CHAPTER 7 – STRATEGIC MANAGEMENT

41. Alexis sought to develop Omega Cool Inc. as a world leader in being a sustainable and restorative corporation in producing computers. This is an example of a(n) ______________________. a) objective b) goal c) mission d) purpose e) vision Ans: e 42. The four steps of strategic management are a) mission and vision; SWOT analysis; choosing a strategy; and evaluating the strategy. b) vision; industry analysis; strategy implementation; and evaluating the strategy. c) vision and mission; SWOT analysis; strategy formulation; and implementing the strategy. d) goal setting; strategy analysis; review of external and internal resources; choosing the strategy. e) two content segments from the Mainstream perspective and two process steps from the Multistream perspective. Ans: c 43. A positive reputation as one of the best companies to work for would be a a) vision. b) strength. c) weakness. d) opportunity. e) threat. Ans: b 44. ____________________ from the external environment make(s) it difficult for managers to achieve their organizational goals. a) High employee turnover b) Increased regulations c) Growth in market demand d) A negative organizational culture e) Weak leadership Ans: b 45. In addition to for-profit businesses, strategic management can also be applied to a) organizations serving homeless families. b) universities and colleges. c) faith-based organizations such as the temples, churches, synagogues, and mosques. d) None of these. e) All of these. Ans: e 46. Under which of the following conditions is the power of suppliers low? a) Suppliers are able to control pricing and the terms of contracts. b) There are few suppliers and they are large firms. c) There are many suppliers and they are small firms. d) The industry is characterized by high capital requirements and low economies of scale. e) There are few customers and highly differentiated products. Ans: c

47. Substitutes for the coffee industry could be a) beer and wine. b) soup and stews. c) juice and milk. d) tea and hot chocolate. e) sports drinks and carbonated soft drinks. Ans: d 48. When the barriers to entry are _____________, the threat of new entrants is ______________. a) low; low b) medium; high c) high; low d) high; high e) strategic; an opportunity Ans: c 49. The _________________ is likely to be higher when differentiation among the company's competitors' products and/or services is low. a) threat of substitutes b) bargaining power of suppliers c) intensity of rivalry d) threat of new entrants e) price Ans: c 50. _______________ industries often have more standardized products and services than _______________ industries. a) Global; mature b) Mature; emergent c) Emergent; fragmented d) Fragmented; global e) Global; emergent Ans: b 51. Resources that provide organizations with a competitive advantage include a) opportunities, strengths, and international resources. b) physical, infrastructural, and human resources. c) infrastructural resources, systems, and emergent technology. d) the power of suppliers, inputs, and physical resources. e) internal assets, growing customer demand, and a cash cow. Ans: b 52. Teamwork, organizational culture, informal relationships, and efficient response to change are examples of ___________ resources that help organizations to gain competitive advantage. a) distinctive competency b) core competency c) human d) physical e) infrastructural Ans: e

53. Luke creates many award-winning hair designs at competitive hair and fashion shows, and this enables his salon to succeed with constant innovation. This is an example of a(an) a) opportunity. b) strength. c) distinctive competency. d) core competency. e) threat. Ans: c 54. A competitive strategy seeks to provide ______________, and a sustained competitive advantage is one that ___________. a) value for customers; values customers. b) a profit; cannot be bought. c) value for customers; cannot be copied. d) accountability; is created by top management. e) a military perspective; is created by top management Ans: c 55. In order to sustain a competitive advantage, the internal resources should be a) valuable, rare, inimitable, and non-substitutable. b) determined by the parent firm. c) allocated by the CEO and his or her team. d) achieving economies of scale. e) core competencies. Ans: a 56. The term "core competency" refers to a) a strength that is central to an organization in achieving its goals. b) opportunities for competing in growth industries. c) strengths that are superior to those of an organization's competitors. d) strengths that play a key role in achieving organizational goals. e) the use of strengths to take advantage of opportunities. Ans: a 57. In order for an organization to achieve a sustainable competitive advantage, resources must meet four criteria; specifically, they must be a) valuable, inimitable, non-substitutable, and core. b) valuable, rare, inimitable, and non-substitutable. c) distinctive, inimitable, non-substitutable, and core. d) distinctive, valuable, rare, and core. e) core, secret, internal, and valuable. Ans: b 58. An inimitable resource is an organizational asset that a) must exist in any organization for that organization to compete in its industry. b) is a distinctive competency. c) is a distinctive strength used to achieve a competitive advantage. d) can be easily duplicated by organizations outside the firm. e) cannot be re-created, or can be created only at a very high cost, by competitors. Ans: e 59. From the Multistream perspective, rare resources are a) not protected by patents. b) open-source goods in the marketplace. c) an opportunity to establish a monopoly. d) an incentive to act responsibly.

