Chapter 04: Strategy Fundamentals And Corporate Strategy
TRUE/FALSE
1. Strategy is a coordinated set of actions that fulfills the firm’s objectives, purposes, and goals.
2. Strategic planning is an effort by which an organization defines the nature of the products and/or
services it provides.
3. Capabilities are the foundation on which a firm builds its strategy.
4. A vital capability such as marketing ability is called a firm’s core competence.
5. Core competencies are present in high technology and manufacturing firms, but not in service firms.
6. A comparative advantage results from something that the firm does better than any of its competitors.
7. For an international firm, changes in the environment are more active than for a firm that only
competes in a single market.
8. The three components of the strategy process include planning, implementation, and evaluation and
control.
9. Information-gathering in the planning process should begin with the external environment in which
the firm competes.
10. Mission statement is a simple statement of the basic purpose or reason for the business to
exist and its activities.
11. Corporate strategy establishes how diversified the firm is to become and in what domains that
diversification will occur.
12. Business-level strategies are the strategies of the different departments, such as accounting,
engineering, and marketing, that act in support of the given functional strategy.
13. A value-chain analysis breaks the firm’s activities into primary activities and support activities.
14. Support activities are the major categories of activities that must take place in a firm to actually
produce its products and services.
15. The principal means by which a firm changes its portfolio of businesses is through alliances.
16. On the whole, mergers and acquisitions have a poor record of performance.
17. The total package of products that complement each other is typically referred to as a product class.
18. If a firm with market power lowers prices, other smaller firms are forced to do the same.
19. The most valuable asset of a firm is values.
20. If the firms in a merger or acquisition rely on similar skills to conduct the critical activities of the
firms, then it is conglomerate diversification.
21. Horizontal M&As involve acquired and acquiring firms that are at the same stage of the production
process in the same industry.
22. It is more common for firms to forward integrate in turbulent product markets than in mature ones.
23. The greatest implementation barrier to international firms working together in an M&A is the cultural
differences of the firms involved.
24. Alliances that are intermediate in their formality are agreements that have more interaction between
the parties, and less agreement between each party in the alliance is required.
25. One of the major challenges facing a strategic alliance is measuring real costs and profits from the
alliance.
MULTIPLE CHOICE
1. Strategic planning:
a.
is a coordinated set of actions that fulfills the firm’s objectives, purposes, and goals.
b.
helps define the type of organization the firm intends to be, and the nature of the
contribution it makes to its constituents.
c.
is an effort by which an organization defines the nature of the products and/or services it
provides.
d.
is the process by which a firm decides its direction over the next several years.
2. Functional skills that a firm develops and which are the foundation on which a firm builds its strategy
are:
a.
capabilities.
b.
resources.
c.
key success factors.
d.
comparative advantages.
3. Which of the following is NOT an example of a key success factor in an airline firm?
a.
An information system that allows the airline to better match demand and flight frequency.
b.
The ability to work well with their employees and unions to generate maximum efficiency.
c.
The capability of designing the best uniform for its employees.
d.
The organizational routines to turn planes around faster.
4. The special capabilities that are the most critical to a firm’s success are called:
a.
key success factors.
b.
core competencies.
c.
missions and visions.
d.
hidden assets.
5. According to the text, Sony is said to have a core competency in:
a.
micromotors.
b.
engines.
c.
imaging technologies.
d.
miniaturization.
6. Core competencies:
a.
are rare and typically cut across functional boundaries.
b.
are tangible and intangible assets that firms possess.
c.
are things that are important only to customers.
d.
are basic functional capabilities.
7. A firm’s resources and capabilities are used to build the firm’s core competencies which, in turn, are
the building blocks for the firm’s strategy and its:
a.
core advantage.
b.
absolute advantage.
c.
competitive advantage.
d.
comparative advantage.
8. All of the following are reasons for a firm’s competitive advantage EXCEPT:
a.
the activity is something that customers value.
b.
it is something that affects the supplier’s purchasing decisions.
c.
it is something that other firms cannot easily duplicate.
d.
the firm is able to build value for the shareholders of the firm.
9. The steps in the planning process include all of the following EXCEPT:
a.
data gathering.
b.
mission generation.
c.
objective setting.
d.
evaluation and control.
10. Which of the following should be inventoried in the evaluation of a firm’s internal capabilities?
a.
Industry status
b.
An analysis of economic trends
c.
The physical assets of the firm
d.
Resources available in the industry
11. Which of the following statements about a firm’s mission statement is false?
a.
Typically, mission statements are short, with approximately 5 to 10 words.
b.
It is a simple statement of the basic purpose for the firm’s existence.
c.
The firm will include its ‘‘reason for existence’’ in its mission statement.
d.
It identifies what is unique about the firm.
12. Which level of a firm’s strategy establishes how diversified the firm is to become and in what domains
that diversification will occur?
a.
Business-level strategy
b.
Corporate-level strategy
c.
Functional-level strategy
d.
Transitional-level strategy
13. The _____ strategy of the firm is concerned with how the firm will compete in each product-market or
industry once they have been chosen.
a.
business-level
b.
functional-level
c.
corporate-level
d.
transitional-level
14. Which of the following is a useful tool that conceptualizes how all the aspects of a firm’s
implementation of its strategy fit together, and that breaks the firm’s activities into primary activities
and support activities?
a.
Resource analysis
b.
Core competency analysis
c.
Strategic group analysis
d.
Value-chain analysis
15. The principal means by which a firm changes its portfolio of businesses is through:
a.
internal diversification.
b.
mergers and acquisitions.
c.
joint ventures.
d.
alliances.
16. Typical barriers to entry in the acquisition of a new business include all of the following EXCEPT:
a.
government hostility toward outside firms that market their product in a country but do not
produce it there.
b.
distribution channels where wholesalers are unwilling to take on new firms.
c.
low levels of customer loyalty in the area.
d.
a geographic area where the best retail locations are already taken.
17. The total package of products that complement each other is typically referred to as a:
a.
product mix.
b.
product class.
c.
product placement.
d.
product platform.
18. Which theory states that the recognition that those who own firms and manage them are now
separated, and thus the agents may act in their own best interest rather than that of the firm?
a.
Agency theory
b.
Contract theory
c.
M&A theory
d.
Attribution theory
19. In terms of the factors motivating a firm entering into an M&A, which of the following is true?
a.
Smaller firms are more willing to pursue an M&A because it limits their financial
exposure.
b.
In high-risk environments, firms are less likely to want to commit resources necessary for
an M&A.
c.
Managers like M&As in entering developing countries if the systematic country risk is
high.
d.
M&As are a good way to test a new market and to see if two firms can share technology
effectively.
20. U.S.-based Unigen Pharmaceuticals has aggressively taken over worldwide suppliers of the delicate
plants needed for their pharmaceutical and nutritional products. This is an example of:
a.
horizontal merger and acquisition.
b.
conglomerate diversification.
c.
vertical integration.
d.
horizontal monopoly.
21. Which of the following usually means that the firms will partner to produce and sell a given product or
service?
a.
Turnkey project
b.
Exporting
c.
Merger
d.
Strategic alliance
22. The most important dimension along which alliances can be differentiated is the _____ of the alliance.
a.
mutuality
b.
formality
c.
professionality
d.
emotionality
23. In a(n) _____, two or more firms both put some resources into a new, separate entity.
a.
equity joint venture
b.
subcontract
c.
licensing arrangement
d.
consortia
24. Which of the following is characterized by several organizations joining together to share expertise
and funding for developing, gathering, and distributing new knowledge?
a.
Subcontracts
b.
Joint ventures
c.
Consortia
d.
Licensing arrangements
25. In which type an alliance do two firms agree to support each other’s activities in some manner, where
the agreements are strictly informal with few, if any, legal protections to enforce the agreements?
a.
Subcontracting alliances
b.
Joint ventures
c.
Licensing arrangements
d.
Informal alliances
ESSAY
1. Briefly describe strategy. How does it differ from strategic planning?
2. Write a short note on the data-gathering step of planning.
3. Compare and contrast the three different levels of strategy.
4. Define mergers and acquisitions. How do they differ?
5. List the strategic goals that a firm can accomplish through M&As. Explain at least one of them.
ANS:
6. What are the advantages of vertical integration?
7. What are the major challenges facing strategic alliances? Explain.
