CAIB 4 TEST 2025
Explain the "Top-Down Approach" - CORRECT ANSWER-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" - CORRECT ANSWER-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"? - CORRECT ANSWER-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"? - CORRECT ANSWER-
Management feels firmly in control and in charge of the decision making.
What is an advantage of the "Bottom-Up Approach"? - CORRECT ANSWER-Business
units will be fully bought into the plan.
What is a disadvantage of the "Bottom-Up Approach"? - CORRECT ANSWER-
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? - CORRECT ANSWER-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. - CORRECT ANSWER-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? - CORRECT ANSWER-3-5 years
What is an action plan? - CORRECT ANSWER-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? - CORRECT ANSWER-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? - CORRECT ANSWER-- 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 -
CORRECT ANSWER-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? -
CORRECT ANSWER-Profiling is the main tool used to analyze the near environment
which includes competitors, the market, and clients.
What is competitor profiling? - CORRECT ANSWER-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? - CORRECT ANSWER-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? - CORRECT ANSWER-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? - CORRECT ANSWER-Matching the brokerage's internal
strengths and weaknesses to the environmental opportunities and threats.
What is a SMART Goal? - CORRECT ANSWER-Specific
Measurable
Action-Oriented
Realistic
Timely
What are the 3 key steps to implementing the plan successfully? - CORRECT
ANSWER-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? - CORRECT ANSWER-
Implementation Program
--> Translates the plan into specific activities. Will outline who is responsible and what
resources are required.
Progress Report
--> Must monitor and evaluate the plan objectively and effectively. Must take corrective
action when necessary.
What is the purpose of a budget? - CORRECT ANSWER-A budget is the best financial
planning tool used to achieve the plan. Budgets force management to forecast revenues
and expenses, yielding a focus on profitability.
What are the 3 elements to organizing effectively? - CORRECT ANSWER-1. Creating
an organizational structure
--> The skeleton upon which the brokerage grows and interacts.
2. Defining Employee Relationships
-->The flow of authority and responsibility must be clearly defined to avoid confusion.
Explain the "Top-Down Approach" - CORRECT ANSWER-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" - CORRECT ANSWER-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"? - CORRECT ANSWER-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"? - CORRECT ANSWER-
Management feels firmly in control and in charge of the decision making.
What is an advantage of the "Bottom-Up Approach"? - CORRECT ANSWER-Business
units will be fully bought into the plan.
What is a disadvantage of the "Bottom-Up Approach"? - CORRECT ANSWER-
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? - CORRECT ANSWER-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. - CORRECT ANSWER-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? - CORRECT ANSWER-3-5 years
What is an action plan? - CORRECT ANSWER-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? - CORRECT ANSWER-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? - CORRECT ANSWER-- 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 -
CORRECT ANSWER-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? -
CORRECT ANSWER-Profiling is the main tool used to analyze the near environment
which includes competitors, the market, and clients.
What is competitor profiling? - CORRECT ANSWER-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? - CORRECT ANSWER-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? - CORRECT ANSWER-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? - CORRECT ANSWER-Matching the brokerage's internal
strengths and weaknesses to the environmental opportunities and threats.
What is a SMART Goal? - CORRECT ANSWER-Specific
Measurable
Action-Oriented
Realistic
Timely
What are the 3 key steps to implementing the plan successfully? - CORRECT
ANSWER-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? - CORRECT ANSWER-
Implementation Program
--> Translates the plan into specific activities. Will outline who is responsible and what
resources are required.
Progress Report
--> Must monitor and evaluate the plan objectively and effectively. Must take corrective
action when necessary.
What is the purpose of a budget? - CORRECT ANSWER-A budget is the best financial
planning tool used to achieve the plan. Budgets force management to forecast revenues
and expenses, yielding a focus on profitability.
What are the 3 elements to organizing effectively? - CORRECT ANSWER-1. Creating
an organizational structure
--> The skeleton upon which the brokerage grows and interacts.
2. Defining Employee Relationships
-->The flow of authority and responsibility must be clearly defined to avoid confusion.
