Strategic Management Model Test Paper - 6 (Answers) - CA Intermediate PDF Download

 Page 1


ANSWERS OF MODEL TEST PAPER 6
PAPER 6B: STRATEGIC MANAGEMENT  
PART I 
1. (A) (i) (a) (ii) (b) (iii)  (c) (iv)  (b) (v)  (d)
1. (B) (i) (c) (ii) (c) (iii)  (b)
PART II 
1. (a)  According to Mendelow's Matrix, environmentally conscious consumers
who influence industry standards fall into the Key Players quadrant. 
These stakeholders possess both high power and high interest, making 
them crucial to the success of Chic Threads’ sustainability-focused 
initiatives. Their high interest stems from their alignment with the brand's 
ethical and eco-friendly values, while their high power arises from their 
ability to shape market trends, advocate for sustainable practices, and 
impact on the brand’s reputation through their purchasing decisions and 
influence within the industry. 
As Key Players, these consumers require active engagement. Chic 
Threads must focus on satisfying their expectations by providing regular 
updates on sustainability efforts, maintaining transparent 
communication, and incorporating their feedback to ensure continued 
support. The brand should actively involve these stakeholders in its 
decision-making processes by seeking their input on product design and 
sustainability measures. Additionally, building strong relationships 
through targeted marketing campaigns, collaborations, and awareness 
initiatives will further solidify their trust and advocacy. Effectively 
managing this stakeholder group is vital, as their support and satisfaction 
directly contribute to the success of the brand’s eco-friendly clothing line. 
(b) To target tech-savvy consumers for the new smartphone model, the tech
company can develop a marketing strategy based on customer behavior.
Consumer behaviour may be influenced by a number of things. These
elements can be categorised into the following conceptual domains:
• External Influences: Utilize online platforms and tech forums to
generate buzz around the new smartphone. Partner with tech
influencers and bloggers to review the product and create awareness
among tech-savvy consumers.
• Internal Influences: Appeal to the desire for innovation and
advanced features among tech-savvy consumers. Highlight the
unique selling points of the new smartphone, such as its cutting-edge
technology, performance, and design.
• Decision Making: Recognize that tech-savvy consumers are early
adopters who value functionality and performance. Provide detailed
specifications and comparisons with other smartphones to help them
make an informed decision.
615
Page 2


ANSWERS OF MODEL TEST PAPER 6
PAPER 6B: STRATEGIC MANAGEMENT  
PART I 
1. (A) (i) (a) (ii) (b) (iii)  (c) (iv)  (b) (v)  (d)
1. (B) (i) (c) (ii) (c) (iii)  (b)
PART II 
1. (a)  According to Mendelow's Matrix, environmentally conscious consumers
who influence industry standards fall into the Key Players quadrant. 
These stakeholders possess both high power and high interest, making 
them crucial to the success of Chic Threads’ sustainability-focused 
initiatives. Their high interest stems from their alignment with the brand's 
ethical and eco-friendly values, while their high power arises from their 
ability to shape market trends, advocate for sustainable practices, and 
impact on the brand’s reputation through their purchasing decisions and 
influence within the industry. 
As Key Players, these consumers require active engagement. Chic 
Threads must focus on satisfying their expectations by providing regular 
updates on sustainability efforts, maintaining transparent 
communication, and incorporating their feedback to ensure continued 
support. The brand should actively involve these stakeholders in its 
decision-making processes by seeking their input on product design and 
sustainability measures. Additionally, building strong relationships 
through targeted marketing campaigns, collaborations, and awareness 
initiatives will further solidify their trust and advocacy. Effectively 
managing this stakeholder group is vital, as their support and satisfaction 
directly contribute to the success of the brand’s eco-friendly clothing line. 
(b) To target tech-savvy consumers for the new smartphone model, the tech
company can develop a marketing strategy based on customer behavior.
Consumer behaviour may be influenced by a number of things. These
elements can be categorised into the following conceptual domains:
• External Influences: Utilize online platforms and tech forums to
generate buzz around the new smartphone. Partner with tech
influencers and bloggers to review the product and create awareness
among tech-savvy consumers.
• Internal Influences: Appeal to the desire for innovation and
advanced features among tech-savvy consumers. Highlight the
unique selling points of the new smartphone, such as its cutting-edge
technology, performance, and design.
• Decision Making: Recognize that tech-savvy consumers are early
adopters who value functionality and performance. Provide detailed
specifications and comparisons with other smartphones to help them
make an informed decision.
615
• Post-decision Processes: Offer excellent customer service and
support to address any technical issues or concerns. Encourage
customers to provide feedback and reviews to build credibility and
trust among tech-savvy consumers.
Figure: Process of consumer behaviour 
By understanding the behavior of tech-savvy consumers and aligning the 
marketing strategy with their preferences, the tech company can 
effectively promote the new smartphone and attract this demographic. 
(c) Strategic Performance Measures (SPM) are metrics organizations use
to evaluate and track the effectiveness of their strategies in achieving
their goals and objectives. SPM provides a framework for monitoring key
areas critical to the organization’s success, ensuring progress toward
desired outcomes and enabling timely adjustments to improve
performance. For GreenEdge Solutions, various types of SPM can be
utilized:
• Financial Measures: Metrics like revenue growth, return on
investment (ROI), and profit margins help evaluate the company’s
financial health and profitability.
• Customer Satisfaction Measures: Assessments of customer
satisfaction, retention, and loyalty indicate how well the company
meets customer needs.
• Market Measures: Market share, customer acquisition, and referral
rates reflect competitiveness and market position.
• Employee Measures: Employee satisfaction, engagement, and
turnover rate help track workplace culture and talent retention.
• Innovation Measures: R&D spending, patent filings, and new
product launches gauge the company’s innovation capabilities.
• Environmental Measures: Monitoring energy consumption, waste
reduction, and carbon emissions ensures the company aligns with
sustainability goals.
Purchase and 
Post Purchase 
Actions 
External Factors 
Market Stimuli 
Environmental 
Factors 
Internal Factors 
Decision 
Making 
616
Page 3


ANSWERS OF MODEL TEST PAPER 6
PAPER 6B: STRATEGIC MANAGEMENT  
PART I 
1. (A) (i) (a) (ii) (b) (iii)  (c) (iv)  (b) (v)  (d)
1. (B) (i) (c) (ii) (c) (iii)  (b)
PART II 
1. (a)  According to Mendelow's Matrix, environmentally conscious consumers
who influence industry standards fall into the Key Players quadrant. 
These stakeholders possess both high power and high interest, making 
them crucial to the success of Chic Threads’ sustainability-focused 
initiatives. Their high interest stems from their alignment with the brand's 
ethical and eco-friendly values, while their high power arises from their 
ability to shape market trends, advocate for sustainable practices, and 
impact on the brand’s reputation through their purchasing decisions and 
influence within the industry. 
As Key Players, these consumers require active engagement. Chic 
Threads must focus on satisfying their expectations by providing regular 
updates on sustainability efforts, maintaining transparent 
communication, and incorporating their feedback to ensure continued 
support. The brand should actively involve these stakeholders in its 
decision-making processes by seeking their input on product design and 
sustainability measures. Additionally, building strong relationships 
through targeted marketing campaigns, collaborations, and awareness 
initiatives will further solidify their trust and advocacy. Effectively 
managing this stakeholder group is vital, as their support and satisfaction 
directly contribute to the success of the brand’s eco-friendly clothing line. 
(b) To target tech-savvy consumers for the new smartphone model, the tech
company can develop a marketing strategy based on customer behavior.
Consumer behaviour may be influenced by a number of things. These
elements can be categorised into the following conceptual domains:
• External Influences: Utilize online platforms and tech forums to
generate buzz around the new smartphone. Partner with tech
influencers and bloggers to review the product and create awareness
among tech-savvy consumers.
• Internal Influences: Appeal to the desire for innovation and
advanced features among tech-savvy consumers. Highlight the
unique selling points of the new smartphone, such as its cutting-edge
technology, performance, and design.
• Decision Making: Recognize that tech-savvy consumers are early
adopters who value functionality and performance. Provide detailed
specifications and comparisons with other smartphones to help them
make an informed decision.
615
• Post-decision Processes: Offer excellent customer service and
support to address any technical issues or concerns. Encourage
customers to provide feedback and reviews to build credibility and
trust among tech-savvy consumers.
