A firm pursuing a best-cost provider strategy:
A. seeks to be the low-cost provider in the largest and fastest growing (or best) market
segment.
B. tries to have the best cost (as compared to rivals) for each activity in the industry’s
value chain.
C. tries to outcompete a low-cost provider by attracting buyers on the basis of charging
the best price.
D. seeks to deliver superior value to buyers by satisfying their expectations on key
attributes and beating rivals in meeting customer expectations on price.
E. seeks to achieve the best costs by using the best operating practices and
incorporating the best features and attributes.
Answer:
The strategic role of a company’s reward system is to:
A. compensate employees for performing their assigned duties in a diligent fashion.
B. boost employee morale in ways that create widespread job satisfaction.
C. enlist employees’ commitment to successful strategy execution by rewarding them,
both monetarily and non-monetarily, for their valuable contributions.
D. relieve managers of the burden of closely monitoring each employee’s performance.
E. boost labor productivity and help lower the firm’s overall labor costs.
Answer:
Acquisition of an existing business is an attractive strategy option for entering a
promising new industry because it:
A. is an effective way to hurdle entry barriers, is usually quicker than trying to launch a
brand-new startup operation, and allows the acquirer to move directly to the task of
building a strong position in the target industry.
B. is less expensive than launching a new startup operation, thus passing the
cost-of-entry test.
C. offers a challenging opportunity to train new resources and revive a sagging business
even if does not offer great prospects for growth, profitability, or return on investment.
D. is more likely to result in passing the shareholder value test, the profitability test, and
the better-off test.
E. offers the prospect of gaining an immediate competitive advantage in the new
industry and thus helps ensure that the diversification move will pass the competitive
advantage test for building shareholder value.
Answer:
Building an organization capable of good strategy execution entails:
A. staffing the organization, acquiring, developing, and strengthening key resources and
competitive capabilities, and structuring the organization and work effort.
B. decentralizing authority for performing strategy-critical value chain activities,
establishing at least two distinctive competencies, and hiring talented employees.
C. investing heavily in employee training, using an empowered organization design and
organization structure in order to maximize labor productivity, and employing effective
incentive compensation systems.
D. centralizing authority in the hands of a chief strategy implementer so as to create the
leadership authority for driving implementation forward at a rapid pace.
E. empowering employees, maximizing internal operating efficiency, and optimizing
core competencies.
Answer:
Delegating greater authority to subordinate managers and employees:
A. creates a more horizontal or flatter organizational structure with fewer management
layers and usually acts to shorten organizational response times.
B. usually slows down decision making because so many more people are involved and
it takes longer to reach a consensus on what to do and when to do it.
C. can be a de-motivating factor because it requires people to take responsibility for
their decisions and actions.
D. is very risky because it usually results in lots of “bad” decisions on the part of
employees, as well as lower levels of financial performance.
E. enhances greater cross-unit coordination and aids the capture of strategic fit benefits
across related businesses.
Answer:
The competitive power of a company resource strength or competitive capability hinges
on all of the following EXCEPT:
A. how hard it is for competitors to copy.
B. whether it is rare and something rivals lack.
C. whether it is really competitively valuable and has the potential to contribute to a
competitive advantage.
D. whether it is nonsubstitutable
E. whether it available in plenty.
Answer:
A “think local, act local” multidomestic strategy works particularly well in all of the
following situations, EXCEPT when there are:
A. regulations enacted by the host governments requiring that products sold locally
meet strictly defined manufacturing specifications or performance standards.
B. significant country-to-country differences in customer preferences and buying habits.
C. diverse and complicated trade restrictions of host governments preclude the use of a
uniform strategy from country-to-country.
D. significant country-to-country differences in distribution channels and marketing
methods.
E. large demands to pursue conflicting objectives simultaneously.
Answer:
The extent to which firms are meeting objectives suggests they:
A. are likely to prosper in the future.
B. are likely to continue their present strategy with only minor fine-tuning.
C. are virtually certain to make fresh strategic moves.
D. recognize “status quo” as the best course of action to adopt.
E. realize refocusing will ensure competitive gains.
Answer:
Which of the following is something to look for in identifying a company’s culture?
A. The atmosphere, spirit and character that pervades the work climate and the values,
business principles, and ethical standards that management preaches and practices
B. The track record in meeting or beating its financial and strategic performance targets
C. The intensity and makeup of the company’s value chain
D. The strategic intent and competitive strategy inherent within the company’s efforts
for successful strategy execution
E. The resource strengths, core competencies, and competitive capabilities that
permeate the organization
Answer:
Which of the following statements concerning the effects of fluctuating exchange rates
on companies competing in foreign markets is true?
A. Fluctuating exchange rates do not pose significant risks to a company’s
competitiveness in foreign markets.
B. The advantages of manufacturing goods in a particular country are largely unaffected
by fluctuating exchange rates.
C. Companies that are manufacturing goods in a particular country and are exporting
much of what they produce are disadvantaged when that country’s currency grows
weaker relative to the currencies of the countries that the goods are being exported to.
D. Companies that are manufacturing goods in a particular country and are exporting
much of what they produce are benefited when that country’s currency grows weaker
relative to the currencies of the countries that the goods are being exported to.
E. Domestic companies under pressure from lower-cost imports are hurt even more
when their government’s currency grows weaker in relation to the currencies of the
countries where the imported goods are being made.
Answer:
Which of the following is NOT a frequently used strategic approach to set a company
apart from rivals and achieve a sustainable competitive advantage?
A. Striving to be the industry’s low-cost provider, thereby aiming for a cost-based
competitive advantage
B. Outcompeting rivals on the basis of differentiating features such as higher quality,
wider product selection, added performance, better service, more attractive styling,
technological superiority, or unusually good value for the money
C. Focusing on a broad buyer segment and offering buyers a very low cost and highly
customized attributes that meet their specialized needs better than rivals’ products
D. Focusing on a narrow market niche and winning a competitive edge by doing a
better job than rivals of satisfying the needs and tastes of buyers comprising the niche
E. Developing a cost advantage based on offering more value for the money
Answer:
Which of the following is NOT accurate as concerns a distinctive competence?
A. A distinctive competence is a competitively important activity that a company
performs better than its rivals.
B. A distinctive competence is typically less restrictive for rivals to copy than a core
competence.
C. A distinctive competence can be a basis for sustainable competitive advantage.
D. A distinctive competence qualifies as a superior internal strength.
E. A distinctive competence enables delivering stand-out value to customers (in the
form of lower prices, better product performance, or superior service).
Answer:
A U.S. company that makes all of its goods at a plant in Brazil and then exports the
Brazilian-made goods to country markets across the world:
A. is competitively disadvantaged when the U.S. dollar declines in value against the
Brazilian real.
B. is competitively advantaged when the Brazilian real declines in value against the
currencies of the countries to which the Brazilian-made goods are being exported.
C. becomes less competitive in foreign markets when the Brazilian real declines in
value against the currencies of the countries to which the Brazilian-made goods are
being exported.
D. is competitively advantaged when the U.S. dollar appreciates in value against the
Brazilian real.
E. is unaffected by changes in the valuation of foreign currencies against the Brazilian
realall that matters to a U.S. company is the valuation of the U.S. dollar against the
Brazilian real.
Answer:
What hurdles are present in calculating industry attractiveness scores?
A. Deciding on the appropriate weights for the attractiveness measures
B. Different analysts use different weights for the different attractiveness measures
C. Gaining sufficient command of the industry to assign more accurate and objective
ratings
D. Deciding the impact of strategic fits to unrelated and related diversification
E. Deciding whether a business is related or unrelated
Answer:
Which of the following is typically the strategic impetus for forward vertical
integration?
A. Being able to control the wholesale/retail portion of the industry value chain
B. Experiencing fewer disruptions in the delivery of the company’s products to end
users
C. Gaining better access to end users and better market visibility
D. Broadening the company’s product line
E. Allowing the firm access to greater economies of scale
Answer:
To build a competitive advantage by out-managing rivals in performing value chain
activities, a company must:
A. position itself in the industry’s more favorably situated strategic group.
B. develop resource strengths that will enable it to pursue the industry’s most attractive
opportunities.
C. develop core competencies and maybe a distinctive competence that rivals don’t have
or can’t quite match and that are instrumental in helping it deliver attractive value to
customers.
D. outsource all of its value chain activities to world-class vendors and suppliers.
E. eliminate its resource weaknesses.
Answer:
When should a business NOT be divested?
A. When the business is worth more to another company than to the parent company
B. When the business is a cash cow
C. When the business provides valuable strategic or resource fits for another company
D. When shareholders would be better served if the company sells the business for a
generous premium
E. When the business lacks the cross-boundary presence of shared values and cultural
compatibility
Answer:
In which of the following circumstances are competitive pressures associated with the
bargaining power of buyers NOT relatively strong?
A. The supply of soccer balls increases during the World Cup season.
B. Consumers can easily compare different smartphones’ features over the Internet
before buying them.
C. Apple designs and manufactures its chip processors rather than buying them from
IBM.
D. Dairy products are usually standardized and therefore differentiated only by price.
E. Buyers tend to delay purchases of expensive goods, such as home entertainment
systems, until they are on sale.
Answer:
Which of the following is NOT a strategic disadvantage of vertical integration?
A. Vertical integration boosts a firm’s capital investment in the industry, thus increasing
business risk if the industry becomes unattractive later.
B. Vertical integration backward into parts and components manufacturing can impair a
company’s operating flexibility when it comes to changing out the use of certain parts
and components.
C. Vertical integration reduces the opportunity for achieving greater product
differentiation.
D. Forward or backward integration often calls for radically different skills and
business capabilities than the firm possesses.
E. Vertical integration poses all kinds of capacity-matching problems.
Answer:
When a corporate parent creates an independent company and divests it by distributing
to its stockholders new shares in the business, it is called:
A. a spinoff.
B. a wholly-owned subsidiary.
C. a functional divesture.
D. fully-diluted stock.
E. a restructure.
Answer:
Which of the following pizza firms competing in a crowded market likely offers the
best value proposition to its customers, based on the following sales pitches?
A. Firm A: “The Tastiest Pizza You’ve Ever Had.”
B. Firm B: “Get fresh, hot pizza, delivered under 20 minutes”or it’s free.”
C. Firm C: “Get your pizza at your doorstep”absolutely free delivery, anywhere.”
D. Firm D: “One pizza, 5 points: to be redeemed with a pan pizza upon reaching 50
points.”
E. Firm E: “Open you pizza box and find a free gift. Hurry! Free gifts for 100 lucky
customers.”
Answer:
Companies that compete on an international basis have a competitive advantage over
their purely domestic rivals:
A. to achieve a larger domestic interest by developing sufficient resource strengths and
competitive capabilities for success.
B. to benefit from coordinating activities across different countries’ domains.
C. solely for the benefit of their shareholders.
D. that guarantees the generation of big profits, big returns on investment, and big cash
surpluses after dividends are paid.
E. to give full access to the proprietary technological expertise or other competitively
valuable capabilities.
Answer:
Dispersing the performance of value chain activities to many different countries rather
than concentrating them in a few country locations tends to be advantageous in all of
the following situations, EXCEPT:
A. when high transportation costs make it expensive to operate from central locations.
B. whenever buyer-related activities are best performed in locations close to buyers.
C. if diseconomies of large size exist, thereby making it more economical to perform an
activity on a smaller scale in several different locations.
D. when it is desirable to hedge against (1) the risks of fluctuating exchange rates, (2)
supply interruptions or (3) adverse political developments.
E. if resources retain their foreign contexts so there is competitive advantage over a
broader domain.
Answer:
Which of the following is NOT among the intended outcomes of horizontal merger and
acquisition strategies?
A. Expanding a company’s geographic coverage
B. Gaining quick access to new technologies or complementary resources and
capabilities
C. Leading the convergence of industries whose boundaries are being blurred by
changing technologies and new market opportunities
D. Extending the company’s business into new product categories
E. Suppressing a rival’s breakthroughs in management or technology
Answer:
Which of the following pairs of variables is LEAST likely to be useful in drawing a
strategic group map?
A. Geographic market scope and degree of vertical integration
B. Brand name reputation and distribution channel emphasis
C. Product quality and product-line breadth
D. Level of profitability and size of market share
E. Price/perceived quality and image range and the extent of buyer appeal
Answer:
Which of the following is one of the first steps to take in launching the strategy
execution process?
A. Ensure all requirements of the value chain are fulfilled.
B. Form a mission statement as a basis for managers to achieve organizational
objectives.
C. Go on the offensive by employing moves to make its product offering more
distinctive and appealing to buyers.
D. Put together a talented management team with the right mix of experiences, skills,
and abilities to get things done.
E. Strive to be more profitable than rivals and aim for a competitive edge based on
bigger profit margins.
Answer:
In leading the push for proficient strategy execution and operating excellence, the roles
of top-level managers include all of the following EXCEPT:
A. being out in the field and seeing how well operations are going.
B. delegating authority to middle and lower-level managers and creating a sense of
empowerment among employees to move the implementation process forward.
C. gathering information firsthand and gauging the progress being made.
D. learning the obstacles in the path of good execution and clearing the way for
progress.
E. holding periodic ceremonies to honor people who excel in displaying the company
values and ethical principles.
Answer:
To test whether a particular diversification move has good prospects for creating added
shareholder value, corporate strategists should use:
A. the profit test, the competitive strength test, the industry attractiveness test, and the
capital gains test.
B. the better-off test, the competitive advantage test, the profit expectations test, and the
shareholder value test.
C. the barrier-to-entry test, the competitive advantage test, the growth test, and the stock
price effect test.
D. the strategic fit test, the industry attractiveness test, the growth test, the dividend
effect test, and the capital gains test.
E. the attractiveness test, the cost-of-entry test, and the better-off test.
Answer:
Define and briefly explain what is meant by each of the following terms.
a) strategic vision
b) stretch objectives
c) strategic objective
d) balanced scorecard
e) strategic intent
Answer:
The tests of whether a diversified company’s businesses exhibit resource fit do NOT
include:
A. whether the excess cash flows generated by cash cow businesses are sufficient to
cover the negative cash flows of its cash hog businesses.
B. whether a business adequately contributes to achieving the corporate parent’s
performance targets.
C. whether the company has adequate financial strength to fund its different businesses
and maintain a healthy credit rating.
D. whether the corporate parent has sufficient cash to fund the needs of its individual
businesses and pay dividends to shareholders without having to borrow money.
E. whether the corporate parent has or can develop sufficient resource strengths and
competitive capabilities to be successful in each of the businesses it has diversified into.
Answer:
Which of the following statements about a high-performance culture is NOT true?
A. Results-oriented, high-performance cultures are permeated with a spirit of
achievement and have a good track record in meeting or beating performance targets.
B. High-performance cultures often have a low regard for high ethical standards, a
strong preference for high-risk strategies, and a slow and methodical approach to
responding to changes in the marketplace.
C. The challenge in creating a high-performance culture is to inspire high loyalty and
dedication on the part of employees, such that they are both energized and preoccupied
with putting forth their very best efforts to do things right and be unusually productive.
D. In a high-performance culture, the clear and unyielding expectation is that all
company personnel, from senior executives to front-line employees, will display
high-performance behaviors and a passion for making the company successful.
E. In high-performance cultures, there’s a strong sense of involvement on the part of
company personnel and emphasis on individual initiative and creativity.
Answer:
A company should not couch its mission in terms of making a profit because a profit is
more correctly an:
A. obligation and a reason for what a company does.
B. objective and a result of what a company does.
C. outlay and a rationale for what a company does.
D. obligation and a responsibility for what a company does.
E. outflow and a right of what a company does.
Answer:
Being first to initiate a particular strategic move can have a high payoff in all of the
following EXCEPT when:
A. pioneering helps build up a firm’s image and reputation and creates strong brand
loyalty.
B. buyers remain strongly loyal to pioneering firms because of incentives and switching
costs barriers.
C. there is a steep learning curve and when learning can be kept proprietary.
D. moving first can constitute a preemptive strike, making imitation extra hard or
unlikely.
E. market uncertainties make it difficult to ascertain what will eventually succeed.
Answer:
Managers must be prepared to modify their strategy in response to all of the following
EXCEPT:
A. changing circumstances that affect performance and the desire to improve the
current strategy.
B. competitor moves in the market and shifting needs of buyers.
C. stagnating market and restrictive industrial opportunities.
D. mounting evidence that the strategy is less effective.
E. public pronouncements from rivals about monthly profit margins.
Answer: