Testbank - Chapter 1

The Nature of Strategic Management

External opportunities; external threats __________ help an organization gather, analyze, and organize

Internal weaknesses; external opportunities

The term _________ is used to refer to strategy formulation,

information.

Internal strengths; internal weaknesses

implementation, and evaluation, with _________referring only to

Ethics officers

strategy formulation.

Operatives

Strategic management can be defined as the art and science of

strategic planning; strategic management

Lobbyists

formulating, implementing, and evaluating cross-functional

assessment; planning

Strategists

decisions that enable an organization to achieve its objectives.

strategic management; strategic planning management cycle; brainstorming

True A disadvantage of international operations is: foreign operations can allow firms to establish low-cost production The action stage of strategic management is called strategy

Which of these requires a firm to establish annual objectives,

facilities in locations close to raw materials and/or cheap labor.

formulation.

devise policies, and allocate resources?

economies of scale can be achieved from operation in global

False

Strategy formulation

rather than solely domestic markets.

Strategy implementation

competitors in foreign markets may not exist.

Strategy manipulation

language, culture, and value systems differ among countries, external and internal factors, measuring performance, and taking

Strategy evaluation

causing communication barriers and problems managing people.

Three fundamental strategy evaluation activities are reviewing corrective actions. True

The rationale for periodically conducting strategic-management

_________ are especially critical for successful strategy

meetings away from the work site is to encourage more

implementation.

Strategies can be defined as specific results that an organization

_____________ and ____________ among participants.

Interpersonal skills

seeks to achieve in pursuing its basic mission.

feedback; rigidity

Technical plans

False

creativity; candor

Long-range plans

Strategies are the means by which long-term objectives will be

confidence; self-interest

Short-range plans

achieved.

strategy evaluation; candor 9. All of these are pitfalls an organization should avoid in strategic Reasons for poor or no strategic planning on part of firms include Anything that a firm does especially well compared to rival firms is planning except:

overconfidence, too expensive, suspicion, and laziness.

referred to as:

using strategic planning to gain control over decisions and

competitive advantage.

resources.

True

comparative advantage.

failing to involve key employees in all phases of planning.

an external opportunity.

hastily moving from mission development to strategy formulation. question "what do we want to become?"

opportunity cost.

using plans as a standard for measuring performance.

Objectives are an organization's statements that answer the False An organization can pursue any and/or all strategies that

Both military and business organizations do all of the following

____________ and __________ refer to economic, social,

potentially could benefit the firm.

except:

cultural, demographic, environmental, political, legal,

False

use of the element of surprise.

governmental, technological, and competitive trends and events

No organization can pursue all the strategies that potentially could

aim "to gain competitive advantage."

that could significantly benefit or harm an organization in the

benefit the firm.

use the assumption of conflict to develop strategies.

future.

use their own strengths to exploit competitors' weaknesses.

Internal strengths; external threats

Communication is an act of strengthening employees' sense of

effectiveness by encouraging them to participate in decision

5. It is predicted that, by 2025, over 18% of the population in the

b. Implementation

making and to exercise initiative and imagination, and rewarding

United States will be over 65 years old.

c. Evaluation

them for doing so.http://www.vuzs.net/

Ans: T Page 88

d. Feedback

False Empowerment is the act of strengthening employees' sense of

e. Goal-setting 6. The first step for using Porter’s Five-Forces Model is to

effectiveness by encouraging and rewarding them to participate in evaluate the relative strength of each competitive force.

13. Anything that a firm does especially well compared to rival

decision making and exercise initiative and imagination.

firms is referred to as _____.

Ans: F Page 101

a. competitive advantage Strategic management must be a self-reflective learning process. 7. Metaphors are handed-down narratives of some wonderful True One pitfall to avoid in strategic planning is top management

b. comparative advantage

event that is based on history but has been embellished with

c. opportunity cost

fictional detail.

d. sustainable advantage

Ans: F Page 127

e. an external opportunity

making many intuitive decisions that conflict with formal planning. True Sample Comprehensive Exam

8. Benchmarking is an analytical tool used to determine whether a 14. The trends in newspaper circulation in the United States firm’s value chain activities are competitive compared to rivals.

provide support for which statement?

Ans: T Page 157

a. Sustainable competitive advantage is easy to maintain.

Chapters 1 – 5 True/False 1. A vision statement answers the question, “What is our

b. Several firms can have similar competitive advantages. 9. Since a combination strategy is not risky, many organizations

c. Some products are relatively immune to changes in the external

pursue a combination of two or more strategies simultaneously.

environment

Ans: F Page: 171

d. Most competitive advantages are hard to sustain

business?,” whereas a mission statement answers, “What do we

e. Competition is generally good for companies and consumers

want to become?”

10. Most companies favor related diversification strategies in

Ans: F Page: 10-11

order to exploit common use of a well-known brand name.

15. In which phase of strategic management are annual objectives

Ans: T Page 180

especially important?

2. The changes that occurred at Disney after Robert Iger took over

a. Formulation

as CEO exemplifies the fact that more and more organizations are

b. Control

centralizing the strategic-management process.

Multiple Choice

c. Evaluation

Ans: F Page: 16

11. What can be defined as the art and science of formulating,

d. Implementation

implementing and evaluating cross-functional decisions that

e. Management

3. In multidivisional organizations, each division should develop a enable an organization to achieve its objectives? a. Strategy formulation mission statement independent of the parent company. Ans: F Page: 63 4. According to Vern McGinnis, to be effective, all a mission

16. Principles of conduct that guide decision-making are known as

b. Strategy evaluation

_____.

c. Strategy implementation

a. human rights

d. Strategic management

b. the Constitution

statement need to do is define what the organization is and what e. Strategic leading

c. business ethics

the organization aspired to be.

d. nonprofit organization policies

Ans: F Page: 63

12. During what stage of strategic management are a firm’s specific internal strengths and weaknesses determined? a. Formulation

e. social responsibility requirements

17. Which of these basic questions should a vision statement

e. Japan

answer?

22. Which of these examples of a mission statement’s focus area

a. What is our business?

is not effective?

27. The term that refers to the EU’s effort to end competitive tax

b. Who are our employees?

a. AT&T focuses on communication rather than telephones.

breaks among member countries is _____.

c. Why do we exist?

b. Exxon/Mobil focuses on oil and gas rather than energy.

a. double taxation

d. What do we want to become?

c. Union Pacific focuses on transportation rather than railroads.

b. taxation bias

e. Who are our competitors?

d. Universal Studios focuses on entertainment rather than movies. c. equity taxation e. Starbucks focuses on the café experience rather than coffee.

18. What is the first step in the comprehensive strategic-

d. tax reconciliation e. tax harmonization

management model?

23. Which type of trend is exemplified by the increasing numbers

a. Developing vision and mission statements

of two-income households in America?

28. According to Porter, what is usually the most powerful of the

b. Performing external audits

a. Social

five competitive forces?

c. Performing internal audits

b. Economic

a. Potential development of substitute products

d. Measuring and evaluating performance

c. Cultural

b. Bargaining power of suppliers

e. Establishing long-term objectives

d. Technological

c. Bargaining power of consumers

e. Historical

d. Rivalry among competing firms

19. According to the comprehensive strategic-management

e. Potential entry of new competitors

model, which step needs to be completed immediately following

24. In general, what happens to American goods in overseas

the establishment of long-term objectives?

markets when there is a strong dollar?

29. A standardized, detailed set of techniques and behaviors that

a. Developing vision and mission statements

a. Less expensive

manage anxieties, but seldom produce intended, technical

b. Performing external audits

b. More attractive

consequences of practical results are called _____.

c. Performing internal audits

c. Cheaper

a. folktales

d. Generating, evaluating, and selecting strategies

d. More expensive

b. rites

e. Measuring and evaluating performance

e. Desirable

c. metaphors d. rituals

20. What is the best time to develop a mission statement?

25. It is predicted that the United States will have how many racial e. values

a. Before a business is opened

or ethnic majorities by the year 2075?

b. When the firm is successful

a. None

30. What are historical narratives describing the unique

c. When the firm is in financial trouble

b. One

accomplishments of a group and its leaders, usually in heroic

d. When the firm is in legal trouble

c. Two

terms?

e. When the firm encounters competition

d. Three

a. Rites

e. Five

b. Sagas

21. A proactive environmental policy is likely to lead to _____.

c. Stories

a. higher cleanup costs

26. Who is the largest exporter to the United States?

d. Myths

b. conservation of energy

a. Mexico

e. Folktales

c. reduced customer loyalty

b. China

d. numerous liability suits

c. Canada

31. Which function of management includes areas such as job

e. higher medical costs

d. United Kingdom

design, job specification, job analysis and unity of command?

a. Planning

e. Unrelated diversification

b. Organizing

b. Best-value c. Low-cost focus

c. Motivating

36. Advanced Medical Optics using acquisitions to obtain all

d. Best-value focus

d. Staffing

medical aspects of eye care, from laser surgery to contacts to

e. Differentiation

e. Controlling

implants for all ages is an example of which type of strategy? a. Forward integration

