CHAPTER1

The Strategic Management Process

1. A firm's distinctive competence arises out of the competitive advantages it holds

over its rivals.
a. True
b. False

2. For business enterprises, terrain refers to the industry environment in which

competition for customers takes place.
a. True
b. False

3. A SWOT analysis examines the external strengths and weaknesses in an industry

environment and the internal opportunities and threats in the firm.
a. True
b. False

4. Senior management is usually the group in a firm that is most responsible for the
company's strategic management.
a. True
b. False

5. Stakeholders are the owners of a corporation.

a. True
b. False

6. Strategy is
a. the search for a distinctive competence.
b. the choice of the terrain on which to compete.
c. the ideas and plans used to compete against a firm's rivals.
d. used only by for-profit firms.

7. The essence of strategy is

a. to capitalize on rivals' weaknesses.
b. to match the firm's internal strengths to the opportunities available in its
terrain.
c. to control the firm's industry environment.
d. develop as many distinctive competencies as possible.
8. A vision statement
a. sets the firm's boundaries and provides a sense of direction for
employees.
b. sets the specific results to be obtained within a given period of time.
c. states what business the firm is in.
d. describes the firm's aspirations to achieve some higher purpose.

9. Which of the following is not one of the major steps in the strategic management
process?
a. problem identification
b. analysis
c. formulation
d. implementation

10. Corporate strategy for a diversified firm

a. entails extensive portfolio analysis.
b. asks how to build competitive advantage for each business unit.
c. asks what set of businesses the firm should operate.
d. seeks to mitigate overall weaknesses by combining strengths from each
business unit.

11. Which of the following is not a strategic imperative?

a. sustain an existing advantage
b. overcome an existing weakness
c. build a new advantage
d. extend an existing advantage to another business

12. The formulation step in the strategic management process seeks to

a. match the firm's internal strengths to the opportunities present in the
external environment.
b. put the firm's strategy into practice.
c. identify the firm's strengths, weaknesses, opportunities, and threats.
d. develop new business opportunities that the firm can exploit.

13. Which of the following statements is not true about strategic decisions?
 a. Strategic decisions are generally short term in nature.
b. Strategic decisions are usually relatively easy to make.
c. Strategic decisions affect only the owners and employees of the firm.
d. Strategic decisions usually entail large financial obligations.

14. Strategic managers include

a. all managers in the firm.
b. only business managers.
c. both business and staff managers.
d. only corporate vice presidents and above.

15. When the needs of one stakeholder group conflict with the needs of another
group, the strategic manager should all but which of the following criteria?
a. society's expectations
b. personal standards of behavior
c. marketing principles
d. legal obligations
 CHAPTER 2
The Competitive Environment:
Assessing Industry Attractiveness

1. Changes in the general environment tend to have different implications for different
industries.
a. True
b. False

2. Barriers to entry are legal prohibitions to expansion of the number of competitors in

an industry.
a. True
b. False

3. Competition among the firms in a strategic group is usually more intense than that
between strategic groups.
a. True
b. False

4. A firm can build and sustain a competitive advantage only to the extent that it
remains distinctive from its competitors.
a. True
b. False

5. Competitive intelligence gathering is a form of environmental scanning that seeks

to identify changes in the macroenvironment.
a. True
b. False

6. The macroenvironment
a. is controlled by the largest firms in an industry.
b. encompasses more than the general environment.
c. has changes that are generally easy to predict.
d. affects every firm and every industry.
7. The demographic environment affects the strategic management process in all the
following ways except
a. increasing participation by women in the workforce.
b. increasing diversity in the population and workforce.
c. increasing political awareness and activity of the workforce.
d. increasing average age of the population.

8. The primary criterion that determines the attractiveness of an industry is

a. market size.
b. potential profitability.
c. few competitors.
d. high barriers to entry.

9. One of Michael Porter's five forces, the threat of new entrants, would be increased
by which of the following?
a. low capital requirements
b. high economies of scale
c. high product differentiation
d. difficult access to distribution channels

10. The key element of the relationship between buyers and suppliers of an industry,
and the competitors in that industry, is
a. political.
b. legal.
c. power.
d. different for each industry.

11. Which of the following tends to decrease the degree of rivalry within an industry?
a. the absence of a clear industry leader
b. a low fixed cost structure
c. slow growth within the industry
d. undifferentiated products

12. Which of the following products would have the lowest threat of substitute
products?
a. carbonated soft drinks
b. newly released movies
 c. tires
d. stock brokerage services

13. Strategic groups are

a. firms within an industry that pursue similar strategies.
b. firms within an industry that form alliances with each other.
c. firms within an industry that agree not to compete with each other.
d. relatively fixed.

14. Which of the following is not an implication of strategic group analysis?

a. Strategic groups can shift over time.
b. Entire strategic groups can appear or disappear over time.
c. A firm's competitive advantage is a function of its distinctiveness from
its rivals.
d. Firms within a strategic groups tend to spin off smaller firms to meet
market niches.