Figure: Process of consumer behaviour 
By understanding the behavior of tech-savvy consumers and aligning the 
marketing strategy with their preferences, the tech company can 
effectively promote the new smartphone and attract this demographic. 
(c) Strategic Performance Measures (SPM) are metrics organizations use
to evaluate and track the effectiveness of their strategies in achieving
their goals and objectives. SPM provides a framework for monitoring key
areas critical to the organization’s success, ensuring progress toward
desired outcomes and enabling timely adjustments to improve
performance. For GreenEdge Solutions, various types of SPM can be
utilized:
• Financial Measures: Metrics like revenue growth, return on
investment (ROI), and profit margins help evaluate the company’s
financial health and profitability.
• Customer Satisfaction Measures: Assessments of customer
satisfaction, retention, and loyalty indicate how well the company
meets customer needs.
• Market Measures: Market share, customer acquisition, and referral
rates reflect competitiveness and market position.
• Employee Measures: Employee satisfaction, engagement, and
turnover rate help track workplace culture and talent retention.
• Innovation Measures: R&D spending, patent filings, and new
product launches gauge the company’s innovation capabilities.
• Environmental Measures: Monitoring energy consumption, waste
reduction, and carbon emissions ensures the company aligns with
sustainability goals.
Purchase and 
Post Purchase 
Actions 
External Factors 
Market Stimuli 
Environmental 
Factors 
Internal Factors 
Decision 
Making 
616
Using these measures, GreenEdge Solutions can systematically assess 
its strategy and make informed decisions to drive sustainable growth and 
success. 
2. (a)  Connect Group has to make strategic changes for its survival. The
changes in the environmental forces often require businesses to make 
modifications in their existing strategies and bring out new strategies. 
Strategic change is a complex process that involves a corporate strategy 
focused on new markets, products, services and new ways of doing 
business. Unless companies embrace change, they are likely to freeze 
and unless companies prepare to deal with sudden, unpredictable, 
discontinuous, and radical change, they are likely to be extinct. 
Three steps for initiating strategic change are: 
(i) Recognise the need for change – The first step is to diagnose the
which facets of the present corporate culture are strategy
supportive and which are not.
(ii) Create a shared vision to manage change – Objectives of both
individuals and organisation should coincide. There should be no
conflict between them. This is possible only if the management and
the organisation members follow a shared vision.
(iii) Institutionalise the change – This is an action stage which
requires the implementation of the changed strategy. Creating and
sustaining a different attitude towards change is essential to ensure
that the firm does not slip back into old ways of doing things.
(b) The term ‘strategic management’ refers to the managerial process of
developing a strategic vision, setting objectives, crafting a strategy,
implementing and evaluating the strategy, and initiating corrective
adjustments were deemed appropriate.
The presence of strategic management cannot counter all hindrances
and always achieve success as there are limitations attached to strategic
management. These can be explained in the following lines:
? The environment is highly complex and turbulent. It is difficult
to understand the complex environment and exactly pinpoint how it
will shape up in future. The organisational estimate about its future
shape may awfully go wrong and jeopardise all strategic plans. The
environment affects as the organisationhas to deal with suppliers,
customers, governments and other external factors.
? Strategic management is a time-consuming process.
Organisations spend a lot of time preparing, communicating the
strategies that may impede daily operations and negatively impact
on routine business.
? Strategic management is a costly process. Strategic
management adds a lot of expenses to an organization. Expert
strategic planners need to be engaged, efforts are made for
analysis of external and internal environments devise strategies
617
Page 4


ANSWERS OF MODEL TEST PAPER 6
PAPER 6B: STRATEGIC MANAGEMENT  
PART I 
1. (A) (i) (a) (ii) (b) (iii)  (c) (iv)  (b) (v)  (d)
1. (B) (i) (c) (ii) (c) (iii)  (b)
PART II 
1. (a)  According to Mendelow's Matrix, environmentally conscious consumers
who influence industry standards fall into the Key Players quadrant. 
These stakeholders possess both high power and high interest, making 
them crucial to the success of Chic Threads’ sustainability-focused 
initiatives. Their high interest stems from their alignment with the brand's 
ethical and eco-friendly values, while their high power arises from their 
ability to shape market trends, advocate for sustainable practices, and 
impact on the brand’s reputation through their purchasing decisions and 
influence within the industry. 
