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Business strategy and strategy development MCQs
Strategic planning can be divided into strategic analysis, strategic choice and strategic implementation. Here on MCQs.CLUB we have prepared helpful Multiple-Choice Questions (MCQs) on Business strategy and strategy development that fully cover MCQs on nature of strategy implementation and strategy evaluation, these MCQs discuss the nature of strategy formulation implementation and evaluation activities. These MCQs also discuss and explain the nature of strategic management. These MCQs are also useful for business management exams, professional accountancy exams and competitive exams.
- Strategic planning can be divided into:
- strategic analysis
- strategic choice
- strategic implementation
- All of the above
- Firms can take different approaches to strategic planning, meaning that they prioritise different elements of strategic analysis. The main approaches to strategic planning include:
- Accounting-led
- Position-based approach
- Resource-based approach
- All of the above
- Accounting-led approach –
- Starts by looking at its key stakeholders and their objectives (e.g. to increase pre-tax profits by x% per year, and earnings per share (EPS) by y% per year).
- Analyses its environment (e.g. markets and competitors; using PEST analysis and Porter’s five forces) before setting its objectives and strategy.
- Organisations should focus their strategy on their own core competences and capabilities – what they are good at.
- None
- Position-based approach –
- Starts by looking at its key stakeholders and their objectives (e.g. to increase pre-tax profits by x% per year, and earnings per share (EPS) by y% per year).
- Analyses its environment (e.g. markets and competitors; using PEST analysis and Porter’s five forces) before setting its objectives and strategy.
- Organisations should focus their strategy on their own core competences and capabilities – what they are good at.
- None
- Resource-based approach –
- Starts by looking at its key stakeholders and their objectives (e.g. to increase pre-tax profits by x% per year, and earnings per share (EPS) by y% per year).
- Analyses its environment (e.g. markets and competitors; using PEST analysis and Porter’s five forces) before setting its objectives and strategy.
- Organisations should focus their strategy on their own core competences and capabilities – what they are good at.
- None
- Organisations need strategies to establish their direction and scope in the long term, and to determine the resources and competences needed to achieve their desired courses of action.
- True
- False
- The rational model provides a useful way of summarising the strategic planning process.
- True
- False
- Which of the following is correct regarding “The rational model”?
- The rational model is a comprehensive approach to strategy.
- It suggests a logical sequence which involves analysing the current situation, generating choices (relating to competitors, products and markets) and implementing the chosen strategies.
- Both A&B
- None
- Strategic analysis can be viewed as understanding the strategic position of any organisation.
- True
- False
- The strategic analysis stage of strategic planning can be break down into a series of steps including:
- Mission and/or vision, Goals and Objectives
- Environmental analysis and Position audit or Situation analysis
- Corporate appraisal and Gap analysis
- All of the above
- The stages of “Strategic choice” include:
- Strategic options generation
- Strategic options evaluation
- Both A&B
- None
- Strategic options evaluation – Normally, each strategy has to be evaluated on the basis of:
- Suitability
- Acceptability
- Feasibility
- All of the above
- The Key tools, models, techniques for Strategic options evaluation are?
- Stakeholder analysis
- Risk analysis
- Decision-making tools such as decision trees, matrices, ranking and scoring methods
- Financial measures (e.g. ROCE, DCF, NPV)
- All of the above
- Which of the following is NOT a Key tool, models, techniques for Strategic options generation?
- Value chain analysis, Scenario building
- Porter’s generic strategic choices
- Ansoff’s growth vector matrix
- Acquisition vs. organic growth
- None
- Which of the following is correct?
- The competitive strategies are the generic strategies for competitive advantage an organisation will pursue. They determine how an organisation generates competitive advantage.
- Product-market strategies (which markets you should enter or leave) determine where you compete and the direction of growth.
- Institutional strategies (i.e. relationships with other organisations) determine the method of growth.
- All of the above
- Which of the following is correct?
- Strategy implementation is the conversion of the strategy into detailed plans or objectives for operating units.
- Strategic implementation is a vital part of the strategic planning process, because a strategy can only start delivering benefit to an organisation once it has been put into practice.
- Both A&B
- None
- The planning of implementation has several aspects including:
- Resource planning (e.g. financial; HRM)
- Operations planning
- Organisation structure and control systems
- All of the above
- The rational model describes a highly structured approach to strategic planning. An organisation identifies its objectives, analyses its current position, develops its strategic options and then selects a strategy to implement.
- The above statement is correct
- The above statement is incorrect
- In order to address the problems identifiable in rational model of strategy, alternative models of strategic planning have been developed, including:
- Freewheeling opportunism
- Incrementalism
- Emergent strategies
- All of the above
- The advantages of a formal system of strategic planning include:
- Identifies risks
- Forces managers to think
- Forces decision-making
- Enforces consistency at all levels
- All of the above
- Criticisms of strategic planning in practice as Mintzberg argued include:
- Practical failure, Routine and regular
- Reduces initiative, Internal politics and Exaggerates power
- Both A&B
- None
- Which of the following is correct for “Difficulties with long term planning”?
- One of the key difficulties in strategic (long term) planning comes from trying to accurately forecast what will happen in the long term.
- Difficulties are likely to be increased further by the complexity and dynamism of the environment, and the rapidity of change within the environment.
- long term plans are too rigid, and do not give companies the flexibility to react to unforeseen short-term opportunities or unexpected short-term crises.
- All of the above
- Structural determinism –
- is the notion that an organisation’s response to an environmental shock or influence will depend on what type of structure it (the organisation) is.
- the concept of structural determinism when considering the relationships between an organisation and its environment.
- Both A&B
- None
- The implications Structural determinism has for strategy makers are:
- For all organisations to pursue a single approach for strategic success is inappropriate because organisations are different. A strategy needs to be adapted to the specific circumstances of the organisation.
- Strategists need to look inside the organisation as well as at the environment. They need to understand the behaviour of the organisation as much as the environment.
- Both A&B
- None
- The freewheeling opportunism approach suggests firms should not bother with strategic plans but should exploit opportunities as they arise.
- True
- False
- Advantages of the freewheeling opportunism approach include:
- Good opportunities are not lost through spending time completing formal planning processes.
- A freewheeling opportunistic approach would adapt to change more quickly (e.g., if there were a very steep rise in the price of a key material input, the opportunist firm would look to find any alternative material as quickly as possible).
- It might encourage a more flexible, creative attitude.
- All of the above
- Disadvantages of the freewheeling opportunism approach include:
- No co-ordinating framework for the organisation, so that some potentially valuable opportunities get missed
- It emphasises the profit motive to the exclusion of all other considerations.
- The firm ends up reacting all the time rather than acting purposively.
- All of the above
- The management accountant’s role regarding freewheeling opportunism approach will be investigative, considering:
- What are the financial characteristics of the proposed strategy? For example, in an acquisition, what is the effect on cash flow?
- How does the proposed strategy affect the firm’s risk profile?
- What new markets will the firm be entering by pursuing this strategy? If so, what is the likely response of competitors?
- All of the above
- Incrementalism – is an approach to strategy and decision-making highlighting small and slow changes rather than one-off changes in direction.
- True
- False
- Which of the following is correct regarding “Emergent strategies”?
- An emergent strategy is one whose final objective is unclear at the outset, and whose elements develop during its life as the strategy proceeds.
- Emergent strategies can emerge ‘bottom up’; they can result from a number of ad hoc choices within an organisation, possibly made lower down the business, not just by senior management.
- Emergent strategies usually take longer to develop than planned strategies, because they evolve rather than being formally planned in one go.
- All of the above
- Emergent strategies can sometimes be seen as survival-based theories of strategy. In order to survive and prosper in an environment which is shifting and changing an organisation has to be ‘fitter’ than in its competitors: only the fittest will survive.
- The above is correct
- The above is incorrect
- For ‘How to craft strategy’, Mintzberg mentions the essential activities in strategic management including:
- Manage stability and Detect discontinuity
- Know the business and Manage patterns
- Reconcile change and continuity
- All of the above
- In the resource-based approach, rather than being developed in response to the external competitive environment, strategy is developed by looking at what makes a firm unique, and using an understanding of these unique competences to determine what to produce and what markets to produce for.
- True
- False
- The resource-based view is that sustainable competitive advantage is only attained as a result of the possession of distinctive resources.
- True
- False
- _____________ is the adequacy and suitability of the resources and competences of an organisation for it to survive and prosper.
- Strategic Capability
- Threshold Capabilities
- Threshold Resources
- None
- _____________ are essential for the organisation to be able to compete in a given market.
- Strategic Capability
- Threshold Capabilities
- Threshold Resources
- None
- Tangible Resources are the physical assets of an organisation, such as plant, labour and finance.
- True
- False
- THRESHOLD RESOURCES and THRESHOLD COMPETENCES are needed to meet customers’ minimum requirements and therefore for the organisation to continue to exist.
