CH 6 Flashcards
1) Long-term objectives represent the results expected from pursuing certain strategies.
T
2) Objectives provide direction and allow for organizational synergy.
T
Strategic objectives include those associated with growth in revenues, growth in earnings, higher dividends, larger profit margins, and improved cash flow.
F
Strategic objectives include larger market share, quicker on-time delivery than rivals, shorter design-to-market times than rivals, lower costs than rivals, and wider geographic coverage than rivals.
T
5) “If it ain’t broke, don’t fix it” refers to managing by crisis.
F
The overall aim of the Balanced Scorecard is to balance financial objectives with strategic objectives.
F
Since a combination strategy bears no risk, many organizations pursue a combination of two or more strategies simultaneously.
F
9) Divestiture is selling all of a company’s assets, in parts, for their tangible worth.
F
8) Horizontal integration is seeking ownership or increased control over competitors.
T
10) A chief executive officer is located in the divisional level of a large firm.
F
Gaining ownership or increased control over distributors or retailers is called forward integration strategy.
T
12) Franchising is an effective means of implementing forward integration.
T
13) A growing trend is for franchisers to buy out their part of the business from their franchisees.
F
14) McDonalds currently owns more than 50 percent of its restaurants.
F
Forward integration strategy is especially effective when the availability of quality distributors is so limited as to offer a competitive advantage to those firms that integrate forward.
T
A strategy of seeking ownership or increased control of a firm’s suppliers is backward integration
T
If a firm’s present suppliers are expensive and unreliable in meeting the firm’s needs for parts, components, and/or raw materials, the firm should pursue a horizontal integration strategy.
F
Horizontal integration is an appropriate strategy when the competitors of an organization are doing poorly.
F
19) Market penetration, market development, and product development are intensive strategies.
T
When the correlation between dollar sales and dollar marketing expenditures has historically been low, market penetration is an appropriate strategy.
F
21) Market development includes introducing present products into new geographic areas.
T
) An appropriate strategy when an organization has excess production capacity is market development.
T
23) PepsiCo is the largest food-and-beverage firm in Russia.
T
Product development is a strategy that seeks increased sales by improving or modifying present products or services.
T
Product development is an appropriate strategy when an organization has successful products that are in the maturity stage of the product life cycle.
T
There are four basic types of diversification: concentric, conglomerate, forward, and backward.
F
Most companies favor related diversification strategies in order to exploit common use of a well-known brand name.
T
Diversification strategies are becoming more popular as organizations are finding it easier to manage diverse business activities.
F
The acquisition of security-software company McAfee by Intel Corp. is an example of related diversification.
T
30) Unrelated diversification is an appropriate strategy when an organization’s present channels of distribution can be used to market the new products to current customers.
T
Deutsche Bank’s entrance into the casino business in Las Vegas is an example of related diversification.
F
Unrelated diversification may be an especially effective strategy when an organization’s basic industry is experiencing increasing annual sales and profits.
F
33) Retrenchment and turnaround are the same strategy.
T
Although bankruptcy can be an effective type of retrenchment strategy, it does not allow firms to avoid major debt obligations and to void union contracts.
F
35) Chapter 7 bankruptcy is a liquidation procedure used only when a firm sees no hope of being able to operate successfully or to obtain necessary creditor agreement.
T
) Chapter 9 bankruptcy applies to municipalities.
T
There were only 106 public U.S. companies filing bankruptcy in 2010, less than half the 211 public firms that filed the prior year.
T
38) Chapter 13 bankruptcy is similar to Chapter 11, but available only to large corporations.
F
39) Divestiture is the selling of all of a company’s assets, in parts, for their tangible worth.
F
40) Divestiture has become a popular strategy for firms to focus on their core business and become more diversified.
F
41) Liquidation is often appropriate when retrenchment and divestiture have failed.
T
According to Porter, strategies allow organizations to gain competitive advantage from three different bases: cost leadership, differentiation, and decentralization.
F
For consumers who are price-sensitive, cost leadership emphasizes producing standardized products at a very low per-unit cost.
T
A best-value strategy offers products or services to a wide range of customers at the best price-value available on the market.
T
A low-cost focus strategy offers products or services to a small range of customers at the lowest price available on the market.
T
Jiffy Lube International would be a good example of a firm seeking the best-value focus strategy.
F
A cost leadership strategy can be especially effective when most buyers use the product in the same ways.
