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
new start-up 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 start-up operation, thus passing the
cost-of-entry test.
C. is a less risky way of passing the attractiveness test.
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.
Recruiting and retaining capable employees
A. is usually much more important to good strategy execution than is assembling a
capable top management team.
B. is important because the quality of an organizations people is always an essential
ingredient of successful strategy executionknowledgeable, engaged employees are a
companys best source of creative ideas for the nuts-and-bolts operating improvements
that lead to operating excellence.
C. is more important during periods of rapid growth than during periods of crisis and
attempted turnarounds.
D. is an important organization-building element, particularly when it comes to
transforming a competence into a core competence or distinctive competence.
E. is easily the most critical aspect in building competitively valuable core
competencies and capabilities.
Which of the following is not a frequently used strategic approach to setting a company
apart from rivals and achieving a sustainable competitive advantage?
A. Aiming for a cost-based competitive advantage
B. Outcompeting rivals on the basis of such differentiating features as higher quality,
wider product selection, added performance, better service, or more attractive styling
C. Striving to be more profitable than rivals by aiming for a competitive edge based on
bigger profit margins
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 expertise and resources that give the company competitive capabilities
that rivals cant easily imitate or trump with capabilities of their own
To use location to build competitive advantage, a company that operates multinationally
or globally must
A. employ either an export strategy or a franchising strategy.
B. scatter its production plants across many countries in different parts of the world so
as to minimize transportation costs.
C. consider (1) whether to concentrate each activity it performs in a few select countries
or disperse performance of the activity to many nations and (2) in which countries to
locate particular activities.
D. locate production plants in those countries having suppliers that can supply all the
necessary raw materials and components so as to avoid inbound shipping costs.
E. concentrate all of its value chain activities in a single countrythe one that has the best
combination of low wage rates, low shipping costs, and low tax rates on profits.
The essence of socially responsible business behavior is
A. encouraging company personnel to run for political offices.
B. balancing strategic actions to benefit shareholders against the duty to be a good
corporate citizen.
C. undertaking actions to balance the interests of all company stakeholders rather than
just exclusively look out for the interests of shareholders.
D. making sizable contributions to political action committees representing the interests
of the industry.
E. pursuing actions to keep prices low enough that the companys profits will not be
viewed by the general public as obscenely high or exorbitant.
Checking a diversified firms business portfolio for the competitive advantage potential
of cross-business strategic fits entails consideration of
A. whether the parent companys competitive advantages are being deployed to
maximum advantage in each of its business units.
B. whether the competitive strategies employed in each business act to reinforce the
competitive power of the strategies employed in the companys other businesses.
C. whether the competitive strategies in each business possess good strategic fit with
the parent companys corporate strategy.
D. the extent to which there are competitively valuable relationships between the value
chains of sister business units and what opportunities they present to reduce costs, share
use of a potent brand name, or transfer skills or technology or intellectual capital from
one business to another.
E. how compatible the competitive strategies of the various sister businesses are and
whether these strategies are properly aimed at achieving the same kind of competitive
advantage.
A companys strategic plan consists of
A. its balanced scorecard and its business model.
B. a vision of where it is headed, a set of performance targets, and a strategy to achieve
them.
C. its strategy and managements specific, detailed plans for implementing it.
D. a companys plans for improving value-creating internal processes.
E. a strategic vision, a strategy, and a business model.
Which of the following is not a common shortcoming of company vision statements?
A. Vague or incompleteshort on specifics
B. Focused and narrowexclusive to a specific direction
C. Bland or uninspiring
D. Not distinctivecould apply to most any company (or at least several others in the
same industry)
E. Too reliant on superlatives (best, most successful, recognized leader, global or
worldwide leader, first choice of customers)
Top managements views about where the company is headed and what its future
product-customer-market-technology will be
A. indicates what kind of business model the company is going to have in the future.
B. constitutes the strategic vision for the company.
C. signals what the firms strategy will be.
D. serves to define the companys mission.
E. indicates what the companys long-term strategic plan is.
Which of the following is not an option for improving supplier-related value chain
activities?
A. Integrate backward into the business of high-cost suppliers in an effort to reduce the
costs of the items being purchased
B. Negotiate more favorable prices with suppliers
C. Collaborate closely with suppliers to identify mutual cost-saving opportunities
D. Switch to lower priced substitute inputs
E. Persuade forward channel allies to implement best practices
Which one of the following is not a reason a company decides to enter foreign markets?
