Which of the following is not a major question to ask in thinking strategically about
industry and competitive conditions in a given industry?
A. How many companies in the industry have good track records for revenue growth
and profitability?
B. What strategic moves are rivals likely to make next?
C. What are the key factors for future competitive success?
D. Does the outlook for the industry offer good prospects for profitability?
E. What forces are driving changes in the industry, and what impact will these changes
have on competitive intensity and industry profitability?
Which one of the following is not a factor that makes it appealing to diversify into a
new industry by forming an internal start-up subsidiary to enter and compete in the
target industry?
A. When internal entry is cheaper than entry via acquisition
B. When a company possesses the skills and resources needed to compete effectively
and there is ample time to launch the business
C. When adding new production capacity will not adversely impact the supply/demand
balance in the industry
D. When the industry is growing rapidly and the target industry is comprised of several
relatively large and well-established firms
E. When incumbent firms are likely to be slow or ineffective in combating a new
entrant’s efforts to crack the market
Corporate social responsibility as it applies to businesses refers to
A. a company’s duty to put the public interest ahead of shareholder interests.
B. societal expectations that all company stakeholders will be treated equally and fairly.
C. a company’s duty to establish socially acceptable core values and to have a strictly
enforced code of ethical conduct.
D. the responsibility that top management has for ensuring that the company’s actions
and decisions are in the best interest of society at large.
E. a company’s duty to operate in an honorable manner, provide good working
conditions for employees, encourage workforce diversity, be a good steward of the
environment, and actively work to better the quality of life in the local communities
where it operates and in society at large.
Companies engaged in a single line of business utilize an organizational structure that
may vary depending upon the strategy-critical activities and can be
A. either a functional (departmental), multidivisional, or matrix organizational
structure.
B. either a centralized, principal, or critical-path organizational structure.
C. either independent, consolidated, or hybrid profit centers.
D. hybrid functional organizations with a combination of decentralized and centralized
decision making.
E. None of these.
When evaluating strategic fit benefits that related diversification can deliver one must
keep in consideration a number of factors. Which one is not relevant?
A. Shareholder value stemming from a diversified business cannot be replicated by
simply owning a diversified portfolio of stocks.
B. The capture of cross-business strategic fits benefits is possible only through related
diversification.
C. Cross-business strategic fit benefits is not automatically realized; the benefits
materialize only after management has successfully pursued internal actions to capture
them.
D. Shareholder value is created when the diversified company’s profitability exceeds
expectations.
E. Related diversification is the process of holding the stock of many businesses in a
portfolio.
The statistical thinking underlying Six Sigma is based on the following three principles:
A. All activities can be controlled, employee empowerment is the best control tool, and
100% control is possible.
B. All work is a process, all processes have variability, and all processes create data that
explains variability.
C. All work activities can be done accurately most of the time, empowered employees
are necessary for effective control, and good statistical data is an empowered
employee’s best control tool.
D. All work is a statistically controllable process, 100% control is possible, and every
well-controlled process is defect-free.
E. Most business processes are subject to control, Six Sigma can remove variability in
how processes are performed, and most defects can be eliminated.
Strategic alliances are more likely to be long lasting when
A. they involve collaboration with suppliers or distribution allies or when both parties
conclude that continued collaboration is in their mutual interests.
B. the alliance involves partners based in countries with distinctly different cultures and
consumer buying habits and preferences.
C. both partners are experienced with strategic alliances and routinely enter into
collaborative agreements with firms in peripheral industries.
D. the alliance involves joining forces in R&D to develop new technologies cheaper
than a company could develop the technology on its own.
E. each partner has considerable resource weaknesses in the marketplace.
Some of the most important nonmonetary approaches to enhancing motivation and
helping drive successful strategy execution include
A. adopting promotion from within policies and acting on suggestions from employees.
B. providing attractive perks and fringe benefits.
C. creating a work atmosphere in which there is genuine sincerity, caring, and mutual
respect among employees and management.
D. using frequent words of praise to recognize employees for commendable
performance.
E. All of these.
When a company has become proficient in modifying, upgrading, or deepening the
company’s resources and capabilities, it is called
A. a dynamic capability.
B. a core competence.
C. a distinct competence.
D. a strategic assessment.
E. None of these.
The essential requirement for different businesses to be “related” is that
A. their value chains possess competitively valuable cross-business relationships.
B. the products of the different businesses are bought by much the same types of
buyers.
C. the products of the different businesses are sold in the same types of retail stores.
D. the businesses have several key suppliers in common.
E. the productions methods that they employ both entail economies of scale.
Diversification merits strong consideration whenever a single-business company
A. has integrated backward and forward as far as it can.
B. is faced with diminishing market opportunities and stagnating sales in its principal
business.
C. has achieved industry leadership in its main line of business.
D. encounters declining profits in its mainstay business.
E. faces strong competition and is struggling to earn a good profit.
Assessments of how a diversified company’s subsidiaries compare in competitive
strength should be based on such factors as
A. vulnerability to seasonal and cyclical downturns, vulnerability to driving forces, and
vulnerability to fluctuating interest rates and exchange rates.
B. relative market share, ability to match or beat rivals on key product attributes, brand
image and reputation, costs relative to competitors, and ability to benefit from strategic
fits with sister businesses.
C. the appeal of its strategy, relative number of competitive capabilities, the number of
products in each businesses product line, which businesses have the highest/lowest
market shares, and which businesses earn the highest/lowest profits before taxes.
D. the ability to hurdle barriers to entry, value chain attractiveness, and business risk.
E. cost reduction potential, customer satisfaction potential, and comparisons of annual
cash flows from operations.
Management’s ranking of business units and establishing a priority for resource
allocation should
A. utilize activity-based costing and benchmarking to determine the funding needs of
each business unit.
B. first consider the strength of funding proposals presented by managers of each
division or business unit.
C. give priority for funding to cash hog businesses.
D. put business units with the brightest profit and growth prospects and solid strategic
and resource fits at the top of the investment priority list.
E. always make the company’s business units with strong resource strengths and
competitive capabilities the central focus of funding initiatives.
In a diversified company, the competitive advantage potential of cross-business
strategic fit is greater when
A. the business lineup includes a number of cash cows.
B. valuable opportunities exist to transfer skills, technology, or intellectual capital from
one business to another, combine the performance of related activities, or share the use
of a well-respected brand name across multiple products or service categories.
C. the strategy maps of the various business units converge.
D. businesses included in the corporate portfolio compete in fast-growing industries.
E. competition is less intense and driving forces are relatively weak.
A well-designed reward system
A. is focused on “what to achieve” to be rewarded as opposed to “what to do” and is
management’s most powerful tool for gaining employee commitment to superior
strategy execution.
B. should be free of elements that induce stress, anxiety, tension, pressure to perform,
and job insecurity.
C. puts the primary emphasis on denying rewards to those who fail to perform tasks in
the prescribed fashion.
D. emphasizes weeding out employees who are consistently low performers.
E. strives for 50-50 balance between positive and negative rewards and 50-50 balance
between monetary and nonmonetary rewards.
Successfully leading the effort to foster a results-oriented, high-performance culture
generally requires simple leadership practices, such as
A. treating employees with dignity and respect.
B. encouraging employees to use initiatives and creativity in performing their work to
continually make changes to operating practices.
C. setting strain objectives to push the envelope on sales efforts.
D. focusing attention on motivational techniques that instill self-interest, which is the
cornerstone of the free-enterprise system.
E. celebrating management’s success with high incentives and loyalty trips.
Six Sigma quality control
A. is a strategy-implementer’s best, most reliable tool for simultaneously achieving
top-notch product quality and low manufacturing costs.
B. consists of a disciplined, statistics-based system aimed at producing not more than
2.5 defects per million iterations for a manufacturing or assembly process.
C. consists of a disciplined, statistics-based system aimed at producing not more than
3.4 defects per million iterations for any business process.
D. consists of a disciplined, statistics-based system aimed at fewer than 5.0 complaints
per million customer transactions.
E. is a powerful tool for companies whose customers are very picky about product
quality and product performance and who can’t afford for the product they use to break
down and require repairs.
Environmental sustainability involves
A. a corporate commitment to go beyond society’s expectations for ethical strategies
and business behavior to addressing the unmet noneconomic needs of society.
B. striking a balance between (1) the economic responsibility to reward shareholders
with profits, (2) the legal responsibility to follow the laws in countries where it
operates, (3) the ethical responsibility to abide by society’s moral norms, and (4) the
discretionary philanthropic responsibility to contribute to the noneconomic needs of
society.
C. deliberate actions to protect the environment and provide for the longevity of
resources, maintain ecological support systems for future generations, and guard against
the ultimate endangerment of the planet.
D. developing strategies that yield a sustainable competitive advantage that will allow
the company to be sustainable for the long term.
E. All of these.
The purposes of defensive strategies include
A. discouraging deep price discounting on the part of ambitious rivals seeking to
capture additional sales and market share.
B. lowering the risk of being attacked by rivals, weakening the impact of any attack that
occurs, and influencing challengers to aim their offensive efforts at other rivals.
C. insulating a company from the impact of competitive pressures and industry driving
forces.
D. weakening competitors in ways that make them largely irrelevant.
E. widening a company’s competitive advantage over rivals.
A diversified company’s business units exhibit good resource fit when
A. each business is a cash cow.
B. a company has the resources to adequately support the requirements of its businesses
as a group without spreading itself too thin and when individual businesses add to a
company’s overall strengths.
C. each business is sufficiently profitable to generate an attractive return on invested
capital.
D. each business unit produces large internal cash flows over and above what is needed
to build and maintain the business.
E. the resource requirements of each business exactly match the company’s available
resources.
The reasons behind the accelerating pace of globalization include
A. countries with previously planned economies are embracing market or mixed
economies.
B. information technology shrinks the importance of geographic distances.
C. ambitious growth-minded countries race to build global share.
D. lower barriers to international trade.
A diversified company that leverages the strategic fits of its related businesses into
competitive advantage
A. has a distinctive competence in its related businesses.
B. has a clear path to achieving 1 + 1 = 3 synergy gains in shareholder value.
C. has a clear path to global market leadership in the industries where it has related
businesses.
D. passes the value chain test and the profit expectations test for building shareholder
value.
E. achieves economies of scope and passes the reduced-costs test for crafting a
diversification strategy capable of creating added shareholder value.
The two biggest drawbacks or disadvantages of unrelated diversification are
A. the difficulties of passing the cost-of-entry test and the ease with which top
managers can make the mistake of diversifying into businesses where competition is
too intense.
B. the difficulties of capturing financial fit and having insufficient financial resources to
spread business risk across many different lines of business.
C. demanding managerial requirements and limited competitive advantage potential
that cross-business strategic fit provides.
D. Ending up with too many cash hog businesses and too much diversity among the
competitive strategies of the businesses it has diversified into.
E. the difficulties of achieving economies of scope and conflicts/incompatibility among
the competitive strategies of the company’s different businesses.
What sets focused (or market niche) strategies apart from low-cost leadership and broad
differentiation strategies is
A. the extra attention paid to top-notch product performance and product quality.
B. their concentrated attention on a narrow piece of the overall market.
C. greater opportunity for competitive advantage.
D. their suitability for market situations where most industry rivals have weakly
differentiated products.
E. their objective of delivering more value for the money.
Launching a preemptive strike type of offensive strategy entails
A. cutting prices below a weak rival’s costs.
B. moving first to secure an advantageous competitive assets that rivals can’t readily
match or duplicate.
C. using hit-and-run tactics to grab sales and market share away from complacent or
distracted rivals.
D. attacking the competitive weaknesses of rivals.
E. leapfrogging into next-generation products and technologies, thus forcing rivals to
play catch-up.
Which of the following should be on a company’s menu of actions to consider in
crafting a strategy of social responsibility?
A. Actions to ensure that the company operates in an honorable and ethical manner
B. Actions to ensure diversity in the workforce
C. Actions (over and above what is required) to protect or enhance the environment,
including both those environmental problems stemming from the company’s own
business activities and those problems outside the company’s immediate sphere of
operations
D. Actions to create a work environment that enhances the quality of life for employees
and makes the company a great place to work
E. All of these
A company that is already diversified may choose to broaden its business base by
building positions in new related or unrelated businesses because
A. it has resources or capabilities that are eminently transferable to other related or
complementary businesses.
B. the company’s growth is sluggish and it needs the sales and profit boost that a new
business can provide.
C. management wants to lessen the company’s vulnerability to seasonal or recessionary
influences.
D. unfavorable driving forces face the company’s core business.
E. All of these.
Which one of the following is not a common type of driving force?
A. Entry or exit of major firms
B. Changing societal concerns, attitudes, and lifestyles
C. Diffusion of technical know-how across more companies and more countries
D. Increasing efforts on the part of industry members to collaborate closely with their
suppliers
E. Technological change and manufacturing process innovation
Merger and acquisition strategies
A. are nearly always a superior strategic alternative to forming alliances or partnerships
with these same companies.
