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Free ACCA Advanced Performance Management Practice Questions & Answers
400 exam-style Advanced Performance Management questions. Pick your answer, hit Check answer, and see the worked solution — free to start, no signup.
100% free · No login to startQuestion 91
What is a 'stakeholder' in the context of strategic management?
Select an option first.
Correct answer: B — Any individual, group, or organisation that has an interest in (or is affected by) the organisation's activities — including shareholders, employees, customers, suppliers, regulators, communities, and the environment
Explanation: Stakeholders: anyone who has a 'stake' in the organisation's decisions and outcomes. Stakeholder management is essential for strategy formulation and performance management. A and C are too narrow; D excludes internal stakeholders.
Question 92
What is 'stakeholder mapping' (the Mendelow matrix)?
Select an option first.
Correct answer: B — A framework that plots stakeholders on a matrix by their power (ability to influence) and interest (how much they care about the organisation) — to guide how much attention should be given to each group
Explanation: Mendelow matrix: four quadrants. High power/high interest → Manage closely. High power/low interest → Keep satisfied. Low power/high interest → Keep informed. Low power/low interest → Minimal effort. A, C and D are wrong.
Question 93
What is the 'resource-based view' (RBV) of competitive strategy?
Select an option first.
Correct answer: B — A strategic framework that argues competitive advantage comes from the organisation's unique internal resources and capabilities (rather than industry structure) — focusing on what the firm has and can do better than rivals
Explanation: RBV (Barney, Prahalad & Hamel): sustainable competitive advantage comes from resources that are Valuable, Rare, Inimitable, and Non-substitutable (VRIN). A, C and D are wrong.
Question 94
What are 'core competencies' (Prahalad and Hamel)?
Select an option first.
Correct answer: B — Deeply embedded capabilities that are the result of collective learning, hard to imitate, and provide access to multiple markets — the skills and technologies that differentiate the organisation from competitors
Explanation: Core competencies: unique bundles of skills and technologies that competitors cannot easily replicate, provide broad market access, and significantly contribute to customer value. Examples: Apple's design capability, Honda's engine technology. A, C and D are wrong.
Question 95
What is the 'product life cycle' (PLC) and how does it affect performance management?
Select an option first.
Correct answer: B — The concept that products move through distinct stages — introduction, growth, maturity, and decline — each with different performance characteristics (e.g., revenue growth rate, margin, investment requirements) that should inform performance targets
Explanation: PLC stages require different performance targets and strategies: Introduction (invest, low profit), Growth (build share, improve margins), Maturity (optimise efficiency, defend share), Decline (manage cash, consider exit). A, C and D are wrong.
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Question 96
What is the 'BCG matrix' (Boston Consulting Group growth-share matrix)?
Select an option first.
Correct answer: B — A portfolio management tool classifying business units or products by market growth rate and relative market share into four categories: Stars (high growth, high share), Cash Cows (low growth, high share), Question Marks (high growth, low share), and Dogs (low growth, low share)
Explanation: BCG matrix: guides resource allocation across a portfolio. Cash Cows fund Stars and selected Question Marks. Dogs may be divested. Each category has different performance expectations. A, C and D are wrong.
Question 97
In the BCG matrix, what is a 'Cash Cow'?
Select an option first.
Correct answer: B — A product with low market growth but high relative market share — generating large, stable cash flows that can be harvested to fund other business units
Explanation: Cash Cow: the business/product is market leader in a mature market. It generates more cash than is needed to maintain its position — the surplus funds Stars and promising Question Marks. A is a Star; C is a Question Mark or Star; D is a Dog.
Question 98
What is the 'McKinsey 7-S framework'?
Select an option first.
Correct answer: B — A framework for analysing the internal alignment of seven organisational elements: Strategy, Structure, Systems, Shared values, Skills, Staff, and Style — all of which must be aligned for the organisation to perform effectively
Explanation: McKinsey 7-S: hard Ss (Strategy, Structure, Systems) and soft Ss (Shared values, Skills, Staff, Style) must all be aligned with each other and with the organisation's strategy. Misalignment causes performance problems. A, C and D are wrong.
Question 99
What is meant by 'strategic fit'?
Select an option first.
Correct answer: B — The alignment between the organisation's strategy and its external environment, internal capabilities, and stakeholder expectations — strategies with strong strategic fit are more likely to be successful
Explanation: Strategic fit (Johnson & Scholes): a good strategy must be suitable (matches environment and capabilities), acceptable (meets stakeholder expectations), and feasible (can be implemented with available resources). A, C and D are wrong.
Question 100
What is a 'vision statement' and how does it differ from a mission statement?
Select an option first.
Correct answer: B — A vision statement describes the desired future state of the organisation ('what we want to become'); a mission statement describes the current purpose ('what we do and why')
Explanation: Vision: aspirational future state (e.g., 'To be the world's most innovative technology company'). Mission: current purpose (e.g., 'To connect people through communication technology'). A, C and D misstate the distinction.
