8 Chapter MGNT 685 practice questions
1. The most important drivers shaping a company's most appealing strategic options fall into two
broad categories:
A) a company's core competencies and the make-up of its value chain.
B) the company's financial condition and its current reputation/image with buyers.
C) the nature of industry and competitive conditions and the firm's own resource strengths and
weaknesses, competitive capabilities, opportunities and threats, and market position.
D) a company's internal strengths and weaknesses and its external opportunities and threats.
E) the company's competitive strength vis--vis rivals and which strategic group it is in.
2. Competitive success in fast-changing or high velocity markets tends to hinge on a company's
ability to
A) be the first-mover in reacting and responding to change.
B) be at worst a fast follower if it is not the first-mover in leading change.
C) to do a better job than rivals of anticipating change and being well-prepared for what happens
next.
D) stay on the cutting-edge of technological change.
E) improvise, experiment, adapt, reinvent, and regenerate as market and competitive conditions
shift rapidly and sometimes unpredictably.
3. Which one of the following statements does not represent one of the typical fundamental changes
in an industry as it reaches maturity?
A) Industry profitability decreases, sometimes permanently.
B) Competition on an international or global scale begins to intensify.
C) New scale economies develop, the industry experience curve drops sharply, and overall costs
per unit produced and sold drop significantly.
D) Increased competitive emphasis is placed on lowering costs and improving service.
E) Firms encounter growing difficulty in coming up with new product innovations and
developing new uses and applications for the product.
4. One of the major mistakes a firm can make during the transition to industry maturity is to
A) steer a middle course between low cost, differentiation, and focusing because such strategic
compromises typically result in a firm ending up "stuck in the middle" with a fuzzy strategy
and no competitive advantage.
B) expand into foreign markets.
C) attack weaker firms and try to capture some of their market share.
D) purchase rival companies at bargain pricesthis simply makes the company a bigger slowgrowth company.
E) dissolve its strategic alliances and partnerships.
5. The typical strategic mistakes companies can make during the transition from fairly rapid growth
to industry maturity include
A) pursuing a low-cost strategy instead of a differentiation strategy; not capitalizing on
economies of scale; and failing to go all out to achieve strong product differentiation so as to
set the company's product offering well apart from those of rivals.
B) steering a middle course between low-cost, differentiation, and focusing; being slow to adapt
existing competencies and capabilities to changing customer expectations; getting caught
with too much capacity as growth slows; and waiting too long to respond to price cutting by
rivals.
C) pursuing a low-cost leadership strategy; overspending on marketing and advertising efforts to
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boost sales growth; and putting too much emphasis on new product R&D and product
innovation.
D) sacrificing long-term competitive position for short-term profit; outsourcing too many value
chain activities to allies and partners, inaccurately predicting the next moves of close rivals;
and pursuing aggressive acquisition of weaker rival firms (instead of letting exit the industry
or go bankrupt).
E) merging with another firm; failing to pursue cost reduction soon enough and aggressively
enough; and abandoning strategic alliances with outsiders.
6. Which of the following is not usually a promising option for competing in a fragmented industry?
A) Specializing by product type or by customer type
B) Becoming a low-cost operator
C) Employing a best-cost provider strategy aimed at giving buyers more value for their money
and trying to appeal to a broader customer base
D) Focusing on a limited geographic area
E) Constructing and operating "formula" facilities at many different locations
7. Which of the following strategy options is generally not very suitable for a runner-up firm trying
to build a stronger competitive market position?
A) A muscle-flexing offensive strategy extending over many market segments and that attacks
the leaders head-on
B) A distinctive image strategy and a superior product strategy
C) Acquisition of or merger with other firms in the industry
D) A content follower strategy
E) A vacant niche strategy or specialist strategy
8. Potentially attractive turnaround strategy options for a struggling business include
A) a harvesting strategy, a guerilla warfare strategy, some type of focus strategy, or a
preemptive strike strategy.
B) selling off assets, shifting to a different strategy, and/or bold efforts to reduce costs.
C) shifting to a strategy that combines the most attractive strategy elements of one or more of
the market leaders.
D) aggressive cost reduction and value chain revamping to try to become the industry's low-cost
leader.
E) concentrating on the same kinds of product features emphasized by the market leaders and
matching or beating the leaders' prices.
9. Which of the following approaches is not a logical component of a strategy to turn around a
struggling single-business company?
A) Replacement of top management and other key personnel and giving the new management
team rein to make whatever changes they deem appropriate
B) Revenue-increasing actions
C) Actions to reduce costs
D) Guerrilla warfare tactics aimed at creating a market niche on the leaders' flanks
E) Actions to sell some of firm's assets and to retrench to a narrower base of operations
10. Which of the following is not among the ten commandments for crafting a successful business
strategy?
A) Avoid strategies capable of succeeding in only the most optimistic circumstances.
B) Consider that attacking competitive weakness is usually more profitable and less risky than
attacking competitive strength.
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C) Be judicious in cutting prices without an established cost advantage.
D) Always pursue full vertical integration so as to have full command of the industry value
chain.
E) Place top priority on crafting and executing strategic moves that enhance the company's longterm competitive position.
11. Which of the following is not a typical challenge that companies in emerging industries have to
contend with and try to overcome?
A) Mounting global competition and increasing vertical integration
B) Many potential buyers expect first-generation products to be rapidly improved and delay
their purchase until technology and product design mature
C) How to induce first-time purchase and overcome customer concerns about product features,
performance reliability, and conflicting claims of rival firms
D) Low barriers to the entry of new firms
E) A situation where there is no consensus about which of several competing technologies will
win out and/or which product features will gain the most buyer favor
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Chapter 9 MGNT 685 practice questions
1. Which one of the following is not one of the elements of crafting corporate strategy for a
diversified company?
A) Picking the new industries to enter and deciding on the means of entry
B) Choosing the appropriate value chain for each business the company has diversified into
C) Pursuing opportunities to leverage cross-business value chain relationships and strategic fits
into competitive advantage
D) Establishing investment priorities and steering corporate resources into the most attractive
business units
E) Initiating actions to boost the combined performance of the businesses the firm has
diversified into
2. Important reasons for a company to consider diversification include
A) a need to soak up excess resources and avoid the temptation to allocate unneeded resources
to the company's various internal functional area activities.
B) the benefits of giving company managers the opportunity to develop first-hand knowledge of
other businesses, customers, technologies, and industry environments.
C) giving the company a broader base to pursue product innovation.
D) a desire to avoid putting all of its "eggs" in one industry basket, dimming growth
opportunities in its present business, and opportunities to transfer its resources, expertise, and
capabilities to other industries.
E) reducing the need to use price cuts to grow the company's profits and return on investment in
its main line of business.
3. To test the probable impact of a particular diversification move on shareholder value, corporate
strategists should use
A) the profit test, the competitive strength test, the industry attractiveness test, and the capital
gains test.
B) the better-off test, the competitive advantage test, the expectations test, and the shareholder
value test.
C) the barrier to entry test, the competitive advantage test, the growth test, and the stock price
effect test.
D) the strategic fit test, the industry attractiveness test, the growth test, the dividend effect test,
and the capital gains test.
E) the attractiveness test, the cost of entry test, and the better-off test.
4. Different businesses are said to be "related" when
A) there are competitively valuable relationships among the activities comprising their
respective value chains.
B) the products of the different businesses are bought by much the same types of buyers.
C) the products of the different businesses are sold in the same types of retail stores.
D) the businesses have several key suppliers in common.
E) the businesses have similar scale economies and experience curve effects, are produced with
similar assembly line methods, and use some common elements of technology.
5. Which of the following is the best example of related diversification?
A) An airline firm acquiring a rent-a-car company
B) A greeting card manufacturer deciding to open a chain of stores to retail its lines of greeting
cards
C) A manufacturer of ready-to-eat cereals acquiring a producer of cake mixes and frozen cakes
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D) A manufacturer of snack foods diversifying into fast-food restaurants
E) A manufacturer of ski equipment acquiring a chain of retail shops specializing in Christmas
ornaments and decorations
6. Related diversification
A) involves diversifying into businesses whose value chains are related in ways that satisfy the
industry attractiveness test and the financial fit test.
B) offers opportunities to turn cross-business strategic fits into competitive advantage.
C) comes closer to satisfying the attractiveness test and the cost of entry test than does unrelated
diversification.
D) involves diversifying into businesses whose value chains are related in ways that satisfy the
cost-of-entry test and the capital gains test.
E) involves diversifying into businesses whose value chains are related in ways that satisfy the
competitive strength and resource adequacy tests.
7. One strategic fit-based approach to related diversification would be to
A) diversify into new industries that present opportunities to transfer a company's technological
expertise in its mainstay business to the new businesses (or to transfer the expertise from the
new business back to the present business).
B) diversify into those industries where the same kinds of driving forces and competitive forces
prevail, thus allowing use of much the same competitive strategy in all of the business a
company is in.
C) acquire rival firms that have broader product lines so as to give the company access to a
wider range of buyer groups.
D) acquire companies in forward distribution channels (wholesalers and/or retailers).
E) expand into foreign markets where the firm currently does no business.
8. Economies of scope
A) stem from the cost-saving efficiencies of operating over a wider geographic area.
B) have to do with the cost-saving efficiencies of distributing a firm's product through many
different distribution channels simultaneously.
C) exist whenever it is less costly for two or more businesses to perform certain value chain
activities jointly under centralized management than it is for these activities to be performed
independently.
D) refer to the cost-savings that flow from operating across all or most of an industry's value
chain activities.
E) arise from the cost-saving efficiencies of having a wide product line and offering customers a
big selection of models and styles to choose from.
9. Which of the following is the best example of unrelated diversification?
A) A newsprint manufacturer acquiring a chain of newspapers.
B) An electrical equipment manufacturer acquiring a potato chip company.
C) A producer of canned soups acquiring a maker of breakfast cereals.
D) A pizza chain acquiring a chain of hamburger outlets.
E) A network TV company buying a professional baseball team and a professional basketball
team so it can televise more live sporting events.
10. The basic premise of unrelated diversification is that
A) the least risky way to diversify is to seek out businesses that are leaders in their respective
industry.
B) the best companies to acquire are those that can pass the capital gains test as opposed to those
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which can pass the better-off test.
C) the best way to build shareholder value is to acquire businesses with strong cross-business
financial fit.
D) any company that can be acquired on good financial terms and that has good profit prospects
represents a good business to diversify into.
E) the task of building shareholder value is better served by seeking to stabilize earnings across
the entire business cycle than by seeking to capture cross-business strategic fits.
11. Which of the following is not among the risks and disadvantages of unrelated diversification?
A) Failing to develop or acquire the skills to manage a business in which one has no prior
experience
B) Spreading corporate resources too thinly over too many different lines of business
C) The strain it places on corporate-level management in trying to cope with the variety of
problems encountered in managing a widely diversified portfolio of businesses
D) A bigger risk of sizable ups and downs in sales and profits over the course of the business
cycle.
E) A bigger chance that corporate managers will drift into letting corporate strategy be little
more than a composite of each line of business strategy
12. With an unrelated diversification strategy, the types of companies that make particularly
attractive acquisition targets are
A) financially distressed companies with good turnaround potential or companies whose assets
are undervalued or companies that have bright growth prospects but are short on investment
capital.
B) companies offering the biggest potential to achieve economies of scope.
C) businesses with excellent cross-business financial fit.
