Mgt603 Strategic Management Solved Mcqs From Book by David (Chap 1)

MGT603 Strategic Management Solved MCQs from Book by
David (chap 1)
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CHAPTER 1
The Nature of Strategic Management
True/False
Introduction
1.The underpinnings of strategic management hinge on managers gaining an understanding of competitors,
markets, prices, suppliers, distributors, governments, creditors, shareholders and customers worldwide.
Ans: T Page: 4
2.Although the Internet has increased in popularity, it has actually led to increases in company expenses.
Ans: F Page 4
3.Consumer e-commerce is five times greater than business-to-business e-commerce.

Ans: F Page 4
What Is Strategic Management?
4.Optimizing for tomorrow the trends of today is the purpose of strategic management.
Ans: F Page: 5
5.Even though useful, strategic planning has been cast aside by corporate America since the early 1990s.
Ans: F Page: 5
6.Resource allocation is included in strategy-formulation activities.

Ans: T Page: 5
7.The terms strategic management and strategy implementation are synonymous.

Ans: F Page: 5
8.A vision statement is, in essence, a company’s game plan.

Ans: F Page: 5
9.Strategy implementation is often considered to be the most difficult stage in the strategic-management
process because it requires personal discipline, commitment and sacrifice.
Ans: T Page: 6
10.The final stage in strategic management is strategy implementation.

Ans: F Page 6
11.Strategy formulation, implementation and evaluation activities occur at three hierarchical levels in a large
diversified organization: corporate, divisional and functional.
Ans: T Page: 6
12.One of the fundamental strategy evaluation activities is reviewing external and internal factors that are the
bases for current strategies.
Ans: T Page: 6
13.An objective, logical, systematic approach for making major decisions in an organization is a way to
describe the strategic-management process.
Ans: T Page: 7
14.Strategic management is an attempt to organize qualitative and quantitative information in a way that
allows effective decisions to be made under conditions of uncertainty.
Ans: T Page: 7
15.Analytical and intuitive thinking should complement each other.
Ans: T Page: 7
16.According to Albert Einstein, “Knowledge is far more important than intuition.”

Ans: F Page 7
17.Management by intuition can be defined as operating from the “I’ve-already-made-up-my-mind-don’t-

bother- me-with-the-facts mode.”
Ans: F Page 7
18.By monitoring external events, companies should be able to identify when change is required.
Ans: F Page: 8
Key Terms in Strategic Management
19.Anything the firm does especially well compared to rival firms could be considered a competitive
advantage.
Ans: T Page 8
20.Once a firm acquires a competitive advantage, they are usually able to sustain the competitive advantage
for an extended period of time.
Ans: F Page 9
21.Newspaper companies in the United States provide a good example of how a company can sustain a
competitive advantage over the long term.
Ans: F Page 9
22.In order for a firm to achieve sustained competitive advantage, a firm must continually adapt to changes
in external trends and events and effectively formulate, implement, and evaluate strategies that capitalize
upon those factors.
Ans: T Page: 9
23.Strategists are usually found in higher levels of management and have considerable authority for
decision-making in the firm.
Ans: T Page: 10
24.The middle manager is the most visible and critical strategic manager.
Ans: F Page: 10
25.All strategists have similar attitudes, values, ethics and concerns for social responsibility.
Ans: F Page: 10
26.A vision statement answers the question, “What is our business?,” whereas a mission

statement answers, “What do we want to become?”
Ans: F Page: 10-11
27.In the last five years, the position of chief strategy officer (CSO) has diminished in comparison to other
top management ranks of many organizations.
Ans: F Page: 10
28.A clear mission statement describes the values and priorities of an organization.
Ans: T Page: 10
29.As of 2004, Wal-Mart was the largest corporation in the world.

Ans: T Page 11
30.Strengths and weaknesses are determined relative to competitors.

Ans: T Page: 12
31.In a multidivisional firm, objectives should be established for the overall company and not for each
division.
Ans: F Page: 13
32.Objectives should be measurable, quantitative, challenging, realistic, consistent and prioritized.

Ans: T Page: 13
33.Annual objectives are long-term milestones that organizations must achieve to reach short-term

objectives.
Ans: F Page: 13
34.Annual objectives are especially important in strategy formulation.

Ans: F Page: 13
35.According to research, a healthier workforce can more effectively and efficiently implement strategies.
Ans: T Page: 13
The Strategic-Management Model
36.Identifying an organization’s existing vision, mission, objectives and strategies is the final step for the
strategic management process.
Ans: F Page: 15
37.Once an effective strategy is designed, modifications are rarely required.

Ans: F Page: 15
38.Application of the strategic-management process is typically more formal in larger and well-
established organizations.
Ans: T Page: 15
Benefits of Strategic Management
39.Followed by commitment, understanding is the most important benefit of strategic management.

Ans: T Page: 16
40.The changes that occurred at Disney after Robert Iger took over as CEO exemplifies the fact that more
and more organizations are centralizing the strategic-management process.
Ans: F Page: 16
41.Firms with planning systems more closely resembling strategic-management theory generally exhibit
superior long-term financial performance relative to their industry.
Ans: T Page: 17
42.Low-performing firms typically underestimate their competitor’s strengths and overestimate their own
firm’s strengths.
Ans: T Page: 17
43.According to Greenley, strategic management provides a cooperative, integrated and enthusiastic

approach to tackling problems and opportunities.
Ans: T Page: 18
Why Some Firms Do No Strategic Planning
44.The poor reward structure is one reason managers do not engage in strategic planning.
Ans: T Page: 18
45.Crises and fires in an organization allows managers the training and time for effective strategic planning.
Ans: F Page: 17
Pitfalls in Doing Strategic Planning
46.Top managers making many intuitive decisions that conflict with the formal plan is one pitfall managers
should avoid in strategic planning.
Ans: T Page: 19
47.Managers must be very formal in strategic planning because formality induces flexibility and creativity.
Ans: F Page: 19
Guidelines for Effective Strategic Management
48.An integral part of strategy implementation must be to evaluate the quality of the strategic-management
process.
Ans: F Page: 19
49.Strategic-management must be a self-reflective learning process that familiarizes managers and

employees in the organization with key strategic issues and feasible alternatives for resolving those issues.
Ans: T Page: 20
Business Ethics and Strategic Management
50.Today, managers and employees can be found personally liable if they ignore, conceal, or disregard a
pollution problem.
Ans: T Page: 21
51.Merely having a code of ethics is not sufficient to ensure ethical business behavior.
Ans: T Page: 23
52.An integral part of the responsibility of all managers is to provide ethical leadership by
constant example and demonstration.
Ans: T Page: 23
Comparing Business and Military Strategy
53.In most situations, business strategy is very different than military strategy.
Ans: F Page: 25
The Nature of Global Competition
54.International operations can be as simple as exporting a product to a single foreign country.

Ans: T Page: 28
55.One risk in international operations is that nationalistic factions could seize the operations.
Ans: T Page: 29
Conclusion
56.All organizations have a strategy from their inception, even if the strategy is informal, unstructured, and
sporadic.
Ans: T Page: 30
57.Nonprofit organizations have less need for strategic management because they are not interested in
making a profit.
Ans: F Page: 30
58.Firms can be more proactive with strategic management.

Ans: T Page: 30
Introduction
59.The term “environment” includes all of the following except:

a.air.
b.water.1
c.firms.
d.natural resources.
e.fauna.
Ans: c Page: 4
60. The one factor that has most significantly impacted the nature and core of buying and selling in nearly all
industries has been
a.the Internet.
b.political borders.
c.corporate greed.
d.customer and employee focus.
e.the government.
Ans: a Page: 4
What Is Strategic Management?

61. What can be defined as the art and science of formulating, implementing and evaluating cross-functional
decisions that enable an organization to achieve its objectives?
a.Strategy formulation
b.Strategy evaluation
c.Strategy implementation
d.Strategic management
e. Strategic leading
Ans: d Page: 5
62. ____________ is used to refer to strategic formulation, implementation and evaluation, with
______________ referring only to strategic formulation.
a.Strategic planning; strategic management
b.Strategic planning; strategic processing
c.Strategic management; strategic planning
d.Strategic management; strategic processing
e.Strategic implementation; strategic focus
Ans: c Page: 5
63. During what stage of strategic management are a firm’s specific internal strengths and weaknesses
determined?
a.Formulation
b.Implementation
c.Evaluation
d.Feedback
e.Goal-setting
Ans: a Page: 5
64. An important activity in __________ is taking corrective action.

a.strategy evaluation
b.strategy implementation
c.strategy formulation
d.strategy leadership
e.all of the above
Ans: a Page: 6
65. What step in the strategic development process involves mobilizing employees and managers to put
strategies into action?
a.Formulating strategy
b.Strategy evaluation
c.Implementing strategy
d.Strategic advantage
e.Competitive advantage
Ans: c Page: 6
66. What types of skills are especially critical for successful strategy implementation?
a.Interpersonal
b.Marketing
c.Technical
d.Conceptual
e.Thinking
Ans: a Page: 6
67. Which phase of strategic management is called the action phase?

a.Strategy formulation
b.Strategy implementation
c.Strategy evaluation
d.Allocating resources
e.Measuring performance
Ans: b Page: 6
68. __________ is not a strategy-implementation activity.

a.Taking corrective actions
b.Establishing annual objectives
c.Devising policies
d.Allocating resources
e.Motivating employees
Ans: a Page: 6
69. Strategy evaluation is necessary because

a.internal and external factors are constantly changing.
b.the SEC requires strategy evaluation.
c.competitors change their strategies.
d.the IRS requires strategy evaluation.
e.firms have limited resources.
Ans: a Page: 6
70. Which statement best describes intuition?

a.It represents the marginal factor in decision-making.
b.It represents a minor factor in decision-making integrated with analysis.
c.It should be coupled with analysis in decision-making.
d.It is better than analysis in decision-making.
e.It is management by ignorance.
Ans: c Page: 7
71. _________ and _________ are external forces transforming business and society today.
a.E-commerce; strategy
b.E-commerce; globalization
c.Strategy; globalization
d.Corporate culture; stakeholders
e.Stakeholders; strategy
Ans: b Page: 8
72. Anything that a firm does especially well compared to rival firms is referred to as:
a.competitive advantage.
b.comparative advantage.
c.opportunity cost.
d.sustainable advantage.
e.an external opportunity.
Ans: a Page: 8
Key Terms in Strategic Management

73. The trends in newspaper circulation in the United States provide support for which statement?
a.Sustainable competitive advantage is easy to maintain.
b.Several firms can have similar competitive advantages.
c.Some products are relatively immune to changes in the external environment
d.Most competitive advantages are hard to sustain
e.Competition is generally good for companies and consumers
Ans: d Page 9
74. Which individuals are most responsible for the success and failure of an organization?
a.Strategists
b.Financial planners
c.Personnel directors
d.Stakeholders
e.Human resource managers
Ans: a Page: 10
75. The first step in strategic planning is generally:

a.Developing a vision statement
b.Establishing goals and objectives
c.Making a profit
d.Developing a mission statement
e.Determining opportunities and threats
Ans: a Page: 10
76. What are enduring statements of purpose that distinguish one business from other similar firms?
a.policies
b.mission statements
c.objectives
d.rules
e.employee conduct guidelines
Ans: b Page: 10
77. The largest company in the world is:

a.Honda Motor
b.ING Group
c.Wal-Mart
d.Ford Motor Company
e.Royal Dutch/Shell Group
Ans: d Page: 10
78. Usually, external opportunities and threats are:

a.uncontrollable by a single organization.
b.controlled by governments.
c.not as important as internal strengths and weaknesses.
d.key functions in strategy implementation.
e.key functions in strategy exploitation.
Ans: a Page: 12
79. Specific results an organization seeks to achieve in pursuing its basic mission are:
a.strategies
b.rules
c.objectives
d.policies
e.mission
Ans: c Page: 13
80. Internal __________ are activities in an organization that are performed especially well.
a.opportunities
b.competencies
c.strengths
d.management
e.factors
Ans: c Page: 13
81. What are the means by which long-term objectives will be achieved?
a.strategies.
b.strengths.
c.weaknesses.
d.policies.
e.opportunities.
Ans: a Page: 13
82. Long-term objectives should be all of the following except:

a.measurable.
b.continually changing.
c.reasonable.
d.challenging.
e.consistent.
Ans: b Page: 13
83. __________ can best be described as short-term in nature.

a.Mission statements
b.Tenure
c.Annual objectives
d.Strategies
e.Management
Ans: c Page: 13
84. In which phase of strategic management are annual objectives especially important?
a.formulation
b.control
c.evaluation
d.implementation
e.management
Ans: d Page: 13
85. What are guides to decision making?

a.laws
b.rules
c.policies
d.procedures
e.goals
Ans: c Page: 13
The Strategic-Management Model
86. The strategic-management process
a.occurs once a year.
b.is a sequential process.
c.is a continuous process.
d.applies mostly to companies with sales greater than $100 million.
e.applies mostly to small businesses
Ans: c Page: 13
87. Which of the following is not included in the strategic management model?
a.Measure and evaluate performance.
b.Perform internal research to identify customers.
c.Establish long-term objectives.
d.Implement strategies.
e.Develop mission and vision statements.
Ans: b Page: 14
Benefits of Strategic Management

88. Strategic management enables an organization to __________, instead of companies just responding to
threats in their business environment.
a.be proactive
b.determine when the threat will subside
c.avoid the threats
d.defeat their competitors
e.foresee into the future
Ans: a Page: 16
89. The act of strengthening employees’ sense of effectiveness by encouraging and rewarding them to
participate in decision-making and exercise initiative and imagination is referred to as:
a.Authoritarianism
b.Proaction
c.Empowerment
d.Transformation
e.Delegation
Ans: c Page: 16
90. How do line managers become “owners” of the strategy?

a.by attending top manager meetings
b.by gathering information about competitors
c.by involvement in the strategic-management process
d.by becoming a shareholder of the firm
e.by buying off top managers
Ans: c Page: 16
91. The changes that occurred when Robert Iger took over the reigns at Disney, demonstrate which current
trend in organizations?
a.increased formalization of the strategic management process
b.increased structuring of strategic management
c.increased decentralizing of strategic management
d.increased emphasis on strategic planning
e.increased central planning of the strategic management process
Ans: c Page 16
92. According to research, organizations using strategic management are __________ than those that do not.
a.more profitable
b.more complex
c.less profitable
d.less static
e.less complex
Ans: a Page: 17
93. According to Greenley, strategic management offers all of these benefits except that
a.it provides an objective view of management problems.
b.it creates a framework for internal communication among personnel.
c.it encourages a favorable attitude toward change.
d.it maximizes the effects of adverse conditions and changes.
e.it gives a degree of discipline and formality to the management of a business.
Ans: d Page: 17- 18
Why Some Firms Do No Strategic Planning

94. What is not a reason given for poor or no strategic planning in organizations?
a.Wasting of time
b.Being content with success
c.Fire-fighting
d.Poor reward structure
e.Trust of management
Ans: e Page: 18-19
Pitfalls in Doing Strategic Planning

95. All of these are pitfalls an organization should avoid in strategic planning except:
a.using plans as a standard for measuring performance.
b.using strategic planning to gain control over decisions and resources.
c.failing to involve key employees in all phases of planning.
d.too hastily moving from mission development to strategy formulation.
e.being so formal in planning that flexibility and creativity are stifled.
Ans: a Page: 19
96. What is not a pitfall an organization should avoid in strategic planning?

a.Failing to communicate the plan to employees
b.Involving all managers rather than delegating planning to a “planner”
c.Top managers not actively supporting the strategic planning process
d.Doing strategic planning only to satisfy accreditation or regulatory requirements
Ans: b Page: 19
97. Which of the following statements is false?

a.Open-mindedness is an important guideline for effective strategic management.
b.Strategic management must become a self-perpetuating socialist mechanism.
c.No organization has unlimited resources.
d.Strategic decisions require trade-offs.
e.Strategic management must be a self-reflective learning process.
Ans: b Page: 20

Business Ethics and Strategic Management
98. Principles of conduct that guide decision-making are known as

a.human rights.
b.the Constitution.
c.business ethics.
d.nonprofit organization policies.
e.social responsibility requirements.
Ans: c Page: 20
99. A (n) ____________ can provide a basis on which policies can be devised to guide daily decisions and
behavior at the work site.
a.list of guidelines
b.policy for safety
c.vision statement
d.code of business ethics
e.annual objective
Ans: d Page: 23
100.Because they must take the __________ of the firm, strategists’ salaries are high compared to those of
other individuals in the organization.
a.moral risks
b.social risks
c.environmental risks
d. societal criticism
e. employee criticism
Ans: a Page: 23
101.What can be created by ethics training and an ethics culture?

a.Competitive responsibility
b.Competitive advantage
c.Strategic advantage
d.Employee cooperation
e.Comparative advantage
Ans: c Page: 25
102.Which of these business actions is (are) always considered to be unethical?

a.poor product or service safety
b.using nonunion labor in a union shop
c.dumping flawed products in a foreign market
d.insider trading
e.all of the above
Ans: e Page: 25
103.Ethical standards come out of __________ in a final analysis.

a.government
b.competitors
c.history and heritage
d.stakeholder analysis
e.community involvement
Ans: c Page: 25
Comparing Business and Military Strategy

104.A strong __________ heritage underlies the study of strategic management.
a.military
b.government
c.political
d.social
e.cultural
Ans: a Page: 25
105.Military strategy is based on an assumption of __________, whereas business strategy is based on an

assumption of __________.
a.conflict; cooperation
b.conflict; competition
c.cooperation; conflict
d.competition; conflict
e.cooperation; competition
Ans: b Page: 26
The Nature of Global Competition
106.____________ are organizations that conduct business operations across national borders.
a.Domestic firms
b.Multinational corporations
c.Parent companies
d.Government-backed companies
e.Franchises
Ans: b Page: 28
107.A(n) __________ refers to a firm investing in international operations, while the _________ is the country
where that business is conducted.
a.parent company; host country
b.home country; parent company
c.parent country; host company
d.host company; home country
e.exporting company; importing company
Ans: a Page: 28
108.The greatest advantage of international operations is:

a.Reduced tariffs and taxes
b.Spreading economic risks over a wider number of markets
c.Access to global technology, culture and business practices2
d.Gaining new customers
e.Less-intense competition
Ans: d Page: 28
109.All of these are potential disadvantages of an international operation except:

a.overestimated weaknesses and underestimated strengths of competitors.
b.differing languages, cultures and value systems.
c.reduced tariffs and taxes.
d.complexity due to a multiple monetary system.
e.all of these are potential disadvantages.
Ans: c Page: 29
Essay Questions
110.Compare and contrast strategic planning with strategic management.
Strategic planning is more often used in the business world, whereas strategic management is often used in
academia. Sometimes, strategic management is used to refer to strategy formulation, implementation and evaluation,
with strategic planning referring only to strategy formulation. The purpose of strategic management is to exploit and
create new and different opportunities for tomorrow; long-range planning, in contrast, tries to optimize for tomorrow
the trends of today.
Page: 5
111.Which stage in the strategic-management process is most difficult? Explain why.

Strategy implementation is the most difficult stage in the strategic-management process because it requires personal
discipline, commitment and sacrifice. Successful strategy implementation hinges upon managers’ ability to motivate
employees, which is more of an art than a science.
Page: 6
112.Explain the relationship between strategic management and competitive advantage for firms. How can a
firm achieve sustained competitive advantage?
Ans: Strategic management is all about gaining and maintaining competitive advantage. Competitive advantage is
anything a firm does especially well compared to rival firms. When a firm can do something that rival firms cannot do,
or owns something that rival firms desire, that can represent a competitive advantage. Getting and keeping
competitive advantage is essential for long-term success of an organization. A firm must strive to achieve sustained
competitive advantage by (1) continually adapting to changes in external trends and events and internal capabilities,
competencies and resources, and by (2) effectively formulating, implementing and evaluating strategies that
capitalize upon those factors.
Page: 8-9
113.Define what strategists are. Describe what they do in an organization.
Strategists are individuals who are most responsible for the success or failure of an organization. They help an
organization gather, analyze and organize information. They track industry and competitive trends, develop
forecasting models and scenario analyses, identify business threats and develop creative action plans. Strategic
planners usually serve in a support or staff role. Usually found in higher levels of management, they typically have
considerable authority for decision-making in the firm.
Page: 9
114.Define and discuss the differences between vision and mission statements.
Many organizations today develop a vision statement that answers the question “What do we want to become?”
Developing a vision statement is often considered the first step in strategic planning, preceding even development of
a mission statement. Many vision statements are a single sentence. For example, the vision statement of Stokes Eye
Clinic in Florence, South Carolina, is “Our vision is to take care of your vision.” The vision of the Institute of
Management Accountants is “Global leadership in education, certification, and practice of management accounting
and financial management.” Mission statements are “enduring statements of purpose that distinguish one business
from other similar firms. A mission statement identifies the scope of a firm’s operations in product and market terms.”
It addresses the basic question that faces all strategists: “What is our business?” A clear mission statement describes
the values and priorities of an organization. Developing a mission statement compels strategists to think about the
nature and scope of present operations and to assess the potential attractiveness of future markets and activities. A
mission statement broadly charts the future direction of an organization.
Page: 11
115.Discuss some forces that influence the formality of strategic-management systems.

Firms that compete in complex, rapidly changing environments, such as technology companies, tend to be more
formal in strategic planning. Firms that have many divisions, products, markets and technologies also tend to be more
formal in applying strategic-management concepts. Greater formality in applying the strategic-management process
is usually positively related with the cost, comprehensiveness, accuracy and success of planning across all types and
sizes of organization.
Page: 14-15
116.List 10 major benefits of strategic management, as stated by Greenley.

There are 14 benefits stated by Greenley. Students are to list any 10 of the following: (1) it allows for identification,
prioritization and exploitation of opportunities, (2) it provides an objective view of management problems, (3) it
represents a framework for improved coordination and control of activities, (4) it minimizes the effects of adverse
conditions and changes, (5) it allows major decisions to better support established objectives, (6) it allows more
effective allocation of time and resources to identified opportunities, (7) it allows fewer resources and less time to be
devoted to correcting erroneous or ad hoc decisions, (8) it creates a framework for internal communication among
personnel, (9) it helps integrate the behavior of individuals into a total effort, (10) it provides a basis for clarifying
individual responsibilities, (11) it encourages forward thinking, (12) it provides a cooperative, integrated and
enthusiastic approach to tackling problems and opportunities, (13) it encourages a favorable attitude toward change,
and (14) it gives a degree of discipline and formality to the management of a business.
Page: 16-17
117.Give at least seven reasons why some firms do no strategic planning.

Ans: Some reasons for poor or no strategic planning are as follows:
Poor reward structures, fire-fighting, waste of time, too expensive, laziness, content with success, fear of failure,
overconfidence, prior bad experience, self-interest, fear of the unknown, honest difference of opinion, and suspicion.
Page: 17-18
118.What are the pitfalls in strategic planning that management in an organization should watch out for or
avoid? Identify any five pitfalls.
There are 13 pitfalls. Students should list any five of the following: (1) using strategic planning to gain control over
decisions and resources; (2) doing strategic planning only to satisfy accreditation or regulatory requirements; (3) too
hastily moving from mission development to strategy formulation; (4) failing to communicate the plan to employees,
who continue to work in the dark; (5) top managers making many intuitive decisions that conflict with the formal plan;
(6) top managers not actively supporting the strategic-planning process; (7) failing to use plans as a standard for
measuring performance; (8) delegating planning to a “planner” rather than involving all managers; (9) failing to involve
key employees in all phases of planning; (10) failing to create a collaborative climate supportive of change; (11)
viewing planning to be unnecessary or unimportant; (12) becoming so engrossed in current problems that insufficient
or no planning is done; and (13) being so formal in planning that flexibility and creativity are stifled.
Page: 18
119.Explain the significance of the ISO (International Organization for Standardization). What are the
purposes of ISO 9000, ISO 14000, and ISO 14001?
Ans: The ISO is based in Geneva, Switzerland and is a network of the national standards institutes of 147 countries.
The ISO is the world’s largest developer of standards and is widely accepted worldwide. ISO standards are voluntary,
since the organization has no legal authority to enforce their implementation. However, many companies that are not
ISO certified often cannot get work. ISO 9000 focuses on quality control and ISO 14000 focuses on operating in an
environmentally-friendly manner. ISO 14000 refers to a series of voluntary standards in the environmental field. ISO
14001 is similar to ISO 14000 because it is also an environmental standard. ISO 14001 is a standard for
Environmental Management Systems. Standards include environmental auditing, environmental performance
evaluation, environmental labeling, and life-style assessment. ISO 14001 standards offer a universal technical
standard for environmental compliance.
Page: 21-22
120.Explain what Drucker means when he says, “Trees die from the top.”
“Trees die from the top,” can be explained as ‘top management creates organizational spirit.’ When top
management’s spirit dies, so does the rest of the company’s spirit. This leads to the downfall, or death, of the
company.
Page: 22-24
121.Compare and contrast business and military strategy.

Business and military strategy are very similar. A key aim of both business and military strategy is “to gain
competitive advantage.” They both also try to use their own strengths to exploit competitor’s weaknesses. Happiness
is not a result of accidental strategies in either business or military organizations. The element of surprise provides
great competitive advantages in both military and business strategy; information systems that provide data on
opponents’ or competitors’ strategies and resources are also vitally important. Finally, both business and military
organizations must adapt to change and constantly improve to be successful.
While business and military strategy are the same in many ways, they have one major difference—business strategy
is formulated, implemented and evaluated with an assumption of competition, whereas military strategy is based on
an assumption of conflict.
Page: 24-25
122.What are the advantages and disadvantages of having international operations? Explain.
International operations create many advantages for a company:
1) Foreign operations can absorb excess capacity, reduce unit costs and spread economic risks over a wider number
of markets;
2) foreign operations can allow firms to establish low-cost production facilities in locations close to raw materials
and/or cheap labor;
3) competitors in foreign markets may not exist, or competition may be less intense than in domestic markets;
4) foreign operations may result in reduced tariffs, lower taxes and favorable political treatment in other countries;
5) joint ventures can enable firms to learn the technology, culture and business practices of other people and to make
contacts with potential customers, suppliers, creditors and distributors in foreign countries;
6) many foreign governments and countries offer varied incentives to encourage foreign investment in specific
locations; and
7) economies of scale can be achieved from operations in global rather than solely domestic markets. Larger-scale
production and better efficiencies allow higher sales volumes and lower price offerings.
There are also numerous potential disadvantages of having internal operations:

1) nationalistic factions could seize foreign operations;
2) firms confront different and often little-understood social, cultural, demographic, environmental, political,
governmental, legal, technological, economic and competitive forces when doing business internationally. These
forces can make communication difficult between the parent firm and subsidiaries;
3) weaknesses of competitors in foreign lands are often overestimated, and strengths are often underestimated.
Keeping informed about the number and nature of competitors is more difficult when doing business internationally;
4) language, culture and value systems differ among countries, and this can create barriers to communication and
problems managing people;
5) gaining an understanding of regional organizations is difficult but is often required in doing business internationally;
6) dealing with two or more monetary systems can complicate international business operations; and
7) the availability, depth and reliability of economic and marketing information in different countries varies extensively,
as do industrial structures, business practices and the number and nature of regional organizations.
David (chap 2) a
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CHAPTER 2
The Business Vision and Mission
1. Vision and mission statements can often be found in the front of annual reports.
Ans: T
2. Although it is important for companies to have a clearly defined mission statement, research has shown
that less than 50% of all companies have used a mission statement in the previous five years.
Ans: F
What Do We Want To Become?
3. The foundation for development of a comprehensive mission statement is provided by a clear vision.
Ans: T
4. The mission statement should be short—preferably one sentence.
Ans: F
5. When developing a vision statement, input should be received from as many managers as possible.
Ans: T
6. If an organization chooses to have both a mission and a vision, the mission statement should be
established first.
Ans: F
What Is Our Business?
7. According to Peter Drucker, asking the question “What is our business?” is synonymous with asking the
question “What is our vision?”
Ans: F
8. A declaration of an organization’s “reason for being” is the mission statement.
Ans: T
9. A mission statement, sometimes called a creed statement, can be defined as an “enduring statement of
purpose that distinguishes one organization from other similar enterprises.”
Ans: T
10. There is no need for a mission statement in small, nonprofit organizations.
Ans: F
11. A mission statement is a declaration of an organization’s financial status.
Ans: F
12. A mission statement can sometimes be called a statement of philosophy.
Ans: T
13. Carefully prepared statements of vision and mission are widely recognized as the first step in strategic
management.
Ans: T
14. An important question a mission statement should answer is, “What do we want to become?”
Ans: F
15. Whereas the mission statement answers the question “What do we want to become?,” the vision
statement answers the question “What is our business?”
Ans: F
16. In order to motivate a workforce effectively, both profit and vision are needed.
Ans: T
17. When developing a mission statement, it is usually advisable to involve as few managers as possible.
Ans: F
18. The first step in the process of developing a mission statement is to ask all participants to prepare what
they believe the organization’s mission should be.
Ans: F
19. According to Campbell and Yeung, the process of developing a mission statement should create an
“emotional bond” and “sense of mission” between the organization and its employees.
Ans: T
20. According to Campbell and Yeung, an organization’s vision is associated with behavior and with the
present.
Ans: F
The Importance of Vision and Mission Statements
21. According to King and Cleland, carefully developed and written mission statements ensure unanimity of
purpose within the organization.
Ans: T
22.
Mission statements are sometimes difficult to derive because top management may disagree over company
objectives.
Ans: T
23. The most important time for a company to develop a mission and vision statement is when the company
is experiencing financial difficulty.
Ans: F
24. In multidivisional organizations, each division should develop a mission statement independent of the
parent company.
Ans: F
25. Mission statements provide managers with a unit of direction that transcends individual, parochial and
transitory needs by promoting a sense of shared expectations among all levels and generations of
employees.
Ans: T
26. A sense of shared expectations among all levels and generations of employees is promoted with a
mission statement.
Ans: T
27. When a company has been successful and/or unsuccessful, the question “What is our business?” should
be asked.
Ans: T
Characteristics of a Mission Statement
28. A mission statement is usually a simple statement of specific beliefs.

Ans: F
29. A mission statement should be broad enough to reconcile differences among an organizations various
stakeholders.
Ans: F
30. Stakeholders of an organization include stockholders, customers and creditors, but not competitors.
Ans: F
31. Individuals who own stock in a corporation are considered stakeholders.
Ans: T
32. Stakeholders both affect and are affected by an organization’s strategic decisions.
Ans: T
33. Mission statements should be stated with high level of precision.
Ans: F
34. The relative attention an organization will devote to meeting the claims of various stakeholders is
indicated in a good mission statement.
Ans: T
35. Precision might stifle creativity in the formulation of an acceptable mission or purpose.
Ans: T
36. In most cases, several paragraphs are required to effectively state a mission statement.
Ans: F
37. An effective mission statement generates the impression a firm is successful, has direction, and is
worthy of time, support and investment.
Ans: T
38. According to Vern McGinnis, to be effective, all a mission statement need to do is define what the
organization is and what the organization aspired to be.
Ans: T
39. It is generally a good idea to use the mission statement as a guide when completing an external and
internal analysis.
Ans: F
40. Good mission statements identify the utility of a firm’s products to its customers.
Ans: T
41. Individual sales over the Internet greatly exceed business-to-business sales over the Internet.
Ans: F
42. Attracting customers is a major reason for developing a mission statement.
Ans: T
43. In Europe,Germany has experienced the greatest annual growth rate in consumer purchases over the
Internet.
Ans: F
44. Social policy should be designed and articulated during the strategy-implementation stage.
Ans: F
45. During the strategy-implementation process, social policy should be set and administered.
Ans: T
46. Social policy should be reaffirmed or changed during strategy implementation.
Ans: F
47. Corporate policies related to mandatory retirement are a growing concern in many counties.
Ans: T
48. According to a survey completed in 2005, Proctor & Gamble scored very low in corporate responsibility.
Ans: F
49. According to the Nobel Laureate Milton Friedman, organizations have tremendous social obligations.
Ans: F
Components of a Mission Statement
50. A firm’s philosophy in a mission addresses the question, “What is the firm’s distinctive competence?”
Ans: F

David (chap 3) The External Assessment
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MGT603 Strategic Management Solved MCQs from Book by David (chap 3)

CHAPTER 3
The External Assessment
True/False
Introduction
1. Industry analysis is also referred to as external strategic management audit.
Ans: T Page: 82
2. An external audit focuses on identifying and evaluating trends and events within the control of
management.
Ans: F Page: 82

The Nature of an External Audit
3. The aim of an external audit is to develop an exhaustive list of every possible factor that could influence
the business.
Ans: F Page: 83
4. External audits attempt to identify key variables that offer actionable responses.
Ans: T Page 83
5. Five major categories of external variables are: (1) economic forces, (2) social and cultural forces, (3)
political, governmental and legal forces, (4) technological forces and (5) demographic forces.
Ans: F Page: 83
6. As many managers and employees as possible should be involved in the process of performing an
external audit.
Ans: T Page: 83
7. To perform an external audit, a company first must gather competitive intelligence and information about
social, cultural, demographic, environmental, economic, political, legal, governmental and technological
trends.
Ans: T Page: 84
8. Freund argues that key external factors must not be hierarchical.
Ans: F Page: 84
The Industrial Organization (I/O) View
9. Research findings suggest that a greater percentage of a firm’s profitability can be explained by the
industry than can be explained by the firm’s internal factors.
Ans: F Page: 85

Economic Forces
10. An economic trend in America is the increasing numbers of two-income households.
Ans: T Page: 85
11. Economic factors do not have much impact on the attractiveness of strategies.
Ans: F Page: 85
12. An increase in interest rates is directly related to an increase in discretionary income and an increase in
the demand for discretionary goods.
Ans: F Page: 85
13. Motor vehicle firms in the United States are vulnerable when the value of the dollar falls.
Ans: F Page: 86
14. A low value of the dollar means lower exports and higher imports.
Ans: F Page: 86
15. In 2005, the Yen rose to a five-year high against the dollar.
Ans: T Page 86
16. The economic standard of living varies little between cities and countries.
Ans: F Page 86
17. The cost of living in London is greater than the cost of living in New York City.
Ans: T Page 87
18. The cost of living in Boston is greater than the cost of living in New York City.
Ans: F Page 87
19. According to the Wall Street Journal, the political bureaucracy in Russia has been able to stimulate economic
progress, free enterprise, and entrepreneurship.
Ans: F Page 87
20. Russian businesses are more likely to fall victim to illegal actions by officials and policemen than by
criminals.
Ans: T Page 87

Social, Cultural, Demographic and Environmental Forces
21. The United States is getting older and less Caucasian.
Ans: T Page: 88
22. It is predicted that, by 2025, over 18% of the population in the United States will be over 65 years old.
Ans: T Page 88
23. Recent consumption trends in the United States indicate that wine consumption is increasing at 5% while beer
consumption is increasing at 10%.
Ans: F Page 88
24. Hispanics are expected to become a larger minority group in the United States than African Americans by
2021.
Ans: T Page: 88
25. In the
United States, the population has been moving from the south and west to the Northeast and Midwest.
Ans: F Page: 89
26. In 2003,China replaced Mexico as the largest exporter to the United States.
Ans: T Page 89

Political, Governmental and Legal Forces
27. Political, governmental, and legal factors are considered key threats for most small and
large organizations.
Ans: F Page 90
28. Political forecasts can be the most important part of an external audit for firms that depend heavily on
government contracts.
Ans: T Page: 83
29. Within the European Union (EU), tax rates have been standardized to end competitive tax breaks among
member countries.
Ans: F page 90

Technological Forces
30. The Internet is changing the very nature of many industries by altering product life cycles and changing
the historical trade-off between productionstandardization and flexibility.
Ans: T Page: 93
31. In practice, critical technology decisions are too often delegated to lower organizational levels or are
made without an understanding of their strategic implications.
Ans: T Page: 94

Competitive Forces
32. A characteristic that describes the most competitive companies in America is “whether it’s broke or not,
fix it—make it better; not just products, but the whole company if necessary.”
Ans: T Page: 96
33. “Innovate or evaporate; particularly in technology-driven businesses, nothing quite recedes like
success,” is a characteristic given that describes the most competitive companies in America.
Ans: T Page: 96
34. Corporate intelligence can be defined as a systematic and ethical process for gathering and
analyzing information about the competition’s activities and general business trends to further a business’s
own goals.
Ans: F Page 96
35. Internal opportunities can be represented by major competitors’ weaknesses.
Ans: F Page: 96
36. According to Business Week, there are less than 500 corporate spies now actively engaged in
intelligence activities.
Ans F: Page 96
37. According to Business Week, and 9 out of 10 large companies have employees dedicated solely to
gathering competitive intelligence.
Ans: T Page: 96
38. An effective CI program allows all areas of a firm to access consistent and verifiable information in
making decisions.
Ans: T Page: 97
39. Competitive intelligence is not considered corporate espionage because 95 percent of the information a
company needs to make strategic decisions is available and accessible to the public.
Ans: T Page: 97
40. Because companies are fearful of corporate espionage, cooperative agreements between competitors are
becoming less popular.
Ans: F Page 98
41. Learning from the partner is a major reason why U.S. firms enter into cooperative agreements.
Ans: F Page: 99
42. Market commonality is the extent to which the type and amount of a firm’s internal resources are
comparable to a rival.
Ans: F page 99

Competitive Analysis: Porter’s Five-Forces Model
43. According to Michael Porter, five competitive forces create vital opportunities and threats
to organizations: (1) new entrants, (2) substitute products or services, (3) bargaining power of suppliers, (4)
bargaining power of buyers, and (5) rivalry among existing firms.
Ans: T Page: 100
44. The first step for using Porter’s Five-Forces Model is to evaluate the relative strength of each competitive
force.
Ans: F Page 101
45. Bargaining power of consumers is usually the most powerful of Porter’s five competitive forces.
Ans: F Page: 101
46. Significant barriers to entry are not always sufficient to keep some new firms from entering industries
with higher-quality products, lower prices and substantial marketing resources.
Ans: T Page: 102
47. Laser eye surgery would be considered a substitute product for eyeglasses and contact lenses.
Ans: T Page 102
48. Forward integration is used by firms to gain control or ownership of suppliers.
Ans: F Page: 102
49. The bargaining power of consumers can be the most important force impacting competitive advantage.
Ans: T page 103
Forecasting Tools and Techniques
50. Forecasts are educated assumptions about future trends and events.
Ans: T Page: 104
51. Qualitative forecasts are most appropriate when historical data are available and when the relationships
among key variables are expected to remain the same in the future.
Ans: F page 104
52. Quantitative forecasts become less accurate as historical relationships become less stable.
Ans: T Page: 104
53. Linear regression is based on the assumption that the future will be different from the past.
Ans: F Page: 104
54. Linear regression is a popular technique for qualitative forecasts.
Ans: F Page 104
55. Without reasonable assumptions, the strategy-formulation process could not proceed effectively.
a. Ans: T Page: 104
The Global Challenge
56. Globalization is a process of worldwide integration of strategy formulation, implementation and

evaluation activities.
Ans: T Page: 106
57. A global strategy seeks to meet the needs of customers worldwide with the lowest cost at the highest
value.
Ans: T Page: 106
58. Rampant corruption and the absence of a legal system are risks that still restrain firms from initiating
business with
China.
Ans: T Page: 106
59.China is the world’s fastest-growing economy.
Ans: T Page 107
60. Hong Kong serves as the gateway to China.
Ans: T Page: 108
Industry Analysis: The EFE Matrix
61. In an EFE Matrix, opportunities often receive higher weights than threats, but threats too can receive high
weights if they are especially severe or threatening.
Ans: T Page: 109
62. Regardless of the number of key opportunities and threats included in an External Factor Evaluation
Matrix, the highest possible total weighted score for an organization is 4.0, and the lowest possible total
weighted score is 0.0.
Ans: F Page: 109
The Competitive Profile Matrix (CPM)

63. Both a Competitive Profile Matrix and an EFE Matrix have the same meaning in the weights, ratings and
total weighted scores.
a. Ans: T Page: 111
64. The critical success factors in a Competitive Profile Matrix are often the same as those in an EFE Matrix.
a. Ans: F Page: 111
Multiple Choice
The Nature of an External Audit

65. __________ is not part of an external audit.
a. Analyzing competitors
b. Analyzing financial ratios
c. Analyzing available technologies
d. Studying the political environment
e. Analyzing social, cultural, demographic and geographic forces
Ans: b Page: 83
66. Identifying and evaluating key social, political, economic, technological and competitive trends and
events comprise
a. developing an effective mission statement.
b. conducting an internal audit.
c. performing an external audit.
d. formulating strategy.
e. implementing strategy.
Ans: c Page: 83
67. The process of performing an external audit needs to include:
a. only top level managers, as it’s a planning function.
b. as many managers and employees as possible.
c. primarily front-line supervisors
d. between 15 to 20 managers for it to be valid
e. stockholders and external government agencies
Ans: b Page: 83
68. To perform an external audit, a company first must:
a. get an approval from the Securities and Exchange Commission
b. perform an internal audit
c. gather competitive intelligence and information about external trends
d. hire a consultant to develop a comprehensive strategic plan.
e. all of these
Ans: c Page: 84
69. Freund emphasizes that key external factors should be all of these except:
a. important to achieving long-term and annual objectives.
b. measurable.
c. relatively few in number.
d. applicable to all competing firms.
e. hierarchical in the sense that some will pertain to the overall company while others will be more narrowly focused.
Ans: c Page: 84

David (chap 4)
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MGT603 Solved MCQs from Book by David (chap 4)

CHAPTER 4
The Internal Assessment

The Nature of an Internal Audit
1.Opportunities are a firm’s distinctive competencies that cannot be easily matched or imitated by competitors.
Ans: F Page: 123

2.The process of performing an internal audit, compared to the external audit, provides more opportunity for
participants to understand how their jobs, departments and divisions fit into the whole organization.
Ans: T Page: 123

3.An internal audit task force of managers could be charged with determining a specific number (usually 10 to
20) of the most important strengths and weaknesses.
Ans: T Page: 124
The Resource-Based View

4.Proponents of the resource-based view argue that external factors are more important than internal factors for a firm in
achieving and sustaining competitive advantage
Ans: F Page: 125

5.The basic premise of the research-based view is that the mix, type, amount and nature of a firm’s internal
resources should be considered first and foremost in devising strategies that can lead to sustainable
competitive advantage
Ans: T Page: 125

Integrating Strategy and Culture

6.The subtle, elusive and largely unconscious forces that shape the workplace are captured by the organizational culture.
Ans: T Page: 126

7.Cultural products include values, beliefs, stories, and language.
Ans: T Page: 126

8.Metaphors are handed-down narratives of some wonderful event that is based on history but has been
embellished with fictional detail.
Ans: F Page 127

9.A ritual is a standardized, detailed set of techniques and behaviors that manage anxieties but seldom produce
intended, technical consequences of practical importance.
Ans: T Page 127

10.In China, business behaviors revolve around guanxi, or personal relations.
Ans: T Page: 128

11.Linkages between a firm’s culture and strategies often determine success.
Ans: T Page: 128

12.The U.S. understanding of Far Eastern cultures is a strength its firms have in competing with Pacific Rim firms.1
Ans: F Page: 129

13.In China, to show that you enjoyed your meal, you should completely finish your food.
Ans: F Page 129

14.The smile is one form of communication that works the same worldwide.
Ans: T Page 129

15.In the U.S., personal achievement and accomplishments are more important than time spent with the family and the
quality of relationships espoused by some cultures.
Ans: T Page: 130

16.Punctuality, in general, is revered in all cultures of the world.
Ans: F Page: 130

17.In the United States, an amicable relationship is often mandatory before conducting business.
Ans: F Page: 131
Management

18.Allocating resources is one of the five basic activities (functions) performed by managers.
Ans: F Page: 131

19.The only certain thing about the future of any organization is change.
Ans: T Page: 131

20.Organizing is the cornerstone of effective strategy formulation.
Ans: F Page: 132

21.Planning should be performed mostly by middle management and then presented to top management for
analysis and approval.
Ans: F Page: 132

22.Controlling is the management function that is most important for the evaluation stage of the strategic
management process.
Ans: T Page 132

23.The purpose of organizing is to achieve coordinated effort by defining task and authority relations.
Ans: T Page: 133

24.Motivation is one explanation why some people work hard and others do not.
Ans: T Page: 134

25.The management function of organizing is included in human resource management.
Ans: F Page: 135

26.The controlling function of management is synonymous to strategy formulation.
Ans: F Page: 127

Marketing
27.There are seven basic functions of marketing: customer analysis, selling, product and service planning, pricing, distribution,
marketing research and opportunity analysis.
Ans: T Page: 136

28.A form of customer analysis is administering customer surveys.
Ans: T Page: 136

29.Successful strategy formulation generally rests upon the ability of an organization to sell some product or
service.
Ans: F Page: 137

30.A new trend is to base advertising rates solely on sales rates with regard to advertising products or services
on the Internet.
Ans: T Page: 137

31.The Internet was the fastest-growing segment of U.S. advertising spending in 2004 compared to 2003.
Ans: T Page 137

32.Pfizer, which has the world’s largest drug sales force, was planning on increasing their sales force by 15% in
2005.
Ans: F Page 137

33.Test marketing is used more frequently by industrial companies than consumer goods companies.
Ans: F Page: 137

34.Five major stakeholders that affect pricing decisions are consumers, governments, suppliers, distributors and competitors.
Ans: T Page: 138

35.Distribution involves warehousing, marketing research, distribution channels, wholesaling and retailing.
Ans: F Page: 138

36.Distribution becomes especially important when a firm is striving to implement a product development or backward
integration strategy.
Ans: F Page: 138

37.Marketing research is the systematic gathering, recording and analyzing of data about problems relating to the
marketing of goods and services.
Ans: T Page: 139

38.An opportunity analysis is an appraisal of the costs, benefits and risks associated with marketing decisions.
Ans: T Page: 139
Finance/Accounting

39.Three areas, according to James Van Horne, comprise the functions or basic decision areas of finance: the
investment decision, the financing decision and the earnings decision.
Ans: F Page: 141

40.Financial ratios are not applicable to nonprofit organizations.
Ans: F Page: 141

41.Dividend decisions concern issues such as the percentage of earnings paid to stockholders, the stability
of dividends paid over time and the repurchase or issuance of stock.
Ans: T Page: 141

42.The idea that paying dividends results in a higher stock price is a myth.
Ans: T Page: 141

43.Activity ratios measure how effectively a firm is using its resources.
Ans: T Page: 143

44.Leverage ratios measure a firm’s ability to meet maturing short-term obligations.
Ans: F Page: 143

45.Total assets turnover ratio is calculated by dividing sales by fixed assets.
Ans: F Page 144

46.Financial ratio analysis rarely has to go beyond the actual calculation and interpretation of ratios.
Ans: F Page 145

47.A limitation of financial ratios is the fact that they are based on accounting data.
Ans: T Page: 145
Production/Operations

48.Capacity decisions concern the design of the physical production system.
Ans: F Page: 147

49.In most industries, only minor costs of producing a product or service are incurred within operations,
so production/operations does not have great value as a competitive weapon in a company’s overall
strategy.
Ans: F Page: 148

50.Increased efficiency, quality, productivity and job satisfaction can come from cross-training workers.
Ans: T Page: 149

Research and Development

51.Four common approaches to determine R&D budget allocations used successfully are:
(1) finance as many project proposals as possible;
(2) use a percentage-of-sales method;
(3) budget for R&D about what competitors spend; or
(4) decide how many successful new products are needed and work backwards to estimate the required R&D investment.
Ans: T Page: 151

52.Internal R&D and contract R&D are the two basic forms of R&D in organizations.
Ans: T Page: 151

53.Spending on research and development is steadily decreasing in the United States.
Ans: F Page: 152
Management Information Systems

54.The functions of information systems are growing in importance because organizations are becoming more complex,
decentralized and globally dispersed.
Ans: T Page: 153

Value Chain Analysis (VCA)
55.Value Chain Analysis can enable a firm to better identify its own strengths and weaknesses especially as compared to
competitors’ Value Chain Analyses.
Ans: T Page: 154

56.Although a useful step in the strategic management process, value chain analysis can rarely help a firm
monitor whether its prices and costs are competitive.
Ans: F Page 155

57.Benchmarking is an analytical tool used to determine whether a firm’s value chain activities are

competitive compared to rivals.
Ans: T Page 157
The IFE Matrix

58.Internal Factor Evaluation Matrix is a summary step when conducting an internal strategic-management audit.

Ans: T Page: 157
59.The Internal Factor Evaluation Matrix should include from 10 to 20 key factors
Ans: T Page: 15
Multiple Choice
The Nature of an Internal Audit

60.A firm’s strengths that cannot be easily matched or imitated by competitors are called
a. internal audits.
b.distinctive competencies.
c. external audits.
d.special properties.
e. internal properties.
Ans: b Page: 115

61.Who should perform an internal audit?
a. A private auditing firm
b.The organization’s accounting department
c. Managers from different units of the organization
d.A team of top-level managers and lower-level employees
e.The chief executive officer
Ans: c Page: 116
62._______ exemplifies the complexity of relationships among the functional areas of business.
a. Government audit
b.External audit
c. Financial ratio analysis
d.Environmental scanning
e. Distribution strategy
Ans: c Page: 116

The Resource Based Web
63.The internal resource categories used in the resource-based approach are physical resources, human
resources and
a. financial resources.
b.shareholder resources.
c. organizational resources.
d.natural resources.
e. technological resources.
Ans: c Page: 117
64.Organizational resources include all of the following except:
a. employee training.
b.firm structure.
c. planning processes.
d.information systems.
e. copyrights.
Ans: a Page: 117

65.Empirical indicators are resources that are either rare, hard to imitate, or
a. expensive.
b.inexpensive.
c. easily substitutable.
d.not easily substitutable.
e. inefficient.
Ans: d Page: 117
Integrating Strategy and Culture

66.A pattern of behavior developed by an organization as it learns to cope with its problems of external adaptation and
internal integration that has worked well enough to be considered valid and to be taught to new members as the correct
way to perceive, think and feel is called
a. dysfunctional behavior.
b.groupthink.
c. behavior modification.
d.organizational culture.
e. internal audit effect.
Ans: d Page: 118

67.Which of the following is not a cultural product?
a. Rites
b.Emotions
c. Rituals
d.Sagas
e. Symbols
Ans: b Page: 118

68.A standardized, detailed set of techniques and behaviors that manage anxieties, but seldom produce
intended, technical consequences of practical results are called
a. folktales.
b.rites
c. metaphors
d.rituals
e. values
Ans: d Page: 119
69.What are historical narratives describing the unique accomplishments of a group and its leaders, usually in heroic
terms.
a. rites
b.sagas
c. stories
d.myths
e. folktales
Ans: b Page: 119

70.Life-directing attitudes that serve as behavioral guidelines are called
a. values.
b.rites.
c. beliefs
d.metaphors
e. legend
Ans: a Page: 119

71.In Europe, it is generally true that the farther __________ on the continent, the more participatory the management
style.
a. south
b.east
c. west
d.north
e. southeast
Ans: d Page: 120

72.Americans place an exceptionally high priority on __________ whereas many foreigners place more worth
on __________.
a. time; relationships
b.relationships; time
c. silence; time
d.silence; relationships
e. close personal distance; ample personal distance
Ans: a Page: 122
Management

73.What is the essential bridge between the present and the future that increases the likelihood of achieving desired
results?
a. Motivating
b.Planning
c. Controlling
d.Staffing
e. Organizing
74.All of the following are basic duties of a manager except:
a. staffing.
b.planning.
c. consolidating.
d.organizing.
e. motivating.
75.What is an up-front investment in success?
a. Planning
b.Organizing
c. Motivating
d.Staffing
e. Controlling
76.Which function of management includes areas such as job design, job specification, job analysis and
unity of command?
a. planning
b.organizing
c. motivating
d.staffing
e. controlling
Ans: b Page: 124

77.Who does a planning horizon of two to five years applies to?
a. top management
b.general management
c. middle management
d.lower management
e. all levels of management
Ans: a Page: 124

78.Synergy is
a. synthetic energy.
b.when a team effort is used to achieve desired results.
c. when individuals work separately to achieve desired results.
d.when financial expectations of the firm are decided upon.
e. employee energy.
79.Which management function includes breaking tasks into jobs, combining jobs to form departments and delegating
authority?
a. motivating
b.staffing
c. organizing
d.controlling
e. planning
80.Which function of management is concerned with span of control and chain of command?
a. planning
b.organizing
c. controlling
d.directing
e. evaluating
81.Which of the following is the process of influencing people to accomplish specific objectives?
a. Staffing
b.Motivating
c. Planning
d.Controlling
e. Organizing
Ans: b Page: 126

82._______ is a major component in motivation.
a. Forecasting
b.Organizational structure
c. Recruiting
d.Management development
e. Communication
83.Staffing involves all of these activities except:
a. recruiting.
b.transferring.
c. customer analysis.
d.managing union relations.
e. training and developing.
Ans: c Page: 127

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CHAPTER 5
Strategies in Action
True/False

Long-Term Objectives
1. Long-term objectives represent the results expected from pursuing certain strategies.
Ans: T Page: 168
2. Objectives provide direction and allow for organizational synergy.

Ans: T Page: 168

3. Strategic objectives include those associated with growth in revenues, growth in earnings, higher dividends, larger
profit margins and improved cash flow.
Ans: F Page 169

4. Strategic objectives include larger market share, quicker on-time delivery than rivals, quicker design-to-
market times than rivals, lower costs than rivals, and wider geographic coverage than rivals.
Ans: T Page: 169

5. “If it ain’t broke, don’t fix it” refers to managing by crisis.

Ans: F Page: 170

6. The overall aim of the Balanced Scorecard is to balance financial objectives with strategic objectives.
Ans: F Page: 170

7. Since a combination strategy is not risky, many organizations pursue a combination of two or more strategies

simultaneously.
Ans: F Page: 171

8. Horizontal integration is seeking ownership or increased control over competitors.
Ans: T Page 173

9. Divestiture is selling all of a company’s assets, in parts, for their tangible worth.
Ans: F Page 173

10. A chief executive officer is located in the divisional level of a large firm.
Ans: F Page: 174

Integration Strategies

11. Gaining ownership or increased control over distributors or retailers is called forward integration strategy.
Ans: T Page: 174
12. Franchising is an effective means of implementing forward integration.
Ans: T Page: 174

13. A growing trend is for franchisers to buy out their part of the business from their franchisees.
Ans: F Page: 175

14. Forward integration strategy is especially effective when the availability of quality distributors is so limited as to
offer a competitive advantage to those firms that integrate forward.
Ans: T Page: 175

15. A strategy of seeking ownership or increased control of a firm’s supplier is backward integration.
Ans: T Page: 175

16. If a firm’s present suppliers are expensive and unreliable in meeting the firm’s needs for parts, components
and/or raw materials, the firm should pursue a horizontal integration strategy.
Ans: F Page: 176

17. Horizontal integration is an appropriate strategy when the competitors of an organization are doing poorly.
Ans: F Page: 176

Intensive Strategies
18. Market penetration, market development, product development and joint venture are intensive strategies.
Ans: F Page: 177
19. When the correlation between dollar sales and dollar marketing expenditures has historically been low, market
penetration is an appropriate strategy.
Ans: F Page: 178

20. Market development includes introducing present products into new geographic areas.
Ans: T Page: 178

21. An appropriate strategy when an organization has excess production capacity is market development.
Ans: T Page: 178

22. Increasing advertising expenditures can be a market development strategy.
Ans: F Page: 179

23. Product development is a strategy that seeks increased sales by improving or modifying present products or services.
Ans: T Page: 179

24. Product development is an appropriate strategy when an organization has successful products that are in the
maturity stage of the product life cycle.
Ans: T Page: 179

Diversification Strategies
25. There are four basic types of diversification: concentric, conglomerate, forward and backward.
Ans: F Page: 180

26. Most companies favor related diversification strategies in order to exploit common use of a well-known brand
name.
Ans: T Page 180

27. The related diversification strategy is effective when an organization has a weak management team.
Ans: F Page: 181

28. Unrelated diversification is an appropriate strategy when an organization’s present channels of distribution can
be used to market the new products to current customers.
Ans: T Page: 182

29. Donald Trump starting TrumpUniversity in 2005 is a good example of unrelated diversification.
Ans: T Page: 183

30. Unrelated diversification may be an especially effective strategy when an organization’s basic industry is experiencing
increasing annual sales and profits.
Ans: F Page 184

Defensive Strategies

31. Retrenchment and turnaround are the same strategy.
Ans: T Page: 184

32. Although bankruptcy can be an effective type of retrenchment strategy, it does not allow firms to avoid major
debt obligations and to void union contracts.
Ans: F Page 185

33. Chapter 7 bankruptcy is a liquidation procedure used only when a firm sees no hope of being able to operate
successfully or to obtain necessary creditor agreement.
Ans: T Page: 185

34. Chapter 9 bankruptcy applies to municipalities.
Ans: T Page: 185

35. Chapter 13 bankruptcy is similar to Chapter 11, but available only to large corporations.

Ans: F Page: 185
36. Divestiture is the selling of land a firm owns.
Ans: F Page: 186

37. Liquidation is often appropriate when retrenchment and divestiture have failed.
Ans: T Page: 188

Michael Porter’s Five Generic Strategies
38. According to Porter, strategies allow organizations to gain competitive advantage from three different bases: cost leadership,
differentiation and integration.
Ans: F Page: 188

39. For consumers who are price sensitive, cost leadership emphasizes producing standardized products at very low
per-unit cost.
Ans: T Page: 188

40. A best-value strategy offers products or services to a wide range of customers at the lowest price on the market.
Ans: F Page 188

41. A low-cost focus strategy offers products or services to a small range of customers at the lowest
price available on the market.
Ans: T Page 188

42. Jiffy Lube International would be a good example of a firm seeking the best-value focus strategy.
Ans: F Page 188

43. A differentiation strategy can only be achieved with a small target market.
Ans: F Page 189

44. Gaining a differentiation advantage is a primary reason for pursuing forward, backward, and horizontal
integration strategies.
Ans: F Page 189

45. A cost leadership strategy can be especially effective when most buyers use the product in the same way.
Ans: T Page 190

46. The most effective differentiation bases are those that are hard or expensive for rivals to duplicate.
Ans: T Page 191

47. A differentiation strategy can be especially attractive when the industry has many different niches and segments,
thereby allowing a focuser to pick a competitively attractive niche suited to its own resources.
Ans: F Page 193

48. In a turbulent, high-velocity market, a lead-change strategy is best whenever the firm has the resources to
pursue this approach.
Ans: T Page 193

Means for Achieving Strategies

49. Cooperative arrangements and joint ventures between competitors are becoming increasingly popular.
Ans: T Page: 193

50. Joint ventures tend to fail when managers who must collaborate daily in operating the venture are not involved in forming or
shaping the venture.
Ans: T Page: 196

51. Divestiture would be an appropriate strategy when a need exists to introduce a new technology quickly.
Ans: F Page: 196

Merger/Acquisition

52. An acquisition occurs when a large organization purchases a smaller one or vice versa.
Ans: T Page: 197

53. When an acquisition or merger is not desired by both parties, it is called a takeover or hostile takeover.
Ans: T Page: 197
54. A leveraged buyout occurs when a firm’s management and other private investors use borrowed funds to buy
out the firm’s shareholders.
Ans: T Page: 200
55. First mover advantage refers to the benefits a firm may achieve by entering a new market or developing a
new product or service prior to rival firms.
Ans: T Page: 200
56. Companies are avoiding outsourcing more and more because it is more expensive than traditional methods
and it does not allow a firm to concentrate on core competencies.
Ans: F Page: 201
Strategic Management in Nonprofit and Government Organizations
57. The nonprofit sector is America’s largest employer.
Ans: T Page: 185
58. Strategists in governmental organizations operate with far more strategic autonomy than their counterparts in
private firms.
Ans: F Page: 187
Strategic Management in Small Firms
59. All sizes and types of organizations can utilize and benefit from strategic-management concepts and
techniques.
Ans: T Page: 187
60. Research shows strategic management in small firms is more formal than in large firms, but large firms that
engage in strategic management outperform those that do not.
Ans: F Page: 187
Multiple Choice
Long-Term Objectives
61. Long-term objectives are needed at which level(s) in an organization?
a. Corporate
b. Divisional
c. Functional
d. All of these
e. None of these
Ans: d Page: 168
62. Financial objectives involve all of the following except:
a. growth in revenues.
b. larger market share.
c. higher dividends.
d. greater return on investment.
e. a rising stock price.
Ans: b Page: 169

63. What principle is based on the belief that the true measure of a really good strategist is the ability to solve
problems?
a. Managing by crisis
b. Managing by objectives
c. Managing by extrapolation
d. Managing by exception
e. Managing by hope
Ans: a Page: 170

64. What principle is built on the idea that there is no general plan for which way to go and what to do?
a. Managing by crisis
b. Managing by extrapolation
c. Managing by objectives
d. Managing by hope
e. Managing by exception
Ans: e Page: 170

65. All of the following are important factors in the Balanced Scorecard except:
a. customer service.
b. employee morale.
c. product quality.
d. business ethics.
e. stockholder equity.
Ans: e Page: 170

66. Which level of strategy is most likely not present in small firms?
a. Corporate/company
b. Functional
c. Divisional
d. Operational
e. All of these are present in small firms
Ans: c Page: 160

67. All of the following are important factors in the Balanced Scorecard except:
a. customer service.
b. employee morale.
c. product quality.
d. business ethics.
e. stockholder equity.
Ans: e Page: 172

68. Budget Rent-a-Car opening car rental shops in Wal-Mart stores is an example of which type of strategy?
a. forward integration
b. backward integration
c. horizontal integration
d. related diversification
e. unrelated diversification
Ans: a Page 173
69. Goodyear Tire & Rubber Co. selling its North American farm-tire business to Titan International is an
example of which type of strategy?
a. related diversification
b. unrelated diversification
c. retrenchment
d. divestiture
e. liquidation
Ans: d page 173

70. Advanced Medical Optics using acquisitions to obtain all medical aspects of eye care, from laser surgery to contacts to
implants for all ages is an example of which type of strategy?
a. forward integration
b. backward integration
c. horizontal integration
d. market development
e. product development
Ans: d Page 173

71. Which of the following is most likely not included in the functional level of a small company?
a. Finance
b. Marketing
c. R & D
d. Department managers
e. Human resource managers
Ans: d Page: 174

Integration Strategies

72. Integration strategies are sometimes collectively referred to as which of these strategies?
a. Horizontal integration
b. Diversification
c. Vertical integration
d. Stuck-in-the-middle
e. Hierarchical integration
Ans: c Page: 174

73. Web sites to sell products directly to consumers are examples of which type of strategy?
a. backward integration
b. product development
c. forward integration
d. horizontal integration
e. conglomerate diversification
Ans: c Page: 174
74. Which of these strategies is effective when the number of suppliers is small and the number of competitors is
large?
a. Conglomerate diversification
b. Forward integration
c. Concentric diversification
d. Backward integration
e. Horizontal diversification
Ans: d Page: 176

75. Backward integration is effective in all of these except:
a. when an organization competes in an industry that is growing rapidly.

b. when an organization has both capital and human resources to manage the new business of supplying its own raw materials.
c. when an organization needs to acquire a needed resource quickly.
d. when the advantage of stable prices are not important.
e. when present suppliers have high profit margins.
Ans: d Page: 176

76. What refers to a strategy of seeking ownership of or increased control over a firm’s competitors?
a. Forward integration
b. Conglomerate diversification
c. Backward integration
d. Horizontal integration
e. Concentric diversification
Ans: d Page: 176

77. In which situation would horizontal integration be an especially effective strategy?
a. When an organization can gain monopolistic characteristics in a particular area or region without being challenged by the
federal government for “tending substantially” to reduce competition.
b. When an organization competes in a slowing industry.
c. When decreased economies of scale provide major competitive advantages.
d. When an organization has neither the capital nor human talent needed to successfully manage an expanded organization.
e. When competitors are succeeding due to managerial expertise or having particular resources an organization possesses.
Ans: a Page: 177
MGT603 MGT603 Strategic Management Solved MCQs from Book

by David (chap 6)
View Comments
Strategy Analysis and Choice

True/False
The Nature of Strategy Analysis and Choice
1. An organization’s present strategies, objectives and mission provide a basis for generating and evaluating
feasible alternative strategies, coupled with the external and internal audit information.
Ans: T Page: 216
2. The Toxics Release Inventory (TRI) is administered by the Environmental Protection Agency in the
United States.
Ans: T Page: 217
3. Sustainability is th1e idea that a business can meet its financial goals without hurting customers.
Ans: F Page: 218
A Comprehensive Strategy-Formulation Framework
4. The first stage of the strategy-formulation framework is the input stage, followed by the decision stage.
Ans: F Page: 219
5. Stage 2 in the strategy-formulation framework involves the Quantitative Strategic Planning Matrix.
Ans: F Page: 201
6. The Strengths-Weaknesses-Opportunities-Threats(SWOT) Matrix, the Strategic Position

and Action Evaluation (SPACE) Matrix, the Boston Consulting Group (BCG) Matrix, the Internal-External (IE)
Matrix and the Grand Strategy Matrix are included in stage two of the strategy-formulation framework.
Ans: T Page: 219
The Input Stage
7. Good intuitive judgment is always needed to determine appropriate weights and ratings in the input stage
matrices.
Ans: T Page: 220
The Matching Stage
8. When completing the matching stage of the strategy-formulation framework, the SWOT Matrix needs to be
completed before the SPACE Matrix.
Ans: F Page: 220
9. The purpose of matching key factors is to generate feasible alternative strategies.
Ans: T Page: 220
10. Strengths-opportunities strategies are based on using a firm’s internal strengths to take advantage of
external opportunities and threats.
Ans: F Page: 221
11. A SWOT Matrix is composed of four cells for the four types of strategies it creates.
Ans: F Page: 221
12. One of the steps of the SWOT Matrix is to list the firm’s key external opportunities.
Ans: T Page: 221
13. The SWOT matrix is widely used as an organizational tool and, if used appropriately, does not have any
significant weaknesses.
Ans: F Page 224-225
14. The most important determinants of an organization’s overall strategic position are considered to be the
two internal dimensions, financial strength (FS) and competitive advantage (CA), and the two external
dimensions, industry strength (IS) and environmental stability (ES).
Ans: T Page: 225
15. The four strategies of the SPACE Matrix are aggressive, conservative, offensive and defensive.
Ans: F Page: 225
16. The ES and CA dimension variables in a SPACE Matrix are assigned a numerical value ranging from –1
(best) to –6 (worst).
Ans: T Page: 226
17. Conservative strategies in a SPACE Matrix most often include product development, market
development, market penetration and concentric diversification.
Ans: T Page: 227
18. The firm should pursue conservative strategies if the coordinates of a SPACE directional vector are (1,4).
Ans: F Page: 228
19. A firm should pursue defensive strategies if the coordinates of a SPACE directional vector are (2,3).
Ans: F Page: 228
20. The firm should pursue aggressive strategies if the coordinates of a SPACE directional vector are (5,4).
Ans: T Page: 228
21. Relative market share position is given on the x-axis of the BCG Matrix.
Ans: T Page: 229
22. The midpoint on the x-axis of a BCG Matrix is typically set at 0.05.
Ans: F Page: 229
23. The size of the circle in a BCG Matrix corresponds to the proportion of corporate revenue generated by
that business unit.
Ans: T Page: 230
24. In a BCG Matrix the pie slice indicates the proportion of corporate profits generated by that division.
Ans: T Page: 230
25. Star, question mark, cash cow and dogs are the four quadrants exhibited by the SPACE Matrix.
Ans: F Page: 231
26. Cash cows represent the organization’s best long-run opportunities for growth and profitability.
Ans: F Page: 231
27. The major overall benefit of the BCG Matrix is that it draws attention to the cash flow, investment
characteristics and needs of an organization’s various divisions.
Ans: T Page: 231
28. Viewing businesses as star, cash cow, dog or question mark is an oversimplification.
Ans: T Page: 232
29. The BCG Matrix does not reflect whether or not various divisions or their industries are growing over
time.
Ans: T Page: 232
30. Having no temporal qualities, the BCG Matrix is a snapshot of an organization at a given point in time.
Ans: T Page: 232
31. Both IE and BCG Matrices are called portfolio matrices.

Ans: T Page: 233
32. BCG Matrix requires more information about the divisions than the IE Matrix.
Ans: F Page: 233
33. On the x-axis of the IE Matrix, an internal factor evaluation score of 2.5 represents a weak internal
position.
Ans: F Page: 235
34. The IE Matrix can be divided into three major regions that have different strategy implications: grow and
build, hold and maintain and harvest or divest.
Ans: T Page: 235
35. The Grand Strategy Matrix is based on two evaluative dimensions, market share and market growth.
Ans: F Page: 237
36. According to the Grand Strategy Matrix, when a Quadrant I firm is too heavily committed to a single
product, then concentric diversification may reduce the risks associated with a narrow product line.
Ans: T Page: 237
37. According to the Grand Strategy Matrix, Quadrant III organizations compete in rapid-growth industries
and have weak competitive positions.
Ans: F Page: 238
The Decision Stage
38. To objectively evaluate feasible alternative strategies identified in Stage 2, the QSPM uses
input information derived from Stage 1.
Ans: T Page: 240
39. Step 1 of a QSPM assigns weights to each key external and internal factor.
Ans: F Page: 241
40. Total attractiveness scores are defined as the sum of the attractiveness scores in a given column of the
QSPM and are computed in the second step of the QSPM.
Ans: F Page: 243
41. A positive feature of QSPM is that sets of strategies can be examined sequentially or simultaneously.
Ans: T Page: 244
42. One positive feature of QSPM is that it does not require intuitive judgments and educated assumptions.
Ans: F Page: 244
Cultural Aspects of Strategy Choice
43. Culture includes the set of shared values, beliefs, attitudes, customs, norms, personalities, heroes and
heroines that describe a firm.
Ans: T Page: 244
44. Strategy changes may be highly effective and productive if a supportive culture does not exist.
Ans: F Page: 245
45. Whenever two firms merge, it becomes especially important to evaluate and consider culture-strategies
linkages.
Ans: T Page: 245
The Politics of Strategy Choice
46. Successful strategists minimize their own political exposure on issues that are highly controversial and
in circumstances where opposition from major power centers was likely.
Ans: T Page: 245
47. Focusing on Higher-Order Issues means it is often possible to achieve similar results using different
means or paths.
Ans: F Page: 246
48. Shifting focus from specific issues to more general ones may increase strategists’ options for gaining
organizational commitment.
Ans: T Page: 246
Governance Issues
49. Now averaging 18 members the trend in America is toward larger boards of directors.
Ans: F Page: 247
50. Boards of directors are composed mostly of outsiders who are becoming more involved in an
organization’s strategic management.
Ans: T Page: 247
51. The Sarbanes-Oxley Act put an end to the “country-club” atmosphere of most boards and has shifted
power from CEOs to directors.
Ans: T Page: 250
Multiple Choice
The Nature of Strategy Analysis and Choice
52. Strategy analysis and choice largely involves making __________ decisions based on
__________ information.
a. long-term; short-term
b. subjective; objective
c. short-term; long-term
d. subjective; short-term
e. objective; subjective
Ans: b Page: 216
A Comprehensive Strategy-Formulation Framework
53. Which stage in the strategy-formulation framework focuses on generating feasible alternative strategies?
a. Input
b. Output
c. Decision
d. Throughput
e. Matching
Ans: e Page: 219
54. Which stage of the strategy-formulation framework involves the Quantitative Strategic Planning Matrix?
a. Stage 1
b. Stage 2
c. Stage 3
d. Stage 4
e. Stage 5
Ans: c Page: 219
55. Which strategy formulation technique reveals the relative attractiveness of alternative strategies and thus
provides an objective basis for selecting specific strategies.
a. SWOT
b. SPACE
c. QSPM
d. IFE
e. CPM
Ans: c Page: 219
56. Each of the nine techniques included in the strategy formulation framework rely on the use of
a. strictly factual data.
b. luck.
c. financial formulas and statistics.
d. intuition and analysis.
e. synergy.
Ans: d Page: 219
The Input Stage
57. Which stage of the strategy formulation framework includes an Internal Factor Evaluation Matrix and a
Competitive Profile Matrix?
a. input
b. matching
c. decision
d. penetration
e. research
Ans: a Page: 219
58. Which stage of the strategy formulation framework contains the Internal-Factor Evaluation Matrix?
a. input stage
b. analysis stage
c. matching stage
d. decision stage
e. output stage
Ans: a Page: 219
The Matching Stage
59. The match an organization makes between its internal resources and skills and the opportunities and
risks created by its external factors can be defined as:
a. Input
b. Concept formulation
c. Strategy
d. SWOT
e. An opportunity
Ans: c Page: 220
60. Which section of the SWOT Matrix involves matching internal strengths with external opportunities?
a. The WT cell
b. The SW cell
c. The WO cell
d. The ST cell
e. The SO cell
Ans: e Page: 221
61. Which strategies aim at improving internal weaknesses by taking advantage of external opportunities?
a. SO
b. WO
c. SW
d. ST
e. WT
Ans: b Page: 221
62. Which strategies use a firm’s strengths to avoid or reduce the impact of external threats?
a. SW
b. WO
c. SO
d. ST
e. WT
Ans: d Page: 221
63. Which strategies are defensive tactics directed at reducing internal weaknesses and avoiding
environmental threats.
a. SO
b. WO
c. SW
d. ST
e. WT
Ans: e Page: 221
64. How many cells are in a SWOT Matrix?

a. two
b. four
c. six
d. eight
e. nine
Ans: e Page: 221
65. Which of the following is not a step of a SWOT Matrix?

a. List the firm’s key external threats.
b. Match strengths with external opportunities and record the resultant SO strategies in the appropriate cell.
c. Match internal weaknesses with external threats and record the resultant WT strategies.
d. List the firm’s external weaknesses.
e. List the firm’s external opportunities.
Ans: d Page: 221-222
66. Which of these is not a SPACE Matrix quadrant?

a. Aggressive
b. Defensive
c. Competitive
d. Offensive
e. Conservative
Ans: d Page: 225
67. The two internal dimensions represented on the axes of the SPACE Matrix are
a. environmental stability and industry strength.
b. industry strength and internationalization.
c. internationalization and competitive advantage.
d. competitive advantage and financial strength.
e. financial strength and environmental stability.
Ans: d Page: 225
68. What are two external dimensions of the SPACE Matrix?

a. Environmental stability and industry strength
b. Environmental stability and competitive advantage
c. Industry strength and competitive advantage
d. Competitive advantage and financial strength
e. Financial strength and industry strength
Ans: a Page: 226
69. The two positive-rated dimensions on SPACE Matrix are

a. FS and CA.
b. CA and ES.
c. FS and IS.
d. IS and ES.
e. FS and ES.
Ans: c Page: 226
70. What type of strategies would you recommend when a firm’s SPACE Matrix directional vector has the
coordinates (-2, +3)?
a. Aggressive
b. Conservative
c. Competitive
d. Defensive
e. Integrative
Ans: b Page: 225
71. In the SPACE analysis, what does a (+6, +3) strategy profile portray?
a. A strong industry
b. An unstable environment
c. A stable environment
d. A weak industry
e. A weak financial position
Ans: a Page: 225
72. What is a weakness associated with a SWOT Matrix?

a. Viewing every business as a Star, Cash Cow, Dog, or Question Mark is an oversimplification
b. Many businesses fall right in the middle of the matrix
c. The matrix has no temporal qualities
d. Other variables besides relative market share position and industry growth rate in sales need to be considered
e. The matrix does not reflect whether or not various divisions or their industry are growing over time
Ans: c Page 225
73. For what type of company is the BCG Matrix ideal for analyzing?
a. Companies with more than one division
b. All companies
c. Companies with annual sales greater than $1 million
d. Companies with annual sales of less than $1 million
e. Large companies
Ans: a Page: 227
74. In the BCG Matrix, which element represents the industry growth rate in sales, measured in percentage
terms?
a. x-axis
b. y-axis
c. first quadrant
d. second quadrant
e. third quadrant
Ans: b Page: 229
75. How would a division with a low relative market share position in a high growth industry be described?
a. question mark
b. cash cow
c. star
d. stuck-in-the-middle
e. dog
Ans: a Page: 230
76. When a division of an organization has a high relative market share and is in a fast-growing industry, it is
called a
a. star
b. cash cow
c. cat
d. question mark
e. dog
Ans: a Page: 230
77. A division with a high relative market share position in a low-growth industry can be described as a
a. star
b. cash cow
c. question mark
d. dog
e. failure
Ans: b Page: 231
78. Which of these is an attractive strategy for a cash cow division?

a. Concentric diversification
b. Horizontal integration
c. Conglomerate diversification
d. Backward integration
e. Forward integration
Ans: a Page: 231
79. Most likely, what was a cash cow in the past?

a. dog
b. failure
c. question mark
d. cat
e. star
Ans: e Page: 231
80. An organization that has a low relative market share position and competes in a slow-growth industry is
referred to as a
a. dog.
b. question mark.
c. star.
d. cash cow.
e. cowboy.
Ans: a Page: 231
81. The BCG Matrix limitations include all of these except:

a. viewing every business as a star, cash cow, dog or question mark can be an oversimplification.
b. requiring at least three years’ worth of data.
c. not reflecting divisional or industry growth over time.
d. not allowing a company to be classified as somewhere in between two categories.
e. other variables such as size of market and competitive advantages are not considered.
Ans: b Page: 232
82. Which analytical tool consists of a nine-cell matrix?

a. Matching Matrix
b. Competitive Profile Matrix
c. SPACE Matrix
d. Grand Strategy Matrix
e. Internal-External Matrix
Ans: e Page 233
83. What analytical tool has four quadrants based on two dimensions: competitive position and market
growth?
a. Competitive Profile Matrix
b. Internal-External Matrix
c. SPACE Matrix
e. QSPM
Ans: d Page: 237
84. Firms located in which quadrant of the Grand Strategy Matrix are in an excellent strategic position?
a. I
b. II
c. III
d. IV
e. V
Ans: a Page: 237
85. According to the Grand Strategy Matrix, which strategy is recommended for a firm with rapid market
growth and a strong competitive position?
a. Market penetration
b. Conglomerate diversification
c. Joint venture
d. Retrenchment
e. Liquidation
Ans: a Page: 237
86. For companies located in Quadrant III of the Grand Strategy Matrix, the first strategy recommended is
a. extensive cost and asset reduction.
b. asset expansion.
c. employee expansion.
d. immediate liquidation of assets.
e. divestiture.
Ans: a Page: 238
87. Although Quadrant _____ companies are growing, according to the Grand Strategy Matrix, they are
unable to compete effectively, and they need to determine why the firm’s current approach is ineffective and
how the company can best change to improve its competitiveness.
a. I
b. II
c. III
d. IV
e. V
Ans: b Page: 238
88. According to the Grand Strategy Matrix, organizations in which .quadrant have a strong competitive
position but are in a slow-growth industry,
a. I
b. II
c. III
d. IV
e. V
Ans: d Page: 238
The Decision Stage
89. Which matrix is included in the decision stage of the strategy formulation framework?
a. Internal Factor Evaluation Matrix
b. Quantitative Strategic Planning Matrix
c. BCG Business Portfolio Matrix
e. SPACE Matrix
Ans: b Page: 239
90. The top row of a QSPM consists of alternative strategies derived from all of these except:
a. Grand Strategy Matrix.
b. BCG Matrix.
c. Space Matrix.
d. CPM Matrix.
e. IE Matrix.
Ans: d Page: 240
91. Which analytical tool determines the relative attractiveness of various strategies based on the extent to
which key external and internal critical success factors are capitalized?
a. BCG Matrix
b. SPACE Matrix
c. TOWS Matrix
d. IE Matrix
e. QSPM
Ans: e Page: 241
92. Which of the following is the first step in developing QSPM?

a. Compute the Total Attractiveness Scores.
b. Examine the Stage 2 matrices and identify alternative strategies the organization should consider implementing.
c. Assign weights to each key external and internal factor.
d. Determine the Attractiveness Scores.
e. Make a list of the firm’s key external opportunities/threats and internal strengths/weaknesses in the left column of
the QSPM.
Ans: e Page: 241-243
93. What term is defined as the product of multiplying ratings by attractiveness scores in each row of the
QSPM?
a. Total attractiveness scores
b. Sum total attractiveness scores
c. Weighted scores
d. Total weighted scores
e. Factors
Ans: a Page: 243
94. What is the highest number of strategies that can be examined at one time with the QSPM?
a. 1
b. 2
c. 5
d. 10
e. There is no limit.
Ans: e Page: 244
95. Which of these is a limitation of QSPM?

a. Only a few strategies can be evaluated simultaneously.
b. The cost of doing the analysis
c. Intuitive judgments and educated guesses are required.
d. Sets of strategies must be examined in reverse order.
e. It requires equal participation from everyone.
Ans: c Page: 244
Cultural Aspects of Strategy Choice

96. What includes the set of shared values, beliefs, attitudes, customs, norms, personalities, heroes and
heroines that describe a firm?
a. Strategy
b. Culture
c.Mission
d. Objectives
e. QSPM
Ans: b Page: 244
The Politics of Strategy Choice
97. What tactic involves shifting focus from specific issues to more general ones?
a. Equifinality
b. Focus on higher-order issues
c. Generalization
d. Satisficing
e. None of the above
Ans: c Page: 246
98. Through which tactic is it possible to achieve similar results using different means or paths?
a. Generalization
b. Satisficing
c. Focus on higher-order issues
d. Equifinality
e. Specialization
Ans: d Page: 246
Governance Issues
99. The act of oversight and direction for an organization is referred to as
a. corporate lawmaking.
b. centralized control.
c. organizational direction.
d. establishing norms.
e. governance.
Ans: e Page: 226
100. Today, what are boards of directors composed mostly of?

a. outsiders
b. management
c. union
d. employees
e. stockholders
Ans: a Page: 247
101. All of the following are principles of good organizational governance, as established by Business Week,
except:
a. No directors do business with the company or accept consulting or legal fees from the firm.
b. The audit, compensation and nominating committees are made up solely of outside directors.
c. Each director owns a large equity stake in the company, excluding stock options.
d. At least two directors are current or former company executives.
e. The CEO is not also the Chairperson of the Board.
Ans: d Page: 247
Essay Questions
102. Explain the concept of matching in the strategy formulation framework. Give at least three examples of
matching.
Matching external and internal critical success factors is the key to effectively generating feasible alternative
strategies. See Table 6-1 on page 220 for examples of matching.
Page: 220
103. If you construct a SPACE Matrix and the directional vector points to the lower left quadrant, what type of
strategies would you recommend? Give several examples.
If the directional vector points to the lower-left quadrant of the SPACE Matrix, students should suggest defensive
strategies. Defensive strategies include retrenchment, divestiture, liquidation and concentric diversification.
Page: 225-227
104. Give five coordinates of a SPACE Matrix directional vector that would suggest conservative strategies to
be most appropriate.
Student answers will vary. However, five examples they may suggest are
(-1,1),
(-2,2),
(-3,3),
(-4,4),
and (-5,5).
Page: 225-227
105. In a BCG Matrix, all divisions are called question marks, stars, cash cows or dogs. Define each of these
terms.
Question Marks have a low relative market share position, yet they compete in a high-growth industry.
Stars represent the organization’s best long-run opportunities for growth and profitability.
Cash Cows have a high relative market share position but compete in a low-growth industry.
Dogs have a low relative market share position and compete in a slow- or no-market-growth industry.
Page: 230-231
106. Compare and contrast the IE Matrix with the BCG Matrix.
The IE Matrix is similar to the BCG Matrix in that both tools involve plotting organizational divisions in a schematic
diagram. Also, the size of each circle represents the percentage sales contribution of each division, and pie slices
reveal the percentage profit contribution of each division in both the BCG and IE Matrix.
Some important differences between the IE Matrix and the BCG Matrix include: 1) different axes; 2) the IE Matrix
requires more information about the divisions than the BCG Matrix; and 3) the strategic implications of each matrix
are different.
Page: 233
107. Explain the benefits and limitations of developing a Boston Consulting Group Matrix.
The BCG Matrix has one major benefit: draws attention to the cash flow, investment characteristics and needs of an
organization’s various divisions.
The BCG Matrix has some limitations: 1) Viewing every business as either a star, cash cow, dog or question mark is
an oversimplification; many businesses fall right in the middle of the BCG Matrix and thus are not easily classified, 2)
the BCG Matrix does not reflect whether or not various divisions or their industries are growing over time; that is, the
matrix has no temporal qualities, but rather it is a snapshot of an organization as any given point in time; and 3) other
variables besides relative market share position and industry growth rate in sales are important in making strategic
decisions about various divisions.
Page: 232
108. Using a Grand Strategy Matrix approach, what strategies are recommended for a firm that is a weak
competitor in a slow-growing market? Elaborate on what these strategies could mean for a college or
university.
A firm that is a weak competitor in a slow-growing market would be located in Quadrant III. Quadrant III strategies
include retrenchment, concentric diversification, horizontal diversification, conglomerate diversification, divestiture
and liquidation.
Student answers will vary when elaborating on what these strategies could mean for a college or university. However,
students should mention that the college or university could possibly have to be closed or facility and staff may have
to be drastically reduced which leads to unhappy students in very large classes.
Page: 237-238
109. Describe the positive features and limitations of QSPM.

There are three positive features of QSPM:
1) Sets of strategies can be examined sequentially or simultaneously;
2) there is no limit to the number of strategies that can be evaluated or the number of sets of strategies that can be
examined at once using the QSPM; and
3) the last positive feature is that it requires strategists to integrate pertinent external and internal factors into the
decision process.
The QSPM is not without some limitations:
1) It always requires intuitive judgments and educated assumptions;
2) The ratings and attractiveness scores require judgmental decisions, even though they should be based on
objective information; and
3) it can be only as good as the prerequisite information and matching analyses upon which it is based.
Page: 239-244
110. Describe the tactics that have been used by politicians that can also aid strategists.
Equifinality—It is often possible to achieve similar results using different means or paths. Strategists should recognize
that achieving a successful outcome is more important than imposing the method of achieving it. It may be possible to
generate new alternatives that give equal results but with far greater potential for gaining commitment.
Satisfying—Achieving satisfactory results with an acceptable strategy is far better than failing to achieve optimal
results with an unpopular strategy.
Generalization—Shifting focus from specific issues to more general ones may increase strategists’ options for gaining
organizational commitment.
Focus on Higher-Order Issues—By raising an issue to a higher level, many short-term interests can be postponed in
favor of long-term interests. For instance, by focusing on issues of survival, the auto and steel industries were able to
persuade unions to make concessions on wage increases.
Provide Political Access on Important Issues—Strategy and policy decisions with significant negative consequences
for middle managers will motivate intervention behavior from them. If middle managers do not have an opportunity to
take a position on such decisions in appropriate political forums, they are capable of successfully resisting the
decisions after they are made. Providing such political access provides strategists with information that otherwise
might not be available and that could be useful in managing intervention behavior.
Page 246
111. Discuss the appropriate role of a board of directors in an organization.
Some principles are: No more than two directors are current or former company executives. No directors do business
with the company or accept consulting or legal fees from the firm. The audit, compensation and nominating
committees are made up solely of outside directors. Each director owns a large equity stake in the company,
excluding stock options. At least one outside director has extensive experience in the company’s core business and
at least one has been CEO of an equivalent-sized company. Fully employed directors sit on no more than four boards
and retirees sit on no more than seven. Each director attends at least 75 percent of all meetings. The board meets
regularly without management present and evaluates its own performance annually. The audit committee meets at
least four times a year. The board is frugal on executive pay, diligent in CEO succession oversight responsibilities,
and prompt to act when trouble arises. The CEO is not also the Chairperson of the Board. Shareholders have
considerable power and information to choose and replace directors. Stock options are considered a corporate
expense. There are no interlocking directorships (where a director or CEO sits on another director’s board).
Page: 246-249

David (chap 7)
View Comments
CHAPTER 7
Implementing Strategies: Management and Operations Issues
True/False
The Nature of Strategy Implementation
1. Effective strategy formulation can usually guarantee successful strategy

implementation.
Ans: F
2. Strategy formulation is the managing of forces during the action, whereas

strategy implementation is the positioning of forces before the action.
Ans: F
3. Strategy formulation requires coordination among a few individuals, but

strategy implementation requires coordination among many.
Ans: T
4. It is always easier to say you are going to do something (strategy formulation)

than to actually do it (strategy implementation).
Ans: T
5. Unlike strategy formulation, strategy implementation varies considerably

among different types and sizes of organizations.
Ans: T
6. A bottom-up flow of communication is essential for developing top-down
support.
Ans: F
Annual Objectives
7. Annual objectives are key components in the strategic-management process
because they dictate how resources will be allocated.

Ans: T
Page: 264
8. Horizontal consistency is more important than vertical consistency in developing
annual objectives.
Ans: F
Page: 266

9. Undesirable conduct such as distorting the record can be a result of overemphasis on

achieving objectives.

Ans: T
Page: 266

Policies
10. Policies refer to specific guidelines, methods, procedures, rules, forms, and
administrative practices established to support and encourage work toward stated
goals.

Ans: T
Page 266

11. Strategies clarify what can and cannot be done in pursuit of an organization’s
objectives.
Ans: F
Page: 266

Resource Allocation
12. Not allocating resources according to the priorities indicated by approved objectives
is detrimental to the strategic-management process.
Ans: T
Page: 268

13. Four types of resources that can be used to achieve desired objectives are financial,
physical, human and technological.

Ans: T
Page: 269

Managing Conflict
14. Avoidance, infusion and confrontation are the classifications for the various
approaches for minimizing and resolving conflict.
Ans: F
Page: 269

15. Conflict of any kind is avoidable in organizations.

Ans: F
Page: 269

16. Concerning managing and resolving conflict, defusion includes such actions as
ignoring the problem in hopes that the conflict will resolve itself.

Ans: F
Page 269

17. Holding a meeting at which conflicting parties present their views and work through
their differences is part of the diffusion strategy of managing conflict.

Ans: F Page: 270

18. Exchanging members of conflicting parties so each can gain an appreciation of the
other’s point of view exemplifies a confrontation approach.

Ans: T
Page: 270

Matching Structure with Strategy

19. Medium-sized firms tend to be divisionally structured, whereas large firms tend to
use an SBU (strategic business unit) or matrix structure.
Ans: T
Page: 271

20. Tasks and activities are grouped together by business function in a

divisional organizational structure.

Ans: F
Page: 271
21. A functional structure can be effective at limiting short-term and narrow thinking.
Ans: F
Page: 271

22. Most large companies have abandoned the functional structure in favor of
decentralization.

Ans: T
Page: 272
23. With a divisional structure, it is possible that competition between divisions may
become so intense that leads to improved sharing of ideas and resources for the
common good of the firm.
Ans: F
Page 272

24. With a divisional structure by customer, an organization can effectively cater to

the requirements of clearly defined customer groups.

Ans: T
Page: 273

25. Because activities are organized according to the way work is actually performed, a
divisional structure by process is similar to the matrix structure.

Ans: F
Page: 274
26. The most complex of all designs is a matrix structure.
Ans: T
Page: 275

27. With the matrix structure it is common for functional resources to be duplicated.

Ans F
Page 275

Some Do’s and Don’ts in Developing Organizational Charts
28. When developing an organizational chart, the top executive of the firm should be
reserved for the President.
Ans: F
Page 277

29. When developing an organizational chart, it is not wise to recommend a dual title for
just one executive.

Ans: T
Page 277

30. In developing an organizational chart, avoid having a particular person reporting to

more than one person above them in the chain of command.

Ans: T
Page 278

Restructuring, Reengineering and E-Engineering
31. Restructuring is also called rightsizing.
Ans: T
Page: 278
32. In terms of number of employees, restructuring usually involves increasing the size
of the firm.
Ans: F
Page: 278
33. Reengineering does not usually affect the organizational structure or chart, nor does
it imply job loss or employee layoffs.
Ans: T
Page: 279
34. The focus of restructuring is changing the way work is actually carried out.
Ans: F
Page: 279

35. Cornerstones of reengineering are decentralization, reciprocal interdependence and

information sharing.

Ans: T
Page: 280

Linking Performance and Pay to Strategies
36. An effective bonus system should be based on two key factors: annual objectives

and long-term objectives.
Ans: T
Page: 281

37. Gain sharing requires employees or departments to establish performance targets; if

actual results exceed objectives, all members get bonuses.

Ans: T
Page: 281-282

38. In 2004, salaries and bonuses of CEOs in the

USA decreased by five percent.
Ans: F
Page: 282

39. In 2004, the highest paid CEO was Steve Jobs from Apple Computer.

Ans: F
Page 283

Managing Resistance to Change
40. People’s anxieties are raised with the thought of change because they fear
economic loss, inconvenience, uncertainty and a break in normal social patterns.
Ans: T
Page: 283

41. Resistance to change can be considered the single greatest threat to successful
strategy implementation.

Ans: T
Page: 283

42. A rational change strategy means giving orders and enforcing those orders.

Ans: F
Page: 283

43. Ideally, the rational type change strategy is the most desirable.

Ans: T
Page: 284

44. The fastest of all approaches to implement change is the rational change strategy.

Ans: F
Page: 284

45. The rational change strategy is one that presents information to convince people of
the need for change.

Ans: F
Page: 284

Managing the Natural Environment
46. Recently, an increasing number of companies have been implementing less

rigorous environmental policies.
Ans: F
Page 285
47. Managing as if the earth matters requires an understanding of how international

trade, competitiveness and global resources are connected.
Ans: T
Page: 285
48. Managing environmental affairs is primarily a technical function performed by
specialists in a firm.
Ans: F
Page: 285
Creating a Strategy-Supportive Culture
49. Changing a strategy to fit an existing culture is not as effective as changing a firm’s
culture to fit a new strategy.
Ans: T
Page: 287

50. An effective, multi-method technique for studying and altering a firm’s structure is
known as triangulation.

Ans: F
Page: 287

51. Individualism, achievement, competition, informality and doing more than expected
are all stressed by Mexican businesses.

Ans: F
Page: 288

52. There is substantial social pressure against becoming a successful entrepreneur in

Russia.
Ans: T
Page: 289

53. An important business activity in

Japan is entertaining because it strengthens Wa.
Ans: T
Page: 290

Production/Operations Concerns When Implementing Strategies
54. Production processes typically constitute less than 50 percent of a firm’s total

assets.
Ans: F
Page: 291

55. JIT significantly increases the costs of implementing strategies.

Ans: F
Page: 292
Human Resource Concerns When Implementing Strategies

56. Besides reducing worker alienation and stimulating productivity, ESOPs allow firms
other benefits, such as substantial depreciation savings.

Ans: F
Page: 293

57. ESOPs work well even in firms with fluctuating payrolls and profits.
Ans: F
Page: 294
Balancing Work Life and Home Life

58. Work/family issues are typically focused on the benefit to working women.
Ans: F
Page 295
59. The United States leads the world in promoting women and minorities into mid- and
top-level managerial positions in business.
Ans: T Page 296
Multiple Choice

60. Strategy formulation
a. is managing forces during the action.
b. focuses on effectiveness.
c. is primarily an operational process.
d. requires coordination among many people.
e. all of the above.
Ans: b
Page: 262
61. Which of these is true about strategy implementation?
a. It is positioning forces before the action.

b. It focuses on effectiveness.
c. It is primarily an operational process.
d. It is primarily an intellectual process.
e. It requires intuitive skills.
Ans: c
Page: 262

Annual Objectives
62. How are objectives in the areas of profitability, growth and market share commonly
established?
a. Business segment
b. Geographic location
c. Customer groups
d. Product
e. All of the above
Ans: e
Page: 264
63. Establishing objectives is a
a. top-level activity.
b. centralized activity.
c. decentralized activity.
d. centralized-decentralized activity.
e. command-and-control activity.
Ans: c
Page: 264

64. Considerable time and effort should be devoted to assuring objectives are well
conceived because they represent the basis for
a. monitoring processes.
b. establishing divisional priorities.
c. allocating resources.
d. evaluating managers.
Ans: e
Page: 264
65. Which of the following is not true about objectives?

a. They should be communicated throughout the organization.
b. They should have an appropriate time dimension.
c. They should incorporate policies.
d. They should be measurable.
e. They should be consistent.
Ans: c
Page: 266

66. Which term would most likely be incorporated into written objective statements?
a. Maximize
b. Minimize
c. 10% increase
d. Adequate
e. All of the above
Ans: c
Page: 266

 Solved
 Custom T-shirts
 Quizzes
 Administrative Assistants
 Achieve
 Information
 Total
 Single
 Abandoned
 Achievement
 Solved
 Custom T-shirts
 Quizzes
 Administrative Assistants
 Achieve
 Information
 Total
Policies
67. What are guidelines, methods, procedures, rules, forms and administrative practices
known as?
a. Long-term objectives
b. Policies
c. Annual objectives
d. Strategies
e. Goals
Ans: b
Page: 266

68. Which of the following issues may not require a management policy?
a. To establish a high- or low-safety stock of inventory
b. To increase motivation
c. To offer numerous or few employee benefits
d. To discourage insider trading
e. To promote from within to or to hire from the outside
Ans: b
Page: 267
Resource Allocation
69. Which term is best defined as a central management activity that allows for strategy
execution.
a. Policy-making
b. Goal-setting
c. Establishing annual objectives
d. Resource allocation
e. Conflict
Ans: d
Page: 268

70. _______ is not a major factor that commonly prohibits effective resource allocation.
a. Underprotection of resources
b. Organizational politics
c. Vague strategy targets
d. Reluctance to take risks
e. Lack of sufficient knowledge
Ans: a

Managing Conflict

71. A disagreement between two or more parties on one or more issues is called a(n)
a. integrated solution.
b. conflict.
c. compromise.
d. diffusion.
e. avoidance.
Ans: b
72. Conflict in an organization is
a. always bad.
b. always good.
c. sometimes good and sometimes bad.
d. a sign of bankruptcy.
e. avoidable.
Ans: c
73. What are three categories of approaches for managing and resolving conflict?
a. Avoidance, diffusion and confrontation

b. Avoidance, payoff and diffusion
c. Confrontation, ignorance and objectivity
d. Buy, sell and hold
e. There are no good ways to manage conflict
Ans: a
Page: 269 - 270

74. Which approach for managing and resolving conflict involves exchanging members
of conflicting parties of that each can gain an appreciation of the others point of view?
a. Avoidance
b. Resistance
c. Compliance
d. Diffusion
e. Confrontation
Ans: e
Page 269-270
75. Which approach for managing and resolving conflict involves ignoring the problem in
hopes that the conflict will resolve itself?
a. Avoidance
b. Resistance
c. Compliance
d. Diffusion
e. Confrontation
Ans: a
Page 269-270
76. Which approach for managing and resolving conflict involves playing down
differences between conflicting parties while accentuating similarities and common
interests?
a. Avoidance
b. Resistance
c. Compliance
d. Diffusion
e. Confrontation
Ans: d
Page 269-270
Matching Structure with Strategy

77. Why do changes in company strategy often require changes in the way an
organization is structured?
a. Structure dictates how goals and objectives will be established.
b. Structure dictates authority over projects.
c. Structure dictates how resources will be obtained.
d. Structure dictates strategy.
e. Structure dictates how money is spent.
Ans: a
Page: 270

78. What type of organizational structure do most small businesses follow?
a. Divisional structure by product

b. Functional structure
c. Divisional structure by customer
d. Process type structure
e. Matrix structure
Ans: b
Page: 271

79. Which organizational structure is the most simple and inexpensive?
a. departmental
b. strategic business unit
c. functional
d. decentralized
e. process
Ans: c
Page: 271

80. Medium-sized firms are more likely to use which type of structure.
a. divisional
b. matrix
c. SBU
d. functional
e. process
Ans: a
Page: 271

81. What is not one of the basic ways a divisional structure can be organized?
a. By geographic area
b. By product or service
c. By customer
d. By process
e. By cost
Ans: e
Page: 272

82. A divisional structure by product is most effective when

a. special emphasis needs to be placed on specific products.
b. an organization offers few products.
c. an organization’s products or services differ substantially.
d. special emphasis needs to be placed on specific services.
e. All of the above
Ans: e
Page: 273

83. How would Hershey’s current divisional structure most likely be classified?
a. By geographic area
b. By product
c. By service
d. By customer
e. By process
Ans: a
Page 273

84. A divisional structure by geographic area is most appropriate when
a. organizations have similar branch facilities located in widely dispersed areas.
b. an organization offers only a limited number of products or services.
c. strict control and attention to product lines are needed.
d. an organization has many skilled managers.
e. the firm serves one geographic area.
Ans: a
Page: 273
85. What is the best divisional structure when a few major customers are of paramount
importance and many different services are provided to these customers?
a. by geographic area
b. by customer
c. by product
d. by process
e. by cost
Ans: b
Page: 273

86. What is the most complex form of organizational structure?

a. Divisional
b. SBU
c. Matrix
d. Functional
e. Geographic
Ans: c
Page: 275
87. Which organizational structure has ambiguous roles for senior executives as a
major disadvantage?
a. functional
b. divisional
c. strategic business unit (SBU)
d. matrix
e. process
Ans: c
Page: 276

88. When developing an organizational chart, you should:

a. Recommend dual titles for executives
b. Use the title “president” for the top person
c. Make sure that the chief financial officer is not at the same level as the chief
operating officer
d. Have division presidents report to a chief operating officer
e. Have the controller or treasurer report directly to the president
Ans: d
Page 277

Restructuring, Reengineering and E-Engineering

89. Restructuring is also referred to as

a. starting over.
b. delayering.
c. diversifying.
d. job security.
e. integrating.
Ans: b
Page: 278
90. Which term is most often concerned primarily with shareholder well-being rather
than employee well-being?
a. Benchmarking
b. Reengineering
c. Product redesign
d. Process management
e. Restructuring
Ans: e
Page: 278

