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ACCA APM practice questions

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Question 1Strategic planning and control

Which statement best describes the purpose of a mission statement within the strategic planning process?

  1. It communicates the organisation's fundamental purpose and reason for existing. Correct answer.
  2. It sets the detailed annual budget for each operating division.
  3. It quantifies the expected financial return to shareholders over the planning horizon.
  4. It specifies the technical standards that products must meet.

Explanation

A mission statement articulates why the organisation exists and whom it serves, providing the overarching direction from which objectives and strategies are derived. It is deliberately broad and qualitative rather than a quantified target or operational control.

Question 2Strategic planning and control

An organisation states that it aims to 'achieve a 15% return on capital employed within three years'. In the hierarchy of strategic planning, this statement is best described as:

  1. a key performance indicator
  2. a corporate objective Correct answer.
  3. a critical success factor
  4. a mission

Explanation

A corporate objective is a quantified, time-bound statement of what the organisation intends to achieve, derived from the mission. CSFs are the areas in which success is essential, and KPIs are the measures used to track performance against them.

Question 3Strategic planning and control

In the Johnson, Scholes and Whittington model of the strategic position, which three factors are examined?

  1. Planning, implementation and control
  2. Strengths, weaknesses and opportunities
  3. Purpose, culture and leadership style
  4. Environment, strategic capability and expectations of stakeholders Correct answer.

Explanation

Strategic position is analysed through the external environment, the organisation's strategic capability (resources and competences), and the expectations and purposes of stakeholders including culture. These three elements together determine the context in which strategy is formulated.

Question 4Strategic planning and control

A company uses PESTEL analysis as part of its strategic planning. Which of the following items would be classified under the 'legal' element?

  1. A decline in consumer confidence
  2. A rise in the national minimum wage
  3. The introduction of a rival's new product
  4. New data protection legislation affecting customer records Correct answer.

Explanation

The legal element of PESTEL covers legislation, regulation and case law that constrain or enable organisational activity, such as data protection rules. Changes in wage rates are economic, confidence is social, and competitor products are competitive rather than macro-environmental factors.

Question 5Strategic planning and control

Porter's five forces framework is used primarily to assess which of the following?

  1. The attractiveness of an industry and the intensity of competition within it Correct answer.
  2. The internal resource base of a single firm
  3. The cultural fit between strategy and organisation
  4. The stages of growth of a product market

Explanation

Porter's five forces examines the competitive structure of an industry through rivalry, buyer and supplier power, threat of entry and threat of substitutes, indicating how attractive profits are likely to be. It is an external industry-level analysis, not an internal or lifecycle tool.

Question 6Strategic planning and control

A firm's value chain analysis distinguishes between primary and support activities. Which of the following is a support activity?

  1. Human resource management Correct answer.
  2. Outbound logistics
  3. Operations
  4. Marketing and sales

Explanation

In Porter's value chain, support activities are firm infrastructure, human resource management, technology development and procurement, which underpin the whole chain. Outbound logistics, marketing and sales, and operations are primary activities directly involved in creating and delivering value.

Question 7Strategic planning and control

An organisation sets a target of reducing customer complaints by 30% over the next year and monitors it monthly. This target is best described as:

  1. a strategy
  2. a mission
  3. a key performance indicator Correct answer.
  4. a critical success factor

Explanation

A KPI is a quantifiable measure used to track progress towards an objective, and a complaints reduction target monitored over time fits this definition. CSFs are the areas where success is essential, while strategies are the means chosen to achieve objectives.

Question 8Strategic planning and control

Which of the following best describes the purpose of a SWOT analysis in strategic planning?

  1. To calculate the payback period of proposed investments
  2. To summarise internal strengths and weaknesses alongside external opportunities and threats Correct answer.
  3. To forecast future exchange rates with precision
  4. To allocate overhead costs between production departments

Explanation

SWOT brings together internal factors (strengths and weaknesses) and external factors (opportunities and threats) to inform the choice of strategy. It is a summary framework rather than a forecasting, costing or investment appraisal technique.

Question 9Strategic planning and control

Ansoff's product/market matrix identifies four strategic options. Which option describes selling existing products to existing customers?

