 August 4 August 8
Sequence the jobs based on minimum critical ratio. (4 marks)

3- 2009 - Dec [4] (a) A company has 3 factories and 3 customers. The following table gives the transportation
cost per unit from the factories to the customers and also the quantities available and required.
Determine the initial transportation solution using Vogel’s method
Factory A B C Availability
F1 10 11 20 10
F2 15 12 10 2
F3 17 9 16 8
Requirement 8 5 7 20
(6 marks)

4- 2011 - Dec [2] (c) Draw the schematic diagram from the following table showing tasks to be
performed on an assembly line in the sequence and time specified :
Task Time (Seconds) Tasks that must precede
A 50
B 40
C 20 A
D 45 C
E 20 C
F 25 D
G 10 E
H 35 B, F, G
(3 marks)

5- 2013 - Dec [1] {C} (i) Shin’s Car Wash & Dry is an automatic, five-minute operation with a single bay.
On a typical Saturday morning, cars arrive at a mean rate of ten per hour, with arrivals tending to
follow a Poisson distribution. Find the average number of cars in line. (1×5 =5 marks)

6- 2013 - Dec [5] (a) A company plans to fill four positions and it decides to conduct aptitude tests and
interviews for the same. While the aptitude tests are conducted by people from the clerical
positions, the job interviews are held by the personnel from the management cadre. The job
interviews immediately follow the aptitude test. The time required (in minutes) by each of the
 positions is given here,
Position P1 P2 P3 P4
Aptitude Test 100 110 140 120
Job Interview 70 90 80 110

If it is desired to minimise the waiting time of the management personnel, in what order the position filling be
handled? ( 5 marks)

7- 2014 - Dec [2] Answer the question:

(c) (ii) An Industrial Engineer, appointed to conduct a time-study for a job, has after observation,
divided the job into 5 elements. He had noted the timings for four cycles of the job as below:

Element Time in Minutes Performance

Rating (%)
Cycle 1 Cycle 2 Cycle 3 Cycle 4
1 1.327 1.254 1.351 1.269 85%
2 0.983 1.854 0.882 0.956 95%
3 1.894 1.821 1.928 1.963 100%
4 2.569 2.173 2.132 2.285 120%
5 1.358 1.139 2.561 1.438 100%

(A) Are there any outliners in the data i.e. probable errors in reading or recording data which
should not be included in the analysis?
(B) Compute the basic time for the job. Also compute the standard time if a relaxation
allowance of 13%, a contingency allowance of 4% and an incentive of 25% are applicable
for the job.
(1 + 6 = 7 marks)
(D)- In a simulation operation, a firm’s maintenance person received requests for service and provided service
during an 8 hour period as shown below:

Request Arrival Time Service Time

(Clock Time) (Hours)
0 1.00
0.3 1.00
2.00 1.50
3.00 1.50
6.30 0.50

The maintenance labour cost is ` 150 per hour, and the delay time cost is ` 500 per hour. Find:
1. The idle time cost for the maintenance person, and
2. The delay time cost for the machinery. (5 marks)

8- 2015 - Dec [2] Answer the question:

(a) (ii) A faculty in a college is planned to rise to strength of 60 staff members and then to remain at
that level. The wastage of recruits depends upon their length of service and is as follows:

Year 1 2 3 4 5 6 7 8 9 10
Total % who left up to end of 6 36 57 66 71 77 81 87 96 100
year

(I) Find the number of staff members to be recruited every year.

(II) If there are seven posts of Head of Department for which length of service is the only criterion of
promotion, what will be average length of service after which a new entrant should expect promotion?
(3 + 4 = 7 marks)
 9- 2015 - Dec [2] Answer the question:
(b) (ii) Calculate the standard time per article produced from the following data obtained by a work
sampling study:
Total No. of observations = 2597
No. of working observations = 2000
No. of units produced in 100 hours duration = 5000 numbers
Proportion of manual labour = 3/4
Proportion of machine time = 1/4
Observed rating factor = 120%
Total allowances = 15% of normal time. (7 marks)

10- 2015 - Dec [2] Answer the question:

(d) (ii) The work-study engineer carries out the work sampling study for 120 hours. The following
observations were made for a machine shop:
Total number of observations 7000
No. of Idle activities 1200
Ratio between manual to machine elements 3:1
Average rating factor 120%
Total number of jobs produced during study 800 units Rest and personal
allowances 17% Compute the standard
time for the job.
(6 marks)

10- 2016 - June [II] Answer the question:

1. (c) Calculate the standard production per shift of 8 hours duration, with the following data:
Observed time per unit = 5 minutes, Rating Factor – 120%, Total allowances = 30% of normal
time. (6 marks)

11- 2017 - June [3] (b) Calculate the standard time per article produced from the following data obtained by a
work sampling study:
Total no. of observations = 2,600 No. of working
observations = 2,000
No. of units produced in 100 hours duration = 5,000 numbers Proportion of manual labour = 3/4
Proportion of machine time = 1/4 Observed rating
factor = 120%
Total allowances = 15% of normal time (10 marks)

12- 2017 - June [4] (a) A Bakery shop sells bakery items. Past data of demand per week in hundred
kilograms with frequency is given below:

Demand/Week 0 6 12 18 24 30
Frequency 1 12 19 8 6 4

Using the following sequence of random numbers, generate the demand for the next 10 weeks. Also find out
the average demand per week

Random numbers 12 27 18 58 43 75 31
62 47 35 53 42 68 71
(10 marks)

13- 2017 - Dec [3] (b) Workers come to a tool store room to enquire about special tools (required by
them) for accomplishing a particular project assigned to them. The average time between the two
arrivals is 60 seconds and the arrivals are assumed to be in Poisson distribution. The average service
time (of the tool room attendant) is 48 seconds.
Determine:
(i) Average Queue Length
(ii) Average Length of non-empty queues
(iii) Average number of workers in system including the worker being attended (3 × 3 = 9 marks)

14- 2017 - Dec [4] (a) The below Table shows the time remaining (number of days until due date) and
the work remaining (number of days’ work) for 5 jobs which were assigned the Letters A to E as they
arrived to the shop. Sequence these jobs by priority rules viz.,
(i) FCFS (ii) EDD (iii) LS (iv) SPT (v) LPT.

Job Number of days until Number of days’ work

due date remaining
A 9 5
B 4 7
C 5 3
D 6 6
E 8 2
(2 × 5 = 10 marks)

15- 2017 - Dec [4] (b) A department works on 8 hours shift, 285 days a year and has the usage data of a
machine, as given below:

Product Annual Demand Processing time (Standard time in hours)

(units)
A 360 7.0
B 435 5.0
C 570 6.0

Calculate:
1. Processing time needed in hours to produce products A, B and C,
2. Annual production capacity of one machine in standard hours, and
3. Number of machines required. (2 × 3 = 6 marks)

16- 2018 - June [4] (a) A blacksmith supervisor in his workshop is considering how he should assign the
four jobs that are to be performed, to four of the workers under him. He wants to assign the jobs to
the workers such that the aggregate time to perform the jobs is the least. Based on previous
experience, he has the information on the time taken by the four workers in performing these jobs
and the same is given in the table below:
Time Taken(in minutes) by 4 Workers
Job
Worker A B C D
1 46 40 51 68
2 57 42 63 55
3 49 53 48 64
4 41 45 61 55
Solve the assignment problem for optimal solution using Hungarian Method
(7 marks)

17- 2018 - June [4] (b) At a tool service centre, the arrival rate is 3 per hour and the service potentials 4
per hour. Simple queue conditions exist. The hourly wage paid to the attendant at the service centre
is ` 2 per hour and the hourly cost of a machinist away from his work is ` 5.
Calculate:
(i) The average number of machinists being served or waiting to be served at any given time.
(ii) The average time a machinist spends waiting for service.
(iii) The total cost of operating the system for an eight-hour day.
 (iv) The cost of the system if there were two attendants working together as a team, each paid ` 2 per
hour and each able to service on average 3 per hour. (2 × 4 = 8 marks)

18- 2018 - June [5] (a) The following jobs have to be shipped a week from now (week has 5 working
days)

Job A B C D E F
Number of days’s work remaining 4 5 8 7 6 3

Sequence the jobs according to priority established by:

(i) Least slack rule
(ii) Critical ratio rule (4 × 2 = 8 marks)

19- 2018 - Dec [4] (b) A departmental store is running a snack items selling outlet. Past data of snack
items’ demand per week in hundred kgs with frequency is given below: (10 marks)

Demand/Week 0 6 12 18 24 30
Frequency 3 10 9 20 6 2
Using the following sequence of random numbers, generate the demand for next 10 weeks. Also find out
the average demand per week.
Random 21 34 48 97 72 31 45 56
Numbers
47 37 82 44 67 75 63
 PRODUCTIVITY MANAGEMENT AND QUALITY
MANAGEMENT
Production And Productivity
Illustration 1
In a particular plant there are 10 workers manufacturing a single product and the output
per month consisting of 25 days of that particular product is 200. How much is the
monthly productivity?

Illustration 2.
There are two industries A and B manufacturing hose couplings. The standard time per
piece is 15 minutes. The output of two small scale industries is 30 and 20 respectively per
shift of 8 hours. Find the productivity of each per shift of 8 hours. What is the expected
production of each per week consisting of 6 days?

Illustration 3.
The following data is available for a machine in a manufacturing unit

Hours worked per day 8

Working days per month 25
Number of operators 1
Standard minutes per unit of production
Machine time 22
Operator time 8
Total time per unit 30

(1)If plant is operated at 75% efficiency, and the operator is working at 100% efficiency,
what is the output per month?
(2)If machine productivity is increased by 10% over the existing level, what will be the output per
month?
(3)If operator efficiency is reduced by 20% over the existing level, what will be the output per month?

Illustration 4.
The following data is avaialable for a manufacturing unit

No. of operators : 15
Daily working hours : 8
No. of days per month : 25
Std. production per month : 300 units
Std. Labour hours per unit : 8

The following information was obtained for November 2015:

:
Man days lost due to absentism : 30
Unit produced : 240
Idle Time : 276 man hours
Find the following:—
(a)Percent absentism
(b)Efficiency of utilisation of labour
(c)Productive efficiency of labour
(d)Overall Productivity of labour in terms of units produced per man per month

Illustration 5.
An incentive scheme allows proportionate production bonus beyond 100%
performance level. Calculate the amount of (i) Incentive bonus and (ii) Total payment
received by an operator on a particular day during which the following particulars
apply:

Operation : Assembling pocket transistor radio set

Work Content : 30 Standard minutes per assembled set

Attended Time : 8 Hours

Time spent on unmeasured work : 2 Hours Numbers of sets assembled during the
day : 15

Wage rate : ` 4 per hour

1) What is the net labour productivity achieved by the operator during the day?

Illustration 6.
Compute the productively per machine hour with the following data .also draw your interpretation

Month No. of Working Production

machines hours Units
employed
January 400 220 99,000
February 550 180 1,00,000
March 580 220 1,25,000

Illustration 7.
Calculate the standard production per shift of 8 hours duration, with the following data:
Observed time per unit = 5 minutes, Rating Factor -120%, Total allowances = 30% of
normal time.

Illustration 8
Study in the Packaging Department of a Softdrinks Manufacturing unit revealed the
following facts for a worker Basant Rao Patil.
Cycle No.
Performance
1 2 3 4
Activity Rating
Element
(A) Get empty 0.15 min 0.25 min — 0.17 min 90%
Cartoon
(B) Place 30
bottles in the 1.56 min * 1.80 min 1.75 min 105%
cartoon
(C) Close the
cartoon & set 0.20 min † 0.10 min 0.15 min 95%
aside
(D) Smoking — 0.50 min — — —
* Bottles slipped out of hands and broke
† Empty cartoon not set aside and used for packaging in the next cycle
Calculate the standard production by Basant Rao in a shift of 8 hours when the units
standard rules allow 10% as Allowance Factor.

Illustration9
A department works on 8 hours shift, 288 days a year and has the usage data of a machine, as given
below
Product Annual Demand Processing time (Standard time in
(units) hours)
A 325 5.0
B 450 4.0
C 550 6.0
Calculate (a) Processing time needed in hours to produce products A, B and C, (b)
Annual production capacity of one machine in standard hours, and (c) Number of
machines required

Illustration 10.
Following results are recorded in a study of work sampling carried for 100 hours in a Machine Shop.
1.Total no. of observations recorded — 2500
2.No. of observations in which no working activity is noticed — 400
3.Ratio of Mannual to Machine elements — 2 : 1
4.Average Rating Factor — 115%
5.No. of articles produced during the study period — 6000
As per the policy of the company, rest and personal allowances are taken as 12% of
Normal Time. Calculate Standard Time to produce an article.
Given that the shop produces 42000 articles per month of 25 working days by 5 workers
working for a shift of 8 hours per day. Consider absentism to be 7%.
Compute Efficiency of utilisation of Labour and Productive Efficency of Labour.
Scanner Questions
1- 2010 - June [2] (d) A sample of 10 pieces is drawn from the production of last two hours of an
automatic screw machine and each unit is inspected for several characteristics and is classified as
“OK” or “Not OK”. The number of units marked “Not OK” for the last 20 samples are given in the
following table in succession:
Sl. No. 1 2 3 4 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20
Not ok Units 0 2 1 1 0 3 0 1 1 2 1 0 2 3 0 0 2 0 0 1
Find and the control limits. Comment on the automatic machine condition.
(5 + 1 = 6 marks)

2- 2012 - June [4] (b) The following data are available for a manufacturing unit: No. of operators 15
Daily working hours 8
No. of days per month 25
Std. production per month 300 units
Std. Labour hours per unit 8
The following information was obtained for January 2012:
Man-days lost due to absenteeism 30
Unit produced 240
Idle Time 276 man hours
You are required to calculate the following:
(i) Percent absenteeism
(ii) Efficiency of utilisation of labour
(iii) Productive efficiency of labour
(iv) Overall productivity of labour in terms of units produced per man per month. (2 × 4 = 8 marks)

3- 2013 - June [4] (c) The following data is available for a machine in a manufacturing unit:
Hours worked per day 8
Working days per month 25
Number of operator 1
Standard minutes per unit of production : Machine time 22
Operator time 8
Total time per unit 30
(i) If plant is operated at 80% efficiency, and the operator is working at 100% efficiency, what is
the output per month?
(ii) If machine productivity is increased by 25% over the existing level, what will be the output per
month?
(iii) If operator efficiency is reduced by 25% over the existing level, what will be the output per
month? (2 + 2 + 2 = 6 marks)

4- 2013 - Dec [1] {C} (f) A firm uses ` 20,00,000 in capital and 20,000 labour hours per year to produce
` 2,00,00,000 in product. What is the partial productivity of labour? (1 mark)

5- 2014 - June [2] (c) Compute the productivity per machine hour with the following data. Also draw your
interpretation
Month No. of machines employed Working hours Production units
March 400 225 99,000
April 500 200 1,00,000
May 600 250 1,35,000
(2 marks)
6- 2014 - Dec [1] Answer the question:
(d) A worker is employed for 11 hours. During this period he takes 7 hours to complete a job with the standard
time of 6 hours. Calculate the productivity of the worker as a percentage. (2 marks)

7- 2015 - Dec [2] Answer the question:

(c) (iii) Compute the productivity per machine hour with the following data. Also draw your
interpretation.
Month No. of machines Working Production Units
employed hours
July 400 225 99,000
August 500 200 1,00,000
September 600 250 1,35,000
(5 marks)

8- 2016 - June II. [3] (b) Compute the productivity per machine hour with the following data. Also draw
your interpretation.

Month No.of machines employed Working hours Production Units

January 400 220 99,000
February 550 180 1,00,000
March 580 220 1,25,000
(4 marks)

9- 2016 - Dec [3] (b) Compute the productivity per machine hour with the following data. Also draw your
interpretation.
Month No. of machines employed Working hours Production
units
July 390 210 95,000
August 540 170 1,00,000
September 570 230 1,30,000
(7 marks) [Sec. B]
PROJECT MANAGEMENT
Gantt Chart
Illustration 1.
A project consists of seven activities. Activities P, Q, R run simultaneously. The relationships
among the various activities is as follows:
Activity Immediate Successor
P S
Q T
R U
Activity “V is the last operation of the project and it is also immediate successor to S, T
and U. Draw the network of the project.

Illustration 2.
Project with the following data is to be implemented. Draw the network and find the critical path.

Activity Predecessor Duration (days) Cost (` Day)

A - 2 50
B - 4 50
C A 1 40
D B 2 100
E A,B 3 100
F E 2 60

1) What is the minimum duration of the project?

2) Draw a Gantt chart for early start schedule.
3) Determine the peak requirement of money and the day on which it occurs in the above
schedule.

llustration 3.
A project has the following time schedule

Activity 1-2 1-3 1-4 2-5 3-6 3-7 4-6 5-8 6-9 7-8 8-9
Time
2 2 1 4 8 5 3 1 5 4 3
(months)

Construct a PERT network and compute

. Critical path and its duration
. Total float for each activity
Also, find the minimum number of cranes the project must have for its activities 2-5, 3-7,
5-8 and 8-9 without delaying the project given that one crane is sufficient to carry out the
work involved in each activity if taken care of individually.

Illustration 4.
A project consists of five activities. Activities P and Q run simultaneously. The
relationship among the various activities is as follows:
Activity Immediate Successor
P R
Q S
Activity T is the last operation of the project and it is also immediate successor to R and S.
Draw the network of the Project.

PERT AND CPM

Illustration 5.
XYZ Auto-manufacturing company has to prepare a design of its latest model of
motorcycle. The various activities to be performed to prepare design are as follows:

Activit Description of activity Preceding activity

y
A Prepare drawing —
B Carry out cost analysis A
C Carry out financial analysis A
D Manufacture tools C
E Prepare bill of material B, C
F Receive material D,E
G Order sub-accessories E
H Receive sub-accessories G
I Manufacture components F
J Final assembly I,H
K Testing and shipment J
Prepare an appropriate network diagram.

Illustration 6.
The following table gives data on normal time & cost and crash time & cost for a project.
Activity Normal Cras
h
Time (days) Cost (`) Time (days) Cost (`)
1—2 6 600 4 1,000
1—3 4 600 2 2,000
2—4 5 500 3 1,500
2—5 3 450 1 650
3—4 6 900 4 2,000
4—6 8 800 4 3,000
5—6 4 400 2 1,000
6—7 3 450 2 800
The indirect cost per day is ` 100.
(1)Draw the network and identify the critical path.
(2)What are the normal project duration and associated cost?
(3)Crash the relevant activities systematically and determine the optimum project completion time
and cost.

Illustration 7.
Draw the network for the following activities and find critical path and total duration of project.