91. Which of these involves comparing a firm against the best firms in the industry on a
wide variety of performance-related criteria?
a. Restructuring
b. Process redesign
c. Reengineering
d. Delayering
e. Benchmarking
Ans: e
Page: 279

92. The primary benefit sought from restructuring is

a. employee involvement.
b. cost reduction.
c. increased morale.
d. increased number of hierarchical levels in the organization.
e. increased innovation.
Ans: b
Page: 279

93. What action involves reconfiguring or redesigning work, jobs and processes for the
purpose of improving costs, quality, service and speed?
a. Restructuring
b. Downsizing
c. Reengineering
d. Delayering
e. Benchmarking
Ans: c
Page: 280

94. A firm uses information technology to break down functional barriers and create a
work system based on business processes, products, or outputs rather than on
functions or inputs in
a. restructuring.
b. benchmarking.
c. reengineering.
d. decentralization.
e. delayering.
Ans: c

Linking Performance and Pay to Strategies
95. Which pay strategy is not a form of incentive compensation?

a. Bonus system
b. Hourly wage
c. Gain sharing
d. Profit sharing
e. All of these are forms of incentive compensation.
Ans: b
96. What pay strategy requires employees or departments to establish
performance targets, such as “if actual results exceed objectives then all
members get bonuses.”
a. Profit sharing
b. Bonus system
c. Salary
d. Gain sharing
e. Hourly wage system
Ans: d
97. Which of these is not one of the tests used to determine whether a
performance-pay plan will benefit an organization?
a. Does the plan capture attention?

b. Do employees understand the plan?
c. Is the plan improving communications?
d. Does the plan pay out when it should?
e. Does the plan reduce management layers?
Ans: e
98. Which Fortune 500 CEO had the greatest salary in 2004?
a. Richard Kinder from Kinder Morgan Energy

b. Bob Nardelli from Home Depot
c. Steve Jobs from Apple Computer
d. Jeff Bezos from Amazon
e. Warren Buffett from Berkshire Hathaway
Ans: b
Managing Resistance to Change
99. What change strategy involves giving orders and enforcing those orders?
a. self-interest
b. educative
c. force
d. rational
e. diffusion
Ans: c
100. Resistance to change can manifest itself through
a. absenteeism.
b. sabotaging production machines.
c. filing unfounded grievances.
d. unwillingness to cooperate.
Ans: e
101. A change strategy that attempts to convince people the change is to their
personal advantage is
a. diffusion.
b. force.
c. educative.
d. rational.
e. compromise.
Ans: d
Managing the Natural Environment
102. What challenge facing all organizations requires managers to formulate

strategies that preserve and conserve natural resources and control pollution?
a. economic
b. ecological
c. compensational
d. benchmarking
e. global
Ans: b
Creating a Strategy-Supportive Culture
103. Formal statements of organizational philosophy, charters, creeds, materials

used for recruitment and selection and socialization help an organization
a. abide by SEC laws.
b. link culture to strategy.
c. set guidelines for firing.
d. increase profits.
e. manage conflicts between stakeholders.
Ans: b
104. Which strategy could be best defined as an effective, multi-method
technique of studying and altering a firm’s culture?
a. Benchmarking
b. Delivering
c. Triangulation
d. Process management
e. Educative change strategy
Ans: c
105. Desire for __________ is a part of the social fabric in worker-manager
relations in
Mexico.
a. harmony
b. friction
c. conflict
d. independence
e. punctuality
Ans: a
106. How is life in Mexico in comparison to life in the United States?
a. Faster
b. More affluent
c. Time-dictated
d. Slower
e. Less harmonious
Ans: d
Page: 289

107. The Russian people are known for their

a. drive.
b. desire to succeed.
c. laziness.
d. lack of motivation.
e. lack of education.
Ans: a
Page: 289

108. Which of the following does not describe most Japanese managers?
a. Reserved
b. Quiet
c. Distant
d. Impulsive
e. Introspective
Ans: d
Page: 290

Production/Operations Concerns When Implementing Strategies

109. Just in time describes

a. implementing strategies just before bankruptcy.
b. delivering materials just as they are needed.
c. a scheduling method for meetings.
d. a personnel planning method.
e. a process for improving quality.
Ans: b
Page: 292
Human Resource Concerns When Implementing Strategies

110. A concern in matching managers with strategy is that jobs have relatively
__________ responsibilities, while people are __________ in their development.
a. static; dynamic
b. dynamic; static
c. quick; slow
d. exciting; dull
e. dull; exciting
Ans: a
Page: 293

111. Approximately how many people in the

United States are now part of two-career families?
a. 2 million
b. 8 million
c. 21 million
d. 60 million
e. 85 million
Ans: d
Page: 295

112. Of the Fortune 500 firms, how many have a woman CEO?
a. two
b. four
c. five
d. twelve
e. twenty-four
Ans: c
Page: 296

113. What is the stated reason for Boeing’s recent firing of CEO Harry Stonecipher?
a. Poor company performance
b. Enforcing discriminatory hiring practices
c. Having an extramarital affair with a coworker
d. Stealing from the company
e. Exorbitant use of company planes
Ans: c
Page 296

114. What is not a major benefit of having a diverse workforce?

a. Improvement of the bottom line
b. An increase in training costs
c. An increase in productivity
d. A decrease in complaints and litigation
e. Higher retention of employees
Ans: b
Essay Questions
115. What are five differences between strategy formulation and strategy
implementation?
Strategy formulation is positioning forces before the action, whereas strategy
implementation is managing forces during the action. Strategy formulation focuses on
effectiveness, whereas strategy implementation focuses on efficiency. Strategy
formulation is primarily an intellectual process, whereas strategy implementation is
primarily an operational process. Strategy formulation requires good intuitive and
analytical skills, whereas strategy implementation requires special motivation and
leadership skills. Strategy formulation requires coordination among a few individuals,
whereas strategy implementation requires coordination among many individuals.
116. List four major reasons annual objectives are essential for strategy
implementation.
Annual objectives are essential for strategy implementation because they
(1) represent the basis for allocating resources,
(2) are a primary mechanism for evaluating managers,
(3) are the major instrument for monitoring progress toward achieving long-term
objectives and
(4) establish organizational, divisional and departmental priorities.
117. Name at least ten examples that may require a management policy.
Possible answers include:
1) To offer extensive or limited management development workshops and seminars.
2) To centralize or decentralize employee-training activities.
3) To recruit through employment agencies, college campuses and/or newspapers.
4) To promote from within or to hire from the outside.
5) To promote on the basis of merit or on the basis of seniority.
6) To tie executive compensation to long-term and/or annual goals.
7) To offer numerous or few employee benefits.
8) To negotiate directly or indirectly with labor unions.
9) To delegate authority for large expenditures or to retain this authority centrally.
10) To allow much, some, or no overtime work.
11) To establish a high- or low-safety stock of inventory.
12) To use one or more suppliers.
13) To buy, lease, or rent new production equipment.
14) To stress quality control greatly or not.
15) To establish many or only a few production standards.
16) To operate one, two, or three shifts.
17) To discourage using insider information for personal gain.
18) To discourage sexual harassment.
19) To discourage smoking at work.
20) To discourage insider trading.
21) To discourage moonlighting.
118. There are three major approaches for minimizing and resolving conflict in an
organization. Define these three approaches and give an example of each.
Various approaches for managing and resolving conflict can be classified into three
categories: avoidance, diffusion and confrontation. Avoidance includes such actions as
ignoring the problem in hopes the conflict will resolve itself, or physically separating the
conflicting individuals. Diffusion can include playing down differences between
conflicting parties while accentuating similarities and common interests, compromising
so there is neither a clear winner nor loser, resorting to majority rule, appealing to a
higher authority, or redesigning present positions. Confrontation is exemplified by
exchanging members of conflicting parties so each can gain an appreciation of the
other’s point of view, or holding a meeting at which conflicting parties present their
views and work through their differences.
119. What are the advantages and disadvantages of a divisional organizational
structure?
A divisional structure has some clear advantages. The first is that accountability is clear.
Also, it creates career development opportunities for managers, allows local control of
local situations, leads to a competitive climate within an organization and allows new
businesses and products to be added easily.
A divisional structure does have its limitations. A divisional structure is costly because
each division requires functional specialists who must be paid, there exists some
duplication of staff services, facilities and personnel, and better-qualified individuals
require higher salaries. It is also costly because it requires an elaborate headquarters-
driven control system. Finally, certain religions, products, or customers may sometimes
receive special treatment, and it may be difficult to maintain consistent, company-wide
practices.
120. There are four basic ways a divisionally structured firm could be organized.
What are these four ways? Give an example of each.
The four basic ways a divisionally structured firm could be organized are
1) by geographic area. An example of this would be any organization with similar branch
facilities located in widely dispersed areas;
2) by product or service. Huffy is an example of divisional structure by product;
3) by customer. Book publishing companies often organize their activities around
customer groups as college, secondary schools and private commercial schools; and
4) by process. An example of this is a manufacturing business organized into six
divisions: electrical work, glass cutting, welding, grinding, painting and foundry work.
Each division would be responsible for generating revenues and profits.
121. Compare and contrast restructuring and reengineering.
Restructuring involves reducing the size of the firm in terms of number of employees,
number of divisions or units and number of hierarchical levels in the firm’s
organizational structure. Restructuring is concerned primarily with shareholder well-
being rather than employee well-being.
In contrast, reengineering is concerned more with employee and customer well-being
than shareholder well-being. Reengineering involves reconfiguring or redesigning work,
jobs and processes for the purpose of improving cost, quality, service and speed.
Whereas restructuring is concerned with eliminating or establishing, shrinking or
enlarging, and moving organizational departments and divisions, the focus of
reengineering is changing the way work is actually carried out. Reengineering is
characterized by many tactical decisions, whereas restructuring is characterized by
strategic decisions.
122. Discuss the do’s and don’ts in developing organizational charts.
Students analyzing strategic management cases are often asked to revise and develop
a firm’s organizational structure. This section provides some basic guidelines for this
endeavor. There are some basic do’s and don’ts in regard to devising or constructing
organizational charts, especially for midsize to large firms. First of all, reserve the title
CEO for the top executive of the firm. Don’t use the title “president” for the top person;
use it for the division top managers if there are divisions within the firm. Also, do not use
the title “president” for functional business executives. They should have the title “chief”,
or “vice president,” or “manager,” or “officer”, such as “Chief Information Officer”, or “VP
of Human Resources”. Further, do not recommend a dual title (such as “CEO and
President”) for just one executive. The Chairman of the Board and CEO of
Bristol-Myers Squibb, Peter Dolan, gave up his title as chairman in 2005. Actually,
“chairperson” is much better than “chairman” for this title. Directly below the CEO, it is
best to have a COO (chief operating officer) with any division presidents reporting
directly to the COO. On the same level as the COO and also reporting to the CEO, draw
in your functional business executives, such as a CFO (chief financial officer), VP of
Human Resources, a CSO (Chief Strategy Officer), a CIO (Chief Information Officer), a
CMO (Chief Marketing Officer), a VP of R&D, a VP of Legal Affairs, a Investment
Relations Officer, Maintenance Superintendent, etc. Note in Figure 7-6 that these
positions are labeled and placed appropriately. Note that a controller and/or treasurer
would normally report to the CFO.
123. What are the three commonly used strategies or approaches for
implementing changes in an organization? Give an advantage and/or
disadvantage for each type of approach.
Although there are various approaches for implementing changes, three commonly
used strategies are a force change strategy, an educative change strategy and a
rational or self-interest change strategy. A force change strategy involves giving orders
and enforcing those orders; this strategy has the advantage of being fast, but low
commitment and high resistance plague it. An educative change strategy1 is one that
presents information to convince people of the need for change; the disadvantage of an
educative change strategy is that implementation becomes slow and difficult. However,
this type of strategy evokes greater commitment and less resistance than does the force
change strategy. Finally, a rational or self-interest change strategy is one that attempts
to convince individuals the change is to their personal advantage. When this appeal is
successful, strategy implementation can be relatively easy.
124. List 10 special natural environment issues.
(1) ozone depletion,
(2) global warming,
(3) depletion of rain forests,
(4) destruction of animal habitats,
(5) protecting endangered species,
(6) developing biodegradable products and packages,
(7) waste management,
(8) clean air,
(9) clean water,
(10) erosion,
(11) destruction of natural resources and
(12) pollution control.
125. Explain the nature and role of ESOPs in strategic management.
An ESOP is a tax-qualified, defined-contribution employee-benefit plan whereby
employees purchase stock of the company through borrowed money or cash
contributions. ESOPs empower employees to work as owners. Besides reducing worker
alienation and stimulating productivity, ESOPs allow firms other benefits, such as
substantial tax savings. Principal, interest and dividend payments on ESOP-funded debt
are tax-deductible. Banks lend money to ESOPs at interest rates below prime. This
money can be repaid in pretax dollars, lowering the debt service as much as 30 percent
in some cases. Research confirms ESOPs can have a dramatically positive effect on
employee motivation and corporate performance, especially if ownership is coupled with
expanded employee participation and involvement in decision-making. Market surveys
indicate customers prefer to do business with firms that are employee-owned.
126. List eight benefits of a diverse workforce.
Students may choose any eight of the following 13 major benefits of having a diverse
workforce:
1) improves corporate culture,
(2) improves employee morale,
(3) leads to a higher retention of employees,
(4) leads to an easier recruitment of new employees,
(5) decreases complaints and litigation,
(6) increases creativity,
(7) decreases interpersonal conflict between employees,
(8) enables the organization to move into emerging markets,
(9) improves client relations,
(10) increases productivity,
(11) improves the bottom line,
(12) maximizes brand identity and
(13) reduces training costs.
David (ch# 8)
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CHAPTER 8 Implementing Strategies: Marketing, Finance/Accounting, R&D and MIS Issues
1. Less than 2 percent of formulated strategies are successfully implemented1.

Ans: F Page: 306
2. Being long term in nature, strategy implementation affects top and middle managers but not the lower-
level employees.
Ans: F Page: 306
Marketing Issues
3. An example of a marketing decision is whether or not to limit the share of business done with a single
customer.
Ans: T Page: 306
4. Given that most information on individuals is available online, the extent to which companies can track
individuals’ movements on the Internet is not a marketing issue of great concern to consumers today.
Ans: F Page: 307
5. Market penetration can be defined as the subdividing of a market into distinct subsets of customers
according to needs and buying habits.
Ans: F Page: 307
6. The marketing mix component factors are product, place, promotion, price and people.
Ans: F Page: 308
7. With market segmentation, a firm can better operate with limited resources.
Ans: T Page: 308
8. The most common bases for segmenting markets are geographic and demographic.
Ans: T Page: 308
9. Segmentation often reveals that large, random fluctuations in demand actually consist of several small,
predictable, and manageable patterns.
Ans: T Page: 308
10. Segmenting industrial markets is generally simpler and easier than segmenting consumer markets.
Ans: F Page: 308
11. Generally, market segmentation is followed by market diversification strategy.

Ans: F Page: 308
12. The next step after segmenting markets so the firm can target particular customer groups is to find out
what customer groups want and expect.
Ans: T Page: 308
13. In general, the Internet makes market segmentation easier.

Ans: T Page 310
14. Multidimensional scaling involves examining three or more criteria simultaneously in a product-

positioning analysis.
Ans: T Page: 311
15. A firm can usually serve two or more market segments with the same strategy.
Ans: F Page: 311
16. It is okay for firms to create expectations that exceed the service the firm can or will offer if it will attract
customers.
Ans: F Page: 311
Finance/Accounting Issues
17. Return on assets is the most widely used technique for determining whether debt, stock, or a
combination of debt and stock is the best alternative for raising capital to implement strategies.
Ans: F Page: 313
18. Besides net profit from operations and the sale of assets, the two basic sources of funds for an ongoing
enterprise are debt and equity.
Ans: T Page: 313
19. In low earning periods, too much debt in the capital structure of an organization can endanger
stockholders’ returns and jeopardize company survival.
Ans: T Page 313
20. Additional capital is often required for successful strategy implementation.

Ans: T Page: 313
21. An EPS/EBIT chart can be constructed to determine the breakeven point, where one financing alternative
becomes more attractive than another.
Ans: T Page: 313
22. A reason for concern over the dilution of company stock is a possible hostile takeover.
Ans: T Page: 315
23. When additional debt is issued to finance implementation of strategy, ownership and control of the
enterprise are diluted.
Ans: F Page: 315
24. In times of depressed stock prices, stock issuances often prove to be the most suitable alternative for
obtaining capital.
Ans: F Page: 315
25. A projected financial analysis can be used to forecast the impact of various implementation decisions.
Ans: T Page: 318
26. When performing pro forma financial analyses, the balance sheet should be prepared before the income
statement.
Ans: F Page: 318
27. The percent-of-sales method should be used for computing the cost of goods sold and the expense items
in projected income statements.
Ans: T Page: 319
28. The cash account is used as a plug figure in pro forma balance sheets.
Ans: T Page: 320
29. The Sarbanes-Oxley Act of 2002 has eliminated the problem of firms inflating their financial projections,
so stakeholders need not worry about the financial projections of different companies.
Ans: F Page: 320
30. A financial budget is a document that details how funds will be obtained and spent for a specified period
of time.
Ans: T Page: 320
31. Limiting an organization’s expenditures is the primary purpose of financial budgets.

Ans: F Page: 320
32. The most common type of financial budget is the capital budget.
Ans: F Page: 321
33. Although cash budgets can be a useful financial tool, publicly held companies are not required to
complete them.
Ans: F Page 321
34. A limitation of financial budgets is that they can hide inefficiencies if based solely on precedent rather
than on periodic evaluation of circumstances and standards.
Ans: T Page: 321
35. All the methods for determining a business’ worth can be grouped into three basic approaches: what a
firm owns, what a firm earns, and what a firm spends.
Ans: F Page: 322
36. A conservative rule of thumb for measuring the value of a firm is to establish a business’ worth to be 10
times the firm’s most current annual profit.
Ans: F Page: 322
37. A recommended approach for determining a firm’s worth is to base the analysis on the selling price of a
similar company.
Ans: T Page: 322
38. To determine the price-earnings ratio, divide the market price of the firm’s annual earnings per share by
the common stock and multiply this number by the firm’s average net income for the past 10 years.
Ans: F Page: 322
39. It is generally not recommended for companies with less than $10 million in sales to go public.
Ans: T Page: 325
40. In general, there are very little costs associated with going public.
Ans F Page 325
41. Buying off the outstanding shares of your company from the open market to make the company private is
what going public means.
Ans: F Page: 299
Research and Development (R&D) Issues
42. If the rate of market growth and technical progress is fast and there are few barriers to possible new
entrants, then in-house R&D is the preferred solution.
Ans: F Page: 325
43. According to research, the most successful new product companies use a research and development
strategy that ties internal strengths to external opportunities and is linked with corporate objectives.
Ans: T Page: 325
44. R&D policies can enhance strategy implementation efforts to emphasize product or process
improvements.
Ans: T Page: 325
45. A major effort in R&D may be very risky if technology is changing rapidly and the market is growing
slowly.
Ans: T Page: 326
46. One R&D strategy is to be an innovative imitator of successful products.

Ans: T Page: 326
47. A current trend in R&D management involves the lifting of the veil of secrecy whereby firms, even major
competitors, are joining forces to develop new products.
Ans: T Page 327
Management Information Systems (MIS) Issues
48. The process of strategic management is facilitated immensely in firms that have an effective information
system.
Ans: T Page: 327
49. Increased costs are a disadvantage of a good information system.

Ans: F Page: 327
50. With information technology, in some cases it is possible to do away with the workplace by allowing
employees to work at home or anywhere, anytime.
Ans: T Page: 328

51. What percent of strategies formulated are successfully implemented?
a. Less than 10 percent
b. About 30 percent
c. Between 40 to 60 percent
d. Approximately 66 percent
e. More than 80 percent
Ans: a Page: 306
52. What level of management is directly affected by strategy implementation?

a. plant managers
b. sales managers
c. project managers
d. division managers
e. all of these
Ans: e Page: 306
Marketing Issues
53. All of the following are examples of marketing decisions that require policies except:
a. to be a market leader or follower.
b. to advertise online or not.
c. to offer a complete or limited warranty.
d. to use heavy, light, or no TV advertising.
e. to use exclusive dealerships or multiple channels of distribution.
Ans: a Page: 306
54. Which two variables are of central importance to strategy implementation?

a. diversification and budgeting.
b. marketing penetration and competition.
c. competition and collaboration.
d. product development and market development.
e. market segmentation and product positioning.
Ans: e Page: 307
55. Subdividing a market into distinct subsets of customers according to their needs and the way they buy
and use a product or service is:
a. market penetration.
b. product diversification.
c. market segregation.
d. market segmentation.
e. positioning.
Ans: d Page: 307
56. Why is market segmentation an important variable in strategy implementation?

a. all company strategies require increased sales through new markets and products.
b. it allows a firm to operate with limited resources.
c. mass production, mass distribution and mass advertising are not always required.
d. market segmentation decisions directly affect marketing mix variables.
Ans: e Page: 307-308
57. Which of the following variables are not directly affected by market segmentation?
a. Product
b. Place
c. Process
d. Promotion
e. Price
Ans: c Page: 308
58. Why is market segmentation an important variable in the strategy-implementation process?

a. company strategies do not require increased sales through new markets and products.
b. it allows a firm to operate with no resources.
c. it directly affects marketing mix variables.
d. it allows a firm to minimize per-unit profits and per-segment sales.
Ans: c Page: 308
59. Perhaps the most dramatic new market segmentation strategy is the
a. targeting of regional tastes.
b. focusing on universal product.
c. preference of international over domestic sales.
d. treatment of industrial markets.
e. none of these.
Ans: a Page: 308
60. Matching of which factors would allow factories to produce desirable levels without extra shifts, overtime
or subcontracting?
a. markets and competitors
b. competition and positioning
c. customer behavior and positioning
d. supply and demand
e. segments and demand
Ans: d Page: 308
61. Which variable would be considered part of the product element of the marketing mix?
a. Advertising
b. Packaging
c. Payment terms
d. Inventory levels and location
e. Publicity
Ans: b Page 308
62. Which variable would be considered part of the place element of the marketing mix?
a. Product line
b. Service level
c. Personal selling
d. Sales territory
e. Discounts and allowances
Ans: b Page 308
63. What entails developing schematic representations that reflect how your products or services compare to
competitors’ on dimensions most important to success in the industry?
a. Positioning
b. Segmentation
c. Penetration
d. Diversification
e. Budgeting
Ans: a Page: 311
64. Which of these is not a correct step in product positioning?

a. Select key criteria that effectively differentiate products or services in the industry.
b. Look for a hole or vacant niche
c. Plot major competitors’ products or services in the resultant matrix.
d. Identify areas in the positioning map where the company’s products or services could be most competitive in the
given target market.
e. Develop a marketing plan to position the company’s products and services appropriately.
Ans: b Page: 311
65. Looking for a vacant niche helps a company determine

a. its advertising budget.
b. the size of the marketing department.
c. the best place to position a product.
d. the best place to locate a new facility.
e. its projected R & D expenditures.
Ans: c Page: 311
66. Multidimensional scaling is used to determine

a. the size of a new building.
b. the size of a new department.
c. the amount of high-tech equipment a firm needs.
d. product positioning.
e. market segmentation.
Ans: d Page: 311
67. Which of the following is (are) true about two different market segments?
a. They can usually be served with the same marketing strategy.
b. They usually require different marketing strategies.
c. They are always in different geographic locations.
d. They are usually incompatible.
e. They are most effective when a firm squats between two segments.
Ans: b Page: 311
68. Which of these is not a rule of thumb when using product positioning as a strategy-implementation tool?
a. “Don’t squat between segments.”
b. “Look for the hole or vacant niche.”
c. “Try to serve more than one segment with the same strategy.”
d. “Don’t position yourself in the middle of the map.”
e. All of these are valid rules of thumb.
Ans: c Page: 311
Finance/Accounting Issues
69. Which of the following is not an example of a decision that may require finance/accounting policies?
a. To extend the time of accounts receivable
b. To establish a certain percentage discount on accounts within a specified period of time
c. To lease or buy fixed assets
d. To use LIFO, FIFO, or a market-value accounting approach
e. To determine the amount of product diversification
Ans: e Page: 313
70. In the low earnings period, too much ______ in the capital structure of an organization can endanger
stockholders’ return and jeopardize company survival.
a. debt
b. liquid assets
c. equity
d. cash
e. tax
Ans: a Page: 313
71. Which of these obligations generally must be met, regardless of circumstances?

a. Dividends
b. Employee
c. Fixed debt
d. Equity
e. All of these
Ans: c Page: 313
72. What is the most widely used technique for determining the best combination of debt and stock?
a. Debt-to-stock ratio
b. Earnings per share/earnings before interest and tax analysis
c. Gross profit analysis
d. Capital asset pricing model
e. Present value analysis
Ans: b Page: 313
73. After completing an EPS/EBIT analysis, what conclusions would you make if the debt line is above the
stock line throughout the range of EBIT on the graph?
a. Debt appears to be the best financing alternative.
b. Stock would be the best financing alternative.
c. A combination of debt and stock is probably the best financial alternative.
d. Dividends must be considered before conclusions can be made.
e. The company should be privately owned.
Ans: a Page: 313
74. What becomes a more attractive financing technique when cost of capital is high?
a. stock issuance
b. debt
c. cost cutting
d. borrowing
e. staying privately owned
Ans: a Page: 315
75. What is a drawback of using only equity to raise capital?

