Mid-Term Exam (Chapters 1-5)
1.
Which one of the following is not a characteristic of an
effectively worded strategic vision statement?
graphic (paints a picture of the kind of company management
is trying to create and the market position or positions the company is
striving to stake out)
consensus-driven (commits the company to a
“mainstream” directional path that most all stakeholders will
enthusiastically support)
focused (is specific enough to provide guidance to managers
in making decisions and allocating resources)
directional (is forward-looking, describes the strategic
course that management has charted and the kinds of
product-market-customer-technology changes that will help the company prepare
for the future)
easy to communicate (is explainable in 10 to 15 minutes, can
be reduced to a memorable slogan)
2.
Which of the following is generally not considered as a
barrier to entry?
sizable capital requirements and an array of regulatory
requirements
sizable economies of scale in production
rapid market growth
strong buyer loyalty to existing brands
difficulties in gaining access to distribution and securing
adequate space of retailers’ shelves
3.
Which of the following is not one of the five typical
sources of competitive pressures?
the attempts of companies in other industries to win
customers over to their own substitute products
the market maneuvering and jockeying for buyer patronage
that goes on among rival sellers in the industry
the bargaining power of suppliers and seller-supplier
collaboration
the power and influence of industry driving forces
the threat of new entrants into the market
4.
A first-rate SWOT analysis
reveals whether a company is competitively stronger than its
closest rivals.
provides a good basis for crafting a strategy.
is a tool for benchmarking whether a firm’s strategy is
closely matched to industry key success factors.
is a way to measure whether a company’s value chain is
longer or shorter than the chains of key rivals.
identifies the reasons a company’s strategy is or is not
working very well.
5.
The objective of competitive strategy is to
grow revenues at a faster annual rate than rivals are able
to grow their revenues.
provide detail to the company’s business model.
get the company into the best strategic group and then
dominate it.
establish a competitively powerful value chain.
build competitive advantage in the marketplace by giving
buyers superior value relative to the offerings of rival sellers.
6.
The major avenues for achieving a cost advantage over rivals
include
eliminating or curbing nonessential cost-producing
activities and performing essential value chain activities more
cost-effectively that rivals.
outsourcing high-cost activities to offshore vendors.
being a first mover in adopting the latest state-of-the-art
technologies, especially those relating to low-cost manufacturing.
having a management team that accepts below-market salaries.
paying lower wages to hourly workers than what rivals are
paying workers.
7.
Which one of the following is not a reliable measure of how
well a company’s current strategy is working?
the company’s overall financial strength
changes in the firm’s image and reputation with its
customers
trends in the company’s sales and earnings growth
evidence of improvement in internal processes such as defect
rate, order fulfillment, and employee productivity
the company’s development of human capital, organizational
capital, and information capital
8.
The options for remedying a supplier-related cost disadvantage
include
shifting from a low-cost leadership strategy to a
differentiation or focus strategy.
cutting selling prices and trying to win a bigger market
share.
forward vertical integration.
trying to negotiate more favorable prices with suppliers and
switching to lower priced substitute inputs.
shifting into the production of substitute products.
9.
In identifying an industry’s key success factors,
strategists should
consider what it will take to overtake the company with the
industry’s overall best strategy.
focus their attention on what it will take to capitalize on
impacts of the industry’s driving forces.
consider on what basis customers choose between competing
brands, what resources and competitive capabilities firms need to be
competitively successful, and what shortcomings are almost certain to put a
company at a significant competitive disadvantage.
consider whether the number of strategic groups is increasing
or decreasing and whether the five competitive forces are powerful or
relatively weak.
try to single out all factors that play a major role in
shaping whether buyer demand grows rapidly or slowly.
10.
Which one of the following does not represent market
circumstances that make a focused low-cost or focused differentiation strategy
attractive?
when buyers are not strongly brand loyal and a large number
of other rivals are attempting to specialize in the same target segment
when it is costly or difficult for multisegment competitors
to meet the specialized needs of the target market niche and at the same time
satisfy the expectations of their mainstream customers
when the target market niche is big enough to be profitable
and offers good growth potential
when the industry has many different segments and market
niches, thereby allowing a focuser to pick an attractive niche suited to its
resource strengths and capabilities
when industry leaders have chosen not to compete in the
niche
11.
