CHAPTER 6Strategy Analysis and Choice

True/False

The Nature of Strategy Analysis and Choice

1. An organization’s present strategies, objectives and mission provide a basis for generating and evaluating feasible alternative strategies, coupled with the external and internal audit information.

Ans: T Page: 196-197

2. Strategic analysis and choice largely involves making objective decisions based on subjective information.

Ans: F Page: 197

3. Identifying and evaluating alternative strategies shouldn’t involve the managers and employees who earlier assembled the organizational vision and mission statements, performed the external audit and conducted the internal audits.

Ans: F Page: 198

A Comprehensive Strategy-Formulation Framework

4. The first stage of the strategy-formulation framework is the input stage, followed by the matching stage.

Ans: T Page: 198

5. Stage 2 in the strategy-formulation framework involves a single technique, the Quantitative Strategic Planning Matrix.

Ans: F Page: 198

6. The Internal Factor Evaluation Matrix and the External Factor Evaluation Matrix are part of the final stage of the strategy formulation framework.

Ans: F Page: 198

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7. The Threats-Opportunities-Weaknesses-Strengths (TOWS) Matrix, the Strategic Position and Action Evaluation (SPACE) Matrix, the Boston Consulting Group (BCG) Business Portfolio Matrix, the Internal-External (IE) Business Portfolio Matrix and the Grand Strategy Matrix are included in stage two of the strategy-formulation framework.

Ans: T Page: 198

The Input Stage

8. Basic input information for the matching and decision stage matrices is provided by the information derived from SPACE, TOWS and BCG matrices.

Ans: F Page: 198

9. Strategists themselves, not analytical tools, are always responsible and accountable for strategic decisions.

Ans: T Page: 199

10. The divisions of an organization should utilize strategy-formulation analytical tools to develop their own strategies and objectives.

Ans: T Page: 199

11. Good intuitive judgment is always needed to determine appropriate weights and ratings in the input stage matrices.

Ans: T Page: 199

The Matching Stage

12. The number of internal factors and external factors in the matching stage is reduced to generate feasible strategies.

Ans: F Page: 199

13. The purpose of matching key factors is to generate feasible alternative strategies.

Ans: T Page: 199

14. To effectively formulate competitive strategies, an organization should match its external opportunities and threats.

Ans: F Page: 199

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15. SO strategies are based on using a firm’s internal strengths to take advantage of external opportunities and threats.

Ans: F Page: 200

16. Matching strengths with weaknesses is how SW strategies are created.

Ans: F Page: 200

17. A TOWS Matrix is composed of four cells for four types of strategies it creates.

Ans: F Page: 200

18. The purpose of each stage 2 matching tool is to generate feasible alternative strategies, not to select or determine which strategies are best.

Ans: T Page: 200

19. Only to get into a situation where they can work from strengths to take advantage of opportunities, organizations generally will pursue the other three types of strategies (WO, ST, or WT).

Ans: T Page: 200-202

20. From matching an internal weakness with an external threat, a WT strategy in the TOWS Matrix could result.

Ans: F Page: 201

21. WT strategies are defensive tactics.

Ans: T Page: 201

22. Matching techniques include both the SPACE Matrix and the TOWS Matrix.

Ans: T Page: 203

23. The ES and CA dimension variables in a SPACE Matrix are assigned a numerical value ranging from –1 (best) to –6 (worst).

Ans: T Page: 204

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24. The most important determinants of an organization’s overall strategic position are considered to be the two internal dimensions, financial strength (FS) and competitive advantage (CA), and the two external dimensions, industry strength (IS) and environmental stability (ES).

Ans: T Page: 204

25. The SPACE Matrix axes are labeled aggressive, conservative, defensive and competitive.

Ans: F Page: 204

26. The four strategies of the SPACE Matrix are aggressive, conservative, offensive and defensive.

Ans: F Page: 204

27. The appropriate strategies are intensive, integration, defensive and diversification when a firm’s directional vector is located in the aggressive quadrant of the SPACE Matrix.