Activity Duration (months) Activity Duration (months)

1-2 2.5 4-5 2.0
2-3 2.5 5-6 3.0
2-4 1.5 6-7 1.5
3-4 1.0 5-7 1.5
3-5 1.0

Illustration 8.
The following activities must be accomplished in order to complete a construction project:
Activity A B C D E F G H I J
Time 3 8 4 2 1 7 5 6 8 9
Predecessors — — AB B A C EF DF GH I
. Construct a network diagram for this project. Find the CP and the duration of the project.
The project has progresses has for 10 weeks and the status is followAssume that you
are project manager of the project mentioned above.
Activities completed: A, B, E. Other activities have not started as yet.
If no managerial action is taken at all when will the project get completed?
What action might you take to get the project back to a schedule that can be
completed by the end of week 42?

Illustration 9.
Given is the following information regarding a project:
Activity A B C D E F G H I J K L
Dependence - - - AB B B FC B EH EH CDFJ K
Duration 3 4 2 5 1 3 6 4 4 2 1 5
Draw the Network Diagram and identify the Critical Path and Project Duration.

Illustration 10.
A project with normal duration and cost along with crash duration and cost for each activity is given
below:
Activity Normal time (Hrs.) Normal cost (`) Crash time (Hrs.) Crash cost (`)
1-2 5 200 4 300
2-3 5 30 5 30
2-4 9 320 7 480
2-5 12 620 10 710
3-5 6 150 5 200
4-5 0 0 0 0
5-6 8 220 6 310
6-7 6 300 5 370
Overhead cost is ` 50 per hour.
Required:
Draw network diagram and identify the critical path
llustration 11.
What are the difference between CPM and PERT.

Scanner Questions
1- 2010 - Dec [4] (d) Jaago Engineering is analyzing the efficiency of its work and service personnel. Its
service procedure is classified into the following seven activities along with its duration:

Activity Duration (Hrs.) Precedence Activity

A 8
B 4
C 6 A
D 9 B
E 11 A
F 3 C
G 1 D, E, F
From the above details:
(i) Draw the network diagram,
(ii) Find the critical path,
(iii) Calculate the expected time,
(iv) Slack time for each path,
(v) Earliest Start and Finish Time,
(vi) Latest Finish and Start Time. (8 marks)

2- 2014 - June [6] (a) A project consists of five activities. Activities P and Q run simultaneously. The
relationship among the various activities is as follows:
Activity Immediate Successor
P R
Q S
Activity T is the last operation of the project and it is also immediate successor to R and S. Draw the network
of the project. (2 marks)

3- 2016 - June [II] Answer the questions:

(a) A project consists of five activities. Activities P and Q run simultaneously. The relationship among
the various activities is as follows:

Activity Immediate Successor

P R
Q S
Activity T is the last operation of the project and it is also immediate successor to R and S. Draw
the network of the project. (4 marks)

3- 2017 - June [5] (a) A project consists of eleven activities A, B, C, D, E, F, G, H, I, J and K.

The relationship among various activities is as follows:

Activity Preceding Activity

A -
B A
C A
D B
E C
 F D, E
G F
H F
I G
J I, H
K J

Draw the network diagram (6 marks)

4- 2017 - Dec [5] (b) Draw the network for the following activities and find critical path and total duration
of the project
Activity Duration (months)
1-2 2
2-3 3
2-4 1
3-4 2
4-5 3
5-6 2
5-7 4
6-8 1
7-8 3
8-9 4
(2+2+2=6marks)
 ECONOMICS OF MAINTENANCE AND
SPARES MANAGEMENT

Illustration 1.
A workshop has 20 nos. of identical machines. The failure pattern of the machine is given below:-
Elapsed time after Probability of failure
Maintenance attention
(in month)
1 0.20
2 0.15
3 0.15
4 0.15
5 0.15
6 0.20
It costs ` 150 to attend a failed machine and rectify the same. Compute the yearly cost of servicing
the broken down machine

Illustration 2.
A Public transport system is experiencing the following number of breakdowns for
months over the past 2 years in their new fleet of vehicles:
Number of breakdowns 0 1 2 3 4
Number of months this occurred 2 8 10 3 1
Each break down costs the firm an average of ` 2,800. For a cost of ` 1,500 per month,
preventive maintenance can be carried out to limit the breakdowns to an average of
one per month. Which policy is suitable for the firm?

Illustration 3.
Indian Electronics, manufactures TV sets and carries out the picture tube testing for 2000
hours. A sample of 100 tubes was put through this quality test during which two tubes failed.
If the average usage of TV by the customer is 4 hours/day and if 10,000 TV sets were sold,
then in one year how many tubes were expected to fail and what is the mean time between
failures for these tubes?

Illustration 4.
A company has 50 identical machines in its facilities. The cost of preventive servicing (Cp)
is ` 20, and the cost of repair after breakdown (CR) is ` 100. The company seeks the
minimum cost preventive servicing frequency and has collected the data on breakdown
probabilities in the following table:
Probabilities of machine breakdown, by month:

Months after servicing that Probability that breakdown will i.Pi

breakdown occurs (i) occur (Pi)
1 0.10 0.10
 2 0.05 0.10
3 0.05 0.15
4 0.10 0.40
5 0.15 0.75
6 0.15 0.90
7 0.20 1.40
8 0.20 1.60
Total 1.00 5.40

Illustration 5.
Compute the requirement of spares for breakdown maintenance for an item that exhibits
a Poissonian behavior for failure rates with a mean breakdown rate of five items per
month. If the lead time for procuring these spares is one month and a service level of 90
per cent is to be used, what buffer stock of these items should be maintained? (A fixed re-
order quantity system of inventory is being used).

Illustration 6.
The main shaft of an equipment has a very high reliability of 0.990. The equipment comes
from Russia and has a high downtime cost associated with the failure of this shaft. This is
estimated at ` 2 crore as the costs of sales lost and other relevant costs. However, this spare
is quoted at `10 lakh at present. Should the shaft spare be procured along with the equipment
and kept or not

Illustration 7.
PQR company has kept records of breakdowns of its machines for 300 days work year as shown
below:
No. of breakdown Frequency in days
0 40
1 150
2 70
3 30
4 10
300
The firm estimates that each breakdown costs ` 650 and is considering adopting a
preventive maintenance program which would cost ` 200 per day and limit the number
of breakdown to an average of one per day. What is the expected annual savings from
preventive maintenance program?

Illustration 8.
A firm is using a machine whose purchase price is ` 15,000. The installation charges
amount to ` 3,500 and the machine has a scrap value of only ` 1,500 because the firm has
a monopoly of this type of work. The maintenance cost in various years is given in the
following table:

Year 1 2 3 4 5 6 7 8 9
Maintenance Cost 260 760 110 160 220 300 410 490 610
(`) 0 0 0 0 0 0 0

The firm wants to determine after how many years should the machine be replaced on economic
considerations, assuming that the machine replacement can be done only at the year end

Illustration 9.
A large computer installation contains 2,000 components of identical nature which are
subject to failure as per probability distribution that follows:

Month End: 1 2 3 4 5
% Failure to date: 10 25 50 80 100
Components which fail have to be replaced for efficient functioning of the system. If they
are replaced as and when failures occur, the cost of replacement per unit is `3.
Alternatively, if all components are replaced in one lot at periodical intervals and
individually replace only such failures as occur between group replacement, the cost of
component replaced is ` 1.
(a)Assess which policy of replacement would be economical.
(b)If group replacement is economical at current costs, then assess at what cost of
individual replacement would group replacement be uneconomical.
(c)How high can the cost per unit in-group replacement be to make a preference for
individual replacement policy?

Illustration 10.
An electric company which generates and distributes electricity conducted a study
on the life of poles. The repatriate life data are given in the following table:
Life data of electric poles

Year after installation: 1 2 3 4 5 6 7 8 9 10

Percentage poles failing: 1 2 3 5 7 12 20 30 16 4
.If the company now installs 5,000 poles and follows a policy of replacing poles only
when they fail, how many poles are expected to be replaced each year during the next
ten years?
To simplify the computation assume that failures occur and replacements are made only at the end
of a year.
.If the cost of replacing individually is ` 160 per pole and if we have a common group replacement
policy it costs ` 80 per pole, find out the optimal period for group replacement

Illustration 11.
Product A has a Mean Time Between Failures (MTBF) of 30 hours and has a Mean Time To
SRepairs (MTTR) of 5 hours. Product B has a MTBF of 40 hours and has a MTTR of 2 hours.

(1)Which product has the higher reliability?

(2)Which product has greater maintainability?
(3)Which product has greater availability?

Illustration 12.
Maharashtra Trucking Company (MTC) has a fleet of 50 trucks. The past data on the
breakdown of the trucks show the following probability distribution (for a new truck as
well as for one which has been repaired after a breakdown).

Months after Maintenance Probability of Breakdown

1 0.10
2 0.20
3 0.30
4 0.40
Each breakdown costs ` 3,000 on an average; which includes cost of time lost and cost of
materials and manpower.
The manager of MTC knows the importance of preventive maintenance. He estimates the
costs of the preventive maintenance to be ` 500 per such preventive action. What should
be the appropriate maintenance policy in terms of the mix of preventive and breakdown
maintenance

Scanner Questions
1- 2008 - Dec [3] (a) A key electric component lasts for a maximum of 3 weeks. The chances of its failing at the
end of first week is 0.1 and the chance of its failing at the end of second week is 0.3.The cost per
component for individual replacement is ` 5 and cost per component for bulk replacement is ` 3. What is
the optimal replacement period assuming there are 100 components initially? (4 marks)

2- 2008 - Dec [4] (a) Load Shedding Power Utility Company has been given the task of power supply by the
State. The Company has noticed that the system has been experiencing the following number of failures
for months over the past one year.

Number of failures 0 1 2 3
Number of months this occurred 2 3 3 4

Each breakdown costs an average of ` 10,000/- Preventive maintenance can be carried out for a cost
of ` 3,000/- to limit the failures to an average of one per month. The Company seeks your advice on
which policy is most suitable for adoption. (4 marks)
(b) A workshop has 30 nos. of identical machines. From the failure pattern of the machines it is
calculated that the expected time before failure is 3 months. It costs ` 200 to attend a failed machine
and rectify the same. Compute the yearly cost of servicing the broken down machines.
(2 marks)

3- 2009 - June [4] (c) Calculate the number of units expected to fail in a year and the mean time between
failures from the following :
Testing time = 100 hours Samples tested = 50
units Failures = 2 units
Average usage = 2 hours/day
Total sales in the year = 500 units (4 marks)
A Public Transport Corporation has gathered the data about the number of breakdowns for months
over the past two years in their new fleet of vehicles:
Number of breakdowns 0 1 2 3 4
Number of months this occurred 3 7 11 2 1
Each breakdown costs the firm an average of ` 3000. For a cost of
`1375 per months, preventive maintenance can be carried out to limit the breakdowns to an average
of one per month. Which policy will be suitable for the firm? (5 marks)

4- 2009 - Dec [4] (c) Super Electronics manufactures TV sets and carries out the picture tube testing for 2500
hours. A sample of 200 tubes was put through this quality test during which 4 tubes failed. If the average
usage of TV by the customer is 5 hours/day and if 15000 TV sets were sold, then in one year how many
tubes were expected to fail and what is the mean time between failures for these tubes? (3 + 1 = 4
marks)

5- 2010 - June [3] (d) Replacement policy is being considered for a new machine installed. Find the year when
the replacement is to be made based on the following information

Year 1 2 3 4 5
 Replacement cost at 1,700 2,000 2,500 2,850 3,000
beginning of the year
Salvage value at the 1,175 1,200 900 400 0
end of the year
Operating costs 500 700 750 1,100 1,200
(4 marks)

6- 2010 - Dec [3] (b) A solar manufacturing company has observed the following number of breakdowns in its
new lantern over the past year

No. of breakdowns 0 1 2 3
No. of months it occurred 3 6 2 1

It costs the firm ` 1500 to rectify a lantern. Should the company go in for preventive maintenance at ` 600 per
month which will limit the breakdown to one per month? Please advise. (4 marks)

7- 2011 - June [2] (c) A workshop has 25 nos. of identical machines. The failure pattern of the machine is
given below.
Elapsed time after Probability of failure
maintenance attention
(in month)
1 0.10
2 0.15
3 0.15
4 0.15
5 0.20
6 0.25
It costs ` 160 to attend a failed machine and rectify the same. Compute the yearly cost of servicing
the broken down machines. (4 marks)

8- 2011 - Dec [4] (a) The probabilities of failure Pn of an equipment in the nth period after maintenance have
been estimated as follows:
n 1 2 3 4
Pn 0.1 0.2 0.4 0.3
Cost of preventive maintenance: ` 150; Cost of breakdown
maintenance: ` 1,000;
Determine the optimum frequency of preventive maintenance. (4 marks)

9- 2012 - June [2] (b) The faculty in a college is planned to rise to strength of 50 staff members and then
to remain at that level. The wastage of recruits depends upon their length of service and is as follows:

Year 1 2 3 4 5 6 7 8 9 10
Total % age who left 5 35 56 65 70 76 80 86 95 100
upto the end of year

(i) Find the number of staff members to be recruited every year.

(ii) If there are seven posts of Head of Deptt. for which, length of service is the only criterion of
promotion, what will be the average length of service after which a new entrant should expect
promotion?
( 5 + 3 = 8 marks)

10- 2012 - June [4] (c) (ii) The following costs have been recorded
Particulars `
Incoming materials inspection 10,000
Training of personnel 30,000
Warranty 45,000
 Process planning 15,000
Scrap 9,000
Quality laboratory 30,000
Rework 25,000
Allowances 10,000
Complaints 14,000
What are the costs of prevention, appraisal, external failure and internal failure? (1 × 4 = 4 marks)

11- 2013 - June [2] (b) Replace the ‘missing words’ with appropriate terms in the following formula to evaluate
the work done by preventive maintenance:
1. (‘missing words’)/(Inspections scheduled) x 100 should be less than 10%
2. Frequency of breakdowns = (Number of breakdowns)/(‘missing words’).
3. Effectiveness of planning = (Labour hours on scheduled maintenance)/(‘missing words’).
(1x3=3 marks)
(e)(ii) A Public transport system is experiencing the following number of breakdowns for months over the past
2 years in their new fleet of vehicles:

Number of breakdowns 0 1 2 3 4
Number of months this occurred 2 8 10 3 1

Each breakdown costs the firm an average of ` 2,800. For a cost of ` 1,500 per month, preventive
maintenance can be carried out to limit the breakdowns to an average of one per month. Which policy
is suitable for the firm? (3 marks)
12- 2013 - June [4] (b) A fleet owner finds from his past records that the costs per year of running a vehicle
whose purchase price is ` 1,00,000 are as under:
Year 1 2 3 4 5
Running costs (`) 10,000 12,000 13,500 15,000 18,000
Resale value (`) 80,000 65,000 55,000 25,000 6,000
Thereafter, running cost increases by ` 3,000, but resale value remains constant at ` 6,000. At what
age is a replacement due? (5marks)

13- 2013 - Dec [5] (b) Arzuu Ltd.’s records of breakdowns of its machines for a 300 day work year are as
shown below:
No. of breakdowns Frequency in
days
0 40
1 150
2 70
3 30
4 10
300
The firm estimates that each breakdown costs ` 600 and is considering adopting a preventive
maintenance program which would cost ` 200 per day and limit the number of breakdown to an average
of one per day. What is the expected annual savings from preventive maintenance program?
(5 marks)

14- 2014 - June [2] (b) The main shaft of calcinator has a very high reliability of 0.990. The equipment comes
from abroad and has a high downtime cost associated with the failure of this shaft. This is estimated at
` 2 crore as the costs of sales lost and other relevant costs. However, this spare is quoted at
10 Lakh at present. Should the shaft spare be procured along with the equipment and kept or not?
(2Marks)

15- 2014 - Dec [2] (a) Answer the question:

 a. An engineering firm has a machine whose purchase price is ` 85,000. The expected
maintenance costs and resale price in different years are as given below:
Year 1 2 3 4 5 6 7
Maintenance Cost (`) 1200 1400 1800 2600 3200 4100 5200

Resale Value (` Thousand) 80 76 71 67 63 58 52

After what time interval should the machine be replaced? (6 marks)

16- 2015 - June [2] (a) (ii) A firm is using a machine whose purchase price is
` 15,000. The installation charges amount to ` 3,500 and the machine has a scrap value of only ` 1,500
because the firm has a monopoly of this type of work. The maintenance cost in various years is given in the
following table:
Year 1 2 3 4 5 6 7 8 9
Maintenance 260 760 1100 1600 2200 3000 4100 4900 6100
Cost (`)
The firm wants to determine after how many years should the machine be replaced on economic
considerations, assuming that the machine replacement can be done only at the year end. (5 marks)

16- 2016 - June [II] Answer the question:

(a) The main shaft of Calcinator has a very high reliability of 0.980. The equipment comes from abroad and
has a high downtime cost associated with the failure of this shaft. This is estimated at ` 1.80 crores as the
costs of sales lost and other relevant costs. However, this spare is quoted at ` 10 lakhs at present. Should
the shaft spare be procured along with the equipment and kept or not? (4 marks)

17- 2016 - Dec [4] (b) Reddy Transport Company (RTC) has a fleet of 50 trucks. The past data on the breakdown
of the trucks show the following probability distribution (for a new truck as well as for one which has been
repaired after a breakdown).

