Ch6 Exam Prep Planning, Strategy, and Competitive Advantage - Contemporary Management 8e Answer Key and Test Bank by Gareth Jones. DOCX document preview.
Essentials of Contemporary Management, 8e (Jones)
Chapter 6 Planning, Strategy, and Competitive Advantage
1) A good plan specifies not only which goals and strategies an organization is committed to but is also accountable for putting the strategies into action to attain the goals.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
2) The corporate-level plan outlines the specific methods a division, a business unit, or an organization will use to compete effectively against its rivals in an industry.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
3) An intermediate-term plan has a time horizon between five and ten years.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
4) Strategy formulation begins with managers systematically analyzing the factors inside an organization and outside in the global environment that affect the organization's ability to meet its goals now and in the future.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
5) According to Michael Porter's theory, it is possible for managers to pursue both a low-cost strategy and a differentiation strategy at the same time.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
6) Managers pursuing a focused differentiation strategy serve just one or a few segments of the market and aim to make their organization the most differentiated company serving that segment.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
7) Synergy is obtained by apportioning financial resources among divisions to increase financial returns or spread risks among different businesses.
Difficulty: 1 Easy
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
8) A strategic alliance can take the form of a written contract between two or more companies to exchange resources, or it can result in the creation of a new organization.
Difficulty: 1 Easy
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
9) An organization's level of involvement abroad decreases in a joint venture because the alliance rarely involves capital investment to produce goods or services outside the home country.
Difficulty: 1 Easy
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
10) The plan for implementing a new strategy requires the development of new functional strategies.
Difficulty: 1 Easy
Topic: Strategic Management
Learning Objective: 06-04 Describe the vital role managers play in implementing strategies to achieve an organization's mission and goals.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
11) The cluster of decisions that managers make to assist an organization to achieve its goals is known as
A) strategy.
B) scenario planning.
C) organizing.
D) needs assessment.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
12) A broad declaration of the organization's overriding purpose, which is intended to identify the organization's products and customer base, as well as to differentiate the organization from its competitors, is known as a ________ statement.
A) business
B) mission
C) strategy
D) position
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
13) When only one central, guiding plan is put into operation to achieve an organizational goal, the organization is experiencing
A) accuracy.
B) flexibility.
C) unity.
D) continuity.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
14) An ongoing process in which managers build and refine previous plans and continually modify plans at all levels, corporate, business, and functional, so that they fit together into one broad framework, is known as
A) continuity.
B) flexibility.
C) accuracy.
D) unity.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
15) Managers should attempt to collect and use all available information in the organization's planning process. This emphasizes the ________ aspect of planning.
A) unity
B) flexibility
C) continuity
D) accuracy
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
16) Another name for the business level of the organization is the ________ level.
A) functional
B) department
C) corporate
D) divisional
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
17) The level of an organization that contains the organization's marketing department, R&D department, and human resources department is the ________ level.
A) functional
B) first-line
C) corporate
D) business
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
18) The plan of an organization that contains top management's decisions about the organization's mission, goals, strategy, and structure is an example of a ________-level plan.
A) corporate
B) divisional
C) functional
D) business
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
19) SynVens, a major retail chain in Hungary, is planning to diversify. To accomplish this, it sets up a corporate level strategy which involves
A) outlining the method to be used in the new textile division which will enable the company to be first or second in market share in five years.
B) entering the textiles industry and aiming to be the first or second in market share in this industry in five years.
C) stating the goals of each of the managers in the textile division to help the company become first or second in market share in five years.
D) identifying the work responsibilities of each employee in the textile division and how their work will enable the company to become first or second in market share in five years.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
20) The industries and national markets an organization intends to compete in and the reasons why are specified in a company's ________-level strategy.
A) divisional
B) departmental
C) functional
D) corporate
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
21) TrueAim, Inc., sets a goal that every product line of the company should be either first or second in its industry in market share. This would be an example of a ________-level strategy.
A) corporate
B) divisional
C) functional
D) business
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
22) Managers at Ferwn Pvt., Ltd., is number two in market share in the local sports equipment manufacturing industry. As part of its business-level strategy, this company
A) invests in new production facilities to enable it to take over the number one spot.
B) devises a plan of action for managers to help it take over the number one spot.
C) states that it plans to take over the number one spot.
D) develops methods to take over the number one spot.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
23) The strategy that explains the methods that a division or an organization will use to compete against its rivals in the industry is a ________-level strategy.
A) functional
B) departmental
C) corporate
D) business
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
24) The organizational strategy that specifies the activities of managers at the departmental level of the organization is a ________-level strategy.
A) functional
B) business
C) corporate
D) divisional
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
25) A plan that is updated and changed every year to take into consideration how the organization's external and internal environments have changed is known as a ________ plan.
A) standing
B) short-term
C) rolling
D) single-use
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
26) TDS Corporation updates its five-year plan annually to take into account changing conditions within the organization and in the organization's external environment. Which of the following best explains this plan implemented by TDS Corporation?
A) standing plan
B) short-term plan
C) rolling plan
D) single-use plan
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
27) The tool that is used in situations when programmed decision making is appropriate is a ________ plan.
A) standing
B) scenario
C) rolling
D) single-use
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
28) A general guide to action for the managers of an organization is known as a
A) rolling plan.
B) rule.
C) policy.
