P9 Dec2021

Paper 9: Operation Management & Strategic Management
[December_2021_Term]

INTERMEDIATE EXAMINATION
Syllabus 2016

Paper 9: OPERATIONS MANAGEMENT & STRATEGIC MANAGEMENT
(OMSM)

Time Allowed: 3 Hours Full Marks: 100

There are Sections A, B, C and D to be answered subject to instructions given against
each.
Section A [20 Marks]
You are required to answer all the questions. Each question carries 1 mark. [20×1=20]
Instructions: Each question is followed by 4 Answer choices and only one is correct. You are
required to select the choice which according to you represents the correct answer.

1. Modern views classifies Production management decisions pertaining to:
(i) People
(ii) People, supply, space
(iii) People, supply, space and time
(iv) People, supply, space, time and feelings;

2. Under product and service design translating product and service specification into
process specification involve:
(i) Marketing functional area of an organization
(ii) Finance functional area of an organisation
(iii) Accounting functional area of an organisation
(iv) Engineering functional area of an organization

3. Which one of the following is not the factor influencing effective capacity?
(i) Level of automations desired
(ii) Forecasts of Demand
(iii) Plant and labour efficiency
(iv) Multiple Shift operation

4. One of the objectives of maintenance is:
(i) To prevent obsolescence.
(ii) To ensure spare parts management.
(iii) To satisfy customers.
(iv) To extend the useful life of Plant & Machinery without sacrificing the level
of performance.
The Institute of Cost Accountants of India (Statutory Body under an Act of Parliament) Page 1

5. Which is not the policy of extending the product range?
(i) Investment in the research and development of additional products
(ii) Loss of rights to produce someone else’s product
(iii) Buying in the product and ‘budging’ it
(iv) Joint development with owners of another product who need access to the
firm’s distribution channels or brands

6. Which one of the following standards is associated with “Quality Assurance in Final
Inspection Test”?
(i) ISO 9001
(ii) ISO 9002
(iii) ISO 9003
(iv) ISO 9004

7. Gantt charts are used for:
(i) Forecasting sales
(ii) Production schedule
(iii) Scheduling and routing
(iv) Linear programming

8. Production control is concerned with:
(i) Passive assessment of plant performance
(ii) Strict control on labours
(iii) Good materials management
(iv) Good product design

9. Merge & Burst Event refers to:
(i) Two or more activities come from an event
(ii) An activity may be merged and burst at the same time
(iii) More than one activity leaves an event
(iv) An activity may be merged or burst at the same time

10. In which of the following layout type, materials are fed into the first machine and
finished products come out of the last machine?
(i) Product layout
(ii) Process layout
(iii) Fixed position layout
(iv) Cellular manufacturing layout

11. JIT means _______.
(i) Just in time purchase
(ii) Just in time production
(iii) Just in time use of materials

(iv) Just in time order the material
12. The card which is prepared by the dispatching department to book the labour involved
in each operation is:
(i) Labour card
(ii) Wage card
(iii) Credit card
(iv) Job card.

13. The document, which is used to show planning quantity standards and production
plan, is known as:
(i) Planning specifications
(ii) Route sheet
(iii) Bill of materials
(iv) Operation sheet

14. When a firm doubles its inputs and finds that its output has more than doubled, this
is known as:
(i) Economies of scale
(ii) Constant returns to scale
(iii) Diseconomies of scale.
(iv) A violation of the law of diminishing returns.

15. Directional Policy Matrix is the same as:
(i) The BCG model
(ii) The 9‐cell GE matrix
(iii) The Life cycle portfolio analysis
(iv) The PIMS matrix

16. Which one of the following does NOT seem to be an advantage of the strategic
management?
(i) Discharges board responsibility
(ii) Provides a framework for decision‐making
(iii) Forces an objective assessment
(iv) It can be expensive

17 The strategy of the TATA group in India could be viewed as a good example of
(i) Conglomerate diversification
(ii) Market development
(iii) Cost Leadership
(iv) Concentric diversification

18. PESTEL is an analytical tool which helps to undertake:

(i) An internal analysis.
(ii) An external analysis
(iii) A competitor analysis
(iv) A strategic analysis

19. The essential ingredients of Business Process Re‐engineering (BPR) are:
(i) Continuous improvements of products, processes and technologies.
(ii) Planning for the technologies, processes and strategic partnerships etc.
(iii) Fundamental re‐thinking and radical redesign of business process to achieve
dramatic results.
(iv) Generation, comparison and evolution of many ideas to find one worthy of
development

