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ICMAP Strategic Level study materials
ICMAP Strategic Level study resources

ICMAP Strategic Level practice questions

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Question 1Strategic Management

In strategic management, a strategy is best described as:

  1. a detailed schedule that assigns daily operating tasks to individual employees
  2. integrated choices about how to compete and reach long-term goals Correct answer.
  3. a list that records the names and current roles of all the firm's employees
  4. a forecast that estimates next month's cash receipts and payments by department

Explanation

Strategy concerns the long-term direction and scope of an organization and the choices that align resources with a competitive position. It is broader than operating schedules, short-term forecasts, or factual records.

Question 2Strategic Management

The primary purpose of a vision statement is to:

  1. describe the future state that the organization seeks to create Correct answer.
  2. specify the exact selling price for each product line in the current year
  3. list the academic qualifications of senior managers
  4. record the attendance and minutes of board committee meetings

Explanation

A vision statement paints a picture of the desired future state and provides long-term direction. It is aspirational and should inspire stakeholders rather than record current details.

Question 3Strategic Management

A mission statement primarily communicates:

  1. the projected quarterly sales figures for each geographical region
  2. the personal career goals of the chief executive officer
  3. the organization's present purpose, scope, and principal stakeholders Correct answer.
  4. the detailed capital budgeting procedure used by the finance department

Explanation

A mission statement defines what the organization is, what it does, whom it serves, and how it differs from competitors. It addresses present purpose and scope rather than detailed plans or personal goals.

Question 4Strategic Management

In SWOT analysis, which pair represents internal factors?

  1. opportunities and threats
  2. strengths and weaknesses Correct answer.
  3. weaknesses and threats
  4. strengths and opportunities

Explanation

SWOT separates internal capabilities from external conditions. Strengths and weaknesses are internal, while opportunities and threats arise from the external environment.

Question 5Strategic Management

Which PESTLE factor is most directly concerned with interest rates and inflation?

  1. Economic Correct answer.
  2. Legal
  3. Environmental
  4. Technological

Explanation

The economic dimension of PESTLE covers macroeconomic conditions such as interest rates, inflation, exchange rates, and economic growth. Legal, technological, and environmental factors address different external influences.

Question 6Strategic Management

Which of the following is one of Porter's five competitive forces?

  1. bargaining power of auditors
  2. threat of new entrants Correct answer.
  3. rate of employee turnover
  4. risk of currency devaluation

Explanation

Porter's five forces are the threat of new entrants, bargaining power of buyers, bargaining power of suppliers, threat of substitutes, and rivalry among existing competitors. Currency risk and employee turnover are not part of the model.

Question 7Strategic Management

A core competence is best described as:

  1. a formal written rule that governs the attendance and punctuality of employees
  2. a bundle of skills and technologies that yields distinctive value and is hard to imitate Correct answer.
  3. a temporary price discount that a firm offers to selected customers during a promotion
  4. a physical asset, such as land or machinery, that appears on the statement of financial position

Explanation

A core competence is a collective capability that creates distinctive customer value, is difficult for rivals to imitate, and can be leveraged into new markets. It is not simply an asset, a promotion, or an administrative rule.

Question 8Strategic Management

The balanced scorecard typically includes which four perspectives?

  1. financial, supplier, legal, and environmental performance measures
  2. financial, customer, internal process, and learning and growth Correct answer.
  3. financial, operational, marketing, and human resource performance measures
  4. customer, competitor, product, and pricing performance measures

Explanation

The balanced scorecard combines financial measures with customer, internal business process, and learning and growth perspectives. This balanced set links performance measurement to strategy rather than relying only on financial results.

Question 9Strategic Management

A hotel chain serves only wealthy business travelers and offers highly personalized luxury services at premium prices. Which generic strategy does this illustrate?

  1. focus differentiation Correct answer.
  2. cost leadership
  3. broad differentiation
  4. stuck in the middle

Explanation

The firm targets a narrow customer segment and competes through superior, personalized service rather than low cost. This combines a focus strategy with differentiation, making focus differentiation the appropriate label.

