Chapter 8
Strategy Formulation and Implementation
True/False Questions
1.Because of Nintendo’s errors in strategy, they have fallen from number one to number three in the video game industry.
Answer: TrueLevel: 2Page: 267Type: F
2.Given the need for massive infusion of cash, only large multinationals are concerned with strategy.
Answer: FalseLevel: 2Page: 268Type: F
3.Top mangers and chief executives have the final responsibility for strategic planning rests.
Answer: TrueLevel: 2Page: 268Type: F
4.The general plan of major action by which an organization intends to achieve its long-term goals is called business-level strategy.
Answer: False Level: 1 Page: 269 Type: F
5.Development of new products is part of an organization's external growth strategy.
Answer: False Level: 2 Page: 269 Type: F
6.There are four categories of grand strategies: growth, stability, retrenchment and diversification.
Answer: False Level: 3 Page: 269Type: F
7.Stability is also referred to as a pause strategy.
Answer: True Level: 1 Page: 270 Type: F
8.Divestiture means selling of a business unit for the cash value of the assets, thus terminating its existence.
Answer: FalseLevel: 1Page: 271Type: F
9.When K-Mart laid off thousands of people and closed over 100 stores, it was following a retrenchment strategy.
Answer: TrueLevel: 3Page: 271Type: A
10.Tools 4 All, a department store, sold all of its inventories at 80 percent off and permanently closed its doors. This is referred to as liquidation.
Answer: TrueLevel: 2Page: 271Type: A
11.Approximately 83 percent of all acquisitions, according to research, are later divested.
Answer: False Level: 2 Page: 271 Type: F
12.Globalization refers to the world-wide standardization of product design and advertising.
Answer: True Level: 1 Page: 271 Type: F
13.With a multidomestic strategy, a company will achieve the globalization or standardization of marketing and production approaches.
Answer: False Level: 2 Page: 272 Type: F
14.A multidomestic strategy standardizes global products/advertising strategies.
Answer: FalseLevel: 2Page: 272Type: F
15.A transnational strategy seeks to achieve both global integration and national responsiveness.
Answer: True Level: 1 Page: 273 Type: F
16.The essence of formulating strategy is choosing how the organization will be identical to its key competitors in the industry.
Answer: FalseLevel: 2Page: 274Type: F
17.Just-for-You, Inc.'s ability to market its products better than its competitors is an example of its core competence.
Answer: True Level: 2 Page: 274 Type: A
18.The interaction of Production and Sales working together to produce profit greater than the total of both working separately is an example of synergy.
Answer: True level: 3 Page: 275 Type: A
19.Value refers to the combination of benefits received and costs paid by the customer.
Answer: True Level: 1 Page: 275 Type: F
20.Business, corporate, and global are the three levels of strategy.
Answer: False Level: 2 Page: 275 Type: F
21.Corporate-level strategy pertains to the organization as a whole.
Answer: TrueLevel: 1Page: 275Type: F
22."How do we compete?" question concerns functional-level strategy.
Answer: False Level: 2 Page: 276 Type: F
23.Strategic decisions at the business level concern amount of advertising, direction and extent of R & D, product changes, new product development, equipment and facilities, and expansion or contraction of product lines.
Answer: TrueLevel: 2Page: 276Type: F
24.Strategy implementation involves the planning and decision making that lead to the establishment of the firm’s goals.
Answer: FalseLevel: 1Page: 278Type: F
25.The administration and execution of the strategic plan is strategy implementation.
Answer: True Level: 2 Page: 278 Type: F
26.Situation analysis typically includes a search for SWOT--situation without threats.
Answer: False Level: 2 Page: 278 Type: F
27.SWOT analysis includes a review of the internal threats and opportunities.
Answer: False Level: 1 Page: 278 Type: F
28.For General Electric, a strong financial base, combined with an excellent reputation with creditors and the equity market, is with a significant strength to include in its SWOT analysis.
Answer: True Level: 3 Page: 279 Type: A
29.Threats are characteristics of the internal environment that may prevent the organization from achieving its strategic goals.
Answer: FalseLevel: 2Page: 279Type: F
30.Portfolio strategy pertains to the mix of business units and product lines that fit together in a logical way to provide synergy and competitive advantage for the corporation.
Answer: TrueLevel: 1Page: 280Type: F
31.The BCG (Boston Consulting Group) matrix evaluates SBUs with respect to their business growth rate and geographical location.
Answer: False Level: 1 Page: 281 Type: F
32.According to the BCG Matrix, the question mark exists in a new, rapidly growing industry but has only a small market share.
Answer: TrueLevel: 1Page: 282Type: F
33.In BCG Matrix, the circle size represents the relative profit made by each business in the company’s portfolio.
Answer: FalseLevel: 2Page: 282Type: F
34.One of Porter's five competitive forces is bargaining power of customers.
Answer: False Level: 1 Page: 283 Type: F
35.The bargaining power of the government, according to Porter, is one of the five competitive forces affecting an organization's competitive environment.
Answer: FalseLevel: 1Page: 283Type: F
36.Differentiation, cost leadership, and focus are three of Porter's competitive strategies.
Answer: True Level: 2 Page: 285 Type: F
37.Organization’s with a focus strategy concentrate on a specific regional market or buyer group.
Answer: TrueLevel: 1Page: 287Type: F
38.Joint Venture represents the ultimate in collaborative relationships.
Answer: FalseLevel: 2Page: 289Type: F
39.Structural design typically begins with the organizational chart.
Answer: TrueLevel: 1Page: 293Type: F
40.Effective implementation is not a necessity if the strategies are truly creative.
Answer: FalseLevel: 2Page: 296Type: F
Multiple Choice Questions
1.The set of decisions and actions used to formulate and implement strategies that will provide a competitively superior fit between the organization and its environment so as to achieve organizational goals is known as
a.strategy formulation.
b.strategic planning.
c.strategic management.
d.strategy implementation.
e.strategy evaluation.
Answer: c Level: 1 Page: 268 Type: F
2.Which of these refers to the overall plan of action for the organization?
a.The mission statement
b.The grand strategy
c.A strategic plan
d.The organizational vision
e.Competitive plan
Answer: b Level: 1 Page: 269 Type: F
3.Dobson Corporation is continually seeking out new markets and products, and is always on the lookout for acquisition candidates. Dobson is pursuing a grand strategy of
a.stability.
b.retrenchment.
c.growth.
d.liquidation.
e.divestiture.
Answer: c Level: 2 Page: 269 Type: A
4.The acquisition of businesses that are related to current product lines or that takes the corporation into new areas is referred to as
a.retrenchment.
b.diversification.
c.liquidation.
d.cash cow.
e.internal growth.
Answer: bLevel: 2Page: 269Type: F
5.Diversification is usually associated with the grand strategy of
a.stability.
b.retrenchment.
c.internal growth.
d.external growth.
e.divestiture.
Answer: d Level: 2 Page: 269 Type: F
6.Toy Trains, Inc. just introduced a new line of trains. This action is consistent with the grand strategy of
a.stability.
b.retrenchment.
c.internal growth.
d.external growth.
e.cash cow.
Answer: c Level: 2 Page: 269 Type: A
7.The management of Mugs, Inc. decided on growing slowly and in a controlled fashion. This is consistent with the grand strategy of
a.growth.
b.stability.
c.divestiture.
d.liquidation.
e.external growth.
Answer: b Level: 2 Page: 270 Type: A
8.When the organization goes through a period of forced decline by either shrinking current business units or selling off or liquidating entire businesses, it is called
a.retrenchment.
b.growth.
c.cash cow.
d.multidomestic.
e.stability.
