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Essentials of Strategic Management
Final EXAM 2024
A well-conceived strategy builds a company's - ANS Ethical worthiness and corporate social responsibility Which of the following is not a frequently used strategic approach to setting a company apart from rivals and achieving a sustainable competitive advantage? - ANS Simply trying to mimic successful strategies of rivals An industrial air-conditioner manufacturing giant decides to outsource its operations to a new geographical location with cheaper labor amidst ongoing labor strikes in a few of its existing locations (due to proposed job cuts and relocation of the plant offshore). This draws criticism in its home market and affects its current market position and productivity. Which of the following would be an appropriate reactive (emergent) strategy while moving forward? - ANS Canceling the job cuts till the market situation and entry operations stabilize A company achieves sustainable competitive advantage when - ANS a sufficiently large number of buyers have a lasting preference for its products or services as compared to the offerings of competitors. A company's realized business strategy is made up of - ANS both deliberate and/or planned initiatives that have proven themselves in the marketplace and newly launched initiatives aimed at further boosting performance and emergent and/or reactive adjustments to unanticipated strategic moves by rivals, unexpected changes in customer preferences, and new market opportunities. Which of the following is a not a frequently used strategic approach to setting a company apart from rivals and achieving a sustainable competitive advantage? - ANS Copying rivals on their competitive moves Different companies across different industries adopt any one of the five generic strategies to gain competitive advantage. Which of the following businesses is most likely to use a low-cost provider strategy? - ANS A baby products retailer sells unassembled baby furniture produced in China Amy's Drive-Thru, a fast food facility near a college campus, offers healthy, sustainably grown vegetarian and vegan fast-food at higher prices than its competitors in the market and has a drive-through and indoor-seated, casual-dining operation. What strategy is Amy's Drive-Thru using to gain a competitive advantage? - ANS A focused differentiation strategy
A company's strategy has a chance of succeeding only when it is predicated on - ANS actions, business approaches, and competitive moves aimed at appealing to buyers and setting the company apart from rivals. The essence of strategy is - ANS developing lasting success that can support growth and secure the company's future over the long term. A creative, distinctive strategy that delivers a sustainable, competitive advantage is important because - ANS a strategy that yields a competitive advantage over rivals is a company's most reliable means of achieving above-average profitability and financial performance. Managers of every company should be willing and ready to modify their strategy because - ANS market conditions and circumstances are changing over time or the current strategy is clearly failing. A company's strategy consists of - ANS competitive moves and approaches that managers have developed to grow the business, attract and please customers, conduct operations, and achieve targeted objectives. Managers in all types of businesses must develop a clear answer for which of the following questions? - ANS What is the set of actions that we need to take to outperform the company's competitors and achieve superior profitability? A pharmaceutical giant acquires a manufacturer of rare specialty drugs to improve its falling share prices and invests all its wealth into the deal. Due to a deficit, it agrees to do a joint venture for the acquisition and involves a major automobile giant to fund the deal. After a rocky start, the companies now have a strong market position and generate good profits. Which of the following regarding the company's strategy is true? - ANS It is a winning strategy. A company's strategy is a "work in progress" and evolves over time because of the - ANS ongoing need of company managers to react and respond to changing industry and competitive conditions. Consider the following three companies and their strategies: Company A is an established database management company that acquires a well-reputed but small publishing house to enter the booming publishing industry.Company B, a sports management house, declared bankruptcy during a recent recession but now has created a television network that airs regional sports events.Company C, a package delivery business, is a startup based on delivery efficiency models created by a few students and delivers almost all kinds of packages. Which of the following describes the use of strategies by these companies accurately? - ANS All three companies employ deliberate strategies.
Changing circumstances and ongoing managerial efforts to improve the strategy - ANS account for why a company's strategy evolves over time. A winning strategy is one that - ANS fits the company's internal and external situation, builds a sustainable competitive advantage, and improves the company's performance. In evaluating proposed or existing strategies, managers should - ANS scrutinize the company's existing strategies on a regular basis to ensure they offer a good strategic fit, create a competitive advantage, and result in above-average performance. A company's core values typically do not include such things as - ANS minimizing innovation, rewarding individuality, and setting financial performance targets. Functional area strategies - ANS are never final, as managing strategy is an on-going, dynamic process. Which of the following is not among the principal managerial tasks associated with managing the strategy execution process? - ANS Surveying employees on how employee job satisfaction can be improved Proficient strategy execution - ANS is always the product of much organizational learning. Well-conceived visions are - ANS a reference point for managers in making strategic decisions. Business strategy concerns - ANS strengthening the company's market position and building competitive advantage. The difference between the concept of a company mission statement and the concept of a strategic vision is that - ANS a mission statement typically concerns a company's present business scope ("who we are and what we do"), whereas the principal concern of a strategic vision is with the company's future business scope (long-term direction and future product-customer-market-technology focus). A balanced scorecard for measuring company performance - ANS entails striking a balance between financial objectives and strategic objectives. Why should long-run objectives take precedence over short-run objectives? - ANS Long-run objectives are necessary for achieving long-term performance and stand as a barrier to undue focus on short-term results. The primary managerial purpose of setting objectives is to - ANS convert the strategic vision into specific performance targets.
The corporate governance failure at Volkswagen in 2015 included all of the following except - ANS the company policy that precluded former executives from serving on its board. Which of the following is the best example of a well-stated financial objective? - ANS Increase earnings per share by 15 percent annually. Functional strategies - ANS concern the actions, approaches, and practices related to particular functions or processes within a business. A company's strategic plan consists of - ANS a vision of where it is headed, a set of performance targets, and a strategy to achieve them. Management is obligated to monitor new external developments, evaluate the company's progress, and make corrective adjustments in order to - ANS decide whether to continue or change the company's strategic vision, objectives, strategy and/or strategy execution methods. Well-stated objectives are - ANS specific, quantifiable or measurable, and challenging, and contain deadlines for achievement. A benefit of a vivid, engaging, and convincing strategic vision is - ANS providing a beacon for lower-level managers in forming departmental missions. Corporate strategy - ANS ensures consistency in strategic approach among businesses of a diversified, multibusiness corporation. Effectively communicating the strategic vision down the line to lower-level managers and employees has the value of - ANS 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. A company's direction, objectives, and strategy - ANS concern the actions, approaches, and practices to be employed in managing particular functions within a business. In a single-business company, the strategy-making hierarchy consists of - ANS business strategy, functional strategies, and operating strategies. Operating strategies primarily entail - ANS how best to manage initiatives of strategic significance within each functional area. A company's mission statement typically addresses which of the following questions? - ANS Who are we, what do we do, and why are we here? Strategic objectives - ANS relate to strengthening a company's overall market standing and competitive vitality.
Industry conditions change - ANS because forces create pressures or incentives for industry participants (competitors, customers, suppliers) to alter their actions in important ways. Which of the following factors should a company consider when determining if an industry offers good prospects for attractive profits? - ANS The industry's growth potential, whether competition appears destined to become stronger or weaker, how the industry's driving forces might affect overall industry profitability, the company's competitive position relative to rivals, and the company's proficiency in performing industry key success factors Just how strong the competitive pressures are from substitute products depends on - ANS whether attractively priced substitutes are readily available and the ease with which buyers can switch to substitutes. The competitive threat that outsiders will enter a market is weaker when - ANS financially strong industry members send strong signals that they will launch strategic initiatives to combat the entry of newcomers. Which of the following is not a major question to ask in thinking strategically about industry and competitive conditions in a given industry? - ANS How many companies in the industry have good track records for revenue growth and profitability? A company's broad macroenvironment refers to - ANS all the strategically significant forces and factors outside a company's boundaries—general economic conditions, population demographics, societal values and lifestyles, technological factors, and governmental legislation and regulation. Which one of the following is not a common type of driving force? - ANS Increasing efforts on the part of industry members to collaborate closely with their suppliers Which of the following is not a good example of a substitute product that triggers stronger competitive pressures? - ANS Dasani water as a substitute for Aquafina water Which of the following is not a factor to consider in identifying an industry's dominant economic features? - ANS Strength of both driving forces and competitive forces Which of the following is not a good example of a marketing-related key success factor (KSF)? - ANS High utilization of fixed assets Which of the following is not generally a driving force capable of producing fundamental changes in industry and competitive conditions? - ANS Ups and downs in the economy and interest rates The collective impact of the five competitive forces on competitive pressures tends to - ANS lower the combined profitability of industry members.
Which of the following do not qualify as potential driving forces capable of inducing fundamental changes in industry and competitive conditions? - ANS Increases in the economic power and bargaining leverage of customers and suppliers, growing supplier- seller collaboration, and growing buyer-seller collaboration The best test of whether potential entry is a strong or weak competitive force is - ANS to ask if the industry's growth and profit prospects are strongly attractive to potential entry candidates. Which one of the following does not intensify the competitive pressures associated with the threat of entry? - ANS Industry members are struggling to earn good profits. Which of the following factors usually is not a consideration involved with evaluating whether an industry presents a sufficiently attractive business opportunity? - ANS Determining the industry outlook for future profitability ________ is/are the strategically relevant factors outside a company's industry boundaries—economic conditions, political factors, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions. - ANS A company's macroenvironment Which of the following is not one of the five typical sources of competitive pressures? - ANS The power and influence of industry-driving forces A company's strategic options for internally performed value chain activities do not include - ANS switching to activity-based costing. Which of the following is not an example of an external threat to a company's future profitability? - ANS Lack of a distinctive competence The competitive power of a company resource depends on - ANS whether the resource is really competitively valuable, if it is rare and something competitors lack, how hard it is to copy or imitate, and how easily it can be trumped by the substitute resource strengths and competitive capabilities of rivals. The options for remedying a cost disadvantage associated with activities performed by forward channel allies include - ANS pressuring forward channel allies to reduce their costs and markups. A company's resource weaknesses can relate to - ANS inability to achieve a leading market share. Which of the following is not a component of evaluating a company's competitive strength and cost structure? - ANS Scanning the environment to determine a company's best and most profitable customers
Identifying the strategic issues a company faces and compiling a "worry list" of problems and roadblocks is an important component of company situation analysis because - ANS the "worry list" sets the management agenda for taking actions to improve the company's performance and business outlook. A company's value chain identifies - ANS the primary activities that create value for customers and related support activities. When a company is good at performing a particular internal activity, it is said to have a - ANS competence A first-rate SWOT analysis - ANS provides a good basis for crafting a strategy. The two most important parts of SWOT analysis are - ANS drawing conclusions from the SWOT listings about the company's overall situation and translating these conclusions into strategic actions to better match the company's strategy to its resource strengths and market opportunities, correct the important weaknesses, and defend against external threats. Which of the following is not a good example of a company's resources? - ANS Having higher earnings per share and a higher stock price than key rivals Sizing up a company's overall resource strengths and weaknesses - ANS essentially involves constructing a strategic balance sheet on which the company's resource strengths represent competitive assets and its resource weaknesses represent competitive liabilities. Which of the following is not an option for remedying a forward channel-related cost disadvantage? - ANS Negotiate more favorable prices with suppliers. Managers can pursue any of several strategic approaches to reduce the costs of internally performed value chain activities and improve a company's cost competitiveness by - ANS acquiring suppliers, rivals, or forward channel distributors. Which of the following is not an option for improving supplier-related value chain activities? - ANS Persuade forward channel allies to implement best practices. A company that is at a disadvantage in the marketplace because it lacks competitively valuable resources possessed by rivals - ANS may be able to develop substitute resources that accomplish the same objective as the competitively valuable resource possessed by rivals. Which one of the following is not a reliable measure of how well a company's current strategy is working? - ANS The company's development of human capital, organizational capital, and information capital
Benchmarking involves - ANS comparing how different companies perform various value chain activities and then making cross-company comparisons of the costs of these activities. Costs and price differences among competing companies can have origins in activities performed by - ANS the company's internally performed activities (its own value chain), but also on costs in the value chain of its suppliers and distribution channel allies. Activity-based costing - ANS is an accounting system that assigns a company's expenses to whichever activity in a company's value chain is responsible for creating the cost. Doing a competitive strength assessment entails - ANS ranking the company against major rivals on each of the important factors that determine market success and ascertaining whether the company has a net competitive advantage or disadvantage versus major rivals. A competitive strategy to be the low-cost provider in an industry typically does not work well when - ANS emergent strategies are required to respond to changes in competitor power. Which of the following is not an action that a company can take to do a better job than its rivals of performing value chain activities more cost-effectively? - ANS Redesigning products to eliminate features that might have market appeal, but excessively increase production costs Companies can pursue differentiation from many angles except - ANS investing in managerial productivity and enjoying experience curve effects. The advantages of focusing a company's entire competitive effort on a single market niche allows for - ANS scaling operations to serve the customer market segment. Domino's Pizza has a well-known slogan: "We'll deliver in 30 minutes or less, or it's free!" By using this slogan, what has the pizza maker achieved? - ANS Built a unique customer value proposition Although there are many routes to competitive advantage, the two biggest factors that distinguish one competitive strategy from another are - ANS whether a company's target market is broad or narrow and whether the company is pursuing a low cost or differentiation strategy. A company's competitive strategy deals with - ANS management's game plan for securing a competitive advantage relative to rivals.
