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Chapter Test
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1
Which of the following statements about a company's strategy is true?
A)Crafting an excellent strategy is more important than executing it well.
B)Managers at all companies face three central questions in thinking strategically about their company's present circumstances and prospects: What's the company's present situation? Where does the company need to go from here? How should it get there?
C)A company's strategy deals with whether the revenue-cost-profit economics of its business model demonstrate the viability of the business enterprise as a whole.
D)Masterful strategies come partly (maybe mostly) by doing things in much the same way as the industry leader but then being better than the leader in one particular area that counts heavily with buyers.
E)Whether a company's strategy is ethical or not does not matter a lot because most customers and most suppliers are relatively unconcerned whether a company they do business with engages in sleazy practices or turns a blind eye to below-board behavior on the part of its employees.
2
The competitive moves and business approaches a company's management are using grow the business, attract and please customers, compete successfully, conduct operations, and achieve the targeted levels of organizational performance is referred to as its
A)strategic offensive for becoming a market leader.
B)business model.
C)long-term strategic direction.
D)mission statement.
E)strategy.
3
Which one of the following is not related to actions and approaches that comprise a company's strategy?
A)How management intends to grow the business
B)How to prove to shareholders that the company's business model is viable
C)How to build a loyal clientele and outcompete rivals
D)How to boost the company's performance
E)How each functional piece of the business (R&D, supply chain activities, production, sales and marketing, distribution, finance, and human resources) will be operated
4
In committing to a particular strategy, a company's managers are in effect saying
A)"This is where we are headed and we have a plan for getting where we want to go.''
B)"We have a plan for being a winner in the marketplace and our extensive analysis of the company's situation indicates it will work."
C)"This is who we are, what we do, and where we are headed."
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 current business model, but it will probably have to be modified as market conditions change."
5
The heart and soul of any strategy is
A)to identify actions and operating approaches that will validate the company's business model work.
B)to identify business approaches that will produce good bottom-line results.
C)the actions and moves in the marketplace that managers are taking to improve the company's financial performance, strengthen its long-term competitive position, and gain a competitive edge over rivals.
D)the actions a company takes to steal substantial sales and market share away from rivals.
E)pursuing competitive maneuvers that will make the company a market leader.
6
Which of the following is not one of the most frequently used strategic approaches to building competitive advantage?
A)Striving for a competitive edge based on bigger profit margins
B)Developing expertise and resource strengths that give the company competitive capabilities that rivals can't easily imitate or trump with capabilities of their own
C)Striving to be the industry's low-cost provider, thereby aiming for a cost-based competitive advantage over rivals
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)Outcompeting rivals based on differentiating features
7
A company's strategy and its quest for competitive advantage are tightly related because
A)a company's strategy determines whether it will have lower or higher costs than rivals and thus be at a competitive advantage or disadvantage.
B)competitive advantage is essential to having a profitable business model.
C)choosing a competitive advantage to pursue also helps a company choose which business model is most appropriate.
D)competitive advantage enables a company to achieve its strategic objectives.
E)a company is almost certain to have better profits and financial performance when its strategy produces a competitive advantage over rivals.
8
A company achieves sustainable competitive advantage when
A)it has a low-cost business model.
B)it is able to increase shareholder value.
C)sufficient numbers of buyers believe the company has demonstrated a commitment to environmental sustainability.
D)it is consistently able to achieve both its strategic and financial objectives.
E)an attractive number of buyers have a lasting preference for its products or services as compared to the offerings of competitors
9
Which one of the following is not something to look for in identifying a company's strategy?
A)Its actions to enter new geographic or product markets or exit existing ones and its actions to form strategic alliances and collaborative partnerships
B)Its actions to merge with or acquire another company in order to strengthen the company's business position
C)Its actions to capture emerging market opportunities and defend against external threats to the company's business prospects
D)The company's actions to validate and improve upon its business model
E)The actions and approaches that define how a company manages such functions as R&D, production, sales and marketing, and finance
10
Company strategies evolve because
A)it is a bad idea to do too much strategizing until a company has been in business long enough to know what strategies will work best.
B)most managers like to develop the strategy in bits and pieces rather than all at once.
C)of the ongoing need to respond to changing market conditions, advancing technology, the fresh moves of competitors, shifting buyer needs and preferences, emerging market opportunities, new ideas for improving the strategy, and any evidence that indicates the strategy is not working well.
D)many managers are conservative, preferring to carefully contemplate the best responses to new developments and avoiding the risks associated with developing a complete strategy too quickly.
E)a strategy does not really transition to a well-crafted stage until a company has been trying to execute it for a number of years and has learned what works and what doesn't.
11
It is normal for a company's strategy to end up being
A)little different from management's original planned set of actions and business approaches since making on-the-spot changes is too risky.
B)a combination of defensive moves to protect the company's market share and offensive initiatives to set the company's product offering apart from rivals.
C)pretty much like the strategies of other industry members since all companies are confronting much the same market conditions and competitive pressures.
D)a blend of proactive actions to improve the company's competitiveness and financial performance and as-needed reactions to unanticipated developments and fresh market conditions.
E)a mirror image of its business model, so as to avoid impairing company profitability.
