Economics 136 - Spring 1996

1. Which of the following does not accurately describe how

a firm's strategy is crafted?
A. The process of strategy formation is incremental,
evolutionary, and situation specific.
B. The strategy formation process never ends, but is
ongoing, entailing periodic revision and finetuning.
C. A firm's strategy typically emerges from an undirected
process where managers at each level craft their strategic
act plans independently.
D. Strategy is seldom formulated solely and completely by
the chief executive officer; however, it is normal for the
CEO to review and approve the organization's formal strategic
plan and to be personally involved in deciding upon major
strategic moves and approaches.
E. Neither a or c accurately describe the strategy
formation process.

2. The task of crafting a business strategy involves:

A. forming responses to changes underway in the external
environment.
B. initiating moves and approaches to secure a sustainable
competitive advantage.
C. uniting the strategic initiatives of functional
departments.
D. addressing specific issues and problems which the
business has.
E. all of these.

3. A mission statement has real managerial value if it

A. helps the organization prepare for the future.
B. communicates an organizational purpose and identity that
can be an inspiration to employees.
C. crystallizes top management's own view about the long-
term direction of the organization.
D. aids managers in avoiding visionless management.
E. All of these

4. Which of the following is not a basic way to manage the

strategy-making process?
A. The master strategist approach
B. The consolidation approach
C. The collaborative approach
D. The champion approach
E. The delegate-it-to-others approach

5. Objective-setting
A. is a call for action--what to achieve, when to achieve
it, and who is responsible.
B. has value as a management tool if performance targets
are stated in quantifiable or measurable terms and carry a
deadline for achievement.
C. provides a set of benchmarks for judging performance.
D. helps substitute purposeful decision-making for aimless
action and confusion over what to accomplish.
E. All of these
6. Successful strategists craft competitive approaches that
will
A. influence the industry's competitive rules in the
company's favor.
B. provide a strong position of advantage.
C. insulate the firm from the five competitive forces.
D. All of the above
E. Just b and c

7. Which of the following is not one of the five

competitive forces?
A. The strength of the driving forces
B. The power of suppliers
C. The threat of potential entry
D. Competition from substitute products
E. None of these.

8. The forces of competition in an industry are a function

of
A. the competitive pressures among rival firms that result
from their trying to jockeying for better market position and
their maneuvers to gain a competitive edge.
B. the availability of substitute products which are
competitively priced.
C. the threat of potential entry into the marketplace.
D. the abilities of suppliers and customers to exercise
bargaining power and leverage.
E. All of these.

9. A firm's competitive strategy concerns

A. management's plan for competing successfully and
strengthening the firm's market position.
B. how to build sustainable competitive advantage.
C. how to outmaneuver rivals.
D. how to defend against competitive pressures.
E. all of these.

10. The essence of a firm's competitive strategy is

A. how to defend against each driving force.
B. whether to go on the offensive or, instead, to craft a
defensive strategy.
C. how to respond to changing industry conditions.
D. which strategic group to attack first.
E. how best to gain a competitive edge over rivals and to
build defenses against the five competitive forces.

11. Strategic cost analysis focuses on

A. comparisons of the costs of different types of
competitive strategies.
B. a firm's overall cost position relative to its rivals.
C. the cost advantages of forward vertical integration as
compared to backward vertical integration.
D. how to achieve the position of being the low-cost
producer in the industry.
E. all of these.
12. Which of the following can sometimes be skipped when
conducting a company situation analysis?
A. Doing a SWOT analysis
B. Assessing a company's competitive position and strength
via a competitive strength assessment
C. Evaluating how well the current strategy is working
D. Conducting strategic cost analysis using value chain
techniques
E. None of these

13. In doing company situation analysis, it is important to

A. conduct a SWOT analysis.
B. size up the pluses and minuses in the company's
competitive position.
C. evaluate how well the firm's present business and
functional area strategies are working and why.
D. identify the strategic issues unique to the firm and its
business.
E. all of the above.

14. Which of the following examples is least likely to

represent a core competence?
A. Manufacturing excellence
B. Capability to develop new products
C. The ability to deliver superior customer services
D. Being more vertically integrated than rivals
E. Capability to produce high quality products

15. From a strategy-making perspective, a company's internal

strengths are important because of
A. their potential for providing the firm with an
experience-based cost advantage.
B. their potential for serving as the cornerstones of
strategy and the building of competitive advantage.
C. the extra muscle they provide in making a success out of
forward integration.
D. the added ability they provide in insulating the firm
against the impact of driving forces.
E. all of these.

16. Using a broad differentiation strategy to produce an

attractive competitive advantage is least likely to be based
on
A. developing a technically superior product.
B. offering buyers a product which is superior in quality
as compared to rivals' brands.
C. giving consumers more support services.
D. providing buyers with a better-performing product.
E. None of these

17. Being the low-cost producer in an industry

A. provides ability to wield heavy influence in setting the
industry's price floor.
B. helps protect profit margins against powerful customers.
C. makes it harder for a new entrant to take away
customers.
D. provides a defense against the attempts of substitutes
to gain a market inroad.
E. all of these.

18. The various approaches to offensive strategy include

A. simultaneous attack on many fronts.
B. guerrilla warfare attacks.
C. preemptive strikes.
D. attacks on competitors' weaknesses.
E. all of these.

19. For a market niche strategy to succeed in producing a

sustainable competitive advantage, the targeted market
segment must
A. be made up of buyers with significantly different demand
curves and a strong preference for high quality over low
price.
B. not display signs of brand loyalty.
C. help generate economies of scale.
D. not be sensitive to increased prices.
E. none of these.

20. Employing a preemptive strategy involves securing a

prime strategic position via such actions as
A. obtaining the business of prestigious customers.
B. expanding production capacity well ahead of market
demand with the intent to discourage competitors from
expanding.
C. securing exclusive access to the best distributors in
the area.
D. tying up the best raw material sources via long-term
contracts or backward vertical integration.
E. All of these

21. The motivation for participating in international

markets includes
A. a desire to seek new markets.
B. a desire to access natural resource deposits in other
countries.
C. a desire to lower costs.
D. the need to compete on a more equal footing with foreign
competitors endeavoring to build a globally dominant market
position.
E. All of these.

22. Which one of the following is not a pitfall in matching

strategy to the firm's overall situation?
A. Underestimating the reactions of rival firms.
B. Deciding against a global strategy because it is too
complicated.
C. Designing an ambitious plan that calls for a lot of
different strategic moves and is likely to overtax the
company's resources.
D. Opting to attack the market leaders head-on with an
initiative strategy.
E. Choosing a strategy that is capable of succeeding only
under the best of circumstances.
23. Which of the following strategy options is generally not
very suitable for runner-up firm trying to build a stronger
competitive market position?
A. An offensive strategy extending over many market
segments and that attacks the leaders head-on
B. A distinctive image strategy
C. Acquisition of or merger with other firms in the
industry
D. A focus strategy keyed to providing superior customer
service
E. An "our is better than theirs" strategy

24. The more diverse that national market conditions are,

the stronger becomes the appeal of
A. a global focus strategy.
B. a multicountry strategy.
C. a strategy to maintain a national (one-country)
production base and export goods to foreign markets.
D. a licensing strategy whereby foreign firms pay royalties
to sell the company's products in other country markets.
E. a global low-cost strategy.

25. One of the major mistakes a firm can make during the
transition to industry maturity is
A. to make no commitment to achieving competitive advantage
via any of the basic competitive strategies, thus ending up
"stuck in the middle" with a fuzzy strategy and no
competitive advantage.
B. to expand into foreign markets.
C. to attack weaker firms and try to capture some of their
market share.
D. to purchase rival companies at low prices.
E. none of the above.

