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CA IPCC : Sample / Mock Test Paper (with Model Answers) - INFORMATION TECHNOLOGY & STRATEGIC MANAGEMENT Sep 2014

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Test Series: September, 2014 MOCK TEST PAPER 1 INTERMEDIATE (IPC): GROUP II PAPER 7: INFORMATION TECHNOLOGY AND STRATEGIC MANAGEMENT SECTION A: INFORMATION TECHNOLOGY Question No. 1 is compulsory. Attempt any five questions from the rest. Time Allowed 1 Hours 1. Maximum Marks 50 Answer all the following questions in brief. (i) Total Quality Management (TQM) (ii) Entity in DFD (iii) Instruction Set Architecture (iv) Application Software (v) Public Data Network (vi) Simplex Connection (vii) Specialized Systems (viii) Dashboards (ix) MS Office applications (x) Cryptography 2. (1 x 10 = 10 Marks) (4 Marks) (a) How a Credit Card is processed? (4 Marks) (b) What is Decision Support System? Discuss its components in brief. 4. (4 Marks) (b) Discuss some of the risks involved in any e-Commerce transaction. 3. (a) Differentiate between Serial and Parallel Transmission. (4 Marks) (a) What do you understand by the term Controls in Business Process Automation (4 Marks) (BPA) ? What are the control objectives? (b) What is Grid Computing? Why do we need it? 6. (a) Discuss the different types of relationships in E-R Diagram. (4 Marks) (b) Discuss Accounting Business Process Cycle. 5. (4 Marks) (4 Marks) (a) Discuss the various Service Models of Cloud Computing. (4 Marks) (b) What do you understand by the term Operating System ? Discuss the various activities executed by Operating System. (4 Marks) The Institute of Chartered Accountants of India 7. Write short notes on any four of the following. (a) Touchpad (b) Information as a Business Asset (c) Threats to a Computer Network Security (d) ACID Test for a Transaction Processing System (TPS) (e) Batch Controls The Institute of Chartered Accountants of India (4 2 = 8 Marks) Test Series: September, 2014 MOCK TEST PAPER 1 INTERMEDIATE (IPC): GROUP II PAPER 7: INFORMATION TECHNOLOGY AND STRATEGIC MANAGEMENT SECTION B: STRATEGIC MANAGEMENT Question No.1 is compulsory. Attempt any five questions from the rest. Time Allowed 1 Hours Maximum Marks 50 (3 Marks) (3 Marks) (c) Briefly discuss growth phase of product life cycle. (3 Marks) (d) What is skimming? (3 Marks) (e) What are different target areas of six-sigma. 2. (a) What do you mean by ethnic mix? (b) What do you understand by shared vision and vision shared . 1. (3 Marks) (a) Contraction and consolidation are basic to turnaround strategy. Discuss. (3 Marks) (b) State with reasons which of the following statements is correct/incorrect: (i) (ii) 3. SBUs facilitate management of multiple businesses. (2 Marks) Information technology has reduced dynamism in the business environment. (2 Marks) (a) Write short notes on the following: (i) Star in BCG matrix (ii) Not-for profit organisations. (2 Marks) (2 Marks) (b) Culture is a strength that can also be a weakness . Discuss 4 (3 Marks) (a) Explain the relevance of experience curve in strategic management. (3 Marks) (b) What are the different sources of raising funds and their impact on the financial strategy which a Financial Manager may consider? (4 Marks) 5 What is micro environment of business? What are its elements? Discuss (7 Marks) 6. How is TOWS Matrix an improvement over the SWOT Analysis? Describe the construction of TOWS Matrix. (7 Marks) 7. (a) What do you understand by strategic control ? Briefly outline its types. (4 Marks) (b) Briefly explain the concepts of operational control and management control.(3 Marks) The Institute of Chartered Accountants of India Test Series: September, 2014 MOCK TEST PAPER 1 INTERMEDIATE (IPC): GROUP II PAPER 7: INFORMATION TECHNOLOGY AND STRATEGIC MANAGEMENT SECTION A: INFORMATION TECHNOLOGY SUGGESTED ANSWERS/HINTS 1. (i) Total Quality Management (TQM): It is the organization-wide effort to install and make permanent a climate in which it continuously improves its ability to deliver high-quality products and services to customers. (ii) Entity in DFD: An entity represents the source or destination of data and is often represented as rectangles (a diagonal line across the right-hand corner in DFD. Entities either provide data to the system (Source) or receive data from it (Sink). Entities are also referred to as agents, terminators, or source/sink. (iii) Instruction Set Architecture (ISA): It is the abstract model of a computing system that is seen by a machine language programmer, including the instruction set, memory address modes, processor registers, and address and data formats. Basically ISA is related to the programming of a computer that is, how the computer understands what each element in its basic language means, what instructions are to be carried out and in what order, etc. (iv) Application Software: Application software includes all those computer software that cause a computer to perform useful tasks beyond the running of the computer itself. It is a collection of programs which address a real life problem of its end users which may be business or scientific or any other problem. The different types of Application software are Application suite, Enterprise