Business Policy and Strategic Management

Which of these strategies is effective when the number of suppliers is small and the number of competitors is large? Conglomerate diversification Forward integration Concentric diversification Backward integration Horizontal diversification

d) Backward integration

Which term is best defined as a central management activity that allows for strategy execution. Policy-making Goal-setting Establishing annual objectives Resource allocation Conflict

d) Resource allocation

If a firm incurs a loss during a particular year, or if the firm had positive net income but paid out dividends more than the net income, its retained earnings for that year will most likely be a large positive number. a low positive number. zero. a negative number. Can not be determined from this information.

d) a negative number

Which of these is/are a basic activity of strategy evaluation? Reviewing the underlying internal and external factors that represent the bases of current strategies Measuring organizational performance Taking corrective actions all of the above both B and C

d) all of the above

Which of the following statements about contingency plans is not true? Contingency plans should be as simple as possible. Only high-priority areas require the insurance of contingency plans. Contingency plans should be developed for favorable and unfavorable events. Develop contingency plans for all contingent events. Contingency plans minimize the impact of potential threats.

d) develop contingency plans for all contingent events

What pay strategy requires employees or departments to establish performance targets, such as "if actual results exceed objectives then all members get bonuses." Profit sharing Bonus system Salary Gain sharing Hourly wage system

d) gain sharing

Burger King opening its first restaurant in Japan is an example of which type of strategy? forward integration backward integration horizontal integration market development product development

d) market development

A pattern of behavior developed by an organization as it learns to cope with its problems of external adaptation and internal integration that has worked well enough to be considered valid and to be taught to new members as the correct way to perceive, think and feel is called dysfunctional behavior. groupthink. behavior modification. organizational culture. internal audit effect.

d) organizational culture

For what type of company is the BCG Matrix ideal for analyzing? Companies with more than one division All companies Companies with annual sales greater than $1 million Companies with annual sales of less than $1 million Large companies

a) Companies with more than one division

Why do changes in company strategy often require changes in the way an organization is structured? Structure dictates how goals and objectives will be established. Structure dictates authority over projects. Structure dictates how resources will be obtained. Structure dictates strategy. Structure dictates how money is spent.

a) Structure dictates how goals and objectives will be established

What is the cornerstone of effective strategy evaluation? Adequate and timely feedback Quality and quantity of managers Smaller ratio of top- to lower-level management Evaluation preceding implementation stage Taking corrective actions

a) adequate and timely feedback

A benefit of using projected balance sheets and income statements is that an organization can compute projected financial ratios under various scenarios. money can be put aside to pay future income taxes. insurance needs can be computed. it is useful in analyzing past performance. all of the above

a) an organization can compute projected financial rations under various scenarios.

Southwest Airlines selling tickets through Galileo is an example of which type of strategy? forward integration backward integration horizontal integration related diversification unrelated diversification

a) foward integration

Which of these is the allocation and reallocation of capital and resources to projects, products, assets and divisions of an organization? Investment decision Dividend decisions Financing decisions Restructuring decisions Strategic decision

a) investment decision

All of the following situations are conducive to market development except: when an organization competes in a high-growth industry. when an organization is very successful at what it does. when new untapped or unsaturated markets exist. when an organization has excess production capacity. when an organization's basic industry is becoming rapidly global in scope.

a) when an organization competes in a high-growth industry

If suppliers are unreliable or too costly, which of these strategies may be appropriate? Horizontal integration Backward integration Market penetration Forward integration Concentric diversification

b) Backward intergration

What type of organizational structure do most small businesses follow? Divisional structure by product Functional structure Divisional structure by customer Process type structure Matrix structure

b) Functional structure

Conflict in an organization is always bad. always good. sometimes good and sometimes bad. a sign of bankruptcy. avoidable.

c) sometimes good and sometimes bad

When you discover major changes have occurred in the firm's internal strategic position while conducting strategy evaluation, you should continue on the present strategic course. immediately discontinue all aspects of the present strategic course. take corrective actions. add additional funds to the present strategic plan. copy the actions of major competitors.

c) take corrective action

Under which condition would a differentiation strategy be especially effective? When the target market niche is large, profitable and growing When technological change is fast paced and competition revolves around rapidly evolving product features. When industry leaders do not consider the niche to be crucial to their own success. When the industry has many different niches and segments, thereby allowing a company to pick a competitively attractive niche suited to its own resources. When few, if any, other rivals are attempting to specialize in the same target segment.