Answer: aLevel: 1Page: 270Type: F
9.As part of a liquidation strategy, Rose International would
a.look to acquire similar organization.
b.attempt to grow in a controlled manner.
c.sell off part of its business.
d.develop new products.
e.market its products aggressively.
Answer: c Level: 3 Page: 271 Type: A
10.means selling off a business unit for the cash value of the assets, thus terminating its existence.
a.Diversification
b.Transnational strategy
c.Synergy
d.Divestiture
e.Liquidation
Answer: eLevel: 1Page: 271Type: F
11.Which of these involves the selling off of businesses that no longer seem central to the corporation?
a.Diversification
b.Transnational strategy
c.Synergy
d.Divestiture
e.Liquidation
Answer: dLevel: 1Page: 271Type: F
12.Divestiture is a type of a strategy.
a.growth
b.global
c.retrenchment
d.stability
e.diversification
Answer: c Level: 1 Page: 271 Type: F
13.If ABC International has standardized its product line throughout the world it is pursuing a
a.multidomestic strategy.
b.retrenchment strategy.
c.diversity strategy.
d.globalization strategy.
e.liquidation strategy.
Answer: d Level: 2 Page: 271 Type: A
14.The assumption that a single global market exists would lead to a
a.globalization strategy.
b.multidomestic strategy.
c.diversity strategy.
d.domestic strategy.
e.liquidation strategy.
Answer: a Level: 2 Page: 271 Type: F
15.Which of these refers to the modification of product design and advertising strategies to suit the specific needs of individual countries?
a.Domestic strategy
b.Global strategy
c.Transnational strategy
d.Multidomestic strategy
e.Market design strategy
Answer: d Level: 1 Page: 272 Type: F
16.A strategy that combines global coordination to attain efficiency with flexibility to meet specific needs in various countries is referred to as a
a.domestic strategy.
b.global strategy.
c.transnational strategy.
d.multidomestic strategy.
e.region design strategy.
Answer: c Level: 1 Page: 273 Type: F
17.The plan of action that prescribes resource allocation and other activities for dealing with the environment and helping the organization attain its goals is known as a(n)
a.goal.
b.objective.
c.mission.
d.vision.
e.strategy.
Answer: e Level: 2 Page: 273 Type: F
18.A ______is a business activity that an organization does especially well relative to its competition is known as
a.strategy
b.synergy
c.cash cow
d.core competence
e.multidomestic
Answer: d Level: 1 Page: 274 Type: F
19.The condition that exists when the organization's parts interact to produce a joint effect that is greater than the sum of the parts acting alone is known as
a.core competence.
b.synergy.
c.value creation.
d.business-level strategy.
e.multidomestic strategy.
Answer: b Level: 1 Page: 275 Type: F
20.When AT&T decided to buy Media One, a cable company, it was pursuing a
a.functional-level strategy.
b.internal growth strategy.
c.multi-domestic strategy.
d.corporate-level strategy.
e.business-level strategy.
Answer: dLevel: 3Page: 275Type: A
21.Which of these can be defined as the combination of benefits received and costs paid by the customer?
a.Organizational benefits
b.Value
c.Cost-benefit diversity
d.Synergy
e.Core competence
Answer: b Level: 1 Page: 275 Type: F
22.When Philip-Morris, the tobacco giant, bought Kraft, Inc., it was pursuing a
a.corporate-level strategy.
b.business-level strategy.
c.functional-level strategy.
d.multidomestic strategy.
e.retrenchment strategy.
Answer: a Level: 2 Page: 275 Type: A
23.______pertains to the organization as a whole.
a.Business-level strategy
b.Functional-level strategy
c.Corporate-level strategy
d.Operational-level strategy
e.Competitive-level strategy
Answer: c Level: 1 Page: 275 Type: F
24.Sears' decision to sell off much of its financial services division is an example of a
a.corporate-level strategy.
b.business-level strategy.
c.functional-level strategy.
d.growth strategy.
e.stability strategy.
