Final Exam multiple choice

Question 1

3. The biggest and most important differences among the competitive strategies of different companies boil down to
   A. how they go about building a brand name image that buyers trust and whether they are a risk-taker or risk-avoider.
   B. the different ways that companies try to cope with the five competitive forces.
   C. whether a company’s market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation.
   D. the kinds of actions companies take to improve their competitive assets and reduce their competitive liabilities.
   E. the relative emphasis they place on offensive versus defensive strategies.

Answer 1

C. whether a company’s market target is broad or narrow and whether the company is pursuing a competitive advantage linked to low cost or differentiation.

Question 2

5. The generic types of competitive strategies include
   A. build market share, maintain market share, and slowly surrender market share. B. offensive strategies and defensive strategies.
   C. low-cost provider, broad differentiation, best-cost provider, focused low-cost, and focused differentiation.
   D. low-cost/low price strategies, high-quality/high price strategies, and medium quality/medium price strategies.
   E. price leader strategies, price follower strategies, technology leader strategies, first-mover strategies, offensive strategies, and defensive strategies.

Answer 2

C. low-cost provider, broad differentiation, best-cost provider, focused low-cost, and focused differentiation.

Question 3

7. A low-cost leader’s basis for competitive advantage is
   A. lower prices than rival firms.
   B. using a low cost/low price approach to gain the biggest market share.
   C. high buyer switching costs.
   D. meaningfully lower overall costs than competitors.
   E. higher unit sales than rivals.

Answer 3

D. meaningfully lower overall costs than competitors.

Question 4

10. The major avenues for achieving a cost advantage over rivals include
    A. revamping the firm’s value chain to eliminate or bypass some cost-producing activities and/or out-managing rivals in the efficiency with which value chain activities are performed.
    B. having a management team that is highly skilled in cutting costs.
    C. being a first-mover in adopting the latest state-of-the-art technologies, especially those relating to low-cost manufacture.
    D. outsourcing high-cost activities to cost-efficient vendors.
    E. paying lower wages and salaries than rivals.

Answer 4

A. revamping the firm’s value chain to eliminate or bypass some cost-producing activities and/or out-managing rivals in the efficiency with which value chain activities are performed.

Question 5

17. A competitive strategy of striving to be the low-cost provider is particularly attractive when
    A. buyers are not very brand-conscious.
    B. most rivals are trying to be best-cost providers.
    C. there are many ways to achieve product differentiation that have value to buyers.
    D. buyers are large and have significant power to bargain down prices and buyers use the product in much the same ways.
    E. most rivals are pursuing focused low-cost or focused differentiation strategies.

Answer 5

D. buyers are large and have significant power to bargain down prices and buyers use the product in much the same ways.

Question 6

19. A competitive strategy to be the low-cost provider in an industry works well when
    A. price competition among rival sellers is especially vigorous.
    B. there are few ways to achieve product differentiation that have value to buyers.
    C. buyers incur low costs in switching their purchases from one seller/brand to another.
    D. industry newcomers use low introductory prices to attract buyers and build a customer base.
    E. All of these.

Answer 6

E. All of these.

Question 7

24. The essence of a broad differentiation strategy is to
    A. appeal to the high end part of the market and concentrate on providing a top-of-the-line product to consumers.
    B. incorporate a greater number of differentiating features into its product/service than rivals. C. lower buyer switching costs.
    D. outspend rivals on advertising and promotion in order to inform and convince buyers of the value of its differentiating attributes.
    E. be unique in ways that are valuable and appealing to a wide range of buyers.

Answer 7

E. be unique in ways that are valuable and appealing to a wide range of buyers.

Question 8

26. Successful differentiation allows a firm to
    A. be the industry’s best-cost provider. B. set the industry ceiling on price.
    C. avoid being dragged into a price war with industry rivals and not be overly concerned about whether entry barriers into the industry are high or low.
    D. command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand.
    E. take sales and market share away from rivals by undercutting them on price.

Answer 8

D. command a premium price for its product, and/or increase unit sales, and/or gain buyer loyalty to its brand.

Question 9

39. A broad differentiation strategy works best in situations where
    A. technological change is slow-paced and new or improved products are infrequent. B. buyer needs and uses of the product are very similar.
    C. buyers incur low costs in switching their purchases to rival brands.
    D. buyers have a low degree of bargaining power and purchase the product frequently. E. technological change is fast-paced and competition revolves around rapidly evolving product features.

Answer 9

E. technological change is fast-paced and competition revolves around rapidly evolving product features.

Question 10

45. What sets focused (or market niche) strategies apart from low-cost leadership and broad differentiation strategies is
    A. the extra attention paid to top-notch product performance and product quality.
    B. their concentrated attention on serving the needs of buyers in a narrow piece of the overall market.
    C. greater opportunity for competitive advantage.
    D. their suitability for market situations where most industry rivals have weakly differentiated products.
    E. their objective of delivering more value for the money.

