Chapter 8—Strategy Formulation and Execution
TRUE/FALSE
1. Research has shown that strategic thinking and planning positively affect a firm’s performance and
financial success.
2. Strategic thinking is more important -profit businesses than for non-profit organizations.
3. Top managers and chief executives have the final responsibility for strategic planning.
4. Front-line managers have the final responsibility for strategic planning.
5. Competitive advantage refers to the set of decisions and actions used to formulate and implement
strategies.
6. The interaction of Production and Sales working together to produce profit greater than the total of
both working separately is an example of synergy.
7. Core competence is the plan of action that prescribes resource allocation and other activities for
dealing with the environment.
8. The combination of benefits received and costs paid by the customer refers to value.
9. Corporate-level strategy pertains to the organization as a whole.
10. The “How do we compete?” question concerns functional-level strategy.
11. The three levels of strategy are business, corporate, and global.
12. Strategic partnerships are the current trend, rather than mergers and acquisitions.
13. In a turbulent business climate, managers should focus on strategic stability rather than flexibility.
14. Strategy implementation involves the planning and decision making that lead to the establishment of
the firm’s goals.
15. Some companies hire competitive intelligence professionals to scan the external environment and
provide data and research on relevant domestic and global trends.
16. The administration and implementation of the strategic plan is strategy execution.
17. The essence of formulating strategy is choosing how the organization will conform to become like its
key competitors in the industry.
18. Executives acquire information about external opportunities and strengths from a variety of reports,
including budgets, financial ratios, profit and loss statements, and surveys of employee attitudes and
satisfaction.
19. Threats are characteristics of the internal environment that may prevent the organization from
achieving its strategic goals.
20. The task environment sectors are the most relevant to strategic behavior and include the behavior of
competitors, customers, suppliers, and the labor supply.
21. Opportunities are characteristics of the internal environment that have the potential to help the
organization achieve or exceed its strategic goals.
22. The mix of business units and product lines that fit together in a logical way to provide synergy and
competitive advantage for the corporation pertains to portfolio strategy.
23. An SBU stands for Star Business Unit.
24. The BCG (Boston Consulting Group) matrix evaluates SBUs with respect to their business growth rate
and geographical location.
25. The question mark exists in a new, rapidly growing industry but has only a small market share,
according to the BCG Matrix.
26. According to the BCG Matrix, the cash cow has a large market share in a rapidly growing industry.
27. The dog, according to the BCG Matrix, is a poor performer.
28. Unrelated diversification occurs when an organization expands into a totally new line of business.
29. Diversification is a strategy of moving into new lines of business.
30. Vertical integration means a firm expands into businesses that either produce the supplies needed to
make products or that distribute and sell those products to customers.
31. Differentiation, cost leadership, and focus are three of Porter’s competitive strategies.
32. Cost leadership is a type of competitive strategy with which the organization seeks to distinguish its
products or services from that of competitors.
33. Organization’s with a focus strategy concentrate on a specific regional market or buyer group.
34. A director of finance would most likely be interested in executing functional level strategies.
35. Business-level strategies include all of the major functions, including finance, research and
development, marketing, and manufacturing.
36. The world-wide standardization of product design and advertising refers to globalization.
37. The transnational strategy handles markets independently for each country.
38. With a multidomestic strategy, a company will achieve the globalization or standardization of
marketing and production approaches.
39. A transnational strategy seeks to achieve both global integration and national responsiveness.
40. A transnational strategy combines degrees of both global standardization and national responsiveness.
41. For successful execution, alignment of everyone in the organization must occur.
42. In order to protect an organization’s mission, the human resource functions are removed from strategic
goals.
43. In strategy implementation, leadership is the ability to influence people to adopt the new behaviors
needed.
MULTIPLE CHOICE
1. To remain competitive, companies should develop strategies that focus on core competencies,
providing synergy, and creating value for _____.
a.
customers
b.
suppliers
c.
stockholders
d.
employees
e.
board members
2. The set of decisions and actions used to formulate and implement strategies that will provide a
competitively superior fit between the organization and its environment so as to achieve organizational
goals is known as:
a.
strategy formulation.
b.
strategic planning.
c.
strategic management.
d.
strategy implementation.
e.
strategy evaluation.
3. The plan of action that prescribes resource allocation and other activities for dealing with the
environment and helping the organization attain its goals is known as a(n) _____.
a.
goal
b.
objective
c.
mission
d.
vision
e.
strategy
4. Which of the following is a business activity that an organization does especially well relative to its
competition?
a.
Strategy
b.
Synergy
c.
Cash cow
d.
Core competence
e.
Multidomestic
5. The condition that exists when the organization’s parts interact to produce a joint effect that is greater
than the sum of the parts acting alone is known as:
a.
core competence.
b.
synergy.
c.
value creation.
d.
business-level strategy.
e.
multidomestic strategy.
6. When properly managed, _____ can create additional value with existing resources, providing a big
boost to the bottom line.
a.
synergy
b.
competitors
c.
government contacts
d.
command structure
e.
cooperation among customers
7. _____ can be defined as the combination of benefits received and costs paid by the customer.
a.
Organizational benefits
b.
Value
c.
Cost-benefit diversity
d.
Synergy
e.
Core competence
8. After Sunshine Systems merged with RTD Enterprises, company executives noticed that due to
increased employee collaboration between the two units, costs were down and revenues increased
within both areas. This is an example of what business phenomenon?
a.
Strategy execution
b.
Portfolio strategy
c.
Core competency
d.
Synergy
e.
Delivering value
9. _____ level strategy pertains to the major functional departments within the business unit.
a.
Operational
b.
Corporate
c.
National
d.
Business
e.
Functional
10. Which of the following pertains to the organization as a whole?
a.
Business-level strategy
b.
Functional-level strategy
c.
Corporate-level strategy
d.
Operational-level strategy
e.
Competitive-level strategy
11. A corporate-level strategy is concerned with the question:
a.
what business are we in?
b.
how do we compete?
c.
how do we support our chosen strategy?
d.
where do we market our products?
e.
should we promote from within?
12. Janessa is the CEO of a privately-held software company. In defining corporate-level strategies, which
of the following questions would she most likely be concerned with?
a.
How do we compete?
b.
What business are we in?
c.
How does marketing support the business?
d.
How can we maximize profits?
e.
How can we make manufacturing processes more efficient?
13. Decisions regarding the proper amount of advertising for a particular good or service are related to:
a.
corporate-level strategies.
b.
functional-level strategies.
c.
tactical-level strategies.
d.
business-level strategies.
e.
retrenchment strategies.
14. Which of these questions is central to a functional-level strategy?
a.
What business are we in?
b.
How do we compete?
c.
How do we support our chosen strategy?
d.
What business do we buy?
e.
Where to market our products?
15. Which of the following lists the strategic management process in proper order?
a.
Formulate strategy; Evaluate strategy; Perform SWOT analysis; Define new
mission/goals; Execute strategy; Control strategy.
b.
Perform SWOT analysis; Evaluate current mission/goals; Formulate strategy; Execute
strategy; Define new mission/goals.
c.
Evaluate current mission/goals; Define new mission/goals; Formulate strategy; Execute
strategy; Perform SWOT analysis .
d.
Evaluate current mission/goals; Perform SWOT analysis; Define new mission/goals;
Formulate strategy; Execute strategy.
e.
Define new mission/goals; Execute strategy; Formulate strategy; Evaluate new
mission/goals; Perform SWOT analysis.
16. _____ refers to the use of managerial tools to direct resources toward the achievement of strategic
goals.
a.
Strategy formulation
b.
Strategy coordination
c.
Strategy execution
d.
Strategy control
e.
Strategy planning
17. Which of the following refers to the planning and decision making that lead to the establishment of the
organization’s goals and of a specific strategic plan?
a.
Strategy formulation
b.
Strategy implementation
c.
Strategy coordination
d.
Strategy control
e.
SWOT
18. Fred has been assigned to conduct a SWOT analysis for his organization, Acme, Inc. As part of this
assignment, Fred will:
a.
conduct an external wage survey.
b.
search for the strengths, weaknesses, opportunities, and threats that impact his firm.
c.
choose a grand strategy for his firm.
d.
do a cost/benefit analysis.
e.
develop a mission.
19. Techniques used to monitor external environments include:
a.
hiring scanning organizations.
b.
hiring the competitive intelligence professionals.
c.
government reports.
d.
professional journals.
e.
all of these.
20. Classy Clay has extremely creative employees who, in the opinion of the organization, keep the
company ahead of the competition. The creativity of these employees would be classified as a(n)
_____.
a.
internal weakness
b.
external opportunity
c.
external strength
d.
internal strength
e.
neutral factor
21. Paramount, Inc. is particularly concerned about pending legislation in Congress that would further
regulate their organization. This legislation would be classified as a(n) _____.
a.
external opportunity
b.
internal strength
c.
external threat
d.
external weakness
e.
congressional chaos
22. Sherri has been asked to participate on a cross-functional task force that is charged with performing an
audit checklist for her advertising firm. The task force will analyze organizational strengths and
weaknesses as they apply to the firm. Sherri’s task is to analyze management quality, staff quality,
degree of centralization, and organizational charts. This level of analysis pertains to which area of the
audit?
a.
Management and organization
b.
Marketing
c.
Human resources
d.
Research and development
e.
Production
23. Where does the information about opportunities and threats comes from?
a.
An analysis of the organization’s internal environment
b.
A department by department study of the organization
c.
Scanning the external environments
d.
Employee grievances
e.
Financial ratios of the organization
24. What type of organizational unit has a unique business mission, product line, competitors, and markets
relative to other units in the same corporation?
a.
Product unit
b.
Functional unit
c.
Strategic business unit
d.
Operational unit
e.
Business consulting group unit
25. How business units and product lines fit together in a logical way is the essence of:
a.
business-level strategy.
b.
portfolio strategy.
c.
competitive strategy.
d.
financial strategy.
e.
functional strategy.
26. Gatekeep Utilities is a subsidiary of GW Enterprises. Gatekeep has a mission and product line that is
unique from GW. Gatekeep’s competitors are also very different from those of its parent, and the
subsidiary markets to a very different group of customers. As such, Gatekeep can be described as a(n)
_____.
a.
product unit
b.
functional unit
c.
operational unit
d.
strategic business unit
e.
boston consulting group unit
27. The BCG matrix organizes along which of the following dimensions?
a.
Market share and profit
b.
Sales and market share
c.
Business growth rate and market share
d.
Business growth rate and profit
e.
Sales and profits
28. Double Click, Inc. has a number of strategic business units. Their hand-held computer unit has a large
market share in this rapidly growing industry. Their hand-held computer business would be classified
as:
a.
a dog.
b.
a star.
c.
a question mark.
d.
a cash cow.
e.
stuck in the middle.
29. Which of these is true about the cash cow?
a.
It generates tremendous profits in a rapidly growing industry.
b.
It has a small market share in a rapidly growing industry.
c.
It has a small market share in a slow growth industry.
d.
It has a large market share in a slow growth industry.
e.
It is generally a dead business that should be divested.
30. The star has a:
a.
large market share in a rapidly growing industry.
b.
large market share in a slow growth industry.
c.
small market share in a rapidly growing industry.
d.
small share of a slow growth market.
e.
moderate market share in a slow growth industry.
31. Which of the following portfolio categories is made up of poor performers who command only a small
share of a slow growth market?
a.
Star
b.
Cash cow
c.
Question mark
d.
Dog
e.
Cat
32. The question mark has a:
a.
large market share in a rapidly growing industry.
b.
large market share in a slow growth industry.
c.
small market share in a rapidly growing industry.
d.
small share of a slow growth market.
e.
moderate market share in a slow growth industry.
33. Which of these is true about the dog division?
a.
It has a large market share in a rapidly growing industry.
b.
It has a large market share in a slow growth industry.
c.
It has a small market share in a rapidly growing industry.
d.
It has a small share of a slow growth market.
e.
It has a moderate market share in a rapidly growing industry.
34. Gillette operates numerous strategic business units. Most of its units in the personal care division have
low market share but high business growth. These units are classified as _____.
a.
dogs
b.
question marks
c.
stars
d.
cash cows
e.
none of these
35. According to the BCG Matrix, which of the following exists in a mature, slow-growth industry, but is
a dominant business in the industry, with a large market share?
a.
Question mark
b.
Asterisk
c.
Dog
d.
Star
e.
Cash cow
36. When an organization expands into a totally new line of business, it is implementing a strategy of:
a.
Related diversification
b.
Unrelated diversification
c.
Cross-functional diversification
d.
Product line diversification
e.
Industry diversification
37. Semway, a regional bank, recently announced that it would soon begin offering financial planning
services. This is an example of which of these?
a.
Related diversification
b.
Unrelated diversification
c.
Cross-functional diversification
d.
Product line diversification
e.
Industry diversification
38. The purpose of _____ is to expand the firm’s business operations to produce new kinds of valuable
products and services?
a.
retrenchment
b.
diversification
c.
liquidation
d.
cash cow
e.
internal growth
39. Which of the following strategies refers to moving into a new business that is related to the company’s
existing business activities?
a.
Horizontal integration
b.
Vertical integration
c.
Unrelated diversification
d.
Related diversification
e.
Strategic partnership
40. All of the following are Porter’s competitive forces except:
a.
differentiation.
b.
bargaining power of buyers.
c.
bargaining power of suppliers.
d.
threat of substitute products.