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Strategic Management: A Competitive Advantage Approach, 17e (David/David) Chapter 5 Strategies in Action 1) Financial objectives involve all of the following EXCEPT A) growth in revenues. B) larger market share. C) higher dividends. D) greater return on investment. E) a rising stock price.

Answer: B Diff: 2 LO: 5.1: Identify and discuss five characteristics and ten benefits of clear objectives. AACSB: Analytical thinking Strategic Management: A Competitive Advantage Approach, 17e (David/David) Chapter 5 Strategies in Action

1) Financial objectives involve all of the following EXCEPT A) growth in revenues. B) larger market share. C) higher dividends. D) greater return on investment. E) a rising stock price. Answer: B Diff: 2 LO: 5.1: Identify and discuss five characteristics and ten

benefits of clear objectives. AACSB: Analytical thinking Strategic Management: A Competitive Advantage Approach, 17e (David/David) Chapter 5 Strategies in Action 1) Financial objectives involve all of the following EXCEPT A) growth in revenues. B) larger market share.

C) higher dividends. D) greater return on investment. E) a rising stock price. Answer: B Diff: 2 LO: 5.1: Identify and discuss five characteristics and ten benefits of clear objectives. AACSB: Analytical thinking Strategic Management: A Competitive

Advantage Approach, 17e (David/David) Chapter 5 Strategies in Action 1) Financial objectives involve all of the following EXCEPT A) growth in revenues. B) larger market share. C) higher dividends. D) greater return on investment. E) a rising stock price. Answer: B Diff: 2

LO: 5.1: Identify and discuss five characteristics and ten benefits of clear objectives. AACSB: Analytical thinking Strategic Management: A Competitive Advantage Approach, 17e (David/David) Chapter 5 Strategies in Action 1. Financial objectives involve all of the following EXCEPT R// larger market share. 2. What principle is based on the belief that the true measure of a really good strategist is the ability to solve problem?

R// Managing by crisis. 3. What principle is built on the idea that there is no general plan for which way to go and what to do? R// Managing by mystery. 4. Long-term objectives represent the results expected from pursuing certain strategies. R// True. 5. Objectives provide direction and allow for organizational synergy. R// True. 6. Strategic objectives include those associated with growth in revenues, growth in earnings, higher dividends, larger profit margins, and improves cash flow. R// False. 7. Strategic objectives include larger market share, quicker on-time delivery than rivals, shorter design-to-market times than rivals, lower costs than rivals, and wider geographic coverage than rivals. R// True. 8. “if ain’t broke, don’t fix it” refers to managing by crisis. R// False. 9. Long-term objectives are needed at which level(s) in an organization? R// Functional, divisional, and corporate. 10. Which level of strategy is most likely NOT present in small firms? R// Divisional. 11. Which strategy is effective when new, but related, products could be offered at highly competitive prices? R// Related diversification.

12. Which strategy should an organization use when its products are currently in the declining stage of the product’s life cycle? R// Related diversification. 13. Because a combination strategy bears no risk, many organizations pursue a combination of two or more strategies simultaneously. R// False. 14. Horizontal integration is seeking ownership or increased control over competitors. R// True. 15. Divestiture is selling all of a company’s assets, in parts, for their tangible worth. R// False. 16. A chief executive officer is located in the divisional level of a large firm. R// False. 17. Gaining ownership or increased control over distributors or retailers is called forward integration strategy. R// True. 18. Long-term objectives are needed at the corporate, divisional, functional, and operational levels of an organization. R// True. 19. Panera installing online ordering and delivery from their restaurants is an example of which type of strategy? R// Forward integration. 20. Forward integration and backward integration are sometimes collectively referred to as. R// Vertical integration.

21. Company websites that sell products they produce directly to consumers are examples of which strategy? R// Forward integration. 22. An effective means of implementing forward integration is through. R// Franchising. 23. Which of these strategies is effective when the number of suppliers is small and the number of competitors is large? R// Backward integration. 24. Backward integration is effective in all of these cases EXCEPT. R// When advantages of stable prices are not particularly important. 25. What refers to a strategy of seeking ownership of, or increased control over a firm’s competitors? R// Horizontal integration. 26. In which situation would horizontal integration be an especially effective strategy? R// When an organization competes in a slowing industry. 27. Franchising is an effective means of implementing forward integration. R// True. 28. A growing trend is for franchisers to buy out their part of the business from their franchises. R// False. 29. Limited availability of quality distributors is a reason why competitive advantage could result from forward integration. R// True.