As Key Players, these consumers require active engagement. Chic 
Threads must focus on satisfying their expectations by providing regular 
updates on sustainability efforts, maintaining transparent 
communication, and incorporating their feedback to ensure continued 
support. The brand should actively involve these stakeholders in its 
decision-making processes by seeking their input on product design and 
sustainability measures. Additionally, building strong relationships 
through targeted marketing campaigns, collaborations, and awareness 
initiatives will further solidify their trust and advocacy. Effectively 
managing this stakeholder group is vital, as their support and satisfaction 
directly contribute to the success of the brand’s eco-friendly clothing line. 
(b) To target tech-savvy consumers for the new smartphone model, the tech
company can develop a marketing strategy based on customer behavior.
Consumer behaviour may be influenced by a number of things. These
elements can be categorised into the following conceptual domains:
• External Influences: Utilize online platforms and tech forums to
generate buzz around the new smartphone. Partner with tech
influencers and bloggers to review the product and create awareness
among tech-savvy consumers.
• Internal Influences: Appeal to the desire for innovation and
advanced features among tech-savvy consumers. Highlight the
unique selling points of the new smartphone, such as its cutting-edge
technology, performance, and design.
• Decision Making: Recognize that tech-savvy consumers are early
adopters who value functionality and performance. Provide detailed
specifications and comparisons with other smartphones to help them
make an informed decision.
615
• Post-decision Processes: Offer excellent customer service and
support to address any technical issues or concerns. Encourage
customers to provide feedback and reviews to build credibility and
trust among tech-savvy consumers.
Figure: Process of consumer behaviour 
By understanding the behavior of tech-savvy consumers and aligning the 
marketing strategy with their preferences, the tech company can 
effectively promote the new smartphone and attract this demographic. 
(c) Strategic Performance Measures (SPM) are metrics organizations use
to evaluate and track the effectiveness of their strategies in achieving
their goals and objectives. SPM provides a framework for monitoring key
areas critical to the organization’s success, ensuring progress toward
desired outcomes and enabling timely adjustments to improve
performance. For GreenEdge Solutions, various types of SPM can be
utilized:
• Financial Measures: Metrics like revenue growth, return on
investment (ROI), and profit margins help evaluate the company’s
financial health and profitability.
• Customer Satisfaction Measures: Assessments of customer
satisfaction, retention, and loyalty indicate how well the company
meets customer needs.
• Market Measures: Market share, customer acquisition, and referral
rates reflect competitiveness and market position.
• Employee Measures: Employee satisfaction, engagement, and
turnover rate help track workplace culture and talent retention.
• Innovation Measures: R&D spending, patent filings, and new
product launches gauge the company’s innovation capabilities.
• Environmental Measures: Monitoring energy consumption, waste
reduction, and carbon emissions ensures the company aligns with
sustainability goals.
Purchase and 
Post Purchase 
Actions 
External Factors 
Market Stimuli 
Environmental 
Factors 
Internal Factors 
Decision 
Making 
616
Using these measures, GreenEdge Solutions can systematically assess 
its strategy and make informed decisions to drive sustainable growth and 
success. 
2. (a)  Connect Group has to make strategic changes for its survival. The
changes in the environmental forces often require businesses to make 
modifications in their existing strategies and bring out new strategies. 
Strategic change is a complex process that involves a corporate strategy 
focused on new markets, products, services and new ways of doing 
business. Unless companies embrace change, they are likely to freeze 
and unless companies prepare to deal with sudden, unpredictable, 
discontinuous, and radical change, they are likely to be extinct. 
Three steps for initiating strategic change are: 
(i) Recognise the need for change – The first step is to diagnose the
which facets of the present corporate culture are strategy
supportive and which are not.
(ii) Create a shared vision to manage change – Objectives of both
individuals and organisation should coincide. There should be no
conflict between them. This is possible only if the management and
the organisation members follow a shared vision.
(iii) Institutionalise the change – This is an action stage which
requires the implementation of the changed strategy. Creating and
sustaining a different attitude towards change is essential to ensure
that the firm does not slip back into old ways of doing things.
(b) The term ‘strategic management’ refers to the managerial process of
developing a strategic vision, setting objectives, crafting a strategy,
implementing and evaluating the strategy, and initiating corrective
adjustments were deemed appropriate.