26. A takeover strategy

A. refers to a surprise attempt of one firm to stack the
board of directors of one of its major competitors.
B. usually involves an effort at unrelated diversification
rather than related diversification.
C. is forbidden by law where the effect is to increase a
firm's degree of vertical integration and market share.
D. is a vehicle for accomplishing an acquisition.
E. none of these.

27. Strategic fits among related businesses offer the

competitive advantage potential of
A. lower costs and economies of scope.
B. efficient transfer of key skills, technological
expertise, or managerial know-how from one business to
another.
C. cross-subsidization and multiple profit sanctuaries.
D. All of these
E. Just a nd b are correct

28. When to diversify

A. is based more on management preferences than any other
factor.
B. depends partly on the firm's remaining opportunities for
further industry growth and partly on the competitive
position a firm occupies.
C. is a function of how soon a company can identify
businesses that can pass the attractiveness test, the
competitive advantage test, and the profit test.
D. varies from firm to firm according to whether the
company is financially strong and has the money to finance
diversification.
E. Both a and d are correct.

29. Divestiture is an attractive corporate strategy option

A. for abandoning businesses which do not "fit".
B. for getting out of businesses which are no longer
attractive (even though they may still be profitable).
C. for unloading poorly performing businesses.
D. for freeing up resources tied up in low priority
business units.
E. all of the above.

30. Which of the following best illustrates an economy of

scope?
A. Eliminating costs by combining related value-chain
activities of different businesses into a single operation
B. Eliminating costs by performing related value chain
activities simultaneously rather than at different times.
C. Eliminating costs by extending the firm's scope of
operations over a wider geographic area.
D. Taking advantage of seller discounts by paying for
purchases early
E. None of the above

31. The shortcomings and weakness inherent in the BCG

growth-share matrix include
A. failing to provide much insight into what strategy
prescriptions to use for "average" businesses.
B. oversimplifying the classification of all businesses as
stars, cash cows, dogs, and question marks.
C. placing too much reliance upon industry growth rate and
relative market share as indicators of profitability, cash
flow, and competitive strength, when in fact the connections
among these variables are not nearly so "tight."
D. the failure to include explicit consideration of other
strategic variables and factors which are important in
assessing how attractive a business is and what strategy
prescriptions are appropriate.
E. all of the above.

32. A business portfolio matrix

A. refers to an emerging type of organization structure.
B. is an especially valuable tool for analyzing a company's
business strategy.
C. is a two-dimensional display comparing the strategic
positions of different businesses using any pair of
strategically-relevant variables.
D. consists of a 6-cell classification scheme that
identifies winners, losers, dogs, cash cows, cash hogs, and
question mark types of businesses.
E. none of these.

33. In judging the attractiveness of each industry a

multibusiness company has diversified into, it is important
to consider
A. each industry's attractiveness relative to the others.
B. the attractiveness of all the industries as a group.
C. whether the industries are evenly distributed between
fast growth and slow growth, high tech and low tech, and
consumer products and industrial products.
D. the strategic fit relationships among the industries
represented in the portfolio.
E. All of the above except c.

34. A chief contribution of the BCG growth-share matrix is

A. the attention it draws to the cash flow and investment
characteristics of various types of businesses and how
corporate financial resources can be used to optimize the
long-term strategic position and performance of the whole
corporate portfolio.
B. that stars and cash cow businesses should be retained
and that dogs and question mark businesses should be
divested.
C. that the "success sequence" for a young business is
problem child to cash hog to cash cow to star.
D. that for a business to become a star it must follow a
strategy of riding the experience curve downward and building
a dominant market share; otherwise it is destined to become a
dog.
E. All of these.

35. Which of the following should be a last resort option

for a diversified company which is experiencing a decline in
performance?
A. Divest weak performing business units
B. Reduce corporate performance objectives
C. Alter strategic plans of some of its business units
D. Add new business units
E. Form alliances in an attempt to alter conditions
responsible for subpart performance

36. The bigger the organization, the more the success of the
chief strategy-implementer depends on
A. having the "right" organizational structure.
B. wise reallocation of resources out of noncritical
activities into strategy-critical activities.
C. devising strategy-supportive policies and procedures for
company personnel to follow.
D. the cooperation and implementing skills of subordinates
who will push the implementation process along in their areas
of authority.
E. All of the above.

37. Which of the following is not a means of flattening

organizational hierarchies and removing middle management
layers?
A. Reengineering
B. Empowerment
C. Use of self-directed work teams
D. Special project teams and new venture teams
E. Outsourcing noncritical value chain activities

38. Which of the following is not an accurate description of

how structure can be matched to strategy?
A. The major organizational building blocks in single
business enterprises are usually functionally specialized
departments, with the nature of functional specialization
varying according to the customer-technology-value chain
characteristics of the business.
B. In fully integrated firms, the major building blocks
tend to be the different processing steps along the
industry's value chain (raw materials production, parts and
components manufacture, assembly, wholesale distribution,
retail operations).
C. In service businesses, the major organizational units
are process departments, where each department utilizes self-
directed work teams to deliver the service, process orders,
process billing, and handle inquiries.
D. Companies with broad geographic coverage typically rely
upon some form of regional or district operating units, each
of which may have profit-loss responsibility for their
assigned geographic area.
E. The typical building blocks for a diversified company
are its individual business units or, in the case of
companies with many individual businesses, groups of
businesses (called strategic business units).

39. The strategy-related advantages of a functional

organization structure include
A. being well-suited to building and developing functional
competencies.
B. allowing the benefits of specialization to be fully
exploited.
C. preserving centralized control over strategic results.
D. being very effective in single business units where key
activities revolve around well-defined skills and areas of
functional specialization.
E. all of these.

40. To design a strategy-supportive organizational

structure, a strategy implementer needs to
A. pinpoint the key value chain activities necessary for
successful strategy execution.
B. determine whether noncritical activities can be
outsourced more efficiently or effectively than they can be
performed internally.
C. determine the degree of authority and independence to
give to each unit.
D. provide for coordination among the various
organizational units.
E. All of these

41. Successful strategy implementers are good at

A. empowering employees and reengineering core business
processes.
B. devising motivational incentives that build wholehearted
commitment and winning attitudes among employees.
C. devising job descriptions that clearly spell out each
activity that each employee has to do to execute the firm's
strategy.
D. linking ethics and culture to the firm's effort to
install best practices.
E. all of these.

42. A good way to establish a tight link between strategy

and the reward structure is to
A. replace managers who consistently do not achieve their
assigned strategic performance targets on schedule.
B. treat the achievement of agreed-upon performance
outcomes as a "contract" and then judge actual performance
against the contracted-for outcomes.
C. hold a series of training sessions to explain to all
employees what the performance targets are and how the reward
system works.
D. have many managers and employees participate in
designing the reward system and in administering it.
E. budget ample funds for wage and salary increases so that
everyone will know that attractive rewards exist.

43. The management task of linking the reward system tightly

to the needs of strategy involves
A. establishing ethical policies and putting together an
inspiring statement of values.
B. playing a visible, active role in moving the
organization culture into alignment with strategy.
C. developing incentives and compensation practices that
reward people for hitting the targets spelled out in the
strategic plan.
D. deciding what kind of internal administrative support
systems to install.
E. all of the above.

44. Total quality management (TQM)

A. deals with procedures to achieve defect-free production.
B. is one of the most attractive alternatives to
reengineering.
C. entails creating a total quality culture bent on
continuously improving the performance of every task and
every value-chain activity.
D. is more a technique for "managing better" than a way to
promote more effective strategy execution.
E. Both (a) and (b) are correct.

