CA Business Strategy & Advisory 3 — Questions and Answers
Question 1: A business advisor recommending a 'turnaround strategy' would most likely suggest:
- Aggressive market expansion and new product launches
- Cost cutting, asset disposal, and refocusing on core operations (Correct answer)
- Increasing leverage to fund acquisitions
- Entering new geographic markets immediately
Correct answer: Cost cutting, asset disposal, and refocusing on core operations
Turnaround strategies address declining performance through cost reduction, divestiture of non-core assets, and refocusing on profitable core activities.
Question 2: In scenario planning, the primary purpose is to:
- Predict the single most likely future state
- Develop one optimistic and one pessimistic forecast
- Explore multiple plausible future environments to test strategy robustness (Correct answer)
- Calculate expected values using probability weightings
Correct answer: Explore multiple plausible future environments to test strategy robustness
Scenario planning creates several distinct, internally consistent future environments to stress-test strategic options rather than predict one outcome.
Question 3: Which of the following best describes 'blue ocean strategy'?
- Competing aggressively to take market share from rivals
- Creating uncontested market space by making competition irrelevant (Correct answer)
- Focusing on cost leadership in existing markets
- Entering developing markets before competitors
Correct answer: Creating uncontested market space by making competition irrelevant
Blue ocean strategy focuses on value innovation to create new demand in uncontested market space rather than fighting over existing customers.
Question 4: A CA advising on a business combination notes the acquirer is paying significantly above book value. The excess of purchase price over fair value of net assets is recorded as:
- Deferred tax asset
- Goodwill (Correct answer)
- Bargain purchase gain
- Capital surplus
Correct answer: Goodwill
Goodwill represents the premium paid above the fair value of identifiable net assets and reflects intangible factors like brand and customer relationships.
Question 5: The balanced scorecard's 'learning and growth' perspective primarily measures:
- Customer satisfaction scores
- Financial return on investment
- Employee capabilities, information systems, and organizational culture (Correct answer)
- Internal process cycle times
Correct answer: Employee capabilities, information systems, and organizational culture
The learning and growth perspective focuses on the human capital, technology, and culture that enable the organization to execute its strategy long-term.
Question 6: In a stakeholder analysis matrix, a stakeholder with HIGH power and LOW interest should be:
- Managed closely with frequent detailed communication
- Kept satisfied with minimal unnecessary engagement (Correct answer)
- Monitored with occasional updates
- Actively engaged as a key partner
Correct answer: Kept satisfied with minimal unnecessary engagement
High power/low interest stakeholders must be kept satisfied to prevent them from using their influence negatively, without overwhelming them with detail.
Question 7: Which pricing strategy involves setting an initially high price and gradually reducing it as competitors enter the market?
- Penetration pricing
- Price skimming (Correct answer)
- Value-based pricing
- Predatory pricing
Correct answer: Price skimming
Price skimming extracts maximum willingness-to-pay from early adopters before lowering prices to attract more price-sensitive segments.
CA Business Strategy & Advisory 3
A business advisor recommending a 'turnaround strategy' would most likely suggest: