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CHAPTER 7
STRATEGIC MANAGEMENT
Question 1. Strategies are defined as
A*:
B:
C:
D:
large-scale action plans for interacting with the environment.
those action statements derived from the corporate mission statement.
corporate-level and business-level environmental interaction statements.
being the first step in the planning process.
Strategies are defined as large-scale action plans for interacting with the
environment to achieve long-term goals.
Question 2. Strategic management is defined as being the process through
which managers formulate and _____________ strategies geared to optimising
strategic goal achievement, given available environmental and internal
conditions.
A:
B:
C:
D*:
describe
delegate
control
implement
The strategic management process includes formulating and implementing
strategies for achieving goals, within existing conditions.
Question 3. Strategies are often developed at three different organisational
levels:
A*:
B:
C:
D:
corporate, business, and functional.
strategic, tactical, and functional.
functional, tactical, and operational.
low, moderate, and high.
Many organisations develop strategies at three different levels:
business and functional.
corporate,
Question 4. The level of strategy within the organisation that addresses
issues such as how resources will be allocated, what businesses the
organisation will operate, and how the strategies of those businesses will be
coordinated is referred to as
A:
B:
C:
D*:
executive-level strategy.
"official"-level strategy.
umbrella-level strategy.
corporate-level strategy.
Corporate level strategy addresses these whole organisation issues.
Question 5. The level of strategy within the organisation that addresses
such issues as deciding the type of competitive advantage to build,
determining responses to changing environmental and competitive conditions,
and coordinating functional-level strategies is referred to as
A:
B:
C:
D*:
umbrella-level strategy.
middle-level strategy.
principal-level strategy.
business-level strategy.
Business-level strategy concentrates on how to best compete within a
particular business. It supports corporate-level strategies and co-ordinates
functional-level strategies.
Question 6. The organisational level at which strategies are determined for
strategic business units (SBUs) is the
A:
B*:
C:
D:
operational level.
business level.
industry level.
corporate level.
A strategic business unit (SBU) is found at the business level of
organisations.
Question 7. A distinct business within the organisation that has its own
identifiable set of competitors and that can be managed reasonably
independently of other businesses within the organisation is referred to as
A:
B:
C*:
D:
an operational business.
a distinct business element.
a strategic business unit.
a cash cow.
A strategic business unit is a distinct business operating within a large
organisation.
Question 8. If an organisation consists of only a single business unit, the
_____________ -level and the _____________ - level strategies are essentially
the same.
A:
B*:
C:
D:
corporate /
corporate /
executive /
operational
umbrella
business
corporate
/ business
When an organisation is only a single business, corporate level and business
level strategies are the same.
Question 9. The level of strategy within an organisation that determines the
main directions for each of the major functional areas within a business is
usually referred to as
A*:
B:
C:
D:
functional-level strategy.
business-level strategy.
competitive-level strategy.
intermediary-level strategy.
Functional-level strategy focuses on plans for managing a functional area in
a business such as manufacturing or operations, marketing, finance or
accounting.
Question 10. Regardless of the approach an organisation uses in making its
strategic management decisions, an analysis should be made of the competitive
situation. One such analysis that assesses both the external and the
internal factors influencing an organisation's ability to compete is called
the
A*:
B:
C:
D:
SWOT analysis.
in-out analysis.
SBU analysis.
competitive matrix analysis.
A SWOT analysis is used to analyse organisational Strengths and Weaknesses,
Opportunities and Threats.
Question 11. Regarding the organisation's external environment, a SWOT
analysis
A:
B:
C*:
D:
would address only the mega-environment.
would address only the task environment.
would investigate both the mega- and the task environments.
does not address the external environment. It only looks at the
internal environment.
In performing a SWOT analysis it is necessary to investigate both the megaenvironment and the task-environment.
Question 12. Porter's oddly named "five competitive forces" model is an
approach to analysing the nature and intensity of competition in a given
industry. From a given organisation's view, the collective strength of these
five forces most directly affects the
A:
B*:
C:
D:
number of customers in the market.
firm's profit potential.
kind of SWOT analysis used.
authority of the CEO.
Porter’s five competitive forces most directly affect profit potential, or
long-term return on investment, of business.
Question 13. Porter suggests that the greater the rivalry
A:
B:
C:
D*:
the
the
the
the
higher the costs
lower the costs
higher the profit potential for businesses in an industry
lower the profit potential for businesses in an industry
Porter maintains that profit potential is lower for businesses in an industry
with great rivalry.
Question 14. Unique organisational strengths that competitors cannot easily
match or imitate are called
A:
B:
C*:
D:
match-ups.
initiators.
distinctive competencies.
intrinsic directed advantages.
Distinctive competencies are resources or capabilities that rare and
difficult for competitors to imitate.
Question 15. The development of corporate-level strategy usually addresses
two issues: a portfolio strategy approach to determine the various businesses
that will make up the organisation, on the one hand, and, on the other, the
selection of
A*:
B:
C:
D:
a grand strategy.
an organisation structure.
the level of operations technology.
appropriate staff.
A grand strategy, together with a portfolio strategy, provides basic
strategic direction at corporate level.
Question 16. An organisation's grand strategy is sometimes called
A*:
B:
C:
D:
a
a
a
a
master strategy.
chart-breaker strategy.
SWOT strategy.
functional strategy.
Another term for an organisation’s grand strategy, which provides basic
strategic direction at corporate level, is a master strategy.
Question 17. Grand strategies are often grouped into three basic categories.
Which of the following is NOT one of them?
A:
B:
C:
D*:
defensive
stability
growth
reactive
Grand strategies are grouped into three types:
defensive grand strategies.
growth, stability and
Question 18. One of the three basic categories of grand strategies involves
organisational expansion along some major dimension. This category of grand
strategy is referred to as
A:
B:
C:
D*:
reactive strategy.
entrepreneurial strategy.
expansion strategy.
growth strategy.
Grand strategies are divided into three categories. The strategy that
involves organisational expansion is called the growth strategy.
Question 19. Organisations pursuing a growth grand strategy usually do so by
using one of three growth strategies identified by the text. Which of the
following is NOT one of those three?
A:
B:
C:
D*:
diversification
vertical integration
concentration
harvest
The three ways of pursuing a growth grand strategy are by diversification,
concentration and vertical integration.
Question 20. There are three major categories of grand strategies that
organisations use. One of these is the
A*:
B:
C:
D:
growth strategy.
stability strategy.
defensive strategy.
opportunistic strategy.
The three major categories of grand strategies are growth, stability and
defensive strategies.
Question 21. If Hungry Jack's were to acquire a big cattle station in
Queensland to supply its own hamburger meat, the company would be involved in
A:
B:
C:
D*:
concentration.
diversification.
horizontal acquisition.
backward integration.
When a business grows by becoming its own supplier, this is called backward
integration.
Question 22. The growth strategy that would be illustrated if Microsoft
Corporation, the giant computer software company, were to buy a professional
basketball team is
A:
B:
C:
D*:
concentration.
concentric diversification.
forward diversification.
conglomerate diversification.
Conglomerate diversification occurs when an organisation diversifies into
unrelated main business areas.
Question 23. If a large clothing manufacturer was to buy into a shoe making
concern, this would best illustrated which of the three types of growth grand
strategies?
A:
B:
C:
D*:
concentration
diversification
conglomerate integration
concentric diversification
Concentric diversification occurs when a business diversifies into related,
but distinct, businesses.
Question 24. A company might choose a grand strategy of ____________ if it is
doing reasonably well and the managers don't want the risks or the hassles
associated with a strategy of growth.
A:
B*:
C:
D:
concentration
stability
defensive
backward integration
A stability strategy involves maintaining the status quo or growing slowly or
methodically.
Question 25. A stability grand strategy is most often used by
A:
B:
C*:
D:
large conglomerates.
old, established companies.
small, privately owned companies.
international joint ventures.
Stability grand strategy is often used by small, privately owned businesses
who do not want the hassles of aggressive growth.
Question 26. There are four reasons why a company might have a stability
grand strategy. Which of the following is NOT one of them?
