Practice test 6 for Section B: Strategic Management covering Introduction to Strategic Management, Strategic Choices.
8 questions across 2 chapters, 15 marks and 30 minutes in the timed paper. Every answer below is shown with the working behind it and the authority it rests on.
Law and standards used: ICAI Study Material for CA Intermediate Paper 6: Financial Management and Strategic Management (relevant for January 2027 attempt).
Questions
8
Marks
15
Time limit
30 minutes
Attempt
January 2027
Group
Group 2
Law basis
ICAI Study Material for CA Intermediate Paper 6: Financial Management and Strategic Management (relevant for January 2027 attempt)
Content as of
2026-11-04
Chapters covered
Introduction to Strategic Management (3 Q)
Strategic Choices (5 Q)
Questions, answers and explanations
Question 1 · 2 marks · Introduction to Strategic Management · medium
Scenario. Indus Conglomerate operates cement, renewables and retail businesses. Its board approves exit from retail and fresh capital allocation to renewables. The cement strategic business unit launches green premium cement for institutional builders. Procurement and logistics teams consolidate vendors and shift to rail dispatch to reduce delivered cost.
Which decision of Indus Conglomerate is a corporate-level strategy?
Cement SBU launching green premium cement for institutional builders
Board approving exit from retail and fresh capital allocation to renewables (correct answer)
Procurement team consolidating vendors
Logistics team shifting to rail dispatch to reduce delivered cost
Answer: B — Board approving exit from retail and fresh capital allocation to renewables
Working. Corporate level: portfolio choice, divestment and capital allocation. Business level: how the cement SBU competes. Functional level: procurement and logistics execution.
Explanation. Corporate-level strategy covers portfolio scope, entry and exit from businesses and allocation of resources across businesses. The board decision on retail exit and renewables capital allocation is therefore corporate-level. Option a is business-level because it concerns competitive positioning of the cement SBU. Options c and d are functional-level operating actions.
Where it goes wrong. Students may classify any important decision as corporate-level, but SBU product positioning and functional efficiency are lower-level strategies.
Authority. Chapter 1: Introduction to Strategic Management, Section 1.6 Strategic Levels in Organisations
Question 2 · 2 marks · Introduction to Strategic Management · medium
Which action of Indus Conglomerate is a business-level competitive strategy?
Board approving exit from retail
Procurement team consolidating vendors
Cement SBU launching green premium cement for institutional builders (correct answer)
Logistics team shifting to rail dispatch
Answer: C — Cement SBU launching green premium cement for institutional builders
Working. Cement SBU strategy: target institutional builders with green premium cement. This is a how-to-compete choice at business level.
Explanation. Business-level strategy translates corporate direction into concrete competitive positioning for a particular business or SBU. The cement SBU green premium launch is a competitive move in its product market. Option a is corporate-level. Options b and d are functional-level operating decisions.
Where it goes wrong. Students may treat a product launch as corporate strategy, but here it is specific to the cement SBU market position.
Authority. Chapter 1: Introduction to Strategic Management, Section 1.6 Strategic Levels in Organisations
Question 3 · 2 marks · Introduction to Strategic Management · medium
Which action of Indus Conglomerate is a functional-level strategy?
Procurement and logistics teams consolidating vendors and shifting to rail dispatch (correct answer)
Board approving exit from retail
Cement SBU launching green premium cement
Corporate office allocating fresh capital to renewables
Answer: A — Procurement and logistics teams consolidating vendors and shifting to rail dispatch
Working. Procurement and logistics are functions. Their actions support cost reduction and execution of the cement SBU plan.
Explanation. Functional-level strategy develops within specific functions such as procurement and logistics to support business and corporate plans. Vendor consolidation and rail dispatch are operational efficiency actions. Option b and d are corporate-level. Option c is business-level.
Where it goes wrong. Students may overlook that functional strategies can be strategic even though they are confined to one function.
Authority. Chapter 1: Introduction to Strategic Management, Section 1.6 Strategic Levels in Organisations
Question 4 · 2 marks · Strategic Choices · medium
Scenario. EcoClean Solutions serves pharmaceutical cleanroom cleaning chemicals. Its standard cleanroom line is redesigned for a narrow set of small pharma cleanrooms and priced below specialized rivals through process savings. Its customized line supplies validation documentation and technical support for biologics clients. The firm considers expanding into general industrial cleaning with both low price and premium customized features.