Question 10Strategic Management

In Porter's value chain, which activity is classified as a primary activity?

  1. human resource management
  2. technological development
  3. outbound logistics Correct answer.
  4. procurement

Explanation

Primary activities are directly involved in creating, selling, delivering, and supporting the product, and they include inbound logistics, operations, outbound logistics, marketing and sales, and service. Procurement, human resource management, and technological development are support activities.

Question 11Strategic Management

A business unit with high market growth and high relative market share is classified in the BCG matrix as a:

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

Explanation

The BCG matrix classifies business units by market growth and relative market share. High growth combined with high share defines a star, which typically requires investment to sustain its position.

Question 12Strategic Management

A soft-drink company introduces its existing beverages into a new overseas country. Under Ansoff's matrix this is:

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

Explanation

Ansoff's matrix combines existing or new products with existing or new markets. Selling existing products in a new market is market development, while product development and diversification involve new products.

Question 13Strategic Management

According to the resource-based view, a resource must be valuable, rare, imperfectly imitable, and:

  1. widely available in the market
  2. non-substitutable Correct answer.
  3. short-lived in its benefits
  4. inexpensive to purchase

Explanation

The VRIN framework states that a resource must be valuable, rare, imperfectly imitable, and non-substitutable to support sustained competitive advantage. If rivals can substitute it easily, the advantage is weakened.

Question 14Strategic Management

In Mendelow's stakeholder power-interest matrix, a stakeholder with high power and high interest should be:

  1. kept informed
  2. managed closely Correct answer.
  3. kept satisfied
  4. monitored minimally

Explanation

Stakeholders with high power and high interest can significantly affect strategy and care about the outcome, so they require close management and engagement. The other quadrants call for different levels of communication and effort.

Question 15Strategic Management

Conglomerate diversification is characterized by:

  1. moving into businesses that share the firm's core technology and production processes
  2. selling existing products to existing customers more intensively through promotion
  3. entering businesses with little operational relatedness to current operations Correct answer.
  4. expanding within the firm's existing product markets and customer segments

Explanation

Conglomerate diversification involves entering businesses that have little operational or market relatedness to the firm's existing activities. It contrasts with related diversification, where synergies and shared capabilities are expected.

Question 16Strategic Management

A key advantage of acquisition over organic growth is:

  1. speed of entry into a new market or capability Correct answer.
  2. lower integration risk after the deal is completed
  3. a guaranteed fit between the two corporate cultures
  4. no need for detailed due diligence before completion

Explanation

Acquisitions can provide rapid access to markets, capabilities, and resources that would take years to build organically. However, they often carry integration and cultural risks rather than eliminating them.

Question 17Strategic Management

A strategy that emerges from a pattern of decisions rather than from a formal plan is called:

  1. deliberate strategy
  2. emergent strategy Correct answer.
  3. prescriptive strategy
  4. intended strategy

Explanation

Mintzberg distinguishes intended and deliberate strategies from emergent strategy, which takes shape through a consistent pattern of decisions and actions. Emergent strategy reflects adaptation and learning rather than strict adherence to a formal plan.

Question 18Strategic Management

Scenario planning is most useful for:

  1. eliminating all uncertainty from long-term financial forecasts and budgets
  2. calculating the payback period of a single proposed investment project
  3. exploring plausible futures and testing strategy under uncertainty Correct answer.
  4. setting daily production targets for factory workers on each shift

Explanation

Scenario planning develops several plausible future environments so that managers can test strategic options and build resilience under uncertainty. It does not eliminate uncertainty or replace routine operational planning.

