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Chapter 01 - What Is Strategy and Why Is It Important?
Chapter 01 What Is Strategy and Why Is It Important? Answer Key
Multiple Choice Questions
What Do We Mean By “Strategy?”
1. (p. 4) Which of the following is not one of the central questions in evaluating a company's
business prospects?
A. What is the company's present situation?
B. What are the key products or service attributes demanded by consumers?
C. Where does the company need to go from here?
D. How should it get there?
E. All of these are pertinent in evaluating a company's business prospects.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategy Meaning
1-20
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Chapter 01 - What Is Strategy and Why Is It Important?
2. (p. 4) A company's strategy concerns
A. its market focus and plans for offering a more appealing product than rivals.
B. how it plans to make money in its chosen business.
C. management's action plan for running the business and conducting operations—its
commitment to pursue a particular set of actions in growing the business, staking out a market
position, attracting and pleasing customers, competing successfully, conducting operations,
and achieving targeted objectives.
D. the long-term direction that management believes the company should pursue.
E. whether it is employing an aggressive offense to gain market share or a conservative
defense to protect its market position.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategy Meaning
3. (p. 4) A company's strategy consists of
A. the competitive moves and business approaches that managers are employing to grow the
business, stake out a market position, attract and please customers, compete successfully,
conduct operations, and achieve targeted objectives.
B. the plans it has to outcompete rivals and establish a sustainable competitive advantage.
C. the offensive moves it is employing to make its product offering more distinctive and
appealing to buyers.
D. the actions it is taking to develop a more appealing business model than rivals.
E. its strategic vision, its strategic objectives, and its strategic intent.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategy Meaning
1-21
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Chapter 01 - What Is Strategy and Why Is It Important?
4. (p. 4) The competitive moves and business approaches a company's management is using to
grow the business, stake out a market position, attract and please customers, compete
successfully, conduct operations, and achieve organizational objectives is referred to as its
A. strategy.
B. mission statement.
C. strategic intent.
D. business model.
E. strategic vision.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategy Meaning
5. (p. 4) In crafting a strategy, management is in effect saying
A. "this is who we are and where we are headed.''
B. "this is our model for making money in our particular line of business."
C. "we intend to launch these new moves to outcompete our rivals."
D. "among all the many different business approaches and ways of competing we could have
chosen, we have decided to employ this particular combination of competitive and operating
approaches in moving the company in the intended direction, strengthening its market
position and competitiveness, and boosting performance."
E. "this is our vision of what our business will be like, what products/services we will sell,
and who our customers will be in the years to come."
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategy Meaning
1-22
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Chapter 01 - What Is Strategy and Why Is It Important?
6. (p. 4) A company's strategy is most accurately defined as
A. management's approaches to building revenues, controlling costs and generating an
attractive profit.
B. the choices management has made regarding what financial plan to pursue.
C. management's concept of "who we are, what we do, and where we are headed."
D. the business model that a company's board of directors has approved for outcompeting
rivals and making the company profitable.
E. management's commitment to pursue a particular set of actions in growing the business,
attracting and pleasing customers, competing successfully, conducting operations, and
improving the company's financial and market performance.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategy Meaning
7. (p. 4) Which of the following is not something a company's strategy is concerned with?
A. Management's choices about how to attract and please customers
B. How quickly and closely to copy the strategies being used by successful rival companies
C. Management's choices about how to grow the business
D. Management's choices about how to compete successfully
E. Management's action plan for conducting operations and improving the company's
financial and market performance
AACSB: Reflective Thinking
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategy Meaning
1-23
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Chapter 01 - What Is Strategy and Why Is It Important?
8. (p. 4) Which of the following is not a primary focus of a company's strategy?
A. How to attract and please customers
B. How each functional piece of the business will be operated
C. How to achieve above-average gains in the company's stock price and thereby meet or beat
shareholder expectations
D. How to compete successfully
E. How to grow the business
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategy Meaning
9. (p. 5) In crafting a company's strategy,
A. management's biggest challenge is how closely to mimic the strategies of successful
companies in the industry.
B. managers have comparatively little freedom in choosing the "hows" of strategy.
C. managers are wise not to decide on concrete courses of action in order to preserve
maximum strategic flexibility.
D. managers need to come up with some distinctive "aha" element to the strategy that draws
in customers and produces a competitive edge over rivals.
E. managers are well-advised to be risk-averse and develop a "conservative" strategy—"dareto-be-different" strategies rarely are successful.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategy Meaning
1-24
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Chapter 01 - What Is Strategy and Why Is It Important?
10. (p. 5) A company's strategy stands a better chance of succeeding when
A. it is developed through a collaborative process involving managers from all levels of the
organization.
B. managers employ conservative strategic moves.
C. it is predicated on competitive moves aimed at appealing to buyers in ways that set the
company apart from rivals.
D. managers copy the strategic moves of successful companies in its industry.
E. managers focus on meeting or beating shareholder expectations.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategy Meaning
11. (p. 9) A creative, distinctive strategy that sets a company apart from rivals and that gives it a
sustainable competitive advantage
A. is a reliable indicator that the company has a profitable business model.
B. is every company's strategic vision.
C. is a company's most reliable ticket to above-average profitability—indeed, the tight
connection between competitive advantage and profitability means that the quest for
sustainable competitive advantage always ranks center stage in crafting a strategy.
D. signals that the company has a bold, ambitious strategic intent that places the achievement
of strategic objectives ahead of the achievement of financial objectives.
E. is the best indicator that the company's strategy and business model are well-matched and
properly synchronized.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategic Advantage
1-25
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Chapter 01 - What Is Strategy and Why Is It Important?
12. (p. 5) The heart and soul of a company's strategy-making effort
A. is figuring out how to become the industry's low-cost provider.
B. is figuring out how to maximize the profits and shareholder value.
C. concerns how to improve the efficiency of its business model.
D. deals with how management plans to maximize profits while, at the same time, operating
in a socially responsible manner that keeps the company's prices as low as possible.
E. involves coming up with moves and actions that produce a durable competitive edge over
rivals.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-02 Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals
and winning a sustainable competitive advantage.
Topic: Strategic Advantage
13. (p. 5-6) A company's strategy and its quest for competitive advantage are tightly connected
because
A. without a competitive advantage a company cannot become the industry leader.
B. without a competitive advantage a company cannot have a profitable business model.
C. crafting a strategy that yields a competitive advantage over rivals is a company's most
reliable means of achieving above-average profitability and financial performance.
D. a competitive advantage is what enables a company to achieve its strategic objectives.
E. how a company goes about trying to please customers and outcompete rivals is what
enables senior managers choose an appropriate strategic vision for the company.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-02 Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals
and winning a sustainable competitive advantage.
Topic: Strategic Advantage
1-26
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Chapter 01 - What Is Strategy and Why Is It Important?
14. (p. 6) A company achieves sustainable competitive advantage when
A. an attractive number of buyers have a lasting preference for its products or services as
compared to the offerings of competitors.
B. it has a profitable business model.
C. it is able to maximize shareholder wealth.
D. it is consistently able to achieve both its strategic and financial objectives.
E. its strategy and its business model are well-matched and in sync.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-02 Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals
and winning a sustainable competitive advantage.
Topic: Strategic Advantage
15. (p. 9) What separates a powerful strategy from a run-of-the-mill or ineffective one is
A. the ability of the strategy to keep the company profitable.
B. the proven ability of the strategy to generate maximum profits.
C. the speed with which it helps the company achieve its strategic vision.
D. management's ability to forge a series of moves, both in the marketplace and internally,
that sets the company apart from rivals, tilts the playing field in the company's favor, and
produces sustainable competitive advantage over rivals.
E. whether it allows the company to maximize shareholder value in the shortest possible time.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-02 Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals
and winning a sustainable competitive advantage.
Topic: Strategic Advantage
1-27
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Chapter 01 - What Is Strategy and Why Is It Important?
16. (p. 8-9) Which of the following is a frequently used strategic approach to setting a company
apart from rivals and achieving a sustainable competitive advantage?
A. Striving to be the industry's low-cost provider, thereby aiming for a cost-based competitive
advantage
B. Outcompeting rivals on the basis of such differentiating features as higher quality, wider
product selection, added performance, better service, more attractive styling, technological
superiority, or unusually good value for the money
C. Developing expertise and resource strengths that give the company competitive capabilities
that rivals can't easily imitate or trump with capabilities of their own
D. Focusing on a narrow market niche and winning a competitive edge by doing a better job
than rivals of serving the special needs and tastes of buyers comprising the niche
E. All of these
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 01-02 Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals
and winning a sustainable competitive advantage.
Topic: Strategic Advantage
17. (p. 8-9) Which of the following is not a frequently used strategic approach to setting a
company apart from rivals and achieving a sustainable competitive advantage?
A. Striving to be the industry's low-cost provider, thereby aiming for a cost-based competitive
advantage
B. Outcompeting rivals on the basis of such differentiating features as higher quality, wider
product selection, added performance, better service, more attractive styling, technological
superiority, or unusually good value for the money
C. Striving to be more profitable than rivals and aiming for a competitive edge based on
bigger profit margins
D. Focusing on a narrow market niche and winning a competitive edge by doing a better job
than rivals of satisfying the needs and tastes of buyers comprising the niche
E. Developing expertise and resource strengths that give the company competitive capabilities
that rivals can't easily imitate or trump with capabilities of their own
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 01-02 Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals
and winning a sustainable competitive advantage.
Topic: Strategic Advantage
1-28
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Chapter 01 - What Is Strategy and Why Is It Important?
18. (p. 9) One of the keys to successful strategy-making is
A. to come up with one or more strategy elements that act as a magnet to draw customers and
yield a lasting competitive edge.
B. to aggressively pursue all of the growth opportunities the company can identify.
C. to develop a product/service with more innovative performance features than what rivals
are offering and to provide customers with better after-the-sale service.
D. to come up with a business model that enables a company to earn bigger profits per unit
sold than rivals.
E. to charge a lower price than rivals and thereby win sales and market share away from
rivals.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-02 Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals
and winning a sustainable competitive advantage.
Topic: Strategic Advantage
19. (p. 9) Winning a competitive edge over competitors generally hinges on which of the
following?
A. Having a competitive product offering.
B. Building valuable expertise and capabilities not readily matched and offering a distinctive
product.
C. Building experience, know-how, and specialized capabilities that have been perfected over
a long period of time.
D. Having "hard to beat" capabilities and impressive product innovation.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-02 Develop an awareness of the four most dependable strategic approaches for setting a company apart from rivals
and winning a sustainable competitive advantage.
Topic: Strategic Advantage
1-29
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Chapter 01 - What Is Strategy and Why Is It Important?
20. (p. 9-10) A company's strategy evolves over time as a consequence of
A. the need to keep strategy in step with changing market conditions and changing customer
needs and expectations.
B. the proactive efforts of company managers to fine-tune and improve one or more pieces of
the strategy.
C. the need to abandon some strategy features that are no longer working well.
D. the need to respond to the newly-initiated actions and competitive moves of rival firms.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-03 Understand that a company's strategy tends to evolve over time because of changing circumstances and ongoing
management efforts to improve the company's strategy.
Topic: Strategy Evolution
21. (p. 9-10) Which of the following is not one of the basic reasons that a company's strategy
evolves over time?
A. The need on the part of company managers to initiate fresh strategic actions that boost
employee commitment and create a results-oriented culture.
B. The proactive efforts of company managers to fine-tune and improve one or more pieces of
the strategy.
C. An ongoing need to abandon those strategy features that are no longer working well.
D. The need to respond to the actions and competitive moves of rival firms.
E. The need to keep strategy in step with changing market conditions and changing customer
needs and expectations.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-03 Understand that a company's strategy tends to evolve over time because of changing circumstances and ongoing
management efforts to improve the company's strategy.
Topic: Strategy Evolution
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Chapter 01 - What Is Strategy and Why Is It Important?
22. (p. 10) Changing circumstances and ongoing managerial efforts to improve the strategy
A. account for why a company's strategy evolves over time.
B. explain why a company's strategic vision undergoes almost constant change.
C. make it very difficult for a company to have concrete strategic objectives.
D. make it very hard to know what a company's strategy really is.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-03 Understand that a company's strategy tends to evolve over time because of changing circumstances and ongoing
management efforts to improve the company's strategy.
Topic: Strategy Evolution
23. (p. 10) A company's strategy is a "work in progress" and evolves over time because of
A. the importance of developing a fresh strategic plan every year (which also has the benefit
of keeping employees from becoming bored with executing the same strategy year after year).
B. the ongoing need to imitate the new strategic moves of the industry leaders.
C. the need to make regular adjustments in the company's strategic vision.
D. the ongoing need of company managers to react and respond to changing market and
competitive conditions.
E. the frequent need to modify key elements of the company's business model.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-03 Understand that a company's strategy tends to evolve over time because of changing circumstances and ongoing
management efforts to improve the company's strategy.
Topic: Strategy Evolution
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Chapter 01 - What Is Strategy and Why Is It Important?
24. (p. 10) It is normal for a company's strategy to end up being
A. a blend of offensive actions on the part of managers to improve the company's profitability
and defensive moves to counteract changing market conditions.
B. a combination of conservative moves to protect the company's market share and somewhat
more risky initiatives to set the company's product offering apart from rivals.
C. a close imitation of the strategy employed by the recognized industry leader.
D. a blend of proactive actions to improve the company's competitiveness and financial
performance and adaptive reactions to unanticipated developments and fresh market
conditions.
E. more a product of clever entrepreneurship than of efforts to clearly set a company's
product/service offering apart from the offerings of rivals.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-03 Understand that a company's strategy tends to evolve over time because of changing circumstances and ongoing
management efforts to improve the company's strategy.
Topic: Strategy Dynamics
25. (p. 10) Crafting a strategy involves
A. trying to imitate as much of the market leader's strategy as possible so as not to end up at a
competitive disadvantage.
B. developing a 5-year strategic plan and then fine-tuning it during the remainder of the plan
period; big changes in strategy are thus made only once every 5 years.
C. stitching together a proactive/intended strategy and then adapting first one piece and then
another as circumstances surrounding the company's situation change or better options
emerge.
D. doing everything possible (in the way of price, quality, service, warranties, advertising, and
so on) to make sure the company's product/service is very clearly differentiated from the
product/service offerings of rivals.
E. All of these accurately characterize the managerial process of crafting a company's
strategy.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-03 Understand that a company's strategy tends to evolve over time because of changing circumstances and ongoing
management efforts to improve the company's strategy.
Topic: Strategy Dynamics
1-32
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Chapter 01 - What Is Strategy and Why Is It Important?
26. (p. 10) Which of the following statements about a company's strategy is true?
A. A company's strategy is mostly hidden to outside view and is deliberately kept under wraps
by top-level managers (so as to catch rival companies by surprise when the strategy is
launched).
B. A company's strategy is typically planned well in advance and usually deviates little from
the planned set of actions and business approaches because of the risks of making on-the-spot
changes.
C. A company's strategy generally changes very little over time unless a newly-appointed
CEO decides to take the company in a new direction with a new strategy.
D. A company's strategy is typically a blend of proactive and reactive strategy elements.
E. A company's strategy is developed mostly on the fly because of the constant efforts of
managers to come up with fresh moves to keep the company's product offering clearly
different and set apart from the product offerings of rival companies.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-03 Understand that a company's strategy tends to evolve over time because of changing circumstances and ongoing
management efforts to improve the company's strategy.
Topic: Strategy Dynamics
27. (p. 10) A company's strategy evolves from one version to the next because of
A. changing management conclusions about which of several appealing strategy alternatives
is actually best.
B. the proactive efforts of company managers to improve this or that aspect of the strategy, a
need to respond to changing customer requirements and expectations, and a need to react to
fresh strategic maneuvers on the part of rival firms.
C. ongoing turnover in the managerial and executive ranks (new managers often decide to
shift to a different strategy).
D. pressures from shareholders to boost profit margins and pay higher dividends.
E. the importance of keeping the company's business model fresh and up-to-date.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-03 Understand that a company's strategy tends to evolve over time because of changing circumstances and ongoing
management efforts to improve the company's strategy.
Topic: Strategy Dynamics
1-33
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Chapter 01 - What Is Strategy and Why Is It Important?
28. (p. 10) Which one of the following does not account for why a company's strategy evolves
from one version to another?
A. A desire on the part of company managers to develop new strategy elements on the fly
B. The need to abandon some strategy elements that are no longer working well
C. A need to respond to changing customer requirements and expectations
D. A need to react to fresh strategic maneuvers on the part of rival firms
E. The proactive efforts of company managers to improve this or that aspect of the strategy
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-03 Understand that a company's strategy tends to evolve over time because of changing circumstances and ongoing
management efforts to improve the company's strategy.
Topic: Strategy Dynamics
29. (p. 10) In the course of crafting a strategy, it is common for management to
A. decide to abandon certain strategy elements that have grown stale or become obsolete.
B. modify the current strategy when market and competitive conditions take an unexpected
turn or some aspects of the company's strategy hit a stone wall.
C. modify the current strategy in response to the fresh strategic maneuvers of rival firms.
D. take proactive actions to improve this or that piece of the strategy.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-03 Understand that a company's strategy tends to evolve over time because of changing circumstances and ongoing
management efforts to improve the company's strategy.
Topic: Strategy Dynamics
1-34
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Chapter 01 - What Is Strategy and Why Is It Important?
The Relationship between a Company’s Strategy and Its Business Model
30. (p. 11) A company's business model
A. concerns the actions and business approaches that will be used to grow the business,
conduct operations, please customers, and compete successfully.
B. is management's storyline for how it will generate revenues ample to cover costs and
produce a profit—absent the ability to deliver good profitability, the strategy is not viable and
the survival of the business is in doubt.
C. concerns what combination of moves in the marketplace it plans to make to outcompete
rivals.
D. deals with how it can simultaneously maximize profits and operate in a socially
responsible manner that keeps its prices as low as possible.
E. concerns how management plans to pursue strategic objectives, given the larger imperative
of meeting or beating its financial performance targets.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 01-04 Learn why it is important for a company to have a viable business model that outlines the company's customer
value proposition and its profit formula.
Topic: Strategy and Business Model
31. (p. 11) A company's business model
A. zeros in on how and why the business will generate revenues sufficient to cover costs and
produce attractive profits and return on investment.
B. is management's storyline for how the strategy will result in achieving the targeted
strategic objectives.
C. details the ethical and socially responsible nature of the company's strategy.
D. explains how it intends to achieve high profit margins.
E. sets forth the actions and approaches that it will employ to achieve market leadership.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 01-04 Learn why it is important for a company to have a viable business model that outlines the company's customer
value proposition and its profit formula.
Topic: Strategy and Business Model
1-35
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Chapter 01 - What Is Strategy and Why Is It Important?
32. (p. 11) A company's business model
A. sets forth management's game plan for maximizing profits for shareholders.
B. details exactly how management's strategy will result in the achievement of the company's
strategic intent.
C. explains how it will achieve high profit margins while at the same time charging relatively
low prices to customers.
D. sets forth the key components of the enterprise's business approach, indicates how
revenues will be generated, and makes a case for why the strategy can deliver value to
customers in a profitable manner.
E. sets forth management's long term action plan for achieving market leadership.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-04 Learn why it is important for a company to have a viable business model that outlines the company's customer
value proposition and its profit formula.
Topic: Strategy and Business Model
33. (p. 11) Management's story line for how and why the company's business approaches will
generate revenues sufficient to cover costs and produce attractive profits and returns on
investment
A. describes what is meant by a company's strategy.
B. best describes what is meant by a company's business model.
C. accounts for why a company's financial objectives are at the stated level.
D. portrays the essence of a company's business purpose or mission.
E. is what is meant by the term strategic intent.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 01-04 Learn why it is important for a company to have a viable business model that outlines the company's customer
value proposition and its profit formula.
Topic: Strategy and Business Model
1-36
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Chapter 01 - What Is Strategy and Why Is It Important?
34. (p. 11-12) The difference between a company's strategy and a company's business model is
that
A. a company's strategy is management's game plan for achieving strategic objectives while
its business model is management's game plan for achieving financial objectives.
B. the strategy concerns how to compete successfully and the business model concerns how to
operate efficiently.
C. a company's strategy is management's game plan for realizing the strategic vision whereas
a company's business model is the game plan for accomplishing the business purpose or
mission.
D. strategy relates broadly to a company's competitive moves and business approaches (which
may or may not lead to profitability) while its business model relates to whether the revenues
and costs flowing from the strategy demonstrate that the business is viable from the
standpoint of being able to earn satisfactory profits and returns on investment.
E. a company's strategy concerns how to please customers while its business model concerns
how to please shareholders.
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
Learning Objective: 01-04 Learn why it is important for a company to have a viable business model that outlines the company's customer
value proposition and its profit formula.
Topic: Strategy and Business Model
What Makes a Strategy a Winner?
35. (p. 12) A winning strategy is one that
A. builds strategic fit, is socially responsible, and maximizes shareholder wealth.
B. is highly profitable and boosts the company's market share.
C. fits the company's internal and external situation, builds sustainable competitive advantage,
and improves company performance.
D. results in a company becoming the dominant industry leader.
E. can pass the ethical standards test, the strategic intent test, and the profitability test.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 01-05 Learn the three tests of a winning strategy.
Topic: Winning Strategy
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Chapter 01 - What Is Strategy and Why Is It Important?
36. (p. 12) A winning strategy is one that
A. results in a company becoming the dominant market leader.
B. produces exceptionally high levels of customer satisfaction and is both ethical and highly
profitable.
C. fits the company's internal and external situations, builds sustainable competitive
advantage, and improves company performance.
D. is ethical, socially responsible, and profitable.
E. builds shareholder value, passes the completeness test, and passes the customer satisfaction
test.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 01-05 Learn the three tests of a winning strategy.
Topic: Winning Strategy
37. (p. 12) Which one of the following questions can be used to test the merits of one strategy
over another and distinguish a winning strategy from a mediocre or losing strategy?
A. How good is the company's business model?
B. Is the company a technology leader?
C. Does the company have low prices in comparison to rivals?
D. Is the company putting too little emphasis on behaving in an ethical and socially
responsible manner?
E. How well does the strategy fit the company's situation?
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-05 Learn the three tests of a winning strategy.
Topic: Winning Strategy
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Chapter 01 - What Is Strategy and Why Is It Important?
38. (p. 13-14) Which of the following questions ought to be used to test the merits of one strategy
over another and distinguish a winning strategy from a mediocre or losing strategy?
A. Is the company's strategy ethical and socially responsible and does it put enough emphasis
on good product quality and good customer service?
B. Is the company putting too little emphasis on growth and profitability and too much
emphasis on behaving in an ethical and socially responsible manner?
C. Is the strategy resulting in the development of additional competitive capabilities?
D. Is the strategy helping the company achieve a sustainable competitive advantage and is it
resulting in better company performance?
E. Does the strategy strike a good balance between maximizing shareholder wealth and
maximizing customer satisfaction?
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-05 Learn the three tests of a winning strategy.
Topic: Winning Strategy
Why Are Crafting and Executing Strategy Important?
39. (p. 14-15) Crafting and executing strategy are top-priority managerial tasks because
A. working their way through the tasks of crafting and executing strategy helps top executives
create tight fits between a company's strategic vision and business model.
B. all company personnel, and especially senior executives, need to know the answer to "who
are we, what do we do, and where are we headed?"
C. there is a compelling need for managers to proactively shape how the company's business
will be conducted and because a strategy-focused enterprise is more likely to be a stronger
bottom-line performer than a company whose management views strategy as secondary and
puts its priorities elsewhere.
D. without clear guidance as to what the company's business model and strategic intent are,
managerial decision-making is likely to be rudderless.
E. how well executives perform these tasks are the key determinants of executive
compensation.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-05 Learn the three tests of a winning strategy.
Topic: Strategy Plan and Execution
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Chapter 01 - What Is Strategy and Why Is It Important?
40. (p. 15) Crafting and executing strategy are top-priority managerial tasks because
A. they are necessary ingredients of a sound business model.
B. good strategy coupled with good strategy execution greatly raises the chances that a
company will be a standout performer in the marketplace.
C. the management skills of top executives are sharpened as they work their way through the
strategy-making/strategy-executing process.
D. doing these tasks helps executives develop an appropriate strategic vision, strategic intent,
and set of strategic objectives.
E. of the contribution they make to maximizing value for shareholders.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 01-05 Learn the three tests of a winning strategy.
Topic: Strategy Plan and Execution
41. (p. 15) Good strategy combined with good strategy execution
A. offers a surefire guarantee for avoiding periods of weak financial performance.
B. are the two best signs that a company is a true industry leader.
C. are more important management functions than forming a strategic vision and setting
objectives.
D. are the most trustworthy signs of good management.
E. signal that a company has a superior business model.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 01-05 Learn the three tests of a winning strategy.
Topic: Strategy Plan and Execution
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Chapter 01 - What Is Strategy and Why Is It Important?
42. (p. 15) The most trustworthy signs of a well-managed company are
A. the eagerness with which executives set stretch financial and strategic objectives and
develop an ambitious strategic vision.
B. aggressive pursuit of new opportunities and a willingness to change the company's
business model whenever circumstances warrant.
C. good strategy-making combined with good strategy execution.
D. a visionary mission statement and a willingness to pursue offensive strategies rather than
defensive strategies.
E. a profitable business model and a balanced scorecard approach to measuring the company's
performance.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 01-05 Learn the three tests of a winning strategy.
Topic: Strategy Plan and Execution
43. (p. 15) Excellent execution of an excellent strategy is
A. the best test of managerial excellence and the best recipe for making a company a standout
performer.
B. a solid indication that managers are maximizing profits and looking out for the best
interests of shareholders.
C. the best test of whether a company is a "true" industry leader.
D. the best evidence that managers have a winning business model.
E. the best test of whether a company enjoys sustainable competitive advantage.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-05 Learn the three tests of a winning strategy.
Topic: Strategy Plan and Execution
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Chapter 01 - What Is Strategy and Why Is It Important?
The Road Ahead
44. (p. 15) What is the foremost question in running a business enterprise?
A. What must managers do, and do well, to make a company a winner in the marketplace?
B. What can employees do, and do well, to ensure customer satisfaction?
C. What can shareholders do, and do well, to ensure a profitable company?
D. None of these.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 01-05 Learn the three tests of a winning strategy.
Topic: Strategy Plan and Execution
Short Answer Questions
45. (p. 6) List five things to look for in identifying the components of an organization's
strategy.
Answer will vary
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 01-01 Understand why every company needs a sound strategy to compete successfully; manage the conduct of its
business; and strengthen its prospects for long-term success.
Topic: Strategy Meaning
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
Chapter 02 Charting a Company's Direction: Vision and Mission, Objectives,
and Strategy Answer Key
Multiple Choice Questions
What Does the Strategy-Making, Strategy-Executing Process Entail?
1. (p. 21-22) Which one of the following is not one of the five basic tasks of the strategy-making,
strategy-executing process?
A. Forming a strategic vision of where the company needs to head and what its future
business make-up will be
B. Setting objectives to convert the strategic vision into specific strategic and financial
performance outcomes for the company to achieve
C. Crafting a strategy to achieve the objectives and get the company where it wants to go
D. Developing a profitable business model
E. Implementing and executing the chosen strategy efficiently and effectively
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategy Process
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
2. (p. 23) Which of the following is an integral part of the managerial process of crafting and
executing strategy?
A. Developing a proven business model
B. Deciding how much of the company's resources to employ in the pursuit of sustainable
competitive advantage
C. Setting objectives and using them as yardsticks for measuring the company's performance
and progress
D. Communicating the company's values and code of conduct to all employees
E. Deciding on the company's strategic intent
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategy Process
3. (p. 21-22) Which of the following are integral parts of the managerial process of crafting and
executing strategy?
A. Developing a strategic vision, setting objectives, and crafting a strategy
B. Developing a proven business model, deciding on the company's strategic intent, and
crafting a strategy
C. Setting objectives, crafting a strategy, implementing and executing the chosen strategy, and
deciding how much of the company's resources to employ in the pursuit of sustainable
competitive advantage
D. Coming up with a statement of the company's mission and purpose, setting objectives,
choosing what business approaches to employ, selecting a business model, and monitoring
developments
E. Deciding on the company's strategic intent, setting financial objectives, crafting a strategy,
and choosing what business approaches and operating practices to employ
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategy Process
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
4. (p. 21-22) The strategy-making, strategy-executing process
A. is usually delegated to members of a company's board of directors so as not to infringe on
the time of busy executives.
B. includes establishing a company's mission, developing a business model aimed at making
the company an industry leader, and crafting a strategy to implement and execute the business
model.
C. embraces the tasks of developing a strategic vision, setting objectives, crafting a strategy,
implementing and executing the strategy, and then monitoring developments and initiating
corrective adjustments in light of experience, changing conditions, and new opportunities.
D. is principally concerned with sizing up an organization's internal and external situation, so
as to be prepared for the challenge of developing a sound business model.
E. is primarily the responsibility of top executives and the board of directors; very few
managers below this level are involved.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategy Process
Stage 1: Developing a Strategic Vision, a Mission, and a Set of Core Values
5. (p. 22) A company's strategic vision concerns
A. "who we are and what we do."
B. why the company does certain things in trying to please its customers.
C. management's storyline of how it intends to make a profit with the chosen strategy.
D. a company's directional path and future product-market-customer-technology focus.
E. what future actions the enterprise will likely undertake to outmaneuver rivals and achieve a
sustainable competitive advantage.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
6. (p. 22) A company's strategic vision
A. is management's story line for how it plans to implement and execute a profitable business
model.
B. sets forth what business the company is presently in and why it uses particular operating
practices in trying to please customers.
C. delineates management's aspirations for the business, providing a panoramic view of
"where we are going" and a convincing rationale for why this makes good business sense.
D. defines "who we are and what we do."
E. spells out a company's strategic intent, its strategic and financial objectives, and the
business approaches and operating practices that will underpin its efforts to achieve
sustainable competitive advantage.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
7. (p. 22) Developing a strategic vision for a company entails
A. prescribing a strategic direction for the company to pursue and a rationale for why this
strategic path makes good business sense.
B. describing its business model and the kind of value that it is trying to deliver to customers.
C. putting together a story line of why the business will be a moneymaker.
D. describing "who we are and what we do."
E. coming up with a long-term plan for outcompeting rivals and achieving a competitive
advantage.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
8. (p. 23) The managerial task of developing a strategic vision for a company
A. concerns deciding what approach the company should take to implement and execute its
business model.
B. entails coming up with a fairly specific answer to "who are we, what do we do, and why
are we here?"
C. is chiefly concerned with addressing what a company needs to do to successfully
outcompete rivals in the marketplace.
D. involves deciding upon what strategic course a company should pursue in preparing for the
future and why this directional path makes good business sense.
E. entails coming up with a persuasive storyline of how the company intends to make money.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
9. (p. 22-23) Which one of the following is not an accurate attribute of an organization's strategic
vision?
A. Providing a panoramic view of "where we are going"
B. Outlining how the company intends to implement and execute its business model
C. Pointing an organization in a particular direction and charting a strategic path for it to
follow
D. Helping mold an organization's character and identity
E. Describing the company's future product-market-customer-technology focus
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
10. (p. 22) Management's strategic vision for an organization
A. charts a strategic course for the organization ("where we are going") and provides a
rationale for why this directional path makes good sense.
B. describes in fairly specific terms the organization's strategic intent, strategic objectives, and
strategy.
C. spells out how the company will become a big moneymaker and boost shareholder value.
D. addresses the critical issue of "why our business model needs to change and how we plan
to change it."
E. spells out the organization's strategic intent and the actions and moves that will be
undertaken to achieve it.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
11. (p. 23) What a company's top executives are saying about where the company is headed and
about what the company's future product-customer-market-technology will be
A. indicates what kind of business model the company is going to have in the future.
B. constitutes their strategic vision for the company.
C. signals what the firm's strategy will be.
D. serves to define the company's mission.
E. indicates what the company's long-term strategic plan is.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
12. (p. 23) One of the important benefits of a well-conceived and well-stated strategic vision is
to
A. clearly delineate how the company's business model will be implemented and executed.
B. clearly communicate management's aspirations for the company to stakeholders and help
steer the energies of company personnel in a common direction.
C. set forth the firm's strategic objectives in clear and fairly precise terms.
D. help create a "balanced scorecard" approach to objective-setting and not stretch the
company's resources too thin across different products, technologies, and geographic markets.
E. indicate what kind of sustainable competitive advantage the company will try to create in
the course of becoming the industry leader.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
13. (p. 23) The defining characteristic of a well-conceived strategic vision is
A. what it says about the company's future strategic course—"the direction we are headed and
what our future product-market-customer-technology focus will be."
B. that it not stretch the company's resources too thin across different products, technologies,
and geographic markets.
C. clarity and specificity about "who we are, what we do, and why we are here."
D. that it be flexible and in the mainstream.
E. that it be within the realm of what the company can reasonably expect to achieve within 4
years.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
14. (p. 23) Which one of the following questions is not pertinent to company managers in
thinking strategically about their company's directional path and developing a strategic
vision?
A. Is the outlook for the company promising if it continues with its present product-markettechnology-customer focus?
B. Are changing market and competitive conditions acting to enhance or weaken the
company's prospects?
C. What business approaches and operating practices should we consider in trying to
implement and execute our business model?
D. What are our ambitions for the company—what industry standing do we want the company
to have?
E. What, if any, new customer groups and/or geographic markets should the company get in
position to serve?
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
15. (p. 23) Which one of the following questions is not something that company managers
should consider in choosing to pursue one strategic course or directional path versus another?
A. Are changing market and competitive conditions acting to enhance or weaken the
company's business outlook?
B. Is the company stretching its resources too thinly by trying to compete in too many markets
or segments, some of which are unprofitable?
C. Will our present business generate sufficient growth and profitability in the years ahead to
please shareholders?
D. What emerging market opportunities should the company pursue and which ones should
not be pursued?
E. Do we have a better business model than key rivals?
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
16. (p. 23) Which of the following are characteristics of an effectively-worded strategic vision
statement?
A. Balanced, responsible, and rational
B. Challenging, competitive, and "set in concrete"
C. Graphic, directional, and focused
D. Realistic, customer-focused, and market-driven
E. Achievable, profitable, and ethical
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
17. (p. 23) Which one of the following is not a characteristic of an effectively-worded strategic
vision statement?
A. Directional (is forward-looking, describes the strategic course that management has
charted and the kinds of product-market-customer-technology changes that will help the
company prepare for the future)
B. Easy to communicate (is explainable in 10-15 minutes, can be reduced to a memorable
slogan)
C. Graphic (paints a picture of the kind of company management is trying to create and the
market position(s) the company is striving to stake out)
D. Consensus-driven (commits the company to a "mainstream" directional path that almost all
stakeholders will enthusiastically support)
E. Focused (is specific enough to provide guidance to managers in making decisions and
allocating resources)
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
18. (p. 23) Which of the following is not a common shortcoming of company vision
statements?
A. Vague or incomplete—short on specifics
B. Too narrow—doesn't leave enough room for future growth
C. Bland or uninspiring
D. Not distinctive—could apply to most any company (or at least several others in the same
industry)
E. Too reliant on superlatives (best, most successful, recognized leader, global or worldwide
leader, first choice of customers)
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
19. (p. 23) Which of the following are common shortcomings of company vision statements?
A. Too specific, too inflexible, and can't be achieved in 5 years
B. Unrealistic, unconventional, and un-businesslike
C. Too broad, vague or incomplete, bland/uninspiring, not distinctive, and too reliant on
superlatives
D. Too broad, too narrow, and too risky
E. Not customer-driven, out-of-step with emerging technological trends, and too ambitious
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
20. (p. 24) Breaking down resistance to a new strategic vision typically requires that top
management
A. institute a balanced scorecard approach to measuring company performance, with the
"balance" including a mixture of both old and new performance measures.
B. keep company personnel well-informed about forthcoming changes in the company's
strategy.
C. frequently reiterate the basis for the new direction at company gatherings, address
employee concerns and fears head-on, and provide updates and progress reports as events
unfold.
D. move promptly to update the company's business model and hold meetings with company
personnel to explain the merits of the new business model.
E. raise wages and salaries to win the support of company personnel for the company's new
direction.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
21. (p. 23) Top management efforts to communicate the strategic vision to company personnel
A. ought to be done in writing rather than orally so as to leave no room for company
personnel to misinterpret what the strategic vision really is.
B. should be done in language that inspires and motivates company personnel to unite behind
executive efforts to get the company moving in the intended direction.
C. tends to be more effective when top management avoids trying to capture the essence of
the strategic vision in a catchy slogan.
D. is most efficiently and effectively done by posting the strategic vision prominently on the
company's Web site and encouraging employees to read it.
E. should be attempted only after management has explained the company's strategic intent,
strategy, and business model to company personnel.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
22. (p. 23) Effectively communicating the strategic vision down the line to lower-level
managers and employees has the value of
A. inspiring company personnel to unite behind managerial efforts to get the company
moving in the intended direction.
B. helping company personnel understand why "making a profit" is so important.
C. making it easier for top executives to set stretch objectives.
D. helping lower-level managers and employees better understand the company's business
model.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
23. (p. 23) Perhaps the most important benefit of a vivid, engaging, and convincing strategic
vision is
A. helping gain managerial consensus on what resources must be developed to successfully
achieve strategic objectives.
B. uniting company personnel behind managerial efforts to get the company moving in the
intended direction.
C. helping justify the company's mission of making a profit.
D. helping company personnel understand the logic of the company's business model.
E. keeping company personnel well-informed.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
24. (p. 26) The task of effectively communicating the strategic vision is made easier by
A. having a simple strategy that is easy for company personnel to understand.
B. combining the strategic vision and the company's values statement into a single document.
C. capturing the essence of the vision in a catchy slogan or brief phrase and then using it
repeatedly as a reminder of "where we are going and why."
D. waiting until the company achieves its mission to tell company personnel about the
strategic vision.
E. combining the strategic vision and the mission statement into a single statement of overall
business purpose.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
25. (p. 26) The payoffs of a clear vision statement do not include
A. reducing the risks of rudderless decision-making.
B. helping the organization prepare for the future.
C. greater ability to avoid strategic inflection points.
D. helping to crystallize top management's own view about the firm's long-term direction.
E. providing a tool for winning the support of organizational members for internal changes
that will help make the vision a reality.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
26. (p. 26) Which of the following is the result of a well-conceived and communicated strategic
vision?
A. Senior executives solidify their own view of the firm's long term direction.
B. The risk of rudderless decision-making is minimized.
C. Organizational members support the changes internally that will help make the vision a
reality.
D. Assists the organization prepare for the future.
E. All of these.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Strategic Vision
27. (p. 26) A company's mission statement typically addresses which of the following
questions?
A. "Who are we and what do we do?"
B. "What objectives and level of performance do we want to achieve?"
C. "Where are we going and what should our strategy be?"
D. "What approach should we take to achieve sustainable competitive advantage?"
E. "What business model should we employ to achieve our objectives and our vision?"
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Mission Statement
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
28. (p. 26) The difference between the concept of a company mission statement and the concept
of a strategic vision is that
A. a mission concerns what to do to achieve short-run objectives and a strategic vision
concerns what to do to achieve long-run performance targets.
B. the mission is to make a profit, whereas a strategic vision concerns what business model to
employ in striving to make a profit.
C. a mission statement deals with what to accomplish on behalf of shareholders and a
strategic vision concerns what to accomplish on behalf of customers.
D. a mission statement typically concerns a company's present business scope ("who we are
and what we do") whereas the principal concern of a strategic vision is the company's long
term direction and future product-market-customer-technology focus.
E. a mission statement deals with "where we are headed " whereas a strategic vision provides
the critical answer to "how will we get there?"
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Mission Statement
29. (p. 26) The difference between a company's mission statement and the concept of a strategic
vision is that
A. the mission explains why it is essential to make a profit, whereas the strategic vision
explains how the company will be a moneymaker.
B. a mission statement typically concerns a company's present business scope and purpose
whereas a strategic vision sets forth "where we are going and why."
C. a mission deals with how to please customers whereas a strategic vision deals with how to
please shareholders.
D. a mission statement deals with "where we are headed " whereas a strategic vision provides
the critical answer to "how will we get there?"
E. a mission statement addresses "how we are trying to make a profit today" while a strategic
vision concerns "how will we make money in the markets of tomorrow?"
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Mission Statement
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
30. (p. 27) A company's mission statement should be sufficiently descriptive and includes which
of the following?
A. Identify the company's services and products to give the company its own identity.
B. Relate to the buyer's needs that the company seeks to satisfy.
C. Identify the customer or market that the company intends to serve.
D. Specify the approach taken by the company to satisfy its customer's needs.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Mission Statement
31. (p. 27) A company's values concern
A. whether and to what extent it intends to operate in an ethical and socially responsible
manner.
B. how aggressively it will seek to maximize profits and enforce high ethical standards.
C. the beliefs and operating principles built into the company's "balanced scorecard" for
measuring performance.
D. the beliefs, traits, and behavioral norms that company personnel are expected to display in
conducting the company's business and pursuing its strategic vision and mission.
E. the beliefs, principles, and ethical standards that are incorporated into the company's
strategic intent and business model.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Vision, Mission and Values
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
32. (p. 27) A company's values relate to such things as
A. how it will balance its pursuit of financial objectives against the pursuit of its strategic
objectives.
B. how it will balance the pursuit of its business purpose/mission against the pursuit of its
strategic vision.
C. fair treatment, integrity, ethical behavior, innovativeness, teamwork, top-notch quality,
superior customer service, social responsibility, and community citizenship.
D. whether it will emphasize stock price appreciation or higher dividend payments to
shareholders, and whether it will put more emphasis on the achievement of short-term
performance targets or long-range performance targets.
E. All of these.
AACSB: Reflective Thinking
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Vision, Mission and Values
33. (p. 28) Company managers connect values to the chosen strategic vision by
A. combining the company's values and mission/business purpose into a single statement.
B. using a values-based balanced scorecard to measure the company's progress in achieving
the vision.
C. making achievement of the values a prominent part of the company's strategic objectives.
D. making it clear that company personnel are expected to live up to the values in conducting
the company's business and pursuing its strategic vision.
E. making adherence to the company's values the centerpiece of the company's strategy.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-01 Grasp why it is critical for company managers to have a clear strategic vision of where a company needs to head
and why.
Topic: Vision, Mission and Values
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
Stage 2: Setting Objectives
34. (p. 28) The managerial purpose of setting objectives includes
A. converting the strategic vision into specific performance targets—results and outcomes the
organization wants to achieve.
B. using the objectives as yardsticks for tracking the company's progress and performance.
C. challenging and helping stretch the organization to perform at its full potential and deliver
the best possible results.
D. pushing company personnel to be more inventive and to exhibit more urgency in
improving the company's financial performance and business position.
E. All of these.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Objectives
35. (p. 30) A company needs financial objectives
A. to spur company personnel to help the company overtake key competitors on such
important measures as net profit margins and return on investment.
B. because adequate profitability and financial strength is critical to effective pursuit of its
strategic vision, as well as to its long-term health and ultimate survival.
C. to indicate to employees whether the emphasis should be on earnings per share or return on
investment or return on assets or positive cash flow.
D. to convince shareholders that top management is acting in their interests.
E. to counterbalance its pursuit of strategic objectives and have a balanced scorecard for
judging the caliber of its overall performance.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Objectives
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
36. (p. 30) Which of the following is the best example of a well-stated financial objective?
A. Increase earnings per share by 15% annually.
B. Gradually boost market share from 10% to 15% over the next several years.
C. Achieve lower costs than any other industry competitor.
D. Boost revenues by a percentage greater than the industry average.
E. Maximize total company profits and return on investment.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Objectives
37. (p. 30) Which of the following is the best example of a well-stated strategic objective?
A. Increase revenues by more than the industry average.
B. Be among the top 5 five companies in the industry on customer service.
C. Overtake key competitors on product quality within three years.
D. Improve manufacturing performance by 5% within 12 months.
E. Obtain 150 new customers during the current fiscal year.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Objectives
38. (p. 30) Strategic objectives
A. are more essential in achieving a company's strategic vision than are financial objectives.
B. relate to strengthening a company's overall business and competitive position.
C. are more difficult to achieve and harder to measure than financial objectives.
D. are generally less important than financial objectives.
E. help managers track an organization's true progress better than financial objectives.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Objectives
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
39. (p. 31) A balanced scorecard for measuring company performance
A. entails putting equal emphasis on financial and strategic objectives.
B. entails putting balanced emphasis on profit and non-profit objectives.
C. prevents the drive for achieving financial objectives from overwhelming the pursuit of
strategic objectives.
D. prevents the drive for achieving strategic objectives from overwhelming the pursuit of
financial objectives.
E. entails creating a set of objectives that is "balanced" in the sense of including both financial
and strategic objectives.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Balancing Objectives
40. (p. 30) A "balanced scorecard" that includes both strategic and financial performance targets
is a conceptually strong approach for judging a company's overall performance because
A. it assists managers in putting roughly equal emphasis on short-term and long-term
performance targets.
B. it entails putting equal emphasis on good strategy execution and good business model
execution.
C. a balanced scorecard approach pushes managers to avoid setting objectives that reflect the
results of past decisions and organizational activities.
D. financial performance measures are lagging indicators that reflect the results of past
decisions and organizational activities whereas strategic performance measures are leading
indicators of a company's future financial performance.
E. it forces managers to put equal emphasis on financial and strategic objectives.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Balancing Objectives
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
41. (p. 30) Perhaps the most reliable way for a company to improve its financial performance
over time is to
A. put 100% emphasis on the achievement of its short-term and long-term financial
objectives.
B. recognize that the achievement of strategic objectives fosters better long-term financial
performance.
C. substitute financial intent for strategic intent and judiciously concentrate on the mission of
making a profit.
D. not allocate any resources to the achievement of strategic objectives until it is very clear
that the company can meet or beat its stretch financial performance targets.
E. avoid use of the "balanced scorecard" philosophy since achievement of financial
performance targets is obviously more important than achievement of strategic performance
targets.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Balancing Objectives
42. (p. 30) A company that pursues and achieves strategic objectives
A. is likely to weaken the achievement of its short-term and long-term financial objectives.
B. believes that the company's financial performance is not as important as it really is.
C. is generally not strongly focused on its true mission of making a profit.
D. is frequently in a better position to improve its future financial performance because of the
increased competitiveness that flows from the achievement of strategic objectives.
E. is likely to be a weak financial performer because diverting resources to the pursuit of
strategic objectives takes away from the achievement of financial performance targets.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Balancing Objectives
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
43. (p. 31) A company exhibits strategic intent when
A. it adopts a strategic plan.
B. it relentlessly pursues an ambitious strategic objective, concentrating the full force of its
resources and competitive actions on achieving that objective.
C. senior executives pursue their strategic vision.
D. top management establishes a comprehensive set of strategic objectives.
E. it pursues a particular competitive advantage.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Balancing Objectives
44. (p. 31) A set of "stretch" financial and strategic objectives
A. pushes the company closer to true profit maximization.
B. helps create a "balanced scorecard" for judging company performance.
C. helps convert the mission statement into meaningful company values.
D. challenges company personnel to execute the strategy with greater proficiency.
E. is an effective tool for avoiding ho-hum results.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Objectives
45. (p. 31) Which one of the following is not an advantage of setting "stretch" objectives?
A. Helping to avoid ho-hum results
B. Pushing company personnel to be more inventive and innovative
C. Helping clarify the company's strategic vision and strategic intent
D. Helping a company be more focused and intentional in its actions
E. Spurring exceptional performance and helping build a firewall against contentment with
modest performance gains
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Objectives
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
46. (p. 31) Why should long-run objectives take precedence over short-run objectives?
A. Focus is placed on improving performance in the near-term.
B. Long-run objectives are necessary for achieving long-term performance and block focus on
short-term results and put the company in a position to perform better later.
C. To satisfy shareholder expectations for progress.
D. Forces the company to consider what to do now to perform better later.
E. None of these.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Balancing Objectives
47. (p. 33) A company needs performance targets or objectives
A. to help guide managers in deciding what strategic path to take in the event that a strategic
inflection point is encountered.
B. because they give the company clear-cut strategic intent.
C. in order to unify the company's strategic vision and business model.
D. for its operations as a whole and also for each of its separate businesses, product lines,
functional departments, and individual work units.
E. in order to prevent lower-level organizational units from establishing their own objectives.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Objectives
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
48. (p. 31-33) Company objectives
A. are needed only in those areas directly related to a company's short-term and long-term
profitability.
B. need to be broken down into performance targets for each of its separate businesses,
product lines, functional departments, and individual work units.
C. play the important role of establishing the direction in which it needs to be headed.
D. are important because they help guide managers in deciding what the company's strategic
intent should be.
E. should be set in a manner that does not conflict with the performance targets of lower-level
organizational units.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-02 Understand the importance of setting both strategic and financial objectives.
Topic: Objectives
Stage 3: Crafting a Strategy
49. (p. 33) The task of stitching together a strategy
A. entails addressing a series of hows: how to grow the business, how to please customers,
how to outcompete rivals, how to respond to changing market conditions, and how to achieve
strategic and financial objectives.
B. is primarily an exercise in deciding which of several freshly-emerging market opportunities
to pursue.
C. is mainly an exercise that should be dictated by what is comfortable to management from a
risk perspective and what is acceptable in terms of capital requirements.
D. requires trying to copy the strategies of industry leaders as closely as possible.
E. is mainly an exercise in good planning.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Crafting Strategy
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
50. (p. 33) Masterful strategies come from
A. successful managerial efforts to develop a sound strategic vision.
B. doing a very thorough job of strategic planning.
C. involving as many company personnel as possible in the strategy-making process.
D. crafting a strategy that mimics the best parts of the strategies of the industry leaders.
E. doing things differently from competitors where it counts—out-innovating them, being
more efficient, adapting faster—rather than running with the herd.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Crafting Strategy
51. (p. 37) Strategy-making is
A. primarily the responsibility of key executives rather than a task for a company's entire
management team.
B. more of a collaborative group effort that involves all managers and sometimes key
employees, as opposed to being the function and responsibility of a few high-level executives.
C. first and foremost the function and responsibility of a company's strategic planning staff.
D. first and foremost the function and responsibility of a company's board of directors.
E. first and foremost the function of a company's chief executive officer—who formulates
strategic initiatives and submits them to the board of directors for approval.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
52. (p. 37) Which of the following is not an accurate description of the task of crafting a
company's strategy?
A. In most companies, crafting strategy is a team effort, involving managers and often key
employees at many organization levels.
B. Ultimate responsibility for leading the strategy-making task rests with the chief executive
officer.
C. The task of crafting strategy is best done by a company's chief strategic planning officer,
who should report directly to the company's CEO and board of directors.
D. It is the responsibility and duty of a company's board of directors to ensure that new
strategy proposals can be defended as superior to alternatives and, ultimately, to approve or
disapprove of the strategy formulated and proposed by the company's management.
E. In most of today's companies, every company manager has a strategy-making role, ranging
from major to minor, for his/her area of responsibility.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
53. (p. 34) Managerial jobs with strategy-making responsibility
A. extend throughout the managerial ranks and exist in every part of a company—business
units, operating divisions, functional departments, manufacturing plants, and sales districts.
B. are primarily located in the strategic planning departments of large corporations.
C. are relatively rare because most strategy-making is done by the members of a company's
board of directors.
D. seldom exist within a functional department (e.g., marketing and sales) or in an operating
unit (a plant or a district office) because these levels of the organization structure are well
below the level where strategic decisions are typically made.
E. are found only at the vice-president level and above in most companies.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
54. (p. 34) Which of the following most accurately describes the task of crafting a company's
strategy?
A. In most companies, strategy-making is the exclusive province of top management—ownerentrepreneurs, CEOs, and other very senior executives.
B. The more a company's operations cut across different products, industries, and
geographical areas, the more that headquarters executives have little option but to delegate
considerable strategy-making authority to down-the-line managers in charge of particular
subsidiaries, product lines, geographic sales offices, and plants.
C. A company's board of directors generally takes the lead role in crafting a company's
strategy.
D. In most of today's companies, the lead strategy-making role is being assumed by an elite
group of corporate entrepreneurs.
E. Masterful strategies are nearly always the product of brilliant corporate entrepreneurs.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
55. (p. 37) A company's overall strategy
A. determines whether its strategic intent is proactive or reactive.
B. is subject to being changed much less frequently than either its objectives or its mission
statement and thus serves as the base of its strategy-making pyramid.
C. should be based on a flexible strategic vision and strategic intent.
D. is customarily reviewed and approved level-by-level by the company board of directors.
E. is really a collection of strategic initiatives and actions devised by managers and key
employees up and down the whole organizational hierarchy.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
56. (p. 34-36) In a diversified company, the strategy-making hierarchy consists of
A. corporate strategy and a group of business strategies (one for each line of business the
corporation has diversified into).
B. corporate or managerial strategy, a set of business strategies, and divisional strategies
within each business.
C. business strategies, functional strategies, and operating strategies.
D. corporate strategy, business strategies, functional strategies, and operating strategies.
E. its diversification strategy, its line of business strategies, and its operating strategies.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Crafting Strategy
57. (p. 34) Corporate strategy for a diversified or multi-business enterprise
A. is orchestrated by senior corporate executives and focuses on how to create a competitive
advantage in each specific line-of-business the total enterprise is in.
B. concerns how best to allocate resources across the departments of each line of business the
company is in.
C. is orchestrated by senior corporate executives and centers around the kinds of initiatives
the company uses to establish business positions in different industries and efforts to boost the
combined performance of the businesses the company has diversified into.
D. deals chiefly with what the strategic intent of each of its business units should be.
E. involves how functional strategies should be aligned with business strategies in each of the
various lines of business the company is in.
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
58. (p. 36) Business strategy concerns
A. the actions and approaches crafted by management to produce successful performance in
one specific line of business.
B. what set of businesses to be in and why.
C. selecting a business model to use in pursuing business objectives.
D. selecting a set of stretch financial and strategic objectives for a particular line of business.
E. choosing the most appropriate strategic intent for a specific line of business.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
59. (p. 36) Business strategy, as distinct from corporate strategy, is chiefly concerned with
A. deciding what new businesses to enter, which existing businesses to get off, and which
existing business to remain in.
B. forging actions and approaches to compete successfully in a particular line of business.
C. making sure the strategic intent of a particular business is in step with the company's
overall strategic intent and strategy.
D. coordinating the competitive approaches of a company's different business units.
E. what business model to employ in each of the company's different businesses.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
60. (p. 36) Functional-area strategies
A. concern the actions, approaches, and practices to be employed in managing particular
functions or business processes or key activities within a business.
B. specify what actions a company should take to resolve specific strategic issues and
problems.
C. are normally crafted by operating-level managers.
D. are concerned with how to unify the firm's several different operating strategies into a
cohesive whole.
E. are normally crafted by the company's CEO and other senior executives.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
61. (p. 36) The primary role of a functional strategy is to
A. unify the company's various operating-level strategies.
B. specify how to build and strengthen the skills, expertise, and competencies needed to
execute operating-level strategies successfully.
C. support and add power to the corporate-level strategy.
D. create compatible degrees of strategic intent among a company's different business
functions.
E. support the overall business strategy and competitive approach.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
62. (p. 36) Operating strategies concern
A. what the firm's operating departments are doing and plan to do to unify the company's
functional and business strategies.
B. the specific plans for building competitive advantage in each major department and
operating unit.
C. the relatively narrow strategic initiatives for managing key operating units within a
business (plants, distribution centers, geographic units) and for performing strategically
significant operating tasks (maintenance, shipping, inventory control, purchasing, advertising)
in ways that support functional strategies and the overall business strategy.
D. how best to carry out the company's corporate strategy.
E. how best to implement and execute the company's different business-level strategies.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
63. (p. 37) In a single-business company, the strategy-making hierarchy consists of
A. business strategy, divisional strategies, and departmental strategies.
B. business strategy, functional strategies, and operating strategies.
C. business strategy and operating strategy.
D. managerial strategy, business strategy, and divisional strategies.
E. corporate strategy, divisional strategies, and departmental strategies.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Managing Strategy
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
64. (p. 37) A company's strategic plan consists of
A. its objectives and its strategy for achieving them.
B. a vision of where it is headed, a set of performance targets, and a strategy to achieve them.
C. its strategy and management's specific, detailed plans for implementing it.
D. a company's strategic vision, strategic objectives, strategic intent, and strategy.
E. a strategic vision, a strategy, and a business model.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Strategic Plan
65. (p. 38) Strategic intent refers to a situation where a company
A. commits to using a particular business model to make money.
B. decides to adopt a particular strategy.
C. relentlessly pursues an ambitious strategic objective, concentrating the full force of its
resources and competitive actions on achieving that objective.
D. commits to pursuing stretch strategic objectives.
E. changes its long-term direction and decides to pursue a newly-adopted strategic vision.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Strategic Plan
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
66. (p. 38) A company with strategic intent
A. is one that is going all-out to overcome the challenges of having encountered a strategic
inflection point.
B. is one that is putting much more emphasis on achieving its strategic objectives than its
financial objectives.
C. is one that has good alignment between its strategic objectives and its strategy.
D. usually has an aggressive strategy and plan for growing its business.
E. usually has an exceptionally bold and grandiose long-term objective—like becoming the
dominant global market leader—and an unshakable commitment to concentrating its full
resources and strategy on achieving that objective.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-03 Understand why the strategic initiatives taken at various organizational levels must be tightly coordinated to
achieve companywide performance targets.
Topic: Strategic Plan
Stage 4: Executing the Strategy
67. (p. 39) Which of the following is not among the principal managerial tasks associated with
managing the strategy execution process?
A. Ensuring that policies and procedures facilitate rather than impede effective execution
B. Creating a company culture and work climate conducive to successful strategy
implementation and execution
C. Surveying employees on how they think costs can be reduced and how employee morale
and job satisfaction can be improved
D. Exerting the internal leadership needed to drive implementation forward and keep
improving on how the strategy is being executed
E. Tying rewards and incentives directly to the achievement of performance objectives and
good strategy execution
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-04 Become aware of what a company must do to achieve operating excellence and to execute its strategy
proficiently.
Topic: Strategy Execution
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
Stage 5: Evaluating Performance and Initiating Corrective Adjustments
68. (p. 39) Management is obligated to monitor new external developments, evaluate the
company's progress, and make corrective adjustments in order to
A. determine whether the company has a balanced scorecard for judging its performance.
B. stay on track in achieving the company's mission and strategic vision.
C. keep the company's board of directors well-informed about the company's future outlook.
D. determine whether the company's business model is well matched to changing market and
competitive circumstances.
E. decide whether to continue or change the company's strategic vision, objectives, strategy
and/or strategy execution methods.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 02-04 Become aware of what a company must do to achieve operating excellence and to execute its strategy
proficiently.
Topic: Strategy Evaluation
69. (p. 40) The leadership challenges that top executives face in making corrective adjustments
when things are not going well include
A. knowing when to replace poorly performing subordinates and when to do a better job of
coaching them to do the right things.
B. being able to discern whether to promote better achievement of strategic performance
targets or whether to promote better achievement of financial performance targets.
C. deciding when adjustments are needed and what adjustments to make.
D. having the analytical skills to separate the problems due to a bad strategy from the
problems due to bad strategy execution.
E. deciding whether the company would be better off making adjustments that curtail the
achievement of strategic objectives or that curtail the achievement of financial objectives.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-04 Become aware of what a company must do to achieve operating excellence and to execute its strategy
proficiently.
Topic: Strategy Evaluation
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
70. (p. 40) The task of top executives in making corrective adjustments includes
A. knowing when to continue with the present corporate culture and when to shift to a
different and better corporate culture.
B. deciding when adjustments are needed and what adjustments to make.
C. being good at figuring out whether to arrive at decisions quickly or slowly in choosing
among the various alternative adjustments.
D. deciding whether to try to fix the problems of poor strategy execution or simply shift to a
strategy that is easier to execute correctly.
E. deciding how to identify the problems that need fixing.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-04 Become aware of what a company must do to achieve operating excellence and to execute its strategy
proficiently.
Topic: Strategy Evaluation
Corporate Governance: The Role of the Board of Directors in the Strategy-Crafting,
Strategy-Executing Process
71. (p. 41) The primary roles/obligations of a company's board of directors in the strategymaking, strategy-executing process include
A. playing the lead role in forming the company's strategy and then directly supervising the
efforts and actions of senior executives in implementing and executing the strategy.
B. providing guidance and counsel to the CEO in carrying out his/her duties as chief strategist
and chief strategy implementer.
C. overseeing the company's direction, strategy and business approaches and evaluating the
caliber of senior executives' strategy-making and strategy-executing skills.
D. working closely with the CEO, senior executives, and the strategic planning staff to
develop a strategic plan for the company and then overseeing how well the CEO and senior
executives carry out the board's directives in implementing and executing the strategic plan.
E. reviewing and approving the company's business model and also reviewing and approving
the proposals and recommendations of the CEO as to how to execute the business model.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-05 Become aware of the role and responsibility of a company's board of directors in overseeing the strategic
management process.
Topic: Corporate Governance
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Chapter 02 - Charting a Company's Direction: Vision and Mission, Objectives, and Strategy
72. (p. 41) The obligations of an investor-owned company's board of directors in the strategymaking, strategy-executing process include
A. coming up with compelling strategy proposals of their own to debate against those put
forward by top management.
B. overseeing the company's financial accounting and financial reporting practices and
evaluating the caliber of senior executives' strategy-making/strategy-executing skills.
C. taking the lead in developing the company's business model and strategic vision.
D. taking the lead in formulating the company's strategic plan but then delegating the task of
implementing and executing the strategic plan to the company's CEO and other senior
executives.
E. approving the company's operating strategies, functional-area strategies, business strategy,
and overall corporate strategy.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-05 Become aware of the role and responsibility of a company's board of directors in overseeing the strategic
management process.
Topic: Corporate Governance
73. (p. 40-41) Which one of the following is not among the chief duties/responsibilities of a
company's board of directors insofar as the strategy-making, strategy-executing process is
concerned?
A. Hiring and firing senior-level executives and working with the company's chief strategic
planning officer to improve the company's strategy when performance comes up short of
expectations
B. Being inquiring critics and exercising strong oversight over the company's direction,
strategy, and business approaches
C. Evaluating the caliber of senior executives' strategy-making/strategy-executing skills
D. Instituting a compensation plan for top executives that rewards them for actions and results
that serve stakeholders' interests, most especially those of shareholders
E. Overseeing the company's financial accounting and financial reporting practices
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 02-05 Become aware of the role and responsibility of a company's board of directors in overseeing the strategic
management process.
Topic: Corporate Governance
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Chapter 03 - Evaluating a Company's External Environment
Chapter 03 Evaluating a Company's External Environment Answer Key
Multiple Choice Questions
The Strategically Relevant Components of a Company’s Macro-Environment
1. (p. 50) A company's "macro-environment" refers to
A. the industry and competitive arena in which the company operates.
B. general economic conditions plus the factors driving change in the markets where a
company operates.
C. all the relevant forces and factors outside a company's boundaries—general economic
conditions, population demographics, societal values and lifestyles, technological factors,
governmental legislation and regulation, and closer to home, the industry and competitive
arena in which it operates.
D. the competitive market environment that exists between a company and its competitors.
E. the dominant economic features of a company's industry.
AACSB: Diversity
Bloom's: Remember
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Company Macro-Environment
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Chapter 03 - Evaluating a Company's External Environment
2. (p. 50) Which one of the following is not part of a company's macroenvironment?
A. Conditions in the economy at large
B. Population demographics and societal values and lifestyles
C. Technological factors and governmental regulations and legislation
D. The industry and competitive environment arena in which the company operates
E. The company's resource strengths, resource weaknesses, and competitive capabilities
AACSB: Diversity
Bloom's: Remember
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Company Macro-Environment
3. (p. 53) Which of the following is not a major question to ask in thinking strategically about
industry and competitive conditions in a given industry?
A. How many companies in the industry have good track records for revenue growth and
profitability?
B. What strategic moves are rivals likely to make next?
C. What are the key factors for future competitive success?
D. Does the outlook for the industry present the company with sufficiently attractive
prospects for profitability?
E. What forces are driving changes in the industry, and what impact will these changes have
on competitive intensity and industry profitability?
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Strategic Thinking
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Chapter 03 - Evaluating a Company's External Environment
4. (p. 53) Thinking strategically about industry and competitive conditions in a given industry
involves evaluating such considerations as
A. the forces driving change in the industry.
B. the dominant economic features of the industry in which the company operates.
C. the kinds of competitive forces industry members are facing and the strength of each
competitive force.
D. the key factors influencing future competitive success in the industry.
E. All of these.
AACSB: Diversity
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Strategic Thinking
Question 1: Does the Industry Offer Attractive Opportunities for Growth?
5. (p. 53) Which of the following is not a factor to consider in identifying an industry's dominant
economic features?
A. Market size and growth rate
B. The extent of backward integration of buyer needs and requirements
C. Whether the products or services of rival firms are becoming more or less differentiated
D. Strength of driving forces and competitive forces
E. The pace of technological change, scale economies and experience curve effects, and
product innovation
AACSB: Diversity
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Industry Growth Opportunities
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Chapter 03 - Evaluating a Company's External Environment
6. (p. 53) Which of the following is not a relevant consideration in identifying an industry's
dominant economic features?
A. Market size and growth rate, the geographic scope of competitive rivalry, and demandsupply conditions
B. The extent to which economies of scale and learning/experience curve effects are present
C. How many strategic groups the industry has and which ones are most profitable and least
profitable
D. The number and sizes of buyers, the number of rivals, and the pace of product innovation
E. The prevalence of technological change
AACSB: Diversity
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Industry Growth Opportunities
Question 2: What Kinds of Competitive Forces are Industry Members Facing, and How
Strong are They?
7. (p. 54) The state of competition in an industry is a function of
A. the competitive pressures associated with the market maneuvering and jockeying for buyer
patronage that goes on among rival firms in the industry.
B. competitive pressures coming from the attempts of companies in other industries
attempting to win buyers over to their substitute products.
C. competitive pressures associated with the threat of new entrants into the marketplace.
D. competitive pressures associated with the bargaining power of suppliers and customers.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Forces
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Chapter 03 - Evaluating a Company's External Environment
8. (p. 54) The nature and strength of the competitive forces that prevail in an industry is
generally a joint product of
A. the pressures induced by the market maneuvering and jockeying for buyer patronage that
goes on among rival sellers in the industry.
B. the threat that firms outside the industry will decide to enter the market.
C. the attempts of companies in other industries to win buyers over to their own substitute
products.
D. competitive pressures stemming from the bargaining power of both suppliers and buyers.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Forces
9. (p. 54) Which of the following is not one of the five typical sources of competitive
pressures?
A. The power and influence of industry driving forces
B. The bargaining power of suppliers and seller-supplier collaboration
C. The threat of new entrants into the market
D. The attempts of companies in other industries to win customers over to their own substitute
products
E. The market maneuvering and jockeying for buyer patronage that goes on among rival
sellers in the industry
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Forces
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Chapter 03 - Evaluating a Company's External Environment
10. (p. 54) The most powerful of the five competitive forces is usually
A. the competitive pressures that stem from the ready availability of attractively-priced
substitute products.
B. the competitive pressures associated with the market maneuvering and jockeying for buyer
patronage that goes on among rival sellers in the industry.
C. the benefits that emerge from close collaboration with suppliers and the competitive
pressures that such collaboration creates.
D. the competitive pressures associated with the potential entry of new competitors.
E. the bargaining power and leverage that large customers are able to exercise.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Forces
11. (p. 54) Typically, the weakest of the five competitive forces in an industry is/are:
A. the threat posed by potential new entrants.
B. the bargaining power and leverage that suppliers are able to exercise.
C. the competitive pressures that stem from the ready availability of attractively-priced
substitute products.
D. the bargaining power and leverage that buyers are able to exercise.
E. None of these is typically weakest.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Forces
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Chapter 03 - Evaluating a Company's External Environment
12. (p. 54) Using the five-forces model of competition to determine what competition is like in a
given industry involves
A. building the picture of competition in three steps: (1) identifying the specific competitive
pressures associated with each of the five competitive forces; (2) evaluating how strong the
pressures comprising each competitive force are; and (3) determining whether the collective
impact of all five competitive forces is conducive to earning attractive profits.
B. building the picture of competition in two steps: (1) determining which rival has the
biggest competitive advantage and (2) assessing whether the competitive advantages
possessed by various industry members allow most industry members to earn above-average
profits.
C. evaluating whether competition is being intensified or weakened by the industry's driving
forces and key success factors.
D. assessing whether the collective impact of all five forces is weak enough to allow industry
members to go on the offensive or use a defensive strategy to insulate against fierce
competitive pressures.
E. gauging the overall strength of competition based on how many industry rivals are
operating with a competitive advantage and how many are operating at a competitive
disadvantage.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Forces
13. (p. 54) What makes the marketplace a competitive battlefield is
A. the race of industry members to build strong defenses against the industry's driving forces.
B. the constant jockeying of industry members to strengthen their standing with buyers and
win a competitive edge over rivals.
C. the ongoing race among rival sellers to have the highest quality product.
D. the ongoing efforts of industry members to introduce new and improved products/services
at a faster rate than their rivals.
E. the ongoing race among rivals to achieve the fastest rate of growth in revenues and profits.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
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Chapter 03 - Evaluating a Company's External Environment
14. (p. 54) Competitive jockeying and market maneuvering among industry rivals
A. determines whether the industry's strategic group map will be static or dynamic.
B. centers around collaborative efforts to overcome the bargaining power of powerful
suppliers and powerful buyers.
C. is usually an industry's strongest driving force.
D. is usually one of the two or three weakest competitive forces because of the close
familiarity that rivals have for one another's likely next moves.
E. is ever-changing as fresh offensive and defensive moves are initiated and as rivals
emphasize first one mix of competitive weapons and tactics and then another.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
15. (p. 57) Which one of the following does not cause the rivalry among competing sellers to be
weak?
A. High buyer switching costs
B. Rapid growth in buyer demand
C. Industry conditions that tempt rivals to use price cuts or other competitive weapons to
boost unit sales
D. Low barriers to entry
E. Strongly differentiated products among rival sellers
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
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Chapter 03 - Evaluating a Company's External Environment
16. (p. 57-58) Factors that tend to result in weak rivalry among competing sellers include
A. low buyer switching costs and low barriers to entry.
B. rapid growth in buyer demand, high buyer costs to switch brands, and so many industry
rivals that any one company's actions have little impact on rivals' businesses.
C. weakly differentiated products among rival sellers.
D. rivals that are quite diverse in terms of their strategies, objectives, and countries of origin.
E. conditions where outsiders have recently acquired weak competitors and are trying to turn
them into major contenders.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
17. (p. 57-58) The rivalry among competing sellers tends to be less intense when
A. industry conditions tempt competitors to use price cuts or other competitive weapons to
boost unit sales.
B. buyer demand is weak and many sellers have excess capacity and/or inventory.
C. industry rivals are not particularly aggressive or active in making fresh moves to improve
their market standing and business performance.
D. rivals have diverse strategies and objectives and are located in different countries.
E. rival sellers have weakly differentiated products.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
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Chapter 03 - Evaluating a Company's External Environment
18. (p. 57-59) Rivalry among competing sellers is generally more intense when
A. there are relatively few industry key success factors and rivals have highly differentiated
products.
B. the industry's driving forces are strong and rivals have strongly differentiated products.
C. barriers to entry are moderately high and the pool of likely entry candidates is small.
D. rivals are active in making fresh moves to lower prices, introduce new products, increase
promotional efforts and advertising, and otherwise gain sales and market share.
E. barriers to entry are high and buyer switching costs are high.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
19. (p. 57-59) Rivalry among competing sellers grows in intensity when
A. rivals' products/services are sold at widely varying prices and there are only 2-4 rivals.
B. rivals have highly differentiated products and buyer demand is growing rapidly.
C. there are so many industry rivals that the impact of any one company's actions is spread
thinly across all industry members.
D. the products/services of rivals are strongly differentiated and buyers have high switching
costs.
E. buyer demand is growing slowly and the industry is composed of 6 to 10 competitors that
are fairly equal in size and competitive capability.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
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Chapter 03 - Evaluating a Company's External Environment
20. (p. 57-58) The rivalry among competing firms tends to be more intense
A. when demand for the product is growing slowly, buyers have low switching costs, and the
actions of any one company to attract more customers and boost market share have strong
direct impact on their rivals.
B. when the products/services of rival sellers are strongly differentiated and buyer demand is
strong.
C. when rivals are relatively content with their market position.
D. when there are so many industry rivals that the impact of any one company's actions is
spread thinly across all industry members.
E. the smaller the number of firms in the industry and the more unequal their market shares.
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
21. (p. 57-59) Which of the following is not among the factors that affect whether competitive
rivalry among participating firms is strong, moderate, or weak?
A. Whether the products of rival sellers are strongly or weakly differentiated
B. Whether demand for the industry's product is growing rapidly or slowly
C. The degree to which rivals are satisfied with their current market position
D. Whether industry driving forces are strong or weak
E. Whether industry conditions tempt competitors to use price cuts or other competitive
weapons to boost unit sales and whether one or two rivals have particularly powerful
strategies
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
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Chapter 03 - Evaluating a Company's External Environment
22. (p. 57-58) Rivalry among competing sellers tends to be more intense when
A. competitors are very unequal in size and capability, such that small competitors must really
scramble to even survive.
B. buyer switching costs are high and market demand is growing rapidly.
C. several competitors are under pressure to improve their market share or profitability and
launch fresh strategic initiatives to attract more buyers and bolster their business position.
D. the products of rival sellers are strongly differentiated.
E. there are fewer than 5 competitors and their products are strongly differentiated.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
23. (p. 57-59) The competitive force of rival firms' jockeying for better market positions, higher
sales and market shares, and competitive advantage
A. is stronger when firms strive to be low-cost producers than when they use differentiation
and focus strategies.
B. is typically a weaker competitive force than is the threat of entry of new rivals.
C. is largely unaffected by whether industry conditions tempt rivals to use price cuts or other
competitive weapons to boost unit sales.
D. tends to intensify when strong companies outside the industry acquire weak firms in the
industry and launch aggressive, well-funded moves to transform the acquired companies into
strong market contenders.
E. is weaker when more firms have weakly differentiated products, buyer demand is growing
slowly, and buyers have moderate switching costs.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
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Chapter 03 - Evaluating a Company's External Environment
24. (p. 58) In analyzing the strength of competition among rival firms, an important
consideration is
A. the potential for buyers to exercise strong bargaining power.
B. the diversity of competitors in terms of visions, strategic intents, objectives, strategies,
resources and countries of origin.
C. the number of firms pursuing differentiation strategies versus the number pursuing lowcost leadership strategies and focus strategies.
D. the extent to which some rivals have more than two competitively valuable competencies
or capabilities.
E. whether the industry is characterized by a strong learning/experience curve and whether the
industry is composed of many or few strategic groups.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
25. (p. 58) In which one of the following instances is rivalry among competing sellers not more
intense?
A. When certain competitors are dissatisfied with their market position and make moves to
bolster their standing
B. When strong companies outside the industry acquire weak firms in the industry and launch
aggressive moves to transform their newly-acquired competitors into stronger market
contenders
C. When competitors are fairly equal in size and capability
D. When the products of rivals are weakly differentiated, buyer switching costs are low, and
market demand is growing slowly
E. When there are vast numbers of small rivals so the impact of any one company's actions is
spread thinly across all industry members
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Rivalry
3-55
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Chapter 03 - Evaluating a Company's External Environment
26. (p. 59-60) Which of the following is generally not considered as a barrier to entry?
A. Rapid market growth
B. Sizable capital requirements and an array of regulatory requirements
C. Strong buyer loyalty to existing brands
D. Sizable economies of scale in production
E. Difficulties in gaining access to technological know-how
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Threat of New Entry
27. (p. 60) Potential entrants are more likely to be deterred from actually entering an industry
when
A. incumbent firms have previously been aggressive in defending their market positions
against entry.
B. incumbent firms are complacent.
C. buyers are not particularly price sensitive and the industry already contains a dozen or
more rivals.
D. the relative cost positions of incumbent firms are about the same, such that no one
incumbent has a meaningful cost advantage.
E. buyer switching costs are moderately low because of strong product differentiation among
incumbent firms.
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Threat of New Entry
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Chapter 03 - Evaluating a Company's External Environment
28. (p. 62) Competitive pressures associated with the threat of entry are greater when
A. incumbent firms are unable or unwilling to strongly contest the entry of newcomers.
B. newcomers can expect to earn attractive profits and a number of outsiders have the
expertise and resources to hurdle whatever entry barriers exist.
C. entry barriers are relatively low and buyer demand for the product is growing fairly
rapidly.
D. existing industry members are looking to expand their market reach by entering product
segments or geographic areas where they currently do not have a presence.
E. All of these conditions heighten the competitive pressures associated with fresh entry into
the industry.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Threat of New Entry
29. (p. 62) Which one of the following does not intensify the competitive pressures associated
with the threat of entry?
A. When incumbent firms are unable or unwilling to launch competitive initiatives to strongly
contest the entry of newcomers
B. When industry members are struggling to earn good profits
C. When entry barriers are relatively low and buyer demand for the product is growing fairly
rapidly
D. When existing industry members are looking to expand their market reach by entering
product segments or geographic areas where they currently do not have a presence
E. When newcomers can expect to earn attractive profits and a number of outsiders have the
expertise and resources to hurdle whatever entry barriers exist
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Threat of New Entry
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Chapter 03 - Evaluating a Company's External Environment
30. (p. 62) Which one of the following increases the competitive pressures associated with the
threat of entry?
A. When incumbent firms are likely to launch competitive initiatives to strongly contest the
entry of newcomers
B. When buyers have a high degree of loyalty to the brands and product offerings of existing
industry members
C. When buyer demand for the product is growing fairly slowly
D. When few outsiders have the expertise and resources to hurdle whatever entry barriers
exist
E. When newcomers can expect to earn attractive profits
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Threat of New Entry
31. (p. 62) The competitive threat that outsiders will enter a market is weaker when
A. financially strong industry members send strong signals that they will launch strategic
initiatives to combat the entry of newcomers.
B. the industry is characterized by the lack of sizable scale economies and learning/experience
curve effects.
C. the industry's market growth is rapid.
D. there are more than 2 entry barriers.
E. buyers have little loyalty to the brands and product offerings of existing industry members.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Threat of New Entry
3-58
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Chapter 03 - Evaluating a Company's External Environment
32. (p. 62) Competitive pressures stemming from the threat of entry are weaker when
A. there are fewer than 20 potential entry candidates and more than 10 firms already in the
industry.
B. there are more than 3 entry barriers.
C. the industry outlook is risky or uncertain.
D. incumbent firms have little ability to leverage distributors, dealers, and/or retailers to retain
their business.
E. the nature of the industry entails few scale economies.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Threat of New Entry
33. (p. 61) The best test of whether potential entry is a strong or weak competitive force is
A. the strength of buyer loyalty to existing brands.
B. whether the industry's driving forces make it harder or easier for new entrants to be
successful.
C. whether the strategies of industry members are well-matched to the industry's key success
factors.
D. whether there are any vacant spaces on the industry's strategic group map.
E. to ask if the industry's growth and profit prospects are strongly attractive to potential entry
candidates.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures and Threat of New Entry
3-59
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Chapter 03 - Evaluating a Company's External Environment
34. (p. 63) Which of the following is not a good example of a substitute product that triggers
stronger competitive pressures?
A. A salad as a substitute for French fries
B. Wireless phones as a substitute for wired telephones
C. Coca-Cola as a substitute for Pepsi
D. Snowboards as a substitute for snow skis
E. Video-on-demand services from a cable TV company as a substitute for going to the
movies
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Substitute Product Sellers
35. (p. 63-64) The competitive pressures from substitute products tend to be stronger when
A. buyers are relatively comfortable with using substitutes and the costs to buyers of
switching over to the substitutes are low.
B. there are more than 10 sellers of substitute products.
C. the quality and performance of the substitutes is well above what buyers need to meet their
requirements.
D. buyers have high psychic costs in severing existing brand relationships and establishing
new ones.
E. demand for the industry's product is not very price sensitive.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Substitute Product Sellers
3-60
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Chapter 03 - Evaluating a Company's External Environment
36. (p. 63) Industry rivals tend to experience weak competitive pressures from substitute
products when
A. the available substitute products are weakly differentiated from one another.
B. the buyers of the industry's products are few in number and they have substantial amounts
of leverage with sellers.
C. rival sellers experience strong bargaining power from both suppliers and influential
customers.
D. buyers incur high costs in switching to substitutes and substitutes are higher priced relative
to the performance they deliver.
E. the producers of substitute products are all pursuing strategies to strongly differentiate their
products on the basis of quality and product performance.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Substitute Product Sellers
37. (p. 64) Whether supplier-seller relationships in an industry represent a strong or weak source
of competitive pressure is a function of
A. whether the profits of suppliers are relatively high or low.
B. the number of suppliers that each seller/industry member purchases from on average.
C. how aggressively rival industry members are trying to differentiate their products.
D. whether suppliers can exercise sufficient bargaining power to influence the terms and
conditions of supply in their favor and the extent of seller-supplier collaboration in the
industry.
E. whether the prices of the items being furnished by the suppliers are rising or falling.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Supplier Bargaining Power
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Chapter 03 - Evaluating a Company's External Environment
38. (p. 65) The strength of competitive pressures that suppliers can exert on industry members is
mainly a function of
A. whether needed inputs are in short supply or whether ample supplies are readily available
from several different suppliers.
B. whether suppliers self-manufacture what they supply or source their items from other
manufacturers.
C. the industry's position in the growth cycle.
D. whether technological change in the businesses of suppliers is rapid or slow.
E. whether the needs and expectations of buyers of the industry product are changing slowly
or rapidly.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Supplier Bargaining Power
39. (p. 65-66) The bargaining leverage of suppliers is greater when
A. there are no good substitutes for the items being furnished by the suppliers and the number
of suppliers is relatively small.
B. industry members incur low costs in switching their purchases from one supplier to
another.
C. industry members purchase in large quantities and thus are important customers of the
suppliers.
D. there is extensive seller-supplier collaboration.
E. the supplier industry is composed of a large number of relatively small suppliers.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Supplier Bargaining Power
3-62
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Chapter 03 - Evaluating a Company's External Environment
40. (p. 65-67) In which one of the following instances are the competitive pressures that industry
members experience in their dealings with suppliers not weakened?
A. When industry members pose a credible threat of backward integration into the business of
suppliers
B. When the cost of switching from one supplier to another is low
C. When the buying firms purchase in large quantities and thus are important customers of the
suppliers
D. When the item being supplied is a commodity
E. When the items purchased from suppliers are in short supply
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Supplier Bargaining Power
41. (p. 65-66) Supplier bargaining power is weaker when
A. good substitute inputs exist or new ones emerge.
B. the cost of switching from one supplier to another is high.
C. suppliers furnish a critical part or component.
D. buying firms are looking for suppliers with good just-in-time supply capabilities.
E. a few large suppliers are the primary sources of a particular item.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Supplier Bargaining Power
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Chapter 03 - Evaluating a Company's External Environment
42. (p. 65-67) Which one of the following is not a factor that affects the strength of supplier
bargaining power?
A. Whether needed inputs are in ample supply and are readily available from several different
suppliers
B. Whether industry members are a strong threat to integrate backward into the business of
suppliers and self-manufacture their own requirements
C. Whether industry members are struggling to make good profits because of slow-growing
market demand
D. Whether the costs of industry members to switch their purchases to alternative suppliers
are high or low
E. Whether the item being supplied is a commodity or is highly differentiated from supplier to
supplier
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Supplier Bargaining Power
43. (p. 65) Which one of the following is not a factor in causing supplier bargaining power to be
relatively strong?
A. The inputs needed from suppliers are in short supply.
B. Suppliers are a strong threat to integrate forward into the business of industry members.
C. The input being supplied is a commodity.
D. The input being supplied significantly enhances the quality or performance of the products
of industry members.
E. There are only a few suppliers of the input.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Supplier Bargaining Power
3-64
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Chapter 03 - Evaluating a Company's External Environment
44. (p. 66-67) When one or more industry members have unusually effective and mutually
advantageous partnerships with their suppliers,
A. it is rare for such partnerships to have much competitive impact on those industry members
not having such partnerships.
B. one unfortunate outcome is that it tends to give the supply partners much enhanced
bargaining power in their dealings with these industry members.
C. there is a strong likelihood such partnerships will put increased competitive pressure on
those industry members who lack productive collaborative relationships with their suppliers.
D. there is a high likelihood of such partnerships reducing competitive pressures on all
industry members, provided technological change in the suppliers' business is rapid and the
item being supplied is a commodity.
E. the usual result is to reduce competitive pressures on all industry members, provided the
costs of the items furnished by supply chain partners amount to 50% or more of total cost.
AACSB: Analytic
Bloom's: Understand
Difficulty: Hard
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Supplier Bargaining Power
45. (p. 65-66) Which one of the following is not a reason why industry members are often
motivated to enter into collaborative partnerships with key suppliers?
A. To reduce the costs of switching suppliers
B. To speed the availability of next-generation components
C. To enhance the quality of parts and components being supplied and reduce defect rates
D. To squeeze out important cost savings for both themselves and their suppliers
E. To reduce inventory and logistics costs
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Supplier Bargaining Power
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Chapter 03 - Evaluating a Company's External Environment
46. (p. 67) Whether buyer-seller relationships in an industry represent a strong or weak source
of competitive pressure is a function of
A. the speed with which general economic conditions and interest rates are changing.
B. the extent to which buyers can exercise enough bargaining power to influence the
conditions of sale in their favor and whether strategic partnerships between certain industry
members can adversely affect other industry members.
C. how many buyers purchase all of their requirements from a single seller versus how many
purchase from several sellers.
D. the number of buyers versus the number of sellers.
E. whether industry members are spending more or less on advertising.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
47. (p. 68-69) Whether buyer bargaining power poses a strong or weak source of competitive
pressure on industry members depends in part on
A. whether most buyers possess roughly equal or varying degrees of bargaining power and
leverage.
B. how many buyers are engaged in collaborative partnerships with sellers.
C. whether entry barriers are high or low and the size of the pool of likely entry candidates.
D. whether the overall quality of the items being furnished by industry members is rising or
falling.
E. whether demand-supply conditions represent a buyer's market or a seller's market.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
3-66
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Chapter 03 - Evaluating a Company's External Environment
48. (p. 69) Which of the following is not a factor that causes buyer bargaining power to be
stronger?
A. Some buyers are a threat to integrate backward into the business of sellers and become an
important competitor.
B. The industry is composed of a few large sellers and the customer group consists of
numerous buyers that purchase in fairly small quantities.
C. Buyers have considerable discretion over whether and when they purchase the product.
D. Buyers purchase the item frequently and are well-informed about sellers' products, prices,
and costs.
E. The costs incurred by buyers in switching to competing brands or to substitute products are
relatively low.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
49. (p. 68-70) Which of the following factors does not affect whether buyer bargaining power
and seller-buyer collaboration are an important source of competitive pressure in an industry?
A. Whether winning the business of certain customers, offer a seller important market
exposure or prestige
B. The extent and importance of collaborative partnerships and alliances between particular
sellers and buyers
C. Whether buyers pose a major threat to integrate backward into the product market of
sellers
D. Whether sellers' products are weakly differentiated, making it easy and inexpensive for
buyers to switch to competing brands
E. Whether buyers have a strong preference for products of superior quality or just average
quality
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
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Chapter 03 - Evaluating a Company's External Environment
50. (p. 67-68) Which of the following factors is not a relevant consideration in determining the
strength of buyer bargaining power?
A. Whether winning the business of prestigious customers gives a seller important market
exposure and heightens its brand name
B. Whether the seller is a manufacturer.
C. Whether buyers pose a major threat to integrate backward into the product market of
sellers
D. Whether sellers' products are weakly differentiated, making it easy for buyers to switch to
competing brands
E. Whether collaborative partnerships and alliances between particular sellers and buyers put
rivals lacking such collaborative relationships at a competitive disadvantage
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
51. (p. 70) Collaborative relationships between particular sellers and buyers in an industry can
represent a source of strong competitive pressure when
A. virtually all buyers have strong brand attachments and are highly brand loyal.
B. demand for the product is growing rapidly.
C. sales are made to buyer groups with either strong bargaining power or high sensitivity.
D. sellers are racing to add the latest and greatest performance features so as to attract the
patronage of important or prestigious buyers.
E. buyers are very quality conscious.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
3-68
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Chapter 03 - Evaluating a Company's External Environment
52. (p. 69) In which of the following circumstances are competitive pressures associated with
the bargaining power of buyers not relatively strong?
A. When buyer demand is growing rapidly
B. When buyers are relatively well informed about sellers' products, prices, and costs
C. When buyers pose a major threat to integrate backward into the product market of sellers
D. When sellers' products are weakly differentiated, making it easy for buyers to switch to
competing brands
E. When buyers have considerable discretion over whether and when they purchase the
product
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
53. (p. 69) Competitive pressures stemming from buyer bargaining power tend to be weaker
when
A. the number of buyers is small, such that each customer's business tends to be particularly
important to a seller.
B. buyer demand is growing slowly or maybe even declining.
C. the costs incurred by buyers in switching to competing brands or to substitute products are
relatively high.
D. buyers purchase the item frequently and are well-informed about sellers' products, prices,
and costs.
E. the buyer group consists a few large buyers and the seller group consists of numerous small
firms.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
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Chapter 03 - Evaluating a Company's External Environment
54. (p. 69) Which of the following conditions acts to weaken buyer bargaining power?
A. When buyers are unlikely to integrate backward into the business of sellers
B. When buyers purchase the item frequently and are well-informed about sellers' products,
prices, and costs
C. When the costs incurred by buyers in switching to competing brands or to substitute
products are relatively low
D. When the products of rival sellers are weakly differentiated and buyers have considerable
discretion over whether and when they purchase the product
E. When buyers are few in number and/or often purchase in large quantities
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
55. (p. 69) Buyers are in position to exert strong bargaining power in dealing with sellers when
A. their costs to switch to competing brands or to substitute products are relatively high.
B. a particular seller's product delivers quality or performance that is very important to the
buyer and is not matched by other brands.
C. they buy the product infrequently or in small quantities and are not particularly wellinformed about sellers' products, prices, and costs.
D. buyer demand is growing rapidly.
E. the number of buyers is small or when a customer is particularly important to a seller.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
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Chapter 03 - Evaluating a Company's External Environment
56. (p. 69) Which of the following factors is not a relevant consideration in judging whether
buyer bargaining power is relatively strong or relatively weak?
A. Whether certain customers offer sellers important market exposure or prestige
B. Whether customers are relatively well informed about sellers' products, prices, and costs
C. Whether buyer needs and expectations are changing rapidly or slowly
D. Whether sellers' products are highly differentiated, making it troublesome or costly for
buyers to switch to competing brands or to substitute products
E. Whether sellers pose little threat of forward integration into the product market of their
customers and whether buyers pose a major threat to integrate backward into the product
market of sellers
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Pressures from Buyer Bargaining Power
57. (p. 70-71) A competitive environment where there is weak to moderate rivalry among sellers,
high entry barriers, weak competition from substitute products, and little bargaining leverage
on the part of both suppliers and customers
A. lacks powerful driving forces.
B. gives each industry competitor the best potential for building sustainable competitive
advantage over rival firms.
C. makes it hard for industry members to compete successfully unless they can strongly
differentiate their products.
D. is conducive to industry members earning attractive profits.
E. requires that industry members have low costs in order to be competitively successful.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Forces and Collective Strength
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58. (p. 70) A competitive environment where there is strong rivalry among sellers, low entry
barriers, strong competition from substitute products, and considerable bargaining leverage on
the part of both suppliers and customers
A. is competitively unattractive from the standpoint of earning good profits.
B. offers little ability to build a sustainable competitive advantage.
C. is highly conducive to achieving strong product differentiation and high customer loyalty
to the company's brand.
D. offers moderate to good prospects for making a reasonable profit and building a
sustainable competitive advantage.
E. requires that industry members have a strongly differentiated product offering in order to
be profitable.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Forces and Collective Strength
59. (p. 71) As a rule, the stronger the collective impact of competitive pressures associated with
the five competitive forces,
A. the stronger are the industry's driving forces.
B. the lower the combined profitability of industry members.
C. the fewer companies that can achieve a competitive advantage via anything other than
being the industry's low-cost leader.
D. the larger the number of competitive advantage opportunities for industry members.
E. the greater the number of industry key success factors.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Competitive Forces and Collective Strength
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Chapter 03 - Evaluating a Company's External Environment
60. (p. 57) Factors that cause the rivalry among competing sellers to be weak include
A. low buyer switching costs and rival sellers that are relatively equal is size and capability.
B. rapid growth in buyer demand and high buyer switching costs.
C. few industry rivals that any one company's actions can easily be anticipated and countered
by its rivals.
D. low barriers to entry and weakly differentiated products among rival sellers.
E. slow growth in buyer demand and strongly differentiated products.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Competitive Pressures and Rivalry
61. (p. 58) The intensity of rivalry among competing sellers does not depend on whether
A. the industry has more than two strong driving forces and whether the industry has more
than 2 strategic groups.
B. competitors are diverse in terms of visions, strategic intents, objectives, strategies,
resources and countries of origin.
C. strong companies outside the industry have acquired weak firms in the industry and are
launching aggressive moves to transform the acquired companies into strong market
contenders.
D. one or two rivals have particularly powerful and successful strategies.
E. industry conditions tempt industry members to use price cuts or other competitive weapons
to boost unit sales.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Competitive Pressures and Rivalry
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Chapter 03 - Evaluating a Company's External Environment
62. (p. 63) In which of the following instances are industry members not subject to stronger
competitive pressures from substitute products?
A. The costs to buyers of switching over to the substitutes are low.
B. Buyers are dubious about using substitutes.
C. The quality and performance of the substitutes is well matched to what buyers need to meet
their requirements.
D. Buyer brand loyalty is weak.
E. Substitutes are readily available at competitive prices.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Competitive Pressures from Substitute Product Sellers
63. (p. 63) Just how strong the competitive pressures are from substitute products depends on
A. whether the available substitutes are strongly or weakly differentiated and whether buyers
make purchases frequently or infrequently.
B. whether attractively priced substitutes are readily available and the ease with which buyers
can switch to substitutes.
C. whether the available substitutes are products or services.
D. whether the producers of substitutes have ample budgets for new product R&D.
E. the speed with which buyer needs and expectations are changing.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Competitive Pressures from Substitute Product Sellers
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Chapter 03 - Evaluating a Company's External Environment
Question 3: What Forces Are Driving Industry Change and What Impacts Will They
Have?
64. (p. 70-71) Industry conditions change
A. because of such powerful driving forces as swings in buyer demand, changing interest
rates, ups and downs in the economy, and higher/lower entry barriers.
B. because of newly-emerging industry threats and industry opportunities that alter the
composition of the industry's strategic groups.
C. because new industry key success factors emerge.
D. because important forces create pressures or incentives for industry participants
(competitors, customers, suppliers) to alter their actions.
E. chiefly because of changes in the barriers to entry and the degree of competition from
substitute products.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-01 Gain command of the basic concepts and analytical tools widely used to diagnose the competitive conditions in a
company's industry.
Topic: Driving Forces
65. (p. 3-72) The "driving forces" in an industry
A. are usually triggered by changing technology or stronger learning/experience curve effects.
B. usually are spawned by growing demand for the product, the outbreak of price-cutting, and
big reductions in entry barriers.
C. are major underlying causes of changing industry and competitive conditions and have the
biggest influences in reshaping the industry landscape and altering competitive conditions.
D. appear when an industry begins to mature but are seldom present during early stages of the
industry life-cycle.
E. are usually triggered by shifting buyer needs and expectations or by the appearance of new
substitute products.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces
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66. (p. 72) The task of driving forces analysis is to
A. develop a comprehensive list of all the potential causes of changing industry conditions.
B. predict which new driving forces will emerge next.
C. determine which of the five competitive forces is the biggest driver of industry change.
D. identify the driving forces, assess whether their impact will make the industry more or less
attractive, and determine what strategy changes are needed to prepare for the impacts of the
driving forces.
E. learn what the industry key success factors are and how they might change in the future.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces
67. (p. 72) Driving forces analysis
A. involves identifying the driving forces, assessing whether their impact will make the
industry more or less attractive, and determining what strategy changes a company may need
to make to prepare for the impacts of the driving forces.
B. identifies which strategic group is the most powerful.
C. helps managers identify which industry member is likely to become (or remain) the
industry leader and why.
D. helps managers identify which key success factors are most likely to help their company
gain a competitive advantage.
E. helps managers identify which of the five competitive forces will be the strongest driver of
industry change.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces
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Chapter 03 - Evaluating a Company's External Environment
68. (p. 73-75) Which of the following is not generally a "driving force" capable of producing
fundamental changes in industry and competitive conditions?
A. Changes in the long-term industry growth rate
B. Increasing globalization of the industry
C. Product innovation and technological change
D. Ups and downs in the economy and in interest rates
E. New government regulations or significant changes in government policy toward the
industry
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces
69. (p. 73-75) Which of the following are most unlikely to qualify as driving forces?
A. Changes in the long-term industry growth rate, the entry or exit of major firms, and
changes in cost and efficiency
B. Increasing globalization of the industry and product innovation
C. New Internet technology applications, new government regulations, and significant
changes in government policy toward the industry
D. Mounting competition from substitutes and increasing efforts to collaborate with suppliers
via strategic alliances
E. Marketing innovations and changes in who buys the industry's product and how they use it
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces
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Chapter 03 - Evaluating a Company's External Environment
70. (p. 73-75) Which of the following do not qualify as potential driving forces capable of
inducing fundamental changes in industry and competitive conditions?
A. Changes in who buys the product and how they use it and changes in the long-term
industry growth rate
B. Entry or exit of major firms, product innovation, and marketing innovation
C. Increases in the economic power and bargaining leverage of customers and suppliers,
growing supplier-seller collaboration, and growing buyer-seller collaboration
D. Growing buyer preferences for differentiated products instead of mostly standardized or
identical products
E. Changes in economies of scale and experience curve effects brought on by changes in
manufacturing technology and new Internet capabilities
AACSB: Analytic
Bloom's: Remember
Difficulty: Hard
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces
71. (p. 74) Which of the following is most likely to qualify as a driving force?
A. Increases in price-cutting by rival sellers and the launch of major new advertising
campaigns by one or more rivals
B. Wildly successful introduction of innovative new products by one or more industry rivals
that force other rivals to respond quickly or lose a major share of their customers to the
innovating rival(s)
C. An increase in the prices of substitute products
D. Decisions on the part the industry's three biggest competitors not to pursue a strategy of
striving to be the industry's low-cost leader
E. Decisions by one or more outsiders not to attempt to enter the industry
AACSB: Analytic
Bloom's: Apply
Difficulty: Easy
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces
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Chapter 03 - Evaluating a Company's External Environment
72. (p. 73-75) Which one of the following is not a common type of driving force?
A. Reductions in uncertainty and business risk
B. Changing societal concerns, attitudes, and lifestyles
C. Diffusion of technical know-how across more companies and more countries
D. Increasing efforts on the part of industry members to collaborate closely with their
suppliers
E. Technological change and manufacturing process innovation
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces
73. (p. 73) Increasing globalization of the industry can be a driving force because
A. the products of foreign competitors are nearly always cheaper or of better quality than
those of domestic companies.
B. foreign producers typically have lower costs, greater technological expertise, and more
product innovation capabilities than domestic firms.
C. it tends to increase rivalry among industry members and often shifts the pattern of
competition among an industry's major players, favoring some and disadvantaging others.
D. it results in companies having fewer competitors and a strategic group map with fewer
circles.
E. market growth rates go up, product innovation speeds up, and new firms are likely to enter
the industry.
AACSB: Analytic
Bloom's: Apply
Difficulty: Medium
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces
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Chapter 03 - Evaluating a Company's External Environment
74. (p. 76) Driving forces analysis helps managers identify whether
A. the combined impacts of the driving forces will act to increase/decrease market demand,
increase/decrease competition, and raise/lower industry profitability in the years ahead.
B. it will become more or less important to aim the company's strategy at being the industry's
low-cost producer.
C. the driving forces will have a bigger impact on company profitability than competitive
forces.
D. the industry is likely to become more or less vertically integrated and why.
E. competitive advantages are likely to grow or diminish in importance.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces Impact
75. (p. 77) An industry's driving forces
A. are generally determined by the sizes of strategic groups and the power of rival firms'
competitive strategies.
B. generally act in ways which will strengthen or weaken market demand, competition, and
industry profitability in future years.
C. frequently cause a reduction in the bargaining power of buyers.
D. are normally triggered by ups and downs in the economy, higher or lower interest rates, or
important new strategic alliances.
E. can be triggered by such factors as growing competitive pressures from substitute products,
and the efforts of rival firms to employ new or different offensive strategies.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces Impact
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Chapter 03 - Evaluating a Company's External Environment
76. (p. 76) In analyzing driving forces, the strategist's role is to
A. identify the driving forces and evaluate their impact on (1) demand for the industry's
product, (2) the intensity of competition, and (3) industry profitability.
B. predict future marketing innovations and how fast the industry is likely to globalize.
C. evaluate what stage of the life cycle the industry is in and when it is likely to move to the
next stage.
D. determine who is likely to exit the industry and what changes can be expected in the
industry's strategic group map.
E. forecast fluctuations in product demand and how buyer needs will most likely change.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces Impact
77. (p. 76) Which one of the following is not an integral part of driving forces analysis?
A. Identifying the specific factors causing fundamental changes in industry conditions and/or
the industry's competitive structure
B. Determining whether the driving forces are acting to cause one or more industry rivals to
shift to a different strategic group
C. Determining whether the driving forces are acting to strengthen or weaken market demand
D. Determining whether the driving forces are acting to make competition more or less
intense
E. Determining whether the driving forces are acting to raise or lower industry profitability
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Driving Forces Impact
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Chapter 03 - Evaluating a Company's External Environment
78. (p. 77) The real payoff for strategy making comes when managers draw conclusions about
A. what strategy adjustments are needed to deal with the changes in conditions.
B. determining the overall strength of the five competitive forces.
C. determining whether the industry's strategic group map will be static or dynamic.
D. conditions in the economy at large.
E. the extent to which rivals have more than two competitively valuable competencies or
capabilities
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 03-02 Learn how to diagnose the factors shaping industry dynamics and to forecast their effects on future industry
profitability.
Topic: Strategy for Changing Industry Conditions
Question 4: How Are Industry Rivals Positioned—Who Is Strongly Positioned and Who
Is Not?
79. (p. 77) What is the best technique for revealing the market position of industry competitors?
A. Strategic group mapping.
B. Global industry change.
C. Dynamic mapping analysis.
D. Distribution analysis.
E. None of these.
AACSB: Reflective Thinking
Bloom's: Remember
Difficulty: Easy
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Strategic Group
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Chapter 03 - Evaluating a Company's External Environment
80. (p. 78) A strategic group
A. consists of those industry members that are growing at about the same rate and have
similar product line breadth.
B. includes all rival firms having comparable profitability.
C. is a cluster of industry rivals that have similar competitive approaches and market
positions.
D. consists of those firms whose market shares are about the same size.
E. is made up of those firms having comparable profit margins.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Strategic Group
81. (p. 78) A strategic group consists of those firms in an industry that
A. are subject to the same driving forces.
B. are placing about the same emphasis on each distribution channel.
C. use the same key success factors to differentiate their products.
D. employ similar competitive approaches and occupy similar positions in the market.
E. have similar size market shares.
AACSB: Analytic
Bloom's: Remember
Difficulty: Easy
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Strategic Group
82. (p. 78) Strategic group mapping is a technique for displaying
A. how many rivals are pursuing each type of strategy.
B. which companies have the biggest market share and who the industry leader really is.
C. the different market or competitive positions that rival firms occupy in an industry and
identifying each rival's closest competitors.
D. which companies have the highest degrees of brand loyalty.
E. which companies have failing business models.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Strategic Group
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Chapter 03 - Evaluating a Company's External Environment
83. (p. 78) Which one of the following pairs of variables is least likely to be useful in drawing a
strategic group map?
A. Geographic coverage and degree of vertical integration
B. Brand name reputation and distribution channel emphasis
C. Product quality and product line breadth
D. Level of profitability and size of market share
E. Price/quality range and whether the company's product appeals to many or few types of
buyers
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Strategic Group
84. (p. 78) The concept of strategic groups is relevant to industry and competitive analysis
because
A. firms in the same strategic groups are rarely close competitors—a firm's closest
competitors are usually in distant strategic groups.
B. strategic group maps help identify each company's market position and its closest
competitors.
C. competition grows in intensity as the number and diversity of the strategic groups in an
industry increases.
D. the profit potential of firms in the same strategic group is usually very similar.
E. competitive pressures tend to be weaker within strategic groups than across strategic
groups.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Strategic Group
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Chapter 03 - Evaluating a Company's External Environment
85. (p. 78) In mapping strategic groups
A. one strategic variable and one financial variable should be used as axes for the map.
B. it is important for the variables used as axes to be highly correlated.
C. the best variables to use as axes for the map are those that differentiate how rivals have
positioned themselves in the marketplace.
D. it is important to use price as the variable for the vertical axis.
E. the primary objective is to determine which strategic groups are profitable and which are
not.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Strategic Group
86. (p. 78) Which of the following is not an appropriate guideline for developing a strategic
group map for a given industry?
A. The variables chosen as axes for the map should indicate big differences in how rivals have
positioned themselves to compete in the marketplace.
B. The variables chosen as axes for the map can be either quantitative or qualitative.
C. The variables chosen as axes for the map should be highly correlated.
D. Several maps should be drawn if more than one pair of variables help illuminate
differences in the competitive positioning of industry members.
E. The sizes of the circles on the map should be drawn proportional to the combined sales of
the firms in each strategic group.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Strategic Group
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Chapter 03 - Evaluating a Company's External Environment
87. (p. 80) With the aid of a strategic group map, one can
A. readily identify the entry and exit barriers for each strategic group.
B. pinpoint precisely which firms are in profitable strategic groups and which are not.
C. identify which competitive forces are strong and which are weak.
D. measure accurately whether across-group rivalry is stronger than within-group rivalry or
vice versa.
E. often learn to what extent industry driving forces and competitive pressures favor some
companies or groups and hurt others.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Strategic Group Maps
88. (p. 80) One of the things that can be gleaned from a strategic group map of industry rivals is
A. which rivals have been in business longer and thus have greater access to experience curve
effects.
B. which rivals have newer manufacturing facilities.
C. which strategic groups have the highest profit margins and the highest customer switching
costs.
D. whether profit prospects vary among strategic groups due to strengths and weaknesses in
their respective market positions on the map (perhaps because competitive pressures are
acting to favor some strategic groups and to disadvantage other groups).
E. which strategic groups are currently viewed as the most prestigious by customers and
which companies are being shunned by customers because of high prices and relatively low
product quality.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Strategic Group Maps
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Chapter 03 - Evaluating a Company's External Environment
Question 5: What Strategic Moves Are Rivals Likely to Make Next?
89. (p. 81) The payoff of good scouting reports on rivals is improved ability to
A. anticipate what moves rivals are likely to make next, thereby providing a valuable assist in
outmaneuvering them in the marketplace.
B. determine which rivals are in the best strategic group.
C. figure out how many key success factors a rival has.
D. determine whether a rival is gaining or losing market share.
E. determine whether a rival has the best strategy and is the industry leader.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Competitive Strategy
90. (p. 81) Having good competitive intelligence about rivals' strategies and moves to improve
their situation is important because
A. it identifies who the industry's current market share leaders are.
B. it helps a company to anticipate what moves rivals are likely to make next and to craft its
own strategic moves with some confidence about what market maneuvers to expect from its
rivals.
C. good scouting reports help identify which rival is in which strategic group.
D. it enables company managers to determine which rival has the worst strategy and how to
avoid making the same strategy mistakes.
E. it enables more accurate predictions about how long it will take a particular rival to copy
most of what the strategy leader is doing.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Competitive Strategy
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Chapter 03 - Evaluating a Company's External Environment
91. (p. 81) Good competitive intelligence about the strategies and competitive strengths and
weaknesses of rival companies helps management determine
A. which competitor has the best strategy and which competitors have flawed or weak
strategies.
B. which rivals are poised to gain market share and which seem destined to lose market share.
C. which rivals are likely to rank among the industry leaders on the road ahead.
D. which rivals are likely to initiate what kinds of fresh strategic moves and why.
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Competitive Strategy
92. (p. 81-82) In seeking to predict the next moves of close or key rivals, it is useful to consider
such questions as:
A. Which rivals badly need to increase their unit sales and market share and what new
offensive initiatives are they likely to employ?
B. Which rivals are poised to gain market share and which seem destined to lose market
share?
C. Which rivals are good candidates to be acquired?
D. Which rivals are likely to enter new geographic markets or expand their product offerings
(so as to enter new market segments where they currently do not have a presence)?
E. All of these.
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-03 Become adept at mapping the market positions of key groups of industry rivals.
Topic: Competitive Strategy
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Chapter 03 - Evaluating a Company's External Environment
Question 6: What Are the Key Factors for Future Competitive Success?
93. (p. 82) The key success factors in an industry
A. are those competitive aspects that most affect industry members' abilities to prosper in the
marketplace—specific strategy elements, product attributes, competencies, competitive
capabilities, and market achievements that spell the difference between being a strong
competitor and a weak competitor.
B. are determined by the industry's driving forces.
C. hinge on how many different strategic groups the industry has.
D. depend on how many rivals are trying to move from one strategic group to another.
E. are a function of such considerations as how many firms are in the industry, how many
have market shares above 5%, and whether the business models being used are similar or
diverse.
AACSB: Analytic
Bloom's: Remember
Difficulty: Medium
Learning Objective: 03-04 Understand why in-depth evaluation of a business's strengths and weaknesses in relation to the specific industry
conditions it confronts is an essential prerequisite to crafting a strategy that is well-matched to its external situation.
Topic: Key Factors for Competitive Success
94. (p. 82) An industry's key success factors
A. are a function of market share, entry barriers, economies of scale, degree of vertical
integration, and industry profitability.
B. vary according to whether an industry has high or low long-term attractiveness.
C. can be determined from an analysis of an industry's dominant economic characteristics,
what competition is like, the impacts of the driving forces, the comparative market positions
of industry members, and the likely next moves of industry rivals.
D. can be determined from studying the "winning" strategies of the industry leaders and ruling
out as potential key success factors the strategy elements of those firms considered to have
"losing" strategies.
E. depend on the relative competitive strengths of the industry leaders and how vulnerable
they are to competitive attack.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-04 Understand why in-depth evaluation of a business's strengths and weaknesses in relation to the specific industry
conditions it confronts is an essential prerequisite to crafting a strategy that is well-matched to its external situation.
Topic: Key Factors for Competitive Success
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Chapter 03 - Evaluating a Company's External Environment
95. (p. 83) In identifying an industry's key success factors, strategists should
A. try to single out all factors which play a major role in shaping whether buyer demand
grows rapidly or slowly.
B. consider on what basis customers choose between competing brands, what resources and
competitive capabilities firms need to be competitively successful, and what shortcomings are
almost certain to put a company at a significant competitive disadvantage.
C. consider whether the number of strategic groups is increasing or decreasing and whether
the five competitive forces are powerful or relatively weak.
D. consider what it will take to overtake the company with the industry's overall best strategy.
E. focus their attention on what it will take to capitalize on impacts of the industry's driving
forces.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-04 Understand why in-depth evaluation of a business's strengths and weaknesses in relation to the specific industry
conditions it confronts is an essential prerequisite to crafting a strategy that is well-matched to its external situation.
Topic: Key Factors for Competitive Success
96. (p. 83) Which of the following is not a question asked to deduce a marketing-related key
success factor?
A. What are the industry product R & D capabilities and expertise in product design?
B. What basis do buyers choose between the competing brands of sellers?
C. What product attributes and service characteristics are crucial?
D. What resources must a company have to be competitive?
E. What shortcomings are almost certain to put a company at a significant disadvantage?
AACSB: Analytic
Bloom's: Understand
Difficulty: Easy
Learning Objective: 03-04 Understand why in-depth evaluation of a business's strengths and weaknesses in relation to the specific industry
conditions it confronts is an essential prerequisite to crafting a strategy that is well-matched to its external situation.
Topic: Key Factors for Competitive Success
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lOMoARcPSD|7205098
Chapter 03 - Evaluating a Company's External Environment
97. (p. 83) Which of the following can aid industries in identifying key success factors?
A. Global distribution capabilities
B. Crucial product attributes and service characteristics
C. Low distribution costs
D. Accurate filling of buyer orders
E. Short delivery time capability
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-04 Understand why in-depth evaluation of a business's strengths and weaknesses in relation to the specific industry
conditions it confronts is an essential prerequisite to crafting a strategy that is well-matched to its external situation.
Topic: Key Factors for Competitive Success
Question 7: Does the Industry Offer Good Prospects for Attractive Profits?
98. (p. 84) Which of the following is particularly pertinent in evaluating whether an industry
presents a sufficiently attractive business opportunity?
A. The industry's growth potential, whether competition appears destined to become stronger
or weaker, and whether the industry's overall profit prospects are above average, average, or
below average
B. An assessment of which firms in the industry have the best and worst competitive
strategies, whether the number of strategic groups in the industry is increasing or decreasing,
and whether economies of scale and experience curve effects are a key success factor
C. Whether there are more than 5 key success factors and more than 5 barriers to entry
D. Constructing a strategic group map and assessing the attractiveness of the competitive
position of each strategic group
E. Whether the market leaders enjoy competitive advantages and how hard it is to develop a
strongly differentiated product
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-04 Understand why in-depth evaluation of a business's strengths and weaknesses in relation to the specific industry
conditions it confronts is an essential prerequisite to crafting a strategy that is well-matched to its external situation.
Topic: Industry Prospects and Profits
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Chapter 03 - Evaluating a Company's External Environment
99. (p. 84) Evaluating whether an industry presents a sufficiently attractive business opportunity
usually does not involve a consideration of which of the following factors?
A. The industry's growth potential, whether competitive pressures will likely grow stronger or
weaker, and whether the industry's future profit prospects are above average, average, or
below average
B. An assessment of the degrees of business risk and uncertainty in the industry's future
C. Whether the industry's future profitability will be favorably or unfavorably affected by the
prevailing driving forces
D. The severity of the problems confronting the industry as a whole
E. Whether the industry's product is strongly or weakly differentiated
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-04 Understand why in-depth evaluation of a business's strengths and weaknesses in relation to the specific industry
conditions it confronts is an essential prerequisite to crafting a strategy that is well-matched to its external situation.
Topic: Industry Prospects and Profits
100. (p. 84) Evaluating whether an industry's environment presents a company with a
sufficiently attractive business opportunity involves
A. sizing up overall industry and competitive conditions to determine whether the industry's
overall profit prospects are above average, average, or below average.
B. determining which firms in the industry have a competitive advantage and how they got
their advantage.
C. determining the overall strength of the five competitive forces.
D. constructing a strategic group map and assessing the attractiveness of the competitive
position of each strategic group to determine the overall attractiveness of all the strategic
groups.
E. using value chain analysis to determine the relative cost positions of rival firms and to learn
who the industry's low-cost producer is.
AACSB: Analytic
Bloom's: Understand
Difficulty: Medium
Learning Objective: 03-04 Understand why in-depth evaluation of a business's strengths and weaknesses in relation to the specific industry
conditions it confronts is an essential prerequisite to crafting a strategy that is well-matched to its external situation.
Topic: Industry Prospects and Profits
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