Chapter 2—Strategic Planning for Competitive Advantage
TRUE/FALSE
1. The manufacturer of Macho brand martial arts products was implementing a strategic plan when it
sponsored a local karate tournament for teenagers.
2. In theory, an SBU should have its own resources for handling basic business functions.
3. When the Walt Disney Company opened Disneyland Paris for the French market, it was an example of
market penetration.
4. A market penetration strategy entails the creation of new products for current customers.
5. The Home Depot’s purchase of Hughes Supply Company allows it to better meet the needs of its
current business customers. This is an example of product development.
6. When a florist shop begins to sell burial caskets to its customers, it is engaged in product development.
7. A diversification strategy entails increasing sales by introducing new products into new markets.
8. A portfolio model is a tool for allocating resources among products or strategic business units on the
basis of relative market share and degree of innovation.
9. In the portfolio mix, notebook computers would be an example of a star.
10. The harvest strategy is appropriate for all SBUs except dogs.
11. In the General Electric model, SBUs that have low overall attractiveness should be avoided if the
organization is not already serving them.
12. The marketing plan is a written document that acts as a guidebook of marketing activities for a
marketing manager.
13. A firm’s mission statement should answer the question, “What products do we produce best?”
14. A production costs analysis could be a part of a company’s SWOT analysis.
15. Environmental scanning entails the collection and interpretation of information about factors in the
external environment that may affect the future of the organization or the implementation of the
marketing plan.
16. A competitive advantage is the set of unique features of a company and its products that are perceived
by the target market as significant and superior to the competition.
17. Developing a cost competitive advantage can enable a firm to deliver superior customer value.
18. As marketers gain more experience in marketing a product, costs tend to decrease, which is an
example of the maturity effect.
19. Niche competitive advantages are difficult to develop and consequently are quite rare.
20. To be useful, marketing objectives should be realistic, measurable, time specific, and based on sales.
21. The company’s marketing objective is to increase sales next year. This is an example of a well-stated
objective.
22. Marketing strategy involves the activities of selecting and describing one or more target markets and
developing and maintaining a marketing mix that will produce mutually satisfying exchanges with
target markets.
23. The development of a target market strategy begins with a marketing audit.
24. The four Ps of the marketing mix are product, planning, promotion, and price.
25. Typically, the development of the marketing mix starts with determining the promotion for a product.
26. The implementation process can be described as simply “doing what you said you were going to do.”
27. Evaluation entails gauging the extent to which marketing objectives have been achieved during the
specified time period.
28. A marketing audit helps management allocate marketing resources efficiently.
29. Strategic planning is most effective when managers view it as an annual exercise.
30. The most critical element for successful strategic planning is top management’s support and
participation.
MULTIPLE CHOICE
1. _____ is the managerial process of creating and maintaining a fit between the organization’s objectives
and resources and the evolving market opportunities.
a.
Tactical management
b.
The market audit
c.
Functional planning
d.
Environmental scanning
e.
Strategic planning
2. Strategic plans require:
a.
long-term resource commitments
b.
a change in organizational structure
c.
the addition of new personnel
d.
new product development
e.
changes in prices
3. With hospitals nationwide facing budget cuts and slimmer profit margins, Dekalb County’s Medical
Center decided to cash in on one of the most consistently profitable services—delivering babies. It
initiated a three-year project to build a $55 million state-of-the-art women’s center with 18 labor and
delivery suites. When the hospital decided to commit its resources to obstetrics, it was engaging in:
a.
benchmarking
b.
alternative problem solving
c.
strategic planning
d.
portfolio evaluation
e.
tactical control
4. Since gas prices have soared and consumers have cut back on their spending on new trucks and SUVs
Ford Motor Corporation is transforming several of its plants to create small cars. Ford has engaged in:
a.
benchmarking
b.
tactical resource realignment
c.
alternative selection
d.
portfolio evaluation
e.
strategic planning
5. A subgroup of a single business or a collection of related businesses within the larger organization is
called a(n):
a.
conglomerate
b.
joint venture
c.
strategic business unit (SBU)
d.
oligarchy
e.
strategic alliance
6. When properly created, an SBU has all of the following characteristics EXCEPT:
a.
plans independent of the other SBUs in the total organization
b.
control over its own resources
c.
a distinct mission
d.
no competitors
e.
a specific target market
7. Yildiz Holding of Turkey purchased Godiva Chocolates from Campbell’s Soup Company. Campbell’s
sold one of its:
a.
strategic business units (SBUs)
b.
strategic alliances
c.
action programs
d.
transactional units
e.
synergistic divisions
8. Until spun off in 2007, Kraft was part of Altria Group, Inc. Kraft had its own management team,
mission statement, and target markets different from Altria Group, Inc. Kraft was a _____ of Altria
Group, Inc.
a.
joint venture
b.
diversified division
c.
heterogeneous element
d.
strategic alliance
e.
strategic business unit
9. General Electric has a financing business called GE Capital, which has its own mission, products,
services, and strategic plans separate from the parent organization. GE Capital is an example of a(n):
a.
organizational level
b.
