Strategic Management Chapter 7 Review

Which of the following is NOT a reason why the growth strategy is so seductive?

a large and growing firm attracts more acquisition offers

Market leaders typically at the peak of their product life cycle and usually able to generate enough cash to maintain their high share of the market are called

stars

Which external growth strategy is a partnership of two or more corporations or business units to achieve mutually beneficial strategic objectives?

strategic alliances

The purpose of vertical growth is to

take over a function previously provided by a supplier or by a distributor.

A firm that internally produces less than half of its own requirements and buys the rest from outside suppliers is what type of vertical integration?

taper integration

As defined by the text, synergy is the concept

that two firms can generate more profits together than separately.

Corporate parenting generates corporate strategy by focusing on

the core competencies of the parent corporation and on the value created from the relationship between the parent and its units

The growth share matrix of the Boston Consulting Group suggests that the excess cash being generated by "cash cows" should be used to fund

"question marks."

Which of the following is NOT true regarding multi-point competition?

-Procter & Gamble, Kimberly-Clark, Scott Paper and Johnson & Johnson engage in multi-point competition. -Multi-point competition may actually slow the development of hypercompetition in an industry. -Managers behave more conservatively toward multi-market rivals, when they realize that an attack on a market leader's position could result in a response in another market. -In one industry, multi-point competition resulted in firms being less likely to exit a market.

Which of the following is NOT one of the advantages of portfolio analysis?

It provides the basis for impartial objectivity from which to make decisions.

Which of the following is NOT one of the limitations of portfolio analysis?

It relies too heavily on objective judgments.

The range of scores for the business strength axis of the GE Business Screen is from

1.00 (weak) to 5.0 (strong).

The line separating areas of high and low relative competitive position as gained from the BCG growth share matrix method, is set at

1.5

Which strategy did KLM choose when it joined forces with Northwest Airlines?

A horizontal integration strategy.

Which one of the following is NOT a characteristic of a firm that has chosen a captive company strategy?

Probably most appropriate for a company with a strong competitive position in a growing industry.

Which of the following is NOT descriptive of the characteristics of conglomerate diversification?

Appropriate for companies wishing to take advantage of their competitive position strengths as they diversify out of an unattractive industry.

The stability strategy is appropriate for all BUT which one of the following circumstances?

Appropriate when the industry is in decline.

The first phase of a turnaround strategy is

contraction

What is a turnaround strategy?

Emphasizes improving operational efficiency and is appropriate when a corporation's problems are pervasive, but not yet critical.

Which of the following is NOT one of the limitations of the BCG Growth Share Matrix?

There are too many aspects of overall competitive position included.

Which one of the following is NOT one of the four steps recommended for plotting of products or SBUs on the GE Business Screen?

Use the growth rate as the criteria measurement for success.

According to transaction cost economics, which of the following is NOT a reason for a firm to prefer vertical integration over contracting to purchasing supplies or services in the open market?

a company's management does not want to rely on outsiders for important raw materials.

An MNC uses which international strategy for entering a foreign market by purchasing another company already operating in the area developing synergistic benefits gained from acquiring strong complementary product lines and a good distribution network?

acquisitions

Which external growth strategy occurs when a corporation is completely absorbed as an operating subsidiary or division of the acquiring firm?

acquisitions

Which strategy specifies the firm's overall direction in terms of its general orientation toward growth, the industries or markets in which it competes, and the manner in which it coordinates activities and transfers resources among business units?

corporate

Strategies that include the flow of financial and other resources to and from a company's product lines and business units can be referred to as

corporate strategies

he purchase of Carroll's Foods for its hog-growing facilities by Smithfield Foods, the world's largest pork processor, is an example of

backward integration

In many cases, _____ integration is more profitable than _____ integration.

backward, forward

Which strategy involves giving up management of the firm to the courts in return for some settlement of the corporation's obligations?

bankruptcy

A disadvantage of vertical integration is that it

creates exit barriers

Products that typically bring in far more money than is needed for maintenance of their market share are called

cash cows

he most logical strategy for a corporation having a strong competitive position possessing a high market share in a highly attractive industry is

concentration

Adding a related or complementary product to a corporation's business units is called

concentric diversification

Growth through diversification out of an industry into an unrelated industry is called

conglomerate diversification.

Which kind of corporate strategy deals with the firm's overall orientation toward growth?

directional strategy

Those products with low market share that do NOT have the potential to bring in much cash are called

dogs

An MNC uses which international strategy for entering a foreign market by simply shipping goods produced in the company's home country to other countries for marketing to minimize risk and to experiment with a specific product?

exporting

With conglomerate diversification, the focus is on

financial considerations

The ability for Nike to manufacture its own shoes and then build stores for distribution is an example of

forward integration

When a firm internally makes 100% of its key supplies and completely controls its distributors, this is known as

full integration

Which one of the following directional strategies is most frequently used in corporations?

growth

The BCG growth share matrix has been criticized because

high growth markets may not always be the best markets.

