Strategic Management and Business Policy, 15e (Wheelen et al.

) Chapter 7 Strategy
Formulation: Corporate Strategy

1) Which strategy specifies the firm's overall direction in terms of its general orientation toward
growth, the industries or markets in which it competes, and the manner in which it coordinates
activities and transfers resources among business units?
A) corporate

2) Which kind of corporate strategy deals with the firm's overall orientation toward growth?
B) directional strategy

3) Which kind of corporate strategy deals with the manner in which the firm coordinates
activities and builds corporate synergies through resource sharing and development?
C) parenting strategy

8) Which one of the following directional strategies is most frequently used in corporations?
C) growth

9) Which external growth strategy involves two or more corporations joining in a stock exchange
and from which only one corporation survives?
A) merger

10) Which of the following strategies was being used when Allied Corporation and Signal
Companies formed Allied Signal?
A) merger

11) Which external growth strategy was demonstrated when Procter & Gamble completely
absorbed Gillette?
E) acquisition

12) Which of the following is not a reason why the growth strategy is so desirable?
E) A large and growing firm attracts more acquisition offers.

13) The most logical growth strategy for a corporation with current product lines with real
growth potential in a growing industry is
A) concentration.

14) Ford Motor Company's use of company resources to build its River Rouge Plant outside of
Detroit so that iron ore could enter into one end of the plant and a finished automobile could exit
out of the other end is called
A) vertical growth.

15) The purpose of vertical growth is to

B) take over a function previously provided by a supplier or by a distributor.
16) The purchase of the supplier Carroll's Foods for its hog-growing facilities by Smithfield
Foods, the world's largest pork processor, is an example of
C) backward integration.

17) The ability for Nike to manufacture its own shoes and then build stores for distribution is an
example of
A) forward integration.

18) A disadvantage of vertical integration is that it

A) creates exit barriers.

19) An attempt to explain that vertical integration is more efficient than contracting for goods
and services in the marketplace when the transaction costs of buying goods on the open market
becomes too great has been proposed by
D) transaction cost economics.

20) In many cases,_____ integration is more profitable than ______ integration

D) backward; forward

21) When a firm internally makes 100% of its key supplies and completely controls its
distributors, this is known as
A) full integration.

22) When Bristol-Myers Squibb purchased 17% of ImClone's common stock to gain access to a
new drug, it was using which type of integration?
E) quasi integration

23) A firm's expansion into other geographic locations and/or increasing the range of products
and services offered to current markets is called
E) horizontal growth.

24) Which strategy did Delta choose when it acquired Northwest Airlines to obtain access to
Northwest's Asian markets?
B) a horizontal integration strategy

25) When Coca Cola contracted with Capgemini to provide accounting and financial services,
which strategy was Coca Cola using?
C) outsourcing

26) Adding a related or complementary product to a corporation's business units is called

C) concentric diversification.

27) Growth through diversification out of an industry into an unrelated industry is called
E) conglomerate diversification.
28) Which strategy might be the most likely when management realizes that the current industry
is unattractive and that the firm lacks outstanding skills that it could easily transfer to related
products or services in other industries?
E) conglomerate diversification

29) With conglomerate diversification, the focus is on

B) sound investment and value-oriented management

30) An international study by Bain & Company concluded that the likelihood of a successful
acquisition is increased with
A) previous experience between an acquirer and a target firm.

31) Studies reveal that over one-half to two-thirds of acquisitions are failures primarily because
A) the premiums paid were too high for the firm to earn their cost of capital.

32) Which family of corporate strategies is often viewed as a lack of strategy?

A) stability strategies

33) Which strategy is considered a timeout?

A) pause/proceed-with-caution

34) Which strategy is an attempt to artificially support profits when a company's sales are
declining by reducing investment and short-term discretionary expenditures?
A) profit strategy

35) In which phase of a turnaround strategy does the firm attempt to "stop the bleeding" with a
general, across-the-board cutback in size and costs?
A) contraction

36) When P&G sold off half of its brands and consolidated others, it was following which
retrenchment strategy?
A) divestment

37) ________seeks to perpetuate a firm while _____terminates the firm.