Question 101
What is 'strategic drift' and how can performance management help prevent it?
Select an option first.
Correct answer: B — The gradual, unintended departure from the organisation's strategic direction, often driven by short-term operational pressures — performance management can prevent it by regularly measuring performance against strategic objectives, not just operational targets
Explanation: Strategic drift (Johnson): small incremental decisions cumulatively move the organisation away from its strategy without deliberate intent. Regular strategic performance reviews (vs. strategic KPIs) can catch drift early. A, C and D are wrong.
Question 102
What is the 'balanced scorecard' approach to strategy execution?
Select an option first.
Correct answer: B — A system that translates strategy into a coherent set of performance measures across four perspectives (financial, customer, internal process, learning & growth), ensuring that operational activities are aligned with strategic objectives
Explanation: BSC: bridges the gap between strategy and execution by defining specific measures, targets, and initiatives for each perspective — creating a performance management system directly linked to strategy. A, C and D are wrong.
Question 103
What are 'strategic initiatives' in the Balanced Scorecard?
Select an option first.
Correct answer: B — Specific projects and action plans designed to achieve the performance targets set for each BSC objective — the bridge between strategic aspiration and operational action
Explanation: Strategic initiatives: the actions the organisation must take to achieve its BSC targets. Without initiatives, the BSC is just a measurement system with no pathway to achievement. A, C and D are wrong.
Question 104
What is the difference between 'efficiency' and 'effectiveness' in organisational performance?
Select an option first.
Correct answer: B — Efficiency is about doing things right (minimising resource use per unit of output); effectiveness is about doing the right things (achieving intended objectives) — an organisation can be efficient but ineffective (producing the wrong outputs well)
Explanation: Efficiency: output/input ratio — producing maximum output from given inputs. Effectiveness: goal achievement — achieving intended outcomes. A factory can be highly efficient (low cost per unit) but ineffective (producing unwanted goods). A, C and D are wrong.
Question 105
What is 'corporate social responsibility' (CSR) and why is it relevant to performance management?
Select an option first.
Correct answer: B — The voluntary commitment of an organisation to operate ethically and consider the social, environmental, and economic impacts of its decisions on all stakeholders — increasingly measured through ESG metrics and linked to long-term value creation
Explanation: CSR/ESG: responsible businesses consider broader impacts. Performance management systems are increasingly incorporating ESG metrics (carbon emissions, community investment, diversity) alongside financial measures. A, C and D are wrong.
Question 106
What is a 'performance contract' in the context of public sector performance management?
Select an option first.
Correct answer: B — A formal agreement between a government body and a public service provider specifying performance targets, responsibilities, and accountability mechanisms — used to hold providers accountable for service delivery
Explanation: Performance contracts: used in public sector to specify what outcomes a provider must achieve (targets for quality, access, cost) and how performance will be measured and reported. A, C and D are too narrow.
Question 107
What is the 'CIMA performance management framework'?
Select an option first.
Correct answer: B — A conceptual framework that links strategic objectives to operational plans through a cascade of measures — covering planning (what do we want to achieve?), control (how do we ensure we achieve it?), and measurement (how do we know we've achieved it?)
Explanation: CIMA's framework: strategy → plans → budgets → KPIs → reporting → analysis → action — a complete performance management cycle. A, C and D are wrong.
Question 108
What is the 'hoshin kanri' (policy deployment) approach to strategy execution?
Select an option first.
Correct answer: B — A Japanese strategic planning method that cascades organisational strategy through all levels — each level creates aligned plans and KPIs that support the level above, ensuring everyone works toward the same strategic goals
Explanation: Hoshin kanri: strategy cascade. Top-level objectives → department goals → individual targets, all aligned. Includes a catchball process (two-way negotiation) to ensure buy-in and feasibility. A and D are other Japanese methods; C is wrong.
Question 109
What is a 'stretch target' and what are the risks of setting them?
Select an option first.
Correct answer: B — A performance target set significantly above current performance levels — intended to inspire breakthrough thinking and innovation. Risk: if too aggressive, they may demotivate managers or encourage unethical behaviour to hit the target
Explanation: Stretch targets: galvanise effort and innovation but risk: (1) demotivation if seen as unachievable, (2) gaming/unethical behaviour to appear to meet targets, (3) short-term decisions to hit targets at the expense of long-term value. A, C and D are wrong.
Question 110
What is 'shareholder value' and how is it measured?
Select an option first.
Correct answer: B — The present value of expected future free cash flows to equity holders, proxied in practice by the total shareholder return (dividends received + capital gain on shares) — metrics include TSR, EPS growth, and dividend yield
Explanation: Shareholder value: ultimate measure is TSR (Total Shareholder Return = dividends + share price appreciation). Internally, EVA and free cash flow are better economic measures than accounting profit. A, C and D are partial or wrong.
