Preview Extract
Chapter 9 Strategic Planning: Strategies, Tactics, and Competitive Dynamics
1) The commitment principle is a management guideline that advises managers to totally commit
themselves to strategic planning.
Answer: False
Rationale:
The commitment principle actually refers to the idea that successful strategic planning requires
the commitment of top management to the strategic planning process and its outcomes, not just
to the planning itself.
2) Strategy is the end result of strategic planning.
Answer: True
Rationale:
Strategic planning is the process of defining an organization's strategy, whereas strategy itself is
the outcome or the plan that guides an organization's decisions and actions.
3) Strategic management is the process of ensuring an organization possesses and benefits from
the use of an appropriate organizational strategy.
Answer: True
Rationale:
Strategic management involves the formulation, implementation, and evaluation of strategies to
achieve organizational goals. It ensures that the organization has a suitable strategy in place and
that it is effectively implemented to achieve desired outcomes.
4) In general, the strategic management process is thought to consist of sequential and continuing
steps.
Answer: True
Rationale:
The strategic management process typically involves several sequential steps, including
environmental analysis, strategy formulation, strategy implementation, and strategy evaluation. It
is also considered to be a continuous, ongoing process rather than a one-time event.
5) The first step in the strategic management process is the establishment of organizational
direction.
Answer: False
Rationale:
The first step in the strategic management process is typically environmental analysis, which
involves assessing the internal and external environments to identify opportunities and threats.
Establishing organizational direction usually comes later in the process, after the analysis has
been completed.
6) Managers only perform environmental analysis to help them understand what is happening
outside their organization.
Answer: False
Rationale:
While environmental analysis does involve understanding external factors, it also includes
assessing internal factors such as organizational capabilities and resources. This helps managers
develop strategies that align with both external opportunities and internal strengths.
7) The general environment of an organization's external environment contains international,
labor, customer, competitor, and supplier components.
Answer: False
Rationale:
The general environment of an organization's external environment typically includes economic,
technological, sociocultural, political, and legal factors. International, labor, customer,
competitor, and supplier components are more specific aspects of the external environment.
8) Demographics are the statistical characteristics of a population.
Answer: True
Rationale:
Demographics refer to statistical data relating to the population and particular groups within it,
such as age, gender, income, education, and occupation.
9) The legal component of the general environment is related to government affairs.
Answer: False
Rationale:
The legal component of the general environment refers to laws and regulations that affect
organizations, such as employment laws, health and safety regulations, and environmental
regulations. While government affairs may be related, the legal component is more focused on
the legal framework within which organizations operate.
10) Motivations, status symbols, and attitudes of the other country are all important aspects of
the international component of the organization's operating environment.
Answer: True
Rationale:
Understanding the motivations, status symbols, and attitudes of people in other countries is
important for organizations operating internationally, as these factors can influence consumer
behavior, business practices, and market trends.
11) "In what kind of environment does the organization now exist?" is one of the four basic
questions required for critical question analysis.
Answer: True
Rationale:
Critical question analysis involves asking four basic questions: What are the issues and the
conclusions? What are the reasons? What words or phrases are ambiguous? In what kind of
environment does the organization now exist? This question helps to contextualize the analysis
by considering the environment in which the organization operates.
12) SWOT is an acronym for Social Welfare Operating Test.
Answer: False
Rationale:
SWOT stands for Strengths, Weaknesses, Opportunities, and Threats. It is a strategic planning
tool used to identify and understand the strengths and weaknesses of an organization, as well as
the opportunities and threats in the external environment.
13) The GE Multifactor Portfolio Matrix was designed to be more complete than the BCG
Growth-Share Matrix.
Answer: True
Rationale:
The GE Multifactor Portfolio Matrix, also known as the GE-McKinsey Matrix, is a strategic
planning tool that evaluates business units based on multiple factors, such as market
attractiveness, competitive position, and industry attractiveness. It is considered more
comprehensive than the BCG Growth-Share Matrix, which only considers market growth rate
and relative market share.
14) According to the GE Multifactor Portfolio Matrix, businesses falling in cells that form a
diagonal from lower left to upper right are the strongest and the ones the company should invest
in and help to grow.
Answer: False
Rationale:
In the GE Multifactor Portfolio Matrix, businesses falling in the upper left quadrant are
considered the strongest and most attractive for investment, as they have high market
attractiveness and strong competitive position. The diagonal from lower left to upper right
represents businesses that are less attractive and may require divestment or restructuring.
15) Strategic implementation is the last step of the strategic management process.
Answer: False
Rationale:
Strategic implementation, also known as strategy execution, is the process of putting a strategy
into action. It follows strategy formulation and is followed by strategy evaluation. It is not the
last step but rather a critical phase in the strategic management process.
16) Tactical planning is long-range planning that emphasizes the current operations of various
parts of the organization.
Answer: False
Rationale:
Tactical planning is short-range planning that focuses on the current operations of various parts
of the organization. It involves specific actions and plans for achieving operational objectives
within a relatively short time frame, typically one year or less.
17) Because tactical plans are based primarily on a prediction of the future, and strategic plans
are based on known circumstances that exist within the organization, tactical plans are generally
less detailed than strategic plans.
Answer: False
Rationale:
Tactical plans are typically more detailed than strategic plans because they focus on specific
actions and steps that need to be taken to implement the broader strategic plans. Strategic plans,
on the other hand, are more general and focus on overall goals and direction.
18) Because strategic planning focuses on the long term and tactical planning on the short term,
strategic plans cover a relatively long period of time whereas tactical plans cover a relatively
short period of time.
Answer: True
Rationale:
Strategic plans typically cover a longer time frame, often three to five years or more, and focus
on the organization's long-term goals and objectives. Tactical plans, on the other hand, cover a
shorter time frame, usually one year or less, and focus on the implementation of specific actions
to achieve short-term objectives.
19) Competitor motivation refers to the incentives that an organization has to take action.
Answer: True
Rationale:
Competitor motivation refers to the reasons why competitors take certain actions, such as
entering a new market, launching a new product, or engaging in price competition.
Understanding competitor motivation can help organizations anticipate and respond to
competitive threats.
20) Competitor capability refers to a firm's ability to undertake an action.
Answer: True
Rationale:
Competitor capability refers to a firm's ability to perform certain actions or strategies effectively.
This includes factors such as financial resources, technological expertise, marketing capabilities,
and organizational skills. Understanding competitor capability can help organizations assess the
competitive landscape and formulate effective strategies.
21) Long-range planning that focuses on the organization as a whole is ________.
A) operational planning
B) organizational planning
C) strategic planning
D) tactical planning
E) managerial planning
Answer: C
Rationale:
Strategic planning is long-range planning that focuses on defining an organization's strategy,
which includes its mission, vision, and long-term objectives. It involves considering the
organization as a whole and determining what must be done in the long term to achieve its goals.
22) In strategic planning, managers consider the organization as a total unit and ask themselves
what must be done in the long term, which is usually ________.
A) three to five years into the future
B) in the coming year
C) one to two years into the future
D) five to ten years from now
E) five to twenty years from now
Answer: A
Rationale:
Strategic planning typically looks three to five years into the future, although this timeframe can
vary depending on the organization and its industry. It involves considering the organization as a
whole and determining what actions are necessary to achieve its long-term objectives.
23) A management guideline that advises managers to commit funds for planning only if in the
foreseeable future they can anticipate a return on planning expenses as a result of the long-range
planning analysis is termed ________.
A) strategic planning
B) the commitment principle
C) organizational planning
D) tactical planning
E) the principle of the objective
Answer: B
Rationale:
The commitment principle advises managers to commit funds for planning only if they can
foresee a return on the planning expenses in the future. This ensures that resources are allocated
efficiently and effectively.
24) A broad and general plan developed to reach long-term organizational objectives is a(n)
________.
A) tactic
B) scenario
C) operational plan
D) organizational goal
E) strategy
Answer: E
Rationale:
A strategy is a broad and general plan developed to reach long-term organizational objectives. It
outlines the approach or direction an organization will take to achieve its goals.
25) Which of the following is true about strategy?
A) Strategy is a general plan developed to reach short-term goals without any planning.
B) Organizational strategy focuses only on the marketing and financial aspects of a business.
C) Smaller organizations are more precise than large organizations in developing organizational
strategy in order to meet their goals sooner.
D) Strategy is actually the end result of strategic planning.
E) Research and development are not a part of an organization's strategy.
Answer: D
Rationale:
Strategy is the end result of strategic planning, which involves defining the organization's
strategy, determining its long-term objectives, and outlining the actions needed to achieve those
objectives. It is not developed without planning, and it encompasses various aspects of the
organization, not just marketing and financial aspects.
26) Axis Cars is an automobile company based out of Delaware. They need to follow an
organizational strategy to regain the market share they recently lost to Toyota. Which of the
following strategies will accomplish this objective?
A) They should increase people efficiency.
B) They should resize and downsize present models.
C) They should increase machine efficiency.
D) They should modernize the car batteries.
E) They should merge with another top-selling automobile brand.
Answer: B
Rationale:
Resizing and downsizing present models can help Axis Cars regain market share lost to Toyota
by potentially reducing costs, improving competitiveness, and meeting changing consumer
demands.
27) Pasta Central, a fast-food chain, has realized that if it wants to beat its leading competitor and
improve market share, it must improve its productivity. Which of the following strategies is most
likely to help Pasta Central to achieve this objective?
A) reassess their market
B) downsize
C) decrease machine efficiency
D) develop valuable real estate holdings
E) increase people efficiency
Answer: E
Rationale:
Increasing people efficiency, such as improving employee training, workflow processes, and
employee motivation, can help Pasta Central improve productivity and compete more effectively
with its leading competitor.
28) ________ is the process of ensuring that an organization possesses and benefits from the use
of an appropriate organizational strategy.
A) Strategic planning
B) Strategy visualization
C) Decision making
D) Strategic management
E) Integrated business planning
Answer: D
Rationale:
Strategic management involves the formulation, implementation, and evaluation of strategies to
achieve organizational objectives. It ensures that the organization has an appropriate strategy in
place and that it is effectively implemented to achieve desired outcomes.
29) The last step in the strategic management process is ________.
A) establishment of an organizational direction
B) environmental analysis
C) strategy formulation
D) strategy implementation
E) strategic control
Answer: E
Rationale:
Strategic control, which involves monitoring and adjusting strategies as needed to ensure they
are implemented effectively and achieve desired outcomes, is the last step in the strategic
management process.
30) The first step of strategic management is designed to ________.
A) establish an organizational direction
B) formulate strategy
C) study the organizational environment
D) advise managers to commit funds for planning
E) control the environment
Answer: C
Rationale:
The first step of strategic management involves studying the organizational environment,
including internal and external factors, to understand the organization's capabilities, resources,
and opportunities and threats it faces. This information is essential for formulating an effective
strategy.
31) The level of an organization's external environment that contains components having broad
long-term implications for managing the organization is the ________.
A) general environment
B) financial environment
C) demographic environment
D) internal environment
E) operating environment
Answer: A
Rationale:
The general environment of an organization's external environment contains components that
have broad, long-term implications for managing the organization. These components include
economic, technological, sociocultural, political, legal, and international factors that can impact
the organization's operations and strategic decisions over time.
32) The ________ component is that part of the general environment that indicates how
resources are being distributed and used within the environment.
A) social
B) economic
C) political
D) international
E) legal
Answer: B
Rationale:
The economic component of the general environment indicates how resources such as money,
goods, and services are being distributed and used within the environment. It includes factors
such as economic growth, inflation, unemployment, and income distribution, which can impact
an organization's operations and strategic decisions.
33) The relative degrees of worth that society places on the way in which it exists and functions
are ________.
A) political ideologies
B) economic conditions
C) demographics
D) social values
E) environmental factors
Answer: D
Rationale:
Social values refer to the relative degrees of worth that society places on the ways in which it
exists and functions. These values can influence social norms, beliefs, and behaviors, which in
turn can affect organizations and their strategies.
34) Which of the following is true about social values?
A) Social values are the statistical characteristics of a population.
B) It includes changes in numbers of people among various population segments.
C) Changes in social values can influence the reception of goods and services within the
organization's environment.
D) Social values are helpful for developing a strategy aimed at recruiting new employees to fill
positions within an organization.
E) The relative degrees of worth that society places on the ways in which it functions can change
dramatically over time.
Answer: E
Rationale:
Social values are the beliefs, attitudes, and priorities that society holds, and they can change over
time. Changes in social values can influence how goods and services are received in the
marketplace and can impact an organization's strategy.
35) Lobbying efforts by interest groups and progress on the passage of laws are examples of the
________ component of the general environment.
A) social
B) political
C) legal
D) technological
E) international
Answer: B
Rationale:
The political component of the general environment includes factors such as lobbying efforts,
political ideologies, and government policies that can impact organizations. Progress on the
passage of laws is a political factor that can influence how organizations operate.
36) Which of the following components includes new approaches to producing goods and
services?
A) the technology component
B) the political component
C) the labor component
D) the legal component
E) the productive component
Answer: A
Rationale:
The technology component of the general environment includes new approaches to producing
goods and services. This component includes technological advancements and innovations that
can impact how organizations operate and compete.
37) The level of an organization's external environment that contains components normally
having relatively specific and immediate implications for managing the organization is the
________.
A) demographic environment
B) general environment
C) industry environment
D) international environment
E) internal environment
Answer: C
Rationale:
The industry environment is the level of an organization's external environment that contains
components having relatively specific and immediate implications for managing the
organization. This includes factors such as competitors, customers, suppliers, and industry
regulations that directly impact the organization's operations and competitive position.
38) Porter's model emphasizes ________.
A) strengths, weaknesses, opportunities, and threats
B) stars, dogs, cash cows, and question marks
C) competitive forces in an industry
D) business strength and industry attractiveness
E) environmental analysis
Answer: C
Rationale:
Porter's model, also known as Porter's Five Forces model, emphasizes competitive forces in an
industry that shape the competitive landscape. These forces include the threat of new entrants,
the bargaining power of buyers, the bargaining power of suppliers, the threat of substitute
products or services, and the intensity of rivalry among existing competitors.
39) According to Porter, threat of new entrants refers to ________.
A) the power that customers have over the firms
B) the power that suppliers have over the firms
C) the extent to which customers may use services from another industry instead of the focal
industry
D) the ability of new firms to enter an industry
E) the intensity of the rules of an organization
Answer: D
Rationale:
According to Porter, the threat of new entrants refers to the ability of new firms to enter an
industry and compete with existing firms. This threat depends on factors such as barriers to
entry, economies of scale, and brand loyalty.
40) According to Porter, ________ refers to the power that customers have over the firms
operating in an industry.
A) the threat of new entrants
B) buyer power
C) supplier power
D) the threat of substitute products
E) intensity of rivalry
Answer: B
Rationale:
According to Porter, buyer power refers to the power that customers have over the firms
operating in an industry. This power can influence prices, quality, and other aspects of products
and services offered by firms in the industry.
41) Which level of the organization's environment exists inside the organization and normally
has immediate and specific implications for managing the organization?
A) the general environment
B) the internal environment
C) the operating environment
D) the external environment
E) the political environment
Answer: B
Rationale:
The internal environment of an organization consists of factors and elements within the
organization itself, such as its employees, management, organizational culture, and resources.
These factors have immediate and specific implications for managing the organization.
42) ________ is the purpose for which — and the reason why — an organization exists.
A) Organizational objective
B) Organizational strategy
C) Organizational mission
D) Organizational policy
E) Organizational rule
Answer: C
Rationale:
The organizational mission is the purpose for which an organization exists. It defines the
organization's reason for being and provides a framework for setting organizational objectives
and developing strategies.
43) The document that is written by management and describes and explains what the purpose
for which the organization exists is the ________.
A) mission statement
B) strategic plan
C) operating plan
D) annual budget
E) vision statement
Answer: A
Rationale:
The mission statement is a written statement that describes the purpose, values, and goals of an
organization. It explains why the organization exists and provides a framework for decisionmaking and goal-setting.
44) Which of the following statements accurately reflects the relationship between the mission
and the objectives?
A) The mission statement reflects and flows naturally from the objectives.
B) The objectives reflect and flow naturally from the mission.
C) There is no direct relationship between the mission and the objectives.
D) The mission statement stands alone and has no influence on the objectives.
E) The mission and the objectives influence each other.
Answer: B
Rationale:
Objectives are specific, measurable targets that support the organization's mission. They are
derived from the mission and help to fulfill its purpose.
45) ________ is the process of determining appropriate courses of action for achieving
organizational objectives and thereby accomplishing organizational purpose.
A) Establishment of organizational direction
B) Strategy implementation
C) Strategy control
D) Strategy formulation
E) Environmental analysis
Answer: D
Rationale:
Strategy formulation is the process of developing strategies and action plans to achieve
organizational objectives. It involves analyzing the internal and external environments, setting
goals, and determining the best course of action.
46) The answer to which of the following critical questions indicates whether the organization is
progressing satisfactorily or not?
A) What are the purposes and objectives of the organization?
B) Where is the organization presently going?
C) In what kind of environment does the organization now exist?
D) What can be done to better achieve organizational goals in the future?
E) What does our SWOT analysis show?
Answer: B
Rationale:
The question "Where is the organization presently going?" relates to the current progress and
direction of the organization, indicating whether it is progressing satisfactorily or not.
47) Which of the following is true about a star SBU?
A) Star SBUs may barely support themselves; in some cases, they actually drain off cash
resources generated by other SBUs.
B) Star SBUs provide the organization with large amounts of cash because their market is not
growing significantly.
C) An SBU that is a star has a small share of a high-growth market.
D) An SBU that is a star has a high share of a high-growth market and typically needs large
amounts of cash to support rapid and significant growth.
E) Because the market of star SBUs is not growing significantly, the cash is generally used to
meet the financial demands of the organization in other areas.
Answer: D
Rationale:
A star SBU has a high market share in a high-growth market, which typically requires significant
investment to support its rapid growth and maintain its competitive position.
48) An SBU with a large market share of a low-growth market is a ________.
A) star
B) dog
C) cash cow
D) question mark
E) low-cost leader
Answer: C
Rationale:
A cash cow SBU has a large market share in a low-growth market. While the market may not
offer significant growth opportunities, the SBU can generate substantial cash flow for the
organization.
49) An SBU of FlexiTech Inc. manufactures CD drives. Although it has a large share in the
market and the product makes significant profits for the company, market growth potential is
limited. Under which quadrant of the BCG Growth-Share Matrix does the CD manufacturing
unit fall?
A) dog
B) question-mark
C) star
D) cash cow
E) low-cost leader
Answer: D
Rationale:
A CD manufacturing unit with a large market share in a low-growth market would fall under the
cash cow quadrant of the BCG Growth-Share Matrix. It generates significant profits but has
limited growth potential.
50) GenEx Group manufactures a variety of products for different markets. One of its SBUs,
GenEx Textiles, is one of its leading revenue generators. GenEx Textiles is the leading player in
the market for textiles. However, the parent company has realized that growth prospects in the
textile industry are limited. The company has already exploited the market to the fullest, and
sustained growth in the future is unlikely. In fact, a substantial amount of the revenue generated
from this textile business is used to fund other SBUs of the parent company. GenEx Textiles is
an example of a ________ for the GenEx Group.
A) star
B) dog
C) cash cow
D) question mark
E) cost-leader
Answer: C
Rationale:
GenEx Textiles, as described, is a cash cow SBU for the GenEx Group. It generates significant
revenue and profits, even though the market growth is limited, and provides funds to support
other SBUs within the company.
51) Which of the following is true about a cash cow?
A) Cash cows can barely support themselves; in some cases, they actually drain off cash
resources generated by other SBUs.
B) An SBU that is a cash cow has a small share of a high-growth market.
C) An SBU that is a cash cow has a large share of a market that is growing only slightly.
D) An SBU that is a cash cow has a high share of a high-growth market and typically needs large
amounts of cash to support rapid and significant growth.
E) Cash cows generate large amounts of cash for the organization and are usually segments in
which management can make additional investments and earn attractive returns.
Answer: C
Rationale:
A cash cow is an SBU with a large market share in a market that is not experiencing significant
growth. These SBUs generate substantial cash flow for the organization but do not require large
investments for growth since the market is not expanding rapidly.
52) An SBU with a small market share of a high-growth market is a ________.
A) star
B) dog
C) cash cow
D) question mark
E) low-cost leader
Answer: D
Rationale:
A question mark SBU has a small market share in a high-growth market. These SBUs require
significant investment to increase market share and become stars or cash cows.
53) Kreme Industries has an SBU Kreme Makeups, Inc., that offers a wide variety of makeup
products and accessories for women. Although market growth rate is high, the SBU's current
market share is low and it needs substantial investment. The parent company is trying to decide
if Kreme Makeups has long-term sustainability before investing any more cash in it. In the
context of the BCG matrix, this SBU of Kreme Industries would be classified as a ________.
A) question mark
B) cash cow
C) dog
D) star
E) low-cost leader
Answer: A
Rationale:
A question mark SBU has a low market share in a high-growth market. These SBUs require
significant investment to increase market share and become stars or cash cows.
54) An SBU with a relatively small market share of a low-growth market is a ________.
A) star
B) dog
C) cash cow
D) question mark
E) low-cost leader
Answer: B
Rationale:
A dog SBU has a small market share in a low-growth market. These SBUs do not generate
significant cash flow and may require reevaluation to determine if they should be divested.
55) Which of the following strategy formulation tools was specifically developed to expand on
the BCG Growth-Share Matrix?
A) Porter's Model for Industry Analysis
B) the critical questions analysis
C) SWOT analysis
D) the GE Multifactor Portfolio Matrix
E) environmental analysis
Answer: D
Rationale:
The GE Multifactor Portfolio Matrix was developed to expand on the BCG Growth-Share Matrix
by considering additional factors such as industry attractiveness and business strengths.
56) Which of the following strategy formulation tools outlines the primary forces that determine
competitiveness within an industry and illustrates how those forces are related?
A) Porter's Model for Industry Analysis
B) the BCG Growth-Share Matrix
C) SWOT analysis
D) the GE Multifactor Portfolio Matrix
E) the Delphi technique
Answer: D
Rationale:
The GE Multifactor Portfolio Matrix outlines the primary forces that determine competitiveness
within an industry and illustrates how those forces are related by considering factors such as
market attractiveness and business strengths.
57) Which of the following is true about the GE Multifactor Portfolio Matrix?
A) Businesses falling in the cells that form a diagonal from lower left to upper right in the matrix
are strong businesses that should be invested in regularly.
B) Businesses in the cells below and to the right of the diagonal are medium-strength businesses
that should be invested in only selectively.
C) The GE Multifactor Portfolio Matrix does not consider factors such as various types of risk
associated with product development.
D) In the matrix, businesses above and to the left of the diagonal are the weakest and serious
candidates for divestiture.
E) This tool helps managers develop organizational strategy that is based primarily on market
attractiveness and business strengths.
Answer: E
Rationale:
The GE Multifactor Portfolio Matrix helps managers develop organizational strategy based on
both market attractiveness and business strengths, providing a more comprehensive approach to
strategic planning.
58) With the GE Multifactor Portfolio Matrix, the businesses falling in the cells that form a
diagonal from lower left to upper right are ________.
A) the strongest and the ones the company should invest in and help grow
B) the strongest and the ones the company should sell
C) medium-strength and should be invested in only selectively
D) the lowest in strength and serious candidates for divestiture
E) the lowest in strength and serious candidates for retrenchment
Answer: C
Rationale:
Businesses falling in the cells that form a diagonal from lower left to upper right in the GE
Multifactor Portfolio Matrix are considered medium-strength businesses that should be invested
in only selectively.
59) Which strategy is an organization following when it focuses on making an organization more
competitive by developing a product or products that customers perceive as being different from
products offered by competitors?
A) cost leadership
B) differentiation
C) focus
D) stability
E) divestiture
Answer: B
Rationale:
Differentiation strategy focuses on making an organization more competitive by developing
products or services that are perceived as unique or different from those of competitors.
60) The Razzmatazz Group of companies plans to launch a new flavor of crackers that is distinct
and unusual. Which of the following strategies is the company following to become more
competitive?
A) stability
B) cost leadership
C) divestiture
D) focus
E) differentiation
Answer: E
Rationale:
The company is following a differentiation strategy by launching a new flavor of crackers that is
distinct and unusual. This strategy aims to make the company's products stand out from
competitors' offerings and attract customers who are looking for unique products.
61) When an organization focuses on making itself more competitive by producing products
more cheaply than competitors can, it is following a ________.
A) stability strategy
B) differentiation strategy
C) focus strategy
D) cost leadership strategy
E) divestiture strategy
Answer: D
Rationale:
A cost leadership strategy involves focusing on producing goods or services more cheaply than
competitors while maintaining acceptable quality standards. This strategy aims to make the
organization more competitive by offering lower prices to customers.
62) In an attempt to offer better deals to customers and thereby increase its market share, Dun's
Burgers integrates backward to buy out its main supplier of beef. Dun's Burgers is using which
of the following strategies to attract customers?
A) focus
B) technology enhancement
C) differentiation
D) cost leadership
E) focused differentiation
Answer: D
Rationale:
By integrating backward to buy out its main supplier of beef, Dun's Burgers is likely aiming to
reduce its costs, which is consistent with a cost leadership strategy. This strategy can help the
company offer better deals to customers and increase its market share.
63) Dun's Burgers has decided to open takeaway counters across the city that will be open until
11 p.m. to cater to people who return late from work. This turns out to be an excellent strategy as
Dun's becomes a hot favorite with the people who work late shifts. This is an example of
________.
A) differentiation strategy
B) technology enhancement strategy
C) cost leadership strategy
D) divestiture strategy
E) focus strategy
Answer: E
Rationale:
By opening takeaway counters that cater to people who work late shifts, Dun's Burgers is
focusing on a specific customer segment, which is consistent with a focus strategy. This strategy
can help the company attract and retain customers in this particular market segment.
64) ________ is a strategy that emphasizes making an organization more competitive by
targeting a particular customer.
A) Differentiation
B) Cost leadership
C) Stability
D) Focus
E) Divestiture
Answer: D
Rationale:
A focus strategy emphasizes targeting a particular customer segment or market niche. This
strategy aims to make the organization more competitive by tailoring its products or services to
meet the specific needs and preferences of that segment.
65) ________ is a strategy adopted by management to increase the amount of business that an
SBU is currently generating.
A) Differentiation
B) Divestiture
C) Retrenchment
D) Growth
E) Focus
Answer: D
Rationale:
Growth strategy is adopted by management to increase the amount of business that an SBU
(Strategic Business Unit) is currently generating. This can involve expanding market share,
entering new markets, or introducing new products or services.
66) A business strategy that is generally applied to star or question mark SBUs is ________.
A) stability
B) focus
C) retrenchment
D) growth
E) divestiture
Answer: D
Rationale:
Growth strategy is generally applied to star or question mark SBUs (Strategic Business Units) to
capitalize on their potential for growth. This strategy aims to increase market share, revenue, and
profitability.
67) ________ is a strategy adopted by management to maintain or slightly improve the amount
of business that an SBU is generating.
A) Focus
B) Stability
C) Retrenchment
D) Growth
E) Divestiture
Answer: B
Rationale:
Stability strategy is adopted by management to maintain or slightly improve the amount of
business that an SBU (Strategic Business Unit) is generating. This strategy aims to maintain the
current level of performance without significant changes.
68) Which business strategy is generally applied to cash cows?
A) divestiture
B) stability
C) growth
D) retrenchment
E) focus
Answer: B
Rationale:
Stability strategy is generally applied to cash cows, which are SBUs (Strategic Business Units)
that generate significant cash flow but have limited growth potential. This strategy aims to
maintain the current level of performance without significant changes.
69) ________ is the strategy through which management attempts to strengthen or protect the
amount of business an SBU is generating.
A) Differentiation
B) Divestiture
C) Retrenchment
D) Growth
E) Focus
Answer: C
Rationale:
Retrenchment strategy is the strategy through which management attempts to strengthen or
protect the amount of business an SBU (Strategic Business Unit) is generating. This can involve
cost-cutting, restructuring, or focusing on core competencies.
70) ________ strategy is generally applied to cash cows or stars that are beginning to lose market
share.
A) Focus
B) Retrenchment
C) Stability
D) Divestiture
E) Growth
Answer: B
Rationale:
Retrenchment strategy is generally applied to cash cows or stars that are beginning to lose
market share. This strategy aims to strengthen or protect the amount of business these SBUs are
generating by addressing issues that are causing the decline in market share.
71) In a retrenchment strategy, managers attempt to ________.
A) eliminate an SBU
B) increase the amount of business of a "star"
C) maintain or slightly improve the amount of business an SBU is generating
D) develop new products that are perceived by customers as different
E) strengthen or protect the amount of business an SBU is generating
Answer: E
Rationale:
A retrenchment strategy is adopted by managers to strengthen or protect the amount of business
an SBU (Strategic Business Unit) is generating. This strategy involves reducing costs,
restructuring operations, or exiting unprofitable markets to improve the SBU's performance.
72) ________ is a strategy adopted to eliminate an SBU that is not generating a satisfactory
amount of business and that has little hope of doing so in the near future.
A) Growth
B) Divestiture
C) Retrenchment
D) Stability
E) Focus
Answer: B
Rationale:
Divestiture is a strategy adopted to eliminate an SBU (Strategic Business Unit) that is not
generating a satisfactory amount of business and that has little hope of doing so in the near
future. This strategy involves selling or closing down the SBU to focus resources on more
profitable areas.
73) The Forrester Group of companies has many products, including a fertilizer manufacturing
unit. While this unit has never been a source of high revenues in the past, the SBU has
increasingly become an area of concern. For the last few years, this SBU has not generated
enough business for the Forrester Group and the parent company does not see things changing in
the future without substantial investment. In a market with low growth potential, its already low
market share has declined further. Which of the following strategies is the Forrester Group likely
to choose for this SBU?
A) stability
B) focus
C) retrenchment
D) growth
E) divestiture
Answer: E
Rationale:
Given the circumstances described, the Forrester Group is likely to choose a divestiture strategy
for this SBU (Strategic Business Unit). Since the unit has not generated enough business and its
market share is declining, divesting it would allow the company to focus on more profitable
areas.
74) ________ is usually applied to SBUs that are dogs or question marks that have failed to
increase market share but still require significant amounts of cash.
