Test 3- Ch. 6,7, & 8.

Which one of the following is NOT a characteristic of a firm that has chosen a captive company strategy? A) It is most appropriate for a company with a strong competitive position in a growing industry. B) The firm reduces its functional activities to reduce costs. C) The firm gains a certainty of sales and production in return for becoming heavily dependent upon another firm for at least 75% of its sales. D) One of its customers makes up a large percentage of the company's sales and wants the company to keep operating as its supplier. E) Management desperately seeks an "angel" to guarantee the company's continued existence.

A) It is most appropriate for a company with a strong competitive position in a growing industry.

Which one of the following is NOT one of the questions that management should raise in their attempt to assess the importance to the corporation of stakeholders' concerns? A) Which stakeholder group should be represented on the board of directors? B) How will this decision affect each stakeholder? C) How much of what the stakeholders want are they likely to get under a certain alternative? D) What are the stakeholders likely to do if they don't get what they want? E) What is the probability that the stakeholders will follow through on their demand?

A) Which stakeholder group should be represented on the board of directors?

54) If a company wishes to be a technological follower and also pursue a differentiation strategy, the appropriate R&D strategy would be to A) adapt the product or delivery system more closely to buyer needs by learning from the leader's experience. B) value activities by learning from the leader's experience. C) avoid R&D costs through imitation. D) create low-cost ways of performing value activities. E) innovate in other activities to increase buyer value.

A) adapt the product or delivery system more closely to buyer needs by learning from the leader's experience.

In a TOWS Matrix, SO Strategies A) are generated by thinking of ways in which a company or business unit could use its strengths to take advantage of opportunities. B) attempt to take advantage of opportunities by overcoming weaknesses. C) are basically defensive and primarily act to minimize weaknesses and avoid threats. D) consider a company's or unit's strengths as a way to avoid threats. E) are ways to get strategists to think "out of the box."

A) are generated by thinking of ways in which a company or business unit could use its strengths to take advantage of opportunities.

The key to outsourcing is to purchase from the outside only those activities that A) are not key to the company's distinctive competence. B) are very expensive. C) provide the company competitive advantage. D) are provided by an important supplier. E) are not very expensive.

A) are not key to the company's distinctive competence.

Avon is an example of a company that demonstrated having a diverse workforce A) can be a competitive advantage. B) can lower productivity. C) can be an effective IT strategy. D) can hinder quality. E) hinders growth.

A) can be a competitive advantage.

According to the BCG Growth Share Matrix, products that typically bring in far more money than is needed for maintenance of their market share are called A) cash cows. B) lost leaders. C) dogs. D) question marks. E) stars.

A) cash cows

Three trends are evident in logistics: outsourcing, the use of the Internet, and A) centralization. B) downsizing. C) logistical partnerships. D) computerization. E) containerized shipping.

A) centralization.

According to Porter, the term that applies to the breadth of a company's or business unit's target market is called A) competitive scope. B) differentiation. C) focus. D) diversification. E) cost leadership.

A) competitive scope.

The most logical growth strategy for a corporation with current product lines with real growth potential in a growing industry is A) concentration. B) conglomerate integration. C) concentric diversification. D) stability. E) retrenchment.

A) concentration.

Which strategy specifies the firm's overall direction in terms of its general orientation toward growth, the industries or markets in which it competes, and the manner in which it coordinates activities and transfers resources among business units? A) corporate B) functional C) divisional D) organizational E) business

A) corporate

Incentives based on meeting strict quantitative targets is a common organizational requirement for which of Porter's generic competitive strategies? A) cost leadership B) differentiation C) cost leadership focus D) differentiation focus E) collusion

A) cost leadership

Intense supervision of labor, sustained capital investment and access to capital are commonly required skills and resources for which of Porter's generic competitive strategies? A) cost leadership B) differentiation C) cost leadership focus D) differentiation focus E) collusion

A) cost leadership

A disadvantage of vertical integration is that it A) creates exit barriers. B) improves coordination of activities. C) decreases demand for the firm's products and services. D) creates entry barriers. E) avoids time consuming tasks.

A) creates exit barriers.

When there are highly automated assembly lines making one mass-produced product using little human labor, this setup is called A) dedicated transfer lines. B) connected line batch flow. C) connected job flow. D) mass batch lines. E) mass job flow.

A) dedicated transfer lines.

To avoid the consensus trap, which technique assigns a group or individual to identify potential pitfalls and problems with a proposed alternative strategy in a formal presentation? A) devil's advocate B) Sloan's judgment C) sales presentation D) dialectical inquiry E) scenario construction

A) devil's advocate

According to D'Aveni A) except for a few stable industries, strategy initiatives do not provide sustainable competitive advantage. B) hypercompetition is rare. C) it is enough to gain competitive advantage by being the lowest cost competitor. D) the theory of hypercompetition is not supported by any research. E) the American home appliance industry was immune to hypercompetition.

A) except for a few stable industries, strategy initiatives do not provide sustainable competitive advantage.

A company which keeps up by imitating a leading company's strategy while ignoring its own strengths and weaknesses is an example of which strategy to avoid? A) follow the leader B) hit another home run C) arms race D) do everything E) losing hand

A) follow the leader

The ability for Nike to manufacture its own shoes and then build stores for distribution is an example of A) forward integration. B) horizontal integration. C) backward integration. D) transferred integration. E) mass integration.

A) forward integration.

When a firm internally makes 100% of its key supplies and completely controls its distributors, this is known as A) full integration. B) taper integration. C) mass integration. D) economical integration. E) strategic integration.

A) full integration.

Which strategy did Circuit City use in 2008 when it converted its retail stores to cash? A) liquidation B) bankruptcy C) diversification D) divestment E) consolidation

A) liquidation

The type of marketing strategy in which a company captures a larger share of an existing market for current products through market saturation or market penetration or develops new markets for current products is called A) market development. B) push strategy. C) product development. D) pull strategy. E) skimming the cream.

A) market development.

37) Which external growth strategy involves two or more corporations joining in a stock exchange and from which only one corporation survives? A) mergers B) strategic alliances C) diversification D) acquisitions E) concentration

A) mergers

Which of the following strategies was being used when Allied Corporation and Signal Companies formed Allied Signal? A) mergers B) strategic alliances C) diversification D) acquisitions E) concentration

A) mergers

When Intel opened four small-scale research facilities adjacent to universities to promote the cross-pollination of ideas, they were using which approach to R&D? A) open innovation B) differentiation C) technology scouts D) continuous improvement E) technological leadership

A) open innovation

The text authors note that the essence of strategy is ? A) opportunity divided by strengths minus weaknesses. B) strength divided by opportunity. C) threat divided by capacity. D) threat divided by opportunity. E) opportunity divided by threat.

A) opportunity divided by strengths minus weaknesses.

One benefit of a U.S. company entering a joint venture with an international firm is that it A) reduces the risks of expropriation by host country officials. B) enhances the policy of the host country's takeover of the firm. C) promotes skepticism among other countries not involved in the merger. D) encourages competitors to work with the company. E) increases revenues by 20%.

A) reduces the risks of expropriation by host country officials.

In which strategy does management hope that another company will have the necessary resources and determination to return the company to profitability? A) sell out B) captive company C) liquidation D) bankruptcy E) profit

A) sell out

A company which imitates the products of competitors is referred to as a A) technological follower. B) technological opportunist. C) technological leader. D) technological manufacturer. E) technological entrepreneur.

A) technological follower.

Corporate parenting generates corporate strategy by focusing on A) the core competencies of the parent corporation and on the value created from the relationship between the parent and its units. B) the cash flow among its business units. C) whether a business unit should be growing, stabilizing, or retrenching. D) acquiring distinctive competencies in the marketplace. E) differentiating its activities into separate units and integrating these activities through complex integrating mechanisms.

A) the core competencies of the parent corporation and on the value created from the relationship between the parent and its units.

The T in SWOT represents ? A) threat. B) tactic. C) tautology. D) task. E) time.

A) threat.

Ford Motor Company's use of company resources to build its River Rouge Plant outside of Detroit so that iron ore could enter into one end of the plant and a finished automobile could exit out of the other end is called A) vertical growth. B) tapered integration. C) horizontal integration. D) external vertical integration. E) quasi-integration.

A) vertical growth.

What does a financial strategy examine?

Answer: A financial strategy examines the financial implications of corporate and business-level strategic options and identifies the best financial course of action. It can also provide competitive advantage through a lower cost of funds and a flexible ability to raise capital to support a business strategy. Financial strategy usually attempts to maximize the financial value of the firm.

Discuss the reasons a firm may form a strategic alliance.

Answer: A firm may form a strategic alliance to obtain or learn new capabilities, to obtain access to specific markets, to reduce financial risk, or to reduce political risk.

What is a propitious niche? Provide an example of a firm that has been able to successfully occupy a propitious niche.

Answer: A propitious niche is an extremely favorable niche that is so well suited to the firm's internal and external environment that other corporations are not likely to challenge or dislodge it. A niche is propitious to the extent that it currently is just large enough for one firm to satisfy its demand. After a firm has found and filled that niche, it is not worth a potential competitor's time or money to also go after the same niche. One company that has successfully found a propitious niche is Frank J. Zamboni & Company, the manufacturer of the machines that smooth the ice at ice skating rinks. Before the machine was invented, people had to clean and scrape the ice by hand to prepare the surface for skating. So long as Zamboni's company is able to produce the machines in the quantity and quality desired at a reasonable price, it's not worth another company's effort to go after Frank J. Zamboni's propitious niche.

Define a retrenchment strategy. Discuss the more popular options.

Answer: A retrenchment strategy may be used when a company has a weak competitive position in some or all of its product lines resulting in poor performance — sales are down and profits are becoming losses. The more popular options are turnaround, becoming a captive company, selling out, bankruptcy, and liquidation. Turnaround strategy emphasizes the improvement of operational efficiency and is probably most appropriate when a corporation's problems are pervasive, but not yet critical. The two basic phases of a turnaround strategy are contraction and consolidation. A captive company strategy is the giving up of independence in exchange for security. If a corporation with a weak competitive position in this industry is unable either to pull itself up by its bootstraps or to find a customer to which it can become a captive company, it may have no choice but to sell out. Bankruptcy involves giving up management of the firm to the courts in return for some settlement of the corporation's obligations. Liquidation is the termination of the firm.

Give an example of a technological leader.

Answer: A technological leader is a company that pioneers an innovation. An example of a technological leader is Nike. They spend more than most in the industry on R&D to differentiate the performance of its athletic shoes from that of its competitors.

What are cooperative strategies?

Answer: Cooperative strategies are used to gain competitive advantage within an industry by working with other firms. The two general types of cooperative strategies are collusion and strategic alliances. Collusion is the active cooperation of firms within an industry to reduce output and raise prices in order to get around the normal economic law of supply and demand. A strategic alliance is a partnership of two or more corporations or business units to achieve strategically significant objectives that are mutually beneficial.

Define corporate parenting.

Answer: Corporate parenting views the corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units. Corporate parenting generates corporate strategy by focusing on the core competencies of the parent corporation and on the value created from the relationship between the parent and its businesses.

What is a corporate scenario? What are the three steps in their construction?

Answer: Corporate scenarios are pro forma balance sheets and income statements that forecast the effect each alternative strategy and its various programs will likely have on division and corporate return on investment. To construct a corporate scenario, the following three steps should be taken: 1. Use industry scenarios to develop a set of assumptions about the task environment. 2. Develop common-size financial statements for the company's or business unit's previous years, to serve as the basis for the trend projections of pro forma financial statements. 3. Construct detailed pro forma financial statements for each strategic alternative.

What are the three key issues that corporate strategy deals with?

Answer: Corporate strategy deals with three key issues: 1. the firm's overall orientation toward growth, stability, and retrenchment (directional strategy). 2. the industries or markets in which the firm competes through its products and business units (portfolio analysis). 3. the manner in which management coordinates activities and transfers resources and cultivates capabilities among product lines and business units (parenting strategy).

What are Porter's four generic strategies?

Answer: Cost leadership is a lower-cost competitive strategy that aims at the broad mass market and requires "aggressive construction of efficient facilities, vigorous pursuit of cost reductions from experience, tight cost and overhead control, avoidance of marginal customer accounts, and cost minimization in areas like R&D, service, sales force, advertising, and so on." Because of its lower costs, the cost leader is able to charge a lower price for its products than its competitors and still make a satisfactory profit. Differentiation is aimed at the broad mass market and involves the creation of a product or service that is perceived throughout its industry as unique. The company or business unit may then charge a premium for its product. Cost focus is a low-cost competitive strategy that focuses on a particular buyer group or geographic market and attempts to serve only this niche, to the exclusion of others. In using cost focus, the company or business unit seeks a cost advantage in its target segment. Differentiation focus concentrates on a particular buyer group, product line segment, or geographic market. In using differentiation focus, the company or business unit seeks differentiation in a targeted market segment.

What is a functional strategy?

Answer: Functional strategy is the approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive competence to provide a company or business unit with a competitive advantage.

Why is growth a very attractive strategy?

Answer: Growth is a very attractive strategy for two key reasons. First, growth based on increasing market demand may mask flaws in a company. Second, a growing firm offers more opportunities for advancement, promotion, and interesting jobs. Growth itself is exciting and ego-enhancing for CEOs.

What is the impact of hypercompetition on competitive advantage?

Answer: Hypercompetition reflects the increasing difficulty of sustaining a competitive advantage over time. As a result of this erosion of competitive advantage, companies must constantly work to improve their advantage. Firms must constantly seek new ways to lower costs and add value to their products and services.

Discuss competitive strategy differences between a fragmented and a consolidated industry.

Answer: In a fragmented industry, there are many small- and medium-sized local companies that compete for relatively small shares of the total market. Focus strategies will likely predominate in a fragmented industry. Fragmented industries are typical for products in the early stages of their life cycle. If few economies are to be gained through size, no large firms will emerge and entry barriers will be low — allowing a stream of new entrants into the industry. As an industry matures, fragmentation is overcome and the industry tends to become a consolidated industry dominated by a few large companies. Although many industries begin fragmented, battles for market share and creative attempts to overcome local or niche market boundaries often increase the market share of a few companies. After product standards become established for minimum quality and features, competition shifts to a greater emphasis on cost and service. Slower growth, overcapacity, and knowledgeable buyers combine to put a premium on a firm's ability to achieve cost leadership or differentiation along the dimensions most desired by the market. Research and development shifts from product to process improvements. Overall product quality improves, and costs are reduced significantly.

In evaluating a strategic alternative, if there is little fit with the company's culture, what are management's options?

Answer: In evaluating a strategic alternative, management must consider corporate culture pressures and assess the strategy's compatibility with the corporate culture. If there is little fit, management must decide if it should take a chance on ignoring the culture, manage around the culture and change the implementation plan, try to change the culture to fit the strategy, or change the strategy to fit the culture.

What is portfolio analysis?

Answer: In portfolio analysis, top management views its product lines and business units as a series of investments from which it expects a profitable return. The product lines/business units form a portfolio of investments that top management must constantly juggle to ensure the best return of the corporation's invested money.

What is outsourcing? What are the seven major outsourcing errors that should be avoided?

Answer: Outsourcing is purchasing from someone else a product or service that had been previously provided internally. It is the reverse of vertical integration. Outsourcing is becoming an increasingly important part of strategic decision making and an important way to increase efficiency and often quality. The seven major outsourcing errors that should be avoided are as follows: 1. Companies failed to keep core activities in house. 2. Companies selected the wrong vendor — those that were not trustworthy or lacked state-of-the-art processes. 3. Companies failed to write an effective contract establishing the balance of power in the relationship. 4. Companies overlooked personnel issues, resulting in employees losing commitment to the firm. 5. Management lost control over the outsourced activity. 6. Companies overlooked the hidden costs of outsourcing. 7. Companies failed to plan an exit strategy (such as reversibility clauses).

Explain the four combination strategies that may be generated from the TOWS Matrix.

Answer: The TOWS Matrix results in four combination strategies as follows: SO Strategies are generated by thinking of ways in which a company or business unit could use its strengths to take advantage of opportunities. ST Strategies consider a company's or unit's strengths as a way to avoid threats. WO Strategies attempt to take advantage of opportunities by overcoming weaknesses. WT Strategies are basically defensive and primarily act to minimize weaknesses and avoid threats.

In a dynamic environment, using consensus to arrive at a strategic decision is not recommended. Why? What two techniques can strategic managers use to avoid the consensus trap?

Answer: The best decisions actually involve a certain amount of heated disagreement, and even conflict. Many diverse opinions are presented, participants trust in one another's abilities and competencies, and conflict is task-oriented, not personal. Two techniques to help strategic managers avoid the consensus trap are the devil's advocate and dialectical inquiry. A devil's advocate is assigned to identify potential pitfalls and problems with a proposed alternative strategy in a formal presentation. The dialectical inquiry involves combining two conflicting views — the thesis and the antithesis — into a synthesis. It requires that two proposals using different assumptions be generated for each alternative strategy under consideration.

Describe the four categories of the BCG Growth Share Matrix.

Answer: The four categories of the BCG Growth Share Matrix are question marks, stars, cash cows, and dogs. Question marks are new products with the potential for success, but they need a lot of cash for development. Stars are market leaders typically at the peak of their product life cycle and are usually able to generate enough cash to maintain their high share of the market and contribute to the company's profits. Cash cows typically bring in far more money than is needed to maintain their market share. In this declining stage of their life cycle, these products are "milked" for cash that will be invested in new question marks. Dogs have low market share and do not have the potential to bring in much cash because they are in unattractive industries. Dogs should be either sold off or managed carefully for the small amount of cash they can generate.

Discuss the more popular stability strategies.

Answer: The more popular stability strategies include the pause-proceed with caution, no change, and profit strategies. A pause-proceed with caution strategy is, in effect, a timeout — an opportunity to rest before continuing a growth or retrenchment strategy. A no change strategy is a decision to do nothing new — a choice to continue current operations and policies for the foreseeable future. A profit strategy is a decision to do nothing new in a worsening situation but instead to act as though the company's problems are only temporary.

