Test Bank For Strategic Management A Competitive Advantage Approach Concepts and Cases 17th Edition Fred R David

Strategic Management: A Competitive Advantage Approach, 17e (David/David)
Chapter 1 The Nature of Strategic Management
1) The goal of strategic management is to

A) achieve competitive advantage.
B) maintain competitive advantage.
C) achieve and maintain competitive advantage.
D) eliminate competitive advantage.
E) eliminate and abolish competitive advantage.
Answer: C
Diff: 2
LO: 1.1: Describe the strategic-management process.
AACSB: Analytical thinking
2) Strategic management focuses on integrating functional areas to achieve organizational

success. Which of the following is NOT one of the functional areas that is the focus of strategic
management?
A) marketing
B) finance and accounting
C) production and operations
D) research and development
E) organizational behavior
Answer: E
Diff: 2
AACSB: Reflective thinking
3) What can be defined as the art and science of formulating, implementing and evaluating cross-
functional decisions that enable an organization to achieve its objectives?
A) Strategy formulation
B) Strategy evaluation
C) Strategy implementation
D) Strategic management
E) Strategic leading
Answer: D
Diff: 1
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4) To gain ________ firms need to provide unique products and services.
A) a bank loan
B) governmental legitimacy
C) a sustainable competitive advantage
D) competitors
E) export orders
Answer: C
Diff: 2
5) The strategic-management process is becoming more widely used by

A) small firms.
B) nonprofit institutions.
C) governmental organizations.
D) multinational conglomerates.
E) all types of organizations.
Answer: E
Diff: 2
6) An organization should take a(n) ________ approach in its industry.

A) adversarial rather than a collegial
B) collegial rather than an adversarial
C) reactive rather than a proactive
D) proactive rather than a reactive
E) cooperative rather than a competitive
Answer: D
Diff: 2
7) The strategic-management process

A) occurs once a year.
B) is a semiannual process.
C) is a continuous process.
D) applies mostly to companies with sales greater than $100 million.
E) applies mostly to small businesses.
Answer: C
Diff: 3
2
8) Sometimes ________ is used to refer to strategic formulation, implementation and evaluation,
with ________ referring only to strategic formulation.
A) strategic planning; strategic management
B) strategic planning; strategic processing
C) strategic management; strategic planning
D) strategic management; strategic processing
E) strategic implementation; strategic focus
Answer: C
Diff: 2
9) The terms "strategic management" and "strategic planning" are used synonymously in this
text.
Answer: TRUE
Diff: 1
10) Strategic management focuses on integrating management, marketing, finance and

accounting, production and operations, research and development, and information systems to
achieve organizational success.
Answer: TRUE
Diff: 1
11) Optimizing for tomorrow the trends of today is the purpose of strategic management.
Answer: FALSE
Diff: 2
12) U.S. firms are not being aggressively challenged in the computer industry.
Answer: FALSE
Diff: 2
13) By occasionally monitoring external events, companies should be able to identify when
change is required.
Answer: FALSE
Diff: 3
3
14) Application of the strategic-management process is typically more formal in larger and well-
established organizations.
Answer: TRUE
Diff: 2
15) To be effective, strategic-management must be a process that familiarizes managers and

employees with the key strategic issues facing an organization and the feasible alternatives for
resolving those issues.
Answer: TRUE
Diff: 3
16) The most effective strategic management is ritualistic, predictable, and formal.
Answer: FALSE
Diff: 3
17) All firms have a strategy, even if it is informal, unstructured, and sporadic.
Answer: TRUE
Diff: 2
18) Despite its great popularity in the 1980s, strategic planning by corporate America is now a
valuable though rare activity.
Answer: FALSE
Diff: 2
19) The strengths and weaknesses of an organization are determined relative to the strengths and
weaknesses of its competitors.
Answer: TRUE
Diff: 2
4
20) Compare and contrast strategic planning with strategic management.
Answer: The term "strategic planning" is more often used in the business world, whereas
"strategic management" is often used in academia. Sometimes, strategic management is used to
refer to strategy formulation, implementation and evaluation, with strategic planning referring
only to strategy formulation.
Diff: 2
21) Discuss some forces that influence the formality of the strategic-management process.
Answer: Application of the strategic-management process is typically more formal in larger and
well-established organizations. Formality refers to the extent that participants, responsibilities,
authority, duties, and approach are specified. Smaller businesses tend to be less formal. Firms
that compete in complex, rapidly changing environments, such as technology companies, tend to
be more formal in strategic planning. Firms that have many divisions, products, markets and
technologies also tend to be more formal in applying strategic-management concepts. Greater
formality in applying the strategic-management process is usually positively associated with
organizational success.
Diff: 3
22) During what stage of strategic management is a firm's specific internal strengths and
weaknesses determined?
A) Formulation
B) Implementation
C) Evaluation
D) Feedback
E) Goal-setting
Answer: A
Diff: 2
LO: 1.2: Discuss the three stages of strategy formulation, implementation, and evaluation
activities.
23) An important activity in ________ is taking corrective action.

A) strategy evaluation
B) strategy implementation
C) strategy formulation
D) strategy leadership
E) strategic analysis
Answer: A
Diff: 2
activities.
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24) What step in the strategic management process involves mobilizing employees and managers
to put strategies into action?
B) Strategy evaluation
C) Strategy implementation
D) Strategic advantage
E) Competitive advantage
Answer: C
Diff: 2
activities.
AACSB: Interpersonal relations and teamwork
25) What types of skills are especially critical for successful strategy implementation?
A) Interpersonal
B) Marketing
C) Technical
D) Conceptual
E) Visionary
Answer: A
Diff: 2
activities.
26) Which phase of strategic management is most strongly associated with "action"?
B) Strategy implementation
C) Strategy evaluation
D) Competing advantages
E) Measuring performance
Answer: B
Diff: 1
activities.
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27) ________ is NOT a strategy-implementation activity.
A) Taking corrective actions
B) Establishing annual objectives
C) Devising policies
D) Allocating resources
E) Motivating employees
Answer: A
Diff: 2
activities.
28) Strategy evaluation is necessary because

A) internal and external factors are constantly changing.
B) the SEC requires strategy evaluation.
C) success today is a guarantee of success tomorrow.
D) the IRS requires strategy evaluation.
E) firms have limited resources.
Answer: A
Diff: 2
activities.
29) In which phase of strategic management are annual objectives especially important?
A) Reduction
B) Formulation
C) Implementation
D) Evaluation
E) Policy
Answer: C
Diff: 2
activities.
30) In which phase of strategic management are long-term objectives especially important?
A) Formulation
B) Control
C) Evaluation
D) Implementation
E) Management
Answer: A
Diff: 2
activities.
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31) The decision to expand or diversify operations is a strategy-formulation issue.
Answer: TRUE
Diff: 2
activities.
32) The decision to merge is a strategy-formulation issue, but the decision to form a joint venture
is a strategy-implementation issue.
Answer: FALSE
Diff: 1
activities.
33) Strategy implementation is often considered to be the most difficult stage in the strategic-
management process.
Answer: TRUE
Diff: 2
activities.
34) The final stage in strategic management is strategy implementation.

Answer: FALSE
Diff: 1
activities.
35) In most large organizations that engage in strategic management, the formulation,
implementation, and evaluation of strategy activities occur at three hierarchical levels: corporate;
divisional or strategic business unit; and functional.
Answer: TRUE
Diff: 2
activities.
36) One of the fundamental strategy evaluation activities is reviewing the external and internal
factors on which strategies are based.
Answer: TRUE
Diff: 2
activities.
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37) Many organizations mistakenly spend more time and effort on the implementation of a plan,
than on the formulation of the plan itself.
Answer: FALSE
Diff: 3
activities.
38) Which stage in the strategic-management process is the most difficult? Explain why.
Answer: Strategy implementation is the most difficult stage in the strategic-management process
because it requires personal discipline, commitment, and sacrifice. Successful strategy
implementation hinges upon managers' ability to motivate employees, which is more of an art
than a science. Interpersonal skills are especially critical for successful strategy implementation.
Diff: 3
activities.
39) The strategic-management process represents a(n) ________, ________, and ________
approach for determining an enterprise's future direction.
A) logical; systematic; subjective
B) intuitive; disorganized; subjective
C) logical; systematic; objective
D) intuitive; disorganized; objective
E) inconsistent; systematic; subjective
Answer: C
Diff: 2
LO: 1.3: Explain the need for integrating analysis and intuition in strategic management.
40) Which statement best describes intuition?

