E-Man Chapter 10
81. Restructuring by downsizing primarily involves: A. decreasing the size of operations. B. working with rivals on projects of mutual benefit. C. customizing products and advertising to best fit local needs. D. joining in partnership to pursue an area of mutual interest. E. adopting standardized products and advertising for use worldwide.
A
82. Restructuring by divestiture primarily involves: A. selling off parts of the organization to refocus on core competencies. B. working with rivals on projects of mutual benefit. C. customizing products and advertising to best fit local needs. D. joining in partnership to pursue an area of mutual interest. E. adopting standardized products and advertising for use worldwide.
A
84. A ________ strategy primarily customizes products and advertising to best fit local needs. A. transnational B. co-opetition C. differentiation D. multidomestic E. cost leadership
D
90. Lucy Inc. sells a range of premium confectionery products. Although Lucy's products are priced a little higher than those of its competitors, its customers are ready to pay for its unique flavours. Lucy Inc. uses the ________ strategy to gain an advantage over its competitors. A. cost leadership B. stuck-in-the-middle C. focused cost leadership D. differentiation E. co-opetition
D
95. A ________ strategy typically concentrates attention on a special market segment in the form of a niche customer group, geographical region, or product or service line. A. co-opetition B. downsizing C. turnaround D. focus E. transnational
D
11. In a hypercompetition situation, a firm faces only a few competitors.
False
32. Which of the following best defines the term "sustainable competitive advantage"? A. It is the ability to outperform rivals in ways that are difficult or costly to imitate. B. It is the ability to formulate technology to gain market exposure. C. It is the ability to focus organizational energies on a unifying and compelling goal. D. It is the ability to formulate strategies efficiently to accomplish long-term goals. E. It is the ability to identify the things that the organization has or does exceptionally well in comparison with competitors.
A
33. Which of the following best describes a strategy? A. It is a comprehensive plan guiding resource allocation to achieve long-term organization goals. B. It is the same as the mission of the organization. C. It is the document expressing the organization's reason for existence in society. D. It is the predominant value system of the organization as a whole. E. It is a special strength that gives an organization a competitive advantage.
A
45. Karen Inc. changes its business strategy from a focused differentiation strategy to a focused cost leadership one. Which of the following steps in the process of strategic management ideally includes this action? A. Strategy analysis B. Strategy formulation C. Strategy assessment D. Strategy identification E. Strategy outsourcing
B
48. A(n) ________ expresses the organization's reason for existence in society. A. statement of purpose B. mission statement C. cash flow statement D. net worth statement E. operating objective
B
36. Decisions related to choices about product and service mix, facilities locations, and new technologies are most likely to be a part of the ________ strategy of an organization. A. branding B. marketing C. corporate D. functional E. business
E
43. Strategic analysis typically refers to the process of: A. crafting strategies to guide the allocation of resources. B. revising objectives and selecting new strategies. C. formulating and implementing strategies. D. directing the total enterprise. E. analyzing the organization's competitive position.
E
12. An unattractive industry is one in which there are high barriers to entry.
False
1. Competitive advantage is the ability to do something so well that one outperforms competitors.
True
10. Emergence of new competitors and resource scarcities are environmental threats.
True
14. The less attractive the industry structure, the harder it will be to make good strategic choices.
True
17. A growth strategy involves expansion of the organization's current operations.
True
5. The strategic management process begins with analysis of mission, values, and objectives.
True
8. Core values are broad beliefs about what is or is not appropriate behavior.
True
9. The presence of strong core values helps build a clear organizational identity.
True
40. The difference between a corporate strategy and a business strategy is that: A. the former sets long-term direction for the total enterprise and the latter is concerned with how a division or strategic business unit will compete in its product or service domain. B. the former focuses on how a division will compete in its product or service domain and the latter is concerned with guiding the use of organizational resources to implement business strategies. C. the former is concerned with formulating and implementing strategies while the latter is involved in crafting strategies to guide the allocation of resources. D. the former adopts standardized products and advertising for use worldwide and the latter seeks efficiencies of global operations with attention to local markets. E. the former adopts standardized products and advertising for use worldwide and the latter customizes products and advertising to best fit local needs.
A
46. Which of the following is the first step in the process of strategic management? A. Strategic analysis B. Strategy formulation C. Strategy implementation D. Strategic marketing E. Strategic outsourcing
A
50. ________ is the predominant value system for the enterprise as a whole. A. Organizational culture B. Corporate subculture C. Managerial value system D. Functional culture E. Leadership value system
A
53. Any special strength that gives an organization a competitive advantage is referred to as its ________. A. core competency B. productivity C. co-opetition ability D. emotional intelligence E. monopolistic power
A
63. The stars in a BCG matrix typically: A. produce large profits through substantial penetration of expanding markets. B. produce large profits and a strong cash flow, but with little upside potential. C. may not generate much profit at the moment, but have upside potential to do so. D. produce little if any profit, and have low potential for future improvement. E. generate high profit for a short span of time and then become inactive.
A
66. Businesses or products with high-market shares in low-growth markets are referred to as ________ in the BCG Matrix. A. cash cows B. stars C. question marks D. dogs E. laggards
A
67. The preferred strategy for cash cows is: A. stability or modest growth. B. targeting only the most promising of the cash cows. C. retrenchment of some of the cash cows. D. decrease of current operations. E. growth and further resource investments.
A
68. The preferred strategy for cash cows is stability or modest growth because: A. they produce large profits and a strong cash flow, but have little upside potential. B. they may not generate much profit at the moment, but have upside potential. C. the markets offer great growth opportunity given that they are new to the market. D. they are not only high performers in the present, but they offer similar potential for the future. E. they produce little if any profit, and must be supported so that they perform better.
A
76. When one hears terms like "acquisition," "merger," and "global expansion," the underlying master strategy is most likely to be one of ________. A. growth B. retrenchment C. downsizing D. turnaround E. restructuring
A
89. A differentiation strategy typically seeks competitive advantage by: A. offering products that are unique and different from the competition. B. operating with lower costs than competitors. C. continuously improving operating efficiencies in purchasing. D. controlling and monitoring the performance of top management. E. including key persons in strategic planning.
A
91. Which of the following is a defining characteristic of a differentiation strategy? A. The strategic objective is to attract customers who stay loyal to the firm's unique products. B. It seeks competitive advantage by operating with lower costs than competitors. C. Success with the differentiation strategy requires tight cost and managerial controls. D. It aims at products or services that are easy to create and distribute. E. It involves working with rivals on projects of mutual benefit.
A
92. Which of the following allows organizations to make profits while selling products or services at low prices their competitors can't profitably match? A. Cost leadership strategy B. Stuck-in-the-middle strategy C. Focused differentiation strategy D. Differentiation strategy E. Co-opetition strategy
A
93. Neptune is a new company in the laundry detergent market, which already has many competitors. Researchers at Neptune have devised a new, cost-efficient formula for manufacturing detergents that has made it possible for Neptune to charge less than its competitors and still make a profit. The strategy used by Neptune is that of ________. A. cost leadership B. stuck-in-the-middle C. focused differentiation D. differentiation E. co-opetition
A
96. Which of the following is a defining characteristic of a focused differentiation strategy? A. It offers a unique product to a special market segment. B. It seeks the lowest costs of operations within a special market segment. C. It analyzes business opportunities according to market growth rate. D. It focuses on substantial penetration of expanding markets. E. It involves decreasing the size of operations.
A
101. Elaborate on the present day corporate strategies.
Answer: A key aspect of corporate strategy today is how to embrace the global economy and its mix of business risks and opportunities. An easy way to spot differences in global strategies is to notice how products are developed and advertised around the world. A firm pursuing a globalization strategy tends to view the world as one large market. It makes most decisions from the corporate headquarters and tries as much as possible to standardize products and advertising for use everywhere. The latest Gillette razors from Procter & Gamble, for example, are likely to be sold and advertised similarly around the world. Firms using a multidomestic strategy try to customize products and advertising as much as possible to fit local references in different countries or regions. McDonald's is a good example. Although you can get your standard fries and Big Mac in most locations, you can have a McVeggie in India, a McArabia Kofta in Saudi Arabia, and a Croque McDo in France. A third approach is the transnational strategy where a firm tries to operate without a strong national identity and blend seamlessly with the global economy. Ford is an example. Its Global Performance strategy draws upon design, manufacturing, and distribution expertise all over the world to build five core car platforms with common parts and components. These platforms are then modified to meet regional tastes.