SWOT
c.
secure business unit
d.
diversified division
e.
strategic business unit
10. Which of the following is a type of strategic alternative that tries to increase market share among
existing customers?
a.
Vertical integration
b.
Product penetration
c.
Divestment
d.
Horizontal integration
e.
Market penetration
11. All of the following are strategic alternatives that match products with markets EXCEPT:
a.
product development
b.
market penetration
c.
product penetration
d.
diversification
e.
market development
12. _____ is a strategy of increasing market share for present products in existing markets.
a.
Market penetration
b.
Product development
c.
Market development
d.
Diversification
e.
Product penetration
13. Market penetration occurs when:
a.
a supermarket adds a new store
b.
a U.S.-based company begins to sell its products in China
c.
Motown records sells DVDs to Wal-Mart
d.
Yoplait yogurt sends coupons to its existing customers
e.
3M distributes breathe-right nasal strips in Europe
14. Kraft foods created a magazine full of recipes and coupons for customers as well as a Web site with
product and recipe information. The goal was to get current customers to purchase more of Kraft’s
products. These activities are representative of a _____ strategy.
a.
diversification
b.
product development
c.
market development
d.
market penetration
e.
product penetration
15. _____ is a strategy that attempts to attract new customers to existing products.
a.
Product development
b.
Market development
c.
Market penetration
d.
Product penetration
e.
Diversification
16. In order to expand its sales into the U.S. market, BRL, an Australia-based winemaker, agreed to a
merger with a U.S.-based wine distribution company. According to Ansoff’s strategic opportunity
matrix, BRL would be implementing a _____ strategy.
a.
diversification
b.
market development
c.
product development
d.
divestment
e.
product penetration
17. Yard Whimzees, a Statesboro, Georgia sign business, began by making wooden signs for residential
use to announce births, anniversaries, and such. The company then turned to the business market by
making signs for businesses. Creating signs for a new market is an implementation of a _____
strategy.
a.
market development
b.
market penetration
c.
product penetration
d.
product development
e.
diversification
18. Years ago, Arm & Hammer baking soda convinced millions of homemakers that their product could
be effective in keeping refrigerators smelling fresh. After years of languishing sales, this campaign led
to a huge increase in sales of a simple, basic product. This is a classic example of a _____ strategy.
a.
market development
b.
product development
c.
market penetration
d.
product penetration
e.
divestment
19. LVMH, a maker of luxury-goods, has expanded its products offerings into China, Russia, India, and
the Middle East. This exemplifies a _____ strategy.
a.
market development
b.
product development
c.
market penetration
d.
diversification
e.
product expansion
20. _____ is a marketing strategy that creates new products for present markets.
a.
Product penetration
b.
Market penetration
c.
Product development
d.
Market development
e.
Diversification
21. Kraft introduced Philadelphia Ready-To-Eat Cheesecake Filling for those who do not have time to
make cheesecake in the traditional manner. This is an example of a _____ strategy.
a.
diversification
b.
market development
c.
product development
d.
divestment
e.
product penetration
22. The marketing of organic cotton tees for Life is good’s existing customers would be an example of a
_____ strategy.
a.
market development
b.
product development
c.
market penetration
d.
product penetration
e.
diversification
23. When McDonald’s introduced yogurt parfaits, entrée salads, and fruit to offer their current customers
more healthy options, the company was engaging in a _____ strategy.
a.
vertical integration
b.
market penetration
c.
diversification
d.
product development
e.
market development
24. The Hallmark Company was inspired by the popularity of Jan Karon’s best-selling novels about
Mitford, a fictional town in the mountains of North Carolina, to develop a new line of products for
Hallmark Gold Crown Stores nationwide. Hallmark created hundreds of Mitford-inspired products that
authentically bring “the little town with the big heart” into tangible reality. The products include
greeting cards, partyware and gift wrap, mugs, and puzzles for Hallmark’s existing customers.
Hallmark used a _____ strategy.
a.
market development
b.
market penetration
c.
product penetration
d.
product development
e.
diversification
25. _____ is the strategy of increasing sales by introducing new products into new markets.
a.
Product penetration
b.
Product development
c.
Market penetration
d.
Market development
e.
