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Chapter 06
Test Bank
True / False Questions
1. Donna's Restaurant is a popular café that specializes in home-cooked meals, friendly service, and a menu that contains vegan and vegetarian
dishes, (menu items that no other restaurant in the area offers). Donna's Restaurant is engaging in strategic positioning by offering the unique menu
items of vegan and vegetarian dishes.
TRUE
AACSB: Knowledge Application

Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 06-01 Identify the three principles underlying stategic positioning.
Topic: Strategic Positioning
Feedback: Strategic positioning means performing different activities from rivals, or performing similar activities in different ways. Donna's
Restaurant is meeting the broad needs of relatively few customers (vegans and vegetarians).
2. A and B Office Supply, a small family-owned company, sells high-priced desks, some as expensive as $10,000, to executives in its area. Very few
companies have chosen to market this product, and A and B has enjoyed record profits over the last 25 years. A and B Office Supply is an example of
a company that would typically not choose to utilize strategic planning.
TRUE

Blooms: Apply
Difficulty: 3 Hard
Topic: Strategic Planning
Feedback: Research results indicate that for small companies strategic planning is probably not worth the effort unless the company is in a highly
competitive industry where small differences in performance may affect the firm's survival potential.
3. The strategic-management process is often touched off by a crisis.

TRUE
AACSB: Analytical Thinking

Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-02 Outline the five steps in the strategic management process.
Topic: Strategic Management
Feedback: The strategic-management process is often touched off by a crisis, such as the one Takata faced in having to recall millions of automotive
airbags.
6-1
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McGraw-Hill Education.
4. The first three steps in the strategic-management process are establishing the mission and the values statement, assessing the current reality, and
formulating the grand strategy.
TRUE

Blooms: Apply
Difficulty: 3 Hard
Feedback: The first three steps in the strategic-management process are (1) establishing the mission and the values statement, (2) assessing the
current reality, and (3) formulating the grand strategy. The next two steps are implementing the strategy and maintaining strategic control, along
with a feedback loop (see Figure 6.1).
5. Frank is interested in rewriting the vision statement for his antique shops, and he wants his employees and his business to grow. Therefore, the
vision for Frank's stores should be positive and inspiring, and it should stretch the company and his employees to achieve objectives that they believe
are not possible.
TRUE

Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 06-03 Identify the characteristics of good mission, vision, and values statements.
Topic: Vision Statement
Feedback: A vision should be positive and inspiring, and it should stretch the organization and its employees to achieve a desired future state that
appears beyond its reach.
6. When Pablo and his partner wrote the mission statement for their fitness center, P&P Fitness, it did not include descriptions of their customers or
the products and services they offer, because those descriptions belong in a vision statement.
FALSE

Blooms: Apply
Difficulty: 3 Hard
Topic: Mission Statement
Feedback: Mission statements may include information about customers and products or services.
7. The vision statement is an organization's purpose or reason for being, and a company's mission statement is its long-term goal of what it wants to
become.
FALSE

Blooms: Understand
Feedback: The mission statement is an organization's purpose or reason for being, and a company's vision statement is its long-term goal of what it
wants to become. (See Table 6.1.)
8. Competitive intelligence means gaining information about one's competitors' activities so that you can anticipate their moves and react
appropriately. For example, managers gain competitive intelligence by reading business publications, such as the, in order to understand competitors'
business plans, goals, and strategies.
TRUE

Blooms: Understand
Difficulty: 1 Easy
Learning Objective: 06-04 Explain how an organization assesses the competitive landscape.
Topic: Competitive Intelligence
Feedback: Practicing competitive intelligence means gaining information about one's competitors' activities so that you can anticipate their moves
and react appropriately. If you are a manager, one of your worst nightmares is that a competitor will surprise you with a service or product that will
revolutionize the market and force you to play catch-up.
6-2
9. The managers of a small bakery, Butter & Batter, decided to do a SWOT analysis to study the strengths and weaknesses within the organization
and the external environment. A key benefit of conducting a SWOT analysis is being able to better formulate strategies in pursuit of the firm's
mission.
TRUE

Blooms: Apply
Difficulty: 3 Hard
Topic: Environmental Scanning
Feedback: SWOT analysis should provide a realistic understanding of the organization in relation to its internal and external environments so you can
better formulate strategy in pursuit of the firm's mission.
10. Organizational threats are an environmental factor that can hinder an organization's ability to achieve a competitive advantage. For example,
managers may realize that the government is about to place restrictions on exports, which will limit the company's ability to sell its products overseas
(which will in turn greatly reduce its profits).
TRUE

Blooms: Remember
Difficulty: 1 Easy
Topic: Organizational Threats
Feedback: Organizational threats are environmental factors that hinder an organization's achieving a competitive advantage.
11. Brilliante Pens, a 125-year-old pen manufacturer, markets very high-quality pens, many of which cost more than $1,000 each, to executives
globally, always maintaining its reputation of superior value in its narrow market. Brilliante is using a cost-focus strategy.
FALSE

Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 06-05 Discuss four techniques for formulating strategy.
Topic: Focused Differentiation Strategy
Feedback: The focused-differentiation strategy is to offer products or services that are of unique and superior value compared to those of competitors
and to target a narrow market. Some luxury cars, like the Rolls-Royce, Ferrari, and Lamborghini, are so expensive that only a few car buyers can
afford them. In contrast, the cost-focus strategy is to keep the costs, and hence prices, of a product or service below those of competitors and to target
a narrow market.
12. For over 20 years, ABC Manufacturing produced only one product, a car part for Moraine Assembly (the Moraine, Ohio, General Motors truck
factory). Because its single-product business is so closely tied to Moraine Assembly, ABC is a vulnerable company.
TRUE

Blooms: Apply
Difficulty: 3 Hard
Topic: Single-Product Strategy
Feedback: In a single-product strategy, a company makes and sells only one product within its market. This strategy allows you to focus your
manufacturing and marketing efforts on that product. The risk, of course, is that you are vulnerable if a rival gets the jump on you, or if an act of God
intervenes, in which case your entire business may go under. ABC Manufacturing will have a hard time staying in business if GM closes Moraine
Assembly or moves it to another country.
13. In a single-product strategy, a company makes and sells only one product within its market. An example of a businessperson following a single-
product strategy is a farmer who grows and sells only corn.
TRUE

Blooms: Apply
Difficulty: 3 Hard
Feedback: In a single-product strategy, a company makes and sells only one product within its market—for example, a corn farmer.
6-3
14. Execution consists of questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve promised
results.
TRUE

Blooms: Understand
Learning Objective: 06-06 Describe the role of effective execution in strategic management.
Topic: Strategy Execution
Feedback: Execution consists of using questioning, analysis, and follow-through to mesh strategy with reality, align people with goals, and achieve
promised results.
15. Because all work ultimately entails some human interaction, effort, or involvement, Bossidy and Charan believe that focusing on organization
synergy is the most important process in strategy execution.
FALSE

Blooms: Understand
Feedback: Because all work ultimately entails some human interaction, effort, or involvement, Bossidy and Charan believe that the people process is
the most important of the three core processes (people, strategy, and operations).
16. _____ focuses on developing a comprehensive program for long-term success.

A. Strategic planning
B. Mission and vision statements
C. Organizational diversity
D. TQM
E. A synergy agenda

Blooms: Remember
Feedback: Strategic planning is concerned with developing a comprehensive program for long-term success.
17. The best ways to avoid faddish management ideas are to

A. understand your own core values, and use this knowledge to create or accept the core values of your company.
B. adopt management by consensus and business process reengineering.
C. adopt MBO and TQM.
D. emphasize employee diversity and expand the business's operations globally.
E. implement a six-sigma quality system and manage by "walking around."

Blooms: Remember
Feedback: Two good ways to avoid faddish management ideas are to understand your own core values and then use this knowledge to help you
create or accept the core values of your company.
18. To understand your own values, you should

A. understand how ethics differs from legal requirements.
B. take a course on value creation and definition.
C. articulate them in writing and test them through daily decision making.
D. focus on cutting costs while improving quality.
E. write a strong marketing plan that will help you achieve your desired profit level.