The presence of strategic management cannot counter all hindrances
and always achieve success as there are limitations attached to strategic
management. These can be explained in the following lines:
? The environment is highly complex and turbulent. It is difficult
to understand the complex environment and exactly pinpoint how it
will shape up in future. The organisational estimate about its future
shape may awfully go wrong and jeopardise all strategic plans. The
environment affects as the organisationhas to deal with suppliers,
customers, governments and other external factors.
? Strategic management is a time-consuming process.
Organisations spend a lot of time preparing, communicating the
strategies that may impede daily operations and negatively impact
on routine business.
? Strategic management is a costly process. Strategic
management adds a lot of expenses to an organization. Expert
strategic planners need to be engaged, efforts are made for
analysis of external and internal environments devise strategies
617
and properly implement. These can be really costly for 
organisations with limited resources particularly when small and 
medium organisation create strategies to compete.  
? Competition is unpredictable. In a competitive scenario, where
all organisations are trying to move strategically, it is difficult to
clearly estimate the competitive responses to the strategies.
3. (a)  Yes, Easy Access and its rivals get advantage by this move. The new
bureaucratic process is making it more complicated for organizations to 
start up and enter the Easy Access market, increasing barriers to entry 
and thereby reducing the threat of new entrants. New entrants can 
reduce an industry’s profitability, because they add new production 
capacity, leading to increase in supply of the product, sometimes even 
at a lower price and can substantially erode existing firm’s market share 
position. However, New entrants are always a powerful source of 
competition. The new capacity and product range they bring in throws 
up a new competitive pressure. The bigger the new entrant, the more 
severe the competitive effect. New entrants also place a limit on prices 
and affect the profitability of existing players, which is known as Price 
War.  
(b) There are several basis of differentiation, major being: Product, Pricing
and Organization.
Product: Innovative products that meet customer needs can be an area
where a company has an advantage over competitors. However, the
pursuit of a new product offering can be costly – research and
development, as well as production and marketing costs can all add to
the cost of production and distribution. The payoff, however, can be great
as customers’ flocks are among the first to have the new product.
Pricing: It fluctuates based on its supply and demand and may also be
influenced by the customer’s ideal value for a product. Companies that
differentiate based on product price can either determine to offer the
lowest price or can attempt to establish superiority through higher prices.
Organisation: Organisational differentiation is yet another form of
differentiation. Maximizing the power of a brand or using the specific
advantages that an organization possesses can be instrumental to a
company’s success. Location advantage, name recognition and
customer loyalty can all provide additional ways for a company to
differentiate itself from the competition.
4. (a)  Leatherite Ltd. is currently manufacturing footwears for males and
females and its top management has decided to expand its business by 
manufacturing leather bags for males and females. Both the products 
are similar in nature within the same industry. The strategic 
diversification that the top management of Leatherite Ltd. has opted for 
is concentric in nature. They were in business manufacturing leather 
footwear and now they will manufacture leather bags as well. They will 
be able to use existing infrastructure and distribution channels. 
618
Page 5


ANSWERS OF MODEL TEST PAPER 6
PAPER 6B: STRATEGIC MANAGEMENT  
PART I 
1. (A) (i) (a) (ii) (b) (iii)  (c) (iv)  (b) (v)  (d)
1. (B) (i) (c) (ii) (c) (iii)  (b)
PART II 
1. (a)  According to Mendelow's Matrix, environmentally conscious consumers
who influence industry standards fall into the Key Players quadrant. 
These stakeholders possess both high power and high interest, making 
them crucial to the success of Chic Threads’ sustainability-focused 
initiatives. Their high interest stems from their alignment with the brand's 
ethical and eco-friendly values, while their high power arises from their 
ability to shape market trends, advocate for sustainable practices, and 
impact on the brand’s reputation through their purchasing decisions and 
influence within the industry. 
As Key Players, these consumers require active engagement. Chic 
Threads must focus on satisfying their expectations by providing regular 
updates on sustainability efforts, maintaining transparent 
communication, and incorporating their feedback to ensure continued 
support. The brand should actively involve these stakeholders in its 
decision-making processes by seeking their input on product design and 
sustainability measures. Additionally, building strong relationships 
through targeted marketing campaigns, collaborations, and awareness 
initiatives will further solidify their trust and advocacy. Effectively 
managing this stakeholder group is vital, as their support and satisfaction 
directly contribute to the success of the brand’s eco-friendly clothing line. 
