Strategic Management Multiple Choice Questions

8/19/2019 Strategic Management Multiple Choice Questions

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StrategyQuestions and answers

Chapter 1 Self-Test1. Good strategy and good strategy execution are the most trustworthy signs of good

management because management is ultimately responsible for a company'sperformance and because good execution of a good strategy is the most surefirerecipe but not a guarantee!" for good company performance.

TrueFalse

#. $inancial ob%ecti&es are important because without acceptable financial performancean organi ation cannot ha&e a good strategy nor is it li(ely to ha&e the resourcesre)uired for good strategy execution.

TrueFalse

*. Strategic ob%ecti&es relate to performance outcomes that impro&e a company'scompetiti&e strength and mar(et position whereas financial ob%ecti&es relate to suchperformance outcomes as profits+ return on in&estment+ cash flow+ di&idend growth+and financial strength.

TrueFalse

,. Crafting strategy is an exercise in inside-out strategic thin(ing.TrueFalse

. Crafting strategy is primarily an administrati&e tas( whereas implementing strategy isprimarily an entrepreneurial tas(.

TrueFalse

. /hich of the following are among the fi&e tas(s of strategic management0a. Forming a strategic vision of what the organization's future businessb. Setting objectivesc. Deciding which objectives are high priority and which are low priorityd. Crafting a strategy to achieve the desired outcomese. Doing outside in strategic thin!ingf. "mplementing and e#ecuting the strategyg. $valuating performance% reviewing new developments% and initiating corrective adjustments in the

organization's vision% long term direction objectives% strategy% and&or implementation

. 2 strategic &ision for a companya. involves how fast to pursue the chosen strategy and reach the targeted levels of performance.b. consists of thin!ing through what it will ta!e to ma!e the chosen strategy wor! as planned.c. consists of management's view of the !ind of company it is trying to create and its intent to sta!e out a

specific business position.d. is pretty much the same thing as a company's strategy.e. concerns management's view of the company's future business ma!eup and long term direction.

3. The ob%ecti&es that managers seta. should spell out how fast the strategy is to be implemented.b. should re uire organizational stretch and disciplined effort.c. should include both short range and long range performance targets.d. ought to put more emphasis on achieving short run performance targets than on long run performance

targets.e. indicate the company's intent to sta!e out a particular business position.f. should include both financial and strategic performance targets.

4. 2 company's strategya. is a combination of planned actions and o the spot adaptive reactions to fresh developing industry and

competitive events.b. is a company's means of achieving its objectives.c. is developed primarily at the same time the company is formed and then evolves slowly thereafter.d. is aimed more at achieving strategic objectives than at achieving financial objectives.e. tends to change less often and more slowly than either its strategic vision or its performance targets.f. reflects managerial choices among alternatives and signals organizational commitment to particular products%

mar!ets% competitive approaches% and ways of operating.


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15. Crafting strategy in&ol&es outside-in strategic thin(ing and entrepeneurship becausea. company managers need to !eep the strategy responsive to such outside drivers as changing buyer

preferences% the latest actions and moves of rivals% mar!et opportunities and threats% and newly appearingbusiness conditions.

b. managers can't !eep company strategy responsive to chances in the business environment unless theye#hibit entrepeneurship in studying mar!et trends% listening to customers% figuring out ways to enhance thecompany activities in new directions in a timely manner.

c. strategy is more adaptive and reactive than intended and planned.d. good entrepeneurship and astute analysis of the e#ternal business environment are !eys to a conservative%

ris! avers strategy.e. shrewd diagnosis of changing mar!et conditions and changing customer preferences and re uirements is

one of the !eys to !eeping company strategies mar!et driven and customer driven.

11. Company strategies e&ol&e becausea. it is a bad idea to do too much strategizing until a company has been in business long enough to !now whatstrategies will wor! best.

b. most managers li!e to develop the strategy in bits and pieces rather than all at once.c. even a well planned out in advance strategy must be adapted to shifting mar!et conditions% the fresh actions

of competitors% altered customer needs and preferences% emerging opportunities and threats% unforeseenevents% and innovative thin!ing about how to improve the present strategy.

d. many managers are conservative% preferring to be late movers in responding new developments andavoiding the ris!s associated with developing a complete strategy too uic!ly.

e. the longer a company is in business% the more li!ely it becomes that the original strategy will need to be finetuned or revised in significant ways or even overhauled entirely in order to !eep the strategy in tune withchanging circumstances.

1#. 2 company's strategy consists of a. the game plan for out competing rivals.b. actions ta!en to capitalize on new opportunities.

c. defensive moves to counter the actions of competitors and protect against e#ternal threats.d. actions to respond to changing industry conditions.e. creating a budget to steer resources into those organizational departments whose activities are crucial to

mar!et success.f. actions to strengthen its resource base and competitive capabilities.g. moves and approaches that define how the company manages ()D% manufacturing% mar!eting% finance% and

other activities.

1*. The tas( of formulating a strategic plan in&ol&esa. planning to create an organizational structure that will facilitate carrying out the chosen strategies.b. mapping out where the organization is headed.c. establishing objectives.d. deciding on a strategy.e. installing internal support systems that enable company personnel to carry out their strategic roles effectively

on a daily basis.f. involves having a strategic planning staff or a special tas! force come up with the specifics and the details of

what to do% while senior management either approves or disapproves what is recommended.

1,. The managerial tas( of implementing strategy includesa. developing a strategic vision and business mission to guide how the strategy is to be communicated%

implemented% and then e#ecuted on a daily basis.b. building an organization a capable of carrying out the strategy successfully.c. e#erting the internal leadership needed to drive implementations forward and to !eep improving on how the

strategy is being e#ecuted.d. creating strong *fits* between the way the organization does things internally to try to e#ecute the strategy

and what wt will ta!e for the strategy to succeed.e. deciding how best to improve short term and long term profitability.

1 . 2 company's long term direction+ strategy+ and approach to strategy implementationare ne&er final because

a. changes in the organization's internal or e#ternal situation fuel the need for strategic adjustments.b. it is always incumbent on management to push for better company performance to find ways to improve

the e#isting strategy and how it is being e#ecuted.c. strategic planners sometimes change their minds about what !ind of long range strategy is best for the

company to pursue.d. the company's board of directors and senior e#ecutives may prefer to e#periment with several different

strategies and implementation approaches to wee which wor!s best.e. ineffective strategic planning efforts seem to be the norm in so many companies.


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1 . The fi&e tas( of strategic managementa. are best performed by professional strategic planners s!illed in the use of strategic analysis techni ues.b. tend to be performed by the C$+ in most companies.c. are primarily the responsibility of a company's board of directors.d. are best performed by senior e#ecutives% with the help and advice from strategic planners.e. tend to re uire the involvement of senior managers% middle managers% and lower echelon managers all

managers tend to have a role in the strategy ma!ing% strategy implementing process.

1 . 6elegating a strategy-ma(ing7strategy-implementing role to middle and lower-le&elmanagers

a. is generally unwise because they lac! the *big picture* !nowledge to ma!e sound strategic decisions.b. wor!s bests when they can see! counsel on an as needed basis from a well staffed strategic planning

department.c. is rarely done in large companies because there are plenty of e#perienced senior level managers to handle

the strategic management function.d. is normal in many companies because the more geographically scattered and diversified an organization's

operations are% the more unwieldy it becomes for senior e#ecutives to craft and implement all the necessaryactions and programs.

e. is managerially comple# because it is hard% if not impossible% to fi# accountability for strategic success orfailure.

13. The strategic role of a company's board of directors in&ol&esa. ta!ing lead responsibility for deciding what the company's long term direction should be and for crafting a

strategy.b. reviewing important strategic moves and officially approving the strategic plans submitted by senior

management.c. wor!ing closely with senior strategic planners and senior e#ecutives to develop consensus on a long term

direction for the company and a long range strategic plan.d. evaluating the caliber of senior e#ecutives' strategy ma!ing and strategy implementing s!ills.

e. being an active participant in the first three tas!s of strategic management and ta!ing a pretty much handsoff approach on the other two tas!s.

14. The role and tas(s of strategic planners and strategic planning departments in thestrategic management process should consist of

a. helping to gather and organize information that strategy ma!ers need.b. doing most of the strategic analysis for line managers and helping free line managers of the tedium of

thin!ing strategically.c. ta!ing lead responsibility for strategy ma!ing and allowing line managers to have lead responsibility for

strategy implementation ,so as to better fi# responsibility for results-.d. wor!ing closely with !ey managers to prepare a sound strategic plan to submit to the board of directors for

final approval.e. wor!ing closely with !ey managers to prepare a sound strategic plan to submit to the board of directors for

final approval.

#5. The ad&antages of first-rate strategic thin(ing and conscious management of thestrategy-ma(ing+ strategy-implementing process include

a. helping to unify the numerous strategy related decisions made by managers across the organization.b. creating a more proactive management posture and counteracting tendencies for decisions to be reactive

and defensive.c. decreased ris! of a failed strategic vision.d. greater ability to out innovate and out maneuver rivals% thereby winning a sustainable competitive advantage.e. raising managers' consciousness regarding the winds of mar!et change% new opportunities% and threatening

developments.

#1. 8888888888888888 are yardstic(s for trac(ing an organi ation's performance andprogress.

##. 2n organi ation's 88888888888888888 consists of the actions and businessapproaches management employees to achie&e the targeted organi ationalperformance.

#*. The most complicated and time consuming part of strategic management is 8888888888888888888888.

#,. 2 8888888888888888888888 outlines an organi ation's mission and future direction+near-term and long-term performance targets+ and strategy.

# . The term 8888888888888888888888888 refers to the full range of managerial acti&itiesassociated with putting the chosen strategy into place+ super&ising its pursuit+ andachie&ing the targeted results.


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Chapter #1. Strategic &isions and company mission statements

a. should be highly personalized uni ue to the organization to which they apply.b. provide a big picture perspective of the organization's future course its customer focus% its target mar!etposition% and the business activities to be pursued.c. are generally focused on the need to ma!e a profit and what size profits and return on investment aredesired.

d. are much more concerned with the present than the future.e. need to be developed after management has settled on a strategy and a set of objectives.

#. 2rri&ing at a good definition of what business an organi ation is presently in usually

re)uires consideringa. what strategic objectives the company is trying to achieve.b. what opportunities management considers most appealing.c. the customer needs being served% or what is being satisfied.d. the company's target mar!et% or who is being satisfied.e. the technologies used and functions performed% or how customers' needs are being satisfied.f. what the company's overall strategy is.

*. $orming a strategic &ision for a company in&ol&es the distinct tas(s ofa. forcefully stating that the organization's fundamental purpose is to ma!e a profit.b. defining what business the company is presently in.c. stating the company's strategic intent and agreeing on its long term strategic objectives.d. deciding on a long term strategic course for the company to pursue.e. communicating the vision in ways that are clear% e#citing% and inspiring.f. establishing a mission statement for each of the company's functional department.

,. 2 well-worded+ well-concei&ed strategic &ision7mission statement has real managerial&alue when

a. it is stated in language broad enough to cover whatever the firm might later decide to do.b. it is no more than one sentence in length.c. it crystallizes senior e#ecutives' own views about the firm's long term direction and business ma!eup.d. it is stated in narrow enough terms to pin down the company's real arena of business interest.e. it conveys an organizational purpose and identity that activates employees to go all out and contribute toma!ing the vision a reality.

. Strategic &isions and mission statementsa. should be communicated to employees in language that arouses a strong sense of organizational purpose%

builds pride% and induces employee buy in.b. need to be changed when emerging opportunities and threats in a company's surrounding business

environment ma!e it desirable to revise the organization's long term direction.c. help reduce the ris! of visionless management and rudderless decision ma!ing.d. provide a beacon that lower level managers can use to form departmental missions and set departmental

objectives.e. help an organization prepare for the future.

.


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3. :stablishing and achie&ing strategic ob%ecti&es merits &ery high priority onmanagement's agenda because

a. pursuing actions that strengthen a company's competitiveness and business position is one of the surestpaths to protecting and sustaining a company's profitability uarter after uarter and year after year.

b. a company's strategic performance is almost as important as a company's financial performance.c. a company that consistently passes up opportunities to strengthen its long term competitive position in order

to realize better near term profitability ris!s diluting its competitiveness and losing momentum in its targetmar!et.

d. well chosen strategic objectives are essential to a well crafted strategy.e. a company can't have a shrewd strategic vision without having aggressive and competitively astute strategic

objectives.

4.


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1,. >n a single business company+ the strategy-ma(ing pyramid includesa. corporate strategy.b. business strategy.c. diversification strategy.d. functional strategies.e. managerial strategies.f. operating strategies.g. industry strategy.h. organization strategy.

1 . The managerial tas( of uniting the strategy-ma(ing effort from the top to the bottom ofthe strategy-ma(ing pyramid in&ol&es

a. more of a bottom up process than a top down process.b. gaining broad consensus for and commitment to the organization's mission and vision% long term direction%

and objectives.c. harmonizing the separate layers of strategy and networ!ing them into a cohesive% coherent% and mutually

reinforcing pattern.d. e#erting strong top down direction setting and strategic leadership so as to get lower level managers to

perform their strategy ma!ing tas!s in a manner that is in accord with the company's vision% objectives% andstrategy rather than in a manner that suits departmental or personal interests.

e. a collaborative effort on the part of all managers to set performance targets and invent strategic actions intheir respective areas of responsibility that contribute directly to overall company objectives and strategy.

1 . >n contemplating what strategy to employ and what strategic actions to pursue+management

a. can ethically pursue any strategic action that i s legal.b. has a duty to its employees to ta!e into account the impact that strategy or a change in strategy has upon

employees and% where such impacts may be adverse or negative% to underta!e such actions e uitably%compassionately% and with due process.

c. has a duty to see that the company's strategic actions are consistent with its being a good citizen in thecommunities where it operates and to e#ercise care in the impact its strategic actions have on thesecommunities.

d. has no special duty or ethical obligation to customers beyond complying with legal re uirements andgovernmental regulations.

e. has a moral duty to pursue satisfactory profitability and an acceptable return on owners' investment.

1 . >n a di&ersified company+ the strategy-ma(ing tas(a. involves three different levels of management !ey e#ecutives% middle managers% and first line supervisors.b. involves four different levels of management !ey e#ecutives in the corporate office% heads of business units

and product divisions% the heads of major functional areas within a business division% and an assortment ofoperating level managers ,plant managers% product managers% regional and district sales managers% and soon-.

c. begins with crafting operating strategies% then progresses up through the managerial hierarchy to functionalstrategies% business strategies% and corporate strategy.

d. is mostly a top down process where corporate e#ecutives dictate the shape of business level strategy% wherebusiness heads are responsible for the functional areas underneath their authority% and where functionalheads are responsible for crafting operating strategies for for the units they supervise.

e. involves a hierarchy of responsibility or a strategy ma!ing pyramid that% starting from the top of the pyramid%begins with corporate strategy and proceeds down to business strategies% functional strategies% andoperating strategies.

13. >n identifying the corporate strategy of a di&ersified company+ one needs to consider a. what !ind of diversification ,related% unrelated% or both- the company is pursuing.b. if diversification is designed to create a strong corporate identity.c. whether the company is diversifying broadly across many industries or is concentrating its efforts narrowly on

a few different industries.d. the company's approach to vertical integration.e. the company's ( ) D strategy.f. recent moves to add new businesses to the company's portfolio and build new positions in attractive

industries.g. whether it has made recent moves to divest wea! or unattractive businesses.h. the company's approach to allocating investment capital across its business units.i. what !ind of competitive approach the company is pursuing in each of its different businesses.

j. whether the company is trying to capture the synergy among related business units and turn it into competitiveadvantage.


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ANSWERS1. a, b2. c, d, e3. b, d, e4. c, d, e5. a, b, c, d, e

6. a, b7. b, c, f, g8. a, c9. a

10. a, b, c, d, e, f 11. a, c, d12. c, d13. a, c14. b, d, f 15. c, d, e16. b, c, e17. b, e18. a, b, c, f, g, h, j19. a, c, d, e, f 20.

"I" Shared values and company culture.7ow much the product is selling for.

"E" Company opportunities and threats.7ow long the product has been on the mar!et industry attractiveness and competitive conditions.

"I" Company resource strengths% resource wea!nesses% competencies% and competitive capabilities."E" Societal% political% regulatory% and community citizenship considerations."I" The personal ambitions% business philosophies% and ethical principles of !ey e#ecutives.

7ow many strategy options or alternatives the company has.21. Corporate strategy22. strategic intent23. distinctive competence24. (1) situation (2) competitive advantage25. collaborative

Chapter * Self - Test


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1. >ndustry and competiti&e analysis aims at de&eloping probing answers to which se&en of the following)uestions0

a. 7ow well is the company's strategy wor!ing9b. 8hat are the strategic plans of other competitors in the industry9c. 8hat are the industry's dominant economic features9d. 8hat !ey factors will determine competitive success or failure9e. 8hat are the drivers of change in the industry and what impact will they have9f. 8hat strengths% wea!nesses% opportunities% and threats are evident in the industry environment9g. 8hat competitive forces are at wor! and how strong are they9h. 8ho's li!ely to ma!e what strategic and competitive moves ne#t9i. 8hich companies are in the strongest&wea!est competitive positions9

j. 7ow attractive is the industry in terms of its prospects for above average profitability9

#. >n identifying an industry's dominant economic features+ it is important to consider such things asa. mar!et size% mar!et growth rate% and where the industry is in the growth cycle.b. what the industry's !ey success factors are.c. which competitors are in which strategic groups.

d. resource re uirements% the prevalence of bac!ward and forward integration% and whether there are significant scale economies in purchasing%manufacturing% shipping% mar!eting% or distribution.

e. the strength of competitive pressures from producers of substitute products.f. whether the industry's products are standardized or differentiated.g. whether the scope of competitive rivalry is local% regional% national% international% or global.

h. the types of distribution channels used to access buyers.i. the pace of technological change.

j. the bargaining power of suppliers.

*. /hich of these are included in the ?fi&e-forces? model of competition0a. Firms in other industries offering substitute productsb. Suppliers of !ey inputsc. The regional&national&global economic climated. Federal and state regulatory agenciese. (ivalry among competing sellersf. 6uyersg. Financial mar!ets ,8all Street investment firms% major ban!s% bond rating agencies-h. :otential new entrantsi. Distributors% wholesalers% and other *middle man* interests

,. The ri&alry among competing sellers is stronger whena. demand for the product is growing rapidly.b. customers' costs to switch brands are low.c. industry conditions tempt rivals to use price cuts or other promotional tactics to boost their sales volumes.d. the number of rivals is relatively small ,less than ;- and there are big d ifferences in their size and competitive capabilities.e. there are significant scale economies and e#perience curve effects.

. @ow serious the competiti&e threat of entry is in a particular industry depends ona. whether industry demand is growing rapidly or slowly.b. the number of customers for the industry's product ,the greater the number of customers% the greater the threat of entry-.c. whether barriers to entry are high or low.d. how many competitors are already in the industry.e. the e#pected reaction of incumbent firms to new entry.

. /hich of the following are generally considered to be barriers to entering a mar(et or industry0

a. The presence of sizable scale economies and e#perience curve effectsb. The presence of more than 1/ rivals already in the industryc. 2 product that is pretty much standardized from rival to rivald. Firms in the industry hold !ey patents and possess significant proprietary technologye. The e#istence of tariffs% import uotas% and government mandated regulationsf. Difficulty in gaining access to technology and specialized !now howg. 6uyer attachment to established brands

. The competiti&e threat that outsiders will enter the industry is wea(er whena. entry barriers are high.b. the industry's product is standardized.c. incumbent firms are li!ely to fight vigorously to prevent a newcomer from siphoning off their customers and eroding their sales volume.d. substitute products are not a strong competitive factor in the mar!et.


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e. newcomers will have a hard time earning attractive profits for several years following entry.

3. The competiti&e threat posed by substitute products is wea(ened whena. buyers believe substitute products don't have better or even e ual features.b. buyers' costs of switching to substitutes are relatively high.c. entry barriers are moderately high but by no means prohibitive.d. customers are in a strong bargaining position.e. substitutes are more e#pensive for buyers to use.

4. 2 good example of the competiti&e power of substitute products isa. the competition between ice s!ates and roller blades.b. the competition between Cadillac and


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e. entails understanding their strategies% monitoring their actions on a regular basis% gauging how well they are faring in the mar!etplace%determining how much pressure they are under to improve their performance% and considering what their options are.

1 . 2n industry's (ey success factorsa. can be determined from a strategic group map.b. concern the competencies% competitive capabilities% product attributes% and mar!et achievements with the most direct bearing on how

profitable any company in the industry is li!ely to be.c. are good candidates for being the cornerstones of a company's strategy.d. determine whether the industry is attractive or unattractive over the long term.e. usually relate to manufacturing related characteristics and rarely to distribution or mar!eting characteristics.

f. can be a basis for sustainable competitive advantage because companies that stand out on particular >SF enjoy a stringer mar!et position fortheir effort.

g. are typically the same from industry to industry.

1 . >mportant factors for company managers to consider in drawing conclusions about whether the industry isan attracti&e or unattracti&e business to be in includeA

a. whether competitive forces are li!ely to grow or diminish in strength.b. the degree of uncertainty and ris! in the industry's future.c. the potential for entry&e#it of major firms.d. the company's ability to capitalize on the vulnerabilities of wea!er rivals.e. whether the company has strong competitive capabilities and is well positioned to improve its mar!et standing and profitability.

13. 2n industry can be considered unattracti&ea. if long term profit prospects are below average for one or more firms.b. if potential entrants view entry barriers as too high and decide against attempting to enter.c. if the industry outloo! is for below average profitability.d. if wea! competitors have little prospect of earning a satisfactory profit.

e. if substitute products are readily available and attractively priced.

14. Competiti&e %oc(eying among ri&al firmsa. tends to be strong% even fierce% in attractive industries and moderate% even country clubbish% in unattractive industries.b. tends to be more vigorous when entry barriers are high and e#it barriers are low.c. varies in intensity from industry to industry.d. tends to be a dynamic ever changing process as some companies initiate fresh actions and moves and as their rivals react and respond.e. tends to involve a *war games* type of contest with shifting emphasis over time in the nature and mi# of competitive weapons and tactics that

rivals employ.f. often results in a situation where the success of any one firm's strategy hinges on what strategies its rivals employee and the resources that

rivals are willing and able to put behind their strategic efforts.

#5. /hich of the following are true0a. 2n industry's dominant economic traits often frame the !inds of strategic approaches a company can pursue.b. 2 company's competitive strategy is increasingly effective the more it provides good defenses against the five competitive forces.c. The tas! of driving forces analysis is to separate the major causes of industry change from the minor ones.d. $nvironmental scanning is a powerful techni ue for identifying what economic traits% competitive forces% and driving forces are most li!ely to

dominate the industry in the future.e. 2 company that is uni uely well situated in an unattractive industry may still be able to earn good profits.

#1. >f an industry has a learning7experience cur&e effect of #5B for each doubling of cumulati&e production&olume and if costs per unit are #.55 for a cumulati&e production &olume of # million units+ then unit costswould be 88 1"88 at a cumulati&e production &olume of , million units and 88 #"88 at a cumulati&eproduction &olume of 3 million units.1. ????????????????????????

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##. The competiti&e structure of an industry is deemed 88888 1"88888 from a profit-ma(ing standpoint if ri&alryamong competing sellers is &ery strong+ entry barriers are 88888 #"88888+ competition from substitutes isstrong+ and at least some important suppliers and customers are in a position to exercise considerablebargaining power.

. ????????????????????????

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#*. 888888888888888888888are factors capable of creating significant incenti&es or pressures for fundamentalchanges in an industry's structure and competiti&e en&ironment.

#,. Those industry ri&als with similar competiti&e approaches and mar(et positions comprise a 88888888888888.

# . 2 sound strategy incorporates efforts to be competent on all industry 888888888888888888 and to excel on atleast on factor.


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29S/:;S1. c% d% e% g% h% i% j2. a, d, f, g, h, i, j

3. a, b, e, f, g, h

4. b, c5. c, e

6. a, d, e, f, g

7. a, c, e

8. a, b, e

9. d, e

10. a, b, c, d, g

11. a, b, d

12. c, f, g

13. a, d, e

14. b, d

15. a, e

16. b, c, f

17. a, b, c, e

18. c

19. c, d, e, f

20. a, b, c, e

21. (1) 1.50 (2) 1.28

22. (1) unattractive (2) low

23. Driving forces

24. strategic group

25. e! success factors

Chapter , Self - Test1. The wea(er a company's financial performance and the less strong its competiti&e position+ the more its

current strategy must be called into )uestion.TrueFalse

#. 2 core competence gi&es a company competiti&e capability and )ualifies as a genuine competiti&e strength+but it does not )ualify as a competiti&e ad&antage.

TrueFalse


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*. The importance of a distincti&e competence to strategy-ma(ing rests with the competiti&ely &aluable capabilityit gi&es a company+ its potential for being a cornerstone of the company's strategy+ and the competiti&e edge itcan potentially produce in the mar(etplace.

TrueFalse

,. 2s a rule+ company strategies should see( to exploit and le&erage company capabilities and its mostcompetiti&ely &aluable resourcesD strategies that place hea&y demand on areas where a company is wea( orhas unpro&en ability should be a&oided.

TrueFalse

. The o&erall competiti&e strength scores resulting from a competiti&e strength assessment pro&ide indicationof net competiti&e ad&antage or disad&antage. Companies with higher o&erall strength ratings ha&e a net com-petiti&e ad&antage o&er ri&als with lower scores+ with si e of the ad&antage being a function of the si es of thedifferences in the o&erall strength ratings.

TrueFalse

. Company situation analysis focuses on de&eloping solid+ probing answers to which of the following )uestionsAa. 8hat should the company's strategy be9b. 7ow strong is the company's competitive position relative to its rivals9c. 8hat does the company's value chain loo! li!e9

d. 2re the company's prices and costs competitive9e. Does the company need to pursue benchmar!ing and activity based costing9f. 8hat are the company's resource strengths and wea!nesses and its e#ternal opportunities and threats9g. 7ow well is the present strategy wor!ing9h. 8hat strategic issues does the company face9i. 8hat is the company's competitive environment li!e does it confront strong% moderate% or wea! competition9

. /hich of the following are criteria for e&aluating the performance of a company's present strategy0a. The company's mar!et share ran!ing and whether its share is trending up% down% or staying more or less the sameb. 8hether the company has at least two core competenciesc. 8hether the company's internal strengths and competitive capabilities outweigh its internal wea!nesses and competitive vulnerabilitiesd. 8hether the company's profit margins are increasing or decreasing and how large they are relative to other firms in the industrye. 8hether the company's sales are growing faster or slower than the industry as a wholef. The firm's image and reputation with customersg. 7ow many strategic issues the company faces and how serious they areh. 8hether the company is regarded as a leader in some significant area ,technology% product uality% service% product innovation% and so on-i. 8hether the firm's value chain is longer or shorter than rivals

j. 7ow strong the company's advertising and promotional programs are relative to those of close rivals

3. The tas( of si ing up a company's internal resource strengths. and wea(nesses and its external opportunitiesand threats

a. is called S8+T analysis.b. provides an overview of whether a firm's strategic situation is fundamentally healthy or unhealthy.c. helps provide a basis for matching the company's strategy to the company's situation.d. is the most important part of figuring out how many and what !ind of strategic issues and problems the company's management needs to

address.e. is best done after a thorough competitive strength assessment so that the identification of company strengths% wea!nesses% opportunities% and

threats will be easier and more accurate.


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4.2 company strengtha. is something the company is good at doing or a characteristic that gives it enhanced competitiveness.b. usually ta!es the form of a s!ill&competence or a physical asset.c. can be a valuable human% organizational% or intangible asset.d. can result from different company resources teaming together to create a competitive capability. a e. can stem from a competitively important

alliance or cooperative venture.f. is any !ind of company asset that results in a company having a sustainable competitive advantage ,otherwise it is not really a strength-.

15. $or a particular company resource to )ualify as the basis for sustainable competiti&e ad&antage+ it musta. be hard to imitate.b. be the company's biggest balance sheet asset.c. be a physical asset% not a human asset.d. really be competitively superior.e. not be readily trumped by different resources&capabilities of rivals.f. be long lasting.g. be tangible rather than intangible.

11. The mar(et opportunities that are most rele&ant to a company area. those best able to assist in correcting the company's competitive wea!nesses.b. those which it has the financial and organizational resources to pursue.c. those that offer important avenues for growth.d. those that create defenses against e#ternal threats.e. those where the company has the greatest potential for competitive advantage.

1#. Company &alue chainsa. show the lin!ed set of activities and functions it performs internally.b. are the same for all firms within an industry but can differ across industries.c. are a tool for determining the e#tent to which a company is globally competitive.d. indicate which activities are most costly and which are least costly.e. identify which activities are strategy critical and which are not.f. identify which internal activities represent core competencies.g. identify the primary activities that create customer value and the related support activities.h. identify which activities are being performed efficiently and which are not.

1*. =enchmar(inga. is a manager's best tool for determining whether a company is performing particular value chain activities and functions efficiently.b. is a tool for determining whether a company's costs for particular value chain activities are in or out of line with competitors.c. is inherently unethical if i t is done with companies that are direct competitors.d. can often be done with the aid of third party organizations so as to protect the confidentiality of individual company data.

e. is not a valid tool for measuring the cost effectiveness of an activity unless it is restricted to companies in the same industry.

1,. 2 company's cost competiti&enessa. depends on how well it benchmar!s its activities against competitors.b. depends on how efficiently it manages its overall value chain activities relative to how efficiently competitors manage theirs.c. depends mainly on bac!ward ,upstream- sections of the overall industry value chain.d. depends mainly on forward ,downstream- sections of overall industry value chain.e. depends on how well its internally performed activities are lin!ed to the activities performed by suppliers and to the activities performed by

forward channel allies.

1 . Strategic actions to eliminate a cost disad&antage cana. aim at lowering costs in the suppliers' part of the industry value chain.b. aim at lowering costs in a company's own internally performed activities.c. aim at lowering costs in the forward channel portion of the value chain.d. ta!e the form of benchmar!ing and the development of activity based costing approaches.

e. aim at concentrating company resources and talents on those s!ills and activities where the company can gain dominating e#pertise.

1 .2 company's best chance to achie&e sustainable competiti&e ad&antagea. is grounded in the caliber of its product or service ,because superior products or services are almost impossible to clone or improve upon-.b. is lin!ed most closely to its ability to sell at a lower price than rivals.c. is in having a shorter% more economical value chain than rivals.d. is to perform most value chain activities internally so as not to be very dependent on either suppliers or forward channel allies.e. is often grounded in its having competitively superior competencies and capabilities as compared to those of rivals.f. often hinges on managerial efforts to concentrate company resources and talents on those competencies% capabilities% and value chain activities

where it can gain dominating e#pertise to serve target customers better than rivals.


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1 . /hich of the following are signs of wea(ness in a company's competiti&e position0a. 2n eroding mar!et shareb. 2 lower price than rivalsc. 2 higher price than rivalsd. "n an unfavorably situated strategic groupe. Too small to be a major factor in the mar!etplacef. @uestionable product uality or customer service or product development s!illsg. Subpar revenue growth relative to competitorsh. Aot able to match the s!ills% e#pertise% or capabilities of competitors in !ey value chain activities

i. 2n after ta# return on e uity below 50 j. SF and strength measure ,using a scale or to 5 or to /-.c. summing the individual strength ratings to get an overall measure of competitive strength for each competitor.d. drawing conclusions about the size of the company's net competitive advantage or disadvantage.e. deciding whether to employ a weighted or an unweighted rating system.

14. The purpose of de&eloping a list of the strategic issues a company faces isa. to draw conclusions about the strengths and wea!nesses of company's present strategy.b. to determine whether it has a distinctive competence.c. to highlight the wea!nesses in its competitive mar!et position and to draw conclusions about whether the firm has a net competitive advantage or

disadvantage.d. to help decide whether the firm needs to shorten or lengthen its value chain in order to better position itself in the mar!etplace.e. to develop an agenda for management action.

#5. 2 company's strategic options for o&ercoming cost disad&antages in the forward downstream" end of itso&erall &alue chain system include

a. pressuring distributors and other forward channel allies to reduce their costs.b. wor!ing closely with forward channel allies to alter practices and procedures in ways that achieve mutually beneficial cost reductions.c. integrating forward to gain better control over the costs of downstream activities. a d. shifting to activity based costing.e. cutting prices enough to eliminate the cost disadvantage in the forward end of the value chain.

#1. 2 is something a company does especially well in comparison to its competitors.

##. in&ol&es comparing a company's costs+ acti&ity by acti&ity+ against the costs of (eyri&als and identifying which internal acti&ities are a source of cost ad&antage or disad&antage.

#*. 2 company's identifies the acti&ities+ functions+ and business processes that areperformed in designing+ producing+ mar(eting+ deli&ering+ and supporting its product s" or ser&ice s".

#,. focuses on cross-company comparisons of how well basic functions+ acti&ities+ andprocesses in a company's &alue chain are performed relati&e to other companies and organi ations.

# . entails de&eloping cost estimates for specific tas(s and acti&ities in a company's&alue chainD the cost data it pro&ides is substantially different from traditional approaches to costaccounting.


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29S/:;S1. T#. T*. T,. T

. T

. b% d% f% g% h. a% d% e% f% h3. a% b% c4. a% c% d% e15. a% d% e% f 11. b% c% e1#. a% g1*. a% b% d1,. b1 . a% b% c1 . e% f

1 . a% d% e% f% g% h% j13. a% b% c% d% e14. a% e#5. a% b% c#1. distinctive competence##. strategic cost analysis#*. value chain#,. benchmar!ing# . activity based costing


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Chapter Self - Test

1. The fi&e generic competiti&e strategies area. market share leadership.b. focused differentiation.c. overall low cost leadership.d. overall !uality leadership.e. broad differentiation.f. best cost provider.g. focused low cost.h. technology leadership.i. customer service leadership.

#.2 company's competiti&e strategya. consists of the business approaches and initiatives it uses to attract customers, withstand competitive pressures, and

strengthen its market position.b. consists mainly of offensive actions.c. consists mainly of defensive actions.d. typically involves both offensive and defensive moves to counter the maneuvering of key rivals.e. typically includes tactical efforts to respond to prevailing market conditions.f. can include actions to shift resources around to improve its long term market position and competitive capabilities.

*. /hich of the following is a distincti&e feature of a low-cost leadership strategy0a. "he strategic target is value conscious buyers.b. "he production emphasis is on continuously searching for ways to reduce costs without sacrificing acceptable !uality and

essential features.c. "he marketing emphasis is on making virtues out of product features that lead to low cost.d. "he product line consists of a few basic models having minimal frills and acceptable !uality.e. #ustaining the strategy depends on fre!uent advances in technology and occasional product innovations.

,. /hich of the following is a distincti&e feature of a best-cost pro&ider strategy0a. "he strategic target is value conscious buyers.b. $ marketing emphasis on under pricing those rival brands with comparable features and attributesc. $ product line consisting of wide selection, many product variations, and emphasis on differentiating featuresd. #ustaining the strategy depends on constant product innovation, e%cellent &' skills, and periodic technological

breakthroughse. $ competitive advantage based on more value for the money

. Stri&ing to be the industry's o&erall low-cost pro&ider a. works well in markets where many buyers are price sensitive.b. entails pursuing cost saving initiatives that will yield a sustainable cost advantage over rivals.c. depends more on e%pertise in controlling the two primary cost drivers than on revamping the value chain to bypass some

cost producing activities altogether.d. involves doing a better job than r ivals of performing internal value chain activities efficiently and of managing the factors that

drive the costs of value chain activities.

e. re!uires making the lowest !uality products possible.f. is a particularly powerful strategy when the industry s product is essentially the same from rival to rival.g. can involve trying to revamp the value chain to bypass or eliminate certain low value added activities.

. 2 low-cost pro&ider strategya. provides attractive defenses against the five competitive forces.b. is virtually risk free because low cost leaders are always able to make a profit g iven their low cost status.c. is an attractive competitive approach when buyers of the industry s product purchase relatively large !uantities and have

significant power to bargain down prices.d. must always aim at absolute low cost in order to assure the greatest success.e. is particularly attractive when there are few ways to achieve product differentiation that have value to buyers.


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. 6ifferentiation strategiesa. are an attractive competitive approach when buyer preferences and re!uirements are too diverse to be satisfied either by a

standardi*ed product or by sellers with identical capabilities.b. work best when the basis for differentiation is superior !uality or superior customer service.c. create much greater buyer loyalty than low cost provider strategies.d. can enhance profitability whenever the e%tra price the product commands outweighs the added costs of achieving the

differentiation.e. usually offer the best chance for gaining market share, as compared to low cost or best cost provider strategies.f. involve incorporating enough features and attributes with buyer appeal to set company product offerings visibly and

distinctively apart from the product offerings of rivals.g. can result in strong customer loyalty when buyers are strongly, attracted to the differentiating features.h. can produce sustainable competitive advantage if the differentiating features possess strong buyer appeal and can t be copied

or easily, matched by rivals.

3. Creating buyer &alue &ia differentiationa. has to be grounded solidly in uni!ue e%tras that deliver real value rather than perceived value. a b. can be achieved anywhere

along the industry value chain.c. can involve incorporating product attributes and user features that lower buyers overall costs of using the product.d. can involve incorporating product attributes and user features that raise the performance a buyer gets from the product.e. can involve incorporating attributes and features that enhance buyer satisfaction in non economic or intangible ways.f. re!uires understanding what attributes represent value to the customer, where along the value chain to create the

differentiating attributes, and what resources and capabilities are needed to produce brand uni!ueness.g. nearly always involves restructuring the value chain to eliminate some activities altogether.h. can involve delivering value to customers via capabilities that rivals don t have or can t afford to match.

4. 6ifferentiation strategies are competiti&ely attracti&e becausea. successful differentiation erects entry barriers in the form of customer loyalty and uni!ueness that newcomers can find hard

to hurdle.b. successful differentiation lessens buyers bargaining power (since other brands are less attractive).c. they give users the latitude to avoid being drawn into price wars (since competing on price is no longer necessary).d. they can lead to higher profitability when the costs of achieving differentiation can be held below the pr ice premium the

differentiating attributes can command in the marketplace.e. appealing differentiating features help fend off threats from substitute products not having comparable features.

15. 6ifferentiation strategies wor( best whena. the basis for differentiation is not linked to uni!ue resource strengths, competencies, and competitive capabilities.b. buyer needs and uses of a product or service are diverse and cannot be satisfied by a standardi*ed product.c. few rivals are following a similar differentiation approach.

d. the most appealing approaches to differentiation are hard or e%pensive for r ivals to duplicate.e. there are not many ways to differentiate that have value to buyers.f. a company pursues top of the line differentiation at the upper end of the price spectrum.

11. The strategy of being a best-cost pro&ider a. combines a strategic emphasis on low cost with a strategic emphasis on more than minimally acceptable !uality, service,

features, and performance.b. is usually somewhat less profitable than either top of the line differentiation or low cost leadership strategies.c. is almost always more profitable than focus+niche strategies because of the potential for creating a much bigger competitive

advantage.d. is the most attractive of all the competitive strategies because it combines the best features of the four other generic

competitive strategies.e. involves using the advantage of lower cost to under price brands with comparable !uality+service+performance+features and

thereby deliver superior buyer value.f. re!uires the resource strengths and capabilities to simultaneously drive unit costs down and product caliber up or, to put it a

bit differently, the capability and know how to incorporate upscale features and attributes at a lower cost than rivals.g. is the easiest of the five generic competitive strategies to copy.h. is the hardest of the five generic strategies to employ successfully.

1#. The characteristics of a focused strategy based either on low-cost or differentiation includea. concentrating on a narrow piece of the total market.b. striving for a competitive advantage based on doing a better job than competitors of serving buyers in the target market

niche.c. the use of guerrilla offensives to capture customers.d. trying to wrest market share away from r ivals via e%tra advertising, above average e%penditures for promotional programs,

and heavy use of point of sale merchandising techni!ues. e. an emphasis on using backward vertical integration to satisfy the speciali*ed re!uirements of niche members.


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1*. $ocusing on a limited mar(et nichea. is more attractive when the niche offers good growth potential and is big enough to be profitable.b. is more attractive when a focuser has the capabilities and resources to serve the segment effectively.c. is more attractive when the focuser can defend itself against challengers based on the customer goodwill it has built up and

on its superior ability to serve niche members.d. works best when it is costly or difficult for multi segment rivals to satisfy the speciali*ed needs of niche members.e. works best when the focuser can use preemptive strikes to create sustainable competitive advantage.f. is more attractive when no other rivals are attempting to speciali*e in serving the same target segment.g. is a vulnerable strategy if rivals have the opportunity to employ end run offensives to thwart the focuser s own strategic

initiatives.h. typically entails lower profit margins and rates of return on investment than can be achieved by aiming to serve the broad

part of the market.

1,. Eertical integrationa. can be a good strategy if it results in strengthening the firm s competitive position otherwise, it is ill advised.b. forward into wholesale distribution and retail operations is one of the best strategic options to lowering the costs of accessing

end users and becoming the overall low cost provider.c. is the most fre!uently used strategy for achieving a cost advantage.d. has some disadvantages, but they are usually offset by the advantages.e. backward into the production of items otherwise sourced from outside suppliers is usually the cheapest and most reliable way

to obtain needed inputs since the profits earned by suppliers can be bypassed.f. locks a firm into relying on its own in house activities and sources of supply and+or distribution outlets (which may prove to be

more costly than having these value chain activities performed by outsiders).g. can pose capacity balance problems at each stage in the value chain.h. can involve different skills, business capabilities, and key success factors at each stage of the industry value chain, thus

raising !uestions about whether it makes good business sense to get involved in performing more activities along theindustry value chain.

1 . Cooperati&e strategies+ alliances+ or partnerships can produce such benefits asa. making vertical integration easier and cheaper.b. improving supply chain efficiency.c. gaining cost saving efficiencies in manufacturing, marketing, and+or distribution.d. speeding new products to market.e. improved access to new technologies (via technology sharing and joint research).f. allowing a company to ac!uire access to competitively valuable resources and capabilities that it could not develop on its own.g. giving a company the capability to launch many offensive initiatives simultaneously across many fronts.h. making it feasible for a company to switch back and forth between a low cost provider strategy and a differentiation strategy.

i. allowing a company to fill gaps in its resources or to offset internal resource weaknesses.

1 . Competiti&e ad&antagea. emerges only after a buildup period, which can range from as little as several months to as much as several years or even

longer.b. is enjoyed over some benefit period, the length of which depends on how much time it takes rivals to launch counter moves

to close the competitive gap.c. is best achieved by initiatives to capitali*e on competitor weaknesses.d. is more sustainable with a differentiation strategy than a low cost provider strategy.e. is harder to achieve with an end run offensive than with initiatives to outmatch rivals strengths.f. tends to be eroded by the actions of competent, resourceful competitors, unless the holder can devise an ongoing series of

strategic initiatives that thwart the gap narrowing actions of rivals.g. is generally achieved via some kind of strategic offensive and then protected and perhaps sustained with some combination of

defensive and offensive strategies.

1 . 2 strategic offensi&e aimed at going head-to-head against (ey competitors to match or beat their strengthsa. may be an attractive way of winning market share away from weaker rivals whose strengths and resources can be

outmatched.b. may be unavoidable if the competitive advantage of a stronger rival is to be narrowed or whittled away entirely.c. nearly always should involve cutting price below those charged by the rivals being targeted.d. is the least risky and most likely to succeed of all of the various types of offensive strategies.e. stands the best chance of succeeding if it is predicated on either a cost advantage or an e!ual or better product offering

otherwise the offensive is probably destined to hurt profitability because of the e%tra costs of supporting such an offensive.


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13. Guerrilla offensi&esa. are particularly well suited offensives for market leaders to wage against small challengers.b. utili*e the principle of surprise and the principle of hit and run.c. are an e%cellent offensive tactic for going after market share in markets comprised of many different buyer segments,

because a guerrilla can randomly go after buyers in different market segments to confuse rivals as to what segment theguerrilla is really interested in.

d. can aim at buyer groups that are not important to larger rivals or at buyers whose loyalty to rival brands is weakest.e. fre!uently involve e%panding capacity ahead of r ivals in hopes of bluffing out rivals from following with e%pansions of their

own.

f. work best when aimed at attracting the business of the most prestigious customers.g. can aim at areas where particular rivals are overe%tended or have spread their resources so thinly as to be temporarily

vulnerable.

14. 6efensi&e strategiesa. serve the purpose of helping protect competitive advantage, lowering the risk of being attacked, weakening the impact of any

attack that occurs, and influencing would be challengers to aim their offensive attacks elsewhere.b. are the best ways to counter the efforts of firms trying to make market inroads with substitute products.c. tend to work more fre!uently than offensive strategies because they are usually less risky.d. can entail actions that signal would be challengers that there is a real threat of strong retaliation if a challenge is mounted.e. often work better if they present a moving target type of defensive as opposed to a defense of the status !uo.f. can involve deflecting market challenges by forgoing some short run profits.g. work best when they involve some form of vertical integration.h. are more likely to succeed if they are predicated on actions to capture first mover advantages via preemptive strikes that

foreclose imitation by rivals.

#5. $irst-mo&er ad&antages and disad&antagesa. concern the speed at which to vertically integrate forward or backward.b. are more important in crafting defensive strategies than offensive strategies.c. concern the pros and cons of vertical integration versus de integration and unbundling.d. concern when to make a strategic move.e. are more important considerations in a technology based differentiation strategy than in a best cost producer strategy.f. deal primarily with whether entry barriers are higher for newcomers than latecomers.g. concern whether to be aggressive or cautious in making a particular strategic move.h. concern whether it is more strategically advantageous to be a leader or a follower.

#1.2 company has whene&er it has an edge o&er ri&als in attracting customers anddefending against competiti&e forces.

##. The 2chilles heel of alliances and cooperati&e strategies is the danger of onother companies for essential expertise and capabilities o&er the long term.

#*. Competiti&e ad&antage is nearly always achie&ed by launching successful 1" strategiesD#" strategies can protect competiti&e ad&antage but rarely are the basis of achie&ing it.

#,. 2n strategy see(s to a&oid head-on competiti&e challenges tied to such tacticsas aggressi&e price-cutting+ escalated ad&ertising+ or efforts to out-differentiate ri&als" and+ instead+ in&ol&emaneu&ering around competitors by aggressi&ely entering unoccupied or less contested mar(et territory byintroducing next-generation products and7or technologies so as to gain first-mo&er ad&antages.

# .2 strategy in&ol&es mo&ing first to secure an ad&antageous position that ri&alsare foreclosed or discouraged from duplicating.


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ANSWERS1. b, c, e, f, g2. a, d, e, f 3. b, c, d4. a, b, e5. a, b, d, f, g6. a, c, e7. a, d, f, g, h8. b, c, d, e, f, h9. a, b, d, e10. b, c, d11. a, e, f 12. a, b13. a, b, c, d, f 14. a, g, h15. b, c, d, e, f, i

16. a, b, f, g17. a, b, e18. b, d, g19. a, d, e, f 20. d, g, h21. competitive advantage22. becoming dependent23. (1) offensive (2) defensive24. end run offensive25. preemptive

strike


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Chapter Self - Test1. Competing in emerging industries

a. poses the strategy-making challenge of dealing with uncertainties about how the market will function, howfast it will grow, and how big it will get.

b. is frequently di cult because of little data and little consensus about which of several competingtechnologies will win out and/or which product attributes will ultimately gain the most buyer favor.

c. is less risky than competing in maturing industries.d. is usually more pro table than competing in either globally competitive industries or industries where market

demand is stagnant or even declining.e. typically involves high entry barriers and small learning/experience curve e ects.f. generally requires participants to wrestle with !"# how to nance the start-up phase, !$# what market

segments to pursue, and !%# what -kind of competitive advantage to build.g. usually entails risk-taking entrepeneurship, a bold strategy !often keyed to product superiority#, e orts to

capture rst-mover advantages and preparing to defend against new entry by pro t-seeking outsiders.

#. >n high-&elocity mar(et en&ironmentsa. the key drivers are vigorous price competition and powerful buyers whose needs are changing rapidly.b. it is typical to have rapid- re technological change, short product lifecycles, frequent launches of fresh

competitive moves by rivals, and rapidly evolving buyer needs and expectations all occurring at once.c. competitive success often hinges on investing aggressively in &'( and staying on the cutting edge of

technological know-how.d. competitive success often hinges on such organi)ational capabilities as speed, agility, resource *exibility, and

innovativeness in nding new and better ways to please customers.e. the driving forces are out of control, making new investment very risky.f. being a fast follower, if not the rst mover, is critical.g. it is virtually impossible for any company to achieve competitive advantage because of the speed with which

conditions change.h. two of the key success factors are creating new competencies and capabilities !to t newly emerging market

conditions# and being able to quickly match rivals on whatever technological approaches and productfeatures they are able to pioneer successfully.

*. /hich of the following are characteristics of a maturing industry0a. +ost competitors are driven to pursue a low-cost provider strategy.b. he industry becomes more pro table because market demand is dependable and stable.c. ntry barriers fall.d. here is more head-to-head competition for market share.

e. uyers become more sophisticated, often driving a harder bargain on repeat purchases. a f. ompetitionoften produces a greater emphasis on which seller o ers the best combination of price and service. a g.0roduct innovation and process-related technological changes begin to come at a faster and faster pace.

h. he industry begins to consolidate to a smaller number of players.i. 0ro t margins start to get squee)ed and industry pro tability begins to erode.

1. ompanies can strengthen their positions in response to the new competitive character of industry maturityby pruning their product lines, focusing on cost reduction, expanding internationally, purchasing/ acquiringweak or struggling competitors, and building new capabilities.

,. Companies that succeed in competing in stagnant or declining industriesa. usually are forced to pursue a best-cost provider strategy.b. depend heavily on defensive strategies rather than o ensive strategies.


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c. typically pursue short-term cash *ow maximi)ation rather than long-term pro t maximi)ation.d. sometimes rely on a focus strategy that involves identifying, creating, and exploiting growth segments within

the overall industry.e. often pursue di erentiation strategies keyed to quality improvement and product innovation.f. draw their cash out of the business quickly and re-deploy it elsewhere !in other more pro table investments#.g. work diligently and persistently to drive costs down.h. are those that are patient and willing to wait the hard times out until the market turns around !as it usually

does# and business conditions improve.


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. Competing in fragmented industriesa. entails demand conditions where there are many, many buyers of the product and the quantity sold to any

one buyer constitutes a tiny fraction of total industry sales volume.b. involves a situation where companies have to cope with low entry barriers, there is an absence of economies

of large-scale production, and no seller has a king-si)ed market share.c. usually requires use of low-cost leadership and broad-appeal di erentiation strategies !because in a

fragmented industry environment such strategies readily lead to industry domination#.d. is very conducive to the use of focused strategies keyed to product speciali)ation, customer speciali)ation, or

geographic speciali)ation.e. normally requires both forward and backward integration in order to achieve a viable long-term market

position.f. tends to be more pro table and more likely to result in sustainable competitive advantage when a company

employs a focused di erentiation strategy instead of a focused low-cost strategy.

. >n a fragmented industrya. the standout competitive feature is the absence of market leaders with king-si)ed market shares.b. participants generally have the strategic freedom to pursue broad or narrow market targets and low-cost or

di erentiation-based competitive advantages.c. the market is usually local !which is why it takes thousands of sellers to cover all the di erent local markets#.d. one of the suitable competitive strategy options is to construct and operate 2formula2 facilities at many

locations.e. another of the suitable competitive strategy options is to form strategic alliances with sellers in many local

markets to gain wider geographic exposure and market visibility.. Companies are moti&ated to expand internationally and compete in additional country mar(ets

a. in order to capture the scale economies and lower costs that may be associated with selling a volume greaterthan can be achieved in any single national market.

b. in order to avoid the risk of *uctuating exchange rates.c. in order to escape slowing growth and market saturation in country markets where they are already

competing.d. because competition is usually weaker in foreign markets.e. to access natural resource deposits in other countries.f. to capitali)e on their competencies and resource strengths.g. to spread their business risk across a wider market base.

3. Competing in international mar(ets poses a bigger strategy-ma(ing challenge than competing in only thecompany's home mar(et because of

a. manufacturing cost variations among countries.b. the risks of exchange rate *uctuations.c. variations in host government trade policies.d. di ering competitive conditions in di erent country markets. e. di ering buyer needs and habits from country

to country.

4. /here multi-country competition pre&ails+a. prices and competitive conditions are strongly linked across country markets to form a world market.b. there is no 2international market,2 1ust a collection of self-contained country markets.c. the risk of *uctuating exchange rates is greatly reduced.d. it makes strategic sense for a company3s strategy to be crafted country by country to be responsive to buyer

needs and competitive conditions in each country.e. the least risky strategy option is to maintain a one-country production base and export goods to each of the

target country markets where the company elects to sell !utili)ing either company-owned or foreign

controlled distribution channels#.15. /hich of the following is a &alid competiti&e strategy option for a company that wants to participate in

international mar(ets0a. 4 global low-cost provider strategyb. 4 multi-country follow-the-leader strategyc. 4 strategy of licensing foreign rms to use the company3s technology or to produce and distribute the

company3s products.d. 4 content follower strategye. 4 global di erentiation strategy where the same di erentiation approach is used in each country market

where the company competes


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f. 4 global focus strategy aimed at the same market niche or segment in each country where the companycompetes a g. +aintaining a one-country production base and exporting goods to foreign markets 56 h. 4multi-country cross-subsidi)ation strategy

i. 4 critical market strategy 1. 4 strategic alliance strategy aimed at having more alliances in more country markets than any other rival.

11. >n globally competiti&e mar(etsa. the pattern of competition is fundamentally di erent from country to country.

b. prices and competitive conditions are closely linked across country markets.c. a company3s competitive position in one country both a ects and is a ected by its position in other countries,

especially so in countries that represent critical markets.d. it makes strategic sense to pursue some type of global strategy.e. a cross-subsidi)ation strategy is preferable to a pro t sanctuary strategy.

1#. Fulti-country and global strategies differ in which of the following respects0a. he strategic arena for a multi-country strategy consists of country markets where the company chooses to

compete, but the strategic arena for a global strategy includes countries which constitute critical markets forthe product and also other 2important2 country markets.

b. he product line in a multi-country strategy is adapted to local needs whereas with a global strategy theproduct line is mostly the same from country to country.

c. he production strategy for a multi-country competitive approach may well involve plants scattered acrossmany host countries whereas a global competitive approach tends to entail locating plants wherever the

best competitive advantage potential exists.d. 7ith a multi-country approach marketing and distribution strategies are adapted to the circumstances andculture of each host country whereas with a global approach there is a lot of worldwide coordination, withminor adaptation to host country situations as required.

e. 7ith a multi-country strategy companies may set up autonomous subsidiaries to customi)e operations to thost country conditions whereas with a global strategy ma1or strategic decisions are closely coordinated andmore uni ed across individual country markets.

1*. /ith a global approach to competing+ the achie&ement of competiti&e ad&antage depends ona. deploying and locating value chain activities !&'(, manufacturing, distribution centers, sales and marketing,

after-the-sale service, and so on# among the various countries so as to achieve lower costs or greaterdi erentiation than rivals.

b. having more pro t sanctuaries than rivals.c. doing a better 1ob of cross-subsidi)ation than rivals.d. competing in more national markets than key rivals.

e. having more manufacturing plants than rivals.f. coordinating company activities and strategic moves worldwide.g. forming more and better strategic alliances than rivals.h. using an export strategy so as to avoid the risks of *uctuating exchange rates.

1,. $orming strategic alliances with ma%or foreign companiesa. is generally the least risky, most likely to succeed, and mostly pro table approach to competing

internationally.b. may o er an avenue for gaining economies of scale in production and/ or marketing.c. are a way of gaining access to international markets that otherwise may be hard or costly to penetrate.d. is a frequently used approach to competing in international markets.e. is the most e ective and dependable way to gain competitive advantage in international markets.f. is usually more e ective in combating competitive disadvantage than in gaining competitive advantage.g. poses organi)ational hurdles because of the potential for con*icting ob1ectives, con*icting opinions about

how to proceed, disagreements over who is to have authority over what, the added costs of coordination andcommunication, and di culties of trying to collaborate in competitively sensitive areas.h. should be viewed as temporary rather than permanent.

1 . Competitors in international mar(ets can be distinguished not only by strategy differences but also bydifferences in their long-term ob%ecti&es and strategic intentD the most common types of strategic intentinclude

a. global dominance.b. competing on a domestic-only basis.c. content followership.d. long-term cross subsidi)ation.e. short-term cross subsidi)ation.


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f. competing only in critical markets.g. constant o ensive attack.h. concentrating on building a stronger domestic market position but still pursuing sales in several or many

foreign markets !to boost sales and pro ts over what can be achieved domestically#.


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1 . rofit sanctuariesa. refer to country markets where a company derives substantial pro ts because of its strong or protected

market position.b. are valuable competitive assets in globally competitive markets because a multinational competitor with

multiple sanctuaries has a resource advantage in waging a competitive o ensive against domesticallycompetitors whose only pro t sanctuary is their home market.

c. enable a company pursuing a multi-country strategy to compete on an equal footing with companiespursuing a global strategy.

d. are a relevant competitive consideration in international markets because companies with multiple pro tsanctuaries have a competitive advantage over companies with a single !or no# pro t sanctuary.

e. are essential to competing successfully in countries that qualify as critical markets.f. are relevant to who has the upper hand in competing in world markets because companies with multiple pro t

sanctuaries can utili)e the pro ts and cash *ows generated in their sanctuaries to support new strategico ensives to gain customers and market share in additional countries.

1 . To sustain their mar(et positions+ industry leaders usually need to consider which of the following strategicoptions0

a. 4 multi-country strategyb. 4 multiple pro t sanctuary strategyc. 4 stay-on-the-o ensive strategyd. 4 strategy that encourages rivals to be content followers rather than aggressive challengerse. 4 cross-subsidi)ation strategy

f. 4 content follower strategyg. 4 harvest strategyh. 4 fortify-and-defend strategy

13. The strategic options most suitable for runner-up competitors includea. a strategy of imitating the strategic actions and approaches of the industry leader.b. becoming a lower-cost producer and using the appeal of a lower price to win customers from weak,

higher-cost rivals.c. using di erentiation strategies keyed to better quality, technological superiority, superior customer service,

or product innovation.d. a harvest strategy.e. a growth via acquisition strategy.f. focusing on a few market segments where the rm3s resource strengths and capabilities can yield a

competitive edge.g. a vertical integration strategy.h. an export strategy.i. a content follower strategy.

1. a turnaround strategy.

14. Strategic efforts to turnaround crisis-ridden companies typically in&ol&e such actions asa. revising the existing strategy !perhaps radically#.b. launching initiatives to boost revenues.c. pursuing cost reduction !often quite aggressively#.d. selling some of the company3s assets to raise cash to pay down debt and to revitali)e the remaining part of

the business.e. endeavoring to put together a business game plan that closely imitates the strategy of a high-performing

company of approximately the same si)e.

#5. /hich of the following do 9


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h. &emember that di erentiation strategies rarely defeat low-cost provider strategies.

#1. exists when competition in one national mar(et is independent of competition inanother national mar(et.

##. are country mar(ets where a company has a strong or protected mar(et positionand deri&es substantial profit.

#*. 2 strategy in&ol&es (eeping rein&estment to a bare-bones minimum+ ta(ing actionsto minimi e operating expenses+ and operating the business in a manner calculated to maximi e short-termcash flows in preparation for an orderly mar(et exit.

#,. 2 big disad&antage of is the danger of depending on another company for essentialexpertise and capabilities.

# . in&ol&es using profits earned in one or more country mar(ets to co&er the addedcosts of waging a competiti&e offensi&e against (ey ri&als in their home mar(ets or to support the costs ofentering a strategically-critical country mar(et.


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29S/:;S1. a% b% f% g#. b% c% d% h*. d% e% f% h% "% j,. d% e% g

. b% d

. a% b% d. a% c% e% f% g3. a% b% c% d% e4. b% d15. a% c% e% f% g11. b% c% d1#. a% b% c% d% e1*. a% f 1,. c% d% f% g% h1 . a% b% h1 . a% b% d% f

1 . c% d% h13. b% c% e% f% "14. a% b% c% d#5. b% d% h#1. ulticountry competition##. profit sanctuaries#*. harvest#,. strategic alliances# . Cross subsidization

Chapter Self - Test


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1. The tas( of crafting corporate strategy for a di&ersified company concernsa. ma!ing strategic moves to position the company in the industries chosen for diversification.b. initiating actions to improve the combined performance of the businesses the firm has diversified into.c. selecting ways to standardize the geographic scope over which all of the company's businesses compete.d. deciding whether to standardize the manufacturing and mar!eting approaches used in each business so as to capture

strategic fit benefits.e. establishing investment priorities and steering corporate resources into the most attractive business units.

#. Companies that are prime candidates for di&ersifying into new businesses includea. single business enterprises with diminishing growth prospects in their present business.b. firms that are fully integrated in a fragmented industry.c. those with competencies and capabilities that are readily transferable to other businesses.d. those with the financial resources and managerial depth to e#pand into other industries.e. wea!ly positioned companies in slow growth industries.f. those who have competitors that are diversifying.g. firms that have 150 or greater mar!et shares in their present business.

*. 6i&ersification results in enhanced shareholder &alue whena. the company's profits are higher after diversification than before diversification.b. the company's return on shareholder e uity is higher after diversification than before diversification.c. the industries chosen for diversification are growing faster than the company's present business.d. diversification results in bigger mar!et shares.e. the businesses a company has diversified into perform better as part of the same firm than they could have performed as

independent companies.

,. /hether a particular di&ersification mo&e is capable of enhancing share-holder &alue can be e&aluated &iaa. the attractiveness test.b. the ac uisition test.c. the entry barrier test.d. the cost of entry test.e. the competition test and the return on investment test.f. the better off test.g. the synergy test and the financial test.

. The strategic options for a company that elects to di&ersify includea. e#panding into new geographic areas.b. e#panding into a group of geographically related country mar!ets.

c. building positions in related businesses.d. ac uiring a number of companies in businesses that are unrelated to its present business so as to spread its investment ris!across many industries.

e. pursuing a combination of related and unrelated diversification.f. partial or full vertical integration.g. e#panding its product line to include a much broader and more diverse selection for customers.

. 2c)uisition of an existing businessa. is the most popular means of diversifying into another industry.b. is usually more costly than entering via internal start up.c. poses the problem of whether to buy a successful company at a high price or a struggling company at a bargain price.d. has the advantage of uic!er entry into the target mar!et ,as compared to internal start up-.e. is the toughest option for diversifying in a manner that passes the synergy test for enhanced shareholder value.f. is the most profitable way to enter a new industry.

g. is usually a more profitable way of entering a new business&industry than via a joint venture or strategic alliance with anothercompany.

. The big drawbac(s to entering a new industry &ia internal start-up includea. passing the attractiveness test for enhanced shareholder value.b. the costs of overcoming entry barriers.c. passing the better off test for enhanced shareholder value.d. the reduced opportunities for capturing strategic fit benefits.e. the e#tra time it ta!es to build a strong and profitable competitive position.


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3. Hoint &entures are an attracti&e way to enter new businesses whena. it is uneconomical or ris!y for a company to underta!e entry on its ownb. pooling the resources and competencies of two or more independent organizations produces a venture arrangement with

more of the s!ills and resource strengths needed to be a strong competitor.c. partners with different objectives and strategies can be found.d. the partners have closely related value chains.e. such ventures help surmount import uotas% tariffs% other trade restrictions% nationalistic political interests% and cultural

roadbloc!s.

4. 2 related di&ersification strategya. involves diversifying into businesses whose value chains have appealing strategic fits.b. is attractive because of the opportunity to turn strategic fits into competitive advantage.c. e#ploits economies of scale whereas an unrelated diversification strategy e#ploits economies of scope.d. offers more competitive advantage potential than an unrelated diversification strategy.e. is usually based on mar!et related strategic fit rather than operating fits or management fits.

15. The competiti&e ad&antage potential of related di&ersificationa. stems from greater degrees of industry attractiveness than is found with unrelated diversification.b. can come partly from the ability to transfer e#pertise or capabilities or technology from one business to another.c. stems partly from opportunities to combine the related activities of separate businesses into a single operation and reduce

costs.d. can come from opportunities to leverage use of a company's brand name reputation in new businesses.

e. can stem from opportunities to capture economies of scope.f. can emerge from collaborative performance of related value chain activities so as to produce valuable new competitivecapabilities.

11. /hile strategic fit relationships can occur throughout the &alue chains of different businesses+a. distribution and customer related strategic fits are the most common and offer the best potential for economies of scope.b. most fits are manufacturing related.c. most fits fall into the categories of being mar!et related% technology related% operating related% or management related.d. operating fits tend to be most important% mar!et fits second most important% management fits third most important% and

technology fits fourth most important.e. most companies prefer to concentrate on technology related fits and capturing the benefits of s!ills transfer because of the

greater chances of success and the big payoff in gaining a technology based competitive advantage.

1#. 2 strategy of unrelated di&ersificationa. involves a willingness to diversify into any industry or business that holds promise for attractive financial gain.

b. has appeal from the standpoint of diversifying business ris! over a set of diverse industries.c. can offer the potential of stable profits ,because hard times in one industry may be offset by good times in another-.d. is generally more profitable than related diversificat

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Strategic Management Multiple Choice Questions

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