Chapter 3

Question 1

What is strategic planning?

Answer 1

Strategic planning is a process where a business develops a statement detailing long-term goals and the strategies and policies to achieve them, typically covering a period of 3 to 10 years.

Question 2

What is the role of operational plans in strategic planning?

Answer 2

Operational plans are created to implement the strategic plan by outlining short- and medium-term objectives, helping to achieve the long-term goals set by the strategic plan.

Question 3

What is a key factor in setting objectives within a strategic plan?

Answer 3

Key factors include setting clear and achievable goals, identifying the necessary actions to achieve those goals, and aligning the overall strategy with the company’s mission and vision.

Question 4

What should be included when creating an operational/business plan?

Answer 4

An operational plan should include setting objectives, allocating responsibilities, agreeing on management style, establishing budgets, setting sales targets, and identifying contingencies.

Question 5

Why is a contingency plan important in strategic planning?

Answer 5

A contingency plan helps to address unforeseen challenges or changes in the business environment, ensuring the strategy can adapt and continue toward its goals despite setbacks.

Question 6

You are tasked with creating a strategic plan for a company, and you need to outline its long-term objectives. Which of the following is a key aspect of strategic planning?

A) Creating an immediate sales plan
B) Defining long-term goals and methods for achieving them
C) Organizing daily staff schedules
D) Establishing short-term budget allocations

Answer 6

B - Defining long-term goals and methods for achieving them.

Question 7

Your company is reviewing its current strategy and needs to consider adjustments. Which of the following is essential in revising a strategic plan?

A) Setting short-term deadlines
B) Identifying and adjusting the contingency plans
C) Revising the immediate daily operational tasks
D) Allocating bonuses for staff performance

Answer 7

B - Identifying and adjusting the contingency plans.

Question 8

You’ve been assigned to allocate management responsibilities in a new strategic plan. Which of the following should you focus on in this step?

A) Ensuring consistent management style across all levels
B) Setting up quarterly operational reviews
C) Directing all attention toward achieving sales targets
D) Focusing solely on the budget and finances

Answer 8

A - Ensuring consistent management style across all levels.

Question 9

In a strategic planning session, you are asked to set a timeline for achieving long-term goals. What aspect is most critical in developing the timeline?

A) Deadlines must be set by the highest-ranking officers only
B) Timetables should consider realistic milestones and flexibility for adjustments
C) Focus entirely on short-term deadlines to keep the team focused
D) Timelines should only be set after sales targets are met

Answer 9

B - Timetables should consider realistic milestones and flexibility for adjustments.

Question 10

As a manager, you are reviewing an operational plan and need to ensure efficient resource use. What should be included in this plan?

A) Focusing only on human resource allocation
B) Identifying key areas for efficient material resource use
C) Ignoring the budget to allow for flexible spending
D) Allocating all resources toward sales growth

Answer 10

B - Identifying key areas for efficient material resource use.

Question 11

What does SMART stand for in the context of business plan objectives?

Answer 11

SMART stands for Specific, Measurable, Achievable, Relevant, and Time-defined.

Question 12

What should be included when outlining the strategy for achieving objectives in a business plan?

Answer 12

The strategy should detail the approach, steps, and methods that will be used to achieve the set objectives.

Question 13

Why is allocating specific responsibility important in implementing a business plan?

Answer 13

Allocating responsibility ensures accountability, clear ownership of tasks, and efficient execution of activities.

Question 14

What role do milestones play in a business plan?

Answer 14

Milestones represent the expected results or key points of progress upon completion of specific activities, helping to track and measure success.

Question 15

What should be considered when estimating the resource requirements for implementing a business plan?

Answer 15

Resource requirements should include the necessary materials, personnel, and time needed to successfully complete the activities outlined in the plan.

Question 16

You are tasked with developing a business plan for a new project. What is a key component you need to ensure the objectives are clear and actionable?

A) Setting general, broad objectives
B) Creating objectives that are SMART (Specific, Measurable, Achievable, Relevant, Time-defined)
C) Focusing only on the project’s final result
D) Avoiding timelines to keep flexibility

Answer 16

B - Creating objectives that are SMART (Specific, Measurable, Achievable, Relevant, Time-defined).

Question 17

You are reviewing a business plan for a specific division. What should be included to clearly define the scope of activities for that division?

A) A list of all the company’s goals
B) A detailed list of specific activities and their responsible personnel
C) Only high-level objectives with no details
D) A budget outline without any activity breakdown

Answer 17

B - A detailed list of specific activities and their responsible personnel.

Question 18

You are assigned to a business plan that requires specific resource allocation. Which of the following should be included in the plan?

A) Only human resources required
B) The estimated resource requirements for the entire period of implementation, including materials and personnel
C) General expectations for resources without specifics
D) Only financial resources with no detailed activity plans

Answer 18

B - The estimated resource requirements for the entire period of implementation, including materials and personnel.

Question 19

In the process of implementing a business plan, you need to set dates for each activity. Why is this step important?

A) To maintain a loose schedule that can adapt
B) To ensure each activity is time-defined, helping track progress and deadlines
C) To focus on the long-term outcome without worrying about specific dates
D) To create a general timeline without specifying start or finish dates

Answer 19

B - To ensure each activity is time-defined, helping track progress and deadlines.

Question 20

You are reviewing a business plan and notice there are no expected results outlined for activities. How should you proceed?

A) Skip defining the results, as they are unnecessary
B) Define expected results or milestones to track the completion and success of each activity
C) Focus only on the cost estimation
D) Remove milestones and focus on the timeline

Answer 20

B - Define expected results or milestones to track the completion and success of each activity.

Question 21

What is the primary goal of monitoring a business plan?

Answer 21

The primary goal is to track whether the original objectives and expected results have been achieved.

Question 22

What is a key feature of SMART objectives?

Answer 22

SMART objectives are Specific, Measurable, Achievable, Relevant, and Time-defined, providing clear targets for monitoring and evaluation.

Question 23

Why is it important to track factors such as sales revenue and customer satisfaction?

Answer 23

Tracking these factors helps measure performance against set objectives, providing insights into whether the business plan is on track.

Question 24

What role do control models play in monitoring business plans?

Answer 24

Control models help management monitor the achievement of business objectives by setting benchmarks and tracking performance, without creating excessive bureaucracy.

Question 25

What is the function of milestones in the control process?

Answer 25

Milestones serve as benchmarks for evaluating strategic and operational performance, offering early warning signals of deviations from expected outcomes.

Question 26

You are asked to implement a control system for tracking a business plan's performance. Which of the following would be the most useful? A) A general timeline without specific objectives B) SMART objectives and measurable factors such as sales revenue and customer satisfaction C) A focus on only tracking expenses D) A system that only looks at long-term goals

Answer 26

B - SMART objectives and measurable factors such as sales revenue and customer satisfaction.

Question 27

You are reviewing a business plan’s performance and need to assess market performance. Which of the following would be most appropriate to measure? A) Only internal factors like overheads B) Market performance against the competition C) The number of staff hired D) Sales revenue from previous periods only

Answer 27

B - Market performance against the competition.

Question 28

As part of the control process, you identify key performance indicators (KPIs) to track. What is their purpose? A) To measure progress towards achieving business objectives B) To create random benchmarks C) To focus on only internal performance metrics D) To reduce the number of objectives being tracked

Answer 28

A - To measure progress towards achieving business objectives.

Question 29

You are implementing a control model using management by objectives (MBO). What is the role of this model? A) To link corporate goals to management and staff targets B) To reduce the number of staff members involved C) To solely focus on financial performance D) To create a detailed step-by-step plan without flexibility

Answer 29

A - To link corporate goals to management and staff targets.