Ans: F Page: 205

28. Conservative strategies in a SPACE Matrix most often include intensive strategies and concentric diversification.

Ans: T Page: 205

29. Integration and diversification strategies are most often included in competitive strategies in a SPACE Matrix.

Ans: F Page: 205

30. Relative market share position is given on the x-axis of the BCG Matrix.

Ans: T Page: 206

31. The midpoint on the x-axis of a BCG Matrix, which corresponds to a division that has half the market share of the leading firm in the industry, is typically set at 0.05.

Ans: F Page: 206

32. In performing SPACE analysis, barriers to entry into market are best categorized as a competitive advantage (CA) variable.

Ans: F Page: 206

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33. In the SPACE Matrix, growth potential, profit potential and financial stability could all fall under the category of industry strength.

Ans: T Page: 206

34. By examining the relative market share and industry growth rate of each division relative to all other divisions with the BCG matrix, a multidivisional organization is allowed to manage its portfolio of businesses.

Ans: T Page: 206

35. Product quality is an important consideration in the BCG Matrix.

Ans: F Page: 206

36. Technical know-how, market share and product life cycle are some examples of areas to consider when evaluating a company’s competitive advantage.

Ans: T Page: 206

37. The Boston Consulting Group Matrix is good for firms with many “profit centers.”

Ans: T Page: 206

38. The company’s total sales and number of employees are key considerations in the Boston Consulting Group Matrix.

Ans: F Page: 206

39. The firm should pursue conservative strategies if the coordinates of a SPACE directional vector are (1,4).

Ans: F Page: 207

40. A firm should pursue defensive strategies if the coordinates of a SPACE directional vector are (2,3).

Ans: F Page: 207

41. The firm should pursue aggressive strategies if the coordinates of a SPACE directional vector are (5,4).

Ans: T Page: 207

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42. A firm should pursue competitive strategies if the coordinates of a SPACE directional vector are (4,6).

Ans: F Page: 207

43. Star, question mark, cash cow and dogs are the four quadrants exhibited by the SPACE Matrix.

Ans: F Page: 208

44. The size of the circle in a BCG Matrix corresponds to the proportion of corporate revenue generated by that business unit. The pie slice indicates the proportion of corporate profits generated by that division.

Ans: T Page: 208

45. Divisions with a low relative market share position and a high industry growth are called question marks in the BCG Matrix.

Ans: T Page: 208

46. Cash cows represent the organization’s best long-run opportunities for growth and profitability.

Ans: F Page: 209 47. Divisions in Quadrant IV are called dogs because the organization must decide

whether to strengthen them by pursuing intensive strategies or engaging in joint venture.

Ans: F Page: 210

48. The major overall benefit of the BCG Matrix is that it draws attention to the cash flow, investment characteristics and needs of an organization’s various divisions.

Ans: T Page: 210

49. Dogs on the BCG Matrix usually become stars after market penetration.

Ans: F Page: 210

50. Generally, the BCG Matrix and the IE Matrix are used only in formulating strategies in multidivisional firms.

Ans: T Page: 211

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51. Viewing businesses as star, cash cow, dog, or question mark is an oversimplification.

Ans: T Page: 211

52. The BCG Matrix does not reflect whether or not various divisions or their industries are growing over time.

Ans: T Page: 211

53. Having no temporal qualities, the BCG Matrix is a snapshot of an organization at a given point in time.

Ans: T Page: 211

54. Both IE and BCG Matrices are called portfolio matrices.

Ans: T Page: 211

55. On the x-axis of the IE Matrix, an internal factor evaluation score of 2.5 represents a weak internal position.

Ans: F Page: 212

56. BCG Matrix requires more information about the divisions than the IE Matrix.

Ans: F Page: 212

57. The IE Matrix can be divided into three major regions that have different strategy implications: grow and build, hold and maintain and harvest or divest.

Ans: T Page: 212-213

58. The Grand Strategy Matrix is based on two evaluative dimensions, market share and market growth.

Ans: F Page: 213

59. Positioned in or around cell IX in the IE Matrix, successful organizations are able to achieve a portfolio of businesses.

Ans: F Page: 213

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60. According to the Grand Strategy Matrix, when a Quadrant I firm is too heavily committed to a single product, then concentric diversification may reduce the risks associated with a narrow product line.

Ans: T Page: 214

61. Quadrant III organizations compete in rapid-growth industries and have weak competitive positions, according to the Grand Strategy Matrix.

Ans: F Page: 214

The Decision Stage

62. The Quantitative Strategic Planning Matrix is an excellent decision stage analytical tool.

Ans: T Page: 215

63. Small companies could skip Stages 1 and 2 of the strategy-formulation framework and develop a QSPM.

Ans: F Page: 216

64. To objectively evaluate feasible alternative strategies identified in Stage 2, the QSPM uses input information derived from Stage 1.

Ans: T Page: 216

65. The left column of a QSPM consists of information taken directly from the Internal Factor Evaluation Matrix and the External Factor Evaluation Matrix.

Ans: T Page: 216

66. Alternative strategies derived from the TOWS Matrix, SPACE Matrix, BCG Matrix, IE Matrix and Competitive Profile Matrix are included in the QSPM’s top row.

Ans: F Page: 216

67. Any number of sets of alternative strategies can be included in the QSPM, and any number of strategies can comprise a given set.

Ans: T Page: 216

68. Step 1 of a QSPM assigns weights to each key external and internal factor.

Ans: F Page: 217

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69. The Sum Total Attractiveness Scores are defined by the product of multiplying the weights (step 2) by the attractiveness scores (step 4) in each row of the QSPM.

Ans: FPage: 218

70. Total attractiveness scores are defined as the sum of the attractiveness scores in a given column of the QSPM.

Ans: F Page: 218

71. The relative desirability of one strategy over another is indicated by the magnitude of the difference between the total attractiveness scores in a given set of strategic alternatives.

Ans: F Page: 218

72. Two limitations of the Quantitative Strategic Planning Matrix are weights and ratings.

Ans: F Page: 219

73. A positive feature of OSPM is that sets of strategies can be examined sequentially or simultaneously.

Ans: T Page: 219

74. One positive feature of OSPM is that it does not require intuitive judgments and educated assumptions.

Ans: F Page: 219

Cultural Aspects of Strategy Choice

75. Culture includes the set of shared values, beliefs, attitudes, customs, norms, personalities, heroes and heroines that describe a firm.

Ans: T Page: 219

76. Generally, small organizations have a business plan whereas large organizations have culture.

Ans: F Page: 219

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77. Culture is the unique way an organization does business.

Ans: T Page: 219

78. Whenever two firms merge, it becomes especially important to evaluate and consider culture-strategies linkages.

Ans: T Page: 220

The Politics of Strategy Choice

79. Successful strategists establish additional hurdles or tests for strongly supported ideas that are considered unacceptable, but which are best not opposed openly.

Ans: T Page: 220-221

80. Successful top managers keep a low political profile on acceptable proposals.

Ans: F Page: 221

81. By continuously chatting and informally questioning, successful CEOs stay abreast of how things are progressing and know when to step in to intervene.

Ans: T Page: 221

82. Successful strategists minimize their own political exposure on issues that are highly controversial and in circumstances where opposition from major power centers was likely.

Ans: T Page: 221

83. Equifinality means it is often possible to achieve similar results using different means or paths.

Ans: T Page: 221

84. Satisficing means it is often possible to achieve similar results using different means or paths.

Ans: F Page: 221

85. Shifting focus from specific issues to more general ones may increase strategists’ options for gaining organizational commitment.

Ans: T Page: 221

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The Role of a Board of Directors

86. Now averaging 18 members rather than 12 as they did a few years ago, the trend in America is toward larger boards.

Ans: F Page: 222

87. Boards of directors are composed mostly of outsiders who are becoming more involved in an organization’s strategic management.

Ans: T Page: 222

88. Business Week recommends board members retire at age 65.

Ans: F Page: 223

89. Business Week recommends the entire board of directors be up for election annually.

Ans: T Page: 223

90. The board of directors of Trans Union Corporation, according to a ruling by the Supreme Court of Delaware in 1985, violated the interests of shareholders when they hastily accepted a takeover bid from the Marmon Group.

Ans: T Page: 224

91. The impact of increasing legal pressures on board members is that directors are demanding access to more financial performance information on a regular basis.

Ans: T Page: 224

92. Boards of directors today are composed mostly of outsiders who are becoming more involved in the company’s strategic-management activities.

Ans: T Page: 224

93. There are on average five times more outsiders on the board than insiders at American firms.

Ans: F Page: 224

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Conclusion

94. Rather than just react to management initiatives, board directors must assume a more activist stance in management development.

Ans: T Page: 225

Multiple Choice

The Nature of Strategy Analysis and Choice

95. Strategy analysis and choice largely involves making __________ decisions based on __________ information.a. long-term; short-termb. subjective; objectivec. short-term; long-termd. subjective; short-terme. objective; subjective

Ans: b Page: 196

A Comprehensive Strategy-Formulation Framework

96. Stage 1 consists of IFE, EFE and CPM. What stage is this in the strategy formulation framework?a. Outputb. Decisionc. Inputd. Matchinge. Functional

Ans: c Page: 198

97. Which stage in the strategy-formulation framework focuses on generating feasible alternative strategies?a. Inputb. Outputc. Decisiond. Stage 3e. Matching

Ans: e Page: 198

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98. The ________ stage involves a single technique, QSPM.a. Stage 2b. Decisionc. Inputd. Matchinge. Stage 1

Ans: b Page: 198

99. A(n) __________ reveals the relative attractiveness of alternative strategies and thus provides an objective basis for selecting specific strategies.a. TOWSb. SPACEc. QSPMd. IFEe. CPM

Ans: c Page: 198

100. Each of the nine techniques included in the strategy formulation framework rely on the use ofa. strictly factual data.b. luck.c. financial formulas and statistics.d. intuition and analysis.e. synergy.

Ans: d Page: 198

The Input Stage

101. The __________ stage includes an Internal Factor Evaluation Matrix and a Competitive Profile Matrix.a. input b. matchingc. decisiond. penetratione. research

Ans: a Page: 198

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102. __________ is not an input stage matrix.a. IFEb. IEc. CPMd. EFE

Ans: b Page: 198

The Matching Stage

103. __________ is not a Stage 2 matching technique.a. The SPACE Matrixb. The Grand Strategy Matrixc. The Competitive Profile Matrixd. The Business Portfolio Matrixe. The TOWS Matrix

Ans: c Page: 198

104. The __________ of the strategy formulation framework contains the TOWS Matrix, the SPACE Matrix, the Grand Strategy Matrix and the Competitive Profile Matrix.a. input stageb. matching stagec. decision staged. output stagee. None of the above

Ans: e Page: 199

105. __________ is not a TOWS strategy.a. SOb. WOc. SWd. STe. WT

Ans: c Page: 200

106. Poor product quality, coupled with reliable suppliers, would suggest a. WT strategies.b. WO strategies.c. ST strategies.d. SO strategies.

Ans: b Page: 200

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107. Matching internal strengths with external opportunities is part of which section of the TOWS Matrix?a. The WT cellb. The WO cellc. The ST celld. The SO celle. The center four cells

Ans: d Page: 200

108. The most ideal situation for a company to be in on the TOWS Matrix would be if they had alla. SO strategies.b. WO strategies.c. ST strategies.d. WT strategies.

Ans: a Page: 200

109. Which strategies aim at improving internal weaknesses by taking advantage of external opportunities?a. SOb. WOc. SWd. STe. WT

Ans: b Page: 200

110. The purpose of each Stage 2 matching tool is to a. identify the strengths, weaknesses, opportunities and threats of the firm.b. generate the feasible alternative strategies for the firm.c. pick the best strategy for the firm to carry out.d. decide who the company’s major competitors are.

Ans: b Page: 200

111. If an organization were to match high employee turnover with increased local competition, what type of strategies would be appropriate?a. SO strategiesb. WO strategiesc. ST strategiesd. WT strategies

Ans: d Page: 201

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112. Which strategies use a firm’s strengths to avoid or reduce the impact of external threats?a. SWb. WOc. SWd. STe. WT

Ans: d Page: 201

113. __________ strategies are defensive tactics directed at reducing internal weaknesses and avoiding environmental threats.a. SOb. WOc. SWd. STe. WT

Ans: e Page: 201

114. A TOWS Matrix is composed of __________ cells.a. fourb. sixc. nined. eighte. two

Ans: c Page: 201

115. Which of the following is not a step of a TOWS Matrix?a. List the firm’s key external threatsb. Match strengths with external opportunities and record the resultant SO

strategies in the appropriate cellc. Match internal weaknesses with external threats and record the resultant WT

strategiesd. List the firm’s external weaknessese. List the firm’s external threats

Ans: d Page: 202

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116. Which of these is not a SPACE Matrix quadrant?a. Aggressiveb. Defensivec. Competitived. Offensivee. Conservative

Ans: d Page: 204

117. __________ reveals whether aggressive, conservative, defensive, or competitive strategies are most appropriate.a. Grand Strategy Matrixb. SPACE Matrixc. Competitive Profile Matrixd. TOWS Matrixe. QSPM

Ans: b Page: 204

118. The two positive-rated dimensions on SPACE Matrix area. FS and CA.b. CA and ES.c. FS and IS.d. IS and ES.e. FS and ES.

Ans: c Page: 204

119. A firm located in the aggressive quadrant of the SPACE Matrix should use its internal strengths toa. take advantage of external opportunities.b. overcome internal weaknesses.c. avoid external threats.d. do all of the above.

Ans: d Page: 205

120. Financial strengths are measured on the SPACE Matrix by variables such as investment, leverage, liquidity, working capital anda. ease of entry into the market.b. product quality.c. operations and facilities.d. working capital.

Ans: d Page: 206

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121. What is the BCG Matrix ideal for analyzing?a. Companies with more than one divisionb. All companiesc. Companies with annual sales greater than $1 milliond. Companies with annual sales of less than $1 millione. Large companies

Ans: a Page: 206

122. The BCG measures relative market share position as a. a division’s sales compared to the sales of similar companies.b. a division’s market share divided by the market share of the largest rival in that

industry.c. the number of products a division has on the market compared to the

competitors.d. the number of employees in a division compared to the number of employees in

the largest rival in the industry.

Ans: b Page: 206

123. __________ should not be included as a factor in the Environmental Stability (ES) computation.a. Technological changesb. Competitive pressurec. Rate of inflationd. Liquiditye. Seasonal effects

Ans: d Page: 206

124. What are two external dimensions of SPACE Matrix?a. Environmental stability and industry strength.b. Environmental stability and competitive advantage.c. Industry strength and competitive advantaged. Competitive advantage and financial strength.e. Financial strength and industry strength.

