Management Daft 11th Edition Test Bank Download

Management Daft 11th Edition Test Bank
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Chapter 8—Strategy Formulation and Execution
TRUE/FALSE
1. Research has shown that strategic thinking and planning positively affect a firm's performance and
financial success.
ANS: T PTS: 1 DIF: Difficulty: Easy

REF: 239 OBJ: LO: 08-01 NAT: BUSPROG: Analytic
STA: DISC: Strategy KEY: Bloom's: Knowledge
2. Strategic thinking is more important -profit businesses than for non-profit organizations.
ANS: F PTS: 1 DIF: Difficulty: Moderate

3. Top managers and chief executives have the final responsibility for strategic planning.
ANS: T PTS: 1 DIF: Difficulty: Moderate

REF: 239-240 OBJ: LO: 08-01 NAT: BUSPROG: Analytic
4. Front-line managers have the final responsibility for strategic planning.

STA: DISC: Strategy KEY: Bloom's: Comprehension
5. Competitive advantage refers to the set of decisions and actions used to formulate and implement
strategies.

6. The interaction of Production and Sales working together to produce profit greater than the total of
both working separately is an example of synergy.
ANS: T PTS: 1 DIF: Difficulty: Difficult

7. Core competence is the plan of action that prescribes resource allocation and other activities for
dealing with the environment.

8. The combination of benefits received and costs paid by the customer refers to value.
9. Corporate-level strategy pertains to the organization as a whole.

10. The "How do we compete?" question concerns functional-level strategy.

11. The three levels of strategy are business, corporate, and global.

12. Strategic partnerships are the current trend, rather than mergers and acquisitions.

13. In a turbulent business climate, managers should focus on strategic stability rather than flexibility.

14. Strategy implementation involves the planning and decision making that lead to the establishment of
the firm's goals.
ANS: F PTS: 1 DIF: Difficulty: Easy

15. Some companies hire competitive intelligence professionals to scan the external environment and
provide data and research on relevant domestic and global trends.

16. The administration and implementation of the strategic plan is strategy execution.

17. The essence of formulating strategy is choosing how the organization will conform to become like its
key competitors in the industry.

18. Executives acquire information about external opportunities and strengths from a variety of reports,
including budgets, financial ratios, profit and loss statements, and surveys of employee attitudes and
satisfaction.

19. Threats are characteristics of the internal environment that may prevent the organization from
achieving its strategic goals.

20. The task environment sectors are the most relevant to strategic behavior and include the behavior of
competitors, customers, suppliers, and the labor supply.
ANS: T PTS: 1 DIF: Difficulty: Difficult

21. Opportunities are characteristics of the internal environment that have the potential to help the
organization achieve or exceed its strategic goals.

22. The mix of business units and product lines that fit together in a logical way to provide synergy and
competitive advantage for the corporation pertains to portfolio strategy.

23. An SBU stands for Star Business Unit.

24. The BCG (Boston Consulting Group) matrix evaluates SBUs with respect to their business growth rate
and geographical location.

25. The question mark exists in a new, rapidly growing industry but has only a small market share,
according to the BCG Matrix.

26. According to the BCG Matrix, the cash cow has a large market share in a rapidly growing industry.

27. The dog, according to the BCG Matrix, is a poor performer.

28. Unrelated diversification occurs when an organization expands into a totally new line of business.

29. Diversification is a strategy of moving into new lines of business.

30. Vertical integration means a firm expands into businesses that either produce the supplies needed to
make products or that distribute and sell those products to customers.

31. Differentiation, cost leadership, and focus are three of Porter's competitive strategies.

32. Cost leadership is a type of competitive strategy with which the organization seeks to distinguish its
products or services from that of competitors.

33. Organization's with a focus strategy concentrate on a specific regional market or buyer group.

34. A director of finance would most likely be interested in executing functional level strategies.

35. Business-level strategies include all of the major functions, including finance, research and
development, marketing, and manufacturing.

36. The world-wide standardization of product design and advertising refers to globalization.

37. The transnational strategy handles markets independently for each country.

38. With a multidomestic strategy, a company will achieve the globalization or standardization of
marketing and production approaches.

39. A transnational strategy seeks to achieve both global integration and national responsiveness.

40. A transnational strategy combines degrees of both global standardization and national responsiveness.

41. For successful execution, alignment of everyone in the organization must occur.

42. In order to protect an organization’s mission, the human resource functions are removed from strategic
goals.

43. In strategy implementation, leadership is the ability to influence people to adopt the new behaviors
needed.

MULTIPLE CHOICE
1. To remain competitive, companies should develop strategies that focus on core competencies,
providing synergy, and creating value for _____.
a. customers
b. suppliers
c. stockholders
d. employees
e. board members
ANS: A PTS: 1 DIF: Difficulty: Moderate
2. The set of decisions and actions used to formulate and implement strategies that will provide a
competitively superior fit between the organization and its environment so as to achieve organizational
goals is known as:
a. strategy formulation.
b. strategic planning.
c. strategic management.
d. strategy implementation.
e. strategy evaluation.
ANS: C PTS: 1 DIF: Difficulty: Easy
3. The plan of action that prescribes resource allocation and other activities for dealing with the
environment and helping the organization attain its goals is known as a(n) _____.
a. goal
b. objective
c. mission
d. vision
e. strategy
ANS: E PTS: 1 DIF: Difficulty: Moderate
4. Which of the following is a business activity that an organization does especially well relative to its
competition?
a. Strategy
b. Synergy
c. Cash cow
d. Core competence
e. Multidomestic
ANS: D PTS: 1 DIF: Difficulty: Easy
5. The condition that exists when the organization's parts interact to produce a joint effect that is greater
than the sum of the parts acting alone is known as:
a. core competence.
b. synergy.
c. value creation.
d. business-level strategy.
e. multidomestic strategy.
ANS: B PTS: 1 DIF: Difficulty: Easy
6. When properly managed, _____ can create additional value with existing resources, providing a big
boost to the bottom line.
a. synergy
b. competitors
c. government contacts
d. command structure
e. cooperation among customers
7. _____ can be defined as the combination of benefits received and costs paid by the customer.
a. Organizational benefits
b. Value
c. Cost-benefit diversity
d. Synergy
e. Core competence
ANS: B PTS: 1 DIF: Difficulty: Easy
8. After Sunshine Systems merged with RTD Enterprises, company executives noticed that due to
increased employee collaboration between the two units, costs were down and revenues increased
within both areas. This is an example of what business phenomenon?
a. Strategy execution
b. Portfolio strategy
c. Core competency
d. Synergy
e. Delivering value
ANS: D PTS: 1 DIF: Difficulty: Difficult
STA: DISC: Strategy KEY: Bloom's: Application
9. _____ level strategy pertains to the major functional departments within the business unit.
a. Operational
b. Corporate
c. National
d. Business
e. Functional
ANS: E PTS: 1 DIF: Difficulty: Easy
10. Which of the following pertains to the organization as a whole?

a. Business-level strategy
b. Functional-level strategy
c. Corporate-level strategy
d. Operational-level strategy
e. Competitive-level strategy
11. A corporate-level strategy is concerned with the question:

a. what business are we in?
b. how do we compete?
c. how do we support our chosen strategy?
d. where do we market our products?
e. should we promote from within?
12. Janessa is the CEO of a privately-held software company. In defining corporate-level strategies, which
of the following questions would she most likely be concerned with?
a. How do we compete?
b. What business are we in?
c. How does marketing support the business?
d. How can we maximize profits?
e. How can we make manufacturing processes more efficient?
ANS: B PTS: 1 DIF: Difficulty: Difficult
13. Decisions regarding the proper amount of advertising for a particular good or service are related to:
a. corporate-level strategies.
b. functional-level strategies.
c. tactical-level strategies.
d. business-level strategies.
e. retrenchment strategies.
ANS: D PTS: 1 DIF: Difficulty: Moderate
14. Which of these questions is central to a functional-level strategy?

a. What business are we in?
b. How do we compete?
c. How do we support our chosen strategy?
d. What business do we buy?
e. Where to market our products?
15. Which of the following lists the strategic management process in proper order?
a. Formulate strategy; Evaluate strategy; Perform SWOT analysis; Define new
mission/goals; Execute strategy; Control strategy.
b. Perform SWOT analysis; Evaluate current mission/goals; Formulate strategy; Execute
strategy; Define new mission/goals.
c. Evaluate current mission/goals; Define new mission/goals; Formulate strategy; Execute
strategy; Perform SWOT analysis .
d. Evaluate current mission/goals; Perform SWOT analysis; Define new mission/goals;
Formulate strategy; Execute strategy.
e. Define new mission/goals; Execute strategy; Formulate strategy; Evaluate new
mission/goals; Perform SWOT analysis.
16. _____ refers to the use of managerial tools to direct resources toward the achievement of strategic
goals.
a. Strategy formulation
b. Strategy coordination
c. Strategy execution
d. Strategy control
e. Strategy planning
ANS: C PTS: 1 DIF: Difficulty: Moderate
17. Which of the following refers to the planning and decision making that lead to the establishment of the
organization's goals and of a specific strategic plan?
a. Strategy formulation
b. Strategy implementation
c. Strategy coordination
d. Strategy control
e. SWOT
18. Fred has been assigned to conduct a SWOT analysis for his organization, Acme, Inc. As part of this
assignment, Fred will:
a. conduct an external wage survey.
b. search for the strengths, weaknesses, opportunities, and threats that impact his firm.
c. choose a grand strategy for his firm.
d. do a cost/benefit analysis.
e. develop a mission.
ANS: B PTS: 1 DIF: Difficulty: Moderate
19. Techniques used to monitor external environments include:

a. hiring scanning organizations.
b. hiring the competitive intelligence professionals.
c. government reports.
d. professional journals.
e. all of these.
20. Classy Clay has extremely creative employees who, in the opinion of the organization, keep the
company ahead of the competition. The creativity of these employees would be classified as a(n)
_____.
a. internal weakness
b. external opportunity
c. external strength
d. internal strength
e. neutral factor
21. Paramount, Inc. is particularly concerned about pending legislation in Congress that would further
regulate their organization. This legislation would be classified as a(n) _____.
a. external opportunity
b. internal strength
c. external threat
d. external weakness
e. congressional chaos
REF: 246-247 OBJ: LO: 08-02 NAT: BUSPROG: Analytic
22. Sherri has been asked to participate on a cross-functional task force that is charged with performing an
audit checklist for her advertising firm. The task force will analyze organizational strengths and
weaknesses as they apply to the firm. Sherri’s task is to analyze management quality, staff quality,
degree of centralization, and organizational charts. This level of analysis pertains to which area of the
audit?
a. Management and organization
b. Marketing
c. Human resources
d. Research and development
e. Production
ANS: A PTS: 1 DIF: Difficulty: Difficult
23. Where does the information about opportunities and threats comes from?
a. An analysis of the organization's internal environment
b. A department by department study of the organization
c. Scanning the external environments
d. Employee grievances
e. Financial ratios of the organization
24. What type of organizational unit has a unique business mission, product line, competitors, and markets
relative to other units in the same corporation?
a. Product unit
b. Functional unit
c. Strategic business unit
d. Operational unit
e. Business consulting group unit
25. How business units and product lines fit together in a logical way is the essence of:
a. business-level strategy.
b. portfolio strategy.
c. competitive strategy.
d. financial strategy.
e. functional strategy.
26. Gatekeep Utilities is a subsidiary of GW Enterprises. Gatekeep has a mission and product line that is
unique from GW. Gatekeep’s competitors are also very different from those of its parent, and the
subsidiary markets to a very different group of customers. As such, Gatekeep can be described as a(n)
_____.
a. product unit
b. functional unit
c. operational unit
d. strategic business unit
e. boston consulting group unit
27. The BCG matrix organizes along which of the following dimensions?
a. Market share and profit
b. Sales and market share
c. Business growth rate and market share
d. Business growth rate and profit
e. Sales and profits
28. Double Click, Inc. has a number of strategic business units. Their hand-held computer unit has a large
market share in this rapidly growing industry. Their hand-held computer business would be classified
as:
a. a dog.
b. a star.
c. a question mark.
d. a cash cow.
e. stuck in the middle.
29. Which of these is true about the cash cow?

a. It generates tremendous profits in a rapidly growing industry.
b. It has a small market share in a rapidly growing industry.
c. It has a small market share in a slow growth industry.
d. It has a large market share in a slow growth industry.
e. It is generally a dead business that should be divested.
30. The star has a:

a. large market share in a rapidly growing industry.
b. large market share in a slow growth industry.
c. small market share in a rapidly growing industry.
d. small share of a slow growth market.
e. moderate market share in a slow growth industry.
31. Which of the following portfolio categories is made up of poor performers who command only a small
share of a slow growth market?
a. Star
b. Cash cow
c. Question mark
d. Dog
e. Cat
32. The question mark has a:

a. large market share in a rapidly growing industry.
b. large market share in a slow growth industry.
c. small market share in a rapidly growing industry.
d. small share of a slow growth market.
e. moderate market share in a slow growth industry.
33. Which of these is true about the dog division?

a. It has a large market share in a rapidly growing industry.
b. It has a large market share in a slow growth industry.
c. It has a small market share in a rapidly growing industry.
d. It has a small share of a slow growth market.
e. It has a moderate market share in a rapidly growing industry.
34. Gillette operates numerous strategic business units. Most of its units in the personal care division have
low market share but high business growth. These units are classified as _____.
a. dogs
b. question marks
c. stars
d. cash cows
e. none of these
35. According to the BCG Matrix, which of the following exists in a mature, slow-growth industry, but is
a dominant business in the industry, with a large market share?
a. Question mark
b. Asterisk
c. Dog
d. Star
e. Cash cow
36. When an organization expands into a totally new line of business, it is implementing a strategy of:
a. Related diversification
b. Unrelated diversification
c. Cross-functional diversification
d. Product line diversification
e. Industry diversification
37. Semway, a regional bank, recently announced that it would soon begin offering financial planning
services. This is an example of which of these?
a. Related diversification
b. Unrelated diversification
c. Cross-functional diversification
d. Product line diversification
e. Industry diversification
ANS: A PTS: 1 DIF: Difficulty: Difficult
38. The purpose of _____ is to expand the firm’s business operations to produce new kinds of valuable
products and services?
a. retrenchment
b. diversification
c. liquidation
d. cash cow
e. internal growth
39. Which of the following strategies refers to moving into a new business that is related to the company's
existing business activities?
a. Horizontal integration
b. Vertical integration
c. Unrelated diversification
d. Related diversification
e. Strategic partnership
40. All of the following are Porter's competitive forces except:

a. differentiation.
b. bargaining power of buyers.
c. bargaining power of suppliers.
d. threat of substitute products.
e. potential new entrants.
41. Which of the following is NOT one of Porter's competitive forces?

a. Potential new entrants
b. Bargaining power of suppliers
c. Bargaining power of stockholders
d. Bargaining power of customers
e. Rivalry among competitors
42. Which of the following strategies involve an attempt to distinguish the firm's products or services from
others in the industry?
a. Cost leadership
b. Differentiation
c. Focus
d. Internal growth
e. Liquidation
43. Which strategy can be profitable for an organization when customers are loyal and willing to pay high
prices?
a. Focus
b. Globalization
c. Overall cost leadership
d. Differentiation
e. Liquidation
44. The _____ strategy involves seeking efficient facilities, cutting costs and using tight cost controls to be
more efficient than competitors.
a. cost leadership
b. differentiation
c. focus
d. internal growth
e. liquidation
45. The human resource department at Paula's Powerwheels is implementing a number of functional level
strategies. These strategies include focusing on ways to retain and develop a stable work force and
ways to improve efficiency in the organization. These functional-level strategies are consistent with
which of the following strategies?
a. Cost leadership
b. Differentiation
c. New product development
d. New market development
e. Divestiture
46. With a(n) _____ strategy, the organization concentrates on a specific regional market or buyer group.
a. cost leadership
b. differentiation
c. focus
d. internal growth
e. liquidation
47. Mingles, Inc. concentrates its efforts on its target market of 18 to 25 year olds. It is using a(n) _____
strategy.
a. focus
b. differentiation
c. cost leadership
d. multidomestic
e. universal strategy
48. General Products Inc. is a small clothing designer and manufacturer located in the United States. A
vast majority of the company’s revenues comes from U.S. sales, although about ten percent of the
company’s revenue come from sales to Canada. General Products Inc. can best be described as using
which global corporate strategy?
a. Globalization strategy
b. Multidomestic strategy
c. Export strategy
d. Transnational strategy
e. Domestic strategy
ANS: C PTS: 1 DIF: Difficulty: Difficult
49. FLY Industries is a global conglomerate company headquartered in the United States that does
business in over fifty countries. The company seeks to balance global efficiencies and local
responsiveness by hiring locally as well as from home. It can best be described as using which global
corporate strategy?
a. Globalization strategy
b. Multidomestic strategy
c. Export strategy
d. Transnational strategy
e. Domestic strategy
ANS: B PTS: 1 DIF: Difficulty: Difficult
50. If ABC International has standardized its product line throughout the world it is pursuing a:
a. multidomestic strategy.
b. retrenchment strategy.
c. diversity strategy.
d. globalization strategy.
e. liquidation strategy.
51. The assumption that a single global market exists would lead to a:
a. globalization strategy.
b. multidomestic strategy.
c. diversity strategy.
d. domestic strategy.
e. liquidation strategy.
52. Which of the following strategies would be appropriate when the need for both national
responsiveness and global integration is low?
a. Globalization
b. Multidomestic
c. Export
d. Transnational
e. Import
STA: DISC: Strategy KEY: Bloom's: Analysis
53. _____ refers to the modification of product design and advertising strategies to suit the specific needs
of individual countries.
a. Domestic strategy
b. Global strategy
c. Transnational strategy
d. Multidomestic strategy
e. Market design strategy
54. Which of the following refers to a strategy that combines global coordination to attain efficiency with
flexibility to meet specific needs in various countries?
a. Domestic strategy
b. Global strategy
c. Transnational strategy
d. Multidomestic strategy
e. Region design strategy
55. Some people argue that _____ is the most difficult and most important part of strategic management.
a. SWOT analysis
b. strategic formation
c. strategic execution
d. strategic analysis
e. strategy evaluation
56. Persuasion, motivation, and changes in cultures and values are examples of which of the dimensions
used to implement strategy?
a. Leadership
b. Structural design
c. Human resources
d. Information and control systems
e. Compensation
ANS: A PTS: 1 DIF: Difficulty: Easy
57. Which of the following is NOT one of the tools used for putting strategy into action?
a. Visible leadership
b. Diversification
c. Human Resources
d. Communication
e. Clear roles and accountability
58. People need to understand how their individual actions can contribute to achieving an organizational
strategy. This can be accomplished by delegating authority, creating teams, and defining roles. These
actions are part of which tool for putting strategy into action?
a. Visible leadership
b. Candid communication
c. Human resources
d. Clear roles and accountability
e. Bargaining power of employees
59. The _____ function recruits selects, trains, transfers, promotes, and lays off employees to achieve
strategic goals.
a. production
b. leadership
c. information and control systems
d. structural design
e. human resource
CASE
Scenario - Theresa Teutul
Theresa Teutul was an executive with Digital Industries, a leading manufacturer of color televisions.
She recognized that the color television market in the late 1970's was facing significant challenges.
After two decades of highly successful development and marketing, the sales of color televisions had
slowed and replacing older color television sets largely created her market.
1. Using the logic of the BCG grid, Theresa should recognize that her strategic business unit was in
which quadrant?
a. Star
b. Cash Cow
c. Question Mark
d. Dog
e. None of these
ANS:
b
PTS: 1 DIF: Difficulty: Moderate REF: 250

OBJ: LO: 08-03 NAT: BUSPROG: Analytic STA: DISC: Strategy
KEY: Bloom's: Application
2. The strategy that the BCG matrix suggests that Theresa should take for this SBU is:
a. invest and grow.
b. liquidate while still profitable.
c. ask her astrologer for advice.
d. keep the SBU healthy and use its excess earnings to invest in other SBU's.
e. divestiture.
ANS:
d

Scenario - SS.com
Faced with rapidly growing business, Swift Stocks, Inc., a global brokerage company with the largest
market share, recently announced that it has established an on-line stock investment and trading
subsidiary, SS.com, where investors can trade stocks at the lowest rates in the industry. The .com
subsidiary has less than one percent market share but it faces a very high business growth rate. In the
brokerage industry the competition is fierce and all players are cutting their on-line commission rates.
3. Swift Stock's traditional brokerage business could be classified as a _____.

a. cash cow
b. dog
c. star
d. question mark
e. stuck in the middle business
ANS:
c

4. SS.com subsidiary for Swift Stocks can be classified as a _____.

a. cash cow
b. dog
c. star
d. question mark
e. stuck in the middle business
ANS:
d

5. If Swift Stock's traditional brokerage business were to face a declining business growth, it may need to
be reclassified as a _____.
a. cash cow
b. dog
c. star
d. question mark
e. dead business
ANS:
a

6. Swift Stock is following which strategy, according to Porter, through the .com subsidiary?
a. Stability
b. Cost leadership
c. Focus
d. Differentiation
e. Retrenchment
ANS:
b

COMPLETION
1. _____ is the set of decisions and actions used to formulate and implement strategies that will provide a
competitively superior fit between the organization and its environment so as to achieve organizational
goals.
ANS: Strategic management

KEY: Bloom's: Knowledge
2. The plan of action that prescribes resource allocation and other activities for dealing with the
environment and helping the organization attain its goals is called a(n) _____.
ANS: strategy

3. A business activity that an organization does particularly well relative to its competition is known as
a(n) _____.
ANS: core competence

4. When organizational parts interact to produce a joint effect that is greater than the sum of the parts
acting alone, _____ occurs.
ANS: synergy

5. The question What business are we in? concerns the _____ strategy.
ANS: corporate-level

6. The question How do we compete? concerns _____ strategy.
ANS: business-level

7. The question How do we support the business-level competitive strategy? concerns _____ strategy.
ANS: functional-level

8. _____ includes the planning and decision making that lead to the establishment of the firm's goals and
the development of a specific strategic plan.
ANS: Strategy formulation

9. The use of managerial and organizational tools to direct resources toward accomplishing strategic
results is known as _____.
ANS: strategy execution

10. _____ is a type of corporate-level strategy that pertains to the organization's mix of strategic business
units.
ANS: Portfolio strategy
PTS: 1 DIF: Difficulty: Moderate REF: 248-249

11. In the BCG matrix, the dog has _____ market share and _____ business growth rate.
ANS: low; low

12. In the BCG matrix, the star has a(n) _____ market share in a rapidly growing industry.
ANS: large

13. The acquisition of a business that is related to current product lines or that takes the corporation into
new areas is called _____.
ANS: diversification

14. The _____ strategy involves an attempt to distinguish the firm's products or services from others in the
industry.
ANS: differentiation

15. With a(n) _____ strategy, the organization aggressively seeks efficient facilities, pursues cost
reductions, and uses tight cost controls to produce products more efficiently than competitors.
ANS: cost leadership

16. With a(n) _____ strategy, the organization concentrates on a specific regional market or buyer group.
ANS: focus

17. The standardization of product design and advertising strategies throughout the world is called _____.
ANS: globalization

18. When an organization chooses a(n) _____ strategy, it means that business decisions such as product
design are made on a country-by-country basis.
ANS: multidomestic

19. A(n) _____ strategy seeks to achieve both global integration and national responsiveness.
ANS: transnational

20. The ability to influence people to adopt the new behaviors needed for strategy implementation is called
_____.
ANS: leadership

21. It is argued that _____ is the most difficult and most important part of strategic management.
ANS: strategic execution

SHORT ANSWER
1. List the four components of a SWOT analysis.
ANS:
A SWOT includes strengths, weaknesses, opportunities, and threats.

2. List the three global corporate strategies.
ANS:
Globalization strategy, transnational strategy, and multidomestic strategy.

ESSAY
1. In order for companies to remain competitive, their strategies must focus on three things. Describe
these three focuses.
ANS:
The three focuses are core competencies, synergy, and value creation. Core competence is something
the organization does very well in comparison to its competitors. A core competence represents a
competitive advantage because the company acquires expertise that competitors do not have. Synergy
occurs when organizational parts interact to produce a joint effect that is greater than the sum of the
parts acting alone. The organization may attain a special advantage with respect to cost, market power,
technology, or management skill. Value creation should be at the heart of strategy. Value is the
combination of benefits received and costs paid by the customer. Managers help their companies
create value by devising strategies that exploit core competencies and attain synergy.

KEY: Bloom's: Analysis
2. Compare and contrast the three levels of strategy in an organization.
ANS:
There are three levels of strategy in an organization: corporate-level, business-level, and
functional-level. Corporate-level strategies involve the whole organization. This level of strategy is
most concerned with answering the question: "What business are we in?" These types of decisions
often involve issues of growth, retrenchment, and/or joint ventures. Business-level strategies are
concerned with the question "How do we compete?" They focus on how the individual business unit
competes within its industry. They may involve such issues as advertising, product changes, and
new-product development. Functional-level strategies are concerned with the question of "How do we
support the business-level strategy?" Involving all of the organization's major functions, these types of
strategies link the functional unit with the strategic business unit.

KEY: Bloom's: Synthesis
3. Differentiate between strategy formulation and strategy implementation.
ANS:
Strategy formulation includes the planning and decision making that lead to the establishment of the
firm's goals and the development of a specific strategic plan. Also, it includes assessing the external
environment and internal problems and integrating the results into goals and strategies. Strategy
implementation uses managerial and organizational tools to direct resources toward accomplishing
strategic results.

4. Briefly describe the Boston Consulting Group matrix, including its dimensions, quadrants, and
strategic recommendations.
ANS:
The two dimensions of the matrix are business growth rate and market share. When growth is high and
share is high, the SBU has the best situation and is called a star. When growth is low and share is high,
the SBU is known as a cash cow. When growth is high but share is low, the SBU is a question mark. In
the fourth quadrant, growth and share are both low. This is the worst situation, and the SBU is a dog.
The strategic recommendations are: (1) invest in stars; (2) milk the cash cow; (3) invest in question
marks to create stars or divest the question marks; and (4) divest the dogs.
PTS: 1 DIF: Difficulty: Difficult REF: 250

5. Briefly discuss Porter's three competitive strategies.
ANS:
Porter identified three competitive strategies: differentiation, cost leadership, and focus. A
differentiation strategy involves the organization attempting to distinguish its product or service from
those of its competition. Advertising, product features, and customer service are some of the ways an
organization can successfully differentiate. A cost leadership strategy is based on the organization
achieving a low-cost position relative to the competition. A company may achieve a cost leadership
through the operation of efficient facilities, cutting costs, or maintaining tight cost control. When a
company uses a differentiation or a cost leadership strategy in a particular market or buyer group, they
are employing a focus strategy. This strategy allows the organization to concentrate on a narrow
market niche.

6. Name and describe the three types of global strategies.
ANS:
The three types of global strategies are globalization, multidomestic, and transnational. Globalization
means that a company's product design and advertising strategies are standardized throughout the
world. This approach is based on the assumption that a single global market exists for many consumer
and industrial products. The theory is that people everywhere want to buy the same products and live
the same way. Multidomestic strategies believe that competition in each country is handled
independently of industry competition in other countries. Thus, marketing, advertising, and product
design is encouraged to be modified and adapted to the specific needs of each country the company is
present in. Many companies reject the idea of a single global market. Transnational strategies seek to
achieve both global integration and national responsiveness. A true transnational strategy is difficult to
achieve, because one goal requires close global coordination while the other goal required local
flexibility. However, many industries are finding that, although increased competition means they
must achieve global efficiency, growing pressure to meet local needs demands national
responsiveness.

KEY: Bloom's: Comprehension
7. Briefly describe the tools for putting strategy into action.
ANS:
The tools for putting strategy into action include visible leadership, clear roles and accountability,
human resources, and candid communication.
• Visible leadership is used to motivate people, shape culture and values, and model desired
behaviors
• Clear roles and accountability include delegating authority and responsibility, creating
teams, and defining roles
• Human resource tools include recruiting employees, providing training, and managing
transfers and promotions
• Candid communication is used to open lines of communication and to encourage honesty
and debate

KEY: Bloom's: Comprehension
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ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Moderate

4. Front-line managers have the final responsibility for strategic planning.

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Difficult

ANS: F PTS: 1 DIF: Difficulty: Moderate

9. Corporate-level strategy pertains to the organization as a whole.

ANS: T PTS: 1 DIF: Difficulty: Easy

10. The "How do we compete?" question concerns functional-level strategy.

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Moderate

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Moderate

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Difficult

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Easy

23. An SBU stands for Star Business Unit.

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Moderate

27. The dog, according to the BCG Matrix, is a poor performer.

ANS: T PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Moderate

29. Diversification is a strategy of moving into new lines of business.

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Moderate

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Moderate

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: F PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Moderate

ANS: T PTS: 1 DIF: Difficulty: Easy

ANS: F PTS: 1 DIF: Difficulty: Easy

ANS: T PTS: 1 DIF: Difficulty: Easy

10. Which of the following pertains to the organization as a whole?

11. A corporate-level strategy is concerned with the question:

14. Which of these questions is central to a functional-level strategy?

19. Techniques used to monitor external environments include:

29. Which of these is true about the cash cow?

30. The star has a:

32. The question mark has a:

33. Which of these is true about the dog division?

40. All of the following are Porter's competitive forces except:

41. Which of the following is NOT one of Porter's competitive forces?

Scenario - Theresa Teutul

PTS: 1 DIF: Difficulty: Moderate REF: 250