Quiz 1.

  Chapter 1.  

1
CORRECT Which of the following statements about a company's strategy is true?
Crafting an excellent strategy is more important than executing it
A)well.

The objective of a well-crafted strategy is not merely temporary

B)competitive success and profits in the short run, but rather the sort
of lasting success that can support growth and secure the
company's future over the long
A company's strategy deals with whether the revenue-cost-profit
C)economics of its business model demonstrate the viability of the
business enterprise as a whole.
Masterful strategies come partly (maybe mostly) by doing things
D)in much the same way as the industry leader but then being better
than the leader in one particular area that counts heavily with
buyers.
Whether a company's strategy is ethical or not does not matter a
E) lot because most customers and most suppliers are relatively
unconcerned whether a company they do business with engages
in sleazy practices or turns a blind eye to below-board behavior
on the part of its employees.

2
CORRECT Competing differently from rivals?doing what competitors don't do or,
even better, doing what they can't do is referred to as its

A)strategic offensive for becoming a market leader.

B)business model.

C)long-term strategic direction.

D)mission statement.

strategy.
E)

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3
CORRECT Which one of the following is not related to actions and approaches
that comprise a company's strategy?

A)How to attract and please customers.

How to prove to shareholders that the company's business model

B)is viable

C)How to compete against rivals.

D)How to capitalize on attractive opportunities to grow the business.

How to achieve the company's performance targets.

E)

4
CORRECT A company achieves sustainable competitive advantage when

A)it has a low-cost business model.

B)it is able to increase shareholder value.

sufficient numbers of buyers believe the company has

C)demonstrated a commitment to environmental sustainability.

it is consistently able to achieve both its strategic and financial

D)objectives.

when it provide buyers with lasting reasons to prefer its products

E) or services over those of competitors.

5
CORRECT Which one of the following is not something to look for in identifying a
company's strategy?
Its actions to enter new geographic or product markets or exit
A)existing ones and its actions to form strategic alliances and
collaborative partnerships
Its actions to merge with or acquire another company in order to
B)strengthen the company's business position

Its actions to capture emerging market opportunities and defend

C)against external threats to the company's business prospects

The company's actions to validate and improve upon its business

D)model

2
 The actions and approaches that define how a company manages
E) such functions as R&D, production, sales and marketing, and
finance

6
CORRECT Company strategies evolve because
it is a bad idea to do too much strategizing until a company has
A)been in business long enough to know what strategies will work
best.
most managers like to develop the strategy in bits and pieces
B)rather than all at once.

of changing circumstances and ongoing management efforts to

C)improve the strategy

many managers are conservative, preferring to carefully

D)contemplate the best responses to new developments and
avoiding the risks associated with developing a complete strategy
too quickly.
a strategy does not really transition to a well-crafted stage until a
E) company has been trying to execute it for a number of years and
has learned what works and what doesn't.

7
CORRECT A company's business model
determines whether its strategy will be ethical or not and meet
A)government regulations.

is management's storyline for how the strategy will result in

B)achieving sustainable competitive advantage and delivering
superior customer satisfaction over the long-term.
is management's blueprint for delivering a valuable product or
C)service to customers in a manner that will generate revenues
sufficient to cover costs and yield an attractive profit
identifies how the company plans to outmaneuver and
D)outcompete key rivals and become a market leader.

sets forth the actions and approaches that it will rely on to earn
E) the best profit margins in the industry.

8
CORRECT A winning strategy is one that
makes the company a market leader, is ethically and socially
A)responsible, and maximizes profits.

B)is highly profitable and boosts the company's market share.

passes the profitability test, the ethics and social responsibility

C)test, the customer satisfaction test, and the shareholder wealth
test.
3
 fits the company's internal and external situation, builds
D)sustainable competitive advantage, and boosts company
performance.
passes the ethical standards test, the competitive advantage test,
E) and the profitability test.

9
CORRECT Crafting and executing strategy are top-priority managerial tasks
because
how managers go about the tasks of crafting and executing
A)strategy sends a message to shareholders and the entire
investment community regarding "what it is we are trying to do
and how we plan to achieve our objectives."
the company is unlikely to be profitable unless senior executives
B)have a clear answer to "where are we headed, how do we plan to
get there, and when do we expect to arrive?"
how well a company performs and the degree of market success
C)it enjoys are directly attributable to the caliber of its strategy and
the proficiency with which the strategy is executed.
without clear guidance as to what the company's business model
D)and strategy are, managerial decision-making is likely to be
haphazard and inconsistent.
a company cannot hope to be a market leader if all it does is
E) respond to changing market conditions, new technologies, new
opportunities, and threatening moves on the part of competitors.

10
CORRECT The most trustworthy signs of a well-managed company are
a strong emphasis on offensive strategies rather than defensive
A)strategies.

a strategy matched to fast-evolving market conditions and bigger

B)profit margins than rivals and a steady upward trend in net
income.

C)attractive bottom-line performance and a proven business model.

D)good strategy and good strategy execution.

having a profitable business model, a willingness to change the

E) company's business model whenever circumstances warrant, and
having a sustainable competitive advantage.

4
Chapter 2

1
CORRECT Which one of the following is not an integral part of the managerial
process of crafting and executing strategy?
Developing a strategic vision, a mission statement and core
A) values.
Choosing a strategic intent.
B)
Setting objectives.
C)
Crafting a strategy
D)
Monitoring developments, evaluating performance, and initiating
E) corrective adjustments.

2
CORRECT A strategic vision for a company
involves how fast to pursue the chosen strategy and reach the
A) targeted levels of performance.
consists of thinking through what it will take to make the chosen
B) strategy work as planned.
provides a panoramic view of "where we are going" and a
C) convincing rationale for why this makes good business sense for
the company
spells out how the company is going to get from where it is now to
D) where it wants to go and when it is expected to arrive.
concerns management's view of how to transition the company's
E) business model from where it is now to where it needs to be.

3
CORRECT Which of the following statements about a company's values is false?
Company values are the beliefs, traits, and behavioral norms that
A) management has determined should guide the pursuit of its vision
and mission
In companies with long-standing values that are deeply
B) entrenched in the corporate culture, senior managers are careful
to craft a vision, mission, and strategy that match established
values, and they reiterate how the value-based behavioral norms
contribute to the company's business success. If the company
changes to a different vision or strategy, executives take care to
explain how and why the core values continue to be relevant.
A company's core values can relate to such things as fair
C) treatment, integrity, ethical behavior, innovativeness, teamwork,
top-notch quality, superior customer service, social responsibility,
and community citizenship.
At values-driven companies, executives "walk the talk" and
D) company personnel are held accountable for embodying the
stated values in their behavior.
5
 At all but a few companies, the stated values are mostly window-
E) dressing and serve mainly to embellish the company's public image.

4 Most boards of directors have a compensation committee, composed

CORRECT entirely of ________________________, to develop a salary and
incentive compensation plan that rewards senior executives for
boosting the company's _______________ performance and growing
the economic value of the enterprise on behalf of shareholders.
outside directors; long-term
A)
shareholders; stock
B)
inside directors; short-term
C)
outside directors; quantitative
D)
Independent experts; overall
E)

5
CORRECT Which of the following represents the best example of a well-stated
strategic objective (as opposed to a well-stated financial objective)?
Achieve revenue growth of 10% annually
A)
Increase market share from 17% to 22% and achieve the lowest
B) overall costs of any producer in the industry, both within three
years
Invest more money in R&D to enable the company to offer
C) customers the widest selection of products in the industry
Achieve a AA bond rating within 2 years and an annual cash flow
D) of $500 million
Pay more attention to reducing costs by half of the current level
E) over the next few years

6
CORRECT Which of the following statements about objectives is false?
A company's managers are well-advised to give the achievement
A) of financial objectives a much higher priority than the achievement
of strategic objectives.
The managerial purpose of setting objectives is to convert the
B) vision and mission into specific performance targets.
A "balanced scorecard" for measuring company performance
C) views financial performance measures as lagging indicators that
reflect the results of past decisions and organizational activities
and views strategic performance measures as leading indicators
of a company's future financial performance
Objectives serve as yardsticks for tracking a company's
D) performance and progress, and (3) they motivate employees to
expend greater effort and perform at a high level.
The best ways to promote outstanding company performance is
E) for managers to deliberately set performance targets high enough
6
 to stretch an organization to perform at its full potential and deliver
the best possible results

7
CORRECT A balanced scorecard for measuring company performance
entails balancing the pursuit of good bottom-line profit against the
A) pursuit of non-profit objectives (although achieving profitability
targets is nearly always given greater emphasis).
involves putting equal emphasis on the achievement of financial
B) objectives, strategic objectives, and social responsibility
objectives.
entails setting both financial and strategic objectives and putting
C) balanced emphasis on their achievement.
helps prevent the pursuit of strategic objectives from dominating
D) the pursuit of financial objectives.
is necessary in order to prevent the drive for achieving financial
E) objectives from weakening the attention paid to social
responsibility, community citizenship, and other worthy goals.

8
CORRECT The task of crafting a strategy is
the function and responsibility of a few high-level executives.
A)
more of a collaborative group effort that involves all managers
B) and sometimes key employees striving to arrive at a consensus
on what the overall best strategy should be.
the function and responsibility of a company's strategic planning
C) staff.
is a collaborative team effort in which every manager has a role
D) for the area he or she heads; it is rarely something that only high-
level managers do.
first and foremost the function and responsibility of a company's
E) board of directors.

9
CORRECT The strategy-making hierarchy in a single business company consists
of
business strategy, divisional strategies, and departmental
A) strategies.
business strategy, functional-area strategies, and operating
B) strategies.
business strategy and operating strategy.
C)
managerial strategy, business strategy, and divisional strategies.
D)
corporate strategy, divisional strategies, and departmental
E) strategies (whereas in a diversified company it consists of
corporate strategy, divisional strategy and operating strategy).

10
CORRECT Which one of the following is not among the chief

7
duties/responsibilities of a company's board of directors insofar as the
strategy-making, strategy-executing process is concerned?
Direct senior executives as to what the company's long-term
A) direction, objectives, business model, and strategy should be and,
further, closely supervise senior executives in their efforts to
implement and execute the strategy
Oversee the company's financial accounting and financial
B) reporting practices.
Evaluating the caliber of the CEO's strategy-making/strategy-
C) executing skills and of other senior executives, since the board
must elect a successor when the incumbent CEO steps down,
either going with an insider or deciding that an outsider is needed
Critically appraise the company's direction, strategy, and business
D) approaches
Institute a compensation plan for top executives that rewards
E) them for actions and results that serve shareholder interests.

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Chapter 3

1
CORRECT Which of the following is not among the factors that determine
whether competitive rivalry among industry members is strong,
moderate, or weak?
Whether buyer demand for the product is growing rapidly or
A) slowly
Whether customers' costs to switch brands is low or high
B)
How active industry rivals are in initiating fresh competitive moves
C) and in using the various weapons of competition to improve their
market standing and business performance
Whether there are few or many rival sellers and whether there are
D) big differences in their sizes and competitive capabilities
Whether industry members are vertically integrated and whether
E) the industry is characterized by significant scale economies and
rapid technological change

2
CORRECT The rivalry among competing sellers in an industry intensifies
when buyer demand for the product is growing rapidly.
A)
when customers are brand loyal and their costs to switch to
B) competing brands or substitute products are relatively high.
when buyer demand is strong and sellers have little or no excess
C) capacity and only minimal inventories.
as the number of rivals increases and as they become more equal
D) in size and competitive capability.
when the products of rival sellers are highly differentiated
E) products and the industry consists of so many rivals that any one
company's actions have little direct impact on rivals' business.

3
CORRECT Competitive pressures associated with the threat of new entrants
grow stronger when
buyer demand is growing slowly and the pool of entry candidates
A) is small.
the number of customers for the industry's product is large and
B) the product offerings of rival sellers are strongly differentiated.
Existing industry members are looking to expand their market
C) reach by entering product segments or geographic areas where
they do not have a presence yet.
there are not many competitors already in the industry, their
D) products are highly differentiated, and buyers are brand loyal.
a small percentage of companies in the industry are currently
E) earning above-average profits, entry barriers are high, and buyers
are not brand loyal.

9
CORRECT Which of the following conditions generally raise the barriers to
entering an industry?
Low levels of brand loyalty on the part of customers and the
A) presence of more than 20 rivals in the industry
Rapid market growth, low buyer switching costs, and weak brand
B) preferences and customer loyalty
Product offerings that are pretty much standardized from rival to
C) rival
High capital requirements, and difficulties in building a network of
D) distributors-retailers and securing adequate space on retailers'
shelves,
The industry is not characterized by scale economies and/or
E) sizable learning/experience curve effects and few firms in the
industry hold key patents and/or possess significant proprietary
technology not readily available to a newcomer

5
CORRECT Competitive pressures stemming from substitute products are weaker when
buyers don't believe substitute products have equal or better
A) features, and buyers' costs of switching to substitutes are
relatively high.
the industry consists of a relatively large number of rival sellers
B) that are fairly equal in size and similar in competitive capability.
entry barriers are moderately high but by no means prohibitive
C) and there is a fairly small pool of entry candidates.
a number of customers buy in large volumes and are in a strong
D) bargaining position to win concessions from sellers.
buyer loyalty to the products they are currently purchasing buyers'
E) costs of switching to substitutes are relatively low.

6
CORRECT Which of the following is not a factor in determining whether the
suppliers to an industry are a source of strong, moderate, or weak
competitive pressures?
Whether certain needed inputs are in short supply and whether
A) the item being supplied is a standard commodity that is readily
available from many suppliers at the going market price
Whether it is difficult or costly for industry members to switch their
B) purchases from one supplier to another or to switch to attractive
substitute inputs
Whether industry members are major customers of suppliers and
C) whether suppliers' sales to members of this one industry
constitute a big percentage of their total sales
Whether the industry supply chain is global or mostly national,
D) whether suppliers have a wide or narrow product line, and
whether industry members place orders frequently or infrequently
with suppliers
Whether certain suppliers provide a differentiated input that
E) enhances the performance or quality of the industry's product

7
CORRECT
10
 Whether the buyers of an industry's product have strong or weak
bargaining leverage over the terms and conditions of sale depends on
how often that sellers alter their prices, how sensitive buyers are
A) to price differences among sellers, whether the item being
purchased is a good or a service, and whether buyers buy
frequently or infrequently.
the frequency with which rival firms change strategies and the
B) amount of advertising that sellers utilize.
whether all buyers have the same degree of negotiating power,
C) whether the item carries a high or low price tag, and whether
there are many or few collaborative partnerships between sellers
and buyers.
whether buyers purchase in relatively large or small quantities,
D) and how well informed buyers are about sellers' prices, products,
and costs.
whether buyer demand is seasonal or year-round, whether entry
E) barriers are high or low, and whether competitive pressures from
substitutes are strong or weak.

8
CORRECT The task of driving forces analysis is to
identify all the underlying factors that can cause industry and
A) company profitability to rise or fall in the years ahead.
predict what new forces of competitive and market change will
B) emerge next.
determine which of the five competitive forces is the biggest driver
C) of industry change and to assess the impact on the company.
identify which companies are being driven to move from one
D) strategic group to another strategic group.
determine how the collective impact of the driving forces will
E) change market demand, competition and industry profitability.

9
CORRECT Strategic group mapping is a helpful analytical tool for
assessing why competitive pressures and driving forces usually
A) impact the biggest strategic groups more so than the smaller
groups.
determining which companies have how big a competitive
B) advantage and how good their prospects are for increasing their
market shares.
determining which company is the most profitable in the industry
C) and why it is doing so well.
revealing the market positions of key industry competitors.
D)
pinpointing which of the five competitive forces is the strongest
E) and which is the weakest.

10
CORRECT An industry's key success factors
can best be determined by studying the strategies of those

11
A) companies in the industry's best strategic group and those in the
worst strategic group.
are so important to competitive success that all firms in the
B) industry must pay close attention to them or risk becoming an
industry laggard or failure.
are mainly a function of an industry's macro-environment and
C) dominant economic features.
can best be determined by identifying the similarities in the
D) strategies of rival companies?those strategy elements that are
most commonly found in the strategies of rivals can be
considered key success factors.
usually relate to technology and manufacturing-related
E) capabilities and rarely to distribution or marketing capabilities.

12
Chapter 4

1
CORRECT Which one of the following is not helpful in identifying the components
of a single-business company's strategy?
Initiatives to build competitive advantage
A)
Efforts to expand or narrow geographic coverage
B)
The company's resource strengths and weaknesses
C)
The company's key functional strategies
D)
Efforts to build competitively valuable partnerships and strategic
E) alliances with other enterprises within its industry

2
CORRECT SWOT analysis
provides the basis for crafting a strategy that capitalizes on the
A) company's strengths, overcomes its weaknesses, aims squarely
at capturing the company's best opportunities, and defends
against competitive and environmental threats
provides a quick overview of where on the scale from "alarmingly
B) weak" to "exceptionally strong" the attractiveness of the
company's overall business situation ranks.
helps provide a basis for matching the company's strategy to its
C) internal resource capabilities and its external opportunities and
threats.
helps identify a company's core competencies and competitive
D) capabilities and the seriousness of its resource weaknesses and
competitive deficiencies.
All of these.
E)

3
CORRECT A core competence
is a more durable company resource than a "distinctive
A) competence."
usually resides in a company's technology and physical assets
B) (state-of-the-art plants and equipment, attractive real estate locations,
modern distribution facilities, and so on) whereas a company
competence usually resides in a company's human assets.
may evolve into a distinctive competence, giving the company
C) superiority over rivals in performing an important value chain
activity
is usually tied closely to the caliber of a company's manufacturing
D) capability and/or its proprietary technology and know-how.
is better suited to helping a company defend against external
E) threats than in pursuing external market opportunities.

13
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4
CORRECT Which of the following analytical tools are particularly useful for
determining whether a company's prices and costs are competitive?
SWOT analysis, strategy assessment, activity-based costing
A) analysis, and key success factor analysis.
Best practices analysis, and value chain analysis.
B)
Value chain analysis and benchmarking.
C)
Competitive position assessment, competitive strength assessment,
D) strategic group mapping, SWOT analysis, and value chain analysis.
SWOT analysis, best practices analysis, activity-based costing
E) analysis, and competitive strength assessment.

5
CORRECT A company's value chain consists of
the activities a company performs in converting its resource
A) weaknesses into resource strengths.
the collection of activities it performs in the course of designing,
producing, marketing, delivering, and supporting its product or
B)
service and delivering value to customers.
those activities a company performs that represent "best practices"?
only best practice activities are capable of delivering value to
C)
customers and thus qualify to be part of a company's value chain.
the activities that a company performs in developing a distinctive
D) competence.
the activities that represent a company's competencies, core
competencies, distinctive competencies, and competitive
E)
capabilities?it is these activities that underpin a company's efforts to
create value for customers and shareholders.

6
CORRECT Benchmarking
is inherently unethical if it involves companies that are direct
competitors because it involves gathering competitively sensitive
A)
information about the operations and costs of rivals.
is not a valid tool for measuring the cost-effectiveness of an activity
B) unless it is restricted to companies in the same industry.
is a potent tool for improving a company's own internal activities that
is based on learning how other companies perform them and
C)
borrowing "best practices".
loses much of its managerial usefulness if it is done with the aid of
third-party organizations who insist on protecting the confidentiality
D)
of individual company data; moreover, benchmarking is not used
very often by companies because of "borderline" ethical
considerations and because most of the time the information and
data used in doing benchmarking studies has turned out to be
unreliable and untrustworthy.
entails calculating the costs of performing each of the primary and
E) related support activities in a company's value chain.

15
7
CORRECT A company's cost competitiveness is largely a function of
whether it does a good enough job of benchmarking its value
A) chain activities against the value chains of competitors so that it
knows exactly how low to drive its costs to be cost-competitive.
how efficiently it manages its overall value chain activities relative
B) to how efficiently competitors manage theirs.
whether it does a better job of building its resource strengths
C) more cost effectively than rivals.
whether it possesses more core competencies and competitive
D) capabilities than rivals.
how closely its internally-performed activities are linked to the
E) activities performed by suppliers and to the activities performed
by forward channel allies.

8
CORRECT For a company to translate performance of value chain activities into
competitive advantage, it
must be more cost efficient in how it performs value chain
A) activities or better able to manage activities that add customer
value.
has to develop more core competencies than rivals by focusing
B) primarily on R&D and market research.
must be more adept than rivals in using benchmarking and
C) activity-based costing.
has to position itself in the strategic group where profit margins
D) are highest.
must adopt more best practices than rival firms.
E)

9
CORRECT The measure of internal cash flow estimates the cash a company's
business is generating _____________________________.
after payment of operating expenses, and interest
A)
before payment of operating expenses, interest, and taxes
B)
after payment of operating expenses, interest, taxes, dividends,
C) and desirable reinvestments in the business
before payment of interest and taxes.
D)
after payment of operating expenses, interest, and taxes
E)

10
CORRECT Which one of the following is not something that can be learned from
doing a competitive strength assessment?
16
 How does the company rank relative to competitors on each of
A) the important factors that determine market success
Whether a company utilizes best practices in performing its value
B) chain activities
Which of the rated companies is competitively strongest and what
C) size competitive advantage it enjoys
Whether a company has a net competitive advantage or is a net
D) competitive disadvantage relative to key rivals (with the size of the
advantage/disadvantage being indicated by the differences
among the companies' competitive strength scores)
Which rival company is competitively weakest and the areas
E) where it is most vulnerable to competitive attack?when a
company has important competitive strengths in areas where one
or more rivals are weak, it makes sense to consider offensive
moves to exploit rivals' competitive weaknesses

17
Chapter 5

1
CORRECT A company's competitive strategy deals
with the specific actions management plans to take to develop a
A) better value chain than rivals.
with how it plans to unify its functional and operating strategies
B) into a cohesive effort aimed at successfully taking customers
away from rivals.
exclusively with the specifics of management's game plan for
C) competing successfully.
specifically with its plans for under-pricing rivals and achieving
D) product superiority.
with the specific actions management intends to take to strongly
E) differentiate its product offering from the offerings of rival
companies in the industry.

2
CORRECT The five generic types of competitive strategies include
offensive strategies, defensive strategies, differentiation
A) strategies, low-cost strategies, and first-mover strategies.
low-cost provider strategies, broad differentiation strategies, best-
B) cost provider strategies, focused low-cost strategies, and focused
differentiation strategies.
offensive strategies, defensive strategies, striving to be a market
C) leader, technological leadership strategies, and product
innovation strategies.
low-price strategies, premium price strategies, middle-of-the-road
D) strategies, product leadership strategies, and market share
leadership strategies.
attacking competitor strengths, attacking competitor weaknesses,
E) market leadership strategies, low-cost leadership strategies, and
product superiority strategies.

3
CORRECT A low-cost leader's basis for competitive advantage is
using an everyday low pricing strategy to gain the biggest market
A) share.
bigger profit margins than rival firms.
B)
high buyer switching costs because of the company's
C) differentiated product offering.
meaningfully lower overall costs than competitors.
D)
a reputation for charging the lowest prices in the industry.
E)

4
CORRECT A competitive strategy of striving to be the low-cost provider is
18
 particularly attractive when
buyers are large and use the product in much the same ways.
A)
most rivals are trying to differentiate their product offering from
B) those of rivals.
there are many ways to achieve higher product quality that have
C) value to buyers.
buyers are not swayed by advertising and are not very brand-
D) loyal.
most rivals are pursuing best-cost or broad differentiation
E) strategies.

5
CORRECT A broad differentiation strategy
is an attractive competitive approach whenever buyers' needs and
A) preferences are too diverse to be satisfied by a product that is
essentially identical from seller to seller.
can produce sustainable competitive advantage if the
B) differentiating features possess strong buyer appeal and can't be
copied or easily matched by rivals.
works best when the basis for differentiation is superior
C) performance features and buyer switching costs are low.
offers a better chance for gaining market share than low-cost or
D) best-cost provider strategies, and typically allows a firm to charge
the highest price in the industry.
can produce sustainable competitive advantage if the
E) differentiating features possess strong buyer appeal and can't be
copied or easily matched by rivals.

6
CORRECT Which of the following is not one of the four basic routes to achieving
a differentiation-based competitive advantage?
Striving to capture all available economies of scale
A)
Incorporating tangible features that raise product performance
B)
Incorporating product attributes and user features that lower the
C) buyer's overall costs of using the company's product
Delivering value to customers via competencies and competitive
D) capabilities that rivals don't have or can't afford to match
Incorporating features that enhance buyer satisfaction in
E) intangible or non-economic ways

7
CORRECT A strategy of being a best-cost provider
is the easiest of the five generic types of competitive strategies to
A) copy or imitate.
combines a strategic emphasis on low cost with a strategic
B) emphasis on more than minimally acceptable quality, service,
features, and performance.

19
 is almost always more profitable than focused or market niche
C) strategies because of the potential for selling more units and
realizing higher revenues.
is the most attractive of all the competitive strategies because it
D) combines the best features of the four other generic types of
competitive strategies.
is usually somewhat less profitable than either top-of-the-line
E) differentiation or low-cost leadership strategies because it is
based on achieving a weaker type of competitive advantage.

8
CORRECT Which of the following are distinguishing features of a best-cost
provider strategy?
The strategic target is price-conscious buyers
A)
A marketing emphasis on charging a slightly higher price than
B) rival brands having comparable features and attributes
A product line that stresses wide selection, many product
C) variations, and emphasis on differentiating features
A competitive advantage based on more value for the money
D)
Using constant product innovation, excellent R&D skills, and
E) periodic technological breakthroughs to sustain the strategy

9
CORRECT What sets focused (or market niche) strategies apart from low-cost
leadership and broad differentiation strategies is
the extra attention paid to establishing a distinctive competence.
A)
their concentrated attention on serving the needs of buyers in a
B) narrow piece of the overall market.
greater opportunity for brand loyalty.
C)
their suitability for market situations where technological change
D) is fast-paced and continuous product innovation is a key success
factor.
their bold strategic intent of global market leadership via heavy
E) advertising.

10
CORRECT A focused differentiation strategy aims at securing competitive
advantage by
providing buyers in the target market niche with the best
A) performance features at a price they perceive as fair..
catering to buyers looking for a medium-quality product at an
B) average price.
offering buyers in the target market niche a product which they
C) perceive is uniquely well suited to their tastes and preferences.
developing unique product attributes.
D)

20
 convincing buyers that the company is a true leader in product
E) innovation.

21
Chapter  6                 

1
CORRECT Which one of the following is not a factor that makes an alliance "strategic"
as opposed to just a convenient business arrangement?
The alliance involves joint contribution of resources and is mutually
A) beneficial.
The alliance helps block a competitive threat or open up new market
B) opportunities.
The alliance helps mitigate a significant risk to a company's business.
C)
The alliance helps build, enhance, or sustain a core competence or
D) competitive advantage.
The alliance is critical to the company's achievement of an important
E) objective.

2
CORRECT Companies are motivated to enter into strategic alliances or cooperative
arrangements
to expedite the development of promising new technologies or products.
A)
to bring together the personnel and expertise needed to create desirable
B) new skill sets and capabilities to improve supply chain efficiency, and/or
gain economies of scale in production and/or marketing.
to acquire or improve market access through joint marketing
C) agreements.
to help win the race against rivals for global market leadership.
D)
All of these.
E)

3
CORRECT The best strategic alliances
aim at teaming up with world-class suppliers or else companies with
A) world-class know-how in product innovation.
are those whose purpose is helping a company master a new technology.
B)
are those formed to enable the partners to be consistent first movers or
C) fast followers.
are highly selective, focusing on particular value chain activities and on
D) obtaining a particular competitive benefit.
aim at insulating the partners against the impacts of the five competitive
E) forces and industry driving forces.

22
4
CORRECT Mergers and acquisitions are a much used strategy because they are an
effective means of
revamping a company's value chain.
A)
facilitating the employment of both offensive and defensive strategies.
B)
creating a more cost-efficient operation, expanding a company's
C) geographic coverage, and extending a company's business into new
product categories.
gaining quick access to new technologies or other resources and
D) competitive capabilities and trying to invent a new industry and lead the
convergence of industries whose boundaries are being blurred by
changing technologies and new market opportunities.
gaining quick access to new technologies or other resources and
E) competitive capabilities and; plus creating a more cost-efficient
operation, expanding a company's geographic coverage, and extending a
company's business into new product categories.

5
CORRECT Which one of the following statements about merger and acquisition
strategies is true?
Merger and acquisition strategies are nearly always a superior strategic
A) alternative to forming alliances or partnerships with these same
companies.
Merger and acquisition strategies tend to be far more successful that
B) forming strategic alliances and cooperative partnerships with other
companies.
Despite many successes, mergers and acquisitions do not always
C) produce the hoped-for outcomes. Cost savings may prove smaller than
expected. Gains in competitive capabilities may never materialize at all.
Mergers and acquisition strategies are a very high-risk strategy because
D) of the financial drain of using the company's cash resources to
accomplish the merger or acquisition.
Merger and acquisition strategies are one of the best ways for helping a
E) company strengthen its brand image.

6
CORRECT Which of the following is typically the strategic impetus for forward vertical
integration?
To charge lower retail prices and thereby attract a bigger, more loyal
A) clientele of customers
To make it easier to expand the company's product line
B)
To gain better access to end users and better market visibility
C)
To achieve greater control over advertising and in-store retail
D) merchandising
To gain better access to greater economies of scale
E)

23
7
CORRECT Which of the following is not a strategic disadvantage of vertical
integration?
It greatly reduces the opportunity for capturing maximum scale
A) economies and achieving the lowest possible operating costs.
Vertical integration poses all kinds of capacity-matching problems.
B)
It boosts a firm's capital investment in the industry and thus increases
C) business risk if the industry becomes unattractive later.
Vertical integration can result in less flexibility in accommodating
D) shifting buyer preferences when a new product design doesn't include
parts and components that the company makes in-house.
Vertically integrated companies are often slow to embrace technological
E) advances or more efficient production methods when they are saddled
with older technology or facilities

8
CORRECT Which of the following is not an advantage of outsourcing the performance
of certain value chain activities to outsiders?
Being able to reduce distribution costs by eliminating the use of
A) wholesale distributors and retail dealers and, instead, selling direct to
end-users at the company's Web site.
Allowing a company to concentrate on its core business, leverage its key
B) resources, and do even better what it already does best
Improving the company's ability to innovate by allying with "world-
C) class" suppliers who have cutting edge intellectual capital and are first-
to-market with next-generation parts and components
Being able to speedily and efficiently assemble diverse kinds of
D) competitively valuable expertise
Obtaining higher quality and/or cheaper components or services
E)

9
CORRECT A blue ocean type of offensive strategy
is a pre-emptive strike type of price-cutting offensive used by a market
A) leader to steal customers away from higher-priced rivals.
offers growth in revenues and profits by discovering or inventing new
B) industry segments that create altogether new demand
involves deliberately attacking those market segments where a key rival
C) makes big profits.
involves using innovative advertising and deep price discounts to grab
D) sales and market share from complacent or distracted rivals.
employs highly creative, never-used-before strategic moves to attack the
E) competitive weaknesses of rivals.

10
CORRECT In which of the following situations is being first to initiate a particular
move not likely to result in a positive payoff?
24
 When pioneering helps build up a firm's image and reputation with
A) buyers
When first-time buyers remain strongly loyal to a pioneering firm in
B) making repeat purchases
When late movers can copy a successful pioneer's moves quickly and at
C) lower cost
When moving first can constitute a preemptive strike, making imitation
D) extra hard or unlikely

25
Chapter 7

1
CORRECT Companies opt to expand into foreign markets for such reasons as to
boost returns on investment, broaden their product lines, avoid tariffs
A) and trade restrictions, and escape having to deal with strong labor
unions.
gain access to new customers, achieve lower costs and enhance the
B) company's competitiveness, capitalize on core competencies, and spread
business risk across a wider market base.
grow sales faster than the industry average, reduce the competitive
C) threats from rivals, and open up more opportunities to enter into
strategic alliances.
avoid having to employ an export strategy, avoid the threat of cross-
D) market subsidization from rivals, and enable the use of a global strategy
instead of a multicountry strategy.
raise the entry barriers for industry newcomers, neutralize the bargaining
E) power of important suppliers, grow sales faster, and increase the number
of loyal customers.

2
CORRECT Which one of the following is not a factor that a company must contend with
in competing in the markets of foreign countries?
Variations in market growth rates from country to country and important
A) country-to-country differences in consumer buying habits and buyer
tastes and preferences
Country-to-country variations in host government policies and trade
B) requirements
The fact that product designs suitable for one country are sometimes
C) inappropriate in another
Vulnerability to adverse shifts in currency exchange rates
D)
A need to convince shippers to keep cross-country transportation costs
E) low

3
CORRECT Which one of the following statements concerning the effects of fluctuating
exchange rates on companies competing in foreign markets is true?
Domestic companies trying to combat competition from foreign imports
A) are hurt even more when their government's currency grows weaker in
relation to the currencies of the countries where the imported goods are
being made.
Fluctuating foreign exchange rates greatly reduce the risks of competing
B) in foreign markets?the big problem occurs when exchange rates are
fixed at unreasonably low levels.
Domestic companies under pressure from lower-cost imports are benefited
C) when their government's currency grows weaker in relation to the currencies
of the countries where the imported goods are being made.
Manufacturers that are exporting much of what they produce are
D) benefited when their country's currency grows stronger relative to the
currencies of the countries that the goods are being exported to.
26
 If the exchange rate of U.S. dollars for euros changes from $1.15 per
E) euro to $1.25 per euro, then it is correct to say that the U.S. dollar has
grown stronger.
4
CORRECT One of the biggest strategy issues confronting a company competing in the
international arena is
whether to enter country markets where competitive forces are relatively
A) strong or whether to only enter country markets where competition is
relatively weak.
whether to charge the same price in all country markets.
B)
whether to license a select few or a large number of foreign firms to
C) produce and distribute the company's products.
whether to offer a mostly standardized product worldwide or whether to
D) customize the company's offerings in each different country market to
match the preferences and requirements of local buyers.
how many strategic alliances to form with foreign-based firms.
E)

5
CORRECT Which one of the following is not among the major reasons a company
might choose to enter foreign markets?
To build profit sanctuaries necessary to wage guerrilla offensives against
A) challengers invading its home market.
To spread business risk across a wider geographic market base.
B)
To gain access to more buyers for the company's products/services.
C)
To capitalize on company competencies and capabilities
D)
To achieve lower costs and enhance the firm's competitiveness.
E)

6
CORRECT Which of the following is/are not "valid" strategy options for entering and/or
competing in foreign markets?
An import strategy, a strategic alliance strategy, a profit sanctuary
A) strategy, and a cross-market subsidization strategy
A global strategy where a company uses essentially the same
B) competitive strategy approach in all country markets where it has a
presence.
A multicountry strategy
C)
An export strategy and using strategic alliances or joint ventures with
D) foreign companies as the primary vehicle for entering foreign markets
A franchising strategy and a strategy of licensing foreign firms to use
E) the company's technology or to produce and distribute the company's
products

27
7
CORRECT Once a company decides to expand beyond its borders it has which of the
following strategic options?
To maintain a domestic production base and export goods to foreign
A) markets.
To rely on strategic alliances or joint ventures to partner with foreign
B) companies.
To license foreign firms to produce and distribute its products or use the
C) company's technology.
Employ a franchising strategy
D)
All of the above.
E)

8
CORRECT Profit sanctuaries
are markets where prices and competitive conditions are strongly linked
A) across country markets to form a world market.
are country markets in which a company derives substantial profits
B) because of its protected market position or unassailable competitive
advantage.
are markets where the risk of fluctuating exchange rates is very high.
C)
are not valuable competitive assets, providing financial weaknesses and
D) hinder a company's race for world-market leadership.
are markets where competitive conditions make it infeasible to employ a
E) profit strategy and an export strategy.

9
CORRECT Which of the following is not a typical option that companies have to
consider to tailor their strategy to fit the circumstances of emerging country
markets?
Develop new sets of core competencies that allow a company to offer
A) value to consumers of emerging markets in ways unmatched by rivals
Prepare to compete on the basis of low price
B)
Be prepared to modify aspects of the company's business model to
C) accommodate local circumstances (but not so much that the company
loses the advantage of global scale and global branding)
Try to change the local market to better match the way the company
D) does business elsewhere
Stay away from those emerging markets where it is impractical or
E) uneconomic to modify the company's business model to accommodate
local circumstances

28
10
CORRECT The strategy options for local companies in competing against global
challengers include
develop business models that exploit the shortcomings of local
A) distribution networks and infrastructure, utilize keen understanding of
local customer needs and preferences, and transferring company
expertise to cross-border markets.
employing defensive rather than offensive strategies, entering into
B) strategic alliances with other local companies to defeat the challengers,
and not using an import strategy.
licensing the company's technology to industry participants competing
C) in foreign markets.
developing a core competence in as many value chain activities as
D) possible, and pursuing a multicountry strategy to quickly build new
profit sanctuaries.
Using an export strategy to gain economies of scale, forming strategic
E) alliances with global giants, using home-run strategies to enter nearby
foreign markets, and relying on patriotic themes in local advertising to
defeat global challengers trying to enter their home markets.

29
Chapter 8

1
CORRECT A company becomes a prime candidate for diversifying under the following
circumstances _______________________
When it spots opportunities for expanding into industries whose
A) technologies and products complement its present business.
When it has a powerful and well-known brand name that can be
B) transferred to the products of other businesses and thereby used as a
lever for driving up the sales and profits of such business.
When diversifying into additional businesses opens new avenues for
C) reducing costs via cross-business sharing or transfer of competitively
valuable resources and capabilities.
When can leverage its collection of resources and capabilities by
D) expanding into businesses where these resources and capabilities are
valuable assets.
All of these.
E)

2
CORRECT To judge whether a particular diversification move has good potential for
building added shareholder value, the move should pass the following tests:
the attractiveness test, the barrier-to-entry test, and the growth test.
A)
the strategic fit test, the resource fit test, and the profitability test.
B)
the barrier-to-entry test, the growth test, and the shareholder value test.
C)
the attractiveness test, the cost-of-entry test, and the better-off test.
D)
the resource fit test, the strategic fit test, the profitability test, and the
E) shareholder value test.

3
CORRECT The better-off test for evaluating whether a particular diversification move is
likely to generate added value for shareholders involves
evaluating whether the diversification move will produce a 1 + 1 = 3
A) outcome such that the company's different businesses perform better together
than apart and the whole ends up being greater than the sum of the parts.
assessing whether the diversification move will make the company
B) better off by increasing its resource strengths and competitive
capabilities.
evaluating whether the diversification move will make the company
C) better off by making it less subject to the bargaining power of customers
and/or suppliers.
assessing whether the diversification move will make the company
D) better off by increasing its profit margins and returns on investment.
All of these.
E)
30
4
CORRECT Which of the following is not accurate as concerns entering a new business
via acquisition, internal start-up, or a joint venture?
The big dilemma of entering an industry via acquisition of an existing
A) company is whether to pay a premium price for a successful company or
to buy a struggling company at a bargain price.
Acquisition is generally the most profitable way to enter a new industry,
B) tends to be more suitable for an unrelated diversification strategy than a
related diversification strategy, and usually requires less capital than entering
an industry via internal start-up.
Acquisition is the most popular means of diversifying into another industry,
C) has the advantage of being quicker than trying to launch a brand-new
operation, and offers an effective way to hurdle entry barriers.
Joint ventures are an attractive way to enter new businesses when the
D) opportunity is too complex, uneconomical, or risky for one company to
pursue alone, when the opportunities in a new industry require a broader
range of competencies and know-how than a company can marshal on
its own, and/or when it aids entry into a foreign market.
The big drawbacks to entering a new industry via internal start-up
E) include the costs of overcoming entry barriers, building an organization
from the ground up, and the extra time it takes to build a strong and
profitable competitive position.
5
CORRECT The strategic appeal of related diversification is that
it allows a firm to reap the competitive advantage benefits of skills
A) transfer, lower costs (due to economies of scope), cross-business use of
a powerful brand name, and/or cross-business collaboration in creating
stronger competitive capabilities.
it is less capital intensive than unrelated diversification because related
B) diversification emphasizes getting into cash cow businesses (as opposed
to cash hog businesses).
it involves diversifying into industries having the same kinds of key
C) success factors.
it is less risky than unrelated diversification because it avoids the
D) acquisition of cash hog businesses.
it facilitates the achievement of greater economies of scale since the
E) company only enters those businesses that serve the same types of buyer
groups and/or buyer needs.

6
CORRECT Economies of scope
stem from the cost-saving efficiencies of scattering a company's
A) manufacturing/assembly plants over a wider geographic area.
have to do with the cost-saving efficiencies of operating across a bigger
B) portion of an industry's total value chain.
stem from cost-saving strategic fits along the value chains of related
C) multiple businesses.
refer to the cost-savings that flow from being able to combine the value
D) chains of different businesses into a single value chain.
are like economies of scale and arise from being able to lower costs via

31
 E) a larger volume operation.

7
CORRECT The defining characteristic of unrelated diversification (as opposed to related
diversification) is
the presence of cross-business resource fit (whereas the defining
A) characteristic of related diversification is the presence of cross-business
strategic fit).
that the value chains of different businesses are so dissimilar that no
B) competitively valuable cross-business relationships are present (in other
words, the value chains of a company's businesses offer no opportunities
to benefit from skills or technology transfer across businesses,
economies of scope, cross-business use of a powerful brand name,
and/or cross-business collaboration in creating stronger competitive
capabilities).
the presence of cross-business strategic fit (whereas the defining
C) characteristic of related diversification is the presence of cross-business
resource fit).
that the company's businesses are in different industries.
D)
the presence of cross-business financial fit.
E)

8
CORRECT Calculating quantitative attractiveness ratings for the industries a company
has diversified into involves
determining the strength of the five competitive forces in each industry,
A) calculating the ability of the company to overcome or contend
successfully with each force, and obtaining overall measures of the
firm's ability to compete successfully in each of its industries.
determining each industry's average profit margins, calculating how far
B) the firm's profit margins are above/below the industry averages, and
then using these values to draw conclusions about industry
attractiveness.
rating the attractiveness of each industry's strategic and resource fits,
C) summing the attractiveness scores, and determining whether the overall
scores for the industries as a group are appealing or not.
selecting a set of industry attractiveness measures, weighting the
D) importance of each measure (with the sum of the weights adding to 1.0),
rating each industry on each attractiveness measure, multiplying the
industry ratings by the assigned weight to obtain a weighted rating,
adding the weighted ratings for each industry to obtain an overall
industry attractiveness score, and using the overall industry
attractiveness scores to evaluate the attractiveness of all the industries,
both individually and as a group.
identifying each industry's average price, rating the difficulty of
E) charging an above-average price in each industry, and deciding whether
the company's prospects for being able to charge above-average prices
make the industry attractive or unattractive.

32
9
CORRECT The 9-cell industry attractiveness-competitive strength matrix
is a valuable tool for ranking a company's different businesses from best
A) to worst based on strategic fit.
shows which of a diversified company's businesses have good/poor
B) resource fit.
indicates which businesses have the highest/lowest economies of scale
C) and which have the highest/lowest economies of scope.
uses quantitative measures of industry attractiveness and competitive
D) strength to plot each business's location on the matrix?the thesis
underlying the matrix is that there are good reasons to concentrate the
company's resources on those businesses having relatively strong
competitive positions in industries with relatively high attractiveness
and to invest minimally or even divest those businesses with relatively
weak competitive positions in industries with relatively low
attractiveness.
pinpoints which of a diversified company's businesses are resource-rich
E) cash cows and which are resource-poor cash hogs.

10
CORRECT Once a firm has diversified and established itself in several different
businesses, then its main strategic alternatives include all but which one of
the following?
Broadening the firm's business scope by diversifying into additional
A) businesses.
Shifting from a multi-country to a global strategy.
B)
Restructuring the company's business line-up with a combination of
C) divestitures and new acquisitions to put a whole new face on the
company's business makeup.
Pursuing multinational diversification and striving to globalize the
D) operations of several of the company's business units.
Divesting some businesses and retrenching to a narrower base of
E) business operations.

33
Chapter 9

1
CORRECT Ethical principles in business
concern the behavioral guidelines a company's top management and
A) board of directors set for company personnel regarding "what is right"
and "what is wrong" in conducting the company's business.
deal chiefly with the actions and behaviors required to operate
B) companies in a socially responsible manner.
are arrived at by picking and choosing among the consensus ethical
C) standards of society to come up with a set of ethical standards that apply
directly to operating a business.
are not materially different from ethical principles in general and have to be
D) judged in the context of society's standards of right and wrong, not by a special
set of rules that business people decide to apply to their own conduct.
involve behavioral guidelines for balancing the interests of non-owner
E) stakeholders (customers, employees, suppliers, and the communities in
which the company has operations) against the interests of company
shareholders.

2
CORRECT According to the school of ethical universalism,
what behaviors are "ethically right" and "ethically wrong" vary across
A) religions, but the boundaries of what is ethical or not
are universal within religions.
concepts of right and wrong universally apply to all business situations
B) within a given country but can vary across countries or cultures.
ethical guidelines exist only when there is universal agreement as to
C) what behaviors are "ethically right" and "ethically wrong"; anything not
universally viewed as unethical is thus within the bounds of what is
ethically permissible.
all societies and countries have some definition of what is ethically
D) permissible (in this sense ethics are universal); however, the definitions
of what is ethically permissible vary according to the prevailing
religious doctrines in each country.
The most important concepts what is right and what is wrong are
E) universal and transcend culture, society, and religion.

3
CORRECT If one adopts the thinking of the school of ethical relativism, then
there are multiple sets of ethical standards because what is ethical or
A) unethical depends on local customs and social mores and can vary from
one culture or nation to another.
there is a "one-size-fits-all" set of authentic ethical standards.
B)
the preferred set of ethical standards is the one which society at large has
C) put in place in the form of laws and regulations.
the prevailing ethical standards are the product of a system of
D) "integrated social contracts."
no ethical standards are ever truly "authentic"?they exist only to the
extent that there is a temporary shared conviction among company
34
 E) managers and company personnel that a particular behavior is either
ethically permissible or ethically impermissible.

4
CORRECT Paying bribes and kickbacks to expedite winning orders from customers or
to facilitate business transactions
is ethically acceptable according to both the school of ethical relativism
A) and the school of ethical universalism, provided the payment of such
bribes and kickbacks is permitted by local laws.
is a thorny ethical issue for multinational companies because in some
B) countries such payments are considered unethical whereas in other
countries the payment of bribes and kickbacks is very much in accord
with local customs and social mores (which makes such payments
"ethically acceptable" according to the school of ethical relativism).
is a clear violation of ethical principles in all countries.
C)
is ethically acceptable according to "integrated social contract theory."
D)
is a clear violation of ethical standards only if one accepts the arguments
E) and reasoning of the school of ethical relativism.

5
CORRECT According to integrated social contracts theory,
the views and principles of the school of ethical universalism are
A) definitely wrong; the correct view is that ethics is a matter of personal
responsibility not a matter of management concern.
universal ethical principles based on the collective views of multiple
B) societies form a social contract that all individuals and organizations
have a duty to observe in all situations.
the standards of what is ethically permissible and what is not should be
C) based on a code of ethical and moral conduct which each
society/country/culture adopts and then enacts into law.
the standards of what is ethically permissible should be determined by
D) the terms of an "ethics contract" which each company employee signs as
a condition of employment.
the only valid ethical standards are those which are universal?and then
E) only if the standards are not absolute and provide some wiggle room
according to the circumstances of the each situation.

6
CORRECT Unethical managerial behavior tends to be driven by such factors as
overzealous or obsessive pursuit of personal gain, wealth, and other
A) selfish interests; a company culture that puts the profitability and good
business performance ahead of ethical behavior; and heavy pressures on
company managers to meet or beat performance targets.
the lack of a company code of ethics.
B)
a lack of training in what is ethical and what is not.
C)
confusing differences between what is ethical behavior in one's personal
D) life and what is ethically permissible in business.
35
 All of the above factors.
E)
7
CORRECT The business case for an ethical strategy
relates to the company's business model and business-level strategy.
A)
must be articulated by the company's senior managers and reinforced by
B) pronouncements from the board of directors.
starts with managers who understand there is big difference between
C) adopting values statements and codes of ethics that serve merely as
window dressing and those that truly paint the white lines for a
company's actual strategy and business conduct.
emphasizes that pursuing unethical strategies not only damages a
D) company's reputation but can also have costly consequences that are
wide ranging.
can be effectively made by executives subscribing to the damage control
E) approach to managing a company's ethical conduct.

8
CORRECT Which one of the following is not a key trait of the ethical culture approach
to managing ethical conduct?
The ethical culture approach is favored at companies where top
A) managers are very concerned about gaining employee buy-in to the
company's ethical standards, business principles, and corporate values
and see the company's code of ethics and/or its statement of corporate
values as integral to the company's identity and ways of operating.
The ethical culture approach is especially well-suited for companies that
B) favor a light approach to ethics compliance.
There are strong peer pressures from coworkers to observe ethical
C) norms.
Compliance procedures need to be an integral part of the ethical culture
D) approach to help send the message that management takes the
observance of ethical norms seriously and that behavior that fall outside
ethical boundaries will have negative consequences.
The integrity of the ethical culture approach depends heavily on the
E) ethical integrity of the executives who create and nurture the culture.

9
CORRECT The notion of social responsibility as it applies to businesses concerns
a company's duty to operate in an honorable manner, provide good
A) working conditions for employees, be a good steward of the
environment, and actively work to better the quality of life in the local
communities where it operates and in society at large.
a company's duty to put the public interest ahead of shareholder
B) interests.
societal expectations that all company stakeholders will be treated
C) equally and fairly.
a company's duty to establish socially acceptable core values and to have
D) a strictly enforced code of ethical conduct.

36
 the responsibility that top management has for ensuring that the
E) company's actions and decisions are in the best interest of society at
large.

10
CORRECT An environmental sustainability strategy consists of a company's deliberate
actions to
provide good working conditions for employees and to actively work to
A) enhance the quality of life in the local communities where it operates
and in society at large.
redesign products and alter production practices to satisfy the
B) expectations of various environmental protection groups.
meet the current needs of customers, suppliers, shareholders, employees
C) and other stakeholders in a manner that protects the environment,
provides for the longevity of natural resources, maintains ecological
support systems for future generations, and guards against ultimate
endangerment of the planet.
apply universal norms regarding the protection of the environment to its
D) everyday operations.
balance commonly held views about what constitutes environmentally
E) appropriate actions against its ability to make a profit.

37
Chapter 10

1
CORRECT Management's handling of the strategy implementation/execution process
can be considered successful
so long as a company is profitable.
A)
if and when the company meets or beats its performance targets and
B) shows good progress in achieving its strategic vision for the company.
once the company's management team convinces a majority of company
C) personnel that the company is headed in the right direction.
if management is able to put the strategy in place within 6 months.
D)
once a capable top management team has been hired, employees have
E) been appropriately empowered, and effective training programs for
company personnel have been put in place.

2
CORRECT Which of the following is not one of the principal managerial components
associated with implementing and executing strategy?
Building an organization with the competencies, capabilities, and
A) resource strengths needed to carry out the strategy successfully.
Allocating sufficient budgetary resources to the strategy execution
B) process.
Reducing the layers of management to a bare minimum and making sure
C) employees are empowered
Adopting best practices and pushing for continuous improvement in how
D) value chain activities are performed
Instilling a corporate culture that promotes good strategy execution
E)

3
CORRECT The three organization-building actions paramount in the task of trying to
execute a company's strategy are
delegating authority to down-the-line managers and doing a good job of
A) empowering employees, deciding which value chain activities to
outsource, and choosing an organization chart that suits the strategy.
persuasively communicating the case for organizational change to down-the-
B) line managers and employees, using organization structures based on
empowered teams, and selecting the right people to staff the organization.
staffing the organization, building and strengthening core competitive and
C) competitive capabilities, and structuring the organization and work effort.
de-layering management hierarchies, deciding which competencies and
D) capabilities to build, and deciding which value chain activities to
outsource.
avoiding business process fragmentation, deciding which value chain
E) activities to outsource, and allocating sufficient time and resources to
38
 employee training.

4
CORRECT The overriding aim in building a management team should be to
assemble a critical mass of talented managers who can function as
A) agents of change, work well together as a team, and produce
organizational results that are dramatically better than what a few star
managers acting individually can achieve.
select people who are charismatic and good communicators.
B)
choose managers who have substantial experience in the industry.
C)
assemble a team of people who believe in the same leadership
D) approaches and use the same approaches to people management.
choose managers who have the same core values and ethical standards.
E)

5
CORRECT Employee training and retraining
tend to be strategically important in organizational efforts to create
A) organizational capabilities but are less useful in trying to help teach
employees skills-based competencies.
are often a valuable and necessary strategy-implementing and strategy-
B) executing element but cannot be relied upon to help teach empowered
employees how to do their jobs better.
come into play primarily when core business processes are fragmented
C) across several functional areas and departments and training is needed to
teach employees how to overcome the fragmentation through better
cross-department collaboration and cooperation.
merit high-priority on management's strategy-implementing agenda
D) when a firm revises its strategy in ways that call for new skills or
different know-how, operating methods, and competitive capabilities
and also become a key activity in businesses where technical know-how
is changing so rapidly that a company loses its ability to compete unless
its skilled people have cutting-edge knowledge and expertise.
becomes particularly significant in a company's organization-building
E) effort if it opts to decentralize decision-making and empower its
employees?empowered employees have to be trained to make the
correct decisions.
6
CORRECT Which one of the following is not part of organizing the work effort in ways
that promote successful strategy execution?
Making internally performed strategy-critical value chain activities the
A) main building blocks in the organization structure
Deciding which value chain activities to perform internally and which to
B) outsource
Determining how much authority to centralize at the top and how much
C) to delegate to down-the-line managers and employees

39
 Forming a special department or work unit to lead the company's effort
D) to capture strategic and resource fits
Providing for cross-unit coordination and the necessary collaboration
E) with suppliers and strategic allies
7
CORRECT Which of the following statements are right about matching the type of
organizational structure to strategy execution requirements?
The type of organizational structure that is most suitable for a given firm
A) will depend on the firm's size and complexity as well as strategy.
As firms grow and their needs for organizational structure evolve, their
B) structural form is likely to evolve.
The four basic types are the simple structure, the functional structure,
C) the multidivisional structure, and the matrix structure.
Organizational structures can be classified into a limited number of
D) standard types.
All of these.
E)
8
CORRECT Which one of the following falsely describes a centralized approach to
decision-making?
Decisions on most matters of importance should be pushed to managers
A) up the line who have the experience, expertise, and judgment to decide
what is the wisest or best course of action.
Hierarchical command-and-control structures speed an organization's
B) responses to changing conditions because top-level managers are in a
position to quickly review the situation and make a final decision.
Tight control by a few senior managers makes it easy to fix
C) accountability when things do not go well.
There is an assumption that frontline personnel have neither the time nor
D) the inclination to direct and properly control the work they are
performing, and that they lack the knowledge and judgment to make
wise decisions about how best to do their work.
Top management operates on the belief that strict enforcement of
E) detailed procedures backed by rigorous managerial oversight is the most
reliable way to keep the daily execution of strategy on track.

9
CORRECT The basic tenets of a decentralized organizational structure include the thesis
that
a company that draws on the combined intellectual capital of all its
A) people can outperform a command-and-control company.
lower-level managers and personnel seldom have the expertise and
B) wisdom to decide what is the wisest and best course of action; hence,
tight management control from the top makes the most sense.
decision-making authority should be put in the hands of the people
C) closest to and most familiar with the situation, and these people should
be trained to exercise good judgment.
most company personnel have neither the time nor the inclination to
D) direct and properly control they work they are performing.

40
 a company that draws on the combined intellectual capital of all its
E) people can outperform a command-and-control company and decision-
making authority should be put in the hands of the people closest to and
most familiar with the situation, and these people should be trained to
exercise good judgment.

10
CORRECT One of the big challenges of organizing and managing a work environment
where employees are empowered to make decisions in their area of
responsibility is
how to exercise control over the actions and decisions of empowered
A) employees so that the business is not put at risk while trying to capture
the benefits of employee empowerment.
how to avoid high levels of stress and anxiety among empowered
B) employees (since they are held accountable for their decisions). those
individuals that are given greater levels of authority and responsibility
motivate and challenge those senior managers who no longer have a
heavy decision-making load.
how many employees to empower.
C)
how to identify and weed out those empowered employees who prove to
D) be poor decision-makers.
keeping lower-level managers and employees properly trained in how to
E) make good decisions.

41
Chapter  11                      

1
CORRECT From a strategy-implementing/strategy-executing perspective, a company's
operating budget should
primarily be based on creating more core competencies than rivals have.
A)
be strategy-driven and based primarily on how much each organizational
B) unit needs to carry out its piece of the strategic plan efficiently and
effectively.
be based on the resources needed to lower the costs of performing each
C) value chain activity.
provide each operating unit with sufficient funds to undertake
D) benchmarking, adopt best practices, implement Six Sigma and/or TQM,
and do cutting-edge business process reengineering.
strongly support the company's established policies and procedures
E) regarding how things are to be done.

2
CORRECT Prescribing policies and operating procedures aid the task of implementing
strategy by
helping empower product champions and work teams.
A)
paving the way for instituting TQM or Six Sigma programs and
B) adopting best practices.
by providing top-down guidance about how certain things need to be
C) done.
helping prevent the corporate culture from being unhealthy and weak.
D)
pushing employees to accept the need for state-of-the-art operating and
E) support systems.

3
CORRECT A "best practice"
refers to the lowest-cost procedure for performing a specific task or
A) activity.
refers to performing strategy-critical activities in a manner that results in
B) fewer than 5 defects per million.
is the particular value chain activity that a firm performs best.
C)
is a method of performing an activity that has been shown consistently
D) deliver superior results compared to other methods.
is a procedure for performing an activity that companies in an industry
E) have "proven" is the most reliable and failsafe way to perform that
activity.

42
4
CORRECT Which of the nonmonetary rewards helps ensure that people in positions of
responsibility have knowledge specific to the business, technology, and
operations they are managing?
Relying on promotion from within whenever possible
A)
Inviting and acting on ideas and suggestions from employees
B)
Providing attractive perks and fringe benefits
C)
Giving awards and other forms of public recognition to high performers
D)
Creating a work atmosphere in which there is genuine caring
E)

5
CORRECT Business process reengineering is a tool for
remodeling and refreshing a strategy-critical core competence.
A)
involves radically redesigning and streamlining how an activity is
B) performed
reducing the size of a company's managerial bureaucracy.
C)
boosting the quality of a company's product and the caliber of its
D) customer service.
expediting the development of an important new competitive capability.
E)

6
CORRECT Total quality management (TQM)
is a philosophy of managing that involves convincing employees that
A) superior product quality is the most reliable key to competitive success
in the marketplace.
is a tool for providing customers with the highest quality product of any
B) company in the industry.
involves managing company operations in a manner calculated to
C) quickly and efficiently make quantum gains in the quality and
effectiveness with which production activities are performed.
is a philosophy that entails creating a total quality culture bent on
D) continuously improving the performance of every task and value chain
activity.
involves managing company operations in a manner calculated to result
E) in mistake-free management of a company's entire business.

7
CORRECT Six Sigma quality program
is a tool that is superior to TQM in achieving top-notch quality in
manufacturing a product.
43
 A)
consists of a disciplined, statistics-based system aimed at producing not
B) more than 2.5 defects per million iterations.
utilizes advanced statistical methods to improve quality by reducing
C) defects and variability in the performance of business process.
is the best practice for managing manufacturing and assembly activities.
D)
is a disciplined, statistics-based approach to manufacturing or
E) assembling a product and results in 5 defects per million iterations when
implemented properly.

8
CORRECT The use of state-of-the-art information and operating systems
not only enable better strategy execution but also strengthen
organizational capabilities (perhaps enough to provide a competitive
A) edge over rivals).

are the most effective way to realize a competitive edge over rivals.
B)
help managers run a tight ship and properly monitor the actions and
C) decisions of empowered employees.
make it easier to develop strategy-supportive policies and procedures.
D)
make the use of TQM or Six Sigma programs substantially more cost-
E) effective.
9
CORRECT Management's most powerful tool for mobilizing employee commitment to
competent strategy execution and operating excellence is
total quality management.
A)
business process reengineering.
B)
a properly designed reward structure.
C)
making the company a great place to work in terms of pay scales, fringe
D) benefits, and employee perks.
effective screening of job applicants such that only the most motivated
E) and energetic people are hired.

10
CORRECT Which of the following is not characteristic of a compensation and reward
system designed to help drive successful strategy execution?
Making the performance payoff a major, not minor, piece of the total
A) compensation package

44
 Keeping performance incentives and bonuses to less than 15% of total
B) compensation
Not skirting the system to find ways to reward effort rather than results
and making sure that the performance targets that each individual or
C) team is expected to achieve involve outcomes that the individual or team
can affect
Having incentives that extend to all managers and all workers and
D) generously rewarding people who turn in outstanding performances
Tying incentives to performance outcomes directly linked to good
strategy execution and financial performance and keeping the time
E) between achieving the target performance outcome and the payment of
the reward as short as possible

45
Chapter 12

1
CORRECT From a strategy-implementing/strategy-executing perspective, a company's
operating budget should
primarily be based on creating more core competencies than rivals have.
A)
be strategy-driven and based primarily on how much each organizational
B) unit needs to carry out its piece of the strategic plan efficiently and
effectively.
be based on the resources needed to lower the costs of performing each
C) value chain activity.
provide each operating unit with sufficient funds to undertake
D) benchmarking, adopt best practices, implement Six Sigma and/or TQM,
and do cutting-edge business process reengineering.
strongly support the company's established policies and procedures
E) regarding how things are to be done.

2
CORRECT Prescribing policies and operating procedures aid the task of implementing
strategy by
helping empower product champions and work teams.
A)
paving the way for instituting TQM or Six Sigma programs and
B) adopting best practices.
by providing top-down guidance about how certain things need to be
C) done.
helping prevent the corporate culture from being unhealthy and weak.
D)
pushing employees to accept the need for state-of-the-art operating and
E) support systems.

3
CORRECT A "best practice"
refers to the lowest-cost procedure for performing a specific task or
A) activity.
refers to performing strategy-critical activities in a manner that results in
B) fewer than 5 defects per million.
is the particular value chain activity that a firm performs best.
C)
is a method of performing an activity that has been shown consistently
D) deliver superior results compared to other methods.
is a procedure for performing an activity that companies in an industry
E) have "proven" is the most reliable and failsafe way to perform that
activity.

46
4
CORRECT Which of the nonmonetary rewards helps ensure that people in positions of
responsibility have knowledge specific to the business, technology, and
operations they are managing?
Relying on promotion from within whenever possible
A)
Inviting and acting on ideas and suggestions from employees
B)
Providing attractive perks and fringe benefits
C)
Giving awards and other forms of public recognition to high performers
D)
Creating a work atmosphere in which there is genuine caring
E)

5
CORRECT Business process reengineering is a tool for
remodeling and refreshing a strategy-critical core competence.
A)
involves radically redesigning and streamlining how an activity is
B) performed
reducing the size of a company's managerial bureaucracy.
C)
boosting the quality of a company's product and the caliber of its
D) customer service.
expediting the development of an important new competitive capability.
E)

6
CORRECT Total quality management (TQM)
is a philosophy of managing that involves convincing employees that
A) superior product quality is the most reliable key to competitive success
in the marketplace.
is a tool for providing customers with the highest quality product of any
B) company in the industry.
involves managing company operations in a manner calculated to
C) quickly and efficiently make quantum gains in the quality and
effectiveness with which production activities are performed.
is a philosophy that entails creating a total quality culture bent on
D) continuously improving the performance of every task and value chain
activity.
involves managing company operations in a manner calculated to result
E) in mistake-free management of a company's entire business.

47
CORRECT Six Sigma quality program
is a tool that is superior to TQM in achieving top-notch quality in
A) manufacturing a product.
consists of a disciplined, statistics-based system aimed at producing not
B) more than 2.5 defects per million iterations.
utilizes advanced statistical methods to improve quality by reducing
C) defects and variability in the performance of business process.
is the best practice for managing manufacturing and assembly activities.
D)
is a disciplined, statistics-based approach to manufacturing or
E) assembling a product and results in 5 defects per million iterations when
implemented properly.

8
CORRECT The use of state-of-the-art information and operating systems
not only enable better strategy execution but also strengthen
A) organizational capabilities (perhaps enough to provide a competitive
edge over rivals).
are the most effective way to realize a competitive edge over rivals.
B)
help managers run a tight ship and properly monitor the actions and
C) decisions of empowered employees.
make it easier to develop strategy-supportive policies and procedures.
D)
make the use of TQM or Six Sigma programs substantially more cost-
E) effective.

9
CORRECT Management's most powerful tool for mobilizing employee commitment to
competent strategy execution and operating excellence is
total quality management.
A)
business process reengineering.
B)
a properly designed reward structure.
C)
making the company a great place to work in terms of pay scales, fringe
D) benefits, and employee perks.
effective screening of job applicants such that only the most motivated
E) and energetic people are hired.

10
CORRECT Which of the following is not characteristic of a compensation and reward
system designed to help drive successful strategy execution?
Making the performance payoff a major, not minor, piece of the total
A) compensation package
48
 Keeping performance incentives and bonuses to less than 15% of total
B) compensation
Not skirting the system to find ways to reward effort rather than results
C) and making sure that the performance targets that each individual or
team is expected to achieve involve outcomes that the individual or team
can affect
Having incentives that extend to all managers and all workers and
D) generously rewarding people who turn in outstanding performances
Tying incentives to performance outcomes directly linked to good
E) strategy execution and financial performance and keeping the time
between achieving the target performance outcome and the payment of
the reward as short as possible

1
CORRECT Which one of the following is not something that shapes and helps define a
company's culture?
The core values and business principles that executives espouse together
A) with the operating practices and behaviors that define "how we do things
around here"
The company's standards of what is ethically acceptable and what is not,
B) along with the legends and stories that people repeat to illustrate and
reinforce the company's core values, traditions, and business practices
A company's approach to people management and its style of operating
C)
The strategy and business model that the company has adopted
D)
The "chemistry" and "personality" that permeates its work environment
E)

2
CORRECT Which one of the following is not something to look for in identifying a
company's culture?
The company's approach to people management and the official policies,
A) procedures, and operating practices that paint the white lines for the
behavior of company personnel
The company's track record in meeting or beating its financial and
B) strategic performance targets
How managers and employees interact and relate to each other
C)
The spirit and character that pervades the work climate
D)
The strength of peer pressures to do things in particular ways and
E) conform to expected norms

3
CORRECT Which of the following statements about a strong-culture company is false?
Decisive leadership on the part of top executives, an industry-leading
A) market share, and strict enforcement of long-standing company policies
49
 are all important traits of a strong culture company.
In strong culture companies, senior managers make a point of reiterating
B) key principles and core values to organization members; more
importantly, they make a conscious effort to display these principles and
values in their own actions and behavior?they walk the talk.
Continuity of leadership, small group size, stable group membership,
C) geographic concentration, and considerable organizational success all
contribute to the emergence and sustainability of a strong culture.
In a strong-culture company, culturally-approved behaviors and ways of
D) doing things are nurtured while culturally-disapproved behaviors and
work practices get squashed.
Senior managers insist that company values and business principles be
E) reflected in the decisions and actions taken by all company personnel;
moreover, individuals encounter strong peer pressures from co-workers
to observe culturally-approved norms and behaviors.

4
CORRECT The characteristics of a weak company culture include
deep hostility to change and to people who champion new ways of doing
A) things.
no code of ethics or statement of core values, a highly centralized
B) managerial hierarchy, and a big corporate bureaucracy.
a lack of values and principles that are consistently preached or widely
C) shared, little co-worker peer pressure to do things in particular ways, and
no strong employee allegiance to what the company stands for or to
operating the business in well-defined ways.
no strong sense of empowerment among company members, little or no
D) top management commitment to a clearly-defined competitive strategy,
and a poor track record in producing good financial results.
All of the above are traits of a weak company culture.
E)

5
CORRECT Which of the following is not one of the four types of unhealthy company
cultures?
Bureaucratic cultures
A)
Change-resistant cultures
B)
Unethical and greed-driven cultures
C)
Politicized cultures
D)
Insular, inwardly-focused cultures
E)
6
CORRECT
Companies with insular, inwardly-focused cultures
are typically opposed to performance-based incentive compensation and
A) employee empowerment.
50
 are prone to be preoccupied with avoiding risks, are unlikely to pursue
B) bold actions to capture emerging opportunities, are frequently lax when
it comes to product innovation and continuous improvement in
performing value chain activities, and prefer following rather than
leading market change.
are typically gung-ho about adapting to changing market conditions so
C) as to protect the company's culture from shareholder criticism.
tend to resist recruiting people who can offer fresh thinking and outside
D) perspectives and typically refrain from looking outside the company for
best practices, new managerial approaches, and innovative ideas.
are typically run by empire-building managers who jealously guard their
E) decision-making prerogatives; they have their own agendas and operate
the work units under their supervision as autonomous "fiefdoms," and
the positions they take on issues is usually aimed at protecting or
expanding their turf.

7
CORRECT
The hallmarks of a high performance corporate culture include
a shared willingness to adapt core values and ethical standards to fit the
A) changing requirements of an evolving strategy, use of a balanced
scorecard approach to tracking company performance, and a gung-ho
approach to discovering best practices.
considerable political infighting that typically consumes a great deal of
organizational energy, often with the result that what's best for the
B) company takes a backseat to political maneuvering.
a "can-do" spirit, pride in doing things right, no-excuses accountability,
C) and a pervasive results-oriented work climate where people go the extra
mile to meet or beat stretch objectives.
charismatic managerial leadership, a lean management bureaucracy, and
D) a must-be-invented-here mindset.
strong inclinations to adopt a wait-and-see posture, carefully analyze
E) several alternative responses, learn from the missteps of early movers,
and then move forward cautiously and conservatively with initiatives
that are deemed safe.

8
CORRECT Adaptive cultures are characterized by such traits as
willingness on the part of organizational members to accept change and
A) take on the challenge of introducing and executing new strategies?
company personnel share a feeling of confidence that the organization
can deal with whatever threats and opportunities come down the pike;
they are receptive to risk taking, experimentation, innovation, and
51
 changing strategies and practices.
orchestrating organizational changes in a manner that (1) demonstrates
B) genuine care for the well-being of all key constituencies (customers,
employees, shareowners, suppliers, and the communities where the
company operates) and (2) tries to satisfy all their legitimate interests
simultaneously.
a proactive approach to identifying issues, evaluating the implications
C) and options, and quickly moving ahead with workable solutions.
a willingness to change operating practices and behaviors to adapt to
D) new market and competitive conditions so long as the changes
do not compromise core values and long-standing business principles
All of these.
E)

9
CORRECT Which of the following is not one of the leadership roles that senior
managers have to play in pushing for good strategy execution and operating
excellence?
Learning the obstacles in the path of good execution and clearing the
A) way for progress
Weeding out managers who are consistently in the ranks of the lowest
B) performers (the bottom 10%) and who are not enthusiastic about the
strategy or how it is being executed
Staying on top what is happening and closely monitor progress.
C)
Putting constructive pressure on the organization and initiate corrective
D) actions.
Delegating authority to middle and lower-level managers and creating a
E) sense of empowerment among employees to move the implementation
process forward.

10
CORRECT The task of top executives in making corrective adjustments includes
deciding when adjustments are needed and what adjustments to make.
A)
knowing when to continue with the present corporate culture and when
B) to shift to a different and better corporate culture.
being good at figuring out whether to arrive at decisions quickly or
C) slowly in choosing among the various alternative adjustments.
deciding whether to try to fix the problems of poor strategy execution or
D) simply shift to a strategy that is easier to execute correctly.
52
 deciding how to identify the problems that need fixing.
E)

53
 Strategy

Question

1 2 3 4 5 6 7 8 9 10

Chapter 1 b e b e d c c d c d

Chapter 2 B c e a b a c d b A

Chapter 3 e d c d a d d e d B

Chapter 4 c e c c b c b a e b

Chapter 5 c b d a e a b d b C

Chapter 6 a e d e c c a b b c

Chapter 7 b e c d b a e b a a

Chapter 8 e b a b a c b d d B

Chapter 9 d e a b b a d b a c

Chapter 10 b c c a d d e b e a

Chapter 11 b c d a b d c a C B

Chapter 12 d b a c a d c e b a

54