  1. Product development
  2. Market penetration Correct answer.
  3. Diversification
  4. Market development

Explanation

Market penetration involves increasing sales of current products in current markets, typically through greater marketing effort or capturing competitor share. The other options involve new products, new markets, or both.

Question 10Strategic planning and control

A retailer decides to launch its existing clothing range into two overseas countries where it has never traded. Under Ansoff's matrix, this decision represents:

  1. market development Correct answer.
  2. product development
  3. conglomerate diversification
  4. market penetration

Explanation

Selling an existing product to a new market is market development, since the product offering is unchanged but the customer base is new. Product development would require a new product, and diversification would require both new products and new markets.

Question 11Strategic planning and control

The BCG growth-share matrix classifies business units by market growth and relative market share. A business unit with high market share in a low-growth market is classified as:

  1. a question mark
  2. a star
  3. a cash cow Correct answer.
  4. a dog

Explanation

High share combined with low market growth produces a cash cow, which generates surplus cash that can fund other units. Stars combine high share with high growth, question marks have low share in high-growth markets, and dogs have low share in low-growth markets.

Question 12Strategic planning and control

Porter's generic strategies identify cost leadership, differentiation and focus. Which statement best explains why a firm 'stuck in the middle' may underperform?

  1. It pursues both low cost and differentiation without achieving either convincingly. Correct answer.
  2. It operates only in narrow market niches with specialised products.
  3. It has deliberately chosen a cost leadership strategy across all segments.
  4. It has outsourced all non-core activities to third parties.

Explanation

Porter argued that a firm failing to achieve either a clear cost advantage or a genuine differentiation advantage loses its competitive position, because it can be beaten on price and on perceived value. Being 'stuck in the middle' is therefore about failing to commit to a coherent generic strategy.

Question 13Strategic planning and control

The product life cycle model suggests different strategies at each stage. Which strategy is most appropriate during the decline stage for a product the firm wishes to retain?

  1. Heavy investment to build brand awareness
  2. Rapid market expansion into new segments
  3. Harvesting or rationalising the product range to maximise remaining cash Correct answer.
  4. Price skimming to recover development costs

Explanation

In decline, demand is falling, so the focus shifts to cost control, harvesting cash and rationalising the range rather than investing for growth. Building awareness and market expansion belong to growth, and skimming typically applies at introduction.

Question 14Strategic planning and control

Which of the following is the best example of a 'critical success factor' for an airline competing on punctuality and service?

  1. The average age of the board of directors
  2. Operational reliability and on-time performance Correct answer.
  3. The number of aircraft in the fleet
  4. The market capitalisation of the airline

Explanation

A critical success factor is the area in which the organisation must perform well to succeed, and for an airline competing on punctuality, operational reliability is such an area. Fleet size, market capitalisation and board age are descriptive facts rather than factors essential to competitive success.

Question 15Strategic planning and control

A company's balanced scorecard includes a measure of employee training hours completed per year. Under the four perspectives of the balanced scorecard, this measure falls within the:

  1. learning and growth perspective Correct answer.
  2. customer perspective
  3. financial perspective
  4. internal business process perspective

Explanation

The learning and growth perspective covers the people, skills, information systems and culture needed to support strategic objectives, so training measures sit here. Financial, customer and internal process perspectives measure outcomes and process performance rather than capability building.

Question 16Strategic planning and control

Which statement best describes the relationship between a mission statement and a vision statement?

  1. Both are required by law for listed companies.
  2. The mission describes current purpose, while the vision describes an aspirational future state. Correct answer.
  3. The mission describes the desired future state, while the vision describes current purpose.
  4. Both are primarily concerned with short-term operational targets.

Explanation

A mission explains the organisation's present purpose and reason for existing, whereas a vision sets out an aspirational picture of what the organisation wants to become. They are complementary but distinct, and neither is a legal requirement nor a short-term target.

Question 17Strategic planning and control

A firm uses benchmarking against best-in-class competitors. Which of the following best describes a limitation of benchmarking as a strategic planning tool?

  1. It always requires the disclosure of confidential competitor information.
  2. It removes the need to set internal performance targets.
  3. It cannot be applied to processes, only to financial results.
  4. It can encourage copying rather than innovation and may ignore contextual differences. Correct answer.

Explanation

Benchmarking identifies gaps against best practice, but imitating competitors may lead to a lack of differentiation and may overlook differences in strategy, scale and context. It can be applied to processes and does not require confidential disclosures or replace internal target setting.

Question 18Strategic planning and control

An organisation's planning process begins with a detailed five-year budget prepared by the finance department and then imposes it on operating units. Which weakness is most likely to result?

  1. The plan may lack ownership and fail to reflect operational realities. Correct answer.
  2. The plan will be unable to include any financial figures.
  3. The plan will be too flexible and will change too frequently.
  4. The plan will automatically breach statutory reporting requirements.

Explanation

A top-down plan prepared in isolation by finance risks lacking buy-in from those who must deliver it and may be based on assumptions divorced from operational reality. Flexibility is not the issue here, and financial content and statutory compliance are unaffected by the planning style.

Question 19Strategic planning and control

A company uses scenario planning as part of its strategic process. What is the primary benefit of this technique?

  1. It guarantees that the most likely scenario will occur.
  2. It replaces the need for budgetary control systems.
  3. It produces a single accurate forecast of the future.
  4. It prepares managers to respond to a range of plausible future conditions. Correct answer.

Explanation

Scenario planning develops several plausible futures so that managers can stress-test strategy and build flexibility to respond to uncertainty. It does not aim to predict a single outcome or guarantee which future will materialise, and it complements rather than replaces budgetary control.

Question 20Strategic planning and control

A manufacturer's strategic capability depends on a patented production process that competitors cannot easily replicate. In resource-based terms, this process is best described as:

  1. a threshold resource
  2. a distinctive capability that is difficult to imitate Correct answer.
  3. a hygiene factor
  4. an operational constraint

Explanation

A resource or capability that is valuable, rare and hard to imitate can underpin sustainable competitive advantage, making it a distinctive capability. Threshold resources are merely the minimum needed to compete, and hygiene factors are unrelated to competitive advantage.

Question 21Strategic planning and control

Porter's five forces includes the 'threat of substitutes'. Which situation best illustrates a high threat of substitutes for a rail commuter operator?

  1. The government raises the regulated rail fare cap.
  2. A supplier of rolling stock increases its prices.
  3. A rival rail company introduces a faster service on the same route.
  4. A new motorway makes car commuting faster and cheaper. Correct answer.

Explanation

A substitute is a different product or service that meets the same customer need, so improved car travel is a substitute for rail commuting. A rival rail service is direct rivalry, fare regulation is a political/economic factor, and supplier pricing relates to supplier power.

Question 22Strategic planning and control

A business unit has low relative market share in a high-growth market. According to the BCG matrix, which strategic option is most consistent with its classification?

  1. Maintain the unit with minimal investment as a cash cow.
  2. Milk the unit for cash to fund other units.
  3. Invest selectively to build share, or consider withdrawal if share cannot be grown. Correct answer.
  4. Divest immediately because the unit is a dog.

Explanation

A low-share unit in a high-growth market is a question mark, where the strategic choice is to invest to build share or to withdraw if that is not achievable. Immediate divestment and milking cash are appropriate to dogs and cash cows respectively.

Question 23Strategic planning and control

An organisation's stated strategy emphasises innovation, but its control systems reward cost minimisation and punish experimentation. Using the cultural web, which element is most directly inconsistent with the stated strategy?

  1. The physical layout of the head office
  2. The formal organisation chart
  3. The stories told about the organisation's history
  4. The routines and reward systems in daily use Correct answer.

Explanation

The cultural web's routines and rituals, together with reward systems, shape day-to-day behaviour and can directly contradict an espoused innovation strategy. Stories, layout and structure may support or reflect culture but the reward system most directly drives behaviour.

Question 24Strategic planning and control

A diversified group uses the Ashridge portfolio matrix to manage its business units. A unit with high benefit from parent influence but low 'fit' with the parent's skills is classified as:

  1. an alien business
  2. a ballast business
  3. a heartland business
  4. a value trap Correct answer.

Explanation

In the Ashridge matrix, a value trap is a unit that would benefit greatly from parent involvement but where the parent lacks the appropriate skills, so intervention risks destroying value. Heartland units combine high fit and high benefit, ballast units fit but gain little, and alien units offer neither.

Question 25Strategic planning and control

A company is choosing between a cost leadership strategy and a differentiation strategy. Which condition would most strongly favour a differentiation strategy?

  1. The firm has no capacity to invest in research and development.
  2. Customers are highly price-sensitive and buy on the basis of lowest cost.
  3. There is a large market segment willing to pay a premium for unique features. Correct answer.
  4. The industry has very low barriers to entry for low-cost producers.

Explanation

Differentiation relies on customers valuing distinctive features enough to pay a premium, so a segment prepared to do so strongly supports this strategy. Price-sensitive customers and easy entry for low-cost producers favour cost leadership, and a lack of R&D capacity undermines differentiation.

Question 26Strategic planning and control

Which of the following best defines a critical success factor (CSF) in the context of strategic planning?

  1. A key activity or attribute required for an organisation to achieve its mission Correct answer.
  2. A tool for analysing the external environment
  3. A financial ratio that measures profitability
  4. A short-term operational target set for a department

Explanation

A critical success factor is a limited number of areas in which results, if satisfactory, will ensure successful competitive performance for the organisation. CSFs are derived from the mission and are essential to achieving strategic goals.

Question 27Strategic planning and control

In the context of strategic planning, what is the primary purpose of a mission statement?

  1. To communicate the organisation's fundamental purpose and values to stakeholders Correct answer.
  2. To outline the operational procedures for daily activities
  3. To provide a detailed analysis of competitors' strengths and weaknesses
  4. To set specific, measurable financial targets for the coming year

Explanation

A mission statement defines the organisation's core purpose, identity, and values, and communicates these to stakeholders. It is not about specific targets or operational details.

Question 28Strategic planning and control

Which of the following is an example of a strategic objective?

  1. Reduce energy consumption by 5% in the next quarter
  2. Increase market share in Europe to 15% within three years Correct answer.
  3. Process customer orders within 24 hours
  4. Hire two new sales assistants for the London store

Explanation

Strategic objectives are long-term, organisation-wide goals that relate to the overall direction and competitiveness of the business. Increasing market share in Europe to 15% within three years is a strategic objective.

Question 29Strategic planning and control

Which of the following best describes the purpose of a vision statement?

  1. To outline the organisation's desired future state or aspirations Correct answer.
  2. To list the key products and services offered
  3. To describe the organisation's current financial position
  4. To provide a detailed plan for achieving strategic goals

Explanation

A vision statement articulates the organisation's aspirations and the future state it aims to achieve. It is forward-looking and inspirational, unlike a mission statement which focuses on present purpose.

Question 30Strategic planning and control

In the context of strategic planning, what does the acronym SMART stand for when setting objectives?

  1. Specific, Measurable, Achievable, Relevant, Time-bound Correct answer.
  2. Simple, Measurable, Agreed, Resourced, Trackable
  3. Strategic, Manageable, Actionable, Realistic, Timely
  4. Specific, Meaningful, Achievable, Relevant, Testable

Explanation

SMART is a widely used framework for setting objectives: Specific, Measurable, Achievable, Relevant, and Time-bound. This ensures objectives are clear and can be monitored.

Question 31Strategic planning and control

Which of the following is a characteristic of a well-designed management information system for strategic control?

  1. It focuses exclusively on financial performance metrics
  2. It delivers relevant and timely information to support decision-making Correct answer.
  3. It is designed to minimise the cost of data collection
  4. It provides real-time data on all operational activities

Explanation

A management information system should provide relevant, timely, and accurate information to managers for decision-making and control. It should balance cost and benefit, but relevance and timeliness are key.

Question 32Strategic planning and control

What is the main purpose of a strategic plan?

  1. To outline the daily operational procedures for staff
  2. To document the organisation's long-term direction and the actions needed to achieve it Correct answer.
  3. To summarise past financial performance for shareholders
  4. To provide a detailed budget for the next financial year

Explanation

A strategic plan sets out the organisation's long-term goals, the strategies to achieve them, and the resources required. It provides a roadmap for the future.

Question 33Strategic planning and control

Which of the following is a key benefit of using a balanced scorecard for strategic control?