Diversification
26. Orange growers in Florida have lost millions of dollars due to hurricanes. As a result, some growers
have decided to bulldoze their orange groves and put in freshwater lakes for raising shrimp, a product
that has a strong popularity and is more weather-resistant. Former orange growers who are now raising
shrimp are pursuing a _____ strategy.
a.
market penetration
b.
product development
c.
diversification
d.
market development
e.
product penetration
27. The company that manufactures Molson beer, which is typically consumed by males, launched an
alcoholic lemonade beverage to attract more females. This launch of a new product to attract a new
market for Molson’s products is an illustration of a _____ strategy.
a.
market development
b.
market penetration
c.
product penetration
d.
product development
e.
diversification
28. Canon began as a camera-making company but has since become a company that produces a wide
range of office equipment in addition to cameras. Canon’s managers evidently believe in growth
through:
a.
market penetration
b.
diversification
c.
product development
d.
market development
e.
market integration
29. Pure Digital Technologies created the Flip, a digital camera that is priced around $150. It filled a gap
between expensive digital cameras and webcams. The Flip plugs straight into your computer and the
video can easily be viewed and shared instantly. Creating a new product for a new market is called
_____.
a.
divestment
b.
segment development
c.
target marketing
d.
diversification
e.
directed growth
30. The _____ is a tool for allocating resources among products or strategic business units on the basis of
relative market share and market growth rate.
a.
market audit
b.
portfolio model
c.
experience matrix
d.
market development analysis
e.
market opportunity analysis
31. All of the following are categories used in the Boston Consulting Group’s portfolio model EXCEPT:
a.
cash cows
b.
stars
c.
problem children
d.
meat eaters
e.
dogs
32. Which of the following category in the portfolio model is a market leader and growing fast?
a.
Star
b.
Meteor
c.
Cash cow
d.
Shiner
e.
Top dog
33. Russell Athletic, which is part of Berkshire Hathaway, Inc., is a market leader in sports apparel, an
industry that is growing rapidly. Russell Athletic is an example of a(n) _____ according to the
portfolio model.
a.
star
b.
question mark
c.
problem child
d.
exclamation point
e.
widow
34. If market share is maintained, stars are likely to grow into:
a.
weak sisters
b.
problem children
c.
cash cows
d.
top dogs
e.
constellations
35. A business unit that usually generates more than it needs to maintain its market share is called a(n)
_____ in a portfolio model.
a.
star
b.
cash cow
c.
problem child
d.
dog
e.
independent
36. Tide laundry detergent is the market leader, but overall industry growth is low in this market. Tide
would be classified as a _____ in a portfolio model.
a.
star
b.
cash cow
c.
problem child
d.
question mark
e.
dog
37. Which of the following represents a business unit that shows rapid growth but poor profit margins?
a.
Star
b.
Cash cow
c.
Problem child
d.
Loss leader
e.
Dog
38. Before Heinz sold its 9-Lives brand cat food unit, the company identified the product as having a low
market share in a high-growth market. The portfolio model would classify 9-Lives as a(n):
a.
star
b.
exclamation point
c.
problem child
d.
cash cow
e.
widow
39. In the mid-1980s, the market for teenage clothes was growing quickly, but jeans were out of fashion.
Levi’s re-launched their jeans, led by advertising for 501s, which had never been a fashionable jean
style. Within a few months, sales factors had increased dramatically, turning a ______ into a star.
a.
widow
b.
cash cow
c.
problem child
d.
loss leader
e.
dog
40. In the portfolio model, a business unit that has low growth potential and a small market share is called
a(n):
a.
widow
b.
problem child
c.
cash cow
d.
dog
e.
bust
41. All of the following are basic strategies resulting from classifying the company’s SBUs EXCEPT:
a.
harvest
b.
build
c.
hold
d.
divest
e.
milk
42. John R. Harland Company is best known for printing checks. Its Financial Solutions division develops
software for mortgage companies, which is a growing industry. This division is currently not
producing at the desired level of profitability, but Harland plans to turn the division into a success by
acquiring other companies that develop similar software. Harland would be engaging in a _____
strategy.
a.
harvesting
b.
diversification
c.
divesting
d.
holding
e.
building
43. Which of the following strategies would be most appropriate for a dog?
a.
harvesting
b.
diversification
c.
divesting
d.
holding
e.
building
44. A written document that acts as a guidebook of marketing activities for the marketing manager is
known as the _____.
a.
strategy document
b.
marketing plan
c.
vision statement
d.
mission statement
e.
