CH 6

ch6
Student: ___________________________________________________________________________
1. The cluster of decisions about what goals to pursue, what actions to take, and how to use resources to
achieve goals, is called an organization's strategy.
True False
2. Planning involves formulation of strategy but not the implementation.
True False
3. The last step in the planning process is to determine the organization's mission and goals.
True False
4. A broad statement of the organization's purpose, products, and customers is called a mission statement.
True False
5. Planning takes place at the corporate level and the business level of the organization, but not at the
functional level of the organization.
True False
6. The divisions of the organization exist at the business level of the organization.
True False
7. The corporate-level plan of an organization contains the decisions about the organization's mission, goals,
strategy, and structure.
True False
8. At the functional level, the business-level plan provides the framework within which functional managers
devise their plans.
True False
9. Functional goals and strategies need not be consistent with divisional goals and strategies.
True False
10. In a typical organization, corporate-level planning is the primary responsibility of first-line supervisors.
True False
11. In a typical organization, top managers are primarily responsible for planning that takes place at the
business level of the organization.
True False
12. The number of months covered in the typical business plan is known as the time horizon of the plan.
True False
13. A business plan that is updated every year depending on the changes in the organization and in the external
environment that have taken place in the previous year is known as a rolling plan.
True False
14. Standing plans are useful in situations that involve programmed decisions.
True False
15. A general guide to action within an organization is called an SOP of the organization.
True False
16. A written set of instructions that describes the series of actions that a manager should take in a specific
situation is called an SOP of the organization.
True False
17. Single-use plans are intended to be used primarily in programmed decision-making situations.
True False
18. Organizational goals should be both challenging and realistic.
True False
19. Strategy formulation begins with managers systematically analyzing the factors or forces inside an
organization and outside in the global environment that affect the organization's ability to meet its goals
now and in the future.
True False
20. While conducting a SWOT analysis, the strengths and weaknesses are considered the external environment
factors affecting the organization.
True False
21. Scenario planning is often used to strengthen SWOT analysis.
True False
22. According to Michael Porter's theory, it is typically possible for managers to pursue both a low-cost
strategy and a differentiation strategy at the same time.
True False
23. Managers of XYZ Company attempt to give the organization a competitive advantage by driving
production costs to as low a level as possible. We can say that the organization is pursuing a differentiation
strategy.
True False
24. Corporate level strategy involves choosing the industry in which a company will compete.
True False
25. When a company is successful in pursuing the strategy of concentration on a single industry, it uses its
functional skills to develop new products or expand its locations.
True False
26. The reason managers pursue vertical integration is that it allows them either to add value to their products
by making them special or unique or to lower the costs of making and selling them.
True False
27. Portfolio strategy is apportioning financial resources among divisions to increase financial returns or spread
risks among different businesses.
True False
28. Organizations that use a global strategy typically customize the product to meet the needs of customers in
different countries.
True False
29. With a multidomestic strategy, managers decide to sell the same product with the same marketing approach
in all of the countries in which the product is sold.
True False
30. The advantages and disadvantages of a global strategy are the same as those of a multidomestic strategy.
True False
31. The least complex global operations are exporting and importing.
True False
32. In a strategic alliance, managers pool or share their organization's resources and know-how with those of a
foreign company, and the two organizations share the rewards or risks of starting a new venture in a foreign
country.
True False
33. Franchising is much more expensive than the others because it requires a higher level of foreign investment
and presents managers with many more threats.
True False
34. Normally, the plan for implementing a new strategy requires the development of new functional strategies.
True False
35. The cluster of decisions that managers make to assist the organization to achieve its goals is known as:
A. strategy.
B. scenario planning.
C. organizing.
D. implementation.
E. related diversification.
36. A broad statement of the organization's overriding purpose, intended to identify the organization's products
and customer base, as well as to differentiate the organization from its competitors is known as:
A. a functional-level plan.
B. a mission statement.
C. planning.
D. a focused low-cost strategy.
E. a focused differentiation strategy.
37. An organization should have only one central plan that guides the organization towards its goals. In other
words, the plan should have:
A. accuracy.
B. flexibility.
C. unity.
D. continuity.
E. synergy.
38. The planning process for an organization should be an ongoing process in which managers refine previous
plans and modify these plans at all levels of the organization. Another way of saying this is that the plans
should have:
A. continuity.
B. flexibility.
C. accuracy.
D. unity.
E. synergy.
39. Managers should attempt to collect and to use all available information in the organization's planning
process. Which aspect of planning is being emphasized?
A. Unity
B. Flexibility
C. Continuity
D. Accuracy
E. Synergy
40. Another name for the business level of the organization is the:
A. functional level.
B. departmental level.
C. corporate level.
D. divisional level.
E. first-line level.
41. Which level of a large organization contains the organization's marketing department, R&D department,
and human resources department?
A. Functional
B. First-line
C. Corporate
D. Business
E. Divisional
42. Which plan of the organization contains top management's decisions about the organization's mission,
goals, strategy, and structure?
A. Corporate-level plan
B. Divisional-level plan
C. Functional-level plan
D. Business-level plan
E. Departmental-level plan
43. SynVens, a major retail chain in Hungary, is planning to diversify. It plans to enter the Textiles industry
and aims to be first or second in market share in this industry in five years. Which of the following levels of
plan does this strategy fall under?
A. Business-level plan
B. Corporate-level plan
D. Divisional-level plan
44. Which type of organizational strategy states in which industries and in which markets the organization
intends to compete?
A. Divisional-level strategy
B. Departmental-level strategy
C. Functional-level strategy
D. Corporate-level strategy
E. Business-level strategy
45. General Electric Company sets a goal that every product line of the company should be either first or
second in its industry in market share. What type of goal does this represent?
A. Corporate-level
B. Divisional-level
C. Functional-level
D. Business-level
E. Departmental-level
46. Managers at Ferwn Pvt. Ltd. (currently number two in market share in the local sports equipments
manufacturing industry behind Potlyn) develop strategies to take-over the number-one spot. Under which
of the following category would this strategy fall?
A. Corporate-level
B. Top-management level
C. Functional-level
D. Business-level
47. Which type of strategy states the methods that a division within an organization will use to compete against
its rivals in the industry?
A. Functional-level strategy
C. Corporate-level strategy
D. Business-level strategy
E. Top-level strategy
48. Which type of strategy specifies the activities of managers at the departmental level of the organization?
B. Business-level strategy
D. Divisional-level strategy
49. A plan that is updated and changed every year to take into consideration how the organization's external
and internal environments have changed is known as:
A. A standing plan
B. Scenario planning
C. A rolling plan
D. A single-use plan
E. Standard operating plan
50. ABC Corporation updates its five-year plan annually in order to take into account changing conditions
within the organization and in the organization's external environment. Which of the following best
explains this plan?
A. A standing plan
C. A rolling plan
51. Which of the following are used in situations in which programmed decision making is appropriate?
A. Standing plans
C. Rolling plans
D. Single-use plans
E. Standard operating plans
52. A general guide to action for the managers of an organization is known as:
A. a rolling plan.
B. a rule.
C. a policy.
D. a standard operating procedure.
E. scenario planning.
53. A formal, written guide to action for employees in an organization is known as:
A. a policy.
B. a rule.
C. a standard operating procedure.
D. a rolling plan.
54. A written set of instructions which describes the series of actions that a manager should take in a specific
situation is known as:
A. a policy.
B. a standard operating procedure.
C. scenario planning
D. a rolling plan.
E. a rule.
55. A company has a requirement that any manager who receives a gift from any of the company's customers
that is worth more than $25 must report this gift to the company's human resources department. This
requirement is an example of:
A. a standing plan.
B. a rolling plan.
C. a policy.
D. a rule.
E. a single-use plan.
56. Which of the following is a learning tool that raises the quality of the planning process and can bring real
benefits to an organization?
A. Standing plans
C. Rolling plans
D. Single-use plans
57. To determine an organization's mission, managers must first define its:
A. vision.
B. strategy.
C. tactics.
D. business.
E. competition.
58. Managers at ABC, Inc. analyze the current situation of their organization and then develop plans to help
their organization to accomplish its mission and achieve its goals. This is known as:
A. synergy planning.
B. strategy formulation.
C. functional planning.
D. SWOT analysis.
E. diversification.
59. A group of managers at Acme Explosives analyzes both the internal strengths and weaknesses of their
organization as well as the opportunities and threats of the external environment. What type of analysis is
this?
A. Mission analysis
B. SWOT analysis
C. Functional analysis
D. Diversification
E. Related Diversification
Bruce has been told to reexamine the strategy of his company, Springfield Horse Racing Corporation. Top
management does not want the company caught unaware of any changes occurring. Bruce thinks about
recent events. A horse has had a catastrophic injury in a major race televised to millions of people, and had
to be euthanized. PETA was pressuring the thoroughbred horse business to change its practices. In general,
thoroughbred race horses are well-treated, but many feel that overbreeding for speed at the expense of the
soundness of horses, as well as the use of drugs to mask pain, were negative factors. On the other hand, the
rate at which horses suffered catastrophic injuries during racing was not significantly different from what
it has been, historically, in the U.S. And the horse racing business was bringing in greater profits to the
company, increasing over 25% in the past 5 years. Bruce believes that part of this performance was due to
particularly attractive locations for the tracks the company owns.
60. Which analysis would assist Terry to formulate a strategy for the company?
A. SWOT
B. MBO
C. MBWA
D. SWAT
E. TQM
61. In performing his analysis, what would Bruce include in an environmental scan?
A. Current corporate strategies

B. Opportunities and threats
C. Weaknesses and threats
D. Strengths and weaknesses
E. Current operational plans
62. The negative publicity due to injuries to horses would be classified as:
A. A weakness
B. A strength
C. A threat
D. An alternative
E. An opportunity
63. Increasing profits in the industry can be categorized under which of the following?
A. Weakness
B. Strength
C. Threat
D. Alternative
E. Opportunity
64. While conducting the analysis, the fact that the company's tracks are in attractive locations can be
categorized under which of the following?
A. Weakness
B. Strength
C. Threat
D. Alternative
E. Opportunity
65. While conducting a SWOT analysis, "an obsolete, narrow product line" would be categorized under which
of the following?
A. Strength
B. Weakness
C. Opportunity
D. Threat
E. Alternative
66. While conducting a SWOT analysis, "slower market growth" would be categorized under which of the
following?
A. Strength
B. Weakness
C. Opportunity
D. Threat
E. Alternative
67. Which of the following is directly proportional to profits of a firm in an industry?
A. Rivalry among organizations

B. Barriers to entry
C. Bargaining power of suppliers
D. Bargaining power of customers
E. Threat of substitute products
68. Which of the following is an advantage of the differentiation strategy?
A. Improved efficiency of equipment.

B. Cheaper new products.
C. Higher level of employee skills.
D. Reduced turnover of employees.
E. Greater barriers to entry.
69. Acme Explosives attempts to gain a competitive advantage by driving down its production costs per unit
below those of its competitors. Which of the following strategy is Acme Explosives pursuing?
A. Focused differentiation strategy

B. Low-cost strategy
C. Related diversification strategy
D. Unrelated diversification strategy
E. Concentration on a single business strategy
70. BIC, makers of ballpoint pens and razors, concentrates on making its products cheaper than its rivals.
Which of the following strategy is BIC pursuing?
A. Focused differentiation
B. Diversification
C. Differentiation
D. Low-cost
E. Market development
71. An organization attempts to succeed by distinguishing its products from those of the competition. What
type of strategy is this?
A. Differentiation strategy
72. Coca-Cola spends an enormous amount of money to try to convince consumers that its product is better
than its competitors. Which of the following strategy is Coca-Cola pursuing?
A. Diversification
B. Focused low - cost
C. Differentiation
D. Low-cost
73. BMW produces cars exclusively for high-income customers. Which of the following strategy is BMW
pursuing?
C. Diversification
D. Low-cost
E. Differentiation
74. The Beswick Knife Company aims at a market of hunters, and they try to keep prices lower than
competition. Which of the following strategy is Beswick pursuing?
A. Low-cost
B. Differentiation
C. Focused low-cost
D. Focused differentiation
E. Diversification
75. Concentration on a single industry, vertical integration, diversification, and international expansion are
principle strategies of which of the following level?
A. Functional-level
B. Divisional-level
C. Departmental-level
D. Corporate-level
E. Business-level
76. Which of the following corporate-level strategy becomes appropriate when managers see the need to
reduce the size of their organizations to increase performance?
A. Vertical integration
B. International expansion
C. Diversification
D. Market development
E. Concentration on a single industry
77. An organization purchases one of its suppliers in order to obtain access to the raw materials, which it needs,
for its production. It also decides to sell its products through its own retail outlets. The former is known as
_____ while the latter is known as _____.
A. forward vertical integration; backward vertical integration

B. backward vertical integration; forward vertical integration
C. backward horizontal integration; forward horizontal integration
D. backward vertical integration; forward horizontal integration
E. backward horizontal integration; forward vertical integration
78. Firestone Tire and Rubber Company purchases rubber plantations in Africa so that it will have a source of
supply for its tire manufacturing plants in Akron, Ohio. This is an example of:
A. forward vertical integration.

B. a global strategy.
C. a diversification strategy.
D. backward vertical integration.
E. a focused-differentiation strategy.
79. Firestone Tire and Rubber Company set up a chain of Firestone retail stores to sell its tires to American
consumers. This is an example of:

C. a focused-differentiation strategy.
D. a multidomestic strategy.
E. backward vertical integration.
80. PepsiCo purchased KFC so that it could replace Coke products with Pepsi products in KFC restaurants.
This was an example of:
A. horizontal integration.
B. vertical integration.
C. a low-cost strategy.
D. a global strategy.
E. a diversification strategy.
81. When Gallo purchased a company that makes wine bottles, it was involved in:
B. backward vertical integration.
C. forward vertical integration.
D. upward integration.
E. strategic alliance.
82. When PepsiCo purchased Frito-Lay and expanded its operations into the snack-food business, which of the
following strategy did is pursue?
B. Market penetration
C. Diversification
E. Low-cost strategy
83. XYZ Corporation designs a corporate-level strategy, which includes expanding its operations into a new
type of business for the organization. This is known as:
A. Concentration on a single business

C. Vertical integration
D. Diversification
E. Synergy
84. When General Electric Company expanded its operations by acquiring NBC television. Which of the
following strategy did it pursue?
B. Diversification
C. Market penetration
D. Low-cost strategy
E. Product development
85. Two divisions of a company decide to use the same manufacturing facilities to capitalize on the
organization's excess capacity and to reduce the fixed costs assigned by corporate headquarters. This is an
example of:
A. a diversification strategy.
B. concentration on a single business.
C. international expansion.
D. a focused-differentiation strategy.
E. synergy.
86. ABC Corporation decides to enter a new type of business in order to create a competitive advantage in one
of existing businesses. Which of the following strategy is ABC pursuing?
A. Concentration on a single business.

B. Related diversification
D. International expansion
E. Differentiation
87. Two divisions of a company decide to use the same distribution channels for their products to reduce the
overlap of their marketing efforts. This is an example of:
A. a low-cost strategy.
B. a focused-differentiation strategy.
C. synergy.
D. a differentiation strategy.
E. diversification.
88. Procter & Gamble uses a joint sales force to sell both its laundry detergent products and its bath soap
products to the same supermarket chains. This is an example of:
A. a focused-differentiation strategy.
B. a low-cost strategy.
C. a differentiation strategy.
D. synergy.
89. When Procter & Gamble uses the same distribution system to deliver its oral care products and its hair care
products to drugstore chains, this is an example of:
A. synergy.
D. an unrelated diversification strategy.
E. a differentiation strategy.
90. When an organization enters a new type of industry, which is not similar in any way to the current
businesses of the organization, this is known as which type of strategy?

B. Unrelated diversification
C. International expansion
D. Related diversification
E. Vertical integration
91. When Matsushita sells its TVs and VCRs using the same basic marketing approach in various countries.
Matsushita is pursuing:
A. a multidomestic strategy.
B. a focused low-cost strategy.
C. a global strategy.
D. vertical integration.
92. Unilever sells different products using a different marketing approach in England than it uses when
marketing these products in the United States. This is an example of:
A. vertical integration.
E. unrelated diversification.
93. Jespher Inc. allows Hertonz, a foreign organization, to take charge of both manufacturing and distributing
one or more of its products in Thailand in return for a negotiated fee. Which of the following strategy is
Jespher pursuing?
A. Exporting
B. Licensing
C. Strategic alliance
D. Joint venture
E. Wholly owned subsidy
94. Madison Hotels sells a foreign organization the rights to use its brand name and operating know-how in
return for a lump-sum payment and a share of the profits. Which of the following strategy is Madison
pursuing?
A. Franchising
B. Licensing
D. Joint venture
95. In general, business planning involves three distinct steps. Discuss these three steps as you would apply
them to a realistic business problem of your choosing.
96. Give the four major reasons why planning is important. Give an example of an organization that failed to
plan well, and describe the consequences of that failure.
97. Almost all managers are involved in business planning activities. Discuss why planning is important to
managers within the organization.
98. Business plans differ in the time horizons that they cover. Discuss the three major types of business plans
in terms of their intended duration and explain why all three of these types of plans are important to a
business.
99. Distinguish between a policy, a rule, and a standard operating procedure of an organization and give one
example of each of these types of standing plans that would be used in a business.
100.A SWOT analysis can be an effective way of analyzing both the internal situation of a business and the
external environment in which the organization carries out its business. Discuss what is meant by a SWOT
analysis. Discuss specific examples of each part of SWOT analysis as it would apply to a consumer
packaged goods company.
101.Michael Porter presented four ways in which the top management of an organization could select a
business-level strategy for their organization. Discuss any two of these four ways of increasing the value of
the organization's products and explain the advantages and disadvantages of the strategies that you choose.
102.According to Porter, organizations cannot simultaneously pursue both a low-cost strategy and a
differentiation strategy. Why? Explain how exceptions to this "rule" can be found, and give an example to
illustrate the point.
103.Managers can use four principal corporate-level strategies in order to help their organization to increase its
sales and profits. Discuss any two of these strategies and explain the decisions that a manager would have
to make in a business in order to design a program that used these two strategies.
104.Discuss the advantages and disadvantages of a global strategy and a multidomestic strategy for a business.
When should each of these strategies be used or not used?
105.List the process of strategy implementation.

ch6 Key
1. The cluster of decisions about what goals to pursue, what actions to take, and how to use resources to
(p. 189) achieve goals, is called an organization's strategy.
TRUE
AACSB: Analytic
Bloom's Taxonomy: Knowledge
Difficulty: Easy
Jones - Chapter 06 #1
Learning Objective: 06-1
Topic: Planning and Strategy
2. Planning involves formulation of strategy but not the implementation.

(p. 189)
FALSE
AACSB: Analytic
Difficulty: Easy
3. The last step in the planning process is to determine the organization's mission and goals.
(p. 189)
FALSE
AACSB: Analytic
Difficulty: Easy
4. A broad statement of the organization's purpose, products, and customers is called a mission statement.
(p. 189)
TRUE
AACSB: Analytic
Difficulty: Easy
5. Planning takes place at the corporate level and the business level of the organization, but not at the
(p. 191) functional level of the organization.
FALSE
AACSB: Analytic
Difficulty: Moderate
Topic: Levels of Planning
6. The divisions of the organization exist at the business level of the organization.
(p. 191)
TRUE
AACSB: Analytic
Bloom's Taxonomy: Comprehension
Difficulty: Easy
7. The corporate-level plan of an organization contains the decisions about the organization's mission,
(p. 192) goals, strategy, and structure.
TRUE
AACSB: Analytic
Difficulty: Easy
Topic: Levels and Types of Planning
8. At the functional level, the business-level plan provides the framework within which functional
(p. 193) managers devise their plans.
TRUE
AACSB: Analytic
Difficulty: Easy
9. Functional goals and strategies need not be consistent with divisional goals and strategies.
(p. 193)
FALSE
AACSB: Analytic
Difficulty: Easy
10. In a typical organization, corporate-level planning is the primary responsibility of first-line supervisors.
(p. 192)
FALSE
AACSB: Analytic
Difficulty: Easy
11. In a typical organization, top managers are primarily responsible for planning that takes place at the
(p. 192) business level of the organization.
FALSE
AACSB: Analytic
12. The number of months covered in the typical business plan is known as the time horizon of the plan.
(p. 194)
TRUE
AACSB: Analytic
Difficulty: Easy
Topic: Time Horizons of Plans
13. A business plan that is updated every year depending on the changes in the organization and in the
(p. 194) external environment that have taken place in the previous year is known as a rolling plan.
TRUE
AACSB: Analytic
Difficulty: Easy
14. Standing plans are useful in situations that involve programmed decisions.
(p. 194)
TRUE
AACSB: Analytic
Difficulty: Easy
Topic: Standing Plans and Single-Use Plans
15. A general guide to action within an organization is called an SOP of the organization.
(p. 194)
FALSE
AACSB: Analytic
Difficulty: Easy
16. A written set of instructions that describes the series of actions that a manager should take in a specific
(p. 194) situation is called an SOP of the organization.
TRUE
AACSB: Analytic
Difficulty: Easy
17. Single-use plans are intended to be used primarily in programmed decision-making situations.
(p. 195)
FALSE
AACSB: Analytic
Difficulty: Easy
18. Organizational goals should be both challenging and realistic.
(p. 196)
TRUE
AACSB: Analytic
Difficulty: Easy
Topic: Establishing Major Goals
19. Strategy formulation begins with managers systematically analyzing the factors or forces inside an
(p. 196) organization and outside in the global environment that affect the organization's ability to meet its goals
now and in the future.
TRUE
AACSB: Analytic
Difficulty: Easy
Topic: Formulating Strategy
20. While conducting a SWOT analysis, the strengths and weaknesses are considered the external
(p. 197) environment factors affecting the organization.
FALSE
AACSB: Analytic
Difficulty: Easy
Topic: SWOT Analysis
21. Scenario planning is often used to strengthen SWOT analysis.

(p. 197)
TRUE
AACSB: Analytic
Difficulty: Easy
22. According to Michael Porter's theory, it is typically possible for managers to pursue both a low-cost
(p. 203) strategy and a differentiation strategy at the same time.
FALSE
AACSB: Analytic
Difficulty: Easy
Topic: "Stuck in the Middle"
23. Managers of XYZ Company attempt to give the organization a competitive advantage by driving
(p. 201- production costs to as low a level as possible. We can say that the organization is pursuing a
202)
differentiation strategy.
FALSE
AACSB: Analytic
Topic: Low-Cost Strategy
24. Corporate level strategy involves choosing the industry in which a company will compete.
(p. 206)
TRUE
AACSB: Analytic
Difficulty: Easy
Topic: Formulating Corporate-Level Strategies
25. When a company is successful in pursuing the strategy of concentration on a single industry, it uses its
(p. 207) functional skills to develop new products or expand its locations.
TRUE
AACSB: Analytic
Difficulty: Easy
Topic: Concentration on a Single Industry
26. The reason managers pursue vertical integration is that it allows them either to add value to their
(p. 208) products by making them special or unique or to lower the costs of making and selling them.
TRUE
AACSB: Analytic
Difficulty: Easy
Topic: Vertical Integration
27. Portfolio strategy is apportioning financial resources among divisions to increase financial returns or
(p. 210- spread risks among different businesses.
211)
TRUE
AACSB: Analytic
Difficulty: Easy
Topic: Unrelated Diversification
28. Organizations that use a global strategy typically customize the product to meet the needs of customers
(p. 211) in different countries.
FALSE
AACSB: Analytic
Difficulty: Easy
Topic: International Expansion
29. With a multidomestic strategy, managers decide to sell the same product with the same marketing
(p. 211) approach in all of the countries in which the product is sold.
FALSE
AACSB: Analytic
Difficulty: Easy
30. The advantages and disadvantages of a global strategy are the same as those of a multidomestic
(p. 212) strategy.
FALSE
AACSB: Analytic
31. The least complex global operations are exporting and importing.
(p. 213)
TRUE
AACSB: Analytic
Difficulty: Easy
Topic: Choosing A Way to Expand Internationally
32. In a strategic alliance, managers pool or share their organization's resources and know-how with those
(p. 214- of a foreign company, and the two organizations share the rewards or risks of starting a new venture in a
215)
foreign country.
TRUE
AACSB: Analytic
Difficulty: Easy
33. Franchising is much more expensive than the others because it requires a higher level of foreign
(p. 215) investment and presents managers with many more threats.
FALSE
AACSB: Analytic
Difficulty: Easy
34. Normally, the plan for implementing a new strategy requires the development of new functional
(p. 216) strategies.
TRUE
AACSB: Analytic
Difficulty: Easy
Topic: Planning and Implementing Strategy
35. The cluster of decisions that managers make to assist the organization to achieve its goals is known as:
(p. 189)
A. strategy.
B. scenario planning.
C. organizing.
D. implementation.
E. related diversification.
A strategy is a cluster of related managerial decisions and actions to help an organization attain one of
its goals.
AACSB: Analytic
Difficulty: Easy
36. A broad statement of the organization's overriding purpose, intended to identify the organization's
(p. 189) products and customer base, as well as to differentiate the organization from its competitors is known
as:
A. a functional-level plan.
B. a mission statement.
C. planning.
D. a focused low-cost strategy.
E. a focused differentiation strategy.
A mission statement is a broad declaration of an organization's overriding purpose, what it is seeking to

achieve from its activities; this statement is also intended to identify what is unique or important about
its products to its employees and customers as well as to distinguish or differentiate the organization in
some ways from its competitors.
AACSB: Analytic
Difficulty: Easy
37. An organization should have only one central plan that guides the organization towards its goals. In
(p. 191) other words, the plan should have:
A. accuracy.
B. flexibility.
C. unity.
D. continuity.
E. synergy.
Unity means that at any one time only one central, guiding plan is put into operation to achieve an
organizational goal.
AACSB: Analytic
Difficulty: Easy
Topic: Why Planning Is Important
38. The planning process for an organization should be an ongoing process in which managers refine
(p. 191) previous plans and modify these plans at all levels of the organization. Another way of saying this is
that the plans should have:
A. continuity.
B. flexibility.
C. accuracy.
D. unity.
E. synergy.
Continuity means that planning is an ongoing process in which managers build and refine previous
plans and continually modify plans at all levels—corporate, business, and functional—so that they fit
together into one broad framework.
AACSB: Analytic
Difficulty: Easy
39. Managers should attempt to collect and to use all available information in the organization's planning
(p. 191) process. Which aspect of planning is being emphasized?
A. Unity
B. Flexibility
C. Continuity
D. Accuracy
E. Synergy
Accuracy means that managers need to make every attempt to collect and utilize all available
information at their disposal in the planning process.
AACSB: Analytic
Difficulty: Easy
40. Another name for the business level of the organization is the:
(p. 191)
A. functional level.
B. departmental level.
C. corporate level.
D. divisional level.
E. first-line level.
In large organizations planning usually takes place at three levels of management: corporate, business or
division, and department or functional.
AACSB: Analytic
Difficulty: Easy
41. Which level of a large organization contains the organization's marketing department, R&D department,
(p. 188) and human resources department?
A. Functional
B. First-line
C. Corporate
D. Business
E. Divisional
Each division has its own set of functions or departments, such as manufacturing, marketing, human
resource management (HRM), and research and development (R&D).
AACSB: Analytic
Difficulty: Easy
42. Which plan of the organization contains top management's decisions about the organization's mission,
(p. 192) goals, strategy, and structure?
A. Corporate-level plan
B. Divisional-level plan
D. Business-level plan
The corporate-level plan contains top management's decisions concerning the organization's mission
and goals, overall (corporate-level) strategy, and structure.
AACSB: Analytic
Difficulty: Easy
43. SynVens, a major retail chain in Hungary, is planning to diversify. It plans to enter the Textiles industry
(p. 192) and aims to be first or second in market share in this industry in five years. Which of the following
levels of plan does this strategy fall under?
A. Business-level plan
B. Corporate-level plan
D. Divisional-level plan
Corporate-level strategy specifies in which industries and national markets an organization intends to
compete and why.
AACSB: Reflective Thinking

Bloom's Taxonomy: Application
44. Which type of organizational strategy states in which industries and in which markets the organization
(p. 192) intends to compete?
A. Divisional-level strategy
C. Functional-level strategy
D. Corporate-level strategy
E. Business-level strategy
Corporate-level strategy specifies in which industries and national markets an organization intends to
compete and why.
AACSB: Analytic
Difficulty: Easy
45. General Electric Company sets a goal that every product line of the company should be either first or
(p. 192) second in its industry in market share. What type of goal does this represent?
A. Corporate-level
B. Divisional-level
C. Functional-level
D. Business-level
One of the goals stated in GE's corporate-level plan is that GE should be first or second in market share
in every industry in which it competes.
AACSB: Analytic
46. Managers at Ferwn Pvt. Ltd. (currently number two in market share in the local sports equipments
(p. 193) manufacturing industry behind Potlyn) develop strategies to take-over the number-one spot. Under
which of the following category would this strategy fall?
A. Corporate-level
B. Top-management level
C. Functional-level
D. Business-level
Business-level strategy outlines the specific methods a division, business unit, or organization will use
to compete effectively against its rivals in an industry.