Question 30

You are tasked with using a balanced scorecard to monitor performance. What should you include in this model? A) A focus on sales revenue only B) A holistic view of business performance across financial, customer, internal process, and learning and growth perspectives C) A focus only on overheads and expenses D) A narrow focus on risk management only

Answer 30

B - A holistic view of business performance across financial, customer, internal process, and learning and growth perspectives.

Question 31

What is the main purpose of management accounting?

Answer 31

The main purpose is to provide managers with information to track the financial performance of the business, allowing for analysis of factors like sales levels, expenses, and operational costs.

Question 32

How does management accounting help predict income and costs?

Answer 32

By analyzing historical data, management accounting helps forecast future income and costs for the remainder of the financial year, aiding in planning and decision-making.

Question 33

What responsibility might the management accounting team have in an insurance operation?

Answer 33

The management accounting team may be responsible for regulatory reporting of financial transactions and the firm’s balance sheet.

Question 34

What are critical success factors (CSFs)?

Answer 34

CSFs are key factors that are crucial for an organization to achieve its mission, often derived from a SWOT analysis, and linked to strategic objectives aimed at overcoming competition or internal weaknesses.

Question 35

How should critical success factors (CSFs) be defined?

Answer 35

CSFs should be SMART (Specific, Measurable, Achievable, Relevant, Time-defined) to ensure clear and actionable goals for the organization.

Question 36

As a manager, you are analyzing financial performance for the year. Which of the following would be most useful in tracking this performance? A) Analyzing historical sales data alone B) Using management accounting to analyze sales levels, expenses, and operational costs C) Only focusing on external market conditions D) Ignoring expenses and focusing only on profits

Answer 36

B - Using management accounting to analyze sales levels, expenses, and operational costs.

Question 37

Your organization is identifying key areas to address for its survival in a competitive market. Which of the following could be considered a critical success factor (CSF)? A) Improving distribution systems to overcome weaknesses B) Lowering prices without considering operational costs C) Reducing staff without assessing impact on operations D) Ignoring competition and focusing only on internal operations

Answer 37

A - Improving distribution systems to overcome weaknesses.

Question 38

You are tasked with monitoring the performance of an insurance company. What type of information would be most beneficial for tracking financial performance? A) Only analyzing the company’s sales revenue B) Analyzing sales levels, staff costs, raw materials, and operational costs C) Ignoring operational costs and focusing solely on income D) Focusing on market trends without internal data

Answer 38

B - Analyzing sales levels, staff costs, raw materials, and operational costs.

Question 39

Your organization is facing competitive pressure, and you need to identify key areas for improvement. Which tool is best for identifying critical success factors (CSFs)? A) SWOT analysis B) Sales data analysis only C) Only focusing on market share D) Randomly setting objectives

Answer 39

A - SWOT analysis.

Question 40

Your company needs to ensure its critical success factors (CSFs) are measurable and achievable. How should these factors be defined? A) They should be vague to allow flexibility B) They should be SMART (Specific, Measurable, Achievable, Relevant, Time-defined) C) They should focus only on long-term objectives D) They should be set without any specific timeline

Answer 40

B - They should be SMART (Specific, Measurable, Achievable, Relevant, Time-defined).

Question 41

What are Key Performance Indicators (KPIs)?

Answer 41

KPIs are measurable objectives that help track the progress of an organization in achieving its strategic goals.

Question 42

What is the difference between results-oriented and effort-oriented KPIs?

Answer 42

Results-oriented KPIs represent the final outcomes (e.g., sales volumes, market share), while effort-oriented KPIs measure the actions taken to achieve those outcomes (e.g., number of potential customers contacted).

Question 43

How do KPIs link to an organization’s strategy?

Answer 43

KPIs are linked to the critical success factors of an organization’s strategy, ensuring that performance is tracked against targets and that corrective actions can be taken if necessary.

Question 44

What is an example of a results-oriented KPI?

Answer 44

Examples include sales volumes, rates of return on investment, market share, and asset growth.

Question 45

What is the key factor when working with KPIs?

Answer 45

The key factor is that KPIs are not just for information; they are actionable measures that require management intervention if an unfavourable position is indicated.

Question 46

Your company is tracking performance through KPIs. Which of the following would be an effort-oriented KPI? A) Sales revenue B) Number of potential customers contacted C) Market share D) Asset growth

Answer 46

B - Number of potential customers contacted.

Question 47

An insurance company identifies the need for an enhanced social media presence. What is a related action point for this KPI? A) Track sales revenue B) Create a job description for a social media manager C) Monitor employee productivity D) Focus only on customer complaints

Answer 47

B - Create a job description for a social media manager.

Question 48

During a monthly meeting, a firm notices an increase in technology risks. What should be done next according to the KRI process? A) Ignore the trend and continue as planned B) Investigate the circumstances and review the effectiveness of controls C) Track only the sales revenue D) Reduce efforts in marketing

Answer 48

B - Investigate the circumstances and review the effectiveness of controls.

Question 49

Your company is monitoring key risks. Which of the following is a potential Key Risk Indicator (KRI)? A) Sales revenue B) IT downtime and technology risks C) Number of new customers acquired D) Employee productivity rates

Answer 49

B - IT downtime and technology risks.

Question 50

You are reviewing your company's KPIs and notice a downward trend in market share. What action should be taken? A) Ignore the trend as it’s a temporary fluctuation B) Investigate the causes of the decline and take corrective action C) Focus solely on increasing marketing budget D) Wait until the trend becomes more significant before acting

Answer 50

B - Investigate the causes of the decline and take corrective action.

Question 51

What is the purpose of a balanced scorecard (BSC)?

Answer 51

The balanced scorecard is a strategic planning and management system that aligns business activities with the organization’s vision statement by measuring performance from four perspectives: financial, customer, internal processes, and learning and growth.

Question 52

What are the four perspectives measured by a balanced scorecard?

Answer 52

The four perspectives are: Financial perspective Customer perspective Internal perspective Learning and growth perspective

Question 53

What does a balanced scorecard aim to achieve for an organization?

Answer 53

A balanced scorecard helps align an organization’s resources to improve efficiencies, foster innovation, and deliver value to customers, ultimately leading to higher shareholder value.

Question 54

Your company wants to ensure its activities align with its mission and vision. Which tool would be most effective for measuring performance across different perspectives? A) SWOT analysis B) Balanced scorecard C) Benchmarking D) Market research

Answer 54

B - Balanced scorecard.

Question 55

A company is looking to improve its internal processes, customer satisfaction, employee learning, and financial performance in a holistic way. Which approach would help the company achieve this? A) Management by objectives B) Balanced scorecard C) Key performance indicators (KPIs) D) Risk management framework

Answer 55

B - Balanced scorecard.

Question 56

Your company is using the balanced scorecard to track performance. Which of the following would be part of the financial perspective? A) Employee training programs B) Sales revenue and profit margins C) Customer satisfaction surveys D) Number of new policies sold

Answer 56

B - Sales revenue and profit margins.

Question 57

What is benchmarking in business?

Answer 57

Benchmarking is the process of comparing a company's performance with a comprehensive standard, such as the growth of the UK economy, a competitor, or an industry leader, to assess its efficiency and effectiveness.

Question 58

What are the three types of benchmarking commonly used?

Answer 58

The three types of benchmarking are: Internal benchmarking: Comparing performance within divisions or departments of the same organization. External benchmarking: Comparing the company’s performance with competing firms. Functional benchmarking: Comparing the company's functions and processes with those of other organizations, regardless of whether they are competitors.

Question 59

What are the key elements for successful benchmarking?

