Questions Chapter 7

Evaluation of Alternatives and Strategic Choice

 True/False Questions

Question Question stem Choice Topic

title

TF07.01 A canon of strategic management is the need to change strategies over time. T A Process for the
Evaluation of the
Alternatives

TF07.01 SWOT is a systematic investigation that considers the organization’s internal strengths and T SWOT – Strengths,
weaknesses and external issues and displays them in a matrix. Weaknesses, Opportunities,
and Threats

TF07.03 Strategies developed by matching the long-term competitive advantages with issues from the three T Evaluate and Select Adaptive
external environments – general, health care, and service area – represents the primary adaptive Strategies
strategies of an organization.

TF07.04 Short-term competitive advantages are not easily duplicated by competitors, especially in the service F Link Strategy with Situational
areas. Analysis
TF07.05 Product life cycle (PLC) analysis can be useful in selecting strategic alternatives based on the principle T Product Life Cycle Analysis
that all products and services go through several distinct stages.
TF07.06 During the growth stage of the product life cycle, prices increase in order to solidify the market F Product Life Cycle
position of specific brands. Analysis
TF07.07 The decomposition and critical review of market characteristics in conjunction with the PLC can serve T Product Life Cycle Analysis
as a guideline for strategy development.
TF07.08 Boston Consulting Group (BCG) portfolio analysis graphically portrays differences among the various T Portfolio Analysis
products/services (stars, cash cows, problem children, and dogs) in terms of relative market share and
market growth rate.

TF07.09 In Boston Consulting Group (BCG) portfolio analysis, problem children exhibit low market F Portfolio Analysis
growth (probably in maturity and decline stages of the PLC) but the organization has a high
relative market share.
Question Question stem Choice Topic
title

TF07.10 The evaluation of products and services in portfolio analysis is a static process best F Portfolio Analysis,
suited for short- and medium-term planning of service and product life cycles. Product Life Cycle
Analysis
TF07.11 Extended portfolio matrix analysis includes a sustainability dimension to the market share and F Extended Portfolio Matrix
market growth dimensions of the Boston Consulting Group (BCG) portfolio analysis. Analysis
TF07.12 In extended portfolio matrix analysis, problem children are characterized by high growth and F Extended Portfolio Matrix
a high market share but low profitability. Analysis
TF07.13 Strategic position and action evaluation (SPACE) analysis suggests the appropriateness T Strategic Position and
of strategic alternatives based on factors relating to four dimensions: service category Action Evaluation
strength, environmental stability, the organization’s relative competitive advantage, and
the organization’s financial strength.

TF07.14 Program evaluation is especially useful in organizations where market share, service category T Program Evaluation
strength, and competitive advantage are not particularly important or not relevant.

TF07.15 The adaptive strategy of a not-for-profit organization is independent of and not related to the F Program Evaluation
programs maintained and emphasized by the organization.
TF07.16 Needs/capacity assessment and program priority setting are two program evaluation T Program Priority Setting
methods.
Question Question stem Choice Topic
title

TF07.17 Community need is a function of (1) clear community requirements (environmental, T Program Evaluation
sanitation, disease control, and so on) and personal health care (primary care) gaps, (2) the
degree to which other institutions (private and public) fill the identified health care gaps, and
(3) public/community health objectives.

TF07.18 Organizational capacity is the organization’s ability to initiate, maintain, and enhance its set T Program Evaluation
of adaptive strategy programs.
TF07.19 Program priority setting is significant because community needs (both the need itself and the T Program Priority Setting
severity of the need) are constantly changing and organizational resources, in terms of
funding and organization capacity, are almost always limited.

TF07.20 Q-sort is a formal method of differentiating the importance of programs through a ranking T Program Priority Setting
procedure that forces choices along a continuum in situations where the difference
between the choices may be quite small.

TF07.21 The purpose of market entry strategies is to break into or capture more of a market. T Evaluate and Select Market
Entry/Exit Strategies

TF07.22 Of the adaptive strategies (expansion, reduction, and maintenance of scope), only F Managing Strategic
expansion of scope requires explicit strategic posture and positioning strategies. Momentum – Adaptive
Strategies
TF07.23 Positioning strategies must be selected based on resources, competencies, and capabilities T Positioning Strategies
(competitive relevant strengths), as well as environmental risks.
TF07.24 Following the completion of strategy formulation decision, program evaluation is F Program Evaluation
used to measure the logic and fit of the strategies.
Question Question stem Choice Topic
title

TF07.25 Managing strategic momentum associated with adaptive, market entry, and competitive F Strategic Momentum –
strategies is simply a matter of keeping the organization on track. Adaptive, Market Entry/Exit
and Competitive Strategies

TF07.26 Interpretations of “facts” mean different things to different people because they are colored T Why Evaluation of
by beliefs, values, and biases. Alternatives and Strategic
Choice Are Important

TF07.27 Analytical strategic thinking maps are primarily used to obtain answers because by following F A Process for the Evaluation
them the correct strategic choice is made correctly. of the Alternatives

TF07.28 Product life cycle analysis is useful in developing strategy alternatives by carefully using the F Product Life Cycle Analysis
interaction of opportunities and threats in the external environment.

TF07.29 In the maturing stage of the product life cycle rapid growth accelerates and organizations F Product Life Cycle Analysis
begin spinning off unprofitable units.

TF07.30 The most important function of a cash cow in the organizational portfolio is to provide the T Portfolio Analysis
funds needed to invest in the rising stars in the portfolio.

TF07.31 One of the reasons not-for-profit organizations use program evaluation is because it is F Program Evaluation
relatively easy to consider the relationship between revenue and market share in the not-
for-profit setting.

TF07.32 When using needs/capacity analysis the only major consideration for the value of a program F Needs/Capacity
is the needs of the community. Assessment

TF07.33 In program priority setting the graphics are useful to differentiate between those programs F Program Priority Setting
that are important and those that are not important.

TF07.34 Evaluation and understanding of the external environment are necessary to successfully T External Conditions
implement a market entry strategy.

TF07.35 One of the important things about market entry strategies is that regardless of the strategy F Resources, Competencies,
selected they all require the same resources, competencies, and capabilities. and Capabilities
Question Question stem Choice Topic
title

TF07.36 Strategic posture concerns the relationship between the organization and the market and T Strategic Posture
describes the pattern of strategic behavior.

TF07.37 Prospectors remain essentially in their own competitive space and resist efforts to move into F Internal Resources,
and out of new services and markets. Competencies, Capabilities

TF07.38 SWOT analysis has no provision for prioritizing or evaluating the internal strengths or T SWOT – Strengths,
weaknesses as being competitive relevant – competitive advantages or competitive Weaknesses, Opportunities,
disadvantages. and Threats

TF07.39 The development of an effective strategy requires that care and attention has been given to T Evaluate and Select
what strategic leaders want to do – expand, reduce, or maintain the scope of the Adaptive Strategies
organizations operations.

TF07.40 In portfolio analysis, black holes have high market growth, a low market share, and low F Extended Portfolio Matrix
profitability. Analysis

Question Question stem
title
MC07.01 Which of the following
weaknesses of SWOT
analysis and the TOWS
matrix give rise to the
strategic thinking map for
matching external issues and
internal competitive
advantages and
disadvantages:
MC07.02 Product life cycle (PLC)
analysis can be useful in:
MC07.03 Which of the following
questions would NOT be
helpful in monitoring signals
that the basic strategy for the
organization needs to be
changed:
Multiple Choice Questions
Selections Choice Topic
a- The designation of external issues as d SWOT – Strengths,
opportunities or threats is often arbitrary. Weaknesses, Opportunities,
b- Opportunities are often presented as strategic and Threats
alternatives rather than independent external issues
affecting the organization.
c- Many external issues may be both opportunities and
threats.
d- All of the above.
a - Developing an external/internal strategy matrix. c Product Life Cycle Analysis
b- Identifying long-term competitive disadvantages.
c- Selecting strategic alternatives based on the
principle that all products and services go
through several distinct stages.
d- Identifying threats posed by competitors
supplying or producing identical products.
a- What is the relative market share? a Link Strategy with
b- Has the strategy been tested with appropriate Situational Analysis
strategic thinking tools?
c- Have the major stakeholders, inside and outside the
organization that will be most influential in ensuring the
success of the strategy been identified and evaluated?
d- If the adaptive strategy is to fill a currently unfilled niche in
the market, has the organization investigated whether the
niche will remain open long enough to return the capital
investment?
Question Question stem
title
MC07.04 Within the context of BCG
portfolio analysis, how are
cash cows identified:
MC07.05 What is the characteristic of
health care organizations that
suggests using extended
portfolio matrix analysis
rather than BCG portfolio
analysis:
MC07.06 Strategic position and action
evaluation (SPACE) analysis
evaluates strategic
alternatives based on factors
relating to four dimensions:
Selections Choice Topic
a- Products and services that appear in the high market b Portfolio Analysis
growth and high market share quadrant.
b- Products and services that appear in the low market
growth and high market share quadrant.
c- Products and services that appear in the low market
growth and low market share quadrant.
d- Products and services that appear in the high market
growth and low market share quadrant.
a- Health care organizations operate in a highly d Extended Portfolio Matrix
regulated environment. Analysis
b- Health care organizations employ the same
strategies.
c- Health care organizations have larger pools of
stakeholders than other organizations.
d- An underlying assumption of BCG portfolio analysis is
that high market share means high profitability;
however, for health care organizations it is quite
possible to have a high market share and no profit.
a- Aggressive, competitive, conservative, and c Strategic Position and Action
defensive. Evaluation
b- Numerical, qualitative, speculative, and
geographical.
c- Service category strength, environmental stability,
relative competitive advantage, and financial
strength.
d- Elements of the external environment, internal strengths,
competitive opportunities, and ability of the organization
to attract venture capital.
Question Question stem
title
MC07.07 Program evaluation is
appropriate for organizations
with which of the following
sets of characteristics:
MC07.08 The Q-sort method is one of
the methodologies used in
what process:
MC07.09 The appropriateness of a
specific market entry
strategy is dependent upon
which of the following:
Selections Choice Topic
a- Organizations where market share, service category a Program Evaluation
strength, and competitive advantage are not particularly
important or not relevant.
b- Organizations exhibiting low market share, high growth,
and low-profitability products and services.
c- Organizations that are highly regulated and well
capitalized.
d- Organizations with the dominant market share, low or
stagnant growth, and low profitability.
a- Measuring internal strengths and weaknesses. d Program Priority Setting
b- Measuring profitability.
c- Measuring market and environmental stability.
d- Program priority setting.
a- The strategy having been tested with appropriate c Evaluate and Select
strategic thinking tools. Market Entry/Exit
b- The major stakeholders, inside and outside the Strategies
organization that will be most influential in ensuring the
success of the strategy having been identified and
evaluated.
c- The external conditions, the pertinent internal strengths
and weaknesses based on the organization’s resources,
competencies, and capabilities, and the goals of the
organization. Each of these three areas should be
scrupulously evaluated.
d- The strategy fills an unfilled niche in the market and the
organization investigated whether the niche will remain
open long enough to return the capital investment.
Question Question stem Selections Choice Topic
title

MC07.10 What are the generic
competitive strategies:
a- Acquisition, licensing, venture capital investment, merger, c Evaluate and Select
and alliance. Competitive Strategies
b- Internal development, internal venture, and
reconfiguring the value chain.
c- Cost leadership, differentiation, and focus.
d- Re-engineering, restructuring, and quality
improvement.

MC07.11 Which of the following is
NOT an important question
when attempting to link
strategic alternatives and
situational analysis:
a- Does the proposed alternative fit with the organizations d Link Strategy with
mission? Situational Analysis
b- Does the proposed alternative move the organization
toward the accomplishment of its vision?
c- Does the proposed alternative address an external
issue?
d- None of the above.

MC07.12 Which of the following is a- Strengths, Weaknesses, Opportunity, and Threat b Evaluate and Select
NOT a method for evaluating analysis. Adaptive Strategies
adaptive strategies: b- Value chain analysis.
c- BCG portfolio analysis.
d- SPACE.
MC07.13 Which of the following are a- Decline. c Product Life Cycle
stages in product life cycle b- Maturity. Analysis
analysis: c- Growth.
d- All the above.

MC07.14 Which of the following is a- Cash cow. d Portfolio Analysis

NOT a quadrant in the BCG b- Problem child.
Portfolio: c- Dog.
d- Black hole.

MC07.15 Which of the following
methods provides guidance
to selecting an aggressive
profile, a competitive profile,
a conservative profile and a
defensive profile:
a- Product life cycle analysis. b Strategic Position and
b- Strategic position and Action Evaluation technique. Action Evaluation
c- Extended portfolio analysis.
d- Needs/Capacity assessment.
Question Question stem Selections Choice Topic
title

MC07.16 Which of the following are
important components of
organizational capacity:
MC07.17 Which of the following is
NOT a factor in determining
community need:
a- The programs fit with regard to the mission and vision of d Needs/Capacity
the organization. Assessment
b- Funds necessary to support the program.
c- All relevant resources and skills.
d- All the above.
a- Number of regulatory agencies. a Needs/Capacity
b- Public and private health care gaps. Assessment
c- Community health objectives.
d- Community resources.

MC07.18 Which of the following would a- Relatively long product life cycle. a Strategic Posture
favor a defender posture: b- Turbulent environment.
c- Low intensity of competitive rivalry.
d- Numerous market and service opportunities.

MC07.19 Which of the following is a- Cost leadership. c Synthesize and Identify

NOT a generic strategy: b- Focus. Implications of Strategy
c- Vertical integration. Choices – Strategy
d- Differentiation. Mapping

MC07.20 In SPACE analysis, which of a- Penetration. b Strategic Position and

the following would not be b- Harvesting. Action Evaluation
considered a competitive c- Product development.
strategy: d- Enhancement.

Question Question stem
title
SE07.01 Identify the principal
weakness of SWOT
(strengths, weaknesses,
opportunities and threats)
analysis and explain how the
TOWS (threats, opportunities,
weaknesses, strengths)
matrix overcomes the
weakness of SWOT.
SE07.02 Describe the four strategic
postures associated with
strategic position and
action evaluation
(SPACE).
Short Essay Questions
Rationale Topic
SWOT analysis involves listing the organization’s strengths and weaknesses SWOT Analysis
as well as perceived external opportunities and threats. SWOT, however, does
not provide much insight into what strategy decisions might result from the list
of strengths and weaknesses and opportunities and threats. As Weilhrich
explains, the TOWS (threats, opportunities, weaknesses, strengths) matrix
was developed to provide a better way to develop and evaluate specific
adaptive strategic alternatives.
In the TOWS approach, internal strengths and weaknesses are matched
against external environmental opportunities and threats to foster strategic
thinking concerning adaptive strategy alternatives. However, both SWOT
analysis and the TOWS matrix approach require strategic managers to
classify external issues as opportunities or threats.
Aggressive posture – This posture is typical in an attractive service category Strategic Position and Action
with little environmental turbulence. The organization enjoys a definite Evaluation
competitive advantage, which it can protect with financial strength. The
critical factor is the entry of new competitors.
Competitive posture – This posture is typical in an attractive service
category. The organization enjoys a competitive advantage in a relatively
unstable environment. The critical factor is financial strength.
Conservative posture – This posture is typical in a stable market with low
growth. Here, the organization focuses on financial stability. The critical factor
is product competitiveness. Defensive posture – This posture is typical of an
unattractive service category in which the organization lacks a competitive
product and financial strength. The critical factor is competitiveness.
Question Question stem
title
SE07.03 Describe the Q-sort
procedure.
SE07.04 Any strategic choice made
by leaders needs to be
consistent with other
components of the strategic
management process. What
factors need to be linked
when formulating strategy?
Rationale Topic
In the Q-sort procedure, each member of the management team is asked to Program Priority Setting
sort the organization’s programs into categories based on their perceived
importance to the organization’s mission and vision. To facilitate the task, the
programs are printed on small cards that may be arranged (sorted) on a table.
To force ranking of programs, managers are asked to arrange the programs in
piles from most important to least important.
The number of categories should be limited to nine and the number of
programs to be assigned to each category is determined in such a manner as
to ensure a normal distribution
– 5 percent of the programs are placed in the first pile or group,
7.5 percent in the second group, 12.5 percent in the third group, and so on. In
this case, there are two programs in the first group, four programs in the
second group, six in the third group, and so on. Each program is assigned a
score ranging from 1 to 9, where 1 is for the lowest and 9 is for the highest
ranked program as a function of the “pile” into which it has been sorted. The
score indicates an individual’s perception of that program’s importance to the
mission and vision of the organization. A program profile is developed by
averaging individual members’ scores for each program.
An important test for strategic choices is that the strategies selected by an Link Strategy with
organization address external issues, draw on competitive advantages or fix Situational Analysis
competitive disadvantages, keep the organization within the parameters of the
mission and values, move the organization toward the vision, and make
progress toward achieving one or more of its strategic goals. Ensuring these
important linkages is a significant part of the strategic thinking process and
helps to assure consistency of analysis and action.
Question Question stem Rationale Topic
title

