Test Bank - Chap 10

Schermerhorn-Introduction to Management, 12th edition Test Bank
Ch10: The Strategic Management Process
True/False Questions
1. Competitive advantage is the ability to do something so well that one outperforms

competitors.
Answer: True
Page: 241
Learning Objective: 10.1
Difficulty: Easy
AACSB: Analytic skills
Bloom’s Taxonomy: Knowledge
2. The purpose of corporate strategy is to guide activities within one specific area of
operations.
Answer: False
Page: 243
Difficulty: Easy
3. In single-product enterprises, business strategies are distinct from corporate

strategies.
Answer: False
Page: 243
Difficulty: Moderate
Bloom’s Taxonomy: Comprehension
4. In a large conglomerate, while the enterprise on a whole will have a corporate

strategy, each SBU will have its own business strategy.
Answer: True
Page: 243
5. The strategic management process begins with analysis of mission, values, and
objectives.
Answer: True
Page: 244
Difficulty: Easy
6. In the process of strategic management, strategic implementation is typically

followed by strategic analysis.
Answer: False
Page: 244
Copyright © 2012 John Wiley & Sons, Inc. 10-1


Difficulty: Easy
7. Stakeholders are individuals and groups unaffected by the organization and its
strategic accomplishments.
Answer: False
Page: 245
8. Core values are broad beliefs about what is or is not appropriate behavior.
Answer: True
Page: 245
Difficulty: Easy
9. The presence of strong core values helps build a clear organizational identity.
Answer: True
Page: 245
10. Emergence of new competitors and resource scarcities are environmental threats.
Answer: True
Page: 247
Difficulty: Easy
11. In a hypercompetition situation, a firm faces only a few competitors.

Answer: False
Page: 248
Difficulty: Easy
12. An unattractive industry is one in which there are high barriers to entry.
Answer: False
Page: 248-249
13. In an attractive industry, there are many competitors.

Answer: False
Page: 248-249
14. The less attractive the industry structure, the harder it will be to make good strategic
choices.
Answer: True
Page: 248
15. In the context of the BCG matrix, the preferred strategy for Stars is retrenchment.
Answer: False
Page: 250
Difficulty: Easy
16. The BCG Matrix recommends making further resource investments in dogs.
Answer: False
Page: 250
Difficulty: Easy
17. A growth strategy involves expansion of the organization’s current operations.

Answer: True
Page: 252
Difficulty: Easy
18. In the context of vertical integration, when a business acquires suppliers, it is referred
to as forward vertical integration.
Answer: False
Page: 252
Difficulty: Easy
19. Bankruptcy under U.S. law protects a firm from creditors while management
reorganizes to restore solvency.
Answer: True
Page: 253
Difficulty: Easy


20. Restructuring by divestiture is mostly followed by organizations that are focused and
not complex.
Answer: False
Page: 253
21. Restructuring by turnaround often occurs along with a change in top management.
Answer: True
Page: 253
Difficulty: Easy
22. A globalization strategy adopts standardized products and advertising for use
worldwide.
Answer: True
Page: 254
Difficulty: Easy
AACSB: Dynamics of the global economy
23. The transnational strategy focuses on working with rivals on projects of mutual
benefit.
Answer: False
Page: 254
Difficulty: Easy
24. In a supplier alliance, firms join together to sell and distribute products or services.
Answer: False
Page: 254
Difficulty: Easy
25. The strategic objective of the differentiation strategy is to attract customers who stay
loyal to the firm’s products and lose interest in those of its competitors.
Answer: True
Page: 256
Difficulty: Easy

26. It is advisable to combine a cost leadership strategy with a differentiation strategy to

get better results.
Answer: False
Page: 257
27. Failures of substance in strategic management show up in poor analysis and bad
strategy selection.
Answer: True
Page: 259
Difficulty: Easy
28. When strategic control fails at the level of top management, it is supposed to kick in
at the level of middle management.
Answer: False
Page: 259
29. Inside directors are chosen from the ranks of middle managers.
Answer: False
Page: 260
Difficulty: Easy
30. A strategic leader needs to reduce the sense of urgency so as to achieve the best
results.
Answer: False
Page: 261
Difficulty: Easy
31. It is a strategic leader’s job to teach the strategy and make it a “cause.”
Answer: True
Page: 261
Difficulty: Easy
Multiple Choice Questions

32. Which of the following best defines the term “sustainable competitive advantage”?
A. It is the ability to outperform rivals in ways that are difficult or costly to imitate.
B. It is the ability to formulate technology to gain market exposure.
C. It is the ability to focus organizational energies on a unifying and compelling
goal.
D. It is the ability to formulate strategies efficiently to accomplish long-term goals.
E. It is the ability to identify the things that the organization has or does
exceptionally well in comparison with competitors.
Answer: A
Page: 241
Difficulty: Easy
33. Which of the following best describes a strategy?

A. It is a comprehensive plan guiding resource allocation to achieve long-term
organization goals.
B. It is the same as the mission of the organization.
C. It is the document expressing the organization’s reason for existence in society.
D. It is the predominant value system of the organization as a whole.
E. It is a special strength that gives an organization a competitive advantage.
Answer: A
Page: 241
Difficulty: Easy
34. A ________ strategy typically sets long-term direction for the total enterprise.
A. branding
B. business
C. corporate
D. functional
E. marketing
Answer: C
Page: 242
Difficulty: Easy
35. A ________ strategy primarily identifies how a division or strategic business unit will
compete in its product or service domain.
A. branding
B. business
C. corporate
D. functional
E. marketing
Answer: B
Page: 243
Difficulty: Easy


36. Decisions related to choices about product and service mix, facilities locations, and
new technologies are most likely to be a part of the ________ strategy of an
organization.
A. branding
B. marketing
C. corporate
D. functional
E. business
Answer: E
Page: 243
Difficulty: Easy
37. The term ________ is often used to describe a business firm that is part of a larger
enterprise.
A. supplier alliance
B. strategic business unit
C. joint venture
D. cash cow
E. co-opetitor
Answer: B
Page: 243
Difficulty: Easy
38. A ________ strategy guides activities within one specific area of operations.
A. branding
B. divisional
C. corporate
D. functional
E. business
Answer: D
Page: 243
Difficulty: Easy
39. Questions such as “How can we best utilize resources within a specific area of
operations to implement our business strategy?” are typically asked while discussing
the ________ strategy.
A. branding
B. divisional
C. corporate
D. functional
E. business
Answer: D
Page: 243


Difficulty: Easy
40. The difference between a corporate strategy and a business strategy is that:
A. the former sets long-term direction for the total enterprise and the latter is
concerned with how a division or strategic business unit will compete in its
product or service domain.
B. the former focuses on how a division will compete in its product or service
domain and the latter is concerned with guiding the use of organizational
resources to implement business strategies.
C. the former is concerned with formulating and implementing strategies while the
latter is involved in crafting strategies to guide the allocation of resources.
D. the former adopts standardized products and advertising for use worldwide and
the latter seeks efficiencies of global operations with attention to local markets.
E. the former adopts standardized products and advertising for use worldwide and
the latter customizes products and advertising to best fit local needs.
Answer: A
Page: 242-243
41. The difference between a corporate strategy and a functional strategy is that:
A. the former focuses on how a strategic business unit will compete in its product
domain and the latter sets long-term direction for the total enterprise.
B. the former sets long-term direction for the total enterprise and the latter guides
activities within one specific area of operations.
C. the former is concerned with formulating and implementing strategies while the
latter is involved in crafting strategies to guide the allocation of resources.
D. the former adopts standardized products and advertising for use worldwide and
the latter seeks efficiencies of global operations with attention to local markets.
E. the former adopts standardized products and advertising for use worldwide and
the latter customizes products and advertising to best fit local needs.
Answer: B
Page: 242-243
42. The entire process of formulating and implementing strategies to accomplish long-
term goals and sustain competitive advantage is referred to as:
A. strategic analysis.
B. strategy formulation.
C. strategy implementation.
D. strategic management.
E. strategic outsourcing.
Answer: D
Page: 243
Difficulty: Easy

