Skip to content

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

Sundaram Auto Components has grown from one plant to five plants in different states producing varied products. The promoters find that decisions are slow because everything goes to the head office, and plant heads lack accountability for profits. Which structural change best fits applying a standard strategy framework to this situation?

A divisional or SBU-based structure fits best. With several plants and varied products, delegating authority to each unit and making it a profit centre speeds up decisions and creates accountability. Simple and functional structures suit small or single-product firms and would keep decisions centralised.

  1. AShift from a divisional structure back to a simple structure
  2. BAdopt a divisional (SBU-based) structure with profit responsibility at each unitCorrect
  3. CAdopt a functional structure with all decisions at the top
  4. DDissolve the plants into one central production unit

Explanation

A diversified, multi-location firm with slow centralised decisions and no profit accountability suits a divisional or SBU structure, where each unit is a profit centre with delegated authority. Functional or simple structures worsen centralisation and suit single-business firms.

Did you get it right without looking?

One question tells you little. A timed set on Strategy Implementation and Evaluation shows your real accuracy, how long you take and where you lose marks.

Practise Strategy Implementation and EvaluationFree diagnostic mock

More Strategy Implementation and Evaluation questions