A) It alone should be used in decision making.
B) It represents a minor factor in decision making integrated with analysis.
C) It should be coupled with analysis in decision making.
D) It is better than analysis in decision making.
E) It is management by ignorance.
Answer: C
Diff: 3
9
41) Strategic management is an attempt to organize qualitative and quantitative information in a
way that allows effective decisions to be made under conditions of uncertainty.
Answer: TRUE
Diff: 2
42) Firms, like organisms, must be "adept at adapting" or they will not survive.
Answer: TRUE
Diff: 2
43) Once an effective strategy is designed, modifications are rarely required.

Answer: FALSE
Diff: 2
44) Analytical and intuitive thinking complement each other.

Answer: TRUE
Diff: 1
45) According to Albert Einstein, "Knowledge is far more important than intuition."
Answer: FALSE
Diff: 1
46) According to Peter Drucker "Imagination is more important than knowledge, because
knowledge is limited, whereas imagination embraces the entire world."
Answer: FALSE
Diff: 2
47) Management by intuition can be defined as operating from the "I've-already-made-up-my-

mind-don't-bother-me-with-the-facts mode."
Answer: FALSE
Diff: 2
10
48) An objective, logical, systematic, and non-intuitive approach for making major decisions in
an organization is a way to describe the strategic-management process.
Answer: FALSE
Diff: 3
49) Discuss the value of integrating intuition and analysis.

Answer: Most organizations can benefit from strategic management, which is based on
integrating intuition and analysis in decision making. Choosing an intuitive or analytic approach
to decision making is not an either-or proposition. Managers at all levels in an organization inject
their intuition and judgment into strategic-management analyses. Analytical thinking and
intuitive thinking complement each other. Operating from the "I've-already-made-up-my-mind-
don't-bother-me-with-the-facts" mode is not management by intuition; it is management by
ignorance. Drucker says, "I believe in intuition only if you discipline it. 'Hunch' artists, who
make a diagnosis, but don't check it out with facts, are the ones in medicine who kill people, and
in management kill businesses." In a sense, the strategic-management process is an attempt both
to duplicate what goes on in the mind of a brilliant, intuitive person who knows the business, and
assimilates and integrates that knowledge using analysis to formulate effective strategies.
Diff: 2
50) Which individuals are most responsible for the success and failure of an organization?
A) Strategists
B) Financial planners
C) Personnel directors
D) Stakeholders
E) Human resource managers
Answer: A
Diff: 1
LO: 1.4: Define and give examples of key terms in strategic management.
51) What are enduring statements of purpose that distinguish one business from other similar
firms?
A) Policies
B) Mission statements
C) Objectives
D) Rules
E) Employee conduct guidelines
Answer: B
Diff: 2
AACSB: Written and oral communication
52) An organization's vision statement

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A) is a constant reminder to its employees of why the organization exists.
B) broadly charts the future direction of an organization.
C) addresses the basic question: "What is our business?"
D) answers the question: "What do we want to become?"
E) is mandated by law.
Answer: D
Diff: 1
53) Generally, external opportunities and threats are

A) uncontrollable by a single organization.
B) unable to have a significant impact on an organization.
C) not worth monitoring and evaluating.
D) key functions in strategy implementation.
E) key functions in strategy exploitation.
Answer: A
Diff: 2
54) Specific results an organization seeks to achieve in pursuing its basic mission are
A) strategies.
B) rules.
C) objectives.
D) policies.
E) tenets.
Answer: C
Diff: 1
55) Internal ________ are controllable activities in an organization that are performed especially
well.
A) opportunities
B) incompetencies
C) strengths
D) objectives
E) factors
Answer: C
Diff: 1
12
56) What are the means by which long-term objectives will be achieved?
A) Strategies
B) Strengths
C) Weaknesses
D) Policies
E) Opportunities
Answer: A
Diff: 2
57) Long-term objectives should be all of the following EXCEPT

A) measurable.
B) continually changing.
C) reasonable.
D) challenging.
E) consistent.
Answer: B
Diff: 2
58) Which of the following is NOT a type of strategy developed from a SWOT analysis?
A) Strengths/Opportunities
B) Strengths/Threats
C) Threats/Opportunities
D) Weaknesses/Opportunities
E) Weaknesses/Threats
Answer: C
Diff: 1
59) Because of the success of the iPad and the iPhone, Apple has tremendous brand recognition.
Brand recognition is one of Apple's
A) weaknesses.
B) opportunities.
C) strengths.
D) threats.
E) strategies.
Answer: C
Diff: 3
13
60) Which of the following is often considered to be the first step in strategic planning?
A) Developing a vision statement
B) Establishing goals and objectives
C) Making a profit
D) Developing a mission statement
E) Determining opportunities and threats
Answer: A
Diff: 1
61) Uber has fewer fixed assets than the typical taxi fleet company. This type of benefit that a
company such as Uber has is called a(n)
A) business moat.
B) first-mover advantage.
C) asset margin.
D) strategic advantage.
E) competitive advantage.
Answer: E
Diff: 2
62) Anything that a firm does especially well compared to rival firms is referred to as
A) competitive advantage.
B) comparative disadvantage.
C) opportunity cost.
D) unsustainable advantage.
E) an external opportunity.
Answer: A
Diff: 1
63) The fact that Apple has no manufacturing facilities of its own
A) has caused it to build up massive debt on its balance sheet.
B) has enabled it to remain financially lean.
C) has been problematic for Apple in terms of debt.
D) illustrates that having more fixed assets than rival firms, can provide major competitive
advantages in a global recession.
E) means that it is in the same position as Sony.
Answer: B
Diff: 2
14
64) A vision statement identifies the scope of a firm's operations in product and market terms.
Answer: FALSE
Diff: 1
65) A vision statement describes an organization's values and priorities.

Answer: FALSE
Diff: 1
66) Strategists are usually found in higher levels of management and have considerable authority
for decision making in the firm.
Answer: TRUE
Diff: 1
67) Middle managers are generally the most visible and critical of all strategic managers.
Answer: FALSE
Diff: 2
68) By the nature of what they do, strategists tend to have similar attitudes, values, ethics, and
concerns for social responsibility.
Answer: FALSE
Diff: 2
AACSB: Ethical understanding and reasoning
69) A vision statement commonly answers the question, "What is our business?" whereas a
mission statement is more likely to answer the question "What do we want to become?"
Answer: FALSE
Diff: 3
70) Because the position of Chief Executive Officer (CEO) has assumed much responsibility for
strategic management in the last five years, the number of firms with the position of Chief
Strategy Officer (CSO) has diminished drastically during this period.
Answer: FALSE
Diff: 2
15
71) A clear mission statement describes the values and priorities of an organization.
Answer: TRUE
Diff: 1
72) In a multidivisional firm, objectives should be established for the overall company and not
for each division.
Answer: FALSE
Diff: 2
73) Objectives should be measurable, challenging, reasonable, consistent, and clear.

Answer: TRUE
Diff: 1
74) Annual objectives are long-term milestones that organizations must achieve to reach short-
term objectives.
Answer: FALSE
Diff: 2
75) Annual objectives are especially important in strategy formulation.

Answer: FALSE
Diff: 2
76) Identifying an organization's existing vision, mission, objectives, and strategies is the final
step for the strategic-management process.
Answer: FALSE
Diff: 2
77) Determining opportunities and threats is generally the first step in strategic planning.
Answer: FALSE
Diff: 2
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78) Anything a firm does especially well, compared to rival firms, could be considered a
competitive advantage.
Answer: TRUE
Diff: 1
79) Once a firm acquires a competitive advantage, it is usually able to sustain it indefinitely.
Answer: FALSE
Diff: 3
80) In order for a firm to achieve sustained competitive advantage, a firm must continually adapt
to changes in external trends and events and effectively formulate, implement, and evaluate
strategies that capitalize upon those factors.
Answer: TRUE
Diff: 2
81) Explain who strategists are and what they do in an organization.