Answer 10

B. their concentrated attention on serving the needs of buyers in a narrow piece of the overall market.

Question 11

54.A firm pursuing a best-cost provider strategy
A. seeks to be the low-cost provider in the largest and fastest growing (or best) market segment.
B. tries to have the best cost (as compared to rivals) for each activity in the industry’s value chain.
C. tries to outcompete a low-cost provider by attracting buyers on the basis of charging the best price.
D. seeks to deliver superior value to buyers by satisfying their expectations on key quality/service/features/performance attributes and beating their expectations on price (given what rivals are charging for much the same attributes).
E. seeks to achieve the best costs by using the best operating practices and incorporating the best features and attributes.

Answer 11

D. seeks to deliver superior value to buyers by satisfying their expectations on key quality/service/features/performance attributes and beating their expectations on price (given what rivals are charging for much the same attributes).

Question 12

64. The marketing emphasis of a company pursuing a broad differentiation strategy usually is to
    A. underprice rival brands with comparable features.
    B. tout differentiating features and charge a premium price that more than covers the extra costs of differentiating features.
    C. out-advertise rivals and make frequent use of discount coupons.
    D. emphasize selling direct to end-users and promoting personalized customer service. E. communicate the product’s ability to serve the customer’s every need.

Answer 12

B. tout differentiating features and charge a premium price that more than covers the extra costs of differentiating features.

Question 13

3. Strategic offensives should, as a general rule, be based on
   A. exploiting a company’s strongest strategic assets.
   B. implementing and executing the chosen strategy efficiently and effectively. C. sizing up an organization’s internal and external situation.
   D. molding an organization’s character and identity.
   E. the buyer’s needs that the company seeks to satisfy.

Answer 13

A. exploiting a company’s strongest strategic assets.

Question 14

10. Which of the following is a prime example of a blue-ocean market strategy? A. eBay online auction industry
B. Starbucks coffee shops
C. Dollar General discount retailing
D. FedEx overnight shipping
E. All of these.

Answer 14

E. All of these.

Question 15

11. Which of the following is a purpose of a defensive strategy? A. To lower the risk of being attacked.
    B. To weaken the impact of any attack that occurs.
    C. To pressure challengers to aim their efforts at other rivals. D. To help protect a competitive advantage.
    E. All of these.

Answer 15

E. All of these

Question 16

14. What is the goal of signaling a challenger that strong retaliation is likely in the event of an attack?
    A. To reduce costs of value chain activities.
    B. Cause the challenger to begin the attack instead of waiting. C. Divert the challenger to use less threatening options.
    D. To create collaborative relationships with challengers.
    E. To insulate other firms from adverse impacts resulting from the challenge.

Answer 16

C. Divert the challenger to use less threatening options.

Question 17

19. In which of the following cases are late-mover advantages (or first-mover disadvantages)
    not likely to arise?
    A. When the costs of pioneering are much higher than being a follower and only negligible learning/experience benefits accrue to the pioneer
    B. When the marketplace is skeptical about the benefits of a new technology or product being pioneered by a first-mover
    C. When the pioneer’s products are somewhat primitive and are easily bested by late movers D. When opportunities exist to invent a new industry or distinctive market segment that creates altogether new demand
    E. When technological change is rapid and fast-following rivals find it easy to leapfrog the pioneer with next-generation products of their own

Answer 17

D. When opportunities exist to invent a new industry or distinctive market segment that creates altogether new demand

Question 18

21. The race among rivals for industry leadership is more likely to be a marathon rather than a sprint when,
    A. new industry or market segments are yet to be developed and create altogether new consumer demand.
    B. fast followers find it easy to leapfrog the pioneer with even better next-generation products of their own.
    C. the market depends on the development of complementary products or services that are currently not available, buyers have high switching costs, and influential rivals are in position to derail the efforts of a first-mover.
    D. entry barriers are high, substitute products or services are readily available, and buyers are prone to negotiate aggressively for better terms and lower prices.
    E. there are nearly always big advantages to being a slow mover rather than an early mover, especially as concerns avoiding the “mistakes” of first or early movers.

Answer 18

C. the market depends on the development of complementary products or services that are currently not available, buyers have high switching costs, and influential rivals are in position to derail the efforts of a first-mover.

Question 19

24. The difference between a merger and an acquisition is that
    A. a merger involves one company purchasing the assets of another company with cash, whereas an acquisition involves a company acquiring another company by buying all of the shares of its common stock.
    B. a merger is a pooling of equals whereas an acquisition involves one company, the acquirer, purchasing and absorbing the operations of another company, the acquired.
    C. in a merger the companies retain their original names whereas in an acquisition the name of the company being acquired is changed to be the name of the acquiring company.
    D. a merger is a combination of three or more companies whereas an acquisition is a pooling of interests of just two companies.
    E. a merger involves two or more companies deciding to adopt the same strategy whereas an acquisition involves one company taking over the strategy-making function of another company.

