CA Intermediate Strategic Management-Strategic Choices (Selection of strategies)

CA Intermediate Strategic Management-Internal enviornment(Strength analysis & strategies)

Strategy Implementation, Strategy Evaluation & Strategy Control

Just for conceptual understanding

SMP-Official data.

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 CA Intermediate Strategic Management-Strategic Choices (Selection of strategies)
CA Intermediate Strategic Management-Internal enviornment(Strength analysis & strategies)
Stages in SMP – It will not ask you here as whole syllabus is smp.
[Link] vision-mission-goals-objectives.
[Link] and organisational analysis.
[Link] of strategy.
[Link] of strategy.
[Link] and controls.

In most situations, strategy-execution process includes the following principal aspects: (SQ)
 Developing budgets that steer ample resources into those activities critical to strategic success.
 Staffing the organisation with the needed skills and expertise, consciously building and strengthening strategy-supportive
competencies and competitive capabilities and organising the work effort.
 Ensuring that policies and operating procedures facilitate rather than impede effective execution.
 Using the best-known practices to perform core business activities and pushing for continuous improvement.
 Motivating people to pursue targets energetically
 Using the best-known practices to perform core business activities a pushing for continuous improvement.
 Exerting the internal leadership needed to drive implementation forward and keep improving strategy execution.
 When the organisation encounters stumbling blocks or weaknesses, management has to see that they are addressed and
rectified quickly.

Corporate strategy
 Planning entails choosing what has to be done in the future (today, next week, next month, next year, over the next couple
of years, etc.) and creating action plans.
 An essential element of effective management is adequate planning.
 Choosing a path of action to achieve defined goals is a part of planning.
 The game plan that really directs the company towards success is called “corporate strategy”.
 Planning may be operational or strategic.
 Senior management develops strategic plans for the entire organisation after evaluating the organization's strengths
and weaknesses in light of potential possibilities and dangers in the outside world.
 They involve gathering and allocating resources in order to achieve organisational goals.
 But operational plans on the other hand are made at the middle and lower-level management.
 They provide specifics on how the resources are to be used effectively to achieve the goals.

Strategic Planning
 The formation of corporate strategy is the result of a process known as strategic planning.
 Strategic planning is the process of determining the objectives of the firm, resources required to attain these objectives
and formulation of policies to govern the acquisition, use and disposition of resources.
 Involves a fact of interactive and overlapping decisions leading to the development of an effective strategy for the firm.
 Determines where an organisation is going over the next year or more and the ways for going there.
 Process is organisation-wide or focused on a major function such as division or other major function.

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Strategy Uncertainity
 Strategic uncertainty refers to the unpredictability and unpredictability of future events and circumstances that can impact
an organization's strategy and goals.
 It can be driven by factors such as changes in the market, technology, competition, regulation, and other external factors.
 Dealing with strategic uncertainty can be challenging and organizations need to have the flexibility, resilience, and agility to
quickly respond to changes in the environment and minimize its impact.
 To be manageable, they need to be grouped into logical clusters or themes.
 It is then useful to assess the importance of each cluster in order to set priorities with respect to Information gathering
and analysis.

How to deal with SU – (Pick and eat area SQ)

 Flexibility:
o Organizations can build flexibility into their strategies to quickly adapt to changes in the environment.
 Diversification:
o Diversifying the organization's product portfolio, markets, and customer base can reduce the impact of strategic
uncertainty.
 Monitoring and Scenario Planning:
o Organizations can regularly monitor key indicators of change and conduct scenario planning to understand how
different future scenarios might impact their strategies.
 Building Resilience:
o Organizations can invest in building internal resilience, such as strengthening their operational processes, increasing
their financial flexibility, and improving their risk management capabilities.
 Collaboration and Partnerships:
o Collaborating with other organizations, suppliers, customers, and partners can help organizations pool resources,
share risk, and gain access to new markets and technologies.