45. The role of budgets in the strategy implementation

process is
A. to exert control over how the company's financial
resources are utilized.
B. to make sure that each organization unit has the
resources needed to carry out its part of the strategic plan.
C. to ensure the creation of the needed core competence.
D. to prevent wasteful spending.
E. all of these.

46. One of the keys to successful performance as a strategic

leader is
A. figuring out how to project charisma and a magnetic
personality.
B. shaping the values and beliefs which undergird the
corporate culture and bringing culture into strong alignment
with strategy.
C. being likable, loved, and well thought of by
subordinates.
D. being clever at winning friends and influencing people.
E. avoiding the appearance of being demanding, arrogant,
obstreperous, or hard to get along with.

47. A strong culture

A. provides a system of informal rules and peer pressures
regarding how employees should behave.
B. helps promote strong ethical behavior among employees.
C. makes it easier to implement best practices and a TQM
philosophy.
D. lessens the amount of supervision employees need,
promotes higher employee productivity, and facilitates the
process of empowering employees.
E. both a and b are correct.

48. Codes of ethics

A. are nearly always a necessary part of organization
building and policy development.
B. serve as a cornerstone for developing a corporate
conscience.
C. serve as benchmarks for establishing strategic and
financial objectives.
D. need to be personally written by the CEO in order to be
taken seriously by employees.
E. All of these except c.

49. When approaching the task of creating a "fit" between

strategy and culture, the strategist's first step should be
to
A. design a plan for cultural change.
B. contact an organizational behavior consultant.
C. obtain a set of guidelines from senior management.
D. conduct an employee survey.
E. identify which aspects of the culture are congruent with
the strategy and which ones are not.

50. In companies that have strong corporate cultures,

employees either "buy in" to the culture's norms or
A. are counseled on their attitudes by managers.
B. receive lower than average performance reviews.
C. are not as rapidly promoted as their peers.
D. decide they are not "happy" and leave the company.
E. none of these.

Answer Sheet for Test "Strategic Management 8/e", 5/06/96

Chapter/ Test Correct
Question Quest Answer

2-43 (-,a,-) 1 C
2-58 (-,a,-) 2 E
2-14 (-,a,-) 3 E
2-81 (-,a,-) 4 B
2-25 (-,a,-) 5 E
3-79 (-,a,-) 6 D
3-36 (-,a,-) 7 A
3-34 (-,a,-) 8 E
3-42 (-,a,-) 9 E
3-46 (-,a,-) 10 E
4-35 (-,a,-) 11 B
4-6 (-,a,-) 12 E
4-1 (-,a,-) 13 E
4-33 (-,a,-) 14 D
4-18 (-,a,-) 15 B
5-40 (-,b,-) 16 E
5-23 (-,a,-) 17 E
5-68 (-,a,-) 18 E
5-55 (-,b,-) 19 E
5-80 (-,a,-) 20 E
6-27 (-,a,-) 21 E
6-1 (-,b,-) 22 B
6-72 (-,a,-) 23 A
6-38 (-,b,-) 24 B
6-13 (-,b,-) 25 A
7-24 (-,a,-) 26 D
7-44 (-,b,-) 27 E
7-3 (-,b,-) 28 B
7-60 (-,a,-) 29 E
7-49 (-,b,-) 30 A
8-22 (-,b,-) 31 E
8-9 (-,a,-) 32 C
8-39 (-,b,-) 33 E
8-25 (-,b,-) 34 A
8-46 (-,b,-) 35 B
9-17 (-,b,-) 36 D
9-72 (-,b,-) 37 D
9-42 (-,b,-) 38 C
9-47 (-,a,-) 39 E
9-34 (-,b,-) 40 E
10-33 (-,b,-) 41 B
10-39 (-,a,-) 42 B
10-26 (-,b,-) 43 C
10-10 (-,b,-) 44 C
10-1 (-,a,-) 45 B
11-38 (-,a,-) 46 B
11-14 (-,b,-) 47 A
11-25 (-,b,-) 48 B
11-43 (-,b,-) 49 E
11-20 (-,b,-) 50 D
 1. Which one of the following is not one of the five basic tasks of strategic
management?

A. Forming a strategic vision of what the company's future business make-up will be

and where the organization is headed

B. Setting performance objectives

C. Crafting a strategy

D. Developing the steps that managers should follow in plotting an organization's long-
term course

E. Implementing and executing the chosen strategy

2. An organization's strategic vision

A. establishes the organization's future course and specifies "where we plan

to go from here."
B. spells out the specific performance targets that management ultimately
wants to reach.
C. represents management's overall game plan for running the company.

D. is a useful supplement to the strategic plan.

E. and an organization's mission are one and the same thing.

1. It is normal for company strategies to end up being

A. a composite of planned actions and as-needed adaptive reactions to fresh

developing industry and competitive circumstances.

B. shaped more by inside-the-company considerations than by outside-the-company

considerations, so long as the strategy yields acceptable results.

C. overhauled every three to six months.

D. radically altered when a new 5-year plan is developed and undergoing only minor
fine-tuning in-between 5-year plans.

E. more a product of "outside-in" than "inside-out" strategic thinking, so long as the

company remains among the ranks of the industry leaders.

4. Managerial jobs with strategy-making responsibility

A. are found only at the vice-president level and above in most companies.
B. are more common in profit-seeking organizations than in not-for-profit
organizations.

C. extend throughout the managerial ranks and exist in every part of a company--business
units, operating divisions, functional departments, manufacturing plants, and sales
districts.

D. seldom exist within a functional department (e.g., marketing and sales) or in an

operating unit (a plant or a district office).

E. None of these.

5. Which one of the following does not accurately characterize the tasks of
crafting and implementing strategy?

A. They touch virtually every managerial job in one way or another, at one time or
another.

B. A company's board of directors usually delegates the tasks of crafting and

implementing strategy to the CEO and to senior managers.

C. The tasks of crafting and implementing strategy exist in non-profit organizations as

well as in profit-seeking enterprises.

D. The tasks of crafting and implementing strategy should not be the function and
responsibility of strategic planners.

E. The tasks of crafting and implementing strategy are not something just top-level
managers deal with.
6. The elements of forming a company mission and strategic vision include

A. defining and understanding what business a company is really in.

B. deciding on a long-term strategic course for the company to pursue.

C. communicating the vision and mission in ways that are clear, exciting, and inspiring.

D. All of these.

E. None of the above.

7. A well-conceived, well-said long-term business mission and company vision

A. helps an organization direct efforts and actions to prepare for the future.

B. communicates an organizational purpose, identity, and long-term direction that can be

inspiring to employees.

C. helps avoid visionless management and rudderless decision-making.

D. helps crystallize top management's own view about the firm's long-term direction and
make-up.

E. All of these.

8. Firms in the same industry can nonetheless be in distinguishably different businesses

because

A. they operate in different parts of the industry's production-distribution chain.

B. some may be fully integrated, some only partially integrated, and some may be
specialized and operate in only a single stage of an industry's total chain of business
activities.

C. they serve somewhat different customer groups.

D. they serve somewhat different customer needs.

E. All of these.
9. A company's strategy

A. evolves over time.

B. emerges from the pattern of actions already initiated and the plans managers have
for

fresh moves.

C. is the game plan for moving the company into an attractive business position and
building

a sustainable competitive advantage.

D. is typically a collection of layered strategies.

E. All of these.

10. The key role of functional strategies is to

A. support the overall business strategy.

B. define the mission and strategic intent of each functional area.
C. help to specify the needed kinds of distinctive competencies and resource
strengths.
D. integrate operating-level strategies.

E. create strategic fit among the enterprise's different core competencies and

resource strengths.

11. An organization's resources, competencies, and competitive capabilities are important

strategy-making considerations because

A. it is foolish to pursue a strategic plan that cannot be executed with the resources,
competitive assets, and capabilities a company can assemble.

B. they may provide valuable strengths in pursuing and capitalizing on a particular

opportunity.
C. they may be sufficiently strong to yield a competitive edge in the enterprise's target
market.

D. they may well have potential for being a cornerstone of strategy.

E. All of these.

12. Which one of the following is not one of the analytical steps in industry and
competitive analysis?

A. Pinpointing key success factors

B. Evaluating the strength of competitive forces
C. Identifying and assessing driving forces
D. Deciding what strategy best fits the situation
E. Trying to predict which rivals will likely make what competitive moves next

13. A firm's competitive strategy concerns

A. management's plan for competing successfully and strengthening the firm's

market position.
B. how to build sustainable competitive advantage.
C. how to outmaneuver rivals.

D. how to defend against competitive pressures.

E. All of these.

14. Driving forces analysis

A. indicates to managers what newly-developing external factors will have the greatest
impact on the industry over the next several years.

B. addresses what the impact and consequences of each driving force will be.

C. prompts managers to think about the kind of strategy needed to respond to the driving
forces and their impact on the industry.

D. All of these.
E. None of these.

15. In identifying an industry's key success factors, strategists should

A. try to single out all factors which play a role in industry growth.
B. consider on what basis customers choose between competing brands.
C. consider what resources and competitive capabilities firms need to be

competitively successful.

D. consider what it takes to achieve competitive advantage over rivals.

E. All of these except a.

16. The competitive structure of an industry is clearly "unattractive" if

A. rivalry among sellers is very strong.

B. entry barriers are relatively low.

C. competition from substitutes is strong.

D. the industry's customers have strong bargaining power over the terms and
conditions

of sale.

E. All of these.

17. In evaluating a company's internal situation and market position, it is important to

A. conduct a SWOT analysis.

B. assess the company's competitive strength vis-a-vis rivals.
C. determine how well the firm's present strategy is working and why.

D. identify the strategic issues the company faces.

E. All of these are relevant.

18. When a company has the ability to perform a competitively relevant value chain
activity very well, it is said to have

A. a distinctive competence.
B. a core competence.

C. a key activity in its value chain that holds promise for strong product differentiation.

D. a key success factor.

E. a strong competitive balance sheet.

19. Wise strategists

A. look for ways to adapt existing resources/capabilities or build new

resources/capabilities so

as to put the company in better position to pursue new market

opportunities and/or better cope with changing industry and competitive
conditions.

B. are alert to when a company's resource strengths and weaknesses make it better suited
to go after some opportunities and not others.

C. understand the merits of crafting a strategy that exploits and leverages the company's
strongest resources and capabilities.

D. avoid strategies that place heavy demands on areas where company resources are
weak or unproven.

E. All of these.

20. The relative cost positions of industry rivals can vary substantially because of
A. differences in basic technology, the age of plants and equipment, and wages paid to
labor.

B. learning and experience curve effects.

C. differences in rival firms' exposure to rates of inflation and changes in foreign

exchange rates.

D. differences in marketing costs, sales and promotion expenditures, and advertising

expenses.

E. All of these.

21. The essence of a competitive strength assessment involves comparing a company

with its key rivals on the basis of

A. who has the best prices and lowest costs.

B. industry key success factors and telling measures of competitive strength
or weakness.

C. who has the most resource strengths, competencies, and competitive

capabilities.

D. who has the biggest market shares.

E. who has the best value chain.

22. Which of the following is not one of the basic types of competitive
strategy?

A. Striving to be the low-cost leader

B. Focused differentiation
C. A dominant firm leadership strategy
D. Focused low-cost
E. A best-cost provider strategy

23. Normally, low-cost providers

 A. have cost-conscious corporate cultures featuring broad employee
participation in cost-control efforts.

B. are committed to ongoing efforts to benchmark costs against best-in-

class performers of an activity and have ongoing programs to promote
continuous cost improvement.

C. intensively scrutinize operating expenses and budget requests.

D. are aggressive in investing in resources and capabilities with real

potential to drive costs out of the business.

E. All of these.

24. A differentiation strategy can be considered successful if

A. the company's brand image with buyers improves significantly.

B. it results in being able to charge a higher price than rivals and the company's
market

share increases.

C. it permits a premium price to be charged that exceeds the extra costs of

differentiating, additional buyers are won over by the differentiating features, and
buyer loyalty to the brand increases.

D. the company's market share rises and it becomes the industry leader in total
profits.

E. the company's brand image improves, buyer loyalty increases, and the
company's price is below the industry average.

25. To create buyer value with a differentiation strategy, a company can

A. incorporate product attributes and user features that lower the buyer's overall
costs of using its product.

B. incorporate features that raise the performance a buyer gets out of its product.
 C. use signals to create perceived value (even if the value is not actually
delivered).

D. incorporate features that enhance buyer satisfaction in intangible ways

(feelings of increased security or safety, prestige, status).

E. All of the above.

26. Focus strategies based either on low-cost or differentiation are especially

appropriate for situations where

A. the market is comprised of distinctly different buyer groups who either have
different needs or use the product in different ways.

B. most other rival firms are using a best-cost producer strategy.

C. buyers have strong bargaining power and entry barriers are low.

D. industry rivals have roughly equal technological capabilities.

E. a number of industry participants are also using some type of focus strategy.

27. The critical strategic issues confronting firms in a young, emerging industry
include

A. how to finance the start-up phase and get through several lean years until the

product catches on.

B. how to successfully implement a best-cost producer strategy.

C. whether to use a differentiation strategy or a focus/market niche strategy.

D. how many core competencies to try to build and nurture.

E. how steep the industry's experience curve will be and whether to expect cost
reductions to come quickly or slowly.

28. The supply side of an industry may be fragmented and contain hundreds or
even thousands of companies because
 A. low entry barriers allow small firms to enter cheaply and quickly.
B. there's an absence of scale economies.
C. buyers require relatively small quantities of customized products.
D. market demand is so large and diverse that it takes very large numbers of
firms

to accommodate buyer requirements.

E. All of the above.

29. The strategic approaches to participating in international markets

include

A. a global focus strategy.

B. maintaining a national (one-country) production base and
exporting goods to

foreign markets.

C. licensing foreign firms to produce and distribute one's

products.

D. a custom-tailored country-by-country approach based on

meeting the particular needs of particular buyers in each
target country.

E. All of the above.

30. Employing a global strategy involves

A. competing in the same basic manner in all countries where the firm does business.

B. selling in many, if not all, of the nations where there is significant buyer
demand.

C. integrating and coordinating the company's moves world wide.

D. All of the above.

E. Just b and c are correct.

31. The task of crafting corporate strategy for a diversified company includes

A. deciding when and how to enter new businesses.

B. choosing what actions to take to boost the combined performance of the

businesses the firm has diversified into.

C. finding ways to capture the synergy among related business units and turn it
into competitive advantage.

D. establishing investment priorities and steering corporate resources into the

most attractive business units.

E. All of these.

32. A company that wants to diversify into new industries can achieve
diversification by

A. forming a joint venture with another company to enter the target industry.

B. creating a new subsidiary internally to compete in the target industry.

C. acquiring a company already operating in the target industry.

D. All of these.

E. Only b and c.

33. An advantage of related diversification is that

A. it offers a way for a firm to exploit what it does best.

B. it is less capital intensive than unrelated diversification.
C. it is more profitable than unrelated diversification.
D. it is less risky than vertical integration because of the lower capital
requirements.

E. it offers the best route to passing the industry attractiveness test.

34. The appeal of related diversification is that it presents opportunities to

A. transfer expertise or technology or capabilities from one business to

another.

B. spread the risks of the total enterprise across a broader base of

businesses.

C. combine the related activities of different businesses into a single

operation and reduce costs.

D. operate the related activities of separate businesses in such

collaborative fashion as to create valuable new competitive capabilities.

E. All of these.

35. The procedural steps in evaluating and critiquing a diversified

company's strategy include

A. applying the industry attractiveness test.

B. determining the competitive strength of each business in the portfolio to

see which ones are strong contenders in their respective industries.

C. crafting new strategic moves to improve the performance of the total

business portfolio via acquisitions, divestiture, or shifts in internal
priorities and resource allocation.

D. evaluating the strategic and resource fits among sister businesses in the
company's portfolio.

E. All of the above.

36. Evaluating a diversified company's strategy and collection of

businesses involves
 A. appraising the attractiveness of each industry the company has
invested in.
B. comparing the actual historical performance and future
performance prospects of

each business unit.

C. applying the strategic fit and resource fit tests.

D. evaluating the competitive strength of each business the company is in.

E. All of these.

37. Determining the extent to which there are competitively valuable

match-ups in the value chains of a diversified company's business
subsidiaries involves ascertaining

A. which business units have value chain match-ups that offer opportunities to
combine

the performance of related value chain activities and reduce costs.

B. which business units have value chain match-ups that offer opportunities to transfer
skills

or technology from one business to another.

C. which business units have opportunities to use a common brand name.

D. which business units have value chain match-ups that offer opportunities to create new
competitive capabilities or to leverage existing resources.

E. All of these.

38. The most important considerations in judging which of a diversified company's

businesses have the best growth and profit prospects include

A. the industry attractiveness and competitive strength evaluations (as summarized in

 the attractiveness-strength matrix).

B. which businesses have the strongest upward trend in return on investment.

C. the competitive intensity found in each of the industries where the company
competes.

D. the amount of annual cash flow a business generates.

E. whether a business is currently a cash cow or a cash hog.

39. The options for allocating a diversified company's financial resources include

A. adding new businesses to the corporate portfolio and establishing positions in

new industries.

B. investing in ways to strengthen or expand existing businesses.

C. funding long-range R&D ventures.
D. paying off existing debt, increasing dividends, or repurchasing shares of the

company's stock.

E. All of these.

40. Whereas crafting strategy is largely a market-driven entrepreneurial activity,

implementing strategy

A. is primarily an operations-driven activity revolving around the

management of people and business processes.

B. involves building and strengthening organizational resources,

competencies and competitive capabilities.

C. is an action-oriented make-things-happen task.

D. tests a manager's ability to lead and direct organizational change,

achieve continuous improvement in business processes, create a strategy-
supportive corporate culture, and meet or beat performance targets.

E. All of these.
41. Which of the following is not one of the principal strategy-implementing tasks?

A. Building an organization with the skills, competencies, capabilities, and resources

to implement and execute the strategy effectively and efficiently

B. Steering resources into those value chain activities critical to strategic success

C. Deciding which of the industry's competitive forces to try to defend against first

D. Instituting best practices and pushing for continuous improvement in how value chain
activities are performed

E. Tying incentives and rewards to the achievement of performance targets and to good
strategy execution

42. Outsourcing non-critical value chain activities offers such advantages as

A. helping concentrate company resources and energies on those value-chain activities

where the company can create unique value for customers and/or develop dominating
depth in one or more competencies and capabilities.

B. helping decrease the size and influence of internal bureaucracies.

C. promoting a total quality management culture.

D. eliminating the need to employ complex matrix organizational structures.

E. Both (a) and (b) are correct.

43. The strategic importance of deliberately trying to develop competencies and

capabilities within an organization is

A. the added decision-making speed which results in responding to market change.

B. the extra coordination and cooperation that results across functional areas.
C. the contribution which they can make to winning a competitive edge based on superior
strategy execution.

D. the added ease with which strategic fit benefits can be captured.

E. the added ease with which the benefits of resource fit can be captured.

44. Which one of the following is not part of a strategy-implementer's task of matching
organization structure to strategy?

A. Pinpointing strategy-critical activities and competitive capabilities

B. Considering which, if any, value chain activities to outsource

C. Considering partnering with outsiders to help develop valuable competencies and

capabilities

D. Determining how to capture resource fit benefits

E. Determining the degree of authority and independence to give organizational units and
employees

45. From a strategy-implementing perspective, the role of budgets is to

A. exert tight control over how the company's financial resources are allocated to its
various value chain activities.

B. make sure that each organization unit has the resources needed to carry out its part of
the strategic plan.

C. ensure the creation of needed core competencies and organizational capabilities.

D. prevent wasteful spending.

E. make sure that unneeded projects go unfunded and that unnecessary organizational
units are disbanded.
46. From a strategy-implementing perspective, well conceived, state-of-the-art support
systems

A. serve to mobilize information and assist in focusing

knowledge and resources.
B. can speed decision-making and shorten organizational
response times.
C. can enhance organizational capabilities.
D. can be a basis for competitive advantage.

E. All of these.

47. A good way to establish a tight link between strategy and the reward structure is to

A. replace managers who consistently do not achieve their assigned

strategic performance targets on schedule.

B. treat the achievement of agreed-upon performance outcomes as a

"contract", compare actual performance against the contracted-for
outcomes, and then reward individuals and groups who achieve their
assigned performance targets and deny rewards to those who don't.

C. hold a series of training sessions to explain to all employees what the

performance targets are and how the reward system works.

D. have many managers and employees participate in designing the

reward system and in administering it.

E. budget ample funds for wage and salary increases so that everyone will
know that attractive rewards exist.

48. Which one of the following is not a fundamental part of a company's culture?

A. The manner in which it deals with employees, unions, stockholders, customers,

vendors, and the communities where it operates

B. The traditions the organization maintains

C. The values and business principles that management preaches and practices

D. The company's strategy

E. The peer pressures that exist and the legends and stories that people repeat about
company happenings

49. A work environment where the culture matches well with the conditions for good
strategy execution is a valuable strategy-implementing ally because

A. there is much less risk of embarrassing ethical violations.

B. there are strong peer pressures and informal rules that have the impact of cultivating
strategy-supportive work habits--culturally-approved behavior thrives and culturally-
disapproved behavior gets squashed and even penalized.

C. there is reduced need to incorporate negative motivational practices and punitive-type

incentives into the company's approach to people management.

D. there is reduced need to employ benchmarking, best practice programs, reengineering,

and TQM to achieve competitive advantage.

E. All of the above.

50. A strong strategy-supportive culture

A. nurtures and motivates people to do their jobs in ways conducive to effective

strategy execution.

B. provides structure, standards, and a value system in which to operate.

C. provides a system of informal rules and peer pressures regarding how to conduct
business internally and how employees should go about doing their jobs.

D. promotes strong employee identification with the company's vision, performance

targets, and strategy.