  1. It provides a comprehensive view of performance across multiple perspectives Correct answer.
  2. It guarantees achievement of strategic objectives
  3. It focuses solely on financial measures to ensure shareholder value
  4. It eliminates the need for budgeting

Explanation

The balanced scorecard combines financial and non-financial measures across four perspectives (financial, customer, internal processes, learning and growth), giving a balanced view of performance.

Question 34Strategic planning and control

A company is using Porter's value chain to analyse its activities. Which of the following is a primary activity?

  1. Procurement
  2. Human resource management
  3. Inbound logistics Correct answer.
  4. Technology development

Explanation

In Porter's value chain, primary activities are directly involved in creating and delivering the product: inbound logistics, operations, outbound logistics, marketing and sales, and service. Support activities include procurement, technology development, and HR management.

Question 35Strategic planning and control

An organisation sets a target of reducing customer complaints by 30% over the next year and monitors it monthly. This is an example of:

  1. A mission statement
  2. A strategic objective
  3. A key performance indicator Correct answer.
  4. A critical success factor

Explanation

A key performance indicator (KPI) is a quantifiable measure used to evaluate the success of an organisation in meeting performance objectives. The target of reducing complaints by 30% is a specific, measurable KPI.

Question 36Strategic planning and control

Ansoff's product/market matrix identifies four strategic options. Which option describes selling existing products to existing markets?

  1. Market penetration Correct answer.
  2. Product development
  3. Market development
  4. Diversification

Explanation

Market penetration involves increasing sales of existing products in existing markets, often through increased marketing or promotional efforts. It is the least risky of Ansoff's strategies.

Question 37Strategic planning and control

A retailer decides to launch its existing clothing range into two overseas countries where it has never traded. Under Ansoff's matrix, this is an example of:

  1. Market penetration
  2. Product development
  3. Market development Correct answer.
  4. Diversification

Explanation

Market development involves taking existing products into new markets, such as new geographic regions. The retailer is using its existing clothing range in new countries.

Question 38Strategic planning and control

The BCG growth-share matrix classifies business units by market growth and relative market share. A business unit with high market growth and high relative market share is classified as a:

  1. Dog
  2. Question mark
  3. Star Correct answer.
  4. Cash cow

Explanation

A star has high market growth and high relative market share. It typically requires investment to maintain its position but has strong potential.

Question 39Strategic planning and control

Porter's generic strategies identify cost leadership, differentiation and focus. Which statement best explains why a firm might fail if it does not adopt one of these strategies?

  1. It will be forced to exit the market
  2. It will automatically become a cost leader
  3. It may become 'stuck in the middle' with no clear competitive advantage Correct answer.
  4. It will achieve higher profitability

Explanation

Porter argued that a firm must choose a clear generic strategy to achieve competitive advantage. Without one, it risks being 'stuck in the middle', lacking the cost advantage or differentiation needed to compete effectively.

Question 40Strategic planning and control

The product life cycle model suggests different strategies at each stage. Which strategy is most appropriate during the maturity stage?

  1. Reduce marketing expenditure to zero
  2. Focus on differentiating the product and managing costs to maintain market share Correct answer.
  3. Divest the product immediately
  4. Invest heavily to build market share

Explanation

In the maturity stage, sales growth slows, and competition intensifies. Strategies often focus on differentiation, cost control, and maintaining market share, possibly through product enhancements or marketing efficiency.

Question 41Strategic planning and control

A company's balanced scorecard includes a measure of employee training hours completed per year. Under the four perspectives of the balanced scorecard, this measure falls under which perspective?

  1. Learning and growth Correct answer.
  2. Financial
  3. Internal business process
  4. Customer

Explanation

The learning and growth perspective focuses on the organisation's ability to develop and improve, including employee training, skills, and knowledge. Training hours are a typical measure in this perspective.

Question 42Strategic planning and control

A firm uses benchmarking against best-in-class competitors. Which of the following best describes a limitation of benchmarking?

  1. It focuses only on financial metrics
  2. It is only applicable to manufacturing firms
  3. It can be time-consuming and costly to gather comparative data Correct answer.
  4. It guarantees improved performance

Explanation

Benchmarking requires identifying best practices, collecting data, and analysing gaps, which can be resource-intensive. It does not guarantee improvement and can be applied to various metrics and industries.