A. To spread business risk across a wider geographic market base
B. To capitalize on company competencies and capabilities
C. To achieve lower costs and enhance the firms competitiveness
D. To build the profit sanctuaries necessary to wage guerrilla offensives against global
challengers endeavoring to invade its home market
E. To gain access to more buyers for the companys products/services
Once company managers have decided on a strategy, the emphasis turns to
A. converting the strategy into actions and good results.
B. empowering employees to revise and reorganize value chain activities to match the
strategy.
C. establishing policies and procedures that instruct company personnel in the ways and
means of executing the strategy.
D. developing a detailed implementation plan that sets forth exactly what every
department and every manager needs to do to proficiently execute the companys
strategy.
E. building the core competencies and competitive capabilities needed to execute the
strategy.
A companys competitive strength scores
A. pinpoint its strengths and weaknesses against rivals and point to offensive and
defensive strategies capable of producing first-rate results.
B. determine whether a company has a cost-effective value chain.
C. learn if the companys market opportunities are better than those of its rival.
D. analyze whether a company is well positioned to gain market share and be the
industrys profit leader.
E. determine whether a companys resource strengths are sufficient to allow it to earn
bigger profits than rivals.
As a rule, all the industries represented in a diversified companys business portfolio
should be judged on such attractiveness factors as
A. market size and projected growth rate.
B. emerging opportunities and threats, the intensity of competition, and the degree of
industry uncertainty and business risk.
C. resource requirements and the presence of cross-industry strategic fits.
D. seasonal and cyclical factors, industry profitability, and whether an industry has
significant social, political, regulatory, and environmental problems.
E. All of these.
Which of the following is not one of the pitfalls of pursuing a differentiation strategy?
A. Trying to strongly differentiate the companys product from those of rivals rather than
be content with weak product differentiation
B. Over differentiating so that the features and attributes incorporated exceed buyer
needs and requirements
C. Trying to charge too high a price premium for the differentiating features
D. Differentiating on features or attributes that rivals can easily copy
E. Overspending on efforts to differentiate the companys product offering
Corporate strategy
A. is primarily concerned with strengthening a companys market position and building
competitive advantage.
B. is subject to being changed much less frequently than either a companys objectives
or its mission statement.
C. should be based on a flexible strategic vision and mission.
D. ensures consistency in strategic approach among businesses of a diversified,
multibusiness corporation.
E. determines balanced scorecard financial and strategic objectives.
Experience indicates that strategic alliances
A. are generally successful.
B. work well in cooperatively developing new technologies and new products but
seldom work well in promoting greater supply chain efficiency.
C. work best when they are aimed at achieving a mutually beneficial competitive
advantage for the allies.
D. stand a reasonable chance of helping a company reduce competitive disadvantage,
but very rarely form the basis of a durable competitive advantage over rivals.
E. are usually a companys best approach to building a distinctive competence.
Different businesses are said to be “unrelated” when
A. they are in different industries.
B. the products of the different businesses are not bought by the same types of buyers or
sold in the same types of retail stores.
C. the products of the different businesses satisfy different buyer needs.
D. the businesses have different supply chains and different types of suppliers.
E. there is an absence of competitively valuable strategic fits between their respective
value chains.
A distinctive competence
A. is a competitively important activity that a company performs better than its
competitors.
B. gives a company competitively valuable capability that is unmatched by rivals.
C. can produce a competitive edge in the marketplace.
D. has the potential for being the cornerstone of a companys strategy.
E. All of these.
What makes related diversification an attractive strategy is
A. the ability to broaden the companys product line.
B. the opportunity to convert the competitive advantage potential into 1 + 1 = 3 gains in
shareholder value.
C. the potential for improving the stability of the companys financial performance.
D. the ability to serve a broader spectrum of buyer needs.
E. the added capability it provides in overcoming the barriers to entering foreign
markets.
Which one of the following is not one of the five stages of an ongoing, continuous
strategic management process?
A. Forming a strategic vision of the companys future direction and focus
B. Setting objectives to measure progress toward achieving the strategic vision
C. Crafting a strategy to achieve the objectives and get the company where it wants to
go
D. Developing a profitable business model
E. Implementing and executing the chosen strategy efficiently and effectively
The attractiveness test for evaluating whether diversification into a particular industry is
likely to build shareholder value involves determining whether
A. conditions in the target industry allow for profits and return on investment that is
equal to or better than that of the companys present business(es).
B. the potential diversification move will boost the companys competitive advantage in
its existing business.
C. shareholders will view the contemplated diversification move as attractive.
D. key success factors in the target industry are attractive.
A companys broad “macro-environment” refers to
A. the industry and competitive arena in which the company operates.
B. general economic conditions plus the factors driving change in the markets being
served.