15. Environmental scanning is

a. done only at the macroenvironmental level.
b. the gathering of information about external conditions for use in
formulating strategies.
c. illegal in many countries.
d. the same thing as competitive intelligence gathering.
 CHAPTER 3
Firm Capabilities: Assessing Strengths and Weaknesses

1. Value created by a firm is most often defined by the firm itself.

a. True
b. False

2. Being the first mover in an industry sometimes has disadvantages.

a. True
b. False

3. One of the main benefits of value chain analysis is its ability to foresee the
changing nature of a firm's strengths and weaknesses.
a. True
b. False

4. Large, established firms are usually quick to respond to changes in the

environment.
a. True
b. False

5. All forms of assessing competitors' strengths and weaknesses are legal and
ethical.
a. True
b. False

6. Which of the following is not a category of activities in a firm's value chain?

a. primary activities
b. secondary activities
c. upstream activities
d. downstream activities

7. In terms of value chain analysis, operations are

a. processing activities that result in a product or service.
b. support activities.
c. activities that transfer finished goods to distribution channels.
d. help determine the competitive scope of the firm's value-adding
activities.
8. Reengineering is
a. only possible in highly technical industries such as nuclear energy.
b. a method of continuously improving a firm's products and services.
c. is used primarily to improve a firm's inbound logistics.
d. the complete rethinking and redesign of how a business operates.

9. Which of the following is an example of a support activity?

a. receiving raw materials for use in the manufacturing process
b. purchase of raw materials for use in the manufacturing process
c. conversion of raw materials into finished goods
d. storing raw materials prior to their use in the manufacturing process

10. Capability drivers are best described as

a. the education levels of workers that allows them to function effectively.
b. distinctive competencies.
c. economic and strategic means by which a firm builds its strengths.
d. competitive advantages.

11. Which of the following is not one of the major categories of capability drivers?
a. first mover status
b. scale of operations
c. experience
d. financial strength

12. The operation of scale and experience advantages depends on all of the
following except
a. centralization
b. susceptibility
c. effective implementation
d. diversified product lines

13. Use of the Internet allows firms to reap all of the following advantages except
a. reaching customers directly
b. offering high levels of customer service
c. offering strong personal relations between provider and buyer
d. making every activity open to price bidding
14. The subset of value chain activities that a firm actually performs
a. is known as its business system.
b. is known as its primary activities.
c. is known as its operations.
d. is known as its logistics.

15. Customer service is such an important component of business strategy because

a. it eliminates competition.
b. it creates value immediately in front of the customer.
c. it cuts operating costs.
d. it adds more value to the firm's activities than any other source.
 CHAPTER 4
Opportunities for Distinction:
Building Competitive Advantage

1. Employing the low-cost leadership strategy means that the firm strives to sell its
product for the lowest price in the market.
a. True
b. False

2. Vertical integration entails the ability of a firm to control the supply of its inputs
and/or the purchase of its outputs.
a. True
b. False

3. A major disadvantage of the low cost leadership strategy is that it is easily copied
by industry rivals.
a. True
b. False

4. Focus strategies are based on providing increased buyer value through distinctive
products or services.
a. True
b. False

5. The product life cycle exerts significant influence on the competitive structure of
the industry environment and sources of competitive advantage.
a. True
b. False

6. The central premise of the low-cost leadership strategy is

a. customers always seek out the lowest price.
b. low cost strategies work well in all industries.
c. economies of scale and experience are most effective in situations
where products have as few modifications as possible.
d. over the long run, the highest quality products have the lowest costs.
7. Within a single industry, the low-cost leadership strategy
a. generally can be used effectively by all of the rivals.
b. generally can be used effectively by only one firm.
c. is close to a guaranteed source of financial success.
d. is an effective long-term strategy.

8. Differentiation strategies are based on

a. the firm's ability to provide products or services at lower cost than its
rivals.
b. providing buyers with a distinctive product or service.
c. targeting a specific niche within the industry.
d. the ability to produce a growing variety of products at reduced unit
costs.

9. Which of the following is not a means of providing increased buyer value?

a. lowering the buyer's cost of using the product
b. increasing buyer satisfaction
c. increasing exposure of the product or service
d. increasing buyers' perceived value

10. All of the following are advantages of the differentiation strategy except
a. firms can partially insulate themselves from competition.
b. customers are more sensitive to prices.
c. high quality can increase the potential market for the product or service.
d. raising barriers to entry by increasing brand loyalty.

11. Which of the following is a disadvantage of the differentiation strategy?

a. Differences among products or services tend to remain stable for long
periods.
b. Price premiums are sustainable as products become more familiar to
customers.
c. Firms are vulnerable to eventual "commoditization" of their products or
services.
d. Differentiated products or services risk being too expensive for the
market.
12. One advantage of focus strategies is
a. the ability to carve out a market niche even against larger competitors.
b. lower selling prices than competitors'.
c. the ability to sustain a price premium for its product or service.
d. access to large market segments.

13. The primary disadvantage of focus strategies is

a. high selling costs.
b. narrow market segments.
c. insulation from broad market competition.
d. the risk of market niche erosion.

14. Mass customization is the ability to

a. produce customized products for single buyers.
b. sell customized products at prices equal to more standardized goods.
c. produce a wide variety of products at reduced unit costs.
d. mass produce items that were once hand made.

15. All of the following are characteristics of a mature market except

a. slow growth.
b. shakeouts of weak competitors.
c. excessive differentiation of products.
d. stable prices.
 CHAPTER 5
Competing on the 'Net: Building Virtual Advantage

1. Most business-to-business (B-to-B) Internet platforms and sites focus on the

individual firm's use.
a. True
b. False

2. Information-intensive businesses are especially geared to the Internet because

their primary products or services can be digitized.
a. True
b. False

3. Disintermediation, or the bypassing of middlemen that separated firms from their

customers, is a force that will cause the supply chain to lengthen.
a. True
b. False

4. Network effects are relevant to the Internet because access to the net will become
clogged as more people use it.
a. True
b. False

5. The biggest potential impact of the Internet on established businesses is that it

makes many parts of an industry's value chain open to competitive bidding.
a. True
b. False

6. Which of the following is not an opportunity offered to business by the Internet?

a. It can provide a direct link between the business and its suppliers and
customers.
b. It can reduce the number of middlemen between the business and its
suppliers and customers.
c. It can reduce a business's overhead costs.
d. It can provide the business with up-to-date information on customers'
wants and needs.
7. Commonly recognized types of Internet commerce platforms include all of the
following except
a. Business-to-Business
b. Business-to-Government
c. Business-to-Consumer
d. Consumer-to-Consumer

8. The basic idea driving the development of the Business-to-Business Internet

platform is to
a. provide access to more customers.
b. provide a wider range of product offerings to customers.
c. reduce overhead expenses by eliminating the need for high-rent retail
locations.
d. reduce the transaction costs of working with suppliers.

9. Business-to-Consumer Internet platforms are designed to

a. provide service to the firm's customers.
b. reduce overhead expenses by eliminating the need for high-rent retail
locations.
c. increase the firm's exposure to potential suppliers.
d. reduce the transaction costs of working with suppliers.

10. Consumer-to-Consumer Internet platforms operate much like

a. used car sales lots.
b. charity drives.
c. auction houses.
d. bartering.

11. Which of the following is not a key difference between E-Business and traditional
business?
a. E-Business is always open for business, while traditional business has
down time.
b. Physical location is more important for E-Business than for traditional
business.
c. E-Business competitors respond immediately, while in traditional
business there is generally some time lag.
d. E-Business offers greater ease of comparison among rivals' products
and services.
12. Which of the following is a primary impact of the Internet on competitive strategy?
a. intermediation, the addition of middlemen to the supply chain
b. shifts in what firms do to provide value to their customers
c. lowering of the costs of production
d. abandoning other channels of distribution

13. A virtual advantage is

a. a firm's competitive advantage that evaporates when challenged by a
competitor.
b. a firm's competitive advantage derived from its Internet operations.
c. available only to Internet-based firms.
d. based on speed, fast turnaround, and deep knowledge of customers'
needs.

14. Sources of virtual advantage include all of the following except

a. customization of offerings.
b. high convenience to customers.
c. consistency of customer service.
d. the firm's control over the relationship.

15. Customer service for Internet-based firms will be crucial because

a. customers will be reluctant to give up their brick-and-mortar suppliers.
b. customers enjoy browsing in shopping malls.
c. customers will be concerned about lack of security and lack of the firm's
reputation.
d. customers will be concerned about the continued existence of the
Internet firm.
 CHAPTER 6
Shifts in Competitive Advantage:
Responding to Environmental Change

1. The opening of a new distribution channel often corresponds with the entry of new
competitor into an industry.
a. True
b. False

2. A significant risk of the defense strategy to environmental change is that it will work
too well, and the firm will become entrenched in its ways.
a. True
b. False

3. In most cases a harvesting strategy is a poor choice for managing environmental

change.
a. True
b. False

4. Inertia is a problem for all organizations, particularly small, newly established

firms.
a. True
b. False

5. Environmental change and the proper response to it are generally clear and
obvious.
a. True
b. False

6. A risk of technology that is shared by all industries is

a. that it will cost too much.
b. that it will stop in the near future.
c. the threat of obsolescence.
d. putting employees out of work.

7. All of the following are sources of environmental change except

a. new technology.
b. new investment.
 c. new distribution channels.
d. shifts in economic variables.

8. Which of the following is not an example of government regulation?

a. tariffs
b. quotas on imported goods
c. antitrust rules
d. demand for a product

9. Of the three main ways for a firm to respond to changes in the environment, which
is the most aggressive?
a. prospecting
b. defending
c. attacking
d. harvesting

10. A defensive response to environmental change is

a. designed to cut overhead costs.
b. the strategy most favored by shareholders.
c. a passive approach.
d. designed to help the firm shield itself from the change.

11. Which of the following is not one of the common defensive responses to
environmental change?
a. price cuts
b. increased promotion
c. reductions in overhead expenditures
d. refinement of existing technology

12. Steps taken in harvesting a business are usually

a. opposite of the steps taken in a defensive response.
b. similar to a prospecting response.
c. done very quickly.
d. very effective.

13. 1Two general characteristics of a firm's competitive environment place limits on

the response options. Which pair shown below describes those constraints?
 a. cost of the response; corporate culture
b. magnitude of threat; ability to adjust
c. power of suppliers; threat of new entrants
d. degree of rivalry; corporate culture

14. The most dangerous situation that a firm can find itself in when considering the
limits to its responses to environmental change is
a. high magnitude of threat and high ability to respond
b. high magnitude of threat and low ability to respond
c. low magnitude of threat and high ability to respond
d. low magnitude of threat and low ability to respond

15. Because of differences in their risk and return preferences, a firm's managers are
a. generally willing to take greater risks than are their employees.
b. generally unwilling to take any risks.
c. generally more aggressive than are the directors of the firm.
d. generally more risk averse than are long-term shareholders in the firm.
 CHAPTER 7
Corporate Strategy:
Leveraging Resources to Extend Advantage

1. Corporate strategy issues are crucial to extending a firm's competitive advantages

to new businesses.
a. True
b. False

2. Backward integration refers to the idea of expanding a firm's value chain activities
into areas currently performed by buyers of the firm's product or service.
a. True
b. False

3. A conglomerate discount indicates that the value of a diversified corporation as a

whole is less than the value of its separate business units.
a. True
b. False

4. For a shared activity to be a significant benefit of diversification, the activity must

be susceptible to economies of scale and experience.
a. True
b. False

5. A spin-off occurs when a diversified company sells a business unit under false
pretenses.
a. True
b. False

6. The resource-based view of the firm

a. asks what the firm can do to make money.
b. places emphasis on what resources are available to the firm in the
general environment.
c. places emphasis on securing sufficient financial resources to assure
survival of the firm.
d. places emphasis on the firm's ability to distinguish itself from its
competitors by investing in inimitable resources.

7. Characteristics of resources that make them valuable to a firm include all of the
following except
 a. being hard to imitate.
b. being susceptible to economies of scale.
c. being highly specialized and durable.
d. being immune to substitution from competitors' resources.

8. Using the vertical integration strategy for diversification assures the firm
a. will remain profitable.
b. will have adequate resources to expand its business.
c. will remain in its current industry.
d. will create synergy among its business units.

9. Which of the following is not a motive of vertical integration strategies?

a. accessing vital resources
b. expanding the firm's market share
c. reducing uncertainty
d. capturing profits that currently exist outside the firm

10. Synergy is
a. the result of a successful unrelated diversification strategy.
b. making sure that the inputs of business equal its output.
c. a situation where the value of the whole is less than the sum of its parts.
d. the goal of a related diversification strategy.

11. The basic source of value in a conglomerate is

a. the synergy created by the combination of its business units.
b. senior management's ability to time the market to buy and sell its
business units.
c. its long-term tangible assets.
d. its ability to share financial resources.

12. The main types of benefits derived from diversification include all of the following
except
a. cost savings.
b. more attractive terrain.
c. access to key resources.
d. the opportunity to share activities among business units.
13. The primary costs of diversification include all but which of the following?
a. ignorance about the new industry
b. overcoming the barriers to entry in the new field
c. neglect of the original business
d. costs of coordination

14. Achieving more attractive terrain is rarely a benefit for all stakeholders because
a. conglomerates often produce dysynergies.
b. many employees lose their jobs after firms diversify.
c. shareholders can achieve the benefits of diversification within their own
investment portfolios.
d. suppliers may be forced to sell their products at lower prices.

15. Which of the following is not a reason to spin off a business unit?
a. to refocus on the firm's primary industry
b. to raise cash that is currently invested in the business unit
c. to reverse earlier diversification efforts when they have failed to produce
sustainable increases in shareholder value
d. to gain access to key resources
 CHAPTER 8
Global Strategy:
Harnessing New Markets to Extend Advantage

1. Globalization is the process by which a firm expands into different national

markets.
a. True
b. False

2. Movement of jobs to locations where labor costs are low is one factor promoting
globalization.
a. True
b. False

3. The second component of globalization strategies, how to minimize a firm's

vulnerabilities and maximize its opportunities, focuses on leveraging the firm's critical
resources.
a. True
b. False

4. Global and multidomestic strategies are forecast to remain separate and distinct
approaches to globalization.
a. True
b. False

5. Part of the reason for the ethical dilemmas encountered by firms pursuing
globalization strategies is related to the varying emphases placed on the individual
and the group in different cultures.
a. True
b. False

6. Which of the following is not<\i> a factor promoting globalization?

a. narrowing of demand characteristics
b. protectionist trade policies
c. change in factor costs around the world
d. emergence of new distribution channels
7. Homogeneity of demand
a. recognizes that different cultures have different tastes and demands.
b. is more prevalent in industries that manufacture end products that
consumers can readily identify.
c. is not a major factor in the software industry
d. recognizes that consumers in different cultures are demanding similar
features in their products.

8. Rising costs of research and development and increasing economies of scale are
both factors promoting globalization. The reason behind both of these factors is
a. the need to spread costs over larger markets than individual nations can
provide.
b. the desire to find markets with higher selling prices.
c. the need for highly educated workers.
d. the need for more sophisticated consumers.

9. A global strategy is
a. any strategy that causes a firm to sell its products in two or more
countries.
b. a strategy that seeks to achieve a high level of consistency and
standardization around the world.
c. a strategy that seeks to adjust the firm's output to individual markets
around the world.
d. a strategy that seeks to penetrate as many national markets as possible.

10. All of the following are actions that firms pursuing a global strategy would use
except
a. product standardization.
b. locating plants to maximize systemwide advantage.
c. worldwide marketing efforts.
d. tailoring product features to meet local tastes.

