Which of the following is a typical source of competitive pressures?

A. Potential changes in a company’s senior leadership and strategy

B. The stock prices of competitor companies

C. The threat of new entrants into the market

D. The power and influence of industry driving forces

2. The two most important parts of SWOT analysis are

A. pinpointing the company’s competitive assets and pinpointing its competitive liabilities.

B. 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.

C. identifying the company’s resource strengths and identifying the company’s best market opportunities.

D. identifying the external threats to a company’s future profitability and pinpointing how many market opportunities it has.

3. The lower the user’s switching costs, the

A. more intense the competitive pressures posed by substitute products.

B. greater the bargaining power from both suppliers and influential customers.

C. harder it is for the sellers of attractive substitutes to lure buyers to their offering.

D. less intense the competitive pressures posed by substitute products.

4. Which of the following is one of the main tasks of identifying strategic issues and problems that merit

front-burner managerial attention?

A. Focusing on the company’s internal management strengths and creating opportunities for advancement

B. Maintaining adherence to the original strategic plan and vision

C. Assessing what challenges the company has to overcome to be financially and competitively successful in the years ahead

D. Evaluating the company’s own resources and competitive position

5. A company’s value chain helps create competitive advantage by

A. ensuring company products and services remain relatively constant.

B. by diversifying distribution channels to increase product availability.

C. driving down costs through lean management principles.

D. contributing to increased efficiency and lower costs than competitors.

6. Key financial ratios that help to indicate how well a company’s strategy is working don’t include

A. market share.

B. working capital.

C. return on stockholders equity.

D. gross profit margin.

7. Having good competitive intelligence about rivals’ strategies, latest actions and announcements, resource

strengths and weaknesses, and moves to improve their situation is important because it

A. enables more accurate predictions about how long it will take a particular rival to copy most of what the strategy leader is

doing.

B. identifies who the industry’s current market-share leaders are.

C. enables company managers to determine which rival has the worst strategy and avoid making the same strategy mistakes.

D. helps a company to craft its own strategic moves with some confidence about what market maneuvers to expect from its

rivals.

8. In analyzing a company’s competitive assets, which of the following questions is most important to ask?

A. Does the company have the industry’s most efficient and effective value chain?

B. Are the company’s key success factors more dominant than the key success factors of close rivals?

C. What are the company’s resources and capabilities, and which are the most competitive?

D. Is the company’s present strategy better than the strategies of its closest rivals based on such performance measures as

earnings per share, ROE, dividend payout ratio, and average annual increase in the common stock price?

9. Which of the following factors represents the strategically relevant political factors in the macroenvironment that will influence the performance of all firms across the board?

A. the strength of the federal banking system

B. the exogenous forces related to the general environmental demand

C. social factors that could fuel a political agenda and create greater transparency

D. bailouts and energy policies that are industry-specific

10. Which of the following statements is true of SWOT analysis?

A. It reveals whether a company is competitively stronger than its closest rivals.

B. It’s a tool for benchmarking whether a firm’s strategy is closely matched to industry key success factors.

C. It’s a way to measure whether a company’s value chain is longer or shorter than the value chains of key rivals.

D. It provides a good overview of whether a company’s situation is fundamentally healthy or unhealthy.

11. Activity-based cost accounting is used to

A. determine the costs of each strategic action a company initiates.

B. benchmark the costs of primary value-chain activities against the costs of the support value chain activities.

C. determine the costs of each primary and support activity in a company’s value chain to reveal the nature of its internal cost

structure.

D. determine whether the value chains of rival companies are similar or different.

12. Which of the following statements is true of activity-based costing?

A. It’s a powerful tool for identifying the different pieces of a company’s value chain and classifying them as primary or support

activities.

B. It involves determining which value-chain activities represent variable costs and which represent fixed costs.

C. It uses benchmarking techniques to develop cost estimates for the value-chain activities of each major rival.

D. It’s an accounting system that assigns expenses to whichever activity in a company’s value chain is responsible for creating the

cost.

13. A company requires a dynamically evolving portfolio of resources and capabilities to

A. retain the benefits of high market share as an interest in growth strategies.

B. maintain its competitiveness and help drive improvements in its performance.

C. sustain complex manufacturing systems as a strategic recoil.

D. assist the strategic planning team in overall direction.

14. How strong the competitive pressures from substitute products are depends on whether the

A. available substitutes are strongly or weakly differentiated and whether buyers make purchases frequently or infrequently.