30. A strategy of seeking ownership or increased control of a firm’s suppliers is backward integration. R// True. 31. If a firm’s present suppliers are expensive and unreliable in meeting the firm’s needs for parts, components, and/or raw materials, the firm should pursue a horizontal integration strategy. R// False. 32. Horizontal integration is an appropriate strategy when the competitors ofa an organization are doing poorly. R// False. 33. List and define the three types of integration strategies. R// The three integrative strategies are forward integration, backward integration, and horizontal integration. Forward integration is the acquisition of ownership r increased control over distributors or retailer. Backward integration is the acquisition of ownership or increased control of a firm’s suppliers. Horizontal integration is the acquisition of ownership or increased control over competitors. 34. List three guidelines for when forward integration would be a particularly good strategy to pursue. R// Some guidelines for when forward integration would be an especially effective strategy are: 1) when an organization’s present distributors are especially expensive, unreliable, or incapable of meeting the firm’s distribution needs; 2) when the availability of quality distributors is so limited as to offer a competitive advantage to those firms that integrate forward; 3) when an organization competes in an industry that is growing and is expected to continue to grow markedly; 4) when an

organization has both the capital and human resources needed to manage the new business f distributing its own products; 5) when the advantages of stable production are particularly high; and (6) when present distributors or retailers have high profit margins. 35. List three guidelines for when horizontal integrations would be a particularly good strategy to pursue. R// Reasons include: 1) An organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government for “tending substantially” to reduce competition; 2) An organization competes in a growing industry; 3) Increased economies of scale provide major competitive advantages; 4) An organization has both the capital and human talent needed to successfully manage an expanded organization, and 5) Competitors are faltering as a result of a lack of managerial expertise or a need for particular resources than an organization possesses, but not as a result of a decline in overall industry sales. 36. Which strategy seeks to increase market share for present products or services in present markets through greater marketing efforts? R// Market penetration. 37. When a domestic company first begins to export to India, it is an example of. R// Market development. 38. Which strategy generally entails large research and development expenditures? R// Products development. 39. All of the following situations are conducive to market development EXCEPT. R// When new channels of distribution are expensive and unreliable.

40. Which strategy is appropriate when an organization competes in an industry characterized by rapid technological developments? R// Product development. 41. If Gap opens five stores for the first time in China, this is an example of which type of strategy? R// Market development. 42. When the correlation between dollar sales and dollar marketing expenditures has historically been low, market penetration is an appropriate strategy. R// False. 43. Market penetration, market development, and product development are intensive strategies. R// True. 44. Market development includes introducing present products into new geographic areas. R// True. 45. An appropriate strategy when an organization has excess production capacity is market development. R// True. 46. Product development is a strategy that seeks increased sales by improving or modifying present products or services. R// True. 47. Product development is an appropriate strategy when an organization has successful products that are in the maturity stage of the product life cycle. R// True.

48. Define and give examples of three intensive strategies. R// Market penetration, market development, and product development are the three types of intensive strategies. Market penetration is the use of greater marketing efforts in an attempt to increase market share for present products or services, in present markets Market development is the introduction of present products or services into new geographic areas. Product development is the seeking of increased sales through new or improved products or services. 49. List three guidelines for when market development would be a particularly good strategy to pursue. R// Market development would be an effective strategy in all of the following situations: 1) when new channels of distribution are available that are reliable, inexpensive, and of good quality; 2( when an organization is successful at what it does; 3) when new untapped or unsaturated markets exist; 4) when an organization has the needed capital and human resources to manage expanded operations 5) when an organization has to excess production capacity; and 6) when an organization’s basic industry is rapidly becoming global in scope. 50. A pasta manufacturer’s purchase of some pet food brands is an example of. R// Unrelated diversification. 51. Which of the following is NOT a guideline for when an organization should use an unrelated diversification strategy? R//When existing markets for an organization’s present products are not yet saturated. 52. There are four basic types of diversification: concentric, conglomerate, forward, and backward.

R// False. 53. In order to exploit common use of a well-known brand name, most companies favor related diversification strategies. R// True. 54. Diversification strategies are becoming more popular as organizations are finding it easier to manage diverse business activities. R// False. 55. The purchase of 80 percent of Procter & Gamble’s pet-food brands by Mars Inc., best known for its M&M chocolates and its Mars and Snickers candy bars, is an example of related diversification. R// False. 56. Unrelated diversification is an appropriate strategy when an organization’s present channels of distribution can be used to market the new products to current customers. R// True. 57. Unrelated diversification may be an especially effective strategy when an organization’s basic industry is experiencing increasing annual sales and profits. R// False. 60. Procter & Gamble’s (P&G) sale of many of its brands in order to focus on its core brands is an example of which type of strategy? R// Divestiture. 61. GoPro laid off one-fifth of its workforce and exited the drone market. This is an example of. R// Retrenchment.

62. What kind of strategy is retrenchment?

A turnaround strategy

63. Bankruptcy

Can be an effective type of retrenchment strategy

64. Which chapter of the bankruptcy code applies to municipalities?

Chapter 9

65. The Family Farmer Bankruptcy Act of 1986 created which of the major types of bankruptcy?

Chapter 12

66. The form of bankruptcy in which all the organizations assets are sold parts for their tangible worth is

Chapter 7

67. Retrenchment would be an effective strategy when an organization

Is plagued by inefficiency, low profitable, poor employee’s morale, and pressure from stockholders to improve performance

68. Which term refers to selling a division or part of an organization?

Divestiture

69. Which strategy should be implemented when a division is responsible for an organizations overall poor performance?

Divestiture

70. Retrenchment is a turnaround strategy.

True

71. Although bankruptcy con be an effective type of retrenchment strategy, it does not allow firms to avoid major debt obligations and to void union contracts.

False 72. Chapter 7 bankruptcy is a liquidation procedure used only when a firm sees no hope of being able to operate successfully or to obtain necessary creditor agreement.

True

73. Chapter 9 bankruptcy applies to municipalities.

True

74. Stockton, California, is the largest U.S. city to declare bankruptcy.

False

75. Chapter 13 bankruptcy is similar to chapter 11, but available only to large corporation.

False

76. Selling a division or part of an organization is called divestiture.

True

77. The process whereby a firm determines the costs associated with organizational activities from purchasing raw materials to manufacturing products to marketing those products is called

Value chain analysis

78. The initial step to implementing value chain analysis is

Dividing a firm’s operations into specific activities or business process.

79. Value chain analysis can enable a firm to better identify its own strengths and weaknesses especially as compared to competitors value chain analyses and their own data over time.

True

80. Benchmarking is an analytical tool used to determine whether a firm’s value chain activities are competitive compared to rivals.

True

81. Under which strategy would you offer products or services to a wide range of customers at the lowest price available on the market?

Cost leadership – Low cost

82. According to Porter, which strategy offers products or services to a niche groups of customers at the lowest price available on the market?

Focus – Low cost

83. Under which condition would a cost leadership strategy be especially effective?

When the products of rival sellers are essentially identical and suppliers are readily available from any of several eager sellers.

84. Under which condition would a differentiation strategy be especially effective?

When technological change is fast paced and competition revolves around rapidly evolving product features.

85. According to Poter, strategies allow organizations to gain competitive advantage from three different bases: cost leadership, differentiation, and decentralization.

False

86. A cost leadership strategy can be especially effective when the market is composed of many price-sensitive buyers.

True

87. A best-value strategy must offer products or services to a wide range of customers at the best price-value available on the market.

False

88. A low-cost focus strategy offers products or services to a small range of customers at the lowest price available on the market.

True

89. A cost leadership strategy can be especially effective when most buyers use the product in the same ways.

True 90. A differentiation strategy can only be achieved with a large target market.

False

91. Differentiation guarantees competitive advantage as long as standard products sufficiently meet customer’s needs.

False

92. The most effective differentiation bases are those that are hard or expensive for rivals to duplicate.

True

93. A low-cost focus strategy can be especially attractive when the target market niche is small.

True

94. To succeed, a differentiation strategy depends on the existence of many different niches and segments within a market, thereby allowing a focuser to pick a competitively attractive niche suited to its own resources.

False

95. When the firms build from within, it is sometimes called ______ growth.

Organic

96. A_____ strategy aims to target a new market where competitors is not yet present.

Blue ocean

97. What occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity?

A joint venture

98. All of the following are cooperative arrangements EXCEPT

Marketing plans

99. Which of the following is NOT a reason joint ventures fail?

Venture risk was minimized

100. Which strategy would be most appropriate when the distinctive competencies of two or more firms complement each other especially well?

Joint venture

101. When two organizations of about equal size unite to form one enterprise, which of these occurs?

Merger

102. Mergers and acquisitions are created for all of the following reasons EXCEPT to

Shift company profit to the United States from countries with low corporate tax rates.

103. If a merger or acquisition is not desired by both parties, it is called a

Hostile takeover

104. A hostile takeover is not unethical as long as it is conducted in a sane, civil, legal manner.

True

105. A secondary buyout occurs when a corporation’s shares are bought by the company’s management and other private investors using borrowed funds.

True

106. The frequency of cooperative arrangements between rival firms has been increasing.

True

107. Joint venture tend to fail when managers who must collaborate daily in operating the venture are not involved in forming or shaping the venture.

True

108. Divestiture would be an appropriate strategy when a need exists to introduce a new technology quickly.

False

109. An acquisition occurs when a large organization purchases a smaller one or vice versa.

True

110. When an acquisition or merger is not desired by both parties, it is called a hostile takeover.

True

111. A leveraged buyout occurs when a firm’s management and other private investors use borrowed funds to buy out the firms’ shareholders.

True

112. ______ advantages refer to the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms.

First mover

113. First mover advantages refer to the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms.

True

114. First mover advantages are analogous to taking the low ground first.

False

115. To sustain the competitive advantage ga...