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1) Strategy formulation or strategic planning begins with a(n) ________, which is the process of
finding a strategic fit between external opportunities and internal strengths while working around
external threats and internal weaknesses.
A) environmental analysis.
B) position analysis.
C) strategic evaluation.
D) objective analysis.
E) situation analysis.
Answer: E
Difficulty: Easy
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Analytical thinking
2) One desired outcome of analyzing strategic factors is identifying niches where an organization
can use its ________ to take advantage of a particular market opportunity.
A) differentiating capabilities.
B) distinctive competencies.
C) situational proficiency.
D) core competencies.
E) distinctive characteristics.
Answer: D
Difficulty: Moderate
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Analytical thinking
3) An acronym for the assessment of the external and internal environments of the business
corporation in the process of strategy formulation/strategic planning is
A) PET.
B) MBO.
C) SWOT.
D) SBU.
E) ROI.
Answer: C
Difficulty: Easy
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Application of knowledge
1
Copyright © 2018 Pearson Education, Ltd.
4) The T in SWOT represents
A) threat.
B) tactic.
C) technique.
D) task.
E) time.
Answer: A
Difficulty: Easy
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Application of knowledge
2
Copyright © 2018 Pearson Education, Ltd.
8) The goal of strategy is to find a(n) ________ that is so well suited to the firm's competitive
advantages that other organizations are not likely to challenge or dislodge it.
A) strategic fit.
B) propitious niche.
C) common thread.
D) business screen.
E) implicit strategy.
Answer: B
Difficulty: Moderate
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Application of knowledge
9) According to the text, unique market opportunities that are available for only a particular time
are called
A) situational occasions.
B) critical openings.
C) strategy implementation.
D) strategic windows.
E) trigger points.
Answer: D
Difficulty: Moderate
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Application of knowledge
11) The matrix that summarizes an organization's strategic factors by combining the external
factors from the EFAS Table with the internal factors from the IFAS Table is called a(n)
A) Total Weighted Score.
B) SWOT Matrix.
C) SFAS Matrix.
D) TOWS Matrix.
E) Issues Priority Matrix.
Answer: C
Difficulty: Moderate
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Application of knowledge
3
Copyright © 2018 Pearson Education, Ltd.
12) In a SFAS Matrix,
A) all strategic factors are weighted equally.
B) the number of strategic factors can become unmanageable.
C) the same criticisms found in the SWOT Matrix are replicated.
D) a factor may be listed as both a strength and a weakness.
E) only internal strategic factors are included.
Answer: D
Difficulty: Difficult
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Analytical thinking
13) If a mission does not provide a common thread for a corporation's businesses, managers
might be unclear about where the company is heading.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Application of knowledge
15) SWOT is an acronym that stands for Strategy, Weaknesses, Opportunities, and Threats.
Answer: FALSE
Difficulty: Easy
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Application of knowledge
16) Populating a SWOT chart, by itself, is just the start of a strategic analysis.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Analytical thinking
17) The goal of strategy is to find an extremely favorable niche so well suited to the firm's
internal and external environment that other corporations are not likely to challenge or dislodge
it.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Analytical thinking
4
Copyright © 2018 Pearson Education, Ltd.
18) The first firm through a strategic window can occupy an extremely favorable niche and
discourage competition (if the firm has the required internal strengths).
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Analytical thinking
19) One company that has successfully found a propitious niche (extremely favorable niche) is
Frank J. Zamboni & Company, the manufacturer of the machines that smooth the ice at ice
skating rinks.
Answer: TRUE
Difficulty: Difficult
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Analytical thinking
21) The SFAS Matrix summarizes an organization's strategic factors by combining the external
factors from the IFAS Table with the internal factors from the EFAS Table.
Answer: TRUE
Difficulty: Difficult
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Application of knowledge
22) What is a propitious niche? Provide an example of a firm that has been able to occupy a
propitious niche successfully.
Answer: A propitious niche is an extremely favorable niche that is so well suited to the firm's
competitive advantages that other corporations are not likely to challenge or dislodge it. A niche
is propitious to the extent that it currently is just large enough for one firm to satisfy demand.
After a firm has found and filled that niche, it is not worth a potential competitor's time or money
to also go after the same niche.
One company that has successfully found a propitious niche is Frank J. Zamboni & Company,
the manufacturer of the machines that smooth the ice at ice skating rinks. Zamboni was the first
company through this strategic window. Before the machine was invented, people had to clean
and scrape the ice by hand to prepare the surface for skating. So long as Zamboni's company can
produce the machines in the quantity and quality desired at a reasonable price, it's not worth
another company's effort to go after Frank J. Zamboni's propitious niche.
Difficulty: Difficult
Learning Obj.: 6.1: Utilize the SFAS matrix and a SWOT diagram to examine business strategy
AACSB: Application of knowledge
5
Copyright © 2018 Pearson Education, Ltd.
23) Which of the following is true of an organization's mission statement?
A) should be crafted late in the strategic implementation stage
B) articulates how the organization will take advantage of opportunities by overcoming
weaknesses
C) does not have to be unique to the organization
D) should be short so every employee can remember it
E) does not provide direction for employees, but rather informs outsiders of what the
organization does
Answer: D
Difficulty: Difficult
Learning Obj.: 6.2: Develop a mission statement that addresses the five elements of good design
AACSB: Analytical thinking
24) An effective mission statement not only needs to be specific to that organization; it must
enable a common thread to highlight and focus the energy of everyone in the organization in the
direction that the top management team believes is best for the business.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.2: Develop a mission statement that addresses the five elements of good design
AACSB: Application of knowledge
25) One of the first steps in good strategy design should include crafting the mission statement
for the organization.
Answer: TRUE
Difficulty: Easy
Learning Obj.: 6.2: Develop a mission statement that addresses the five elements of good design
AACSB: Application of knowledge
6
Copyright © 2018 Pearson Education, Ltd.
27) Which strategy raises the questions of whether to compete on the basis of lower cost or
differentiation and whether to compete for the biggest market or a niche market?
A) business
B) corporate
C) competitive
D) functional
E) focus
Answer: C
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
7
Copyright © 2018 Pearson Education, Ltd.
30) Which of the following is not cited as one of the questions that development of a competitive
strategy should raise?
A) Should we compete on the basis of lower cost?
B) Should we compete head-to-head with major competitors?
C) Should we differentiate our products or services on some basis other than cost?
D) Should we compete by garnering political support of influential leaders?
E) Should we compete in a niche market that we can satisfy which is superior to that of the
competition?
Answer: D
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
31) According to Porter, the generic competitive strategy that reflects the ability of the
corporation or its business unit to design, produce, and market a comparable product more
efficiently than its competitors is called
A) competitive scope.
B) differentiation.
C) cost leadership.
D) diversification.
E) focus.
Answer: C
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
32) What are the three generic competitive strategies that Porter promotes as the means for
outperforming other corporations in a particular industry?
A) competitive scope, differentiation, and focus
B) diversification, concentration, and competitive scope
C) cost, competitive scope, and focus
D) concentration, cost leadership, and differentiation
E) cost leadership, differentiation, and focus
Answer: E
Difficulty: Easy
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
8
Copyright © 2018 Pearson Education, Ltd.
33) According to Porter, the generic competitive strategy that reflects the ability to provide
unique and superior value to the buyer in terms of product quality, special features, or after-sale
service is called
A) competitive scope.
B) differentiation.
C) focus.
D) diversification.
E) cost leadership.
Answer: B
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
34) According to Porter, the term that applies to the breadth of a company's or business unit's
target market is called
A) competitive scope.
B) differentiation.
C) focus.
D) diversification.
E) cost leadership.
Answer: A
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
9
Copyright © 2018 Pearson Education, Ltd.
36) Apple is an example of a company following which of Porter's generic competitive
strategies?
A) cost leadership
B) differentiation
C) cost focus
D) competitive scope
E) diversification
Answer: B
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
37) Which of Porter's competitive strategies recommends that a company emphasize a particular
buyer group or geographic market and attempts to seek a cost advantage in its targeted segment?
A) differentiation
B) cost leadership
C) differentiation focus
D) competitive advantage
E) cost focus
Answer: E
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
38) In manufacturing toilet paper for grocery store chains (and avoiding competing directly
against Charmin), Potlach has followed which of Porter's generic competitive strategies?
A) differentiation
B) cost leadership
C) differentiation focus
D) competitive advantage
E) cost focus
Answer: E
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
10
Copyright © 2018 Pearson Education, Ltd.
39) Orphagenix, a small biotech firm, avoids head-to-head competition with large
pharmaceutical companies by developing orphan drugs to target diseases that affect fewer than
200,000 people. This is an example of which of Porter's generic strategies?
A) differentiation
B) cost leadership
C) differentiation focus
D) competitive advantage
E) cost focus
Answer: C
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
41) When a company is concerned that the higher price it charges for its higher quality is too far
above the price of the competition, the company is likely addressing a risk of following which
competitive strategy?
A) cost leadership
B) focus
C) stuck-in-the-middle
D) differentiation
E) competitive scope
Answer: D
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
11
Copyright © 2018 Pearson Education, Ltd.
42) Which of the following is not one of the risks of a cost leadership strategy?
A) The technology that the organization has been using changes.
B) Pricing for higher quality that is too far above the price of the competition.
C) Competitors can achieve viable imitations.
D) Other bases for cost leadership erode.
E) Proximity in differentiation is lost.
Answer: B
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
43) Which strategy is a firm following if it provides a unique and superior value in a narrow
market?
A) differentiation focus
B) cost leadership
C) differentiation
D) cost focus
E) stuck in the middle
Answer: A
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
12
Copyright © 2018 Pearson Education, Ltd.
46) Morgan Motor Car Company manufactures classic British sports cars. Which of Porter's
strategies is this company following?
A) differentiation focus
B) cost leadership
C) stuck in the middle
D) differentiation
E) cost focus
Answer: A
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
47) Walt Disney Company competes successfully in the entertainment industry using which of
Porter's competitive strategies?
A) differentiation focus
B) stuck in the middle
C) cost leadership
D) differentiation
E) cost focus
Answer: D
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
48) The focus strategies will likely predominate when many small- and medium-sized local
companies compete for relatively small shares of the total market in a(n)
A) united industry.
B) fragmented industry.
C) consolidated industry.
D) isolated industry.
E) integrated industry.
Answer: B
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
13
Copyright © 2018 Pearson Education, Ltd.
49) As an industry matures while overcoming fragmentation and becomes dominated by a small
number of large companies, it tends to become a(n)
A) united industry.
B) fragmented industry.
C) consolidated industry.
D) isolated industry.
E) integrated industry.
Answer: C
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
14
Copyright © 2018 Pearson Education, Ltd.
53) The last stage of a hypercompetitive industry is reached when the remaining large global
competitors
A) raise entry barriers.
B) move into untapped markets.
C) attack the strongholds of other firms.
D) compete on cost and quality.
E) work their way to a situation of perfect competition in which no one has any advantage and
profits are minimal.
Answer: E
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
54) According to D'Aveni's book, Hypercompetition, which of the following statements is true?
A) Except for a few stable industries, strategy initiatives do not provide sustainable competitive
advantage.
B) Hypercompetition is rare.
C) It is enough to gain competitive advantage by being the lowest cost competitor.
D) The theory of hypercompetition is not supported by any research.
E) The American home appliance industry was immune to hypercompetition.
Answer: A
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
55) Which of Porter's broad mass market competitive strategies requires tight cost control,
frequent detailed control reports, and cost minimization in areas like R&D, service and
advertising?
A) focus
B) differentiation
C) cost leadership
D) focus differentiation
E) concentration
Answer: C
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
15
Copyright © 2018 Pearson Education, Ltd.
56) Research suggests that a differentiation strategy is more likely to generate higher profits than
a lower cost strategy because differentiation creates
A) a better entry barrier.
B) a better exit barrier.
C) a better niche market.
D) a more sustainable competitive advantage.
E) no clear long-term strategy.
Answer: A
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
57) Differentiation is a viable strategy for earning above-average returns in a specific business
because the resulting increased value to the customer
A) lowers costs.
B) lowers price sensitivity.
C) lowers customer loyalty.
D) lowers market share.
E) lowers entry barriers.
Answer: B
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
16
Copyright © 2018 Pearson Education, Ltd.
60) Strict targets to improve efficiency are likely to be found in organizations following which of
Porter's generic competitive strategies?
A) cost leadership
B) differentiation
C) stuck in the middle
D) differentiation focus
E) cooperative
Answer: A
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
61) According to Barney, under which condition would tacit collusion most likely be successful?
A) There is a large number of identifiable competitors.
B) Costs vary among firms.
C) One firm tends to act as the price leader.
D) Sales are characterized by a low frequency of large orders.
E) There are low barriers to entry in the industry.
Answer: C
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
62) When a company following a differentiation strategy ensures that the higher price it charges
for its higher quality is not priced too far above the price of the competition, the company is
using the process of
A) low-cost differentiation.
B) cost leadership.
C) cost proximity.
D) basic differentiation.
E) price fixing.
Answer: C
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
63) When firms follow each other's lead to reduce the level of competition such as GE and
Westinghouse did in steam turbines, it is referred to as
A) explicit collusion.
B) a strategic alliance.
C) a mutual service consortium.
D) conscious parallelism.
E) partnering.
Answer: D
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
17
Copyright © 2018 Pearson Education, Ltd.
64) A secret salary cap was the contention in a 2012 collusion lawsuit filed against
A) KFC.
B) The National Football League.
C) GE.
D) Major League Baseball.
E) ESPN.
Answer: B
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
66) Collusion
A) may be explicit or tacit.
B) may be tacit and therefore legal.
C) is rarely practiced by competing firms.
D) cannot occur without direct communication among firms.
E) is a popular competitive strategy.
Answer: A
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
67) The active cooperation of firms within an industry to reduce output and raise prices to get
around the normal law of supply and demand is referred to as
A) a strategic alliance.
B) collusion.
C) a strategic roll up.
D) a merger.
E) licensing.
Answer: B
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
18
Copyright © 2018 Pearson Education, Ltd.
68) The two general types of cooperative strategies are
A) competitive and functional.
B) collusion and competitive.
C) strategic alliances and collusion.
D) strategic alliances and competitive.
E) competitive and collusive alliances.
Answer: C
Difficulty: Easy
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
69) If it is to be successful, Porter advises that a division possess strong marketing abilities,
product engineering, a creative flair, strong capability in basic research and a corporate
reputation for quality or technological leadership, for which one of the following generic
competitive strategies?
A) focus
B) differentiation
C) overall cost leadership
D) vertical growth
E) concentration
Answer: B
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
70) Product engineering, creative flair, and strong cooperation from channels are commonly
required skills and resources for which of Porter's generic strategies?
A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion
Answer: B
Difficulty: Easy
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Reflective thinking
71) Intense supervision of labor, sustained capital investment and access to capital are commonly
required skills and resources for which of Porter's generic competitive strategies?
A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion
Answer: A
Difficulty: Easy
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Reflective thinking
19
Copyright © 2018 Pearson Education, Ltd.
72) Amenities to attract highly skilled labor, scientists, or creative people are a common
organizational requirement for which of Porter's generic competitive strategies?
A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion
Answer: B
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Reflective thinking
73) Incentives based on meeting strict quantitative targets are a common organizational
requirement for which of Porter's generic competitive strategies?
A) cost leadership
B) differentiation
C) cost leadership focus
D) differentiation focus
E) collusion
Answer: A
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Reflective thinking
74) One skill required of the cost leadership strategy is a strong marketing ability.
Answer: FALSE
Difficulty: Easy
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
75) Business strategy focuses on improving the competitive position of a company's or business
unit's products or services within the specific industry or market segment that the company or
business unit serves.
Answer: TRUE
Difficulty: Easy
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
76) Cost leadership is the ability of a company or business unit to design, produce, and market a
comparable product more efficiently than its competitors.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
20
Copyright © 2018 Pearson Education, Ltd.
77) A cost leader's lower costs allow it to continue to earn profits during times of heavy
competition.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
78) An example of a company following a cost focus strategy is Potlach Corporation, which
makes house brands of toilet paper for Safeway and other grocery store chains.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
79) One risk of a cost leadership strategy is that the technology for production or of products
may change.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
80) An example of a company that was "stuck in the middle" was K-Mart as the company tried
to imitate both Walmart's low-cost strategy and Target's differentiation strategy.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
81) Although Porter agrees that it is possible for a company to achieve low cost and
differentiation simultaneously, he suggests that no company has been able to achieve this.
Answer: FALSE
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
83) The strategic rollup was developed in the mid-1990s as an efficient way to quickly
consolidate a fragmented industry with the resulting large firm creating economies of scale.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
21
Copyright © 2018 Pearson Education, Ltd.
84) Rollups are not synonymous with traditional mergers and acquisitions.
Answer: TRUE
Difficulty: Easy
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
85) One danger of D'Aveni's concept of hypercompetition is that it may lead to an overemphasis
on short-term tactics over long-term strategy.
Answer: TRUE
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
86) The ability to market a comparable product or service more efficiently than competitors is
the one skill not required in a cost leadership strategy.
Answer: FALSE
Difficulty: Easy
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
87) Tight cost control is an organizational requirement for a cost leadership strategy.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
88) The only way to gain competitive advantage within an industry is to use a competitive
strategy.
Answer: FALSE
Difficulty: Easy
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Analytical thinking
89) Those companies using cooperative strategies are generally not able to gain a competitive
advantage.
Answer: FALSE
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
90) The two general types of cooperative strategies are collusion and strategic alliances.
Answer: TRUE
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
22
Copyright © 2018 Pearson Education, Ltd.
91) In tacit collusion, there is no direct communication among competing firms.
Answer: TRUE
Difficulty: Difficult
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
92) Collusion is the active cooperation of firms within an industry to reduce output and raise
prices in order to get around the normal economic law of supply and demand.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
94) Discuss competitive strategy differences between a fragmented and a consolidated industry.
Answer: In a fragmented industry, there are many small- and medium-sized local companies
competing for relatively small shares of the total market. Focus strategies will likely predominate
in a fragmented industry. Fragmented industries are typical for products in the early stages of
their life cycle. If few economies are to be gained through size, no large firms will emerge and
entry barriers will be low—allowing a stream of new entrants into the industry.
23
Copyright © 2018 Pearson Education, Ltd.
95) What is the impact of hypercompetition on competitive advantage?
Answer: Hypercompetition reflects the increasing difficulty of sustaining a competitive
advantage over time. As a result of this erosion of competitive advantage, companies must
constantly work to improve their advantage. Firms must constantly seek new ways to lower costs
and add value to their products and services.
Difficulty: Easy
Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations
AACSB: Application of knowledge
98) The "cell" chip created by IBM, Sony Electronics, and Toshiba was a result of pooling their
resources in a
A) joint venture.
B) licensing arrangement.
C) value-chain partnership.
D) mutual service consortium.
E) competitive advantage.
Answer: D
Difficulty: Difficult
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Application of knowledge
24
Copyright © 2018 Pearson Education, Ltd.
99) Disadvantages of joint ventures include all of the following EXCEPT
A) loss of control.
B) lower profits.
C) probability of conflicts with partners.
D) likely transfer of technological advantage to the partner.
E) mutual dependence.
Answer: E
Difficulty: Moderate
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Application of knowledge
100) When Facebook partnered with nine news organizations to allow the news organizations
(including powerhouses like the New York Times and NBC News) to post stories on the
Facebook site, they engaged in
A) a joint venture.
B) a licensing arrangement.
C) a value-chain partnership.
D) a mutual service consortium.
E) a competitive advantage.
Answer: C
Difficulty: Difficult
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Analytical thinking
102) Which of the following is not a reason companies or business units may form a strategic
alliance?
A) to obtain access to specific markets
B) to reduce financial risk
C) to reduce political risk
D) to set prices in the industry
E) to learn new capabilities
Answer: D
Difficulty: Moderate
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Analytical thinking
25
Copyright © 2018 Pearson Education, Ltd.
103) The kind of strategic alliance in which there is a partnership of similar companies in similar
industries who pool their resources to gain a benefit that is too expensive to develop alone is the
A) joint venture.
B) licensing agreement.
C) value-chain partnership.
D) mutual service consortia.
E) holding company.
Answer: D
Difficulty: Moderate
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Application of knowledge
104) Which strategy has been used successfully by Yum! Brands to establish KFC and Pizza Hut
restaurants across the globe?
A) joint venture
B) licensing arrangement
C) strategic alliance
D) marketing strategy
E) value-chain partnership
Answer: B
Difficulty: Difficult
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Application of knowledge
105) The kind of strategic alliance in which a company forms a strong and close long-term
relationship for mutual advantage with a key supplier or distributor is the
A) joint venture.
B) licensing agreement.
C) value-chain partnership.
D) mutual service consortia.
E) holding company.
Answer: C
Difficulty: Moderate
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Application of knowledge
26
Copyright © 2018 Pearson Education, Ltd.
106) Which of the following is not considered a strategic alliance success factor?
A) Have a clear strategic purpose.
B) Operate with short-term time horizon.
C) Agree on an exit strategy for when the partners' objectives are achieved or the partnership
fails.
D) Minimize conflicts among the partners by clarifying the objectives.
E) Identify likely partnering risks and deal with them when the alliance is formed.
Answer: B
Difficulty: Moderate
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Analytical thinking
107) Alliances do not take less financial resources than do acquisitions or going it alone and are
not easier to exit if necessary.
Answer: FALSE
Difficulty: Moderate
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Analytical thinking
108) Too much partnering experience with the same strategic partners generates diminishing
returns over time and leads to reduced performance.
Answer: TRUE
Difficulty: Difficult
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Analytical thinking
109) A licensing arrangement is an agreement in which the licensing firm grants rights to another
firm in another country or market to produce and/or sell a product.
Answer: TRUE
Difficulty: Easy
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Application of knowledge
110) A value chain partnership is a loose alliance with several distributors for the short term.
Answer: FALSE
Difficulty: Moderate
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Application of knowledge
111) One success factor to a strategic alliance is the ability to identify likely partnering risks and
deal with them when the alliance is formed.
Answer: TRUE
Difficulty: Moderate
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Analytical thinking
27
Copyright © 2018 Pearson Education, Ltd.
112) Discuss the reasons a firm may form a strategic alliance.
Answer: A strategic alliance is a long-term cooperative arrangement between two or more
independent firms or business units that engage in business activities for mutual economic gain.
A firm may form a strategic alliance to obtain or learn new capabilities, to obtain access to
specific markets, to reduce financial risk, or to reduce political risk.
Difficulty: Moderate
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Application of knowledge
113) Discuss the types of alliances that businesses can engage in?
Answer: The types of alliances that businesses can engage in include a mutual service
consortium, a joint venture, a licensing arrangement, and a value-chain partnership. A mutual
service consortium is a partnership of similar companies in similar industries that pool their
resources to gain a benefit that is too expensive to develop alone. A joint venture is a
"cooperative business activity, formed by two or more separate organizations for strategic
purposes, that creates an independent business entity and allocates ownership, operational
responsibilities, and financial risks and rewards to each member, while preserving their separate
identity/autonomy." A licensing arrangement is an agreement in which the licensing firm grants
rights to another firm in another country or market to produce and/or sell a product. The licensee
pays compensation to the licensing firm in return for technical expertise. A value-chain
partnership is a strong and close alliance in which one company or unit forms a long-term
arrangement with a key supplier or distributor for mutual advantage.
Difficulty: Difficult
Learning Obj.: 6.4: Identify the types of strategic alliances
AACSB: Application of knowledge
28
Copyright © 2018 Pearson Education, Ltd.
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rencontre, moi. Ecoute: veux-tu changer cet habit calabrais contre
un uniforme de capitaine et aller faire la guerre aux Français? Je me
charge de te lever une compagnie sur mes terres et de t’acheter des
épaulettes.
—Merci, monseigneur, merci, dit Bruno; votre offre est celle d’un
prince magnifique; mais j’ai certaine vengeance à accomplir et qui
me retient encore pour quelque temps en Sicile; après nous verrons.
—C’est bien, dit le prince, tu es libre; mais, crois-moi, tu ferais
mieux d’accepter.
—Je ne puis, excellence.
—Alors, voilà la bourse que tu m’as demandée; va-t’en au diable
avec, et tâche de ne pas venir te faire pendre devant la porte de
mon hôtel[18].
Bruno pesa la bourse dans sa main.
—Cette bourse est bien lourde, monseigneur, ce me semble.
—C’est que je n’ai pas voulu qu’un faquin comme toi se vantât
d’avoir fixé une somme à la libéralité du prince de Butera, et qu’au
lieu de deux cents onces que tu me demandais, j’en ai mis trois
cents.
—Quelle que soit la somme qu’il vous a plu de m’apporter,
monseigneur, elle vous sera fidèlement rendue.
—Je donne et je ne prête pas, dit le prince.
—Et moi j’emprunte ou je vole, mais je ne mendie pas, dit Bruno.
Reprenez votre bourse, monseigneur; je m’adresserai au prince de
Vintimille ou de la Cattolica.
—Eh bien! soit, dit le prince. Je n’ai jamais vu de bandit plus
capricieux que toi: quatre drôles de ton espèce me feraient perdre la
tête; aussi je m’en vais. Adieu!
—Adieu, monseigneur, et que sainte Rosalie vous garde!...
Le prince s’éloigna les mains dans les poches de son gilet de
peau de daim, et en sifflant son air favori. Bruno resta immobile, le
regardant s’en aller, et ce ne fut que lorsqu’il l’eut perdu de vue qu’il
se retira de son côté en poussant un soupir.
Le lendemain l’aubergiste incendié reçut, par les mains d’Ali, les
trois cents onces du prince de Butera.
VI.