Months after Maintenance Probability of Breakdown

1 0.10
2 0.20
3 0.30
4 0.40

Each breakdown costs ` 3,000 on an average, which includes cost of time lost and cost of materials
and manpower.
The manager of RTC knows the importance of preventive maintenance. He estimates the costs of the
preventive maintenance to be ` 500 per such preventive action.
What should be the appropriate maintenance policy in terms of the mix of preventive and breakdown.
(10 marks) (SecB)

18- 2017 - June [5] (b) Product A has a Mean Time Between Failures (MTBF) of 35 hours and a Mean Time
to Repairs (MTTR) of 6 hours. Product B has a MTBF of 45 hours, and has a MTTR of 3 hours.
1. Which product has higher reliability?
2. Which product has greater maintainability?
3. Which product has greater availability? ( 3 + 3 + 4 = 10 marks)

19- 2017 - Dec [5] (a) A Public Transport Company is experiencing the following number of breakdowns for
months over the past 2 years in their new fleet of vehicles:

Number of breakdowns 0 1 2 3 4
Number of months this occurred 3 6 9 4 2

Each breakdown costs the company an average of ` 2,500. For a cost of

` 1,700 per month, preventive maintenance can be carried out to limit the breakdowns to an average of
 one per month. Which policy is suitable for the company? (10 marks)

20- 2018 - June [5] (b) A cab operations company is experiencing the following number of breakdowns for
months over the past 2 years in their new fleet of cabs:

Number of breakdowns 0 1 2 3 4
Number of months this occurred 3 7 9 4 1

Each breakdown costs the firm an average of ` 2,500. For a cost of ` 1,600 per month, preventive
maintenance can be carried out to limit the breakdowns to an average of one per month. Which policy is
suitable for the firm? (8 marks)

21- 2018 - Dec [5] (b) An automotive firm is using a machine whose purchase price is ` 18,000.
The Installation charges amount to ` 3,800 and the machine has a scrap value of only ` 1,800 because
the firm has a monopoly of this type of work. The maintenance cost in various years is given in the
following table:

Year 1 2 3 4 5 6 7 8 9
Maintenance cost 250 720 1200 1700 2300 3200 4300 4800 6300
(`)

The firm wants to determine after how many years should the machine be replaced on economic
considerations, assuming that the machine replacement can be done only at the year end.
(10 marks)
Strategic Management

SM Notes (Part-B)
New Syllabus
by
ONLY FOR CMA
CMA Inter Group-2

40 Marks
40 Marks
Section – B [Strategic Management]
◉ Module 8 = Introduction

◉ Module 9 = Strategic Analysis and Strategic Planning

◉ Module 10 = Formulation and Implementation of Strategy

◉ Module 11 = Digital Strategy

Module – 8 Introduction

This Module Includes

Chapter- 1 Introduction to Strategy and Strategic Management

Chapter- 2 Alignment of Strategy with Vision, Mission and
Culture
Chapter- 3 Objectives of Strategic Management
Chapter- 4 Organisational Genomics
Chapter- 5 Alignment with Individual Level Objective and
Organizational Objective
Chapter- 6 Balanced Score Card
Chapter- 7 EVA – Driven Responsibility Accounting
Chapter-1 Introduction of Strategy and Strategic
Management
Strategy
1. The term strategy is derived from the Greek word strategia, meaning “generalship’
2. Strategy is all about integrating organizational activities and utilizing and allocating the scarce
resources within the organizational environment so as to meet the present objectives.
3. While planning a strategy it is essential to consider that decisions are not taken in a vacuum and
that any act taken by a firm is likely to be met by a reaction from those affected, competitors,
customers, employees or suppliers.
4. Strategy may be defined as the direction and scope of an organisation over the long term, which
achieves advantage for the organisation through the configuration of resources within a changing
environment and to fulfil stakeholder expectations.

Characteristics of Strategy or Strategic decision.

1. Strategy is likely to be concerned with the long-term direction of an organization.
2. Strategic decisions are normally about trying to achieve some advantage for the organization over
competition.
3. Strategic decisions are concerned with the scope of the organization’s activities.
4. Strategy can be seen as matching the resources and activities to the environment in which it
operates.
5. Strategy can be seen as stretching an organisation’sresources and competencesto create new
opportunities or to capitalise on them
6. Strategies may require major resource changes for an organization.
7. Strategic decisions are likely to affect operational decisions.
8. The strategy of an organization is affected not only by environmental forces and resource availability
but also by the values and expectations of those who have power in and around the organization.

The consequences of the characteristics of strategy:

A- likely to be a complex in nature.
B- Likely to be made in situations of uncertainty.
C- Likely to demand an integrated approach.
D- Manage change relationships and networks outside the organization.
E- Strategic Decisions will very often involve change in organizations.

A typical business firm usually considers three types of strategy.

◉ Corporate strategy:
1. It is concerned with the overall purpose and scope of an organisation and how value will be added
to the different parts (business units) and product lines of the organisation.
2. Corporate strategies typically fit within the three main categories of stability, growth and
retrenchment.
3. Decisions include investment in diversification, vertical integration, acquisitions, new ventures, the
allocation of resources between the different businesses of the firm and divestments.

◉ Business strategy:
1. It is about how to compete successfully in particular markets.
2. It emphasizes improvement of the competitive position of a organization’s products or services
in the specified industry or market segment served by that business unit.
3. These strategies fit within the two overall categories, namely, competitive andcooperative
strategies.
◉ Functional strategy or Operational Level Strategy:
1. It is concerned with how the component parts of an organization deliver effectively the
corporate and business level strategies in terms of resources, processes and people.
2. It is concerned with developing and nurturing competence to provide a business unit with
a competitive advantage. These strategies are taken at the functional level directed towards
maximizing resource productivity.

Red Oceans VS. Blue Oceans

Red Oceans –
• Red oceans represent all the industries that are currently in existence and are the known market
space.
• In the red oceans, industry boundaries are defined and accepted, and the competitive rules of the
game are known.
• In a red ocean market or a red ocean strategy, there is a concentrated market and will be highly
competitive.
• These are normally found by the small but unpopular market.
• In a red ocean market, the competition would normally be high, and the existing companies
compete with each other using competitive methods.
• One of the examples of a red ocean company can be different automobile companies. All the
various companies are competing with each other to solve the same problem, or the demand faced
by the consumers. A red ocean market is highly competitive and would be riskier for a new company
especially a startup.

Blue Oceans –
 • The concept of Blue Ocean Strategy was first coined by W. Chan Kim and Renee Mauborgne in their
book
• According to them Blue oceans denote all the industries which are currently not existence and
remain unexplored, unknown and untainted by competition.
• A blue ocean strategy is focused more on the new trends and demands of the consumers in creating
a new market based on it.
• Blue oceans are a more unoccupied market and not much known. The blue ocean market is mostly
concentrated on providing value and is created based on that.
• In the blue ocean strategy, a new product or service is created which is not available in the market
which would solve a problem that is already there in the market. The blue ocean market pays a lot
of attention to value and innovation aspects.

Strategic Management
1. It refers to a set of managerial decisions and actions that determines the long term performance of
an organisation.
2. Originally called ‘corporate planning’, the shift from ‘corporate planning’ to what became termed as
‘strategic management’ was associated with increasing focus on competition.

Strategic
Management

Environmental Strategy Strategy Evaluation and

Scanning Formulation Implementation Control

Environmental scanning:
1. It refers to the monitoring, evaluating and disseminating of information from the external and
internal environments to key people within the organisation.
2. The purpose is to identify the strategic factors both internal and external elements that will shape
the future of the organisation.
3. The range of methods and techniques available for environmental scanning is wide.

Strategy Formulation:
1. It refers to the development of long range plans for the effective management of environmental
opportunities and threats, in the light of corporate strengths and weaknesses (SWOT).
2. It includes defining the mission, setting objectives, developing strategies and setting policy
guidelines.

Strategy Implementation:
1. It is the process by which strategies and policies are put into practise though the development of
programs, budgets and procedures.
2. This includes day to day decisions in resource allocation and is typically conducted by the middle
and lower level managers with review by the top management.
 3. It involves taking actions at the functional, business and corporate levels to execute a strategic plan.
4. Implementations include, for example, putting quality improvement programs, changing the way
product is designed, positioning the product differently, market segmentation, expanding through
mergers and acquisitions and downsizing the company.

Evaluation and control:

1. It involves the process through which organisational activities and performances are monitored. The
actual performances are compared to the desired performances and corrective actions are taken to
resolve problems. The process of evaluation and control helps to identify the weakness and lacunae
of the previously implemented strategic plan and thereby, stimulates the entire process to begin
again
Chapter-2 Alignment of Strategy with Vision,
Mission & Culture
Vision:
• Nike: ‘To bring innovation and inspiration to ever athlete
in the world.’

• Scotland Yard: ‘to make London the safest

major city in the world

• Dabur: ‘Dedicated to the health and well being of

every household.’
• Infosys: ‘To be a globally respected corporation
that provides best-of- breed business solutions, leverage

Meaning And Use Of Mission:

1. The term ‘mission’ implies the fundamental and enduring objectives of an organisation that set it
apart from other organisations of similar nature. The mission is a general enduring statement of
instruction of an organisation.
2. The corporate mission highlights the organisation self-concept and indicates the nature of product
or service to be offered or rendered for fulfillment of the requirements of the customers as also for
the community and society as a whole.
3. The mission may, as such, be described as the scope of operations in terms of product, market or
the service as well as customers and clients
4. A company’s mission describes its purpose and its present business (who we are, what we do and
why we are here). It announces what the company is providing to society; either a service or a
product.
5. The mission statement of an organisation can be either product oriented or customer oriented.
6. A product-oriented business definition focuses on the characteristics of the products sold and the
markets served, not on which kinds of customer needs the products are satisfying
7. A customer –oriented view of a company’s business focuses on customer needs rather than a
particular product (or solution) for satisfying those needs. A customer-oriented mission statement
also assists companies in capitalizing on changes in their environment

Mission statement of some organisations and the nature of the statement

1. Bharat Gas: To make Bharat Gas a dominant brand in the

segments we market, by becoming trendsetters in customer service, safety and
quality. (It is a customer oriented mission statement).

2. Nirma: Nirma is a customer focused company committed to

consistently offer better quality products and services that maximise value to the customer.
(It is a customer oriented mission statement).
3. Microsoft corporation: to empower every person and every
organisation on the planet to achieve more. (It is a customer oriented mission statement).

Mission includes
∙ A definition of products and services the organisation provides.
∙ Technology used to provide these products and services.

∙ Types of markets
∙ Customers need or requirement
∙ Distinctive Competencies

Defining The Company Mission:

What is a Company Mission?

1. The mission of a business is the fundamental, unique purpose that sets it apart from other
firms of its type and identifies the scope of its operations in product and market terms.

2. In short, the mission describes the product, market, and technological areas of emphasis
for the business in a way that reflects the values and priorities of the strategic decision
makers.

Objectives and Goals

1. We frequently use the term organisation’s “objectives and goals”, the term “objective
and goals” set target of any particular aspect like profit and revenue growth, etc.
2. Here are some common definitions of Objectives.
a) Objectives are performance targets which organisations wants as to result or outcomes in
the specified periods
b) Objectives achievements are used as benchmark of organisation performance and success.
c) Objectives are formed from visions and mission statement of organisations.
d) Objectives are forlong term whereas goals are for short term.

Objectives should possess certain desirable characteristics in order to be

effective. They are as follows:
1. Specific:
The first step towards setting objectives is to specify what the company wants to achieve. This
involves answer to five specific set of questions namely, what the organisation wants to achieve?
Why the company wants to achieve? Who are being involved in the process? Where it wants to
achieve and which are the resources and constraints that needs to be identified? Specific objectives
are more likely to lead and motivate the managers.
 2. Understandable:
The objectives should be such that they are understandable to those who are expected to achieve
them. Clarity in objectives helps to avoid ambiguity which in turn helps to achieve the desired
results.
3. Measurable:
Objectives should be precise and measurable. There has to be a standard against which they can
judge their performance. It is often considered to be a good practice to quantify objectives rather
than to state them in qualitative terms. It helps to measure and control the achievement of the
objectives with respect to comparable companies in a particular industry and in general.
4. Attainable:
Objectives must be challenging but realistic or attainable. They give all employees an incentive to
look for ways of improving the operations of an organisation. If an objective is unrealistic in the
challenges it poses, employees may give up; an objective that is too easy may fail to motivate
managers and other employees.
5. Relevant:
Objectives must be linked to the overall vision and mission of the organisation. There should not be
any conflict between the objectives that the management has set with the goals of the organisation.
This is a very important task as misalignment between the two can lead to failure in achieving the
corporate vision.
6. Time Bound:
Objectives should specify a time period. Time constraints tell employees that success requires an
objective to be attained by a given date, not after that date. Deadlines can inject a sense of urgency
into objective attainment and act as a motivator. However, not all objectives require time
constraints.

Organisational culture:
Organisational culture is the ‘basic assumptions and beliefs that are shared by members of an organisation,
that operate unconsciously and define in a basic taken-for-granted fashion an organisation’s view of itself
and its environment’. Related to this are taken-for-granted ways of doing things, the routines that
accumulate over time. In other words, culture is about that which is taken for granted but none the less
contributes to how groups of people respond and behave in relation to issues they face. It therefore has
important influences on the development and change of organisational strategy.

Culture’s influence on strategy

The taken-for-granted nature of culture is what makes it centrally important in relation to strategy and the
management of strategy. There are two primary reasons for this:
a. Managing culture: Because it is difficult to observe, identify and control that which is taken for
granted, it is difficult to manage. This is why having a way to analyse culture so as to make it more
evident is important.
b. Culture as a driver of strategy: Organisations can be ‘captured’ by their culture and find it very
difficult to change their strategy outside the bounds of that culture. Managers, faced with a
changing business environment, are more likely to attempt to deal with the situation by searching
for what they can understand and cope with in terms of the existing culture.
Chapter-3 Objectives of Strategic Management
The objectives of strategic management may be listed as under:
◉ To identify opportunities and adapt resources to exploit the opportunities created.
◉ To create opportunities by stretching the resources and competences of the organisation and capitalise
them.
◉ To help managers to understand the key relationships among actions, context, and performance by
providing the conceptual frameworks.
◉ To help an organization enjoy competitive advantage.
◉ To monitor and remain responsive to the demands of key stakeholders.
◉ To identify the critical success factors and meet the needs and wants of the customers.
◉ To avoid failure by focusing on the building blocks of competitive advantage (superior efficiency, superior
quality, superior innovation and superior responsiveness to customers), instituting continuous
improvement and learning, tracking the best industrial practices and using benchmarking.
◉ To overcome inertia and accept the changes in the ever-changing environment to remain competitive
and at times to survive.
◉ To develop a creative and innovative attitude and to think strategically
Chapter-4 Organizational Genomics
Introduction:-
1. Genomics is the study of all of a person’s genes (the genome), including interactions of those genes
with each other and with the person’s environment.
2. The organization of modern corporations helps in interaction with stakeholders.
3. A stakeholder is any person or group associated with the organization that has a stake in the
organization’s output. Corporations face a massive challenge in trying to organize, communicate
and respond to all of their different stakeholders.
4. The most efficient way for corporations to interact with each different stakeholder group is to
establish boundary-spanning departments, which are offices within an organization that interact
across boundaries that divide the company between different stakeholders.
5. Department of Public Affairs, investor relations, customer relations, community relations, etc. are
some of the examples of boundary- spanning departments. All managers and employees need to be
aware of how people behave in order to provide the best working environment.
6. Organizational behaviour is about how people may be motivated to work together in more effective
ways. The interaction required to direct a group toward a set of common goals is called
organizational communication.

Strategic Leadership
It is about how to effectively manage a company’s strategy making process to create competitive
advantage. Strategic leaders must strive towards maximising shareholders value by balancing the profit
growth and profitability of the organisation. Some of the key qualities that a strategic leader is expected to
have are as follows:
1. Strategic leader should be a visionary. He should have a strong sense of direction and a clear and
compelling vision of where the organisation should go.
2. A good strategic leader must have the ability to identify and articulate the business model the
organisation will use to attain the vision. This requires a fit between the organisational strategies
with the organisational vision.
3. A good strategic leader should demonstrate a sense of commitment towards the vision and the
business model through his actions and words.
4. He should develop a strong network of both formal and informal sources to remain well informed
about whatever is happening in and around the organisation.
5. A good strategic leader should be able recognise and empower subordinates to make decisions.
This not only acts as a motivator for the subordinates but also relives the leader from being
overloaded with responsibilities.
6. In this process of delegation, the strategic leader may delegate many important responsibilities to
his subordinates but he will not delegate those which are of critical importance to the success of
the organisation. A good strategic leader should try to develop a consensus for his ideas among his
subordinates rather than attempt to use his authority to force the ideas through.

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Emotional Intelligence
In order to estimate someone’s psychological capabilities Goleman (1998) used a term called emotional intelligence.
Emotional intelligence is a term that Daniel Goleman coined to describe a bundle of psychological attributes that
many strong and effective leaders exhibit
1. Self-awareness—the ability to understand one’s own moods, emotions, and drives, as well as their effect
on others.
2. Self-regulation—the ability to control or redirect disruptive impulses or moods, that is, to think before
acting.
3. Motivation—a passion for work that goes beyond money or status and a propensity to pursue goals with
energy and persistence.
4. Empathy—the ability to understand the feelings and viewpoints of subordinates and to take those into
account when making decisions.
5. Social skills—friendliness with a purpose.

Organizational Change
In any business environment, change should happen. It shows one’s commitment to the kind of growth and
evolution it takes to stay modern, relevant, and competitive. Countless factors make change inevitable. But what
kind of change we are thinking about is important. Change can include things like:
◉ Introducing new software or updating marketing practices
◉ Updated business processes
◉ A full-on restructuring
◉ Leadership changes
◉ Updated thinking
◉ New project management tools
◉ Budget constraints
◉ Shifts in strategy

There are countless organizational change management (OCM) methods. Each involves a basic series of steps or
practices that could be linear or cyclical in approach. Some of the most popular methods include:
◉ Kotter 8-Step Process for Leading Change: Create → Build → Form → Enlist → Enable → Generate → Sustain →
Institute
◉ McKinsey & Company’s 7-S Framework: Style, Skills, Systems, Structure, Staff, and Strategies = Shared Values &
Goals
◉ Kurt Lewin’s Change Model: Unfreeze → Change → Refreeze
◉ ADKAR Model: Awareness → Desire → Knowledge → Ability → Reinforcement
◉ The Kubler-Ross Model: Shock → Anger → Bargaining → Depression → Acceptance
◉ Satir Change Management Model: Late Status Quo → Resistance → Chaos → Integration → New Status Quo
◉ William Bridges’ Transition Model: Ending → Neutral Zone → New Beginnings

However, there is no right or wrong in terms of which method to choose. Any method can facilitate smooth
transitions and positive change. The best method depends on the organisation and stakeholder needs and
preferences. Methods are generally seen as interchangeable.

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Chapter-5 Alignment with Individual Level Objective and
Organizational Objective
Introduction
1. Personal objectives refer to the job-specific goals of each individual employee.
2. They are important because they communicate to employees what is important and what is
expected of them.
3. Managers usually set between five and seven goals per employee using a mix of those that are
activity-based such as number of sales calls per week and/or outcome-based measures such as
closed sales in dollar amounts.
4. When completed at the individual level, managers may add more objectives specifically designed to
maximize team efforts.
5. The goal is to achieve quantity and quality of effort between individuals and the team.
◉ Employee objectives are ways to measure progress and performance for members of a team.
◉ These can help employees better understand their roles and help managers guide their teams
in achieving important organizational and personal goals.
◉ Knowing how to write effective objectives can help leaders and team members create a more
productive work environment.
◉ Employee objectives are targets that an employee and their manager agree on to measure the
employee’s job performance.
◉ Companies may set new objectives for their employees quarterly, biannually or annually.
◉ These objectives provide employees with guidance for their responsibilities that contribute to
larger company goals.
◉ Employees and managers periodically review the employee’s progress toward achieving their
goals.

SMART
To create effective objectives, make sure they’re specific, measurable, attainable, relevant and time-based. These
guidelines are often abbreviated using the acronym SMART. Here are more details regarding the SMART goal
framework:
◉ Specific: Specific goal provides the employee with the exact result needed for their performance to be
successful. A clear objective can optimize productivity and effectiveness.
◉ Measurable: Successful goals can usually be measured using metrics that determine an employee’s success or
progress. A quota, for example, is one way to measure an employee’s success.
◉ Attainable: Effective goals are often those which are ambitious and also possible to achieve. Consider if and
how an employee can attain their objectives with the tools and resources available to them within a specified
time frame.

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 ◉ Relevant: A relevant objective
contributes to the larger goals of a
company. Consider the upward
impact of employees achieving
certain goals, like how they tie to
bigger company strategies like
growth.
◉ Time Based: Set realistic timelines for
employees to complete their tasks.
If a task is ongoing, you might
consider your next review as a
deadline for achieving objectives.
SMART goals help clarify responsibilities
and ensure both manager and
employee knows what to expect. They
can help develop employees’ skills and
move goals forward toward larger, higher-
level goals.

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FAST framework
1. It was in the year 1954 when Peter Drucker, the great management guru, introduced “management by
objectives”.
2. Management by objectives according to Drucker is an approach where employees would agree with their
boss on a set of goals and work toward achieving those objectives throughout the year.
3. The importance of goal setting and accomplishment of objectives has been the central for managers who
follow a well-established set of practices.
4. Traditionally the managers aspired to make their goals SMART, by ensuring they are specific, measurable,
achievable, realistic, and time-bound.
5. However, over the past few decades, a handful of leading companies including Google, Intel, etc. have
pioneered and refined an alternative approach to harness the power of goals to drive and align action.
6. The four core principles that underpin effective goal systems can be summarised into the acronym FAST.
Goals should be embedded in frequent discussions; ambitious in scope;
7. Modern concept views goals to be FAST and not SMART.

Acronym Term Definition Advantages

Frequently Goals should be frequently discussed in ◉ Gives guidance for important decisions.
F discussed order to see the progress, allocate ◉ Helps employees remain focused on the
resources as and when needed, most important matters.
prioritise of initiatives and provide ◉ Links performance feedback to concrete
feedback goals.
◉ Evaluates the progress and helps in
course corrections.
Ambitious Goals should be challenging or ◉ Motivates performance of individuals
A ambitious but not impossible to and teams towards goal.
achieve ◉ Helps in minimising the risk of
downplaying the achievements of the
subordinates.
◉ Focuses on the innovative ways to
achieve goals.

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 Specific Goals should be translated into specific ◉ Clearly mentions what the employees
S metrics so that there is clarity in are expected to deliver.
achieving the goals ◉ Helps in easy identification of deviations
from the goals and offers quick course
corrections.
◉ Enhances performance of individuals
and teams.
Transparent Goals and their achievements should ◉ Use of peer pressure to perform on
T be made public for all employees to goals.
see. ◉ Clearly showcases the activities and
contribution of the employees towards
goal achievement.
◉ Helps employees understand the agenda
of other employees and the teams.
◉ Helps to identify the strategies those are
redundant and are not aligned to the
overall organizational goals

Performance objectives
Performance objectives for employees are set so that they can know what is expected of them and understand what
they are accountable for. They can be performance-based, or they can be development-led. The following are some
of the examples of performance objectives for employees.

◉ Productivity: This has to do with the amount of work that an employee is expected to perform within a specific
time. This is one of the most important performance objectives for employees. In the service industry such as
banking, this could be the number of clients that a service consultant has assisted. This helps to increase
productivity within a business, and it can increase sales and revenue.

◉ Quality and efficiency: This has to do with the manner of performing activities. It takes productivity further to
deal with how fast the worker can perform a task. This measure also takes quality into consideration. Not only
should the service be fast, but it must be of good quality. This is one of the most vital performance objectives
for employees because it makes them pay more attention to the quality of their work which reduces human
error while increasing productivity. ‘

◉ Education and self-development: This performance objective for employees considers the needs of workers. It
focuses on the goals workers set to develop themselves. It can include things such as an employee learning a
new skill, doing a new course or simply job-shadowing someone. This makes workers more valuable due to
continuous growth in their respective fields. This also encourages employers to see how committed workers
are to their own growth and personal development

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Chapter-6 Balance Score Card
The balanced scorecard: a framework to translate a strategy into operational terms. Source: Robert S. Kaplan and
David P. Norton, ‘‘Using the balanced scorecard as a strategic management system,’’ Harvard Business Review
January. February 1996

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Chapter-7 EVA – Driven Responsibility Accounting
1. Profit is the surplus of revenues over costs available for distribution to the owners of the firm.

2. The transition from accounting profit to economic profit was triggered due to a major problem of
accounting profit as it combines two types of returns: the normal return to capital that rewards
investors for the use of their capital; and economic profit, which is the pure surplus available after
all inputs (including capital) have been paid for.

3. Economic profit represents a purer and more reliable measure of profit that is a better measure of
performance. In order to distinguish economic profit from accounting profit, economic profit is
often referred to as rent or economic rent.

4. A widely used measure of economic profit is economic value added (EVA), devised and popularised
by the New York consulting firm Stern Stewart & Company.

5. EVA = Net Operating Profit After Tax (NOPAT) - Cost Of Capital

Cost of capital is calculated as: capital employed multiplied by the weighted average of capital
(WACC).

6. Economic profit has two main advantages over accounting profit as a performance measure.

◉ First, it sets a more demanding performance discipline for managers. As Stern Stewart’s
calculations show, many major corporations’ apparent profitability disappears once cost of
capital is taken into account.
◉ Second, using economic profit improves the allocation of capital between the different
businesses of the firm by taking account of the real costs of more capital intensive businesses.

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Important Question
Module- 8 Introduction
Explain the meaning of Strategy and its characteristics?
1. The term strategy is derived from the Greek word strategia, meaning “generalship’
2. Strategy is all about integrating organizational activities and utilizing and
allocating the scarce resources within the organizational environment so as
to meet the present objectives.
3. While planning a strategy it is essential to consider that decisions are not taken
in a vacuum and that any act taken by a firm is likely to be met by a reaction
from those affected, competitors, customers, employees or suppliers.
4. Strategy may be defined as the direction and scope of an organisation over the long
term, which achieves advantage for the organisation through the configuration of
resources within a changing environment and to fulfil stakeholder expectations.

Characteristics of Strategy or Strategic decision.

1. Strategy is likely to be concerned with the long-term direction of an organization.
2. Strategic decisions are normally about trying to achieve some advantage for the
organization over competition.
3. Strategic decisions are concerned with the scope of the organization’s activities.
4. Strategy can be seen as matching the resources and activities to the
environment in which it operates.
5. Strategy can be seen as stretching an organisation’sresources and competencesto
create new
opportunities or to capitalise on them
6. Strategies may require major resource changes for an organization.
7. Strategic decisions are likely to affect operational decisions.
The strategy of an organization is affected not only by environmental forces and resource
availability but also by the values and expectations of those who have power in and around
the organization
“A typical business form usually considers three types of Strategy” –
Discuss.
A typical business firm usually considers three types of strategy
1. Corporate strategy: It is concerned with the overall purpose and scope of an
organisation and how value will be added to the different parts (business units) and
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 product lines of the organisation. Corporate strategies typically fit within the three
main categories of stability, growth and retrenchment. Decisions include investment
in diversification, vertical integration, acquisitions, new ventures, the allocation of
resources between the different businesses of the firm and divestments.

2. Business strategy: It is about how to compete successfully in particular markets. It

emphasises improvement of the competitive position of a organisation’s products or
services in the specified industry or market segment served by that business unit.
These strategies fit within the two overall categories namely, competitive and
cooperative strategies.

3. Functional strategy or Operational Level Strategy: It is concerned with how the

component parts of an organisation deliver effectively the corporate and business
level strategies in terms of resources, processes and people. It is concerned with
developing and nurturing competence to provide a business unit with a competitive
advantage. These strategies are taken at the functional level directed towards
maximising resource productivity. It may be mentioned that organisations use all the
three types of strategies simultaneously. The term ‘hierarchy of strategy’ is
commonly used to explain the nesting of one strategy within another so that they
complement and support one another. It also refers to the grouping of strategies by
level in the organisation. Functional strategies support business strategies, which in
turn support the corporate strategy.

What do you mean by Strategic management and its Characteristics?

1. It refers to a set of managerial decisions and actions that determines the long term
performance of an organisation.
2. Originally called ‘corporate planning’, the shift from ‘corporate planning’ to what
became termed as ‘strategic management’ was associated with increasing focus on
competition.
Strategic
Management

Environmental Strategy Strategy Evaluation and

Scanning Formulation Implementation Control

• Environmental scanning:

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 1. It refers to the monitoring, evaluating and disseminating of information from
the external and internal environments to key people within the organisation.
2. The purpose is to identify the strategic factors both internal and external
elements that will shape the future of the organisation.
3. The range of methods and techniques available for environmental scanning is wide.

• Strategy Formulation:

1. It refers to the development of long range plans for the effective management
of environmental opportunities and threats, in the light of corporate strengths
and weaknesses (SWOT).
2. It includes defining the mission, setting objectives, developing strategies
and setting policy guidelines.
• Strategy Implementation:

1. It is the process by which strategies and policies are put into practise though the
development of programs, budgets and procedures.
2. This includes day to day decisions in resource allocation and is typically
conducted by the middle and lower level managers with review by the top
management.
3. It involves taking actions at the functional, business and corporate levels to
execute a strategic plan.
4. Implementations include, for example, putting quality improvement programs,
changing the way product is designed, positioning the product differently,
market segmentation, expanding through mergers and acquisitions and
downsizing the company.
• Evaluation and control:
It involves the process through which organisational activities and performances are
monitored. The actual performances are compared to the desired performances and
corrective actions are taken to resolve problems. The process of evaluation and
control helps to identify the weakness and lacunae of the previously implemented
strategic plan and thereby, stimulates the entire process to begin again

What do you mean by Emotional Intelligence?

In order to estimate someone’s psychological capabilities Goleman (1998) used a term
called emotional intelligence. Emotional intelligence is a term that Daniel Goleman coined
to describe a bundle of psychological attributes that many strong and effective leaders
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exhibit
1. Self-awareness—the ability to understand one’s own moods, emotions, and
drives, as well as their effect on others.
2. Self-regulation—the ability to control or redirect disruptive impulses or moods,
that is, to think before acting.
3. Motivation—a passion for work that goes beyond money or status and a
propensity to pursue goals with energy and persistence.
4. Empathy—the ability to understand the feelings and viewpoints of subordinates
and to take those into account when making decisions.
5. Social skills—friendliness with a purpose.

Write the objectives of strategic Management?

1. To identify opportunities and adapt resources to exploit the opportunities created.
2. To create opportunities by stretching the resources and competences of the
organisation and capitalise them.
3. To help managers to understand the key relationships among actions, context, and
performance by providing the conceptual frameworks.
4. To help an organisation enjoy competitive advantage.
5. To sustain and improve the competitive position by the deployment and acquisition
of appropriate resources and by monitoring and responding to environmental
changes.
6. To monitor and remain responsive to the demands of key stakeholders.
7. To identify the critical success factors and meet the needs and wants of the
customers.
8. To avoid failure by focusing on the building blocks of competitive advantage (superior
efficiency, superior quality, superior innovation and superior responsiveness to
customers), instituting continuous improvement and learning, tracking the best
industrial practices and using benchmarking.
9. To overcome inertia and accept the changes in the ever-changing environment to
remain competitive and at times to survive.
10.To develop a creative and innovative attitude and to think strategically.

Explain SMART Framework?

To create effective objectives, make sure they’re specific, measurable, attainable, relevant
and time-based. These guidelines are often abbreviated using the acronym SMART. Here
are more details regarding the SMART goal framework:
◉ Specific: Specific goal provides the employee with the exact result needed for their
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 performance to be successful. A clear objective can optimize productivity and
effectiveness.
◉ Measurable: Successful goals can usually be measured using metrics that determine an
employee’s success or progress. A quota, for example, is one way to measure an
employee’s success.
◉ Attainable: Effective goals are often those which are ambitious and also possible to
achieve. Consider if and how an employee can attain their objectives with the tools and
resources available to them within a specified time frame.
◉ Relevant: A relevant objective contributes to the larger goals of a company. Consider
the upward impact of employees achieving certain goals, like how they tie to bigger
company strategies like growth.
◉ Time Based: Set realistic timelines for employees to complete their tasks. If a task is
ongoing, you might consider your next review as a deadline for achieving objectives.
SMART goals help clarify responsibilities and ensure both manager and employee knows
what to expect. They can help develop employees’ skills and move goals forward toward
larger, higher-level goals.
Explain FAST framework?
1. It was in the year 1954 when Peter Drucker, the great management guru, introduced
“management by objectives”.
2. Management by objectives according to Drucker is an approach where employees
would agree with their boss on a set of goals and work toward achieving those
objectives throughout the year.
3. The importance of goal setting and accomplishment of objectives has been the
central for managers who follow a well-established set of practices.
4. Traditionally the managers aspired to make their goals SMART, by ensuring they are
specific, measurable, achievable, realistic, and time-bound.
5. However, over the past few decades, a handful of leading companies including
Google, Intel, etc. have pioneered and refined an alternative approach to harness the
power of goals to drive and align action.
6. The four core principles that underpin effective goal systems can be summarised into
the acronym FAST. Goals should be embedded in frequent discussions; ambitious in
scope;
7. Modern concept views goals to be FAST and not SMART.

Acronym Term Definition Advantages

F Frequently Goals should be frequently ◉ Gives guidance for important
discussed discussed in order to see the decisions.
progress, allocate resources ◉ Helps employees remain

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 as and when needed, focused on the most
prioritise of initiatives and important matters.
provide feedback ◉ Links performance feedback
to concrete goals.
◉ Evaluates the progress and
helps in course corrections.
A Ambitious Goals should be challenging ◉ Motivates performance of
or ambitious but not individuals and teams
impossible to achieve towards goal.
◉ Helps in minimising the risk of
downplaying the
achievements of the
subordinates.
◉ Focuses on the innovative
ways to achieve goals.
S Specific Goals should be translated ◉ Clearly mentions what the
into specific metrics so that employees are expected to
there is clarity in achieving deliver.
the goals ◉ Helps in easy identification of
deviations from the goals and
offers quick course
corrections.
◉ Enhances performance of
individuals and teams.
T Transparent Goals and their ◉ Use of peer pressure to
achievements should be perform on goals.
made public for all ◉ Clearly showcases the
employees to see. activities and contribution of
the employees towards goal
achievement.
◉ Helps employees understand
the agenda of other
employees and the teams.
◉ Helps to identify the
strategies those are
redundant and are not
aligned to the overall
organizational goals

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Explain the concept of Balance Score Card
The balanced scorecard: a framework to translate a strategy into operational terms. Source:
Robert S. Kaplan and David P. Norton, ‘‘Using the balanced scorecard as a strategic
management system,’’ Harvard Business Review January. February 1996

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Module 9 Strategic Analysis and Strategic Planning
This Module Includes

Chapter- 1 Analysis of Business Environment

Chapter- 2 PESTEL, Value Chain and Porter’s 5 Framework
Chapter- 3 SWOTC Analysis (Industry Sector and Company)
Chapter- 4 Portfolio Analysis and BCG Matrix
Chapter- 5 Stages in Strategic Planning
Chapter- 6 Alternatives in Strategic Planning

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Chapter- 1 Analysis of Business Environment

Introduction
1. Business environment refers to the sum total of all the conditions, events and influences in and
around an organization that affects it hence, a clear understanding of business environment is of
crucial importance.
2. The very survival of an organization depends on its environment. However, the environment is also
the source of threats for example, hostile shifts in market demand, new regulatory requirements,
innovations in technology or the entry of new competitors.
3. Environmental change can be both an opportunity as well as a threat to an organization.
4. It is vital that managers analyses their environments carefully in order to anticipate and if possible
influence environmental change.

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 • The macro-environment is the outermost and the highest-level layer. This consists of broad
environmental factors that impact to a greater or lesser extent on almost all organisations.

• Industry, or sector, forms the next layer with this broad general environment. This is made up of
organisations producing the same products or services.

• Competitors and markets are the most immediate layer surrounding organisations. Within most
industries or sectors there will be many different organisations with different characteristics and
competing on different bases, some closer to a particular organisation, some more remote.

Characteristics of Business Environment

Business environment exhibits many characteristics. Some of the important characteristics are as follows:

1. Environment is complex: The business environment happens to be very complex as it comprises of a

number of factors namely, events, conditions and influences arising from different sources interacting
with each other to create entirely new sets of influences. It is indeed difficult to instantly say what
factors constitute a given environment. Environment is a complex phenomenon and it is easier to
understand it in segments or compartments rather than grasp in totality.

2. Environment is dynamic: The changing nature of environment is a constant. The dynamism of the
environment is largely due to large number of factors that continuously influences its character and
shape.

3. Environment is Multi-faceted: The perception of the observer is very important to determine the
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 shape and character of thee environment. Changes in the environment may be perceived differently
by different individual. The changes and developments may be considered to be an opportunity to one
and a threat to others.

4. Environment has a far reaching impact: The impact of environment on an organisation is huge. It
critically underpins the growth and profitability of an organisation. Any changes in the environment
affect the organisation in more ways than one. The very survival and existence of an organisation is
critically dependent on its environment.

Chapter- 2 PESTEL, Value Chain and Porter’s 5 Framework

PESTEL
The PESTEL framework is an extension of the PEST strategic framework, one that includes additional
assessment of the Environmental and Legal factors that can impact a business. The PESTEL framework
shows some of the macro-environmental influence which might affect organizations. It focuses on
the six principal components of strategic significance in the macro-environment namely, political,
economic, social, technology, environmental and legal forces.

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 ◉ Political factors
These factors determine the extent to which a government may influence the economy or a certain
industry. For example, a government may impose a new tax or duty due to which entire revenue
generating structures of organizations might change. Political factors include tax policies, Fiscal policy,
trade tariffs, etc. that a government may levy around the fiscal year and it may affect the business
environment (economic environment) to a great extent.

◉ Economic Factors
These factors are determinants of an economy’s performance that directly impacts a company and have
resonating long term effects. For example, a rise in the inflation rate of any economy would affect the
way companies price their products and services. Adding to that, it would affect the purchasing power of
a consumer and change demand/supply models for that economy. Economic factors include inflation
rate, interest rates, foreign exchange rates, economic growth patterns, etc. It also accounts for the FDI
(foreign direct investment) depending on certain specific industries who’re undergoing this analysis.

