Professional Documents
Culture Documents
Strategy
Questions and answers
Chapter 1 Self-Test
1. Good strategy and good strategy execution are the most trustworthy signs of
good management because management is ultimately responsible for a company's
performance and because good execution of a good strategy is the most surefire
recipe (but not a guarantee!) for good company performance.
☐ True
☐ False
6. Which of the following are among the five tasks of strategic management?
☐ a. Forming a strategic vision of what the organization's future business
☐ b. Setting objectives
☐ c. Deciding which objectives are high priority and which are low priority
☐ d. Crafting a strategy to achieve the desired outcomes
☐ e. Doing outside-in strategic thinking
☐ f. Implementing and executing the strategy
☐ g. Evaluating performance, reviewing new developments, and initiating corrective adjustments in
the organization's vision, long-term direction objectives, strategy, and/or implementation
9. A company's strategy
☐ a. is a combination of planned actions and o-the-spot adaptive reactions to fresh developing industry
and competitive events.
☐ b. is a company's means of achieving its objectives.
☐ c. is developed primarily at the same time the company is formed and then evolves slowly thereafter.
☐ d. is aimed more at achieving strategic objectives than at achieving financial objectives.
☐ e. tends to change less often and more slowly than either its strategic vision or its performance targets.
☐ f. reflects managerial choices among alternatives and signals organizational commitment to particular
products, markets, competitive approaches, and ways of operating.
10. Crafting strategy involves outside-in strategic thinking and entrepeneurship because
☐ a. company managers need to keep the strategy responsive to such outside drivers as changing buyer
preferences, the latest actions and moves of rivals, market opportunities and threats, and newly appearing
business conditions.
☐ b. managers can't keep company strategy responsive to chances in the business environment unless they
exhibit entrepeneurship in studying market trends, listening to customers, figuring out ways to enhance the
company activities in new directions in a timely manner.
☐ c. strategy is more adaptive and reactive than intended and planned.
☐ d. good entrepeneurship and astute analysis of the external business environment are keys to a
conservative, risk-avers strategy.
☐ e. shrewd diagnosis of changing market conditions and changing customer preferences and requirements is
one of the keys to keeping company strategies market-driven and customer-driven.
19. The role and tasks of strategic planners and strategic planning departments in
the strategic management process should consist of
☐ a. helping to gather and organize information that strategy-makers need.
☐ b. doing most of the strategic analysis for line managers and helping free line managers of the tedium
of thinking strategically.
☐ c. taking lead responsibility for strategy-making and allowing line managers to have lead responsibility for
strategy implementation (so as to better fix responsibility for results).
☐ d. working closely with key managers to prepare a sound strategic plan to submit to the board of directors
for final approval.
☐ e. working closely with key managers to prepare a sound strategic plan to submit to the board of directors for
final approval.
ANSWERS
1. T
2. F
3. T
4. F
5. F
6. a, b, d, f, g
7. c, e
8. b, c, f
9. a, b, f
10. a, b, e
11. c, e
12. a, b, c, d, f, g
13. b, c, d
14. b, c, d
15. a, b
16. e
17. d
18. b, d
19. a, e
20. a, b, e
21. objectives
22. strategy
23. implementing strategy
24. strategic plan
25. strategy implementation
Chapter 2
1. Strategic visions and company mission statements
☐ a. should be highly personalized --unique to the organization to which they apply.
☐ b. provide a big picture perspective of the organization's future course -- its customer focus, its target
market position, and the business activities to be pursued.
☐ c. are generally focused on the need to make a profit and what size profits and return on investment are
desired.
☐ d. are much more concerned with the present than the future.
☐ e. need to be developed after management has settled on a strategy and a set of objectives.
6. Objectives
☐ a. represent a managerial commitment to achieving specific performance outcomes by a certain time.
☐ b. are needed for each key result that managers deem important to organizational success.
☐ c. are best stated in general terms (maximize profits, reduce costs, increase sales) rather than quantifiable
terms (increase after-tax profits by 10% in 2 years, grow sales revenues by 20% annually) so that
managers will have the latitude to adjust target outcomes to levels that prove realistic and achievable.
☐ d. should be aimed more at near-term targets than long-range targets because of the uncertainties associated
with setting long-range targets at realistic levels.
☐ e. should place far more emphasis on financial targets than strategic targets.
7. Which of the following are good examples of strategic objectives (as opposed
to financial objectives)?
☐ a. Achieve earnings growth of 10% annually
☐ b. Increase market share from 17% to 22% within 3 years a c. Achieve the lowest overall costs of any
producer in the industry
☐ d. Achieve a AA bond rating within 2 years
☐ a e. Increase the return on invested capital from 13.5% to 15.0% within 2 years
☐ f. Offer the broadest product line of any company in the industry
☐ g. Be a recognized industry leader in technology and product innovations
11. Business strategy (as distinct from corporate strategy, functional strategies,
and operating strategies)
☐ a. concerns the pattern of moves and approaches crafted by management to produce successful performance
in one specific line of business.
☐ b. is usually crafted personally by a company's CEO.
☐ c. is chiefly concerned with HOW to build and strengthen the company's competitive position in a
specific business and market arena.
☐ d. can be judged as powerful or weak depending on whether it has the capacity to produce a sizable and
sustainable competitive advantage or whether it results in competitive disadvantage.
☐ e. is the result of what operating strategies and what functional strategies lower-level managers choose
to pursue.
15. The managerial task of uniting the strategy-making effort from the top to the bottom
of the strategy-making pyramid involves
☐ a. more of a bottom-up process than a top-down process.
☐ b. gaining broad consensus for and commitment to the organization's mission and vision, long-term
direction, and objectives.
☐ c. harmonizing the separate layers of strategy and networking them into a cohesive, coherent, and mutually
reinforcing pattern.
☐ d. exerting strong top-down direction-setting and strategic leadership so as to get lower-level managers to
perform their strategy-making tasks in a manner that is in accord with the company's vision, objectives, and
strategy rather than in a manner that suits departmental or personal interests.
☐ e. a collaborative effort on the part of all managers to set performance targets and invent strategic actions in
their respective areas of responsibility that contribute directly to overall company objectives and strategy.
18. In identifying the corporate strategy of a diversified company, one needs to consider
☐ a. what kind of diversification (related, unrelated, or both) the company is pursuing.
☐ b. if diversification is designed to create a strong corporate identity.
☐ c. whether the company is diversifying broadly across many industries or is concentrating its efforts narrowly
on a few different industries.
☐ d. the company's approach to vertical integration.
☐ e. the company's R & D strategy.
☐ f. recent moves to add new businesses to the company's portfolio and build new positions in
attractive industries.
☐ g. whether it has made recent moves to divest weak or unattractive businesses.
☐ h. the company's approach to allocating investment capital across its business units.
☐ i. what kind of competitive approach the company is pursuing in each of its different businesses.
☐ j. whether the company is trying to capture the synergy among related business units and turn it into
competitive advantage.
19. To identify the strategy for a single-business company, one needs to consider
☐ a. whether the company's competitive approach is based on low cost/low price or differentiation
(providing attributes not found in rival brands) or focusing on a specific market niche.
☐ b. the company's approach to allocating investment capital to each of its different activities.