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Impact of uncertainity
 Each element of strategic uncertainty involves potential trends or events that could have an impact on present, proposed,
and even potential businesses., a trend toward natural foods may present opportunities for juices for a firm producing
aerated drinks on the basis of a strategic uncertainty.
 The impact of a strategic uncertainty will depend on the importance of the impacted SBU to a firm.
 Some SBUs are more important than others.
 The importance of established SBUs may be indicated by their associated sales, profits, or costs.
 However, such measures might need to be supplemented for potential growth as present sales, profits, or costs may not
reflect the true value.

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Strategy Formulation vs Implementation – (Pick and eat area SQ)

Sr. No Strategy Formulation Strategy Implementation

Strategy formulation includes planning and

1 Strategy implementation involves all those means
decision-making involved in developing the
related to executing the strategic plans.
organisationÕs strategic goals and plans.
2 In short, strategy formulation is placing the In short, strategy implementation is managing
forces before the action. forces during the action.
3 An entrepreneurial activity based on strategic An administrative task based on strategic and
decision-making. operational decisions.
4 Emphasizes on effectiveness. Emphasizes on efficiency.
5 Primarily an intellectual and rational process. Primarily an operational process.

6 Requires coordination among few individuals at the Requires coordination among many individuals at the
top level. middle and lower levels.
7 Requires a great deal of initiative, logical skills,
Requires specific motivational and leadership traits.
conceptual, intuitive and analytical skills.
8 Strategy formulation precedes strategy Strategy implementation follows strategy
implementation. formulation.

Linkages
 Forward Linkages:
o The different elements in strategy formulation starting with objective setting through environmental and
organizational appraisal, strategic alternatives and choice to the strategic plan determine the course that an
organization adopts for itself.
o With the formulation of new strategies, or reformulation of existing strategies, many changes have to be affected
within the organization.
o For instance, the organizational structure has to undergo a change in the light of the requirements of the modified
or new strategy.
o The style of leadership has to be adapted to the needs of the modified or new strategies.
o In this way, the formulation of strategies has forward linkages with their implementation.
 Backward Linkages:

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o Just as implementation is determined by the formulation of strategies, the formulation process is also affected by
factors related with implementation.
o While dealing with strategic choice, remember that past strategic actions also determine the choice of strategy.
o Organizations tend to adopt those strategies which can be implemented with the help of the present structure of
resources combined with some additional efforts.
o Such incremental changes, over a period of time, take the organization from where it is to where it wishes to be.
Issues in SI
 Project Implementation
 Procedureal implementation
 Resource allocation
 Structural implementation
 Functional implementation
 Behavioural implementation

STRATEGY FORMULATED
(Expand FMCG market reach & profitability)
↓
PROGRAMMES
(New product launches, rural expansion, brand building)
↓
PROJECTS
(Launch of new Surf Excel variant with fixed time & cost)
↓
RESOURCE ALLOCATION
(Advertising budget, sales force, manufacturing capacity)
↓
STRUCTURAL IMPLEMENTATION
(Separate divisions: Foods, Home Care, Personal Care)
↓
FUNCTIONAL IMPLEMENTATION
(Marketing → rural penetration
Operations → efficient distribution
HR → sales incentives)
↓
BEHAVIOURAL IMPLEMENTATION
(Performance-linked incentives & strong execution culture)
↓
STRATEGY SUCCESSFULLY IMPLEMENTED

Strategic Change – Steps (Pick and eat area SQ)

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Kurt lewins - SQ

Change management in the digital transition consists of four essential elements:

 Defining the goals and objectives of the transformation
 Assessing the current state of the organization and identifying gaps
 Creating a roadmap for change that outlines the steps needed to reach the desired state
 Implementing and managing the change at every level of the organization

How it works
 Change management is a process or set of tools and best practices used to manage changes in an organization.
 It assists in making changes in a safe and regulated manner, reducing the possibility of detrimental effects on the company.
 Any sort of organisation, including enterprises, organisations, governmental bodies, and even families, can utilise change
management to manage changes.
 Change management models and methods come in a wide variety, but they all have key things in common.
 These include creating a clear vision for the change, involving stakeholders in the process, coming up with a plan for putting
the change into action, and keeping an eye on the results.
 Although change management is frequently viewed as a difficult and complicated process, it is vital for ensuring that digital
transformation projects are successful.

