Test 11: answer key

Question 1 · 2 marks · Strategy Implementation and Evaluation · medium

Scenario. NovaTech Ltd follows a formal strategic management process. It scans external opportunities and threats and reviews internal strengths and weaknesses; then selects related diversification; thereafter prepares budgets, staffing plans and information systems; finally compares actual performance with standards and takes corrective action.

In NovaTech Ltd, the diagnostic phase involving environmental scanning and organisational analysis belongs to which stage of the strategic management process?

1. Strategy formulation
2. Environmental and organisational analysis (correct answer)
3. Strategy implementation
4. Strategic evaluation and control

Answer: B — Environmental and organisational analysis

Working. No numerical working required. Identify the stage from the stated activities of scanning and organisational review.

Explanation. The strategic management process identifies environmental and organisational analysis as the diagnostic stage. It involves scanning external opportunities and threats and reviewing internal strengths and weaknesses. Strategy formulation follows this diagnosis and selects alternatives.

Where it goes wrong. Confusing environmental analysis with strategy formulation. Analysis diagnoses the situation; formulation selects the strategy.

Authority. Chapter 5: Strategy Implementation and Evaluation - Strategic Management Process

Question 2 · 2 marks · Strategy Implementation and Evaluation · medium

Preparing budgets, staffing plans and information systems after choosing related diversification is an example of which stage?

1. Strategic vision and mission development
2. Environmental and organisational analysis
3. Strategy implementation (correct answer)
4. Strategic evaluation and control

Answer: C — Strategy implementation

Working. No numerical working required. Match the described actions with implementation activities.

Explanation. Budgets, staffing, policies and information systems are means of executing the chosen strategy. They convert strategic plans into action and are therefore part of strategy implementation. Evaluation and control occur after implementation.

Where it goes wrong. Treating budgeting as strategy formulation. Budgeting is an implementation and execution activity when it follows strategic choice.

Authority. Chapter 5: Strategy Implementation and Evaluation - Strategy Implementation

Question 3 · 2 marks · Introduction to Strategic Management · medium

Which feature is generally associated with strategic decisions?

1. They are long-term, directional and involve major resource commitments (correct answer)
2. They are routine and repetitive operational choices
3. They require no environmental appraisal
4. They are always delegated to functional managers

Answer: A — They are long-term, directional and involve major resource commitments

Working. No numerical working required. Apply the definition and dimensions of strategic decisions.

Explanation. Strategic decisions are long-range, shape the direction of the organisation and commit significant resources. They are not routine operational choices and normally involve top management and environmental appraisal. Delegation to functional managers is not a defining feature.

Where it goes wrong. Treating all managerial decisions as strategic. Routine purchasing or staffing actions are operational unless they affect long-term direction and competitive position.

Authority. Chapter 1: Introduction to Strategic Management - Concept of Strategy

Question 4 · 2 marks · Strategy Implementation and Evaluation · medium

Scenario. Global Aerospace uses a matrix structure for a complex satellite project. Engineers report to both the project director and the functional head of engineering. The firm wants to manage resource conflicts and dual authority.

What is the key structural feature of the matrix structure at Global Aerospace?

1. Only one reporting line from engineer to project director
2. Only one reporting line from engineer to functional head
3. A simple structure with the owner-manager making all decisions
4. Dual reporting lines to both the project manager and the functional manager (correct answer)

Answer: D — Dual reporting lines to both the project manager and the functional manager

Working. No numerical working required. Identify dual reporting from the scenario.

Explanation. A matrix structure combines functional and product or project forms at the same level. Employees have two superiors: a project or product manager and a functional manager. Options a and b describe single-line structures, and option c describes a simple structure.

Where it goes wrong. Describing matrix simply as a project team. The defining feature is dual authority and dual reporting.