40. Which strategy would be most appropriate when the distinctive

32. Which of the following is the process of influencing people to

b. Backward integration

competencies of two or more firms complement each other

accomplish specific objectives?

c. Horizontal integration

especially well?

a. Staffing

d. Market development

a. Conglomerate diversification

b. Motivating

e. Product development

b. Divestiture

c. Planning

c. Joint venture

d. Controlling

37. In which situation would horizontal integration be an especially d. Retrenchment

e. Organizing

effective strategy?

e. Integration

a. When an organization can gain monopolistic 33. Which decision concerns determining the best capital

characteristics in a particular area or region without being

structure for the firm and includes examining various methods by challenged by the federal government for “tending

59.The term “environment” includes all of the following except:

which the firm can raise capital?

substantially” to reduce competition.

a.air.

a. Investment

b. When an organization competes in a slowing industry.

b.water.

b. Dividends

c. When decreased economies of scale provide major competitive c.firms.

c. Financing

advantages.

d. Capital budgeting

d. When an organization has neither the capital nor human talent e.fauna.

e. Implementation

needed to successfully manage an expanded organization.

d.natural resources. Ans: c Page: 4

e. When competitors are succeeding due to managerial expertise 34. What category of ratios measures how effectively a firm can

or having particular resources an organization possesses.

maintain its economic position in the growth of the economy and

60. The one factor that has most significantly impacted the nature and core of buying and selling in nearly all industries has been

industry?

38. Win-Dixie closing one-third of its stores and eliminating 22,000 a.the Internet.

a. Profitability

jobs in an attempt to emerge from bankruptcy would be an

b.political borders.

b. Liquidity

example of _____.

c.corporate greed.

c. Leverage

a. divestiture

d.customer and employee focus.

d. Activity

b. backward integration

e.the government.

e. Growth

c. liquidation

Ans: a Page: 4

d. retrenchment 35. Budget Rent-a-Car opening car rental shops in Wal-Mart

e. forward integration

stores is an example of which type of strategy?

What Is Strategic Management? 61. What can be defined as the art and science of formulating,

a. Forward integration

39. According to Porter, which strategy offers products or services implementing and evaluating cross-functional decisions that

b. Backward integration

to a small range of customers at the lowest price available on the enable an organization to achieve its objectives?

c. Horizontal integration

market?

a.Strategy formulation

d. Related diversification

a. Low-cost

b.Strategy evaluation

c.Strategy implementation

e.Competitive advantage

a.It represents the marginal factor in decision-making.

d.Strategic management

Ans: c Page: 6

b.It represents a minor factor in decision-making integrated with

e. Strategic leading Ans: d Page: 5

analysis. 66. What types of skills are especially critical for successful

c.It should be coupled with analysis in decision-making.

strategy implementation?

d.It is better than analysis in decision-making.

62. ____________ is used to refer to strategic formulation,

a.Interpersonal

e.It is management by ignorance.

implementation and evaluation, with ______________ referring

b.Marketing

Ans: c Page: 7

only to strategic formulation.

c.Technical

a.Strategic planning; strategic management

d.Conceptual

71. _________ and _________ are external forces transforming

b.Strategic planning; strategic processing

e.Thinking

business and society today.

c.Strategic management; strategic planning

Ans: a Page: 6

a.E-commerce; strategy

d.Strategic management; strategic processing

b.E-commerce; globalization

e.Strategic implementation; strategic focus

67. Which phase of strategic management is called the action

c.Strategy; globalization

Ans: c Page: 5

phase?

d.Corporate culture; stakeholders

a.Strategy formulation

e.Stakeholders; strategy

63. During what stage of strategic management are a firm’s

b.Strategy implementation

Ans: b Page: 8

specific internal strengths and weaknesses determined?

c.Strategy evaluation

a.Formulation

d.Allocating resources

72. Anything that a firm does especially well compared to rival

b.Implementation

e.Measuring performance

firms is referred to as:

c.Evaluation

Ans: b Page: 6

a.competitive advantage.

d.Feedback

b.comparative advantage.

e.Goal-setting

68. __________ is not a strategy-implementation activity.

c.opportunity cost.

Ans: a Page: 5

a.Taking corrective actions

d.sustainable advantage.

b.Establishing annual objectives

e.an external opportunity.

64. An important activity in __________ is taking corrective action. c.Devising policies a.strategy evaluation

d.Allocating resources

b.strategy implementation

e.Motivating employees

c.strategy formulation

Ans: a Page: 6

Ans: a Page: 8

Key Terms in Strategic Management 73. The trends in newspaper circulation in the United States

d.strategy leadership e.all of the above

69. Strategy evaluation is necessary because

provide support for which statement?