◉ Socio-cultural factors
These factors scrutinize the social environment of the market, and gauge determinants like cultural
trends, demographics, population analytics, etc. An example of this can be buying trends for Western
countries like the US where there is high demand during the Holiday season.

◉ Technological factors
These factors pertain to innovations in technology that may affect the operations of the industry and the
market favorably or unfavorably. This refers to automation, research and development, and the amount
of technological awareness that a market possesses.

◉ Environmental factors
They include protection laws, waste disposal, energy consumption, weather, climate, climate
change and associated factors like water shortages. These factors can directly impact industries
such as insurance, farming, energy production, and tourism. They may have an indirect but
substantial effect on other industries such as transportation and utilities.

◉ Legal
These factors have both external and internal sides. There are certain laws that affect the business
environment in a certain country while there are certain policies that companies maintain for
themselves. Legal analysis takes into account both of these angles and then charts out the strategies in
light of these legislations. For example, consumer laws, safety standards, labor laws, etc.

PORTER’S FIVE FORCES FRAMEWORK

The five forces framework helps to identify the sources of competition in an industry or sector. When
using this framework to understand competitive forces it is essential to keep in mind the following:
◉ It must be used at the level of strategic business units and not at the level of whole organization.
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 This is because organizations are diverse in their operations and markets.

◉ The framework must not be used just to give a snapshot in time. It is important not just to
describe these forces but also to understand how they can be countered and overcome in the
future.

◉ These competitive forces will not only be subject to steady changes into the future but, more
importantly, the discontinuities caused by changes in the macro-environment.

◉ The five forces are independent of each other. Pressures form one direction can trigger off
changes in another in a dynamic process of shifting sources of competition.

◉ Competitive behaviour may be concerned with disrupting these forces and not simply
accommodating them.

The five forces are discussed hereunder: Risk of Entry by Potential Competitors
Threat of entry will depend on the extent to which there are barriers to entry. Barriers to
entry are factors that need to be overcome by new entrants if they are to compete
successfully. These should be seen as providing delays to entry and not as permanent
barriers. The typical barriers are:

Economies of Scale
Economies of scale arise when unit costs fall as a firm expands its output. Sources of scale
economies include cost reductions gained through mass producing a standardised
commodity, discounts on bulk purchases of raw material inputs and component parts,
the advantages gained by spreading fixed production costs over a large production
volume and the cost savings associated with spreading marketing and advertising costs
over a large volume of output. If theses cost advantages are significant then a new
company that enters the industry and produces on a small scale suffers a significant cost
disadvantage relative to established companies.

Brand Loyalty
Brand loyalty exists when consumers have a preference for the products of established
companies. A company can create a brand loyalty through continuous advertising of its
brand-name products and company name, patent protection of products, product
innovation achieved through company research and development programs, an
emphasis on high product quality and good after sales service.

Absolute cost advantages

Absolute cost advantages arise from three sources namely,

(a) superior production operations and processes due to accumulated experience, patents,
or secret processes,

(b) control of particular inputs required for production, such as labour, materials, equipment,
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or management skills, that are limited in their supply; and

(c) access to cheaper funds because existing companies represent lower risks than new
entrants. If established companies have absolute cost advantages, the threat of entry as a
component of five forces is weaker.

Customer Switching Costs

Switching costs arise when it cost a customer time, energy, and money to switch from
the products offered by one established company to the products offered by a new
entrant. When switching costs are high, customers can be locked in the product offerings
of established companies, even if new entrants offer better products.

Government Regulation
Legal restraints on competition vary from patent protection, to regulation of markets, through to
direct government action. Of course, managers in the hitherto protected environments might face
the pressures of competition for the first time if governments remove such protection. Historically,
government regulation has constituted a major barrier into many industries

Competitive Rivalry
Competitive rivals are organisations with similar products and services aimed at the same
customer group. The competitive struggle can be fought using price, product, design,
advertising and promotion spending, direct selling efforts, and after-sales service and
support. More intense rivalry implies lower prices or more spending on non-price
competitive weapons or both. The intensity of rivalry among established companies
within an industry is largely a function of the factors such as:
(i) The balance between the competitor
(i) The level of industry demand
(ii) In industries where fixed costs are high
(iii) If the addition of extra capacity is in large increments
(iv) The level of differentiation plays an important role.
(v) Exit barriers are economic, strategic and emotional factors that prevent companies
from leaving an industry.

The Bargaining Power of the Buyers

The bargaining power of the buyers refers to the ability of buyers to bargain down prices
charged by companies in the industry or to raise the costs of companies in the industry
by demanding better quality products and services. Buyer power is likely to be high when
some of the following conditions prevail

(i) The product or service that the industry supplies comprise a large number of small operators.
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 (ii) There is a concentration of buyers, particularly if the volume purchases of the buyers are high.
(iii) When the supply industry depends on the buyers for a large percentage of its total orders.
(iv) There are alternative sources of supply, perhaps because the product or service requires is
undifferentiated between suppliers or when the deregulation in the markets spawns new
competitors.
(v) When switching costs are low so that the buyers can play off the supplying
companies against each other to force down process.
(vi) There is a threat of backward integration by the buyer (e.g. by acquiring a
supplier) if satisfactory prices or quality from suppliers cannot be obtained.

The Bargaining Power of the Suppliers

The bargaining power of the suppliers refers to the ability of suppliers to raise input prices
or to raise the costs of the industry in other ways. Supplier power is likely to be high when
some of the following conditions prevail
(i) The product that the suppliers sell has few substitutes and is vital to the companies in the
industry.
(ii) There is a concentration of suppliers rather than a fragmented source of supply.
(iii) The brand of the supplier is powerful.
(iv) The supplier’s customers are highly fragmented.
(v) Supplier’s can threaten to enter their customer’s industry and use their inputs to produce
products that would compete directly with those of companies already in the industry.
(vi) Companies in the industry cannot threaten to enter their supplier’s industry and
make their own inputs as a tactic for lowering the price of inputs.

The Threat of Substitutes

Substitute products refer to the products of different businesses or industries that can
satisfy similar customer needs. Substitution reduces demand for a particular class of
products as customers watch to the alternatives. Substitution may take several forms:
(i) There could be product for product substitution for e.g., email substitution for a postal service.
(ii) There may be substitution of need by a new product or service, rendering an existing
product or service redundant.
(iii) Generic substitution occurs where products or services compete for disposable income.
Andrew Grove, former CEO of Intel, has argued that Porter’s 5 forces model ignores a sixth force: the
power, vigour, and competence of complementors. Complementors are companies that sell
products that add value to the products of companies in industry because when used together,
the products better satisfy customer demands. The complementors to the personal computer
industry are the companies that make software applications to run on those machines. The
greater the supply of high quality software applications to run on personal computers, the greater
will be the value of personal computers to customers.

VRIO Framework
The VRIO framework, as given by Barney, helps an organisation to evaluate its competencies with the help of
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the following questions:
◉ Value: It questions whether the firm’s competencies provide customer value and competitive
advantage or not. It should be mentioned that threshold competencies only help a firm to exist in
business and do not provide any competitive advantage. Competitive advantage comes from core
competencies.

◉ Rareness: It questions the extent to which the competencies of the firm are rare. In other words,
whether the competitors or the rivals possess the same competencies or not. The rarity component
can help organisations to be competitively superior compared to its rivals.

◉ Imitability: One of the factors on which the durability of competitive advantage depends is the barriers
to imitation. The greater are the barriers the more durable will be the firm’s competitive advantage.
Tangible resources are easy to imitate whereas intangible resources such as reputation, capabilities,
marketing strategies and technologies are difficult to imitate.

◉ Organisation: It refers to the level at which a firm is organised to utilise its resources. A firm where
employees are able to take more risks, bring innovation and get rewarded is in a better situation in
terms of utilisation of firm’s resources. Having an organised structure is fundamental to the optimal
utilisation of resources

The Value Chain

The value chain describes the categories of activities within and around an organisation, which together
create a product or service. The concept was developed in relation to competitive strategy by Michael Porter.
The term value chain refers to the idea that a company is a chain of activities that transforms inputs into
outputs that customer’s value. The transformation process involves both primary activities and support
activities that add value to the product. Activities can be broadly divided into two types namely, primary
activities and secondary or support activities.

Primary activities are directly concerned with the creation or delivery of a product or service. For example, for
a manufacturing business the primary activists are as follows:

◉ Inbound logistics are activities concerned with receiving; storing and distributing inputs to the product
or service including materials handling, stock control, transport, etc.

◉ Operations transform these inputs into the final product or service. Operations include machining,
packaging, assembly, testing, etc.

◉ Outbound logistics collect, store and distribute the product to customers, for example warehousing,
materials handling, distribution, etc.

◉ Marketing and sales provide the means whereby consumers/users are made aware of the product or
service and are able to purchase it. This includes sales administration, advertising and selling.

◉ Service includes those activities that enhance or maintain the value of product or service, such as
installation, repair, training and spares.

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Support activities help to improve the effectiveness or efficiency of primary activities. The following are the
support or secondary activities:
◉ Procurement: It refers to the processes that occur in many parts of the organisation for acquiring the
various resource inputs to the primary activities.

◉ Technology development: All value activities have a ‘technology’, even if it is just know-how.
Technologies may be concerned directly with a product or with processes or with a particular
resource.

◉ Human resource management: This transcends all primary activities. It is concerned with those
activities involved in recruiting, managing, training, developing and rewarding people within the
organisation.

◉ Infrastructure: The formal systems of planning, finance, quality control, information management, and
the structures and routines that are part of an organisation’s culture.

In the value chain process the value can be added early in the value chain, i.e. upstream and later in the value
chain, i.e. downstream.

Chapter- 3 SWOTC Analysis (Industry Sector and Company)

SWOTC Analysis
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 S = Strength
W = Weaknesses
O = Opportunities
T/C = Threats or Challenges

1. SWOT analysis is a technique developed at Stanford in the 1970s, frequently used

in strategic planning.
2. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats and is a
structured planning method that evaluates those four elements of an organization,
project or business venture.
3. A SWOT analysis is a simple, but powerful, framework for leveraging the organization's
strengths, improving weaknesses, minimizing threats, and taking the greatest possible
advantage of opportunities.
4. SWOT analysis is a process where the management team identifies the internal and
external factors that will affect the company's future performance. It helps us to
identify of what is happening internally and externally, so that you can plan and manage
your business in the most effective and efficient manner.
5. While finalising the corporate plan together with corporate objectives, growth
strategies, it would be necessary to make a review of the corporate strengths and
weaknesses in connection with it’s mission and objectives. This is an important
managerial task linked with corporate planning process.

Corporate strengths and weaknesses can be broadly enumerated as under:

Corporate Strengths:
• Financially very sound
• Good products and product-mix with high demand including future prospects
• Full capacity utilisation, locational advantages
• Good infrastructures
• Good industrial relations
• No political interference
• Good performance in production and services with consistent records
• Good raw materials base

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 • Incentives from State Government
• Good relation with Government departments
• Technologically rich and with expertise
These are the corporate strengths within and outside the organisation .

Corporate Weaknesses:
Similar to Corporate strengths, there may be corporate weaknesses too. These may be
enumerated as under:
• Under-utilisation of capacity due to economic slump
• High debt burden in the capital structure
• Poor product-mix
• Lack of managerial strengths
• Technology gap
• Demand gap
• Poor infrastructures
• Raw materials source at a distance
• Lack of latest information technology
• Competition war
Both corporate strength and corporate weaknesses are examined and reviewed
together in connection with corporate mission and objectives. A balanced and
appropriate mix from both strengths and weaknesses is made in order to
formulate a good corporate plan, which can be achieved and fulfilled during it’s
entire plan period
Now we outline the ‘opportunities’ and ‘threats’
Opportunities:
• Seasonal/climatical demand of products
• Global markets for the company’s products/services (Export opportunities)
• To explore the markets in the undeveloped/under-developed/developing
states/places
• To avail of the incentives/concessions declared by Central and State
Governments
• Diversifications opportunities
• Mergers/acquisition opportunities
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 • Good home market available due to boost in the economy
• Liberalised policies of the Government both at Centre as well as State level for
the individual production and industrial developments
Similar to opportunities, there may be threats too prevailing from time
to time, which must be examined and necessary action taken to be free
from these or to solve these prudently so that loss to the organisation
may be minimum. The probable threats, which may arise or be faced by
the organisation, are listed out as under

Threats & Challenges:

• Globalisation
• Competition
• Price cutting war
• Free imports
• Political instability
• Quality thrusts
• High and adverse debt equity ratio
• Increase in financing cost
• Economic slow down due to
international recession impact

In the above Para, details of:

• Strengths
• Weaknesses
• Opportunities
• Threats
Each and every factor of the SWOT
would be analysed critically to find out a best
alternative out of various alternatives available.

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Chapter- 4 Portfolio Analysis and BCG Matrix
PORTFOLIO ANALYSIS
Portfolio analysis is a term used in describing methods of analysing a product-market portfolio with
the following aims
I. To identify the current strengths and weaknesses of an organisation’s products in
its markets, and the state of growth or decline in each of these markets.
II. To identify what strategy is needed to maintain a strong position or improve a weak one.
III. Several matrices have been developed over the years to analyse market share,
market growth and market position.

BCG MATRICES
The Boston Consulting Group (BCG)’s matrix analyses ‘products and businesses by market share and market
growth.’

The Boston Consulting Group (BCG) growth-share matrix is a planning tool that uses graphical representations
of a company’s products and services in an effort to help the company decide what it should keep, sell, or
invest more in.

The matrix plots a company’s offerings in a four-square matrix, with the y-axis representing the rate of market
growth and the x-axis representing market share. It was introduced by the Boston Consulting Group in 1970. 1

The BCG growth-share matrix breaks down products into four categories, known as "dogs," "cash cows,"
"stars," and “question marks.” Each category quadrant has its own set of unique characteristics
Understanding the Boston Consulting Group (BCG) Matrix

The horizontal axis of the BCG Matrix represents the amount of market share of a product and its strength in
the particular market. By using relative market share, it helps measure a company’s competitiveness.

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 The
vertical
axis of the
BCG
Matrix
represents
the growth
rate of a
product
and its
potential
to grow in
a
particular
market.

In addition, there are four quadrants in the BCG Matrix:

1. Question marks: Products with high market growth but a low market share.
2. Stars: Products with high market growth and a high market share.
3. Dogs: Products with low market growth and a low market share.
4. Cash cows: Products with low market growth but a high market share.

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The horizontal axis of the BCG Matrix represents the amount of market share of a product and its strength in
the particular market. By using relative market share, it helps measure a company’s competitiveness.

The vertical axis of the BCG Matrix represents the growth rate of a product and its potential to grow in a
particular market.

1. Cash cows

Cash cows have a high market share but a low growth rate. Which actually means they don’t cost much but
promise high returns. A good example of a cash cow is Google’s online advertising business. They have a high
market share in a saturated market and don’t need to spend a lot to get high returns from the business.

Every business portfolio wants to maximize cash cows and is the eventual aim of all business units.

2. Stars

Stars have a high market share and a high growth rate. They can generate some profit, however, growth is at
the expense of money and these are cash consuming. The hope is that eventually the stars will be
transformed into cash cows.

Android business for google is a Star. They have a very high market share in a high growth market but it is
consuming money.

3. Question marks

Question marks are the ‘problem child’, they have high growth potential but a low market share. With a lot of
(financial) support and strategic, they can be turned into stars.

Google plus business for Google in Social Media space was a question mark. However, it is another matter
they couldn’t turn it into a Star and eventually had to shelve it. this, however, makes the question marks a
difficult decision to make. It can go either way, it can move to be a Star or it can move into a Dog.

4. Dogs

These are business units with a low share in a saturated market. Dogs should be held on to only if they have a
value other than a financial one (e.g. a vanity project or favor for a friend).

Online blogging platform Blogger for Google can be an example of Dogs. It is operating in a, now obsolete
user-generated blogging space but still has a much lower market share. Whether Google is going to liquidate
the business is to be seen.

Limitations of BCG Matrix

The BCG Matrix produces a framework for allocating resources among different business units and makes it
possible to compare many business units at a glance. But BCG Matrix is not free from limitations, such as-

1. BCG matrix classifies businesses as low and high, but generally businesses can be medium also. Thus,
the true nature of business may not be reflected.
2. Market is not clearly defined in this model.
3. High market share does not always leads to high profits. There are high costs also involved with high
market share.
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 4. Growth rate and relative market share are not the only indicators of profitability. This model ignores
and overlooks other indicators of profitability.
5. At times, dogs may help other businesses in gaining competitive advantage. They can earn even more
than cash cows sometimes.
6. This four-celled approach is considered as to be too simplistic.

Chapter- 5 Stages in Strategic Planning

The formal strategic planning process has five main steps:
Select the corporate mission and major corporate goals
The first component of the strategic planning process is crafting the organisation’s mission statement, which
provides the framework or context within which strategies are formulated. A mission statement has four main
components: a statement of its reason for existence which is normally referred to as the mission; a statement
of some desired future state, usually referred to as the vision; a statement of the key values that the
organisation is committed to; and a statement of major goals.

Analyse the organisation’s external competitive environment to identify

opportunities and threats
The second component of the strategic planning process is an analysis of the organisation’s external operating
environment. The essential purpose of the external analysis is to identify strategic opportunities and threats
within the organisation’s operating environment that will affect how it pursues its mission. Three interrelated
environments should be examined when undertaking an external analysis: the industry environment in which
the company operates, the country or national environment and the wider socioeconomic or macro
environment.

Analyse the organisation’s internal operating environment to identify the

organisation’s strengths and weaknesses
Internal analysis, the third component of the strategic planning process, focuses on reviewing the resources,
capabilities, and competencies of a company. The goal is to identify the strengths and weaknesses of the
company. The next component of strategic thinking requires the generation of a series of strategic
alternatives, or choices of future strategies to pursue, given the company’s internal strengths and weaknesses
and its external opportunities and threats. The comparison of strengths, weaknesses, opportunities, and
threats is normally referred to as a SWOT analysis. More generally, the goal of a SWOT analysis is to create,
affirm, or fine-tune a company-specific business model that will best align, fit, or match a company’s
resources and capabilities to the demands of the environment in which it operates.

Select strategies
Managers select strategies that build on the organisation’s strengths and correct its weaknesses in order to
take advantage of external opportunities and counter external threats. In order to select the right strategies
managers compare and contrast the various alternative possible strategies against each other and then
identify the set of strategies that will create and sustain a competitive advantage. It is very important for the
strategic managers to keep in mind that the strategies selected should be consistent with the mission and
major goals of the organisation. They should be congruent and constitute a viable business model.

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Implement the strategies
In order to achieve a competitive advantage and increase profitability managers must put those strategies
selected into action. Strategy implementation involves taking actions at the functional, business, and
corporate levels to execute a strategic plan.

