Student Number _________________________
QMN260 SAMPLE FINAL EXAM
Strategic Management
Please answer each of the following questions in the space provided.
SHORT ANSWERS
1. When a firm expands abroad how can they structure the subsidiary? Provide one
advantage/disadvantage of each structure choice (12 points)
2. What are the four generic business strategies? Give one advantage and one
disadvantage of each (16 points).
3. Why is the mission statement the first step in the strategic management process?
How does it relate to the other parts of the strategic management process and to a
firm’s business and corporate strategy? (28 points)
4. What are cognitive biases and how can they be resolved in the strategy-making
process? (24 points)
Multiple Choice (2 POINTS EACH)
Put your answer (a, b, c, d, or e) to each of the multiple choice questions in the separate
answer sheet provided
Answer
_____1.
The scenario approach to strategic planning involves
a) using computers to build virtual worlds for top-level managers.
b) honing in on a single prediction of future demand conditions using an
iterative planning process.
c) functional managers setting key corporate objectives.
d) formulating plans that are based upon "what if" scenarios about the
future.
e) making planning the exclusive domain of top-level managers.
_____2.
To make sure that ethical issues are considered in business decisions
a) a company should use a bottom-up approach.
b) top managers should articulate and model ethical behaviors.
c) a company should have a no-layoff policy
d) a company should spend the majority of its operating budget to teach
people what is legal and not legal.
e) a company should hire and promote employees that do whatever it takes
to achieve organizational objectives.
_____3.
Which of the following industry structures consists of a large number of
small and medium-sized companies, none of which is in a position to determine
industry price?
a) Fragmented industry
b) Consolidated industry
c) Oligopoly
d) Monopoly
e) Sector
_____4.
The intellectual property of an organization is
a) a tangible resource.
b) an intangible resource.
c) a tangible capability.
d) an intangible capability.
e) a tangible competence.
_____5.
When a company services the broad market and has a low degree of product
differentiation, it is most likely
a) pursuing a focus strategy.
b) pursuing a differentiation strategy.
c) pursuing a cost-leadership strategy.
d) stuck in the middle.
e) pursuing both cost leadership and differentiation.
_____6.
Which entry mode gives a multinational the tightest control over foreign
operations?
a) Exporting from the home country and letting a foreign agent organize
local marketing
b) Licensing
c) Franchising
d) Entering into a joint venture with a foreign company to set up overseas
operations
e) Setting up a wholly owned subsidiary
_____7.
Which of the following entry modes is generally the most costly method of
serving a foreign market?
a) Exporting
b) Wholly owned subsidiaries
c) Joint ventures
d) Licensing
e) Joint ventures and wholly owned subsidiaries are equally costly.
_____8.
Which of the following statements concerning reengineering and TQM is
correct?
a) Reengineering is more important than TQM.
b) After reengineering has taken place TQM takes over.
c) After TQM has taken place, reengineering takes over.
d) Reengineering and TQM usually take place after a company
restructures.
e) TQM is more important than reengineering.
_____9.
Which of the following is not a generic competitive strategy?
a) Cost leadership
b) Differentiation
c) Focused cost leadership
d) Focused differentiation
e) Innovation
_____10.
Transfer pricing is used most commonly in a
a) multidivisional structure.
b) product team structure.
c) functional structure.
d) matrix structure.
e) geographic structure.
END OF EXAM
Sample answers
1. When a firm expands abroad how can they structure the subsidiary? Provide one
advantage/disadvantage of each structure choice (12 points)
Exporting
Lowest cost, little control
Licensing
Low cost, cannot coordinate moves
Franchising
Low cost quick expansion, lack of quality control
Joint venture
More control, higher costs
Wholly owned
Most expensive, highest level of control
2. Why is the mission statement the first step in the strategic management process?
How does it relate to the other parts of the strategic management process and to a
firm’s business and corporate strategy? (28 points)
The mission statement is the starting point because we need to know what a firm
wants to do and be before we can determine if the current strategy is correct or
whether another strategy is better.
Also SWOT can only be identified in relationship to the mission of the firm. The
mission helps define what external factors might have an impact on the firm (In
reaching its goals) and what factors internal to the firm provide a strength or
weakness in achieving these goals.
Based on its mission a firm identifies the building blocks of efficiency, quality,
innovation and customer responsiveness which will help it achieve its goals and
which it can build (have) a strength in.
Finally the mission is related to Corporate and business strategy. Firms choose a
corporate strategy to pursue based on their mission; the strategy that best helps the
firm achieve its mission. The mission also helps in business strategy the mission
helps define the way in which the firm will compete.
3. What are cognitive biases and how can they be resolved in the strategy-making process?
(20 points)
Cognitive biases are systematic errors in human decision making that arise from
the way people process information. Examples of these biases include prior
hypothesis, escalation of commitment, reasoning by analogy, representativeness,
and illusion of control.
Several techniques can be used to deal with biases, Devil’s advocacy, Dialectic
inquiry, the outside view, group decision making.
4. What are the four generic business strategies? Give one advantage and one disadvantage
of each (20 points).
Differentiation
ADV: Can change a higher price for the product/service
DIS: Hard to know what differences will be attractive to customers and
not easily copied by competitors
Cost-leadership
ADV: Protected from industry competitors because it has a lower cost
structure.
DIS: Dangerous when competitors are able to develop new strategies that
lower their cost structure and beat the cost leader at its game
Focus differentiation
ADV: Permits a company to stay close to its customers and respond to
their changing needs
DIS: Differentiators may compete for a focuser’s niche by offering a
product that can satisfy the demands of the focuser’s customers
Focus cost-leadership
ADV: Protected in the niche area because of low cost structure. Provide an
opportunity to develop efficiency based strengthens that might lead to
general cost leadership.
DIS: Production costs often exceed those of a general low-cost company.
This can create a problem if the general cost leader enters the niche
market.
Multiple choice:
1
2
3
4
5
6
7
8
9
10
d
b
a
b
c
e
b
b
e
a