Which one of the following is not a common type of driving
force?
changing societal concerns, attitudes, and lifestyles
entry or exit of major firms
technological change and manufacturing process innovation
diffusion of technical know-how across more companies and
more countries
increasing efforts on the part of industry members to
collaborate closely with their suppliers
12.
Which of the following best describes the market opportunities
that tend to be most relevant to a particular company?
those that help promote greater diversification of revenues
and profits
those that match up well with the firm’s financial resources
and competitive capabilities, offer the best growth and profitability, and
present the most potential for competitive advantage
those that help correct a company’s biggest weaknesses and
competitive deficiencies
those that provide avenues for taking market share away from
close rivals and enhance a company’s image as a leader in product innovation
and product quality
those that offer the company a chance to raise entry
barriers
13.
Opportunities to differentiate a company’s product offering
are more likely to be captured by highly skilled marketers.
are always dependent on the capabilities of the company’s
R&D staff.
usually are tied to product quality, durability,
reliability, and proliferation.
are most frequently attached to a product’s brand image,
performance, and reliability.
can exist in supply chain activities, R&D, manufacturing
activities, distribution and shipping, or marketing, sales, and customer
service.
14.
Which of the following is not one of the basic reasons that
a company’s strategy evolves over time?
anongoing need to abandon those strategy features that are
no longer working well
the proactive efforts of company managers to improve the
company’s financial performance and secure a competitive advantage
the need to keep strategy in step with changing industry and
competitive conditions
the need to respond to the actions and competitive moves of
rival firms
the need on the part of company managers to make no
adjustments to the company’s business model
15.
A company’s resources are competitive assets that are owned
or controlled by the company and include
intangible assets such as brand recognition and buyer
loyalty.
tangible resources such as plants, distribution centers, and
manufacturing equipment.
All of these choices are correct.
financial resources such as a company’s credit rating and
borrowing capacity.
intangible assets such as having a results-oriented culture.
16.
A competitive environment in which there is strong rivalry
among sellers, low entry barriers, strong competition from substitute products,
and considerable bargaining leverage on the part of both suppliers and
customers
is highly conducive to achieving strong product
differentiation and high brand loyalty.
offers moderate to good prospects for achieving low costs
and building a sustainable competitive advantage.
offers little ability to build a sustainable competitive
advantage.
requires that industry members have a strongly
differentiated product offering in order to be profitable.
is competitively unattractive from the standpoint of earning
good profits.
17.
The payoff of good scouting reports on rivals is improved
ability to
determine which rivals are in the best strategic group.
determine whether a rival is gaining or losing market share,
whether rivals are increasing or decreasing R&D spending, and what new
marketing promotions are in the works.
predict what strategic moves rivals are likely to make next,
thereby allowing a company to prepare defensive countermoves and develop
strategies to exploit rivals’ missteps.
figure out how many key success factors a rival has.
determine whether a rival has the best strategy and is the
industry leader.
18.
Which one of the following is not a reason industry members
are often motivated to enter into collaborative partnerships with key
suppliers?
to speed the availability of next-generation components
to enhance the quality of parts and components being
supplied and reduce defect rates
to reduce the costs of switching suppliers
to reduce inventory and logistics costs
to squeeze out important cost savings for both themselves
and their suppliers
19.
Which of the following are most unlikely to qualify as
driving forces?
mounting competition from substitutes and increasing efforts
to collaborate with suppliers via strategic alliances
new Internet technology applications, new government
regulations, and significant changes in government policy toward the industry
changes in the long-term industry growth rate, the entry or
exit of major firms, and changes in cost and efficiency
increasing globalization of the industry and product
innovation
changes in who buys the industry’s product and how they use
it
20.
Why should long-run objectives take precedence over
short-run objectives?
Long-run objectives are necessary for achieving long-term
performance and stand as a barrier to undue focus on short-term results.
The focus is placed on improving performance in the near
term.
None of these are correct.
Long-run objectives will force the company to deliver
performance improvement in the current period.
Long-run objectives will satisfy shareholder expectations
for progress.
21.
It is normal for a company’s strategy to end up being
left unchanged from management’s original planned set of
actions and business approaches since making on-the-spot changes is too risky.
a blend of deliberate planned actions to improve the
company’s competitiveness and financial performance and as-needed unplanned
reactions to unanticipated developments and fresh market conditions.
a mirror image of its business model, so as to avoid
impairing company profitability.
like the strategies of other industry members since all
companies are confronting much the same market conditions and competitive
pressures.
a combination of defensive moves to protect the company’s
market share and offensive initiatives to set the company’s product offering
apart from rivals.
22.
A strategy to be the industry’s overall low-cost provider
tends to be more appealing than a differentiation or focus strategy when
buyers have high switching costs in changing from one
seller’s product to another.
the market is composed of many buyer types, all with varying
needs and expectations.
there are many ways to achieve product differentiation that
buyers find appealing.
buyers use the product in a variety of different ways.
the offerings of rival firms are essentially identical,
standardized, commodity-like products.
23.
The most important payoff of doing a thorough SWOT analysis
is
assisting strategy makers in drawing conclusions about the
company’s overall situation and crafting a strategy that is well-matched to the
company’s resources and capabilities, its market opportunities, and the
external threats to its future well-being.
identifying whether the company’s value chain is cost
effective vis-à-vis the value chains of rivals.
revealing whether a company’s market share, measures of
profitability, and sales compare favorably or unfavorably vis-à-vis key competitors.
helping strategy makers benchmark the company’s resource
strengths against industry key success factors.
enabling a company to assess its leverage in negotiations
with buyers.
24.
Management’s strategic vision for an organization
describes in fairly specific terms the organization’s
business model, strategic objectives, and strategy.
addresses the critical issue of “why our business model
needs to change and how we plan to change it.”
spells out how the company will become a big moneymaker and
boost shareholder value.
spells out the organization’s strategic moves that will be
undertaken to achieve competitive advantage.
charts a strategic course for the organization (“where
we are going”) and outlines the company’s future
product-customer-market-technology focus.
25.
A company’s strategy is a “work in progress” and
evolves over time because of the
need to make regular adjustments in the company’s strategic
vision.
ongoing need to imitate the new strategic moves of the
industry leaders.
frequent need to modify key elements of the company’s
business model.
importance of developing a fresh strategic plan every year.
ongoing need of company managers to react and respond to
changing industry and competitive conditions.
26.
Which of the following is not an appropriate guideline for
developing a strategic group map for a given industry?
Sizes of the circles on the map should be drawn proportional
to the combined sales of the firms in each strategic group.
Variables chosen as axes for the map can be quantitative,
qualitative, or discrete and defined in terms of distinct classes and
combinations.
Variables chosen as axes for the map should indicate big
differences in how rivals have positioned themselves to compete in the
marketplace.
Several maps should be drawn if more than one pair of
variables can help illuminate differences in the competitive positioning of
industry members.
Variables selected as axes for the map should be highly
correlated.
27.
The target market of a best-cost provider is
price-sensitive buyers.
value-conscious buyers.
brand-conscious buyers.
young adults (in the 18-to-35 age group).
middle-income buyers.
28.
Which of the following is not one of the pitfalls of a
low-cost provider strategy?
becoming so fixated on cost reductions that products become
too features-poor
using a cost-based advantage to improve the company’s
bargaining position with high-volume buyers
using approaches to reducing costs that can be easily copied
by rivals
cutting prices more than the size of a company’s cost
advantage
overly aggressive price cutting
29.
Thinking strategically about industry and competitive
conditions in a given industry involves evaluating such considerations as
interest rates, exchange rates, unemployment rates,
inflation rates, and economic growth.
the birth of new industries, new knowledge, and disruptive
technologies.
weather, climate change, and water shortages.
how often sellers alter their prices, how sensitive buyers
are to price differences among sellers, whether the item being purchased is a
good or a service, and whether buyers buy frequently or infrequently.
cultural, lifestyle, and demographic changes.
30.