20. The BCG matrix is based on:
(i) Industry Attractiveness and Business Strength
(ii) Industry Growth Rate and Business Strength
(iii) Industry Attractiveness and Relative Market Share
(iv) Growth Rate and Relative Market Share


Section B [20 Marks]
You are required to answer all the questions. Each question carries 1 mark. [20×1=20]
Instructions: Each question is followed by a space where you are required to type your
answer.
1. Relate the following characteristic to either Product (P) or Service (S):
Markets served by the productive system are regional, national and international.

Type your answer here :
Product (P)
2. Principle of _____________ permits revisions with the least difficulty and at minimum
cost.

Type your answer here:
Flexibility
3. Fill in the blank:
‐‐‐‐‐‐‐ method of analytical evaluation of a job assigns equal weights for each
characteristic.
Straight Point
4 Conducting occasional check‐ups of the products manufactured or assembled to
ensure high quality of the production is called _________.
Type your answer here: Inspection
5. Fill in the blank:
‐‐‐‐‐‐‐ is used for scheduling when jobs are produced to order in batches.
Type your answer here :Batch scheduling system
6. What is a certain specific techniques which can be used for planning, management and
control of project?
Type your answer here: Network analysis
7 Which department is responsible for Availability of vital spare parts needs to be
ascertained to meet an emergency like breakdown?
Type your answer here :Maintenance Spares
8. _______is a reduction in the number of firm’ employees and, sometimes, in the number of
its operating units.


Downsizing
9. Mention the two categories of spare parts.

spare parts are categorized into two main groups (i) fast moving and (ii) slow moving
parts.
10. ________ trend in Production/Operations management involves drastic measures or
break through improvements to improve the performance of a firm
Re‐engineering
11. The dimensions of service quality are the ease with which a service can be availed.
This is called __________.
Convenience
12. The full form of VAM is __________ Method.
Fill in the blank appropriately.
Vogel’s Approximation
13. The probability that a product will function for a specific time period without failure is
termed as product’s __________.
Reliability
14. The activity of specifying when to start the job and when to end the job is known as
Scheduling.
15. Typically profits are highest in which stage of the industry life‐cycle?
Growth
16. The strategy which concentrates around a production market is called as _______.
Niche
17. A structure in which the owner‐ manager makes all major decisions and monitors all

activities while the staffs serves as an extension of the manager’s supervisory authority
is called a __________.

Simple structure
18. The monitoring, evaluating and disseminating of information from the external and
internal environments to key people within the corporation is called _______.
Environmental scanning
19. ________specifies the firm’s formal reporting relationships, procedures, controls and
authority and decision making processes.
Organisational structure
20. Intensity of competition is _________in low‐ return industries.

Fill in the blank.
High


Section C [48 Marks]
You are required to answer any 4 out of 6 questions in this section [4 × 12= 48]
Instructions: Each question is followed by a space where you are required to type your answer.
Candidates shall provide adequate reasons/workings in brief, in support of their answers.

1. (i) The production management of today presents certain characteristics which make it look totally
different from what it was during the past. Explain. 4
Type of answer here:

Today’s production system is characterised by at least four features:
1. Manufacturing as Competitive Advantage: In the past production was considered to be
like any other function in the organisation. When demand was high and production
capacities were inadequate, the concern was to somehow muster all inputs and use them
to produce goods which would be grabbed by market. But today’s scenario is
contrasting. Plants have excess capacities, competition is mounting and firms look and
gain competitive advantage to survive and succeed. Interestingly, production system
offers vast scope to gain competitive edge and firms intend to exploit the potential. Total
Quality Management (TQM), Time‐Based Competition, Business Process Re‐engineering
(BPRE), Just‐in‐Time (JIT), Focused Factory, Flexible Manufacturing Systems (FMS),
Computer Integrated Manufacturing (CIM), and The Virtual Corporation are but only
some techniques which the companies are employing to gain competitive advantage.
2. Services Orientation: As was stated earlier, service sector is gaining greater relevance
these days. The production system, therefore, needs to be organised keeping in mind the
peculiar requirements of the service component. The entire manufacturing needs to be
geared to serve (i) intangible and perishable nature of the services, (ii) constant
interaction with clients or customers, (iii) small volumes of production to serve local
markets, and (iv) need to locate facilities to serve local markets. There is increased
presence of professionals on the production, instead of technicians and engineers.
3. Disappearance of Smokestacks: Protective labour legislation, environmental movement
and gradual emergence of knowledge based organisations have brought total
transformation in the production system. Today’s factories are aesthetically designed
and built, environment friendly ‐ in fact, they are homes away from homes. Going to
factory everyday is no more excruciating experience, it is like holidaying at a scenic spot.
A visit to ABB, L & T or Smith Kline and Beecham should convince the reader about the
transformation that has taken place in the wealth creation system.
4. Small has Become Beautiful:It was E.F. Schumacher who, in his famous book Small
Beautiful, opposed giant organisations and increased specialisation. He advocated, instea
intermediate technology based on smaller working units, community ownership, an
regional workplaces utilising local labour and resources. For him, small was beautifu
Businessmen, all over the world, did not believe in Schumacher’s philosophy. Inspired b
economies of scale, industrialists went In for huge organisations and mass productio
systems.

(ii) The monthly requirement of raw material for a company is 3,200 units. The carrying cost is
estimated to be 25% of the purchase price per unit, in addition to Rs. 2.5 per unit. The ordering
cost is Rs. 28 per order. The purchase price of raw material is Rs. 24 per unit. However, there is a
discount of 6% available on the purchase price if it orders 3,200 units or more but less than 6,200

units per month and a discount of 15% available on the purchase price if orders are 6,200 units
or more per month. 8

You are required to find EOQ and Total Inventory Costs.

Type of answer here:

(i) EOQ (units) for:
Order Size < 3200= 503
Order Size > 3200 but < 6200= 514
Order Size > 6200 =532

(ii) Total Inventory Cost (Rs.) :

Order Size < 3200= 9,25,875.3
Order Size > 3200 but < 6200= 8,70,487.8
Order Size > 6200 =7,87,402.7
Workings:
Computation of EOQ and Total Inventory Costs
Order Size >
Order Size Order Size
Particulars 3200 but <
< 3200 > 6200
6200
Annual Demand (units) 38,400 38,400 38,400
Purchase Price per unit (Rs./unit) 24 22.56 20.4
Ordering Cost per Order (Rs./order) 28 28 28
Carrying Cost per unit (Rs.) 8.5 8.14 7.6
EOQ (units) 503 514 532
Total Purchase Cost (Rs.) 9,21,600 8,66,304 7,83,360
Total Ordering Cost (Rs.) 2,137.575 2,091.829 2,021.053
Total Carrying Cost (Rs.) 2,137.75 2,091.98 2,021.6
Total Inventory Cost (Rs.) 9,25,875.3 8,70,487.8 7,87,402.7

Formula applied for computation:
Annual Demand (units) = Monthly Demand (units) X 12
Price per unit (Rs.) = Purchase Price per unit (Rs.) – Discount, if applicable
Carrying Cost per unit (Rs.) = Rs. 2.5 + 25% of Price per unit
Total Purchase Cost (Rs.) = Annual Demand (units) X Purchase Price per unit (Rs.)
Total Ordering Cost (Rs.) = (Annual Demand / EOQ) X Ordering Cost per order
Total Carrying Cost (Rs.) = Average Inventory X Carrying Cost per unit = EOQ/2 X Carrying
Cost per unit

Total Inventory Costs (Rs.) = Total Purchase Cost (Rs.) + Total Ordering Cost (Rs.) + Total
Carrying Cost (Rs.)

2. (i) Every good or service is made by using some variation of one of three process strategies. What are
the three process strategies in an organization’s approach. 6


