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CA Intermediate · Financial Management and Strategic Management · Strategy Implementation and Evaluation

Meridian Pharma's plant head notices that actual output is 8% below target. Before taking corrective action, he investigates and finds the target itself was set using a capacity that was never available because of a regulatory shutdown. In the strategic control process, what is the most appropriate action?

The appropriate action is to revise the target. Strategic control tests whether premises remain valid, and here the capacity assumed was never available due to the shutdown. The deviation therefore stems from an unrealistic standard, not poor execution, so corrective action should adjust the standard itself.

  1. ARevise the standard or target, since the deviation arises from an unrealistic premiseCorrect
  2. BReplace the plant head and keep the target
  3. CIgnore the deviation as it is below 10%
  4. DIncrease output next year to compensate without any change in targets

Explanation

Strategic control checks whether premises still hold. Since the capacity assumption was invalid, the target is flawed and should be revised. Penalising people or chasing an unachievable target does not address the cause, and the 10% threshold is invented and irrelevant.

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