The benefit of a vivid, engaging, and convincing strategic
vision is
All of these are important benefits of an effective
strategic vision.
it reduces the risk of rudderless decision making by
managers at all levels of the organization.
it helps an organization prepare for the future.
its ability to unite company personnel behind managerial
efforts to get the company moving in the intended direction.
its ability to crystallize top management’s own view about
the company’s long-term direction.
31.
Which of the following conditions acts to weaken buyer
bargaining power?
when the costs incurred by buyers in switching to competing
brands or to substitute products are relatively low
when buyers are well informed about sellers’ products,
prices, and costs
when buyers are unlikely to integrate backward into the
business of sellers
when buyers are few in number and/or often purchase in large
quantities
when buyers have the ability to postpone purchases if they
don’t like the prices offered by sellers
32.
One of the most telling signs of whether a company’s market
position is strong or precarious is
whether it is in a bigger or smaller strategic group than
its closest rivals.
whether its product is strongly or weakly differentiated
from rivals.
whether its prices and costs are competitive with those of
key rivals.
the opinions of buyers regarding which seller has the best
product quality and customer service.
whether it has a lower stock price than key rivals.
33.
A resource-based strategy
uses a company’s valuable and rare resources and competitive
capabilities to deliver value to customers that rivals have difficulty
matching.
uses industry key success factors to provide a company with
a core competence that rivals cannot effectively imitate.
is typically based on a stand-alone resource strength such
as technological expertise.
is often based on cross-department combinations of
intellectual capital and expertise.
refers to a company’s most efficiently executed value-chain
activity.
34.
The aim of the best-cost provider strategy is to create a
competitive advantage by
translating its best-cost status into achieving the highest
profit margins of any firm in the industry.
offering buyers the industry’s best-performing product at
the best cost and best (lowest) price in the industry.
outcompeting rivals using low-cost provider strategies.
incorporating attractive or upscale product attributes at a
lower cost than rivals.
attracting buyers on the basis of having the industry’s
overall best-performing product at a price that is slightly below the
industry-average price.
35.
A company’s direction, objectives, and strategy
All of these choices are correct.
have to be revisited whenever a firm encounters disruptive
changes in its environment.
are never final as it is an ongoing process.
are not a now-and-then task.
have to be revisited any time internal conditions warrant.
36.
Which of the following questions ought to be used to
distinguish a winning strategy from a so-so or flawed strategy?
Does the strategy contain a sufficient number of emergent
and/or reactive elements?
Is the company putting too little emphasis on growth and
profitability and too much emphasis on behaving in an ethical and socially
responsible manner?
Is the strategy well matched to the company’s situation,
helping the company achieve a sustainable competitive advantage and resulting
in better company performance?
Is the strategy built on a company’s weakness, or does it
require resources that are deficient in the company?
Does the strategy strike a good balance between maximizing
shareholder wealth and maximizing customer satisfaction?
37.
An industry’s driving forces
can be triggered by such factors as growing competitive
pressures from substitute products, greater seller-supplier collaboration, and
the efforts of rival firms to employ new or different offensive strategies.
are normally triggered by ups and downs in the economy,
higher or lower inflation rates, higher or lower interest rates, or important
new strategic alliances.
are generally determined by competitive pressures, the sizes
of strategic groups, and the power of rival firms’ competitive strategies.
generally act in ways that will strengthen or weaken market
demand, make competition more or less intense, and lead to higher or lower
industry profitability.
frequently cause a leveling off of industry growth and a reduction
in the bargaining power of buyers.
38.
A company’s mission statement typically addresses which of
the following questions?
Who are we? What do we do? and Why are we here?
Where are we going and what should our strategy be?
What objectives and level of performance do we want to
achieve?
Why have we chosen a particular business model to achieve
our objectives and our vision?
What approach should we take to achieve sustainable
competitive advantage?
39.
What sets focused (or market niche) strategies apart from
low-cost leadership and broad differentiation strategies is
their suitability for market situations where most industry
rivals have weakly differentiated products.
their objective of delivering more value for the money.
the extra attention paid to top-notch product performance
and product quality.
their concentrated attention on a narrow piece of the
overall market.
greater opportunity for competitive advantage.
40.