SE07.05 Summarize the evaluation There are several methods for deciding which of the adaptive strategic Evaluate and Select
of adaptive strategy alternatives is most appropriate for an organization including the Adaptive Strategies
alternatives. external/internal strategy matrix, product life cycle (PLC) analysis, portfolio
analyses (BCG and extended), strategic position and action evaluation
(SPACE) analysis, and program evaluation. Using these methods, managers
can classify internal and external factors to gain perspective on which
adaptive strategic alternative or combination of alternatives is most
appropriate. Once the most appropriate adaptive strategy (or combination of
adaptive strategies) has been determined, a market entry strategy must be
selected.

Expansion and maintenance of scope strategies are initiated through one or

more of the market entry strategies. Entry strategies include acquisition,
licensing, venture capital investment, merger, alliance, joint venture, internal
development, internal venture, and reconfiguration of the value chain. The
organization’s internal resources, competencies, and capabilities
(competitively relevant strengths), the external conditions, and the
organization’s objectives will determine which of these strategies is most
appropriate. After the market entry strategy has been selected, competitive
strategies, which include strategic posture and positioning strategies, should
be evaluated and selected. Strategic postures include defender, prospector,
and analyzer strategies. Positioning strategies include market-wide or focus
strategies of cost leadership or differentiation. The external conditions and
internal resources, capabilities, and competencies influence strategic posture
and positioning strategies. Therefore, the most appropriate strategic posture
and positioning strategy may be selected through an evaluation of the internal
skills and resources of the organization and the external conditions.
Question Question stem
title
SE07.06 What is an
External/Internal Strategy
Matrix and how is it used
in arriving at strategic
choices?
SE07.07 How can the product life
cycle analysis be helpful to
the decision maker when
thinking about what might
be the best market
entry/exit strategy?
SE07.08 Why is it important for not-
for-profit and public-sector
organizations to set
program priorities and re-
evaluate these priorities
on a regular basis?
Rationale Topic
An external/internal strategy matrix presents an illustration of external issues External/Internal
with internal competitive advantages and disadvantages. The resulting Strategy Matrix
strategic thinking map is useful for matching external issues with internal
competitive advantages and disadvantages. This approach, utilizing the
complete results of a comprehensive external and internal analysis, better
fosters strategic thinking concerning adaptive strategy alternatives than the
customary SWOT analysis. In the external/internal strategy matrix, adaptive
strategic alternatives are suggested by the interactions of the seven sets of
variables (long- and short-term competitive advantages, long- and short-term
competitive disadvantages, and general, health care, and competitive issues).
The primary focus is the adaptive strategic alternatives, but this analysis could
also be applied to the development of any type of strategy. In practice,
particularly in open discussion sessions, some of the alternatives developed
through the strategy matrix may be adaptive, market entry/exit, competitive, or
value-adding service delivery and support strategies.
Quite often health care organizations develop the services they already offer. Product Life Cycle
However, this development makes sense only in relation to the services stage Analysis
in the product life cycle. This development is most desirable if the service is in
the introductory stage. If the service is in a mature stage it is usually better to
develop a joint-venture with an experienced partner. Introducing new service
variations during late maturity or decline carries greater risk unless the
variation in the service is sufficiently different to result in the creation of an
entirely new service life cycle.
Program priority setting is important because community needs (both the Program Priority
need itself and the severity of the need) are constantly changing and Setting
organizational resources, in terms of funding and organization capacity, are
almost always limited. Invariably, more programs have a higher community
need than resources are available. Therefore, the most important programs
may be expanded or maintained. The organization must have an
understanding of which programs are the most important, which should be
provided incremental funding, and which should be the first to be scaled
back if funding is reduced or eliminated.
 Rationale
Question Question stem Topic
title

