Reference no: EM131323708

BUSINESS POLICY AND STRATEGY MIDTERM EXAM

Question 1: In the __________ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high.

Introduction

Growth

Maturity

Decline

Question 2: One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by:

Hiring more experienced personnel

Repeating a process until a task becomes easier

Spreading out a given expense or investment over a greater volume

Competing in an industry a long time

Question 3: In the __________ stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low.

Introduction

Growth

Maturity

Decline

Question 4: One of the reasons the Internet is eroding sustainable competitive advantages is:

Incumbent firms are entering market segments that they previously considered to be too small

Nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage

Differentiators have been able to preserve the unique advantages that have always been the hallmark of their success

Firms are ignoring opportunities to offer high-end services in niche markets

Question 5: The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. These are the following except:

Automated and flexible manufacturing systems

Exploiting the profit pool concept for competitive advantage

Coordinating the "extended" value chain by way of information technology

Deriving benefits from highly focused and high technology markets

Question 6: A differentiation strategy enables a business to address the five competitive forces by:

Lessening competitive rivalry by distinguishing itself

Having brand-loyal customers become more sensitive to prices

Increasing economies of scale

Serving a broader market segment

Question 7: During the decline stage of the product life cycle, a harvesting strategy means that a firm keeps a product going without significantly reducing marketing support, technological development or other investments, while hoping that competitors will exit the market.

True

False

Question 8: Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform:

At about the same level as firms that achieve either cost or differentiation advantages

About the same as firms that are "stuck-in-the-middle."

Lower than firms that achieve differentiation advantages but higher than firms that achieve cost advantages

Higher than firms that achieve either a cost or a differentiation advantage

Question 9: One potential pitfall of a differentiation strategy is that a brand's identification in the marketplace may become diluted through excessive product line extensions.

True

False

Question 10: The primary aim of strategic management at the business level is:

Maximizing risk-return tradeoffs through diversification

Achieving a low cost position

Maximizing differentiation of products and/or services

Achieving competitive advantage(s)

Question 11: An important advantage of first movers or "pioneers" in a market is that they may establish brand recognition that may later serve as an important switching cost.

True

False

Question 12: A firm following a focus strategy:

Must focus on governmental regulations

Must focus on a market segment or group of segments

Must focus on the rising cost of inputs

Must avoid entering international markets

Question 13: Piecemeal productivity improvements during a turnaround typically does not involve:

Business process reengineering

Increased capacity utilization

Benchmarking

Expansion of a firm's product market scope

Question 14: During the growth stage of the market life cycle, customers are very likely to establish brand loyalty.

True

False

Question 15: One way the Internet and digital technologies are creating opportunities for firms with differentiation strategies is by enabling mass customization.

True

False

Question 16: Research shows that the following are all strategies used by firms engaged in successful turnarounds except:

Asset and cost surgery

Selective product and market pruning

Global expansion

Piecemeal productivity improvements

Question 17: To generate above average returns, a firm following an overall cost leadership position should not be concerned with attaining parity or proximity on the basis of differentiation relative to its peers.

True

False

Question 18: According to the text, intellectual capital is the difference between the market value and the book value of a firm. Intellectual capital can be increased by:

Increasing retention of below average workers

Attracting and retaining knowledgeable workers

Decreasing labor costs

Increasing the turnover of employees

Question 19: In most effective evaluation and reward systems employees only receive evaluation and feedback from their immediate supervisor.

True

False

Question 20: Attracting and retaining human capital is a challenge for many firms today. Firms experiencing high turnover should:

Focus on increased recruiting

Decrease money spent on human capital

Make their work environment less stimulating

Adopt effective retention strategies

Question 21: Technical skills are a necessary and sufficient condition for hiring an employee.

True

False

Question 22: Human capital and social capital are vital for superior firm performance. If a firm has strong human capital, the firm may exploit this by building social capital. This can be accomplished through:

Requiring workers to work independently of each other

Decreasing the interaction of departments within the firm

Encouraging the sharing of ideas between employees in the firm

Structuring the firm with rigid departmental and employee divisions

Question 23: The makeup of goods and services in the Gross Domestic Products of developed countries has changed over the last decade. More than 50% of the value of GDP of developed countries is based on:

Clothing and apparel

Capital accumulation

Financial management

Knowledge

Question 24: Among the downsides of social capital is/are:

High social capital may breed "groupthink," i.e., a tendency not to question shared beliefs

Socialization processes whereby individuals are socialized into the norms and values of the organization may become expensive

Individuals may become less willing to collaborate on joint projects

A and B

Question 25: Maintaining a competitive workforce is very challenging in today's economy. The role of evaluating human capital, in recent years, has:

Increased

Decreased

Become less important

Remained the same

Question 26: Generally, employees are most likely to stay with an organization if:

The employer provides high salaries to technology professionals

The organization's mission and values align with the employee's mission and values

The firm is in a high tech industry

The mission and values of the organization change often

Question 27: 360-degree evaluation systems are not useful due to the need to integrate large amounts of feedback.