A properly implemented change management strategy can help an organization to: (SQ)
 Specify the parameters and goals of the digital transformation
 Determine which procedures and tools need to be modified.
 Make a plan for implementing the improvements.
 Involve staff members and parties involved in the transformation process.
 Track progress and make required course corrections

Five best practices for managing change in small and medium-sized businesses are:
 Begin at the top:
o A focused, invested, united leadership that is on the same age about the company's future is reflected in change
that begins at the top.
o The culture that will motivate the rest of the organisation to accept change can only be generated and promoted in
this way.
 Ensure that the change is both necessary and desired:
o The fact that decision-makers are unaware of how to properly handle a digital transformation and the effects it
will have on their firm is one of the main causes of this.

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o If a corporation doesnÕt have a sound strategy in place, introducing too much too fast can frequently become a
major issue down the road.
 Reduce disruption:
o Employee perceptions of what is required or desirable change can differ by department, rank, or performance history.
o It's crucial to lessen how changes affect staff.
o The introduction of new tactics or technologies intended to improve management and corporate operations causes
employee concern about change.
 Encourage communication:
o Create channels so that workers may contact you with queries or complaints.
o Encourage departmental collaboration to propagate ideas and innovations as new procedures take root.
o Communication promotes efficiency and has the power to influence culture, just like your vision.
o The people who will be affected the most by these changes are reassured that they are not in danger through
effective communication, which keeps everyone on the same page.
 Recognize that change is the norm, not the exception:
o Change readiness may be defined as “the ability to continuously initiate and respond to change in ways that create
advantage, minimize risk, and sustain performance.”
o In order to keep up with the customers, businesses must also adapt their operations.
o They must prepare for change in advance and expect them.
o It may run into difficulties because change is not a project but rather an ongoing process

It is possible to reduce workplace disruption by:- Pick and eat area (SQ)
 Getting the word out early and preparing for some interruption.
 Giving staff members the knowledge and tools, they need to adjust to change.
 Creating an environment that encourages transformation or change.
 Empowering change agents to provide context and clarity for changes, such as project managers or team leaders.
 Ensuring that IT department is informed of changes in technology or infrastructure and is prepared to support them.

How to manage change during dt

 Specify the digital transformationÕs aims and objectives:
o What is the intended outcome?
o What are the precise objectives that must be accomplished?
o It will be easier to make sure that everyone is on the same page and pursuing the same aims if everyone has a clear
grasp of the goals.
 Always, always, always communicate:
o It might be challenging for people to accept change and adjust to it.
o Ensure that you routinely and honestly discuss the objectives of the digital transformation and how they will affect
stakeholders, including employees, clients, and other parties.
 Be ready for resistance:
o Even when a change is for the better, it can be challenging for people to embrace it.
o Have a strategy in place for dealing with any resistance that may arise.
 Implement changes gradually:
o Changes should ideally be implemented gradually rather than all at once.
o In order to avoid overwhelming individuals with too much change at once, this will give people time to become used
to the new way of doing things.
 Offer assistance and training:
o Workers will need guidance in the new procedures, software applications, etc.

Strategic leadership
 A strategic leader is a change agent to initiates strategic changes in the organisations and ensure that the changes
successfully implemented.
 For the most part, major change efforts have to be top-down and vision-driven.

