Ch1. The Concept of Strategy

Question 1

Strategy today is essentially a detailed plan which every member of the organization must follow to ensure success.
a. true
b. false

Answer 1

b. false
p. 2

Question 2

Strategy is a unifying theme that gives coherence and direction to the actions and decisions of an individual or an organization.
a. true
b. false

Answer 2

a. true
p. 2

Question 3

For most firms, although good luck may play a part, success is more likely to be a result of a soundly grounded and well executed strategy.
a. true
b. false

Answer 3

a. true
p. 6

Question 4

Sound strategy and effective implementation largely determine the probability and extent of the success of a firm.
a. true
b. false

Answer 4

a. true
p. 6

Question 5

A sound strategy relies on four factors: measurable short-term targets;
sound understanding of the competitive environment;
objective appraisal of resources;
and top down implementation of strategic decisions.
a. true
b. false

Answer 5

b. false
p. 6-7

Question 6

Usually, business success has been proved to rely in the end on superior resources.
a. true
b. false

Answer 6

b. false
p. 6-7

Question 7

From the military arena, tactics are about actions and techniques for winning battles, whereas strategy is about winning the war.
a. true
b. false

Answer 7

a. true
p. 8

Question 8

Strategic decisions are likely to have important implications for the organisation as a whole and involve major resource commitment.
a. true
b. false

Answer 8

a. true
p. 8

Question 9

The evolution of business strategy has been driven more by academic thinking than the practical needs of business.
a. true
b. false

Answer 9

b. false
p. 9

Question 10

Strategy in the 1950’s and 1960’s was dominated by corporate planning based on economic forecasting.
a. true
b. false

Answer 10

a. true
p. 9

Question 11

In the 1970’s and 1980’s, strategy evolved to be viewed more in terms of positioning the company in markets and in relation to competitors in order to maximise the potential for profit.
a. true
b. false

Answer 11

a. true
p. 9

Question 12

Strategy has been forced to evolve to cope with an increasingly fast-paced and volatile environment, making inflexible long-term plans redundant.
a. true
b. false

Answer 12

a. true
p. 10

Question 13

Strategy has evolved from “strategy as a detailed plan” to become “strategy as direction” in the early 21st century.
a. true
b. false

Answer 13

a. true
p. 12

Question 14

Corporate strategy is also called business strategy, or competitive strategy.
a. true
b. false

Answer 14

b. false
p. 12

Corporate strategy defines the scope of the firm in terms of the industries and markets in which it competes.

Business strategy is concerned with how the firm competes within a particular industry or market. If the firm is to prosper within an industry, it must establish a competitive advantage over its rivals. Hence, this area of strategy is also referred to as competitive strategy.

Question 15

Strategy is predominantly about countering short-term competition.
a. true
b. false

Answer 15

b. false
p. 13

Question 16

Much can be learned about a firm’s actual strategy by looking at where it invests the most money, and what products, services and technologies it is working on.
a. true
b. false

Answer 16

a. true
p. 14

Question 17

Some observers have noticed that there’s only a weak link between a firm’s intended or stated strategy, and its actual or realised strategy.
a. true
b. false

Answer 17

a. true
p. 15

Question 18

Stakeholder analysis is a useful tool for analysing how profit is distributed amongst shareholders.
a. true
b. false

Answer 18

b. false
p. 18-20

Question 19

Company law throughout the developed, industrialised world obliges firms to primarily focus on profit for shareholders.
a. true
b. false

Answer 19

b. false
p. 20-21

During the 1990s, Anglo‐Saxon shareholder capitalism was in the ascendancy – many continental European and Japanese companies changed their strategies and corporate governance to increase their responsiveness to shareholder interests. However, during the 21st century, shareholder value maximization has come to be associated with short‐termism, financial manipulation (Enron, WorldCom), excessive CEO compensation and the failures of risk management that precipitated the 2008/9 financial crisis. The responsibilities of business to employees, customers, society and the natural environment are central ethical and social issues.

