Strategic Management Final Review Questions

Management's most powerful tool for winning employee commitment to good strategy execution and operating excellence is

a system of rewards and incentives tied tightly to the achievement of the targeted strategic and financial performance.

The means of entering a new business by buying an existing business is referred to as ______.

acquisition

Actions that would NOT help to rectify a company's unethical and greed-driven culture encompass

adopting accounting principles that make the company's financial performance appear better than it really is.

When activist groups criticized Nike for the working conditions in the Asian factories that produced Nike footwear, company chairman Phil Knight ______.

began to monitor working conditions in the factories that made Nike products

Changing a problem culture

is one of the toughest managerial tasks because of the heavy anchor of ingrained behaviors and ways of doing things.

The primary objective of deploying a defensive strategy is to

lower the risk of being attacked, to weaken the impact of any attack that occurs, and to influence challengers to aim their efforts at other rivals.

Companies practicing unrelated diversification overwhelmingly enter new businesses by ______.

obtaining an established company

Practices companies use to recruit, train, and retrain the most capable people they can find involve all of the following except

putting employees through short-term training programs, but focusing on the top 10 percent and providing them with challenging, interesting, and skill-stretching assignments.

The competitive advantage opportunities that a global competitor can gain by dispersing performance of its activities across many nations include all of the following, except

centralizing value chain activities to foster just-in-time inventory activities.

Adherents of ethical universalism are likely to believe that ______.

common agreement about right and wrong is the basis for ethical standards that apply to all businesspeople

A greenfield venture strategy involves

creating a subsidiary business by setting up all aspects of the operation from the ground up

What supports competitive offensives in one market with resources and profits diverted from operations in another market?

cross-market subsidization

Short-termism can be defined as the tendency for managers to ______

focus excessive attention on near-term performance objectives

Short-termism can be defined as the tendency for managers to ______.

focus excessive attention on near-term performance objectives

The primary reason that Facebook Inc. decided to expand outside its United States home market was to

gain access to new customers for the company's products/services.

The best targets for offensive-minded firms to challenge are

market leaders that are vulnerable.

An environmental sustainability strategy can enhance a company's competitive advantage by ______.

promoting the company's reputation among environmentally conscious consumers

Business process reengineering involves

radical redesigning and streamlining how an activity is performed.

After a evaluating the strength, attractiveness, and fit of a diversified company's strategy, the next move is to ______.

rank the performance potential of the businesses

The strategic options for expansion into foreign markets do not include

relying on home country governments to restrict imports via raising tariffs and local content requirements

When a firm with a related diversification strategy has businesses that match specialized resource requirements at points along their value chains that are critical for the business's market success, they are said to have

resource fit

Self-dealing occurs when managers

take advantage of their position to further their own private interests rather than those of the firm.

Unrelated diversification strategies

tend to have more overall failures than successes.

Short-termism is defined as

the tendency for managers to focus on immediate performance objectives at the expense of longer-term strategic objectives.

According to the concept of ethical universalism, fundamental concepts of right and wrong ______.

transcend culture, society, and religion

Which are examples of opportunities for strategic fit?

transferring specialized expertise from the value chain of one business to another, Exploiting the common use of a well-known brand name, Sharing costs between businesses by combining their related value chain activities into a single operation

Which of the following statements are true about a successful diversification effort?

It must give shareholders value that they cannot get by purchasing different stocks on their own, It must add long-term economic value for shareholders

Which of the following allow businesses with strategic fit in supply chain activities perform better together?

Obtaining volume discounts on incoming components, Sharing logistical resources, Cooperating with common supply chain partners

Which of the following have been cited as reasons why a company has a moral obligation to act in a manner that benefits all stakeholders?

Ordinary decency, Civic-mindedness

Which of the following is true of economies of scope?

They come directly from strategic fit along the value chains of related businesses.

The school of ethical universalism holds that

the most fundamental conceptions of right and wrong are universal and apply to members of all societies, all companies, and all businesspeople.

Diversified companies that are able to create more value in their businesses than other diversified companies have what is called

a parenting advantage.

A primary advantage of a centralized organization structure is that it

allows for quick decision making and strong leadership in crisis situations.