☐ c. the firm's geographic coverage, approach to vertical integration, and its collaborative partnerships
and alliances with others -- all of which combine to establish its competitive scope within the industry.
☐ d. the key functional strategies being employed.
☐ e. what the company is doing to deal with changing industry conditions and other emerging developments.
☐ f. what it is doing to secure a competitive advantage.
☐ g. how many different operating strategies the company has and what their key features are.
☐ h. whether the strategy is ethical or unethical.
☐ i. recent internal moves to change compensation methods.
20. The factors that shape the choice of company strategy can be grouped into 2 broad
categories - factors external to the company and factors internal to the company.
Below is a list of items that may or may not have great bearing on a company's
choice of strategy. If you deem an item is relevant to a firm's choice of what strategy
to employ, then classify it as an external factor (by marking as an "E") or as an
internal factor (by marking as an "I"). If the item is not relevant as a factor, the box
should remain blank.
☐ Shared values and company culture.
☐ How much the product is selling for.
☐ Company opportunities and threats.
☐ How long the product has been on the market industry attractiveness and competitive conditions.
☐ Company resource strengths, resource weaknesses, competencies, and competitive capabilities.
☐ Societal, political, regulatory, and community citizenship considerations.
☐ The personal ambitions, business philosophies, and ethical principles of key executives.
☐ How many strategy options or alternatives the company has.
ANSWERS
1. a, b
2. c, d, e
3. b, d, e
4. c, d, e
5. a, b, c, d, e
6. a, b
7. b, c, f, g
8. a, c
9. a
10. a, b, c, d, e, f
11. a, c, d
12. c, d
13. a, c
14. b, d, f
15. c, d, e
16. b, c, e
17. b, e
18. a, b, c, f, g, h, j
19. a, c, d, e, f
20.
"I" Shared values and company culture.
How much the product is selling for.
"E" Company opportunities and threats.
How long the product has been on the market industry attractiveness and competitive conditions.
"I" Company resource strengths, resource weaknesses, competencies, and competitive
capabilities. "E" Societal, political, regulatory, and community citizenship considerations.
"I" The personal ambitions, business philosophies, and ethical principles of key executives.
How many strategy options or alternatives the company has.
21. Corporate strategy
22. strategic intent
23. distinctive competence
24. (1) situation (2) competitive advantage
25. collaborative
Chapter 3 Self-Test
1.Industry and competitive analysis aims at developing probing answers to which seven of the following
questions?
☐ a. How well is the company's strategy working?
☐ b. What are the strategic plans of other competitors in the industry?
☐ c. What are the industry's dominant economic features?
☐ d. What key factors will determine competitive success or failure?
☐ e. What are the drivers of change in the industry and what impact will they have?
☐ f. What strengths, weaknesses, opportunities, and threats are evident in the industry environment?
☐ g. What competitive forces are at work and how strong are they?
☐ h. Who's likely to make what strategic and competitive moves next?
☐ i. Which companies are in the strongest/weakest competitive positions?
☐ j. How attractive is the industry in terms of its prospects for above average profitability?
6. Which of the following are generally considered to be barriers to entering a market or industry?
☐ a. The presence of sizable scale economies and experience curve effects
☐ b. The presence of more than 20 rivals already in the industry
☐ c. A product that is pretty much standardized from rival to rival
☐ d. Firms in the industry hold key patents and possess significant proprietary technology
☐ e. The existence of tariffs, import quotas, and government-mandated regulations
☐ f. Difficulty in gaining access to technology and specialized know-how
☐ g. Buyer attachment to established brands
7. The competitive threat that outsiders will enter the industry is weaker when
☐ a. entry barriers are high.
☐ b. the industry's product is standardized.
☐ c. incumbent firms are likely to fight vigorously to prevent a newcomer from siphoning off their customers and eroding their sales volume.
☐ d. substitute products are not a strong competitive factor in the market.
☐ e. newcomers will have a hard time earning attractive profits for several years following entry.
11. Whether the buyers of an industry's product have strong or weak bargaining leverage over the terms
and conditions of sale depends on
☐ a. whether the costs of switching to substitute products are high or low.
☐ b. whether the costs of switching to competing brands are high or low.
☐ c. whether all buyers have the same degree of negotiating power.
☐ d. whether buyers purchase in relatively large or small quantities.
☐ e. whether buyer demand is sporadic or stable, seasonal or year-round, cyclical, or recession-proof.
12. Which of the following are NOT among the most common types of driving forces?
☐ a. Product innovation
☐ b. Shifts in buyer composition and the appearance of new ways of using the product
☐ c. Ups and downs in interest rates and the stock market
☐ d. Advances in technology and the diffusion of more technical know-how across the industry
☐ e. Shifts in buyer preferences away from differentiated products to more or less standardized products
☐ f. The decisions of one or more rivals to try to boost their market shares
☐ g. A reduction in the prices of substitute products
15. Trying to determine what strategic moves rivals are likely to make next
☐ a. is important because of its bearing on a company's own best strategic moves.
☐ b. usually requires evaluating the industry's key success factors as well as how many driving forces are present.
☐ c. involves scrutinizing which of the five competitive forces is strongest.
☐ d. cannot be done effectively without first drawing a strategic group map.
☐ e. entails understanding their strategies, monitoring their actions on a regular basis, gauging how well they are faring in the
marketplace, determining how much pressure they are under to improve their performance, and considering what their options are.
17. Important factors for company managers to consider in drawing conclusions about whether the industry
is an attractive or unattractive business to be in include:
☐ a. whether competitive forces are likely to grow or diminish in strength.
☐ b. the degree of uncertainty and risk in the industry's future.
☐ c. the potential for entry/exit of major firms.
☐ d. the company's ability to capitalize on the vulnerabilities of weaker rivals.
☐ e. whether the company has strong competitive capabilities and is well positioned to improve its market standing and profitability.
21. If an industry has a learning/experience curve effect of 20% for each doubling of cumulative production
volume and if costs per unit are $2.00 for a cumulative production volume of 2 million units, then unit
costs would be $ (1) at a cumulative
production volume of 4 million units and $ (2) at a cumulative
production volume of 8 million units.
1.
2.
22. The competitive structure of an industry is deemed (1) from a profit-making standpoint if rivalry
among competing sellers is very strong, entry barriers are (2) , competition from substitutes is
strong, and at least some important suppliers and customers are in a position to exercise considerable
bargaining power.
1.
2.
ANSWERS
1. c, d, e, g, h, i, j
2. a, d, f, g, h, i, j
3. a, b, e, f, g, h
4. b, c
5. c, e
6. a, d, e, f, g
7. a, c, e
8. a, b, e
9. d, e
10. a, b, c, d, g
11. a, b, d
12. c, f, g
13. a, d, e
14. b, d
15. a, e
16. b, c, f
17. a, b, c, e
18. c
19. c, d, e, f
20. a, b, c, e
21. (1) 1.50 (2) 1.28
22. (1) unattractive (2) low
23. Driving forces
24. strategic group
25. key success factors
Chapter 4 Self-Test
1.The weaker a company's financial performance and the less strong its competitive position, the more its
current strategy must be called into question.
☐ True
☐ False
2.A core competence gives a company competitive capability and qualifies as a genuine competitive strength,
but it does not qualify as a competitive advantage.
