Management Canadian 11th Edition Robbins Test Bank

Management Canadian 11th Edition
Robbins Test Bank

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Management, 11ce
Chapter 9: Managing Strategically
Chapter 9 Managing Strategically
Question ID: 9-1

Question Type: TF
Question: Strategic management consists of the decisions and actions that determine the
long-run performance of the organization.
A) True
B) False
Answer: TRUE
Diff: 1 Page Ref: 209
Skill: Recall
Learning Objective: 9-1 Explain the role of strategic management and why it is
important.
Question ID: 9-2

Question Type: TF
Question: The strategic design for how a company intends to profit from its strategies,
processes and activities is often called a strategic deployment plan.
A) True
B) False
Answer: FALSE
Skill: Recall
important.
Question ID: 9-3

Question Type: TF
Question: The most fundamental questions about strategy address why firms, facing the
same environmental conditions, have varying levels of performance.
A) True
B) False
Answer: TRUE
Skill: Recall
important.
Copyright © 2016 Pearson Canada Inc. 9-1

Management, 11ce
Question ID: 9-4

Question Type: TF
Question: Studies indicate that organizations that use strategic management have higher
levels of performance.
A) True
B) False
Answer: TRUE
Skill: Recall
important.
Question ID: 9-5

Question Type: TF
Question: Generally, strategic plans do not work well for small, entrepreneurial
companies.
A) True
B) False
Answer: FALSE
Skill: Applied
important.
Question ID: 9-6

Question Type: TF
Question: The same environment can present opportunities to one organization and pose
threats to another.
A) True
B) False
Answer: TRUE
Skill: Recall
important.
Question ID: 9-7

Question Type: TF
Question: The first step in the strategic management process is analyzing the external
environment.
A) True
B) False
Answer: FALSE
Skill: Recall

Management, 11ce
Learning Objective: 9-2 Explain the role of managers in each of the six strategic
management steps.
Question ID: 9-8

Question Type: TF
Question: Understanding the organization's culture is a crucial part of external analysis.
A) True
B) False
Answer: FALSE
Skill: Applied
management steps.
Question ID: 9-9

Question Type: TF
Question: Evaluating an organization's intangible assets is part of conducting an internal
analysis in the strategic management process.
A) True
B) False
Answer: TRUE
Skill: Recall
management steps.
Question ID: 9-10

Question Type: TF
Question: Activities that an organization does well or any unique resources that it has are
called opportunities.
A) True
B) False
Answer: FALSE
Skill: Recall
management steps.
Question ID: 9-11

Question Type: TF
Question: The major value-creating capabilities and skills of the organization are known
as its primary resources.
A) True
B) False
Answer: FALSE

Management, 11ce
Skill: Recall
management steps.
Question ID: 9-12

Question Type: TF
Question: One of the components of the mission statement should be the organization’s
competitive advantage.
A) True
B) False
Answer: FALSE
Skill: Recall
management steps.
Question ID: 9-13

Question Type: TF
Question: Mission statement should have a comment on the organization’s technology
status.
A) True
B) False
Answer: TRUE
Skill: Recall
management steps.
Question ID: 9-14

Question Type: TF
Question: SWOT analysis includes an analysis of an organization's internal and external
environments.
A) True
B) False
Answer: TRUE
Skill: Recall
management steps.

Management, 11ce
Question ID: 9-15

Question Type: TF
Question: When conducting a SWOT analysis, threats are activities the organization
doesn't do well or resources it needs but doesn't possess.
A) True
B) False
Answer: FALSE
Skill: Recall
management steps.
Question ID: 9-16

Question Type: TF
Question: The final step in the strategic management process is to implement the
strategies.
A) True
B) False
Answer: FALSE
Skill: Recall
management steps.
Question ID: 9-17

Question Type: TF
Question: Managers using the strategic management process always achieve positive
outcomes.
A) True
B) False
Answer: FALSE
Skill: Recall
management steps.
Question ID: 9-18

Question Type: TF
Question: A strong organizational culture may act as a significant barrier to accepting any
changes in the organization's strategies.
A) True
B) False
Answer: TRUE
Skill: Applied

Management, 11ce
management steps.
Question ID: 9-19

Question Type: TF
Question: Organizational strategy is based on the mission and goals of the organization
and the roles that each business unit in the organization will play.
A) True
B) False
Answer: TRUE
Skill: Recall
Learning Objective: 9-3 Describe the three types of organizational strategies.
Question ID: 9-20

Question Type: TF
Question: In horizontal integration, the organization attempts to gain control of its inputs
by becoming its own supplier.
A) True
B) False
Answer: FALSE
Skill: Recall
Question ID: 9-21

Question Type: TF
Question: One method of implementing a growth strategy is by increasing production
capacity.
A) True
B) False
Answer: TRUE
Skill: Applied
Question ID: 9-22

Question Type: TF
Question: A trucking company that grows by purchasing a chain of gasoline stations is
engaged in horizontal integration.
A) True
B) False
Answer: FALSE
Skill: Applied

Management, 11ce
Question ID: 9-23

Question Type: TF
Question: Concentration and diversification are two types of renewal strategies.
A) True
B) False
Answer: FALSE
Diff: 2 Page Ref: 215-216
Skill: Recall
Question ID: 9-24

Question Type: TF
Question: When Air Canada acquired Canadian Airlines International, it was pursuing a
strategy of growth by vertical integration.
A) True
B) False
Answer: FALSE
Skill: Applied
Question ID: 9-25

Question Type: TF
Question: A stability strategy may be appropriate in industries where there is rapid and
dramatic change, as well as industries facing slow- or no-growth opportunities.
A) True
B) False
Answer: TRUE
Skill: Applied
Question ID: 9-26

Question Type: TF
Question: A renewal strategy is a corporate strategy designed to address organizational
weaknesses that are leading to performance declines.
A) True
B) False
Answer: TRUE
Skill: Recall

Management, 11ce
Question ID: 9-27

Question Type: TF
Question: An automobile manufacturer that decides to purchase a truck manufacturer and
a recreational vehicles manufacturer is engaging in horizontal integration.
A) True
B) False
Answer: FALSE
Skill: Applied
Question ID: 9-28

Question Type: TF
Question: A retrenchment strategy is a short-run renewal strategy that helps an
organization stabilize operations, revitalize organizational resources and capabilities, and
prepare to compete once again.
A) True
B) False
Answer: TRUE
Skill: Recall
Question ID: 9-29

Question Type: TF
Question: A turnaround strategy is a type of renewal strategy used when an organization
is in serious trouble.
A) True
B) False
Answer: TRUE
Skill: Recall
Question ID: 9-30

Question Type: TF
Question: The BCG matrix evaluates businesses to identify which ones offer high
potential and which ones drain organizational resources.
A) True
B) False
Answer: TRUE
Skill: Recall

Management, 11ce
Question ID: 9-31

Question Type: TF
Question: Based on the BCG matrix, dogs are characterized by low growth and low
market share.
A) True
B) False
Answer: TRUE
Skill: Recall
Question ID: 9-32

Question Type: TF
Question: Design thinking means thinking outside existing alternatives and creating new
alternatives.
A) True
B) False
Answer: TRUE
Skill: Recall
Learning Objective: 9-4 Describe competitive advantage and the competitive strategies
organizations use to get it.
Question ID: 9-33

Question Type: TF
Question: In design thinking, managers apply the strategic management process to all
problems.
A) True
B) False
Answer: FALSE
Skill: Recall
Question ID: 9-34

Question Type: TF
Question: According to Michael Porter's competitive strategies framework, the cost
leadership strategy results in exceptionally high-quality products at the lowest cost in the
industry.
A) True
B) False
Answer: FALSE
Skill: Applied

