Exploring Management 4th Edition Schermerhorn Test Bank 1

Exploring Management 4th Edition by
Schermerhorn ISBN 1118620194

9781118620199
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File: mod07, Chapter 7: Strategy and Strategic Management
Multiple Choice
1. A(n) ______________ is a comprehensive action plan that identifies long-term

direction for an organization.
a) competitive advantage
b) strategy
c) objective
d) idea
Ans: b
Bloom’s: Knowledge
Level: Medium
Learning Objective 1: Identify the types of strategies used by organizations.
Section Reference: Strategy is a comprehensive plan for achieving competitive
advantage.
2. A phrase or statement that focuses organizational energies on achieving a specific goal
is called a(n) ____________.
a) mission
b) vision
c) strategic intent
d) logo
Ans: c
Level: Easy
advantage.
3. Microsoft promised to put a computer within an arm’s reach of every consumer in the
world. This could be considered a statement of __________.
a) strategic intent
b) strategy
c) competitive advantage
d) global positioning
Ans: a
Bloom’s: Application
Level: Medium
advantage.
4. Operating in successful ways that are difficult to imitate is called a __________.

a) strategy
b) strategic intent
c) business plan
d) competitive advantage
Ans: d
Level: Easy
advantage.
5. What are the three levels of strategy used in organizations?
a) Personal, competitive, and corporate
b) Competitive, corporate, and legal
c) Corporate, business, and functional
d) Business, functional, and competitive
Ans: c
Level: Medium
Learning Objective 1: Discuss the types of strategies used by organizations.
advantage.
Feedback a): Incorrect. The correct answer is corporate, business, functional.
Feedback b): Incorrect. The correct answer is corporate, business, functional.
Feedback c): Correct.
Feedback d): Incorrect. The correct answer is corporate, business, functional.
6. In a large company, a strategy that sets the long-term direction for the entire company
is called a __________ strategy.
a) corporate
b) senior level
c) functional
d) board
Ans: a
Bloom’s: Comprehension
Level: Medium
Section Reference: Organizations use corporate, business, and functional strategies.
7. Which of these is an example of a strategic question at the corporate level?

a) What should our next product be?
b) How will we price our newest product?
c) Should we set up more sales offices?
d) In what industries and markets should we compete?
Ans: d
Level: Medium
8. A strategy that identifies how a division or business unit will compete in its product or
service domain is called a __________ strategy.
a) corporate
b) middle management
c) business
d) bottom level
Ans: c
Level: Medium
9. A strategy that guides activities within a specific area such as engineering and
marketing is called a(n) ____________ strategy.
a) business
b) functional
c) corporate
d) employee
Ans: b
Level: Medium
10. An example of a question asked at the business strategy level is:

a) How are we going to compete for customers in a competitive market?
b) What is our role in supporting engineering?
c) How many divisions should we have?
d) In what industries and markets should the corporation compete in?
Ans: a
Level: Medium
11. An example of a strategic question asked at the functional level is:
a) How does the engineering department support the business strategy?
b) What kind of product or service mix should we have?
c) How are we going to compete within this competitive industry?
d) In what industries and markets should the corporation compete in?
Ans: a
Level: Medium
12. A strategy for expanding an organization’s business is called a __________ strategy.

a) big
b) multiple
c) retrenchment
d) growth
Ans: d
Level: Easy
Section Reference: Growth strategies focus on expansion.
13. All of the following are growth strategies EXCEPT:

a) concentration
b) diversification
c) vertical integration
d) restructuring
Ans: d
Level: Medium
Section Reference: Restructuring and divestiture strategies focus on consolidation.
14. When a company expands in its existing markets, it is called growth through
__________.
a) retrenchment
b) diversification
c) concentration
d) globalization
Ans: c
Level: Easy
15. When a company expands by entering new business areas, it is called growth through
__________.
a) diversification
b) vertical integration
c) retrenchment
d) globalization
Ans: a
Level: Easy
16. ABC International is expanding by acquiring suppliers and distributors. This is called
growth through
a) diversification.
b) vertical integration.
c) retrenchment.
d) globalization.
Ans: b
Level: Medium
17. The riskiest growth strategy is through __________.

a) vertical integration
b) unrelated diversification
c) related diversification
d) backward integration
Ans: b
Level: Medium
18. Both Coca-Cola and PepsiCo have pursued __________ by purchasing some of their
major bottlers.
a) forward vertical integration
b) backward vertical integration
c) forward horizontal integration
d) backward horizontal integration
Ans: a
Level: Difficult
19. A strategy whose objective is to correct major problems in the business through
radical changes to current operations is called a _________ strategy.
a) going out of business
b) growth
c) status quo
d) retrenchment
Ans: d
Level: Medium
20. Which of the following is NOT a retrenchment strategy?

a) Diversification
b) Liquidation
c) Restructuring
d) Divestiture
Ans: a
Level: Medium
21. When a company closes and sells its assets in order to pay its debts, it is called
__________.
a) divestiture
b) liquidation
c) diversification
d) restructuring
Ans: b
Level: Medium
22. When a company reduces the size of its existing operations, it is called __________.
a) divestiture
b) liquidation
c) downsizing
d) diversification
Ans: c
Level: Medium
23. The retrenchment strategy that calls for selling off part of the organization is called
__________.
a) liquidation
b) downsizing
c) diversification
d) divestiture
Ans: d
Level: Medium
24. A __________ protects an insolvent firm from creditors during a period of

reorganization to restore profitability.
a) divestiture
b) downsizing
c) backward integration
d) chapter 11 bankruptcy
Ans: d
Level: Easy
25. A __________ strategy views the world as one market and adopts standard products
and advertising for use worldwide.
a) multidomestic
b) globalization
c) diversification
d) transnational
Ans: b
Level: Medium
Section Reference: Global strategies focus on international business initiatives.
26. A __________ strategy customizes products and advertising to the culture of the local
markets into which they are sold.
a) multidomestic
b) globalization
c) diversification
d) transnational
Ans: a
Level: Medium
27. Which of these strategies tries to operate without a strong national identity and seeks
a balance between the efficiency of worldwide operations and responsiveness to local
cultures?
a) Multidomestic
b) Globalization
c) Diversification
d) Transnational
Ans: d
Level: Medium
28. Two companies join together in partnership to pursue an area of mutual interest. This
is called a(n) __________.
a) acquisition
b) downsizing
c) strategic alliance
d) divestiture
Ans: c
Level: Medium
Section Reference: Cooperative strategies focus on alliances and partnerships.
29. A company legally works with its rivals on projects of mutual benefit. This is called
__________.
a) competition
b) collusion
c) co-opetition
d) restructuring
Ans: c
Level: Medium
30. Garden Tools, Inc. (GTI) uses the internet to market their products and gain
competitive advantage. GTI is employing a(n) __________ strategy.
a) communication
b) computer
c) e-business
d) electronic
Ans: c
Level: Medium
Section Reference: E-business strategies focus on using the Internet for business success.
31. The web-based business model of __________ involves providing free listings from
online merchants for directing potential customers to them.
a) advertising
b) brokerage
c) referral
d) subscription
Ans: c
Level: Medium
32. The electronic version of the basic retail strategy of selling directly to customers is
__________.
a) e-business
b) B2C
c) B2G
d) B2B
Ans: b
Level: Easy
33. Which strategy uses information technology and the internet to link organizations
vertically in supply chains?
a) B2C
b) B2S
c) B2G
d) B2B
Ans: d
Level: Medium
34. Which of these refers to the process of formulating and implementing strategies to
accomplish long term goals and to maintain a competitive advantage?
a) Strategic controlling
b) Strategic management
c) Globalization
d) Vertical integration
Ans: b
Level: Medium
Learning Objective 2: Understand how managers formulate and implement strategies.
Section Reference: The strategic management process formulates and implements
strategies.
35. Strategic management consists of strategy __________ and __________.

a) action; implementation
b) implementation; direction
c) formulation; implementation
d) formulation; review
Ans: c
Level: Medium
strategies.
36. The __________ statement defines the purpose of the organization and its reason for
existence in society.
a) operating objectives
b) corporate strategy
c) mission
d) strategy
Ans: c
Level: Medium
Section Reference: Strategy formulation begins with the organization’s mission and
objectives.
37. Specific results that companies try to achieve such as net sales and profits are
common results called __________.
a) operations
b) mission statements
c) strategic plans
d) operating objectives
Ans: d
Level: Medium
objectives.
38. “S” in the SWOT analysis refers to:

a) Strengths
b) Standards
c) Social
d) Systems
Ans: a
Level: Easy
Section Reference: SWOT analysis identifies strengths, weaknesses, opportunities, and
threats.
39. The SWOT element that focuses on outdated facilities and obsolete technologies in an
organization is called __________.
a) threats
b) opportunities
c) weaknesses
d) strengths
Ans: c
Level: Medium
threats.
40. A special strength, which a company has, that gives it a competitive advantage is
called a(n) __________.
a) unfair advantage
b) differential strategy
c) core competency
d) differential advantage
Ans: c
Level: Medium
threats.
41. According to Michael Porter, industry attractiveness is a function of which of these

five forces?
a) Profitability, market share, workforce quality, innovativeness, and social responsibility
b) Cost efficiency, product quality, service quality, workforce quality, and innovativeness
c) Differentiation, cost leadership, focused differentiation, focused cost, and integration
d) Competitors, new entrants, suppliers, customers, and substitutes
Ans: d
Level: Medium
Section Reference: Porter’s five forces model examines industry attractiveness.
42. When ABC Manufacturing focuses on offering products that are unique compared to
competitors’ products, they are focusing on a(n) _________ strategy.
a) integrated
b) cost leadership
c) differentiation
d) diversification
Ans: c
Level: Medium
Section Reference: Porter’s competitive strategies model examines business or product
strategies.
43. A strategic position within an industry relying upon low cost for a market segment
would be called a:
a) focused price leadership strategy.
b) focused differentiation strategy.
c) focused cost leadership strategy.
d) differentiation strategy.
Ans: c
Level: Medium
strategies.
44. From the BCG matrix, all of the following describe “question marks” EXCEPT:
a) Do not generate much profit
b) Low market shares, high market growth
c) High market shares, low market growth
d) Difficult for strategic decision making
Ans: c
Level: Medium
Section Reference: Portfolio planning examines strategies across multiple businesses or
products.
45. If Toddler Toys (TT) has products that the Boston Consulting Group would identify
as dogs, which of these would be the best strategy for TT?
a) High growth
b) Retrenchment
c) Low growth
d) No growth
Ans: b
Level: Medium
products.
46. A strategic leader must do all of the following EXCEPT:

e) Make sure all competing ideas receive attention and resources.
f) Implement and control organizational strategies.
g) Inspire people to engage in the process of continuous change.
h) Create a sense of urgency.
Ans: a
Level: Difficult
Learning Objective 2: Discuss how managers formulate and implement strategies.
Section Reference: Strategic leadership ensures strategy implementation and control.
Feedback a): Incorrect. The correct answer is make sure all competing ideas receive
attention and resources.
Feedback b): Incorrect. The correct answer is make sure all competing ideas receive
Feedback c): Incorrect. The correct answer is make sure all competing ideas receive
Feedback d): Correct.
True/False
47. Business strategies should support business goals.
Ans: True
Level: Easy
48. The key to having a sustainable competitive advantage is to operate in a way that is
difficult to imitate.
Ans: True
Level: Easy
advantage.
49. With the release of its iPad, Apple was the first to market an innovative product by
linking design, technology, and customer appeal. As such, the iPad offers Apple a
sustainable competitive advantage.
Ans: True
Level: Medium
advantage.
50. A functional strategy provides long-term direction for the total enterprise.
Ans: False
Level: Medium
51. The advantage of growth through concentration is that you are growing in an area that
you know and, presumably, have expertise.
Ans: True
Level: Medium
52. A retrenchment strategy could be a “going out of business” strategy.
Ans: True
Level: Medium
53. Critical thinking is a “must have” for success in strategic management.
Ans: True
Level: Easy
54. Just about any kind of partnership between two companies could be called a strategic
alliance.
Ans: True
Level: Medium
55. The strategy of working with rivals on projects of mutual benefit is called
crowdsourcing.
Ans: False
Level: Medium
56. The web-based business model of infomediary brings buyers and sellers together for
online business transactions and taking a percentage from the sales.
Ans: False
Level: Medium
57. The process of strategic management focuses only on developing strategies.
Ans: False
Level: Medium
strategies.
58. A mission statement includes specific goals that the organization wants to achieve.
Ans: False
Level: Difficult
objectives.
59. A SWOT analysis includes a detailed examination of an organization’s strengths and
weaknesses.
Ans: True
Level: Easy
threats.
60. A special strength that gives an organization a competitive advantage is called a core
competency.
Ans: True
Level: Medium
threats.
61. Porter’s Model of Industry Attractiveness includes four competitive forces.
Ans: False
Level: Easy
62. Operating objectives such as profits, cost efficiency, market share, product quality, a
talented workforce, innovation, and social responsibility are often under scrutiny when,
executives meet to discuss how well an organization is doing.
Ans: True
Level: Medium
objectives.
63. A focused differentiation is when you compete on price with your competitors.
Ans: False
Level: Medium
strategies.
64. The makers of Coke and Pepsi follow a focused cost leadership strategy.
Ans: False
Level: Difficult
strategies.
65. “Cash cows” are the business units that have high market shares in high-growth
markets in the BCG matrix.
Ans: False
Level: Medium
products.
66. Strategic leadership inspires people to implement organizational strategies.
Ans: True
Level: Medium
Fill-in-the-Blank
67. The ability to perceive situations, gather and interpret relevant information, and make
decisions is called __________.
Ans: critical thinking

Level: Medium
Section Reference: Management Live.
68. A(n) __________ is a comprehensive action plan that identifies long-term direction
for an organization and guides resource utilization to accomplish its goals.
Ans: strategy
Level: Medium
advantage.
69. Strategies that guide the activities of specific areas in implementing the
organizational-level strategies are called ________ strategies.
Ans: functional
Level: Medium
70. When your company expands into new areas of business it is called ________.
Ans: diversification
Level: Medium
71. __________ entails cutting the size of your organization and reducing the workforce.
Ans: Downsizing
Level: Medium
72. When a business owner sells off parts of their organization to refocus attention on
core business areas it is called a _________.
Ans: divestiture
Level: Medium
73. The international business strategy that adopts standard products and advertising to
use worldwide is called a(n) __________ strategy.
Ans: globalization
Level: Medium
74. __________ is strategic use of the Internet to engage customers and potential
customers in providing opinions and suggestions on products and their designs.
Ans: Crowdsourcing
Level: Medium
75. The process of putting strategies into action is called strategic _____________.
Ans: implementation
Level: Easy
strategies.
76. The shorter-term guides to action under the mission statement are called __________.
Ans: operating objectives

Level: Medium
objectives.
77. Special strengths of an organization that give the organization a competitive

advantage are called __________________.
Ans: Core competencies

Level: Medium
threats.
78. A(n) __________ strategy seeks the lowest costs of operations within a special
market segment.
Ans: focused cost leadership
Level: Medium
strategies.
79. __________ is the capability to inspire people to successfully engage in a process of

continuous change, performance enhancement, and implementation of the firm’s goals.
Ans: Strategic leadership

Level: Medium
Essay
80. Define the difference between a competitive advantage and a sustainable competitive
advantage.
Ans: A competitive advantage is something that you do better than your rivals. However,
a sustainable competitive advantage has the additional strength of being a competitive
advantage that is also difficult to imitate.
Level: Medium
advantage.
81. What is the difference between a globalization strategy and a transnational strategy?
Ans: A globalization strategy attempts to develop standard products and a strong national
identity for use worldwide, whereas a transnational strategy tries to operate without a
strong national identity.
Level: Medium
82. What are the three levels of strategy in large companies? Define each of them as to
their relationship to organizational structure, their purpose and their strategic questions.
Ans: The three levels of strategy are corporate, business and functional.
Corporate is the highest level. The corporate strategy sets the direction for the
corporation as a whole. At this level, the strategic question is “In what industries and
markets should the corporation compete?”
The Business strategy is for those divisions and business units that report to corporate
management. Each division or unit will have its own strategy, but these strategies must be
in support of the corporate strategy. The strategic question at this level is, “How are we
going to compete for customers in our industries and markets?”
The Functional strategy is for those departments such as production, engineering, and
marketing that report to division management. Each department may have its own
strategy, but all of the functional strategies must support each other as well as the
business strategy. The strategic question at the functional level is “How can we best
utilize resources within the function to support implementation of the business strategy?”
Bloom’s: Synthesis
Level: Medium
83. Name Porter’s Five Forces and describe their relation to the organization’s internal
and external environments.
Ans: The Five Forces are Industry Competition, Suppliers, Customers, New Entrants, and
Substitute Products.
Industry Competition is the rivalry that exists among competing firms. Typically, there
are a few competitors that dominate the market in terms of their size and relative market
share.
Suppliers are the firms from which a company purchases its equipment and raw
materials. Large suppliers may have broader product lines or lower prices, but smaller
suppliers may offer more personal service.
Customers are the reason for a firm’s existence. Large customers offer greater sales but,
because of their buying power, they often demand lower prices.
New Entrants are potential competitors who might enter the market. Too large or too
many competitors can destroy the profitability of a market.
Substitute Products are always a threat. They are often a result of new technologies and
can literally destroy a company that does not keep up with the newer technology.
Bloom’s: Analysis
Level: Medium
84. Discuss the classifications in the Boston Consulting Group’s matrix as they relate to
industry growth, market share, and business strategy.
Ans: The BCG matrix consists of Cash Cows, Stars, Question Marks, and Dogs.
Cash Cows are high market share low industry growth businesses. They are typically
profitable and cash generators. The cash cow strategy is little or no growth.
Stars are high market share high industry growth businesses. They are typically
profitable, but not cash generators due to the high cost of maintaining their growth. The
stars strategy is to at the market rate or higher.
Question Marks are low market share high industry growth businesses. They are
probably not profitable and cash users. The question mark strategy is either high growth
or retrenchment.
Dogs are low market share low industry growth businesses. They most likely are not
profitable and cash users. The dog strategy is retrenchment.
Bloom’s: Evaluation
Level: Medium
products.

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Exploring Management 4th Edition Schermerhorn Test Bank 1

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Exploring Management 4th Edition by

Schermerhorn ISBN 1118620194

Download full test bank at :

File: mod07, Chapter 7: Strategy and Strategic Management

1. A(n) ______________ is a comprehensive action plan that identifies long-term

4. Operating in successful ways that are difficult to imitate is called a __________.

7. Which of these is an example of a strategic question at the corporate level?

10. An example of a question asked at the business strategy level is:

12. A strategy for expanding an organization’s business is called a __________ strategy.

13. All of the following are growth strategies EXCEPT:

17. The riskiest growth strategy is through __________.

20. Which of the following is NOT a retrenchment strategy?

24. A __________ protects an insolvent firm from creditors during a period of

35. Strategic management consists of strategy __________ and __________.

38. “S” in the SWOT analysis refers to:

41. According to Michael Porter, industry attractiveness is a function of which of these

46. A strategic leader must do all of the following EXCEPT:

47. Business strategies should support business goals.

52. A retrenchment strategy could be a “going out of business” strategy.

53. Critical thinking is a “must have” for success in strategic management.

57. The process of strategic management focuses only on developing strategies.

61. Porter’s Model of Industry Attractiveness includes four competitive forces.

66. Strategic leadership inspires people to implement organizational strategies.

Ans: critical thinking

Ans: operating objectives

77. Special strengths of an organization that give the organization a competitive

Ans: Core competencies

79. __________ is the capability to inspire people to successfully engage in a process of

Ans: Strategic leadership

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35. Strategic management consists of strategy and .