B. attractively priced substitutes are readily available and the ease with which buyers can switch to substitutes.

C. producers of substitutes have ample budgets for new product research and development (R&D).

D. available substitutes are products or services.

15. The competitive position of industry suppliers is weakened when

A. there are no sufficient substitutes for supplier products.

B. the items purchased from suppliers are in short supply.

C. the cost of switching from one supplier to another is low.

D. suppliers’ products are differentiated.

16. The nature and strength of the strongest competitive force that prevails in an industry is generally a

product of

A. the pressures induced by the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the

industry.

B. the pressures of environmental requirements in different competing geographies.

C. regulatory requirements intensified by changing governing bodies.

D. the unknown competitor business expansion strategies that impact industry production and outlook.

17. Which of the following is a component of evaluating a company’s resources and competitive assets?

A. Scanning the environment to determine a company’s best and most profitable customers

B. Deciding which resources are tangible and which are intangible and considering cross-functional capabilities

C. Assessing barriers to entry in new markets based on regulatory requirements

D. Assessing whether the company’s costs and prices are competitive based on geographical inputs

18. The strategically relevant factors outside a company’s industry boundaries—economic conditions,

political factors, sociocultural forces, technological factors, environmental factors, and legal/regulatory

conditions—are known as

A. the industry and the competitive arena in which the company operates.

B. the competitive market environment that exists between a company and its competitors.

End of exam

C. a company’s macro-environment.

D. general economic conditions plus the factors driving change in the markets where a company operates.

19. Which of the following steps are used in the five forces framework model of competition to identify

competitive pressures?

A. (1) Identify pressures for each of the five competitive forces; (2) evaluate the strength of these pressures; and (3) determine

whether the collective impact of all five competitive forces supports high profitability.

B. (1) Determine which rival has the biggest competitive advantage and (2) assess whether the competitive advantages of various

industry members allow most industry members to earn above-average profits.

C. Evaluate whether competition is being (1) intensified or (2) weakened by the industry’s driving forces and key success factors

D. (1) Assess whether the collective impact of all five forces is weak enough to allow industry members to go on the offensive

and (2) use a defensive strategy to insulate against fierce competitive pressures

20. The rivalry among competing sellers tends to be less intense when

A. industry conditions tempt competitors to use price cuts or other competitive weapons to boost unit sales.

B. rivals have diverse strategies and objectives and are located in different countries.

C. buyer demand is weak and many sellers have excess capacity and/or inventory.

D. industry rivals are not particularly aggressive or active in making fresh moves to improve their market standing and business

performance.

3- Crafting a Strategy

1. Which of the following actions is typically the strategic impetus for forward-vertical integration?

A. Fewer disruptions in the delivery of the company’s products to end-users

B. Gaining better access to end-users and better market visibility

C. Allowing the firm access to greater economies of scale

D. Being able to control the wholesale/retail portion of the industry value chain

2. The best strategic options for a local company in competing against global challengers include

A. export strategies, licensing strategies, franchising strategies, and cross-market coordination strategies.

B. locating buyer-related activities, such as sales, advertising, or technical assistance, close to buyers.

C. export strategies, entering into alliances and/or joint ventures with one or more foreign companies having globally competitive

strengths, and/or cross-border transfer strategies.

D. using its understanding of local customer preferences to create customized products or services, transferring the company’s

expertise to cross-border markets, and/or using acquisitions and rapid growth strategies to defend against expansion-minded

multinationals.

3. The definition of cross-market subsidization is

A. the practice of shifting company resources from nations where a company has big-profit sanctuaries to nations where it has

smaller profit sanctuaries.

B. the practice of getting a company’s home government to help finance, and otherwise subsidize, its entry into the markets of

foreign countries.

C. using cross-border transfer of a company’s skills and expertise as a basis for successfully overcoming the barriers to entering

new country markets.

D. supporting competitive offensives in one market with resources and profits diverted from operations in other country markets.

4. One of the biggest risks of competing in foreign markets is

A. the extent to which the advantages of exporting goods from a particular country can be wiped out when fluctuating exchange

rates result in that country’s currency growing much weaker relative to the currencies of the countries to which the goods are

being exported.

B. the extent to which the advantages of manufacturing goods in a particular country can be wiped out when fluctuating exchange

rates result in that country’s currency growing stronger relative to the currencies of the countries where the output is being sold.

C. the potential for local government officials to reduce tariffs on the imports of its goods into their country.

D. whether the economies of foreign countries will continue to grow at double-digit rates.

5. Which of the following actions is something a company should consider when crafting an environmental-

sustainability strategy?

A. Investing in sustainable technologies only if the country in which the company operates supports these technologies

B. Working to provide for the longevity of natural resources

C. Making contributions to the Global Environmental Council that are distributed on a competitive basis

D. Prioritizing operations in ecological support systems that support the greatest business growth

6. Exxon Mobil enters 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?

A. To scale back its core competencies

B. To gain access to new customers

C. To gain access to low-cost inputs of production

D. To restrict its factors of production

7. Cross-business strategic fit in a diversified enterprise is

A. competitively valuable and may enable related diversification to produce a 1 + 1 = 3 benefit.

B. most beneficial when consolidated businesses form a single operation.

C. detrimental if value-chain activities are performed by disinterested corporate partners.

D. primarily a byproduct of unrelated diversification and exists when the value-chain activities of unrelated performance

outcomes.

8. The definition of business ethics is

A. the application of general ethical principles to the actions and decisions of companies and the conduct of the workforce.

B. developing a consensus among companies worldwide as to what ethical principles businesses should be expected to follow in

their operations.

C. developing a special set of ethical standards for businesses to observe in conducting their affairs.

D. ethical behavior expectations of company personnel in the course of doing their jobs.

9. Market size and growth rates in different countries can be influenced positively or negatively by

A. differing population sizes, cultures, income levels, infrastructure, and distribution networks among countries.

B. competitive rivalry that is only moderate in some countries.

C. the ability of management to tailor a strategy to take into consideration differences among country markets.

D. which countries have the weakest foreign rivals.

10. Strategic fit between two or more businesses exists when one or more activities comprising their

respective value chains present opportunities

A. to prevent the transfer of expertise or technology or capabilities from one business to another.

B. for cross-business collaboration to build valuable new resource strengths and competitive capabilities.

C. to independently preserve common brand names from cross-business usage.

D. to increase costs by combining the performance of the related value chain activities of different businesses.

11. _______ is one of the five generic types of competitive strategy a company is following when it offers a

better tasting product at a high premium.

A. Focused low-cost provider

B. Broad differentiation

C. Market-share dominator

D. Best-cost provider

12. Which one of the following is a key element of integrated social-contracts theory?

A. Bribes and kickbacks aren’t considered part of the theory since they aren’t universally banned.

B. Ethical principles at the country level outweigh universal principles.

C. Universal ethical norms always take precedence over local ethical norms.

D. Integrated social-contracts theory rejects the slippery slope of ethical relativism and embraces ethical universalism.

13. A strategy to be the industry’s overall low-cost provider isn’t particularly well matched to the market

situation when

A. there are few ways to achieve differentiation that have value to buyers.

B. buyers have widely varying needs and special requirements and the prices of substitute products are relatively high.

C. the offerings of rival firms are essentially identical, standardized, commodity-like products.

D. price competition is especially vigorous.

14. Which of the following is a main disadvantage of pursuing an export strategy?

A. It becomes vulnerable when the costs of shipping the products are high.

B. It’s slow to implement across different foreign countries.

C. There’s a risk of sharing valuable know-how to foreign companies.

D. It may be difficult to manage in multiple countries.

15. The strength of a “think local, act local” multidomestic strategy is that

A. each of a company’s country strategies is almost totally different from, and unrelated to, its strategies in other countries.

B. it avoids host country ownership requirements and import quotas.

C. the plants located in different countries can be operated independently of one another, thus promoting greater achievement of

scale economies.

D. it matches a company’s competitive approach to prevailing market and competitive conditions in each country market, country

by country.

16. A focused low-cost strategy seeks to achieve competitive advantage by

A. serving buyers in the target market niche at a lower cost and lower price than rivals.

B. performing the primary value-chain activities at a lower cost per unit than can the industry’s low-cost leaders.

C. outmatching competitors in offering niche members an absolute rock-bottom price.

D. dominating more market niches in the industry via a lower cost and a lower price than any other rival.

17. Businesses within a related diversification company have a good resource fit when they

A. have strong parenting capabilities important to sharing and market strength.

B. have well-matched specialized resource requirements along their respective value chains critical for market success.

C. pursue vertical integration and gain greater operating control over more stages of each businesses’ value chain.

D. steer a middle course between the other businesses’ low-cost differentiation and focusing.

End of exam

18. A low-cost leader’s basis for competitive advantage is

A. using a low-cost/low-price approach to gain the biggest market share.

B. meaningfully lower overall costs than competitors.

C. high buyer switching costs.

D. lower prices than those of rival firms.

19. While there are many routes to competitive advantage, the two biggest factors that distinguish one

competitive strategy from another are

A. whether a company can build a brand name and an image that buyers trust.

B. whether a company can achieve lower costs than rivals and whether the company is pursuing the industry’s sales and market

share leader’s role.

