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CA Intermediate · Financial Management and Strategic Management · Introduction to Strategic Management

A mid-sized Indian textile exporter's board spends a session defining what business it is in, the customers it will serve, and the long-term position it wants in global markets, and then commits large resources to a new region that cannot easily be reversed. Which characteristic of strategic decisions is most clearly shown by the irreversibility of the commitment?

The irreversibility shows that strategic decisions involve major resource commitments that are difficult to reverse. Such decisions are long-term, taken by top management and affect the whole organisation, unlike routine, short-term operational decisions that can easily be changed.

  1. AStrategic decisions are taken only at the operational level
  2. BStrategic decisions involve major resource commitments that are difficult to reverseCorrect
  3. CStrategic decisions have a short-term time horizon
  4. DStrategic decisions are routine and repetitive

Explanation

Strategic decisions typically involve significant resource commitment and are hard to reverse, which is what the exporter's region entry shows. Operational and routine decisions are short-term and repetitive, so the other options describe the opposite of strategic decisions.

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