True
False
True
False
True
False
True
False
True
False
6. Which of the following are among the five tasks of strategic management?
a. involves how fast to pursue the chosen strategy and reach the targeted levels of performance.
b. consists of thinking through what it will take to make the chosen strategy work as planned.
c. consists of management's view of the kind of company it is trying to create and its intent to stake out a
specific business position.
d. is pretty much the same thing as a company's strategy.
e. concerns management's view of the company's future business makeup and long-term direction.
9. A company's strategy
a. is a combination of planned actions and o-the-spot adaptive reactions to fresh developing industry and
competitive events.
b. is a company's means of achieving its objectives.
c. is developed primarily at the same time the company is formed and then evolves slowly thereafter.
d. is aimed more at achieving strategic objectives than at achieving financial objectives.
e. tends to change less often and more slowly than either its strategic vision or its performance targets.
f. reflects managerial choices among alternatives and signals organizational commitment to particular products,
markets, competitive approaches, and ways of operating.
10. Crafting strategy involves outside-in strategic thinking and entrepeneurship because
a. company managers need to keep the strategy responsive to such outside drivers as changing buyer
preferences, the latest actions and moves of rivals, market opportunities and threats, and newly appearing
business conditions.
b. managers can't keep company strategy responsive to chances in the business environment unless they
exhibit entrepeneurship in studying market trends, listening to customers, figuring out ways to enhance the
company activities in new directions in a timely manner.
c. strategy is more adaptive and reactive than intended and planned.
d. good entrepeneurship and astute analysis of the external business environment are keys to a conservative,
risk-avers strategy.
e. shrewd diagnosis of changing market conditions and changing customer preferences and requirements is
one of the keys to keeping company strategies market-driven and customer-driven.
a. it is a bad idea to do too much strategizing until a company has been in business long enough to know what
strategies will work best.
b. most managers like to develop the strategy in bits and pieces rather than all at once.
c. even a well-planned-out-in-advance strategy must be adapted to shifting market conditions, the fresh actions
of competitors, altered customer needs and preferences, emerging opportunities and threats, unforeseen
events, and innovative thinking about how to improve the present strategy.
d. many managers are conservative, preferring to be late-movers in responding new developments and
avoiding the risks associated with developing a complete strategy too quickly.
e. the longer a company is in business, the more likely it becomes that the original strategy will need to be fine
tuned or revised in significant ways or even overhauled entirely in order to keep the strategy in tune with
changing circumstances.
a. planning to create an organizational structure that will facilitate carrying out the chosen strategies.
b. mapping out where the organization is headed.
c. establishing objectives.
d. deciding on a strategy.
e. installing internal support systems that enable company personnel to carry out their strategic roles effectively
on a daily basis.
f. involves having a strategic planning staff or a special task force come up with the specifics and the details of
what to do, while senior management either approves or disapproves what is recommended.
a. developing a strategic vision and business mission to guide how the strategy is to be communicated,
implemented, and then executed on a daily basis.
b. building an organization a capable of carrying out the strategy successfully.
c. exerting the internal leadership needed to drive implementations forward and to keep improving on how the
strategy is being executed.
d. creating strong "fits" between the way the organization does things internally to try to execute the strategy
and what wt will take for the strategy to succeed.
e. deciding how best to improve short-term and long-term profitability.
15. A company's long term direction, strategy, and approach to strategy implementation
are never final because
a. changes in the organization's internal or external situation fuel the need for strategic adjustments.
b. it is always incumbent on management to push for better company performance -- to find ways to improve
the existing strategy and how it is being executed.
c. strategic planners sometimes change their minds about what kind of long-range strategy is best for the
company to pursue.
d. the company's board of directors and senior executives may prefer to experiment with several different
strategies and implementation approaches to wee which works best.
e. ineffective strategic planning efforts seem to be the norm in so many companies.
a. are best performed by professional strategic planners skilled in the use of strategic analysis techniques.
b. tend to be performed by the CEO in most companies.
c. are primarily the responsibility of a company's board of directors.
d. are best performed by senior executives, with the help and advice from strategic planners.
e. tend to require the involvement of senior managers, middle managers, and lower-echelon managers -- all
managers tend to have a role in the strategy-making, strategy-implementing process.
a. is generally unwise because they lack the "big picture" knowledge to make sound strategic decisions.
b. works bests when they can seek counsel on an as-needed basis from a well-staffed strategic planning
department.
c. is rarely done in large companies because there are plenty of experienced senior-level managers to handle
the strategic management function.
d. is normal in many companies because the more geographically scattered and diversified an organization's
operations are, the more unwieldy it becomes for senior executives to craft and implement all the necessary
actions and programs.
e. is managerially complex because it is hard, if not impossible, to fix accountability for strategic success or
failure.
a. taking lead responsibility for deciding what the company's long-term direction should be and for crafting a
strategy.
b. reviewing important strategic moves and officially approving the strategic plans submitted by senior
management.
c. working closely with senior strategic planners and senior executives to develop consensus on a long-term
direction for the company and a long-range strategic plan.
d. evaluating the caliber of senior executives' strategy-making and strategy-implementing skills.
e. being an active participant in the first three tasks of strategic management and taking a pretty-much handsoff approach on the other two tasks.
19. The role and tasks of strategic planners and strategic planning departments in the
strategic management process should consist of
20. The advantages of first-rate strategic thinking and conscious management of the
strategy-making, strategy-implementing process include
a. helping to unify the numerous strategy-related decisions made by managers across the organization.
b. creating a more proactive management posture and counteracting tendencies for decisions to be reactive
and defensive.
c. decreased risk of a failed strategic vision.
d. greater ability to out-innovate and out-maneuver rivals, thereby winning a sustainable competitive advantage.
e. raising managers' consciousness regarding the winds of market change, new opportunities, and threatening
developments.
ANSWERS
1. T
2. F
3. T
4. F
5. F
6. a, b, d, f, g
7. c, e
8. b, c, f
9. a, b, f
10. a, b, e
11. c, e
12. a, b, c, d, f, g
13. b, c, d
14. b, c, d
15. a, b
16. e
17. d
18. b, d
19. a, e
20. a, b, e
21. objectives
22. strategy
23. implementing strategy
24. strategic plan
25. strategy implementation
Chapter 2
1.
a. it is stated in language broad enough to cover whatever the firm might later decide to do.
b. it is no more than one sentence in length.
c. it crystallizes senior executives' own views about the firm's long-term direction and business makeup.
d. it is stated in narrow enough terms to pin down the company's real arena of business interest.
e. it conveys an organizational purpose and identity that activates employees to go all out and contribute to
making the vision a reality.
a. should be communicated to employees in language that arouses a strong sense of organizational purpose,
builds pride, and induces employee buy-in.
b. need to be changed when emerging opportunities and threats in a company's surrounding business
environment make it desirable to revise the organization's long-term direction.
c. help reduce the risk of visionless management and rudderless decision-making.
d. provide a beacon that lower-level managers can use to form departmental missions and set departmental
objectives.
e. help an organization prepare for the future.
6. Objectives
7. Which of the following are good examples of strategic objectives (as opposed to
financial objectives)?
a. pursuing actions that strengthen a company's competitiveness and business position is one of the surest
paths to protecting and sustaining a company's profitability quarter after quarter and year after year.
b. a company's strategic performance is almost as important as a company's financial performance.
c. a company that consistently passes up opportunities to strengthen its long-term competitive position in order
to realize better near-term profitability risks diluting its competitiveness and losing momentum in its target
market.
d. well-chosen strategic objectives are essential to a well-crafted strategy.
e. a company can't have a shrewd strategic vision without having aggressive and competitively astute strategic
objectives.
9. Objectives
a. should be set at high enough levels to stretch an organization to reach its full potential.
b. are needed for the organization as a whole but not for separate businesses, product lines, functional areas,
or departments in order to keep the full attention of all employees and managers trained on achieving the
targeted levels of organization-wide performance.
c. should be set via a bottom-up process rather than a top-down process so as to involve a greater number of
employees.
d. should primarily have a short-range focus because well-chosen short-term objectives greatly reduce the need
for long-term performance objectives.
e. are needed for both the near-term and the long-term.