A) Bankruptcy; liquidation

38) Research comparing concentric with conglomerate diversification concludes that

C) the relationship between relatedness and performance follows an inverted U-shaped curve.

39) The controversy surrounding external versus internal growth finds

B) internal growth appears to be superior financially to external growth.

40) The stability strategy is appropriate for all of the following circumstances EXCEPT
D) appropriate when the industry is in decline.
41) Which strategy is most appropriate as a temporary strategy to enable a corporation to
consolidate its resources after prolonged rapid growth in an industry now facing an uncertain
future?
D) pause/proceed with caution strategy

42) Which strategy is most appropriate for a company in an industry in which the future is
expected to continue as an extension of the present?
B) no change strategy

43) Which of the following describes a turnaround strategy?

C) emphasizes improving operational efficiency and is appropriate when a corporation's
problems are pervasive, but not yet critical

44) The strategy which takes place in three basic phases of contraction, consolidation, and rebirth
is
E) turnaround.

45) Which one of the following is characteristic of a firm that has chosen a captive company
strategy?
A) It is most appropriate for a company with a strong competitive position in a growing industry.

46) In which strategy does management hope that another company will have the necessary
resources and determination to return the company to profitability?
A) sell out

47) Which strategy involves giving up management of the firm to the courts in return for some
settlement of the corporation's obligations?
B) bankruptcy

48) Which strategy did Circuit City use in 2008 when it converted its retail stores to cash?
A) liquidation

49) Which one of the following is not a characteristic of a firm that has chosen a captive
company strategy?
A) It is most appropriate for a company with a strong competitive position in a growing industry.

79) One of the most popular aids to developing corporate strategy in multi-business corporations
that views business units in terms of the cash they generate is called
C) portfolio analysis.

80) In the Boston Consulting Group's Growth-Share Matrix, the relative competitive position of
a product or division is defined as
E) its market share divided by that of the largest other competitor.
81) The Growth-Share Matrix of the Boston Consulting Group suggests that the excess cash
being generated by cash cows should be used to fund
B) question marks.

82) According to the BCG Growth-Share Matrix, market leaders that typically are at the peak of
their product life cycle and are usually able to generate enough cash to maintain their high
shareof the market are called
E) stars.

83) According to the BCG Growth-Share Matrix, products that typically bring in far more money
than is needed for maintenance of their market share are called
A) cash cows.

84) According to the BCG Growth-Share Matrix, those products with low market share in an
unattractive industry that do not have the potential to bring in much cash are called
C) dogs.

85) According to the BCG Growth-Share Matrix, the key to success with this model is
E) market share leadership.

86) Which of the following is not one of the limitations of the BCG Growth-Share Matrix?
D) The market leader is ignored in the analysis.

87) Underlying the BCG Growth-Share Matrix is the concept of the

D) experience curve.

88) An example of a company that did not blindly follow the prescriptions of a portfolio model
was
C) General Mills.

89) A simple way to portray a corporation's portfolio of investments is by using the

C) BCG Growth-Share Matrix.

90) Which of the following is not one of the advantages of portfolio analysis?
B) It provides the basis for impartial objectivity from which to make decisions.

91) Which of the following is not one of the limitations of portfolio analysis?
C) It relies too heavily on objective judgments.

100) According to Campbell, Goold, and Alexander, when parent companies create more value
than any of their rivals would if they owned the same businesses, they have
C) parenting advantage.

101) Corporate parenting generates corporate strategy by focusing on

A) the core competencies of the parent corporation and on the value created from the relationship
between the parent and its units.
102) According to the text, 75% of a company's market value is derived from its
B) intangible assets.

103) As corporations become global competitors and expand into more markets through strategic
alliances, multipoint competition is likely
C) to become less prevalent going forward.

104) A corporate strategy that cuts across divisional boundaries to build synergy across business
units and to improve the competitive position of one or more business units is called
B) horizontal strategy.

105) When P&G, Kimberly-Clark, and Scott Paper compete with each other in varying
combinations of consumer paper products, they are said to be engaging in
C) multipoint competition.