(b) To target tech-savvy consumers for the new smartphone model, the tech
company can develop a marketing strategy based on customer behavior.
Consumer behaviour may be influenced by a number of things. These
elements can be categorised into the following conceptual domains:
• External Influences: Utilize online platforms and tech forums to
generate buzz around the new smartphone. Partner with tech
influencers and bloggers to review the product and create awareness
among tech-savvy consumers.
• Internal Influences: Appeal to the desire for innovation and
advanced features among tech-savvy consumers. Highlight the
unique selling points of the new smartphone, such as its cutting-edge
technology, performance, and design.
• Decision Making: Recognize that tech-savvy consumers are early
adopters who value functionality and performance. Provide detailed
specifications and comparisons with other smartphones to help them
make an informed decision.
615
• Post-decision Processes: Offer excellent customer service and
support to address any technical issues or concerns. Encourage
customers to provide feedback and reviews to build credibility and
trust among tech-savvy consumers.
Figure: Process of consumer behaviour 
By understanding the behavior of tech-savvy consumers and aligning the 
marketing strategy with their preferences, the tech company can 
effectively promote the new smartphone and attract this demographic. 
(c) Strategic Performance Measures (SPM) are metrics organizations use
to evaluate and track the effectiveness of their strategies in achieving
their goals and objectives. SPM provides a framework for monitoring key
areas critical to the organization’s success, ensuring progress toward
desired outcomes and enabling timely adjustments to improve
performance. For GreenEdge Solutions, various types of SPM can be
utilized:
• Financial Measures: Metrics like revenue growth, return on
investment (ROI), and profit margins help evaluate the company’s
financial health and profitability.
• Customer Satisfaction Measures: Assessments of customer
satisfaction, retention, and loyalty indicate how well the company
meets customer needs.
• Market Measures: Market share, customer acquisition, and referral
rates reflect competitiveness and market position.
• Employee Measures: Employee satisfaction, engagement, and
turnover rate help track workplace culture and talent retention.
• Innovation Measures: R&D spending, patent filings, and new
product launches gauge the company’s innovation capabilities.
• Environmental Measures: Monitoring energy consumption, waste
reduction, and carbon emissions ensures the company aligns with
sustainability goals.
Purchase and 
Post Purchase 
Actions 
External Factors 
Market Stimuli 
Environmental 
Factors 
Internal Factors 
Decision 
Making 
616
Using these measures, GreenEdge Solutions can systematically assess 
its strategy and make informed decisions to drive sustainable growth and 
success. 
2. (a)  Connect Group has to make strategic changes for its survival. The
changes in the environmental forces often require businesses to make 
modifications in their existing strategies and bring out new strategies. 
Strategic change is a complex process that involves a corporate strategy 
focused on new markets, products, services and new ways of doing 
business. Unless companies embrace change, they are likely to freeze 
and unless companies prepare to deal with sudden, unpredictable, 
discontinuous, and radical change, they are likely to be extinct. 
Three steps for initiating strategic change are: 
(i) Recognise the need for change – The first step is to diagnose the
which facets of the present corporate culture are strategy
supportive and which are not.
(ii) Create a shared vision to manage change – Objectives of both
individuals and organisation should coincide. There should be no
conflict between them. This is possible only if the management and
the organisation members follow a shared vision.
(iii) Institutionalise the change – This is an action stage which
requires the implementation of the changed strategy. Creating and
sustaining a different attitude towards change is essential to ensure
that the firm does not slip back into old ways of doing things.
(b) The term ‘strategic management’ refers to the managerial process of
developing a strategic vision, setting objectives, crafting a strategy,
implementing and evaluating the strategy, and initiating corrective
adjustments were deemed appropriate.
The presence of strategic management cannot counter all hindrances
and always achieve success as there are limitations attached to strategic
management. These can be explained in the following lines:
? The environment is highly complex and turbulent. It is difficult
to understand the complex environment and exactly pinpoint how it
will shape up in future. The organisational estimate about its future
shape may awfully go wrong and jeopardise all strategic plans. The
environment affects as the organisationhas to deal with suppliers,
customers, governments and other external factors.
? Strategic management is a time-consuming process.
Organisations spend a lot of time preparing, communicating the
strategies that may impede daily operations and negatively impact
on routine business.
? Strategic management is a costly process. Strategic
management adds a lot of expenses to an organization. Expert
strategic planners need to be engaged, efforts are made for
analysis of external and internal environments devise strategies
617
and properly implement. These can be really costly for 
organisations with limited resources particularly when small and 
medium organisation create strategies to compete.  
? Competition is unpredictable. In a competitive scenario, where
all organisations are trying to move strategically, it is difficult to
clearly estimate the competitive responses to the strategies.
3. (a)  Yes, Easy Access and its rivals get advantage by this move. The new
bureaucratic process is making it more complicated for organizations to 
start up and enter the Easy Access market, increasing barriers to entry 
and thereby reducing the threat of new entrants. New entrants can 
reduce an industry’s profitability, because they add new production 
capacity, leading to increase in supply of the product, sometimes even 
at a lower price and can substantially erode existing firm’s market share 
position. However, New entrants are always a powerful source of 
competition. The new capacity and product range they bring in throws 
up a new competitive pressure. The bigger the new entrant, the more 
severe the competitive effect. New entrants also place a limit on prices 
and affect the profitability of existing players, which is known as Price 
War.  
(b) There are several basis of differentiation, major being: Product, Pricing
and Organization.
Product: Innovative products that meet customer needs can be an area
where a company has an advantage over competitors. However, the
pursuit of a new product offering can be costly – research and
development, as well as production and marketing costs can all add to
the cost of production and distribution. The payoff, however, can be great
as customers’ flocks are among the first to have the new product.
Pricing: It fluctuates based on its supply and demand and may also be
influenced by the customer’s ideal value for a product. Companies that
differentiate based on product price can either determine to offer the
lowest price or can attempt to establish superiority through higher prices.
Organisation: Organisational differentiation is yet another form of
differentiation. Maximizing the power of a brand or using the specific
advantages that an organization possesses can be instrumental to a
company’s success. Location advantage, name recognition and
customer loyalty can all provide additional ways for a company to
differentiate itself from the competition.
4. (a)  Leatherite Ltd. is currently manufacturing footwears for males and
females and its top management has decided to expand its business by 
manufacturing leather bags for males and females. Both the products 
are similar in nature within the same industry. The strategic 
diversification that the top management of Leatherite Ltd. has opted for 
is concentric in nature. They were in business manufacturing leather 
footwear and now they will manufacture leather bags as well. They will 
be able to use existing infrastructure and distribution channels. 
618
Concentric diversification amounts to related diversification. 
In concentric diversification, the new business is linked to the existing 
businesses through process, technology or marketing. The new product 
is a spin-off from the existing facilities and products/processes. This 
means that in concentric diversification too, there are benefits of synergy 
with the current operations.  
(b) According to C.K. Prahalad and Gary Hamel, major core competencies
are identified in three areas - competitor differentiation, customer value,
and application to other markets.
? Competitor differentiation: The company can consider having a
core competence if the competence is unique and it is difficult for
competitors to imitate. This can provide a company an edge
compared to competitors. It allows the company to provide better
products or services to market with no fear that competitors can
copy it.
? Customer value: When purchasing a product or service it has to
deliver a fundamental benefit for the end customer in order to be a
core competence. It will include all the skills needed to provide
fundamental benefits. The service or the product has to have real
impact on the customer as the reason to choose to purchase them.
If customer has chosen the company without this impact, then
competence is not a core competence.
? Application of competencies to other markets: Core
competence must be applicable to the whole organization; it cannot
be only one particular skill or specified area of expertise. Therefore,
although some special capability would be essential or crucial for
the success of business activity, it will not be considered as core
competence, if it is not fundamental from the whole organization’s
point of view. Thus, a core competence is a unique set of skills and
expertise, which will be used throughout the organisation to open
up potential markets to be exploited.
OR 
Strategic planning Operational planning 
Strategic planning shapes 
the organisation and its 
resources. 
Operational planning deals with 
current deployment of 
resources. 
Strategic planning 
assesses the impact of 
environmental variables. 
Operational planning develops 
tactics rather than strategy. 
Strategic planning takes a 
holistic view of the 
organisation. 
Operational planning projects 
current operations into the 
future. 
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