Implementation can include, for example,

◉ putting quality improvement programs into place
◉ changing the way a product is designed
◉ positioning the product differently in the marketplace
◉ segmenting the marketing and offering different versions of the product to different consumer groups
◉ implementing price increases or decreases
◉ expanding through mergers and acquisitions
◉ downsizing the company by closing down or selling off parts of the company

The Feedback Loop

The strategy planning process is a continuous process and the feedback loop indicates that strategic planning
never ends. In order to determine the extent to which strategic goals and objectives are actually being
achieved, and to what degree competitive advantage is being created and sustained execution of the strategy
must be monitored. This information and knowledge is returned to the corporate level through feedback
loops, and becomes the input for the next round of strategy formulation and implementation. Top managers
can then decide whether to reaffirm the existing business model and the existing strategies and goals, or
suggest changes for the future.

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Important Question
Module- 9 Strategic Analysis and Strategic Planning
Explain the concept of PESTEL Framework?
The PESTEL framework is an extension of the PEST strategic framework, one that includes
additional assessment of the Environmental and Legal factors that can impact a business. The
PESTEL framework shows some of the macro-environmental influence which might
affect organizations. It focuses on the six principal components of strategic
significance in the macro-environment namely, political, economic, social,
technology, environmental and legal forces.
◉ Political factors
These factors determine the extent to which a government may influence the economy or a
certain industry. For example, a government may impose a new tax or duty due to which
entire revenue generating structures of organizations might change. Political
factors include tax policies, Fiscal policy, trade tariffs, etc. that a government may levy
around the fiscal year and it may affect the business environment (economic
environment) to a great extent.

◉ Economic Factors
These factors are determinants of an economy’s performance that directly impacts a
company and have resonating long term effects. For example, a rise in the inflation rate
of any economy would affect the way companies price their products and services.
Adding to that, it would affect the purchasing power of a consumer and change
demand/supply models for that economy. Economic factors include inflation rate,
interest rates, foreign exchange rates, economic growth patterns, etc. It also accounts for
the FDI (foreign direct investment) depending on certain specific industries who’re
undergoing this analysis.

◉ Socio-cultural factors
These factors scrutinize the social environment of the market, and gauge determinants like
cultural trends, demographics, population analytics, etc. An example of this can be buying
trends for Western countries like the US where there is high demand during the Holiday
season.

◉ Technological factors
These factors pertain to innovations in technology that may affect the operations of the
industry and the market favorably or unfavorably. This refers to automation, research and
development, and the amount of technological awareness that a market possesses.

◉ Environmental factors
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 They include protection laws, waste disposal, energy consumption, weather,
climate, climate change and associated factors like water shortages. These factors
can directly impact industries such as insurance, farming, energy production, and
tourism. They may have an indirect but substantial effect on other industries such
as transportation and utilities.

◉ Legal

These factors have both external and internal sides. There are certain laws that affect the
business environment in a certain country while there are certain policies that companies
maintain for themselves. Legal analysis takes into account both of these angles and then
charts out the strategies in light of these legislations. For example, consumer laws, safety
standards, labor laws, etc.
Explain the concept of PESTEL Framework?
Threat of entry will depend on the extent to which there are barriers to entry. Barriers
to entry are factors that need to be overcome by new entrants if they are to compete
successfully. These should be seen as providing delays to entry and not as permanent
barriers. The typical barriers are:
• Economies of Scale
Economies of scale arise when unit costs fall as a firm expands its output. Sources
of scale economies include cost reductions gained through mass producing a
standardised commodity, discounts on bulk purchases of raw material inputs
and component parts, the advantages gained by spreading fixed production
costs over a large production volume and the cost savings associated with
spreading marketing and advertising costs over a large volume of output. If
theses cost advantages are significant then a new company that enters the
industry and produces on a small scale suffers a significant cost disadvantage
relative to established companies.

• Brand Loyalty
Brand loyalty exists when consumers have a preference for the products of
established companies. A company can create a brand loyalty through
continuous advertising of its brand-name products and company name, patent
protection of products, product innovation achieved through company
research and development programs, an emphasis on high product quality and
good after sales service.

• Absolute cost advantages

Absolute cost advantages arise from three sources namely,
(a) superior production operations and processes due to accumulated experience,
patents, or secret processes,
(b) control of particular inputs required for production, such as labour, materials,

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 equipment, or management skills, that are limited in their supply; and
(c) access to cheaper funds because existing companies represent lower risks than
new entrants. If established companies have absolute cost advantages, the threat
of entry as a component of five forces is weaker.

• Customer Switching Costs

Switching costs arise when it cost a customer time, energy, and money to switch
from the products offered by one established company to the products
offered by a new entrant. When switching costs are high, customers can be
locked in the product offerings of established companies, even if new entrants
offer better products.

• Government Regulation
Legal restraints on competition vary from patent protection, to regulation of
markets, through to direct government action. Of course, managers in the
hitherto protected environments might face the pressures of competition for
the first time if governments remove such protection. Historically, government
regulation has constituted a major barrier into many industries

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Explain the concept of SWOTC Analysis?
S = Strength
W = Weaknesses
O = Opportunities
T/C = Threats or Challenges
6. SWOT analysis is a technique developed at Stanford in the 1970s, frequently used
in strategic planning.
7. SWOT is an acronym for Strengths, Weaknesses, Opportunities, and Threats and is a
structured planning method that evaluates those four elements of an organization,
project or business venture.
8. A SWOT analysis is a simple, but powerful, framework for leveraging the organization's
strengths, improving weaknesses, minimizing threats, and taking the greatest possible
advantage of opportunities
9. SWOT analysis is a process where the management team identifies the internal and
external factors that will affect the company's future performance. It helps us to identify
of what is happening internally and externally, so that you can plan and manage your
business in the most effective and efficient manner.
10. While finalising the corporate plan together with corporate objectives, growth
strategies, it would be necessary to make a review of the corporate strengths and
weaknesses in connection with it’s mission and objectives. This is an important
managerial task linked with corporate planning process.

Corporate strengths and weaknesses can be broadly enumerated as under:

Corporate Strengths:
• Financially very sound
• Good products and product-mix with high demand including future prospects
• Full capacity utilisation, locational advantages
• Good infrastructures
• Good industrial relations
• No political interference
• Good performance in production and services with consistent records
• Good raw materials base
• Incentives from State Government
• Good relation with Government departments
• Technologically rich and with expertise
These are the corporate strengths within and outside the organisation.

Corporate Weaknesses:
Similar to Corporate strengths, there may be corporate weaknesses too. These may be
enumerated as under:
• Under-utilisation of capacity due to economic slump
• High debt burden in the capital structure
• Poor product-mix
• Lack of managerial strengths
 • Technology gap
• Demand gap
• Poor infrastructures
• Raw materials source at a distance
• Lack of latest information technology
• Competition war
Both corporate strength and corporate weaknesses are examined and reviewed
together in connection with corporate mission and objectives. A balanced and
appropriate mix from both strengths and weaknesses is made in order to formulate
a good corporate plan, which can be achieved and fulfilled during it’s entire plan
period
Now we outline the ‘opportunities’ and ‘threats’
Opportunities:
• Seasonal/climatical demand of products
• Global markets for the company’s products/services (Export opportunities)
• To explore the markets in the undeveloped/under-developed/developing
states/places
• To avail of the incentives/concessions declared by Central and State
Governments
• Diversifications opportunities
• Mergers/acquisition opportunities
• Good home market available due to boost in the economy
• Liberalised policies of the Government both at Centre as well as State level for
the individual production and industrial developments
Similar to opportunities, there may be threats too prevailing from time to
time, which must be examined and necessary action taken to be free from
these or to solve these prudently so that loss to the organisation may be
minimum. The probable threats, which may arise or be faced by the
organisation, are listed out as under
Threats & Challenges:
• Globalisation
• Competition
• Price cutting war
• Free imports
• Political instability
• Quality thrusts
• High and adverse debt equity ratio
• Increase in financing cost
• Economic slow down due to international recession impact
Explain the concept of BCG Matrices?
The Boston Consulting Group (BCG)’s matrix analyses ‘products and businesses by market share and market
growth.’
• The Boston Consulting Group (BCG) growth-share matrix is a planning tool that uses
graphical representations of a company’s products and services in an effort to help the
company decide what it should keep, sell, or invest more in.

• The matrix plots a company’s offerings in a four-square matrix, with the y-axis
representing the rate of market growth and the x-axis representing market share. It was
introduced by the Boston Consulting Group in 1970.1

• The BCG growth-share matrix breaks down products into four categories, known as
"dogs," "cash cows," "stars," and “question marks.” Each category quadrant has its own
set of unique characteristics

Understanding the Boston Consulting Group (BCG) Matrix

• The horizontal axis of the BCG Matrix represents the amount of market share of a
product and its strength in the particular market. By using relative market share, it helps
measure a company’s competitiveness.

• The vertical axis of the BCG Matrix represents the growth rate of a product and its
potential to grow in a particular market.
In

addition, there are four quadrants in the BCG Matrix:

5. Question marks: Products with high market growth but a low market share.
6. Stars: Products with high market growth and a high market share.
7. Dogs: Products with low market growth and a low market share.

Cash cows: Products with low market growth but a high market share. The horizontal axis of
the BCG Matrix represents the amount of market share of a product and its strength in the
particular market. By using relative market share, it helps measure a
company’s competitiveness.

The vertical axis of the BCG Matrix represents the growth rate of a product and its potential to
grow in a particular market.

2. Cash cows

Cash cows have a high market share but a low growth rate. Which actually means they don’t
cost much but promise high returns. A good example of a cash cow is Google’s online
advertising business. They have a high market share in a saturated market and don’t need to
spend a lot to get high returns from the business.

Every business portfolio wants to maximize cash cows and is the eventual aim of all business
units.

2. Stars

Stars have a high market share and a high growth rate. They can generate some profit,
however, growth is at the expense of money and these are cash consuming. The hope is that
eventually the stars will be transformed into cash cows.
Android business for google is a Star. They have a very high market share in a high growth
market but it is consuming money.

3. Question marks

Question marks are the ‘problem child’, they have high growth potential but a low market
share. With a lot of (financial) support and strategic, they can be turned into stars.

Google plus business for Google in Social Media space was a question mark. However, it is
another matter they couldn’t turn it into a Star and eventually had to shelve it. this, however,
makes the question marks a difficult decision to make. It can go either way, it can move to be a
Star or it can move into a Dog.

4. Dogs

These are business units with a low share in a saturated market. Dogs should be held on to
only if they have a value other than a financial one (e.g. a vanity project or favor for a friend).

Online blogging platform Blogger for Google can be an example of Dogs. It is operating in a,
now obsolete user-generated blogging space but still has a much lower market share. Whether
Google is going to liquidate the business is to be seen.

Limitations of BCG Matrix

The BCG Matrix produces a framework for allocating resources among different business units
and makes it possible to compare many business units at a glance. But BCG Matrix is not free
from limitations, such as-

7. BCG matrix classifies businesses as low and high, but generally businesses can be
medium also. Thus, the true nature of business may not be reflected.
8. Market is not clearly defined in this model.
9. High market share does not always leads to high profits. There are high costs also
involved with high market share.
10.Growth rate and relative market share are not the only indicators of profitability. This
model ignores and overlooks other indicators of profitability.
11.At times, dogs may help other businesses in gaining competitive advantage. They can
earn even more than cash cows sometimes.
12.This four-celled approach is considered as to be too simplistic.

Analyze the steps in a formal strategic planning process?

The formal strategic planning process has five main steps:
Select the corporate mission and major corporate goals
The first component of the strategic planning process is crafting the organisation’s mission
statement, which provides the framework or context within which strategies are formulated. A
mission statement has four main components: a statement of its reason for existence which is
normally referred to as the mission; a statement of some desired future state, usually referred
to as the vision; a statement of the key values that the organisation is committed to; and a
statement of major goals.

Analyse the organisation’s external competitive environment to identify

opportunities and threats
The second component of the strategic planning process is an analysis of the organisation’s
external operating environment. The essential purpose of the external analysis is to identify
strategic opportunities and threats within the organisation’s operating environment that will
affect how it pursues its mission. Three interrelated environments should be examined when
undertaking an external analysis: the industry environment in which the company operates,
the country or national environment and the wider socioeconomic or macro environment.

Analyse the organisation’s internal operating environment to identify the

organisation’s strengths and weaknesses
Internal analysis, the third component of the strategic planning process, focuses on reviewing
the resources, capabilities, and competencies of a company. The goal is to identify the
strengths and weaknesses of the company. The next component of strategic thinking requires
the generation of a series of strategic alternatives, or choices of future strategies to pursue,
given the company’s internal strengths and weaknesses and its external opportunities and
threats. The comparison of strengths, weaknesses, opportunities, and threats is normally
referred to as a SWOT analysis. More generally, the goal of a SWOT analysis is to create,
affirm, or fine-tune a company-specific business model that will best align, fit, or match a
company’s resources and capabilities to the demands of the environment in which it operates.

Select strategies
Managers select strategies that build on the organisation’s strengths and correct its
weaknesses in order to take advantage of external opportunities and counter external threats.
In order to select the right strategies managers compare and contrast the various alternative
possible strategies against each other and then identify the set of strategies that will create
and sustain a competitive advantage. It is very important for the strategic managers to keep in
mind that the strategies selected should be consistent with the mission and major goals of the
organisation. They should be congruent and constitute a viable business model.

Implement the strategies

In order to achieve a competitive advantage and increase profitability managers must put
those strategies selected into action. Strategy implementation involves taking actions at the
functional, business, and corporate levels to execute a strategic plan.
Implementation can include, for example,
◉ putting quality improvement programs into place
◉ changing the way a product is designed
◉ positioning the product differently in the marketplace
◉ segmenting the marketing and offering different versions of the product to different
consumer groups
◉ implementing price increases or decreases
◉ expanding through mergers and acquisitions
◉ downsizing the company by closing down or selling off parts of the company

Explain Critical Success Factors?

Critical success Factors are those product features that are particularly valued by a group of
customers, and, therefore, where the organisation must excel to outperform competition.
Major Sources of CSFs
Rockart has identified four major sources of CSFs
◉ Structure of the Industry: Some CSFs are specific to the structure of the industry for
e.g., the extent of service support expected by the customers. Automobile companies
have to invest in building a national network of authorizes service stations to ensure
service delivery to their customers.

◉ Competitive strategy, industry position and geographic location: CSFs also arise from
the above factors for e.g. the large pool of English- speaking manpower makes India an
attractive location for outsourcing the BPO needs of American and British firms.
 ◉ Environmental Factors: CSFs may also arise out of general/business environment of a
firm, like the deregulation of Indian industry. With the deregulation of
telecommunication industry, many private companies had opportunities of growth.

Temporal factors: Certain short-term organisational developments like sudden loss of critical
manpower (like the charismatic CEO) or break-up of the family owned business, may
necessitate CSFs like ‘appointment of a new CEO’ or ‘rebuilding the company image’.
Temporarily such CSFs would remain CSFs till the time they are achieved. In the process of
developing alternatives, it may be useful to narrow down the range of options by identifying
the more promising alternatives, in the light of the Critical Success Factor (CSFs). The options
relevant to those factors may be analyzed along with a forecast of their outcome
Module 10 Formulation And Implementation of
Strategy
This Module Includes

Chapter- 1 Strategy Formulation

Chapter- 2 Structuring of Organisation for implementation of
strategy
Chapter- 3 Strategic Business unit
Chapter- 4 Business Process Re- Engineering
Chapter- 5 Management Control, Operation & Task Control
Chapter- 6 Goal Congruence.

Chapter-1 Strategy Formulation

Formulation of strategy
1. Develop and evaluate strategic alternatives
2. Select appropriate strategies for all levels in the organisation that provide
relativeadvantage over competitors
3. Match organizational strengths to environmental opportunities
 4. Correct weaknesses and guard against threats

PRODUCTION STRATEGY

Need for a Production Strategy:

1. The key to successful survival of an enterprise as an independent unit is how

efficientlyproduction activity is managed.
2. The two major factors that contribute to business failures are obsolescence of
theproduct line and excessive production costs.
3. These factors themselves have been the outcome of ineffective production planning.
4. Production strategy plays crucial role in shaping the ultimate success of a firm. Being
based on objective analysis of external environmental forces and corporate
strengths and weaknesses, it enables an organisation to make optimal decisions
regarding product, production capacity, and plant location, choice of machine and
equipment andmaintenance of existing facilities.

Formulating Production Strategy:

The following steps are involved in the formulation of production strategy

1. Study the overall corporate plan and define the objectives.

2. Analyse the present production operations and the present and future environment.
3. Review sales- forecast and marketing.
4. Make strategic decisions for production

• Study of Corporate Plan and Statement of Objectives:

1. As in other operating areas, production planning begins with corporate objectives
andplanning premises.
2. Examination of overall corporate planning not only provides overall directions for
manufacturing but also answers questions about overall economic, industrial,
marketand company factors which will limit and otherwise affect the production
planning.
3. Within the framework of these overall planning factors, the planner establishes
production objectives and definitions of the general product and process areas in
whichproduction operations should concentrate.

• Analysis of the Present Production Operations and the

EnvironmentalForces:
1. The production manager should analyse the current manufacturing operations arid
thepresent and future environmental trends to determine the company’s
manufacturing strengths and weaknesses and to isolate environmental factors such
as the manpower supply and new process and equipment developments, which
 significantly affect manufacturing operations.
2. During this phase of manufacturing planning, the planner examines the
premises orfactors that affect the manufacturing operations specifically
3. A study of plant location should be made to assess the effectiveness of present
location with respect to key supplies and channels of distribution, and analyse the
economies of plant location in terms of labour costs and reservoir of labour skills, both
short-term andlong-term.
4. The existing condition of the machinery should be studied and its quality and
efficiency should be compared with others in the same field including overseas
competitors.
5. Regarding maintenance, production manager should check availability of
replacementparts.

• Review of Sales Forecast and Marketing Mix:

1. Since planning in other areas affects manufacturing plans, the planner
should examine the plans in these areas. Sales goals are the basis upon
which specificoperating plans for manufacturing are built.
2. Hopefully, the manufacturing manager will have participated in the
development ofthese goals so that the sales goals can be reconciled with
operations limitations.
3. Once settled manufacturing plans can be developed to meet sales goals.

• Making Strategic Decisions:

Keeping in mind the overall corporate business mix, present production operations,
environmental forces, sales forecast and marketing mix, the production manager has to
decideabout the extent of manufacturing activity, choice of manufacturing process,
capacity machines and equipment to be used, and physical facilities.
(a) Extent of Production Activity:

(b) Choice of Manufacturing Process:

(c) Capacity Decisions:

(d) Choosing Machines and Equipment:

 (e) Physical Facilities Decisions:

MARKETING
STRATEGY MARKET: Market is an arrangement that provides an opportunity of exchange of
goods and services, for money or money’s worth. It is the means to settle the terms of
exchange.