Management, 11ce
Question ID: 9-35

Question Type: TF
Question: A company that competes by offering unique products that are widely valued
by customers is following a differentiation strategy.
A) True
B) False
Answer: TRUE
Skill: Applied
Question ID: 9-36

Question Type: TF
Question: WestJet Airlines is an example of a company that has used the low-cost leader
strategy to compete in the Canadian airline industry.
A) True
B) False
Answer: TRUE
Skill: Applied
Question ID: 9-37

Question Type: TF
Question: According to Michael Porter's competitive strategies framework, a company
using a focus strategy seeks to offer a unique product to a broad target market by
focusing on a specific product attribute such as exceptionally high quality or
extraordinary service.
A) True
B) False
Answer: FALSE
Skill: Applied

Management, 11ce
Question ID: 9-38

Question Type: TF
Question: Since Internet technology is now so universally accessible, it can no longer
contribute to the development of a sustainable competitive advantage for any particular
organization.
A) True
B) False
Answer: FALSE
Skill: Applied
Question ID: 9-39

Question Type: TF
Question: Creating and sustaining a strong organizational culture is one of the dimensions
of strategic leadership.
A) True
B) False
Answer: TRUE
Skill: Recall
Question ID: 9-40

Question Type: TF
Question: Strategic leadership refers to the executives’ ability to apply the strategic
planning process.
A) True
B) False
Answer: FALSE
Skill: Applied
Question ID: 9-41

Question Type: TF
Question: One important customer service strategy is to give customers what they want
regardless of the cost.
A) True
B) False
Answer: FALSE
Skill: Recall

Management, 11ce
Learning Objective: 9-5 Discuss current strategic management issues.
Question ID: 9-42

Question Type: TF
Question: Innovation strategies focus exclusively on radical, breakthrough products as
the key source of sustainable competitive advantage.
A) True
B) False
Answer: FALSE
Skill: Recall
Question ID: 9-43

Question Type: MC
Question: A business model comprises of __________ and whether the company can
make money doing that.
A) what managers do to develop the organization's strategies
B) focus on the short-run performance of an organization
C) a process that is done best if it is done quickly
D) providing products/services that customers will value
E) beating the competition
Answer: D
Skill: Recall
important.
Question ID: 9-44

Question Type: MC
Question: Studies of the factors that contribute to organizational performance have shown
__________ relationship between strategic planning and performance.
A) no
B) a mixed
C) a negative
D) a positive
E) a neutral
Answer: D
Skill: Recall
important.

Management, 11ce
Question ID: 9-45

Question Type: MC
Question: A __________ is a strategic design for how a company intends to profit from
its strategies, work processes, and work activities.
A) mission statement
B) master plan
C) business model
D) strategic deployment plan
E) functional strategic plan
Answer: C
Skill: Recall
important.
Question ID: 9-46

Question Type: MC
Question: The __________ answers the question "What is our reason for being in
business?"
A) strategic plan
B) tactical objective
C) strategic purpose
D) operational imperative
E) mission
Answer: E
Skill: Recall
management steps.
Question ID: 9-47

Question Type: MC
Question: Concern for survival, growth, and profitability are all expressed in the
organization’s __________________.
A) strategic plan
B) mission statement
C) business model
D) competitive strategy
E) SWOT analysis
Answer: B
Skill: Recall
management steps.

Management, 11ce
Question ID: 9-48

Question Type: MC
Question: Mission statement should contain an expression for _____________.
A) profitability
B) strategic management process
C) strengths and opportunities
D) concern for public image
E) e-business strategy
Answer: D
Skill: Recall
management steps.
Question ID: 9-49

Question Type: MC
Question: The purpose of Cathy's Clowns is "to provide healthy entertainment that makes
young children laugh." This statement describes Cathy's __________ .
A) strategic plan
B) tactical objective
C) strategic purpose
D) business model
E) mission statement
Answer: E
Skill: Applied
management steps.
Question ID: 9-50

Question Type: MC
Question: "At HBC, we have a tremendous sense of responsibility, not only to the
continued growth and success of our company, but also to the nation that we have been
instrumental in building. Our culture is grounded in a commitment to take into account
the social needs and issues impacting the communities where we do business." This
statement relates most closely to which component of a mission statement?
A) products or services
B) customers
C) concern for public image
D) philosophy
E) concern for employees
Answer: D
Skill: Applied
management steps.

Management, 11ce
Question ID: 9-51

Question Type: MC
Question: The mission statement of Cirque du Soleil states, "We are united by one
overriding goal: to entertain, uplift, and enlighten audiences the world over." This
statement relates most closely to which component of a mission statement?
A) markets
B) customers
D) philosophy
Answer: A
Skill: Applied
management steps.
Question ID: 9-52

Question Type: MC
Question: "At IBM, we recognize individual differences and appreciate how these
differences provide a powerful competitive advantage and a source of great pride and
opportunity in the workplace and marketplace." This statement relates most closely to
which component of a mission statement?
A) products or services
B) technology
D) concern for survival
Answer: E
Skill: Applied
management steps.
Question ID: 9-53

Question Type: MC
Question: At which step of the strategic management process do managers try to find out
what the competition is doing and what pending legislation might affect the organization?
A) identify current mission, objectives, and strategies
B) formulate strategies
C) evaluate results
D) conduct internal analysis
E) conduct external analysis
Answer: E
Skill: Applied

Management, 11ce
management steps.
Question ID: 9-54

Question Type: MC
Question: At which step of the strategic management process do managers identify
opportunities and threats?
A) internal analysis
C) external analysis
D) identify current mission, objectives, and strategies
E) evaluate results
Answer: C
Skill: Recall
management steps.
Question ID: 9-55

Question Type: MC
Question: __________ are positive trends in external environmental factors, while
__________ are negative trends.
A) Strengths; weaknesses
B) Strengths; threats
C) Opportunities; weaknesses
D) Opportunities; threats
E) Opportunities; risks
Answer: D
Skill: Recall
LO: 2
management steps.

Management, 11ce
Question ID: 9-56

Question Type: MC
Question: Computer peripherals provider Ascent plans to enter a new market in another
country. Which of the following represents a threat for Ascent?
A) Ascent's profit margin in the previous year was its lowest on record and it will
require long-term planning to improve margins.
B) Ascent lacks the resources to enter the market on its own and has to find a
partner in the new market.
C) Ascent will have to plan its entry carefully as the laws in the country do not
favour foreign businesses.
D) Ascent needs to improve its service capabilities in the new country as this is an
important source of revenue.
E) Ascent has to find internal resources to provide most of the financing for the
new venture.
Answer: C
Skill: Applied
management steps.
Question ID: 9-57

Question Type: MC
Question: Jill is assessing the labour supply in the locations where her company currently
operates. She is currently at which stage of the strategic management process?
B) internal analysis
C) external analysis
D) evaluate results
E) formulate strategies
Answer: C
Skill: Applied
management steps.

Management, 11ce
Question ID: 9-58

Question Type: MC
Question: Carly's Car Care has just found out that a new competitor is opening a few
doors down in a prime location. The competitor will feature the very latest in car washing
technology at competitive prices. The new competitor represents which of the following
for Carly?
A) opportunity
B) weakness
C) threat
D) strength
E) risk
Answer: C
Skill: Applied
management steps.
Question ID: 9-59

Question Type: MC
Question: At which step of the strategic management process do managers assess their
financial capital, technical expertise, employee skills, and marketing capabilities?
C) evaluate results
D) internal analysis
E) external analysis
Answer: D
Skill: Applied
management steps.

