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.