BUS 195 (CHAPTER 5)

Under which condition would a differentiation strategy be especially effective? A) When there are few ways to differentiate the product or service that buyers perceive as having value B) When technological change is fast paced and competition revolves around rapidly evolving product features C) When most buyers use the product in the same way D) When many rival firms are following a similar differentiation approach E) When the differentiation base is easy or inexpensive for rivals to duplicate

B) When technological change is fast paced and competition revolves around rapidly evolving product features

In order to exploit common use of a well-known brand name, most companies favor related diversification strategies.

TRUE

Joint ventures tend to fail when managers who must collaborate daily in operating the venture are not involved in forming or shaping the venture.

TRUE

Limited availability of quality distributors is a reason why competitive advantage could result from forward integration.

TRUE

Long-term objectives represent the results expected from pursuing certain strategies.

TRUE

Market penetration, market development, and product development are intensive strategies.

TRUE

Product development is an appropriate strategy when an organization has successful products that are in the maturity stage of the product life cycle.

TRUE

The most effective differentiation bases are those that are hard or expensive for rivals to duplicate.

TRUE

A secondary buyout occurs when a corporation's shares are bought by the company's management and other private investors using borrowed funds.

FALSE

Although bankruptcy can be an effective type of retrenchment strategy, it does not allow firms to avoid major debt obligations and to void union contracts.

FALSE

Because a combination strategy bears no risk, many organizations pursue a combination of two or more strategies simultaneously.

FALSE

Chapter 13 bankruptcy is similar to Chapter 11, but available only to large corporations.

FALSE

There were far more global mergers and acquisitions in 2014 than in any year since A) 2007. B) 1999. C) 1985. D) 1967. E) 1951.

A) 2007.

Amazon's start of rapid delivery services in some U.S. cities is an example of which type of strategy? A) Forward integration B) Backward integration C) Horizontal integration D) Related diversification E) Unrelated diversification

A) Forward integration

What principle is based on the belief that the true measure of a really good strategist is the ability to solve problems? A) Managing by crisis B) Managing by objectives C) Managing by extrapolation D) Managing by exception E) Managing by hope

A) Managing by crisis

Which strategy seeks to increase market share for present products or services in present markets through greater marketing efforts? A) Market penetration B) Forward integration C) Market development D) Backward integration E) Product development

A) Market penetration

What occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity? A) Retrenchment B) A joint venture C) Liquidation D) Forward integration E) Divestiture

B) A joint venture

Which strategy should be implemented when a division is responsible for an organization's overall poor performance? A) Backward integration B) Divestiture C) Forward integration D) Cost leadership E) Related diversification

B) Divestiture

When two organizations of about equal size unite to form one enterprise, which of these occurs? A) Hostile takeover B) Merger C) Acquisition D) Leveraged buyout E) Friendly takeover

B) Merger

Which strategy is appropriate when an organization competes in an industry characterized by rapid technological developments? A) Retrenchment B) Product development C) Backward integration D) Liquidation E) Market penetration

B) Product development

Which strategy is effective when new, but related, products could be offered at highly competitive prices? A) Forward integration B) Related diversification C) Related integration D) Conglomerate diversification E) Unrelated diversification

B) Related diversification

When companies are hired by other companies to take over functional operations such as human resources, information systems, payroll, accounting, or customer service, this is called A) marketing. B) outsourcing. C) licensing. D) franchising. E) divestiture.

B) outsourcing.

According to Porter, which strategy offers products or services to a niche group of customers at the lowest price available on the market? A) Cost Leadership - Low Cost B) Cost Leadership - Best Value C) Focus - Low Cost D) Focus - Best Value E) Differentiation

C) Focus - Low Cost

Websites that sell products directly to consumers are examples of which type of strategy? A) Backward integration B) Product development C) Forward integration D) Horizontal integration E) Conglomerate diversification

C) Forward integration

Bankruptcy A) should never be used as a strategy. B) should be used only when one is legally forced to do so. C) can be an effective type of retrenchment strategy. D) should only be used for large firms. E) should only be used for small, private firms.

C) can be an effective type of retrenchment strategy.

Retrenchment would be an effective strategy when an organization A) has shrunk so quickly that major internal reorganization is needed. B) is one of the stronger competitors in a given industry. C) is plagued by inefficiency, low profitability, poor employee morale and pressure from stockholders to improve performance. D) has decided to capitalize on opportunities, maximize threats, take advantage of strengths and overcome weaknesses. E) does not have a clearly distinctive competence and has failed to meet its objectives and goals consistently over time.

C) is plagued by inefficiency, low profitability, poor employee morale and pressure from stockholders to improve performance.