A*:
B:
C:
D:
The firm is too small for any other strategy.
A growth strategy may become too successful for the firm to handle.
Some managers may be unconcerned with their strategic direction.
In a declining market, stability might be considered to be an aggressive
strategy.
Small firms can choose a growth strategy, but there are a variety of reasons,
as mentioned, for deciding to stay small.
Question 27. A defensive grand strategy is sometimes called a
A:
B:
C*:
D:
concentration strategy.
reinforcement strategy.
master strategy of retrenchment.
concentric harvest strategy.
Defensive strategy involves focussing on reducing organisational operations,
by cost cutting, and could be called a master strategy of retrenchment.
Question 28. There are four types of defensive strategies:
divestiture,
A:
B*:
C:
D:
portfolio, and release.
turnaround, and liquidation.
concentration, and liquidation.
turnaround, and release.
The four types of defensive strategies are:
and liquidation.
harvest, divestiture, turnaround
Question 29. The four types of defensive strategies are:
turnaround,
A:
B:
C:
D*:
harvest,
liquidation,
storage, and divestiture.
portfolio, and pick.
fortress, and concentration.
harvest, and divestiture.
Liquidation, turnaround, harvest and divestiture are the four types of
defensive strategies.
Question 30. The defensive grand strategy which tries to maximise short-run
profits and cash flow while planning to exit the market in the long-run is
referred to as
A:
portfolio.
B*:
C:
D:
harvest.
concentration.
turnaround,
Harvest entails minimising investments and maximising short-run profits and
cash flow, with the long-run intent of leaving the market.
Question 31. Employees and the community are concerned when a "raider" buys a
local company and then proceeds to "milk it dry," taking out as much profit
and cash flow as possible in the short run and announcing its intention of
selling the place off when the company is no longer operable. Which of the
following defensive grand strategies would best be described by this
A*:
B:
C:
D:
harvest
liquidation
turnaround
divestiture
This type of action is called a harvest strategy and is part of defensive
grand strategies.
Question 32. When a company decides to sell a business or part of one as a
defensive grand strategy it is called
A*:
B:
C:
D:
divestiture
liquidation
turnaround
harvest
A divestiture involves selling or divesting a business or part of one.
Question 33. The BCG growth-share matrix and the product/evolution matrix are
two
A:
B:
C:
D*:
defensive grand strategies.
approaches to applying Michael Porter's five competitive forces model.
strategies for concentric diversification.
portfolio strategy approaches for analysing business mix.
These are two portfolio strategies approaches which help managers determine
the types of businesses the organisation should be involved with.
Question 34. The BCG growth-share matrix is a portfolio approach to business
mix analysis that looks at two variables about the performance of a firm's
several businesses. One of these variables is relative market share; the
other is
A:
B*:
C:
marginal costs.
the growth rate of the market.
the break-even point.
D:
return on assets.
Relative market share and market growth rate are the two performance
variables which the BCG growth-share matrix uses.
Question 35. The BCG growth-share matrix identifies four categories for a
firm's separate businesses. Which of the following is NOT one of them?
A:
B:
C*:
D:
question mark
cash cow
goat
star
The BCG growth-share matrix divides businesses into four categories: star,
question mark, cash cow and dog.
Question 36. If a business classified as a question mark by the BCG
growth-share matrix does well, the next classification it would be expected
to move to would be that of
A:
B*:
C:
D:
goat.
star.
cash cow.
exclamation point.
Businesses move from the question mark to the star category according to the
BCG growth-share matrix.
Question 37. One of several grand strategies is usually chosen for a business
unit that has been classified as being a "dog" according to the BCG
growth-share matrix. Which of the following is NOT usually one of them?
A:
B:
C*:
D:
harvest
liquidation
vertical integration
divestiture
Businesses classified as dogs may be harvested, divested or liquidated as
part of their organisation’s grand strategy.
Question 38. There are four criticisms or shortcomings of the BCG
growth-share matrix. Which of the following is NOT one of them?
A:
B:
C:
D*:
The matrix does not directly address the majority of businesses that are
"average."
The classifications may be somewhat misleading; businesses with low
market shares, for example, may not really be question marks.
Many managers dislike the terminology associated with the
classifications for businesses.
The matrix applies only to manufacturing businesses and not to those
which provide services.
The flaws in the BCG matrix include all the above ideas except that it does
not just apply to manufacturing businesses but to all types of businesses.
Question 39. The product/market evolution matrix analyses and classifies
businesses according to two variables or dimensions: the industry's
product/market evolution stage and the business's
A:
B*:
C:
D:
marginal growth rate.
competitive position.
break-even point.
cash-flow ratio.
The product/market evolution matrix looks at the competitive position of a
business as well as it stage of evolution.
Question 40. The product/market evolution matrix, identifies five stages in
the evolutionary life of an industry. Which of the following is NOT one of
them?
A:
B*:
C:
D:
growth
explosion
decline
maturity and saturation
The stages in the evolutionary life of an industry are: growth, competitive
shakeout, maturity and saturation and decline.
Question 41. In the product/market evolution matrix, "maturity and
saturation", "decline", "competitive shakeout" are terms used to classify
A:
B:
C*:
D:
a firm's competitive position.
market acceptance.
the industry's stage in its evolutionary life cycle.
the rate of market growth and market dynamism.
These terms are all stages in the evolutionary life cycle.
Question 42. Which phase of the product/market evolution matrix is
particularly important in that it might well last for an extended period of
time?
A*:
B:
C:
D:
maturity and saturation
growth
competitive shakeout
concentric divestiture
The maturity and saturation stage often lasts for a long time.
Question 43. Cost leadership, focus, and differentiation are three
____________ strategies proposed by Michael Porter.
A*:
B:
C:
D:
business-level
growth
defensive
matrix
These are Porter’s three business-level strategies to gain competitive
advantage over other firms operating in the same industry.
Question 44. Cost leadership, differentiation, and ____________ are the three
business-level strategies proposed by Michael Porter.
A*:
B:
C:
D:
focus
hold and grow
concentric dynamism
product life-cycle matrix
Porter’s three business-level strategies include cost leadership,
differentiation and focus.
Question 45. The cost leadership strategy proposed by Michael Porter holds
that a business should try to
A:
B:
C:
D*:
price its goods/services so as to have the highest markup in the
industry.
never be the cost leader, as doing so suggests low quality.
follow the cost leader by an amount equal to half the basic markup.
be the cost leader and not just one of several.
Porter suggests that businesses should be cost leaders, that is offer the
lowest costs in an industry, and not just one of a group.
Question 46. Michael Porter's strategy for businesses that suggests that the
firm work to develop products and services that are viewed as unique in the
industry, thereby allowing the business to charge premium prices, is usually
referred to as
A:
B:
C*:
D:
focus.
maturity.
differentiation.
growth cycle.
Porter suggests that businesses need to differentiate themselves from others
in the same industry.
Question 47. Advertising that your company's shampoo is the best dandruff
shampoo on the market would be an example of Michael Porter's business
strategy of
A:
B*:
C:
D:
cost leadership.
differentiation.
caution.
focus.
This is an example of differentiation or developing products and services
seen as unique by the industry.
Question 48. The expression, "finding a niche in the market" would describe
Michael Porter's business strategy of
A:
B:
C*:
D:
differentiation.
advertising leadership.
focus.
aggressiveness.
A focus strategy specialises by having cost leadership and/or differentiation
in a particular position or segment of an entire market.
Question 49. In strategic management, the basic thrust of strategy at the
functional level of the organisation is to support
A:
B*:
C:
D:
product quality.
business-level strategies.
growth and development.
efforts against foreign competition.
Functional-level strategies detail specific ways functional areas can bolster
business-level strategy.
Question 50. Examples of business units for which functional strategies would
be developed would include
A:
B*:
C:
D:
corporate-level, business-level, and operational-level units.
research and development, marketing and distribution.
strategic and tactical units.
the Asian operation and the potato chip division of a snack manufacturer
Functional strategies would need to be developed in such areas as research
and development, marketing, and distribution.