Software, Information Worker software, Educational Software, Media Development Software etc. (v) Public Data Network: A Public Data Network is defined as a network shared and accessed by users not belonging to a single organization. It is a network established and operated by a telecommunications administration, or a recognized private operating agency, for the specific purpose of providing data transmission services for the public. The Internet is an example of a Public Data Network. (vi) Simplex Connection: A simplex connection is a connection in which the data flows in only one direction, from the transmitter to the receiver. This type of connection is useful if the data do not need to flow in both directions (for example, from your computer to the printer or from the mouse to your computer.). (vii) Specialized Systems: Specialized Systems provide comprehensive end to end IT solutions and services (including systems integration, implementation, engineering The Institute of Chartered Accountants of India services, software application customization and maintenance) to various corporations in India and other part of a world. Specialized Systems also offer comprehensive solutions to various sectors to confront challenges, and convert every challenge into an opportunity. ERP, CRM, SCM and HRMS are some of the examples of specialized systems. (viii) Dashboards: Dashboards involve using the information gathered from the data warehouse and making it available to users as snapshots of many different things. Dashboards are flexible tools that can be bent into as many different shapes as per user requirements. It includes a collection of graphs, reports, and KPIs that can help monitor such business activities as progress on a specific initiative. (ix) MS Office Applications: These are various office automation systems made available by Microsoft Corporation which include MS Word, MS Excel, MS PowerPoint, MS Access, etc. Each of these software help to achieve automation of various tasks in the office. It has features such as customized ribbon, backstage view, built-in graphics toolset, enhanced security, excel spark lines, pivot for Excel, PowerPoint broadcast, Power Point compression, paste, preview and outlook conversation view. (x) Cryptography: These are the programs that transform data into codes that appear meaningless to anyone who does not possess the authentication to access the respective system resource or file. 2. (a) S. No. 1 2 3 4 5 SERIAL TRANSMISSION PARALLEL TRANSMISSION In this, the data bits are transmitted serially one after another. Data is transmitted over a single wire. It is a cheaper mode of transferring data. It is useful for long distance data transmissions. In this, the data bits are transmitted simultaneously. Data is transmitted over eight different wires. It is relatively expensive mode of transferring data. Not practical for long distance communications as it uses parallel path, so cross talk may occur. It is relatively faster. It is relatively slower. 6 The Institute of Chartered Accountants of India (b) The risks associated with e-Commerce are multi-faceted and some of them are listed below: 3. Problem of anonymity: There is need to identify and authenticate users in the virtual global market where anyone can sell to or buy from anyone, anything from anywhere. Repudiation of contract: There is possibility that the electronic transaction in the form of contract, sale order or purchase by the trading partner or customer may be denied. Lack of authenticity of transactions: The electronic documents that are produced in the course of an e-Commerce transaction may not be authentic and reliable. Data Loss or theft or duplication: The data transmitted over the Internet may be lost, duplicated, tampered with or replayed. Attack from hackers: Web servers used for e-Commerce may be vulnerable to hackers. Denial of Service: Service to customers may be denied due to non-availability of system as it may be affected by viruses, e-mail bombs and floods. Non-recognition of electronic transactions: e-Commerce transactions, as electronic records and digital signatures may not be recognized as evidence in courts of law. Lack of audit trails: Audit trails in e-Commerce system may be lacking and the logs may be incomplete, too voluminous or easily tampered with. Problem of piracy: Intellectual property may not be adequately protected when such property is transacted through e-Commerce. (a) The steps involved during a Credit Card processing are as under: Step 1: Authorization - This is the first step in processing a credit card. After a merchant swipes the card, the data is submitted to merchant s bank, called an acquirer, to request authorization for the sale. The acquirer then routes the request to the card-issuing bank, where it is authorized or denied, and the merchant is allowed to process the sale. Step 2: Batching - This is the second step in processing a credit card. At the end of a day, the merchant reviews all the day s sales to ensure they were authorized and signed by the cardholder. It then transmits all the sales at once, called a batch, to the acquirer to receive payment. Step 3: Clearing - This is the third step in processing a credit card. After the