02 Apr SECTION 1ManagingThe Strategy-Making Process ForCo
SECTION 1ManagingThe Strategy-Making Process ForCompetitive Advantage-The principal driver(s) of shareholder value is (are)profitability.profit growth.market share.profitability and profit growth.-A competitive advantage is considered to be a sustained competitive advantage when theadvantage endures for a long time.firm is able to spread the advantage to all of its business units.advantage is very large.advantage was gained at a low cost.-Functional managerslook at the overall picture of a corporation.are responsible for the specific business functions or operations that constitute a company or one of its divisions.have no strategic role.formulate generic strategies.-The first step in the strategic management process isdefining the mission and major goals of the organization.analyzing the macro- environment.analyzing the industry environment.determining the firm’s strengths and weaknesses.-Aaron planned to cut prices at his bicycle shop, but when a competing shop began to offer free repairs, Aaron decided to copy them. Aaron’s new strategy offer free repairs is an example of a(n)mistake.deliberate strategy.emergent strategy.intended strategy.-The scenario approach to strategic planning involveshoming in on a single prediction of future demand conditions using an iterative planning process.devising plans for coping with a number of different possible future states of the world.functional managers setting key corporate objectives.using computers to build virtual worlds for top-level managers.-Which of the following cognitive biases occurs when decision makers commit even more resources when they receive feedback that the project is failing?Prior hypothesis biasReasoning by analogyIllusion of controlEscalating commitment-EdwardWrapp’s ideas about the astuteness of political power suggest that successful strategic managersare skilled organizational politicians who can build consensus and get their ideas pushed through.are unwilling to live with less than total acceptance of their programs.maintain tight control over as many decisions as possible.publicly commit themselves to bold strategic agendas.-Devil’s advocacyis simpler than the expert approach.is an example of ivory tower planning.involves one group member being responsible for questioning the assumptions of a plan.results in unproductive conflict.-Which of the following is NOT a characteristic of well-constructed goals?They are precise and measurable.They are the result of a group decision process.They specify a time period.They are challenging but realistic.-The primary goal of a SWOT analysis is tobenchmark a company’s performance.force managers to think creatively rather than analyticallyforecast future events.create, affirm, or fine-tune a company-specific business model.-Systematic errors in the decision-making process are caused byinadequate information.information overload.cognitive biases on the part of decision makers.poor data collection procedures.SECTION 2 Building Competitive AdvantageThrough Functional-Level Strategy-Which of the following is NOT a characteristic of emotional intelligence?Self-awarenessSelf-regulationSelf-esteemEmpathy-Economies of scale may be foundin several of a company’s departments.only in manufacturing operations.principally in research and development activities.primarily in administrative areas of a company.The experience curve refers to thelearning by doing technique.company’s overall experience in a particular industry.systematic lowering of the cost structure and unit cost reductions.diseconomies of scale caused by inexperienced workers.-Managers should not become complacent about efficiency-based cost advantages becauseneither learning effects nor economies of scale go on forever.the experience curve is likely to bottom out at some pointcost advantages gained by experience effects can be made obsolete by the development of new technologies.all of these choices.-The marketing strategy that a company adoptshas little impact on a company’s efficiency and cost structure.has an effect on efficiency and cost structure, but the extent of this effect cannot be determined.should not take into account the impact the strategy has on efficiency or cost structure.can have a major impact on efficiency and cost structure.-The use of self-managing teamsis limited to only very large organizations.requires members to coordinate their own activities and make decisions.typically increases the need for supervisors.all of these choices.-A company’s infrastructure includes the company’sorganization structure, culture, and style of leadership.organization structure and morale level.culture and productivity levels.overall profitability levels.-Flexible manufacturing technologies allow companies tomass-produce a standardized output at a low delivered cost.avoid plant-level diseconomies of scale.ride down the experience curve more rapidly than competitors.produce small batches of customized products at a relatively low cost.-Just-In-Time inventory systemsare used only by manufacturing firms.are implemented primarily by the manufacturing function.have components arrive at a manufacturing plant just in time to enter the production process.are valuable when there is a labor dispute with a key supplier.-Which of the following is NOT one of the principles commonly found in companies that have successfully embraced the TQM philosophy?Building an organizational commitment to qualityCreating a separate quality department within the firmA strong customer focusFinding ways to measure quality-Poor commercialization of new productsis the result of inefficient manufacturing technology.occurs when a company markets a product for which there is not enough demand.occurs when a product is not well adapted a customer’s needs.is due to poor quality.-Which of the following recommendations would NOT be appropriate for a manager who was starting a cross-functional product-development team?Let the team members co-manage the team.Locate team members in the same physical space.Allow the team to develop its own communication and conflict resolution processes.Compose the team with members from each of the key functional areas.-Which of the following statements about customer focus is false?It must start at the top of the organization.It can be facilitated by soliciting feedback from the customer.It requires that all employees see the customer as the focus of their activity.It can be achieved by mass customization.SECTION 3 STRATEGY IN THE GLOBAL ENVIRONMENT-The globalization of production has allowed firms toincrease their market share.lower their cost structure.respond to individual market segments.avoid international competition.-When a company performs a value creation activity in the optimal location for that activity, wherever in the world that might be, it is trying to capitalize oneconomies of scale.economies of scope.the transnational strategy.location economies.-Which of the following is NOT a necessity for leveraging the skills of global subsidiaries?The firm must have incentives for local managers to share knowledge and ideas.The firm’s managers must be aware that competencies can develop anywhere.The firm must be pursuing a strategy of differentiation.The firm’s managers must help to transfer competencies around the company.-Global expansionis feasible only for large companies.can enable companies to increase their profitability and grow their profits more rapidly.allows domestic companies in the mature stage of the industry life cycle to maintain profits but not to increase them.requires locating facilities in foreign countries.-Which of the following factors increases pressures for cost reductions?Price as the main competitive weapon in a marketIncreasing national wealthGreat transportation needsDifferences in distribution channels-Which of the following factors increases pressures for local responsiveness?Powerful buyersPersistent excess capacityDifferences in customer tastes and preferencesTrade barriers-A localization strategy is based on which of the following ideas?There is a convergence in the tastes of consumers in different nations of the world.There are substantial economies of scale to be realized from centralizing global production.Consumers tastes and preferences differ among national markets.Competitive strategy should be centralized at the world head office.-The Achilles heel of international strategy is thatmarket demand inevitably dries up.costs cannot be sufficiently controlled over long periods of time.prices eventually tumble drastically.competitors inevitably emerge.-Which of the following is NOT an objective of a transnational company?Low cross-national integrationRealization of location economiesLocal responsivenessGlobal learning-A company that enters a foreign market by entering into a licensing agreement with a local companycan realize location economies.can engage in global strategic coordination.can realize experience-curve effects.risks losing control over its technology to the venture partner.-Which entry mode gives a multinational the tightest control over foreign operations?Exporting from the home country and letting a foreign agent organize local marketingSetting up a wholly owned subsidiaryFranchisingLicensing-Factors of production include all but which of the following?LandRaw materialsEthnic diversityManagerial sophisticationSECTION 4 Building Competitive AdvantageThrough Business-Level Strategy-To create a successful business model, managers must choose a set of business-level strategies thatallow the company to better compete with rivals within an industry.help them decide what businesses to enter and exit.help build an organizational structure that contains multiple businesses.work together to give a company a competitive advantage over its rivals.help it to diversify to better leverage distinctive competencies.-Which of the following is not a generic competitive strategy?Cost leadershipDifferentiationFocused cost leadershipFocused differentiationInnovation-The main difference between companies following a cost leadership strategy and those following a focused cost leadership strategy isstandardized market price.industry life cycle stage.degree of market segmentation.age of the market.market trajectory.-Alarge company produces a variety of clothing for different customer groups. This firm is pursuing which of the following strategies?Cost leadershipDifferentiationBoth cost and differentiationFocusShare building-The most expensive competitive strategy to pursue isdifferentiation.cost leadership.focus.growthhypercompetition.-In which of the following situations does a differentiation strategy make the most sense?The industry is fragmented into different customer groups, each of which has different needs.Customer needs are primarily satisfied by the price of the product.There is a lot of technological change.There are low barriers to entry and exit.The industry is in the maturity stage of the life cycle.-A shrinking market segment poses the greatest threat to a company pursuing which of the following strategies?Cost leadershipDifferentiationFocused differentiationGrowthBoth cost leadership and differentiation simultaneously-Jordan’s ice cream stand offers different combinations of premium flavors, cones, and toppings to create hundreds of extravagant, customized products. Which generic strategy is Jordan following in the restaurant industry?Cost leadershipDifferentiationFocused cost leadershipFocused differentiationBoth cost leadership and differentiation simultaneously-Market segmentation is best described as what type of process?StaticRegressiveEvolvingNormativeRevolving-Companies that successfully differentiate a product often charge blank____ prices for them.premiumexorbitantbelow costaveragenone of these choices-A company pursuing a cost-leadership strategy does which of the following?Includes substandard components in the product to keep costs lowChooses strategies that keep costs as low as feasible and are effectiveKeeps advertising expenses at a maximumRelies on patent protections to keep costs lowNone of these choices-If a company uses a focused cost-leadership strategy, it competes in the market segments whereit can operate at no cost disadvantagewhere cost is not a high concern.it can operate at a minimal cost disadvantage.there is frequently little or no competition.none of these choices.-A strategic group is a group of companies within a particular industrywith the same overhead costs.with the same cost structure.that are pursuing a similar business model.that are using the same suppliers.all of these choices.SECTION 5 Corporate-Level Strategy: HorizontalIntegration, Vertical Integration, AndStrategic Outsourcing-The final part of the strategy formulation process isformulation of business-level strategies.formulation of functional-level strategies.formulation of corporate-level strategiesdevelopment of functional-level goals.development of business-level goals.-When a company decides to expand into new industries, it mustconstruct its business models at two levels.secure government approval from the Securities and Exchange Commission (SEC).select a new CEO.all of these choices.none of these choices.-A specialized asset is one that is designed toperform a multitude of generic tasks.perform a specified sequence of tasks.perform several nonsequential tasks.perform a specific task.none of these choices.-Many industries have experienced increased consolidation over the last decade due to an increase instrategic alliances.vertical integration.horizontal integration.franchising.diversification.-Which of the following is a benefit that firms should expect to gain from the use of horizontal integration?Expanded control over stages of the supply chainBetter realization of economies of scaleShared risk with another firmReduced risk of holdupReduced investments in noncore activities-Horizontal integration in an industry tends toincrease rivalry among firms.reduce rivalry among firms.have little effect on rivalry among firms.reduce the number of consumers buying the products.none of these choices-Antitrust regulationfavors large companies.reduces industry competitionis concerned with companies’ abuse of their market power to raise prices for consumers above the level that would exist in more competitive situations.tends to raise prices for consumers.enables the achievement of market power.-When an intermediate manufacturer moves into final assembly, it is pursuingbackward integration.forward integration.taper integration.related diversification.unrelated diversification.-Vertical integration can be disadvantageous whencompetitors are vertically integrated.demand is stable.industry technology is changing rapidly.technology is changing slowly.competitors are vertically integrated and industry technology changes rapidly.-th of data suggests that most mergers and acquisitionscreate extensive value for the companies involved.do not create, and may actually reduce, value for the entities involved.create and sustain large and immediate increases in value.have little financial impact on the firms involved.none of these choices.-Companies can maintain market discipline over suppliers byoutsourcing.demanding hostages.attaining a credible commitment.parallel sourcing.full integration.-Credible commitmentsare believable promises or pledges to support the development of a long-term relationship between companies.facilitate diversification based on acquisitions and restructuring.facilitate competitive bidding.facilitate vertical integration.reduce the risk of losing proprietary technology to a venture partner and facilitate vertical integration.-Another name for long-term cooperative relationships between two or more companies who agree to commit resources to develop new products ishorizontal integration.outsourcing.strategic alliance.joint venture.vertical integration.-When there is a minimal need for close long-term cooperation between a company and its suppliers, which of the following strategies is the most appropriate?Full integrationTaper integrationCompetitive biddingLong-term contractingDiversification based on economies of scope-To ensure the easy transfer of important competitive information between a firm and its outsourcing contractors, the firm shouldexchange hostages.use parallel sourcing.lengthen the supply chain.develop trust.become a virtual corporation.-A credible commitment on the part of two companies is an example of ashort-term agreement.commitment that may be terminated by either company at any time.believable promise or pledge to support the development of a long-term relationship between companies.public relations gesture undertaken to stimulate sales.marketing strategy.-Strategic outsourcing is best described as ameans of getting rid of excess activities.way of getting other companies to do what the outsourcing company no longer wants to do.method of streamlining the marketing activities of a company.decision to allow one or more of a company’s value chain activities to be performed by other companies.none of these choices.
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