Management, 11ce
Question ID: 9-60

Question Type: MC
Question: Helen, the owner of Crazy Cupcakes, is conducting a SWOT analysis of her
company to find out where she can improve her business and to identify possibilities for
expansion. Which of the following represents an opportunity for expansion?
A) There has been a trend toward personalized cupcakes for a variety of
occasions.
B) The production process was found to be highly efficient, and wastage was kept
to a minimum.
C) In a taste test, Crazy Cupcakes products ranked higher than competitors in the
taste and texture segments.
D) Crazy Cupcakes decorators are among the best in their field, and design plays
a major role in the popularity of the products.
E) The prices of flour and sugar have gone down in the last six months.
Answer: A
Skill: Applied
management steps.
Question ID: 9-61

Question Type: MC
Question: The major value-creating capabilities and skills of the organization are knows
as ______________.
A) core competencies
B) human resources
C) financial resources
D) leadership expertise
E) training and development programs
Answer: A
Skill: Recall
management steps.

Management, 11ce
Question ID: 9-62

Question Type: MC
Question: An organization that has been able to excel in product research and design,
manufacturing, marketing and managing its human resources to reach a leadership
position in the marketplace is taking advantages of its _________.
A) competitive advantage
B) leadership expertise
C) creativity and innovation
D) core competencies
E) marketing expertise
Answer: D
Skill: Applied
management steps.
Question ID: 9-63

Question Type: MC
Question: Bella Vista Clothing targets teenaged girls with a range of affordable ready-to-
wear clothing. The company is opening two new outlets, as sales have been excellent.
Which of the following represents a strength for the company?
A) The company's in-house designers have a knack for identifying and
popularizing fashion trends.
B) Disposable income is rising, and consumers will have more money to spend on
clothes.
C) Overseas customers have shown an interest in buying Bella Vista clothes
through the company's online store.
D) A long-time competitor recently went out of business, so Bella Vista can cut
down on its advertising budget.
E) Teenage girls are increasingly taking part-time jobs so they can afford to buy
more clothes.
Answer: A
Skill: Applied
management steps.

Management, 11ce
Question ID: 9-64

Question Type: MC
Question: Pat's Pets has developed a reputation as the industry leader in quality pet care.
It has exceptionally skilled employees who are known for their humane and loving
treatment of animals. For Pat's, these resources would be considered __________.
A) opportunities
B) differential benefits
C) competitive assets
D) primary resources
E) core competencies
Answer: E
Skill: Applied
management steps.
Question ID: 9-65

Question Type: MC
Question: Which of the following is one of the drawbacks to strong organizational
cultures that a manager should consider when completing the strategic management
process?
A) They always hinder the organization's strategic actions.
B) Employees will have less understanding of the planning process.
C) Employee attitudes tend to be strong, but their organizational values are weak.
D) They cancel out any organizational distinctive competence.
E) They are difficult to change.
Answer: E
Skill: Applied
management steps.
Question ID: 9-66

Question Type: MC
Question: Once managers have completed their analysis of the strengths, weaknesses,
opportunities, and threats facing the organization, they can proceed to the next step of the
strategic management process, which is to __________.
A) identify competitors
B) identify the organization's current mission, goals, and strategy
C) implement strategies
D) formulate strategies
E) identify environmental trends
Answer: D
Skill: Recall

Management, 11ce
management steps.
Question ID: 9-67

Question Type: MC
Question: If a bank evaluates the capabilities of its training and development department
employees prior to implementing a new training program designed to change their
method of providing customer service, it is completing what step in the strategic
management process?
A) external analysis
B) identify the organization's current mission, goals, and strategies
C) internal analysis
D) formulate strategies
E) implement strategies
Answer: C
Skill: Applied
management steps.
Question ID: 9-68

Question Type: MC
Question: A(n) __________ strategy addresses organizational weaknesses, helps stabilize
operations, and revitalizes organizational resources and capabilities.
A) diversification
B) integration
C) concentration
D) retrenchment
E) stability
Answer: D
Skill: Recall
Question ID: 9-69

Question Type: MC
Question: The renewal strategy of __________ is used to correct less serious
performance setbacks, while a __________ strategy is used for more critical performance
problems.
A) diversification; integration
B) integration; retrenchment
C) stability; concentration
D) retrenchment; turnaround
E) stability; retrenchment
Answer: D

Management, 11ce
Skill: Recall
Question ID: 9-70

Question Type: MC
Question: Organizations grow by using strategies of ________.
A) concentration, integration, or diversification
B) concentration, integration, or innovation
C) integration, diversification, or differentiation
D) integration, diversification, or stabilization
E) differentiation, integration, or innovation
Answer: A
Skill: Recall
Question ID: 9-71

Question Type: MC
Question: When an organization grows by combining operations with competitors, the
strategy is known as a __________ strategy.
A) retrenchment
B) horizontal integration
C) vertical integration
D) stability
E) diversification
Answer: B
Skill: Recall
Question ID: 9-72

Question Type: MC
Question: When an organization attempts to grow by merging with or acquiring firms in
different but associated industries, the strategy is known as a __________ strategy.
A) related differentiation
D) related diversification
E) concentration
Answer: D
Skill: Recall
LO: 3

Management, 11ce
Question ID: 9-73

Question Type: MC
Question: When an organization attempts to grow by merging with or acquiring firms in
different and unrelated industries, the strategy is known as a __________ strategy.
A) unrelated diversification
D) unrelated differentiation
E) retrenchment
Answer: A
Skill: Recall
Question ID: 9-74

Question Type: MC
Question: The Jim Pattison Group has grown by acquiring firms in diverse industries.
Today, Jim Pattison owns food retail chains, car dealerships, radio stations, a fishing
company, a sign company, a packaging company, and several museum-themed tourist
attractions. Jim Pattison has pursued a strategy of __________.
A) vertical integration
C) related differentiation
D) unrelated differentiation
E) unrelated diversification
Answer: E
Skill: Applied
Question ID: 9-75

Question Type: MC
Question: When Air Canada acquired its largest domestic competitor, Canadian Airlines
International, it was pursuing a strategy of __________.
A) forward vertical integration
C) related diversification
D) related differentiation
E) backward vertical integration
Answer: B
Skill: Applied

Management, 11ce
Question ID: 9-76

Question Type: MC
Question: When athletic sportswear manufacturer Nike decided to open its own chain of
retail stores, it was pursuing which corporate strategy?
A) backward vertical integration
B) forward vertical integration
D) unrelated diversification
E) horizontal integration
Answer: B
Skill: Applied
Question ID: 9-77

Question Type: MC
Question: When Kimberly-Clark Corporation merged with Scott Paper Company to form
the world's largest producer of tissue paper, they were pursuing which growth strategy?
Answer: E
Skill: Applied
Question ID: 9-78

Question Type: MC
Question: When consumer electronics manufacturer Sony Corporation decided to open its
own chain of retail stores, it was pursuing which corporate strategy?
Answer: B
Skill: Applied

Management, 11ce
Question ID: 9-79

Question Type: MC
Question: When L'Oreal acquired The Body Shop, it carried out ________.
A) horizontal integration
B) forward horizontal integration
C) backward horizontal integration
D) diversified integration
E) unrelated diversification
Answer: A
Skill: Applied
Question ID: 9-80

Question Type: MC
Question: Over the last century, the Campbell Soup Company has expanded by acquiring
other packaged consumer food companies such as Pace, V8, Pepperidge Farms, Swanson,
and Godiva Chocolatiers. Campbell was pursuing which corporate strategy?
Answer: C
Skill: Applied
Question ID: 9-81

Question Type: MC
Question: Florance is a chain of flower shops in the Toronto area. The company recently
acquired Knick-knacks, which owns three gift shops. Which of the following is most
similar to this acquisition?
A) Construction firm Donaldson acquired Fabrica Textiles as it seemed like a
good investment.
B) Faced with mounting raw material costs, I&A Products took over its supplier,
BR Corporation.
C) Dallas Shoes buys out RunTime Shoes and expands its distribution channels
through RunTime outlets.
D) Toy World acquired Unicorn Children's Books and now retails both toys and
books from co-branded outlets.
E) Loblaw’s acquired Shopper’s Drug Mart as the latter was showing huge
profits.
Answer: D
Skill: Applied

Management, 11ce
Question ID: 9-82

Question Type: MC
Question: When the Campbell Soup Company began to manufacture its own cans to gain
more control over a key production input, it was pursuing which corporate strategy?
D) concentration
Answer: A
Skill: Applied
Question ID: 9-83

Question Type: MC
Question: When aluminum manufacturer Alcan purchased a mining company that mines
bauxite, a key input in aluminum production, it was pursuing which corporate strategy?
A) concentration
D) backward vertical integration
Answer: D
Skill: Applied
Question ID: 9-84

Question Type: MC
Question: YUM! Brands is the world's largest restaurant company, with more than
33,000 restaurants in over 100 countries. Their restaurant brands include KFC, Pizza Hut,
and Taco Bell. They recently acquired two other fast-food restaurant chains: A&W
Hamburgers and Long John Silver's Seafood. YUM! has pursued which type of corporate
strategy?
A) related differentiation
Answer: C
Skill: Applied

Management, 11ce
Question ID: 9-85

Question Type: MC
Question: Which of the following describes a company growing by combining with other
organizations in the same industry?
A) forward vertical integration
B) backward vertical integration
C) horizontal integration
E) concentration
Answer: C
Skill: Recall
Question ID: 9-86

Question Type: MC
Question: Ronald's has been in the fast-food business for five years. After struggling for
two years, it finally broke even, and the french fries it offers are its most popular product.
However, during the past year, its business has suffered because the farm that used to
supply it with potatoes has increased its prices drastically. What should Ronald's do to
control production costs?
A) Reorganize the organizational hierarchy to increase efficiency.
B) Buy out the farm and become its own supplier.
C) Open more distribution outlets.
D) Broaden the product range by introducing potato nuggets on its menu.
E) Hire more efficient outlet managers.
Answer: B
Skill: Applied
Question ID: 9-87

Question Type: MC
Question: Cindy's Cosmetics continues to offer the same high quality beauty products
that it has for the last 10 years. The company is successful in its market segment and has
no plans for change in the near future. The company is pursuing which type of strategy?
A) integration
B) stability
C) diversification
D) retrenchment
E) concentration
Answer: B
Skill: Applied

Management, 11ce
Question ID: 9-88

Question Type: MC
Question: When Air Canada went into bankruptcy protection to restructure its
organization and reduce its operating costs, it was pursuing which of the following
strategies?
A) integration
B) stability
C) diversification
D) turnaround
E) concentration
Answer: D
Skill: Applied
Question ID: 9-89

Question Type: MC
Question: When a university reduces its course offerings in a semester due to low student
enrolment, it is pursuing a strategy of __________.
A) integration
B) retrenchment
C) diversification
D) stability
E) concentration
Answer: B
Skill: Applied
Question ID: 9-90

Question Type: MC
Question: Pepsico is divided into several product divisions, including Pepsi, Frito-Lay,
Tropicana, Quaker, and Gatorade. Each division has its own strategy that defines the
products it wants to offer and the customers it wants to target. The divisions are called
__________.
A) subsidiary operating divisions
B) strategic operating centres
C) strategic business units
D) diversified business enterprises
E) segmented business units
Answer: C
Skill: Applied

Management, 11ce
Question ID: 9-91

Question Type: MC
Question: Which of the following provides a framework for understanding diverse
businesses and helps managers establish priorities for allocating resources?
A) a differentiation strategy
B) vertical integration
C) a corporate portfolio matrix
D) a strategic business unit
E) strategic flexibility
Answer: C
Skill: Recall
Question ID: 9-92

Question Type: MC
Question: According to the BCG matrix, a __________ does not consume or produce
much cash, and holds little or no promise for improved performance.
A) cash cow
B) star
C) dog
D) question mark
E) falling star
Answer: C
Skill: Recall
Question ID: 9-93

Question Type: MC
Question: According to the BCG matrix, a business unit that has low market share in a
rapidly growing market is known as a __________.
A) cash cow
B) high flyer
C) dog
D) question mark
E) rising star
Answer: D
Skill: Recall

Management, 11ce
Question ID: 9-94

Question Type: MC
Question: The Duracell division of Gillette is the dominant producer of alkaline batteries
worldwide. Demand for alkaline batteries continues to thrive as consumers embrace a
growing number of portable digital electronic products. According to the BCG matrix,
Duracell is a __________.
A) question mark
B) falling star
C) cash cow
D) star
E) dog
Answer: D
Skill: Applied
Question ID: 9-95

Question Type: MC
Question: The global leader in the cigarette lighter business is French company BIC, but
the market is expected to decline in coming years as fewer people take up smoking.
Realizing these factors, Gillette decided to sell its Cricket lighter division to Swedish
Match. According to the BCG matrix, Gillette viewed Cricket as a __________.
A) question mark
B) sleeping giant
C) cash cow
D) dog
E) star
Answer: D
Skill: Applied
Question ID: 9-96

Question Type: MC
Question: BIC is the world's largest producer of ballpoint pens. The market for ballpoint
pens remains steady, but prospects for future growth are limited as new innovations in
writing technology are expected to emerge. According to the BCG matrix, ballpoint pens
are a __________ for BIC.
A) question mark
B) sleeping giant
C) cash cow
D) star
E) white elephant
Answer: C
Skill: Applied

Management, 11ce
Question ID: 9-97

Question Type: MC
Question: The AFV (Alternative Fuel Vehicle) division of General Motors produces gas-
electric hybrids and other automobiles that run on ethanol, natural gas, and hydrogen.
While current market share is small, GM is anticipating dramatic growth in the next few
years as demand for alternative fuel vehicles skyrockets. Using the BCG matrix, GM
would classify the AFV division as a __________.
A) question mark
B) sleeping giant
C) cash cow
D) star
E) dog
Answer: A
Skill: Applied
Question ID: 9-98

Question Type: MC
Question: The distinct edge that sets an organization apart from its competitors is called a
__________.
A) defining characteristic
B) significant benefit
C) proprietary competence
D) competitive advantage
E) differential benefit
Answer: D
Skill: Recall
Question ID: 9-99

Question Type: MC
Question: A competitive tool that can be applied to any organizational work problem by
thinking outside existing alternatives and creating new alternatives is called _________.
A) Critical thinking
B) Competitive advantage
C) Business strategy
D) Design thinking
E) Renewal strategy
Answer: D
Skill: Recall

Management, 11ce
Question ID: 9-100

Question Type: MC
Question: Design thinking gives organizations a competitive advantage by _______.
A) Applying diversification strategy
B) Creating new alternatives to problems
C) Allowing employees to make decisions
D) Applying differentiation strategy
E) Increasing organizational strengths
Answer: B
Skill: Recall
Question ID: 9-101

Question Type: MC
Question: Kiva Systems, manufacturer of robots used in flexible automation systems,
demonstrates the power of ________ by "teaching" its robots to dispose of used
cardboard and to assist in gift wrapping for e-commerce warehouse fulfillment.
A) design thinking
B) competitive advantage
C) strategic flexibility
D) e-business strategies
E) first-mover strategy
Answer: A
Skill: Applied
Question ID: 9-102

