Test Bank CH 4-5-6

Download as pdf or txt
Download as pdf or txt
You are on page 1of 62
At a glance
Powered by AI
The key takeaways are about environmental scanning, industry analysis, and organizational structures. Environmental scanning involves monitoring external and internal factors, industry analysis examines competitive forces using Porter's model, and the three basic organizational structures are simple, functional, and divisional.

The three basic organizational structures are the simple, functional, and divisional. The simple structure has no categories and is for small companies. The functional structure is for medium companies organized by functions. The divisional structure is for large corporations organized by product-market distinctions.

Corporate culture has two distinct attributes - intensity and integration. Cultural intensity is the degree of acceptance of cultural norms and values. Cultural integration is the extent different units share a common culture.

Strategic Management & Business Policy, 13e (Wheelen/Hunger)

Chapter 4 Environmental Scanning and Industry Analysis

1) Environmental scanning is the monitoring, evaluating, and disseminating of information from


the external and internal environments to key people within the corporation.
Answer: TRUE
Diff: 1 Page Ref: 98
Topic: Environmental Scanning

2) A corporation uses environmental scanning to avoid strategic surprise.


Answer: TRUE
Diff: 2 Page Ref: 98
Topic: Environmental Scanning
AACSB: Analytic Skills

3) Political-legal forces regulate the values, mores, and customs of society.


Answer: FALSE – Sociocultural Forces
Diff: 1 Page Ref: 99
Topic: Environmental Scanning

4) The task environment includes the economic, technological, political-legal, and sociocultural
forces.
Answer: FALSE – natural environment
Diff: 2 Page Ref: 99
Topic: Environmental Scanning

5) Industry analysis was popularized by Michael Porter.


Answer: TRUE
Diff: 2 Page Ref: 99
Topic: Environmental Scanning

6) In dynamic environments, the CEO's focus is on forces in the societal environment.


Answer: FALSE
Diff: 1 Page Ref: 99
Topic: Environmental Scanning

7) Today's organizations must scan the natural environment for factors that might previously
have been taken for granted.
Answer: TRUE
Diff: 1 Page Ref: 99
Topic: Environmental Scanning

8) The transferring of profits from a foreign subsidiary to a corporation's headquarters is known


as repatriation of profits.
Answer: TRUE
Diff: 1 Page Ref: 100
Topic: Environmental Scanning
1
9) An example of an economic variable in the societal environment is antitrust regulation.
Answer: FALSE – political-legal environment
Diff: 2 Page Ref: 102
Topic: Environmental Scanning
AACSB: Analytic Skills

10) The growing health consciousness is an example of a political-legal force.


Answer: FALSE – sociocultural force
Diff: 2 Page Ref: 104
Topic: Environmental Scanning
AACSB: Analytic Skills

11) One of the demographic variables in the societal environment is the changing household
composition.
Answer: TRUE
Diff: 2 Page Ref: 105
Topic: Environmental Scanning
AACSB: Analytic Skills

12) One of the breakthrough developments in technology is the portable information device.
Answer: TRUE
Diff: 1 Page Ref: 102
Topic: Environmental Scanning
AACSB: Use of IT

13) A multinational corporation is a company with significant assets and activities in multiple
countries.
Answer: TRUE
Diff: 1 Page Ref: 105
Topic: Environmental Scanning

14) The origin of competitive advantage lies in the ability to identify and respond to
environmental change well in advance of competition.
Answer: TRUE
Diff: 3 Page Ref: 108
Topic: Environmental Scanning

15) The willingness to reject unfamiliar as well as negative information is called issues priority.
Answer: FALSE – strategic myopia
Diff: 2 Page Ref: 109
Topic: Environmental Scanning

2
16) A corporation's internal strategic factors are those key environmental trends that are judged to
have both a medium to high probability of occurrence and a medium to high probability of
impact on the corporation.
Answer: FALSE
Diff: 3 Page Ref: 109
Topic: Environmental Scanning

17) An industry is a group of firms producing a similar product or service.


Answer: TRUE
Diff: 1 Page Ref: 109
Topic: Industry Analysis: Analyzing the Task Environment

18) According to Michael Porter, the weaker each of the competitive forces, the more limited
companies are in their ability to raise prices and earn greater profits.
Answer: FALSE
Diff: 3 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking

19) According to Michael Porter, a high force can be regarded as threat because it is likely to
reduce profits.
Answer: TRUE
Diff: 2 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking

20) An entry barrier is an obstruction that makes it difficult for a company to enter an industry.
Answer: TRUE
Diff: 1 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment

21) One of the possible barriers to entry is product differentiation.


Answer: TRUE
Diff: 2 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

22) The need to invest huge financial resources in manufacturing facilities in order to produce
large commercial airplanes creates a significant barrier to entry to any competitor for Boeing and
Airbus.
Answer: TRUE
Diff: 3 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking

3
23) Governments can do little to erect barriers to entry in an industry.
Answer: FALSE
Diff: 2 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment

24) NutraSweet can serve as a product substitute for sugar satisfying the same need.
Answer: TRUE
Diff: 2 Page Ref: 112
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

25) A buyer may be powerful when changing suppliers’ costs a great deal.
Answer: FALSE - supplier
Diff: 2 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking

26) A consolidated industry is dominated by a few large firms, each of which struggles to
differentiate its products from the competition.
Answer: TRUE
Diff: 1 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment

27) Multidomestic industries are specific to each country or group of countries.


Answer: TRUE
Diff: 1 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment

28) The only factor used to determine whether an industry will be primarily multidomestic or
primarily global is the pressure for local responsiveness.
Answer: FALSE
Diff: 2 Page Ref: 115
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking

29) McDonald's and Olive Garden are in the same strategic group.
Answer: FALSE
Diff: 3 Page Ref: 116
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

30) Reactors are companies with a limited product line that focus on improving the efficiency of
their existing operations.
Answer: FALSE - defenders
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment

4
31) In hypercompetitive industries, competitive advantage comes from an up-to-date knowledge
of environmental trends and competitive activity coupled with a willingness to risk a current
advantage for a possible new advantage.
Answer: TRUE
Diff: 1 Page Ref: 118
Topic: Industry Analysis: Analyzing the Task Environment

32) Key success factors seldom vary from industry to industry.


Answer: FALSE
Diff: 2 Page Ref: 118
Topic: Industry Analysis: Analyzing the Task Environment

33) An industry matrix summarizes the key success factors within a particular industry.
Answer: TRUE
Diff: 2 Page Ref: 119
Topic: Industry Analysis: Analyzing the Task Environment

34) Competitive intelligence is an informal program of gathering information on a company's


competitors.
Answer: FALSE - formal
Diff: 1 Page Ref: 120
Topic: Competitive Intelligence

35) Business intelligence is one of the fastest growing fields within strategic management.
Answer: TRUE
Diff: 1 Page Ref: 120
Topic: Competitive Intelligence

36) A.C. Nielsen is an example of an outside organization providing a firm with competitive
intelligence.
Answer: TRUE
Diff: 2 Page Ref: 121
Topic: Competitive Intelligence
AACSB: Analytic Skills

37) To combat the increasing theft of company secrets, the U.S. government passed the
Economic Espionage Act.
Answer: TRUE
Diff: 2 Page Ref: 122
Topic: Competitive Intelligence

38) Faulty underlying assumptions are the most frequent cause of forecasting errors.
Answer: TRUE
Diff: 2 Page Ref: 123
Topic: Forecasting

5
39) Extrapolation rests on the assumption that the world is relatively dynamic and changes
quickly in the short run.
Answer: FALSE - consistent
Diff: 2 Page Ref: 124
Topic: Forecasting

40) Statistical modeling is a quantitative forecasting technique that attempts to discover causal or
at least explanatory factors that link two or more time series together.
Answer: TRUE
Diff: 2 Page Ref: 124
Topic: Forecasting

41) An industry scenario is a forecasted description of a particular industry's likely future. It is


developed by analyzing the probable impact of future societal forces on key groups in a
particular industry.
Answer: TRUE
Diff: 2 Page Ref: 125
Topic: Forecasting

42) The combination of the degree of complexity and the degree of change existing in an
organization's external environment is/are called
A) strategic factors.
B) strategic issues.
C) environmental uncertainty.
D) strategic fit.
E) scenarios.
Answer: C
Diff: 1 Page Ref: 98

43) According to the text, one reason environmental uncertainty is a threat to strategic managers
is because
A) it is a costly and time consuming process.
B) the strategic manager cannot control the environment.
C) it forces the strategic manager to be reactive.
D) it hampers their ability to develop long-range plans.
E) there are too many uncontrollable variables.
Answer: D
Diff: 2 Page Ref: 98

6
44) Which of the following is NOT descriptive of external environmental scanning?
A) Used as a tool to ensure a corporation's long-term health.
B) Used to monitor, evaluate, and disseminate information from the external environment to key
people within the corporation.
C) Used to identify opportunities and threats.
D) It is a tool that corporations use to avoid strategic surprise.
E) Used to identify strengths and weaknesses.
Answer: E
Diff: 2 Page Ref: 98
Topic: Environmental Scanning

45) The corporation's task environment


A) encompasses the physical working areas of the organization.
B) includes those elements or groups within an organization's industry.
C) is an advisory committee to top-management.
D) is an accounting of the many jobs within an organization.
E) is the job requirement specification listing necessary skills and abilities.
Answer: B
Diff: 1 Page Ref: 99
Topic: Environmental Scanning

46) Which of the following is NOT an element of the organization's task environment?
A) local communities
B) trade associations
C) governments
D) technological developments
E) special interest groups
Answer: D
Diff: 2 Page Ref: 99
Topic: Environmental Scanning
AACSB: Analytic Skills

47) Which environment was generally perceived by business people to be a given until the 20th
century?
A) the task environment
B) the natural environment
C) the industry
D) the societal environment
E) the external environment
Answer: B
Diff: 2 Page Ref: 99
Topic: Environmental Scanning
AACSB: Ethical Reasoning

7
48) Which of the following is NOT a major force in the societal environment?
A) political-legal forces
B) labor forces
C) economic forces
D) technological forces
E) sociocultural forces
Answer: B
Diff: 2 Page Ref: 101
Topic: Environmental Scanning

49) All of the following are technological breakthroughs already having a significant impact on
many industries EXCEPT
A) growing health consciousness.
B) alternative energy sources.
C) genetically altered organisms.
D) smart, mobile robots.
E) virtual personal assistants.
Answer: A
Diff: 1 Page Ref: 102
Topic: Environmental Scanning
AACSB: Analytic Skills

50) Which societal force includes demographic trends?


