Strategic Business Leader (SBL) Flashcards

A CEO proposes acquiring a company in an unrelated industry to diversify the group's revenue streams. The board should be MOST concerned about which strategic issue?

Answer: The company lacks the management expertise and synergies to add value in an unrelated industry

Unrelated (conglomerate) diversification is the highest-risk growth strategy because the acquiring company has no existing knowledge, capabilities, or synergies in the target industry. Without the ability to add value through management expertise or resource sharing, the acquisition is unlikely to create shareholder value — this is the 'parenting advantage' concept.

In the context of integrated reporting (), which of the six capitals refers to the relationships and trust an organisation builds with external stakeholders and communities?

Answer: Social and relationship capital

The framework identifies six capitals: financial, manufactured, intellectual, human, social and relationship, and natural. Social and relationship capital encompasses the relationships within and between communities, stakeholder groups, and networks, including shared norms, values, and trust. It captures the organisation's social licence to operate.

A company operates in a highly regulated industry and is considering lobbying government to change regulations in its favour. According to ethical frameworks, this action is BEST evaluated using which approach?

Answer: All three frameworks should be applied as they may yield different conclusions

In SBL, candidates are expected to apply multiple ethical frameworks rather than relying on a single perspective. Deontological ethics might question the duty to be transparent; consequentialism would weigh benefits and harms to all stakeholders; virtue ethics would ask what character traits the action reflects. Applying all three provides a comprehensive ethical evaluation.

Which of the following BEST describes the concept of 'strategic drift' as identified by Johnson?

Answer: The gradual movement of an organisation's strategy away from the forces at work in its environment

Strategic drift occurs when an organisation's strategy gradually moves out of alignment with its environment. This typically happens because management makes only incremental adjustments while the environment changes more fundamentally. The organisation may not recognise the drift until a crisis point is reached, at which point transformational change becomes necessary.

A company's risk register shows a risk with a probability rating of 4/5 and an impact rating of 2/5. The risk committee should classify this as:

Answer: Cannot be determined without knowing the risk appetite of the organisation

While the expected value (probability × impact = 8/25) suggests a medium-level risk, the classification cannot be determined without reference to the organisation's risk appetite. Risk appetite defines how much risk the organisation is willing to accept. A risk-averse organisation might treat this as high priority, while a risk-seeking one might accept it. The risk appetite framework is essential context.

In project management, which approach is MOST appropriate when the project requirements are uncertain and likely to evolve during development?

Answer: Agile methodology with iterative sprints and continuous feedback

Agile methodology is specifically designed for environments where requirements are uncertain and evolving. It uses iterative sprints (short development cycles) with continuous stakeholder feedback, allowing the project to adapt as requirements become clearer. Waterfall and PRINCE2 (in its traditional form) assume requirements can be defined upfront, making them less suitable for uncertain environments.