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 Leading change has to start with diagnosing the situation and then deciding which of several ways to handle it.
Managers have five leadership roles to play in pushing for good strategy execution: (SQ)
 Staying on top of what is happening, closely monitoring progress, solving out issues, and learning what obstacles lie in the
path of good execution.
 Promoting a culture of esprit de corps that mobilizes and energizes organizational members to execute strategy in a
competent fashion and perform at a high level.
 Keeping the organization responsive to changing conditions, alert for new opportunities, bubbling with innovative ideas, and
ahead of rivals in developing competitively valuable competencies and capabilities.
 Exercising ethical leadership and insisting that the company conduct its affairs like a model corporate citizen.
 Pushing corrective actions to improve strategy execution and overall strategic performance

Responsibilities of Strategic Leader

 Making strategic decision
 Formulating policies and action plans to implement strategic decisions
 Managing human capital;
 Managing change in org
 Creating and sustaining strong culture
 Ensuring effective communication

Types of leadership style SQ

 Transformational
o Transformational leadership style uses charisma and enthusiasm to inspire people to exert them for the good of
the organization.
o Transformational leadership style may be appropriate in turbulent environments, in industries at the very start
or end of their life-cycles, in poorly performing organizations when there is a need to inspire a company to
embrace major changes.
o Transformational leaders offer excitement, vision, intellectual stimulation and personal satisfaction.
o They inspire involvement in a mission, giving followers a ‘dreamÕ or ‘visionÕ of a higher calling so as to elicit more
dramatic changes in organizational performance.
o Such a leadership motivates followers to do more than originally affected to do by stretching their abilities and
increasing their self-confidence, and also promote innovation throughout the organization.
 Transactional
o Transactional leadership style focuses more on designing systems and controlling the organizationÕs activities and
are more likely to be associated with improving the current situation.
o Transactional leaders try to build on the existing culture and enhance current practices.
o Transactional leadership styleuses the authority of its office to exchange rewards, such as pay and status.
o They prefer a more formalized approach to motivation, setting clear goals with explicit rewards or penalties for
achievement or non-achievement.
o Transactional leadership style may be appropriate in static environment, in mature industries, and in organizations
that are performing well.
o The style is better suited in persuading people to work efficiently and run operations smoothly.

Strategic Control
 The process of control has the following elements:
o Objectives of the business system which could be operationalized into measurable and controllable standards.
o Mechanism for monitoring and measuring the performance of the system.
o A mechanism for
 comparing the actual results with reference to the standards
 for detecting deviations from standards and
 for learning new insights on standards themselves.
 A mechanism for feeding back corrective and adaptive information and instructions to the system, for
effecting the desired changes to set right the system to keep it on course.
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 Operational Control:
o The thrust of operational control is on individual tasks or transactions as against total or more aggregative
management functions.
o One of the tests that can be applied to identify operational control areas is that there should be a clear-cut and
somewhat measurable relationship between inputs and outputs which could be predetermined or estimated with least
uncertainty.
o The control activity consists of regulating the processes within certain ‘tolerancesÕ, irrespective of the effects of
external conditions on the formulated standards, plans and instructions.
o Some of the examples of operational controls can be stock control (maintaining stocks between set limits), production
control (manufacturing to set programmes), quality control (keeping product quality between agreed limits), cost
control (maintaining expenditure as per standards), budgetary control (keeping performance to budget).
 Management control
o When compared with operational control, 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.
o The basic purpose of management control is the achievement of enterprise goals – short range and long range – in a
most effective and efficient manner.
 Strategic Control:
o Strategic control focuses on the dual questions of whether:
 The strategy is being implemented as planned; and
 The results produced by the strategy are those intended.”
o There is often a time gap between the stages of strategy formulation and its implementation.
o A strategy might be affected on account of changes in internal and external environments of organisation.
o There is a need for warning systems to track a strategy as it is being implemented.
o Strategic control is the process of evaluating strategy as it is formulated and implemented.
o It is directed towards identifying problems and changes in premises and making necessary adjustments.