T
48) A differentiation strategy can only be achieved with a large target market.
F
49) Differentiation guarantees competitive advantage.
F
) The most effective differentiation bases are those that are hard or expensive for rivals to duplicate.
T
51) A low-cost focus strategy can be especially attractive when the target market niche is small.
F
A differentiation strategy can be especially attractive when the industry has many different niches and segments, thereby allowing a focuser to pick a competitively attractive niche suited to its own resources.
F
In a turbulent, high-velocity market, a lead-change strategy is best whenever the firm has the resources to pursue this approach.
T
Cooperative arrangements and joint ventures between competitors are becoming increasingly popular.
T
Joint ventures tend to fail when managers who must collaborate daily in operating the venture are not involved in forming or shaping the venture.
T
Divestiture would be an appropriate strategy when a need exists to introduce a new technology quickly.
F
57) An acquisition occurs when a large organization purchases a smaller one or vice versa.
T
When an acquisition or merger is not desired by both parties, it can be called a takeover or hostile takeover.
T
White knight is a term that refers to a firm that agrees to acquire another firm when the other firm is facing a hostile takeover by some company.
T
A leveraged buyout occurs when a firm’s management and other private investors use borrowed funds to buy out the firm’s shareholders.
T
First mover advantage refers to the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms.
T
Companies are avoiding outsourcing more and more because it is more expensive than traditional methods and it does not allow a firm to concentrate on core competencies.
F
While outsourcing manufacturing, tech support, and back-office work is quite common, it is still unheard of for companies to outsource product design.
F
65) The nonprofit sector is America’s largest employer.
T
Strategists in governmental organizations operate with far more strategic autonomy than their counterparts in private firms.
F
Public enterprises generally cannot diversify into unrelated businesses or merge with other firms.
T
) All sizes and types of organizations can utilize and benefit from strategic-management concepts and techniques.
T
69) Research shows strategic management in small firms is more formal than in large firms.
F
Long-term objectives are needed at which level(s) in an organization?
A) Corporate
B) Divisional
C) Functional
D) All of the above
E) None of the above
D
Financial objectives involve all of the following EXCEPT
A) growth in revenues
B) larger market share
C) higher dividends
D) greater return on investment
E) a rising stock price
B
What principle is based on the belief that the true measure of a really good strategist is the ability to solve problems?
A) Managing by crisis
B) Managing by objectives
C) Managing by extrapolation
D) Managing by exception
E) Managing by hope
A
73) What principle is built on the idea that there is no general plan for which way to go and to do?
A) Managing by crisis
B) Managing by extrapolation
C) Managing by objectives
D) Managing by hope
E) Managing by subjectives
E
All of the following are listed among the “softer” factors in the Balanced Scorecard EXCEPT
A) customer service
B) employee morale
C) product quality
D) business ethics
E) stockholder equity
E
Which level of strategy is most likely not present in small firms?
A) Company
B) Functional
C) Divisional
D) Operational
E) All of the above are present in small firms.
C
Starbucks reaching a deal with Green Mountain Coffee Roasters for that firm to sell packs of Starbucks Tazo-branded coffee and tea in their brewers is an example of which type of strategy?
A) Forward integration
B) Backward integration
C) Horizontal integration
D) Related diversification
E) Unrelated diversification
A
Marriott selling its timeshare business is an example of which type of strategy?
A) Related diversification
B) Unrelated diversification
C) Retrenchment
D) Divestiture
E) Liquidation
D
Hawaiian Airlines beginning to offer flights from Hawaii to Seoul, Korea, and Tokyo, Japan, rather than mostly flying to and from the U.S. mainland, is an example of which type of strategy?
A) Forward integration
B) Backward integration
C) Horizontal integration
D) Market development
E) Product development
D
Which of the following is most likely NOT included in the functional level of a small company?
A) Finance
B) Marketing
C) R&D
D) Department managers
E) Human resource managers
D
Integration strategies are sometimes collectively referred to as which of the following categories of strategies?
A) Horizontal integration
B) Diversification
C) Vertical integration
D) Stuck-in-the-middle
E) Hierarchical integration
C
Websites that sell products directly to consumers are examples of which type of strategy?
A) Backward integration
B) Product development
C) Forward integration
D) Horizontal integration
E) Conglomerate diversification
C
Today McDonald’s owns about _______ percent of its 32,800 restaurants.
A) 20
B) 30
C) 40
D) 50
E) 60
A
83) Which of these strategies is effective when the number of suppliers is small and the number of competitors is large?