The decision to diversify should begin with ______

an economic justification

Economies of scope

are cost reductions that flow from strategic fit along the value chains of related businesses.

The three tests for judging whether a particular diversification move can create value for shareholders are the

attractiveness test, the cost of entry test, and the better-off test.

The main disadvantage of using a franchising strategy to pursue opportunities in foreign markets is

maintaining quality control

Businesses are said to be related when ______.

their value chains exhibit competitively important cross-business commonalities

In a world of ethical relativism, ______.

there are few absolutes for judging the conduct of a company in various markets

Strategic offensives should be based on

those areas of strength where the company has its greatest competitive advantage over targeted rivals.

The drawbacks of an unrelated diversification strategy include

very demanding managerial requirements and limited competitive advantage potential.

The basic tenet of the school of ethical relativism states that

what constitutes ethical or unethical behavior on the part of local businesspeople is properly governed by local ethical standards rather than the standards that prevail in other locations.

Companies practicing unrelated diversification overwhelmingly enter new businesses by ______

obtaining an established company

In general, business ethics consists of ______.

the application of ethical principles and standards to the actions and decisions of business organizations

Business ethics can be defined as

the application of ethical principles and standards to the actions and decisions of business organizations and the conduct of their personnel.

A corporate social responsibility strategy can be defined as ______.

the combination of socially responsible endeavors a company elects to pursue

You are considering employment opportunities after graduation. What would you look for in identifying a prospective employer's company's culture?

the company's atmosphere, spirit and character that constitutes the work climate and the values, business principles, and ethical standards that company management preaches and practices

Which of the following is a reason for a business to establish an ethical business strategy?

To provide a competitive advantage, serving the self-interest of shareholders

Conditions that create first-mover advantages include all of the following except

the costs of pioneering are high relative to the benefits accrued.

Which statement is true concerning strategic fit?

It allows cross-business sharing of resources that enable value chain activities

True or false: Ethical principles in business differ substantially from general ethical principles in society

False

Where can cross-business strategic fit exist?

In supply chain activities, At various points along the value chain, In customer service activities

Which of the following are terms that refer to diversification by starting a new business subsidiary from scratch?

Internal development, Corporate venturing, New venture development

Related diversification strategies are strong when built upon sharing

competitively valuable resources.

Which of the following would be an example of a company shifting the environmental cost of its business onto society?

A manufacturer disposes of waste in public waters that must be treated and cleaned with tax revenues.

Which of the following statements about corporate social responsibility (CSR) are true?

CSR strategies are often linked to a company's core values, Many firms organize their CSR strategies around themes that are consistent with their production or marketing strategies, "Corporate citizenship" is a term commonly used to describe CSR initiatives

Adherents of the concept of ethical relativism believe which of the following?

Given actions are ethically right or wrong depending on the ethical norms of the country in which they take place, Holding a common template for judging the ethics of business actions everywhere is ethically problematic

Unrelated businesses

have dissimilar value chains and resource requirements with no competitively important cross-business commonalities at the value chain level.

In order to be a good market for a company to be in, an industry should ______.

pass the industry attractiveness test

A cultural norm at a company can be understood as ______.

the generally accepted methods of doing business on a day-to-day basis

Coca-Cola's August 2018 move to acquire Costa Coffee, an international coffee chain, meant that the acquired company had to first pass which three Tests of Corporate Advantage?

the industry attractiveness test, the cost-of-entry test, and the better-off (synergy) test

A greenfield venture in a foreign market is one

where the company creates a wholly owned subsidiary business by setting up all aspects of the operation upon entering the market from the ground up

Diversification is not really viewed as a success unless it _____

yields added long-term economic value for shareholders

The "triple bottom line" refers to what three performance metrics a company should simultaneously succeed in?

economic, social, and environmental

When ethical principles are deeply ingrained in a company's culture, ______.

employees tend to abide by the company's business principles and values

Factors that do not make competing across national borders more difficult than competing domestically include

the difficulty in achieving strategic fit in sales and marketing activities

Which the following practices increase the likelihood that a company will pursue unethical business strategies?

Putting pressure on company managers to meet short-term targets, Employing faulty oversight of daily business practices,

A competitively valuable strategic fit is not derived from

restricting cross-business linkages among value chain activities

Diversifying into new industries

should be explored when a single-business company encounters dwindling opportunities in its principal business.

