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IAI Actuarial Core Principles · Business Management · Strategy, competitive advantage, strategic decision process and PEST analysis

A Pune-based life insurer's board wants to enter the micro-insurance segment. The strategy team proposes to begin by defining what the insurer wants to achieve and the environment it operates in, before listing options. In a rational strategic decision process, which step should logically come immediately after the team has analysed the external environment and the firm's internal resources?

After analysing the external environment and internal resources, the team should generate and evaluate alternative strategic options. Selection, implementation, resource allocation and monitoring all follow once a choice is made, so they cannot logically come immediately after the analysis stage.

  1. AGenerating and evaluating alternative strategic optionsCorrect
  2. BMonitoring and controlling the results of the chosen strategy
  3. CCommunicating the final plan to policyholders
  4. DAllocating budgets to individual departments
  5. Reviewing the performance of the previous year's strategy

Explanation

A rational process runs from objectives and analysis of the environment and resources, to generating options, evaluating and choosing among them, implementing and then monitoring. Monitoring and budgeting come after a choice has been made. Therefore options are generated and evaluated next.

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