Types of Strategic Control

 Premise control:
 A strategy is formed on the basis of certain assumptions or premises about the complex and turbulent organizational
environment.
 Over a period of time these premises may not remain valid.
 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.
 It primarily involves monitoring two types of factors:
 Environmental factors such as economic (inflation, liquidity, interest rates), technology, social and legal-regulatory.
 Industry factors such as competitors, suppliers, substitutes.
 Thus, managers are required to select those premises that are likely to change and would severely impact the functioning
of the organization and its strategy, as it is neither feasible nor desirable to control all types
 Strategic surveillance:
 Contrary to the premise control, the strategic surveillance is unfocussed.
 It involves general monitoring of various sources of information to uncover unanticipated information having a bearing on
the organizational strategy.
 It involves casual environmental browsing. Reading financial and other newspapers, business magazines, attending
meetings, conferences, discussions and so on can help in strategic surveillance.
 Strategic surveillance may be loose form of strategic control but is capable of uncovering information relevant to the
strategy.
 Special alert control:
 At times, unexpected events may force organizations to reconsider their strategy.
 Sudden changes in government, natural calamities, terrorist attacks, unexpected merger/acquisition by competitors,
industrial disasters and other such events may trigger an immediate and intense review of strategy.
 To cope up with such eventualities, the organisations form crisis management teams to handle the situation.

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 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 associated with incremental steps and actions.
 Strategic implementation control is not a replacement to operational control.
 Unlike operational control, it continuously monitors the basic direction of the strategy.
 The two basic forms of implementation control are:
o Monitoring Strategic Thrusts
 Monitoring strategic thrusts helps managers to determine whether the overall strategy is progressing as
desired or whether there is need for readjustments.
o Milestone Reviews:
 All key activities necessary to implement strategy are segregated in terms of time, events or major resource
allocation.
 It normally involves a complete reassessment of the strategy.
 It also assesses the need to continue or refocus the direction of an organization.
Strategic Performance measures
 Strategic performance measures are key indicators that organizations use to track the effectiveness of their strategies
and make informed decisions about resource allocation.
 The measures provide a snapshot of the organization's performance, enabling leaders to assess whether their strategies are
aligned with their goals and objectives and to make necessary adjustments to improve their performance.
Types of Strategic Performance Measures
 Financial Measures:
o Financial measures, such as revenue growth, return on investment (ROI), and profit margins, provide an understanding
of the organization's financial performance and its ability to generate profit.
 Customer Satisfaction Measures:
o Customer measures, such as customer satisfaction, customer retention, and customer loyalty, provide insight into the
organization's ability to meet customer needs and provide high-quality products and services.
 Market Measures:
o Market measures, such as market share, customer acquisition, and customer referrals, provide information about the
organization's competitiveness in the marketplace and its ability to attract and retain customers.
 Employee Measures:
o Employee measures, such as employee satisfaction, turnover rate, and employee engagement, provide insight into the
organization's ability to attract and retain talented employees and create a positive work environment.
 Innovation Measures:
o Innovation measures, such as research and development (R&D) spending, patent applications, and new product
launches, provide insight into the organization's ability to innovate and create new products and services that meet
customer needs.
 Environmental Measures:
o Environmental measures, such as energy consumption, waste reduction, and carbon emissions, provide insight into the
organization's impact on the environment and its efforts to operate in a sustainable manner.
The importance of SPM
 Goal Alignment:
o Strategic performance measures help organizations align their strategies with their goals and objectives, ensuring
that they are on track to achieve their desired outcomes.
 Resource Allocation:
o Strategic performance measures provide organizations with the information they need to make informed decisions
about resource allocation, enabling them to prioritize their efforts and allocate resources to the areas that will have
the greatest impact on their performance.
 Continuous Improvement:
o Strategic performance measures provide organizations with a framework for continuous improvement, enabling them
to track their progress and make adjustments to improve their performance over time.
 External accountability
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o Strategic performance measures help organizations demonstrate accountability to stakeholders, including
shareholders, customers, and regulatory bodies, by providing a clear and transparent picture of their performance.

