Strategies MCQ Quiz - Objective Question with Answer for Strategies - Download Free PDF

The correct options are (C) and (E) Only.

Key Points 

The important principles of reengineering model developed by Michael Hammer are processing the data for using them at work and centralizing all the geographically based data. All the data that has been collected for various purposes should be centralized in the organization database.

Important Points 

Business Process Reengineering:

Business Process Reengineering is a management strategy through which companies evaluate their business process and find out the areas for improvement. These strategies are helpful in both small and large organizations. This helps in improvement in areas of cost, customer service, and overall efficiency. 

Michael Hammer's Seven Principles of Business Reengineering:

Michael Hammer and James Champy have defined seven principles of business reengineering in their book "Reengineering the Corporation: A Manifesto for Business Revolution". These principles illustrate how business process reengineering can help develop business operations.

The 7 principles of Business Reengineering are as follows:

• Focus on results instead of tasks: The companies should focus on the outcome of the tasks instead of its process.
• Allow all individuals to be part of the process: This principle states that all individuals should be part of the process and become active contributors.
• Combining Data collection with data processing: This principle states that the person involved in data collection should also do the processing work to reduce human error.
• Sharing resources between departments: This principle states that the information that has been collected should be shared between various departments which will centralize the operation.
• Joining parallel processes: This principle states that all the processes should take place in coordination. This will help in ensuring that there are no delays in the overall process.
• Integrating decision-making throughout the process: This principle states that decision-making should be involved in each stage of the process to accelerate the processing time.
• Data collection from accurate source: This principle states that the data should be collected once and from a good and reliable source.

Additional Information 

Developing value-added jobs, developing an action plan for activities, and taking actions for making the program operations are not part of business reengineering principles.

Hence, the correct options are (C) and (E) Only.

The correct answer is Horizontal merger.

Key Points Based on the information provided, the combination of Firm X and Firm Y would most likely be considered a horizontal merger.

Here's why:

Horizontal mergers occur when two companies in the same industry, which were previously competing with each other, decide to join forces. This is exactly the case with Firm X and Firm Y.
By merging, the combined entity gains a larger market share, increased bargaining power with suppliers and customers, and potentially eliminates redundant costs.
However, horizontal mergers can also raise antitrust concerns as they can reduce competition in the market, potentially leading to higher prices for consumers.
Here are some other types of mergers, but they wouldn't fit the scenario described:

• Vertical mergers: These occur when companies at different stages of the same supply chain merge, for example, a manufacturer and a distributor.
• Conglomerate mergers: These involve companies in completely different industries coming together, leading to a diversified business portfolio.

Therefore, considering the direct competition between Firm X and Firm Y before their planned merger, horizontal merger is the most accurate classification.

The correct answer is A - II, B - I, C - III, D - IV.

Key Points Reducing capital is a process by which a company reduces its authorized capital. This can be done for a variety of reasons, such as to improve the company's financial ratios or to return capital to shareholders.
Sales > Variable cost means that the company is generating enough revenue to cover its variable costs, such as the cost of goods sold and sales commissions. However, it may not yet be profitable, as it still needs to cover its fixed costs, such as rent and salaries.
Sales > Break even sales means that the company is generating enough revenue to cover all of its costs, both fixed and variable. This is the point at which the company becomes profitable.
Take-over of firm is the process by which one company acquires another company. This can be done through a variety of methods, such as a friendly acquisition or a hostile takeover.
IRDA stands for Insurance Regulatory and Development Authority. It is the regulatory body for the insurance industry in India.

The correct answer is A - II, B - I, C - III, D - IV

The correct answer is (i) and (ii) only.

Key Points Reconstruction of a company can take place when the company is undercapitalized or has incurred heavy losses which must be written off. Overcapitalization is not a reason for reconstruction.

Overcapitalization occurs when a company has more capital than it needs to operate its business. This can happen if a company has raised too much money through equity or debt financing. Overcapitalized companies may have difficulty generating returns on their investment, and they may be more vulnerable to financial shocks.

Reconstruction of an overcapitalized company can involve reducing the company's share capital, selling assets, or paying off debt. The goal of reconstruction is to reduce the company's capital to a level that is appropriate for its needs

The correct answer is Fixed overhead.

