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

Within Kaveri Health Insurance, the health division head decides to compete by offering low-cost, simple cashless plans to first-time buyers rather than premium plans with wide hospital networks. Which statement best describes this decision?

It is a business-unit, or competitive, strategy. The division is choosing how to compete in its chosen market by offering simple low-cost plans to first-time buyers. Corporate strategy concerns the mix of businesses in the group, while operational matters concern day-to-day implementation rather than the basis of competition.

  1. AIt is a corporate strategy because it affects the shareholders
  2. BIt is a business-unit strategy on how the division will compete and gain advantage in its chosen marketCorrect
  3. CIt is an operational strategy because it involves day-to-day claims handling
  4. DIt is not a strategy because it concerns only one division
  5. It is a functional strategy limited to the finance department

Explanation

Choosing a cost-focused position for a particular customer segment is about how a single business unit competes for advantage. Corporate strategy concerns the portfolio of businesses. Operations cover implementation, not the choice of competitive basis.

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