A) political-legal forces
B) labor forces
C) economic forces
D) technological forces
E) sociocultural forces
Answer: E
Diff: 2 Page Ref: 103
Topic: Environmental Scanning
AACSB: Analytic Skills

51) Which of the following is NOT one of the eight sociocultural trends mentioned in the text?
A) Increasing environmental awareness.
B) Growth of the seniors market.
C) Decline of the mass market.
D) Increasing food consumption.
E) Impact of Generation Y boomlet.
Answer: D
Diff: 2 Page Ref: 104-105
Topic: Environmental Scanning

8
52) Which is the largest of the current US generations?
A) Baby Boomers
B) Woofies
C) Silent Generation
D) Gen X
E) Gen Y
Answer: A
Diff: 1 Page Ref: 103
Topic: Environmental Scanning

53) A company with significant assets and activities in multiple countries is known as a(n)
________.
A) multinational corporation
B) repatriated corporation
C) transferable corporation
D) duplicate corporation
E) emancipated corporation
Answer: A
Diff: 1 Page Ref: 105
Topic: Environmental Scanning

54) When strategic managers have a willingness to reject unfamiliar as well as negative
information it is referred to as
A) strategic paralysis.
B) corporate inertia.
C) management indifference.
D) strategic myopia.
E) Corporate apathy
Answer: D
Diff: 2 Page Ref: 108
Topic: Environmental Scanning

55) The issues priority matrix used in environmental scanning is composed of two axis or
dimensions which are labeled
A) importance to the industry and likelihood of occurrence.
B) industry growth rate and probable competitive position.
C) probability of occurrence and probable impact on the corporation.
D) probable industry attractiveness and business strength/competitive position.
E) issue importance and relative power of stakeholder groups.
Answer: C
Diff: 3 Page Ref: 109
Topic: Environmental Scanning

9
56) What are the key environmental trends that are judged to have a medium to high probability
of occurrence and a medium to high probability of impact on the corporation?
A) external strategic factors
B) scenarios
C) industry forces
D) strategic issues
E) historical concerns
Answer: A
Diff: 2 Page Ref: 109
Topic: Industry Analysis: Analyzing the Task Environment

57) Industry analysis is primarily concerned with a corporation's


A) societal environment.
B) task environment.
C) sociocultural environment.
D) economic environment.
E) internal environment.
Answer: B
Diff: 2 Page Ref: 109
Topic: Industry Analysis: Analyzing the Task Environment

58) According to Porter, the corporation is most concerned with


A) the intensity of competition within its industry.
B) the aggregate level of demand for a product line.
C) a market's position on its life cycle.
D) the amount of pressure from the societal environment.
E) the level of government action in an industry.
Answer: A
Diff: 2 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment

59) In addition to Porter's Five Forces, another force added in the text is
A) bargaining power of unions.
B) other stakeholders.
C) threat of prospects.
D) threat of shareholders.
E) bargaining strength of employees.
Answer: B
Diff: 1 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment

10
60) The collective strength of the interaction of potential entrants, buyers, substitutes, suppliers,
firm rivalry, and other stakeholders determine
A) the level of government action in an industry.
B) the probable industry attractiveness and business strength position.
C) the ultimate profit potential in the industry measured in terms of long-run return on invested
capital.
D) the aggregate level of demand for a product line.
E) the amount of pressure from the societal environment.
Answer: C
Diff: 3 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment

61) According to Porter's model, a strong or high force is likely to reduce profits and can be
regarded as a(n)
A) benefit.
B) opportunity.
C) advantage.
D) threat.
E) risk.
Answer: D
Diff: 2 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment

62) According to Porter's model, a low force can enable the company to earn greater profits and
can be regarded as a(n)
A) benefit.
B) opportunity.
C) advantage.
D) threat.
E) risk.
Answer: B
Diff: 2 Page Ref: 110
Topic: Industry Analysis: Analyzing the Task Environment

63) Which of the following is NOT descriptive of the "threat of new entrants?"
A) Depends on the presence of entry barriers.
B) Have a desire to gain market share.
C) Depends on the reaction of existing competitors.
D) Does not impact industry attractiveness.
E) Brings new capacity and substantial resources.
Answer: D
Diff: 2 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

11
64) Which barrier to entry uses brand identification to force new entrants to spend heavily to
overcome existing customer loyalty?
A) rivalry among existing firms
B) switching costs
C) capital requirements
D) product differentiation
E) access to distribution channels
Answer: D
Diff: 2 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

65) Which barrier to entry uses cost advantages associated with large size?
A) rivalry among existing firms
B) switching costs
C) cost disadvantages independent of size
D) capital requirements
E) economies of scale
Answer: E
Diff: 3 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

*66) Which barrier to entry is demonstrated by Microsoft's MS-DOS operating system?


A) government policy
B) switching costs
C) cost disadvantages independent of size
D) capital requirements
E) economies of scale
Answer: C
Diff: 3 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

*67) Intel was able to gain a significant cost advantage over its competitors in the production and
sale of microprocessors because of
A) capital requirements.
B) product differentiation.
C) switching costs.
D) economies of scale.
E) access to distribution.
Answer: D
Diff: 3 Page Ref: 111
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking

12
68) Which of the following is NOT descriptive of intense rivalry among firms?
A) slow industry growth
B) high fixed costs
C) high exit barriers
D) few competitors or competitors that are roughly equal in size and power
E) product offerings that are highly differentiated
Answer: E
Diff: 3 Page Ref: 112
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

69) Which of the following is NOT descriptive of "threat of substitute products or services?"
A) Substitute products appear to be different, but satisfy the same need as another product.
B) If the cost of switching is low, substitutes may have a strong effect on an industry.
C) Identifying substitutes is relatively easy since they look similar.
D) Possible substitute products or services may not appear to be easily substitutable.
E) Substitutes limit the potential returns of an industry.
Answer: C
Diff: 2 Page Ref: 112
Topic: Industry Analysis: Analyzing the Task Environment

70) A sugar company that is worried that consumers may buy artificial sweetener instead of
sugar is concerned about the
A) threat of new entrants.
B) rivalry among existing firms.
C) threat of substitute products.
D) bargaining power of suppliers.
E) bargaining power of buyers.
Answer: C
Diff: 2 Page Ref: 112
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

71) Which of the following is NOT descriptive of a high level of bargaining powers of buyers?
A) Changing suppliers costs very little.
B) Alternative suppliers are plentiful because of standardization of the product.
C) The purchased product represents a high percentage of buyer's costs.
D) The buyer buys a large proportion of the seller's product or service.
E) A buyer earns high profits and is very insensitive to costs and service differences.
Answer: E

13
*72) When General Motors considers making its own automotive parts, Delphi Automotive
Supply Company would be concerned with the
A) bargaining power of suppliers.
B) bargaining power of buyers.
C) rivalry among existing competitors.
D) threat of substitutes.
E) threat of new entrants.
Answer: B
Diff: 2 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking

73) Which of the following is NOT descriptive of a high level of bargaining power of suppliers?
A) Substitutes are readily available.
B) The product or service is unique.
C) The supplier industry is dominated by a few companies, but sells too many.
D) The purchasing industry buys only a small portion of the supplier group's goods and services.
E) Suppliers are able to integrate forward and compete directly with their present customers.
Answer: A
Diff: 2 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

*74) Other software companies could not compete with Microsoft based on the hesitation of
consumers to try a new software. Which of Porter's forces does this reflect?
A) threat of new entrants
B) bargaining power of buyers
C) threat of substitutes
D) bargaining power of suppliers
E) rivalry among existing firms
Answer: D
Diff: 2 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

75) A company or an industry whose product works well with a firm's product and without which
the product would lose much of its value is considered to be a(n)
A) complementor.
B) oligopoly.
C) strategic group.
D) industry leader.
E) staggered company.
Answer: A
Diff: 1 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment

14
*76) A relationship that illustrates the term complementor is
A) Microsoft and Intel.
B) General Motors and Ford.
C) Hewlett Packard and Compaq.
D) Gateway and Dell.
E) America Online and CompuServe.
Answer: A
Diff: 2 Page Ref: 113
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking

77) According to the text, the strength of each of the six driving forces of industry competition
varies according to the
A) effectiveness of the strategic planning.
B) stage of industry evolution.
C) industry growth rate and competitive position.
D) changes in the political environment.
E) amount of government regulation.
Answer: B
Diff: 2 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment

78) In a fragmented industry


A) no firm has large market share.
B) prices drop as new competitors enter the market.
C) economies of scale are used to reduce costs.
D) companies integrate to further reduce costs.
E) all of the above.
Answer: E
Diff: 2 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment

*79) The U.S. major home appliance industry, including the companies of Maytag, Whirlpool,
General Electric, and Electrolux, is an example of an industry
A) that has evolved from an oligopoly to a monopoly.
B) in which each company maintained a distinct product line.
C) that was once fragmented, but now is consolidated.
D) that has experienced consistent, increasing sales.
E) experiencing a successful strategy of product specialization because of product differentiation.
Answer: C
Diff: 3 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

15
80) An industry dominated by a few large firms, all of which struggle with product
differentiation, is known as
A) multidomestic.
B) consolidated.
C) global.
D) indigenous.
E) worldwide.
Answer: B
Diff: 2 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment

81) In which type of international industry do corporations tailor their products to the specific
needs of consumers in a particular country?
A) consortium industry
B) global industry
C) indigenous industry
D) multidomestic industry
E) worldwide industry
Answer: D
Diff: 1 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment

82) Which type of international industry manufactures and sells the same products with only
minor adjustments made for individual countries around the world?
A) consortium industry
B) global industry
C) indigenous industry
D) multidomestic industry
E) worldwide industry
Answer: B
Diff: 1 Page Ref: 115
Topic: Industry Analysis: Analyzing the Task Environment

83) Which of the following is an example of a global industry?