B. may offer considerable cost-saving opportunities and can also be beneficial in
helping a company try to invent a new industry and lead the convergence of industries
whose boundaries are being blurred by changing technologies and new market
opportunities.
C. are a particularly effective way of pursuing a blue ocean strategy and outsourcing
strategies.
D. seldom are a superior strategic alternative to forming alliances or partnerships with
these same companies because of the financial drain of using the company’s cash
resources to accomplish the merger or acquisition.
E. are one of the best ways for helping a company strongly differentiate its product
offering and use a differentiation strategy to strengthen its market position.
Which of the following is not an example of an external threat to a company’s future
profitability?
A. The lack of a distinctive competence
B. The potential of a hostile takeover
C. Adverse changes in foreign exchange rates
D. Unfavorable demographic shifts
E. The introduction of restrictive trade policies in countries where the company does
business
A competitive environment where there is strong rivalry among sellers, low entry
barriers, strong competition from substitute products, and considerable bargaining
leverage on the part of both suppliers and customers
A. is competitively unattractive from the standpoint of earning good profits.
B. offers little ability to build a sustainable competitive advantage.
C. is highly conducive to achieving strong product differentiation and high brand
loyalty.
D. offers moderate to good prospects for achieving low costs and building a sustainable
competitive advantage.
E. requires that industry members have a strongly differentiated product offering in
order to be profitable.
The risks of a focused strategy based on either low-cost or differentiation include
A. the chance that niche customers will bargain more aggressively for good deals than
customers in the overall marketplace.
B. the potential for the preferences and needs of niche members to shift over time
toward many of the same product attributes and capabilities desired by buyers in the
mainstream portion of the market.
C. the potential for the segment to be highly vulnerable to economic cycles.
D. the potential for segment growth to race beyond the production or service
capabilities of incumbent firms.
E. All of these.
What is the meaning of the term “balanced scorecard”? What are the merits of using a
balanced scorecard in judging a company’s performance?
Answer:
Answer may vary
What are the primary country differences that shape strategy choices in international
markets?
Answer:
Answer may vary
In what sorts of circumstances is it strategically advantageous to be a fast follower or
late mover as opposed to a first mover?
Answer:
Answer may vary
What are the merits of outsourcing the performance of certain value chain activities as
opposed to performing them in-house? Under what circumstances does outsourcing
make good strategic sense?
Answer:
Answer may vary
The use of incentives and rewards is the single most powerful tool at management’s
disposal to win strong employee commitment to carrying out the strategic plan. True or
false? Explain.
Answer:
Answer may vary
Identify and briefly explain any four of the factors that influence the strength or
intensity of competitive rivalry among an industry’s member firms.
Answer:
Answer may vary
What are the eight key questions that form the framework of thinking strategically
about a company’s industry and competitive environment?
Answer:
Answer may vary
Identify and briefly explain any three factors that lead to strong bargaining power on the
part of suppliers.
Answer:
Answer may vary
Identify three factors that affect whether an industry does or does not present a
company with a good business opportunity?
Answer:
Answer may vary
Identify and briefly discuss four steps that managers can take to change a culture that is
out of step with the company’s strategy.
Answer:
Answer may vary
The attractiveness test is the most important test for determining whether diversification
into a new business is likely to result in 1 + 1 = 3 increases in shareholder value (as
opposed to simply a 1 + 1 = 2 type of increase). True or false? Justify and explain your
answer.
Answer:
Answer may vary
Why is sustainable competitive advantage so important to a winning business strategy?
Answer: Answer may vary
Briefly identify the major reasons a company may choose to expand outside its
domestic market.
Answer:
Answer may vary
One of the big dangers in crafting a competitive strategy is that managers, torn between
the pros and cons of the various generic strategies, will opt for ‘stuck in the middle”
strategies that represent compromises between lower costs and greater differentiation
and between broad and narrow market appeal. True or false? Explain your answer.
Answer:
Answer may vary
Which one of the five generic competitive strategies is most likely to be best suited for
an industry whose product is a commodity? Explain.
Answer:
Answer may vary
Identify and briefly describe five common barriers to entering an industry.
Answer:
Answer may vary
What are the four main strategic alternatives a diversified company can employ to
improve the performance of its overall business lineup?
Answer:
Answer may vary
What is the relevance of quantitatively measuring the competitive strength of each
business in a diversified company’s business portfolio and determining which business
units are strongest and weakest?
Answer:
Answer may vary