Question 19Strategic Management

Benchmarking involves:

  1. comparing processes and performance with best practice to find improvements Correct answer.
  2. setting selling prices by adding a standard markup to the total unit cost of a product
  3. centralizing all operating and investment decisions at the corporate head office
  4. forecasting future demand by surveying a representative sample of current customers

Explanation

Benchmarking compares an organization's processes, practices, and performance against recognized best practice to identify gaps and improvement opportunities. It is a learning and improvement tool rather than a pricing or centralization method.

Question 20Strategic Management

Strategic control differs from operational control because strategic control focuses on:

  1. correcting minor deviations in daily production schedules and output levels
  2. monitoring the efficiency of individual machine operators on each shift
  3. checking whether employee expense claims follow detailed company policy
  4. whether the overall direction and assumptions of strategy remain valid Correct answer.

Explanation

Strategic control questions the continuing validity of the strategy, its assumptions, and its overall direction in a changing environment. Operational control focuses on efficiency and conformity in day-to-day activities.

Question 21Strategic Management

Blue ocean strategy seeks to create uncontested market space by:

  1. increasing advertising expenditure to capture market share from established rivals
  2. imitating the cost structure of the industry's lowest-cost competitor in every activity
  3. simultaneously pursuing differentiation and low cost through value innovation Correct answer.
  4. focusing only on premium customers within an existing market segment and product category

Explanation

Blue ocean strategy pursues value innovation, which breaks the trade-off between differentiation and low cost by creating new demand in uncontested market space. It is not merely imitation, premium segmentation, or heavier promotion.

Question 22Strategic Management

A high threat of substitutes most directly affects industry profitability by:

  1. increasing the bargaining power of suppliers over input prices
  2. reducing the number of firms that can achieve economies of scale
  3. raising the fixed costs required to enter the industry
  4. placing a ceiling on prices that incumbent firms can charge Correct answer.

Explanation

When attractive substitutes are available, customers can switch away, which limits the prices incumbents can charge and pressures margins. This is why the threat of substitutes is a key determinant of industry profitability.

Question 23Strategic Management

Causal ambiguity protects a competitive advantage because:

  1. competitors cannot identify which resources or actions produce superior performance Correct answer.
  2. it legally prevents competitors from copying a patented production process or design
  3. it guarantees that customer demand for the firm's products will remain stable
  4. it makes a valuable resource cheaper for the owner to maintain over a long period

Explanation

Causal ambiguity exists when the link between a firm's resources and its superior performance is unclear, even to the firm itself. This uncertainty makes imitation difficult because rivals do not know what exactly to copy.

Question 24Strategic Management

A diversified company has parenting advantage when:

  1. its business units are all located in the same geographic region
  2. its corporate office charges the lowest possible management fee to business units
  3. it creates more value in its businesses than alternative owners would create Correct answer.
  4. it owns the largest market share in at least one of its industries

Explanation

Parenting advantage means that the corporate parent adds more value to its business units than other potential owners would, through better guidance, resources, or linkages. It is about superior value creation by the parent, not low fees or geographic concentration.

Question 25Strategic Management

The main purpose of a strategic risk register is to:

  1. document the minutes and action points of operational team meetings each week
  2. identify, assess, and assign owners to risks that could affect strategic objectives Correct answer.
  3. list the prices charged by competitors for similar products in each regional market
  4. record the daily attendance and leave entitlements of employees in each department

Explanation

A strategic risk register records risks that could threaten strategic objectives, assesses their likelihood and impact, and assigns responsibility for monitoring and mitigation. It supports board and executive oversight rather than routine administration.

Question 26Strategic Management

In a PESTEL analysis, a sustained rise in the national inflation rate is classified under which heading?

  1. Environmental
  2. Political
  3. Economic Correct answer.
  4. Social

Explanation

PESTEL's economic category covers macroeconomic variables such as inflation, interest rates, exchange rates and growth, because these shape costs, prices and demand. Political factors concern government policy and stability, while social and environmental factors concern demographics, culture and ecological conditions.

Question 27Strategic Management

What is the primary purpose of a mission statement?