Best-cost provider strategies are appealing in those market situations where - ANS diverse buyer preferences make product differentiation the norm and where a large number of value-conscious buyers can be induced to purchase mid-range products. Which of the following is not a value driver of a broad differentiation strategy? - ANS Utilizing just-in-time inventories and made-to-order products when customer demand rises Bypassing regular sales channels in favor of Internet retailing can have strong appeal if it - ANS includes partnering rather than competing with existing distributors. Which of the following signals would not warn challengers that strong retaliation is likely? - ANS Announcing strong quarterly earnings potential to financial analysts Which of the following ways are employed by defending companies to fend off a competitive attack? - ANS Gaining product line exclusivity to force competitors to use other distributors The big risk of employing an outsourcing strategy is - ANS hollowing out the competitive capabilities a company needs to be a master of its own destiny. Which of the following is not an example of a company that uses blue ocean market strategy? - ANS Walmart's logistics and distribution in the retail industry A company's menu of strategic choices to supplement its decision to employ one of the five basic competitive strategies does not include - ANS whether to employ a preemptive strike type of green ocean strategy. First-mover advantages are unlikely to be present in which one of the following instances? - ANS When rapid market evolution (due to fast-paced changes in technology or buyer preferences) presents opportunities to leapfrog a first-mover's products with more attractive next-version products The purposes of defensive strategies include - ANS lowering the risk of being attacked by rivals, weakening the impact of any attack that occurs, and influencing challengers to aim their offensive efforts at other rivals. Which of the following is not a potential advantage of backward vertical integration? - ANS Reduced business risk because of controlling a bigger portion of the overall industry value chain Which of the following is typically the strategic impetus for forward vertical integration? - ANS Gaining better access to end users and better market visibility
The Achilles' heel (or biggest danger/pitfall) of relying heavily on alliances and cooperative strategies is - ANS becoming dependent on other companies for essential expertise and capabilities. Mergers and acquisitions are often driven by such strategic objectives as to - ANS expand a company's geographic coverage, extend its business into new product categories, or gain quick access to new technologies or other resources and capabilities. A hit-and-run or guerrilla warfare type offensive strategy - ANS involves unexpected attacks (usually by a small to medium-sized competitor) to grab sales and market share from complacent or distracted rivals. Which one of the following is not a good type of rival for an offensive-minded company to target? - ANS Other offensive-minded companies with a sizable war chest of cash and marketable securities Experience indicates that strategic alliances - ANS stand a reasonable chance of helping a company reduce competitive disadvantage but very rarely form the basis of a durable competitive advantage over rivals. The two most compelling reasons for a company to pursue vertical integration (either forward or backward) are to - ANS strengthen the company's competitive position and/or boost its profitability. Which of the following is not an example of a defensive move to protect a company's market position and restrict a challenger's options for initiating competitive attack? - ANS Challenging struggling runner-up firms that are on the verge of going under Merger and acquisition strategies sometimes fail because of the - ANS misinterpretation of the cultural differences, like employee disenchantment and low morale, differences in management styles and operating procedures, and operations integration decision mistakes. Strategic alliances are more likely to be long lasting-when - ANS they involve collaboration with suppliers or distribution allies or when both parties conclude that continued collaboration is in their mutual interests. Vertical integration strategies - ANS extend a company's competitive and operating scope because its operations extend across more parts of the total industry value chain. To use location to build competitive advantage, a company that operates multinationally or globally must - ANS consider (1) whether to concentrate each activity it performs in a few select countries or disperse performance of the activity to many nations and (2) in which countries to locate particular activities.
Competing in the markets of foreign countries generally does not involve which of the following? - ANS Crafting a multicountry strategy that can transform the world market into one big profit sanctuary The advantages of using a licensing strategy to participate in foreign markets include - ANS being able to leverage the company's technical know-how or patents without committing significant additional resources to markets that are unfamiliar, politically volatile, economically uncertain, or otherwise risky. The advantages of using a franchising strategy to pursue opportunities in foreign markets include - ANS franchisees bear most of the costs and risks of establishing foreign locations, and the franchisor is required to expend only the resources to recruit, train, and support foreign franchisees. A think local, act local multidomestic type of strategy - ANS is more appealing the bigger the country-to-country differences in buyer tastes, cultural traditions, and marketing methods. The disadvantages of using a franchising strategy to pursue opportunities in foreign markets do not include - ANS franchisees bearing most of the costs and risks of establishing foreign locations, so a franchisor has to expend only the resources to recruit, train, support, and monitor franchisees. Exxon Mobil has entered into a pact with Gazprom, the world's largest natural gas extractor, to set up a processing unit in Baku, Azerbaijan. Which of the following is most likely the reason for Exxon Mobil to opt for this strategic alliance? - ANS To gain access to low-cost inputs of production A localized or multidomestic strategy - ANS has two big drawbacks: (1) it hinders the transfer of a company's competencies and resources across country boundaries because the strategies in different host countries can be grounded in varying competencies and capabilities, and (2) it does not promote building a single, unified competitive advantage, especially one based on low cost. The transnational approach of a firm using a think global, act local version of a global strategy entails - ANS pursuing the same basic competitive strategy theme (low-cost, differentiation, best-cost, focused) in all countries where the firm does business but giving local managers some latitude to adjust product attributes to better satisfy local buyers and to adjust production, distribution, and marketing to be responsive to local market conditions.