Answer: Strategists are individuals who are most responsible for the success or failure of an
organization. They help an organization gather, analyze, and organize information. They track
industry and competitive trends, develop forecasting models and scenario analyses, identify
business threats, and develop creative action plans. Strategic planners usually serve in a support
or staff role. Usually found in higher levels of management, they typically have considerable
authority for decision making in the firm. The CEO is the most visible and critical strategic
manager. Any manager who has responsibility for a unit or division, responsibility for profit and
loss outcomes, or direct authority over a major piece of the business is a strategic manager
(strategist). In the last few years, the position of chief strategy officer (CSO) has emerged as a
new addition to the top management ranks of many organizations. This corporate officer title
represents recognition of the growing importance of strategic planning in business.
Diff: 2
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82) Discuss the differences between vision and mission statements.
Answer: Many organizations today develop a vision statement that answers the question "What
do we want to become?" Developing a vision statement is often considered the first step in
strategic planning, preceding even development of a mission statement. Many vision statements
are a single sentence. For example, the vision statement of Stokes Eye Clinic in Florence, South
Carolina, is "Our vision is to take care of your vision." Mission statements are "enduring
statements of purpose that distinguish one business from other similar firms. A mission statement
identifies the scope of a firm's operations in product and market terms." It addresses the basic
question that faces all strategists: "What is our business?" A clear mission statement describes
the values and priorities of an organization. Developing a mission statement compels strategists
to think about the nature and scope of present operations and to assess the potential attractiveness
of future markets and activities. A mission statement broadly charts the future direction of an
organization and serves as a constant reminder to employees of why the organization exists and
what its founders envisioned.
Diff: 2
83) Strategic management enables an organization to ________, instead of just responding to

threats in its business environment.
A) be proactive
B) be immune to threats
C) avoid responsibility for shaping its future
D) relinquish control over its destiny
E) be reactive
Answer: A
Diff: 2
LO: 1.5: Describe the benefits of engaging in strategic management.
84) How do line managers become "owners" of the strategy?

A) By attending top manager meetings
B) By executing plans formulated by other people
C) By involvement in the strategic-management process
D) By becoming a shareholder of the firm
E) By buying off top managers
Answer: C
Diff: 2
18
85) Annually, ________ businesses in the United States fail.
A) exactly 100
B) less than 1,000
C) about 10,000
D) more than 100,000
E) almost 10 million
Answer: D
Diff: 1
86) Organizations using strategic management are generally ________ than those that do not.
A) more profitable
B) more complex
C) less profitable
D) less successful
E) less complex
Answer: A
Diff: 2
87) Strategic management offers all of the following benefits EXCEPT

A) increased discipline.
B) enhanced communication.
C) increased synergy.
D) increased resistance to change.
E) more effective allocation of time and resources.
Answer: D
Diff: 2
88) There is a dramatic shift in mass retailing to

A) "trading up" and taking customers from more exclusive stores.
B) selling only the most expensive merchandise.
C) opening dramatically larger supercenters.
D) operating stores with less square footage.
E) cutting back on their online presence.
Answer: D
Diff: 2
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89) More than ________ businesses in the United States fail annually.
A) 25,000
B) 50,000
C) 75,000
D) 100,000
E) 125,000
Answer: D
Diff: 2
90) Through involvement in the strategic-planning process, ________ must become "owners" of
the strategy.
A) line managers
B) shareholders
C) customers
D) suppliers
E) stakeholders
Answer: A
Diff: 1
91) Commitment and understanding may be the most important benefits of strategic
management.
Answer: TRUE
Diff: 2
92) The best approach for strategists is to carefully develop strategic plans themselves and then
present them to operating managers to execute.
Answer: FALSE
Diff: 3
93) Firms with planning systems more closely resembling strategic-management theory
generally exhibit superior long-term financial performance relative to their industries.
Answer: TRUE
Diff: 2
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94) Low-performing firms typically underestimate their competitor's strengths and overestimate
their own strengths.
Answer: TRUE
Diff: 2
95) Some of the benefits of strategic management are increased discipline, enhanced
communication, and more effective allocation of time and resources.
Answer: TRUE
Diff: 2
96) Firms can be more proactive with strategic management.

Answer: TRUE
Diff: 2
97) While the number of people shopping online has increased, the average amount spent per
person online has decreased.
Answer: FALSE
Diff: 2
98) Enhanced awareness of external threats is a financial benefit of strategic management.

Answer: FALSE
Diff: 2
99) Substantial research indicates that a healthier workforce can more effectively and efficiently
implement strategies.
Answer: TRUE
Diff: 2
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100) List any five nonfinancial benefits to a firm that engages in strategic management.
Answer: There are a number of benefits to a firm that engages in strategic management.
Students are to list any five of the following: 1. increased discipline; 2. improved coordination; 3.
enhanced communication; 4. reduced resistance to change; 5. increased forward thinking; 6.
improved decision making; 7. increased synergy; 8. more effective allocation of time and
resources.
Diff: 2
101) What nonfinancial benefits does strategic management offer a firm?

Answer: Besides offering a number of financial benefits, strategic management offers firms
many other tangible benefits which are essentially nonfinancial in nature. These include
enhanced awareness of external threats, improved understanding of competitors' strategies,
increased employee productivity, reduced resistance to change, and a clearer understanding of
performance-reward relationship.
Diff: 3
102) Which of the following is NOT a reason given for poor or no strategic planning in an
organization?
A) Planning is viewed as a waste of time
B) Content with current success
C) Too busy "firefighting" to plan ahead
D) No monetary rewards for planning
E) Trust of management makes it unnecessary
Answer: E
Diff: 2
LO: 1.6: Explain why some firms do not engage in strategic planning in all instances.
103) The lack of monetary rewards is one cause of managers not engaging in strategic planning.
Answer: TRUE
Diff: 2
104) Internal crises give an organization's managers extra time needed to plan ahead.
Answer: FALSE
Diff: 1
22
105) List any five of the reasons given for why some firms do no strategic planning.
Answer: Ten reasons are stated; students should list any five of the following: 1. no formal
training in strategic management; 2. no understanding of or appreciation for the benefits of
planning; 3. no monetary rewards for doing planning; 4. no punishment for not planning; 5. too
busy "firefighting" (resolving internal crises) to plan ahead; 6. to view planning as a waste of
time, since no product/service is made; 7. laziness; effective planning takes time and effort; time
is money; 8. content with current success; failure to realize that success today is not a guarantee
for success tomorrow (even Apple Inc. is an example); 9. overconfident; 10. prior bad experience
with strategic planning done sometime/somewhere.
Diff: 2
106) All of these are pitfalls an organization should avoid in strategic planning EXCEPT
A) using plans as a standard for measuring performance.
B) using strategic planning to gain control over decisions and resources.
C) failing to involve key employees in all phases of planning.
D) too hastily moving from mission development to strategy formulation.
E) being so formal in planning that flexibility and creativity are stifled.
Answer: A
Diff: 2
LO: 1.7: Describe the pitfalls in actually doing strategic planning.
107) Which of the following is NOT a pitfall an organization should avoid in strategic planning?
A) Failing to communicate the plan to employees
B) Involving all managers rather than delegating planning to a "planner"
C) Top managers not actively supporting the strategic-planning process
D) Doing strategic planning only to satisfy accreditation or regulatory requirements
E) Failing to create a collaborative climate supportive of change
Answer: B
Diff: 2
108) Making many intuitive decisions that conflict with the formal plan is a pitfall in strategic
planning.
Answer: TRUE
Diff: 2
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109) Managers must be very formal in strategic planning in order to foster flexibility and
creativity.
Answer: FALSE
Diff: 1
110) Identify any five pitfalls in strategic planning for which management should watch out.
Answer: Thirteen pitfalls are stated. Students should list any five of the following: 1. using
strategic planning to gain control over decisions and resources; 2. doing strategic planning only
to satisfy accreditation or regulatory requirements; 3. too hastily moving from mission
development to strategy formulation; 4. failing to communicate the plan to employees, who
continue to work in the dark; 5. top managers making many intuitive decisions that conflict with
the formal plan; 6. top managers not actively supporting the strategic-planning process; 7. failing
to use plans as a standard for measuring performance; 8. delegating planning to a "planner"
rather than involving all managers; 9. failing to involve key employees in all phases of planning;
10. failing to create a collaborative climate supportive of change; 11. viewing planning to be
unnecessary or unimportant; 12. becoming so engrossed in current problems that insufficient or
no planning is done; and 13. being so formal in planning that flexibility and creativity are stifled.
Diff: 2
111) Terms such as objectives, mission, strengths, and weaknesses were first formulated to
address problems
A) on the battlefield.
B) in the boardroom.
C) on the trading floor.
D) in the military hierarchy.
E) in interpersonal relationships.
Answer: A
Diff: 2
LO: 1.8: Discuss the connection between business and military strategy.
112) According to Webster's New World Dictionary, ________ is "the science of planning and
directing large-scale military operations, of maneuvering forces into the most advantageous
position prior to actual engagement with the enemy."
A) competitive advantage
B) war
C) strategy
D) formulation
E) business
Answer: C
Diff: 1
24
113) Business or military success is
A) generally the happy result of accidental strategies.
B) undermined by the element of surprise.
C) the product of both attention to changing external and internal conditions and the insightful
adaptations to those conditions.
D) unrelated to external conditions.
E) unrelated to internal conditions.
Answer: C
Diff: 2
114) Superior strategy formulation and implementation ________ an opponent's superiority in

numbers and resources.
A) are irrelevant to
B) are not enough to surmount
C) can overcome
D) can lead to
E) unite
Answer: C
Diff: 1
115) A strong ________ heritage underlies the study of strategic management.

A) military
B) government
C) political
D) social
E) cultural
Answer: A
Diff: 1
116) Military strategy is based on an assumption of ________, whereas business strategy is

based on an assumption of ________.
A) conflict; cooperation
B) conflict; competition
C) cooperation; conflict
D) competition; conflict
E) cooperation; competition
Answer: B
Diff: 2
25
117) Both business and military organizations must ________ and ________ to be successful.
A) be impervious to change; continually improve
B) adapt to change; constantly improve
C) shun change; stay the course
D) be impervious to change; stay the course
E) none of the above
Answer: B
Diff: 2
118) Military success is usually the happy result of accidental strategies, but business success is
the product of continuous attention to changing conditions and insightful adaptations to those
conditions.
Answer: FALSE
Diff: 1
119) Despite some exceptions, business strategy is very different than military strategy.
Answer: FALSE
Diff: 2
120) The element of surprise provides great competitive advantages in both military and business
strategy.
Answer: TRUE
Diff: 1
121) Both military and business strategy are formulated, implemented, and evaluated with an
assumption of competition.
Answer: FALSE
Diff: 2
122) Superior strategy formulation is an advantage, but it cannot overcome an opponent's

superiority in numbers and resources.
Answer: FALSE
Diff: 2
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123) Compare and contrast business and military strategy.
Answer: In many respects, business strategy is like military strategy, and military strategists
have learned much over the centuries that can benefit business strategists today. A key aim of
both business and military strategy is "to gain competitive advantage." They both also try to use
their own strengths to exploit competitor's weaknesses. Success is not the happy result of
accidental strategies in either business or military organizations. The element of surprise
provides great competitive advantages in both military and business strategy. Information
systems that provide data on opponents' or competitors' strategies and resources are also vitally
important. Finally, both business and military organizations must adapt to change and constantly
improve to be successful. While business and military strategy are the same in many ways, they
have one major difference–business strategy is formulated, implemented and evaluated with an
assumption of competition, whereas military strategy is based on an assumption of conflict.
Diff: 2
Strategic Management: A Competitive Advantage Approach, 17e

(David/David)Chapter 5 Strategies in Action
1) Financial objectives involve all of the following EXCEPTA) growth in revenues.B) larger
market share.C) higher dividends.D) greater return on investment.E) a rising stock price.Answer:
BDiff: 2LO: 5.1: Identify and discuss five characteristics and ten benefits of clear
objectives.AACSB: Analytical thinking2) What principle is based on the belief that the true
measure of a really good strategist is theability to solve problems?A) Managing by crisisB)
Managing by objectivesC) Managing by extrapolationD) Managing by exceptionE) Managing by
hopeAnswer: ADiff: 2LO: 5.1: Identify and discuss five characteristics and ten benefits of clear
objectives.AACSB: Analytical thinking3) What principle is built on the idea that there is no
general plan for which way to go and whatto do?A) Managing by crisisB) Managing by
extrapolationC) Managing by objectivesD) Managing by hopeE) Managing by mysteryAnswer:
EDiff: 2LO: 5.1: Identify and discuss five characteristics and ten benefits of clear
objectives.AACSB: Analytical thinking4) Long-term objectives represent the results expected
from pursuing certain strategies.Answer: TRUEDiff: 1LO: 5.1: Identify and discuss five
characteristics and ten benefits of clear objectives.AACSB: Analytical thinking
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5) Objectives provide direction and allow for organizational synergy.Answer: TRUEDiff:
2LO: 5.1: Identify and discuss five characteristics and ten benefits of clear
objectives.AACSB: Analytical thinking6) Strategic objectives include those associated with
growth in revenues, growth in earnings,higher dividends, larger profit margins, and improved
27
cash flow.Answer: FALSEDiff: 2LO: 5.1: Identify and discuss five characteristics and ten
benefits of clear objectives.AACSB: Analytical thinking7) Strategic objectives include larger
market share, quicker on-time delivery than rivals, shorterdesign-to-market times than rivals,
lower costs than rivals, and wider geographic coverage thanrivals.Answer: TRUEDiff: 2LO: 5.1:
Identify and discuss five characteristics and ten benefits of clear
objectives.AACSB: Analytical thinking8) "If it ain't broke, don't fix it" refers to managing by
crisis.Answer: FALSEDiff: 2LO: 5.1: Identify and discuss five characteristics and ten benefits of
clear objectives.AACSB: Analytical thinking9) Long-term objectives are needed at which
level(s) in an organization?A) CorporateB) DivisionalC) FunctionalD) Functional, divisional,
and corporateE) Corporate and divisional levels, but not functional levelAnswer: DDiff:
2LO: 5.2: Define and give an example of eleven types of strategies.AACSB: Analytical thinking
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10) Which level of strategy is most likely NOT present in small firms?A) CompanyB)
FunctionalC) DivisionalD) OperationalE) GlobalAnswer: CDiff: 2LO: 5.2: Define and give an
example of eleven types of strategies.AACSB: Analytical thinking11) Which strategy is effective
when new, but related, products could be offered at highlycompetitive prices?A) Forward
integrationB) Related diversificationC) Related integrationD) Conglomerate diversificationE)
Unrelated diversificationAnswer: BDiff: 2LO: 5.2: Define and give an example of eleven types
of strategies.AACSB: Analytical thinking12) Which strategy should an organization use when its
products are currently in the decliningstage of the product's life cycle?A) DivestitureB) Related
diversificationC) Backward integrationD) Unrelated diversificationE) RetrenchmentAnswer:
BDiff: 2LO: 5.2: Define and give an example of eleven types of
strategies.AACSB: Analytical thinking13) Because a combination strategy bears no risk, many
organizations pursue a combination oftwo or more strategies simultaneously.Answer:
FALSEDiff: 3LO: 5.2: Define and give an example of eleven types of
strategies.AACSB: Analytical thinking14) Horizontal integration is seeking ownership or
increased control over competitors.Answer: TRUEDiff: 2LO: 5.2: Define and give an example
of eleven types of strategies.AACSB: Analytical thinking
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15) Divestiture is selling all of a company's assets, in parts, for their tangible worth.Answer:
FALSEDiff: 2LO: 5.2: Define and give an example of eleven types of
strategies.AACSB: Analytical thinking16) A chief executive officer is located in the divisional
level of a large firm.Answer: FALSEDiff: 2LO: 5.2: Define and give an example of eleven types
of strategies.AACSB: Analytical thinking17) Gaining ownership or increased control over
distributors or retailers is called forwardintegration strategy.Answer: TRUEDiff: 2LO: 5.2:
Define and give an example of eleven types of strategies.AACSB: Analytical thinking18) Long-
term objectives are needed at the corporate, divisional, functional, and operationallevels of an
28
organization.Answer: TRUEDiff: 1LO: 5.2: Define and give an example of eleven types of
strategies.AACSB: Analytical thinking19) Panera installing online ordering and delivery from
their restaurants is an example of whichtype of strategy?A) Forward integrationB) Backward
integrationC) Horizontal integrationD) Related diversificationE) Unrelated
diversificationAnswer: ADiff: 2LO: 5.3: Identify and discuss the three types of "Integration
Strategies."AACSB: Analytical thinking
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20) Forward integration and backward integration are sometimes collectively referred to asA)
horizontal integration.B) diversification.C) vertical integration.D) stuck-in-the-middle.E)
hierarchical integration.Answer: CDiff: 2LO: 5.3: Identify and discuss the three types of
"Integration Strategies."AACSB: Analytical thinking21) Company websites that sell products
they produce directly to consumers are examples ofwhich type of strategy?A) Backward
integrationB) Product developmentC) Forward integrationD) Horizontal integrationE)
Conglomerate diversificationAnswer: CDiff: 2LO: 5.3: Identify and discuss the three types of
"Integration Strategies."AACSB: Analytical thinking22) An effective means of implementing
forward integration is throughA) product development.B) market development.C) innovation.D)
cost leadership.E) franchising.Answer: EDiff: 2LO: 5.3: Identify and discuss the three types of
"Integration Strategies."AACSB: Analytical thinking23) Which of these strategies is effective
when the number of suppliers is small and the numberof competitors is large?A) Conglomerate
diversificationB) Forward integrationC) Concentric diversificationD) Backward integrationE)
Horizontal diversificationAnswer: DDiff: 2LO: 5.3: Identify and discuss the three types of
"Integration Strategies."AACSB: Analytical thinking
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24) Backward integration is effective in all of these cases EXCEPTA) when an organization
competes in an industry that is growing rapidly.B) when an organization has both capital and
human resources to manage the new business ofsupplying its own raw materials.C) when an
organization needs to acquire a needed resource quickly.D) when the advantages of stable prices
are not particularly important.E) when present suppliers have high profit margins.Answer:
DDiff: 2LO: 5.3: Identify and discuss the three types of "Integration
Strategies."AACSB: Analytical thinking25) What refers to a strategy of seeking ownership of, or
increased control over a firm'scompetitors?A) Forward integrationB) Conglomerate
29
diversificationC) Backward integrationD) Horizontal integrationE) Concentric
diversificationAnswer: DDiff: 2LO: 5.3: Identify and discuss the three types of "Integration
Strategies."AACSB: Analytical thinking26) In which situation would horizontal integration
be an especially effective strategy?A) When an organization can gain monopolistic
characteristics in a particular area or regionwithout being challenged by the federal government
for "tending substantially" to reducecompetitionB) When an organization competes in a slowing
industryC) When decreased economies of scale provide major competitive advantagesD) When
an organization has neither the capital nor human talent needed to successfully managean
expanded organizationE) When competitors are succeeding due to managerial expertise or
having particular resourcesan organization possessesAnswer: ADiff: 3LO: 5.3: Identify
and discuss the three types of "Integration Strategies."AACSB: Analytical thinking27)
Franchising is an effective means of implementing forward integration.Answer: TRUEDiff:
1LO: 5.3: Identify and discuss the three types of "Integration
Strategies."AACSB: Analytical thinking
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28) A growing trend is for franchisers to buy out their part of the business from their
franchisees.Answer: FALSEDiff: 3LO: 5.3: Identify and discuss the three types of "Integration
Strategies."AACSB: Analytical thinking29) Limited availability of quality distributors is a
reason why competitive advantage couldresult from forward integration.Answer: TRUEDiff:
Strategies."AACSB: Analytical thinking30) A strategy of seeking ownership or increased control
of a firm's suppliers is backwardintegration.Answer: TRUEDiff: 2LO: 5.3: Identify and discuss
the three types of "Integration Strategies."AACSB: Analytical thinking31) If a firm's present
suppliers are expensive and unreliable in meeting the firm's needs for parts, components, and/or
raw materials, the firm should pursue a horizontal integration strategy.Answer: FALSEDiff:
Strategies."AACSB: Analytical thinking32) Horizontal integration is an appropriate strategy
when the competitors of an organization aredoing poorly.Answer: FALSEDiff: 3LO: 5.3:
Identify and discuss the three types of "Integration Strategies."AACSB: Analytical thinking33)
List and define the three types of integration strategies.Answer: The three integrative strategies
are forward integration, backward integration, andhorizontal integration. Forward integration is
the acquisition of ownership or increased controlover distributors or retailers. Backward
integration is the acquisition of ownership or increasedcontrol of a firm's suppliers. Horizontal
integration is the acquisition of ownership or increasedcontrol over competitors.Diff: 2LO: 5.3:
Identify and discuss the three types of "Integration Strategies."AACSB: Analytical thinking
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30
34) List three guidelines for when forward integration would be a particularly good strategy
to pursue.Answer: Some guidelines for when forward integration would be an especially
effective strategyare: 1) when an organization's present distributors are especially
expensive, unreliable, orincapable of meeting the firm's distribution needs; 2) when the
availability of quality distributorsis so limited as to offer a competitive advantage to those firms
that integrate forward; 3) when anorganization competes in an industry that is growing and is
expected to continue to growmarkedly; 4) when an organization has both the capital and human
resources needed to managethe new business of distributing its own products; 5) when the
advantages of stable productionare particularly high; and (6) when present distributors or
retailers have high profit margins.Diff: 2LO: 5.3: Identify and discuss the three types of
"Integration Strategies."AACSB: Analytical thinking35) List three guidelines for when
horizontal integration would be a particularly good strategy to pursue.Answer: Reasons include:
1) An organization can gain monopolistic characteristics in a particular area or region without
being challenged by the federal government for "tendingsubstantially" to reduce competition; 2)
An organization competes in a growing industry; 3)Increased economies of scale provide major
competitive advantages; 4) An organization has boththe capital and human talent needed to
successfully manage an expanded organization; and 5)Competitors are faltering as a result of a
lack of managerial expertise or a need for particularresources that an organization possesses, but
not as a result of a decline in overall industry sales.Diff: 2LO: 5.3: Identify and discuss the three
types of "Integration Strategies."AACSB: Analytical thinking36) Which strategy seeks to
increase market share for present products or services in presentmarkets through greater
marketing efforts?A) Market penetrationB) Forward integrationC) Market developmentD)
Backward integrationE) Product developmentAnswer: ADiff: 2LO: 5.4: Give specific guidelines
when market penetration, market development, and productdevelopment are especially effective
strategies.AACSB: Analytical thinking
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37) When a domestic company first begins to export to India, it is an example ofA) horizontal
integration.B) backward integration.C) forward integration.D) concentric diversification.E)
market development.Answer: EDiff: 3LO: 5.4: Give specific guidelines when market
penetration, market development, and productdevelopment are especially effective
strategies.AACSB: Analytical thinking38) Which strategy generally entails large research and
development expenditures?A) Market penetrationB) RetrenchmentC) Forward integrationD)
Product developmentE) DivestitureAnswer: DDiff: 2LO: 5.4: Give specific guidelines when
market penetration, market development, and productdevelopment are especially effective
strategies.AACSB: Analytical thinking39) All of the following situations are conducive to
market development EXCEPTA) when new channels of distribution are expensive and
unreliable.B) when an organization is successful at what it does.C) when new untapped or
unsaturated markets exist.D) when an organization has excess production capacity.E) when an
organization's basic industry is rapidly becoming global in scope.Answer: ADiff: 3LO: 5.4: Give
specific guidelines when market penetration, market development, and productdevelopment are
especially effective strategies.AACSB: Analytical thinking
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31

40) Which strategy is appropriate when an organization competes in an industry characterized
byrapid technological developments?A) RetrenchmentB) Product developmentC) Backward
integrationD) LiquidationE) Market penetrationAnswer: BDiff: 3LO: 5.4: Give specific
guidelines when market penetration, market development, and productdevelopment are
especially effective strategies.AACSB: Analytical thinking41) If Gap opens five stores for the
first time in China, this is an example of which type ofstrategy?A) Forward integrationB)
Backward integrationC) Horizontal integrationD) Market developmentE) Product
developmentAnswer: DDiff: 2LO: 5.4: Give specific guidelines when market penetration, market
development, and productdevelopment are especially effective
strategies.AACSB: Analytical thinking42) When the correlation between dollar sales and dollar
marketing expenditures has historically been low, market penetration is an appropriate
strategy.Answer: FALSEDiff: 2LO: 5.4: Give specific guidelines when market penetration,
market development, and productdevelopment are especially effective
strategies.AACSB: Analytical thinking43) Market penetration, market development, and product
development are intensive strategies.Answer: TRUEDiff: 2LO: 5.4: Give specific guidelines
strategies.AACSB: Analytical thinking44) Market development includes introducing present
products into new geographic areas.Answer: TRUEDiff: 1LO: 5.4: Give specific guidelines
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45) An appropriate strategy when an organization has excess production capacity is
marketdevelopment.Answer: TRUEDiff: 2LO: 5.4: Give specific guidelines when market
penetration, market development, and productdevelopment are especially effective
strategies.AACSB: Analytical thinking46) Product development is a strategy that seeks increased
sales by improving or modifying present products or services.Answer: TRUEDiff: 1LO: 5.4:
Give specific guidelines when market penetration, market development, and productdevelopment
are especially effective strategies.AACSB: Analytical thinking47) Product development is
an appropriate strategy when an organization has successful productsthat are in the maturity
stage of the product life cycle.Answer: TRUEDiff: 2LO: 5.4: Give specific guidelines when
market penetration, market development, and productdevelopment are especially effective
strategies.AACSB: Analytical thinking48) Define and give examples of three intensive
strategies.Answer: Market penetration, market development, and product development are the
three typesof intensive strategies. Market penetration is the use of greater marketing efforts in an
attempt toincrease market share for present products or services, in present markets.
32
Market developmentis the introduction of present products or services into new geographic
areas. Productdevelopment is the seeking of increased sales through new or improved products
or services.Diff: 2LO: 5.4: Give specific guidelines when market penetration, market
development, and productdevelopment are especially effective
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49) List three guidelines for when market development would be a particularly good strategy
to pursue.Answer: Market development would be an effective strategy in all of the following
situations: 1)when new channels of distribution are available that are reliable, inexpensive, and
of goodquality; 2) when an organization is successful at what it does; 3) when new untapped
orunsaturated markets exist; 4) when an organization has the needed capital and human
resourcesto manage expanded operations; 5) when an organization has excess production
capacity; and 6)when an organization's basic industry is rapidly becoming global in scope.Diff:
2LO: 5.4: Give specific guidelines when market penetration, market development,
and productdevelopment are especially effective strategies.AACSB: Analytical thinking50) A
pasta manufacturer's purchase of some pet food brands is an example ofA) backward
integration.B) divestiture.C) retrenchment.D) unrelated diversification.E) forward
integration.Answer: DDiff: 2LO: 5.5: Explain when diversification is an effective
business strategy.AACSB: Analytical thinking51) Which of the following is NOT a guideline for
when an organization should use an unrelateddiversification strategy?A) When revenues derived
from an organization's current products or services would increasesignificantly by adding the
new unrelated, productsB) When an organization's present channels of distribution can be used
to market the new products to current customersC) When the new products have countercyclical
sales patterns compared to an organization's present productsD) When an organization competes
in a highly competitive and/or a no-growth industryE) When existing markets for an
organization's present products are not yet saturatedAnswer: EDiff: 3LO: 5.5: Explain when
diversification is an effective business strategy.AACSB: Analytical thinking52) There are four
basic types of diversification: concentric, conglomerate, forward, and backward.Answer:
FALSEDiff: 2LO: 5.5: Explain when diversification is an effective
business strategy.AACSB: Analytical thinking
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53) In order to exploit common use of a well-known brand name, most companies favor
relateddiversification strategies.Answer: TRUEDiff: 2LO: 5.5: Explain when diversification is
an effective business strategy.AACSB: Analytical thinking54) Diversification strategies are
becoming more popular as organizations are finding it easier tomanage diverse business
activities.Answer: FALSEDiff: 2LO: 5.5: Explain when diversification is an effective
business strategy.AACSB: Analytical thinking55) The purchase of 80 percent of Procter &
33
Gamble's pet-food brands by Mars Inc., best knownfor its M&M chocolates and its Mars and
Snickers candy bars, is an example of relateddiversification.Answer: FALSEDiff: 3LO: 5.5:
Explain when diversification is an effective business strategy.AACSB: Analytical thinking56)
Unrelated diversification is an appropriate strategy when an organization's present channelsof
distribution can be used to market the new products to current customers.Answer: TRUEDiff:
2LO: 5.5: Explain when diversification is an effective
business strategy.AACSB: Analytical thinking57) Unrelated diversification may be an especially
effective strategy when an organization's basic industry is experiencing increasing annual sales
and profits.Answer: FALSEDiff: 3LO: 5.5: Explain when diversification is an effective
business strategy.AACSB: Analytical thinking58) List the two types of diversification strategies
and state the clear distinction between them.Answer: Related and unrelated are the two types of
diversification strategies. Businesses aresaid to be related when their value chains possess
competitively valuable cross-business strategicfits; businesses are said to be unrelated when their
value chains are so dissimilar that nocompetitively valuable cross-business relationships
exist.Diff: 2LO: 5.5: Explain when diversification is an effective
business strategy.AACSB: Analytical thinking
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59) List three guidelines for when related diversification would be a particularly good strategy
to pursue.Answer: Six guidelines for when related diversification may be an effective strategy
are: 1)when an organization competes in a no-growth or a slow-growth industry; 2) when adding
new, but related, products would significantly enhance the sales of current products; 3) when
new, butrelated, products could be offered at highly competitive prices; 4) when new, but
related, products have seasonal sales levels that counterbalance an organization's existing peaks
andvalleys; 5) when an organization's products are currently in the declining stage of the
product'slife cycle; and 6) when an organization has a strong management team.Diff: 2LO: 5.5:
Explain when diversification is an effective business strategy.AACSB: Analytical thinking60)
Procter & Gamble's (P&G) sale of many of its brands in order to focus on its core brands isan
example of which type of strategy?A) Related diversificationB) Unrelated diversificationC)
RetrenchmentD) DivestitureE) LiquidationAnswer: DDiff: 2LO: 5.6: List guidelines for when
retrenchment, divestiture, and liquidation are especiallyeffective
strategies.AACSB: Application of knowledge61) GoPro laid off one-fifth of its workforce and
exited the drone market. This is an example ofA) divestiture.B) backward integration.C)
liquidation.D) retrenchment.E) forward integration.Answer: DDiff: 2LO: 5.6: List guidelines
for when retrenchment, divestiture, and liquidation are especiallyeffective
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62) What kind of strategy is retrenchment?A) A turnaround strategyB) An expansion strategyC)
A diagonal strategyD) An intensive strategyE) An offensive strategyAnswer: ADiff: 2LO: 5.6:
List guidelines for when retrenchment, divestiture, and liquidation are especiallyeffective
strategies.AACSB: Analytical thinking63) BankruptcyA) should never be used as a strategy.B)
should be used only when one is legally forced to do so.C) can be an effective type of
retrenchment strategy.D) should only be used for large firms.E) should only be used for small,
private firms.Answer: CDiff: 2LO: 5.6: List guidelines for when retrenchment, divestiture, and
liquidation are especiallyeffective strategies.AACSB: Analytical thinking64) Which chapter of
the bankruptcy code applies to municipalities?A) Chapter 7B) Chapter 8C) Chapter 9D) Chapter
12E) Chapter 13Answer: CDiff: 2LO: 5.6: List guidelines for when retrenchment, divestiture,
and liquidation are especiallyeffective strategies.AACSB: Analytical thinking65) The Family
Farmer Bankruptcy Act of 1986 created which of the major types of bankruptcy?A) Chapter 7B)
Chapter 8C) Chapter 9D) Chapter 12E) Chapter 13Answer: DDiff: 2LO: 5.6: List guidelines
strategies.AACSB: Written and oral communication

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66) The form of bankruptcy in which all the organization's assets are sold in parts for
theirtangible worth isA) Chapter 7.B) Chapter 8.C) Chapter 9.D) Chapter 11.E) Chapter
13.Answer: ADiff: 2LO: 5.6: List guidelines for when retrenchment, divestiture, and liquidation
are especiallyeffective strategies.AACSB: Analytical thinking67) Retrenchment would be an
effective strategy when an organizationA) has shrunk so quickly that major internal
reorganization is needed.B) is one of the stronger competitors in a given industry.C) is plagued
by inefficiency, low profitability, poor employee morale, and pressure fromstockholders to
improve performance.D) has decided to capitalize on opportunities, maximize threats, take
advantage of strengths, andovercome weaknesses.E) does not have a clearly distinctive
competence and has failed to meet its objectives and goalsconsistently over time.Answer: CDiff:
3LO: 5.6: List guidelines for when retrenchment, divestiture, and liquidation are
especiallyeffective strategies.AACSB: Analytical thinking68) Which term refers to selling a
division or part of an organization?A) Joint ventureB) DivestitureC) Concentric diversificationD)
LiquidationE) Horizontal integrationAnswer: BDiff: 2LO: 5.6: List guidelines for when
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69) Which strategy should be implemented when a division is responsible for an
organization'soverall poor performance?A) Backward integrationB) DivestitureC) Forward
integrationD) Cost leadershipE) Related diversificationAnswer: BDiff: 2LO: 5.6: List guidelines
strategies.AACSB: Analytical thinking70) Retrenchment is a turnaround strategy.Answer:
TRUEDiff: 1LO: 5.6: List guidelines for when retrenchment, divestiture, and liquidation are
especiallyeffective strategies.AACSB: Analytical thinking71) Although bankruptcy can be an
effective type of retrenchment strategy, it does not allowfirms to avoid major debt obligations
and to void union contracts.Answer: FALSEDiff: 2LO: 5.6: List guidelines for when
strategies.AACSB: Analytical thinking72) Chapter 7 bankruptcy is a liquidation procedure used
only when a firm sees no hope of beingable to operate successfully or to obtain necessary
creditor agreement.Answer: TRUEDiff: 2LO: 5.6: List guidelines for when retrenchment,
divestiture, and liquidation are especiallyeffective strategies.AACSB: Analytical thinking73)
Chapter 9 bankruptcy applies to municipalities.Answer: TRUEDiff: 2LO: 5.6: List guidelines
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74) Stockton, California, is the largest U.S. city to declare bankruptcy.Answer: FALSEDiff:
1LO: 5.6: List guidelines for when retrenchment, divestiture, and liquidation
are especiallyeffective strategies.AACSB: Analytical thinking75) Chapter 13 bankruptcy is
similar to Chapter 11, but available only to large corporations.Answer: FALSEDiff: 2LO: 5.6:
List guidelines for when retrenchment, divestiture, and liquidation are especiallyeffective
strategies.AACSB: Analytical thinking76) Selling a division or part of an organization is called
divestiture.Answer: TRUEDiff: 1LO: 5.6: List guidelines for when retrenchment, divestiture, and
liquidation are especiallyeffective strategies.AACSB: Analytical thinking77) Explain each of the
five types of bankruptcy: Chapters 7, 9, 11, 12 and 13.Answer: Chapter 7 bankruptcy is a
liquidation procedure used only when a corporation sees nohope of being able to operate
successfully or to obtain the necessary creditor agreement. All theorganization's assets are sold in
parts for their tangible worth. Chapter 9 bankruptcy applies tomunicipalities. Chapter 11
bankruptcy allows organizations to reorganize and come back afterfiling a petition for protection.
Chapter 12 bankruptcy provides special relief to family farmerswith debt equal to or less
than $1.5 million. Chapter 13 bankruptcy is a reorganization plansimilar to Chapter 11, but it is
available only to small businesses owned by individuals withunsecured debts of less than
$100,000 and secured debts of less than $350,000. The Chapter 13debtor is allowed to operate
the business while a plan is being developed to provide for thesuccessful operation of the
business in the future.Diff: 2LO: 5.6: List guidelines for when retrenchment, divestiture, and
liquidation are especiallyeffective strategies.AACSB: Analytical thinking
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78) The process whereby a firm determines the costs associated with organizational
activitiesfrom purchasing raw materials to manufacturing products to marketing those products is
calledA) the Resource-Based Approach.B) Value Chain Analysis.C) Strategic Cost Analysis.D)
the Internal Factor Evaluation Matrix.E) Cost-Benefit Analysis.Answer: BDiff: 2LO: 5.7:
Explain value chain analysis and benchmarking in strategic
management.AACSB: Analytical thinking79) The initial step to implementing value chain
analysis isA) attaching a cost to each discrete activity.B) establishing costs in terms of time.C)
establishing costs in terms of money.D) converting the cost data into information by looking for
competitive cost strengths andweaknesses.E) dividing a firm's operations into specific activities
or business processes.Answer: EDiff: 2LO: 5.7: Explain value chain analysis and
benchmarking in strategic management.AACSB: Analytical thinking80) Value chain analysis
can enable a firm to better identify its own strengths and weaknessesespecially as compared to
competitors' value chain analyses and their own data over time.Answer: TRUEDiff: 2LO: 5.7:
Explain value chain analysis and benchmarking in strategic
management.AACSB: Analytical thinking81) Benchmarking is an analytical tool used to
determine whether a firm's value chain activitiesare competitive compared to rivals.Answer:
TRUEDiff: 3LO: 5.7: Explain value chain analysis and benchmarking in strategic
management.AACSB: Analytical thinking
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82) Under which strategy would you offer products or services to a wide range of customers
atthe lowest price available on the market?A) Cost Leadership - Low CostB) Cost Leadership -
Best ValueC) Focus - Low CostD) Focus - Best ValueE) DifferentiationAnswer: ADiff:
2LO: 5.8: Identify and discuss Porter's two generic strategies: cost leadership and
differentiation.AACSB: Analytical thinking83) According to Porter, which strategy offers
products or services to a niche group of customersat the lowest price available on the market?A)
Cost Leadership - Low CostB) Cost Leadership - Best ValueC) Focus - Low CostD) Focus - Best
ValueE) DifferentiationAnswer: CDiff: 2LO: 5.8: Identify and discuss Porter's two generic
strategies: cost leadership and differentiation.AACSB: Analytical thinking84) Under which
condition would a cost leadership strategy be especially effective?A) When there are many ways
to achieve product differentiation that have value to buyersB) When most buyers use the product
in different waysC) When buyers incur high costs in switching their purchases from one seller to
anotherD) When buyers are small and have little power to bargain down pricesE) When the
products of rival sellers are essentially identical and supplies are readily availablefrom any of
several eager sellersAnswer: EDiff: 2LO: 5.8: Identify and discuss Porter's two generic
strategies: cost leadership and differentiation.AACSB: Analytical thinking
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85) Under which condition would a differentiation strategy be especially effective?A) When
there are few ways to differentiate the product or service that buyers perceive as havingvalueB)
When technological change is fast paced and competition revolves around rapidly
evolving product featuresC) When most buyers use the product in the same wayD) When many
rival firms are following a similar differentiation approachE) When the differentiation base is
easy or inexpensive for rivals to duplicateAnswer: BDiff: 3LO: 5.8: Identify and discuss Porter's
two generic strategies: cost leadership and differentiation.AACSB: Analytical thinking86)
According to Porter, strategies allow organizations to gain competitive advantage from
threedifferent bases: cost leadership, differentiation, and decentralization.Answer: FALSEDiff:
differentiation.AACSB: Analytical thinking87) A cost leadership strategy can be especially
effective when the market is composed of many price-sensitive buyers.Answer: TRUEDiff:
differentiation.AACSB: Analytical thinking88) A best-value strategy must offer products or
services to a wide range of customers at the best price-value available on the market.Answer:
FALSEDiff: 3LO: 5.8: Identify and discuss Porter's two generic strategies: cost leadership and
differentiation.AACSB: Analytical thinking89) A low-cost focus strategy offers products or
services to a small range of customers at thelowest price available on the market.Answer:
TRUEDiff: 2LO: 5.8: Identify and discuss Porter's two generic strategies: cost leadership and
differentiation.AACSB: Analytical thinking90) A cost leadership strategy can be especially
effective when most buyers use the product inthe same ways.Answer: TRUEDiff: 2LO: 5.8:
Identify and discuss Porter's two generic strategies: cost leadership and
differentiation.AACSB: Analytical thinking
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91) A differentiation strategy can only be achieved with a large target market.Answer:
FALSEDiff: 3LO: 5.8: Identify and discuss Porter's two generic strategies: cost leadership and
differentiation.AACSB: Analytical thinking92) Differentiation guarantees competitive advantage
as long as standard products sufficientlymeet customer needs.Answer: FALSEDiff: 3LO: 5.8:
differentiation.AACSB: Analytical thinking93) The most effective differentiation bases are those
that are hard or expensive for rivals toduplicate.Answer: TRUEDiff: 2LO: 5.8: Identify and
discuss Porter's two generic strategies: cost leadership and
differentiation.AACSB: Analytical thinking94) A low-cost focus strategy can be
especially attractive when the target market niche is small.Answer: TRUEDiff: 2LO: 5.8:
differentiation.AACSB: Analytical thinking95) To succeed, a differentiation strategy depends on
the existence of many different niches andsegments within a market, thereby allowing a focuser
to pick a competitively attractive nichesuited to its own resources.Answer: FALSEDiff:
38
differentiation.AACSB: Analytical thinking
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96) Discuss each of Michael Porter's generic strategies.Answer: According to Porter, strategies
allow organizations to gain competitive advantage fromtwo different bases: cost leadership and
differentiation. Porter calls these bases generic strategies.Cost leadership emphasizes producing
standardized products at a very low per-unit cost forconsumers who are price sensitive. Two
alternative types of cost leadership strategies can bedefined. Type 1 is a low-cost strategy that
offers products or services to a wide range ofcustomers at the lowest price available on
the market. Type 2 is a best-value strategy that offers products or services to a wide range of
customers at the best price value available on the market.The best-value strategy aims to offer
customers a range of products or services at the lowest price available compared to a rival's
products with similar attributes. Both Type 1 and Type 2strategies target a large market.
Differentiation, Type 3, is a strategy aimed at producing productsand services considered unique
industry-wide and directed at consumers who are relatively priceinsensitive. Focus
means producing products and services that fulfill the needs of small groups ofconsumers. Type
4, a low cost focus strategy, offers products or services to a small range ofcustomers at the
lowest price available on the market.Diff: 2LO: 5.8: Identify and discuss Porter's two generic
strategies: cost leadership and differentiation.AACSB: Analytical thinking97) When firms build
from within, it is sometimes called ________ growth.A) acquisitiveB) retrenchmentC)
inorganicD) organicE) sustainableAnswer: DDiff: 2LO: 5.9: Compare and contrast when
companies should "build, borrow, or buy" as key meansfor achieving
strategies.AACSB: Analytical thinking98) A ________ strategy aims to target a new market
where competition is not yet present.A) differentiationB) market penetrationC) blue oceanD)
product proliferationE) consolidationAnswer: CDiff: 2LO: 5.9: Compare and contrast when
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99) What occurs when two or more companies form a temporary partnership or consortium
forthe purpose of capitalizing on some opportunity?A) RetrenchmentB) A joint ventureC)
LiquidationD) Forward integrationE) DivestitureAnswer: BDiff: 2LO: 5.9: Compare and contrast
when companies should "build, borrow, or buy" as key meansfor achieving
strategies.AACSB: Analytical thinking100) All of the following are cooperative arrangements
EXCEPTA) Research and Development (R&D) partnerships.B) joint-bidding consortia.C) cross-
licensing agreements.D) cross-manufacturing agreements.E) marketing plans.Answer: EDiff:
2LO: 5.9: Compare and contrast when companies should "build, borrow, or buy" as key
39
meansfor achieving strategies.AACSB: Analytical thinking101) Which of the following is NOT
a reason joint ventures fail?A) Managers who must collaborate daily in operating the venture are
not involved in forming orshaping the venture.B) The venture may not be supported equally by
both partners.C) The venture may benefit the partnering companies, but may not benefit the
customers whothen complain about poorer service or criticize the companies in other ways.D)
Venture risk was minimized.E) The venture may begin to compete more with one of the partners
than the other.Answer: DDiff: 2LO: 5.9: Compare and contrast when companies should "build,
borrow, or buy" as key meansfor achieving strategies.AACSB: Analytical thinking
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102) Which strategy would be most appropriate when the distinctive competencies of two
ormore firms complement each other especially well?A) Conglomerate diversificationB)
DivestitureC) Joint ventureD) RetrenchmentE) IntegrationAnswer: CDiff: 2LO: 5.9: Compare
and contrast when companies should "build, borrow, or buy" as key meansfor achieving
strategies.AACSB: Analytical thinking103) When two organizations of about equal size unite to
form one enterprise, which of theseoccurs?A) Hostile takeoverB) MergerC) AcquisitionD)
Leveraged buyoutE) Friendly takeoverAnswer: BDiff: 1LO: 5.9: Compare and contrast when
strategies.AACSB: Analytical thinking104) Mergers and acquisitions are created for all of the
following reasons EXCEPT toA) gain new technology.B) reduce tax obligations.C) gain
economies of scale.D) smooth out seasonal trends in sales.E) shift company profits to the United
States from countries with low corporate tax rates.Answer: EDiff: 3LO: 5.9: Compare and
contrast when companies should "build, borrow, or buy" as key meansfor achieving

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105) If a merger or acquisition is not desired by both parties, it is called a ________A) hostile
takeover.B) leveraged buyout.C) consolidation.D) management buyout.E) white knight
takeover.Answer: ADiff: 2LO: 5.9: Compare and contrast when companies should "build,
borrow, or buy" as key meansfor achieving strategies.AACSB: Analytical thinking106) A hostile
takeover is not unethical as long as it is conducted in a sane, civil, legal manner.Answer:
TRUEDiff: 2LO: 5.9: Compare and contrast when companies should "build, borrow, or buy"
as key meansfor achieving strategies.AACSB: Ethical understanding and reasoning107) A
40
secondary buyout occurs when a corporation's shares are bought by the company'smanagement
and other private investors using borrowed funds.Answer: FALSEDiff: 3LO: 5.9: Compare and
contrast when companies should "build, borrow, or buy" as key meansfor achieving
strategies.AACSB: Analytical thinking108) The frequency of cooperative arrangements between
rival firms has been increasing.Answer: TRUEDiff: 2LO: 5.9: Compare and contrast when
strategies.AACSB: Analytical thinking109) Joint ventures tend to fail when managers who must
collaborate daily in operating theventure are not involved in forming or shaping the
venture.Answer: TRUEDiff: 2LO: 5.9: Compare and contrast when companies should "build,
borrow, or buy" as key meansfor achieving strategies.AACSB: Analytical thinking
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110) Divestiture would be an appropriate strategy when a need exists to introduce
a newtechnology quickly.Answer: FALSEDiff: 2LO: 5.9: Compare and contrast when
strategies.AACSB: Analytical thinking111) An acquisition occurs when a large organization
purchases a smaller one or vice versa.Answer: TRUEDiff: 1LO: 5.9: Compare and contrast when
strategies.AACSB: Analytical thinking112) When an acquisition or merger is not desired by both
parties, it is called a hostile takeover.Answer: TRUEDiff: 1LO: 5.9: Compare and contrast when
strategies.AACSB: Analytical thinking113) A leveraged buyout occurs when a firm's
management and other private investors use borrowed funds to buy out the firm's
shareholders.Answer: TRUEDiff: 2LO: 5.9: Compare and contrast when companies should
"build, borrow, or buy" as key meansfor achieving strategies.AACSB: Analytical thinking114)
What are four common problems that cause joint ventures to fail?Answer: One problem that
causes joint ventures to fail is that managers who must collaboratedaily in operating the venture
are not involved in forming or shaping the venture. A second problem is if the venture benefits
the partnering companies, but does not benefit customers whothen complain about poorer service
or criticize the companies in other ways. A third problemoccurs if the venture is not
supported equally by both partners. A final problem that can cause a joint venture to fail is that
the venture may begin to compete more with one of the partners thanthe other.Diff: 3LO: 5.9:
Compare and contrast when companies should "build, borrow, or buy" as key meansfor
achieving strategies.AACSB: Analytical thinking
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115) ________ advantages refer to the benefits a firm may achieve by entering a new market
ordeveloping a new product or service prior to rival firms.A) First moverB) OutsourcingC)
DifferentiatorD) CorporateE) Fast followerAnswer: ADiff: 1LO: 5.10: Discuss first mover
41
advantages and disadvantages.AACSB: Analytical thinking116) First mover advantages refer to
the benefits a firm may achieve by entering a new market ordeveloping a new product or service
prior to rival firms.Answer: TRUEDiff: 2LO: 5.10: Discuss first mover advantages and
disadvantages.AACSB: Analytical thinking117) First mover advantages are analogous to taking
the low ground first.Answer: FALSEDiff: 3LO: 5.10: Discuss first mover advantages and
disadvantages.AACSB: Analytical thinking118) To sustain the competitive advantage gained by
being a first mover, a firm needs to be acost leader.Answer: FALSEDiff: 2LO: 5.10: Discuss first
mover advantages and disadvantages.AACSB: Analytical thinking119) Which of the following
is noted in the text as a serious obstacle for many small businessowners?A) A lack of business
ethicsB) An excess of employees and managerial staffC) A lack of experience in networkingD)
A lack of strategic-management knowledgeE) Having too many suppliersAnswer: DDiff:
2LO: 5.11: Explain how strategic planning differs in for-profit, not-for-profit, and
small firms.AACSB: Analytical thinking
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Strategic Management: A Competitive Advantage Approach, 17e (David/David)

Chapter 1 The Nature of Strategic Management

1) The goal of strategic management is to

2) Strategic management focuses on integrating functional areas to achieve organizational

5) The strategic-management process is becoming more widely used by

6) An organization should take a(n) ________ approach in its industry.

7) The strategic-management process

10) Strategic management focuses on integrating management, marketing, finance and

15) To be effective, strategic-management must be a process that familiarizes managers and

23) An important activity in ________ is taking corrective action.

28) Strategy evaluation is necessary because

34) The final stage in strategic management is strategy implementation.

40) Which statement best describes intuition?

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

44) Analytical and intuitive thinking complement each other.

47) Management by intuition can be defined as operating from the "I've-already-made-up-my-

49) Discuss the value of integrating intuition and analysis.

52) An organization's vision statement

53) Generally, external opportunities and threats are

57) Long-term objectives should be all of the following EXCEPT

65) A vision statement describes an organization's values and priorities.

73) Objectives should be measurable, challenging, reasonable, consistent, and clear.

75) Annual objectives are especially important in strategy formulation.

81) Explain who strategists are and what they do in an organization.

83) Strategic management enables an organization to ________, instead of just responding to

84) How do line managers become "owners" of the strategy?

87) Strategic management offers all of the following benefits EXCEPT

88) There is a dramatic shift in mass retailing to

96) Firms can be more proactive with strategic management.

98) Enhanced awareness of external threats is a financial benefit of strategic management.

101) What nonfinancial benefits does strategic management offer a firm?

114) Superior strategy formulation and implementation ________ an opponent's superiority in

115) A strong ________ heritage underlies the study of strategic management.

116) Military strategy is based on an assumption of ________, whereas business strategy is

122) Superior strategy formulation is an advantage, but it cannot overcome an opponent's

Strategic Management: A Competitive Advantage Approach, 17e

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