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Points To Remember, Addressing Questions On Strategic Choice

3 points to remember while addressing a question on Strategic Choices, have a balanced approach, don’t think in 2D but in 3D!

Playing a game of chess

After clearing my CIMA strategic level in 2019, I have been writing and correcting CIMA SCS and ACCA SBL mocks for the last two years. This advice may apply to other papers as well. You may be given a question on one or more strategic options and asked to comment on the opportunities and risks on the same. To have a balanced approach, remember these 3 points, and you can’t go wrong:

1. Think Of All The Options Possible

  • I recently corrected a mock, where the question was to advise on the adverse outcomes of a company press release. The immediate reaction of every student would be only to write all the possible negative points that come to mind. But do remember to mention in your conclusion to this sub-task that there could be minimal to no negative impact also. That is very much a plausible outcome, yet preparing for the worst is the prudent thing to do.
  • When offering suggestions on what to do in a particular situation, many students forget the option of ‘doing nothing’ and letting the case sort itself out. There may be instances where this approach may be recommended.
  • On specific projects, apart from choosing to go ahead with the project or not, sometimes, delaying the project, looking at the cash flows and dynamic environment could seem a good option. Some, in short, think holistically, and not just the obvious! This is what makes you stand out compared to the other students.
  • When choosing to invest in a strategic option, timing is also essential. Are we blocking funds in an option that could soon be obsolete? Should we wait as we see more lucrative opportunities just around the corner? It would be worth considering this as well.

2. Scenario Planning

It is easy to state the obvious, the black and the white, the yes and the no, but sometimes, you may be stuck between two equally good options. Given the factors mentioned in the question, you can choose between options.

But if it is not mentioned in the question that you have to choose just one of the two, you could also recommend choosing both the options, as long as they have a positive NPV and increase shareholder wealth. At the same time, it would be prudent to advise the Board to incorporate scenario planning, to build up multiple scenarios around the options and see what could positively or negatively impact the option beyond the obvious.

Factors mentioned today could change tomorrow. For example, black swan events like COVID 19 or war in an otherwise peaceful country could change your investment decisions overnight. Hence, recommend scenario planning before deciding between options, and you could even provide some examples.

3. Sensitivity Analysis

The same goes for sensitivity analysis. Brent was sitting at USD 65 a barrel in 2021, and suddenly, with the Ukraine-Russia war breaking out, it crossed USD 100 a barrel. How will such dynamic change affect your project’s budget? Recommend to use sensitivity analysis in the costing part of your project or strategic decision—plan around worst-case scenarios, e.g. fluctuations in interest rates and exchange rates etc.

By incorporating the above points, you demonstrate to the examiner that you don’t think in 2D but in 3D! We live in a VUCA environment, and the speed at which technologies are changing is beyond someone ever imagined at the turn of the century. Your answers should reflect that you think with the times and are employment ready!

Evita Veigas
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