CH 7 Questions

Which of the following is true of the BCG matrix? a. It helps in restructuring the structure of an organization. b. It helps managers understand how strategic business units contribute to an overall organization. c. It divides the market into low-, medium-, and high-growth markets. d. It suggests that slow-growing markets have more stable and attractive business opportunities for an organization's products.

It helps managers understand how strategic business units contribute to an overall organization. -By assessing each SBU on the basis of its market growth rate and relative market share, managers can make decisions about whether to commit further financial resources to the SBU or to sell or liquidate it.

Which of the following is a level at which organizations develop strategies? a. Entry-level strategy b. Ethical-level strategy c. Business-level strategy d. Structural-level strategy

Business-level strategy

In the context of implementing an overall cost leadership strategy, which of the following statements is true? a. Production and sales focus on complex product attributes. b. Accounting and finance focus on profit margins from first-tier brands. c. Manufacturing helps maintain a large run of highly standardized products. d. Organizational culture emphasizes development of new products.

Manufacturing helps maintain a large run of highly standardized products. -Manufacturing emphasizes increased volume of production to reduce the per-unit costs of manufacturing

_____ helps an organization perceive, or even generate, new opportunities in its environment. a. Integration b. Creativity c. Flexibility d. Parity

creativity -organizations often increase creativity and flexibility by adopting a decentralized organization structure

An organization that implements a defender strategy focuses on: a. protecting its market from new competitors. b. increasing costs to improve the performance of its current products. c. taking numerous risks to enhance sales. d. enhancing creativity and innovation.

protecting its market from new competitors -it tends to downplay creativity and innovation in bringing out new products or series and to focus its efforts instead on lowering costs or improving the performance of current products

A _____ is a comprehensive plan for accomplishing an organization's goals. a. strategy b. theory c. hypothesis d. contract

strategy -Strategic management, in turn, is a way of approaching business opportunities and challenges—it is a comprehensive and ongoing management process aimed at formulating and implementing effective strategies.

_____ refers to the set of processes involved in creating or determining the strategies of an organization. a. Strategy formulation b. Strategy enunciation c. Strategy implementation d. Strategy assimilation

strategy formulation -determines what the strategy is

Which of the following is part of Porter's five forces model of the competitive environment? a. A threat of substitutes b. A threat of contamination c. Distinctive competencies d. Strategic imitations

A threat of substitutes -Porter's five forces are level of competitive rivalry, power of suppliers, power of buyers, threat of substitutes, and threat of new entrants. In general, when the level of competitive rivalry, the power of suppliers and buyers, and the threat of substitutes and new entrants are all high, an industry has relatively few opportunities and numerous threats.

A(n) _____ is the purchase of a firm by a firm that is considerably larger. a. acquisition b. merger c. union d. arbitration

acquisition -In most cases, the acquired firm's "identity" disappears altogether.

Unlike multidomestic firms, global corporations: a. assume that customers are the same regardless of nationality. b. concentrate decision-making responsibilities in a handful of local companies. c. produce goods that are highly diversified. d. have home-country biases.

assume that customers are the same regardless of nationality. -multidomestic firms believe that its customers in every country are fundamentally different and must be approached from that perspective

The _____ is an international strategy in which a company attempts to combine the benefits of global scale efficiencies with the benefits and advantages of local responsiveness. a. multidomestic strategy b. transnational strategy c. home replication strategy d. global strategy

transnational strategy -To do so, the transnational corporation does not automatically centralize or decentralize authority. Rather, it carefully assigns responsibility for various organizational tasks to the unit of the organization best able to achieve the dual goals of efficiency and flexibility.

Which of the following areas does a well-conceived strategy address? a. Financial capability b. Motivation approaches c. Management dynamics d. Resource deployment

resource deployment Effective strategies are those that promote a superior alignment between the organization and its environment and the achievement of strategic goals. In general, a well- conceived strategy addresses three areas: distinctive competence, scope, and resource deployment.

SWOT is an acronym that stands for: a. stimulants, weaknesses, operations, and tribulations. b. strengths, weaknesses, opportunities, and threats. c. schisms, windfalls, organigrams, and tiers. d. securities, waivers, outlays, and torts.

strengths, weaknesses, opportunities, and threats. -SWOT analysis is a careful evaluation of an organization's internal strengths and weaknesses as well as its environmental opportunities and threats.

Which of the following is one of the four frequently used bases of related uses for diversification? a. Common product b. Common resources c. Common supplier d. Common reputation

Common reputation -Firms that implement related diversification can do so using any number of bases of relatedness. Four frequently used bases of related uses for diversification are similar technology, common distribution and marketing skills, common brand name and reputation, and common customers.

Which of the following is true of an emergent strategy? a. Its application occurs only if there is a clear corporate mission that is defined. b. Its implementation involves resource allocation even without explicitly chosen strategies. c. It is effective inside the rules of organizational practices. d. It is deregulated by government guidelines.

Its implementation involves resource allocation even without explicitly chosen strategies. -a pattern of action that develops over time in an organization in the absence of mission and goals or despite mission and goals.

Which of the following must occur for an organization to support differentiation? a. Manufacturing must emphasize the reduction of costs. b. Marketing and sales must emphasize the high-value image of an organization's products. c. Accounting and finance must control funds to discourage the need to develop new products. d. Organizational culture must limit creativity and innovation.

Marketing and sales must emphasize the high-value image of an organization's products. -Organizations that have used their marketing function to implement a differentiation strategy include Chanel, Calvin Klein, and Bloomingdale's.

Which of the following is a function of marketing and sales in an organization? a. Promoting whistle-blowing b. Controlling cash flow c. Creating products and services d. Pricing products or services

Pricing products or services -Marketing and sales are used to promote products or services and the overall public image of an organization (often through various types of advertising), price products or services, directly contact customers, and make sales.

Which of the following strategies may be implemented in the decline stage of the product life cycle? a. Maintaining high costs b. Product differentiation c. Product life extension d. Prospector approaches

Product differentiation -In the decline stage, demand for the product or technology decreases, the number of organizations producing the product drops, and total sales drop. Organizations that differentiate their product, keep their costs low, or develop new products or services may do well during this stage.

_____ exists among a set of businesses when the businesses' economic value together is greater than their economic value separately. a. Congruence b. Parity c. Synergy d. Integrity

Synergy -McDonald's is using synergy as it diversifies into other restaurant and food businesses. For example, its McCafe premium coffee stands in some McDonald's restaurants allows the firm to create new revenue opportunities while using the firm's existing strengths in food-product purchasing and distribution

A theoretical advantage of unrelated diversification is that: a. a business will have high performance at the outset. b. corporate managers will focus on the future performance of the business. c. a business will have a stable performance over time. d. corporate managers will have a great understanding of a business.

a business will have stable performance over time -During any given period, if some businesses owned by the organization are in a cycle of decline, others may be in a cycle of growth.

International firms can improve their efficiency by: a. improving competitive parity. b. capturing economies of scale. c. lowering their economies of scope. d. enhancing their decentralized operations.

capturing economies of scale. -International firms can improve their efficiency through several means not accessible to a domestic firm. By building factories to serve more than one country, international firms may also lower their production costs by capturing economies of scale.

An organization has a _____ when it is not implementing valuable strategies that are being implemented by competing organizations. a. distinctive incompetency b. competitive disadvantage c. competitive parity d. strategic redundancy

competitive disadvantage -Organizations with a competitive disadvantage can expect to attain below-average levels of performance

A company that uses a defender strategy: a. orients toward risk taking and growth in new markets. b. concentrates on protecting its current markets. c. increases the costs of its products. d. concentrates on a specific regional market and product line.

concentrates on protecting its current markets. -maintaining stable growth, and serving current customers, generally by lowering its costs and improving the performance of its existing products.

The GE Business Screen: a. considers industry attractiveness and competitive position. b. focuses solely on market growth and market share. c. operates on the idea that the smaller the capital requirement the more the competitive intensity. d. uses cash cows to denote markets with high growth for a company.

considers industry attractiveness and competitive position. -These two factors are divided into three categories each, to make the nine-cell matrix. These cells, in turn, classify business units as winners, losers, question marks, average businesses, or profit producers.

A transnational company: a. focuses little attention on integration and coordination among its subsidiaries . b. decentralizes research and development. c. decentralizes human resource management. d. rarely locates the responsibility for one product line to one country.

decentralizes human resource management. -In a transnational corporation, human resource management and marketing may be decentralized, allowing managers of local subsidiaries to customize their business activities to better respond to the local culture and business environment.

A company can implement a diversification strategy by: a. revamping current services. b. developing new products. c. increasing the number of suppliers. d. using forward horizontal integration.

developing new products. -Some firms diversify by developing their own new products and services within the boundaries of their traditional business operations. Honda is an example of a company that followed this path to diversification.

A(n) _____ is a strategy in which an organization seeks to distinguish itself from competitors through the quality of its products or services. a. differentiation strategy b. prospector strategy c. focus strategy d. analyzer strategy

differentiation strategy -Firms that successfully implement a differentiation strategy are able to charge more than competitors because customers are willing to pay more to obtain the extra value they perceive.

A main purpose of SWOT analysis is to: a. discover an organization's distinctive competencies. b. exploit an organization's common strengths. c. instigate an organization's quest for competitive parity. d. enumerate an organization's competitive disadvantages.

discover an organization's distinctive competencies. -so that the organization can choose and implement strategies that exploit its unique organizational strengths.

_____ refers to the number of different businesses that an organization is engaged in and the extent to which these businesses are related to one another. a. Functionalization b. Integration c. Decentralization d. Diversification

diversification There are three types of diversification strategies: single-product strategy, related diversification, and unrelated diversification.

A(n) _____ is a pattern of action that develops over time in an organization in the absence of mission and goals or despite mission and goals. a. deliberate strategy b. assimilative strategy c. emergent strategy d. recursive strategy

emergent strategy -implementing emergent strategies involves allocating resources even though an organization has not explicitly chosen its strategies

Organizations that implement unrelated diversification usually: a. have corporate managers who provide strategic guidance. b. have corporate managers who appropriately allocate capital. c. display increased performance over time. d. fail to exploit important synergies.

fail to exploit important synergies. -Research suggests that unrelated diversification usually does not lead to high performance. Because organizations that implement unrelated diversification fail to exploit important synergies, they are at a competitive disadvantage compared to organizations that use related diversification.

A weakness of the single-product strategy is that the: a. firm using it will suffer if its product is replaced by a new one. b. firm using it will require excessive capital. c. cost of production is high. d. marketing of a product is poor.

firm using it will suffer if its product is replaced by a new one. -Because it has staked its survival on a single product, an organization works very hard to make sure that the product is a success. Of course, if the product is not accepted by the market or is replaced by a new one, the firm will suffer.

Organizations that implement the analyzer strategy: a. avoid innovation in new businesses. b. sell their products at high prices. c. promote rigidity in services. d. focus on selling customized products.

focus on selling customized products. -Organizations implementing the analyzer strategy have tight accounting and financial controls as well as high flexibility, efficient production as well as customized products, and creativity along with low costs

A _____ is a strategy in which an organization concentrates on a specific regional market, product line, or group of buyers. a. focus strategy b. overall cost leadership strategy c. prospector strategy d. reactor strategy

focus strategy -This strategy may have either a: differentiation focus- whereby a firm differentiates its products in the focus market or an overall cost leadership focus - whereby a firm manufactures and sells its products at low cost in the focus market

_____ refers to an organization's beginning of the business activities formerly conducted by its customers. a. Unrelated diversification b. Related diversification c. Forward vertical integration d. Backward vertical integration

forward vertical integration -ex: many firms are employing this today as they use the Internet and social media to market their products and services directly to consumers

The first stage of the product life cycle is the _____. a. decline stage b. maturity stage c. introduction stage d. growth stage

introduction stage -The product life cycle is a model that shows how sales volume changes over the life of products. The cycle begins when a new product or technology is first introduced, which is termed as the introduction stage.

It is difficult to imitate a distinctive competence because: a. its nature might not be understood by competing firms. b. its application will lead to competitive parity. c. it might not be applicable to a competing firms' products. d. it will lead to a competitive disadvantage.

its nature might not be understood by competing firms. -Procter & Gamble, for example, considers that its sustained competitive advantage is based on its manufacturing practices. Large sections of Procter & Gamble's plants are screened off to keep this information secure

Decentralizing power in the hands of a local subsidiary: a. promotes the unbridled pursuit of global efficiency and multimarket flexibility. b. may make it difficult to transfer learning from one subsidiary to another. c. prevents the subsidiary from rejecting outside information. d. allows single units of a firm to accept lessons from other units.

may make it difficult to transfer learning from one subsidiary to another -Local subsidiaries may be disposed to automatically reject outside information as not being germane to the local situation

The _____ is an international strategy in which a company manages itself as a collection of relatively independent operating subsidiaries, each of which focuses on a specific local market. a. related diversification strategy b. home replication strategy c. multidomestic strategy d. global strategy

multidomestic strategy -The multidomestic approach is particularly effective when there are clear differences among national markets; when economies of scale for production, distribution, and marketing are low; and when the cost of coordination between the parent corporation and its various foreign subsidiaries is high.

During the maturity stage of the product life cycle, the: a. number of new firms producing the current product increases. b. product differentiation concerns are negligible. c. number of established firms producing the product declines. d. overall demand for the product increases.

number of established firms producing the product declines.

Which of the following is a major tool for managing diversification? a. Synergies b. Organization structure c. Mergers d. Ethical congruence

organization structure -However an organization implements diversification—whether through internal development, vertical integration, or mergers and acquisitions—it must monitor and manage its strategy. The two major tools for managing diversification are (1) organization structure and (2) portfolio management techniques

Which of the following is an organizational strength? a. A large number of middle-men b. Impersonal relations among workers c. Surplus capital d. A strong trade union

surplus capital -organizational strengths are skills and capabilities that enable an organization to conceive of and implement its strategies. -Strengths may include such things as a deep pool of managerial talent, surplus capital, a unique reputation and/or brand name, and well-established distribution channels