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

Rohan, an actuary at Sahyadri Life, is told that the company's corporate strategy is to grow in rural markets. He suggests that the actuarial pricing team should design low-ticket micro-insurance products with simple underwriting, and that the IT team should build a vernacular mobile app. Which statement best describes these team plans?

These are functional strategies: plans by pricing and IT that turn the company's rural growth strategy into specific actions. They should fit with and support the higher-level corporate and business strategies, rather than replacing them or standing apart as purely technical tasks.

  1. AThey are corporate strategies because they involve the whole group
  2. BThey are functional strategies that translate the higher-level strategy into plans for each function, and must be consistent with itCorrect
  3. CThey are unrelated to strategy because they are only technical tasks
  4. DThey replace the need for a business unit strategy
  5. They are mission statements because they describe purpose

Explanation

Functional strategies set out how each function such as pricing or IT contributes to the higher-level strategy. They must be aligned with corporate and business strategy to be effective. They are not mission statements and do not replace business unit strategy.

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