43. Strategic analysis typically refers to the process of:

A. crafting strategies to guide the allocation of resources.
B. revising objectives and selecting new strategies.
C. formulating and implementing strategies.
D. directing the total enterprise.
E. analyzing the organization’s competitive position.
Answer: E
Page: 244
Difficulty: Easy
44. ________ is the process of crafting strategies to guide the allocation of resources.
A. Strategic analysis
B. Strategy formulation
C. Strategy implementation
D. Strategic crafting
E. Strategic outsourcing
Answer: B
Page: 244
Difficulty: Easy
45. Karen Inc. changes its business strategy from a focused differentiation strategy to a
focused cost leadership one. Which of the following steps in the process of strategic
management ideally includes this action?
A. Strategy analysis
C. Strategy assessment
D. Strategy identification
E. Strategy outsourcing
Answer: B
Page: 244
Difficulty: Hard
AACSB: Reflective thinking skills
Bloom’s Taxonomy: Application
46. Which of the following is the first step in the process of strategic management?
D. Strategic marketing
Answer: A
Page: 244
Difficulty: Easy

47. Which of the following is the last step in the process of strategic management?
D. Strategic marketing
Answer: C
Page: 244
Difficulty: Easy
48. A(n) ________ expresses the organization’s reason for existence in society.
A. statement of purpose
B. mission statement
C. cash flow statement
D. net worth statement
E. operating objective
Answer: B
Page: 245
Difficulty: Easy
49. ________ are broad beliefs about what is or is not appropriate behavior.
A. Corporate subcultures
B. Marketing values
C. Core values
D. Diversified values
E. Functional values
Answer: C
Page: 245
Difficulty: Easy
AACSB: Ethical understanding and reasoning abilities
50. ________ is the predominant value system for the enterprise as a whole.
A. Organizational culture
B. Corporate subculture
C. Managerial value system
D. Functional culture
E. Leadership value system
Answer: A
Page: 246
Difficulty: Easy
51. Which of the following is true about operational objectives?

A. They set forth an organization’s purpose.

B. They direct activities toward key performance areas.

C. They represent what the strategy or underlying business model is trying to
accomplish.
D. They guide the behavior of organization members in ways consistent with
mission and core values.
E. They set standards for accomplishing the mission statement.
Answer: B
Page: 246
Difficulty: Easy
52. A ________ begins with a systematic evaluation of the organization’s resources and
capabilities and focuses on identifying the organization’s core competencies.
A. functional strategy
B. mission statement
C. flanking strategy
D. branding analysis
E. SWOT analysis
Answer: E
Page: 246
Difficulty: Easy
53. Any special strength that gives an organization a competitive advantage is referred to
as its ________.
A. core competency
B. productivity
C. co-opetition ability
D. emotional intelligence
E. monopolistic power
Answer: A
Page: 246
Difficulty: Easy
54. Aquamarine Inc. is the market leader of car batteries primarily because of its unique
distribution system. The distribution system that has given the company an advantage
over its competitors is an example of the company’s ________.
A. co-opetition strategy
B. core competency
C. technical skill
D. emotional intelligence
E. monopolistic power
Answer: B
Page: 246
Difficulty: Hard

55. Which of the following is a defining characteristic of a SWOT analysis?

A. It examines the diversity at the work place and increases cohesiveness.
B. It is based on the statistical principle of multivariate.
C. It identifies things that inhibit performance.
D. It determines the level of sales needed in order to breakeven.
E. It is based on a year-to-year comparison of a firm’s ratios.
Answer: C
Page: 247
Difficulty: Easy
56. Which of the following is true about oligopoly?

A. There are several direct competitors.
B. It ensures that there is no competition for resources.
C. There are only a few competitors.
D. It is seen most often in the fast foods industry.
E. There are many substitute products.
Answer: C
Page: 248
Difficulty: Easy
57. According to Porter, which of the following is one of the five forces that affect
industry competition?
A. Bargaining power of intermediaries
B. Market share
C. Market growth rate
D. Substitute products
E. Workplace diversity
Answer: D
Page: 248
Difficulty: Easy
58. If there are many competitors and the barriers to entry are low, the:
A. industry is attractive.
B. industry is unattractive.
C. customers have low bargaining power.
D. industry is mature.
E. industry is not mature.
Answer: B
Page: 248
59. Which of the following increases the attractiveness of a market?

A. Low barriers to entry

B. Many competitors
C. Many substitute products
D. High power of suppliers
E. Few substitute products
Answer: E
Page: 248
60. ________ decreases the attractiveness of the market.

A. Few competitors
B. High barriers to entry
C. Few substitute products
D. High power of customers
E. Low power of suppliers
Answer: D
Page: 248
61. ________ analyzes business opportunities according to market growth rate and
market share.
A. Flanking strategy
B. BCG matrix
C. Five Forces analysis
D. Strategy formulation
E. Logistics plan
Answer: B
Page: 249
Difficulty: Easy
62. Businesses or products with high-market-shares in high-growth markets are referred

to as ________ in the BCG Matrix.
A. cash cows
B. stars
C. question marks
D. dogs
E. laggards
Answer: B
Page: 250
Difficulty: Easy
63. The stars in a BCG matrix typically:

A. produce large profits through substantial penetration of expanding markets.

B. produce large profits and a strong cash flow, but with little upside potential.
C. may not generate much profit at the moment, but have upside potential to do so.
D. produce little if any profit, and have low potential for future improvement.
E. generate high profit for a short span of time and then become inactive.
Answer: A
Page: 250
Difficulty: Easy
64. The preferred strategy for stars is:

A. stability or modest growth.
B. targeting only the most promising of the stars.
C. retrenchment of some of the stars.
D. decrease of current operations.
E. growth and further resource investments.
Answer: E
Page: 250
Difficulty: Easy
65. The preferred strategy for stars is growth because they:

A. produce large profits and a strong cash flow, but have little upside potential.
B. may not generate much profit at the moment, but have upside potential.
C. produce large profits and a strong cash flow for only a short span of time and
must be nurtured.
D. are not only high performers in the present, but they offer similar potential for the
future.
E. produce little if any profit, and must be supported so that they perform better.
Answer: D
Page: 250
66. Businesses or products with high-market shares in low-growth markets are referred to
as ________ in the BCG Matrix.
A. cash cows
B. stars
C. question marks
D. dogs
E. laggards
Answer: A
Page: 250
Difficulty: Easy
67. The preferred strategy for cash cows is:


B. targeting only the most promising of the cash cows.

C. retrenchment of some of the cash cows.
D. decrease of current operations.
E. growth and further resource investments.
Answer: A
Page: 250
Difficulty: Easy
68. The preferred strategy for cash cows is stability or modest growth because:
A. they produce large profits and a strong cash flow, but have little upside potential.
B. they may not generate much profit at the moment, but have upside potential.
C. the markets offer great growth opportunity given that they are new to the market.
D. they are not only high performers in the present, but they offer similar potential
for the future.
E. they produce little if any profit, and must be supported so that they perform
better.
Answer: A
Page: 250
69. One of the differences between stars and cash cows is that:
A. cash cows produce high profits.
B. the strategy for cash cows is retrenchment.
C. cash cows have little upside potential.
D. cash cows can easily penetrate expanding markets.
E. the strategy for cash cows is growth.
Answer: C
Page: 250
70. Businesses or products with low-market shares in high-growth markets are referred to
A. cash cows
B. stars
C. question marks
D. dogs
E. laggards
Answer: C
Page: 250
Difficulty: Easy
71. The preferred strategy for question marks is:


B. retrenchment of all question marks.

C. decrease of current operations.
D. growth and retrenchment of the question marks.
E. growth and heavy resource investments.
Answer: D
Page: 250
Difficulty: Easy
72. The preferred strategy for question marks is to grow or retrench because:
A. they produce large profits and a strong cash flow, but have little upside potential.
B. they may not generate much profit at the moment, the upside potential is there.
for the future.
E. they produce little if any profit, and must be supported so that they perform
better.
Answer: B
Page: 250
73. Businesses or products with low-market shares in low-growth markets are referred to
A. cash cows
B. stars
C. question marks
D. dogs
E. laggards
Answer: D
Page: 251
Difficulty: Easy
74. The preferred strategy for dogs is:

B. retrenchment of all dogs.
C. decrease of current operations.
D. to grow or retrench the dogs.
E. growth and heavy resource investments.
Answer: B
Page: 251
Difficulty: Easy
75. The preferred strategy for dogs is retrenchment because:

A. they produce large profits and a strong cash flow, and the upside potential is

there.
B. they may not generate much profit at the moment, but the upside potential is
there.
for the future.
E. they produce little if any profit, and they have low potential for future
improvement.
Answer: E
Page: 251
76. When one hears terms like “acquisition,” “merger,” and “global expansion,” the
underlying master strategy is most likely to be one of ________.
A. growth
B. retrenchment
C. downsizing
D. turnaround
E. restructuring
Answer: A
Page: 252
Difficulty: Easy
77. Tulips Inc., a successful designer brand, has several outlets in the U.S. To push sales
growth, Tulips has decided to focus more on its primary business and open up its
branches in ten different countries. This approach taken by Tulips is an example of
growth through ________.
A. strategic alliance
B. vertical integration
C. liquidation
D. diversification
E. concentration
Answer: E
Page: 252
Difficulty: Hard
78. Which of the following is a defining characteristic of growth through diversification?

A. It involves extending business within the same business area.
B. It involves acquisition of or investment in new and different business areas.
C. It involves decreasing the size of operations.
D. It involves selling company assets to pay creditors.
E. It involves fixing specific performance problems.
Answer: B
Page: 252
Difficulty: Easy


79. Growth through ________ typically occurs by acquiring suppliers or distributors.

A. strategic alliance
B. vertical integration
C. liquidation
D. divestiture
E. concentration
Answer: B
Page: 252
Difficulty: Easy
80. ________ is where a business closes and sells its assets to pay creditors.
A. Concentration
B. Diversification
C. Vertical integration
D. Liquidation
E. Strategic alliance
Answer: D
Page: 253
Difficulty: Easy
81. Restructuring by downsizing primarily involves:

A. decreasing the size of operations.
B. working with rivals on projects of mutual benefit.
C. customizing products and advertising to best fit local needs.
D. joining in partnership to pursue an area of mutual interest.
E. adopting standardized products and advertising for use worldwide.
Answer: A
Page: 253
Difficulty: Easy
82. Restructuring by divestiture primarily involves:

A. selling off parts of the organization to refocus on core competencies.
B. working with rivals on projects of mutual benefit.
C. customizing products and advertising to best fit local needs.
D. joining in partnership to pursue an area of mutual interest.
E. adopting standardized products and advertising for use worldwide.
Answer: A
Page: 253
Difficulty: Easy

83. Which of the following strategies primarily tries to fix specific performance
problems?
A. Downsizing
B. Turnaround
C. Multidomestic
D. Divestiture
E. Co-opetition
Answer: B
Page: 253
Difficulty: Easy
84. A ________ strategy primarily customizes products and advertising to best fit local
needs.
A. transnational
B. co-opetition
C. differentiation
D. multidomestic
E. cost leadership
Answer: D
Page: 254
Difficulty: Easy
85. Which of the following is a defining characteristic of the transnational strategy?