Ans: a Page: 6

a.internal and external factors are constantly changing.

a.Sustainable competitive advantage is easy to maintain.

b.the SEC requires strategy evaluation.

b.Several firms can have similar competitive advantages.

c.competitors change their strategies.

c.Some products are relatively immune to changes in the external

65. What step in the strategic development process involves

mobilizing employees and managers to put strategies into action? d.the IRS requires strategy evaluation.

environment

a.Formulating strategy

e.firms have limited resources.

d.Most competitive advantages are hard to sustain

b.Strategy evaluation

Ans: a Page: 6

e.Competition is generally good for companies and consumers Ans: d Page 9

c.Implementing strategy d.Strategic advantage

70. Which statement best describes intuition? 74. Which individuals are most responsible for the success and

failure of an organization?

e.key functions in strategy exploitation.

83. __________ can best be described as short-term in nature.

a.Strategists

Ans: a Page: 12

a.Mission statements

b.Financial planners

b.Tenure

c.Personnel directors

79. Specific results an organization seeks to achieve in pursuing

c.Annual objectives

d.Stakeholders

its basic mission are:

d.Strategies

e.Human resource managers

a.strategies

e.Management

Ans: a Page: 10

b.rules

Ans: c Page: 13

c.objectives 75. The first step in strategic planning is generally:

d.policies

84. In which phase of strategic management are annual objectives

a.Developing a vision statement

e.mission

especially important?

b.Establishing goals and objectives

Ans: c Page: 13

a.formulation

c.Making a profit

b.control

d.Developing a mission statement

80. Internal __________ are activities in an organization that are c.evaluation

e.Determining opportunities and threats

performed especially well.

d.implementation

Ans: a Page: 10

a.opportunities

e.management

b.competencies

Ans: d Page: 13

76. What are enduring statements of purpose that distinguish one c.strengths business from other similar firms?

d.management

85. What are guides to decision making?

a.policies

e.factors

a.laws

b.mission statements

Ans: c Page: 13

b.rules

c.objectives

c.policies

d.rules

81. What are the means by which long-term objectives will be

d.procedures

e.employee conduct guidelines

achieved?

e.goals

Ans: b Page: 10

a.strategies.

Ans: c Page: 13

b.strengths. 77. The largest company in the world is:

c.weaknesses.

a.Honda Motor

d.policies.

b.ING Group

e.opportunities.

The Strategic-Management Model

c.Wal-Mart

Ans: a Page: 13

86. The strategic-management process a.occurs once a year.

d.Ford Motor Company e.Royal Dutch/Shell Group

82. Long-term objectives should be all of the following except:

b.is a sequential process.

Ans: d Page: 10

a.measurable.

c.is a continuous process.

b.continually changing.

d.applies mostly to companies with sales greater than $100

78. Usually, external opportunities and threats are:

c.reasonable.

million.

a.uncontrollable by a single organization.

d.challenging.

e.applies mostly to small businesses

b.controlled by governments.

e.consistent.

Ans: c Page: 13

c.not as important as internal strengths and weaknesses.

Ans: b Page: 13

d.key functions in strategy implementation.

87. Which of the following is not included in the strategic management model?

a.Measure and evaluate performance.

organizations?

Pitfalls in Doing Strategic Planning

b.Perform internal research to identify customers.

a.increased formalization of the strategic management process

95. All of these are pitfalls an organization should avoid in

c.Establish long-term objectives.

b.increased structuring of strategic management

strategic planning except:

d.Implement strategies.

c.increased decentralizing of strategic management

a.using plans as a standard for measuring performance.

e.Develop mission and vision statements.

d.increased emphasis on strategic planning

b.using strategic planning to gain control over decisions and

Ans: b Page: 14

e.increased central planning of the strategic management process resources. Ans: c Page 16

Benefits of Strategic Management

c.failing to involve key employees in all phases of planning. d.too hastily moving from mission development to strategy

88. Strategic management enables an organization to

92. According to research, organizations using strategic

formulation.