Answer 19

B. a merger is a pooling of equals whereas an acquisition involves one company, the acquirer, purchasing and absorbing the operations of another company, the acquired.

Question 20

31. The two best reasons for investing company resources in vertical integration (either
    forward or backward) are to
    A. expand into foreign markets and/or control more of the industry value chain. B. broaden the firm’s product line and/or avoid the need for outsourcing.
    C. gain a first mover advantage over rivals in revamping the industry value chain. D. strengthen the company’s competitive position and/or boost its profitability.
    E. achieve product differentiation and/or lengthen the company’s value chain to include more activities performed in-house and thereby gain greater ability to reduce internal operating costs.

Answer 20

D. strengthen the company’s competitive position and/or boost its profitability.

Question 21

33. For backward vertical integration into the business of suppliers to be a viable and profitable strategy, a company
    A. must first be a proficient manufacturer.
    B. must be able to achieve the same scale economies as outside suppliers and match or beat suppliers’ production efficiency with no drop-off in quality.
    C. must have excess production capacity, so that it has ample in-house ability to undertake additional production activities.
    D. needs to have a wide product line, so that it can supply parts and components for many products.
    E. should have a distinctive competence in production process technology and at least a core competence in manufacturing R&D.

Answer 21

B. must be able to achieve the same scale economies as outside suppliers and match or beat suppliers’ production efficiency with no drop-off in quality.

Question 22

39. The two big drivers of outsourcing are
    A. increased ability to cut R&D expenses and increased ability to avoid the problems of strategic alliances.
    B. that outsiders can often perform certain activities better or cheaper and outsourcing allows a firm to focus its entire energies on those activities that are at the center of its expertise (its core competencies).
    C. a desire to reduce the company’s investment in fixed assets and the need to narrow the scope of the company’s in-house competencies and competitive capabilities.
    D. the ability to avoid capital investments that accompany vertical integration and a desire to reduce the company’s risk exposure to changing technology and/or changing buyer
    preferences.
    E. that a smaller in-house work force and a low investment in intellectual capital produce cost savings.

Answer 22

A. increased ability to cut R&D expenses and increased ability to avoid the problems of strategic alliances.

Question 23

48. Entering into strategic alliances and collaborative partnerships can be competitively valuable because
    A. working closely with outsiders is essential in developing new technologies and new products in virtually every industry.
    B. cooperative arrangements with other companies are very helpful in racing against rivals to build a strong global presence and/or racing to seize opportunities on the frontiers of advancing technology.
    C. they represent highly effective ways to achieve low-cost leadership and capture first-mover advantages.
    D. they are a powerful way for companies to build loyalty and goodwill among customers with diverse needs and expectations.
    E. they are quite effective in helping a company transfer the risks of threatening external developments to other companies.

Answer 23

B. cooperative arrangements with other companies are very helpful in racing against rivals to build a strong global presence and/or racing to seize opportunities on the frontiers of advancing technology.

Question 24

1. The reasons why a company opts to expand outside its home market include
   A. gaining access to new customers for the company’s products/services.
   B. spreading its business risk across a wider market base.
   C. achieving lower costs and enhancing the company’s competitiveness.
   D. a desire to capitalize on its core competencies and capabilities.
   E. All of these.

Answer 24

E. All of these.

Question 25

The difference between political risks and economic risks is that
A. political risks stem from instability or weakness in national governments while economic risks stem from the stability of a country’s monetary system, economic and regulatory policies.
B. political risks stem from stability in foreign business and economic risks stem from an excess of property right protections.
C. political rights stem from hostility to foreign business while economic risks stem from the
instability of the monetary system.
D. political risks stem from risks due to exchange rate fluctuations and economic risks stem from hostility to foreign business.
E. political risks stem from stability of a country’s monetary system and economic risks stem from instability in national business.

Answer 25

A. political risks stem from instability or weakness in national governments while economic risks stem from the stability of a country’s monetary system, economic and regulatory policies.

Question 26

22. Companies operating in a cross-country marketplace have to respond to
    A. whether to customize their offerings in each different country market to match the tastes and preferences of local buyers.
    B. whether to pursue a strategy of offering a mostly standardized product worldwide.
    C. how much to customize their offerings in each different country market to match the tastes and preferences of local buyers.
    D. None of these. E. All of these.

Answer 26

E. All of these.

Question 27

24. Multidomestic competition refers to situations where
    A. no domestic companies have king-sized market shares and each national market has many competitors.
    B. competition in one national market is independent of competition in other national markets and, as a consequence, there is strictly speaking no “international or world market.”
    C. domestic rivals pursue focused or market niche strategies and do not compete internationally.
    D. domestic companies have a competitive disadvantage in competing with foreign rivals that operate in many different countries.
    E. most competitors operate in more than two country markets but rarely in more than 20.

