TEST BANK for Crafting & Executing Strategy: The Quest for Competitive Advantage: Concepts and Cases by ACADEMIAMILL

Chapter 1 What Is Strategy and Why Is It Important? 1)

What is strategy and why is it important?

2) Briefly define each of the following terms: ● sustainable competitive advantage ● deliberate strategy ● emergent strategy ● realized strategy ● abandoned strategy

What are the three tests of a winning strategy?

4) Identify and briefly describe the five most frequently used strategic approaches to achieving a sustainable competitive advantage. Provide examples.

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5) What is the connection between a company's strategy and its quest for sustainable competitive advantage?

Provide at least two examples of a company's competitively valuable capabilities.

7) What are the three questions that managers can use to distinguish a winning strategy from a so-so or flawed strategy? Briefly explain why each question is important.

8) Should a company's strategy be tightly connected to its quest for competitive advantage? Why or why not? What difference does it make whether a company has a sustainable competitive advantage or not?

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9) During a recession, a high-end beverage producer facing strong competition in a saturated market has decided to phase out all its flagship products and introduce a new line of second-label beverages at lower price points in reaction to its falling market share. Would this type of a reactive strategy revive its position? Why or why not?

10)

Compare the business models of Gillette and Epson.

11) Why are the capabilities needed to build a sustainable competitive advantage so important to a winning business strategy? Cite one of the company examples in the chapter to illustrate your answer.

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12)

Why is a company's strategy typically a blend of proactive and reactive approaches?

13) Can an organization succeed by pursuing strategies that are proactive and reactive? Explain.

14) Explain why a company's strategy cannot be completely planned out in advance and why crafting a company's strategy cannot be a one-time, once-and-for-all managerial exercise. Identify at least three factors that account for why company strategies evolve.

15)

Explain in detail what a company's business model entails.

16)

What factors determine whether a strategy can be called a winning strategy?

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17)

How can a manager tell a winning strategy from a strategy that is mediocre or a loser?

18)

Why is sustainable competitive advantage so important to a winning business strategy?

19) Why is it appropriate to argue that good strategy-making combined with good strategy execution are valid signs of good management?

20) Mediocre execution of a powerful strategy is a proven recipe for winning in the marketplace. True or false? Explain your answer.

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21) Good strategy plus good strategy execution equals good management. True or false? Justify and explain your answer.

22) Apple Inc.'s strategy, outlined in Chapter 1, represents a managerial commitment to an integrated array of considered choices about how it should compete. What are the hallmarks of Apple Inc.'s strategy?

23) A new entrant in a market dominated by established players introduces itself with copycat products of another competitor. Would this strategy work in the long term for the firm? Justify your answer.

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24) An established manufacturer and marketer of apparel and equipment for competitive sports is fast losing market share to companies that not only offer similar products, but also are upgrading their research and development capabilities to produce better products. List a few general actions and approaches that would help the established company revive its position.

25) A well-established brewery offers lower-priced beer to powerful supermarket buyers at widespread locations and has loyal distributors that supply mass goods to supermarket retailers. With fewer ways to achieve differentiation in the market, most new microbrewery entrants offer similar products but lack sufficient funding to compete against the well-established brewery. Which strategy could new microbrewers employ? Explain your answer.

26) In late June 2020, Uber consummated a deal to purchase Postmates, a mobile food delivery service, for about $2.6 billion, as the on-demand food delivery market had consolidated and Uber sought for new ways to make money. The tie-up was expected to bolster Uber’s delivery business, Uber Eats, and help the company compensate for the cratering of its core ridehailing business, which had collapsed in many cities because of the COVID-19 pandemic in 2020. Food delivery was not yet profitable, but demand had soared while restaurants were closed and people were primarily dining at home. What type of strategy—proactive or emergent—did Uber use to try and regain a competitive advantage?

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27) A mobile on-demand transportation company with an established brand name uses a unique mobile app and GPS mapping technology to reduce the time for drivers to pick up passengers and take them to their destinations. It then gives the mobile apps away free to all riders. Which of the five generic strategies is this company using?

28) A dining facility with multiple branches caters to newlywed couples only. The ambience, special live music arrangements for each couple, and privacy of the dining sections have become a rage among newlyweds. Which of the five generic strategies has the company used?

29) LinkedIn specializes in social networking for businesses and recruiters. Which of the five generic strategies is LinkedIn employing?

30) An electronic chip manufacturer has a quarterly release of its products. What can you say about its strategy?

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31) A data storage company realizes that its facilities are used mostly by financial institutions. It capitalizes on the opportunity and starts storing specific financial information only and is now one of the most sought-after financial databases. What strategy has the company employed?

32) An established company in a market decides to donate a part of its profits to a children's charity to improve its market image. Soon after, it launches a website that offers new clothes, accessories, and books that could be donated to various children's charities by interested parties. The company gained positive publicity and its sales went up. What would you say about this strategy?

33) Keurig, a coffee machine manufacturer, sells high-quality espresso machines at a very low price but provides low-cost refills of varietal coffee pods at a relatively higher price than rivals. Explain this business model.

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34) A pizza maker manufactures thin-crust pizzas and offers free soft drinks with a pack of four pan pizzas. What can you say about its Value-Price-Cost Framework?

35) A new entrant into the mobile phone market imitates its rivals' cell phones, feature for feature, but offers its products at a 20 percent discount over its rivals' prices. What can you say about the new entrant's prospects for long-term success?

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36) During the COVID-19 pandemic, the news for American meat processers was dire. The coronavirus sickened and killed their workers, restaurants ran out of beef, and pork processors were forced to dispose of their stock due to closed processing plants. The meat industry’s troubles were thought to have provided a boost for plant-based meat substitutes, which had a jump of 35 percent in sales from February through May 2020. Impossible Foods and Beyond Meat both made products that look, cook, and taste similar to conventional meat. But their supplies are steady—and even increasing. Their factories were considered to be safer than traditional meat plants, with no coronavirus outbreaks among workers. While their meat substitute products traditionally cost more than conventional meat at the grocery stores and restaurants, these companies were able to take advantage of the situation to present a bigger value proposition to consumers. What winning strategies could account for Impossible Foods’s and Beyond Meat’s becoming standout performers in the marketplace?

37) Explain why some companies get to the top of industry rankings and stay there, while others do not.

38) In late June of 2020, lululemon, the purveyor of expensive athleisure and activewear, announced that it was betting on the future of personalized remote exercise as a way to reach customers by acquiring Mirror, a home fitness start-up that sells a $1,495 wall-mounted machine for streaming workout classes. The value of that deal was an estimated $500 million. Mirror charged customers $39 a month to stream its live or on-demand classes. The purchase was said by observers to fit with lululemon’s ambitions to become an experiential brand—from clothing to workouts to memories of those sessions—and to add Mirror’s revenue stream to that of lululemon’s. What type of generic strategy is lululemon using to sustain a competitive advantage?

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39) Managers of all types of business organizations must develop a clear answer for which of the following questions? A) What approaches do we need to take in order to gain a competitive advantage in the marketplace? B) What is the set of actions that we need to take to outperform competitors and achieve superior profitability? C) Where are we now? D) Where do we go from here? E) When will we know that we are there?

40) Sanofi, a pharmaceutical company selling prescription drugs in France for the past 10 years, has had moderate sales in a crowded market while its rivals manufacture and market drugs having similar efficacy and safety precautions, but with superior market share. This particular pharmaceutical company's greatest challenge is to increase prescriptions of their drugs by French doctors. What would be the most effective strategy for Sanofi to improve sales performance in its existing market? A) modifying marketing communication to increase brand familiarity within key physician segments B) relocating all the existing drug manufacturing facilities to developing countries to reduce operational costs C) employing hiring plans that aim at acquiring drug designers from rival companies D) exiting the market and entering a new unexplored geographical location E) engaging in new contract talks with suppliers about price breaks

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41) You have been hired as a consultant by SandCloud, a venture-backed established company in the beachwear and toweling markets. SandCloud’s owners are weighing a decision to donate a part of its profits to a children's charity to improve its market image. Your advice to SandCloud regarding strategy is that it will consist of the action plan management takes to A) develop a more appealing business model than rival beachwear and toweling companies. B) compete against rivals in the beachwear and toweling industry and establish a transitory competitive advantage. C) concentrate on improving its existing product offering irrespective of its decision to donate a percentage of its profits to a children’s charity. D) stake out a unique market position in beachwear and toweling markets and achieve superior profitability. E) identify its strategic vision, its strategic objectives, and its strategic intent.

42) Keurig, the coffee machine manufacturer, sells high-quality espresso machines at a very low price and also provides low-cost refills of varietal coffee pods at a relatively higher price than rivals. The action steps that Keurig’s managers take to outperform the company's competitors and achieve superior profitability are known as its A) strategy. B) mission statement. C) strategic intent. D) value-cost-price framework. E) market visioning statement.

43)

Strategy, at its essence, is about

A) matching rival businesses' products and quality dimensions in the marketplace. B) building profits for short-term success. C) realigning the market to provoke change in rival companies. D) developing lasting success that can support growth and secure the company's future over the long term. E) re-creating a business model with regularity.

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44) as

To improve performance, there are many different avenues for outcompeting rivals, such

A) realizing a higher cost structure and lower operating profit margins than rivals in order to drive sales growth. B) creating products analogous with competitors so as to be competitive in the same markets. C) pursuing similar personalized customer service or quality dimensions as rivals. D) being undecided whether to concentrate operations on local or global markets. E) strengthening competitiveness by pursuing strategic alliances and collaborative partnerships.

45) Pizza Port, a craft brewing and pizza chain in southern California, manufactures thincrust pizzas and offers one free pint of beer with the purchase of four large pizzas. What would you advise Pizza Port’s owners not to do to craft a strategy that will enhance its future profits? A) Establish a distribution plan to set up more rapid pizza and beer delivery than any other rivals in the region, B) Devise a social media marketing plan that aims at mass customer segments, providing them with updates on new releases of beer, attractive advertisements, and offers on products. C) Implement a diversification plan that aims at eventually adding regions outside of southern California to its existing line of products. D) Chart an acquisition plan that aims at rebranding and creating franchises with local smaller-scale pizza restaurants and craft beer taprooms that seek funding and offer attractive locations. E) Create a sales plan that aims to enhance initial sales and market penetration with low prices based on high operational costs.

46)

A cleverly crafted and well-executed strategy

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A) precludes the capture of emerging opportunities. B) produces mediocre financial performance. C) immunizes a business from changing macro-economic and market conditions. D) provides direction only in terms of what the company should do. E) can withstand the competitive challenges from rival firms.

47)

A company's strategy is not concerned with management's choices about how to A) attract and please customers. B) stake out the same market position as successful rival companies. C) grow the business. D) compete successfully. E) conduct operations and improve the company's financial and market performance.

48) FaberRoad, a respected courier brand, is rapidly losing its market share to competitors who do overnight deliveries of packages or offer lower prices. The company's research department has found that many customers care more about knowing exactly when a package will arrive than getting it the next day. Which strategy would best address the current state of FaberRoad and help it regain its market? A) employing night delivery drivers at a high cost and maintenance charges B) developing radio tags that could be attached to packages to allow for real-time tracking by customers' PCs and mobile phones C) diversifying the different types of packages that can be transported and enabling booking through calls D) acquiring small transportation companies with cheaper trucks and tempos, rebranding, and using them for deliveries E) engaging in expensive advertising with new tag lines and famous celebrities to enhance its brand image in the market

49)

A company's strategy stands a better chance of succeeding when

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A) it is developed through a collaborative process involving all managers and staff from all levels of the organization. B) managers employ conservative strategic moves based on past experience and form an underlying basis of control. C) it is predicated on competitive moves aimed at appealing to buyers in ways that set the company apart from rivals. D) managers copy the strategic moves of successful companies in its industry. E) managers focus on meeting or beating shareholder expectations.

50)

In crafting a company's strategy, managers

A) face the biggest challenge of how closely to replicate strategies of successful companies in the industry. B) have comparatively little freedom in choosing the "hows" of strategy. C) are wise not to decide on concrete courses of action in order to preserve maximum strategic flexibility. D) need to come up with a sustainable competitive advantage that draws in customers and produces a competitive edge over rivals. E) are well-advised to be risk-averse and develop a "conservative" strategy—"dare-to-bedifferent" strategies are rarely successful.

51)

The heart and soul of a company's strategy-making effort is determining how to

A) become the industry's low-cost provider. B) maximize profits and shareholder value. C) improve the efficiency of its business model. D) maximize profits while simultaneously operating in a socially responsible manner that keeps the company's prices as low as possible. E) come up with moves and actions that produce a durable competitive edge over rivals.

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52) The pattern of actions and business approaches that would not define a company's strategy include actions to A) strengthen market standing and competitiveness by acquiring or merging with other companies. B) strengthen competitiveness via strategic coalitions and partnerships. C) upgrade competitively important resources and capabilities. D) gain sales and market share with lower prices despite increased costs. E) strengthen the firm's bargaining position with suppliers and distributors.

53) A creative, distinctive strategy that delivers a sustainable competitive advantage is important because A) without a competitive advantage a company cannot become the industry leader. B) without a competitive advantage a company is likely to fall into bankruptcy. C) crafting a strategy that yields a competitive advantage over rivals is a company's most reliable means of achieving above-average profitability and financial performance. D) a competitive advantage is what enables a company to achieve its strategic objectives. E) how a company goes about trying to please customers and outcompete rivals is what enables senior managers to choose an appropriate strategic vision for the company.

54)

A company achieves a competitive advantage when it

A) provides buyers with superior value compared to rival sellers or offers the same value at a lower cost. B) has a profitable business model. C) is able to maximize shareholder wealth. D) is consistently able to achieve both its strategic and financial objectives. E) has a strategy well-matched to its business model.

55) A creative and distinctive strategy that sets a company apart from rivals and that gives it a sustainable competitive advantage

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A) is a reliable indicator that the company has a socially responsible business model. B) is achievable in emerging but not mature industries. C) is a company's most reliable ticket to above-average profitability. D) signals that the company has a bold, ambitious strategic intent that places the achievement of strategic objectives ahead of the achievement of financial objectives. E) is the best indicator that the company's strategy and business model are well-matched and properly synchronized.

56)

What separates a powerful strategy from a run-of-the-mill or ineffective one?

A) the ability of the strategy to keep the company profitable B) the proven ability of the strategy to generate maximum profits C) the speed with which it helps the company achieve its strategic vision D) management's ability to forge a series of actions, both in the marketplace and internally, that sets the company apart from rivals and produces sustainable competitive advantage E) whether it allows the company to maximize shareholder value in the shortest possible time

57) Volta Motors, a manufacturer of self-driving delivery trucks, is working on developing its next-generation electric vehicles. It has decided on a strategy of focusing on a narrow buyer segment and outcompeting rivals by offering buyers customized autonomous, self-driving electric vehicles at a lower cost than rivals. What basic strategic approach has Volta Motors decided upon? A) focused differentiation B) best-cost provider C) low-cost provider D) broad differentiation E) focused low cost

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58) Strategic approaches to set a company apart from rivals and achieve a sustainable competitive advantage are not likely to include A) striving to be the industry's low-cost provider. B) outcompeting rivals on the basis of differentiating features that will appeal to a broad spectrum of buyers. C) developing a best-cost provider strategy that gives customers more value for the money. D) focusing on a narrow market niche and serving buyers' special needs and tastes. E) striving to be the industry's high-price provider.

59) If you were advising Rebel Toad Brewing, a local brewpub, about how to set itself apart from rivals and achieve a sustainable competitive advantage, you would most likely not recommend that Rebel Toad Brewing A) strive to be the industry's low-cost provider, thereby aiming for a cost-based competitive advantage. B) outcompete rivals on the basis of differentiating features such as higher quality, wider product selection, added performance, better service, more attractive styling, technological superiority, or unusually good value for the money. C) mimic the successful strategies of rivals. D) focus on a narrow market niche to achieve a competitive edge by doing a better job than rivals of satisfying the needs and tastes of buyers composing the niche. E) develop a cost advantage based on offering more value for its patrons' money.

60) Soap is critical for hygiene, but it’s not always available in certain areas around the world. Pacha Soap is trying to change that via small production of all-natural handmade soap sold primarily through selected Whole Foods stores. For every bar of Pacha Soap purchased, Andrew and Abigail Vrbas, the company’s founders, donate a bar to someone in need. Pacha Soap, however, enjoys the least bargaining power with its suppliers because the company is

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A) involved in mass production of its products to cater to an expanding customer base. B) actively catering to a broad, price-sensitive customer base. C) manufacturing high-quality soap and related bath products from readily available raw materials for a broad customer base. D) selling soap and related bath products deemed to be highly popular and easily available across most supermarkets. E) offering high-cost specialized soap that could be purchased primarily by socially conscious customers in limited markets.

61) Winning a sustainable competitive edge over competitors does not hinge on which of the following? A) having a distinctive competitive product offering B) building competitively valuable expertise and capabilities not readily matched and offering distinctive products C) building experience, know-how, and specialized capabilities that have been perfected over a long period of time D) having hard-to-beat capabilities and impressive product innovation E) building products and distributing them at low prices to a broad customer base irrespective of manufacturing cost

62) If you were asked to develop a low-cost provider strategy for a start-up passenger air carrier business, what would you most likely not recommend? A) offer low prices on short-distance flights and eliminate meals during flights B) offer low prices on long-distance flights and maintain long service times for aircraft between flights C) offer low prices on short-distance flights and improve airplane capacity by reducing the distance between existing seats to permit adding more rows of seating D) offer low prices on short-distance flights and pay flight attendants a minimum wage E) offer low prices on long-distance flights and charge fees for both carry-on and checked luggage

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63) Amy's Drive-Thru, a fast-food facility, offers healthy, sustainably grown veggie and vegan fast food at higher prices than its competitors in the market and has a drive-through and indoor seated casual dining operation. What strategy is Amy's Drive-Thru using to gain competitive advantage? A) a low-cost provider strategy B) a broad differentiation strategy C) a focused low-cost strategy D) a differentiation strategy E) a best-cost provider strategy

64) BloomsJay Resorts Inc. has multiple tropical resorts in various locations. In a crowded market that caters to all kinds of consumers, this resort caters mainly to gays with a guaranteed hassle-free holiday experience at a premium price. What strategy is BloomsJay using to gain competitive advantage? A) a low-cost provider strategy B) a broad differentiation strategy C) a focused low-cost strategy D) a focused differentiation strategy E) a best-cost provider strategy

65)

Identify the company with a low-cost provider strategy.

A) A fashion clothing line uses sought-after designers and natural fabrics. B) A mortgage company specializes in lending money for second homes. C) An online retailer delivers organic groceries overnight. D) A baby products retailer sells unassembled baby furniture produced in China. E) A dairy products manufacturer uses exotic substitutes to produce lactose-free dairy products.

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66) Giving customers more value for the money by satisfying their expectations on key quality features, performance, and/or service attributes while beating their price expectations is a strategy. A) best-cost provider B) focused low-cost C) focused differentiation D) broad differentiation E) low-cost provider

67) An evolving strategy for a ride-share business like Uber or Lyft is not likely to be triggered by A) their need to keep strategy in step with changing circumstances, market conditions, and changing customer needs and expectations. B) the proactive efforts of their managers to fine-tune and improve one or more pieces of the strategy. C) their need to abandon some strategy features that have been faltering or are no longer working well. D) their need to respond to the newly initiated actions and competitive moves of manufacturers of autonomous vehicles. E) their need to respond to short-term swings in the stock market that impact timing of an initial public offering (IPO).

68)

A "repeatedly evolving strategy" best applies to a

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A) console gaming hardware and software manufacturer, established in a saturated market, that plans its research and development activities to allow for quarterly releases of new products that match or overtake features of rivals' gaming platforms. B) manufacturer and marketer of home fitness equipment and subscription services for socially distant workout sessions. C) start-up natural cosmetics manufacturer that replicates the products of rivals but at a comparable quality and lower price. D) regional supermarket chain that specializes in catering to Hispanic and Latinx consumers. E) not-for-profit housing agency that formulates urban redevelopment plans during a four-year window of time and implements them phase by phase over that period.

69) Managers of every company should be willing and ready to modify their strategies because A) market conditions and circumstances are changing over time or the current strategy is clearly failing. B) the task of crafting strategy is a one-time event. C) the strategic vision necessitates periodic updating. D) frequent changes in strategy make it very difficult for rivals to imitate. E) all strategies are reactive.

70) Adapting to new conditions like new innovations by competitors, fast-changing technological developments, and constantly evaluating what is working result in A) an assured profitability strategy. B) a broad market entry strategy. C) an emergent strategy. D) unlimited revenue generation. E) a proactive strategy.

71)

Managers must be prepared to modify their strategy except when

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A) changing circumstances affect performance and the desire to improve the current strategy. B) rivals make or adjust moves in the market due to the shifting needs of buyers. C) encountering stagnating market conditions and increasingly restrictive new customer acquisition opportunities. D) evidence is mounting that the current strategy is becoming less effective. E) rivals announce their monthly profit margins in public.

72)

A company's strategy is a "work in progress" and evolves over time because of the

A) importance of developing a fresh strategic plan every year that keeps employees from becoming bored with executing the same strategy year after year. B) ongoing need to imitate the new strategic moves of the industry leaders. C) need to make regular adjustments in the company's strategic vision. D) ongoing need of company managers to react and respond to changing market and competitive conditions. E) frequent need to modify key elements of the company's business model.

73)

It is normal for a company's strategy to end up being

A) a blend of offensive actions on the part of managers to improve the company's profitability and defensive moves to counteract changing market conditions. B) a combination of conservative moves to protect the company's market share and somewhat more risky initiatives to set the company's product offering apart from rivals. C) a close imitation of the strategy employed by the recognized industry leader. D) a blend of proactive actions to improve the company's competitiveness and financial performance, and adaptive reactions to unanticipated developments and fresh market conditions. E) more a product of clever entrepreneurship than of efforts to clearly set a company's product/service offering apart from the offerings of rivals.

74)

Crafting a deliberate strategy involves developing strategy elements that

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A) imitate as much of the market leader's strategy as possible so as not to end up at a competitive disadvantage. B) comprise a five-year strategic plan that is then fine-tuned during the remainder of the plan period; big changes in strategy are thus made only once every five years. C) consist of a blend of proactive new planned initiatives plus ongoing strategy elements continued from prior periods. D) deliberately eliminate the ongoing strategic elements and implement new planned initiatives. E) consist of adaptive change plans to new market situations along with abandoned, redundant ongoing elements.

75)

Strategy formulation is

A) mostly hidden to outside view and is deliberately kept under wraps by top-level managers (so as to catch rival companies by surprise when the strategy is launched). B) typically planned well in advance and usually deviates little from the planned set of actions and business approaches because of the risks of making on-the-spot changes. C) static over time unless a newly appointed CEO decides to take the company in a new direction with a new strategy. D) typically a blend of proactive and reactive strategy elements. E) developed solely on the fly because managers must make constant efforts to come up with fresh moves to keep a company's product offering clearly set apart from the product offerings of rival firms.

76)

A company's realized strategy evolves from one version to the next due to

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A) changing management direction because of understanding several appealing strategy alternatives. B) the proactive efforts of company managers to improve the current strategy, a need to respond to changing customer requirements and expectations, and a need to react to fresh strategic maneuvers on the part of rival firms. C) ongoing turnover in the managerial and executive ranks (new managers often decide to shift to a different strategy). D) pressures from shareholders to boost profit margins and pay higher dividends. E) the importance of keeping the company's business model fresh and up-to-date.

77)

It is incorrect to say that a company's strategy evolves due to A) a need to promote stability and retain the status quo. B) the need to abandon some strategy elements that are no longer working well. C) a need to respond to changing customer requirements and expectations. D) a need to react to fresh strategic maneuvers on the part of rival firms. E) the proactive efforts of company managers to improve obsolete aspects of the strategy.

78)

In the course of crafting a strategy, managers typically do not

A) abandon certain strategy elements that have grown stale or become obsolete. B) modify the current strategy when market and competitive conditions take an unexpected turn or some aspects of the company's strategy hit a stone wall. C) revamp the current strategy in response to the fresh strategic maneuvers of rival firms. D) take proactive actions to improve this or that piece of the strategy. E) share the strategy publicly to obtain additional customer and shareholder support.

79)

Strategy is about competing differently than rivals; thus, strategy success is about

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A) the sources of sustained advantages and superior profitability. B) those emergent, unplanned, reactive, and adaptive plans that are more appropriate than deliberate or intended ones that drive the realized strategy. C) matching internal resources and capabilities to the industry environment. D) keeping the firm current with the rapid pace of change in the industry. E) replacing proactive and reactive measures by modified ongoing strategic elements to preserve company values.

80)

A deliberate strategy is best exemplified by a(n)

A) popular downtown theater that has been staging plays and showing films decides to begin booking rock and roll acts. B) airline company that cuts frills to cope with increasing fuel prices. C) IT firm that trims jobs during a recession. D) smartphone manufacturer that divests its tablet production branch after not gaining market share. E) online jewelry reseller that discontinues its line of turquoise rings due to lack of demand.

81)

An emergent strategy is best exemplified by a(n)

A) local hardware store that offers a 10 percent discount for seniors on the first Wednesday of every month. B) online book reseller that diversifies into custom book publishing. C) oil-change franchisor that continues geographical expansion despite a recession. D) healthy food manufacturer that integrates forward into drive-thru fast health food restaurants. E) microbrewer that invests in building community water wells during a drought.

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82) Consider the following three companies and their strategies. ● Company A is an established database management company that acquires a well-reputed but small publishing house to enter the booming publishing industry. ● Company B, a sports management house, declared bankruptcy during a recent recession but now has created a television network that airs regional sports events. ● Company C, a package delivery business, is a start-up based on delivery efficiency models created by a few students and delivers almost all kinds of packages. The use of strategies by these three companies can be analyzed accurately by saying that A) Company B employs an emergent strategy, whereas companies A and C employ deliberate strategies. B) All three companies employ deliberate strategies. C) All three companies employ emergent strategies. D) Company C employs a deliberate strategy; companies A and B employ emergent strategies. E) Companies A and C employ emergent strategies; company B employs a deliberate strategy.

83) A luxury bathtub manufacturer offered scented bubble bath foams and massage coupons as a gimmick when its bathtubs did not sell. The bubble foam became famous among some women and led to a line of exclusive bath products for women. The manufacturer established shops in various regional locations and hired celebrities to market its products to enhance sales. Now its products are sold through retail outlets and online sites throughout the world. Which of the following is accurate? A) Offering scented bubble bath foams and massage coupons was an emergent strategy. B) Creating a sub brand that offered exclusive bath products for women was an emergent strategy. C) Establishing shops in regional locations was an emergent strategy. D) Hiring celebrities to market its products was an emergent strategy. E) Creating a worldwide presence through retail outlets and online sites was an emergent strategy.

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84) Due to impending labor strife over planned layoffs in its Silicon Valley headquarters, a social networking company has decided to outsource its programming operations to an emerging market, India, to obtain cheaper labor. Since then, this social networking company has encountered criticism that has diminished its current market position and staff productivity. You have been retained by this company to develop an appropriate reactive (emergent) strategy that would begin by A) hiring and training new talent to begin operations in the emerging market. B) acquiring a local computer chip marketing and distribution specialist firm in the new location. C) canceling the idea of outsourcing and retaining the existing workforce to run operations. D) shifting the existing workforce to the new geographical location and paying them according to new standards. E) canceling the job cuts until the market situation and entry operations stabilize.

85)

A company's business model

A) concerns the actions and business approaches that will be used to grow the business, conduct operations, and stake a competitor's market position. B) is management's blueprint for how it will generate revenues sufficient to cover costs and yield an attractive profit. C) concerns what combination of moves in the marketplace it plans to make to outcompete rivals. D) deals with how it can simultaneously maximize profits and operate in a socially responsible manner that keeps its prices as low as possible. E) concerns how management plans to pursue strategic objectives, given the larger imperative of meeting or beating its financial performance targets.

86) The consumer goods companies listed below all pursue the same business model with the exception of

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A) Dell laptops. B) Gillette razors. C) Epson printers. D) Keurig espresso coffee machines. E) Nintendo Wii.

87)

Why is it important to craft a business model?

A) because it sets forth management's game plan for maximizing profits for shareholders B) because it details exactly how management's strategy will result in the achievement of the company's strategic intent C) because it is a part of an operating model that focuses on delivering excellence and creating value for external shareholders and internal labor force D) because it sets forth the key components of the enterprise's business approach, indicates how revenues will be generated, and makes a case for why the strategy can deliver value to customers in a profitable manner E) because it sets forth management's long-term action plan to match the business standards set by formidable rivals

88) Square attained a solid foothold in small retail and service businesses in the United States, such as hair salons, massage therapists, and food trucks. Currently, Square gets a large percentage of its revenue (greater than 20 percent) from the restaurant business.“Square for restaurants” allows restaurant owners to manage their entire Point of Sale (POS) system, including credit card and mobile wallet payments, menu updates, floor layouts, employee scheduling, tip splitting, payroll processing, and employee performance tracking using a single platform, as well as tools such as customer relationship management, inventory management, and employee management. Square’s blueprint for how and why the company's business approaches will generate revenues sufficient to cover costs and produce attractive profits and returns on investment

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A) is what is meant by the term strategic intent. B) portrays the essence of a company's business purpose or mission. C) accounts for why a company's financial objectives are at the stated level. D) best describes what is meant by a company's strategy. E) best describes what is meant by a company's business model.

89)

The difference between a company's strategy and a company's business model is that

A) a company's strategy is management's game plan for achieving strategic objectives while its business model is management's game plan for achieving financial objectives. B) the strategy concerns how to compete successfully and the business model concerns how to operate efficiently. C) a company's strategy is management's game plan for realizing the strategic vision, whereas a company's business model is the game plan for accomplishing its corporate responsibility goals. D) strategy relates broadly to a company's competitive moves and business approaches while its business model relates to whether the revenues flowing from the strategy are sufficient to cover costs and realize a profit. E) a company's strategy is solely concerned with how to please customers while its business model is solely concerned with how to please shareholders.

90)

The customer value proposition lays out the company's approach to A) meeting profitability guidelines without the risk of losing customers. B) operating efficiently given the current level of customers. C) embracing rival company approaches to gaining customers. D) satisfying customer wants and needs at a price that customers will consider a good

value. E) assuring that the company makes enough profits based on its per-unit cost.

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91) A regional electric scooter manufacturer sells its scooter at a lower price than other manufacturers of two-wheeler scooters. What will make the product most attractive for customers? A) low profit B) high value C) high cost D) low value E) low cost

92) You have been asked to advise Waltham Furniture, a company that seeks to serve a target middle-class customer demographic obsessed with the quality and price of products. Your proposed value proposition for this company to offer to its customers would be to A) identify the unique features of your client's furniture without comparing it with a rival's products. B) offer copycat furniture at low cost but an average quality compared to your client's rivals. C) offer the same quality of furniture as do your client's rivals but at a high cost based on greater market share and higher brand value. D) provide comparable quality furniture at a much lower price than your rivals but leave the final assembly of purchased furniture to customers accompanied by an easy-to-follow assembly guide. E) market and sell only average quality furniture compared to your rivals at an imperceptible difference in price.

93) Based upon its advertising slogan, the pizza restaurant that likely offers the best value proposition to its customers is

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A) Johnny's Pie Shop: "The Tastiest Pizza You've Ever Had." B) Fast 'n Fresh Pizza: "Get fresh, hot pizza, delivered under 20 minutes—or it's free." C) Sustainable Slices: "Organic and sustainably sourced ingredients that are good for you and the planet." D) Loyalty Pizza: "One pizza, 5 points: to be redeemed with a pan pizza upon reaching 50 points." E) Crackerjack Pizza: "Open your pizza box and find a free gift. Hurry! Free gifts for 100 lucky customers."

94) U.S.-based Teladoc Health provides virtual health services to businesses via seamlessly connected general medical, mental health, and complex care portals to deliver convenience, outcomes, and significant efficiencies to both parties. Its primary offerings include telehealth, medical opinions, AI and analytics, and licensable platform services. Which of the value propositions would not benefit the company? A) providing free referrals to medical specialists B) establishing a comparison feature tab that allows business customers to compare offerings from other online health services providers C) updating the site with better high-resolution video D) providing mobile friendly version of the site and compatible apps for mobile users E) allowing customers to pay through gift coupons

95) A search engine giant specializes in all types of search items; provides a free translation feature for 80 different languages; stores all passwords for commonly visited sites in encrypted form; allows users to view ads on previously made related searches; provides suggestive search items to assist the user; allows users to view a collection of related web pages users might want to visit; and provides a faster load time and more accurate hits than its rivals. This search engine company uses a profit formula that primarily consists of

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A) providing a free translation feature for 80 different languages. B) allowing users to view ads on previously made related searches. C) allowing users to view a collation of related web pages users might want to visit. D) providing a faster load time and more accurate hits than its rivals. E) providing suggestive search items based on history of sites visited.

96)

A winning strategy is one that

A) builds strategic fit, is socially responsible, and maximizes shareholder wealth. B) is highly profitable and boosts the company's market share. C) fits the company's internal and external situation, builds sustainable competitive advantage, and improves company performance. D) results in a company becoming the dominant industry leader. E) can pass the ethical standards test, the strategic intent test, and the profitability test.

97)

A winning strategy must pass which three tests? A) the dominant market test, the sustainable advantage test, and the profit test B) the fit test, the competitive advantage test, and the performance test C) the sustainable performance test, the fit test, and the profit test D) the performance test, the dominant market test, and the fit test E) the fit test, the sustainable advantage test, and the dominant market test

98) To distinguish a winning strategy from a mediocre or losing strategy, a strategic manager should ask which question?

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A) How good is the company's business model? B) Is the company a technology leader? C) Does the company have low prices in comparison to rivals? D) Is the company putting too little emphasis on behaving in an ethical and socially responsible manner? E) How well does the strategy fit the company's situation?

99) Shopify, which began as a Canadian snowboard marketing company, has evolved into an e-commerce software solutions provider that allows merchants to quickly and easily set up and maintain an online store. Shopify helps merchants compete against Amazon. It’s been expanding its business to provide tools in payments, inventory control, and shipping. In addition, the company rolled out Shopify Capital to extend loans to U.S. merchants. To test the merits of Shopify’s strategy and distinguish it as a winning strategy, which major question needs to be addressed? A) Is Shopify’s strategy helping the company achieve a sustainable competitive advantage, and is it resulting in a better company performance? B) Is Shopify putting too little emphasis on growth and profitability and too much emphasis on behaving in an ethical and socially responsible manner? C) Is Shopify’s strategy resulting in the development of additional competitive capabilities? D) Is Shopify’s strategy ethical and socially responsible, and does it put enough emphasis on good product quality and good customer service? E) Does Shopify’s strategy strike a good balance between maximizing shareholder wealth and maximizing customer satisfaction?

100) For John Sidanta, CEO and founder of Primaplast, a manufacturer of biodegradable plastic drinking straws made from recycled material, crafting and executing a strategy is a toppriority managerial task because it

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A) helps Primaplast management create tight fits between a company's strategic vision and its business model. B) allows Primaplast company personnel, and especially senior executives, to know the answer to "who are we, what do we do, and where are we headed?" C) is Primaplast management's prescription for doing business, its roadmap to competitive advantage, a game plan for pleasing customers, and its formula for improving performance, especially in light of impending community and some food service outlets' bans on conventional plastic drinking straws. D) provides Primaplast with clear guidance as to what the company's business model and strategic intent are, and helps keep managerial decision-making from being rudderless. E) establishes how well Primaplast executives perform these tasks and are the key determinants of executive compensation.

101) Why are crafting and executing business strategies the foremost tasks of any organization? A) because they are necessary ingredients of a sound operational business model B) because a good strategy coupled with a good strategy execution are the most telling signs of good management and allow a company to be a standout performer in the marketplace C) because the management skills of top executives are sharpened as they work their way through the strategy-making, strategy-executing processes D) because doing these tasks helps executives develop an appropriate strategic vision, strategic intent, and set of strategic objectives E) because of the contribution they make to maximizing value for shareholders

102)

Good strategy combined with good strategy execution

A) offers a surefire guarantee for avoiding periods of weak financial performance. B) is the best sign that a company is a true industry leader. C) is a more important management function than forming a strategic vision combined with setting objectives. D) is the clearest indicator of good management. E) signals that a company has the best business model in a market.

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103)

The most significant signs of a well-managed company are

A) the eagerness with which executives set stretch financial and strategic objectives and develop an ambitious strategic vision. B) aggressive pursuit of new opportunities and a willingness to change the company's business model whenever circumstances warrant. C) good strategy-making combined with good strategy execution. D) a visionary mission statement and a willingness to pursue offensive strategies rather than defensive strategies. E) a profitable business model and a balanced scorecard approach to measuring the company's performance.

104)

Excellent execution of an excellent strategy is

A) the best test of managerial excellence and the best recipe for making a company a standout performer. B) a solid indication that managers are maximizing profits and looking out for the best interests of shareholders. C) the best test of whether a company is a true industry leader. D) the best evidence that managers have an emerging business model. E) the best test of whether a company enjoys sustainable competitive advantage.

105) Ben Weprin is founder and CEO of Graduate Hotel, a growing chain of boutique hotels situated near college campuses and designed to cater to the nostalgia and local boosterism that are part of the culture of university towns. (Room keys are imprinted with the names of famous alumni, and public spaces are decorated with historical photos of campus life, vintage art, and other collegiate artifacts.) Mr. Weprin and his company are trying to create a brand that will find year-round business by catering to more than just alumni coming back for once-a-year football weekends or 10-year anniversaries of their graduating classes. What is the major question that Mr. Weprin and his team need to ask about his company's strategy?

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A) What must managers do, and do well, to make a company a winner in the marketplace? B) What can employees do, and do well, to ensure customer satisfaction? C) What can shareholders do, and do well, to ensure a profitable company? D) What do customers do, and how to profile customers who buy a company's product and tailor sales strategy around them? E) What do suppliers do, and how to get supplies at the lowest cost to build a profitable business?

106) A pharmaceutical giant acquires a manufacturer of rare specialty drugs to improve its falling share prices and invests all its wealth into the deal. Due to a deficit, it agrees to do a joint venture for the acquisition and involves a major automobile giant to fund the deal. After a rocky start, the companies now have a strong market position and generate good profits. How would you characterize this company's strategy? A) It fails the performance test. B) It fails the competitive advantage and the fit tests. C) It is a winning strategy. D) It fails in all three tests. E) It fails the fit test but passes the competitive advantage and performance tests.

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107) Consider the following five companies and their situations. ● Company A is an established online fantasy sports gaming company that has been accused of game-rigging, bribes, and kickbacks. ● Company B, a ride-share company, has delayed its planned initial public offering due to reports of having an inhospitable workplace characterized by sexual harassment and discrimination. ● Company C, a pharmaceutical manufacturer, charges higher prices for life-saving drugs in some countries than it charges in others. ● Company D, a manufacturer and marketer of high-end consumer electronics, has a strict Code of Conduct that requires its suppliers to comply with several standards regarding safe working conditions, fair treatment of workers, and environmentally safe manufacturing. ● Company E, a pizza delivery business, is a being boycotted by customers and losing sponsored tie-ins with professional sports due to racist comments by its founder and CEO. Which of the above companies is distinguished by an ethical strategy as opposed to an unethical or flawed strategy? A) Company A B) Company B C) Company C D) Company D E) Company E

108)

In evaluating proposed or existing strategies managers should

A) initiate new initiatives even though they don't seem to match the company's internal and external situation. B) scrutinize the company's existing strategies on a regular basis to ensure they offer a good strategic fit, create a competitive advantage, and result in above-average performance. C) evaluate the firm's business model at least every three years. D) ensure core capabilities are incorporated for establishing a competitive advantage. E) align existing strategies with new strategies to emphasize incremental gains.

109)

A winning strategy is one that

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A) builds strategic fit, is socially responsible, and maximizes shareholder wealth. B) is highly profitable and boosts the company's market share. C) results in a company becoming the dominant industry leader. D) fits the company's internal and external situation, builds sustainable competitive advantage, and improves company performance. E) can pass the ethical standards test, the strategic intent test, and the profitability test.

110) A seldom-used strategic approach to setting a company apart from rivals and achieving a sustainable competitive advantage is A) striving to be the industry's low-cost provider, thereby aiming for a cost-based competitive advantage. B) outcompeting rivals on the basis of such differentiating features as higher quality, wider product selection, added performance, better service, more attractive styling, or technological superiority. C) developing competitively valuable resources and capabilities that rivals cannot easily match, copy, or trump with capabilities of their own. D) focusing on a narrow market niche and winning a competitive edge by doing a better job than rivals of serving the special needs and tastes of buyers in the niche. E) copying the attributes of a popular product or service.

111)

A company achieves sustainable competitive advantage when

A) it has a profitable business model. B) a sufficiently large number of buyers have a lasting preference for its products or services as compared to the offerings of competitors. C) it is able to maximize shareholder wealth. D) it is consistently able to achieve both its strategic and financial objectives. E) its strategy and its business model are well matched and in sync.

112)

A company's business strategy is not likely to include

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A) actions to respond to changing market conditions or other external factors. B) actions to strengthen competitiveness via strategic alliances and collaborative partnerships. C) actions to strengthen internal capabilities and competitively valuable resources. D) actions to manage the functional areas of the business. E) management's actions to revise the company's financial and strategic performance targets.

113)

Changing circumstances and ongoing managerial efforts to improve the strategy A) account for why a company's strategy evolves over time. B) explain why a company's strategic vision undergoes almost constant change. C) make it very difficult for a company to have concrete strategic objectives. D) make it very hard to know what a company's strategy really is. E) are consistent with a planned strategy approach.

114) Under Armour, a multinational sports apparel company saw its sales drop in North America while sales in the Asia/Pacific rose 12 percent that same year. The company plans an entry into a new geographical location, Vietnam—which is considered an emerging market and also a potential supplier—with its established and best-selling product line: women’s running shorts. If you were advising Under Armour, what would you least be likely to recommend to this company? A) Establish a distribution plan to set up more supply outlets than any other rivals in the location. B) Devise a social media marketing plan that aims at the women’s fitness consumer segments with attractive advertisements and special offers on products. C) Implement a diversification plan that aims at adding remote fitness classes by subscription. D) Establish joint ventures or strategic partnerships with local smaller scale sports apparel retailers and offer them an exclusive product lineup. E) Create a sales plan that aims to enhance initial sales and market penetration with low prices based on high operational costs.

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115) Mad Magazine pivoted unsuccessfully in 2019 to eliminate future newsstand sales and publish only one issue per year, to republish recycled content from 67 years of publication, and also to reassign the space formerly occupied by new content to high-priced advertisements. Subscriptions to Mad Magazine as a result have fallen precipitously and are now available for deep discounts. What do we learn from this example about strategies that yield sustainable competitive advantage? A) Mad Magazine no longer possesses a competitive advantage that enables this company to achieve its strategic objectives. B) Mad Magazine failed to attract sufficiently large numbers of buyers who have a lasting preference for its products or services over those offered by rivals, owing to the efforts of competitors to offset that appeal and overcome the company’s advantage. C) Mad Magazine’s competitive advantage no longer stems from the company’s strategic vision. D) Mad Magazine’s decreases in shareholder value were contingent on an unsustainable competitive advantage. E) Mad Magazine’s poor planning and execution of a strategy that changed or evolved the customer value proposition led to its failure.

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Answer Key Test name: Chap 01_23e 39) B 40) A 41) D 42) A 43) D 44) E 45) E 46) E 47) B 48) B 49) C 50) D 51) E 52) D 53) C 54) A 55) C 56) D 57) B 58) E 59) C 60) E 61) E 62) B 63) D 64) D Version 1

65) D 66) A 67) E 68) A 69) A 70) C 71) E 72) D 73) D 74) C 75) D 76) B 77) A 78) E 79) A 80) A 81) E 82) B 83) B 84) E 85) B 86) A 87) D 88) E 89) D 90) D 91) B 92) D 93) B 94) B Version 1

95) B 96) C 97) B 98) E 99) A 100) C 101) B 102) D 103) C 104) A 105) A 106) C 107) D 108) B 109) D 110) E 111) B 112) E 113) A 114) E 115) E

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Chapter 2 Charting a Company’s Direction 1) Identify the five integrated stages of the strategy-making, strategy-executing process, and which tasks each stage entails.

2) What is the difference between strategic vision and strategic intent? Provide at least one example of each term to support your answer.

3) A well-conceived strategic vision helps prepare a company for the future. True or false? Explain and justify your answer.

4) Explain why an organization needs a strategic vision. What purpose does a strategic vision serve?

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5) Explain and provide an example of unsuccessful and successful uses of extreme stretch goals.

Is there a difference between a strategic vision and a mission statement? Please explain.

7) Explain how managers can decide to capture the vision of where an organization should head in a catchy or easily remembered slogan. Cite at least three examples of company slogans that capture a company's vision.

8) Identify and provide at least two examples illustrating the key characteristics of a wellstated organizational objective.

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9) What is meant by the term "stretch objectives"? Is it important that companies establish stretch objectives? Why or why not?

10)

Why does an organization need both financial and strategic objectives?

11) Explain the difference between financial objectives and strategic objectives. Give examples of each.

12) Margot, the VP of the Global Home Products division at Tiffany's, has been tasked with developing financial and strategic objectives. Tiffany's is a luxury jewelry and accessories company based in New York. In preparation for Tiffany’s acquisition by LVMH, a global luxury brands conglomerate, Margot has been asked to add short-term and longer-term performance targets. Is it important for her to spell out both of these short-term and long-term performance targets? Which time frame is more important? Are there trade-offs involved? Explain.

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13) The achievement of financial objectives tends to be a leading indicator of a company's performance, while the achievement of strategic objectives tends to be a lagging indicator of a company's future financial performance. True or false? Support and explain your answer.

14) What is the meaning of the term "balanced scorecard"? What are the merits of using a balanced scorecard in judging a company's performance?

15) You have been recently hired as a strategic planning manager for HotelTonight. HotelTonight provides mobile applications for booking same-day unsold hotel deals. It offers a marketplace for hotels to fill tonight only and last-minute rooms that would otherwise remain empty; and enables guests to book the deals using their smartphones and tablets. HotelTonight was acquired by Airbnb in late 2019, and the incoming executive team has asked you for your opinion on the impact of setting objectives on company's future financial performance. Would you say that the achievement of strategic objectives or the achievement of financial objectives is most important in terms of impact? For what reason(s)?

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16) Explain the role and responsibility of the CEO in the strategy-making, strategy-executing process. Name several CEOs and their companies that exemplify this role.

17) What are some of the arguments for and against adopting the balanced scorecard approach? Explain and then provide several examples of organizations that have adopted the balanced scorecard performance measurement system.

18) The task of crafting a company's strategy is typically a job for the company's whole management team, not just a small group of senior executives. True or false? Explain and support your answer.

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19)

Explain why a company's strategy is really a collection of strategies.

20) Compare and contrast the strategy-making hierarchy at Patagonia, a privately owned manufacturer and marketer of sustainable outdoor clothing, with the strategy-making hierarchy at Nike, a publicly traded multinational corporation engaged in the design, development, manufacturing, and worldwide marketing and sales of diversified footwear, apparel, equipment, accessories, and services.

21) Weak governance at Volkswagen contributed to the 2015 emissions-cheating scandal, which cost the company billions of dollars and the trust of its stakeholders. Explain.

22) An organization's strategic plan consists of the actions that management plans to take in the near future. True or false? Explain and justify your answer.

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23) Identify and explain three actions that top executives can take to help instill a spirit of high achievement into the corporate culture and mobilize organizational energy behind the drive for good strategy execution and operating excellence.

24) Identify and explain four actions that top executives can take that are key elements in directing organizational action and building capabilities behind the drive for good strategy execution to meet or beat performance targets.

25) Six years after its founding, in 2009, at 25, Elizabeth Holmes, founder and CEO of Theranos, a company based in Palo Alto, California, that manufactured and marketed medical devices for testing blood, told a small group at Stanford University that her ticket to success was "conviction" that you could "make something work, no matter what." On June 15, 2018, Holmes and Theranos's former president Ramesh "Sunny" Balwani were indicted on multiple counts of wire fraud and conspiracy to commit wire fraud. According to the indictment, investors and doctors and patients were defrauded. Holmes herself had falsely claimed in 2014 that the company had annual revenues of $100 million, a thousand times more than the actual figure of $100,000. Prosecutors claimed they had engaged in an "elaborate, years-long fraud" wherein they "deceived investors into believing that its key product—a portable blood analyzer—could conduct comprehensive blood tests from finger drops of blood." It was alleged the defendants were aware of the unreliability and inaccuracy of their products, but concealed that information. If convicted, they each face a maximum fine of $250,000 and 20 years in prison. Normatively speaking, which actions should Theranos's board of directors have taken to provide good governance oversight and prevent this fraud from occurring?

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26) A company's board of directors plays an independent and fiduciary role in corporate governance and the strategy-making, strategy-executing process. True or false? Please explain.

27) Brad Black and Susan Griffin-Black are cofounders and top managers of one of the last large independently owned organic beauty companies, EO Products. Explain the strategy the partners could use to strengthen EO Products' market position and build a competitive advantage over its rivals. Differentiate between a business strategy and a corporate strategy.

28) Identify and briefly discuss at least two examples of faulty oversight by a company's board of directors in corporate governance and/or the strategy-making, strategy-executing process.

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29) Compare and contrast the strategy-making task for a diversified multibusiness purveyor of jewelry and luxury home furnishings such as Tiffany's, as opposed to a single-business company such as GemX, a private jewelry social club.

30) Good strategic planning is not about eliminating risks, but increasing the odds of success. True or false? Explain.

31) You have been asked to evaluate Kampus Kombucha’s mission statement, "To heal and refresh everyone we touch." You would most likely observe that Kampus Kombucha’s mission statement A) specifies the buyer needs that it seeks to satisfy and the customer groups or markets it serves. B) specifically informs customers and employees "who we are, what we do, and why we are here." C) is vague, fairly uninformative, and blurs the essence of this company’s business activities. D) describes more of an objective and a result of what this company does instead of its purpose. E) portrays this company’s aspirations for the future.

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32)

A company's strategic plan

A) maps out the company's history. B) links the company's financial targets to control mechanisms. C) outlines the competitive moves and approaches to be used in achieving the desired business results. D) focuses on offering a more appealing product than rivals. E) lists methods of making money in its chosen business.

33)

An integral part of the managerial process of crafting and executing strategy includes

A) developing a proven business model. B) deciding how much of the company's resources to employ in the pursuit of sustainable competitive advantage. C) developing a strategic vision. D) communicating the company's values and code of conduct to all employees. E) deciding on the company's strategic intent.

34)

Integral parts of the managerial process of crafting and executing strategy include

A) developing a strategic vision, strategic management, and crafting a strategy. B) developing a proven business model, deciding on the company's strategic intent, and crafting a strategy. C) strategic management, crafting a strategy, implementing and executing the chosen strategy, and deciding how much of the company's resources to employ in the pursuit of sustainable competitive advantage. D) coming up with a statement of the company's mission and purpose, strategic management, choosing what business approaches to employ, selecting a business model, and monitoring developments. E) deciding on the company's strategic intent, setting financial objectives, crafting a strategy, and choosing what business approaches and operating practices to employ.

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35)

The strategy-making, strategy-executing process is shaped by

A) management's strategic vision, strategic and financial objectives, and strategy. B) the decisions made by the compensation and audit committees of the board of directors. C) external factors such as the industry's economic and competitive conditions and internal factors such as the company's collection of resources and capabilities. D) the challenges of developing a sound business model. E) top executives and the board of directors; very few managers below this level are involved in the process.

36) When companies adopt the strategy-making and strategy-execution process, it requires they start by A) developing a strategic vision and mission, and values. B) developing a proven business model, deciding on the company's top management team, and crafting a strategy. C) strategic management, developing a business model, crafting a strategy, and deciding how much of the company's resources to employ in the pursuit of sustainable competitive advantage. D) coming up with a statement of the company's mission and communicating it to all employees, strategic management, selecting a business model, and monitoring developments and initiating corrective adjustments to the business model when necessary. E) deciding on the company's board of directors, setting financial objectives, crafting a strategy, and choosing what business approaches and operating practices to employ.

37)

A company's strategic vision concerns

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A) management's storyline of how it intends to make a profit with the chosen strategy "who we are and what we do." B) what future actions the enterprise will likely undertake to outmaneuver rivals and achieve a sustainable competitive advantage. C) "who we are and what we do." D) a company's directional path and future product-customer-market-technology focus. E) why the company does certain things in trying to please its customers.

38)

The real purpose of the company's strategic vision A) lays out how management plans to implement and execute a profitable business

model. B) describes what business the company is presently in and why it has chosen certain operating practices to meet the needs of customers. C) serves as management's tool for giving the organization a sense of direction. D) defines "who we are and what we do." E) spells out a company's strategic intent, its strategic and financial objectives, and the business approaches and operating practices that will underpin its efforts to achieve sustainable competitive advantage.

39)

A strategic vision constitutes management's view and conclusions about the company's A) long-term direction and what product-market-customer mix seems optimal. B) business model and the kind of value that it is trying to deliver to customers. C) justification of why the business will be a moneymaker. D) past and present scope of work. E) long-term plan for outcompeting rivals and achieving a competitive advantage.

40)

The managerial task of developing a strategic vision for a company

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A) concerns deciding what approach the company should take to implement and execute its business model. B) entails coming up with a fairly specific answer to "who are we, what do we do, and why are we here?" C) is chiefly concerned with addressing what a company needs to do to successfully outcompete rivals in the marketplace. D) involves deciding upon what strategic course a company should pursue in preparing for the future and why this directional path makes good business sense. E) entails coming up with a concrete plan for how the company intends to make money.

41)

An unlikely, inaccurate feature of an organization's strategic vision is A) providing a panoramic view of "where we are going." B) outlining how the company intends to implement and execute its business model. C) pointing an organization in a particular direction and charting a strategic path for it to

follow. D) helping mold an organization's character and identity. E) describing the company's future product-market-customer focus.

42)

Management's strategic vision for an organization

A) charts a strategic course for the organization ("where we are going") and provides a rationale for why this directional path makes good sense. B) describes in fairly specific terms the organization's strategic objectives and strategy. C) spells out how the company will become a big moneymaker and boost shareholder value. D) addresses the critical issue of "why our business model needs to change and how we plan to change it." E) spells out the organization's strategic intent and the actions and moves that will be undertaken to achieve it.

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43)

TOMS Shoes’ company values are

A) directly linked to this company’s strategic vision, whereas its mission is tied to other valuable underlying assets. B) marginally distinguishable among those of other rivals in the footwear industry. C) an integral part of this company's DNA, but only if executives decide to ingrain designated core values into corporate culture. D) strictly limited in number (not more than two per company). E) focused on the wealth maximization of shareholders.

44) What a company's top executives are saying about where the company is headed long term with respect to its future product-market-customer-technology mix A) indicates what kind of business model the company is going to have in the future. B) constitutes the strategic vision for the company. C) signals what the firm's emergent strategy will be. D) serves to define the company's business plan. E) indicates what kind of products and services the company plans to offer in the future.

45)

One of the important benefits of a well-conceived and well-stated strategic vision is to

A) clearly delineate how the company's business model will be implemented and executed. B) clearly communicate management's aspirations for the company to stakeholders and help steer the energies of company personnel in a common direction. C) set forth the firm budgetary objectives in clear and fairly precise terms. D) help create a balanced scorecard approach to objective setting and not stretch the company's resources too thin across different products, technologies, and geographic markets. E) indicate what kind of sustainable competitive advantage the company will try to create in the course of becoming the industry leader.

46)

The defining characteristic of a well-conceived strategic vision is

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A) what it says about the company's future strategic course—"the direction we are headed and what our future product-market-customer focus will be." B) that it not stretch the company's resources too thin across different products, technologies, and geographic markets. C) clarity and specificity about "who we are, what we do, and why we are here." D) that it be flexible and operate in the mainstream. E) that it be within the realm of what the company can reasonably expect to achieve within four years.

47) When company managers are in the process of thinking strategically about what directional path should be taken by the company, they are not likely to ask which question? A) Is the outlook for the company promising if it continues with its present product offerings? B) Are changing market and competitive conditions acting to enhance or weaken the company's prospects? C) What business approaches and operating practices should we consider in trying to implement and execute our business model? D) What strategic course offers attractive opportunity for growth and profitability? E) What, if any, new customer groups and/or geographic markets should the company get in position to serve?

48) Company managers are unlikely to consider this question when choosing to pursue one strategic course or directional path versus another.

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A) Are changing market and competitive conditions acting to enhance or weaken the company's business outlook? B) Is the company stretching its resources too thinly by trying to compete in too many markets or segments, some of which are unprofitable? C) Will our present business generate sufficient growth and profitability in the years ahead to please shareholders? D) What market opportunities should the company pursue and which ones should not be pursued? E) Do we have a better business model than key rivals?

49) Characteristics of an effectively worded strategic vision statement are most likely to include A) balanced, responsible, and rational. B) challenging, competitive, and "set in concrete." C) graphic, directional, and focused. D) realistic, customer-focused, and market-driven. E) achievable, profitable, and ethical.

50)

An effectively worded strategic vision statement is not likely to be

A) directional (is forward-looking, describes the strategic course that management has charted that will help the company prepare for the future). B) easy to communicate (is explainable in 5 to 10 minutes, and can be reduced to a memorable slogan). C) graphic (paints a picture of the kind of company management is trying to create and the market position(s) the company is striving to stake out). D) consensus-driven (commits the company to a "mainstream" directional path that almost all stakeholders will enthusiastically support). E) focused (provides guidance to managers in making decisions and allocating resources).

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51)

The wording of a company's vision statement should commonly be

A) vague or incomplete—short on specifics. B) flexible—adjustable according to changing circumstances. C) bland or uninspiring—short on inspiration. D) generic—could apply to almost any company (or at least several others in the same industry). E) reliant on superlatives (best, most successful, recognized leader, global or worldwide leader, first choice of customers).

52)

Common shortcomings of company vision statements include

A) too specific and too flexible. B) unrealistic, unconventional, and unbusinesslike. C) too broad, vague or incomplete, bland/uninspiring, not distinctive, and too reliant on superlatives. D) too graphic, too narrow, and too risky. E) not customer-driven, out of step with emerging technological trends, and too ambitious.

53) Breaking down resistance to a new strategic vision typically requires that management, on an as-needed basis, A) institute a balance scorecard to measuring company performance, with the balance including a mixture of both old and new performance measures. B) inform company personnel about forthcoming changes in the company's strategy. C) reiterate the company's need for the new direction, while addressing employee concerns head-on, calming fears, lifting spirits, and providing them with updates and progress reports as events unfold. D) explain all updates and merits of the company's business model to align strategy with employee concerns. E) raise wages and salaries to win the support of company personnel for the company's new direction.

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54)

An engaging and convincing strategic vision

A) ought to put "who we are and what we are doing" in writing rather than orally so as to leave no room for company personnel to misinterpret what the strategic vision really is. B) should be done in language that inspires and motivates company personnel to unite behind executive efforts to get the company moving in the intended direction. C) tends to be more effective when top management avoids trying to capture the essence of the strategic vision in a catchy slogan. D) is most efficiently and effectively done by posting the strategic vision prominently on the company's website and encouraging employees to read it. E) should be explained after the company's strategic intent, strategy, and business model have been conveyed to company personnel.

55) The managerial task of effectively conveying the essence of the strategic vision is made easier by A) having operating strategies that are easy for company personnel to understand and execute. B) combining the strategic vision and the company's values statement into a single document. C) adopting a catchy slogan and then using it repeatedly to illuminate the direction and purpose of "where we are headed and why." D) waiting until the company realizes its mission and ensures the existing corporate culture is compatible with the new vision and direction. E) distributing written statements that explain "where we are going and why."

56) Effectively communicating the strategic vision down the line to lower-level managers and employees has the value of

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A) explaining "where we are going and why" and, more importantly, inspiring and energizing company personnel to unite to get the company moving in the intended direction. B) helping company personnel understand why making a profit and having a business plan are so important. C) making it easier for top executives to set and communicate the company's stretch objectives. D) helping lower-level managers and employees better understand the company's business model. E) aiding lower-level managers and employees in formulating and achieving a balanced scorecard.

57) is

Perhaps the most important benefit of a vivid, engaging, and convincing strategic vision

A) helping gain managerial consensus on what resources must be developed to successfully achieve strategic objectives. B) uniting company personnel behind managerial efforts to get the company moving in the intended direction. C) helping justify the company's mission of making a profit. D) helping company personnel understand the logic of the company's business model. E) keeping company personnel well-informed.

58)

The benefit of a vivid, engaging, and convincing strategic vision is not its ability to

A) crystallize top management's own view about the company's long-term direction. B) reduce the risk of rudderless decision making by managers at all levels of the organization. C) help an organization prepare for the future. D) unite company personnel behind managerial efforts to get the company moving in the intended direction. E) help company personnel understand the logic of the company's business model.

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59) The payoffs of having a strategic vision that describes management's aspirations for the company's future and the course and direction charted to achieve those aspirations are not typically connected with A) reducing the risks of rudderless decision making. B) helping the organization prepare for the future. C) avoiding strategic inflection points and management's reaction in aligning decision choices. D) helping to crystallize top management's own view about the firm's long-term direction. E) providing a tool for winning the support of organizational members for internal changes that will help make the vision a reality.

60)

A well-conceived and communicated strategic vision ordinarily does not result in

A) solidifying senior executives' view of the firm's long-term direction. B) minimizing the risk of rudderless decision making. C) galvanizing organizational members in support of internal changes that will help make the vision a reality. D) assisting the organization in preparing for the future. E) protests from stakeholders that the business is rudderless.

61)

A company's mission statement typically addresses which question? A) Who are we and what do we do? B) What objectives and level of performance do we want to achieve? C) Where are we going and what should our strategy be? D) What approach should we take to achieve sustainable competitive advantage? E) What business model should we employ to achieve our objectives and our vision?

62) The difference between the concept of a company mission statement and the concept of a strategic vision is that a

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A) mission concerns what to do to achieve short-term objectives, while a strategic vision concerns what to do to achieve long-term performance targets. B) mission statement focuses on the methods needed to make a profit, whereas a strategic vision concerns what business model to employ in striving to make a profit. C) mission statement deals with what to accomplish on behalf of shareholders, while a strategic vision concerns what to accomplish on behalf of customers. D) mission statement typically concerns a company's purpose and its present business scope, whereas the principal concern of a strategic vision is a company's aspirations for its future. E) mission statement deals with "where we are headed," whereas a strategic vision provides the critical answer to "how will we get there?"

63) The primary difference between a company's mission statement and the company's strategic vision is that a A) mission statement explains why it is essential to make a profit, whereas the strategic vision explains how the company will be a moneymaker. B) mission statement typically concerns a company's present business scope and purpose, whereas a strategic vision sets forth "where we are going and why." C) mission statement deals with how to please customers, whereas a strategic vision deals with how to please shareholders. D) mission statement deals with "where we are headed," whereas a strategic vision provides the critical answer to "how will we get there?" E) mission statement addresses "how we are trying to make a profit today," while a strategic vision concerns "how will we make money in the markets of tomorrow?"

64)

A company's mission statement does not A) identify the company's services and products. B) specify the buyer's needs that the company seeks to satisfy. C) identify the customer or market that the company intends to serve. D) give the company its own identity. E) explain "where we are headed."

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65) A company should not couch its mission statement in terms of making a profit because a profit is more correctly an A) obligation and a reason for what a company does. B) objective and a result of what a company does. C) outlay and a rationale for what a company does. D) obligation and a responsibility for what a company does. E) outflow and a right of what a company does.

66)

A company's values or core values concern

A) whether and to what extent it intends to operate in an ethical and socially responsible manner. B) how aggressively it will seek to maximize profits and enforce high ethical standards. C) the beliefs and operating principles built into the company's balanced scorecard for measuring performance. D) the beliefs, traits, and behavioral norms that company personnel are expected to display in conducting the company's business and pursuing its strategic vision and mission. E) the beliefs, principles, and ethical standards that are incorporated into the company's strategic intent and business model.

67)

A company's values relate to such things as

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A) how it will balance its pursuit of financial objectives against the pursuit of its strategic objectives. B) how it will balance the pursuit of its business purpose/mission against the pursuit of its strategic vision. C) fair treatment, integrity, ethical behavior, innovativeness, teamwork, top-notch quality, superior customer service, social responsibility, and community citizenship. D) whether it will emphasize stock price appreciation or higher dividend payments to shareholders. E) whether it will put more emphasis on the achievement of short-term performance targets or long-range performance targets.

68) A superior example of a company vision that is short, specific, memorable, clearly articulated, and forward-looking is A) Hilton Hotel's vision "to fill the earth with light and the warmth of hospitality." B) Whole Foods' vision "to be a dynamic leader in the quality food business. We are a mission-driven company that aims to set the standards of excellence for food retailers. We are building a business in which high standards permeate all aspects of our company. Quality is a state of mind at Whole Foods Market." C) Keurig's vision "to become the world's leading personal beverage systems company." D) Nike's vision "to create products, services and experiences for today's athlete while solving problems for the next generation." E) Google's vision "to organize the world's information and make it universally accessible and useful."

69)

Well-stated objectives are A) quantifiable or measurable, and contain deadlines for achievement. B) succinct and concise so as to identify the company's risk and return options. C) broad and take into account views of all the stakeholders. D) directly related to the dividend payout ratio for stockholder returns. E) representative of customers' aspirations for company performance.

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70)

A company needs financial objectives

A) to overtake key competitors on such important measures as net profit margins and return on investment. B) because without adequate profitability and financial strength, the company's ultimate survival is jeopardized. C) to convince shareholders that top management is acting in their interests. D) to translate the company's business model into action items. E) to indicate to employees that financial objectives always take precedence over strategic objectives.

71) What does a company specifically exhibit when it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective? A) competitive edge B) sustainable advantage C) strategic intent D) financial strength E) strategic vision

72)

A company exhibits strategic intent when

A) management crafts and adopts a strategic plan. B) it relentlessly pursues an ambitious strategic objective, concentrating the full force of its resources and competitive actions on achieving that objective. C) it aggressively pursues financial objectives, establishing a priority on meeting the performance metrics and instilling a sense of urgency throughout the company. D) management establishes a comprehensive set of financial objectives that meet stockholder expectations. E) it capitalizes on its primary competitive advantage and ensures resources are allocated to maintain its strategy.

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73) Managers can deliberately set challenging performance targets at levels high enough to promote outstanding company performance by establishing A) stretch objectives that challenge the organization to deliver stretch gains in performance. B) mainstay objectives that although are easily attainable, and the company is obligated to meet, they are designed to spur motivation in the workforce. C) financial objectives that drive standardization of cost-efficiency and unify stringent operating specifications. D) a specifically detailed and integrated model of operating policies, practices, and procedures. E) why the company does certain things in trying to please its customers.

74)

A company needs financial objectives to

A) spur company personnel to help the company overtake key competitors on such important measures as net profit margins and return on investment. B) communicate management's targets for financial performance and achieve strategic objectives. C) indicate to employees whether the emphasis should be on earnings per share, return on investment, return on assets, or positive cash flow. D) convince shareholders that top management is acting in their interests. E) counterbalance its pursuit of strategic objectives and have a balanced scorecard for judging the caliber of its overall performance.

75)

The best example of a well-stated, specific financial objective is to

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A) increase earnings per share by 15 percent annually. B) gradually boost market share from 10 percent to 15 percent over the next several years. C) achieve lower costs than any other industry competitor. D) boost revenues by a percentage margin greater than the industry average. E) maximize total company profits and return on investment.

76)

A superior example of a well-stated strategic objective is to A) increase revenues by more than the industry average. B) be among the top five companies in the industry in customer service. C) overtake key competitors on product performance or quality within three years. D) improve manufacturing performance by 5 percent within 12 months. E) obtain 150 new customers during the current fiscal year.

77)

Strategic objectives

A) are more essential in achieving a company's strategic vision than are financial objectives. B) relate to strengthening a company's overall market standing and competitive position. C) are more difficult to achieve and harder to measure than financial objectives. D) are generally less important than financial objectives. E) help managers track an organization's true progress better than financial objectives.

78)

Adopting a set of "stretch" financial and stretch strategic objectives

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A) pushes the company to strive for lesser but adequate profitability levels, because the stretch objectives are considered unattainable. B) is a widely held method for creating a "scorecard" for monitoring company performance. C) helps convert the mission statement into meaningful company values. D) challenges company personnel to execute the strategy with greater enthusiasm, proficiency, and understanding. E) is an effective tool for pushing the company to perform at its full potential and deliver the best possible results.

79)

Setting stretch objectives does not provide an organization with the advantage of

A) helping to avoid mediocre results. B) pushing company personnel to be more inventive and innovative. C) helping clarify the company's strategic vision and strategic intent. D) helping a company be more focused and intentional in its actions. E) spurring exceptional performance and helping build a firewall against contentment with modest performance gains.

80)

Strategic intent refers to a situation where a company A) commits to using a particular business model to make money. B) decides to adopt a particular strategy. C) relentlessly pursues an ambitious strategic objective. D) commits to pursuing balanced-scorecard objectives. E) changes its long-term direction and decides to pursue a newly adopted strategic vision.

81)

A "balanced scorecard" for measuring company performance

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A) entails putting equal emphasis on financial and strategic objectives. B) entails putting balanced emphasis on profit and nonprofit objectives. C) prevents the drive for achieving financial objectives from overwhelming the pursuit of strategic objectives. D) prevents the drive for achieving strategic objectives from overwhelming the pursuit of financial objectives. E) strikes a balance between financial and strategic objectives.

82) A "balanced scorecard" that includes both strategic and financial performance targets is a conceptually strong approach for judging a company's overall performance because A) it assists managers in putting roughly equal emphasis on short-term and long-term performance targets. B) it entails putting equal emphasis on good strategy execution and good business model execution. C) a balanced-scorecard approach pushes managers to avoid strategic management that reflects the results of past decisions and organizational activities. D) financial performance measures are lagging indicators that reflect the results of past decisions and organizational activities, whereas strategic performance measures are leading indicators of a company's future financial performance and business prospects. E) it forces managers to put equal emphasis on financial and strategic objectives.

83) Perhaps the most reliable way for a company to improve its financial performance over time is to

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A) put 100 percent emphasis on the achievement of its short-term and long-term financial objectives. B) recognize that the achievement of strategic objectives signals that the company is well positioned to sustain or improve its performance. C) substitute financial intent for strategic intent and judiciously concentrate on the mission of making a profit. D) not allocate any resources to the achievement of strategic objectives until it is very clear that the company can meet or beat its stretch financial performance targets. E) avoid use of the balanced-scorecard philosophy since achievement of financial performance targets is obviously more important than the achievement of strategic performance targets.

84)

A company that pursues and achieves strategic objectives

A) is likely to weaken the achievement of its short-term and long-term financial objectives. B) believes that the company's financial performance is not as important as it really is. C) is generally not strongly focused on its true mission of making a profit. D) is frequently in a better position to improve its future financial performance because of the increased competitiveness that flows from the achievement of strategic objectives. E) is likely to be a weak financial performer because diverting resources to the pursuit of strategic objectives takes away from the achievement of financial performance targets.

85)

A company needs performance targets or objectives

A) to help guide managers in deciding what strategic path to take in the event that a strategic inflection point is encountered. B) because they give the company clear-cut strategic intent. C) in order to unify the company's strategic vision and business model. D) for its operations as a whole and also for each of its separate businesses, product lines, functional departments, and individual work units. E) in order to prevent lower-level organizational units from establishing their own objectives.

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86)

Company objectives

A) are needed only in those areas directly related to a company's short-term and longterm financial strength. B) need to be broken down into performance targets for separate businesses, product lines, functional departments, and individual work units. C) play the important role of establishing the direction toward which an organization needs to be headed. D) are important because they help guide managers in deciding what the company's strategic intent should be. E) should support, but not conflict with, the performance targets of lower-level organizational units.

87) When trade-offs have to be made between achieving long-term and achieving short-term objectives A) long-term objectives should take precedence unless the short-term performance targets have unique importance. B) long-term objectives should take precedence because of the need for future survival. C) short-term objectives should take precedence because they focus attention on delivering performance improvement. D) short-term objectives should take precedence unless the long-term performance targets are not achievable. E) long-term objectives should never take precedence until the short-term objective is achieved.

88)

The task of stitching together a strategy

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A) entails addressing a series of hows: how to grow the business, how to please customers, how to outcompete rivals, how to respond to changing market conditions, and how to achieve strategic and financial objectives. B) is primarily an exercise in deciding which of several freshly emerging market opportunities to pursue. C) is mainly an exercise that should be dictated by what is comfortable to management from a risk perspective and what is acceptable in terms of capital requirements. D) requires trying to copy the strategies of industry leaders as closely as possible. E) is mainly an exercise in good planning.