A) retailing
B) banking
C) tires
D) insurance
E) health care
Answer: C
Diff: 2 Page Ref: 115
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

16
84) The two factors that tend to determine whether an industry will be primarily multidomestic
or primarily global are (1) the pressure for coordination within the MNCs operating in that
industry and (2):
A) the pressure for local responsiveness on the part of individual country markets.
B) the power of the local country governments to restrict MNC actions.
C) the need for brand management in the various MNCs operating within that industry.
D) the importance of differentiating with integrating mechanisms in regional cooperatives.
E) the likelihood of terrorist activity impacting that industry.
Answer: A
Diff: 3 Page Ref: 115
Topic: Industry Analysis: Analyzing the Task Environment

85) When the pressure for coordination is strong and the pressure for local responsiveness is
weak for multinational corporations within a particular industry, the industry will tend to become
A) global.
B) consolidated.
C) multidomestic.
D) risky.
E) indigenous.
Answer: A

Local responsiveness – Global


Coordination – Multidomestic

86) When the pressure for local responsiveness is strong and the pressure for coordination is
weak for multinational corporations in an industry, the industry will tend to become
A) global.
B) consolidated.
C) multidomestic.
D) risky.
E) indigenous.
Answer: C
Diff: 3 Page Ref: 115
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking

87) What is a set of business units or firms that "pursue similar strategies with similar
resources?"
A) strategic group
B) collective collaboration
C) cooperative
D) integral association
E) strategic assembly
Answer: A
Diff: 1 Page Ref: 115
Topic: Industry Analysis: Analyzing the Task Environment

17
88) Which of the following is NOT one of the general strategic types?
A) initiators
B) reactors
C) analyzers
D) prospectors
E) defenders
Answer: A

Prospectors – broad product lines


Defenders – limited product lines
Analyzers – 2 product market
Reactors – lack a consistency strategy

89) Which strategic orientation is demonstrated by companies that have a limited product line
and focuses on improving the efficiency of their existing operations?
A) initiators
B) reactors
C) analyzers
D) prospectors
E) defenders
Answer: E
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Analytic Skills

90) A company that operates in at least two different product-market areas in which one product
is stable and the other one is variable, reflects which strategic orientation?
A) initiators
B) reactors
C) analyzers
D) prospectors
E) defenders
Answer: C
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment

91) Companies with fairly broad product lines that focus on product innovations and market
opportunities, reflect which strategic orientation?
A) initiators
B) reactors
C) analyzers
D) prospectors
E) defenders
Answer: D
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment

18
92) Corporations that lack a consistent strategy-structure-culture relationship reflect which
strategic orientation?
A) initiators
B) reactors
C) analyzers
D) prospectors
E) defenders
Answer: B
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment

93) To succeed in a hypercompetitive industry, companies must be willing to


A) cut prices below marginal costs.
B) pursue market share instead of profits.
C) operate in the ethical gray zone.
D) cannibalize their own successful product lines.
E) reduce spending on research and development.
Answer: D
Diff: 3 Page Ref: 118
Topic: Industry Analysis: Analyzing the Task Environment
AACSB: Reflective Thinking

94) A table which summarizes the key success factors within a particular industry is called a(n)
A) EFAS Table.
B) IFAS Table.
C) SFAS Table.
D) TOWS Matrix.
E) industry matrix.
Answer: E
Diff: 1 Page Ref: 119
Topic: Industry Analysis: Analyzing the Task Environment

95) Those variables that can affect significantly the overall competitive positions of companies
within any particular industry are known as
A) external strategic factors.
B) internal strategic factors.
C) matrix factors.
D) key success factors.
E) industry scenario.
Answer: D
Diff: 1 Page Ref: 118
Topic: Industry Analysis: Analyzing the Task Environment

19
96) A formal program of gathering information on a company's competitors is referred to as
A) statistical modeling.
B) competitive intelligence.
C) competitive strategy.
D) quantitative forecasting.
E) qualitative matrix.
Answer: B
Diff: 1 Page Ref: 120
Topic: Competitive Intelligence

*97) Which of the following is true in regards to competitive intelligence?


A) The Economic Espionage Act makes it illegal to steal any material that a business has taken
"reasonable efforts" to keep secret.
B) The Society of Competitive Intelligence Professionals urges strategists to stay within the law
and to act ethically when searching for information.
C) The Society of Competitive Intelligence Professionals states that illegal activities are foolish
because the vast majority of worthwhile competitive intelligence is available publicly via annual
reports, web sites, and libraries.
D) A number of firms hire consultants with questionable reputations who do what is necessary to
get information when the selected methods do not meet SPIC ethical standards or are illegal.
E) all of the above
Answer: E
Diff: 3 Page Ref: 122
Topic: Competitive Intelligence

98) The primary activity of competitive intelligence is to


A) monitor competitors.
B) engage in corporate espionage
C) survey stakeholders
D) determine industry R & D statistics
E) reverse engineer competitors' products.
Answer: A
Diff: 1 Page Ref: 122
Topic: Competitive Intelligence

99) A study of nearly 500 of the world's largest corporations indicated which of the following to
be the most widely practiced form of forecasting?
A) statistical modeling
B) scenario-writing
C) delphi technique
D) brainstorming
E) trend extrapolation
Answer: E
Diff: 1 Page Ref: 124
Topic: Forecasting

20
100) Over ________ of large companies use trend extrapolation for forecasting.
A) 20%
B) 30%
C) 40%
D) 50%
E) 70%
Answer: E
Diff: 1 Page Ref: 124
Topic: Forecasting

101) Trend extrapolation is


A) the process of converting intuition and hunches into reality.
B) the extension of present trends into the future.
C) the process of asking some authorities in the area to make an "informed guess" about the
future.
D) given a large amount of historical data on certain interrelated factors, one attempts to
conceptualize alternative futures.
E) detecting faulty underlying assumptions before forecasting errors can occur.
Answer: B
Diff: 2 Page Ref: 124
Topic: Forecasting

102) A non-quantitative approach to forecasting that requires simply the presence of people with
some knowledge of the situation to be predicted is called
A) simulations.
B) the delphi technique.
C) signal monitoring.
D) brainstorming.
E) scenarios.
Answer: D
Diff: 2 Page Ref: 124
Topic: Forecasting

103) One ground rule necessary for effective brainstorming is


A) scrutinize each idea generated.
B) propose ideas without mentally screening them.
C) calculating future earnings of each idea.
D) critique each idea for rationality.
E) forecast the success of each idea.
Answer: B
Diff: 2 Page Ref: 124
Topic: Forecasting

21
104) A forecasting technique using quantitative measures that attempt to discover causal or at
least explanatory factors that link two or more time series together is called
A) the delphi technique.
B) statistical modeling.
C) trend extrapolation.
D) trend-impact analysis.
E) morphological analysis.
Answer: B
Diff: 2 Page Ref: 124
Topic: Forecasting

105) The most widely used forecasting technique used after trend extrapolation is
A) statistical modeling.
B) simulations.
C) scenario-writing.
D) expert opinion.
E) brainstorming.
Answer: C
Diff: 1 Page Ref: 125
Topic: Forecasting

106) Which one of the following is NOT part of the process of industry scenarios?
A) Examine possible shifts in societal variables.
B) Identify uncertainties in each of the six forces in the task environment.
C) Generate at least 15 scenarios.
D) Make a range of plausible assumptions about future trends.
E) Analyze the industry situation that would prevail under each scenario.
Answer: C
Diff: 1 Page Ref: 125
Topic: Forecasting

107) The technique recommended by the text to organize an analysis of external strategic factors
is called
A) IFAS.
B) EFAS.
C) SFAS.
D) S.W.O.T.
E) the issues priority matrix.
Answer: B
Diff: 1 Page Ref: 126
Topic: Synthesis of External Factors - EFAS

22
108) In the EFAS Table, the indicator of how well a particular company is responding to current
and expected factors in its external environment is characterized by the
A) IFAS.
B) industry matrix.
C) total weighted score.
D) S.W.O.T. weighted score.
E) SFAS weighted score.
Answer: C
Diff: 3 Page Ref: 127
Topic: Synthesis of External Factors - EFAS

109) Describe the four general forces in the societal environment.


Answer: The four general forces in the societal environment are economic, technological,
political-legal, and sociocultural. Economic forces regulate the exchange of materials, money,
energy, and information. Technological forces generate problem-solving inventions. Political-
legal forces allocate power and provide constraining and protecting laws and regulations.
Sociocultural forces regulate the values, mores, and customs of society.
Diff: 1 Page Ref: 99
Topic: Environmental Scanning

110) List eight current sociocultural trends in the U.S. that are transforming North America and
the world.
Answer: Eight current sociocultural trends in the U.S. that are transforming North American and
the world are as follows:
Increasing environmental awareness
Growing health consciousness
Expanding seniors market
Impact of Generation Y boomlet
Decline of the mass market
Changing pace and location of life
Changing household composition
Increasing diversity of workforce and markets
Diff: 2 Page Ref: 104-105
Topic: Environmental Scanning

23
111) Describe Porter's approach to industry analysis.
Answer: Michael Porter contends that a corporation is most concerned with the intensity of
competition within its industry. The level of this intensity is determined by basic competitive
forces. These are the threat of new entrants, rivalry among existing firms, threat of substitute
products or services, bargaining power of buyers, bargaining power of suppliers, and relative
power of other stakeholders (added later by the authors).

New entrants to an industry typically bring to it new capacity, a desire to gain market share, and
substantial resources. The threat of entry depends on the presence of entry barriers and the
reaction that can be expected from existing competitors.

A competitive move by one firm can be expected to have noticeable effect on its competitors and
thus may cause retaliation or counter efforts. Intense rivalry is related to the presence of the
number of competitors, rate of industry growth, product or service characteristics, the amount of
fixed costs, capacity, the height of exit barriers, and the diversity of rivals. (continued)

Substitute products are those products that appear to be different but can satisfy the same need as
another product.

Buyers affect an industry through their ability to force down prices, bargain for higher quality or
more services, and play competitors against each other.

Suppliers can affect an industry through their ability to raise prices or reduce the quality of
purchased goods and services.

The sixth force includes a variety of stakeholder groups from the task environment. The
importance of these stakeholder groups varies by industry.
Diff: 3 Page Ref: 110-113
Topic: Industry Analysis: Analyzing the Task Environment

112) Distinguish between a fragmented and consolidated industry.


Answer: A fragmented industry has no firm with a large market share and each firm serves only
a small piece of the total market in competition with others. As new competitors enter the
industry, prices drop as a result of competition.

A consolidated industry is dominated by a few large firms, each of which struggles to


differentiate its products from the competition. The automobile, petroleum, and major home
appliance industries are examples of mature, consolidated industries each controlled by a few
large competitors.
Diff: 2 Page Ref: 114
Topic: Industry Analysis: Analyzing the Task Environment

24
113) What are the two factors that tend to determine whether an industry will be primarily
multidomestic or primarily global?
Answer: The factors that tend to determine whether an industry will be primarily multidomestic
or primarily global are pressure for coordination within the multinational operations operating in
that industry and pressure for local responsiveness on the part of individual country markets. A
multidomestic industry is one in which companies tailor their products to the specific needs of
consumers in a particular country. A global industry is one in which companies manufacture and
sell the same products, with only minor adjustments made for individual countries around the
world.
Diff: 3 Page Ref: 114-115
Topic: Industry Analysis: Analyzing the Task Environment

114) Describe the four strategic types of the Miles and Snow typology.
Answer: According to Miles and Snow, there are four general types of firms based on a common
strategic orientation and a combination of structure, culture, and processes consistent with that
strategy. Defenders are companies with a limited product line that focus on improving the
efficiency of their existing operations. Prospectors are companies with fairly broad product lines
that focus on product innovation and market opportunities. Analyzers are corporations that
operate in at least two different product-market areas, one stable and one variable. Reactors are
corporations that lack a consistent strategy-structure-culture relationship.
Diff: 2 Page Ref: 117
Topic: Industry Analysis: Analyzing the Task Environment

115) Define competitive intelligence.


Answer: Competitive intelligence is a formal program of gathering information on a company's
competitors. Often called business intelligence, it is one of the fastest growing fields within
strategic management. Most companies use outside organizations (such as A.C. Nielsen Co.) to
provide them with environmental data. The Internet provides the quickest means to obtain data.
Some companies choose to use industrial espionage or other intelligence-gathering techniques to
get their information straight from their competitors.
Diff: 2 Page Ref: 120-121
Topic: Competitive Intelligence

116) Discuss the most commonly practiced form of forecasting.


Answer: Trend extrapolation is the most widely practiced form of forecasting with over 70% of
the world's largest firms using this technique either occasionally or frequently. Extrapolation is
the extension of present trends into the future. It rests on the assumption that the world is
reasonably consistent and changes slowly in the short run. Time-series methods are approaches
of this type: they attempt to carry a series of historical events forward into the future. The basic
problem with extrapolation is that a historical trend is based on a series of patterns or
relationships among so many different variables that a change in any one can drastically alter the
future direction of the trend. As a rule of thumb, the further back into the past you can find
relevant data supporting the trend, the more confidence you can have in the prediction.
Diff: 3 Page Ref: 124
Topic: Forecasting

25
Strategic Management & Business Policy, 14e (Wheelen)
Chapter 6 Strategy Formulation: Situation Analysis and Business Strategy

1) SWOT is an acronym that stands for Strategy, Weaknesses, Opportunities, and Threats.
Answer: FALSE

2) SWOT analysis is a panacea for strategy.


Answer: FALSE

3) A propitious niche is a need in the marketplace that is currently unsatisfied.


Answer: FALSE

4) The first firm through a strategic window can occupy a propitious niche and discourage
competition (if the firm has the required internal strengths).
Answer: TRUE

5) 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.
Answer: TRUE

6) Niches do not change over time.


Answer: FALSE

7) 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

8) The TOWS Matrix illustrates how the external opportunities and threats facing a particular
corporation can be matched with that company's internal strengths and weaknesses to result in
four sets of possible strategic alternatives.
Answer: TRUE

9) SO strategies attempt to take advantage of opportunities by overcoming weaknesses.


Answer: FALSE

10) 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

1
Copyright © 2015 & 2016 Pearson Education, Inc.
11) Differentiation is the ability of a company or business unit to design, produce, and market a
comparable product more efficiently than its competitors.
Answer: FALSE

12) A cost leader's lower costs allow it to continue to earn profits during times of heavy
competition.
Answer: TRUE

13) An example of a company following a cost focus strategy is Potlach Corporation, who makes
house brands toilet paper for Safeway and other grocery store chains.
Answer: TRUE

14) One risk of a cost leadership strategy is that the technology may change.
Answer: TRUE

15) An example of a company that was "stuck in the middle" is K-Mart as they tried to imitate
both Wal-Mart's low-cost strategy and Target's differentiation strategy.
Answer: TRUE

16) Based on the eight dimensions of quality discussed in the text, reliability is defined as the
product's ease of repair.
Answer: FALSE

17) Most entrepreneurial ventures follow focus strategies.


Answer: TRUE

18) 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

19) Rollups are synonymous with mergers and acquisitions.


Answer: FALSE

20) 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

21) One skill required of the cost leadership strategy is a strong marketing ability.
Answer: FALSE

2
Copyright © 2015 & 2016 Pearson Education, Inc.
22) Successful late movers tend to be large firms with considerable resources and related
experience.
Answer: TRUE

23) The first company to manufacture and sell a new product or service is called the ground
breaker.
Answer: FALSE

24) A defensive tactic usually takes place in an established competitor's market location.
Answer: FALSE

25) When AMD went after Intel's microprocessor business by developing low priced chips to go
after the customers Intel didn't mind losing, it was using a frontal attack.
Answer: FALSE

26) Oracle is using encirclement in attacking SAP in ERP software by surrounding SAP with
acquisitions.
Answer: TRUE

27) Microbreweries that make beer for sale for local customers, use guerilla warfare against
national brewers like Anheuser-Busch.
Answer: TRUE

28) 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

29) Too much partnering experience with the same strategic partners generates diminishing
returns over time and leads to reduced performance.
Answer: TRUE

30) 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

31) A value chain partnership is a loose alliance with several distributors for the short-term.
Answer: FALSE

32) 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

3
Copyright © 2015 & 2016 Pearson Education, Inc.
33) The concept that advocates management's attempt to find a strategic fit between external
opportunities and internal strengths while working around external threats and internal
weaknesses is called
A) environmental analysis.
B) position analysis.
C) strategic evaluation.
D) objective analysis.
E) situational analysis.

34) The particular capabilities and resources a firm possesses and the superior way in which they
are used is called
A) distinctive competencies.
B) differentiating capabilities.
C) situational proficiency.
D) core competencies.
E) distinctive characteristics.

35) 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) P.E.T.
B) M.B.O.
C) S.W.O.T.
D) S.B.U.
E) R.O.I.

36) The T in SWOT represents


A) tactic.
B) threat.
C) tautology.
D) temporal.
E) time.

37) The text authors note that the essence of strategy is


A) opportunity divided by capacity.
B) strength divided by opportunity.
C) threat divided by capacity.
D) threat divided by opportunity.
E) opportunity divided by threat.

38) All of the following reflect criticisms of the SWOT analysis EXCEPT
A) uses no weights to reflect priorities.

4
Copyright © 2015 & 2016 Pearson Education, Inc.
B) only requires a single level of analysis.
C) provides a rational link to strategy implementation.
D) ambiguity in words and phrases.
E) generation of lengthy lists.

39) In the development of a SFAS matrix, the first step is to


A) enter the ratings of how the company's management is responding to each of the strategic
factors.
B) calculate the weighted scores.
C) list the most important EFAS and IFAS items.
D) indicate short-term for the duration.
E) enter the weights for all of the internal factors.

40) A corporation's specific competitive role which is so well-suited to the firm's internal and
external environment that other corporations are NOT likely to challenge or dislodge it.
A) propitious niche.
B) strategic fit
C) common thread
D) business screen
E) implicit strategy

41) 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.

42) One company that has successfully found a propitious niche is


A) Coca-Cola.
B) PepsiCo.
C) Wal-Mart.
D) Frank J. Zamboni & Company.
E) Disney.

43) The technique that illustrates how management can match the external opportunities and
threats with its strengths and weaknesses to yield four sets of strategic alternatives is called a (an)
A) IFAS Table.
B) EFAS Table.
C) SFAS Table.

5
Copyright © 2015 & 2016 Pearson Education, Inc.
D) TOWS Matrix.
E) Issues Priority Matrix.

44) In a TOWS Matrix, SO Strategies


A) are generated by thinking of ways in which a company or business unit could use its
strengths to take advantage of opportunities.
B) attempt to take advantage of opportunities by overcoming weaknesses.
C) are basically defensive and primarily act to minimize weaknesses and avoid threats.
D) consider a company's or unit's strengths as a way to avoid threats.
E) are ways to get strategists to think "out of the box."

45) In a TOWS Matrix, ST Strategies


A) are generated by thinking of ways in which a company or business unit could use its strengths
to take advantage of opportunities.
B) attempt to take advantage of opportunities by overcoming weaknesses.
C) are basically defensive and primarily act to minimize weaknesses and avoid threats.
D) consider a company's or unit's strengths as a way to avoid threats.
E) are ways to get strategists to think "out of the box."

46) In a TOWS Matrix, WT Strategies


A) are generated by thinking of ways in which a company or business unit could use its strengths
to take advantage of opportunities.
B) attempt to take advantage of opportunities by overcoming weaknesses.
C) are basically defensive and primarily act to minimize weaknesses and avoid threats.
D) consider a company's or unit's strengths as a way to avoid threats.
E) are ways to get strategists to think "out of the box."

47) Business strategy focuses on


A) ensuring that the company maintains the existing market share that it has historically enjoyed.
B) improving the competitive position of a corporation's products or services within the
industry or market segment served.
C) providing adequate shareholders' return on investment.
D) preventing the competition from gaining a competitive edge by undermining their marketing
plan.
E) recovering the competitive lead by using all available resources that the company can provide.

48) Business strategy is composed of


A) corporate and competitive strategy.
B) functional and divisional strategy.
C) competitive and cooperative strategy.
D) corporate and cooperative strategy.

6
Copyright © 2015 & 2016 Pearson Education, Inc.
E) divisional and competitive strategy.

49) Which of the following is NOT 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?

50) According to Porter, the 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) concentration.
D) diversification.
E) lower cost.

51) What are the two generic competitive strategies that Porter promotes as the means for
outperforming other corporations in a particular industry?
A) competitive scope and differentiation
B) diversification and concentration
C) lower cost and competitive scope
D) concentration and lower cost
E) lower cost and differentiation

52) According to Porter, the 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) concentration.
D) diversification.
E) lower cost.

53) 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.

7
Copyright © 2015 & 2016 Pearson Education, Inc.
C) concentration.
D) diversification.
E) lower cost.

54) Wal-Mart, McDonald's and Alamo are all examples of companies following which of Porter's
competitive strategies?
A) differentiation
B) cost leadership
C) differentiation focus
D) competitive advantage
E) cost focus

55) When lower cost and differentiation strategies have a narrow focus on a market niche they
are simply called
A) cost leadership and differentiation.
B) concentration and differentiation.
C) cost focus and differentiation focus.
D) competitive scope and focused differentiation.
E) diversification and concentration.

56) 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

57) Patagonia uses sustainability in pursuing which of Porter's generic strategies?


A) differentiation
B) cost leadership
C) differentiation focus
D) competitive advantage
E) cost focus

58) 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

8
Copyright © 2015 & 2016 Pearson Education, Inc.
D) competitive advantage
E) cost focus

59) Which of Porter's competitive strategies concentrates on seeking differentiation in a


particular buyer group, product line segment, or geographic market?
A) differentiation
B) cost leadership
C) differentiation focus
D) competitive advantage
E) cost focus

60) 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.

61) 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) Achieving excessive success causing jealousy amongst competitors.
C) Competitors can achieve viable imitations.
D) Cost focusers achieve even lower cost in niche market segments.
E) Proximity in differentiation is lost.

62) Which of the following is NOT one of the risks of the focus strategy?
A) The target segment's structure erodes.
B) The segment's differences from other segments narrow.
C) The advantages of a broad line increase.
D) The exit of focusers from the industry.
E) Demand disappears for the product in the target segment.

63) According to Porter, a business unit in a competitive marketplace with no generic


competitive strategy is
A) achieving synergy.
B) practicing innovative leadership.
C) stuck in the middle.
D) not goal directed.
E) last in line.

9
Copyright © 2015 & 2016 Pearson Education, Inc.
64) Most entrepreneurial ventures follow
A) differentiation strategies.
B) focus strategies.
C) no strategies.
D) cost leadership strategies.
E) all of the above

65) Which of the following is NOT one of the eight dimensions of quality?
A) serviceability
B) durability
C) performance
D) value
E) features

66) A car's cruise control, known as a "bell and whistle" is an example of which of the eight
dimensions of quality?
A) performance
B) features
C) reliability
D) durability
E) aesthetics

67) 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.

68) 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.

69) A method developed in the mid-1990s as an efficient means to quickly consolidate a


fragmented industry can be referred to as a(n)
A) strategic plan.

10
Copyright © 2015 & 2016 Pearson Education, Inc.
B) strategic rollup.
C) cost strategy.
D) differentiation strategy.
E) focus strategy.

70) As an industry becomes hypercompetitive, firms initially respond by


A) raising entry barriers.
B) moving into untapped markets.
C) attacking the strongholds of other firms.
D) competing on cost and quality.
E) working their way to a situation of perfect competition.

71) The book Hypercompetition was written by


A) Porter.
B) Drucker.
C) Mintzberg.
D) Maslow.
E) D'Aveni.

72) 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.

73) A tactic is defined by the text as


A) a specific operating plan specifying how a strategy is to be implemented in terms of
when and where it is to be put into action.
B) the first company to manufacture and sell a new product or service.
C) any action by a company or business unit that provides a direct or indirect indication of its
intentions, motives, goals, or internal situation.
D) policies which link formulation and implementation of the strategy.
E) the ability to adapt a product or delivery system more closely to buyers' needs.

74) Porter recommends that a division with tight cost control, frequent detailed control reports, a
well structured organization, and quantitatively-based incentives is required for which of the
following generic competitive strategies?
A) focus

11
Copyright © 2015 & 2016 Pearson Education, Inc.
B) differentiation
C) overall cost leadership
D) focus differentiation
E) concentration

75) 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

76) Timing tactics answer the question


A) who in the company implements strategy.
B) where the strategy is implemented.
C) what strategy is implemented.
D) when a company implements a strategy.
E) why a company implements a strategy.

77) The first company to manufacture and sell a new product or service is called a(n)
A) opportunist.
B) first mover.
C) cost leader.
D) power broker.
E) ground breaker.

78) Which of the following is NOT an advantage of being a first mover?


A) The company is able to establish a reputation as an industry leader.
B) The company is able to move down the learning curve to assume the cost leader position.
C) A first mover can set the standard for all subsequent products in the industry.
D) Being first provides a company profit advantages for about ten years in consumer goods and
about twelve years in industrial goods.
E) First movers may be able to keep R & D costs low by imitating the technological
advances of others.

79) Which offensive tactic utilizes a head-to-head approach with the firm's competitor by
matching every category of competition from price to promotion to distribution channel?
A) flanking maneuver

12
Copyright © 2015 & 2016 Pearson Education, Inc.
B) bypass attack
C) encirclement
D) frontal assault
E) guerilla warfare

80) When Kimberly-Clark introduced Huggies disposable diapers against Procter & Gamble's
market leading Pampers, they were using the offensive tactic known as a(n)
A) flanking maneuver.
B) frontal assault.
C) encirclement.
D) bypass attack.
E) guerilla attack.

81) Which tactic deals with where a company implements a strategy?


A) a timing tactic
B) a market location tactic
C) collusion
D) corporate strategy
E) cooperative strategy

82) Which offensive tactic advocates attacking a part of the market where the competitor is
weak?
A) flanking maneuver
B) bypass attack
C) encirclement
D) frontal assault
E) guerilla warfare

83) Which offensive tactic proposes an indirect approach against the established competitor such
as changing the rules of the game?
A) flanking maneuver
B) bypass attack
C) encirclement
D) frontal assault
E) guerilla warfare

84) When Yamaha entered the market with a broader range of pianos, keyboards, and other
musical instruments, it was using which offensive tactic?
A) flanking maneuver
B) bypass attack
C) encirclement

13
Copyright © 2015 & 2016 Pearson Education, Inc.
D) frontal assault
E) guerilla warfare

85) Which of the following is NOT an offensive tactic?


A) frontal assault
B) flanking maneuver
C) guerilla warfare
D) raising structural barriers
E) encirclement

86) Which offensive tactic have the microbreweries used against major brewers?
A) flanking maneuver
B) bypass attack
C) encirclement
D) frontal assault
E) guerilla warfare

87) Which of the following is true of defensive tactics?


A) Defensive tactics aim to lower the probability of attack.
B) Defensive tactics divert attacks to less threatening avenues.
C) Defensive tactics lessen the intensity of an attack.
D) Defensive tactics reduce short-term profitability to ensure long-term profitability.
E) all of the above

88) Which defensive tactic is used by Coca Cola with their offering of unprofitable
noncarbonated beverages to keep competitors off store shelves?
A) guerilla warfare
B) lower the inducement for attack
C) encirclement
D) raise structural barriers
E) increase expected retaliation

89) Which defensive tactic was used by Southwest Airlines when deliberately keeping their
prices low and constantly investing in cost-reducing measures?
A) guerilla warfare
B) lower the inducement for attack
C) encirclement
D) raise structural barriers
E) increase expected retaliation

90) According to Porter, strategies to raise structural barriers include all of the following

14
Copyright © 2015 & 2016 Pearson Education, Inc.
EXCEPT
A) tie up suppliers by obtaining exclusive contracts.
B) avoid suppliers that also serve competitors.
C) decrease scale economies.
D) block channel access by signing exclusive agreements.
E) raise buyer switching costs by offering training to users.

91) 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.

92) Which of the following is NOT a reason companies or business units may form a strategic
alliance?
A) To obtain technological and/or manufacturing capabilities.
B) To reduce financial risk.
C) To reduce political risk.
D) To set prices in the industry.
E) To learn new capabilities.

93) 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.

94) 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

95) 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.

15
Copyright © 2015 & 2016 Pearson Education, Inc.
B) licensing agreement.
C) value-chain partnership.
D) mutual service consortia.
E) holding company.

96) 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.
D) Minimize conflicts among the partners by clarifying the objectives.
E) Identify likely partnering risks and deal with them when the alliance is formed.

97) What is a propitious niche? Provide an example of a firm that has been able to successfully
occupy a propitious niche.
Answer:
A propitious niche is an extremely favorable niche that is so well suited to the firm's
internal and external environment 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 its 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.
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 is able to produce the
machines in the quantity and quality desired at a reasonable price, it's not worth another
company's while to go after Frank J. Zamboni's propitious niche.

98) Explain the four combination strategies that may be generated from the TOWS Matrix.
Answer:
The TOWS Matrix results in four combination strategies as follows:
SO Strategies are generated by thinking of ways in which a company or business unit could
use its strengths to take advantage of opportunities.
ST Strategies consider a company's or unit's strengths as a way to avoid threats.
WO Strategies attempt to take advantage of opportunities by overcoming weaknesses.
WT Strategies are basically defensive and primarily act to minimize weaknesses and avoid
threats.

99) What are Porter's four generic strategies?

16
Copyright © 2015 & 2016 Pearson Education, Inc.
Answer:
Cost leadership is a lower-cost competitive strategy that aims at the broad mass market
and requires "aggressive construction of efficient facilities, vigorous pursuit of cost
reductions from experience, tight cost and overhead control, avoidance of marginal
customer accounts, and cost minimization in areas like R&D, service, sales force,
advertising, and so on." Because of its lower costs, the cost leader is able to charge a lower
price for its products than its competitors and still make a satisfactory profit.

Differentiation is aimed at the broad mass market and involves the creation of a product or
service that is perceived throughout its industry as unique. The company or business unit
may then charge a premium for its product.

Cost focus is a low-cost competitive strategy that focuses on a particular buyer group or
geographic market and attempts to serve only this niche, to the exclusion of others. In
using cost focus, the company or business unit seeks a cost advantage in its target segment.

Differentiation focus concentrates on a particular buyer group, product line segment, or


geographic market. In using differentiation focus, the company or business unit seeks
differentiation in a targeted market segment.

100) Discuss the difference between a fragmented and a consolidated industry.


Answer:
In a fragmented industry, there are many small- and medium-sized local companies that
compete 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.

As an industry matures, fragmentation is overcome and the industry tends to become a


consolidated industry dominated by a few large companies. Although many industries
begin fragmented, battles for market share and creative attempts to overcome local or
niche market boundaries often increase the market share of a few companies. After
product standards become established for minimum quality and features, competition
shifts to a greater emphasis on cost and service. Slower growth, overcapacity, and
knowledgeable buyers combine to put a premium on a firm's ability to achieve cost
leadership or differentiation along the dimensions most desired by the market. Research
and development shifts from product to process improvements. Overall product quality
improves, and costs are reduced significantly.

17
Copyright © 2015 & 2016 Pearson Education, Inc.
101) What are timing tactics?
Answer:
A timing tactic deals with when a company implements a strategy. The first company to
manufacture and sell a new product or service is called the first mover (or pioneer). Late
movers may be able to imitate the technological advances of others.

102) Discuss offensive tactics and defensive tactics.


Answer:
An offensive tactic usually takes place in an established competitor's market location. A
defensive tactic usually takes place in the firm's own current market position as a defense
against possible attack by a rival. Offensive tactics include frontal assault, flanking
maneuver, bypass attack, encirclement, and guerrilla warfare.

Defensive tactics aim to lower the probability of attack, divert attacks to less threatening
avenues, or lessen the intensity of an attack. They make a company's or business unit's
competitive advantage more sustainable by causing a challenger to conclude that an attack
is unattractive. The tactics include raising structural barriers, increasing expected
retaliation, and lowering the inducement for attack.

103) What are cooperative strategies?


Answer:
Cooperative strategies are used to gain competitive advantage within an industry by
working with other firms. The two general types of cooperative strategies are collusion and
strategic alliances. 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. A strategic alliance is a partnership of two or more corporations or business units
to achieve strategically significant objectives that are mutually beneficial.

104) What are the types of alliances that business can engage in?
Answer:
The types of alliances that businesses can engage in include a mutual service consortia, 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

18
Copyright © 2015 & 2016 Pearson Education, Inc.
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.

19
Copyright © 2015 & 2016 Pearson Education, Inc.
Strategic Management & Business Policy, 14e (Wheelen)
Chapter 5 Internal Scanning and Organizational Analysis

1) Resources are the organization's assets and are the basic building blocks of the organization.
Answer: TRUE

2) The resources of an organization include tangible assets, human assets, and intangible assets.
Answer: TRUE

3) Capabilities refer to a corporation's ability to exploit its resources.


Answer: TRUE

4) New product development would be a core competency if it goes beyond one division.
Answer: TRUE

5) General Electric is well known for its distinctive competency in management development.
Answer: TRUE

6) Core competencies may mature and become core deficiencies.


Answer: TRUE

7) An example of a cluster in the US is found in the Silicon Valley.


Answer: TRUE

8) Two characteristics that determine the sustainability of a firm's distinctive competency are
durability and transparency.
Answer: FALSE

9) Durability is the rate at which a firm's underlying resources and capabilities (core
competencies) can be duplicated by others.
Answer: FALSE

10) A core competency can be easily imitated to the extent that it is transparent, transferable, and
replicable.
Answer: TRUE

11) Since competitors were not able to understand how Gillette's Mach 3 razor was produced, it
was considered transparent.
Answer: FALSE

1
Copyright © 2015 & 2016 Pearson Education, Inc.
12) Transferability is the ability of competitors to use duplicated resources and capabilities to
imitate the other firm's success.
Answer: FALSE

13) Tacit knowledge is knowledge that can be easily communicated or articulated and as result
can be easily imitated.
Answer: FALSE

14) eBay and Amazon.com have successfully used the efficiency model by acting as an
intermediary to connect multiple sellers to multiple buyers.
Answer: FALSE

15) A value chain is a linked set of value-creating activities.


Answer: TRUE

16) A company's center of gravity is the part of the value chain that is most important to the
company and the point where its greatest expertise and core competencies lie.
Answer: TRUE

17) A company's center of gravity is usually the point at which the company started.
Answer: TRUE

18) According to Porter, a manufacturing firm's support activities usually begin with inbound
logistics, go through an operations process in which a product is manufactured, and continue on
to outbound logistics and finally to service.
Answer: FALSE

19) When a company uses the same marketing channel for two separate products, this is an
example of an economy of scope.
Answer: TRUE

20) A functional structure is appropriate for a medium sized firm with several product lines in
one industry.
Answer: FALSE

21) A divisional structure has no functional or product categories and is appropriate for a small,
entrepreneur-dominated company with one or two product lines that operates in a reasonably
small, easily identifiable market niche.
Answer: FALSE

2
Copyright © 2015 & 2016 Pearson Education, Inc.
22) Cultural integration is the degree to which members of a unit accept the norms, values, or
other culture content associated with the unit.
Answer: FALSE

23) When employees across the organization hold the same cultural values and norms, this
demonstrates a high level of cultural integration.
Answer: TRUE

24) The corporate culture generally reflects the values of the founder(s) and the mission of the
firm.
Answer: TRUE

25) The marketing mix refers to the particular combination of key variables under the
corporation's control that can be used to affect demand and to gain competitive advantage.
Answer: TRUE

26) The product life cycle enables a marketing manager to examine the marketing mix of a
particular product or group of products in terms of its position in its life cycle.
Answer: TRUE

27) Research reveals a positive relationship between corporate reputation and financial
performance.
Answer: TRUE

28) Research indicates that greater financial leverage has a positive impact on performance for
firms in dynamic environments.
Answer: FALSE

29) A good rule of thumb for R & D spending is that a corporation should spend at a "normal"
rate for that particular industry unless its strategic plan calls for unusual expenditures.
Answer: TRUE

30) A company's capability in product R & D can be measured by consistent reductions in unit
manufacturing costs and by the number of product defects.
Answer: FALSE

31) It is generally accepted that product R & D normally dominates the early stages of a
product's life cycle, whereas process R & D becomes especially important in the later stages.
Answer: TRUE

3
Copyright © 2015 & 2016 Pearson Education, Inc.
32) Historically, competitive leadership in a market changes hands as one technology nears the
end of its S-curve.
Answer: TRUE

33) An example of an intermittent manufacturing system is an auto body repair shop.


Answer: TRUE

34) Intermittent manufacturing systems reap benefits from economies of scale.


Answer: FALSE

35) Flexible manufacturing permits the low-volume output of custom-tailored products at


relatively low unit costs through economies of scope.
Answer: TRUE

36) Using concurrent engineering, Chrysler Corporation was able to reduce its product
development cycle from 60 to 36 months.
Answer: TRUE

37) To increase flexibility, avoid layoffs, and reduce labor costs, corporations are using more
contingent workers.
Answer: TRUE

38) A current trend in corporate information systems is the increasing use of the Internet for
marketing, intranets for internal communication, and extranets for logistics and distribution.
Answer: TRUE

39) The EFAS Table is one way to organize the internal factors into generally accepted categories
of strengths and weaknesses as well as to analyze how well a particular company's management
is responding to these specific factors in light of the perceived importance of these factors to the
company.
Answer: FALSE

40) Those critical strengths and weaknesses that are likely to determine if a firm will be able to
take advantage of opportunities while avoiding threats are called
A) SWOT.
B) competitive forces.
C) internal strategic factors.
D) quality accounting.
E) factor analysis.

4
Copyright © 2015 & 2016 Pearson Education, Inc.
41) Which of the following is NOT one of the four question areas Barney proposes in his VRIO
framework used to evaluate a firm's key resources?
A) durability
B) organization
C) rareness
D) value
E) imitability

42) When a company determines a competency's competitive advantage, Barney refers to this
issue as
A) value.
B) rareness.
C) imitability.
D) organization.
E) durability.

43) According to Barney's VRIO framework, the exploitation of a resource pertains to the
________ of the resource.
A) value
B) rareness
C) imitability
D) organization
E) durability

44) A corporation's ability to exploit its resources is referred to as its


A) resources.
B) capabilities.
C) core competencies.
D) critical success factors.
E) key performance factors.

45) Things that a corporation can do exceedingly well across the corporation are called
A) resources.
B) distinctive competencies.
C) core competencies.
D) critical success factors.
E) key performance factors.

46) When a company's core competencies are superior to those of competitors, these are known
as
A) resources.

5
Copyright © 2015 & 2016 Pearson Education, Inc.
B) distinctive competencies.
C) core competencies.
D) critical success factors.
E) key performance factors.

47) Which of the following statements is true concerning clusters?


A) The desire to build or upgrade a core competency is one reason why entrepreneurial and other
fast-growing firms often tend to locate close to their competitors.
B) Clusters are geographic concentrations of interconnected companies and industries.
C) An example of a cluster in the U.S. is California's Silicon Valley.
D) According to Porter, clusters provide access to employees, suppliers, specialized information,
and complementary products.
E) all of the above

48) The rate at which a firm's underlying resources and capabilities depreciate or become
obsolete is called
A) replicability.
B) transparency.
C) imitability.
D) durability.
E) transferability.

49) The rate at which a firm's underlying resources, capabilities, or core competencies can be
duplicated by others is called
A) replicability.
B) transparency.
C) imitability.
D) durability.
E) transferability.

50) When a company takes apart a competitor's product in order to find out how it works, this
process is known as
A) durability.
B) replicability.
C) reverse engineering.
D) transparency.
E) transferability.

51) The speed with which other firms can understand the relationship of resources and
capabilities supporting a successful firm's strategy is called
A) imitability.

6
Copyright © 2015 & 2016 Pearson Education, Inc.
B) reverse engineering.
C) transferability.
D) transparency.
E) durability.

52) The ability of competitors to use duplicated resources and capabilities to imitate the other
firm's success is called
A) imitability.
B) durability.
C) transferability.
D) transparency.
E) replicability.

53) Knowledge that can be easily articulated and communicated is known as


A) tacit knowledge.
B) explicit knowledge.
C) imitable knowledge.
D) transferable knowledge.
E) durable knowledge.

54) ________ is more valuable because it can provide companies with a sustainable competitive
advantage that is harder for competitors to imitate.
A) Tacit knowledge
B) Explicit knowledge
C) Imitable knowledge
D) Transferable knowledge
E) Durable knowledge

55) Knowledge that is not easily communicated because it is deeply rooted in employee
experience or in a corporation's culture is called
A) tacit knowledge.
B) explicit knowledge.
C) imitable knowledge.
D) transferable knowledge.
E) durable knowledge.

56) On the continuum of resource sustainability, where would Sony's Walkman be placed?
A) slow-cycle resources
B) sustainable resources
C) standard-cycle resources
D) fast-cycle resources

7
Copyright © 2015 & 2016 Pearson Education, Inc.
E) down-cycle resources

57) The business model used by IBM to make money not selling IBM products, but by selling its
expertise to improve their customers operations is the
A) profit pyramid model.
B) advertising model.
C) customer solutions model.
D) efficiency model.
E) entrepreneurial model.

58) The business model used by HP in selling printers and printer cartridges is the
A) profit pyramid model.
B) advertising model.
C) customer solutions model.
D) efficiency model.
E) multi-component system/installed base model.

59) A linked set of value-creating activities beginning with basic materials provided by suppliers
and ending with distributors getting the final product into the hands of the ultimate consumer is
called a(n)
A) value chain.
B) continuum of sustainability.
C) strategic capability.
D) fully integrated activity set.
E) a strategic group.

60) The part of an industry's value chain that is most important to a company and the point where
its greatest expertise and capabilities lie is called the company's
A) functional crossroads.
B) center of gravity.
C) dynamic equilibrium.
D) R&D intensity.
E) economy of scope.

61) Which of the following is NOT a primary activity of the value chain?
A) raw materials handling
B) installation
C) repair
D) purchasing
E) warehousing

8
Copyright © 2015 & 2016 Pearson Education, Inc.
62) Which of the following is NOT a support activity of the value chain?
A) procurement
B) technology development
C) human resource management
D) marketing and sales
E) strategic planning

63) When examining the corporate value chain of a particular product or service, which one of
the following is NOT one of the PRIMARY activities that usually occur?
A) operations
B) inbound and outbound logistics
C) auditing and accounting
D) marketing and sales
E) customer service

64) The second step when analyzing the value-added chain is to


A) identify the legal ramifications and responsibilities of their product or service.
B) examine the linkages among the product's or service's value activities.
C) confirm that all variables have been included and taken into consideration.
D) ensure that quality management is adequately addressed.
E) examine the potential synergies among the corporation's product or business units.

65) When the value chains of two separate products or services share activities, such as the same
marketing channels, in order to reduce costs, this is an example of
A) economies of scope.
B) economies of scale.
C) economies of integration.
D) economies of learning.
E) outsourcing.

66) Which of the following describes a typical functional structure?


A) Employees tend to be specialists in the business functions important to that industry
such as manufacturing, marketing, finance, and human resources.
B) This is most appropriate for large corporations with many product lines in several related
industries, with employees acting as specialists attempting to gain synergy among divisional
activities.
C) This is most appropriate for small, entrepreneur-dominated companies with one or two
product lines that operate in a small niche market, with employees acting as jack-of-all trades.
D) Employees have two or more superiors, a project manager and a functional manager.

9
Copyright © 2015 & 2016 Pearson Education, Inc.
E) This is most appropriate for large corporations with many product lines in several unrelated
industries, with employees acting as specialists but with no attempt at gaining synergy among the
divisions.

67) Which of the following best describes a simple structure?


A) Work is divided into subunits on the basis of such functions as manufacturing, marketing,
finance, and human resources.
B) This is most appropriate for large corporations with many product lines in several related
industries, with employees acting as functional specialists attempting to gain synergy among
divisional activities.
C) This is most appropriate for small, entrepreneur-dominated companies with one or two
product lines that operate in a small niche market, with employees acting as jack-of-all
trades.
D) Employees have two or more superiors, a project manager and a functional manager.
E) This is most appropriate for large corporations with many product lines in several unrelated
industries, with employees acting as functional specialists but with no attempt at gaining synergy
among the divisions.

68) Which one of the following best describes a divisional structure?


A) Work is divided into subunits on the basis of such functions as manufacturing, marketing,
finance, and human resources.
B) This is most appropriate for large corporations with many product lines in several
related industries, with employees acting as functional specialists attempting to gain
synergy among divisional activities.
C) This is most appropriate for small, entrepreneur-dominated companies with one or two
product lines that operate in a small niche market, with employees acting as jack-of-all trades.
D) Employees have two or more superiors, a project manager and a functional manager.
E) This is most appropriate for large corporations with many product lines in several unrelated
industries, with employees acting as functional specialists but with no attempt at gaining synergy
among the divisions.

69) Which one of the following best describes a conglomerate structure?


A) Work is divided into subunits on the basis of such functions as manufacturing, marketing,
finance, and human resources.
B) This is most appropriate for large corporations with many product lines in several related
industries, with employees acting as functional specialists attempting to gain synergy among
divisional activities.
C) This is most appropriate for small, entrepreneur-dominated companies with one or two
product lines that operate in a small niche market, with employees acting as jack-of-all trades.
D) Employees have two or more superiors, a project manager and a functional manager.

10
Copyright © 2015 & 2016 Pearson Education, Inc.
E) This is most appropriate for large corporations with many product lines in several
unrelated industries; unrelatedness prevents any attempt at gaining synergy among the
divisions.

70) According to the text, which one of the following is NOT descriptive of a corporation's
culture?
A) A corporation's culture is a collection of beliefs, expectations, and values learned and shared
by corporation's members and transmitted from one generation of employees to another.
B) Corporate cultures are only temporary and can be easily changed.
C) Corporate culture norms are created which define acceptable behavior from top management
to operative employee.
D) Myths and rituals often emerge over time to explain why a certain aspect of the culture is
important.
E) Cultures have a powerful influence on the behavior of managers and can strongly affect a
corporation's ability to shift its strategic direction.

71) What are the two distinct attributes of corporate culture?


A) differentiation and integration
B) durability and imitability
C) concern for people and concern for task
D) intensity and integration
E) amount of complexity and tolerance of change

72) What is the attribute of corporate culture that is the degree to which members of a unit accept
the norms, values, or other culture content associated with the unit?
A) integration
B) strength
C) intensity
D) coordination
E) unity

73) Which of the following is a function of corporate culture?


A) It encourages a laissez faire set of attitudes.
B) It encourages flexibility and thus constant change.
C) It conveys a sense of identity for employees.
D) It generates creative approaches to new situations.
E) It focuses employee commitment on their own careers.

74) Which of the following is NOT a function of corporate culture?


A) conveys a sense of identity for employees
B) adds to the stability of the organization as a social system

11
Copyright © 2015 & 2016 Pearson Education, Inc.
C) helps generate employee commitment to something greater than themselves
D) keeps people guessing about what to do next
E) serves as a frame of reference for employees to use as a guide for appropriate behavior

75) The breadth of an organization's culture is also known as


A) cultural integration.
B) cultural diversification.
C) cultural intensity.
D) cultural strategy.
E) cultural prerogative.

76) Through market research, corporations can target their various products or services so that
management can discover what niches to seek or develop, and how to minimize competitive
pressure. This is descriptive of
A) marketing position.
B) product life cycle.
C) market segmentation.
D) marketing mix.
E) marketing leverage.

77) The particular combination of product, place, promotion, and price is called
A) marketing position.
B) product life cycle.
C) market segmentation.
D) marketing mix.
E) marketing leverage.

78) An example of the promotion variable of the marketing mix is


A) advertising.
B) discounts
C) location.
D) services.
E) quality.

79) A graph showing time plotted against the dollar sales of a product as it moves from
introduction through growth and maturity to decline is called the
A) marketing position.
B) product life cycle.
C) market segmentation.
D) marketing mix.
E) marketing leverage.

12
Copyright © 2015 & 2016 Pearson Education, Inc.
80) Which of the following statements is true concerning a corporate reputation?
A) It is a widely held perception of a company by the general public.
B) A good corporate reputation can be a strategic resource.
C) There is a positive relationship between corporate reputation and financial performance.
D) Reputation tends to be long-lasting and hard for others to duplicate.
E) all of the above

81) As compared to a firm with low financial leverage, a firm with a high amount of financial
leverage in an expanding market should have
A) lower profits.
B) higher profits
C) higher earnings per share.
D) lower earnings per share.
E) higher sales revenue.

82) The ratio of total debt to total assets is known as


A) budgeting leverage.
B) capital finance.
C) capital budgeting.
D) financial leverage.
E) financial budgeting.

83) Which of the following is NOT a responsibility of a research and development manager?
A) Choosing among alternative new technologies to use within the corporation.
B) Developing methods of embodying the new technology in new products and processes.
C) Deploying resources so that the new technology can be successfully implemented.
D) Taking the design and operationalizing the plan into mass production.
E) Suggesting and implementing a corporation's technological strategy in light of its corporate
objectives and policies.

84) The process of taking a new technology from the laboratory to the marketplace is called
A) economies of scope versus operating leverage.
B) the R&D mix.
C) technological competence.
D) technological discontinuity.
E) technology transfer.

85) When scientists concentrate on quality control and the development of design specifications,
this is referred to as
A) basic R&D.

13
Copyright © 2015 & 2016 Pearson Education, Inc.
B) product R&D.
C) engineering R&D.
D) life cycle R&D.
E) R&D mix.

86) The displacement of one technology by another, as shown by two S-shaped curves on a
graph, is referred to as
A) economies of scope versus operating leverage.
B) technology transfer.
C) the R&D mix.
D) technological discontinuity.
E) a disjunctive learning or experience curve.

87) The proposition that silicon chips double in complexity every 18 months is referred to as
A) Ohm's Law.
B) Porter's Five Forces Model.
C) Moore's Law.
D) Mintzberg's Rule.
E) Keynesian's Theory.

88) In Christensen's book, The Innovator's Dilemma, he explains that managers remain with
certain technologies based on
A) return of investment.
B) net present value.
C) cost reduction.
D) total operating expenses.
E) time spent during technology implementation.

89) According to the text, the primary task of the operations manager is to
A) make sure all the products or services are producing maximum revenue.
B) develop and operate a system that will produce the required number of products or
services with a certain quality, at a given cost, within an allotted time.
C) make sure the process has a high quality control.
D) ensure that the process is manufactured or delivered as efficiently as possible.
E) interface with the other functional departments to coordinate their operations in avoiding
duplication of effort.

90) Which of the following terms best describes a system in which items are normally processed
sequentially, but the work and sequence of the process vary?
A) continuous system
B) debt capacity

14
Copyright © 2015 & 2016 Pearson Education, Inc.
C) chronological processing
D) operating leverage
E) intermittent system

91) An automobile assembly line is an example of which approach to manufacturing?


A) continuous system
B) debt capacity
C) sequential processing
D) job shop
E) intermittent system

92) The impact of a specific change in sales volume on net operating income is referred to as the
A) continuous system.
B) chronological processing.
C) operating leverage.
D) debt capacity.
E) intermittent system.

93) The concept that suggests that unit production costs decline by some fixed percent each time
the total accumulated volume of production in units doubles is referred to as
A) the R & D mix.
B) the experience curve.
C) technological competence.
D) break-even analysis.
E) technology transfer.

94) Which one of the following is NOT descriptive of the experience curve?
A) It is very useful because it is consistent within the industry for all involved organizations
over time.
B) It is used to estimate the production cost of a product produced by newly introduced
techniques or processes.
C) It is used to estimate the production costs of a product never before made with the present
techniques and process.
D) The concept was first applied in the airframe industry.
E) It shows that production costs decline by some fixed percentage as production in units
doubles.

95) Flexible manufacturing emphasizes


A) high-volume output of mass produced products.
B) the cost advantages of an intermittent system with the customer-oriented advantages of a
continuous system.

15
Copyright © 2015 & 2016 Pearson Education, Inc.
C) the learning curve is longer since technology is automated.
D) economies of scope over economies of scale.
E) economies of scale over economies of scope.

96) Strategic managers must be concerned with human resource management because
A) dealing with people is their primary job.
B) quality of work life is more important than strategic management.
C) they must be aware of the ability and willingness of the workforce to implement new
strategies.
D) workers are more likely to go on strike if management attempts to cross them.
E) they must be aware of the possibility and potential of unionism.

97) In order to move more quickly through a product's development stage, companies like
Motorola and Chrysler are using
A) concurrent engineering.
B) cross-functional work teams.
C) advisory committees.
D) task forces.
E) continuous engineering.

98) The term that describes putting once isolated specialists together to work and compare notes
in a collective product design effort is called
A) simultaneous strategy.
B) participatory planning.
C) jointly-designed objectives.
D) concurrent engineering.
E) cooperative design.

99) Human resource departments have found that to reduce employee dissatisfaction and
unionization efforts, they must
A) significantly increase their wage rates.
B) shorten the work week to allow for more leisure time.
C) offer a wider variety of benefits and attractive enticements.
D) guarantee their workers life time jobs.
E) consider the quality of work life in the design of jobs.

100) Which one of the following is NOT one of the four methods to improve the corporation's
quality of work life?
A) Improve the work environment
B) Introduce participative problem-solving
C) More responsive management

16
Copyright © 2015 & 2016 Pearson Education, Inc.
D) Introduce innovative reward systems
E) Restructuring work

101) The mix in the workplace of people from different races, cultures, and backgrounds is
referred to as
A) demographics.
B) human diversity.
C) quality of work life.
D) globalization.
E) internationalization.

102) The PRIMARY task of the manager of information systems is to


A) prevent unlawful usage of the information from the system.
B) make sure the information contained in the system is up-to-date and accurate.
C) monitor the input of information into the information system.
D) design and manage the flow of information in a corporation to improve productivity and
decision making.
E) ensure that only those who have authorized permission have access to the information system.

103) Describe Barney's VRIO framework.


Answer:
Barney, in his VRIO framework of analysis, proposes four questions to evaluate a firm's
competencies:
Value: Does it provide competitive advantage?
Rareness: Do other competitors possess it?
Imitability: Is it costly for others to imitate?
Organization: Is the firm organized to exploit the resource?

104) Discuss the two characteristics that determine the sustainability of a firm's distinctive
competency.
Answer:
Two characteristics determine the sustainability of a firm's distinctive competency:
durability and imitability. Durability is the rate at which a firm's underlying resources,
capabilities, or core competencies depreciate or become obsolete. Imitability is the rate at
which a firm's underlying resources, capabilities, or core competencies can be duplicated
by others.

105) Define a value chain and the significance of the center of gravity.
Answer:
A value chain is a linked set of value-creating activities beginning with basic raw materials
coming from suppliers, moving on to a series of value-added activities involved in

17
Copyright © 2015 & 2016 Pearson Education, Inc.
producing and marketing a product or service, and ending with distributors getting the
final goods into the hands of the ultimate consumer. A company's center of gravity is the
part of the chain that is most important to the company and the point where its greatest
expertise and capabilities lie - its core competencies. This is usually the point at which the
company started.

106) Discuss the three basic organizational structures.


Answer:
The three basic organizational structures are the simple, functional, and divisional. The
simple structure has no functional or product categories and is appropriate for a small,
entrepreneur-dominated company with one or two product lines that operates in a
reasonably small, easily identifiable market niche. Employees tend to be generalists and
jacks-of-all-trades. The functional structure is appropriate for a medium-sized firm with
several product lines in one industry. Employees tend to be specialists in the business
functions important to that industry. The divisional structure is appropriate for a large
corporation with many product lines in several related industries. Employees tend to be
functional specialists organized according to product-market distinctions.

107) What are the two distinct attributes of culture?


Answer:
Corporate culture has two distinct attributes - intensity and integration. Cultural intensity
is the degree to which members of a unit accept the norms, values, or other culture content
associated with the unit. This shows the culture's depth. Cultural integration is the extent
to which units throughout an organization share a common culture. This is the culture's
breadth.

108) What is R & D intensity?


Answer:
A company's R & D intensity is the firm's spending on R & D as a percentage of sales
revenue. This is a principal means of gaining market share in global competition. This
amount often varies by industry.

109) Distinguish between continuous and intermittent systems providing examples of each.
Answer:
Manufacturing can be intermittent or continuous. In intermittent systems (job shops), the
item is normally processed sequentially, but the work and sequence of the process vary. An
example is an auto body repair shop. Continuous systems are those laid out as lines on
which products can be continuously assembled or processed. A firm using continuous
systems invests heavily in fixed investments such as automated processes and highly
sophisticated machinery. Continuous systems reap benefits from economies of scale. An
example is an automobile assembly line.

18
Copyright © 2015 & 2016 Pearson Education, Inc.

You might also like