Free CIMA E3 Strategic Management Practice Questions

Sample Practice Questions

Try these 10 sample questions from the CIMA E3 Strategic Management practice bank. Each includes the answer and explanation. Continue with the interactive practice above to review the full question set.

1. 1A planner has identified a desired outcome but has not considered what people, assets or funding are needed. Which element is missing from a strategy expressed as a course of action?

   1. A.Specification of the resources requiredCorrect answer: A
   2. B.Selection of a different strategic objective
   3. C.Definition of a different planning horizon
   4. D.Identification of a new market opportunity

   Explanation: The source states: "including the specification of resources required" The means of delivery are missing; changing the objective, horizon or opportunity does not specify resources.

   Reference: CIMA Strategic Management E3 Study Text — Kaplan Publishing — p.4, The purpose of strategy

2. 2A firm's patented production capability enables it to deliver superior quality. How should this be classified in a SWOT analysis?

   1. A.External threat
   2. B.Internal weakness
   3. C.External opportunity
   4. D.Internal strengthCorrect answer: D

   Explanation: The source states: "Strengths include a company’s capabilities and resources" The patented capability belongs to the firm and enables advantage, so it is a strength rather than an external condition or a limitation.

   Reference: CGMA Essential Tools for Management Accountants — p.32, Strategic Planning Tools

3. 3A strategic review aims to assess how well ethics is embedded in an organisation. Which evidence is most directly relevant?

   1. A.Marketing promises and the number of products sold
   2. B.Ethical intent statements and projected sales growth
   3. C.Competitor conduct and share-price movements
   4. D.Codes, ethics training and reporting arrangementsCorrect answer: D

   Explanation: The source states: "ethical statements and codes of conduct; training; collection of ethical data; reporting of ethical issues" Conduct codes, training and reporting evidence embedding ethics. Intent or commercial outcomes alone do not establish those practices.

   Reference: CGMA Essential Tools for Management Accountants — p.28, Ethical Management Reflection Checklist

4. 4Why should strategic options be evaluated against predefined criteria when management must choose between them?

   1. A.To describe the resources already consumed by past operations
   2. B.To identify the customers who purchased the current products
   3. C.To provide an explicit basis for comparing the alternativesCorrect answer: C
   4. D.To classify the transactions appearing in the financial statements

   Explanation: The study text states: "The choice is based on predefined criteria and an evaluation of the options against these criteria." Criteria provide the basis for comparing options. Retrospective resource records, customer lists and transaction classification supply other kinds of information rather than the comparison standard.

   Reference: CIMA Strategic Management E3 Study Text — Kaplan Publishing — p.P20, E3D: Making strategic choices

5. 5A strategy depends on reliable service, but management monitors only annual profit. What improvement would a balanced scorecard support?

   1. A.Replace profit with a larger collection of financial ratios
   2. B.Combine financial outcomes with relevant non-financial service measuresCorrect answer: B
   3. C.Monitor service measures separately from financial outcomes
   4. D.Focus on productivity and omit customer outcomes

   Explanation: The source states: "the financial measures of an organisation and key non-financial measures" The scorecard connects financial results with non-financial drivers. More financial ratios, disconnected service measures or omitted customer outcomes do not provide that balance.

   Reference: CGMA Essential Tools for Management Accountants — p.38, Balanced Scorecard

6. 6For a digital transformation intended to improve customer retention, which board-level statement defines the value sought?

   1. A.Install the replacement application on the approved timetable
   2. B.Increase retention through a more seamless customer serviceCorrect answer: B
   3. C.Purchase the planned number of software licences
   4. D.Complete the migration of existing customer records

   Explanation: The source states: "including defining value" Customer retention is a business outcome. Installation, licensing and migration are implementation outputs that do not themselves define the value sought.

   Reference: Strategic level Examination Blueprint 2026–2027 — printed p.30, Digital strategy — Governance

7. 7A manufacturer enters a market without examining its own production capacity. Which strategic relationship has it neglected?

   1. A.Matching positioning to customer preferences
   2. B.Matching activities to resource capabilityCorrect answer: B
   3. C.Matching business scope to stakeholder values
   4. D.Matching product choice to market growth

   Explanation: The source states: "Strategy must also match the activities of an organisation to its resource capability." Production capacity concerns internal capability. The alternatives concern customers, stakeholders and the market.

   Reference: CIMA Strategic Management E3 Study Text — Kaplan Publishing — p.4, Characteristics of strategic decisions

8. 8Only two suppliers provide a critical component, and changing supplier requires expensive retooling. Which competitive force is strengthened?

   1. A.Supplier bargaining powerCorrect answer: A
   2. B.Buyer bargaining power
   3. C.Threat of substitutes
   4. D.Threat of new entry

   Explanation: The source states: "cost of switching from one supplier to another." High supplier-switching costs make it harder for the buyer to resist supplier demands. They do not directly strengthen customers, substitutes or entry.

   Reference: CGMA Essential Tools for Management Accountants — p.50, Supplier power

9. 9During an ethical review, a manager is unsure whether procurement staff receive relevant training. What action follows the checklist's guidance?

   1. A.Involve procurement and other relevant colleagues to verify practiceCorrect answer: A
   2. B.Record that training exists because the policy mentions it
   3. C.Record that training is absent because the reviewer has not seen it
   4. D.Exclude procurement from the assessment to preserve consistency

   Explanation: The source states: "Never assume answers without involving others" The reviewer should verify the actual practice with relevant people. Both assumed presence and assumed absence are unsupported, and excluding the area leaves the issue untested.

   Reference: CGMA Essential Tools for Management Accountants — p.29, Ethical Management Reflection Checklist

10. 10Which criterion focuses on whether an option can actually be implemented using resources available to the organisation?

    1. A.Market attractiveness
    2. B.Suitability
    3. C.Acceptability
    4. D.FeasibilityCorrect answer: D

    Explanation: The source states: "whether the chosen strategy can be implemented successfully." Feasibility concerns practical implementation. Suitability concerns fit; acceptability concerns stakeholders; market attractiveness alone does not establish deliverability.

    Reference: ACCA — The strategic planning process, part 2 — Strategic choice — Feasibility