Chapter 6 — Category Strategy Development
True / False
1. Increasing revenues involves either raising prices or keeping prices stable and increasing volume.
a.
True
b.
False
True
Easy
Analytic
2. In general, the less important the category, the more critical it is that internal stakeholders will be involved.
a.
True
b.
False
False
Easy
Analytic
3. Objectives drive goals, whether at the highest levels of an organization or at the functional or department level.
a.
True
b.
False
True
Easy
Analytic
4. A category strategy is a decision process used to identify which suppliers should provide a group of products or
services, the form of the contract, the performance measures used to measure supplier performance, and the appropriate
level of price, quality, and delivery arrangements that should be negotiated.
a.
True
b.
False
True
Moderate
Analytic
5. In general, the more important the commodity, the less likely that cross-functional members and user groups will be
involved.
a.
True
b.
False
False
6. The problem with secondary data is that they are often outdated and may not provide the specific information for which
the team is looking.
a.
True
b.
False
True
Easy
Analytic
7. SWOT analysis was created to describe the competitive forces in a market economy that help shape an industry.
a.
True
b.
False
False
Easy
Analytic
8. As a strategic planning tool, a SWOT analysis can provide insight even with limited data.
a.
True
b.
False
True
Easy
Analytic
9. The RFI constitutes a binding agreement by both the supplier and the purchaser.
a.
True
b.
False
False
Easy
Analytic
10. Identifying the major suppliers in a market is an important first step of any supplier analysis.
a.
True
b.
False
Easy
Analytic
Chapter 6 — Category Strategy Development
True
Easy
Analytic
11. A preferred supplier designation indicates that the selected supplier should receive the business for a critical
commodity under all possible conditions.
a.
True
b.
False
False
Easy
Analytic
12. A supplier catalog allows users to order directly through the Internet using a company procurement card (just like a
credit card) with the delivery made directly to the site the next day.
a.
True
b.
False
True
Moderate
Analytic
13. In some cases, a firm may be looking to develop a long-term relationship with a potential supplier, particularly if the
supplier is in the “Routine” quadrant of the Strategy Portfolio Matrix and the category of spend is low volume and routine
to the company’s business.
a.
True
b.
False
False
Moderate
Analytic
14. After the buyer-supplier relationship has been established, buyers no longer need to track supplier performance over
time.
a.
True
b.
False
False
Easy
Analytic
15. The strategic sourcing process ends when a contract is signed with a supplier.
a.
True
b.
False
False
Easy
Analytic
16. The insourcing/outsourcing decision cannot be applied to virtually every process conducted within the traditional
walls of an organization.
a.
True
b.
False
False
Easy
Analytic
17. Supply base optimization usually refers to increasing the number of suppliers used.
a.
True
b.
False
False
Easy
Analytic
18. Supply base optimization requires an analysis of the number of suppliers required currently and in the future for each
purchased item.
a.
True
b.
False
True
Easy
Analytic
19. Only recently have senior executives begun to realize the increased risk attributed to the higher probability of product
and service flow disruptions in global sourcing networks.
a.
True
b.
False
True
20. One factor that is increasing the risk exposure to supply chain disruption is the decreasing propensity of companies to
outsource processes to global suppliers.
a.
True
b.
False
False
Moderate
Analytic
21. Global sourcing can be used to access new markets or to gain access to the same suppliers that are helping global
companies become more competitive.
a.
True
b.
False
True
Moderate
Analytic
22. More complex logistics and currency fluctuations require measuring all relevant costs before committing to a
worldwide source.
a.
True
b.
False
True
Easy
Analytic
23. Longer-term relationships are sought with suppliers that have exceptional performance or unique technological
expertise.
a.
True
b.
False
True
Easy
Analytic
24. A longer-term relationship should never include a joint product development relationship with shared development
Moderate
Analytic
Chapter 6 — Category Strategy Development
costs and intellectual property.
a.
True
b.
False
False
Easy
Analytic
25. When purchasers find that suppliers’ capabilities are not high enough to meet current or future expectations, those
suppliers should always be eliminated from the supply base.
a.
True
b.
False
False
Easy
Analytic
26. Total cost of ownership typically includes costs associated with late delivery, poor quality, or other forms of supplier
nonperformance.
a.
True
b.
False
True
Easy
Analytic
27. An e-RA is an offline, static auction between a buying organization and a group of pre-qualified suppliers who
compete against each other to win the business to supply goods or services that have ill-defined specifications for design,
quantity, quality, delivery, and related terms and conditions.
a.
True
b.
False
False
Moderate
Analytic
28. Organizations tend to evolve through four phases as they become mature and sophisticated in their supply
management strategy development.
a.