Answer 27

B. competition in one national market is independent of competition in other national markets and, as a consequence, there is strictly speaking no “international or world market.”

Question 28

. The characteristics of a world market where global competition prevails include
A. a market situation where competitive conditions across national markets are linked
strongly enough to form a true world market and where leading competitors typically compete head to head in many different countries.
B. minor cost variations from country-to-country (as concerns production, distribution, sales and marketing, and other primary components of the industry value chain) and minimal cross- country trade restrictions.
C. a competitive environment comprised of so many competitors that no company has a sizable worldwide market share.
D. many companies racing for global market leadership, with most contenders using the same basic type of competitive strategy and positioned in the same strategic group.
E. low barriers to entry, such as large number of rivals that the actions of any one rival have little impact on the sales and market shares of other rivals, and key success factors that vary
from country to country.

Answer 28

A. a market situation where competitive conditions across national markets are linked
strongly enough to form a true world market and where leading competitors typically compete head to head in many different countries.

Question 29

30. The generic strategic options for competing in foreign markets include
    A. global low-cost, global differentiation, global best-cost, and global focus strategies. B. maintaining a national (one-country) production base and exporting goods to foreign markets.
    C. licensing foreign firms to produce and distribute one’s products or to use the company’s technology.
    D. a custom-tailored country-by-country approach based on meeting the particular needs of particular buyers in each target country.
    E. All of these.

Answer 29

D. a custom-tailored country-by-country approach based on meeting the particular needs of particular buyers in each target country.

Question 30

45. Which of the following is the role of local managers to experienced multinational companies?
    A. To contribute needed understanding of local market conditions, local buying habits, local ways of doing business.
    B. To run the local operations for the company.
    C. To understand how “the system” works to detour the hazards of collaborative alliances with local companies.
    D. To serve as conduits for the flow of information between the corporate office and local operations.
    E. All of these.

Answer 30

E. All of these.

Question 31

46. When a company operates in the markets of two or more different countries, its foremost strategic issue is
    A. whether to use strategic alliances to help defeat its rivals.
    B. whether to vary the company’s competitive approach to fit specific market conditions and buyer preferences in each host country or whether to employ essentially the same strategy in all countries.
    C. whether to maintain a national (one-country) manufacturing base and export goods to the other countries.
    D. choosing which foreign companies to team up with via strategic alliances or joint ventures. E. whether to test the waters with an export strategy before committing to some other competitive approach.

Answer 31

B. whether to vary the company’s competitive approach to fit specific market conditions and buyer preferences in each host country or whether to employ essentially the same strategy in all countries.

Question 32

59. The competitive strategy of a firm pursuing a “think global, act local” approach to strategy-making
    A. entails little or no strategy coordination across countries.
    B. usually involves cross-subsidizing the prices in those markets where there are significant country-to-country differences in the product attributes that customers are most interested in. C. involves selling a mostly standardized product worldwide, but varying a company’s use of distribution channels and marketing approaches to accommodate local market conditions.
    D. is essentially the same in all country markets where it competes but it may nonetheless give local managers room to make minor variations where necessary to better satisfy local buyers and to better match local market conditions.
    E. involves having strongly differentiated product versions for different countries and selling them under distinctly different brand names (one for each country or group of neighboring countries) so that there will be no doubt in customers’ minds that the product is more local than global.

Answer 32

D. is essentially the same in all country markets where it competes but it may nonetheless give local managers room to make minor variations where necessary to better satisfy local buyers and to better match local market conditions.

Question 33

75. Profit sanctuaries are country markets or geographic regions whereby
    A. a company can rank the competitive advantage opportunities in each industry.
    B. a company possesses good strategic fit with other businesses and identifies the value chain where this fit occurs.
    C. a company derives substantial profits because of its protected market position or unassailable competitive advantage.
    D. a company creates substantial investment strategies because it is losing competitive advantage over competitors.
    E. a company that invests its dividends in expanding its foreign market presence.

Answer 33

C. a company derives substantial profits because of its protected market position or unassailable competitive advantage.

Question 34

82. The basic strategy options for local companies in competing against global challengers include
    A. best-cost provider, focused low cost, and low-cost leadership strategies.
    B. export strategies, licensing strategies, and cross-border transfer strategies.
    C. utilizing keen understanding of local customer needs and preferences to create customized products or services, developing business models to exploit shortcoming in local infrastructure, and using acquisitions and rapid growth to defend against expansion-minded multinationals.
    D. franchising strategies, multidomestic strategies keyed to product superiority, global low- cost leadership strategies, and cross-border coordination strategies.
    E. focused differentiation and broad differentiation strategies.

Answer 34

C. utilizing keen understanding of local customer needs and preferences to create customized products or services, developing business models to exploit shortcoming in local infrastructure, and using acquisitions and rapid growth to defend against expansion-minded multinationals.

Question 35

84. Which of the following is not a viable strategy option for a local company in competing against global challengers?
    A. Using cross-market transfer strategies to hedge against the risks of exchange rate fluctuations and adverse political developments
    B. Developing business models to exploit shortcoming in local distribution networks or infrastructure
    C. Taking advantage of low-cost labor and other competitively important local work-force qualities
    D. Transferring a company’s expertise to cross-border markets and initiating actions to contend on a global scale
    E. Using acquisitions and rapid growth strategies to defend against expansion-minded multinationals

Answer 35

A. Using cross-market transfer strategies to hedge against the risks of exchange rate fluctuations and adverse political developments

Question 36

1. The task of crafting corporate strategy for a diversified company encompasses
   A. picking the new industries to enter and deciding on the means of entry.
   B. initiating actions to boost the combined performance of the businesses the firm has entered. C. pursuing opportunities to leverage cross-business value chain relationships and strategic
   fits into competitive advantage.
   D. establishing investment priorities and steering corporate resources into the most attractive business units.
   E. All of these.

Answer 36

E. All of these.

Question 37

3. Diversification merits strong consideration whenever a single-business company
   A. has integrated backward and forward as far as it can.
   B. is faced with diminishing market opportunities and stagnating sales in its principal business.
   C. has achieved industry leadership in its main line of business. D. encounters declining profits in its mainstay business.
   E. faces strong competition and is struggling to earn a good profit.

Answer 37

B. is faced with diminishing market opportunities and stagnating sales in its principal business.

Question 38

7. Diversifying into new businesses is justifiable only if it
   A. results in increased profit margins and bigger total profits. B. builds shareholder value.
   C. helps a company escape the rigors of competition in its present business.
   D. leads to the development of a greater variety of distinctive competencies and competitive capabilities.
   E. helps the company overcome the barriers to entering additional foreign markets.

Answer 38

B. builds shareholder value.

Question 39

14. A company can best accomplish diversification into new industries by
    A. outsourcing most of the value chain activities that have to be performed in the target business/industry.
    B. acquiring a company already operating in the target industry, creating a new business subsidiary internally to compete in the target industry, or forming a joint venture with another company to enter the target industry.
    C. integrating forward or backward into the target industry.
    D. shifting from a strategic group comprised mostly of single-business companies to a strategic group comprised of diversified companies.
    E. employing an offensive strategy with new product innovation as its centerpiece.

Answer 39

B. acquiring a company already operating in the target industry, creating a new business subsidiary internally to compete in the target industry, or forming a joint venture with another company to enter the target industry.

Question 40

26. Which of the following is an important appeal of a related diversification strategy? A. Related diversification is an effective way of capturing valuable financial fit benefits.
    B. Related diversification offers more competitive advantage potential than does unrelated diversification.
    C. Related diversification offers significant opportunities to strongly differentiate a company’s product offerings from those of rivals.
    D. Related diversification is more likely to pass the cost-of-entry test and the capital gains test than unrelated diversification.
    E. Related diversification is typically more profitable than unrelated diversification, which is a major factor in helping related diversification pass the attractiveness test.

Answer 40

B. Related diversification offers more competitive advantage potential than does unrelated diversification.

Question 41

27. Businesses are said to be “related” when
    A. they have several key suppliers and several key customers in common. B. their value chains have the same number of primary activities.
    C. their products are both sold through retailers.
    D. their value chains possess competitively valuable cross-business relationships that present opportunities to transfer resources from one business to another, combine similar activities and reduce costs, share use of a well-known brand name, and/or create mutually useful resource strengths and capabilities.
    E. many consumers buy the products/services of both businesses.

Answer 41

D. their value chains possess competitively valuable cross-business relationships that present opportunities to transfer resources from one business to another, combine similar activities and reduce costs, share use of a well-known brand name, and/or create mutually useful resource strengths and capabilities.

Question 42

38. Which of the following best illustrates an economy of scope?
    A. Being able to eliminate or reduce costs by combining related value-chain activities of different businesses into a single operation
    B. Being able to eliminate or reduce costs by performing all of the value chain activities of related sister businesses at the same location
    C. Being able to eliminate or reduce costs by extending the firm’s scope of operations over a wider geographic area
    D. Being able to eliminate or reduce costs by expanding the size of a company’s manufacturing plants
    E. Being able to eliminate or reduce costs by having more value chain activities performed in- house rather than outsourcing them

Answer 42

A. Being able to eliminate or reduce costs by combining related value-chain activities of different businesses into a single operation

Question 43

40. A diversified company that leverages the strategic fits of its related businesses into competitive advantage
    A. has a distinctive competence in its related businesses.
    B. has a clear path to achieving 1 + 1 = 3 gains in shareholder value.
    C. has a clear path to global market leadership in the industries where it has related businesses.
    D. passes the value chain test and the profit expectations test for building shareholder value.
    E. achieves economies of scope and passes the reduced-costs test for crafting a diversification strategy capable of creating added shareholder value.

Answer 43

B. has a clear path to achieving 1 + 1 = 3 gains in shareholder value.

Question 44

41. A strategy of diversifying into unrelated businesses
    A. is aimed at achieving good financial fit (whereas related diversification aims at good strategic fit).
    B. is the best way for a company to pass the attractiveness test in choosing which types of businesses/industries to enter.
    C. discounts the importance of strategic fit benefits and instead focuses on building and managing a group of businesses capable of delivering good financial performance irrespective of the industries these businesses are in.
    D. concentrates on diversifying into businesses where a company can leverage use of a well- known brand name in ways that create added value for shareholders.
    E. generally offers more competitive advantage potential than related diversification.

Answer 44

C. discounts the importance of strategic fit benefits and instead focuses on building and managing a group of businesses capable of delivering good financial performance irrespective of the industries these businesses are in.

Question 45

44. Which of the following is not likely to command much strategic attention from the top executives of companies pursuing an unrelated diversification strategy?
    A. Acquiring new businesses with attractive profit prospects
    B. Whether existing businesses should be retained or divested based on their ability to meet corporate targets for profit and returns on investment
    C. Looking for new businesses that present good opportunities for achieving economies of scope
    D. Identifying acquisition candidates that are financially distressed, can be acquired at a bargain price, and whose operations can, in management’s opinion, be turned around with the aid of the parent company’s financial resources and managerial know-how
    E. Identifying opportunities to acquire new businesses in industries with bright growth prospects

Answer 45

C. Looking for new businesses that present good opportunities for achieving economies of scope

Question 46

55. What rationales for unrelated diversification are not likely to increase shareholder value? A. In order to reduce risk by spreading the company’s investments over a set of truly diverse industries.
    B. To enable a company to achieve rapid or continuous growth.
    C. To chance that market downtrends in some of the company’s businesses will be partially offset by cyclical upswings in its other businesses.
    D. To provide benefits to managers such as high compensation and reduction in employment risk.
    E. All of these.

Answer 46

E. All of these.

Question 47

56. Which of the following is a diversified business with one major “core” business and a collection of small related or unrelated businesses?
    A. Broadly Diversified Enterprise. B. Narrowly Diversified Enterprise. C. Multi-business Enterprise.
    D. High Compensation/Low risk Enterprise. E. Dominant Business Enterprise.

Answer 47

E. Dominant Business Enterprise.

Question 48

57. To identify a diversified company’s strategy, one should consider such factors as
    A. the extent to which the firm is broadly or narrowly diversified, whether it is pursuing related or unrelated diversification (or a mixture of both), and the recent moves it has made to divest businesses, acquire new businesses, and strengthen the positions of existing businesses. B. whether the company is focusing on “milking its cash cows” or “feeding its cash hogs.”
    C. the technological proficiencies, labor skill requirements, and functional area strategies characterizing each of the firm’s businesses.
    D. each business’s competitive approach—whether it is pursuing a low-cost leadership, differentiation, best-cost, focused differentiation, or focused low-cost strategy.
    E. whether it is emphasizing the pursuit of economies of scale or economies of scope.

Answer 48

A. the extent to which the firm is broadly or narrowly diversified, whether it is pursuing related or unrelated diversification (or a mixture of both), and the recent moves it has made to divest businesses, acquire new businesses, and strengthen the positions of existing businesses.

Question 49

61. A comprehensive evaluation of the group of businesses a company has diversified into involves
    A. evaluating the attractiveness of industries the company has diversified into and the competitive strength of each of its business units.
    B. evaluating the strategic fits and resource fits among the various sister businesses.
    C. ranking the performance prospects of the businesses from best to worst and determining what the corporate parent’s priorities should be in allocating resources to its various businesses.
    D. using the results of the prior analytical steps as a basis for crafting new strategic moves to improve the company’s overall performance.
    E. All of these.

Answer 49

E. All of these.

Question 50

78. The value of determining the relative competitive strength of each business a company has diversified into is
    A. to have a quantitative basis for identifying which businesses have large/small competitive advantages or competitive disadvantages vis-à-vis the rivals in their respective industries.
    B. to have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent’s revenue growth.
    C. to compare resource strengths and weaknesses, business by business.
    D. to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries.
    E. to have a quantitative basis for rating them from strongest to weakest in terms of contributing to the corporate parent’s profitability.

Answer 50

D. to have a quantitative basis for rating them from strongest to weakest in contending for market leadership in their respective industries.