A) Focus
B) Divestiture
C) Growth
D) Stability
E) Retrenchment
Answer: B
Rationale:
Divestiture is usually applied to SBUs (Strategic Business Units) that are dogs or question marks
that have failed to increase market share but still require significant amounts of cash. This
strategy involves selling or closing down the SBUs to reduce costs and focus resources on more
profitable areas.
75) One of the SBUs under the Retro Group of companies is not generating a satisfactory amount
of business. Extensive analysis shows that the company is losing its market share because its
competitors have more sustainable processes. Analysts also feel that the growth prospects in this
industry are extremely limited. Which of the following organizational strategies should the
company adopt?
A) focus
B) stability
C) retrenchment
D) growth
E) divestiture
Answer: E
Rationale:
Given the circumstances described, the Retro Group should adopt a divestiture strategy for this
SBU (Strategic Business Unit) that is not generating a satisfactory amount of business. Since the
growth prospects are limited and competitors have sustainable processes, divesting the SBU
would be a strategic decision to focus resources on more profitable areas.
76) ________, the fourth step of the strategic management process, is putting formulated
strategies into action.
A) Strategy implementation
B) Environmental analysis
C) Strategic control
D) Strategy formulation
E) Strategic feedback
Answer: A
Rationale:
Strategy implementation is the fourth step of the strategic management process. It involves
putting formulated strategies into action by allocating resources, designing organizational
structures, and managing people to achieve organizational goals.
77) Which of the following is the ability to manage people during implementation?
A) allocating skill
B) interacting skill
C) monitoring skill
D) organizing skill
E) tactical skill
Answer: B
Rationale:
Interacting skill is the ability to manage people during implementation. It involves
communication, motivation, and leadership to ensure that strategies are effectively implemented
and organizational goals are achieved.
78) Which of the following is the ability to use information to determine whether a problem has
arisen that is blocking implementation?
A) allocating skill
B) interacting skill
C) monitoring skill
D) organizing skill
E) tactical skill
Answer: C
Rationale:
Monitoring skill is the ability to use information to determine whether a problem has arisen that
is blocking implementation. It involves tracking progress, identifying issues, and taking
corrective action to ensure that strategies are implemented successfully.
79) ________ is the ability to create throughout the organization a network of people who can
help solve implementation problems as they occur.
A) Organizing skill
B) Interacting skill
C) Monitoring skill
D) Allocating skill
E) Tactical skill
Answer: A
Rationale:
Organizing skill is the ability to create throughout the organization a network of people who can
help solve implementation problems as they occur. It involves establishing structures, processes,
and systems to support strategy implementation.
80) The last step of the strategic management process, consisting of monitoring and evaluating
the strategic management process as a whole, is ________.
A) strategy implementation
B) strategy formulation
C) strategic control
D) environmental analysis
E) strategic action
Answer: C
Rationale:
Strategic control is the last step of the strategic management process. It consists of monitoring
and evaluating the strategic management process as a whole to ensure that strategies are
implemented as planned and organizational goals are achieved.
81) ________ is short-range planning that emphasizes the current operations of various parts of
the organization.
A) Operational planning
B) Intermediate planning
C) Strategic planning
D) Strategic control
E) Tactical planning
Answer: E
Rationale:
Tactical planning is short-range planning that emphasizes the current operations of various parts
of the organization. It focuses on translating strategic plans into specific objectives and action
plans that can be implemented by middle and lower-level managers.
82) Mary has just formulated the annual budget for her department. She has outlined how the
funds must be allocated and spent over the next one year. This would most likely be categorized
as ________.
A) strategic planning
B) intrinsic planning
C) intermediate planning
D) tactical planning
E) strategic control
Answer: D
Rationale:
Formulating an annual budget for a department, outlining how funds will be allocated and spent
over the next year, is an example of tactical planning. Tactical planning focuses on specific
objectives and actions for the short term, typically one year or less.
83) Which of the following sentences about the differences between strategic planning and
tactical planning is true?
A) Tactical plans cover a relatively long period of time whereas strategic plans cover a relatively
short period of time.
B) Strategic planning emphasizes analyzing the future and tactical planning emphasizes
analyzing the everyday functioning of the organization.
C) Tactical plans are generally less detailed than strategic plans.
D) Facts on which to base tactical plans are usually more difficult to gather than are facts on
which to base strategic plans.
E) Tactical plans are usually developed by upper-level management and strategic plans by lowerlevel management.
Answer: B
Rationale:
The statement "Strategic planning emphasizes analyzing the future and tactical planning
emphasizes analyzing the everyday functioning of the organization" is true. Strategic planning
focuses on long-term goals and future directions, while tactical planning focuses on short-term
actions and current operations.
84) ________ refers to the process by which firms undertake strategic and tactical actions and
how competitors respond to these actions.
A) Strategic control
B) Environmental analysis
C) Competitive dynamics
D) Strategy implementation
E) SWOT analysis
Answer: C
Rationale:
Competitive dynamics refers to the process by which firms undertake strategic and tactical
actions and how competitors respond to these actions. It involves analyzing competitors'
behaviors, strategies, and responses in the marketplace.
85) ________ refers to how mindful a company is of its competitor's actions.
A) Strategic control
B) Competitor motivation
C) Competitor awareness
D) Competitor capability
E) Strategic implementation
Answer: C
Rationale:
Competitor awareness refers to how mindful a company is of its competitor's actions. It involves
monitoring and understanding competitors' strategies, strengths, weaknesses, and behaviors in
the marketplace.
86) Briefly discuss the strategic management process.
Answer: Strategic management is the process of ensuring that an organization possesses and
benefits from the use of an appropriate organizational strategy, and consists of five sequential
steps.
1. The first step in the process is environmental analysis, which is the study of organizational
environment to pinpoint environmental factors that can significantly influence organizational
operations. The environment is divided into three distinct levels for analysis - general, operating,
and internal.
2. The second step of the process is establishing organizational direction based upon the
environmental analysis. Two important ingredients of organizational direction are organizational
mission and organizational objectives. In this step, the mission and the mission statement are
developed. From the mission flow the objectives of the organization.
3. The third step is strategy formulation, which is the process of determining appropriate courses
of action for achieving organizational objectives, and thereby accomplishing organizational
purpose.
4. The next step, strategy implementation, is putting formulated strategies into action.
5. The fifth and final step is strategy control, which consists of monitoring and evaluating the
strategic management process to ensure that it is operating properly.
87) What are the main strategy formulation tools of strategic management?
Answer: Strategy formulation is the process of determining appropriate courses of action for
achieving organizational objectives, and thereby accomplishing organizational purposes.
1. One tool of strategy formulation is Critical Question Analysis. This process asks four basic
questions about the present purposes and objectives of the organization, its present direction and
environment, and actions that can be taken to achieve organizational goals in the future.
2. Another tool is SWOT analysis, a strategy development tool that identifies and matches the
organization's internal strengths and weaknesses with external opportunities and threats.
3. The third strategy formulation tool is a business portfolio analysis that bases business
strategies primarily upon the market share that a significant organizational segment enjoys, and
the growth of the market in which the business exists.
88) What is the BCG Growth-Share Matrix? Explain what stars, question marks, cash cows, and
dogs are. According to the BCG Growth-Share Matrix, what should managers do with each of
these?
Answer: The Boston Consulting Group (BCG), a leading manufacturing consulting firm,
developed and popularized a portfolio analysis tool that helps managers develop organizational
strategy based on market share of businesses and the growth of markets in which businesses
exist.
The first step in using the BCG Growth-Share Matrix is identifying the organization's strategic
business units (SBUs). A strategic business unit is a significant organization segment that is
analyzed to develop organizational strategy aimed at generating future business or revenue.
After SBUs have been identified for a particular organization, the next step in using the BCG
Matrix is to categorize each SBU within one of the four matrix quadrants: star, cash cow,
question mark, and, dog.
1. An SBU that is a star has a high share of a high-growth market and typically needs large
amounts of cash to support rapid and significant growth. Stars also generate large amounts of
cash for the organization and are usually segments in which management can make additional
investments and earn attractive returns.
2. An SBU that is a cash cow has a large share of a market that is growing only slightly.
Naturally, these SBUs provide the organization with large amounts of cash, but because their
market is not growing significantly, the cash is generally used to meet the financial demands of
the organization in other areas, such as the expansion of a star SBU.
3. An SBU that is a question mark has a small share of a high-growth market. They are dubbed
question marks because it is uncertain whether management should invest more cash in them to
gain a larger share of the market or deemphasize or eliminate them. Management will choose the
first option when it believes it can turn the question mark into a star, and the second when it
thinks further investment would be fruitless.
4. An SBU that is a dog has a relatively small share of a low-growth market. They may barely
support themselves; in some cases, they actually drain off cash resources generated by other
SBUs.
89) Compare and contrast strategic and tactical planning.
Answer: 1. Strategic planning is long-range planning (three to five years) that focuses on the
organization as a whole and tactical planning is short-range (one year or less) planning that
emphasizes the current operations of various parts of the organization.
2. Because upper-level managers generally have a better understanding of the organization as a
whole than lower-level managers do, and because lower-level managers generally have a better
understanding of the day-to-day organizational operations than upper-level managers do,
strategic plans are usually developed by upper-level management and tactical plans by lowerlevel management.
3. Strategic planning emphasizes analyzing the future and tactical planning emphasizes analyzing
the everyday functioning of the organization. Because of this, facts on which to base strategic
plans are usually more difficult to gather than are facts on which to base tactical plans.
4. Strategic plans are generally less detailed than tactical plans because strategic plans are based
primarily on a prediction of the future and tactical plans on known circumstances that exist
within the organization.
90) What is competitive dynamics? Briefly describe the factors that influence a firm's action or
reaction?
Answer: Competitive dynamics refers to the process by which firms undertake strategic and
tactical actions and how competitors respond to these actions. The study of competitive
dynamics is important in order to understand why managers undertake such actions. Inevitably, it
is these actions and reactions that influence a firm's ultimate financial performance.
Research suggests that three primary factors influence a firm's action or reaction: awareness,
motivation, and capability. Competitor awareness refers to how mindful a company is of its
competitor's actions. Competitor motivation refers to the incentives that an organization has to
take action. Competitor capability refers to a firm's ability to undertake an action.
Test Bank for Modern Management: Concepts and Skills
Samuel C. Certo, S. Trevis Certo
9780133059922, 9780133254105, 9780135983546
