Strategic Management Multiple Choice Questions with Answers

The origins of Business Policy & Strategic Management can be retraced to

a. 1930
b. 1911
c. 1879
d. 1938
Answer: b
BCG in BCG matrix stands for
a. Boston Calmette Group
b. British Consulting Group ​
c. Boston Corporate Group
d. Boston Consulting Group
Answer: d
Which of the following is not part of the micro environment?
a. Technology
b. Shareholders
c. Competitors
d. Publics
Answer: a
Which of the following is not a part the Macro Environment?
a. Laws & Policies
b. Demographics
c. Suppliers
d. Social Values
Answer: c
Cultural values would be part of which of the following factor in macro environment?
a. Demographic
b. Social
c. Ecological
d. Natural
Answer: b
What does Dog symbolize in BCG matrix?
a. Introduction
b. Growth
c. Maturity
d. Decline
Answer: d
What does Stars symbolize in BCG matrix?
a. Introduction
b. Growth
c. Maturity
d. Decline
Answer: b
What does Question Mark (?) symbolize in BCG matrix?
a. Remain Diversified
b. Invest
c. Stable
d. Liquidate
Answer: a
What do Cash Cows symbolize in BCG matrix?
a. Remain Diversified
b. Invest
c. Stable
d. Liquidate
Answer: c
What does Green symbolize in BCG matrix?
a. Invest & Expand
b. Select & Earn
c. Harvest & Divest
d. Both a & b
Answer: a
What does Yellow symbolize in BCG matrix?
a. Invest & Expand
b. Harvest & Divest
c. Select & Earn
d. Both a & b
Answer: c
What does Red symbolize in BCG matrix?
a. Invest & Expand
b. Harvest and Earn
c. Harvest & Divest
d. Select & Earn
Answer: c
The GE 9 cell model is based on
a. Industry attractiveness & Business Strength
b. Industry Growth rate & Business strength
c. Industry Attractiveness & Relative market share
d. Industry Growth & Relative market share
Answer: a
The BCG Matrix is based on
a. Industry attractiveness & Business Strength
b. Industry Growth rate & Business strength
c. Industry Attractiveness & Relative market share
d. Industry Growth rate & Relative market share
Answer: d
In strategic thinking, how long is the long term, approximately?
a. 1 Month to 1 year
b. 2 to 3 years
c. 3 to 5 years
d. More than 5 years
Answer: d
Low cost, Differentiation and Focus are examples of __________________
a. Corporate strategies
b. Operational Strategies
c. Business Strategies
d. Functional Strategies
Answer: c
The word tactic is most likely to be associated with:
a. Business Strategy
b. Corporate strategy
c. Operational Strategy
d. All of the above
Answer: c
In BCG matrix, what is the label of the horizontal axis?
a. Relative Market share
b. Business Strength
c. Industry Growth Rate
d. Market Growth Rate
Answer: a
In BCG Matrix, what is the label of the Vertical axis?
a. Relative Market share
b. Business Strength
c. Industry Growth Rate
d. Market Growth Rate
Answer: c
In GE 9 cell matrix, what is the label of the horizontal axis?
a. Relative Market share
b. Industry Attractiveness
c. Industry Growth Rate
d. Market Growth Rate
Answer: b
Another name for GE 9 cell model is
a. Three colour matrix
b. Stop light matrix
c. Strategic Portfolio Matrix
d. Colour light matrix
Answer: b
ORGANIZATION & STRATEGY
To find out what an organization's strategy is, you should:
a) Read the mission statement
b) Look at what the organization actually does
c) Read the strategic plan
d) Ask the CEO

Which of the following statements is not true when describing a successful strategy?
a) It provides some property that is unique or distinctive
b) It provides the means for renewing competitive advantage
c) It addresses changes in the external environment
d) It guarantees long term survival
In the context of strategic management resources can be defined as:
a) The knowledge and skills within the organization
b) Something that an organization owns or controls that cannot be copied
c) Something that an organization owns, controls or has access to on a semi-
permanent basis
d) The physical assets of the organization
In the context of strategic management, stakeholders can be defined as:
a) An individual or group with a financial stake in the organization
b) An external individual or group that is able to impose constraints on the
organization
c) Internal groups or individuals that are able to influence strategic direction of the
organization
d) An individual or group with an interest in the organization's activities and who
seeks to influence them
In the case where an organization acquires its supplier, this is an example of:
a) Horizontal integration
b) Forwards vertical integration
c) Backwards vertical integration
d) Downstream vertical integration
When a firm seeks the benefits of global integration and local adaptation, it is best
described as which type of strategy?
a) Transnational
b) Global
c) Multi-national
d) Global-local
Knowledge which is difficult to define and codify is known as:
a) Explicit
b) Tangible
c) Tacit
d) Random
Competitive advantage based on the creation of opportunities using internal resources is
characterized by which approach/view?
a) The positioning approach
b) The outside-in approach
c) The resource-based view
d) The knowledge-management approach
'Reputation' in the context of an organization's resources can provide competitive
advantage because:
a) It is difficult to copy
b) It is based on word-of-mouth
c) It is a threshold resource
d) It is explicit
A strategic manager that seeks to reach acceptable profit targets as opposed to making as
much profit as possible is making decisions of which type?
a) Satisfactory
b) Satisfying
c) Irrational
d) Optimal
WHAT IS STRATEGIC MANAGEMENT?
A strategic decision can be distinguished from other types of decisions by three factors,
these are magnitude, time-scale and:
a) Commitment
b) Riskiness
c) Impact
d) Longevity
'Logical instrumentalism' can be described as:
a) Careful design and planning
b) Emergent
c) Cautious resource allocation
d) Top management rational analysis
An organization in which strategy development is characterized by internal political
 negotiation and self-interest is operating in which strategy-making mode?
a) The transactive mode
b) The muddling through mode
c) The command mode
d) The emotional mode
'Influence' is defined as the ability to ____________ someone to something they would
not otherwise have done.
a) Intimidate
b) Force
c) Order
d) Persuade
McDonalds is deciding whether to expand into manufacturing kitchen equipment in
China. At what level is this decision likely to be made?
a) Business
b) Corporate
c) Functional
d) International
The authors believe there are three tests that can be applied to judge whether a strategy is
'good'. These are:
a) Fit, distinctiveness, sustainability
b) Fit, internal resources, external environment
c) Distinctiveness, internal resources, fit
d) Sustainability, distinctiveness, external environment
Diversification into many unrelated areas is an example of:
a) Risk management
b) Good management
c) Uncertainty reduction
d) Sustainability
According to Porter, dealing with the paradox of premature commitment versus not
enough commitment involves some kind of:
a) Trade-off
b) Lock-in
c) Lock-out
d) Diversification
Corporate governance is concerned with:
a) Executive remuneration, disclosure of information, auditing and accounting
procedures, and organizations' management structures
b) Elections to the board of directors
c) Relationships with national governments
d) Corporate-level strategy ​
The principal-agent problem is concerned with:
a) Procurement
b) Appropriation of shareholders' investment by a firm's managers
c) How to control a firm's distributors and dealers
d) Corporate social responsibility
Influence of Environment
1. In terms of the PESTLE analysis, the liberalizing of international trade and tariff regimes
could go in which section or sections?

a) Political
b) Legal
c) Political and economic and legal
d) Political and environmental ​

2. An 'industry recipe' can be defined as:

 a) An accepted pattern of operating and competing
b) A tactic for anticipating a competitor's next move
c) The hidden competences that are difficult to imitate
d) A strategic group
3. Typically, profits are highest in which stage of the industry life-cycle?

a) Introduction
b) Growth ​
c) Maturity
d) Decline

4. Which of the following industries is least likely to follow the conventional life-cycle
model?

a) Software development
b) Coal mining
c) Insurance broking
d) Hairdressing

5. Brandenburger and Nalebuff added a sixth force to Porter's Five Forces. It is known as:

a) The threat of substitutes

b) The power of complementors
c) Seller power
d) Government regulation
6. The Six Forces framework is based on the principle of:

a) Resource-based view
b) Conduct - structure - performance
c) Econometrics
d) Structure - conduct - performance
7. In the Six Forces, the 'threat of new entrants' relates to:

a) Barriers to entry
b) Substitutes
c) Switching costs
d) Buyer power
8. An industry characterized by irregular patterns of stability, rapid technological change,
high uncertainty and global competition can be described as:

a) Hypercompetitive
b) Hyperactive
c) Atypical
d) Co-optetive
9. A situation in which the joint moves of two firms can determine how much money each
firm can make or lose can be explained using the story of:

a) The Trojan Horse

b) The Icarus Paradox
c) The Prisoner's Dilemma
d) The Icarus Dilemma
10. In the context of environmental analysis, 'munificence' means:

a) The extent to which resources are freely available to support firms in an industry and
enable them to grow
b) The extent to which it is diverse
c) The extent to which it is stable or turbulent
d) The extent to which the industry follows the conventional life-cycle stages
COMPETITIVE STANCE
1. A 'market driven' firm will typically:

a) Develop new products and then find someone to sell them to

b) Define the target market and produce products that will satisfy those customers' needs
c) Operate in a product-oriented fashion
d) Suffer from market-myopia
2. Segmentation is a way of:

a) Subdividing markets
b) Subdividing industries
c) Differentiating products
d) Subdividing organizations into departments
3. A B2C market is:

a) Business to commercial
b) Business to consumer
c) Business to contract
d) Business to corporate
4. Sgmentation is a compromise between two ideals: mass marketing and:

a) Customization
b) Uniformity
c) Innovation
d) Convergence of tastes
5. Porter's generic strategies are:

a) Low price, differentiation, focus

b) Cost leadership, differentiation, cost focus, focus differentiation
c) Price leadership, differentiation, focus
d) Low cost, differentiation, focus differentiation
6. According to Porter, if an organization does not follow either a cost leadership strategy or a
differentiation strategy they are:

a) Hybrid
b) Stuck in the middle
c) Typical
d) No frills
7. According to Bowman's generic strategies model a high price, low-perceived value
strategy is only feasible in:

a) An oligopoly
b) A monopoly
c) A concentrated industry
d) A fragmented industry
8. Treacy and Wiersema identify 3 ways a firm may get competitive advantage. These are:

a) Low cost, customer intimacy, product leadership

b) Operational excellence, customer intimacy, product leadership
c) Operational excellence, reputation, product leadership
d) Low costs, reputation, product leadership
9. In Porter's Generic Strategies model, a focus strategy involves:

a) Selling a limited range of products

b) Selling to a narrow customer segment
c) Selling to one region only
d) Selling simple products that are cheap to produce
 10. H&M, the clothes retailer is for most of its products following which generic strategy?

a) Focused differentiation
b) Hybrid
c) Cost Focus
d) No Frills
SCOPE, SCALE & DIVERSITY
1. Substantial changes to the range of offerings or the markets served or both are known as:

a) Differentiation
b) Diversification
c) Relocation
d) Brand extension
2. At corporate level, diversification comes about when a firm is involved in two or more:

a) Businesses
b) Markets
c) Segments
d) Industries
3. On average, the highest levels of profitability are shown by:

a) Firms focused on just one or two products

b) Firms with a moderately diverse range of related products and businesses
c) Firms with a very diverse range of related products and businesses
d) Firms with a diverse range of unrelated products and businesses
4. Economies of scale are derived from:

a) Achieving cheaper unit costs through making larger quantities

b) Using cheaper raw materials
c) Increasing the breadth of the portfolio
d) Increasing the number of markets served
5. Which of the following outcomes is NOT an advantage of a completely vertically
integrated business?

a) Potentially greater control is achieved

b) Potentially greater quality is achieved
c) Lowering of risk is achieved
d) Lower price of supplies is achieved
6. Which of the following might be sources of synergy between two business units?

a) They have similar customers and use the same distribution channels
b) The profits from one can be used to finance the other when its gets into trouble
c) They both have a website
d) They are both located in the same town
7. Which of the following might NOT be an advantage of increasing the number of countries
in which a clothing firm does business?

a) Exposure to demanding customers with exotic tastes

b) Increased efficiency
c) Making life more difficult for competitors
d) Increased access to funding
8. Which of the following are NOT likely to be sources of relatedness between businesses?

a) Similarities in size
b) Operating in industries with similar success factors
c) Similarities in production technologies
d) Selling to customers with similar demographic characteristics
9. Synergies allow businesses to add value to one another whereas the extent to which the
 corporate centre can add value to each of its businesses is called:

a) Relatedness
b) Size
c) Competencies
d) Vision
10. Learning from trying out new and different things is termed:

a) Absorptive capacity
b) Exploitation
c) Exploration
d) Economies of scope
THE VALUE CHAIN
1. The value chain is subdivided into two main headings. These are primary activities and:

a) Peripheral activities
b) Support activities
c) Secondary activities
d) Outsourced activities
2. In the value chain, primary activities are:

a) Directly involved in the production, marketing and delivery of the product or service
b) Those activities that are all undertaken in-house
c) Those activities that support the production, marketing and delivery of the product or
service
d) Directly involved in the production and delivery of the product or service
3. The 'operations' in a passenger airline service would be:

a) The manufacture of the aircraft

b) Getting passengers and baggage from A to B by means of flying in an aircraft
c) The design of the price structure and yield plan
d) Selling the tickets to passengers
4. One of the strategic decisions relating to the value chain concerns vertical integration. This
would involve:

a) Deciding whether to locate operations in the home country or in a foreign location

b) Deciding whether the activity should be performed within the organization or by a
different firm
c) Deciding to link all activities using Enterprise Resource Planning
d) Deciding whether to share certain activities across different products and markets
5. Firm A has decided to use an outside travel firm for making travel arrangements but it is
based on the premises of Firm A. This is an example of:

a) Nearshoring
b) Offshoring
c) Insourcing
d) Outsourcing
6. A network of firms providing different parts of a value-chain in the production of a product
or service is known as:

a) Franchising
b) Nearshoring
c) Orchestrating
d) Co-specialization
7. A firm outsources many of its value chain activities. Compared to a firm that does
everything in-house this is likely to incur:

a) Higher transaction costs, lower control

b) Higher transaction costs, higher control
 c) Lower transaction costs, higher control
d) Lower transaction costs, lower control
8. When a firm promises more than it can actually deliver to win a contract, this is known as:

a) Adverse selection
b) Inverse selection
c) Moral hazard
d) Trust hazard
9. Which of the following outcomes is a potential benefit of outsourcing?

a) Higher flexibility
b) Higher control
c) Lower transaction costs
d) Better linkages between activities
10. A joint venture can be defined as:

a) Two firms collaborate together on a specific project

b) One firm licenses its intellectual property to another firm
c) Two firms merge together
d) Two firms come together to form a third, legally separate firm
The Resource Based View of the Firm
1. Knowledge that exists in an organization but is difficult to write down and codify is known
as:

a) Explicit knowledge
b) Tacit knowledge
c) Virtual knowledge
d) Ambiguous knowledge
2. Tacit knowledge is seen as important feature of competitive advantage in which approach
to strategy?

a) Resource-based view of the firm

b) Competitive positioning approach
c) Industrial organization
d) Evolutionary approach
3. The Resource-based view of the firm could also be described as:

a) The outside-in approach

b) The inside-out approach
c) The outsider approach
d) The insider approach
4. Firms that are able to build relational capital are more able to:

a) Increase turnover
b) Appoint friends and relatives to senior management positions
c) Decide on an appropriate range of products
d) Transfer knowledge to their alliance partners
5. An organization has competitive advantage in the markets in which it competes but its
culture is rather inwards looking and complacent. In this situation it is unlikely that
competitive advantage will be:

a) Copied
b) Eroded
c) Sustainable
d) Threshold
6. The VIRUS acronym in relation to strategic resources stands for:

a) Valuable, Intimate, Rare, Un-Substitutable

 b) Valuable, Inimitable, Robust, Un-Substitutable
c) Variable, Inimitable, Robust, Un-Substitutable
d) Value, Inimitable, Rare, Un-Substitutable
7. If a resource is 'inimitable' a competitor finds it:

a) Easy to copy
b) Easy to acquire
c) Easy to copy and easy to acquire
d) Difficult to copy
8. The things that an organization does with its strategic assets are known as:

a) Strategic activities
b) Competences
c) Threshold activities
d) Threshold competences
9. Which type of asset is rarely strategic?

a) Brand name
b) Financial assets
c) Reputation ​
d) Land and property
10. Which type of assets can be considered as the most heterogeneous?

a) Human
b) Financial
c) Physical
d) Intangible
Architecture, Structure & Culture
1. When there is a fit between the goals of the organization and the goals of individuals, this
is known as:

a) Goal fit
b) Goal congruence
c) Goal hierarchy fit
d) Goal coordination
2. Which of the following is correct?

a) An organization's structure would be expected to evolve as it grew larger and more

diverse
b) Every organization starts out with a simple structure, then moves to a functional structure
before becoming divisionalized
c) Network structures are superior to functional ones
d) Organizational performance will suffer if the structure is not stable
3. The shape or format of reporting and decision making relationships can be defined as the
organizational:

a) Span of control
b) Architecture
c) Hierarchy
d) Chain of command
4. The main components of an organization's architecture are structural hierarchy, values and
belief systems, contracts and relationships and (two more):

a) Control systems and ways of working

b) Information infrastructure and power structures
c) Control systems and power structures
d) Control systems and information infrastructure
5. A 'vertical architecture' is one which:
 a) Has a tall hierarchy
b) Has many layers of management
c) Extends beyond the boundaries of legal ownership
d) Is very bureaucratic
6. Organizational structures and systems can be judged using five dimensions (ABCDE) to
assess whether they are achieving an appropriate balance. These five dimensions are
Autonomy, Bureaucracy, Cultural Control, Decentralization and:

a) Equal Opportunities
b) Economic Incentives
c) Equality and Diversity
d) Evidence of Learning
7. Employees who work in an autonomous fashion are:

a) Given freedom to make decisions

b) Closely monitored
c) Heavily influenced by organizational culture
d) Motivated by non-financial rewards
8. Bureaucracy is sometimes seen as a negative thing but it has some benefits for
organizations. Which of the following is NOT a benefit of bureaucracy?

a) It can make information easier to share

b) It can reduce errors
c) It can increase organizational flexibility
d) It can ensure that stakeholders are treated consistently
9. Successful business relationships tend to:

a) Combine relational contracts - to build trust in the long term - with transactional contracts
to cover specific situations
b) Depend upon tightly written legal contracts that take account of every potential problem
or issue
c) Rely upon firms being able to trust their employees and partners
d) Be treated as finite games that both partners know will end sooner or later
10. Goffee and Jones use two variables to classify organizational cultures. These are:

a) Sociability and Synergy

b) Cohesion and Synergy
c) Sociability and Solidarity
d) Solidarity and Cohesion

The Managing of Complex Organization

1. A holding company is:

a) An organization with a balanced portfolio of individual businesses

b) A decentralized organization with a small head office that organizes finance for the
subsidiaries
c) A centralized organization with a small head office that helps subsidiaries develop and
finance their strategies
d) A decentralized organization with a large head office that offers a broad range of advice
and services to subsidiaries
2. A firm has a functional director for six areas and an area director for three functions.
There, staff at each area/function will be reporting to 2 bosses. This firm has which type
of structure?

a) Project structure
b) Matrix structure
c) Divisionalized structure
d) Front-back structure
3. An organization structure that is in the main a functional or divisional structure but also
includes project teams to deal with specific issues is called:

a) An M-form structure
b) A front-back structure
c) A networked structure
d) A hybrid structure
4. An organization that divides its structure into two main parts - one dealing with product
groups and one dealing with customer segments is called:

a) A front-back structure
b) A product-customer structure
c) A back to back structure
d) A matrix structure
5. The essential question that a corporate parent needs to ask is:

a) Does it add value to its individual businesses

b) How does it achieve a balanced portfolio
c) How does it achieve synergies across business units
d) How related should its business units be
6. A corporate parent can offer an individual business a number of 'propositions'. These are
build propositions, stretch propositions, link propositions, select propositions and:

a) Lend propositions
b) Locate propositions
c) Leverage propositions
d) Leap propositions
7. The parenting style 'financial control' will tend to be most suitable in which type of
portfolio?

a) A broad portfolio of fast growing businesses

b) Stable businesses with low investment needs
c) A narrow portfolio of closely related businesses
d) A rapidly changing business environment
8. Which type of corporate parenting style has the closest relationship with its individual
businesses?

a) Co-evolution
b) Corporate flexibility
c) Strategic Control
d) Strategic planning
9. What is the main reason why organizations enter alliances?

a) To find out how the other organization works, and copy it

b) To obtain synergies between other organizations' resources and their own
c) To increase their capacity to learn
d) Because they have not enough cash to acquire the other organization
10. Which of the following is NOT an important element to look for when selecting an
alliance partner?

a) Very similar culture and resources

b) Compatible expectations and objectives
c) They should have as much to lose as you do if the alliance fails
d) Resources that complement your own

Test-1 ​
A company's competitive strategy deals with
A. Management's game plan for competing successfully—the specific efforts to please customers,
offensive and defensive moves to counter the maneuvers of rivals, the reactions and responses to
whatever market conditions prevail at the moment and the initiatives undertaken to improve the
company's market position
B. What its strategy will be in such functional areas as R&D, production, sales and marketing,
distribution, finance and accounting and so on
C. Its efforts to change its position on the industry's strategic group map
Answer:a
The objective of competitive strategy is to
A. Contend successfully with the industry's 5 competitive forces
B. Knock the socks off rival companies by doing a better job of satisfying buyer needs and
preferences
C. Get the company into the best strategic group and then dominate it
Answer:b
A company achieves competitive advantage whenever
A. It is the acknowledged market share leader
B. It is the industry's acknowledged technology leader
C. It has greater financial resources than its rivals
D. It has a well-known and well-regarded brand name, prefers offensive strategies to defensive
strategies and has a strong balance sheet
E. It has some type of edge over rivals in attracting customers and coping with competitive forces
Answer:e
A company can be said to have competitive advantage if
A. It is the acknowledged leader in product quality
B. It has a different value chain than rivals
C. It has some type of edge over rivals in attracting customers and coping with competitive forces
Answer:c
While there are many routes to competitive advantage, they all involve
A. Building a brand name image that buyers trust
B. Delivering superior value to buyers and building competencies and resource strengths in
performing value chain activities that rivals cannot readily match
C. Achieving lower costs than rivals and becoming the industry's sales and market share leader
Answer:B
The biggest and most important differences among the competitive strategies of different
companies boil down to
A. How they go about building a brand name image that buyers trust and whether they are a risk-
taker or risk-avoider
B. The different ways that companies try to cope with the five competitive forces
C. Whether a company's market target is broad or narrow and whether the company is pursuing a
competitive advantage linked to low cost or differentiation
Answer:c
Which of the following is not one of the five generic types of competitive strategy?
A. A low-cost provider strategy
B. A broad differentiation strategy
C. A best-cost provider strategy
D. A focused low-cost provider strategy
E. A market share dominator strategy
Answer:e
The generic types of competitive strategies include
A. Build market share, maintain market share and slowly surrender market share
B. Offensive strategies and defensive strategies
C. Low-cost provider, broad differentiation, best-cost provider, focused low-cost and focused
differentiation
Answer:c
Which one of the following generic types of competitive strategy is typically the best
strategy for a company to employ?
A. A low-cost leadership strategy
B. A broad differentiation strategy
C. A best-cost provider strategy
D. A focused low-cost provider strategy
E. There is no such thing as a "best" competitive strategy; a company's "best" strategy is always
one that is customized to fit both industry and competitive conditions and the company's own
resources and competitive capabilities
Answer:e
A low-cost leader's basis for competitive advantage is
A. Lower prices than rival firms
B. Using a low cost/low price approach to gain the biggest market share
C. High buyer switching costs
D. Meaningfully lower overall costs than competitors
Answer:d
How valuable a low-cost leader's cost advantage is depends on
A. Whether it is easy or inexpensive for rivals to copy the low-cost leader's methods or otherwise
match its low costs
B. How easy it is for the low-cost leader to gain the biggest market share
C. The aggressiveness with which the low-cost leader pursues converting the cost advantage into
the absolute lowest possible costs
Answer:a
A low-cost leader can translate its low-cost advantage over rivals into superior profit
performance by
A. Cutting its price to levels significantly below the prices of rivals
B. Either using its low-cost edge to underprice competitors and attract price sensitive buyers in
large enough numbers to increase total profits or refraining from price-cutting and using the low-
cost advantage to earn a bigger profit margin on each unit sold
C. Going all out to use its cost advantage to capture a dominant share of the market
Answer:b
The major avenues for achieving a cost advantage over rivals include
A. Revamping the firm's value chain to eliminate or bypass some cost-producing activities and/or
out-managing rivals in the efficiency with which value chain activities are performed
B. Having a management team that is highly skilled in cutting costs
C. Being a first-mover in adopting the latest state-of-the-art technologies, especially those relating
to low-cost manufacture
Answer:a
A competitive strategy of striving to be the low-cost provider is particularly attractive when
A. Buyers are not very brand-conscious
B. Most rivals are trying to be best-cost providers
C. There are many ways to achieve product differentiation that have value to buyers
D. Buyers are large and have significant power to bargain down prices; buyers use the product in
much the same ways; and buyers have low switching costs
Answer:d
Which of the following is not an action that a company can take to do a better job than
rivals of performing value chain activities more cost-effectively?
A. Striving to capture all available economies of scale and learning/experience curve effects
B. Trying to operate facilities at full capacity
C. Adopting labor-saving operating methods
D. Improving supply chain efficiency
E. Outsourcing all production-related activities
Answer:e
Which of the following is not one of the ways that a company can achieve a cost advantage
by revamping its value chain?
A. Cutting out distributors and dealers by selling direct to customers
B. Replacing certain value chain activities with faster and cheaper online technology
C. Increasing production capacity and then striving hard to operate at full capacity
Answer:c
To succeed with a low-cost provider strategy, company managers have to
A. Pursue backward or forward integration to detour suppliers or buyers with considerable
bargaining power and leverage
B. Move the performance of most all value chain activities to low-wage countries
C. Sell direct to users of their product or service and eliminate use of wholesale and retail
intermediaries
D. Do two things: (1) do a better job than rivals of pursuing cost savings throughout the value
chain and (2) be proactive in revamping the firm's overall value chain to eliminate low value-
added activities and bypass "nonessential" cost-producing activities
Answer:d
Achieving a cost advantage over rivals entails
A. Concentrating on the primary activities portion of the value chain and outsourcing all support
activities
B. Being a first-mover in pursuing backward and forward integration and controlling as much of
the industry value chain as possible
C. Out-managing rivals in performing value chain activities cost-effectively and finding creative
ways to cut cost-producing activities out of the value chain
Answer:c
The best evidence that a company is the industry's low-cost provider is that
A. It sells more of its product/service than its key competitors and is the market share leader
B. It has lower overall per unit costs for its product/service than other competitors in the industry
C. It has lower total operating costs on its income statement than do its competitors
Answer:b
A company pursuing a low-cost leadership strategy must generally
A. Have products with good-to-excellent attributes so that its low prices will provide customers
with more value for the money
B. Have acceptable quality products that incorporate a good basic design with few frills and offer
a limited number of models/styles to select from
C. Have a wide selection of products that are of average or better quality
Answer:b
Being the overall low-cost provider in an industry has the attractive advantage of
A. Building strong customer loyalty and locking customers into its product (because customers
have such high switching costs)
B. Giving the firm a very appealing brand image
C. Putting a firm in position to compete offensively on the basis of low price, win the business of
price sensitive customers, set the floor on market price and defend against price war conditions
should they arise
Answer:c
A competitive strategy to be the low-cost provider in an industry works well when
A. Price competition among rival sellers is especially vigorous
B. There are few ways to achieve product differentiation that have value to buyers
C. Buyers incur low costs in switching their purchases from one seller/brand to another
D. Industry newcomers use low introductory prices to attract buyers and build a customer base
E. All of these
Answer:e
A competitive strategy predicated on low-cost leadership tends to work best when
A. There are widely varying needs and preferences among the various buyers of the product or
service
B. There are many market segments and market niches, such that it is feasible for a low-cost
leader to dominate the niche where buyers want a budget-priced product
C. Price competition is especially vigorous and the offerings of rival firms are essentially
identical, standardized, commodity-like products
Answer:c
In which of the following circumstances is a strategy to be the industry's overall low-cost
provider not particularly well matched to the market situation?
A. When the offerings of rival firms are essentially identical, standardized, commodity-like
products
B. When there are few ways to achieve differentiation that have value to buyers
C. When price competition is especially vigorous
D. When buyers have widely varying needs and special requirements and the prices of substitute
products are relatively high
Answer:d
A strategy to be the industry's overall low-cost provider tends to be more appealing than a
differentiation or best-cost or focus/market niche strategy when
A. There are many ways to achieve product differentiation that buyers find appealing
B. Buyers use the product in a variety of different ways and have high switching costs in
changing from one seller's product to another
C. The offerings of rival firms are essentially identical, standardized, commodity-like products
Answer:c
In which of the following circumstances is a low-cost leadership strategy not likely to be
particularly successful?
A. When the industry's product is a standardized commodity
B. When buyers are looking for a good-to-excellent product at a bargain price
C. When the industry is composed of more than three strategic groups and the companies in at
least one of the groups are pursuing full vertical integration strategies
Answer:c
Which of the following is not one of the pitfalls of a low-cost provider strategy?
A. Overly aggressive price-cutting
B. Trying to set the industry's price ceiling
C. Not emphasizing avenues of cost advantage that can be kept proprietary or that relegate rivals
to playing catch up
Answer:b
The essence of a broad differentiation strategy is to
A. Appeal to the high end part of the market and concentrate on providing a top-of-the-line
product to consumers
B. Incorporate a greater number of differentiating features into its product/service than rivals
C. Lower buyer switching costs
D. Outspend rivals on advertising and promotion in order to inform and convince buyers of the
value of its differentiating attributes
E. Be unique in ways that are valuable and appealing to a wide range of buyers
Answer:e
A company attempting to be successful with a broad differentiation strategy has to
A. Study buyer needs and behavior carefully to learn what buyers consider important, what they
think has value and what they are willing to pay for
B. Incorporate more differentiating features into its product/service than rivals
C. Concentrate its differentiating efforts on marketing and advertising (where almost all
differentiating features are created)
Answer:a
Successful differentiation allows a firm to
A. Be the industry's best-cost provider
B. Set the industry ceiling on price
C. Avoid being dragged into a price war with industry rivals and not be overly concerned about
whether entry barriers into the industry are high or low
D. Command a premium price for its product and/or increase unit sales (because additional
buyers are won over by the differentiating features), and/or gain buyer loyalty to its brand
(because some buyers prefer the differentiating features and are thus brand loyal)
Answer:d
A company that succeeds in differentiating its product offering from those of its rivals can
usually
A. Avoid having to compete on the basis of simply a low price
B. Charge a price premium for its product (because buyers see its differentiating features as worth
something extra)
C. Increase unit sales (because of the attraction of its differentiating product attributes)
D. Gain buyer loyalty to its brand (because some, maybe many, of its customers will have a
strong preference for the company's differentiating features)
E. All of the above
Answer:e
A broad differentiation strategy improves profitability when
A. It is focused on product innovation
B. Differentiating enhances product performance
C. The differentiating features appeal to sophisticated and prestigious buyers
D. Unit sales increase and the extra price the product commands exceeds the added costs of
achieving the differentiation
Answer:d
Whether a broad differentiation strategy ends up enhancing company profitability depends
mainly on whether
A. Many buyers view the product's differentiating features as having value
B. Most buyers have similar needs and use the product in the same ways
C. Unit sales increase and the extra price the product commands exceeds the added costs of
achieving the differentiation
Answer:c
Using a broad differentiation strategy to produce an attractive competitive advantage is
least likely to be based on
A. Developing a superior performing product
B. Offering buyers a product which is superior in quality and reliability as compared to rivals'
brands
C. Giving consumers comprehensive support services
D. Providing buyers with a continuing stream of better-designed, better-performing and more
stylish products
E. Undercutting the prices being charged by rivals
Answer:e
Opportunities to differentiate a company's product offering
A. Are most reliably found in the R&D portion of the value chain
B. Are typically located in the sales and marketing portion of the value chain
C. Can exist in activities all along an industry's value chain
Answer:c
Easy-to-copy differentiating features
A. Cannot produce sustainable competitive advantage
B. Seldom are perceived by buyers as having much value
C. Tend to give buyers a high degree of power in bargaining for a lower price
Answer:a
The most appealing approaches to differentiation are
A. Those that are also being pursued by other rivals with differentiation strategies
B. Those that are the most costly to incorporate (because expensive attributes are perceived by
buyers as more valuable and worth paying more for)
C. Those that can be made even more attractive to buyers via clever advertising
D. Generally related to flavor and taste or sophisticated use of Internet technology applications
E. Those that are hard or expensive for rivals to duplicate and that also have considerable buyer
appeal
Answer:e
Perceived value and signaling value are often an important part of a successful differentiation
strategy because
A. Of the diversity of buyer needs and preferences
B. Buyers seldom will pay for value they don't perceive, no matter how real the value of the
differentiating extras may be
C. Most buyers are heavily influenced by clever ads that signal value
Answer:b
A differentiation-based competitive advantage
A. Nearly always is attached to the quality and service aspects of a company's product offering
B. Most usually is the result of highly effective marketing and advertising
C. Requires developing at least one distinctive competence that buyers consider valuable
D. Hinges on a company's success in developing top-of-the-line product features that will
command the biggest price premium in the industry
E. Often hinges on incorporating features that (1) raise the performance of the product or (2)
lower the buyer's overall costs of using the company's product or (3) enhance buyer satisfaction in
intangible or non-economic ways
Answer:e
Which of the following is not one of the four basic routes to achieving a differentiation-
based competitive advantage?
A. Delivering value to customers via competencies and competitive capabilities that rivals don't
have or can't afford to match
B. Incorporating features that raise product performance
C. Incorporating product attributes and user features that lower the buyer's overall costs of using
the company's product
D. Appealing to buyers who are sophisticated and shop hard for the best, stand-out differentiating
attributes
Answer:d
Achieving a differentiation-based competitive advantage can involve
A. Incorporating product attributes and user features that lower a buyer's overall cost of using the
product
B. Incorporating features that raise the performance a buyer gets from using the product
C. Incorporating features that enhance buyer satisfaction in non-economic or intangible ways
D. Delivering value to customers via competencies and competitive capabilities that rivals don't
have or can't afford to match
E. All of the above are viable ways of building competitive advantage via differentiation
Answer:e
Broad differentiation strategies are well-suited for market circumstances where
A. There are many ways to differentiate the product or service and many buyers perceive these
differences as having value
B. Most buyers have the same needs and use the product in the same ways
C. Buyers are susceptible to clever advertising
Answer:a
Broad differentiation strategies generally work best in market circumstances where
A. Buyer needs and preferences are too diverse to be fully satisfied by a standardized product
B. Most buyers have similar needs and use the product in the same ways
C. The products of rivals are weakly differentiated and most competitors are resorting to clever
advertising to try to set their product offerings apart
Answer:a
A broad differentiation strategy works best in situations where
A. Technological change is slow-paced and new or improved products are infrequent
B. Buyer needs and uses of the product are very similar
C. Buyers incur low costs in switching their purchases to rival brands
D. Buyers have a low degree of bargaining power and purchase the product frequently
E. Technological change is fast-paced and competition revolves around rapidly evolving product
features
Answer:e
A broad differentiation strategy generally produces the best results in situations where
A. Buyer brand loyalty is low
B. Buyer needs and uses of the product are diverse
C. New and improved products are introduced only infrequently
Answer:b
In which one of the following market circumstances is a broad differentiation strategy
generally not well-suited?
A. When buyer needs and preferences are too diverse to be fully satisfied by a standardized
product
B. When few rivals are pursuing a similar differentiation approach
C. When the products of rivals are weakly differentiated and most competitors are resorting to
clever advertising to try to set their product offerings apart
Answer:c
The pitfalls of a differentiation strategy include
A. Trying to differentiate on the basis of attributes or features that are easily copied
B. Choosing to differentiate on the basis of attributes that buyers do not perceive as valuable or
worth paying for
C. Trying to charge too high a price premium for the differentiating features
D. Being timid and not striving to open up meaningful gaps in quality or performance or service
or other attractive differentiating attributes
E. All of these
Answer:e
Which of the following is not one of the pitfalls of pursuing a differentiation strategy?
A. Trying to strongly differentiate the company's product from those of rivals rather than be
content with weak product differentiation
B. Over-differentiating so that the features and attributes incorporated exceed buyer needs and
requirements
C. Trying to charge too high a price premium for the differentiating features
Answer:a
Which one of the following statements about pursuing a broad differentiation strategy is
false?
A. Any differentiating feature that works well is a magnet for imitators
B. The best opportunities for achieving strong product differentiation are in the production
technology and marketing portions of the value chain
C. A low-cost provider strategy can defeat a broad differentiation strategy when buyers are
satisfied with a basic product and don't think "extra" attributes are worth paying a higher price
Answer:b
A company achieves best-cost provider status by
A. Selling a product with the best cost at the best price
B. Having the best cost (as compared to rivals) for each activity in the industry's value chain
C. Providing buyers with the best attributes at the best cost
D. Incorporating attractive or upscale attributes into its product offering at a lower cost than rivals
Answer:d
A firm pursuing a best-cost provider strategy
A. Seeks to be the low-cost provider in the largest and fastest growing (or best) market segment
B. Tries to have the best cost (as compared to rivals) for each activity in the industry's value chain
C. Tries to outcompete a low-cost provider by attracting buyers on the basis of charging the best
price
D. Seeks to deliver superior value to buyers by satisfying their expectations on key
quality/service/features/performance attributes and beating their expectations on price (given
what rivals are charging for much the same attributes)
Answer:d
Best-cost provider strategies
A. Aim at using the best operating practices to achieve lower costs and charge lower prices than
companies pursuing low-cost provider strategies
B. Involve charging a lower price for a product that has more upscale attributes and features than
the products offered by companies pursuing either focused differentiation or broad differentiation
strategies
C. Seek to attract buyers on the basis of charging the best price for a mid-quality, average-
performing product
D. Aim at giving customers more value for the money
Answer:d
The objective of a best-cost provider strategy is to
A. Deliver superior value to buyers by satisfying their expectations on key
quality/performance/features/service attributes and beating their expectations on price (given
what rivals are charging for much the same attributes)
B. Offer buyers the industry's best-performing product at the best cost and best (lowest) price in
the industry
C. Attract buyers on the basis of having the industry's overall best-performing product at a price
that is slightly below the industry-average price
Answer:a
The competitive objective of a best-cost provider strategy is to
A. Outmatch the resource strengths of both low-cost providers and differentiators
B. Position the company outside the competitive arena of low-cost producers and differentiators
C. Meet or exceed buyer expectations on key quality/performance/features/service attributes and
beat their expectations on price (given what rivals are charging for much the same attributes)—
thereby achieving a value-based competitive advantage
Answer:c
For a best-cost provider strategy to be successful, a company must have
A. Excellent marketing and sales skills in convincing buyers to pay a premium price for the
attributes/features incorporated in its product
B. Resource strengths and competitive capabilities that allow it to incorporate upscale attributes at
lower costs than rivals whose products have similar upscale attributes
C. Access to greater learning/experience curve effects and scale economies than rivals
Answer:b
The competitive advantage of a best-cost provider is
A. Having the best value chain in the industry
B. Its brand name reputation
C. Its capability to incorporate upscale attributes at lower costs than rivals whose products have
similar upscale attributes
Answer:c
The target market of a best-cost provider is
A. Value-conscious buyers
B. Brand-conscious buyers
C. Price-sensitive buyers
Answer:a
Best-cost provider strategies are appealing in those market situations where
A. Diverse buyer preferences make product differentiation the norm and where many buyers are
sensitive to both price and value
B. A company is positioned between competitors who have ultra-low prices and competitors who
have top-notch products in terms of both quality and performance
C. Buyers are more quality-conscious than price-conscious
Answer:a
The big danger or risk of a best-cost provider strategy is
A. That buyers will be highly skeptical about paying a relatively low price for upscale
attributes/features
B. Not establishing strong alliances and partnerships with key suppliers
C. That low-cost leaders will be able to steal away some customers on the basis of a lower price
and high-end differentiators will be able to steal away customers with the appeal of better product
attributes
Answer:c
A company's biggest vulnerability in employing a best-cost provider strategy is
A. Relying too heavily on outsourcing
B. Getting squeezed between the strategies of firms employing low-cost provider strategies and
high-end differentiation strategies
C. Getting trapped in a price war with low-cost leaders
Answer:b
Focused strategies keyed either to low-cost or differentiation are especially appropriate for
situations where
A. The market is composed of distinctly different buyer groups who have different needs or use
the product in different ways
B. Most other rival firms are using a best-cost producer strategy
C. Buyers have strong bargaining power and entry barriers are low
Answer:a