103. List a few key responsibilities of strategic leadership.
Answer: Key responsibilities of strategic leadership are described below: • A strategic leader has to maintain strategic control. This means that the CEO and other top managers should always be in touch with the strategy, how well it is being implemented, whether the strategy is generating performance success or failure, and the need for the strategy to be tweaked or changed. • A strategic leader has to be the guardian of trade-offs. It is the leader's job to make sure that the organization's resources are allocated in ways consistent with the strategy. This requires the discipline to sort through many competing ideas and alternatives, to stay on course, and not to get sidetracked. • A strategic leader needs to create a sense of urgency. The leader can't allow the organization and its members to grow slow and complacent. Even when doing well, the leader keeps the focus on getting better and being alert to conditions that require adjustments to the strategy. • A strategic leader needs to make sure that everyone understands the strategy. Unless strategies are understood, the daily tasks and contributions of people lose context and purpose. Everyone might work very hard, but without alignment to strategy the impact is dispersed and fails to advance common goals. • A strategic leader needs to be a teacher. It is the leader's job to teach the strategy and make it a "cause." In order for strategy to work it must become an ever present commitment throughout the organization. This means that a strategic leader must be a great communicator. Everyone must understand the strategy and how it makes their organization different from others.
102. What are the terms on which Porter based his model for choosing competitive strategies? What are the three competitive strategies cited by Porter?
Answer: Porter frames the strategy analysis in terms of market scope of the product or service, and source of competitive advantage for the product or service. The three business-level strategies cited by Porter are: cost leadership, differentiation, and focus. A differentiation strategy seeks competitive advantage through uniqueness. A cost leadership strategy seeks competitive advantage by operating with lower costs than competitors. A focus strategy concentrates attention on a special market segment in the form of a niche customer group, geographical region, or product or service line.
35. A ________ strategy primarily identifies how a division or strategic business unit will compete in its product or service domain. A. branding B. business C. corporate D. functional E. marketing
B
37. The term ________ is often used to describe a business firm that is part of a larger enterprise. A. supplier alliance B. strategic business unit C. joint venture D. cash cow E. co-opetitor
B
41. The difference between a corporate strategy and a functional strategy is that: A. the former focuses on how a strategic business unit will compete in its product domain and the latter sets long-term direction for the total enterprise. B. the former sets long-term direction for the total enterprise and the latter guides activities within one specific area of operations. C. the former is concerned with formulating and implementing strategies while the latter is involved in crafting strategies to guide the allocation of resources. D. the former adopts standardized products and advertising for use worldwide and the latter seeks efficiencies of global operations with attention to local markets. E. the former adopts standardized products and advertising for use worldwide and the latter customizes products and advertising to best fit local needs.
B
44. ________ is the process of crafting strategies to guide the allocation of resources. A. Strategic analysis B. Strategy formulation C. Strategy implementation D. Strategic crafting E. Strategic outsourcing
B
51. Which of the following is true about operational objectives? A. They set forth an organization's purpose. B. They direct activities toward key performance areas. C. They represent what the strategy or underlying business model is trying to accomplish. D. They guide the behavior of organization members in ways consistent with mission and core values. E. They set standards for accomplishing the mission statement.
B
54. Aquamarine Inc. is the market leader of car batteries primarily because of its unique distribution system. The distribution system that has given the company an advantage over its competitors is an example of the company's ________. A. co-opetition strategy B. core competency C. technical skill D. emotional intelligence E. monopolistic power
B
58. If there are many competitors and the barriers to entry are low, the: A. industry is attractive. B. industry is unattractive. C. customers have low bargaining power. D. industry is mature. E. industry is not mature.
B
61. ________ analyzes business opportunities according to market growth rate and market share. A. Flanking strategy B. BCG matrix C. Five Forces analysis D. Strategy formulation E. Logistics plan
B
62. Businesses or products with high-market-shares in high-growth markets are referred to as ________ in the BCG Matrix. A. cash cows B. stars C. question marks D. dogs E. laggards
B
72. The preferred strategy for question marks is to grow or retrench because: A. they produce large profits and a strong cash flow, but have little upside potential. B. they may not generate much profit at the moment, the upside potential is there. C. the markets offer great growth opportunity given that they are new to the market. D. they are not only high performers in the present, but they offer similar potential for the future. E. they produce little if any profit, and must be supported so that they perform better.
B
74. The preferred strategy for dogs is: A. stability or modest growth. B. retrenchment of all dogs. C. decrease of current operations. D. to grow or retrench the dogs. E. growth and heavy resource investments.
B
78. Which of the following is a defining characteristic of growth through diversification? A. It involves extending business within the same business area. B. It involves acquisition of or investment in new and different business areas. C. It involves decreasing the size of operations. D. It involves selling company assets to pay creditors. E. It involves fixing specific performance problems.