Type your answer here

a) Process Focus: Majority (about 75 per cent) of global production is devoted to low
volume, high variety products in manufacturing facilities called job shops. Such
facilities are organised around performing processes. For example, the processes might
be welding, grinding or painting carried out in departments devoted to these processes.
Such facilities are process focussed in terms of equipment, machines, layout and
supervision. They provide a high degree of product flexibility as products move
intermittently between processes. Each process is designed to perform a wide variety
of activities and handle frequent changes. Such processes are called intermittent
processes. These facilities have high variable costs and low utilisation of facilities
b) Repetitive Focus: A repetitive process is a product oriented production process that
uses modules. It falls between product focus and process focus. It uses modules which
are parts or components prepared often in a continuous or mass production process. A
good example of repetitive process is the assembly line which is used for assembling
automobiles and household appliances and is less flexible than process‐focused facility.
Personal computer is an example of a repetitive process using modules in which the
modules are assembled to get a custom product with the desired configuration.
c) Product Focus: It is a facility organised around products, a product oriented, high‐
volume low‐variety process. It is also referred to as continuous process because it has
very long continuous production run. Examples of product focussed processes are steel,
glass, paper, electric bulbs, chemicals and pharmaceutical products, bolts and nuts etc.
Product‐focussed facilities need standardisation and effective quality control. The
specialised nature of the facility requires high fixed cost, but low variable costs reward
high facility utilisation.

(ii) Calculate the standard time per article produced from the following data obtained by a work
sampling study: 6
Total no. of observations = 2,600
No. of working observations = 2,000
No. of units produced in 100 hours duration = 5,000
numbers Proportion of manual labour = ¾
Proportion of machine time = ¼ Observed rating factor = 120%
Total Allowances = 15% of Normal time
Standard time per article produced =1.185 minutes
Workings:
Actual working time in the duration of 100 hours = 100 × (2,000/2,600) = 76.923
hours
Time taken per article = (76.923 × 60) / 5,000 = 0.923 minute
Observed manual labour time per article = 0.923 × (3/4) = 0.6922 minute
Observed machine time per article = 0.923 × (1/4) = 0.230 minute
Normal labour time per unit = Observed time / unit × Rating factor = 0.6922×1.20
= 0.8306 minute
Standard labour time per unit = 0.8306 + (15 / 100) × 0.8306 = 0.9552 minute
Standard time per unit of article produced = 0.9552 + 0.230 = 1.185 minutes


3. (i) Differentiate between CPM and PERT. 4

PERT CPM
It is a technique for planning It is a technique for planning
scheduling & controlling of projects
scheduling & controlling of
whose activities are subject to projects whose activities not
uncertainty in the performance time. subjected to any uncertainty and
Hence it is a probabilistic model. the performance times are fixed.
Hence it is a deterministic model.
It is an Event oriented system It is an Activity oriented system
Basically does not differentiate Differentiates clearly the critical
critical and noncritical activities. activities from the other activities.
Used in projects where resources Used in projects where overall
(men, materials, money) are always costs is of primarily important.
available when required. Therefore better utilized

resources.

(ii) An incentive scheme allows proportionate production bonus beyond 100% performance level.
Calculate the amount of: 8

(a) Incentive bonus and

(b) Total payment received by an operator on a particular day during which the following
particulars apply:
Operation : Assembling a table clock set
Work Content : 40 Standard minutes per assembled set
Attended Time: 8 Hours
Time spent on unmeasured work : 3 Hours
Number of sets assembled during the day : 10 Wage rate : Rs. 5 per hour

(c) What is the net labor productivity achieved by the operator during the day?

(i) Incentive bonus = Rs.8.33 for five hours on measured work
(ii) Total earnings for the day = Rs. 48.33
(iii) Net labour productivity = 2 sets per hour
Workings:
Total standard minutes worked during the day = 40×10 = 400,
Working time = 8‐3 = 5 hours = 300 minutes.
Performance = (400×100)/300 = 133.34% or 0.3333

(a) Incentive bonus = 0.3333×5×5= Rs.8.33 for five hours on measured work

(b) Guaranteed wage for 8 hours = 8×5 = Rs. 40;
Total earnings for the day = Rs.(8.33+40) = Rs. 48.33

(c) Net labour productivity = Output in units/Net person hours
=10/5 = 2 sets per hour.

4. (i) A Public transport system is experiencing the following number of breakdowns for months over
the past 2 years in their new fleet of cars: 8

Number of breakdowns 0 3 4 6 8
Number of months this occurred 5 8 6 3 2

Each breakdown costs the firm an average of Rs. 2,800. For a cost of Rs.6,500 per month, preventive
maintenance can be carried out to limit the breakdowns to an average of one per month.
Which policy is suitable for the firm?
Type your Answer Here:
Expected Breakdown cost per month= Rs.9,548.
Preventive maintenance cost per month= Rs.9,300
Thus, preventive maintenance policy is suitable for the firm.
Workings:

Converting the frequencies to a probability distribution and determining the
expected cost/month of breakdowns we get:
No. of Frequency in Probability Expected no. of
breakdowns months breakdowns
(x) (f) (p = f/sum f) (px)
0 5 0.21 0
3 8 0.33 0.99
4 6 0.25 1
6 3 0.13 0.78
8 2 0.08 0.64
Sum f = 24 Sum p = 1 Sum px = 3.41

Expected Breakdown cost per month= Expected no. of breakdowns per month × cost of each
breakdown
= 3.41 × Rs. 2800 = Rs.9,548.

Preventive maintenance cost per month:
Average cost of one breakdown/month = Rs.2, 800
Maintenance contract cost/month = Rs. 6,500
Total = Rs.9,300

(iii) Explain the phases of strategic management. 4


Type your Answer Here:
As managers attempt to better deal with the changing world, a firm generally evolves
through the following four phases of strategic management.

Phase 1 Basic financial planning:

Managers initiate serious planning when they are requested to propose the following
year’s budget. Projects are proposed on the basis of very little analysis, with most
information coming from within the firm. The sales force usually provides the small
amount of environmental information. Such simplistic operational planning only
pretends to be strategic management, yet it is quite time consuming. Normal company
activities are often suspended for weeks while managers try to cram ideas into the
proposed budget. The time horizon is usually one year.

Phase 2 Forecastbased planning:

As annual budgets become less useful at stimulating long term planning, managers
attempt to propose fiveyear plans. At this point they consider projects that may take
more than a year. In addition to internal information, mangers gather any available
environmental data and extrapolate current trends five years into the future. The phase
is also time consuming, often involving a full month of managerial activity to make sure
all the proposed budgets fit together. The process gets very political as managers compete
for larger shares of funds. The time horizon is usually three to five years.

Phase 3 Externally oriented (strategic) planning:

Frustrated with highly political yet ineffectual five –year plans, top management takes
control of the planning process by initiating strategic planning. The company seeks to
increase its responsiveness to changing markets and competition by thinking
strategically. Planning is taken out of the hands of lower level managers and concentrated
in a planning staff whose task is to develop strategic plans for the corporation. Consultants
often provide the sophisticated and innovative techniques that the planning staff uses to
gather information and forecast future needs. Such top down planning emphasises formal
strategy formulation and leaves the implementation issues o lower management levels.

Phase 4 – Strategic Management:

Strategic management is the continuous planning, monitoring, analysis and assessment of
all that is necessary for an organization to meet its goals and objectives. Strategic plans at
this point detail the implementation, evaluation and control issues. Rather than attempting
to perfectly forecast the future, the plans emphasise probable scenarios and contingency
strategies. Strategic information, previously available centrally to top management, is
available via local area networks and intranets to people throughout the organisation.
Instead of a large centralised planning staff, internal and external planning consultants are
available to help guide group strategy discussions. Although top management may still
initiate strategic planning process, the resulting strategies may come from anywhere in the
organisation. Planning is typically interactive across levels and no longer top down. People
at all levels are now involved.

5. (i) Explain the restructuring strategy of leveraged buyouts. 4


A leveraged buyout (LBO) is a restructuring strategy whereby a party (typically a private
equity firm) buys all of a firm’s assets in order to take the firm private. Once the transaction
is completed, the company’s stock is no longer traded publicly. Traditionally, leveraged
buyouts were used as a restructuring strategy to correct for managerial mistakes or
because the firm’s managers were making decisions that primarily served their own
interests rather than those of shareholders. However, some firms use buyouts to build firm
resources and expand rather than simply restructure distressed assets.

Significant amounts of debt are commonly incurred to finance a buyout, hence, the term
leveraged buyout. To support debt payments and to downscope the company to
concentrate on firm’s core businesses, the owners may immediately sell a number of assets.
It is not uncommon for those buying a firm through an LBO to restructure the firm to the
point that it can be sold at a profit within a five to eight year period. Leveraged buyouts
have not been popular in India.

