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FOREIGN TRADE UNIVERSITY STRATEGIC MANAGEMENT

This is a closed- book examination, students are not allowed to use any document. Duration: 75 minutes

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I. Multiple Choice Question (3 Marks)

1.A company's strategy consists of

A) the competitive moves and business approaches that managers are employing to grow the business, stake out a market position, attract and please customers, compete successfully,

conduct operations, and achieve targeted objectives.

B) the plans it has to outcompete rivals and establish a sustainable competitive advantage.

C) the offensive moves it is employing to make its product offering more distinctive and appealing to buyers.

D) the actions it is taking to develop a more appealing business model than rivals.

E) its strategic vision, its strategic objectives, and its strategic intent.

Answer: A

2.In crafting a strategy, management is in effect saying

A) "this is who we are and where we are headed.''

B) "this is our model for making money in our particular line of business."

C) "we intend to launch these new moves to outcompete our rivals."

D) "among all the many different business approaches and ways of competing we could have chosen, we have decided to employ this particular combination of competitive and operating approaches in moving the company in the intended direction, strengthening its market position and competitiveness, and boosting performance."

E) "this is our vision of what our business will be like, what products/services we will sell, and who our customers will be in the years to come."

Answer: D

3. Which of the following is not something a company's strategy is concerned with?

A) Management’s choices about how to attract and please customers

B) How quickly and closely to copy the strategies being used by successful rival companies

C) Management’s choices about how to grow the business

D) Management’s choices about how to compete successfully

E) Management’s action plan for conducting operations and improving the company’s financial and market performance

Answer: B

4 .The heart and soul of a company's strategy-making effort

A) is figuring out how to become the industry’s low-cost provider.

B) is figuring out how to maximize the profits and shareholder value.

C) concerns how to improve the efficiency of its business model.

D) deals with how management plans to maximize profits while, at the same time, operating in a socially responsible manner that keeps the company’s prices as low as possible.

E) involves coming up with moves and actions that produce a durable competitive edge over rivals.

Answer: E 5.Which one of the following is not part of a company's macroenvironment?

A) Conditions in the economy at large

B) Population demographics and societal values and lifestyles

C) Technological factors and governmental regulations and legislation

D) The industry and competitive environment arena in which the company operates

E) The company’s resource strengths, resource weaknesses, and competitive capabilities

Answer: E 6.Which of the following is not one of the five typical sources of competitive pressures?

A) The power and influence of industry driving forces

B) The bargaining power of suppliers and seller-supplier collaboration

C) The threat of new entrants into the market

D) The attempts of companies in other industries to win customers over to their own substitute products

E) The market maneuvering and jockeying for buyer patronage that goes on among rival sellers in the industry

Answer: A

7.Typically, the weakest of the five competitive forces in an industry is/are:

A) the threat posed by potential new entrants.

B) the bargaining power and leverage that suppliers are able to exercise.

C) the competitive pressures that stem from the ready availability of attractively-priced

substitute products.

D) the bargaining power and leverage that buyers are able to exercise.

E) None of the above is typically weakest.

Answer: E 8. Factors that tend to result in weak rivalry among competing sellers include

A) low buyer switching costs and low barriers to entry.

B) rapid growth in buyer demand, high buyer costs to switch brands, and so many industry rivals that any one company’s actions have little impact on rivals’ businesses.

C) weakly differentiated products among rival sellers.

D) rivals that are quite diverse in terms of their strategies, objectives, and countries of origin.

E) conditions where outsiders have recently acquired weak competitors and are trying to turn them into major contenders.

Answer: B

9.The competitive force of rival firms' jockeying for better market positions, higher sales and market shares, and competitive advantage

A) is stronger when firms strive to be low-cost producers than when they use differentiation and focus strategies.

B) is typically a weaker competitive force than is the threat of entry of new rivals.

C) is largely unaffected by whether industry conditions tempt rivals to use price cuts or other competitive weapons to boost unit sales.