11. Business strategy (as distinct from corporate strategy, functional strategies, and
operating strategies)
a. concerns the pattern of moves and approaches crafted by management to produce successful performance
in one specific line of business.
b. is usually crafted personally by a company's CEO.
c. is chiefly concerned with HOW to build and strengthen the company's competitive position in a specific
business and market arena.
d. can be judged as powerful or weak depending on whether it has the capacity to produce a sizable and
sustainable competitive advantage or whether it results in competitive disadvantage.
e. is the result of what operating strategies and what functional strategies lower-level managers choose to
pursue.
a. concern the strategic initiatives and approaches of key internal units (plants, distribution centers, sales
districts) and for handling daily operating tasks having strategic significance (purchasing, shipping,
advertising).
b. are generally crafted by the business head working in consultation with key subordinates and department
heads.
c. are needed for every major departmental unit and every major piece of the business.
d. have, as their main role, to support the overall business strategy and competitive approach.
e. should be crafted independently of one another to avoid duplication and overlap.
a. corporate strategy.
b. business strategy.
c. diversification strategy.
d. functional strategies.
e. managerial strategies.
f. operating strategies.
g. industry strategy.
h. organization strategy.
15. The managerial task of uniting the strategy-making effort from the top to the bottom of
the strategy-making pyramid involves
16. In contemplating what strategy to employ and what strategic actions to pursue,
management
a. involves three different levels of management - key executives, middle managers, and first-line supervisors.
b. involves four different levels of management - key executives in the corporate office, heads of business units
and product divisions, the heads of major functional areas within a business division, and an assortment of
operating-level managers (plant managers, product managers, regional and district sales managers, and so
on).
c. begins with crafting operating strategies, then progresses up through the managerial hierarchy to functional
strategies, business strategies, and corporate strategy.
d. is mostly a top-down process where corporate executives dictate the shape of business-level strategy, where
business heads are responsible for the functional areas underneath their authority, and where functional
heads are responsible for crafting operating strategies for for the units they supervise.
e. involves a hierarchy of responsibility or a strategy-making pyramid that, starting from the top of the pyramid,
begins with corporate strategy and proceeds down to business strategies, functional strategies, and
operating strategies.
18. In identifying the corporate strategy of a diversified company, one needs to consider
19. To identify the strategy for a single-business company, one needs to consider
a. whether the company's competitive approach is based on low cost/low price or differentiation (providing
attributes not found in rival brands) or focusing on a specific market niche.
b. the company's approach to allocating investment capital to each of its different activities.
c. the firm's geographic coverage, approach to vertical integration, and its collaborative partnerships and
alliances with others -- all of which combine to establish its competitive scope within the industry.
d. the key functional strategies being employed.
e. what the company is doing to deal with changing industry conditions and other emerging developments.
f. what it is doing to secure a competitive advantage.
g. how many different operating strategies the company has and what their key features are.
h. whether the strategy is ethical or unethical.
i. recent internal moves to change compensation methods.
20. The factors that shape the choice of company strategy can be grouped into 2 broad
categories - factors external to the company and factors internal to the company.
Below is a list of items that may or may not have great bearing on a company's choice
of strategy. If you deem an item is relevant to a firm's choice of what strategy to
employ, then classify it as an external factor (by marking as an "E") or as an internal
factor (by marking as an "I"). If the item is not relevant as a factor, the box should
remain blank.
21.
25. The
approach to performing the strategy-making task is when a
manager enlists the help of key subordinates in hammering out a consensus strategy
that all the key players will go back and do their best to implement successfully.
ANSWERS
1. a, b
2. c, d, e
3. b, d, e
4. c, d, e
5. a, b, c, d, e
6. a, b
7. b, c, f, g
8. a, c
9. a
10. a, b, c, d, e, f
11. a, c, d
12. c, d
13. a, c
14. b, d, f
15. c, d, e
16. b, c, e
17. b, e
18. a, b, c, f, g, h, j
19. a, c, d, e, f
20.
"I" Shared values and company culture.
How much the product is selling for.
"I" Company resource strengths, resource weaknesses, competencies, and competitive capabilities.
"E" Societal, political, regulatory, and community citizenship considerations.
"I" The personal ambitions, business philosophies, and ethical principles of key executives.
How many strategy options or alternatives the company has.
21.
22.
23.
24.
25.
Corporate strategy
strategic intent
distinctive competence
(1) situation (2) competitive advantage
collaborative
Chapter 3 Self-Test
1. Industry and competitive analysis aims at developing probing answers to which seven of the following
questions?
g. whether the scope of competitive rivalry is local, regional, national, international, or global.
6. Which of the following are generally considered to be barriers to entering a market or industry?
7. The competitive threat that outsiders will enter the industry is weaker when
e. newcomers will have a hard time earning attractive profits for several years following entry.
a. buyers believe substitute products don't have better or even equal features.
b. buyers' costs of switching to substitutes are relatively high.
c. entry barriers are moderately high but by no means prohibitive.
d. customers are in a strong bargaining position.
e. substitutes are more expensive for buyers to use.
11. Whether the buyers of an industry's product have strong or weak bargaining leverage over the terms and
conditions of sale depends on
a. whether the costs of switching to substitute products are high or low.
b. whether the costs of switching to competing brands are high or low.
c. whether all buyers have the same degree of negotiating power.
d. whether buyers purchase in relatively large or small quantities.
e. whether buyer demand is sporadic or stable, seasonal or year-round, cyclical, or recession-proof.
12. Which of the following are NOT among the most common types of driving forces?
a. Product innovation
b. Shifts in buyer composition and the appearance of new ways of using the product
c. Ups and downs in interest rates and the stock market
d. Advances in technology and the diffusion of more technical know-how across the industry
e. Shifts in buyer preferences away from differentiated products to more or less standardized products
f. The decisions of one or more rivals to try to boost their market shares
g. A reduction in the prices of substitute products
15. Trying to determine what strategic moves rivals are likely to make next
a. is important because of its bearing on a company's own best strategic moves.
b. usually requires evaluating the industry's key success factors as well as how many driving forces are present.
c. involves scrutinizing which of the five competitive forces is strongest.
d. cannot be done effectively without first drawing a strategic group map.
e. entails understanding their strategies, monitoring their actions on a regular basis, gauging how well they are faring in the marketplace,
determining how much pressure they are under to improve their performance, and considering what their options are.
17. Important factors for company managers to consider in drawing conclusions about whether the industry is
an attractive or unattractive business to be in include:
a. whether competitive forces are likely to grow or diminish in strength.
b. the degree of uncertainty and risk in the industry's future.
c. the potential for entry/exit of major firms.
d. the company's ability to capitalize on the vulnerabilities of weaker rivals.
e. whether the company has strong competitive capabilities and is well positioned to improve its market standing and profitability.
21. If an industry has a learning/experience curve effect of 20% for each doubling of cumulative production
volume and if costs per unit are $2.00 for a cumulative production volume of 2 million units, then unit costs
would be $__(1)__ at a cumulative production volume of 4 million units and $__(2)__ at a cumulative
production volume of 8 million units.
1. ________________________
2. ________________________
22. The competitive structure of an industry is deemed _____(1)_____ from a profit-making standpoint if rivalry
among competing sellers is very strong, entry barriers are _____(2)_____, competition from substitutes is
strong, and at least some important suppliers and customers are in a position to exercise considerable
bargaining power.
1. ________________________
2. ________________________
23. _____________________are factors capable of creating significant incentives or pressures for fundamental
changes in an industry's structure and competitive environment.
24. Those industry rivals with similar competitive approaches and market positions comprise a ______________.
25. A sound strategy incorporates efforts to be competent on all industry __________________ and to excel on at
least on factor.
ANSWERS
1.
c, d, e, g, h, i, j
2. a, d, f, g, h, i, j
3. a, b, e, f, g, h
4. b, c
5. c, e
6. a, d, e, f, g
7. a, c, e
8. a, b, e
9. d, e
10. a, b, c, d, g
11. a, b, d
12. c, f, g
13. a, d, e
14. b, d
15. a, e
16. b, c, f
17. a, b, c, e
18. c
19. c, d, e, f
20. a, b, c, e
21. (1) 1.50 (2) 1.28
22. (1) unattractive (2) low
23. Driving forces
24. strategic group
25. key success factors
Chapter 4 Self-Test
1. The weaker a company's financial performance and the less strong its competitive position, the more its
current strategy must be called into question.