B
79. Growth through ________ typically occurs by acquiring suppliers or distributors. A. strategic alliance B. vertical integration C. liquidation D. divestiture E. concentration
B
83. Which of the following strategies primarily tries to fix specific performance problems? A. Downsizing B. Turnaround C. Multidomestic D. Divestiture E. Co-opetition
B
85. Which of the following is a defining characteristic of the transnational strategy? A. It involves working with rivals on projects of mutual benefit. B. It seeks efficiencies of global operations with attention to local markets. C. It tries to fix specific performance problems. D. It involves expansion of the organization's current operations. E. It analyzes business opportunities according to market growth rate.
B
87. In a(n) ________ alliance, firms typically join together to sell and deliver products or services. A. supplier B. distribution C. contracting D. vertical E. outsourcing
B
97. Which of the following is a defining characteristic of a focused cost leadership? A. It offers a unique product to a special market segment. B. It seeks the lowest costs of operations within a special market segment. C. It analyzes business opportunities according to market growth rate. D. It focuses on substantial penetration of expanding markets. E. It involves decreasing the size of operations.
B
99. Process failure where the planning process becomes an end in itself, rather than a means to an end is referred to as ________. A. lack of participation error B. goal displacement C. failures of substance D. divestiture E. downsizing
B
100. ________ is the capability to inspire people to successfully engage in a process of continuous change, performance enhancement, and implementation of organizational strategies. A. Free-riding B. Scientific management C. Strategic leadership D. Social loafing E. Groupthink
C
34. A ________ strategy typically sets long-term direction for the total enterprise. A. branding B. business C. corporate D. functional E. marketing
C
47. Which of the following is the last step in the process of strategic management? A. Strategic analysis B. Strategy formulation C. Strategy implementation D. Strategic marketing E. Strategic outsourcing
C
49. ________ are broad beliefs about what is or is not appropriate behavior. A. Corporate subcultures B. Marketing values C. Core values D. Diversified values E. Functional values
C
55. Which of the following is a defining characteristic of a SWOT analysis? A. It examines the diversity at the work place and increases cohesiveness. B. It is based on the statistical principle of multivariate. C. It identifies things that inhibit performance. D. It determines the level of sales needed in order to breakeven. E. It is based on a year-to-year comparison of a firm's ratios.
C
56. Which of the following is true about oligopoly? A. There are several direct competitors. B. It ensures that there is no competition for resources. C. There are only a few competitors. D. It is seen most often in the fast foods industry. E. There are many substitute products.
C
69. One of the differences between stars and cash cows is that: A. cash cows produce high profits. B. the strategy for cash cows is retrenchment. C. cash cows have little upside potential. D. cash cows can easily penetrate expanding markets. E. the strategy for cash cows is growth.
C
70. Businesses or products with low-market shares in high-growth markets are referred to as ________ in the BCG Matrix. A. cash cows B. stars C. question marks D. dogs E. laggards
C
86. Ten Inc., an IT company, enters into a partnership with Turnover Finances. The terms of the agreement state that Ten Inc. would purchase the service of Turnover Finance's finance team for a period of five years. This is an appropriate example of a(n) ________ alliance. A. supplier B. distribution C. outsourcing D. co-opetition E. equity strategic
C
94. Which of the following is true of a cost leadership strategy? A. It seeks competitive advantage through uniqueness. B. It works best with the product differentiation strategy. C. To succeed, it requires tight cost and managerial controls. D. It concentrates on serving a unique market segment better than anyone else. E. It involves working with rivals on projects of mutual benefit.
C
98. A lack of participation error is most likely to occur when: A. the planning process becomes an end in itself. B. the performance of top management is not monitored. C. key persons are not included in the strategic planning. D. there is lack of efficiency in vertical communication. E. the cost leadership strategy and the differentiation strategy are used simultaneously.
C
38. A ________ strategy guides activities within one specific area of operations. A. branding B. divisional C. corporate D. functional E. business
D
39. Questions such as "How can we best utilize resources within a specific area of operations to implement our business strategy?" are typically asked while discussing the ________ strategy. A. branding B. divisional C. corporate D. functional E. business
D
42. The entire process of formulating and implementing strategies to accomplish long-term goals and sustain competitive advantage is referred to as: A. strategic analysis. B. strategy formulation. C. strategy implementation. D. strategic management. E. strategic outsourcing.
