E3- Strategic Management Practice Test Answers The Practice Test can be viewed at http://www.pearsonvue.com/cima/practiceexams/ These answers have been provided by CIMA for information purposes only. In the case of questions where a numerical input is required, the stated answer is given in the format in which it should be input, and also to the appropriate degree of accuracy. Note that a small range of values may be acceptable, for example, to take account of rounding differences, where appropriate. For all other question types, the correct answer(s) are shown. CIMA will not accept challenges to these answers on the basis of academic judgement. These answers do not provide explanation as to why a particular answer is or is not correct students are encouraged to revisit their learning materials to determine the source of any incorrect attempts at answers 1. The Board of P encourages collaboration and partnerships with other organisations. P s management has always been highly innovative in the services it provides. 2. A Foreign Direct Investment strategy. 3. Customers have shifted from minimal effort to keep satisfied. 4. Falling profits are the effect of increased power of substitutes. 5. BBA will gain barriers to entry in its niche segment. BBA will need to reduce its product range. BBA will be more exposed to risk from a decline in this segment. 6. Increased competitive rivalry Market entry by new competitors Increased threat from substitutes 7. Explicit and implicit coercion: policies of forced economies, redundancies and closures to reduce costs, and the introduction of changes to working practices. Negotiation and agreement: urgent meetings with trade union representatives to develop a plan to make SMO profitable and to incentivize employees by offering them a share in the profits of SMO when it is sold. Facilitation and support: announcement of generous financial packages and help with finding new jobs for staff who are willing to volunteer for redundancy from SMO, and of training for those willing to change job roles. 8. Setting a direction for the organization Aligning people by communicating the direction of the strategy Motivating and inspiring staff to pursue the organisation s vision 9. Competitor analysis, Porter s 5 forces analysis, industry life cycle analysis, PEST analysis. 10. Mash-up 11. Human resource management Service Marketing and sales The Chartered Institute of Management Accountants 2014 no reproduction without prior consent
12. 13. A strategy that maintains relationships with governments, media, regulators and society at large to achieve sustainable advantage. 14. It improves management s communication and awareness of complex issues affecting AGG. It provides some consensus amongst management on what AGG should research in future. It helps AGG s management to concentrate on the longer term despite the high uncertainty. 15. Commanding style: focus on results and directs people in non-authoritarian way towards mutually defined goals. 16. Viral advertising 17. Integrity 18. Participation and involvement: the need for change has not come from R, therefore such a change will require the active participation and involvement of R and the IT staff. 19. Sustainability can help EKD reduce costs and improve efficiency. Sustainability can help EKD to comply with laws and regulations and to avoid fines. Sustainability can help protect the reputation of EKD with key stakeholders. 20. The team needs to buy into, or have ownership of, a decision, plan or strategic change. 21. A virtual organisation 22. Porter s Value chain Analysis 23. Downstream supply chain management 24. Communicate a vision Energise teams Support the change process 25. Big data allows an increasing understanding and segmentation of customers Big data can be used to improve the development of the next generation of products and services for organisations. 26. Brand performance Quality of manufacturing 27. Stress to the government of ABC s home country the jobs that winning the contract could create and lobby them to ask the government of X Land to include ABC in the tender. 28. Strategy and Oversight Execution and Alignment Strategy and Oversight Performance and Reporting 29. Mature products may not repay the opportunity cost of additional investment in them due to low margins and the danger of decline. 30. POOR: they did not understand the ethical principles involved correctly and the action they took was not strong enough in the circumstances. 31. Reduction in the transactions costs of dealing with suppliers. Higher production and sales due to suppliers responding quickly to demand and leading to fewer stock outs of components. High reliance on technology reduces operating risks. 32. Buying a rival to Division Y, to acquire its market share of 6%. E3 Strategic Management 2 2014
33. Where management has a high degree of comfort with techniques of the rational approach. Where the future can be forecast with reasonable certainty. In an organisation where departmental loyalties take priority over attaining corporate goals. 34. The role of a Company Director combines some of the role of Film Producers with some of the role of Film Directors. 35. Working capital to sales ratio Fixed assets to sales ratio Operating profits to sales ratio 36. The use of its equipment by hospitals to enhance appearance as well as to assist in curing illness and injury. 37. Strong Weak Weak 38. POOR: Evaluation is based on a flawed assessment of core competences and incorrect applications of Ansoff s Matrix and SAF analysis. 39. Webcasts Social media 40. Long term forecasts of market trends Competitor prices and profit margins Assessments of potential acquisition targets 41. 42. 43. Computer-aided design 44. Systems Skills Shared values 45. The removal of positional authority in the group to enable free discussion to take place. The independence of members enables unpopular or novel ideas to be discussed. Its group nature facilitates the sharing of knowledge and encourages a shared view. 46. Appoint a Change Agent to develop CFH. 47. Innovation Flexibility Competitive performance 2014 3 E3 Strategic Management
48. 49. Revolutionary 50. The manager of Division B has an incentive to invest in the new machine which would be against the interest of shareholders. The managerial bonus system is rewarding poor performance by the manager of Division B. ROI is an unsuitable measure for evaluating new investments. 51. 52. One takes future earnings into account the other does not. 53. An effective team has a unity of purpose and all team members understand this purpose. An effective team involves its stakeholders in assessing progress towards goals. E3 Strategic Management 4 2014
54. 55. The economic recession, leading to reduced funding Rising demand resulting in H losing staff 56. Awareness amongst luxury car buyers of the superior comfort of WNR s vehicles Annual reductions in the production costs of WNR s vehicles Superior comfort of WNR s vehicles compared to domestic and foreign rivals 57. Evaluation of the competitors actions Evaluation of forecast passenger volumes Evaluation of public concern for environmental damage 58. 59. Learning and growth 60 It is a potential source of competitive advantage for LSN that should be managed strategically as well as operationally. Changes in information strategy can have significant impacts on internal and external stakeholders that need to be handled strategically. Information systems expenditure is significant and often requires evaluation against both strategic initiatives and business operations. 2014 5 E3 Strategic Management