SE07.09 Under what types of
external conditions are the
various strategic postures
likely to be most
successful?
External conditions are very important in the selection of strategic posture. Strategic Posture
Defender strategies tend to be successful when the external environment is
relatively stable (change is slow and reasonably predictable). In such situations,
competitive rivalry is low and the barriers to entering the market are high.
Because defender organizations focus on a narrow product line, the strategy
works best when relatively long product life cycles are expected. Defender
strategies are most effective in the mature stage of the product life cycle. The
risks associated with the defender posture are that the PLC will be dramatically
shortened by external change (new technology, for instance) or that a
competitor can somehow unexpectedly take away market share.
Prospectors operate well in rapidly changing, turbulent environments. In these
situations, change is coming so rapidly that there are few rewards for efficiency.
In addition, prospectors are successful by utilizing a technology across several
markets (prospecting in new high-growth markets). Products are usually in the
introductory and early growth stages of the PLC and the cycle tends to be
relatively short. As a result, entry barriers may be low and the intensity of rivalry
typically is low (there is room for everybody). As products or services mature,
prospector organizations move on to new products and services, typically in
introductory stages of the PLC.
Analyzers operate well in conditions where there is moderate external change
with some product categories that are quite stable and some that are changing.
Competitive rivalry tends to be relatively high and these organizations cannot
afford to ignore new product developments, markets, or product categories.
PLCs for their stable products are moderately long but there are periodic
innovations and disruptions. Analyzers attempt to maintain balance with both
mature- and growth-stage products or services and markets.
Reactors tend to exit in protected or monopolistic markets or are legislatively
restricted from moving into new markets or offering new products. Like
defenders, reactors often focus on efficiency rather than external changes. In
addition, for products and markets in the decline stage of the product life cycle, a
reactor strategy may be part of a harvesting strategy or prelude to divestiture or
liquidation.
 Rationale
Question Question stem Topic
title

SE07.10 How are market entry/exit Once expansion of scope or maintenance of scope through enhancement Evaluate and Select
strategies related to the adaptive strategies are selected market entry strategies must be used to break Market Entry/Exit
adaptive strategies of into or capture more of the market. All of the expansion adaptive strategies Strategies
expansion of scope and require some activity to reach more patients with services. Similarly,
maintenance of scope enhancement strategies indicate that the organization must improve what it is
through enhancement? already doing, which requires market entry analysis. Reduction of scope
strategies are methods to either rapidly or slowly, partially or completely leave
markets and require little further analysis beyond identifying buyers or internal
cost cutting issues. The specific market entry/exit strategy considered to be
appropriate depends on (1) the external conditions; (2) the pertinent internal
strengths and weaknesses based on the organization’s resources,
competencies, and capabilities; and (3) the goals of the organization.