Question 20

Paradoxically, the most consistently profitable companies are those whose primary goals are not stated in terms of profits.
a. true
b. false

Answer 20

a. true
p. 22-23

Question 21

Strategy is fundamentally about:
a. Being better than rivals
b. Success in achieving long-term goals
c. Satisfying all stakeholders
d. Being an excellent “corporate citizen”

Answer 21

b. Success in achieving long-term goals
p. 2

Question 22

Success is fundamentally linked to:
a. A soundly formulated strategy and luck
b. An effectively formulated strategy and a strong awareness of the rivals’ strengths
c. A clear understanding of the environment and strong political skills
d. A soundly formulated and effectively implemented strategy

Answer 22

d. A soundly formulated and effectively implemented strategy
p. 6-8

Question 23

From the two illustrations describing key attributes of strategy at the beginning of the chapter, four factors stand out:
a. Goals, environment, appraisal of resources, and social and cultural implications
b. Goals, internal and external analysis of the environment, effective implementation, and awareness of rivals’ strengths
c. Consistent goals, understanding the environment, objective appraisal of resources, and effective implementation
d. Goals, environment, irreversibility of decision, and effective implementation

Answer 23

c. Consistent goals, understanding the environment, objective appraisal of resources, and effective implementation
p. 6-8

Question 24

Strategic goals should be:
a. Simple
b. Consistent
c. Long term
d. All of the above

Answer 24

d. All of the above
p. 6-8

Question 25

Appraising a firm’s resources consists of:
a. Protecting the firm from its weaknesses and trying to reduce or eliminate them
b. Leveraging the firm’s strengths to increase market share and profit
c. Being very realistic yet creative about what can be achieved with what you’ve got
d. Completing 360-degree analytical evaluations of top managers’ strengths and weaknesses

Answer 25

c. Being very realistic yet creative about what can be achieved with what you’ve got
p. 6-8

Question 26

The success of an organization in general, depends on the following:
a. Being consistently focused on an achievable goal
b. Having a strong and in-depth knowledge of the competitive environment
c. Realistic appraisal of its own strengths and weaknesses
d. All of the above plus the ability to implement strategy with commitment, consistency and determination

Answer 26

d. All of the above plus the ability to implement strategy with commitment, consistency and determination
p. 6-8

Question 27

Modern strategy applied to the business world shares with military strategy:
a. Only linguistic roots
b. Some authors such as Sun Tzu and his “Art of War”
c. The existence of resources, conflict, and battle between players
d. Decisions of significance to overall success, and major resource commitment

Answer 27

d. Decisions of significance to overall success, and major resource commitment
p. 8

Question 28

In the military field, we generally make the following distinction between strategy and tactics:
a. Tactics are the overall plan whereas strategy focuses on specific actions
b. Tactics are a scheme of specific everyday actions, practices and techniques whereas strategy relates to the top-level plan
c. Tactics encompass specific political actions within the firm whereas strategy is the overall plan for deploying resources to establish a favourable position
d. Tactics are the overall plan whereas strategy is concerned with the manoeuvres to win battles

Answer 28

b. Tactics are a scheme of specific everyday actions, practices and techniques whereas strategy relates to the top-level plan
p. 8

Question 29

Strategy and tactics:
a. Are interchangeable terms
b. Relate to achievement of overall long-term objectives, and multiple short-term objectives, respectively
c. Can be seen as what top managers do and what lower level employees do, respectively
d. None of the above

Answer 29

b. Relate to achievement of overall long-term objectives, and multiple short-term objectives, respectively
p. 8

Question 30

Corporate strategy and business strategy
a. Are interchangeable terms
b. Relate to achievement of overall long-term objectives, and multiple short-term objectives, respectively
c. Can be seen as what top managers do and what lower level employees do, respectively
d. concern the scope of the firm’s activities and how the firm competes in its chosen areas respectively

Answer 30

d. concern the scope of the firm’s activities and how the firm competes in its chosen areas respectively
p. 9-12

Question 31

Modern business strategy has evolved across time due to:
a. Business school academics developing new theories, which are taught to new graduates
b. Earlier methods have simply been seen as old-fashioned
c. Changes in the practical needs of business and developments in academic thought
d Computerisation and the internet age meaning that we know more about what’s really going on nowadays

Answer 31

c. Changes in the practical needs of business and developments in academic thought
p. 9-10

Question 32

By the early 1980s, thinking on strategy had shifted to:
a. an emphasis on macro-economic forecasting and financial planning
b. the development of formal corporate plans
c. the positioning of firms in markets and a focus on competition
d. the analysis the drivers of profitability and the development of diversification strategies