True
False
2. A core competence gives a company competitive capability and qualifies as a genuine competitive strength,
but it does not qualify as a competitive advantage.
True
False
3. The importance of a distinctive competence to strategy-making rests with the competitively valuable capability
it gives a company, its potential for being a cornerstone of the company's strategy, and the competitive edge it
can potentially produce in the marketplace.
True
False
4. As a rule, company strategies should seek to exploit and leverage company capabilities and its most
competitively valuable resources; strategies that place heavy demand on areas where a company is weak or
has unproven ability should be avoided.
True
False
5. The overall competitive strength scores resulting from a competitive strength assessment provide indication
of net competitive advantage or disadvantage. Companies with higher overall strength ratings have a net competitive advantage over rivals with lower scores, with size of the advantage being a function of the sizes of the
differences in the overall strength ratings.
True
False
6. Company situation analysis focuses on developing solid, probing answers to which of the following questions:
a. What should the company's strategy be?
b. How strong is the company's competitive position relative to its rivals?
c. What does the company's value chain look like?
d. Are the company's prices and costs competitive?
e. Does the company need to pursue benchmarking and activity-based costing?
f. What are the company's resource strengths and weaknesses and its external opportunities and threats?
g. How well is the present strategy working?
h. What strategic issues does the company face?
i. What is the company's competitive environment like --does it confront strong, moderate, or weak competition?
7. Which of the following are criteria for evaluating the performance of a company's present strategy?
a. The company's market share ranking and whether its share is trending up, down, or staying more or less the same
b. Whether the company has at least two core competencies
c. Whether the company's internal strengths and competitive capabilities outweigh its internal weaknesses and competitive vulnerabilities
d. Whether the company's profit margins are increasing or decreasing and how large they are relative to other firms in the industry
e. Whether the company's sales are growing faster or slower than the industry as a whole
f. The firm's image and reputation with customers
g. How many strategic issues the company faces and how serious they are
h. Whether the company is regarded as a leader in some significant area (technology, product quality, service, product innovation, and so on)
i. Whether the firm's value chain is longer or shorter than rivals
j. How strong the company's advertising and promotional programs are relative to those of close rivals
8. The task of sizing up a company's internal resource strengths. and weaknesses and its external opportunities
and threats
a. is called SWOT analysis.
b. provides an overview of whether a firm's strategic situation is fundamentally healthy or unhealthy.
c. helps provide a basis for matching the company's strategy to the company's situation.
d. is the most important part of figuring out how many and what kind of strategic issues and problems the company's management needs to
address.
e. is best done after a thorough competitive strength assessment so that the identification of company strengths, weaknesses, opportunities, and
threats will be easier and more accurate.
10. For a particular company resource to qualify as the basis for sustainable competitive advantage, it must
a. be hard to imitate.
b. be the company's biggest balance sheet asset.
c. be a physical asset, not a human asset.
d. really be competitively superior.
e. not be readily trumped by different resources/capabilities of rivals.
f. be long-lasting.
g. be tangible rather than intangible.
11. The market opportunities that are most relevant to a company are
a. those best able to assist in correcting the company's competitive weaknesses.
b. those which it has the financial and organizational resources to pursue.
c. those that offer important avenues for growth.
d. those that create defenses against external threats.
e. those where the company has the greatest potential for competitive advantage.
13. Benchmarking
a. is a manager's best tool for determining whether a company is performing particular value chain activities and functions efficiently.
b. is a tool for determining whether a company's costs for particular value chain activities are in or out of line with competitors.
c. is inherently unethical if it is done with companies that are direct competitors.
d. can often be done with the aid of third-party organizations so as to protect the confidentiality of individual company data.
e. is not a valid tool for measuring the cost-effectiveness of an activity unless it is restricted to companies in the same industry.
17. Which of the following are signs of weakness in a company's competitive position?
a. An eroding market share
b. A lower price than rivals
c. A higher price than rivals
d. In an unfavorably situated strategic group
e. Too small to be a major factor in the marketplace
f. Questionable product quality or customer service or product development skills
g. Subpar revenue growth relative to competitors
h. Not able to match the skills, expertise, or capabilities of competitors in key value chain activities
i. An after-tax return-on-equity below 15%
j. Low revenues or market shares in market segments where growth is fastest or potential is greatest
19. The purpose of developing a list of the strategic issues a company faces is
a. to draw conclusions about the strengths and weaknesses of company's present strategy.
b. to determine whether it has a distinctive competence.
c. to highlight the weaknesses in its competitive market position and to draw conclusions about whether the firm has a net competitive advantage or
disadvantage.
d. to help decide whether the firm needs to shorten or lengthen its value chain in order to better position itself in the marketplace.
e. to develop an agenda for management action.
20. A company's strategic options for overcoming cost disadvantages in the forward (downstream) end of its
overall value chain system include
a. pressuring distributors and other forward channel allies to reduce their costs.
b. working closely with forward channel allies to alter practices and procedures in ways that achieve mutually beneficial cost reductions.
c. integrating forward to gain better control over the costs of downstream activities. a d. shifting to activity-based costing.
e. cutting prices enough to eliminate the cost disadvantage in the forward end of the value chain.
21. A
22.
involves comparing a company's costs, activity by activity, against the costs of key
rivals and identifying which internal activities are a source of cost advantage or disadvantage.
23. A company's
identifies the activities, functions, and business processes that are
performed in designing, producing, marketing, delivering, and supporting its product(s) or service(s).
24.
25.
entails developing cost estimates for specific tasks and activities in a company's
value chain; the cost data it provides is substantially different from traditional approaches to cost
accounting.
ANSWERS
1. T
2. T
3. T
4. T
5. T
6. b, d, f, g, h
7. a, d, e, f, h
8. a, b, c
9. a, c, d, e
10. a, d, e, f
11. b, c, e
12. a, g
13. a, b, d
14. b
15. a, b, c
16. e, f
17. a, d, e, f, g, h, j
18. a, b, c, d, e
19. a, e
20. a, b, c
21. distinctive competence
22. strategic cost analysis
23. value chain
24. benchmarking
25. activity-based costing
Chapter 5 Self-Test
1. The five generic competitive strategies are
a. market share leadership.
b. focused differentiation.
c. overall low-cost leadership.
d. overall quality leadership.
e. broad differentiation.
f. best-cost provider.
g. focused low-cost.
h. technology leadership.
i. customer service leadership.
7. Differentiation strategies
a. are an attractive competitive approach when buyer preferences and requirements are too diverse to be satisfied either by a
standardized product or by sellers with identical capabilities.
b. work best when the basis for differentiation is superior quality or superior customer service.
c. create much greater buyer loyalty than low-cost provider strategies.
d. can enhance profitability whenever the extra price the product commands outweighs the added costs of achieving the
differentiation.
e. usually offer the best chance for gaining market share, as compared to low-cost or best-cost provider strategies.
f. involve incorporating enough features and attributes with buyer appeal to set company product offerings visibly and
distinctively apart from the product offerings of rivals.
g. can result in strong customer loyalty when buyers are strongly, attracted to the differentiating features.
h. can produce sustainable competitive advantage if the differentiating features possess strong buyer appeal and can't be copied
or easily,
matched by rivals.
12. The characteristics of a focused strategy based either on low-cost or differentiation include
a. concentrating on a narrow piece of the total market.
b. striving for a competitive advantage based on doing a better job than competitors of serving buyers in the target market
niche.
c. the use of guerrilla offensives to capture customers.
d. trying to wrest market share away from rivals via extra advertising, above-average expenditures for promotional programs,
and heavy use of point-of-sale merchandising techniques.
e. an emphasis on using backward vertical integration to satisfy the specialized requirements of niche members.