e) restricted to technological innovations. Ans: d 60. Proprietary intellectual property can address the _________________________ to achieve a sustained competitive advantage. a) five forces of competition b) four characteristics of resources c) four types of business strategies d) SWOT analysis e) None of these Ans: b 61. Top management teams can use a SWOT analysis to help develop their a) target market for competing in a global market. b) organization's strategy for competing in the future. c) human resources to achieve ISO 9001 criteria. d) technological innovations for competing in a new industry. e) organization's systems, policies, and procedures. Ans: b 62. Payless Shoes, a retail chain known for affordable footwear, uses a business-level strategy of a) differentiation. b) focused differentiation. c) cost leadership. d) focused cost leadership. e) distinctive competency. Ans: d 63. During strategy implementation, a Multistream perspective focuses on a) new market opportunities. b) strategic learning. c) the growth stage of the product life cycle. d) the emergent aspects of a strategy. e) distinctive competency. Ans: b 64. Marilyn Duggers is the CEO of a organization that uses a cost leadership strategy to enter into children's furniture manufacturing. She would need to focus on a) increasing economies of scale. b) decreasing economies of scale. c) increasing elasticity of demand. d) decreasing elasticity of demand. e) providing unique, extraordinary service. Ans: a 65. Red Carpet Relocation Inc. is a company that specializes in helping expatriate executives move to new assignments in Asia. The business-level strategy is one of a) differentiation. b) focused differentiation. c) cost leadership. d) focused cost leadership. e) vertical integration. Ans: b 66. Corporate-level strategy focuses on a) what industries to compete in. b) how to compete in an industry. c) differentiation of unique products and services. d) unique, extraordinary services to support products.

e) increasing economies of scale. Ans: a 67. When Ford expands its automobile production into manufacturing buses, trucks, and miscellaneous small vehicles such as golf carts, the company has a corporate-level strategy known as a) vertical integration. b) unrelated diversification. c) related diversification. d) horizontal integration. e) focused differentiation. Ans: c 68. As a financial investment firm for corporate pension fund managers, Accelerate Fund Management finds itself expanding into property management of residential real estate, managing long-term care facilities, and new construction of residential subdivisions. Its corporate strategy is a) vertical integration. b) unrelated diversification. c) related diversification. d) horizontal integration. e) backward integration. Ans: b 69. Todd and Husain created a computer repair business that is growing. As their profit grew, they decided to expand into recycling computer parts that their customers are discarding and rebuilding computers for sale to disadvantaged communities. Their corporate strategy can be identified as a) vertical integration. b) related diversification. c) unrelated diversification. d) horizontal integration. e) differentiation. Ans: a 70. 3-B Bakery produces bagels, buns, and breads for many restaurants in town. Recently, the CEO decided to grow into a new market with a cafe retail operation. This is an example of a) backward integration. b) forward integration. c) horizontal integration. d) unrelated diversification. e) None of these. Ans: b 71. The BCG matrix is a portfolio-planning tool used to help corporations with their ______________-level strategy. a) executive b) functional c) business d) corporate e) industry Ans: d 72. The BCG matrix uses the two dimensions of _________________ to analyze different lines of businesses in different industries. a) quality and costs b) market share and industry growth rate c) geographical market breadth and length of time in industry d) customer diversity and product diversity e) global growth rate and domestic growth rate Ans: b

73. An industry's potential for profitability in the future can be assessed by examining a) market share. b) target market. c) customer segments. d) market growth. e) early market adopters. Ans: d 74. The phases of the product life cycle are a) focused business, diversification, forward diversification, and unrelated diversification. b) growth, rebirth, decline, and maturity. c) innovation, prototype, growth, and maturity. d) invention, innovation, prototype, introduction, growth, and refinement. e) introduction, growth, maturity, and decline. Ans: e 75. The ____________________ stage of the product life cycle involves mergers, consolidation, and firm exit as demand reaches a plateau. a) introductory b) growth c) maturity d) decline e) rebirth Ans: c 76. The desktop PC computer industry is in the stage of ______________________, when the demand continues to increase and organizations invest to expand production capacity. a) introduction b) growth c) maturity d) decline e) renewal Ans: b 77. During the ______________ stage of the product life cycle, most people do not know about the product or service, and the future potential is ambiguous. a) introduction b) growth c) maturity d) decline e) rebirth Ans: a 78. When profitability drops and the most efficient firms have the advantage, the product life cycle is in the _____________ stage. a) introduction b) early growth c) late growth d) maturity e) decline Ans: e 79. The cash cow businesses in a BCG matrix would have ________ market share in a _________-growth or mature industry. a) low; high b) low; moderate c) moderate; high d) high; low

e) high; high Ans: d 80. Expert Insights has three major business lines: tutoring children, management training for executives, and career coaching for outplacement services. The career coaching is the newest business and was considered a question mark when the managers conducted a portfolio analysis using the BCG matrix. This means that the company has ________market share in a __________-growth industry. a) low; high b) low; moderate c) moderate; low d) moderate; moderate e) high; high Ans: a 81. With the increasing capacity to have virtual network storage file cabinets, businesses manufacturing flash drives with low market share are likely to have a ______________________ in the near future. a) question mark b) cash cow c) star d) dog e) cat Ans: d 82. Strategy implementation depends on the prior steps of a) vision, SWOT analysis, and strategy formulation. b) introduction, growth, and maturity. c) functional-level to business-level to corporate-level strategies. d) differentiation, cost leadership and diversification. e) forward, backward, and vertical integration. Ans: a 83. From a content school perspective, Honda used ________________________ to enter into the mature U.S. motorcycle market. a) a BCG matrix for portfolio planning b) the product life cycle c) a related diversification with a differentiation strategy d) a well-designed cost leadership business strategy e) low economies of scale for "everyday Americans" Ans: d 84. Rational analysis, a top-down approach, and the linear development of strategy characterize the _____________ school from the Mainstream perspective. a) information age b) content c) process d) strategic learning e) product life cycle Ans: b 85. Strategy from the Multistream approach reflects the _____________ school. a) information b) content c) process d) Gen X e) diversification

Ans: c 86. The Mainstream perspective is associated with the ____________ school, whereas the Multistream perspective is associated with the _____________ school. a) process; information b) information; strategic learning c) strategic learning; content d) content; process e) content; strategic learning Ans: d 87. Meesha Gupta, CEO of Q-Minds Inc., engages in strategic learning during the implementation process to determine a) how well the SWOT analysis was done. b) a new vision for the future. c) what is working and what is not working in the strategy. d) the future stage of the product life cycle. e) who should be hired to create the next generation of technological innovations. Ans: c 88. Alpha Corporate followed through with its international expansion by successfully entering into the Chinese market; this illustrates a(an) ________________ strategy. a) emergent b) deliberate c) differentiation d) unintended e) formulation Ans: b 89. A(an) _________________ strategy draws on the actions of front line employees and a bottom-up process. a) intended b) differentiation c) deliberate d) emergent e) corporate Ans: d 90. The Yankee Candle Factory wanted to stay focused on the growing success of its scented candle business But a group of employees wanted to open a pub and a car museum to meet the needs of men who were waiting as their wives shopped. The additional new business activities are examples of a(an) _____________ corporate strategy that is also a(an) _____________ strategy. a) unrelated diversification; deliberate b) unrelated diversification; emergent c) related diversification; deliberate d) related diversification; emergent e) vertical integration; process strategy Ans: b 91. The Multistream perspective on strategic management focuses on a) maximizing financial wealth and balancing the interests of different shareholders. b) sustenance economics and balancing the well-being of all stakeholders. c) a top-down process to formulate and implement strategy. d) the content school. e) maximizing profit for stakeholders. Ans: b 92. The CEO of the accounting firm Secure Books pulled the organization together to determine its future vision and strategy. The result was that the company would work to meet the needs of the community

