File: mod07, Module 07: Strategy and Strategic Management

Multiple Choice

1. A comprehensive action plan that identifies long term direction for an organi ation is called a !!!!!!!!!!!!. a" competitive advantage #" strategy c" o#$ective d" idea Ans: # %esponse: See page See page 1&' (evel: )asy

'. !!!!!!!!!!!! is a phrase or statement that focuses organi ational energies on achieving a specific goal. a" Mission #" *ision c" Strategic intent d" (ogo Ans: c %esponse: See page 1&' (evel: )asy

+. ,uring the time of the great depression, -er#ert -oover promised the voters .a chic/en in every pot and a car in every garage.0 1his could #e considered a statement of !!!!!!!!!!. a" strategic intent #" strategy c" competitive advantage d" glo#al positioning Ans: a %esponse: See page 1&' (evel: Medium

&. 2perating in successful 3ays that are difficult to imitate is called a !!!!!!!!!!!!!!. a" strategy #" strategic intent c" #usiness plan d" competitive advantage Ans: d %esponse: See page 1&' (evel: )asy

4. 5hich of the follo3ing does not contri#ute to a sustaina#le competitive advantage6 a" #eing easily imitated #" outperforming your rivals c" performing successfully for customers d" #eing a#le to maintain your edge e" all of the a#ove Ans: a %esponse: See page 1&'7 to have a sustaina#le advantage, your .edge0 must #e hard to imitate. (evel: Medium

8. 1he levels of strategy used in organi ations are corporate, #usiness and !!!!!!!!. a" personal #" competitive c" functional d" legal Ans: d %esponse: See page 1&+ (evel: Medium

7. 9n a large company, a strategy that sets the long term direction for the entire company is called a !!!!!!!!!! strategy. a" corporate #" senior level c" functional d" #oard

Ans: a %esponse: See page 1&' (evel: )asy

:. An e;ample of a strategic <uestion at the corporate level is: a" 5hat should our ne;t product #e6 #" -o3 3ill 3e price our ne3est product6 c" Should 3e set up more sales offices6 d" 9n 3hat industries and mar/ets should 3e compete6 Ans: d %esponse: See page 1&' (evel: Medium

=. A strategy that identifies ho3 a division or #usiness unit 3ill compete in its product or service domain is called a !!!!!!!!!! strategy. a" corporate #" middle management c" #usiness d" #ottom level Ans: c %esponse: See page 1&+ (evel: )asy

10. A !!!!!!!!!! strategy is one that guides activities 3ithin specific area such as engineering and mar/eting. a" #usiness #" functional c" corporate d" employee Ans: # %esponse: See page 1&+ (evel: Medium

11. An e;ample of a strategic <uestion at the division or strategic #usiness unit level is: a" 5hat should our ne;t product or service #e6

#" 5hat is our role in supporting engineering6 c" -o3 many divisions should 3e have6 d" 9n 3hat industries and mar/ets should the corporation compete in6 Ans: a %esponse: See page 1&+ (evel: Medium

1'. An e;ample of a strategic <uestion at the functional level is: a" -o3 do 3e support the #usiness strategy6 #" -o3 many divisions should 3e have6 c" -o3 are 3e going to compete 3ithin this industry or mar/et6 d" 9n 3hat industries and mar/ets should the corporation compete in6 Ans: a %esponse: See page 1&+ (evel: Medium

1+. A strategy for e;panding an organi ation>s #usiness is called a !!!!!!!!! strategy. a" #ig #" multiple c" retrenchment d" gro3th Ans: d %esponse: See page 1&+ (evel: )asy

1&. 5hich of the follo3ing is not a gro3th strategy6 a" concentration #" diversification c" vertical integration d" restructuring Ans: d %esponse: See pages 1&+ (evel: Medium

14. 5hen a company e;pands in its e;isting mar/ets it is called gro3th through !!!!!!!. a" e;pansion #" diversification c" concentration d" glo#ali ation Ans: c %esponse: See page 1&+ (evel: )asy

18. 5hen a company e;pands #y entering ne3 #usiness areas, it is called gro3th through !!!!!!!!. a" diversification #" vertical integration c" e;pansion d" glo#ali ation Ans: a %esponse: See page 1&+ (evel: )asy

17. 5hen a company e;pands #y ac<uiring suppliers or distri#utors, it is called gro3th through !!!!!!!!. a" diversification #" vertical integration c" e;pansion d" glo#ali ation Ans: # %esponse: See page 1&& (evel: )asy

1:. 1he ris/iest gro3th strategy is through: a" vertical integration #" unrelated diversification c" related diversification d" #ac/3ard integration e" for3ard integration Ans: #

%esponse: See page 1&&7 the issue is moving into an area that you don>t /no3 or don>t have e;pertise in. (evel: Medium

1=. A strategy 3hose o#$ective is to correct ma$or pro#lems in the #usiness through radical changes to current operations is called a !!!!!!!!! strategy. a" going out of #usiness #" gro3th c" status <uo d" retrenchment Ans: d %esponse: See page 1&& (evel: )asy

'0. 5hich of the follo3ing is not a retrenchment strategy6 a" diversification #" li<uidation c" restructuring d" divestiture Ans: a %esponse: See page 1&& (evel: )asy

'1. 5hen a company closes and sells its assets in order to pay its de#ts, it is called !!!!!!!!!!!!. a" divestiture #" li<uidation c" diversification d" restructuring Ans: # %esponse: See page 1&& (evel: )asy

''. 5hen a company reduces the si e of its e;isting operations, it is called !!!!!!!!!!!!.

a" divestiture #" li<uidation c" do3nsi ing d" diversification Ans: c %esponse: See page 1&& (evel: )asy

'+. 1he retrenchment strategy that calls for selling off part of the organi ation is called: a" li<uidation #" do3nsi ing c" diversification d" divestiture e" #ac/3ards integration Ans: d %esponse: See definitions on page 1&& (evel: )asy

'&. A !!!!!!!!! protects an insolvent firm from creditors during a period of reorgani ation to restore profita#ility. 1he retrenchment strategy that calls for selling off part of the organi ation is called: a" divestiture #" do3nsi ing c" retrenchment d" chapter 11 #an/ruptcy Ans: d %esponse: See definitions on page 1&& (evel: )asy

'4. A !!!!!!!!!! strategy vie3s the 3orld as one mar/et and adopts standard products and advertising for use 3orld3ide. a" multidomestic #" glo#ali ation c" diversification d" transnational Ans: #

%esponse: See page 1&& (evel: )asy

'8. A !!!!!!!!!! strategy customi es products and advertising to the culture of the local mar/ets into 3hich they sell. a" multidomestic #" glo#ali ation c" diversification d" transnational Ans: a %esponse: See page 1&& (evel: )asy

'7. A !!!!!!!!!! strategy tries to operate 3ithout a strong national identity and see/s a #alance #et3een the efficiency of 3orld3ide operations and responsiveness to local cultures. a" multidomestic #" glo#ali ation c" diversification d" transnational Ans: d %esponse: See page 1&4 (evel: )asy

':. 5hen t3o companies $oin together in partnership to pursue an area of mutual interest, it is called a !!!!!!!!!!!!!!!. a" ac<uisition #" do3nsi ing c" strategic alliance d" divestiture Ans: c %esponse: See page 1&4 (evel: )asy

'=. 5hen a company legally 3or/s 3ith its rivals on pro$ects of mutual #enefit, it is called !!!!!!!. a" competition #" collusion c" co?opetition d" restructuring Ans: c %esponse: See page 1&4 (evel: )asy

+0. Companies that use the internet to mar/et their products and gain competitive advantage are employing a@n" !!!!!!!!!!! strategy. a" communication #" computer c" e?#usiness d" electronic Ans: c %esponse: See page 1&8 (evel: )asy

+1. 1he electronic version of the #asic retail strategy of selling directly to customers is: a" e?#usiness #" A'C c" A'B d" A'A e" 91 Ans: # %esponse: See page 1&87 A'C means #usiness?to?customer and involves selling via the internet directly to customers (evel: )asy

+'. A !!!!!!!!! strategy uses information technology and the internet to lin/ organi ations vertically in supply chains. a" A'C #" A'S c" A'B d" A'A

Ans: d %esponse: See page 1&8 (evel: )asy

++. 1he process of formulating and implementing strategies to accomplish long term goals and to maintain a competitive advantage is called !!!!!!!!!!. a" strategic controlling #" strategic management c" glo#ali ation d" vertical integration Ans: # %esponse: See page 1&: (evel: )asy

+&. Strategic management consists of strategy !!!!!!!!! and !!!!!!!!!. a" action C implementation #" implementation C direction c" formulation C implementation d" formulation C revie3 Ans: c %esponse: See page 1&: (evel: )asy

+4. 1he !!!!!!!!! statement defines the purpose of the organi ation and its reason for e;istence in society. a" operating o#$ectives #" corporate strategy c" mission d" strategy Ans: c %esponse: See the definition on page 1&: (evel: )asy

+8. Specific results such as net sales and profits are common results called !!!!!!!!! that companies try to achieve. a" operations #" mission statements c" strategic plans d" operating o#$ectives Ans: d %esponse: See page 1&= (evel: )asy

+7. 5hich of the follo3ing is not a part of a S521 analysis6 a" strengths #" standards c" 3ea/nesses d" opportunities Ans: # %esponse: See page 1&= (evel: )asy

+:. 1he S521 element that focuses on internal deficiencies is: a" threats #" opportunities c" 3ea/nesses d" strengths e" 3ants Ans: c %esponse: See page 1&= for these descriptions (evel: )asy

+=. A special strength that a company has that gives it a competitive advantage is called a !!!!!!!!!. a" unfair advantage #" differential strategy c" core competency d" differential advantage Ans: c

%esponse: See page 140 (evel: Medium

&0. Dorter suggests that industry attractiveness is a function of five forces, including: a" profita#ility, mar/et share, 3or/force <uality, innovativeness, social responsi#ility #" cost efficiency, product <uality, service <uality, 3or/force <uality, innovativeness c" differentiation, cost leadership, focused differentiation, focused cost, integration d" rivalry, ne3 entrant threat, supplier po3er, #uyer po3er, threat of su#stitutes e" Eone of the a#ove is Dorter>s list of forces Ans: d %esponse: See the description on page 140 (evel: Medium

&1. A strategy that focuses on offering products that are uni<ue 3ith respect to competitor>s products is called a !!!!!!!!!!!!! strategy. a" integrated #" cost leadership c" differentiation d" diversification Ans: c %esponse: See page 141 (evel: )asy

&'. A strategic position 3ithin an industry relying upon lo3 cost for a mar/et segment 3ould #e called a@n": a" focused price leadership strategy #" focused differentiation strategy c" focused cost leadership strategy d" differentiation strategy e" integrated strategy Ans: c %esponse: See the descriptions on page 141 (evel: )asy

&+. 1he recommendation of the ACB matri; on <uestion mar/s is retrenchment or !!!!!!!!. a" invest freely #" invest for sta#ility c" invest in a targeted manner d" divest Ans: c %esponse: See page 14+7 these are potentially either stars or dogs, so invest carefully (evel: Medium

&&. 5hat is the #est strategy for products that the Aoston Consulting Broup 3ould identify as dogs6 a" high gro3th #" retrenchment c" lo3 gro3th d" no gro3th Ans: # %esponse: See page 14+ (evel: Medium

&4. A strategic leader has to: a" avoid communication in order to minimi e distractions. #" dictate direction. c" strive for am#iguity in order to avoid divisions in the group. d" create a sense of urgency. Ans: d %esponse: See page 14&7 the others are reversed (evel: Medium

1rueCFalse

&8. Ausiness strategies should support #usiness goals and o#$ectives. Ans: 1rue %esponse: See page 1&'

(evel: )asy

&7. 1he /ey to having a sustaina#le competitive advantage is operating in a 3ay that is difficult to imitate. Ans: 1rue %esponse: See page 1&' (evel: )asy

&:. A functional strategy provides long term direction for the total enterprise. Ans: False %esponse: See page 1&+ (evel: Medium

&=. 1he advantage of gro3th through concentration is that you are gro3ing in an area that you /no3 and, presuma#ly, have e;pertise. Ans: 1rue %esponse: See discussion on page 1&+ (evel: )asy

40. A retrenchment strategy could #e a going out of #usiness strategy. Ans: 1rue %esponse: See <uote on page 1&& (evel: )asy

41. Fust a#out any /ind of partnership #et3een t3o companies could #e called a strategic alliance. Ans: 1rue %esponse: See definitions on page 1&4. (evel: Medium

4'. Co?opetition is the strategy of 3or/ing 3ith rivals on pro$ects of mutual #enefit. Ans: 1rue %esponse: See page 1&4 (evel: Medium

4+. 1he process of strategic management focuses only upon developing strategies. Ans: False %esponse: See page 1&:7 it focuses on #oth formulation and implementation. (evel: Medium

4&. A mission statement includes specific goals that the organi ation 3ants to achieve. Ans: False %esponse: See page 1&:7 mission statements should #e related to specific goals #ut they are not included in the statement. (evel: ,ifficult

44. A S521 analysis includes a detailed e;amination of an organi ation>s strengths and 3ea/nesses. Ans: 1rue %esponse: See page 1&= (evel: )asy

48. A special strength that gives an organi ation a competitive advantage is called a core competency. Ans: 1rue %esponse: See page 140 (evel: )asy

47. Dorter>s Model of 9ndustry Attractiveness includes four forces.

Ans: False %esponse: See page 140 (evel: )asy

4:. 9f your strategy is to compete on price against your competitors, your strategy is one of focused differentiation. Ans: False %esponse: See page 1417 general competition #ased on price is a cost leadership strategy (evel: )asy

4=. 9n the ACB matri;, stars are the #usiness units that have high mar/et shares in high? gro3th mar/ets. Ans: 1rue %esponse: See pages 14+ for this definition (evel: )asy

80. Strategic leadership inspires people to implement organi ational strategies. Ans: 1rue %esponse: See page 14& (evel: )asy

Fill?in?the?Alan/

81. A !!!!! is a comprehensive action plan that identifies long?term direction for an organi ation and guides resource utili ation to accomplish its goals. Ans: strategy %esponse: See page 1&' for this definition (evel: )asy

8'. !!!!! strategies guide the activities of specific areas in implementing the organi ational?level strategies. Ans: Functional %esponse: See page 1&+ for this definition (evel: Medium

8+. );pansion into areas of ne3 #usiness is called !!!!!. Ans: diversification %esponse: See page 1&+ for this discussion (evel: )asy

8&. !!!!! entails cutting the si e of your organi ation and reducing the 3or/force. Ans: ,o3nsi ing %esponse: See page 1&& for this definition (evel: )asy

84. 1he international #usiness strategy that adopts standard products and advertising to use 3orld3ide is called a !!!!! strategy. Ans: glo#ali ation %esponse: See page 1&& for this discussion (evel: Medium

88. Strategic !!!!! is the process of putting strategies into action. Ans: implementation %esponse: See page 1&: for this definition (evel: )asy

87. 1he shorter?term guides to action under the mission statement are called !!!!! !!!!!. Ans: operating o#$ectives

%esponse: See page 1&= for this definition (evel: Medium

8:. !!!!! !!!!! are special strengths of an organi ation and give the organi ation a competitive advantage. Ans: Core competencies %esponse: See page 140 for this definition (evel: Medium

8=. A@n" !!!!! strategy indicates concentration on a special mar/et segment or niche. Ans: focus %esponse: See page 141 for this discussion (evel: )asy

70. !!!!! !!!!! is the capa#ility to inspire people to successfully engage in a process of continuous change, performance enhancement, and implementation of the firm>s goals. Ans: Strategic leadership %esponse: See page 14& for this definition (evel: Medium

)ssay

71. ,efine the difference #et3een a competitive advantage and a sustaina#le competitive advantage. Ans: A competitive advantage is something that you do #etter than your rivals. -o3ever, a sustaina#le competitive advantage has the addition strength of #eing a competitive advantage that is also difficult to imitate. %esponse: See pages 1&' (evel: Medium

7'. 5hat is the difference #et3een a glo#ali ation strategy and a transnational strategy6

Ans: A glo#ali ation strategy attempts to develop standard products and a strong national identity for use 3orld3ide 3hereas a transnational strategy tries to operate 3ithout a strong national identity. %esponse: See page 1&& (evel: Medium

7+. 5hat are the three levels of strategy in large companies6 ,efine each of them as to their relationship to organi ational structure, their purpose and their strategic <uestions. Ans: 1he three levels of strategy are corporate, #usiness and functional. Corporate is the highest level. 1he corporate strategy sets the direction for the corporation as a 3hole. At this level, the strategic <uestion is .9n 3hat industries and mar/ets should the corporation compete60 1he Business strategy is for those divisions and #usiness units that report to corporate management. )ach division or unit 3ill have its o3n strategy #ut these strategies must #e in support of the corporate strategy. 1he strategic <uestion at this level is .-o3 are 3e going to compete for customers in our industries and mar/ets60 1he Functional strategy is for those departments such as production, engineering and mar/eting that report to division management. )ach department may have its o3n strategy #ut all of the functional strategies must support each other as 3ell as the #usiness strategy. 1he strategic <uestion at the functional level is .-o3 can 3e #est utili e resources 3ithin the function to support implementation of the #usiness strategy60 %esponse: See pages &+ (evel: Medium

7&. Eame Dorter>s Five Forces and descri#es their relation to the organi ation>s internal and e;ternal environments. Ans: 1he Five Forces are 9ndustry Competition, Suppliers, Customers, Ee3 )ntrants and Su#stitute Droducts. Industry Competition is the rivalry that e;ists among competing firms. 1ypically, there are a fe3 competitors that dominate the mar/et in terms of their si e and relative mar/et share. Suppliers are the firms from 3hich a company purchases its e<uipment and ra3 materials. (arge suppliers may have #roader product lines or lo3er prices #ut smaller suppliers may offer more personal service. Customers are the reason for a firm>s e;istence. (arge customers offer greater sales #ut, #ecause of their #uying po3er, they often demand lo3er prices. New Entrants are potential competitors 3ho might enter the mar/et. 1oo large or too many competitors can destroy the profita#ility of a mar/et. Substitute Products are al3ays a threat. 1hey are often a result of ne3 technologies and can literally destroy a company that does not /eep up 3ith the ne3er technology.

%esponse: See page 140 (evel: Medium

74. ,iscuss the classifications in the Aoston Consulting Broup>s matri; as they relate to industry gro3th, mar/et share and #usiness strategy. Ans: 1he ACB matri; consists of Cash Co3s, Stars, Guestion Mar/s and ,ogs. Cash Cows are high mar/et share lo3 industry gro3th #usinesses. 1hey are typically profita#le and cash generators. 1he cash co3 strategy is little or no gro3th. Stars are high mar/et share high industry gro3th #usinesses. 1hey are typically profita#le #ut not cash generators due to the high cost of maintaining their gro3th. 1he stars strategy is to at the mar/et rate or higher. Question Marks are lo3 mar/et share high industry gro3th #usinesses. 1hey are pro#a#ly not profita#le and cash users. 1he <uestion mar/ strategy is either high gro3th or retrenchment. Do s are lo3 mar/et share lo3 industry gro3th #usinesses. 1hey most li/ely are not profita#le and cash users. 1he dog strategy is retrenchment. %esponse: See page 14+ (evel: Medium