__________, instead of companies just responding to threats in

management are __________ than those that do not.

e.being so formal in planning that flexibility and creativity are

their business environment.

a.more profitable

stifled.

a.be proactive

b.more complex

Ans: a Page: 19

b.determine when the threat will subside

c.less profitable

c.avoid the threats

d.less static

96. What is not a pitfall an organization should avoid in strategic

d.defeat their competitors

e.less complex

planning?

e.foresee into the future

Ans: a Page: 17

a.Failing to communicate the plan to employees

Ans: a Page: 16

b.Involving all managers rather than delegating planning to a 93. According to Greenley, strategic management offers all of

“planner”

89. The act of strengthening employees’ sense of effectiveness by these benefits except that

c.Top managers not actively supporting the strategic planning

encouraging and rewarding them to participate in decision-making a.it provides an objective view of management problems.

process

and exercise initiative and imagination is referred to as:

b.it creates a framework for internal communication among

d.Doing strategic planning only to satisfy accreditation or

a.Authoritarianism

personnel.

regulatory requirements

b.Proaction

c.it encourages a favorable attitude toward change.

Ans: b Page: 19

c.Empowerment

d.it maximizes the effects of adverse conditions and changes.

d.Transformation

e.it gives a degree of discipline and formality to the management 97. Which of the following statements is false?

e.Delegation

of a business.

a.Open-mindedness is an important guideline for effective

Ans: c Page: 16

Ans: d Page: 17- 18

strategic management. b.Strategic management must become a self-perpetuating

90. How do line managers become “owners” of the strategy? a.by attending top manager meetings

socialist mechanism. Why Some Firms Do No Strategic Planning

c.by involvement in the strategic-management process

c.No organization has unlimited resources. 94. What is not a reason given for poor or no strategic planning in d.Strategic decisions require trade-offs. organizations? e.Strategic management must be a self-reflective learning

d.by becoming a shareholder of the firm

a.Wasting of time

process.

e.by buying off top managers

b.Being content with success

Ans: b Page: 20

Ans: c Page: 16

c.Fire-fighting

b.by gathering information about competitors

d.Poor reward structure 91. The changes that occurred when Robert Iger took over the

e.Trust of management

reigns at Disney, demonstrate which current trend in

Ans: e Page: 18-19

Business Ethics and Strategic Management 98. Principles of conduct that guide decision-making are known as

a.human rights.

b.using nonunion labor in a union shop

operations across national borders.

b.the Constitution.

c.dumping flawed products in a foreign market

a.Domestic firms

c.business ethics.

d.insider trading

b.Multinational corporations

d.nonprofit organization policies.

e.all of the above

c.Parent companies

e.social responsibility requirements.

Ans: e Page: 25

d.Government-backed companies

Ans: c Page: 20

e.Franchises 103.Ethical standards come out of __________ in a final analysis. Ans: b Page: 28

99. A (n) ____________ can provide a basis on which policies can a.government be devised to guide daily decisions and behavior at the work site. b.competitors

107.A(n) __________ refers to a firm investing in international

a.list of guidelines

c.history and heritage

operations, while the _________ is the country where that

b.policy for safety

d.stakeholder analysis

business is conducted.

c.vision statement

e.community involvement

a.parent company; host country

d.code of business ethics

Ans: c Page: 25

b.home country; parent company

e.annual objective Ans: d Page: 23

c.parent country; host company Comparing Business and Military Strategy

d.host company; home country

104.A strong __________ heritage underlies the study of strategic e.exporting company; importing company 100.Because they must take the __________ of the firm,

management.

strategists’ salaries are high compared to those of other

a.military

individuals in the organization.

b.government

108.The greatest advantage of international operations is:

a.moral risks

c.political

a.Reduced tariffs and taxes

b.social risks

d.social

b.Spreading economic risks over a wider number of markets

c.environmental risks

e.cultural

c.Access to global technology, culture and business practices

d. societal criticism

Ans: a Page: 25

d.Gaining new customers

e. employee criticism Ans: a Page: 23

Ans: a Page: 28

e.Less-intense competition 105.Military strategy is based on an assumption of __________,

Ans: d Page: 28

whereas business strategy is based on an assumption of 101.What can be created by ethics training and an ethics culture? __________.

109.All of these are potential disadvantages of an international

a.Competitive responsibility

a.conflict; cooperation

operation except:

b.Competitive advantage

b.conflict; competition

a.overestimated weaknesses and underestimated strengths of

c.Strategic advantage

c.cooperation; conflict

competitors.

d.Employee cooperation

d.competition; conflict

b.differing languages, cultures and value systems.

e.Comparative advantage

e.cooperation; competition

c.reduced tariffs and taxes.

Ans: c Page: 25

Ans: b Page: 26

d.complexity due to a multiple monetary system. e.all of these are potential disadvantages.

102.Which of these business actions is (are) always considered to

Ans: c Page: 29

be unethical?

The Nature of Global Competition

a.poor product or service safety

106.____________ are organizations that conduct business