47. Which type of strategy states the methods that a division within an organization will use to compete
(p. 193) against its rivals in the industry?
D. Business-level strategy
Business-level strategy outlines the specific methods a division, business unit, or organization will use
to compete effectively against its rivals in an industry.
AACSB: Analytic
Difficulty: Easy
48. Which type of strategy specifies the activities of managers at the departmental level of the organization?
(p. 193)
B. Business-level strategy
D. Divisional-level strategy
Functional-level strategy is a plan of action that managers of individual functions (such as

manufacturing or marketing) can take to improve the ability of each function to perform its task-specific
activities in ways that add value to an organization's goods and services and thereby increase the value
customers receive.
AACSB: Analytic
Difficulty: Easy
49. A plan that is updated and changed every year to take into consideration how the organization's external
(p. 194) and internal environments have changed is known as:
A. A standing plan
C. A rolling plan
A rolling plan is a plan that is updated and amended every year to take account of changing conditions
in the external environment.
AACSB: Analytic
Difficulty: Easy
50. ABC Corporation updates its five-year plan annually in order to take into account changing conditions
(p. 194) within the organization and in the organization's external environment. Which of the following best
explains this plan?
A. A standing plan
C. A rolling plan
A rolling plan is a plan that is updated and amended every year to take account of changing conditions
in the external environment.
AACSB: Analytic
Difficulty: Easy
51. Which of the following are used in situations in which programmed decision making is appropriate?
(p. 194)
A. Standing plans
C. Rolling plans
D. Single-use plans
Standing plans are used in situations in which programmed decision making is appropriate.
AACSB: Analytic
Difficulty: Easy
52. A general guide to action for the managers of an organization is known as:
(p. 194)
A. a rolling plan.
B. a rule.
C. a policy.
D. a standard operating procedure.
A policy is a general guide to action.
AACSB: Analytic
Difficulty: Easy
53. A formal, written guide to action for employees in an organization is known as:
(p. 194)
A. a policy.
B. a rule.
C. a standard operating procedure.
D. a rolling plan.
A rule is a formal, written guide to action.
AACSB: Analytic
Difficulty: Easy
54. A written set of instructions which describes the series of actions that a manager should take in a
(p. 194) specific situation is known as:
A. a policy.
B. a standard operating procedure.
C. scenario planning
D. a rolling plan.
E. a rule.
A standing operating procedure is a written instruction describing the exact series of actions that should
be followed in a specific situation.
AACSB: Analytic
Difficulty: Easy
55. A company has a requirement that any manager who receives a gift from any of the company's
(p. 194) customers that is worth more than $25 must report this gift to the company's human resources
department. This requirement is an example of:
A. a standing plan.
B. a rolling plan.
C. a policy.
D. a rule.
E. a single-use plan.
A rule is a formal, written guide to action.

56. Which of the following is a learning tool that raises the quality of the planning process and can bring
(p. 195) real benefits to an organization?
A. Standing plans
C. Rolling plans
D. Single-use plans
Scenario planning is a learning tool that raises the quality of the planning process and can bring real
benefits to an organization.
AACSB: Analytic
Difficulty: Easy
57. To determine an organization's mission, managers must first define its:

(p. 196)
A. vision.
B. strategy.
C. tactics.
D. business.
E. competition.
To determine an organization's mission —the overriding reason it exists to provide customers with
goods or services they value—managers must first define its business so that they can identify what
kind of value customers are receiving.
AACSB: Analytic
Topic: Defining the Business
58. Managers at ABC, Inc. analyze the current situation of their organization and then develop plans to help
(p. 196) their organization to accomplish its mission and achieve its goals. This is known as:
A. synergy planning.
B. strategy formulation.
C. functional planning.
D. SWOT analysis.
E. diversification.
In strategy formulation managers work to develop the set of strategies (corporate, divisional, and
functional) that will allow an organization to accomplish its mission and achieve its goals. Strategy
formulation begins with managers systematically analyzing the factors or forces inside an organization
and outside in the global environment that affect the organization's ability to meet its goals now and in
the future.
AACSB: Analytic
Topic: Formulating Strategy
59. A group of managers at Acme Explosives analyzes both the internal strengths and weaknesses of their
(p. 197) organization as well as the opportunities and threats of the external environment. What type of analysis
is this?
A. Mission analysis
B. SWOT analysis
C. Functional analysis
D. Diversification
E. Related Diversification
SWOT analysis is a planning exercise in which managers identify internal organizational strengths (S)
and weaknesses (W) and external environmental opportunities (O) and threats (T).
AACSB: Analytic
Bruce has been told to reexamine the strategy of his company, Springfield Horse Racing Corporation.
Top management does not want the company caught unaware of any changes occurring. Bruce thinks
about recent events. A horse has had a catastrophic injury in a major race televised to millions of
people, and had to be euthanized. PETA was pressuring the thoroughbred horse business to change its
practices. In general, thoroughbred race horses are well-treated, but many feel that overbreeding for
speed at the expense of the soundness of horses, as well as the use of drugs to mask pain, were negative
factors. On the other hand, the rate at which horses suffered catastrophic injuries during racing was not
significantly different from what it has been, historically, in the U.S. And the horse racing business was
bringing in greater profits to the company, increasing over 25% in the past 5 years. Bruce believes that
part of this performance was due to particularly attractive locations for the tracks the company owns.
Jones - Chapter 06
60. Which analysis would assist Terry to formulate a strategy for the company?
(p. 197)
A. SWOT
B. MBO
C. MBWA
D. SWAT
E. TQM
Strategy formulation begins with managers systematically evaluating forces and factors inside and
outside the organization that affect its abilities to meet goals now and in the future. SWOT analysis is
one technique managers can use to analyze these factors.

61. In performing his analysis, what would Bruce include in an environmental scan?
(p. 197)
A. Current corporate strategies

B. Opportunities and threats
C. Weaknesses and threats
D. Strengths and weaknesses
E. Current operational plans
Opportunities and threats are by definition environmental (external).

Difficulty: Hard
62. The negative publicity due to injuries to horses would be classified as:
(p. 197)
A. A weakness
B. A strength
C. A threat
D. An alternative
E. An opportunity
Negative publicity is an external, negative factor, and therefore a threat.

Difficulty: Hard
63. Increasing profits in the industry can be categorized under which of the following?
(p. 197)
A. Weakness
B. Strength
C. Threat
D. Alternative
E. Opportunity
Increasing profits in the industry is an external, positive factor and thus is an opportunity.

Difficulty: Hard
64. While conducting the analysis, the fact that the company's tracks are in attractive locations can be
(p. 197) categorized under which of the following?
A. Weakness
B. Strength
C. Threat
D. Alternative
E. Opportunity
Having tracks in attractive locations is an internal, positive factor and is thus a strength.

Difficulty: Hard
65. While conducting a SWOT analysis, "an obsolete, narrow product line" would be categorized under
(p. 198 which of the following?
(Table
6.1))
A. Strength
B. Weakness
C. Opportunity
D. Threat
E. Alternative
An obsolete, narrow product line is an internal, negative factor, and therefore a weakness.
AACSB: Analytic
66. While conducting a SWOT analysis, "slower market growth" would be categorized under which of the
(p. 198 following?
(Table
6.1))
A. Strength
B. Weakness
C. Opportunity
D. Threat
E. Alternative
Slower market growth is an external, negative factor, and therefore a threat.

67. Which of the following is directly proportional to profits of a firm in an industry?

(p. 200-
201)
A. Rivalry among organizations
B. Barriers to entry
C. Bargaining power of suppliers
D. Bargaining power of customers
E. Threat of substitute products
Higher the barriers to entry, higher the profits because there is less competition in the industry. All the
other distracters are inversely proportional to profits. High rivalry, low profits; High bargaining power
of supplier, low profits; High bargaining power of customers, low profits; High threat of substitute
products, low profits.
AACSB: Analytic
Difficulty: Hard
Topic: The Five Forces Model
68. Which of the following is an advantage of the differentiation strategy?

(p. 202)
A. Improved efficiency of equipment.

B. Cheaper new products.
C. Higher level of employee skills.
D. Reduced turnover of employees.
E. Greater barriers to entry.
Differentiation makes industry entry difficult because new companies have no brand name to help them
compete and customers don't perceive other products to be close substitutes, so this also allows for
premium pricing and results in high profits.
AACSB: Analytic
Topic: Differentiation Strategy
69. Acme Explosives attempts to gain a competitive advantage by driving down its production costs per
(p. 201- unit below those of its competitors. Which of the following strategy is Acme Explosives pursuing?
202)
A. Focused differentiation strategy

E. Concentration on a single business strategy
With a low-cost strategy, managers try to gain a competitive advantage by focusing the energy of all
the organization's departments or functions on driving the company's costs down below the costs of its
industry rivals.
AACSB: Analytic
70. BIC, makers of ballpoint pens and razors, concentrates on making its products cheaper than its rivals.
(p. 202) Which of the following strategy is BIC pursuing?
B. Diversification
C. Differentiation
D. Low-cost
BIC pursues a low-cost strategy; it offers customers razor blades priced lower than Gillette's and
ballpoint pens less expensive than those offered by Cross or Waterman.
AACSB: Analytic
Difficulty: Easy
71. An organization attempts to succeed by distinguishing its products from those of the competition. What
(p. 202) type of strategy is this?
A. Differentiation strategy
With a differentiation strategy, managers try to gain a competitive advantage by focusing all the
energies of the organization's departments or functions on distinguishing the organization's products
from those of competitors on one or more important dimensions, such as product design, quality, or
after-sales service and support.
AACSB: Analytic
Difficulty: Easy
72. Coca-Cola spends an enormous amount of money to try to convince consumers that its product is better
(p. 202) than its competitors. Which of the following strategy is Coca-Cola pursuing?
A. Diversification
C. Differentiation
D. Low-cost
Coca-Cola pursues a strategy of differentiation. It spends enormous amounts of money on advertising to

differentiate, and create a unique image for its products.
AACSB: Analytic
Difficulty: Easy
73. BMW produces cars exclusively for high-income customers. Which of the following strategy is BMW
(p. 203) pursuing?
C. Diversification
D. Low-cost
E. Differentiation
BMW, for example, pursues a focused differentiation strategy, producing cars exclusively for higher-
income customers.
AACSB: Analytic
Topic: Focused Low-Cost and Focused Differentiation Strategies
74. The Beswick Knife Company aims at a market of hunters, and they try to keep prices lower than
(p. 203) competition. Which of the following strategy is Beswick pursuing?
A. Low-cost
B. Differentiation
C. Focused low-cost
D. Focused differentiation
E. Diversification
Companies pursuing a focused low-cost strategy serve one or a few segments of the overall market and
aim to make their organization the lowest-cost company serving that segment.

Topic: Focused Low-Cost and Focused Differentiation Strategies
75. Concentration on a single industry, vertical integration, diversification, and international expansion are
(p. 206) principle strategies of which of the following level?
A. Functional-level
B. Divisional-level
C. Departmental-level
D. Corporate-level
E. Business-level
The principal corporate-level strategies that managers use to help a company grow and keep it at the top
of its industry, or to help it retrench and reorganize to stop its decline, are (1) concentration on a single
industry, (2) vertical integration, (3) diversification, and (4) international expansion.
AACSB: Analytic
Difficulty: Easy
76. Which of the following corporate-level strategy becomes appropriate when managers see the need to
(p. 207) reduce the size of their organizations to increase performance?
C. Diversification
E. Concentration on a single industry
Concentration on a single industry becomes an appropriate corporate-level strategy when managers see
the need to reduce the size of their organizations to increase performance.
AACSB: Analytic
Topic: Concentration on a Single Industry
77. An organization purchases one of its suppliers in order to obtain access to the raw materials, which it
(p. 207) needs, for its production. It also decides to sell its products through its own retail outlets. The former is
known as _____ while the latter is known as _____.
A. forward vertical integration; backward vertical integration

B. backward vertical integration; forward vertical integration
C. backward horizontal integration; forward horizontal integration
D. backward vertical integration; forward horizontal integration
E. backward horizontal integration; forward vertical integration
Vertical integration is a corporate-level strategy in which a company expands its business operations
either backward into a new industry that produces inputs for the company's products (backward vertical
integration) or forward into a new industry that uses, distributes, or sells the company's products
(forward vertical integration).
AACSB: Analytic
Difficulty: Easy
78. Firestone Tire and Rubber Company purchases rubber plantations in Africa so that it will have a source
(p. 207) of supply for its tire manufacturing plants in Akron, Ohio. This is an example of:

D. backward vertical integration.
E. a focused-differentiation strategy.
Purchasing firms that produces inputs for the company's products is backward vertical integration.

79. Firestone Tire and Rubber Company set up a chain of Firestone retail stores to sell its tires to American
(p. 207) consumers. This is an example of:

C. a focused-differentiation strategy.
E. backward vertical integration.
Setting up stores that sell the company's own products makes it forward vertical integration.

80. PepsiCo purchased KFC so that it could replace Coke products with Pepsi products in KFC restaurants.
(p. 207) This was an example of:
B. vertical integration.
C. a low-cost strategy.
D. a global strategy.
Purchasing outlets that sells the company's products makes it forward vertical integration.

81. When Gallo purchased a company that makes wine bottles, it was involved in:
(p. 207)
B. backward vertical integration.
C. forward vertical integration.
D. upward integration.
E. strategic alliance.
Purchasing a supplier of raw materials is backward vertical integration.

82. When PepsiCo purchased Frito-Lay and expanded its operations into the snack-food business, which of
(p. 209) the following strategy did is pursue?
B. Market penetration
C. Diversification
E. Low-cost strategy
Diversification is the corporate-level strategy of expanding a company's business operations into a

new industry in order to produce new kinds of valuable goods or services. Example includes PepsiCo's
diversification into the snack-food business with the purchase of Frito Lay.
AACSB: Analytic
Topic: Diversification
83. XYZ Corporation designs a corporate-level strategy, which includes expanding its operations into a new
(p. 209) type of business for the organization. This is known as:

D. Diversification
E. Synergy
Diversification is the corporate-level strategy of expanding a company's business operations into a new
industry in order to produce new kinds of valuable goods or services.
AACSB: Analytic
Difficulty: Easy
84. When General Electric Company expanded its operations by acquiring NBC television. Which of the
(p. 209) following strategy did it pursue?
B. Diversification
C. Market penetration
D. Low-cost strategy
E. Product development
Diversification is the corporate-level strategy of expanding a company's business operations into a new
industry in order to produce new kinds of valuable goods or services.
AACSB: Analytic
Difficulty: Easy
85. Two divisions of a company decide to use the same manufacturing facilities to capitalize on the
(p. 209) organization's excess capacity and to reduce the fixed costs assigned by corporate headquarters. This is
an example of:
A. a diversification strategy.
B. concentration on a single business.
C. international expansion.
D. a focused-differentiation strategy.
E. synergy.
Synergy is obtained when the value created by two divisions cooperating is greater than the value
that would be created if the two divisions operated separately and independently. Two or more of
the divisions of a diversified company can utilize the same manufacturing facilities, distribution
channels, or advertising campaigns—that is, share functional activities. Each division has to invest
fewer resources in a shared functional activity than it would have to invest if it performed the functional
activity by itself.
AACSB: Analytic
Topic: Related Diversification
86. ABC Corporation decides to enter a new type of business in order to create a competitive advantage in
(p. 209) one of existing businesses. Which of the following strategy is ABC pursuing?
A. Concentration on a single business.

B. Related diversification
D. International expansion
E. Differentiation
Related diversification is the strategy of entering a new business or industry to create a competitive
advantage in one or more of an organization's existing divisions or businesses.
AACSB: Analytic
87. Two divisions of a company decide to use the same distribution channels for their products to reduce
(p. 209) the overlap of their marketing efforts. This is an example of:
A. a low-cost strategy.
C. synergy.
D. a differentiation strategy.
E. diversification.
Synergy is obtained when the value created by two divisions cooperating is greater than the value
that would be created if the two divisions operated separately and independently. Two or more of
the divisions of a diversified company can utilize the same manufacturing facilities, distribution
channels, or advertising campaigns—that is, share functional activities. Each division has to invest
fewer resources in a shared functional activity than it would have to invest if it performed the functional
activity by itself.
AACSB: Analytic
88. Procter & Gamble uses a joint sales force to sell both its laundry detergent products and its bath soap
(p. 209) products to the same supermarket chains. This is an example of:
A. a focused-differentiation strategy.
B. a low-cost strategy.
C. a differentiation strategy.
D. synergy.
The way Procter & Gamble's disposable diaper and paper towel divisions cooperate is a good example
of the successful production of synergies. These divisions share the costs of procuring inputs such
as paper and packaging, a joint sales force sells both products to retail outlets, and both products are
shipped using the same distribution system.
AACSB: Analytic
89. When Procter & Gamble uses the same distribution system to deliver its oral care products and its hair
(p. 209) care products to drugstore chains, this is an example of:
A. synergy.
D. an unrelated diversification strategy.
The way Procter & Gamble's disposable diaper and paper towel divisions cooperate is a good example
of the successful production of synergies. These divisions share the costs of procuring inputs such
as paper and packaging, a joint sales force sells both products to retail outlets, and both products are
shipped using the same distribution system.
AACSB: Analytic
90. When an organization enters a new type of industry, which is not similar in any way to the current
(p. 210) businesses of the organization, this is known as which type of strategy?

B. Unrelated diversification
C. International expansion
D. Related diversification
E. Vertical integration
Managers pursue unrelated diversification when they establish divisions or buy companies in new
industries that are not linked in any way to their current businesses or industries.
AACSB: Analytic
Topic: Unrelated Diversification
91. When Matsushita sells its TVs and VCRs using the same basic marketing approach in various countries.
(p. 211) Matsushita is pursuing:
A. a multidomestic strategy.
D. vertical integration.
If managers decide that their organization should sell the same standardized product in each national
market in which it competes, and use the same basic marketing approach, they adopt a global strategy.
AACSB: Analytic
92. Unilever sells different products using a different marketing approach in England than it uses when
(p. 211) marketing these products in the United States. This is an example of:
A. vertical integration.
E. unrelated diversification.
If managers decide to customize products and marketing strategies to specific national conditions, they
adopt a multidomestic strategy.
AACSB: Analytic
93. Jespher Inc. allows Hertonz, a foreign organization, to take charge of both manufacturing and
(p. 214) distributing one or more of its products in Thailand in return for a negotiated fee. Which of the
following strategy is Jespher pursuing?
A. Exporting
B. Licensing
D. Joint venture
In licensing , a company (the licenser) allows a foreign organization (the licensee) to take charge of both
manufacturing and distributing one or more of its products in the licensee's country or world region in
return for a negotiated fee.

94. Madison Hotels sells a foreign organization the rights to use its brand name and operating know-how in
(p. 214) return for a lump-sum payment and a share of the profits. Which of the following strategy is Madison
pursuing?
A. Franchising
B. Licensing
D. Joint venture
In franchising , a company (the franchiser) sells to a foreign organization (the franchisee) the rights
to use its brand name and operating know-how in return for a lump-sum payment and a share of the
franchiser's profits.

95. In general, business planning involves three distinct steps. Discuss these three steps as you would apply
(p. 189) them to a realistic business problem of your choosing.
Business planning involves determining the mission and goals of the organization, formulating a
business strategy to carry out this mission and to attempt to achieve these goals, and implementing this
business strategy.

96. Give the four major reasons why planning is important. Give an example of an organization that failed
(p. 190- to plan well, and describe the consequences of that failure.
191)
The reasons are: (1) Planning gives a sense of direction and purpose; (2) Planning gets managers to
participate in decision-making about goals and strategies; (3) Planning helps coordinate managers and
units; and (4) Planning can be used as a control mechanism.

Difficulty: Hard
97. Almost all managers are involved in business planning activities. Discuss why planning is important to
(p. 190- managers within the organization.
191)
Planning provides an opportunity for managers to become involved in the important decisions of the
organization. Planning can give the organization a sense of purpose and direction to its activities; it
can help managers in different departments of the organization to coordinate their activities toward a
common set of goals; and it can help with the controlling function of the organization by providing
benchmarks against which the performance of managers can be evaluated.
AACSB: Analytic
98. Business plans differ in the time horizons that they cover. Discuss the three major types of business
(p. 194) plans in terms of their intended duration and explain why all three of these types of plans are important
to a business.
Long-term plans have time horizons of 5 years or more, while short-term plans have horizons of 1 year
or less. In general, corporate- and business-level plans involve long- and intermediate-term horizons,
while short-term horizons are most appropriate for functional plans.
AACSB: Analytic
99. Distinguish between a policy, a rule, and a standard operating procedure of an organization and give one
(p. 194) example of each of these types of standing plans that would be used in a business.
A policy is a general guide to action. A rule is a formal, written guide to action. An SOP is a written
instruction describing an exact series of actions that should be followed in particular circumstances.

100. A SWOT analysis can be an effective way of analyzing both the internal situation of a business and
(p. 197) the external environment in which the organization carries out its business. Discuss what is meant by
a SWOT analysis. Discuss specific examples of each part of SWOT analysis as it would apply to a
consumer packaged goods company.
SWOT (Strengths, Weaknesses, Opportunities, Threats) is a form of analysis that a firm can use as its
first step in determining what strategy is most likely to help it achieve its mission and goals.
Strengths and weaknesses are internal to the organization. Opportunities and threats are external.