(ii) What are the primary tasks of strategic center firm 4


The strategic center firm is engaged in the following four primary tasks as it manages the
strategic network and controls its operations.

a. Strategic outsourcing The strategic center firm outsources and partners with more firms
than other network members. At the same time, the strategic center firm requires
network partners to be more than contractors. Members are expected to find
opportunities for the network to create value through its cooperative work.

b. Competencies To increase network effectiveness, the strategic center firm seeks ways to
support each member’s efforts to develop core competencies with the potential of
benefiting the network.

c. Technology The strategic center firm is responsible for managing the development and
sharing of technology based ideas among network members. The structural
requirement that members submit formal reports detailing the technology oriented
outcomes of their efforts to strategic center firm facilitates this activity.

d. Race to learn The strategic center firm emphasises that the principal dimensions of
competition are between value chains and between networks of value chains. Because
of this interconnection, the strategic network is only as strong as its weakest value
chain link. With its centralised decision making authority and responsibility, the
strategic center firm guides participants in efforts to form networkspecific competitive
advantages. The need for each participant to have capabilities that can be the
foundation for network’s competitive advantages encourages friendly rivalry among
participants seeking to develop the skills needed to quickly form new capabilities that
create value for the network.

(iii) Distinguish between downsizing and downscoping. 4


Downsizing is a reduction in the number of firm’ employees and, sometimes, in the number
of its operating units, but it may or may not change the composition of businesses in the
company’s portfolio. Downsizing is often a part of acquisitions that fail to create the value
anticipated when the transaction was completed. Downsizing is often used when the
acquiring firm paid too high of a premium to acquire the target firm. Once thought to be an
indicator of organisational decline, downsizing is now recognised as s legitimate
restructuring strategy. Managers should remember that as a strategy, downsizing will be
far more effective when they consistently use human resource practices that ensure
procedural justice and fairness in downsizing decisions.

Downscoping refers to divestiture, spin off, or some other means of eliminating businesses
that are unrelated to the firm’s core businesses. Downscoping has a more positive effect on
firm performance than does downsizing because firms commonly find that down scoping
causes them to refocus on their core business. Managerial effectiveness increases because
the firm has become less diversified, allowing the top management team to better
understand and manage the remaining businesses.

Firms often use the down scoping and downsizing strategies simultaneously. However,
when doing this, firms avoid layoffs of key employees, in that such layoffs might lead to a
loss of one or more core competencies. Instead, a firm that is simultaneously down scoping
and downsizing becomes smaller by reducing the diversity of businesses in its portfolio.
Generally, the down scoping and downsizing releases funds to be used in their core
business to strengthen it.

6. Write short notes on any four out of five questions. [ 4 X 3 = 12]
(i) Design capacity and Effective capacity

Design Capacity: The maximum output rate or service capacity an operation, process or
facility is designed for.

Effective Capacity: Design capacity minus allowance such as personal time and
maintenance.
Design capacity is the maximum rate of output achieved under ideal conditions, Effective
capacity is always less than design capacity owing to realities of changing product mix, the
need for periodic maintenance of equipment, lunch break, problems in scheduling and
balancing operations etc. Actual output cannot exceed effective capacity and is often less
because of machine breakdowns, absenteeism, shortages of materials and quality
problems as well as factors that are outside the control of the operation mangers.

(ii) Specification


A specification is a detailed description of a material, part or product, including physical
measures such as dimensions, volume, weight, surface finish etc. Specifications indicate
tolerances on physical measures which provide production department with precise
information about the characteristics of products to be produced and the processes and

production equipment to be used to achieve the specified tolerances (acceptable
variations).Interchangeability of parts in products produced in large volumes (mass
production and flowline production)is provided by appropriate specification of tolerances
to facilitate the desired fit between parts which are assembled together.

(iii) Chase Approach and Combination Approach in matching demand and capacity.

Chase approach represents the other extreme, in that demand is not altered, but resources
are. In fact in a “pure” chase environment the resources are continually being raised or
lowered to meet the demand as it fluctuates under the normal conditions.

Combination approach is by far the most common approach. As the name implies,
companies using this approach will ―mix and matchǁ, altering demand and resources in
such a way to maximize performance to their established criteria, including profit,
inventory investment, and the impact on people.

(iv) Strategic center firm

A strategic network is a loose federation of partners participating in the network’s
operations on a flexible basis. At the core or center of the strategic network, the strategic
center firm is one around which the network’s cooperative relationships revolve. Because
of its central position, the strategic center firm is the foundation for the strategic network’s
structure. Concerned with various aspects of organisational structure, such as formal
reporting, relationships and procedures, the strategic center firm manages what are often
complex, cooperative interactions among network partners. To perform the tasks, the
strategic center firm must make sure that incentives for participating in the network are
aligned so that network firms continue to have a reason to remain connected.