A. It involves working with rivals on projects of mutual benefit.
B. It seeks efficiencies of global operations with attention to local markets.
C. It tries to fix specific performance problems.
D. It involves expansion of the organization’s current operations.
E. It analyzes business opportunities according to market growth rate.
Answer: B
Page: 254
Difficulty: Easy
86. Ten Inc., an IT company, enters into a partnership with Turnover Finances. The terms
of the agreement state that Ten Inc. would purchase the service of Turnover Finance’s
finance team for a period of five years. This is an appropriate example of a(n)
________ alliance.
A. supplier
B. distribution
C. outsourcing
D. co-opetition
E. equity strategic
Answer: C
Page: 254
Difficulty: Hard

87. In a(n) ________ alliance, firms typically join together to sell and deliver products or
services.
A. supplier
B. distribution
C. contracting
D. vertical
E. outsourcing
Answer: B
Page: 254
Difficulty: Easy
88. The strategy of working with rivals on projects of mutual benefit is referred to as
________.
A. downsizing
B. turnaround
C. divestiture
D. vertical integration
E. co-opetition
Answer: E
Page: 254
Difficulty: Easy
89. A differentiation strategy typically seeks competitive advantage by:

A. offering products that are unique and different from the competition.
B. operating with lower costs than competitors.
C. continuously improving operating efficiencies in purchasing.
D. controlling and monitoring the performance of top management.
E. including key persons in strategic planning.
Answer: A
Page: 256
Difficulty: Easy
90. Lucy Inc. sells a range of premium confectionery products. Although Lucy’s products
are priced a little higher than those of its competitors, its customers are ready to pay
for its unique flavours. Lucy Inc. uses the ________ strategy to gain an advantage
over its competitors.
A. cost leadership
B. stuck-in-the-middle
C. focused cost leadership
D. differentiation
E. co-opetition
Answer: D
Page: 256

Difficulty: Hard
91. Which of the following is a defining characteristic of a differentiation strategy?

A. The strategic objective is to attract customers who stay loyal to the firm’s unique
products.
B. It seeks competitive advantage by operating with lower costs than competitors.
C. Success with the differentiation strategy requires tight cost and managerial
controls.
D. It aims at products or services that are easy to create and distribute.
E. It involves working with rivals on projects of mutual benefit.
Answer: A
Page: 256
92. Which of the following allows organizations to make profits while selling products or
services at low prices their competitors can’t profitably match?
A. Cost leadership strategy
B. Stuck-in-the-middle strategy
C. Focused differentiation strategy
D. Differentiation strategy
E. Co-opetition strategy
Answer: A
Page: 257
Difficulty: Easy
93. Neptune is a new company in the laundry detergent market, which already has many
competitors. Researchers at Neptune have devised a new, cost-efficient formula for
manufacturing detergents that has made it possible for Neptune to charge less than its
competitors and still make a profit. The strategy used by Neptune is that of ________.
A. cost leadership
B. stuck-in-the-middle
C. focused differentiation
D. differentiation
E. co-opetition
Answer: A
Page: 257
Difficulty: Hard
94. Which of the following is true of a cost leadership strategy?

A. It seeks competitive advantage through uniqueness.
B. It works best with the product differentiation strategy.
C. To succeed, it requires tight cost and managerial controls.
D. It concentrates on serving a unique market segment better than anyone else.
E. It involves working with rivals on projects of mutual benefit.

Answer: C
Page: 257
95. A ________ strategy typically concentrates attention on a special market segment in

the form of a niche customer group, geographical region, or product or service line.
A. co-opetition
B. downsizing
C. turnaround
D. focus
E. transnational
Answer: D
Page: 258
Difficulty: Easy
96. Which of the following is a defining characteristic of a focused differentiation

strategy?
A. It offers a unique product to a special market segment.
B. It seeks the lowest costs of operations within a special market segment.
C. It analyzes business opportunities according to market growth rate.
D. It focuses on substantial penetration of expanding markets.
E. It involves decreasing the size of operations.
Answer: A
Page: 258
Difficulty: Easy
97. Which of the following is a defining characteristic of a focused cost leadership?

A. It offers a unique product to a special market segment.
B. It seeks the lowest costs of operations within a special market segment.
C. It analyzes business opportunities according to market growth rate.
D. It focuses on substantial penetration of expanding markets.
E. It involves decreasing the size of operations.
Answer: B
Page: 258
Difficulty: Easy
98. A lack of participation error is most likely to occur when:

A. the planning process becomes an end in itself.
B. the performance of top management is not monitored.
C. key persons are not included in the strategic planning.
D. there is lack of efficiency in vertical communication.
E. the cost leadership strategy and the differentiation strategy are used
simultaneously.

Answer: C
Page: 259
Difficulty: Easy
99. Process failure where the planning process becomes an end in itself, rather than a
means to an end is referred to as ________.
A. lack of participation error
B. goal displacement
C. failures of substance
D. divestiture
E. downsizing
Answer: B
Page: 259
Difficulty: Easy
100. ________ is the capability to inspire people to successfully engage in a process of

continuous change, performance enhancement, and implementation of organizational
strategies.
A. Free-riding
B. Scientific management
C. Strategic leadership
D. Social loafing
E. Groupthink
Answer: C
Page: 261
Difficulty: Easy
Essay Questions
101. Elaborate on the present day corporate strategies.

Answer: A key aspect of corporate strategy today is how to embrace the global
economy and its mix of business risks and opportunities. An easy way to spot
differences in global strategies is to notice how products are developed and advertised
around the world.
A firm pursuing a globalization strategy tends to view the world as one large market.
It makes most decisions from the corporate headquarters and tries as much as possible
to standardize products and advertising for use everywhere. The latest Gillette razors
from Procter & Gamble, for example, are likely to be sold and advertised similarly
around the world.
Firms using a multidomestic strategy try to customize products and advertising as
much as possible to fit local references in different countries or regions. McDonald’s
is a good example. Although you can get your standard fries and Big Mac in most
locations, you can have a McVeggie in India, a McArabia Kofta in Saudi Arabia, and
a Croque McDo in France.

A third approach is the transnational strategy where a firm tries to operate without a
strong national identity and blend seamlessly with the global economy. Ford is an
example. Its Global Performance strategy draws upon design, manufacturing, and
distribution expertise all over the world to build five core car platforms with common
parts and components. These platforms are then modified to meet regional tastes.
Page: 254
102. What are the terms on which Porter based his model for choosing competitive
strategies? What are the three competitive strategies cited by Porter?
Answer: Porter frames the strategy analysis in terms of market scope of the product
or service, and source of competitive advantage for the product or service. The three
business-level strategies cited by Porter are: cost leadership, differentiation, and
focus.
A differentiation strategy seeks competitive advantage through uniqueness. A cost
leadership strategy seeks competitive advantage by operating with lower costs than
competitors. A focus strategy concentrates attention on a special market segment in
the form of a niche customer group, geographical region, or product or service line.
Page: 256-258
Difficulty: Easy
103. List a few key responsibilities of strategic leadership.

Answer: Key responsibilities of strategic leadership are described below:
 A strategic leader has to maintain strategic control. This means
that the CEO and other top managers should always be in touch with the
strategy, how well it is being implemented, whether the strategy is generating
performance success or failure, and the need for the strategy to be tweaked or
changed.
 A strategic leader has to be the guardian of trade-offs. It is the leader’s job to
make sure that the organization’s resources are allocated in ways consistent
with the strategy. This requires the discipline to sort through many competing
ideas and alternatives, to stay on course, and not to get sidetracked.
 A strategic leader needs to create a sense of urgency. The leader can’t allow
the organization and its members to grow slow and complacent. Even when
doing well, the leader keeps the focus on getting better and being alert to
conditions that require adjustments to the strategy.
 A strategic leader needs to make sure that everyone understands the strategy.
Unless strategies are understood, the daily tasks and contributions of people
lose context and purpose. Everyone might work very hard, but without
alignment to strategy the impact is dispersed and fails to advance common
goals.
 A strategic leader needs to be a teacher. It is the leader’s job to teach the
strategy and make it a “cause.” In order for strategy to work it must become
an ever present commitment throughout the organization. This means that a
strategic leader must be a great communicator. Everyone must understand the
strategy and how it makes their organization different from others.
Page: 261