C. whether a company can offer the lowest possible prices and whether the company can get the best suppliers in the market.

D. whether a company’s target market is broad or narrow and whether the company is pursuing a low cost or differentiation

strategy.

20. How do ethical principles apply to businesses?

A. They chiefly deal with the rules each company’s top management and board of directors make about “what is right” and “what

is wrong.”

B. They chiefly deal with the actions and behaviors required to operate companies in a socially responsible manner.

C. They’re not materially different from ethical principles in general.

D. They’re generally less stringent than the ethical principles for society at large.

4- Executing the Strategy

1. Symbolic culture-changing actions by management include

A. holding ceremonial events to honor employees who exemplify the new culture.

B. firing employees who refuse to accept the new culture.

C. promoting employees who uphold the new culture.

D. providing positive performance reviews to those who exemplify the new culture.

2. When it is difficult or impossible to out-strategize rivals (beat them with a superior strategy), the other

main avenue to competitive advantage is to

A. beat them with a healthy corporate culture based on such core values as high ethical standards, a strong sense of corporate

social responsibility, and genuine concern for customer well-being.

B. do a better job of empowering employees and flattening the organization structure.

C. out-execute them (beat them by performing certain value chain activities in superior fashion).

D. outcompete rivals with a stronger corporate culture.

3. From a strategy-implementing/strategy-executing perspective, budget allocations should

A. primarily be based on the number of new strategic initiatives being implemented in each department.

B. depend on how much stretch there is in each department’s objectives and what additional resources are needed to help reach

these performance targets.

C. be linked to the costs of performing value-chain activities as determined by benchmarking against best-in-industry

competitors.

D. be strategy-driven and based primarily on how much each organizational unit must have to carry out its piece of the strategic

plan efficiently and effectively.

4. The guidelines for designing an incentive compensation system that will help drive successful strategy

execution includes

A. having an outside wage-and-salary expert administer the system, so that there’s no doubt as to its fairness and impartiality.

B. making the payoff for meeting or beating performance targets a major, not minor, piece of the total compensation package.

C. making minimal use of nonmonetary incentives and rewarding people for diligently performing their assigned duties.

D. having a bonus and incentive plan that applies to managers only (employees generally shouldn’t be included in incentive pay

plans, but should have attractive wages and salaries).

5. Coordinating the work efforts of internal organization units is best accomplished by

A. establishing monetary incentives that reward people for being cooperative team players.

B. establishing a corporate culture where teamwork is a core value and decisions are made by general consensus among team

leaders in the affected work units.

C. having closely related activities report to a single executive who has the authority and organizational clout to coordinate,

integrate, and arrange for the cooperation of units under their supervision.

D. having the heads of support activities report to the heads of primary, strategy-critical activities.

6. Which of the following steps is a useful guideline in designing strategy-facilitating policies and operating

procedures?

A. Having more policies and procedures is better than having few policies and procedures; strict enforcement always beats lax

enforcement.

B. Let individuals act in an empowered and self-directed way, subject only to the constraint that their actions and behavior be

ethical and in step with the corporate culture.

C. Prescribe enough policies to give organizational members clear direction in implementing strategy, place boundaries on their

actions, and then empower them to act within these boundaries however they think makes sense.

D. Prescribe enough policies and procedures that little is left to chance in performing value-chain activities—employees should

have no leeway to do things in a manner that deviates from the company’s best-practices standard.

7. Total quality management (TQM) emphasizes

A. managing with high operational efficiencies.

B. continuous improvement in all phases of operations.

C. incremental change in parts of the organization.

D. widespread adoption of industry standard operating practices.

8. A well-designed organizational structure is one that

A. connects geographic organizational units.

B. engages traditional functional departments.

C. aligns various formal and informal segments and matches each to strategy.

D. provides a voice for employees and promotes employee empowerment.

9. The three components of building an organization capable of good strategy execution are

A. hiring a capable top management team, empowering employees, and establishing a strategy-supportive corporate culture.

B. staffing the organization, building core competencies and competitive capabilities, and structuring the organization and work

effort.

C. putting a centralized decision-making structure in place, determining who should have responsibility for each value-chain

activity, and aligning the corporate culture with key policies, procedures, and operating practices.

D. making periodic changes in the firm’s internal organization to keep people from getting into a comfortable rut, instituting a

decentralized approach to decision making, and developing the appropriate competencies and capabilities.