Question 43Strategic planning and control

An organisation's planning process begins with a detailed five-year budget prepared by the finance department and then imposed on operating units. Which of the following is a likely consequence of this approach?

  1. The budget may lack operational realism and fail to secure commitment Correct answer.
  2. It will reduce the need for strategic control
  3. It will encourage innovation and flexibility
  4. Operating units will be highly motivated to achieve the budget

Explanation

A top-down budget imposed without input from operating units may lack realism and fail to gain commitment from those responsible for achieving it. This can lead to demotivation and poor performance.

Question 44Strategic planning and control

A manufacturer's strategic capability depends on a patented production process that competitors cannot easily replicate. This is an example of:

  1. A key performance indicator
  2. A core competence Correct answer.
  3. A strategic objective
  4. A critical success factor

Explanation

A core competence is a unique capability that provides competitive advantage and is difficult for competitors to imitate. The patented process is a core competence.

Question 45Strategic planning and control

Porter's five forces includes the 'threat of substitutes'. Which situation best illustrates a high threat of substitutes?

  1. A rail operator faces competition from low-cost airlines for short-haul travel Correct answer.
  2. A soft drink producer faces many similar-priced competitors
  3. A supplier of raw materials has few customers
  4. A pharmaceutical company has patent protection for its drugs

Explanation

The threat of substitutes is high when alternative products or services can satisfy the same need. Low-cost airlines are a substitute for short-haul rail travel, increasing the threat.

Question 46Strategic planning and control

A business unit has low relative market share in a high-growth market. According to the BCG matrix, which strategic option is most appropriate?

  1. Divest the unit
  2. Harvest for cash
  3. Invest to build market share Correct answer.
  4. Maintain the current position

Explanation

A question mark (low share, high growth) has potential but requires investment to build market share. The appropriate strategy is often to invest to turn it into a star, or divest if investment cannot be justified.

Question 47Strategic planning and control

A firm's board wants a single framework that links strategy formulation to performance measurement across financial and non-financial dimensions, and that shows cause-and-effect between measures. Which approach best meets this requirement?

  1. Setting a single profit target for each division
  2. Preparing a zero-based budget for every cost centre
  3. Adopting the balanced scorecard with strategy maps Correct answer.
  4. Producing monthly variance reports against last year

Explanation

The balanced scorecard translates strategy into objectives and measures across four perspectives, and strategy maps make the cause-and-effect links between them explicit. Budgeting and variance reporting are control tools that do not by themselves connect strategy to multi-dimensional measurement.

Question 48Strategic planning and control

In the rational model of strategic planning, which element comes immediately after the analysis of the external environment and internal position?

  1. Implementation of the chosen strategy
  2. Definition of the organisational culture
  3. Monitoring of actual performance against budget
  4. Generation and evaluation of strategic options Correct answer.

Explanation

The rational planning sequence moves from analysis (internal and external appraisal) to the generation and evaluation of options, then to selection, implementation and control. Implementation and monitoring follow the choice of strategy, not the appraisal stage.

Question 49Strategic planning and control

A conglomerate's corporate parent adds little value to its business units, imposes a rigid planning calendar on them, and centrally approves decisions the units' managers understand far better. Which concept best describes the risk this parent creates?

  1. Value destruction by the parenting role Correct answer.
  2. Portfolio diversification benefit
  3. Economies of scope in shared services
  4. Parenting advantage through synergy

Explanation

The parenting framework distinguishes value-adding parenting from parenting that destroys value by adding cost, bureaucracy or constraints without commensurate benefit. Here the centre's controls and centralised approvals erode rather than enhance unit performance.

Question 50Strategic planning and control

A company defines a strategic objective as 'to increase the proportion of revenue from services to 40% within three years'. Which characteristic of a well-formulated objective does this statement best demonstrate?

  1. It is delegated to operational staff
  2. It is measurable and time-bound Correct answer.
  3. It is expressed as a broad mission
  4. It is inspirational and open-ended

Explanation

The statement specifies a quantified target (40%) and a deadline (three years), which are the measurable and time-bound attributes of a well-formed objective. Mission statements are broad and directional rather than quantified.