  1. To state the organisation's basic purpose and scope of activity Correct answer.
  2. To quantify the short-term financial targets set for each department and unit
  3. To record market share achieved against each named competitor
  4. To list the operating procedures that staff must follow each day

Explanation

A mission statement communicates why the organisation exists and the boundaries of what it does, giving stakeholders a shared sense of purpose. Quantified targets belong in objectives, procedures belong in operational manuals, and performance records belong in control reports.

Question 28Strategic Management

Which of the following best describes a strategic business unit (SBU)?

  1. A temporary team formed to complete one specific project
  2. The corporate centre that allocates capital across the whole group
  3. A functional department, such as marketing, serving the whole organisation
  4. A unit with its own markets, competitors and strategy, run semi-autonomously Correct answer.

Explanation

An SBU is a distinguishable part of a firm that serves a defined market, faces identifiable competitors and is managed with its own strategy and profit responsibility. This allows the corporate centre to plan and control each area of activity separately.

Question 29Strategic Management

Which of the following describes a first-mover advantage?

  1. Gaining early brand loyalty and pre-empting key resources Correct answer.
  2. Copying a rival's proven product and selling it more cheaply
  3. Spreading fixed costs over a larger volume of output
  4. Securing legal protection for an invention through a patent

Explanation

First-mover advantage arises from being early into a market: customers form habits, distribution and supplier contracts are locked up, and scarce locations or licences are taken before rivals arrive. Imitation, scale economies and patents are separate sources of advantage.

Question 30Strategic Management

A company reports its performance against profit, people and planet. This reporting framework is known as:

  1. The value chain
  2. The product life cycle
  3. The experience curve
  4. The triple bottom line Correct answer.

Explanation

The triple bottom line extends performance measurement beyond financial profit to include social (people) and environmental (planet) outcomes. It is used to show how sustainability commitments are being met alongside economic results.

Question 31Strategic Management

Lewin's model of planned organisational change consists of which three stages?

  1. Plan, do, review
  2. Sense, seize, transform
  3. Diagnose, decide, deliver
  4. Unfreeze, move, refreeze Correct answer.

Explanation

Lewin argued that established behaviour must first be unfrozen, then shifted to a new pattern, and finally refrozen so the new way of working becomes the norm. The model highlights that change requires loosening existing routines before new ones can take hold.

Question 32Strategic Management

Which sequence best represents the strategic management process?

  1. Implementation, formulation, analysis, evaluation
  2. Formulation, evaluation, analysis, implementation
  3. Analysis, formulation, implementation, evaluation Correct answer.
  4. Evaluation, analysis, formulation, implementation

Explanation

Strategy work begins with analysis of the internal and external environment, then moves to formulating strategic options, putting the chosen strategy into action, and finally evaluating results against objectives. Evaluation closes the loop by feeding learning into the next round of analysis.

Question 33Strategic Management

The stakeholder view of strategy differs from the shareholder view mainly in that it:

  1. Considers the interests of all affected groups, not just owners Correct answer.
  2. Assumes advantage comes only from cost leadership
  3. Focuses only on maximising returns to owners
  4. Treats strategy as the exclusive responsibility of the board

Explanation

The stakeholder view holds that employees, customers, suppliers, communities and others affected by the organisation have legitimate claims that strategy must balance. The shareholder view instead prioritises maximising returns to owners.

Question 34Strategic Management

A strategic group map is used mainly to:

  1. Rank a firm's products by market growth and relative market share
  2. Group rivals that follow similar strategies to compare their positions Correct answer.
  3. Classify stakeholders by their power and level of interest
  4. Break down the value chain into primary and support activities

Explanation

A strategic group map plots competitors along two dimensions that reflect strategic choices, such as price and breadth of line, so that clusters of similar rivals and gaps in the market become visible. It reveals who the closest competitors are and where mobility barriers sit.

Question 35Strategic Management

The experience curve suggests that unit cost falls by a constant percentage each time:

  1. Annual sales revenue doubles
  2. The number of competitors halves
  3. Cumulative output doubles Correct answer.
  4. Fixed overhead is fully absorbed

Explanation

The experience curve links declining unit cost to accumulated production experience: each doubling of cumulative output reduces value-added cost per unit by a predictable percentage. It differs from scale economies, which depend on the current rate of output rather than on accumulated volume.

Question 36Strategic Management

A firm whose costs sit slightly above the cost leader's, yet whose differentiation is too weak to justify a price premium, is best described as:

  1. A focused differentiator
  2. A cost leader
  3. A first mover
  4. Stuck in the middle Correct answer.

Explanation

Porter argued that firms must achieve either a cost advantage or a meaningful differentiation to succeed, and that those caught between the two earn below-average returns. Being neither the cheapest nor clearly differentiated leaves no defensible basis for pricing.

Question 37Strategic Management

A brewer buys a barley malting plant that supplies its raw material. This move is best described as:

  1. Forward vertical integration
  2. Market penetration
  3. Backward vertical integration Correct answer.
  4. Conglomerate diversification

Explanation

Backward integration means moving towards the source of supply, so acquiring an input supplier reduces dependence on external suppliers and can secure quality or cost. Forward integration, by contrast, moves towards the customer and distribution end of the chain.

Question 38Strategic Management

Economies of scope exist when:

  1. A firm gains market power by acquiring a competitor
  2. Unit cost falls as the volume of a single product rises
  3. Two products cost less to produce together than separately Correct answer.
  4. A firm reduces its product range to cut complexity

Explanation

Scope economies come from sharing activities, resources or capabilities across different products or businesses, so joint production is cheaper than separate production. They are a central justification for related diversification.

Question 39Strategic Management

Which situation most strongly favours forming a joint venture over wholly owned entry into a foreign market?

  1. The target market is small and can be served adequately by exporting
  2. Local law requires local part-ownership and a partner holds key local knowledge Correct answer.
  3. The firm already holds every capability it needs and wants total control
  4. The firm wishes to withdraw from an unattractive industry

Explanation

A joint venture suits situations where each partner contributes something the other lacks, such as local knowledge, contacts or the legal right to operate, and where risk is better shared. Where full control is possible and desirable, a wholly owned route is usually preferred.

Question 40Strategic Management

Outsourcing a support activity is most justified when:

  1. The activity must be tightly coordinated with core processes
  2. The activity is central to the firm's differentiation
  3. Doing so increases the firm's fixed cost base
  4. A specialist can do it more cheaply without eroding advantage Correct answer.

Explanation

Outsourcing makes sense for activities that are not sources of competitive advantage, where an external specialist enjoys lower cost or superior capability and coordination risk is modest. Transferring the activity converts fixed costs into variable ones and frees resources for core work.

Question 41Strategic Management

In Kotter's eight-step model of leading change, the first step is to:

  1. Form a powerful guiding coalition
  2. Anchor new approaches in the culture
  3. Create a sense of urgency Correct answer.
  4. Communicate the vision widely

Explanation

Kotter's model begins by establishing a sense of urgency so that people accept that change cannot wait; only then can a guiding coalition be assembled and a vision communicated. Anchoring changes in the culture is the final step, reached only after wins have been consolidated.

Question 42Strategic Management

In the introduction stage of the product life cycle, the usual strategic priority is to:

  1. Defend market share through sharp price cuts against new entrants
  2. Extend the line into new segments to spread fixed costs
  3. Build awareness and trial, often accepting low or negative profit Correct answer.
  4. Harvest the product by minimising all marketing expenditure

Explanation

During introduction, sales are low and launch costs are high, so the priority is to create awareness and encourage trial rather than to maximise margin. Heavy promotion and distribution building generally mean profits are small or negative until volume grows.