acquirer receives the batch, it sends it through the card network, where each sale is routed to the appropriate issuing bank. The issuing bank then subtracts its The Institute of Chartered Accountants of India interchange fees, which are shared with the card network, and transfers the remaining amount through the network back to the acquirer. Step 4: Funding - This is the fourth and final step in processing a credit card. After receiving payment from the issuer, minus interchange fees, the acquirer subtracts its discount fee and sends the remainder to the merchant. The merchant is now paid for the transaction, and the cardholder is billed. Using a credit card to make a purchase over the Internet follows the same scenario. But on the Internet, added steps must be taken to provide for secure transactions and authentication of both buyer and seller. (b) Decision Support System: A Decision Support System (DSS) may be defined as a computer-based information system that supports business or organizational decision-making activities. DSSs serve the management, operations, and planning levels of an organization (usually mid and higher management) and help to make decisions, which may be rapidly changing and not easily specified in advance. DSS can be either fully computerized, human or a combination of both. DSS has four basic components: (i) The user: The user is usually a manager with an unstructured or semistructured problem to solve and may be at management - level of an organization. (ii) One or more databases: Databases contain both routine and non-routine data from both internal and external sources. (iii) Planning languages: Planning languages can either be general-purpose or special purpose allowing users to perform routine tasks and specific tasks respectively. (iv) Model Base: Model base is the brain of the DSS as it performs data manipulations and computations with the data provided to it by the user and the database. The planning language in DSS allows the user to maintain a dialogue with the model base. 4. (a) Controls in Business Process Automation (BPA): In today s computerized information systems, most of the business processes are being automated. The growth of e-commerce has been supported by the growth of the Internet. The innovations in IT components such as hardware, software, networking technology, communication technology and ever-increasing bandwidth are leading to evolution completely new business models. All these new business models and new methods presume that the information required by business managers is available all the time and is accurate, hence the requirement for proper controls. Control is defined as policies, procedures, practices and organization structure that are designed to provide reasonable The Institute of Chartered Accountants of India assurance that business objectives are achieved and undesired events are prevented or detected and corrected. Control Objectives: Major control objectives are given as follows: Authorization - ensures that all transactions are approved by responsible personnel in accordance with their specific or general authority before the transaction is recorded. Completeness - ensures that no valid transactions have been omitted from the accounting records. Accuracy - ensures that all valid transactions are accurate, consistent with the originating transaction data, and information is recorded in a timely manner. Validity - ensures that all recorded transactions fairly represent the economic events that actually occurred, are lawful in nature, and have been executed in accordance with management's general authorization. Physical Safeguards and Security - ensures that access to physical assets and information systems are controlled and properly restricted to authorized personnel. Error Handling - ensures that errors detected at any stage of processing receive prompts corrective action and are reported to the appropriate level of management. Segregation of Duties - ensures that duties are assigned to individuals in a manner that ensures that no one individual can control both the recording function and the procedures relative to processing a transaction. (b) Grid Computing: Grid Computing is a computer network in which each computer's resources are shared with every other computer in the system. Processing power, memory and data storage are all community resources that authorized users can tap into and leverage for specific tasks. A grid computing system can be as simple as a collection of similar computers running on the same operating system or as complex as inter-networked systems comprised of every computer platform we can think of. It is a special kind of distributed computing in which different computers within the same network share one or more resources. In the ideal grid computing system, every resource is shared, turning a computer network into a powerful supercomputer. With the right user interface, accessing a grid computing system would look no different than accessing a local machine's resources. Every authorized computer would have access to enormous processing power and storage capacity. We need Grid Computing because of the following reasons: Civil engineers collaborate to design, execute, & analyze