Ethical business strategies ______.

typically arise from managers with strong moral characters

Corporate brands that do not have a connotation of any specific type of product are known as

umbrella brands.

Corporate parents effectively contribute to the success of their businesses by

utilizing popular umbrella brands, providing general resources that lower their operating costs, providing general resources that lower their operating costs.

When is outsourcing not beneficial?

when internal control over an activity is deemed essential

The school of ethical relativism holds that

when there are cross-country or cross-cultural differences in what is deemed ethical or unethical in business situations, it is appropriate for local moral standards to take precedence over what the ethical standards may be elsewhere.

Which of the following are questions to ask when evaluating industry attractiveness?

Does each industry the company has diversified into represent a good market for the company to be in, How appealing is the whole group of industries in which the company has invested, Which of the company's industries are most attractive?

_________ is when a company sells its goods in foreign markets at prices that are below the prices at which it normally sells in its home market or well below its full costs per unit

Dumping practices

Which of the following actions can be effective ways to stop companies that practice socially irresponsible behaviors?

Enacting legislation that makes the activity illegal, Boycotting the companies' products and services, Publicizing the bad behavior of companies

True or false: Ethical principles in business differ substantially from general ethical principles in society.

False

Why is acquisition considered to be an attractive approach for companies seeking diversification into another industry?

It is quicker than trying to launch a brand-new operation, offers an effective way to hurdle entry barriers, and allows the acquirer to move directly to the task of building a strong position in the target industry.

Which of the following are the ways a company can enter a new business?

Joint ventures, Acquisition, Internal startup

Which of the following statements concerning the relationship between business and the environment is true?

Maintaining the finite supply of the world's natural resources is crucial to the long-term economic interests of corporations.

Which of the following statements are true of unrelated diversification?

Most management teams are not capable of effectively managing a diversified group of unrelated businesses, Problems can occur when corporate management makes decisions for businesses they do not know well, A very small number of unanticipated problems or mistakes can have a major negative effect on corporate earnings

In order to pass the three tests of corporate advantage, what must executives do?

Negotiate favorable acquisition prices, Diversify into industries where the businesses can produce consistently good earnings and return on investment, Do a superior job of corporate parenting via high-level managerial oversight

In what ways do economic risks differ from political risks?

Political risks stem from instability in national governments, while economic risks stem from the stability of a country's monetary system, and its economic and regulatory policies

Which of the following statements are true of multibusiness diversification strategies?

Some multibusiness enterprises are diversified into unrelated areas but have a group of related businesses within each area, Some companies are narrowly diversified around two to five related or unrelated businesses, Combination related-unrelated diversification strategies are attractive to companies with a mix of valuable competitive assets

Teresa has been assigned to research the export strategies of several global companies. She would consider a good example of a dominant export strategy to be

The United States, which is home to the world's three largest producers and suppliers of artificial heart valves.

Which of the following is true about joint ventures?

They are usually short-lived, ending as soon as the partners decide to part ways

Which of the following are true statements concerning related businesses?

They have compatible value chain activities, They have similar resources and capabilities, They can be combined to perform better than the sum of the individual businesses

What are characteristics of ethical business managers?

They understand that there is a difference between simply having a code of ethics and seeing that the company follows it, They provide an example to other employees by consciously living by the company's business principles

Which set of standards takes precedence in integrative social contracts theory?

Universal ethical norms

Which of the following are actions a company should take according to integrative social contracts theory?

Uphold a small number of universal ethical principles that are applicable in all situations, Adhere to local values and customs that define the boundaries of ethical behavior

Short-termism at a company can do which of the following?

Weaken the company's brand, Undermine activities that promote long-term success

Examining which of the following are ways to determine whether a company is actually guided by its official code of ethics?

Whether the company adheres to the code of ethics when crafting strategy, The extent to which daily operations follow the code of ethics

Which are broad categories of action for crafting strategic moves to improve a diversified company's overall performance?

Widening the company's business scope by making new acquisitions in new industries, Divesting certain businesses and retrenching to a narrower base of business operations, Sticking closely with the existing business lineup and pursuing opportunities that those businesses present

In response to Nike's efforts to restore its reputation, human rights activist groups have ______.

continued to monitor and criticize Nike

Research has shown a link between product-boycott announcements and ______.

declining stock prices

The most important strategic issue for companies to resolve when competing in international markets is

determining whether to standardize or customize the company's offerings

The business case for why companies should act in a socially responsible manner includes such reasons as it

generates internal operating benefits (as concerns employee recruiting, workforce retention, employee morale, and training costs).

What is it called when a diversified company can add value by shifting capital from business units generating free cash flow to those needing additional capital to expand and realize their growth potential?

internal capital market

Determining the competitive value of strategic fit in diversified companies ______.

is important in evaluating their related diversification strategies

Corporate restructuring strategies

radically alter the business lineup by divesting poor performers and acquiring new promising businesses.

Which of the following statements about corporate culture is true? Multiple choice question.

Company culture can be a powerful mechanism for communicating the degree to which a company is committed to its values.

Some people have argued that there is an implied social contract between a business and the members of society, according to which of the following?

A business has a moral responsibility to promote the general welfare and avoid doing harm, The members of society agree not to unreasonably restrain a business's pursuit of fair profit.

A good resource fit would include solid parenting capabilities in companies that pursue which of the following?

An unrelated diversification strategy

What questions can be answered by determining the competitive value of strategic fit in diversified companies?

Are the cost savings associated with economies of scope likely to give one or more businesses a cost-based advantage, How much competitive value will come from the cross-business transfer of skills, technology, or intellectual capital, Will leveraging a potent umbrella brand or corporate image strengthen the businesses and increase sales?

Which of the following are among the four questions that need to be asked when determining how best to enter a new business?

Are there entry barriers to overcome, Is speed an important factor in the firm's chances for successful entry, Which is the least costly mode of entry, given the company's objectives?

Which of the following statements about corporate culture is true?

Company culture can be a powerful mechanism for communicating the degree to which a company is committed to its values

Which of the following actions should a company consider, according to the nine-cell attractiveness-strength matrix?

Concentrate resources in businesses that possess higher degrees of attractiveness and competitive strength, Be cautious about investing in companies located intermediately on the grid, Remove resources from ventures that are low in attractiveness and strength unless they offer superior profit or cash flow opportunity

Differences in which of the following cause variations in ethical standards across cultures?

Core values, Religious beliefs, Social customs

Which of the following statements accurately reflect how ethical standards vary among different cultures?

European managers, in contrast to Chinese managers, tend to emphasize business standards that protect workers' freedom of political opinion, Japanese managers, in contrast to managers in other countries, are likely to highly value showing respect for the collective good of society

Steps involved in assessing the positive and negative aspects of a diversified company's strategy and determining how to improve performance include which of the following?

Evaluating the individual and group attractiveness of the industries the company has diversified into, Determining if the firm's resources fit the requirements of its current business lineup, Determining the competitive strength of the company's business units

Companies that place little importance on operating in a socially responsible manner may be vulnerable to criticism from pressure groups using which of the following tactics?

Generating negative publicity in the media, Promoting product boycotts

Which of the following statements about official codes of ethical conduct is most accurate?

In the United States, publicly traded companies must have an official code of ethics or explain why they do not have one.

Which of the following are benefits of acquisition?

It allows access to hard-to-find resources and capabilities that work well with those of the acquiring company, It is quicker than trying to launch a new operation, It is a useful way to get over entry barriers, such as building brand awareness.

Which statement is true concerning the pursuit of growth through unrelated diversification?

It can be misguided if the growth is not profitable growth.

What are the effects of cultural pressure at a company to hit goals at all costs?

It creates an environment in which workers have license to pursue any profitable strategy they can get away with, It can cause even honorable employees to behave unethically, It virtually ensures that unethical employees will minimize the importance of observing ethical standards

Which of the following are true of the nine-cell attractiveness-strength matrix?

It identifies the business strength of businesses, It identifies the industry attractiveness of businesses

Which of the following are true of the nine-cell attractiveness-strength matrix?

It identifies the business strength of businesses, It identifies the industry attractiveness of businesses, It helps diversified companies allocate resources among their businesses

Which of the following best describes the multidivisional structure?

It is a decentralized structure consisting of a set of operating divisions organized along business, customer, product, or geographic lines, and central corporate headquarters.

