Strategic Management and Business Ethics
Domain 4 - Strategic Management and Business Ethics. This section tests strategy formulation tools and the IMA Statement of Ethical Professional Practice, including the prescribed escalation path when an ethical conflict arises. Ethics items reward knowing the sequence of steps, not moral outrage.
Core rules
- Porter's five forces: rivalry, new entrants, substitutes, supplier power, buyer power. Generic strategies: cost leadership, differentiation, focus; being stuck in the middle erodes returns.
- SWOT pairs internal strengths and weaknesses with external opportunities and threats. The Ansoff matrix classifies growth by product and market newness into penetration, market development, product development and diversification.
- IMA standards: competence, confidentiality, integrity, credibility. Confidentiality covers proprietary information but never protects illegal or unethical activity.
- Resolution sequence: follow the organisation's policy; discuss with the immediate supervisor unless that person is involved; escalate to the next level; use a confidential ethics hotline or audit committee; consult legal counsel; resign only after all internal avenues fail.
Worked example
A controller is asked to hold the books open and ship product in the final week of the quarter under a side agreement allowing returns. This is channel stuffing: with a right of return and no genuine transfer of control, revenue must not be recognised. The controller should document the instruction in writing, refuse to record the revenue, escalate to the CFO and then the audit committee, and if unresolved use the ethics hotline. Resigning immediately is not the prescribed first step, and confidentiality does not justify silence about a misstatement.
Traps
- Choosing public disclosure or resignation before exhausting internal channels.
- Treating a superior's approval as a defence for a misstatement.
- Confusing credibility (fair, objective disclosure of unfavourable information) with confidentiality.
- Recommending a generic strategy that contradicts the firm's value chain.