Blooms: Understand
6-4
Topic: Values
Feedback: According to Keven Daum, the best ways to understand your own values are to articulate them clearly in writing and test them daily
through decision making.
19. The three key principles of ______ are the creation of a unique and valuable position, trade-offs in competing, and creating a "fit" among
activities.
A. company diversity
B. an increased MBO
C. a strong employee morale
D. an environment with few or no competitors
E. strategic positioning

Blooms: Understand
Feedback: The three key principles of strategic positioning are (1) the creation of a unique and valuable position, (2) trade-offs in competing, and (3)
creating a "fit" among activities.
20. According to Harvard Business School professor Michael Porter, strategic positioning means _____ to achieve sustainable competitive
advantage.
A. aggressive growth
B. distinctive positioning
C. collaborative planning
D. strategic alliances
E. retrenchment

Blooms: Understand
Feedback: According to Porter, strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a
company. "It means," he says, "performing different activities from rivals, or performing similar activities in different ways."
21. What are the three sources of a unique and valuable strategic position?
A. few needs, many customers; broad needs, few customers; broad needs, many customers
B. low-cost products; huge market needs; unique products
C. many needs, few customers; little need, many customers; narrow needs, few customers
D. poor products available; few products available; no products available
E. bad economy; strong economy; stable economy

Blooms: Understand
Feedback: A unique and valuable strategic position emerges from three possible sources: (1) few needs, many customers; (2) broad needs, few
customers; and (3) broad needs, many customers.
22. Instructor Services is a technology company that offers many IT services in highly populated southern Ohio. The company's services and
products include computer training, support, monitoring, repair, network design, virus removal, and software upgrades. It even sells refurbished
computers. The source of Instructor Services' strategic position is
A. low-profit margin and many customers.
B. broad needs and few customers.
C. broad needs and many customers.
D. high-profit margin and many customers.
E. high-profit margin and few customers.

Blooms: Apply
Difficulty: 3 Hard
6-5
Feedback: Strategy is the creation of a unique and valuable position. Strategic position emerges from three sources. One of the sources, like
Instructor Services', is broad needs, many customers. This strategy is oriented toward serving the broad needs of many customers.
23. With small businesses in very competitive industries, small differences in performance may affect that company's survival. In this case, it is worth
the effort for the company's managers to implement
A. organizational diversity.
B. a synergy agenda.
C. MBO.
D. TQM.
E. strategic planning.

Blooms: Understand
Feedback: Researchers conclude that "it may be that the small improvement in performance is not worth the effort involved in strategic planning
unless a firm is in a very competitive industry where small differences in performance may affect the firm's survival potential."
24. A local karate studio offers many services: karate lessons to young children (under age 10), judo lessons to preteens, kickboxing courses for
teenagers and adults, and self-defense courses for older people. We can say that the studio has achieved _____ because the studio's activities interact
and reinforce one another.
A. an effective defensive strategy
B. a blue ocean strategy
C. diversification
D. contingency
E. fit

Blooms: Apply
Difficulty: 3 Hard
Feedback: "Fit" refers to the ways a company's activities interact and reinforce one another. The karate studio has achieved good fit with its many
related activities.
25. Gig companies, such as Amazon, Google, and Apple, are no longer content simply to enhance part of your life. Their new strategy is to build a
device, sell it to consumers, and then
A. send customers to partner retailers to supply content.
B. sell them the content to play on their device.
C. sell them the maintenance agreements for their devices.
D. find service companies to assist customers if needed.
E. focus on selling more items and devices to their friends and families.

Blooms: Understand
Feedback: With big companies, especially big-tech companies such as Amazon, Google, or Apple, the strategy is to get consumers tied not just to a
brand or device or platform but to make them captive of the company's ecosystem and to get them connected "as tightly as possible so they and their
content are locked into one system," says analyst Michael Gartenberg.
26. ______ requires a manger to visit an earlier step in the strategic-management process in order to revise actions if necessary.
A. The organizational mission
B. Strategy formulation
C. The current reality assessment
D. The feedback loop
E. The planning process

Blooms: Understand
6-6
Topic: Strategic Control System
Feedback: The feedback loop, which provides an opportunity to monitor progress, revise actions, and maintain strategic control, originates at the final
step of the strategic-management process (see Figure 6.1).
27. In order, the steps of the strategic-management process are

A. establish the mission and vision statements, assess the current reality, conduct a trend analysis, and maintain the feedback loop.
B. establish the mission statement, maintain strategic control, formulate the grand strategy, and implement the strategy.
C. establish the mission, vision, and values statements; assess the current reality; formulate the grand strategy; implement the strategy; and maintain
strategic control.
D. establish the vision and values statements, develop a mission statement, formulate the grand strategy, implement the strategy, and maintain the
feedback loop.
E. determine the strategy; carry out the strategic plans; and establish the mission, vision, and values statements.

Blooms: Remember
Difficulty: 1 Easy
Feedback: The steps of the strategic-management process are (1) establishing the mission, vision, and values statement; (2) assessing the current
reality; (3) formulating the grand strategy; (4) implementing the strategy; and (5) maintaining strategic control and the feedback loop (see Figure
6.1).
28. The second step in the strategic-management process is a(n) ________, where managers look at where the organization stands, and then
determine what is working and what could be different to maximize efficiency and effectiveness in achieving the organization's mission.
A. organizational vision statement
B. company synergy assessment
C. current reality assessment
D. ethical and diversity evaluation
E. grand strategy

Blooms: Understand
Feedback: The second step in the strategic-management process is to do a current reality assessment, or organizational assessment—to look at where
the organization stands and see what is working and what could be different to maximize efficiency and effectiveness in achieving the organization's
mission.
29. An organization's vision statement needs to describe

A. the organization's purpose or reason for being.
B. what the company will market and its business plan.
C. the organization's purpose or reason for being and its strategic intent.
D. the organization's ethical and diversity standards.
E. what the company wants to become and its long-term direction and strategic intent.

Blooms: Apply
Difficulty: 3 Hard
Feedback: An organization's vision statement expresses is its long-term goals, describing what it wants to become, as well as its long-term direction
and strategic intent.
30. "Who are our customers? What are our major products or services? In what geographic areas do we compete?" A good _____ will answer these
questions.
A. vision statement
B. code of ethics
C. mission statement
D. value pact
E. management belief statement

6-7
Blooms: Remember
Difficulty: 1 Easy
Feedback: Good mission statements should answer these questions: (1) Who are our customers? (2) What are our major products or services? (3) In
what geographic areas do we compete? (4) What is our basic technology? (5) What is our commitment to economic objectives? (6) What are our
basic beliefs, values, aspirations, and philosophical priorities? (7) What are our major strengths and competitive advantages? (8) What are our public
responsibilities, and what image do we wish to project? (9) What is our attitude toward our employees? (See Table 6.1.)
31. "Is it appropriate for the organization and for the times? Does it set standards of excellence and reflect high ideals? Is it ambitious?" A good
_______ will answer these questions.
A. belief agreement
B. code of ethics
C. mission statement
D. vision statement
E. values statement

Blooms: Understand
Feedback: Good vision statements should answer these questions: (1) Is it appropriate for the organization and for the times? (2) Does it set standards
of excellence and reflect high ideals? (3) Does it clarify purpose and direction? (4) Does it inspire enthusiasm and encourage commitment? (5) Is it
well articulated and easily understood? (6) Does it reflect the uniqueness of the organization, its distinctive competence, what it stands for, what it's
able to achieve? (7) Is it ambitious?
32. The growth, stability, and defensive strategies are common

A. leadership strategies.
B. cost-leadership strategies.
C. types of differentiation plans.
D. stabilization strategies.
E. grand strategies.

Blooms: Remember
Difficulty: 1 Easy
Feedback: Three common grand strategies are growth, stability, and defensive strategies.
33. Access Office Equipment has shifted to sales and service of laptops and PCs, where it has the potential to triple the number of its customers. The
company is no longer offering repairs on older types of office equipment because the demand for service on this equipment is low, and profits in that
part of the business have dropped significantly. Access Office Equipment is implementing a _____ strategy.
A. growth
B. cutting-edge
C. stability
D. defensive
E. diverse

Blooms: Apply
Difficulty: 3 Hard
Feedback: A growth strategy is a grand strategy that involves expansion, as in expanding sales revenues, market share, number of employees, or
number of customers or (for nonprofits) clients served. In a variation of this strategy, it can grow market share or profits by innovating improvements
in products of services (an innovation strategy).
34. Organic Foods International has decided to increase its market share by hiring a marketing rep to visit businesses in the area and invite their
employees to shop at Organic Foods and attend monthly health events that take place at Organic Foods stores. Each of the individual stores has hired
two new employees to handle the anticipated increase in customer traffic. Organic Foods is using a _____ strategy.
A. cutting-edge
B. stability
C. defensive
6-8
D. growth
E. diverse

Blooms: Apply
Difficulty: 3 Hard
Feedback: A growth strategy is a grand strategy that involves expansion, as in expanding sales revenues, market share, number of employees, or
number of customers or (for nonprofits) clients served.
35. Delux Technology has a reputation of reliability and a winning customer service, qualities that helped to build this highly respected name brand
over the last 15 years. Speaking at a recent business conference, Steve, the CEO of Delux, told his audience, "We have built our reputation by
changing little over the last several years, but consistently helping customers with great, caring service and a reliable product." Which type of
strategy does Delux Technology use?
A. defensive strategy
B. merger approach
C. retrenchment strategy
D. growth strategy
E. stability strategy

Blooms: Apply
Difficulty: 3 Hard
Feedback: A stability strategy is a grand strategy that involves little or no significant change to a product or to business practices.
36. Over the course of 40 years, Sal grew his company to six package shipping stores. With his retirement approaching and the increased
competition, he decided to reduce the number of locations to two. Sal's reduction of effort represents a
A. merger approach.
B. fixed plan.
C. defensive strategy.
D. growth strategy.
E. stability strategy.

Blooms: Remember
Difficulty: 1 Easy
Feedback: A defensive strategy, or a retrenchment strategy, is a grand strategy that involves reduction in the organization's efforts. Example: Redbox,
which installed more than 40,000 DVD movie-rental kiosks in grocery stores, 7-Elevens, and Walmart stores during a seven-year growth period, in
2014 began uninstalling kiosks (more than 500 in the United States) and switching to a defensive strategy. Not only had the company run out of good
locations in which to place its machines, it was also contending with challenges from online streaming and more original television programs. The
music industry is also engaged in a defensive/retrenchment strategy.
37. _________ is another term for a defensive strategy.

A. A retrenchment strategy
B. A fixed plan
C. The aggressive approach
D. A growth strategy
E. A stability strategy

Blooms: Understand
Difficulty: 1 Easy
Feedback: A defensive strategy, or a retrenchment strategy, is a grand strategy that involves reduction in the organization's efforts.
38. Strategy formulation is the process of

A. gaining information about competition and then selecting which information to react to.
B. choosing among different strategies and altering them to best fit the organization's needs.
6-9
C. strategically controlling your employees' actions.
D. selecting the employees who best fit the organization.
E. developing a strong diversity plan.

Blooms: Remember
Difficulty: 1 Easy
Feedback: Strategy formulation is the process of choosing among different strategies and altering them to best fit the organization's needs.
39. Rashid, the CEO of Top Productions, said to his new vice president of accounting, "In the past I had resistance to new ideas by employees who
felt that our plans threatened their influence or their jobs. So when you tell your collections department that we just hired a collection agency to
handle bad debt, you may have to sell your collections manager and his supervisors on using the agency. You also have to emphasize the fact that
nobody is going to be laid off." Selling middle and supervisory managers on changes to overcome their resistance is often a necessary part of
A. reality assessment.
B. strategy formulation.
C. strategic control.
D. operational control.
E. strategy implementation.

Blooms: Apply
Difficulty: 3 Hard
Feedback: Often strategy implementation means overcoming resistance by people who feel the new plans threaten their influence or livelihood. Thus,
top managers can't just announce the plans; they have to actively sell them to middle and supervisory managers.
40. ___________ is(are) included in strategic control.

A. Implementing MBO
B. A strong employee diversity and synergy agenda
C. Seldom making adjustments to a strategy
D. Monitoring the execution of strategy and making adjustments, if necessary,
E. Developing a diversity plan

Blooms: Remember
Difficulty: 1 Easy
Feedback: Strategic control consists of monitoring the execution of strategy and making adjustments, if necessary.
41. Bryan Barry suggests that to keep a strategic plan on track, organizations should
A. engage people, keep it simple, stay focused, and keep moving.
B. engage people, keep people happy, provide fun activities, and provide good benefits.
C. provide fun activities, provide good benefits, and keep it simple.
D. engage people, keep it simple, stay focused, and offer a good benefits package.
E. aggressively compete, cut costs, focus on customer service, and engage people.

Blooms: Understand
Feedback: To keep a strategic plan on track, suggests Bryan Barry, you need to do the following: engage people, keep it simple, stay focused, and
keep moving.
42. George, a chef and owner of L'Auberge, a popular restaurant, is always visiting his competitors to observe how they are doing things in their
restaurants. He told one of his managers, "I eat dinner at a lot of restaurants because I want to know what is going on. I am always concerned that one
of our competitors will surprise us with a new service or menu item, like ours but better." In which activity is George engaging?
A. competitive intelligence
B. environmental scanning
C. TQM
6-10
D. corporate spying
E. management by observation

Blooms: Apply
Difficulty: 3 Hard
Feedback: Practicing competitive intelligence means gaining information about one's competitors' activities so that you can anticipate their moves
and react appropriately.
43. Pedro, CEO of a successful IT company, is constantly reading press releases, ads, and news articles about his competition. He regularly checks
information about new competitive products and visits trade shows to study his competition. Pedro is involved in
A. environmental observation.
B. TQM.
C. corporate spying.
D. management by observation.
E. competitive intelligence.

Blooms: Apply
Difficulty: 3 Hard
Feedback: Gaining competitive intelligence isn't always easy, but there are several avenues and, surprisingly, most of them are public sources—
including advertising, investor information, and informal sources. Salespeople and marketers, who are out calling on corporate clients, may return
with tidbits of information on what competitors are doing.
44. Susana keeps a close eye on her company's internal and external environment to discover possible opportunities for new products and to discern
possible threats from the competition. In which activity is Susana engaged?
A. the synergistic approach
B. environmental scanning
C. corporate spying
D. management by observation
E. competitive intelligence

Blooms: Apply
Difficulty: 3 Hard
Feedback: Environmental scanning is the careful monitoring of an organization's internal and external environments to detect early signs of
opportunities and threats that may influence the firm's plans.
45. A SWOT analysis is

A. a search for the strengths, weaknesses, opportunities, and threats influencing an organization's competition.
B. a diversity and synergy method used in vertical integration.
C. a search for the strengths, weaknesses, opportunities, and threats affecting an organization.
D. an analysis of strategies, ways to improve, output methods, and threats influencing a company.
E. an inexpensive method of implementing a forecast.

Blooms: Remember
Difficulty: 1 Easy
Feedback: SWOT analysis, also known as a situational analysis, is a search for the strengths, weaknesses, opportunities, and threats affecting an
organization.
46. Many customers shop at Organic Foods because of the employees' extensive product knowledge. In a SWOT analysis, the employees' high levels
of product knowledge are an example of the company's
A. strengths.
B. threats.
C. weaknesses.
6-11
D. opportunities.
E. intelligence.

Blooms: Apply
Difficulty: 3 Hard
Topic: Organizational Strengths
Feedback: Strengths are inside matters; they are the skills and capabilities that give the organization special competencies and competitive
advantages in executing strategies in pursuit of its vision. Strengths could be work processes, organization, culture, staff, product quality, production
capacity, image, financial resources and requirements, service levels, and other internal matters.
47. Don knows that one of the reasons people do not return to his electronics store is because of the slow service. How would a SWOT analysis
classify the slow service at Don's electronic store?
A. as a strength
B. as a threat
C. as a weakness
D. as an opportunity
E. as intelligence

Blooms: Apply
Difficulty: 3 Hard
Topic: Organizational Weaknesses
Feedback: Weaknesses are internal matters. They are the drawbacks that hinder an organization in executing strategies in pursuit of its vision.
Weaknesses could be in the same categories as strengths: work processes, organization, culture, staff, product quality, production capacity, image,
financial resources and requirements, service levels, and other internal matters. At Don's electronics store, the slow service is a weakness.
48. Christopher's Restaurant and Catering serves delicious vegetarian and vegan dishes. So when the local community became interested in eating a
healthier diet, Christopher's benefited. In a SWOT analysis, the changing community attitudes are an example of a(n) _____ for Christopher's
Restaurant.
A. strength
B. threat
C. weakness
D. opportunity
E. intelligence

Blooms: Apply
Difficulty: 3 Hard
Topic: Organizational Opportunities
Feedback: Opportunities are outside matters. They are environmental factors that the organization may exploit for competitive advantage.
Opportunities could be market segment analysis, industry and competition analysis, impact of technology on organization, product analysis,
governmental impacts, and other external matters.
49. The owners of Smith's Yard Mart, a family-owned garden center in a rural community, are concerned over the news that a large retailer with a
garden center is building a new store on the other side of town. According to a SWOT analysis, this new retailer is a(n) ____ to Smith's.
A. strength
B. threat
C. weakness
D. opportunity
E. intelligence

Blooms: Apply
Difficulty: 3 Hard
Topic: Organizational Threats
Feedback: Threats are outside matters. They are environmental factors that hinder an organization's achieving a competitive advantage. Threats could
be in the same categories as opportunities: market segment analysis, industry and competition analysis, impact of technology on an organization,
product analysis, governmental impacts, and other external matters. The new retail store poses a threat to Smith's Yard Mart.
6-12
50. In a SWOT analysis, organizational strengths are
A. external opportunities that a company can take advantage of.
B. environmental factors that the organization may exploit for competitive advantage.
C. MBO skills that should be emphasized.
D. skills and capabilities that give a company advantages in executing its strategies.
E. means that give a specific industry an advantage in a down economy.

Blooms: Understand
Topic: Organizational Strengths
Feedback: Organizational strengths are the skills and capabilities that give the organization special competencies and competitive advantages in
executing strategies in pursuit of its mission.
51. Organizational opportunities in a SWOT analysis are

A. environmental factors that the organization may exploit for a competitive advantage.
B. weaknesses within the organizational hierarchy.
C. MBO skills and opportunities that should be emphasized.
D. skills and capabilities that give an industry advantages in executing its strategies.
E. problems that a specific industry needs to correct.

Blooms: Remember
Difficulty: 1 Easy
Topic: Organizational Opportunities
Feedback: Organizational opportunities are environmental factors that the organization may exploit for competitive advantage.
52. A forecast is a(n)

A. glimpse of what just happened.
B. execution of strategy and adjustments.
C. projection for the future.
D. analysis of the past.
E. plan for implementing strategic plans.

Blooms: Remember
Difficulty: 1 Easy
Topic: Forecast
Feedback: A forecast is a vision or projection of the future.
53. Contingency planning is also known as

A. organizational opportunities.
B. scenario goal-setting and plans.
C. a trend analysis.
D. scenario planning and scenario analysis.
E. strategic planning.

Blooms: Remember
Difficulty: 1 Easy
Topic: Contingency Planning
Feedback: Contingency planning is also known as scenario planning and scenario analysis, which is the creation of alternative hypothetical but
equally likely future conditions.
54. The basic assumption that the picture of the present can be projected into the future is the basis of a
A. strategic goal.
B. business plan.
C. vision statement.
D. SWOT analysis.
E. trend analysis.
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Blooms: Understand
Topic: Forecast
Feedback: A trend analysis is a hypothetical extension of a past series of events into the future. An example of trend analysis is a time-series forecast,
which predicts future data based on patterns of historical data. Time-series forecasts are used to predict long-term trends, cyclic patterns (as in the up-
and-down nature of the business cycle), and seasonal variations (as in Christmas sales versus summer sales).
55. Sales this year at Donna's Pawn Shop have been high, and based on several factors, Donna projects next year's sales to also be good. However,
even with her forecast of continued strong sales, Donna and her business partner need to develop a plan in case sales drop unexpectedly. ________ is
the type of planning for alternative future conditions.
A. Background planning
B. Trend analysis
C. A vision plan
D. Contingency planning
E. A managerial pact

Blooms: Apply
Difficulty: 3 Hard
Topic: Contingency Planning
Feedback: Contingency planning, also known as scenario planning and scenario analysis, is the creation of alternative hypothetical but equally likely
future conditions.
56. ________ is the process by which a company compares its performance with that of high-performing organizations.
A. Trend analysis
B. Synergy
C. Contingency planning
D. Forecasting
E. Benchmarking

Blooms: Understand
Difficulty: 1 Easy
Topic: Benchmarking
Feedback: Benchmarking is a process by which a company compares its performance with that of high-performing organizations.
57. Michael Porter proposed that business-level strategies originate with the primary competitive forces in the firm's environment; these forces are
A. the threats of new entrants and the bargaining power of buyers and suppliers.
B. the threats of substitute products and the services and competitive rivalries.
C. the threats of new entrants and substitute products or services, the bargaining power of suppliers and buyers, and competitive rivalries.
D. the threats of government paperwork and tax increases, the bargaining power of suppliers, and competitive rivalries.
E. the bargaining power of suppliers.

Blooms: Remember
Topic: Porter's Five Forces
Feedback: Strategic-management expert Michael Porter suggested in his model for industry analysis that business-level strategies originate in five
primary competitive forces in the firm's environment: (1) threats of new entrants, (2) bargaining power of suppliers, (3) bargaining power of buyers,
(4) threats of substitute products or services, and (5) rivalry among competitors.
58. Tom and his family have developed a successful business selling a liquid spray fertilizer to farmers. The fertilizer consists of rich, organic,
composted material. Recently NuBreed Seed, a national seed company, has been marketing a powdered chemical fertilizer to its customers;
NuBreed's fertilizer is less expensive than Tom's product. NuBreed's efforts are an example of the ___ in Porter's model for industry analysis.
A. buyers' negotiating influence
B. competitive rivalry among competitors
C. threats of substitute products and services
D. power of the suppliers
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E. threats of new ideas

Blooms: Understand
Feedback: In an example of the threats of substitute products or services, at one time oil companies worried that Brazil was close to becoming energy
self-sufficient because it was able (for a while) to meet its growing demand for vehicle fuel by substituting ethanol (derived from Brazilian
sugarcane) for petroleum.
59. Porter's competitive strategies of cost-leadership and differentiation focus on ____ markets, while the cost-focus and focused-differentiation
strategies focus on ____ markets.
A. narrow; wide
B. specific; broad
C. growth; specific
D. diverse; narrow
E. wide; narrow

Blooms: Remember
Difficulty: 1 Easy
Topic: Strategy
Feedback: Porter's four competitive strategies (also called four generic strategies) are (1) cost-leadership (wide markets), (2) differentiation (wide
markets), (3) cost-focus (narrow markets), and (4) focused-differentiation (narrow markets).
60. When organizations endeavor (1) to keep their costs (and hence the prices of their products or services) below those of competitors and (2) to
target a wide market, they are utilizing a _____ strategy.
A. focused-differentiation
B. differentiation
C. cost-leadership
D. reinventing
E. cost-focus

Blooms: Remember
Difficulty: 1 Easy
Topic: Cost-Leadership Strategy
Feedback: The cost-leadership strategy is to keep the costs, and hence prices, of a product or service below those of competitors and to target a wide
market.
61. Organic Market sells high-quality products and grocery items that are unique to its area; in addition it offers delivery for customers who are
unable to leave their home and a number of regular workshops regarding healthy eating. By offering these types of products and services, Organic
Market is pursuing a _____ strategy.
A. cost-savings
B. cost-focus
C. value-focused
D. differentiation
E. focused-differentiation

Blooms: Apply
Difficulty: 3 Hard
Topic: Differentiation Strategy
Feedback: The differentiation strategy is to offer products or services that are of unique and superior value compared to those of competitors but to
target a wide market.
62. Mountain Rescue Incorporated sells emergency safety and rescue products to ski patrols and rescue workers at prices that are below those of its
competitors, which offer a larger line of more expensive products and focus on broader markets. Mountain Rescue Incorporated is pursuing a ____
strategy.
A. cost-focus
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B. cost-leadership
C. differentiation
D. narrow
E. focused-differentiation

Blooms: Apply
Difficulty: 3 Hard
Topic: Cost-Focus Strategy
Feedback: The cost-focus strategy is to keep the costs, and hence prices, of a product or service below those of competitors and to target a narrow
market.
63. The Golden Bed in Dayton, Ohio, sells high-quality, unique bedding that is a real value to upscale homes in the area. No other company in its
local area markets bedding of such quality and value. By offering this type of product, The Golden Bed is utilizing a _____ strategy.
A. cost-leadership strategy
B. focused-differentiation
C. cost-focus
D. uniquely focused
E. differentiation

Blooms: Remember
Difficulty: 1 Easy
Topic: Focused Differentiation Strategy
Feedback: The focused-differentiation strategy is to offer products or services that are of unique and superior value compared to those of competitors
and to target a narrow market.
64. Motherboard Technology makes and sells only one product, a high-quality processor for mainframe computers, within its market—Silicon
Valley, California. Which strategy is Motherboard Technology using?
A. cost-focus
B. focused-differentiation
C. diversification
D. single-product
E. differentiation

Blooms: Apply
Difficulty: 3 Hard
Feedback: In a single-product strategy, a company makes and sells only one product within its market. Making just one product allows you to focus
your manufacturing and marketing efforts just on that product. This means that your company can become savvy about repairing defects, upgrading
production lines, scouting the competition, and doing highly focused advertising and sales. However, a single-product strategy can make a business
vulnerable to various market forces or acts of God.
65. Quality Services is an organization that operates several companies that market food products, restaurant equipment, and paper and plastic
products, and it even has a division that counsels restaurant owners, helping them launch new restaurants successfully. Quality Services is pursuing a
_____ strategy.
A. single-product
B. diversification
C. focused-differentiation strategy
D. differentiation
E. multiproduct

Blooms: Apply
Difficulty: 3 Hard
Topic: Diversification
Feedback: Diversification strategy means operating several businesses to spread the risk. Major entertainment/media companies follow this strategy.
66. When an organization operates several businesses to spread the risk, such as a landscaping company that offers not only landscaping services but
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also lawn care, snow removal, and other services, that business is utilizing a ____ strategy.
A. diversity
B. diversification
C. focused-differentiation
D. differentiation
E. multiservice

Blooms: Apply
Difficulty: 3 Hard
Feedback: A diversification strategy means operating several businesses to spread the risk. You see a diversification strategy in action at a grocery
store that sells food, toiletries, pharmaceuticals, cards, flowers, and often more.
67. In the 1970s, Atari singlehandedly created a market for home video games, offering a console and cartridges that contained games like Space
Invaders, Centipede, and Asteroids. At the time, Atari effectively implemented a ______ strategy.
A. greenfield
B. diversification
C. blue ocean
D. defensive
E. multiproduct

Blooms: Apply
Difficulty: 3 Hard
Topic: Blue Ocean Strategy
Topic: Strategy
Feedback: A blue ocean strategy refers to a company's creating a new, uncontested market space that makes competitors irrelevant, creates new
consumer value, and decreases costs. For a while, Atari accomplished this goal. Of course, competitors eventually entered the industry.
68. The BCG matrix is a means of evaluating strategic business units on the basis of their
A. business costs and share of the market.
B. differentiation and profitability.
C. business growth rates and share of the market.
D. BCG ratio.
E. product quality and profitability.

Blooms: Understand
Topic: BCG Matrix
Feedback: The BCG matrix is a means of evaluating strategic business units on the basis of (1) their business growth rates and (2) their share of the
market.
69. In the BCG matrix, _______ are organizations that have slow growth but high market share, with income that often finances stars and question
marks.
A. sleeping giants
B. dogs
C. cash cows
D. turtles
E. sleepers

Blooms: Remember
Difficulty: 1 Easy
Topic: BCG Matrix
Feedback: In the BCG matrix, cash cows have slow growth but high market share, and income from them often finances stars and question marks.
70. In the BCG matrix, _____ are companies that have high growth and high market share, and are definite keepers.
A. sleeping giants
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B. stars
C. cash cows
D. turtles
E. sleepers

Blooms: Remember
Difficulty: 1 Easy
Topic: BCG Matrix
Feedback: In the BCG matrix, stars have high growth and high market share, and are definite keepers.
71. Global CEOs desire ___________ even more than profit growth, stimulating innovation, customer loyalty, and finding qualified employees.
A. an ethical workplace
B. organization diversity
C. an increased usage of MBO
D. happy employees
E. excellence in execution

Blooms: Understand
Feedback: How important is execution to organizational success in today's global economy? A survey of 769 global CEOs from 40 countries
revealed that "excellence in execution" was their most important concern, more important than "profit growth," "customer loyalty," "stimulating
innovation," and "finding qualified employees."
72. Successful controlling within an organization, according to Bossidy and Charan, demands that managers build a foundation of controlling using
___________, the three core processes.
A. leading, planning, and recruiting
B. people, strategy, and operations
C. diversity, people, and profitability
D. people, planning, and leading
E. leading, synergy, and diversity

Blooms: Understand
Feedback: Bossidy and Charan outline how organizations and managers can improve the ability to execute. Effective execution requires managers to
build a foundation for execution within three core processes found in any business: people, strategy, and operations.
73. A company's overall ability to execute is a function of effectively executing according to three processes, but Bossidy and Charan believe that the
_____ process is the most important.
A. operations
B. leading
C. people
D. planning
E. strategy

Blooms: Understand
Feedback: A company's overall ability to execute is a function of effectively executing according to three processes: people, strategy, and operations.
Because all work ultimately entails some human interaction, effort, or involvement, Bossidy and Charan believe that the people process is the most
important.
74. "What is the assessment of the external environment? What are the critical issues facing the business? Can the business execute the strategy?"
According to Bossidy and Charan, a ______ should address these some of these questions.
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A. code of ethics
B. value statement
C. diversity agenda
D. mission statement
E. strong strategic plan

Blooms: Understand
Feedback: According to Bossidy and Charan, a strong strategic plan addresses nine questions, among them: "What is the assessment of the external
environment? What are the critical issues facing the business? Can the business execute the strategy? Are the short term and long term balanced?"
75. Which of the following questions is NOT useful for evaluating a company's values statement?
A. Does it set standards of excellence and reflect high ideals?
B. Does it express the company's distinctiveness, its view of the world?
C. Is it tough, serving as the foundation on which difficult company decisions can be made?
D. Will it be unchanging, as valid 100 years from now as it is today?
E. Would you wish the organization to continue to hold these values, even if at some point they become a competitive disadvantage?
AACSB: Reflective Thinking

Blooms: Understand
Difficulty: 3 Hard
Topic: Values
Feedback: A values statement describes what the organization stands for, its core priorities, the values its employees embody, and what its products
contribute to the world. "Does it set standards of excellence and reflect high ideals?" is a question for evaluating a vision statement, not a values
statement.
76. A ____ statement should describe what the organization stands for, its core priorities, the values its employees embody, and what its products
contribute to the world.
A. mission
B. vision
C. values
D. diversity
E. strategy

Blooms: Remember
Topic: Values
Feedback: A values statement should describe what the organization stands for, its core priorities, the values its employees embody, and what its
products contribute to the world.
77. This question contains two parts; be sure to answer both. First, summarize the three sources from which strategic position emerges, providing an
example of a company with each strategic position. (You will be providing three examples.) Second, select either McDonald's or Apple Computer
and discuss the company's strategic position.
Strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company. It means, according to
Michael Porter, "performing different activities from rivals, or performing similar activities in different ways."
Strategic position emerges from three sources:
(1) Few needs, many customers: A strategic position can be derived from serving the few needs of many customers. Example: Jiffy Lube provides
only lubricants, but it provides them to all kinds of people with all kinds of motor vehicles.
(2) Broad needs, few customers: A strategic position may be based on serving the broad needs of just a few customers. Example: Wealth
management and investment advisory firm Bessemer Trust focuses exclusively on high-net-worth clients.
(3) Broad needs, many customers: The strategy may be oriented toward serving the broad needs of many customers. Example: National movie theater
operator Carmike Cinemas operates only in cities with populations of fewer than 200,000 people.
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McDonald's strategic position stems from few needs and many customers. The overall "need" is a meal, whether breakfast, lunch, or dinner. It serves
all kinds of people, of all ages, in many different locations across the country (and across the world).
Apple's strategic position stems from broad needs and many customers. The overall "needs" in this case is a wide range of electronic devices for
personal and workplace use and entertainment. Apple serves the needs of many customers around the world; it has one of the world's two dominant
operating systems (the other is owned by Microsoft).

Blooms: Understand
78. This question contains two parts; be sure to answer both. First, explain the three key principles that underlie strategic positioning. Next, explain
whether strategic management works as well for small companies as it does for large organizations, providing an example of how a small company
can offer personal connections as a source of competitive advantage.
Strategic positioning attempts to achieve sustainable competitive advantage by preserving what is distinctive about a company. Three key principles
underlie strategic positioning:
1. Strategy is the creation of a unique and valuable position. This position emerges from three possible sources: (a) few needs, many customers; (b)
broad needs, few customers; or (c) broad needs, many customers.
2. Strategy requires trade-offs in competing. Some strategies are incompatible. Thus, a company has to choose not only what strategy to follow but
also what strategy not to follow.
3. Strategy involves creating a "fit" among activities." "Fit" has to do with the ways a company's activities interact and reinforce one another. The
most effective companies have good or excellent fit among their activities.
One analysis found that companies with fewer than 100 employees could benefit from strategic planning, if only slightly. Even so, the researchers
concluded, "it may be that the small improvement in performance is not worth the effort involved in strategic planning unless a firm is in a very
competitive industry where small differences in performance may affect the firm's survival potential." Example: Whereas the strategy of big e-
commerce companies is to build a device, sell it to consumers, sell content to play on it, and sell advertising space, the strategy of small retailers—
like Hello Hello Books in Maine—is to discourage price comparisons (as in creating "buy it where you try it" campaigns or refusing to carry popular
items carried by big retailers), offer freebies, and attempt to establish a personal or emotional connection with customers. They also try to exploit the
sympathies of shoppers to "support the little guy."

Blooms: Understand
79. Imagine that you are the CEO of Biggies, a chain of family-style restaurants. You are interested in implementing the strategic management
process in your restaurants. Summarize the strategic management process and explain how you would execute each of the steps and the feedback
loop of the strategic management process in your restaurant chain.
The strategic-management process involves five steps:
1. Establish the mission, vision, and values statements.

2. Assess the current reality.
3. Formulate the grand strategy.
4. Implement the strategy.
5. Maintain strategic control.
The feedback loop comes out of strategic control. Through control, managers monitor progress and take corrective action early and rapidly when
things go awry, sometimes returning to earlier steps to rethink policies, redo budgets, or revise personnel arrangements.
Following are suggested answers for implementing the strategic-management process at Biggies.
1. Establish the mission, vision, and values statements. Biggies' mission statement might be "To provide an affordable meal for the American family,
with quality food and friendly service." Its vision statement might read, "Biggies will expand beyond the East Coast to become a national brand
known for its commitment to the local community and to its atmosphere of family friendliness. Our restaurants will be a place where parents can
count on healthy and tasty meals not only for themselves, but also for their children." The values statement might read, "Biggies is committed to fair
trade and equity, to ensuring that suppliers are paid a reasonable price for their goods, and to offering jobs first and foremost to the people who live in
the towns where our restaurants are located."
2. Assess the current reality. To assess the current reality, as the CEO of Biggies you will conduct competitive intelligence, keeping track of your
competitors' actions (for example, the new menu items they are offering) to make sure you are not caught unaware. You may decide to conduct a
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SWOT analysis (strengths, weaknesses, opportunities, and threats) in your environment, and you will plan for your business's long-term potential by
forecasting with trend analysis and planning for contingencies. You will benchmark your competitors to assess their best practices and perhaps use
Porter's model for industry analysis, examining the threats of new entrants, the bargaining power of suppliers and buyers, the threats of substitute
products or services, and rivalry among competitors.
3. Formulate the grand strategy. As the CEO, you will decide whether to pursue a growth, stability, or defensive strategy. You will also decide on a
key competitive strategy: cost-leadership, differentiation, cost-focus, or focused-differentiation. You will decide whether to focus on a single product
or to diversify; and you may use the BCG matrix to determine whether each restaurant in your chain is a star, question mark, cash cow, or dog. You
likely will not use a blue ocean strategy because there are many chain restaurants and it would be almost impossible to find a market space that
makes all competitors irrelevant.
4. Implement the strategy. To implement the strategies you've chosen, you will overcome roadblocks in the organization's structure and culture,
keeping an eye on personnel who may feel that the plans threaten their influence or livelihood. You will win over these employees by actively selling
your plans to them and making them feel like an important part of the company's success.
5. Maintain strategic control. To maintain strategic control, you will engage people, keep it simple, stay focused, and keep moving. You'll focus on
the three core business processes: people, strategy, and operations.

Blooms: Apply
Difficulty: 3 Hard
80. This question has two parts; be sure to answer both. First, summarize each of the three common grand strategies. Next, provide an example of
how a company (real or hypothetical) might execute each strategy.
These are the three common grand strategies:
1. A growth strategy is a grand strategy that involves expansion—as in sales revenues, market share, number of employees, or number of customers
or (for nonprofits) clients served. Sometimes a growth strategy is based on innovations in products or services; other times it is based on promotion
and marketing. Example: A car wash can expand its offerings beyond simple car washes and begin offering waxing, polishing, and detailing. The car
wash can also increase its promotion and marketing efforts to try to expand its market share. For example, it can place a coupon in local newspapers
or ads in the local pennysaver.
2. A stability strategy is a grand strategy that involves little or no significant change. Example: A downtown family jewelry store that specializes in
unique jewelry made with precious stones (such as emeralds, diamonds, and rubies) may decide it is very happy focusing on selling that particular
type of product. Because there will always be a demand for precious stones and unique jewelry, the owners of the store can feel confident that a
stability strategy will help them maintain their profits and competitive advantage over the long term.
3. A defensive strategy, or a retrenchment strategy, is a grand strategy that involves reduction in the organization's efforts. The company can reduce
costs by freezing hiring or tightening expenses. It can sell off (liquidate) assets—land, buildings, inventories, and the like. It can gradually phase out
product lines or services. Examples: In recent years, Sears has been contracting, closing off stores, and selling valuable real estate in prestigious
downtown locations. Kmart has also been implementing a retrenchment strategy, closing many of its stores. In 2016, Macy's announced the closing
of 100 stores.

Blooms: Remember
Difficulty: 1 Easy
81. This question contains several parts; be sure to answer each. Describe the characteristics of a good vision statement, and list at least three of the
questions that a good vision statement will ask. Finally, evaluate how well IKEA's vision statement matches each question.
IKEA's vision statement:
"At IKEA our vision is to create a better everyday life for many people. Our business idea supports this vision by offering a wide range of well-
designed, functional home furnishing products at prices so low that as many people as possible will be able to afford them."
Although a vision statement can be short, it should be positive and inspiring, and it should stretch the organization and its employees to achieve a
desired future state that appears beyond its reach. A vision statement expresses the company's long-term goal of what it wants to become.
A good vision statement will ask the following seven questions. (Evaluations of IKEA's vision statement on each criterion follow in parentheses.)
1. Is it appropriate for the organization and for the times? (IKEA's vision statement is appropriate for the organization. It reflects the fact that in the
Internet age, people are constantly on the lookout for the best deals on quality merchandise.)
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2. Does it set standards of excellence and reflect high ideals? (IKEA's vision statement shows its ideals in phrases like "create a better everyday life,"
"well-designed, functional home furnishing products," and "as many people as possible.")
3. Does it clarify purpose and direction? (IKEA's purpose is clear in its vision statement: It wants as many people as possible to be able to afford
quality home furnishing.)
4. Does it inspire enthusiasm and encourage commitment? (IKEA's vision statement does inspire enthusiasm because it taps into most people's desire
to have a nice home, regardless of their income or social status.)
5. Is it well articulated and easily understood? (IKEA's vision statement uses easy-to-understand language and is easily understood because it is so
direct and forthright.)
6. Does it reflect the uniqueness of the organization, its distinctive competence, what it stands for, what it's able to achieve? (IKEA's vision statement
does score high on all of these criteria; it is hard to think of another company that matches IKEA's goals and successes on these criteria.)
7. Is it ambitious? (IKEA's vision statement is ambitious. Just by saying "as many people as possible," the company commits itself to continuously
looking for ways to price its products so that more and more people can afford them.)

Blooms: Understand
82. Imagine that you are the CEO of a national chain of pet stores, Pets R Us. Define competitive intelligence and explain how you would use it to
assess the current reality/business climate.
Competitive intelligence means gaining information about one's competitors' activities so that you can anticipate their moves and react appropriately.
Managers never want to be caught unaware when a competitor offers a distinctive new product or service.
Gaining competitive intelligence isn't always easy, but there are several avenues, and most of them are public sources. They include (1) public
information and advertising, (2) investor information, such as corporate annual reports, and (3) informal sources, such as trade show gossip and
information from company salespeople.
As the CEO of Pets R Us, you will want to carefully monitor the activities of your key competitors, like Petco and PetSmart. You'll read as many of
their advertisements as you can find, both in print and online. You will certainly visit their stores and their websites to see what products and services
they offer. As you walk around the stores, you may think of ways to improve your own stores. You will assuredly read their annual reports, looking
at their profitability and benchmarking it against the profitability of PetSmart; this financial information may help you determine whether your costs
are too high, your revenue is too low, and so forth. At trade shows and conventions, you'll visit the Petco and PetSmart booths, listening for news that
may be useful to you. If you hire staff members who formerly worked for Petco or PetSmart, they may be able to share information about why they
think their former employer is successful—or how the company failed its customers.

Blooms: Apply
Difficulty: 3 Hard
83. Choose a local fast-food restaurant (such as a McDonald's, Wendy's, Taco Bell, KFC, or a locally owned diner) and develop a SWOT analysis for
the restaurant, utilizing the four elements of a SWOT analysis.
SWOT analysis—also known as a situational analysis—is a search for the strengths, weaknesses, opportunities, and threats affecting the
organization.
Examples of a firm's strengths and weaknesses: work processes, organization, culture, staff, product quality, production capacity, image, financial
resources and requirements, service levels, and other internal matters.
Examples of a firm's opportunities and threats: market segment analysis, industry and competition analysis, impact of technology on organization,
product analysis, governmental impacts, and other external matters (see Figure 6.2).
A SWOT analysis for McDonald's:
Strengths: McDonald's has major brand recognition, as well as a presence throughout the United States (and, increasingly, throughout the world),
with reasonable prices that most people can afford, and convenient locations.
Weaknesses: Despite attempts to offer healthier foods, most meals are still high in calories and fat; jobs are perceived as "dead-end" jobs, which will
not attract potential employees of high caliber.
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Opportunities: In an increasingly harried world, more and more people want food delivered to their homes or offices. McDonald's might begin
offering delivery in highly populated areas that would make the investment in drivers worthwhile.
Threats: Newer restaurant chains, such as Subway, emphasize the freshness and nutritional value of their menu items; restaurants have a hard time
competing in large cities like New York, where people prefer local restaurants and delicatessens.

Blooms: Apply
Difficulty: 3 Hard
84. Define and describe a trend analysis. Give an example of the ways in which a department store like Macy's or Dillard's might use a trend analysis.
A trend analysis is a hypothetical extension of a past series of events into the future. The basic assumption is that the picture of the present can be
projected into the future. This is not a bad assumption, if you have enough historical data, but it is always subject to surprises. And if your data are
unreliable, they will produce erroneous trend projections. An example of trend analysis is a time-series forecast, which predicts the future based on
patterns of historical data. Time-series forecasts are used to predict long-term trends, cyclic patterns (as in the up-and-down nature of the business
cycle), and seasonal variations (as in Christmas sales versus summer sales).
Department stores like Macy's and Dillard's will look for seasonal trends—for example, they will certainly sell more swimsuits in July than they do
in December. They will sell more men's clothes around Father's Day, and they will sell more women's clothes around Mother's Day. They will
carefully examine which types of products are being purchased by people of different age groups; for example, they may see 20-somethings buying
the latest electronic gadgets while 60-somethings purchase baby clothes for their newly born grandchildren. Examining sales data and trends will
help the stores' buyers choose the best selection of merchandise for each store at any given time of year and will also help the stores' marketers
customize their marketing outreach to different demographics.

Blooms: Understand
Topic: Forecast
85. The question has two parts; be sure to complete both. First, summarize Michael Porter's model for industry analysis, explaining each of the five
primary competitive forces. Next, imagine you are the CEO of The Big Ram, a company that sells ramen noodles. Give an example of each of the
five primary competitive forces in The Big Ram's environment.
According to Michal Porter, business-level strategies originate in the five primary competitive forces in a firm's environment:
1. Threats of new entrants: New competitors can affect an industry almost overnight, taking away customers from existing organizations. For The Big
Ram, new companies may enter the market for ramen noodles, offering new flavors or varieties, or undercutting The Big Ram's prices.
2. Bargaining power of suppliers: Companies without multiple suppliers are at the mercy of the one. Some companies are readily able to switch
suppliers, but others are not. If The Big Ram sources all of its noodles from one supplier, it will be at that supplier's mercy.
3. Bargaining power of buyers: Customers who buy a lot of products or services from an organization have more bargaining power than those who
don't, and customers who use the Internet to shop around are better able to negotiate a better price. Consumers' tastes may change. If people suddenly
decide that ramen noodles are unhealthy, The Big Ram's business could take a nose dive.
4. Threats of substitute products or services: Other companies may offer similar or different substitute products. The Big Ram may find itself
attacked by Kraft, which has decided to lower the price of its macaroni and cheese in order to take business away from The Big Ram.
5. Rivalry among competitors: Other ramen noodle companies, like Nissin and Top Ramen, want to be the most successful and will always be
looking for ways to take market share from The Big Ram.

Blooms: Apply
Difficulty: 3 Hard
86. This question contains two parts; be sure to answer each. First, summarize Porter's four competitive strategies, giving examples of companies that
use each of the strategies. Next, suppose you are CEO of PaperWhite, a company that produces reams of copy paper. Which strategy would you use,
and why?
Porter identified two "wide" strategies (cost-leadership and differentiation) that deal with broad markets, and two "narrow" strategies (cost-focus and
focused-differentiation) that target specific markets.
1. Cost-leadership focuses on keeping costs and prices low for a wide market; examples are Timex, Acer, Home Depot, and Bic.
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2. Differentiation stresses offering unique and superior products and services to a wide market; examples include Ritz-Carlton, Lexus, and Coca-
Cola.
3. Cost-focus emphasizes low costs and prices, but to a narrow market; examples include low-cost products sold at discount store and discount
regional gas station chains, such as Terrible Herbst, Rotten Robbie, and Maverik chains in parts of the West.
4. Focused-differentiation stresses unique and superior products to a narrow market; examples include the Ford GT supercar, Norwegian Cruise
Line's Norwegian Escape, Cartier, Turnbull & Asser, and niche books.
As the CEO of PaperWhite, you would most likely use the cost-leadership strategy, because paper is paper, and (almost) everyone needs it.

Blooms: Apply
Difficulty: 3 Hard
87. Explain how a company would utilize a single-product strategy and a diversification strategy (including a vertical integration strategy). Provide
an example of a company that uses each type of strategy.
In a single-product strategy, a company makes and sells only one product within its market. Making just one product allows you to focus your
manufacturing and marketing efforts just on that product. This means that your company can become savvy about repairing defects, upgrading
production lines, scouting the competition, and doing highly focused advertising and sales. The risk, of course, is that if you do not focus on all
aspects of the business, if a rival gets the jump on you, or if an act of God intervenes (for a florist, if roses suffer a blight right before Mother's Day),
your entire business may go under. The single-product strategy is seen all the time as you drive past the small retail businesses in a small town: There
may be one shop that sells only flowers, one that sells only security systems, and so on.
Diversification is operating several businesses in order to spread the risk. You see the diversification strategy at the small retailer level when you
drive past a store that sells gas and food and souvenirs and DVD movies. One kind of diversification strategy is vertical integration, in which a firm
expands into businesses that provide the supplies it needs to make its products or that distribute and sell its products. For many years, Hollywood
movie studios followed this model, not only producing movies but also distributing them and even owning their own theaters. Today Netflix follows
the same path by producing and distributing its own entertainment programming. Starbucks has long followed a plan of vertical integration by buying
and roasting all its own coffee and then selling it through its Starbucks coffee stores.

Blooms: Apply
Difficulty: 3 Hard
88. Explain the difference between a cost-leadership strategy and a differentiation strategy. Provide an example of a company that uses each type of
strategy.
A cost-leadership strategy is to keep the costs, and hence prices, of a product or service below those of competitors and to target a wide market. This
puts the pressure on R&D managers to develop products or services that can be created cheaply, production managers to reduce production costs, and
marketing managers to reach a wide variety of customers as inexpensively as possible. Firms implementing the cost-leadership strategy include
Timex, computer maker Acer, hardware retailer Home Depot, and pen maker Bic.
A differentiation strategy is to offer products or services that are of unique and superior value compared with those of competitors but to target a
wide market. Because products are expensive, managers may have to spend more on R&D, marketing, and customer service. This is the strategy
followed by Ritz-Carlton hotels and the makers of Lexus automobiles. This strategy is also pursued by companies trying to create brands to
differentiate themselves from competitors. Coca-Cola spends millions of dollars a year on ads.

Blooms: Apply
Difficulty: 3 Hard
Topic: Cost-Leadership Strategy
Topic: Differentiation Strategy
89. This question contains multiple parts; be sure to answer all of them. First, define and explain strategic control. Next, summarize Bryan Barry's
suggestions for keeping strategic planning on track. Finally, suppose you are the owner of a dog-walking service with eight dog-walkers on staff.
Explain how you would implement each of Barry's suggestions.
Strategic control consists of monitoring the execution of strategy and taking corrective action, if necessary. To keep a strategic plan on track,
suggests Bryan Barry, you need to do the following:
(1) Engage people. You need to actively engage people in clarifying what your group hopes to accomplish and how you will accomplish it. You will
want to make sure that all of your dog walkers show up on time to walk the dogs and that they are courteous to the dog owners.
6-24
(2) Keep it simple. Keep your planning simple, unless there's a good reason to make it more complex. As the owner of a dog-walking service, your
focus is simple: dogs. You aren't planning to walk cats or attach birds to a string so that they can flap their wings.
(3) Stay focused. Stay focused on the important things. Your focus should be on reliable, quality dog-walking services at a reasonable price.
(4) Keep moving. Keep moving toward your vision of the future, adjusting your plans as you learn what works. For example, you may learn that you
can increase your profits by walking multiple dogs at the same time; you may also find ways to offer premium services to your clients (such as
dropping dogs off at the groomer's and then picking them up and delivering them home).

Blooms: Understand
Topic: Strategic Control System
Category # of Questions
AACSB: Analytical Thinking 48
AACSB: Knowledge Application 38
AACSB: Reflective Thinking 3
Accessibility: Keyboard Navigation 76
Blooms: Apply 37
Blooms: Remember 21
Blooms: Understand 31
Difficulty: 1 Easy 20
Difficulty: 2 Medium 31
Difficulty: 3 Hard 38
Learning Objective: 06-01 Identify the three principles underlying stategic positioning. 14
Learning Objective: 06-02 Outline the five steps in the strategic management process. 11
Learning Objective: 06-03 Identify the characteristics of good mission, vision, and values statements. 7
Learning Objective: 06-04 Explain how an organization assesses the competitive landscape. 29
Learning Objective: 06-05 Discuss four techniques for formulating strategy. 21
Learning Objective: 06-06 Describe the role of effective execution in strategic management. 7
Topic: BCG Matrix 3
Topic: Benchmarking 1
Topic: Blue Ocean Strategy 1
Topic: Competitive Intelligence 4
Topic: Contingency Planning 2
Topic: Cost-Focus Strategy 1
Topic: Cost-Leadership Strategy 2
Topic: Differentiation Strategy 2
Topic: Diversification 3
Topic: Environmental Scanning 4
Topic: Focused Differentiation Strategy 2
Topic: Forecast 3
Topic: Mission Statement 3
Topic: Organizational Opportunities 2
Topic: Organizational Strengths 2
Topic: Organizational Threats 2
Topic: Organizational Weaknesses 1
Topic: Porter's Five Forces 4
Topic: Single-Product Strategy 4
Topic: Strategic Control System 2
Topic: Strategic Management 18
Topic: Strategic Planning 4
Topic: Strategic Positioning 6
Topic: Strategy 2
Topic: Strategy Execution 7
Topic: Values 3
Topic: Vision Statement 4
6-25

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AACSB: Knowledge Application

AACSB: Knowledge Application

3. The strategic-management process is often touched off by a crisis.

AACSB: Analytical Thinking

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Analytical Thinking

AACSB: Analytical Thinking

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Analytical Thinking

AACSB: Analytical Thinking

16. _____ focuses on developing a comprehensive program for long-term success.

AACSB: Analytical Thinking

17. The best ways to avoid faddish management ideas are to

AACSB: Analytical Thinking

18. To understand your own values, you should

AACSB: Analytical Thinking

AACSB: Analytical Thinking

AACSB: Analytical Thinking

AACSB: Analytical Thinking

AACSB: Knowledge Application

AACSB: Analytical Thinking

AACSB: Knowledge Application

AACSB: Analytical Thinking

AACSB: Analytical Thinking

27. In order, the steps of the strategic-management process are

AACSB: Analytical Thinking

AACSB: Analytical Thinking

29. An organization's vision statement needs to describe

AACSB: Knowledge Application

AACSB: Analytical Thinking

AACSB: Analytical Thinking

32. The growth, stability, and defensive strategies are common

AACSB: Analytical Thinking

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Analytical Thinking

37. _________ is another term for a defensive strategy.

AACSB: Analytical Thinking

38. Strategy formulation is the process of

AACSB: Analytical Thinking

AACSB: Knowledge Application

40. ___________ is(are) included in strategic control.

AACSB: Analytical Thinking

AACSB: Analytical Thinking

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Knowledge Application

45. A SWOT analysis is

AACSB: Analytical Thinking

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Knowledge Application

AACSB: Analytical Thinking

51. Organizational opportunities in a SWOT analysis are