12
A company's strategy can be considered "ethical"
A)if all of its different actions and elements are legal and in compliance with governmental rules and regulations.
B)so long as its actions and behaviors can pass the test of "moral scrutiny" and are aboveboard in the sense of not being shady or unconscionable, injurious to others, or unnecessarily harmful to the environment.
C)only if all elements of the strategy are in accord with what is generally considered as being in the overall best interests of society at large.
D)so long as religious authorities and noted ethics experts find nothing "wrong" in the company's actions.
E)if it in compliance with the company's code of ethics and has been approved by the company's chief ethics officer.
13
In crafting an ethical strategy, company managers
A)must ensure that each piece of the strategy entails actions and behaviors that are within the letter and spirit of the law.
B)are well advised to implement managerial training sessions that help define what strategic actions are ethical (and which will be pursued) and which are unethical (and will not be tolerated).
C)are well advised to have environmental groups and consumer protection agencies "certify" the company's primary business approaches.
D)have to go beyond what strategic actions and behaviors are legal and address whether all the various elements of the company's strategy can pass the test of moral scrutiny.
E)have to back off aggressive efforts to maximize profits.
14
A company's business model
A)determines whether its strategy will be ethical or not.
B)is management's storyline for how the strategy will result in achieving sustainable competitive advantage.
C)is management's rationale for how the strategy will be a moneymaker—absent the ability to deliver good profitability, the strategy is not viable and the survival of the business is in doubt.
D)identifies how the company plans to outmaneuver and outcompete key rivals and become a market leader.
E)sets forth the actions and approaches that it will rely on to earn the best profit margins in the industry.
15
The difference between a company's strategy and a company's business model is that
A)strategy relates broadly to a company's action plan for running the business and building competitive advantage, while its business model relates to whether the revenues and costs flowing from the strategy will allow the business to earn satisfactory profits and returns on investment.
B)the strategy concerns how to achieve the company's vision and the business model concerns how to operate efficiently.
C)a company's strategy is management's game plan for building shareholder value whereas a company's business model is the game plan for accomplishing the business purpose or mission.
D)a company's strategy is developed by the board of directors and chief executive officer while its business model is developed by line managers.
E)a company's strategy concerns how to please customers while its business model concerns how to please shareholders.
16
A viable business model
A)is derived from the company's strategic vision.
B)lays out a compelling case for how the strategy will yield competitive advantage.
C)should explain how the company will achieve high profit margins while at the same time charging relatively low prices to customers.
D)must be closely linked to the company's business strategy.
E)must generate revenues sufficient to cover costs and deliver good profitability.
17
Which of the following statements concerning Microsoft's business model and Red Hat's business model (as discussed in Illustration Capsule 1.2) is false?
A)Microsoft has a proven business model while Red Hat's business model is unproven.
B)Microsoft's business model involves employing a cadre of highly skilled programmers to develop proprietary code; keeping the source code hidden from customers/users, and locking them in to using Microsoft's proprietary software.
C)Most of Microsoft's costs arise on the front end in developing the software and are thus "fixed"; the variable costs of producing and packaging the CDs provided to users are only a couple of dollars per copy—once the breakeven volume is reached, Microsoft's revenues from additional sales are almost pure profit.
D)Red Hat relies on the collaborative efforts of volunteer programmers from all over the world who contribute bits and pieces of code to improve and polish the Linux system.
E)Red Hat's business model is predicated on closely guarding its source code while Microsoft is a strong advocate of open or free source code.
18
A winning strategy is one that
A)makes the company a market leader, is ethically and socially responsible, and maximizes profits.
B)is highly profitable and boosts the company's market share.
C)passes the profitability test, the ethics and social responsibility test, the customer satisfaction test, and the shareholder wealth test.
D)fits the company's internal and external situation, builds sustainable competitive advantage, and boosts company performance.
E)passes the ethical standards test, the competitive advantage test, and the profitability test.
19
Crafting and executing strategy are top-priority managerial tasks because
A)how managers go about the tasks of crafting and executing strategy sends a message to shareholders and the entire investment community regarding "what it is we are trying to do and how we plan to achieve our objectives."
B)The company is unlikely to be profitable unless senior executives have a clear answer to "where are we headed, how do we plan to get there, and when do we expect to arrive?"
C)there is a compelling need for managers to proactively shape how the company's business will be conducted and because a strategy-focused organization is more likely to be a strong bottom-line performer.
D)without clear guidance as to what the company's business model and strategy are, managerial decision-making is likely to be haphazard and inconsistent.
E)a company cannot hope to be a market leader if all it does is respond to changing market conditions, new technologies, new opportunities, and threatening moves on the part of competitors.
20
The most trustworthy signs of a well-managed company are
A)a strong emphasis on offensive strategies rather than defensive strategies.
B)a strategy matched to fast-evolving market conditions and bigger profit margins than rivals and a steady upward trend in net income.
C)attractive bottom-line performance and a proven business model.
D)good strategy and good strategy execution.
E)having a profitable business model, a willingness to change the company's business model whenever circumstances warrant, and having a sustainable competitive advantage.







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