- True
- False
- Resources are not productive on their own. Therefore, organisational capability is vital as a basis for achieving competitive advantage. These organisational capabilities could be in a range of different areas including:
- Corporate functions (financial control; multinational co-ordination)
- Research and development
- Product design
- Operations (operational efficiency; continuous improvement; flexibility)
- All of the above
- A core competence must have qualities such as:
- It must make a disproportionate contribution to the value the customer perceives, or to the efficiency with which that value is delivered.
- It must be ‘competitively unique’, which means one of three things: actually unique; superior to competitors; or capable of dramatic improvement.
- It must be extendable; in that it must allow for the development of an array of new products and services.
- All of the above
- Chartered Management Accountants – ‘Help organisations establish viable strategies and convert them into profit (in a commercial context) or into value-for-money (in a not-for-profit context). To achieve this, they work as an integral part of multi-skilled management teams in carrying out the:
- Formulation of policy and setting of corporate objectives.
- Formulation of shorter-term operational plans.
- Acquisition and use of finance.
- Generation, communication and interpretation of financial and non-financial information for management and other stakeholders.
- Monitoring of outcomes against plans and other benchmarks and the initiation of responsive action for performance improvement.
- (I) (III) and (IV) only
- (II) (IV) and (V) only
- All of the above
- None
- A key aspect of the management accountant’s role as a business partner is to work closely with the business to improve decision making and to enhance the business’ ability to create value.
- True
- False
- The challenge lies in providing more relevant information for decision making. Traditional management accounting systems may not always provide this because:
- Historical costs are not necessarily the best guide to decision making.
- Strategic issues are not easily detected by management accounting systems.
- Both A&B
- None
- Strategic Management Accounting – is a ‘form of management accounting in which emphasis is placed on information which relates to factors external to the entity, as well as non-financial information and internally generated information’.
- The above statement is correct
- The above statement is incorrect
- Which of the following is correct?
- Strategic management accounting translates the consequences of different strategies into a common accounting language for comparison.
- It relates business operations to financial performance and, therefore, helps ensure that business activities are focused on shareholders’ needs for profit.
- Both A&B
- None
- Which of the following is correct?
- Goal congruence – ‘In a control system, the state which leads individuals or groups to take actions which are in their self-interest and also in the best interest of the entity.
- Goal incongruence exists when the interests of individuals or of groups associated with an entity are not in harmony.’
- Both A&B
- None
- Strategic management accounting has to bridge a gap between financial reporting on the one hand and the uncertainties of the future on the other. Success factors for a strategic management accounting system (SMAS) include:
- Close the communication gap between accountants and managers
- Distinguish between economic and managerial performance
- Distinguish discretionary from engineered costs
- Use standard costs strategically
- All of the above
- One of most important examples of ethics can be found in the role of directors, who act as agents to run an organisation on behalf of its owners – often the shareholders.
- True
- False
- CORPORATE GOVERNANCE is ‘the system by which organisations are directed and controlled’
- True
- False
- Which of the following is correct?
- The main purpose of corporate governance is to monitor the parties within an organisation who control and use the organisation’s resources on behalf its owners.
- The main objective of corporate governance is to contribute to improved accountability and performance in creating long-term value for the owners (long-term shareholder value).
- Both A&B
- None
- The key elements in corporate governance include:
- The management and reduction of risk is a fundamental issue in all definitions of good governance; whether explicitly stated or merely implied.
- Good governance is not just about externally established codes, it also requires a willingness to apply the spirit as well as the letter of the law.
- Accountability is generally a major theme in all governance frameworks.
- All of the above
- Role of the board of directors are:
- To define the purpose of the company and the values by which the company will perform its daily existence.
- To identify the stakeholders relevant to the business of the company.
- Monitoring the human capital aspects of the company in regard to succession, morale, training, remuneration
- All of the above
- Directors increase shareholder value by challenging the CEO to grow revenues, by asking questions about the current position, and by challenging the strategic plan. However, directors often have experience and capabilities which could be useful in formulating business strategy.
- The above statement is correct
- The above statement is incorrect
- Where directors have experience of strategic implementation, they can also use this to assist the management team.
- True
- False
- Which of the following is correct?
- In order to carry out effective scrutiny, directors need to have relevant expertise in industry, company, functional area and governance.
- The board as whole needs to contain a mix of expertise and a balance between executive management and independent non-executive directors.
- Both A&B
- None
- The Board of Directors should be responsible for taking the policy and strategic decisions in an organisation, and they should ensure that good corporate governance is maintained within the organisation.
- The above statement is correct
- The above statement is incorrect
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