Authority. Chapter 5: Strategy Implementation and Evaluation - Organisation Structure - Matrix Structure

Question 5 · 2 marks · Strategy Implementation and Evaluation · hard

A matrix structure is most appropriate for Global Aerospace when:

1. The firm is a small single-product firm with a simple structure
2. Product, technology, customer and functional priorities have roughly equal strategic importance and information processing needs are high (correct answer)
3. Only functional efficiency matters and project coordination is unnecessary
4. The firm wants to eliminate all conflicts between departments

Answer: B — Product, technology, customer and functional priorities have roughly equal strategic importance and information processing needs are high

Working. No numerical working required. Apply the conditions for matrix structure effectiveness.

Explanation. Matrix structures are used when several dimensions such as product, customer, technology and functional area have roughly equal strategic priority. They support cross-functional coordination in complex environments. Matrix does not eliminate conflicts; it manages them through dual authority.

Where it goes wrong. Assuming matrix removes conflict. It can increase conflicts over resources and authority unless roles are clearly understood.

Authority. Chapter 5: Strategy Implementation and Evaluation - Organisation Structure - Matrix Structure

Question 6 · 2 marks · Strategy Implementation and Evaluation · medium

Which mechanism is most appropriate for making the matrix structure effective and resolving authority conflicts?

1. Giving the functional head final authority in all project matters
2. Making the project manager report to the functional manager
3. Planning, training, clear mutual understanding of roles, excellent communication and mutual trust (correct answer)
4. Avoiding communication between project and functional teams to reduce conflict

Answer: C — Planning, training, clear mutual understanding of roles, excellent communication and mutual trust

Working. No numerical working required. Match the described mechanism with matrix implementation requirements.

Explanation. Matrix effectiveness depends on planning, training, clearly defined roles and responsibilities, strong internal communication and mutual trust. Single-line authority arrangements defeat the purpose of the matrix. Avoiding communication increases conflict.

Where it goes wrong. Thinking that one manager must always prevail. Matrix requires balanced dual authority with clear role understanding.

Authority. Chapter 5: Strategy Implementation and Evaluation - Organisation Structure - Matrix Structure

Question 7 · 2 marks · Strategy Implementation and Evaluation · hard

Scenario. An internal strategic audit team at Orion Ltd compares its warranty claim process with the industry leader. It finds a gap in response time. Management classifies the comparison and the gap for further action.

What type of benchmarking and gap is represented by comparing the warranty claim process with the industry leader and finding a response-time gap?

1. Competitive benchmarking and performance gap (correct answer)
2. Internal benchmarking and process slack
3. Functional benchmarking and value gap
4. Generic benchmarking and planning gap

Answer: A — Competitive benchmarking and performance gap

Working. No numerical working required. Classify the benchmarking type and gap from the scenario facts.

Explanation. Comparison with an industry leader is competitive benchmarking. The difference between current response time and the leader's response time is a performance gap. Internal benchmarking compares within the same organisation. Planning gap relates to difference between desired and projected outcomes.

Where it goes wrong. Calling any external comparison functional benchmarking. Competitive benchmarking specifically compares with competitors or industry leaders.

Authority. Chapter 5: Strategy Implementation and Evaluation - Strategic Control and Strategic Audit

Question 8 · 1 marks · Strategy Implementation and Evaluation · medium

What is the primary purpose of a strategic audit in this context?

1. To record day-to-day cash vouchers
2. To compute only the current ratio
3. To prepare the annual financial statements
4. To identify gaps between current performance and desired strategic standards (correct answer)

Answer: D — To identify gaps between current performance and desired strategic standards

Working. No numerical working required. Apply the definition of strategic audit.

Explanation. A strategic audit evaluates whether strategy is being implemented as planned and whether results are as intended. It helps identify performance gaps against strategic standards. Cash voucher recording, ratio computation and financial statement preparation are narrower accounting tasks.

Where it goes wrong. Confusing strategic audit with statutory financial audit or routine accounting. Strategic audit focuses on strategic performance and implementation gaps.

Authority. Chapter 5: Strategy Implementation and Evaluation - Strategic Control and Strategic Audit