D) tends to intensify when strong companies outside the industry acquire weak firms in the industry and launch aggressive, well-funded moves to transform the acquired companies into strong market contenders.

E) is weaker when more firms have weakly differentiated products, buyer demand is growing slowly, and buyers have moderate switching costs.

Answer: D

10.Which one of the following does not intensify the competitive pressures associated with the threat of entry?

A) When incumbent firms are unable or unwilling to launch competitive initiatives to strongly contest the entry of newcomers

B) When industry members are struggling to earn good profits

C) When entry barriers are relatively low and buyer demand for the product is growing fairly rapidly

D) When existing industry members are looking to expand their market reach by entering product segments or geographic areas where they currently do not have a presence

E) When newcomers can expect to earn attractive profits and a number of outsiders have the expertise and resources to hurdle whatever entry barriers exist

Answer: B

11. The payoff of doing a thorough SWOT analysis is

A) identifying whether the company's value chain is cost effective vis-à-vis the value chains of rivals.

B) helping strategy-makers benchmark the company's resource strengths against industry key success factors.

C) enabling a company to assess its overall competitive position relative to its key rivals.

D) revealing whether a company’s market share, measures of profitability, and sales compare favorably or unfavorably vis-à-vis key competitors.

E) assisting strategy-makers in crafting a strategy that is well-matched to the company's resources and capabilities, its market opportunities, and the external threats to its future well- being.

Answer: E

12. Which of the following is not a good example of a company strength?

A) More intellectual capital and better e-commerce capabilities than rivals

B) Fruitful partnerships or alliances with suppliers that reduce costs and/or enhance product quality and performance

C) Having higher earnings per share and a higher stock price than key rivals

D) A well-known brand name and enjoying the confidence of customers

E) A lower-cost value chain than rivals

Answer: C 13.A core competence

A) gives a company competitive capability and is a genuine company strength and resource.

B) typically has competitive value, the amount of which is reflected in the physical and tangible assets on a company's balance sheet.

C) usually is grounded in the technological expertise of a particular department or work group.

D) is more difficult for rivals to copy than a distinctive competence.

E) refers to a company's lowest-cost and most efficiently executed value-chain activity.

Answer: A

14.The objective of competitive strategy is to

A) contend successfully with the industry’s 5 competitive forces.

B) knock the socks off rival companies by doing a better job of satisfying buyer needs and preferences.

C) get the company into the best strategic group and then dominate it.

D) establish a competitively powerful value chain.

E) grow revenues at a faster annual rate than rivals are able to grow their revenues.

Answer: B

15.While there are many routes to competitive advantage, they all involve

A) building a brand name image that buyers trust.

B) delivering superior value to buyers and building competencies and resource strengths in performing value chain activities that rivals cannot readily match.

C) achieving lower costs than rivals and becoming the industry’s sales and market share leader.

D) finding effective and efficient ways to strengthen the company’s competitive assets and to reduce its competitive liabilities.

E) getting in the best strategic group and dominating it.

Answer: B 16.A low-cost leader can translate its low-cost advantage over rivals into superior profit performance by

A) cutting its price to levels significantly below the prices of rivals.

B) either using its low-cost edge to underprice competitors and attract price sensitive buyers in large enough numbers to increase total profits or refraining from price-cutting and using the low-cost advantage to earn a bigger profit margin on each unit sold.

C) going all out to use its cost advantage to capture a dominant share of the market.

D) spending heavily on advertising to promote its cost advantage and the fact that it charges the lowest prices in the industryit can then use this reputation for low prices to build very strong customer loyalty, gain repeat sales year after year, and earn sustained profits over the long-term.

E) outproducing rivals and thus having more units available to sell.

Answer: B

17. Opportunities to differentiate a company’s product offering

A) are most reliably found in the R&D portion of the value chain.

B) are typically located in the sales and marketing portion of the value chain.

C) can exist in activities all along an industry’s value chain.

D) usually are tied to product quality and customer service.

E) are most frequently attached to a company’s manufacturing expertise and to its ability to

achieve scale economies in production.

Answer: C 18.A European-based company that makes all of its goods at a plant in Brazil and then exports the Brazilian-made goods to country markets in many different parts of the world

A) is competitively disadvantaged when the euro declines in value against the Brazilian real.

B) is competitively disadvantaged when the Brazilian real declines in value against the currencies of the countries to which the Brazilian-made goods are being exported.

C) becomes less competitive in foreign markets when the Brazilian real gains in value against the currencies of the countries to which the Brazilian-made goods are being exported.

D) is competitively advantaged when the euro appreciates in value against the Brazilian real.

E) has no interest in whether the euro grows stronger or weaker versus the Brazilian real unless its chief competitors are other companies located in countries whose currency is also the euro.

Answer: C 19 .Which of the following statements regarding multicountry competition is false?

A) One of the features of multicountry competition is that buyers in different countries are attracted to different product attributes.

B) With multicountry competition, the power and strength of a company’s strategy and resource capabilities in one country significantly enhance its competitiveness in other country markets.

C) One of the features of multicountry competition is that industry conditions and competitive forces in each national market differ in important respects.

D) One of the features of multicountry competition is that the mix of competitors in each country market varies from country to country.

E) With multicountry competition, rivals battle for national championships and winning in one country market does not necessarily signal the ability to fare well in other countries.

Answer: B

20.In global competition

A) the leading companies compete for having the biggest share of the world market, but only occasionally compete head-to-head in different countries.

B) the markets in various countries are part of the world market and competitive conditions across country markets are strongly linked.

C) a company's overall market strength is the sum of its market shares in each country market where it has a presence.

D) the industry leaders are foreign companies; domestic companies are relegated to runner-up status.

E) a firm's overall competitive advantage is determined by the size of the competitive advantage it has in each of its profit sanctuaries.

Answer: B

II. Short- Answer Question.

1.Discuss the pros and cons of a strategy of unrelated diversification. Take example of corporation that is pursuing this kind of strategy (2marks)

Students have to write down the following contents to get the full mark:

What Is Unrelated Diversification?

Involves diversifying into businesses with

No strategic fit

No meaningful value chain relationships

No unifying strategic theme

Basic approach Diversify into any industry where potential exists to realize good financial

results

While industry attractiveness and cost-of-entry tests are important, better-off test is secondary

Appeal of Unrelated Diversification

Business risk scattered over different industries

Financial resources can be directed to those industries offering best profit prospects

If bargain-priced firms with big profit potential are bought, shareholder wealth can be enhanced

Stability of profits Hard times in one industry may be offset by good times in another industry

Key Drawbacks of Unrelated Diversification

a.Demanding Managerial Requirements b.Limited Competitive Advantage Potential

2.What are the keys to sustaining a focused low-cost strategy? (2 marks)

Big enough to be profitable and offers good growth potential

Not crucial to success of industry leaders

Costly or difficult for multi-segment competitors to meet specialized needs of niche members

Focuser has resources and capabilities to effectively serve an attractive niche

Few other rivals are specializing in same niche

Focuser can defend against challengers via superior ability to serve niche members

3.Identify and briefly explain any three of the factors that influence the bargaining strength and leverage of suppliers. (3marks)

Students have to list down three of the following elements and give a short explanation for each:

Industry members incur high costs in switching their purchases to alternative suppliers

Needed inputs are in short supply

Supplier provides a differentiated input that enhances the quality of performance of sellers’ products or is a valuable part of sellers’ production process

There are only a few suppliers of a specific input

Some suppliers threaten to integrate forward

Item being supplied is a commodity

Seller switching costs to alternative suppliers are low

Good substitutes exist or new ones emerge

Surge in availability of supplies occurs

Industry members account for a big fraction of suppliers’ total sales

Industry members threaten to integrate backward

Seller collaboration with selected suppliers provides attractive win-win opportunities