Answer: a Level: 2 Page: 275 Type: A
25.A corporate-level strategy is concerned with the question
a.what business are we in?
b.how do we compete?
c.how do we support our chosen strategy?
d.where do we market our products?
e.should we promote from within?
Answer: a Level: 2 Page: 275 Type: F
26.When Coca-Cola introduced Surge, a new citrus soft-drink, it was pursuing a
a.functional-level strategy.
b.multi-domestic strategy.
c.corporate-level strategy.
d.retrenchment strategy.
e.business-level strategy.
Answer: eLevel: 3Page: 276Type: A
27.Ford's decision to completely redesign its Ford Taurus can be classified as a
a.corporate level strategy.
b.business level strategy.
c.functional level strategy.
d.retrenchment strategy.
e.stability strategy.
Answer: b Level: 2 Page: 276 Type: A
28.Decisions regarding the proper amount of advertising for a particular good or service are related to
a.corporate-level strategies.
b.functional-level strategies.
c.tactical-level strategies.
d.business-level strategies.
e.retrenchment strategies.
Answer: d Level: 2 Page: 276 Type: F
29.Which of these questions is central to a functional-level strategy?
a.What business are we in?
b.How do we compete?
c.How do we support our chosen strategy?
d.What business do we buy?
e.Where to market our products?
Answer: c Level: 1 Page: 277 Type: F
30.Which of these refers to the use of managerial tools to direct resources toward the achievement of strategic goals?
a.Strategy formulation
b.Strategy coordination
c.Strategy implementation
d.Strategy control
e.Strategy planning
Answer: c Level: 2 Page: 278 Type: F
31.The planning and decision making that lead to the establishment of the organization's goals and of a specific strategic plan is known as
a.strategy formulation.
b.strategy implementation.
c.strategy coordination.
d.strategy control.
e.SWOT.
Answer: a Level: 2 Page: 278 Type: F
32.Which of these typically includes a search for SWOT that affect organizational performance?
a.Strengths and weaknesses
b.Opportunities and threats
c.Situational analysis
d.External environment analysis
e.Cultural analysis
Answer: c Level: 2 Page: 278 Type: F
33.Barney has been assigned to conduct a situation analysis for his organization, Let’s Share, Inc. As part of this assignment, Barney will
a.conduct an external wage survey.
b.search for the strengths, weaknesses, opportunities, and threats that impact his firm.
c.choose a grand strategy for his firm.
d.do a cost/benefit analysis.
e.develop a mission.
Answer: b Level: 2 Page: 278 Type: A
34.Techniques used to monitor external environments include
a.hiring scanning organizations.
b.hiring the competition's employees
c.government reports.
d.buying competitors' garbage.
e.all of the above.
Answer: e Level: 2 Page: 278 Type: F
35.Plum Plastics has extremely creative employees who, in the opinion of the organization, keep the company ahead of the competition. The creativity of these employees would be classified as
a.an internal weakness.
b.an external opportunity.
c.an external strength.
d.an internal strength.
e.a neutral factor.
Answer: d Level: 2 Page: 279 Type: A
36.Where does the information about opportunities and threats comes from?
a.An analysis of the organization's internal environment
b.A department by department study of the organization
c.Scanning the external environments
d.Employee grievances
e.Financial ratios of the organization
Answer: c Level: 2 Page: 279 Type: F
37.Drain Well, Inc. is particularly concerned about pending legislation in Congress that would further regulate their organization. This legislation would be classified as
a.an external opportunity.
b.an internal strength.
c.an external threat.
d.an external weakness.
e.a congressional chaos.
Answer: c Level: 2 Page: 280 Type: A
38.According to your text, which of the following is a particular strength of Kraft Foods?
a.Marketing
b.Finance
c.Management
d.Production
e.R&D
Answer: e Level: 2 Page: 280 Type: F
39.How business units and product lines fit together in a logical way is the essence of
a.business-level strategy.
b.portfolio strategy.
c.competitive strategy.
d.financial strategy.
e.functional strategy.
