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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?

an ongoing 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.

financial resources such as a company's credit rating and borrowing capacity.

intangible assets such as having a results-oriented culture.

All of these choices are correct.

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

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.

All of these are important benefits of an effective strategic vision.

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

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.

All of these choices are correct.

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 do not 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.

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.

All of these choices are correct.

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.



Available solutions

    Question 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 sub

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