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Exam
Name___________________________________
MULTIPLE CHOICE. Choose the one alternative that best completes the statement or answers the question.
1) Which strategy seeks to increase market share of present products or services in present markets 1)
through greater marketing efforts?
A) Forward integration
B) Market development
C) Market penetration
D) Backward integration
E) Product development
Answer: C
Explanation: A)
B)
C)
D)
E)
2) Egypt-based Fresh Electric Co. assembles gas stoves and water heaters in Georgia, for export to 2)
Azerbaijan and Armenia. This is an example of which type of strategy?
A) Product development
B) Market development
C) Horizontal integration
D) Backward integration
E) Forward integration
Answer: B
Explanation: A)
B)
C)
D)
E)
1
4) Nakheel, the property unit of Dubai World, engaged in several rounds of job cuts in 2008 and 2010. 4)
This is an example of
A) forward integration.
B) unrelated diversification.
C) retrenchment.
D) backward integration.
E) divestiture.
Answer: C
Explanation: A)
B)
C)
D)
E)
6) Selling all of a company's assets in parts for their tangible worth is called 6)
A) divestiture.
B) liquidation.
C) concentric diversification.
D) unrelated integration.
E) joint venture.
Answer: B
Explanation: A)
B)
C)
D)
E)
2
8) In which situation would horizontal integration be an especially effective strategy? 8)
A) When decreased economies of scale provide major competitive advantages.
B) When an organization can gain monopolistic characteristics in a particular area or region
without being challenged by the federal government for "tending substantially" to reduce
competition.
C) When an organization competes in a slowing industry.
D) When an organization has neither the capital nor human talent needed to successfully
manage an expanded organization.
E) When competitors are succeeding due to managerial expertise or having particular resources
an organization possesses.
Answer: B
Explanation: A)
B)
C)
D)
E)
9) Innovation implies 9)
A) the recycling of unused product
B) the modification of an existing product
C) the duplication of a popular product
D) the creation of a completely new product
E) All of the above
Answer: D
Explanation: A)
B)
C)
D)
E)
3
11) Backward integration is effective in all of these except 11)
A) when present suppliers have high profit margins.
B) when an organization has both capital and human resources to manage the new business of
supplying its own raw materials.
C) when an organization needs to acquire a needed resource quickly.
D) when an organization competes in an industry that is growing rapidly.
E) when the advantage of stable prices are not important.
Answer: E
Explanation: A)
B)
C)
D)
E)
13) All of the following are important factors in the Balanced Scorecard except 13)
A) customer service.
B) business ethics.
C) employee morale.
D) product quality.
E) stockholder equity.
Answer: E
Explanation: A)
B)
C)
D)
E)
4
14) The sale of Global Investment House of Kuwait 's stakes in Salam Bank to Techtronic Industries is 14)
an example of which type of strategy?
A) Retrenchment
B) Divestiture
C) Liquidation
D) Related diversification
E) Unrelated diversification
Answer: B
Explanation: A)
B)
C)
D)
E)
15) Which of the following is not a reason joint ventures fail? 15)
A) The venture may not be supported equally by both partners.
B) Managers who must collaborate daily in operating the venture are not involved in forming or
shaping the venture.
C) The venture may begin to compete more with one of the partners than the other.
D) Stakeholders from both partners are equally satisfied.
E) The venture may benefit the partnering companies but may not benefit the customers who
then complain about poorer service or criticize the companies in other ways.
Answer: D
Explanation: A)
B)
C)
D)
E)
5
17) Which strategy should be implemented when a division is responsible for an organization's overall 17)
poor performance?
A) Backward integration
B) Cost leadership
C) Forward integration
D) Divestiture
E) Related diversification
Answer: D
Explanation: A)
B)
C)
D)
E)
18) Mergers and acquisitions are created for all of the following reasons except to 18)
A) gain economies of scale.
B) gain new technology.
C) smooth out seasonal trends in sales.
D) increase its number of employees.
E) reduce tax obligations.
Answer: D
Explanation: A)
B)
C)
D)
E)
19) What principle is built on the idea that there is no general plan for which way to go and what to 19)
do?
A) Managing by crisis
B) Managing by subjectives
C) Managing by extrapolation
D) Managing by hope
E) Managing by objectives
Answer: B
Explanation: A)
B)
C)
D)
E)
6
20) Under which strategy would you offer products or services to a wide range of customers at the 20)
lowest price available on the market?
A) Differentiation
B) Low-cost focus
C) Low-cost
D) Best-value focus
E) Best-value
Answer: E
Explanation: A)
B)
C)
D)
E)
21) Which strategy would be effective when the stockholders of a firm can minimize their losses by 21)
selling the organization's assets?
