Strategic Management Exam 1 practice quiz

A company's vision primarily states: a. what the company wants to accomplish ultimately. b. how the company plans to accomplish its goals. c. how the company plans to compete in its industry. d. what the company actually does to generate revenues.

a

Donna has been recently promoted to the position of a team lead at an auditing company. This promotion was based on her boss's assessment that Donna is capable of organizing resources such as time, workforce, and budget efficiently based on the projects, as well as guiding her team to achieve the organization's goals. From this scenario, we can say that Donna is currently at _____ of the Level-5 leadership pyramid. a. Level 3 b. Level 5 c. Level 1 d. Level 4

a

If a company chooses to keep its vision customer-oriented rather than product-oriented, what will be its implication? a. The company will tend to be more flexible when adapting to changing environments. b. The company will clearly define how it means to satisfy a customer need. c. The company will fail to establish a positive relationship between its vision statement and performance. d. The company will have a short-term, unidirectional focus.

a

In the fiscal year 2012, BlackBerry's Cost of goods sold (COGS)/Revenue ratio was higher than that of its competitor, Apple. This implies that BlackBerry needs to work toward: a. driving down its costs. b. reducing its return on revenue. c. increasing its fixed costs and decreasing its variable costs. d. lowering its inventory turnover.

a

Return on risk capital primarily includes: a. Stock price appreciation plus dividends received over a specific period. b. economic value created by a firm plus reservation price. c. consumer surplus plus firm profit. d. account receivables plus account payables.

a

The tenet behind the triple bottom line is that: a. a firm should achieve positive results along the economic, social, and ecological dimensions to gain a sustainable strategy. b. a firm's primary objective should be increasing the total returns to its shareholders. c. a firm's return on revenue can be broken down into three ratios; COGS / Revenue, R&D / Revenue, and SG&A / Revenue. d. a firm should solely focus on increasing the economic value created for its customers.

a

The working capital turnover of Tesva Systems Corp. is 6.0. What does this financial data suggest? a. For every dollar Tesva Systems puts to work, the company realizes $6.00 of sales. b. For every $6.00 Tesva Systems puts to work, the company incurs a cost of $1.00. c. For every $6.00 Tesva Systems puts to work, the company realizes a sales of $1.00. d. For every dollar Tesva Systems puts to work, the company realizes $6.00 in loss.

a

Which of the following actions of an automobile firm will be considered as a strategic commitment? a. The firm investing eight years and $4 billion to develop a range of hybrid cars with which it will compete in the future b. The firm promoting its new model of coupe through a free Europe trip worth $15,000 to be won as an early bird offer c. The firm launching an existing model of a car in red as a limited edition for six months d. The firm spending $100,000 on renting a manufacturing facility to meet the temporary demand for its cars

a

Which of the following is a stakeholder attribute that managers should consider at every step in a stakeholder impact analysis? a. Legitimacy b. Literacy c. Supremacy d. Solvency

a

Which of the following statements related to a firm's stakeholders is NOT true? a. While external stakeholders are those who make contributions toward the firm, internal stakeholders are those who reap all the benefits. b. A firm's stakeholders include organizations and groups along with individuals who can affect or be affected by the firm's actions. c. Effective stakeholder management is an example of the actions managers can take in order to enhance a firm's competitive advantage. d. If internal or external stakeholders withhold participation in the firm's exchange relationships, it can have severe negative performance implications.

a

As the Chief Executive Officer (CEO) of PepsiCo, Indra Nooyi declared PepsiCo's vision to be "Performance with a Purpose." She wants to reposition PepsiCo toward a more sustainable future by focusing not only on economic, but also social and environmental contributions. Which of the following approaches to the development of strategy does PepsiCo best illustrate? a. Bottom-up strategic approach b. Top-down strategic planning c. Realized strategic planning d. Emergent strategic planning

b

For an apparel manufacturing unit, the cost incurred on fabrics, buttons, and zippers is considered as variable cost primarily because it: a. has no impact on a firm's profits. b. is dependent on the level of consumer demand. c. is not included when calculating total costs. d. has an inverse relationship with the level of output.

b

Higher ratios of receivables turnover indicate: a. inefficiency in turning raw materials into finished goods. b. shorter durations of interest-free loans to customers. c. inefficiency in paying creditors. d. higher interest rates paid on credit extended by suppliers.

b

The board of directors of True Goods Inc., a company that has a large product mix, has decided to get actively involved in research and development for the next three financial years. Budget for each business unit under the company will be allocated from the headquarters in proportion to its previous performances. The board has also decided to liquidate those units that have failed to perform so far. Which of the following strategies does this scenario best illustrate? a. Business strategy b. Corporate strategy c. Functional strategy d. Divisional strategy

b

The greater the difference between value creation and cost, the: a.less likely a firm will gain competitive advantage. b. greater a firm's economic contribution. c. less likely that a firm's strategic position will be competitive. d. greater a firm's competitive parity.

b

Though the microwaves manufactured by Sun Electra Inc. and FS Electronics Inc. sell at the same price of $600 per unit, the economic value created by Sun Electra Inc. is more than that of FS Electronics Inc. In the context of this scenario, which of the following statements is true? a. FS Electronics has been able to create more producer surplus for itself than Sun Electra. b. Sun Electra has a relative cost advantage over FS Electronics. c. Sun Electra has been able to gain an advantage over FS Electronics through superior product differentiation. d. Sun Electra and FS Electronics have achieved a competitive parity.

b

Univo Corp. is a public company whose shares are currently trading in the market at $150 each. The company manufactures smartphones at the cost of $300 per unit and sells them in the market for $500 each. What is the company's producer surplus? a. $150 b. $200 c. $300 d. $650

b

Which of the following does a firm possess when it can outperform other firms in the same industry or the industry average over a prolonged period of time? a. Strategic positioning b. Sustainable competitive advantage c. Long-term capital gain d. Consistent power position

b

Which of the following equations best expresses return on revenue? a. Sales/Revenue b. Net profits/Revenue c. Revenue - Cost d. Revenue - Gross profits

b

Which of the following groups will NOT be considered a company's internal stakeholder? a. Board members b. Suppliers c. Shareholders d. Managers

b

Which of the following is an advantage of accounting data? a. Accounting data consider off-balance sheet items, which makes comparing companies with different capital structures easy. b. Accounting data can be easily transformed into financial ratios to help assess and evaluate the competitive performance of firms. c. Accounting profitability ratios not only show us the outcomes from past decisions, but also provide information to guarantee future performance. d. Accounting data focus mainly on intangible assets, which are more important than tangible assets in firms' stock market valuations.

b

Which of the following ratios best expresses inventory turnover? a. Inventory/Per unit cost of production b. Cost of goods sold/Inventory c. Annul profits/Inventory d. Inventory/Working capital

b

_____ precisely indicates how much of a firm's sales is converted into profits. a. Inventory turnover b. Return on revenue c. Working capital turnover d. Break-even price

b

A diagnosis of the competitive challenge, an element of a good strategy, is primarily accomplished through _____. a. strategy formulation b. strategy control c. strategy analysis d. strategy implementation

c

A firm incurs $100 to manufacture an office table. It fixes the market price of the table as $250, and discounts the price to $200. However, the maximum a person is willing to pay for it is $180. What is the amount of total perceived consumer benefits in this scenario? a. $200 b. $100 c. $180 d. $250

c

A high percentage of R&D/Revenue ratio indicates a(n): a. strong focus on marketing and sales to promote products and services. b. negligent investment toward research and development. c. strong focus on innovation to improve current products and services. d. inefficiency in the management to focus on new products.

c

An organization's _____ describes what the organization actually does—the products and services it plans to provide, and the markets in which it will compete. a. promissory note b. vision c. mission d. code of conduct

c

Blue Ace Autos Inc. and Ferdova Autos Inc. are two competing automobile companies. While Blue Ace Autos's Cost of goods sold / Revenue is 63.4%, the Cost of goods sold / Revenue of Ferdova Autos is 54.2%. What do you infer from this financial data? a. Blue Ace Autos and Ferdova Autos have achieved a competitive parity. b. Blue Ace Autos is able to command a greater price premium for its products than Ferdova Autos. c. Blue Ace Autos is less efficient than Ferdova Autos in producing goods. d. Blue Ace Autos has a higher profit margin than Ferdova Autos.

c

Evaluating the data collected from environmental analysis, the corporate executives of F&S Pharma Inc. realized that it was the right time to expand the business. The company's vision was accordingly adjusted from "To Be the Best in the Pharmaceutical Industry" to "To Make Good Health Accessible to Everyone around the Globe." To support the new vision, the executives decided that the company would first enter the Asian market where its growth potential would be huge. To further support these decisions, the general managers of different SBUs and the functional managers formulated their own strategies. Which of the following approaches to the development of strategy does this best illustrate? a. Scenario planning b. Bottom-up strategic approach c. Top-down strategic planning d. Reverse mentoring

c

Motors Inc. is a vendor who supplies auto parts to an automobile manufacturing company. In return, Motors Inc. relies on the company for its revenue and is affected by any decisions taken by the company. In this scenario, Motors Inc. is a(n) _____ for the automobile manufacturing company. a. representative sample b. focus group c. external stakeholder d. internal stakeholder

c

The working capital of a small home-based business is $200,000. The revenues generated account to $600,000, and the profits incurred are $300,000. What would be the company's working capital turnover? a. $100,000, that is, $300,000 - $200,000 b. 2, that is, $600,000/$300,000 c. 3, that is, $600,000/$200,000 d. $300,000, that is, $600,000 - $300,000

c

Which of the following forces is most closely related to firm effects within a pharmaceutical industry? a. The types of products and the services offered within the industry b. The entry and exit barriers existing within the industry c. The strategic actions taken by managers of a firm in the industry d. The number and the size of the firms in the industry

c

Which of the following is a disadvantage of the balanced scorecard approach to measure firm performance? a. It fails to allow managers and executives to find a balance between financial and strategic goals. b. It only relies on an internal view of the firm, ignoring the external view. c. It provides only limited guidance about which performance metrics to choose. d. It fails to allow managers to align their different perspectives to create a more focused corporation overall.

c

Which of the following is an external performance metric? a. Return on revenue b. Inventory turnover c. Total return to shareholders d. Fixed assets turnover

c

Which of the following statements accurately brings out the difference between an organization's vision and mission? a. Mission is the organization's aspirations and vision is about how these aspirations can be made true. b. Vision is short-term—oriented and is related to the organization's present, whereas the mission is futuristic. c. Vision defines what the organization wants to accomplish ultimately, whereas the mission defines the means by which vision is accomplished. d. Vision is valid at the functional level of the organization, whereas mission covers the entire organization.

c

_____ is best described as a measure of how effectively capital is being used by a firm to generate revenue. a. Risk capital b. Return on revenue c. Working capital turnover d. Revenue per employee

c

A firm is likely to have a competitive advantage when it: a. performs at a level similar to the other firms in the industry. b. provides goods similar to those of its competitors, but at a higher price. c. minimizes the difference between value creation and the costs involved. d. provides services that consumers will value more than those of its rivals.

d

ChatRoom is an instant messaging mobile application. Initially, users were not charged. However, after a period of six months, the users had to pay for a fee to use the upgraded version of the application with advanced features. Which of the following business models does this best illustrate? a. Pay-as-you-go b. Razor-razor-blade c. Subscription-based d. Freemium

d

Daily Dose Inc. is a supermarket chain that has decided to adopt cost-leadership as its strategy for competitive advantage. Which of the following statements is most likely true about Daily Dose Inc.? a. Daily Dose Inc. will hire a professional sales workforce to provide a superior customer experience. b. Daily Dose Inc. will keep the ambience of its stores luxurious. c. Daily Dose Inc. will stock a wider range of products at higher prices than its competitors. d. Daily Dose Inc. will aim to attract its customers through lower prices.

d

Economic contribution is created when the: a. value a consumer attaches to a good or service is lesser than what he or she paid for it. b. revenue generated by selling a unit of a product is equal to the cost incurred by the firm in producing it. c. price a customer is willing to pay for a good is less than what it costs the firm to manufacture it. d. price a customer is willing to pay for a good or service is more than the cost the firm incurs to produce it.

d

_____ is best described as the behaviors and styles of executives that influence others to achieve an organization's vision and mission. a. Venture capitalism b. Intrapreneurship c. Machiavellianism d. Strategic leadership

d

If a company has 25 million shares outstanding, and each share is traded at $400, the _____ is $10 billion. a. return on revenue b. total return to shareholders c. customer lifetime value d. market capitalization

d

The idea that all available information about a firm's past, current state, and expected future performance is embedded in the market price of the firm's stock is called the _____. a. time compression economies b. upper-echelons theory c. price-demand function d. efficient-market hypothesis

d

The inventory turnover of G&L Apparels Inc. is 102.6 and that of White Couture Inc. a competitor, is 15.6. What do you infer from this financial data? a. G&L Apparel faces a lower customer demand for its inventory than White Couture. b. G&L Apparels incurs a higher production cost than White Couture. c. G&L Apparel has more unsold merchandise than White Couture. d. G&L Apparels has lesser capital tied up in its inventory than White Couture

d

The market capitalization of a public company is $5 billion. Each share of the company is traded at $200. What do you infer from this financial data? a. The firm pays an annual dividend of 10 percent. b. The firm's total return to shareholder is $5 billion. c. The firm's economic value created is $5 billion. d. The firm's number of outstanding shares is 25 million.

d

The metaphor of a black swan best applies to: a. low profitable strategic business units within a large enterprise that are best divested or liquidated. b. highly profitable business units in low growth markets that are to be sustained solely for revenue generation. c. small businesses that become successful enough to raise capital through initial public offering. d. events that are considered highly unexpected and highly impactful when they do occur.

d

The payables turnover of Tesva Automobiles Inc. is 8.2 and that of its competitor, Mova Automobiles Inc., is 18.4. What does this financial data indicate? a. Mova Automobiles will have a stronger negotiating power with its suppliers than Tesva Automobiles. b. Mova Automobiles will have to pay its shareholders more dividends than that paid by Tesva Automobiles. c. Tesva Automobiles will take longer to pay its creditors than the time taken by Mova Automobiles. d. Tesva Automobiles will be more efficient than Mova Automobiles in generating interest-free loans from suppliers.

d

Which of the following financial ratios typically indicates a company's efficiency in extending credit, as well as collecting debts? a. Inventory turnover b. Return on revenue c. Fixed asset turnover d. Receivables turnover

d

Which of the following is a philanthropic responsibility of a firm? a. Competitive disadvantage b. Strategic positioning c. Competitive parity d. Corporate citizenship

d

Which of the following statements best explains why JetBlue airlines is now struggling to maintain a competitive advantage, despite enjoying some years of early competitive advantage? a. It has tried to stay committed to a cost leadership position b. It has ignored the need to reduce its costs while focusing too heavily on product differentiation c. It has ignored the need to focus on driving up its perceived value d. It has tried to combine a cost leadership position with a differentiation strategy

d

Which of the following statements will effectively guide a strategist? a. Strategy is all about competitive benchmarking and operational effectiveness. b. It is necessary to isolate the key stakeholders and their needs when formulating a strategy. c. Industry and firm effects that determine firm performance are independent of each other. d. The principles of strategic management can be applied universally to all organizations.

d

_____ is best described as the combination of intended and emergent strategy. a. Recognized strategy b. Tactical strategy c. Dominant strategy d. Realized strategy

d