CH 6

Question 1

1) Long-term objectives represent the results expected from pursuing certain strategies.

Answer 1

T

Question 2

2) Objectives provide direction and allow for organizational synergy.

Answer 2

T

Question 3

Strategic objectives include those associated with growth in revenues, growth in earnings, higher dividends, larger profit margins, and improved cash flow.

Answer 3

F

Question 4

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.

Answer 4

T

Question 5

5) “If it ain’t broke, don’t fix it” refers to managing by crisis.

Answer 5

F

Question 6

The overall aim of the Balanced Scorecard is to balance financial objectives with strategic objectives.

Answer 6

F

Question 7

Since a combination strategy bears no risk, many organizations pursue a combination of two or more strategies simultaneously.

Answer 7

F

Question 8

9) Divestiture is selling all of a company’s assets, in parts, for their tangible worth.

Answer 8

F

Question 8

8) Horizontal integration is seeking ownership or increased control over competitors.

Answer 8

T

Question 9

10) A chief executive officer is located in the divisional level of a large firm.

Answer 9

F

Question 10

Gaining ownership or increased control over distributors or retailers is called forward integration strategy.

Answer 10

T

Question 11

12) Franchising is an effective means of implementing forward integration.

Answer 11

T

Question 12

13) A growing trend is for franchisers to buy out their part of the business from their franchisees.

Answer 12

F

Question 13

14) McDonalds currently owns more than 50 percent of its restaurants.

Answer 13

F

Question 14

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.

Answer 14

T

Question 15

A strategy of seeking ownership or increased control of a firm’s suppliers is backward integration

Answer 15

T

Question 16

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.

Answer 16

F

Question 17

Horizontal integration is an appropriate strategy when the competitors of an organization are doing poorly.

Answer 17

F

Question 18

19) Market penetration, market development, and product development are intensive strategies.

Answer 18

T

Question 19

When the correlation between dollar sales and dollar marketing expenditures has historically been low, market penetration is an appropriate strategy.

Answer 19

F

Question 20

21) Market development includes introducing present products into new geographic areas.

Answer 20

T

Question 21

) An appropriate strategy when an organization has excess production capacity is market development.

Answer 21

T

Question 22

23) PepsiCo is the largest food-and-beverage firm in Russia.

Answer 22

T

Question 23

Product development is a strategy that seeks increased sales by improving or modifying present products or services.

Answer 23

T

Question 24

Product development is an appropriate strategy when an organization has successful products that are in the maturity stage of the product life cycle.

Answer 24

T

Question 25

There are four basic types of diversification: concentric, conglomerate, forward, and backward.

Answer 25

F

Question 26

Most companies favor related diversification strategies in order to exploit common use of a well-known brand name.

Answer 26

T

Question 27

Diversification strategies are becoming more popular as organizations are finding it easier to manage diverse business activities.

Answer 27

F

Question 28

The acquisition of security-software company McAfee by Intel Corp. is an example of related diversification.

Answer 28

T

Question 29

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.

Answer 29

T

Question 30

Deutsche Bank’s entrance into the casino business in Las Vegas is an example of related diversification.

Answer 30

F

Question 31

Unrelated diversification may be an especially effective strategy when an organization’s basic industry is experiencing increasing annual sales and profits.

Answer 31

F

Question 32

33) Retrenchment and turnaround are the same strategy.

Answer 32

T

Question 33

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.

Answer 33

F

Question 34

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.

Answer 34

T

Question 35

) Chapter 9 bankruptcy applies to municipalities.

Answer 35

T

Question 36

There were only 106 public U.S. companies filing bankruptcy in 2010, less than half the 211 public firms that filed the prior year.

Answer 36

T

Question 37

38) Chapter 13 bankruptcy is similar to Chapter 11, but available only to large corporations.

Answer 37

F

Question 38

39) Divestiture is the selling of all of a company’s assets, in parts, for their tangible worth.

Answer 38

F

Question 39

40) Divestiture has become a popular strategy for firms to focus on their core business and become more diversified.

Answer 39

F

Question 40

41) Liquidation is often appropriate when retrenchment and divestiture have failed.

Answer 40

T

Question 41

According to Porter, strategies allow organizations to gain competitive advantage from three different bases: cost leadership, differentiation, and decentralization.

Answer 41

F

Question 42

For consumers who are price-sensitive, cost leadership emphasizes producing standardized products at a very low per-unit cost.

Answer 42

T

Question 43

A best-value strategy offers products or services to a wide range of customers at the best price-value available on the market.

Answer 43

T

Question 44

A low-cost focus strategy offers products or services to a small range of customers at the lowest price available on the market.

Answer 44

T

Question 45

Jiffy Lube International would be a good example of a firm seeking the best-value focus strategy.

Answer 45

F

Question 46

A cost leadership strategy can be especially effective when most buyers use the product in the same ways.

Answer 46

T

Question 47

48) A differentiation strategy can only be achieved with a large target market.

Answer 47

F

Question 48

49) Differentiation guarantees competitive advantage.

Answer 48

F

Question 49

) The most effective differentiation bases are those that are hard or expensive for rivals to duplicate.

Answer 49

T

Question 50

51) A low-cost focus strategy can be especially attractive when the target market niche is small.

Answer 50

F

Question 51

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.

Answer 51

F

Question 52

In a turbulent, high-velocity market, a lead-change strategy is best whenever the firm has the resources to pursue this approach.

Answer 52

T

Question 53

Cooperative arrangements and joint ventures between competitors are becoming increasingly popular.

Answer 53

T

Question 54

Joint ventures tend to fail when managers who must collaborate daily in operating the venture are not involved in forming or shaping the venture.

Answer 54

T

Question 55

Divestiture would be an appropriate strategy when a need exists to introduce a new technology quickly.

Answer 55

F

Question 56

57) An acquisition occurs when a large organization purchases a smaller one or vice versa.

Answer 56

T

Question 57

When an acquisition or merger is not desired by both parties, it can be called a takeover or hostile takeover.

Answer 57

T

Question 58

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.

Answer 58

T

Question 59

A leveraged buyout occurs when a firm’s management and other private investors use borrowed funds to buy out the firm’s shareholders.

Answer 59

T

Question 60

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.

Answer 60

T

Question 61

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.

Answer 61

F

Question 62

While outsourcing manufacturing, tech support, and back-office work is quite common, it is still unheard of for companies to outsource product design.

Answer 62

F

Question 63

65) The nonprofit sector is America’s largest employer.

Answer 63

T

Question 64

Strategists in governmental organizations operate with far more strategic autonomy than their counterparts in private firms.

Answer 64

F

Question 65

Public enterprises generally cannot diversify into unrelated businesses or merge with other firms.

Answer 65

T

Question 66

) All sizes and types of organizations can utilize and benefit from strategic-management concepts and techniques.

Answer 66

T

Question 67

69) Research shows strategic management in small firms is more formal than in large firms.

Answer 67

F

Question 68

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

Answer 68

D

Question 69

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

Answer 69

B

Question 70

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

Answer 70

A

Question 71

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

Answer 71

E

Question 72

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

Answer 72

E

Question 73

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.

Answer 73

C

Question 74

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

Answer 74

A

Question 75

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

Answer 75

D

Question 76

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

Answer 76

D

Question 77

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

Answer 77

D

Question 78

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

Answer 78

C

Question 79

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

Answer 79

C

Question 80

Today McDonald’s owns about _______ percent of its 32,800 restaurants.
A) 20
B) 30
C) 40
D) 50
E) 60

Answer 80

A

Question 81

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

Answer 81

D

Question 82

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

Answer 82

D

Question 83

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

Answer 83

D

Question 84

) 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

Answer 84

A

Question 85

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

Answer 85

A

Question 86

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.

Answer 86

E

Question 87

Which strategy generally entails large research and development expenditures?
A) Market penetration
B) Retrenchment
C) Forward integration
D) Product development
E) Divestiture

Answer 87

D

Question 88

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

Answer 88

A

Question 89

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

Answer 89

B

Question 90

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

Answer 90

B

Question 91

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

Answer 91

B

Question 92

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.

Answer 92

D

Question 93

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

Answer 93

E

Question 94

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

Answer 94

D

Question 95

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.

Answer 95

D

Question 96

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

Answer 96

A

Question 97

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.

Answer 97

C

Question 98

Which chapter of the bankruptcy code applies to municipalities?
A) Chapter 7
B) Chapter 8
C) Chapter 9
D) Chapter 12
E) Chapter 13

Answer 98

C

Question 99

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.

Answer 99

A

Question 100

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.

Answer 100

C

Question 101

Which term refers to selling a division of an organization?
A) Joint venture
B) Divestiture
C) Concentric diversification
D) Liquidation
E) Horizontal integration

Answer 101

B

Question 102

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

Answer 102

B

Question 103

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.

Answer 103

D

Question 104

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

Answer 104

E

Question 105

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

Answer 105

A

Question 106

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

Answer 106

C

Question 107

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

Answer 107

E

Question 108

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

Answer 108

B

Question 109

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

Answer 109

B

Question 110

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

Answer 110

E

Question 111

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.

Answer 111

D

Question 112

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

Answer 112

C

Question 113

) 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

Answer 113

B

Question 114

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

Answer 114

E

Question 115

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.

Answer 115

A

Question 116

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.

Answer 116

B

Question 117

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

Answer 117

D