CHAPTER 5: STRATEGIC MANAGEMENT
Multiple Choice Questions
1. The concept of _____ is the ability of a firm to provide valu...
6. Which one of the following is NOT included in a firm’s mission statement?
a. company philosophy
b. customers and market...
b. institutional forces
c. sociocultural forces
d. geopolitical forces
13. _____ consist primarily of the demographics and...
a. commercial and industrial forces
b. military and governmental forces
c. institutional and physical forces
d. educationa...
a. planning, finance, accounting, legal activities, and government relations
b. acquiring, training, evaluating, compensat...
29. Activities that transform inputs into the products and services of the firm, as well as
maintenance of machines, are p...
d. Differentiated forecasts
35. Setting strategic objectives facilitates the ability of a firm to do all of the following
...
d. above-average profits
41. Which of the following provides the best explanation of why consumers are willing to
pay a pr...
a. global strategy
b. multicultural strategy
c. differentiation strategy
d. multipoint competition strategy
47. A company ...
These elements are superiority, rarity, inimitability, and non-substitutability.
Superior value is sometimes referred to a...
57. What is a value chain? (p. 126)
A value chain is a set of key activities that directly produce or support the producti...
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Management, Hitt, Black, Porter, Test Bank, Vahdi Boydaş, Mensur Boydaş,

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Management, Hitt, Black, Porter, Test Bank, Vahdi Boydaş, Mensur Boydaş,

  1. 1. CHAPTER 5: STRATEGIC MANAGEMENT Multiple Choice Questions 1. The concept of _____ is the ability of a firm to provide value to customers that exceeds what competitors can provide. a. strategic management b. distinctive competence c. competitive advantage d. comparative advantage 2. Which one of the following is necessary if a firm is to maintain a competitive advantage? a. winning consistently over the long term in a competitive situation b. charging a lower price than what competitors charge c. reproducing the successful actions of competitors d. providing products and services of a superior quality to those of competitors 3. Achievement of which of the following will usually give a competitive advantage? a. rarity, durability, non-substitutability, and tangibility b. responsiveness, rarity, empathy, and durability c. superiority, non-substitutability, inimitability, and rarity d. superiority, assurance, non-substitutability, and durability 4. Dom Pérignon is only made during the best years and all grapes used to make it are harvested during the same year. As such, it is a “vintage” champagne, which has achieved a _____. a. strategic advantage b. competitive advantage c. comparative advantage d. distinctive advantage 5. Which of the following best describes a situation where there is a high potential for substitutes? a. A car manufacturer offers a wide range of vehicles at different prices. b. The trans-Atlantic airline routes are serviced by a great many different carriers. c. Consumers can choose between soda, water, iced tea and many other options to quench their thirst. d. Windows software is used by a wide variety of customers, from household users to giant industries. 76 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)
  2. 2. 6. Which one of the following is NOT included in a firm’s mission statement? a. company philosophy b. customers and markets c. principal products or services d. sources of revenues 7. A _____ provides a view of the firm over the long term and what it should achieve in the future. a. strategic vision b. mission statement c. differentiated leadership strategy d. multipoint competitive analysis 8. By stating its intention to have “Kellogg’s Products on Every Table in the World,” Kellogg’s is articulating its _____. a. action plan b. strategic vision c. global forecast d. marketing target 9. Which of the following is NOT a step in the strategic management process? a. determining strategic vision b. securing interim financing c. establishing objectives d. formulating strategy 10. A mission statement articulates the fundamental purpose of the organization and often contains all of the following EXCEPT _____. a. competitive profiles b. company philosophy c. obligations to shareholders d. commitment to employees 11. In order to determine what strategy to pursue, a company must analyze its _____. a. internal capabilities b. external environment c. internal resources d. all of the above 12. Within a global context, _____ include the rules, policies, and enforcement processes that influence the behavior of individuals and organizations within a country. a. physical forces 77 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)
  3. 3. b. institutional forces c. sociocultural forces d. geopolitical forces 13. _____ consist primarily of the demographics and cultural characteristics of the societies in which an organization operates. a. Open-market forces b. Sociocultural forces c. Environmental forces d. Technological forces 14. _____ are NOT considered one of the dimensions of a firm’s general environment. a. Primary forces b. Economic forces c. Technological forces d. Sociocultural forces 15. Which of the following best illustrates the assertion that “demographics provide important data about the population, but societal values translate that data into business implications”? a. The longevity of the Japanese when combined with their low birthrate means that fewer and fewer Japanese workers will have to support more and more retirees. b. Global warming and rising gas prices will increase the demand for hybrid cars. c. Falling birthrates and modestly increasing education standards are expected to lead to a shortage of qualified technicians in the United States. d. Baby Boomers will be reaching retirement age by 2010; however, society’s idea of retirement has expanded to include the pursuit of second careers. Therefore, companies will be able to hire experienced workers at open-market prices. 16. In a certain city, the bars and restaurants built outdoor seating areas prior to the city passing laws banning indoor smoking of tobacco products. To what dimension of the general environment were the bar and restaurant owners reacting? a. political-legal forces b. economic forces c. institutional forces d. sociocultural forces 17. When conducting an environmental analysis in a foreign country, two additional dimensions of the external environment are typically examined: _____. 78 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)
  4. 4. a. commercial and industrial forces b. military and governmental forces c. institutional and physical forces d. educational and cultural forces 18. Federal spending pushes the federal deficit up, causing an increase in interest rates. What is the LEAST likely result of this occurrence? a. unemployment increases b. it becomes more expensive to borrow money c. businesses expand at a slower rate d. consumer spending rises 19. Which of the following is not one of the five forces in the industry and competitive environment identified by Porter? a. substitutes b. alliances c. new entrants d. the nature of rivalry 20. Within the context of Porter’s Five Forces, all of the following EXCEPT _____ are dimensions that will lead to lower profits. a. few suppliers b. price-based competition c. fragmented customers d. low entry barriers 21. The XYZ Company wishes to enter the beer market in Country A by building a new brewery there. Many companies already have breweries in Country A. Furthermore, a new brewery will be very expensive to build. Which of the following is the obstacle that makes it difficult for The XYZ Company to start this business in Country A? a. low costs of switching b. high costs of switching c. low barriers to entry d. high barriers to entry 22. A firm’s value chain consists of _____. a. primary and support activities b. primary and secondary activities c. observable and surreptitious activities d. regional and global activities 23. According to Michael Porter, primary value chain activities involve _____. 79 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)
  5. 5. a. planning, finance, accounting, legal activities, and government relations b. acquiring, training, evaluating, compensating, and developing human resources c. expertise and the tools or equipment related to the exercise of that expertise d. creating a product or service and distributing it to customers 24. A local microbrewery is working on its methods of advertising, promoting, and selling its product. This is an example of _____. a. primary activities in the value chain b. support activities in the value chain c. procurement activities in the value chain d. service activities in the value chain 25. The _____ of a product or service is a function of how many customers are willing to purchase the product or service and how much they are willing to pay for it. a. market value b. relative value c. absolute value d. intrinsic value 26. In the cut flower industry, fresh flowers must be available to customers as soon as possible after they have been harvested. This places a premium on which of the primary activities in the value chain? a. operations and service b. procurement and management c. operations and the value chain d. inbound and outbound logistics 27. According to Michael Porter, _____ is NOT a support activity in the value chain. a. procurement b. marketing and sales c. technology development d. human resource management 28. Which of the following is NOT a primary activity, according to Porter? a. operations b. procurement c. inbound logistics d. marketing and sales 80 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)
  6. 6. 29. Activities that transform inputs into the products and services of the firm, as well as maintenance of machines, are part of the _____. a. operations component of the value chain b. procurement component of the value chain c. inbound logistics component of the value chain d. outbound logistics component of the value chain 30. A _____ is an interrelated set of activities that can deliver competitive advantage not only in the short term but also into the future. a. core competence b. corporate strategy c. competitive advantage d. strategic vision 31. SWOT analysis stands for _____. a. strengths, weaknesses, opportunities, and tools b. strengths, weaknesses, opportunities, and threats c. strengths, weaknesses, organizations, and threats d. strengths, weaknesses, organizations, and tools 32. Petro is the premier provider of oilfield consultancy services in a certain region. Its consultants are experts in local conditions. Recent discoveries of metal deposits in its region have spawned attractive new markets outside of the oilfield. Global firms with cutting-edge technology that Petro cannot afford have been attracted by the new markets. If Petro did a SWOT analysis, what would be one of its weaknesses? a. access to cutting edge technology b. recent discoveries of metal deposits c. detailed knowledge of local oil markets d. entry of international companies into the market 33. What part of a SWOT analysis focuses on the external environment? a. strengths and weaknesses b. weaknesses and threats c. opportunities and threats d. strengths and opportunities 34. _____ translate the strategic intent and mission of the firm into concrete and measurable goals. a. Inbound logistics b. Core competencies c. Strategic objectives 81 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)
  7. 7. d. Differentiated forecasts 35. Setting strategic objectives facilitates the ability of a firm to do all of the following EXCEPT _____. a. allocate resources appropriately b. clarify yearly objectives or goals c. hold people accountable for results d. reach a shared understanding of priorities 36. Managers pursuing a _____ seek to make their product or service different from those of competitors on dimensions valued by customers. a. global strategy b. differentiation strategy c. cost leadership strategy d. multipoint competition strategy 37. A manufacturer striving to be the lowest-cost producer of a product or service, while charging slightly less than industry-average prices, is pursuing a/an_____. a. cost leadership strategy b. differentiation strategy c. integrated leadership strategy d. multipoint competition strategy 38. Cost leadership and differentiation are _____. a. focused strategies for management processes b. targeted strategies for gaining market share c. generic strategies for obtaining a competitive advantage d. strategic methods for integrating internal and external analyses 39. Which of the following typically does NOT help achieve cost leadership? a. use of special technology b. employing economies of scale c. offering superior products and services d. selling more products through existing sales channels 40. If a firm has lower costs than its competitors and it can command prices similar to its competitors, then it can obtain _____. a. average profits b. premium profits c. fair-market profits 82 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)
  8. 8. d. above-average profits 41. Which of the following provides the best explanation of why consumers are willing to pay a premium price for Starbucks coffee? a. Starbucks coffee is roasted, giving it a distinctive flavor. b. Starbucks is a clearly recognized and respected brand. c. Starbucks employees are trained to be attentive to customers. d. Starbucks differentiates itself through its product, service, and brand reputation. 42. A customer segment is defined as a group of customers who _____. a. place similar value on product features b. are the first to purchase innovative products c. are found in the same geographical location d. have homogenous demographic characteristics 43. A firm that differentiates its product based on style and performance and targets a narrow segment of customers is pursuing a/an _____. a. multipoint competition strategy b. focused differentiation strategy c. focused cost leadership strategy d. integrated differentiation-cost leadership strategy 44. To succeed when pursuing a _____, there must be significant differences among the firm’s target customers or among geographical segments of its customers. a. focus strategy b. global strategy c. leveraged strategy d. competitive strategy 45. A company seeks to enter the soda market by introducing an unusual line of sodas that glow in the dark. It intends to sell these sodas at no greater cost than normal sodas. What strategy is the company using in entering the soda market? a. cost leadership strategy b. multipoint differentiation strategy c. focused differentiation strategy d. integrated differentiation-cost leadership strategy 46. A _____ involves competing with firms across markets by using strengths in one market to overcome weaknesses in another market. 83 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)
  9. 9. a. global strategy b. multicultural strategy c. differentiation strategy d. multipoint competition strategy 47. A company decides to enter the commercial education market by purchasing a small company that prepares paying students to take high-stakes tests. How is the company choosing to enter this new market? a. by acquisition b. by organic growth c. by strategic alliance d. by leveraging core competencies 48. The “Seven S” approach developed by McKinsey Consulting _____. a. helps managers develop appropriate strategic alliances b. allows managers to acquire, train, and develop personnel c. provides instant access to and immediate knowledge of new markets d. is perhaps the most widely used strategy implementation framework 49. McKinsey discovered that performance declined when many of their clients implemented new strategic plans because the strategies were _____. a. not developed organically within the company b. executed without sufficient studies of the competitive environment c. implemented within old structures, cultures, skills, styles, and staff d. not designed, recommended, and reviewed by McKinsey consultants 50. Companies perform _____ to reinforce efforts that have contributed to desired results and to correct those that have not. a. internal audits b. SWOT analyses c. benchmarking exercises d. organizational performance evaluations Short Essay Questions 51. What is the meaning of the term “competitive advantage”? (p. 116) The concept of competitive advantage involves the ability of a firm to win consistently over the long term in a competitive situation. 52. Discuss the four required elements for competitive advantage. (pp. 116 – 117) 84 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)
  10. 10. These elements are superiority, rarity, inimitability, and non-substitutability. Superior value is sometimes referred to as either comparative advantage or distinctive competence. The essence of superior value as an aspect of competitive value is embodied in the following question: Does the firm provide products and services that produce value for customers that is superior to any provided by competitors? When applied to a company, the element of rarity means that no other firms can have the capabilities needed to provide the quality and quantity of services it can produce. If no other firms hold similar capabilities, and the company produces superior value for its customers, then it will hold a competitive advantage. Possessing rare capabilities that enable it to provide superior value for customers will only give a company a temporary advantage. Therefore, companies must create barriers that make it difficult for others to imitate these capabilities. Such barriers can range from the size of the company to its culture and corporate reputation. Finally, a low possibility of substitution is required for a company to maintain its competitive advantage over time. The term “substitution” refers to the ability of customers to fulfill their needs by alternate means. 53. What is the purpose of a strategic vision? (p. 118) The strategic vision provides a view of the firm over the long term and what it should achieve in the future. It is the heart of the firm’s strategy and strategic plan. 54. What elements are included in a firm’s mission statement? (pp. 118 – 119) A mission statement includes the following: company philosophy, company identity, primary products or services, customers and markets, geographic focus, obligations to shareholders, and commitment to employees. 55. Name the forces in the general environment that can influence the effectiveness of an organization’s strategy. (p. 119) The general environment consists of sociocultural, technological, economic, political- legal, and global forces. 56. Name the five industry and competitor forces that can significantly influence the performance of organizations within an industry. (p. 123) Michael Porter developed perhaps the most well known model for analyzing a firm’s industry and competitor environment. The framework focuses on five forces: the nature of rivalry, new entrants, substitutes, customers, and suppliers. 85 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)
  11. 11. 57. What is a value chain? (p. 126) A value chain is a set of key activities that directly produce or support the production of what a firm ultimately offers to customers. The primary activities of a value chain include inbound logistics, operations, outbound logistics, marketing and sales, and after-sale service. The support activities of a value chain include firm infrastructure, human resource management, technology development, and procurement. 58. What happens during a SWOT analysis? (p. 129) During a SWOT analysis, a firm’s internal strengths and weaknesses are weighed, as well as its external opportunities and threats. First, a company should identify and evaluate its strengths and weaknesses. Next, it should focus on the external environment; that is, the opportunities and threats. Important insights can be obtained after comparing and matching the strengths and weaknesses of the organization and the opportunities and threats of the business environment. 59. What is the importance to a business of setting strategic objectives? (p. 130) Setting strategic objectives is a critical step in the strategic management process because it assists in (1) appropriate allocation of resources, (2) reaching a mutual understanding of priorities, (3) delegating responsibilities, and (4) holding people accountable for results. 86 Copyright © (2009) Pearson Education, Inc. Publishing as (Prentice Hall)

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