D) companies that have bright growth prospects, plenty of cash, and interrelated value chains.
E) companies capable of readily passing the cost-of-entry test, the profit test, the dividend
growth test and the capital gains test.
13. Generally, internal entry into a new business is more attractive than acquiring an existing firm in
the targeted industry when
A) the costs associated with internal startup are less than the costs of buying an existing
company and there is ample time to launch the new business from the ground up.
B) there will be positive effects on the entrant's other existing businesses.
C) the target industry is young, fragmented, and growing rapidly.
D) all of the potential acquisition candidates are losing money.
E) the target industry is comprised of several relatively large and well-established firms.
14. The most popular strategy for entering new businesses and accomplishing diversification is
A) forming a joint venture with another company to enter the target industry.
B) internal startup.
C) acquisition of an existing business already in the chosen industry.
D) forming a strategic alliance with another company to enter the target industry.
E) strategic alliance and joint ventures are equally popular and rank well ahead of acquisition
and internal start-up in frequency of use.
15. The difference between corporate restructuring strategies and corporate turnaround strategies is
that
A) restructuring entails a revamping of the value chains of each of a diversified company's
businesses whereas turnaround strategies aim at restoring the profitability of particular
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businesses.
B) restructuring entails reducing the scope of diversification to a smaller number of businesses
whereas turnaround strategies aim at restoring a diversified company's overall profitability.
C) restructuring strategies entail revamping the strategies of a diversified company's different
businesses whereas turnaround strategies aim at revamping the strategies of a diversified
company's poorly performing businesses.
D) restructuring strategies involve divesting some businesses and acquiring new ones so as to
put a new face on a diversified company's business makeup whereas corporate turnaround
strategies focus on restoring a diversified company's money-losing businesses to profitability.
E) restructuring entails broadening the scope of diversification to include a larger number of
businesses whereas turnaround strategies aim at restoring a diversified company's overall
profitability.
16. One of the primary reasons why a diversified multinational corporation is in strategic position to
outmuscle either a one-business competitor or a one-country competitor is that
A) the DMNC is almost certainly going to have a better market image than a one-business or
one-country competitor because of its multi-business, multi-country operations.
B) the DMNC is almost certainly going to have more economies of scope because of its multicountry operations.
C) the DMNC has more strategic fit across its value chain activities than does a one-business
competitor or a one-country competitor.
D) the DMNC has the financial resources to out-advertise a one-business competitor or a onecountry competitor.
E) the DMNC can resort to both cross-business and cross-country subsidization to support a
long-term price-cutting, market-share-building offensive that gradually whittles away a onebusiness or one-country competitor's market share and profitability.
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Chapter 10 MGNT 685 practice questions
1. Which one of the following is not a standard part of analyzing the strategy of a diversified
company?
A) Assessing the competitive strength of each business the company has diversified into.
B) Determining which business units have the most potential for employing low-cost producer
strategies, differentiation strategies, focus strategies, and best-cost producer strategies and
also determining how soon the company's cash hogs can be transformed into cash cows.
C) evaluating the strategic fits and resource fits among the various sister businesses.
D) Identifying the company's current corporate strategy and applying the industry attractiveness
test to each of the industries the company has diversified into.
E) Rating each business unit on the basis of its historical performance and future prospects and
deciding what priority to give each of the company's business units in allocating resources
and making new capital investments.
2. To identify a multi-business firm's corporate strategy, one should consider such factors as
A) the extent to which the firm is diversified (as measured by the proportion of sales and profit
contributed by each business and by whether its diversification base is broad or narrow).
B) whether the company is focusing on "milking its cash cows" or "feeding its cash hogs."
C) the technological proficiencies, labor skill requirements, and functional area strategies
characterizing each of the firm's businesses.
D) each business's competitive approachwhether it is pursuing low-cost leadership,
differentiation, best-cost, or focus strategy.
E) how many core competencies each business in the portfolio has.
3. Which of the following is not generally something that ought to be considered in evaluating the
attractiveness of the industries represented in a diversified company's business portfolio?
A) Market size and projected growth rate, industry profitability, and the intensity of competition
B) Industry uncertainty and business risk
C) The use of strategic alliances and collaborative partnerships in each industry, the extent to
which firms in the industry utilize outsourcing, and how many of what kinds of key success
factors each industry has
D) Seasonal and cyclical factors, resource requirements, and whether an industry has significant
social, political, regulatory, and environmental problems
E) The presence of cross-industry strategic fits and resource fits
4. When industry attractiveness ratings are calculated for a multi-business company, the results help
indicate
A) which industries are most attractive and which are least attractive from the standpoint of
overall long-term profitability.
B) which industries have the most attractive key success factors and which industries have
relatively unattractive key success factors.
C) which industries are most competitive and which are least competitive.
D) the relative attractiveness of the value chains of the different industries.
E) which industries have the most attractive key success factors and which are most attractive
from the standpoint of industry driving forces.
5. A weighted industry attractiveness assessment is generally analytically superior to an unweighted
assessment because
A) a weighted ranking identifies which industry opportunities are likely to offer the greatest
long-term profit prospects.
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B) an unweighted ranking doesn't discriminate between strong and weak industry driving forces
and industry competitive forces.
C) it does a more accurate job of singling out which industry key success factors are the most
important.
D) an unweighted ranking doesn't help identify which industries have the easiest and hardest
value chains to execute.
E) the various measures are not likely to be equally important in determining industry
attractiveness or in contributing to achievement of the company's strategic vision and
objectives or in matching up well with the company's circumstances.
6. The basic purpose of assessing the relative competitive strength of a diversified company's
business units is to determine
A) which one has the most competitive prices, the lowest costs, and best overall profit margins.
B) how well positioned each business unit is in its industry and the extent to which it already is
or can become a strong market contender.