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

How should financial budgets be thought of? A tool for limiting expenditures. A method for obtaining the most productive and profitable use of an organization's resources. A method for rationing the profits from the past year. A method for determining who should receive the largest pay raise. A tool for forecasting future profits.

b) a method for obtaining the most productive and profitable use of an organization's resources

The purpose of strategy evaluation is to increase the budget annually. alert management to problems or potential problems. make budget changes. evaluate employees' performance. improve R&D programs.

b) alert management to problems or potential problems

The purpose of a mission statement is to declare all of these except: a reason for being. an annual financial plan. a statement of purpose. a statement of beliefs. whom it wants to serve.

b) an annual financial plan

What is not a major benefit of having a diverse workforce? Improvement of the bottom line An increase in training costs An increase in productivity A decrease in complaints and litigation Higher retention of employees

b) an increase in training cost

Corrective action should do all of the following except: capitalize upon internal strengths. avoid external opportunities. avoid external threats. improve internal weaknesses. strengthen an organization's competitive position.

b) avoid external opportunities

What are three categories of approaches for managing and resolving conflict? Avoidance, diffusion and confrontation Avoidance, payoff and diffusion Confrontation, ignorance and objectivity Buy, sell and hold There are no good ways to manage conflict

b) avoidance, payoff and diffusion

What is the best divisional structure when a few major customers are of paramount importance and many different services are provided to these customers? by geographic area by customer by product by process by cost

b) by customer

The primary benefit sought from restructuring is employee involvement. cost reduction. increased morale. increased number of hierarchical levels in the organization. increased innovation.

b) cost reduction

A firm's strengths that cannot be easily matched or imitated by competitors are called internal audits. distinctive competencies. external audits. special properties. internal properties.

b) distinctive compentencies

What is the most widely used technique for determining the best combination of debt and stock? Debt-to-stock ratio Earnings per share/earnings before interest and tax analysis Gross profit analysis Capital asset pricing model Present value analysis

b) earnings per share/earnings before interest and tax analysis

Formal statements of organizational philosophy, charters, creeds, materials used for recruitment and selection and socialization help an organization abide by SEC laws. link culture to strategy. set guidelines for firing. increase profits. manage conflicts between stakeholders.

b) link culture to strategy

What category of ratios measures a firm's ability to meet maturing short-term obligations? Profitability Liquidity Leverage Activity Growth

b) liquidity

When companies take over functional operations of other firms, such as human resources, information systems, payroll, accounting, or customer service, this is called marketing. outsourcing. licensing. franchising. divestiture.

b) outsourcing

When an industry relies heavily on government contracts, which forecasts can be the most important part of an external audit. economic political technological competitive multinational

b) political

A good information system can allow a firm to gain competitive advantage. reduce costs. increase productivity. increase customers. reduce turnover.

b) reduce costs

Which of the following issues may not require a management policy? To establish a high- or low-safety stock of inventory To increase motivation To offer numerous or few employee benefits To discourage insider trading To promote from within to or to hire from the outside

b) to increase motivation

All of the following are key questions that can reveal internal strengths and weaknesses in the management department except: Is the organization's structure appropriate? Are reward and control mechanisms effective? Are the organization's products positioned well among competing products? Does the firm use strategic management concepts? Do managers delegate authority well?

c) Are the organization's products positioned well among competing products?

The act of strengthening employees' sense of effectiveness by encouraging and rewarding them to participate in decision-making and exercise initiative and imagination is referred to as: Authoritarianism Proaction Empowerment Transformation Delegation

c) Empowerment

What step in the strategic development process involves mobilizing employees and managers to put strategies into action? Formulating strategy Strategy evaluation Implementing strategy Strategic advantage Competitive advantage

c) Implementing Strategy

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

c) Joint venture

What can be created by ethics training and an ethics culture? Competitive responsibility Competitive advantage Strategic advantage Employee cooperation Comparative advantage

c) Strategic advantage

Globalization of industries is occurring for all of these reasons except: a worldwide trend toward similar consumption patterns. the emergence of global buyers. a worldwide trend toward different consumption patterns. e-commerce and the instant transmission of money and information across continents. the emergence of global sellers.

c) a worldwide trend toward different consumption patterns

What is a theme that has become a more important strategic issue due to global warming, bioterrorism, and increased pollution? a) internal environment b) measuring performance c) external environment d) internal stakeholders e) monitoring employees

c) external environment

Retrenchment would be an effective strategy when an organization has shrunk so quickly that major internal reorganization is needed. is one of the stronger competitors in a given industry. is plagued by inefficiency, low profitability, poor employee morale and pressure from stockholders to improve performance. has decided to capitalize on opportunities, maximize threats, take advantage of strengths and overcome weaknesses. 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 these is true about strategy implementation? It is positioning forces before the action. It focuses on effectiveness. It is primarily an operational process. It is primarily an intellectual process. It requires intuitive skills.

c) it is primarily an operational process

A(n) __________ refers to a firm investing in international operations, while the _________ is the country where that business is conducted. parent company; host country home country; parent company parent country; host company host company; home country exporting company; importing company

c) parent country; host company

Identifying and evaluating key social, political, economic, technological and competitive trends and events comprise developing an effective mission statement. conducting an internal audit. performing an external audit. formulating strategy. implementing strategy.

c) preforming an external audit

What category of ratios includes return on total assets and return on stockholders' equity? leverage activity profitability growth liquidity

c) profitability

All of these are potential disadvantages of an international operation except: overestimated weaknesses and underestimated strengths of competitors. differing languages, cultures and value systems. reduced tariffs and taxes. complexity due to a multiple monetary system. all of these are potential disadvantages.

c) reduced tariffs and taxes

What action involves reconfiguring or redesigning work, jobs and processes for the purpose of improving costs, quality, service and speed? Restructuring Downsizing Reengineering Delayering Benchmarking

c) reengineering

What effect do trends in the dollar's value have on companies in different industries and in different locations? significant and equal marginal and equal significant and unequal insignificant and unequal no significant impact

c) significant and unequal

What is a central strategy-implementation technique that allows an organization to examine the expected results of various actions and approaches? EPS/EBIT Financial budgeting TOWS analysis Projected financial statement analysis External analysis

d) projected financial statement analysis

Nortel cutting another 2,900 jobs in 2007 in an attempt to stay in business would be an example of: divestiture. backward integration. liquidation. retrenchment. forward integration.

d) retrenchment

It is recommended that organizations carefully develop a written mission statement for all of the following reasons except: to provide a basis for allocating organizational resources. to establish a general tone or organizational climate. to ensure unanimity of purpose within the organization. to ensure a command-and-control structure. to facilitate the translation of objectives into a work structure involving the assignment of tasks to responsible elements within the organization.

d) to ensure a command-and-control structure

Which of the following is not a basic function of production management? Capacity Inventory Workforce Transportation Quality

d) transportation

Whirlpool selling its struggling Hover floor-care business to Techtronic Industries is an example of which type of strategy? related diversification unrelated diversification retrenchment divestiture liquidation

devistiture

______ has been successful in determining R&D budget allocations. Financing as many project proposals as possible Using the percentage of sales method Budgeting for R&D about what competitors spend Deciding how many successful new products are needed All of the above have been used

e) All of the above have been used

Which of the following is not a key question that can reveal internal strengths and weaknesses of the marketing department? Does the firm have an effective sales organization? Is our product quality good? Are markets segmented effectively? Are the firm's products and services priced appropriately? Does the firm have good liquidity?

e) Does the firm have good liquidity?

Which of these is not one of the tests used to determine whether a performance-pay plan will benefit an organization? Does the plan capture attention? Do employees understand the plan? Is the plan improving communications? Does the plan pay out when it should? Does the plan reduce management layers?

e) Does the plan reduce management layers?

Under which condition would a cost leadership strategy be especially effective? When there are many ways to differentiate the product or service and many buyers perceive these differences as having value. When buyer needs and uses are diverse When few rival firms are following a similar approach When technological change is fast paced and competition revolves around rapidly evolving product features. 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.

How are objectives in the areas of profitability, growth and market share commonly established? Business segment Geographic location Customer groups Product all of the above

e) all of the above

Resistance to change can manifest itself through absenteeism. sabotaging production machines. filing unfounded grievances. unwillingness to cooperate. all of the above

e) all of the above

What level of management is directly affected by strategy implementation? plant managers sales managers project managers division managers all of these

e) all of these

What category of ratios measures how effectively a firm can maintain its economic position in the growth of the economy and industry? profitability liquidity leverage activity growth

e) growth

Mergers and acquisitions are created for all of the following reasons except to gain new technology. reduce tax obligations. gain economies of scale. smooth out seasonal trends in sales. increase its number of employees.

e) increase its number of employees

Which two variables are of central importance to strategy implementation? diversification and budgeting. marketing penetration and competition. competition and collaboration. product development and market development. market segmentation and product positioning.

e) market segmentation and product positioning

All of the following are reasons to be completely open with the strategy process except: managers, employees and other stakeholders can readily contribute to the process. investors, creditors and other stakeholders have greater basis for supporting a firm that is open. visibility promotes democracy whereas secrecy promotes autocracy. participation and openness enhances understanding, commitment and communication within the firm. openness limits rival firms from imitating or duplicating the firm's strategies.

e) openness limits rival firms from imitating or duplicating the firm's strategies

Effective mission statements are usually changed every few months. are usually changed every few years. never require revision. become ineffective in the first year. stand the test of time and require little revision.

e) stand the test of time and require little revision

The term that refers to the EU's effort to end competitive tax breaks among member countries is double taxation. taxation bias. equity taxation. tax reconciliation. tax harmonization.

e) tax reconciliation