a. The cost
b. Fluctuations in the stock market
c. Dilution of the control of the company
d. That it will cause EPS to roller coaster
e. That it doesn’t raise as much capital as debt financing
Ans: c Page: 315
76. A benefit of using projected balance sheets and income statements is that
a. an organization can compute projected financial ratios under various scenarios.
b. money can be put aside to pay future income taxes.
c. insurance needs can be computed.
d. it is useful in analyzing past performance.
Ans: a Page: 318
77. Projected financial analysis is an important strategy-implementation technique because

a. it is an exact measurement of financial costs in the future.
b. it is an exact measurement of future company profits.
c. it allows an organization to examine the expected results of various actions and approaches.
d. insurance needs can be computed.
e. none of the above
Ans: c Page: 318
78. What is a central strategy-implementation technique that allows an organization to examine the expected
results of various actions and approaches?
a. EPS/EBIT
b. Financial budgeting
c. TOWS analysis
d. Projected financial statement analysis1
e. External analysis
Ans: d Page: 318
79. The first step in preparing a projected statements is to

a. prepare the projected balance sheet.
b. take an inventory of goods.
c. estimate increases in debt.
d. prepare the projected income statement.
e. calculate the projected net income.
Ans: d Page: 318
80. In preparing projected statements, to project cost of goods sold and the expense items in the income
statement, which of these methods is recommended?
a. Determining the net worth method
b. What a firm earns method
c. Percentage-of-sales method
d. Price-earnings ratio met
e. Outstanding shares method
Ans: c Page: 318-319
81. Which element in the projected income statement cannot be forecasted using the percentage-of-sales
method?
a. Cost of goods sold
b. Selling expense
c. Administrative expense
d. Interest expense
e. All of these items are forecasted using the percentage-of-sales method.
Ans: d Page: 319
82. Retained earnings is obtained by subtracting

a. any dividends from net income.
b. net income from EBIT.
c. taxes from EBIT.
d. interest expense from EBT.
e. EBIT from CGS.
Ans: a Page: 319-320
83. In projected financial statements, what account is used as a plug figure?

a. retained earnings
b. fixed assets
c. cash
d. long-term liabilities
e. stockholders’ equity
Ans: c Page: 320
84. Which of these is the most common type of budgeting time frame?
a. Daily
b. Quarterly
c. Annual
d. Every decade
e. Monthly
Ans: c Page: 320
85. If a firm incurs a loss during a particular year, or if the firm had positive net income but paid out
dividends more than the net income, its retained earnings for that year will most likely be
a. a large positive number.
b. a low positive number.
c. zero.
d. a negative number.
e. Can not be determined from this information.
86. What is the most common type of financial budget?

a. cash
b. sales
c. profits
d. factory
e. flexible
Ans: a Page: 321
87. Who has mandated that every publicly held company in the United States must issue an annual cash-flow
statement in addition to the usual financial reports?
a. SEC
b. Congress
c. FCC
d. FASB
e. OPEC
Ans: d Page: 321
88. How should financial budgets be thought of?

a. A tool for limiting expenditures.
b. A method for obtaining the most productive and profitable use of an organization’s resources.
c. A method for rationing the profits from the past year.
d. A method for determining who should receive the largest pay raise.
e. A tool for forecasting future profits.
Ans: b Page: 320
89. What is a limitation of using financial budgets?
a. They can be so detailed that they are cumbersome and expensive.
b. They can become a substitute for objectives.
c. They can hide inefficiencies if done only on precedent.
d. They are sometimes used as instruments of tyranny.
e. All of the above.
Ans: e Page: 321
90. Which of the following methods is not accepted for determining a business’ worth?
a. What the firm owns.
b. What the firm earns.
c. What the firm’s return on investment has been.
d. What the firm will bring in the market.
e. All of the above are accepted.
Ans: c Page: 322
91. Which item is/are not included in net worth?
a. Fixed assets
b. Common stock
c. Additional paid-in-capital
d. Retained earnings
e. All of these are included in net worth
Ans: a Page: 322
92. Which method of determining a firm’s net worth divides the market price of the firm’s stock by the annual
earnings per share and multiplies this number by the firm’s average net income for the past five years?
a. Debt/equity method
b. Current ratio method
c. Price-earnings ratio method
d. Long-term asset method
e. Outstanding shares method
93. What best describes how much a company is worth?

a. An exact science
b. An educated guess
c. Explicit accounting standards
d. Known only to the firm’s accountants
e. Static
94. The Financial Accounting Standard Board (FASB) Rule 142 deals with
a. illegal inflation of financial projections.
b. hacking issues in MIS.
c. goodwill.
d. how firms conduct R & D.
e. improving marketing policies.
95. What is the best definition of goodwill?

a. Premiums paid for acquisition
b. Value attached to the firms reputation
c. Excess of assets over liabilities
d. Value associated with benefits from environmental programs
e. Excess of current assets over liabilities
96. If an initial stock issuance is at or under $1 million, what is the average total cost paid to lawyers,
accountants and underwriters?
a. 1 dollar in 20
b. 1 dollar in 10
c. 25 percent
d. 5 percent
e. 40 percent
Research and Development (R&D) Issues

97. R&D employees and managers perform all of the following tasks except:
a. transferring complex technology.
b. alternating products to particular tastes and specifications.
c. researching resource availability.
d. adapting processes to local markets.
e. adjusting process to local raw materials.
98. Which of the following is not a major approach to R&D?

a. To be a pioneer
b. To be an innovative imitator
c. To be a low-cost producer by mass-producing products similar to but less expensive than products recently
introduced
d. To be a liquidator
e. All of the above are major approaches to R&D.
99. The attitude of U.S. firms toward research and development is best described by which of the following?
a. The veil of secrecy is being lifted, resulting in more collaboration.
b. Firms are more cutthroat than ever and less cooperative with each other.
c. Firms are less interested in working with universities.
d. Firms are spending less in total research and development expenditures.
e. Firms are less involved with research consortia than ever.
Management Information Systems (MIS) Issues

100. A good information system can allow a firm to
a. gain competitive advantage.
b. reduce costs.
c. increase productivity.
d. increase customers.
e. reduce turnover.
Essay Questions
101. Name five examples of marketing decisions that may require policies.
1) To use exclusive dealerships or multiple channels of distribution

2) To use heavy, light, or no TV advertising;
3) To limit (or not) the share of business done with a single customer;
4) To be a price leader or a price follower;
5) To offer a complete or limited warranty;
6) To reward salespeople based on straight salary, straight commission, or a combination salary/commission ;
7) To advertise online or not.
102. Although there are many marketing variables that impact the success or failure of strategy-
implementation efforts, two variables are central to the process. What are these variables? Discuss why they
are so important.
Two variables of central importance to strategy implementation are market segmentation and product positioning.
Segmentation is important because it is a key to matching supply and demand, which is one of the thorniest problems
in customer service. Segmentation often reveals that large, random fluctuations in demand actually consist of several
small, predictable and manageable patterns. Product positioning is important because it is a severe mistake to
assume the firm knows what customers want and expect. Many firms have become successful by filling the gap
between what customers and producers see as good service. What the customer believes is good service is
paramount, not what the producer believes service should be. Positioning entails developing schematic
representations that reflect how a firm’s products or services compare to competitors’ on dimensions most important
to success in the industry.
103. What are the marketing-mix component factors? Give some examples of each.
The marketing-mix component factors consist of product, place, promotion and price. Please refer to Table 8-1 on
page 308 for examples of each factor.
104. What are the five steps required for effective product positioning? Give an example of a product-
positioning matrix for an organization of your choice.
There are five steps required for effective product positioning. These five steps are as follows:
(1) select key criteria that effectively differentiate products or services in the industry,
(2) diagram a two-dimensional product-positioning map with specified criteria on each axis,
(3) plot major competitors’ products or services in the resultant four-quadrant matrix,
(4) identify areas in the positioning map where the company’s products or services could be most competitive in the
given target market and look for niches and
(5) develop a marketing plan to position the company’s products or services appropriately.
105. Name five examples of finance/accounting decisions that may require policies.
1) To raise capital with short-term debt, long-term debt, preferred stock, or common stock;
2) To lease or buy fixed assets;
3) To determine an appropriate dividend payout ratio;
4) To use LIFO, FIFO, or a market-value accounting approach;
5) To extend the time of accounts receivable.
6) To establish a certain percentage discount on accounts within a specified period of time;
7) To determine the amount of cash that should be kept on hand.
106. Describe the considerations of EPS/EBIT analysis.

There are four considerations of EPS/EBIT analysis:
1) profit levels may be higher for stock or debt alternatives when EPS levels are lower;
2) flexibility;
3) dilution of ownership can be an overriding concern in closely held corporations in which stock issuances affect the
decision-making power of majority stockholders; and
4) timing in relation to movements of stock prices, interest rates and bond prices becomes important.
107. Explain how to perform a projected financial analysis.

The steps to performing a projected financial analysis are as follows:
(1) prepare the projected income statement before the balance sheet and start by forecasting sales as accurately as
possible;
(2) use the percentage-of-sales method to project CGS and the expense items in the income statement;
(3) calculate the projected net income;
(4) subtract from the net income any dividends to be paid and add the remaining net income to Retained Earnings;
(5) project the balance sheet items, beginning with retained earnings and then forecasting stockholders’ equity, long-
term liabilities, total liabilities, total assets, fixed assets and current assets—in that order; and
(6) list comments on the projected statements.
108. Identify and describe three approaches for determining a business’ worth.
The three approaches for determining a business’ worth are what a firm owns, what a firm earns and what a firm will
bring in the market. Please see the discussion on page 322 under “Evaluating the Worth of a Business” for
descriptions of each approach.
109. Explain the important issues involved in deciding whether to go public, i.e., a private firm considering
becoming a public firm. Include cost estimates, advantages and disadvantages.
110. Discuss guidelines used to determine whether a firm should conduct R&D internally or externally.
First, if the rate of technical progress is slow, the rate of market growth is moderate, and there are significant barriers
to possible new entrants, then in-house R&D is the preferred solution. Second, if technology is changing rapidly, and
the market is growing slowly, then a major in-house effort in R&D may be risky. Third, if technology is changing slowly
but the market is growing quickly, there generally is not enough time for in-house development. Finally, if both
technical progress and market growth are fast, R&D expertise should be obtained through acquisition of a well-
established firm in the industry.
111. List and describe the three major R&D approaches for implementing strategies.
The three major R&D approaches for implementing strategies are:
(1) to be the first firm to market new technological products;
(2) to be an innovative imitator of successful products, thus minimizing the risks and costs of start-up; and
(3) to be a low-cost producer by mass-producing products similar to but less expensive than products recently
introduced.

David (chap 9)
View Comments
CHAPTER 9
Strategy Review, Evaluation and Control
True/False
The Nature of Strategy Evaluation
1. Most strategists believe that an organization’s well being depends on evaluation of the strategic-
management process.
Ans: T Page: 337
2. Adequate, timely feedback is important to effective strategy evaluation.

Ans: T Page: 337
3. Too much emphasis on evaluating strategies may be expensive and counter productive.
Ans: T Page: 337
4. Strategy evaluation should have a long-run focus and avoid a short-run focus.

Ans: F Page: 327
5. According to Richard Rumelt, consonance and consistency are based on a firm’s external assessment.
Ans: F Page: 337
6. According to Rumelt, consistency and feasibility are largely based on a firm’s internal assessment.
Ans: T Page: 337
7. Consistency, distinctiveness, advantage and feasibility are Richard Rumelt’s four criteria for evaluating a
strategy.
Ans: F Page: 337
8. Strategy evaluation is becoming increasingly easier with the passage of time, given the technological
advances.
Ans: F Page: 337
9. The decreasing time span for which planning can be done with any degree of certainty is a reason strategy
evaluation is more difficult today.
Ans: T Page: 337
10. Strategies may be inconsistent if policy problems and issues continue to be brought to the top for
resolution.
Ans: T Page: 338
11. Competitive advantages normally are the result of superiority in one of three areas: feasibility,
consistency, or consonance.
Ans: F Page: 338
12. Regardless of the size of the organization, a certain amount of management by wandering around at all
levels is essential to effective strategy evaluation.
Ans: T Page: 339
13. Because large companies have more at stake, it is more important for large organizations to conduct
strategy evaluation than small companies.
Ans: F Page: 339
14. The end of the fiscal year is the best time to do strategy evaluation.
Ans: F Page: 339
A Strategy-Evaluation Framework
15. Changes in the organization’s management, marketing, finance, R&D and CIS strengths and weaknesses
should all be the focus of a revised EFE matrix in strategy evaluation.
Ans: F Page: 340
16. In strategy evaluation, a revised IFE matrix should indicate how effective a firm’s strategies have been in
response to key opportunities and threats.
Ans: F Page: 340
17. Strengths, weaknesses, opportunities and threats should continually be monitored for change because it
is not really a question of whether these factors will change but rather when they will change and in what
ways.
Ans: T Page: 341
18. When taking corrective action, you need to compare expected results to actual results.
Ans: F Page: 342
19. Criteria for evaluating strategies should be measurable and easily verifiable.

Ans: T Page: 343
20. Specific financial ratios are rarely used criteria to evaluate strategies.

Ans: F Page: 343
21. Measuring organizational performance includes comparing expected results to actual results,
investigating deviations from plans, evaluating individual performance and examining progress being made
toward meeting stated objectives.
Ans: T Page: 343
22. Intuitive judgments are almost always involved in deriving quantitative criteria.

Ans: T Page: 343
23. Most quantitative evaluation criteria are geared to long-term objectives rather than annual objectives.
Ans: F Page: 343
24. Measuring organizational performance requires making changes to reposition a firm competitively for the
future.
Ans: F Page: 344
25. Taking corrective actions does not necessarily mean that existing strategies will be abandoned, or even
that new strategies must be formulated.
Ans: T Page: 344
26. Corrective action in strategy evaluation is necessary to keep an organization on track toward achieving
stated objectives.
Ans: T Page: 344
27. Alvin Toffler argues that environments are becoming so dynamic and complex that they threaten people
and organizations with future shock in his thought-provoking books entitled Future Shock and The Third
Wave.
Ans: T Page: 344
28. Future shock occurs when the type and speed of changes overpower an individual or organization’s
ability and capacity to adapt.
Ans: T Page: 344
29. According to research, participation in strategy-evaluation activities is one of the best ways to overcome
individuals’ resistance to change.
Ans: T Page: 344-345
The Balanced Scorecard
30. The basic form of a Balanced Scorecard is the same for all organizations and industries.
Ans: F Page: 346
31. The Balanced Scorecard Approach deals with the question, “How satisfied are the firm’s customers.”
Ans: T Page: 346
Published Sources of Strategy-Evaluation Information

32. Each year, Fortune publishes strategy evaluation research on both the United States and other countries.
Ans: T Page: 346
Characteristics of an Effective Evaluation System

33. Strategy-evaluation activities must be meaningful, i.e., they should specifically relate to a firm’s
objectives.
Ans: T Page: 349
34. Timely approximate information generally more desirable as a basis for strategy evaluation than
accurate information that does not depict the present.
Ans: T Page: 349
35. The test of an effective evaluation system is its usefulness and complexity.

Ans: F Page: 349
36. Small organizations require a more elaborate and detailed strategy-evaluation system because they are
still evolving.
Ans: F Page: 349
37. There is no one ideal strategy-evaluation system for all organizations.

Ans: T Page: 349
Contingency Planning
38. Contingency plans are alternative plans that can be put into effect if certain key events do not occur as
expected.
Ans: T Page: 350
39. Organizations should prepare contingency plans just for unfavorable events.

Ans: F Page: 350
40. Strategies should try to cover all bases by planning for all possible contingencies.
Ans: F Page: 350
41. Contingency plans should be as simple as possible.

Ans: T Page: 350
42. Alternative strategies not selected for implementation should be discarded, as they have a tendency to
contaminate the contingency plans.
Ans: F Page: 350
43. Identifying both beneficial and unfavorable events that could possibly derail the strategy or strategies is
the first step of effective contingency planning.
Ans: T Page: 351
Auditing
44. Independent auditors, government auditors and IRS auditors are the three groups of people who perform
audits.
Ans: F Page: 352
45. Independent auditors are basically CPAs who provide their services to organizations for a fee.
Ans: T Page: 352
46. Public accounting firms usually avoid strategy evaluation services.

Ans: F Page: 352
47. Two government agencies—IRS and GAO—employ government auditors responsible for making
sure organizations comply with federal laws, statutes and policies.
Ans: T Page: 352
48. Moving environmental affairs from the line side of the organization to the staff side is required when
instituting an environmental audit.
Ans: F Page: 353
49. The strategic management process should be completely open because participation and openness
enhance understanding, commitment, and communication within the firm.
Ans T: Page 354
50. Increased education and diversity of the workforce at all levels are reasons why the top-down approach
should be favored in organizations.
Ans: F Page: 354
Multiple Choice
The Nature of Strategy Evaluation

51. Which of these is/are a basic activity of strategy evaluation?
a. Reviewing the underlying internal and external factors that represent the bases of current strategies
b. Measuring organizational performance
c. Taking corrective actions
d. All of the above.
e. Both b and c
Ans: d Page: 336
52. The purpose of strategy evaluation is to

a. increase the budget annually.
b. alert management to problems or potential problems.
c. make budget changes.
d. evaluate employees’ performance.
e. improve R&D programs.
Ans: b Page: 336
53. What is the cornerstone of effective strategy evaluation?

a. Adequate and timely feedback
b. Quality and quantity of managers
c. Smaller ratio of top- to lower-level management
d. Evaluation preceding implementation stage
e. Taking corrective actions
Ans: a Page: 337
54. All of these are Richard Rumelt’s criteria to evaluate a strategy except:
a. advantage.
b. consistency.
c. feasibility.
d. distinctiveness.
e. consonance.
Ans: d Page: 337
55. What is happening to strategy evaluation with the passage of time?

a. increasingly difficult
b. much simpler
c. very convenient
d. an unnecessary activity
e. less important
Ans: a Page: 337
56. All of the following are reasons strategy evaluation is more difficult today except:
a. a dramatic increase in the environment’s complexity.
b. the increasing number of variables.
c. the increase in the number of both domestic and world events affecting organizations.
d. the decreasing difficulty of predicting the future with accuracy.
e. the rapid rate of obsolescence of even the best plans.
Ans: d Page: 337
57. Which of the following is not a reason for the increasing difficulty of evaluating strategies?
a. Product life cycles are longer today than ever.
b. Domestic and world economies are less stable than ever.
c. Product development cycles are longer than ever.
d. Technological advancement is more rapid.
e. Change is occurring more frequently than ever.
Ans: a Page: 337
58. What is important because organizations face dynamic environments in which key external and internal
factors often change quickly and dramatically?
a. Strategy formulation
b. Strategy evaluation
c. Strategy simplification
d. Strategy modification
e. Strategy implementation
Ans: b Page: 337

59. A final broad test of strategy is its
a. advantage.
b. feasibility.
c. consonance.
d. consistency.
e. distinctiveness.
Ans: b Page: 338
60. Competitive advantage normally is the result of superiority in resources, skills and
a. employees.
b. position.
c. consistency.
d. feasibility.
e. governance.
Ans: b Page: 338
61. What term refers to the need for strategists to examine sets of trends, as well as individual trends in
evaluating strategies?
a. Consistency
b. Consonance
c. Synergy
d. Feasibility
e. Advantage
Ans: b Page 338
62. In evaluating strategies, which one of Rumelt’s criteria for evaluating strategies, refers to the need for
strategists to examine sets of trends?
a. consistency
b. consonance
c. feasibility
d. advantage
e. empowerment
Ans: b Page: 338
63. If success for one organizational department means failure for another department, then strategies may
be
a. synergistic.
b. advantageous.
c. inconsonant
d. failures.
e. inconsistent.
Ans: e Page: 338
64. When empowered employees are held accountable for and pressured to achieve specific goals and are
given wide latitude in their actions to achieve them, there can be
a. increased productivity.
b. dysfunctional behavior.
c. decreased number of complaints.
d. decreased turnover.
e. increased number of litigations.
Ans: b Page: 339
65. Strategy-evaluation activities should be performed

a. on a periodic basis.
b. at the onset of a problem.
c. on a continuous basis.
d. upon completion of major projects.
e. every two years.
Ans: c Page: 339
A Strategy-Evaluation Framework
66. Corrective actions are not needed when
a. changes have occurred in the firm’s internal strategic position.
b. external and internal factors have not significantly changed.
c. the firm is not progressing satisfactorily toward achieving stated objectives.
d. competitive factors are on the rise.
e. the industry is slowing down.
Ans: b Page: 340
67. When you discover major changes have occurred in the firm’s internal strategic position while
conducting strategy evaluation, you should
a. continue on the present strategic course.
b. immediately discontinue all aspects of the present strategic course.
c. take corrective actions.
d. add additional funds to the present strategic plan.
e. copy the actions of major competitors.
Ans: c Page: 340
68. Changes in the organization’s management, marketing, finance/accounting, R&D and CIS strengths and
weaknesses should be the focus of a revised
a. mission.
b. IFE matrix.
c. vision.
d. EFE matrix.
e. EPM matrix.
Ans: b Page: 340
69. A revised __________ should indicate how effective a firm’s strategies have been in response to key
opportunities and threats.
a. IFE matrix
b. mission
c. EFE matrix
d. vision
e. CPM matrix
Ans: c Page: 340
70. Which of the following is not included in measuring organizational performance?

a. Comparing results to competitors’ expectations.
b. Examining progress being made toward meeting stated objectives.
c. Investigating deviations from plans.
d. Evaluating individual performance.
e. Comparing expected results to actual results.
Ans: a Page: 342-343
71. Ineffectiveness and/or inefficiencies indicate the need for

a. layoffs.
b. consultants.
c. some form of correction action.
d. reductions in pay.
e. more synergy.
Ans: c Page: 343
72. What is the basis for quantitative financial evaluation?

a. Reduction in costs
b. The EPS/EBIT Analysis
c. Capital Asset Pricing Model
d. Financial ratios
e. Present value analysis
Ans: d Page: 343
73. Which of these is not a key financial ratio?

a. Market share
b. Production quality
c. Earnings per share
d. Asset growth
e. Return on equity
Ans: b Page: 343
74. Strategy evaluation is based on

a. empirical data.
b. qualitative criteria.
c. objective data.
d. qualitative and quantitative criteria.
e. intuition.
Ans: d Page: 343
75. Financial ratios are used to compare a firm’s performance over different time periods, compare the firm’s
performance to industry averages, and compare a firm’s performance with
a. overall business standards.
b. the performance of international firms.
c. the performance of suppliers.
d. non-financial ratios.
e. the performance of competitors.
Ans: e Page: 343
76. Most quantitative criteria are geared to objectives rather than objectives.
a. top-management; employee
b. short-term; annual
c. annual; long-term
d. environmental; community
e. profit; social
Ans: c Page: 343
77. What corrective actions should a firm take during strategy evaluation?
a. Revising the business mission
b. Issuing stock
c. Revising objectives
d. Selling a division
e. All of the above
Ans: e Page: 344
78. What occurs when the nature, types and speed of changes overpower an individual’s or organization’s
ability and capacity to adapt?
a. Corporate downfall
b. Corrective actions
c. Future shock
d. Corporate agility
e. Measuring performance
Ans: c Page: 344
79. Corrective actions should

a. strengthen an organization’s competitive position in its industry.
b. streamline asset holdings.
c. reduce the staff size.
d. involve abandoning existing strategies.
Ans: a Page: 344
80. What is the best way to overcome individuals’ resistance to change in strategy evaluation?
a. Participation
b. Command-and-control
c. Laissez-faire system
d. Rational argument
e. Emotional reactions
Ans: a Page: 344
81. An organization’s ability to adapt successfully to changing circumstances refers to its

a. corporate agility.
b. future shock.
c. dynamism.
d. revision power.
e. liquidity.
Ans: a Page: 344
82. Corrective action should do all of the following except:

a. capitalize upon internal strengths.
b. avoid external opportunities.
c. avoid external threats.
d. improve internal weaknesses.
e. strengthen an organization’s competitive position.
Ans: b Page: 345
The Balanced Scorecard

83. Which of the following is not a component of the Balanced Scorecard?
a. Social responsibility
b. Financial performance
c. Customer knowledge
d. Internal business processes
e. Learning and growth
Ans: a Page: 346
84. What aims to balance long term with short term concerns, financial with non-financial concerns, and
internal with external concerns.
a. Contingency planning
b. The Balanced Scorecard approach
c. Taking corrective action
d. Measuring performance
e. reviewing Bases of Strategy
Ans: b Page: 346
Published Sources of Strategy-Evaluation Information

85. In the important publication used to evaluate a firm’s strategy, the Fortune 50 includes all of the following
except:
a. the top retailers.
b. the top transportation companies.
c. the top utilities.
d. the top banks.
e. the top hospitals.
Ans: e Page: 346
86. Which of these is not a key attribute in Fortune’s strategy evaluation research on “
America’s Most Admired Companies”?
a. Quality of management
b. Innovation
c. Long-term investment value
d. Amount of physical resources
e. Use of corporate assets
Characteristics of an Effective Evaluation System
87. What is not a characteristic of an effective evaluation system?

a. Economical
b. Timely
c. Information-oriented
d. Meaningful
e. Provide a true picture of what is happening
Ans: c Page: 349
88. Controls need to be _________ rather than__________.