89) You have been hired as a consultant to Brad Black and Susan Griffin-Black, cofounders and top managers of one of the last remaining large independently owned organic beauty companies, EO Products. What business strategy could the partners use to strengthen EO Products' market position and build a competitive advantage over its rivals? A) Work with business unit heads to strengthen the EO Products' market position by improving the performance of a single line of business unit. B) Improve the combined performance of the set of businesses EO Products' has diversified into by capturing cross-business synergies. C) Address the questions of what businesses EO Products' should hold or divest. D) Grow EO Products by acquisition, creation of a strategic alliance, or through internal development. E) Provide guidance to EO Products towards which new markets to enter and how to best enter these new markets.

90) The faster a company's business environment is changing, the more critical it becomes for its managers to

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A) pay attention to early warnings of future change and be willing to experiment to establish a market position in the future. B) determine whether the company has a balanced scorecard for judging its performance. C) establish controls to monitor the impact of external changes appropriately and ensure the internal environment is maintained. D) replicate and implement only those strategies that have worked for rivals. E) determine what changes should be made to its customer value proposition.

91)

Why should long-run objectives take precedence over short-run objectives?

A) The focus is placed on improving performance in the long term. B) Long-run objectives are necessary for achieving long-term performance and stand as a barrier to undue focus on short-term results. C) Long-run objectives will satisfy shareholder expectations for progress. D) Long-run objectives will force the company to deliver performance improvement in the current period. E) Long-run objectives will keep the company in line with its balanced scorecard.

92)

Financial objectives generally encompass A) receiving a bond rating of AA or higher. B) having broader or deeper technological capabilities than rivals. C) having a wider product line than rivals. D) overtaking key competitors on product performance, quality, or customer service. E) achieving a market share of 9 percent.

93)

Financial objectives for the Henhouse Brewing Company, a craft brewery, include

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A) introducing five new products over the next 10 years. B) reducing product development time by one-third to half the current rate of 24 months. C) developing stronger national and global distribution capabilities than competitors. D) boosting internal cash flows by 7 percent to fund new brewing research and development activities. E) improving security and stability of information technology capabilities to prevent breaches and outages.

94)

Strategy-making is

A) primarily the responsibility of key executives rather than a task for a company's entire management team. B) more of a collaborative group effort that involves all managers and sometimes key employees, as opposed to being the function and responsibility of a few high-level executives. C) first and foremost the function and responsibility of a company's strategic planning staff. D) first and foremost the function and responsibility of a company's board of directors. E) first and foremost the function of a company's chief executive officer, who formulates strategic initiatives and submits them to the board of directors for approval.

95) CrossFit operates on an affiliate model in which individual gyms—referred to as boxes— pay to affiliate with CrossFit HQ, which, in turn, provides certain benefits such as training, certification, resources, and qualifications for the sports elite events. During late spring 2020, CrossFit HQ and its founder-CEO, Greg Glassman, came under pressure from some of its sponsors and affiliates for not speaking out about important social issues related to civil rights and racial equality, with questions about where the company and its leader stood on the issue of protests that were at the time under way across the United States and in other parts of the world. As a result, many sponsors and affiliates cut ties with CrossFit. Who should oversee CrossFit’s response strategy?

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A) The response should be a team effort, involving managers and often key employees at many levels of the organization. B) Greg Glassman, Cross-Fit’s chief executive officer, should oversee the strategy. C) CrossFit’s chief strategic planning officer, who should report directly to the company's CEO and board of directors. should oversee the response. D) CrossFit’s board of directors should oversee the response to approve or disapprove of the strategy formulated and proposed by the company's management. E) Because each CrossFit manager has a strategy-making role (ranging from major to minor) for his or her area of responsibility, each should oversee the response strategy.

96)

Managerial jobs with strategy-making responsibility

A) extend throughout the managerial ranks and exist in every part of a company— business units, operating divisions, functional departments, manufacturing plants, and sales districts. B) are primarily located in the strategic planning departments of large corporations. C) are relatively rare because most strategy-making is done by the members of a company's board of directors. D) seldom exist within a functional department (e.g., marketing and sales) or in an operating unit (a plant or a district office) because these levels of the organization structure are well below the level where strategic decisions are typically made. E) are found only at the vice-president level and above in most companies.

97)

Crafting a company's strategy is best described as

A) the exclusive province of top management—owner-entrepreneurs, CEOs, and other very senior executives. B) delegation of considerable strategy-making authority to down-the-line managers in charge of particular subsidiaries, product lines, geographic sales offices, and plants in companies that are diversified geographically or by product/market. C) involving the board of directors in the lead role in crafting a company's strategy. D) being assumed by an elite group of corporate entrepreneurs. E) always the product of brilliant corporate entrepreneurs.

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98)

In a diversified company like Disney Inc., the process of crafting a strategy involves

A) determining whether its strategic intent is proactive or reactive. B) a flexible strategic vision and strategic intent. C) changing the base of its strategy-making pyramid as conditions warrant. D) review and approval at every level by the company’s board of directors. E) a bundle of strategic initiatives and actions devised by managers and key employees up and down the whole organizational hierarchy.

99) The strategy-making hierarchy in a diversified company like Alibaba Group, an ecommerce giant based in China, consists of A) corporate strategy, business strategies, functional strategies, and operating strategies. B) business strategies, functional strategies, and operating strategies. C) its diversification strategy, its line of business strategies, and its operating strategies. D) corporate strategy and a group of business strategies (one for each line of business the corporation has diversified into). E) corporate or managerial strategy, a set of business strategies, and divisional strategies within each business.

100)

Corporate strategy for a diversified or multibusiness enterprise

A) is orchestrated by midlevel managers and focuses on how to create a competitive advantage in each specific line of business the total enterprise is in. B) concerns how best to allocate resources across the departments of each line of business the company is in. C) is orchestrated by senior corporate executives and centers around the kinds of initiatives the company uses to establish business positions in different industries. D) deals chiefly with what the strategic intent of each of its business units should be. E) involves how functional strategies should be aligned with business strategies in each of the various lines of business the company is in.

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101)

Business strategy concerns

A) strengthening the market position and building competitive advantage for a single line of business. B) ensuring consistency in strategic approach among the businesses of a diversified company. C) selecting a model for a single line of business to use in pursuing objectives that contribute to the whole of a diversified company. D) selecting a set of stretch financial and strategic objectives for a single business unit. E) choosing the most appropriate strategic intent for a specific line of business.

102)

Business strategy, as distinct from corporate strategy, is chiefly concerned with

A) deciding what new businesses to enter, which existing businesses to get out of, and which existing business to remain in. B) deciding how to build competitive advantage and improve performance in a particular line of business. C) making sure the strategic intent of a particular business is in step with the company's overall strategic intent and strategy. D) coordinating the competitive approaches of a company's different business units. E) what business model to employ in each of the company's different businesses.

103)

Functional-area strategies

A) concern the actions, approaches, and practices to be employed in managing particular functions within a business. B) specify what actions a company should take to resolve specific strategic issues and problems. C) are normally crafted by operating-level managers. D) are concerned with how to unify the firm's several different operating strategies into a cohesive whole. E) are normally crafted by the company's CEO and other senior executives.

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104)

The primary role of a functional strategy is to

A) unify the company's various operating-level strategies. B) specify how to build and strengthen the skills, expertise, and competencies needed to execute operating-level strategies successfully. C) support and add power to the corporate-level strategy. D) create compatible degrees of strategic intent among a company's different business functions. E) determine how to support particular activities in ways that support the overall business strategy and competitive approach.

105)

Operating strategies are primarily concerned with

A) what the firm's operating departments are doing and plan to do to unify the company's functional and business strategies. B) the specific plans for building competitive advantage in each major department and operating unit. C) how to manage initiatives of strategic significance within each functional area and adding detail and completeness in ways that support functional strategies and the overall business strategy. D) how best to carry out the company's corporate strategy. E) how best to implement and execute the company's different business-level strategies.

106)

In a single-business company, the strategy-making hierarchy consists of A) business strategy, divisional strategies, and departmental strategies. B) business strategy, functional strategies, and operating strategies. C) business strategy and operating strategy. D) managerial strategy, business strategy, and divisional strategies. E) corporate strategy, divisional strategies, and departmental strategies.

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107)

A company's strategic plan

A) details key objectives and the strategy for achieving them. B) lays out its future direction and business purpose, performance targets, and strategy. C) identifies the company's strategy and management's specific, detailed plans for implementation. D) consists of a company's strategic vision, strategic objectives, strategic intent, and strategy. E) summarizes the company's strategic vision, a strategy, and a business model.

108) You have been hired to manage the strategy execution process at Venmo, a mobile payments subsidiary of PayPal. Your primary tasks would include A) ensuring policies and procedures facilitate rather than impede effective execution. B) engendering a company culture and work climate that impedes successful strategy implementation and execution. C) surveying employees for their opinions about how to implement strategies for cost reductions and improvements in employee morale and job satisfaction. D) exerting your power to drive implementation forward and improve on how the strategy is being executed. E) taking punitive actions against those staff that are unable to achieve performance objectives.

109)

Managing the strategy-execution process involves

A) describing the strategic course that will help the company prepare for the future. B) organizing the company along the lines of best practice. C) surveying employees on how they think costs can be reduced and how employee morale and job satisfaction can be improved. D) exerting the external leadership needed to drive stabilization. E) tying rewards and incentives directly to profit.

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110) Management is obligated to monitor new external developments, evaluate the company's progress, and make corrective adjustments in order to A) determine whether the company has a balanced scorecard for judging its performance. B) stay on track in achieving the company's mission and strategic vision. C) keep the company's board of directors well-informed about the company's future outlook. D) determine whether the company's business model is well-matched to changing market and competitive circumstances. E) decide whether to continue or change the company's strategic vision, objectives, strategy, and/or strategy-execution methods.

111) The leadership challenges that top executives face in making corrective adjustments when things are not going well include A) knowing when to replace poorly performing subordinates and when to do a better job of coaching them to do the right things. B) being able to discern whether to promote better achievement of strategic performance targets or whether to promote better achievement of financial performance targets. C) deciding when adjustments are needed and what adjustments to make. D) having the analytic skills to separate the problems due to bad strategy execution. E) deciding whether the company would be better off making adjustments that curtail the achievement of strategic objectives or that curtail the achievement of financial objectives.

112) The task of top executives of a U.S. lodging chain when the company faces major disruptions in its environment, for example, a fall-off in patronage due to a global pandemic and the economic repercussions due to widespread unemployment, is to not only raise questions about the appropriateness of its direction and strategy, but also to

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A) ferret out the causes of disruptive changes and decide both when and what adjustments are needed for improved performance and operating excellence. B) figure out whether to arrive at decisions quickly or slowly in choosing among the various alternative adjustments. C) install new customer relationship management (CRM) systems and invest in robotics and automation that together will reduce the need for company personnel to perform essential activities to sustain operations. D) decide whether to try to fix the problems of poor strategy execution or simply shift to a strategy that is easier to execute correctly. E) decide how to identify the problems that need fixing.

113) In March 2019, the perpetrator of the Christchurch mosque shootings in New Zealand used Facebook to stream live footage of the attack as it unfolded. Victims included 49 dead and 51 injured at the Christchurch mosque. Facebook took 29 minutes to detect the livestreamed video, which was 8 minutes longer than it took police to arrest the gunman. About 1.3 million copies of the video were blocked from Facebook, but 300,000 copies were published and shared. Effective corporate governance requires Facebook’s board of directors to A) play the lead role in forming the company's strategy and then directly supervise the efforts and actions of senior executives in implementing and executing the strategy. B) provide guidance and counsel to the CEO in carrying out his or her duties as chief strategist and chief strategy implementer. C) strengthen its oversight of the company's strategic direction, evaluate the caliber of senior executives' skills, handle executive compensation, and oversee financial reporting practices. D) work closely with the CEO, senior executives, and the strategic planning staff to develop a strategic plan for the company and then oversee how well the CEO and senior executives carry out the board's directives in implementing and executing the strategic plan. E) review and approve the company's business model and also review and approve the proposals and recommendations of the CEO as to how to execute the business model.

114) The key duties of a company's board of directors in the strategy-making, strategyexecuting process include

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A) coming up with compelling strategy proposals of their own to debate against those put forward by top management. B) overseeing the company's financial accounting and financial reporting practices and evaluating the caliber of senior executives' strategy-making/strategy-executing skills. C) taking the lead in developing the company's business model and strategic vision. D) taking the lead in formulating the company's strategic plan but then delegating the task of implementing and executing the strategic plan to the company's CEO and other senior executives. E) approving the company's operating strategies, functional-area strategies, business strategy, and overall corporate strategy.

115) The chief duties/responsibilities of a company's board of directors, with respect to strategy-making and strategy execution, are not concerned with A) hiring and firing senior-level executives and working with the company's chief strategic planning officer to improve the company's strategy when performance comes up short of expectations. B) being inquiring critics and exercising strong oversight over the company's direction, strategy, and business approaches. C) evaluating the caliber of senior executives' strategy-making/strategy-executing skills. D) instituting a compensation plan for top executives that rewards them for actions and results that serve stakeholders' interests, most especially those of shareholders. E) overseeing the company's financial accounting and financial reporting practices.

116) Every corporation should have a strong independent board of directors that does all of the following except

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A) remain well-informed about the company's performance and exercises its fiduciary duty to protect shareholders responsibly. B) guide management in choosing a strategic direction and makes independent judgments about the validity and wisdom of management's proposed strategic actions. C) evaluate the leadership skills of the CEO and other senior executives. D) retain sufficient courage to curb management actions deemed inappropriate or unduly risky. E) take responsibility for leading the strategy-making, strategy-executing process.

117)

Corporate governance failures at Volkswagen included all of the following except

A) a unique ownership structure where a single family, Porsche, controlled more than 50 percent of voting shares. B) a strong independent board of directors that was responsible for making independent judgments about the validity and wisdom of management's proposed strategic actions. C) inadequate monitoring of the CEO and other senior executives. D) elevating management to the supervisory board even though they had presided over past scandals. E) unwillingness of the board of directors to accept any responsibility for allowing use of "defeat devices" on at least 11 million vehicles with diesel engines.

118)

Strategic objectives for Lululemon Athletica do not include

A) exploring new concepts such as stores that are tailored to each community. B) continuing to expand the brand globally through international expansion. C) increasing total comparable sales, which includes comparable store sales and direct to consumer. D) building a robust digital ecosystem with key investments in customer relationship management, analytics, and capabilities to elevate guest experience across all touch points. E) improving employee job satisfaction.

119)

The key characteristics of a well-stated organizational objective are not represented by

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A) Jet Blue’s plan to grow 150 flights a day to 200 a day over the coming years. B) Lululemon’s planned expansion of the brand globally through international market penetration, opening 11 new stores in Asia and Europe, including the first stores in China, South Korea, and Switzerland. C) General Mills’ plan to build a more agile organization by streamlining support functions, allowing for more fluid use of resources and idea sharing around the world, as well as enhancing e-commerce know-how to capture more growth in this emerging channel. D) Yahoo!’s extreme stretch goals to return that company to profitability and raise its stock price. E) TOMS Shoes’ one-for-one model that builds the cost of giving away a pair of shoes into the price of each pair it sells, enabling the company to make a profit while still giving away shoes to the needy.

120) Allianz Italy, 7-Eleven, Wells Fargo Bank, Ford Motor Company, Verizon, ExxonMobil, Pfizer, DuPont, Royal Canadian Mounted Police, and U.S. Army Medical are examples of companies that have adopted the balanced scorecard in order to A) balance the pursuit of good bottom-line profit against the pursuit of nonprofit objectives (although achieving profitability targets is nearly always given greater emphasis). B) set both financial and strategic objectives and put balanced emphasis on their achievement. C) prevent the pursuit of strategic objectives from dominating the pursuit of financial objectives. D) putequal emphasis on the achievement of financial objectives, strategic objectives, and social responsibility objectives. E) preclude the drive for achieving financial objectives from weakening the attention paid to social responsibility, community citizenship, and other worthy goals.

121)

The difference between financial objectives and strategic objectives is

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A) financial objectives need to be broken down into performance targets for each of the organization’s separate businesses, product lines, functional departments, and individual work units, while strategic objectives are needed only in those areas directly related to a company's short-term and long-term profitability. B) financial objectives help answer the question “Where do we want to go?” and strategic objectives help answer the question “How are we going to get there?” C) financial objectives determine the geographic and business scope of the company’s operations while strategic objectives should be set in a manner that does not conflict with the performance targets of lower-level organizational units. D) financial objectives are needed only in those areas directly related to a company's short-term and long-term profitability while strategic objectives need to be broken down into performance targets for each of the organization’s separate businesses, product lines, functional departments, and individual work units. E) financial objectives relate to the financial performance targets management has established for the organization to achieve, while strategic objectives relate to target outcomes that indicate a company is strengthening its market standing, competitive position, and future business prospects.

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Answer Key Test name: Chap 02_23e 31) C 32) C 33) C 34) A 35) C 36) A 37) D 38) C 39) A 40) D 41) B 42) A 43) C 44) B 45) B 46) A 47) C 48) E 49) C 50) D 51) B 52) C 53) C 54) B 55) C 56) A Version 1

57) B 58) E 59) C 60) E 61) A 62) D 63) B 64) E 65) B 66) D 67) C 68) E 69) A 70) B 71) C 72) B 73) A 74) B 75) A 76) C 77) B 78) E 79) C 80) C 81) E 82) D 83) B 84) D 85) D 86) B Version 1

87) A 88) A 89) A 90) A 91) A 92) A 93) D 94) B 95) D 96) A 97) B 98) E 99) A 100) C 101) A 102) B 103) A 104) E 105) C 106) B 107) B 108) A 109) B 110) E 111) C 112) A 113) C 114) B 115) A 116) E Version 1

117) B 118) E 119) D 120) B 121) E

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Chapter 3 Evaluating a Company’s External Environment 1) What are the six key questions that form the framework of thinking strategically about a company's industry and competitive environment?

2) Draw the five forces model of competition and briefly describe the relevance of each of the five forces in determining the overall strength of competitive pressures a company faces. Which of the five competitive forces is typically the strongest?

What are the five competitive forces that compose the five forces model of competition?

Competitive markets are economic battlefields. True or false? Explain.

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5) Identify and briefly explain any four of the factors that influence the strength or intensity of competitive rivalry among an industry's member firms.

6) Identify at least five factors that have intensified the rivalry among the coffee roasting and retailing industry's member firms.

7) Identify five factors that tend to weaken the intensity of competitive rivalry among an industry's member firms.

Identify and briefly describe five common barriers to entering an industry.

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9) Two friends of yours are considering opening a pizza parlor and delivery service within walking distance of your campus. They have asked you to help them identify the competitive pressures stemming from the threat that new firms will enter the pizza segment of the restaurant industry. What information can you give them?

10) Based on your analysis of the ease of entry into the pizza segment of the restaurant industry, your friends have decided to move forward with their plan to open a pizza parlor and delivery service within walking distance of your campus. Before they finalize the product mix for their restaurant, they have asked you to identify the competitive pressures stemming from the threat of substitutes for the pizza segment of the restaurant industry. What would your report to them include?

11) Based on your analysis of the ease of entry into and the threat of substitute products and services in the pizza segment of the restaurant industry, your friends have now asked you to estimate the threat of retaliation by incumbent rivals in the industry. Explain your assessment of this threat.

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12) Identify and briefly explain any two of the factors that influence the strength of competition from substitute products.

13) Which factors influence the bargaining strength and leverage of suppliers in the pizza segment of the restaurant industry?

14) Identify at least three tools to diagnose the competitive conditions in the personal fitness industry and explain the meaning and significance of each of the following and their relationship to one another.

15)

Identify and briefly provide examples of the most common drivers of industry change.

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16) If some strategic groups are more attractive than others, why do less well-positioned firms not simply migrate to a more attractive position? Explain and provide an example or two.

17) Explain why low switching costs and weakly differentiated products tend to give buyers a high degree of bargaining power.

18) Where the real payoff from strategic analysis of industry dynamics comes is for managers to draw some conclusions about what strategy adjustments will be needed to deal with the impacts of the driving forces. True or false? Explain.

19) Factors that influence the bargaining strength and leverage of buyers include which elements?

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20) Strong bargaining power on the part of buyers increases or decreases competitive pressure in what ways?

21)

Assess the bargaining power on the part of buyers of cosmetics.

22)

What is the Value Net framework? What are the steps in using this framework?

23) For a complete assessment of the driving forces in an industry, three steps are required. Briefly explain those steps.

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24) Identify the five most impactful driving forces in the hospitality and lodging industry and briefly explain how each one can produce important changes in industry and competitive conditions.

25) Your study group has been charged with conducting an assessment of competitive behavior in the sporting apparel industry. What are likely to be the key elements of your analysis?

26) What is the value of using Michael Porter's Framework for Competitor Analysis to observe competitors and trying to predict what moves they will make next?

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27) What are an industry's key success factors (KSFs)? How would you assess those factors for the beer industry?

28) Identify four factors that affect whether an industry does or does not present a company with a good business opportunity.

29) Can an industry be attractive to one company and unattractive to another company? Why or why not?

30) Danielle and Casey, your semester project clients, own Retrograde, a locally owned coffee roaster and retailer. The Retrograde partners have asked you to explain the importance of studying their competitors in the coffee industry and trying to predict what moves those rivals will make next.

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31) What are societal shocks and why are they not normally considered to be part of a PESTEL analysis?

32) The strategically relevant factors outside a company's industry boundaries—economic conditions, political factors, sociocultural forces, technological factors, environmental factors, and legal/regulatory conditions—are known as A) the industry and the competitive arena in which the company operates. B) general economic conditions plus the factors driving change in the markets where a company operates. C) a company's macro-environment. D) the competitive market environment that exists between a company and its competitors. E) the dominant economic features of a company's industry.

33)

Managers must chart a company's strategic course by

A) focusing on the local environment in which they are operating. B) ensuring excess production capacity and/or inventory. C) competing fiercely for a share in the market. D) building a bigger dealer network. E) developing a thorough understanding of the company's external and internal environment.

34)

The rideshare-on-demand industry is affected by such macro-influences as

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A) the strengths and weaknesses of competing transportation companies. B) the resources and capabilities of rival firms. C) the distinctive competences of incumbent firms. D) disasters, pandemics, and other unanticipated events in the natural environment. E) changes in the financial health of the firm.

35) Societal shocks are not among the principal components of strategic significance in the PESTEL analysis because they are A) caused by political factors including the extent to which government intervenes in the economy in an ongoing manner. B) dictated by foreseeable economic conditions that include the general economic climate and specific factors such as interest rates, inflation rate, and unemployment rate, as well as conditions in the stock and bond markets that can affect consumer confidence. C) associated with anticipated sociocultural forces that include societal values, attitudes, cultural factors, and lifestyles that impact business. D) the result of technological factors that include the pace of change and technical developments that have the potential for improving society. E) much harder for companies to anticipate and prepare for because they often begin with little warning.

36) The biggest strategy-shaping impact on on-demand transportation providers such as Uber and Lyft is most likely to be A) Yellow Cab companies launching mobile app campaigns for community connection and awareness. B) Amazon launching a mobile delivery service via drones. C) new government regulations that require all drivers to be hired as employees rather than as contingent workers. D) Tesla and ZipCar announcing a joint venture for electric automobile sharing services. E) DoorDash and GrubHub developing and marketing a mobile app for their customers to share rides on delivery vehicles.

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37) A strategically relevant political factor in the macro-environment that will influence the performance of all firms across the board is most likely to be A) the strength of the federal banking system. B) the exogenous forces related to the general environmental demand. C) social factors that could fuel a political agenda and create greater transparency. D) bailouts and energy policies that are industry specific. E) tax policy, fiscal policy, and tariffs providing impetus for antitrust matters.

38) Avon Products at one point secured information about its biggest rival, Mary Kay Cosmetics, by having its personnel search through the garbage bins outside MKC's headquarters. This is an example of A) how companies in an industry can sustain good track records for revenue growth and profitability. B) strategic moves rivals are likely to make next. C) industry key factors for future competitive success. D) lawful gathering of competitive intelligence. E) lawful but probably unethical gathering of competitive intelligence.

39) Which of the following situations does not exemplify the impact of macro-environment on a company’s strategic opportunities? A) Sales of Stolichnaya Vodka in the United States dwindle on account of a boycott of Russian products. B) Consumer confidence in Volkswagen drops precipitously because of falsified emissions data. C) Netflix squares off with Amazon Prime as its most potent rival in the streaming television and film industry. D) Traffic increases at the outlets of Whole Foods following its introduction of stores containing solely generic products. E) Sales of FitBit surge on account of a new feature that monitors users' blood pressure.

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40) The most powerful and widely used conceptual tool for diagnosing the principal competitive pressures in a market is A) the five forces framework. B) PESTEL. C) the driving forces model. D) strategic group mapping. E) SWOT analysis.

41) The competitive pressures on companies within an industry come from all of the following except A) those associated with the market maneuvering and jockeying for buyer patronage that goes on among rival firms in the industry. B) those companies in other industries attempting to win buyers over to their substitute products. C) those associated with the threat of new entrants into the marketplace. D) those associated with the bargaining power of suppliers and customers. E) those associated with environmental factors such as water shortages.

42)

The five forces of competitive pressures do not include

A) the power and influence of social/demographic trends. B) the bargaining power of suppliers and seller-supplier collaboration. C) the threat of new entrants into the market. D) the attempts of companies in other industries to win customers over to their own substitute products. E) the market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry.

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43) Market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry A) is less strong than the competitive pressures that stem from the ready availability of attractively priced substitute products. B) is the strongest force among the five forces that drive profitability in an industry. C) emerges from close collaboration with suppliers and the competitive pressures that such collaboration creates. D) is less important than competitive pressure associated with the potential entry of new competitors. E) has about the same impact as bargaining power and leverage that large customers are able to exercise.

44) Using the five forces model of competition to determine the character and strength of the competitive forces within a given industry involves A) building the picture of competition in three steps: (1) identify the different parties involved, along with specific factors that bring about competitive pressures; (2) evaluate how strong the pressures stemming from each of the five forces are (strong, moderate or weak); and (3) determine whether the collective impact of the five competitive forces is conducive to earning attractive profits in the industry. B) building the picture of competition in two steps: (1) determine which rival has the biggest competitive advantage and (2) assess whether the competitive advantages possessed by various industry members allow most industry members to earn above-average profits. C) evaluating whether competition is being intensified or weakened by the industry's driving forces and key success factors. D) assess whether the collective impact of all five forces is weak enough to allow industry members to go on the offensive or use a defensive strategy to insulate against fierce competitive pressures. E) gauging the overall strength of competition based on how many industry rivals are operating with a competitive advantage and how many are operating at a competitive disadvantage.

45)

What makes the marketplace a competitive battlefield?

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A) the race of industry members to build strong defenses against the industry's driving forces B) the constant rivalry of firms to strengthen their standing with buyers and win a competitive edge over rivals C) the ongoing race among rival sellers to have the highest-quality product D) the ongoing efforts of industry members to introduce new and improved products/services at a faster rate than their rivals E) the ongoing race among rivals to achieve the fastest rate of growth in revenues and profits

46)

Market maneuvering among industry rivals

A) determines whether the industry's strategic group map will be static or dynamic. B) centers around collaborative efforts to overcome the bargaining power of powerful suppliers and powerful buyers. C) is usually an industry's strongest driving force. D) is usually one of the two or three weakest competitive forces because of the close familiarity that rivals have for one another's likely next moves. E) is ongoing and dynamic, with moves and countermoves of rivals producing a continually evolving competitive landscape that delivers winners and losers.

47)

Rivalry among competing sellers decreases A) when buyer demand is growing rapidly. B) as it becomes less costly for buyers to switch brands. C) as the products of rival sellers become commoditized. D) when there is excess production relative to demand. E) as the number of competitors increases.

48)

Predictable external forces in the natural environment include

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A) the trend toward healthier lifestyles, which can shift spending toward exercise equipment and health clubs and away from alcohol and snack foods. B) air and/or water pollution, the depletion of irreplaceable natural resources, global warming, or inefficient energy/resource usage. C) interest rates, exchange rates, the inflation rate, the unemployment rate, the rate of economic growth, trade deficits or surpluses, savings rates, and per-capita domestic product. D) tax policy, fiscal policy, tariffs, the political climate, and the strength of institutions such as the federal banking system. E) societal shocks such as terrorism, pandemics, civil wars, and foreign invasions.

49)

Legal and regulatory factors in the external environment include

A) antitrust laws that prohibit the combination of companies in certain industries that would tend to reduce consumer choices. B) nomination of justices to lifetime positions. C) genetic engineering, nanotechnology, and solar energy technology. D) changes in birth rates. E) consumer boycotts of companies that have unfair or unethical labor practices.

50)

Rivalry among competing sellers is generally less intense when

A) there are relatively more industry key success factors. B) the industry's driving forces are weak and rivals have mostly commodity products. C) barriers to entry are moderately low and the pool of likely entry candidates is large. D) rivals are wary of making fresh moves to lower prices, introduce new products, increase promotional efforts and advertising, and otherwise gain sales and market share. E) buyers have many alternative products or services from which to choose.

51) The competitive battles among rival sellers striving for better market positions, higher sales and market shares, and competitive advantage suggest the rivalry force

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A) is stronger when firms strive to be low-cost producers than when they use differentiation and focus strategies. B) is often weak when rivals have emotional stakes in business or face high exit barriers. C) is largely unaffected by whether industry conditions tempt rivals to use price cuts or other competitive weapons to boost unit sales. D) tends to intensify when strong companies with sizable financial resources, proven competitive capabilities, and respected brand names hurdle entry barriers looking for growth opportunities and launch aggressive, well-funded moves to transform into strong market contenders. E) is weaker when more firms have weakly differentiated products, buyer demand is growing slowly, and buyers have moderate switching costs.

52)

In analyzing the strength of competition among rival firms, an important consideration is

A) the potential for buyers to exercise strong bargaining power. B) the diversity of competitors in terms of long-term direction, objectives, strategies, and countries of origin. C) the number of firms pursuing differentiation strategies versus the number pursuing low-cost leadership strategies and focus strategies. D) the extent to which some rivals have more than two competitively valuable competencies or capabilities. E) whether the industry is characterized by a strong learning/experience curve and whether the industry is composed of many or few strategic groups.

53)

The intensity of rivalry among competing sellers does not depend on whether

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A) the industry has more than two strong driving forces and whether the industry has more than two diverse and capable strategic groups. B) competitors are diverse in terms of long-term directions, objectives, strategies, and countries of origin. C) strong companies outside the industry have acquired weak firms in the industry and are launching aggressive moves to transform the acquired companies into strong market contenders. D) one or two rivals have particularly powerful and successful strategies to grow the business, attract and retain buyers, and develop a sustained competitive advantage. E) industry conditions attract industry members to use price cuts or other competitive weapons to boost total sales volume and market share.

54)

In which of the following instances is rivalry among competing sellers not more intense?

A) when certain competitors are dissatisfied with their market position and make moves to bolster their standing B) when strong companies outside the industry acquire weak firms in the industry and launch aggressive moves to transform their newly acquired competitors into stronger market contenders C) when competitors are fairly equal in size and capability D) when the products of rivals are weakly differentiated, buyer switching costs are low, and market demand is growing slowly E) when there are vast numbers of small rivals so the impact of any one company's actions is spread thinly across all industry members

55)

Competing companies are seldom able to strengthen their market positions via A) accumulating vast amounts of capital in order to raise barriers to entry. B) differentiating their products by offering higher quality than rivals. C) using patents and trademarks to protect their intellectual property. D) enjoying cost advantages due to economies of scale and/or economies of scope. E) reducing distribution capabilities and market presence.

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56)

Which of the following is generally not considered a barrier to entry? A) restrictive regulatory policies B) high capital requirements C) strong brand preferences D) many industry patents in place E) weak network effects in customer demand

57)

Potential entrants are more likely to be deterred from actually entering an industry when

A) incumbent firms are willing and able to be aggressive in defending their market positions against entry. B) incumbent firms are complacent. C) buyers are not particularly price-sensitive and the industry already contains a dozen or more rivals. D) the relative cost positions of incumbent firms are about the same, such that no one incumbent has a meaningful cost advantage. E) buyer switching costs are moderately low because of strong product differentiation among incumbent firms.

58) Competitive pressures associated with the threat of entry are greater in all of the following situations except when

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A) incumbent firms are willing to strongly contest the entry of newcomers with moves designed to make entry unprofitable. B) a large pool of potential entrants exists, some of which have the capabilities to overcome high entry barriers. C) entry barriers are relatively low and buyer demand for the product is growing rapidly, and newcomers can expect to earn attractive profits without inviting a strong reaction from incumbents. D) existing industry members are looking to expand their market reach by entering product segments or geographic areas where they currently do not have a presence. E) customers have low brand preferences and low degrees of loyalty to seller.

59)

The best test of whether potential entry is a strong or weak competitive force is

A) the strength of buyer loyalty to existing brands. B) whether the industry's driving forces make it harder or easier for new entrants to be successful. C) whether the strategies of industry members are well-matched to the industry's key success factors. D) whether there are any vacant spaces on the industry's strategic group map. E) to ask if the industry's growth and profit prospects are strongly attractive to potential entry candidates.

60)

The competitive threat that outsiders will enter a market is weaker when

A) financially strong industry members send strong signals that they will launch strategic initiatives to combat the entry of newcomers. B) the industry's market growth is rapid. C) the pool of entry candidates is large and some have resources that would make them formidable market contenders. D) newcomers can be expected to earn attractive profits. E) buyers have little loyalty to the brands and product offerings of existing industry members.

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61) Which of the following is a good example of a substitute product that triggers stronger competitive pressures? A) Coca-Cola as a substitute for Pepsi B) Netflix as a substitute for Prime Video C) Papa John’s as a substitute for Domino’s Pizza D) distance learning via Zoom as a substitute for in-class sessions E) Gold’s Gyms as a substitute for 24-Hour Fitness

62)

The competitive pressures from substitute products tend to be stronger when A) good substitutes are readily available. B) there are fewer number of substitute products. C) substitutes have lower performance features. D) buyers incur high costs in switching to substitutes. E) substitutes are priced above the market.

63) In which of the following instances are industry members not subject to stronger competitive pressures from substitute products? A) The costs to buyers of switching over to the substitutes are low. B) Buyers are dubious about using substitutes. C) The quality and performance of the substitutes are well-matched to what buyers need to meet their requirements. D) Buyer brand loyalty is weak. E) Substitutes are readily available at competitive prices.

64)

Determining how strong the threat of substitutes will be entails

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A) identifying the relative price/performance relationship of the substitutes, the switching costs, and the overall buyer demand for the substitute. B) identifying the attractiveness of other industries. C) measuring Coke as a substitute for Pepsi and applying dynamic simulation modeling techniques. D) adopting a substitute product concentration factor to the buyer volume. E) judging whether industry members are capable of self-manufacturing their products.

65)

The lower the user's switching costs, the A) harder it is for the sellers of attractive substitutes to lure buyers to their offering. B) more intense the competitive pressures posed by substitute products. C) less intense the competitive pressures posed by substitute products. D) greater the bargaining power from both suppliers and influential customers. E) lesser the bargaining power from both suppliers and influential customers.

66) Whether supplier-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of A) whether the profits of suppliers are relatively high or low. B) the average number of suppliers that each seller/industry member purchases from. C) how aggressively rival industry members are trying to differentiate their products. D) whether demand for supplier products is high and they are in short supply. E) whether the prices of the items being furnished by the suppliers are rising or falling.

67) The strength of competitive pressures that suppliers can exert on industry members is MAINLY a function of

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A) whether needed inputs are in short supply and whether suppliers provide differentiated input that enhances performance of the product. B) whether suppliers self-manufacture what they supply or source their items from other manufacturers. C) whether the industry's position in the growth cycle is favorable. D) whether technological change in the businesses of suppliers is rapid or slow. E) whether the needs and expectations of supplier-seller relationships are changing slowly or rapidly.

68)

The bargaining leverage of suppliers is greater when A) the suppliers' products/services account for a small percentage of industry members'

costs. B) industry members incur low costs in switching their purchases from one supplier to another. C) industry members account for a big fraction of supplier's sales. D) there is extensive seller-supplier collaboration. E) the supplier industry is composed of a large number of relatively small suppliers.

69) In which one of the following instances is supplier bargaining power and leverage not weakened? A) when industry members pose a credible threat of backward integration into the business of suppliers B) when the cost of switching from one supplier to another is low C) when the items purchased from suppliers are in short supply D) when the buying firms purchase in large quantities and thus are important customers of the suppliers E) when the item being supplied is a commodity

70) When an industry member is a major customer of the supplier, and the relationship (partnership) is unusually effective and mutually advantageous, Version 1

A) it is rare for such partnerships to have much competitive impact on those industry members not having such partnerships. B) one unfortunate outcome is that it tends to give the supply partners much enhanced bargaining power in their dealings with these industry members. C) there is a strong likelihood such partnerships will put increased competitive pressure on those industry members who lack productive collaborative relationships with their suppliers. D) there is a high likelihood of such partnerships reducing competitive pressures on all industry members, provided technological change in the suppliers' business is rapid and the item being supplied is a commodity. E) the usual result is to reduce competitive pressures on all industry members, provided the costs of the items furnished by supply chain partners amount to 50 percent or more of total cost.

71)

The higher the switching costs for industry members, the more it can

A) limit supplier bargaining power. B) enhance supplier bargaining power. C) enhance the quality of parts and components being supplied, and in effect reduce defect rates. D) provide important cost savings for the collaborative supplier-seller relationship. E) limit the supply of products and/or services.

72) Whether buyer-seller relationships in an industry represent a strong or weak source of competitive pressure is a function of A) the speed with which general economic conditions and interest rates are changing. B) the extent to which buyers can exercise enough bargaining power to influence the conditions of sale in their favor and whether strategic partnerships between certain industry members can adversely affect other industry members. C) how many buyers purchase all of their requirements from a single seller versus how many purchase from several sellers. D) the number of buyers versus the number of sellers. E) whether industry members are spending more or less on advertising.

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73) Whether buyer bargaining power poses a strong or weak source of competitive pressure on industry members depends in part on A) the degree to which buyers have any bargaining preferences and the extent to which buyers are price sensitive. B) how many buyers are engaged in collaborative partnerships with sellers. C) whether entry barriers are high or low and the size of the pool of likely entry candidates. D) whether the overall quality of the items being furnished by industry members is rising or falling. E) whether demand-supply conditions represent a buyer's market or a seller's market.

74)

Buyer bargaining power is weaker when

A) some buyers are a threat to integrate backward into the business of sellers and become an important competitor. B) buyers are small and numerous relative to sellers. C) buyers have considerable discretion over whether and when they purchase the product. D) buyers purchase the item frequently and are well informed about sellers' products, prices, and costs. E) buyers’ costs of switching to competing brands or to substitute products are relatively high.

75)

Buyer bargaining power is stronger when

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A) winning the business of certain high-profile customers offers a seller important market exposure or prestige. B) the extent and importance of collaborative partnerships and alliances between particular sellers and buyers are credible. C) buyers cannot integrate backward into the product market of sellers. D) sellers' products are differentiated, making it easy and inexpensive for buyers to switch to competing brands. E) the industry's products are standardized or undifferentiated.

76) Which of the following factors is not a relevant consideration in determining the strength of buyer bargaining power? A) the relationship between the buyer market and seller market B) the degree to which the seller is a manufacturer of goods and services in substantial quantities C) the degree to which buyers pose a credible threat to integrate backward into the product market of sellers D) the degree to which buyers are well informed about a seller's products, prices, and costs E) the degree to which industry goods are standardized and undifferentiated

77) Collaborative relationships between particular sellers and buyers in an industry can represent a source of strong competitive pressure when A) virtually all buyers have strong brand attachments and are highly brand loyal. B) demand for the product is growing rapidly. C) sales are made to buyer groups with either strong bargaining power or high sensitivity. D) sellers are racing to add the latest and greatest performance features so as to attract the patronage of important or prestigious buyers. E) buyers are very quality conscious.

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78) In which of the following circumstances are competitive pressures associated with the bargaining power of buyers relatively moderate to weak? A) The supply of soccer balls increases during the World Cup season. B) Consumers can easily compare different smartphones' features over the Internet before buying them. C) Apple designs and manufactures its chip processors rather than buying them from Intel. D) Dairy products are usually standardized and therefore differentiated only by price. E) Buyers tend to delay purchases of luxury goods, such as home entertainment systems, until they are on sale.

79) Competitive pressures stemming from buyer bargaining power tend to be weakest in which of the following circumstances? A) Most consumers vary the brands they choose for their cookware and kitchen gadgets. B) There is a global decline in the demand for cable television services. C) The commercial jet aviation manufacturing industry offers highly differentiated products. D) The Internet offers a huge amount of information on a variety of products. E) Heinz owns a metal-can manufacturing subsidiary to cut back on supplier costs.

80)

Which of the following conditions acts to weaken buyer bargaining power?

A) when buyers are unlikely to integrate backward into the business of sellers B) when buyers purchase the item frequently and are well informed about sellers' products, prices, and costs C) when the costs incurred by buyers in switching to competing brands or to substitute products are relatively low D) when the products of rival sellers are weakly differentiated and buyers have considerable discretion over whether and when they purchase the product E) when buyers are few in number and/or often purchase in large quantities

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81)

Buyers are in position to exert strong bargaining power in dealing with sellers when

A) their costs to switch to competing brands or to substitute products are relatively high. B) a particular seller's product delivers quality or performance that is very important to the buyer and is not matched by other brands. C) they buy the product infrequently or in small quantities and are not particularly well informed about sellers' products, prices, and costs. D) buyer demand is growing rapidly. E) buyers are price sensitive because the product represents a significant portion of their purchasing budget.

82) Which of the following factors is not a relevant consideration in judging whether buyer bargaining power is relatively strong or relatively weak? A) whether certain customers offer sellers important market exposure or prestige B) whether customers are relatively well informed about sellers' products, prices, and costs C) whether buyer needs and expectations are changing rapidly or slowly D) whether sellers' products are highly differentiated, making it troublesome or costly for buyers to switch to competing brands or to substitute products E) whether buyers pose a major threat to integrate backward into the product market of sellers

83) Not all buyers of an industry's product have equal degrees of bargaining power with sellers because A) sellers in an industry provide similar products and generally their cost structures are different because of competitive advantages in their operation. B) some sellers may be less sensitive than others to price, quality, or service differences. C) along the various stages of the value chain sellers are conducive to earning attractive profits. D) the industry is a highly cohesive structure with limited fragmentation and few industry members. E) sellers are large and few in number relative to the number of buyers.

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84) A competitive environment where there is weak to moderate rivalry among sellers, high entry barriers, weak competition from substitute products, and little bargaining leverage on the part of both suppliers and customers A) lacks powerful driving forces. B) gives each industry competitor the best potential for building sustainable competitive advantage over rival firms. C) makes it challenging for industry members to compete successfully unless they can strongly differentiate their products. D) is conducive to industry members earning attractive profits. E) requires that industry members have low costs in order to be competitively successful.

85) A competitive environment characterized by moderate-to-weak rivalry among sellers, high entry barriers, moderate-to-weak competition from substitute products, and moderate-tolow bargaining leverage on the part of both suppliers and customers A) is considered to be competitively attractive from the standpoint of earning good profits. B) offers incumbent firms the ability to build a sustainable competitive advantage. C) is unlikely to be conducive to achieving high customer loyalty to the company's brand. D) offers poor prospects for making a reasonable profit and building a sustainable competitive advantage. E) requires that industry members have a strongly differentiated product offering in order to be profitable.

86) The stronger the collective impact of competitive pressures associated with the five competitive forces, the

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A) stronger are the industry's driving forces. B) greater number of companies that can achieve a competitive advantage via differentiation. C) larger the number of competitive advantage opportunities for industry members. D) greater the number of industry key success factors. E) fewer companies that can achieve a competitive advantage via anything other than being the industry's low-cost leader.

87) Based on an analysis of the five competitive forces, in which of the following industries is profitability likely to be lowest? A) pharmaceuticals B) wireless lighting systems C) wearable fitness and health monitors D) pizza restaurants E) delivery services using drones

88) Based on an analysis of the five competitive forces, in which of the following industries is profitability likely to be highest? A) apparel B) tire manufacturing C) electric and gas utilities D) commercial airlines E) video streaming services

89) As a rule, the collective impact of competitive pressures associated with the five competitive forces

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A) determines the strength of the industry's driving forces. B) determines the extent of the competitive pressure on industry profitability. C) means that fewer companies can achieve a competitive advantage via anything other than being the industry's low-cost leader. D) means there will be a larger number of competitive advantage opportunities for industry members. E) means there will be a greater number of industry key success factors.

90) A company's strategy is increasingly effective the more it can match the company strategy to competitive conditions, so the firm can A) pursue avenues that expose the firm to as many of the different competitive pressures as possible. B) shift the competitive battle in favor of the firm by altering the underlying factors driving the five forces. C) pursue ways to identify and complement the five forces' contradictions and inferences to attract competitive growth opportunities. D) pursue avenues that promote strategic thinking about how to contest competitor strengths and weaknesses and to create a checklist of potential profitability preferences. E) shift societal concerns, attitudes, and lifestyles by altering the pattern of competition.

91)

The value net framework includes an analysis of A) the firm, substitutes, suppliers, customers, and competitors. B) the firm, suppliers, customers, competitors, and driving forces. C) substitutes, suppliers, customers, competitors, and driving forces. D) the firm, suppliers, customers, competitors, and complementors. E) substitutes, suppliers, customers, competitors, and potential entrants.

92)

Which of the following is not an example of a complementor?

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A) microprocessors and laptops B) automobiles and gasoline stations C) theme parks and hotels D) gyms and fitness equipment E) newspapers and Internet news providers

93)

The "driving forces" in an industry A) are usually triggered by changing technology or stronger learning/experience curve

effects. B) usually are spawned by growing demand for the product, the outbreak of price-cutting, and big reductions in entry barriers. C) are major underlying causes of changing industry and competitive conditions and have the biggest influences in reshaping the industry landscape and altering competitive conditions. D) appear when an industry begins to mature but are seldom present during early stages of the industry life cycle. E) are usually triggered by shifting buyer needs and expectations or by the appearance of new substitute products.

94)

Industry conditions change because of

A) such powerful driving forces as swings in buyer demand, changing interest rates, ups and downs in the economy, and higher/lower entry barriers. B) newly emerging industry threats and industry opportunities that alter the composition of the industry's strategic groups. C) newly emerging industry key success factors. D) important forces enticing or pressuring certain industry participants (competitors, customers, suppliers) to alter their actions in important ways. E) changes in the barriers to entry and the degree of competition from substitute products.

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95) You have been asked to analyze the Value Net of the major regions of the California wine industry and have observed close relationships between wineries and local hospitality businesses (such as restaurants and lodging facilities) in the regions under study. Those local hospitality businesses can be said to be A) cohabitors. B) competitors. C) cooperators. D) complementors. E) customers.

96)

One of the steps of driving-forces analysis is to identify which

A) strategy changes a company may need to make to prepare for the impacts of the driving forces. B) strategic group is the most powerful. C) industry member is likely to become (or remain) the industry leader and why. D) key success factors are most likely to help their company gain a competitive advantage. E) of the five competitive forces will be the strongest driver of industry change.

97) Which of the following is not generally a "driving force" capable of producing fundamental changes in industry and competitive conditions? A) changes in the long-term industry growth rate B) increasing globalization of the industry C) product innovation and technological change D) movement in the economy and in interest rates E) regulatory influences and government policy changes

98)

Which of the following qualify as driving forces?

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A) changes in the long-term industry growth rate, the entry or exit of major firms, reductions of uncertainty and business risks, and changes in cost and efficiency B) using corporate sleuthing to assess the resources and capabilities of rival firms C) the emergence of complementors in the Value Net D) increasing efforts to collaborate with suppliers via strategic alliances and partnerships, escalating risk levels and normalization of cost and efficiency in the industry E) direct foreign investment

99) Which of the following does not qualify as potential driving forces capable of inducing fundamental changes in industry and competitive conditions? A) changes in who buys the product and how they use it, and changes in the long-term industry growth rate B) changes brought about by the entry or exit of major firms, product innovation, and marketing innovation and cost efficiency C) changes in the economic power and bargaining leverage of customers and suppliers, growing supplier-seller collaboration, and growing buyer-seller collaboration D) changes in buyer preferences for differentiated products instead of mostly standardized or identical products E) changes in economies of scale and experience curve effects brought on by changes in manufacturing technology and new Internet capabilities

100)

Which of the following is most likely to qualify as a driving force?

A) increases in price cutting by rival sellers and the launch of major new advertising campaigns by one or more rivals B) successful introduction of innovative new products or new ways to market products C) an increase in the prices of substitute products D) decisions on the part of industry's three biggest competitors not to pursue a strategy of striving to be the industry's low-cost leader E) decisions by one or more outsiders not to attempt to enter the industry

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101)

Which of the following is not a common type of driving force? A) reductions in uncertainty and business risk B) changing societal concerns, attitudes, and lifestyles C) diffusion of technical know-how across companies and countries D) increasing efforts to collaborate closely with suppliers E) advances in technology and manufacturing process innovation

102)

Increasing globalization of the ride-share industry can be a driving force because

A) the services provided by foreign ride-share competitors are nearly always cheaper or of better quality than those of domestic companies. B) foreign ride-share operators typically have lower costs, more technological expertise, and greater social network integration capabilities than domestic firms. C) ride-share companies need to spread their operating reach into more and more country markets to meet emerging consumer demand and take advantage of available operating opportunities. D) it results in ride-share companies having fewer competitors and a strategic group map with fewer circles. E) market growth rates rise, product innovation accelerates, and new ride-share start-ups are increasingly likely to enter the industry.

103)

Driving-forces analysis helps managers identify whether

A) the collective impact of the driving forces will act to increase/decrease market demand, increase/decrease competition, and raise/lower industry profitability in the years ahead. B) it will become more or less important to aim the company's strategy at being the industry's low-cost producer. C) the driving forces will have a bigger impact on company profitability than competitive forces. D) the industry is likely to become more or less vertically integrated and why. E) competitive advantages are likely to grow or diminish in importance.

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104) Evaluating the industry's driving forces, as a whole, requires understanding their influence on the attractiveness of industry environment and generally are A) determined by the sizes of strategic groups and the power of rival firms' competitive strategies. B) defined in ways that will strengthen or weaken market demand, competition, and industry profitability in future years. C) the cause of a reduction in the bargaining power of buyers. D) triggered by movement in the economy, higher or lower interest rates, or important new strategic alliances. E) triggered by such factors as growing competitive pressures from substitute products, and the efforts of rival firms to employ new or different offensive strategies.

105)

In analyzing driving forces, the strategist's role is to

A) identify the driving forces and evaluate their impact on demand for the industry's product, the intensity of competition, and industry profitability. B) predict future marketing innovations and how fast the industry is likely to globalize. C) evaluate what stage of the life cycle the industry is in and when it is likely to move to the next stage. D) determine who is likely to exit the industry and what changes can be expected in the industry's strategic group map. E) forecast fluctuations in product demand and how buyer needs will most likely change.

106)

Driving-forces analysis typically does not include

A) determining whether forces are acting to cause fundamental changes in industry conditions and/or the industry's competitiveness. B) determining whether forces are acting to cause industry rivals to shift to a different strategic group. C) determining whether forces are acting to strengthen or weaken market demand. D) determining whether forces are acting to make competition more or less intense. E) determining whether forces are acting to raise or lower industry profitability.

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107)

The real payoff of driving forces is to help managers understand

A) what strategy changes are needed to prepare for the impacts of the driving forces. B) the overall strength of the five competitive forces. C) whether the industry's strategic group map will be static or dynamic. D) what conditions exist in the economy at large. E) the extent to which rivals have more than two competitively valuable competencies or capabilities.

108)

Driving-forces analysis has

A) speculative value because it compels the firm to drive strategic intent and collective choice into operating practices. B) theoretical value because it allows managers to visualize the many different dimensions of the preferred forces that allow for industry functionality. C) practical value and is basic to the task of thinking strategically about where the industry is headed and how to prepare for the changes ahead. D) no real analytical value because the driving forces are already established in the marketplace and it is too late to make astute and timely strategy adjustments. E) perceived value and is associated with identifying the close and distant rivals within an operating industry.

109) Which of the following driving forces would have the least impact on the attractiveness of the cosmetics industry? A) changes in the long-term industry growth rate B) major shifts in consumer preferences C) industry incumbents deciding to shift to a different strategic group D) changes in costs and efficiency E) regulatory influences and government policy changes

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110) What is the best technique for revealing the different market or competitive position that rival firms occupy in the industry? A) strategic group mapping B) PESTEL analysis C) five forces framework D) the Value Net framework E) competitor analysis

111)

A strategic group

A) consists of those industry members that are growing at about the same rate and have similar product line breadth. B) includes all rival firms having comparable profitability. C) is a cluster of industry members with similar competitive approaches and market positions in the market. D) consists of those firms whose market shares are about the same size. E) is made up of those firms having comparable profit margins.

112)

Not all positions on a strategic group map are equally attractive because A) small strategic groups are always less profitable than large strategic groups. B) entry and exit barriers are different for each strategic group. C) across-group rivalry is always weakest at the outer edge of the strategic group map. D) industry-driving forces and competitive pressures favor some groups and disadvantage

others. E) key success factors are substantially different for differently positioned industry participants.

113)

When all sellers pursue essentially identical strategies and have similar market positions

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A) they remain subject to different driving forces. B) they place about the same emphasis on various distribution channels. C) they use the same key success factors to differentiate their products. D) the industry can be said to contain one strategic group. E) they still must possess customer service attributes that differentiate them from one another in the marketplace.

114)

Strategic group mapping is a visual technique for displaying

A) how many rivals are pursuing each type of strategy. B) which companies have the biggest market share and who the industry leader really is. C) the different market or competitive positions that rival firms occupy in an industry and for identifying each rival's closest competitors. D) which companies have the highest degrees of brand loyalty. E) which companies have failing business models.

115) Which of the following pairs of variables are least likely to be useful in drawing a strategic group map? A) geographic market scope and degree of vertical integration B) brand name reputation and distribution channel emphasis C) product quality and product-line breadth D) level of profitability and size of market share E) price/perceived quality and image range and the extent of buyer appeal

116)

The concept of strategic groups is relevant to industry and competitive analysis because

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A) firms in the same strategic groups are rarely close competitors—a firm's closest competitors are usually in distant strategic groups. B) strategic group maps help identify how each competing firm is positioned and the relationship to its closest competitors. C) competition grows in intensity as the number and diversity of the strategic groups in an industry increase. D) the profit potential of firms in the same strategic group is usually very similar. E) competitive pressures tend to be weaker within strategic groups than across strategic groups.

117)

When drawing a strategic group map

A) one strategic variable and one financial variable should be used as axes for the map. B) it is important for the variables used as axes to be highly correlated. C) the best variables to use as axes for the map are those that identify the competitive characteristics that delineate strategic approaches used in the industry. D) it is important to use price as the variable for the vertical axis. E) the primary objective is to determine which strategic groups are profitable and which are not.

118) Which of the following is not an appropriate guideline for developing a strategic group map for a given industry? A) The variables chosen as axes for the map should indicate important differences among rival approaches. B) The variables chosen as axes for the map do not have to be either quantitative or continuous. They can be discrete variables. C) The variables chosen as axes for the map should be highly correlated. D) Several maps should be drawn if more than one pair of variables give different exposures to the competitive positioning relationships present in the industry structure. E) The sizes of the circles on the map should be drawn proportional to the combined sales of the firms in each strategic group.

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119)

A strategic group map for the pizza segment of the food service industry reveals

A) the entry and exit barriers for each strategic group and intersegment competition with other casual restaurants. B) which pizza restaurants are in profitable strategic groups and which are not. C) which competitive forces are strong and which are weak for pizza restaurants. D) whether across-group rivalry among pizza establishments is stronger than withingroup rivalry, and vice versa. E) which pizza establishments are close competitors and which are distant rivals, and that not all positions on the map are equally attractive.

120)

One of the things that can be gleaned from a strategic group map of industry rivals is

A) which rivals have been in business longer and thus have greater access to experience curve effects. B) which rivals have newer manufacturing facilities and thus have achieved greater product quality. C) which strategic groups have the highest profit margins and the highest customer switching costs and thus represent key operating characteristics. D) that some strategic groups are more favorably positioned than others because they confront weaker competitive forces and/or because they are more favorably impacted by industry driving forces. E) which strategic groups are currently being shunned by customers because of high prices and relatively low product quality.

121)

Strategic group map analysis does not entail drawing conclusions about A) where on the map is the best place to be and why. B) which companies/strategic groups are destined to prosper because of their positions. C) which companies/strategic groups seem destined to struggle. D) what accounts for why some parts of the map are better than others. E) where on the map is the easiest position to shift to a more favorably situated position.

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122)

The payoff of good scouting reports on rivals is an improved ability to A) anticipate what moves rivals are likely to make next. B) determine which rivals are in the best strategic group. C) figure out how many key success factors a rival has. D) determine whether a rival is gaining or losing market share. E) determine whether a rival has the best strategy and is the industry leader.

123) To succeed in predicting a competitor's next moves, company strategists need to appraise a rival's A) current strategy, financial health, market share, resources and capabilities. B) strategic group, assumptions, resources and capabilities, financial health. C) current strategy, assumptions, resources and capabilities, objectives. D) market share, strategic group, driving forces, assumptions. E) resources and capabilities, assumptions, current strategy, objectives.

124) Having good competitive intelligence about rivals' strategies and moves to improve their situation is important because A) it identifies who the industry's current market share leaders are. B) it allows a company to anticipate what moves rivals are likely to make next and to craft its own strategic moves with some confidence. C) it helps identify which rival is in which strategic group. D) it enables company managers to determine which rival has the worst strategy and how to avoid making the same strategy mistakes. E) it enables more accurate predictions about how long it will take a particular rival to copy most of what the strategy leader is doing.

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125) PayPal has invested heavily into a system for gathering competitive intelligence about the strategic direction and likely moves of key rivals in the mobile payments industry. Doing so allows PayPal and its subsidiary, Venmo, to determine which rivals are pursuing all of the following, except A) flawed or weak strategies. B) strategies that are likely to lead to attaining a sustainable competitive advantage. C) superior resources and capabilities. D) similar competitive approaches. E) meaningful and attainable strategic objectives.

126) Angela and Jeff are co-owners of five specialty cupcake baking stores in their region. Which of the following questions would not help them to predict the next strategic moves and countermoves of their rivals? A) Which mode of transport does the rival's supplier use? B) How does the rival manage door-to-door deliveries at no extra cost? C) What percentage of customers frequent the rival's store? D) Why are the rival's cupcakes so popular among customers? E) How frequently does their rival fulfill special orders for custom cupcakes and how large are those special orders?

127)

A rival's strategic moves and countermoves are A) indicators for the visualization of strategic mapping techniques. B) enabled and constrained by the set of capabilities they have at hand. C) measured by the extent to which they can unveil financial objectives. D) responses to the broader definition of the industry opportunities. E) signs of the competitive pressures from the industry.

128)

The extent to which firms are meeting objectives suggests they

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A) are likely to prosper in the future. B) are likely to continue their present strategy with only minor fine-tuning. C) are virtually certain to make fresh strategic moves. D) recognize the status quo as the best course of action to adopt. E) realize that refocusing will ensure competitive gains.

129)

Competitive intelligence can be gleaned from

A) company press releases, company websites, management presentations, annual reports, and 10-K filings. B) SWOT analysis, PESTLE analysis, KSF analysis, and driving-forces analysis. C) strategic group maps, Value Net analysis, and five forces analysis. D) financial ratio analysis, KSF analysis, driving-forces analysis, and five forces analysis. E) KSF analysis, Value Net analysis, and driving-forces analysis.

130)

The key success factors in an industry

A) are those competitive factors that most affect industry members' abilities to prosper in the marketplace—the particular strategy elements, product attributes, operational approaches, resources, and competitive capabilities that spell the difference between being a strong competitor and a weak one, and between profit and loss. B) are determined by the industry's driving forces, which are essential to surviving and thriving in the industry. C) hinge on how many different strategic groups the industry has operating within the industry and their level of profitability and sustainable advantages. D) depend on how many rivals are trying to move from one strategic group to another without losing momentum. E) are a function of such considerations as how many firms are in the industry, how many have market shares above 5 percent, and whether the business models being used are similar or diverse.

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131)

An industry's key success factors can always be deduced by asking what factors

A) are a function of market share, entry barriers, and economies of scale, degree of vertical integration, and industry profitability that are advantageous. B) vary according to whether an industry has high or low long-term attractiveness. C) such as product attributes and service characteristics are crucial, what resources and competitive capabilities are needed, and what shortcomings are evident to put a company at a competitive disadvantage. D) can be determined from studying the winning strategies of the industry leaders and ruling out as potential key success factors the strategy elements of those firms considered to have losing strategies. E) depend on the relative competitive strengths of the industry leaders and how vulnerable they are to competitive attack.

132)

In identifying an industry's key success factors, strategists should

A) try to single out all factors that play a major role in shaping whether buyer demand grows rapidly or slowly. B) consider on what basis customers choose between competing brands, what resources and competitive capabilities firms need to be competitively successful, and what shortcomings are almost certain to put a company at a significant competitive disadvantage. C) consider whether the number of strategic groups is increasing or decreasing and whether the five competitive forces are powerful or relatively weak. D) consider what it will take to overtake the company with the industry's overall best strategy. E) focus their attention on what it will take to capitalize on the impacts of the industry's driving forces.

133) Which of the following is not a question asked to deduce a marketing-related key success factor?

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A) What are the industry product R&D capabilities and expertise in product design? B) On what basis do buyers choose between the competing brands of sellers? C) What product attributes and service characteristics are crucial? D) What resources must a company have to be competitive? E) What shortcomings are almost certain to put a company at a significant disadvantage?

134) Which of the following can aid company strategists in identifying key success factors in their industry? A) global distribution capabilities of suppliers B) product attributes and service characteristics that buyers consider to be crucial C) low switching costs of buyers and suppliers D) accurate filling of buyer orders E) short delivery time capability

135)

Correctly diagnosing an industry's key success factors

A) points to those things that every firm in the industry needs to attend to in order to develop product propositions. B) hints at the firm's ability to generate above-average profitability. C) reveals that the firm's capabilities and resources are aligned with operating practices of industry participants. D) raises a company's chances of crafting a sound strategy. E) raises a company's sustainability dimensions and market characteristics in line with industry dynamics.

136) Which of the following is particularly pertinent in evaluating whether an industry presents a sufficiently attractive business opportunity?

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A) the industry's growth potential, whether competition appears destined to become stronger or weaker, and whether the industry's overall profit prospects are above average, average, or below average B) an assessment of which firms in the industry have the best and worst competitive strategies, whether the number of strategic groups in the industry is increasing or decreasing, and whether economies of scale and experience curve effects are a key success factor C) whether there are more than five key success factors and more than five barriers to entry D) constructing a strategic group map and assessing the attractiveness of the competitive position of each strategic group E) whether the market leaders enjoy competitive advantages and how hard it is to develop a strongly differentiated product

137) In evaluating whether the industry and competitive environment presents sufficiently attractive prospects for both competitive success and attractive profits usually does not involve a consideration of which of the following factors? A) the industry's growth potential and whether competitive pressures will likely grow stronger or weaker, and whether strong competitive forces are squeezing industry profitability to subpar levels B) whether the company occupies a stronger market position than rivals C) whether the industry's future profitability will be favorably or unfavorably affected by the prevailing driving forces D) the severity of the macro-environment problems confronting the industry E) whether the industry's product is strongly or weakly differentiated

138) When evaluating whether an industry's environment presents a company with an aboveaverage profitability and an attractive business opportunity, it primarily involves

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A) determining the industry's outlook for future profitability. B) determining which firms in the industry have a competitive advantage and how they got their advantage. C) determining the overall strength of the five competitive forces. D) constructing a strategic group map and assessing the attractiveness of the competitive position of each strategic group to determine the overall attractiveness of all the strategic groups. E) using value chain analysis to determine the relative cost positions of rival firms and to learn who the industry's low-cost producer is.

139) Which of the following factors should WingMan, a company developing a fleet of food trucks that will operate solely in university towns, consider when determining if the food-truck industry offers good prospects for attractive profits? A) the industry's growth potential, whether competition appears destined to become stronger or weaker, how the industry's driving forces might affect overall industry profitability, the company's competitive position relative to rivals, and the company's proficiency in performing industry key success factors B) an assessment of which rival food-truck businesses in the industry have the best and worst competitive strategies, whether the number of strategic groups in the industry is increasing or decreasing, and whether economies of scale and experience curve effects are a key success factor C) whether there are more than five key success factors, more than five barriers to entry, and more than five industry drivers for food-truck operators D) whether the market leaders in food trucks enjoy competitive advantages and how difficult it is to promote innovation to develop a strongly differentiated product or service for which a price premium may be charged E) constructing a strategic group map of the food-truck industry and assessing the attractiveness of the competitive position of each strategic group

140) Which of the following is considered a key success factor for Boeing, a manufacturingbased business?

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A) capabilities that result in short delivery times B) low distribution costs C) accurate filing of buyer orders D) high labor productivity E) global distribution capabilities

141) Which of the following factors was probably the most important consideration in Uber’s decision to purchase Postmates with respect to whether or not the meal delivery services industry presented a sufficiently attractive business opportunity? A) constructing a strategic group map to assess the attractiveness of the competitive position of each strategic group to determine the overall attractiveness of all the strategic groups in the food delivery industry B) using value chain analysis to determine the relative cost positions of rival firms in the food delivery industry and who is the industry's lowest-cost producer C) determining which firms in in the food delivery industry have a competitive advantage and how they attained their advantage D) determining the overall strength of the five competitive forces shaping the food delivery industry E) determining the outlook for future profitability in the food delivery industry

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Answer Key Test name: Chap 03_23e 32) C 33) E 34) D 35) E 36) C 37) A 38) E 39) C 40) A 41) E 42) A 43) B 44) A 45) B 46) E 47) A 48) B 49) A 50) D 51) D 52) B 53) A 54) E 55) E 56) E 57) A Version 1

58) E 59) E 60) E 61) D 62) A 63) B 64) A 65) B 66) D 67) A 68) A 69) A 70) C 71) B 72) B 73) E 74) E 75) E 76) B 77) C 78) A 79) C 80) A 81) E 82) C 83) B 84) D 85) A 86) A 87) D Version 1

88) E 89) B 90) B 91) B 92) E 93) C 94) D 95) D 96) A 97) D 98) A 99) C 100) B 101) D 102) C 103) A 104) B 105) A 106) B 107) A 108) C 109) C 110) A 111) C 112) D 113) D 114) C 115) D 116) B 117) C Version 1

118) C 119) E 120) D 121) E 122) A 123) A 124) B 125) D 126) A 127) B 128) B 129) A 130) A 131) C 132) B 133) A 134) B 135) D 136) A 137) E 138) A 139) A 140) D 141) E

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Chapter 4 Evaluating a Company’s Resources, Capabilities, and Competitiveness 1) You have been hired to evaluate SunPower's ability to compete successfully against its market rivals in the U.S. solar power industry. Briefly list the guiding questions for your strategic assessment of SunPower.

2) You have chosen as a course project to review CannaCraft, a northern California– integrated manufacturer and marketer of edible cannabis products. What indicators would you examine to determine whether or not CannaCraft's present strategy is working well?

3) Identify one competitive resource strength that a SWOT analysis of Blue Apron and Domino's Pizza would reveal.

4) What would a deep look at the cost structure of Everlane (Illustration Capsule 4.1), a manufacturer and online marketer of slim-fit denim jeans, reveal?

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5) Why is the simplicity of SWOT analysis also its major limitation? Explain and support your answer.

6) In conducting a SWOT analysis, is it enough to simply compile lists of the company's strengths, weaknesses, opportunities, and threats? Why or why not?

7) Explain how SunPower used benchmarking to improve its competitive position in the U.S. solar power industry.

8) What is meant by the term "best practices"? Why does it matter whether a company utilizes best practices in performing the activities included in its value chain?

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9) Describe a company (real or fictional) that is at a cost disadvantage compared to its rivals. What strategic moves should this company undertake to restore cost parity?

10) Describe and provide an example of a firm (real or fictional) that is at a differentiation disadvantage compared to its rivals. What strategic moves should this firm undertake to restore or capture a differentiation advantage?

11) If you were advising Hilton Hotels, what three main approaches would you suggest to rectify any weaknesses in this company's customer value proposition?

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12) Explain why a weighted competitive strength assessment is important and useful to strategic managers.

13) You have been asked to defend why your strategic analysis of StitchFix solely consists of an assessment of the company's external environment but not an evaluation of its internal resources and competitive position. How would you respond?

14) Why is it important for company managers to develop a worry list of strategic issues and problems that they need to address and resolve? What should they consider to develop this list?

15) You have been asked to defend why your strategic analysis of StitchFix solely consists of an assessment of the company’s external environment but not an evaluation of its internal resources and competitive position. How would you respond?

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16) Guadalupe and Gabrielle have been hired by David Ortega, owner and CEO of Lola’s Markets, to develop a list of questions to evaluate this company’s internal situation. What questions should be on that list? What would be the best indicators of whether or not Lola’s Markets’ strategy is working?

17)

In evaluating how well a company's strategy is working, the two best indicators are A) SWOT and value chain analyses. B) Porter’s five forces and Value Net analyses. C) value chain and PESTEL analyses. D) competitive strength and financial ratio analyses. E) SWOT and PESTEL analyses.

18) Everlane (Illustration Capsule 4.1) is a manufacturer and online marketer of slim-fit denim jeans. When Everlane's managers engage in the process of developing a list of questions to evaluate their company's internal situation, which question should be asked first regarding Everlane’s resources and competitive position? A) What strategic issues and problems merit back-burner managerial attention at Everlane? B) How well is Everlane's present strategy working? C) Which are Everlane's least profitable geographic market segments? D) Has Everlane reached competitive parity with its key rivals? E) To what extent do Everlane's value chain activities need to be more or less transparent?

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19) Choose the analytical tool that you would use to evaluate how well Apple Inc.'s strategy and competitive approach are currently working. A) PESTEL analysis B) Porter's five forces analysis C) Value Net analysis D) Porter's three tests for evaluating diversification outside the core business E) competitive strength assessment

20) A superior indicator of how sound W. L. Gore's strategy is and whether or not the strategy signals strong execution is A) falling short of its stated financial objectives, that is, its financial performance is well below the industry average, and its market share gains reflect short-term preferences for capacity maximization. B) remaining inattentive to possible improvements in its functional areas, creating stretch business goals, and providing a product-focused value proposition to customers. C) forgoing initiatives designed to build market share and to promote corporate responsibility. D) achieving its stated financial and strategic objectives via improvements in its internal processes such as defect rate, order fulfillment, delivery times, days of inventory, and employee productivity. E) undertaking new initiatives to promote corporate social responsibility.

21) Teresa is CFO of a company that sells prescription eyeglasses online. Which financial ratio would indicate to Teresa how well her company's strategy is working? A) return on liquidity B) gross profit margin C) time-to-market ratio D) market share E) webpage views and click-through benchmarks

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22) Teresa is CFO of a company that sells prescription eyeglasses online. Key financial ratios that could help her measure her company’s profitability include A) operating profit margin, return on stockholders' equity, and return on assets. B) times interest earned, current ratio, and acid-test ratio. C) total debt to assets, debt to equity, and long-term debt to equity. D) inventory turnover, accounts receivable collection period, and fixed asset turnover. E) dividend yield on common stock, price to earnings ratio, and dividend payout ratio.

23)

One important indicator of how well a company's present strategy is working is whether

A) it has more core competencies than close rivals. B) its strategy is built around at least two of the industry's key success factors. C) the company is achieving its financial and strategic objectives and is an above-average industry performer. D) it is customarily a first-mover in introducing new or improved products (a good sign) or a late-mover (a bad sign). E) it is subject to weaker competitive forces and pressures than close rivals (a good sign) or stronger competitive forces and pressures (a bad sign).

24) Key functional strategies of SunPower, a solar power manufacturing and installation company (described in Illustration Capsule 4.2) include A) R&D, technology, and product design. B) benchmarking against rival firms. C) diversifying beyond the low-cost, large-scale utility solar market and into residential and commercial markets. D) divestment of noncore assets. E) forecasting how solar power prices are likely to fluctuate over time.

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25)

A company's resources and capabilities represent

A) the firm's net working capital and related determinants for measuring operating performance and capabilities. B) the firm's competitive assets that determine its competitiveness and ability to succeed in the marketplace. C) whether the firm has the industry's most efficient value chain. D) management's sources and uses of funding for new strategic initiatives. E) positive trends with relevant cultural factors related to buyers' choices and product modifications.

26) If you were asked to use a powerful analytical tool to size up Amazon's competitive assets and determine whether they can provide the foundation necessary for its competitive success in the marketplace, you would choose A) VRIN tests. B) SWOT analysis. C) competitive strength matrix analysis. D) financial and asset management analysis. E) value chain analysis.

27)

The difference between a resource and a capability is a resource

A) is a productive input or competitive asset, whereas a capability is the capacity of the firm to perform some internal activity competently. B) is a reserve supply or back-up supply function, whereas a capability is the ability to manage the resource function. C) is a mechanism used for carrying out some responsibility, whereas a capability possesses the ability to monitor the resource. D) represents the firm's fixed assets, whereas a capability defines whether the firm is competent to perform some function with these assets. E) represents the firm's human assets, whereas a capability defines the skills and knowledge of these human resources.

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28)

Starbucks’s employee management, training, and real estate are

A) also known as Starbucks’s productive inputs or competitive assets, while human assets and intellectual capital are considered capabilities or competencies. B) only representative of Starbucks’s physical resources. C) part of Starbucks’s inventory of the firm's strengths, weaknesses, opportunities, and threats. D) capabilities that Starbucks developed and enabled via the deployment of company resources. E) considered Starbucks’s organizational resources because they consist of processes.

29) Warby Parker is an online retailer of prescription eyewear. Warby Parker’s capabilities in market research and engineering as well as the company’s relations with suppliers and manufacturing companies are considered A) Warby Parker’s resources to competently perform some internal activity. B) Warby Parker’s core competence. C) by Warby Parker as resources or some combination of those resources. D) a competitively valuable resource for Warby Parker. E) cross-functional capabilities for Warby Parker that draw on a number of different kinds of resources and are multidimensional in nature.

30) When strategic managers assess the competitive power of company resources, what matters is

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A) whether it helps differentiate a company's product offering from the product offerings of rival firms. B) whether the resource is really competitively valuable, if it is rare and something competitors lack, how hard it is to copy or imitate, and how easily it can be trumped by the substitute resource strengths and competitive capabilities of rivals. C) whether customers are aware of the resource and view it positively enough to boost the company's brand name reputation. D) whether the resource is something rivals are unable to perform, if it is an important differentiating product or service feature, how strongly it contributes to the company's brand image, and if it is the foundation of a cost-based advantage. E) whether the resource is technology based or based on superior marketing know-how.

31)

Tangible resources do not include A) physical resources. B) financial resources. C) human assets. D) technological assets. E) organizational resources.

32)

Tangible resources include

A) human assets and intellectual capital, which can include the talent of the work force and the creativity and innovativeness of certain personnel. B) reputational assets, which can include the company's reputation for quality, service, and reliability as well as its reputation for fair dealings with suppliers. C) relationships such as alliances that provide access to technologies, specialized knowhow, or geographic markets. D) technological assets such as patents, copyrights, and innovation technologies. E) company culture and incentive system, which includes the norms of behavior and business principles.

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33)

Among W. L. Gore's tangible resources are A) human assets and intellectual capital. B) creativity, production technologies, and patents. C) brand, image, and reputation. D) relationships. E) company culture.

34) Starbucks has hired you to make a systematic inventory of its competitive capabilities. To do so, you would conduct an assessment of Starbucks's A) resources and functions. B) competitive set via a strategy matrix. C) sustainability initiatives and resource bundles. D) cross-functional systems and collaborative resource methodology. E) financial statements and managerial depth charts.

35) A company that lacks a stand-alone resource that is competitively powerful may attempt to develop a competitive advantage through A) improved employee training programs, new marketing promotions, or technological enhancements to production processes. B) the development of a new business strategy that draws upon existing resource strengths. C) extensive strategic planning and resource identification sessions involving managers at all levels of the organization. D) bundled resources that enable superior performance of cross-functional capabilities that can be leveraged to support its business model and strategy. E) devising clever approaches to turning resource weaknesses into resource strengths.

36)

Organizational capabilities are virtually always

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A) knowledge based, residing in people and in the company's intellectual capital, or in organizational processes and systems, which embody tacit knowledge. B) more complex than resources and are exercised only through key personnel. C) require constant evaluation to ensure cooperative support from management. D) easier and less challenging to categorize than resources because there are fewer to be concerned about. E) reflective of the industry's driving forces.

37) Warby Parker, an online merchant of prescription eyewear, has linked and closely integrated competitive assets centered around one or more cross-functional capabilities, which are sometimes referred to as resource A) bundles. B) capabilities. C) assets. D) functions. E) competencies.

38)

A sustainable competitive advantage is gained when a company

A) has durable competitive assets that are central to its strategy and superior to those of rival firms. B) has sufficient resources to expedite its strategy. C) realizes its inherent weaknesses are transformable to advantages. D) can stand out relative to rivals because of resource utilization. E) has resources in well-populated geographical locations.

39)

The four tests of a resource's competitive power are often referred to as the

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A) SCIR test, which asks if a resource is sustainable, competitive, internalized, and reproducible. B) competitive advantage sustainable method test. C) reliability resources simulation. D) VRIN test, which asks if a resource is valuable, rare, inimitable, and nonsubstitutable. E) organizational capability metric analysis.

40) The spotlight in analyzing a company's resources, internal circumstances, and competitiveness includes such questions/concerns as A) whether the company is located all over the globe. B) whether the company's key success factors are more dominant than the key success factors of close rivals. C) whether the company has the industry's most efficient and effective value chain. D) what the company's resource strengths and weaknesses are in relation to the market opportunities and external threats. E) what new acquisitions the company would be well advised to make in order to strengthen its financial performance and overall balance sheet position.

41)

Choose the indicator that is not relevant in identifying a company's present strategy.

A) the key functional strategies (R&D, supply chain management, production, sales and marketing, HR, and finance) a company is employing B) management's planned, proactive moves to outcompete rivals (via better product design, improved quality or service, wider product lines, and so on) C) the company's mission, strategic objectives, and financial objectives D) moves to respond and react to changing conditions in the macro-environment and in industry and competitive conditions E) the strategic role of its collaborative partnerships and strategic alliances with others

42)

The best quantitative evidence of whether a company's present strategy is working well is

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A) whether the company has more competitive assets than it does competitive liabilities. B) whether the company is in the industry's best strategic group. C) the caliber of results the strategy is producing, specifically whether the company is achieving its financial and strategic objectives and is an above-average industry performer. D) whether the company has a shorter value chain than close rivals. E) whether the company is in theFortune 500.

43) If you were hired to conduct a review of how effectively Tesla Motors’ current strategy is working, what aspect of your review would be considered irrelevant? A) whether the company's sales are growing faster, slower, or about the same pace as the industry as a whole, thus resulting in a rising, falling, or stable market share B) whether it has a larger number of competitive assets than competitive liabilities and whether it has a superior quality product C) the firm's image and reputation with its customers D) whether its profit margins are rising or falling and how large its margins are relative to those of its rivals E) evidence of improvement in internal processes such as defect rate, order fulfillment, delivery times, days of inventory, and employee productivity

44)

A resource of a firm is considered to be A) a market opportunity. B) an environmental threat. C) the capacity of a firm to competently perform some internal activity. D) a competitive deficiency. E) deployed to develop and enable a firm's capabilities.

45)

How are a company's organizational capabilities developed and enabled?

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A) by strengthening the traditions that company executives are committed to maintaining B) through deployment of a company's resources or some combination of its resources C) by talking openly about the problems of the present company and determining how new behaviors will improve performance D) by shifting from decentralized to centralized decision making E) by urging company personnel to search outside the company for work practices and operating approaches that may be an improvement over what the company is presently doing

46)

The best example of a company resource is

A) having higher earnings per share and a higher return on shareholders' equity investment than key rivals. B) being totally self-sufficient such that the company does not have to rely in any way on key suppliers, partnerships with outsiders, or strategic alliances. C) having proven technological expertise and an ability to churn out new and improved products on a regular basis. D) having a larger number of competitive assets than competitive liabilities. E) having more built-in key success factors than rivals.

47)

A good example of a company's resources does not include

A) more intellectual capital and better e-commerce capabilities than rivals. B) fruitful partnerships or alliances with suppliers that reduce costs and/or enhance product quality and performance. C) having higher earnings per share and a higher stock price than key rivals. D) a well-known brand name and enjoying the confidence of customers. E) a lower-cost value chain than rivals.

48) If a company does not possess stand-alone resource strengths capable of contributing to competitive advantage,

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A) all potential for competitive advantage is lost. B) it is unlikely to survive in the marketplace and should exit the industry. C) it may have a bundle of resources that can be leveraged to develop a distinctive competence. D) it is virtually blocked from using offensive strategies and must rely on defensive strategies. E) its best strategic option is to revamp its value chain in hopes of creating stronger competitive capabilities.

49)

Resource and capability analysis is designed to A) ascertain the internal marketplace of nondistinct divisions of the company. B) ascertain which of a company's resources and capabilities are competitively valuable. C) stimulate demand for a product. D) ascertain to what extent a competitor can sustain a competitive advantage. E) stimulate economic growth for companies within the industry.

50)

Resource and capability analysis is achieved by A) probing the caliber of a firm's competitive assets relative to those of rival firms. B) attaining price stability. C) analyzing only internal strengths and weaknesses through a matrix comparison model. D) cost-benefit analysis of the company's core product sales. E) performing resource-specific activities within the organization to allocate available

capital.

51) When a company has become proficient in modifying, upgrading, or deepening the company's resources and capabilities in response to its changing environment and market opportunities, it is called the company's

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A) dynamic capability. B) core competence. C) distinct competence. D) strategic assessment. E) benchmarking exercise.

52) A company that has competitive assets that are central to its company strategy and superior to those of rival firms creates a A) long-term derivative strategy. B) cash flow feasibility analysis. C) competitive advantage over other companies. D) resource deployment strategic plan. E) cost underestimation and benefit overestimation.

53) on

The competitive power of a company resource strength or competitive capability hinges

A) whether or not it can be measured by financial ratio analysis. B) whether or not it is contributing to stakeholder wealth appreciation. C) whether it is tangible or intangible. D) whether or not it is rare. E) whether or not it is impacted by macro-economic forces.

54) Which two factors inhibit the ability of rivals to imitate a firm's most valuable resources and capabilities?

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A) social ambiguity and causal uncertainty B) social simplicity and causal complexity C) collective complexity and causal ambiguity D) social complexity and causal ambiguity E) social simplicity and causal uncertainty

55)

A competitively valuable resource or capability is a company's A) enabling foundation of its business model. B) equally valuable substitute resource providing a competitive advantage. C) assessment of the availability of superior substitutes. D) unsurpassed worker productivity and product quality. E) unique piecework incentive system, providing a competitive advantage.

56)

Imitation by rivals is most challenging when A) resources are unique. B) resources must be built over time. C) capabilities reflect a high level of social complexity and causal ambiguity. D) resources and capabilities require a high level of capital investment. E) resources are primarily intangible.

57) For a particular company's resource or capability to have real competitive power and perhaps qualify as a basis for competitive advantage, it should

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A) be hard to copy, be rare and something rivals lack, be competitively valuable, and not be easily trumped by substitute resource strengths possessed by rivals. B) be something that a company does internally rather than in collaborative arrangements with outsiders. C) be patentable. D) be an industry key success factor and occupy a prime position in the company's value chain. E) have the potential for lowering the firm's unit costs.

58) The competitive power of a company's resource strength is not measured by which one of the following tests? A) Is the resource rare and something rivals lack? B) Is the resource strength something that a company has internally rather than in collaborative arrangements with outsiders? C) Is the resource strength easily trumped by the substitute resources/capabilities of rivals? D) Is the resource strength hard to copy? E) Is the resource strength competitively valuable, having the potential to contribute to a competitive advantage?

59)

A company requires a dynamically evolving portfolio of resources and capabilities to

A) assist the strategic planning team in overall direction. B) sustain complex manufacturing systems as a strategic recall. C) sustain its competitiveness and help drive improvements in its performance. D) sustain benefits of high market share as an interest in growth strategies. E) transform knowledge into a management style supporting competition in a globally diverse world.

60)

A company's dynamic capability is not manifested by its

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A) capacity to improve existing resources and capabilities. B) ability to upgrade its R&D resources to drive product innovation. C) capacity to add new resources and capabilities to the competitive asset portfolio. D) ability to replace degraded resources with acquired capabilities. E) ability to keep antiquated resources by disregarding innovative capabilities.

61)

A dynamic capability is the A) ongoing capacity to modify existing resources and capabilities to create new ones. B) improvement evaluation process for eliminating waste in the firm. C) functional and operating resources management process. D) ongoing capability to understand and establish a commitment to resource alignment. E) improvement evaluation process for repurposing waste in the firm.

62) identifies and assesses a company's resource strengths and weaknesses and its external opportunities and threats. A) A SWOT analysis B) A competitive asset/liability analysis C) A competitive positioning analysis D) A strategic resource assessment E) Company resource mapping

63)

A first-rate SWOT analysis

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A) is a way to measure whether a company's value chain is longer or shorter than the chains of key rivals. B) is a tool for benchmarking whether a firm's strategy is closely matched to industry key success factors. C) reveals whether a company is competitively stronger than its closest rivals. D) provides a good basis for crafting a strategy.

64) If you were conducting a SWOT analysis for a textbook publisher, which of the following steps would you omit from your SWOT analysis? A) identifying the textbook publisher's market opportunities B) matching the textbook publisher's strategy to its resource strengths and market opportunities, correcting problematic weaknesses, and defending against worrisome threats C) identifying the textbook publisher's resource weaknesses D) drawing conclusions about the textbook publisher's overall business situation E) benchmarking the textbook publisher's resource strengths and competitive capabilities against industry key success factors

65)

SWOT analysis is a simple but powerful tool for

A) gauging whether a company has a cost-competitive value chain. B) sizing up a company's resources and capabilities, strengths and deficiencies, its market opportunities, and the external threats to its future well-being. C) evaluating whether a company is in the most appropriate strategic group. D) determining a company's competitive strength vis-à-vis close rivals. E) identifying the market segments in which a company is strongly positioned and weakly positioned.

66)

A company's strengths are important because they

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A) pave the way for establishing a low-cost advantage over rivals. B) represent the quality of its competitive assets that enhance its competitiveness in the marketplace. C) provide extra muscle in helping lengthen the company's value chain. D) give it competitive protection against the industry's driving forces. E) provide extra organizational muscle in turning a core competence into a key success factor.

67) When an activity becomes something a company has learned to perform proficiently and capably, the company is said to have a A) competence. B) competitive advantage over rivals. C) key value chain proficiency. D) distinctive capability. E) resource advantage.

68) When a company has a proficiency in performing a strategically and competitively important value chain activity better than its rivals, it is said to have a A) company competence. B) core competence. C) distinctive competence. D) key value chain proficiency. E) competitive advantage over rivals.

69)

The difference between a core competence and a distinctive competence is that a

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A) distinctive competence refers to a company's strongest resource or competitive capability, whereas a core competence refers to a company's lowest-cost and most efficiently executed value-chain activity. B) core competence usually resides in a company's base of intellectual capital, whereas a distinctive competence stems from the superiority of a company's physical and tangible assets. C) core competence is a competitively and strategically relevant activity that a firm performs well compared to its other activities, whereas a distinctive competence is a competitively relevant activity a firm performs well compared to other rival firms. D) core competence represents a resource strength, whereas a distinctive competence is achieved by having more resource strengths than rival companies. E) core competence usually resides in a company's technology and physical assets, whereas a distinctive competence usually resides in a company's know-how, expertise, and intellectual capital.

70)

A core competence

A) detracts from a company's arsenal of competitive capabilities and competitive assets and is not a resource strength considered to be genuine. B) is typically results-based, residing in a company's tangible physical assets on the balance sheet. C) is often grounded in a single department's set of knowledge and expertise. D) is an activity that a firm performs proficiently that is also central to its strategy and competitive success. E) is a proficiently performed external activity.

71)

A core competence

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A) is a more competitively valuable strength than a competence because of the key role the activities play in the company's strategy. B) typically has competitive value, the amount of which is reflected in the physical and tangible assets on a company's balance sheet. C) usually is grounded in the technological expertise of a particular department or work group. D) is more difficult for rivals to copy than a distinctive competence. E) refers to a company's lowest-cost and most efficiently executed value-chain activity.

72)

An example of an external threat to a company's future profitability does not include

A) lack of a distinctive competence. B) potential of a hostile takeover. C) adverse changes in foreign exchange rates. D) unfavorable demographic shifts. E) introduction of restrictive trade policies in countries where the company does business.

73) When a company performs a particular competitively important activity truly well in comparison to its rivals, it is said to have a A) company competence. B) strategic resource. C) distinctive competence. D) core competence. E) key success factor.

74)

A core competence for Procter and Gamble is its capability to

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A) manufacture high-quality products at a lower cost than rivals. B) create and operate a system for cost-efficient supply chain management. C) fill customer orders accurately and swiftly. D) manage an ever-expanding portfolio of branded consumer products. E) speed new or next-generation products to the marketplace.

75)

A distinctive competence is not

A) a competitively important activity that a company performs better than its rivals. B) typically less restrictive for rivals to copy than a core competence. C) a basis for sustainable competitive advantage. D) considered as a superior internal strength. E) capable of delivering stand-out value to customers (in the form of lower prices, better product performance, or superior service).

76)

Starwood Hotels' company resource strengths consist of

A) its core competencies in site selection, construction, reservations systems, and operations. B) the magnitude of its unit sales, revenues, and market share vis-à-vis those of key hotel industry rivals. C) the magnitude of its profit margins and return on investment vis-à-vis those of key hotel industry rivals. D) whether it has more primary activities in its value chain than close rivals and a better overall value chain than its rivals in the hotel industry. E) whether it has a more profitable business model than close rivals in the hotel industry.

77)

A company resource weakness or competitive deficiency

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A) represents a problem that needs to be turned into a strength because weaknesses prevent a firm from being a winner in the marketplace. B) causes the company to fall into a lower strategic group than it otherwise could compete in. C) prevents a company from having a distinctive competence. D) is something a company lacks or does poorly (in comparison to rivals) or a condition that puts it at a disadvantage in the marketplace. E) usually stems from having a missing link or links in the industry value chain.

78) that

The external market opportunities which are most relevant to a company are the ones

A) can increase market share. B) are reinforced by the overall business strategy and reflect the business model. C) match up well with the firm's competitive assets, offer the best prospects for growth and profitability, and present the most potential for competitive advantage. D) qualify to correct its internal weaknesses and resource deficiencies. E) are relevant for defending against the external threats to its well-being.

79) that

The market opportunities most relevant to a low-cost provider of mobile phones are those

A) offer the best prospects for growth and profitability in emerging markets. B) provide a strong defense against threats to the company's profitability. C) embrace the most potential for product innovation. D) provide differentiation features to take market share away from close rivals. E) hold the most potential to reduce dropped calls.

80)

An external threat to a company's future profitability does not include

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A) the lack of a distinctive competence. B) new legislation that entails burdensome and costly government regulations. C) slowdowns in market growth. D) more intense competitive pressures. E) the introduction of restrictive trade policies in countries where the company does business.

81)

External threats to a company's future profitability and well-being do not include

A) the likely entry of potent new competitors. B) the lack of a well-known brand name with which to attract new customers and help retain existing customers. C) shifts in buyer needs and tastes away from the industry's product. D) costly new regulatory requirements. E) growing bargaining power on the part of the company's major customers and major suppliers.

82) External threats may pose various degrees of adversity upon the company and can surface from many sources and examples, except for A) the advent of cheaper or better technologies. B) the entry of lower-cost foreign competitors and restrictive foreign trade policies. C) new burdensome regulations. D) higher overall unit costs relative to those of key competitors. E) rising prices on key inputs (such as energy costs).

83)

The payoff of doing a thorough SWOT analysis is

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A) identifying whether the company's value chain is cost-effective vis-à-vis the value chains of rivals. B) helping strategy makers benchmark the company's resource strengths against industry key success factors. C) enabling a company to assess its overall competitive position relative to its key rivals. D) revealing whether a company's market share, measures of profitability, and sales compare favorably or unfavorably vis-à-vis key competitors. E) assisting strategy makers in crafting a strategy that is well-matched to the company's resources and capabilities, its market opportunities, and the external threats to its future wellbeing.

84) Examples of a potential resource weakness or competitive deficiency for a company do not include A) less productive R&D efforts than rivals. B) having a single, unified functional strategy instead of several distinct functional strategies. C) lack of a strong brand image and reputation (as compared to rivals). D) higher overall unit costs relative to rivals. E) too narrow a product line relative to rivals.

85) If you were asked to conduct a SWOT analysis for Nike, you would not evaluate which of these market opportunities? A) serving additional customer groups or market segments B) growing buyer preferences for substitutes for the industry's product C) acquiring rival firms or companies with attractive technological expertise or capabilities D) expanding into new geographic markets E) demographic trends that favor increased repeat purchases and/or higher volume purchases of the company's product

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86) If you were asked to conduct a SWOT analysis for your company, you would not be able to assess A) how to improve your company’s strategy by building on its strengths and capabilities. B) which market opportunities are best suited to your company’s strengths and capabilities. C) which of your company’s resource weaknesses and deficiencies need to be corrected so as to better enable the pursuit of important market opportunities and to better defend against certain external threats. D) how your company’s management could turn a core competence into a distinctive competence. E) whether any of your company’s resource strengths can be used to help lessen the impact of external threats.

87)

The two most important parts of SWOT analysis are

A) pinpointing the company's competitive assets and pinpointing its competitive liabilities. B) identifying the company's resource strengths and identifying the company's best market opportunities. C) identifying the external threats to a company's future profitability and pinpointing how many market opportunities it has. D) drawing conclusions from the SWOT listings about the company's overall situation and translating these conclusions into strategic actions to better match the company's strategy to its resource strengths and market opportunities, correct the important weaknesses, and defend against external threats. E) making accurate lists of the company's strengths, weaknesses, opportunities, and threats and then using these lists as a basis for ascertaining how well the company's strategy is working.

88) One of the most telling signs of whether a company's market position is strong or precarious is

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A) whether its product is strongly or weakly differentiated from rivals. B) whether its prices and costs are competitive with those of key rivals. C) whether it has a lower stock price than key rivals. D) the opinions of buyers regarding which seller has the best product quality and customer service. E) whether it is in a bigger or smaller strategic group than its closest rivals.

89) Two analytical tools useful in determining whether a company's prices and costs are competitive are A) SWOT analysis and key success factor analysis. B) SWOT analysis and benchmarking. C) value chain analysis and benchmarking. D) competitive position assessment and competitive strength assessment. E) driving-forces analysis and SWOT analysis.

90) The three main areas in the value chain where significant differences in the costs of competing firms can occur include A) age of plants and equipment, number of employees, and advertising costs. B) operating-level activities, functional area activities, and line of business activities. C) the nature and makeup of their own internal operations, the activities performed by suppliers, and the activities performed by wholesale distribution and retailing allies. D) human resource activities (particularly labor costs), vertical integration activities, and strategic partnership activities. E) variable cost activities, fixed cost activities, and administrative activities.

91) Identifying the primary and secondary activities that are included in a company's value chain

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A) indicates whether a company's resource strengths will ultimately translate into greater value for shareholders. B) reveals whether a company's resource strengths are well matched to the industry's key success factors. C) is the first step in understanding a company's cost structure (since each activity in the value chain gives rise to costs). D) is called benchmarking. E) is called resource value analysis.

92) A much-used and potent managerial tool for determining whether a company performs particular functions or activities in a manner that represents "the best practice" when both cost and effectiveness are taken into account is A) competitive strength analysis. B) activity-based costing. C) resource cost mapping. D) SWOT analysis. E) benchmarking.

93)

Activity-based costing at Everlane

A) analyze the costs of each of Everlane’s primary activity. B) determine whether the value chains of Everlane’s rival companies are similar or different. C) benchmark the costs of Everlane’s primary value chain activities against the costs of the support value chain activities. D) determine the costs of each strategic action that Everlane initiates. E) assess the degree to which Everlane’s total costs should be broken down into costs for specific activities depends on how valuable it is to know the costs of specific activities versus broadly defined activities.

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94)

Activity-based costing

A) is an accounting system that assigns a company's expenses to whichever activity in a company's value chain is responsible for creating the cost. B) involves using benchmarking techniques to develop cost estimates for the value chain activities of each major rival. C) is a powerful tool for identifying the different pieces of a company's value chain and classifying them as primary activities and support activities. D) involves determining which value chain activities represent variable costs and which represent fixed costs. E) is a tool for identifying the activities that cause a company's product to be strongly differentiated from the products of rivals.

95) Costs and price differences among competing companies can have origins in activities performed by A) the company's internally performed activities (its own value chain) compared to the cost structure of the internally performed activities of rival companies. B) value chains of the company's suppliers. C) value chains of a company's distributors and retail dealers and forward channel allies. D) the company's internally performed activities (its own value chain), but also on costs in the value chain of its suppliers and distribution channel allies. E) whether the company has a longer or shorter value chain than its close rivals.

96)

Benchmarking involves

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A) comparing how different companies perform various value chain activities and then making cross-company comparisons of the costs and effectiveness of these activities. B) checking whether a company has achieved more of its financial and strategic objectives over the past five years relative to its direct competitors. C) studying whether a company's resource strengths are more/less powerful than the resource strengths of rival companies. D) studying how a company's competitive capabilities stack up against the competitive capabilities of selected companies known to have world-class competitive capabilities. E) comparing the best practices in one industry against the best practices in another industry.

97) The process of benchmarking SunPower's value chain activities against its rivals in the solar power industry would not entail A) identifying the best practices in performing various value chain activities. B) learning how best practice companies achieve lower costs or better results in performing benchmarked activities. C) constructing a company value chain and identifying which activities are primary and which are support activities. D) making cross-company comparisons of the costs of performing specific value chain activities. E) taking actions to improve a company's cost competitiveness when benchmarking reveals that its costs and results of performing an activity are not as good as what other companies have achieved.

98) Benchmarking provides low-cost providers such as Dollar General, Ryanair, T.J.Maxx, and Nucor Steel with A) hard evidence of cost competitiveness. B) proof of resource availability. C) a company strategy. D) verification of total cost ownership. E) improvements to internal processes.

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99)

The most difficult part of benchmarking is A) the decision of whether to do it at all. B) how to obtain access to information regarding rivals' practices and costs. C) when to initiate the process. D) what information to utilize in the analysis process. E) when to stop the process and move forward with strategy.

100) Obtaining cost information is a primary difficulty associated with benchmarking. The following are typical sources for collecting information except from A) published reports, industry research firms, and trade groups. B) talking to knowledgeable industry leaders. C) field trips to the facilities of competitors or noncompeting firms. D) independent firms and consulting firms to gather best practices and comparative cost data without identifying competing firms. E) classified government documents.

101) Managers can improve efficiency and effectiveness in a company's value chain by analyzing A) a company's own internal activity segments, the suppliers' part, and the forward (distribution) channel portion of the value chain system. B) a company's reinforced activities identified as efficiency measures for improved effectiveness. C) only the internal activity segments. D) only the suppliers' part. E) only the distributors' channel portion.

102)

Remedying an internal cost disadvantage involves

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A) investing in costly technological improvements. B) redesigning the product or some of its components to reduce defect rates and warranty returns. C) forgoing the use of best practices throughout the company. D) eliminating some cost-producing activities altogether by revamping the value chain. E) performing activities in the same way as done earlier.

103) If you were a consultant to SunPower, one of the largest solar power companies in the United States, you would not recommend which activity to remedy high internal costs relative to its rivals? A) finding ways to detour around activities or items where costs are high B) redesigning the product or some of its components to permit more economical manufacture or assembly C) implementing aggressive strategic resource mapping to permit across-the-board cost reduction D) outsourcing high-cost activities to vendors or contractors who can perform them more economically E) relocating high-cost activities (like manufacturing) to geographic areas (like China or Latin America or Eastern Europe) where they can be performed more cost effectively

104) A company's strategic options for remedying cost disadvantages in internally performed value chain activities do not include A) revamping its value chain to eliminate or bypass some cost-producing activities (particularly low value-added activities). B) implementing the use of best practices, particularly for high-cost activities. C) investing in productivity-enhancing, cost-saving technological improvements. D) switching to activity-based costing. E) outsourcing the performance of high-cost activities to vendors that can perform them more cheaply.

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105)

The options for remedying a supplier-related cost disadvantage include

A) pressuring suppliers for more favorable prices, switching to lower-priced substitute inputs, and collaborating closely to identify mutual cost-saving opportunities. B) instituting forward vertical integration. C) shifting into the production of substitute products. D) shifting from a low-cost leadership strategy to a differentiation or focus strategy. E) cutting selling prices and trying to win a bigger market share.

106)

Remedying a supplier-related cost disadvantage would not entail

A) integrating backward into the business of high-cost suppliers in an effort to reduce the costs of the items being purchased. B) negotiating more favorable prices with suppliers. C) collaborating closely with suppliers to identify mutual cost-saving opportunities. D) switching to lower-priced substitute inputs. E) persuading forward channel allies to implement best practices.

107) Remedying a cost disadvantage associated with activities performed by forward channel partners (wholesale distributors and retail dealers) would not involve A) changing to a more economical distribution strategy such as putting more emphasis on cheaper distribution channels (perhaps direct sales via the Internet) or perhaps integrating forward into company-owned retail outlets. B) enhancing differentiation through activities such as cooperative advertising at the forward end of the value chain. C) pressuring distributors/dealers and other forward channel allies to reduce their costs and markups. D) insisting on across-the-board cost cuts in all value chain activities—those performed by suppliers, those performed in-house, and those performed by distributors/dealers. E) collaborating with forward channel allies to identify win-win opportunities to reduce costs.

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108) The means to enhance differentiation through activities at the forward end of the value chain system do not include A) engaging in cooperative advertising and promotions. B) creating exclusive arrangements with downstream sellers or other mechanisms that increase their incentives for enhanced-delivery customer value. C) creating and enforcing standards for downstream activities. D) assisting in training channel partners in business practices. E) enhancing cost-reducing activities with defensive functionality designed to create incentives.

109) A company's value-creating activities can offer a competitive advantage in one of these ways. A) contribute to greater efficiency and lower costs and provide a basis for differentiation B) contribute expense savings and enhance product exclusivity C) reduce cost disadvantages and market price anomalies D) contribute customer experience value and conserve operating functionality E) contribute to competitive assets and discontinue distinctive competencies

110) For a company to translate its performance of value chain activities into a competitive advantage, it must A) undertake ongoing and persistent efforts to be cost-efficient and develop differentiation advantages. B) have more core competencies than rivals. C) have at least three distinctive competencies. D) have competencies that allow it to produce the highest-quality product in the industry. E) have more competitive assets than competitive liabilities.

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111) To build a competitive advantage by out-managing rivals in performing value chain activities, a company must A) position itself in the industry's more favorably situated strategic group. B) develop resource strengths that will enable it to pursue the industry's most attractive opportunities. C) develop core competencies and maybe a distinctive competence that rivals don't have or can't quite match and that are instrumental in helping it deliver attractive value to customers. D) outsource all of its value chain activities to world-class vendors and suppliers. E) eliminate its resource weaknesses.

112)

When companies engage in value-creating activities, they do so by

A) focusing on exploiting a company's best-executed operating strategy. B) concentrating on efficient performance of the company's primary value chain activities. C) concentrating on minimizing the costs associated with the design of a product or service. D) drawing on specific company resources and capabilities that underlie and enable the activity. E) focusing on working with forward-channel allies to develop capabilities to outmatch the capabilities of rivals.

113) As a manager at the French discount retailer Carrefour, you could derive a competitive advantage from A) building organizational expertise in performing Carrefour's competitively important value chain activities. B) understanding how Carrefour's value chain activities provide opportunity for growth. C) building value-creating activities all along Carrefour's value chain. D) increasing Carrefour's superiority over rivals by executing even unimportant tasks and activities extremely well. E) sustaining Carrefour's current chain of activities to lower costs.

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114)

The value of doing competitive strength assessment is to

A) determine how competitively powerful are the company's core competencies. B) learn if the company's market opportunities are better than those of its rivals. C) learn whether a company has a distinctive competence. D) learn how the company ranks relative to rivals on each of the important factors that determine market success and ascertain whether the company has a net competitive advantage or disadvantage vis-à-vis key rivals. E) determine whether a company's resource strengths are sufficient to allow it to earn bigger profits than rivals.

115)

Understanding where a company is competitive requires

A) determining whether a company has a cost-effective value chain. B) developing quantitative strength ratings for the company and key rivals on each industry key success factor and each pivotal resource, capability, and value chain activity. C) identifying a company's core competencies and distinctive competencies (if any). D) analyzing whether a company is well positioned to gain market share and be the industry's profit leader. E) developing quantitative measures of a company's chances for future profitability.

116) Assigning a weight to each measure of competitive strength assessment is generally analytically superior because A) a weighted ranking identifies which competitive advantages are most powerful. B) an unweighted ranking does not discriminate between companies with high and low market shares. C) it singles out which competitor has the most competitively potent core competencies. D) weighting each company's overall competitive strength by its percentage share of total industry profits produces a more accurate measure of its true competitive strength. E) All of the various measures of competitive strength are not equally important.

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117) The overall competitive strength scores for a company like Peloton, a manufacturer of fitness bike equipment and marketer of subscriptions to interactive sports and fitness content A) provide a more accurate assessment of the strength of competitive forces in the fitness equipment industry. B) eliminate the bias introduced for those fitness equipment firms that possess large market shares. C) indicate how all the different strength measures add up—whether Peloton is at a net overall competitive advantage or disadvantage against each rival such as SoulCycle and Flywheel. D) provide a more reliable measure of what competitive moves rivals such as SoulCycle and Flywheel are likely to make next. E) weight each rival’s overall competitive strength by the size of its market share, which in turn produces a more accurate measure of Peloton’s true competitive strength.

118) In a weighted competitive strength assessment, the sum of importance weights should add up to A) 100 percent. B) 1.00. C) 10. D) 100. E) 1000.

119) In a weighted competitive strength analysis, each strength measure is assigned a weight based on

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A) its percentage share of total industry revenues. B) its percentage share of total industry losses. C) its perceived importance in determining a company's competitive success in the marketplace. D) its percentage share of total industry profits. E) what it takes to provide better analytical balance between the companies with high ratings and the companies with low ratings and thus get the sum of the weights to add up to 1.0.

120) Calculating competitive strength ratings for a company and its rivals using the industry's most telling measures of competitive strength or weakness A) is a way of determining which competitor has the highest overall competitive advantage in the marketplace and which competitor is faced with the lowest overall competitive disadvantage. B) is the most reliable indicator of which industry member has the highest overall product quality. C) is a powerful way of revealing which competitors are in the best and worst strategic groups. D) is the most reliable indicator of which industry member has the lowest overall costs and is the low-cost leader. E) pinpoints which industry rivals are most insulated from the industry's driving forces.

121)

Quantitative measures of a company's competitive strength

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A) signal which competitor has the most distinctive competencies and which competitor has the fewest. B) provide useful indicators of how a company compares against key rivals, factor by factor and capability by capability—thus indicating whether the company has a net overall competitive advantage or disadvantage against each rival. C) reveal which competitors are in the best and worst strategic groups. D) show which industry rival has the best overall market opportunities and which competitor has the poorest market opportunities. E) pinpoint which industry rival is subject to the least amount of competitive pressures from the five competitive forces.

122) The company with the highest rating on a given measure has an implied competitive edge on that specific measure, with the size of its edge A) providing the company with an overall net competitive score that is reduced by the weighted measure. B) signaling a weak position and competitive disadvantage. C) reflecting the difference between its weighted rating and rivals' weighted ratings. D) reflecting an area of potential improvement in order to achieve a sustainable competitive advantage. E) requiring reevaluation of the weighted measure.

123) Calculating competitive strength ratings for a company and comparing them against strength ratings for its key competitors helps indicate

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A) which weaknesses and vulnerabilities of competitors the company might be able to attack successfully. B) which competitors are in profitable strategic groups and which competitors are in unprofitable strategic groups. C) which competitors are employing offensive strategies and which competitors are employing defensive strategies. D) which competitors are likely to make money and which are likely to lose money in the years ahead. E) what the industry's key success factors are.

124) A company's competitive strength scores pinpoint its strengths and weaknesses against rivals and A) suggest the company use its strengths to exploit its own competitive liabilities. B) point directly to the kinds of offensive/defensive actions it can use to exploit its competitive strengths and reduce its competitive liabilities. C) point directly to the company to use its weaknesses as offensive moves to challenge rivals' weaknesses. D) suggest receptivity for astute companies to drive their operating practices if the strength scores are very low. E) point directly to accepting the competitive strength scores on face value.

125)

Conducting a competitive strength assessment does not involve an analysis of

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A) factors on which a company is competitively strongest and weakest vis-à-vis key rivals. B) whether a company should correct its weaknesses by adopting best practices and/or revamping the makeup of its value chain. C) which of the rated companies is competitively strongest and what size competitive advantage it enjoys. D) whether a company has a net competitive advantage or a net competitive disadvantage relative to key rivals (with the size of the advantage/disadvantage being indicated by the differences among the companies' competitive strength scores). E) which rival company is competitively weakest and the areas where it is most vulnerable to competitive attack.

126) Identifying the strategic issues a company faces and compiling a "worry list" of problems and roadblocks is an important component of company situation analysis because A) without a precise fix on what problems/issues a company confronts, managers cannot know what the industry's key success factors are. B) the worry list sets the management agenda for taking actions to improve the company's performance and business outlook. C) without a precise fix on what problems/roadblocks a company confronts, managers are less clear about what value chain activities to benchmark. D) these issues and obstacles must be cleared before management can focus clearly on what is the best strategy for the company to pursue. E) the worry list helps company managers clarify their thinking about how best to modify the company's value chain.

127) Pinpointing the strategic issues that SunPower's management needs to address ordinarily would not include

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A) analyzing SunPower's external environment. B) evaluating SunPower's own resources and competitive position. C) surveying SunPower's board members, managers, select employees, and key investors regarding what strategic issues they think the company faces. D) developing a worry list of "how to…," "whether to…," and "what to do about…" for SunPower. E) assessing what challenges SunPower must overcome to be financially and competitively successful in the years ahead.

128) If you were tasked with identifying the strategic issues and problems that merit frontburner managerial attention at SunPower, you would most likely not begin by A) drawing upon the results and conclusions from analyzing SunPower's external environment. B) drawing upon the results and conclusions from evaluating SunPower's own resources and competitive position. C) drawing up a worry list for SunPower consisting of "how to…," "whether to…," and "what to do about…". D) drawing up a list of strategic issues and problems that SunPower faces first. E) drawing up a list of issues and problems that SunPower management needs to address to improve the company's position and prospects.

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Answer Key Test name: Chap 04_23e 17) D 18) B 19) E 20) D 21) B 22) A 23) C 24) A 25) B 26) A 27) A 28) A 29) E 30) B 31) C 32) D 33) B 34) A 35) D 36) A 37) A 38) A 39) D 40) D 41) C 42) C Version 1

43) B 44) E 45) B 46) C 47) C 48) C 49) B 50) A 51) B 52) C 53) D 54) D 55) A 56) C 57) A 58) B 59) C 60) E 61) A 62) A 63) D 64) E 65) B 66) B 67) A 68) C 69) C 70) D 71) A 72) A Version 1

73) C 74) D 75) B 76) A 77) E 78) C 79) A 80) A 81) B 82) D 83) E 84) B 85) B 86) D 87) D 88) B 89) C 90) C 91) C 92) B 93) E 94) A 95) D 96) A 97) C 98) A 99) B 100) E 101) A 102) D Version 1

103) C 104) D 105) A 106) E 107) D 108) E 109) A 110) A 111) C 112) D 113) A 114) D 115) B 116) E 117) C 118) B 119) C 120) A 121) B 122) C 123) A 124) B 125) B 126) B 127) C 128) D

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Chapter 5 The Five Generic Competitive Strategies 1) What are the five generic competitive strategies? Briefly describe each one and identify the type of competitive advantage that each strategy is aimed at achieving.

2) Identify cost drivers in a company's value chain. Explain how these drivers impact a firm's generic strategy.

3) Identify uniqueness drivers in a company's value chain. Explain how these drivers impact a firm's generic strategy.

4) Just as pursuing a cost advantage can involve the entire value chain system, the same is true for a differentiation advantage. How might these activities support a firm's generic strategy to become (1) a low-cost provider or (2) enhance its differentiation advantage?

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5) Describe the strategy of striving to be the industry's overall low-cost provider. What does a company have to do to achieve low-cost provider status?

6) Describe and explain the primary cost-reducing approaches that Walmart has taken to become the low-cost provider in the retail industry.

7) Match each of the organizations/companies below to its competitive strategy. Explain your choices.

8) What market conditions and circumstances make a low-cost provider strategy attractive? What are the pitfalls in pursuing a low-cost provider strategy? What can go wrong?

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9) Sales in the emerging hard seltzer category of alcoholic beverages in the United States rose from $210 million in 2018 to $1.2 billion in 2019. The U.S. hard seltzer market is forecasted to reach $2.5 billion by 2021. In 2019, White Claw captured nearly 60 percent of all hard seltzer sales, using a proprietary brewing process that consisted of fermented sugar and a yeast strain that took more than a year to develop. What are the distinctive features of White Claw’s broad differentiation strategy? Under what circumstances is a broad differentiation strategy appealing?

10)

What are the pitfalls to be avoided in pursuing a broad differentiation strategy?

11) What are the distinctive features of a best-cost provider strategy? Under what circumstances is a best-cost provider strategy appealing?

12) What type of competitive advantage does a best-cost provider strategy aim at achieving? Explain what a company has to do to achieve this advantage.

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13) Provide two examples of companies pursuing a low-cost strategy and two examples of companies pursuing a best-cost strategy and explain how their strategic targets are similar or different.

14) What are the distinctive features of a focused low-cost strategy? How does it differ from a low-cost leadership strategy?

15) What are the distinctive features of a focused differentiation strategy? How is it different from a broad differentiation strategy?

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16) What strategy would you recommend for a small-sized company entering a highly segmented market, each segment with a complex set of needs and spending power?

17) A mobile manufacturer decides to reduce the price of its latest line of smartphones, which are not the cheapest but have features that are popular among most users. Which strategy is the manufacturer using?

18) In what market and competitive circumstances are focused low-cost and focused differentiation strategies not attractive?

19) Explain how the marketing emphasis of a low-cost provider differs from the marketing emphasis of a best-cost provider.

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20) Explain how the keys to sustaining a broad differentiation strategy differ from the keys to sustaining a best-cost producer strategy.

21)

What are the keys to sustaining a focused low-cost strategy?

22) One of the big dangers in crafting a competitive strategy is that managers, torn between the pros and cons of the various generic strategies, will opt for "stuck in the middle" strategies that represent compromises between lower costs and greater differentiation and between broad and narrow market appeal. True or false? Explain your answer.

23) For a company's competitive strategy to succeed in delivering favorable performance and the intended competitive edge over rivals, it has to be well matched to a company's internal situation and underpinned by an appropriate set of resources, know-how, and competitive capabilities. True or false? Explain your answer.

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24) Juanita and Noelia have been hired as student consultants to work on a strategic direction for a local credit union. The local credit union is seeking to expand geographically in a highly segmented market, ever mindful that each segment has its own complex set of needs and set of consumers with different levels of banking needs. What are some of the risks of a best-cost provider generic strategy that these students would be most likely to mention to this regional financial services provider? Why?

25)

A company's competitive strategy should

A) ensure it is designed to concentrate on a small range of products so it can react quickly to competitive moves. B) be well matched to its internal situation and predicated on leveraging its collection of competitively valuable resources and competencies. C) be well matched to its resources and capabilities in order to incorporate standard attributes into its product offering. D) be supportive with its objective to become at least an average performer within its industry. E) be well attuned to doing an outstanding job of satisfying the needs and expectations of niche buyers.

26)

The five generic competitive strategies include

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A) low-cost differentiation. B) no-cost provider. C) best-margin. D) narrow differentiation. E) high-cost.

27) While there are many routes to competitive advantage, the two biggest factors that distinguish one competitive strategy from another are A) whether a company can build a brand name and an image that buyers trust. B) whether a company's target market is broad or narrow and whether the company is pursuing a low-cost or differentiation strategy. C) whether a company can achieve lower costs than rivals and whether the company is pursuing the industry's sales and market share leader's role. D) whether a company can offer the lowest possible prices and whether the company can get the best suppliers in the market. E) whether a company's overall costs are lower than competitors' and whether the company can achieve strong product differentiation.

28) Whatever strategic approach is adopted by a company to deliver value, it nearly always requires A) that management undertake formal planning sessions with functional departments to ensure productivity improvement. B) the identification of strengths and weaknesses within the company. C) matching corporate identity with the corporate culture in order to integrate effort and build sales momentum. D) performing value chain activities differently than rivals and building competitively valuable resources and capabilities that rivals cannot readily match. E) constant efforts to thwart entry of new rivals and their attempts to create differentiated products with unit costs above price premium.

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29) 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 the 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.

30) A boutique hotel chain provides upscale rooms and superior customer service at value prices. What strategy is the hotelier using to gain competitive advantage? A) a low-cost provider strategy B) a broad differentiation strategy C) a focused low-cost strategy D) a focused differentiation strategy E) a best-cost provider strategy

31)

The generic types of competitive strategies include

A) market share growth provider, sales revenue leader strategy, and market share retention strategy. B) offensive strategies, defensive strategies, and counter maneuvers strategies. C) low-cost provider, broad differentiation, best-cost provider, focused low-cost, and focused differentiation strategies. 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, and firstmover strategies.

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32) All other things being equal, the "best" generic competitive strategy for a company to employ is a strategy that A) seeks to underprice rivals on comparable products that attract a broad spectrum of buyers. B) seeks to differentiate product offerings from rivals by offering superior attributes that attract a broad spectrum of buyers. C) concentrates on a narrow buyer segment and outcompetes rivals by offering niche members customized attributes. D) concentrates on value-conscious buyers and outcompetes rivals by offering products at attractive prices. E) is well matched to a company's internal situation; underpinned by an appropriate set of resources, know-how, and competitive capabilities; and difficult for rivals to match.

33)

The objective of a competitive strategy is to

A) establish a competitively powerful value chain. B) grow revenues at a faster annual rate than rivals are able to grow their revenues. C) lend greater detail to the company's business model. D) provide buyers superior value relative to the offerings of rival sellers in order to attain a competitive advantage. E) get the company into the best strategic group and then dominate it.

34)

A low-cost leader's basis for competitive advantage is A) lowest possible prices for comparable products. B) a low-cost/moderate price approach to gain the biggest market share. C) high buyer switching costs. D) meaningful lower overall costs than rivals on comparable products. E) higher unit sales than rivals.

35)

In order to be successful with a low-cost leadership strategy, company managers have to

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A) eliminate wholesale and retail intermediaries and instead sell directly to users of their product or service. B) perform value chain activities more cost-effectively than rivals and be proactive in revamping the firm's overall value chain to eliminate or bypass "nonessential" cost-producing activities. C) outsource the majority of value chain activities to nations that have lower wage rates and fewer regulations. D) develop and market products and services at that absolute lowest possible cost. E) pursue backward or forward integration to deter suppliers or buyers with considerable bargaining power and leverage.

36)

Low-cost leaders who have the lowest industry costs are likely to

A) have outmanaged rivals in finding ways to perform value chain activities more cost effectively. B) be considering exiting the current product market and use their competitive low-cost strength to gain a competitive advantage in other product arenas. C) be favorites to win the game of strategy in the long run. D) understand that driving costs to the lowest possible level is the only way to sell cheap products to consumers. E) understand that they have lower bargaining power with suppliers than rivals who employ a different strategy.

37)

How valuable a low-cost leader's cost advantage is depends on

A) whether it is easy or inexpensive for rivals to copy the low-cost leader's methods or otherwise match its low costs. B) how easy it is for the low-cost leader to gain the biggest market share. C) the aggressiveness with which the low-cost leader pursues converting the cost advantage into the absolute lowest possible costs. D) the leader's ability to combine the cost advantage with a reputation for good quality. E) the low-cost leader's ability to be the industry leader in manufacturing innovation so as to keep lowering its manufacturing costs.

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38) A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by A) underpricing rivals and attracting quality-sensitive buyers in great enough numbers. B) maintaining the present price and using the lower-cost edge to earn a higher profit margin on each unit sold. C) going all out to use its cost advantage to capture a dominant share of the market. D) spending heavily on advertising to promote its cost advantage to build strong customer loyalty. E) outproducing rivals and thus having more available units for sale.

39) Hampton by Hilton’s focused low-cost strategy in the lodging industry was different from a low-cost leadership strategy in that the company A) serves buyers in a target market niche at a lower cost and a lower price than rival competitors. B) created a new reservations system. C) gave a sense of exclusivity to its customers. D) coordinated with suppliers to lower its cost of linens and fixtures. E) emphasized low-wage human resource management policies.

40)

The major avenues for achieving a cost advantage over rivals include

A) performing value chain activities more cost effectively than rivals or revamping the firm's overall value chain to eliminate or bypass some cost-producing activities. 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.

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41)

Achieving a sure-cost advantage over rivals entails

A) concentrating on the primary activities portion of the value chain and outsourcing all support activities. B) being a first-mover in pursuing backward and forward integration and controlling as much of the industry value chain as possible. C) selling a mostly standard product and increasing the scale of operation. D) minimizing R&D expenses and paying below-average wages and salaries to conserve on labor costs. E) producing a standard product, redesigning the product infrequently, and having minimal advertising.

42) A fast-food restaurant stocks bread, meat, sauces, and other main ingredients, but does not assemble and cook its burgers and sandwiches until a customer places an order. Which cost driver is the restaurant efficiently using to cut costs? A) supply chain efficiencies B) economies of scale C) incentive systems and culture D) bargaining power E) capacity utilization

43)

Dramatic cost advantages can often emerge from

A) using distributors and wholesalers exclusively to move products through the forward supply chain. B) operating facilities at partial capacity to reduce energy usage. C) increasing reliance on suppliers distant from the company’s own facilities. D) redesigning the company’s value chain system in ways that eliminate costly work steps and entirely bypass certain cost-producing value chain activities. E) over-differentiating so that product features exceed the needs of most buyers.

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44) Vanguard, one of the world's largest investment management companies, has attained cost leadership via A) ferreting out cost-saving opportunities in every part of the value chain. B) undertaking an operations functionality redesign. C) establishing sales productivity and operating practices guidelines. D) re-creating rivals' assembly plant structuration savings. E) pursuing a differentiation strategy that can be easily copied.

45) Clinícas del Azúcar is addressing diabetes, a major health issue in Mexico, by using a generic strategy that is known as A) focused differentiation: providing only specialized diabetes treatments at selected facilities. B) focused low cost: using proprietary technology and a streamlined care system. C) best-cost leadership: making multiple referrals to other care providers to eliminate the need and expense for professionals and equipment to be brought under the roof of one facility. D) broad differentiation: charging a price premium for upscale high-quality care for up to 80 percent of the population. E) broad low cost: using aggressive cost reduction and price cutting to attract patients.

46)

The culture of a company can be a cost-efficient value chain activity because it can A) allow for safeguarding internalized operating benefits. B) distinguish a company's capacity integration efforts. C) spur worker pride in productivity and continuous improvement. D) foster quality technological enhancements. E) increase a company's bargaining power with suppliers.

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47) How can a capital-intensive company achieve a cost advantage by revamping its value chain? A) downsizing a direct sales force and utilizing distributors and dealers exclusively B) eliminating sales operations at the company's website C) via higher rates of capacity utilization to allow depreciation and other fixed costs to be spread over a larger unit volume, thereby lowering fixed costs per unit D) centralizing facilities and outsourcing shipping and handling activities E) expanding operations by eliminating low value-added or unnecessary work steps and activities

48)

An example of how companies can revamp their value chain to reduce costs is to A) have suppliers locate their plants close to companies' own facilities. B) continue to utilize traditional methods of distribution and sales. C) not make any changes in product manufacturing but change end distribution methods. D) increase extra services to increase staffing requirements. E) facilitate the learning curve by providing superior training to new employees.

49) Choose the best example of a women's fashion retailer that uses cost drivers effectively to manage its value chain activities. A) Callie's Closet orders large amounts of supplies and keeps them stocked until customer demand rises to prevent falling behind schedule in meeting customer needs. B) Bowdon Designs captures supply chain efficiencies via partnerships with its suppliers to streamline ordering and purchasing and to reduce inventory carrying costs. C) Molly's Made-to-Measure collects customer requests first and starts processing them only after reaching a certain number. D) Aubergine routes all its supplies to a warehouse for storage and then transports them to individual factories for processing. E) Tamarind substitutes lower-cost inputs with high-quality, high-cost inputs to gain customer attention and loyalty.

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50) A potato chip manufacturer purchases a potato farm. Which of the following regarding its strategy is true? A) The manufacturer has effectively used vertical integration to increase its bargaining position and reduce transaction costs. B) The manufacturer has efficiently capitalized on the experience and learning-curve effects within the company. C) The manufacturer has enhanced utilization by allowing depreciation and other fixed costs to be spread over a larger unit volume. D) The manufacturer has sacrificed quality by using a lower-cost input. E) The manufacturer has effectively reduced its operating costs by outsourcing its activities.

51) A competitive strategy of striving to be the low-cost provider is particularly attractive when A) buyers are not very price-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) most buyers use the product in much the same ways, with user requirements calling for a standardized product. E) most rivals are pursuing focused low-cost or focused differentiation strategies.

52)

Being the overall low-cost provider in an industry has the attractive advantage of

A) building strong customer loyalty and locking customers into its product because customers have high switching costs. B) giving the firm a very appealing brand image. C) putting a firm in the best position to win the business of price-sensitive customers and earn profits by setting the floor on market price. D) putting the company in a strong position to be more profitable than companies pursuing a differentiation strategy. E) greatly reducing the strong bargaining power of rivals with the key distributors.

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53)

A competitive strategy to be the low-cost provider in an industry works well when A) price competition among rival sellers is especially sluggish. B) there are numerous ways to achieve product differentiation that have no value to

buyers. C) buyers incur high costs in switching their purchases from one seller/brand to another. D) industry newcomers use introductory low prices to attract buyers and build a customer base. E) industry newcomers use high introductory prices to let buyers know they have a superior product to build a customer base.

54)

A low-cost leadership strategy becomes competitively powerful when A) buyers of the product or service use the product or service in the same ways. B) the offerings of rival firms are essentially unique, different, and customized to end

users. C) price competition among rivals is absent. D) buyers prefer that the products/services of competing sellers have widely varying attributes and prices. E) buyers have high switching costs.

55) Vanguard’s generic strategy to become the financial services industry's overall low-cost provider is particularly well matched to a customer-market characterized by

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A) offerings of Vanguard’s rivals that are essentially identical and readily available from many eager sellers. B) multiple possibilities to achieve differentiation that have value to buyers. C) buyers are willing to pay a price premium for Vanguard’s portfolio management services. D) widely varying financial services customers’ needs and special requirements, and the prices of substitute services are relatively high. E) many small investors seeking premium financial services account for the preponderance of industry sales.

56) A company’s generic strategy that strives for it to become an industry's overall low-cost provider tends to be more appealing than other generic strategies when A) there are many ways to achieve product differentiation that buyers find appealing. B) buyers have high switching costs in changing from one seller's product to another. C) the product offerings of rivals are essentially identical and available from eager sellers. D) price competition from other vendors and the prospect of price wars are relatively weak. E) the market is composed of many distinct segments with varying buyer needs and expectations.

57)

A major advantage afforded by a low-cost provider strategy is A) overly aggressive price-cutting. B) setting the industry's price ceiling to capture volume gains and achieve economies of

scale. C) relying on an approach to reduce costs that can be easily copied. D) becoming too fixated on cost reduction. E) having the basis for the firm's cost advantage undermined by cost-saving technological breakthroughs that can be readily adopted by rival firms.

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58)

A major drawback of using a low-cost provider strategy is

A) industry cost leadership. B) capturing volume gains and achieving economies of scale. C) relying on approaches to reduce costs that can be easily copied. D) beneficial and sustainable cost reduction. E) development of a cost-saving technological breakthrough that cannot be readily adopted by rival firms.

59) From the list below, identify the company that is not the lowest-cost provider in its industry. A) Southwest Airlines B) Walmart C) Nucor Steel D) Uber E) Nordstrom

60)

Value drivers of a broad differentiation strategy tend not to include

A) creating product features that appeal to a wide range of buyers. B) improving customer service or adding extra services. C) seeking out high-quality inputs. D) emphasizing human resource management activities that improve the skills, expertise, and knowledge of company personnel. E) utilizing just-in-time inventories and made-to-order products when customer demand rises and that buyers consider worth the cost.

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61) Companies like Dell in personal computers and Ducati in motorcycles pursue close coordination and collaboration with their channel suppliers in order to A) retrain managers to improve their skills, expertise, and knowledge. B) enhance differentiation throughout the value chain system to better address customer needs. C) replace outdated production capacity to better address customer needs. D) coordinate with channel allies on premium pricing to support consumer desires for status, image, prestige, upscale fashion, superior craftsmanship, and the finer things in life. E) achieve economies of scale throughout the value chain system.

62)

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-theline 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) offer unique product attributes in ways that are valuable and appealing and that buyers consider the cost worth it.

63) Prada, Gucci, and Burberry are among the high-fashion design companies that are attempting to be successful with a broad differentiation strategy via A) studying buyer needs and behavior carefully to learn what buyers consider important, what they think has value, and what they are willing to pay for. B) incorporating more differentiating features into their fashion items than rivals. C) concentrating on marketing and advertising (where almost all differentiating features are created). D) investing in a dazzling array of features that exceed the needs of most buyers. E) concentrating on offering advanced features, regardless of their value to customers, to create one-of-a-kind fashion products.

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64)

Successful broad 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.

65) A company that succeeds in differentiating its product offering from those of its rivals should A) compete via price gouging. B) provide a dazzling array of features and options for its products. C) offer minor or trivial improvements in quality or performance. D) attract mainly price-conscious buyers. E) seek out sources of value creation that are time consuming or burdensome for rivals to match.

66)

A broad differentiation strategy improves profitability when

A) it is focused on product innovation. B) differentiating enhances product performance and quality. C) the differentiating features appeal to sophisticated and prestigious buyers. D) the higher price the product commands exceeds the added costs of achieving the differentiation. E) the differentiator charges a price that is only fractionally higher than the industry's low-cost provider.

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67) Whether a broad differentiation strategy ends up enhancing a company's profitability depends mainly on whether A) many buyers view the product's differentiating features as having value. B) most buyers have similar needs and use the product in the same ways. C) most buyers accept the customer value proposition as unique and the product can produce sufficient unit sales to cover the costs of achieving the differentiation. D) buyer switching costs are low and customer loyalty to any one brand is low. E) buyers are prone to shop the market for sellers offering the best price.

68)

Opportunities to differentiate a company's product offering

A) are most reliably found in the R&D portion of the value chain. B) are typically located in the sales and marketing portion of the value chain. C) can exist in activities all along an industry's value chain. D) usually are tied to product quality and customer service. E) are most frequently attached to a company's manufacturing expertise and to its ability to achieve economies of scale in production.

69)

What are value drivers?

A) a set of factors (analogous to cost drivers) that are particularly effective in having a strong differentiation effect B) a firm's hidden success factor for creating over-the-top product features that will command the highest price in the industry C) a technique for easily identifying factors that validate a firm's performance D) a set of factors that verify the unique nature of a firm E) a set of guidelines for identifying the most promising upscale attributes to incorporate into a product

70)

A differentiation strategy works best when

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A) technological change is fast-paced and competition revolves around rapidly evolving product features. B) buyers' needs are homogeneous. C) many rival firms are also pursuing a differentiation approach. D) there are few other ways to make a product unique to buyers. E) firms have ample excess cash to invest in R&D activities.

71) Hilton Hotels has diversified its lodging brands by adding Curio Collection, Tapestry Collection, and Canopy by Hilton, properties that offer stylish, distinctive decors and personalized services that appeal to young professionals seeking distinctive lodging alternatives. Managers can enhance the differentiation of these new brands based on all of these value drivers except A) striving to create superior product features, design, and performance. B) striving for innovation and technological advances. C) pursuing continuous quality improvement. D) increasing the intensity of marketing, brand building, and sales activities. E) seeking out low-quality inputs.

72)

Brands create customer loyalty, which in turn A) increases the perceived cost of switching to another product. B) strengthens the product's quality. C) validates the motivation for alternate products. D) provides monetary incentive for using the product. E) allows a company to operate facilities at full capacity.

73)

Approaches to enhancing differentiation through changes in the value chain include

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A) coordinating with customers to enhance the buying experience and build a company's image. B) working with distributors to speed up new product development cycles. C) colluding with distributors or shippers to raise product or service costs. D) collaborating with employees to outsource nonessential activities. E) coordinating with channel allies to enhance customer value.

74)

The objective of differentiation is to

A) offer customers something rivals can't, at least in terms of the level of satisfaction. B) develop strategies that are different from those of rivals. C) establish objectives that are measurable and meaningful when it comes to sales growth. D) offer customers a sustainable competitive advantage. E) offer a diverse range of comparable products with low switching costs.

75)

A route to take in developing a differentiation advantage includes

A) incorporating product attributes and user features that raise the buyer's overall costs, but keep the price minimal. B) incorporating tangible features that add functionality, and increase customer satisfaction with the product specifications, functions, and styling. C) signaling value by targeting sophisticated buyers. D) incorporating intangible features that enhance buyer satisfaction in economic ways. E) emphasizing high quality and performance of products through a standard and simple, no-fuss packaging.

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76) Gem X is an exclusive social club for jewelry enthusiasts and connoisseurs. It was founded in New York City in 2017 and has since expanded to become a global community of friends, mentors and collaborators. Its website states, “With a wide network ranging from designers, gemologists, curators, art historians and collectors, our members share in expert jewelry knowledge and behind-the-scenes experiences.” Gem X charges a higher price for its jewelry and has a rigorous quality control process to ensure the social responsibility of its jewelry suppliers. What strategy is Gem X using to deliver superior value to customers? A) incorporating intangible features B) incorporating tangible features C) lowering the buyer's overall cost D) leveraging its power over suppliers E) signaling value by targeting sophisticated buyers

77)

A differentiation-based competitive advantage

A) nearly always is attached to the quality and service aspects of a company's product offering. B) usually is the result of highly effective marketing and advertising to enhance the brand, raise awareness, and build consistent customer experience. C) requires developing at least one distinctive competence that buyers consider valuable. D) hinges on a company's success in developing top-of-the-line product features that will command the highest price premium in the industry. E) often hinges on incorporating features that raise the performance of the product or lower the buyer's overall costs of using the company's product, or enhances buyer satisfaction in intangible or noneconomic ways, or delivers value to customers by differentiating on the basis of competencies and capabilities that rivals can't match.

78)

To attain a differentiation-based competitive advantage, a company would be unlikely to

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A) deliver value to customers via the company's resources, competencies, and value chain activities that rivals don't have or can't afford to match and are well matched to the requirements of the strategy. B) utilize research and development to incorporate tangible features that raise product performance and increase customer satisfaction with the product. C) incorporate product attributes and user features that lower the buyer's overall costs of using the company's product. D) appeal to buyers who are sophisticated and shop hard for the best, stand-out differentiating attributes. E) build in product design features that enhance buyer satisfaction in intangible or noneconomic ways.

79) According to the value-price-cost framework, deploying a differentiation strategy involves costs that might well exceed those of the average competitor, but with a successful differentiation strategy, that disadvantage is more than made up for by A) a rise in the perceived value of the differentiated good, giving the differentiator a clear competitive advantage over the average rival. B) a rise in the price of the differentiated good, giving the differentiator a clear value advantage over the average rival. C) no change in the price of the differentiated good, giving the differentiator a clear value advantage over the average rival. D) no change in the perceived value of the differentiated good, giving the differentiator a clear competitive advantage over the average rival. E) a drop in the price of the differentiated good, giving the differentiator a clear competitive advantage over the average rival.

80) Perceived value and signaling value are often an important part of a successful differentiation strategy because

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A) of the standardization of buyer needs and preferences. B) buyers seldom will pay for value they don't perceive, no matter how real the value of the differentiating extras may be. C) buyer satisfaction cannot be achieved until a product's value is promoted through clever ads. D) differentiation is all about selling products to sophisticated buyers. E) there are no other ways to differentiate a product.

81)

Broad differentiation strategies are well suited for market circumstances where A) there are many ways to differentiate the product or service that has value to buyers. B) most buyers have the same needs and use the product in the same ways. C) technological changes are slow paced. D) barriers to entry are high and suppliers have a low degree of bargaining power. E) price competition is especially vigorous.

82)

A broad differentiation strategy would work best for which of these companies?

A) American Giant, because it possesses the capability to incorporate attractive or upscale attributes at a lower cost than rivals B) Canada Goose, because using small-scale production or custom-made products, it focuses on product features and attributes that appeal specifically to niche members C) Clinícas del Azúcar, because it is able to use technology to lower its costs significantly by limiting its customer base to a well-defined buyer segment D) Prada, because it can command a high price premium for its high-fashion designs. E) Vanguard, because the products of rival sellers are essentially identical and are readily available from several sellers

83)

A broad differentiation strategy works best in situations where

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A) technological change is slow paced and new or improved products are infrequent. B) buyer needs and uses of the product or service 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) buyer needs and uses of the product or service are diverse.

84)

A broad differentiation strategy generally produces the best results in situations where

A) buyer brand loyalty is low. B) few rival firms are following a similar differentiation approach. C) new and improved products are introduced only infrequently. D) most rivals are pursuing a differentiation strategy and are seeking to differentiate their products on most of the same features and attributes. E) perceived value of a product is not of great importance.

85) A broad differentiation strategy is generally not suitable for attaining a competitive advantage when A) buyer needs and preferences are too diverse to be fully satisfied by a standardized product. B) few rivals are pursuing a similar differentiation approach. C) products of rivals are weakly differentiated. D) there are many ways to differentiate a product or a service and many buyers perceive these differences valuable. E) technological change is fast paced and competition revolves around rapidly evolving product features.

86)

A low-cost provider strategy can defeat a differentiation strategy when

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A) sellers are not charging a price premium. B) many rivals are pursuing a similar differentiation approach. C) a company can offset thinner profit margins per unit by selling enough additional units to increase total profits. D) there are few ways to differentiate a product or a service and many buyers perceive these differences valuable. E) customers are basically satisfied and don't think extra attributes are worth a higher price.

87)

A pitfall to avoid in pursuing a differentiation strategy is A) trying to differentiate on the basis of attributes or features that are easily and quickly

copied. B) choosing a product offering that supports buyers' indifference to rival brands' offerings. C) charging a premium price for the differentiating features. D) meeting and exceeding the meaningful gaps in quality, performance, service, and other attractive differentiating attributes offered by rivals. E) spending on activities to differentiate the company's product to enhance profitability.

88)

Differentiation strategies A) strive to create value for customers. B) offer trivial improvements in quality, service, or performance features. C) often result in overcharging for the differentiating features. D) add so many frills and extra features that the end product exceeds the needs of buyers. E) often result in overspending on efforts to differentiate the company's product offering.

89) Focused strategies keyed either to low cost or differentiation are especially appropriate for situations where

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A) the market is composed of distinctly different buyer groups who have different needs or use the product in different ways. B) most other rival firms are using a best-cost producer strategy. C) buyers have strong bargaining power and entry barriers are low. D) most industry rivals have weakly differentiated products. E) most industry participants are also using a focused differentiation strategy.

90) 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 least money.

91)

A focused low-cost strategy seeks to achieve competitive advantage by

A) outmatching competitors in offering niche members an absolute rock-bottom price. B) delivering more value for lesser money than other competitors. C) performing the primary value chain activities at a lower cost per unit than can the industry's low-cost leaders. D) dominating more market niches in the industry via a lower cost and a lower price than any other rival. E) serving buyers in a narrow piece of the total market (target market niche) at a lower cost and lower price than rivals.

92)

A focused low-cost strategy can lead to attractive competitive advantage when

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A) buyers are looking for the best value at the best price. B) buyers are looking for a budget-priced product. C) buyers are price sensitive and are attracted to brands with low switching costs. D) a market is emerging and demand in the target market niche is growing rapidly and is served by industry-wide competitors. E) a firm can lower costs significantly by limiting its customer base to a well-defined buyer segment.

93) Market circumstances that make a focused low-cost or focused differentiation strategy attractive are characterized by A) a target market niche that is too small to be profitable and offers low growth potential. B) an industry that has few or no segments and market niches, thereby precluding the choice of an attractive niche suited to a company's resource strengths and capabilities. C) high costs or increased difficulty for multisegment rivals to meet the specialized needs of the target market niche and at the same time satisfy the expectations of their mainstream customers. D) intense competition from industry leaders in the niche or focused segment. E) few, if any, rivals that are attempting to specialize in the same target segment.

94)

A focused differentiation strategy aims at securing competitive advantage by

A) providing niche members with a top-of-the-line product at a premium price. B) catering to buyers looking for an upscale product at an attractively low price. C) offering a product carefully designed to appeal to the unique preferences and needs of a narrow, well-defined group of buyers. D) developing product attributes that no other company in the industry has. E) convincing a narrow, well-defined group of buyers that the company has a truly world-class product.

95) The major difference between a low-cost provider strategy and a focused low-cost strategy is the Version 1

A) amount of outsourcing involved. B) length of the managerial experience curve. C) size of the buyer group to which a company is appealing. D) number of upscale attributes incorporated into the product offering. E) production methods being used to achieve a low-cost competitive advantage.

96) A drink manufacturer finds setting up a plant to make its own bottle caps expensive and technically difficult. Which of the following will be most helpful in solving the manufacturer's problem? A) outsourcing B) achieving economies of scale C) lowering input costs D) increasing bargaining power E) going for a vertical integration with a distributor

97) A government oil company is having trouble with the private refineries and transporters to whom it delegates important stages of production. It decides to become more active along the entire supply chain from locating deposits to retailing the fuel to consumers. Which of the following does it intend to achieve? A) outsourcing B) economies of scale C) increase inputs D) advanced production technology E) vertical integration

98)

The risks of a focused strategy for a company like Canada Goose are the

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A) chance that niche customers will bargain more aggressively for good deals than customers in the overall marketplace. B) potential for the preferences and needs of niche members to shift over time toward product attributes desired by buyers in the mainstream portion of the market. C) potential for the segment to be highly vulnerable to economic cycles. D) potential for segment growth to race beyond the production or service capabilities of incumbent firms. E) potential for the segment to become too specialized for other multisegmented rivals to enter.

99)

Focusing carries several risks, one of which is the

A) chance that niche customers will bargain more aggressively for good deals than customers in the overall marketplace. B) chance that competitors will find effective ways to match the focused firm's capabilities in serving the target market. C) potential for the segment to be highly vulnerable to economic cycles. D) potential for the segment to become too specialized for other multisegmented rivals to enter. E) inability of a company to compete industry-wide.

100) Focusing the ability can secure a competitive edge but also carries some risks that could be detrimental to the focused firm, such as A) the likelihood that a focused company will become so cost efficient it will achieve excessive profits. B) the potential for the preferences and needs of niche members to shift over time toward mainstream provider product attributes. C) the potential for the niche to become so attractive it will not attract new competitors thereby providing excessive market segment profits. D) the potential for technological advances to favor only low-cost providers. E) the likelihood that a focused company will become so cost inefficient it will achieve excessive profits.

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101)

Best-cost provider strategies are those that

A) are a hybrid of low-cost provider and differentiation strategies that aim at providing desired attributes while beating rivals on price. B) are rewarded by providing buyers with the best attributes at a premium. C) have strategy elements related to the lowest-cost provider in the largest and fastestgrowing (or best) market segment. D) look for a low-cost advantage rather than a differentiation advantage. E) look for a differentiation advantage rather than a low-cost advantage.

102) To profitably employ a best-cost provider strategy, a company must have the resources and capabilities to A) sell a product with the best cost at the best price. B) have the best cost (as compared to rivals) for each activity in the industry's value chain. C) provide buyers with the best attributes at the best cost. D) incorporate attractive or upscale attributes into its product offering at a lower cost than rivals. E) do a better job than rivals of adopting the best operating practices.

103)

A firm pursuing a best-cost provider strategy

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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 attributes and beating rivals in meeting customer expectations on price. E) seeks to achieve the best costs by using the best operating practices and incorporating the best features and attributes.