(v) Limitations of the BCG model.

The following are the limitations of The BCG Model:
(i) How do you define your market? Segmentation strategies can provide a niche. A niche
is inevitably a low or restricted share of the market, yet it is the heart of a focus
strategy. Firms can profit servicing small lowgrowth niches.
(ii) Market growth and market share are assumed to be reliable pointers for cash flow.
This is often not true. High market share does not necessarily mean high profits,
especially if a firm has high costs, or has bought market share by low pricing.
(iii) Relative market share amongst competitors is not necessarily an indication of their
competitive strengths at any particular time. After all, market leaders are vulnerable.
(iv) The BCG model might become a selffulfilling prophecy: Dogs which could be made
profitable might simply be left to the rather than be resuscitated.
(v) It does not suggest any response to declining markets other than withdrawal: many
firms can make money in 'sunset industries'.
(vi) It ignores the extent to which a firm which serves a number of markets can exploit
production synergies.
(vii) It ignores the threat of substitute products.

Section D [12 Marks]
CASE STUDY

You are required to answer all the questions in this section
Instructions: Each question is followed by a space where you are required to type your answer.
Candidates shall provide adequate reasons/workings in brief, in support of their answers

To stimulate interest and provide an atmosphere for intellectual discussion, the finance faculty in a
management school decides to hold special seminars on four contemporary topics – leasing,
portfolio management, private mutual funds, swaps and options. Such seminars should be held once
per week in the afternoons. However scheduling these seminars (one for each topic and not more
than one seminar per afternoon) has to be done carefully so that the number of students unable to
attend is kept to a minimum. A careful study indicates that the number of students who cannot
attend a particular seminar on a specific day is as follows:

Day Leasing Portfolio Private Swaps

Management Mutual and
Funds Options
Monday 50 40 60 20
Tuesday 40 30 40 30
Wednesday 60 20 30 20
Thursday 30 30 20 30
Friday 10 20 10 30

(i) You are required to construct the Matrix after Row Operation under Step 1 and Matrix after Column
Operation under Step 2. 3

Solving Assignment Problem using Hungarian Method using the Revised Assignment
Problem

Step 1 : Matrix after Row Operation
Day Leasing Portfolio Private Swaps and Dummy
Management Mutual Options
Funds
Monday 50 40 60 20 0
Tuesday 40 30 40 30 0
Wednesday 60 20 30 20 0
Thursday 30 30 20 30 0
Friday 10 20 10 30 0

Step 2 : Matrix after Column Operation


Funds
Monday 40 20 50 0 0
Tuesday 30 10 00 10 0
Wednesday 50 0 20 0 0
Thursday 20 10 10 10 0
Friday 0 0 0 10 0

The numbers of allocated cells are not equal to the no of rows. Hence the solution is not
optimal.

(ii) You are required to check for the optimality of the assignment table. 3
(For Assignment type the letter “A” beside the figure in the required cell and for Strikingout
or NottoAssign, type the letter “X” beside the figure in the required cell. For example, A0,
X0)
Step ‐ 3 : Assignment
Management Mutual Funds Options
Monday 40 20 50 0 A 0 X
Tuesday 30 10 00 10 0 A
Wednesday 50 0 A 20 0X 0X
Thursday 20 10 10 10 0X
Friday 0 A 0X 0X 10 0X
The numbers of allocated cells are not equal to the no of rows. Hence the solution is not optimal.
(iii) You are required to construct the Assignment Table if the solution is not optimal under Step2
(For Assignment type the letter “A” beside the figure in the required cell and for Striking‐out or Not‐to‐
Assign, type the letter “X” beside the figure in the required cell. For example, A0, X0)
Step 3 : Assignment
Funds
Monday 40 20 50 0 A 10
Tuesday 30 0 X 20 0 X 0 A
Wednesday 50 0 A 20 0 X 10
Thursday 10 0 X 0 A 0 X 0 X

Friday 0 A 0 X 0 X 10 10

(iv) Find the total number of students who will be missing at least one seminar. 3

70
Workings:
Days No. of students missing seminar
Monday 20
Tuesday NIL (dummy)
Wednesday 20
Thursday 20
Friday 10

TOTAL 70

END

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Paper 9: Operation Management & Strategic Management

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