EcoClean standard cleanroom line targets a narrow small pharma cleanroom segment and is priced below specialized rivals through process savings. Which Porter strategy is most appropriate?
Cost leadership across the broad cleaning chemicals market
Differentiation across the broad cleaning chemicals market
Focused differentiation
Focused cost leadership (correct answer)
Answer: D — Focused cost leadership
Working. Narrow target segment plus low-cost process advantage equals focused cost leadership.
Explanation. The line serves a narrow segment and competes through lower cost and price, so it is focused cost leadership. Option a is broad cost leadership because it lacks a narrow segment. Option b is broad differentiation. Option c is focused differentiation because the basis is not low cost.
Where it goes wrong. Students may see low price and choose broad cost leadership, ignoring the narrow small pharma cleanroom segment.
EcoClean customized line supplies validation documentation and technical support for biologics clients. Which strategy is it pursuing and what is its main risk?
Broad cost leadership with risk of mass-market price war
Focused differentiation with risk that narrow segment demand contracts or specialized features are imitated (correct answer)
Stuck in the middle with risk of low cost
Conglomerate diversification with risk of unrelated business
Answer: B — Focused differentiation with risk that narrow segment demand contracts or specialized features are imitated
Working. Narrow biologics segment plus unique validation support equals focused differentiation. Risk follows from narrow segment dependence and imitation.
Explanation. Validation documentation and technical support create perceived uniqueness for a narrow biologics client group, so this is focused differentiation. Its main risks are dependence on a narrow segment and imitation of specialized features. Option a is broad cost leadership. Option c is a failed generic strategy. Option d is unrelated diversification.
Where it goes wrong. Students may label any customized service as broad differentiation, but the client segment is narrow.
If EcoClean enters general industrial cleaning with both low price and premium customized features without a clear segment, what outcome is most likely under Porter competitive strategy analysis?
Focused cost leadership becomes stronger
Focused differentiation becomes stronger
The firm risks being stuck in the middle due to conflicting cost and differentiation signals (correct answer)
Market penetration automatically improves margins
Answer: C — The firm risks being stuck in the middle due to conflicting cost and differentiation signals
Working. Low price signals cost leadership, premium features signal differentiation, and broad general market removes focus. The combined position lacks a clear advantage.
Explanation. Porter warns that trying to be all things to all buyers without a clear cost or differentiation advantage can create conflicting signals and a stuck-in-the-middle position. Option a and b assume focus remains clear, but the expansion is general and mixed. Option d is unrelated because market penetration is an Ansoff growth option, not a remedy for strategy conflict.
Where it goes wrong. Students may assume adding features and lowering price is always beneficial, but it can blur competitive position.
Scenario. Delta Electronics has three strategic business units. Its smart sensors unit is in a growth industry with a favourable competitive position. Its power tools unit is in a mature industry with a strong position. Its legacy calculator unit is in an ageing industry with a weak position. The planners apply the Arthur D. Little matrix.
For Delta Electronics legacy calculator unit in an ageing industry with a weak competitive position, which ADL matrix prescription is most appropriate?
Withdraw or divest (correct answer)
Invest for fast growth
Defend and renew the position
Hold a niche and harvest
Answer: A — Withdraw or divest
Working. ADL cell: ageing industry plus weak position. Appropriate action: withdraw or divest.
Explanation. In the ADL matrix, a weak competitive position in an ageing industry calls for withdrawal or divestment. Option b suits a dominant or strong position in an embryonic or growth industry. Option c suits a stronger position in a mature stage. Option d is not adequate for a weak position in an ageing industry.
Where it goes wrong. Students may recommend harvest for every ageing business, but ADL links the prescription to both maturity and competitive position.
Which ADL competitive position is comparatively rare and often attributable to a monopoly or strong protected technological leadership?
Strong
Favourable
Tenable
Dominant (correct answer)
Answer: D — Dominant
Working. ADL competitive positions: dominant, strong, favourable, tenable and weak. Dominant is the rarest and strongest.
Explanation. The dominant position is described as comparatively rare and often linked to monopoly or protected technological leadership. Strong, favourable and tenable are lower competitive positions with less freedom and more vulnerability.
Where it goes wrong. Students may confuse strong with dominant, but dominant is the exceptional position with the greatest strategic freedom.