A) Differentiation
B) Diversification
C) Liquidation
D) Integration
E) Cost leadership
Answer: C
Explanation: A)
B)
C)
D)
E)
22) What percentage of McDonald's restaurants are actually owned by the McDonald's corporation? 22)
A) 35 percent B) 55 percent C) 63 percent D) 23 percent E) 43 percent
Answer: D
Explanation: A)
B)
C)
D)
E)
23) When companies take over functional operations of other firms, such as human resources, 23)
information systems, payroll, accounting, or customer service, this is called
A) outsourcing.
B) licensing.
C) marketing.
D) franchising.
E) divestiture.
Answer: A
Explanation: A)
B)
C)
D)
E)
7
24) What refers to a strategy of seeking ownership of or increased control over a firm's competitors? 24)
A) Forward integration
B) Horizontal integration
C) Conglomerate diversification
D) Concentric diversification
E) Backward integration
Answer: B
Explanation: A)
B)
C)
D)
E)
25) Which level of strategy is most likely not present in small firms? 25)
A) Operational
B) Divisional
C) Functional
D) Corporate/company
E) All of these are present in small firms
Answer: B
Explanation: A)
B)
C)
D)
E)
8
27) Which chapter of the bankruptcy code applies to municipalities? 27)
A) Chapter 9
B) Chapter 7
C) Chapter 13
D) Chapter 8
E) Chapter 12
Answer: A
Explanation: A)
B)
C)
D)
E)
28) Aramco's ownership of Saudi Petroleum International, which specializes in scheduling, loading, 28)
storage, transportation and delivery of crude oil, is an example of which type of strategy?
A) Unrelated diversification
B) Forward integration
C) Related diversification
D) Backward integration
E) Horizontal integration
Answer: B
Explanation: A)
B)
C)
D)
E)
29) Websites which sell products directly to consumers are examples of which type of strategy? 29)
A) Horizontal integration
B) Conglomerate diversification
C) Forward integration
D) Product development
E) Backward integration
Answer: C
Explanation: A)
B)
C)
D)
E)
9
30) Under which condition would a differentiation strategy be especially effective? 30)
A) When the industry has many different niches and segments, thereby allowing a company to
pick a competitively attractive niche suited to its own resources.
B) When industry leaders do not consider the niche to be crucial to their own success.
C) When the target market niche is large, profitable and growing.
D) When technological change is fast paced and competition revolves around rapidly evolving
product features.
E) When few, if any, other rivals are attempting to specialize in the same target segment.
Answer: D
Explanation: A)
B)
C)
D)
E)
31) Forward and backward integration strategies are sometimes collectively referred to as which of 31)
these strategies?
A) Hierarchical integration
B) Horizontal integration
C) Vertical integration
D) Stuck-in-the-middle
E) Diversification
Answer: C
Explanation: A)
B)
C)
D)
E)
32) When two organizations of about equal size unite to form one enterprise, which of these occurs? 32)
A) Leveraged buyout
B) Hostile takeover
C) Merger
D) Divestiture
E) Acquisition
Answer: C
Explanation: A)
B)
C)
D)
E)
10
33) When a domestic company first begins to export to India, it is an example of 33)
A) forward integration.
B) concentric diversification.
C) market development.
D) backward integration.
E) horizontal integration.
Answer: C
Explanation: A)
B)
C)
D)
E)
35) Adding new, unrelated products or services for present customers is called 35)
A) related diversification.
B) unrelated diversification.
C) conglomerate diversification.
D) forward integration.
E) backward integration.
Answer: A
Explanation: A)
B)
C)
D)
E)
36) According to Porter, which strategy offers products or services to a small range of customers at the 36)
lowest price available on the market?
A) Best-value
B) Differentiation
C) Low-cost focus
D) Low-cost
E) Best-value focus
Answer: C
Explanation: A)
B)
C)
D)
E)
11
37) What occurs when two or more companies form a temporary partnership or consortium for the 37)
purpose of capitalizing on some opportunity?
A) Liquidation
B) A joint venture
C) Retrenchment
D) Divestiture
E) Forward integration
Answer: B
Explanation: A)
B)
C)
D)
E)
38) When Dubai Aerospace Enterprise (DAE) acquired Standard Aero and Landmark Aviation in 2007, 38)
the transaction was valued at
A) US$19 billion
B) US$1.19billion
C) US$1.09 billion
D) US$1.9 billion
E) US$2.9 billion
Answer: D
Explanation: A)
B)
C)
D)
E)
39) According to journalists' findings, what is a serious obstacle for many small business owners? 39)
A) An excess of employees and managerial staff
B) A lack of business ethics
C) A lack of experience in networking
D) A lack of strategic-management knowledge
E) Having too many suppliers
Answer: D
Explanation: A)
B)
C)
D)
E)
12
40) What term refers to selling a division of an organization? 40)
A) Divestiture
B) Joint venture
C) Liquidation
D) Horizontal integration
E) Concentric diversification
Answer: A
Explanation: A)
B)
C)
D)
E)
43) Which strategy is appropriate when an organization competes in an industry characterized by 43)
rapid technological developments?