Question Type: MC
Question: Michael Porter proposes that some __________ are inherently more profitable
than others.
A) companies
B) industries
C) SBUs
D) products
E) entrepreneurs
Answer: B
Skill: Recall

Management, 11ce
Question ID: 9-103

Question Type: MC
Question: In Michael Porter's five forces model of industry attractiveness, __________ is
determined by barriers to entry such as economies of scale and brand loyalty.
A) threat of substitutes
B) threat of new entrants
C) bargaining power of buyers
D) bargaining power of suppliers
E) intensity of current competitive rivalry
Answer: B
Skill: Applied
Question ID: 9-104

Question Type: MC
determined by the degree of supplier concentration and substitute inputs.
Answer: D
Skill: Applied
Question ID: 9-105

Question Type: MC
determined by the industry growth rate, increasing or falling demand, and product
differences.
B) threats of new entrants
Answer: E
Skill: Applied

Management, 11ce
Question ID: 9-106

Question Type: MC
Question: Switching costs and buyer loyalty are examples of strategic forces that
determine the __________.
Answer: A
Skill: Applied
Question ID: 9-107

Question Type: MC
Question: The cost leadership strategy requires a firm to __________.
A) aggressively search out efficiencies in operations
B) be unique in its product offering
C) achieve a cost advantage in a narrow industry segment
D) engage in product engineering and have creative flair
E) have strong research capabilities
Answer: A
Skill: Applied
Question ID: 9-108

Question Type: MC
Question: According to Michael Porter's competitive strategies framework, which of the
following strategies seeks to offer unique products to a broad customer market?
A) cost leadership
B) differentiation
C) focus
D) stuck in the middle
E) diversification
Answer: B
Skill: Recall

Management, 11ce
Question ID: 9-109

Question Type: MC
Question: An organization that is unable to develop a competitive advantage based on
one of Michael Porter's competitive strategies is termed __________.
A) a dog
B) noncompeting
C) new entrant
E) diversified
Answer: D
Skill: Recall
Question ID: 9-110

Question Type: MC
Question: For many years, Canadian retailer Zellers used the slogan "Where the lowest
price is the law." Which one of Michael Porter's competitive strategies was Zellers using?
A) retrenchment
B) differentiation
C) focus
D) cost leadership
E) diversification
Answer: D
Skill: Applied
Question ID: 9-111

Question Type: MC
Question: Appliance maker Maytag states that its products are so reliable that its
customers may never need a service call. For nearly 40 years, it has promoted this claim
in advertisements featuring the legendary "Lonely Maytag Repairman." Which of the
following is the primary source of Maytag's competitive advantage?
A) cost leadership
B) differentiation
C) focus
D) retrenchment
E) diversification
Answer: B
Skill: Applied

Management, 11ce
Question ID: 9-112

Question Type: MC
Question: Elegance Chocolatier supplies premium chocolates to five-star hotels and
restaurants that cater exclusively to wealthy customers. Which of the following is the
primary source of Elegance's competitive advantage?
A) price focus
B) cost focus
C) differentiation focus
D) wealth focus
E) diversification focus
Answer: C
Skill: Applied
Question ID: 9-113

Question Type: MC
Question: Claire's Fashions markets an inexpensive line of fashion jewellery that targets
"tween" girls, aged 8 to 12. Claire's is using which of the following competitive
strategies?
A) design thinking
B) cost leadership
D) customer focus
E) diversification focus
Answer: B
Skill: Applied
Question ID: 9-114

Question Type: MC
Question: Functional strategy directly supports the __________ strategy.
A) corporate
B) business
C) differentiation
D) diversification
E) focus
Answer: B
Skill: Recall

Management, 11ce
Question ID: 9-115

Question Type: MC
Question: ________ is the ability to recognize major eternal environmental changes.
A) Strategic leadership
B) Strategic management
C) Strategic competence
D) Strategic flexibility
E) Competitive advantage
Answer: D
Skill: Recall
Question ID: 9-116

Question Type: MC
Question: How can an organization develop strategic flexibility?
A) It should commit resources only after thorough planning.
B) It should monitor and evaluate its past strategies.
C) It should depend on tried and tested perspectives from senior employees.
D) It should have multiple alternatives when making strategic decisions.
E) It should allow employees to participate in decision-making.
Answer: D
Skill: Recall
Question ID: 9-117

Question Type: MC
Question: A cost leader might use e-business techniques to __________.
A) implement an online bidding process to increase sales force outcomes
B) implement online testing and evaluation of job applicants
C) adopt web-based inventory control systems to eliminate storage costs
D) attract more customers to high-end products with pop-up ads
E) design niche websites that target specific groups with specific interests
Answer: B
Skill: Applied

Management, 11ce
Question ID: 9-118

Question Type: MC
Question: A differentiator might use e-business techniques to __________.
A) implement an online bidding process to increase sales force expenses
C) adopt web-based inventory control systems to increase storage costs
D) shorten customer response times
Answer: D
Skill: Applied
Question ID: 9-119

Question Type: MC
Question: A focuser might use e-business techniques to __________.
A) implement an online bidding process to increase sales force expenses
C) adopt web-based inventory control systems to increase storage costs
D) shorten customer response times
Answer: E
Skill: Applied
Question ID: 9-120

Question Type: MC
Question: Which of the following is most likely to use Internet-based knowledge systems
to provide rapid online responses to service requests from customers in a broad market?
A) cost leader
B) differentiator
C) focuser
D) first mover
E) diversifier
Answer: B
Skill: Applied

Management, 11ce
Question ID: 9-121

Question Type: MC
Question: Canadian retailer Future Shop sells merchandise through both its website and
its physical store locations. They are using an e-business strategy called _________.
A) bricks-and-mortar
B) first mover
C) click-and-save
D) clicks-and-bricks
E) shop-and-ship
Answer: D
Skill: Applied
Question ID: 9-122

Question Type: MC
Question: According to our textbook, effective customer service strategies involve giving
the customer what they want, effective communication, and __________.
A) providing employees with incentives and bonuses for good service
B) providing employees with customer service training
C) having detailed policies and procedures in place
D) implementing control systems to monitor performance
E) promoting an entrepreneurial culture
Answer: B
Skill: Recall
Question ID: 9-123

Question Type: MC
Question: Which of the following is a first-mover advantage?
A) excellent customer service
B) cost minimization
C) high visibility in the market
D) opportunity to use e-business strategies
E) opportunity to build customer loyalty
Answer: E
Skill: Applied

Management, 11ce
Question ID: 9-124

Question Type: MC
Question: Which of the following is a first-mover disadvantage?
A) Uncertainty over competitor imitation
B) Access to diminishing workforce
C) Market entry barriers
D) High taxes in certain industries
E) Inflexibility of prospective customers
Answer: A
Skill: Recall
Refer to the scenario below to answer the following questions
Personal SWOT Analysis (Scenario)
University students in their last year are focused on getting information about the
situation in the job market on graduation. As a process of self-examination during her
senior year of college, Casey decides to develop a SWOT analysis of her prospects
relative to getting a job.
Question ID: 9-125

Question Type: MC
Question: Casey majored in marketing and really enjoyed studying market research as a
subject. Through research on the Internet and in the university library, she discovers that
this industry appears to have significant positive external trends. She interprets this as
a(n) ________.
A) weakness
B) threat
C) strength
D) opportunity
E) strategy
Answer: D
Skill: Applied
management steps.

Management, 11ce
Question ID: 9-126

Question Type: MC
Question: Casey realizes that she has a personal characteristic that suggests she is not
comfortable interacting with strangers. She interprets this as a(n) ________ if she is to
get a job as a salesperson.
A) threat
B) strength
C) weakness
D) opportunity
E) differentiation
Answer: C
Skill: Applied
management steps.
Question ID: 9-127

Question Type: MC
Question: In looking at her graduating class, Casey notices that there is a large number of
students graduating with the same major as she is. This situation can be a(n) _________
in her job hunt.
A) opportunity
B) weakness
C) strength
D) focus
E) threat
Answer: E
Skill: Applied
management steps.
Question ID: 9-128

Question Type: MC
Question: Casey has been taking courses in the Asian languages department for the last
three years and consequently speaks reasonably coherent Chinese. Spending a summer in
Shanghai on an intensive language course further improved her language skills. Few
students are interested in learning Chinese these days so this is a(n) ____________ Casey
possesses over other job applicants.
A) opportunity
B) strength
C) differentiation
D) focus skill
E) core competency
Answer: B

Management, 11ce
Skill: Applied
management steps.
Refer to the scenario below to answer the following questions.
SWOT Analysis (Scenario)
Terri has been asked to review her company's strategy in the cosmetics industry. Top
management wants to ensure that they are aware of emerging trends and changes. Terri
began reviewing a list of factors in her mind. Recently, there has been some negative
publicity about cosmetics testing on animals; an industry practice that has become very
controversial and increasingly unacceptable to consumers. The laboratory animals at
Terri’s company are well treated, but they are still used to test new products. On a
positive note, industry-wide sales are up 10 percent. Women are buying more cosmetics
in general, which is good news for the company. Another positive factor is their
personnel. They have many good people working in the company, particularly in research
and development where the expertise is exceptional. The only other negative factor noted
by Terri was that last year's advertising campaign had not achieved the desired results.
Something needed to be done in that department. Terri began to compile her report.
Question ID: 9-129

Question Type: MC
Question: The controversy and negative publicity associated with cosmetics testing on
animals would be classified as a(n) __________.
A) strength
B) weakness
C) threat
D) opportunity
E) core competency
Answer: C
Skill: Applied
management steps.

Management, 11ce
Question ID: 9-130

Question Type: MC
Question: The fact that industry-wide sales are up by 10 percent because women are
buying more cosmetics would be considered a(n) __________.
A) core competency
B) strength
C) weakness
D) opportunity
E) threat
Answer: D
Skill: Applied
management steps.
Question ID: 9-131

Question Type: MC
Question: The quality of the company's personnel would be considered a(n) __________.
A) differential benefit
B) strength
C) weakness
D) opportunity
E) threat
Answer: B
Skill: Applied
management steps.
Question ID: 9-132

Question Type: MC
Question: The failure of the advertising campaign would be classified as a(n) ________.
A) core competency
B) strength
C) weakness
D) opportunity
E) threat
Answer: C
Skill: Applied
management steps.

Management, 11ce
Question ID: 9-133

Question Type: MC
Question: The exceptional expertise in research and development would be considered
a(n) __________.
A) core competency
B) differential benefit
C) environmental advantage
D) opportunity
E) proprietary achievement
Answer: A
Skill: Applied
management steps.
Competitive Strategies (Scenario)
Carly’s general manager has just given her a big assignment: develop three different
potential strategies the business could use to maintain its competitive advantage. Its
computer business was slowly losing market share to competitors, and everyone realized
that something needed to be done. Carly glanced through the article by Michael Porter
that her manager had provided. According to Porter, there were three different types of
strategies to choose from. Carly began wondering if there was a way they could make
their computers cheaper so they could be sold at a lower price. If they could reduce the
price by $100 per machine, they would become the industry price leader. Carly wondered
if they could find any lower-priced suppliers for the more expensive computer
components. She knew that their computers were particularly appealing to small business
owners due, in part, to price. They were able to offer the lower price because their
computers were not as powerful or fast as some machines; but they did contain all the
basic word processing, database, and spreadsheet applications required by the typical
small business owner. This combination of program capabilities, lack of product frills,
and good reputation for quality had worked successfully for them in the past. Now Carly
wondered if they would be better off looking at a smaller segment of the market, such as
small businesses with accounts receivable billings that could fully utilize the database
capabilities. She knew this strategy would cut their market potential by 50 percent, but
maybe targeting a smaller market niche would lead to better results in the long-term.
Carly began compiling her report for Friday's meeting.

Management, 11ce
Question ID: 9-134

Question Type: MC
Question: The competitive strategy of reducing the price by $100 to become the industry
price leader is called __________.
A) retrenchment
B) diversification
C) focus
D) differentiation
E) cost leadership
Answer: E
Skill: Applied
Question ID: 9-135

Question Type: MC
Question: Positioning the company’s products based on their reputation for quality with
few frills but good programming capabilities involves the competitive strategy of
__________.
A) retrenchment
B) diversification
C) focus
D) differentiation
E) cost leadership
Answer: D
Skill: Applied
Question ID: 9-136

Question Type: MC
Question: The competitive strategy based on developing the market for small businesses
that require large databases to process their accounts receivable billings is called ______.
B) diversification
D) cost focus
E) cost leadership
Answer: C
Skill: Applied

Management, 11ce
Question ID: 9-137

Question Type: MC
Question: If Carly's company could find a way to both reduce the price by $100 and
specifically target the small businesses that need large databases, it could pursue the
competitive strategy known as __________.
B) cost diversification
D) cost focus
E) cost leadership
Answer: D
Skill: Applied
Question ID: 9-138

Question Type: MC
Question: If Carly's company is unable to develop a competitive advantage based on one
of Michael Porter's competitive strategies, it would be described as __________.
A) a dog
B) a question mark
C) retrenched
E) inflexible
Answer: D
Skill: Applied
Clubhouse Gourmet -A- (Scenario)
Imagine that you are the president of Clubhouse Gourmet, a successful chain of fast-food
restaurants with 60 locations across Canada. The success you have experienced in the last
five years has you considering various options about what to do next with the business.
Should you continue to expand the business at the current rate? Or perhaps open new and
different restaurants? What should you do?

Management, 11ce
Question ID: 9-139

Question Type: MC
Question: You are earning good profits but are fearful of growing too fast, so you decide
to keep Clubhouse Gourmet in the same business and do not change the menu, hoping to
retain the same market share and return-on-investment record. This would be considered
a __________ strategy.
A) stability
B) growth
C) retrenchment
D) diversification
E) differentiation
Answer: A
Skill: Applied
Question ID: 9-140

Question Type: MC
Question: If you decided to purchase a chain of five home furnishing stores because it
was a good investment, this would be considered which strategy?
A) horizontal integration
B) unrelated differentiation
E) vertical integration
Answer: D
Skill: Applied
Question ID: 9-141

Question Type: MC
Question: If you decided to expand Clubhouse Gourmet by increasing its menu items and
opening more restaurants across the country, you would be pursuing which type of
growth strategy?
C) concentration
D) related diversification
E) related differentiation
Answer: C
Skill: Applied

Management, 11ce
Question ID: 9-142

Question Type: MC
Question: You have decided to purchase a competing chain of fast-food restaurants called
Sandwich King. Once the acquisition is completed, you plan to combine their operations
with those of Clubhouse Gourmet. This is an example of which growth strategy?
A) concentration
C) unrelated diversification
D) related differentiation
E) vertical integration
Answer: B
Skill: Applied
Question ID: 9-143

Question Type: MC
Question: With the acquisition of Sandwich King, you now have more than 100
restaurant locations across Canada. The bread suppliers that you have been using are
unable to keep up with demand in some markets, so you decide to purchase a wholesale
bakery that is large enough to provide a secure supply of fresh bread to your busiest
restaurants. Purchasing the bakery is an example of which strategy?
A) stability
B) unrelated diversification
C) forward vertical integration
D) backward vertical integration
Answer: D
Skill: Applied
Question ID: 9-144

Question Type: MC
Question: It is now 10 years later, and as the original owner of Clubhouse Gourmet, you
have seen your business holdings grow substantially. The number of stores you own and
franchise has grown by 200 percent, and you own a number of companies in both related
and unrelated industries. You now need to develop strategies to manage your portfolio of
businesses, so you turn to the BCG matrix for help.Since most of the businesses in your
portfolio operate independently under their own strategies, they are considered _______.
A) subsidiary operating divisions
B) strategic profit centres
C) segmented business units
D) diversified business enterprises
E) strategic business units
Answer: E

Management, 11ce

Skill: Applied
Question ID: 9-145

Question Type: MC
Question: Your oldest business, Clubhouse Gourmet, has not grown much in recent
years. However, it is virtually debt-free and continues to generate large amounts of
profits. According to the BCG matrix, Clubhouse Gourmet would be considered a(n)
__________.
A) cash cow
B) problem child
C) question mark
D) old dog
E) sleeping giant
Answer: A
Skill: Applied
Question ID: 9-146

Question Type: MC
Question: Recently, you also purchased a small company that produces computer
imaging software for medical applications. The business is profitable and growing, but
the technological unknowns make it risky. According to the BGC matrix, it would be
considered a(n) __________.
A) cash cow
B) problem child
C) question mark
D) sleeping giant
E) star
Answer: C
Skill: Applied

Management, 11ce
Question ID: 9-147

Question Type: MC
Question: Another purchase you made was to acquire a small chain of coffee shops called
Time-out Café. You don't anticipate much growth, and it will never achieve the scale of
market leaders such as Starbucks, Tim Hortons, and Second Cup. According to the BCG
matrix, Time-out Café would probably be a __________.
A) cash cow
B) liability
C) dinosaur
D) dog
E) question mark
Answer: D
Skill: Applied
Question ID: 9-148

Question Type: MC
Question: Perhaps the most successful business in your portfolio is a company called
Home Alone that produces a line of wireless security products for do-it-yourself
homeowners. The anticipated growth rate is spectacular, and the product line is so
popular that it dominates the market in Canada. According to the BCG matrix, Home
Alone would probably be a(n) __________.
A) rocket
B) cash cow
C) high flyer
D) question mark
E) star
Answer: E
Skill: Applied
The Strategic Management Process (Scenario)
Kerry is vice-president of operations at Delta Corp. The company president has asked
Kerry to lead the strategic management process that will help guide Delta through the
next five to ten years. At next week’s management meeting, Kerry must give a
presentation that explains the process. In preparation, Kerry begins by reviewing the steps
in the strategic management process from his university textbook.

Management, 11ce
Question ID: 9-149

Question Type: MC
Question: Kerry learns that the first step in the strategic management process is to _____.
A) formulate strategies
B) conduct internal analysis
C) conduct external analysis
D) analyze current competition
E) identify the organization's current mission, objectives, and strategies
Answer: E
Skill: Recall
management steps.
Question ID: 9-150

Question Type: MC
Question: At some point, Kerry will need to assess Delta's financial resources, technical
expertise, employee skills, and marketing capabilities. This occurs at which step of the
strategic management process?
D) write a business plan
Answer: B
Skill: Recall
management steps.
Question ID: 9-151

Question Type: MC
Question: Kerry will also need to assess industry trends, level of competition, labour
supply, and pending legislation that might have an impact on Delta's operations. This
occurs at which step of the strategic management process?
D) write a business plan
Answer: C
Skill: Recall
management steps.

Management, 11ce
Question ID: 9-152

Question Type: MC
Question: Kerry learns that the combined internal and external analyses are called
__________.
A) a business model
B) SWOT analysis
C) core competencies
D) BCG matrix
E) total opportunity analysis
Answer: B
Skill: Recall
management steps.
Question ID: 9-153

Question Type: MC
Question: When Kerry reaches the end of the strategic management process, he will be at
which step?
D) evaluate results
E) implement strategies
Answer: D
Skill: Recall
management steps.
Megabyte Centre (Scenario)
Your old friend Ariel Eskenazi is the owner and general manager of Megabyte Centre, a
computer reseller and systems integrator located in Panama City, Panama. Since leaving
IBM Canada to start a business in his home country, Ariel has watched his company
grow steadily, due in large part to the business partnerships he's established over the
years with large foreign computer and software firms, such as Goldstar and Microsoft.
These relationships have helped his company win considerable market share in Panama,
as well as in other parts of Latin America. However, in recent years, there has been a
huge influx of foreign capital into Panama. For example, several large Asian firms have
established subsidiaries in Panama to launch their North American operations. Tourism is
also on the rise, and dozens of new hotels have been built in the metropolitan area over
the past three years. As a result, demand for Megabyte's products and services has

Management, 11ce
increased dramatically, but so has the level and diversity of its competition. While
Megabyte's customer base has remained fairly loyal, many longtime customers are
beginning to demand price concessions and enhanced service levels in return for their
continued business. Ariel has recently learned that several of his former suppliers and
business partners are considering establishing their own local sales offices in Panama
City to sell direct to market rather than distributing through Megabyte. Ariel knows you
are very knowledgeable about competitive strategy and asks for your advice. You begin
by telling him a little about Michael Porter's competitive strategies framework.
Question ID: 9-154

Question Type: MC
Question: According to Porter, the possibility of Ariel's former suppliers entering the
local market as direct competitors would be considered which of the five forces?
B) bargaining power of suppliers
D) threat of new entrants
Answer: D
Skill: Applied
Question ID: 9-155

Question Type: MC
Question: Ariel's customers' demands for lower prices and enhanced service relates to
which of Michael Porter's five forces?
D) intensity of current competitive rivalry
E) bargaining power of suppliers
Answer: C
Skill: Applied

Management, 11ce
Question ID: 9-156

Question Type: MC
Question: The rapid industry growth rate and increasing growth of other existing
businesses relate to which one of Michael Porter's five forces?
E) intensity of current rivalry
Answer: E
Skill: Applied
Question ID: 9-157

Question Type: MC
Question: Once Ariel has assessed the five forces and determined the threats and
opportunities that exist in the current environment, he will be ready to select an
appropriate competitive strategy. The three competitive strategies proposed by Michael
Porter are __________.
A) cost leadership, focus, and diversification
B) cost leadership, focus, and integration
C) focus, differentiation, and cost leadership
D) focus, differentiation, and retrenchment
E) focus, diversification, and combination
Answer: C
Skill: Recall
Question ID: 9-158

Question Type: MC
Question: Ariel is thinking about closing down the retail side of his business and
concentrating his resources on reselling hardware, software, and systems integration
services to Latin American governments and public sector agencies. This is an example
of which of Michael Porter's competitive strategies?
A) cost leadership
B) integration
C) differentiation
D) retrenchment
E) focus
Answer: E
Skill: Applied

Management, 11ce
Question ID: 9-159

Question Type: ES
Question: In a short essay, discuss the Boston Consulting Group (BCG) matrix and
explain its usefulness in segmenting businesses. Include a discussion of the
characteristics for each of the four categories based on the BCG matrix.
Answer:
The Boston Consulting Group matrix introduced the idea that an organization's
businesses could be evaluated and plotted using a 2 x 2 matrix to identify which ones
offered high potential and which were a drain on organizational resources. The horizontal
axis represents market share, which was evaluated as either low or high; and the vertical
axis indicates anticipated market growth, which also was evaluated as either low or high.
Based on its evaluation, the business was placed in one of four categories:
1. Cash cows (low growth, high market share)—Businesses in this category generate
large amounts of cash, but their prospects for future growth are limited.
2. Stars (high growth, high market share)—These businesses are in a fast-growing
market, and hold a dominant share of that market. Their contribution to cash flow
depends on their need for resources.
3. Question marks (high growth, low market share)—These businesses are in an attractive
industry but hold a small market share percentage.
4. Dogs (low growth, low market share)—Businesses in this category do not produce or
consume much cash. However, they hold little promise for improved performance.
Skill: Applied
Question ID: 9-160

Question Type: ES
Question: In a short essay, discuss the concept of competitive advantage. Include
discussion on quality and design thinking and their roles in sustaining competitive
advantage. Give specific examples of companies and their respective competitive
advantages to support your answer.
Answer: Competitive advantage is what sets an organization apart; that is, its distinct
edge. That distinct edge comes from the organization's core competencies, which might
be in the form of organizational capabilities—the organization does something that others
cannot do or does it better than others can do it. For example, Dell has developed a
competitive advantage based on its ability to create a direct-selling channel that's highly
responsive to customers. WestJet Airlines has a competitive advantage because its low
operating costs and skills at giving passengers what they want—quick, convenient, and
fun service. Or those core competencies that lead to competitive advantage also can come
from organizational assets or resources—the organization has something that its
competitors do not have. For instance, Wal-Mart's state-of-the-art information systems

Management, 11ce
allows it to monitor and control inventories and supplier relations more efficiently than
its competitors, which Wal-Mart has turned into a price advantage.
Skill: Applied
Question ID: 9-161

Question Type: ES
Question: In a short essay, describe and discuss the five competitive forces, according to
Michael Porter, that determine industry attractiveness and profitability. In discussing
these forces, be sure to identify specific factors that determine the strength of each force.
Answer: 1. Threat of new entrants—Factors such as economies of scale, brand loyalty,
and capital requirements determine how easy or difficult it is for new competitors to enter
an industry.
2. Threat of substitutes—Factors such as switching costs and buyer loyalty determine the
degree to which customers are likely to buy a substitute product.
3. Bargaining power of buyers—Factors such as number of customers in the market,
customer information, and the availability of substitutes determine the amount of
influence that buyers have in an industry.
4. Bargaining power of suppliers—Factors such as the degree of supplier concentration
and availability of substitute inputs determine the amount of power that suppliers have
over firms in the industry.
5. Existing rivalry—Factors such as industry growth rate, increasing or falling demand,
and product differences determine how intense the competitive rivalry will be among
firms in the industry.
Skill: Applied
Question ID: 9-162

Question Type: ES
Question: In a short essay, list and discuss the three competitive strategies, according to
Michael Porter. Include specific examples of companies that pursue each of the three
competitive strategies.
Answer:
1. Cost leadership strategy—When an organization sets out to be the lowest-cost
producer in its industry, it is following a cost leadership strategy. A low-cost leader
aggressively searches out efficiencies in production, marketing, and other areas of
operation. Overhead is kept to a minimum, and the firm does everything it can to cut
costs. For example, at Wal-Mart's headquarters in Bentonville, Arkansas, office
furnishings are sparse and drab but functional. Although low-cost leaders don't place a lot
of emphasis on ''frills,'' the product or service being sold must be perceived as

Management, 11ce
comparable in quality to that offered by rivals or at least be acceptable to buyers.

Examples of companies that have used the low-cost leader strategy include Wal-Mart,
Hyundai, and WestJet Airlines.
2. Differentiation strategy—The company that seeks to offer unique products that are
widely valued by customers is following a differentiation strategy. Sources of
differentiation might be exceptionally high quality, extraordinary service, innovative
design, technological capability, or an unusually positive brand image. The key to this
competitive strategy is that whatever product or service attribute is chosen for
differentiation must set the firm apart from its competitors and be significant enough to
justify a price premium that exceeds the cost of differentiation. Practically any successful
product or service can be identified as an example of the differentiation strategy: WestJet
Airlines (customer service), Research In Motion (reputation for quality and innovative
design), Martha Sturdy (design and brand image), and Lee Valley Tools (product design).
3. Focus strategy—The aim of the focus strategy is at a cost advantage or a differentiation
advantage in a narrow segment. That is, managers select a market segment or group of
segments in an industry and don't attempt to serve the broad market. The goal of a focus
strategy is to exploit a narrow segment of a market. These segments can be based on
product variety, type of end buyer, distribution channel, or geographical location of
buyers. Research suggests that the focus strategy may be the most effective choice for
small businesses because they typically do not have the economies of scale or internal
resources to successfully pursue one of the other two strategies.
Skill: Applied
Question ID: 9-163

Question Type: ES
Question: In a short essay, discuss the strategies by which an organization grows. Give
relevant examples to support your answer.
Answer: Organizations grow by using concentration, vertical integration, horizontal
integration, or diversification.
An organization that grows using concentration focuses on its primary line of business
and increases the number of products offered or markets served in this primary business.
For instance, Bose Corporation of Framingham, Massachusetts, which focuses on
developing innovative audio products has become one of the world's leading
manufacturers of speakers for home entertainment, automotive, and pro audio markets
with sales of more than $2 billion by using this strategy.
A company also might choose to grow by vertical integration, either backward, forward,
or both. In backward vertical integration, the organization becomes its own supplier so it
can control its inputs. For instance, eBay owns an online payment business that helps it
provide more secure transactions and control one of its most critical processes. In forward
vertical integration, the organization becomes its own distributor and is able to control its
outputs. For example, Apple has more than 287 retail stores worldwide to distribute its
product.

Management, 11ce
In horizontal integration, a company grows by combining with competitors. For instance,

French cosmetics giant L'Oreal acquired The Body Shop.
Finally, an organization can grow through diversification, either related or unrelated.
Related diversification happens when a company combines with other companies in
different, but related, industries. For example, American Standard Cos., based in
Piscataway, New Jersey, is in a variety of businesses including bathroom fixtures, air
conditioning and heating units, plumbing parts, and pneumatic brakes for trucks.
Although this mix of businesses seems odd, the company's "strategic fit" is the
efficiency-oriented manufacturing techniques developed in its primary business of
bathroom fixtures, which it has transferred to all its other businesses. Unrelated
diversification is when a company combines with firms in different and unrelated
industries. For instance, the Tata Group of India has businesses in chemicals,
communications and IT, consumer products, energy, engineering, materials, and services.
In this case, there is no strategic fit among the businesses.
Skill: Applied
Question ID: 9-164

Question Type: ES
Question: Discuss how managers can formulate e-business strategies that contribute to
the development of a sustainable competitive advantage in today's environment.
Answer: Managers use e-business strategies to develop a sustainable competitive
advantage.
A cost leader can use e-business to reduce costs in a variety of ways. It might use online
bidding and order processing to eliminate the need for sales calls and to decrease sales
force expenses; it could use Web-based inventory control systems that reduce storage
costs; or it might use online testing and evaluation of job applicants.
A differentiator needs to offer products or services that customers perceive and value as
unique. For instance, a business might use Internet-based knowledge systems to shorten
customer response times, provide rapid online responses to service requests, or automate
purchasing and payment systems so that customers have detailed status reports and
purchasing histories.
Finally, because the focuser targets a narrow market segment with customized products,
it might provide chat rooms or discussion boards for customers to interact with others
who have common interests; design niche Web sites that target specific groups with
specific interests, or use Web sites to perform standardized office functions such as
payroll or budgeting.
Skill: Recall

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Chapter 9 Managing Strategically

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Learning Objective: 9-5 Discuss current strategic management issues.

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