Ans: a Page: 206

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125. If the SPACE Matrix directional vector falls in the aggressive quadrant, which of these strategies are not appropriate?a. Intensiveb. Integrativec. Diversificationd. Defensivee. Combination

Ans: d Page: 206

126. Which of these quadrants in SPACE Matrix implies staying close to the firm’s basic competencies and not taking excessive risks?a. Conservativeb. Competitivec. Defensived. Aggressivee. None of these

Ans: a Page: 206

127. ______________ is common to the defensive and conservative quadrants of a SPACE Matrix.a. Product developmentb. Concentric diversificationc. Divestitured. Market penetratione. Retrenchment

Ans: b Page: 206

128. What type of strategies would you recommend when a firm’s SPACE Matrix directional vector has the coordinates (-2, +3)?a. Aggressiveb. Conservativec. Competitived. Defensivee. Integrative

Ans: b Page: 207

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129. In the SPACE analysis what does a (+6, +3) strategy profile portray?a. A strong industryb. An unstable environmentc. A stable environmentd. A weak industrye. A weak financial position

Ans: a Page: 207

130. How would a division with a low relative market share position in a high growth industry be described? a. Question markb. Cash cowc. Stard. Stuck-in-the-middlee. Dog

Ans: a Page: 208

131. When a division of an organization has a high relative market share and is in a fast-growing industry, it is called aa. star.b. cash cow.c. question mark.d. dog.

Ans: a Page: 209

132. A division with a high relative market share position in a low-growth industry can be described as aa. star.b. cash cow.c. question mark.d. dog.e. failure.

Ans: b Page: 210

133. Which of these is an attractive strategy for a cash cow division?a. Concentric diversificationb. Horizontal integrationc. Conglomerate diversificationd. Backward integratione. Forward integration

Ans: a Page: 210

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134. Most likely, a cash cow was what in the past?a. dogb. question markc. calfd. stare. failure

Ans: d Page: 210

135. The BCG Matrix limitations includea. being a time-consuming and costly analysis.b. requiring at least three years’ worth of data.c. not reflecting divisional or industry growth over time.d. not allowing a company to be classified as somewhere in between two

categories.e. both c & d.

Ans: e Page: 211

136. The BCG Matrix and the IE Matrix are different in all of the following aspects excepta. their axes.b. the IE requires more information about the divisions than the BCG Matrix.c. the way they plot organizational divisions.d. their strategic implications.

Ans: b Page: 212

137. What has four quadrants based on two dimensions: competitive position and market growth?a. Competitive Profile Matrixb. TOWS Matrixc. SPACE Matrixd. Grand Strategy Matrixe. QSPM

Ans: d Page: 213

138. Firms located in which quadrant of the Grand Strategy Matrix are in an excellent strategic position?a. Ib. IIc. IIId. IV

Ans: a Page: 213

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139. __________ in the Grand Strategy Matrix is recommended for a firm with rapid market growth and a strong competitive position.a. Market penetrationb. Conglomerate diversificationc. Joint ventured. Retrenchmente. Liquidation

Ans: a Page: 213

140. The Grand Strategy Matrix can be used to evaluate competitive position and market growth fora. individual products.b. company divisions and individual products.c. whole companies and company divisions.d. just whole companies.

Ans: c Page: 213

141. For companies located in Quadrant III of the Grand Strategy Matrix, the first strategy recommended isa. extensive cost and asset reduction.b. asset expansion.c. employee expansion.d. immediate liquidation of assets.

Ans: a Page: 214

142. Although Quadrant _____ companies are growing, according to the Grand Strategy Matrix, they are unable to compete effectively, and they need to determine why the firm’s current approach is ineffective and how the company can best change to improve its competitiveness.a. Ib. IIc. IIId. IV

Ans: b Page: 214

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143. Quadrant _____ organizations have a strong competitive position but are in a slow-growth industry, according to the Grand Strategy Matrix.a. Ib. IIc. IIId. IV

Ans: d Page: 214

144. A(n) __________ strategy could be most effective when a firm has excess production capacity and its basic industry is experiencing declining sales and profits.a. backward integrationb. forward integrationc. concentric diversificationd. joint venturee. integration

Ans: c Page: 215

The Decision Stage

145. __________ is included in the decision stage of the strategy formulation framework.a. Internal Factor Evaluation Matrixb. Quantitative Strategic Planning Matrixc. BCG Business Portfolio Matrixd. Grand Strategy Matrixe. SPACE Matrix

Ans: b Page: 215

146. The top row of a QSPM consists of alternative strategies derived from all of these excepta. TOWS Matrix.b. BCG Matrix.c. Space Matrix.d. CPM Matrix.e. IE Matrix.