A) Product development
B) Liquidation
C) Market penetration
D) Backward integration
E) Retrenchment
Answer: A
Explanation: A)
B)
C)
D)
E)
13
44) Which of these strategies is effective when the number of suppliers is small and the number of 44)
competitors is large?
A) Conglomerate diversification
B) Forward integration
C) Concentric diversification
D) Horizontal diversification
E) Backward integration
Answer: E
Explanation: A)
B)
C)
D)
E)
45) Which strategy generally entails large research and development expenditures? 45)
A) Retrenchment
B) Divestiture
C) Product development
D) Forward integration
E) Market penetration
Answer: C
Explanation: A)
B)
C)
D)
E)
46) Under which condition would a cost leadership strategy be especially effective? 46)
A) When few rival firms are following a similar approach.
B) When the products of rival sellers are essentially identical and supplies are readily available
from any of several eager sellers.
C) When there are many ways to differentiate the product or service and many buyers perceive
these differences as having value.
D) When buyer needs and uses are diverse.
E) When technological change is fast paced and competition revolves around rapidly evolving
product features.
Answer: B
Explanation: A)
B)
C)
D)
E)
14
47) Which of the following is most likely not included in the functional level of a small company? 47)
A) Finance
B) Human resource managers
C) R & D
D) Marketing
E) Department managers
Answer: E
Explanation: A)
B)
C)
D)
E)
48) What principle is based on the belief that the true measure of a really good strategist is the ability to 48)
solve problems?
A) Managing by subjectives
B) Managing by hope
C) Managing by extrapolation
D) Managing by objectives
E) Managing by crisis
Answer: E
Explanation: A)
B)
C)
D)
E)
49) Damac Holding laying off employees in 2007 in order to counter the slowdown in economic 49)
activity is an example of
A) retrenchment.
B) divestiture.
C) forward integration.
D) backward integration.
E) liquidation.
Answer: A
Explanation: A)
B)
C)
D)
E)
15
50) Which strategy would be most appropriate when the distinctive competencies of two or more firms 50)
complement each other especially well?
A) Divestiture
B) Retrenchment
C) Joint venture
D) Integration
E) Conglomerate diversification
Answer: C
Explanation: A)
B)
C)
D)
E)
TRUE/FALSE. Write 'T' if the statement is true and 'F' if the statement is false.
51) According to varous sources, 95 percent of all businesses in the Arab region are family firms. 51)
Answer: True False
Explanation:
52) A low-cost focus strategy offers products or services to a small range of customers at the lowest 52)
price available on the market.
Answer: True False
Explanation:
53) According to Porter, strategies allow organizations to gain competitive advantage from three 53)
different bases: cost leadership, differentiation and integration.
Answer: True False
Explanation:
54) Strategic objectives include those associated with growth in revenues, growth in earnings, higher 54)
dividends, larger profit margins and improved cash flow.
Answer: True False
Explanation:
55) There are four basic types of diversification: concentric, conglomerate, forward and backward. 55)
Answer: True False
Explanation:
56) A differentiation strategy can be especially attractive when the industry has many different niches 56)
and segments, thereby allowing a focuser to pick a competitively attractive niche suited to its own
resources.
Answer: True False
Explanation:
57) Instead of extending the life cycle of existing products through modification and improvement, 57)
innovative strategies make existing products obsolete.
Answer: True False
Explanation:
16
58) Market penetration, market development, product development and joint venture are intensive 58)
strategies.
Answer: True False
Explanation:
59) Horizontal integration is an appropriate strategy when the competitors of an organization are 59)
doing poorly.
Answer: True False
Explanation:
60) The related diversification strategy is effective when an organization has a weak management 60)
team.
Answer: True False
Explanation:
61) A differentiation strategy can only be achieved with a large target market. 61)
Answer: True False
Explanation:
62) Research shows strategic management in small firms is more formal than in large firms, but large 62)
firms that engage in strategic management outperform those that do not.
Answer: True False
Explanation:
63) A best-value strategy offers products or services to a wide range of customers at the lowest price 63)
on the market.
Answer: True False
Explanation:
64) Most companies favor related diversification strategies in order to exploit the common use of a 64)
well-known brand name.