shake table experiments. The Institute of Chartered Accountants of India 5. An insurance company mines data from partner hospitals for fraud detection. An application service provider offloads excess load to a compute cycle provider. An enterprise configures internal & external resources to support e-Business workload. Large-scale science and engineering are done through the interaction of people, heterogeneous computing resources, information systems and instruments, all of which are geographically and organizationally dispersed. (a) The various types of relationships in E-R Diagram are as follows: (i) One-to-One relationship (1:1), as in a single parent record to a single child record or as in a husband record and wife record in a monogamous society. (ii) One-to-Many relationship (1:N), as in a single parent record to two or more child records for example, a teacher who teaches three single-section courses. (iii) Many-to-One relationships (M:1), as in two or more parent records to a single child record-for example, when three administrators in a small town share one minister. (iv) Many-to-Many relationships (M:N), as in two or more parent records to two or more child records for example, when two or more students are enrolled in two or more courses. (a) One-to-one relationship Husband Wife T eacher (b) One-to-many relationship Course 1 (c) Many-to-one relationship Course 2 Course 3 Mayor Fire Chief Minister (d) Many-to-many relationship Student 2 Student 3 Course 1 The Institute of Chartered Accountants of India Student 1 Course 2 Course 3 (b) Accounting or Book keeping Cycle covers the business processes involved in recording and processing accounting events of a company. It begins when a transaction or financial event occurs and ends with its inclusion in the financial statements. Source Document Financial Statement THE ACCOUNTING CYCLE Journal Ledger Trial Balance Closing Entries Adjusted Trial Balance Adjustments (a) Source Document: a document the capture data from transactions and events. (b) Journal: transactions are recorded into journals from the source document. (c) Ledger: entries are posted to the ledger from the journal. (d) Trial Balance: unadjusted trial balance containing totals from all account heads is prepared. (e) Adjustments: appropriate adjustment entries are passed. (f) Adjusted Trial balance: the trial balance is finalized post adjustments. (g) Closing entries: appropriate entries are passed to transfer accounts to financial statements. (h) Financial statement: the accounts are organized into the financial statements. 6. (a) Mainly, there are five Service models of Cloud Computing. These are given as follows: Infrastructure as a Service (IaaS): It is the foundation of cloud services. It provides clients with access to server hardware, storage, bandwidth and other fundamental computing resources. The service is typically paid for on a usage basis. It provides access to shared resources on need basis, without revealing details like location and hardware to clients. Software as a Service (SaaS): It includes a complete software offering on the cloud. Users can access a software application hosted by the cloud vendor on payper-use basis. SaaS is a model of software deployment where an application is The Institute of Chartered Accountants of India hosted as a service provided to customers across the Internet and thus the businesses get the same benefits as commercial software with smaller cost outlay. Platform as a Service (PaaS): It provides clients with access to the basic operating software and optional services to develop and use software applications (e.g. database access and payment service) without the need to buy and manage the underlying computing infrastructure. Network as a Service (NaaS): It is a category of cloud services where the capability provided to the cloud service user is to use network/transport connecting services. NaaS involves optimization of resource allocation by considering network and computing resources as a whole. Some of the examples are: Virtual Private Network, Mobile Network Virtualization etc. Communication as a Service (CaaS): CaaS is an outsourced enterprise communication solution that can be leased from a single vender. The CaaS vendor is responsible for all hardware and software management and offers guaranteed Quality of Service (QoS). It allows businesses to selectively deploy communication devices and modes on a pay-as-you-go, as-needed basis. This approach eliminates the large capital investments. Examples are: Voice over IP (VoIP), Instant Messaging (IM), Collaboration and Videoconferencing application using fixed and mobile devices. (b) An Operating System (OS) is a set of computer programs that manages computer hardware resources and acts as an interface with computer applications programs. The operating system is a vital component of the system software in a computer system. Application programs usually require an operating system to function that provides a convenient environment to users for executing their programs. Some prominent Operating systems used nowadays are Windows 7, Windows 8, Linux, UNIX, etc. A variety of activities are executed by Operating systems which include: Performing hardware functions: Application programs to perform tasks have to obtain input from keyboards, retrieve data from disk & display output on monitors. Achieving all this is facilitated by operating system. Operating system acts as an intermediary between the application program and the hardware. User Interfaces: An important function of any operating system is to provide user interface. For example In DOS, command based User Interface (UI) i.e. text commands and in Windows, Graphic User Interface (GUI) are used that use icons & menus. So, how we interface with our system will be provided by Operating system. Hardware Independence: Every computer could have different specifications and configurations of hardware. Operating system provides Application Program Interfaces (API), which can be used by application developers to create The Institute of Chartered Accountants of India 7. application software, thus obviating the need to understand the inner workings of OS and hardware. Thus, OS gives us hardware independence. Memory Management: Operating System allows controlling how memory is accessed and maximizes available memory & storage. Operating systems also provides Virtual Memory by carving an area of hard disk to supplement the functional memory capacity of RAM. In this way it augments memory by creating a virtual RAM. Task Management: Task Management feature of Operating system helps in allocating resources to make optimum utilization of resources. This facilitates a user to work with more than one application at a time i.e. multitasking and also allows more than one user to use the system i.e. timesharing. Networking Capability: Operating systems can provide systems with features & capabilities to help connect computer networks. Like Linux & Windows 8 give us an excellent capability to connect to internet. (a) Touchpad: A touchpad is a pointing device featuring a tactile sensor, a specialized surface that can translate the motion and position of a user's fingers to a relative position on screen. Touchpad is a common feature of laptop computers, and are also used as a substitute for a mouse where desk space is scarce. Because they vary in size, they can also be found on Personal Digital Assistants (PDAs) and some portable media players. Wireless touchpads are also available as detached accessories. Touchpads operate in one of several ways, including capacitive sensing and conductance sensing. While touchpads, like touch screens, are able to sense absolute position, resolution is limited by their size. (b) For information to be used effectively - and therefore to maximize its strategic value - it must be available as a shared, easily accessible service within an organization by continuous updating the old database system. Information becomes an asset fro an organization if it is useful, digital, accessible, relevant, accurate, trust-worthy, searchable, understandable, spatially enabled and shareable at the time when required. Information can be treated as a valuable commodity if it can be used effectively. Information that is accurate and encompassing will allow decision-makers to better an organization s performance. Without reliable information, the decision-making process can be badly hampered. Where a business is geographically dispersed, with servers hosted in different locations, or a business has a network of applications, there can also be the obstacle of replicating data across the network. In short, without effectively management of information the result can be information chaos. To achieve operational performance, it is important to ensure that Information Technology infrastructure is tailored to an organization that is able to meet an organization s needs for Customer Relationship Management (CRM), Enterprise The Institute of Chartered Accountants of India Resource Planning (ERP), Business Intelligence (BI), Data Warehousing, Data Migration and Replication. (c) Threat: A threat is anything that can disrupt the operation, functioning, integrity, or availability of a network or system. Network security threats can be categorized into four broad themes: Unstructured Threats - These originate mostly from inexperienced individuals using easily available hacking tools from the Internet that include port-scanning tools, address-sweeping tools, and many others. Structured Threats - These originate from individuals who are highly motivated and technically competent and usually understand network systems design and the vulnerabilities of those systems. They can understand as well as create hacking scripts to penetrate those network systems. External Threats - These originate from individuals or organizations working outside an organization, which does not have authorized access to organization s computer systems or network. They usually work their way into a network from the Internet or dialup access servers. Internal Threats - Typically, these threats originate from individuals who have authorized access to the network. These users either have an account on a server or physical access to the network. An internal threat may come from a discontented former or current employee or contractor. (d) ACID Test for a Transaction Processing System (TPS) Prerequisite