Choosing right SPM

 Organizations should choose strategic performance measures that are aligned with their goals and objectives and that
provide relevant and actionable information.
In selecting the right measures, organizations should consider the following factors:
 Relevance:
 The measure should be relevant to the organization's goals and objectives, providing actionable and meaningful
information.
 This ensures that the performance measures are directly aligned with what the organization aims to achieve, and
that the information obtained can drive improvements and strategic decisions.
 Data Availability:
o The measure should be based on data that is readily available and can be collected and analyzed in a timely manner.
This is important to ensure that the organization can efficiently gather and utilize data without significant delays or
obstacles.
 Data Quality:
o The measure should be based on high-quality data that is accurate and reliable.
o Accurate and reliable data are crucial for making informed decisions and assessing the true performance of the
organization.
 Data Timeliness:
o The measure should be based on data that is current and up-to-date.
o Timely data allows organizations to make informed decisions quickly, enabling them to respond promptly to changes
and emerging challenge

Structures
Simple
 Simple organizational structure is most appropriate for companies that follow a single-business strategy and offer a line of
products in a single geographic market.
 The simple structure also is appropriate for companies implementing focused cost leadership or focused differentiation
strategies.
 A simple structure is an organizational form in which the owner-manager makes all major decisions directly and monitors all
activities, while the companyÕs staff merely serves as an executor.
 Little specialization of tasks, few rules, little formalization, unsophisticated information systems and direct involvement of
owner-manager in all phases of dayto-day operations characterise the simple structure.
 In the simple structure, communication is frequent and direct, and new products tend to be introduced to the market quickly,
which can result in a competitive advantage.
 A simple organizational structure may result in competitive advantages for some small companies relative to their larger
counterparts.
 These potential competitive advantages include a broad-based openness to innovation, greater structural flexibility, and an
ability to respond more rapidly to environmental changes.

Functional
 A widely used structure in business organisations is functional type because of its simplicity and low cost.
 A functional structure groups tasks and activities by business function, such as production/operations, marketing,
finance/accounting, research and development, and management information systems.

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 Besides being simple and inexpensive, a functional structure also promotes specialization of labour, encourages efficiency,
minimizes the need for an elaborate control system, and allows rapid decision making.
 The functional structure consists of a chief executive officer or a managing director and supported by corporate staff with
functional line managers in dominant functions such as production, financial accounting, marketing, R&D, engineering, and
human resources.
 The functional structure enables the company to overcome the growth-related constraints of the simple structure, enabling
or facilitating communication and coordination.
 However, compared to the simple structure, there also are some potential problems.
 Differences in functional specialization and orientation may impede communications and coordination.
 Thus, the chief executive officer must integrate functional decision-making and coordinate actions of the overall business
across functions.

Divisional
 Some form of divisional structure generally becomes necessary to motivate employees, control operations, and compete
successfully in diverse locations.
 The divisional structure can be organized in one of the four ways:
o By geographic area,
o By product or service,
o By customer, or
o By process.
 With a divisional structure, functional activities are performed both centrally and, in each division, separately.
 A divisional structure has some clear advantages.
o First and the foremost, accountability is clear.
o That is, divisional managers can be held responsible for sales and profit levels.
o Because a divisional structure is based on extensive delegation of authority, managers and employees can easily see
the results of their good or bad performances.
o Employee morale is generally higher in a divisional structure than it is in centralized structure.
o Other advantages of the divisional design are that it creates career development opportunities for managers, allows
local control of local situations, leads to a competitive climate within an organization, and allows new businesses and
products in be added easily.
 The divisional design is not without some limitations.
o Perhaps the most important limitation is that a divisional structure is costly, for a number of reasons.
o First, each division requires functional specialists who must be paid.
o Second, there exists some duplication of staff services, facilities, and personnel; for instance, functional specialists
are also needed centrally (at headquarters) to coordinate divisional activities.
o Third, managers must be well qualified because the divisional design forces delegation of authority better-qualified
individuals requires higher salaries.
o A divisional structure can also be costly because it requires an elaborate, headquarters-driven control system.
o Finally, certain regions, products, or customers may sometimes receive special treatment, and it may be difficult to
maintain consistent, companywide practices.
 A divisional structure by geographic area is appropriate for organizations whose strategies are formulated to fit the
particular needs and characteristics of customers in different geographic areas.
 This type of structure can be most appropriate for organizations that have similar branch facilities located in widely
dispersed areas.
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 A divisional structure by geographic area allows local participation in decision making and improved coordination within a
region.
 The divisional structure by product (or services) is most effective for implementing strategies when specific products or
services need special emphasis.
 Also, this type of structure is widely used when an organization offers only a few products or services, when an organizationÕs
products or services differ substantially.
 The divisional structure allows strict control over and attention to product lines, but it may also require a more skilled
management force and reduced top managementcontrol.
 A divisional structure by process is similar to a functional structure, because activities are organized according to the way
work is actually performed.
 However, a key difference between these two designs is that functional departments are not accountable for profits or
revenues