Key Points 

• The main difference between marginal costing and absorption costing lies in the treatment of fixed manufacturing overhead costs.
• Marginal costing, also known as variable costing or direct costing, treats fixed manufacturing overhead costs as period costs and does not allocate them to the products.
• Under marginal costing, only variable manufacturing costs (direct materials, direct labor, and variable overhead) are considered as product costs. Fixed manufacturing overhead costs are treated as expenses in the period they are incurred and are not included in the cost of the products.
• Marginal costing focuses on the contribution margin (sales revenue minus variable costs) and provides insights into the profitability of individual products or segments.
• On the other hand, absorption costing treats fixed manufacturing overhead costs as part of the cost of the products.
• Under absorption costing, both variable and fixed manufacturing costs are allocated to the products.
• The fixed manufacturing overhead costs are absorbed into the cost of the products using a predetermined overhead absorption rate based on a specific allocation base, such as direct labor hours or machine hours.
• Absorption costing provides a more comprehensive view of the cost of producing a product and helps in determining the full cost of inventory and the pricing decisions.

The correct answer is Determining the level and type of performance that is crucial for the growth of the organization.

Key Points

Determining the level and type of performance that is crucial for the growth of the organization would qualify to be a strategic HRM activity.

​Strategic Human Resource Management

• It is a process of managing human resources that links the workforce with the core strategies, objectives, and goals of an organization.
• It includes hiring and training employees in alignment with the goals of the business and the vision statement, mission statement, and organizational strategies that guide them.

Important Points

Some common examples of Strategic HRM programs and policies include:

• Performance management
• Training and development
• Compensation and benefits
• Employee relations

Some of the benefits under Strategic HRM:

• Increased job satisfaction
• Better work culture
• Improved rates of customer satisfaction
• Efficient resource management
• A proactive approach to managing employees
• Productivity boost

The correct answer is Indian Bank.

Key Points

• Allahabad Bank is amalgamated with Indian Bank.
• will function as branches of Indian Bank following the amalgamation of the two lenders as per Reserve Bank of India (RBI)
• It is effective by April 1, Allahabad Bank will cease to exist in its present form and will be officially merged with Indian Bank. 
• Indian bank with 113 years and Allahabad Bank with 155 years will create an institution with sound financial strength and nationwide connectivity consisting of 6,000-plus branches, 4,800-plus ATMs, 43,000-plus employees serving 120 million-plus customers and business mix of over Rs 8 trillion.

The correct answer is IMG-R.

• Reliance Industries Ltd (RIL) has entered into a definitive agreement to acquire 50% shares held by IMG Singapore Pte. Ltd in IMG-Reliance Ltd, for a cash consideration not exceeding ₹52.08 crores.
• IMG Singapore Pte. Ltd., a wholly-owned subsidiary of IMG, holds 50% of the share capital of IMG-R.
• Post completion of the acquisition, IMG-R will become a wholly-owned subsidiary of RIL.

The correct answer is Uncertainty.

Key Points

Managers who are involved in the strategic planning exercise operate in an environment of uncertainty.

Environmental uncertainty

• It is the inability to predict the success or failure of decision- making units due to environmental factors.
• Instability, complexity, and resource scarcity all lead to uncertainty.

Strategic Uncertainty is defined as the situation where the current state of knowledge is such that-

• the order or nature of things is unknown
• the consequences, extent, or magnitude of circumstances, conditions, or events is unpredictable
• credible probabilities to possible outcomes cannot be assigned.

Important Points

​Strategic planning:

• It is an organizational management activity that sets priorities, allocate resources, strengthen operations, and ensure that employees and other stakeholders are working toward common goals.
• A strategic planning system has two major functions-
  • to develop an integrated, coordinated, and consistent long-term plan of action
  • ​to facilitate adaptation of the corporation to environmental change

The correct answer is (a) - (iii), (b) - (i), (c) - (ii), (d) - (iv).

Important Points 

The correct answer is Scope.

Key Points

• The nature of STRATEGIC management:
  • Organizations have to decide what strategies to adopt and when to change strategies.
  • Strategy is a comprehensive plan for accomplishing the organizational mission.
  • Strategic management is a comprehensive and ongoing management process aimed at formulating and implementing effective strategies that promote a superior alignment between the organization and its environment and the achievement of strategic goals.
  • Components of strategy
  • Well-conceived strategies deal with three areas:
  • scope of a strategy specifies the range of markets in which the organization will compete. Hence, Option 4 is correct.
  • resource deployment is how a company will distribute its resources across various areas.
  • distinctive competence is something the organization does extremely well.
  • Synergy refers to how different areas of the business complement or enhance other areas.

Additional Information 

Strategic Planning is an organization's process of defining its strategy, or direction, and making decisions on allocating its resources to pursue this strategy.

The following are the tasks of strategic planning:

1. Developing a strategic vision and business mission.
2. Setting Objectives.
3. Crafting Tactics to achieve organizational objectives.
4. Implementing and executing the tactics.
5. Evaluating and Measuring performance.

Therefore, developing a strategic vision and a business mission is the first task of Strategic Planning.

The correct answer is Poison pills. 