A firm's expansion into other geographic locations and/or increasing the range of products and services offered to current markets is called

horizontal growth

corporate strategy that cuts across divisional boundaries to build synergy across business units to improve the competitive position of one or more business units is called

horizontal strategy

The controversy surrounding external versus internal growth finds

internal growth appears to be superior financially to external growth.

The GE Business Screen has been criticized because

it can get quite complicated and cumbersome.

In the Boston Consulting Group's growth share matrix, the relative competitive position of a product, division, or corporation is defined as

its market share divided by that of the largest other competitor.

An MNC uses which international strategy for entering a foreign market by associating itself with a firm in the host country or a government agency in that country to combine resources and expertise needed for the development of a new product or technologies?

joint ventures

Which strategy is the termination of the firm because it is in an unattractive industry and the company is too weak to be sold as a growing concern?

liquidation

An agreement between two separate firms to provide agreed-upon goods and services to each other for a specified period of time is known as a(n)

long term contract

A relative market share ratio above 1.0, calculated by the Boston Consulting Group's growth share matrix method, belongs to the

market leader.

According to the BCG growth share matrix, the key to success is

market share

Which of the following is NOT defined by GE as one of the variables forming industry attractiveness?

market share

Which of the following is defined by GE as one of the variables forming business strength/competitive position?

market share

Which external growth strategy involves two or more corporations joining in a stock exchange and from which only one corporation survives?

mergers

Which of the following strategies was being used when Allied Corporation and Signal Companies formed Allied Signal?

mergers

Business firms that compete with each other not only in one business unit, but in a number of related business units are said to be engaging in

multipoint competition.

Which strategy is most appropriate for a company in an industry in which the future is expected to continue as an extension of the present?

no change strategy

According to the text, 75% of a company's value is derived from

organizational knowledge.

The collection of unused resources of a company is known as

organizational slack

When resources are purchased from outsiders through long-term contracts instead of being made in-house, this process is referred to as

outsourcing

According to Campbell, Goold, and Alexander in their parenting-fit matrix when parent companies create more value than any of their rivals would if they owned the same businesses, they have

parenting advantage.

Which kind of corporate strategy deals with the manner in which the firm coordinates activities and transfers resources and cultivates capabilities among product lines and business units?

parenting strategy

Which strategy is most appropriate as a temporary strategy to enable a corporation to consolidate its resources after prolonged rapid growth in an industry now facing an uncertain future?

pause/proceed with caution strategy

One of the most popular aids to developing corporate strategy in multi-business corporations views business units in terms of the cash they generate is called

portfolio analysis.

Which kind of corporate strategy deals with the coordination of cash flow among business units?

portfolio strategy

With concentric diversification, the focus is on

product-market synergy

An MNC uses which international strategy for entering a foreign market by combining the higher labor skills and technology available in the developed countries with the lower cost labor available in the developing countries?

production sharing

Which strategy is descriptive of a corporation in a mature industry facing a drop in its attractiveness, opting to decrease short term discretionary expenses to maintain profits at a certain level?

profit strategy

A firm which gets most of its requirements from an outside supplier that is under its partial control is what type of vertical integration?

quasi integration

According to the BCG Growth Share Matrix, new products which need a lot of cash for development and with the potential for success are called

question marks

One benefit of a U.S. company entering a joint venture with an international firm is the joint venture

reduces the risks of expropriation.

Which strategy is most appropriate for a corporation having a weak competitive position regardless of the industry's attractiveness, resulting in poor performance, decreased sales and lost profits?

retrenchment strategy

The hope of which strategy is that another company will have the necessary resources and determination to return the company to profitability?

sell out

All of the following factors reflect transaction costs EXCEPT

selling a market agreement

Research comparing concentric with conglomerate diversification concludes that

the relationship between relatedness and performance is curvilinear.

The theory that proposes that vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying goods on the open market becomes too great is known as

transaction cost economics.

The strategy which takes place in two basic phases of contraction and consolidation is

turnaround.

In international dealings, turnkey operations are

typically contracts for construction of operating facilities in exchange for a fee.

Ford Motor Company's use of company resources to build its River Rouge Plant outside of Detroit so that iron ore could enter into one end of the plant and a finished automobile could exit out of the other end is called

vertical growth

One study of various growth projects revealed that the most successful growth strategy was

vertical growth

In international dealings, green field development is/are

when a corporation chooses to build a facility from scratch allowing it the freedom to design the plant, choose suppliers, and hire its work force.

Management contracts are used in international dealings

when an MNC has a large amount of management talent available and chooses to use its personnel to assist a firm in a host country for a specified fee and period of time.