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Strategic Management and Business Policy, 13e (Wheelen) - PIV Chapter 8 Strategy Formulation: Functional Strategy and Strategic Choice The orientation of the functional strategy is dictated by its parent business unit's strategy. Answer: TRUE Diff: 1 PageRef: 237 Topic: Functional Strategy Each busi...

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Strategic Management and Business Policy, 13e (Wheelen) - PIV Chapter 8 Strategy Formulation: Functional Strategy and Strategic Choice 1) The orientation of the functional strategy is dictated by its parent business unit's strategy. Answer: TRUE Diff: 1 PageRef: 237 Topic: Functional Strategy 2) Each business unit has its own set of departments, each with its own functional strategy. Answer: TRUE Diff: 1 PageRef: 286 Topic: Functional Strategy 3) A product strategy deals with pricing, selling, and distributing a product. Answer: FALSE Diff: 1 PageRef: 286 Topic: Functional Strategy 4) Using a market development strategy, a company can develop new products for existing markets or develop new products for new markets. Answer: FALSE Diff: 2 PageRef: 286 Topic: Functional Strategy 5) When Colgate-Palmolive and Unilever take a successful product that they marketed in one part of the world and market it elsewhere, they are following a market development strategy. Answer: TRUE Diff: 2 PageRef: 286 Topic: Functional Strategy AACSB: Analytic Skills 6) Sara Lee Corporation uses the line extension strategy when they put the Sara Lee name on various new food products. Answer: TRUE Diff: 2 PageRef: 286 Topic: Functional Strategy AACSB: Analytic Skills 7) When the Kellogg Company changed to a push strategy, they spent more money on consumer advertising designed to build brand awareness so that shoppers will ask for the products. Answer: FALSE Diff: 2 PageRef: 287 Topic: Functional Strategy AACSB: Analytic Skills

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8) Penetration pricing attempts to hasten market development and offers the pioneer the opportunity to use the experience curve to gain market share with a low price and dominate the industry. Answer: TRUE Diff: 3 PageRef: 287 Topic: Functional Strategy 9) The use of the Internet to market goods directly to the customer allows a company to use dynamic pricing. Answer: TRUE Diff: 2 PageRef: 287 Topic: Functional Strategy 10) A financial strategy examines the financial implications of corporate and business-level strategic options and identifies the best financial course of action. Answer: TRUE Diff: 1 PageRef: 287 Topic: Functional Strategy 11) Equity financing is preferred for related diversification while debt financing is preferred for unrelated diversification. Answer: TRUE Diff: 3 PageRef: 288 Topic: Functional Strategy 12) In a leveraged buy-out, the acquired company, in effect, pays for its own acquisition. Answer: TRUE Diff: 2 PageRef: 288 Topic: Functional Strategy 13) An example of the use of the leader R&D functional strategy to achieve a low-cost competitive advantage is Dean Foods Company. Answer: FALSE Diff: 2 PageRef: 289 Topic: Functional Strategy AACSB: Analytic Skills 14) An operations strategy determines how and where a product or service is to be manufactured, the level of vertical integration in the production process, the deployment of physical resources, and relationships with suppliers. Answer: TRUE Diff: 2 PageRef: 290 Topic: Functional Strategy

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15) The continuous improvement system was developed in China. Answer: FALSE Diff: 2 PageRef: 291 Topic: Functional Strategy 16) The automobile industry is currently experimenting with the strategy of mass customization in which pre-assembled sub-assemblies are delivered as they are needed to a company's assembly line workers. Answer: FALSE Diff: 3 PageRef: 291 Topic: Functional Strategy 17) The importance of sole sourcing was supported by Michael Porter to obtain high supplier quality. Answer: FALSE Diff: 2 PageRef: 292 Topic: Functional Strategy 18) Two suppliers are the sole suppliers of two different parts, but they are also backup suppliers for each others parts in parallel sourcing. Answer: TRUE Diff: 3 PageRef: 293 Topic: Functional Strategy 19) Logistics strategy deals with the flow of products into and out of the manufacturing process. Answer: TRUE Diff: 2 PageRef: 172 Topic: Functional Strategy 20) Research indicates that the use of work teams leads to increased quality and productivity as well as higher employee satisfaction and commitment. Answer: TRUE Diff: 2 PageRef: 246245 Topic: Functional Strategy 21) The follow-the-moon management philosophy allows project team members living in one country to pass their work to team members in another country in which the work day is just beginning. Answer: FALSE Diff: 1 PageRef: 295 Topic: Functional Strategy 22) Outsourcing is the reverse of vertical integration. Answer: FALSE Diff: 2 PageRef: 295 Topic: The Sourcing Decision: Location of Functions AACSB: Reflective Thinking 3 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

23) The key to outsourcing is to purchase from outside only those activities that are not key to the company's distinctive competencies. Answer: TRUE Diff: 2 PageRef: 297 Topic: The Sourcing Decision: Location of Functions 24) Fujitsu demonstrated a strategy to avoid when it imitated IBM's strategy in 1990. Answer: TRUE Diff: 2 PageRef: 298 Topic: Strategies to Avoid 25) Corporate scenarios are pro forma balance sheets and income statements that forecast the effect each alternative strategy and its various programs will likely have on division and corporate return on investment. Answer: TRUE Diff: 1 PageRef: 299 Topic: Strategic Choice: Selecting the Best Strategy 26) Risk is composed not only of the probability that the strategy will be effective, but also of the amount of assets the corporation must allocate to that strategy and the length of time the assets will be unavailable for other uses. Answer: TRUE Diff: 2 PageRef: 301 Topic: Strategic Choice: Selecting the Best Strategy 27) Chevron uses the real-options approach for bidding on petroleum reserves. Answer: TRUE Diff: 2 PageRef: 302 Topic: Strategic Choice: Selecting the Best Strategy AACSB: Reflective Thinking 28) The attractiveness of a strategic alternative is seldom affected by its perceived compatibility with the key stakeholders in a corporation's task environment. Answer: FALSE Diff: 1 PageRef: 302 Topic: Strategic Choice: Selecting the Best Strategy 29) If the strategy is incompatible with the corporate culture, the likelihood of its success is very low. Answer: TRUE Diff: 2 PageRef: 303 Topic: Strategic Choice: Selecting the Best Strategy

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30) Even the most attractive strategic alternative might not be selected if it is contrary to the needs and desires of important top managers. Answer: TRUE Diff: 1 PageRef: 304 Topic: Strategic Choice: Selecting the Best Strategy 31) Some executives show a self-serving tendency to attribute the firm's problems not to their own poor decisions, but to environmental events out of their control such as government policies or a poor economic climate. Answer: TRUE Diff: 2 PageRef: 304 Topic: Strategic Choice: Selecting the Best Strategy 32) There is mounting evidence that when an organization is facing a dynamic environment, the best strategic decisions are arrived at through consensus when everyone agrees on one alternative. Answer: FALSE Diff: 3 PageRef: 305 Topic: Strategic Choice: Selecting the Best Strategy 33) "The customer is always right" is an example of a policy in Nordstrom's. Answer: TRUE Diff: 2 PageRef: 306 Topic: Developing Policies AACSB: Analytic Skills 34) Which strategy is developed to pull together the various activities and competencies of each department so that corporate and business unit performance improves and resource productivity is maximized? A) business strategy B) competitive strategy C) generic strategy D) enterprise strategy E) functional strategy Answer: E Diff: 2 PageRef: 286 Topic: Functional Strategy 35) The pricing, selling, and distributing of a product is referred to as a(n) ________ strategy. A) marketing B) functional C) operations D) financial E) human resource management Answer: A Diff: 1 PageRef: 286 Topic: Functional Strategy 5 Copyright © 2012 Pearson Education, Inc. publishing as Prentice Hall

36) The type of marketing strategy in which a company captures a larger share of an existing market for current products through market saturation or market penetration or develops new markets for current products is called A) market development. B) push strategy. C) product development. D) pull strategy. E) skimming the cream. Answer: A Diff: 2 PageRef: 286 Topic: Functional Strategy 37) When Smith & Wesson puts its name on others' products, like men's cologne, it is using which marketing strategy? A) demand pricing B) brand pricing C) line extension D) penetration extension E) demand extension Answer: C Diff: 3 PageRef: 286 Topic: Functional Strategy AACSB: Reflective Thinking 38) A company may use which of the following trade promotions to "push" their products through the distribution system? A) discounts B) in-store special offers C) advertising allowances D) coupons E) brand advertising Answer: E Diff: 2 PageRef: 287 Topic: Functional Strategy 39) When a company spends a large amount of money on trade promotion in order to gain or hold shelf space in retail outlets, a company is using a ________ strategy. A) pull B) push C) lengthening D) knot E) hold Answer: B Diff: 2 PageRef: 287 Topic: Functional Strategy

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40) Which type of pricing takes advantage of the demand curve while the product is still novel and competitors are few? A) demand pricing B) competitive pricing C) skim pricing D) penetration pricing E) loss-leader pricing Answer: C Diff: 2 PageRef: 287 Topic: Functional Strategy 41) Which type of pricing attempts to hasten market development and offers the pioneer the opportunity to utilize the experience curve to gain market share and dominate the industry? A) demand pricing B) competitive pricing C) skim pricing D) penetration pricing E) loss-leader pricing Answer: D Diff: 2 PageRef: 287 Topic: Functional Strategy 42) Which of the following is NOT a goal of financial strategies? A) Examine the financial implication of corporate and business level strategic options and identify the best financial course of action. B) Provide the corporation with the appropriate financial structure and funds to achieve its overall objectives. C) Institute a new product development plan to generate profit potential. D) Provide competitive advantage through a lower cost of funds and a flexible ability to raise capital to support a business strategy. E) Attempt to maximize the financial value of the firm. Answer: C Diff: 1 PageRef: 287 Topic: Functional Strategy 43) All of the following are benefits for a company to raising its debt levels EXCEPT A) deterrent to takeover by other firms. B) improvement in productivity. C) improvement in cash flows. D) force management to focus on core businesses. E) increase in shareholder value. Answer: E Diff: 2 PageRef: 288 Topic: Functional Strategy

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44) A popular financial strategy in which a company is acquired in a transaction financed largely by debt eventually paid off with money generated from the acquired company's operations or by sale of its assets is A) illegal in most countries. B) a good way to build a core competency. C) an application of the capital asset pricing model. D) the leveraged buyout. E) an example of internal financing. Answer: D Diff: 2 PageRef: 288 Topic: Functional Strategy 45) Leveraged buyouts are also referred to as A) leveraged bargains. B) management buyouts. C) management bargains. D) coordinated buyouts. E) debt buyouts. Answer: B Diff: 1 PageRef: 288 Topic: Functional Strategy 46) When a company exchanges 100 shares of stock worth $10 each for 50 shares worth $20 each, they are using A) tracking stock. B) holding stock. C) an LBO. D) reverse stock split. E) split stock. Answer: D Diff: 2 PageRef: 288 Topic: Functional Strategy AACSB: Analytic Skills 47) The strategy that deals with product and process innovation and improvement is known as a(n) ________ strategy. A) marketing B) R & D C) operations D) financial E) human resource management Answer: B Diff: 1 PageRef: 289 Topic: Functional Strategy

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48) A company which pioneers an innovation is called a(n) A) technological follower. B) technological opportunist. C) technological leader. D) technological manufacturer. E) technological entrepreneur. Answer: C Diff: 1 PageRef: 289 Topic: Functional Strategy 49) A company which imitates the products of competitors is referred to as a(n) A) technological follower. B) technological opportunist. C) technological leader. D) technological manufacturer. E) technological entrepreneur. Answer: A Diff: 1 PageRef: 289 Topic: Functional Strategy 50) When Intel opened four small-scale research facilities adjacent to universities to promote the cross-pollination of ideas, they were using which approach to R & D? A) open innovation B) differentiation C) technology scouts D) continuous improvement E) technological leadership Answer: A Diff: 3 PageRef: 289 Topic: Functional Strategy AACSB: Analytic Skills 51) According to Porter, to achieve a cost advantage by following the functional strategy of technological followership, a business unit should A) pioneer the lowest-cost product design. B) innovate in other activities to increase buyer value. C) avoid R&D costs through imitation. D) create low-cost ways of performing value activities. E) be the first firm down the learning curve. Answer: C Diff: 2 PageRef: 289 Topic: Functional Strategy

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52) According to Porter, to achieve a differentiation competitive strategy by following the functional strategy of technological leadership a business unit should A) pioneer the lowest-cost product design. B) innovate in other activities to increase buyer value. C) avoid R&D costs through imitation. D) create low-cost ways of performing value activities. E) be the first firm down the learning curve. Answer: B Diff: 2 PageRef: 289 Topic: Functional Strategy 53) If a company wishes to be a technological leader and also maintain a cost advantage, the appropriate R&D strategy would be to A) increase the cost of the product. B) lower the cost of the product or value activities by learning from the leader's experience. C) avoid R&D costs through imitation. D) create low-cost ways of performing value activities. E) innovate in other activities to increase buyer value. Answer: D Diff: 3 PageRef: 289 Topic: Functional Strategy 54) If a company wishes to be a technological follower and also pursue a differentiation strategy, the appropriate R&D strategy would be to A) adapt the product or delivery system more closely to buyer needs by learning from the leader's experience. B) value activities by learning from the leader's experience. C) avoid R&D costs through imitation. D) create low-cost ways of performing value activities. E) innovate in other activities to increase buyer value. Answer: A Diff: 3 PageRef: 289 Topic: Functional Strategy 55) When a company determines how and where a product or service is to be manufactured, the level of vertical integration in the production process, the deployment of physical resources, and relationships with suppliers, the company is developing its ________ strategy. A) marketing B) R & D C) operations D) financial E) human resource management Answer: C Diff: 2 PageRef: 290 Topic: Functional Strategy

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56) A flexible manufacturing system is defined by the text as A) one-of-a-kind production using skilled labor. B) highly automated assembly lines making one mass-produced product using little human labor. C) the grouping of parts into manufacturing families to produce a wide variety of mass-produced items. D) a process utilizing the just-in-time (JIT) method of manufacturing. E) standardization of components with each machine functioning like a job shop, but is positioned in the same order as the parts are processed. Answer: C Diff: 1 PageRef: 290 Topic: Functional Strategy 57) When components are standardized and each machine functions like a job shop but is positioned in the same order as the parts are processed, this setup is known as A) mass customization. B) connected line batch flow. C) connected job flow. D) mass batch flow. E) mass job flow. Answer: B Diff: 2 PageRef: 290 Topic: Functional Strategy 58) When there are highly automated assembly lines making one mass-produced product using little human labor, this setup is called A) dedicated transfer lines. B) connected line batch flow. C) connected job flow. D) mass batch lines. E) mass job flow. Answer: A Diff: 2 PageRef: 290 Topic: Functional Strategy 59) As it relates to operations, AMT stands for A) Automated Manufacturing Technology. B) Advanced Manufacturing Technology. C) Asymptotic Manufacturing Technology. D) Advanced Monotone Technology. E) Automated Manufacturing Technician. Answer: B Diff: 1 PageRef: 290 Topic: Functional Strategy

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60) Continuous improvement is an operations concept developed in A) the United States. B) Sweden. C) Japan. D) Germany. E) Canada. Answer: C Diff: 1 PageRef: 291 Topic: Functional Strategy 61) When Dell Computer's customers use the Internet to design their own computers, this demonstrates which manufacturing strategy? A) continuous improvement B) mass production C) job shop D) mass customization E) just-in-time Answer: D Diff: 3 PageRef: 292 Topic: Functional Strategy AACSB: Reflective Thinking 62) When a company deals with obtaining raw materials, parts, and supplies needed to perform the operations function, the company is developing its ________ strategy. A) operations B) purchasing C) R & D D) financial E) human resource management Answer: B Diff: 1 PageRef: 292 Topic: Functional Strategy 63) The purchasing strategy in which the purchasing company orders a particular part from several vendors is A) sole sourcing. B) multiple sourcing. C) just-in-time sourcing. D) backup sourcing. E) parallel sourcing. Answer: B Diff: 1 PageRef: 292 Topic: Functional Strategy

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64) The concept of ________ was taken one step further in JITII, in which vendor sales representatives usually have desks next to the purchasing company's factory floor, attend production status meetings, visit the R&D lab, and analyze the purchasing company's sales forecasts. A) multiple sourcing B) outsourcing C) sole sourcing D) parallel sourcing E) all of the above Answer: C Diff: 2 PageRef: 292 Topic: Functional Strategy 65) The purchasing strategy in which two suppliers are the sole suppliers of different parts, but are also the backup suppliers for each other's parts is A) sole sourcing. B) multiple sourcing. C) just-in-time sourcing. D) backup sourcing. E) parallel sourcing. Answer: E Diff: 2 PageRef: 293 Topic: Functional Strategy 66) Three trends are evident in logistics: outsourcing, the use of the Internet, and A) centralization. B) downsizing. C) logistical partnerships. D) computerization. E) containerized shipping. Answer: A Diff: 2 PageRef: 294 Topic: Functional Strategy 67) The flow of products into and out of the manufacturing process is a factor when developing a(n) ________ strategy. A) marketing B) logistics C) operations D) financial E) human resource management Answer: B Diff: 2 PageRef: 294 Topic: Functional Strategy

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68) Many companies have found that outsourcing logistics A) helps centralize logistics. B) reduces costs and improves delivery time. C) is an effective business-level strategy. D) helps the company differentiate themselves. E) all of the above Answer: B Diff: 2 PageRef: 294 Topic: Functional Strategy 69) Avon is an example of ...