Definition of marketing “is getting the right goods and services to the right people at the
rightplace, at the right time, at the right price, with right communication and promotion.”

Marketing Functions:
Marketing involves eight important functions:

1. Buying,
2. Selling,
3. Storage,
4. Transportation,
5. Financing,
6. Standardisation,
7. Grading and
8. Risk-Taking.

Marketing Plan:
1. Marketing plan is a written document that specifies in detail the firms marketing objectives
and how marketing management will use the controllable marketing toolssuch as product
design, channels, promotion and pricing to achieve these objectives
2. Marketing strategy means finding attractive opportunities and developing profitableways
to capture the market.

The Marketing Concept and the Selling Concept:

Marketing Concept
The marketing concept has been expressed in many ways:

1. meeting needs profitably

2. find wants and fill them
3. love the customer, not the product
4. have it your way
 5. you’re the boss
6. to do all in our power to pack the customer’s rupee full of value, quality and

satisfactionThe marketing concept rests on four main pillars, namely

a) target market,
b) customer needs,
c) coordinated marketing and
d) profitability

Selling Concept
The selling concept takes an inside-out perspective. The four pillars of selling concept

a) Factory
b) Products
c) Selling and Promoting
d) Profits through Sales volume

It starts with the factory, focuses on the company’s existing products, and calls for heavy
selling and promoting to produce profitable sales. The marketing concept takes an
outside-inperspective. It starts with a well-defined market, focuses on customer needs,
co-ordinates allthe activities that will affect customers and produces profit through
customer satisfaction

Social Marketing:
Societal marketing concept calls for a customer orientation backed by integrated
marketingaimed at generating customer satisfaction and long-run consumer welfare as
the key to attaining long-run profitable volume.

Marketing Management:
Marketing management is the crucial and creative task of delivering consumer satisfaction
andthereby earning, profits through consumer demand.

Marketing Strategies:
a) Marketing strategy is a process that can allow an organisation to concentrate its
limitedresources on the greatest opportunities to increase sales and achieve a
sustainable competitive advantage.
b) A marketing strategy should be centered around the key concept that
customersatisfaction is the main goal.
c) Markets can be described and defined by their nature of competition.
d) The marketer’s first task is to select a promising market arid identify its needs
andbuying patterns, after which he formulates strategies for each controllable
factor (product, distribution, promotion and pricing).
e) In formulating and implementing overall marketing strategy, management concerns
itself with identifying opportunities to serve target markets profitably and serving
themso effectively that it is difficult for competitors to take business away on a
profitable basis.
f) The importance of formalized overall marketing strategies (i.e., deliberately
 plannedcompetitive postures) varies with the competitive setting. There are four
types of competitive settings
1. No direct competition 2. Pure competition 3. Monopolistic
competition 4.Oligopolistic competition

Formulating Overall Marketing Strategy:

A marketing strategy should be used as a working paper that guides the store’s operations for
the next 1-2 years. The format of a marketing strategy has three sections:

a) Basic assumptions -- based on survey results and past planning processes;

b) Strategic goals -- goals for growth and fiscal health of the co.

g) Achieving goals -- operational ideas for changes that will alter the perception of the
storefront by the public to conform to the strategic goals

Manpower Strategy
1. The concept of Human Resource Development (HRD) has evolved over time with
therecognition of people employed in organisations as a resource.
2. Strategic management of human resources includes assessing staffing needs in the
lightof strategies formulated and developing a staffing plan for implementation of
strategy.
3. The compensation and incentive payments necessary to motivate technically
skilled employees and managers also need to be kept in view in connection with
the staffingplan.
4. The basic policy in that respect is to be that of linking corporate earnings with
individualbenefits
5. The following aspects of human resource strategy are required to be focused for
thepurpose:
a) Job analysis and human resource planning before selection and
recruitment ofmanpower,
b) Recruitment and selection of staff with required skill and abilities with the
processbeing consistent with the objectives,
c) Human resource development by way of training and development
programmes,performance appraisal, appropriate compensation package and
incentive schemes to secure motivation.
Features human resource strategy
1. Orientation of the members. HRM strategy has to ensure that individuals
employedin the organisation have necessary orientation so that the mission and
objectives of the organisation are internalised by the members and they have a
sense of identification with the values and culture of the organisation.
2. Facilitation of organisational changes as and when called for. The practices and
procedures are required to be in conformity with the changing internal and
externalconditions. This is a vital role of HR strategy management.
3. Coping with diversity of workforce. Modern organisations with highly complex
nature of jobs and processes generally have a highly diversified workforce
 differentiated in terms of age, sex, religion, professional and technical skills and
educational background.To maintain a balanced workforce with harmonious
relations and providing equitable incentives and rewards are aspects of HRM
functions which can sustain an effective workforce. This is a responsibility of HR
strategy managers.
4. Maintaining competent and committed workforce in a competitive environment.
The intensity of market competition for enterprises has been growing fast with
globalisationand liberaliation of economic policies. There are competitive strategies
of low cost production and differentiation of products which may enable companies
to secure a competitive edge. HRM has the responsibility of managing workforce so
as to make it competent in ability as well as committed to organisational success.
5. Development of core competency. An enterprise succeeds in achieving its strategic
objectives mainly on the basis of capabilities in the technical, marketing or human
skillsin areas of crucial importance. These are known as core competencies of the
organisation which are unique internal strengths not possessed by competitors.
HRM isrequired to undertake building up of core competency by the organisation as
to securedynamic leadership in the product market.
6. Empowered workforce as an active resource. HR strategy is best managed when
the members of an organisation are individually in control of their work and are able
to realise their potentials with empowerment to take relevant decisions on their
own. Thisis likely to secure enduring performance based achievements.

7. Appropriate work culture and ethical norms. No organisation can get the best
contribution from its members unless individuals develop a liking for challenging
jobs and follow the ethical norms of the organisation functionally. This may require
redesigning of jobs and work processes as well as developing trust and confidence
among individuals and work groups, as also emphasising intrinsic motivation for
improving performance. HRM encompasses creation of an appropriate work culture
onthe above lines.
Chapter -2 STRUCTURING OF ORGANIZATION FOR IMPLEMENTATIONOF STRATEGY

Introduction
Strategy implementation is a critical issue. Strategies remain useless unless they are
effectivelyimplemented. Strategy implementation requires a suitable organizational
structure to translate the strategies into concrete action plans.

Strategic Implementation
Strategy is dependent on many variables – Internal as well as external. All factors
areinterrelated.

The Mckinsey Company, a well known management consultancy firm in the United States,
towards the end of 1970s was asked to find a solution to this knotty issue. A strategy is
usuallysuccessful when the other S’s in the 7-S framework fit into or support the strategy.

•Strategy: A set of decisions and actions aimed at gaining a sustainable

competitiveadvantage.

•Structure: The organisation chart and associated information that shows who
reports towhom and how tasks are both divided and integrated.
•Systems: The flow of activities involved in the daily operation of a business, including its
coreprocesses and its support systems.

•Style: How managers collectively spend their time and attention and how they use
symbolicbehaviour. How management acts is more important than what management
says.

•Staff: How companies develop employees and shape basic values

•Shared Values: Commonly held beliefs, mindsets and assumptions that shape how
anorganisation behaves— its corporate culture.

•Skills: An organisation’s dominant capabilities and competencies.

Organizational Structure
The successful implementation of Strategy requires an effective organization structure.
Organizational structure means the framework in which the organization defines how
tasksare divided, resources are deployed and departments are co-ordinated. There are
several types of organizational structure:

(1) Functional Structure

(2) Geographic Structure

(3) Matrix Structure

(4) Hybrid Structure

Functional structure:
The functional structure is characterized by the simultaneous combination of similar
activities and the separation of dissimilar activities on the basis of function. All Cost
Accountants are located in the Cost Accounting Department, and the HOD of Cost
Accounting is responsible forall cost related activities. The same is true in marketing,
research and development, and manufacturing. The functional organization form is one of
the most common organizational structures found in firms pursuing strategy of
concentration or very high relatedness. A functional structure is most appropriate when
the organization is small to medium size and relatively stable.

Geographic structure:
Another basic form structural grouping is geographic structure, in which activities and
personnel are grouped by specific geographic locations. Each geographic unit includes all
functions required to produce and market products in that region. Organization
according togeographic areas or territories is rather common structural form for large-
scale enterprise whose strategies need to be tailored to fit the particular needs and
features of different.

Matrix structure:
Another way to achieve focus on multiple outcomes is with the matrix structure. The
matrix structure creates a dual chain of command; two lines of budget authority and two
sources ofperformance and reward. The key feature of the matrix is that product (or
business) and functional lines of authority are overlaid to form a matrix or grid, between
the product manager and functional manager.

Hybrid Organization And supplemental Methods:

A single type of structural design is not always sufficient to meet the requirements of
strategy.When this occurs, one opinion is to mix and blend the basic organizations forms,
matching structure to strategy, requirement by requirement, and unit by unit, Hybrid
structure is a formof departmentalization that adopts parts of both functional and
divisional structures at the same level of management. The major potential advantage of
the hybrid structures is that thecombination may allow the firm to gain the advantages
offered by the primary structure whileat least diminishing the impact of the disadvantages.

Remaining Part of this Chapter will discuss in later videos

CHAPTER-3 STRATEGY BUSINESS UNIT (SBU)
SBU groups similar divisions into “Strategic Business Units” and then delegate’s
authority and responsibility of each unit to a senior executive who is normally
identified as CEO or MD of that SBU. It is an extension of Divisional structure

SBU Structure Big organisation like Unilever, etc have many SBUs for their
differentcategories of products like Cosmetics, Food products and Beverages, etc,
and each is managed through separate unit head.

Advantages:

• Promotes accountability since units’ heads are responsible for individual

SBUprofitability
• Career development opportunities are further higher in this structure
• Allow better control of categories of products manufacturing, marketing
anddistributions
• Helps to expand in different related and unrelated

businessesDisadvantages:
 • May provide inconsistent approach to tackle customers, etc, because
eachunit may work in it’s own way to handle situations
• High cost approach

Matrix Organisation
Structure:

The above structures (Functional, Divisional and SBU) consist of flow of

authority from top to bottom i.e. vertical flow whereas Matrix structure
contains both vertical and horizontal flow of communications or authority. This
type of structure
is frequently used in IT organisation for managing different projects. Each
individual project is managed by a project manager and projects manager will have
his team arranged under him.

Advantages:

• Useful for some specific industries like Information Technology, Healthcare

etc.
• Employee can see visible results of their efforts
• Remove barrier to communications
• Managing projects are easy
• Effective structures when environment is very dynamic
Disadvantages:

• Complex structure as this contains both vertical and horizontal flow of

information
• High cost approach due to more management positions
• Dual lines of authority
• Conflicts arises in the allocation of resources
The three most important Characteristics of SBU are:

• It is a single business or a collection of related businesses which offer scope for

independent planning and which might feasibly stand alone from the rest of the
organisation.

• Has it’s own set of competitors.

• Has a manager who has responsibility for strategic planning and profit
performance, and who has control of profit-influencing factors.
Chapter-4 BUSINESS PROCESS RE-ENGINEERING
Business process reengineering is an approach used to improve organizational
performance by increasing the efficiency and effectiveness of processes that exist
across the organization. In addition to the redesigning of business processes, it
also involves the redesigning of associated systems and organizational structures.

Usually, reasons like new market opportunities, increasing competition, poor

financial performance, and decreasing market share trigger the need for a
business process transformation.

BPR involves the analysis and transformation of several major components of a

business. These include,

• Strategy
• Organization
• Process
• Technology
• Culture

BPR includes three phases; analysis phase, design phase, and implementation
phase. It is also referred to as business process redesign, business process change
management, and business transformation.

Benefits of Business Process Reengineering

BPR plays a major role in organizational performance improvement in terms of
cost, quality, delivery, employee productivity, etc. It also helps

• Streamline business processes and systems

• Companies easily adapt to changing times and reduce operating expenses
• Improve company profitability and sustain competitive advantage
• Boost employee productivity
• Increase customer satisfaction by improving the quality of products and
services

BPR Implementation | Business Process Reengineering Steps

Reengineering a process focuses on redesigning a process as a whole which
includes fundamentally rethinking how the organizational work should be done in
order to achieve dramatic improvement. That’s what differentiates BPR from
process improvement which only focuses on functional or incremental
improvement.
Reengineering might not be appropriate in all situations, especially if your
processes only require optimization and if your organization is not looking to
undergo dramatic change. In such a case, you can opt for a process
improvementtechnique.

Step 1: Set the vision and business

goalsstep 2: Establish a

competent team Step 3:

Understand the current process

Step 4: Redesign the process

Step 5: Implement the reengineered process

Important Question
Module-10 Formulation and Implementation of Strategy

Explain different types of Structures

Functional structure:
The functional structure is characterized by the simultaneous combination of similar
activities and the separation of dissimilar activities on the basis of function. All Cost
Accountants are located in the Cost Accounting Department, and the HOD of Cost
Accounting is responsible forall cost related activities. The same is true in marketing,
research and development, and manufacturing. The functional organization form is one
of the most common organizational structures found in firms pursuing strategy of
concentration or very high relatedness. A functional structure is most appropriate when
the organization is small to medium size and relatively stable.

Matrix structure:
Another way to achieve focus on multiple outcomes is with the matrix structure. The
matrix structure creates a dual chain of command; two lines of budget authority and
two sources ofperformance and reward. The key feature of the matrix is that product
(or business) and functional lines of authority are overlaid to form a matrix or grid,
between the product manager and functional manager.
Multidivisional Structure
A multidivisional structure is built up of separate divisions on the basis of products, services
or geographical areas. Divisionalisation often comes about as an attempt to overcome the
problems that functional structures have in dealing with the diversity mentioned above.
Each division can respond to the specific requirements of its product/ market strategy,
using its own set of functional departments.
The transnational structure
The transnational structure seeks to obtain the best from the two extreme international
strategies, the multi domestic strategy and the global strategy. A global strategy would
typically be supported by global product divisions; a multi domestic strategy would be
supported by local subsidiaries with a great deal of design, manufacturing and marketing
autonomy for all products. The transnational structure, however, attempts to achieve both
high local responsiveness and high global coordination. The transnational is like a matrix
but has two specific features: first, it responds specifically to the challenge of
internationalisation; second, it tends to have more fixed responsibilities within its
crosscutting dimensions.

Analyze the advantages and disadvantages of Project – based

structures.
A project-based structure is one where teams are created, undertake the work and are then
dissolved. This can be particularly appropriate for organisations that deliver large and
expensive goods or services (civil engineering, information systems, films) or those
delivering time-limited events (conferences, sporting events or consulting engagements).
The organisation structure is a constantly changing collection of project teams created,
steered and glued together loosely by a small corporate group. Many organisations use
such teams in a more ad hoc way to complement the ‘main’ structure. For example,
taskforces are set up to make progress on new elements of strategy or to provide
momentum where the regular structure of the organisation is not effective.

Advantages of Project-based structures

◉ The project-based structure can be highly flexible, with projects being set up and
dissolved as required.
◉ Accountability and control are good because project teams should have clear tasks to
achieve within a defined life.
◉ Projects can be effective at knowledge exchange as project team members will
typically be drawn from different departments within the firm.
◉ Projects can also draw members internationally and, because project life spans are
typically short, project teams may be more willing to work temporarily around the
world.

Disadvantages of Project-based structures

◉ Without strong programme management providing overarching strategic control,
organisations are prone to proliferate projects in an ill-coordinated fashion.
◉ The constant breaking up of project teams can also hinder the accumulation of
knowledge over time or within specialisms.

Categorize major reasons of SBU approach.

SBU groups similar divisions into “Strategic Business Units” and then delegate’sauthority
and responsibility of each unit to a senior executive who is normally identified as CEO or
MD of that SBU. It is an extension of Divisional structure
SBU Structure Big organisation like Unilever, etc have many SBUs for their different
categories of products like Cosmetics, Food products and Beverages, etc, and each is
managed through separate unit head.

Advantages:

• Promotes accountability since units’ heads are responsible for individual SBU
profitability
• Career development opportunities are further higher in this structure
• Allow better control of categories of products manufacturing, marketing and
distributions
• Helps to expand in different related and unrelated businesses
Disadvantages:

• May provide inconsistent approach to tackle customers, etc, because eachunit

may work in it’s own way to handle situations
• High cost approach

What do you mean by goal congruence? Discuss five areas that

have the ability to create goal congruence.
◉ Goal congruence is the term that is used to describe the situation when the goals of
different interest groups coincide.
◉ The achievement of goal congruence is essential in order to increase the profitability
of the organisation and to achieve its goals.
◉ It is very important that the individual goals are consistent with the organisational
goals.
◉ It may be said that in a perfect organisation individual goals and organisational goals
should correspond perfectly.
◉ However, it is rarely the case as employees have both personal as well as
organisational goals.
◉ One way of to achieve goal congruence between shareholders and managers is by
carefully designing remuneration packages for managers which would motivate
managers to take decisions which were consistent with the objectives of the
shareholders.
The following are some of the areas that have the ability to create goal congruence:
◉ Communication and Understanding
Channels of communication and how goals are perceived are important to achieve goal
congruence. Operational managers have a responsibility of being aware as to what
actions are desirable and what goals are to be achieved. It should be understood
that the communication of different goals can occur through informal channels,
which involves meetings and face to face interactions, or through formal channels
including budgets or other financial documents. There is a inherent risk that even if
the communication is well executed, it might be perceived in different ways.
Organisations, therefore, should internalise the goals in a good manner to avoid
that employees feel inability to achieve them.

◉ Create direction
One of the reasons for lack of goal congruence is the absence of direction related to
employees’ behaviour. Performance management and goals facilitate efficient
communication about what managers want their subordinates to focus on. It needs
no mention that providing clear information and direction, employees can better
understand what is expected from them, how to perform adequately, and how to
contribute effectively to the achievement of the organisational goals. There is a
need to increase the employees understanding of the strategic objectives as well as
the organisation’s value drivers.

◉ Motivation
The problem of motivation can exist even though employees have knowledge about
how to perform adequately because employees can act in their own self interest
instead of in the organisation’s best interest. The employees can make their own
performance report better by allocating resources without befitting the
 organisation as a whole. One of the strongest reasons for demotivation among
employees and managers is dislike for the work allocated. The reason for motivation
varies among employees. While some employees feel motivated for some
recognition and appraisals others may feel motivated because of commitment and
responsibility without any required pay off. The more motivated the employees of
the organisation the better will be the goal congruence.

◉ Incentives
In order to increase the likelihood of employees working to achieve their individual
goals, organisation’s aim to influence motivation by providing incentives. Research
suggests that individuals tend to perform better when they are rewarded. Rewards
and compensations should create goal congruence between individual goals and
organisational goals by stimulating individuals to perform by providing incentives, as
rewards are related to increased effort.

◉ Connection
It is very important to create a connection between goals, performance measures and
incentives. In order to align the employees’ self interest and overall organisational
objectives it is necessary to relate incentives with performance. By linking incentives
to certain goals, individuals tend to pay more attention to what is important.

Explain Business Processing Reengineering

◉ Business process reengineering is an approach used to improve organizational
performance by increasing the efficiency and effectiveness of processes that exist
across the organization. In addition to the redesigning of business processes, it also
involves the redesigning of associated systems and organizational structures.

◉ Usually, reasons like new market opportunities, increasing competition, poorfinancial

performance, and decreasing market share trigger the need for a business process
transformation.

◉ BPR involves the analysis and transformation of several major components of a

business. These include
a) Strategy
b) Organization
c) Process
d) Technology
e) Culture
◉ BPR includes three phases; analysis phase, design phase, and implementation phase.
It is also referred to as business process redesign, business process change
management, and business transformation
Benefits of Business Process Reengineering
BPR plays a major role in organizational performance improvement in terms ofcost,
quality, delivery, employee productivity, etc. It also helps
• Streamline business processes and systems
• Companies easily adapt to changing times and reduce operating expenses
• Improve company profitability and sustain competitive advantage
• Boost employee productivity
• Increase customer satisfaction by improving the quality of products and
services
Module- 11 Digital Strategy
What is Digital Strategy?
➢ A digital strategy, sometimes called a digital media strategy, is a plan for maximizing
the business benefits of data assets and technology-focused initiatives. A successful
digital strategy requires a cross-functional team with executive leadership, marketing
and information technology (IT) members.

➢ Digital strategy, on the other hand, focuses on technology, not culture. Digital
strategy is most relevant to changes in business models, and uses technology to
create the capabilities a company needs to become a digital business. Setting down a
strategy is a key component of the transformation process, and ensures that
technology is being implemented in a way that supports the business objectives.

➢ In scientific terms, digital technology is a technology in which information is

represented in digital form, i.e., as 0s and 1s. Some of the examples of digital
technologies are online games, multimedia, social media and mobile phones.

➢ In today’s organization, there are many ideas of what constitutes a digital strategy. A
marketing executive will see a digital strategy as social media and web channels. An
IT person would see a digital strategy as cloud. An operations executive will see it as
data analytics. An R&D executive would see it as online products. A financial person
will see it as online revenue channels.

What is common element of digital strategy?

◉ Choose a Leader -This is the most important part of creating a digital strategy, but
choosing the right person will depend on company culture, structure and priorities.
Whether companies place leadership with the CEO or an appointed Chief Digital
Officer, the leader’s influence will need to match the scope of digital strategy;
otherwise, it will be difficult to create the full buy-in from each department necessary
to make effective changes.

◉ Attack vs. Defend- McKinsey & Company emphasizes that companies would do well
to categorize their potential threats and opportunities in digital business, then
compare these against their own purpose. This clarifies whether a proactive or
defensive stance needs to guide new initiatives.

◉ Take a Measured Approach - Digital strategy often incorporates a process for

assessing whether new technology will really complement or grow the current
business. If you fear that your company is already behind on digital, it can be
tempting to rush into a project without looking at how it fits your current strategy. By
 taking a measured approach, you can avoid wasting resources on initiatives that
don’t align with your business’s needs and priorities.

◉ Future Proof - The goal of digital transformation is to create an appropriate

foundation for digital business. This means creating an organization that can continue
to reinvent itself as necessary to keep up with changes in technology and customer
expectations. Digital strategy should be visionary enough to carry companies through
changes in the digital economy, in a way that continues to bring a digital edge to the
business.

What is Big Data?

➢ Big data is a collection of data that is huge in volume and is growing exponentially
with time.
➢ It is a data with so large size and complexity that none of traditional data
management tools can store it or process it efficiently.
➢ Big data is also a data but with huge size. Examples of Big Data include stock
exchange, social networking site, jet engine, etc.
➢ There are three types of Big Data namely, structured, unstructured and semi-
structured.

◉ A ‘structured data’ is any data that can be stored, accessed and processed in
the form of fixed format. A lot of success has been achieved over a period of
time in developing techniques for working with such kind of data (where the
format is well known in advance) and also deriving value out of it.

◉ An unstructured data is one with unknown form or structure. In addition to

the size being huge, un-structured data poses multiple challenges in terms of
its processing for deriving value out of it.

◉ A semi-structured data can contain both the forms of data. Example of semi-
structured data is a data represented in an XML file.

What is Characteristics Big Data?

◉ Volume – Size of data plays a very crucial role in determining value out of data. Also,
whether a particular data can actually be considered as a Big Data or not, is
dependent upon the volume of data. The name Big Data itself is related to a size
which is enormous. Hence, ‘Volume’ is one characteristic which needs to be
considered while dealing with Big Data solutions.

◉ Variety – Variety refers to heterogeneous sources and the nature of data, both
structured, unstructured and semi structured. During earlier days, spreadsheets and
 databases were the only sources of data considered by most of the applications
however, in recent period data can be in the form of emails, photos, videos,
monitoring devices, PDFs, audio, etc.. These data also need to be analysed.

◉ Velocity – The term ‘velocity’ refers to the speed of generation of data and
processing of data to be responsive to the needs of the customers. Big Data velocity
deals with the speed at which data flows in from sources like business processes,
application logs, networks, and social media sites, sensors, mobile devices, etc. The
flow of data is massive and continuous.

◉ Variability – This refers to the inconsistency which can be shown by the data at
times, thus hampering the process of being able to handle and manage the data
effectively.

What is benefit of Big Data Processing?

◉ Businesses can utilize outside intelligence while taking decisions.
◉ Improved customer service.
◉ Early identification of risk to the product/services, if any.
◉ Better operational efficiency.

What is Cloud Computing?

◉ Cloud computing is a general term for anything that involves delivering hosted
services over the internet.

◉ These services are divided into three main categories or types of cloud computing:
infrastructure as a service (IaaS), platform as a service (PaaS) and software as a
service (SaaS).

a) IaaS providers, such as Amazon Web Services (AWS), supply a virtual server
instance and storage, as well as application programming interfaces (APIs) that
let users migrate workloads to a virtual machine (VM). Users have an allocated
storage capacity and can start, stop, access and configure the VM and storage
as desired.

b) In the PaaS model, cloud providers host development tools on their

infrastructures. Users access these tools over the internet using APIs, web
portals or gateway software. PaaS is used for general software development,
and many PaaS providers host the software after it’s developed.

c) SaaS is a distribution model that delivers software applications over the

internet; these applications are often called web services. Users can access
SaaS applications and services from any location using a computer or mobile
 device that has internet access. In the SaaS model, users gain access to
application software and databases.

◉ A cloud can be private or public.

a) A public cloud sells services to anyone on the internet.

b) A private cloud is a proprietary network or a data center that supplies hosted
services to a limited number of people, with certain access and permissions
settings.
c) Private or public, the goal of cloud computing is to provide easy, scalable
access to computing resources and IT services. Examples of cloud computing
include Google Docs, Microsoft 365, Email services, Google Calendar, Skype,
Wats App, Zoom, etc

What are merit / benefit of Cloud Computing?

Cloud computing benefits to modern businesses including the following: Cost management:
◉ Cloud infrastructure can reduce capital costs, as organisations don’t have to spend
massive amounts of money buying and maintaining equipment. Moreover,
companies don’t need large IT teams to handle cloud data center operations because
they can rely on the expertise of their cloud providers’ teams. Cloud computing also
cuts costs related to downtime

◉ Data and workload mobility: Cloud computing allows users to access data from
anywhere with any device with just an internet connection. That means users don’t
have to carry around USB drives, an external hard drive or multiple CDs to access
their data. Users can access corporate data through smart phones and other mobile
devices, enabling remote employees to stay up to date with co-workers and
customers. End users can easily process, store, retrieve and recover resources in the
cloud. In addition, cloud vendors provide all the upgrades and updates automatically,
saving time and effort.

◉ Business continuity and disaster recovery (BCDR): The biggest worry for
organisations in the present digital landscape is data loss. Storing data in the cloud
guarantees that users can always access their data even if their devices, e.g., laptops
or smart phones, are inoperable. With cloud-based services, organisations can
quickly recover their data in the event of emergencies, such as natural disasters or
power outages. This benefits BCDR and helps ensure that workloads and data are
available even if the business suffers damage or disruption.

What are Demerit of Cloud Computing?

In spite of the fact that cloud computing has huge benefits yet, it has its own causes of
concern as follows:
◉ Cloud security: There is a clear lack of transparency regarding how and where
sensitive information entrusted to the cloud provider is handled. When relying on the
cloud, organisations risk data breaches, hacking of APIs and interfaces, compromised
credentials and authentication issues.

◉ Cost unpredictability: The concept Pay-as-you-go subscription plans for cloud use,
along with scaling resources to accommodate fluctuating workload demands, can
make it tough to define and predict final costs.

◉ Lack of capability and expertise: With cloud-supporting technologies rapidly

advancing, organisations are struggling to keep up with the growing demand for tools
and employees with the proper skill sets and knowledge needed to architect, deploy,
and manage workloads and data in a cloud.

◉ IT governance: The emphasis on do-it-yourself capability in cloud computing can

make IT governance difficult, as there is no control over provisioning, de provisioning
and management of infrastructure operations.

◉ Compliance with industry laws: When transferring data from on-premises local
storage into cloud storage, it can be difficult to manage compliance with industry
regulations through a third party. Management of multiple clouds: Every cloud is
different, so multi-cloud deployments can disjoint efforts to address more general
cloud computing challenges.

◉ Cloud performance: Network and provider outages can interfere with productivity
and disrupt business processes if organisations are not prepared with contingency
plans.

◉ Building a private cloud: Architecting, building and managing private clouds whether
for its own purpose or for a hybrid cloud goal can be a daunting task for IT
departments and staff.

◉ Cloud migration: The process of moving applications and other data to a cloud
infrastructure often causes complications. Migration projects frequently take longer
than anticipated and go over budget.

◉ Vendor lock-in: Switching between cloud providers can cause significant issues. This
includes technical incompatibilities, legal and regulatory limitations and substantial
costs incurred from sizable data migrations.

What is Artificial intelligence?

◉ Artificial intelligence (AI) is intelligence exhibited by machines and systems, with
machines imitating functions which are mostly related with human cognition.

◉ There are three levels of AI namely; Narrow AI, General AI/human-level and Super AI.

◉ Narrow AI refers to the current state-of-the-art with existing software that

automates a traditionally human activity and often outperforms humans in efficiency
and endurance in one specialized area, e.g., forecasting the weather, autonomous
driving, etc.

◉ General AI/human-level AI describes the capacity of machines to understand their

environment and reason and act accordingly, just as a human would in all activities
across all dimensions, including scientific creativity, general knowledge, and social
skills.

◉ Super AI, the highest level of AI, is reached when AI becomes much smarter than the
best human brains in practically every field.

◉ Super AI systems can make deductions about unknown environments.

◉ Machine learning (ML) describes automated learning of implicit properties of, or

underlying rules for data. It is a major component for implementing

◉ AI since its output is used as the basis for recommendations, decisions, and feedback
mechanisms with regards to a previously unknown situation.

◉ ML is an approach to creating AI. As most AI systems today are ML-based, the terms
are often used interchangeably-particularly in a business context.

◉ ML involves training algorithms on sample input data to optimize its performance on

a specific task so that the machine gains a new capability.

◉ Deep learning is a branch of AI. It mainly deals with neural networks that consist of
many layers, hence the name “deep.” In the last years, deep neural networks have
been the most successful AI approach in many areas.

◉ AI is required for analyzing previously unavailable or indecipherable data (e.g., video

or sound which previously could only be interpreted by humans), in order to detect
quality issues.

◉ AI also has the ability to help detection and analysis mechanisms, improve its own
accuracy by continuously learning from the issues detected, and optimize
 manufacturing processes by incorporating feedback and adjusting the control
parameters accordingly.

◉ It is amazing to note how much friendly a technology AI is emerging to help people in

quest for solving problems for society.

What is Block Chain?

◉ Blockchain is a shared, immutable ledger that facilitates the process of recording
transactions and tracking assets in a business network.
◉ An asset can be tangible (house, car, cash, land, etc.) or intangible (intellectual
property, patents, copyrights, branding).
◉ Virtually anything of value can be tracked and traded on a blockchain network,
reducing risk and cutting costs for all involved.
◉ The importance of block chain network systems from the fact that business runs on
information. The information should be accurate and received fast.
◉ Blockchain is ideal for delivering that information because it provides immediate,
shared and completely transparent information stored on an immutable ledger that
can be accessed only by permissioned network members.
◉ A blockchain network can track orders, payments, accounts, production and much
more.
◉ As members share a single view of the truth, one can see all details of a transaction
end to end, giving greater confidence, as well as new efficiencies and opportunities.

List the Important components of a block chain?

◉ Distributed ledger technology All network participants have access to the distributed
ledger and its immutable record of transactions. With this shared ledger, transactions
are recorded only once, eliminating the duplication of effort that’s typical of
traditional business networks.

◉ Immutable records No participant can change or tamper with a transaction after it’s
been recorded to the shared ledger. If a transaction record includes an error, a new
transaction must be added to reverse the error, and both transactions are then
visible.

◉ Smart contracts A smart contract is stored on the blockchain and executed

automatically. A smart contract can define conditions for corporate bond transfers;
include terms for travel insurance to be paid and much more. A smart contract acts a
set of rules and allows fastest transactions. The benefits of blockchain network
 ◉ Increased trust As block chain is used by only the members who are within a defined
network. This assures the members that the data being received by them is accurate
and timely data. Moreover, the confidential blockchain records will be shared only
with network members to whom one has specifically granted access.

◉ Greater security The increase security in blockchain network arises from the fact that
consensus on data accuracy is required from all network members, and all validated
transactions are immutable because they are recorded permanently. No one, not
even a system administrator, can delete a transaction.

◉ Increased efficiencies With a distributed ledger that is shared among members of a

network, time-wasting record reconciliations are eliminated. The smart contract
enables automated transactions thereby saving on time.

What is Robotic Process Automation?

◉ Robotic Process Automation (RPA) is a form of business process automation that
allows anyone to define a set of instructions for a robot or ‘bot’ to perform.

◉ RPA bots are capable of mimicking most human-computer interactions to carry out a
ton of error-free tasks, at high volume and speed.

◉ Robotic process automation is not a physical or mechanical robot.

◉ RPA is the process by which a software bot uses a combination of automation,

computer vision, and machine learning to automate repetitive, high-volume tasks
that are rule-based and trigger-driven.

◉ Robotic process automation tools are best suited for processes with repeatable,
predictable interactions with IT applications.

◉ RPA tools can improve the efficiency of these processes and the effectiveness of
services without fundamental process redesign.

◉ The benefits of RPA solutions not only reduce cost but also include:

a) Decreased cycle times.

b) Flexibility and scalability
c) Improved accuracy
d) Improved employee morale
e) Detailed data capture

The different types of digital marketing strategies

◉ Social Media Marketing Platforms Todays’ consumers are highly reliant on social
media platforms such as Instagram, Facebook, LinkedIn, and Snapchat. This is why it
is essential that brands are active across accounts. First, marketing teams can use
these channels to distribute paid ads and sponsored content. Each platform has a
way for marketing teams to create paid ad campaigns and segment users so these
ads appear on the feeds of target audience members. While each platform is
different, most have capabilities that allow marketing teams to place ads based on
location, job title, interests, age, etc. Social media is also a great way to promote
products or resources organically to your followers, and engage with consumers.
Chances are, people that follow your brand on social media have likely purchased
from you in the past. Interacting with them on social media or answering customer
service-oriented questions is a great way to ensure continued engagement with the
brand and cultivate positive experiences and customer loyalty

◉ Influencer Marketing Another effective way to harness digital channels to reach

target audiences is with influencer marketing. Brands can partner with celebrities,
sites, or others that are considered experts in their field, that share similar values.
Brands can then reach these influencers’ followers with branded content and offers.

◉ Email Marketing Email marketing campaigns allow organizations to stay connected

with prospects and customers, sending them customized newsletters or offers based
on past shopping history or brand engagements. If an individual has interacted with a
few of your branded touch points- like an email offer for 10 percent off the items
they have been considering, or free shipping - that may be what ultimately brings
about a conversion.

◉ Content Marketing Content marketing allows marketing teams to be proactive in

answering their users’ questions. Marketing teams create content, videos, and other
assets to answer questions or provide context to consumers throughout the three
stages of the buyer’s journey:

I. The awareness stage: Buyer realizes they have a need

II. The consideration stage: Buyer determines a course of action to meet this
need
III. The decision stage: Buyer decides on a product / service to purchase to meet
the need

◉ Search Engine Optimization (SEO) Marketing Search engine optimization often goes
hand in hand with content marketing. When the customer from the above example is
 conducting research for which gym shoes to buy, they will probably click on one of
the first three results that appear on Google. With this in mind, the athletic shoes’
marketing team wants to ensure their article appears in those top results. This is
done by optimizing content for user experience and ensuring the technical elements
are in place to enable search engine crawlers to easily find and index this content

◉ Pay-per-click (PPC) Pay-per-click is a form of paid advertising that allows marketing

teams to essentially purchase traffic to their website. Marketers place ads on
websites or search engines such as Google and Microsoft Bing, and pay a fee each
time the ad is clicked on. These ads often appear at the top of the search results
page, and are typically determined by bids on specific keywords, while banner ads on
websites usually have set prices.

◉ Affiliate Marketing Affiliate marketing is similar to referral programs; it involves

working with outside individuals or companies under the agreement that they
promote your product in exchange for a commission from each sale that can be
attributed to their efforts. This is a way to cut down on costs and outsource some of
the heavy lifting of promotion; however, you’re putting your brand’s reputation in
someone else’s hands, so this type of marketing often requires more extensive
monitoring and tracking.

◉ Mobile Marketing Mobile marketing initiatives can include many of the digital
marketing strategies mentioned above, and typically will leverage a combination of
text messages, social media, email, push notifications, and mobile applications. The
importance of mobile marketing is rising, as it is expected that by 2024, the number
of mobile shoppers will rise to approximately 187.5 million users. With the clear
move to mobile, marketers need to think about how they can optimize their current
marketing efforts for mobile to be able to deliver a seamless and user-friendly
experience.