1

Which of the following is NOT a reason why strategy matters to

businesses?
Your Answer
Strategy defines a company’s current and future goals and objectives
Correct Answer
Strategy defines a company’s current and future goals and objectives
Explanation
Strategy does not define a company’s goals and objectives, but rather
supports its decision to achieve goals through the execution of actions
at the corporate, business and functional levels.

2
Consider the following sentence:

“To become the most affordable fashion brand for every person in
the world.”

This is most likely to be a growing fashion company’s

Your Answer
Vision statement
Correct Answer
Vision statement
Explanation
For a growing company, this is a forward-looking vision statement as it
aims at becoming the top cost leader in the fashion industry around the
world.

3
What is the first step in a strategic analysis process?
Your Answer
Analyzing the external and internal environment
Correct Answer
Analyzing the external and internal environment
Explanation
Strategic analysis process begins with analyzing a company’s external
and internal environment to identify the opportunities and threats in
the industry and understand its strengths and weaknesses.

4
Book Co. is an online book store which sells both fiction and non-fiction
books. After analyzing the online book retail industry and assessing its
current and predicted sales, Book Co. decides to move away from non-
fictions and target only the fiction market which is expected to have a
20% growth in sales. This is an example of __________ strategy.
Your Answer
Business-level
Correct Answer
Business-level
Explanation
Decision around which market segment(s) to target or enter is a
business-level strategy.

5
The threat of potential entrants is high when
Your Answer
Switching costs are low
Correct Answer
Switching costs are low
Explanation
When switching costs are low for customers, they are indifferent
between buying products of companies offering close substitutes.
Therefore, the threat of potential entrants into the industry is high.
When customers have high brand loyalty, they are unlikely to switch to
other products offered by another company.
Companies are less likely to enter an industry if investment in specialist
equipment is needed.
When there is strict government regulation in the industry, it becomes
more difficult for new companies to enter the industry in a short period
of time.

6
The bargaining power of suppliers is low when
Your Answer
There are many alternative suppliers
Correct Answer
There are many alternative suppliers
Explanation
When there are many alternative suppliers in the industry, companies
can easily switch to another supplier thus reducing the bargaining
power of suppliers.

When suppliers are large or concentrated, they can have huge influence
on input prices and thus have high bargaining power.

When switching costs are high, companies are unlikely to switch to

another supplier thus allowing current suppliers to raise prices.

When only few substitute inputs are available, companies have to stick
with their current suppliers for raw materials or inputs, giving suppliers
high bargaining power.

7
According to what is taught in this course, company is most likely to
start earning positive profits at the ___ stage of an industry life-cycle.
Your Answer
Growth
Correct Answer
Growth
Explanation
It is mostly likely for companies to start generating positive profits at
the growth stage of an industry life-cycle.

8
Match the following examples of PEST factors to the correct categories.
R&D investments

Your Answer
Technological factors
Correct Answer
Technological factors

Interest rates

Your Answer
Economic factors
Correct Answer
Economic factors

International trade policies

Your Answer
Political factors
Correct Answer
Political factors

Currency exchange rates

Your Answer
Economic factors
Correct Answer
Economic factors

Education level changes

Your Answer
Socio-demographic factors
Correct Answer
Socio-demographic factors

Regulatory environment change

Your Answer
Political factors
Correct Answer
Political factors

Scientific advancement

Your Answer
Technological factors
Correct Answer
Technological factors

Inflation

Your Answer
Economic factors
Correct Answer
Economic factors
Explanation
None.

9
The combination of firm-specific and valuable   1.   and firm-
specific   2.   allows a company to possess a core competency.
Your Answer

1. resources
2. capability

Correct Answer

1. resources | resource
2. capabilities | capability

Explanation
The combination of firm-specific and valuable resource(s) and firm-
specific capability(ies) allows a company to possess a core competency.

10
A company is unlikely to sustain its competitive advantage when
Your Answer
Competitors have low strategic commitment
Correct Answer
Competitors have low strategic commitment
Explanation
When competitors have low strategic commitment, they can quickly
respond to changes in the industry and imitate other companies’
competitive advantage.

Competitors with low absorptive capacity are unable to easily imitate

competitive advantage of others, therefore company can sustain its
competitive advantage.

When there is low rate of product innovation in the industry,

companies can sustain its competitive advantage for a longer period of
time.

When competitors require a long time to imitate a core competency,

the company can build a strong market position because their
products/services cannot be easily imitated.

11
Identify which of the following are primary activities and which are
support activities in a value chain.
Inbound movement of materials

Your Answer
Primary activities
Correct Answer
Primary activities

Sales and promotion of products/services

Your Answer
Primary activities
Correct Answer
Primary activities

Management of cash inflows and outflows

Your Answer
Support activities
Correct Answer
Support activities

Movement of final products to customers

Your Answer
Primary activities
Correct Answer
Primary activities

Acquisition of materials from external source

Your Answer
Support activities
Correct Answer
Support activities

Quality assurance, control systems and work culture

Your Answer
Support activities
Correct Answer
Support activities

Maintenance of products
Your Answer
Primary activities
Correct Answer
Primary activities

Research and development

Your Answer
Support activities
Correct Answer
Support activities
Explanation
None.

12
Suppose the supply chain for a clothing industry is as follows:

Raw materials > Parts manufacturing > Final assembly > Retailer >
Customer

If a final assembly company wants to expand into the manufacturing

industry, it is pursuing a
Your Answer
Backward vertical integration
Correct Answer
Backward vertical integration
Explanation
Backward vertical integration is the expansion of business into
upstream industries, which in this example are the manufacturing or
raw materials extracting industries for the final assembly company.

 
Horizontal integration involves the acquisition or merger with
companies in the same industry.

Forward vertical integration is the expansion of business into

downstream industries. In this example, the company would be moving
to the retail industry if it pursues a forward vertical integration.

Tapered integration is the use of strategic outsourcing in some of a

company's operating activities.

13
Which of the following is not a benefit of related diversification?
Your Answer
Fair allocation of resources and capital across business units based on
performance
Correct Answer
Fair allocation of resources and capital across business units based on
performance
Explanation
The performance-based allocation of resources and capital occurs
when a company pursues unrelated diversification.

Related diversification allows company to transfer and leverage core

competencies from existing business units into business units in a new
industry

Related diversification also enables to use of core competencies to

increase overall performance of the company.

 
Because the newly established business units are closely related to the
company's existing business units, the linkages among business units
allows the sharing of resources and product bundling, which in turn
leads to greater profits.

14
Technology Inc. has three computer product lines: laptops, desktops
and tablets. The company’s marketing team recently conducted a
market research and found out that their products were less popular
among customers due to their below-average functionalities and
designs. To win back their customers, Technology Inc. decided to target
and allocate majority of its resources to the laptop market, which has
always been its top-selling product line. The company expected the
addition of distinct features and a brand-new design of laptops would
allow it to charge premium prices and attract a large group of
customers.

Based on the above information about Technology Inc.'s market

segmentation, the company is pursuing a
Your Answer
Focus strategy
Correct Answer
Focus strategy
Explanation
Technology Inc. is using a focus strategy by targeting only one market
segment. This strategy allows the company to enhance its product
features and functions and appeal to the higher-income customers.

15
According to Porter’s generic strategies, company with a cost leadership
strategy creates competitive advantage through ___ and targets a ___
market.
Your Answer
Low cost; broad
Correct Answer
Low cost; broad
Explanation
According to Porter’s generic strategies, company with a cost leadership
strategy creates competitive advantage through low cost and targets a
broad market.

16
Which of the following is the definition of product proliferation?
Your Answer
Products cater to the needs of all market segments and everything is
served in the market, so there is no opportunity for new competitors to
enter the industry
Correct Answer
Products cater to the needs of all market segments and everything is
served in the market, so there is no opportunity for new competitors to
enter the industry
Explanation
Product proliferation refers to the differentiation of products into every
single market segments, which reduces the chances of rival entrants
into the industry.

17
When a company in a declining industry attempts to minimize the
amount of assets that are employed to reduce the cost structure and
remain profitable, it is pursuing a
Your Answer
Harvest strategy
Correct Answer
Harvest strategy
Explanation
Harvest strategy is the reduction of the amount of assets employed in a
business to reduce cost structure and maximize profits.

 
Leadership strategy is when company tries to become the dominant
player in a declining industry by using aggressive pricing or acquiring
competitors.

Niche strategy is when company focuses on pockets of demands that

are declining more slowly than the industry to maintain profitability.

Divestment strategy is the decision of a company to exit the industry by

selling off its assets to another company.

18
A modified DCF analysis is best for evaluating and selecting the optimal
strategic alternative when a company has ___ goal(s) and ___
measure(s).
Your Answer
Multiple; quantitative
Correct Answer
Multiple; quantitative
Explanation
It is best to perform a modified DCF analysis when a company has
multiple goals which are measured quantitatively.

19
Company A uses the following scorecard to evaluate the three strategic
alternatives it came up with:
   
Calculate the total points scored for each of the alternatives. Based on
the total points scored, which strategic alternative is the best for
company A?
Your Answer
Alternative B
Correct Answer
Alternative B
Explanation
Based on the total points scored, alternative B has the highest score of
7 compared to alternative A (4 points) and C (1 points).

 
 20
Which of the following is not a component of the strategic pillars map?
Your Answer
Values
Correct Answer
Values
Explanation
A strategic pillars map outlines a company’s vision, mission, pillars and
strategic alternatives. Values are not outlined in a strategic pillars map.