17. A strategic offensive aimed at going head-to-head against key competitors to match or beat their strengths
a. may be an attractive way of winning market share away from weaker rivals whose strengths and resources can be
outmatched.
b. may be unavoidable if the competitive advantage of a stronger rival is to be narrowed or whittled away entirely.
c. nearly always should involve cutting price below those charged by the rivals being targeted.
d. is the least risky and most-likely-to-succeed of all of the various types of offensive strategies.
e. stands the best chance of succeeding if it is predicated on either a cost advantage or an equal-or-better product offering;
otherwise the offensive is probably destined to hurt profitability because of the extra costs of supporting such an offensive.
22. The Achilles heel of alliances and cooperative strategies is the danger of
other companies for essential expertise and capabilities over the long term.
on
ANSWERS
1. b, c, e, f, g
2. a, d, e, f
3. b, c, d
4. a, b, e
5. a, b, d, f, g
6. a, c, e
7. a, d, f, g, h
8. b, c, d, e, f, h
9. a, b, d, e
10. b, c, d
11. a, e, f
12. a, b
13. a, b, c, d, f
14. a, g, h
15. b, c, d, e, f, i
16. a, b, f, g
17. a, b, e
18. b, d, g
19. a, d, e, f
20. d, g, h
21. competitive advantage
22. becoming dependent
23. (1) offensive (2) defensive
24. end-run offensive
25.
strike
preemptive
Chapter 6 Self-Test
1. Competing in emerging industries
a. poses the strategy-making challenge of dealing with uncertainties about how the market will function, how
fast it will grow, and how big it will get.
b. is frequently difficult because of little data and little consensus about which of several competing
technologies will win out and/or which product attributes will ultimately gain the most buyer favor.
c. is less risky than competing in maturing industries.
d. is usually more profitable than competing in either globally competitive industries or industries where market
demand is stagnant or even declining.
e. typically involves high entry barriers and small learning/experience curve effects.
f. generally requires participants to wrestle with (1) how to finance the start-up phase, (2) what market
segments to pursue, and (3) what -kind of competitive advantage to build.
g. usually entails risk-taking entrepeneurship, a bold strategy (often keyed to product superiority), efforts to
capture first-mover advantages and preparing to defend against new entry by profit-seeking outsiders.
a. the key drivers are vigorous price competition and powerful buyers whose needs are changing rapidly.
b. it is typical to have rapid-fire technological change, short product lifecycles, frequent launches of fresh
competitive moves by rivals, and rapidly evolving buyer needs and expectations all occurring at once.
c. competitive success often hinges on investing aggressively in R&D and staying on the cutting edge of
technological know-how.
d. competitive success often hinges on such organizational capabilities as speed, agility, resource flexibility, and
innovativeness in finding new and better ways to please customers.
e. the driving forces are out of control, making new investment very risky.
f. being a fast follower, if not the first mover, is critical.
g. it is virtually impossible for any company to achieve competitive advantage because of the speed with which
conditions change.
h. two of the key success factors are creating new competencies and capabilities (to fit newly emerging market
conditions) and being able to quickly match rivals on whatever technological approaches and product
features they are able to pioneer successfully.
c. typically pursue short-term cash flow maximization rather than long-term profit maximization.
d. sometimes rely on a focus strategy that involves identifying, creating, and exploiting growth segments within
the overall industry.
e. often pursue differentiation strategies keyed to quality improvement and product innovation.
f. draw their cash out of the business quickly and re-deploy it elsewhere (in other more profitable investments).
g. work diligently and persistently to drive costs down.
h. are those that are patient and willing to wait the hard times out until the market turns around (as it usually
does) and business conditions improve.
a. entails demand conditions where there are many, many buyers of the product and the quantity sold to any
one buyer constitutes a tiny fraction of total industry sales volume.
b. involves a situation where companies have to cope with low entry barriers, there is an absence of economies
of large-scale production, and no seller has a king-sized market share.
c. usually requires use of low-cost leadership and broad-appeal differentiation strategies (because in a
fragmented industry environment such strategies readily lead to industry domination).
d. is very conducive to the use of focused strategies keyed to product specialization, customer specialization, or
geographic specialization.
e. normally requires both forward and backward integration in order to achieve a viable long-term market
position.
f. tends to be more profitable and more likely to result in sustainable competitive advantage when a company
employs a focused differentiation strategy instead of a focused low-cost strategy.
6. In a fragmented industry
a. the standout competitive feature is the absence of market leaders with king-sized market shares.
b. participants generally have the strategic freedom to pursue broad or narrow market targets and low-cost or
differentiation-based competitive advantages.
c. the market is usually local (which is why it takes thousands of sellers to cover all the different local markets).
d. one of the suitable competitive strategy options is to construct and operate "formula" facilities at many
locations.
e. another of the suitable competitive strategy options is to form strategic alliances with sellers in many local
markets to gain wider geographic exposure and market visibility.
7. Companies are motivated to expand internationally and compete in additional country markets
a. in order to capture the scale economies and lower costs that may be associated with selling a volume greater
than can be achieved in any single national market.
b. in order to avoid the risk of fluctuating exchange rates.
c. in order to escape slowing growth and market saturation in country markets where they are already
competing.
d. because competition is usually weaker in foreign markets.
e. to access natural resource deposits in other countries.
f. to capitalize on their competencies and resource strengths.
g. to spread their business risk across a wider market base.
8. Competing in international markets poses a bigger strategy-making challenge than competing in only the
company's home market because of
a. prices and competitive conditions are strongly linked across country markets to form a world market.
b. there is no "international market," just a collection of self-contained country markets.
c. the risk of fluctuating exchange rates is greatly reduced.
d. it makes strategic sense for a company's strategy to be crafted country by country to be responsive to buyer
needs and competitive conditions in each country.
e. the least risky strategy option is to maintain a one-country production base and export goods to each of the
target country markets where the company elects to sell (utilizing either company-owned or foreign
controlled distribution channels).
10. Which of the following is a valid competitive strategy option for a company that wants to participate in
international markets?
f. A global focus strategy aimed at the same market niche or segment in each country where the company
competes a g. Maintaining a one-country production base and exporting goods to foreign markets F7 h. A
multi-country cross-subsidization strategy
i. A critical market strategy
j. A strategic alliance strategy aimed at having more alliances in more country markets than any other rival.
12. Multi-country and global strategies differ in which of the following respects?
a. The strategic arena for a multi-country strategy consists of country markets where the company chooses to
compete, but the strategic arena for a global strategy includes countries which constitute critical markets for
the product and also other "important" country markets.
b. The product line in a multi-country strategy is adapted to local needs whereas with a global strategy the
product line is mostly the same from country to country.
c. The production strategy for a multi-country competitive approach may well involve plants scattered across
many host countries whereas a global competitive approach tends to entail locating plants wherever the
best competitive advantage potential exists.
d. With a multi-country approach marketing and distribution strategies are adapted to the circumstances and
culture of each host country whereas with a global approach there is a lot of worldwide coordination, with
minor adaptation to host country situations as required.
e. With a multi-country strategy companies may set up autonomous subsidiaries to customize operations to fit
host country conditions whereas with a global strategy major strategic decisions are closely coordinated and
more unified across individual country markets.
13. With a global approach to competing, the achievement of competitive advantage depends on
a. deploying and locating value chain activities (R&D, manufacturing, distribution centers, sales and marketing,
after-the-sale service, and so on) among the various countries so as to achieve lower costs or greater
differentiation than rivals.
b. having more profit sanctuaries than rivals.
c. doing a better job of cross-subsidization than rivals.
d. competing in more national markets than key rivals.
e. having more manufacturing plants than rivals.
f. coordinating company activities and strategic moves worldwide.
g. forming more and better strategic alliances than rivals.
h. using an export strategy so as to avoid the risks of fluctuating exchange rates.
a. is generally the least risky, most likely to succeed, and mostly profitable approach to competing
internationally.
b. may offer an avenue for gaining economies of scale in production and/ or marketing.
c. are a way of gaining access to international markets that otherwise may be hard or costly to penetrate.
d. is a frequently used approach to competing in international markets.
e. is the most effective and dependable way to gain competitive advantage in international markets.
f. is usually more effective in combating competitive disadvantage than in gaining competitive advantage.
g. poses organizational hurdles because of the potential for conflicting objectives, conflicting opinions about
how to proceed, disagreements over who is to have authority over what, the added costs of coordination and
communication, and difficulties of trying to collaborate in competitively sensitive areas.
h. should be viewed as temporary rather than permanent.