Question 111
What is 'total shareholder return' (TSR)?
Select an option first.
Correct answer: B — The total return to a shareholder over a period, combining dividend yield and capital gain (or loss) on share price — commonly used as a performance target in executive remuneration schemes
Explanation: TSR = (Ending share price − Beginning share price + Dividends) ÷ Beginning share price. It captures the full return to shareholders. A is just dividend yield; C ignores dividends; D is a proxy but not the same.
Question 112
What is the significance of the 'cost of equity' in the context of value-based management?
Select an option first.
Correct answer: B — It represents the minimum return shareholders require on their investment — if the company does not earn at least this return, it destroys value for shareholders even if it reports accounting profit
Explanation: Cost of equity (ke): the opportunity cost of shareholders' capital. If ROE < ke, the company destroys shareholder value despite being profitable in accounting terms. EVA captures this by deducting a full capital charge. A, C and D are incomplete or wrong.
Question 113
A company's revenues are growing rapidly but EVA is declining. What might explain this pattern?
Select an option first.
Correct answer: B — The company may be investing heavily in low-return capital (ROCE < WACC) to achieve revenue growth — growth destroys value when the return on invested capital is below the cost of that capital
Explanation: Value creation: growth adds value ONLY if ROCE > WACC. 'Profitable growth' that earns below WACC destroys value. This is why revenue-only targets are dangerous — value-based management requires measuring economic profit on invested capital. A and C are wrong; D is wrong.
Question 114
What is the difference between 'corporate strategy' and 'business unit strategy'?
Select an option first.
Correct answer: B — Corporate strategy defines the overall scope and direction of the organisation (which businesses to be in); business unit strategy defines how each business unit will compete in its chosen market
Explanation: Corporate (group) level: portfolio decisions — which businesses to own, buy, or sell. Business unit level: competitive strategy — how to win in the chosen market (cost leadership, differentiation). A, C and D are wrong.
Question 115
What is the 'value for money' concept in public sector performance management?
Select an option first.
Correct answer: B — The assessment of whether public resources are being used in an economical, efficient, and effective manner — the three Es framework provides the measurement approach
Explanation: VFM in the public sector: accountability to taxpayers requires demonstrating that public money is well spent (Economy), productively used (Efficiency), and achieves intended outcomes (Effectiveness). A, C and D are wrong.
Question 116
What is the 'performance gap' analysis technique?
Select an option first.
Correct answer: B — Identifying the gap between the organisation's current performance trajectory and its strategic objectives — and then determining the strategies needed to close that gap
Explanation: Performance gap: if current strategies and trajectory will not achieve objectives, a gap exists. Gap analysis defines the scale of strategic change needed and identifies strategic options to close the gap. A, C and D are wrong.
Question 117
What does 'strategy execution' involve in the context of performance management?
Select an option first.
Correct answer: B — Translating strategic plans into operational actions and results through: effective resource allocation, clear accountability, aligned incentive systems, robust performance monitoring, and timely corrective action
Explanation: Strategy execution (Kaplan & Norton's Strategy Execution Premium): most strategies fail in execution, not formulation. Effective execution requires governance, communication, resource alignment, and performance management systems. A, C and D are too narrow.
Question 118
In designing a reward system, what is meant by 'line of sight'?
Select an option first.
Correct answer: B — The principle that employees must be able to clearly see how their individual actions contribute to the performance measures on which they are rewarded — a direct, transparent connection between what they do and what they earn
Explanation: Line of sight: employees should understand how their daily work drives the KPIs and rewards. Without clear line of sight, rewards fail to motivate relevant behaviour. A, C and D are literal not figurative.
Question 119
A company in the private sector and one in the public sector both use the Balanced Scorecard. What is the main structural difference in how they implement it?
Select an option first.
Correct answer: B — In a private sector BSC, financial objectives sit at the top of the hierarchy (as the ultimate goal); in a public sector BSC, the mission/citizen outcomes sit at the top, with financial objectives appearing as constraints (stay within budget) rather than as the primary objective
Explanation: The hierarchy differs: private sector → financial objectives are ultimate; public sector → social outcomes are ultimate, with financial management as a constraint. This reflects the fundamental difference in organisational purpose. A, C and D are wrong.
Question 120
What is 'transfer pricing manipulation' and why is it a concern in multinational companies?
Select an option first.
Correct answer: B — Using internal transfer prices to shift profits from high-tax to low-tax countries — reducing the group's total tax burden at the expense of individual tax authorities, and potentially distorting divisional performance measures
Explanation: TP manipulation: by setting prices above or below arm's length, multinationals can shift taxable profits. OECD BEPS project addresses this. It also distorts performance measurement — the high-tax subsidiary looks unprofitable not due to performance but due to pricing. A, C and D are wrong.
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