Answer: True False
Explanation:
65) The most effective differentiation bases are those that are hard or expensive for rivals to duplicate. 65)
Answer: True False
Explanation:
66) Out of the wordld's 300 largest private equity firms in 2010, sixty were from the Arab world. 66)
Answer: True False
Explanation:
67) A chief executive officer is located in the divisional level of a large firm. 67)
Answer: True False
Explanation:
68) Gaining ownership or increased control over distributors or retailers is called forward integration 68)
strategy.
Answer: True False
Explanation:
17
69) India commands over 60 percent of all backoffice outsourcing. 69)
Answer: True False
Explanation:
70) A growing trend is for franchisers to buy out their part of the business from their franchisees. 70)
Answer: True False
Explanation:
71) Chapter 13 bankruptcy is similar to Chapter 11, but available only to large corporations. 71)
Answer: True False
Explanation:
73) For consumers who are price sensitive, cost leadership emphasizes producing standardized 73)
products at very low per-unit cost.
Answer: True False
Explanation:
74) Product development is an appropriate strategy when an organization has successful products that 74)
are in the maturity stage of their life cycle.
Answer: True False
Explanation:
75) Innovative strategy requires investing a small amount of capital in R&D and changing the 75)
company culture to one that supports creativity and talent.
Answer: True False
Explanation:
76) Almarai's takeover of companies that are not part of their primary dairy business is an example of 76)
related diversification.
Answer: True False
Explanation:
77) A leveraged buyout occurs when a firm's management and other private investors use borrowed 77)
funds to buy out the firm's shareholders.
Answer: True False
Explanation:
78) Divestiture is selling all of a company's assets, in parts, for their tangible worth. 78)
Answer: True False
Explanation:
79) Product development is a strategy that seeks increased sales by improving or modifying present 79)
products or services.
Answer: True False
Explanation:
18
80) According to statistics from the American Bankruptcy Institute, Chapter 11 bankruptcy filings in 80)
the U.S. increased from 43,694 in 1980 to 60,837 in 2009.
Answer: True False
Explanation:
81) Liquidation is often appropriate when retrenchment and divestiture have failed. 81)
Answer: True False
Explanation:
82) "If it ain't broke, don't fix it" refers to managing by crisis. 82)
Answer: True False
Explanation:
83) Strategic objectives include larger market share, quicker on-time delivery than rivals, quicker 83)
design-to-market times than rivals, lower costs than rivals, and wider geographic coverage than
rivals.
Answer: True False
Explanation:
84) A cost leadership strategy can be especially effective when most buyers use the product in the same 84)
way.
Answer: True False
Explanation:
85) Divestiture would be an appropriate strategy when a need exists to introduce a new technology 85)
quickly.
Answer: True False
Explanation:
86) Joint ventures tend to fail when the managers who are required to collaborate daily in operating the 86)
venture are not involved in forming or shaping the venture.
Answer: True False
Explanation:
87) When an acquisition or merger is not desired by both parties, it is called a takeover or a hostile 87)
takeover.
Answer: True False
Explanation:
88) In the Arab world, the non-profit sector is not as common and active as it is in Western countries. 88)
Answer: True False
Explanation:
89) Al Faisaliah Hotel would be a good example of a firm seeking the best-value focus strategy. 89)
Answer: True False
Explanation:
19
90) When the correlation between dollar sales and dollar marketing expenditures has historically been 90)
low, market penetration is an appropriate strategy.
Answer: True False
Explanation:
91) Objectives provide direction and allow for organizational synergy. 91)
Answer: True False
Explanation:
92) Cooperative arrangements and joint ventures between competitors are becoming increasingly 92)
popular.
Answer: True False
Explanation:
93) Unrelated diversification is an appropriate strategy when an organization's present channels of 93)
distribution can be used to market the new products to current customers.
Answer: True False
Explanation:
94) Market development includes introducing present products into new geographic areas. 94)
Answer: True False
Explanation:
95) First mover advantages refers to the benefits a firm may achieve by entering a new market or 95)
developing a new product or service prior to rival firms.
Answer: True False
Explanation:
96) Orascom Telecom and Etisalat both seek to dominate the international market while searching for 96)
opportunities in other regions, especially in Africa and Asia .
Answer: True False
Explanation:
97) All sizes and types of organizations can utilize and benefit from strategic-management concepts 97)
and techniques.
Answer: True False
Explanation:
98) Chapter 7 bankruptcy is a liquidation procedure used only when a firm sees no hope of being able 98)
to operate successfully or to obtain necessary creditor agreement.
Answer: True False
Explanation:
99) Divestiture has become a popular strategy to enable firms to focus on their core business and 99)
become more diversified.
Answer: True False
Explanation:
20
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