Difficulty: Hard
101. Michael Porter presented four ways in which the top management of an organization could select a
(p. 201- business-level strategy for their organization. Discuss any two of these four ways of increasing the value
203)
of the organization's products and explain the advantages and disadvantages of the strategies that you
choose.
Managers can select a low-cost strategy, a differentiation strategy, a focused low-cost strategy, or a
focused differentiation strategy.
With a low-cost strategy, managers try to gain a competitive advantage by focusing the energy of all
the organization's departments or functions on driving the company's costs down below the costs of its
industry rivals. When existing companies have low costs and can charge low prices, it is difficult for
new companies to enter the industry because entering is always an expensive process.
With a differentiation strategy, managers try to gain a competitive advantage by focusing all the
energies of the organization's departments or functions on distinguishing the organization's products
from those of competitors on one or more important dimensions, such as product design, quality, or
after-sales service and support. Organizations that successfully pursue a differentiation strategy may be
able to charge a premium price for their products, a price usually much higher than the price charged by
a low-cost organization. The premium price allows organizations pursuing a differentiation strategy to
recoup their higher costs. Differentiation makes industry entry difficult because new companies have no
brand name to help them compete and customers don't perceive other products to be close substitutes, so
this also allows for premium pricing and results in high profits.
Managers pursuing a focused low-cost strategy serve one or a few segments of the overall market and
aim to make their organization the lowest-cost company serving that segment.
Managers pursuing a focused differentiation strategy serve just one or a few segments of the market and
aim to make their organization the most differentiated company serving that segment.
AACSB: Analytic
Topic: Formulating Business-Level Strategies
102. According to Porter, organizations cannot simultaneously pursue both a low-cost strategy and a
(p. 202- differentiation strategy. Why? Explain how exceptions to this "rule" can be found, and give an example
203)
to illustrate the point.
According to Porter's theory, managers cannot simultaneously pursue both a low-cost strategy and
a differentiation strategy. Porter believed that differentiation always raises costs and thus requires
premium pricing to recover those costs. However, organizations with extremely efficient production
systems (such as Toyota) have been able to pursue both strategies simultaneously by keeping costs
down while providing a superior design and quality product.
AACSB: Analytic
Topic: "Stuck in the Middle"
103. Managers can use four principal corporate-level strategies in order to help their organization to increase
(p. 206- its sales and profits. Discuss any two of these strategies and explain the decisions that a manager would
211)
have to make in a business in order to design a program that used these two strategies.
Managers can concentrate the organization on a single business, can use a diversification strategy, can
expand internationally, or can use either a backward or forward vertical integration strategy.
1. Concentration on a single industry becomes an appropriate corporate-level strategy when managers
see the need to reduce the size of their organizations to increase performance. Managers may decide
to get out of certain industries when, for example, the business-level strategy pursued by a particular
division no longer works and the division has lost its competitive advantage. To improve performance,
managers now sell off low-performing divisions, concentrate remaining organizational resources in one
industry, and try to develop new products customers want to buy. By contrast, when organizations are
performing effectively, they often decide to enter new industries in which they can use their resources to
create more valuable products.
2. When an organization is performing well in its industry, managers often see new opportunities to
create value by either producing the inputs it uses to make its products or distributing and selling its
products to customers. Vertical integration is a corporate-level strategy in which a company expands
its business operations either backward into a new industry that produces inputs for the company's
products (backward vertical integration) or forward into a new industry that uses, distributes, or sells
the company's products (forward vertical integration). The reason managers pursue vertical integration
is that it allows them either to add value to their products by making them special or unique or to lower
the costs of making and selling them. Although vertical integration can strengthen an organization's
competitive advantage and increase its performance, it can also reduce an organization's flexibility to
respond to changing environmental conditions and create threats that must be countered by changing the
organization's strategy.
3. Diversification is the corporate-level strategy of expanding a company's business operations into a
new industry in order to produce new kinds of valuable goods or services. There are two main kinds of
diversification: related and unrelated.
4. If managers decide that their organization should sell the same standardized product in each national
market in which it competes, and use the same basic marketing approach, they adopt a global strategy.
If managers decide to customize products and marketing strategies to specific national conditions, they
adopt a multidomestic strategy.
AACSB: Analytic
104. Discuss the advantages and disadvantages of a global strategy and a multidomestic strategy for a
(p. 211- business. When should each of these strategies be used or not used?
212)
Global strategies and multidomestic strategies represent two extremes of the dimension of how much an
organization customizes features of its products and marketing to different countries. Global strategies
are good because they are cheaper, but differentiated products sold by local organizations can hurt the
organization. Multidomestic strategies have the opposite advantages and disadvantages.
AACSB: Analytic
Difficulty: Hard
105. List the process of strategy implementation.
(p. 216)
Strategy implementation is a five-step process:

1. Allocating responsibility for implementation to the appropriate individuals or groups.
2. Drafting detailed action plans that specify how a strategy is to be implemented.
3. Establishing a timetable for implementation that includes precise, measurable goals linked to the
attainment of the action plan.
4. Allocating appropriate resources to the responsible individuals or groups.
5. Holding specific individuals or groups responsible for the attainment of corporate, divisional, and
functional goals.
AACSB: Analytic
Topic: Planning and Implementing Strategy
ch6 Summary
Category # of Questions
AACSB: Analytic 85
AACSB: Reflective Thinking 20
Bloom's Taxonomy: Application 17
Bloom's Taxonomy: Comprehension 27
Bloom's Taxonomy: Knowledge 61
Difficulty: Easy 55
Difficulty: Hard 8
Difficulty: Moderate 42
Jones - Chapter 06 106
Learning Objective: 06-1 60
Topic: "Stuck in the Middle" 2
Topic: Choosing A Way to Expand Internationally 5
Topic: Concentration on a Single Industry 2
Topic: Defining the Business 1
Topic: Differentiation Strategy 3
Topic: Diversification 3
Topic: Establishing Major Goals 1
Topic: Focused Low-Cost and Focused Differentiation Strategies 2
Topic: Formulating Business-Level Strategies 1
Topic: Formulating Corporate-Level Strategies 3
Topic: Formulating Strategy 2
Topic: International Expansion 6
Topic: Levels and Types of Planning 12
Topic: Levels of Planning 4
Topic: Low-Cost Strategy 3
Topic: Planning and Implementing Strategy 2
Topic: Planning and Strategy 7
Topic: Related Diversification 5
Topic: Standing Plans and Single-Use Plans 11
Topic: SWOT Analysis 11
Topic: The Five Forces Model 1
Topic: Time Horizons of Plans 5
Topic: Unrelated Diversification 2
Topic: Vertical Integration 6
Topic: Why Planning Is Important 5

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ch6

A. Current corporate strategies

A. Rivalry among organizations

A. Improved efficiency of equipment.

A. Focused differentiation strategy

A. forward vertical integration; backward vertical integration

A. forward vertical integration.

A. forward vertical integration.

A. Concentration on a single business

A. Concentration on a single business.

A. Concentration on a single business

105.List the process of strategy implementation.

2. Planning involves formulation of strategy but not the implementation.

21. Scenario planning is often used to strengthen SWOT analysis.

A mission statement is a broad declaration of an organization's overriding purpose, what it is seeking to

AACSB: Reflective Thinking

AACSB: Reflective Thinking

Functional-level strategy is a plan of action that managers of individual functions (such as

A policy is a general guide to action.

A rule is a formal, written guide to action.

A rule is a formal, written guide to action.

AACSB: Reflective Thinking

57. To determine an organization's mission, managers must first define its:

AACSB: Reflective Thinking

A. Current corporate strategies

Opportunities and threats are by definition environmental (external).

AACSB: Reflective Thinking

Negative publicity is an external, negative factor, and therefore a threat.

AACSB: Reflective Thinking

AACSB: Reflective Thinking

AACSB: Reflective Thinking

Slower market growth is an external, negative factor, and therefore a threat.

AACSB: Reflective Thinking

67. Which of the following is directly proportional to profits of a firm in an industry?

68. Which of the following is an advantage of the differentiation strategy?

A. Improved efficiency of equipment.

A. Focused differentiation strategy

Coca-Cola pursues a strategy of differentiation. It spends enormous amounts of money on advertising to

AACSB: Reflective Thinking

A. forward vertical integration; backward vertical integration

A. forward vertical integration.

AACSB: Reflective Thinking

A. forward vertical integration.

AACSB: Reflective Thinking

AACSB: Reflective Thinking

Purchasing a supplier of raw materials is backward vertical integration.

AACSB: Reflective Thinking

Diversification is the corporate-level strategy of expanding a company's business operations into a

A. Concentration on a single business

A. Concentration on a single business.

A. Concentration on a single business

AACSB: Reflective Thinking

AACSB: Reflective Thinking

AACSB: Reflective Thinking

AACSB: Reflective Thinking

AACSB: Reflective Thinking

AACSB: Reflective Thinking

Strategy implementation is a five-step process: