BUS 495 Exam 1
How is the Balanced Scorecard used in the strategy process?
The balanced scorecard is a strategy evaluation and control technique. It is based on the need of firms to "balance" financial measures that are oftentimes used exclusively in strategy evaluation with various nonfinancial measures such as product quality and employee morale. An effective Balanced Scorecard contains a carefully chosen combination of strategic and financial objectives tailored to the company's business.
Activity ratios measure how effectively a firm is using its resources - True - False
True
Dividend decisions concern the percentage of earnings paid to stockholders, the stability of dividends paid over time, and stock repurchase. - True - False
True
Compare and contrast vision statements with mission statements.
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What are the values of the three components of the DuPont Analysis - 0.15; 2.02; 0.35 - 0.16; 1.02; 2.86 - 0.15; 1.02; 0.35 - 0.15; 0.98; 2.86 - 0.16; 0.98; 0.35
- 0.15; 0.98; 2.86
A firm has a net income of $6850 and interest expense of $2130. The tax rate is 34%. What is the firm's time interest earned ratio? - 3.22 - 6.33 - 5.19 - 5.87 - 5.38
- 5.87 - Time interest earned ratio = (Earnings before interest & taxes ) / interest = EBIT/interest - Net income = Earnings before taxes (1-tax rate) - Earnings before taxes = Net income / (1-tax rate) - Earnings before interest & taxes = Interest + Net income / (1 - tax rate) - EBIT = 2130 + 6850/(1-0.34)=12508 - Time interest earned ratio = 12508/2130 = 5.87
What is the cornerstone of effective strategy evaluation? - Smaller ratio of top- to lower-level management - Adequate and timely feedback - Quality and quantity of managers - Evaluation preceding implementation stage - Punitive corrective actions
- Adequate and timely feedback
Core competencies refer to - The ability to integrate multiple technologies - The collective learning of the organization - A range of skills and capabilities critical for developing competitive advantage - All the above
- All the above
Decisions about which markets to compete refer to - Strategic management - Market positioning - Corporate strategy - Business strategy - Market attractiveness
- Corporate strategy
Which of the following is often considered to be the first step in strategic planning? - Making a profit - Establishing goals and objectives - Developing a vision statement - Determining opportunities and threats - Developing a mission statement
- Developing a vision statement
Procter & Gamble sale of many of its brands in order to focus on its core brands is an example of which type of strategy? - Divestiture - Retrenchment - Related diversification - Unrelated diversification - Liquidation
- Divestiture
For 2021, Stablstock Corporation had earnings per share (EPS) of $2. In 2022, the number of outstanding shares of the company's common stock did not change, and the firm's EPS rose to $2.50. At what rate did the company's net income grow from 2021 to 2022?
- EPS = Net income / # shares - Net income = EPS x # shares - Net Income Growth 2022 = (Net income 2022 / Net income 2021) -1 - = ((EPS 2022 x # shares) / (EPS 2021 x shares)) -1 - = (EPS 2022 / EPS 2021) -1 - = (2.5/2) -1 = 0.25 = 25%
The acronym PESTEL stands for political, economic, sociocultural, technological, ______, and legal forces. - Environment - Ecological - Economic - Ethnic - External
- Environment
Which of the following is the first activity in strategy evaluation? - Taking corrective actions - Monitoring the internal environment - Examining the underlying bases of current strategies - Measuring organizational performance - Monitoring the external environment
- Examining the underlying bases of current strategies
Which of these examples of a mission statement focus area does NOT identify the utility of the firm's products to its customers? - AT&T focuses on communication rather than telephones - A clothing retailer focuses on attractive looks rather than on clothes - Union Pacific focuses on transportation rather than railroads - ExxonMobil focuses on oil and gas rather than energy - Universal Studios focuses on entertainment rather than movies
- ExxonMobil focuses on oil and gas rather than energy
An external audit focuses on identifying and evaluating trend and events within the control of management - True - False
- False
Well conceived and properly executed mission and vision statements are not subject to revision. - True - False
- False
Panera installing online ordering and delivery from their restaurants is an example of which type of strategy? - Backward integration - Unrelated diversification - Forward integration - Horizontal integration - Related diversification
- Forward integration
To perform an external audit, a company first must: - Create a budget - Gather competitive intelligence and information about external trends - Perform an internal audit - Get an approval from the SEC - Hire a consultant to develop a comprehensive strategic plan
- Gather competitive intelligence and information about external trends
What refers to a strategy of seeking ownership of, or increased control over a firm's competitors? - Conglomerate diversification - Backward integration - Horizontal integration - Forward integration - Concentric diversification
- Horizontal integration
The DuPont identity can be used to help a financial manager determine: I. the degree of financial leverage used by a firm II. the growth potential of the firm III. the utilization rate of a firm's assets IV. the rate of return on a firm's assets - I, III, and IV - I, II, and III only - I and III only - II, III, and IV only - II and III only
- I, III, and IV
Whenever new firms can easily enter a particular industry, the intensity of competitiveness among firms tends to - Increase - Neutralize - Become irrelevant - Stay the same - Decrease
- Increase
If Chipotle opens five stores for the first time in China, this is an example of which type of strategy? - Backward integration - Product development - Market development - Horizontal integration - Forward integration
- Market development
Which strategy seeks to increase market share for present products or services in present markets through greater marketing efforts? - Forward integration - Market development - Product development - Market penetration - Backward integration
- Market penetration
Which of the following is NOT an external force that must be examined in formulating strategies? - Cultural - Social - Environmental - Economic - Organizational
- Organizational
Which of the following is NOT a reason for the increasing difficulty of evaluating strategies? - Technological advancement is more rapid - Product development cycles are shorter - Product life cycles are longer - Domestic and world economies are less stable - Change is occurring more frequently
- Product life cycles are longer
According to Porter, what is usually the most powerful of the five competitive forces? - Potential entry of new competitors - Rivalry among competing firms - Bargain power of consumers - Bargaining power of suppliers - Potential development of substitute products
- Rivalry among competing firms
_________ within an industry are sets of firms competing in similar ways for similar customers and interacting more directly within each group than with competitors drawn from other strategic groups in the industry - Rivals - Geographical groups - Vertical groups - Parallel groups - Strategic groups
- Strategic groups
What step in the strategic management process involves mobilizing employees and managers to put strategies into action? - Strategy formulation - Strategic advantage - Competitive advantage - Strategy implementation - Strategy evaluation
- Strategy implementation
An industry's buyer are most powerful when - They can threaten vertical integration - The buyers are many - They entry barrier are high - They buy in small quantities frequently - They can pass the industry's high costs to the consumers
- They can threaten vertical integration
Evaluating strategies on a continuous rather than on a periodic basis allows benchmarks of progress to be established and more effectively monitored. - True - False
- True
In most large organizations that engage in strategic management, the formulation, implementation, and evaluation of strategy activities occur at three hierarchical levels: corporate; divisional or strategic business unit; and functional. - True - False
- True
Laser eye surgery would be considered a substitute product for eyeglasses and contact lenses - True - False
- True
Some of the benefits of strategic management are increased discipline, enhanced communication, and more effective allocation of time and resources. - True - False
- True
Which of these basic questions should a vision statement answer? - What is our business? - What are our challenges? - What do we want to become? - Who are our competitors? - What is our core strength?
- What do we want to become?
Under which condition would a differentiation strategy be especially effective? - When there are few ways to differentiate the product or service that buyers perceive as having value - When most buyers use the product in the same way - When the differentiation base is easy or inexpensive for rivals to duplicate - When technological change is fast paced and competition revolves around rapidly evolving products features - When many rival firms are following a similar differentiation approach
- When technological change is fast paced and competition revolves around rapidly evolving products features
A good mission statement has: - a shareholder orientation - a profit orientation - a customer orientation - an environmental orientation - an employee orientation
- a customer orientation
The goal of strategic management is to: - achieve competitive advantage - maintain competitive advantage - eliminate competitive advantage - eliminate and abolish competitive advantage - achieve and maintain competitive advantage
- achieve and maintain competitive advantage
The purpose of a mission statement is to declare all of these EXCEPT: - a statement of beliefs - a reason for being - an annual financial plan - whom an organization wants to serve - a statement of purpose
- an annual financial plan
In the process of developing a mission statement, it is important to involve: - as few managers as possible - lower-level management only - as many managers as possible - the board of directors only - upper-level management only
- as many managers as possible
In value chain analysis, the activities of an organization are divided into two major categories of value activities, primary and support. Which of the following is a primary activity? - developing a mission statement - assembling the product - monitoring the cost of producing the product through a cost accounting system - recruiting and training employees - information technology
- assembling the product
Which ratio would be considered an activity ratio? - average collection period - earnings per share - current ratio - net profit margin - debt-to-equity
- average collection period
All stakeholders' claims on an organization ___________ pursued with equal emphasis. - must ideally be - are required to be - should always be - cannot be - can usually be
- cannot be
The ratios that are based on financial statement values and used for comparison purposes are called: - financial ratios - analytical standards - industrial statistics - accounting returns - equity standards
- financial ratios
The act of oversight and direction for an organization is referred to as: - corporate lawmaking - establishing norms - governance - organizational direction - centralized control
- governance
PackageIt Company makes protective sleeves for iPads and generated gross profit at a 60 percent rate for 2022. Net sales totaled $5,000,000 in that year. What was the amount of the company's 2015 cost of goods sold?
- gross profit margin = (Sales-COGS)/Sales = 1-COGS/Sales - 0.6 = 1 -COGS/5000000 - COGS/5000000 = 0.4 - COGS = 0.4x5000000 = 2,000,000
A firm's strengths that cannot be easily matched or imitated by competitors are called - distinctive competencies - internal properties - external audits - internal audits. - interrelated properties
- internal properties
The _________ decision is the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization - dividend - financing - investment - benchmark - restructuring
- investment
The strategic-management process: - occurs once a year. - is a semiannual process. - applies mostly to companies with sales greater than $100 million. - applies mostly to small businesses. - is a continuous process.
- is a continuous process.
A core competence - serves as a unifying force for a company's operating strategies - refers to a company's best executed functional strategy - is achieved by operational excellence, customer intimacy and product leadership - is something that a firm does especially well in relation to rival companies
- is something that a firm does especially well in relation to rival companies
Pricing is one of the basic functions of - research and development - management information systems - production/operations - marketing - finance/accounting
- marketing
Corrective actions are almost always __ except when external and internal factors have not significantly changed and the firm is progressing satisfactorily toward achieving stated objectives. - needed - prohibitively expensive - unnecessary - undesirable - futile
- needed
A resource is valuable if it is rare, hard to imitate, or - not easily substitutable - inefficient - expensive - inexpensive - easily substitutable
- not easily substitutable
Strategy-evaluation activities should ideally be performed: - only at the onset of a problem - solely upon completion of major projects - just on a periodic basis - on a continuous basis - annually only
- on a continuous basis
Strategic management focuses on integrating functional areas to achieve organizational success. Which of the following is NOT one of the functional areas that is the focus of strategic management? - production and operations - finance and accounting - research and development - organizational behavior - marketing
- organizational behavior
Today, boards of directors are composed mostly of: - management - company employees - outsiders - union members - past executives
- outsiders
In determining the ______, marketers often make decisions related to areas such as warehousing, distribution channels, and real site locations - product - place - promotion - profit - price
- place
In order to appeal to diverse stakeholders, an effective mission statement should be: - reconciliatory - provocative - inflammatory - dysfunctional - contentious
- reconciliatory
Which of the following is considered a profitability measure? - days sales in territory - fixed asset turnover - price-earnings ratio - return on assets - cash coverage ratio
- return on assets
Internal _____________ are controllable activities in an organization that are performed especially well. - objectives - factors - strengths - incompetencies - opportunities
- strengths
Because of the success of the iPad and the iPhone, Apple has tremendous brand recognition. Brand recognition is one of Apple's: - threats. - strengths. - opportunities. - strategies. - weaknesses.
- strengths.
If you discover during the course of strategy evaluation that major changes have occurred in the firm's internal strategic position, you should: - follow the original strategic plan - continue on the present strategic course - wait until the next quarter to see if things revert - take corrective actions - acquire additional capital
- take corrective actions
Land is an example of a(n) __ resource. - tangible - intangible - shareholder - technological - financial
- tangible
Since ___________ resources can more easily be bought and sold, __________ resources are often more important for gaining and sustaining competitive advantages. - intangible; tangible - tangible; intangible - internal; external - tangible; organizational - intangible; external
- tangible; intangible
Generally, external opportunities and threats are: - unable to have a significant impact on an organization. - uncontrollable by a single organization. - not worth monitoring and evaluating. - key functions in strategy exploitation. - key functions in strategy implementation.
- uncontrollable by a single organization.
Good mission statements identify the __________ of a firm's products to its customers. - price - utility - profit margin - demand - popularity
- utility
All of the following are basic functions of marketing except: - product planning - pricing products - promoting products - distributing products - value chain analysis
- value chain analysis
Identify and briefly explain five of the key characteristics of strategic decisions
1. Directive, 2. Cross-functional, 3. Integrated (impacts the entire organization), 4. Involve a significant commitment of resources (consequential, high stakes) 5. Not-easily-reversible
Which financial statement do the following appear on: 1. Cost to acquire new machinery and equipment 2. Inventory of finished goods 3. Cost of wages paid to employees 4. Intangible assets 5. R&D
1. Statement of cash flows 2. Balance sheet 3. Income statement 4. Balance sheet 5. Notes to the financial statements