104)

The objective of a best-cost provider strategy is to A) deliver superior value to value-conscious buyers at a comparatively lower price than

rivals. B) offer buyers the industry's best-performing product at the best cost and best (lowest) price in the industry. C) attract buyers on the basis of having the industry's overall best-performing product at a price that is slightly below the industry-average price. D) outcompete rivals using low-cost provider strategies. E) translate its best-cost status into achieving the highest profit margins of any firm in the industry.

105)

The competitive objective of a best-cost provider strategy is to

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A) outmatch the resource strengths of both low-cost providers and differentiators. B) position the company outside the competitive arena of low-cost producers and differentiators. C) meet or exceed buyer expectations on key quality/performance/features/service attributes and beat their expectations on price (given what rivals are charging for much the same attributes). D) deliver superior value to buyers by doing such a good job of cost control that it ends up with the best cost (as compared to rivals) in performing each activity in its value chain. E) identify and concentrate on those differentiating features that are inexpensive to incorporate.

106)

What is the primary target market for a best-cost provider? A) value-hunting buyers B) price-conscious buyers C) best-price driven buyers D) value-conscious buyers E) brand-conscious buyer

107)

The competitive advantage of a best-cost provider like Trader Joe's is

A) having the best value chain in the industry. B) its brand name reputation. C) its capability to incorporate upscale or attractive attributes into its product offerings at lower costs than rivals. D) a distinctive competence in delivering top-notch quality and customer service. E) a distinctive competence in supply chain management.

108)

For a best-cost provider strategy to be successful, a company must have

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A) excellent marketing and sales skills in convincing buyers to pay a premium price for the attributes/features incorporated in its product. B) resource strengths and competitive capabilities that allow it to incorporate upscale attributes at lower costs than rivals whose products have similar upscale attributes. C) access to greater learning/experience curve effects and scale economies than rivals. D) one of the best-known and most respected brand names in the industry. E) a short, low-cost value chain.

109)

The target market of a best-cost provider is A) value-conscious buyers. B) brand-conscious buyers. C) price-sensitive buyers. D) middle-income buyers. E) young adults (in the 18–35 age group).

110)

Best-cost provider strategies are appealing in those market situations where

A) diverse buyer preferences make product differentiation the norm and where a large number of value-conscious buyers can be induced to purchase midrange products. B) a company is positioned between competitors who have ultra-low prices and competitors who have top-notch products in terms of both quality and performance. C) buyers are more quality-conscious than price-conscious. D) there are numerous buyer segments, buyer needs are diverse across these segments, only a few of the segments are growing rapidly, and sellers' products are strongly differentiated. E) buyers are more performance-conscious than value-conscious.

111)

The big danger or risk of a best-cost provider strategy is

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A) that buyers will be highly skeptical about paying a relatively low price for upscale attributes/features. B) not establishing strong alliances and partnerships with key suppliers. C) that rivals with low-cost provider strategies will be able to steal away some customers on the basis of a lower price, and high-end differentiators will be able to steal away customers with the appeal of better product attributes. D) that it will be unable to achieve top-notch quality at a rock-bottom cost. E) becoming too highly integrated and not relying enough on outsourcing.

112)

Trader Joe's biggest vulnerability in employing a best-cost provider strategy is

A) relying too heavily on outsourcing. B) getting squeezed between the strategies of firms employing low-cost provider strategies and high-end differentiation strategies. C) getting trapped in a price war with low-cost leaders. D) being timid in cutting its prices far enough below high-end differentiators to win away many of their customers. E) not having a sustainable distinctive competence in cost reduction.

113) Success with a best-cost provider strategy designed to outcompete high-end differentiators requires A) achieving significantly lower costs in providing the upscale features. B) providing significantly better product attributes in order to justify a price above what low-cost leaders are charging. C) matching the company's resources and capabilities to a low-cost provider status. D) motivating buyers to purchase upscale features that match rivals. E) achieving the lowest costs in the industry.

114) For all types of generic strategies, a company's success in sustaining its competitive edge depends on

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A) its market and competitive environment, a defensible niche, and a homogeneous strategic group. B) establishing a central theme for how the company will endeavor to outcompete its rivals and engage complementors with cooperative strategies. C) having resources and capabilities that rivals have trouble duplicating and for which there are no good substitutes. D) defining its differences in terms of product line, production emphasis, location, joint ventures, and strategic alliances. E) defining its differences in terms of marketing emphasis, strategic group intracompetition, and the means of maintaining strategy.

115) The production emphasis of a company pursuing a broad differentiation strategy usually involves A) eliminating cost reduction and decreasing quality and essential features to boost profitability. B) strong efforts to be a leader in manufacturing process innovation. C) emphasis on building differentiating features that buyers are willing to pay for and includes wide selection and many product variations. D) the aggressive pursuit of economies of scale and experience-curve effects. E) developing a distinctive competence in zero-defect manufacturing techniques.

116) to

The marketing emphasis of a company pursuing a broad differentiation strategy usually is

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 directly to end-users and promoting personalized customer service. E) communicate the product's ability to serve the customer's every need.

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117)

The keys to maintaining a broad differentiation strategy are to

A) stress constant innovation to stay ahead of imitative rivals and to concentrate on a few differentiating features. B) charge a premium price that more than covers the extra costs of differentiating features and to convince customers to be brand loyal. C) out-innovate and out-advertise rivals. D) emphasize personalized customer service and to add as many differentiating features as possible. E) keep prices close to the average of all rivals and to spend heavily on new product R&D.

118) The marketing emphasis of a company pursuing a focused low-cost provider strategy usually is to A) tout the company's lower prices. B) tout the lack of frills and extras. C) out-advertise rivals and make frequent use of discount coupons. D) communicate the attractive features of a budget-priced product offering that fits niche members' expectations. E) communicate the product's ability to serve the customer's every need.

119) The underlying criteria of a best-cost provider strategy usually is found in the ability of a company to A) offer better goods at attractive prices. B) create attributes that appeal specifically to niche members. C) lower overall costs more than rivals in serving niche members. D) offer buyers something attractively different from competitors' offerings. E) offer the best product at the industry's lowest possible price.

120) A production-based emphasis toward a low-cost provider strategy usually requires a company to strive for Version 1

A) product superiority. B) continuous cost reductions without sacrificing acceptable quality and essential features. C) small-scale production or custom-made products that match the tastes and requirements of niche members. D) appealing features and better quality at lower costs than rivals. E) whatever differentiating features buyers are willing to pay for.

121)

An approach that is unlikely to help a company's low-cost provider strategy succeed is

A) possessing resources and capabilities to keep costs below those of its competitors. B) pursuing cost-effective management of value chain activities better than rivals. C) deploying effective leveraging of cost drivers. D) having the innovative capability to bypass certain value chain activities being performed by rivals. E) evolving the capabilities to simultaneously deliver lower-cost and higherquality/differentiated features.

122) You have been asked to advise Lexus on its generic strategy. Success in sustaining Lexus’s best-cost strategy requires that the company A) possesses the resources and capabilities to keep costs below those of its competitors. B) possesses the resources and capabilities to leverage value drivers effectively and incorporate attributes into its product offering that a broad range of buyers will find appealing. C) possesses the capability to do an outstanding job of satisfying the needs and expectations of niche buyers. D) possesses the innovative capability to bypass certain value chain activities being performed by rivals. E) possesses the resources and capabilities to incorporate upscale product or service attributes at a lower cost than rivals.

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123) What best-cost provider strategy would you be most unlikely to recommend for a smallsized boutique lodging company entering a highly segmented market, each segment with a complex set of needs and spending power? A) Deploy its innovative capability to bypass certain value chain activities being performed by rivals. B) Position itself between the strategies of firms using low-cost and high-end differentiation strategies. C) Deploy effective leveraging of cost drivers. D) Reconfigure its resources and capabilities to keep costs below those of its competitors. E) Pursue cost-effective management of value chain activities better than rivals.

124) Luxco, the St. Louis-based manufacturer of Everclear, a 190-proof beverage made from grain alcohol, decided to reposition this brand as an effective upscale hand sanitizer and household germ killer during the novel coronavirus pandemic. What would be required for Luxco’s best-cost generic strategy to become successful? A) Everclear must siphon customers away from a national brand like Clorox with the appeal of a lower price (despite less appealing product attributes). B) Everclear must offer buyers significantly better product attributes to justify a price above what low-cost leaders like Clorox, Great Value bleach, and Good Neighbor family sanitizers are charging. C) Everclear has to manage to lure customers away from Clorox with the appeal of better product attributes (even though their products carry a higher price tag). D) Everclear should decide to compete head-on with generic brands such as Great Value bleach and Good Neighbor family sanitizers. E) Everclear must decide to position itself between the strategies of firms like Clorox using low-cost strategies and firms like Organic to Green Clean using high-end differentiation strategies.

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Answer Key Test name: Chap 05_23e 25) B 26) D 27) B 28) D 29) C 30) E 31) C 32) E 33) D 34) D 35) B 36) A 37) A 38) B 39) A 40) A 41) C 42) A 43) D 44) A 45) B 46) C 47) C 48) A 49) B 50) A Version 1

51) D 52) C 53) D 54) A 55) A 56) C 57) B 58) C 59) D 60) E 61) B 62) E 63) A 64) D 65) E 66) D 67) C 68) C 69) A 70) A 71) E 72) A 73) E 74) A 75) B 76) E 77) E 78) D 79) A 80) B Version 1

81) A 82) D 83) E 84) B 85) C 86) E 87) A 88) A 89) A 90) B 91) E 92) E 93) E 94) C 95) C 96) A 97) E 98) B 99) B 100) B 101) A 102) D 103) D 104) A 105) C 106) D 107) C 108) B 109) A 110) A Version 1

111) C 112) B 113) A 114) C 115) C 116) B 117) A 118) D 119) A 120) B 121) E 122) E 123) B 124) B

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Chapter 6 Strengthening a Company’s Competitive Position 1)

Identify and briefly explain five types of offensive strategies.

2) A former co-founder of the Tinder dating app, Whitney Wolfe Herd began her dating start-up Bumble with the idea of giving women the opportunity to send the first message to the person they’re interested in. Bumble now has 75 million users in 150 countries. Would you characterize Bumble as following an offensive or defensive strategy? For what reasons?

3) There are a number of offensive strategy options for improving market positions using cost-based and blue-ocean-type strategies. Define the terms and suggest ways in which the strategies could be operationalized.

What is a blue-ocean strategy, what is its appeal, and what is its drawback?

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5) What are the purposes of defensive strategies? Give at least two examples of defensive moves.

6) What are the strategic advantages of being a first-mover? Are there any strategic advantages of being a follower or late-mover?

Identify and briefly discuss two "best targets" for offensive attacks by companies.

Discuss why timing of strategic moves is important.

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9) Imagine that you are the manager of a housekeeping service. Specifically describe how you would use the concepts of (1) scope of the firm, (2) horizontal integration, and (3) vertical integration to build and achieve a competitive advantage over rival housekeeping services.

10) Under what circumstances are mergers with or acquisitions of other companies a better solution than entering into partnerships or alliances with these companies? How do mergers and/or acquisitions contribute to enhancing a company's position?

11) What are mergers and/or acquisitions? How do they contribute to enhancing a company's position?

12)

What are the general strategic objectives of merger and acquisition strategies?

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13)

What are the strategic advantages of a backward vertical integration strategy?

14)

What are the strategic disadvantages of a backward vertical integration strategy?

15)

What are the strategic advantages of a forward vertical integration strategy?

16)

What are the strategic disadvantages of a forward vertical integration strategy?

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17) What are the merits of outsourcing the performance of certain value chain activities as opposed to performing them in-house? Under what circumstances does outsourcing make good strategic sense?

18)

When is a strategic alliance most likely to be unsuccessful?

19)

Why do strategic alliances often fail to measure up to expectations?

20)

Why does a company racing for global market leadership need strategic alliances?

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21) Why does a company racing to stake out a strong position in an industry of the future need strategic alliances?

22) Identify at least three factors that can aid companies in forming a successful strategic alliance.

23)

Identify and briefly discuss four disadvantages of a vertical integration system.

24) What are the advantages of strategic alliances and collaborative partnerships with key suppliers?

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25) You are the owner of a French-Japanese fusion food truck and mobile catering company. Instead of entering into an alliance or partnership with a local restaurateur to establish a bricksand-mortar location downtown, you decide to merge with C'est La Sushi, a regional chain of French-Japanese fusion restaurants. What are the reasons for preferring a merger to an alliance or partnership? Explain the other organizational mechanisms that are also preferable to alliances.

26) What are the merits of strategic alliances and collaborative partnerships for companies racing to seize opportunities in an industry of the future? Under what circumstances do they make sense? How do they contribute to competitive advantage?

27) The COVID-19 crisis in 2020 caused an unprecedented increase in demand for products such as medical devices and personal protective equipment (PPE). In attempting to respond quickly to this spike in demand, many companies considered collaborating with competitors, and governments of some countries responded by promising an expedited review of proposals for joint ventures and alliances. But many proposed collaborations, no matter how well-intentioned from a public health perspective, threatened to expose the companies involved to tremendous risk. Identify and briefly discuss at least three factors a company must consider before engaging in strategic alliances.

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28) Identify and briefly explain what is meant by each of the following terms: ● outsourcing strategy ● vertical integration strategy ● first-mover advantage ● first-mover disadvantage ● horizontal and vertical scope

29) Your best friend is considering opening Emerald City, a canine day- and long-term care business that also performs grooming and minor veterinary services. She wants to know what is meant by hit-and-run (or guerrilla warfare) and preemptive strike offensive strategies. Explain to your friend what hit-and-run and preemptive strike offensive strategies are, and then give her the circumstances in which either of these strategies will likely be most effective.

30) Instead of entering into an alliance or partnership, Apple Inc. opts to merge with Tesla Motors to develop a new generation of autonomous electric vehicles. What are the reasons for preferring a merger to an alliance or partnership? Explain the other organizational mechanisms that are also preferable to alliances.

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31)

Define and briefly discuss some of the advantages of a vertical integration strategy.

32) Etsy promotes its ability to connect thoughtful consumers with artisans selling unique hand-crafted items online. Etsy’s strategy is a good example of A) an offensive strategy to seek uncharted waters and compete in blue oceans. B) an offensive strategy to offer an equally good or better product at a lower price. C) an offensive strategy to leapfrog competitors by being the first adopter of nextgeneration technologies or being the first to market with next-generation products. D) a defensive strategy to capture occupied territory by maneuvering around rivals. E) a defensive strategy to minimize the competitive advantages of rivals.

33)

A hit-and-run or guerrilla warfare–type offensive strategy

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A) involves random offensive attacks used by a market leader to steal customers away from unsuspecting smaller rivals. B) involves undertaking surprise moves to secure an advantageous position in a fastgrowing and profitable market segment; usually the guerrilla signals rivals that it will use deep price cuts to defend its newly won position. C) works best if the guerrilla is the industry's low-cost leader. D) involves pitting a small company's own competitive strengths head-on against the strengths of much larger rivals. E) involves unexpected attacks (usually by a small- to medium-sized competitor) to grab sales and market share from complacent or distracted rivals.

34)

Strategic offensives make sense when a company is A) focusing relentlessly on destroying a competitive advantage. B) applying resources where rivals are least able to defend themselves. C) leveraging its weaknesses to strengthen operating vulnerabilities. D) trying to whittle away at a rival’s competitive advantage. E) displaying a “wait-and-see” approach to its rivals’ moves.

35) Once a company has decided to employ a particular generic competitive strategy, then it must make the following additional strategic choices, except whether to A) focus on building competitive advantages. B) employ the element of surprise as opposed to doing what rivals expect and are prepared for. C) display a strong bias for swift, decisive, and overwhelming actions to overpower rivals. D) create and deploy company resources to cause rivals to defend themselves. E) pay special attention to buyer segments that a rival is already serving.

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36) To complement and supplement the choice of one of the five generic competitive strategies, Amazon, Apple, Facebook, and Google pursue offensive actions such as A) playing softball against rivals. B) employing the element of surprise as opposed to doing what rivals expect and are prepared for. C) pursuing a market share leadership strategy. D) blocking the avenues open to challengers. E) signaling challengers that retaliation is likely.

37)

Strategic offensives should, as a general rule, be based on

A) exploiting a company's strongest competitive assets—its most valuable resources and capabilities. B) instigating and executing the chosen strategy efficiently and effectively. C) scoping and scaling an organization's internal and external situation. D) molding an organization's character and identity. E) satisfying the buyer's needs that the company seeks to meet.

38)

The principal offensive strategy options include all of the following except

A) offering an equally good or better product at a lower price. B) using hit-and-run or guerrilla warfare tactics to grab sales and market share from complacent or distracted rivals. C) launching a preemptive strike to secure an advantageous position that rivals are prevented or discouraged from duplicating. D) pursuing continuous product innovation to draw sales and market share away from less innovative rivals. E) initiating a market threat and counterattack simultaneously to effect a distraction.

39)

Offensive strategic moves involve all of the following except

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A) leapfrogging competitors by being first to market with next-generation products. B) using hit-and-run or guerrilla warfare tactics to grab sales and market share. C) launching a preemptive strike to secure an advantageous position that rivals are prevented or discouraged from duplicating. D) pursuing continuous product innovation to draw sales and market share away from rivals. E) blocking the avenues open to challengers.

40)

An offensive to yield good results can be short if

A) buyers respond immediately (to a dramatic cost-based price cut or imaginative ad campaign). B) competition creates an appealing new product. C) the technology needs debugging. D) new production capacity needs to be installed. E) consumer acceptance of an innovative product takes time.

41) Bumble, a digital dating site where women make the first move, specifically uses which strategic weapon in its offensive arsenal? A) pursuing disruptive product innovations to create new markets B) adopting and improving on the good ideas of other companies or rival firms C) using hit-and-run guerilla warfare tactics to grab market share from distracted or complacent rivals D) launching a preemptive strike to capture an industry's limited resources or capture a rare opportunity E) offering an equally good or better product at a lower price than rivals

42)

The worst targets for an offensive-minded company to target are

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A) market leaders that are strong. B) runner-up firms with strengths in areas where the offensive-minded challenger is weaker. C) large multinational companies with vast capabilities and resources. D) runner-up firms that have amassed sufficient resources and capabilities to place them on the verge of becoming market leaders. E) other offensive-minded companies that possess a sizable war chest of cash and marketable securities.

43)

Launching a preemptive strike type of offensive strategy entails

A) sapping the rival's financial strength and competitive position. B) weakening the rival's resolve. C) moving first to secure advantageous competitive assets that rivals can't readily match or duplicate. D) threatening the rival's overall survival in the market. E) using hit-and-run tactics to grab sales and market share away from complacent or distracted rivals.

44)

A blue-ocean strategy

A) is an offensive strike employed by a market leader that is directed at pilfering customers away from unsuspecting rivals to boost profitability. B) involves an unexpected (out-of-the-blue) preemptive strike to secure an advantageous position in a fast-growing market segment. C) works best when a company is the industry's low-cost leader. D) involves abandoning efforts to beat out competitors in existing markets and instead inventing a new industry or new market segment that renders existing competitors largely irrelevant and allows a company to create and capture altogether new demand. E) involves the use of highly creative, never-used-before strategic moves to attack the competitive weaknesses of rivals.

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45)

A good example of blue-ocean type of offensive strategy is a company like

A) EERO that leapfrogged rivals in innovation in the home Wi-Fi market. B) EasyJet that developed a cost advantage to undercut its rivals in passenger airlines. C) Home Depot that adopted and improved on the good ideas of other companies. D) Australian winemaker Casella Wines that created a Yellow Tail brand designed to appeal to a wider market, one that also includes consumers of other alcoholic beverages. E) Google that plays hardball, aggressively pursuing competitive advantage and trying to reap the benefits a competitive edge offers—a leading market share, excellent profit margins, and rapid growth.

46)

An example of a company that does not use blue-ocean market strategy is A) eBay in the online auction industry. B) Tune Hotels in the lodging industry. C) Uber and Lyft in the ridesharing industry. D) Cirque du Soleil in the live entertainment industry. E) Walmart's logistics and distribution in the retail industry.

47) As general manager of a local restaurant chain, you have been asked to develop defensive moves to protect your company's market position and restrict any challenger's options for initiating a competitive attack. You would present all but ONE of the following strategic options to your executive team. A) Challenge struggling runner-up restaurants that are on the verge of going under. B) Grant volume discounts or better financing terms to dealers/distributors and provide discount coupons to customers to help discourage them from frequenting other local restaurants. C) Signal to challengers and new entrants in the local restaurant industry that retaliation is likely in the event they launch an attack. D) Publicly commit your restaurant chain to a policy of matching a competitor's terms or prices or breadth of menu items. E) Maintain a war chest of cash and/or marketable securities.

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48)

The purposes of a defensive strategy do not include A) increasing the risk of having to defend an attack. B) weakening the impact of any attack that occurs. C) pressuring challengers to aim their efforts at other rivals. D) helping protect a competitive advantage. E) decreasing the risk of being attacked.

49)

To fend off a competitive attack, defensive-minded companies

A) remain steadfast to current product features and models to ensure resources are not diverted toward unproductive efforts. B) avoid giving suppliers volume discounts or providing them with better financing terms from the strategic response in order to maintain current profitability levels. C) use innovation and intellectual property protection to obtain product line exclusivity to force competitors to use other distributors. D) void all lengthy warranties to save money. E) avoid competitor's clients since their loyalty will not allow them to switch.

50) What is the goal of signaling a challenger that strong retaliation is likely in the event of an attack? A) to alleviate their fears by committing to reduce the costs of value chain activities B) to cause the challenger to begin the attack instead of waiting C) to dissuade challengers from attacking or diverting them into using less-threatening options D) to create collaborative relationships with challengers E) to insulate other firms from adverse impacts resulting from the challenge

51)

A signal that would not warn challengers that strong retaliation is likely is

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A) publicly announcing management's commitment to maintain market share. B) publicly committing to a company policy of matching competitors' terms or pricing. C) maintaining a war chest of cash and marketable securities. D) making a strong counterresponse to the moves of weak competitors. E) publicly announcing strong quarterly earnings potential to financial analysts.

52) While other dating apps were already in existence, Tinder found success in pioneering the swiping phenomenon, thereby easing the process of finding love online and making the use of dating apps commonplace. This is an example of A) a late-mover advantage. B) a fast-follower advantage. C) a blue-ocean strategy. D) competitive imitation. E) a first-mover advantage.

53)

Being a first mover is not particularly advantageous under which circumstance?

A) when moving first with a preemptive strike makes imitation difficult or unlikely B) when first-time buyers remain strongly loyal to pioneering firms in making repeat purchases C) when early commitments to new technologies, types of components, or emerging distribution channels produce an absolute cost advantage over rivals D) when markets are slow to accept the innovative product offering of a first mover, and fast followers possess sufficient resources and marketing muscle to overtake a first mover E) when being a pioneer helps build a firm's image and reputation with buyers

54)

First-mover disadvantages (or late-mover advantages) rarely arise when

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A) the costs of pioneering are much higher than being a follower and only negligible learning/experience curve benefits accrue to the pioneer. B) rapid market evolution gives fast followers an opening to leapfrog the pioneer with next-generation products of their own. C) the pioneer's products are somewhat primitive and do not live up to buyer expectations, allowing clever followers to win disenchanted buyers with better-performing products. D) the marketplace is skeptical about the benefits of a new technology or product being pioneered by a first mover. E) the market response is strong and the pioneer gains a monopoly position that enables it to recover its investment.

55) What was the primary advantage of Zoom’s strategy to enter the online video conferencing marketplace as an adept follower of rivals such as Skype, WebEx, and GoToMeeting? A) the costs of pioneering in the online video conferencing market were much lower than being a follower and major learning/experience benefits were accrued to the pioneer. B) opportunities existed for a blue-ocean strategy to invent a new industry or distinctive market segment that created altogether new demand. C) the pioneers underestimated the market demand for online video conferencing. D) rapid market evolution (due to fast-paced changes in either technology or buyer needs) gave second movers the opening to leapfrog a first mover's products with more attractive and affordable next-version products. E) technological change in this market was slow, and fast-following rivals encountered great difficulties in leapfrogging the pioneers with next-generation products of their own.

56)

First-mover advantages are unlikely to be present when

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A) pioneering helps build a firm's image and reputation with buyers. B) rapid market evolution (due to fast-paced changes in technology or buyer preferences) presents opportunities to leapfrog a first-mover's products with more attractive next-version products. C) early commitments to new technologies, new-style components, new or emerging distribution channels, and so on, can produce an absolute cost advantage over rivals. D) moving first can constitute a preemptive strike, making imitation extra hard or unlikely. E) first-time customers remain strongly loyal to pioneering firms in making repeat purchases.

57) Because the timing of a strategic move can be just as important as the choice of move to make, a company's best option with respect to timing of an action is A) to be the first mover. B) to be a fast follower. C) to be a late mover (because it is cheaper and easier to imitate the successful moves of the leaders and moving late allows a company to avoid the mistakes and costs associated with trying to be a pioneer—first-mover disadvantages usually overwhelm first-mover advantages). D) to be the last mover—playing catch-up is usually fairly easy and almost always is much cheaper than any other option. E) to carefully weigh the first-mover advantages against the first-mover disadvantages and act accordingly.

58) The race among rivals for industry leadership is more likely to be a marathon rather than a sprint when

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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 in regard to avoiding the "mistakes" of first or early movers.

59)

For every emerging opportunity, there exists a(n)

A) market penetration curve, and this typically has an inflection point where the business model falls into place. B) opportunity to achieve first-mover status, which depends on analyzing the competitive status curve where all the potential rivals are encoded. C) emerging pitfall that is a counterpoint to the intended growth. D) normal curve scenario which signifies the average growth curve will be opportunistic. E) intense competition that constrains the company's prospects for rapid growth and superior profitability.

60)

Market conditions and factors that tend not to favor first movers include

A) buyer behavior that is readily attracted to new technology or product features. B) conditions that make imitation difficult and absolute cost advantages that accrue to those who make early commitments to new technologies, components, or distribution channels. C) quick market penetration and strong loyalty among first-time customers. D) growth in demand that depends on the development of complementary products or services that are not currently available and new-industry infrastructure that is needed before buyer demand can surge. E) pouring too few resources into getting ahead of the market opportunity.

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61)

What does the scope of the firm refer to?

A) the range of activities the firm performs externally and its social responsibility activities B) to gain competitive advantage based on where it locates its various value chain activities C) the firm's capability to employ vertical integration strategies D) the range of activities the firm performs internally and the breadth of its product offerings, the extent of its geographic market, and its mix of businesses E) to prevent foreign competition from affecting the market

62) Product and service segments that the firm serves within its market form an important dimension of firm scope that has relevance for business-level strategy and is known as A) market segmentation. B) vertical scope. C) matrix planning elements. D) concentric diversification. E) horizontal scope.

63) The extent to which a firm's internal activities may encompass one, some, many, or all of the activities that make up an industry's entire value chain system is known as A) horizontal scope. B) initial, secondary, and tertiary scope. C) vertical scope. D) value chain scope. E) competitive advantage matrix.

64)

The difference between a merger and an acquisition is that

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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 the combining of two or more companies into a single corporate entity, 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.

65) Ride-hailing giant Uber purchased food delivery business Postmates in July 2020 in a $2.65 billion all-stock takeover. Postmates will continue to operate under its own name, but will be combined with UberEats to create the country's second-largest delivery goliath. This is known as a(n) A) merger involving one company purchasing the assets of another company. B) merger involving two or more companies deciding to adopt the same strategy. C) acquisition involving one company purchasing the assets of another company with cash. D) acquisition in which the name of the company being acquired is changed to be the name of the acquiring company. E) acquisition involving one company (the acquirer) purchasing and absorbing the operations of another company (the acquired).

66) Lululemon’s strategy to acquire Mirror, the home exercise startup, for $500 million in June 2020 was primarily intended to

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A) lead the convergence of industries whose boundaries were being blurred by changing technologies and new market opportunities. B) create a more cost-efficient operation out of the combined companies. C) expand Lululemon's geographic coverage. D) facilitate a company's shift from a broad differentiation strategy to a focused differentiation strategy. E) take advantage of Mirror’s blue-ocean strategy.

67) In the face of strong competition from Amazon, Walmart's 2016 acquisition of Jet.com was driven by a strategic objective, such as A) expanding its geographic coverage or extending its business into new product categories. B) reducing the number of industry key success factors. C) reducing the number of strategic groups in the industry. D) facilitating its shift from a low-cost leadership strategy to a focused low-cost strategy. E) lengthening its value chain and thereby putting it in a better position to deliver superior value to buyers.

68)

Merger and acquisition strategies

A) are nearly always superior alternatives to forming alliances or partnerships with these same companies. B) may offer considerable cost-saving opportunities and can also be beneficial in helping a company try to invent a new industry. C) are a particularly effective way of pursuing a blue-ocean strategy and an outsourcing strategy. D) seldom are superior alternatives to forming alliances with these same companies because of the financial drain of using the company's cash resources to accomplish the merger or acquisition. E) are one of the best ways for helping a company strongly differentiate its product offering and use a differentiation strategy to strengthen its market position.

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69) Airbnb’s April 2019 acquisition of the last-minute hotel booking application, HotelTonight, was unlikely to have A) created a more cost-efficient operation from the combination of the two companies. B) enabled Airbnb to gain quick access to new technologies or other resources and capabilities. C) afford Airbnb with a leadership role in the convergence of the travel and vacation rental industries, whose boundaries were being blurred by changing technologies and new market opportunities. D) extend Airbnb’s vacation rental business into new product categories. E) suppressed its rival company Booking.com’s breakthroughs in management or technology.

70)

Mergers and acquisitions

A) are nearly always successful in achieving their desired purpose. B) frequently do not produce the hoped-for outcomes. C) are generally less effective than forming alliances or partnerships with these same companies. D) are highly risky because of the financial drain that comes from using the company's cash resources to pay for the costs of the merger or acquisition. E) are usually more successful in achieving cost reductions than in expanding a company's market opportunities.

71)

A primary reason why mergers and acquisitions sometimes fail is due to the

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A) misinterpretation of the cultural differences, like employee disenchantment and low morale, differences in management styles and operating procedures, and operations integration decision mistakes. B) execution of functional and integration activity, while sustaining and capitalizing on the combined sources of revenue. C) development of effective integration plans conducive to employee satisfaction. D) advertising message detailing the merger announcement. E) creation of management-employee programs in order to foster better communication.

72)

Why do mergers and acquisitions sometimes fail to produce anticipated results? A) The hoped-for outcomes and changes to existing operations may not eventuate. B) Cost savings are equal or better than expected. C) Gains in competitive capabilities quickly materialize. D) Efforts to mesh corporate cultures go smoothly. E) Key employees at the acquired company can quickly become disenchanted and leave.

73)

Vertical integration strategies

A) extend a company's competitive scope within the same industry by expanding its operations across multiple segments or stages of the industry value chain. B) are one of the best strategic options for helping companies win the race for global market leadership. C) offer good potential to expand a company's lineup of products and services. D) are particularly effective in boosting a company's ability to expand into additional geographic markets, particularly the markets of foreign countries. E) are a good strategy option for helping a company revamp its value chain and bypass low value-added activities.

74) The best reason for investing company resources in vertical integration (either forward or backward) is to

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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) add materially to a company's technological capabilities, 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 a greater ability to reduce internal operating costs.

75)

A good example of vertical integration is a A) global public accounting firm acquiring a small local or regional public accounting

firm. B) large supermarket chain getting into convenience food stores. C) crude oil refiner purchasing a firm engaged in drilling and exploring for oil. D) hospital opening up a nursing home for the aged. E) railroad company acquiring a trucking company specializing in long-haul freight.

76)

A vertical integration strategy can expand the firm's range of activities

A) backward into sources of supply and/or forward toward end users. B) backward into other industry business lines and/or forward to suppliers of raw materials. C) to enable the supply chain the opportunity for expansion. D) to complement the industry's horizontal value chain line of profitability. E) to establish full integration by participating in a tapered integration (without the outsourced and in-house activities).

77) The two most compelling reasons for a company to pursue vertical integration (either forward or backward) are to

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A) strengthen the company's competitive position and/or boost its profitability. B) 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. C) broaden the firm's product line and/or avoid the need for outsourcing. D) expand into foreign markets and/or control more of the industry value chain. E) enable use of offensive strategies and/or gain a first-mover advantage over rivals in revamping the industry value chain.

78) 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 an ample in-house ability to undertake additional production activities. D) needs to have a wide product line, so 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.

79)

The hallmarks of Tesla's vertical integration strategy do not include

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A) investments in a "gigafactory" that manufactures the batteries that are essential for a long-lasting Tesla electric vehicle. B) research and development and rapid deployments of Tesla's control integration systems (creating control factors across its entire value chain). C) in-house manufacturing of key components and new parts that require frequent updates resulting in a shorter learning curve and more rapid new Tesla vehicle development. D) fostering closer relationships between Tesla engineering and manufacturing departments to provide greater control over product design. E) a network of dealerships that allows Tesla to sell directly to consumers and handle maintenance needs without relying on third parties that sometimes have competing priorities.

80)

The potential advantages of Tesla's backward vertical integration strategy include

A) increased vulnerability to Tesla from powerful suppliers (who may be inclined to raise prices at every opportunity). B) moderately increased risks to Tesla of disruptions in obtaining crucial components or support services. C) reduced costs. D) increased business risk for Tesla because it can control a larger portion of the overall industry value chain. E) enhancement of Tesla's differentiation capabilities and perhaps achieving a differentiation-based competitive advantage.

81)

Backward vertical integration can produce a

A) full integration when activities remain the domain of key suppliers. B) tapered integration if the firm consolidates all activities in-house. C) differentiation-based competitive advantage when activities enhance the performance of the final product. D) focused differentiation strategy when the market is broad and the product is a commodity. E) lower degree of flexibility in accommodating shifting buyer preferences.

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82)

The strategic impetus for forward vertical integration is to A) gain better access to end users and better market visibility. B) achieve the same scale economies as wholesale distributors and/or retail dealers. C) control price at the retail level. D) bypass distributors and dealers and sell direct to consumers at the company's website. E) build a core competence in mass merchandising.

83) The strategic impetus for Tesla's forward vertical integration into dealerships and charging stations is A) being able to control the wholesale/retail portion of the automobile industry value chain. B) experiencing fewer disruptions in the delivery of the company's vehicles to end users. C) gaining better access to Tesla's end users and better market visibility. D) broadening Tesla's product line. E) providing Tesla with access to resources and capabilities to achieve greater economies of scale.

84)

A strategic disadvantage of vertical integration is

A) to boost a firm's capital investment in the industry, thus increasing business risk if the industry becomes unattractive later. B) to impair a company's operating flexibility when it comes to changing out the use of certain parts and components. C) to impair a company's flexibility in accommodating shifting buyer preferences. D) to require radically different skills and business capabilities than the firm possesses. E) to speed up the company's adoption of technological advances.

85)

The best example of forward vertical integration is

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A) Amazon Studios and Netflix Originals that produce high-quality original content for their digital streaming services. B) Harley-Davidson and Ducati's own-branded stores that sell motorcycles and related memorabilia. C) Spanish clothing maker Inditex's textile design and manufacturing capabilities for its Zara brand. D) Apple Inc.'s advanced semiconductor design and manufacturing capabilities for its iPhones. E) International Paper's investments into pulp mills near its paper mills.

86) Bypassing regular wholesale/retail channels in favor of direct sales and Internet retailing can have appeal if it A) reinforces the brand, enhances consumer satisfaction, and results in lower prices to end users. B) can result in better coordination of the firm's direct sales activity to wholesalers and distributors. C) can establish a retail frontal attack while efficiently managing its backward (defensive) sales orientation. D) combines the best of all sales channels and provides financial support to distribution allies. E) creates a channel conflict, thereby providing competitive improvisation.

87)

A strategy of vertical integration can have substantial drawbacks, including

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A) whether horizontal integration can limit the performance of strategy-critical activities in ways that increase cost, build expertise, protect proprietary know-how, or increase differentiation. B) raising the firm's capital investment in the industry and increasing business risk, as well as providing less flexibility in accommodating shifting buyer preferences by locking the firm into relying on its own in-house activities. C) the environmental costs of coordinating operations across vertical chain activities. D) loss of technological know-how. E) the difficulties faced in entering outside vertical and horizontal markets.

88) For a backward vertical integration strategy into the business of suppliers to be viable and profitable, a company must possess A) the capability to achieve the same scale economies as outside suppliers and also match or beat suppliers' production efficiency with no drop in quality. B) considerable expertise in supply chain management, transportation logistics, and inventory control techniques. C) large state-of-the-art production facilities so that it can fully capture all economies of scale in producing parts and components. D) a distinctive competence in production process technology and at least a core competence in manufacturing R&D. E) excess production capacity so that it has an ample in-house ability to undertake additional production activities.

89)

An outsourcing strategy

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A) is nearly always a more attractive strategic option than merger and acquisition strategies. B) carries the substantial risk of raising a company's costs. C) carries the substantial risk of making a company overly dependent on its suppliers. D) increases a company's risk exposure to changing technology and/or changing buyer preferences. E) involves farming out certain value chain activities presently performed in-house to outside vendors.

90)

The two big drivers of outsourcing are

A) an increased ability to cut R&D expenses and an increased ability to avoid the problems of strategic alliances. B) that outsiders can often perform certain activities better or more cheaply, 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 workforce and a low investment in intellectual capital will produce cost savings.

91)

Outsourcing strategies

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A) are nearly always a more attractive strategic option than merger and acquisition strategies. B) carry the substantial risk of raising a company's costs. C) carry the substantial risk of making a company overly dependent on its suppliers. D) increase a company's risk exposure to changing technology and/or changing buyer preferences. E) involve farming out value chain activities presently performed in-house to outside specialists and strategic allies.

92) The following are good examples of outsourcing some value chain activities that were formerly performed in-house except A) IBM performs information technology services for Colgate-Palmolive. B) Luxottica manufactures glasses for Dolce & Gabbana. C) Nordstrom retails certain products for Coach, Inc. D) Foxconn manufactures the iPad and iPhone for Apple Inc. E) Paychex performs HR services for Robert Half Financial & Accounting.

93) Why might a company not choose to outsource certain value chain activities presently performed in-house? A) because it streamlines company operations in ways that improve organizational flexibility and cuts the time it takes to get new products into the marketplace B) because it allows a company to concentrate on its core business, leverage its key resources, and do even better what it already does best C) because it helps the company assemble diverse kinds of expertise speedily and efficiently D) because it enables a company to gain better access to end users and better market visibility E) because it improves a company's ability to innovate

94)

What might be considered a major drawback of employing an outsourcing strategy?

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A) It allows a company to concentrate on its core business, leverage its key resources and core competencies, and do even better what it already does best. B) It can hollow out a firm's own capabilities and cause it to lose touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success. C) It reduces the company's risk exposure to changing technology and/or buyer preferences. D) It improves organizational flexibility and speeds time to market. E) It involves an activity that can be performed better or more cheaply by outside specialists.

95) Relying on outsiders to perform certain value chain activities offers such strategic advantages as A) ensuring more costly components or services. B) improving the company's inability to innovate by allying with "best-in-class" suppliers. C) reducing the company's risk exposure to changing technology and/or changing buyer preferences. D) increasing the firm's inability to assemble diverse kinds of expertise speedily and efficiently. E) reducing its information technology and operational costs so that organizational flexibility is maintained.

96)

Outsourcing strategies can offer such advantages as

A) increasing a company's ability to strongly differentiate its product and be successful with either a broad differentiation strategy or a focused differentiation strategy. B) obtaining higher-quality and/or cheaper components or services, improving a company's ability to innovate, and reducing its risk exposure. C) speeding a company's entry into foreign markets. D) permitting greater use of strategic alliances and collaborative partnerships. E) giving a firm more direct control over the costs of value chain activities.

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97)

The big risk of employing an outsourcing strategy is

A) causing the company to become partially integrated instead of being fully integrated. B) hollowing out a firm's own capabilities and losing touch with activities and expertise that contribute fundamentally to the firm's competitiveness and market success. C) hurting a company's R&D capability. D) putting the company in the position of being a late mover instead of an early mover. E) increasing the firm's risk exposure to both supply chain management failures and shifts in the composition of the industry value chain.

98)

Strategic alliances are

A) the cheapest means of developing new technologies and getting new products to market quickly. B) collaborative formal arrangements where two or more companies join forces and agree to work cooperatively toward some strategically relevant objective. C) a proven means of reducing the costs of performing value chain activities. D) best used to insulate a company from the impact of the five competitive forces. E) the best way to help insulate a firm from the adverse impacts of industry driving forces.

99) A formal agreement, or , is between two or more separate companies in which they agree to work cooperatively toward some common objective. A) joint venture B) vertical integration C) strategic alliance D) forward integration E) outsourcing

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100) Under which circumstance can an alliance be considered just a convenient business arrangement rather than "strategic"? A) The alliance is critical to the company's achievement of an important objective. B) The alliance helps block a competitive threat. C) The alliance helps open up important new market opportunities. D) The alliance helps build, enhance, or sustain a core competence or competitive advantage. E) The alliance helps the company obtain additional financing on better credit terms.

101) In spring 2020, Toyota and Panasonic announced that the two companies had formed a strategic alliance known as Primearth EV Co. in order to develop new batteries with improved prismatic cells for pure electric cars. This alliance is known as a A) partnership. B) joint liability company. C) joint venture. D) dual proprietorship. E) socially responsible partnership.

102) 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 firstmover 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.

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103) Microsoft's alliance with immuno-sequencing company Adaptive Biotechnologies can be called "strategic" because it serves all of the following strategic purposes except A) builds, sustains, or enhances Microsoft's core competence in artificial intelligence. B) blocks a competitive threat from Amazon to become a health care industry player. C) accelerates drug development and bring new therapies to patients sooner than if each party had "gone it alone." D) opens up important, new health care market opportunities for both alliance members. E) contracts out certain value chain activities by both parties to outside vendors.

104)

The best strategic alliances

A) are highly selective, focusing on particular value chain activities and on obtaining a particular competitive benefit. B) are those whose purpose is to create an industry key success factor. C) are those that help a company move quickly from one strategic group to another. D) involve joining forces in R&D to develop new technologies cheaper than a company could develop the technology on its own. E) aim at raising an industry's barriers to entry.

105) What might not be considered as a strategically beneficial reason why a company may enter into strategic partnerships or cooperative arrangements with key suppliers, distributors, or makers of complementary products? A) to improve access to new markets B) to expedite the development of promising new technologies or products C) to enable greater opportunities for employee advancement D) to improve supply chain efficiency E) to overcome disadvantages of small production volumes that limit scale economies and low production costs

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106) Companies racing against rivals for global market leadership need strategic alliances and collaborative partnerships with companies in foreign countries to A) combat the bargaining power of foreign suppliers and help defend against the competitive threat of substitute products produced by foreign rivals. B) help raise needed financial capital from foreign banks and use the brand names of their partners to make sales to foreign buyers. C) get into critical country markets quickly, gain inside knowledge about unfamiliar markets and cultures, and access valuable skills and competencies that are concentrated in particular geographic locations. D) help wage price wars against foreign competitors. E) exercise better control over efforts to revamp the global industry value chain.

107) A company racing to seize opportunities on the frontiers of advancing technology often utilizes strategic alliances and collaborative partnerships to A) discourage rival companies from merging with or acquiring the very companies that it is partnering with. B) reduce overall business risk and raise entry barriers into the newly emerging industry. C) help master new technologies and build new expertise and competencies, establish a stronger beachhead for participating in the target industry, and open up broader opportunities in the target industry. D) help defeat competitors that are employing broad differentiation strategies. E) enhance its chances of achieving global low-cost leadership.

108) Carlos, the CEO of a local HR recruiting and staffing company, is considering a strategic alliance with a local payroll company. What would not likely be a consideration for Carlos with respect to whether the proposed alliance could become successful and realize its intended benefits?

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A) picking a good partner B) recognizing that the alliance must benefit both sides C) minimizing the amount of resources that the partners commit to the alliance D) ensuring that both parties live up to their commitments E) structuring the decision-making process so actions can be taken swiftly when needed

109)

Strategic alliances are more likely to be long lasting when they involve

A) partners that respectively have considerable resource weaknesses in the marketplace. B) partners that are not only experienced with strategic alliances, but who also routinely enter into collaborative agreements with firms in peripheral industries. C) partners based in countries with distinctly different cultures and consumer buying habits and preferences. D) joining forces in R&D to develop new technologies cheaper than a company could develop the technology on its own. E) collaboration with suppliers or distribution allies, or when both parties conclude that continued collaboration is in their mutual interests.

110) If you were advising Hoffmann-LaRoche, which set up Roche Partnering to manage more than 190 alliances in the health care industry, what might not be a reason why some of those alliances could prove to be unstable or break apart? A) Anticipated gains may fail to materialize for Roche Partnering due to an overly optimistic view of the synergies. B) Anticipated gains for Roche Partnering may fail to materialize due to a poor fit in terms of the combination of resources and capabilities. C) One or more of the 190 partners in Roche Partnering could gain access to another company's proprietary knowledge base, technologies, or trade secrets. D) The partners may disagree among themselves over how to divide the profits gained from joint collaboration. E) There is a risk for any or all of the 190 partners in Roche Partnering to become overly dependent on other companies within the partnership.

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111)

Experience indicates that strategic alliances

A) are generally successful. B) work well in cooperatively developing new technologies and new products but seldom work well in promoting greater supply chain efficiency. C) work best when they are aimed at achieving a mutually beneficial competitive advantage for the allies. D) can suffer culture clash and integration problems due to different management styles and business practices. E) are rarely useful in helping a company win the race for global industry leadership.

112) The Achilles' heel (or biggest disadvantage/pitfall) of relying heavily on alliances and cooperative strategies is A) that partners will not fully cooperate or share all they know, preferring instead to guard their most valuable information and protect their more valuable know-how. B) becoming dependent on other companies for essential expertise and capabilities. C) the added time and extra expenses associated with engaging in collaborative efforts. D) having to compromise the company's own priorities and strategies in reaching agreements with partners. E) the collaborative arrangements will not live up to expectations.

113) The principal advantages of strategic alliances over vertical integration or horizontal mergers/acquisitions are

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A) resource pooling and risk sharing, more adaptive response capabilities, and greater speed of deployment. B) potential profitability of the alliance and related experience-curve economics. C) the facilitation of best practices, more production capacity, and relevant synergistic savings. D) the transactional and relational concept of operating practices and competencies. E) material additions to a company's technological capabilities, strengthening of the firm's competitive position, and boosting of its profitability.

114) A company that has greater success in managing its strategic alliance can credit all of the following, except A) establishing strong interpersonal relationships to facilitate communication. B) incorporating contractual safeguards. C) making opportunities for learning a routine management process. D) establishing a system to manage alliances in a systematic fashion. E) creating organizational learning barriers across boundaries.

115)

A company that fails to manage its strategic alliance probably has A) incorporated contractual safeguards. B) made opportunities for learning a routine management process. C) created a system to manage alliances in a systematic fashion. D) established strong interpersonal relationships and established trust. E) refrained from making commitments to its partners and ensured they do the same.

116) Samsung Group, which includes Samsung Electronics, successfully manages an ecosystem of over 1,300 partnerships that enable productive activities from global procurement to local marketing to collaborative R&D. Samsung Group's alliance management capability can be said to have

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A) developed over time, out of effort and learning. B) decreased the company's knowledge assets. C) created successful strategic alliances. D) diminished the company's knowledge capabilities. E) expedited the transfer of new assets into the strategic alliance.

117) Imagine you are advising a local low-cost commercial construction business that is considering diversifying via acquisition into affordable residential construction. What would you not say is a typical strategic objective or benefit that could be derived from a merger or an acquisition with an existing residential construction company? A) to gain quick access to new technologies or other resources and capabilities B) to create a more cost-efficient operation out of the combined companies C) to fundamentally alter a company's trajectory and improve its business outlook D) to expedite shifting from one strategy to another and gain better access to additional financial capital E) to extend a company's business into new product or service categories and/or expand a company's geographic coverage

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Answer Key Test name: Chap 06_23e 32) A 33) E 34) D 35) E 36) B 37) A 38) E 39) E 40) A 41) A 42) E 43) C 44) D 45) D 46) E 47) A 48) A 49) C 50) C 51) E 52) E 53) D 54) E 55) D 56) B 57) E Version 1

58) C 59) A 60) D 61) D 62) E 63) C 64) B 65) E 66) A 67) A 68) B 69) E 70) B 71) A 72) E 73) A 74) D 75) C 76) A 77) A 78) B 79) B 80) E 81) C 82) A 83) C 84) C 85) B 86) A 87) C Version 1

88) A 89) E 90) B 91) E 92) C 93) D 94) B 95) C 96) B 97) B 98) B 99) C 100) E 101) C 102) B 103) E 104) A 105) C 106) C 107) C 108) C 109) E 110) D 111) D 112) B 113) A 114) E 115) E 116) A 117) D Version 1

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Chapter 7 Strategies for Competing in International Markets 1) Identify and briefly discuss the key reasons why a company may consider expanding outside its domestic market.

2) Explain why the strategies of firms that expand internationally are usually grounded in home-country advantages or core competencies.

Briefly identify the special features of competing in foreign markets.

4) Explain how exchange rate fluctuations pose a risk to manufacturing companies that rely upon an export strategy to compete in foreign markets.

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Identify and explain the significance of each of the following terms and concepts:

a. global strategy b. export strategy c. licensing strategy d. franchising strategy

6) Compare and contrast the advantages for entering and competing in foreign markets for the strategic options of exporting, licensing, and franchising.

Explain why an acquisition is better than a greenfield venture.

8) What are the pros and cons of using strategic alliances to try to enhance a company's ability to compete in foreign markets?

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9) Discuss in some detail the difference between a multidomestic strategy and a global strategy. Give the pros and cons of each.

10) What circumstances call for use of a multidomestic strategy for competing in international markets?

11)

When is a global strategy "superior" to a multidomestic strategy?

12)

How does a transnational strategy differ from a multidomestic or a global strategy?

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13)

When should a company enter a new country via internal development?

14) A global strategy embraces the theme "think-global, act-global," whereas a multidomestic strategy relies more on a "think-local, act-local" mentality. True or false? Explain.

15) Explain the differences between a "think-global, act-global" strategy and a "think-global, act-local" strategy.

16) Explain why a company desirous of competing in foreign markets needs to pay careful attention to where it locates it value chain activities.

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17) Imagine that you are the manager of an aspiring multinational social media company. Identify and briefly explain two ways that your company could expand outside your domestic market to improve overall competitiveness.

18) Under what circumstances is it advantageous for a company competing in foreign markets to disperse certain value chain activities across many countries?

19)

List and discuss three strategy options for competing in emerging markets.

20)

Explain the importance of competing in emerging markets.

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21) Identify and briefly describe a local company's strategic options in competing against global challengers.

22) Boris and Natasha have been assigned a capstone strategy project to identify approaches to defend against the entry of multinational companies into Russia, which is considered an emerging market. Identify and provide examples of three strategic approaches.

23) Imagine you are advising a company that makes designer face masks. You are asked to determine a country for its manufacturing operations. The company’s top criteria for choosing a country to enter is that it should have comparatively low-cost labor. You would advise this company to enter which country(ies)?

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24) Suppose that you are the manager of an aspiring multinational video conferencing company. Given limited budgets and know-how with respect to foreign markets, what are the strategic options available to your company to expand outside its domestic market to improve its overall competitiveness. Which option would you recommend and why?

25) Explain the rationale for and provide an example of a company expanding internationally to extend the life cycle of its products.

26)

The world economy is globalizing at an accelerated pace because

A) countries previously open to foreign companies have closed their markets. B) countries that previously had market or mixed economies now embrace planned economies. C) information technology is exacerbating the importance of geographic distance. D) growth-minded companies are racing to build stronger competitive positions in the markets of more countries. E) countries opposed to market or mixed economies have erected more stringent trade barriers.

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27) In 2018, Suelin Chen and Mark Zheng co-founded Cake, a free social media app that catalogs users’ end-of-life wishes, instructions, and documents such as obituaries. Cake, based in Boston, makes money through strategic partnerships primarily with health care providers and will eventually add fee-based premium services in global markets. Cake has decided to expand outside its U.S. home market in order to A) match its core competencies and capabilities with rival social media companies such as What’sApp and Facebook. B) compete with global social media providers such as WeChat and TikTok. C) gain access to new customers for the company's products/services. D) achieve differentiation through economies of scale, experience, and increased purchasing power. E) identify newer and stronger resources and capabilities in its home market.

28)

The primary reasons that companies opt to expand into foreign markets are to

A) raise the entry barriers for industry newcomers, neutralize the bargaining power of important suppliers, grow sales faster, and increase the number of loyal customers. B) avoid having to employ an export strategy, avoid the threat of cross-market subsidization from rivals, and enable the use of a global strategy instead of a multidomestic strategy. C) grow sales faster than the industry average, reduce the competitive threats from rivals, and open up more opportunities to enter into strategic alliances. D) boost returns on investment, broaden their product lines, avoid tariffs and trade restrictions, and escape dealing with strong labor unions. E) gain access to new customers, achieve lower costs, enhance the company's competitiveness, capitalize on core competencies, and spread business risk across a wider market base.

29)

Tiffany & Co. opted to enter into the mining industry in Canada in order to

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A) build the profit sanctuary necessary to wage guerrilla offensives against global challengers endeavoring to invade its home market. B) capitalize on company competencies and capabilities. C) gain access to new customers in new markets. D) access diamonds that could be certified as "conflict-free" and not associated with unethical mining practices or the finding of military activities in Africa. E) achieve lower costs and enhance the firm's competitiveness.

30) ExxonMobil enters into a pact with Gazprom, the world's largest natural gas extractor, to set up a processing unit in Baku, Azerbaijan. Which of the following is most likely the reason for ExxonMobil to opt for this strategic alliance? A) to gain access to new customers B) to scale back its core competencies C) to restrict its factors of production D) to gain access to low-cost inputs of production E) to better compete with Gazprom

31)

Why do companies decide to enter a foreign market? A) to capture economies of scale in product development, manufacturing, or marketing B) to raise input costs through greater pooled purchasing power C) to decrease the rate at which they accumulate experience and move up the learning

curve D) to concentrate risk within a broader base of countries, especially when sales are down in one area and the company can undermine sales elsewhere E) to exploit the natural resources found within its home market

32) By deploying capabilities across a larger international domain, a company like Honda can gain the experience needed to upgrade its capabilities to a higher performance standard in order to

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A) contribute to a guaranteed recipe for competitive success. B) support the resource buildup needed to achieve depth in a developing or protected market. C) challenge a weaker set of international competitors, enabling a company to rely on a more modest set of competitive capabilities. D) rely on its one-country customer base for competitive advantage and on its global sales for comparative advantage. E) spread its variable costs of product development over a greater volume of unit sales.

33) Crafting a strategy to compete in one or more foreign markets can be considered complex because A) factors that affect industry competitiveness are the same from country to country. B) of the potential for location-based advantages to conducting value chain activities in certain countries. C) different government policies and economic conditions make the business climate more favorable in some countries than in others. D) currency exchange rates among countries are generally fixed and rarely change. E) buyer tastes and preferences differ among countries and present a challenge for companies concerning. customizing versus standardizing their products and services.

34) When Disney relied on licensing agreements with the Oriental Land Company to open its first foreign theme park, Tokyo Disneyland,

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A) Disney was able to meet the challenge of localizing its product offerings in Japan, leading to a low-cost advantage. B) Japanese consumer buying habits and demographics no longer posed a challenge for Disney. C) Disney no longer needed to contend with fluctuating exchange rates and country-tocountry variations in host government restrictions and requirements. D) the Oriental Land Company reaped the windfall because the partner who bore the risk was also likely to be the biggest beneficiary from any upside gain. E) Disney, not the Oriental Land Company, reaped the windfall because of learning curve effects.

35) The diamond framework is not likely to answer which of the following questions about competing on an international basis? A) Where will the foreign entrants come from? B) Which countries have the weakest foreign rivals? C) What are the attributes of a country's business environment? D) What location of value chain activities is most beneficial? E) What are the disadvantages of allowing foreign competition?

36) Market size and growth rates in different countries can be influenced positively or negatively by A) the ability of management to tailor a strategy to take into consideration differences among country markets. B) which countries have the weakest foreign rivals. C) competitive rivalry that is only moderate in some countries. D) differing population sizes, cultures, income levels, infrastructure, and distribution networks among countries. E) the large size of emerging markets such as Brazil, Russia, China, and India.

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37) Nikki, CEO of an aspiring multinational craft vodka company, is researching crosscountry differences in demographic, cultural, and market conditions. She would not likely discover that A) Nike produces its own line of skate shoes. B) Keurig has acquired a large coffee farm in Costa Rica. C) Latvia makes low-cost loans to U.S. vodka distillers to stimulate competition in its market. D) Intel's silicon chips are identical across the world. E) McDonald's offers 100 percent beef-free products in its outlets in India.

38) You have been asked to consult with Sonic.net, a regional Internet Service Provider, about the advisability of competing abroad. Your assessment of the opportunities for Sonic.net to craft a strategy to compete in one or more countries in the world would not necessarily A) evaluate country-to-country differences in consumer buying habits and buyer tastes and preferences. B) evaluate country-to-country variations in host government restrictions and requirements and fluctuating exchange rates for the company's offerings in each different country market or whether to offer a mostly standardized product worldwide. C) evaluate which countries to locate company operations for maximum locational advantage, given country-to-country variations in wage rates, worker productivity, energy costs, tax rates, and the like. D) evaluate a multidomestic strategy that considers the world market as a mostly homogeneous market.

39)

One of the biggest strategic challenges to competing in the international arena includes

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A) how to leverage the opportunities arising from shifting exchange rates. B) how to charge the same price in all country markets. C) how to identify foreign firms licensed to produce and distribute the company's products. D) whether to offer a standardized product worldwide or a customized product offering in each different country market. E) whether to pursue a franchising strategy or a joint venture strategy.

40) What factor is not LIKELY responsible for Apple's decision to set up mobile phone manufacturing facilities in India? A) growth potential of India's emerging market B) global standardization of mobile phone technology C) potential location advantages in wages, inflation rates, and tax rates that reduce costs D) franchising opportunities in India E) comparatively lower exchange rate and political risks

41) According to Michael E. Porter’s Diamond of National Competitive Advantage, an important factor shaping Tesla’s decision to manufacture EV in China is A) existing similarities among buyer tastes for a particular product or service across countries. B) the competitive pressures to increase differentiation. C) the stable exchange rates between the U.S. dollar and the Chinese yuan. D) the extent to which Chinese governmental policies affect the local business climate. E) the level of Chinese industry-related support activities to foster customization of products and services.

42) A location-based advantage for competing on an international basis can best be exemplified by

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A) Microsemi Corporation acquiring California-based Actel Corporation. B) RBC Wealth Management closing operations in south Florida. C) Samsung diversifying and venturing into textiles and food processing. D) Hyundai signing a memorandum of understanding with the government of South Korea to halt exports. E) De Beers establishing greenfield operations in the mining region of South Africa.

43) The Irish government’s policies that make it more attractive for foreign companies to locate operations in that country include A) subsidies and low interest loans to domestic companies. B) stringent environmental compliance regulations. C) prior approval of capital spending projects. D) requirements such as partial ownership of foreign company operations by local companies or investors or that a certain percentage of the parts and components used in manufacturing a product be obtained from local suppliers. E) reduced taxes, low-cost loans, and site-development assistance.

44) Apollo Tires sets up a manufacturing unit in Mexico. Following this, Renault-Nissan signs a supply contract with the tire manufacturer. In which of the following ways is RenaultNissan likely to gain from the pact? A) different styles of management, organization, and strategy B) knowledge sharing within same value chain system C) availability of natural resources at low cost D) growth potential and large size of the market E) government policies in the host country

45) Gallo Wines is seeking international market entry. One if its top criteria for choosing a country to enter is a pro-business government policy. John would advise Gallo Wines to enter

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A) Argentina, which has increased its interest rate on loans to foreign entrants from 15 percent to 19 percent. B) Germany, since the European Union has imposed a 16 percent tariff on the import of agricultural produce. C) Australia, which recently introduced a permanent employer-sponsored visa program for skilled manpower. D) South Africa, which now levies a per metric ton carbon tax on electricity and a per liter surcharge on water. E) China, whose government favors partial local ownership of foreign-owned companies.

46) A typical host government requirement that encourages the entry of foreign companies to establish operations in that country is A) imposing burdensome tax structures and regulatory requirements upon foreign companies doing business within their borders. B) placing restrictions on exports to ensure adequate local supplies. C) having rules and policies that protect local companies from foreign competition. D) reduced taxes, low-cost loans, site location and site development assistance, and government-sponsored training for workers to encourage companies to construct production and distribution facilities. E) establishing local content requirement on goods made inside their borders by foreign companies.

47)

The difference between political risks and economic risks is that

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A) political risks stem from instability or weakness in national governments, while economic risks stem from the stability of a country's monetary system, and its economic and regulatory policies. B) political risks stem from stability in foreign business, while economic risks stem from an excess of property right protections. C) political risks stem from hostility to foreign currencies, while economic risks stem from the instability of the monetary system. D) political risks stem from exchange rate fluctuations, while economic risks stem from hostility to foreign business. E) political risks stem from the stability of a country's monetary system, while economic risks stem from instability in national business.

48) A U.S. organic personal hygiene product manufacturer that exports toothpaste and deodorant made at its U.S. plants for shipment to the U.K. market A) is competitively disadvantaged when the U.S. dollar declines in value against the British pound. B) is largely unaffected by fluctuating exchange rates. It would, however, be affected if its plants were in the United Kingdom or other foreign countries. C) becomes more competitive in the United Kingdom when the U.S. dollar gains in value against the British pound. D) becomes more competitive in the United Kingdom when the U.S. dollar declines in value against the British pound. E) has no interest in whether the dollar grows stronger or weaker versus the British pound unless it is competing only against companies located in the United Kingdom.

49) An Irish dairy producer that exports gourmet cheeses made at its Kerry plants to the United States

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A) is competitively disadvantaged when the euro declines in value against the U.S. dollar. B) is largely unaffected by fluctuating exchange rates between the euro and the U.S. dollar. It would, however, be affected if its plants were in the United States. C) becomes less competitive in the U.S. market when the euro rises in value against the U.S. dollar. D) becomes more competitive in European markets when the euro declines in value against the U.S. dollar. E) has no interest in whether the euro grows stronger or weaker versus the U.S. dollar unless its chief competitors are other companies located in countries whose currency is also the euro.

50) A U.S. company that makes all of its goods at a plant in Brazil and then exports the Brazilian-made goods to country markets across the world A) is competitively disadvantaged when the U.S. dollar declines in value against the Brazilian real. B) is competitively advantaged when the Brazilian real declines in value against the currencies of the countries to which the Brazilian-made goods are being exported. C) becomes less competitive in foreign markets when the Brazilian real declines in value against the currencies of the countries to which the Brazilian-made goods are being exported. D) is competitively advantaged when the U.S. dollar appreciates in value against the Brazilian real. E) is unaffected by changes in the valuation of foreign currencies against the Brazilian real—all that matters to a U.S. company is the valuation of the U.S. dollar against the Brazilian real.

51) A European-based company that makes all of its goods at a plant in Brazil and then exports the Brazilian-made goods to country markets in many different parts of the world

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A) is competitively disadvantaged when the euro declines in value against the Brazilian real. B) is competitively disadvantaged when the Brazilian real declines in value against the currencies of the countries to which the Brazilian-made goods are being exported. C) becomes less competitive in foreign markets when the Brazilian real gains in value against the currencies of the countries to which the Brazilian-made goods are being exported. D) is competitively advantaged when the euro appreciates in value against the Brazilian real. E) has no interest in whether the euro grows stronger or weaker versus the Brazilian real unless its chief competitors are other companies located in countries whose currency is also the euro.

52) Why does a U.S. company exporting wooden furniture manufactured in Malaysia to the European Union benefit from the decline in the value of the ringgit against the euro? A) A decline in the value of the ringgit against the euro raises the cost of furniture manufactured in Malaysia, and makes it less competitive in European markets. B) A decline in the value of the ringgit against the euro reduces the cost of furniture manufactured in Malaysia, and makes it more competitive in European markets. C) A decline in the value of the ringgit against the euro has no impact on the cost of furniture manufactured in Malaysia, in both Malaysian or European markets. D) A decline in the value of the ringgit against the euro makes European goods more competitive, compared to Malaysian goods. E) A decline in the value of the ringgit against the euro makes Malaysian goods less competitive in the U.S. market.

53) The advantages of manufacturing goods in a particular country and exporting them to foreign markets

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A) are largely unaffected by fluctuating exchange rates. B) are greatest when local distributors and dealers in that country can be convinced not to carry products that are made outside the country's borders. C) can be wiped out when that country's currency grows weaker relative to the currencies of the countries where the output is being sold. D) are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold. E) are multiplied by the potential for local government officials to raise tariffs on the imports of foreign-made goods into their country.

54) The 2015 merger of Walgreens Boots Alliance, one of the world's largest pharmaceutical purchasers, is not likely to A) reduce the significant risks of fluctuating exchange rates to its competitiveness in foreign markets. B) avoid the effects of fluctuations in exchange rates on the costs of manufacturing goods in a particular country. C) succeed when the currency of the country from which the goods are being exported grows weaker relative to the currencies of the countries that the goods are being exported to. D) see the advantages of manufacturing goods in a particular country erode when that country's currency grows stronger relative to the currencies of the countries where the output is being sold. E) come under pressure from lower-cost imports if local currency grows weaker in relation to the currencies of the countries where the imported goods are being made.

55)

The impact of fluctuating exchange rates on companies competing in foreign markets

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A) are easy to predict in spite of the variety of factors involved and the uncertainties surrounding when and by how much these factors will change. B) never change the pecking order consisting of which countries represent the low-cost manufacturing locations and which rivals have the upper hand in the marketplace. C) always disadvantage domestic companies facing competitive pressure from lower-cost imports when their government's currency grows weaker. D) always benefit domestic companies facing competitive pressure from lower-cost imports when their government's currency grows weaker. E) help domestic companies under pressure from lower-cost imports when their government's currency grows weaker in relation to the currencies of the countries where the imported goods are being made.

56) The advantages of manufacturing goods in a particular country and exporting them to foreign markets A) are weakened when that country's currency grows stronger relative to the currencies of the countries where the output is being sold. B) are greatest when local consumers prefer products manufactured inside the country's borders. C) are largely unaffected by fluctuating exchange rates. D) can be wiped out when that country's currency grows weaker relative to the currencies of the countries where the output is being sold. E) are largely unaffected by tariffs or quotas.

57) A weaker U.S. dollar is an economically favorable exchange-rate shift for manufacturing plants based in the United States. A) This is a true statement. B) No, the U.S. dollar must be stronger. C) Yes, because it provides for a weakened foreign demand for U.S.-made goods. D) Yes, because it makes such plants less cost-competitive with foreign plants. E) Yes, because it provides incentives of foreign companies to locate manufacturing facilities in the United States to make goods for U.S. consumers.

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58) Cross-country differences in demographic, cultural, and market conditions are not present for A) Fisher and Paykel, a company that produces energy-efficient, top-loading washing machines for sale in France. B) Starbucks, which has developed a new line of Vietnamese coffee drinks for sale in Southeast Asian markets. C) Ireland, a country that provides low-cost loans and tax havens to foreign entrants in order to stimulate capital investment. D) Pizza Hut, whose store layouts and menus are uniform in all its locations around the world. E) Ben & Jerry's Ice Cream, which produces kimchi-flavored ice cream for sale in South Korea.

59) Sara is researching cross-country differences in demographic, cultural, and market conditions. She would not likely discover that A) Nike produces its own line of skate shoes. B) Keurig has acquired a large coffee farm in Costa Rica. C) Scotland provides low-cost loans to U.S. craft whisky distillers seeking entry to its markets in order to stimulate competitive rivalry. D) Intel's silicon chips are identical across the world. E) McDonald's offers 100 percent beef-free products in its outlets in India.

60) Companies operating in an international marketplace have to respond to all of the following, except

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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) the tensions between market pressures to localize a company's product offerings country by country and the competitive pressures to lower costs through greater product customization. E) whether to buy a struggling competitor at a bargain price or pay a premium to gain entry to the local market.

61) Imagine you are consulting Sonoma Brands, manufacturer and marketer of KRAVE artisanal beef jerky, about the company’s strategic options for expansion into Pacific Rim markets. What mode of entry would you most likely recommend to Sonoma Brands? A) Rely on the Pacific Rim governments to restrict imports via raising tariffs and local content requirements. B) Establish a profit sanctuary in the Pacific Rim. C) Maintain its U.S. production base and export products to Pacific Rim markets. D) Agree to a significant level of local content in the manufacture of products. E) Sell the company to a competitor located in the Pacific Rim.

62) Trader Joe’s strategic options for expansion into foreign markets would not typically involve A) pursuing a profit sanctuary strategy. B) relying on cooperative agreements with foreign companies. C) employing a franchising strategy using local ownership. D) establishing a subsidiary via acquisition or greenfield development. E) exporting goods to foreign markets from a national base.

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63)

Among the factors that do not determine whether to employ entry strategy options are

A) cross-border transfer activities and home country advantages. B) the nature of the firm's objectives and trade barriers. C) whether the firm has a full range of resources and capabilities needed to operate abroad along with trade barriers. D) country-specific factors such as trade barriers and transaction costs, such as the cost of contracting with a partner and monitoring compliance with the terms of the contract. E) transaction costs, such as the cost of contracting with a partner and monitoring compliance with the terms of the contract.

64) Using domestic plants as a production base for exporting goods to selected foreign country markets can be a(n) A) excellent initial strategy to test the international waters and learn if attractive market positions can be established in foreign markets. B) competitively successful strategy when a company is focusing on vacant market niches in each foreign country and does not have to compete head-to-head against strong host country competitors. C) powerful strategy since a company can maintain a one-country production base, allowing it to capitalize on company competencies and capabilities. D) weak strategy when competitors are pursuing multicountry strategies. E) powerful strategy because a company is not vulnerable to fluctuating exchange rates.

65) Maya has chosen to research the export strategies of several global products. She would consider a good example of a DOMINANT export strategy to be

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A) the popular Harry Potter character Voldemort, which can only be leased or rented for use by amusement park operators. B) ZipCar, which allows taxi fleet operators to use its trademarks, services, and products for a fee. C) the United States, which is home to the world's three largest producers and suppliers of artificial heart valves. D) American Airlines' common stock, which is owned by AMR Corp., but is not available for public purchase. E) Facebook, which generates 51 percent of its advertising revenue outside the United States.

66)

The advantages of using a licensing strategy to participate in foreign markets include

A) being especially well suited to achieve scale economies. B) being able to charge lower prices than rivals. C) being able to achieve first-mover advantages quickly and easily. D) being able to leverage the company's technical know-how, appealing brand, or patents without committing their resources or capabilities to foreign markets. E) being able to achieve higher product quality and better product performance than with an export strategy.

67) The advantages of using a franchising strategy to pursue opportunities in foreign markets include A) having franchisees bear most of the costs and risks of establishing foreign locations and requiring the franchisor to expend only the resources to recruit, train, and support and monitor franchisees. B) being particularly well suited to the global expansion efforts of companies with multidomestic strategies. C) allowing a company to achieve scale economies. D) being well suited to companies who employ cross-border transfer strategies. E) being well suited to the global expansion efforts of manufacturers.

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68)

The big problem a franchisor faces is

A) allowing franchisees to achieve scale economies. B) maintaining quality control due to a lack of commitment to consistency and standardization. C) eliminating the costs and risks associated with establishing a foreign business location. D) sharing foreign facilities and marketing strategies with local businesses. E) achieving higher product quality and better product performance than with an export strategy.

69) The advantages of using an acquisition strategy to pursue opportunities in foreign markets include A) having a high level of control and speed as an entry strategy to overcome trade barriers. B) allowing a company to achieve scalable economies. C) eliminating the costs and risks associated with establishing a foreign business location. D) achieving variable product quality and competitive product performance. E) exporting goods at higher costs than rivals in those locations.

70)

The big issue an acquisition-minded firm must consider is whether

A) to acquire the firm at a price that cannot recapture the investment. B) to require the acquired firm's resources and management capability to sustain the ongoing struggling operation. C) to pay a premium price for a successful local company or to buy a struggling firm at a discount price. D) to pay a price that builds in all the synergistic advantages to the acquired firm. E) to pay a very high premium price that sends a signal to the market that the new firm has arrived.

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71)

A greenfield venture in a foreign market is one

A) where the company creates a wholly owned subsidiary business by setting up all aspects of the operation upon entering the market from the ground up. B) where foreign facilities and marketing strategies are shared with local businesses. C) where the company learns through training by the foreign entity on how to compete. D) that supports exports into a foreign market by marketing indirectly through local rivals. E) that offers lower risk and a faster path to financial returns.

72) Acquisition of an existing firm rather than via internal development may be the least risky and cost-efficient means of overcoming entry barriers such as A) putting its own strategy into place. B) accelerating efforts to build a strong market presence. C) moving directly to the task of transferring resources and personnel, integrating and redirecting activities into its own operation. D) fast-tracking exports into a foreign market by marketing indirectly through local rivals. E) gaining access to local distribution networks, building supplier networks, and establishing working relationships with key government officials.

73) When justifying her considerations for her China-based wine importation company's foreign market entry, Ming-Chi probably would not choose

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A) entering a new foreign country via internal development and building a foreign subsidiary from scratch when having scale economies to compete against local rivals. B) entering a new foreign country via internal development and building a foreign subsidiary from scratch by having the ability to gain increased access to distribution channels and networks. C) entering a new foreign country via internal development and building a foreign subsidiary from scratch adding new production capacity, because it will adversely impact the supply-demand balance in the local market. D) entering a new foreign country via internal development and building a foreign subsidiary from scratch, because it is cheaper than making an acquisition. E) entering a new foreign country via internal development and building a foreign subsidiary from scratch, because it is cheaper than entering into strategic alliances and cooperative agreements.

74) Greenfield ventures, like all market entry strategies, can pose serious problems to achieving foreign market entry success. What is not deemed a barrier to success? A) Such ventures can require costly capital investments. B) Such ventures can have a tendency to divert valuable resources from current business. C) Such ventures really need well-functioning strong markets. D) Such ventures are the fastest entry route to achieve a sizeable market share. E) Such ventures require legal protections of foreign investors.

75) Sandi is considering conditions that make an internal start-up strategy appealing over an acquisition and has determined that she would ONLY choose an internal start-up strategy when an internal start-up A) is more costly. B) affects the supply-demand balance by increasing production capacity. C) is unable to gain distribution access advantages. D) has the necessary scale and resource strengths to compete with rivals. E) lacks the experience in establishing new subsidiaries.

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76) A major disadvantage of strategic alliances, joint ventures, and cooperative agreements between domestic and foreign firms is A) to compete on a more global scale while still preserving their independence. B) to gain better access to scale economies in production and/or marketing. C) to fill competitively important gaps in their technical expertise and/or knowledge of local markets. D) to share distribution facilities and dealer networks, thus mutually strengthening their access to buyers. E) to create permanent arrangements between the domestic and foreign firms.

77)

A cross-border alliance was not created when

A) Walgreens merged with Alliance Boots in 2014. B) Hyundai Motor Company planned to open a new manufacturing plant in the Czech Republic. C) The insurance company Geico became a wholly owned subsidiary of Berkshire Hathaway. D) Renault-Nissan disclosed that it had sold more than one in ten cars worldwide. E) Carrefour, a French grocery chain, established a new wholly owned venture in Poland.

78)

A cross-border alliance was not created when

A) Deutsch, a New York–based wine importer, and Casella, an Australian wine producer, created and marketed the Yellowtail wine brand. B) Walmart and Rakuten Kobo Inc. partnered to enable Walmart to begin selling eBooks and audiobooks in the United States, and also establish a grocery delivery service in Japan. C) The British insurance company Geico became a wholly owned subsidiary of Berkshire Hathaway. D) Yum! Brands offered KFC franchises in China. E) Lidl, a German deep-discount supermarket chain, established a new wholly owned venture with a supermarket chain in Poland.

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79)

An unlikely risk of cross-border alliances between domestic and foreign firms is A) overcoming language and cultural barriers. B) launching new initiatives to stay abreast of shifting market conditions. C) developing mutually agreeable ways of dealing with key issues or differences. D) disengaging from the alliance once its purpose has been served. E) becoming overly dependent on foreign partners for essential expertise.

80)

The risks of strategic alliances often include all of the following except A) conflicting objectives and strategies. B) deep differences of opinion about how to proceed operationally and strategically. C) important differences in corporate values. D) misunderstandings about appropriate ethical standards. E) potential for royalty from trustworthy firms.

81) What is the foremost strategic issue that must be addressed by firms when operating in two or more foreign markets? A) deciding on the degree to vary its competitive approach to fit the specific market conditions and buyer preferences in each host country B) deciding on the appropriate level of sustainable profitability C) deciding on the relative cost competitiveness of the home country D) deciding on the degree of globalization to maintain expansion capabilities E) deciding on the resources and capabilities of allies

82) Electronic Arts, like most companies that operate internationally, endeavors to employ as global a strategy as customer needs and market conditions permit via a

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A) profit sanctuary strategy in which a company derives substantial profits because of a strong or protected market position. B) pace of foreign country development strategy that enables it to overcome more than one factor on Michael E. Porter’s Diamond of National Competitive Advantage. C) country-mapping strategy that is its strategy architecture for competing in two or more countries simultaneously. D) glocalization strategy that incorporates elements of both a globalized and a localized approach to strategy making. E) global strategy better able to focus its full resources on securing a sustainable low-cost or differentiation-based competitive advantage over both domestic rivals and global rivals.

83) When a company operates in the markets of two or more different countries, its foremost strategic decision is A) whether to test the waters with an export strategy before committing to some other competitive approach. 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) which foreign companies to team up with via strategic alliances or joint ventures. E) whether to use strategic alliances to help defeat its rivals.

84)

A localized or multidomestic strategy

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A) is generally inferior to a global strategy when it comes to pursuing product differentiation. B) has two big drawbacks: (1) it hinders transfer of a company's competencies and resources across country boundaries because the strategies in different host countries can be grounded in varying competencies and capabilities; and (2) it does not promote building a single, unified competitive advantage, especially one based on low cost. C) is generally preferable to a global strategy in situations where buyers are price sensitive because a "think-local, act-local" type of multidomestic strategy is better suited to achieving low unit costs than a global strategy. D) is generally best suited for globally standardized industries, in which small countryby-country differences can be accommodated. E) involves much less adherence to using the same basic competitive strategy theme (low-cost, differentiation, best-cost, or focused) in all country markets.

85) Which statement is not a reason BP implemented a multidomestic competitive strategy to market its Castrol oil lubricants around the world? A) Buyers in different countries are attracted to different product attributes. B) The benefits from global integration and standardization are high. C) Industry conditions and competitive forces in each national market differ in important respects. D) The mix of competitors in each country market varies from country to country. E) Winning in one country market does not necessarily signal the ability to fare well in other countries.

86) Véronique is the CEO of a wind power energy company. Identify which company model she would emulate to craft a multidomestic strategy.

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A) Intel strongly encourages its trading partners to use the UN/EDIFACT ISO standard ISO 9735 for syntax and data exchange. B) Castrol produces over 3,000 different formulas of oil lubricants to meet the requirements of different climates, vehicle types and uses, and equipment applications that characterize different country markets. C) Tiffany & Co., an American luxury jewelry and specialty retailer, controls its general market approach from its headquarters in New York. D) Ford Motors establishes its own ride-sharing business in Mumbai, India. E) Vueling, a low-cost carrier based in Spain, adapts its price to competitive pressures from Norwegian Air, RyanAir, and EasyJet.

87)

When is it appropriate to use a think-local, act-local approach strategy?

A) when the need for local responsiveness is minimal and when potential efficiency gains from standardization is unrestricted by cross-country opportunities B) when the local manager is intellectually savvy C) when the local market provides strong opportunity for growth and profitability D) when the need for local responsiveness is high due to significant cross-country differences in demographic, cultural, and market conditions and where benefits from standardization is limited E) when the need for centralized decision making is relevant due to various macroeconomic and market conditions

88) Choose the statement that is not a reason a global strategy contrasts sharply with a multidomestic strategy.

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A) In global competition, rivals vie for worldwide market leadership. B) In globally competitive industries, the power and strength of a company's strategy and resource capabilities in one country significantly enhance its competitiveness in other country markets. C) In global competition, a firm's overall competitive advantage (or disadvantage) grows out of its entire worldwide operations. D) In global competition, there's more cross-country variation in industry conditions and competitive forces than there is in industries where multidomestic competition prevails. E) In global competition, many of the same rival companies compete against each other in many different countries, but especially so in countries where sales volumes are large and where having a competitive presence is strategically important to building a strong global position in the industry.

89) Despite their obvious benefits, think-local, act-local strategies have all of the following drawbacks except A) in global competition, rivals vie for worldwide market leadership and the leading competitors compete head-to-head in the markets of many different countries. B) in globally competitive industries, a company's competitive position in one country both affects and is affected by its position in other countries. C) in multidomestic competition, there is greater cross-country variation in market conditions and the nature of the competitive contest among rivals than tends to be the case in globally competitive markets. D) with multidomestic competition, the competitive contest is localized, with rivals battling for national market leadership; moreover, winning in one country market does not necessarily signal that a company has the ability to fare well in the markets of other countries. E) in global competition, the size of a firm's worldwide competitive advantage (or disadvantage) equals the sum of the competitive advantages (or disadvantages) it has in each country market where it competes.

90)

The most unlikely element of a localized multidomestic strategy is

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A) granting country managers fairly wide strategy-making latitude. B) scattering plants across many host countries, each producing product versions for local area markets. C) adapting marketing and distribution to the buying habits, customs, and culture of each host country. D) considering the preference for local suppliers (use of some local suppliers may be mandated by host governments). E) selling directly to buyers (perhaps via the company's website) to avoid having to establish networks of wholesale/retail dealers in each country market.

91)

A "think-local, act-local" multidomestic type of strategy

A) is very risky, given fluctuating exchange rates and the propensity of foreign governments to impose tariffs on imported goods. B) is usually defeated by a "think-global, act-global" type of strategy. C) is more appealing when the country-to-country differences in buyer tastes, cultural traditions, and market conditions are diverse. D) is generally an inferior strategy when one or more foreign competitors are pursuing a global low-cost strategy. E) can defeat a global strategy if the "think-local, act-local" multicountry strategist concentrates its efforts exclusively in those foreign markets that have superior resources.

92)

The strength of a "think-local, act-local" multidomestic strategy is that it

A) matches a company's competitive approach to prevailing market and competitive conditions in each country market, country by country. B) employs strategies that are almost totally different from and also unrelated to its strategies in other countries. C) operates independent plants, located in different countries, thus promoting greater achievement of scale economies. D) avoids host country ownership requirements and import quotas. E) eliminates the costs and burdens of trying to coordinate the strategic moves undertaken in one country with the moves undertaken in the other countries.

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93) A "think-local, act-local" multidomestic strategy works particularly well in all of the following situations, except when there are A) regulations enacted by the host governments requiring that products sold locally meet strictly defined manufacturing specifications or performance standards. B) significant country-to-country differences in customer preferences and buying habits. C) diverse and complicated trade restrictions of host governments preclude the use of a uniform strategy from country-to-country. D) significant country-to-country differences in distribution channels and marketing methods. E) large demands to pursue conflicting objectives simultaneously.

94)

A "think-local, act-local" multidomestic strategy entails

A) offering a narrow product line aimed at serving buyers in the same segments of country markets worldwide. B) giving local managers considerable strategy-making latitude and often producing different product versions for different countries. C) adopting aggressive efforts to locate facilities in those country markets that have superior resources. D) pursuing strong product differentiation and competing in many buyer segments. E) extensive efforts to transfer a company's competencies and resource strengths from one country to another so as to keep entry costs into new country markets low.

95)

Employing a "think-local, act-local" multidomestic strategy is highly questionable when

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A) a company desires to transfer competencies and resources across country boundaries and is striving to build a single, uniform competitive advantage worldwide. B) there are significant country-to-country differences in customer preferences and buying habits and the industry is characterized by big economies of scale and strong experience curve effects. C) the trade restrictions of host governments are diverse and complicated. D) there are significant country-to-country differences in distribution channels and marketing methods. E) host governments enact regulations requiring that products sold locally meet strictly defined manufacturing specifications or performance standards.

96)

What is a primary drawback of a localized multidomestic strategy?

A) It hinders the use of cross-border coordination of a company's activities and increases a company's vulnerability to adverse shifts in currency exchange rates. B) It makes it very difficult to take into account significant country-to-country differences in distribution channels and marketing methods. C) It makes it difficult and costly to be responsive to country-to-country differences in customer needs, buying habits, cultural traditions, and market conditions. D) It hinders the transfer of a company's competencies and resources across country boundaries and hinders the pursuit of a single, uniform competitive advantage in all country markets where a company operates. E) It is unsuitable for competing in the markets of emerging countries and posing added difficulty in modifying a company's business model to compete on the basis of low price.

97)

A global strategy allows for

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A) the leading companies to compete for the biggest share of the world market, but only occasionally compete head-to-head in different countries. B) the markets in various countries to be part of the world market and competitive conditions across country markets to be strongly linked. C) a company's overall market strength to be the sum of its market shares in each country market where it has a presence. D) the industry leaders to be foreign companies, while domestic companies are relegated to runner-up status. E) a firm's overall competitive advantage to be determined by the size of the competitive advantage it has in each of its profit sanctuaries.

98)

A global strategy is one in which a company performs all of the following tasks, except it

A) employs the same basic competitive approach in all countries where it operates. B) sells much of the same products everywhere. C) strives to build global brands. D) coordinates its actions worldwide with strong headquarters control that represents a think-global, act-global approach. E) uses local brand names to cater to a country's specific needs.

99)

A think-global, act-global strategic theme puts emphasis on

A) executing a global domination strategy that focuses the company's resource strengths on entry strategies across all country boundaries. B) ensuring that value chain activities are defined by country-specific attributes to capitalize on economies of scale. C) building a global brand name and aggressively pursuing opportunities to transfer ideas, products, and capabilities from one country to another. D) elevating resources and capabilities developed on a country-by-country basis so as to capitalize on a country's uniqueness. E) implementing mass-customization techniques that can address local preferences efficiently.

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100)

What is the best way to achieve the efficiency potential of a global strategy?

A) Managerial attention should be focused on objective-setting, specifically oriented toward production practices. B) Resources and best practices should be shared, value chain activities should be integrated, and capabilities should be transferred from one location to another as they are developed. C) The best identified resources and capabilities should be centralized at headquarters. D) Value chain activities must be dispersed across many countries to elevate cost control management as a primary focus in all countries. E) Local managers should be given considerable latitude for executing strategies for the country markets they are responsible for.

101)

Four Seasons Hotels uses which strategy to compete globally? A) A "think-local, act-local approach." B) A "think-global, act-local approach." C) A "think-global, act-global approach." D) A "think-local, act-global approach." E) An "emerging market, profit sanctuary approach."

102) When comparing and contrasting the differences between a localized multidomestic strategy and a global strategy you would not say that

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A) a global strategy entails extensive strategy coordination across countries and a multidomestic strategy entails little or no strategy coordination across countries. B) a global strategy often entails use of the best suppliers from anywhere in the world, whereas a multidomestic strategy may entail fairly extensive use of local suppliers (especially where use of local sources is required by host governments). C) a global strategy tends to involve use of similar distribution and marketing approaches worldwide, whereas a multidomestic strategy often entails adapting distribution and marketing to local customs and the culture of each country. D) a global strategy involves striving to be the global low-cost provider by economically producing and marketing a mostly standardized product worldwide, whereas a multidomestic strategy entails pursuing broad differentiation and striving to strongly differentiate its products in one country from the products it sells in other countries. E) a global strategy relies upon the same technologies, competencies, and capabilities worldwide, whereas a multidomestic strategy often entails the use of somewhat different technologies, competencies, and capabilities as may be needed to accommodate local buyer tastes, cultural traditions, and market conditions.

103)

The marker of a true transnational strategy is

A) a big majority of the company's rivals are pursuing localized multidomestic strategies. B) striking the right balance between thinking globally and acting locally, even though it is more costly and complex to implement. C) host governments enact regulations requiring that products sold locally meet strict manufacturing specifications or performance standards. D) plants need to be scattered across many countries to avoid high shipping costs. E) market growth rates vary considerably from country to country.

104) The approach of a firm using a "think-global, act-local" version of a transnational strategy entails

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A) producing and marketing a variety of product versions under the same brand name, with each different version being designed specifically to accommodate the needs and preferences of buyers in a particular country. B) having little or no strategy coordination across countries. C) pursuing the same basic competitive strategy theme (low cost, differentiation, best cost, focused) in all countries where the firm does business but giving local managers some latitude to adjust product attributes to better satisfy local buyers and to adjust production, distribution, and marketing to be responsive to local market conditions. D) selling the company's products under a wide variety of brand names (often one brand for each country or group of neighboring countries) so buyers in each country market will think they are buying a locally made brand. E) selling numerous product versions (each customized to buyer tastes in one or more countries and sometimes branded for each country), but opting to only sell direct to buyers at the company's website so as to bypass the costs of establishing networks of wholesale/retail dealers in each country market.

105) The essential difference between a "think-global, act-global" and a "think-global, actlocal" approach to strategy-making is that A) a "think-global, act-global" approach entails extensive strategy coordination across countries and a "think-global, act-local" approach entails little or no strategy coordination across countries. B) the former aims at implementing the same business model worldwide, whereas the latter aims at implementing customized business models to better match local market circumstances. C) the "think-global, act-global" approach gives local managers more latitude to make minor strategy variations where necessary to better satisfy local buyers and to better match local market conditions. D) a "think-global, act-global" approach involves selling a mostly standardized product worldwide, whereas a "think-global, act-global" approach entails selling products that are highly differentiated from country to country. E) a "think-global, act-global" approach involves selling under a single brand name worldwide, whereas a "think-global, act-local" approach entails utilizing multiple brands (typically one for each different country or group of neighboring countries).

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106)

A primary drawback of a global strategy is that it

A) allows firms to address local needs as precisely as locally based rivals can. B) permits firms to be more responsive to changes in local market conditions, either in the form of new opportunities or competitive threats. C) provides for lower transportation costs and also may involve higher tariffs. D) involves higher coordination costs due to more complex tasks of managing a globally integrated enterprise. E) raises production costs due to the greater variety of designs and components.

107)

A transnational strategy is sometimes referred to as a

strategy.

A) cross-border integrated B) synergistic global C) think-global, act-global D) think-local, act-local E) glocalization

108)

Companies often implement a transnational strategy because it

A) combines flexible coordination with the pursuit of conflicting objectives simultaneously. B) provides an easy mode of operating to transfer and share resources and capabilities across borders. C) is conducive to mass customization techniques that enable companies to address local preferences in an efficient semi-standard manner. D) is the least complex and easiest to implement of all the strategy choices. E) is capable of achieving an efficiency potential through centralized decision making and strong headquarters control.

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109) The transnational approach of a firm using a "think-global, act-local" version of a global strategy entails A) selling numerous product versions (each customized to buyer tastes in one or more countries and sometimes branded for each country) but opting to only sell direct to buyers at the company's website so as to bypass the costs of establishing networks of wholesale/retail dealers in each country market. B) pursuing the same basic competitive strategy theme (low-cost, differentiation, bestcost, focused) in all countries where the firm does business but giving local managers some latitude to adjust product attributes to better satisfy local buyers and to adjust production, distribution, and marketing to be responsive to local market conditions. C) selling the company's products under a wide variety of brand names (often one brand for each country or group of neighboring countries) so that buyers in each country market will think they are buying a locally made brand. D) producing and marketing a variety of product versions under the same brand name, with each different version being designed specifically to accommodate the needs and preferences of buyers in a particular country. E) little or no strategy coordination across countries.

110) What strategy is considered more conducive to transferring and leveraging subsidiary skills and capabilities across borders? A) a transnational strategy B) an international strategy C) a think-local, act-global strategy D) a cross-border integrated strategy E) a standardized integrated strategy

111) Companies that compete internationally can pursue competitive advantage in world markets (or offset domestic disadvantages) by

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A) using a differentiation-based competitive strategy in those country markets with superior resources. B) choosing not to compete in countries with high tariffs and high taxes (which then have to be passed along to buyers in the form of higher prices), thus keeping costs and prices lower than rivals. C) using an export strategy to circumvent the risks of adverse exchange rate fluctuations. D) locating value chain activities in whatever nations prove most advantageous in a manner that uses location to lower costs or achieve greater product differentiation, allow for the transfer of competitively valuable competencies and capabilities from one country to another, and allow for cross-border coordination. E) employing a multidomestic strategy instead of a global strategy.

112) Adidas located its first robotic “speedfactory” in Germany to accomplish which objective? A) to build a state-of-the-art facility in order to fully capture scale economies via an export strategy B) to use export, licensing, or franchising strategies so as to minimize risk and capital investment C) to locate buyer-related activities in all countries where it sells its product D) in order to benefit from Germany’s superior technological resources and allow greater oversight from company headquarters, also located in Germany E) to disperse its primary activities among various countries in a manner that lowered costs or helped to achieve greater product differentiation in foreign markets

113) To use location to build competitive advantage, a company that operates transnationally or globally must

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A) employ either an export strategy or a franchising strategy. B) scatter its production plants across many countries in different parts of the world so as to minimize transportation costs. C) consider whether to concentrate each activity it performs in a few select countries or disperse performance of the activity to many nations and consider in which countries to locate particular activities. D) locate production plants in those countries having suppliers that can supply all the necessary raw materials and components so as to avoid inbound shipping costs. E) concentrate all of its value chain activities in the one country that has the best combination of low wage rates, low shipping costs, and low tax rates on profits.

114) In competing in foreign markets, companies find it advantageous to concentrate their activities in a limited number of locations in all of these situations, except when A) there are significant scale economies in performing an activity. B) the costs of manufacturing or other activities are significantly lower in some geographic locations than in others. C) when there is a steep learning or experience curve associated with performing an activity in a single location (thus making it economical to serve the whole world market from just one or maybe a few locations). D) certain locations have superior resources, allow better coordination of related activities, or offer other valuable advantages. E) the addition of new production capacity will not adversely impact the supply-demand balance in the local market.

115) When concentrating production in a few locations, which of the following can allow a manufacturer to lower unit costs, boost quality, or master a new technology more quickly? A) significant scale economies B) learning-curve effects C) superior resources D) profit sanctuaries E) supporting industries

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116) Dispersing the performance of value chain activities to many different countries rather than concentrating them in a few country locations tends to be advantageous in all of the following situations, except A) when high transportation costs make it expensive to operate from central locations. B) whenever buyer-related activities are best performed in locations close to buyers. C) if diseconomies of large size exist, thereby making it more economical to perform an activity on a smaller scale in several different locations. D) when it is desirable to hedge against (1) the risks of fluctuating exchange rates, (2) supply interruptions, or (3) adverse political developments. E) if resources retain their foreign contexts so there is competitive advantage over a broader domain.

117) The competitive advantage opportunities that a global competitor can gain by dispersing performance of its activities across many nations include all of the following, except A) being able to shift production from one country to another to take advantage of exchange rate fluctuations, differing wage rates, differing energy costs, or differing trade restrictions. B) being in a better position to choose where and how to challenge rivals. C) shortening delivery times to customers by having geographically scattered distribution facilities. D) locating buyer-related activities (such as sales, advertising, after-sale service and technical assistance) close to buyers. E) centralizing value chain activities to foster just-in-time inventory activities.

118) Dispersing particular value chain activities across many countries rather than concentrating them in a select few countries can be more advantageous, except when

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A) buyer-related activities (such as sales, advertising, after-sale service, and technical assistance) need to take place close to buyers. B) buyers' demand for short delivery times and/or high transportation costs make it uneconomical to operate from one or just a few locations. C) it helps hedge against the risks of exchange rate fluctuations, supply disruptions, and adverse political developments. D) there are diseconomies of scale in trying to operate from a single location. E) there are reasons to decouple buyer-related activities in favor of locational advantages.

119) Transferring core competencies and resource strengths from one country market to another is A) a good way for companies to develop broader or deeper competencies and competitive capabilities that can become a strong basis for sustainable competitive advantage. B) best accomplished with a multidomestic strategy as opposed to a global strategy. C) feasible only with a global strategy; it can't be done with a multidomestic strategy. D) unlikely to result in a competitive advantage. E) nearly always the easiest and most surefire way to build competitive advantage in trying to compete successfully in foreign markets.

120)

Dispersing activities to many locations is competitively advantageous when

A) high transportation costs, diseconomies of large size, and trade barriers make it too expensive to operate from a central location. B) a multidomestic strategy is better than a global strategy. C) technical after-sale services are unimportant to buyers. D) achieving economies of scale and scope in materials procurement, parts manufacture, finished-goods assembly, technology research, and new product development can frequently be decoupled from buyer locations and performed wherever advantage lies. E) host governments offer less restrictive trade barriers and regulatory requirements to companies that conform to local business practices.

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121) Companies that compete on an international basis have a competitive advantage over their purely domestic rivals A) to achieve a larger domestic interest by developing sufficient resource strengths and competitive capabilities for success. B) to benefit from coordinating activities across different countries' domains. C) solely for the benefit of their shareholders. D) that guarantees the generation of big profits, big returns on investment, and big cash surpluses after dividends are paid. E) to give full access to the proprietary technological expertise or other competitively valuable capabilities.

122) Sharing and transferring resources and capabilities across borders may also contribute to the development of broader or deeper competencies and capabilities, thereby helping a company achieve A) control over its resource capabilities. B) a dominating depth in some competitively valuable area. C) an intensity of resource diversification. D) precision and compliance in resource agility and responsiveness. E) direct investments in foreign countries.

123)

Profit sanctuaries are country markets or geographic regions where a company

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

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124)

Profit sanctuaries are found to differ by a company's strategy, such that a(n)

A) domestic-only company has access to many profit sanctuary locations worldwide. B) international competitor usually has a profit sanctuary in its home market and may have other sanctuaries in countries where it has a strong position and market share. C) globally competitive company generally has a profit sanctuary outside its home market in countries where it is a market leader and enjoys a strong competitive position. D) transnational company has profit sanctuaries in every country where it operates. E) company competing in a few country markets has more profit sanctuaries.

125) What supports competitive offensives in one market with resources and profits diverted from operations in another market? A) cross-market subsidization B) a foreign market strategy C) a domestic-only company D) a home market offensive E) a multidomestic company

126)

What does the World Trade Organization (WTO) not do primarily? A) promotes fair trade practices B) actively polices dumping C) deals with the rules of trade between nations D) helps producers, exporters, and importers conduct business E) sets countries' tariff rates

127) is when a company sells its goods in foreign markets at prices that are below the prices at which it normally sells in its home market or well below its full costs per unit.

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A) Dumping practices B) Price-clearing system C) Clearance sale D) Discounting practices E) Competitive advantage

128) What can happen when international rivals compete against one another in multiplecountry markets? A) It could create attractive industries that would have otherwise badly deteriorated. B) It could produce a business lineup consisting of too many slow-growth, declining, low-margin, or competitively weak businesses. C) It could create a greater diversity in the types of value chain activities between each business. D) It could initiate a deterrence effect that encourages mutual restraint in taking aggressive action against one another due to the fear of a retaliatory response that might escalate the battle into a cross-border competitive war. E) It could increase shareholder interests by concentrating corporate resources on foreign business activities to contend for market leadership.

129) Companies aspiring for global market leadership have to prioritize competing in the markets A) of emerging countries. B) of advanced industrialized nations. C) where they do not possess a strong competitive disadvantage compared with the domestic market leaders. D) where business risks are lowest. E) where high barriers to entry and government regulations protect incumbent firms.

130) Tailoring a strategy to fit the circumstances of emerging country markets does not typically involve Version 1

A) competing on the basis of low price. B) modifying aspects of the company's business model to accommodate local circumstances (but not so much that the company loses the advantage of global scale and global branding). C) transforming the local market to better match the way the company does business elsewhere. D) developing a strategy for the short-term and forget about a long-term strategy because conditions in emerging country markets change so rapidly. E) avoiding those emerging markets where it is impractical or uneconomic to modify the company's business model to accommodate local circumstances.

131) When tailoring their strategy to fit circumstances of emerging country markets, viable strategic options companies should consider include all of the following, except A) trying to change the local market to better match the way the company does business elsewhere. B) being prepared to modify aspects of the company's business model to accommodate local circumstances. C) preparing to compete on the basis of low price. D) staying away from those emerging markets where it is impractical to modify the company's business model to accommodate local circumstances. E) focusing on local markets whose circumstances will be most challenging to the company's business model.

132) Modification of a company's business model to accommodate the unique local circumstances of developing countries is best exemplified by

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A) Mahindra and Mahindra's number one ranking in J. D. Power Asia Pacific's annual new-vehicle overall quality category. B) Home Depot relying on its value propositions only in some developing countries. C) Unilever developing a low-cost detergent, named Wheel, for the Indian market. D) Japan's reputation for competitive strength in consumer electronics. E) Dell entering China by deviating from its traditional Internet-based orders to orders over phone and fax.

133) The basic strategy options for local companies in competing against global challengers include A) best-cost provider and focused low-cost provider and low-cost leadership strategies. B) export strategies, licensing strategies, and cross-border transfer strategies. C) utilizing 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.

134) Televisa, a Mexican media company, became the world's most prolific producer of Spanish-language soap operas owing to its expertise in Spanish culture and linguistics. Which of the following strategies did Televisa employ to defend against global giants?

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A) The company developed business models that exploit shortcomings in local distribution networks or infrastructure. B) It utilized keen understanding of local customer needs and preferences to create customized products or services. C) Televisa took advantage of aspects of the local workforce with which large international companies may be unfamiliar. D) The company transferred company expertise to cross-border markets and initiated actions to contend on an international level. E) It used acquisition and rapid-growth strategies to better defend against expansionminded internationals.

135) A viable strategy option for a local company when entering into competition with global challengers does not involve 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 shortcomings in local distribution networks or infrastructures. C) taking advantage of low-cost labor and other competitively important local workforce 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.

136) Tailoring a company's strategy to fit the sometimes unusual or challenging circumstances presented in developing-country markets is not exemplified by

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A) Suzuki’s entry into India that triggered a quality revolution among Indian auto parts and automobile manufacturers, including Mahindra and Mahindra. B) Home Depot’s withdrawal from China. C) Unilever’s development of a Wheel, a low-cost detergent in a single-use package, for sale in India. D) Kellogg’s introduction of single-serving premixed yogurt-and-cereal breakfast packs in Vietnam. E) McDonald’s vegetable burgers in parts of Asia and price adjustments in countries with low levels of disposable income.

137) Tiffany and Zulema have asked you for advice about strategic partners in Canada and Mexico to launch a new food truck locator app. You explain to them that the major pitfalls associated with pursuing strategic alliances with foreign partners are not likely to include A) learning that a local partner's knowledge and expertise turns out to be less valuable than expected with respect to development and execution of mobile app-based businesses. B) overcoming language and cultural barriers and figuring out how to deal with diverse (or conflicting) operating practices. C) reaching mutually agreeable ways to deal with key issues or launching new initiatives fast enough to stay abreast of rapid advances in technology or shifting market conditions. D) discovering that a local partner has conflicting objectives and strategies, deep differences of opinion about how to proceed, or important differences in corporate values and ethical standards. E) offer a way to test the value and viability of a cooperative arrangement with a foreign partner before making a more permanent commitment.

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Answer Key Test name: Chap 07_23e 26) D 27) A 28) E 29) D 30) D 31) A 32) D 33) C 34) D 35) E 36) D 37) C 38) D 39) D 40) D 41) D 42) E 43) E 44) B 45) C 46) D 47) A 48) D 49) C 50) B 51) C Version 1

52) B 53) D 54) B 55) D 56) A 57) A 58) D 59) C 60) E 61) C 62) A 63) A 64) A 65) C 66) D 67) A 68) B 69) A 70) C 71) A 72) E 73) E 74) D 75) D 76) E 77) D 78) D 79) D 80) E 81) A Version 1

82) D 83) B 84) B 85) B 86) B 87) D 88) D 89) E 90) E 91) C 92) A 93) E 94) B 95) A 96) D 97) B 98) E 99) C 100) B 101) B 102) D 103) B 104) C 105) C 106) D 107) E 108) C 109) B 110) A 111) D Version 1

112) D 113) C 114) E 115) B 116) E 117) E 118) E 119) A 120) A 121) B 122) B 123) C 124) B 125) A 126) E 127) A 128) D 129) A 130) D 131) E 132) E 133) C 134) D 135) A 136) D 137) E

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Chapter 8 Corporate Strategy 1) Briefly discuss when it makes good strategic sense for a company to consider diversification.

2) Identify and briefly discuss each of the three tests for determining whether diversification into a new business is likely to build shareholder value.

3) Provide (1) an example showing how a strategy of related diversification benefited both companies and (2) an example showing how a strategy of related diversification did not benefit both companies. On balance, is related diversification a wise move for a corporation?

4) Explain the relevance of the following as they relate to building shareholder value via diversification. ● the industry attractiveness test ● the cost-of-entry test ● the better-off test

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5) Identify and briefly discuss each of the three options for entering new businesses. What are the driving choice parameters for entry into new businesses and which one is the most popular in the sense of being used most frequently?

6) What type of enterprise is a diversified business with one major "core" business and a collection of small related or unrelated businesses? Provide at least two examples.

7) Which is the better approach to diversification—a strategy of related diversification or a strategy of unrelated diversification? Explain and support your answer.

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8) What is meant by the term "strategic fit"? What are the advantages of pursuing strategic fit and matchups in choosing which industries to diversify into?

Discuss the pros and cons of a strategy of unrelated diversification.

10) Imagine that you have been hired by Bill Newlands, president and COO of Constellation Brands (CB), to review the beverage company's diversified portfolio of businesses. Based in Victor, New York, CB has about 40 facilities and approximately 9,000 employees. The company has more than 100 brands in its portfolio. Wine brands include Robert Mondavi, Wild Horse Winery, Clos du Bois, Franciscan Estates, Kim Crawford, Meiomi, Mark West, Ruffino, and The Prisoner. CB's beer portfolio includes imported brands such as Corona, Modelo Especial, Negra Modelo, Pacífico, as well as Ballast Point and Funky Buddha. Spirits brands include Black Velvet Canadian Whisky, Svedka Vodka, Casa Noble Tequila, and High West Whiskey. Your task is to quantitatively measure the competitive strength of each business in CB's portfolio and determine which business units are strongest and weakest. List the six steps involved in the process.

11) What is the industry attractiveness test? How is it used to evaluate a diversified company's business lineup? Why is it relevant?

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12) What is the relevance of quantitatively measuring the competitive strength of each business in a diversified company's business portfolio and determining which business units are strongest and weakest?

13) What are the advantages and benefits of using an industry attractive-business strength matrix to evaluate a diversified company's lineup of businesses?

14) What is meant by the term "resource fit" as it applies to evaluating a diversified company's business lineup?

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15) Explain and provide examples comparing and contrasting cash cow businesses and cash hog businesses.

16) Why is it pertinent in evaluating a diversified company's business lineup to rank a diversified company's businesses on the basis of their future performance prospects?

17) What factors should management consider when ranking business units and setting a priority for resource allocation?

18) What are the four main strategic paths that a diversified company can employ to improve the performance of its overall business lineup?

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19) What might induce an already diversified company to enter additional businesses and broaden its diversification base?

20) An additional, and often very important motivating factor for adding new businesses is to complement and strengthen the market position and competitive capabilities of one or more of its present businesses. Explain and provide three examples.

21) Under what circumstances might a diversified firm choose to divest one or more of its businesses?

22) Why has corporate restructuring become a popular strategy at many diversified companies over the past decade?

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23) Explain the rationale for and provide some examples of how corporate restructuring became a popular strategy at many diversified companies, especially those that had diversified broadly into many different industries and lines of business.

24) Identify and explain the meaning and strategic significance of each of the following terms. a) Related diversification b) Strategic fit c) Economies of scope d) Retrenching e) Unrelated diversification

25) Explain the benefits and drawbacks of and provide examples of how u nrelated diversification strategies can meet the potential that can be realized from superior corporate parenting or the sharing and transfer of general resources and capabilities.

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26) in July 2020, Chevron bid $5 billion for the oil and gas exploration company Noble Energy, Inc. This acquisition was required to pass which three Tests of Corporate Advantage? A) the resource fit test, the profitability test, and the value chain cross-fit test B) the better-off (synergy) test, the competitive advantage test, and the cost-of-entry test C) the capability test, the industry attractiveness test, and the strategic fit test D) the industry attractiveness test, the cost-of-entry test, and the better-off (synergy) test E) the shareholder value test, the cost-of-entry test, and the competitive advantage test

27) Uber, a mobile ride-sharing on-demand service, offered to purchase Postmates, a mobile food delivery service, for about $2.6 billion in June 2020. What major factor caused Uber to determine whether or not its diversification strategy was timely and likely to be successful? A) Uber considered that growth opportunities were limited in ride-sharing at a time when buyer demand was flat or declining while on-demand food delivery market was experiencing rapid growth and consolidation. B) Uber’s entry into the on-demand food delivery market would result in increased performance of its existing ride-share business. C) Uber’s entry into the on-demand food delivery market would raise switching costs for customers. D) Uber had plentiful opportunities for profitable growth in its present industry. E) Uber’s diversification would result in stronger and more defensible distinctive competencies.

28) Anna and Martha own and manage A&M, a limited liability corporation (LLC) that provides a wide array of services: mailing, notary services, packaging and pickup for UPS and FedEx, as well as faxing and document scanning. Anna and Martha have asked you, as their consultant, to consider whether or not they might want to diversify into financial planning due to the increasing number of retirees moving into their community. How would you advise Anna and Martha to proceed?

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A) A&M needs to develop a corporate-wide strategy. B) A&M needs to develop a multiline strategy. C) A&M needs to consider diversification opportunities into financial planning if the company has encountered diminishing market opportunities and stagnating sales in its principal business. D) A&M needs to remain on course, but only if this single-business company can achieve profitable growth opportunities in its present industry. E) A&M needs to remain on course, but only if it can generate enhanced market opportunities and increasing sales in its principal business.

29)

Diversifying into new businesses can be considered a success 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.

30)

It becomes particularly urgent for a company to consider diversification when there are

A) opportunities to leverage existing competencies and capabilities by expanding into businesses where these same resources are key success factors and valuable competitive assets. B) diminishing market opportunities and stagnating sales in its principal business. C) opportunities to lower costs by entering closely related businesses. D) opportunities to transfer a powerful and well-respected brand name to the products of other businesses and thereby increase the sales and profits of these newly entered businesses. E) needs to avoid putting all of its "eggs" in one industry basket.

31)

To create value for shareholders via diversification, a company must

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A) get into new businesses that are profitable. B) diversify into industries that are growing rapidly. C) spread its business risk across various industries by only acquiring firms that are strong competitors in their respective industries. D) diversify into businesses that can perform better under a single corporate umbrella than they could perform operating as independent, stand-alone businesses. E) diversify into businesses that have either key success factors or value chains that are similar to its present businesses.

32) How would you explain the difference between a one-business company and a diversified company? A) The first uses a business-level strategy, while the second uses a set of business strategies and a corporate strategy. B) The first uses a business-level strategy, while the second uses a corporatewide strategy. C) The first uses an operating strategy, while the second uses a business-line strategy. D) The first uses a functional strategy, while the second uses a business-line strategy. E) The first uses a single-line strategy, while the second uses a multiline strategy.

33) The task of crafting a company's overall corporate strategy for a diversified company encompasses all of the following except A) picking the new industries to enter and deciding on the means of entry. B) initiating actions to boost the combined performance of the corporation's collection of businesses. C) pursuing opportunities to leverage cross-business value chain relationships and strategic fit into competitive advantage. D) establishing investment priorities and steering corporate resources into the most attractive business units. E) divesting well-performing businesses.

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34) You are the general manager of a regional HR staffing company. What strategic consideration would be least likely to influence your decision to diversify your firm into new, related or unrelated business services? A) making a selection among new industries to enter and deciding on the means of entry B) analyzing and settling on the appropriate value chain for each business the company has entered C) leveraging cross-business value chain relationships and strategic fit to achieve a competitive advantage D) establishing investment priorities and steering corporate resources into the most attractive business units E) taking actions to boost the combined performance of any new lines of business the firm has entered

35) The decision to pursue diversification requires management to resolve which industries to enter and whether to enter, and includes such decisions as the following, except A) selecting the appropriate value chain operating practices to improve the financial outlook. B) starting a business from the ground up. C) acquiring a company already established in the target industry. D) forming a joint venture or partnership with another company. E) structuring a strategic alliance with another company to take advantage of the opportunity.

36) When Disney acquired Marvel Comics on August 31, 2009, for $4.24 billion, management needed to determine whether or not there were opportunities to strengthen the business, which includes all of the following considerations, except

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A) the transferring of valuable resources and capabilities from one business to another. B) initiating actions to boost the combined performance of the corporation's collection of businesses. C) opportunities to pursue debt reduction to lower its debt/equity ratio while maintaining asset levels. D) sharing the use of powerful and well-respected brand names across multiple businesses. E) encouraging knowledge-sharing and collaborative activity among the businesses.

37) When pharmacy chain CVS Health announced a $69 billion merger with the health insurance giant Aetna late in 2017, top management of CVS needed to weigh a number of strategic considerations except A) CVS's opportunities to pursue rapid growth strategies in its most promising businesses. B) CVS's opportunities to initiate profit improvements or turnaround strategies for weakperforming businesses showing potential. C) CVS's opportunities to divest other unattractive businesses. D) CVS's opportunities to pursue debt reduction to lower its debt/equity ratio while maintaining asset levels. E) CVS's opportunities to pursue divestiture of businesses that did not fit into the company's longer-term plans.

38) Initiating actions to boost the combined performance of the corporation's collection of businesses includes all of the following strategic options, except A) sticking closely with the existing business lineup and pursuing available opportunities. B) broadening the scope of diversification by entering additional industries. C) divesting some businesses and retrenching to a narrower collection of businesses. D) restructuring the entire company by adding and removing businesses to improve overall performance. E) refocusing the existing businesses on new substitute product-line opportunities outside the existing industry framework.

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39) At the time when the French conglomerate LVMH (Louis Vuitton Moët Hennessy) was considering acquiring the American jeweler Tiffany & Company, LVMH management needed to determine whether or not there were opportunities to strengthen the business and strengthen its competitive advantage by A) restructuring the entire company by adding and removing businesses to improve LVMH’s overall performance. B) expanding into additional businesses such as Tiffany & Company that would unlock possibilities for a comprehensive cost enhancement strategy. C) forcing cultural independence, operating diversity, and sophisticated analytical responsibility on Tiffany & Company in order to ensure compatibility with LVMH’s corporate overhead identity. D) purchasing a powerful and well-known brand name, Tiffany & Company, that could be transferred to the products of other businesses and thereby used as a lever for driving up the sales and profits of such businesses. E) refocusing LVMH’s existing businesses on new substitute product-line opportunities outside the existing luxury goods industry framework.

40) The three tests for judging whether a particular diversification move can create value for shareholders are the A) attractiveness test, the profitability test, and the shareholder value test. B) strategic fit test, the competitive advantage test, and the return-on-investment test. C) resource fit test, the profitability test, and the shareholder value test. D) attractiveness test, the cost of entry test, and the better-off test. E) shareholder value test, the cost of entry test, and the profitability test.

41) To test whether a particular diversification move has good prospects for creating added shareholder value, corporate strategists should use the

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A) profit test, the competitive strength test, the industry attractiveness test, and the capital gains test. B) better-off test, the competitive advantage test, the profit expectations test, and the shareholder value test. C) barrier-to-entry test, the competitive advantage test, the growth test, and the stock price effect test. D) strategic fit test, the industry attractiveness test, the growth test, the dividend effect test, and the capital gains test. E) attractiveness test, the cost of entry test, and the better-off test.

42) The better-off test for evaluating whether a particular diversification move is likely to generate added value for shareholders involves assessing whether the move will A) make the company better off because it will produce a greater number of core competencies. B) make the company better off by improving its balance sheet strength and credit rating. C) make the company better off by spreading shareholder risks across a greater number of businesses and industries. D) produce a synergistic outcome such that the company's different businesses perform better together than apart and the whole ends up being greater than the sum of the parts. E) help each business earn exactly what they were earning before coming under the same corporate umbrella.

43)

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 from scratch, or forming a joint venture with one or more companies to enter the target industry. C) integrating forward or backward into the target industry. D) shifting from a strategic group comprising mostly single-business companies to a strategic group comprising diversified companies. E) employing an offensive strategy with new product innovation as its centerpiece.

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44) Lululemon, the purveyor of expensive athleisure and activewear, announced in June 2020 that it was betting on the future of personalized remote exercise as a way to reach customers by acquiring Mirror, a home fitness start-up. Lululemon’s acquisition of an existing business is an attractive strategy option for entering a promising new industry because it A) is an effective way for Lululemon to hurdle entry barriers and is vastly less timeconsuming than trying to launch a new start-up operation in home fitness. B) is less expensive for Lululemon than launching a new start-up operation in home fitness, thus passing the cost-of-entry test. C) is a less risky way of passing the attractiveness test because it can enable Lululemon to select the appropriate value chain for Mirror. D) is more likely to result in Lululemon’s passing the shareholder value test, the profitability test, and the better-off test via entry into the home fitness industry segment. E) offers Lululemon the prospect of gaining an immediate competitive advantage in home fitness and thus helps ensure that the diversification move will pass the competitive advantage test for building shareholder value.

45) In late October 2019, LVMH (Louis Vuitton Moët Hennessy) was preparing a bid to take over the American jeweler Tiffany & Company for $16.2 billion. Tiffany & Company’s market value at that time was estimated to be about $12 billion. The acquisition or control premium for this particular deal can be calculated as the amount by which the price LVMH offered for Tiffany & Company exceeded the A) amount that was offered for Tiffany & Company and the amount that was held in escrow to complete the deal. B) amount paid as a down payment for Tiffany & Company that was to be held in escrow until closing. C) preacquisition market value of Tiffany & Company. D) comparable value of similar luxury brand companies to Tiffany & Company within the same market. E) fair market value of similar companies in the same geographic locale as Tiffany & Company.

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46) What is the name of the process for developing new businesses as an outgrowth of a company's established business operations? A) corporate venturing B) value chain integration C) resource capability process D) diversification activity capabilities E) business launch

47) Tanisha is CEO of a multinational corporate event planning firm. What would make it unappealing to her to consider diversification into a new industry such as lodging by forming an internal start-up subsidiary to enter and compete in the target industry? A) when internal entry is cheaper than entry via acquisition B) when a company possesses the skills and resources to overcome entry barriers and there is ample time to launch the business and compete effectively C) when adding new production capacity will not adversely impact the supply demand balance in the industry by creating oversupply conditions D) when the industry is growing rapidly and the target industry is comprised of several relatively large and well-established firms E) when incumbent firms are likely to be slow or ineffective in combating a new entrant's efforts to crack the market

48) In what analysts said was the largest oil-patch tie-up since the coronavirus pandemic, delivered a shock to the industry. In July 2020, Chevron bid $5 billion for the oil and gas exploration company Noble Energy, Inc. The big dilemma Chevron faced at the time was whether to

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A) focus on building brand awareness or establish stronger supplier relationships in oil and gas exploration. B) focus on acquiring technical know-how in oil and gas exploration or to outsource those activities. C) strive for scale economies or to acquire technical know-how to customize oil and gas exploration. D) focus on building brand awareness or to strive for scale economies in oil and gas production. E) pay a premium price for a successful oil and gas exploration company or to purchase a struggling oil and gas exploration company at a bargain price.

49) The transaction costs for Lululemon to complete a business agreement in order to purchase Mirror in June 2020 included A) costs of cross-leveraging business fits. B) costs of valuation. C) costs of entry. D) costs of exit. E) acquisition premiums.

50)

The essential requirement for different businesses to be "related" is that A) their value chains exhibit competitively valuable cross-business commonalities. B) the products of the different businesses are bought by many of the same types of

buyers. C) the products of the different businesses are sold in the same types of retail stores. D) the businesses have several key suppliers in common. E) the production methods they employ both entail economies of scale.

51)

Unrelated businesses

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A) sell products from the different businesses to much the same types of buyers and retail outlets. B) have dissimilar value chains and resource requirements with no competitively important cross-business commonalities at the value chain level. C) perform better than just the sum of the individual businesses. D) will always have several key suppliers in common. E) employ production methods that create economies of scale.

52) Procter & Gamble's acquisition of Gillette was integral to a corporate diversification strategy for building the company around businesses A) with strategic fit with respect to key value chain activities and competitive assets. B) that are highly independent, proficient, and efficient operating firms. C) with strategic fit across separate value chain activities that drive each business. D) that can also include unrelated businesses with dissimilar resource requirements. E) that have dissimilar value chain activities with no cross-business commonalities.

53)

Related corporate diversification does not necessarily provide opportunities

A) for transferring expertise, technology, and other capabilities from one business to another. B) for reducing costs on advertising by leveraging use of a competitively powerful brand name. C) to exploit a first-mover strategy and capture valuable financial fits. D) for cross-business collaboration to create valuable new competencies and capabilities. E) to share other resources (besides brands) that support corresponding value chain activities across businesses.

54) Strategic fit between two or more businesses exists when one or more activities comprising their respective value chains present opportunities

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A) to prevent the transfer of expertise or technology or capabilities from one business to another. B) to independently preserve common brand names from cross-business usage. C) to increase costs by combining the performance of the related value chain activities of different businesses. D) for cross-business collaboration to build valuable new resource strengths and competitive capabilities. E) to maintain business value chain activities separate and apart from one business to another to protect company independence.

55)

One strategic fit-based approach to related diversification would be to

A) diversify into new industries that present opportunities to transfer specialized expertise, technological know-how, or other valuable resources and capabilities from one business's value chain to another's. B) diversify into foreign markets where the firm has unrelated businesses. C) acquire rival firms that have broader product lines so as to give the company access to a wider range of buyer groups. D) acquire companies in forward distribution channels (wholesalers and/or retailers). E) expand into foreign markets where the firm currently does no business.

56) Of the following strategic fit opportunities, which choice is not supportive of related business activities? A) transferring specialized expertise, technological know-how, or other valuable resources and capabilities from one business's value chain to another's B) cost sharing between businesses by combining their related value chain activities into a single operation C) overhauling and streamlining the operations of the business by refocusing value chain activities toward businesses that can provide a superior job of parenting D) exploiting common use of a well-known brand name E) sharing other resources (besides brands) that support corresponding value chain activities across businesses

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57) Businesses with strategic fit with respect to their supply chain activities perform better together because of all of the following except the A) potential for skills transfer in procuring materials. B) sharing of resources and capabilities in logistics. C) benefits of added collaboration with common supply chain partners. D) added leverage gained with shippers when securing volume discounts on incoming parts and components. E) increased allocation and allotment of support activities and specialized resources and capabilities.

58)

Competitively valuable strategic fit is exemplified by

A) Berkshire Hathaway, whose holdings include an insurance group, an energy group, a financial products group, and a diverse group covering manufacturing, service, and retailing as well as a significant share of a number of other companies. B) Fortune Brands, a manufacturer of diverse consumer products ranging from spirits to golf products to hardware. C) Tata Group, which is organized into 11 “verticals,” including 30 businesses among the information technology, steel, automotive, consumer and retail, infrastructure, financial services, aerospace and defense, tourism and travel, telecom and media, and trading and investments industries. D) Yamaha Corporation, a producer of all types of musical instruments, audio equipment, communication devices, industrial robots, home appliances, sporting goods, industrial machinery and components, specialty metals, golf products, resorts, and semiconductors.

59)

What is the difference between economies of scale and economies of scope?

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A) Scale refers to the magnitude or size of the operation, while scope refers to the reach of defined savings within the value chain. B) Scale refers to the extent of change, while scope refers to the possibilities of change. C) Scale is about dimensions, while scope is about the capacity available for production capabilities. D) Scale refers to cost savings that accrue directly from larger-sized operations, while scope stems directly from strategic fit along the value chains of related businesses. E) Scale and scope mean the same thing and the only difference is the extent of cost savings accrued from unrelated businesses in each.

60)

Cross-business strategic fit in a diversified enterprise is not normally achieved when

A) the management know-how accumulated in one business is transferable to the other. B) two businesses present opportunities to economize on marketing, selling, and distribution costs. C) related diversification produces a synergistic performance outcome. D) the value chain activities of unrelated businesses possess economies of scope and good financial fit. E) a company can transfer its brand-name reputation to the products of a newly acquired business and add to the competitive power of the new business.

61)

What makes related diversification an attractive strategy?

A) the ability to broaden the company's product line B) the opportunity to convert cross-business strategic fit into competitive advantage over business rivals whose operations don't offer comparable strategic fit benefits C) the potential for improving the stability of the company's financial performance D) the ability to serve a broader spectrum of buyer needs E) the added capability it provides in overcoming the barriers to entering foreign markets

62)

Economies of scope

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A) are cost reductions that flow from operating in multiple related businesses. B) arise only from strategic fit relationships in the production portions of the value chains of sister businesses. C) are more associated with unrelated diversification than related diversification. D) are present whenever diversification satisfies the attractiveness test and the cost-ofentry test. E) arise mainly from strategic-fit relationships in the distribution portions of the value chains of unrelated businesses.

63)

When discussing "economies of scope," it involves understanding that they

A) stem from the cost-saving efficiencies of operating over a wider geographic area. B) have to do with the cost-saving efficiencies of distributing a firm's product through many different distribution channels simultaneously. C) stem from cost-saving strategic fits along the value chains of related businesses. D) refer to the cost savings that flow from operating across all or most of an industry's value chain activities. E) arise from the cost-saving efficiencies of having a wide product line and offering customers a big selection of models and styles to choose from.

64)

An economy of scope is best illustrated by being able to eliminate or reduce costs by

A) combining related value-chain activities of different businesses into a single operation. B) performing all of the value chain activities of related sister businesses at the same location. C) extending the firm's scope of operations over a wider geographic area. D) expanding the size of a company's manufacturing plants. E) having more value chain activities performed in-house rather than outsourcing them.

65)

A major advantage of related diversification is that it

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A) offers ways for a firm to realize 1 + 1 = 3 benefits because the value chains of the different businesses present competitively valuable cross-business relationships. B) is less capital intensive and usually more profitable than unrelated diversification. C) involves diversifying into industries having the same kinds of key success factors. D) is less risky than either vertical integration or unrelated diversification due to lower capital requirements. E) passes the industry attractiveness test and thus offers the best route to 2 + 2 = 4 benefits.

66)

The basic premise of unrelated diversification is that

A) the least risky way to diversify is to seek out businesses that are leaders in their respective industry. B) the best companies to acquire are those that offer the greatest economies of scope rather than the greatest economies of scale. C) the best way to build shareholder value is to acquire businesses with strong crossbusiness financial fit. D) any company that can be acquired on good financial terms and that has satisfactory growth and earnings potential represents a good acquisition and a good business opportunity. E) the task of building shareholder value is better served by seeking to stabilize earnings across the entire business cycle than by seeking to capture cross-business strategic fits.

67) it

With a strategy of unrelated diversification, an acquisition is deemed to have potential if

A) can achieve at least existing profit margins into the near future. B) has the opportunity to generate positive buzz in the industry, even if it may not be able to contribute to the parent firm's bottom line. C) can pass the industry attractiveness test and the cost-of-entry test, and if it has good prospects for profit growth. D) can pass at least the industry attractiveness test if not the cost-of-entry test. E) can add economic value for managers.

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68)

Corporate parenting refers to all of the following except

A) the role that a diversified corporation plays in nurturing its component businesses through the provision of top management expertise, disciplined control, financial resources, and capabilities. B) the help subsidiaries receive in performing better when they utilize astute high-level guidance from corporate executives. C) the corporation's ability to provide generalized support resources so as to create value by lowering company-wide overhead costs by eliminating duplication of efforts. D) efforts to capitalize on the umbrella brands and enhance value proposition across businesses. E) efforts to judiciously segregate funds for each business in such a way that keeps the money safe and discourages shifting funds across business units.

69)

An umbrella brand

A) is a generalized resource that can be leveraged in unrelated diversification. B) is a brand name that can steer a narrow assortment of business types. C) represents a public disclosure spotlighting the corporate image. D) represents an overall corporate marker covering its overriding image of sustainability and responsibility. E) is a specialized resource designed to influence profit growth.

70)

A diversified company has a parenting advantage when it

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A) is more able than other companies to boost the combined performance of its individual businesses through its high-level guidance, general oversight, and other corporate-level contributions. B) is more able than other companies to create positive collaboration within its portfolio for different specialty groups and geographic locations. C) results in supporting short-term economic shareholder value. D) manages a set of fundamentally similar business operations inside fundamentally similar industries and environments. E) avoids acquiring undervalued companies and thus reduces risks.

71) Should a company pursue an unrelated diversification strategy, the types of companies that make particularly attractive acquisition targets would be A) struggling companies with good turnaround potential, undervalued companies that can be acquired at a bargain price, and companies that have bright growth prospects but are short on investment capital. B) companies offering the biggest potential to reduce labor costs. C) cash cow businesses with excellent financial fit. D) companies that are market leaders in their respective industries. E) companies that employ the same basic type of competitive strategy as the parent corporation's existing businesses.

72)

The two biggest drawbacks or disadvantages of unrelated diversification are

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A) the difficulties of passing the cost-of-entry test and the ease with which top managers can make the mistake of diversifying into businesses where competition is too intense. B) the difficulties of capturing financial fit and having insufficient financial resources to spread business risk across many different lines of business. C) the demanding managerial requirements and the limited competitive advantage potential due to lack of cross-business strategic fit benefits. D) ending up with too many cash hog businesses and too much diversity among the competitive strategies of the businesses it has diversified into. E) the difficulties of achieving economies of scope and conflicts/incompatibility among the competitive strategies of the company's different businesses.

73) For an unrelated diversification strategy to produce financial results above that of standalone entities, executives must do all of the following except A) diversify into businesses that can produce consistently good earnings and returns on investment and thereby satisfy the attractiveness test. B) negotiate favorable acquisition prices (to satisfy the cost-of-entry test). C) do a superior job of corporate parenting via high-level managerial oversight and resource sharing, financial resource allocation and portfolio management, or restructuring underperforming businesses (to satisfy the better-off test). D) satisfy the attractiveness test, the cost-of-entry test, and the better-off test. E) leverage the cross-business strategic fit advantage effectively.

74)

The two biggest drawbacks or disadvantages of unrelated diversification are

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A) underemphasizing the importance of resource fit and the strong likelihood of diversifying into businesses that top management does not know all that much about. B) insufficient cash flows to finance so many different lines of business and a lack of uniformity among the strategies of the businesses it has diversified into. C) volatile sales and profits and making the mistake of diversifying into too many cash cow businesses. D) the difficulties of competently managing many different businesses and being without the added source of competitive advantage that cross-business strategic fit provides. E) overinvesting in the achievement of economies of scope and the difficulties of achieving a good mix of cash cow and cash hog businesses.

75) Which of the following rationales for pursuing unrelated diversification is likely to increase shareholder value? A) to reduce risk by way of 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 reduced unemployment risk E) to restructure an underperforming business

76)

Two important negatives of unrelated diversification are

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A) underemphasizing the importance of resource fit and the strong likelihood of diversifying into businesses that top management does not know all that much about. B) insufficient cash flows to finance so many different lines of business and a lack of uniformity among the strategies of the businesses it has diversified into. C) volatile sales and profits and making the mistake of diversifying into too many cash cow businesses. D) the difficulties of competently managing a set of fundamentally different businesses and having a very limited competitive advantage potential that cross-business strategic fit provides. E) overinvesting in the achievement of economies of scope and the difficulties of achieving a good mix of cash cow and cash hog businesses.

77) The one factor that company executives need not worry about when their company is managing many diverse, unrelated firms is to A) stay abreast of what's happening in each industry and subsidiary. B) pick business-unit heads having the requisite combination of managerial skills and know-how to motivate people. C) understand the true value of strategic investment proposals by business-unit managers. D) know what to do if a business unit stumbles. E) "manage by the numbers"—that is, keep a close track on the financial and operating results of each subsidiary.

78)

A sound justification for unrelated diversification is that doing so can

A) result in risk reduction by spreading a company's investments over a set of diverse industries. B) meet expectations for rapid or continuous growth. C) stabilize earnings, that is, market downtrends in some of the company's businesses will be partially offset by cyclical upswings in its other businesses. D) support managerial motives including the prospects for higher compensation. E) deliver enhanced shareholder value if an undervalued company can be purchased at a bargain price.

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79) Vicki is the COO of Kaiser Permanente Thrive, a diversified health care provider in northern California with one hospital that accounts for 60 percent of the company's total revenues and the remainder, a collection of small related or unrelated health care divisions. She would define Kaiser Permanente Thrive as what type of health care enterprise? A) broadly diversified B) narrowly diversified C) dominant business D) portfolio business E) multibusiness

80) Which of the following is a diversified business with one major "core" business and a collection of small related or unrelated businesses? A) a broadly diversified enterprise B) a narrowly diversified enterprise C) a multibusiness enterprise D) a high-compensation/low-risk enterprise E) a dominant business enterprise

81) There is ample room for companies to customize their diversification strategies and be defined as being either narrowly or broadly diversified, and when combination related-unrelated diversification strategy options are adopted, they have particular appeal to A) those companies with a mix of valuable competitive assets, covering the spectrum from generalized to specialized resources and capabilities. B) those large multibusiness firms, sometimes called conglomerates, because they have a unique capability designed to stabilize earnings. C) companies with a portfolio of product choices for buyer-related behavior. D) corporate managers who take on risks without performing due diligence. E) corporate managers who want to play the corporate parent role without fiduciary responsibility.

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82) On June 26, 2018, CEO John Flannery of General Electric Company (GE) announced that the company planned to spin off its health care business and divest its stake in oil-services firm Baker Hughes. The slimmed-down company would refocus on jet engines, power plants, and renewable energy. What was not an important consideration for CEO Flannery when evaluating the merits of this diversified company's new strategy? A) assessing the competitive strength of each business GE had previously diversified into B) determining which business units were cash cows and which ones were cash hogs, and then evaluating how soon GE's cash hogs could be transformed into cash cows C) analyzing the strategic fits and resource fits among the various sister businesses D) assessing the attractiveness of the industries GE had previously diversified into, both individually and as a group E) ranking the performance prospects of the current portfolio of GE businesses from best to worst and deciding what priority to give each of the company's business units in allocating resources

83) As a rule, the key indicators of industry attractiveness, for all the industries represented in a diversified company's business portfolio, should not be measured on such attractiveness factors as A) market size and projected growth rate. B) emerging opportunities and threats, and the intensity of competition. C) resource requirements and the presence of cross-industry strategic fits. D) seasonal and cyclical factors, industry profitability, and whether an industry has significant social, political, regulatory, and environmental problems. E) the utility of the products for consumers from all age groups.

84) VF Corporation, maker of North Face and other popular "lifestyle" apparel brands, decided to split itself into two separate organizations as a result of its efforts to

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A) separate the cash cows from the cash hogs and pass the resource fit test. B) maximize the competitive advantage potential of cross-business strategic fit among the company's various business units and assess the need to diversify into other industries. C) determine the degree of risk involved with each business unit and tighten the strategic fits among its present business lineup. D) reap some benefit from using a nine-cell matrix to simultaneously portray industry attractiveness and business unit competitive strength. E) rank the performance prospects of the businesses from best to worst and determine what the corporate parent's priorities should be in allocating resources to its various businesses.

85) Calculating quantitative attractiveness ratings for the industries that a company has diversified into involves A) determining each industry's key success factors, calculating the ability of the company to be successful at meeting or exceeding each industry benchmark, and obtaining overall measures of the firm's ability to compete successfully in each of its industries based on the combined ratings of industry benchmarks. B) determining each industry's competitive advantage factors, calculating the ability of the company to be successful on each competitive advantage factor, and obtaining overall measures of the firm's ability to achieve sustainable competitive advantage in each of its industries based on the combined competitive advantage factor ratings. C) selecting a set of industry attractiveness measures, weighting the importance of each measure, rating each industry on each attractiveness measure, multiplying the industry ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each industry to obtain an overall industry attractiveness score, and using the overall industry attractiveness scores to interpret the attractiveness of all the industries, both individually and as a group. D) rating the attractiveness of each industry's strategic and resource fits, summing the attractiveness scores, and determining whether the overall scores for the industries as a group are appealing or not. E) identifying each industry's average profitability, rating the difficulty of achieving average profitability in each industry, and deciding whether the company's prospects for aboveaverage profitability are attractive or unattractive, industry by industry.

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86) The chief purpose of calculating quantitative industry attractiveness scores for each industry a company has diversified into is to A) determine which industry is the biggest and fastest growing. B) get in position to rank the industries from most competitive to least competitive. C) provide a basis for drawing analysis-based conclusions about the attractiveness of the industries a company has diversified into, both individually and as a group, and further to provide an indication of which industries offer the best and worst long-term prospects. D) ascertain which industries have the easiest-to-achieve key success factors. E) rank the attractiveness of the various industry value chains from best to worst.

87) A weighted industry attractiveness assessment is generally analytically superior to an unweighted assessment because A) a weighted ranking identifies which industries offer the best/worst long-term profit prospects. B) an unweighted ranking doesn't discriminate between strong and weak industry driving forces and industry competitive forces. C) it does a more accurate job of singling out which industry key success factors are the most important. D) an unweighted ranking doesn't help identify which industries have the easiest and hardest value chains to execute. E) the various measures of attractiveness are not likely to be equally important in determining overall attractiveness.

88) When calculating the weighted industry attractiveness scores, we find the more intensely competitive an industry is A) the lower the attractiveness weighting for that industry. B) the higher the attractiveness weighting for that industry. C) suggests the resources are beyond the parent company's reach. D) suggests the industry attractiveness measures have been incorrectly weighted. E) the more likely the company's profit and revenues will be intensive.

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89)

What hurdles are present in calculating industry attractiveness scores? A) deciding on the appropriate weights for the attractiveness measures B) different analysts use different weights for the different attractiveness measures C) gaining sufficient command of the industry to assign more accurate and objective

ratings D) deciding the impact of strategic fits to unrelated and related diversification E) deciding whether a business is related or unrelated

90)

For a diversified company to be a strong performer

A) a substantial portion of its revenues and expenses must come from business units with relatively low attractiveness scores. B) its principal business must be in industries with a good outlook for growth and aboveaverage profitability. C) its business units in high attractiveness score industries should be candidates for divesture. D) its business units must operate within the favorable aspects of their industry environment. E) its business units must have a popular image, even if the performance of their products does not greatly satisfy buyer expectations.

91) Assessments of how a diversified company's subsidiaries compare in competitive strength should be based on such factors as

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A) vulnerability to seasonal and cyclical downturns, vulnerability to driving forces, and vulnerability to fluctuating interest rates and exchange rates. B) relative market share, the ability to match or beat rivals on key product attributes, brand image and reputation, costs relative to competitors, and the ability to benefit from strategic fits with sister businesses. C) the appeal of its strategy, the relative number of competitive capabilities, the number of products in each business's product line, which businesses have the highest/lowest market shares, and which businesses earn the highest/lowest profits before taxes. D) the ability to hurdle barriers to entry, value chain attractiveness, and business risk. E) cost reduction potential, customer satisfaction potential, and comparisons of annual cash flows from operations.

92) Huawei has hired you to calculate its relative share of the global mobile phone market. How would you conduct this analysis? A) by dividing Huawei's percentage share of total industry sales volume by the percentage share held by its largest rival. B) by adjusting Huawei's revenue share up or down by a factor proportional to whether their quality/customer service factors are above/below industry averages. C) by dividing Huawei's market share (based on dollar volume) by the industry-average market share. D) by identifying Huawei's cash cows, which have big relative market shares (above 1.0), and cash hogs, which have low relative market shares (below 0.5). E) by subtracting the industry-average market share (based on revenue) from Huawei's market share to highlight relative share above/below the industry average. This amount is a better indicator of a business's competitive strength than is just looking at the firm's market share percentage.

93) Calculating quantitative competitive strength ratings for each of a diversified company's business units involves

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A) determining each industry's key success factors, rating the ability of each business to be successful on each industry benchmark, and adding the individual ratings to obtain overall measures of each business's ability to compete successfully. B) identifying the competitive forces facing each business, rating the strength of these competitive forces industry by industry, and then ranking each business's ability to be profitable, given the strength of the competition it faces. C) selecting a set of competitive strength measures, weighting the importance of each measure, rating each business on each strength measure, multiplying the strength ratings by the assigned weight to obtain a weighted rating, adding the weighted ratings for each business unit to obtain an overall competitive strength score, and using the overall competitive strength scores to evaluate the competitive strength of all the businesses, both individually and as a group. D) determining which businesses possess good strategic fit with other businesses, identifying the portion of the value chain where this fit occurs, and evaluating the strength of the competitive advantage attached to each of the strategic fits to get an overall measure of competitive advantage potential. Businesses with the highest/lowest competitive advantage potential have the most/least competitive strength. E) rating the caliber of each business's strategic and resource fit, weighting the importance of each type of strategic/resource fit, calculating weighted strategic/resource fit scores, and adding the weighted ratings for each business to obtain an overall strength score for each business unit that indicates whether the company has adequate strategic/resource fits to be a strong market contender in each of the industries where it competes.

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

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95) Indra Nooyi is CEO of PepsiCo, a diversified consumer products company. What does a competitive strength score above 5 tell her about PepsiCo's position in the market? A) PepsiCo's business units are all fairly strong market contenders in their respective industries. B) PepsiCo's units are all fairly weak market contenders in their respective industries. C) PepsiCo will not likely perform well over the next five years. D) PepsiCo's competitive strength score is meaningless unless it is comparable to CocaCola's competitive strength score. E) PepsiCo's rivals will likely prevail in the race to achieve sustainable competitive advantage.

96)

The nine-cell industry attractiveness competitive strength matrix

A) is useful for helping decide which businesses should have high, average, and low priorities in deploying corporate resources. B) indicates which businesses are cash hogs and which are cash cows. C) pinpoints what strategies are most appropriate for businesses positioned in the three top cells of the matrix, but is less clear about the best strategies for businesses positioned in the bottom six cells. D) identifies which sister businesses have the greatest strategic fit. E) identifies which sister businesses have the highest level of resource fit.

97) One of the most significant contributions to strategy making in diversified companies that the nine-cell industry attractiveness competitive strength matrix provides is

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A) identifying which businesses have strategies that should be continued, which businesses have strategies that need fine-tuning, and which businesses have strategies that need a major overhaul. B) that businesses having the greatest competitive strength and that are positioned in the most attractive industries should have the highest priority for corporate resource allocation and that competitively weak businesses in relatively unattractive industries should have the lowest priority and perhaps even be considered for divestiture. C) pinpointing which strategies are most appropriate for businesses positioned in the four corners of the matrix (although the matrix reveals little about the best strategies for businesses positioned in the remainder of the matrix). D) its ability to pinpoint what kind of competitive advantage or disadvantage each business has. E) pinpointing which businesses to keep and which ones to divest.

98) The nine-cell attractiveness-strength matrix provides clear, strong logic for considering using A) only industry attractiveness in allocating resources and investment capital to its different businesses. B) only business strength in allocating resources and investment capital to the different businesses. C) both industry attractiveness and business strength in allocating resources and investment capital to its different businesses. D) both industry attractiveness and product strength in allocating resources and investment capital to its different businesses. E) both resource fit and product strength in allocating resources and investment capital to its different businesses.

99) Checking the competitive advantage potential of cross-business strategic fits in a diversified company involves evaluating the extent to which sister businesses present opportunities

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A) to combine the performance of certain cross-business activities and thereby reduce costs. B) to transfer skills, technology, or intellectual capital from one business to another. C) for the company's different businesses to share use of a well-respected brand name. D) for sister businesses to collaborate in creating valuable new competitive capabilities. E) to create a positive image in the industry irrespective of the financial performance of its businesses.

100) Checking a diversified company's business portfolio for the competitive advantage potential of cross-business strategic fits does not involve ascertaining the extent to which sister business units A) have value chain match-ups that offer opportunities to combine the performance of related value chain activities and reduce costs. B) have value chain match-ups that offer opportunities to transfer skills or technology or intellectual capital from one business to another. C) have opportunities to share use of a well-respected brand name. D) have value chain match-ups that offer opportunities to create new competitive capabilities or to leverage existing resources. E) are cash cows and which ones are cash hogs.

101) Michelle Buck, CEO of the Hershey Company, has hired you as a consultant to assess her diversified company's business units for cross-business competitive advantage potential. Your assessment would not normally involve ascertaining the extent to which Hershey's business units

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A) have value chain match-ups that offer opportunities to combine the performance of related value chain activities and reduce costs. B) have value chain match-ups that offer opportunities to transfer skills or technology or intellectual capital from one business to another. C) are making maximum use of the parent company's competitive advantages. D) have value chain match-ups that offer opportunities to create new competitive capabilities or to leverage existing resources. E) present opportunities to share use of a well-respected brand name.

102) You have been hired as a consultant by Mary Dillon, CEO of Ulta Beauty, a $5.9 billion company that is the largest U.S. retailer of cosmetics. CEO Dillon has asked you to consider several related diversification options for Ulta based on the potential for good resource fits. You would advise CEO Dillon that a company pursuing related diversification exhibits resource fit when A) each new line of business for Ulta could become a cash cow. B) each new line of business for Ulta would add to a company's overall resource strengths and have matching resource requirements and/or could do so when Ulta has adequate corporate resources to support its business needs and add sufficient value. C) each new line of business for Ulta could become sufficiently profitable to generate an attractive return on invested capital. D) each new line of business for Ulta could generate large internal cash flows over and above what is needed to build and maintain the business. E) the resource requirements of each new line of business for Ulta could be synergistic with the company's available resources.

103)

The businesses in a diversified company's lineup exhibit good resource fit when

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A) the resource requirements of each business exactly match the resources the company has available. B) individual businesses have matching resource requirements at points along their value chain and add to a company's overall resource strengths and when solid parenting capabilities exist without spreading itself too thin. C) each business generates just enough cash flow annually to fund its own capital requirements and thus does not require cash infusions from the corporate parent. D) each business unit produces sufficient cash flows over and above what is needed to build and maintain the business, thereby providing the parent company with enough cash to pay shareholders a generous and steadily increasing dividend. E) there are enough cash cow businesses to support the capital requirements of the cash hog businesses.

104) What is it called when a diversified company can add value by shifting capital from business units generating free cash flow to those needing additional capital to expand and realize their growth potential? A) internal capital market B) cash cow benefits C) economic value added D) shareholder value added E) transaction cost valuation

105) Mary Barra, CEO of General Motors, has asked you to evaluate the financial resource fit of its new autonomous (self-driving) vehicle and electric vehicle (EV) divisions. You would advise CEO Barra that a diversified company's business units exhibit good financial resource fit when

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A) both new divisions are sufficiently profitable to generate an attractive return on invested capital. B) the resource requirements of each new division exactly match the company's available resources. C) GM has the resources to adequately support the requirements of its new divisions as a group without spreading itself too thin because these new divisions have the potential to add to GM's overall strengths. D) each new division produces large internal cash flows over and above what is needed to build and maintain the business. E) both new divisions present a cash drain on the legacy car and truck divisions of GM and should be managed more cost-effectively.

106) Management's ranking of business units and establishing a priority for resource allocation should A) always make the company's business units with strong resource strengths and competitive capabilities the central focus of funding initiatives. B) put business units with the brightest profit and growth prospects and solid strategic and resource fits at the top of the investment priority list. C) utilize activity-based costing and benchmarking to determine the funding needs of each business unit. D) first consider the strength of funding proposals presented by managers of each division or business unit. E) give priority for funding to cash hog businesses.

107) The tests of whether a diversified company's businesses exhibit resource fit do not include whether

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A) the excess cash flows generated by cash cow businesses are sufficient to cover the negative cash flows of its cash hog businesses. B) a business adequately contributes to achieving the corporate parent's performance targets. C) the company has adequate financial strength to fund its different businesses and maintain a healthy credit rating. D) the corporate parent has sufficient cash to fund the needs of its individual businesses and pay dividends to shareholders without having to borrow money. E) the corporate parent has or can develop sufficient resource strengths and competitive capabilities to be successful in each of the businesses it has diversified into.

108) Imagine that you have been hired by Bill Newlands, president and COO of Constellation Brands (CB), to review the beverage company's diversified portfolio of businesses. Of the analytical tools that you could use to assess CB's business lineup for adequate resource fit, which one would you not be likely to use? A) estimating whether the excess cash flows generated by cash cow businesses in CB's portfolio are sufficient to cover the negative cash flows of its cash hog businesses B) assessing whether or not CB's recently acquired businesses are acting to strengthen this company's resource base and competitive capabilities or whether they are causing its competitive and managerial resources to be stretched too thinly across its businesses C) determining whether or not the opportunity exists for CB to achieve 1 + 1 = 2 outcomes among CB's portfolio of brands D) analyzing whether or not CB has adequate financial strength to fund its different businesses and maintain a healthy credit rating E) conducting feasibility studies into whether or not CB possesses or can develop sufficient resource strengths and competitive capabilities to be successful in each of the businesses it has diversified into

109) What is the best guideline for deciding what the priorities should be for allocating resources to the various businesses of a diversified company?

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A) Businesses with high industry attractiveness ratings should be given top priority and those with low industry attractiveness ratings should be given low priority. B) Business subsidiaries with the brightest profit and growth prospects, attractive positions on the nine-cell matrix, and solid strategic and resource fits generally should head the list for corporate resource support. C) The positions of each business in the nine-cell attractiveness-strength matrix should govern resource allocation. D) Businesses with the most strategic and resource fits should be given top priority and those with the fewest strategic and resource fits should be given low priority. E) Businesses with high competitive strength ratings should be given top priority and those with low competitive strength ratings should be given low priority.

110) The options for allocating a diversified company's financial resources include all of the following except A) making acquisitions to establish positions in new businesses or to complement existing businesses. B) investing in ways to strengthen or grow existing businesses. C) funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses. D) paying off existing debt and building cash reserves. E) decreasing dividend payments and/or selling shares of stock.

111)

Deploying a diversified company's financial resources would normally not involve

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A) making acquisitions to establish positions in new businesses or to complement existing businesses. B) investing financial resources in cash cow businesses until they show enough strength to generate positive cash flows. C) funding long-range R&D ventures aimed at opening market opportunities in new or existing businesses. D) paying down existing debt, increasing dividends, or repurchasing shares of the company's stock. E) investing in ways to strengthen or grow existing businesses.

112) Corporate strategy options for already diversified companies include all of the following except A) broadening the company's business scope by making new acquisitions in new industries. B) divesting weak-performing businesses and retrenching to a narrower base of business operations. C) restructuring the company's business lineup with a combination of divestitures and new acquisitions to put a whole new face on the company's business makeup. D) pursuing growth opportunities within the existing business lineup. E) pursuing certain acquisitions even if they have done badly or haven't quite lived up to expectations.

113) The strategic options to improve a diversified company's overall performance do not include which of the following categories of actions?

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A) broadening the company's business scope by making new acquisitions in new industries B) increasing dividend payments to shareholders and/or repurchasing shares of the company's stock C) restructuring the company's business lineup with a combination of divestitures and acquisitions to put a whole new face on the company's business makeup D) pursuing multinational diversification and striving to globalize the operations of several of the company's business units E) divesting weak-performing businesses and retrenching to a narrower base of business operations

114) 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) multinational diversification B) restructure the company's business lineup with a combination of divestitures and new acquisitions C) craft new initiatives designed to build/enhance the reputation and image of the company D) divest some businesses and retrench to a narrower diversification base E) broaden the diversification base

115) Barbara Rentler, CEO of Ross Stores, Inc. (parent company of Ross Dress for Less and dd's Discount retail chains), is considering broadening her company's business scope by building positions in new related or unrelated businesses. Ms. Rentler would be advised to pursue a diversification strategy for all of the following reasons except

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A) Ross has resources or capabilities that are eminently transferable to other related or complementary businesses. B) Ross's growth is sluggish and it wants the sales and profit boost that a new business can provide. C) Ross's management wants to lessen the company's vulnerability to seasonal or recessionary influences or to threats from emerging new technologies, legislative regulations, and new product innovations that alter buyer preferences and resource requirements. D) Ross wants to make new acquisitions to strengthen or complement some of its present businesses, market positioning, and competitive capabilities. E) Ross's top management wants to increase its compensation.

116)

Retrenching to a narrower diversification base is

A) usually the most attractive long-run strategy for a broadly diversified company confronted with recession, high interest rates, mounting competitive pressures in several of its businesses, and sluggish growth. B) a strategy that allows a diversified firm's energies to be concentrated on building strong positions in a smaller number of businesses rather the stretching its resources and managerial attention too thinly across many businesses. C) an attractive strategy option for revamping a diverse business lineup that lacks strong cross-business financial fit. D) sometimes an attractive option for deepening a diversified company's technological expertise and supporting a faster rate of product innovation. E) a strategy best reserved for companies in poor financial shape.

117) When General Electric created an independent health care division and divested it in June 2018 by distributing to GE's stockholders new shares in the new business, the strategic action was termed

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A) a spin-off. B) a wholly owned subsidiary. C) a functional divesture. D) a satellite business. E) a dysfunctional restructure.

118)

Moves to improve a diversified company's overall performance do not include

A) retrenching to a narrower base of business operations. B) broadening the company's business scope by making new acquisitions in new industries. C) restructuring the company's business lineup and putting a whole new face on the company's business makeup. D) sticking closely to the existing business lineup and pursuing the growth opportunities presented by these businesses. E) retaining weak-performing businesses in order to sustain a wide base of business operations.

119) PepsiCo divested its group of fast-food restaurant businesses (KFC, Pizza Hut, and Taco Bell) to Yum! Brands in order to allow PepsiCo to focus on its core soft drink and snack-food businesses. A useful guide to determine whether or when to divest a business subsidiary is to ask, A) "Have we missed the opportunity to milk these cash cows?" B) "If we were not in this business today, would we want to get into it now?" C) "Can't we derive a parenting advantage with these businesses?" D) "Do we need to do the math to achieve 1 + 1 = 3 outcomes from these diversified businesses?" E) "Will these three businesses pass the ‘cost-of-exit' test?"

120)

When should a business not be divested?

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A) when the business is worth more to another company than to the parent company B) when the business is a cash cow C) when the business provides valuable strategic or resource fits for another company D) when shareholders would be better served if the company sells the business for a generous premium E) when the business lacks the cross-boundary presence of shared values and cultural compatibility

121)

Strategies to restructure a diversified company's business lineup involve

A) revamping the value chains of each of a diversified company's businesses. B) focusing on restoring the profitability of its money-losing businesses and thereby improving the company's overall profitability. C) revamping the strategies of its different businesses, especially those that are performing poorly. D) divesting low-performing businesses that do not fit and acquiring new ones where opportunities are more promising to put a new face on the company's business makeup. E) broadening the scope of diversification to include a larger number of smaller and more diverse businesses.

122)

Corporate restructuring strategies

A) involve making major changes in a diversified company's business lineup, divesting some businesses and/or acquiring others, so as to put a whole new face on the company's business lineup. B) entail reducing the scope of diversification to a smaller number of businesses. C) entail selling off marginal businesses to free up resources for redeployment to the remaining businesses. D) focus on crafting initiatives to restore a diversified company's money-losing businesses to profitability. E) focus on broadening the scope of diversification to include a larger number of businesses and boosting the company's growth and profitability.

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123) Conditions that may make corporate restructuring strategies appealing include all of the following except 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) a business lineup that consists of too many cash cow businesses.

124)

Unlikely candidates for divestiture in a corporate restructuring effort are A) business units that lack strategic fit with the businesses to be retained. B) weak performers. C) businesses in unattractive industries. D) businesses that are cash hogs or that lack other types of resource fit. E) businesses compatible with the company's revised diversification strategy.

125) An outstanding corporate parent like Berkshire Hathaway is not likely to benefit its portfolio of businesses by A) providing high-level oversight and making available other corporate resources. B) purchasing competitively weak businesses or businesses in unattractive industries. C) restructuring underperforming acquisitions. D) allocating financial resources across the business portfolio. E) investing in ways to strengthen or grow existing businesses.

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126) Sam Yagan, CEO of Match.com, along with other related social media businesses, is now considering broadening his company’s business scope by building positions in new related or unrelated mobile app businesses such as ShopRunner, an app that would provide free two-day shipping and seamless checkout at leading online retailers. Mr. Yagan should pursue this diversification strategy for which of the following reasons? A) Match.com possesses adequate financial strength and has sufficient resources to support its entire group of businesses without spreading itself too thin. B) Match.com doesn’t need another cash hog in its portfolio. C) Match.com needs cash hog businesses to supply capital to its cash cow businesses. D) Match.com’s planned diversification would detract from achieving company-wide performance targets. E) Match.com’s previously acquired dating app businesses are already acting to strengthen the company’s resource base and competitive capabilities.

127) When VF Corporation was considering the spin-off of its slow-growth jeanswear brands (Wrangler, Lee, and Rock & Republic) into an independent, publicly traded company, which of the following questions was most likely asked? A) Did we miss the opportunity to milk these cash cows? B) Will these three businesses pass the “cost-of-exit” test? C) If we were not in this business today, would we want to get into it now? D) Why couldn't we derive a parenting advantage with these businesses? E) Do we need to do the math to achieve 1 + 1 = 3 outcomes from these diversified businesses?

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Answer Key Test name: Chap 08_23e 26) D 27) A 28) C 29) B 30) B 31) D 32) A 33) E 34) B 35) A 36) B 37) D 38) E 39) D 40) D 41) E 42) D 43) B 44) A 45) C 46) A 47) D 48) E 49) B 50) A 51) B Version 1

52) A 53) C 54) D 55) A 56) C 57) E 58) C 59) D 60) D 61) B 62) A 63) C 64) A 65) A 66) D 67) C 68) E 69) A 70) A 71) A 72) C 73) E 74) D 75) E 76) D 77) B 78) E 79) C 80) E 81) A Version 1

82) B 83) E 84) E 85) C 86) C 87) E 88) A 89) E 90) B 91) B 92) A 93) C 94) D 95) A 96) A 97) B 98) C 99) E 100) E 101) C 102) B 103) B 104) A 105) C 106) B 107) D 108) C 109) B 110) E 111) B Version 1

112) E 113) B 114) C 115) E 116) B 117) A 118) E 119) B 120) B 121) D 122) A 123) E 124) E 125) B 126) A 127) C

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Chapter 9 Ethics, Corporate Social Responsibility, Environmental Sustainability, and Strategy 1)

Does a substantial difference exist between ethics and business ethics?

Define ethical universalism, ethical relativism, and integrative social contracts theory.

3) What are the strengths and weaknesses of the thesis that ethical standards are (or should be) universal?

4) What are the differences between the school of ethical universalism and the school of ethical relativism?

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5) Relying on the principle of ethical relativism to determine what is right or wrong (1) presents which major opportunities and (2) poses which problems for multinational companies trying to decide which ethical standards to enforce company-wide?

6) Is a competitive strategy based on ethical relativism a "one-size-fits-all" approach? Explain your answer.

7) What is meant by integrated social contracts theory? What is its contribution to the debate about ethical standards?

8) What is meant by (1) ethical universalism and (2) integrated social contracts theory? Which of these two schools of thought do you believe is most inclusive? Explain the reasons for your answer.

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9) PepsiCo's Global Code of Conduct plays a pivotal role in ensuring that PepsiCo's employees, managers, and directors around the world are complying with the company's high ethical standards. Which of the three schools of thought are reflected in PepsiCo's Global Code of Conduct? Please explain your answer.

10) Imagine you are CEO of a multinational company supplying infant care products to emerging economies. Do you and your company have a duty to go beyond legal requirements and conform to the ethical norms of the societies in which it operates?

11)

What is the case for why business strategies should be ethical?

12) Apart from "the business of business is business, not ethics" kind of thinking, there are three other primary factors that contribute to a drive toward unethical business behavior. Identify and explain the three factors.

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13) What are the major costs that businesses incur due to ethical failures? Please provide examples.

14) Why does Southwest Airlines make reporting an important part of its commitment to social responsibility?

15) Unilever is recognized on GlobeScan's Global Sustainability Survey for sustainable companies with a score 2.5 times higher than its closest competitor. Which practices and actions has Unilever deployed to implement its sustainability plan?

16)

What is sustainability in business? Define and provide at least two examples.

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17) Ben & Jerry’s, Whole Foods Market, Stonyfield Farm, TOMS, Keurig Green Mountain, and Patagonia are examples of companies that expanded their customer bases because of their visible and well-publicized activities as socially conscious companies. Why has it been important for strategy makers at these companies to find points of intersection between society and the company's ability to execute value chain activities or better serve customer needs?

18) Imagine you are the founder of a company that provides shelter for pets that have neither homes nor owners to return to after a major weather disaster such as a fire, hurricane, or flood. What moral case could you provide to your staff as to why your company should engage in socially responsible actions and environmentally sustainable business practices?

19) You are working on a strategic planning project for Shelina Moreda, founder of She'Z Trailblazer, a girls' dirt bike riding camp located in northern California. What business case would you make to Ms. Moreda about why her company should engage in socially responsible actions and environmentally sustainable business practices?

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20) In what ways do socially responsible actions and sustainable business practices result in lower costs for a company's human resource activities?

21) Why are well-conceived CSR strategies and sustainable business practices considered in the best long-term interest of shareholders?

22) Explain the key tenets of the concept of environmental sustainability. How does striving for environmental sustainability impact strategic initiatives involving a company's shareholders, its employees, and the environment?

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23) Explain and provide examples of how companies committed to environmental sustainability are able to address society's concerns about protecting the environment, while lowering costs and/or creating value for customers.

24) Provide at least three examples of companies that pursue sustainability strategies and explain what their activities entail.

25) A business should endeavor to be socially responsible in its actions and conduct under what set of circumstances?

26) Has a high correlation between a company's social responsibility and its competitive advantage and financial performance been empirically proven?

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27) On August 1, 2018, Reddit, an American social news aggregation, web content rating, and discussion website reported that it had been hacked. A spokesperson for Reddit said publicly, "Think about whether there's anything on your Reddit account that you wouldn't want associated back to that address." The company also included instructions for users to remove their Reddit data. Do Reddit company managers have an obligation to observe ethical norms when crafting and executing a strategic response to this breach of data security and potential loss of consumer privacy?

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28) Millions of young Americans have begun investing in recent years through Robinhood, which was founded in 2013 by two Stanford graduates, with a sales pitch of “no trading fees or account minimums.” The ease of trading turned Robinhood into a cultural phenomenon and a Silicon Valley venture capital investors’ favorite, with the start-up reaching an $8.3 billion valuation. Other Robinhood employees, who Other Robinhood employees, who Other Robinhood emSome analysts have observed, however, that at least part of Robinhood’s success appeared to have been built on a Silicon Valley playbook of behavioral nudges and push notifications, which drew inexperienced investors into the riskiest trading. In 2018, Robinhood released software that accidentally reversed the direction of options trades, giving customers the opposite outcome from what they expected. In 2019, it mistakenly allowed people to borrow infinite money to multiply their bets, leading to some enormous gains and losses. In March 2020, the site was down for almost two days, just as stock prices were gyrating because of the coronavirus pandemic. Robinhood’s customers were unable to make trades to blunt the damage to their accounts. Those dangers came into focus in June 2020 when Alex Kearns, 20, a college student in Nebraska, committed suicide after he logged into the app and saw that his balance had dropped to a negative $730,000. The figure was high partly because of some incomplete trades. Some Robinhood employees, who declined to be identified for fear of retaliation, said the company failed to provide adequate guardrails and technology to support its customers. Other Robinhood employees, who also declined to be identified, said the start-up had underinvested in technology and moved too quickly rather than carefully. By late spring 2020, Robinhood reported that it had 13 million accounts, up from 10 million at the end of 2019. What could become an intangible or invisible cost incurred by Robinhood should any ethical wrongdoing by this company be disclosed?

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29) On August 1, 2018, Reddit, an American social news aggregation, web content rating, and discussion website reported that it had been hacked. A spokesperson for Reddit said publicly, "Think about whether there's anything on your Reddit account that you wouldn't want associated back to that address." The company also included instructions for users to remove their Reddit data. Do Reddit company managers have an obligation to observe ethical norms when crafting and executing a strategic response to this breach of data security and potential loss of consumer privacy? A) No, because ethics in business are generally less stringent than the ethical principles for society at large. B) Yes, because ethics in business are generally more stringent than the ethical principles for society at large. C) Yes, because ethics in business are not materially different from ethical principles in general. D) No, because ethics in business only concern the rules each company's top management and board of directors make about "what is right" and "what is wrong." E) No, because ethics in business deal chiefly with the actions and behaviors required to operate companies in a socially responsible manner.

30)

How do ethical principles apply to businesses?

A) They chiefly deal with the actions and behaviors required to operate companies in a socially responsible manner. B) They chiefly deal with the rules each company's top management and board of directors make about "what is right" and "what is wrong." C) They are not materially different from ethical principles in general. D) They are generally less stringent than the ethical principles for society at large. E) They are generally more stringent than the ethical principles for society at large.

31)

Ethical principles as they apply to the conduct of personnel and business decisions

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A) deal chiefly with standards a company has 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 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) deal primarily with the company's duty to comply with legal requirements and conform to ethical norms of society, 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.

32) Although exposing children to hazardous work and long work hours is unquestionably deplorable, which of the following, if true, leads to a moral dilemma? A) Use of adult workers instead leads to higher labor costs. B) Children are not as efficient as adults in doing physically demanding work. C) Many child laborers come from poverty-stricken families. D) Banning child labor increases school attendance. E) Working children learn independence.

33) The results of strategies that cannot pass the test of moral scrutiny often are NOT manifested in A) sharp drops in stock prices and lower dividends. B) devastating public relations hits. C) sizable fines. D) criminal indictment and convictions of company executives. E) increased customer loyalty.

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34) The contentions that (1) many of the same standards of what's ethical and what's unethical resonate with peoples of most societies regardless of local traditions and cultural norms and (2) to the extent there is common moral agreement about right and wrong actions, common ethical standards can be used to judge the conduct of personnel at companies operating in a variety of country markets and cultural circumstances, are defining beliefs of which of the following? A) the school of ethical relativism but not the school of ethical universalism B) the school of ethical universalism but not the school of ethical relativism C) integrative social contracts theory but not the school of ethical universalism D) the school of ethical relativism and the school of ethical universalism E) the school of ethical relativism but not integrative social contracts theory

35)

The school of ethical universalism holds that

A) concepts of right and wrong are not absolute and leave room for deviation from country to country or circumstance to circumstance. B) concepts of right and wrong are universal within countries but not across countries and cultures. C) concepts of right and wrong are governed by the Global Code of Ethical and Social Morality. D) the most fundamental conceptions of right and wrong are universal and apply to members of all societies, all companies, and all businesspeople. E) there are multiple sets of standards concerning what is ethically right or wrong that are universally applicable to citizens of a country.

36)

According to the school of ethical universalism

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A) concepts of what constitute ethical behavior and unethical behavior are dictated by subjectively provable moral principles but not by objectively provable moral principles. B) concepts of right and wrong are universal within countries/societies but not across countries or cultures. C) concepts of what is ethical and what is unethical are socially determined, leaving room for variation from country to country or circumstance to circumstance. D) to the extent there is common moral agreement about right and wrong actions and behaviors across multiple cultures and countries, there exists a set of universal ethical standards to which all societies and all individuals can be held accountable. E) all societies and countries are obligated to apply universally defined ethical principles of right and wrong as set forth by a global body that formulates the Code of Ethical Behavior for the world.

37) Common moral agreement about right and wrong actions and behaviors across multiple cultures and countries, also known as ethical universalism, gives rise to A) principles that set forth the traits and behaviors considered virtuous, that is, which a good person is supposed to believe in and display. B) principles embodied in international law that all societies and countries are obliged to practice. C) principles of right and wrong in judging the ethical correctness of business behavior. D) standards of what's ethical and what's unethical, applicable to all businesses in all countries, irrespective of local business traditions and local business norms. E) standards of what constitutes ethical and unethical behavior in business situations that are partly universal, but mainly are governed by local business norms.

38)

If one concurs with the school of ethical universalism, then one believes that

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A) many basic moral standards travel well across cultures and countries and really do not vary significantly according to local cultural beliefs, social mores, religious convictions, and/or the circumstances of the situation. B) since ethical standards are subjectively determined, each company has a window within which it can define and implement its own ethical principles of right and wrong. C) what is deemed right or wrong, fair or unfair, moral or immoral, ethical or unethical in business situations should be judged in light of local customs and social mores and can legitimately vary from one culture or nation to another. D) each country should have some degree of latitude in setting its own ethical standards for judging the ethical correctness of business actions/behaviors within its borders. E) concepts of right and wrong as they apply to business behavior are purely based on an individual's understanding of ethics and differ from person to person.

39)

The strength of the beliefs underlying ethical universalism is that

A) ethical universalism recognizes significant variation in basic moral standards according to local cultural beliefs, local religious beliefs, and social mores. B) ethical standards are objectively determined by religious and moral experts. C) what is deemed right or wrong, fair or unfair, moral or immoral, ethical or unethical is (or should be) grounded in religious doctrine and applied strictly to all business situations. D) it draws upon the collective views of multiple societies and cultures to put some clear boundaries on what constitutes ethical business behavior and what constitutes unethical business behavior no matter what country or culture a company is operating in. E) it leaves room for thinking that concepts of right and wrong can be varying shades of gray.

40) Uber's scandals, tarnished reputation, loss of market share to rival companies, and the ouster of its cofounder Travis Kalanick was not due to

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A) inadequate returns to its shareholders owing to the delay of its planned initial public offering (IPO). B) unfair competitive practices. C) inadequate attention to customer safety and data privacy. D) sexual harassment in the workplace and a toxic workplace culture. E) price gouging during crises.

41)

The school of ethical relativism holds that

A) what constitutes ethical or unethical conduct should be determined by the religious convictions of each society or each culture within a country. B) when there are cross-country or cross-cultural differences in what is deemed ethical or unethical in business situations, it is appropriate for local moral standards to take precedence over what the ethical standards may be elsewhere. C) concepts of right and wrong are always governed by business norms in each country, culture, or society. D) concepts of right and wrong are always a function of each individual's own set of values, beliefs, and ethical convictions. E) concepts of right and wrong as they apply to business behavior are always absolute and usually more stringent than universal ethical principles.

42)

Ethical relativism implies that

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A) concepts of ethically right and ethically wrong are relative across countries and cultures but are universal within countries or cultures. B) individuals and businesses have a basic right to "moral free space," and it is inappropriate to specify ethically permissible and ethically impermissible actions and behaviors. C) there are important occasions when local cultural norms and morality and the circumstances of the situation determine whether certain behaviors are right or wrong, for there are no absolutes when it comes to business ethics. D) concepts of right and wrong as applied to business situations are always a function of each company's own set of values, beliefs, and ethical convictions (as stated in the company's code of ethical conduct). E) standards of what is ethically right and ethically wrong as applied to business behavior are determined solely by whatever business norms prevail in a particular company's home country and are applicable to its operations in all other countries.

43) PepsiCo's Global Code of Conduct provides specific guidance concerning how to make decisions, how to treat others, and how to conduct business globally, organized around which four key operating principles? A) respect in the workplace, ethics in business activities, dealing with situations that call for bribery, and integrity in the marketplace B) integrity in the marketplace, ethics in business activities, global compliance, and whistle-blowing C) whistle-blowing, global compliance, integrity in the marketplace, and responsibility to shareholders D) global compliance, dealing with situations that call for bribery, integrity in the marketplace, and responsibility to shareholders E) respect in the workplace, integrity in the marketplace, ethics in business activities, and responsibility to shareholders

44)

The underlying thesis of ethical relativism does not imply that

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A) in a multinational company, application of ethical relativism equates to multiple sets of ethical standards. B) there are few absolutes when it comes to business ethics and thus few ethical absolutes for consistently judging a company's conduct in various countries and markets. C) when there are cross-country or cross-cultural differences in ethical standards, it is appropriate for ethical standards in a company's home market to take precedence over what the local ethical standards may be. D) a company that adopts the principle of ethical relativism and holds company personnel to local ethical standards necessarily assumes that what prevails as local morality is an adequate guide to ethical behavior. E) according to the ethical relativism school of thinking, a "one-size-fits-all" template for judging the ethical appropriateness of business actions and the behaviors of company personnel does not exist.

45)

According to the advocates of ethical relativism,

A) if the use of underage labor and/or the payment of bribes/kickbacks are acceptable in a particular culture/society/country, then a case can be made that it is morally correct and ethical for a company to use these practices in conducting its business activities in that culture/society/country. B) each company should have the flexibility to set its own standards for deciding whether the use of underage labor and/or the payment of bribes/kickbacks are ethically acceptable or not. C) if the use of underage labor and/or the payment of bribes/kickbacks are not legal but locally acceptable in a particular country, then it is morally correct and ethical for a company to use these practices in that country. D) each industry should go by standards established by competitors for deciding whether the use of underage labor and/or the payment of bribes/kickbacks are ethically acceptable or not. E) it is very clear that the use of underage labor or the payment of bribes and kickbacks are ethically impermissible—local customs, behavioral norms, and traditions absolutely cannot be taken into account.

46)

A belief in ethical relativism leads to the conclusion that

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A) since ethical standards are subjective, it is perfectly appropriate for each company to define and implement its own ethical principles of right and wrong as concerns the use of underage labor and the payment of bribes and kickbacks. B) ethical standards are determined objectively (rather than subjectively). C) whether the use of underage labor and the payment of bribes/kickbacks should be deemed ethical or unethical depends on the moral standards, values, and business norms that prevail in particular cultures, societies, countries, or circumstances. D) ethical standards are objective and universal—thus whether the use of underage labor and the payment of bribes and kickbacks should be deemed ethical or unethical is definitely not dependent on the moral standards, values, and business norms that prevail in particular cultures, societies, countries, or circumstances. E) standards of right and wrong are governed by what is legal in a given country—thus whether the use of underage labor and the payment of bribes and kickbacks are ethical or unethical is governed by local law.

47) The degree of cross-country variability in paying bribes and kickbacks to grease business transactions A) violates ethical principles of right and wrong in all countries. B) is ethically acceptable according to the principle of ethical universalism and ethically unacceptable according to the principle of ethical relativism. C) is acceptable to immoral managers but not to amoral managers. D) is one of the thorniest ethical problems that multinational companies face because paying bribes is normal and customary in some countries and ethically or legally forbidden in others. E) is more acceptable in dealing with a company's suppliers than in dealing with a company's customers.

48) Multinational companies that forbid the payment of bribes and kickbacks in their codes of ethical conduct and that are serious about enforcing this prohibition

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A) are generally advocates of the ethical relativism school of thought. B) are misguided in their efforts because bribes and kickbacks are really no different from tipping for service at restaurants as you pay for a service rendered. C) face a particularly vexing problem of losing business to competitors that have no scruples—an outcome that penalizes ethical companies and company personnel. D) are out-of-step with business reality given that the preponderance of company managers are immoral. E) are in a distinct minority compared to companies that view the payment of bribes and kickbacks as a legitimate or permissible practice.

49)

According to the ethical relativism school of thinking,

A) there can be no one-size-fits-all template (set of authentic ethical norms) against which to gauge the conduct of company personnel, due to cross-cultural differences in ethical standards. B) a company should have a different set of ethical standards for each country in which it operates. C) only respected religious experts can provide companies with a higher order moral compass. D) the best source of ethical standards in each country where the company operates is that country's adopted Code of Required Ethical Conduct. E) since there can be no one-size-fits-all set of authentic ethical norms, it is appropriate for each company to hold company personnel to observing the company's code of ethical conduct.

50) Codes of conduct based on ethical relativism are not ethically problematic for multinational companies if they

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A) create a maze of conflicting ethical standards. B) justify conflicting ethical standards for operating in different countries. C) establish little moral basis for establishing ethical standards for a company worldwide. D) restrict enforcement of ethical standards worldwide. E) create standards that mostly relate to ethical codes in a company's home market, which might trigger compliance issues in the local market.

51) 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 in the company's home market. B) may 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.

52) The contention that ethical standards should be governed both by (1) a limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations and (2) the circumstances of local cultures, traditions, and shared values that further prescribe what constitutes ethically permissible behavior and what does not are the basic principles of A) the school of ethical relativism. B) the school of ethical universalism. C) the global corruption standards published by Transparency International. D) integrative social contracts theory. E) the Global Code of Ethical and Social Morality developed by the United Nations.

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53) The contention that ethical standards should reflect the collective views of multiple societies in establishing a set of universal ethical principles (that are widely recognized as laying legitimacy to ethical boundaries on actions and behavior in all situations) and in allowing inclusion of a set of prevailing customary actions of local cultures or groups (with their traditions and shared values), that further prescribe to what represents ethically permissible behavior and what does not, constitutes the basic principles of A) the school of ethical relativism. B) the school of ethical universalism. C) integrated social contracts theory. D) corporate social responsibility. E) the triple bottom line.

54) According to integrated social contracts theory, the ethical standards a company should try to uphold A) are governed by the school of ethical universalism. B) are governed both by a limited number of universal ethical principles and the circumstances of local cultures, traditions, and shared values. C) are governed by each country's Code of Required Ethical Conduct, which sets forth that each individual/group/business/organization has a "social contract" to observe the ethical and moral standards that the country has adopted. D) should be determined by the company's moral managers. E) should be absolute and avoid wiggle room according to the circumstances of the situation.

55) In 2017, it came to light that in order to meet its demanding profit target, Wells Fargo put such pressure on its employees to hit sales quotas that many employees responded by fraudulently opening customer accounts. Wells Fargo's ethical lapses are not a good example of

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A) how certain universal ethical principles apply in those situations where all societies— those endowed with rationality and moral knowledge—have a common moral agreement on what is right and wrong. B) how, within the boundaries of a social contract, local cultures or groups can specify what additional actions may or may not be ethically permissible. C) how 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) how universal ethical norms always take precedence over local ethical norms. E) how local ethical norms always take precedence over universal ethical norms.

56)

Integrated social contracts theory does not apply

A) to those situations where most all societies—endowed with rationality and moral knowledge—have common moral agreement on what is wrong and thereby place limits on which actions and behaviors fall inside the boundaries of what is right, and which ones fall outside. B) to commonly held views about what is morally right and wrong that constitute a "social contract" (contract with society) that is binding on all individuals, groups, organizations, and businesses in terms of establishing the line between ethical and unethical behaviors. C) to principles or norms that provide some "moral free space" for the people in a particular country (or local culture or even a company) to make specific interpretations of how certain actions may or may not be permissible within the bounds defined by universal ethical principles. D) to the principle that universal ethical norms take precedence over local ethical norms. E) to the slippery slope of ethical relativism.

57) Shannon and Ian, student consultants, chose a home construction business as a client for a semester strategic planning assignment. Upon examination of the client's financial statements, the students discover that their client has been cheating the government out of several thousand dollars a year in taxes. Their client is a company owned by a couple who are in their late 50s and who have two children in college. Shannon and Ian are the only people other than the owners who are in a position to know about this situation. Which ethical principle should guide Shannon and Ian in their decision whether or not to report the owners to the Internal Revenue Service? Version 1

A) There is no such thing as "moral free space"—all ethical standards are determined by societal norms, and individuals have an implied social contract to live up to these standards. B) Few nations or cultures have common moral agreement on what is ethically right and wrong. C) There should be no absolute limits put on what actions and behaviors fall inside the boundaries of what is ethically or morally right and which actions/behaviors fall outside. D) Adherence to universal ethical norms always takes precedence over local ethical norms. E) Ethical relativism should always be adhered to before ethical universalism when dealing within boundaries of a country's culture and norms.

58)

The strength of integrated social contracts theory is that it

A) correctly recognizes that all soundly reasoned ethical standards are universal. B) accommodates the best parts of ethical universalism and ethical relativism. C) puts no absolute limits on what actions and behaviors fall inside the boundaries of what is ethically or morally right and which actions/behaviors fall outside. D) recognizes the importance of allowing local ethical norms to always take precedence over universal ethical norms. E) recognizes that individuals and businesses have a basic right to "moral free space" and that it is inappropriate to specify ethically permissible and ethically impermissible actions and behaviors.

59) According to integrative social contracts theory, the ethical standards a company should try to uphold

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A) are governed by the school of ethical universalism. B) should be determined by the company's board of directors. C) should never be absolute but rather always provide some wiggle room according to the circumstances of the situation. D) are governed by each country's Code of Required Ethical Conduct, which sets forth that each individual/group/business/organization has a "social contract" to observe the ethical and moral standards that the country has adopted. E) are governed both by (1) a limited number of universal ethical principles that are widely recognized as putting legitimate ethical boundaries on actions and behavior in all situations and (2) the circumstances of local cultures, traditions, and shared values that further prescribe what constitutes ethically permissible behavior and what does not—but universal norms always take precedence over local ethical norms.

60)

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.

61) For their final business class in college, Bill and Jill have been assigned a client that needs to improve its accounting and budgeting systems. Bill received the assignment by claiming on his résumé to have majored in accounting. His consulting partner, Jill, a marketing major, learns that he never actually passed any accounting courses. Jill is deciding whether or not to overlook the false claim, since Bill is otherwise conscientious and honorable and failure to pass the course might jeopardize his graduation. In her conversation with the instructor, which question will Jill NOT raise?

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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?

62) Senior executives can ensure compliance with the ethical code of conduct by considering whether A) the proposed action is fully compliant and in harmony with the code of ethical conduct and whether stakeholders would consider anything ethically objectionable. B) the code of conduct is rejected by the market and accepted by employees. C) the code of conduct was accepted by rivals. D) the creation of the code of conduct should be handled by executives or employees. E) to eliminate the need to execute a code of conduct at all.

63)

Unethical managerial behavior tends to be driven by such factors as

A) a lack of training in what is ethical and what is not. B) overzealous or obsessive pursuit of personal gain, wealth, and other self-interests; a company culture that puts the profitability and good business performance ahead of ethical behavior; and heavy pressures on company managers to meet or beat performance targets. C) widespread managerial belief in the ethical relativism school of thinking. D) widespread managerial belief in the ethical universalism school of thinking. E) confusing differences between what is ethical behavior in one's personal life and what is ethically permissible in business.

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64) When Robin and Rich ask for a client's financial statements in order to complete the data collection for their strategic management project, the owner of the business tells Robin that his accountants are "preparing the financials but these won't be ready for several months." The client instead suggests that Robin and Rich fabricate the financials, since what he "really wants is a marketing plan," and that "no one will ever know if you've seen the actual financials or not." Which of the following should not guide Robin and Rich in their decision whether or not to take this as an authorization to submit false data as part of their final report? A) the pervasiveness of immoral and amoral businesspeople B) overzealous pursuit of personal gain, wealth, and other selfish interests C) a company or campus culture that places good business performance and good grades ahead of ethical behavior D) heavy pressures on students to meet or beat assignment deadlines E) their desire to complete the project, independent of their actual performance on the project

65) For Uber, what was not a consequence of pursuing a strategy that had unethical or shady components? A) a pressing need to repair a toxic workplace culture characterized by sexual harassment and managerial inaction in response to formal complaints about unwanted behavior B) devastating public relations and the need for damage control C) a significant market share loss to Lyft D) defections of investors who nevertheless believed that the company's ride-sharing industry will grow E) the ouster of its cofounder Travis Kalanick from his position as the company's CEO

66) The likelihood of ethical lapses as well as poor long-term company performance tends to increase when there is/are

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A) dramatic cuts in research and development expenditures in years when low earnings are reported by the company. B) increases in research and development expenditures in years when low earnings are reported by the company. C) executive commitment to implementing strategic suggestions from the board of directors. D) attracting investors who think the company's industry will grow. E) hiring and maintaining a skilled and diverse workforce.

67) Walmart, in 2017, announced plans to spend $20 billion on a share repurchase program while laying off thousands of workers and closing dozens of Sam’s Club stores. This is a good example of A) buyback boosterism. B) short-termism. C) ethical relativism. D) tangible shareholder value appreciation. E) long-termism.

68)

Short-termism is defined as

A) making assessments of the moral character of a company's managers. B) the tendency for managers to focus on immediate performance objectives at the expense of longer-term strategic objectives. C) assessing the costs and damages to the company's reputation as a result of ethical violations. D) weighing the short-term costs of regulatory compliance with the long-term costs of noncompliance. E) assessing the short-term costs of complying with government regulations.

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69) Cultural demands to employ unethical means if circumstances become challenging can prompt A) otherwise dishonorable people to behave ethically. B) increased observance of ethical strategic actions. C) a moral work climate. D) clever ways to operate outside established policies to boost profits. E) company authorization to observe what's right.

70) When high ethical principles are deeply ingrained in the corporate culture of a company, culture can function as a powerful mechanism for all of the following except A) communicating ethical behavioral norms. B) gaining employee buy-in to the company's moral standards. C) gaining employee buy-in to the company's business principles. D) gaining employee buy-in to the company's corporate values. E) boosting short-termism.

71) In July 2018, the Papa John's pizza chain decided to distance itself from John Schnatter, its founder and pitchman, after it was reported that he had used a racial slur in a comment about black people. Mr. Schnatter apologized and resigned as chairman. The company said Mr. Schnatter's image, a fixture on its marketing materials, would be removed as the "first of several key steps to rebuild trust from the inside-out." Papa John's suddenly faced the tricky task of disentangling itself from its founder and convincing its customers and investors to move on, and also began considering whether or not to rebrand itself. Papa John's strategy needed to be ethical because

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A) of the dangers that Papa John's top management might have become embarrassed if the company did not take action. B) it is good business and in the best interest of shareholders. C) everyone in the media behaves as ethics watchdogs and somebody might have blown the whistle on the company's unethical behavior. D) of the inevitable risks of being boycotted by customers of major corporate affiliates including Major League Baseball and the National Football League if an unethical strategy was used. E) unethical strategies boost long-termism in corporate culture.

72)

The effect of ethical standards on a company's strategy does not

A) always reflect badly on the character of the company personnel involved. B) encompass what is unethical in whole or in part as morally wrong. C) automatically result in damage to a company's reputation and have costly consequences. D) constitute good business and pursue the best interest of shareholders. E) lead to lower employee morale and higher employee turnover.

73) In 2020, Smithfield Foods, one of the nation’s largest meat-packing companies, came under public scrutiny for refusing to disclose the number of positive novel coronavirus cases among its employees, as well as for its decision to export large amounts of meat to China while publicly warning about a looming meat shortage in the United States. Smithfield Foods’s chief executive, Kenneth Sullivan, responded to critics of the company’s actions by saying, “Processing plants were no more designed to operate in a pandemic than hospitals were designed to produce pork. In other words, for better or worse, our plants are what they are. Four walls, engineered design, efficient use of space, etc.” How would you characterize Smithfield Foods’ response in this situation?

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A) Any strategy that increases the risk of continued scrutiny or eventual litigation would reflect badly on the character of Smithfield Foods’ personnel. B) Smithfield Foods’ senior executives are correct in their assessment because it is considered to be an essential business. C) An ethical strategy would run counter to the self-interest of Smithfield Foods’ shareholders, partly because an ethical strategy can reduce profits and partly because ethical behavior can impair employee productivity. D) Smithfield Foods’ customers in China will appreciate its efforts to sustain normal operations in the midst of a global health crisis. E) A strategy that is perceived to be unethical but is actually ethical, but may be not good for business.

74) Which of these situations demonstrates how companies of strong moral character have pursued ethical strategies? A) Employees at Thinx, a manufacturer of women’s absorbent underwear, tolerate harassment, low pay, short maternity leaves, and the high demands of their jobs because they believe that the company is dedicated to a just cause. B) Employees at Wayfair, the online home furnishings giant, walk out of the company’s Boston headquarters to protest its sale of $200,000 worth of bedroom furniture to a government contractor that operates a network of shelters for migrant children near the southwestern United States border. C) McDonald’s board of directors dismiss CEO Steve Easterbrook after determining that he had engaged in a relationship that violated company policy prohibiting employees with “a direct or indirect reporting relationship” from “dating or having a sexual relationship.” D) Quaker Oats’ management announces the company will retire the Aunt Jemima name and character that had been associated with racial stereotyping after widespread international protests against racism. E) Employees at REI, an outdoor recreation equipment retailer and employee-owned cooperative, report on social media that their store managers in Arizona and Texas had not properly informed them about colleagues who had tested positive for the novel coronavirus.

75)

Notions of right and wrong, fair and unfair, moral and immoral, ethical and unethical

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A) are governed mainly by religious views held in different geographic regions of the world. B) are present in all societies, organizations, and individuals. C) vary enormously from country to country across the world. D) ultimately depend on the circumstances—nothing is really black or white when it comes to ethical standards. E) ultimately depend on a person's own values and beliefs.

76) Visible costs that are incurred by companies and imposed for ethical wrongdoing include all of the following except 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) legal and investigative costs.

77) Internal administrative costs that are incurred by companies for ethical wrongdoing include all of the following except A) costs attached to adverse effects on employee productivity. B) costs of remedial education and ethics training to company personnel. C) costs incurred in taking corrective actions. D) administrative costs associated with future compliance. E) legal and investigative costs.

78) After it came to light in 2017 that Wells Fargo employees fraudulently opened customer accounts to hit sales quotas, rehabilitating this bank's shattered reputation was expected to be time consuming and costly because its employees' actions could

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A) result in increased corporate taxes on the bank's profits. B) lead to unnerved creditors and increased risk of default on loans due to potential business fallout. C) result in higher stock prices and higher returns on invested capital. D) result in the increased costs of servicing the bank's customers. E) result in poaching talented employees from rival banks.

79)

The theory of corporate social responsibility concerns

A) a company's duty to establish socially acceptable core values and to have a strictly enforced code of ethical conduct. B) a company's duty to maximize shareholder value. C) the blending of shareholder interests and employee interests. D) the company's responsibility to balance between strategic actions to benefit shareholders against the duty to be a good corporate citizen. E) top management's responsibility to ensure that the company's actions and decisions are in the best interest of society at large.

80) Uber prizes ruthless internal competition and WeWork promotes a partying, self-dealing culture. These two companies are examples of workplaces cultures A) that balance the time and money their companies spend to carry out social responsibility while preserving the bottom line. B) that prize internal benefits such as improved workforce retention and motivation. C) designed for the aggressive pursuit of market share, revenues, and profits. D) that increase the risk of reputation-damaging incidents. E) that promote increased buyer patronage.

81)

The essence of socially responsible business behavior is

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A) balancing strategic actions to benefit shareholders against the duty to be a good corporate citizen. B) pursuing actions to keep prices low enough that the company's profits will not be viewed by the general public as obscenely high or exorbitant. C) making sizable contributions to political action committees representing the interests of the industry. D) undertaking actions to balance the interests of all company stakeholders rather than just exclusively working to protect the interests of shareholders. E) providing jobs for the local community rather than outsourcing them to low wage labor countries.

82)

Corporate social responsibility refers to A) putting the public interest ahead of shareholder interests. B) equitable treatment of all stakeholders. C) a company's obligation to maximize shareholder wealth responsibly. D) ensuring that companies act in the best interest of stakeholders at large. E) operating in an honorable manner and being a good steward of the environment.

83) When companies formulate and implement a strategy of corporate social responsibility, they generally do not A) devote efforts to employ an ethical strategy and observe ethical principles in operating the business. B) make charitable contributions, donate money and the time of company personnel to community service endeavors, supporting various worthy organizational causes. C) take steps to provide suppliers, distributors, and other value chain partners with handsome profit margins. D) initiate actions to build a workforce that is diverse with respect to gender, race, national origin, and other aspects that different people bring to the workplace. E) pursue actions to protect the environment and, in particular, to minimize or eliminate any adverse impact on the environment stemming from the company's own business activities.

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84) Imagine that you are the chief executive of an automobile manufacturer. Your management team brings you a proposal: Let’s close a plant producing gasoline cars in Michigan and open one producing electric cars farther south. You must decide whether to approve the plan. Which action would typically be considered in crafting your company's strategy of social responsibility? A) actions to promote your shareholders’ interests such as raising the dividend or boosting the stock price B) actions restricting community service endeavors by employees in order to maintain productivity and meet quotas C) actions to ensure that your company provides relocation assistance and continuous employment for staff after the Michigan plant is closed D) actions that find loopholes in restrictive government regulations to permit the relaxation of workplace safety policies E) actions to increase profits by locating the new plant in a low-wage country like Mexico

85)

Good corporate citizens

A) create a democratic workplace whereby the voices of lower-level employees are heard through representation on the board of directors. B) go beyond meeting society's expectations for ethical strategies and business behavior by fostering social benefit and balancing the interests of all. C) provide work-from-home options to working mothers residing in distant locations. D) develop and market only products that are "environmentally friendly." E) identify up-and-coming managers who have a future in local- or state-level politics.

86)

A company's social responsibility strategy typically comprises

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A) actions to enhance workforce homogeneity. B) lobbying the government to rescind workplace safety and environmental regulations. C) making trade-offs between the betterment of profits versus the quality of life in the local community in which it operates. D) conscious efforts to ensure that all elements of the company's strategy are ethical and that its actions protect or enhance the environment (beyond what is legally required). E) ensuring the company's pricing and profits will not be viewed by the general public as obscenely high or exorbitant.

87) Unilever's goal in 2010 was to double the size of the business while halving its environmental footprint by 2020. What actions has it not taken in pursuit of this goal? A) Unilever set up a central corporate team dedicated to spreading best sustainability practices from one factory or business unit to the rest of the company. B) Unilever created a "small actions, big differences" fund to invest in innovative ideas that help the company achieve its sustainability goal. C) Unilever dedicated significant resources and time to pursuing profit maximization strategies in order to boost its sustainability scores. D) Unilever worked with its suppliers to source sustainable agricultural products to reduce emissions from the overall footprint of its products and extend its sustainability efforts to its entire supply chain. E) Unilever enabled over 716,000 small farmers to improve their agricultural practices and/or their incomes.

88)

How do good corporate citizens function?

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A) They pursue discretionary activities that contribute to the betterment of society, especially in areas where government has chosen not to focus its efforts or has fallen short. B) They are active participants in the political processes. C) They identify up-and-coming managers who have a future in local- or state-level politics. D) They create a democratic workplace where the voices of lower-level employees are heard through representation on the board of directors. E) They seek to replace government functions with more efficient, market-driven solutions.

89) The "triple bottom line" refers to what three performance metrics a company should simultaneously succeed in? A) economic, social, and environmental B) pay, power, and performance C) planning, execution, and results D) legal, social, and economical E) legal, social, and environmental

90) The three dimensions of performance are often referred to in terms of the "three pillars" and include all of the following except A) a company's efforts to improve the lives of its internal and external stakeholders. B) the various social initiatives that make up the CSR strategies. C) a firm's ecological impact and environmental practices. D) the economic impact (value and costs) that the company has on society. E) a company's efforts to reduce research and development funding to boost profits.

91)

Triple-bottom-line (TBL) reporting is emerging as an important way for companies to

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A) conceal their initiatives and accomplishments in the areas of diversity, environment, community, and ethics to increase profitability. B) make the results of their CSR strategies apparent to stakeholders and for stakeholders to hold companies accountable for their impact on society. C) minimize transparency and facilitate benchmarking CSR efforts across firms and industries. D) minimize the use of standard reporting frameworks and metrics. E) attract profit-oriented investors.

92)

A company's environmental sustainability strategy consists of its deliberate actions to

A) shelter the environmental impacts from the company's resources and competitive capabilities. B) provide for the defense of natural resources usage within cross-border commitments. C) moderate assurance for ecological support systems for future generations. D) guard against ultimate endangerment of the business. E) operate the business in a manner that promotes the longevity of sustainability effects.

93)

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 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) protect and enhance natural resources and ecological support systems, taking into account the current consumption for the current generation. D) apply universal norms regarding the protection of the environment to its everyday operations and to function below the levels required by prevailing environmental regulations. E) balance commonly held views about what constitutes environmentally appropriate actions against its ability to make a profit.

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94) The Dow Jones sustainability index comprises the top 10 percent of the 2,500 companies listed in the Dow Jones World Index that excel in A) corporate governance and climate change mitigation. B) economic performance and environmental performance. C) economic performance, environmental performance, and social performance. D) mitigating the impact of climate change on the factory workers that make their products. E) climate change mitigation and labor practices.

95)

What is the function of the Global Reporting Initiative?

A) It promotes greater transparency and facilitates benchmarking CSR efforts across firms and industries. B) It promotes and establishes mutual funds investment opportunities comprised of companies that excel on the basis of the triple bottom line. C) It promotes greater awareness of the Dow Jones World Index, which comprises companies that are engaged in environment sustainability. D) It promotes corporate governance, climate change, and labor practices. E) It is a nonprofit reporting organization that ranks companies on habitat protection.

96)

CSR and sustainability strategies typically entail

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A) careful consideration of revised corporate social agendas, specifically for the purpose of improving a company’s competitive strength in the marketplace. B) discontinuing a company's customer value proposition or key value chain activities that may not be considered socially responsible. C) selectively weakening a company’s competitive advantage in the marketplace in order to provide for the longevity of natural resources, maintain ecological support systems for future generations, and guard against ultimate endangerment of the planet. D) an observable and measurable level of expenditure that consists of 5 percent (or more) of pretax profits on social responsibility initiatives. E) deliberate actions to protect the environment, provide for the longevity of natural resources, maintain ecological support systems for future generations, and guard against ultimate endangerment of the planet.

97) Sourcing a supply from a small, women-owned business is an example of a corporate social responsibility action to A) enhance employee well-being. B) support philanthropy. C) protect and sustain the environment. D) ensure honorable and ethical action. E) promote workforce diversity.

98) When a company's social responsibility initiatives become part of the way it operates its business every day, these initiatives are A) likely to be fully effective in creating a competitive advantage. B) normally based on a corporate social agenda. C) ambiguous and rarely make a difference in the way the company does business. D) implausible to advance a positive, high-energy workplace environment. E) heavily dependent on encouraging employee morality.

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99) The moral case for why a company should actively promote the betterment of society and act in a manner benefiting all its stakeholders A) is based on the principle of treating people fairly and with respect. B) is based on the conviction that improving the well-being of society ranks higher in priority and is certainly nobler than making a profit and serving the interests of shareholders. C) boils down to "it's the right thing to do." D) rests on the principle that a business is duty bound to fulfill its social contract to serve the interests of all stakeholders in a business enterprise. E) is based on the principle that business activities lack real legitimacy and have few socially redeeming qualities unless and until a company exerts a significant and sincere effort to give something back to the community.

100) The rationale for businesses to act in a socially responsible manner include all of the following reasons, with the exception of A) every action a company takes can be interpreted as a statement of what it stands for. B) most business leaders can be expected to acknowledge that socially responsible actions and environmental sustainability are important and that businesses have a duty to be good corporate citizens. C) in return for society granting a business a "license to operate" and not be unreasonably restrained in its pursuit of a fair profit, a business is obligated to act as a responsible citizen and do its fair share to promote the general welfare. D) acting in a socially responsible manner is in the best financial interest of shareholders. E) every business has a duty to do what's best for shareholders while operating honorably, provide good working conditions to employees, and be a good environmental steward.

101) The business case for why companies should act in a socially responsible manner includes such reasons as it

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A) generates internal operating benefits (as concerns employee recruiting, workforce retention, employee morale, and training costs). B) increases the risk of reputation-damaging incidents. C) is not in the best interest of shareholders. D) can lead to decreased buyer patronage. E) can increase costs and reduce employee retention.

102) Marianne has opened a jewelry shop in your community and sources precious gems and metals only from Canada rather than Africa. Her rationale for her CSR and environmentally sustainable business practices includes all of the following except A) increasing buyer patronage. B) shortening the supply chain. C) lowering costs and enhancing employee recruiting and workforce retention. D) creating opportunities for revenue enhancement and best long-term profits for shareholders. E) reducing her exposure to the risk of reputation-damaging incidents.

103) A strategic objective that is not considered a part of the business case for why companies should act in a socially responsible manner can be stated as, A) "Every business has a moral duty to be a good corporate citizen." B) "Acting in a socially responsible manner reduces the risk of reputation-damaging incidents." C) "Acting in a socially responsible manner is in the overall best interest of shareholders." D) "To the extent that a company's socially responsible behavior wins applause from consumers and fortifies its reputation, a company may win additional patronage." E) "Acting in a socially responsible manner can generate internal benefits (as concerns employee recruiting, workforce retention, employee morale, and training costs)."

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104) The outcomes of why acting in a socially responsible manner is good business, do not include 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.

105) Studies done on the correlation between good corporate behavior and good financial performance have generally found correlation. A) no B) a small positive C) a small negative D) a large positive E) a large negative

106) A multinational automobile manufacturer issues a public statement that the company's vehicle emissions tests had been falsified to meet environmental compliance standards over recent years using software specifically designed for that purpose. Following the news, the CEO is replaced, vehicle sales plummet, and the company's stock price sharply declines. Which of the following has the company incurred?

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A) only visible and internal administrative costs B) visible but not intangible costs C) visible and intangible costs D) internal administrative costs but not visible costs E) internal administrative costs but not intangible costs

107) A manufacturer and marketer of prescription pharmaceuticals decided to raise the price of its anti-malaria drug from $15.00 per dose to $750.00 per dose, a price increase of 5,000 percent. Following a public outcry, the CEO was forced to resign, the company was forced to retract the price hike, and the company's stock price sharply declined. Which of the following has the company incurred? A) only visible and internal administrative costs B) visible but not intangible costs C) internal administrative costs but not intangible costs D) internal administrative costs but not visible costs E) visible and intangible costs

108) Which company's unethical practices will tend to incur mainly internal administrative costs? A) Company U must retrain its employees who are working in a toxic culture due to widespread reports of sexual harassment. B) Company V's tax evasion practices are revealed, leading to a dramatic drop in its stock price and simultaneously rising costs of debt. C) Company W incurs penalties of $1.0 billion for auto and mortgage loan abuses. D) Company X pays its male employees higher wages than female employees even though it has been propagating messages of workplace equality and fair play. E) Company Y experiences massive customer defections when it is made public that it is engaging in price gouging, or selling low-cost products at high prices.

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109) A company that sets aside 2 percent of its pretax profits to build and then fund a cancerrecovery facility for teens is an example of a corporate social responsibility action to A) enhance employee well-being. B) support philanthropy. C) protect and sustain the environment. D) ensure honorable and ethical action. E) promote workforce diversity.

110) A company that promotes carpooling among its employees, has cut its printer-paper usage in half, and has installed solar panels on its roof is an example of a corporate social responsibility action to A) promote workforce diversity. B) ensure the company operates honorably and ethically. C) support philanthropy and participate in community service. D) protect and sustain the environment. E) enhance workplace amenities and employee well-being.

111) How can a company enhance the quality of life for its employees to support its attempt to uphold its reputation as a socially responsible business? A) It can discontinue relying on those suppliers that manufacture products using child labor. B) It can provide work-at-home opportunities. C) It can donate a percentage of its profits to a national charity. D) It can pay to have litter removed from a state highway. E) It can sell its products at a discounted price in underdeveloped countries.

112) From the ethical relativism perspective, which action is most likely to be considered morally valid?

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A) bribing a government official to allow you to transfer gambling winnings to a tax haven B) performing genital mutilations on nonconsenting female teens C) employing as laborers children under the age of nine D) agreeing to a country's policy of prohibiting the education of females E) bribing a government official in an underdeveloped country to obtain a permit to build a hospital

113) Imagine you were asked to work for a residential construction company. How would you build a moral case for this company to engage in corporate social responsibility and environmentally sustainable business practices? A) Socially responsible actions and sustainable business practices can lower the construction firm's costs and enhance employee recruiting and workforce retention. B) Opportunities for revenue enhancement may also come from CSR and environmental sustainability strategies by the construction firm. C) Well-conceived CSR strategies and sustainable business practices are in the best longterm interest of the owners of the construction firm. D) Like any business, the construction firm must engage in practices that reflect ordinary decency and civic-mindedness, and contribute to society's well-being. E) If the construction firm makes a strong commitment to socially responsible behavior, doing so will reduce the risk of reputation-damaging incidents.

114) Following public revelations of pressures on bank staff to set up fraudulent accounts in order to reach sales quotas, the CEO of Wells Fargo Bank was forced to apologize to and recompense customers for whom the bank had set up false credit card and auto loan accounts. As a consequence, over 100,000 account managers were terminated, a $186 million fine was paid to the U.S. government, the CEO was forced to resign, and the company's stock price also sharply declined. Which of the following costs did Wells Fargo incur?

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A) only visible and internal administrative costs B) visible but not intangible costs C) internal administrative costs, tangible costs, and intangible costs D) internal administrative costs but not visible costs E) visible and intangible costs

115) Valid business reasons for why companies should act in a socially responsible manner do not include A) generating internal benefits (such as improved employee recruiting, workforce retention, training, and worker productivity). B) reducing the risk of reputation-damaging incidents. C) acting in the best interest of shareholders in terms of increased stock price and financial performance. D) increasing buyer patronage and customer loyalty. E) reducing the triple bottom line.

116) Ben & Jerry's, Whole Foods Market, Stonyfield Farm, TOMS, Keurig Green Mountain, and Patagonia all have engaged in visible and well-publicized activities as socially conscious companies with which major result? A) increasing buyer patronage B) reducing the risk of reputation-damaging incidents C) internal benefits such as improved efficiency and workforce retention D) apparent correlations between CSR and their stock prices as well as other measures of financial performance E) reductions of their bottom lines by unspecified and unjustifiable amounts

117) Among the merits of why acting in a socially responsible manner is "good business," what remains to be proven in practice?

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A) Companies with good reputations for contributing time and money to bettering society are better able to attract and retain employees compared to companies with tarnished reputations. B) That there is a high correlation between socially responsible behavior that addresses social issues and a firm's competitive advantage and financial performance. 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) Operating in a socially responsible manner protects the company from consumer, environmental, and human rights activist groups that are quick to criticize businesses whose behavior they consider to be out of line. E) Well-conceived social responsibility strategies help avoid or preempt legal and regulatory actions that could prove costly to the company.

118) Juanita has opened a jewelry shop in your community and sources precious gems and metals only from Canada rather than Africa. Her rationale for this CSR and environmentally sustainable business practice includes all of the following except A) increasing buyer patronage. B) shortening the supply chain. C) lowering costs and enhancing employee recruiting and workforce retention. D) creating opportunities for revenue enhancement and best long-term profits for shareholders. E) reducing her exposure to the risk of reputation-damaging incidents.

119) Imagine you are the founder of a company that provides shelter for pets that have neither homes nor owners to return to after a major weather disaster such as a fire, hurricane, or flood. What moral case could you provide to your staff as to why your company should engage in socially responsible actions and environmentally sustainable business practices? A) “Do whatever it takes to meet or beat their numbers.” B) “The business of business is business, not ethics.” C) “Society has given us the moral free space.” D) “Do unto others before they do it to you.” E) “It’s the right thing to do.”

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120)

An example of a company that does not pursue sustainability strategies is

A) Häagen-Dazs, a maker of all-natural ice creams, which donates a portion of its profits and started a social media campaign to raise awareness about the dangers associated with the decreasing honeybee population. B) Keurig Green Mountain, which helps farmers improve their farming techniques and addresses local water scarcity and planning for climate change. C) Insys Therapeutics, which pays doctors to promote its pain management pharmaceuticals. D) Staples, one of the largest nonutility corporate producers of renewable energy in the United States, due to its installation of solar power panels in all of its outlets (and the sale of what it does not consume in renewable energy credit markets). E) TOMS shoes, which for every pair of shoes purchased donates a pair to a child in need in over 50 different countries.

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Answer Key Test name: Chap 09_23e 29) C 30) C 31) D 32) C 33) E 34) B 35) D 36) D 37) A 38) A 39) D 40) A 41) B 42) C 43) E 44) C 45) A 46) C 47) D 48) C 49) A 50) E 51) B 52) D 53) C 54) B Version 1

55) E 56) E 57) D 58) B 59) E 60) B 61) A 62) A 63) B 64) E 65) D 66) A 67) B 68) B 69) D 70) E 71) B 72) E 73) E 74) C 75) B 76) E 77) A 78) B 79) D 80) D 81) A 82) E 83) C 84) C Version 1

85) B 86) D 87) C 88) A 89) A 90) E 91) B 92) E 93) B 94) C 95) A 96) E 97) E 98) A 99) C 100) D 101) A 102) B 103) A 104) B 105) B 106) C 107) E 108) A 109) B 110) D 111) B 112) E 113) E 114) C Version 1

115) E 116) A 117) B 118) B 119) E 120) C

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Chapter 10 Building an Organization Capable of Good Strategy Execution 1) Does Tim Cook, CEO of Apple Inc., have sole responsibility for strategy execution and for making sure that the task of implementing and executing the strategy for that company goes well?

2) Does the need to tailor a company's strategy-executing approaches to the particulars of the situation at hand necessarily alter the principal managerial components of the strategyimplementing/strategy-executing process?

3) How has Zara gone about building an organization capable of proficient strategy execution?

4) Identify and briefly discuss/explain three components of structuring a company's work effort to promote successful strategy execution.

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5) Which recommended practices has Deloitte used to recruit and retain the best employees to make its rank-and-file employees a genuine competitive asset?

6) Imagine that you have been retained as a consultant to REI, a diversified U.S. retailer of outdoor adventure outerwear, gear, and travel expeditions. What might be some common approaches that you would recommend to REI for improving its core competencies and competitive capabilities?

7) Explain what is involved in building capabilities internally. What steps are required? How much time does it take? How hard is it? Support your answer.

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8) What are some disadvantages of outsourcing noncritical, and sometimes even critical, value chain activities? Why?

9) Identify General Motors’ organizational structure. Why is it appropriate for GM? What are the other three types of organizational structures that GM might have chosen that are aligned with strategy execution?

10) In choosing between a centralized and a decentralized organizational structure, which of the two is more likely to further the cause of good strategy execution? Why?

11) A decentralized organizational structure is more likely to further the cause of good strategy execution than is a centralized organization structure. True or false? Justify your answer.

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12) Identify and discuss the basic tenets, the chief advantages, and the chief disadvantages of centralized organizational structures.

13) Identify and discuss the basic tenets, the chief advantages, and the chief disadvantages of decentralized organizational structures.

14) Accenture, AT&T, Boeing, Merck, Hilton, L’Oreal, Marriott, and Procter & Gamble were among the leading companies that hired people with disabilities in 2019. What is the business case for these businesses to empower their employees? What are some of the challenges of implementing employee empowerment?

15) Identify two companies and describe how these businesses go about developing employee talent and a building a top-caliber management team.

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16) A centralized organization structure is more likely to further the cause of good strategy execution than is a decentralized organization structure. True or false? Explain.

17) What is meant by empowerment of employees? How does it differ from delegation of authority? In what ways can empowerment of employees aid the cause of good strategy execution?

18) Any time rivals can readily duplicate successful strategies, making it impossible to outstrategize rivals, what is the chief way to achieve lasting competitive advantage? Provide an example.

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19) What might reduce the risk of collaborative arrangements in the quest to obtain valuable resources and capabilities? Provide at least one example.

20) Intel Corp. has historically overseen the development and manufacturing of its proprietary semiconductors in-house. In late July 2020, it decided for the first time which activities to perform internally and which to outsource to another company (Taiwan Semiconductor Manufacturing Co, considered the world’s leading semiconductor producer). Most of the other U.S.-based semiconductor companies had shut or sold domestic plants long before then and had other firms make the components, mostly in Asia. Intel Corp., founded in 1968, had remained as the lone holdout, producing semiconductors at its plants in Arizona, New Mexico, and Oregon, maintaining that control over all its value chain activities improved each side of its operation and created better semiconductors. Outsourcing could have several strategyexecuting advantages (and disadvantages) for Intel Corp. What are those advantages? What are the disadvantages?

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21) Camille, a classmate of yours has recently received a job offer to join Everlane’s remote customer experience team, which would enable her to work from home. Everlane is a fashion brand that targets the ethically minded with minimalist basics. In 2017, Everlane went public with its commitment to sustainability, trademarking the phrase “radical transparency.” Everlane’s major period of growth came as many brands realized consumers cared about the conditions in which their clothing was made. The company is committing to ensure all of its cotton comes from certified organic sources by 2023, and to eliminate virgin plastic in its supply chain by 2021. However, in the summer of 2020, Everlane’s internal investigators found that insensitive terms were used while discussing black models; that leaders violated employees’ personal space by touching them, and used inappropriate terms when referring to people of color; that new hires felt isolated and unwelcome; that there was a lack of consistent policies around promotions; and that there were no formal processes to effectively escalate harassment or discrimination. Everlane’s remote customer, however, has no opportunities for career growth and none of the startup perks—annual retreats, kombucha on tap—enjoyed by full-time colleagues at headquarters in San Francisco. Based on what you have learned about strategy-supportive talent management practices, what might be a good reason to advise Camille not to accept Everlane's offer?

22) What business case would you make to WeWork to decentralize its organizational structure and empower its employees? What are some of the drawbacks to decentralizing WeWork’s organizational structure?

23)

Once company managers have decided on a strategy, the emphasis turns to

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A) building the core competencies and competitive capabilities needed to execute the strategy. B) developing a detailed implementation plan that sets forth exactly what every department and every manager needs to do to proficiently execute the company's strategy. C) establishing policies and procedures that instruct company personnel in the ways and means of executing the strategy. D) converting the strategy into actions and good results. E) empowering employees to revise and reorganize value chain activities to match the strategy.

24)

Strategy execution

A) requires revamping the value chain in order to maximize operating efficiency. B) depends on management's ability to direct organizational change. C) involves selecting a capable management team. D) consists of choosing among broad or narrow low-cost and differentiation strategies to compete against rivals. E) requires deciding which core competencies and value chain activities to leave as is and which ones to overhaul and improve.

25)

Deloitte's successful execution of its talent management strategy does not involve

A) sponsorship to help rising leaders navigate the firm, develop new competencies, expand their network, and hone the skills needed to accelerate their careers. B) formal training programs, including mandatory training hours for all of its employees to ensure that individuals continue to further their professional development. C) punishment for missed deadlines, misdirected or wasteful efforts, and managerial ineptness. D) special programs for high performers, such as its Global Fellows program and its Emerging Leaders Development program. E) a clear path to partnership that serves as a motivational tool for top performers, often leading to career acceleration.

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26)

The managerial approach to implementing and executing a strategy should always A) be customized to fit the particulars of a company's situation. B) involve only minor changes to the existing strategy. C) require radical strategy changes for successful execution. D) rely on the active support of frontline employees. E) focus on market conditions and the company's resources and capabilities.

27) The approach to identifying the items needed to be placed on management's action agenda of the strategy execution plan always involves A) generalized activities that will underscore the particulars of the company's situation. B) some definitive managerial recipe for successful strategy execution that works for all company situations and all types of strategies, or that works for all types of managers. C) a set of unimportant managerial tasks that must be covered no matter what the circumstances. D) senior management's judgment about how to proceed in light of prevailing circumstances. E) a high-end differentiation strategy for proficient implementation and execution.

28)

What does a good strategy execution require?

A) a team effort with all managers having strategy executing responsibility in their areas of authority, and making all employees active participants in the strategy execution process B) incremental changes to current operating practices be implemented to ensure existing resource capabilities are not impacted too severely C) little consensus building, despite the magnitude of the proposed changes, because employees know the benefits gained from the planning process D) the strategy-critical value chain activities to be simplified so that all company personnel can be cognizant of the benefits of the execution parameters E) additional investments in capital projects rather than adding to a company's talent base and building intellectual capital

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29)

The three components of building a capable organization are

A) optimizing the number of core competencies and competitive capabilities, making sure that all managers and employees are empowered, and maximizing internal operating efficiency. B) putting a centralized decision-making structure in place, determining who should have responsibility for each value chain activity, and aligning the corporate culture with key policies, procedures, and operating practices. C) staffing the organization, building core competencies and competitive capabilities, and structuring the organization and work effort. D) making periodic changes in the firm's internal organization to keep people from getting into a comfortable rut, instituting a decentralized approach to decision making, and developing the appropriate competencies and capabilities. E) hiring a capable top management team, empowering employees, and establishing a strategy-supportive corporate culture.

30) What are the principal managerial components of the strategy execution process developed by Zara, the world's largest fashion retail chain? A) producing and marketing high fashion clothing that retail for luxury prices B) using periodic deep discounting to move unsold clothing inventory C) tightly aligning design, production, advertising, and real estate with the overall strategy of fast fashion D) meeting industry standards in how value chain activities are performed E) spending no money on advertising, which is a hallmark of cost-effective strategy execution

31)

Building an organization capable of good strategy execution entails

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A) investing heavily in employee training, using an empowered organization design and organization structure in order to maximize labor productivity, and employing effective incentive compensation systems. B) staffing the organization, building core competencies and competitive capabilities, and structuring the organization and work effort. C) empowering employees, maximizing internal operating efficiency, and optimizing core competencies. D) decentralizing authority for performing strategy-critical value chain activities, establishing at least two distinctive competencies, and hiring talented employees. E) centralizing authority in the hands of a chief strategy implementer so as to create the leadership authority for driving implementation forward at a rapid pace.

32) While outsourcing has allowed Apple to reap the benefits of lower cost and more flexible manufacturing, its lack of direct control has proven to be a challenge. How did Apple step in to improve working conditions at Foxconn, one of its major suppliers? A) Apple paid for the installation of suicide prevention nets below Foxconn's factory windows. B) Apple discontinued its relationship with Foxconn in the best interests of Apple customers who were concerned over labor practices at the factories that manufacture the iPhone. C) Apple tightened its supplier standards and increased its efforts at monitoring conditions and enforcing its standards, such as over 700 comprehensive site audits each year to ensure compliance. D) Apple used its immense sales volume and strong cash position and preferred treatment from suppliers as leverage to induce Foxconn to increase the salaries of the 1.3 million people on its payroll. E) Apple discontinued all outsourcing activities in Asia and transferred the manufacture and production of its products to low-wage countries in Latin America.

33) In formulating an action agenda to implement and execute a new or different strategy, the place for managers to begin is with

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A) the task of revising and enhancing the company's core competencies. B) choosing which leadership style to employ in trying to carry out the strategy successfully. C) evaluating whether existing policies and procedures are adequately strategysupportive. D) allocating more resources to strategy-critical parts of the business. E) a probing assessment of what the organization must do differently and better to carry out the strategy successfully.

34)

When strategies fail, it is often because of A) poor execution of the strategy. B) shortfalls exposed with the strategic management design process. C) inadequate support for the management team responsible for the planning process. D) secondary operating practices that hinder the required changes. E) lack of sufficient information about operating systems.

35)

The two best signs of good strategy execution are whether

A) the company is challenging its current performance targets and whether value chain activities are fully integrated within the strategic response criteria. B) managers are personally leading the change process and whether they are meeting deadlines set for budgetary requirements. C) the company is meeting or beating its performance targets and whether it is performing value chain activities in a manner that is conducive to company-wide operating excellence. D) managers are fully behind the changes and whether the company's value chain managers are executing them diligently. E) the company identifies what the organization must do and how to make the necessary internal changes.

36)

The most important leadership trait in the strategy execution process is

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A) a strong, confident sense of what to do and how to do it. B) strong communication skills (both written and verbal) covering motivating intent. C) strong management skills to ensure a systematic approach to administration. D) strong organizational skills so as to make actions structured toward results. E) strong empathy skills when employees run into challenging moments.

37) Imagine that you are about to become the manager of a local chain consisting of four upscale restaurants. To prepare for the position, you have been reviewing the 10 managerial tasks of successful strategy execution. What would not be among those tasks? A) managing the people, talents, and business processes of an operations-driven restaurant chain B) directing organizational change and achieving continuous improvement in restaurant operations and business processes C) creating and nurturing a strategy-supportive culture across all restaurant locations D) developing and meeting, or exceeding, performance targets consistently E) focusing on how market conditions impact your restaurant chain's resources and capabilities

38) Aimée, owner of The Discerning Equestrian, a local apparel, tack, and equipment outlet, is facing growing competition from online retailers such as Equestrian.com. She has sought your advice about the managerial task of executing strategy. What would you not be likely to advise her to do? A) Be action-oriented, and make things happen. B) Direct organizational change, achieve continuous improvement in operations and business processes, create and nurture a strategy-supportive culture, and consistently meet or beat performance targets. C) Employ new techniques to overcome managerial resistance to change. D) Direct a team effort which entails that every manager think through the answer to "What does my area have to do to implement its part of the strategic plan, and what should I do to get these things accomplished effectively and efficiently?" E) Focus solely on your operations, management of people, and business processes.

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39) the

What makes the managerial task of executing strategy so challenging and demanding is

A) trial-and-error experimentation that is required to come up with a workable organizational structure. B) people-management skills required, the resistance to change that has to be overcome, and the perseverance necessary to get a variety of initiatives launched and kept moving along. C) time and effort it takes to build core competencies. D) time, training, and creative effort it takes to empower employees and teach them responsible decision making. E) supervisory requirements associated with getting company personnel to do things the right way.

40)

Implementing and executing strategy successfully requires

A) the same kinds of creative management talent and innovative thinking capabilities as crafting strategy. B) a financially driven process aimed at squeezing the most profit out of conducting daily operations. C) the efforts of a company's whole management team, not just a few senior managers. D) a high-caliber CEO that possesses the business vision, industry and competitive analysis skills, and entrepreneurial creativity needed to navigate the competitive landscape. E) less managerial expertise and effort to perform well, at least in comparison with crafting a winning strategy.

41) Practices that the most successful companies like Alphabet, Boston Consulting Group, Edward Jones, Deloitte, Facebook, Genentech, Intuit, and Salesforce.com use to hire the best people they can find do not include

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A) weeding out the 20 percent lowest-performing employees each year. B) coaching average performers to improve their skills and capabilities. C) striving to retain talented, high-performing employees via promotions, salary increases, and other perks. D) rotating people through jobs that span functional and geographic boundaries. E) careful screening and evaluation of job applicants.

42) Although ultimate responsibility for implementing and executing strategy falls upon the shoulders of senior executives, A) top-level managers still have to rely on the active support and cooperation of middle and lower-level managers in pushing needed changes in functional areas and operating units. B) the pivotal and most decisive strategy-implementing actions are carried out by frontline supervisors who have the day-to-day responsibility of seeing that key activities are done properly. C) it is a company's employees who most determine whether the drive for good strategy execution will succeed or fail. D) the success or failure of the implementation/execution effort hinges chiefly on doing an effective job of empowering employees to make day-to-day operating decisions that support good strategy execution. E) the success or failure of the implementation/execution effort hinges chiefly on a company's reward system and whether its policies and procedures are strategy-supportive.

43)

Implementing and executing a company's strategy

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A) is primarily the job of the company's board of directors since they direct the actions and policies of the top senior executives in executing the strategy. B) is a task for every manager and the whole management team, but ultimate responsibility for success or failure falls upon the top senior executives, especially the chief executive officer of the company. C) is primarily a responsibility of all company personnel because all personnel are active participants in the strategy execution process and their actions have a huge impact on the ultimate outcome. D) should be delegated to a chief strategy implementer appointed by the chief executive officer. E) is primarily a task for middle and lower-level managers because it is they who have responsibility for pushing the needed changes all the way down to the lowest levels of the organization.

44) Management's handling of the strategy implementation/execution process can be considered successful A) when the internal organization develops two or more core competencies in performing value chain activities. B) if and when the company meets or beats its performance targets and shows good progress in achieving its strategic vision for the company. C) if the company's culture is strong and strategy-supportive. D) if management is able to marshal adequate resources to put the strategy in place within 6 to 12 months. E) if managers and employees express strong support for the company's strategy and long-term direction.

45)

The three components of building a capable organization are

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A) making periodic changes in the firm's internal organization to keep people from getting into a comfortable rut, instituting a decentralized approach to decision making, and developing the appropriate competencies and capabilities. B) hiring a capable top management team, empowering employees, and establishing a strategy-supportive corporate culture. C) putting a centralized decision-making structure in place, determining who should have responsibility for each value chain activity, and aligning the corporate culture with key policies, procedures, and operating practices. D) staffing the organization, acquiring, developing, and strengthening key resources and competitive capabilities, and structuring the organization and work effort. E) optimizing the number of core competencies and competitive capabilities, making sure that all managers and employees are empowered, and maximizing internal operating efficiency.

46) If management is to match a company's organization structure to its strategy in an effective way, then it is essential A) for strategy-critical value-chain activities to be the main building blocks on the organization chart. B) that value chain activities be deliberately organized so as to produce maximum strategic fit. C) for the company to be organized around cross-functional teams rather than around functional specialties and functional departments. D) to define the jobs of company personnel in terms of the functions to be performed rather than in terms of the results to be achieved. E) that company personnel be empowered to make both strategic decisions and operating decisions.

47)

The most common building blocks for a company's organizational structure

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A) usually consist of two divisions—a division charged with performing primary value chain activities and a division charged with performing support activities. B) involve a functional or departmental structure that includes process, geographic, product, or customer groups performing one or more major processing steps along the value chain. C) typically consist of an unempowered employee department, an empowered employee department, teams of front-line supervisors, teams of middle-level managers and administrators, and the group of top-level executives that constitute the company's "executive suite." D) are almost always the departments performing such key administrative support functions as finance, accounting, information technology, human resource management, and R&D. E) usually consist of supply chain management, components manufacture, assembly, distribution, and administration.

48) Facebook has hired you to manage its launch team for its new dating app. What would be the highest priority on your list of activities to ensure a successful launch and implementation of this new app? A) staffing the organization, acquiring, developing, and strengthening key resources and competitive capabilities, and structuring the organization and work effort B) decentralizing authority for performing strategy-critical value chain activities, establishing at least two distinctive competencies, and hiring talented employees C) investing heavily in employee training, using an empowered organization design and organization structure in order to maximize labor productivity, and employing effective incentive compensation systems D) centralizing authority in the hands of a chief strategy implementer so as to create the leadership authority for driving implementation forward at a rapid pace E) empowering employees, maximizing internal operating efficiency, and optimizing core competencies

49) Imagine that you are a senior executive of a large organization such as Starbucks that has geographically scattered operating units. What would not be on your agenda?

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A) communicating the case for change B) directing resources to the right places C) building consensus for how to proceed D) establishing deadlines and measures of progress E) orchestrating the action steps and implementation sequence

50) The primary activities involved in building an organization's strategy-supportive resources, capabilities, and organizational structure are not concerned with A) putting together a strong management team. B) developing a set of resources and capabilities suited to the current strategy and at the same time updating resources and capabilities as external conditions and the firm's strategy change. C) instituting organizational arrangements that facilitate good strategy execution; establishing lines of authority and reporting relationships; deciding how much decision-making authority to delegate. D) overseeing all strategic activities including: related and unrelated diversification, internal business development, joint ventures and alliances, mergers and acquisitions, modes of entry into international markets, ethics training and sustainability programs, and relationships with key stakeholders. E) training and retaining company personnel to maintain knowledge-based and skillsbased capabilities.

51) Steps to update a company's capabilities to match changing market conditions and customer expectations take place often include A) staffing the organization. B) recruiting and retaining talented employees. C) acquiring, developing, and strengthening key resources and capabilities. D) organizing value chain activities and business processes. E) structuring the organization and work effort.

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52) Because of the many managerial tasks involved and the role of leadership in strategy execution, when implementing a strategy A) it is critical to ensure that all anticipated strategy-supportive resources and capabilities are already in place. B) assembling a strong management team is especially important. C) changing market conditions are likely to throw the entire strategy execution efforts off track. D) strengthening the firm's core competencies is the number one priority. E) an effectively structured organization can lead to higher bureaucratic costs.

53) You are considering a career with Enterprise Holdings, parent of the Alamo, Enterprise, and National car rental companies. What facets of Enterprise's talent management strategy are not likely to be strategy-supportive? A) staffing the organization with managers and employees capable of executing the strategy well and promoting from within B) creating an environment in which employees are made to feel that their views and suggestions count C) employing people who have similar management styles, leadership approaches, business philosophies, and personalities D) providing people with opportunities to gain experience in a variety of international settings E) making the work environment stimulating and engaging so that employees will consider the company a great place to work

54) Putting together a capable top management team with the right mix of experiences, skills, and abilities

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A) should take top priority in building competitively valuable core competencies. B) is particularly important when the firm is pursuing unrelated diversification or making a number of new acquisitions in related businesses. C) is important in building an organization capable of proficient strategy execution, but is nearly always less crucial than doing a superior job of training and retraining employees. D) entails filling key managerial slots with smart people who are clear thinkers, good at figuring out what needs to be done, and who are skilled in "making it happen" and delivering good results. E) is particularly essential for executing a strategy to keep a company's costs lower than rivals and become the industry's low-cost leader.

55) An initial step that companies typically take in launching the strategy execution process is often to A) ensure all requirements of the value chain are fulfilled. B) form a mission statement as a basis for managers to achieve organizational objectives. C) go on the offensive by employing moves to make its product offering more distinctive and appealing to buyers. D) put together a talented management team with the right mix of experiences, skills, and abilities to get things done. E) strive to be more profitable than rivals and aim for a competitive edge based on bigger profit margins.

56)

The overriding aim in building a management team should be to

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A) ensure oversight of every step of the value chain. B) assemble a critical mass of talented managers who can function as agents of change, work well together as a team, and produce organizational results that are dramatically better than what one- or two-star managers acting individually can achieve. C) choose managers experienced in gathering competitive intelligence. D) select people who have similar management styles, leadership approaches, business philosophies, and personalities. E) choose managers who are competent in executing a strategy to keep a company's costs lower than rivals and become the industry's low-cost leader.

57)

The process of recruiting and retaining capable employees is

A) more important during periods of rapid growth than during periods of crisis and attempted turnarounds. B) always an essential ingredient of successful strategy execution. C) an essential element of developing a distinctive competence. D) closely tied to developing strong information capital capabilities. E) more important than having a good situational fit between the company's strategy and its external environment.

58)

Recruiting and retaining capable employees is

A) usually much more important to good strategy execution than is assembling a capable top-management team. B) important because the quality of an organization's people is always an essential ingredient of successful strategy execution. C) more important during periods of rapid growth than during periods of crisis and attempted turnarounds. D) an important organization-building element, particularly when it comes to transforming a competence into a core competence or distinctive competence. E) easily the most critical aspect in building competitively valuable core competencies and capabilities.

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59)

Recruiting and retaining capable employees do not entail

A) spending considerable effort on screening and evaluating job applicants. B) offering promising employees challenging, interesting, and skill-stretching assignments. C) providing the board of directors with stock options and equity ownership. D) coaching average performers to improve their skills and capabilities. E) offering stock options, flexible hours, onsite day care for children, and retirement packages.

60) Glassdoor is a California-based social media company that provides a space for employees and former employees to anonymously review companies and their management. You have recently had a job offer to relocate and work for Glassdoor. Based on what you have learned about strategy-supportive talent management practices, what might be a good reason not to accept Glassdoor's offer? A) Glassdoor provides careful screening and evaluation of job applicants, along with continuous training and retraining programs for employees who continue throughout their careers. B) Glassdoor has a policy of rotating people through jobs that not only have great content but also span functional and geographic boundaries. C) Glassdoor has a track record of eliminating the bottom 10 percent of the lowestperforming employees each year to increase the overall quality performance metrics to aboveaverage industry standards. D) Glassdoor has developed a culture in which it encourages employees to challenge existing ways of doing things, to be creative and innovative in proposing better ways of operating, and to push their ideas for new products or businesses. E) Glassdoor is dedicated to fostering a stimulating and engaging work environment such that employees will consider the company a great place to work.

61) Companies that depend on and highly value the contribution of intellectual capital to good strategy execution generally do not

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A) provide their employees with challenging, interesting, and skill-stretching assignments and also rotate them through jobs that not only have great content but also span functional and geographic boundaries. B) implement rewards and benefits programs such as promotions, salary increases, performance bonuses, stock options, and other perks. C) invest time and money into coaching underperformers and benchwarmers to improve their skills and capabilities. D) encourage their employees to challenge existing ways of doing things, to be creative and innovative in proposing better ways of operating, and to push their ideas for new products or businesses. E) foster a stimulating and engaging work environment so that their employees will consider the company a great place to work.

62) The implementation process is likely to be hampered by missed deadlines, misdirected efforts, and managerial ineptness if A) a capable results-oriented management team is not in place. B) the personnel have different management styles. C) top managers start asking tough, incisive questions. D) important details require attention. E) an additional investment in capital projects is required.

63)

Who is most likely to have strong strategy implementation capabilities? A) Valery typically probes with tough, incisive questions. B) Greg is often sympathetic to his team members' problems and shortcomings. C) Maria can complete a job in half the time as her colleagues. D) Jorge prefers to launch, manage, and complete projects by himself. E) Chong advocates promoting qualified people from within the firm.

64)

It is ideal for key management slots to be filled from outside

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A) in turnaround and rapid-growth situations. B) when problems with the old strategy are obvious. C) in a worst-case scenario. D) when the managerial whole is greater than the sum of individual efforts. E) in a centralized structure.

65)

Good strategy execution requires which of the following?

A) putting those resources and capabilities into place, strengthening them as needed, and then modifying them as market conditions evolve B) a universal business model to raise profits and lower costs C) strengthening the competitive environment arena outside the company's operating territory D) a planned budget to protect the company's financial condition and eliminate wasteful use of cash E) passive pressures stemming from the dominance of outside market buyers

66)

A dynamic capability is the

A) ongoing capacity to modify existing resources and capabilities to create new ones. B) improvement evaluation process for eliminating waste in the firm. C) functional and operating resources management process. D) ongoing capability to understand and establish a rival commitment to resource alignment. E) most compelling product or service in a firm.

67)

The most common approaches to capability building include all of the following, except

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A) developing capabilities internally. B) acquiring capabilities through mergers and acquisitions. C) accessing capabilities via collaborative partnerships. D) renewing capabilities to align with customer expectations. E) divesting underperforming units.

68) In June 2019, six months after taking over as CEO of global fast-moving consumer goods giant Unilever, Alan Jope warned that as part of its sustainability agenda, the company would dispose of brands that lacked a clear social or environmental purpose within a certain time frame. Imagine you have been asked to present a strategy implementation plan to the top management of Unilever. Your presentation would most likely include which implementation option as a means of building and strengthening its competitively valuable resources and capabilities? A) Unilever needs to shift from out-executing rivals to out-strategizing them. B) Unilever needs to shift from decentralized to centralized decision making so as to give senior executives more authority and control in driving cultural change. C) Unilever needs to align its organizational structure with its strategy by returning to a simple structure with limited task specialization; few rules; informal relationships; minimal use of training, planning, and liaison devices; and a lack of sophisticated support systems. D) Unilever needs to rely on its in-house capabilities only if its suppliers, competitors, or other companies possess comparable expertise. E) Unilever needs to automate where possible, using industrial robots.

69)

The capability building process entails

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A) developing the ability to do something, however imperfectly or inefficiently, and molding these efforts into an organizational ability; also, as experience grows and personnel perform the activity consistently well and at an acceptable cost, it is transformed into a tried-andtrue competence and as they continue to polish and refine their know-how into further improvements, they then create a real competitive capability. B) deciding which value chain activities to perform internally and which ones to outsource; and deciding how much authority to centralize at the top and how much to delegate to down-the-line managers and employees. C) creating the needed capability internally when industry conditions, technology, or competitors are moving at such a rapid clip that time is of the essence. D) a wait-and-see attitude, because companies often implement strategy inefficiently or imperfectly. E) appropriate coordinating mechanisms and those networking and communications arrangements considered necessary to support effective execution of the firm's strategy.

70)

Core competencies and competitive capabilities are usually

A) lodged in the narrow skills and specialized work efforts of a single department, as opposed to the combined expertise and capabilities of specialists scattered across several departments. B) observed to stem from collaborative efforts with strategic allies. C) bundles of skills and know-how that most often grow out of the collaborative efforts of cross-functional work groups and departments performing complementary activities at different locations in a firm's value chain. D) found to result in competitive advantage when they involve highly specific technologies and are grounded in a company's own deep technical expertise. E) built rapidly, usually in conjunction with important product innovations.

71)

The traits of the capability-building process involve all of the following except

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A) evolving changes in customer needs and competitive conditions that often require tweaking and adjusting a company's portfolio of competencies and intellectual capital to keep its capabilities freshly honed and on the cutting edge. B) a core competence or capability that emerges incrementally out of company efforts either to bolster skills that contributed to earlier successes or to respond to customer problems, new technological and market opportunities, and the competitive maneuverings of rivals. C) core competencies or capabilities that are most often bundles of skills and know-how that grow out of the combined efforts of cross-functional work groups and departments performing complementary activities at different locations in a firm's value chain. D) the key to leveraging a core competence into a distinctive competence (or transforming a capability into a competitively superior capability), which concerns concentrating more effort and talent than rivals on deepening and strengthening a competence or capability so as to achieve the dominance needed for competitive advantage. E) saving time by creating capabilities from scratch to remain aligned with external conditions and company strategy rather than updating and remodeling existing capabilities.

72) The capabilities and core competencies that Zara has developed in the execution of its strategy, that is, rapid production processes and new apparel introductions, are not concerned with

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A) bundles of skills and know-how that grew out of the combined efforts of Zara's crossfunctional work groups and departments performing complementary activities at different locations in a firm's value chain. B) evolving changes in customer needs and competitive conditions that often required tweaking and adjusting Zara's portfolio of competencies and intellectual capital to keep its capabilities freshly honed and on the cutting edge. C) acts to bolster skills that contributed to Zara's earlier successes, or acts to respond to customer problems, new technological or market opportunities, and the competitive maneuvers of rivals. D) cost-effectively hiring a cadre of people with the right talent and expertise, putting them together in a single work group, and then teaming the work group with Zara's key strategic allies/partners to mesh the skills, expertise, and competencies needed to perform the desired capabilities with some proficiency. E) leveraging Zara's core competence into a distinctive competence (or transforming a capability into a competitively superior capability), by concentrating more effort and talent than rivals on deepening and strengthening the competence or capability so as to achieve the dominance needed for competitive advantage.

73) What is not part of the process of upgrading core competencies and competitive capabilities? A) Core competencies can be leveraged into competitive advantage by concentrating sufficient effort and talent on deepening and strengthening them so that the firm achieves dominating depth and gains the capability to outperform rivals by a meaningful margin. B) Core competencies have to be tweaked and adjusted to keep them fresh and responsive to changing customer needs and market conditions. C) Core competencies typically are lodged in the combined efforts of different work groups and departments. D) Core competencies generally grow out of company efforts to master a strategy-critical technology or to invent and patent a valuable technology. E) Core competencies tend to emerge gradually rather than blossom quickly.

74)

Firms generally leverage the expertise of their talent pool in building capabilities by

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A) updating existing capabilities. B) establishing a new arsenal of resource capabilities by phasing out existing capabilities. C) refreshing existing capabilities. D) augmenting or recombining well-established capabilities with existing resources. E) building resource capabilities from scratch so it is easy and less time consuming.

75) Managerial actions to develop core competencies and competitive capabilities internally generally take one of two forms. What are they? A) either strengthening the company's base of skills, knowledge, and experience or coordinating and integrating the efforts of various work groups and departments B) either putting in high incentive bonuses to reward individual employees who train hard to develop the desired capability or launching an extensive training effort to develop the capability quickly with newly hired employees C) either using benchmarking and the adoption of best practices to imitate a capability that rivals have already developed or empowering a team of employees to develop the capability however they best see fit D) either using developed dynamic capabilities or acquiring the capability from outside sources E) either by enforcing close cross-business collaboration or by centralizing the performance of functions requiring close coordination at the corporate level

76) Suppose you were advising Creator, the robot-powered hamburger restaurant in San Francisco, on how to build its competencies and capabilities prior to expanding to new geographic locations. What are you most likely to recommend?

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A) Building new competencies and capabilities from scratch is easier and less time consuming than refreshing and renewing current practices. B) Core competencies have to remain continuously updated in order to meet customer needs and dynamic market conditions. C) As experience grows and the robots learn how to perform the activities consistently well and at an acceptable cost, the capability will evolve into a tried-and-true competence. D) Creator should preserve existing capabilities as external conditions and company strategy changes no matter what the cost. E) When a company succeeds in hiring talented employees and training them properly to oversee the robots’ operation, the company’s competencies and capabilities tend to develop more quickly and may last for a decade or more.

77) Sometimes a company can short-circuit the task of building an organizational capability in-house by A) putting in high-incentive bonuses to reward individual employees who train hard to develop the desired capability. B) launching an extensive training effort to develop the capability quickly with newly hired employees. C) either acquiring a company that has already developed the capability or else acquiring the desired capability through collaborative efforts with outsiders having the requisite skills, know-how, and expertise. D) using benchmarking and the adoption of best practices to imitate a capability that rivals have already developed. E) empowering a team of employees to develop the capability however they best see fit.

78)

What is the advantage of acquiring capabilities through merger and acquisition?

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A) speed, because developing new capabilities internally can take many years of effort B) empowerment, because you can capture the essence of the capability and refocus the firm C) price, because it is always cheaper to buy a whole company and pull out the capabilities individually D) assets, because they are the basis of the sale E) investment, because resources and capabilities are considerably stronger

79)

When are capabilities-motivated acquisitions essential?

A) when industry conditions, like technology advances, are central to growth and rivalry is intense B) when first-mover advantages for products or services can be added to the portfolio lineup C) when the acquired firm can be purchased at a discount due to underperformance D) when a market opportunity can slip by faster than a needed capability can be created internally E) when the capabilities involve tacit knowledge and complex routines

80) Training and retraining of employees likely to make the LEAST important contribution to good strategy execution is A) when a company shifts to a strategy requiring different skills, competitive capabilities, managerial approaches, and operating methods. B) when an organization is striving to build skills-based competencies. C) when technical know-how is changing so rapidly that a company loses its ability to compete unless its skilled people have cutting-edge knowledge and expertise. D) when the chosen strategy calls for a deeper technological capability or building and using new capabilities. E) when the strategy execution effort is based on tried-and-true operating practices that vary little from year to year.

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81) The strategic importance of deliberately trying to develop organizational competencies and capabilities is A) lower costs for employee training. B) improved strategy execution and a potential for competitive advantage. C) an increased ability to reduce total operating costs. D) the added ease with which strategic fit and resource fit benefits can be captured. E) the enhanced ability to avoid the perils of outsourcing.

82) Accessing capabilities through an external source can be accomplished through all of these except A) outsourcing, but depends on what can safely be delegated to outside suppliers. B) joint ventures, which depend on how well the partners will work together. C) strategic alliances, which should be selected as much for management style, culture, and goals as for their resources and capabilities. D) learning-based collaborative partnerships for the purpose of learning how the partner does things, internalizing its methods, and thereby acquiring its capabilities. E) promoting qualified people with the right know-how in a timely and cost-effective manner.

83) When it is difficult or impossible to out-strategize rivals (beat them with a superior strategy), the other main avenue to competitive advantage is to A) do a better job of empowering employees and flattening the organization structure. B) outcompete rivals with a stronger corporate culture. C) out-execute them (beat them by performing certain value chain activities in superior fashion). D) beat them with a healthy corporate culture based on such core values as high ethical standards, a strong sense of corporate social responsibility, and genuine concern for customer well-being. E) institute a more motivating and cost-efficient compensation and reward system.

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84)

Superior strategy execution capabilities are A) easy for rivals to copy. B) socially simple. C) develop quickly. D) easy to achieve. E) hard to imitate.

85) You are doing a consulting project for Habitat for Humanity, a not-for-profit organization that builds low-income housing. Which practice would you recommend to Habitat for Humanity to support good strategy execution? A) Choose an organization structure that is a tight fit with the corporate culture. B) Match the firm's organizational structure to its unique strategy. C) Decide how much to spend on training managers and employees. D) Strive for a loose-tight continuum between a high degree of centralization and a high degree of decentralization. E) Ensure the firm hires a capable management team.

86)

Organizing a company's work effort to promote successful strategy execution involves

A) deciding how much to spend on training managers and employees. B) deciding which value chain activities to perform in-house and which to outsource, and making internally performed strategy-critical value chain activities the main building blocks in the organization structure. C) choosing an organization structure that is a tight fit with the corporate culture. D) hiring an inexpensive yet capable management team. E) instituting a compensation structure that reduces employee turnover and thus stabilizes the makeup of work teams.

87) If management is to match a company's organization structure to its strategy in an effective way, then it is essential

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A) that company personnel be empowered to make both strategic decisions and operating decisions. B) for strategy-critical value chain activities to be the main building blocks on the organization chart. C) that value chain activities be deliberately organized so as to produce maximum strategic fit. D) to define the jobs of company personnel in terms of the functions to be performed rather than in terms of the results to be achieved. E) for the company to be organized around cross-functional teams rather than around functional specialties and functional departments.

88) Organizing the work effort in ways that promote successful strategy execution is not likely to include A) facilitating collaboration with external partners and strategic allies. B) providing for cross-unit coordination and deciding which value chain activities to perform in-house and which ones to outsource. C) determining how much authority to centralize at the top and how much to delegate to down-the-line managers and employees. D) determining which functions and organizational units require superior intellectual capital. E) maintaining expertise and resource depth in performing those internally strategycritical value chain activities that underpin its long-term competitive success and provide for the main building blocks in the organization structure.

89)

Outsourcing value chain activities has such strategy executing advantages as

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A) shrinking internal bureaucracies, decreasing delays in decision making, and accelerating responses to changing market conditions. B) facilitating the empowerment of employees (because there are fewer things to do internally). C) promoting a total quality management culture. D) reducing the need to establish a strongly implanted corporate culture. E) reducing the strategic importance of building valuable core competencies.

90) When a company uses outsourcing to zero in on even better performance of those truly strategy-critical activities where its expertise is most needed, then it may also be able to A) create a values-based corporate culture that excels in product innovation. B) decrease internal bureaucracies, flatten its organizational structure, and shorten the time it takes to respond to changing market conditions. C) devote more resources to its social responsibility strategy, better empower employees, and reduce employee turnover. D) better police compliance with ethical standards, lower overall operating costs, and create two or more distinctive competencies. E) reduce the potential for information overload and improve the quality of decision making in each domain.

91) Companies are unlikely to use outsourcing to improve performance of strategy-critical activities when they are engaged in A) improving a company's chances for outclassing rivals in the performance of strategycritical activities and turning a core competence into a distinctive competence. B) promoting quick establishment of a total quality culture. C) speeding internal decision making and shortening the time it takes to respond to changing market conditions. D) capitalizing on the partnerships with outsiders to enhance its arsenal of capabilities and thus contribute to better strategy execution. E) helping decrease internal bureaucracies and flatten the organizational structure.

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92) Critics of companies that use outsourcing contend that shifting responsibility for performing value chain activities to outside specialists A) has the disadvantage of raising fixed costs and reducing variable costs and makes it harder to develop distinctive competencies. B) can hollow out a company's knowledge base and capabilities, leaving it at the mercy of outside suppliers and short of the resource strengths to be a master of its own destiny. C) results in less organizational flexibility and leads to sometimes exorbitant costs in collaborating with outside suppliers and strategic partners. D) slows down decision making on key strategic issues because outside suppliers have to be consulted first. E) lowers the morale of company employees, dampens a company's ability to implement best practices, and results in greater bureaucracy and slower decision making.

93) What might be a rationale for a company like Domino’s Pizza to pursue outsourcing its pizza delivery services to GrubHub as a strategy execution step in order to enhance the performance of Domino’s value chain activities? A) Outsourcing pizza delivery support services to GrubHub raises Domino’s fixed and variable costs. B) Outsourcing pizza delivery support services to GrubHub can hollow out Domino’s knowledge base and capabilities, leaving it at the mercy of outside suppliers, and short of the resource strengths to be a master of its own destiny. C) Outsourcing pizza delivery support services to GrubHub can add to a Domino’s arsenal of capabilities and contribute to better strategy execution. D) Outsourcing pizza delivery support services to GrubHub produces greater competitiveness. E) Outsourcing pizza delivery support services to GrubHub is just one of those value chain activities that are at the core of Domino’s strategy and for which it can create unique value.

94)

A firm's organizational structure is composed of

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A) resource strengths and competitive capabilities that allow it to incorporate attributes at lower costs than rivals whose products have similar attributes. B) the formal and informal arrangement of tasks, responsibilities, lines of authority, and reporting relationships by which the firm is administered. C) superior marketing and sales skills to convince buyers to pay a premium price for the attributes/features incorporated in its product. D) sustainable distinctive competencies to ensure cost reduction and competitiveness. E) a number of independent functional units involved in some common undertaking, with one unit typically in a more central role.

95) Companies engaged in a single line of business most commonly utilize an organizational structure that can be A) either independent, consolidated, or hybrid profit centers. B) a functional (departmental) organizational structure. C) either centralized, principal, or critical path in nature. D) highly decentralized matrices. E) hybrid functional organizations with a combination of decentralized and centralized decision making.

96)

In order to coordinate and control the complex set of activities, managers must ensure

A) the organizational structure enables bureaucratic waste and strives for eliminating imposed capacity limitations of the strategy. B) the various parts of the organizational structure are aligned with one another and also matched to the requirements of the strategy. C) they have enough employees dedicated to the various functions to attain economies of scale benefits. D) they can orchestrate the process with forceful administration and political maneuvering. E) they accommodate situational idiosyncrasies to build a competitively capable organization.

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97) The rationale for making strategy-critical value chain activities the primary building blocks in a company's organizational scheme is based on the A) much shorter time it takes to build core competencies and competitive capabilities. B) benefit such an organizational scheme has in reducing costs. C) benefit such an organizational scheme has in improving the productivity of geographically scattered organizational units. D) thesis that if activities crucial to strategic success are to have the resources, decisionmaking influence, and organizational impact, they have to be centerpieces in the organizational scheme. E) benefit such an organizational scheme has in making the empowerment of employees more effective.

98)

Primary building blocks in a company's organizational structure do NOT include A) functional departments. B) process and operations departments. C) empowered employee departments. D) divisional units performing major processing steps. E) geographic organizational units.

99)

Among the known structural forms of organization, which is nonexistent?

A) a functional structure where function is a major step in the firm's value chain B) a simple structure where all major decisions and oversight are a duty of the central executive C) a multidivisional structure where each division of the firm is an independent profit center D) a matrix structure where there are two or more divisions organized to enhance crosscommunication E) a network structure where independent organizations are involved in a common undertaking

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100)

A simple organizational structure is also known as a

structure.

A) line-and-staff B) functional C) matrix D) multidivisional E) three-dimensional

101)

How is a functional structure or unitary structure organized?

A) with a central executive handling all major decisions B) to lighten the load of senior executives so they can concentrate on value chain action agendas C) specifically to manage unrelated diversification opportunities D) into functional departments, with departmental managers who report to the CEO and small corporate staff E) with top-heavy management and with senior executives forming a central office of the chairman

102)

A multidivisional structure consists of a

A) centralized structure combining corporate overhead with support functions. B) decentralized structure with a set of operating divisions organized along business, product, customer groups or geographic lines, and a central corporate headquarters that allocates resources, provides support functions, and monitors divisional activities. C) decentralized structure or divisional structure that monitors performance and allocates funding to those divisions wanting to grow. D) decentralized format of senior executives with large overhead staff to manage and control all the business lines. E) centralized structure that controls the coordination across the more diversified and complex functions within the organization.

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103) Which structure combines two or more organizational forms, with multiple reporting relationships, and is used to foster cross-unit collaboration? A) matrix structure B) composite structure C) divisional structure D) network structure E) functional structure

104)

Larger firms with more complex organizational structures are A) less decentralized in their decision making than smaller firms. B) more decentralized in their decision making than smaller firms. C) less decentralized in their decision making than larger firms with simpler structures. D) more centralized in their decision making than smaller firms. E) not decentralized due to their operating size.

105) Imagine you are proposing that your organization reconfigure itself into a highly centralized organizational structure. Your major supporting rationale for proposing this change is that a highly centralized organizational structure A) encourages company employees to exercise initiative and act responsibly. B) promotes greater motivation and involvement in the business on the part of more company personnel. C) spurs new ideas and creative thinking, as well as allows for fast response to market change. D) requires fewer layers of management. E) eliminates the potential for conflicting goals and actions on the part of lower-level managers.

106)

A disadvantage of the centralized organization is that it

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A) lengthens response times by those closest to the market conditions because they must seek approval for their actions. B) does not encourage responsibility among lower-level managers and rank-and-file employees. C) discourages lower-level managers and rank-and-file employees from exercising any initiative. D) diverts authority away from those closest to, and most knowledgeable about, the situation for actions. E) results in higher-level managers being unaware of actions taken by empowered personnel under their supervision.

107)

A decentralized organizational structure is predicated on the belief that

A) top executives should establish a collegial, collaborative culture where decisions are made by general consensus on what to do and when. B) strict enforcement of detailed procedures backed by rigorous managerial oversight is necessary because company personnel cannot be counted on to act wisely or keep costs to a bare bones level. C) decision-making authority should be pushed down to the lowest organizational level capable of making timely, informed, and competent decisions. D) most company personnel have neither the time nor the inclination to direct and properly control the work they are performing and that they lack the knowledge and judgment to make wise decisions about how best to do their work. E) lower-level managers and employees should go up the ladder of command for approval on most all strategic and operating issues of much importance.

108)

A primary disadvantage of a centralized organizational structure is that it results in

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A) lengthening response times and discouraging lower-level managers and rank-and-file employees from exercising initiative. B) losing top-level management control. C) putting too much decision-making authority in the hands of lower-level company personnel. D) making it hard to fix accountability when things do not go well and putting the organization at risk when bad decisions are made. E) impeding cross-unit coordination and the capture of strategic fits.

109)

The major disadvantage of a decentralized organizational structure is that it can result in

A) increasing the size of the corporate bureaucracy. B) reducing a company's response times to changing external events. C) discouraging lower-level managers and rank-and-file employees from exercising initiative. D) putting the organization at risk if higher-level management is unaware of their actions. E) creating more layers of management.

110)

The principal advantage of a decentralized organizational structure is that it can

A) reduce the layers of management and encourage lower-level managers and rank-andfile employees to exercise initiative and act responsibly. B) make it easy to fix accountability when company performance targets are not met. C) generate higher productivity on the part of the workforce and a greater ability to become an industry low-cost leader. D) enhance cross-unit coordination and the capture of strategic fits. E) establish the emergence of a collegial, collaborative culture where teamwork is a core value and decisions are made on the basis of consensus.

111)

Delegating greater authority to subordinate managers and employees

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A) creates a more horizontal or flatter organizational structure with fewer management layers and usually acts to shorten organizational response times. B) usually slows down decision making because so many more people are involved and it takes longer to reach a consensus on what to do and when to do it. C) can be a demotivating factor because it requires people to take responsibility for their decisions and actions. D) is very risky because it usually results in lots of "bad" decisions on the part of employees, as well as lower levels of financial performance. E) enhances greater cross-unit coordination and aids the capture of strategic fit benefits across related businesses.

112) The organizing challenge of a decentralized structure that stresses employee empowerment is A) how to keep empowered employees from making lots of stupid decisions. B) establishing a collegial, collaborative culture so that decisions can be made by gaining a quick consensus on what to do and when to do it. C) how to avoid demotivating employees (because empowered employees are expected to take responsibility for their actions and decisions). D) how to exercise control over the actions and decisions of empowered employees so that the business is not put at risk while trying to capture the benefits of empowerment. E) how to convince lower-level managers and employees that they are empowered.

113)

Coordinating the work efforts of internal organization units is best accomplished by

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A) establishing a corporate culture where teamwork is a core value and decisions are made by general consensus among team leaders in the affected work units. B) having closely related activities report to a single executive who has the authority and organizational clout to coordinate, integrate, and arrange for the cooperation of units under their supervision. C) having the heads of support activities report to the heads of primary, strategy-critical activities. D) establishing monetary incentives that reward people for being cooperative team players. E) having frequent meetings among the heads of closely related activities and work units to establish mutually agreeable deadlines.

114) One of the big weaknesses of organization structures that do not have cross-business collaboration is A) making it hard to effectively empower employees. B) making it difficult to have closely related activities report to a single executive. C) that pieces of strategically relevant activities and capabilities often end up scattered across many departments, with each pursuing its own priorities, projects, and agendas. D) impeding the use of outsourcing. E) making it hard to fix managerial accountability for poor results.

115) Diversified companies like LVMH or Prada Group that are striving to capture the benefits of synergy between separate luxury products businesses often face challenges in A) giving business-unit heads full rein to operate independently. B) having pieces of strategically relevant activities and capabilities scattered across many departments, with each pursuing its own priorities, projects, and agendas. C) centralizing performance of functions requiring close coordination at the functional level. D) serving the interests of individual businesses and not the company as a whole. E) maintaining adequate control and cross-unit coordination.

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116)

Building organizational bridges with external allies is aided by

A) appointing "relationship managers" and giving them responsibility for making particular strategic partnerships or alliances generate the intended benefits. B) agreeing with allies to meet frequently and make all decisions pertaining to the alliance on the basis of mutual agreement and consensus. C) getting each strategic ally to agree to appoint someone as head of the collaborative effort and to give that person the authority to enforce tight coordination of joint activities. D) forming a 50-50 joint venture with each strategic partner, and then assigning people to the joint venture that has the authority and responsibility to enforce tight coordination. E) entering into a written agreement detailing the roles and responsibilities of the company and the ally/partner, setting forth the results that are expected, establishing deadlines for achieving these results, and designating the people who are to be responsible for making the collaborative effort work successfully.

117)

A network structure is likely to be poorly managed if A) it ensures that the right partners are included and the activities are coordinated. B) it encourages more effective collaboration and cooperation among partners. C) it includes a hand-picked, integrated network of suppliers. D) the arrangement of independent organizations is involved in a common undertaking. E) no one firm has a central control over the others.

118)

A company must do all of the following to match structure to strategy except

A) choose a basic organizational design and modify it to fit the company's particular business. B) supplement the design structure with coordinating mechanisms. C) institute networking and communication arrangements to support strategy execution. D) set up "ideal" organizational arrangements despite having to disturb existing relationships. E) knit the efforts of outsourced groups together.

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119) Natalie, owner and president of Russian River Brewing, a craft beer company, is facing growing competition from local craft beer taprooms. She has sought your advice about the managerial task of executing strategy. What would you be likely to advise her to do? A) Wait until there is a shakeout in the local craft beer market and then capture share as the smaller companies go out of business. B) Direct organizational change, achieve continuous improvement in operations and business processes, create and nurture a strategy-supportive culture, and consistently meet or beat performance targets. C) Employ new techniques to overcome managerial resistance to change. D) Never allow division managers to see the company’s strategic plan, in case they show it to company rivals. E) Focus solely on outsourcing operations, management of people, and business processes as much as possible to reduce costs.

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Answer Key Test name: Chap 10_23e 23) D 24) B 25) C 26) A 27) D 28) A 29) C 30) C 31) B 32) C 33) E 34) A 35) C 36) A 37) E 38) C 39) B 40) C 41) A 42) A 43) B 44) B 45) D 46) A 47) B 48) A Version 1

49) E 50) D 51) C 52) B 53) C 54) D 55) D 56) B 57) B 58) B 59) C 60) C 61) C 62) A 63) A 64) A 65) A 66) A 67) E 68) B 69) A 70) C 71) E 72) D 73) D 74) D 75) A 76) B 77) C 78) A Version 1

79) A 80) E 81) B 82) E 83) C 84) E 85) B 86) B 87) B 88) D 89) A 90) B 91) B 92) B 93) C 94) B 95) B 96) B 97) D 98) C 99) E 100) A 101) D 102) B 103) B 104) B 105) E 106) E 107) C 108) A Version 1

109) D 110) A 111) A 112) D 113) B 114) C 115) E 116) A 117) E 118) E 119) B

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Chapter 11 Managing Internal Operations 1) How do companies use strategic priorities to drive how capital allocations are made in the pursuit of good strategy execution? Provide at least two examples.

2) Surani is the executive director of operations for Sutter Pacific Medical Center. What would be a compelling rationale for Surani to develop policies and procedures that facilitate superior strategy execution?

3) Benchmarking is defined as the process of identifying, studying, and implementing best practices in executing strategy. Suppose you are managing a local landscaping company. How would you justify the use of benchmarking for your business?

4) You are the owner and CEO of a manufacturer of camping and outdoor adventure equipment. What might be the payoff of implementing total quality management (TQM) in your business?

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5) How do Six Sigma quality control programs benefit the Charleston Area Medical Center, and what are two types of programs that they include?

6) Is there a difference between Six Sigma DMAIC programs and Six Sigma DMADV programs? If so, what are those differences?

7) What three principles underlie the statistical thinking of Six Sigma quality control programs?

8) Explain how the Six Sigma process of define, measure, analyze, improve, and control (DMAIC) works. Provide at least two examples of companies that have adopted Six Sigma.

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9) While Six Sigma programs often improve the efficiency of many operating activities and processes, there is evidence that innovation can be stifled by Six Sigma programs. True or false? Explain.

10) Natalie and Vinnie own the Russian River Brewing Company, a craft brewer and taproom in northern California. What actions could the partners take to realize full value from TQM or Six Sigma initiatives and promote a culture of operating excellence?

11) Discuss the importance of and provide at least three examples of the strategic benefits of real-time information systems.

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12) Name the five broad areas that information systems need to cover and explain the significance of real-time tracking and reporting.

13) Discuss control mechanisms that managers can use to monitor the performance of empowered employees.

14) The use of incentives and rewards is the single most powerful tool at management's disposal to win strong employee commitment to carrying out the strategic plan. True or false? Explain.

15) Provide three examples of nonmonetary motivation and rewards practices that have the capability to foster good strategy execution and explain how they act to produce such a result.

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16) Why is it unwise to take off the pressure for good performance or play down the adverse consequences of shortfalls in performance as part of a company's motivational and reward scheme for promoting competent strategy execution?

17) Discuss why it is generally undesirable for approaches to motivation, compensation, and people management to avoid the use of negative consequences or punishment if performance targets are not achieved or if particular people are habitual underperformers. Does striking a balance between rewards and punishment generally work better?

18) Steve Maas, owner of Oliver's Markets, a chain of four regional grocery stores, believes that attention and energy on what to achieve as opposed to what to do makes the work environment at Oliver's Markets results-oriented. To facilitate this effort, Oliver's Markets has implemented an employee stock ownership program. Is Steve correct in his approach? Explain your answer.

19)

How has Wegmans Food Markets created a strategy-supportive reward structure?

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20) Suppose you are managing a local golf course. How might you go about developing and implementing an incentive compensation system that will help drive successful strategy execution?

21) Why does a company's budget need to be closely linked to the needs of good strategy execution? Why might a change in strategy call for budget reallocations?

22) How do well-conceived policies and procedures aid the task of implementing and executing strategy? Explain how well-conceived policies and procedures facilitate organizational change and good strategy execution.

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23) How does TQM differ from business process reengineering? Explain the value of striving for continuous improvement in processes and activities.

24) Identify types of support systems that a company can install to support the execution of its strategy. How important are these systems to the strategy implementation process?

25) Besides financial and other monetary rewards and incentives, what are some nonmonetary motivation and rewards practices that can foster good strategy execution in an organization?

26) Casey and Danielle, owners of Retrograde Coffee Roasters, have hired Jane, a secondyear student in the Masters of Business Administration Data Analytics program, to develop a state-of-the-art information and operating system for its roastery and retail outlet to enable better strategy execution. How would Casey and Danielle justify retaining Jane and adopting the new IT system?

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27) Erica is the owner and CEO of Global Package, a manufacturer of custom glass packaging for wine and craft beer producers. What might be among her greatest challenges in making resource allocations to meet the strategic priorities of her business?

28) Changes in strategy at your university are being triggered by guidance from local and state governments regarding social distancing, shifts from classroom to online teaching, and sudden declines in student enrollments. What are some of the likely implications?

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29) In 2018, Beyond Meat, a producer of plant-based meat substitutes suitable for consumption by vegetarians and vegans, published certain company policies and procedures in its Company Code of Conduct and Ethics document: “Employees are expected to deal fairly and honestly with anyone with whom they have contact in the course of performing their duties to the Company. The making of false or misleading statements about the Company’s competitors is prohibited by this Code, inconsistent with the Company’s reputation for integrity and harmful to the Company’s business. Employees may not take unfair advantage of anyone through manipulation, concealment, abuse of privileged information, misuse of confidential information, misrepresentation of material facts or any other unfair business practice. Employees involved in procurement have a special responsibility to adhere to principles of fair competition in the purchase of products and services by selecting suppliers based exclusively on typical commercial considerations, such as quality, cost, availability, service and reputation, and not on the receipt of special favors. Employees involved in sales have a special responsibility to abide by all Company policies regarding selling activities, including Company policies relevant to revenue recognition.” These policies and procedures in support of Beyond Meat’s strategy execution effort are important for what reasons?

30) A company's ability to marshal adequate resources in support of new strategic initiatives and steer them to the appropriate organizational units is important to the strategy execution process because

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A) changes in strategy often require resource reallocation, and organizational units need the proper funding to carry out their part of the strategic plan effectively and efficiently. B) accurate budgets are the key to exercising tight financial controls over what organization units can and cannot do in carrying out management's directives to execute the chosen strategy proficiently. C) tight budget control is management's most powerful tool for first-rate strategy execution. D) lean, carefully managed budgets protect the company's financial condition and eliminate the wasteful use of cash. E) lean, strictly enforced budgets are management's best and most used means of getting organizational units to exercise the fiscal discipline needed to execute the chosen strategy in a cost-efficient manner.

31) Managers charged with implementing and executing strategy need to be deeply involved in the budgeting and resource allocation process because of all the following reasons except A) too little funding deprives organizational units of the necessary resources to execute their piece of the strategic plan while too much funding wastes organizational resources and reduces financial performance. B) resource allocation involves screening of requests for people, facilities, and equipment, and approving them whether they contribute to the strategy execution effort or not. C) without major budget reallocations there is little chance that desired core competencies and organizational capabilities will emerge. D) lean, carefully managed budgets protect the company's financial condition and eliminate the wasteful use of cash. E) a change in strategy nearly always calls for budget reallocations and resource shifting.

32) From a strategy-implementing/strategy-executing perspective, operating budget allocations should

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A) primarily be based on the number of new strategic initiatives being implemented in each operating department. B) be based on the number of people employed in each of the divisions. C) be strategy-driven and based on how much each organizational unit needs to carry out its piece of the strategic plan efficiently and effectively. D) be linked to the costs of performing value chain activities as determined by benchmarking against best-in-industry competitors. E) depend on how much stretch there is in each department's objectives and what additional resources are needed to help reach these performance targets.

33)

New strategies often entail budget reallocations because

A) revamping the performance of value chain activities can be costly. B) the accompanying policy revisions and compensation incentives tend to require different levels of funding than before. C) business units important in the prior strategy but having a lesser role in the new strategy may need downsizing, while units and activities that now have a bigger and more critical strategic role may need more people, new equipment, additional facilities, and above-average increases in their operating budgets. D) empowering employees to carry out the new strategy elements and shifting to a total quality management type of culture to build skills in competent strategy execution typically require substantial new funding and budget revisions. E) adopting best practices and pushing for continuous improvement tends to reduce costs and reduce overall resource requirements.

34) Visible actions to reallocate operating funds and move people into different and new organizational units

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A) can be dysfunctional in trying to implement a new strategy because of the anxiety and insecurity that big changes in budgets cause among company personnel. B) signal a determined commitment to strategic change and can help catalyze and give credibility to the implementation process. C) run the risk of inadvertently creating barriers to building the needed competencies and capabilities. D) tend to impede the task of empowering employees and shifting to a new, more strategy-supportive culture. E) are rarely necessary in implementing a new strategy unless the new strategy entails a radically different set of value chain activities.

35)

A company's operating budget must

A) be strategy-driven in order to amply fund the performance of key value chain activities. B) be risk-averse, so as not to run the risk of inadvertently creating barriers to building the needed competencies and capabilities. C) be employee-driven to gain commitment to strengthening the company's core competencies and competitive capabilities. D) trim costs of key value chain activities to achieve cost efficiency in new strategic initiatives. E) follow traditional and time-tested methods of budgeting to support rapid adjustments in strategy.

36)

Merely fine-tuning the execution of a company's existing strategy normally requires A) big shifts of resources from one area to another. B) a larger allocation of resources to the effort. C) trimming costs and shifting resources to activities that have a higher priority. D) creativity in finding ways for cost reductions, that is, ways to do less with less. E) cost-cutting in key value chain activities.

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37) Apple decides to reallocate resources by curtailing online ad budgets and investing heavily in scratch-resistant Sapphire, the material that differentiates the Apple Watch from rival wearable computing device brands. What is most likely the reason for Apple's reallocation of resources? A) making critical value chain activities less effective B) supporting the new strategic initiative of the brand C) signaling commitment to online sales of the brand D) signaling commitment to offline sales of the brand E) impeding the efforts of rivals to hoard Sapphire

38) In 2013, Google decided to kill its 20 percent time policy, which allowed its staff to work on side projects of their choice, one day per week. The decision to end the 20 percent time policy was most likely made in order to A) deter entry of rival companies into Google's Internet advertising market space. B) increase Google's external debt and equity capital funding requirements. C) lower Google's cost of handling online transactions. D) permit reallocation of resources to enhance Google's strategy execution capabilities. E) increase B2B demand for Google's existing diversified Internet services businesses.

39) Cavco Construction divests funds from its commercial property ventures to invest in gated community properties close to New York, signaling a change of strategy. Which of the following statements about Cavco is most likely true? A) Cavco is impeding the efforts to proficiently execute the strategy. B) Cavco is merely fine-tuning its existing strategy to test efficiency. C) Cavco is marshalling resources to support a new strategic initiative. D) Cavco is hampering work climate conducive for good strategy execution. E) Cavco is focusing on activities that are a low priority in the strategy execution effort.

40)

Well-conceived policies and operating procedures facilitate good strategy execution by

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A) leaving it up to employees regarding how things are to be done. B) removing roadblocks to creativity and innovation. C) fostering a work climate that preserves the status quo whenever possible. D) enforcing consistency in how strategy-critical activities are performed. E) channeling individual and group efforts along a strategy-supportive path.

41)

Prescribing policies and operating procedures aids the task of implementing strategy by

A) helping ensure that worker eligibility for incentive bonuses is measured consistently and awarded fairly. B) fostering the use of best practices, TQM, Six Sigma, and continuous improvement efforts. C) acting as a powerful lever for changing employee attitudes about the need for a different incentive and reward system. D) helping build employee commitment to strengthening the company's core competencies and competitive capabilities. E) placing limits on ineffective independent action and channeling efforts of individuals along a path more conducive to good strategy execution and operating excellence.

42)

Providing top-down guidance can aid the task of implementing strategy

A) provided it promotes greater use of and commitment to best practices and total quality management. B) because really effective internal policies and procedures are not easily duplicated by other firms. C) because astutely conceived policies or procedures can result in competitive advantage. D) by helping align the actions and behavior of company personnel with the requirements for good strategy execution, placing limits on independent action, and helping overcome resistance to change. E) by making it easier to impose tight budget controls and avoid wasting scarce resources.

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43)

A useful guideline in designing strategy-facilitating policies and operating procedures is

A) to prescribe enough policies to give organizational members clear direction in implementing strategy and to place reasonable boundaries on their actions. This then empowers them to act within these boundaries in pursuit of company goals. B) that strictly enforced policies work better than loosely enforced policies. C) that more policies/procedures work better than fewer policies/procedures, and that strict enforcement always beats lax enforcement. D) to let individuals act in an empowered and self-directed way, subject only to the constraint that their actions and behavior be ethical and in step with the corporate culture. E) to prescribe enough policies and procedures that little is left to chance in performing value chain activities, and employees should have no leeway to do things in a manner that deviates from the company's best-practices standard.

44) Not among the reasons that Wegmans Food Markets delivers above-average profit margins and has below-average employee turnover rates in comparison to its supermarket industry rivals is A) its recruitment and staffing policy of filling at least half of its open opportunities internally. B) a regular series of programs designed to "hear," capture, and implement employees' ideas. C) its company events such as "open-door" days, team huddles, focus groups, and twoway Q&As with senior management. D) it has rewards and benefits substantially lower than supermarket industry averages in order to boost profit margins. E) its multimillion dollar investments in the training and education of its employees.

45) In prescribing policies and procedures that facilitate independent action on the part of empowered employees for good strategy execution, companies need to do all of the following except

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A) give organization members clear direction and place reasonable boundaries on their actions. B) empower employees to act within the company's set boundaries in pursuit of company goals. C) allow company personnel to act with some defined degree of freedom, especially when individual creativity and initiative are more essential to good strategy execution than standardization and strict conformity. D) institute policies that give employees substantial leeway to carry out activities in the way they think is best. E) produce policy manuals on strategy execution that prescribe exactly how daily operations are to be conducted.

46) Good strategy execution can involve policies and procedures manuals in order to maintain consistency in product quality and service behavior patterns to allow for A) activities that need to be strictly prescribed and activities to allow room for independent action on the part of company personnel. B) differences in product range and quality across company outlets. C) an extremely narrow scope of independent thinking and action of company staff. D) a written strategy but not the routines for running the business. E) ample leeway in how staff perform activities at different company outlets.

47)

What is a good example of how not to facilitate strategy execution?

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A) Kia's service centers follow similar routines when receiving vehicles for servicing. B) Ford encourages its staff to refrain from engaging in practices out of sync with the company's mission. C) Honda's personnel follow a 227-page manual to ensure that its showrooms have similar operating practices across regions. D) Chevrolet's electric vehicle service center personnel receive the same specialized training and replicate the caliber of customer service across locations. E) Tesla resists standardization of the way activities are performed at its service centers because its personnel have primarily been poached from BMW, Chevrolet, and VW's electric vehicle divisions.

48) Imagine you are a consultant to a local donut shop chain. You have been asked to design a superior strategy execution effort for the owners of the company. What process management tool would you most likely not provide to the owners? A) best practices methods to drive continuous improvement in how internal operations are and should be conducted at the donut chain. B) benchmarking of the donut chain's operating activities and business processes against "best-in-industry" and "best-in-world" performers. C) "best-in-company" operating activities and processes to standardize how the different locations of the donut chain perform the same functions. D) operating practices that generate economies of scale and scope without a reconfiguration of the donut chain's current value chain activities. E) performance yardsticks for judging effectiveness and efficiency for particular value chain activities and business processes that are deemed strategically critical for the donut chain.

49)

A "best practice" refers to a

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A) policy or procedure that is unusually effective. B) method of performing an activity or business process that consistently delivers superior results compared to other approaches and that at least one company has demonstrated works particularly well in terms of delivering operating excellence. C) strategy-critical activity that results in sustainable competitive advantage. D) value chain activity that is a company's distinctive competence. E) particular value chain activity that management has given top priority to performing in world-class fashion.

50)

A "best practice" standard

A) helps a company move toward performing its value chain activities more effectively and efficiently. B) is the sole means of measuring whether or not a company performs a specific task or activity so as to achieve the lowest possible costs. C) conforms to established industry standards. D) is a measure of a company's core competence. E) is often sufficient justification for maintaining the status quo.

51)

The idea behind benchmarking and best practices is to

A) identify which companies are the best performers of a strategically relevant activity and then copy their methods exactly. B) search the world for a company that performs a strategically relevant task or value chain activity at the lowest possible cost and then use business process reengineering techniques to try to meet or beat the costs of the world's low-cost performer of that activity. C) perform each activity in the industry value chain according to standard industry practice and then regularly benchmark the company's performance to see if it is actually achieving the industry standard. D) identify companies that are the best performers of an activity and then adapt their practices to fit the company's own specific circumstances and operating requirements. E) determine whether a company has a world-class value chain.

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52)

The backbone of the process of identifying, studying, and implementing best practices is A) business process reengineering. B) a corporate culture that has a core value of operating excellence. C) benchmarking. D) Six Sigma quality control techniques. E) the innovative application of TQM techniques.

53) A local dairy that produces organic milk, yogurt, butter, and ice cream has asked you to provide a tool for its managers to promote operating excellence in performing value chain activities. Which tools and methods would you not recommend to the owners of the local dairy? A) utilize benchmarking B) adapt best practices C) install TQM and/or Six Sigma quality control techniques D) undertake business process reengineering E) adopt standard industry techniques

54) Natalie and Vinnie are co-owners of the Russian River Brewing Company, a craft brewer and brewpub located in northern California. Natalie is president and Vinnie is the brewmaster. Which three techniques are the owners not likely to adopt to promote the brewery's operating excellence and further the cause of good strategy execution? A) benchmarking, business process reengineering, and TQM techniques B) business process reengineering, Six Sigma, and best practices techniques C) strategic resource training, standard industry techniques, and competitor strength matrix techniques D) TQM, business process reengineering, and Six Sigma quality control techniques E) best practices, TQM, and Six Sigma quality control techniques

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55) Because functional organization structures often result in pieces of strategically relevant activities and capabilities being scattered across many different functional departments, companies have found that A) it is necessary to give these functional departments the freedom to collaborate closely with each other to achieve the desired degree of coordination. B) it is necessary to outsource those activities that are fragmented to strategic partners in order to achieve the needed coordination. C) there is merit in using business process reengineering to radically redesign and streamline strategy-critical processes and workflow from different departments and unifying their performance into a single department or cross-functional work group that has charge over the whole process. D) TQM is a potent way to reengineer the work effort, avoid the shortcomings of a functional organization structure, and achieve rapid-response capability. E) it makes good organizational sense to combine those functional departments where fragmentation is a problem into a single department.

56)

Business process reengineering is a tool for A) expediting the redesign of existing products and shortening the design-to-market

cycle. B) radically redesigning and streamlining how an activity (workflow) is performed, by pulling the pieces of strategy-critical activities out of different departments and unifying their performance in a single department or cross-functional work group. C) instituting total quality management. D) making the most effective use of Six Sigma techniques. E) the rapid redesign of an organization's structure so as to quickly create organizational competencies and capabilities.

57)

Business process reengineering

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A) involves radically redesigning and streamlining the workflow (typically enabled by cutting-edge use of online technology and information systems), with the goal of achieving quantum gains in performance of the activity. B) is not a useful tool for streamlining a company's work effort and moving it closer to operational excellence. C) is the major tool that ambidextrous organizations deploy to drive continuous improvement efforts. D) is typically cheaper and easier than using Six Sigma techniques to achieve the same cost savings. E) is a company's best justification for eliminating all nonmonetary rewards and incentives for its employees.

58)

Total quality management (TQM)

A) entails creating a total quality culture that strives for continuously improving the performance of every value chain activity and is driven by a philosophy of managing a set of business practices: 100 percent accuracy in performing tasks (zero defects), involvement and empowerment of employees at all levels, team-based work design, benchmarking, and total customer satisfaction. B) is a valuable tool for helping company managers identify what the best practice is for performing a particular activity at a high level of quality. C) works best when used in conjunction with Six Sigma quality control techniques. D) is an excellent tool for reengineering business processes and making quantum gains in the efficiency and effectiveness with which the processes are performed. E) is a philosophy of doing things that aims at mistake-free management of a company's entire business.

59) While TQM concentrates on producing quality goods and fully satisfying customer expectations, it achieves its biggest successes when it is extended to

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A) effecting at least a 99 percent accuracy in performing tasks. B) technologically based phases of operations, particularly data management and software-based processes. C) the adoption of industry standard operating practices and benchmarking against those practices. D) changing an organization’s culture and business philosophy previously devoid of pressing, customer-driven incentives to improve. E) streamlining the organization via downsizing and overall cost reductions to ensure a sustainable competitive advantage.

60) Why would Belinda, owner of GC Micro, a $70 million company that manufactures customized IT equipment and software for Fortune 1000 companies and defense contractors, decide to invest in a total quality management (TQM) program? A) because a TQM program deals exclusively with procedures to achieve defect-free manufacturing and assembly B) because a TQM program nearly always contributes more to the achievement of operating excellence than either business process reengineering or Six Sigma quality control techniques C) because a TQM program entails creating a corporate culture bent on continuously improving the performance of every task and every value chain activity D) because TQM programs are considerably more effective in improving manufacturing and assembly activities than they are in improving such value chain activities as R&D, human resources management, supply chain management, information technology, sales, and marketing and finance E) because TQM programs are generally considered the best tool for reengineering strategy-critical business processes

61) that

An erroneous justification to implement a total quality management (TQM) program is

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A) TQM aims at instilling enthusiasm and commitment to doing things right from the top to the bottom of the organization. B) TQM produces significant results very quickly, with very little benefit emerging after the first six months. C) TQM doctrine preaches that there's no such thing as "good enough" and that everyone has a responsibility to participate in continuous improvement. D) TQM, if used effectively, can result in a corporate culture bent on continuously improving the performance of every task and every value chain activity. E) TQM emphasizes continuous improvement in all phases of operations, 100 percent accuracy in performing tasks, involvement and empowerment of employees at all levels, teambased work design, benchmarking, and total customer satisfaction.

62)

Six Sigma programs

A) utilize advanced statistical methods to improve quality by reducing defects and variability in the performance of business processes. B) consist of a disciplined, statistics-based system aimed at producing not more than 2.5 defects per million iterations for a manufacturing or assembly process. C) are based on three principles: (1) all work is a statistically controllable process; (2) no well-controlled process allows variability; and (3) defect-free work requires tight statistical controls. D) suggest that all activities can be controlled, employee empowerment is the best control tool, and 100 percent control is possible. E) radically redesign and streamline how an activity is performed.

63)

Six Sigma quality control

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A) is a strategy implementer's best, most reliable tool for simultaneously achieving topnotch product quality and low manufacturing costs. B) consists of a disciplined, statistics-based system aimed at producing not more than 2.5 defects per million iterations for a manufacturing or assembly process. C) consists of a disciplined, statistics-based system aimed at producing not more than 3.4 defects per million iterations for any business process. D) consists of a disciplined, statistics-based system aimed at fewer than 5.0 complaints per million customer transactions. E) is a powerful tool for companies whose customers are very picky about product quality and product performance and who can't afford for the product they use to break down and require repairs.

64)

Six Sigma processes

A) are based on three principles: (1) all work is a statistically controllable process; (2) no well-controlled process allows variability; and (3) defect-free work requires tight statistical controls. B) can be used for both improving existing business processes and for developing new processes or products. C) can be used for improving products or business processes but not for developing new products or new processes. D) consists of a disciplined, statistics-based system aimed at producing not more than 10 defects per million iterations for a manufacturing or assembly process. E) can be used for developing new products or new business processes but not for improving existing products or business processes.

65) a(n)

The Six Sigma process of define, measure, analyze, improve, and control (DMAIC) is

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A) improvement system for existing processes falling below specification and needing incremental improvement. B) improvement system used to develop new processes or products at 100 percent defectfree levels. C) system of statistical procedures for achieving 100 percent control over how a task is performed. D) improvement system used to develop new processes or products at Six Sigma levels. E) system of statistical procedures for eliminating 100 percent of the variability in how a task is performed.

66) Six Sigma's DMADV process of define, measure, analyze, design, and verify is a particularly good vehicle for A) improving performance when there are small variations in how well an activity is performed. If there are wide variations, then the Six Sigma DMVSI process has to be used. B) achieving 100 percent control over how a task is performed and eliminating 100 percent of the variability in how a task is performed. C) improving performance when there are wide variations in how well an activity is performed. D) developing new processes or products at Six Sigma quality levels. E) improving customer satisfaction, whereas Six Sigma improves manufacturing processes.

67) The statistical thinking underlying Six Sigma is based on which of the following three principles?

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A) All activities can be controlled, employee empowerment is the best control tool, and 100 percent control is possible. B) All work is a process, all processes have variability, and all processes create data that explain variability. C) All work activities can be done accurately most of the time, empowered employees are necessary for effective control, and good statistical data is an empowered employee's best control tool. D) All work is a statistically controllable process, 100 percent control is possible, and every well-controlled process is defect-free. E) Most business processes are subject to control, Six Sigma can totally remove variability in how processes are performed, and most defects can be eliminated.

68) Charleston Area Medical Center (CAMC) has implemented Six Sigma quality programs in order to A) improve the efficiency of numerous CAMC health care delivery operating processes, although the downside is that using Six Sigma approach can stifle innovative activities. B) manage a set of business practices that emphasizes continuous improvement in all phases of CAMC's operations and 100 percent accuracy in performing tasks order to control health care costs. C) improve the performance of CAMC's heath care delivery services when there are only small variations in how well an activity is performed. D) focus on development of new health care delivery processes but not on improving existing business processes at CAMC. E) employ statistical procedures to eliminate 92 percent of the variability in how a task is performed at CAMC.

69) Lagunitas Brewing Company has successfully and methodically applied Six Sigma methods to its value chain, activity by activity, so that the company can

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A) clearly consider what it will take to overtake rivals with the industry's overall best strategy. B) make major strides in improving the proficiency with which its strategy is executed without sacrificing innovation. C) increase its bargaining power with suppliers and create better seller-supplier collaborations. D) assess the extent to which rivals have competitively valuable competencies or capabilities. E) construct a business model that entails a value proposition based on quality.

70)

An ambidextrous organization is one that

A) pursues incremental improvements in operating efficiency, while R&D and other processes that allow the company to develop new ways of offering value to customers are given freer rein. B) is capable of using efficiency and effectiveness with equal skill. C) is very skillful and versatile with operating activity. D) is managed by employing continuous improvement in operating practices while managing employees as a loosely integrated network of efficiency. E) employs identical improvement methods for both operating processes and R&D.

71) The big difference between business process reengineering and continuous improvement programs like TQM or Six Sigma is that

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A) reengineering is a tool for installing process organization, whereas TQM/Six Sigma concern defect-free production methods and delivering world-class customer service. B) reengineering helps create core competencies, whereas TQM/Six Sigma are tools for making a core competence stronger and more efficient. C) reengineering is a tool for achieving one-time quantum improvement, whereas TQM and Six Sigma programs aim at ongoing incremental improvements. D) business process reengineering requires benchmarking, whereas TQM and Six Sigma do not. E) reengineering represents an effort to totally revamp a firm's value chain, whereas TQM looks at incrementally improving the performance of two or three targeted value chain activities and Six Sigma is primarily for reducing manufacturing defects.

72) To obtain maximum benefits from benchmarking, best practices, reengineering, TQM, and Six Sigma programs aimed at facilitating better strategy execution, managers need to A) start with a clear idea of what specific outcomes really matter, such as a Six Sigma defect rate or superior customer satisfaction, and then build a total quality culture that is genuinely committed to achieving these outcomes. B) have annual contests to see which part of the company is making the greatest strides in approaching operating excellence. C) strive for 100 percent control over the variability in how each and every value chain activity is performed. D) have at least 50 percent of company personnel earn "green belts" in Six Sigma techniques. E) build core competencies in TQM, Six Sigma, benchmarking, best practices adoption, and business process reengineering.

73)

Without a strategic framework, managers lack the context in which to

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A) fix things that really matter to business-unit performance and competitive success. B) carry out companywide goals related to the dynamics of a single business model. C) employ the company's resources in the pursuit of sustainable competitive advantage. D) communicate aspirations for the company. E) analyze the emerging market opportunities more precisely.

74) To build a total quality culture and achieve full value from the use of TQM or Six Sigma initiatives, managers can take such action steps as A) encouraging quality-supportive behaviors on the part of employees, while empowering employees to make changes to improve quality. B) requiring all employees to attend Six Sigma training programs and achieve "black belt" status. C) instituting greater centralization of decision making to help enforce strict compliance with quality control policies and procedures. D) dismissing employees that do not want to be part of an ambidextrous organization. E) using online systems to discover and disseminate any unethical actions by employees.

75) Although it is relatively easy for rivals to implement process management tools, it is much more difficult and time consuming for them to A) instill a deeply ingrained culture of operating excellence. B) keep employees well informed about the strides being made with continuous improvement. C) unify the managerial efforts behind improving operating practices as a commendable goal. D) combine the pursuit of financial objectives with the pursuit of its strategic objectives. E) understand the barriers to installing new operating activities.

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76) Providing a set of well-honed routines that represent a store of managerial knowledge about how to execute the strategy efficiently and effectively is part of which company’s strategy execution repertoire? A) Hallmark reengineered its process for developing new greeting cards by creating teams of mixed-occupation personnel (artists, writers, lithographers, merchandisers, and administrators) to work on a single holiday or greeting card theme. B) McDonald’s policy manual spelled out detailed procedures that personnel in each McDonald’s unit are expected to observe. C) Merrill & Company had a disconnected organizational arrangement whereby pieces of an activity are performed in different functional departments. D) Microsoft regularly shifted hundreds of programmers to new high-priority programming initiatives within a matter of weeks or even days. E) Valve Corporation has a 37-page handbook for new employees, detailing how things get done.

77)

Which organization does not use business process reengineering? A) Blue Mountain creates teams of mixed-occupation freelancers to design Christmas

cards. B) Speedmore integrates three distribution units to form a consolidated zonal distribution center. C) Bank of America automates global transaction services in a quest for operational efficiencies. D) PayPal segregates payment notification operations from mobile transfer operations to expand its customer base. E) Florida Power eliminates work depots, entrusting the task of repair to crew members in a mobile van.

78)

Which organization uses business process reengineering to attain operational excellence?

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A) AT&T works toward creating a total quality culture by continuously reviewing the performance of every value chain activity. B) Acer Phones uses advanced statistical methods to remove the causes of defects at its manufacturing units. C) Ericsson introduces continuous-improvement business philosophy at its customer care centers. D) Cellkon pulls the pieces of an activity out of different departments to create a crossfunctional work group. E) Honeywell strives to incrementally reduce defects through an ongoing assessment process.

79) Which organization does not use Six Sigma programs to improve quality and strategy execution? A) Alphabet, which promotes creative activities and innovation. B) Charleston Area Medical Center, which applies advanced statistical methods to improve the quality and effectiveness of patient care. C) Ciba Vision, which dramatically reduces its operating expenses. D) Froedtert Hospital, which improves the accuracy of administering the proper drug doses to patients. E) Pfizer, which streamlines its R&D process and lowers the cost of delivering medicines to patients.

80)

There is evidence that Six Sigma can

A) take longer than TQM to demonstrate significant results. B) stifle innovation and creativity in organizations. C) help managers run a tight ship and preserve strong, centralized control over internal activities. D) provide ample justification for becoming an ambidextrous organization. E) foster decentralized decision making and employee empowerment.

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81)

Well-conceived, state-of-the-art information and operating systems

A) are essential because business process reengineering efforts, TQM, Six Sigma, and benchmarking programs can't be carried out effectively without them. B) not only enable better strategy execution but also strengthen organizational capabilities (perhaps enough to provide a competitive edge over rivals). C) make it simple and easy-to-spot cost overruns and inefficiencies. D) are valuable tools for shortening a company's value chain, boosting workforce morale and productivity, and simplifying the task of adopting best practices. E) help managers run a tight ship and preserve strong, centralized control over internal activities.

82)

Internal information business systems are primarily used to track data on A) the components of PESTEL analysis. B) competitive forces and competitor power. C) efforts by rivals to commit corporate espionage via hacking into virtual networks. D) the company’s stock price performance. E) financial and operating data.

83) The broad areas that internal information business systems need to cover include all of the following except data. A) financial performance B) corporate culture C) customer D) operations E) employee

84) Information systems provide managers with a means for monitoring all of the following except

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A) the results that flow from the actions of subordinates. B) the performance of empowered workers. C) weekly operating statistics. D) employees with over-the-shoulder supervision. E) daily operating statistics.

85)

What is spurious to superior strategy execution and operating excellence?

A) having real-time information systems that permit company managers to stay on top of implementation initiatives and daily operations and to intervene if things seem to be drifting off course B) having state-of-the-art operating systems, information systems, and real-time data C) having access to online systems that provide statistical information about operating activities D) having the system's capability to identify and diagnose problems, so as to take corrective actions E) having access to employee data of competitors

86)

Leaving employees to their own devices in meeting performance standards

A) enables managers to monitor daily and weekly operating statistics without resorting to constant over-the-shoulder supervision. B) optimizes the performance of self-managed work groups in peer-based control environments. C) is preferable to relying on peer pressure to keep team members operating between the white lines. D) is NOT a recommended way for managers to monitor the operating performance of employees to ensure superior strategy execution. E) is the best use of information systems capabilities in the strategy execution effort.

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87) Sandi has been hired as a consultant to develop a state-of-the-art information and operating system for a local winery to enable better strategy execution. How have Mike and Chris, owners of the winery, justified retaining Sandi and adopting the new IT system? A) They want to embrace modern technology in the winery. B) They want to gain a competitive edge over wine industry rivals. C) They are seeking more efficient methods to spot cost overruns and inefficiencies. D) They desire to increase workforce productivity and retention. E) Their aim is to boost management morale.

88) Management's most powerful tool for mobilizing organizational commitment to competent strategy execution and operating excellence is the A) diligent and persistent use of benchmarking and best practices. B) proper use of a reward structure with motivational incentives. C) implementation of TQM and/or Six Sigma programs. D) periodic giving of inspirational speeches aimed at arousing employees' emotional energy. E) process of providing employees with a high degree of job security (ideally, via a nolayoff policy).

89) Management's most powerful tool for winning employee commitment to good strategy execution is A) the establishment of strategy-supportive policies and procedures. B) empowering employees and encouraging them to adopt best practices. C) setting stretch objectives. D) a structure of rewards and incentives tied tightly to the achievement of the organization's strategic priorities. E) aggressive use of TQM and Six Sigma quality control programs.

90)

The strategic role of a company's reward system is to

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A) compensate employees for performing their assigned duties in a diligent fashion. B) boost employee morale in ways that create widespread job satisfaction. C) enlist employees' commitment to successful strategy execution by rewarding them, both monetarily and nonmonetarily, for their valuable contributions. D) relieve managers of the burden of closely monitoring each employee's performance. E) boost labor productivity and help lower the firm's overall labor costs.

91)

Reward and incentive systems serve as a(n)

A) direct stimulus for satisfying the basic expectations of the standard job and mechanisms. B) indirect motivational tool designed to convert employee commitment into highpowered incentives. C) indirect type of control mechanism that conserves on more costly control mechanisms of supervisory oversight. D) direct base-pay financial compensation mechanism that competes with rival companies' salary bands for similar work efforts. E) negative motivational element.

92) Enlisting employees' sustained and energetic commitment to good strategy execution and achievement of the strategic priorities and financial objectives is best done by A) having top executives commit to making employees the company's most valuable competitive asset. B) developing core competencies in the use of TQM, Six Sigma programs, and business process reengineering. C) resourceful and effective use of motivational incentives, both monetary and nonmonetary. D) clever and innovative use of benchmarking and best practices. E) providing employees with a high degree of job security and attractive perks.

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93) What is not a recommended incentive when trying to gain employees' wholehearted commitment to good strategy execution and operating excellence? A) providing attractive perks and fringe benefits B) giving awards and public recognition to high performers and showcasing company successes C) creating a work atmosphere in which there is genuine caring and mutual respect among workers and between management and employees D) relying on opportunities for promoting from within wherever possible E) withholding information from employees about financial performance, strategy, and competitors' actions

94) Camille, a classmate of yours, has recently received a job offer to join Everlane’s remote customer experience team, which would enable her to work from home. Everlane is a fashion brand that targets the ethically minded with minimalist basics. However, in the summer of 2020, Everlane’s internal investigators found that insensitive terms were used while discussing black models; that leaders violated employees’ personal space by touching them, and used inappropriate terms when referring to people of color; that new hires felt isolated and unwelcome; that there was a lack of consistent policies around promotions; and that there were no formal processes to effectively escalate harassment or discrimination. Everlane’s remote customer, however, has no opportunities for career growth and none of the start-up perks— annual retreats, kombucha on tap—enjoyed by full-time colleagues at headquarters in San Francisco. What change in policy is most likely to be effective in trying to attract Camille to work at Everlane? A) strictly enforcing all rules in the employee handbook with the use of fines B) coercion of employees via explicit orders and implicit threats C) providing a safe, comfortable, and attractive working environment; enticing perks; and fringe benefits D) docking the pay of employees who become whistleblowers when the company does something unethical E) providing outplacement services for new recruits that don’t make the cut

95) A motivation and incentive system that is aimed at spurring stronger employee commitment to good strategy execution Version 1

A) should focus on incorporating more positive than negative motivational elements. B) should be tied first and foremost to whether employees satisfactorily perform their assigned duties in an ethical and honorable manner. C) must involve deliberately assigning employees heavy workloads and tight deadlines. D) needs to put top priority on making employees happy and secure in their jobs. E) must avoid the potential for negative consequences if performance is subpar.

96) From the standpoint of promoting successful strategy execution, it is important that the firm's motivation and reward system A) be completely free of such elements as tension, pressure, anxiety, job insecurity, and tight deadlines—a no-pressure/no-adverse-consequences work environment is essential. B) emphasize only positive types of rewards. C) accentuate positive rewards but also carry out the "up-or-out" policy for performance that does not meet expectations. D) not deny rewards to employees who put forth good effort and try hard, though performance is subpar. E) reduce job insecurity and give employees an incentive to stay busy and work hard.

97)

A reward system that accentuates positive rewards for good performance

A) works best in strong culture organizations, while negative motivational approaches and reward systems tend to be most successful in weak culture organizations. B) is especially effective in aligning the well-being of organizational members with achieving the company's performance targets; reward systems with negative elements tend to be very dysfunctional in motivating employees. C) seldom works very well because the threat of denying rewards to subpar performers is typically the most powerful motivator. D) works fine so long as 100 percent emphasis is placed on monetary incentives. E) has considerable appeal because when cooperation is positively enlisted and rewarded, rather than strong-armed by orders and threats (implicit or explicit), people tend to respond with more enthusiasm, dedication, creativity, and initiative.

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98)

A no-pressure/no-adverse-consequences work environment does not necessarily lead to

A) superior strategy execution or operating excellence. B) satisfactory outcomes because there is always a cadre of ambitious people who relish the challenge. C) workforce morale issues. D) establishing more positive than negative motivational reward elements. E) excessive shortfall in performance.

99)

To create a strategy-supportive system of rewards and incentives, a company must A) reward people for accomplishing results, not just for dutifully performing assigned

tasks. B) focus jobholders' attention and energy on what to do as opposed to what to achieve. C) demand jobholders' 100 percent attendance since it guarantees results. D) hold jobholders responsible for their function and not burden them with being accountable. E) incorporate negative motivational elements to ensure results.

100) Motivational and incentive compensation practices that aim at winning the commitment of company personnel to good strategy execution typically A) use only positive rewards and never involve the use of tension, fear, job insecurity, stress, or anxiety. B) entail decidedly positive rewards for meeting or beating performance targets, but also impose sufficiently negative consequences when actual performance falls short of the target. C) aim at creating a no-pressure/no-adverse-consequences work environment. D) entail paying the highest wages and salaries in the industry for all jobholder positions and also stressing nonmonetary rewards, like cash bonuses for high-performing employees. E) put top priority on making employees happy and secure in their jobs.

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101) Shelina, who runs a motorbike riding camp for girls, is considering the creation of an effective compensation system for her staff. What should Shelina do first? A) Establish ethical compensation policies and convince employees that they are the firm's most valuable competitive asset. B) Design monetary and nonmonetary incentives that boost labor productivity and help lower the firm's overall labor costs. C) Generously reward and recognize people who meet or beat performance targets and deny rewards and recognition to those who don't. D) Pay employees a bonus for each strategic and financial objective that the company achieves. E) Allow employees to propose what rewards they would like to receive to achieve the company's stretch objectives.

102)

A well-designed reward system

A) ties rewards to performance outcomes directly linked to good strategy execution and the achievement of financial and strategic objectives. B) should be free of elements that induce stress, anxiety, tension, pressure to perform, and job insecurity. C) puts the primary emphasis on denying rewards to those who fail to perform tasks in the prescribed fashion. D) emphasizes weeding out employees who are average performers. E) strives for a 50-50 balance between positive and negative rewards and a 50-50 balance between monetary and nonmonetary rewards.

103)

An important consideration in designing a strategy-supportive reward system is to

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A) link the payment of all monetary rewards to the company's bottom-line profitability. B) employ incentives that will help motivate employees to put in long hours and sacrifice personal ambitions and aspirations to pursue the priorities of management. C) choose those types of rewards and incentives that will focus employees' attention on total customer satisfaction. D) make across-the-board wage and salary increases the cornerstone of monetary rewards. E) make nonmonetary rewards and recognition an integral part of the reward system.

104) The guidelines for designing an incentive compensation system that will help drive successful strategy execution include A) making the performance payoff a major, not minor, piece of the total compensation package. B) having incentives that apply to the management team (employees should generally not be included in incentive pay plans but should have attractive wages and salaries). C) having an outside wage and salary expert administer the system so there is no doubt as to its fairness and impartiality. D) basing the incentives on group performance rather than individual performance. E) making minimal use of nonmonetary incentives and rewarding people for diligently performing their assigned duties.

105) Designing a reward and incentive system that helps promote good strategy execution would not be characterized by A) being administered with scrupulous objectivity and fairness. B) minor payoffs as a piece of the total compensation package. C) extending the program to all managers and all employees, not just top management. D) rewarding nonperformers who, despite expending tremendous effort, have not fared well in achieving the benchmarks under the incentive system. E) ensuring that the performance targets that each individual or team is expected to achieve involve outcomes that the individual or team can personally affect.

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106) A compensation and reward system designed to help drive successful strategy execution at companies like Nucor and Wegmans A) disconnects incentives to performance outcomes directly linked to good strategy execution and financial performance. B) is always administered using subjective criteria and distributed only to employees with greater than 10 years of service. C) ensures that the performance targets that each individual or team is expected to achieve involve outcomes that the individual or team can personally affect. D) provides generous rewards for key executives only. E) offers all employees rewards that amount to 3 percent of an employee's total compensation.

107) The more a manager understands what motivates subordinates and the more he or she relies on motivational incentives as a tool for achieving the targeted strategic and financial results the A) higher the incentives for employees to act ethically. B) greater the opportunity for the company to attune its value chains to the level of industry (buyer) demand. C) greater the employees' commitment to day-by-day strategy execution and achievement of performance targets. D) fewer the number of rivals will be attracted to enter the industry. E) greater the company's relative competitive strength in its industry.

108) Angela, owner of Sift Cupcakes, a specialty baking company, has decided to consult with her staff before introducing nonmonetary incentives to enhance employee motivation. When she asked her staff for with some ideas, she decided to implement all of the following except

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A) eliminating perks and fringe benefits, such as maternity leave and onsite child care. B) giving awards and public recognition to high performers and showcasing company successes. C) sharing information with staff about the company's strategic plan and its operating and financial performance. D) providing opportunities for employees to quickly move up the ranks to join the management level. E) creating a work atmosphere where there was genuine caring and mutual respect among staff and between management and staff.

109) The top management at a new social media technology company would like to revamp its incentive compensation system to attract ambitious employees. What would be their best approach? A) Make the performance bonus at least 3 to 4 percent of base salary to have some impact. B) Make the performance bonus at least 10 to 12 percent of base salary to have some impact. C) Make the performance payoff equal for average and below-average performers. D) Set unrealistic performance standards, but with an equally high compensation. E) Reward people who work very hard, even if they fall short of achieving performance targets.

110)

A change in strategy nearly always entails budget reallocations because

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A) revamping the performance of value chain activities can be costly. B) the accompanying policy revisions and compensation incentives tend to require different levels of funding than before. C) organizational units important in the prior strategy but having a lesser role in the new strategy may need downsizing, while units and activities that now have a bigger and more critical strategic role may need more people, new equipment, additional facilities, and above-average increases in their operating budgets. D) empowering employees to carry out the new strategy elements typically requires substantial new funding and budget revisions. E) adopting best practices and pushing for continuous improvement tend to reduce costs and reduce overall resource requirements.

111)

A useful guideline in designing strategy-facilitating policies and operating procedures is

A) to prescribe enough policies to give organizational members clear direction in implementing strategy and to place desirable boundaries on their actions, then empower them to act within these boundaries however they think makes sense. B) that strictly enforced policies work better than loosely enforced policies. C) that more policies/procedures work better than few policies/procedures and that strict enforcement always beats lax enforcement. D) to let individuals act in an empowered and self-directed way, subject only to the constraint that their actions and behavior be ethical and in step with the corporate culture. E) to prescribe enough policies and procedures that little is left to chance in performing value chain activities; employees should have no leeway to do things in a manner that deviates from the company's best practices standard.

112)

Reengineering how a firm performs a business process

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A) is a tool for pulling the pieces of strategy-critical processes out of different departments and unifying their performance in a single department or cross-functional work group. B) is the most frequently used tool of total quality management (TQM). C) requires that a company have many strategic partnerships and alliances with outsiders. D) is typically cheaper and easier to do than using Six Sigma techniques to achieve the same cost savings. E) is usually a company's most important "best practice" for achieving operating excellence.

113)

Six Sigma quality control

A) is a strategy-implementer's best, most reliable tool for simultaneously achieving topnotch product quality and low manufacturing costs. B) consists of a disciplined, statistics-based system aimed at producing not more than 2.5 defects per million iterations for a manufacturing or assembly process. C) consists of a disciplined, statistics-based system aimed at producing not more than 3.4 defects per million iterations for any business process. D) consists of a disciplined, statistics-based system aimed at fewer than 5.0 complaints per million customer transactions. E) is a powerful tool for companies whose customers are very picky about product quality and product performance and who can't afford for the product they use to break down and require repairs.

114) Company strategies and value-creating processes can't be effectively executed without internal information systems that include A) customer data, employee data, supplier/partner data, operations data, and financial performance data. B) TQM, reengineering, and Six Sigma programs. C) monetary and nonmonetary reward systems. D) activity-based cost accounting, benchmarking, and best practices. E) continuous access to social networks.

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115) Essential state-of-the-art operating and information systems that support Amazon’s strategies and value-creating internal processes encompass A) competitor intelligence databases. B) information systems to track supplier/partner/collaborative ally data. C) barometers and benchmarking data. D) systems to secure corporate espionage data. E) data management systems for undertaking benchmarking, TQM, and Six Sigma quality control.

116) An important consideration in designing a strategy-supportive motivation and reward system is to A) link the payment of all monetary rewards to the company's profitability. B) employ incentives that will help motivate employees to work hard at performing their assigned duties and activities. C) choose those types of rewards and incentives that focus employees' attention on "what to do." D) make across-the-board wage and salary increases the cornerstone of monetary rewards. E) make both monetary and nonmonetary rewards integral parts of the reward system.

117) The guidelines for designing an incentive compensation system that will help drive successful strategy execution include

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A) making the payoff for meeting or beating performance targets a major, not minor, piece of the total compensation package. B) having a bonus and incentive plan that applies to managers only (employees should generally not be included in incentive pay plans but should have attractive wages and salaries). C) having an outside wage and salary expert administer the system, so that there is no doubt as to its fairness and impartiality. D) basing the incentives on group performance rather than individual performance. E) making minimal use of nonmonetary incentives and rewarding people for diligently performing their assigned duties.

118) Kaitlin is manager of the county library and is considering developing and implementing a reward and incentive system that helps promote good strategy execution. What should she AVOID doing in her strategy implementation effort? A) The reward system must be administered with scrupulous objectivity and fairness. B) The payoff for meeting or beating performance targets must be a major, not minor, piece of the total compensation package. C) Any incentive plan should extend to all managers and all employees, not just top management. D) Ways must be found to reward deserving nonperformers who, for some reason, do not fare well under the incentive system. E) Make sure that the performance targets each individual or team is expected to achieve involve outcomes that the individual or team can personally affect.

119) If you were developing an incentive system designed to help drive successful strategy execution at your automotive service and repair business, which compensation and reward system would you most likely adopt?

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A) Tie incentives to performance outcomes that are directly linked to and supportive of good strategy execution and financial performance. B) Lengthen the time between achieving the target performance outcome and the payment of the reward to sustain performance beyond the short term. C) Make sure the performance targets that each individual or team is expected to achieve involve outcomes beyond their control because unforeseen external factors may impact the business. D) Make the performance payoff a minor, not major, piece of the total compensation package and administer the rewards on a subjective basis. E) Create a reward system that involves 50 percent nonmonetary rewards for nonmanagers only.

120) Evan, the cofounder, owner, and CEO of a Filipino fusion restaurant and a growing fleet of food trucks selling similar cuisine, has asked you to help his company managers promote continuous improvement (operating excellence) in performing value chain activities. Among the continuous improvement approaches, which would you be unlikely to recommend to Evan for this purpose? A) an ambidextrous organization that provides incremental improvements in operating efficiency, while R&D and other processes that allow the company to develop new ways of offering value to customers are given freer rein B) Six Sigma quality control techniques, entailing the use of advanced statistical methods to identify and remove the causes of defects (errors) and undesirable variability in performing an activity or business process C) total quality management (TQM), an approach that emphasizes continuous improvement in all phases of operations, 100 percent accuracy in performing tasks, involvement and empowerment of employees at all levels, team-based work design, benchmarking, and total customer satisfaction D) business process reengineering, which involves radically redesigning and streamlining how an activity is performed, with the intent of achieving quantum improvements in performance E) strategic group mapping, an aid in examining what strategic groups exist, identifying the companies within each group, and determining if a competitive “white space” exists where industry competitors are able to create and capture new demand

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121) In the order-processing section of General Electric’s circuit breaker division, elapsed time from order receipt to delivery was cut from three weeks to three days by consolidating six production units into one, reducing a variety of former inventory and handling steps, automating the design system to replace a human custom-design process, and cutting the organizational layers between managers and workers from three to one. This is a good example of A) business process reengineering, to drive continuous improvement in how internal operations are and should be conducted. B) operating practices that generate economies of scale and scope. C) "best-in-company" operating activities and processes to standardize functions. D) benchmarking of operating activities and business processes against "best-in-industry" and "best-in-world" performers. E) performance yardsticks for judging effectiveness and efficiency for particular value chain activities and business processes that are deemed strategically critical.

122) Dara Khosrowshahi, CEO of Uber, Inc., is evaluating the strategy execution effort at his company now that it has acquired Postmates, a service that delivers meals from local restaurants. Khosrowshahi is interested in new policies and operating procedures to aid management's task of strategy execution. Of the following, what would be the most likely justification for any new policy or procedure? A) It helps to build employee commitment to adopting best practices and using the tools of TQM and Six Sigma. B) It helps to enforce consistency in how particular activities are performed. C) It loosens boundaries on employees’ actions. D) It may transform a healthy corporate culture into an unhealthy culture. E) It provides bottom-up guidance from operating managers, supervisory personnel, and employees regarding how to alter past practices and how things need to be done now.

123) Examples given in the text of visible actions to reallocate operating funds and move people into new organizational units have shown management’s determined commitment to strategic change at which companies?

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A) AT&T and Microsoft B) Allied Signal and Ford C) Bank of America and GEICO D) General Electric and Hallmark E) McDonald’s and Value Corporation

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Answer Key Test name: Chap 11_23e 30) A 31) B 32) C 33) C 34) B 35) A 36) C 37) B 38) D 39) C 40) D 41) E 42) D 43) A 44) D 45) E 46) A 47) E 48) D 49) B 50) A 51) D 52) C 53) E 54) C 55) C Version 1

56) B 57) A 58) A 59) C 60) C 61) B 62) A 63) C 64) B 65) A 66) D 67) B 68) A 69) B 70) A 71) C 72) A 73) A 74) A 75) A 76) C 77) D 78) D 79) A 80) B 81) B 82) E 83) B 84) D 85) E Version 1

86) D 87) B 88) B 89) D 90) C 91) C 92) C 93) E 94) C 95) A 96) C 97) E 98) A 99) A 100) B 101) C 102) A 103) E 104) A 105) D 106) C 107) C 108) A 109) B 110) C 111) A 112) A 113) C 114) A 115) B Version 1

116) E 117) A 118) D 119) A 120) E 121) A 122) B 123) A

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Chapter 12 Corporate Culture and Leadership 1) Why was Goldman Sachs having trouble recruiting the best and brightest MBAs, finding itself competing for talent with high-tech firms like Amazon, Google, and Facebook? What lessons can be learned about how culture impacts the strategy execution effort?

2) When confronted with problems in recruiting newly minted talent from top business schools, what steps did Goldman Sachs take to change its culture and work climate? What lessons can be learned from Goldman's efforts about the culture change effort to promote good strategy execution?

3) The more consequential driver of PUMA’s speed and agility is its high-performance culture. True or false? For what reasons?

4) In 2017, it came to light that in order to meet its demanding profit target, Wells Fargo put such pressure on its employees to hit sales quotas that many employees responded by fraudulently opening customer accounts. Characterize Wells Fargo's corporate culture. How did its culture undercut its strategy execution effort? What lessons about the importance of culture to the strategy execution effort can be learned from this situation? Version 1

5) In 2020, Cross-Fit's well-publicized scandals, tarnished reputation, loss of Reebok as one of its two major sponsors, disaffection of its affiliated gyms, and the ouster of its founder Greg Glassman illustrated an unhealthy culture. Once a new management team is brought in, what steps could be taken to perpetuate a healthier culture at Cross-Fit?

6) How can one determine whether or not a company has a strong or weak corporate culture?

7) Vicky is COO and chief nursing officer of a regional Kaiser Permanente health care facility. She has asked you for help in understanding how important a healthy culture is for her organization. How might you explain to Vicky the purpose and benefits of closely aligning Kaiser's corporate culture with its requirements for proficient and often mission-critical strategy execution?

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What are the distinctive features of high-performance corporate cultures?

9) Areena is the Diversity Program Manager in Tech Recruiting at Facebook. To nurture an adaptive culture that is sufficiently flexible to respond rapidly to changing business conditions, what are the most important characteristics of prospective employees that Areena needs to take into consideration? Why?

10) Suppose you are managing a company that provides digital archival record-keeping services to midsized companies and institutions. How might the two basic types of healthy corporate cultures become valuable to good strategy execution? How would you know if your company has one or the other type of healthy corporate culture?

11) Your state university has been recognized by its peer schools for having a healthy culture, particularly in its responses to recent weather disasters that resulted in the loss of homes for more than 500 students, faculty, and staff. Could clashing subcultures still exist in your university? For what reasons?

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12) Jason manages an auto dealership that is characterized by hostility to change, heavily politicized decision making, insular thinking, unethical and greed-driven behaviors, and the presence of incompatible, clashing subcultures. These traits, individually and together, are indicative of what type of corporate culture?

13)

Briefly identify three types of unhealthy corporate cultures.

14) Why is changing a problem culture one of the toughest management tasks? Explain and justify your answer.

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15) It's your first full-time job since graduation, and morale at the financial services company you just joined is poor and no end seems to be in sight. What would you suggest to your supervisor to change a culture that is out of step with the company's strategy?

16) Gina has recently been hired as the CEO of the St. Vincent DePaul Society affiliate in your local community. She recognizes that her current organization, a charity, is dysfunctional. Employees and volunteers alike stubbornly pose obstacles to executing her strategic initiatives to grow donations to the charity, sales of donated items, and possible diversification into other activities that could provide financial support to her organization's mission. What might be Gina's options regarding culture-changing actions that could lead to rectifying St. Vincent DePaul's dysfunctional culture?

17) What are the primary responsibilities of top-level executives in the strategy implementation and execution effort?

18) What are the two things involved in the leadership challenge to consistently achieve good strategy execution?

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19) Why is Apple Inc. widely recognized as an exemplar of a healthy corporate culture? Please explain.

20)

What is the role of managerial leadership in changing a problem corporate culture?

21) Due to the retirements of the KLH consulting company's founder-managers, Bri, a longtime employee, has recently been promoted to CEO. KLH is an IT consultancy that specializes in installing and servicing computerized network systems for small- to medium-sized businesses, but KLH has recently experienced declining sales, missed deadlines, increasing costs, and the departures of many fellow long-term employees. What steps could Bri take to change a culture that is out of step with the company's strategy?

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22)

Explain how managerial leadership can foster a high-performance culture.

23) Enumerate at least four actions that managerial leadership can take to mobilize the effort for excellence in strategy execution.

24) When a company's strategy execution effort is not delivering good results, it is the leader's responsibility to step forward and initiate corrective actions. What are some of the actions a leader can take to correct the strategy execution effort?

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25) You are an employee at a pharmaceutical company that manufactures and markets offpatent, generic treatments for various common ailments. It has just been reported in the press that the CEO of your company personally spearheaded a sudden fourfold price increase in the prices charged for a particular generic medication while taking a huge pay raise for herself. The CEO has worked for your company for 25 years. The same press report revealed that your CEO's alma mater awarded her a business degree 10 years after she had attended the school, even though she had completed only about half of the coursework. Your company's motto states: "We challenge every member of every team to challenge the status quo. Embrace change. And drive the business forward with passion and commitment. We have integrity. We behave responsibly." As an employee of this company, how would you characterize the culture?

26) What are the most important symbolic culture-changing actions? Cite at least two examples of symbolic actions.

27)

Why is a company's corporate culture important?

A) It represents the integration of the strategy and business model that a company has adopted. B) It influences the organization's actions and approaches to conducting business. C) It guides core values and its internal code of ethics. D) It influences the dedication to ethical conduct and accepted work practices. E) It codifies formal traditions that company executives are committed to maintaining to ensure the company's strategy-supportive culture is change resistant.

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28)

Apple Inc.'s corporate culture is a product of all of the following except

A) the shared values and core business principles and beliefs that management preaches and practices. B) its standards of what is ethically acceptable and what is not and the stories that get told over and over to illustrate and reinforce the company's shared values, business practices, and traditions. C) the company's approach to people management and the "chemistry" and "personality" that permeates its work environment. D) the work practices and behaviors that define "how we do things around here." E) its lack of mechanisms for aligning, constraining, and regulating the actions, decisions, and behaviors of company personnel.

29) Sara is founder and CEO of FlexJobs, a subscription service that's focused on telecommuting jobs, including freelance, flexible, and part-time work for remote employees. If you were advising Sara on the factors shaping a company culture at FlexJobs, which factor would you consider as unimportant? A) FlexJobs’s core values, beliefs, business principles, and traditions that permeate the workplace B) FlexJobs’s work practices and behaviors that define "how we do things around here" C) FlexJobs’s approach to managing people and its style of operating D) FlexJobs’s mission, strategy, and business model that her company has adopted E) the "chemistry" that permeates FlexJobs’s work environment

30)

A company's culture is in part defined and identified by

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A) its internal work climate and personality—as shaped by its shared values, work practices, traditions, and ingrained attitudes and behaviors that define "how we do things around here." B) whether it employs a low-cost provider, best-cost provider, differentiation, or focused strategy. C) whether decision making is centralized or decentralized and whether it is a singlebusiness company or a diversified company. D) how strongly its strategic vision is linked to its core values. E) whether it is a well-known industry leader, an up-and-coming company that is gaining market share, a middle-of-the-pack company unlikely to move up in the industry ranks, or an industry ran that may or may not survive.

31)

A company's culture is not indicative of A) its company psyche and organizational DNA. B) its self-replicating operating system that defines how things are done. C) its core competencies and capabilities along the value chain. D) company traditions and stories that exemplify behavioral norms. E) accepted work practices that are held in high esteem.

32) You are considering employment opportunities after graduation. What would you be unlikely to seek out in identifying a prospective employer's company's culture? A) the company's defined spirit and character that pervades the work climate B) the company's resource strengths, core competencies, and competitive capabilities C) the company's revered traditions and oft-repeated stories about "heroic acts" and "how we do things around here" D) the company's approach to people management and the official policies, procedures, and operating practices that paint the white lines for the behavior of company personnel E) the company's shared values, business principles, and ethical standards that management preaches and practices

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33) You are considering employment opportunities after graduation. What would you look for in identifying a prospective employer's company's culture? A) the atmosphere, spirit and character that pervades the work climate and the values, business principles, and ethical standards that management preaches and practices B) the track record in meeting or beating its financial and strategic performance targets C) the intensity and makeup of the company's value chain D) the strategic intent and competitive strategy inherent within the company's efforts for successful strategy execution E) the resource strengths, core competencies, and competitive capabilities that permeate the organization

34)

The characterization of these companies' corporate cultures are all correct except

A) W. L. Gore's culture promotes multidiscipline teams to organize around opportunities and in the process, leaders emerge. B) Walmart's culture encourages the zealous pursuit of low costs and frugal operating practices, as well as a strong work ethic. C) Nordstrom's “Respond to Unreasonable Customer Requests” is seen as a heroic act. D) Apple's “We’re perfectionists. Idealists. Inventors. Forever tinkering with products and processes, always on the lookout for better, and open about the process.” E) PUMA’s corporate culture is based on the slogan "Forever Faster."

35)

A company's value statement and code of ethics

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A) help to mold the culture and communicate what kinds of actions and behaviors are expected of all company personnel. B) help prevent it from coming across to customers and the general public as greedy. C) serve the valuable purpose of making its suppliers hesitant to engage in business practices that are unethical. D) are the most important factors determining its reputation with customers, suppliers, employees, shareholders, and society at large. E) should always be made a prominent and visible part of the company's strategic intent and strategy.

36) Many executives want the work climate at their companies to mirror certain values and ethical standards because they A) desire validation of the company's formal values statement and code of ethics. B) want to impress outsiders and create a positive company image. C) want to increase the likelihood that the public will ignore any future lapses in approved behavior. D) are committed to improving the company's strategy execution, performance, and reputation. E) are certain that their company's strategic intent and strategy execution efforts will come to naught without those values and standards.

37)

A corporate culture founded on ethical business principles and socially approved values

Version 1

A) virtually guarantees that a company will be (or soon become) the acknowledged industry leader because of the ethical and socially approved manner in which its business is being conducted. B) doesn't necessarily impact a company's long-term strategic success favorably or unfavorably. C) does more to detract from a company's chances for strategic success and market leadership than to help it. D) is a positive force underlying a company's long-term financial success and reduces the likelihood of lapses in ethical and socially approved behavior that can damage the company's reputation. E) is seldom more than window-dressing and is generally regarded by customers, suppliers, employees, shareholders, and society at large as nothing more than good public relations.

38)

The two culture-building roles of a company's stated values and ethical standards are to

A) communicate the company's good intentions and establish a corporate conscience. B) confirm the integrity of company personnel and signal the above-board nature of the company's business principles and operating methods. C) steer company personnel toward doing the right thing and convince outsiders that the company is socially responsible. D) foster a work climate where company personnel share common and strongly held convictions about how the company's business is to be conducted and to provide them with guidance about how to do their jobs, steering them toward both doing things right and doing the right things. E) provide a basis for designing culture-supportive incentive compensation plans and reinforcing the appropriateness of particular ethical and moral actions.

39)

Codes of ethics and statements of core values

Version 1

A) are the single most effective measure of enforcing ethical behavior and cultural norms, provided they are written down and every employee is given a copy. B) serve as yardsticks for gauging the appropriateness of particular actions, decisions, and behaviors. C) serve as the best benchmarks for judging whether the corporate culture is deeply ingrained, planted and accepted or not. D) need to be personally written and presented by the CEO to reinforce the company values and convictions so that employees will take it seriously. E) serve to give top-priority emphasis to every employee in training programs a company conducts.

40) You have recently been hired to work in a high-level human resources management position for The Athletic, an online subscription service for sports fans. Imagine that one of your first tasks is to develop a list of The Athletic's core values. What core value would you most likely put on your list? A) commitment to “ends justify the means” and “not invented here” approaches B) winking at or casting a blind eye to unethical behavior C) exhibiting teamwork and cooperative attitudes D) maintaining cut-throat competition with other sports fan sites E) encouraging the formation of clashing subcultures to promote innovative approaches

41) A significant part of a company’s core values and ethical standards is captured in the stories about company personnel who have A) been caught giving or accepting bribes, kickbacks, or gifts. B) displayed a depth of commitment by going the extra mile to help customers. C) dealt with suppliers that employ child labor or engage in other unsavory practices. D) benefited from a no-layoff policy and adequate funding of employee retirement programs. E) misused or appropriated company assets, resources, and property for personal or other inappropriate purposes.

Version 1

42)

A company's stated core values and ethical principles are

A) important because of their role in ensuring that company executives will not engage in unethical behavior or behave in a manner that is contrary to the company's core values. B) typically tightly linked to its strategic vision and strategy. C) the best indicators of a company's social responsibility strategy. D) meant to foster a work climate where company personnel share common and strongly held convictions about how the company's business is to be conducted and provide guidance in displaying the core values in their actions and behaviors. E) strictly enforced in strong culture companies and weakly enforced in weak culture companies.

43)

Companies employ various techniques to embed core values and ethical standards except

A) incorporating the statement of values and the code of ethics into orientation programs for new employees and training courses for managers and employees. B) making the display of core values and ethical principles a factor in evaluating each person's job performance. C) encouraging everyone to use their influence in helping enforce observance of core values and ethical standards. D) using ceremonial occasions to recognize individuals and groups who display the values and ethical principles. E) instituting standard practices and procedures for employees to follow as a foundation for maintaining ethical and cultural norm conflict clashes and behavioral lapses.

44)

Once values and ethical standards have been formally adopted, a company must

Version 1

A) require every employee to memorize the company's formal statement of core values and code of ethics. B) make it unequivocally clear that the company's core values and ethical standards are strictly enforced cultural norms. C) rely only on word-of-mouth indoctrination and company tradition to instill values and ethical conduct. D) grant compensation increases and promotions only to those managers who are willing to act as evangelists for the company's core values and ethical standards. E) hold periodic ceremonies to vilify employees that do not live up to the company's core values or who are found guilty of violating the company's code of ethics.

45)

Transforming core values and ethical standards into cultural norms never involves

A) instituting procedures for enforcing ethical standards. B) immediately dismissing any employee caught violating the company's code of ethics or disregarding core values. C) screening out job applicants who do not exhibit compatible character traits. D) periodically having ceremonial occasions to recognize individuals and groups who display the values and ethical principles. E) having senior executives frequently reiterate the importance and role of company values and ethical principles at company events and internal communications to employees.

46) The retelling of legendary stories does a lot for establishing a company's core values, but it should not A) place pressure on company personnel to display core values and to do their part in keeping the companies traditions alive. B) illustrate the kind of behavior the company reveres. C) inspire company personnel to perform similarly and reinforce the depth of commitment that people have displayed. D) reflect an aspect of company culture no longer current. E) steer company personnel toward both doing things right and doing the right thing.

Version 1

47)

PUMAs corporate culture is designed to

A) communicate the company's good intentions. B) validate the integrity and above-board nature of the company's business principles and operating methods. C) steer company personnel toward both doing things right and doing the right thing. D) establish a corporate conscience. E) adapt and respond quickly to changing market conditions.

48)

Company folktales and stories frequently

A) articulate a company's strategic vision and strategic intent. B) capture a significant part of a company's culture. C) are indicative of a company's openness in sharing its financial performance and strategic plan with all staff members. D) mirror formal documentation about what are a company's best practices and performance benchmarks. E) document troublesome customers who return products or who encounter problems with deliveries.

49)

Once established, company cultures can be perpetuated by

Version 1

A) relying on word-of-mouth indoctrination and the power of tradition to instill the culture's fundamentals, as well as frequent reiteration of core values by senior managers and group members, and regular ceremonies honoring members who display desired cultural behaviors. B) avoiding frequent or dramatic reorganizations that could disturb existing relationships and networking among departments and company personnel. C) making adherence to cultural beliefs and cultural norms the defining features of the company's strategic vision. D) rewarding departments that observe cultural norms with above-average budget increases and penalizing those who don't with budget cuts. E) making cultural values and beliefs the centerpiece of the company's competitive strategy.

50)

Perpetuating a company's culture does not involve

A) word-of-mouth indoctrination of new members in the culture's fundamentals. B) frequent reiteration of core values by senior managers and group members. C) visibly rewarding those who display cultural norms and penalizing those who don't. D) maintaining a consistent strategic vision and strategic intent over time. E) telling and retelling of company legends and regular ceremonies honoring members who display desired cultural behaviors.

51)

Which of the following statements about a company's culture is not true?

Version 1

A) The more new employees a company is hiring, the more important it becomes to screen job applicants every bit as much for how well their values, beliefs, and personalities match up with the culture as for their technical skills and experience. B) The longer people stay at an organization, the more that they come to embrace and mirror the corporate culture—their values and beliefs tend to be molded by mentors, fellow workers, company training programs, and the reward structure. C) A company's culture, once established, tends to remain stable and entrenched over time. D) Typically, key elements of the culture originate with a founder or certain strong leaders who articulated them as a set of business principles, company policies, operating approaches, and ways of dealing with employees, customers, vendors, shareholders, and local communities where the company has operations. E) Company cultures can be perpetuated by the telling and retelling of company legends, by regular ceremonies honoring members who display desired cultural behaviors, and by visibly rewarding those who display cultural norms and penalizing those who don't.

52)

Even if a company has a strong culture, the culture and work climate may or may not

A) reward identification of cost savings opportunities in support of a low-cost strategy. B) reward initiative, risk-taking, and creativity to spur innovation in a technology-based company. C) share certain deeply rooted values and norms of behavior. D) be compatible with what is needed for effective implementation of the chosen strategy. E) reflect a deep commitment to benchmarking, best practices, and operating excellence.

53) What actions, behaviors, and work practices that are conducive to good strategy implementation support the strategy execution effort?

Version 1

A) using peer pressure to company personnel to perform, enhancing worker productivity and buy-in, and focusing the attention of employees on what is most important B) energizing the workforce, ensuring that personnel memorize the company values statement and code of ethics, and achieving competitive advantage C) providing for greater strategic flexibility, using peer pressure to company personnel to perform, and energizing the workforce D) enhancing worker productivity and buy-in, focusing the attention of employees on what is most important, and ensuring adherence to the company culture E) focusing the attention of employees on what is most important, insisting that official policies and procedures be followed religiously, and using peer pressure to company personnel to perform

54)

The characteristics of a strong-culture company include all of the following except

A) deeply rooted values and operating approaches that "regulate" the conduct of a company's business and the climate of its workplace. B) strong managerial commitment to display company values and principles in their own actions and behavior. C) dedicated efforts on the part of management to communicating values and business principles to organization members and explaining how they relate to the company's business environment. D) ingrained shared values and business principles guide management in making decisions. E) co-worker peer pressure to challenge cultural norms.

55) The emergence and sustainability of a high-performance culture, like that at PUMA, have been fostered by

Version 1

A) senior executives that walk the walk of high ethical standards. B) a strong emphasis on developing innovative core competencies and competitive capabilities. C) a sincere, long-standing company commitment to operating the business according to established traditions, thereby creating an internal environment that supports decision making and strategies based on cultural norms. D) centralized decision making and strict enforcement of company policies. E) a long-standing commitment to strict enforcement of established policies and procedures and steadfast unwillingness to change these policies and procedures.

56)

Contributing to the emergence and sustainability of a strong culture does not necessitate

A) continuity of leadership, small group size, stable group membership, geographic concentration, and considerable organizational success. B) a founder or strong leader who establishes values, principles, and practices that are consistent and sensible in light of customer needs, competitive conditions, and strategic requirements. C) a sincere, long-standing company commitment to operating the business according to established traditions, thereby creating an internal environment that supports decision making and strategies based on cultural norms. D) centralized decision making, strict enforcement of company policies, and a strong commitment to being the market share leader. E) a genuine concern for the well-being of the organization's three biggest constituencies—customers, employees, and shareholders.

57) by

A strong culture company like W. L. Gore or Nordstrom is unlikely to be characterized

Version 1

A) culturally approved behaviors and ways of doing things being nurtured while culturally disapproved behaviors and work practices being squashed. B) senior managers that make a point of reiterating key principles and core values to organization members; more importantly, they make a conscious effort to display these principles and values in their own actions and behavior and they insist that company values and business principles be reflected in the decisions and actions taken by all company personnel. C) continuity of leadership, small group size, stable group membership, geographic concentration, and considerable organizational success that all contribute to the emergence and sustainability of a strong culture. D) centralized decision-making, strict enforcement of company policies, diligent pursuit of a distinctive competence, and a bold strategic intent that are the hallmarks of a strong-culture company. E) values and behavioral norms considered to be similar to crabgrass: deeply rooted and hard to weed out.

58) Apple Inc.'s strongly implanted corporate culture has a powerful influence on the behavior of its personnel with the exception of A) most corporate personnel have acknowledged and accepted the cultural traditions. B) management expectations and co-worker peer pressure cause employees to conform. C) over time people who do not like the culture tend to leave. D) over time achieving low workforce turnover is a catalyst for conformity and acceptance. E) a strong leader that uses coercion and the threat of punishment to enforce norms.

59) A strongly implanted culture provides a huge assist in executing strategy because company managers can use the traditions, beliefs, values, common bonds, or behavioral norms

Version 1

A) as levers to mobilize commitment to executing the chosen strategy. B) as reinforcement for convincing staff that the strategy is sound and molded in tradition. C) to ensure the staff will embrace the new strategy like they have in the past. D) to manipulate jobholders into thinking traditions are important. E) as disciplinary measures in making the employees perform better and achieve targets.

60)

A weak company culture A) celebrates change and consensual decision making. B) produces champions of innovation and creativity. C) creates harmonious subcultures along its value chain. D) promotes greed-driven and unethical behaviors. E) rewards consensus thinking.

61) In direct contrast to strong-culture companies, what is not likely to be typical characteristic of a weak company's culture? A) a lack of values and principles that are consistently preached or widely shared B) a tendency among employees to view their jobs as just a way of making a living C) co-worker peer pressure to do things in a particular way D) few widely revered traditions and few culture-induced norms E) no strong employee allegiance to what the company stands for or to operating the business in well-defined ways

62) You are being actively recruited by a banking institution with a reputation for a weak corporate culture. What aspect of this bank's culture would most strongly impact your decision to accept or reject an offer from this company?

Version 1

A) There is virtually no employee support for the company's strategic vision and strategy. B) There is no code of ethics and the company has little regard for high ethical standards. C) Little assistance is provided in executing strategy because there are no traditions, values, or behavioral norms that management can use as levers to mobilize commitment to executing the chosen strategy. D) The company is fairly receptive to change and to people who champion new ways of doing things. E) The company has a dearth of intellectual capital and shows inattention to building core competencies.

63) A work environment where the culture is in sync with the chosen strategy and is conducive to good strategy execution is considered a valuable managerial ally because A) there is much less risk of embarrassing ethical violations. B) it provides company personnel with clear guidance regarding "how we do things around here" and produces significant peer pressure from co-workers to conform to culturally acceptable norms. C) there is reduced need to incorporate negative motivational practices and punitive-type incentives into the reward structure and in the company's approach to people management. D) there is reduced need to employ benchmarking, best practice programs, reengineering, Six Sigma, and TQM to achieve competitive advantage. E) the culture can be readily incorporated into the company's strategic vision and facilitate the achievement of stretch objectives.

64) What is the major benefit of closely aligning the corporate culture with the requirements for proficient strategy execution?

Version 1

A) A good strategy-culture alignment that makes it possible to establish a much bolder strategic vision and strategic intent. B) A good strategy-culture alignment that enhances a company's cost competitiveness. C) A tight strategy-culture fit that steers company personnel into displaying behaviors and adopting operating practices that promote good strategy execution. D) A tight strategy-culture alignment that enhances the creation of core competencies and distinctive competencies. E) A tight strategy-culture alignment that makes it easier to change a company's culture over time—as a company's strategy evolves, the culture automatically evolves too.

65)

The cultural changes at Goldman Sachs's to support its recruitment strategy involved

A) retaining long-held attitudes and behaviors that were well suited to first-rate strategy execution. B) steering company personnel to culturally approved behaviors and work practices to make it far simpler to root out operating practices that were a misfit or inappropriate. C) dedicating considerable efforts to poach new recruits from high-tech companies that encouraged behaviors and work practices conducive to good strategy execution. D) a tight strategy-culture alignment that reconfigured core competencies and distinctive competencies to achieve a cost-based competitive advantage. E) liberalizing parental leave policies, providing greater flexibility in work schedules, enacting protections for interns and junior bankers designed to limit their working hours, as well as overhauling its performance review and promotion systems, and its recruiting practices and policies regarding diversity.

66) When a company's culture is out of sync with what is needed for strategic success and good strategy execution

Version 1

A) the strategy has to be changed as rapidly as possible to regain harmony with cultural norms. B) company personnel need to cling to familiar practices, be wary of change, and blame top management for any shortfalls in performance. C) management needs to go on the offensive to reinterpret the culture and explain to company personnel why there really is good overall cultural fit with the strategy. D) any unhealthy or dysfunctional cultural traits must be changed as fast as possible and management needs to be aggressively striving to ingrain new behaviors and work practices that will enable first-rate strategy execution. E) management must sanction any company personnel who refuse to participate in an allout effort to create a different portfolio of competencies and capabilities that will permit the strategy to be changed in ways that will fit the culture.

67)

The hallmarks of a high-performance corporate culture include a

A) deep commitment to employee training, unusually attractive fringe benefit packages for company personnel, and frequently revised and updated values and ethics statements. B) "can-do" spirit, pride in doing things right, no-excuses accountability, and a pervasive results-oriented work climate where people go the extra mile to meet or beat stretch objectives. C) strong emphasis on teamwork, strict enforcement of company policies and procedures, and incentive compensation for all employees aligned with a balanced scorecard approach to measuring performance. D) deep commitment to pioneering new best practices, a preference for being a fastfollower as opposed to a first-mover or late-mover, and across-the-board bonuses for all personnel when the company meets or beats stretch objectives. E) deep commitment to top-notch quality and superior customer service, dedicated use of TQM and/or Six Sigma quality control programs, and the payment of big performance bonuses and stock options.

68)

High-performance corporate cultures are not

Version 1

A) results-oriented, permeated with a spirit of achievement, and able to meet or exceed performance targets. B) characterized by high ethical standards, a strong preference for high-risk strategies, and a slow and methodical approach to responding to changes in the marketplace. C) prone to provide rewards and recognition of loyalty and dedication on the part of employees, such that they are both energized and preoccupied with putting forth their very best efforts to do things right and be unusually productive. D) expecting that all company personnel, from senior executives to front-line employees, display high-performance behaviors and a passion for making the company successful. E) capable of involvement on the part of company personnel and eager to embrace individual initiative and creativity.

69)

How would you assess PUMA’s corporate culture?

A) High performance: PUMA's high-potential and high-performance individuals are identified and promoted regardless of level and across functions. B) Low performance: PUMA’s people often have a low regard for high ethical standards (because some disregard for ethics is a normal part of meeting or beating performance targets). C) Adaptive: PUMA’s challenge in creating an adaptive culture has been to come up with a strategic vision and strategy that wins enthusiastic support from most all company personnel. D) Rigid: PUMA’s clear and unyielding expectation is that all company personnel will strictly follow company policies and procedures. E) Motivational: PUMA has a strong managerial commitment to paying big bonuses and granting generous stock options.

70)

What is the hallmark of an adaptive corporate culture?

Version 1

A) a shared willingness to adapt core values to fit the changing requirements of an evolving strategy B) a conservative strategy, prudent risk-taking, and strong peer pressures to observe cultural norms C) a clear willingness on the part of organizational members to accept change and take on the challenge of introducing and executing new strategies D) a commitment to the types of core values and ethical standards that make a company a great place to work E) a strong preference for performance-based compensation systems—especially the payment of bonuses and stock options

71)

In adaptive corporate cultures

A) the prevailing view is that the best way to look out for the interests of employees is to change core values and cultural norms in whatever ways are needed to fit the changing requirements of an evolving strategy. B) company personnel are amenable to changing policies and operating practices as long as the core elements of the company's strategic vision and strategy remain intact. C) members are willing to embrace a proactive approach to trying new ideas, altering operating practices, and changing pieces of the strategy provided it doesn't imperil their job security, entail cuts in compensation, or require different work practices. D) there's a spirit of doing what's necessary to ensure long-term organizational success provided that core values and business principles are not compromised and provided top management undertakes the changes in a manner that exhibits genuine concern for the legitimate interests of stakeholders. E) there is little need for policies and procedures because group members willingly accept experimentation and innovation.

72)

Which of the following statements about adaptive corporate cultures is not true?

Version 1

A) The hallmark of adaptive corporate cultures is willingness on the part of organizational members to accept change and take on the challenge of introducing and executing new strategies. B) The stand-out cultural traits are a "can-do" spirit, pride in doing things right, noexcuses accountability, and a pervasive results-oriented work climate where people go the extra mile to meet or beat stretch objectives. C) Company personnel share a feeling of confidence that the organization can deal with whatever threats and opportunities come down the pike; they are receptive to risk taking, experimentation, innovation, and changing strategies and practices. D) Adaptive cultures are exceptionally well suited to companies with fast-changing strategies and market environments. E) For an adaptive culture to remain intact over time, top management must orchestrate organizational changes in a manner that (1) demonstrates genuine care for the well-being of all key constituencies and (2) tries to satisfy all their legitimate interests simultaneously.

73)

A counterproductive cultural trait of an organization is not evidenced by

A) a politicized internal environment and empire-building managers who jealously guard their turf. B) hostility to change and a wariness of people who champion new ways of doing things. C) an aversion to looking outside the company for best practices, new managerial approaches, and innovative ideas. D) an aversion to incentive compensation and overemphasis on working in teams. E) overzealous pursuit of wealth and status on the part of key executives.

74)

Unhealthy company cultures typically have such characteristics as

Version 1

A) tight budget controls, overly strict enforcement of long-standing policies and procedures, and high ethical standards. B) a preference for conservative strategies, an aversion to incentive compensation, and excessive emphasis on profitability. C) a politicized internal environment, hostility to change and an aversion to looking outside the company for best practices, new managerial approaches, and innovative ideas. D) overemphasis on employee empowerment, a complacent approach to building competencies and capabilities, no coherent business philosophy, and excessively bureaucratic policies and procedures. E) an emphasis on innovation, a strong preference for hiring managers from outside the company, and few core values and traditions.

75)

A healthy company culture may be identified as A) insular and inwardly-focused. B) change-resistant. C) unethical and greed-driven. D) politicized. E) hyper-adaptive.

76)

A distinctive characteristic of a healthy corporate culture is

A) the presence of counterproductive cultural traits that adversely impact the work climate and company performance. B) a preoccupation with risk management and capitalizing on related market opportunities. C) a decision-making effort that is subject to pressure from many different cliques. D) ethical behavior that is driven by subcultures. E) a strong fixation on attending to what customers are saying and how their needs and expectations are to be met.

77)

Companies with change-resistant cultures are

Version 1

A) typically opposed to performance-based incentive compensation and employee empowerment. B) prone to be preoccupied with avoiding risks and are unlikely to pursue actions to capture emerging opportunities. C) often overly gung ho about looking outside the company for best practices, new managerial approaches, and innovative ideas. D) often preoccupied with making sure the company has an aggressive strategic vision that embraces risky business strategies. E) typically run by amoral managers who have little regard for high ethical standards.

78)

Characteristics of an unhealthy, politicized internal corporate environment do not include

A) political infighting that consumes a great deal of organizational energy. B) continuous empire-building that is a common practice as managers pursue their own agendas. C) building of autonomous fiefdoms that pervades the work climate. D) overabundance of political maneuvering that takes away from efforts to execute strategy. E) taking of positions on issues.

79)

What defines an insular, inwardly focused culture?

A) The firm never underestimates rivals because of their proven track record in defending challenges. B) The firm believes they have all the answers because of their past great market success and is thus overconfident. C) The firm's unflinching belief in the company's superiority breeds a champion's attitude and thus they thrive on doing better by adapting to fresh thinking from outside the company. D) The firm values their customers' opinions and fully understands their needs and expectations. E) The firm has a commitment to hiring young people who can offer fresh thinking and new perspectives.

Version 1

80) Actions that would not help to rectify a company's unethical and greed-driven culture encompass A) requiring all company personnel to attend culture-training programs to better understand the new culture-related actions and behaviors that are expected. B) promoting individuals who have stepped forward to spearhead the shift to a different culture and who can serve as role models for the desired cultural behavior. C) dismissing executives that exude an "ends-justify-the-means" mentality in pursuing overambitious operating and financial targets. D) adopting accounting principles that make the company's financial performance appear better than it really is. E) hiring frontline employees who display high-performance behaviors and a passion for making the company successful.

81)

When are multiple subcultures most problematic?

A) when they are compatible with the overarching corporate culture and are supportive of strategy-execution B) when they don't clash and coordinating efforts to craft and execute strategy within each subculture is relatively easy C) when they foster teamwork and support a collaborative approach to strategy execution D) when they embrace conflicting business philosophies that are inconsistent with superior strategy execution E) when they guide management in coming up with consistent approaches to executing company strategies

82)

When should a culture be changed as rapidly as can be managed?

Version 1

A) never, because the actions and behaviors needed to execute the new strategy successfully are well entrenched, and thus are not changeable B) only rarely, because it is natural for company personnel to cling to existing practices and to be wary of new approaches C) when a company decides on any innovations to its products or services D) when a strong culture is unhealthy or otherwise out of sync with the actions and behaviors needed to execute the strategy successfully E) when the case for cultural reform is not credible, symbolic, or substantive

83)

Changing a problem culture

A) is one of the toughest managerial tasks because of the heavy anchor of ingrained behaviors and ways of doing things. B) is best done by instituting an aggressive program to train employees in the ways and beliefs of the new culture to be implanted. C) is best done by selecting a team of key employees to lead the culture change effort. D) requires writing a new statement of core values, having a series of lengthy meetings with employees to explain the new culture and the reasons why cultural change is needed, and then having both employees and shareholders vote to ratify and adopt the new culture. E) can be done quickly only if managers tie incentive compensation to exhibiting the desired new cultural behaviors and if managers visibly praise people who exhibit the desired new cultural traits.

84) The single most visible factor that distinguishes successful culture-change efforts from failed attempts is A) forceful management actions to empower employees to adopt new operating practices. B) competent leadership at the top. C) delayering the management hierarchy. D) developing a new value statement that inspires company personnel to put forth their best efforts to achieve performance targets. E) convincing employees that top management is genuinely committed to high ethical standards and the exercise of corporate social responsibility.

Version 1

85)

The place for management to begin in trying to change a problem culture is

A) identifying facets of the present culture that are obstacles to executing the company's strategy and meeting performance targets. B) spending heavily on programs to train employees in the ways and beliefs of the new culture to be implanted. C) visibly praising and rewarding people who exhibit traits and behaviors that undermine the existing culture. D) writing a new value statement and describing in highly motivating terms the kind of culture that is needed. E) instituting incentive compensation programs that generously reward employees for adopting best practices.

86) have

Companies with multinational operations and/or newly acquired businesses typically

A) strong cultures. B) multiple cultures (or subcultures) rather than a single culture. C) weak cultures. D) adaptive cultures. E) low-performance cultures.

87)

When trying to change a problem culture, management should undertake such steps as

Version 1

A) selecting a team of key employees to lead the culture change effort and design a plan for cultural change. B) identifying facets of the present culture that are supportive of good strategy execution and which ones are not and then specifying what new actions, behaviors, and work practices are needed in the new culture to improve performance. C) drawing up an action plan to change the present culture and then persuading company personnel why this plan of action is good and will be successful. D) conducting an employee survey to determine the organization's cultural norms and what company personnel like and dislike about the current culture. E) employing a consultant with expertise in culture change and following his or her advice on how to proceed.

88)

In moving to alter a problem culture, management should do all of the following except

A) identify which aspects of the present culture are supportive of good strategy execution and which ones are not. B) specify what new actions, behaviors, and work practices should be prominent in the "new" culture. C) talk openly about the problems of the present culture and how new behaviors will improve performance. D) employ visible, forceful actions—both substantive and symbolic—to ingrain a new set of behaviors, practices, and cultural norms. E) avoid cross-unit cooperation.

89)

A step management can take that is inappropriate to change a problem culture is

Version 1

A) identifying which aspects of the present culture are supportive of good strategy execution and which ones are not. B) specifying what new actions, behaviors, and work practices should be prominent in the "new" culture. C) appointing a team of key managers and employees to design a plan for cultural change and then lead the internal effort to change the culture. D) talking openly about the problems of the present culture and how new behaviors will improve performance. E) employing visible, forceful actions—both substantive and symbolic—to ingrain a new set of behaviors, practices, and cultural norms.

90) The menu of actions management can take to change problem culture does not include which of the following? A) making a compelling case for why the company's new strategic direction and cultureremodeling efforts are in the organization's best interests and why company personnel should wholeheartedly join the effort to doing things somewhat differently B) replacing senior executives who are strongly identified with the old culture and who may be stonewalling needed organizational and cultural changes C) promoting individuals who are known to possess the desired cultural traits, who have stepped forward to advocate for the shift to a different culture, and who can serve as role models for the desired cultural behavior D) revising policies and procedures in ways that will help drive cultural change E) shifting from decentralized to centralized decision-making so as to give senior executives more authority and control in driving the cultural change

91)

Managers can alter a problem culture if they

Version 1

A) identify aspects of the present culture that pose problems. B) revise policies and procedures in ways that will help drive cultural change and replace senior executives who are resisting and obstructing needed organizational and cultural changes. C) empower employees to adopt whatever new work practices they believe will be an improvement. D) make a concerted effort to turn the company's core competencies into distinctive competencies. E) shift from decentralized to centralized decision-making so as to give senior executives more authority and control in driving cultural change.

92) What is a substantive culture-changing action that a company's managers would refrain from undertaking to alter a problem culture? A) promoting individuals who are known to possess the desired cultural traits, who have stepped forward to advocate for the shift to a different culture, and who can serve as role models for the desired cultural behavior B) appointing outsiders with the desired cultural attributes to high-profile positions C) screening all candidates for new positions carefully, and hiring only those who appear to fit in with the new culture D) urging company personnel to search outside the company for work practices and operating approaches that may be an improvement over what the company is presently doing, and paying sizable bonuses to those employees who identify practices that the company ends up adopting E) designing compensation incentives that boost the pay of teams and individuals who display the desired cultural behaviors and hitting change-resisters in the pocketbook

93) Changing a problem culture to create better alignment with strategy generally does not involve

Version 1

A) replacing old-culture managers with new-breed managers. B) designing compensation incentives that boost the pay of teams and individuals who display the desired cultural behaviors and hit change-resisters in the pocketbook. C) altering the company's financial objectives. D) using company gatherings and ceremonial occasions to praise individuals and groups that display the desired new cultural traits and behaviors. E) both symbolic and substantive actions by executives to implant new cultural behaviors.

94)

What is an ineffective management action to remodel a corporate culture?

A) to cite reasons why and how certain behavioral norms and work practices in the current culture pose obstacles to good execution of new strategic initiatives B) to explain how new behaviors and work practices that are to be introduced and have important roles in the new culture will be more advantageous and produce better results C) to call upon first-level supervisors and rank-and-file employees to identify cultural barriers to good strategy execution and then to lead the cultural change effort D) to grant pay raises to individuals who step out front, lead the adoption of the desired work practices, display the new-style behaviors, and achieve pace-setting results E) to revise strategy-supportive policies and procedures in ways that will help drive cultural change

95)

The most important symbolic actions are those that top executives take to A) lead by example. B) lead by influence. C) follow by example. D) follow the majority. E) lead to the contrary.

96)

Symbolic culture-changing actions include all of the following except

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A) leading by example. B) reinforcing and celebrating culture-change successes. C) praising individuals and groups that exemplify the new desired behavior. D) ensuring top executives' actions match their rhetoric. E) revising policies and procedures in ways that will help drive cultural change.

97)

Changing a problem culture

A) means eliminating unhealthy or dysfunctional traits as fast as possible. B) is always a short-term exercise. C) requires a determined effort by a limited number of employees. D) is usually easier than it is to instill a strategy-supportive culture from scratch in a brand-new organization. E) takes less time than changing a healthy culture.

98) Leading the drive for good strategy execution and operating excellence calls upon senior executives to A) be very personable, effective communicators, and skilled in the empowerment of company personnel. B) personally lead the implementation process and drive the pace of progress. C) delegate little to subordinates and, instead, personally exert a strong, highly visible influence on the company's approaches to strategy execution. D) be creative in establishing policies and procedures that will instill high standards of operating excellence. E) be charismatic, decisive decision makers, and make inspiring speeches at company events.

99) For an enterprise to execute its strategy in truly proficient fashion and approach operating excellence

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A) mid-level executives must be charismatic, be decisive decision makers, and make inspiring speeches at company events. B) all employees must be very personable, effective communicators, and be skilled in the empowerment of company personnel. C) the management must be creative in establishing policies and procedures that will instill high standards of operating excellence. D) top executives must take the lead in the implementation/execution process and personally drive the pace of progress. E) the CEO must gather information firsthand and demand progress from mid-level managers.

100) What actions did recruiting managers at Goldman Sachs not take to change the bank's culture and push for good strategy execution and operating excellence? A) Goldman recruiters learned the obstacles in the path of good execution, and cleared the way for progress by seeking buy-in from C-level executives to institute changes in the bank's culture. B) Goldman instituted more employee-friendly work schedules and policies, more accommodating of work-life balance. C) Goldman liberalized its parental leave policies, provided greater flexibility in work schedules, and enacted protections for interns and junior bankers designed to limit their working hours. D) Goldman weeded out managers who were consistently in the ranks of the lowest performers (the bottom 10 percent) and who were not enthusiastic about the strategy or how it is being executed. E) Goldman overhauled its performance review and promotion systems as well as its recruiting practices and policies regarding diversity.

101) When management is leading the drive for good strategy execution and operating excellence, it calls for all of the following actions on their part except

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A) staying on top of what is happening. B) monitoring progress closely. C) putting constructive pressure on the organization to execute the strategy with excellence. D) establishing a must-be-invented-here mindset. E) empowering rank-and-file employees to act on their own initiative.

102) What technique can be utilized by leaders to stay informed on how well the strategy execution process is progressing? A) managing by walking around B) managing bothersome work activities C) multibusiness warning actions D) managers being well advised E) multibusiness walking ahead

103) Leading the effort to instill a spirit of high achievement into Goldman Sachs's culture and putting constructive pressure on the organization to achieve good results in a successful manner is primarily contingent on A) the degree to which lower-level managers and supervisors are good practitioners of MBWA. B) top executives making operating excellence the company's only core value. C) the extent to which top management emphasizes a positive rather than a negative reward system. D) top executives stressing the adoption of best practices, pushing for continuous product innovation, and providing employees with a stream of suggestions for improving company operations. E) treating employees with dignity and respect, celebrating individual, group, and company successes, and setting stretch objectives.

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104) The leadership challenges that top executives face in making corrective adjustments when things are not going well include A) knowing when to replace poorly performing workers and when to do a better job of coaching them to do the right things. B) being able to discern whether to emphasize adjustments that will promote better achievement of strategic performance targets or whether to emphasize adjustments that will promote better achievement of financial performance targets. C) undertaking a thorough analysis of the situation, exercising good business judgment in deciding what actions to take, and then ensuring good implementation of the corrective actions that are initiated. D) having the analytical skills to separate the problems due to a bad strategy from the problems due to bad strategy execution. E) deciding whether the company would be better off making adjustments that curtail the achievement of strategic objectives or that curtail the achievement of financial objectives or that curtail the achievement of some of both.

105) Leadership actions or managerial practices that perpetuate an unhealthy or problem culture normally do not A) use empowerment to help create a motivated workforce. B) treat employees as indentured servants. C) procrastinate in setting objectives and only occasionally communicating expectations for reaching targets. D) ignore individual, group, and company successes. E) follow a "must-be-invented-here" mindset.

106) Leadership actions or managerial practices that are not normally taken to foster a resultsoriented, high-performance culture include

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A) treating employees as individuals with no regard for their rank or contributions. B) building morale and fostering pride. C) setting stretch objectives and clearly communicating expectations for reaching targets. D) using motivational techniques and compensation incentives to inspire employees. E) using the tools of benchmarking, best practices, business process reengineering, TQM, and Six Sigma to focus attention on continuous improvement.

107)

The task of top executives in making corrective adjustments includes

A) knowing when to continue with the present corporate culture and when to shift to a different and better corporate culture. B) being good at figuring out whether to arrive at decisions quickly or slowly in choosing among the various alternative adjustments. C) thoroughly analyzing the situation and exercising good business judgment in deciding what actions to take. D) deciding whether to try to fix the problems of poor strategy execution or simply shift to a strategy that is easier to execute correctly. E) deciding how to identify the problems that need fixing.

108)

The character of a company's culture is a not a product of

A) core values and beliefs espoused by executives. B) standards of what is ethically acceptable and what is not. C) organizational learning from past errant behavior on the part of executives and employees. D) its traditions and the stories that get told over and over. E) the "chemistry" and the "personality" that permeate the work environment.

109)

The hallmarks of a weak-culture company do not include

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A) a lack of widely shared and strongly held values, principles, and behavioral norms. B) a lack of cultural mechanisms for aligning, constraining, and regulating the actions, decisions, and behaviors of company personnel. C) a work climate where there is no strong employee allegiance to what the company stands for or to operating the business in well-defined ways. D) an environment where many employees' view their company as just a place to work and their job as just a way to make a living. E) a "can-do" spirit, where people take pride in doing things right, no-excuses accountability, and a pervasive results-oriented work climate where people go the extra mile to meet or beat stretch objectives.

110) Successfully leading the effort to instill a spirit of high achievement into a company's culture and put constructive pressure on the organization to achieve good results A) entails such actions as treating employees with dignity and respect, celebrating individual, group, and company successes, and setting stretch objectives. B) hinges on the extent to which top management emphasizes a positive rather than a negative reward system. C) requires that top executives make operating excellence the company's only core value. D) calls for top executives to stress the adoption of best practices, push for continuous product innovation, and provide employees with a stream of suggestions for improving company operations. E) hinges on the degree to which lower-level managers and supervisors are good practitioners of MBWA.

111)

The purpose of managing by walking around or MBWA is to

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A) learn more about company operations and see how activities are really being done. B) be visible and accessible to employees. C) give employees a chance to make suggestions for improvement. D) gather information about what strategy to follow and to learn what competitors are doing. E) gather information about what is happening from people at different organizational levels and learn firsthand how well the strategy execution process is proceeding.

112)

The process of making corrective adjustments in strategy execution

A) is a typical cultural mechanism for aligning, constraining, and regulating the actions, decisions, and behaviors of company personnel. B) exemplifies a results-oriented work climate where people go the extra mile to meet or beat stretch objectives. C) features a ceremony honoring individuals who believe so strongly in their ideas that they take it on themselves to hurdle the bureaucracy, maneuver their projects through the system, and turn them into improved services, new products, or even new businesses. D) varies according to the situation. E) enables companies to indoctrinate new hires rapidly into widely shared and strongly held values, principles, and behavioral norms.

113)

Success in making corrective actions does not depend on

A) recognizing that unsatisfactory performance may be due as much or more to flawed strategy as to weak strategy execution. B) good implementation of the corrective actions that are initiated. C) the exercise of good business judgment in deciding what actions to take. D) a thorough analysis of the situation. E) an action plan for executing strategy that enables managers to foresee all the problems that will arise.

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114) For decades, Hearst magazines have advised American women on how they should conduct themselves in the home ( Good Housekeeping, Redbook), in society ( Harper’s Bazaar, Town & Country), and in the bedroom ( Cosmopolitan), as well as other publications such as Marie Claire and O, The Oprah Magazine. In 2020, the Hearst Magazines leader, Troy Young, drew complaints from employees who said he had made lewd, sexist remarks at work. Current and former employees also spoke out on social media and during staff meetings on what they described as a toxic environment at Hearst magazines. If you were advising Hearst magazines on how to fix its unhealthy culture, what steps would you propose? A) (1) Replace high-profile executives and managers who are allied with the old culture and either openly or covertly oppose needed organizational and cultural changes; (2) cite reasons why the current strategy has to be modified; (3) convince company personnel of why the present culture poses problems; (4) take a wait-and-see approach regarding actions to promote any desired new behaviors and work practices. B) (1) Institute a system to punish counterproductive cultural traits that adversely impact the work climate and company performance; (2) cite reasons why the current strategy has to be modified; (3) convince company personnel of why the present culture poses problems; (4) take a wait-and-see approach regarding actions to promote any desired new behaviors and work practices. C) (1) Postpone business process reengineering efforts such as TQM and Six Sigma; (2) institute offsite employee training programs; (3) foster decentralized decision making; (4) take swift, forceful actions to promote any desired new behaviors and work practices. D) (1) Promote business process reengineering efforts such as TQM and Six Sigma; (2) eliminate offsite employee training programs; (3) foster centralized decision making; (4) take swift, forceful actions to promote any desired new behaviors and work practices. E) (1) Identify those facets of the present culture that are dysfunctional, (2) define the desired new behaviors; (3) convince company personnel of why the present culture poses problems; (4) take swift, forceful actions to promote any desired new behaviors and work practices.

115) You have been hired by the owners to manage Harmony Farms, a small local retail chain that features garden and irrigation equipment. To prepare for the position, you have been reviewing how to make a compelling case for why culture-remodeling efforts are in the organization’s best interests and why company personnel should wholeheartedly join the effort to do things somewhat differently. This can be done by taking which three steps?

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A) (1) Create and nurture a strategy-supportive culture across all retail locations; (2) tell stories to describe the new values and desired behaviors and connect them to everyday practices; (3) direct organizational change and achieve continuous improvement in operations and business processes at and across all locations. B) (1) Explain how new behaviors and work practices will be more advantageous and produce better results; (2) direct organizational change and achieve continuous improvement in operations and business processes at and across all locations; (3) reinforce the core values, beliefs, business principles, and traditions that permeate the workplace. C) (1) Explain why and how certain behaviors and work practices in the current culture pose obstacles; (2) tell stories to describe the new values and desired behaviors and connect them to everyday practices; (3) cite reasons why the current strategy has to be modified. D) (1) Explain why and how certain behaviors and work practices in the current culture pose obstacles; (2) direct organizational change and achieve continuous improvement in operations and business processes at and across all locations; (3) develop and meet (or exceed) performance targets consistently. E) (1) Explain how new behaviors and work practices will be more advantageous and produce better results; (2) focus on how market conditions impact your resources and capabilities; (3) develop and meet (or exceed) performance targets consistently.

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Answer Key Test name: Chap 12_23e 27) B 28) E 29) D 30) A 31) C 32) B 33) A 34) D 35) A 36) D 37) D 38) D 39) B 40) C 41) B 42) D 43) E 44) B 45) B 46) D 47) E 48) B 49) A 50) D 51) C 52) D Version 1

53) A 54) E 55) C 56) D 57) D 58) E 59) A 60) D 61) C 62) C 63) B 64) C 65) E 66) D 67) B 68) B 69) A 70) C 71) D 72) B 73) D 74) C 75) E 76) E 77) B 78) E 79) B 80) D 81) D 82) D Version 1

83) A 84) B 85) A 86) B 87) B 88) E 89) C 90) E 91) B 92) D 93) C 94) C 95) A 96) E 97) A 98) B 99) D 100) D 101) D 102) A 103) E 104) C 105) A 106) A 107) C 108) C 109) E 110) A 111) E 112) D Version 1

113) E 114) E 115) B

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