What is a downside to an unethical business strategy?

It reflects badly on the character of the company and its employees.

Which of the following would be misguided reasons for pursuing unrelated diversification?

Risk reduction, Reducing earnings volatility, Building shareholder value, Boosting managerial compensation

Which of the following are strategic options for increasing a corporation's overall success?

Sticking closely with the existing business lineup and pursuing opportunities presented by these businesses, Broadening the scope of diversification by entering additional industries, Retrenching to a narrower scope of diversification by divesting poorly performing businesses

What are likely consequences of ethical strategies for a business?

Sustaining the reputation of the company, Winning the approval of suppliers, employees, and investors

Which of the following statements are true concerning the thinking that the "business of business is business, not ethics"?

That type of thinking has been apparent in a number business scandals covered in the media, That type of thinking is dangerous because it increases the likelihood that a company will adopt unethical strategies

Which of the following statements are true concerning the ranking of a diversified company's business units from best to worst?

The position of different businesses in the nine-cell matrix is a good criteria for identifying high-opportunity and low-opportunity businesses, Future revenue and earnings for fast-growing industries usually look superior to those for slow-growing industries,The rankings help high-level executives prioritize businesses for resource support and capital investment

In the business world, what does the term "sustainability" refer to?

The relationship of a company to its environment and its use of natural resources, The concept of corporate social responsibility

Which of the following are drawbacks of acquisition?

There can be high integration costs, Integration of the company into the existing firm can be time consuming, There are often excessive premiums

Internal development of a new business is a good idea when which of the following conditions are met?

There is plenty of time to start the business, The parent company has the in-house resources needed to launch the company, It is cheaper to enter internally than through an acquisition

Which of the following statements are true of economies of scope?

They are available only to firms engaging in related diversification, They are a distinct concept from economies of scale, They result from strategic fit among related businesses, allowing the sharing of resources among diversified businesses

In an unrelated diversification strategy, managers must make sure acquisition candidates have which of the following characteristics?

They are in an industry with attractive growth potential, They meet corporate targets for profitability and return on investment, They are big enough to significantly contribute to the parent company's bottom line

Why might business managers act ethically even when they are not deeply committed to ethical principles?

They recognize the risks associated with unethical strategies,They wish to avoid scandal and disciplinary action, They hope to prevent their staff from thinking negatively of them

Entering a new business via a joint venture can be useful in which of the following situations?

When diversification entails operations in a foreign country, When an opportunity in a new industry requires more know-how than one company has alone, When an opportunity is too complicated or risky for one company to attempt alone

Imagine that you are the CEO of a discount clothing retailer that is considering broadening the company's business scope, by building positions in new related or unrelated businesses. You would be advised to pursue a diversification strategy for all of the following reasons except:

Your company's top management wants to increase its compensation.

The core concept of corporate social responsibility (CSR) can best be expressed as

a company's duty to operate in an honorable manner, provide good working conditions for employees, encourage workforce diversity, be a good steward of the environment, and actively work to better the quality of life in local communities and in society at large.

A diversified company in which one core business accounts for 50% to 80% of total revenues and other businesses account for the remainder is known as ______.

a dominant-business enterprise

The environmental sustainability strategies of Ford and Green Mountain Coffee Roasters have shown that ______.

a significant number of consumers will buy a company's products in part to encourage environmentally sustainable business practices`

CSR strategies that are directed at improving a company's "triple bottom line" focus on what types of performance metrics?

economic, environmental, and social metrics

A company can best accomplish diversification into new industries by

acquiring a company already operating in the target industry, creating a new business from scratch, or forming a joint venture with one or more companies to enter the target industry.

According to the school of ethical universalism, the most important concepts of what is right and what is wrong

are universal and transcend culture, society, and religion.

One of the most widely used and effective tools for gauging how well a company is executing pieces of its strategy entails

benchmarking the company's performance of activities and business processes against "best-in-industry" performers.

Strategic analysis of diversified companies _____.

builds on the same ideas and techniques used for analyzing single-business companies

The crafting of strategic moves to improve a diversified company's overall performance ______.

can be placed into four broad categories of action

Choosing how best to enter a new business

depends partially on determining the least costly mode of entry.