E. All of these.
Answer Sheet for Test "QUIZ98.TST", 5/22/98

No. in

Q-Bank No. on Test Correct Answer

1 4 (-,a,-) 1 D

1 10 (-,a,-) 2 A

1 25 (-,a,-) 3 A

1 48 (-,a,-) 4 C

1 59 (-,a,-) 5 B

2 3 (-,a,-) 6 D

2 10 (-,a,-) 7 E

2 17 (-,a,-) 8 E

2 40 (-,a,-) 9 E

2 65 (-,a,-) 10 A

2 73 (-,a,-) 11 E

3 5 (-,a,-) 12 D

3 23 (-,a,-) 13 E

3 61 (-,a,-) 14 D

3 86 (-,a,-) 15 E

3 94 (-,a,-) 16 E

4 1 (-,a,-) 17 E

4 24 (-,a,-) 18 B

4 35 (-,a,-) 19 E

4 48 (-,a,-) 20 E
4 66 (-,a,-) 21 B

5 6 (-,a,-) 22 C

5 22 (-,a,-) 23 E

5 36 (-,a,-) 24 C

5 50 (-,a,-) 25 E

5 51 (-,a,-) 26 A

6 3 (-,a,-) 27 A

6 19 (-,a,-) 28 E

6 26 (-,a,-) 29 E

6 47 (-,a,-) 30 D

7 1 (-,a,-) 31 E

7 23 (-,a,-) 32 D

7 29 (-,a,-) 33 A

7 33 (-,a,-) 34 E

8 1 (-,a,-) 35 E

8 5 (-,a,-) 36 E

8 35 (-,a,-) 37 E

8 50 (-,a,-) 38 A

8 54 (-,a,-) 39 E

9 2 (-,a,-) 40 E

9 4 (-,a,-) 41 C

9 26 (-,a,-) 42 E

9 28 (-,a,-) 43 C

9 39 (-,a,-) 44 D

10 1 (-,a,-) 45 B
10 21 (-,a,-) 46 E

10 35 (-,a,-) 47 B

11 1 (-,a,-) 48 D

11 6 (-,a,-) 49 B

11 11 (-,a,-) 50 E

1. Business strategy, as distinct from corporate strategy, has to

do with
A. the specific action plan for successfully competing in a given
industry.
B. deciding what size budget allocations to give each functional
area and operating department.
C. what kind of strategic fit to have between different business
units.
D. the ways to coordinate the competitive approaches of related
business units.
E. all of these.

2. Establishing challenging but achievable objectives

A. reduces the risk that the chosen mission will be only a
statement of good intentions and a symbol of unrealized achievement.
B. makes it more likely that organizational resources can and will
be allocated in support of achieving the agreed-upon performance
targets.
C. helps convert the mission into specific performance targets and
specific commitments to action.
D. all of these.
E. only (a) and (c) are accurate.

3. Which of the following is not one of the major levels of

organization strategy?
A. Corporate strategy
B. Managerial strategy
C. Business strategy
D. Functional strategy
E. Operating strategy

4. A core competence
A. refers to a company's best-executed functional strategy.
B. is usually associated with one or more of a company's operating
strategies.
C. is something a firm does especially well in comparison to rival
companies.
D. is achieved by being further down the learning curve than rival
companies.
E. All of the above except b.

5. Which of the following is not relevant as concerns a company's

mission?
A. What kind and how much (if any) diversification to pursue?
B. Who should our customers be?
C. Should we try to be the market share leader in our industry?
D. How far should our scope of operations extend across each
industry we are in?
E. Which customer needs should we try to satisfy?

6. The competitive structure of an industry is unattractive from a

profit-making perspective when
A. the industry's driving forces are strong.
B. there are few opportunities for achieving scale economies.
C. capital requirements are large.
D. entry barriers are low, competition from substitutes is strong,
both suppliers and customers are able to exercise considerable
bargaining leverage, and rivalry among competing sellers is strong.
E. all of these

7. In evaluating and choosing among the different competitive

approaches being taken by firms in the industry, it is usually relevant
to consider
A. how many firms are following each strategic approach and that
degree of success each approach is enjoying.
B. the skills and organizational requirements needed to execute
each basic type of strategy being followed.
C. the differences in competitive intensity between and within
strategic groups.
D. All of these.
E. Just (a) and (b).

8. The competitive structure of an industry is clearly

"unattractive" if
A. rivalry among sellers is very strong.
B. entry barriers are relatively low.
C. competition from substitutes is strong.
D. the industry's customers have strong bargaining power over the
terms and conditions of sale.
E. All of these

9. From a strategy-making standpoint, the chief purpose of

situation analysis is to
A. determine whether a company is using the correct strategy.
B. determine whether a company's competitive position is strong or
weak.
C. identify and evaluate the features in a firm's external/internal
environment that most directly affect its strategic options and
opportunities.
D. figure out which competitors have the best strategy and pose the
biggest competitive threat.
E. all of these

10. In analyzing driving forces, the strategist's role is to

A. adequately assess potential for cost efficiency.
B. predict future marketing innovations.
C. evaluate what stage of the life cycle the industry is in.
D. evaluate what impact each force will have and to craft an
appropriate strategic response.
E. forecast fluctuations in product demand.
11. When assessing a company's strategic situation, the logical
beginning point is with
A. evaluation of competitive strengths and weaknesses.
B. evaluation of the company's future profit prospects and current
financial position.
C. identification of the present strategy and how well it is
working (as measured by key performance indicators).
D. using environmental scanning techniques to assess emerging
company threats and opportunities.
E. conducting a five forces analysis of the company's
competitive capabilities.

12. From a strategy-making perspective, a company's internal

strengths are important because of
A. their potential for providing the firm with an experience-based
cost advantage.
B. their potential for serving as the cornerstones of strategy and
the building of competitive advantage.
C. the extra muscle they provide in making a success out of forward
integration.
D. the added ability they provide in insulating the firm against
the impact of driving forces.
E. all of these.

13. The best example of a potential company weakness is

A. rising sales of substitute products.
B. falling trade barriers in attractive foreign markets
C. proprietary technology.
D. no clear strategic direction.
E. changing buyer needs and tastes in the company's
target markets.

14. SWOT analysis is a particularly useful analytical tool

A. for sizing up the strength of a firm's current competitive
position.
B. for assessing how well a firm's present strategy is working.
C. for gaining a first-cut look at a firm's overall situation.
D. for identifying what kind of competitive edge a firm has.
E. for evaluating whether a company has more core
competencies than close rivals.

15. Identifying and assessing a company's internal strengths and

weaknesses and external opportunities and threats is called
A. SWOT analysis.
B. competitive strength assessment.
C. environmental and company scanning.
D. strategic mapping of the company's competitive position.
E. strategic issue identification.

16. Employing a preemptive strategy involves securing a prime

strategic position via such actions as
A. obtaining the business of prestigious customers.
B. expanding production capacity well ahead of market demand with
the intent to discourage competitors from expanding.
C. securing exclusive access to the best distributors in the area.
D. tying up the best raw material sources via long-term contracts
or backward vertical integration.
E. All of these

17. Which of the following is the best example of vertical

integration?
A. A manufacturer of soft drinks expands into the manufacture of
fruit juices.
B. A manufacturer of personal and home computers opens up a chain
of retail stores to handle the sales and service of its line of
computers.
C. A newspaper publisher acquires a chain of paperback bookstores.
D. A manufacturer of cooking ranges and microwave ovens decides to
go into the manufacture of refrigerators.
E. None of these.

18. The generic types of competitive strategies include

A. build market share, maintain market share, and give up market
share.
B. be the dominant leader, be a content follower, and aggressively
overhaul and reposition.
C. low-cost leadership, broad differentiation, best-cost provider,
and focus or market niche strategies.
D. concentration, vertical integration, and diversification
E. all of the above are alternative competitive strategies.

19. A best-cost producer strategy

A. is most successful when producers have the skills to
simultaneously manage unit costs down and product calibre upward.
B. aims at being the low-cost producer of a product with good-to-
excellent product attributes, then using the cost advantage to
underprice brands having comparable attributes.
C. involves having the best (lowest) cost relative to producers
whose brands are comparably positioned on the product attribute
dimensions.
D. All of the above
E. Just b and c are correct

20. Sustaining a differentiation strategy involves

A. stressing constant improvement and innovation to stay ahead of
imitative competitors.
B. being totally dedicated to including more differentiating
features than any other competitor.
C. concentrating on a few key differentiating features and
communicating the points of difference in credible ways.
D. All of the above
E. Just a and c are correct

21. Which of the following approaches is not a logical component of

a strategy to turn around a struggling single-business company?
A. Replacement of top management and other key personnel
B. Revenue-increasing actions
C. Actions to reduce costs
D. Actions to retrench and to reduce assets
E. Guerrilla warfare tactics aimed at creating a market niche on
the leaders' flanks
22. Which of the following strategy options is generally not very
suitable for runner-up firm trying to build a stronger competitive
market position?
A. An offensive strategy extending over many market segments and
that attacks the leaders head-on
B. A distinctive image strategy
C. Acquisition of or merger with other firms in the industry
D. A focus strategy keyed to providing superior customer service
E. An "our is better than theirs" strategy

23. In global competition

A. rival companies compete for global market share, but only
occasionally compete head-to-head in different countries.
B. a firm's overall competitive advantage grows out of the
advantages generated at its home base.
C. market strength is directly proportional to its portfolio of
home-based core competencies.
D. prices and competitive conditions across country markets are
strongly linked together.
E. All of the above

24. The strategic approaches that are particularly well-suited for

maturing industry environments where demand growth is beginning to slow
down include:
A. pursuing revenue growth by increasing sales to existing
customers.
B. gaining market share and competitive position by purchasing
weaker firms at bargain prices.
C. shifting to greater emphasis on entering attractive foreign
markets.
D. pursuing opportunities to reduce costs, to measure costs more
precisely, and to price products more carefully.
E. all of these.

25. Which of the following strategic approaches would normally make

the least sense for a firm with a dominant market share to consider?
A. A vertical integration strategy.
B. A strategy of staying on the offensive.
C. A strategy aimed at being the low-cost producer.
D. A harvesting strategy.
E. A fortify and defend strategy.

26. The attractiveness test for evaluating a diversification move

into a new industry
A. concerns whether the target industry is attractive enough from
the standpoint of low barriers to entry and minimal capital investment
requirements.
B. deals with whether the company being acquired is a star or a
dog.
C. involves an assessment of whether the industry chosen for
diversification is likely to provide attractive returns on investment.
D. is a calculation to determine if the overall entry costs will be
higher than the company can afford without going into debt.
E. deals with whether investors will react positively and cause the
company's stock to jump when the diversification move is announced.

27. The competitive advantage of related diversification is

A. it converts the strategic fits among the firm's businesses into
an extra measure of competitive advantage that goes beyond what business
subsidiaries are able to achieve on their own.
B. it creates value predicated on exploiting the linkages between
the value chains of different businesses.
C. that cost sharing can lower overall costs and skills and
expertise can be transferred across businesses.
D. All of the above
E. Just b and c are correct.

28. In firms with related diversification strategies, the problem of

where to diversify next is addressed by
A. locating businesses that offer attractive financial returns and
having large relative market shares.
B. identifying industries with the greatest long-term
attractiveness.
C. locating an attractive industry having good strategic fit with
one or more of the firm's present businesses.
D. acquiring cash cow businesses with the potential to become
stars.
E. Both a and c are correct.

29. The most successful diversification moves, in terms of building

shareholder value,
A. satisfy the attractiveness test, the cost of entry test, and the
better off test.
B. involve a shift of resources into faster-growing industries.
C. are those that lead to "star" status for each of the businesses
in the corporate portfolio.
D. entail multinational diversification instead of domestic-only
diversification.
E. all of these.

30. Related diversification

A. involves diversifying into businesses whose value chains are
related in ways that satisfy the better-off test.
B. offers opportunities to turn strategic fits into competitive
advantage.
C. comes closer to satisfying the attractiveness test and the cost
of entry test than does unrelated diversification.
D. All of these
E. Just a and b are correct.

31. The shortcomings and weakness inherent in the BCG growth-share

matrix include
A. failing to provide much insight into what strategy prescriptions
to use for "average" businesses.
B. oversimplifying the classification of all businesses as stars,
cash cows, dogs, and question marks.
C. placing too much reliance upon industry growth rate and relative
market share as indicators of profitability, cash flow, and competitive
strength, when in fact the connections among these variables are not
nearly so "tight."
D. the failure to include explicit consideration of other strategic
variables and factors which are important in assessing how attractive a
business is and what strategy prescriptions are appropriate.
E. all of the above.
32. Evaluating a diversified company's portfolio involves
A. appraising the attractiveness of each industry the company has
invested in.
B. comparing actual historical performance and future performance
prospects of each business unit.
C. ranking the business units in terms of priority for new capital
investment.
D. evaluating the competitive strength of each business the company
is in.
E. All of these

33. A business portfolio matrix

A. is an effective tool for determining which of a diversified
company's businesses have the greatest amount of strategic fit.
B. is a two-dimensional display comparing the strategic positions
of every business a diversified company is in.
C. helps estimate how big each business's relative market share is.
D. compares the relative market share of every business a
diversified company is in.
E. Both b and d.

34. Assessments of the long-term attractiveness of each industry

represented in a diversified company's portfolio should be based on
A. a complete value-chain analysis of each industry.
B. conclusions drawn from constructing both a growth-share matrix
and a life-cycle matrix.
C. the best judgments of analysts and senior executives who are
experienced and have knowledge about these industries.
D. formal, quantitative, attractiveness scores derived from ratings
of each relevant attractiveness measure (weighted by its relative
importance).
E. All of the above.

35. Which one of the following is not a pertinent part of corporate

strategy analysis and evaluation?
A. Construction of a business portfolio matrix
B. Determining the competitive strength and market position of each
business in the corporate portfolio
C. Evaluating the long-term attractiveness of the industries and
markets in which the firm does business
D. Ranking the businesses in order of priority for new investment
E. Determining the extent to which strategic decision-making for
individual business units
should be decentralized.

36. Which of the following is most likely not to be a strategy-

critical area where it is very important to create a strong "fit" with
strategy?
A. Organization skills, capabilities, and structure
B. The methods used to train employees
C. Rewards and incentives
D. Beliefs, attitudes, shared values, and ethics
E. Policies, procedures, and support systems

37. Perhaps the one biggest practical problem of a strategic

business unit type of organization structure is
A. the added costs and inefficiency of another layer of top
management.
B. what criteria to use in defining or setting up a strategic
business unit and which business to put in which SBUs.
C. the rivalry and politics that emerge among SBUs,
D. the indecision it creates at the corporate level about how to
allocate resources among different SBUs.
E. the increased resistance to internal change that SBUs often
generate.

38. Core competencies are a basis for sustainable competitive

advantage because
A. distinctive core competencies and organizational capabilities
are not easily duplicated by rivals.
B. they are usually lodged in patentable or proprietary
technological know-how.
C. it is hard for rivals to identify them.
D. they are usually quite expensive to create, thus erecting a big
financial hurdle for rivals to overcome.
E. All of the above.