What are the strategies to avoid proposed by the authors?

Answer: The strategies to avoid are as follows: 1. Follow the leader. Imitating a leading competitor's strategy might seem to be a good idea, but it ignores a firm's particular strengths and weaknesses and the possibility that the leader may be wrong. 2. Hit another home run. If a company is successful because it pioneered an extremely successful product, it tends to search for another super product that will ensure growth and prosperity. 3. Arms race. Entering into a spirited battle with another firm for increased market share might increase sales revenue, but that increase will probably be more than offset by increases in advertising, promotion, R&D, and manufacturing costs. 4. Do everything. When faced with several interesting opportunities, management might tend to leap at all of them. At first, a corporation might have enough resources to develop each idea into a project, but money, time, and energy are soon exhausted as the many projects demand large infusions of resources. 5. Losing hand. A corporation might have invested so much in a particular strategy that top management is unwilling to accept its failure. Believing that it has too much invested to quit, the corporation continues to throw "good money after bad."

Discuss the three general orientations comprising directional strategy?

Answer: The three general orientations comprising directional strategy are growth, stability and retrenchment. Growth strategies expand the company's activities. Stability strategies make no change to the company's current activities. Retrenchment strategies reduce the company's level of activities.

Discuss the two basic growth strategies.

Answer: The two basic growth strategies are concentration on the current product line in one industry and diversification into other product lines in other industries. If a company's product lines have real growth potential, concentration of resources on those product lines makes sense as a strategy for growth. Companies begin thinking about diversification when their growth has plateaued and opportunities for growth in the original business have been depleted.

What are the types of alliances that businesses can engage in?

Answer: The types of alliances that businesses can engage in include a mutual service consortia, a joint venture, a licensing arrangement, and a value-chain partnership. A mutual service consortium is a partnership of similar companies in similar industries that pool their resources to gain a benefit that is too expensive to develop alone. A joint venture is a "cooperative business activity, formed by two or more separate organizations for strategic purposes, that creates an independent business entity and allocates ownership, operational responsibilities, and financial risks and rewards to each member, while preserving their separate identity/autonomy." A licensing arrangement is an agreement in which the licensing firm grants rights to another firm in another country or market to produce and/or sell a product. The licensee pays compensation to the licensing firm in return for technical expertise. A value-chain partnership is a strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage.

What are the more popular options for international entry?

Answer: There are several popular options for international entry. Exporting is a good way to minimize risk and experiment with a specific product. Exporting involves shipping goods produced in the company's home country to other countries for marketing. Under a licensing agreement, the licensing firm grants rights to another firm in the host country to produce and/or sell a product. The licensee pays compensation to the licensing firm in return for technical expertise. Under a franchising agreement, the franchiser grants rights to another company to open a retail store using the franchiser's name and operating system. In exchange, the franchisee pays the franchiser a percentage of its sales as a royalty. Forming a joint venture between a foreign corporation and a domestic company is the most popular strategy used to enter a new country. Companies often form joint ventures to combine the resources and expertise needed to develop new products or technologies. A relatively quick way to move into an international area is through acquisitions — purchasing another company already operating in that area. If a company doesn't want to purchase another company's problems along with its assets, it may choose greenfield development — building its own manufacturing plant and distribution system. Production sharing is the process of combining the higher labor skills and technology available in the developed countries with the lower-cost labor available in developing countries. Turnkey operations are typically contracts for the construction of operating facilities in exchange for a fee. The BOT (Build, Operate, Transfer) concept is a variation of the turnkey operation. Instead of turning the facility over to the host country when completed, the company operates the facility for a fixed period of time during which it earns back its investment, plus a profit. Management contracts offer a means through which a corporation may use some of its personnel to assist a firm in a host country for a specified fee and period of time.

Distinguish between a market development and a product development strategy.

Answer: Using a market development strategy, a company or business unit can (1) capture a larger share of an existing market for current products through market saturation and market penetration or (2) develop new markets for current products. Using the product development strategy, a company or unit can (1) develop new products for existing markets or (2) develop new products for new markets.

Discuss W. Edward Deming's position on sole sourcing.

Answer: W. Edward Deming strongly recommended sole sourcing as the only manageable way to obtain high supplier quality. Sole sourcing relies on only one supplier for a particular part. Deming argued that the buyer should work closely with the supplier at all stages. This reduces both cost and time spent on product design as well as improving quality. By using JIT, it can also simplify the production process.

A study of 30 firms revealed that outsourcing can lead to a ________ percent reduction in costs. A) 3 B) 9 C) 20 D) 30 E) 50

B) 9

Which of the following is NOT one of the risks of a cost leadership strategy? A) The technology that the organization has been using changes B) Achieving excessive success causes jealousy amongst competitors C) Competitors can achieve viable imitations D)Other bases for cost leadership erode E) Proximity in differentiation is lost

B) Achieving excessive success causes jealousy amongst competitors.

As it relates to operations, AMT stands for A) Automated Manufacturing Technology. B) Advanced Manufacturing Technology. C) Asymptotic Manufacturing Technology. D) Advanced Monotone Technology. E) Automated Manufacturing Technician.

B) Advanced Manufacturing Technology.

The book Hypercompetition was written by A) Porter. B) D'Aveni. C) Mintzberg. D) Maslow. E) Drucker.

B) D'Aveni.

Which of the following reflects the impact of industry backgrounds on strategic choices? A) Executives from other industries tend to make riskier decisions. B) Executives with strong ties within an industry tend to choose strategies commonly used in that industry. C) Executives from other industries tend to downsize as a first choice. D) Executives with strong ties within an industry tend to make riskier decisions. E) Executives from other industries tend to emphasize ROI.

B) Executives with strong ties within an industry tend to choose strategies commonly used in that industry.

A Car's cruise control, known as a "bell and whistle," is an example of which of the eight dimensions of quality? A) Performance B) Features C) Reliability D) Durability E) Aesthetics

B) Features

Most entrepreneurial ventures follow A) Differentiation strategies B) Focus strategies C) No strategies D) Cost leadership strategies E) All of the above

B) Focus strategies

The focus strategies will likely predominate when many small and medium sized goal companies compete for relatively small shares of the total market in a(n) A) United industry B) Fragmented industry C) Consolidate industry D) Isolated industry

B) Fragmented industry

Which of the following is NOT one of the advantages of portfolio analysis? A) The graphic depiction facilitates communication. B) It provides the basis for impartial objectivity from which to make decisions. C) It encourages top management to evaluate each of the corporation's businesses individually. D) It raises the issue of cash flow availability for use in expansion and growth. E) It stimulates the use of externally oriented data to supplement management's judgment.

B) It provides the basis for impartial objectivity from which to make decisions.

Which of the following is NOT considered a strategic alliance success factor? A) Have a clear strategic purpose. B) Operate with short-term time horizon. C) Agree on an exit strategy for when the partners' objectives are achieved or the partnership fails. D) Minimize conflicts among the partners by clarifying the objectives. E) Identify likely partnering risks and deal with them when the alliance is formed.

B) Operate with short-term time horizon.

The strategy that deals with product and process innovation and improvement is known as a(n) ________ strategy. A) marketing B) R&D C) operations D) financial E) human resource management

B) R&D

According to the text, which one of the following is NOT one of the reasons why innovations seem to occur more often in small firms rather than in large, established corporations? A) An entrepreneur in a small firm is more willing to accept greater risk than would a larger firm of diversified ownership. B) Small firms are completely ignorant of risk management. C) The greater the assets involved and the longer they are tied up, the more likely top management in large firms is to demand a high probability of success. D) Companies operating in global industries must deal with a greater amount of risk than firms operating only in one country. E) If the corporation's stock is widely held as in the case of large firms and experiences stock price declines due to some external assessment, it places the firm in jeopardy of being acquired.

B) Small firms are completely ignorant of risk management.

Which strategy did Delta choose when it acquired Northwest Airlines to obtain access to Northwest's Asian markets? A) a retrenchment strategy using horizontal integration through internal means B) a horizontal integration strategy C) a stability strategy using concentric diversification D) a growth strategy using vertical integration through external means E) a retrenchment strategy using a concentration method

B) a horizontal integration strategy

Which strategy involves giving up management of the firm to the courts in return for some settlement of the corporation's obligations? A) liquidation B) bankruptcy C) diversification D) divestment E) consolidation

B) bankruptcy

The active cooperation of firms within an industry to reduce output and raise prices to get around the normal law of supply and demand is referred to as A) a strategic alliance. B) collusion. C) a strategic roll up. D) a merger. E) licensing.

B) collusion.

When components are standardized and each machine functions like a job shop but is positioned in the same order as the parts are processed, this setup is known as A) mass customization. B) connected line batch flow. C) connected job flow. D) mass batch flow. E) mass job flow.

B) connected line batch flow.