Question 43Strategic Management

A firm closes two loss-making divisions so that it can concentrate resources on its strongest businesses. This is best described as:

  1. Market development
  2. Retrenchment Correct answer.
  3. Conglomerate diversification
  4. Horizontal integration

Explanation

Retrenchment is a contraction strategy in which activities or assets are reduced to stem losses and release resources for the areas where the firm can compete effectively. It is often a precursor to recovery rather than an admission of failure.

Question 44Strategic Management

Transformational leadership is best characterised by:

  1. Relying on formal rules and hierarchy to direct work
  2. Delegating all strategic decisions to external advisers
  3. Rewarding staff strictly according to measured outputs
  4. Inspiring commitment to a vision and stimulating change Correct answer.

Explanation

Transformational leaders raise followers' aspirations by articulating a compelling vision, acting as a role model and encouraging new ways of thinking, which is valuable when strategy demands major change. Transactional leadership, by contrast, relies on exchange, rewards and monitoring.

Question 45Strategic Management

Strategic intent, as described by Hamel and Prahalad, refers to:

  1. A modest target set to match the industry average
  2. A detailed five-year operating budget
  3. The short-term objectives of each business unit
  4. An ambitious stretch goal that focuses the whole organisation Correct answer.

Explanation

Strategic intent is an obsessively held, ambitious long-term goal that stretches a firm far beyond its current resources and concentrates effort across the organisation. The resulting resource gap is closed through innovation and learning rather than by trimming ambition to fit present means.

Question 46Strategic Management

Strategic drift occurs when:

  1. A firm deliberately changes its strategy before rivals respond
  2. A firm's strategy is copied exactly by its competitors
  3. Managers choose a strategy inconsistent with the mission statement
  4. Incremental change lags behind the environment, so performance declines Correct answer.

Explanation

Strategic drift describes a gradual failure of alignment: managers keep making small adjustments to a familiar strategy while the external environment moves faster, so the gap widens silently until a crisis forces transformation. Its danger is that the misalignment is hard to notice while performance still looks acceptable.

Question 47Strategic Management

Under Porter's tests for diversification, the 'better-off' test asks whether:

  1. The new unit gains advantage from its links with the parent Correct answer.
  2. Entry cost will be recovered within three years
  3. The parent has enough cash to fund the acquisition
  4. The target industry is structurally attractive

Explanation

The better-off test requires that the combined businesses create value that neither could achieve alone, typically through shared activities, skills or core competencies. Passing it distinguishes genuine synergy from diversification that merely transfers funds between businesses.

Question 48Strategic Management

In Porter's diamond, which element refers to the presence of skilled labour, natural resources and infrastructure within a nation?

  1. Demand conditions
  2. Factor conditions Correct answer.
  3. Related and supporting industries
  4. Firm strategy, structure and rivalry

Explanation

Factor conditions describe a country's endowment of inputs, including human capital, physical resources, knowledge and infrastructure, and explain why certain industries locate where they do. The other diamond corners cover sophisticated home demand, the presence of capable supplier clusters, and the intensity of domestic competition.

Question 49Strategic Management

In Greiner's model of organisational growth, each evolutionary phase ends with:

  1. A period of stable profits
  2. A merger with a larger competitor
  3. The appointment of an external auditor
  4. A crisis that must be resolved before growth continues Correct answer.

Explanation

Greiner argued that organisations move through evolutionary periods of steady growth, each terminated by a revolutionary crisis of management, such as a leadership or control crisis. Resolving the crisis through a new management style allows the next evolutionary phase to begin.

Question 50Strategic Management

Transaction cost economics suggests a firm should internalise an activity when:

  1. Asset specificity and uncertainty make market contracting expensive Correct answer.
  2. The firm lacks the capability to perform the activity
  3. Internal bureaucracy costs exceed the supplier's price
  4. The activity is widely available from many competing suppliers

Explanation

Transaction cost economics compares the cost of organising an activity internally with the cost of buying it in the market. Where specialised assets, uncertainty and opportunistic risk make contracts costly to write and enforce, hierarchy becomes the cheaper governance choice.