Test-2 ​
What sets focused (or market niche) strategies apart from low-cost leadership and broad
differentiation strategies is
A. The extra attention paid to top-notch product performance and product quality
B. Their concentrated attention on serving the needs of buyers in a narrow piece of the overall
market
C. Greater opportunity for competitive advantage
Answer:b
Companies pursuing a focused low-cost or focused differentiation strategy strive to
A. Build a value-based competitive advantage keyed to product uniqueness
B. Develop the capability to simultaneously serve buyers in a variety of distinct and different
market segments
C. Do a better job of serving the needs and expectations of buyers in the target market niche than
other competitors in the industry
Answer:c
A focused low-cost strategy seeks to achieve competitive advantage by
A. Outmatching competitors in offering niche members an absolute rock-bottom price
B. Delivering more value for the money than other competitors
C. Performing the primary value chain activities at a lower cost per unit than can the industry's
low-cost leaders
D. Dominating more market niches in the industry via a lower cost and a lower price than any
other rival
E. Serving buyers in the target market niche at a lower cost and lower price than rivals
Answer:e
The chief difference between a low-cost leader strategy and a focused low-cost strategy is
A. Whether the product is strongly differentiated or weakly differentiated from rivals
B. The degree of bargaining power that buyers have
C. The size of the buyer group that a company is trying to appeal to
Answer:c
A focused differentiation strategy aims at securing competitive advantage
A. By providing niche members with a top-of-the-line product at a premium price
B. By catering to buyers looking for an upscale product at an attractively low price
C. With a product offering carefully designed to appeal to the unique preferences and needs of a
narrow, well-defined group of buyers
Answer:c
A focused low-cost strategy can lead to attractive competitive advantage when
A. Buyers are looking for the best value at the best price
B. Buyers are looking for a budget-priced product
C. Buyers are price sensitive and are attracted to brands with low switching costs
D. Demand in the target market niche is growing rapidly and a company can achieve a big
enough volume to fully capture all the available scale economies
E. A firm can lower costs significantly by limiting its customer base to a well-defined buyer
segment; its two options for achieving a low-cost advantage are (1) out-managing rivals in
controlling the factors that drive costs and (2) reconfiguring its value chain in ways that deliver a
cost edge over rivals
Answer:e
The chief difference between a broad differentiation strategy and a focused differentiation is
A. The size of the buyer group that a company is trying to appeal to
B. The degree of bargaining power that buyers have
C. Whether the product is strongly differentiated or weakly differentiated from rivals
Answer:a
Which one of the following does not represent market circumstances that make a focused
low-cost or focused differentiation strategy attractive?
A. When it is costly or difficult for multi-segment competitors to put capabilities in place to meet
the specialized needs of the target market niche and at the same time satisfy the expectations of
their mainstream customers
B. When the industry has many different segments and market niches, thereby allowing a focuser
to pick an attractive niche suited to its resource strengths and capabilities
C. When industry leaders do not see that having a presence in the niche is crucial to their own
success
D. When the target market niche is not overcrowded with a number of other rivals attempting to
focus on the same niche
E. When buyers are not strongly brand loyal and most industry competitors are pursuing some
sort of a focused strategy
Answer:e
The risks of a focused strategy based on either low-cost or differentiation include
A. The chance that competitors outside the niche will find effective ways to match the focuser's
capabilities in serving the target niche
B. The potential for the preferences and needs of niche members to shift over time towards many
of the same product attributes and capabilities desired by buyers in the mainstream portion of the
market
C. The potential for the segment to become so attractive that it is soon inundated with
competitors, intensifying rivalry and splintering sales, profits and growth prospects
D. The potential for segment growth to slow to such a small rate that a focuser's prospects for
future sales and profit gains become unacceptably dim
E. All of these
Answer:e
The production emphasis of a company pursuing a broad differentiation strategy usually
involves
A. A search for continuous cost reduction without sacrificing acceptable quality and essential
features
B. Strong efforts to be a leader in manufacturing process innovation
C. Efforts to build-in whatever differentiating features that buyers are willing to pay for and
striving for product superiority
Answer:c
The marketing emphasis of a company pursuing a broad differentiation strategy usually is to
A. Underprice rival brands with comparable features
B. Tout differentiating features and charge a premium price that more than covers the extra costs
of differentiating features
C. Out-advertise rivals and make frequent use of discount coupons
Answer:b
The keys to sustaining a broad differentiation strategy are
A. To stress constant innovation to stay ahead of imitative rivals and to concentrate on a few
differentiating features
B. To charge a premium price that more than covers the extra costs of differentiating features and
to convince customers to be brand loyal
C. To out-innovate and out-advertise rivals
Answer:a
The marketing emphasis of a company pursuing a focused low-cost provider strategy usually is to
A. Tout the company's lower prices
B. Tout the lack of frills and extras
C. Out-advertise rivals and make frequent use of discount coupons
D. Communicate the attractive features of a budget-priced product offering that fits niche
members' expectations
Answer:d
One of the big dangers in crafting a competitive strategy is that managers, torn between the pros
and cons of the various generic strategies, will opt for
A. A low-cost provider strategy because it is usually the safest, least risky competitive strategy
B. A "stuck-in-the-middle" strategy
C. A broad differentiation strategy because it is frequently the most profitable competitive
strategy
Answer:b
Once a company has decided to employ a particular generic competitive strategy, then it must
make such additional strategic choices as
A. Whether to enter into strategic alliances or collaborative partnerships
B. Whether and when to employ offensive and defensive moves
C. What type of Web site strategy to employ
Answer:a
Which one of the following is not a strategic choice that a company must make to
complement and supplement its choice of one of the five generic competitive strategies?
A. Whether to enter into strategic alliances or collaborative partnerships
B. Whether and when to employ offensive and defensive moves
C. Whether to employ a market share leadership strategy
Answer:c
Strategic alliances
A. Are the cheapest means of developing new technologies and getting new products to market
quickly
B. Are collaborative arrangements where two or more companies join forces to achieve mutually
beneficial strategic outcomes
C. Are a proven means of reducing the costs of performing value chain activities
Answer:b
A strategic alliance
A. Is a collaborative arrangement where companies join forces to defeat mutual competitive rivals
B. Involves two or more companies joining forces to pursue vertical integration
C. Is a formal agreement between two or more companies in which there is strategically relevant
collaboration of some sort, joint contribution of resources, shared risk, shared control and mutual
dependence
Answer:c
Entering into strategic alliances and collaborative partnerships can be competitively
valuable because
A. Working closely with outsiders is essential in developing new technologies and new products
in virtually every industry
B. Cooperative arrangements with other companies are very helpful in racing against rivals to
build a strong global presence and/or racing to seize opportunities on the frontiers of advancing
technology
C. They represent highly effective ways to achieve low-cost leadership and capture first-mover
advantages
Answer:b
The best strategic alliances
A. Are highly selective, focusing on particular value chain activities and on obtaining a particular
competitive benefit
B. Are those whose purpose is to create an industry key success factor
C. Are those which help a company move quickly from one strategic group to another
Answer:a
Companies racing against rivals for global market leadership need strategic alliances and
collaborative partnerships with companies in foreign countries in order to
A. Combat the bargaining power of foreign suppliers and help defend against the competitive
threat of substitute products produced by foreign rivals
B. Help raise needed financial capital from foreign banks and use the brand names of their
partners to make sales to foreign buyers
C. Get into critical country markets quickly and accelerate the process of building a potent global
presence, gain inside knowledge about unfamiliar markets and cultures and access valuable skills
and competencies that are concentrated in particular geographic locations
Answer:c
A company racing to seize opportunities on the frontiers of advancing technology often utilizes
strategic alliances and collaborative partnerships in order to
A. Discourage rival companies from merging with or acquiring the very companies that it is
partnering with
B. Reduce overall business risk and raise entry barriers into the newly emerging industry
C. Help master new technologies and build new expertise and competencies faster than would be
possible through internal efforts, establish a stronger beachhead for participating in the target
industry and open up broader opportunities in the target industry by melding their capabilities
with the resources and expertise of partners
Answer:c
Which of the following is not a typical reason that many alliances prove unstable or break apart?
A. Diverging objectives and priorities
B. An inability to work well together
C. The emergence of more attractive technological paths that are better pursued alone or with
other partners
D. Disagreement over how to divide the profits gained from joint collaboration
Answer:d
Experience indicates that strategic alliances
A. Are generally successful
B. Work well in cooperatively developing new technologies and new products but seldom work
well in promoting greater supply chain efficiency
C. Work best when they are aimed at achieving a mutually beneficial competitive advantage for
the allies
D. Have a high "divorce rate."
Answer:d
Which of the following is not a factor that makes an alliance "strategic" as opposed to just a
convenient business arrangement?
A. The alliance is critical to the company's achievement of an important objective
B. The alliance helps block a competitive threat
C. The alliance helps open up important new market opportunities
D. The alliance helps build, enhance or sustain a core competence or competitive advantage
E. The alliance helps the company obtain additional financing on better credit terms
Answer:e
The Achilles heel (or biggest disadvantage/danger/pitfall) of relying heavily on alliances and
cooperative strategies is
A. That partners will not fully cooperate or share all they know, preferring instead to guard their
most valuable information and protect their more valuable know-how
B. Becoming dependent on other companies for essential expertise and capabilities
C. The added time and extra expenses associated with engaging in collaborative efforts
Answer:b
Which of the following is not one of the factors that affects whether a strategic alliance will
be successful and realize its intended benefits?
A. Picking a good partner
B. Recognizing that the alliance must benefit both sides
C. Minimizing the amount of resources that the partners commit to the alliance
Answer:c
Which one of the following is not a strategically beneficial reason why a company may enter
into strategic partnerships or cooperative arrangements with key suppliers, distributors or
makers of complementary products?
A. To improve access to new markets
B. To expedite the development of promising new technologies or products
C. To enable greater vertical integration
Answer:c
The competitive attraction of entering into strategic alliances and collaborative
partnerships is
A. In allowing companies to bundle competencies and resources that are more valuable in a joint
effort than when kept separate
B. Speeding new products to market more quickly
C. Enabling greater vertical integration
Answer:a
The difference between a merger and an acquisition is that
A. A merger involves one company purchasing the assets of another company with cash, whereas
an acquisition involves a company acquiring another company by buying all of the shares of its
common stock
B. A merger is a pooling of equals whereas an acquisition involves one company, the acquirer,
purchasing and absorbing the operations of another company, the acquired
C. In a merger the companies retain their original names whereas in an acquisition the name of
the company being acquired is changed to be the name of the acquiring company
Answer:b
Which of the following is not a typical strategic objective or benefit that drives mergers and
acquisitions?
A. To gain quick access to new technologies or other resources and capabilities
B. To create a more cost-efficient operation out of the combined companies
C. To expand a company's geographic coverage
D. To facilitate a company's shift from a broad differentiation strategy to a focused differentiation
strategy
Answer:d
Mergers and acquisitions are often driven by such strategic objectives as to
A. Expand a company's geographic coverage or extend its business into new product categories
B. Reduce the number of industry key success factors
C. Reduce the number of strategic groups in the industry
Answer:a
Merger and acquisition strategies
A. Are nearly always a superior strategic alternative to forming alliances or partnerships with
these same companies
B. May offer considerable cost-saving opportunities (perhaps helping to transform otherwise
high-cost companies into a competitor with average or below-average costs) and can also be
beneficial in helping a company try to invent a new industry and lead the convergence of
industries whose boundaries are being blurred by changing technologies and new market
opportunities
C. Are a particularly effective way of pursuing a blue ocean strategy and outsourcing strategies
Answer:b
Mergers and acquisitions
A. Are nearly always successful in achieving their desired purpose
B. Frequently do not produce the hoped-for outcomes
C. Are generally less effective than forming alliances or partnerships with these same companies
Answer:b
Vertical integration strategies
A. Extend a company's competitive scope within the same industry by expanding its operations
across more parts of the industry value chain
B. Are one of the best strategic options for helping companies win the race for global market
leadership
C. Offer good potential to expand a company's lineup of products and services
Answer:a
The two best reasons for investing company resources in vertical integration (either forward or
backward) are to
A. Expand into foreign markets and/or control more of the industry value chain
B. Broaden the firm's product line and/or avoid the need for outsourcing
C. Enable use of offensive strategies and/or gain a first mover advantage over rivals in revamping
the industry value chain
D. Strengthen the company's competitive position and/or boost its profitability
Answer:d
For backward vertical integration into the business of suppliers to be a viable and profitable
strategy, a company
A. Must first be a proficient manufacturer
B. Must be able to achieve the same scale economies as outside suppliers and match or beat
suppliers' production efficiency with no drop-off in quality
C. Must have excess production capacity, so that it has ample in-house ability to undertake
additional production activities
Answer:b
The strategic impetus for forward vertical integration is to
A. Gain better access to end users and better market visibility
B. Achieve the same scale economies as wholesale distributors and/or retail dealers
C. Control price at the retail level
Answer:a
Which of the following is typically the strategic impetus for forward vertical integration?
A. Being able to control the wholesale/retail portion of the industry value chain
B. Fewer disruptions in the delivery of the company's products to end-users
C. Gaining better access to end users and better market visibility
Answer:c
A good example of vertical integration is
A. A global public accounting firm acquiring a small local or regional public accounting firm
B. A large supermarket chain getting into convenience food stores
C. A crude oil refiner purchasing a firm engaged in drilling and exploring for oil
Answer:c
Which of the following is not a potential advantage of backward vertical integration?
A. Reduced vulnerability to powerful suppliers (who may be inclined to raise prices at every
opportunity)
B. Reduced risks of disruptions in obtaining crucial components or support services
C. Reduced costs
D. Reduced business risk because of controlling a bigger portion of the overall industry value
chain
Answer:d
Which of the following is not a strategic disadvantage of vertical integration?
A. Vertical integration boosts a firm's capital investment in the industry, thus increasing business
risk if the industry becomes unattractive later
B. Vertical integration backward into parts and components manufacture can impair a company's
operating flexibility when it comes to changing out the use of certain parts and components
C. Vertical integration reduces the opportunity for achieving greater product differentiation
Answer:c
Outsourcing strategies
A. Are nearly always a more attractive strategic option than merger and acquisition strategies
B. Carry the substantial risk of raising a company's costs
C. Carry the substantial risk of making a company overly dependent on its suppliers
D. Increase a company's risk exposure to changing technology and/or changing buyer preferences
E. Involve farming out value chain activities presently performed in-house to outside specialists
and strategic allies
Answer:e
Outsourcing the performance of value chain activities presently performed in-house to outside
vendors and suppliers makes strategic sense when
A. An activity can be performed better or more cheaply by outside specialists
B. It allows a company to focus its entire energies on those activities that are at the center of its
expertise (its core competencies) and that are most critical to its competitive and financial success
C. Outsourcing won't adversely hollow out the company's technical know-how, competencies or
capabilities
D. It reduces the company's risk exposure to changing technology and/or changing buyer
preferences
E. All of these
Answer:e
The two big drivers of outsourcing are
A. Increased ability to cut R&D expenses and increased ability to avoid the problems of strategic
alliances
B. A desire to take advantage of the fact that outsiders can perform certain activities better or
cheaper and allowing a company to focus its entire energies on those activities that are at the
center of its expertise (its core competencies) and that are most critical to its competitive and
financial success
C. A desire to reduce the company's investment in fixed assets and the need to narrow the scope
of the company's in-house competencies and competitive capabilities
Answer:b
Which of the following is not one of the benefits of outsourcing value chain activities presently
performed in-house?
A. Streamlining company operations in ways that improve organizational flexibility and cut the
time it takes to get new products into the marketplace
B. Allowing a company to concentrate on its core business, leverage its key resources and do
even better what it already does best
C. Helping the company assemble diverse kinds of expertise speedily and efficiently
D. Preventing a company from hollowing out its technical know-how, competencies or
capabilities
Answer:d
Relying on outsiders to perform certain value chain activities offers such strategic
advantages as
A. Obtaining higher quality and/or cheaper components or services
B. Improving the company's ability to innovate by allying with "best-in-world" suppliers
C. Reducing the company's risk exposure to changing technology and/or changing buyer
preferences
D. Increasing the firm's ability to assemble diverse kinds of expertise speedily and efficiently
E. All of the above
Answer:e
Outsourcing strategies can offer such advantages as
A. Increasing a company's ability to strongly differentiate its product and be successful with
either a broad differentiation strategy or a focused differentiation strategy
B. Obtaining higher quality and/or cheaper components or services, improving a company's
ability to innovate and reducing its risk exposure
C. Speeding a company's entry into foreign markets
Answer:b
The big risk of employing an outsourcing strategy is
A. Causing the company to become partially integrated instead of being fully integrated
B. Hollowing out a firm's own capabilities and losing touch with activities and expertise that
contribute fundamentally to the firm's competitiveness and market success
C. Hurting a company's R&D capability
Answer:b
Which of the following is not one of the principal offensive strategy options?
A. Leapfrogging competitors by being the first adopter of next-generation technologies
B. Offering an equally good or better product at a lower price
C. Blocking the avenues open to challengers
Answer:c
Which one of the following is an example of an offensive strategy?
A. Blocking the avenues open to challengers
B. Signaling challengers that retaliation is likely
C. Pursuing continuous product innovation to draw sales and market share away from less
innovative rivals
Answer:c
A blue ocean type of offensive strategy
A. Is an offensive attack used by a market leader to steal customers away from unsuspecting
smaller rivals
B. Involves a preemptive strike to secure an advantageous position in a fast-growing market
segment
C. Works best when a company is the industry's low-cost leader
D. Involves abandoning efforts to beat out competitors in existing markets and, instead, inventing
a new industry or new market segment that renders existing competitors largely irrelevant and
allows a company to create and capture altogether new demand
Answer:d
A hit-and-run or guerilla warfare type of offensive strategy involves
A. Random offensive attacks used by a market leader to steal customers away from unsuspecting
smaller rivals
B. Undertaking surprise moves to secure an advantageous position in a fast-growing and
profitable market segment; usually the guerilla signals rivals that it will use deep price cuts to
defend its newly-won position
C. Work best if the guerilla is the industry's low-cost leader
D. Pitting a small company's own competitive strengths head-on against the strengths of much
larger rivals
E. Random raids by a small competitor to grab sales and market share from complacent or
distracted rivals
Answer:e
Launching a preemptive strike type of offensive strategy entails
A. Cutting prices below a weak rival's costs
B. Moving first to secure an advantageous position that rivals are prevented or discouraged from
duplicating
C. Using hit-and-run tactics to grab sales and market share away from complacent or distracted
rivals
Answer:b
Which one of the following statements about offensive strategies is false?
A. It often takes the use of successful offensive strategies to build to competitive advantage
B. One situation when a company needs to use offensive strategies is when it has no choice but to
try to whittle away at a strong rival's competitive advantage
C. Offensive strategies have much to recommend when a company sees an opening to gain
profitable market share at the expense of rivals
D. One of the most potent types of offensive strategy is to introduce new features or models to fill
vacant niches in a company's overall product offering and thereby better match the product
offerings of key rivals
Answer:d
Which one of the following is not a trait of a good strategic offensive?
A. Trying to build a more cost-efficient supply chain than rivals have
B. Being impatient with the status quo and displaying a strong bias for swift, decisive actions to
boost a company's competitive position vis-à-vis rivals
C. Applying resources where rivals are least able to defend themselves
Answer:a
Which one of the following is not a good type of rival for an offensive-minded company to
target?
A. Market leaders that are vulnerable
B. Runner-up firms with weaknesses in areas where the challenger is strong
C. Small local and regional companies with limited capabilities
D. Other offensive-minded companies with a sizable war chest of cash and marketable securities
Answer:d
Which one of the following statements regarding the basis for offensive attack on rivals is
false?
A. It is generally wise to use a company's resource strengths to attack rivals in those competitive
areas where they are strong
B. Ignoring the need to tie a strategic offensive to a company's strengths is like going to war with
a popgun
C. Strategic offensives should, as a general rule, be predicated on leveraging a company's
competitive assets—its core competencies, competitive capabilities and other resource strengths
D. Offensive initiatives aimed at exploiting the competitive weaknesses of rivals stand a better
chance of success than do those that challenge a competitor's strengths
E. Attacking a market leader is always unwise
Answer:e
The purposes of defensive strategies are to
A. Aggressively retaliate against rivals pursuing offensive strategies and prevent against price
wars
B. Lower the risk of being attacked by rivals, weaken the impact of any attack that occurs and
influence challengers to aim their offensive efforts at other rivals
C. Guard against adverse changes in the company's macro-environment and insulate the company
from the impact of industry driving forces
Answer:b
Which one of the following is not a defensive option for protecting a company's market
share and competitive position?
A. Adding new features or models and otherwise broadening the product line to close off vacant
niches and gaps to opportunity-seeking challengers
B. Thwarting the efforts of rivals to attack with lower prices by maintaining economy-priced
options of its own
C. Running comparison ads that call attention to weaknesses in rivals' products
Answer:c
Which of the following is a potential defensive move to ward off challenger firms?
A. Granting volume discounts or better financing terms to dealers/distributors and providing
discount coupons to buyers to help discourage them from experimenting with other
suppliers/brands
B. Signaling challengers that retaliation is likely in the event they launch an attack
C. Lengthening warranties, offering free or low-cost training and support services and providing
coupons and sample giveaways to buyers most prone to experiment with using rival brands
D. Maintaining a war chest of cash and marketable securities
E. All of these
Answer:e