Walmart, as a discount retailer, is an example of a company follow which of Porter's competitive strategies? A) differentiation B) cost leadership C) differentiation focus D) competitive advantage E) cost focus

B) cost leadership

Amenities to attract highly skilled labor, scientists, or creative people is a common organizational requirement for which of Porter's generic competitive strategies? A) cost leadership B) differentiation C) cost leadership focus D) differentiation focus E) collusion

B) differentiation

Apple is an example of a company following which if Porter's generic competitive strategies? A) cost leadership B) differentiation C) cost focus D) competitive scope E) diversification

B) differentiation

If it is to be successful, Porter advises that a division possess strong marketing abilities, product engineering, a creative flair, strong capability in basic research and a corporate reputation for quality or technological leadership, for which one of the following generic competitive strategies? A) focus B) differentiation C) overall cost leadership D) vertical growth E) concentration

B) differentiation

Product engineering, creative flair, and strong cooperation from channels are commonly required skills and resources for which of Porter's generic strategies? A) cost leadership B) differentiation C) cost leadership focus D) differentiation focus E) collusion

B) differentiation

According to Porter the generic competitive strategy that reflects the ability to provide unique and superior value to the buyer in terms of product quality, special features, or after-sales service is called - A) competitive scope. B) differentiation. C) focus. D) diversification. E) cost leadership.

B) differentiation.

Which kind of corporate strategy deals with the firm's overall orientation toward growth? A) portfolio strategy B) directional strategy C) parenting strategy D) cooperative strategy E) functional strategy

B) directional strategy

The particular capabilities and resources a firm possesses and the superior way in which they are used is called ____________________________? A) differentiating capabilities. B) distinctive competencies. C) situational proficiency. D) core competencies. E) distinctive characteristics.

B) distinctive competencies.

A company which has previously found great success pioneering an extremely successful product that is presently trying to turn another "long-shot" into a success would be an example of which strategy to avoid? A) follow the leader B) hit another home run C) arms race D) do everything E) losing hand

B) hit another home run

A corporate strategy that cuts across divisional boundaries to build synergy across business units and to improve the competitive position of one or more business units is called A) vertical strategy. B) horizontal strategy. C) hierarchical strategy. D) portfolio strategy. E) pyramid strategy.

B) horizontal strategy.

Business strategy focuses on A) ensuring that the company maintains the existing market share that it has historically enjoyed. B) improving the competitive position of a corporation's products or services within the industry or market segment served. C) providing adequate shareholders' return on investment. D) preventing the competition from gaining a competitive edge by undermining their marketing plan. E) recovering the competitive lead by using all available resources that the company can provide.

B) improving the competitive position of a corporation's products or services within the industry or market segment served.

According to Porter, to achieve a differentiation competitive strategy by following the functional strategy of technological leadership, a business unit should A) pioneer the lowest-cost product design. B) innovate in other activities to increase buyer value. C) avoid R&D costs through imitation. D) create low-cost ways of performing value activities. E) be the first firm down the learning curve.

B) innovate in other activities to increase buyer value.

According to the text, 75% of a company's market value is derived from its A) employees. B) intangible assets. C) plant assets. D) joint ventures. E) licensing agreements.

B) intangible assets.

The controversy surrounding external versus internal growth finds A) external growth appears to be superior financially to internal growth. B) internal growth appears to be superior financially to external growth. C) there appears to be no financial advantage to either. D) acquisitions have a lower survival rate than new internally generated business ventures. E) strategic alliances are superior to both.

B) internal growth appears to be superior financially to external growth.

An MNC uses which international strategy for entering a foreign market by associating itself with a firm in the host country or a government agency in that country to combine resources and expertise needed for the development of a new product or technologies? A) licensing B) joint ventures C) production sharing D) exporting E) acquisitions

B) joint ventures

Which strategy has been used successfully by Yum! Brands to establish KFC and Pizza Hut restaurants across the globe? A) joint venture B) licensing arrangement C) strategic alliance D) marketing strategy E) value-chain partnership

B) licensing arrangement

The flow of products into and out of the manufacturing process is a factor when developing a(n) ________ strategy. A) marketing B) logistics C) operations D) financial E) human resource management

B) logistics

Leveraged buyouts are also sometimes referred to as A) leveraged bargains. B) management buyouts. C) management bargains. D) coordinated buyouts. E) debt buyouts.

B) management buyouts.

The pricing, selling, and distributing of a product is referred to as a(n) ________ strategy. A) functional B) marketing C) operations D) financial E) human resource management

B) marketing

The purchasing strategy used by an automobile manufacturer when it orders seats for a specific car model from several vendors is A) sole sourcing. B) multiple sourcing. C) just-in-time sourcing. D) backup sourcing. E) parallel sourcing.

B) multiple sourcing.

Which strategy is most appropriate for a company in an industry in which the future is expected to continue as an extension of the present? A) horizontal integration strategy B) no change strategy C) retrenchment strategy D) pause/proceed with caution strategy E) profit strategy

B) no change strategy

When a company determines how and where a product or service is to be manufactured, the level of vertical integration in the production process, the deployment of physical resources, and relationships with suppliers, the company is developing its ________ strategy. A) marketing B) operations C) R&D D) financial E) human resource management

B) operations

Once the best strategic alternative is selected, the broad guidelines for its implementation are then defined by A) trade-offs. B) policies. C) procedures. D) resource allocation. E) strategic options.

B) policies.

The type of strategy used to influence a corporation's key stakeholders in order to increase their support of corporate activities is A) cooperative strategy. B) political strategy. C) competitive strategy. D) marketing strategy. E) profit strategy.

B) political strategy.

A corporation's specific competitive role which is so well-suited to the firm's internal and external environment that other corporations are NOT likely to challenge or dislodge it. A) strategic fit B) propitious niche C) common thread D) business screen E) implicit strategy

B) propitious niche

When a company deals with obtaining raw materials, parts, and supplies needed to perform the operations function, the company is developing its ________ strategy. A) operations B) purchasing C) R&D D) financial E) human resource management

B) purchasing

When a company spends a large amount of money on trade promotion in order to gain or hold shelf space in retail outlets, a company is using a ________ strategy. A) pull B) push C) financial D) dedicated line E) dynamic pricing

B) push

The Growth Share Matrix of the Boston Consulting Group suggests that the excess cash being generated by cash cows should be used to fund A) dogs. B) question marks. C) stars. D) white knights. E) fish.

B) question marks.

A new approach to evaluating alternatives under conditions of high environmental uncertainty that proposes it pays to have a broad range of options open is the A) net present value. B) real options approach. C) stakeholder priority matrix. D) risk assessment approach. E) hurdle rate approach.

B) real options approach.

Many companies have found that outsourcing logistics A) helps centralize logistics. B) reduces costs and improves delivery time. C) is an effective business-level strategy. D) helps the companies differentiate themselves. E) all of the above

B) reduces costs and improves delivery time.

Which type of pricing takes advantage of the demand curve while the product is still novel and competitors are few to increase profits? A) demand pricing B) skim pricing C) competitive pricing D) penetration pricing E) loss-leader pricing

B) skim pricing

With conglomerate diversification, the focus is on A) product-market synergy. B) sound investment and value-oriented management. C) employee satisfaction. D) similar product offerings. E) market demand.

B) sound investment and value-oriented management.

A method developed in the mid-1990s as an efficient means to quickly consolidate a fragmented industry can be referred to as a A) merger. B) strategic rollup. C) cost strategy. D) differentiation strategy. E) focus strategy.

B) strategic rollup.

The purpose of vertical growth is to A) take over a function previously supplied by a former employer. B) take over a function previously provided by a supplier or by a distributor. C) acquire a company of similar objective. D) sell a company encumbered with debt. E) expand to countries with strong trade alliances.

B) take over a function previously provided by a supplier or by a distributor.

A secret salary cap was the contention in a 2012 collusion lawsuit filed against A) KFC. B) the National Football League. C) GE. D) Major League Baseball. E) ESPN.

B) the National Football League.

When considering acceptable alternative strategies, the most important criterion is the capability of the proposed strategy to deal with A) the prospects of ensuring profitable return on investment. B) the specific strategic factors developed in the SWOT analysis. C) defining the competitive environment in which the firm is competing. D) the future long-term prospects of the industry. E) governmental regulations and requirements placed on the industry.

B) the specific strategic factors developed in the SWOT analysis.

According to Paul Nutt, a decision-making authority, what percent of decisions made by managers are failures? A) 10 B) 25 C) 50 D) 75 E) 90

C) 50

As an industry matures while overcoming fragmentation and becomes dominated by a small number of large companies, it tends to become a(n) A) United industry B) Fragmented industry C) Consolidated industry D) Isolated industry E) Integrated industry

C) Consolidated industry

When a company following a differentiation strategy ensures that the higher price it charges for its higher quality is not priced too far above the price of the competition, the company ohs using the process of A) Low-cost differentiation B) Cost leadership C) Cost proximity D) Basic differentiation E) Price fixing

C) Cost proximity

Which of Porter's competitive strategies concentrated on seeking differentiation in a particular buyer group, product line segment, or geographic market? A) Differentiation B) Cost leadership C) Differentiation focus D) Competitive advantage E) Cost focus

C) Differentiation focus

One company that has successfully found a propitious niche is - A) Coca-Cola. B) PepsiCo. C) Frank J. Zamboni & Company. D) Walmart. E) Disney.

C) Frank J. Zamboni & Company.

An example of a company that did not blindly follow the prescriptions of a portfolio model was A) Apple. B) Nike. C) General Mills. D) Dell. E) IBM.

C) General Mills.

42) Which of the following is NOT a goal of financial strategies? A) Examine the financial implication of corporate and business level strategic options and identify the best financial course of action. B) Provide the corporation with the appropriate financial structure and funds to achieve its overall objectives. C) Institute a new product development plan to generate profit gain market share. D) Provide competitive advantage through a lower cost of funds and a flexible ability to raise capital to support a business strategy. E) Attempt to maximize the financial value of the firm.

C) Institute a new product development plan to generate profit gain market share.

Which of the following is NOT one of the limitations of portfolio analysis? A) It contains value-laden terminology that can lead to self-fulfilling prophecies. B) It is not difficult: Easy to define product/market segments. C) It relies too heavily on objective judgments. D) It suggests the use of standard strategies which may be impractical or may miss potential opportunities. E) It provides an illusion of scientific rigor.

C) It relies too heavily on objective judgments.

Continuous improvement is an operations concept developed by Deming and perfected by firms in A) the United States. B) Sweden. C) Japan. D) Germany. E) Canada.

C) Japan.

Which one of the following is NOT true of risk? A) It includes the length of time the asset will be unavailable for other uses. B) It includes the probability that the strategy will be effective. C) Managers who own a significant amount of stock in their firms are less likely to engage in risk-taking actions. D) It includes the amount of assets the corporation must allocate to that strategy. E) The greater the assets involved, the more likely top management is to demand a high probability of success.

C) Managers who own a significant amount of stock in their firms are less likely to engage in risk-taking actions.

According to Barney, under which condition would tacit collusion most likely be successful? A) There is a large number of identifiable competitors. B) Costs are not similar among firms. C) One firm tends to act as the price leader. D) Sales are characterized by a high frequency of large orders. E) There are low barriers to entry in the industry.

C) One firm tends to act as the price leader.

An acronym for the assessment of external and internal environments of the business corporation in the process of strategy formulation/strategic planning is _____? A) PET. B) MBO. C) SWOT. D) SBU. E) ROI.

C) SWOT.

According to Porter, a business unit in a competitive marketplace with no generic competitive strategy is A) Achieving synergy B)) Practicing innovative leadership C) Stuck in the middle D) Not goal directed E) Last in line

C) Stuck in the middle

A flexible manufacturing system is A) one-of-a-kind production using skilled labor. B) highly automated assembly lines making one mass-produced product using little human labor. C) a grouping of parts into manufacturing families to produce a wide variety of mass-produced items. D) a process utilizing the just-in-time (JIT) method of manufacturing. E) standardization of components with each machine functioning like a job shop, but is positioned in the same order as the parts are processed.

C) a grouping of parts into manufacturing families to produce a wide variety of mass-produced items.

In a TOWS Matrix, WT Strategies A) are generated by thinking of ways in which a company or business unit could use its strengths to take advantage of opportunities. B) attempt to take advantage of opportunities by overcoming weaknesses. C) are basically defensive and primarily act to minimize weaknesses and avoid threats. D) consider a company's or unit's strengths as a way to avoid threats. E) are ways to get strategists to think "out of the box."

C) are basically defensive and primarily act to minimize weaknesses and avoid threats.

Since the deregulation of the airline industry, major airlines have entered into a spirited battle for market share by cutting prices and offering special deals. This is an example of which strategy to avoid? A) follow the leader B) hit another home run C) arms race D) do everything E) losing hand

C) arms race

According to Porter, to achieve a cost advantage by following the functional strategy of technological followership, a business unit should A) pioneer the lowest-cost product design. B) innovate in other activities to increase buyer value. C) avoid R&D costs through imitation. D) create low-cost ways of performing value activities. E) be the first firm down the learning curve.

C) avoid R&D costs through imitation.

The purchase of the supplier Carroll's Foods for its hog-growing facilities by Smithfield Foods, the world's largest pork processor, is an example of A) forward integration. B) horizontal integration. C) backward integration. D) transferred integration. E) mass integration.

C) backward integration.

When Smith & Wesson puts its name on others' products like men's cologne, it is using which marketing strategy? A) demand pricing B) brand pricing C) brand extension D) penetration extension E) demand extension

C) brand extension

Business strategy is composed of A) corporate and competitive strategy. B) functional and divisional strategy. C) competitive and cooperative strategy. D) corporate and cooperative strategy. E) divisional and competitive strategy.

C) competitive and cooperative strategy.

Adding a related or complementary product to a corporation's business units is called A) concentration. B) horizontal growth. C) concentric diversification. D) vertical growth. E) conglomerate diversification.

C) concentric diversification.

74) Porter recommends that a division with tight cost control, frequent detailed control reports, a well structured organization, and quantitatively based incentives is required for which of the following generic competitive strategies? A) focus B) differentiation C) cost leadership D) focus differentiation E) concentration

C) cost leadership

According to Porter, the generic competitive strategy that reflects the ability of the corporation or its business unit to design, produce, and market a comparable product more efficiently than its competitors is called A) competitive scope. B) differentiation. C) cost leadership. D) diversification. E) focus.

C) cost leadership.

Orphagenix, a small biotech firm, avoids head-to-head competition with large pharmaceutical companies by developing orphan drugs to target diseases that affect fewer than 200,000 people. This is an example of which of Porter's generic strategies? A) differentiation B) cost leadership C) differentiation focus D) competitive advantage E) cost focus

C) differentiation focus

According to the BCG Growth Share Matrix, those products with low market share in an unattractive industry that do NOT have the potential to bring in much cash are called A) cash cows. B) lost leaders. C) dogs. D) question marks. E) stars.

C) dogs.

Which of the following describes a turnaround strategy? A) a form of divestment and is appropriate when corporate problems can be traced to the poor performance of an SBU or product line B) occurs when the corporation reduces the scope of some of its functional activities and becomes "captive" to another firm C) emphasizes improving operational efficiency and is appropriate when a corporation's problems are pervasive, but not yet critical D) occurs when a corporation liquidates all its assets E) involves adding different products or divisions to the corporation

C) emphasizes improving operational efficiency and is appropriate when a corporation's problems are pervasive, but not yet critical

An MNC uses which international strategy for entering a foreign market by simply shipping goods produced in the company's home country to other countries for marketing to minimize risk and to experiment with a specific product? A) licensing B) joint ventures C) exporting D) production sharing E) acquisitions

C) exporting

Which one of the following directional strategies is most frequently used in corporations? A) stability B) consolidation C) growth D) retrenchment E) expansion

C) growth

Tacit collusion A) involves direct communication among competing firms. B) is most likely to be successful if there are many competitors. C) is seen with conscious parallelism as practiced by GE and Westinghouse. D) is not illegal. E) is most effective when the industry does not have a firm that acts as a price leader.

C) is seen with conscious parallelism as practiced by GE and Westinghouse.

All of the following reflect criticisms of the SWOT analysis EXCEPT - A) it uses no weights to reflect priorities. B) it only requires a single level of analysis. C) it provides a rational link to strategy implementation. D) it uses ambiguity in words and phrases. E) it generates lengthy lists.

C) it provides a rational link to strategy implementation.

In the development of a SFAS matrix, the first step is to ? A) enter the ratings of how the company's management is responding to each of the strategic factors. B) calculate the weighted scores. C) list the most important EFAS and IFAS items. D) indicate short-term goals for the duration. E) enter the weights for all of the internal factors.

C) list the most important EFAS and IFAS items.

When P&G, Kimberly-Clark, and Scott Paper compete with each other in varying combinations of consumer paper products, they are said to be engaging in A) oligopolistic competition. B) strategic competition. C) multipoint competition. D) laissez-faire competition. E) horizontal competition.

C) multipoint competition.

According to Campbell, Goold, and Alexander, when parent companies create more value than any of their rivals would if they owned the same businesses, they have A) multi-point competition. B) strategic advantage. C) parenting advantage. D) portfolio analysis. E) no real advantage.

C) parenting advantage.

Which kind of corporate strategy deals with the manner in which the firm coordinates activities and builds corporate synergies through resource sharing and development? A) portfolio strategy B) directional strategy C) parenting strategy D) cooperative strategy E) functional strategy

C) parenting strategy

One of the most popular aids to developing corporate strategy in multi-business corporations that views business units in terms of the cash they generate is called A) PIMS. B) segmentation analysis. C) portfolio analysis. D) industry analysis. E) diversification study.

C) portfolio analysis.

A recent trend in information systems strategy used by multinational corporations is A) computerizing accounting. B) automating customer service. C) practicing follow-the-sun management. D) replacing Fortran with Cobol in order to boost productivity. E) replacing mainframe computers with robots.

C) practicing follow-the-sun management.

An MNC uses which international strategy for entering a foreign market by combining the higher labor skills and technology available in the developed countries with the lower cost labor available in the developing countries? A) licensing B) joint ventures C) production sharing D) exporting E) acquisitions

C) production sharing

Jet airplane manufacturers often enter into strategic alliances to A) obtain new capabilities. B) obtain access to specific markets. C) reduce financial risk. D) reduce political risk. E) preserve autonomy.

C) reduce financial risk.

The concept of ________ was taken one step further in JITII, in which vendor sales representatives usually have desks next to the purchasing company's factory floor, attend production status meetings, visit the R&D lab, and analyze the purchasing company's sales forecasts. A) multiple sourcing B) outsourcing C) sole sourcing D) parallel sourcing E) all of the above

C) sole sourcing

The two general types of cooperative strategies are A) competitive and functional. B) collusion and competitive. C) strategic alliances and collusion. D) strategic alliances and competitive. E) competitive and collusive alliances.

C) strategic alliances and collusion.

The evaluation of alternative strategies and selection of the best alternative is referred to as A) alternative generation. B) strategic implementation. C) strategic choice. D) strategic selection. E) evaluation.

C) strategic choice.

48) A company which pioneers an innovation is called a A) technological follower. B) technological opportunist. C) technological leader. D) technological manufacturer. E) technological entrepreneur.

C) technological leader.

As defined by the text, synergy is the concept A) that involves adding different products or divisions to the corporation. B) that supports divestiture of one corporation by another. C) that two firms can generate more profits together than separately. D) that a corporation can enter one or more businesses that are necessary to manufacture its own product. E) that two functional areas of a corporation can coordinate their work as a team.

C) that two firms can generate more profits together than separately.

Research comparing concentric with conglomerate diversification concludes that A) conglomerate diversification is always less profitable than concentric diversification. B) concentric diversification is always less profitable than conglomerate diversification. C) the relationship between relatedness and performance follows an inverted U-shaped curve. D) neither concentric nor conglomerate diversification are ever profitable. E) for optimum effectiveness both conglomerate and concentric diversification should be utilized in tandem.

C) the relationship between relatedness and performance follows an inverted U-shaped curve.

The kind of strategic alliance in which a company forms a strong and close long-term relationship for mutual advantage with a key supplier or distributor is the A) joint venture. B) licensing agreement. C) value-chain partnership. D) mutual service consortia. E) holding company.

C) value-chain partnership.

When P&G (the maker of Folgers and Millstone coffee) worked with Mr. Coffee, Krups, and Hamilton Beach to market Home Café, they engaged in a A) joint venture. B) licensing arrangement. C) value-chain partnership. D) mutual service consortium. E) competitive advantage.

C) value-chain partnership.

In international dealings, greenfield development is A) a way in which an MNC may contract with a foreign government or local firm to trade raw materials for certain resources belonging to the MNC. B) a way in which an MNC can take total control of operations by acquiring a firm already established in the host country. C) when a corporation chooses to build a facility from scratch allowing it the freedom to design the plant, choose suppliers, and hire its workforce. D) when an MNC has a large amount of management talent available and chooses to use its personnel to assist a firm in a host country for a specified fee and period of time. E) contracting for construction of operating facilities in exchange for a fee.

C) when a corporation chooses to build a facility from scratch allowing it the freedom to design the plant, choose suppliers, and hire its workforce.

Which of the following is NOT one of the risks of the focus strategy? A) The target segment's structure erodes B) The segment's differences from other segments narrow C) The advantages of a broad line increase D) Focusers exit the industry E) Demand disappears for the product in the target segment

D) Focusers exit the industry

Which of the following is NOT one of the questions that development of a competitive strategy should raise? A) Should we compete on the basis of lower cost? B) Should we compete head-to-head with major competitors? C) Should we differentiate our products or services on some basis other than cost? D) Should we compete by garnering political support of influential leaders? E) Should we compete in a niche market that we can satisfy which is superior to that of the competition?

D) Should we compete by garnering political support of influential leaders?

The technique that illustrates how management can match the eternal opportunities and threats with its strengths and weaknesses to yield four sets of strategic alternatives is called a A) IFAS Table. B) EFAS Table. C) SFAS Table. D) TOWS Matrix. E) Issues Priority Matrix.

D) TOWS Matrix.

Which of the following is NOT one of the limitations of the BCG Growth Share Matrix? A) It is too simplistic. B) The link between market share and profitability is questionable. C) Growth rate is only one aspect of industry attractiveness. D) There are too many aspects of overall competitive position included. E) Small competitors with fast-growing market share are ignored.

D) There are too many aspects of overall competitive position included.

Which of the following is NOT one of the eight dimensions of quality? A) Serviceability B) Durability C) Performance D) Value E) Features

D) Value

The stability strategy is appropriate for all of the following circumstances EXCEPT A) useful in the short-run but can be dangerous if followed too long. B) most appropriate for reasonably successful corporations in a reasonably predictable environment. C) when a firm is continuing its current activities without a significant change in direction. D) appropriate when the industry is in decline. E) popular with small business owners who have found a niche and are happy with their success.

D) appropriate when the industry is in decline.

In many cases, ________ integration is more profitable than ________ integration. A) forward; backward B) vertical; backward C) backward; vertical D) backward; forward E) mass; forward

D) backward; forward

As an industry becomes hypercompetitive, firms initially respond by A) raising entry barriers. B) moving into untapped markets. C) attacking the strongholds of other firms. D) competing on cost and quality. E) working their way to a situation of perfect competition.

D) competing on cost and quality.

When firms follow each other's lead to reduce the level of competition such as GE and Westinghouse did in steam turbines, it is referred to as A) explicit collusion. B) a strategic alliance. C) a mutual service consortium. D) conscious parallelism. E) partnering.

D) conscious parallelism.

In a TOWS Matrix, ST Strategies A) are generated by thinking of ways in which a company or business unit could use its strengths to take advantage of opportunities. B) attempt to take advantage of opportunities by overcoming weaknesses. C) are basically defensive and primarily act to minimize weaknesses and avoid threats. D) consider a company's or unit's strengths as a way to avoid threats. E) are ways to get strategists to think "out of the box."

D) consider a company's or unit's strengths as a way to avoid threats.

The technique used to help strategic managers choose among alternative choices by defining the task environment, developing a set of various forecasts, and using pro forma financial statements is called A) decision trees. B) SWOT analysis. C) industry scenarios. D) corporate scenarios. E) Capital Asset Pricing Model.

D) corporate scenarios.

If a company wishes to be a technological leader and also maintain a cost advantage, the appropriate R&D strategy would be to A) increase the cost of the product. B) lower the cost of the product or value activities by learning from the leader's experience. C) avoid R&D costs through imitation. D) create low-cost ways of performing value activities. E) innovate in other activities to increase buyer value.

D) create low-cost ways of performing value activities.

To avoid the consensus trap, which technique involving presenting two conflicting views (the thesis and the antithesis) presented in a debate format can be traced back to Plato and Aristotle? A) devil's advocate B) Sloan's judgment C) sales presentation D) dialectical inquiry E) scenario construction

D) dialectical inquiry

Underlying the BCG Growth Share Matrix is the concept of the A) product life cycle. B) industry life cycle. C) market size. D) experience curve. E) industry profitability.

D) experience curve.

When Dell Computer's customers use the Internet to design their own computers, this demonstrates which manufacturing strategy? A) continuous improvement B) mass production C) job shop D) mass customization E) just-in-time

D) mass customization

Which of the following is NOT one of the major outsourcing errors that should be avoided? A) failure to keep core activities inhouse B) selecting the wrong vendor C) writing a poor contract D) micromanaging the outsourced activity to maintain control E) overlooking personnel issues

D) micromanaging the outsourced activity to maintain control

The kind of strategic alliance in which there is a partnership of similar companies in similar industries who pool their resources to gain a benefit that is too expensive to develop alone is the A) joint venture. B) licensing agreement. C) value-chain partnership. D) mutual service consortia. E) holding company.

D) mutual service consortia.

The "cell" chip created by IBM, Sony Electronics, and Toshiba was a result of pooling their resources in a A) joint venture. B) licensing arrangement. C) value-chain partnership. D) mutual service consortium. E) competitive advantage.

D) mutual service consortium.

Purchasing a product or service from an outside contractor that had been previously provided internally is called A) vertical integration. B) horizontal integration. C) transaction costing. D) outsourcing. E) geographic integration.

D) outsourcing.

Which strategy is most appropriate as a temporary strategy to enable a corporation to consolidate its resources after prolonged rapid growth in an industry now facing an uncertain future? A) horizontal integration strategy B) no change strategy C) retrenchment strategy D) pause/proceed with caution strategy E) profit strategy

D) pause/proceed with caution strategy

Which type of pricing attempts to hasten market development and offers the pioneer the opportunity to utilize the experience curve to gain market share with a low price and dominate the industry? A) demand pricing B) competitive pricing C) skim pricing D) penetration pricing E) loss-leader pricing

D) penetration pricing

When a company exchanges 200 shares of stock worth $20 each for 100 shares worth $40 each, they are using A) tracking stock. B) holding stock. C) an LBO. D) reverse stock split. E) split stock.

D) reverse stock split.

According to the text, unique market opportunities that are available for only a particular time are called ? A) situational occasions. B) critical openings. C) strategy implementation. D) strategic windows. E) trigger points.

D) strategic windows.

A popular financial strategy in which a company is acquired in a transaction financed largely by debt and eventually paid with money generated from the acquired company's operations or by sale of its assets is A) illegal in most countries. B) a good way to build a core competency. C) an application of the capital asset pricing model. D) the leveraged buyout. E) an example of internal financing.

D) the leveraged buyout.

Which of the following is NOT a reason companies or business units may form a strategic alliance? A) to obtain access to specific markets B) to reduce financial risk C) to reduce political risk D) to set prices in the industry E) to learn new capabilities

D) to set prices in the industry

An attempt to explain that vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying goods on the open market becomes too great has been proposed by A) population theory. B) institution theory. C) freakonomics. D) transaction cost economics. E) transaction growth theory.

D) transaction cost economics.

Management contracts are used in international dealings A) as a way in which an MNC may contract with a foreign government or local firm to trade raw materials for certain resources belonging to the MNC. B) as a way in which an MNC can take total control of operations by either starting a business from scratch or acquiring a firm already established in the host country. C) when a corporation chooses to build a facility from scratch allowing it the freedom to design the plant, choose suppliers, and hire a workforce. D) when an MNC has a large amount of management talent available and chooses to use its personnel to assist a firm in a host country for a specified fee and period of time. E) when an MNC typically contracts for construction of operating facilities in exchange for a fee.

D) when an MNC has a large amount of management talent available and chooses to use its personnel to assist a firm in a host country for a specified fee and period of time.

Which of the following is NOT a reason why the growth strategy is so desirable? A) There are more opportunities for advancement and promotion. B) A corporation that experiences successful growth is thought of positively by the marketplace and potential investors. C) A large and growth-oriented corporation has more clout and influence. D) A growing firm can cover up mistakes and inefficiencies because of the increase in cash flow revenue. E) A large and growing firm attracts more acquisition offers.

E) A large and growing firm attracts more acquisition offers.

An MNC uses which international strategy for entering a foreign market by purchasing another company already operating in the area developing synergistic benefits gained from acquiring strong complementary product lines and a good distribution network? A) licensing B) joint ventures C) production sharing D) exporting E) acquisitions

E) acquisitions

Which external growth strategy was demonstrated when Procter & Gamble completely absorbed Gillette? A) mergers B) strategic alliances C) diversification D) concentration E) acquisitions

E) acquisitions

Collusion A) may be explicit. B) may be tacit. C) is illegal when explicit. D) can be illegal even when tacit. E) all of the above

E) all of the above

If there is little fit between a strategic alternative under consideration and the corporate culture, which of the following is one of management's options to consider? A) Take a chance on ignoring the culture by implementing the strategic alternative. B) Manage around the culture and change the implementation plan. C) Try to change the culture to fit the strategy. D) Change the strategy to fit the culture. E) all of the above

E) all of the above

In licensing arrangements A) the licensee can gain technical expertise. B) companies can be aided in entering new countries directly. C) the licensee might become a competitor to the licensing firm. D) companies should never license their distinctive competencies. E) all of the above

E) all of the above

The most commonly used political strategies include which of the following? A) constituency building B) political action committee contributions C) advocacy advertising D) lobbying E) all of the above

E) all of the above

Which strategy might be the most likely when management realizes that the current industry is unattractive and that the firm lacks outstanding skills that it could easily transfer to related products or services in other industries? A) concentration B) horizontal growth C) concentric diversification D) vertical growth E) conglomerate diversification

E) conglomerate diversification

Growth through diversification out of an industry into an unrelated industry is called A) concentration. B) horizontal growth. C) concentric diversification. D) vertical growth. E) conglomerate diversification.

E) conglomerate diversification.

A company may use which of the following trade promotions to "pull" their products through the distribution system? A) discounts B) in-store special offers C) advertising allowances D) coupons E) consumer advertising

E) consumer advertising

64) In international dealings, turnkey operations are A) a way in which an MNC may contract with a foreign government or local firm to trade raw materials for certain resources belonging to the MNC. B) a way in which an MNC can take total control of operations by either starting a business from scratch or acquiring a firm already established in the host country. C) when a corporation chooses to build a facility from scratch allowing it the freedom to design the plant, choose suppliers, and hire a workforce. D) when an MNC has a large amount of management talent available and chooses to use its personnel to assist a firm in a host country for a specified fee and period of time. E) contracting for construction of operating facilities in exchange for a fee.

E) contracting for construction of operating facilities in exchange for a fee.

In manufacturing toilet paper for grocery store chains (and avoiding competing directly against Charmin), Potlach has followed which of Porter's generic competitive strategies? A) differentiation B) cost leadership C) differentiation focus D) competitive advantage E) cost focus

E) cost focus

Which of Porter's competitive strategies recommends that a company emphasize a particular buyer group or geographic market and attempts to seek a cost advantage in its targeted segment? A) differentiation B) cost leadership C) differentiation focus D) competitive advantage E) cost focus

E) cost focus

What are the three generic competitive strategies that Porter promotes as the means for outperforming other corporations in a a particular industry? A) competitive scope, differentiation, and focus B) diversification, concentration, and competitive scope C) cost, competitive scope, and focus D) concentration, cost leadership, and differentiation E) cost leadership, differentiation, and focus

E) cost leadership, differentiation, and focus

Which strategy is developed to pull together the various activities and competencies of each department so that corporate and business unit performance improves and resource productivity is maximized? A) business strategy B) competitive strategy C) generic strategy D) enterprise strategy E) functional strategy

E) functional strategy

A firm's expansion into other geographic locations and/or increasing the range of products and services offered to current markets is called A) forward vertical growth. B) diversification. C) backward vertical growth. D) captive company strategy. E) horizontal growth.

E) horizontal growth.

All of the following are benefits for a company to raising its debt levels EXCEPT A) deterrent to takeover by other firms. B) improvement in productivity. C) improvement in cash flows. D) force management to focus on core businesses. E) improvement in strategic options.

E) improvement in strategic options.

According to a 2012 survey by Deloitte Consulting, the most popular outsourced activity was A) marketing. B) sales. C) finance. D) R&D. E) information technology.

E) information technology.

In the Boston Consulting Group's Growth Share Matrix, the relative competitive position of a product or division is defined as A) its market share. B) its gross sales divided by its market share. C) its market share multiplied by that of its nearest competitor. D) its market share divided by that of the smallest other competitor. E) its market share divided by that of the largest other competitor.

E) its market share divided by that of the largest other competitor.

A company which has invested so heavily in a particular strategy that it will not consider a change in this strategy even if it is not successful, would be an example of which strategy to avoid? A) follow the leader B) hit another home run C) arms race D) do everything E) losing hand

E) losing hand

According to the BCG Growth Share Matrix, the key to success with this model is A) effective management. B) competitive positioning. C) innovative initiative. D) industry leadership. E) market share.

E) market share.

Disadvantages of joint ventures include all of the following EXCEPT A) loss of control. B) lower profits. C) probability of conflicts with partners. D) likely transfer of technological advantage to the partner. E) mutual dependence.

E) mutual dependence.

The purchasing strategy in which two suppliers are the sole suppliers of different parts, but are also the backup suppliers for each other's parts is A) sole sourcing. B) multiple sourcing. C) just-in-time sourcing. D) backup sourcing. E) parallel sourcing.

E) parallel sourcing.

When Bristol-Myers Squibb purchased 17% of ImClone's common stock to gain access to a new drug, it was using which type of integration? A) full integration B) long-term contracts C) backwards integration D) taper integration E) quasi integration

E) quasi integration

The concept that advocates management's attempt to find a strategic fit between external opportunities and internal strengths while working around external threats and internal weakness is called _____________________________? A) environmental analysis. B) position analysis. C) strategic evaluation. D) objective analysis. E) situation analysis.

E) situation analysis.

According to the BCG Growth Share Matrix, market leaders that typically are at the peak of their product life cycle and are usually able to generate enough cash to maintain their high share of the market are called A) cash cows. B) lost leaders. C) dogs. D) question marks. E) stars.

E) stars.

The strategy which takes place in two basic phases of contraction and consolidation is A) merger. B) liquidation. C) integration. D) divestment. E) turnaround.

E) turnaround.

The first step in constructing a corporate scenario is to A) develop a common-sized financial statement. B) construct detailed pro forma financial statements. C) decide upon how much risk management is willing to accept. D) analyze the societal environment. E) use industry scenarios to develop a set of assumptions about the task environment.

E) use industry scenarios to develop a set of assumptions about the task environment.

The last stage of a hypercompetitive industry is reached when the remaining large global competitors A) raise entry barriers. B) move into untapped markets. C) attack the strongholds of other firms. D) compete on cost and quality. E) work their way to a situation of perfect competition in which no one has any advantage and profits are minimal.

E) work their way to a situation of perfect competition in which no one has any advantage and profits are minimal.

F: A long-term contract is considered vertical integration.

False

F: A product development strategy deals with pricing, selling, and distributing a product.

False

F: A relatively quick way to move into an international area is through greenfield development.

False

F: A strategy's compatibility with the corporate culture has little likelihood of impacting its success.

False

F: A value chain partnership is a loose alliance with several distributors for the short term.

False

F: According to the BCG Growth Share Matrix, cash cows are market share leaders typically at the growth stage of their product life cycle and are usually able to generate enough cash to maintain their high share of the market.

False

F: Alliances take more financial resources and involve more risk than do acquisitions and going it alone.

False

F: Concentric diversification is growth into unrelated businesses.

False

F: Corporate parenting is the coordination of cash flow among units.

False

F: Equity financing is preferred for unrelated diversification while debt financing is preferred for related diversification.

False

F: Exporting grants rights to another company to open a retail store using the franchiser's name and operating system.

False

F: One skills required of the cost leadership strategy is a strong marketing ability.

False

F: Research indicates that the use of work teams leads to decreased quality and productivity as well as lower employee satisfaction and commitment as a result of less accountability.

False

F: Risk in strategic management is only the probability that the strategy will be effective.

False

F: SWOT is an acronym that stands for Strategy, Weaknesses, Opportunities, and Threats.

False

F: So strategies attempt to take advantage of opportunities by overcoming weaknesses.

False

F: The automobile industry is currently experimenting with the strategy of mass customization in which pre-assembled sub-assemblies are delivered as they are needed to a company's assembly line workers.

False

F: The follow-the-moon management philosophy allows project team members living in one country to pass their work to team members in another country in which the workday is just beginning.

False

F: The only way to gain competitive advantage within an industry is to use a competitive strategy.

False

F: The stability strategies are really a lack of any strategy.

False

F: The two basic growth strategies are concentration and strategic alliances.

False

F: There is mounting evidence that when an organization is facing a dynamic environment, the best strategic decisions are arrived at through consensus when everyone agrees on one alternative.

False

F: Those companies using cooperative strategies are generally not able to gain a competitive advantage.

False

F: Vertical integration is going backward on an industry's value chain.

False

F: When the Kellogg Company changed to a push strategy, they spent more money on consumer advertising designed to build brand awareness so that shoppers will ask for the products.

False

F: With taper integration, a firm internally makes 100% of its key supplies and completely controls its distributors.

False

A licensing arrangment is an agreement in which the licensing firm grants rights to another firm in another country or market to produce and/or sell a product.

True

T: "The customer is always right" is an example of a policy in Nordstrom's.

True

T: A cost leader's lower costs allow it to continue to earn profits during times of heavy competition

True

T: A financial strategy examines the financial implications of corporate and business-level strategic options and identifies the best financial course of action.

True

T: A limitation of the BCG Growth Share Matrix is the questionable link between market share and profitability.

True

T: A merger is a transaction involving two or more corporations in which stock is exchanged, but from which only one corporation survives.

True

T: According to the BCG Growth Share Matrix, dogs should be either sold off or managed carefully for the small amounts of cash they can generate.

True

T: An example of a company following a cost focus strategy is Potlach Corporation, who makes house brands of toilet paper for Safeway and other grocery store chains.

True

T: An example of a company that was "stuck in the middle" is K-Mart as they tried to imitate both Walmart's low-cost strategy and Target's differentiation strategy.

True

T: An example of forward quasi-integration would be a large pharmaceutical firm that acquires part interest in a drugstore chain in order to guarantee that its drugs have access to the distribution channel.

True

T: An example of the use of the leader R&D functional strategy to achieve a differentiation competitive advantage is Nike Inc.

True

T: An operations strategy determines how and where a product or service is to be manufactured, the level of vertical integration in the production process, the deployment of physical resources, and relationships with suppliers.

True

T: BP and Royal Dutch Shell are examples of fully integrated firms because they internally make 100% of their key supplies and completely control their distributors.

True

T: Backward integration is often more profitable than forward integration.

True

T: Based on the eight dimensions of quality discussed in the text, serviceability is defined as the product's ease of repair.

True

T: Business strategy focuses on improving the competitive position of a company's or business unit's products or services within the specific industry or market segment that the company or business unit serves.

True

T: Church & Dwight uses the line extension strategy when they put the Arm & Hammer name on various new food products.

True

T: Collusion in the active cooperation of firms within an industry to reduce output and raise prices in order to get around economic law of supply and demand.

True

T: Conglomerate diversification is diversifying into an industry unrelated to its current one.

True

T: Corporate parenting views the corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units.

True

T: Corporate scenarios are pro forma balance sheets and income statements that forecast the effect each alternative strategy and its various programs will likely have on division and corporate return on investment.

True

T: Corporate strategy deals primarily with the choice of direction for the firm as a whole and the management of its business or product portfolio.

True

T: Cost leadership is the ability of a company or business unit to design, produce, and market a comparable product more efficiently than its competitors.

True

T: Each business unit has its own set of departments, each with its own functional strategy.

True

T: Even the most attractive strategic alternative might not be selected if it is contrary to the needs and desires of important top managers.

True

T: Forming a joint venture between a foreign corporation and a domestic company is the most popular strategy used to enter a new country.

True

T: Fujitsu demonstrated a strategy to avoid when it imitated IBM's strategy focused on mainframes in 1990.

True

T: Horizontal growth can be achieved by expanding the firm's products into other geographic locations and/or by increasing the range of products and services offered to current markets.

True

T: If a mission does not provide a common thread for a corporation's businesses, managers might be unclear about where the company is heading.

True

T: If a new business is very similar to that of the acquiring firm, it adds little new to the corporation and only marginally improves performance.

True

T: In a leveraged buyout, the acquired company, in effect, pays for its own acquisition.

True

T: In multipoint competition, large multi-business corporations compete against other large multi-business firms in a number of markets.

True

T: In tacit collusion, there is no direct communication among competing firms.

True

T: Logistics strategy deals with the flow of products into and out of the manufacturing process.

True

T: Management contracts are common when a host government expropriates part or all of a foreign-owned company's holdings in its country.

True

T: Most entrepreneurial ventures follow focus strategies,

True

T: Niches can grow and change over time.

True

T: One company that has successfully founded a propitious niche is Frank J. Zamboni & Company, the manufacturer of the machines that smooth the ice at ice skating rinks.

True

T: One danger D'Aveni's concept of hyper competition is that it may lead to an overemphasis on short-term tactics over long-term strategy.

True

T: One limitation of portfolio analysis is that it provides an illusion of scientific rigor.

True

T: One risk of a cost leadership strategy is that technology for production or of products may change.

True

T: One success factor to a strategic alliance is the ability to identify likely partnering risks and deal with them when the alliance is formed.

True

T: Outsourcing is the alternative to vertical integration.

True

T: Penetration pricing attempts to hasten market development and offers the pioneer the opportunity to use the experience curve to gain market share with a low price and dominate the industry.

True

T: Rollups are not synonymous with traditional mergers and acquisitions.

True

T: SWOT analysis by itself is not a panacea for strategy.

True

T: Some executives show a self-serving tendency to attribute the firm's problems not to their own poor decisions, but to environmental events out of their control such as government policies or a poor economic climate.

True

T: Stability strategies can be very useful in the short run, but they can be dangerous if followed for too long.

True

T: Synergy is the concept that two businesses operating within a company will generate more profits together than they could separately by common use of technology, customers, distribution, managerial skills, or product similarity.

True

T: The GE Business Screen is based on long-term industry attractiveness and business strength/competitive position.

True

T: The TOWS Matrix illustrates how the external opportunities and threats facing a particular corporation can be matched with the company's internal strengths and weaknesses to result in four sets of possible strategic alternatives.

True

T: The attractiveness of a strategic alternative is affected by its perceived compatibility with the key stakeholders in a corporation's task environment.

True

T: The continuous improvement system was developed by Deming.

True

T: The first firm through a strategic window can occupy a propitious niche and discourage competition (if the firm has the required internal strengths)

True

T: The goal is to find a propitious niche so well suited to the firm's internal and external environment that other corporations are not likely to challenge or dislodge it.

True

T: The importance of sole sourcing was supported by Deming to obtain high supplier quality.

True

T: The key to outsourcing is to purchase from outside only those activities that are not key to the company's distinctive competencies.

True

T: The most widely pursued corporate directional strategies are those designed to achieve growth.

True

T: The orientation of the functional strategy is dictated by its parent business unit's strategy.

True

T: The real-options approach is used by Chevron for bidding on petroleum reserves.

True

T: The strategic rollup was developed in the mid-1990s as an efficient way to quickly consolidate a fragmented industry with the resulting large firm creating economies of scale.

True

T: The two general types of cooperative strategies are collusion and strategic alliances.

True

T: The use of the Internet to market goods directly to the customer allows a company to use dynamic pricing.

True

T: Tight cost control is an organizational requirement for a cost leadership strategy.

True

T: Turnkey operations are typically contracts for the construction of operating facilities in exchange for a fee.

True

T: Two suppliers are the sole suppliers of two different parts, but they are also backup suppliers for each other's parts in parallel sourcing.

True

T: Using a market development strategy, a company can capture a larger share of an existing market for current products or develop new markets for current products.

True

T: Vertical integration is the degree to which a firm operates vertically in multiple locations on an industry's value chain from extracting raw materials to manufacturing to retailing.

True

T: When Colgate-Palmolive and Unilever take a successful product that they marketed in one part of the world and market it elsewhere, they are following a market development strategy.

True

T: When Sony's CEO, Howard Stringer, eliminated 10,000 jobs and closed 11 plants, he was addressing the contraction phase of the turnaround strategy.

True

Too much partnering experience with the same strategic partners generates diminishing returns over time and leads to reduce performance.

True