C) which business unit has the greatest number of resource strengths, competencies, and
competitive capabilities and which one has the least.
D) which one has the biggest market share and is growing the fastest.
E) which one has the best value chain.
7. The value of using relative market share in assessing a business's competitive strength is
A) increased ability to identify which businesses have competitive advantages and which do not.
B) the ability to compare financial performance against market share changes.
C) more accurate identification of competitive strengths and weaknesses, business by business.
D) that relative market share more clearly indicates (1)competitive position and comparative
strength in the market place than do percentage market shares and (2)whether a business is
likely to be in a strong relative cost position based on scale economies and experience in
producing the product.
E) None of the above.
8. The most significant contributions to strategy-making in diversified companies provided by the 9cell industry attractiveness/competitive strength matrix include
A) why it is important to use weights to evaluate each key determinant of resource fit.
B) providing a basis for rating a company's business units in terms of investment priority and for
pinpointing which businesses should be considered for possible divestiture.
C) its ability to identify cash cow and cash hog businesses.
D) its ability to pinpoint what kind of competitive advantage or disadvantage each business has.
E) the ability to identify the strategic fits and resource fits that exist among the different
businesses.
9. Checking a diversified company's business portfolio for cross-business competitive advantage
potential does not involve which one of the following?
A) Ascertaining which business units have value chain match-ups that offer opportunities to
combine the performance of related value chain activities and reduce costs
B) Ascertaining which business units have value chain match-ups that offer opportunities to
transfer skills or technology or intellectual capital from one business to another
C) Ascertaining which business units have similar industry key success factors
D) Ascertaining which business units have value chain match-ups that offer opportunities to
create new competitive capabilities or to leverage existing resources
E) Ascertaining which business units present opportunities to exploit common use of a wellrespected brand name
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10. In a diversified company, business subsidiaries that lack strategic fit
A) should always be divested.
B) should be considered for divestiture unless they are unusually good financial performers or
else offer superior growth opportunities.
C) should be harvested, then divested.
D) should be milked for maximum cash flow, then sold.
E) should be kept if they require only minimal levels of corporate resource support to maintain
profitability.
11. Checking a diversified company's business line-up for competitive and managerial resource fits
does not involve which one of the following?
A) Determining whether the company's resource strengths are well-matched to the key success
factors of the industries it has diversified into
B) Determining whether the value chains of different businesses are similar in a number of
competitively important respects
C) Determining whether the company has or can readily develop the managerial depth and
expertise to cope with the assortment of managerial and operating problems posed by its
different businesses
D) Determining whether the company needs to invest in upgrading its resource base in order to
stay ahead of (or abreast of) the efforts of rivals to upgrade their resource base
E) Determining whether competitive capabilities in one business can be leveraged by
transferring them to another business
12. Which one of the following is not a particularly relevant consideration in deciding what the
priorities should be for allocating resources to the various businesses of a diversified company?
A) Whether and how corporate resources and capabilities can be used to enhance the
competitiveness and profitability of particular business units
B) What competitive strategy the business is presently using
C) Whether a business exhibits good strategic fit and resource fit
D) Compatibility with the corporation's long-term direction and strategic vision
E) Industry attractiveness and competitive strength of the various businessesnormally strong
businesses in attractive industries should be given higher priority than weak businesses in
unattractive industries
13. Which one of the following is not a reasonable option for deploying a diversified company's
financial resources?
A) Spending to add new businesses to the corporate portfolio and establish positions in new
industries
B) Concentrating most of a company's financial resources in cash cow businesses and allocating
little or no additional resources to cash hog businesses until they show enough strength to
generate positive cash flows
C) Funding long-range R&D ventures
D) Paying down existing debt, increasing dividends, or repurchasing shares of the company's
stock
E) Investing in ways to strengthen or expand existing businesses
14. Which of the following should be a last resort option for a diversified company that is
experiencing a decline in performance?
A) Divest weak performing business units and acquire attractive new business units
B) Reduce corporate performance objectives
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C) Alter strategic plans of some of its business units in ways that should boost performance
D) Upgrade the company's resource base
E) Form strategic alliances and/or collaborative partnerships to try to alter conditions
responsible for subpar performance
15. In diversified companies, shareholder interests are generally best served by
A) pursuing narrow rather than broad diversification.
B) divesting businesses that are currently not earning an attractive profit.
C) concentrating corporate resources on businesses that can contend for market leadership in
their industry.
D) trying to maximize overall corporate growth in revenues.
E) trying to maximize the firm's short-term profits, cash flow, and return on investment.
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Chapter 11 MGNT 685 practice questions
1. Whereas crafting strategy is largely a market-driven entrepreneurial activity, implementing
strategy
A) is primarily an operations-driven activity revolving around the management of people and
business processes.
B) involves building and strengthening organizational resources, competencies and competitive
capabilities.
C) is an action-oriented make-things-happen task.
D) tests a manager's ability to lead and direct organizational change, achieve continuous
improvement in business processes, create a strategy-supportive corporate culture, and meet
or beat performance targets.
E) All of these.
2. Management's handling of the strategy implementation process can be considered successful
A) when the internal organization structure ends up being well-matched to the requirements of
successful strategy execution.
B) if and when the company achieves the targeted strategic and financial performance and
shows good progress in achieving management's strategic vision for the company.
C) if the company's policies and procedures are strategy-supportive.
D) if the budget is made after the strategy is chosen, rather than before, so that resource
allocation is fully supportive of strategy execution.
E) if managers and employees support the company's strategy and long-term direction and are
motivated to pursue aggressive implementation.
3. Which of the following is not one of the principal managerial components associated with
implementing and executing strategy?