Which of the following is noted in the text as a serious obstacle for many small business owners? A) A lack of business ethics B) An excess of employees and managerial staff C) A lack of experience in networking D) A lack of strategic-management knowledge

D) A lack of strategic-management knowledge

Long-term objectives are needed at which level(s) in an organization? A) Corporate B) Divisional C) Functional D) All of the above E) Corporate & divisional levels, but not functional level

D) All of the above

Which of these strategies is effective when the number of suppliers is small and the number of competitors is large? A) Conglomerate diversification B) Forward integration C) Concentric diversification D) Backward integration E) Horizontal diversification

D) Backward integration

The Family Farmer Bankruptcy Act of 1986 created which of the major types of bankruptcy? A) Chapter 7 B) Chapter 8 C) Chapter 9 D) Chapter 12 E) Chapter 13

D) Chapter 12

What refers to a strategy of seeking ownership of, or increased control over a firm's competitors? A) Forward integration B) Conglomerate diversification C) Backward integration D) Horizontal integration E) Concentric diversification

D) Horizontal integration

Which strategy generally entails large research and development expenditures? A) Market penetration B) Retrenchment C) Forward integration D) Product development E) Divestiture

D) Product development

Which of the following is NOT a reason joint ventures fail? A) Managers who must collaborate daily in operating the venture are not involved in forming or shaping the venture. B) The venture may not be supported equally by both partners. C) The venture may benefit the partnering companies but may not benefit the customers who then complain about poorer service or criticize the companies in other ways. D) Venture risk was minimized. E) The venture may begin to compete more with one of the partners than the other.

D) Venture risk was minimized.

The controversial practice of a company borrowing money simply to fund dividend payouts to itself is known as A) a leveraged buyout. B) retrenchment. C) first mover advantage. D) dividend recapitalization. E) dividend divestiture.

D) dividend recapitalization.

Staples 170 store closings in North America in 2014 is an example of A) divestiture. B) backward integration. C) liquidation. D) retrenchment. E) forward integration.

D) retrenchment.

Which strategy would be effective when the stockholders of a firm can minimize their losses by selling the organization's assets? A) Integration B) Differentiation C) Diversification D) Cost leadership E) Liquidation

E) Liquidation

Which of the following is NOT a guideline for when an organization should use an unrelated diversification strategy? A) When revenues derived from an organization's current products or services would increase significantly by adding the new unrelated, products B) When an organization's present channels of distribution can be used to market the new products to current customers C) When the new products have countercyclical sales patterns compared to an organization's present products D) When an organization competes in a highly competitive and/or a no-growth industry E) When existing markets for an organization's present products are not yet saturated

E) When existing markets for an organization's present products are not yet saturated

"If it ain't broke, don't fix it" refers to managing by crisis.

FALSE

A differentiation strategy can only be achieved with a large target market.

FALSE

A growing trend is for franchisers to buy out their part of the business from their franchisees.

FALSE

A cost leadership strategy can be especially effective when the market is composed of many price-sensitive buyers.

TRUE

A leveraged buyout occurs when a firm's management and other private investors use borrowed funds to buy out the firm's shareholders.

TRUE

A low-cost focus strategy offers products or services to a small range of customers at the lowest price available on the market.

TRUE

An acquisition occurs when a large organization purchases a smaller one or vice versa.

TRUE

An appropriate strategy when an organization has excess production capacity is market development.

TRUE

Chapter 9 bankruptcy applies to municipalities.

TRUE

Gaining ownership or increased control over distributors or retailers is called forward integration strategy.

TRUE

Companies are avoiding outsourcing more and more because it is more expensive than traditional methods and it does not allow a firm to concentrate on its core business.

FALSE

Divestiture has become a popular strategy for firms to become more diversified.

FALSE

Divestiture is selling all of a company's assets, in parts, for their tangible worth.

FALSE

If a firm's present suppliers are expensive and unreliable in meeting the firm's needs for parts, components, and/or raw materials, the firm should pursue a horizontal integration strategy.

FALSE

Research indicates that strategic management in small firms is more formal than in large firms.

FALSE

Strategic objectives include those associated with growth in revenues, growth in earnings, higher dividends, larger profit margins, and improved cash flow.

FALSE

Strategists in governmental organizations operate with far more strategic autonomy than their counterparts in private firms.

FALSE

The purchase of 80 percent of Procter & Gamble's pet-food brands by Mars Inc., best known for its M&M chocolates and its Mars and Snickers candy bars, is an example of related diversification.

FALSE

To succeed, a differentiation strategy depends on the existence of many different niches and segments within a market, thereby allowing a focuser to pick a competitively attractive niche suited to its own resources.

FALSE

Unrelated diversification may be an especially effective strategy when an organization's basic industry is experiencing increasing annual sales and profits.

FALSE

When the correlation between dollar sales and dollar marketing expenditures has historically been low, market penetration is an appropriate strategy.

FALSE