15. Competitors in international markets can be distinguished not only by strategy differences but also by
differences in their long-term objectives and strategic intent; the most common types of strategic intent
include
a. global dominance.
b. competing on a domestic-only basis.
c. content followership.
d. long-term cross subsidization.
e. short-term cross subsidization.
a. refer to country markets where a company derives substantial profits because of its strong or protected
market position.
b. are valuable competitive assets in globally competitive markets because a multinational competitor with
multiple sanctuaries has a resource advantage in waging a competitive offensive against domestically
competitors whose only profit sanctuary is their home market.
c. enable a company pursuing a multi-country strategy to compete on an equal footing with companies
pursuing a global strategy.
d. are a relevant competitive consideration in international markets because companies with multiple profit
sanctuaries have a competitive advantage over companies with a single (or no) profit sanctuary.
e. are essential to competing successfully in countries that qualify as critical markets.
f. are relevant to who has the upper hand in competing in world markets because companies with multiple profit
sanctuaries can utilize the profits and cash flows generated in their sanctuaries to support new strategic
offensives to gain customers and market share in additional countries.
17. To sustain their market positions, industry leaders usually need to consider which of the following strategic
options?
a. A multi-country strategy
b. A multiple profit sanctuary strategy
c. A stay-on-the-offensive strategy
d. A strategy that encourages rivals to be content followers rather than aggressive challengers
e. A cross-subsidization strategy
f. A content follower strategy
g. A harvest strategy
h. A fortify-and-defend strategy
18. The strategic options most suitable for runner-up competitors include
a. a strategy of imitating the strategic actions and approaches of the industry leader.
b. becoming a lower-cost producer and using the appeal of a lower price to win customers from weak,
higher-cost rivals.
c. using differentiation strategies keyed to better quality, technological superiority, superior customer service,
or product innovation.
d. a harvest strategy.
e. a growth via acquisition strategy.
f. focusing on a few market segments where the firm's resource strengths and capabilities can yield a
competitive edge.
g. a vertical integration strategy.
h. an export strategy.
i. a content follower strategy.
j. a turnaround strategy.
19. Strategic efforts to turnaround crisis-ridden companies typically involve such actions as
20. Which of the following do NOT qualify as a "commandment" for crafting successful business strategies?
a. Place top priority on crafting and executing strategic moves that will enhance a company's long-term
competitive position.
b. Always harvest a weak business and re-deploy the cash flows to more profitable business opportunities.
c. Avoid compromise or middle-of-the-road strategies that try to balance lower costs against greater
differentiation and that result in average costs, average quality, average features, average service, and
average appeal.
d. Sell or close a crisis-ridden business immediately; turnaround strategies are doomed to fail.
e. Invest in creating a sustainable competitive advantage.
f. Be wary of attacking capable, resourceful rivals without solid competitive advantage and ample financial
strength.
g. Consider that attacking competitive weakness is usually more profitable and less risky than attacking
competitive strength.
21.
another national market.
22.
are country markets where a company has a strong or protected market position
and derives substantial profit.
23. A
strategy involves keeping reinvestment to a bare-bones minimum, taking actions
to minimize operating expenses, and operating the business in a manner calculated to maximize short-term
cash flows in preparation for an orderly market exit.
24. A big disadvantage of
expertise and capabilities.
25.
involves using profits earned in one or more country markets to cover the added
costs of waging a competitive offensive against key rivals in their home markets or to support the costs of
entering a strategically-critical country market.
ANSWERS
1. a, b, f, g
2. b, c, d, h
3. d, e, f, h, I, j
4. d, e, g
5. b, d
6. a, b, d
7. a, c, e, f, g
8. a, b, c, d, e
9. b, d
10. a, c, e, f, g
11. b, c, d
12. a, b, c, d, e
13. a, f
14. c, d, f, g, h
15. a, b, h
16. a, b, d, f
17. c, d, h
18. b, c, e, f, I
19. a, b, c, d
20. b, d, h
21. Multicountry competition
22. profit sanctuaries
23. harvest
24. strategic alliances
25. Cross-subsidization
Chapter 7 Self-Test
2. Companies that are prime candidates for diversifying into new businesses include
a. single business enterprises with diminishing growth prospects in their present business.
b. firms that are fully integrated in a fragmented industry.
c. those with competencies and capabilities that are readily transferable to other businesses.
d. those with the financial resources and managerial depth to expand into other industries.
e. weakly positioned companies in slow-growth industries.
f. those who have competitors that are diversifying.
g. firms that have 25% or greater market shares in their present business.
a. the company's profits are higher after diversification than before diversification.
b. the company's return on shareholder equity is higher after diversification than before diversification.
c. the industries chosen for diversification are growing faster than the company's present business.
d. diversification results in bigger market shares.
e. the businesses a company has diversified into perform better as part of the same firm than they could have performed as
independent companies.
4. Whether a particular diversification move is capable of enhancing share-holder value can be evaluated via
7. The big drawbacks to entering a new industry via internal start-up include
a. involves diversifying into businesses whose value chains have appealing strategic fits.
b. is attractive because of the opportunity to turn strategic fits into competitive advantage.
c. exploits economies of scale whereas an unrelated diversification strategy exploits economies of scope.
d. offers more competitive advantage potential than an unrelated diversification strategy.
e. is usually based on market-related strategic fit rather than operating fits or management fits.
11. While strategic fit relationships can occur throughout the value chains of different businesses,
a. distribution and customer-related strategic fits are the most common and offer the best potential for economies of scope.
b. most fits are manufacturing-related.
c. most fits fall into the categories of being market-related, technology related, operating-related, or management-related.
d. operating fits tend to be most important, market fits second most important, management fits third most important, and
technology fits fourth most important.
e. most companies prefer to concentrate on technology-related fits and capturing the benefits of skills transfer because of the
greater chances of success and the big payoff in gaining a technology-based competitive advantage.
14. For unrelated diversification to result in enhanced shareholder value, corporate managers
a. must pursue acquisition opportunities in many different kinds of industries both to broadly diversify financial risk and to
stabilize earnings.
b. must pursue multinational diversification.
c. must do a superior job of overseeing the firm's subsidiaries and contributing to how they are managed such that the
businesses perform at a higher level than they could achieve as stand-alone operations.
d. must do a superior job of diversifying into industries and businesses that can produce consistently good returns on
investment.
e. must do an excellent job of negotiating favorable prices in acquiring the companies chosen for the diversification effort.
f. must be shrewd in selling previously-acquired businesses at their peak and getting premium prices (before it becomes clear to
outsiders that the business probably faces eroding long-term profitability).
g. have to aggressively shift corporate resources out of businesses where profit prospects are dimming and into businesses
where there are high returns on investment and potential for rapid profit growth.
15. Which of the following accurately characterize approaches to shareholder value via diversification?
a. Unrelated diversification is an easier and safer way to build shareholder value than is related diversification.
b. Related diversification seeks to build shareholder value by converting the strategic fits among related businesses into an extra
measure of competitive advantage and using this advantage to achieve better profitability and long-term performance.
c. With unrelated diversification, a company's competitive advantages do not extend beyond what each business is able to
achieve on its own.
d. Unrelated diversification involves less competitive risk than related diversification because the competitive positions of
different businesses are not linked together by strategic fit.
e. Creating shareholder value via unrelated diversification is predicated on shrewd deployment of corporate financial resources
and executive skill in spotting financially rewarding business opportunities.
a. are complex because they involve both a diversity of businesses and a diversity of national markets.
b. usually are predicated on unrelated diversification approaches rather than related diversification approaches.
c. are potentially powerful when built around related diversification.
d. are ill-suited for capturing economies of scope.
e. are ill-suited for creating multiple profit sanctuaries.
f. offer potent advantages for out-competing a one-business domestic company.
g. offer potent advantages for out-competing a one-business multinational company.