Test-3 ​
One of the biggest Internet-related strategic issues facing many businesses is
A. Whether to have a company Web site
B. Whether and how to incorporate use of Internet technology applications in performing various
internal value chain activities
C. How best to try to offset the company's competitive disadvantage vis-à-vis rivals that already
sell direct to buyers at their Web site
D. Whether to form a strategic alliance with a pure dot-com enterprise
E. What role the company's Web site should play in the company's competitive strategy
Answer:e
Which of the following is not one of the options that companies have for using the Internet
as a distribution channel to access buyers?
A. Establishing a company Web site so as to have an Internet presence
B. Operating a Web site that provides existing and potential customers with extensive product
information but that relies on click-throughs to distribution channel partners to handle orders and
sales transactions
C. Using online sales at the company's Web site as a relatively minor distribution channel for
achieving incremental sales
Answer:a
One very important advantage of a product-information-only Web site strategy is
A. Lower advertising costs and lower customer service costs
B. Avoiding the extra costs associated with operating Web site e-stores
C. Added ability to interest potential buyers in purchasing the company's products
D. Avoiding channel conflict
Answer:d
The advantages of a brick-and-click strategy include
A. Being able to attract bargain-hunting shoppers by selling the company's merchandise online at
lower prices than in traditional retail stores
B. Being able to offer a much wider product line than is stocked at brick-and-mortar stores
C. Low incremental investments to establish a Web site, the ability to access a wider customer
base and the ability to use existing distribution centers and/or company store locations for picking
orders from on-hand inventories and making deliveries
Answer:c
Two big appeals of a brick-and-click strategy are
A. Lower advertising costs and enhanced ability to charge lower prices than rivals
B. Economically expanding a company's geographic reach and giving existing and potential
customers another choice of how to communicate with the company, shop for company products,
make purchases or resolve customer service problems
C. Low incremental investments to establish a Web site and the ability of customers to use
existing company store locations to view and inspect items prior to purchase
Answer:b
A company that elects to use the Internet as its exclusive channel for accessing buyers must
address such strategic issues as
A. Whether it will have a broad or narrow product offering
B. How it will deliver unique value to buyers
C. How it will draw traffic to its Web site and then convert page views into revenues
D. Whether it will perform order fulfillment activities internally or outsource them
E. All of the above
Answer:e
Assuming a company elects to use the Internet as its exclusive channel for accessing buyers, then
which of the following is not one of the strategic issues that it will need to address?
A. Whether to pursue a competitive advantage based on low-costs, differentiation or more value
for the money
B. How to deliver unique value to buyers
C. How to draw traffic to its Web site and then convert page views into revenues
D. Whether to employ a forward integration strategy
Answer:d
Being first to initiate a particular move can have a high payoff when
A. Pioneering helps build up a firm's image and reputation with buyers
B. First-time buyers remain strongly loyal to pioneering firms in making repeat purchases
C. Moving first can result in a cost advantage over rivals
D. Moving first can constitute a preemptive strike, making imitation extra hard or unlikely
E. All of these
Answer:e
In which of the following instances is being a first-mover not particularly advantageous?
A. When a pioneer is using a low-cost provider strategy
B. When buyers are not loyal to pioneering firms in making repeat purchases
C. When a pioneer is pursuing product innovation
Answer:b
Because when to make a strategic move can be just as important as what move to make, a
company's best option with respect to timing is
A. To be the first mover
B. To be a fast follower
C. To be a late mover (because it is cheaper and easier to imitate the successful moves of the
leaders and moving late allows a company to avoid the mistakes and costs associated with trying
to be a pioneer—first-mover disadvantages usually overwhelm first-mover advantages)
D. To be the last-mover—playing catch-up is usually fairly easily and nearly always much
cheaper than any other option
E. To carefully weigh the first-mover advantages against the first-mover disadvantages and act
accordingly
Answer:e
When the race among rivals for industry leadership is a marathon rather than a sprint,
A. It is best to be a fast follower rather than a first mover or a slow mover
B. Fast followers find it easy to leapfrog the pioneer with even better next-generation products of
their own
C. A slow mover may not be unduly penalized and first-mover advantages can be fleeting
Answer:c
First-mover disadvantages arise when
A. The costs of pioneering are much higher than being a follower and only negligible buyer
loyalty or cost savings accrue to the pioneer
B. Technological change is rapid and following rivals find it easy to leapfrog the pioneer with
next-generation products of their own
C. The pioneer's skills, know-how and products are easily copied or even bested by late movers
D. All of these
Answer:d
In which of the following cases are first-mover disadvantages not likely to arise?
A. When the costs of pioneering are much higher than being a follower and only negligible buyer
loyalty or cost savings accrue to the pioneer
B. When new infrastructure is needed before market demand can surge
C. When the pioneer's skills, know-how and products are easily copied or even bested by late
movers
Answer:b
The task of crafting corporate strategy for a diversified company encompasses
A. Picking the new industries to enter and deciding on the means of entry
B. Initiating actions to boost the combined performance of the businesses the firm has entered
C. Pursuing opportunities to leverage cross-business value chain relationships and strategic fits
into competitive advantage
D. Establishing investment priorities and steering corporate resources into the most attractive
business units
E. All of these
Answer:e
Which one of the following is not one of the elements of crafting corporate strategy for a
diversified company?
A. Picking new industries to enter and deciding on the means of entry
B. Choosing the appropriate value chain for each business the company has entered
C. Pursuing opportunities to leverage cross-business value chain relationships and strategic fits
into competitive advantage
Answer:b
Diversification merits strong consideration whenever a single-business company
A. Has integrated backward and forward as far as it can
B. Is faced with diminishing market opportunities and stagnating sales in its principal business
C. Has achieved industry leadership in its main line of business
Answer:b
Diversification ought to be considered when
A. A company's profits are being squeezed and it needs to increase its net profit margins and
return on investment
B. A company lacks sustainable competitive advantage in its present business
C. A company begins to encounter diminishing growth prospects in its mainstay business
Answer:c
Diversification becomes a relevant strategic option in all but which one of the following
situations?
A. When a company spots opportunities to expand into industries whose technologies and
products complement its present business
B. When a company is only earning a low profit margin in its principal business
C. When a company has a powerful and well-known brand name that can be transferred to the
products of other businesses and thereby used as a lever for driving up the sales and profits of
such businesses
Answer:b
Diversifying into new businesses is justifiable only if it
A. Results in increased profit margins and bigger total profits
B. Builds shareholder value
C. Helps acompany escape the rigors of competition in its present business
Answer:b
To create value for shareholders via diversification, a company must
A. Get into new businesses that are profitable
B. Diversify into industries that are growing rapidly
C. Spread its business risk across various industries by only acquiring firms that are strong
competitors in their respective industries
D. Diversify into businesses that can perform better under a single corporate umbrella than they
could perform operating as independent, stand-alone businesses
Answer:d
The three tests for judging whether a particular diversification move can create value for
shareholders are
A. The attractiveness test, the profitability test and the shareholder value test
B. The strategic fit test, the competitive advantage test and the return on investment test
C. The resource fit test, the profitability test and the shareholder value test
D. The attractiveness test, the cost-of-entry test and the better-off test
Answer:d
To test whether a particular diversification move has good prospects for creating added
shareholder value, corporate strategists should use
A. The profit test, the competitive strength test, the industry attractiveness test and the capital
gains test
B. The better-off test, the competitive advantage test, the profit expectations test and the
shareholder value test
C. The barrier to entry test, the competitive advantage test, the growth test and the stock price
effect test
D. The strategic fit test, the industry attractiveness test, the growth test, the dividend effect test
and the capital gains test
E. The attractiveness test, the cost of entry test and the better-off test
Answer:e
The attractiveness test for evaluating whether diversification into a particular industry is
likely to build shareholder value involves determining whether
A. Conditions in the target industry are sufficiently attractive to permit earning consistently good
profits and returns on investment
B. The potential diversification move will boost the company's competitive advantage in its
existing business
C. Shareholders will viewed the contemplated diversification move as attractive
Answer:a
The cost-of-entry test for evaluating whether diversification into a particular industry is
likely to build shareholder value involves
A. Determining whether a newly entered business presents opportunities to cost-efficiently
transfer competitively valuable skills or technology from one business to another
B. Determining whether the cost to enter the target industry will strain the company's credit rating
C. Considering whether a company's costs to enter the target industry are low enough to preserve
attractive profitability or so high that the potentials for good profitability and return on investment
are eroded
Answer:c
The better-off test for evaluating whether a particular diversification move is likely to
generate added value for shareholders involves
A. Assessing whether the diversification move will make the company better off because it will
produce a greater number of core competencies
B. Assessing whether the diversification move will make the company better off by improving its
balance sheet strength and credit rating
C. Assessing whether the diversification move will make the company better off by spreading
shareholder risks across a greater number of businesses and industries
D. Evaluating whether the diversification move will produce a 1 + 1 =3 outcome such that the
company's different businesses perform better together than apart and the whole ends up being
greater than the sum of the parts
Answer:d
Acquisition of an existing business is an attractive strategy option for entering a promising new
industry because it
A. Is an effective way to hurdle entry barriers, is usually quicker than trying to launch a brand-
new start-up operation and allows the acquirer to move directly to the task of building a strong
position in the target industry
B. Is less expensive than launching a new start-up operation, thus passing the cost-of-entry test
C. Is a less risky way of passing the attractiveness test
Answer:a
Internal start-up of a new business subsidiary can be a more attractive means of entering a
desirable new business than is acquiring an existing firm already in the targeted industry when
A. The costs associated with internal startup are less than the costs of buying an existing company
and the company has ample time and adequate resources to launch the new internal start-up
business from the ground up
B. There is a small pool of desirable acquisition candidates
C. The target industry is growing rapidly and no good joint venture partners are available
Answer:a
The most popular strategy for entering new businesses and accomplishing diversification is
A. Forming a joint venture with another company to enter the target industry
B. Internal startup
C. Acquisition of an existing business already in the chosen industry
Answer:c
A company can best accomplish diversification into new industries by
A. Outsourcing most of the value chain activities that have to be performed in the target
business/industry
B. Acquiring a company already operating in the target industry, creating a new subsidiary
internally to compete in the target industry or forming a joint venture with another company to
enter the target industry
C. Integrating forward or backward into the target industry
Answer:b
Which one of the following is not a factor that makes it appealing to diversify into a new
industry by forming an internal start-up subsidiary to enter and compete in the target
industry?
A. When internal entry is cheaper than entry via acquisition
B. When a company possesses the skills and resources to overcome entry barriers and there is
ample time to launch the business and compete effectively
C. When adding new production capacity will not adversely impact the supply demand balance in
the industry by creating oversupply conditions
D. When the industry is growing rapidly and the target industry is comprised of several relatively
large and well-established firms
Answer:d
Diversifying into a new industry by forming a new internal subsidiary to enter and compete
in the target industry is attractive when
A. All of the potential acquisition candidates are losing money
B. It is impractical to outsource most of the value chain activities that have to be performed in the
target business/industry
C. There is ample time to launch the new business from the ground up and entry barriers can be
hurdled at acceptable cost
Answer:c
A joint venture is an attractive way for a company to enter a new industry when
A. A firm is missing some essential skills or capabilities or resources and needs a partner to
supply the missing expertise and competencies or fill the resource gaps
B. It needs access to economies of scope and good financial fits in order to be cost-competitive
C. It is uneconomical for the firm to achieve economies of scope on its own initiative
Answer:a
A joint venture is an attractive way for a company to enter a new industry when
A. The pool of attractive acquisition candidates in the target industry is relatively small
B. It needs better access to economies of scope in order to be cost-competitive
C. The industry is growing slowly and adding too much capacity too soon could create
oversupply conditions
D. The firm has no prior experience with diversification and the industry is on the verge of
explosive growth
E. The opportunity is too risky or complex for a company to pursue alone, a company lacks some
important resources or competencies and needs a partner to supply them and/or a company needs
a local partner in order to enter a desirable business in a foreign country
Answer:e
The essential requirement for different businesses to be "related" is that
A. Their value chains possess competitively valuable cross-business relationships
B. The products of the different businesses are bought by much the same types of buyers
C. The products of the different businesses are sold in the same types of retail stores
Answer:a
Businesses are said to be "related" when
A. They have several key suppliers and several key customers in common
B. Their value chains have the same number of primary activities
C. Their products are both sold through retailers
D. Their value chains possess competitively valuable cross-business relationships that present
opportunities to transfer resources from one business to another, combine similar activities and
reduce costs, share use of a well-known brand name and/or create mutually useful resource
strengths and capabilities
Answer:d
Which of the following is the best example of related diversification?
A. An airline firm acquiring a rent-a-car company
B. A greeting card manufacturer deciding to open a chain of stores to retail its lines of greeting
cards
C. A manufacturer of ready-to-eat cereals acquiring a producer of cake mixes and baking
products
Answer:c
Which of the following is the best example of related diversification?
A. A beer brewer acquiring a maker of aluminum cans
B. A manufacturer of canoes diversifying into the production of tennis rackets
C. A PC producer deciding to diversify into producing and marketing its own brands of MP3
players and LCD TVs
Answer:c
A big advantage of related diversification is that
A. It offers ways for a firm to realize 1 + 1 = 3 benefits because the value chains of the different
businesses present competitively valuable cross-business relationships
B. It is less capital intensive and usually more profitable than unrelated diversification
C. It involves diversifying into industries having the same kinds of key success factors
Answer:a
Which of the following is not one of the appeals of related diversification?
A. It can offer opportunities for transferring expertise, technology and other capabilities from one
business to another
B. It can offer opportunities for reducing costs and for leveraging use of a competitively powerful
brand name
C. Related diversification is particularly well-suited for the use of offensive strategies and
capturing valuable financial fits
Answer:c
Which of the following is an important appeal of a related diversification strategy?
A. Related diversification is an effective way of capturing valuable financial fit benefits
B. Related diversification offers more competitive advantage potential than does unrelated
diversification
C. Related diversification offers significant opportunities to strongly differentiate a company's
product offerings from those of rivals
Answer:c
A company pursuing a related diversification strategy would likely address the issue of what
additional industries/businesses to diversify into by
A. Locating businesses with well-known brand names and large market shares
B. Identifying industries with the least competitive intensity
C. Identifying an attractive industry whose value chain has good strategic fit with one or more of
the firm's present businesses
Answer:c
One strategic fit-based approach to related diversification would be to
A. Diversify into new industries that present opportunities to transfer competitively valuable
expertise, technological know-how or other skills/capabilities from one sister business to another
B. Diversify into those industries where the same kinds of driving forces and competitive forces
prevail, thus allowing use of much the same competitive strategy in all of the business a company
is in
C. Acquire rival firms that have broader product lines so as to give the company access to a wider
range of buyer groups
Answer:a
The best place to look for cross-business strategic fits is
A. In R&D and technology activities
B. In supply chain activities
C. In sales and marketing activities
D. In production and distribution activities
E. Anywhere along the respective value chains of related businesses—no one place is best
Answer:e
Cross-business strategic fits can be found
A. In unrelated as well as related businesses and in the markets of foreign countries as well as in
domestic markets
B. Only in businesses whose products/services satisfy the same general types of buyer needs and
preferences
C. Mainly in either technology related activities or sales and marketing activities
D. Chiefly in the R&D portions of the value chains of unrelated businesses
E. Anywhere along the respective value chains of related businesses
Answer:e
Which of the following statements about cross-business strategic fit in a diversified
enterprise is not accurate?
A. Strategic fit between two businesses exists when the management know-how accumulated in
one business is transferable to the other
B. Strategic fit exists when two businesses present opportunities to economize on marketing,
selling and distribution costs
C. Competitively valuable cross-business strategic fits are what enable related diversification to
produce a 1 + 1 = 3 performance outcome
D. Strategic fit is primarily a byproduct of unrelated diversification and exists when the value
chain activities of unrelated businesses possess economies of scope and good financial fit
Answer:d
Economies of scope
A. Are cost reductions that flow from operating in multiple businesses
B. Arise only from strategic fit relationships in the production portions of the value chains of
sister businesses
C. Are more associated with unrelated diversification than related diversification
Answer:a
Economies of scope
A. Stem from the cost-saving efficiencies of operating over a wider geographic area
B. Have to do with the cost-saving efficiencies of distributing a firm's product through many
different distribution channels simultaneously
C. Stem from cost-saving strategic fits along the value chains of related businesses
Answer:c
Which of the following best illustrates an economy of scope?
A. Being able to eliminate or reduce costs by combining related value-chain activities of different
businesses into a single operation
B. Being able to eliminate or reduce costs by performing all of the value chain activities of related
sister businesses at the same location
C. Being able to eliminate or reduce costs by extending the firm's scope of operations over a
wider geographic area
Answer:c
What makes related diversification an attractive strategy is
A. The ability to broaden the company's product line
B. The opportunity to convert cross-business strategic fits into competitive advantages over
business rivals whose operations don't offer comparable strategic fit benefits
C. The potential for improving the stability of the company's financial performance
Answer:b
) A diversified company that leverages the strategic fits of its related businesses into
competitive advantage
A. Has a distinctive competence in its related businesses
B. Has a clear path to achieving 1 + 1 = 3 gains in shareholder value
C. Has a clear path to global market leadership in the industries where it has related businesses
Answer:b
A strategy of diversifying into unrelated businesses
A. Is aimed at achieving good financial fit (whereas related diversification aims at good strategic
fit)
B. Is the best way for a company to pass the attractiveness test in choosing which types of
businesses/industries to enter
C. Discounts the value and importance of strategic fit benefits and instead focuses on building
and managing a group of businesses capable of delivering good financial performance
irrespective of the industries these businesses are in
Answer:c
Different businesses are said to be "unrelated" when
A. They are in different industries
B. The products of the different businesses are not bought by the same types of buyers or sold in
the same types of retail stores
C. The products of the different businesses satisfy different buyer needs
D. The businesses have different supply chains and different types of suppliers
E. There is an absence of competitively valuable strategic fits between their respective value
chains
Answer:e
The basic premise of unrelated diversification is that
A. The least risky way to diversify is to seek out businesses that are leaders in their respective
industry
B. The best companies to acquire are those that offer the greatest economies of scope rather than
the greatest economies of scale
C. The best way to build shareholder value is to acquire businesses with strong cross-business
financial fit
D. Any company that can be acquired on good financial terms and that has satisfactory growth
and earnings potential represents a good acquisition and a good business opportunity
Answer:d
Which of the following is the best example of unrelated diversification?
A. A chain of radio stations acquiring TV stations
B. An electrical equipment manufacturer acquiring an athletic footwear company
C. A producer of canned soups acquiring a maker of breakfast cereals
Answer:b
In companies pursuing a strategy of unrelated diversification,
A. The main basis for competitive advantage and improved shareholder value is increased ability
to achieve economies of scope
B. Each business is on its own in trying to build a competitive edge and the consolidated
performance of the businesses is likely to be no better than the sum of what the individual
businesses could achieve if they were independent
C. There is a strong chance that the combined competitive advantages of the various businesses
will produce a 1 + 1 = 3 performance outcome as opposed to just a 1 + 1 = 2 performance
outcome
Answer:b
In diversified companies with unrelated businesses, the strategic attention of top executives
tends to be focused on
A. Screening acquisition candidates and evaluating the pros and cons or keeping or divesting
existing businesses
B. Identifying acquisition candidates that can pass the better-off test
C. Identifying opportunities to achieve greater economies of scope
Answer:a
Which of the following is not likely to command much strategic attention from the top
executives of companies pursuing an unrelated diversification strategy?
A. Acquiring new businesses with attractive profit prospects
B. Whether existing businesses should be retained or divested based on their ability to meet
corporate targets for profit and returns on investment
C. Looking for new businesses that present good opportunities for achieving economies of scope
Answer:c
Which of the following merits top priority attention by top executives of companies
pursuing an unrelated diversification strategy?
A. Acquiring new businesses that utilize much the same technology as existing businesses
B. Whether to keep or divest businesses whose competitive strategies do not match the overall
competitive strategy of the corporation
C. Looking for new businesses having attractive distribution-related and customer-related
strategic fits with existing businesses
D. Identifying acquisition candidates that are financially distressed, can be acquired at a bargain
price and whose operations can, in management's opinion, be turned around with the aid of the
parent company's financial resources and managerial know-how
Answer:d
With an unrelated diversification strategy, the types of companies that make particularly
attractive acquisition targets are
A. Financially distressed companies with good turnaround potential, undervalued companies that
can be acquired at a bargain price and companies that have bright growth prospects but are short
on investment capital
B. Companies offering the biggest potential to reduce labor costs
C. Cash cow businesses with excellent financial fit
Answer:a
A key issue in companies pursuing an unrelated diversification strategy is
A. How wide a net to cast in building a portfolio of unrelated businesses
B. Whether to keep or divest businesses whose technological approaches do not match the overall
technology and R&D strategy of the corporation
C. How quickly to divest businesses whose competitive strategies do not closely match the
competitive strategies of sister businesses
Answer:a
One of the chief advantages of an unrelated diversification strategy is that it
A. Expands a firm's competitive advantage opportunities to include a wider array of businesses
B. Spreads the stockholders' risks across a group of truly diverse businesses
C. Increases strategic fit opportunities and the potential for a 1 + 1 =3 outcome on the bottom line
Answer:b

Test-4
Which of the following is not one of the appeals of an unrelated diversification strategy?
A. The ability to spread business risk over truly diverse businesses (as compared to related
diversification which is limited to spreading risk only among businesses with strategic fit)
B. An ability to employ the company's financial resources to maximum advantage by investing in
whatever industries/businesses offer the best profit prospects
C. Superior top management ability to cope with the wide variety of problems encountered in
managing a broadly diversified group of businesses
Answer:c
Which of the following is not among the disadvantages and managerial problems
encountered by companies pursuing unrelated diversification strategies?
A. Being without the added source of competitive advantage that cross-business strategic fit
provides
B. Spreading corporate resources too thinly over too many different lines of business
C. The strain it places on corporate-level management in trying to stay on top of fresh industry
developments and the strategic progress and plans of each business subsidiary
D. Ending up with too many cash hog businesses (as compared to related diversification
strategies where cash hog businesses are rare)
Answer:d
The two biggest drawbacks or disadvantages of unrelated diversification are
A. The difficulties of passing the cost-of-entry test and the ease with which top managers can
make the mistake of diversifying into businesses where competition is too intense
B. The difficulties of capturing financial fit and having insufficient financial resources to spread
business risk across many different lines of business
C. Demanding managerial requirements and being without the added source of competitive
advantage that cross-business strategic fit provides
Answer:c
The two biggest drawbacks or disadvantages of unrelated diversification are
A. Underemphasizing the importance of resource fit and the strong likelihood of diversifying into
businesses that top management does not know all that much about
B. Insufficient cash flows to finance so many different lines of business and a lack of uniformity
among the strategies of the businesses it has diversified into
C. Volatile sales and profits and making the mistake of diversifying into too many cash cow
businesses
D. The difficulties of competently managing many different businesses and being without the
added source of competitive advantage that cross-business strategic fit provides
Answer:d
A fundamental weakness of unrelated diversification is
A. The tendency of corporate managers to place too much emphasis on investing in cash cows
rather than promising cash hogs
B. Reducing a company's access to economies of scope
C. Greater potential for there to be too much diversity among the competitive strategies of the
various business subsidiaries
D. The greater risk of getting trapped in tough struggles with strong competitors
E. That the greater the number of businesses a company is in and the more diverse they are, the
harder it is for corporate managers to stay abreast of what's happening in each industry and each
subsidiary, know much about the problems and issues each business
Answer:d
A fundamental weakness of unrelated diversification is
A. The tendency of corporate managers to place too much emphasis on investing in cash cows
rather than promising cash hogs
B. Reducing a company's access to economies of scope
C. Greater potential for there to be too much diversity among the competitive strategies of the
various business subsidiaries
D. The greater risk of getting trapped in tough struggles with strong competitors
E. That the greater the number of businesses a company is in and the more diverse they are, the
harder it is for corporate managers to stay abreast of what's happening in each industry and each
subsidiary, know much about the problems and issues each business confronts and know what to
do if a business unit stumbles and its results suddenly head downhill
Answer:e
To identify a diversified company's strategy, one should consider such factors as
A. The extent to which the firm is broadly or narrowly diversified, whether it is pursuing related
or unrelated diversification (or a mixture of both) and the recent moves it has made to divest
businesses, acquire new businesses and strengthen the positions of existing businesses
B. Whether the company is focusing on "milking its cash cows" or "feeding its cash hogs."
C. The technological proficiencies, labor skill requirements and functional area strategies
characterizing each of the firm's businesses
Answer:a
When identifying a diversified company's present corporate strategy, which of the following
would not be something to look for?
A. Recent moves to build positions in new industries
B. The company's approach to allocating investment capital and resources across its present
businesses
C. Recent management actions to strengthen the company's positions in existing businesses
D. Recent moves to divest weak or unattractive business units
E. Actions over the past few years to substitute global strategies for multi-country strategies in
one or more business units
Answer:e
Which of the following is not a major consideration in evaluating the pluses and minuses of a
diversified company's strategy?
A. Checking whether the company's resources fit the requirements of its present business lineup
B. Scrutinizing each industry/business to determine where driving forces are strongest/weakest
and how many profitable strategic groups the company has diversified into
C. Ranking the performance prospects of the various businesses from best to worst and
determining what the corporate parent's priorities should be in allocating resources to its different
businesses
Answer:b
Evaluating a diversified company's corporate strategy and critiquing the pluses and minuses of its
business lineup involves
A. A SWOT analysis of each industry in which the firm has a business interest
B. Applying the cost-of-entry test, the better-off test, the profitability test and the shareholder
value test to each business and industry represented in the company's business portfolio
C. Evaluating the strategic fits and resource fits among the various sister businesses and deciding
what priority to give each of the company's business units in allocating resources
Answer:c
Which one of the following is not an important aspect of evaluating the merits of a
diversified company's strategy?
A. Assessing the competitive strength of each business the company has diversified into
B. Determining which business units are cash cows and which ones are cash hogs and then
evaluating how soon the company's cash hogs can be transformed into cash cows
C. Evaluating the strategic fits and resource fits among the various sister businesses
Answer:b
Which of the following is not generally something that ought to be considered in evaluating
the attractiveness of a diversified company's business makeup?
A. Market size and projected growth rate, industry profitability and the intensity of competition
B. Industry uncertainty and business risk
C. The frequency with which strategic alliances and collaborative partnerships are used in each
industry, the extent to which firms in the industry utilize outsourcing and whether the industries a
company has diversified into have common key success factors
Answer:c
Assessments of the long-term attractiveness of each industry represented in a diversified
company's lineup of businesses should be based on
A. A complete value-chain analysis of each industry
B. Whether the industries have the same kinds of driving forces
C. How many companies in each industry are making money and how many are losing money
D. Quantitative industry attractiveness scores derived from rating each industry on several
relevant attractiveness measures (weighted according to their relative importance in determining
overall attractiveness)
Answer:d
The chief purpose of calculating quantitative industry attractiveness scores for each
industry a company has diversified into is to
A. Determine which industry is the biggest and fastest growing
B. Get in position to rank the industries from most competitive to least competitive
C. Provide a basis for drawing analysis-based conclusions about the attractiveness of the
industries a company has diversified into, both individually and as a group and further to provide
an indication of which industries offer the best and worst long-term prospects
Answer:c
A weighted industry attractiveness assessment is generally analytically superior to an
unweighted assessment because
A. A weighted ranking identifies which industries offer the best/worst long-term profit prospects
B. An unweighted ranking doesn't discriminate between strong and weak industry driving forces
and industry competitive forces
C. It does a more accurate job of singling out which industry key success factors are the most
important
D. An unweighted ranking doesn't help identify which industries have the easiest and hardest
value chains to execute
E. The various measures of attractiveness are not likely to be equally important in determining
overall attractiveness
Answer:e
When industry attractiveness ratings are calculated for each of the industries a multi-business
company has diversified into, the results help indicate
A. Which industries appear to be the best and worst ones to be in and the attractiveness of all the
industries as a group from the standpoint of the company's long-term performance
B. Which industries have attractive key success factors and which industries have unattractive
key success factors
C. Which industries have the biggest economies of scale and which industries have the greatest
economies of scope and the overall potential for cost reduction in the industries as a group
Answer:a
Calculating quantitative attractiveness ratings for the industries a diversified company has
invested in
A. Allows a company to rank the competitive advantage opportunities in each industry from best
to worst
B. Helps identify which industries have the best/worst prospects for revenue growth
C. Identifies which industry has the best/worst value chain from the standpoint of cost reduction
potential
D. Provides a basis for deciding whether a diversified company has good prospects for growth
and profitability, given the attractiveness ratings of the industries in which it has business
interests
Answer:d
Assessments of how a diversified company's subsidiaries compare in competitive strength should
be based on such factors as
A. Vulnerability to seasonal and cyclical downturns, vulnerability to driving forces and
vulnerability to fluctuating interest rates and exchange rates
B. Relative market share, ability to match or beat rivals on key product attributes, brand image
and reputation, costs relative to competitors and ability to benefit from strategic fits with sister
businesses
C. The appeal of its strategy, relative number of competitive capabilities, the number of products
in each businesses product line, which businesses have the highest/lowest market shares and
which businesses earn the highest/lowest profits before taxes
Answer:b
The basic purpose of calculating competitive strength scores for each of a diversified
company's business units is to
A. Rank the business unit from best to worst in terms of potential for cost reduction and profit
margin improvement
B. Determine how strongly positioned each business unit is in its industry and the extent to which
it already is or can become a strong market contender
C. Determine which business unit has the greatest number of resource strengths, competencies
and competitive capabilities and which one has the least
Answer:b
Using relative market share to assess a business's competitive strength is analytically superior to
straight percentage measures of market share because relative market share
A. Is a better measure of a business's potential for increased sales and profitability
B. Is a better indicator of competitive strength than is a simple percentage measure of market
share—for instance, a company with a 20% share is in a much stronger competitive position if its
largest rival has a share of 10% (which means its relative market share is 2.0) than it is if its
largest rival has a 30% market share (in which case the company's relative market share is only
0.67)
Answer:b
A weighted competitive strength analysis of a diversified company's business units is
conceptually stronger than an unweighted analysis because
A. It provides a more accurate assessment of the strength of cross-business strategic fits
B. It provides better indication of which business units have the best strategy (vis-à-vis the rival
in their respective industry)
C. The different measures of competitive strength are unlikely to be equally important
Answer:c
The value of determining the relative competitive strength of each business a company has
diversified into is
A. To have a quantitative basis for identifying which businesses have large/small competitive
advantages or competitive disadvantages vis-à-vis the rivals in their respective industries
B. To have a quantitative basis for rating them from strongest to weakest in terms of contributing
to the corporate parent's revenue growth
C. To compare resource strengths and weaknesses, business by business
D. To have a quantitative basis for rating them from strongest to weakest in contending for
market leadership in their respective industries
Answer:d
The nine-cell industry attractiveness-competitive strength matrix
A. Is useful for helping decide which businesses should have high, average and low priorities in
allocating corporate resources
B. Indicates which businesses are cash hogs and which are cash cows
C. Pinpoints what strategies are most appropriate for businesses positioned in the three top cells
of the matrix but is less clear about the best strategies for businesses positioned in the bottom six
cells
Answer:a
The most important strategy-making guidance that comes from drawing a 9-cell industry
attractiveness-competitive strength matrix is
A. Which businesses in the portfolio have the most potential for strategic fit and resource fit
B. Why cash cow businesses are more valuable than cash hog businesses
C. That corporate resources should be concentrated on those businesses enjoying both a higher
degree of industry attractiveness and competitive strength and that businesses having low
competitive strength in relatively unattractive industries should be looked at for possible
divestiture
Answer:c
One of the most significant contributions to strategy-making in diversified companies that
the 9-cell industry attractiveness/competitive strength matrix provides is
A. Identifying which businesses have strategies that should be continued, which business have
strategies that need fine-tuning and which businesses have strategies that need major overhaul
B. That businesses having the greatest competitive strength and positioned in the most attractive
industries should have the highest priority for corporate resource allocation and that competitively
weak businesses in relatively unattractive industries should have the lowest priority and perhaps
even be considered for divestiture
C. Pinpointing what strategies are most appropriate for businesses positioned in the four corners
of the matrix (although the matrix reveals little about the best strategies for businesses positioned
in the remainder of the matrix)
Answer:b
In a diversified company, a business subsidiary has more competitive advantage potential
when
A. It is a cash cow
B. It has value chain relationships with other business subsidiaries that present competitively
valuable opportunities to transfer skills or technology or intellectual capital from one business to
another, combine the performance of related activities and reduce costs, share use of a well-
respected brand name or collaborate to create new competitive capabilities
C. It is the company's biggest profit producer or is capable of becoming the biggest
Answer:b
Checking a diversified company's business portfolio for the competitive advantage potential of
cross-business strategic fits does not involve ascertaining
A. The extent to which sister business units have value chain match-ups that offer opportunities to
combine the performance of related value chain activities and reduce costs
B. The extent to which sister business units have value chain match-ups that offer opportunities to
transfer skills or technology or intellectual capital from one business to another
C. The extent to which sister business units have opportunities to share use of a well-respected
brand name
D. The extent to which sister business units have value chain match-ups that offer opportunities to
create new competitive capabilities or to leverage existing resources
E. Which business units are cash cows and which ones are cash hogs
Answer:e
Checking a diversified firm's business portfolio for the competitive advantage potential of cross-
business strategic fits entails consideration of
A. Whether the parent's company's competitive advantages are being deployed to maximum
advantage in each of its business units
B. Whether the competitive strategies employed in each business act to reinforce the competitive
power of the strategies employed in the company's other businesses
C. Whether the competitive strategies in each business possess good strategic fit with the parent
company's corporate strategy
D. The extent to which there are competitively valuable relationships between the value chains of
sister business units and what opportunities they present to reduce costs, share use of a potent
brand name, create competitively valuable new capabilities via cross-business collaboration or
transfer skills or technology or intellectual capital from one business to another
Answer:d
Which of the following is not a part of checking a diversified company's business units for cross-
business competitive advantage potential?
A. Ascertaining the extent to which sister business units have value chain match-ups that offer
opportunities to combine the performance of related value chain activities and reduce costs
B. Ascertaining the extent to which sister business units have value chain match-ups that offer
opportunities to transfer skills or technology or intellectual capital from one business to another
C. Ascertaining the extent to which sister business units are making maximum use of the parent
company's competitive advantages
Answer:c
A diversified company's business units exhibit good resource fit when
A. Each business is a cash cow
B. A company has the resources to adequately support the requirements of its businesses as a
group without spreading itself too thin and when individual businesses add to a company's overall
strengths
C. Each business is sufficiently profitable to generate an attractive return on invested capital
Answer:b
The businesses in a diversified company's lineup exhibit good resource fit when
A. The resource requirements of each business exactly match the resources the company has
available
B. Individual businesses add to a company's resource strengths and when a company has the
resources to adequately support the requirements of its businesses as a group without spreading
itself too thin
C. Each business is generates just enough cash flow annually to fund its own capital requirements
and thus does not require cash infusions from the corporate parent
Answer:b
A "cash cow" type of business
A. Generates unusually high profits and returns on equity investment
B. Is so profitable that it has no long-term debt
C. Generates positive cash flows over and above its internal requirements, thus providing a
corporate parent with cash flows that can be used for financing new acquisitions, investing in
cash hog businesses and/or paying dividends
Answer:c
A "cash hog" type of business
A. Is one that is losing money and requires cash infusions from its corporate parent to continue
operations
B. Is one that generates cash flows that are too small to fully fund its operations and growth
C. Generates negative cash flows from internal operations and thus requires cash infusions from
its corporate parent to report a profit
Answer:b
The difference between a "cash-cow" business and a "cash hog" business is that
A. A cash cow business is making money whereas a cash hog business is losing money
B. A cash cow business generates enough profits to pay off long-term debt whereas a cash hog
business does not
C. A cash cow business generates positive retained earnings whereas a cash hog business
produces negative retained earnings
D. A cash cow business produces large internal cash flows over and above what is needed to build
and maintain the business whereas the internal cash flows of a cash hog business are too small to
fully fund its operating needs and capital requirements
Answer:d
The tests of whether a diversified company's businesses exhibit resource fit do not include
A. Whether the excess cash flows generated by cash cow businesses are sufficient to cover the
negative cash flows of its cash hog businesses
B. Whether a business adequately contributes to achieving the corporate parent's performance
targets
C. Whether the company has adequate financial strength to fund its different businesses and
maintain a healthy credit rating
D. Whether the corporate parent has sufficient cash to fund the needs of its individual businesses
and pay dividends to shareholders without having to borrow money
Answer:d
Which one of the following is not part of the task of checking a diversified company's business
line-up for adequate resource fit?
A. Determining whether the excess cash flows generated by cash cow businesses are sufficient to
cover the negative cash flows of its cash hog businesses
B. Determining whether recently acquired businesses are acting to strengthen a company's
resource base and competitive capabilities or whether they are causing its competitive and
managerial resources to be stretched too thinly across its businesses (sometimes newly-acquired
businesses soak up a disproportionate share of management's time and put a strain on other
company resources)
C. Determining whether some business units have value chain match-ups that offer opportunities
to transfer skills or technology or intellectual capital from one business to another
Answer:c
Which one of the following is not a particularly relevant consideration in deciding what the
priorities should be for allocating resources to the various businesses of a diversified company?
A. Whether and how corporate resources and capabilities can be used to enhance the
competitiveness of particular business units
B. What competitive strategy the business is presently using
C. Whether a business exhibits good strategic fit and resource fit with sister businesses
Answer:b
Which one of the following is the best guideline for deciding what the priorities should be for
allocating resources to the various businesses of a diversified company?
A. Businesses with high industry attractiveness ratings should be given top priority and those
with low industry attractiveness ratings should be given low priority
B. Business subsidiaries with the brightest profit and growth prospects and solid strategic and
resource fits generally should head the list for corporate resource support
C. The positions of each business in the nine-cell attractiveness-strength matrix should govern
resource allocation
Answer:b
Which one of the following is not a reasonable option for deploying a diversified company's
financial resources?
A. Making acquisitions to establish positions in new businesses or to complement existing
businesses
B. Concentrating most of a company's financial resources in cash cow businesses and allocating
little or no additional resources to cash hog businesses until they show enough strength to
generate positive cash flows
C. Funding long-range R&D ventures aimed at opening market opportunities in new or existing
businesses
Answer:b
The strategic options to improve a diversified company's overall performance do not include
which of the following categories of actions?
A. Broadening the company's business scope by making new acquisitions in new industries
B. Increasing dividend payments to shareholders and/or repurchasing shares of the company's
stock
C. Restructuring the company's business lineup and putting a whole new face on the company's
business makeup
Answer:b
Once a company has diversified into a collection of related or unrelated businesses and
concludes that some strategy adjustments are needed, which one of the following is not one
of the main strategy options that a company can pursue?
A. Pursue multinational diversification
B. Restructure the company's business lineup
C. Craft new initiatives to build/enhance the reputation of the company's brand name
Answer:c
Retrenching to a narrower diversification base
A. Is usually the most attractive long-run strategy for a broadly diversified company confronted
with recession, high interest rates, mounting competitive pressures in several of its businesses and
sluggish growth
B. Has the advantage of focusing a diversified firm's energies on building strong positions in a
few core businesses rather the stretching its resources and managerial attention too thinly across
many businesses
C. Is an attractive strategy option for revamping a diverse business lineup that lacks strong cross-
business financial fit
Answer:b
In which of the following instances is retrenching to a narrower diversification base not
likely to be an attractive or advisable strategy for a diversified company?
A. When a diversified company has struggled to make certain businesses attractively profitable
B. When a diversified company has too many cash cows
C. When one or more businesses are cash hogs with questionable long-term potential
Answer:b
Strategies to restructure a diversified company's business lineup involves
A. Revamping the value chains of each of a diversified company's businesses
B. Focusing on restoring the profitability of its money-losing businesses and thereby improving
the company's overall profitability
C. Revamping the strategies of its different businesses, especially those that are performing
poorly
D. Divesting some businesses and acquiring new ones so as to put a new face on a diversified
company's business makeup
Answer:d
Corporate restructuring strategies
A. Involve making radical changes in diversified company's business lineup, divesting some
businesses and acquiring new ones so as to put a new face on the company's business lineup
B. Entails reducing the scope of diversification to a smaller number of businesses
C. Entail selling off marginal businesses to free up resources for redeployment to the remaining
businesses
Answer:a
What sets a multinational diversification strategy apart from other diversification strategies
is
A. The presence of extra degrees of strategic fit and more economies of scope
B. The potential to have a higher degree of technological expertise
C. A diversity of businesses and a diversity of national markets
Answer:c
The sources of a competitive advantage for a diversified multinational corporation do not
include
A. Transferring competitively valuable resources from one business to another and one country to
another
B. The ability to exploit opportunities for both cross-business and cross-country collaboration and
strategic coordination
C. Leveraging use of a well-known and competitively powerful brand name
D. Pursuing cross-business economy of scope opportunities and striving to fully capture scale
economies
E. Trying to maximize the number of cash cow businesses and minimize the number of cash hog
businesses
Answer:e
Which one of the following is not a way for a company to build competitive advantage by
pursuing a multinational diversification strategy?
A. Fully capturing economies of scale and experience curve effects as well as cross-business
economies of scope
B. Using cross-business or cross-country market subsidization to outcompete rivals
C. Fully capturing both cross-business financial fits and cross-country financial fits
Answer:c

Test-5 ​
1. A sustained or sustainable competitive advantage requires that:
a. the value creating strategy be in a formulation stage.
b. competitors be simultaneously implementing the strategy.
c. other companies not be able to duplicate the strategy.
d. average returns be earned by the company.
Answer: c. other companies not be able to duplicate the strategy.
2. Investors in a company judge the adequacy of the returns on their investment in
relation to:
a. the returns on other investments of similar risk..
b. the stock market's overall performance.
c. the initial size of the investment.
d. the prime interest rate.
Answer: a. the returns on other investments of similar risk..
3. The strategic management process is:
a. a set of activities that is guaranteed to prevent organizational failure.
b. a process concerned with a firm's resources, capabilities, and competencies, but not the
conditions in its external environment.
c. a set of activities that to date have not been used successfully in the not-for-profit
sector.
d. a dynamic process involving the full set of commitments, decisions, and actions related
to the firm.
Answer: d. a dynamic process involving the full set of commitments, decisions, and
actions related to the firm.
4. Which of the following is NOT an assumption of the Industrial Organization, or
I/O, model?
a. Organizational decision makers are rational and committed to acting in the firm's best
interests.
b. Resources to implement strategies are not highly mobile across firms.
c. The external environment is assumed to impose pressures and constraints that
determine the strategies that result in superior performance.
d. Firms in given industries, or given industry segments, are assumed to control similar
strategically relevant resources.
Answer: d. Firms in given industries, or given industry segments, are assumed to control
similar strategically relevant resources.
5. Which of the following is NOT an assumption of the resource-based model?
a. Each firm is a unique collection of resources and capabilities.
b. All firms possess the same strategically relevant resources.
c. Resources are not highly mobile across firms.
d. Firms acquire different resources and capabilities over time.
Answer: b. All firms possess the same strategically relevant resources.
6. In contrast to the industrial organization model, in a resource-based model, which
of the following factors would be considered a key to organizational success?
a. unique market niche.
b. weak competition.
c. economies of scale.
d. loyal employees.
Answer: d. loyal employees.
7. The resource-based model of the firm argues that:
a. all resources have the potential to be the basis of sustained competitive
advantage.
b. resources are not a source of potential competitive advantage.
c. the key to competitive success is the structure of the industry in which the firm
competes.
d. resources that are valuable, rare, costly to imitate, and non-substitutable form the basis
of a firm's core competencies.
Answer: d. resources that are valuable, rare, costly to imitate, and non-substitutable form
the basis of a firm's core competencies.
8. The I/O model and the resource-based view of the firm suggest conditions that
firms should study in order to:
a. compete in domestic but not international markets.
b. examine strategic outputs achieved mainly in the last 5-year period.
c. engage in different sets of competitive dynamics.
d. develop the most effective strategy.
Answer: d. develop the most effective strategy.
9. Strategic mission:
a. is a statement of a firm's unique purpose and scope of operations.
b. is an internally-focused affirmation of the organization's societal and ethical goals.
c. does not limit the firm by specifying the industry in which the firm intends to compete.
d. is developed by a firm before the firm develops its strategic intent.
Answer: a. is a statement of a firm's unique purpose and scope of operations.
10. The interests of an organization's stakeholders often conflict, and the
organization must prioritize its stakeholders because it cannot satisfy them all. The
________ is the most critical criterion in prioritizing stakeholders.
a. power of each stakeholder
b. urgency of satisfying each stakeholder
c. importance of each stakeholder to the firm
d. influence of each stakeholder
Answer: a. power of each stakeholder

1. The __________ environment is composed of elements in the broader society that can
influence an industry and the firms within it.
a. general
b. competitor
c. sociocultural
d. industry
Answer: a. general
2. The environmental segments that comprise the general environment typically will
NOT include:
a. demographic factors.
b. sociocultural factors.
c. substitute products or services.
d. technological factors.
Answer: c. substitute products or services.
3. Which of the following is an opportunity for an entrepreneur who wishes to open
a business doing therapeutic massage in his small community?
a. the average age of the population in his community is high
b. the level of unemployment in his community is high
c. a chiropractor and two independent physical therapists located in his community
d. the average income level of the population in his community is low
Answer: c. a chiropractor and two independent physical therapists located in his
community
4. The economic environment refers to:
a. the nature and direction of the economy in which a firm competes or may compete.
b. the economic outlook of the world provided by the World Bank.
c. an analysis of how the environmental movement and world economy interact.
d. an analysis of how new environmental regulations will affect our economy.
Answer: a. the nature and direction of the economy in which a firm competes or may
compete.
5. An industry is defined as:
a. a group of firms producing the same item.
b. firms producing items that sell through the same distribution channels.
c. firms that have the same seven digit standard industrial code.
d. a group of firms producing products that are close substitutes.
Answer: d. a group of firms producing products that are close substitutes.
6. Which of the following is NOT an entry barrier to an industry?
a. expected competitor retaliation
b. economies of scale
c. customer product loyalty
d. bargaining power of suppliers
Answer: d. bargaining power of suppliers
7. Switching costs refer to the:
a. cost to a producer to exchange equipment in a facility when new technologies emerge.
b. cost of changing the firm's strategic group.
c. one-time costs suppliers incur when selling to a different customer.
d. one-time costs customers incur when buying from a different supplier
Answer: d. one-time costs customers incur when buying from a different supplier
8. Suppliers are powerful when:
a. satisfactory substitutes are available.
b. they sell a commodity product.
c. they offer a credible threat of forward integration.
d. they are in a highly fragmented industry.
Answer: c. they offer a credible threat of forward integration.
9. Buyers are powerful when:
a. there is not a threat of backward integration.
b. they are not a significant purchaser of the supplier's output.
c. there are no switching costs.
d. the buyers' industry is fragmented.
Answer: c. there are no switching costs.
10. Upper limits on the prices a firm can charge are impacted by:
a. expected retaliation from competitors.
b. the cost of substitute products.
c. variable costs of production.
d. customers' high switching costs
Answer: b. the cost of substitute products.