Answer 59

Successful benchmarking requires: - Comprehensive and accurate information on competitors or comparable industries - Benchmarks based on industry best practices - Flexibility to adapt to external changes - Alignment with the company's corporate strategies - Sound internal audit processes

Question 60

Your company is assessing its performance against competitors to identify areas of improvement. Which type of benchmarking are you using? A) Internal benchmarking B) External benchmarking C) Functional benchmarking D) Employee benchmarking

Answer 60

B - External benchmarking.

Question 61

Your company compares the performance of its customer service department with similar departments in other organizations. Which type of benchmarking is being applied? A) Functional benchmarking B) Internal benchmarking C) External benchmarking D) Competitor benchmarking

Answer 61

A - Functional benchmarking.

Question 62

A company is comparing the performance of its various departments to identify best practices and improve efficiency. What type of benchmarking is this? A) Internal benchmarking B) External benchmarking C) Functional benchmarking D) Competitor benchmarking

Answer 62

A - Internal benchmarking.

Question 63

What is Management by Objectives (MBO)?

Answer 63

MBO is a process where both management and employees agree on objectives and understand what they need to do to achieve them. It aligns individual goals with the organization’s overall goals, promoting clarity and motivation.

Question 64

What are some advantages of Management by Objectives (MBO)?

Answer 64

Advantages of MBO include: Increased motivation and job satisfaction through employee involvement in goal setting Better communication and coordination within the organization Clear and measurable goals (SMART methodology) Higher commitment to self-set objectives Alignment of employee objectives with organizational goals

Question 65

What are some disadvantages of Management by Objectives (MBO)?

Answer 65

Disadvantages include: Potential for employees to see it as a management ploy Possible excessive paperwork and meetings Focus on short-term goals at the expense of long-term objectives Difficulty in evaluating subjective goals Managers may lack skills in interpersonal interaction Risk of employees distorting results to meet individual goals

Question 66

Your company has implemented MBO, and employees are setting their own objectives. What is the primary benefit of this approach? A) Employees are less likely to achieve their goals. B) Employees tend to be more committed to objectives they set for themselves. C) Employees have no involvement in goal setting. D) Managers set all goals for the employees.

Answer 66

B - Employees tend to be more committed to objectives they set for themselves.

Question 67

A manager is focusing only on short-term objectives, ignoring the long-term vision of the company. What is a potential disadvantage of this focus within the MBO framework? A) It enhances long-term organizational growth. B) It leads to an overemphasis on short-term goals. C) It improves employee morale. D) It reduces the need for goal setting.

Answer 67

B - It leads to an overemphasis on short-term goals.

Question 68

In an MBO system, what is essential for managers to effectively link employee objectives with organizational goals? A) Extensive training and strong interpersonal skills B) A rigid, mechanistic control system C) Complete focus on achieving personal goals D) Ignoring employee input during goal setting

Answer 68

A - Extensive training and strong interpersonal skills.

Question 71

What is the main goal of strategic planning in an insurance company? A) Approve claims decisions B) Design staff incentive schemes C) Set long-term direction and resource allocation D) Conduct market research

Answer 71

Answer: C) Set long-term direction and resource allocation Explanation: Strategic planning defines the business's long-term goals (3–10 years) and how to allocate resources to meet them.

Question 72

Which of the following is a characteristic of SMART objectives? A) Simple, Measurable, Abstract, Reasonable, Timeless B) Strategic, Measured, Accurate, Reasoned, Timely C) Specific, Measurable, Achievable, Relevant, Time-defined D) Short, Manageable, Aligned, Realistic, Tactical

Answer 72

Answer: C) Specific, Measurable, Achievable, Relevant, Time-defined Explanation: SMART objectives guide planning and monitoring by ensuring targets are clearly defined and measurable.

Question 73

What does a variance analysis help management understand? A) The best sales techniques B) The company’s future strategy C) Differences between actual and budgeted performance D) How to write operational reports

Answer 73

Answer: C) Differences between actual and budgeted performance Explanation: Variance analysis identifies deviations from the budget to support corrective action and future planning​ .

Question 74

Which budgeting approach requires justification for all expenditures, not just increases? A) Top-down budgeting B) Rolling budgeting C) Zero-based budgeting D) Incremental budgeting

Answer 74

Answer: C) Zero-based budgeting Explanation: Zero-based budgeting starts from zero and requires all spending to be justified each time

Question 75

What is the first step in the 'Five Cs' of decision-making? A) Crunch B) Consult C) Consider D) Communicate

Answer 75

Answer: C) Consider Explanation: The first step involves considering the problem, its scope, and implications before consulting others​

Question 76

A balanced scorecard evaluates an organisation from which perspective? A) Financial, Operational, Legal, Customer B) Tactical, Strategic, Operational, Functional C) Financial, Customer, Internal, Learning & Growth D) Strategic, Risk, Profit, Loss

Answer 76

Answer: C) Financial, Customer, Internal, Learning & Growth Explanation: The balanced scorecard measures performance across these four perspectives to provide a holistic view​ .

Question 77

What distinguishes a change management programme from a project? A) It is cheaper B) It has a specific deadline C) It is continuous and strategic D) It doesn’t require stakeholder involvement

Answer 77

Answer: C) It is continuous and strategic Explanation: Unlike finite projects, change programmes seek ongoing transformation and involve broad stakeholder engagement

Question 78

Which of the following is a key performance indicator (KPI)? A) Staff job titles B) Annual holiday allocation C) Customer satisfaction score D) Regulatory penalties

Answer 78

Answer: C) Customer satisfaction score Explanation: KPIs are measurable values (like customer satisfaction) that reflect progress toward business objectives​

Question 79

What is a key risk indicator (KRI) used for? A) Identifying competitors B) Measuring customer service C) Highlighting potential threats D) Tracking staff absences

Answer 79

C) Highlighting potential threats Explanation: KRIs flag emerging risks such as fraud, IT failures, or regulatory breaches to enable proactive management

Question 80

What is the main purpose of benchmarking? A) To calculate staff bonuses B) To set underwriting targets C) To compare performance against best practice D) To analyse solvency ratios

Answer 80

Answer: C) To compare performance against best practice Explanation: Benchmarking involves comparing internal metrics to industry or best-in-class standards.

Question 81

Which budgeting method starts from the strategic objectives and flows down? A) Rolling B) Bottom-up C) Zero-based D) Top-down

Answer 81

Answer: D) Top-down Explanation: Top-down budgeting begins with senior management setting high-level targets, which are then refined by departments​

Question 82

Which control model involves aligning staff and management goals with corporate goals? A) Benchmarking B) Balanced scorecard C) Management by objectives (MBO) D) Management accounting

Answer 82

Answer: C) Management by objectives (MBO) Explanation: MBO ensures goals at all levels are aligned, promoting coordinated achievement of business strategy​

Question 83

What is the main advantage of rolling budgets? A) They reduce management workload B) They automatically increase revenue C) They are updated continuously to reflect current conditions D) They don’t require approval

Answer 83

Answer: C) They are updated continuously to reflect current conditions Explanation: Rolling budgets allow flexibility and adjustment throughout the year as business conditions change

Question 84

What is forecasting primarily used for in the budgeting process? A) Recording past expenses B) Predicting future income and expenditure C) Reviewing last year’s audit D) Allocating staff holidays

Answer 84

Answer: B) Predicting future income and expenditure Explanation: Forecasting helps anticipate future revenues and costs to prepare more accurate budgets​

Question 85

Which type of management information would help with strategic decisions? A) Daily call logs B) Weekly expenses C) Annual competitor analysis D) Staff shift timetables

Answer 85

Answer: C) Annual competitor analysis Explanation: Strategic information supports long-term planning and decisions, such as assessing competitive threats