Answer 32

c. the positioning of firms in markets and a focus on competition
p. 9-10

Question 33

The shift from Corporate Planning to Strategy-Making implies:
a. From the sources of profit outside the firm to the sources of profit within the firm
b. To the Resource-based view of the firm
c. Both a and b
d. From the structure-based approach to the value-added perspective

Answer 33

c. Both a and b
p. 9-10

Question 34

The contemporary phenomena of “winner-takes-all markets” and “standards battles” are a feature of which of the following:
a. Smartphone operating systems
b. online auctions
c. the market for digital media storage devices
d. all of the above

Answer 34

d. all of the above
p. 9-10

Question 35

The simplest useful definition of business strategy would be:
a. A sort of plan
b. A conceptual construct relating to the juxtaposition of corporate richness versus the snakes and ladders of a kaleidoscopic environment
c. How to win the corporate wars; price wars, technology races, develop killer applications
d. The means by which organisations achieve their long-term objectives

Answer 35

d. The means by which organisations achieve their long-term objectives
p. 11-12

Question 36

Corporate and Business strategy differ mainly in that:
a. Corporate Strategy has a broader scope, including decisions about which industries to operate in
b. Business strategy is subordinate to corporate strategy
c. Both a and b
d. There is no real difference; they are the same thing

Answer 36

c. Both a and b
p. 11-12

Question 37

Business strategy defines:
a. The way a firm competes in a particular industry or market
b. How a firm gains a competitive advantage over its rivals within a specific industry or market
c. Both a and b
d. Neither a nor b

Answer 37

c. Both a and b
p. 11-13

Question 38

Business strategy can be summarized as:
a. The means by which organisations achieve their long-term objectives
b. The means by which individuals achieve their objectives
c. The formal detailed plans used by organizations to guide their actions
d. The will of top managers to change their organization

Answer 38

a. The means by which organisations achieve their long-term objectives
p. 11-13

Question 39

Two basic questions concern corporate and business strategy:
a. Where and how to compete?
b. How and when to compete?
c. What are the best arenas and structures to compete?
d. When and where to compete?

Answer 39

a. Where and how to compete?
p. 11-13

Question 40

A mission statement:
a. is a statement of the company’s values
b. is a basic statement of the organization’s purpose
c. outlines what the company wants to be
d. articulates the company’s competitive strategy

Answer 40

b. is a basic statement of the organization’s purpose
p. 14-15

Question 41

In addition to just reading published information, to identify a firm’s strategy you could
a. Identify where the company is making most of its investments
b. Identify where the company is doing most of its business
c. Find out what new products and services the company is putting most effort into
d. All of the above

Answer 41

d. All of the above
p. 14-15

Question 42

The 1950’s/60’s style of Corporate Planning assumed that:
a. There would be almost no difference between the intended strategy and the realised strategy
b. The business world is essentially a predictable environment
c. There was unlikely to be anything unexpected to occur of sufficient importance to disrupt the strategic plan
d. All of the above

Answer 42

d. All of the above
p. 15-17

Question 43

The shift in strategy from a plan to a direction leads to:
a. A downgrade its role in management
b. An overt quest for flexibility and responsiveness
c. A need for top managers’ training
d. Less work for top managers

Answer 43

b. An overt quest for flexibility and responsiveness
p. 15-17

Question 44

As the environment becomes more turbulent, or unpredictable:
a. Strategy appears to not be very useful
b. Strategy remains just as vital a tool to navigate the firm through “stormy seas”
c. Strategy is put into the hands of external consultants
d. Strategy becomes an “impossible exercise”

Answer 44

b. Strategy remains just as vital a tool to navigate the firm through “stormy seas”
p. 15-17

Question 45

The difference between intended and realised strategy is:
a. Significant because studies suggest that only 10 to 30% of intended strategy becomes realised
b. Greater in unsuccessful companies
c. Unimportant, because no-one ever expects the intended strategy to seriously be implemented
d. Only a very small difference, in general

Answer 45

a. Significant because studies suggest that only 10 to 30% of intended strategy becomes realised
p. 15-17

Question 46

A strategy can be described as:
a. Intended, emergent, or realized
b. Intended, emergent, or sustained
c. Emergent, critical, or sustained
d. Realized, emergent, failed

Answer 46

a. Intended, emergent, or realized
p. 15-17

Question 47

In practice, strategy making is:
a. A combination of centrally-driven rational design and decentralized adaptation
b. A combination of luck, organizational politics, and centrally-driven planning
c. The expression of political games among top managers
d. None of the above