C. all the strategically significant forces and factors outside a companys boundaries
general economic conditions, population demographics, societal values and lifestyles,
technological factors, and governmental legislation and regulation.
D. the competitive market environment that exists between a company and its
competitors.
E. the dominant economic features of a companys industry.
A strategic alliance
A. is a collaborative arrangement where companies join forces to defeat mutual
competitive rivals.
B. involves two or more companies joining forces to pursue vertical integration.
C. is a formal agreement between two or more companies in which there is strategically
relevant collaboration of some sort, joint contribution of resources, shared risk, shared
control, and mutual dependence.
D. is a partnership between two companies that is typically intended to eliminate the
need to engage in outsourcing.
E. is usually a cheaper and more effective way for companies to join forces than is
merger.
Company strategies and value creating processes cant be effectively executed without
internal information systems that include
A. customer data, employee data, supplier/partner data, operations data, and financial
performance data.
B. TQM, reengineering, and Six Sigma programs.
C. monetary and nonmonetary reward systems.
D. activity-based cost accounting, benchmarking, and best practices.
E. All of these.
Sizing up a companys overall resource strengths and weaknesses
A. essentially involves constructing a strategic balance sheet” where the companys
resource strengths represent competitive assets and its resource weaknesses represent
competitive liabilities.
B. is called benchmarking.
C. is called competitive strength assessment.
D. is focused squarely on ascertaining whether the company has more/less resource
strengths than weaknesses.
E. is called company resource mapping.
The generic types of competitive strategies include
A. build market share, maintain market share, and slowly surrender market share.
B. offensive strategies and defensive strategies.
C. low-cost provider, broad differentiation, focused low-cost, focused differentiation,
and best-cost provider strategies.
D. low-cost/low-price strategies, high-quality/high-price strategies,
medium-quality/medium-price strategies, low-cost/high-price strategies.
E. price leader strategies, price follower strategies, technology leader strategies,
first-mover strategies, offensive strategies, and defensive strategies.
A blue ocean type of offensive strategy
A. refers to initiatives by a market leader to steal customers away from unsuspecting
smaller rivals.
B. involves a preemptive strike to secure an advantageous position in a fast-growing
market segment.
C. entails attacking rivals head-on with deep price discounts and continuous product
innovation.
D. involves abandoning efforts to beat out competitors in existing markets and, instead,
inventing a new industry or new market segment that renders existing competitors
largely irrelevant and allows a company to create and capture altogether new demand.
E. involves the use of surprise hit-and-run guerrilla tactics to harass money-losing rivals
and drive them into bankruptcy.
The chief advantage of a decentralized organizational structure is to
A. put decision-making authority in the hands of those closest and most knowledgeable
about the situation.
B. make it easy to fix accountability when company performance targets are not met.
C. increase productivity on the part of the workforce.
D. enhance cross-unit coordination and capture of strategic fits.
E. create a collegial, collaborative culture where teamwork is a core value and decisions
are made on the basis of consensus.
Executing strategy
A. is primarily an operations-driven activity revolving around the management of
people and business processes.
B. tests a managers ability to direct organizational change and achieve continuous
improvement in operations and business processes.
C. tests a managers ability to create and nurture a strategy-supportive culture.
D. tests a managers ability to consistently meet or beat performance targets.
E. All of these.
Divestiture can be accomplished by
A. selling a business outright.
B. spinning the unwanted business off as a managerially and financially independent
company by selling shares to the investing public via an initial public offering of stock.
C. spinning the unwanted business off as a managerially and financially independent
company by distributing shares in the new company to existing shareholders of the
parent company.
D. All of these.
E. None of these; the best and quickest ways to divest a business are either to close it or
else just walk away and give the keys to creditors.
Which of the following is not generally on a companys 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 build a workforce that is diverse with respect to gender, race, national
origin, and perhaps other personal characteristics
C. Actions to look out exclusively for the best interests of shareholders
D. Actions to protect or enhance the environment (apart from what is required by
governmental authorities)
E. Actions to create a work environment that enhances the quality of life for employees
One of the most viable strategic options companies should consider in tailoring their
strategy to fit circumstances of emerging country markets includes
A. try to change the local market to better match the way the company does business
elsewhere.
B. be prepared to modify aspects of the companys business model to accommodate
local circumstances.
C. prepare to compete on the basis of low price.
D. stay away from those emerging markets where it is impractical to modify the
companys business model to accommodate local circumstances.
E. All of these.