10. What separates companies that make a sincere effort to take action in line with their values from

companies that are content to only talk about values?

A. A strong board of directors that’s committed to avoiding the unfavorable media exposure that occurs when a company steps

out of bounds and gets caught

B. Company leaders who believe in “walking the talk” and believe in reiterating values

C. Shareholders who insist that senior executives include values in policies and procedures

D. Pressure from customers who want and expect the companies they do business with to be honorable and inhabit the values

they profess

11. Successfully leading the effort to instill a spirit of high achievement into a company’s culture and put

constructive pressure on the organization to achieve good results

A. entails such actions as treating employees with dignity and respect, celebrating individual, group, and company successes, and

setting stretch objectives.

B. requires that top executives make operating excellence the company’s only core value.

C. calls for top executives to stress the adoption of best practices, push for continuous product innovation, and provide

employees with a stream of suggestions for improving company operations.

D. hinges on the extent to which top management emphasizes a positive rather than a negative reward system.

12. What actions, behaviors, and work practices that are conducive to good strategy implementation

support the strategy execution effort?

A. Energizing the workforce, ensuring that personnel memorize the company values statement and code of ethics, and achieving

competitive advantage

B. Providing for greater strategic flexibility, using peer pressure to company personnel to perform, and energizing the workforce

C. Using peer pressure to company personnel to perform, enhancing worker productivity and buy-in, and focusing the attention

of employees on what is most important

D. Enhancing worker productivity and buy-in, focusing the attention of employees on what is most important, and ensuring

adherence to the company culture

13. The approach to identifying the items needed to be placed on management’s action agenda of the

strategy execution plan always involves

A. some definitive managerial recipe for successful strategy execution that works for all company situations and all types of

strategies, or that works for all types of managers.

B. a set of unimportant managerial tasks that must be covered no matter what the circumstances.

C. generalized activities that will underscore the particulars of the company’s situation.

D. senior management’s judgment about how to proceed in light of prevailing circumstances.

14. A strong corporate culture

A. is usually created by prescribing a comprehensive set of policies, procedures, and best practices for employees to follow.

B. helps promote innovative behavior among employees and rapid adaptation to market-driven and customer-driven changes.

C. isn’t particularly well-suited to building strong core competencies and competitive capabilities.

D. promotes good strategy execution when the cultural norms are a good fit with the strategy and hurts execution when the

cultural norms are a poor fit.

15. The first principle in designing an effective compensation system and the most dependable way to keep

people focused on strategy execution and the achievement of performance targets is to

A. establish ethical compensation policies and convince employees that they are the firm’s most valuable competitive asset.

B. design monetary and nonmonetary incentives that boost labor productivity and help lower the firm’s overall labor costs.

C. pay employees a bonus for each strategic and financial objective that the company achieves.

D. generously reward and recognize people who meet or beat performance targets and to deny rewards and recognition to those

who don’t.

16. _______ is/are a tool(s) that company managers can use to promote operating excellence in performing

value-chain activities.

End of exam

A. TQM and/or Six Sigma quality-control techniques

B. Adoption of standard industry techniques

C. Reinforcement of company values

D. Implementation of a new technology platform

17. Management’s most powerful tool for mobilizing organizational commitment to competent strategy

execution and operating excellence is the

A. diligent and persistent use of benchmarking and best practices.

B. implementation of TQM and/or Six Sigma programs.

C. periodic giving of inspirational speeches aimed at arousing employees’ emotional energy.

D. proper use of a reward structure with motivational incentives.

18. A weak company culture

A. provides little assistance in executing strategy because there are no traditions, values, or behavioral norms that management

can use as levers to mobilize commitment to executing the chosen strategy.

B. doesn’t usually have a code of ethics and has little regard for high ethical standards.

C. offers virtually no employee support for the company’s strategic vision and strategy.

D. is fairly receptive to change and to people who champion new ways of doing things.

19. If management is to match a company’s organization structure to its strategy in an effective way, then

it’s essential

A. to define the jobs of company personnel in terms of the functions to be performed rather than in terms of the results to be

achieved.

B. that value chain activities be deliberately organized so as to produce maximum strategic fit.

C. for the company to be organized around cross-functional teams rather than around functional specialties and functional

departments.

D. for strategy-critical value-chain activities to be the main building blocks on the organization chart.

20. The goal of decentralized decision making is to

A. create camaraderie among teams.

B. facilitate faster decisions by those with the greatest experience.

C. place decision-making control with the people closest and most knowledgeable.

D. ensure senior management can easily approve most decisions.