Question 51

97. Once a company has diversified into a collection of related or unrelated businesses and concludes that some strategy adjustments are needed, which one of the following is not one of the main strategy options that a company can pursue?
    A. Pursue multinational diversification
    B. Restructure the company’s business lineup with a combination of divestitures and new acquisitions
    C. Craft new initiatives to build/enhance the reputation of the company’s brand name
    D. Divest some businesses and retrench to a narrower diversification base
    E. Broaden the diversification base

Answer 51

C. Craft new initiatives to build/enhance the reputation of the company’s brand name

Question 52

106. Conditions that may make corporate restructuring strategies appealing include
     A. ongoing declines in the market shares of one or more major business units that are falling prey to more market-savvy competitors.
     B. a business lineup that consists of too many slow-growth, declining, low-margin, or competitively weak businesses.
     C. an excessive debt burden with interest costs that eat deeply into profitability. D. ill-chosen acquisitions that haven’t lived up to expectations.
     E. All of these.

Answer 52

E. All of these.

Question 53

3. Ethical principles as they apply to business conduct and business decisions
   A. deal chiefly with standards a company has (and that are elaborated in its code of ethics) about what is right and wrong insofar as the conduct of its business is concerned and about what behaviors are expected of company personnel.
   B. deal chiefly with the behaviors that a company’s board of directors expects of all company personnel in both their conduct on-the-job and their conduct off-the-job.
   C. involve the rules a company’s top management and board of directors make about “what is right” and “what is wrong.”
   D. are not materially different from ethical principles in general.
   E. are generally less stringent than the ethical principles for society at large because it is well understood that businesses should not be expected to operate any differently than what the law requires of them.

Answer 53

D. are not materially different from ethical principles in general.

Question 54

11. The contention that since different societies and cultures have divergent values and standards of right and wrong it is appropriate to judge behavior as ethical/unethical in the light of local customs and social mores rather than according to a single set of ethical standards
    A. defines what is meant by ethical relativism.
    B. defines what is meant by ethical universalism.
    C. is the foundation of integrated social contracts theory. D. is the basis for the theory of ethical variation.
    E. is the guiding principle of the Global Code of Ethical and Social Morality created by the
    United Nations.

Answer 54

A. defines what is meant by ethical relativism.

Question 55

21. Companies that adopt the principle of ethical relativism in providing ethical guidance to company personnel
    A. base their standards of what is ethical and what is unethical on the Global Code of Ethical Conduct first developed in 1935 and since subscribed to by the governments of 180 countries. B. quickly find themselves on a slippery slope with no higher order moral compass if they operate in countries where ethical standards vary considerably from country to country.
    C. have no fair way to judge the ethical correctness of the conduct of company personnel. D. have a one-size-fits-all set of ethical standards.
    E. end up allowing each company employee to determine what set of ethical standards to observe.

Answer 55

B. quickly find themselves on a slippery slope with no higher order moral compass if they operate in countries where ethical standards vary considerably from country to country.

Question 56

24. According to integrated social contracts theory,
    A. universal ethical principles apply in those situations where most all societies—endowed with rationality and moral knowledge—have common moral agreement on what is wrong and thereby put limits on what actions and behaviors fall inside the boundaries of what is right and which ones fall outside.
    B. commonly held views about what is morally right and wrong form a contract with society that is binding on all individuals, groups, organizations, and businesses in terms of establishing right and wrong and in drawing the line between ethical and unethical behaviors C. universal ethical principles or norms leave some “moral free space” for the people in a particular country (or local culture or even a company) to make specific interpretations of what other actions may or may not be permissible within the bounds defined by universal ethical principles.
    D. universal ethical norms always take precedence over local ethical norms. E. All of these.

Answer 56

E. All of these.

Question 57

28. The litmus test of a company’s code of ethics is
    A. the degree to which it is connected to a company’s statement of core values.
    B. the extent to which it is embraced in crafting strategy and in the day-to-day operations of the business.
    C. the extent to which a company’s approach to ethical behavior mirrors the ethical principles for society at large.
    D. based on the rules a company’s top management and board of directors make about “what is right” and “what is wrong.”
    E. determined by the ethical behaviors expected of company personnel in the course of doing their jobs.

Answer 57

B. the extent to which it is embraced in crafting strategy and in the day-to-day operations of the business.

Question 58

29. Which of the following is not a key question that senior executives must ask whenever a new strategic initiative is under review?
    A. Would the potential outcome of the proposed action pose a risk of embarrassment? B. Is what we are proposing to do fully compliant with our code of ethical conduct?
    C. Is there anything in the proposed action that could be considered ethically objectionable? D. Is it apparent that this proposed action is in harmony with our core values?
    E. Are any conflicts or concerns evident between the proposed action and our core values?