D
57. According to Porter, which of the following is one of the five forces that affect industry competition? A. Bargaining power of intermediaries B. Market share C. Market growth rate D. Substitute products E. Workplace diversity
D
60. ________ decreases the attractiveness of the market. A. Few competitors B. High barriers to entry C. Few substitute products D. High power of customers E. Low power of suppliers
D
65. The preferred strategy for stars is growth because they: A. produce large profits and a strong cash flow, but have little upside potential. B. may not generate much profit at the moment, but have upside potential. C. produce large profits and a strong cash flow for only a short span of time and must be nurtured. D. are not only high performers in the present, but they offer similar potential for the future. E. produce little if any profit, and must be supported so that they perform better.
D
71. The preferred strategy for question marks is: A. stability or modest growth. B. retrenchment of all question marks. C. decrease of current operations. D. growth and retrenchment of the question marks. E. growth and heavy resource investments.
D
73. Businesses or products with low-market shares in low-growth markets are referred to as ________ in the BCG Matrix. A. cash cows B. stars C. question marks D. dogs E. laggards
D
80. ________ is where a business closes and sells its assets to pay creditors. A. Concentration B. Diversification C. Vertical integration D. Liquidation E. Strategic alliance
D
52. A ________ begins with a systematic evaluation of the organization's resources and capabilities and focuses on identifying the organization's core competencies. A. functional strategy B. mission statement C. flanking strategy D. branding analysis E. SWOT analysis
E
59. Which of the following increases the attractiveness of a market? A. Low barriers to entry B. Many competitors C. Many substitute products D. High power of suppliers E. Few substitute products
E
64. The preferred strategy for stars is: A. stability or modest growth. B. targeting only the most promising of the stars. C. retrenchment of some of the stars. D. decrease of current operations. E. growth and further resource investments.
E
75. The preferred strategy for dogs is retrenchment because: A. they produce large profits and a strong cash flow, and the upside potential is there. B. they may not generate much profit at the moment, but the upside potential is there. C. the markets offer great growth opportunity given that they are new to the market. D. they are not only high performers in the present, but they offer similar potential for the future. E. they produce little if any profit, and they have low potential for future improvement.
E
77. Tulips Inc., a successful designer brand, has several outlets in the U.S. To push sales growth, Tulips has decided to focus more on its primary business and open up its branches in ten different countries. This approach taken by Tulips is an example of growth through ________. A. strategic alliance B. vertical integration C. liquidation D. diversification E. concentration
E
88. The strategy of working with rivals on projects of mutual benefit is referred to as ________. A. downsizing B. turnaround C. divestiture D. vertical integration E. co-opetition
E
13. In an attractive industry, there are many competitors.
False
15. In the context of the BCG matrix, the preferred strategy for Stars is retrenchment.
False
16. The BCG Matrix recommends making further resource investments in dogs.
False
18. In the context of vertical integration, when a business acquires suppliers, it is referred to as forward vertical integration.
False
2. The purpose of corporate strategy is to guide activities within one specific area of operations.
False
20. Restructuring by divestiture is mostly followed by organizations that are focused and not complex.
False
23. The transnational strategy focuses on working with rivals on projects of mutual benefit.
False
24. In a supplier alliance, firms join together to sell and distribute products or services.
False
26. It is advisable to combine a cost leadership strategy with a differentiation strategy to get better results.
False
28. When strategic control fails at the level of top management, it is supposed to kick in at the level of middle management.
False
29. Inside directors are chosen from the ranks of middle managers.
False
3. In single-product enterprises, business strategies are distinct from corporate strategies.
False
30. A strategic leader needs to reduce the sense of urgency so as to achieve the best results.
False
6. In the process of strategic management, strategic implementation is typically followed by strategic analysis.
False
7. Stakeholders are individuals and groups unaffected by the organization and its strategic accomplishments.
False
19. Bankruptcy under U.S. law protects a firm from creditors while management reorganizes to restore solvency.
True
21. Restructuring by turnaround often occurs along with a change in top management.
True
22. A globalization strategy adopts standardized products and advertising for use worldwide.
True
25. The strategic objective of the differentiation strategy is to attract customers who stay loyal to the firm's products and lose interest in those of its competitors.
True
27. Failures of substance in strategic management show up in poor analysis and bad strategy selection.
True
31. It is a strategic leader's job to teach the strategy and make it a "cause."
True
4. In a large conglomerate, while the enterprise on a whole will have a corporate strategy, each SBU will have its own business strategy.
True