1. As defined in the text, resources:

a. are concrete sources of value.
b. are easily identified.
c. have two categories: generic and unique.
d. are the source of the firm's capabilities.
Answer: d. are the source of the firm's capabilities.
2. Tangible resources include:
a. assets that are people dependent such as know-how.
b. assets that can be seen and quantified.
c. organizational culture.
d. a firm's reputation.
Answer: b. assets that can be seen and quantified.
3. Intangible assets include:
a. the firm's reputation.
b. a firm's borrowing capacity.
c. depreciated capital assets.
d. manufacturing facilities.
Answer: a. the firm's reputation.
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4. Compared to tangible resources, intangible resources are:
a. of less strategic value to the firm.
b. not the focus of strategic analysis.
c. a more potent source of competitive advantage.
d. more likely to be reflected on the firm's balance sheet.
Answer: c. a more potent source of competitive advantage.
5. Which of the following is a true statement about capabilities?
a. Capabilities emerge over time through complex interactions of tangible and intangible
resources.
b. Valuable capabilities are based almost entirely on tangible resources.
c. Capabilities based on human capital are more vulnerable to obsolescence than other intangible
capabilities because of the tendency for employee knowledge to become outdated.
d. The link between firm financial performance and capabilities is dependent on whether the
capabilities are based on tangible or intangible resources.
Answer: a. Capabilities emerge over time through complex interactions of tangible and intangible
resources
6. What is the job of a Chief Learning Officer?
a. implementing employee training and development programs
b. educating customers about the firm's products
c. developing an environment in which knowledge is widespread among employees
d. establishing programs to promote education in the community
Answer: c .developing an environment in which knowledge is widespread among
employees
7. A major department store chain has a strict policy of banning photographs of its
sales floor or back room operations. It also does not allow academics to include it in
research studies for publication in research journals. In fact, some of its own top
managers refer to the store policies on secrecy as "verging on paranoid." These
policies indicate that the top management of the firm believes the organization's
core competencies are:
a. causally ambiguous.
b. unobservable.
c. imitable.
d. valuable.
Answer: c. imitable.
8. When a resource or capability is valuable, rare, costly to imitate, and
nonsubstitutable firms may obtain:
a. a temporary competitive advantage.
b. a complex competitive advantage.
c. competitive parity.
d. a sustainable competitive advantage.
Answer: d. a sustainable competitive advantage.
9. Costly-to-imitate capabilities can emerge for all of the following reasons
EXCEPT:
a. scientific transference.
b. social complexity
c. historical conditions
d. causal ambiguity
Answer: a. scientific transference.
An integrated and coordinated set of commitments and actions designed to exploit
core competencies and gain a competitive advantage in a specific product market is
a definition of:
a. business strategy.
b. core competencies.
c. sustained competitive advantage.
d. strategic mission.
Answer: a. business strategy.
In evaluating its customers, which of the following is NOT a relevant question?
a. How will core competencies meet the customer's needs?
b. Who is the customer?
c. What are the customers' needs?
d. How will our top management team interact with the customer?
Answer: d. How will our top management team interact with the customer?
Customer needs are related to the:
a. characteristics that can be used to subdivide a large market into segments.
b. set of values exhibited by a group of customers.
c. use of core competencies to implement a strategy.
d. benefits and features of a good or service that customers want to purchase.
Answer: d. benefits and features of a good or service that customers want to purchase.
Business-level strategies are concerned specifically with:
a. creating differences between the firm's position and its rivals.
b. the industries in which the firm will compete.
c. how functional areas will be organized within the firm.
d. how a business with multiple physical locations will operate one of those locations.
Answer: a. creating differences between the firm's position and its rivals.
A company using a narrow scope in its business strategy is:
a. following a cost leadership business strategy.
b. focusing on a broad array of geographic markets.
c. limiting the group of product segments served.
d. likely to earn only average returns.
Answer: c. limiting the group of product segments served.
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A cost leadership strategy provides goods or services with features that are:
a. acceptable to customers.
b. unique to the customer.
c. highly valued by the customer.
d. able to meet unique needs of the customer
Answer: a. acceptable to customers
When the costs of supplies increase in an industry, the low-cost leader may:
a. continue competing with rivals on the basis of product features.
b. lose customers as a result of price increases.
c. make it difficult for new entrants to the industry to achieve above-average returns.
d. be the only firm able to pay the higher prices and continue to earn average or above-
average returns.
Answer: d. be the only firm able to pay the higher prices and continue to earn average or
above- average returns.
The risks of a cost leadership strategy include:
a. becoming "stuck in the middle."
b. production and distribution processes becoming obsolete
c. the ability of competing firms to provide similar features in a product.
d. customers deciding the product isn't worth what the firm must charge for it.
Answer: b. production and distribution processes becoming obsolete
A firm successfully implementing a differentiation strategy would expect:
a. customers to be sensitive to price increases.
b. to charge premium prices.
c. customers to perceive the product as standard.
d. to automatically have high levels of power over suppliers.
Answer: b. to charge premium prices.
A differentiation strategy provides products that customers perceive as having:
a. acceptable features.
b. features of little value relative to the value provided by the low-cost leader's product.
c. features for which the customer will pay a low price.
d. features that are non-standardized for which they are willing to pay a premium.
Answer: d. features that are non-standardized for which they are willing to pay a
premium.
The differentiation strategy can be effective in controlling the power of rivalry with
existing competitors in an industry because:
a. customers will seek out the lowest cost product.
b. customers of non-differentiated products are sensitive to price increases.
c. customers are loyal to brands that are differentiated in meaningful ways.
d. the differentiation strategy benefits from rivalry.
Answer: c. customers are loyal to brands that are differentiated in meaningful ways.
When implementing a focus strategy, the firm seeks:
a. to be the lowest cost producer in an industry.
b. to offer products with unique features for which customers will pay a premium.
c. to avoid being stuck in the middle.
d. to serve the specialized needs of a market segment.
Answer: d. to serve the specialized needs of a market segment.
 ​
Test-6
1. Above-average returns are:
a. higher profits than the firm earned last year.
b. higher profits than the industry average over the last 10 years.
c. profits in excess of what an investor expects to earn from a historical pattern of performance of
the firm.
d. profits in excess of what an investor expects to earn from other investments with a similar level
of risk.
Answer: d. profits in excess of what an investor expects to earn from other investments with a
similar level of risk.
3. The strategic management process is
a. a set of activities that will assure a temporary advantage and average returns for the firm.
b. a decision-making activity concerned with a firm's internal resources, capabilities, and
competencies, independent of the conditions in its external environment.
c. a process directed by top-management with input from other stakeholders that seeks to achieve
above-average returns for investors through effective use of the organization's resources.
d. the full set of commitments, decisions, and actions required for the firm to achieve above-
average returns and strategic competitiveness.
Answer: d. the full set of commitments, decisions, and actions required for the firm to achieve
above-average returns and strategic competitiveness.
All of the following are assumptions of the industrial organization (I/O) model EXCEPT
a. Organizational decision makers are rational and committed to acting in the firm's best interests.
b. Resources to implement strategies are firm-specific and attached to firms over the long-term.
c. The external environment is assumed to impose pressures and constraints that determine the
strategies that result in above-average returns.
d. Firms in given industries, or given industry segments, are assumed to control similar
strategically relevant resources.
Answer: b. Resources to implement strategies are firm-specific and attached to firms over the
long-term.
All of the following are assumptions of the resource-based model EXCEPT
a. Each firm is a unique collection of resources and capabilities.
b. The industry's structural characteristics have little impact on a firm's performance over time.
c. Capabilities are highly mobile across firms.
d. Differences in resources and capabilities are the basis of competitive advantage.
Answer: c. Capabilities are highly mobile across firms.
In the resource-based model, which of the following factors would be considered a key to
organizational success?
a. unique market niche
b. weak competition
c. economies of scale
d. skilled employees
Answer: d. skilled employees
All of the following are resources of an organization EXCEPT
a. an hourly production employee's ability to catch subtle quality defects in products.
b. oil drilling rights in a promising region.
c. weak competitors in the industry.
d. a charity's endowment of $400 million.
Answer: c. weak competitors in the industry.
The resource-based model of the firm argues that
a. all resources have the potential to be the basis of sustained competitive advantage.
b. all capabilities can be a source of sustainable competitive advantage.
c. the key to competitive success is the structure of the industry in which the firm competes.
d. resources and capabilities that are valuable, rare, costly to imitate, and non-substitutable form
the basis of a firm's core competencies.
Answer: d. resources and capabilities that are valuable, rare, costly to imitate, and non-
substitutable form the basis of a firm's core competencies.
The goal of the organization's ____ is to capture the hearts and minds of employees,
challenge them, and evoke their emotions and dreams.
a. vision
b. mission
c. culture
d. strategy
Answer: a. vision
A firm's mission
a. is a statement of a firm's business in which it intends to compete and the customers which it
intends to serve.
b. is an internally-focused affirmation of the organization's financial, social, and ethical goals.
c. is mainly intended to emotionally inspire employees and other stakeholders.
d. is developed by a firm before the firm develops its vision.
Answer: a. is a statement of a firm's business in which it intends to compete and the customers
which it intends to serve.
The environmental segments that comprise the general environment typically will NOT
include
a. demographic factors.
b. sociocultural factors.
c. substitute products or services.
d. technological factors.
Answer: c. substitute products or services.
An analysis of the economic segment of the external environment would include all of the
following EXCEPT
a. interest rates.
b. international trade.
c. the strength of the U.S. dollar.
d. the move toward a contingent workforce.
Answer: d. the move toward a contingent workforce.
Product differentiation refers to the:
a. ability of the buyers of a product to negotiate a lower price.
b. response of incumbent firms to new entrants.
c. belief by customers that a product is unique.
d. fact that as more of a product is produced the cheaper it becomes per unit.
Answer: c. belief by customers that a product is unique.
Which of the following is NOT an entry barrier to an industry?
a. expected competitor retaliation
b. economies of scale
c. customer product loyalty
d. bargaining power of suppliers

Answer: d. bargaining power of suppliers

Switching costs refer to the:
a. cost to a producer to exchange equipment in a facility when new technologies emerge.
b. cost of changing the firm's strategic group.
c. one-time costs suppliers incur when selling to a different customer.
d. one-time costs customers incur when buying from a different supplier.
Answer: d. one-time costs customers incur when buying from a different supplier.
New entrants to an industry are more likely when (i.e., entry barriers are low when...)
a. it is difficult to gain access to distribution channels.
b. economies of scale in the industry are high.
c. product differentiation in the industry is low.
d. capital requirements in the industry are high.
Answer: c. product differentiation in the industry is low.
Suppliers are powerful when:
a. satisfactory substitutes are available.
b. they sell a commodity product.
c. they offer a credible threat of forward integration.
d. they are in a highly fragmented industry.
Answer: c. they offer a credible threat of forward integration.
The highest amount a firm can charge for its products is most directly affected by
a. expected retaliation from competitors.
b. the cost of substitute products.
c. variable costs of production.
d. customers' high switching costs.
Answer: b. the cost of substitute products.
All of the following are forces that create high rivalry within an industry EXCEPT
a. numerous or equally balanced competitors.
b. high fixed costs.
c. fast industry growth.
d. high storage costs.
Answer: c. fast industry growth.
According to the five factors model, an attractive industry would have all of the following
characteristics EXCEPT:
a. low barriers to entry.
b. suppliers with low bargaining power.
c. a moderate degree of rivalry among competitors.
d. few good product substitutes.
Answer: a. low barriers to entry.
Internal analysis enables a firm to determine what the firm
a. can do.
b. should do.
c. will do.
d. might do.
Answer: a. can do.
An external analysis enables a firm to determine what the firm
a. can do.
b. should do.
c. will do.
d. might do.
Answer: d. might do.
____ is/are the source of a firm's ____, which is/are the source of the firm's ____.
a. Resources, capabilities, core competencies
b. Capabilities, resources, core competencies
c. Capabilities, resources, above average returns
d. Core competencies, resources, competitive advantage
Answer: a. Resources, capabilities, core competencies
In the airline industry, frequent-flyer programs, ticket kiosks, and e-ticketing are all
examples of capabilities that are
a. rare.
b. causally ambiguous.
c. socially complex.
d. valuable.
Answer: d. valuable.
Compared to tangible resources, intangible resources are
a. of less strategic value to the firm.
b. not the focus of strategic analysis.
c. a more potent source of competitive advantage.
d. more likely to be reflected on the firm's balance sheet.
Answer: c. a more potent source of competitive advantage.
Which of the following is a true statement about capabilities?
a. Capabilities emerge over time through complex interactions of tangible and intangible
resources.
b. Valuable capabilities are based almost entirely on tangible resources.
c. Capabilities based on human capital are more vulnerable to obsolescence than other intangible
capabilities because of the tendency for employee knowledge to become outdated.
d. The link between firm financial performance and capabilities is dependent on whether the
capabilities are based on tangible or intangible resources.
Answer: a. Capabilities emerge over time through complex interactions of tangible and intangible
resources.
To be a core competency, a capability must satisfy all of the following criteria EXCEPT:
a. be technologically innovative.
b. be hard for competing firms to duplicate.
c. be without good substitutes.
d. be valuable to customers.
Answer: a. be technologically innovative.
Capabilities that other firms cannot develop easily are classified as
a. costly to imitate.
b. rare.
c. valuable.
d. nonsubstitutable.
Answer: a. costly to imitate.
Costly-to-imitate capabilities can emerge for all of the following reasons EXCEPT
a. lack of scientific transference.
b. social complexity.
c. unique historical conditions.
d. causal ambiguity.
Answer: a. lack of scientific transference.
Gamma, Inc., has struggled for industry dominance with Ardent, Inc., its main competitor,
for years. Gamma has gathered and analyzed large amounts of competitive intelligence
about Ardent. It has observed as much of the firm's internal functioning and technology as
it can legally, yet Gamma cannot understand why ABC has a competitive advantage over it.
The source of ABC's success is
a. impregnable.
b. causally ambiguous.
c. rationally obscure.
d. elusive.
Answer: b. causally ambiguous.
Firms that achieve competitive parity can expect to:
a. earn below-average returns.
b. earn average returns.
c. earn above-average returns.
d. initially earn above-average returns, declining to average returns.
Answer: b. earn average returns.
Business-level strategies detail commitments and actions taken to provide value to
customers and gain competitive advantage by exploiting core competencies in
a. the selection of industries in which the firm will compete.
b. specific product markets.
c. primary value chain activities.
d. particular geographic locations.
Answer: b. specific product markets.
The three dimensions of a firm's relationships with customers include all the following
EXCEPT
a. exclusiveness.
b. affiliation.
c. richness.
d. reach.
Answer: a. exclusiveness.
The effectiveness of any of the generic business-level strategies is contingent upon
a. customer needs and competitors' strategies.
b. the match between the opportunities and threats in its external market and the strengths and
weaknesses of its internal environment.
c. the trends in the general consumer base and the robustness of the global and industry economy.
d. the firm's competitive scope and its competitive advantage.
Answer: b. the match between the opportunities and threats in its external market and the
strengths and weaknesses of its internal environment.
Business-level strategies are concerned specifically with:
a. creating differences between the firm's position and its rivals.
b. selecting the industries in which the firm will compete.
c. how functional areas will be organized within the firm.
d. how a business with multiple physical locations will operate one of those locations.
Answer: a. creating differences between the firm's position and its rivals.
A cost leadership strategy targets the industry's ____ customers.
a. most typical
b. poorest
c. least educated
d. most frugal
Answer: a. most typical
When the costs of supplies increase in an industry, the low-cost leader
a. may continue competing with rivals on the basis of product features.
b. will lose customers as a result of price increases.
c. will be unable to absorb higher costs because cost-leaders operate on very narrow profit
margins.
d. may be the only firm able to pay the higher prices and continue to earn average or above-
average returns.
Answer: d. may be the only firm able to pay the higher prices and continue to earn average or
above- average returns.
When a product's unique attributes provide value to customers, the firm is implementing
a. a differentiation strategy.
b. a cost leadership strategy.
c. an integrated cost leadership/differentiation strategy.
d. a single-product strategy.
Answer: a. a differentiation strategy.
A company pursuing a differentiation or focused differentiation strategy would
a. have highly efficient systems linking suppliers' products with the firm's production processes.
b. use economies of scale.
c. have strong capabilities in basic research.
d. make investments in easy-to-use manufacturing technologies.
Answer: c. have strong capabilities in basic research.
T or F? A firm using a differentiation strategy can charge a premium price.
Answer: T
A differentiation strategy can be effective in controlling the power of substitutes in an
industry because
a. customers have low switching costs.
b. substitute products are lower quality.
c. a differentiating firm can always lower prices.
d. customers develop brand loyalty.
Answer: d. customers develop brand loyalty.
The typical risks of a differentiation strategy do NOT include which of the following?
a. Customers may find the price differential between the low-cost product and the differentiated
product too large.
b. Customers' experience with other products may narrow customers' perception of the value of a
product's differentiated features.
c. Counterfeit goods are widely available and acceptable to customers.
d. Suppliers of raw materials erode the firm's profit margin with price increases.
Answer: d. Suppliers of raw materials erode the firm's profit margin with price increases.
Competitive rivalry has the most effect on the firm's ____ strategies than the firm's other
strategies.
a. business-level
b. corporate-level
c. acquisition
d. international
Answer: a. business-level
Multimarket competition occurs when firms
a. sell different products to the same customer.
b. have a high level of awareness of their competitors' strategic intent.
c. simultaneously enter into an attack strategy.
d. compete against each other in several geographic or product markets.
Answer: d. compete against each other in several geographic or product markets.
Competitive dynamics refers to the
a. circumstances where competitors are aware of the degree of their mutual interdependence
resulting from market commonality and resource similarity.
b. set of competitive actions and competitive responses the firm takes to build or defend its
competitive advantages and to improve its market position.
c. total set of actions and responses taken by all firms competing within a market.
d. ongoing set of competitive actions and competitive responses between competitors as they
maneuver for advantageous market position.
Answer: c. total set of actions and responses taken by all firms competing within a market.
Firms with few competitive resources are more likely
a. to not respond to competitive actions.
b. respond quickly to competitive actions.
c. delay responding to competitive actions.
d. respond to strategic actions, but not to tactical actions.
Answer: c. delay responding to competitive actions.
Which of the following would be an example of a strategic action?
a. a "two movies for the price of one" campaign by Blockbuster Video
b. use of product coupons by a local grocer
c. entry into the European market by Home Depot
d. fare increases by Southwest Airlines
Answer: c. entry into the European market by Home Depot
The chief disadvantage of being a first mover is the
a. high degree of risk.
b. high level of competition in the new marketplace.
c. inability to earn above-average returns unless the production process is very efficient.
d. difficulty of obtaining new customers.
Answer: a. high degree of risk.
On the whole there are more competitive responses to
a. strategic actions than to tactical actions.
b. tactical actions than to strategic actions.
c. buyer pressures than to supplier pressures.
d. the demands of the top management team than to industry structural pressures.
Answer: b. tactical actions than to strategic actions.
Competitors are more likely to respond to competitive actions that are taken by
a. differentiators.
b. larger companies.
c. first movers.
d. market leaders.
Answer: d. market leaders.
Ninety percent of Wm. Wrigley Company's total revenue comes from chewing gum. This is
an example of
a. market commonality.
b. standard-cycle markets.
c. economies of scale.
d. market dependence.
Answer: d. market dependence.
All competitive advantages do not accrue to large sized firms. A major advantage of smaller
firms is that they
a. are more likely to have organizational slack.
b. can launch competitive actions more quickly.
c. have more loyal and diverse workforces.
d. can wait for larger firms to make mistakes in introducing innovative products.
Answer: b. can launch competitive actions more quickly.