Answer 58

A. Would the potential outcome of the proposed action pose a risk of embarrassment?

Question 59

31. Unethical managerial behavior tends to be driven by such factors as
    A. the pervasiveness of immoral and amoral businesspeople.
    B. overzealous pursuit of personal gain, wealth, and other selfish interests.
    C. a company culture that puts the profitability and good business performance ahead of ethical behavior.
    D. heavy pressures on company managers to meet or beat earnings targets. E. All of these.

Answer 59

E. All of these.

Question 60

36. The strength of the beliefs underlying the moral case for an ethical strategy
    A. begins with managers who themselves have strong character (for example, who are honest, have integrity, and truly care about how they conduct a company’s business).
    B. starts with managers who walk the talk in displaying the company’s stated values.
    C. involves managers with high ethical principles and standards who are advocates of a corporate code of ethics and strong ethics compliance and are genuinely committed to certain corporate values and business practices.
    D. starts with managers who understand there is big difference between adopting values statements and codes of ethics that serve merely as window dressing and those that truly paint the white lines for a company’s actual strategy and business conduct.
    E. All of these.

Answer 60

E. All of these.

Question 61

37. A company’s strategy needs to be ethical because
    A. of the dangers that top management will get embarrassed if the company’s unethical behavior is publicly exposed.
    B. (1) a strategy that is unethical in whole or in part is morally wrong and reflects badly on the character of the company personnel involved and (2) an ethical strategy is good business and in the best interest of shareholders.
    C. everyone is an ethics watchdog and somebody is sure to blow the whistle on the company’s unethical behavior.
    D. of the risks of getting caught and prosecuted by governmental authorities if an unethical strategy is used.
    E. unethical strategies are inconsistent with or else weaken the corporate culture.

Answer 61

B. (1) a strategy that is unethical in whole or in part is morally wrong and reflects badly on the character of the company personnel involved and (2) an ethical strategy is good business and in the best interest of shareholders.

Question 62

41. Visible costs which are incurred by companies and imposed for ethical wrongdoing can include
    A. Government fines and penalties.
    B. Civil penalties arising from class-action lawsuits or other litigation. C. Lower dividends for shareholders.
    D. Lower stock prices. E. All of these.

Answer 62

E. All of these.

Question 63

42. The notion of social responsibility as it applies to businesses concerns
    A. a company’s duty to put the public interest ahead of shareholder interests.
    B. societal expectations that all company stakeholders will be treated equally and fairly. C. a company’s duty to establish socially acceptable core values and to have a strictly enforced code of ethical conduct.
    D. the responsibility that top management has for ensuring that the company’s actions and decisions are in the best interest of society at large.
    E. a company’s duty to operate in an honorable manner, provide good working conditions for employees, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large.

Answer 63

E. a company’s duty to operate in an honorable manner, provide good working conditions for employees, be a good steward of the environment, and actively work to better the quality of life in the local communities where it operates and in society at large.

Question 64

50. An environmental sustainability strategy consists of a company’s deliberate actions to
    A. operate in an honorable manner, provide good working conditions for employees, and to actively work to enhance the quality of life in the local communities where it operates and in society at large.
    B. meet the current needs of customers, suppliers, shareholders, employees and other stakeholders in a manner that protects the environment, provides for the longevity of natural resources, maintains ecological support systems for future generations, and guards against ultimate endangerment of the planet.
    C. apply ethical principles of right and wrong regarding the protection and enhancement of natural resources and ecological support systems as set forth in the Global Code of Ethical Behavior adopted by 150 nations of the world.
    D. apply universal norms regarding the protection of the environment to its everyday operations and to establish guidelines regarding what actions are ecology sound based on the findings of the scientific community.
    E. balance commonly held views about what constitutes environmentally appropriate actions against its ability to make a profit.

Answer 64

B. meet the current needs of customers, suppliers, shareholders, employees and other stakeholders in a manner that protects the environment, provides for the longevity of natural resources, maintains ecological support systems for future generations, and guards against ultimate endangerment of the planet.

Question 65

57. Which one of the following is false as concerns the merits of why acting in a socially responsible manner is “good business”?
    A. The higher the public profile of a company or brand, the greater the scrutiny of its activities and the higher the potential for it to become a target for pressure group action.
    B. Acting in a socially responsible manner nearly always results in higher profits and a higher stock price for shareholders.
    C. To the extent that a company’s socially responsible behavior wins applause from consumers and fortifies its reputation, a company may win additional patronage.
    D. Some employees feel better about working for a company committed to improving society—a condition that can contribute to lower turnover and better worker productivity. E. Companies with deservedly good reputations for contributing time and money to the
    betterment of society are better able to attract and retain employees compared to companies with tarnished reputations.

Answer 65

B. Acting in a socially responsible manner nearly always results in higher profits and a higher stock price for shareholders.