strategic plan
45. Earl is starting a new bank. Before their opening day Earl had a meeting with all employees. He
discussed their mission, defined objectives for the bank for the coming years and shared who their
target market is. He talked about their product offerings and where their future branches would be
located. Earl is sharing the bank’s:
a.
reengineering
b.
hierarchical restructuring
c.
financial analysis
d.
marketing plan
e.
strategic contingency planning
46. Marketing plans should be written to do all of the following EXCEPT:
a.
compare actual and expected performance
b.
provide clearly stated activities
c.
create common goals for employees to work toward
d.
allow managers to enter the marketplace with an awareness of possibilities and problems
e.
control the elements of the external marketing environment
47. All of the following are elements of the marketing plan EXCEPT:
a.
business mission statement
b.
situation analysis
c.
target market strategy
d.
marketing mix
e.
portfolio analysis
48. A statement of the firm’s business based on a careful analysis of benefits sought by present and
potential customers and an analysis of existing and anticipated environmental conditions is known as
a(n):
a.
business audit
b.
marketing plan
c.
mission statement
d.
environmental focus
e.
portfolio model
49. The _____ answers the question, “What business are we in?”
a.
mission statement
b.
financial statement
c.
situation analysis
d.
market strategy
e.
strategic plan
50. The annual report of Albertson’s grocery has the following statement: “Guided by relentless focus on
our five imperatives, we will constantly strive to implement the critical initiatives required to achieve
our vision. In doing this, we will deliver operational excellence in every corner of the Company and
meet or exceed our commitments to the many constituencies we serve. All of our long-term strategies
and short-term actions will be molded by a set of core values that are shared by each and every
associate.” This statement is an example of Albertson’s:
a.
marketing mix strategy
b.
quantifiable goal
c.
mission statement
d.
statement of economic potential
e.
market segmentation strategy
51. The focus of an organization’s mission statement should be on:
a.
the products it wishes to sell
b.
the market it wishes to serve
c.
its social responsibilities
d.
the desires of government regulators
e.
technologies it understands well
52. _____ occurs when a business is defined in terms of goods and services rather than by the benefits
customers seek from it.
a.
Synergy
b.
Tunnel vision
c.
Narrowcasting
d.
Unempowerment
e.
Marketing myopia
53. By defining its business as “printing books” instead of “empowering imaginations,” a children’s book
publishing company would more than likely experience:
a.
market synergy
b.
product entropy
c.
market harvesting
d.
nonspecific strategic planning
e.
marketing myopia
54. A _____ is a study conducted by an organization to identify its internal strengths and weaknesses and
also examine external opportunities and threats.
a.
situation analysis
b.
marketing audit
c.
trend analysis
d.
strategic alternative selection
e.
competitive advantage audit
55. The SWOT acronym refers to a firm’s analysis of its:
a.
sales, width of product mix, observations, and technology
b.
situations, wealth, organizational strengths, and target markets
c.
strengths, weaknesses, opportunities, and threats
d.
service levels, willingness to spend, organizational culture, and total revenues
e.
strategies, willingness to change, objectives, and trends
56. Tub King is a small company that refinishes antique claw foot bathtubs, antique sinks, and provides
training for bathtub refinishing. The company’s management is currently conducting a formal study of
its current strengths and weaknesses by looking at the company’s profit and sales histories and
searching for opportunities and threats by studying consumer trends. Tub King is conducting a(n):
a.
marketing audit
b.
SWOT analysis
c.
environmental scan
d.
market differentiation scan
e.
strategic window search
57. Briggs and Stratton is a Southeastern company that makes small engines. The company is looking at
customer trends, its competitors, and the economy to see if there are any threats or opportunities on the
horizon. It has also examined its production policies and sales histories to determine its strengths and
weaknesses. Briggs & Stratton is conducting a(n):
a.
environmental test
b.
market audit
c.
trend analysis
d.
situation analysis
e.
competitive advantage search
58. Coca-Cola drink vending machines are found all over the world. The newest machines have an
interactive screen that runs advertisements and allows users to obtain free photos of themselves and
ringtones after they have bought a drink. The reason for the introduction of this new style vending
machine is to “allow the company to interact more directly with its customers.” According to a SWOT
analysis, the technology used by these machines is an example of a(n):
a.
strength because it is part of Coke’s external environment
b.
advantage because it is part of Coke’s marketing environment
c.
weakness because Coke cannot control technology
d.
opportunity because it is part of Coke’s external environment
e.
benefit because Coke has the resources to make use of the new technology
59. In 2011, Diamond Foods, Inc. purchased Pringles from Procter & Gamble. The decision to purchase
Pringles represented a(n) _____ to Diamond Foods.
a.
opportunity
b.
strength
c.
weakness
d.
threat
e.
burden