for secure and transparent auditing reports of the city's carbon footprint. This is example of a _____________________ mission and vision. a) Mainstream b) Multistream c) shareholder d) top-down e) wealth-maximizing Ans: b 93. Competing to win can a) motivate people to do their best. b) bring out the worst in people. c) lead to creative and illegal accounting practices. d) Answers B and C only. e) All of these. Ans: e 94. The main difference between a Multistream SWOT analysis and a Mainstream SWOT analysis is in the former's emphasis on a) customer service. b) technological innovations. c) increased efficiency in the production process. d) safeguarding the environment. e) project management with Six Sigma black belts. Ans: d 95. Multistream managers tend to be more concerned than Mainstream managers about _____________________. a) work-life balance b) searching for low-cost suppliers c) the impact of overseas suppliers on domestic workers d) work-life balance and searching for low-cost suppliers e) work-life balance and the impact of overseas suppliers on domestic workers Ans: e 96. A Multistream approach to the five parallel factors of Porter's five competitive forces would nurture the community by a) enhancing the well-being.of stakeholders. b) building partnerships across organizations based on trust. c) creating interdependence that is mutually beneficial. d) All of these. e) None of these. Ans: d 97. Promoting fair trade to minimize oppression of workers and enable suppliers to earn a living wage is an example of a Multistream approach to conducting an analysis with _____________________. a) the industry life cycle. b) the product life cycle. c) SWOT. d) the BCG matrix. e) corporate-level strategies. Ans: c 98. Providing craftspeople in low-income countries with access to the global marketplace with pricing systems to ensure an adequate livelihood is an example of _________________ sourcing of suppliers. a) Multistream b) Mainstream

c) emergent strategic d) global e) competitive Ans: a 99. Initiatives related to______________________ would be more important for Multistream managers than for Mainstream managers. a) efficient equipment and technology b) maximizing profit margins c) the financial bottom line d) meaningful work e) None of these Ans: d 100. "Inimitable" for Mainstream managers focuses on enhancing ___________________, whereas "inimitable" for Multistream managers focuses on __________________. a) profitability; teaching others b) monopoly; teaching others c) monopoly; increasing need for responsibility d) profitability; increasing need for responsibility e) the financial interests of shareholders; protecting the well-being of stakeholders. Ans: b 101. For rare resources, Multistream managers focus on the importance of _____________________. a) creating market power. b) acting more responsibly. c) using them quickly to enhance the well-being of stakeholders. d) quickly gaining control over as much of them as possible. e) discouraging new entrants by raising the barriers to entry. Ans: b 102. Sharing of micro-financing practices to provide credit to micro-entrepreneurs is an example of the Multistream management of resources that are a) rare. b) valuable. c) inimitable. d) non-substitutable. e) distinctive. Ans: c 103. _______________ and _______________ are important considerations for a Multistream strategy formulation. a) Sustainable profit; rational analysis b) Porter's five forces of competition; product life cycle analysis c) SWOT analysis; ecological sustainability d) Social justice; ecological sustainability e) Social justice; SWOT analysis Ans: d 104. A transformer strategy seeks to use resources that are normally a) thrown away or under-used. b) focused on dealing with social injustice. c) focused on reducing waste. d) aimed at reducing costs. e) innovative in radically changing work processes. Ans: a 105. A Multistream matrix used to analyze which industry to enter would focus on dimensions such as ________________ and __________________.

a) market growth; sustainability b) restorativeness; sustainability c) restorativeness; market growth d) restorativeness; domestic growth e) None of these. Ans: b

ESSAYS
127. Explain how an industry can become increasingly difficult for firms to survive in by using Porter's Five-Forces of Competition framework. Ans: A difficult industry environment would have powerful suppliers who can demand high prices for inputs and thus reduce profit margins in the industry. Powerful customers would demand lower prices than the industry can charge, and if the prices fall below break-even, the industry will be operating at a loss. Low barriers to entry allow easy access for new competition. and the threat of new entrants would increase the industry's capacity to produce more goods and services. This would result in pressure to lower prices and, hence, profit margins. If there are many substitutes available, the threat of substitutes would be high, which would decrease profit margins in the industry. Last, a high intensity of rivalry would decrease profitability, especially if competition increases to a hypercompetitive level with cutthroat competition. 128. Compare and contrast corporate-level strategy and business-level strategy. Ans: At the corporate level, the strategy is focused on the whole organization and on the activities of all aspects of the business. The question to address is which industry the company should be competing in. If a company has only one business line, it is not likely to have a corporate strategy. At the business level, the strategy is focused on determining how to compete in a specific industry by establishing its market position, target market, and strategic tactics. Multiple business strategies may be found in a diversified corporation because the industries are different for each business line. 129. Explain the difference between diversification and differentiation strategies. Ans: Diversification is a corporate-level strategy that involves more than one business competing in at least two different industries. The different types of differentiation are unrelated and related diversification. For related diversification, a corporation can be vertically or horizontally integrated. Vertical integration occurs when a company expands into business activity either forward in the production chain, such as a manufacturer expanding into distribution, or backward in the production chain, such as when a manufacturer goes into an industry that provides input into the business. Horizontal integration occurs when a business expands into activities that are at the same stage of the production chain. Whereas diversification is a corporate-level strategy, differentiation is a business-level strategy that focuses on how to compete in an industry. A differentiation strategy depends on providing unique and extraordinary products or services that customers value enough to pay premium prices. Most innovations in the early stages of the product life cycle can use a differentiation strategy. 130. What are the major similarities and differences in the results of conducting an industry analysis for flavored water with Porter's five forces of competition? Note that a lot depends on whether flavored water is assumed to be in the water industry or in the beverage industry. (NOTE to instructor: Determining the boundary definitions of an industry is often argued by expert witnesses in antitrust lawsuits, where the defendant often argues for a broader definition and the plaintiff for a narrower one.) Ans: In both the water and beverage industries, the bargaining power of suppliers and that of customers are relatively the same. Both tend to be low because the inputs are broadly available commodities and the customers are broadly dispersed without any particular one dominating.. The water industry is more narrowly defined, which leads to a higher threat of substitutes and a higher

threat of new entrants. In the beverage industry, the threat of substitutes and the threat of new entrants are much lower. The number of potential substitutes for the beverage industry is much lower, which lowers the threat of substitutes. The beverage industry is in a mature stage of the product life cycle, which means there are large, established, dominant competitors who have raised the barriers to entry through achieving economies of scale. 131. Discuss how minimizer and transformer strategies are basic Multistream strategies. Please provide an example to illustrate your answer. Ans: A minimizer strategy is used to lower a broader range of costs beyond financial to include social and ecological. A company that does international business with fair trade minimizes social costs by providing farmers and related stakeholders with a living wage. A transformer strategy draws inputs from resources that are considered waste products or resources under-used by other organizations. For example, the Scrapbox uses a transformer strategy when it asks manufacturers for their discards, it resells the goods to schools and the community for making arts and crafts. 132. Use an example to illustrate how you would use a Multistream portfolio matrix. Ans: A Multistream portfolio matrix can be constructed as a 2 x 2 when two different unrelated dimensions are juxtapose with low to high on each dimension. The dimensions could be sustainability of the environment and restorativeness. Positions on the matrix indicates assessments of different industries that could fall into one of four positions on the matrix - innocent bystander, sustainability hero, fragile player, and lavish actor. A business undergoing change can migrate from one position to another on the matrix. The matrix can also be constructed with different dimensions such as contributions to quality of community life or advancement of social justice with fair trade practices. 133. Explain how the product life cycle is related to the BCG matrix. Ans: An important factor of the product life cycle is the growth rate at each of the four stages — introduction, growth, maturity, and decline. The BCG matrix can employ the four different types of strategy along each stage of the product life cycle. At the introductory stage, the businesses can be classified as a question mark where the PLC has an uncertain future. At the growth stage, a business can be identified as a star if it also has a large market share. Cash cows are associated with the mature stage because the industry is consolidating and technological innovations maybe more constrained. In the decline stage, a business can be identified as a dog with low market share in a shrinking industry. 134. What are the similarities and differences between a Mainstream to a Multistream approach to strategy? Ans: The Mainstream approach is associated withe four basic steps of strategic management — visioning (and mission), SWOT analysis, formulating a strategy, and implementing the strategy. It is associated with the content school and has a top down rational-analytic approach. The strategy tends to be deliberate when the intended strategy is carried out. The Multistream approach to strategy uses a similar set of steps but it is more aligned with the process school and has a bottom up emergent approach. It focuses on the "stream of actions" to craft strategy 135. Discuss how you can engage in strategic learning in your own professional development to fulfill your vision. Ans: Students can identify a career goal and conduct an analysis of their own SWOT. Then they select an approach for competing with other undergraduates in the same field. Comparable to a business strategy, students would identify whether they are going into a specialized field such as actuarial science or a more general field such as management. The key is that strategic learning requires constant check and evaluation while gathering input from different stakeholders and balancing demands that may conflict with one another.

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