a. action oriented; information oriented
b. cultural; political
c. qualitative; quantitative
d. measurable; timely
e. universal; diverse
Ans: a Page: 349
89. The strategy-evaluation process should foster

a. mutual understanding.
b. implementation.
c. corporate culture.
d. profit centers.
e. contingency plans.
Ans: a Page: 349
90. What factor determines the final design of a firm’s strategy-evaluation and control system?
a. Opportunities
b. Threats
c. External characteristics
d. The organization’s characteristics
e. The competition’s characteristics
Ans: d Page: 349
91. Familiarity with local environments usually makes gathering and evaluating information much easier for
organizations than for ones.
a. non-profit; for-profit
b. for-profit; non-profit
c. large; small
d. small; large
e. foreign; domestic
Ans: d Page: 349
Contingency Planning
92. What activity is defined as having alternative plans that can be put into effect if certain key events do not
occur as expected?
a. Corporate agility
b. Scenario planning
c. Strategy evaluation
d. Contingency planning
e. Forecasting
Ans: d Page: 350
93. Which of the following statements about contingency plans is not true?
a. Contingency plans should be as simple as possible.
b. Only high-priority areas require the insurance of contingency plans.
c. Contingency plans should be developed for favorable and unfavorable events.
d. Develop contingency plans for all contingent events.
e. Contingency plans minimize the impact of potential threats.
Ans: d Page: 350
94. What permits quick response to change, prevents panic in crisis situations, and makes managers more
adaptable.
a. Auditing
b. Implementing a balanced scorecard
c. Contingency planning
d. Taking corrective actions
e. Measuring performance
Ans: c Page: 351
Auditing
95. What term refers to a systematic process of objectively obtaining and evaluating evidence regarding
assertions about economic actions and events to ascertain the degree of correspondence between these
assertions and established criteria, and communicating the results to interested users?
a. Auditing
b. Innovation
c. R&D
d. Strategic Management
e. Accounting
Ans: a Page: 352
96. Which type of auditors are specifically responsible for safeguarding the assets of a company?
a. Independent auditors
b. Government auditors
c. Internal auditors
d. External auditors
e. Research auditors
Ans: c Page: 352
The Environmental Audit

97. Product design, manufacturing, transportation, customer use, packaging, product disposal and corporate
rewards should reflect considerations to develop constructive relations with employees, consumers,
suppliers and distributors.
a. profit
b. union
c. top-management
d. environmental
e. customer
Ans: d Page: 352
Twenty-First-Century Challenges in Strategic Management

98. Most strategy literature advocates that strategic management is
a. more of a science than an art.
b. more of an art than a science.
c. based on analysis rather than research.
d. based on intuition rather than analysis.
e. based on creativity rather than intuition.
Ans: a Page: 353
99. All of the following are reasons to be completely open with the strategy process except:
a. managers, employees and other stakeholders can readily contribute to the process.
b. investors, creditors and other stakeholders have greater basis for supporting a firm that is open.
c. visibility promotes democracy whereas secrecy promotes autocracy.
d. participation and openness enhances understanding, commitment and communication within the firm.
e. openness limits rival firms from imitating or duplicating the firm’s strategies.
Ans: e Page: 354
100. Which of the following is not a reason why some firms prefer to conduct strategic-planning in secret?
a. Dissemination of a firm’s strategies may translate into competitive intelligence for rival firms.
b. It enhances understanding, commitment and communication within the firm.
c. It limits criticism, second-guessing and hindsight.
d. Participants in a visible strategy process become more attractive to rival firms, who may lure them away.
e. Secrecy limits rival firms from imitating or duplicating the firm’s strategies.
Ans: b Page: 354
Essay Questions
101 Explain why strategy evaluation can be a complex and sensitive undertaking.
Strategy can be a complex and sensitive undertaking because too much emphasis on evaluating strategies may be
expensive and counterproductive. No one likes to be evaluated too closely! The more managers attempt to evaluate
the behavior of others, the less control they have. Yet too little or no evaluation can create even worse problems.
Strategy evaluation is essential to ensure stated objectives are being achieved.
Page: 337
102 Discuss some of the reasons why strategy evaluation is becoming increasingly difficult with the passage
of time.
Possible answers include: Domestic and world economies were more stable in years past; Product life cycles were
longer; product development cycles were longer; technological advancement was slower; change occurred less
frequently; there were fewer competitors; foreign companies were weak; and there were more regulated industries.
Other reasons include: 1) A dramatic increase in the environment’s complexity; 2) The increasing difficulty of
predicting the future with accuracy; 3) The increasing number of variables; 4) The rapid rate of obsolescence of even
the best plans; 5) The increase in the number of both domestic and world events affecting organizations; and 6) The
decreasing time span for which planning can be done with any degree of certainty.
Page: 337
103 Compare and contrast two of Rumelt’s four criteria for evaluating strategies.
Rumelt’s four criteria for evaluating strategies are consistency, consonance, feasibility and advantage. Students
should take their answers from Table 9-1 on page 338, which provides descriptions of each.
Page: 338
104 Describe each of the activities that comprise strategy evaluation.
The activities that comprise strategy evaluation are: (1) reviewing bases of an organization’s strategy, (2) measuring
organizational performance and (3) taking corrective actions. Please refer to pages 340-342 for descriptions of each
activity.
Page: 340-342
105 What are the most commonly used quantitative criteria to evaluate strategies? Give several examples of
these criteria.
Quantitative criteria commonly used to evaluate strategies are financial ratios, which strategists use to make three
critical comparisons: (1) comparing the firm’s performance over different time periods, (2) comparing the firm’s
performance to that of competitors’ and (3) comparing the firm’s performance to industry averages. Some particularly
useful key financial ratios used as criteria for strategy evaluation are: (1) ROI, (2) ROE, (3) profit margin, (4) market
share, (5) debt to equity, (6) earnings per share, (7) sales growth and (8) asset growth.
Page: 342-343
106 Discuss the different perspectives and concerns of the Balanced Scorecard.
The Balanced Scorecard is a process that allows firms to evaluate strategies from four perspectives: financial
performance, customer knowledge, internal business processes, and learning and growth. It aims to balance long-
term concerns with short-term concerns, financial with non-financial concerns, and internal with external concerns.
Page: 346
107 Identify some important guidelines for effective strategic management, as presented in the chapter.
Please refer to the entire discussion on pages 349 under Characteristics of an Effective Evaluation System.
Page: 349
108. Describe the seven-step process of effective contingency planning in strategy evaluation.
The suggested seven-step process of effective contingency planning is as follows:
(1) Identify both beneficial and unfavorable events that could possibly derail the strategy or strategies;
(2) specify trigger points and calculate about when contingent events are likely to occur;
(3) assess the impact of each contingent event;
(4) develop contingency plans; (
5) assess the counter impact of each contingency plan;
(6) determine early warning signals for key contingent events and monitor them; and
(7) for contingent events with reliable early warning signals, develop advance action plans to take advantage of the
available lead time.
Page: 351-352
109. Individuals who perform audits can be divided into three groups. Identify these three groups and give
an example of each.
People who perform audits can be divided into three groups:
independent auditors, government auditors and internal auditors. An example of an independent auditor is the
CPAs at Arthur Andersen public accounting firm. The GAO and IRS are examples of government auditors.
Employees within an organization who are responsible for safeguarding company assets, for assessing the efficiency
of company operations and for ensuring the generally accepted business procedures are examples of internal
auditors.
Page: 352
110 Discuss the three challenges that strategists face today.

The three challenges that strategists face today are 1) deciding whether the process of strategic management should
be more of an art or a science; 2) deciding whether strategies should be visible or hidden from stakeholders; or 3)
deciding whether the process should be more top-down or bottom-up in the firm.
Page: 353-355
MGT603 Strategic Management Solved MCQs Set 1

A company's competitive strategy deals with
A. Management's game plan for competing successfully—the specific efforts to please customers, offensive and
defensive moves to counter the maneuvers of rivals, the reactions and responses to whatever market conditions
prevail at the moment and the initiatives undertaken to improve the company's market position
B. What its strategy will be in such functional areas as R&D, production, sales and marketing, distribution, finance
and accounting and so on
C. Its efforts to change its position on the industry's strategic group map
Answer:a
The objective of competitive strategy is to
A. Contend successfully with the industry's 5 competitive forces
B. Knock the socks off rival companies by doing a better job of satisfying buyer needs and preferences
C. Get the company into the best strategic group and then dominate it
Answer:b
A company achieves competitive advantage whenever
A. It is the acknowledged market share leader
B. It is the industry's acknowledged technology leader
C. It has greater financial resources than its rivals
D. It has a well-known and well-regarded brand name, prefers offensive strategies to defensive strategies and has a
strong balance sheet
E. It has some type of edge over rivals in attracting customers and coping with competitive forces
Answer:e
A company can be said to have competitive advantage if
A. It is the acknowledged leader in product quality
B. It has a different value chain than rivals
C. It has some type of edge over rivals in attracting customers and coping with competitive forces
Answer:c
While there are many routes to competitive advantage, they all involve
A. Building a brand name image that buyers trust
B. Delivering superior value to buyers and building competencies and resource strengths in performing value chain
activities that rivals cannot readily match
C. Achieving lower costs than rivals and becoming the industry's sales and market share leader
Answer:B
The biggest and most important differences among the competitive strategies of different companies boil
down to
A. How they go about building a brand name image that buyers trust and whether they are a risk-taker or risk-avoider
B. The different ways that companies try to cope with the five competitive forces
C. Whether a company's market target is broad or narrow and whether the company is pursuing a competitive
advantage linked to low cost or differentiation
Answer:c
Which of the following is not one of the five generic types of competitive strategy?
A. A low-cost provider strategy
B. A broad differentiation strategy
C. A best-cost provider strategy
D. A focused low-cost provider strategy
E. A market share dominator strategy
Answer:e
The generic types of competitive strategies include
A. Build market share, maintain market share and slowly surrender market share
B. Offensive strategies and defensive strategies
C. Low-cost provider, broad differentiation, best-cost provider, focused low-cost and focused differentiation
Answer:c
Which one of the following generic types of competitive strategy is typically the best strategy for a company
to employ?
A. A low-cost leadership strategy
B. A broad differentiation strategy
C. A best-cost provider strategy
D. A focused low-cost provider strategy
E. There is no such thing as a "best" competitive strategy; a company's "best" strategy is always one that is
customized to fit both industry and competitive conditions and the company's own resources and competitive
capabilities
Answer:e
A low-cost leader's basis for competitive advantage is
A. Lower prices than rival firms
B. Using a low cost/low price approach to gain the biggest market share
C. High buyer switching costs
D. Meaningfully lower overall costs than competitors
Answer:d
How valuable a low-cost leader's cost advantage is depends on
A. Whether it is easy or inexpensive for rivals to copy the low-cost leader's methods or otherwise match its low costs
B. How easy it is for the low-cost leader to gain the biggest market share
C. The aggressiveness with which the low-cost leader pursues converting the cost advantage into the absolute lowest
possible costs
Answer:a
A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by
A. Cutting its price to levels significantly below the prices of rivals
B. Either using its low-cost edge to underprice competitors and attract price sensitive buyers in large enough
numbers to increase total profits or refraining from price-cutting and using the low-cost advantage to earn a bigger
profit margin on each unit sold
C. Going all out to use its cost advantage to capture a dominant share of the market
Answer:b
The major avenues for achieving a cost advantage over rivals include
A. Revamping the firm's value chain to eliminate or bypass some cost-producing activities and/or out-managing rivals
in the efficiency with which value chain activities are performed
B. Having a management team that is highly skilled in cutting costs
C. Being a first-mover in adopting the latest state-of-the-art technologies, especially those relating to low-cost
manufacture
Answer:a
A competitive strategy of striving to be the low-cost provider is particularly attractive when
A. Buyers are not very brand-conscious
B. Most rivals are trying to be best-cost providers
C. There are many ways to achieve product differentiation that have value to buyers
D. Buyers are large and have significant power to bargain down prices; buyers use the product in much the same
ways; and buyers have low switching costs
Answer:d
Which of the following is not an action that a company can take to do a better job than rivals of performing
value chain activities more cost-effectively?
A. Striving to capture all available economies of scale and learning/experience curve effects
B. Trying to operate facilities at full capacity
C. Adopting labor-saving operating methods
D. Improving supply chain efficiency
E. Outsourcing all production-related activities
Answer:e
Which of the following is not one of the ways that a company can achieve a cost advantage by revamping its
value chain?
A. Cutting out distributors and dealers by selling direct to customers
B. Replacing certain value chain activities with faster and cheaper online technology
C. Increasing production capacity and then striving hard to operate at full capacity
Answer:c
To succeed with a low-cost provider strategy, company managers have to
A. Pursue backward or forward integration to detour suppliers or buyers with considerable bargaining power and
leverage
B. Move the performance of most all value chain activities to low-wage countries
C. Sell direct to users of their product or service and eliminate use of wholesale and retail intermediaries
D. Do two things: (1) do a better job than rivals of pursuing cost savings throughout the value chain and (2) be
proactive in revamping the firm's overall value chain to eliminate low value-added activities and bypass
"nonessential" cost-producing activities
Answer:d
Achieving a cost advantage over rivals entails
A. Concentrating on the primary activities portion of the value chain and outsourcing all support activities
B. Being a first-mover in pursuing backward and forward integration and controlling as much of the industry value
chain as possible
C. Out-managing rivals in performing value chain activities cost-effectively and finding creative ways to cut cost-
producing activities out of the value chain
Answer:c
The best evidence that a company is the industry's low-cost provider is that
A. It sells more of its product/service than its key competitors and is the market share leader
B. It has lower overall per unit costs for its product/service than other competitors in the industry
C. It has lower total operating costs on its income statement than do its competitors
Answer:b
A company pursuing a low-cost leadership strategy must generally
A. Have products with good-to-excellent attributes so that its low prices will provide customers with more value for the
money
B. Have acceptable quality products that incorporate a good basic design with few frills and offer a limited number of
models/styles to select from
C. Have a wide selection of products that are of average or better quality
Answer:b
Being the overall low-cost provider in an industry has the attractive advantage of
A. Building strong customer loyalty and locking customers into its product (because customers have such high
switching costs)
B. Giving the firm a very appealing brand image
C. Putting a firm in position to compete offensively on the basis of low price, win the business of price sensitive
customers, set the floor on market price and defend against price war conditions should they arise
Answer:c
A competitive strategy to be the low-cost provider in an industry works well when
A. Price competition among rival sellers is especially vigorous
B. There are few ways to achieve product differentiation that have value to buyers
C. Buyers incur low costs in switching their purchases from one seller/brand to another
D. Industry newcomers use low introductory prices to attract buyers and build a customer base
E. All of these
Answer:e
A competitive strategy predicated on low-cost leadership tends to work best when
A. There are widely varying needs and preferences among the various buyers of the product or service
B. There are many market segments and market niches, such that it is feasible for a low-cost leader to dominate the
niche where buyers want a budget-priced product
C. Price competition is especially vigorous and the offerings of rival firms are essentially identical, standardized,
commodity-like products
Answer:c
In which of the following circumstances is a strategy to be the industry's overall low-cost provider not
particularly well matched to the market situation?
A. When the offerings of rival firms are essentially identical, standardized, commodity-like products
B. When there are few ways to achieve differentiation that have value to buyers
C. When price competition is especially vigorous
D. When buyers have widely varying needs and special requirements and the prices of substitute products are
relatively high
Answer:d
A strategy to be the industry's overall low-cost provider tends to be more appealing than a differentiation or
best-cost or focus/market niche strategy when
A. There are many ways to achieve product differentiation that buyers find appealing
B. Buyers use the product in a variety of different ways and have high switching costs in changing from one seller's
product to another
C. The offerings of rival firms are essentially identical, standardized, commodity-like products
Answer:c
In which of the following circumstances is a low-cost leadership strategy not likely to be particularly
successful?
A. When the industry's product is a standardized commodity
B. When buyers are looking for a good-to-excellent product at a bargain price
C. When the industry is composed of more than three strategic groups and the companies in at least one of the
groups are pursuing full vertical integration strategies
Answer:c
Which of the following is not one of the pitfalls of a low-cost provider strategy?
A. Overly aggressive price-cutting
B. Trying to set the industry's price ceiling
C. Not emphasizing avenues of cost advantage that can be kept proprietary or that relegate rivals to playing catch up
Answer:b
The essence of a broad differentiation strategy is to
A. Appeal to the high end part of the market and concentrate on providing a top-of-the-line product to consumers
B. Incorporate a greater number of differentiating features into its product/service than rivals
C. Lower buyer switching costs
D. Outspend rivals on advertising and promotion in order to inform and convince buyers of the value of its
differentiating attributes
E. Be unique in ways that are valuable and appealing to a wide range of buyers
Answer:e
A company attempting to be successful with a broad differentiation strategy has to
A. Study buyer needs and behavior carefully to learn what buyers consider important, what they think has value and
what they are willing to pay for
B. Incorporate more differentiating features into its product/service than rivals
C. Concentrate its differentiating efforts on marketing and advertising (where almost all differentiating features are
created)
Answer:a
Successful differentiation allows a firm to
A. Be the industry's best-cost provider
B. Set the industry ceiling on price
C. Avoid being dragged into a price war with industry rivals and not be overly concerned about whether entry barriers
into the industry are high or low
D. Command a premium price for its product and/or increase unit sales (because additional buyers are won over by
the differentiating features), and/or gain buyer loyalty to its brand (because some buyers prefer the differentiating
features and are thus brand loyal)
Answer:d
A company that succeeds in differentiating its product offering from those of its rivals can usually
A. Avoid having to compete on the basis of simply a low price
B. Charge a price premium for its product (because buyers see its differentiating features as worth something extra)
C. Increase unit sales (because of the attraction of its differentiating product attributes)
D. Gain buyer loyalty to its brand (because some, maybe many, of its customers will have a strong preference for the
company's differentiating features)
E. All of the above
Answer:e
A broad differentiation strategy improves profitability when
A. It is focused on product innovation
B. Differentiating enhances product performance
C. The differentiating features appeal to sophisticated and prestigious buyers
D. Unit sales increase and the extra price the product commands exceeds the added costs of achieving the
differentiation
Answer:d
Whether a broad differentiation strategy ends up enhancing company profitability depends mainly on
whether
A. Many buyers view the product's differentiating features as having value
B. Most buyers have similar needs and use the product in the same ways
C. Unit sales increase and the extra price the product commands exceeds the added costs of achieving the
differentiation
Answer:c
Using a broad differentiation strategy to produce an attractive competitive advantage is least likely to be
based on
A. Developing a superior performing product
B. Offering buyers a product which is superior in quality and reliability as compared to rivals' brands
C. Giving consumers comprehensive support services
D. Providing buyers with a continuing stream of better-designed, better-performing and more stylish products
E. Undercutting the prices being charged by rivals
Answer:e
Opportunities to differentiate a company's product offering
A. Are most reliably found in the R&D portion of the value chain
B. Are typically located in the sales and marketing portion of the value chain
C. Can exist in activities all along an industry's value chain
Answer:c
Easy-to-copy differentiating features
A. Cannot produce sustainable competitive advantage
B. Seldom are perceived by buyers as having much value
C. Tend to give buyers a high degree of power in bargaining for a lower price
Answer:a
The most appealing approaches to differentiation are
A. Those that are also being pursued by other rivals with differentiation strategies
B. Those that are the most costly to incorporate (because expensive attributes are perceived by buyers as more
valuable and worth paying more for)
C. Those that can be made even more attractive to buyers via clever advertising
D. Generally related to flavor and taste or sophisticated use of Internet technology applications
E. Those that are hard or expensive for rivals to duplicate and that also have considerable buyer appeal
Answer:e
Perceived value and signaling value are often an important part of a successful differentiation strategy because
A. Of the diversity of buyer needs and preferences
B. Buyers seldom will pay for value they don't perceive, no matter how real the value of the differentiating extras may
be
C. Most buyers are heavily influenced by clever ads that signal value
Answer:b
A differentiation-based competitive advantage
A. Nearly always is attached to the quality and service aspects of a company's product offering
B. Most usually is the result of highly effective marketing and advertising
C. Requires developing at least one distinctive competence that buyers consider valuable
D. Hinges on a company's success in developing top-of-the-line product features that will command the biggest price
premium in the industry
E. Often hinges on incorporating features that (1) raise the performance of the product or (2) lower the buyer's overall
costs of using the company's product or (3) enhance buyer satisfaction in intangible or non-economic ways
Answer:e
Which of the following is not one of the four basic routes to achieving a differentiation-based competitive
advantage?
A. Delivering value to customers via competencies and competitive capabilities that rivals don't have or can't afford to
match
B. Incorporating features that raise product performance
C. Incorporating product attributes and user features that lower the buyer's overall costs of using the company's
product
D. Appealing to buyers who are sophisticated and shop hard for the best, stand-out differentiating attributes
Answer:d
Achieving a differentiation-based competitive advantage can involve
A. Incorporating product attributes and user features that lower a buyer's overall cost of using the product
B. Incorporating features that raise the performance a buyer gets from using the product
C. Incorporating features that enhance buyer satisfaction in non-economic or intangible ways
D. Delivering value to customers via competencies and competitive capabilities that rivals don't have or can't afford to
match
E. All of the above are viable ways of building competitive advantage via differentiation
Answer:e
Broad differentiation strategies are well-suited for market circumstances where
A. There are many ways to differentiate the product or service and many buyers perceive these differences as having
value
B. Most buyers have the same needs and use the product in the same ways
C. Buyers are susceptible to clever advertising
Answer:a
Broad differentiation strategies generally work best in market circumstances where
A. Buyer needs and preferences are too diverse to be fully satisfied by a standardized product
B. Most buyers have similar needs and use the product in the same ways
C. The products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try to
set their product offerings apart
Answer:a
A broad differentiation strategy works best in situations where
A. Technological change is slow-paced and new or improved products are infrequent
B. Buyer needs and uses of the product are very similar
C. Buyers incur low costs in switching their purchases to rival brands
D. Buyers have a low degree of bargaining power and purchase the product frequently
E. Technological change is fast-paced and competition revolves around rapidly evolving product features
Answer:e
A broad differentiation strategy generally produces the best results in situations where
A. Buyer brand loyalty is low
B. Buyer needs and uses of the product are diverse
C. New and improved products are introduced only infrequently
Answer:b
In which one of the following market circumstances is a broad differentiation strategy generally not well-
suited?
A. When buyer needs and preferences are too diverse to be fully satisfied by a standardized product
B. When few rivals are pursuing a similar differentiation approach
C. When the products of rivals are weakly differentiated and most competitors are resorting to clever advertising to try
to set their product offerings apart
Answer:c
The pitfalls of a differentiation strategy include
A. Trying to differentiate on the basis of attributes or features that are easily copied
B. Choosing to differentiate on the basis of attributes that buyers do not perceive as valuable or worth paying for
C. Trying to charge too high a price premium for the differentiating features
D. Being timid and not striving to open up meaningful gaps in quality or performance or service or other attractive
differentiating attributes
E. All of these
Answer:e
Which of the following is not one of the pitfalls of pursuing a differentiation strategy?
A. Trying to strongly differentiate the company's product from those of rivals rather than be content with weak product
differentiation
B. Over-differentiating so that the features and attributes incorporated exceed buyer needs and requirements
C. Trying to charge too high a price premium for the differentiating features
Answer:a
Which one of the following statements about pursuing a broad differentiation strategy is false?
A. Any differentiating feature that works well is a magnet for imitators
B. The best opportunities for achieving strong product differentiation are in the production technology and marketing
portions of the value chain
C. A low-cost provider strategy can defeat a broad differentiation strategy when buyers are satisfied with a basic
product and don't think "extra" attributes are worth paying a higher price
Answer:b
A company achieves best-cost provider status by
A. Selling a product with the best cost at the best price
B. Having the best cost (as compared to rivals) for each activity in the industry's value chain
C. Providing buyers with the best attributes at the best cost
D. Incorporating attractive or upscale attributes into its product offering at a lower cost than rivals
Answer:d
A firm pursuing a best-cost provider strategy
A. Seeks to be the low-cost provider in the largest and fastest growing (or best) market segment
B. Tries to have the best cost (as compared to rivals) for each activity in the industry's value chain
C. Tries to outcompete a low-cost provider by attracting buyers on the basis of charging the best price
D. Seeks to deliver superior value to buyers by satisfying their expectations on key
quality/service/features/performance attributes and beating their expectations on price (given what rivals are charging
for much the same attributes)
Answer:d
Best-cost provider strategies
A. Aim at using the best operating practices to achieve lower costs and charge lower prices than companies pursuing
low-cost provider strategies
B. Involve charging a lower price for a product that has more upscale attributes and features than the products
offered by companies pursuing either focused differentiation or broad differentiation strategies
C. Seek to attract buyers on the basis of charging the best price for a mid-quality, average-performing product
D. Aim at giving customers more value for the money
Answer:d
The objective of a best-cost provider strategy is to
A. Deliver superior value to buyers by satisfying their expectations on key quality/performance/features/service
attributes and beating their expectations on price (given what rivals are charging for much the same attributes)
B. Offer buyers the industry's best-performing product at the best cost and best (lowest) price in the industry
C. Attract buyers on the basis of having the industry's overall best-performing product at a price that is slightly below
the industry-average price
Answer:a
The competitive objective of a best-cost provider strategy is to
A. Outmatch the resource strengths of both low-cost providers and differentiators
B. Position the company outside the competitive arena of low-cost producers and differentiators
C. Meet or exceed buyer expectations on key quality/performance/features/service attributes and beat their
expectations on price (given what rivals are charging for much the same attributes)—thereby achieving a value-based
competitive advantage
Answer:c
For a best-cost provider strategy to be successful, a company must have
A. Excellent marketing and sales skills in convincing buyers to pay a premium price for the attributes/features
incorporated in its product
B. Resource strengths and competitive capabilities that allow it to incorporate upscale attributes at lower costs than
rivals whose products have similar upscale attributes
C. Access to greater learning/experience curve effects and scale economies than rivals
Answer:b
The competitive advantage of a best-cost provider is
A. Having the best value chain in the industry
B. Its brand name reputation
C. Its capability to incorporate upscale attributes at lower costs than rivals whose products have similar upscale
attributes
Answer:c
The target market of a best-cost provider is
A. Value-conscious buyers
B. Brand-conscious buyers
C. Price-sensitive buyers
Answer:a
Best-cost provider strategies are appealing in those market situations where
A. Diverse buyer preferences make product differentiation the norm and where many buyers are sensitive to both
price and value
B. A company is positioned between competitors who have ultra-low prices and competitors who have top-notch
products in terms of both quality and performance
C. Buyers are more quality-conscious than price-conscious
Answer:a
The big danger or risk of a best-cost provider strategy is
A. That buyers will be highly skeptical about paying a relatively low price for upscale attributes/features
B. Not establishing strong alliances and partnerships with key suppliers
C. That low-cost leaders will be able to steal away some customers on the basis of a lower price and high-end
differentiators will be able to steal away customers with the appeal of better product attributes
Answer:c
A company's biggest vulnerability in employing a best-cost provider strategy is
A. Relying too heavily on outsourcing
B. Getting squeezed between the strategies of firms employing low-cost provider strategies and high-end
differentiation strategies
C. Getting trapped in a price war with low-cost leaders
Answer:b
Focused strategies keyed either to low-cost or differentiation are especially appropriate for situations where
A. The market is composed of distinctly different buyer groups who have different needs or use the product in
different ways
B. Most other rival firms are using a best-cost producer strategy
C. Buyers have strong bargaining power and entry barriers are low
Answer:a
MGT603 Strategic Management Solved MCQs Set 2