Ans: d Page: 216

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147. The __________ determines the relative attractiveness of various strategies based on the extent to which key external and internal critical success factors are capitalized.a. BCG Matrixb. SPACE Matrixc. TOWS Matrixd. IE Matrixe. QSPM

Ans: e Page: 216

148. In the QSPM, a minimum of _______ internal and ______ external critical success factors should be included.a. 2; 2b. 4; 4c. 10; 10d. 40; 40e. 20; 20

Ans: c Page: 217

149. Which of the following is the first step in developing QSPM?a. Compute the Total Attractiveness Scoresb. Examine the Stage 2 matrices and identify alternative strategies the

organization should consider implementingc. Assign weights to each key external and internal factord. Determine the Attractiveness Scorese. Make a list of the firm’s key external opportunities/threats and internal

strengths/weaknesses in the left column of the QSPM

Ans: e Page: 217-218

150. What term is defined as the product of multiplying ratings by attractiveness scores in each row of the QSPM?a. Total attractiveness scoresb. Sum total attractiveness scoresc. Weighted scoresd. Total weighted scorese. Factors

Ans: a Page: 218

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151. What should be included in strategies in the QSPM?a. all strategies suggested by Stage 2 matrices.b. only the best or most promising strategies suggested by Stage 2 matrices.b. strategies that will assure organizational success.c. strategies that encourage corporate expansion.

Ans: b Page: 218

152. What is the highest number of strategies that can be examined at one time with the QSPM?a. 5b. 2c. 1d. 10e. There is no limit.

Ans: e Page: 219

153. Which of these do QSPM limitations include?a. Only a few strategies can be evaluated simultaneouslyb. The cost of doing the analysisc. Subjective judgments and educated guesses are requiredd. It is only as good as the prerequisite input information and matching

analyses upon which it is basede. Both c & d

Ans: e Page: 219

Cultural Aspects of Strategy Choice

154. What includes the set of shared values, beliefs, attitudes, customs, norms, personalities, heroes and heroines that describe a firm?a. Strategyb. Culturec. Missiond. Objectivese. QSPM

Ans: b Page: 219

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155. The culture of a firm is important when considering strategies becausea. cultural products can support strategies so managers can often implement

changes swiftly and easily.b. everyone in the firm should have a vote as to which strategies to implement.c. culture can dictate the choice of strategies.d. Employees always welcome cultural change.

Ans: a Page: 219-220

The Politics of Strategy Choice

156. __________ is known as the tactic of shifting focus from specific issues to more general ones.a. Equifinalityb. Focus on higher-order issuesc. Generalizationd. Satisficinge. None of the above

Ans: c Page: 221

157. __________ means it is possible to achieve similar results using different means or pathsa. Generalizationb. Satisficingc. Focus on higher-order issuesd. Equifinalitye. Specialization

Ans: d Page: 221

The Role of a Board of Directors

158. Today, boards of directors are composed mostly of __________.a. outsidersb. managementc. uniond. employeese. stockholders

Ans: a Page: 222

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159. Except for ________________, the roles and duties of a board of directors include all of these broad categories.a. control and oversight over managementb. adhering to legal prescriptionsc. consideration of stakeholders’ interestsd. advancement of stockholders’ rightse. expansion of management stock options

Ans: e Page: 223

160. According to Business Week, a good board of directors performs all of these responsibilities excepta. link the CEO’s pay to specific goals.b. place the entire board up for election every five years.c. require directors to retire at age 70.d. require each director to own a large amount of company stock.e. compensate board members only in company stock.