Answer: b Level: 2 Page: 280 Type: F
40.The BCG matrix organizes along which of the following dimensions?
a.Market share and profit
b.Sales and market share
c.Business growth rate and market share
d.Business growth rate and profit
e.Sales and profits
Answer: c Level: 2 Page: 281 Type: F
41.Click Once, Inc. has a number of strategic business units. Their hand-held computer unit has a large market share in this rapidly growing industry. Their hand-held computer business would be classified as
a.a dog.
b.a star.
c.a question mark.
d.a cash cow.
e.stuck in the middle.
Answer: b Level: 2 Page: 281 Type: A
42.Which of these is true about the cash cow?
a.It generates tremendous profits in a rapidly growing industry.
b.It has a small market share in a rapidly growing industry.
c.It has a small market share in a slow growth industry.
d.It has a large market share in a slow growth industry.
e.It is generally a dead business that should be divested.
Answer: d Level: 2 Page: 282 Type: F
43.The star has a
a.large market share in a rapidly growing industry.
b.large market share in a slow growth industry.
c.small market share in a rapidly growing industry.
d.small share of a slow growth market.
e.moderate market share in a slow growth industry.
Answer: a Level: 2 Page: 282 Type: F
44.Which of the following portfolio categories is made up of poor performers who command only a small share of a slow growth market?
a.Star
b.Cash cow
c.Question mark
d.Dog
e.Cat
Answer: d Level: 1 Page: 282 Type: F
45.The question mark has a
a.large market share in a rapidly growing industry.
b.large market share in a slow growth industry.
c.small market share in a rapidly growing industry.
d.small share of a slow growth market.
e.moderate market share in a slow growth industry.
Answer: c Level: 2 Page: 282 Type: F
46.Which of these is true about the dog division?
a.It has a large market share in a rapidly growing industry.
b.It has a large market share in a slow growth industry.
c.It has a small market share in a rapidly growing industry.
d.It has a small share of a slow growth market.
e.It has a moderate market share in a rapidly growing industry.
Answer: d Level: 2 Page: 282 Type: F
47.Gillette operates numerous strategic business units. Most of its are in the personal care division.
a.dogs
b.question marks
c.stars
d.cash cows
e.none of the above
Answer: b Level: 2 Page: 282 Type: F
48.Barriers to entry are related to which competitive force?
a.Rivalry among competitors
b.Potential new entrants
c.Threat of substitute products
d.Bargaining power of buyers
e.Bargaining power of suppliers
Answer: b Level: 2 Page: 283 Type: F
59.All of the following are Porter's competitive forces EXCEPT
a.differentiation.
b.bargaining power of buyers.
c.bargaining power of suppliers.
d.threat of substitute products.
e.potential new entrants.
Answer: a Level: 2 Page: 283 Type: F
50.The strategy involves an attempt to distinguish the firm's products or services from others in the industry.
a.cost leadership
b.differentiation
c.focus
d.internal growth
e.liquidation
Answer: b Level: 2 Page: 285 Type: F
51.Which strategy can be profitable for an organization when customers are loyal and willing to pay high prices?
a.Focus
b.Globalization
c.Overall cost leadership
d.Differentiation
e.Liquidation
Answer: d Level: 2 Page: 285 Type: F
52.Which strategy involves seeking efficient facilities, cutting costs and using tight cost controls to be more efficient than competitors?
a.Cost leadership
b.Differentiation
c.Focus
d.Internal growth
e.Liquidation
Answer: a Level: 2 Page: 286 Type: F
53.The human resource department at Tyke’s Tricycles is implementing a number of functional level strategies. These strategies include focusing on ways to retain and develop a stable work force and ways to improve efficiency in the organization. These functional-level strategies are consistent with which of the following strategies?