final exam

I. Multiple – Choice Question (3 Marks)

1. A company's strategy concerns

A) its market focus and plans for offering a more appealing product than rivals.

B) how it plans to make money in its chosen business.

C) management’s action plan for running the business and conducting operations—its

commitment to pursue a particular set of actions in growing the business, staking out a

market position, attracting and pleasing customers, competing successfully, conducting

operations, and achieving targeted objectives.

D) the long-term direction that management believes the company should pursue.

E) whether it is employing an aggressive offense to gain market share or a conservative defense

to protect its market position.

Answer: C Page: 6 Learning Objective: 1 Difficulty: Medium Taxonomy: Knowledge

AACSB: Value Creation

2. Which of the following is not a primary focus of a company's strategy?

A) How to attract and please customers

B) How each functional piece of the business will be operated

C) How to achieve above-average gains in the company’s stock price and thereby meet or beat

shareholder expectations

D) How to compete successfully

E) How to grow the business

Answer: C Page: 6 Learning Objective: 1 Difficulty: Medium Taxonomy: Comprehension


3. In crafting a company’s strategy,

A) management’s biggest challenge is how closely to mimic the strategies of successful

companies in the industry.

B) managers have comparatively little freedom in choosing the hows of strategy.

C) managers are wise not to decide on concrete courses of action in order to preserve maximum

strategic flexibility.

D) managers need to come up with some distinctive “aha” element to the strategy that draws in

customers and produces a competitive edge over rivals.

E) managers are well-advised to be risk-averse and develop a “conservative” strategy—“dare-to-

be-different” strategies rarely are successful.

Answer: D Page: 6 Learning Objective: 1 Difficulty: Medium Taxonomy: Comprehension


4.A company’s strategy stands a better chance of succeeding when

A) it is developed through a collaborative process involving managers from all levels of the

organization.

B) managers employ conservative strategic moves.

C) it is predicated on competitive moves aimed at appealing to buyers in ways that set the

company apart from rivals.

D) managers copy the strategic moves of successful companies in its industry.

E) managers focus on meeting or beating shareholder expectations

Answer: C Page: 7 Learning Objective: 1 Difficulty: Easy Taxonomy: Comprehension


5.A company’s strategy and its quest for competitive advantage are tightly connected because

A) Without a competitive advantage a company cannot become the industry leader.

B) Without a competitive advantage a company cannot have a profitable business model.

C) Crafting a strategy that yields a competitive advantage over rivals is a company’s most

reliable means of achieving above-average profitability and financial performance.

D) a competitive advantage is what enables a company to achieve its strategic objectives.

E) how a company goes about trying to please customers and outcompete rivals is what enables

senior managers choose an appropriate strategic vision for the company.

Answer: C Page: 9 Learning Objective: 1 Difficulty: Medium Taxonomy: Comprehension


6.Which of the following is not something to look for in identifying a company's strategy?

A) Actions to respond to changing market conditions or other external factors

B) Management actions to revise the company's financial and strategic performance targets

C) Actions to strengthen competitive capabilities and correct competitive weaknesses

D) Actions to capture emerging market opportunities and defend against external threats to the

company's business prospects

E) Actions to gain sales and market share via lower prices, more performance features, more

appealing design, or other such actions.

Answer: B Page: 10 Learning Objective: 1 Difficulty: Medium Taxonomy: Comprehension


7.A company's "macroenvironment" refers to A) the industry and competitive arena in which the company operates. B) general economic conditions plus the factors driving change in the markets where a company

operates. C) all the relevant forces and factors outside a company's boundariesgeneral economic

conditions, population demographics, societal values and lifestyles, technological factors,

governmental legislation and regulation, and closer to home, the industry and competitive

arena in which it operates. D) the competitive market environment that exists between a company and its competitors. E) the dominant economic features of a company's industry.

Answer: C Page: 56 - 57 Learning Objective: 1 Difficulty: Easy Taxonomy: Knowledge

AACSB: Domestic/Global Economic Environments

8.Thinking strategically about industry and competitive conditions in a given industry involves evaluating

such considerations as A) the forces driving change in the industry. B) the dominant economic features of the industry in which the company operates. C) the kinds of competitive forces industry members are facing and the strength of each

competitive force. D) the key factors influencing future competitive success in the industry. E) All of the above.

Answer: E Page: 58 Learning Objective: 1 Difficulty: Easy Taxonomy: Comprehension AACSB:

Domestic/Global Economic Environments

9. Using the five-forces model of competition to determine what competition is like in a given

industry involves A) building the picture of competition in three steps: (1) identifying the specific competitive

pressures associated with each of the five competitive forces; (2) evaluating how strong the

pressures comprising each competitive force are; and (3) determining whether the collective

impact of all five competitive forces is conducive to earning attractive profits. B) building the picture of competition in two steps: (1) determining which rival has the biggest

competitive advantage and (2) assessing whether the competitive advantages possessed by

various industry members allow most industry members to earn above-average profits. C) evaluating whether competition is being intensified or weakened by the industry’s driving

forces and key success factors. D) assessing whether the collective impact of all five forces is weak enough to allow industry

members to go on the offensive or use a defensive strategy to insulate against fierce

competitive pressures. E) gauging the overall strength of competition based on how many industry rivals are operating

with a competitive advantage and how many are operating at a competitive disadvantage.

Answer: A Page: 60 Learning Objective: 2 Difficulty: Medium Taxonomy: Comprehension


10.What makes the marketplace a competitive battlefield is A) the race of industry members to build strong defenses against the industry’s driving forces. B) the constant jockeying of industry members to strengthen their standing with buyers and win

a competitive edge over rivals. C) the ongoing race among rival sellers to have the highest quality product. D) the ongoing efforts of industry members to introduce new and improved products/services at

a faster rate than their rivals. E) the ongoing race among rivals to achieve the fastest rate of growth in revenues and profits.



11.Factors that cause the rivalry among competing sellers to be weak include A) low buyer switching costs and rival sellers that are relatively equal is size and capability. B) rapid growth in buyer demand and high buyer switching costs. C) few industry rivals that any one company’s actions can easily be anticipated and countered by

its rivals. D) low barriers to entry and weakly differentiated products among rival sellers. E) slow growth in buyer demand and strongly differentiated products.



12.The competitive force of rival firms' jockeying for better market positions, higher sales and market

shares, and competitive advantage A) is stronger when firms strive to be low-cost producers than when they use differentiation and

focus strategies.

B) is typically a weaker competitive force than is the threat of entry of new rivals. C) is largely unaffected by whether industry conditions tempt rivals to use price cuts or other

competitive weapons to boost unit sales. D) tends to intensify when strong companies outside the industry acquire weak firms in the

industry and launch aggressive, well-funded moves to transform the acquired companies into

strong market contenders. E) is weaker when more firms have weakly differentiated products, buyer demand is growing

slowly, and buyers have moderate switching costs.

Answer: D Page: 65 Learning Objective: 2 Difficulty: Medium Taxonomy: Comprehension


13.The spotlight in analyzing a company’s resources, internal circumstances, and competitiveness

includes such questions/concerns as A) whether the company's present strategy is better than the strategies of its closest rivals based

on such performance measures as earnings per share, ROE, dividend payout ratio, and

average annual increase in the common stock price. B) whether the company's key success factors are more dominant than the key success factors of

close rivals.

C) whether the company has the industry's most efficient and effective value chain. D) what are the company’s resource strengths and weaknesses and its external opportunities and

threats. E) what new acquisitions the company would be well advised to make in order to strengthen its

financial performance and overall balance sheet position.

Answer: D Page: 101 Learning Objective: 1 Difficulty: Easy Taxonomy: Knowledge AACSB:

Value Creation

14.One important indicator of how well a company's present strategy is working is whether A) it has more core competencies than close rivals. B) its strategy is built around at least two of the industry's key success factors. C) the company is achieving its financial and strategic objectives and whether it is an above-

average industry performer. D) it is customarily a first-mover in introducing new or improved products (a good sign) or a

late-mover (a bad sign). E) it is subject to weaker competitive forces and pressures than close rivals (a good sign) or

stronger competitive forces and pressures (a bad sign).

Answer: C Page: 103 Learning Objective: 1 Difficulty: Medium Taxonomy:

Comprehension AACSB: Value Creation

15.The best example of a company strength is A) having higher earnings per share and a higher return on shareholders’ equity investment than

key rivals. B) being totally self-sufficient such that the company does not have to rely in any way on key

suppliers, partnerships with outsiders, or strategic alliances. C) having proven technological expertise and ability to churn out new and improved products on

a regular basis. D) having a larger number of competitive assets than competitive liabilities. E) having more built-in key success factors than rivals.

Answer: C Page: 106 Learning Objective: 1 Difficulty: Medium Taxonomy: Application


16.When a company has real proficiency in performing a competitively important value chain activity, it

is said to have A) a distinctive competence. B) a core competence. C) a key value chain proficiency. D) a competitive advantage over rivals. E) a company competence.

Answer: B Page: 107 Learning Objective: 1 Difficulty: Easy Taxonomy: Comprehension


17.The difference between a company competence and a core competence is that A) a company competence refers to a company's best-executed functional strategy and a core

competence refers to a company's best-executed business strategy. B) a company competence refers to a company's strongest resource whereas a core competence

refers to a company's lowest-cost and most efficiently performed value chain activity. C) a company competence is a competitively relevant activity which a firm performs especially

well relative to other internal activities, whereas a core competence is an activity that a

company has learned to perform proficiently. D) a company competence represents real proficiency in performing an internal activity whereas

a core competence is a competitively relevant activity which a firm performs better than other

internal activities. E) a core competence usually resides in a company's technology and physical assets whereas a

company competence usually resides in a company's human assets and intellectual capital.

Answer: D Page: 107 - 108 Learning Objective: 1 Difficulty: Medium Taxonomy:


18. Sizing up a company’s overall resource strengths and weaknesses A) essentially involves constructing a “strategic balance sheet” where the company's resource

strengths represent competitive assets and its resource weaknesses represent competitive

liabilities. B) is called benchmarking. C) is called competitive strength assessment. D) is focused squarely on ascertaining whether the company has more/less resource strengths

than weaknesses. E) is called company resource mapping.

Answer: A Page:111 Learning Objective: 1 Difficulty: Medium Taxonomy: Comprehension


19.The biggest and most important differences among the competitive strategies of different companies

boil down to A) how they go about building a brand name image that buyers trust and whether they are a risk-

taker or risk-avoider. B) the different ways that companies try to cope with the five competitive forces. C) whether a company’s market target is broad or narrow and whether the company is pursuing

a competitive advantage linked to low cost or differentiation.

D) the kinds of actions companies take to improve their competitive assets and reduce their

competitive liabilities. E) the relative emphasis they place on offensive versus defensive strategies.



20.How valuable a low-cost leader's cost advantage is depends on A) whether it is easy or inexpensive for rivals to copy the low-cost leader’s methods or

otherwise match its low costs. B) how easy it is for the low-cost leader to gain the biggest market share. C) the aggressiveness with which the low-cost leader pursues converting the cost advantage into

the absolute lowest possible costs. D) the leader's ability to combine the cost advantage with a reputation for good quality. E) the low-cost leader's ability to be the industry leader in manufacturing innovation so as to

keep lowering its manufacturing costs.

Answer: A Page: 141 Learning Objective: 3 Difficulty: Medium Taxonomy: Comprehension


21.The major avenues for achieving a cost advantage over rivals include A) revamping the firm's value chain to eliminate or bypass some cost-producing activities and/or

out-managing rivals in the efficiency with which value chain activities are performed. B) having a management team that is highly skilled in cutting costs. C) being a first-mover in adopting the latest state-of-the-art technologies, especially those

relating to low-cost manufacture. D) outsourcing high-cost activities to cost-efficient vendors. E) paying lower wages and salaries than rivals.

Answer: A Page: 141 Learning Objective: 3 Difficulty: Medium Taxonomy:


22. In which one of the following market circumstances is a broad differentiation strategy generally not

well-suited? A) When buyer needs and preferences are too diverse to be fully satisfied by a standardized

product B) When few rivals are pursuing a similar differentiation approach C) When the products of rivals are weakly differentiated and most competitors are resorting to

clever advertising to try to set their product offerings apart D) When there are many ways to differentiate the product or service and many buyers perceive

these differences as having value E) When technological change is fast-paced and competition revolves around rapidly evolving

product features



23. The two best reasons for investing company resources in vertical integration (either forward or

backward) are to A) expand into foreign markets and/or control more of the industry value chain. B) broaden the firm's product line and/or avoid the need for outsourcing.

C) gain a first mover advantage over rivals in revamping the industry value chain. D) strengthen the company's competitive position and/or boost its profitability. E) achieve product differentiation and/or lengthen the company’s value chain to include more

activities performed in-house and thereby gain greater ability to reduce internal operating

costs.

Answer: D Page: 175 Learning Objective: 3 Difficulty: Medium Taxonomy:


24.A good example of vertical integration is A) a global public accounting firm acquiring a small local or regional public accounting firm. B) a large supermarket chain getting into convenience food stores. C) a crude oil refiner purchasing a firm engaged in drilling and exploring for oil. D) a hospital opening up a nursing home for the aged. E) a railroad company acquiring a trucking company specializing in long-haul freight.



25.Which one of the following is not likely to be a suitable strategy option for companies competing in

rapid-growth industries?

A) Driving down costs per unit so as to enable price reductions that attract droves of new

customers B) Pursuing rapid product innovation, both to set a company’s product offering apart from rivals

and to incorporate attributes that appeal to growing numbers of customers C) Gaining access to additional distributional channels and sales outlets D) Vertically integrating forward and backward to enable greater control of the industry value

chain E) Expanding the product line to add models/styles that appeal to a wider range of buyers

Answer: D Page: 184 - 185 Learning Objective: 5 Difficulty: Medium Taxonomy: Comprehension


26.In a maturing market where the rates of growth are on the decline, rival firms can often improve their

competitive position in the marketplace by

A) pursuing backward and/or forward vertical integration to capture greater control over the

industry value chain and shifting to standardized product offerings. B) concentrating on adding new models and performance features, emphasizing product

innovation, and spending heavily on advertising to achieve much stronger product

differentiation vis-à-vis rivals. C) shifting to focus or market niche strategies so as to concentrate exclusively on those buyers

and models/styles where demand is continuing to grow at above-average rates. D) pruning marginal products and models, improving value chain efficiency, trimming costs,

acquiring rival firms at bargain prices, and building new or more flexible competitive

capabilities, and expanding internationally. E) competing aggressively on the basis of superior customer service and adding new models and

styles to broaden the product offering.



27. Diversifying into a new industry by forming a new internal subsidiary to enter and compete in the

target industry is attractive when A) all of the potential acquisition candidates are losing money. B) it is impractical to outsource most of the value chain activities that have to be performed in

the target business/industry. C) there is ample time to launch the new business from the ground up and entry barriers can be

hurdled at acceptable cost. D) the company has built up a hoard of cash with which to finance a diversification effort. E) none of the companies already in the industry are attractive strategic alliance partners.

Answer: C Page: 243 Learning Objective: 1 Difficulty: Easy Taxonomy: Comprehension


28.Diversification becomes a relevant strategic option in all but which one of the following situations? A) When a company spots opportunities to expand into industries whose technologies and

products complement its present business. B) When a company is only earning a low profit margin in its principal business C) When a company has a powerful and well-known brand name that can be transferred to the

products of other businesses and thereby used as a lever for driving up the sales and profits of

such businesses. D) When a company can open up new avenues for reducing costs by diversifying into closely

related businesses. E) When a company can leverage existing competencies and capabilities by expanding into

industries where these same resource strengths are key success factors and valuable

competitive assets.

Answer: B Page: 241 Learning Objective: 1 Difficulty: Easy Taxonomy: Comprehension


29. Businesses are said to be "related" when A) they have several key suppliers and several key customers in common. B) their value chains have the same number of primary activities. C) their products are both sold through retailers. D) their value chains possess competitively valuable cross-business relationships that present

opportunities to transfer resources from one business to another, combine similar activities

and reduce costs, share use of a well-known brand name, and/or create mutually useful

resource strengths and capabilities. E) many consumers buy the products/services of both businesses.



30.One strategic fit-based approach to related diversification would be to A) diversify into new industries that present opportunities to transfer competitively valuable

expertise, technological know-how, or other capabilities from one business to another. B) diversify into those industries where the same kinds of driving forces and competitive forces

prevail, thus allowing use of much the same competitive strategy in all of the business a

company is in. C) acquire rival firms that have broader product lines so as to give the company access to a

wider range of buyer groups.

D) acquire companies in forward distribution channels (wholesalers and/or retailers). E) expand into foreign markets where the firm currently does no business.

Answer: A Page: 244 - 245 Learning Objective: 2 Difficulty: Easy Taxonomy:


II. Short- Answer Question.

1. What are the strategic disadvantages of a backward vertical integration strategy? (2marks)

2. Explain the difference between a cash cow business and a dog business. Take example of a cash cow

business and a dog business in reality. (3 marks)

3. Describe the strategy of striving to be the industry's overall low cost provider. Take one company that

you know to reveal how it achieves low-cost provider status?

final exam

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