MGT603 Solved MCQs from Book by David (chap 5) True/False Long-Term Objectives 1. Long-term objectives represent the results expected from pursuing certain strategies. Ans: T Page: 168 2. Objectives provide direction and allow for organizational synergy. Ans: T Page: 168 3. Strategic objectives include those associated with growth in revenues, growth in earnings, higher dividends, larger profit margins and improved cash flow. Ans: F Page 169 4. Strategic objectives include larger market share, quicker on-time delivery than rivals, quicker design-to-market times than rivals, lower costs than rivals, and wider geographic coverage than rivals. Ans: T Page: 169 5. “If it ain’t broke, don’t fix it” refers to managing by crisis. 6. The overall aim of the Balanced Scorecard is to balance financial objectives with strategic objectives. Ans: F Page: 170 7. Since a combination strategy is not risky, many organizations pursue a combination of two or more strategies simultaneously. Ans: F Page: 171 8. Horizontal integration is seeking ownership or increased control over competitors. Ans: T Page 173 9. Divestiture is selling all of a company’s assets, in parts, for their tangible worth. Ans: F Page 173 10. A chief executive officer is located in the divisional level of a large firm. Ans: F Page: 174 Integration Strategies 11. Gaining ownership or increased control over distributors or retailers is called forward integration strategy. Ans: T Page: 174 12. Franchising is an effective means of implementing forward integration. Ans: T Page: 174 13. A growing trend is for franchisers to buy out their part of the business from their franchisees. Ans: F Page: 175 14. Forward integration strategy is especially effective when the availability of quality distributors is so limited as to offer a competitive advantage to those firms that integrate forward. 15. A strategy of seeking ownership or increased control of a firm’s supplier is backward integration. Ans: T Page: 175 16. If a firm’s present suppliers are expensive and unreliable in meeting the firm’s needs for parts, components and/or raw materials, the firm should pursue a horizontal integration strategy. Ans: F Page: 176 17. Horizontal integration is an appropriate strategy when the competitors of an organization are doing poorly. Ans: F Page: 176 Intensive Strategies 18. Market penetration, market development, product development and joint venture are intensive strategies. Ans: F Page: 177 19. When the correlation between dollar sales and dollar marketing expenditures has historically been low, market penetration is an appropriate strategy. Ans: F Page: 178 20. Market development includes introducing present products into new geographic areas. Ans: T Page: 178 21. An appropriate strategy when an organization has excess production capacity is market development. Ans: T Page: 178 22. Increasing advertising expenditures can be a market development strategy. Ans: F Page: 179 23. Product development is a strategy that seeks increased sales by improving or modifying present products or services. Ans: T Page: 179 24. Product development is an appropriate strategy when an organization has successful products that are in the maturity stage of the product life cycle. Ans: T Page: 179 Diversification Strategies 25. There are four basic types of diversification: concentric, conglomerate, forward and backward. Ans: F Page: 180 26. Most companies favor related diversification strategies in order to exploit common use of a well-known brand name. Ans: T Page 180 27. The related diversification strategy is effective when an organization has a weak management team. Ans: F Page: 181 28. Unrelated diversification is an appropriate strategy when an organization’s present channels of distribution can be used to market the new products to current customers. Ans: T Page: 182 29. Donald Trump starting TrumpUniversity in 2005 is a good example of unrelated diversification. Ans: T Page: 183 30. Unrelated diversification may be an especially effective strategy when an organization’s basic industry is experiencing increasing annual sales and profits. Ans: F Page 184 Defensive Strategies 31. Retrenchment and turnaround are the same strategy. Ans: T Page: 184 32. Although bankruptcy can be an effective type of retrenchment strategy, it does not allow firms to avoid major debt obligations and to void union contracts. Ans: F Page 185 33. Chapter 7 bankruptcy is a liquidation procedure used only when a firm sees no hope of being able to operate successfully or to obtain necessary creditor agreement. Ans: T Page: 185 34. Chapter 9 bankruptcy applies to municipalities. Ans: T Page: 185 35. Chapter 13 bankruptcy is similar to Chapter 11, but available only to large corporations. 36. Divestiture is the selling of land a firm owns. Ans: F Page: 186 37. Liquidation is often appropriate when retrenchment and divestiture have failed. Ans: T Page: 188 Michael Porter’s Five Generic Strategies 38. According to Porter, strategies allow organizations to gain competitive advantage from three different bases: cost leadership, differentiation and integration. Ans: F Page: 188 39. For consumers who are price sensitive, cost leadership emphasizes producing standardized products at very low per-unit cost. 40. A best-value strategy offers products or services to a wide range of customers at the lowest price on the market. 41. A low-cost focus strategy offers products or services to a small range of customers at the lowest price available on the market. 42. Jiffy Lube International would be a good example of a firm seeking the best-value focus strategy. 43. A differentiation strategy can only be achieved with a small target market. Ans: F Page 189 44. Gaining a differentiation advantage is a primary reason for pursuing forward, backward, and horizontal integration strategies. Ans: F Page 189 45. A cost leadership strategy can be especially effective when most buyers use the product in the same way. Ans: T Page 190 46. The most effective differentiation bases are those that are hard or expensive for rivals to duplicate. Ans: T Page 191 47. A differentiation strategy can be especially attractive when the industry has many different niches and segments, thereby allowing a focuser to pick a competitively attractive niche suited to its own resources. Ans: F Page 193 48. In a turbulent, high-velocity market, a lead-change strategy is best whenever the firm has the resources to pursue this approach. Ans: T Page 193 Means for Achieving Strategies 49. Cooperative arrangements and joint ventures between competitors are becoming increasingly popular. Ans: T Page: 193 50. Joint ventures tend to fail when managers who must collaborate daily in operating the venture are not involved in forming or shaping the venture. Ans: T Page: 196 51. Divestiture would be an appropriate strategy when a need exists to introduce a new technology quickly. Ans: F Page: 196 Merger/Acquisition 52. An acquisition occurs when a large organization purchases a smaller one or vice versa. Ans: T Page: 197 53. When an acquisition or merger is not desired by both parties, it is called a takeover or hostile takeover. 