CA Inter P6 · Chapter 10
Introduction to Strategic Management MCQs with Answers
10 multiple-choice questions on Introduction to Strategic Management for CA Inter P6 Financial Management and Strategic Management. Try each one before revealing the answer and explanation.
Practise this chapter interactivelyQuestion 1
A company's realised strategy usually differs from what it planned because:
- A) Strategy is always entirely planned in advance and never changes
- B) Only reactive strategies are ever implemented in practice
- C) Realised strategy is decided only by functional managers
- D) The actual strategy is a blend of proactive (planned) strategy elements and reactive (adaptive) responses to unanticipated developments
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Answer: D) The actual strategy is a blend of proactive (planned) strategy elements and reactive (adaptive) responses to unanticipated developments
Strategy is partly proactive and partly reactive. Proactive strategy is the planned, deliberate part based on management's analysis, while reactive strategy is the adaptive reaction to unforeseen changes in the environment. Some planned elements are abandoned and new ones are added, so the company's actual strategy combines both.
Question 2
Which level of strategy deals with the question 'What businesses should we be in, and how should resources be allocated among them?'
- A) Corporate-level strategy
- B) Business-level strategy
- C) Functional-level strategy
- D) Operational-level strategy
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Answer: A) Corporate-level strategy
Corporate-level strategy is set by top management for the organisation as a whole. It decides the portfolio of businesses, diversification and allocation of resources across them. Business-level strategy is about how to compete within a particular business. Functional strategy supports these through areas such as marketing, finance and HR.
Question 3
Arogya Foods, one of five divisions of a diversified group, decides to compete in the packaged millet snacks market by offering clearly healthier products at a premium price. This decision is a:
- A) Functional-level strategy
- B) Corporate-level strategy
- C) Business-level strategy
- D) Mission statement
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Answer: C) Business-level strategy
Deciding how a particular business unit will compete in its market, here through differentiation on health benefits, is a business-level strategy. Which divisions the group should own would be corporate-level. Pricing tactics or the advertising plan of the marketing department would be functional-level.
Question 4
Which of the following best describes the difference between a vision and a mission?
- A) A vision is a short-term target, while a mission is a long-term dream
- B) A vision is set by functional managers, while a mission is set by front-line staff
- C) A vision states quantified annual targets, while a mission states the budget
- D) A vision describes what the organisation wants to become in future, while a mission describes its present purpose and the business it is in
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Answer: D) A vision describes what the organisation wants to become in future, while a mission describes its present purpose and the business it is in
A vision is an inspiring picture of the organisation's desired future. A mission explains why the organisation exists: who its customers are, what needs it meets and how. Quantified targets belong to goals and objectives, which turn the mission into measurable results.
Question 5
Which of the following is NOT usually regarded as an element of strategic intent?
- A) Vision
- B) Annual budgets for individual cost centres
- C) Mission
- D) Goals and objectives
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Answer: B) Annual budgets for individual cost centres
Strategic intent expresses what the organisation strives for. In the ICAI study material it is set out through the vision, mission, goals and objectives, and values. Annual cost-centre budgets are operational control tools used during implementation, not elements of strategic intent.
Question 6
Which sequence correctly shows the stages of the strategic management process?
- A) Strategic intent → environmental and organisational analysis → strategy formulation → strategy implementation → strategy evaluation and control
- B) Strategy formulation → strategy evaluation → strategic intent → environmental analysis → implementation
- C) Strategy implementation → strategic intent → strategy formulation → environmental analysis → evaluation
- D) Environmental analysis → strategy implementation → strategic intent → strategy formulation → evaluation
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Answer: A) Strategic intent → environmental and organisational analysis → strategy formulation → strategy implementation → strategy evaluation and control
The process starts by setting strategic intent (vision, mission, objectives). The organisation then analyses its external and internal environment, formulates strategy by choosing among alternatives, and implements it. Finally it evaluates performance and takes corrective action, which feeds back into the earlier stages.
Question 7
Which of the following is a recognised limitation of strategic management?
- A) It is useful only for not-for-profit organisations
- B) The environment is complex and changes quickly, so it is hard to predict, and the process takes considerable time and cost
- C) It removes the need for top management to make decisions
- D) It prevents an organisation from anticipating any future changes
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Answer: B) The environment is complex and changes quickly, so it is hard to predict, and the process takes considerable time and cost
Strategic management helps an organisation be proactive and anticipate change, but it has limitations. The environment is highly complex and turbulent, which makes forecasting difficult. The process takes time and money, and fully reliable future planning is impossible. It applies to all types of organisations and depends on top management judgement.
Question 8
The objective 'increase the share of exports in revenue from 18% to 30% within three years' is a good example of an objective because it is:
- A) A functional policy for the export department
- B) A statement of the organisation's vision
- C) Vague, which allows flexibility
- D) Specific, measurable and time-bound
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Answer: D) Specific, measurable and time-bound
Good objectives turn the mission into concrete, measurable targets with a deadline, so that performance can be monitored. This objective states the measure (export share), the target (30%) and the time frame (three years). A vision is a broad, inspiring statement and is not normally quantified.
Question 9
Which of the following is a characteristic of strategic decisions, as distinct from routine operating decisions?
- A) They are repetitive and follow standard procedures
- B) They can be reversed at little or no cost
- C) They have long-term effects, commit significant resources and are mainly taken by top management
- D) They affect only a single department for a short period
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Answer: C) They have long-term effects, commit significant resources and are mainly taken by top management
Strategic decisions are non-routine, future-oriented and affect the whole organisation. They involve large commitments of resources that are hard to reverse, and they are usually taken or approved by top management. Repetitive, departmental and easily reversible decisions are operational.
Question 10
Prakash Engineering has made pumps for 40 years. The board now decides to use its free cash to acquire a chain of diagnostic laboratories. At which level of strategy is this decision taken, and what type of strategy is it?
- A) Corporate level: unrelated (conglomerate) diversification
- B) Business level: cost leadership
- C) Functional level: marketing strategy
- D) Business level: related diversification into pumps
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Answer: A) Corporate level: unrelated (conglomerate) diversification
Choosing to enter a new industry that has no link with existing products, markets or technology is a corporate-level decision about the firm's business portfolio. Since diagnostic laboratories have no relation to pump manufacturing, this is unrelated or conglomerate diversification.