39. The bigger the organization, the more the success of the chief
strategy-implementer depends on
A. having the "right" organizational structure.
B. wise reallocation of resources out of noncritical activities
into strategy-critical activities.
C. devising strategy-supportive policies and procedures for company
personnel to follow.
D. the cooperation and implementing skills of subordinates who will
push the implementation process along in their areas of authority.
E. All of the above.

40. In developing an action agenda, strategy implementers should

A. designate a chief strategy implementer with responsibility for
deciding what the action priorities are.
B. consider all the internal ramifications of implementing a new
strategy and then determine the action priorities and sequence in which
things need to be done.
C. usually make decisions authoritatively instead of on the basis
of consensus.
D. do a survey of all key managers and employees to determine their
views on what types of changes need to be made.
E. All of these.

41. In trying to stay on top of what strategic progress is being

made, a strategy-implementer
A. should depend mainly on formal reporting and communication
channels to provide the needed information.
B. is well advised to make personal contact with subordinates and
customers, to be a close observer of the competitive actions of rival
firms, and to deliberately seek out informal sources of information.
C. should run a tight ship and preserve strong, centralized control
over internal activities.
D. should insist upon the installation of a comprehensive data base
and computerized information system to provide all managers and
employees with as much information as possible.
E. both (a) and (b).
42. From a strategy-implementing perspective, formal reports and
information systems should
A. make it easy to flag big or unusual variances from plan.
B. aim at "no surprises" and generating "early warning signs."
C. involve no more data and reporting than is really needed to give
a reliable picture of what is going on.
D. be kept simple and timely, and track all key strategic
performance indicators as often as practical.
E. all of these.

43. Gathering and reporting strategy-critical information on a

timely basis and tracking key performance measures is part of the
strategy-implementing process because
A. managers need prompt feedback on how well implement initiatives
are progressing and whether performance milestones are being met in
order to detect problems early and take corrective action.
B. information systems are the manager's primary tool for spotting
flaws and weaknesses in the strategy.
C. reengineering efforts, TQM, and benchmarking programs can't be
carried out effectively without the most up-to-date strategic
information.
D. good information is the basis for designing strategy-supportive
policies and operating procedures.
E. All of the above.

44. Successful strategy implementers are good at

A. empowering employees and reengineering core business processes.
B. devising motivational incentives that build wholehearted
commitment and winning attitudes among employees.
C. devising job descriptions that clearly spell out each activity
that each employee has to do to execute the firm's strategy.
D. linking ethics and culture to the firm's effort to install best
practices.
E. all of these.

45. The role of budgets in the strategy implementation process is

A. to exert control over how the company's financial resources are
utilized.
B. to make sure that each organization unit has the resources
needed to carry out its part of the strategic plan.
C. to ensure the creation of the needed core competence.
D. to prevent wasteful spending.
E. all of these.

46. In adaptive corporate cultures, members

A. are empowered and there is a need for fewer policies and
procedures.
B. are amenable to changing policies and operating practices as
long as the core elements of business strategy remain intact.
C. willingly embrace a proactive approach to identifying issues,
trying new ideas, altering operating practices, and changing pieces of
the strategy so long as core business principles are not compromised and
the changes are needed to satisfy the legitimate interests of
stakeholders.
D. are willing to change what's necessary to promote long-term
success provided it doesn't imperil job security or entail unethical
behavior.
E. Both (b) and (d) are correct.

47. A work environment where the culture matches well with the
conditions for good strategy execution is a valuable strategy-
implementing ally because
A. there is much less risk of embarrassing ethical violations.
B. there are strong peer pressures and informal rules that have the
impact of cultivating strategy-supportive work habits--culturally-
approved behavior thrives and culturally-disapproved behavior gets
squashed and even penalized.
C. there is reduced need to incorporate negative motivational
practices and punitive-type incentives into the company's approach to
people management.
D. there is reduced need to employ benchmarking, best practice
programs, reengineering, and TQM to achieve competitive advantage.
E. All of the above.

48. A strategy-implementer's culture-shaping effort generally

includes
A. designing tight links between culture and rewards.
B. conducting ceremonial events to honor people whose actions and
performance serve as role models, publicly praising good deeds, and
leading by example.
C. trying to minimize the effects of peer pressure, company
politics, and maverick behavior.
D. all of these
E. only b and c are correct.

49. Creating a strong fit between strategy and corporate culture

usually does not involve
A. instituting employee recognition programs such as employee of
the month awards and individual achievement awards.
B. developing a values statement and a code of ethics.
C. preparing a detailed rules and procedure manual for use by all
managers and employees.
D. replacing traditional managers with the new breed of managers.
E. insisting that top managers lead by example; for instance, if
the strategy entails being the low-cost producer, top managers might
have only spartan office decor, have few if any executive perks, and
push cost-cutting moves within their own areas of responsibility.

50. Enforcing ethical behavior entails

A. the CEO and other senior officers being openly and unequivocally
committed to ethical conduct.
B. managers at all levels setting an excellent ethical example in
their own behavior.
C. dismissing employees who play politics internally and who oppose
one or more corporate values.
D. all of these.
E. only a and b.

Answer Sheet for Test "Strategic Management 8/e", 5/13/96

Chapter/ Test Correct
Question Quest Answer

2-60 (-,b,-) 1 A
2-27 (-,b,-) 2 D
2-42 (-,a,-) 3 B
2-73 (-,a,-) 4 C
2-7 (-,b,-) 5 C
3-106 (-,b,-) 6 D
3-76 (-,a,-) 7 D
3-105 (-,a,-) 8 E
3-1 (-,b,-) 9 C
3-30 (-,a,-) 10 D
4-7 (-,b,-) 11 C
4-18 (-,a,-) 12 B
4-25 (-,b,-) 13 D
4-14 (-,b,-) 14 C
4-12 (-,a,-) 15 A
5-80 (-,a,-) 16 E
5-92 (-,b,-) 17 B
5-2 (-,a,-) 18 C
5-65 (-,b,-) 19 D
5-46 (-,b,-) 20 E
6-80 (-,b,-) 21 E
6-72 (-,a,-) 22 A
6-49 (-,b,-) 23 D
6-9 (-,b,-) 24 E
6-67 (-,b,-) 25 D
7-21 (-,a,-) 26 C
7-36 (-,b,-) 27 D
7-37 (-,b,-) 28 C
7-20 (-,b,-) 29 A
7-33 (-,a,-) 30 E
8-22 (-,b,-) 31 E
8-8 (-,a,-) 32 E
8-10 (-,b,-) 33 B
8-42 (-,b,-) 34 D
8-2 (-,b,-) 35 E
9-19 (-,b,-) 36 B
9-62 (-,b,-) 37 B
9-32 (-,b,-) 38 A
9-17 (-,b,-) 39 D
9-15 (-,b,-) 40 B
10-18 (-,b,-) 41 B
10-20 (-,a,-) 42 E
10-24 (-,b,-) 43 A
10-33 (-,b,-) 44 B
10-1 (-,a,-) 45 B
11-8 (-,b,-) 46 C
11-4 (-,a,-) 47 B
11-15 (-,b,-) 48 B
11-22 (-,b,-) 49 C
11-28 (-,b,-) 50 E
Answer Key

1 E
2 B
3 D
4 C
5 B
6 D
7 E
8 D
9 C
10 A
11 E
12 E
13 D
14 C
15 B
16 B
17 C
18 E
19 E
20 E
21 E
22 B
23 E
24 E
25 D
26 D
27 C
28 E
29 A
30 D
31 E
32 E
33 C
34 E
35 E
36 B
37 E
38 E
39 E
40 E
41 E
42 B
43 E
44 A
45 C
46 E
47 E
48 B
49 E
50 B