Answer 47

a. A combination of centrally-driven rational design and decentralized adaptation
p. 15-17

Question 48

In regard to strategy making, most firms are likely to exhibit:
a. A combination of design and emergence
b. A process labeled as “planned emergence”
c. An interaction between strategic design, through formal top-level processes, and strategic enactment through decisions made by all management levels of the organization
d. All of the above

Answer 48

d. All of the above
p. 15-17

Question 49

The balance between designed strategy and emergent strategy depends mostly on:
a. The type of organizational structure
b. The stability and predictability of a firm’s environment
c. Top managers’ personalities
d. Middle managers’ autonomy

Answer 49

b. The stability and predictability of a firm’s environment
p. 15-17

Question 50

The role of strategy today is claimed to be:
a. A unifying role underpinning all consequent decisions
b. A means by which top management can communicate and gain commitment to a sense of direction
c. A means by which top management can inspire and motivate the workforce
d. All of the above

Answer 50

d. All of the above
p. 17-18

Question 51

Profit-making firms are about creating value:
a. This value is simply the profit generated at the end of the year
b. They must create value for several stakeholder groups if this is to result in sustainable long-term profit generation
c. Value to some stakeholders eg customers, may be difficult to quantify in money terms
d. Both c and b

Answer 51

d. Both c and b
p. 17-18

Question 52

To business organizations, the term ‘stakeholders’ refers to:
a. the organizations shareholders
b. all those parties the organization does business with
c. all those who have an interest in the company
d. all potential and actual employees

Answer 52

c. all those who have an interest in the company
p. 18-20

Question 53

Stakeholder analysis:
a. is a useful tool for deciding the distribution of profit to shareholders
b. is a useful tool for identifying, understanding and prioritizing the needs of key stakeholders
c. is a useful tool for mapping potential futures for the organization
d. all of the above

Answer 53

b. is a useful tool for identifying, understanding and prioritizing the needs of key stakeholders
p. 18-20

Question 54

What should organizations seek to do with stakeholders that have high levels of interest in the organization but low power?
a. monitor
b. keep satisfied
c. Keep informed
d. Manage closely

Answer 54

c. Keep informed
p. 18-20

Question 55

Maximising shareholder value:
a. Is the sole objective of all profit-making companies in every country
b. Is the primary legal obligation only in the English-speaking countries
c. Is not the only legal obligation in central & southern Europe, and in Asia. Firms here are legally obliged to take account of a broad range of stakeholder interests
d. Both b and c

Answer 55

d. Both b and c
p. 20-22

Question 56

Corporate Social Responsibility:
a. Fits more readily with the central/southern Europe and Asian legal framework of broader stakeholder obligations
b. Is not seen as an imperative requirement by all influential thinkers
c. Is becoming more important for all firms to take account of due to the threat of adverse publicity
d. All of the above

Answer 56

d. All of the above
p. 20-22

Question 57

Shareholder interests are commonly prioritised over those of other stakeholders because:
a. unless the firm earns a rate of profit that covers its cost of capital it will not survive
b. decision-making is simplified and excessive political wrangling avoided
c. management teams that fail to maximise the profits of their companies will be replaced by those that do
d. all of the above

Answer 57

d. all of the above
p. 24-25

Question 58

The fundamental role of strategy is to:
a. Determine how the firm will make a profit in its industry environment:
b. Determine how the firm will deploy its resources to satisfy its short-term financial goals
c. Determine how the firm will deploy its resources to satisfy its long-term goals, given the conditions in the competitive environment
d. Determine how the firm can organize its own activities and achieve dominance

Answer 58

c. Determine how the firm will deploy its resources to satisfy its long-term goals, given the conditions in the competitive environment
p. 27-28

Question 59

If a firm’s strategy ensures it is consistent with both its internal and external environment, it achieves:
a. Strategic fit
b. Strategic adjustment
c. Environment consistency
d. Political and social fit

Answer 59

a. Strategic fit
p. 27-28

Question 60

The notion of “strategic fit”:
a. Does not mean much, and is a common statement made in strategic literature
b. Implies coherence between resources, capabilities, structure and systems
c. Expresses how well a firm’s strategy fits its internal and external environment
d. Answers b and c

Answer 60

d. Answers b and c
p. 27-28