CAIB 4 Practice Questions with Correct
Answers
Explain the "Top-Down Approach"
Management decides unilaterally on the mission, strategies, and objectives for the brokerage
and instructs the individual business units to achieve the established objectives.
Explain the "Bottom-Up Approach"
Management provides the mission and broad strategies, but leaves the development of
objectives, goals, and activities to the individual business units.
What is a disadvantage of the "Top-Down Approach"?
Lack of buy-in from employees who had no part in developing the plan. It's "management's
plan", not their plan.
What is an advantage of the "Top-Down Approach"?
Management feels firmly in control and in charge of the decision making.
What is an advantage of the "Bottom-Up Approach"?
Business units will be fully bought into the plan.
What is a disadvantage of the "Bottom-Up Approach"?
Management may feel that they lack control and that the planning process is not in their
hands. Additionally, if management makes changes to the business unit's objectives, the
business units may not be very accepting to this.
What is the best approach to planning?
,A combination of the top-down and bottom-up approaches with open communication
throughout the process is key to effective and successful planning.
What are the 4 characteristics of a plan? Explain each.
1. Simplicity - Plan and outcome must be simple
2. Practicality - Must be realistic
3. Severability - Finished plan is the aggregate of its parts. The parts must be separate so that
each business unit has it's role.
4. Flexibility - A good plan must allow for modification
Typically, how long do strategic plans last?
3-5 years
What is an action plan?
The strategic plan gives direction to the action plans. The action plans have specific activities
that support the fulfillment of the strategic plan. They apply to a specific business unit and
generally span over 1 year.
What are the 7 components of a strategic plan?
1. Scanning the external environment (Distant vs. Near)
2. Analyzing the internal environment and assessing the current position.
3. Matching strengths and weaknesses to the opportunities and threats (SWOT analysis)
4. Defining a corporate focus
5. Developing strategies
6. Developing objectives
7. Setting goals
What is the purpose of strategic planning?
,- Assess future impact of current decisions/actions
- Provide structure for dealing with business risks/uncertainty
- Consider courses of action in response to changing environmental conditions.
- Incorporate a process for determining the brokerage's purpose, direction, and expected
results.
What are the 2 aspects to an external environment scan? Provide an example of each
1. Distant Environment
--> Factors which are critical to the long term survival of the brokerage, but which it has no
control or ability to influence.
Ex. Economy, technology, government, demographic forces.
2. Near Environment
--> Factors which the brokerage may exert a degree of influence over.
Ex. Brokerages clients/prospects, market segment selected, competitors.
What is the main tool used to analyze the near environment? What are the 3 types?
Profiling is the main tool used to analyze the near environment which includes competitors,
the market, and clients.
What is competitor profiling?
Gathering info such as size, financial condition, location of head office and branches, range
of products, quality of service, market share, market segments served, use of technology, and
its public image. A profile should be prepared for each competitor considered a threat to the
brokerage
What is market profiling?
, Identifying, analyzing, and forecasting key marketplace factors which may affect the
brokerage by posing a threat or presenting an opportunity. The brokerage should analyze the
total market in which it competes.
What is client profiling?
Perhaps the greatest benefit of profiling. It achieves a clear understanding of the nature and
characteristics of the brokerages clients. Must understand clients to develop realistic
strategies to satisfy their needs.
If the brokerage has no database, they can rely on surveying and market research.
What is a SWOT Analysis?
Matching the brokerage's internal strengths and weaknesses to the environmental
opportunities and threats.
What is a SMART Goal?
Specific
Measurable
Action-Oriented
Realistic
Timely
What are the 3 key steps to implementing the plan successfully?
1. Controlling implementation
2. Linking budgets to strategies, objectives, and goals
3. Motivating for implementation
What are the 2 major tools used to control implementation?
Answers
Explain the "Top-Down Approach"
Management decides unilaterally on the mission, strategies, and objectives for the brokerage
and instructs the individual business units to achieve the established objectives.
Explain the "Bottom-Up Approach"
Management provides the mission and broad strategies, but leaves the development of
objectives, goals, and activities to the individual business units.
What is a disadvantage of the "Top-Down Approach"?
Lack of buy-in from employees who had no part in developing the plan. It's "management's
plan", not their plan.
What is an advantage of the "Top-Down Approach"?
Management feels firmly in control and in charge of the decision making.
What is an advantage of the "Bottom-Up Approach"?
Business units will be fully bought into the plan.
What is a disadvantage of the "Bottom-Up Approach"?
Management may feel that they lack control and that the planning process is not in their
hands. Additionally, if management makes changes to the business unit's objectives, the
business units may not be very accepting to this.
What is the best approach to planning?
,A combination of the top-down and bottom-up approaches with open communication
throughout the process is key to effective and successful planning.
What are the 4 characteristics of a plan? Explain each.
1. Simplicity - Plan and outcome must be simple
2. Practicality - Must be realistic
3. Severability - Finished plan is the aggregate of its parts. The parts must be separate so that
each business unit has it's role.
4. Flexibility - A good plan must allow for modification
Typically, how long do strategic plans last?
3-5 years
What is an action plan?
The strategic plan gives direction to the action plans. The action plans have specific activities
that support the fulfillment of the strategic plan. They apply to a specific business unit and
generally span over 1 year.
What are the 7 components of a strategic plan?
1. Scanning the external environment (Distant vs. Near)
2. Analyzing the internal environment and assessing the current position.
3. Matching strengths and weaknesses to the opportunities and threats (SWOT analysis)
4. Defining a corporate focus
5. Developing strategies
6. Developing objectives
7. Setting goals
What is the purpose of strategic planning?
,- Assess future impact of current decisions/actions
- Provide structure for dealing with business risks/uncertainty
- Consider courses of action in response to changing environmental conditions.
- Incorporate a process for determining the brokerage's purpose, direction, and expected
results.
What are the 2 aspects to an external environment scan? Provide an example of each
1. Distant Environment
--> Factors which are critical to the long term survival of the brokerage, but which it has no
control or ability to influence.
Ex. Economy, technology, government, demographic forces.
2. Near Environment
--> Factors which the brokerage may exert a degree of influence over.
Ex. Brokerages clients/prospects, market segment selected, competitors.
What is the main tool used to analyze the near environment? What are the 3 types?
Profiling is the main tool used to analyze the near environment which includes competitors,
the market, and clients.
What is competitor profiling?
Gathering info such as size, financial condition, location of head office and branches, range
of products, quality of service, market share, market segments served, use of technology, and
its public image. A profile should be prepared for each competitor considered a threat to the
brokerage
What is market profiling?
, Identifying, analyzing, and forecasting key marketplace factors which may affect the
brokerage by posing a threat or presenting an opportunity. The brokerage should analyze the
total market in which it competes.
What is client profiling?
Perhaps the greatest benefit of profiling. It achieves a clear understanding of the nature and
characteristics of the brokerages clients. Must understand clients to develop realistic
strategies to satisfy their needs.
If the brokerage has no database, they can rely on surveying and market research.
What is a SWOT Analysis?
Matching the brokerage's internal strengths and weaknesses to the environmental
opportunities and threats.
What is a SMART Goal?
Specific
Measurable
Action-Oriented
Realistic
Timely
What are the 3 key steps to implementing the plan successfully?
1. Controlling implementation
2. Linking budgets to strategies, objectives, and goals
3. Motivating for implementation
What are the 2 major tools used to control implementation?