Multi divisional

 Multidivisional (M-form) structure is composed of operating divisions where each division represents a separate business to
which the top corporate officer delegates responsibility for day-to-day operations and business unit strategy to division
managers.
 By such delegation, the corporate office is responsible for formulating and implementing overall corporate strategy and
manages divisions through strategic and financial controls.
 Multidivisional or M-form structure was developed in the 1920s, in response to coordination- and control-related problems
in large firms.
 Functional departments often had difficulty dealing with distinct product lines and markets, especially in coordinating
conflicting priorities among the products.
 Costs were not allocated to individual products, so it was not possible to assess an individual productÕs profit contribution.
Loss of control meant that optimal allocation of firm resources between products was difficult (if not impossible).
 Top managers became overinvolved in solving short-run problems (such as coordination, communications, conflict resolution)
and neglected long-term strategic issues.
 Multidivisional structure calls for:
o Creating separate divisions, each representing a distinct business
o Each division would house its functional hierarchy;
o Division managers would be given responsibility for managing day-to-day operations;
o A small corporate office that would determine the long-term strategic direction of the firm and exercise overall
financial control over the semiautonomous divisions.
 This would enable the firm to more accurately monitor the performance of individual businesses, simplifying control problems,
facilitate comparisons between divisions, improving the allocation of resources and stimulate managers of poorly performing
divisions to seek ways to improve performance.
 When the firm is less diversified, strategic controls are used to manage divisions.
 Strategic control refers to the operational understanding by corporate officers of the strategies being implemented
within the firmÕs separate business units.

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SBU
 This concept is relevant to multi-product, multi-business enterprises.
 It is impractical for an enterprise with a multitude of businesses to provide separate strategic planning treatment to each
one of its products/businesses; it has to necessarily group the products/businesses into a manageable number of strategically
related business units and then take them up for strategic planning.
 An SBU is a grouping of related businesses, which is amenable to composite planning treatment.
 As per this concept, a multi-business enterprise groups its multitude of businesses into a few distinct business units in a
scientific way.
 The purpose is to provide effective strategic planning treatment to each one of its products/businesses.
 The three most important characteristics of a SBU are:
o It is a single business or a collection of related businesses which offer scope for independent planning and which
might feasibly standalone from the rest of the organization.
o It has its own set of competitors.
o It has a manager who has responsibility for strategic planning and profit performance, and who has control of profit-
influencing factors.
 It recognises that just because a firm is structured into a number of territorial units, say six units, it is not necessarily in
six different businesses.
 It may be engaged in only three distinct businesses.
 It is also possible that it is engaged in more than six businesses.
 The endeavour should be to group the businesses into an appropriate number of strategic business units before the firm
takes up the strategy formulation task.
 The SBU structure is composed of operating units where each unit represents a separate business to which the top corporate
officer delegates responsibility for day-to-day operations and business unit strategy to its managers.
 By such delegation, the corporate office is responsible for formulating and implementing overall corporate strategy and
manages SBUs through strategic and financial controls.
 Hence, the SBU structure groups similar products into strategic business units and delegates authority and responsibility
for each unit to a senior executive who reports directly to the chief executive officer.
 A strategic business unit (SBU) structure consists of at least three levels, with a corporate headquarters at the top, SBU
groups at the second level, and divisions grouped by relatedness within each SBU at the third level.
 This enables the company to more accurately monitor the performance of individual businesses, simplifying control problems.
 It also facilitates comparisons between divisions, improving the allocation of resources and can be used to stimulate managers
of poorly performing divisions to seek ways to improve performance.
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 This means that, within each SBU, divisions are related to each other, as also that SBU groups are unrelated to each other.
 Within each SBU, divisions producing similar products and/or using similar technologies can be organised to achieve synergy.
 Individual SBUs are treated as profit centres and controlled by corporate headquarters that can concentrate on strategic
planning rather than operational control so that individual divisions can react more quickly to environmental changes.
 Such a grouping would in its turn, help the corporation carry out its strategic management endeavour better.
 The concept provides the right direction to strategic planning by removing the vagueness and confusion often experienced
in such multi-business enterprises in the matter of grouping of the businesses.
 The attributes of an SBU and the benefits a firm may derive by using the SBU Structure are as follows:
o A scientific method of grouping the businesses of a multi-business corporation which helps the firm in strategic
planning.
o An improvement over the territorial grouping of businesses and strategic planning based on territorial units.
o An SBU is a grouping of related businesses that can be taken up for strategic planning distinct from the rest of the
businesses

