Chapter 8 Strategy Formulation and Implementation

True/False Questions
1. Because of Nintendos errors in strategy, they have fallen from number one to number three in the video game industry. Answer: True . Level: !age: "# Ty$e: %

&iven the need for massive infusion of cash, only large multinationals are concerned with strategy. Answer: %alse Level: !age: "' Ty$e: %

(.

To$ mangers and chief e)ecutives have the final res$onsibility for strategic $lanning rests. Answer: True Level: !age: "' Ty$e: %

*.

The general $lan of ma+or action by which an organi,ation intends to achieve its long-term goals is called business-level strategy. Answer: %alse Level: 1 !age: ". Ty$e: %

/.

0evelo$ment of new $roducts is $art of an organi,ation1s e)ternal growth strategy. Answer: %alse Level: !age: ". Ty$e: %

".

There are four categories of grand strategies: growth, stability, retrenchment and diversification. Answer: %alse Level: ( !age: ". Ty$e: %

#.

2tability is also referred to as a $ause strategy. Answer: True Level: 1 !age: #3 Ty$e: %

'.

0ivestiture means selling of a business unit for the cash value of the assets, thus terminating its e)istence. Answer: %alse Level: 1 !age: #1 Ty$e: %

..

4hen 5-6art laid off thousands of $eo$le and closed over 133 stores, it was following a
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retrenchment strategy. Answer: True 13. Level: ( !age: #1 Ty$e: A

Tools * All, a de$artment store, sold all of its inventories at '3 $ercent off and $ermanently closed its doors. This is referred to as li7uidation. Answer: True Level: !age: #1 Ty$e: A

11.

A$$ro)imately '( $ercent of all ac7uisitions, according to research, are later divested. Answer: %alse Level: !age: #1 Ty$e: %

1 .

&lobali,ation refers to the world-wide standardi,ation of $roduct design and advertising. Answer: True Level: 1 !age: #1 Ty$e: %

1(.

4ith a multidomestic strategy, a com$any will achieve the globali,ation or standardi,ation of mar8eting and $roduction a$$roaches. Answer: %alse Level: !age: # Ty$e: %

1*.

A multidomestic strategy standardi,es global $roducts9advertising strategies. Answer: %alse Level: !age: # Ty$e: %

1/.

A transnational strategy see8s to achieve both global integration and national res$onsiveness. Answer: True Level: 1 !age: #( Ty$e: %

1".

The essence of formulating strategy is choosing how the organi,ation will be identical to its 8ey com$etitors in the industry. Answer: %alse Level: !age: #* Ty$e: %

1#.

:ust-for-;ou, <nc.1s ability to mar8et its $roducts better than its com$etitors is an e)am$le of its core com$etence. Answer: True Level: !age: #* Ty$e: A The interaction of !roduction and 2ales wor8ing together to $roduce $rofit greater than the total of both wor8ing se$arately is an e)am$le of synergy. Answer: True level: ( !age: #/ Ty$e: A

1'.

1..

=alue refers to the combination of benefits received and costs $aid by the customer. Answer: True Level: 1 !age: #/ Ty$e: %

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3.

Business, cor$orate, and global are the three levels of strategy. Answer: %alse Level: !age: #/ Ty$e: %

1.

>or$orate-level strategy $ertains to the organi,ation as a whole. Answer: True Level: 1 !age: #/ Ty$e: %

?@ow do we com$eteA? 7uestion concerns functional-level strategy. Answer: %alse Level: !age: #" Ty$e: %

(.

2trategic decisions at the business level concern amount of advertising, direction and e)tent of B C 0, $roduct changes, new $roduct develo$ment, e7ui$ment and facilities, and e)$ansion or contraction of $roduct lines. Answer: True Level: !age: #" Ty$e: %

*.

2trategy im$lementation involves the $lanning and decision ma8ing that lead to the establishment of the firms goals. Answer: %alse Level: 1 !age: #' Ty$e: %

/.

The administration and e)ecution of the strategic $lan is strategy im$lementation. Answer: True Level: !age: #' Ty$e: %

".

2ituation analysis ty$ically includes a search for 24DT--situation without threats. Answer: %alse Level: !age: #' Ty$e: %

#.

24DT analysis includes a review of the internal threats and o$$ortunities. Answer: %alse Level: 1 !age: #' Ty$e: %

'.

%or &eneral Electric, a strong financial base, combined with an e)cellent re$utation with creditors and the e7uity mar8et, is with a significant strength to include in its 24DT analysis. Answer: True Level: ( !age: #. Ty$e: A

..

Threats are characteristics of the internal environment that may $revent the organi,ation from achieving its strategic goals. Answer: %alse Level: !age: #. Ty$e: %

(3.

!ortfolio strategy $ertains to the mi) of business units and $roduct lines that fit together in a logical way to $rovide synergy and com$etitive advantage for the cor$oration.
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Answer: True (1.

Level: 1

!age: '3

Ty$e: %

The B>& FBoston >onsulting &rou$G matri) evaluates 2BHs with res$ect to their business growth rate and geogra$hical location. Answer: %alse Level: 1 !age: '1 Ty$e: %

( .

According to the B>& 6atri), the 7uestion mar8 e)ists in a new, ra$idly growing industry but has only a small mar8et share. Answer: True Level: 1 !age: ' Ty$e: %

((.

<n B>& 6atri), the circle si,e re$resents the relative $rofit made by each business in the com$anys $ortfolio. Answer: %alse Level: !age: ' Ty$e: %

(*.

Dne of !orter1s five com$etitive forces is bargaining $ower of customers. Answer: %alse Level: 1 !age: '( Ty$e: %

(/.

The bargaining $ower of the government, according to !orter, is one of the five com$etitive forces affecting an organi,ation1s com$etitive environment. Answer: %alse Level: 1 !age: '( Ty$e: %

(".

0ifferentiation, cost leadershi$, and focus are three of !orter1s com$etitive strategies. Answer: True Level: !age: '/ Ty$e: %

(#.

Drgani,ations with a focus strategy concentrate on a s$ecific regional mar8et or buyer grou$. Answer: True Level: 1 !age: '# Ty$e: %

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:oint =enture re$resents the ultimate in collaborative relationshi$s. Answer: %alse Level: !age: '. Ty$e: %

(..

2tructural design ty$ically begins with the organi,ational chart. Answer: True Level: 1 !age: .( Ty$e: %

*3.

Effective im$lementation is not a necessity if the strategies are truly creative. Answer: %alse Level: !age: ." Ty$e: %

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$ultiple Choi%e Questions

1. The set of decisions and actions used to formulate and im$lement strategies that will $rovide a com$etitively su$erior fit between the organi,ation and its environment so as to achieve organi,ational goals is 8nown as a. b. c. d. e. strategy formulation. strategic $lanning. strategic management. strategy im$lementation. strategy evaluation. Level: 1 !age: "' Ty$e: %

Answer: c .

4hich of these refers to the overall $lan of action for the organi,ationA a. b. c. d. e. The mission statement The grand strategy A strategic $lan The organi,ational vision >om$etitive $lan Level: 1 !age: ". Ty$e: %

Answer: b (.

0obson >or$oration is continually see8ing out new mar8ets and $roducts, and is always on the loo8out for ac7uisition candidates. 0obson is $ursuing a grand strategy of a. b. c. d. e. stability. retrenchment. growth. li7uidation. divestiture. Level: !age: ". Ty$e: A

Answer: c *.

The ac7uisition of businesses that are related to current $roduct lines or that ta8es the cor$oration into new areas is referred to as a. b. c. d. e. retrenchment. diversification. li7uidation. cash cow. internal growth. Level: !age: ". Ty$e: %

Answer: b

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/.

0iversification is usually associated with the grand strategy of a. b. c. d. e. stability. retrenchment. internal growth. e)ternal growth. divestiture. Level: !age: ". Ty$e: %

Answer: d ".

Toy Trains, <nc. +ust introduced a new line of trains. This action is consistent with the grand strategy of a. b. c. d. e. stability. retrenchment. internal growth. e)ternal growth. cash cow. Level: !age: ". Ty$e: A

Answer: c #.

The management of 6ugs, <nc. decided on growing slowly and in a controlled fashion. This is consistent with the grand strategy of a. b. c. d. e. growth. stability. divestiture. li7uidation. e)ternal growth. Level: !age: #3 Ty$e: A

Answer: b '.

4hen the organi,ation goes through a $eriod of forced decline by either shrin8ing current business units or selling off or li7uidating entire businesses, it is called a. b. c. d. e. retrenchment. growth. cash cow. multidomestic. stability. Level: 1 !age: #3 Ty$e: %

Answer: a ..

As $art of a li7uidation strategy, Bose <nternational would a. b. c. loo8 to ac7uire similar organi,ation. attem$t to grow in a controlled manner. sell off $art of its business.
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d. e.

develo$ new $roducts. mar8et its $roducts aggressively. Level: ( !age: #1 Ty$e: A

Answer: c 13.

means selling off a business unit for the cash value of the assets, thus terminating its e)istence. a. b. c. d. e. 0iversification Transnational strategy 2ynergy 0ivestiture Li7uidation Level: 1 !age: #1 Ty$e: %

Answer: e 11.

4hich of these involves the selling off of businesses that no longer seem central to the cor$orationA a. b. c. d. e. 0iversification Transnational strategy 2ynergy 0ivestiture Li7uidation Level: 1 !age: #1 Ty$e: %

Answer: d 1 .

0ivestiture is a ty$e of a a. b. c. d. e. growth global retrenchment stability diversification

strategy.

Answer: c 1(.

Level: 1

!age: #1

Ty$e: %

<f AB> <nternational has standardi,ed its $roduct line throughout the world it is $ursuing a a. b. c. d. e. multidomestic strategy. retrenchment strategy. diversity strategy. globali,ation strategy. li7uidation strategy. Level: !age: #1 Ty$e: A

Answer: d 1*.

The assum$tion that a single global mar8et e)ists would lead to a

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a. b. c. d. e.

globali,ation strategy. multidomestic strategy. diversity strategy. domestic strategy. li7uidation strategy. Level: !age: #1 Ty$e: %

Answer: a 1/.

4hich of these refers to the modification of $roduct design and advertising strategies to suit the s$ecific needs of individual countriesA a. b. c. d. e. 0omestic strategy &lobal strategy Transnational strategy 6ultidomestic strategy 6ar8et design strategy Level: 1 !age: # Ty$e: %

Answer: d 1".

A strategy that combines global coordination to attain efficiency with fle)ibility to meet s$ecific needs in various countries is referred to as a a. b. c. d. e. domestic strategy. global strategy. transnational strategy. multidomestic strategy. region design strategy. Level: 1 !age: #( Ty$e: %

Answer: c 1#.

The $lan of action that $rescribes resource allocation and other activities for dealing with the environment and hel$ing the organi,ation attain its goals is 8nown as aFnG a. b. c. d. e. goal. ob+ective. mission. vision. strategy. Level: !age: #( Ty$e: %

Answer: e 1'.

A IIIIII is a business activity that an organi,ation does es$ecially well relative to its com$etition is 8nown as a. b. c. strategy synergy cash cow
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d. e.

core com$etence multidomestic Level: 1 !age: #* Ty$e: %

Answer: d 1..

The condition that e)ists when the organi,ation1s $arts interact to $roduce a +oint effect that is greater than the sum of the $arts acting alone is 8nown as a. b. c. d. e. core com$etence. synergy. value creation. business-level strategy. multidomestic strategy. Level: 1 !age: #/ Ty$e: %

Answer: b 3.

4hen ATCT decided to buy 6edia Dne, a cable com$any, it was $ursuing a a. b. c. d. e. functional-level strategy. internal growth strategy. multi-domestic strategy. cor$orate-level strategy. business-level strategy. Level: ( !age: #/ Ty$e: A

Answer: d 1.

4hich of these can be defined as the combination of benefits received and costs $aid by the customerA a. b. c. d. e. Drgani,ational benefits =alue >ost-benefit diversity 2ynergy >ore com$etence Level: 1 !age: #/ Ty$e: %

Answer: b .

4hen !hili$-6orris, the tobacco giant, bought 5raft, <nc., it was $ursuing a a. b. c. d. e. cor$orate-level strategy. business-level strategy. functional-level strategy. multidomestic strategy. retrenchment strategy. Level: !age: #/ Ty$e: A

Answer: a (.

IIIIII $ertains to the organi,ation as a whole.

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a. b. c. d. e.

Business-level strategy %unctional-level strategy >or$orate-level strategy D$erational-level strategy >om$etitive-level strategy Level: 1 !age: #/ Ty$e: %

Answer: c *.

2ears1 decision to sell off much of its financial services division is an e)am$le of a a. b. c. d. e. cor$orate-level strategy. business-level strategy. functional-level strategy. growth strategy. stability strategy. Level: !age: #/ Ty$e: A

Answer: a /.

A cor$orate-level strategy is concerned with the 7uestion a. b. c. d. e. what business are we inA how do we com$eteA how do we su$$ort our chosen strategyA where do we mar8et our $roductsA should we $romote from withinA Level: !age: #/ Ty$e: %

Answer: a ".

4hen >oca->ola introduced 2urge, a new citrus soft-drin8, it was $ursuing a a. b. c. d. e. functional-level strategy. multi-domestic strategy. cor$orate-level strategy. retrenchment strategy. business-level strategy. Level: ( !age: #" Ty$e: A

Answer: e #.

%ord1s decision to com$letely redesign its %ord Taurus can be classified as a a. b. c. d. e. cor$orate level strategy. business level strategy. functional level strategy. retrenchment strategy. stability strategy. Level: !age: #" Ty$e: A

Answer: b

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'.

0ecisions regarding the $ro$er amount of advertising for a $articular good or service are related to a. b. c. d. e. cor$orate-level strategies. functional-level strategies. tactical-level strategies. business-level strategies. retrenchment strategies. Level: !age: #" Ty$e: %

Answer: d ..

4hich of these 7uestions is central to a functional-level strategyA a. b. c. d. e. 4hat business are we inA @ow do we com$eteA @ow do we su$$ort our chosen strategyA 4hat business do we buyA 4here to mar8et our $roductsA Level: 1 !age: ## Ty$e: %

Answer: c

(3. 4hich of these refers to the use of managerial tools to direct resources toward the achievement of strategic goalsA a. b. c. d. e. 2trategy formulation 2trategy coordination 2trategy im$lementation 2trategy control 2trategy $lanning Level: !age: #' Ty$e: %

Answer: c (1.

The $lanning and decision ma8ing that lead to the establishment of the organi,ation1s goals and of a s$ecific strategic $lan is 8nown as a. b. c. d. e. strategy formulation. strategy im$lementation. strategy coordination. strategy control. 24DT. Level: !age: #' Ty$e: %

Answer: a ( .

4hich of these ty$ically includes a search for 24DT that affect organi,ational $erformanceA a. 2trengths and wea8nesses
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b. c. d. e.

D$$ortunities and threats 2ituational analysis E)ternal environment analysis >ultural analysis Level: !age: #' Ty$e: %

Answer: c ((.

Barney has been assigned to conduct a situation analysis for his organi,ation, Lets 2hare, <nc. As $art of this assignment, Barney will a. b. c. d. e. conduct an e)ternal wage survey. search for the strengths, wea8nesses, o$$ortunities, and threats that im$act his firm. choose a grand strategy for his firm. do a cost9benefit analysis. develo$ a mission. Level: !age: #' Ty$e: A

Answer: b (*.

Techni7ues used to monitor e)ternal environments include a. b. c. d. e. hiring scanning organi,ations. hiring the com$etition1s em$loyees government re$orts. buying com$etitors1 garbage. all of the above. Level: !age: #' Ty$e: %

Answer: e (/.

!lum !lastics has e)tremely creative em$loyees who, in the o$inion of the organi,ation, 8ee$ the com$any ahead of the com$etition. The creativity of these em$loyees would be classified as a. b. c. d. e. an internal wea8ness. an e)ternal o$$ortunity. an e)ternal strength. an internal strength. a neutral factor. Level: !age: #. Ty$e: A

Answer: d (".

4here does the information about o$$ortunities and threats comes fromA a. b. c. d. e. An analysis of the organi,ation1s internal environment A de$artment by de$artment study of the organi,ation 2canning the e)ternal environments Em$loyee grievances %inancial ratios of the organi,ation
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Answer: c (#.

Level:

!age: #.

Ty$e: %

0rain 4ell, <nc. is $articularly concerned about $ending legislation in >ongress that would further regulate their organi,ation. This legislation would be classified as a. b. c. d. e. an e)ternal o$$ortunity. an internal strength. an e)ternal threat. an e)ternal wea8ness. a congressional chaos. Level: !age: '3 Ty$e: A

Answer: c ('.

According to your te)t, which of the following is a $articular strength of 5raft %oodsA a. b. c. d. e. 6ar8eting %inance 6anagement !roduction BC0 Level: !age: '3 Ty$e: %

Answer: e (..

@ow business units and $roduct lines fit together in a logical way is the essence of a. b. c. d. e. business-level strategy. $ortfolio strategy. com$etitive strategy. financial strategy. functional strategy. Level: !age: '3 Ty$e: %

Answer: b *3.

The B>& matri) organi,es along which of the following dimensionsA a. b. c. d. e. 6ar8et share and $rofit 2ales and mar8et share Business growth rate and mar8et share Business growth rate and $rofit 2ales and $rofits Level: !age: '1 Ty$e: %

Answer: c *1.

>lic8 Dnce, <nc. has a number of strategic business units. Their hand-held com$uter unit has a large mar8et share in this ra$idly growing industry. Their hand-held com$uter business would be classified as
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a. b. c. d. e.

a dog. a star. a 7uestion mar8. a cash cow. stuc8 in the middle. Level: !age: '1 Ty$e: A

Answer: b * .

4hich of these is true about the cash cowA a. b. c. d. e. <t generates tremendous $rofits in a ra$idly growing industry. <t has a small mar8et share in a ra$idly growing industry. <t has a small mar8et share in a slow growth industry. <t has a large mar8et share in a slow growth industry. <t is generally a dead business that should be divested. Level: !age: ' Ty$e: %

*(.

Answer: d The star has a a. b. c. d. e.

large mar8et share in a ra$idly growing industry. large mar8et share in a slow growth industry. small mar8et share in a ra$idly growing industry. small share of a slow growth mar8et. moderate mar8et share in a slow growth industry. Level: !age: ' Ty$e: %

Answer: a **.

4hich of the following $ortfolio categories is made u$ of $oor $erformers who command only a small share of a slow growth mar8etA a. b. c. d. e. 2tar >ash cow Juestion mar8 0og >at Level: 1 !age: ' Ty$e: %

Answer: d */.

The 7uestion mar8 has a a. b. c. d. e. large mar8et share in a ra$idly growing industry. large mar8et share in a slow growth industry. small mar8et share in a ra$idly growing industry. small share of a slow growth mar8et. moderate mar8et share in a slow growth industry. Level: !age: ' Ty$e: %

Answer: c

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*".

4hich of these is true about the dog divisionA a. b. c. d. e. <t has a large mar8et share in a ra$idly growing industry. <t has a large mar8et share in a slow growth industry. <t has a small mar8et share in a ra$idly growing industry. <t has a small share of a slow growth mar8et. <t has a moderate mar8et share in a ra$idly growing industry. Level: !age: ' Ty$e: % are in the $ersonal

Answer: d *#.

&illette o$erates numerous strategic business units. 6ost of its care division. a. b. c. d. e. dogs 7uestion mar8s stars cash cows none of the above Level: !age: ' Ty$e: %

Answer: b *'.

Barriers to entry are related to which com$etitive forceA a. b. c. d. e. Bivalry among com$etitors !otential new entrants Threat of substitute $roducts Bargaining $ower of buyers Bargaining $ower of su$$liers Level: !age: '( Ty$e: %

Answer: b /..

All of the following are !orter1s com$etitive forces EK>E!T a. b. c. d. e. differentiation. bargaining $ower of buyers. bargaining $ower of su$$liers. threat of substitute $roducts. $otential new entrants. Level: !age: '( Ty$e: %

Answer: a /3.

The strategy involves an attem$t to distinguish the firm1s $roducts or services from others in the industry. a. b. c. d. cost leadershi$ differentiation focus internal growth
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e.

li7uidation Level: !age: '/ Ty$e: %

Answer: b /1.

4hich strategy can be $rofitable for an organi,ation when customers are loyal and willing to $ay high $ricesA a. b. c. d. e. %ocus &lobali,ation Dverall cost leadershi$ 0ifferentiation Li7uidation Level: !age: '/ Ty$e: %

Answer: d / .

4hich strategy involves see8ing efficient facilities, cutting costs and using tight cost controls to be more efficient than com$etitorsA a. b. c. d. e. >ost leadershi$ 0ifferentiation %ocus <nternal growth Li7uidation Level: !age: '" Ty$e: %

Answer: a /(.

The human resource de$artment at Ty8es Tricycles is im$lementing a number of functional level strategies. These strategies include focusing on ways to retain and develo$ a stable wor8 force and ways to im$rove efficiency in the organi,ation. These functional-level strategies are consistent with which of the following strategiesA a. b. c. d. e. Dverall cost leadershi$ 0ifferentiation New $roduct develo$ment New mar8et develo$ment 0ivestiture Level: !age: '" Ty$e: A

Answer: a /*. 4ith a grou$. a. b. c. d. e.

strategy, the organi,ation concentrates on a s$ecific regional mar8et or buyer cost leadershi$ differentiation focus internal growth li7uidation
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Answer: c //.

Level:

!age: '#

Ty$e: %

6ingles, <nc. concentrates its efforts on its target mar8et of 1' to / year olds. <t is using a strategy. a. b. c. d. e. focus differentiation overall cost leadershi$ multidomestic universal strategy Level: !age: '# Ty$e: A

Answer: a /".

2e$arate entities created with two or more active firms as s$onsors are called a. b. c. d. e. ac7uisitions. +oint ventures. strategic business $artnering. mergers. $referred su$$lier arrangements. Level: 1 !age: '. Ty$e: %

Answer: b /#.

4hen 0u!ont and Kero) coo$erated to create a se$arate entity called 0K <maging, <nc., it im$lemented which of these coo$erative strategiesA a. b. c. d. e. Ac7uisitions :oint ventures 2trategic business $artnering 6ergers !referred su$$lier arrangements Level: ( !age: '. Ty$e: A

Answer: b /'.

>otton >reations is e)$ecting to introduce new $roducts that will e)$erience ra$id growth. 4hich of the following functional-level strategies should they ignoreA a. b. c. d. e. Test mar8eting >onsumer $roduct trials >ost reduction Advertising cam$aigns All of the above should be ignored. Level: ( !age: .3 Ty$e: A

Answer: c /..

2ome $eo$le argue that management.

is the most difficult and most im$ortant $art of strategic

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a. b. c. d. e.

24DT analysis strategic formation strategic im$lementation strategic analysis strategy evaluation Level: !age: .1 Ty$e: %

Answer: c "3.

!ersuasion, motivation, and changes in cultures and values are e)am$les of which of the dimensions used to im$lement strategyA a. b. c. d. e. Leadershi$ 2tructural design @uman resources <nformation and control systems >om$ensation Level: 1 !age: . Ty$e: %

Answer: a "1.

As a way of im$lementing their differentiation strategy which em$hasi,es 7uality, 1 ( >or$oration decided to switch from an assembly line manufacturing system to a system based on wor8 teams. This is an e)am$le of which of the dimensions used for im$lementing strategyA a. b. c. d. e. Leadershi$ 2tructural design @uman resources <nformation systems >ontrol systems Level: ( !age: .( Ty$e: A

Answer: b " .

To encourage em$loyees to find ways to cut costs, and thus achieve their strategic goal of overall cost leadershi$, 0elta 0reamforce introduced a $ay-for-$erformance system. This is an e)am$le of which of the dimensions used for im$lementing strategyA a. b. c. d. e. <nformation and control systems @uman resources Leadershi$ 2tructural design 24DT Level: !age: .( Ty$e: A when a com$any goes global.

Answer: a "(. The a. b.

of im$lementing a strategy is cost, less difficulty, lessened

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c. d. e.

difficulty, increased ease, increased success, increased Level: !age: .* Ty$e: %

Answer: c

S%enario Questions
S%enario*+arla +a,idson 0arla 0avidson was an e)ecutive with 0igital <ndustries, a leading manufacturer of color televisions. 2he recogni,ed that the color television mar8et in the late 1.#31s was facing significant challenges. After two decades of highly successful develo$ment and mar8eting, the sales of color televisions had slowed and re$lacing older color television sets largely created her mar8et. 1. Hsing the logic of the B>& grid, 0arla should recogni,e that her strategic business unit was in which 7uadrantA a. b. c. d. e. 2tar >ash >ow Juestion 6ar8 0og None of the above Ty$e: A

Answer: b .

The strategy that the B>& matri) suggests that 0arla should ta8e for this 2BH is a. b. c. d. e. invest and grow. li7uidate while still $rofitable. as8 her astrologer for advice. 8ee$ the 2BH healthy and use its e)cess earnings to invest in other 2BH1s. divestiture.

(.

Answer: d Ty$e: A 4hich one of the following is not one of the com$etitive forces that !orter recommends that 0arla should recogni,eA a. b. c. d. e. !otential new entrants Bargaining $ower of buyers Threat of substitute $roducts Bargaining $ower of su$$liers All of the above are com$etitive forces. Ty$e: A
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Answer: e

S%enario*QT-%om %aced with ra$idly growing business, Juic8 Trade, <nc., a global bro8erage com$any with the largest mar8et share, recently announced that they have established an on-line stoc8 investment and trading subsidiary, JT.com, where investors can trade stoc8s at the lowest rates in the industry. The .com subsidiary has less than one $ercent mar8et share but it faces a very high business growth rate. <n the bro8erage industry the com$etition is fierce and all $layers are cutting their on-line commission rates. 1. Juic8 Trades traditional bro8erage business could be classified as a a. b. c. d. e. cash cow. dog. star. 7uestion mar8. stuc8 in the middle business. Ty$e: A

Answer: c .

JT.com subsidiary for Juic8 Trade can be classified as a a. cash cow. b. dog. c. star. d. 7uestion mar8. e. stuc8 in the middle business. Answer: d Ty$e: A

(.

<f Juic8 Trades traditional bro8erage business were to face a declining business growth, it may need to be reclassified as a a. b. c. d. e. cash cow. dog. star. 7uestion mar8. dead business. Ty$e: A

Answer: a *.

Juic8 Trade is following which strategy, according to !orter, through the .com subsidiaryA a. b. c. d. e. 2tability >ost leadershi$ %ocus 0ifferentiation Betrenchment
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Answer: b

Ty$e: A

Short./ns0er Questions
1. is the set of decisions and actions used to formulate and im$lement strategies that will $rovide a com$etitively su$erior fit between the organi,ation and its environment so as to achieve organi,ational goals. Answer: 2trategic management . !age: "'

AFnG IIIIIII is the general $lan of ma+or action by which an organi,ation intends to achieve its long-term goals. Answer: grand strategy !age: ".

(.

IIIIII can be $romoted internally by investing in e)$ansion or e)ternally by ac7uiring additional business divisions. Answer: &rowth !age: ".

*.

The ac7uisition of business that are related to current $roduct lines or that ta8e the cor$oration into new areas is called IIIIII. Answer: diversification !age: ".

/.

2tability is sometimes called IIIIII. Answer: $ause strategy !age: #3

".

IIIIII means that the organi,ation goes through a $eriod of forced decline by either shrin8ing current business units or selling of or li7uidating entire businesses. Answer: Betrenchment !age: #3

#.

Terminating the e)istence of a business unit by selling it off for the cash value of its assets is 8nown as IIIIIII. Answer: li7uidation !age: #1

'.

The standardi,ation of $roduct design and advertising strategies throughout the world is called . Answer: globali,ation !age: #1

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..

List the three global cor$orate strategies. Answer: &lobali,ation strategy, transnational strategy, and multidomestic strategy. !age: #

13.

4hen an organi,ation chooses aFnG IIIIIII strategy, it means that business decisions such as $roduct design are made on a country-by-country basis. Answer: multidomestic !age: #

11.

A strategy see8s to achieve both global integration and national res$onsiveness. Answer: transnational !age: #

1 .

The $lan of action that $rescribes resource allocation and other activities for dealing with the environment and hel$ing the organi,ation attain its goals is called a . Answer: strategy !age: #(

1(.

A business activity that an organi,ation does $articularly well relative to its com$etition is 8nown as aFnG IIIIIII. Answer: core com$etence !age: #*

1*.

4hen organi,ational $arts interact to $roduce a +oint effect that is greater than the sum of the $arts acting alone, occurs. Answer: synergy !age: #/ strategy.

1/.

The 7uestion What business are we in? concerns Answer: cor$orate-level !age: #/

1".

The 7uestion How do we compete? concerns Answer: business-level !age: ##

strategy.

1#.

The 7uestion How do we support the business-level competitive strategy? concerns strategy. Answer: functional-level !age ##

1'.

includes the $lanning and decision ma8ing that lead to the establishment of the firm1s goals and the develo$ment of a s$ecific strategic $lan. Answer: 2trategy formulation !age: #'

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1..

The use of managerial and organi,ational tools to direct resources toward accom$lishing strategic results is 8nown as IIIIIII. Answer: strategy im$lementation !age: #'

3.

List the four com$onents of a situation analysis. Answer: A situation analysis includes a search for 24DT -- strengths, wea8nesses, o$$ortunities, and threats. !age: #'

1.

IIIIIII is a ty$e of cor$orate-level strategy that $ertains to the organi,ation1s mi) of strategic business units. Answer: !ortfolio strategy !age: '3

<n the B>& matri), the star has a IIIIIII mar8et share in a ra$idly growing industry. Answer: large !age: '1

(.

<n the B>& matri), the dog has IIIIII mar8et share and IIIIII business growth rate. Answer: low, low !age: '1

*.

List !orter1s com$etitive forces. Answer: !otential new entrants, bargaining $ower of buyers, bargaining $ower of su$$liers, threat of substitute $roducts, and rivalry among com$etitors. !age: '(

/.

The strategy involves an attem$t to distinguish the firm1s $roducts or services from others in the industry. Answer: differentiation !age: '/

".

4ith a strategy, the organi,ation aggressively see8s efficient facilities, $ursues cost reductions, and uses tight cost controls to $roduce $roducts more efficiently than com$etitors. Answer: cost leadershi$ !age: '"

#.

4ith a buyer grou$.

strategy, the organi,ation concentrates on a s$ecific regional mar8et or

Chapter Eight * Strategy Formulation and Implementation Test Bank * Page 2!"

Answer: focus '.

!age: '#

IIIIII strategies are when com$anies +oin with other organi,ations to $romote innovation, e)$and mar8ets, and $ursue +oint goals. Answer: !artnershi$ !age: ''

..

The IIIIII is driving and su$$orting the move toward $artnershi$ thin8ing. Answer: <nternet !age: ''

(3.

IIIIII and IIIIII re$resent the ultimate ste$ in collaborative relationshi$s. Answer: 6ergers, ac7uisitions !age: '.

(1.

IIIIII involves regularly ma8ing difficult decisions about doing things in a way that su$$orts rather than undermines the organi,ations chosen strategy. Answer: <m$lementation !age: .1

( .

The ability to influence $eo$le to ado$t the new behaviors needed for strategy im$lementation is called IIIIII. Answer: leadershi$ !age: .

((.

Beward systems, $ay incentives, budgets for allocating resources, information technology systems, and organi,ations rules, $olicies, and $rocedures are included in IIIIII. Answer: information and control systems !age: .(

Essay Questions
1. Briefly e)$lain the three grand strategies for domestic o$erations. AN24EB: The three grand strategies are growth, stability, and retrenchment. &rowth is $romoted internally by investing in e)$ansion or e)ternally by ac7uiring additional business divisions. <nternal growth often involves develo$ing new or modified $roducts. 2tability is achieved by the com$any remaining the same si,e or growing slowly in a controlled fashion. 2tability is often accom$anied by a focus on efficiency. Betrenchment is the strategy of shrin8ing current business units or selling off or li7uidating entire businesses. Betrenchment is often a res$onse to a significant decrease in the demand for the com$any1s $roducts.
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Level: .

!age: ".- #3

Name and describe the three ty$es of global strategies. AN24EB: The three ty$es of global strategies are globali,ation, multidomestic, and transnational. &lobali,ation means that a com$anys $roduct design and advertising strategies are standardi,ed throughout the world. This a$$roach is based on the assum$tion that a single global mar8et e)ists for many consumer and industrial $roducts. The theory is that $eo$le everywhere want to buy the same $roducts and live the same way. 6ultidomestic strategies believe that com$etition in each country is handled inde$endently of industry com$etition in other countries. Thus, mar8eting, advertising, and $roduct design is encouraged to be modified and ada$ted to the s$ecific needs of each country the com$any is $resent in. 6any com$anies re+ect the idea of a single global mar8et. Transnational strategies see8 to achieve both global integration and national res$onsiveness. A true transnational strategy is difficult to achieve, because one goal re7uires close global coordination while the other goal re7uired local fle)ibility. @owever, many industries are finding that, although increased com$etition means they must achieve global efficiency, growing $ressure to meet local needs demands national res$onsiveness. Level: !age: #1- #(

(.

>om$are and contrast the three levels of strategy in an organi,ation. AN24EB: There are three levels of strategy in an organi,ation: cor$orate-level, business-level, and functional-level. >or$orate-level strategies involve the whole organi,ation. This level of strategy is most concerned with answering the 7uestion: ?4hat business are we inA? These ty$es of decisions often involve issues of growth, retrenchment, and9or +oint ventures. Business-level strategies are concerned with the 7uestion ?@ow do we com$eteA? They focus on how the individual business unit com$etes within its industry. They may involve such issues as advertising, $roduct changes, and new-$roduct develo$ment. %unctionallevel strategies are concerned with the 7uestion of ?@ow do we su$$ort the business-level strategyA? <nvolving all of the organi,ation1s ma+or functions, these ty$es of strategies lin8 the functional unit with the strategic business unit. Level: !age: #/- ##

*.

<n order for com$anies to remain com$etitive, their strategies must focus on three things. 0escribe these three focuses. AN24EB: The three focuses are core com$etences, synergy, and value creation. >ore com$etence is something the organi,ation does very well in com$arison to its com$etitors. A core
Chapter Eight * Strategy Formulation and Implementation Test Bank * Page 2!&

com$etence re$resents a com$etitive advantage because the com$any ac7uires e)$ertise that com$etitors do not have. 2ynergy occurs when organi,ational $arts interact to $roduce a +oint effect that is greater than the sum of the $arts acting alone. The organi,ation may attain a s$ecial advantage with res$ect to cost, mar8et $ower, technology, or management s8ill. =alue creation should be at the heart of strategy. =alue is the combination of benefits received and costs $aid by the customer. 6anagers hel$ their com$anies create value by devising strategies that e)$loit core com$etencies and attain synergy. Level: /. !age: #(- #/

0ifferentiate between strategy formulation and strategy im$lementation. AN24EB: 2trategy formulation includes the $lanning and decision ma8ing that lead to the establishment of the firms goals and the develo$ment of a s$ecific strategic $lan. Also, it includes assessing the e)ternal environment and internal $roblems and integrating the results into goals and strategies. 2trategy im$lementation uses managerial and organi,ational tools to direct resources toward accom$lishing strategic results. Level: !age: #'

".

Briefly describe the Boston >onsulting &rou$ matri), including its dimensions, 7uadrants, and strategic recommendations. AN24EB: The two dimensions of the matri) are business growth rate and mar8et share. 4hen growth is high and share is high, the 2BH has the best situation and is called a star. 4hen growth is low and share is high, the 2BH is 8nown as a cash cow. 4hen growth is high but share is low, the 2BH is a 7uestion mar8. <n the fourth 7uadrant, growth and share are both low. This is the worst situation, and the 2BH is a dog. The strategic recommendations are: F1G invest in starsL F G mil8 the cash cowL F(G invest in 7uestion mar8s to create stars or divest the 7uestion mar8sL and F*G divest the dogs. Level: ( !age: '1- '

#.

Briefly discuss !orter1s three com$etitive strategies. AN24EB: !orter identified three com$etitive strategies: differentiation, cost leadershi$, and focus. A differentiation strategy involves the organi,ation attem$ting to distinguish its $roduct or service from those of its com$etition. Advertising, $roduct features, and customer service are some of the ways an organi,ation can successfully differentiate. A cost leadershi$ strategy is based on the organi,ation achieving a low-cost $osition relative to the com$etition. A com$any may achieve a cost leadershi$ through the o$eration of efficient
Chapter Eight * Strategy Formulation and Implementation Test Bank * Page 2!'

facilities, cutting costs, or maintaining tight cost control. 4hen a com$any uses a differentiation or a cost leadershi$ strategy in a $articular mar8et or buyer grou$, they are em$loying a focus strategy. This strategy allows the organi,ation to concentrate on a narrow mar8et niche. Level: '. !age: '/- '#

Briefly describe the different coo$erative strategies using the continuum of coo$erative strategies. AN24EB: !lease refer to e)hibit '-' in the te)t. The different coo$erative strategies are $referred su$$lier arrangements, strategic business $artnering, +oint venture, mergers, and ac7uisitions. Level: !ages: '.

..

4hen a com$any goes global, it is difficult to im$lement strategies. E)$lain. AN24EB: <n the international arena, fle)ibility and su$erb communication are considered mandatory leadershi$ s8ills. Also, managers must design a structure for the organi,ation that will achieve the desired level of global integration and local res$onsiveness, as well as, have the ability to merge successfully with foreign cultures. <nformation and control systems must fit the needs and incentives within local cultures. Becruitment, training, transfer, $romotion, and layoff of international human resources create an array of $roblems not confronted in North America. Labor laws, guaranteed +obs, and cultural traditions of 8ee$ing un$roductive em$loyees on the +ob $rovide s$ecial $roblems for strategy and im$lementation. Level: ( !age: .*

13.

0escribe how a strategy can be $ut into action. AN24EB: !lease refer to e)hibit '-.MThe tools include leadershi$, structural design, human resources, and information and control systems. Level: ( !age: .1, . - .*

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