A) Conglomerate diversification
B) Forward integration
C) Concentric diversification
D) Backward integration
E) Horizontal diversification
D
Backward integration is effective in all of these cases EXCEPT
A) when an organization competes in an industry that is growing rapidly
B) when an organization has both capital and human resources to manage the new business of supplying its own raw materials
C) when an organization needs to acquire a needed resource quickly
D) when the advantages of stable prices are not important
E) when present suppliers have high profit margins
D
What refers to a strategy of seeking ownership of, or increased control over a firm’s competitors?
A) Forward integration
B) Conglomerate diversification
C) Backward integration
D) Horizontal integration
E) Concentric diversification
D
) In which situation would horizontal integration be an especially effective strategy?
A) when an organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government for “tending substantially” to reduce competition
B) when an organization competes in a slowing industry
C) when decreased economies of scale provide major competitive advantages
D) when an organization has neither the capital nor human talent needed to successfully manage an expanded organization
E) when competitors are succeeding due to managerial expertise or having particular resources an organization possesses
A
Which strategy seeks to increase market share for present products or services in present markets through greater marketing efforts?
A) Market penetration
B) Forward integration
C) Market development
D) Backward integration
E) Product development
A
When a domestic company first begins to export to India, it is an example of
A) horizontal integration.
B) backward integration.
C) forward integration.
D) concentric diversification.
E) market development.
E
Which strategy generally entails large research and development expenditures?
A) Market penetration
B) Retrenchment
C) Forward integration
D) Product development
E) Divestiture
D
All of the following situations are conducive to market development EXCEPT
A) when new channels of distribution are expensive and unreliable
B) when an organization is very successful at what it does
C) when new untapped or unsaturated markets exist
D) when an organization has excess production capacity
E) when an organization’s basic industry is becoming rapidly global in scope
A
91) Which strategy is appropriate when an organization competes in an industry characterized by rapid technological developments?
A) Retrenchment
B) Product development
C) Backward integration
D) Liquidation
E) Market penetration
B
Which strategy is effective when new, but related, products could be offered at highly competitive prices?
A) Forward integration
B) Related diversification
C) Backward
D) Conglomerate diversification
E) Unrelated diversification
B
Which strategy should an organization use if it competes in a no-growth or a slow-growth industry?
A) Divestiture
B) Related diversification
C) Backward integration
D) Unrelated diversification
E) Retrenchment
B
Tyson Foods opening a manufacturing plan that makes diesel and jet fuel from chicken fat, beef tallow, and leftover food grease from the firm’s meat-processing plants is an example of
A) backward integration.
B) divestiture.
C) retrenchment.
D) unrelated diversification.
E) forward integration.
D
Which of the following is NOT a guideline for when an organization should use an unrelated diversification strategy?
A) when revenues derived from an organization’s current products or services would increase significantly by adding the new unrelated, products
B) when an organization’s present channels of distribution can be used to market the new products to current customers
C) when the new products have countercyclical sales patterns compared to an organization’s present products
D) when an organization competes in a highly competitive and/or a no-growth industry
E) when existing markets for an organization’s present products are not yet saturated
E
Many more firms have failed at ________ than have succeeded due to the immense challenge of managing businesses in many industries rather than in a single industry.
A) forward integration
B) related diversification
C) backward integration
D) unrelated diversification
E) horizontal integration
D
Borders closing 200 of its 488 superstores and laying off 6,000 of its 19,500 employees is an example of
A) divestiture.
B) backward integration.
C) liquidation.
D) retrenchment.
E) forward integration.
D
What kind of strategy is retrenchment?
A) A turnaround strategy
B) An expansion strategy
C) A diagonal strategy
D) An intensive strategy
E) An offensive strategy
A
Bankruptcy
A) should never be used as a strategy.
B) should be used only when one is legally forced to do so.
C) can be an effective type of retrenchment strategy.
D) should only be used for large firms.
E) should only be used for small, private firms.
C
Which chapter of the bankruptcy code applies to municipalities?
A) Chapter 7
B) Chapter 8
C) Chapter 9
D) Chapter 12
E) Chapter 13
C
The form of bankruptcy in which all the organization’s assets are sold in parts for their tangible worth is
A) Chapter 7.
B) Chapter 8.
C) Chapter 9.
D) Chapter 11.
E) Chapter 13.
A
Retrenchment would be an effective strategy when an organization
A) has shrunk so quickly that major internal reorganization is needed.
B) is one of the stronger competitors in a given industry.
C) is plagued by inefficiency, low profitability, poor employee morale and pressure from stockholders to improve performance.
D) has decided to capitalize on opportunities, maximize threats, take advantage of strengths and overcome weaknesses.
E) does not have a clearly distinctive competence and has failed to meet its objectives and goals consistently over time.
C
Which term refers to selling a division of an organization?
A) Joint venture
B) Divestiture
C) Concentric diversification
D) Liquidation
E) Horizontal integration
B
Which strategy should be implemented when a division is responsible for an organization’s overall poor performance?
A) Backward integration
B) Divestiture
C) Forward integration
D) Cost leadership
E) Related diversification
B
106) Selling all of a company’s assets, in parts, for their tangible worth is called
A) joint venture.
B) divestiture.
C) concentric diversification.
D) liquidation.
E) unrelated integration.
D
Which strategy would be effective when the stockholders of a firm can minimize their losses by selling the organization’s assets?
A) Integration
B) Differentiation
C) Diversification
D) Cost leadership
E) Liquidation
E
Under which strategy would you offer products or services to a wide range of customers at the lowest price available on the market?
A) Cost Leadership – Low Cost
B) Cost Leadership – Best Value
C) Focus – Low Cost
D) Focus – Best Value
E) Differentiation
A
According to Porter, which strategy offers products or services to a niche group of customers at the lowest price available on the market?
A) Cost Leadership – Low Cost
B) Cost Leadership – Best Value
C) Focus – Low Cost
D) Focus – Best Value
E) Differentiation
C
Under which condition would a cost leadership strategy be especially effective?
A) when there are many ways to differentiate the product or service and many buyers perceive these differences as having value
B) when buyer needs and uses are diverse
C) when few rival firms are following a similar approach
D) when technological change is fast paced and competition revolves around rapidly evolving product features
E) when the products of rival sellers are essentially identical and supplies are readily available from any of several eager sellers
E
Under which condition would a differentiation strategy be especially effective?
A) when the target market niche is large, profitable and growing
B) when technological change is fast paced and competition revolves around rapidly evolving
product features
C) when industry leaders do not consider the niche to be crucial to their own success
D) when the industry has many different niches and segments, thereby allowing a company to pick a competitively attractive niche suited to its own resources
E) when few, if any, other rivals are attempting to specialize in the same target segment
B
What occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity?
A) Retrenchment
B) A joint venture
C) Liquidation
D) Forward integration E) Divestiture
B
All of the following are cooperative arrangements EXCEPT
A) R&D partnerships
B) joint-bidding consortia
C) cross-licensing agreements
D) cross-manufacturing agreements
E) marketing plans
E
Which of the following is NOT a reason joint ventures fail?
A) Managers who must collaborate daily in operating the venture are not involved in forming or shaping the venture.
B) The venture may not be supported equally by both partners.
C) The venture may benefit the partnering companies but may not benefit the customers who then complain about poorer service or criticize the companies in other ways.
D) Stakeholders from both partners are equally satisfied.
E) The venture may begin to compete more with one of the partners than the other.
D
Which strategy would be most appropriate when the distinctive competencies of two or more firms complement each other especially well?
A) Conglomerate diversification
B) Divestiture
C) Joint venture
D) Retrenchment
E) Integration
C
) When two organizations of about equal size unite to form one enterprise, which of these occurs?
A) Hostile takeover
B) Merger
C) Acquisition
D) LBO
E) Divestiture
B
Mergers and acquisitions are created for all of the following reasons EXCEPT to
A) gain new technology
B) reduce tax obligations
C) gain economies of scale
D) smooth out seasonal trends in sales
E) increase the number of employees
E
There are annually more than 10,000 mergers in the United States that total more than A) $700 billion.
B) $825 billion.
C) $975 billion.
D) $1 trillion.
E) $3 trillion.
A
When companies take over functional operations of other firms, such as human resources, information systems, payroll, accounting, or customer service, this is called
A) marketing.
B) outsourcing.
C) licensing.
D) franchising.
E) divestiture.
B
According to journalists’ findings, what is a serious obstacle for many small business owners?
A) A lack of business ethics
B) An excess of employees and managerial staff
C) A lack of experience in networking
D) A lack of strategic-management knowledge
E) Having too many suppliers
D