Atomicity Consistency Isolation Durability Explanation This means that a transaction is either completed in full or not at all. TPS systems ensure that transactions take place in their entirety. TPS systems exist within a set of operating rules (or integrity constraints). If an integrity constraint states that all transactions in a database must have a positive value, any transaction with a negative value would be refused. Transactions must appear to take place in seclusion. For example, when a fund transfer is made between two accounts the debiting of one and the crediting of another must appear to take place simultaneously. The funds cannot be credited to an account before they are debited from another. Once transactions are completed they cannot be undone. To ensure that this is the case even if the TPS suffers failure, a log will be created to document all completed transactions. The Institute of Chartered Accountants of India (d) Batch Controls: Batch controls are put in place at locations where batch processing is being used. Batch processing is where there is a time gap between occurrence and recording of transactions, that is, transactions are not recorded at the time of occurrence but are accumulated and a set (based on number/ time) is processed. The objective is to ensure accuracy and completeness of the content and that they are not lost during transportation. To implement batch control on each batch, a batch control sheet is prepared and on that sheet following details are mentioned: Batch number, type, date, voucher type; Total Monetary Amount: for example, for a cash payment batch, the total payout of cash payment vouchers; Total Items: for example, the supporting with batch; Total Documents: for example, total number of voucher with the batch; and Hash Totals: for example, total of voucher number or account code. The Institute of Chartered Accountants of India Test Series: September, 2014 MOCK TEST PAPER 1 INTERMEDIATE (IPC): GROUP II PAPER 7: INFORMATION TECHNOLOGY AND STRATEGIC MANAGEMENT SECTION B: STRATEGIC MANAGEMENT SUGGESTED ANSWERS/HINTS 1. (a) Ethnic mix reflects the changes in the ethnic make-up of a population and has implications both for a company's potential customers and for the workforce. Issues that should be addressed include: What do changes in the ethnic mix of the population imply for product and service design and delivery? Will new products and services be demanded or can existing ones be modified? Managers prepared to manage a more culturally diverse workforce? How can the company position itself to take advantage of increased workforce heterogeneity? (b) Individuals in organisations relate themselves with the vision of their organisations in different manner. When the individuals are able to bring organisational vision close to their hearts and minds they have "shared vision". Shared vision is a force that creates a sense of commonality that permeates the organization and gives coherence to diverse activities. However, 'vision shared' shows imposition of vision from the top management. It may demand compliance rather than commitment. For success of organisations having shared vision is better than vision shared. (c) Product life cycle (PLC) is a concept that describes a product s four major life stages, i.e., introduction, growth, maturity and decline in terms of sales, profits, customers, competitors and marketing emphasis. As the product finds market acceptance in introduction stage, it gradually enters the Growth stage. During growth stage there is an exponential rise of the volumes accepted by the market. Many new entrants join the industry and then fight for market share. In this stage consolidation and concentration begins. Profits increase and mass marketing is done with product differentiation. (d) Skimming refers to a strategy for new products that are generating significant interest. In skimming, prices of a new product are kept at a very high level. The idea is to take advantage of the initial interest that a new product generates amongst the buyers who are relatively price insensitive. They are ready to pay more. The Institute of Chartered Accountants of India (e) Six sigma means maintenance of the desired quality in processes and end products. It means taking systemic and integrated efforts toward improving quality and reducing cost. Six sigma efforts target different areas such as improving customer satisfaction, improving quality, reducing wastage reducing cycle time, reducing defects. 2. (a) Turnaround is needed when an enterprise's performance deteriorates significantly. It is highly targeted effort to return an organization to profitability and increase positive cash flows to a sufficient level. To achieve its objectives, turnaround strategy must reverse causes of distress, resolve the financial crisis, achieve a rapid improvement in financial performance, regain stakeholder support, and overcome internal constraints and unfavourable industry characteristics. These aspects require contraction and consolidation. (b) (i) Correct: Organizing business along SBU lines and creating strategic business units has become a common practice for multi-product/service and global organizations. It is a convenient and intelligent grouping of activities along distinct businesses and has replaced the conventional groupings. SBU facilitates strategic planning, gaining product-related/market-related specialization, gaining cost-economies and more rational organizational structure. (ii) Incorrect: The reality is just the other way round. The fast-paced changes in the information technology have far-reaching implications for businesses. Technology has changed the ways of how business operates now. This is leading to many new business opportunities as well as making obsolete many existing systems. 3. (a) (i) BCG growth-share matrix is a simple way to portray an organisation s portfolio of investments. The matrix is based on combinations of relative market share of the products or SBUs and their market growth rate. Stars, a position in the matrix, are characterised by high market share and high growth rate. They are products or SBUs that are growing rapidly. Business organisations that enjoy star positions have best opportunities for expansion and growth. (ii) We can find many organizations around us, which do not have any commercial objective of making profits. Their genesis may be for social, charitable, or educational purposes. Their main aim is to provide services to members, beneficiaries or public at large. A non-commercial organization comes to existence to meet the needs not met by business enterprises. These organizations may not have owners in true sense. ways of operating and internal work environment. Culture is a strength that can also be a weakness . (b) As a strength, culture can facilitate communication, decision-making & control and create cooperation & commitment. An organization s culture could be strong and cohesive when it conducts its business according to a clear and explicit set of The Institute of Chartered Accountants of India principles and values, which the management devotes considerable time to communicating to employees and which values are shared widely across the organization. As a weakness, culture may obstruct the smooth implementation of strategy by creating resistance to change. An organization s culture could be characterized as weak when many subcultures exist, few values and behavioral norms are shared and traditions are rare. In such organizations, employees do not have a sense of commitment, loyalty and sense of identity. 4. (a) Experience curve is similar to learning curve which explains the efficiency gained by workers through repetitive productive work. Experience curve results from a variety of factors such as learning effects, economies of scale, product redesign and technological improvements in production. The concept of experience curve is relevant for a number of areas in strategic management. For instance, experience curve is considered a barrier for new firms contemplating entry in an industry. It is also used to build market share and discourage competition. (b) Besides net profit from operations and the sale of assets, two basic sources of capital for an organization are debt and equity. Being a financial manager to determine an appropriate mix of debt and equity in a firm's capital structure can be vital to successful strategy implementation. Fixed debt obligations generally must be met, regardless of circumstances. This does not mean that stock issuances are always better than debt for raising capital. If ordinary stock is issued to finance strategy implementation; ownership and control of the enterprise are diluted. This can be a serious concern in today's business environment of hostile takeovers, mergers, and acquisitions. The major factors regarding which strategies have to be made by a financial manager are: capital structure; procurement of capital and working capital borrowings; reserves and surplus as sources of funds; and relationship with lenders, banks and financial institutions. Strategies related to the sources of funds are important since they determine how financial resources will be made available for the implementation of strategies. Organizations have a range of alternatives regarding the sources of funds. While one company may rely on external borrowings, another may follow a policy of internal financing. 5. The environment of business can be categorised into two broad categories microenvironment and macro-environment. Micro-environment is related to small area or immediate periphery of an organization. Micro-environment influences an organization regularly and directly. Developments in the micro environment have direct impact on the working of organizations. Micro environment includes the company itself, its suppliers, marketing intermediaries, customer markets and competitors. The elements of micro environment are specific to the said business and affects its working on short term basis. The Institute of Chartered Accountants of India 6. Consumers / Customers: Customers who may or may not be consumers are the people who pay money to acquire organisational products and services. Consumer is the one who ultimately consumes or uses the product or services. The marketer has to closely monitor and analyse the changes in the consumer tastes and preferences and their buying habits. Consumer occupies the