Difficulty: Easy

Test Bank - Chap 10

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Schermerhorn-Introduction to Management, 12th edition Test Bank

Ch10: The Strategic Management Process

1. Competitive advantage is the ability to do something so well that one outperforms

3. In single-product enterprises, business strategies are distinct from corporate

4. In a large conglomerate, while the enterprise on a whole will have a corporate

6. In the process of strategic management, strategic implementation is typically

Copyright © 2012 John Wiley & Sons, Inc. 10-1

Learning Objective: 10.2

11. In a hypercompetition situation, a firm faces only a few competitors.

13. In an attractive industry, there are many competitors.

Copyright © 2012 John Wiley & Sons, Inc. 10-2

17. A growth strategy involves expansion of the organization’s current operations.

Copyright © 2012 John Wiley & Sons, Inc. 10-3

AACSB: Analytic skills

Copyright © 2012 John Wiley & Sons, Inc. 10-4

26. It is advisable to combine a cost leadership strategy with a differentiation strategy to

Multiple Choice Questions

Copyright © 2012 John Wiley & Sons, Inc. 10-5

33. Which of the following best describes a strategy?

Copyright © 2012 John Wiley & Sons, Inc. 10-6

AACSB: Analytic skills

Copyright © 2012 John Wiley & Sons, Inc. 10-7

Learning Objective: 10.1

Copyright © 2012 John Wiley & Sons, Inc. 10-8

Bloom’s Taxonomy: Knowledge

43. Strategic analysis typically refers to the process of:

Copyright © 2012 John Wiley & Sons, Inc. 10-9

51. Which of the following is true about operational objectives?

Copyright © 2012 John Wiley & Sons, Inc. 10-10

B. They direct activities toward key performance areas.

Copyright © 2012 John Wiley & Sons, Inc. 10-11

55. Which of the following is a defining characteristic of a SWOT analysis?

56. Which of the following is true about oligopoly?

59. Which of the following increases the attractiveness of a market?

Copyright © 2012 John Wiley & Sons, Inc. 10-12

A. Low barriers to entry

60. ________ decreases the attractiveness of the market.

62. Businesses or products with high-market-shares in high-growth markets are referred

63. The stars in a BCG matrix typically:

Copyright © 2012 John Wiley & Sons, Inc. 10-13

64. The preferred strategy for stars is:

65. The preferred strategy for stars is growth because they:

67. The preferred strategy for cash cows is:

Copyright © 2012 John Wiley & Sons, Inc. 10-14

B. targeting only the most promising of the cash cows.

71. The preferred strategy for question marks is:

Copyright © 2012 John Wiley & Sons, Inc. 10-15

B. retrenchment of all question marks.

74. The preferred strategy for dogs is:

75. The preferred strategy for dogs is retrenchment because:

Copyright © 2012 John Wiley & Sons, Inc. 10-16

78. Which of the following is a defining characteristic of growth through diversification?

Copyright © 2012 John Wiley & Sons, Inc. 10-17

AACSB: Analytic skills

79. Growth through ________ typically occurs by acquiring suppliers or distributors.

81. Restructuring by downsizing primarily involves:

82. Restructuring by divestiture primarily involves:

Copyright © 2012 John Wiley & Sons, Inc. 10-18

85. Which of the following is a defining characteristic of the transnational strategy?

Copyright © 2012 John Wiley & Sons, Inc. 10-19

Bloom’s Taxonomy: Application

89. A differentiation strategy typically seeks competitive advantage by:

Copyright © 2012 John Wiley & Sons, Inc. 10-20

91. Which of the following is a defining characteristic of a differentiation strategy?