The external market opportunities that are most relevant to
a company are the ones that
match up well with the firm’s financial resources and
competitive capabilities, offer the best growth and profitability, and present
the most potential for competitive advantage.
correct its internal weaknesses and resource deficiencies.
help defend against the external threats to its well-being.
increase market share.
reinforce its overall business strategy.
41.
The elements of a company’s business model are
its business strategy, its collection of competitively
valuable resources, and a strong management team.
management’s answers to the questions: Where are we now?
Where do we want to go? and How are we going to get there?
its actions to capture emerging market opportunities and
defend against threats to the company’s business prospects, its actions to
strengthen competitiveness via strategic alliances, and its actions to enter
new geographic or product markets.
its deliberate strategy, its emergent strategy, and its
realized strategy.
its customer value proposition as well as the company’s
profit formula.
42.
Which one of the following is not part of a company’s broad
macro-environment?
conditions in the economy at large
governmental regulations and legislation
technological and ecological factors
population demographics, and societal values and lifestyles
the company’s resource strengths, resource weaknesses, and
competitive capabilities
43.
Which of the following is not a factor to consider in
identifying an industry’s dominant economic features?
role and pace of technological change
strength of both driving forces and competitive forces
market demand-supply conditions
market size, growth rate, and prospects
scope of competitive rivalry including geographic area
44.
Which of the following is not generally a “driving
force” capable of producing fundamental changes in industry and
competitive conditions?
Product innovation and technological change
Changes in the long-term industry growth rate
Increasing globalization of the industry
Ups and downs in the economy and interest rates
New government regulations or significant changes in
government policy toward the industry
45.
When looking at the entire industry, the main areas in a
company’s overall value chain where important differences between firm’s cost
and value donot occur are in
a company’s own internal activities, the suppliers industry
value chain, and the forward channel portion of the industry chain.
the forward channel portion of the industry chain.
None of these choices are correct.
the suppliers industry value chain.
a company’s own internal activities.
46.
The risks of a focused strategy based on either low-cost or
differentiation include
the chance that niche customers will bargain more
aggressively for good deals than customers in the overall marketplace.
the potential for the segment to be highly vulnerable to
economic cycles.
All of these choices are correct.
the potential for segment growth to race beyond the
production or service capabilities of incumbent firms.
the chance that competitors will find effective ways to
match the focused firm’s capabilities in serving the target niche.
47.
Company objectives
play the important role of establishing the direction in
which the company needs to be headed.
need to be broken down into performance targets for each of
its separate businesses, product lines, functional departments, and individual
work units.
are important because they help guide managers in deciding
what the company’s strategy map should look like.
should be set in a manner that does not conflict with the
performance targets of lower-level organizational units.
are needed only on a companywide basis related to a
company’s short-term and long-term profitability.
48.
Effectively communicating the strategic vision down the line
to lower-level managers and employees has the value of
helping lower-level managers and employees better understand
the company’s business model.
making it easier for top executives to set strategic
objectives.
All of these choices are correct.
helping company personnel understand why “making a
profit” is so important.
not only explaining “where we are going and why”
but, more importantly, also inspiring and energizing company personnel to unite
to get the company moving in the intended direction.
49.
A differentiation-based competitive advantage
nearly always is attached to the quality and service aspects
of a company’s product offering.
often hinges on incorporating features that: (1) raise the
performance of the product, (2) lower the buyer’s overall costs of using the
company’s product, (3) enhance buyer satisfaction in intangible or noneconomic
ways, or (4) deliver value to customers by exploiting competitive capabilities
that rivals can’t match.
most often is the result of highly effective marketing and
advertising campaigns designed to build awareness and recognition of the
product or service offering.
requires developing at least one distinctive competence that
buyers consider valuable.
hinges on a company’s success in developing top-of-the-line
product features that will command the biggest price premium in the industry.
50.
Driving forces analysis
helps managers identify which of the five competitive forces
will be the strongest driver of industry change.
helps managers identify which key success factors are most
likely to help their company gain a competitive advantage.
involves identifying the driving forces, assessing whether
their impact will make the industry more or less attractive, and determining
what strategy changes a company may need to make to prepare for the impact of
the driving forces.
helps managers identify which industry member is likely to
become (or remain) the industry leader and why.
identifies which strategic group is the most powerful.