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What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation
strategies is
A. The extra attention paid to top-notch product performance and product quality
B. Their concentrated attention on serving the needs of buyers in a narrow piece of the overall market
C. Greater opportunity for competitive advantage
Answer:b
Companies pursuing a focused low-cost or focused differentiation strategy strive to
A. Build a value-based competitive advantage keyed to product uniqueness
B. Develop the capability to simultaneously serve buyers in a variety of distinct and different market segments
C. Do a better job of serving the needs and expectations of buyers in the target market niche than other competitors
in the industry
Answer:c
A focused low-cost strategy seeks to achieve competitive advantage by
A. Outmatching competitors in offering niche members an absolute rock-bottom price
B. Delivering more value for the money than other competitors
C. Performing the primary value chain activities at a lower cost per unit than can the industry's low-cost leaders
D. Dominating more market niches in the industry via a lower cost and a lower price than any other rival
E. Serving buyers in the target market niche at a lower cost and lower price than rivals
Answer:e
The chief difference between a low-cost leader strategy and a focused low-cost strategy is
A. Whether the product is strongly differentiated or weakly differentiated from rivals
B. The degree of bargaining power that buyers have
C. The size of the buyer group that a company is trying to appeal to
Answer:c
A focused differentiation strategy aims at securing competitive advantage
A. By providing niche members with a top-of-the-line product at a premium price
B. By catering to buyers looking for an upscale product at an attractively low price
C. With a product offering carefully designed to appeal to the unique preferences and needs of a narrow, well-defined
group of buyers
Answer:c
A focused low-cost strategy can lead to attractive competitive advantage when
A. Buyers are looking for the best value at the best price
B. Buyers are looking for a budget-priced product
C. Buyers are price sensitive and are attracted to brands with low switching costs
D. Demand in the target market niche is growing rapidly and a company can achieve a big enough volume to fully
capture all the available scale economies
E. A firm can lower costs significantly by limiting its customer base to a well-defined buyer segment; its two options
for achieving a low-cost advantage are (1) out-managing rivals in controlling the factors that drive costs and (2)
reconfiguring its value chain in ways that deliver a cost edge over rivals
Answer:e
The chief difference between a broad differentiation strategy and a focused differentiation is
A. The size of the buyer group that a company is trying to appeal to
B. The degree of bargaining power that buyers have
C. Whether the product is strongly differentiated or weakly differentiated from rivals
Answer:a
Which one of the following does not represent market circumstances that make a focused low-cost or
focused differentiation strategy attractive?
A. When it is costly or difficult for multi-segment competitors to put capabilities in place to meet the specialized needs
of the target market niche and at the same time satisfy the expectations of their mainstream customers
B. When the industry has many different segments and market niches, thereby allowing a focuser to pick an attractive
niche suited to its resource strengths and capabilities
C. When industry leaders do not see that having a presence in the niche is crucial to their own success
D. When the target market niche is not overcrowded with a number of other rivals attempting to focus on the same
niche
E. When buyers are not strongly brand loyal and most industry competitors are pursuing some sort of a focused
strategy
Answer:e
The risks of a focused strategy based on either low-cost or differentiation include
A. The chance that competitors outside the niche will find effective ways to match the focuser's capabilities in serving
the target niche
B. The potential for the preferences and needs of niche members to shift over time towards many of the same
product attributes and capabilities desired by buyers in the mainstream portion of the market
C. The potential for the segment to become so attractive that it is soon inundated with competitors, intensifying rivalry
and splintering sales, profits and growth prospects
D. The potential for segment growth to slow to such a small rate that a focuser's prospects for future sales and profit
gains become unacceptably dim
E. All of these
Answer:e
The production emphasis of a company pursuing a broad differentiation strategy usually involves
A. A search for continuous cost reduction without sacrificing acceptable quality and essential features
B. Strong efforts to be a leader in manufacturing process innovation
C. Efforts to build-in whatever differentiating features that buyers are willing to pay for and striving for product
superiority
Answer:c
The marketing emphasis of a company pursuing a broad differentiation strategy usually is to
A. Underprice rival brands with comparable features
B. Tout differentiating features and charge a premium price that more than covers the extra costs of differentiating
features
C. Out-advertise rivals and make frequent use of discount coupons
Answer:b
The keys to sustaining a broad differentiation strategy are
A. To stress constant innovation to stay ahead of imitative rivals and to concentrate on a few differentiating features
B. To charge a premium price that more than covers the extra costs of differentiating features and to convince
customers to be brand loyal
C. To out-innovate and out-advertise rivals
Answer:a
The marketing emphasis of a company pursuing a focused low-cost provider strategy usually is to
A. Tout the company's lower prices
B. Tout the lack of frills and extras
C. Out-advertise rivals and make frequent use of discount coupons
D. Communicate the attractive features of a budget-priced product offering that fits niche members' expectations
Answer:d
One of the big dangers in crafting a competitive strategy is that managers, torn between the pros and cons of the
various generic strategies, will opt for
A. A low-cost provider strategy because it is usually the safest, least risky competitive strategy
B. A "stuck-in-the-middle" strategy
C. A broad differentiation strategy because it is frequently the most profitable competitive strategy
Answer:b
Once a company has decided to employ a particular generic competitive strategy, then it must make such additional
strategic choices as
A. Whether to enter into strategic alliances or collaborative partnerships
B. Whether and when to employ offensive and defensive moves
C. What type of Web site strategy to employ
Answer:a
Which one of the following is not a strategic choice that a company must make to complement and
supplement its choice of one of the five generic competitive strategies?
A. Whether to enter into strategic alliances or collaborative partnerships
B. Whether and when to employ offensive and defensive moves
C. Whether to employ a market share leadership strategy
Answer:c
Strategic alliances
A. Are the cheapest means of developing new technologies and getting new products to market quickly
B. Are collaborative arrangements where two or more companies join forces to achieve mutually beneficial strategic
outcomes
C. Are a proven means of reducing the costs of performing value chain activities
Answer:b
A strategic alliance
A. Is a collaborative arrangement where companies join forces to defeat mutual competitive rivals
B. Involves two or more companies joining forces to pursue vertical integration
C. Is a formal agreement between two or more companies in which there is strategically relevant collaboration of
some sort, joint contribution of resources, shared risk, shared control and mutual dependence
Answer:c
Entering into strategic alliances and collaborative partnerships can be competitively valuable because
A. Working closely with outsiders is essential in developing new technologies and new products in virtually every
industry
B. Cooperative arrangements with other companies are very helpful in racing against rivals to build a strong global
presence and/or racing to seize opportunities on the frontiers of advancing technology
C. They represent highly effective ways to achieve low-cost leadership and capture first-mover advantages
Answer:b
The best strategic alliances
A. Are highly selective, focusing on particular value chain activities and on obtaining a particular competitive benefit
B. Are those whose purpose is to create an industry key success factor
C. Are those which help a company move quickly from one strategic group to another
Answer:a
Companies racing against rivals for global market leadership need strategic alliances and collaborative
partnerships with companies in foreign countries in order to
A. Combat the bargaining power of foreign suppliers and help defend against the competitive threat of substitute
products produced by foreign rivals
B. Help raise needed financial capital from foreign banks and use the brand names of their partners to make sales to
foreign buyers
C. Get into critical country markets quickly and accelerate the process of building a potent global presence, gain
inside knowledge about unfamiliar markets and cultures and access valuable skills and competencies that are
concentrated in particular geographic locations
Answer:c
A company racing to seize opportunities on the frontiers of advancing technology often utilizes strategic alliances and
collaborative partnerships in order to
A. Discourage rival companies from merging with or acquiring the very companies that it is partnering with
B. Reduce overall business risk and raise entry barriers into the newly emerging industry
C. Help master new technologies and build new expertise and competencies faster than would be possible through
internal efforts, establish a stronger beachhead for participating in the target industry and open up broader
opportunities in the target industry by melding their capabilities with the resources and expertise of partners
Answer:c
Which of the following is not a typical reason that many alliances prove unstable or break apart?
A. Diverging objectives and priorities
B. An inability to work well together
C. The emergence of more attractive technological paths that are better pursued alone or with other partners
D. Disagreement over how to divide the profits gained from joint collaboration
Answer:d
Experience indicates that strategic alliances
A. Are generally successful
B. Work well in cooperatively developing new technologies and new products but seldom work well in promoting
greater supply chain efficiency
C. Work best when they are aimed at achieving a mutually beneficial competitive advantage for the allies
D. Have a high "divorce rate."
Answer:d
Which of the following is not a factor that makes an alliance "strategic" as opposed to just a convenient business
arrangement?
A. The alliance is critical to the company's achievement of an important objective
B. The alliance helps block a competitive threat
C. The alliance helps open up important new market opportunities
D. The alliance helps build, enhance or sustain a core competence or competitive advantage
E. The alliance helps the company obtain additional financing on better credit terms
Answer:e
The Achilles heel (or biggest disadvantage/danger/pitfall) of relying heavily on alliances and cooperative
strategies is
A. That partners will not fully cooperate or share all they know, preferring instead to guard their most valuable
information and protect their more valuable know-how
B. Becoming dependent on other companies for essential expertise and capabilities
C. The added time and extra expenses associated with engaging in collaborative efforts
Answer:b
Which of the following is not one of the factors that affects whether a strategic alliance will be successful
and realize its intended benefits?
A. Picking a good partner
B. Recognizing that the alliance must benefit both sides
C. Minimizing the amount of resources that the partners commit to the alliance
Answer:c
Which one of the following is not a strategically beneficial reason why a company may enter into strategic
partnerships or cooperative arrangements with key suppliers, distributors or makers of complementary
products?
A. To improve access to new markets
B. To expedite the development of promising new technologies or products
C. To enable greater vertical integration
Answer:c
The competitive attraction of entering into strategic alliances and collaborative partnerships is
A. In allowing companies to bundle competencies and resources that are more valuable in a joint effort than when
kept separate
B. Speeding new products to market more quickly
C. Enabling greater vertical integration
Answer:a
The difference between a merger and an acquisition is that
A. A merger involves one company purchasing the assets of another company with cash, whereas an acquisition
involves a company acquiring another company by buying all of the shares of its common stock
B. A merger is a pooling of equals whereas an acquisition involves one company, the acquirer, purchasing and
absorbing the operations of another company, the acquired
C. In a merger the companies retain their original names whereas in an acquisition the name of the company being
acquired is changed to be the name of the acquiring company
Answer:b
Which of the following is not a typical strategic objective or benefit that drives mergers and acquisitions?
A. To gain quick access to new technologies or other resources and capabilities
B. To create a more cost-efficient operation out of the combined companies
C. To expand a company's geographic coverage
D. To facilitate a company's shift from a broad differentiation strategy to a focused differentiation strategy
Answer:d
Mergers and acquisitions are often driven by such strategic objectives as to
A. Expand a company's geographic coverage or extend its business into new product categories
B. Reduce the number of industry key success factors
C. Reduce the number of strategic groups in the industry
Answer:a
Merger and acquisition strategies
A. Are nearly always a superior strategic alternative to forming alliances or partnerships with these same companies
B. May offer considerable cost-saving opportunities (perhaps helping to transform otherwise high-cost companies into
a competitor with average or below-average costs) and can also be beneficial in helping a company try to invent a
new industry and lead the convergence of industries whose boundaries are being blurred by changing technologies
and new market opportunities
C. Are a particularly effective way of pursuing a blue ocean strategy and outsourcing strategies
Answer:b
Mergers and acquisitions
A. Are nearly always successful in achieving their desired purpose
B. Frequently do not produce the hoped-for outcomes
C. Are generally less effective than forming alliances or partnerships with these same companies
Answer:b
Vertical integration strategies
A. Extend a company's competitive scope within the same industry by expanding its operations across more parts of
the industry value chain
B. Are one of the best strategic options for helping companies win the race for global market leadership
C. Offer good potential to expand a company's lineup of products and services
Answer:a
The two best reasons for investing company resources in vertical integration (either forward or backward) are to
A. Expand into foreign markets and/or control more of the industry value chain
B. Broaden the firm's product line and/or avoid the need for outsourcing
C. Enable use of offensive strategies and/or gain a first mover advantage over rivals in revamping the industry value
chain
D. Strengthen the company's competitive position and/or boost its profitability
Answer:d
For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a
company
A. Must first be a proficient manufacturer
B. Must be able to achieve the same scale economies as outside suppliers and match or beat suppliers' production
efficiency with no drop-off in quality
C. Must have excess production capacity, so that it has ample in-house ability to undertake additional production
activities
Answer:b
The strategic impetus for forward vertical integration is to
A. Gain better access to end users and better market visibility
B. Achieve the same scale economies as wholesale distributors and/or retail dealers
C. Control price at the retail level
Answer:a
Which of the following is typically the strategic impetus for forward vertical integration?
A. Being able to control the wholesale/retail portion of the industry value chain
B. Fewer disruptions in the delivery of the company's products to end-users
C. Gaining better access to end users and better market visibility
Answer:c
A good example of vertical integration is
A. A global public accounting firm acquiring a small local or regional public accounting firm
B. A large supermarket chain getting into convenience food stores
C. A crude oil refiner purchasing a firm engaged in drilling and exploring for oil
Answer:c
Which of the following is not a potential advantage of backward vertical integration?
A. Reduced vulnerability to powerful suppliers (who may be inclined to raise prices at every opportunity)
B. Reduced risks of disruptions in obtaining crucial components or support services
C. Reduced costs
D. Reduced business risk because of controlling a bigger portion of the overall industry value chain
Answer:d
Which of the following is not a strategic disadvantage of vertical integration?
A. Vertical integration boosts a firm's capital investment in the industry, thus increasing business risk if the industry
becomes unattractive later
B. Vertical integration backward into parts and components manufacture can impair a company's operating flexibility
when it comes to changing out the use of certain parts and components
C. Vertical integration reduces the opportunity for achieving greater product differentiation
Answer:c
Outsourcing strategies
A. Are nearly always a more attractive strategic option than merger and acquisition strategies
B. Carry the substantial risk of raising a company's costs
C. Carry the substantial risk of making a company overly dependent on its suppliers
D. Increase a company's risk exposure to changing technology and/or changing buyer preferences
E. Involve farming out value chain activities presently performed in-house to outside specialists and strategic allies
Answer:e
Outsourcing the performance of value chain activities presently performed in-house to outside vendors and suppliers
makes strategic sense when
A. An activity can be performed better or more cheaply by outside specialists
B. It allows a company to focus its entire energies on those activities that are at the center of its expertise (its core
competencies) and that are most critical to its competitive and financial success
C. Outsourcing won't adversely hollow out the company's technical know-how, competencies or capabilities
D. It reduces the company's risk exposure to changing technology and/or changing buyer preferences
E. All of these
Answer:e
The two big drivers of outsourcing are
A. Increased ability to cut R&D expenses and increased ability to avoid the problems of strategic alliances
B. A desire to take advantage of the fact that outsiders can perform certain activities better or cheaper and allowing a
company to focus its entire energies on those activities that are at the center of its expertise (its core competencies)
and that are most critical to its competitive and financial success
C. A desire to reduce the company's investment in fixed assets and the need to narrow the scope of the company's
in-house competencies and competitive capabilities
Answer:b
Which of the following is not one of the benefits of outsourcing value chain activities presently performed in-house?
A. Streamlining company operations in ways that improve organizational flexibility and cut the time it takes to get new
products into the marketplace
B. Allowing a company to concentrate on its core business, leverage its key resources and do even better what it
already does best
C. Helping the company assemble diverse kinds of expertise speedily and efficiently
D. Preventing a company from hollowing out its technical know-how, competencies or capabilities
Answer:d
Relying on outsiders to perform certain value chain activities offers such strategic advantages as
A. Obtaining higher quality and/or cheaper components or services
B. Improving the company's ability to innovate by allying with "best-in-world" suppliers
C. Reducing the company's risk exposure to changing technology and/or changing buyer preferences
D. Increasing the firm's ability to assemble diverse kinds of expertise speedily and efficiently
E. All of the above
Answer:e
Outsourcing strategies can offer such advantages as
A. Increasing a company's ability to strongly differentiate its product and be successful with either a broad
differentiation strategy or a focused differentiation strategy
B. Obtaining higher quality and/or cheaper components or services, improving a company's ability to innovate and
reducing its risk exposure
C. Speeding a company's entry into foreign markets
Answer:b
The big risk of employing an outsourcing strategy is
A. Causing the company to become partially integrated instead of being fully integrated
B. Hollowing out a firm's own capabilities and losing touch with activities and expertise that contribute fundamentally
to the firm's competitiveness and market success
C. Hurting a company's R&D capability
Answer:b
Which of the following is not one of the principal offensive strategy options?
A. Leapfrogging competitors by being the first adopter of next-generation technologies
B. Offering an equally good or better product at a lower price
C. Blocking the avenues open to challengers
Answer:c
Which one of the following is an example of an offensive strategy?
A. Blocking the avenues open to challengers
B. Signaling challengers that retaliation is likely
C. Pursuing continuous product innovation to draw sales and market share away from less innovative rivals
Answer:c
A blue ocean type of offensive strategy
A. Is an offensive attack used by a market leader to steal customers away from unsuspecting smaller rivals
B. Involves a preemptive strike to secure an advantageous position in a fast-growing market segment
C. Works best when a company is the industry's low-cost leader
D. Involves abandoning efforts to beat out competitors in existing markets and, instead, inventing a new industry or
new market segment that renders existing competitors largely irrelevant and allows a company to create and capture
altogether new demand
Answer:d
A hit-and-run or guerilla warfare type of offensive strategy involves
A. Random offensive attacks used by a market leader to steal customers away from unsuspecting smaller rivals
B. Undertaking surprise moves to secure an advantageous position in a fast-growing and profitable market segment;
usually the guerilla signals rivals that it will use deep price cuts to defend its newly-won position
C. Work best if the guerilla is the industry's low-cost leader
D. Pitting a small company's own competitive strengths head-on against the strengths of much larger rivals
E. Random raids by a small competitor to grab sales and market share from complacent or distracted rivals
Answer:e
Launching a preemptive strike type of offensive strategy entails
A. Cutting prices below a weak rival's costs
B. Moving first to secure an advantageous position that rivals are prevented or discouraged from duplicating
C. Using hit-and-run tactics to grab sales and market share away from complacent or distracted rivals
Answer:b
Which one of the following statements about offensive strategies is false?
A. It often takes the use of successful offensive strategies to build to competitive advantage
B. One situation when a company needs to use offensive strategies is when it has no choice but to try to whittle away
at a strong rival's competitive advantage
C. Offensive strategies have much to recommend when a company sees an opening to gain profitable market share
at the expense of rivals
D. One of the most potent types of offensive strategy is to introduce new features or models to fill vacant niches in a
company's overall product offering and thereby better match the product offerings of key rivals
Answer:d
Which one of the following is not a trait of a good strategic offensive?
A. Trying to build a more cost-efficient supply chain than rivals have
B. Being impatient with the status quo and displaying a strong bias for swift, decisive actions to boost a company's
competitive position vis-à-vis rivals
C. Applying resources where rivals are least able to defend themselves
Answer:a
Which one of the following is not a good type of rival for an offensive-minded company to target?
A. Market leaders that are vulnerable
B. Runner-up firms with weaknesses in areas where the challenger is strong
C. Small local and regional companies with limited capabilities
D. Other offensive-minded companies with a sizable war chest of cash and marketable securities
Answer:d
Which one of the following statements regarding the basis for offensive attack on rivals is false?
A. It is generally wise to use a company's resource strengths to attack rivals in those competitive areas where they
are strong
B. Ignoring the need to tie a strategic offensive to a company's strengths is like going to war with a popgun
C. Strategic offensives should, as a general rule, be predicated on leveraging a company's competitive assets—its
core competencies, competitive capabilities and other resource strengths
D. Offensive initiatives aimed at exploiting the competitive weaknesses of rivals stand a better chance of success
than do those that challenge a competitor's strengths
E. Attacking a market leader is always unwise
Answer:e
The purposes of defensive strategies are to
A. Aggressively retaliate against rivals pursuing offensive strategies and prevent against price wars
B. Lower the risk of being attacked by rivals, weaken the impact of any attack that occurs and influence challengers
to aim their offensive efforts at other rivals
C. Guard against adverse changes in the company's macro-environment and insulate the company from the impact
of industry driving forces
Answer:b
Which one of the following is not a defensive option for protecting a company's market share and
competitive position?
A. Adding new features or models and otherwise broadening the product line to close off vacant niches and gaps to
opportunity-seeking challengers
B. Thwarting the efforts of rivals to attack with lower prices by maintaining economy-priced options of its own
C. Running comparison ads that call attention to weaknesses in rivals' products
Answer:c
Which of the following is a potential defensive move to ward off challenger firms?
A. Granting volume discounts or better financing terms to dealers/distributors and providing discount coupons to
buyers to help discourage them from experimenting with other suppliers/brands
B. Signaling challengers that retaliation is likely in the event they launch an attack
C. Lengthening warranties, offering free or low-cost training and support services and providing coupons and sample
giveaways to buyers most prone to experiment with using rival brands
D. Maintaining a war chest of cash and marketable securities
E. All of these
Answer:e

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MGT603 Strategic Management Solved MCQs from Book by

3.Consumer e-commerce is five times greater than business-to-business e-commerce.

What Is Strategic Management?

6.Resource allocation is included in strategy-formulation activities.

7.The terms strategic management and strategy implementation are synonymous.

8.A vision statement is, in essence, a company’s game plan.

10.The final stage in strategic management is strategy implementation.

16.According to Albert Einstein, “Knowledge is far more important than intuition.”

17.Management by intuition can be defined as operating from the “I’ve-already-made-up-my-mind-don’t-

Key Terms in Strategic Management

26.A vision statement answers the question, “What is our business?,” whereas a mission

29.As of 2004, Wal-Mart was the largest corporation in the world.

30.Strengths and weaknesses are determined relative to competitors.

32.Objectives should be measurable, quantitative, challenging, realistic, consistent and prioritized.

33.Annual objectives are long-term milestones that organizations must achieve to reach short-term

34.Annual objectives are especially important in strategy formulation.

The Strategic-Management Model

37.Once an effective strategy is designed, modifications are rarely required.

Benefits of Strategic Management

39.Followed by commitment, understanding is the most important benefit of strategic management.

43.According to Greenley, strategic management provides a cooperative, integrated and enthusiastic

Pitfalls in Doing Strategic Planning

Guidelines for Effective Strategic Management

49.Strategic-management must be a self-reflective learning process that familiarizes managers and

Business Ethics and Strategic Management

Comparing Business and Military Strategy

The Nature of Global Competition

54.International operations can be as simple as exporting a product to a single foreign country.

58.Firms can be more proactive with strategic management.

59.The term “environment” includes all of the following except:

What Is Strategic Management?

64. An important activity in __________ is taking corrective action.

67. Which phase of strategic management is called the action phase?

68. __________ is not a strategy-implementation activity.

69. Strategy evaluation is necessary because

70. Which statement best describes intuition?

Key Terms in Strategic Management

75. The first step in strategic planning is generally:

77. The largest company in the world is:

78. Usually, external opportunities and threats are:

82. Long-term objectives should be all of the following except:

83. __________ can best be described as short-term in nature.

85. What are guides to decision making?

Benefits of Strategic Management

90. How do line managers become “owners” of the strategy?

Why Some Firms Do No Strategic Planning

Pitfalls in Doing Strategic Planning

96. What is not a pitfall an organization should avoid in strategic planning?

97. Which of the following statements is false?

98. Principles of conduct that guide decision-making are known as

101.What can be created by ethics training and an ethics culture?

102.Which of these business actions is (are) always considered to be unethical?

103.Ethical standards come out of __________ in a final analysis.

Comparing Business and Military Strategy

105.Military strategy is based on an assumption of __________, whereas business strategy is based on an

108.The greatest advantage of international operations is:

109.All of these are potential disadvantages of an international operation except:

111.Which stage in the strategic-management process is most difficult? Explain why.