☐ True
☐ False
3.The importance of a distinctive competence to strategy-making rests with the competitively valuable capability
it gives a company, its potential for being a cornerstone of the company's strategy, and the competitive edge it
can potentially produce in the marketplace.
☐ True
☐ False
4.As a rule, company strategies should seek to exploit and leverage company capabilities and its most
competitively valuable resources; strategies that place heavy demand on areas where a company is weak
or has unproven ability should be avoided.
☐ True
☐ False
5.The overall competitive strength scores resulting from a competitive strength assessment provide indication
of net competitive advantage or disadvantage. Companies with higher overall strength ratings have a net
com- petitive advantage over rivals with lower scores, with size of the advantage being a function of the sizes
of the differences in the overall strength ratings.
☐ True
☐ False
6. Company situation analysis focuses on developing solid, probing answers to which of the following questions:
☐ a. What should the company's strategy be?
☐ b. How strong is the company's competitive position relative to its rivals?
☐ c. What does the company's value chain look like?
☐ d. Are the company's prices and costs competitive?
☐ e. Does the company need to pursue benchmarking and activity-based costing?
☐ f. What are the company's resource strengths and weaknesses and its external opportunities and threats?
☐ g. How well is the present strategy working?
☐ h. What strategic issues does the company face?
☐ i. What is the company's competitive environment like --does it confront strong, moderate, or weak competition?
7. Which of the following are criteria for evaluating the performance of a company's present strategy?
☐ a. The company's market share ranking and whether its share is trending up, down, or staying more or less the same
☐ b. Whether the company has at least two core competencies
☐ c. Whether the company's internal strengths and competitive capabilities outweigh its internal weaknesses and competitive vulnerabilities
☐ d. Whether the company's profit margins are increasing or decreasing and how large they are relative to other firms in the industry
☐ e. Whether the company's sales are growing faster or slower than the industry as a whole
☐ f. The firm's image and reputation with customers
☐ g. How many strategic issues the company faces and how serious they are
☐ h. Whether the company is regarded as a leader in some significant area (technology, product quality, service, product innovation, and so on)
☐ i. Whether the firm's value chain is longer or shorter than rivals
☐ j. How strong the company's advertising and promotional programs are relative to those of close rivals
8.The task of sizing up a company's internal resource strengths. and weaknesses and its external opportunities
and threats
☐ a. is called SWOT analysis.
☐ b. provides an overview of whether a firm's strategic situation is fundamentally healthy or unhealthy.
☐ c. helps provide a basis for matching the company's strategy to the company's situation.
☐ d. is the most important part of figuring out how many and what kind of strategic issues and problems the company's management needs
to address.
☐ e. is best done after a thorough competitive strength assessment so that the identification of company strengths, weaknesses, opportunities, and
threats will be easier and more accurate.
10. For a particular company resource to qualify as the basis for sustainable competitive advantage, it must
☐ a. be hard to imitate.
☐ b. be the company's biggest balance sheet asset.
☐ c. be a physical asset, not a human asset.
☐ d. really be competitively superior.
☐ e. not be readily trumped by different resources/capabilities of rivals.
☐ f. be long-lasting.
☐ g. be tangible rather than intangible.
11. The market opportunities that are most relevant to a company are
☐ a. those best able to assist in correcting the company's competitive weaknesses.
☐ b. those which it has the financial and organizational resources to pursue.
☐ c. those that offer important avenues for growth.
☐ d. those that create defenses against external threats.
☐ e. those where the company has the greatest potential for competitive advantage.
13. Benchmarking
☐ a. is a manager's best tool for determining whether a company is performing particular value chain activities and functions efficiently.
☐ b. is a tool for determining whether a company's costs for particular value chain activities are in or out of line with competitors.
☐ c. is inherently unethical if it is done with companies that are direct competitors.
☐ d. can often be done with the aid of third-party organizations so as to protect the confidentiality of individual company data.
☐ e. is not a valid tool for measuring the cost-effectiveness of an activity unless it is restricted to companies in the same industry.
17. Which of the following are signs of weakness in a company's competitive position?
☐ a. An eroding market share
☐ b. A lower price than rivals
☐ c. A higher price than rivals
☐ d. In an unfavorably situated strategic group
☐ e. Too small to be a major factor in the marketplace
☐ f. Questionable product quality or customer service or product development skills
☐ g. Subpar revenue growth relative to competitors
☐ h. Not able to match the skills, expertise, or capabilities of competitors in key value chain activities
☐ i. An after-tax return-on-equity below 15%
☐ j. Low revenues or market shares in market segments where growth is fastest or potential is greatest
19. The purpose of developing a list of the strategic issues a company faces is
☐ a. to draw conclusions about the strengths and weaknesses of company's present strategy.
☐ b. to determine whether it has a distinctive competence.
☐ c. to highlight the weaknesses in its competitive market position and to draw conclusions about whether the firm has a net competitive advantage
or disadvantage.
☐ d. to help decide whether the firm needs to shorten or lengthen its value chain in order to better position itself in the marketplace.
☐ e. to develop an agenda for management action.
20. A company's strategic options for overcoming cost disadvantages in the forward (downstream) end of
its overall value chain system include
☐ a. pressuring distributors and other forward channel allies to reduce their costs.
☐ b. working closely with forward channel allies to alter practices and procedures in ways that achieve mutually beneficial cost reductions.
☐ c. integrating forward to gain better control over the costs of downstream activities. a d. shifting to activity-based costing.
☐ e. cutting prices enough to eliminate the cost disadvantage in the forward end of the value chain.
22. involves comparing a company's costs, activity by activity, against the costs of
key rivals and identifying which internal activities are a source of cost advantage or disadvantage.
23. A company's identifies the activities, functions, and business processes that
are performed in designing, producing, marketing, delivering, and supporting its product(s) or service(s).
24. focuses on cross-company comparisons of how well basic functions, activities, and
processes in a company's value chain are performed relative to other companies and organizations.
25. entails developing cost estimates for specific tasks and activities in a
company's value chain; the cost data it provides is substantially different from traditional approaches to
cost accounting.
ANSWERS
1. T
2. T
3. T
4. T
5. T
6. b, d, f, g, h
7. a, d, e, f, h
8. a, b, c
9. a, c, d, e
10. a, d, e, f
11. b, c, e
12. a, g
13. a, b, d
14. b
15. a, b, c
16. e, f
17. a, d, e, f, g, h, j
18. a, b, c, d, e
19. a, e
20. a, b, c
21. distinctive competence
22. strategic cost analysis
23. value chain
24. benchmarking
25. activity-based costing
Chapter 5 Self-Test
7. Differentiation strategies
☐ a. are an attractive competitive approach when buyer preferences and requirements are too diverse to be satisfied either by
a standardized product or by sellers with identical capabilities.
☐ b. work best when the basis for differentiation is superior quality or superior customer service.
☐ c. create much greater buyer loyalty than low-cost provider strategies.
☐ d. can enhance profitability whenever the extra price the product commands outweighs the added costs of achieving
the differentiation.
☐ e. usually offer the best chance for gaining market share, as compared to low-cost or best-cost provider strategies.
☐ f. involve incorporating enough features and attributes with buyer appeal to set company product offerings visibly
and distinctively apart from the product offerings of rivals.
☐ g. can result in strong customer loyalty when buyers are strongly, attracted to the differentiating features.
☐ h. can produce sustainable competitive advantage if the differentiating features possess strong buyer appeal and can't be
copied or easily, matched by rivals.
12. The characteristics of a focused strategy based either on low-cost or differentiation include
☐ a. concentrating on a narrow piece of the total market.
☐ b. striving for a competitive advantage based on doing a better job than competitors of serving buyers in the target
market niche.
☐ c. the use of guerrilla offensives to capture customers.
☐ d. trying to wrest market share away from rivals via extra advertising, above-average expenditures for promotional
programs, and heavy use of point-of-sale merchandising techniques.
☐ e. an emphasis on using backward vertical integration to satisfy the specialized requirements of niche members.
17. A strategic offensive aimed at going head-to-head against key competitors to match or beat their strengths
☐ a. may be an attractive way of winning market share away from weaker rivals whose strengths and resources can
be outmatched.
☐ b. may be unavoidable if the competitive advantage of a stronger rival is to be narrowed or whittled away entirely.
☐ c. nearly always should involve cutting price below those charged by the rivals being targeted.
☐ d. is the least risky and most-likely-to-succeed of all of the various types of offensive strategies.
☐ e. stands the best chance of succeeding if it is predicated on either a cost advantage or an equal-or-better product offering;
otherwise the offensive is probably destined to hurt profitability because of the extra costs of supporting such an
offensive.
21.A company has whenever it has an edge over rivals in attracting customers and
defending against competitive forces.
22. The Achilles heel of alliances and cooperative strategies is the danger of on
other companies for essential expertise and capabilities over the long term.
23. Competitive advantage is nearly always achieved by launching successful (1) strategies;
(2) strategies can protect competitive advantage but rarely are the basis of achieving it.
24. An strategy seeks to avoid head-on competitive challenges (tied to such tactics
as aggressive price-cutting, escalated advertising, or efforts to out-differentiate rivals) and, instead, involve
maneuvering around competitors by aggressively entering unoccupied or less contested market territory by
introducing next-generation products and/or technologies so as to gain first-mover advantages.
25.A strategy involves moving first to secure an advantageous position that rivals
are foreclosed or discouraged from duplicating.
ANSWERS
1. b, c, e, f, g
2. a, d, e, f
3. b, c, d
4. a, b, e
5. a, b, d, f, g
6. a, c, e
7. a, d, f, g, h
8. b, c, d, e, f, h
9. a, b, d, e
10. b, c, d
11. a, e, f
12. a, b
13. a, b, c, d, f
14. a, g, h
15. b, c, d, e, f, i
16. a, b, f, g
17. a, b, e
18. b, d, g
19. a, d, e, f
20. d, g, h
21. competitive advantage
22. becoming dependent
23. (1) offensive (2) defensive
24. end-run offensive
25. preemptive
strike
Chapter 6 Self-Test
1. Competing in emerging industries
☐ a. poses the strategy-making challenge of dealing with uncertainties about how the market will function, how
fast it will grow, and how big it will get.
☐ b. is frequently difficult because of little data and little consensus about which of several competing
technologies will win out and/or which product attributes will ultimately gain the most buyer favor.
☐ c. is less risky than competing in maturing industries.
☐ d. is usually more profitable than competing in either globally competitive industries or industries where market
demand is stagnant or even declining.
☐ e. typically involves high entry barriers and small learning/experience curve effects.
☐ f. generally requires participants to wrestle with (1) how to finance the start-up phase, (2) what
market segments to pursue, and (3) what -kind of competitive advantage to build.
☐ g. usually entails risk-taking entrepeneurship, a bold strategy (often keyed to product superiority), efforts to
capture first-mover advantages and preparing to defend against new entry by profit-seeking outsiders.
☐ c. typically pursue short-term cash flow maximization rather than long-term profit maximization.
☐ d. sometimes rely on a focus strategy that involves identifying, creating, and exploiting growth segments within
the overall industry.
☐ e. often pursue differentiation strategies keyed to quality improvement and product innovation.
☐ f. draw their cash out of the business quickly and re-deploy it elsewhere (in other more profitable investments).
☐ g. work diligently and persistently to drive costs down.
☐ h. are those that are patient and willing to wait the hard times out until the market turns around (as it usually
does) and business conditions improve.
8. Competing in international markets poses a bigger strategy-making challenge than competing in only
the company's home market because of
☐ a. manufacturing cost variations among countries.
☐ b. the risks of exchange rate fluctuations.
☐ c. variations in host government trade policies.
☐ d. differing competitive conditions in different country markets. e. differing buyer needs and habits from country
to country.
9. Where multi-country competition prevails,
☐ a. prices and competitive conditions are strongly linked across country markets to form a world market.
☐ b. there is no "international market," just a collection of self-contained country markets.
☐ c. the risk of fluctuating exchange rates is greatly reduced.
☐ d. it makes strategic sense for a company's strategy to be crafted country by country to be responsive to buyer
needs and competitive conditions in each country.
☐ e. the least risky strategy option is to maintain a one-country production base and export goods to each of the
target country markets where the company elects to sell (utilizing either company-owned or foreign
controlled distribution channels).
10. Which of the following is a valid competitive strategy option for a company that wants to participate
in international markets?
☐ a. A global low-cost provider strategy
☐ b. A multi-country follow-the-leader strategy
☐ c. A strategy of licensing foreign firms to use the company's technology or to produce and distribute the
company's products.
☐ d. A content follower strategy
☐ e. A global differentiation strategy where the same differentiation approach is used in each country market
where the company competes
☐ f. A global focus strategy aimed at the same market niche or segment in each country where the company
competes a g. Maintaining a one-country production base and exporting goods to foreign markets F7 h. A
multi-country cross-subsidization strategy
☐ i. A critical market strategy
☐ j. A strategic alliance strategy aimed at having more alliances in more country markets than any other rival.
ANSWERS
1. a, b, f, g
2. b, c, d, h
3. d, e, f, h, I, j
4. d, e, g
5. b, d
6. a, b, d
7. a, c, e, f, g
8. a, b, c, d, e
9. b, d
10. a, c, e, f, g
11. b, c, d
12. a, b, c, d, e
13. a, f
14. c, d, f, g, h
15. a, b, h
16. a, b, d, f
17. c, d, h
18. b, c, e, f, I
19. a, b, c, d
20. b, d, h
21. Multicountry competition
22. profit sanctuaries
23. harvest
24. strategic alliances
25. Cross-subsidization
Chapter 7 Self-Test
14. For unrelated diversification to result in enhanced shareholder value, corporate managers
☐ a. must pursue acquisition opportunities in many different kinds of industries both to broadly diversify financial risk and
to stabilize earnings.
☐ b. must pursue multinational diversification.
☐ c. must do a superior job of overseeing the firm's subsidiaries and contributing to how they are managed such that the
businesses perform at a higher level than they could achieve as stand-alone operations.
☐ d. must do a superior job of diversifying into industries and businesses that can produce consistently good returns on
investment.
☐ e. must do an excellent job of negotiating favorable prices in acquiring the companies chosen for the diversification effort.
☐ f. must be shrewd in selling previously-acquired businesses at their peak and getting premium prices (before it becomes clear
to outsiders that the business probably faces eroding long-term profitability).
☐ g. have to aggressively shift corporate resources out of businesses where profit prospects are dimming and into businesses
where there are high returns on investment and potential for rapid profit growth.
15. Which of the following accurately characterize approaches to shareholder value via diversification?
☐ a. Unrelated diversification is an easier and safer way to build shareholder value than is related diversification.
☐ b. Related diversification seeks to build shareholder value by converting the strategic fits among related businesses into an
extra measure of competitive advantage and using this advantage to achieve better profitability and long-term performance.
☐ c. With unrelated diversification, a company's competitive advantages do not extend beyond what each business is able to
achieve on its own.
☐ d. Unrelated diversification involves less competitive risk than related diversification because the competitive positions
of different businesses are not linked together by strategic fit.
☐ e. Creating shareholder value via unrelated diversification is predicated on shrewd deployment of corporate financial resources
and executive skill in spotting financially rewarding business opportunities.
16. Divestiture of an existing business operation
☐ a. can involve selling the business unit outright to a willing buyer.
☐ b. can involve spinning the business off as a financially and managerially independent company in which the parent
company may or may not retain partial ownership.
☐ c. becomes an attractive strategic option when the business's profit prospects sour or when it no longer fits in with the parent
company's long-term direction and overall corporate strategy.
☐ d. is a last resort strategic option because it almost always means taking a large asset writeoff.
☐ e. merits consideration anytime top management concludes it can sell it for more than its original acquisition cost.
17. Portfolio restructuring
☐ a. involves revamping a diversified company's business makeup through a series of divestitures and new acquisitions.
☐ b. is the most-used technique of shifting from a related diversification strategy to an unrelated diversification strategy.
☐ c. merits consideration when a diversified company's long-term performance prospects are poor due to a business portfolio
comprised of too many slow-growth, declining, or competitively weak businesses.
☐ d. focuses on efforts to restore money-losing businesses to profitability instead of divesting them.
☐ e. is usually undertaken when corporate management concludes that the company is in too many businesses and needs
to concentrate its efforts on a few core businesses.
18. Multinational diversification strategies
☐ a. are complex because they involve both a diversity of businesses and a diversity of national markets.
☐ b. usually are predicated on unrelated diversification approaches rather than related diversification approaches.
☐ c. are potentially powerful when built around related diversification.
☐ d. are ill-suited for capturing economies of scope.
☐ e. are ill-suited for creating multiple profit sanctuaries.
☐ f. offer potent advantages for out-competing a one-business domestic company.
☐ g. offer potent advantages for out-competing a one-business multinational company.
19. The sources of competitive advantage for a DMNC include
☐ a. transferring expertise in a core technology to related products and businesses (as Honda has done).
☐ b. concentrating on related global industries where there are strategic fits that produce economies of scope and that offer
brand name transfer benefits.
☐ c. superior product quality.
☐ d. superior customer service.
☐ e. greater potential to employ cross-subsidization tactics against one business domestic competitors and one-
business multinational competitors.
☐ f. a lower risk of asset write-offs in divesting poorly-performing business units.
☐ g. less risk that any one business will fall upon hard times.
☐ h. leveraging its brand name by diversifying into businesses able to use the same brand.
20.A one-business domestic company is weakly positioned to defend its market position against a determined,
aggressive DMNC because
☐ a. diversification is a more powerful strategy than single-business concentration.
☐ b. it has only one profit sanctuary (its home market), which leaves it vulnerable to low prices from a DMNC with multiple
profit sanctuaries.
☐ c. the DMNC may have economy-of-scope advantages growing out of a related diversification strategy.
☐ d. the DMNC can use financial resources generated from its other businesses to fund a long-term competitive offensive in
the domestic company's home market and gradually sap the domestic company's financial strength (by eroding the size
of its home market profit sanctuary).
☐ e. it is more vulnerable to economic recessions.
21. Which of the following are strategic options for improving a diversified company's performance?
☐ a. Acquire new businesses
☐ b. Divest weak-performing businesses
☐ c. Employ portfolio restructuring
☐ d. Retrench to a narrower diversification base
☐ e. Pursue multinational diversification
☐ f. Pursue greater value chain diversity and make sure all businesses that the firm diversifies into pass the competition test
and the profit test
☐ g. Pursue turnaround strategies for poorly performing businesses in the company's business lineup
22. For a potential diversification move to pass the test, the diversifying
company must bring added potential for competitive advantage to the new business it enters or the
new business must offer added competitive advantage potential to the company's present business.
23. (1) exists when different businesses have sufficiently
related (2) that there are opportunities for skills transfer and cost-reduction, thus
forming a basis for competitive advantage.
24. arise from the ability to eliminate costs by operating two or
more businesses under the same corporate umbrella.
25. Related diversification represents a (1) approach to building shareholder value
whereas unrelated diversification is principally a (2) approach to creating shareholder
value.
ANSWERS
1. a, b, e
2. a, c, d
3. e
4. a, d, f
5. c, d, e
6. a, c, d
7. e
8. a, b, e
9. a, b, d
10. b, c, d, e, f
11. c
12. a, b, c
13. c, d
14. c, d, e, f, g
15. b, c, e
16. a, b, c
17. a, c
18. a, c, f, g
19. a, b, e, h
20. b, c, d
21. a, b, c, d, e, g
22. better-off
23. strategic fit, value chains
24. economies of scope
25. strategic, financial
Chapter 8 Self-Test
1. For a diversified company to be a strong performer a substantial portion of its revenues and profits must come
from business units judged to be in attractive industries.
☐True
☐False
3. Relative market share is a better indicator of a business's competitive strength and market position than is
absolute market share.
☐True
☐False
4. Relative market share is calculated by dividing a company's market share by the market share of its largest
rival.
☐True
☐False
5. Shareholder interests are generally best served by concentrating corporate resources on businesses that can
contend for market leadership in their industries.
☐True
☐False
6. One factor to consider in determining the attractiveness of an industry that that a company has diversified into
is whether it has valuable strategic fit relationships with other industries represented in the company's busi-
ness portfolio.
☐True
☐False
7. Firms emphasizing related diversification should divest businesses with little or no strategic fit unless these
businesses are unusually good financial performers or offer superior growth opportunities.
☐ True
☐False
8. The businesses in a diversified company's portfolio exhibit good resource fit when they add to a company's
resource strengths (either financially or strategically) and when the company has the resources to support
the requirements of its businesses without stretching itself too thinly.
☐ True
☐ False
9. In deciding whether to divest a business unit, corporate managers should rely primarily on whether the
business is a cash hog or a cash cow -- cash hogs should nearly always be divested; cash cows should
almost never be divested.
☐True
☐False
10. A cash hog business is one whose internal cash flows are not big enough to cover annual capital
requirements and thus requires regular infusions of financial capital; a cash cow business is one
which generates positive cash flows more than sufficient to cover its annual capital requirements.
☐True
☐False
14. Developing quantitative ratings of which of a diversified company's industries are most attractive and
least attractive involves
☐ a. selecting an appropriate set of industry attractiveness measures.
☐ b. determining the makeup of each industry's value chain.
☐ c. assigning weights to each of the industry attractiveness measures.
☐ d. rating each industry on each attractiveness measure (using a 1 to 5 or 1 to 10 rating scale).
☐ e. multiplying the rating by the assigned weight to get a weighted attractiveness rating.
☐ f. summing the weighted attractiveness ratings to obtain an overall attractiveness rating.
☐ g. using the overall ratings to draw a strategic group map for the industry
☐ h. deciding whether an industry is attractive or unattractive based on its position on the industry strategic group
map.
15. The more that a diversified company's business portfolio includes subsidiaries with competitively
valuable strategic fits, the greater is its potential for
☐ a. realizing positive cash flows and being a cash cow.
☐ b. realizing economies of scope.
☐ c. enhancing the competitive capabilities of particular business units. a d. achieving a combined performance
greater than the subsidiaries could achieve operating as an independent company.
☐ e. having the best value chain of any of the rivals against which it competes.
☐ f. having more profit sanctuaries than rivals.
16. Critiquing a diversified company's strategy, assessing its business makeup, and deciding how to improve
the competitive strength and performance potential of its businesses involves
☐ a. applying the cost-0f-entry test.
☐ b. doing a SWOT analysis.
☐ c. drawing a strategic group map.
☐ d. evaluating the long-term attractiveness of each industry the company is in.
☐ e. evaluating the competitive strength of the company's business units to determine which are really strong
contenders in their industries.
☐ f. doing a five forces analysis.
☐ g. determining the competitive advantage potential of any value chain relationships and strategic fits among
existing business units.
☐ h. rating each business unit on the basis of how well it has performed recently and how good its future
performance is likely to be.
☐ i. ranking the business units in terms of priority for new investment. identifying cross-subsidization opportunities.
17. The 9-cell industry attractiveness-business strength matrix
☐ a. uses quantitative measures of long-term industry attractiveness and business strength/competitive position to
plot each business's location.
☐ b. stresses giving top priority to businesses having strong competitive positions in industries with high long-term
attractiveness.
☐ c. provides real guidance as to the specific strategy actions which need to be taken in each business based on its
position in the industry.
☐ d. is a useful tool for displaying which businesses offer the best strategic fit and resource fit. a e. is a useful tool for
gauging the overall attractiveness of a diversified company's collection of businesses.
18. To arrive at a quantitative measure of business strength/competitive position each business unit in
a diversified company should be rated on the basis of such factors as
☐ a. relative market share.
☐ b. ability to compete on price and/or quality and/or service.
☐ c. how well the business unit's competencies and competitive capabilities match industry key success factors.
☐ d. growth in revenues and profits over the last five years.
☐ e. brand name recognition and reputation.
☐ f. which business has the best strategy.
☐ g. profitability relative to competitors.
☐ h. technology and innovation capabilities.
☐ i. degree of bargaining leverage with suppliers and customers.
19. To determine whether a business fits well strategically in a diversified company's business portfolio, it
is useful to consider whether
☐ a. a business unit has valuable strategic fit with other businesses in the portfolio.
☐ b. the business has a relative market share above 50%.
☐ c. it has the same strategic objectives as other businesses in the portfolio.
☐ d. it is pursuing the same basic competitive strategy as other businesses in the portfolio.
☐ e. the business matches well with the company's long-term strategic direction and can contribute to achieving the
company's strategic vision.
20. The most important considerations in comparing the performance of different businesses in a
diversified company's portfolio are
☐ a. sales growth.
☐ b. profit growth. D c. the debt-to-assets ratio.
☐ d. inventory turnover ratios.
☐ e. percentage contribution to the company's total earnings.
☐ f. the number of core competencies and distinctive competencies each business unit has.
☐ g. the return on capital invested in the business.
☐ h. relative product quality.
☐ i. cash flow generation.
☐ j. the relative number of customers and percentage growth in the customer base.
21. Ranking a diversified company's businesses in terms of priority for new capital investment
☐ a. should be done principally on the basis of relative long-term industry attractiveness and secondarily on the basis
of strategic fit with other businesses.
☐ b. should be based on how much it will take to substantially enhance the competitive standing of each business;
attempts should then be made to fund as much of the needed investments as possible, starting with
the business needing the smallest amount and proceeding to the business needing the largest
amount.
☐ c. should be based primarily on strategic fit considerations and long-term growth potential.
☐ d. should be based chiefly on relative competitive strength, recent performance and potential for achieving high
positive cash flows.
☐ e. should take into account all those business aspects relevant to deciding whether a business's outlook and
prospects are excellent, good, fair, or poor; as a general rule, corporate managers should concentrate
company resources on businesses with excellent to good prospects and invest minimally, if at all, in
businesses with sub-par prospects.
22. If a diversified company cannot realistically hope to achieve its performance objectives with its current
lineup of businesses, then it can try to close the performance gap by
☐ a. divesting weak-performing or money-losing businesses.
☐ b. adding new businesses to the corporate portfolio.
☐ c. issuing more shares of common stock and using the proceeds to pay off corporate debt.
☐ d. lowering corporate performance objectives.
☐ e. revising the strategic plans of some or all of the businesses in the portfolio to get better performance out of
existing businesses.
☐ f. forming strategic alliances or collaborative partnerships to try to remedy the conditions responsible for
underperformance.
☐ g. upgrading the company's resource base.
23. In the case of companies with an unrelated diversification strategy, decisions to add more
unrelated businesses to the portfolio lineup tend to be based on
☐ a. the company's financial ability to make another acquisition.
☐ b. whether new acquisitions are needed to boost overall corporate performance.
☐ c. whether the timing is right for another acquisition.
☐ d. whether there are pressing acquisition opportunities that need to be acted on immediately (to avoid being lost
altogether).
☐ e. identifying a business to divest so as to make room in the portfolio for a new acquisition.
☐ f. whether corporate management believes it possesses the range and depth of expertise to take on the
supervision of an additional business.
24. Corporate strategy in major enterprises
☐ a. tends to be crafted all at once in comprehensive fashion, following a full-scale portfolio review.
☐ b. usually emerges incrementally, a step at a time, as confidence and consensus build for what strategic moves
need to be made and as attention and resources are concentrated on a few critical thrusts that integrate
corporate direction, objectives, and strategies.
☐ c. changes more slowly than in single-business enterprises because it is harder to make adjustments in corporate
strategy than in business strategy.
☐ d. tends to be more driven by financial considerations than by strategic fit and competitive advantage
considerations.
☐ e. requires more formal analysis and brainstorming than is typically required in single-business enterprises
because fitting the pieces of corporate strategy together is more complex than fitting the pieces of business
strategy together.
25. In reviewing a diversified company's portfolio and deciding on what strategic moves are needed to
improve overall corporate performance, one needs to consider such factors as whether
☐ a. the company has enough businesses in very attractive industries.
☐ b. the company's business mix is over-weighted with marginally performing businesses, question marks,
slow-growth businesses, or businesses in decline.
☐ c. the company has the financial strength to support the new investment needs of its businesses.
☐ d. the portfolio contains businesses that the company really doesn't need to be in.
☐ e. corporate performance is being dragged down by businesses that are in average-to-weak competitive positions.
☐ f. the makeup of the business portfolio puts the company in good position for the future.
ANSWERS
1. T
2. T
3. T
4. T
5. T
6. T
7. T
8. T
9. F
10. T
11. a, c, e, f, g
12. c, e, f
13. a, d, e, f, h, i, j
14. a, c, d, e, f
15. b, c, d
16. d, e, g, h, i
17. a, b, e
18. a, b, c, e, g, h, i
19. a, e
20. a, b, e, g, i
21. e
22. a, b, d, e, f, g
23. a, b, c, d, f
24. b
25. a, b, c, d, e, f
Chapter 9 Self-Test
1. The multi-skill, multi-activity character of core competencies makes building and strengthening them an
exercise in managing human skills, intellect, and knowledge bases and in networking the efforts of
different workgroups and departments.
☐True
☐False
2. One of the first strategy-implementing steps is to put together a solid management team with good personal
chemistry and the mix of experiences, skills, and know-how to implement and execute the strategy.
☐True
☐False
3. Of all the different organizational structures, a functional structure has the best overall advantages, the
easiest-to-overcome disadvantages, and the best fit with most strategies.
☐True
☐False
4. Reengineering is an organizational tool to reduce business process fragmentation and to cut bureaucratic
overheads.
☐True
☐False
5. A decentralized business unit structure is the best organizational arrangement for coordinating the related
activities of related businesses.
☐True
☐False
6. Implementing strategy
☐a. is a task that must be done by the chief executive officer and the heads of major organizational units (business
divisions, functional departments, and key operating units).
☐b. involves leading, working with others, allocating resources, building and strengthening competitive capabilities,
and matching how the organization performs value chain activities to the requirements for good strategy
execution.
☐c. is easier and less time-consuming than crafting strategy.
☐d. is a job for the whole management team, not a few senior managers, because every manager needs to be
concerned with what has to be done in his/her area of authority to implement the company's strategy
successfully.
☐e. can be considered successful if the organization achieves its strategic and financial objectives.
☐f. tests a manager's ability to direct organizational change, motivate people, achieve continuous improvement in
strategy-critical business processes, and meet or beat performance targets.
7. The principal management tasks in implementing strategy include
☐a. creating a strategy-supportive work environment and corporate culture.
☐b. reducing the layers of management to a bare minimum.
☐c. building an organization with the competencies, capabilities, and resource strengths to carry out the strategy
successfully.
☐d. making sure that employees are empowered.
☐e. establishing strategy-supportive policies and procedures.
☐f. developing budgets to steer ample resources into those value-chain activities critical to strategic success.
☐g. monitoring the actions of competitors.
☐h. installing information, communication, and operating systems that enable personnel to carry out their strategic
roles proficiently.
☐i. tying rewards and incentives to the achievement of performance objectives and good strategy execution.
☐j. exerting the internal leadership needed to drive implementation forward and to keep improving on how the
strategy is being executed.
☐a. are problematic because no one person or department oversees the whole activity/process and is accountable
for good results.
☐b. can lengthen completion time.
☐c. frequently drive up overhead costs (because coordinating the fragmented pieces can soak up hours of effort
from many people).
☐d. occurs most frequently in matrix structures and decentralized business unit structures.
☐e. generally signal that management has strayed too far from strict adherence to a centralized functional
organization structure.
☐f. prevent a company from building strong competencies or capabilities in that activity or process.
☐g. can be avoided by outsourcing the activity from external allies.
14. Partnering with outsiders to develop or gain access to competitively valuable capabilities
☐a. entails high risk and should be avoided if at all possible.
☐b. makes strategic sense when outsiders can add to a company's resource strengths and contribute materially to
better strategy execution.
☐c. is okay for remedying resource deficiencies but not for building resource strengths.
☐d. is best accomplished using a matrix organization structure.
☐e. is usually more costly and less effective than building and developing the capability internally.
☐f. requires establishing internal organizational arrangements to manage the relationships with outsiders and to
build the necessary bridges between the partnering organizations.
15. In determining the degrees of authority and independence to give each organizational unit,
☐a. it is better to rely more on the principle of centralized authority than to risk pushing decision-making authority
down to lower-level managers and employees (who may be ill-equipped or unwilling to take on added
responsibility).
☐b. experience proves that a centralized hierarchical structure is superior to a decentralized flat structure.
☐c. the recent trend is for companies to shift away from authoritarian, multi-layered hierarchical structures to
flatter, more decentralized structures that stress employee empowerment.
☐d. centralizing authority in a few senior executives is the most reliable way to shorten decision times and respond
quickly and decisively to events as they unfold (the greater the strategic need for short decision response
times, the more that authority needs to be centralized).
☐e. centralizing authority over the related activities of separate businesses makes sense when there are
opportunities to share a common sales force, utilize common distribution channels, or rely upon a common
field service organization to handle customer requests for technical assistance or to provide maintenance and
repair services.
16. Outsourcing activities not critical to effective strategy execution
☐a. allows a company to concentrate its full energies and resources on those value-chain activities where it can
create unique value, where it may have a chance to be best in the industry (or even world class), and where it
needs control to build core competencies, win competitive advantage, and manage relationships with key
customers and suppliers.
☐b. can result in downsized internal bureaucracies.
☐c. can result in a flatter organizational structure.
☐d. can increase competitive responsiveness.
☐e. makes strategic sense whenever outsiders can perform them at lower cost and/or with higher value-added than
the buyer company can perform them internally.
☐f. has the disadvantage of hindering the development of managers with cross-functional experience.
☐g. can inhibit the use of self-contained work forces and cross-functional task forces.
☐h. can, if done in too many areas, hollow out a company, leaving it without skills and capabilities needed to be a
master of its own destiny.
17. The strategic advantages of functional and process organization structures include
☐a. providing an excellent training ground for future general managers.
☐b. providing a way to centralize control for strategic results.
☐c. becoming a basis for competitive advantage (lower cost or unique capability) when dominating depth in one or
more functional specialties or business processes is a key success factor.
☐d. promoting in-depth functional or process expertise (a big advantage when the firm's value chain consists of a
series of discipline-specific activities or business processes).
☐e. forcing profit responsibility to the top.
☐f. avoiding fragmentation of strategy-critical business processes.
☐g. promoting creative entrepeneurship and rapid adaptation to changing market circumstances.
☐h. exploiting learning/experience curve effects and scale economies associated with functional or process
specialization.
☐i. being the best organizational design for empowering people.
ANSWERS
1. T
2. T
3. F
4. T
5. F
6. b, d, e, f
7. a, c, e, f, h, i, j
8. c, d, g
9. a, f, g, i
10. b, c, e, f
11. a, c, e
12. a, e, f
13. a, b, c
14. b, f
15. c, e
16. a, b, c, d, e, h
17. b, c, d, f, h
18. d, e, f, g, h
19. a, c, f, g, i
20. b, c, e, f
21. a, c, d, e, f, i
22. d, f, g
23. a, e, f, g, h, i
24. a, d, g, h, j
25. c, d, g
Chapter 10 Self-Test
1. Cost-effective strategy implementation requires that budgets for organizational units be
prepared ahead of the plans and schedule for implementing strategy -- otherwise
organizational resources are likely to be wasted.
☐True
☐False
2. In deciding how many policies and procedures to prescribe and how tight they should
be, a good guideline is to prescribe enough policies to give organizational members
clear direction and make them tight enough to place desirable boundaries on their
actions; then empower people to act within these boundaries however they think
makes sense.
☐True
☐False
3. The best policies and procedures are those that give employees sufficient leeway to do
activities whatever way they believe is best.
☐True
☐False
4. Benchmarking, best practice implementation, and some form of TQM are basic tools for
implementing strategies keyed to defect-free manufacturing, superior product quality,
superior customer service, and total customer satisfaction.
☐True
☐False
5. The essential difference between reengineering and TQM is that reengineering aims at
redesigning the value chain while TQM programs aim at continuously improving how
particular value chain activities are performed.
☐True
☐False
6. TQM programs can be a very effective follow-on to reengineering efforts.
☐True
☐False
8. Getting employees to buy into the strategy and commit to making it work is best done
by talking to everyone about how important new strategic practices and achievement
of performance targets are to the company's future and its ability to provide job
security.
☐True
☐False
11.The most dependable way to keep company personnel focused on achieving the
objectives laid out in the strategic plan is to generously reward individuals and
groups who achieve their assigned performance targets and to deny rewards to those
who don't.
☐True
☐False
12.The key to creating a reward system that promotes good strategy execution is to
make strategically relevant measures of performance the dominating basis for
designing incentives, evaluating individual and group efforts, and handing out
rewards.
☐True
☐False
15. Unless meaningful incentive rewards and career consequences are attached to
successfully implementing strategic initiatives and hitting strategic performance
targets, few company personnel will attach much significance to the company's
strategic plan.
☐True
☐False
25. Motivating employees to do their best in trying to make the strategy work entails
☐a. using monetary incentives.
☐b. using non-monetary incentives.
☐c. creating a work climate where there is a constructive amount of pressure for employees
to perform well.
☐d. taking care to avoid those approaches that could result in employee stress, anxiety, or
job insecurity.
☐e. making sure that all employees are rewarded regularly for their efforts and that the
amount of incentive compensation is pretty much equal from employee to employee.
ANSWERS
1. F
2. T
3. F
4. T
5. F
6. T
7. T
8. F
9. F
10.
11.
12.
13.
14.
15.
16.
17.
18.
19.
20. a, b, d, f, g, h, i
21.
22.
23.
24.
25. a, b, cANSWERS
1.
Chapter 11 Self-Test
1. It is difficult to implement a strategy successfully when a firm's culture is not well
aligned with the beliefs, practices, behaviors, and business approaches that the
strategy calls for.
☐True
☐False
2. Companies, especially large ones, typically have multiple cultures or subcultures.
☐True
☐False
3. When a company's culture is out of sync with what is needed for successful strategy
implementation and execution, the wisest and best course of action is to change the
strategy.
☐True
☐False
4. The task of reshaping a firm's culture to better fit strategy generally takes from a
few weeks to a month in small firms to as much as a year in large companies.
☐True
☐False
5. Symbolic actions to change the corporate culture are more important than
substantive actions.
☐True
☐False
6. Charisma and personal magnetism are key traits that a CEO needs in order
to successfully lead efforts to change corporate culture.
☐True
☐False
7. High ethical standards are nice, even desirable, but they have little impact on a
company's long-term strategic success or on efforts to build a healthy corporate
culture.
☐True
☐False
☐ f. the kinds of relationships it has developed with employees, unions, suppliers, customers,
stockholders, and the communities where it operates.
☐ g. its policies and its ethical standards.
☐ h. its folklore (legends, stories, heroes).
☐ i. the types of competitive strategy it employs, its financial and strategic objectives, and its
strategic vision. its supervisory practice, its operating style, and its internal work
environment.
☐ g. openly supporting managers and employees at all ranks who propose or help
initiate useful change.
17. Changing a company's culture and aligning it with the requirements for
strategic success
☐ a. are among the toughest management tasks.
☐ b. entails diagnosing which facets of the present culture are strategy supportive and which
are not.
☐ c. involves open and candid communication among all concerned about those aspects of
the culture that have to be changed.
☐ d. requires visible actions, both symbolic and substantive, to modify the culture.
☐ e. nearly always requires that senior executives personally lead the culture-changing
effort.
☐ f. may require replacing old-culture traditionalist managers with "new breed" managers.
18. Instilling and ingraining a company's values statement and code of ethics in
company policies, practices, and actual conduct entails such actions as
☐ a. making them an integral part of employee training and educational programs.
☐ b. screening out job applicants who do not exhibit compatible character traits.
☐ c. communicating the values and ethics code to all employees and explaining compliance
procedures.
☐ d. promptly dismissing any employee who violates the ethics code or disavows company
values.
☐ e. the CEO openly and unequivocally endorsing the values and ethics code and leading the
enforcement of ethical standards.
☐ f. having all officers sign statements affirming their belief in the company's values and
their agreement to abide by the ethics code, then circulating these signed statements
among all company personnel.
19. The managerial task of exerting strategic leadership entails
☐ a. fostering a strategy-supportive climate and culture.
☐ b. developing a budget to implement and execute the strategy.
☐ c. staying on top of what is happening and how well things are going (often via MBWA).
☐ d. making sure that policies and procedures are supportive of effective strategy execution.
☐ e. building consensus and dealing with the internal politics of crafting and implementing
strategy.
☐ f. being an authoritarian, hard-nosed decision-maker who is willing to make the tough calls.
g. being a strong advocate of TQM. h. enforcing ethical standards.
☐ i. keeping the internal organization responsive, innovative, and alert for new opportunities.
☐ j. pushing corrective actions to improve strategy execution and overall strategic
performance.
20. Successful culture-change efforts
☐ a. require a major reorganization to achieve a strategy-supportive organization structure.
☐ b. require strong, forceful top management leadership because considerable internal clout
is needed to bring about major cultural change. c. require major budget reallocations.
☐ d. entail persuasive top management arguments that cultural changes are needed to serve
the long-term best interests of all key constituencies.
☐ e. usually entail challenging the status quo, promoting an openness to new ideas, and
gaining the commitment of individuals and department to support the new strategic
direction and needed new practices.
☐ f. usually requires rewriting the company's code of ethics and altering ethical standards
accordingly.
☐ g. frequently involve reengineering core business processes, benchmarking, and promoting
TQM.
☐ h. involve recognizing and rewarding people who exhibit the desired new cultural traits and
who lead or promote successful cultural change efforts.
21. refers to a company's values, beliefs, traditions,
operating style, and internal work environment.
22. From a strategy implementation perspective, the best types of corporate culture are
cultures.
23. The difference between a values statement and a code of ethics is that a (1)
is a cornerstone for building a corporate culture whereas a (2) is
a basis for developing a corporate conscience.
ANSWERS
1. T
2. T
3. F
4. F
5. F
6. F
7. F
8. T
9. F
10. F
11. a, b, g, h, j
12. a, e, f, g, h
13. a, e, f
14. b, c, d
15. c, d, e, f
16. a, b, e, f, g
17. a, b, c, d, e, f
18. a, b, c, e
19. a, c, e, h, i, j
20. b, d, e, h
21. corporate culture
22. adaptive
23. values statement
24. code of ethics
25. managing by walking around
26. weak