Chapter 5 - Strategies in Action

What kind of strategy is retrenchment? A) A turnaround strategy B) An expansion strategy C) A diagonal strategy D) An intensive strategy E) An offensive strategy

A) A turnaround strategy

The form of bankruptcy in which all the organization's assets are sold in parts for their tangible worth is A) Chapter 7. B) Chapter 8. C) Chapter 9. D) Chapter 11. E) Chapter 13.

A) Chapter 7.

Under which strategy would you offer products or services to a wide range 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

A) Cost Leadership — Low Cost

Long-term objectives are needed at which level(s) in an organization? A) Corporate B) Divisional C) Functional D) All of the above E) None of the above

D) All of the above

Liberty Media Corp. selling its Starz television network is an example of which type of strategy? A) Related diversification B) Unrelated diversification C) Retrenchment D) Divestiture E) Liquidation

D) Divestiture

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

B) Related diversification

Which strategy should an organization use when its products are currently in the declining stage of the product's life cycle? A) Divestiture B) Related diversification C) Backward integration D) Unrelated diversification E) Retrenchment

B) Related diversification

Financial objectives involve all of the following EXCEPT A) growth in revenues. B) larger market share. C) higher dividends. D) greater return on investment. E) a rising stock price.

B) larger market share.

Which chapter of the bankruptcy code applies to municipalities? A) Chapter 7 B) Chapter 8 C) Chapter 9 D) Chapter 12 E) Chapter 13

C) Chapter 9

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

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

IKEA Group investing $1.9 billion in India to open 25 new stores between 2013 and 2018 is an example of which type of strategy? A) Forward integration B) Backward integration C) Horizontal integration D) Market development E) Product development

D) Market development

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

When a domestic company first begins to export to India, it is an example of A) horizontal integration. B) backward integration. C) forward integration. D) concentric diversification. E) market development.

E) market development.

Divestiture has become a popular strategy for firms to focus on their core business and become more diversified.

False

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

False

Divestiture would be an appropriate strategy when a need exists to introduce a new technology quickly.

False

Horizontal integration is an appropriate strategy when the competitors of an organization are doing poorly.

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

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

There are four basic types of diversification: concentric, conglomerate, forward, and backward.

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

A best-value strategy offers products or services to a wide range of customers at the best price-value available on the market.

True

A cost leadership strategy can be especially effective when most buyers use the product in the same ways.

True

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

True

Chapter 9 bankruptcy applies to municipalities.

True

First mover advantages refer to the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms.

True

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

True

Market development includes introducing present products into new geographic areas.

True

Retrenchment and turnaround are the same strategy.

True

Selling a division or part of an organization is called divestiture.

True

Stockton, a city in California, declared Chapter 9 bankruptcy in 2012 to avoid having to close key functions such as their police and fire departments.

True

Strategic objectives include larger market share, quicker on-time delivery than rivals, shorter design-to-market times than rivals, lower costs than rivals, and wider geographic coverage than rivals.

True

The practice of a firm borrowing money to fund dividend payouts to itself is known as dividend recapitalization.

True

The strategic-management process is just as vital for small companies as for large companies.

True

Unrelated diversification is an appropriate strategy when an organization's present channels of distribution can be used to market the new products to current customers.

True

White knight is a term that refers to a firm that agrees to acquire another firm when the other firm is facing a hostile takeover by some company.

True

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

Which term refers to selling a division of an organization? A) Joint venture B) Divestiture C) Concentric diversification D) Liquidation E) Horizontal integration

B) Divestiture

Which level of strategy is most likely NOT present in small firms? A) Company B) Functional C) Divisional D) Operational E) All of the above are present in small firms.

C) Divisional

Integration strategies are sometimes collectively referred to as which of the following categories of strategies? A) Horizontal integration B) Diversification C) Vertical integration D) Stuck-in-the-middle E) Hierarchical integration

C) Vertical integration

Jiffy Lube International would be a good example of a firm seeking the best-value focus strategy.

False

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

False

Secondary buyouts decreased substantially from 2011 to 2012.

False

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

False

While outsourcing manufacturing, tech support, and back-office work is quite common, it is still unheard of for companies to outsource product design.

False

Franchising is an effective means of implementing forward integration.

True

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

True

Horizontal integration is seeking ownership or increased control over competitors.

True

In a turbulent, high-velocity market, a lead-change strategy is best whenever the firm has the resources to pursue this approach.

True

Most companies favor related diversification strategies in order to exploit common use of a well-known brand name.

True

The nonprofit sector is America's largest employer.

True

The number of hostile takeovers is on the rise.

True

Today McDonald's owns about ________ percent of its restaurants. A) 9 B) 20 C) 50 D) 67 E) 89

D) 67

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

True

Liquidation is often appropriate when retrenchment and divestiture have failed.

True

Deutsche Bank's entrance into the casino business in Las Vegas is an example of related diversification.

False

Differentiation guarantees competitive advantage.

False

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

Chapter 7 bankruptcy is a liquidation procedure used only when a firm sees no hope of being able to operate successfully or to obtain necessary creditor agreement.

True

Cooperative arrangements and joint ventures are being used increasingly.

True

For consumers who are price-sensitive, cost leadership emphasizes producing standardized products at a very low per-unit cost.

True

Forward integration strategy is especially effective when the availability of quality distributors is so limited as to offer a competitive advantage to those firms that integrate forward.

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

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

True

Objectives provide direction and allow for organizational synergy.

True

Product development is a strategy that seeks increased sales by improving or modifying present products or services.

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

Public enterprises generally cannot diversify into unrelated businesses or merge with other firms.

True

TFDonalds currently owns more than 50 percent of its restaurants.

True

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

True

When an acquisition or merger is not desired by both parties, it can be called a takeover or hostile takeover.

True

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

Diversification strategies are becoming more popular as organizations are finding it easier to manage diverse business activities.

False

A strategy of seeking ownership or increased control of a firm's suppliers is backward integration.

True

The acquisition of human-resources software and consulting services company Kenexa by IBM is an example of related diversification.

True

There are annually more than 10,000 mergers in the United States that total more than A) $700 billion. B) $825 billion. C) $975 billion. D) $1 trillion. E) $3 trillion.

A) $700 billion.

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.

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) Stakeholders from both partners are equally satisfied. E) The venture may begin to compete more with one of the partners than the other.

D) Stakeholders from both partners are equally satisfied.

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.

Selling all of a company's assets, in parts, for their tangible worth is called A) joint venture. B) divestiture. C) concentric diversification. D) liquidation. E) unrelated integration.

D) liquidation

Revlon closing its manufacturing plant in France and laying off 5 percent of its workforce is an example of A) divestiture. B) backward integration. C) liquidation. D) retrenchment. E) forward integration.

D) retrenchment.

Amazon installing "Amazon Lockers" in grocery, 7-Eleven, and drugstores that accept packages for later pickup, in order to combat issues with missing deliveries or having packages stolen, 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

In which situation would horizontal integration be an especially effective strategy? A) when an organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government for "tending substantially" to reduce competition B) when an organization competes in a slowing industry C) when decreased economies of scale provide major competitive advantages D) when an organization has neither the capital nor human talent needed to successfully manage an expanded organization E) when competitors are succeeding due to managerial expertise or having particular resources an organization possesses

A) when an organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government for "tending substantially" to reduce competition

All of the following situations are conducive to market development EXCEPT A) when new channels of distribution are expensive and unreliable. B) when an organization is successful at what it does. C) when new untapped or unsaturated markets exist. D) when an organization has excess production capacity. E) when an organization's basic industry is rapidly becoming global in scope.

A) when new channels of distribution are expensive and unreliable.

When companies take over functional operations of other firms, 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.

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

False

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

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

Which strategy would be most appropriate when the distinctive competencies of two or more firms complement each other especially well? A) Conglomerate diversification B) Divestiture C) Joint venture D) Retrenchment E) Integration

C) Joint venture

When the PE firm Clayton, Dubilier & Rice bought David's Bridal from the PE firm Leonard Green & Partner LP this was an example of A) dividend recapitalization. B) a joint venture. C) a secondary buyout. D) a leveraged buyout. E) a merger.

C) a secondary buyout.

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.

According to journalists' findings, what is 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 E) Having too many suppliers

D) A lack of strategic-management knowledge

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 type of bankruptcy? A) Chapter 7 B) Chapter 8 C) Chapter 9 D) Chapter 12 E) Chapter 13

D) Chapter 12

Many more firms have failed at ________ than have succeeded due to the immense challenge of managing businesses in many industries rather than in a single industry. A) forward integration B) related diversification C) backward integration D) unrelated diversification E) horizontal integration

D) unrelated diversification

FedEx entering the computer repair business offering major corporations overnight computer repair is an example of A) backward integration. B) divestiture. C) retrenchment. D) unrelated diversification. E) forward integration.

D) unrelated diversification.

Backward integration is effective in all of these cases EXCEPT A) when an organization competes in an industry that is growing rapidly. B) when an organization has both capital and human resources to manage the new business of supplying its own raw materials. C) when an organization needs to acquire a needed resource quickly. D) when the advantages of stable prices are not important. E) when present suppliers have high profit margins.

D) when the advantages of stable prices are not important.

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

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

What principle is built on the idea that there is no general plan for which way to go and what to do? A) Managing by crisis B) Managing by extrapolation C) Managing by objectives D) Managing by hope E) Managing by subjectives

E) Managing by subjectives

Mergers and acquisitions are created for all of the following reasons EXCEPT to A) gain new technology. B) reduce tax obligations. C) gain economies of scale. D) smooth out seasonal trends in sales. E) increase the number of employees.

E) increase the number of employees.

All of the following are cooperative arrangements EXCEPT A) R&D partnerships. B) joint-bidding consortia. C) cross-licensing agreements. D) cross-manufacturing agreements. E) marketing plans.

E) marketing plans.

Under which condition would a cost leadership strategy be especially effective? A) when there are many ways to achieve product differentiation that have value to buyers B) when most buyers use the product in different ways C) when buyers incur high costs in switching their purchases from one seller to another D) when buyers are small and have little power to bargain down prices E) when the products of rival sellers are essentially identical and supplies are readily available from any of several eager sellers

E) when the products of rival sellers are essentially identical and supplies are readily available from any of several eager sellers

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

False

A low-cost focus strategy can be especially attractive when the target market niche is small.

False

According to Porter, strategies allow organizations to gain competitive advantage from three different bases: cost leadership, differentiation, and decentralization.

False

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) Divestiture

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

A chief executive officer is located in the divisional level of a large firm.

False

A differentiation strategy can be especially attractive when the industry has many different niches and segments, thereby allowing a focuser to pick a competitively attractive niche suited to its own resources.

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

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 core competencies.

False