11. Using financial, technological, and marketing resources from one market to battle
a competitor in another market is
a. a multidomestic strategy.
b. known as globalization.
c. called cross-subsidization
d. an example of how firms using a multidomestic strategy can accelerate
learning.
12. Multidomestic strategies are
a. strategies that seek to achieve a high level of consistency and
standardization around the world.
b. used when a firm has multiple headquarters around the world.
c. collections of country or region-based strategies.
d. used to find locations where costs of production are minimized.

13. Which of the following is not a characteristic of a multidomestic strategy?

a. standardized product offerings
b. localized value-adding activities
c. local channels of distribution
d. leveraging a global brand name

14. All of the following are benefits of global expansion except

a. opportunities for market expansion
b. recovery of high costs of product development
c. increased political influence for the firm in its home country
d. accelerated learning

15. Many of the costs of globalization are

a. time related
b. organizational
c. technological
d. redundant
 CHAPTER 9
Strategic Alliances: Teaming and Allying for Advantage

1. Strategic alliances are most prevalent in industries whose environments are

relatively stable.
a. True
b. False

2. Co-opetition is the idea that firm cannot cooperate and compete at the same
time.
a. True
b. False

3. The central problem of sharing knowledge with alliance partners is the impossibility
of limiting how the partners will use it.
a. True
b. False

4. The lowest costs and risks of forming alliances occur when managers view the
partnerships as substitutes for their own firm's internal development activities.
a. True
b. False

5. The most important step in preparing for an alliance is to understand how the
firm's competencies contribute to its competitive advantage.
a. True
b. False

6. Strategic alliances
a. include vertical integration.
b. are banned in many countries because of anti-trust regulations.
c. are relatively simple to manage.
d. are formal linkages between firms designed to achieve a specific goal.

7. Which of the following is not a valid reason for entering into a strategic alliance?
a. reduce risk
b. enter new markets
c. conduct industrial espionage
d. learn new technologies
8. Which of the following is not true of licensing arrangements?
a. They typically represent a sale of technology- or product-based
knowledge.
b. They are the simplest forms of strategic alliance.
c. They provide equity ownership in a new entity.
d. They allow one firm to gain assistance in commercializing a new
technology.

9. Joint ventures
a. are the most complex form of strategic alliance.
b. create a new entity that is owned by the joint venture partners.
c. are most popular when the industry's core technology is not changing
rapidly.
d. are most useful after an industry's technological standards have been
established.

10. Cross-holding arrangements are

a. the most complex form of strategic alliances.
b. primarily financial in nature.
c. seldom used in high-tech industries.
d. designed to limit the spread of knowledge to competitors.

11. All of the following are true of cross-holding consortia except

a. they involve extensive equity investments in member firms among the
other members.
b. they are helpful in building a long-term focus.
c. they assist in gaining a technological critical mass.
d. they typically do not cross traditional industry boundaries.

12. The most complicated form of strategic alliance is

a. a knowledge web.
b. an industry-spanning alliance network.
c. a joint venture.
d. a multipartner consortia.

13. Which of the following is not a risk associated with strategic alliances?
 a. incompatibility among partners
b. knowledge or skill leakage
c. proliferation of technological standards within an industry
d. dependence on alliance partners

14. The risk of dependence can occur

a. when alliance partners fail to include independence clauses in their
agreements.
b. without the firm's awareness.
c. because one firm seeks to dominate its partner.
d. only in high-tech industries such as memory chip design.

15. Ethical concerns about strategic alliances arise due to all of the following except
a. the balance between financial investments and returns.
b. the balance between cooperation and competition among alliance
members.
c. loyalty among personnel assigned to the alliance.
d. viewing the alliance as a dispensable assignment or "going native."
 CHAPTER 10
Designing Organizations for Competitive Advantage

1. In a broad sense, strategy implementation focuses on building a more effective

organization.
a. True
b. False

2. Organization structure's dual purpose is to promote efficiency and effectiveness

within the firm.
a. True
b. False

3. Centralization is the degree to which a firm's sales are generated from a single
location.
a. True
b. False

4. A geographic division structure is an organizational form that divides and organizes

the firm's activities according to where activities and people are physically located.
a. True
b. False

5. Worldwide product divisions are often used in conjunction with a multidomestic

strategy.
a. True
b. False

6. Organizational structure is
a. what determines a firm's success in carrying out its strategy.
b. the chart that depicts reporting relationships within a firm.
c. the process that senior managers go through to decide the most
effective reporting relationships within a firm.
d. the formal definition of working relationships between people in a firm.

7. Which of the following is not one of the basic building blocks of organizational
structure?
a. specialization
b. leadership
 c. standardization
d. centralization

8. A functional organizational structure

a. partitions the firm into divisions, each with all of the functions necessary
for it to carry out its own strategy.
b. groups employees according to their specialties.
c. makes it easy to coordinate the activities of a firm.
d. is most often used by conglomerates.

9. A functional organizational structure is usually suitable for all of the following

situations except
a. low-cost leadership strategies.
b. small firms.
c. single-business firms.
d. firms using unrelated diversification strategies.

10. A primary concern when using a functional organization structure

a. is that managers will place their functional area's priorities over the goals
for the entire firm.
b. is that overhead costs will be higher than those incurred by other
structural forms.
c. is that employees will have difficulty grasping the concept and purpose
of the structure.
d. is a lack of specialization.

11. Forms that a product structure may take include all of the following except
a. product divisions.
b. geographic divisions.
c. strategic business units.
d. sectors.

12. In actual practice, the matrix form of organization

a. has been uniformly successful.
b. has reduced the level of political behavior in the firm.
c. has had more disadvantages than advantages.
d. has reduced stress levels among employees.
13. Worldwide geographic division structures are most often used
a. when a firm has a small percentage of its total business originate
outside its home country.
b. when a firm sells a highly standardized product in every country in which
it operates.
c. in conjunction with a multidomestic strategy.
d. when the firm is attempting to combine the benefits of both global and
multidomestic strategies.

14. Choosing the "right" structure for a firm

a. is a necessary but not sufficient condition for successfully implementing
its strategy.
b. is difficult only when the firm is pursuing a diversification strategy.
c. is unrelated to the firm's strategy.
d. is a decision that should be made only once.

15. The primary ethical concern related to organizational structure is

a. the potential for abuse of employees.
b. the degree of geographic separation between employees and their
immediate supervisors.
c. the degree of stress involved in the matrix form of organization.
d. senior management's ability to set and enforce boundaries for proper
behavior by employees of the firm.
 Chapter 11
Attaining Integration for Advantage

1. Virtual organizations are designed to do away with the need for face-to-face
conversations among employees of a firm.
a. True
b. False

2. Denominator management is the concept that a manager must provide instructions

so that the least experienced worker (the lowest common denominator) will
understand what to do.
a. True
b. False

3. Shared values are the systems of unwritten rules that govern behavior in a firm.
a. True
b. False

4. Myths, legends, and socialization are common ways to convey a firm's shared
values to its employees.
a. True
b. False

5. One of the most powerful ways for a CEO to demonstrate her support for the firm's
ethical credo is to continuously behave in ways that agree with the credo.
a. True
b. False

6. An organizational structure that attempts to balance a firm's need to

simultaneously centralize and decentralize its activities is known as
a. loose coupling.
b. division of labor.
c. segregation/integration.
d. coordination.

7. Which of the following is not characteristic of a networked organization?

a. semipermeable boundaries
b. reliance on external alliances
 c. high specialization of knowledge
d. organizational focus on core processes and technologies

8. A firm's core processes are

a. the same as its core competencies.
b. key activities that cut across all of the firm's functions and divisions.
c. often created by employing a matrix structure.
d. generally linked to only one functional area.

9. An organizational structure that links people and activities within and outside the
firm is called
a. loose coupling.
b. a networked organization.
c. a real-time structure.
d. a virtual organization.

10. The characteristics of a virtual organization include all of the following except
a. organizational focus on core processes and technologies.
b. high specialization of knowledge.
c. rapid assembly and disassembly of project teams.
d. ability to connect quickly and easily with firms outside the organization.

11. Which of the following is not characteristic of a hierarchy-based reward system?

a. use of both objective and subjective criteria to measure performance
b. focus on individual measures of performance
c. emphasis on the long-term
d. close manager-subordinate relationships

12. A hierarchy-based reward system is suitable for all of the following except
a. low-cost leadership strategies.
b. differentiation strategies.
c. related diversification strategies.
d. global strategies.

13. Performance-based reward systems incorporate all of the following except

a. close manager-employee relationships.
b. emphasis on objective performance measures.
 c. prevalence of bonuses as a major component of total compensation.
d. focus on individual measures of performance.

14. Performance-based reward systems are most often associated with

a. differentiation strategies.
b. global strategies.
c. related diversification strategies.
d. multidomestic strategies.

15. Ideally, shared values should

a. "bubble up" from the ranks of the workers.
b. change to fit changes in the general environment.
c. be simple to understand.
d. reflect society's values.
 Chapter 12
Cooperation and Autonomy: Managing Interrelationships

1. Multipoint competition is the process of competing in several different markets at

once.
a. True
b. False

2. Any time a firm pursues global expansion, the need for communication and
cooperation will tend to increase.
a. True
b. False

3. The main problems caused by creeping bureaucracy are ineffective decision

making and excessive amounts of time taken to reach decisions.
a. True
b. False

4. The blending of many different sources of technology to create new, higher order
products is known as technology fusing.
a. True
b. False

5. Technology fusion strategies generally require a shift toward more cooperation

among divisions of a firm.
a. True
b. False

6. When a firm has a distinctive competence that is widely shared among its divisions
a. more autonomy is required for each SBU.
b. more cooperation is required among the SBUs.
c. the firm will reorganize to emphasize that distinctive competence.
d. staffing levels can be reduced.

7. Off-line coordinators
a. refer to low tech managers, usually in slow changing industries.
b. are typically relatively inexperienced, lower level managers.
 c. work extensively with division managers to foster informal cooperation.
d. are usually the first people to be laid off during delayering.

8. Firms that need extensive cooperation among their divisions should have a
corporate culture that
a. celebrates individual achievement.
b. emphasizes overall corporate goals rather than division objectives.
c. encourages internal competition among employees and divisions.
d. stresses objective measures of performance.

9. Which of the following is not a factor that encourages cooperation among business
units?
a. changes in the ways customers use products
b. the rise of multipoint competition
c. increased global expansion activity
d. environmental turbulence

10. All of the following are examples of technological convergence except

a. industry convergence
b. utilization of common design and technological skills.
c. consolidation of distribution channels.
d. the rise of computer-integrated manufacturing systems.

11. All of the following are factors promoting greater autonomy among business units
except
a. the rise of multipoint competition.
b. increased acquisition activity.
c. the need to avert creeping bureaucracy.
d. environmental upheaval.

12. Which of the following is not a cause of creeping bureaucracy?

a. additional mid-level management layers
b. increases in the number of rules and regulations
c. growth of firms
d. downsizings and delayerings
13. Environmental turbulence can result from any of the following except
a. entrance of strong rivals into the industry.
b. global warming.
c. new technologies.
d. new government regulation.

14. As technology fusion progresses within a firm and the need for internal synergy
and sharing of ideas grows,
a. SBUs should become more autonomous.
b. the need for autonomy grows for all divisions.
c. the need for cooperation grows within the firm.
d. organizations outside the firm will tend to attack.

15. The primary reason for ethical concerns in the search for the proper balance
between cooperation and autonomy is
a. the ethical appeal of cooperation is opposed to the efficiency appeal of
autonomy.
b. employees' ability to adjust to changing emphases between cooperation
and autonomy.
c. employees' resistance to change.
d. achieving the proper match between structure and strategy.
 Chapter 13
Managing Strategic Change:

Building Learning Organizations

1. According to the authors of the text, in the future the only sustainable source of
competitive advantage will be a firm's ability to change and learn new skills.
a. True
b. False

2. Managers in static organizations see change as an opportunity to learn and

improve.
a. True
b. False

3. The majority of firms are static organizations rather than learning organizations.
a. True
b. False

4. The biggest reason that employees of firms resist change is fear of the unknown.
a. True
b. False

5. For companies to build new sources of competitive advantage they must change
at least as fast as other firms in the industry.
a. True
b. False

6. The ability to learn and create new sources of competitive advantage

a. is the definition of a learning organization.
b. will be needed only in high tech industries.
c. will distinguish between profitable and unprofitable firms.
d. will affect all types of firms.

7. Firms that see change as an opportunity to learn and create new sources of
competitive advantage
a. are guaranteed success.
b. are learning organizations.
 c. will be the industry leaders of the next century.
d. will remain static

8. The common theme in characteristics of a learning organization is

a. continuous improvement.
b. highly educated managers.
c. openness to new ideas.
d. concentration on core processes.

9. Decentralization of decision making helps establish a learning organization in all of

the following ways except
a. training managers for higher level positions.
b. encouraging workers and managers to participate in decisions that
directly affect them.
c. giving workers room to experiment.
d. making the flow of information less likely to be distorted.

10. True openness to new ideas and criticism

a. is a common trait among managers.
b. is especially rare in learning organizations.
c. is rare in almost all firms.
d. can easily be taught in training seminars.

11. Which of the following is not a common reason for resistance to change?
a. lack of interest in the opportunities presented by the need for change
b. lack of sufficient financial incentives
c. conflict between the need for change and existing values
d. fear of personal loss

12. All of the following are reasons adding to the fear of cannibalization except
a. recognition that the firm's existing distinctive advantages could soon
become obsolete.
b. recognition that the firm may need to learn an entirely new set of skills.
c. recognition that profit margins in new markets are likely to be smaller
than existing margins.
d. recognition that workers may be forced to transfer to other divisions,
thus depleting the pool of talent within the focal SBU.
13. Which of the following is not a key step in building commitment to change?
a. recognize the need for change
b. foster debate
c. command workers to change
d. allocate resources

14. External sources of information about new developments in the general

environment include all but
a. buyers.
b. competitors.
c. suppliers.
d. lobbyists.

15. Promoting the need for learning and embracing change is very difficult because
a. so many human relationship issues are involved.
b. people resist learning new skills.
c. constant training is extremely expensive.
d. technology is changing so rapidly.
 Chapter 14

Redefining Advantage

1. Continuous quality improvement (CQI) is the cultivation and practice of quality in

every employee's tasks and activities throughout the firm.
a. True
b. False

2. Reengineering seeks to make small incremental improvements in the ways a firm

operates.
a. True
b. False

3. The productivity paradox is the situation that held in most manufacturing plants-
increased efficiency always led to decreased variety in output.
a. True
b. False

4. Computer-integrated manufacturing technology tends to conflict with total quality

management and reengineering programs.
a. True
b. False
5. Despite all of the emphasis on technological advances, the organization of
tomorrow will need to rely on its employees as its primary source of competitive
advantage.
a. True
b. False

6. Statistical process controls (SPCs)

a. were introduced by Frederick W. Taylor.
b. are the single most important component in a total quality management
program.
c. were widely used first in the United States.
d. are not sufficient in themselves to constitute a total quality management
program.

7. Which of the following is not an aspect of quality?

a. functionality
b. reliability
 c. low cost
d. aesthetics

8. Total quality management (TQM)

a. was originally developed in Japan.
b. is more of a philosophy than a program.
c. is reinvention of the ways a firm operates.
d. is accomplish through defect-free production.

9. Benchmarking includes all of the following steps except

a. identification of appropriate channels of distribution.
b. identification of processes that need improvement.
c. location of firms that perform well the processes of concern.
d. duplication of the outside firm's successful processes.

10. Building a quality culture is vital because

a. competitors cannot easily copy a firm's culture.
b. it is the least expensive way to implement a TQM program.
c. it is easier to administer than statistical process controls (SPCs).
d. it makes the firm's employees feel better about their jobs.

11. Reengineering has become more common within organizations for all of the
following reasons except
a. shorter product life cycles.
b. the need to improve quality.
c. information intensity.
d. hidden costs of inefficiency.

12. Reengineering involves which of the following activities?

a. reorganizing the firm around functional activities
b. installing firewalls in the firm's computer system to prevent interaction
with customers and suppliers
c. defining the firm's purpose and need for process revision
d. developing internal measures to track efficiency

13. Computer-integrated manufacturing technology (CIM) and flexible manufacturing

systems (FMS) have changed manufacturing processes in all of the following ways
except
 a. making more rapid responses to changes in market demand.
b. making retooling more flexible.
c. accelerating throughput.
d. increasing fixed costs.

14. A horizontal organization

a. relies on functional specialists to streamline its operations.
b. does not go as far as a networked organization in establishing
connections with customers and suppliers.
c. depends on temporary employees to keep a flat organization structure.
d. relies on cross-functional teams.

15. The process of including suppliers and customers in a firm's value-adding

activities is known as
a. reengineering.
b. external partnering.
c. continuous quality improvement.
d. benchmarking.
 Chapter Quiz
This activity contains 23 questions.

_________ is the process by which a firm manages the formulation and

implementation of its strategy.

Total Quality Management

Strategic Management
Micro-Management
Economic Logic

The two most critical questions that __________ strategy must address
are how a company will achieve its objectives today, when other firms
may be competing to satisfy the same customer's needs and how the
firm plans to compete in the future.

corporate
functional
business
operational

Which of the following is not one of the three fundamental questions

addressed by corporate strategy?

In what business will we compete?

How can we, as a corporate parent, add value to our various lines
of business?
How will diversification or our entry into a new industry help us to
compete in our other industries?
How can we best position our operations to compete against
present and future rivals within a particular business?

Which of the following statements regarding strategy formulation and

strategy implementation is the most accurate?

Neither strategy formulation, nor strategy implementation can

succeed without the other.
Strategy formulation is more important than strategy
implementation.
Strategy implementation is more important than strategy
 formulation.
Neither strategy formulation, nor strategy implantation can have a
significant impact on firm performance.

All of the following are elements of the strategy diamond except

Vehicles
Advantages
Arenas
Staging

Within the strategy diamond ______ refer(s) to decisions about the areas
in which a firm will be active including its products, services, distribution
channels, market segments, geographic areas, technologies, and even
stages of the valuecreation process

economic logic
differentiators
vehicles
arenas

_______ refer(s) to the timing and pace of strategic moves and choices
in this area typically reflect available resources, including cash, human
capital, and knowledge.

Differentiators
Vehicles
Staging
Economic logic

_________ is the process of taking the actions that put the strategy into
effect and ensuring that organizational decisions are consistent with it.

Strategy implementation
Strategic control
Strategy formulation
Strategy organization
___________ refers to the manner in which responsibilities, tasks, and
people are organized and includes the organization's hierarchy, units,
divisions and coordinating mechanisms.

Structure
Systems and processes
People and rewards
Strategic leadership

A firm's ability to create value in a way that its rivals can't is known as its
____________.

business strategy
corporate strategy
competitive advantage
dynamic advantage

The word strategy is derived from the Roman strategos, which is roughly
translated as "the general's view."

True
False

The strategic leader's perspective is distinguished form other

perspectives by the fact that it's a holistic view of the business and its
environment rather than a constricted focus on a single functional area.

True
False

Business strategy refers to the ways in which a firm will compete against
present and future rivals within a particular business

True
False

The two most critical questions that corporate strategy must address are
how a company can achieve its objective today, when other firms are
competing to satisfy the same customer's needs and how it plans to
compete in the future.

True
 False

Strategy formulation is the process of deciding what to do while strategy

implementation is the process of performing all the activities necessary
to do what has been planned.

True
False

To be effective, strategies must result from rational and methodical

planning processes based on analyses of both internal resources and
capabilities and the external environment.

True
False

The five elements of the strategy diamond are technologies, vehicles,

differentiators, staging, and economic logic.

True
False

Vehicles are features or attributes of a product that help a company beat

its competitors in the marketplace.

True
False

Key differentiators usually materialize without significant up-front

decisions, but without valuable differentiators, firms tend to lose
marketplace battles.

True
False

The field of strategic management focuses on explanations of

competitive advantage-on the reasons why companies experience above
and belownormal rates of returns and on the ways that firms can exploit
the limits of perfect competition.

True
False

Explain the difference between a business level strategy and a corporate

level strategy.

To create paragraphs in your essay response, type <p> at the beginning

of the paragraph, and </p> at the end.

Differentiate between strategy formulation and strategy implementation,

discuss the relationship between these two processes and identify which
is more important for business success.

To create paragraphs in your essay response, type <p> at the beginning

of the paragraph, and </p> at the end.

Identify and differentiate between three perspectives that offer insight

into why companies experience above and belownormal rates of returns
and on the ways that firms can exploit the limits of perfect competition.

To create paragraphs in your essay response, type <p> at the beginning

of the paragraph, and </p> at the end.