20.A one-business domestic company is weakly positioned to defend its market position against a determined,
aggressive DMNC because
a. diversification is a more powerful strategy than single-business concentration.
b. it has only one profit sanctuary (its home market), which leaves it vulnerable to low prices from a DMNC with multiple profit
sanctuaries.
c. the DMNC may have economy-of-scope advantages growing out of a related diversification strategy.
d. the DMNC can use financial resources generated from its other businesses to fund a long-term competitive offensive in the
domestic company's home market and gradually sap the domestic company's financial strength (by eroding the size of its
home market profit sanctuary).
e. it is more vulnerable to economic recessions.
21. Which of the following are strategic options for improving a diversified company's performance?
a. Acquire new businesses
b. Divest weak-performing businesses
c. Employ portfolio restructuring
d. Retrench to a narrower diversification base
e. Pursue multinational diversification
f. Pursue greater value chain diversity and make sure all businesses that the firm diversifies into pass the competition test and
the profit test
g. Pursue turnaround strategies for poorly performing businesses in the company's business lineup
(1)
(2)
ANSWERS
1. a, b, e
2. a, c, d
3. e
4. a, d, f
5. c, d, e
6. a, c, d
7. e
8. a, b, e
9. a, b, d
10.
b, c, d, e, f
11.
c
12.
a, b, c
13.
c, d
14.
c, d, e, f, g
15.
b, c, e
16.
a, b, c
17.
a, c
18.
a, c, f, g
19.
a, b, e, h
20.
b, c, d
21.
a, b, c, d, e, g
22.
better-off
23.
strategic fit, value chains
24.
economies of scope
25.
strategic, financial
Chapter 8 Self-Test
1. For a diversified company to be a strong performer a substantial portion of its revenues and profits must come
from business units judged to be in attractive industries.
True
False
3. Relative market share is a better indicator of a business's competitive strength and market position than is
absolute market share.
True
False
4. Relative market share is calculated by dividing a company's market share by the market share of its largest
rival.
True
False
5. Shareholder interests are generally best served by concentrating corporate resources on businesses that can
contend for market leadership in their industries.
True
False
6. One factor to consider in determining the attractiveness of an industry that that a company has diversified into
is whether it has valuable strategic fit relationships with other industries represented in the company's business portfolio.
True
False
7. Firms emphasizing related diversification should divest businesses with little or no strategic fit unless these
businesses are unusually good financial performers or offer superior growth opportunities.
True
False
8. The businesses in a diversified company's portfolio exhibit good resource fit when they add to a company's
resource strengths (either financially or strategically) and when the company has the resources to support the
requirements of its businesses without stretching itself too thinly.
True
False
9. In deciding whether to divest a business unit, corporate managers should rely primarily on whether the
business is a cash hog or a cash cow -- cash hogs should nearly always be divested; cash cows should almost
never be divested.
True
False
10. A cash hog business is one whose internal cash flows are not big enough to cover annual capital
requirements and thus requires regular infusions of financial capital; a cash cow business is one which
generates positive cash flows more than sufficient to cover its annual capital requirements.
True
False
12. To evaluate the overall attractiveness of the industries a company has diversified into, it is important to
a. do a SWOT analysis of each industry.
b. draw a strategic group map for each industry.
c. consider the attractiveness of each industry from the standpoint of whether it represents a good business for the
company to be in.
d. prepare a value chain analysis of each industry.
e. evaluate each industry's attractiveness relative to the others.
f. consider how appealing the mix of industries is as a group.
g. determine the strategic fits among the key success factors of each industry the firm is in.
13. Which of the following are pertinent in evaluating the attractiveness of a particular industry that a company
has diversified into?
a. The intensity of competition
b. How many firms in the industry are fully vertically integrated
c. What competitive strategy each industry rival has adopted
d. Emerging industry opportunities and threats
e. Resource requirements
f. Seasonal and cyclical factors
g. The number of strategic groups in the industry
h. Industry profitability
i. The degree of risk inherent in being in the industry
j. Whether the industry has special environmental, regulatory, social, or human impact problems
14. Developing quantitative ratings of which of a diversified company's industries are most attractive and least
attractive involves
a. selecting an appropriate set of industry attractiveness measures.
b. determining the makeup of each industry's value chain.
c. assigning weights to each of the industry attractiveness measures.
d. rating each industry on each attractiveness measure (using a 1 to 5 or 1 to 10 rating scale).
e. multiplying the rating by the assigned weight to get a weighted attractiveness rating.
f. summing the weighted attractiveness ratings to obtain an overall attractiveness rating.
g. using the overall ratings to draw a strategic group map for the industry
h. deciding whether an industry is attractive or unattractive based on its position on the industry strategic group
map.
15. The more that a diversified company's business portfolio includes subsidiaries with competitively valuable
strategic fits, the greater is its potential for
a. realizing positive cash flows and being a cash cow.
b. realizing economies of scope.
c. enhancing the competitive capabilities of particular business units. a d. achieving a combined performance
greater than the subsidiaries could achieve operating as an independent company.
e. having the best value chain of any of the rivals against which it competes.
f. having more profit sanctuaries than rivals.
16. Critiquing a diversified company's strategy, assessing its business makeup, and deciding how to improve the
competitive strength and performance potential of its businesses involves
a. applying the cost-0f-entry test.
b. doing a SWOT analysis.
c. drawing a strategic group map.
d. evaluating the long-term attractiveness of each industry the company is in.
e. evaluating the competitive strength of the company's business units to determine which are really strong
contenders in their industries.
f. doing a five forces analysis.
g. determining the competitive advantage potential of any value chain relationships and strategic fits among
existing business units.
h. rating each business unit on the basis of how well it has performed recently and how good its future
performance is likely to be.
i. ranking the business units in terms of priority for new investment. identifying cross-subsidization opportunities.
18. To arrive at a quantitative measure of business strength/competitive position each business unit in a
diversified company should be rated on the basis of such factors as
a. relative market share.
b. ability to compete on price and/or quality and/or service.
c. how well the business unit's competencies and competitive capabilities match industry key success factors.
d. growth in revenues and profits over the last five years.
e. brand name recognition and reputation.
f. which business has the best strategy.
g. profitability relative to competitors.
h. technology and innovation capabilities.
i. degree of bargaining leverage with suppliers and customers.
19. To determine whether a business fits well strategically in a diversified company's business portfolio, it is
useful to consider whether
a. a business unit has valuable strategic fit with other businesses in the portfolio.
b. the business has a relative market share above 50%.
c. it has the same strategic objectives as other businesses in the portfolio.
d. it is pursuing the same basic competitive strategy as other businesses in the portfolio.
e. the business matches well with the company's long-term strategic direction and can contribute to achieving the
company's strategic vision.
20. The most important considerations in comparing the performance of different businesses in a diversified
company's portfolio are
a. sales growth.
b. profit growth. D c. the debt-to-assets ratio.
d. inventory turnover ratios.
e. percentage contribution to the company's total earnings.
f. the number of core competencies and distinctive competencies each business unit has.
g. the return on capital invested in the business.
h. relative product quality.
i. cash flow generation.
j. the relative number of customers and percentage growth in the customer base.
21. Ranking a diversified company's businesses in terms of priority for new capital investment
a. should be done principally on the basis of relative long-term industry attractiveness and secondarily on the basis
of strategic fit with other businesses.
b. should be based on how much it will take to substantially enhance the competitive standing of each business;
attempts should then be made to fund as much of the needed investments as possible, starting with the
business needing the smallest amount and proceeding to the business needing the largest amount.
c. should be based primarily on strategic fit considerations and long-term growth potential.
d. should be based chiefly on relative competitive strength, recent performance and potential for achieving high
positive cash flows.
e. should take into account all those business aspects relevant to deciding whether a business's outlook and
prospects are excellent, good, fair, or poor; as a general rule, corporate managers should concentrate
company resources on businesses with excellent to good prospects and invest minimally, if at all, in
businesses with sub-par prospects.
22. If a diversified company cannot realistically hope to achieve its performance objectives with its current lineup
of businesses, then it can try to close the performance gap by
a. divesting weak-performing or money-losing businesses.
b. adding new businesses to the corporate portfolio.
c. issuing more shares of common stock and using the proceeds to pay off corporate debt.
d. lowering corporate performance objectives.
e. revising the strategic plans of some or all of the businesses in the portfolio to get better performance out of
existing businesses.
f. forming strategic alliances or collaborative partnerships to try to remedy the conditions responsible for
underperformance.
g. upgrading the company's resource base.
23. In the case of companies with an unrelated diversification strategy, decisions to add more unrelated
businesses to the portfolio lineup tend to be based on
a. the company's financial ability to make another acquisition.
b. whether new acquisitions are needed to boost overall corporate performance.
c. whether the timing is right for another acquisition.
d. whether there are pressing acquisition opportunities that need to be acted on immediately (to avoid being lost
altogether).
e. identifying a business to divest so as to make room in the portfolio for a new acquisition.
f. whether corporate management believes it possesses the range and depth of expertise to take on the
supervision of an additional business.
25. In reviewing a diversified company's portfolio and deciding on what strategic moves are needed to improve
overall corporate performance, one needs to consider such factors as whether
a. the company has enough businesses in very attractive industries.
b. the company's business mix is over-weighted with marginally performing businesses, question marks,
slow-growth businesses, or businesses in decline.
c. the company has the financial strength to support the new investment needs of its businesses.
d. the portfolio contains businesses that the company really doesn't need to be in.
e. corporate performance is being dragged down by businesses that are in average-to-weak competitive positions.
f. the makeup of the business portfolio puts the company in good position for the future.
ANSWERS
1. T
2. T
3. T
4. T
5. T
6. T
7. T
8. T
9. F
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
25.
T
a, c, e, f, g
c, e, f
a, d, e, f, h, i, j
a, c, d, e, f
b, c, d
d, e, g, h, i
a, b, e
a, b, c, e, g, h, i
a, e
a, b, e, g, i
e
a, b, d, e, f, g
a, b, c, d, f
b
a, b, c, d, e, f
Chapter 9 Self-Test
1. The multi-skill, multi-activity character of core competencies makes building and strengthening them an
exercise in managing human skills, intellect, and knowledge bases and in networking the efforts of different
workgroups and departments.
True
False
2. One of the first strategy-implementing steps is to put together a solid management team with good personal
chemistry and the mix of experiences, skills, and know-how to implement and execute the strategy.
True
False
3. Of all the different organizational structures, a functional structure has the best overall advantages, the
easiest-to-overcome disadvantages, and the best fit with most strategies.
True
False
4. Reengineering is an organizational tool to reduce business process fragmentation and to cut bureaucratic
overheads.
True
False
5. A decentralized business unit structure is the best organizational arrangement for coordinating the related
activities of related businesses.
True
False
6. Implementing strategy
a. is a task that must be done by the chief executive officer and the heads of major organizational units (business
divisions, functional departments, and key operating units).
b. involves leading, working with others, allocating resources, building and strengthening competitive capabilities,
and matching how the organization performs value chain activities to the requirements for good strategy
execution.
c. is easier and less time-consuming than crafting strategy.
d. is a job for the whole management team, not a few senior managers, because every manager needs to be
concerned with what has to be done in his/her area of authority to implement the company's strategy
successfully.
e. can be considered successful if the organization achieves its strategic and financial objectives.
f. tests a manager's ability to direct organizational change, motivate people, achieve continuous improvement in
strategy-critical business processes, and meet or beat performance targets.
9. Building core competencies and competitively valuable capabilities in per- forming one or more
strategy-critical activities in the value chain
a. can yield a sustainable competitive advantage over rivals by providing a basis for superior strategy execution.
b. should be the first thing managers do in establishing an organizational structure.
c. requires spending more money on developing competence-related capabilities than competitors.
d. is primarily the responsibility of the employee training department and first-line supervisors.
e. is basically a team-building exercise.
f. is an exercise that is best orchestrated by senior managers with the clout to enforce the necessary networking
and collaboration among individuals, groups, departments, and external allies.
g. is an ongoing task rather than a one-time event.
h. is an inside organization-building challenge, not one where outsiders (suppliers, strategic) allies ought to have
an important role.
i. can sometimes be accomplished through collaborative efforts with external allies and/or by acquiring or merging
with another company.
12. To organize the work effort in a strategy-supportive fashion and fit organizational structure to strategy,
a. those primary activities and key tasks in the value chain that are pivotal to successful strategy execution and
are performed internally should be made the main building blocks in the organization structure.
b. all facets of a strategy-critical business process must be placed under the authority of a single manager.
c. all strategy-critical value-chain activities need to be performed internally rather than out-sourced.
d. support activities should be centralized and primary activities should be decentralized.
e. reporting and coordinating arrangements for support activities need to be woven into an organizational design
that facilitates enhanced performance of strategy-critical value chain activities.
f. It is often both desirable and cost effective to partner with outsiders to add to a company's arsenal of
competitive capabilities and to perform strategy-critical value chain activities.
a. are problematic because no one person or department oversees the whole activity/process and is accountable
for good results.
b. can lengthen completion time.
c. frequently drive up overhead costs (because coordinating the fragmented pieces can soak up hours of effort
from many people).
d. occurs most frequently in matrix structures and decentralized business unit structures.
e. generally signal that management has strayed too far from strict adherence to a centralized functional
organization structure.
f. prevent a company from building strong competencies or capabilities in that activity or process.
g. can be avoided by outsourcing the activity from external allies.
14. Partnering with outsiders to develop or gain access to competitively valuable capabilities
a. entails high risk and should be avoided if at all possible.
b.makes strategic sense when outsiders can add to a company's resource strengths and contribute materially to
better strategy execution.
c. is okay for remedying resource deficiencies but not for building resource strengths.
d.is best accomplished using a matrix organization structure.
e. is usually more costly and less effective than building and developing the capability internally.
f. requires establishing internal organizational arrangements to manage the relationships with outsiders and to
build the necessary bridges between the partnering organizations.
15. In determining the degrees of authority and independence to give each organizational unit,
a. it is better to rely more on the principle of centralized authority than to risk pushing decision-making authority
down to lower-level managers and employees (who may be ill-equipped or unwilling to take on added
responsibility).
b.experience proves that a centralized hierarchical structure is superior to a decentralized flat structure.
c. the recent trend is for companies to shift away from authoritarian, multi-layered hierarchical structures to flatter,
more decentralized structures that stress employee empowerment.
d.centralizing authority in a few senior executives is the most reliable way to shorten decision times and respond
quickly and decisively to events as they unfold (the greater the strategic need for short decision response
times, the more that authority needs to be centralized).
e. centralizing authority over the related activities of separate businesses makes sense when there are
opportunities to share a common sales force, utilize common distribution channels, or rely upon a common
field service organization to handle customer requests for technical assistance or to provide maintenance and
repair services.
17. The strategic advantages of functional and process organization structures include
a. providing an excellent training ground for future general managers.
b. providing a way to centralize control for strategic results.
c. becoming a basis for competitive advantage (lower cost or unique capability) when dominating depth in one or
more functional specialties or business processes is a key success factor.
d. promoting in-depth functional or process expertise (a big advantage when the firm's value chain consists of a
series of discipline-specific activities or business processes).
e. forcing profit responsibility to the top.
f. avoiding fragmentation of strategy-critical business processes.
g. promoting creative entrepeneurship and rapid adaptation to changing market circumstances.
h. exploiting learning/experience curve effects and scale economies associated with functional or process
specialization.
i. being the best organizational design for empowering people.
21. Among the strategic disadvantages of a decentralized business unit @INCORRECT organization are
a. the absence of a built-in mechanism for coordinating related value chain activities across related business units.
b. the difficulty of developing suitable bonus and incentive compensation OF THE 6 CORRECT ANSWERS,
arrangements for business-unit managers.
c. the potential for higher administrative overhead costs.
d. the potential for excessive business-unit rivalry for corporate resources and attention.
e. the heavy dependence of corporate management on having competent business-unit mangers.
f. the potential for corporate managers to lose touch with business-unit situations.
g. top-heavy corporate management.
h. the accounting difficulties associated with operating each business unit as a stand-alone profit center.
i. the problem it creates in deciding of how much authority to delegate to business-unit managers.
22. Organizing a broadly diversified company into strategic business units (SBUs) offers the advantages of
a. fewer layers of management.
b. lower overhead costs.
c. easy clarification of the roles and authority of the CEO, the SBU head, and the business-unit head.
d. promoting the coordination of related value chain activities across businesses within the same SBU.
e. promoting the coordination of related value chain activities across businesses not in the same SBU.
f. helping allocate corporate resources to the areas with the greatest growth opportunities.
g. making the task of strategic review of company businesses by corporate executives more objective and more
effective.
h. promoting more decisions on the basis of "what's best for the organization as a whole."
i. creating needed checks and balances among competing viewpoints.
24. Among the most frequently used ways to supplement a company's basic building-block organization design
are
a. cross-functional task forces.
b. SBU teams.
c. matrix teams.
d. venture teams.
e. self-contained work teams.
f. empowered decentralization.
g. special project teams.
h. process teams.
i. functionally-specialized work teams.
j. the creation of relationship managers.
ANSWERS
1. T
2. T
3. F
4. T
5. F
6. b, d, e, f
7. a, c, e, f, h, i, j
8. c, d, g
9. a, f, g, i
10. b, c, e, f
11. a, c, e
12. a, e, f
13. a, b, c
14. b, f
15. c, e
16. a, b, c, d, e, h
17. b, c, d, f, h
18. d, e, f, g, h
19. a, c, f, g, i
20. b, c, e, f
21. a, c, d, e, f, i
22. d, f, g
23. a, e, f, g, h, i
24. a, d, g, h, j
25. c, d, g
Chapter 10 Self-Test
1. Cost-effective strategy implementation requires that budgets for organizational units be
prepared ahead of the plans and schedule for implementing strategy -- otherwise
organizational resources are likely to be wasted.
True
False
2. In deciding how many policies and procedures to prescribe and how tight they should
be, a good guideline is to prescribe enough policies to give organizational members
clear direction and make them tight enough to place desirable boundaries on their
actions; then empower people to act within these boundaries however they think makes
sense.
True
False
3. The best policies and procedures are those that give employees sufficient leeway to do
activities whatever way they believe is best.
True
False
4. Benchmarking, best practice implementation, and some form of TQM are basic tools for
implementing strategies keyed to defect-free manufacturing, superior product quality,
superior customer service, and total customer satisfaction.
True
False
5. The essential difference between reengineering and TQM is that reengineering aims at
redesigning the value chain while TQM programs aim at continuously improving how
particular value chain activities are performed.
True
False
8. Getting employees to buy into the strategy and commit to making it work is best done
by talking to everyone about how important new strategic practices and achievement of
performance targets are to the company's future and its ability to provide job security.
True
False
11.The most dependable way to keep company personnel focused on achieving the
objectives laid out in the strategic plan is to generously reward individuals and groups
who achieve their assigned performance targets and to deny rewards to those who
don't.
True
False
12.The key to creating a reward system that promotes good strategy execution is to make
strategically relevant measures of performance the dominating basis for designing
incentives, evaluating individual and group efforts, and handing out rewards.
True
False
17.Prescribing policies and operating procedures aid the task of implementing strategy by
a. helping empower product champions and create self-managed work teams.
b. providing personnel with top-down guidance on how certain things are to be done and
what behavior is expected.
c. placing limits on independent action and channeling individual and group efforts along
the intended path.
d. indicating how reengineering needs to be accomplished.
e. specifying how big operating budgets will need to be for organizational units to carry out
their assigned piece of the strategy in a competent fashion.
f. helping enforce needed consistency in how particular strategy-critical activities are
performed in geographically scattered operating units.
g. paving the way for instituting TQM, best practices, and internal support systems.
h. helping alter the internal work climate and corporate culture in ways that produce a
stronger fit with the strategy being implemented.
19. Reengineering, TQM, and the identification and adoption of best practices
a. are tools managers can use to promote better strategy execution.
b. are more effective when used sparingly -- normally in strategy-critical areas of the
business; it is usually a mistake to introduce them on a wide scale throughout the
organization.
c. should be undertaken in tandem, not separately.
d. yield their best results in flat, decentralized organization environments rather than in
centralized, vertical structures.
e. have been used widely in Japan and only rarely in U.S. and European companies.
f. need to be instituted before management has a clear fix on the indicators of successful
strategy execution, not after.
25. Motivating employees to do their best in trying to make the strategy work entails
a. using monetary incentives.
b. using non-monetary incentives.
c. creating a work climate where there is a constructive amount of pressure for employees
to perform well.
d. taking care to avoid those approaches that could result in employee stress, anxiety, or
job insecurity.
e. making sure that all employees are rewarded regularly for their efforts and that the
amount of incentive compensation is pretty much equal from employee to employee.
ANSWERS
1. F
2. T
3. F
4. T
5. F
6. T
7. T
8. F
9. F
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20.
21.
22.
23.
24.
a, b, d, f, g, h, i
25.
1.
a, b, cANSWERS
Chapter 11 Self-Test
1. It is difficult to implement a strategy successfully when a firm's culture is not well
aligned with the beliefs, practices, behaviors, and business approaches that the strategy
calls for.
True
False
3. When a company's culture is out of sync with what is needed for successful strategy
implementation and execution, the wisest and best course of action is to change the
strategy.
True
False
4. The task of reshaping a firm's culture to better fit strategy generally takes from a few
weeks to a month in small firms to as much as a year in large companies.
True
False
5. Symbolic actions to change the corporate culture are more important than substantive
actions.
True
False
6. Charisma and personal magnetism are key traits that a CEO needs in order to
successfully lead efforts to change corporate culture.
True
False
7. High ethical standards are nice, even desirable, but they have little impact on a
company's long-term strategic success or on efforts to build a healthy corporate culture.
True
False
8. In a strong-culture company where strategy and culture are well-aligned, managers are
less dependent on policies, procedures, rules, and supervision to enforce what people
should and should not do because deeply imbedded cultural norms can be counted
upon to guide behavior.
True
False
f. the kinds of relationships it has developed with employees, unions, suppliers, customers,
stockholders, and the communities where it operates.
g. its policies and its ethical standards.
h. its folklore (legends, stories, heroes).
i. the types of competitive strategy it employs, its financial and strategic objectives, and its
strategic vision. its supervisory practice, its operating style, and its internal work
environment.
g. openly supporting managers and employees at all ranks who propose or help initiate
useful change.
17. Changing a company's culture and aligning it with the requirements for strategic
success
a. are among the toughest management tasks.
b. entails diagnosing which facets of the present culture are strategy supportive and which
are not.
c. involves open and candid communication among all concerned about those aspects of
the culture that have to be changed.
d. requires visible actions, both symbolic and substantive, to modify the culture.
e. nearly always requires that senior executives personally lead the culture-changing
effort.
f. may require replacing old-culture traditionalist managers with "new breed" managers.
18. Instilling and ingraining a company's values statement and code of ethics in company
policies, practices, and actual conduct entails such actions as
a. making them an integral part of employee training and educational programs.
b. screening out job applicants who do not exhibit compatible character traits.
c. communicating the values and ethics code to all employees and explaining compliance
procedures.
d. promptly dismissing any employee who violates the ethics code or disavows company
values.
e. the CEO openly and unequivocally endorsing the values and ethics code and leading the
enforcement of ethical standards.
f. having all officers sign statements affirming their belief in the company's values and
their agreement to abide by the ethics code, then circulating these signed statements
among all company personnel.
21.
refers to a company's values, beliefs, traditions,
operating style, and internal work environment.
22. From a strategy implementation perspective, the best types of corporate culture are
cultures.
23. The difference between a values statement and a code of ethics is that a
is a cornerstone for building a corporate culture whereas a
(2)
a basis for developing a corporate conscience.
(1)
is
ANSWERS
1. T
2. T
3. F
4. F
5. F
6. F
7. F
8. T
9. F
10. F
11. a, b, g, h, j
12. a, e, f, g, h
13. a, e, f
14. b, c, d
15. c, d, e, f
16. a, b, e, f, g
17. a, b, c, d, e, f
18. a, b, c, e
19. a, c, e, h, i, j
20. b, d, e, h
21. corporate culture
22. adaptive
23. values statement
24. code of ethics
25. managing by walking around
26. weak