central position in the market. Competitors: Competitors are the other business entities that compete for resources as well as markets. A study of the competitive scenario is essential for the marketer, particularly threats from competition. Organization: Individuals occupying different positions or working in different capacities in organizations consists of individuals who come from outside. They have different and varied interests. An organization has several non-specific elements in form of individuals and groups that may affect its activities. Owners, board of directors and employees form part of organisation. Market: The market is larger than customers. The market is to be studied in terms of its actual and potential size, its growth prospect and also its attractiveness. The marketer should study the trends and development and the key success factors of the market. Suppliers: Suppliers form an important component of the micro environment. The suppliers provide raw materials, equipment, services and so on. Suppliers with their own bargaining power affect the cost structure of the industry. They constitute a major force, which shapes competition in the industry. Market Intermediaries: Intermediaries bridge the gap between the organisations and customers. They are in form of stockist, wholesalers and retailers. They exert considerable influence on the business organizations. In many cases the consumers are not aware of the manufacturer of the products they buy. They buy product from the local retailers or big departmental stores. Through SWOT analysis organisations identify their strengths, weaknesses, opportunities and threats. While conducting the SWOT Analysis managers are often not able to come to terms with the strategic choices that the outcomes demand. Heinz Weihrich developed a matrix called TOWS matrix by matching strengths and weaknesses of an organization with the external opportunities and threats. The incremental benefit of the TOWS matrix lies in systematically identifying relationships between these factors and selecting strategies on their basis. The matrix is outlined below: The Institute of Chartered Accountants of India 7. The TOWS Matrix is a relatively simple tool for generating strategic options. Through TOWS matrix four distinct alternative kinds of strategic choices can be identified. SO (Maxi-Maxi): SO is a position that any firm would like to achieve. The strengths can be used to capitalize or build upon existing or emerging opportunities. ST (Maxi-Mini): ST is a position in which a firm strives to minimize existing or emerging threats through its strengths. WO (Mini-Maxi): The strategies developed need to overcome organizational weaknesses if existing or emerging opportunities are to be exploited to maximum. WT (Mini-Mini): WT is a position that any firm will try to avoid. An organization facing external threats and internal weaknesses may have to struggle for its survival. (a) Strategic Control focuses on the dual questions of whether: (1) the strategy is being implemented as planned; and (2) the results produced by the strategy are those intended. There are four types of strategic control: Premise control: A strategy is formed on the basis of certain assumptions or premises about the environment. Premise control is a tool for systematic and continuous monitoring of the environment to verify the validity and accuracy of the premises on which the strategy has been built. Strategic surveillance: Strategic surveillance is unfocussed. It involves general monitoring of various sources of information to uncover unanticipated information having a bearing on the organizational strategy. The Institute of Chartered Accountants of India Special alert control: At times unexpected events may force organizations to reconsider their strategy. Sudden changes in government, natural calamities, unexpected merger/acquisition by competitors, industrial disasters and other such events may trigger an immediate and intense review of strategy. Implementation control: Managers implement strategy by converting major plans into concrete, sequential actions that form incremental steps. Implementation control is directed towards assessing the need for changes in the overall strategy in light of unfolding events and results. (b) The thrust of operational control is on individual tasks or transactions as against total or more aggregative management functions. When compared with operational, management control is more inclusive and more aggregative, in the sense of embracing the integrated activities of a complete department, division or even entire organisation, instead or mere narrowly circumscribed activities of sub-units. For example, procuring specific items for inventory is a matter of operational control, in contrast to inventory management as a whole. Many of the control systems in organisations are operational and mechanistic in nature. A set of standards, plans and instructions are formulated. On the other hand the basic purpose of management control is the achievement of enterprise goals short range and long range in an effective and efficient manner. The Institute of Chartered Accountants of India

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