Ans: b Page: 223-224

161. What did Business Week conclude a board of directors should do?a. Ensure no more than two board members are insidersb. Limit the number of other boards a member can serve onc. Ban interlocking directorshipsd. All of the above

Ans: d Page: 223-224

Essay Questions

162. Explain the concept of matching in the strategy formulation framework. Give at least three examples of matching.

Matching external and internal critical success factors is the key to effectively generating feasible alternative strategies. See Table 6-1 on page 200 for examples of matching.

Page: 199-200

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163. If you construct a SPACE Matrix and the directional vector points to the lower left quadrant, what type of strategies would you recommend? Give several examples.

If the directional vector points to the lower-left quadrant of the SPACE Matrix, students should suggest defensive strategies. Defensive strategies include retrenchment, divestiture, liquidation and concentric diversification.

Page: 205

164. Give five coordinates of a SPACE Matrix directional vector that would suggest conservative strategies to be most appropriate.

Student answers will vary. However, five examples they may suggest are (-1,1), (-2,2), (-3,3), (-4,4), and (-5,5).

Page: 205

165. In a BCG Matrix, all divisions are called question marks, stars, cash cows, or dogs. Define each of these terms.

Question Marks have a low relative market share position, yet they compete in a high-growth industry.Stars represent the organization’s best long-run opportunities for growth and profitability.Cash Cows have a high relative market share position but compete in a low-growth industry.Dogs have a low relative market share position and compete in a slow- or no-market-growth industry.

Page: 208-210

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166. Explain the benefits and limitations of developing a Boston Consulting Group Matrix.

The BCG Matrix has one major benefit: draws attention to the cash flow, investment characteristics and needs of an organization’s various divisions.

The BCG Matrix has some limitations: 1) Viewing every business as either a star, cash cow, dog, or question mark is an oversimplification; many businesses fall right in the middle of the BCG Matrix and thus are not easily classified, 2) the BCG Matrix does not reflect whether or not various divisions or their industries are growing over time; that is, the matrix has no temporal qualities, but rather it is a snapshot of an organization as any given point in time and 3) other variables besides relative market share position and industry growth rate in sales are important in making strategic decisions about various divisions.

Page: 210-211

167. Compare and contrast the IE Matrix with the BCG Matrix.

The IE Matrix is similar to the BCG Matrix in that both tools involve plotting organizational divisions in a schematic diagram. Also, the size of each circle represents the percentage sales contribution of each division, and pie slices reveal the percentage profit contribution of each division in both the BCG and IE Matrix.

Some important differences between the IE Matrix and the BCG Matrix include 1) different axes, 2) the IE Matrix requires more information about the divisions than the BCG Matrix and 3) the strategic implications of each matrix are different.

Page: 211-212

168. Using a Grand Strategy Matrix approach, what strategies are recommended for a firm that is a weak competitor in a slow-growing market? Elaborate on what these strategies could mean for a college or university.

A firm that is a weak competitor in a slow-growing market would be located in Quadrant III. Quadrant III strategies include retrenchment, concentric diversification, horizontal diversification, conglomerate diversification, divestiture and liquidation.

Student answers will vary when elaborating on what these strategies could mean for a college or university. However, students should mention that the college or university could possibly have to be closed or facility and staff may have to be drastically reduced which leads to unhappy students in very large classes.

Page: 214

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169. Describe the positive features and limitations of QSPM.

There are three positive features of QSPM: 1) Sets of strategies can be examined sequentially or simultaneously, 2) there is no limit to the number of strategies that can be evaluated or the number of sets of strategies that can be examined at once using the QSPM and 3) the last positive feature is that it requires strategists to integrate pertinent external and internal factors into the decision process.

The QSPM is not without some limitations: 1) It always requires intuitive judgments and educated assumptions, 2) The ratings and attractiveness scores require judgmental decisions, even though they should be based on objective information and 3) it can be only as good as the prerequisite information and matching analyses upon which it is based.

Page: 219

170. Discuss the appropriate role of a board of directors in an organization.

Please refer to Table 6-7 on page 223 for Board of Directors Duties and Responsibilities.

Page: 221-224

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