True
b.
False
True
Easy
29. In the final and most advanced stage of supply management strategy development, supply management has assumed a
tactical orientation with reporting directly to lower-level management and a simple internal, rather than a strong external,
customer focus.
a.
True
b.
False
False
Moderate
Analytic
30. In the initial stages of supply management strategy development, supply management adopts essentially a short-term
approach and reacts to complaints from its internal customers when deliveries are late, quality is poor, or costs are too
high.
a.
True
b.
False
True
Moderate
Analytic
31. In the moderate development phase of supply management strategy development, supply management councils or lead
buyers may be responsible for entire classes of commodities, and companywide databases by region may be developed to
facilitate this coordination.
a.
True
b.
False
True
Moderate
Analytic
Multiple Choice
32. A _____ refers to a specific family of products or services that is used in delivering value to the end customer.
a.
b.
c.
d.
e.
Analytic
33. Which of the following is not one of the primary ways that companies create shareholder value?
a.
Increase volume.
b.
Reduce cost of employees (downsize).
c.
Reduce cost of process and waste.
d.
Reduce cost of goods and services.
e.
Lower prices.
34. A _____ is concerned with (1) the definition of businesses in which the corporation wishes to participate and (2) the
acquisition and allocation of resources to these business units.
a.
business unit strategy
b.
supply management strategy
c.
human resource management strategy
d.
corporate strategy
e.
functional strategy
35. A _____ is concerned with (1) the scope or boundaries of each business and the links with corporate strategy and (2)
the basis on which the business unit will achieve and maintain a competitive advantage within an industry.
a.
commodity strategy
b.
category strategy
c.
business unit strategy
d.
functional strategy
e.
supply management strategy
36. A _____ specifies how supply management will (1) support the desired competitive business-level strategy and (2)
complement other functional strategies.
Chapter 6 — Category Strategy Development
a.
supply management strategy
b.
corporate strategy
c.
marketing strategy
d.
category strategy
e.
business unit strategy
Moderate
Analytic
37. A _____ specifies how a group tasked with developing the strategy for the specific category being purchased will
achieve goals that in turn will support higher level strategies.
a.
functional strategy
b.
corporate strategy
c.
business unit strategy
d.
category strategy
e.
None of the above.
Moderate
Analytic
38. A _____ is an annual review of a firm’s entire set of purchases.
a.
cost analysis
b.
price analysis
c.
make-buy analysis
d.
technology roadmap
e.
spend analysis
Easy
Analytic
39. Which of the following is not one of the questions to be addressed when conducting a spend analysis?
a.
What did the business spend its money on over the past year?
b.
Did the business receive the right amount of products and services given what it paid for them?
c.
What suppliers received the majority of the business, and did they charge an accurate price across all the
divisions in comparison to the requirements in the POs, contracts, nad statements of work?
d.
What was the on-time delivery performance for each supplier?
e.
Which divisions of the business spent their money on products and services that were correctly budgeted for?
40. Which of the following is not one of the steps in the strategic sourcing process?
a.
Build the team and the project charter.
b.
Conduct market intelligence research on suppliers.
c.
Increasing revenues.
d.
Strategy development.
e.
Supplier relationship management.
Easy
Analytic
41. The _____ in the strategic sourcing process is a clear statement of the goals and objectives of the sourcing project,
which is officially announced shortly after the team’s first few meetings.
a.
triangulation phase
b.
optimization process
c.
spend analysis
d.
project charter
e.
price analysis
Moderate
Analytic
42. The key to good market intelligence is to _____ data, which means to explore, compare, and contrast data from
multiple sources before it can be validated.
a.
triangulate
b.
minimize
c.
gather
d.
collect
e.
assemble
Easy
Analytic
43. The whole point of collecting _____ is to understand the prevailing market conditions and the ability of current or
potential new suppliers to deliver the product or service effectively.
Moderate
Analytic
Chapter 6 — Category Strategy Development
a.
customer data
b.
secondary data
c.
internal data
d.
spend analysis data
e.
market research
44. All of the following are examples of factors in Porter’s market internal competition force except _____.
a.
speed of industry growth
b.
buyer propensity to substitute
c.
exit barriers
d.
switching costs
e.
capacity utilization
45. Which of the following is not one of Porter’s five forces?
a.
Buyer bargaining power.
b.
Switching costs.
c.
Threat of new entrants.
d.
Market internal competition.
e.
Supplier bargaining power.
46. Which of the following is not one of the examples of Porter’s threat of new entrants?
a.
Capital markets.
b.
Economies of scale.
c.
Supplier concentration.
d.
Product life cycles.
e.
Brand equity and customer loyalty.