ACCA Strategic Professional · Strategic Business Leader · Strategic choices
Darnley Foods plans to launch a premium range. Analysis shows the option fits its brand and market, and funding is secured. However, the main institutional shareholders have said they will oppose any strategy whose expected return is below the company's current return on capital, and the forecast return is lower. Which conclusion is most appropriate?
The option fails on acceptability. Acceptability considers whether the expected return, risk and stakeholder reactions are tolerable, and the influential institutional shareholders will oppose a return below the current level. Suitability and funding were already satisfied, so those criteria are not the reason the option fails.
- AThe option fails on acceptability because key stakeholders' return expectations are not metCorrect
- BThe option fails on feasibility because funding is a constraint
- CThe option fails on suitability because it does not fit the brand
- DThe option passes all three criteria because funding is secured
Explanation
Acceptability concerns the expectations of stakeholders, including the return they require. Shareholders will oppose a lower-return strategy, so it fails here. Suitability was confirmed and funding is secured, so feasibility on finance is not the problem.
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