True

False

Question 28: In an effort to capture key employees from competitors, firms may attract the symbolic leader of a group within a competing firm and hope others will follow. This has been termed:

The "Columbus effect."

The "Pied Piper effect."

Strategically competitive hiring

Knowledge integration

Question 29: As the competitive environment changes, strategic management must focus on different aspects of the organization. Recently, strategic management has moved from focusing on:

Intangible resources to tangible resources

Tangible resources to intangible resources

Working capital to fixed capital

Fixed capital to working capital

Question 30: The management of intellectual property involves all of the following except:

Patents

Contracts with confidentiality and noncompete clauses

Converting explicit knowledge to tacit knowledge

Copyrights and trademarks

Question 31: Explicit knowledge is generally known to everyone in the firm and is not a critical concern of management.

True

False

Question 32: In the knowledge economy, if a large portion of a firm's value is in intellectual and human assets, the difference between the company's market value and book value should ___________ a company with mostly physical and financial assets.

Be equal to

Be smaller than

Be larger than

Not be correlated with

Question 33: Companies have found that referrals from their own employees are generally an ineffective approach to recruiting top talent.

True

False

Question 34: In today's economy, reliance on the three traditional financial statements: income statement, balance sheet, and statement of cash flow, has increased.

True

False

Question 35: There is generally a weak relationship between equity markets (e.g., New York Stock Exchange) and economic indicators.

True

False

Question 36: Environmental forecasting involves developing plausible projections about the ________ of environmental change.

Direction

Scope

Speed

All of the above

Question 37: Competitor Intelligence gathering is no different than spying.

True

False

Question 38: The most intense rivalry results from:

Numerous equally balanced competitors, slow industry growth, high fixed or storage costs

Few competitors, slow industry growth, lack of differentiation, high fixed or storage costs

Numerous equally balanced competitors, manufacturing capacity increases only in large increments, low exit barriers

A high level of differentiation

Question 39: The threat of new entrants is high when there are:

Low economies of scale

High capital requirements

High switching costs

High differentiation among competitors' products and services

Question 40: Strategic groups consist of:

A group of top executives who make strategies for a company

A group of firms within an industry that follow similar strategies

A group of executives drawn from different companies within an industry that makes decisions on industry standards

A group of firms within an industry that decide to collude rather than compete with each other so that they can increase their profits

Question 41: The strategic groups in the world-wide automobile industry have been very stable and unchanging in recent years.

True

False

Question 42: The aging of the population, changes in ethnic composition, and effects of the baby boom are:

Macroeconomic changes

Demographic changes

Global changes

Sociocultural changes

Question 43: Interest rate increases have a __________ impact on the residential home construction industry and a __________ effect on industries that produce consumer necessities such as prescription drugs or basic grocery items.

Positive; negligible

Negative; negligible

Negative; positive

Positive; negative

Question 44: Firms would be most likely to face intense rivalry with competitors when they:

Are in a high growth industry with low fixed costs

Are in a protected market

Have high fixed costs, in a slow growth industry with high exit barriers

Have low exit barriers for easy transition to another industry

Question 45: An end user's switching costs are potentially much higher because of the Internet.

True

False

Question 46: Increasingly larger numbers of women entering the work force since the early 1970s is an example of:

Demographic changes

Political and legal environmental changes

Sociocultural changes

Technological developments

Question 47: Porter's Five Forces model helps to determine both the nature of competition in an industry and the industry's profit potential.

True

False

Question 48: Threat of substitute products comes from:

Other companies in the same industry

Foreign companies which can use cheap labor in their countries

Firms in other industries that produce products or services that satisfy the same customer need

All of the above

Question 49: The Internet and digital technologies suppress the bargaining power of buyers by providing them with more information to make buying decisions.

True

False

Question 50: The more attractive the price/performance ratio of substitute products, the more tightly it constrains an industry's ability to charge high prices.

True

False

Question 51: Fortune Brands states they will "cut corporate costs by $30 million a year." This is an example of a:

Nonfinancial strategic objective

Financial strategic objective

Vision statement

Mission statement

Question 52: Decisions by Boards of Directors are always consistent with shareholder interests.

True

False

Question 53: The three primary participants in corporate governance are: (1) the shareholders; (2) management (led by the chief executive officer); and, (3) employees.

True

False

Question 54: According to the text, a mission statement is an overarching statement that is massively inspiring, long-term, and only discusses the purpose of the company.

True

False

Question 55: Strategy formulation and implementation is a challenging on-going process. To be effective, it should involve:

The CEO and the board of directors

The board of directors, CEO, and CFO

Line and staff managers

All of the above

Question 56: The four key attributes of strategic management include the idea that:

Strategy must be directed toward overall organizational goals and objectives

Strategy must be focused on long-term objectives

Strategy must be focused on one specific area of an organization

Strategy must focus on competitor strengths

Question 57: "We want to be the top-ranked supplier by our customers." (PPG) This is an example of a:

Nonfinancial strategic objective

Financial strategic objective

Vision statement

Mission statement

Question 58: Organizational goals and objectives should be vague in order to allow for changes in strategy.

True

False

Question 59: Strategic objectives are more specific than vision statements.

True

False

Question 60: Members of Boards of Directors are:

Appointed by the Securities and Exchange Commission

Elected by the shareholders as their representatives

Elected by the public

Only allowed to serve one term of four years

Question 61: According to Michael Porter, management innovations such as total quality, benchmarking, and business process reengineering cannot lead to sustainable competitive advantage because:

Companies that have implemented these techniques have lost money

There is no proof that these techniques work

They cost too much money and effort to implement

Every company is trying to implement them and hence it does not make a company different from others

Question 62: Peter Senge, of M.I.T., recognized three types of leaders. __________ are individuals that, although having little positional power and formal authority, generate their power through the conviction and clarity of their ideas.

Local line leaders

Executive leaders

Internal networkers

Shop floor leaders

Question 63: In large organizations, conflicts can arise between functional areas. In order to resolve these conflicts, strategic objectives:

Put financial objectives above human considerations

Align departments toward departmental goals

Help resolve conflicts through their common purpose

Cause debate and increase conflict

Question 64: According to the text, formulating strategy includes taking into consideration strategy at the business, international, and corporate levels. In addition managers must formulate effective entrepreneurial initiatives.

True

False

Question 65: A mission statement encompasses both the purpose of the company as well as the basis of competition and competitive advantage.

True

False

Question 66: Social responsibility is the idea that organizations are not only accountable to stockholders but also to the community-at-large.

True

False

Question 67: The two principal means by which firms achieve synergy through market power are: pooled negotiating power and corporate parenting.

True

False

Question 68: Whenever an organization diversifies, it represents investing a stockholder's funds in a way in which the individual investor is unable.

True

False

Question 69: Antitakeover tactics include all of the following except:

Greenmail

Golden parachutes

Golden handcuffs

Poison pills

Question 70: One of the risks of vertical integration is that there may be problems associated with unbalanced capacities or unfilled demands along a firm's value chain.

True

False

Question 71: An antitakeover tactic called (a) __________ is when a firm offers to buy shares of their stock from a company (or individual) planning to acquire their firm at a higher price than the unfriendly company paid for it.

Golden parachute

Greenmail

Poison pill

Scorched earth

Question 72: When management uses common production facilities or purchasing procedures to distribute different but related products, they are:

Building on core competencies

Sharing activities

Achieving process gains

Using portfolio analysis

Question 73: Sharing core competencies is one of the primary potential advantages of diversification. In order for diversification to be most successful, it is important that:

The similarity required for sharing core competencies must be in the value chain, not in the product

The products use similar distribution channels

The target market is the same, even if the products are very different

The methods of production are the same

Question 74: Among the disadvantages of acquisitions are the expensive premiums that are frequently paid to acquire a business.

True

False

Question 75: The potential advantages of strategic alliances and joint ventures include entering new markets as well as developing and diffusing new technologies.

True

False

Question 76: Sharing activities across business units can provide two primary benefits: cost savings and revenue enhancements.

True

False

Question 77: A publishing company that purchases a chain of bookstores to sell its books is an example of unrelated diversification.

True

False

Question 78: Restructuring requires the corporate office to find either poorly performing firms with unrealized potential or firms in industries on the threshold of significant, positive change.

True

False

Question 79: __________ is when a firm's corporate office helps subsidiaries make wise choices in their own acquisitions, divestures, and new ventures.

Parenting

Restructuring

Leveraging core competencies

Increasing market power

Question 80: Market power refers to cost savings from leveraging core competencies or sharing activities among the businesses in a corporation.

True

False

Question 81: It may be advantageous to vertically integrate when:

Lower transaction costs and improved coordination are vital and achievable through vertical integration

The minimum efficient scales of two corporations are different

Flexibility is reduced, providing a more stationary position in the competitive environment

Various segregated specializations will be combined

Question 82: Vertical integration is attractive when market transaction costs are higher than internal administrative costs.

True

False

Question 83: A company offering local telecommunications service combines resources with an international company that manufactures digital switching equipment to research a new type of telecommunications technology. This is an example of:

Joint diversification

Strategic alliance

Divestment

Global integration

Question 84: Value chain analysis can only be applied to manufacturing operations.

True

False

Question 85: Human resource management consists of activities involved in the recruiting, hiring, training, development, and compensation of all types of personnel. It:

Supports only individual primary activities

Supports only individual support activities

Supports both individual primary and support activities and the entire value chain

Supports mostly support activities but does have some impact on primary activities

Question 86: Products and services that are difficult to imitate help firms sustain their profitability.

True

False

Question 87: A variety of firm resources include interpersonal relations among managers in the firm, its culture, and its reputation with its suppliers and customers. Such competitive advantages are based upon:

Social complexity

Path dependency

Physical uniqueness

Tangible resources

Question 88: An important implication of the "balanced scorecard" approach is that:

Managers need to recognize tradeoffs in stakeholder demands and realize that such demands represent a "zero-sum" game in which one stakeholder will gain only at another's loss

The key emphasis on customer satisfaction and financial goals are only a means to that end

Managers should not look at their job as primarily balancing stakeholder demands; increasing satisfaction among multiple stakeholders can be achieved simultaneously

Gains in financial performance and customer satisfaction must often come at a cost of employee satisfaction

Question 89: Information systems can create advantages that deter entry by competitors into an industry.

True

False

Question 90: Business models can be defined as methods companies use to create value and earn profits in a competitive environment.

True

False

Question 91: Inbound logistics include:

Machining and packaging

Warehousing and inventory control

Repair and parts supply

Promotion and packaging

Question 92: Value chain analysis assumes that a firm's basic economic purpose is to create value and it is a useful framework for analyzing a firm's strengths and weaknesses.

True

False

Question 93: Four Internet-based activities that are enhancing firms' capabilities to use the Internet to add value include:

Outsourcing, problem-solving, bill-paying, and delivery

Evaluating, bill-paying, customizing, and returning

Search, rescue, repair, return

Search, evaluation, problem-solving, and transaction

Question 94: Which of the following is a support activity?

Inbound logistics

Operations

Technology development

Customer service

Question 95: A commission-based business model, when applied to the Internet, is similar to the broadcast television model in which viewers watch shows produced with revenues from commission fees.

True

False

Question 96: Which of the following lists consists of support activities?

Human resource management, technology development, customer service, and procurement

Human resource management, customer service, marketing and sales, and operations

Human resource management, information systems, procurement, and firm infrastructure

Customer service, information systems, technology development, and procurement

Question 97: How should managers assess changes in their firm's competitive position in their industries during a period of unusual economic growth?

Compare the firm's financial ratios with ratios of firms in other strategic groups in the industry

Compare the firm's financial ratios over the most recent one-year period

Compare the financial ratios of all firms in the country's industry-some of whom serve very diverse market segments and have specialized accordingly

Compare the financial ratios of firms in the company's strategic group

Question 98: Performing a value chain analysis provides a complete assessment of the firm's strengths and weaknesses.

True

False

Question 99: Customer service would include:

Product promotion

Product distribution

Parts supply

Procurement of critical supplies

Question 100: The three key types of resources that are central to the resource-based view of the firm are:

Tangible resources, intangible resources, and organizational structure

Culture, tangible resources, intangible resources

Tangible resources, intangible resources, and organizational capabilities

Tangible resources, intangible resources, and top management