A) Building an organization with the skills, competencies, capabilities, and resources to carry
out the strategy successfully and steering ample resources into those value chain activities
critical to strategic success
B) strategy-supportive Establishing policies and procedures
C) Deciding which value chain activities to revise first and which to leave as is
D) Instituting best practices and pushing for continuous improvement in how value chain
activities are performed
E) Tying incentives and rewards to the achievement of performance targets and to good strategy
execution
4. Responsibility for implementing strategy
A) is primarily the job of the chief executive officer.
B) is a task for every manager and the whole management team.
C) is primarily a senior management responsibility.
D) should be delegated to a chief strategy implementer appointed by the chief executive officer.
E) is primarily a task for middle and lower-level managers because it is they who have
responsibility for pushing the needed changes all the way down to the lowest levels of the
organization.
5. The three components of building a capable organization are
A) making periodic changes in the firm's internal organization to keep people from getting into a
comfortable rut, instituting a decentralized approach to decision-making, and developing the
appropriate competencies and capabilities.
B) allocating resources in a manner most conducive to efficient performance of key value chain
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activities, empowering employees, and hiring a capable top management team.
C) putting a centralized decision-making structure in place, determining who should have
responsibility for each value chain activity, and aligning the organization structure with key
policies, procedures, and operating practices.
D) staffing the organization, building core competencies and competitive capabilities, and
structuring the organization and work effort.
E) flattening the organization structure, making sure that all managers and employees are
empowered, and .
6. Which of the following is generally not among the practices that companies use to develop their
knowledge base and build intellectual capital?
A) Careful screening and evaluation of job applicants
B) Continuous training and retraining of employees
C) Weeding out the 20% lowest performing employees each year
D) Giving people skills-stretching assignments and rotating them through jobs that span
functional and geographic boundaries
E) Encouraging employees to be creative and innovative and fostering a stimulating and
engaging work environment
7. Core competencies and competitive capabilities
A) usually are lodged in the narrow skills and specialized work efforts of a single department, as
opposed to the combined expertise and capabilities of specialists scattered across several
departments.
B) typically emerge incrementally as a company acts to respond to customer problems, new
technological or market opportunities, and the competitive maneuvers of rivals or else tries to
capitalize on the skills, abilities, and know-how that contributed to its earlier successes.
C) are most often composites of skills and activities performed at different locations in a firm's
value chain that, when linked and coordinated, create unique organizational capability.
D) tend to result in competitive advantage when they are highly specific, grounded in deep
technical expertise, and involve know-how that can be kept proprietary.
E) Both B and C are correct.
8. Which of the following is not one of the traits of core competencies?
A) The key to leveraging core competencies into competitive advantage is concentrating
sufficient effort and talent on deepening and strengthening them that the firm achieves
dominating depth and gains the capability to outperform rivals by a meaningful margin.
B) Core competencies should be broad enough and flexible enough to respond to changing
customer needs and other market conditions.
C) Core competencies typically are lodged in the combined efforts of different work groups and
departments, making it hard for individual supervisors or department heads to be responsible
for building such competencies.
D) Core competencies generally grow out of company efforts to master a strategy-critical
technology, to develop in-depth expertise in some functional specialty, to invent and patent a
valuable technology, or to learn an unusual skill in performing a key value-chain activity.
E) Core competencies tend to emerge gradually rather than blossoming quickly from a series of
recent organization-building
9. Strategy implementers can't afford to become complacent once core competencies are in place
and functioning because
A) most core competencies and organizational capabilities are easily and inexpensively copied
by rivals.
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B) it is a constant organization-building challenge to broaden, deepen, or modify them in
response to ongoing customer-market changes.
C) it is easy for rivals to create offsetting competencies and capabilities of their own.
D) most every competent company has competitively valuable distinctive competencies and
resource strengths that it can deploy in retaliation.
E) All of the above.
10. Sometimes a company can short-circuit the task of building an organizational capability in-house
by
A) acquiring the desired capability through collaborative efforts with outsiders having the
requisite skills, know-how, and expertise.
B) launching an extensive training effort to develop the capability quickly with newly hired
employees.
C) acquiring a company that has already developed the capability.
D) imitating a capability that rivals have already developed.
E) Both A and C.
11. Which one of the following is not part of a strategy-implementer's task of matching organization
structure to strategy?
A) Pinpointing strategy-critical activities
B) Deciding which, if any, value chain activities to outsource from partners
C) Determining how much authority to centralize and how much to delegate to down-the-line
managers and employees
D) Selecting the right people for key positions and determining how to capture resource fit
benefits
E) Providing for cross-unit cooperation and collaboration to build/strengthen strategy-supportive
competencies and capabilities
12. To identify what an organization's strategy-critical value chain activities are, one should seek
answers to which of the following questions?
A) "What value chain activities have to be performed extra well and in timely fashion to achieve
sustainable competitive advantage?" and "In what value chain activities would poor
execution seriously impair strategic success?"
B) "What alliances and partnerships are needed to enhance organizational resources and
capabilities?"; "What value chain activities are linked most closely together?"; and "How
closely do they need to be coordinated?"
C) "Do the related activities of related functional are activities need to be tightly coordinated?"
"What important activities do our outside allies and partners perform?"
D) "How many core competencies does the organization need to outmatch its rivals and where
are they located in the value chain?"
E) "What reasons are there to outsource some of the company's value chain activities and how
closely do these activities need to be coordinated with what is done in-house?"
13. In a company that is organized around functional departments,
A) the critical value chain activities tend to be performed more efficiently and effectively.
B) pieces of strategically relevant activities and capabilities often end up scattered across many
departments.
C) it is easier to build core competencies and competitive capabilities.
D) there is less room for the organization structure to evolve to remain in step with the new
strategy-executing requirements of an evolving strategy.
E) internal bureaucracies are likely to be smaller and the decision-making process is likely to be
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speedy.
14. Which of the following is not a means of flattening organizational hierarchies and removing
middle management layers?
A) Centralizing decision-making
B) Empowerment of employees
C) Decentralizing decision-making
D) Reengineering business processes
E) Outsourcing non-critical value chain activities
15. Centralizing authority for some activities at the corporate level in a diversified enterprise has
merit when
A) the company is pursuing unrelated diversification.
B) the company is financially distressed and is under the gun to execute turnaround strategies in
several of its major business subsidiaries.
C) the related activities of related business units need to be tightly coordinated to capture
strategic fit benefits.
D) the company is pursuing cross-business subsidization tactics.
E) the company has a number of strategic alliances and collaborative partnerships in the supply
chains of its different businesses.
16. Reengineering how a firm performs a business process
A) is a way of attacking the fragmentation of business processes across departmental lines and
reducing costs.
B) is a tool best suited for company with a delayered, decentralized organization structure.
C) yields the most benefit when a company has many strategic partnerships and alliances with
outsiders.
D) has the disadvantage of requiring a more centralized approach to decision-making.
E) usually requires outsourcing one or more of the process steps formerly performed internally.
17. Which of the following is an unlikely characteristic of the organizational structures of the future?
A) Highly centralized decision-making (made possible by much greater use of business process
reengineering)
B) Fewer barriers between people at different vertical ranks, between functions and disciplines,
and between units in different locations
C) Extensive use of e-commerce technology and e-commerce business practices
D) Extensive collaborative efforts among people in different specialties and different geographic
locations
E) A capacity for rapid change and learning
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Chapter 12 Practice Questions MGNT 685
1. From a strategy-implementing/strategy-executing perspective, budget allocations should
primarily be based on
A) the number of new strategic initiatives being implemented in each department.
B) the number of people employed in each of the divisions.
C) how much each organizational unit needs to carry out its part of the strategic plan efficiently
and effectively.
D) the costs of performing value chain activities as determined by benchmarking against best-inindustry competitors.
E) how much stretch there is in each department's objectives and what additional resources are
needed to help reach these performance targets.
2. New strategies often entail budget reallocations because
A) more money will be needed to fund the new strategy initiatives.
B) the accompanying policy revisions and compensation incentives tend to require different
levels of funding than before.
C) the value chain activities and organizational units critical to executing the old strategy are not
necessarily as critical in executing the new strategy, thus making it cost-effective to shift
resources out of areas that now have a lesser strategy-executing role and redirecting them to
the value chain activities now having a bigger and more important strategy-executing role.
D) empowering employees to carry out the new strategy elements and shifting to a total quality
management type of culture to build skills in competent strategy execution typically require
substantial new funding and budget revisions.
E) the number of people employed in each department is likely to change.
3. A useful guideline in designing strategy-facilitating policies and operating procedures is
A) to prescribe enough policies to give organizational members clear direction in implementing
strategy and to place desirable boundaries on their actions, then empower them to act within
these boundaries however they think makes sense.
B) that strictly-enforced policies work better than loosely-enforced policies.
C) that an environment of few policies and laid-back management is not as supportive of a
strong corporate culture as is a system where policies and procedures are tightly enforced to
ensure conformity and standardized behavior.
D) to let individuals act in an empowered and self-directed way, subject only to the constraint
that their actions and behavior be ethical and consistent with the corporate culture.
E) to prescribe enough policies and procedures that nothing is left to chance in performing value
chain activities
employees should have no leeway to do things in a manner other than the
prescribed strategy-supportive fashion.
4. Which one of the following is not a benefit of prescribing policies and operating procedures to
aid management's task of implementing strategy?
A) Helping align actions and behavior with strategy, placing limits on independent action, and
channeling group efforts in ways that support better strategy execution
B) Providing top-down guidance to operating managers, supervisory personnel, and employees
regarding how things need to be done and what behavior is expected
C) Acting as a lever for helping change corporate culture in ways that promote a stronger fit
with strategy
D) Helping build employee commitment to using best practices and TQM tools
E) Helping enforce needed consistency in how particular value chain activities are performed in
geographically scattered organization units
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5. The big difference between reengineering and continuous improvement programs like TQM is
that
A) reengineering is a tool for installing process organization whereas TQM concerns defect-free
production methods and delivering world-class customer service.
B) reengineering helps create core competencies whereas TQM is a tool for making a core
competence stronger and more efficient.
C) reengineering is a tool for achieving one-time quantum improvements in performing a
business process whereas TQM seeks ongoing incremental improvement.
D) reengineering requires benchmarking whereas TQM doesn't.
E) reengineering represents an effort to totally revamp a firm's value chain whereas TQM looks
at incrementally improving the performance of two or three targeted value-chain activities.
6. To obtain maximum benefits from benchmarking, best practices, reengineering, TQM, and
related tools, managers need to
A) start by defining exactly what they want the organization to accomplish in terms of better
strategy execution
whether it be defect-free manufacture, on-time delivery, faster cycle
time, superior customer satisfaction, lower costs, or whatever.
B) have annual TQM contests similar to Motorola's and train managers and key employees in
six-sigma quality techniques as Motorola has done through Motorola University.
C) consider instituting policies and procedures like those at Great Plains, Amalgamated Sugar,
and Granite Rock.
D) install strategy-critical information and operating systems to support effective daily execution
of strategy (like Federal Express has done).
E) deemphasize functional departments and shift to a process-oriented approach to organization.
7. Which of the following is not a good example of a support system capable of assisting better
strategy implementation and execution?
A) An online, real-time inventory control and sales tracking system
B) A sophisticated cost accounting system that can track profits and losses on each item in a
company's product line
C) A formalized program for screening, testing, hiring, and training new employees to be
friendly, courteous, and helpful in their contacts with customers
D) A corporate training program in ethics and corporate values
E) An online reservation system for a hotel chain
8. Which of the following does not really account for why installing adequate information,
performance tracking, and control systems are an important part of the strategyimplementing/strategy-executing process?
A) Communicating data and information at Internet speed is a necessity in today's business
world
investment in Internet-related, e-commerce systems is revolutionizing the manner in
which company operations are conducted.
B) Diagnostic control systems to track performance relieve managers of the burden of constantly
doing their own monitoring and allow them more time for other issues.
C) Such systems can be used to help ensure that the actions of empowered employees stay
within acceptable bounds and don't expose the organization to excessive risk.
D) Controls systems encourage employee creativity and help keep the work environment
exciting and results-oriented.
E) Data analysis procedures help flag big or unusual variances from preset performance
standards.
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9. The management task of linking the reward system tightly to the needs of strategy involves
A) establishing ethical compensation policies and putting together an inspiring statement of why
employees are the firm's most valuable competitive asset.
B) being creative in designing monetary and non-monetary incentives that boost labor
productivity and help lower the firm's overall labor costs.
C) developing incentives and compensation practices that reward people for meeting or beating
the performance targets spelled out in the strategic plan.
D) deciding how big a bonus to pay for each strategic and financial objective that is achieved.
E) challenging employees to establish stretch objectives and propose rewarding ways to achieve
them.
10. From the standpoint of promoting successful strategy implementation and execution, it is
important that the firm's motivation and reward system
A) be completely free of such elements as tension, pressure, anxiety, job insecurity, and tight
deadlines.
B) emphasize only positive types of rewards.
C) stress what to accomplish rather than what to do.
D) tie rewards to the achievement of financial objectives rather than strategic objectives and be
reviewed annually to see that the costs of any incentives and bonuses are not out of line with
the budget.
E) result in higher levels of morale, reduce job insecurity, induce employees to stay busy and
work hard, help steer employees to behave in an ethical manner, and help instill corporate
values.
11. An important consideration in designing a strategy-supportive reward system is to
A) link the firm's performance targets to the budgeting and resource allocation process.
B) employ incentives that will help keeping employees busy, make across-the-board wage and
salary increases an integral part of the system, and make greater employee empowerment part
of the system.
C) put about 50% of the emphasis on non-monetary rewards and 50% on monetary rewards.
D) delegate primary responsibility for leading the strategy implementation effort to whichever
senior manager is most skilled at empowering employees and inspiring them to do their best.
E) make non-monetary rewards an integral part of the reward system.
12. Management's most powerful strategy-implementing/strategy-executing tool is
A) the establishment of strategy-supportive policies and procedures.
B) empowering employees and instituting best practices.
C) the practice of management by walking around, listening to what employees are saying, and
following their suggestions.
D) a system of rewards and incentives tied tightly to the achievement of the targeted strategic
performance.
E) strong core competencies and competitive capabilities.
13. Which of the following is not characteristic of a well-designed compensation and reward system?
A) Linking incentives tightly to performance targets that are critical to successful execution of
the company's strategy
B) Keeping the time between performance reviews and payment of the rewards short
C) Making sure that the performance targets that each individual is expected to achieve involve
outcomes that the individual can affect
D) Generous rewards for people who turn in outstanding performances
E) A reward system that involves 50 percent non-monetary rewards and a work environment
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that avoids placing pressure on managers and employees to achieve high performance levels
14. Some caution needs to be exercised in using performance-based compensation systems because
A) in some countries, incentive compensation runs counter to local customs and cultural norms.
B) some managers and employees are not psychologically and emotionally strong enough to
cope with performance-based pay systems.
C) if the performance-based pay exceeds 5 percent of total compensation, the result can be a
serious decline in employee morale.
D) too much emphasis on pay-for-performance tends to have a negative impact on employee
productivity.
E) it detracts from having employees focus diligently on the duties and functions they are
supposed to perform.
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Chapter 13 Practice Questions MGNT 685
1. Which one of the following is not a fundamental part of a company's culture?
A) The manner in which it deals with employees, unions, stockholders, customers, vendors, and
the communities where it operates
B) The traditions the organization maintains
C) The values and business principles that management preaches and practices
D) The company's strategy
E) The peer pressures that exist and the legends and stories that people repeat about company
happenings
2. Which one of the following is not a typical characteristic of an unhealthy company culture?
A) A politicized internal environment
B) Hostility to change and to people who champion new ways of doing things
C) An aversion to looking outside the company for superior practices and approaches
D) Values and behavioral norms that are widely shared, decentralized decision-making, and low
levels of employee turnover
E) Promotion of managers that are adept at administration and internal organization
maneuvering but that are short on entrepreneurial skills and leadership ability
3. The hallmarks of an adaptive corporate culture include
A) values and ethics statements that are revised and updated as the company's vision, mission,
objectives, and strategy changes.
B) emphasis on recruiting senior managers from companies outside the industry that are noted
for having strong cultures
C) strong management concern for the well-being of stakeholders; receptiveness to risk-taking,
experimentation, and innovation; and a proactive approach to coping with the challenges of
changing business conditions.
D) charismatic managerial leadership, extensive use of employee empowerment, and strong
commitment to the use of best practices.
E) high ethical standards, strong commitment to TQM principles, and a preference for
performance-based compensation systems.
4. Which one of the following is not part of changing a company's culture and bringing it into better
alignment with strategy?
A) Shifting to decentralized decision-making, altering the company's code of ethics so as to raise
ethical standards, and putting all employees through a culture-change training program
B) Diagnosing which facets of the present culture are strategy-supportive and which are not
C) Active leadership by the CEO and other senior executives, including pushing for new
behaviors and communicating the reasons for cultural change
D) Undertaking both substantive and symbolic actions to transform the culture
E) Establishing a new set of corporate values, reiterating the importance and the contribution of
these values, and rewarding people who exhibit the desired new cultural traits
5. Efforts to bring a company's culture into tighter alignment with strategy generally include
A) designing tight links between culture and the organization structure.
B) using company gatherings and ceremonial occasions to praise individuals and groups that
display the desired cultural traits and behaviors.
C) trying to minimize the effects of peer pressure, company politics, and maverick behavior.
D) a managerial campaign to emphasize to employees that competent execution of the
organization's strategic plan is the key to long-term corporate success and the creation of a
sustainable competitive advantage.
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E) making employee acceptance of the desired culture one of the criteria for rewarding
employees with higher monetary compensation.
6. Creating a strong fit between strategy and corporate culture usually does not involve
A) instituting employee recognition programs (such as employee of the month awards and
individual achievement awards) to call everyone's attention to behavior that reflect the
desired cultural norms.
B) developing a values statement.
C) preparing a detailed rules and procedure manual that all managers and employees can refer to
in trying to practice the desired cultural norms and behavior.
D) replacing managers who insist on displaying old-culture behavior with managers who will act
and function as new-culture role models.
E) insisting that top managers lead by example; for instance, if the strategy entails being the
low-cost producer, top managers might have only spartan office decor, have few if any
executive perks, and push cost-cutting moves within their own areas of responsibility.
7. Which of the following is not an integral part of the ethics enforcement process?
A) Developing procedures for handling potential ethic violations
B) Every employee must receive adequate training and education in what constitutes ethical
behavior and compliance with the code and what does not
C) Line managers at all levels must give serious and continuous attention to the task of
explaining how the code of ethics applies in their areas
D) Insisting on ethical behavior must be looked upon by management as a continuous culturebuilding, culture-nurturing exercise.
E) Immediately dismissing any employee caught violating or disagreeing with the company's
code of ethics
8. If a company is serious about displaying high ethical standards and enforcing ethical behavior,
then a written code of ethics
A) should be provided to every employee and every employee should be asked to sign a
statement annually indicating compliance with the code.
B) should be personally prepared by the company's CEO in order for the company's ethical
expectations to be taken seriously by employees.
C) is a useful way to define the company's ethical position and standards and to indicate
explicitly what the company expects in terms of ethical behavior.
D) should typically be the centerpiece in all of the company's employee training programs.
E) All of these.
9. Which of the following is not an integral aspect of implementing a code of ethics?
A) Strong endorsements by the CEO
B) Convincing a majority of the company's shareholders and employees to vote for adoption of
the code
C) Communicating the ethics code to all employees
D) Incorporating the code of ethics into employee training and education programs
E) Word-of-mouth indoctrination of new employees by existing employees
10. In assessing whether an organization is instilled with a spirit of high performance, the key test is
A) whether employees are happy and satisfied.
B) whether labor costs are low relative to key rivals.
C) whether employees get along and work well together.
D) the extent to which the organization is focused on achievement and excellence, has a results-
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oriented culture, and pursues policies and practices that inspire employees to do their best.
E) whether employee turnover rates and absenteeism are minimal.
11. Managers who are successful in exercising good strategic leadership
A) are skilled entrepreneurs who also have a talent for delegating authority and responsibility to
subordinates.
B) serve as role models for the rest of the organization and spend a lot of time coaching others
how to be like them.
C) typically do a lot of managing by walking around and push corrective actions to do a better
job of strategy execution.
D) have charismatic personalities and inspire others to follow their lead.
E) spend more of their time crafting a winning strategy than in personally directing the strategy
implementation and execution process.
12. In multinational and global companies where some cross-border diversity in the corporate culture
is normal, the leadership requirements of culture-changing efforts
A) are more complex and demanding than in domestic-only enterprises.
B) entail being sensitive to the cultures and mores of different countries, discerning when to
allow some cross border diversity in the corporate culture and when to insist on cross-border
conformity.
C) are made easier by instituting incentives and compensation systems that reward people for
conforming to the corporate culture..
D) require a toleration for cross-border cultural differences and a willingness to let the managers
of each country's operations be the leaders of the local corporate culture.
E) Both A and C.
13. Which one of the following is not something a manager in a leadership role should do to promote
an organizational climate where champion innovators can blossom and thrive?
A) Encourage individuals and groups to be creative, hold brainstorming sessions, let their
imaginations fly, and come up with innovative proposals
B) Give large, visible rewards to successful champions
C) Be willing to turn down the ideas and suggestions of mavericks who propose out-of-theordinary ventures or want to experiment with high-risk ideas
D) Use ad hoc organizational forms to support ideas and experimentation
E) Encourage lots of "tries" and be willing to tolerate mistakes and failures
14. The single most visible factor that distinguishes successful culture-change efforts from failed
attempts is
A) ensuring that the new culture embraces employee empowerment.
B) competent leadership at the top.
C) delayering the management hierarchy.
D) developing a new values statement and a more rigid code of ethics.
E) convincing employees of the benefits of using best practices and pursuing continuous
improvement.
15. Which one of the following is not likely to be an effective management action to match culture
and strategy?
A) Calling upon first-level supervisors and rank-and-file- employees to lead the cultural change
effort
B) Making a compelling case for cultural change, persuading individuals and groups to commit
to the new direction and culture, convincing skeptics that all is not well, and motivating
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people to overcome the obstacles to cultural change
C) Challenging the status quo with very basic questions--Are we really giving customers what
they want? How can we drive costs out of the business and be more competitive on price?
Why aren't we taking more business away from rivals? Why aren't we doing more to grow
revenues at a faster rate?
D) Recognizing and generously rewarding those who exhibit new cultural norms and who lead
successful change efforts
E) Espousing a stakeholders-are-king philosophy that links the need to change to the need to
serve the best long-term interests of the firm's key constituencies
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