Key PointsDefensive Mechanism:

• In Mergers & acquisitions transactions, a defense mechanism (also known as a defense strategy) is any set of procedures that are employed by a target company to prevent a hostile takeover.
• A hostile takeover is a type of acquisition in which a bidder takes over a target company without the consent, and against the wishes, of the management or board of directors of the target. 
• Generally, defense mechanisms can be divided into two broad categories: pre-offer defense mechanisms and post-offer defense mechanisms.

Pre-Offer Defense Mechanisms: 

• The pre-offer defense is a preemptive strategy.
• It is primarily used to either make the company’s shares less attractive for a potential bidder (e.g., increase the overall acquisition costs) or set restrictions in corporate governance to limit the benefits to the potential bidder.
• The pre-offer defense mechanisms include the following strategies: Poison pill, Poison put, Golden parachutes & Supermajority provisions. 

Important PointsPoison pill: 

• The poison pill defense includes the dilution of shares of the target company in order to make it more difficult and expensive for a potential acquirer to obtain a controlling interest in the target.
• The flip-in poison pill is the issuance of additional shares of the target company, which existing shareholders can purchase at a substantial discount.
• The flip-over poison pill provides an opportunity for target company shareholders to purchase shares in the acquiring company at a significantly discounted price.

Additional InformationPost-offer defense mechanisms:

Post-offer defense mechanisms are employed when a target company receives a bid for a hostile takeover. Examples of post-offer defense mechanisms are: White knight defense, Greenmail defense, Crown jewel defense, Pac-Man defense

• Greenmail defense: Greenmail defense refers to the target company buying back shares of its own stock from a takeover bidder who has already acquired a substantial number of shares in pursuit of a hostile takeover.
• Pac-Man defense: The Pac-Man defense occurs when a target company attempts to acquire its potential acquirer when a takeover bid has already been received.
• Liability restructuring: Restructuring Liabilities means all unpaid costs and expenses (including Other Taxes and severance but excluding Income Taxes) of the Company or its Subsidiaries related to or arising out of the Commercial Restructuring.

Hence, Poison pill is a pre-offer takeover defense employed by target companies in hostile takeovers. 

Key Points

Merger:

• A merger is a corporate transaction in which two currently operating, independent firms come together to form a single, new legal company.
• Example-Vodafone and Idea Merged and made VI Company
• Here management plays a crucial role while making merger decisions
• Sometimes they commit some errors as well which results in losses. 

Important Points

Hubris Hypothesis

• Hubris is taken from the Greek language which means "animal spirits" and has a dictionary meaning of "excessive pride and enthusiasm."
• As per the Hubris hypothesis, managers become overly optimistic while assessing potential targets because of their own overconfidence in their capacity to make wise decisions.

Hence, when managers commit errors of over-optimism in evaluating merger opportunities due to excessive pride or animal spirit is termed as Hubris Hypothesis.

Additional Information

Managerialism

• According to managerialism theory, managers' pay is a function of the size of the company.
• Hence, they aim to grow the company further.

Information Signaling

• The revaluation of a company's own shares in light of fresh knowledge produced by the merger process is referred to as informational signaling.
• Management usually has the chance to share inside information with investors so as to incline share price.

Sitting on gold mine

• It is a type of information signaling.
• the merging activity leads to the distribution of new information and let the market estimate that bidders have superior information.
• Once the announcement of merger activity has been made, the market may automatically revalue any previously "undervalued" shares of the bidder company.
• Theoretically, knowing that the "target firm is undervalued" makes a bidder more likely to engage in merger or acquisition activity.

The correct answer is Greenmail.

Key Points

•  The post-offer takeover defense mechanism in which a target company buys back its shares at a significant premium is called Greenmail.
• Greenmail is a type of share repurchase that is used by a target company to buy back its shares from a hostile bidder at a premium price. The goal of greenmail is to make the takeover bid prohibitively expensive for the bidder.
• Greenmail is a controversial practice, and it is often seen as a way for target companies to avoid the scrutiny of a hostile takeover. However, greenmail can also be used by target companies to protect their shareholders from being taken over by a hostile bidder.

Additional Information Here are some other post-offer takeover defense mechanisms:

• Poison pill: This is a provision in a company's charter that allows the company to issue new shares at a discounted price to existing shareholders if a hostile bidder acquires a certain percentage of the company's shares. This makes it prohibitively expensive for the bidder to acquire the company.
• White knight: This is a friendly acquirer that is brought in by the target company to fend off a hostile bidder. The white knight will typically offer to buy the target company at a price that is higher than the hostile bidder's offer.
• Pac-Man defense: This is a strategy in which the target company makes a hostile bid for the hostile bidder. This is a risky strategy, but it can be effective in deterring a takeover