D) standard operating procedure.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
29) A formal, written guide to action for employees in an organization is known as a
A) policy.
B) rule.
C) standard operating procedure.
D) rolling plan.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
30) A written set of instructions that describes the series of actions that a manager should take in a specific situation is known as a
A) policy.
B) standing operating procedure.
C) scenario plan.
D) rolling plan.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
31) A company has a requirement that any manager who receives a gift from any of the company's customers worth more than $25 must report this gift to the company's human resources department. This is an example of a
A) tactical plan.
B) rolling plan.
C) policy.
D) rule.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
32) To determine an organization's mission, managers must first define its
A) vision.
B) strategy.
C) tactics.
D) business.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
33) The ability of the CEO and top managers to convey to their subordinates a compelling vision of what they want the organization to achieve is known as ________ leadership.
A) calculated
B) strategic
C) planned
D) tactical
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
34) Managers at Dimensions, Inc., created an effective strategy formulation, which determined that the company has
A) three managers who exceeded expectations and two managers who did not reach quarterly expectations.
B) a strength in R&D, a weakness in product range, and an increasing threat from companies in East Asia.
C) an overall strong business rating in the United States and Canada.
D) a profit margin that steadily increased between 1990 and 2000.
Difficulty: 3 Hard
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
35) A group of managers at Right Stuff, Ltd., analyzes both the internal strengths and weaknesses of their organization as well as the opportunities and threats of the external environment. Which of the following planning exercises does this indicate?
A) mission analysis
B) SWOT analysis
C) functional analysis
D) divisional analysis
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
36) While managers at QualityFirst Manufacturing were conducting a SWOT analysis, they concluded that their product line is obsolete and narrow. Their product line would be categorized as a(n)
A) strength.
B) weakness.
C) opportunity.
D) threat.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
37) Ace Components, Inc., conducted a SWOT analysis, which determined a major threat by
A) identifying how defects in a product has hurt customer trust.
B) predicting a rise in the cost of manufacturing products using tungsten.
C) identifying a loss in brand name recognition in the eastern United States.
D) predicting low trading volumes and low volatility levels in the stock market.
Difficulty: 3 Hard
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
38) Industries that are characterized by permanent, ongoing, intense competition brought about by advancing technology or changing customer tastes, fads, and fashions are an example of
A) global competition.
B) differentiated competition.
C) focused competition.
D) hypercompetition.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
39) Why is planning considered an important process for managers?
A) It gives a sense of direction and purpose.
B) It ensures only top-level managers make decisions.
C) It creates a time horizon for different planning levels.
D) It identifies which markets to enter or avoid.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
40) Which of the following qualities of an effective plan allows for alterations if the situation changes?
A) continuity
B) unity
C) flexibility
D) accuracy
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
41) The planning and strategy making necessary to increase the efficiency and effectiveness of a particular function are the responsibility of a
A) divisional manager.
B) CEO.
C) corporate office.
D) functional manager.
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
42) The decision of a company to invest in state-of-the-art European production facilities is an example of a ________-level strategy.
A) division
B) business
C) corporate
D) functional
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
43) Which of the following is most likely to require a short-term plan?
A) corporate mission
B) business strategies
C) functional goals
D) divisional structure
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
44) Cheng-En has just completed a study for his company, NewElectronics, Inc., which produces wireless earbuds. This study focuses on the major threats to NewElectronics. Cheng-En has found that his company has one major rival, MagicSounds, Inc., which has developed impressive brand loyalty. Cheng-En's company uses a specific type of metal that only a few suppliers offer. However, NewElectronics's earbuds would still be affordable for many customers. Furthermore, Cheng-En does not see any products that can be used in place of New Electronics earbuds. Based on what you know about Michael Porter's five forces model, which of the following would Cheng-En claim is the greatest threat to NewElectronics?
A) the low prices of earbuds as a result of fierce competition
B) the high price of the metal used to make the earbuds
C) the ease with which his company could enter the earbud market
D) customers bargaining to drive down the prices of earbuds
Difficulty: 3 Hard
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
45) EnergyPlus, Ltd., produces nutritional fruit bars, but is having trouble staying in business. Considering Michael Porter's five force model, which of the following is most likely the greatest threat for this company?
A) many suppliers that provide its ingredients
B) the existence of one other major competitor
C) the introduction of a new granola bar to the market
D) an increase in the use of indoor exercise equipment
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
46) Digicom Corp. attempts to gain a competitive advantage by driving down its production costs per unit below those of its competitors. Digicom is pursuing a(n) ________ strategy.
A) focused differentiation
B) low-cost
C) related diversification
D) unrelated diversification
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
47) Sterling, Inc., pursues a low-cost strategy by
A) concentrating on its advertising department to make its pens more desirable than its rivals.
B) focusing on its design department to make its pens more attractive than its rivals.
C) concentrating on R&D to make its pens more reliable than its rivals.
D) focusing on using cheaper resources to make its pens less expensive than its rivals.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
48) An organization attempts to succeed by distinguishing its products from those of the competition; this is a(n) ________ strategy.
A) differentiation
B) low-cost
C) related diversification
D) unrelated diversification
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
49) An advantage of the differentiation strategy is
A) less expensive new products.
B) a higher level of employee skills.
C) reduced turnover of employees.
D) greater barriers to entry.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
50) Coca-Cola spends an enormous amount of money on advertising to distinguish, and create a unique image for, their products. Coca-Cola is pursuing a ________ strategy.
A) diversification
B) focused low-cost
C) differentiation
D) low-cost
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
51) BMW produces cars exclusively for high-income customers. BMW is pursuing a ________ strategy.
A) focused differentiation
B) focused low-cost
C) diversification
D) low-cost
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
52) Clark is the new CEO of Stonehedge, Inc. He wants to pursue a focused low-cost strategy for his company, which sells weapons and gear to hunters. To accomplish this, he will
A) keep the prices of the company's hunting weapons and gear about the same as those of the competition.
B) make the prices of the company's hunting weapons less than those of the competition, but keep the gear's price about the same as that of the competition.
C) make the prices of the company's hunting weapons and gear less than those of the competition.
D) keep the prices of the company's hunting weapons about the same as those of the competition, but make the gear's price higher than that of the competition.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
53) What is the plan of action for a business-level strategy based on SWOT analysis?
A) to maximize an organization's ability to create value
B) to take advantage of favorable opportunities
C) to choose industries and countries to invest in
D) to improve task-specific activities within the organization
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
54) What happens when there are only a few large customers in the market?
A) They keep changing their tastes, fads, and fashions.
B) They drive down the price of the output through bargaining.
C) They tend to be referred to as "stuck in the middle."
D) They start concentrating on a single industry.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
55) A company that is serving only a few market segments has most likely adopted a ________ strategy.
A) focused differentiation
B) focused low cost
C) horizontal integration
D) vertical integration
Difficulty: 1 Easy
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
56) Olav is the CEO for Blue Stone, Ltd., which makes costume jewelry designed by a Spanish artist named Valeria. As a result, this jewelry has strong appeal in areas of the United States with a large Latino population. However, the U.S. market already has two companies that make high-quality costume jewelry, which are popular with people who have a mid-to-high range income. Considering all of these elements, what should Olav do to ensure Blue Stone gains market share and is profitable?
A) He should make sure every department, including production and marketing, is focused on highlighting how Valeria's designs are different from those of the competition.
B) He should focus the efforts of all departments on showing U.S. customers why Blue Stone's costume jewelry is better quality than fine jewelry.
C) He should ensure that every department, from production to marketing to shipping, focuses on reducing their costs below those of their competitors.
D) He should narrow the company's target market to just the Latino market in a few areas of the United States and ensure that Blue Stone's prices are the lowest.
Difficulty: 3 Hard
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
57) The motorcycle company EasyRider, Inc., finds itself stuck in the middle. To make this situation profitable, EasyRider decides to
A) invest less in the production process, thereby lowering the quality of their motorcycles and lowering their price.
B) lower the prices for the motorcycles despite the high production costs associated with each model.
C) hone its production process to make it extremely efficient, thereby lowering production costs while maintaining high quality.
D) invest more in the production process, thereby improving the quality of the motorcycles and increasing their price.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
58) Concentration on a single industry, vertical integration, diversification, and international expansion are principal strategies of the ________ level of an organization.
A) functional
B) department
C) corporate
D) business
Difficulty: 1 Easy
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
59) The corporate-level strategy that involves a company reinvesting its profits to strengthen its competitive position in the industry in which it is currently operating is
A) vertical integration.
B) international expansion.
C) market development.
D) concentration on a single industry.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
60) Best Grounds Coffee wants to pursue a vertical integration corporate level strategy. To accomplish this, it
A) develops new products, including an expresso machine.
B) purchases the supplier in Brazil that provides its coffee beans.
C) starts a cookie company to complement its production of coffee.
D) buys an electronics company that specializes in GPS devices.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
61) Firestone Tire and Rubber Company purchases rubber plantations in Africa so that it will have a source of supply for its tire manufacturing plants in Akron, Ohio. This is an example of a ________ strategy.
A) forward vertical integration
B) global
C) diversification
D) backward vertical integration
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
62) Firestone Tire and Rubber Company set up a chain of Firestone retail stores to sell its tires to American consumers. This is an example of
A) forward vertical integration.
B) global strategy.
C) focused differentiation strategy.
D) multidomestic strategy.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
63) PepsiCo purchased KFC so that it could replace Coke products with Pepsi products in KFC restaurants. This is an example of a ________ strategy.
A) horizontal integration
B) vertical integration
C) low-cost
D) global
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
64) When Gallo purchased a company that makes wine bottles, it was involved in ________ integration.
A) horizontal
B) backward vertical
C) forward vertical
D) upward
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
65) When PepsiCo purchased Frito-Lay and expanded its operations into the snack-food business, it was pursuing a ________ strategy.
A) vertical integration
B) market penetration
C) diversification
D) market development
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
66) TechnoSol Ltd. produces solar heating devices, including solar panels. The company decides to pursue an unrelated diversification corporate-level strategy when it buys
A) the retail stores that sell its solar panels.
B) the metal supplier for its solar panels.
C) a company that produces athletic gear, including basketball shoes.
D) a company that produces heating equipment, including furnaces.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
67) When General Electric Company expanded its operations by acquiring NBC television, this was an illustration of
A) vertical integration.
B) diversification.
C) market penetration.
D) a low-cost strategy.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
68) Two divisions of a company decide to use the same manufacturing facilities to capitalize on the organization's excess capacity and to reduce the fixed costs assigned by corporate headquarters. This is an example of
A) diversification.
B) merger.
C) consolidation.
D) synergy.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
69) Hemisphere Corporation decides to enter a new type of business in order to create a competitive advantage in one of its existing businesses. Hemisphere is engaging in
A) concentration on a single business.
B) related diversification.
C) vertical integration.
D) international expansion.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
70) Procter & Gamble uses a joint sales force to sell both its laundry detergent products and its bath soap products to the same supermarket chains. This is an example of
A) a focused differentiation strategy.
B) a low-cost strategy.
C) a differentiation strategy.
D) synergy.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
71) When Procter & Gamble uses the same distribution system to deliver its oral care products and its hair care products to drugstore chains, this is an example of
A) synergy.
B) differentiation.
C) diversification.
D) merger.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
72) When an organization enters a new type of industry, which is not similar in any way to the current businesses of the organization, it is engaged in
A) concentration on a single business.
B) unrelated diversification.
C) international expansion.
D) related diversification.
Difficulty: 1 Easy
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
73) Manuela is one of the top managers at Electrix, Ltd. She wants her company to use a global strategy by
A) buying the company in Mexico that sells its TVs and DVD players.
B) buying the company in Mexico that supplies the metal for its TVs and DVD players.
C) selling its TVs and DVD players in France using the marketing approach that is used in the United States.
D) selling its TVs and DVD players in France using a marketing approach that tailored toward French culture.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
74) Carry On, Inc., sells different products using a different marketing approach in England than it uses when marketing these products in the United States. This is an example of a ________ strategy.
A) vertical integration
B) focused low-cost
C) global
D) multidomestic
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
75) The least complex global operation is
A) a joint venture.
B) exporting.
C) licensing.
D) franchising.
Difficulty: 1 Easy
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
76) FarHorizons, Inc., allows Banerjee, a foreign organization, to take charge of both manufacturing and distributing one or more of its products in India in return for a negotiated fee. This is an example of
A) exporting.
B) licensing.
C) a strategic alliance.
D) a joint venture.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
77) Madison Hotels sold a foreign organization the right to use its brand name and operating know-how in return for a lump-sum payment and a share of the profits. This is an example of
A) franchising.
B) licensing.
C) a strategic alliance.
D) a joint venture.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
78) The form of international expansion that gives an organization high potential return because the organization does not have to share its profits with a foreign organization and reduces the level of risk because the organization's managers have full control over all aspects of their foreign company's operations, is a
A) joint venture.
B) partial venture.
C) partially owned foreign subsidiary.
D) wholly owned foreign subsidiary.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
79) When managers pool or share their organization's resources and know-how with those of a foreign company, and the two organizations share the rewards or risks of starting a new venture in a foreign country, the two organizations are involved in
A) a joint venture.
B) a strategic alliance.
C) differentiation.
D) licensing.
Difficulty: 1 Easy
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
80) The reason managers pursue vertical integration is that it
A) provides stable environmental conditions.
B) improves flexibility in operations.
C) increases sales overall.
D) strengthens competitive advantage.
Difficulty: 1 Easy
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
81) Apportioning financial resources among divisions to increase financial returns or spread risks among different businesses is called a ________ strategy.
A) global
B) divisional
C) functional
D) portfolio
Difficulty: 1 Easy
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
82) A backward vertical integration occurs when a company expands into a new industry that
A) helps create a competitive advantage.
B) produces inputs for the company's products.
C) is not related to the current business in any way.
D) uses or distributes the company's products.
Difficulty: 1 Easy
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
83) What is the major advantage of a multidomestic strategy?
A) the ability to gain market share or charge higher prices for customized product offerings and marketing approaches to local conditions
B) the significant cost savings associated with not having to customize products and marketing approaches to different national conditions
C) the high-quality skills of foreign manufacturers and the specialized knowledge of foreign managers about the needs of local customers
D) the reduced level of risk owing to the managers' full control over all aspects of their foreign subsidiary's operations
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
84) A strategic alliance among two or more companies that agree to jointly establish and share the ownership of a new business is called a
A) joint venture.
B) franchise.
C) portfolio management.
D) wholly owned foreign subsidiary.
Difficulty: 1 Easy
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Remember
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
85) Great Deal, Inc., is a highly profitable clothing store chain. Dom, the CEO, has decided it is time for the company to increase its competitive advantage. Dom is not worried about stability and wants to make sure he is able to be knowledgeable about all aspects of the company. Which of the following should Dom do?
A) purchase an appliance manufacturer and a magazine publisher
B) partner with a shoe manufacturer in a different market
C) add a department to Great Deal's stores that sells appliances
D) buy a fabric supplier and a clothing manufacturer
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
86) FinePrint, Inc., is a major book publisher in the United States. However, the future of book sales is unpredictable, thereby making FinePrint's position precarious. Which of the following should the CEO of FinePrint do in order to provide the greatest stability for the company?
A) purchase a publishing company specializing in children's books
B) invest in a small chain of books stores and change their names to FinePrint
C) acquire a cosmetics company, an auto parts company, and a baked goods company
D) sign a licensing agreement with a ballpoint pen company
Difficulty: 3 Hard
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
87) Grand Productions has just produced a historical epic film that appeals to the U.S. male audience because of its realistic battle scenes. However, Grand Productions knows that audiences in other countries will be drawn to the film for different reasons, such as its romance or it struggle between classes. Considering this, Grand Productions should give the film an international release using a ________ strategy.
A) multidomestic
B) global
C) low-cost
D) differentiation
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
88) To avoid development costs, a U.S. tennis racquet company forms a licensing agreement with a South African company, which allows the
A) U.S. company and the South African company to merge.
B) U.S. company to manufacture the racquets in South Africa.
C) South African company to have access to the technology used to make the racquets.
D) U.S. company and the South African company to combine their resources to make the racquets.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
89) Callista is a manager at ThrillSeeker, Ltd., a company that makes amusement park rides. She has decided that she would like to create value by purchasing one of the companies that produces the materials ThrillSeeker needs to make its rides. She has already chosen a team of people and assigned them the responsibility to making sure the purchase happens. What should she do next?
A) establish a timetable for buying a parts manufacturer.
B) devise a plan on how to purchase the plastic supplier.
C) establish a work team to focus on purchasing a chain of amusement parks.
D) give a work team the authority needed to buy the distributor of ThrillSeeker's rides.
Difficulty: 3 Hard
Topic: Corporate-Level Strategy; Strategic Management
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.; 06-04 Describe the vital role managers play in implementing strategies to achieve an organization's mission and goals.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
90) To implement the fifth step of the strategic implementation process, a manager would
A) review an action plan on expanding a company into Europe.
B) establish a deadline for purchasing a chain of retail stores.
C) give a work team the budget needed to license a product.
D) talk to employees about feedback received concerning a product they worked on.
Difficulty: 2 Medium
Topic: Strategic Management
Learning Objective: 06-04 Describe the vital role managers play in implementing strategies to achieve an organization's mission and goals.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
91) In general, business planning involves three distinct steps. Discuss these three steps.
- The first step is determining the organization's mission and goals. A mission statement is a broad declaration of an organization's overriding purpose, what it is seeking to achieve from its activities; this statement also identifies what is unique or important about its products to its employees and customers; finally, it distinguishes or differentiates the organization in some ways from its competitors.
- The second step is formulating strategy. Managers analyze the organization's current situation and then conceive and develop the strategies necessary to attain the organization's mission and goals.
- The third step is implementing strategy. Managers decide how to allocate the resources and responsibilities required to implement the strategies among people and groups within the organization.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
92) Give the four major reasons why planning is important.
1. Planning is necessary to give the organization a sense of direction and purpose. A plan states what goals an organization is trying to achieve and what strategies it intends to use to achieve them. A plan keeps managers on track so they use the resources under their control efficiently and effectively.
2. Planning is a useful way of getting managers to participate in decision making about the appropriate goals and strategies for an organization. Effective planning gives all managers the opportunity to participate in decision making.
3. A plan helps coordinate managers concerning the different functions and divisions of an organization to ensure that they all pull in the same direction and work to achieve its desired future state.
4. A plan can be used as a device for controlling managers within an organization. A good plan specifies not only which goals and strategies the organization is committed to, but also who bears the responsibility for putting the strategies into action to attain the goals. When managers know they will be held accountable for attaining a goal, they are motivated to do their best to make sure the goal is achieved.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
93) Explain briefly the three levels in the planning and strategy-making process and give an example for each. Also mention how they are linked with each other.
- The corporate-level plan contains top management's decisions concerning the organization's mission and goals, overall strategy, and structure. Corporate-level strategy specifies in which industries and national markets an organization intends to compete and why. Corporate-level planning and strategy are the primary responsibility of top or corporate managers. The corporate-level plan provides the framework within which divisional managers create their business-level plans. For example, the CEO and top managers can decide that a corporation will be involved in food and beverages, healthcare, restaurants, and agriculture. Also, they can decide the national markets, such as the United States, Japan, China, and so forth.
- At the business level, the managers of each division create a business-level plan that details (1) the long-term divisional goals that will allow the division to meet corporate goals and (2) the division's business-level strategy and structure necessary to achieve divisional goals. Business-level strategy outlines the specific methods a division, a business unit, or an organization will use to compete effectively against its rivals in an industry. For example, managers can decide the goals for the Food & Beverages division and the strategy and structure needed to achieve these goals.
- A functional-level plan states the goals that the managers of each function will pursue to help their division attain its business-level goals, which, in turn, will allow the entire company to achieve its corporate goals. Functional-level strategy is a plan of action that managers of individual functions can follow to improve the ability of each function to perform its task-specific activities in ways that add value to an organization's goods and services and thereby increase the value customers receive. At the functional level, the business-level plan provides the framework within which functional managers devise their plans. For example, in a Food & Beverages division, managers can decide on improving the sales campaigns for these particular goods, such as sports drinks and nutritional snacks.
In the planning process, it is important to ensure that planning across the three different levels is consistent. Functional goals and strategies should be consistent with divisional goals and strategies, which, in turn, should be consistent with corporate goals and strategies, and vice versa. When consistency is achieved, the whole company operates in harmony; activities at one level reinforce and strengthen those at the other levels, increasing efficiency and effectiveness. To help accomplish this, each function's plan is linked to its division's business-level plan, which, in turn, is linked to the corporate plan.
Difficulty: 3 Hard
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Apply
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
94) Business plans differ in the time horizons that they cover. Discuss the three major types of business plans in terms of their intended duration and explain why all three of these types of plans are important to a business.
- Long-term plans have a time horizon of five years or more. Typically corporate and business-level goals and strategies require long-term plans.
- Intermediate-term plans have a time horizon between one and five years. Corporate and business level goals require intermediate-term plans. Functional-level goals and strategies also require intermediate-term plans.
- Short-term plans have a time horizon of one year or less. Functional-level goals and strategies require short-term plans.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
95) Distinguish between a policy, a rule, and a standard operating procedure of an organization and give one example of each of these types of standing plans that would be used in a business.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
96) Explain a SWOT analysis. Describe briefly the steps involved in a SWOT analysis and give an example for each.
- The first step in SWOT analysis is to identify an organization's strengths and weaknesses. The task facing managers is to identify the strengths and weaknesses that characterize the present state of their organization. For example, a company could have a differentiated strategy with its car radios. Its strength could be with advertising to potential consumers the quality of these radios. However, it could also have a weakness in the products themselves. These radios might not be noticeably better than their competitors' cheaper radios. As a result, consumers might not want pay the higher price for them.
- The second step in SWOT analysis begins when managers embark on a full-scale SWOT planning exercise to identify potential opportunities and threats in the environment that affect the organization now or may affect it in the future. For example, with the car radio company, an opportunity could be an expanding market for high-end radios in China. A threat could be the lower-priced radios of competitors, especially considering that the quality of the competitors' radios seem to be as good. Scenario planning is often used to strengthen this analysis.
With the SWOT analysis completed and strengths, weaknesses, opportunities, and threats identified, managers can continue the planning process and determine specific strategies for achieving the organization's mission and goals. The resulting strategies should enable the organization to attain its goals by taking advantage of opportunities, countering threats, building strengths, and correcting organizational weaknesses.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Apply
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
97) Discuss Michael Porter's five forces model and give an example for each force.
- The level of rivalry among organizations in an industry: The more that companies compete against one another for customers—for example, by lowering the prices of their products or by increasing advertising—the lower is the level of industry profits (low prices mean less profit). For example, five companies could produce yogurt. Because of the fierce competition between these companies, the price of yogurt could lower. As a result, each company would make less of a profit.
- The potential for entry into an industry: The easier it is for companies to enter an industry—because, for example, barriers to entry, such as brand loyalty, are low—the more likely it is for industry prices and therefore industry profits to be low. For example, an entrepreneur might want to open an organic chain restaurant. However, because there are no established restaurants of this sort, brand loyalty is low. As a result, industry prices and profits will tend to be low.
- The power of large suppliers: If there are only a few large suppliers of an important input, then suppliers can drive up the price of that input, and expensive inputs result in lower profits for companies in an industry. For example, say there are only a few suppliers of oak wood. Because of this, these suppliers can raise the price for buying this material. Companies that produce products made of oak, such as furniture, can thus expect lower profits due to the high cost of buying this raw material.
- The power of large customers: If only a few large customers are available to buy an industry's output, they can bargain to drive down the price of that output. As a result, industry producers make lower profits. For example, there may be only a few large customers, such as national governments and a few wealthy people, who can buy extremely powerful telescopes. As a result, these customers can bargain to drive down the price of this product, thereby lowering the profits for companies that make these telescopes.
- The threat of substitute products: Often the output of one industry is a substitute for the output of another industry. For example, sports drinks and bottled water are substitutes for cola. When a substitute for their product exists, companies cannot demand high prices for it, or customers will switch to the substitute. This constraint keeps profits low.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between planning and strategy.
Bloom's: Understand
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
98) Michael Porter presented four ways in which the top management of an organization could select a business-level strategy for their organization. Discuss any two of these four ways of increasing the value of an organization's products and explain the advantages and disadvantages of the strategies that you choose.
- With a low-cost strategy, managers try to gain a competitive advantage by focusing the energy of all the organization's departments or functions on driving the company's costs down below the costs of its industry rivals. When existing companies have low costs and can charge low prices, it is difficult for new companies to enter the industry because entering is always an expensive process.
- With a differentiation strategy, managers try to gain a competitive advantage by focusing all the energies of the organization's functions on distinguishing the organization's products from those of competitors on one or more important dimensions, such as product design, quality, or after-sales service and support. Organizations that successfully pursue a differentiation strategy may be able to charge a premium price for their products. This allows organizations to recoup their higher costs. Differentiation makes industry entry difficult because new companies have no brand name to help them compete, and customers do not perceive other products to be close substitutes. This also allows for premium pricing and results in high profits.
- Managers pursuing a focused low-cost strategy serve one or a few segments of the overall market and aim to make their organization the lowest-cost company serving that segment.
- Managers pursuing a focused differentiation strategy serve just one or a few segments of the market and aim to make their organization the most differentiated company serving that segment.
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
99) According to Porter, organizations cannot simultaneously pursue both a low-cost strategy and a differentiation strategy. Illustrate why. Show how exceptions to this "rule" can be found, and give an example to demonstrate the point.
With a low-cost strategy, managers try to gain a competitive advantage by focusing the energy of all the organization's functions on driving the company's costs down below the costs of its industry rivals. With a differentiation strategy, managers try to gain a competitive advantage by focusing all the energies of the organization's functions on distinguishing the organization's products from those of competitors on one or more important dimensions. Often the process of making products unique and different is expensive. Porter identified a simple correlation: Differentiation raises costs and thus necessitates premium pricing to recoup those high costs. Organizations stuck in the middle tend to have lower levels of performance than do those that pursue a low-cost or a differentiation strategy. To avoid being stuck in the middle, top managers must instruct departmental managers to take actions that will result in either low cost or differentiation. However, organizations with extremely efficient production systems have been able to pursue both strategies simultaneously by keeping costs down while providing a superior design and quality product. For example, a company's efficiency in producing DVD players could be so high that it is able to produce high-quality players with low production costs. As a result, it can charge low prices for these players.
Difficulty: 3 Hard
Topic: Strategic Planning
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a competitive advantage that may lead to superior performance.
Bloom's: Apply
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
100) Managers can use four principal corporate-level strategies in order to help their organization to increase its sales and profits. Discuss any two of these strategies and explain the decisions that a manager would have to make in a business in order to design a program that used these two strategies. Also, give an example for each strategy you discuss.
- Concentration on a single industry becomes an appropriate corporate-level strategy when managers see the need to reduce the size of their organizations to increase performance. Managers may decide to get out of certain industries when, for example, the business-level strategy pursued by a particular division no longer works, and the division has lost its competitive advantage. To improve performance, managers now sell off low-performing divisions, concentrate remaining organizational resources in one industry, and try to develop new products customers want to buy. For example, a company could have three divisions: clothing, computer games, and sports equipment. However, the clothes and sports equipment division are performing poorly. As a result, the company sells off these two divisions and focus its attention on computer games. In contrast, when organizations are performing effectively, they often decide to enter new industries in which they can use their resources to create more valuable products.
- When an organization is performing well in its industry, managers often see new opportunities to create value by either producing the inputs it uses to make its products or distributing and selling its products to customers. Vertical integration is a corporate-level strategy in which a company expands its business operations either backward into a new industry that produces inputs for the company's products (backward vertical integration) or forward into a new industry that uses, distributes, or sells the company's products (forward vertical integration). For example, a company that produces jewelry could implement backward vertical integration by buying the supplier of the jewels, such as a diamond mine. This same company could implement forward vertical integration by buying a chain of retail stores that sells its jewelry. The reason managers pursue vertical integration is that it allows them either to add value to their products by making them special or unique, or to lower the costs of making and selling them. Although vertical integration can strengthen an organization's competitive advantage and increase its performance, it can also reduce an organization's flexibility to respond to changing environmental conditions and create threats that must be countered by changing the organization's strategy.
- Diversification is the corporate-level strategy of expanding a company's business operations into a new industry in order to produce new kinds of valuable goods or services. There are two main kinds of diversification: related and unrelated. For example, a company that produces shoes could expand its operation by producing shoe polish. This type of diversification is related because the divisions of these two products can share shipping costs to shoe stores. Also, a company that produces soft drinks could expand by producing furniture. This type of diversification is unrelated because soft drinks and furniture are not linked.
- If managers decide that their organization should sell the same standardized product in each national market in which it competes, and use the same basic marketing approach, they adopt a global strategy. For example, a company could produce copy machines and sell them in the United States. If this company decides to sell these machines in Australia using the same marketing approach as in the United States, then it is adopting a global strategy. If managers decide to customize products and marketing strategies to specific national conditions, they are adopting a multidomestic strategy.
Difficulty: 3 Hard
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Apply
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
101) Write a brief note on global strategies and multidomestic strategies. Also mention one advantage and one disadvantage of each.
Both global and multidomestic strategies have advantages and disadvantages. The major advantage of a global strategy is the significant cost savings associated with not having to customize products and marketing approaches to different national conditions. The major disadvantage of pursuing a global strategy is that by ignoring national differences, managers may leave themselves vulnerable to local competitors that differentiate their products to suit local tastes.
The advantages and disadvantages of a multidomestic strategy are the opposite of those of a global strategy. The major advantage of a multidomestic strategy is that by customizing product offerings and marketing approaches to local conditions, managers may be able to gain market share or charge higher prices for their products. The major disadvantage is that customization raises production costs and puts the multidomestic company at a price disadvantage because it often has to charge prices higher than the prices charged by competitors pursuing a global strategy.
Difficulty: 3 Hard
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
102) Discuss the different modes of international expansion. Give an example for each.
- The least complex global operations are exporting and importing. A company engaged in exporting makes products at home and sells them abroad. For example, a company could produce clocks in the United States and sell them in Japan. A company engaged in importing sells products at home that are made abroad. For example, a U.S. company could sell clocks made in Switzerland.
- In licensing, a company (the licenser) allows a foreign organization (the licensee) to take charge of both manufacturing and distributing one or more of its products in the licensee's country or world region in return for a negotiated fee. For example, a company could produce automobiles in Japan. This company (the licenser) could allow a U.S. company (the licensee) to manufacture and distribute these automobiles in the United States in return for a negotiated fee. In franchising, a company (the franchiser) sells to a foreign organization (the franchisee) the rights to use its brand name and operating know-how in return for a lump-sum payment and share of the franchiser's profits. For example, a U.S. chain restaurant (the franchiser) could sell to a Chinese organization (the franchisee) the rights to use its brand name and operating know-how in return for a lump-sum payment and share of the franchiser's profits.
- In a strategic alliance, managers pool or share their organization's resources and know-how with those of a foreign company, and the two organizations share the rewards or risks of starting a new venture in a foreign country. A strategic alliance can take the form of a written contract between two or more companies to exchange resources, or it can result in the creation of a new organization. A joint venture is a strategic alliance among two or more companies that agree to jointly establish and share the ownership of a new business. For example, say a U.S. recording company called Starlight, Inc., wants to expand into Germany. This company has many years of experience in producing music for a U.S. audience, but not for a German audience. However, a German company called Liebestraum has years of experience marketing music to a German audience, but not a U.S. audience. These two companies could form a joint venture by combining into one company StarLiebe, Inc., which would combine the expertise of both companies allowing them to distribute music to both the U.S. and German markets.
- When managers decide to establish a wholly owned foreign subsidiary, they invest in establishing production operations in a foreign country independent of any local direct involvement. For example, a British automobile company could establish a wholly owned foreign subsidiary in the United States. By doing this, the British company operates alone without a direct involvement by the United States. The British company, therefore receives all of the rewards and bears all of the risks of operating abroad.
Difficulty: 3 Hard
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Apply
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
103) Distinguish related diversification from unrelated diversification. Provide suitable examples.
The way Procter & Gamble's disposable diaper and paper towel divisions cooperate is a good example of the successful production of synergies. These divisions share the costs of procuring inputs such as paper and packaging; a joint sales force sells both products to retail outlets; and both products are shipped using the same distribution system. This resource sharing has enabled both divisions to reduce their costs, and as a result, they can charge lower prices than their competitors and so attract more customers. In addition, the divisions can share the research costs of developing new and improved products, such as finding more absorbent material, that increase both products' differentiated appeal.
Managers pursue unrelated diversification when they establish divisions or buy companies in new industries that are not linked in any way to their current businesses or industries. One main reason for pursuing unrelated diversification is that sometimes managers can buy a poorly performing company, transfer their management skills to that company, turn around its business, and increase its performance—all of which create value. Another reason for pursuing unrelated diversification is that purchasing businesses in different industries lets managers engage in portfolio strategy, which is apportioning financial resources among divisions to increase financial returns or spread risks among different businesses, much as individual investors do with their own portfolios.
In 2014, Honeywell International announced it would divest its brake pad and braking system components business to better focus its corporate objectives on the company's core technologies. Before the announcement, Honeywell's 2014 outlook was lukewarm at best. After the announcement, the company said it expected earnings growth of between 8 percent and 12 percent.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
104) List and describe the four ways to expand internationally.
1. Importing and exporting: The least complex global operations are exporting and importing. A company engaged in exporting makes products at home and sells them abroad. A company engaged in importing sells products at home that are made abroad (products it makes itself or buys from other companies).
2. Licensing and franchising: In licensing, a company (the licenser) allows a foreign organization (the licensee) to take charge of both manufacturing and distributing one or more of its products in the licensee's country or world region in return for a negotiated fee. In franchising, a company (the franchiser) sells to a foreign organization (the franchisee) the rights to use its brand name and operating know-how in return for a lump-sum payment and share of the franchiser's profits.
3. Strategic alliances: In a strategic alliance, managers pool or share their organization's resources and know-how with those of a foreign company, and the two organizations share the rewards or risks of starting a new venture in a foreign country. A joint venture is a strategic alliance among two or more companies that agree to jointly establish and share the ownership of a new business.
4. Wholly owned foreign subsidiaries: When managers decide to establish a wholly owned foreign subsidiary, they invest in establishing production operations in a foreign country independent of any local direct involvement. Operating alone, without any direct involvement from foreign companies, an organization receives all of the rewards and bears all of the risks associated with operating abroad. This method of international expansion is much more expensive than the others because it requires a higher level of foreign investment and presents managers with many more threats. However, investment in a foreign subsidiary or division offers significant advantages: It gives an organization high potential returns because the organization does not have to share its profits with a foreign organization, and it reduces the level of risk because the organization's managers have full control over all aspects of their foreign subsidiary's operations. Moreover, this type of investment allows managers to protect their technology and know-how from foreign organizations.
Difficulty: 2 Medium
Topic: Corporate-Level Strategy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are used to strengthen a company's business-level strategy and competitive advantage.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
105) List the process of strategy implementation.
1. Allocating responsibility for implementation to the appropriate individuals or groups
2. Drafting detailed action plans that specify how a strategy is to be implemented
3. Establishing a timetable for implementation that includes precise, measurable goals linked to the attainment of the action plan
4. Allocating appropriate resources to the responsible individuals or groups
5.Holding specific individuals or groups responsible for the attainment of corporate, divisional, and functional goals
Difficulty: 2 Medium
Topic: Strategic Planning
Learning Objective: 06-04 Describe the vital role managers play in implementing strategies to achieve an organization's mission and goals.
Bloom's: Understand
AACSB: Knowledge Application
Accessibility: Keyboard Navigation
Document Information
Connected Book
Contemporary Management 8e Answer Key and Test Bank
By Gareth Jones
Explore recommendations drawn directly from what you're reading
Chapter 4 Managing in the Global Environment
DOCX Ch. 4
Chapter 5 Decision Making, Learning, Creativity, and Entrepreneurship
DOCX Ch. 5
Chapter 6 Planning, Strategy, and Competitive Advantage
DOCX Ch. 6 Current
Chapter 7 Designing Organizational Structure
DOCX Ch. 7
Chapter 8 Control, Change, and Entrepreneurship
DOCX Ch. 8