54. A leveraged buyout occurs when a firm’s management and other private investors use borrowed funds to buy out the firm’s shareholders. 55. First mover advantage refers to the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms. 56. Companies are avoiding outsourcing more and more because it is more expensive than traditional methods and it does not allow a firm to concentrate on core competencies. Strategic Management in Nonprofit and Government Organizations 57. The nonprofit sector is America’s largest employer. 58. Strategists in governmental organizations operate with far more strategic autonomy than their counterparts in private firms. Strategic Management in Small Firms 59. All sizes and types of organizations can utilize and benefit from strategic-management concepts and techniques. 60. Research shows strategic management in small firms is more formal than in large firms, but large firms that engage in strategic management outperform those that do not. Multiple Choice Long-Term Objectives 61. Long-term objectives are needed at which level(s) in an organization? 62. Financial objectives involve all of the following except: a. growth in revenues. b. larger market share. c. higher dividends. d. greater return on investment. e. a rising stock price. Ans: b Page: 169 63. What principle is based on the belief that the true measure of a really good strategist is the ability to solve problems? a. Managing by crisis b. Managing by objectives c. Managing by extrapolation d. Managing by exception e. Managing by hope 64. What principle is built on the idea that there is no general plan for which way to go and what to do? a. Managing by crisis b. Managing by extrapolation c. Managing by objectives d. Managing by hope e. Managing by exception Ans: e Page: 170 65. All of the following are important factors in the Balanced Scorecard except: a. customer service. b. employee morale. c. product quality. d. business ethics. e. stockholder equity. Ans: e Page: 170 66. Which level of strategy is most likely not present in small firms? a. Corporate/company b. Functional c. Divisional d. Operational e. All of these are present in small firms Ans: c Page: 160 67. All of the following are important factors in the Balanced Scorecard except: a. customer service. b. employee morale. c. product quality. d. business ethics. e. stockholder equity. Ans: e Page: 172 68. Budget Rent-a-Car opening car rental shops in Wal-Mart stores is an example of which type of strategy? a. forward integration b. backward integration c. horizontal integration d. related diversification e. unrelated diversification Ans: a Page 173 69. Goodyear Tire & Rubber Co. selling its North American farm-tire business to Titan International is an example of which type of strategy? a. related diversification b. unrelated diversification c. retrenchment d. divestiture e. liquidation Ans: d page 173 70. Advanced Medical Optics using acquisitions to obtain all medical aspects of eye care, from laser surgery to contacts to implants for all ages is an example of which type of strategy? a. forward integration b. backward integration c. horizontal integration d. market development e. product development Ans: d Page 173 71. Which of the following is most likely not included in the functional level of a small company? a. Finance b. Marketing c. R & D d. Department managers e. Human resource managers Ans: d Page: 174 Integration Strategies 72. Integration strategies are sometimes collectively referred to as which of these strategies? a. Horizontal integration b. Diversification c. Vertical integration d. Stuck-in-the-middle e. Hierarchical integration Ans: c Page: 174 73. Web sites to sell products directly to consumers are examples of which type of strategy? a. backward integration b. product development c. forward integration d. horizontal integration e. conglomerate diversification Ans: c Page: 174 74. Which of these strategies is effective when the number of suppliers is small and the number of competitors is large? a. Conglomerate diversification b. Forward integration c. Concentric diversification d. Backward integration e. Horizontal diversification Ans: d Page: 176 75. Backward integration is effective in all of these except: a. when an organization competes in an industry that is growing rapidly. b. when an organization has both capital and human resources to manage the new business of supplying its own raw materials. c. when an organization needs to acquire a needed resource quickly. d. when the advantage of stable prices are not important. e. when present suppliers have high profit margins. Ans: d Page: 176 76. What refers to a strategy of seeking ownership of or increased control over a firm’s competitors? a. Forward integration b. Conglomerate diversification c. Backward integration d. Horizontal integration e. Concentric diversification Ans: d Page: 176 77. In which situation would horizontal integration be an especially effective strategy? a. When an organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government for “tending substantially” to reduce competition. b. When an organization competes in a slowing industry. c. When decreased economies of scale provide major competitive advantages. d. When an organization has neither the capital nor human talent needed to successfully manage an expanded organization. e. When competitors are succeeding due to managerial expertise or having particular resources an organization possesses. Ans: a Page: 177 |
When suppliers are unreliable or too costly companies follow which of the appropriate strategies?
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