Matrix Structure

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 The matrix structure is used when neither functional nor divisional structures are sufficient to implement organizational
strategy.
 It combines functional and product/project structures simultaneously, resulting in dual authority, where employees report
to both a functional manager and a project or product manager.
 Functional departments are permanent, while product or project units are usually temporary and market-oriented.
 This structure is suitable for complex and dynamic environments but is highly complex due to dual reporting, shared authority,
and high communication requirements.
 For effectiveness, it requires clear roles, strong coordination, and effective internal communication.
 The matrix structure is often found in an organization or within an SBU when the following three conditions exists:
o Ideas need to be cross-fertilised across projects/products.
o Resources are scare
o Abilities to process information and to make decisions need to be improved.
For development of matrix structure Davis and Lawrence, have proposed three distinct phases:
 Cross-functional task forces:
o Temporary cross-functional task forces are initially used when a new product line is being introduced.
o A project manager is in charge as the key horizontal link.
 Product/brand management:
o If the cross-functional task forces become more permanent, the project manager becomes a product or brand
manager and a second phase begins.
o In this arrangement, function is still the primary organizational structure, but product or brand managers act as the
integrators of semi permanent products or brands.
 Mature matrix:
o The third and final phase of matrix development involves a true dual-authority structure.
o Both the functional and product structures are permanent.
o All employees are connected to both a vertical functional superior and a horizontal product manager.
o Functional and product managers have equal authority amd must work together

Network Structure
 A radical organizational design, the network structure is an example of what could be termed a “non-structure” by its virtual
elimination of in-house business functions.
 Many activities are outsourced.
 A corporation organized in this manner is often called a virtual organization because it is composed of a series of project
groups or collaborations linked by constantly changing non-hierarchical, cobweblike networks.
 The network structure becomes most useful when the environment of a firm is unstable and is expected to remain so.
 Under such conditions, there is usually a strong need for innovation and quick response.
 Instead of having salaried employees, it may contract with people for a specific project or length of time.
 In its ultimate form, the network organization is a series of independent firms or business units linked together by a common
system that designs, produces, and markets a product or service.
 It allows a company to concentrate on its distinctive competencies, while gathering efficiencies from other firms who are
concentrating their efforts in their areas of expertise

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 CA Intermediate Strategic Management-Strategic Choices (Selection of strategies)
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Hourglass
 The hourglass structure has three layers—
o Top management,
o A thin middle layer, and a
o Broad operating level—where information technology replaces many middle-management tasks.
o IT directly links top and bottom levels, reducing coordination and supervisory roles.
o Middle managers in this structure are generalists, handling cross-functional issues rather than narrow specializations.
o The structure reduces costs, speeds up decision-making, and improves organizational responsiveness.
o However, fewer middle-level roles limit promotion opportunities, which may reduce motivation.
o Organizations address this through lateral movement, challenging assignments, and performance-based rewards.

Vishesh Kothariee- Faculty for CA Foundation-Law, CA Intermediate-Law, Audit, Fm-Sm, CA Final-Advance Auditing.