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35. (p. 161) The primary aim of strategic management at the business level is
A. maximizing risk-return tradeoffs through diversification.
B. achieving a low cost position.
C. maximizing differentiation of products and/or services.
D. achieving competitive advantage(s).
D
36. (p. 164) Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities that include expertise in process engineering (technology development) characterize what generic strategy?
A. differentiation
B. overall cost leadership
C. differentiation focus
D. stuck-in-the-middle
B
37. (p. 165) A manufacturing business pursuing cost leadership will likely
A. focus on a narrow market segment.
B. rely on experience effects to raise efficiency.
C. use advertising to build brand image.
D. put heavy emphasis on product engineering.
B
38. (p. 165) One aspect of using a cost leadership strategy is that experience effects may lead to lower costs. Experience effects are achieved by
A. hiring more experienced personnel.
B. repeating a process until a task becomes easier.
C. spreading out a given expense or investment over a greater volume.
D. competing in an industry for a long time.
B
39. (p. 165) The experience curve suggests that cutting prices is a good strategy
A. if it can induce greater demand and thereby help a firm travel down the experience curve faster.
B. in industries characterized by high economies of scale.
C. in the maturity stage of the industry life cycle.
D. in the decline stage of the industry life cycle.
A
40. (p. 168) Convincing rivals not to enter a price war, protection from customer pressure to lower prices, and the ability to better withstand cost increases from suppliers characterize which type of competitive strategy?
A. Overall cost leadership.
B. Differentiation.
C. Differentiation focus.
D. Cost leadership focus.
A
41. (p. 168-169) Which of the following is a risk (or potential pitfall) of cost leadership?
A. Cost cutting may lead to the loss of desirable features.
B. Attempts to stay ahead of the competition may lead to gold plating.
C. Cost differences increase as the market matures.
D. Producers are more able to withstand increases in suppliers' cost.
A
42. (p. 169) A firm can achieve differentiation through all of the following means EXCEPT
A. improving brand image.
B. better customer service.
C. offering lower prices to frequent customers.
D. adding additional product features.
C
43. (p. 170) Support value chain activities that involve excellent applications engineering support (technology development) and facilities that promote a positive firm image (firm infrastructure) characterize what generic strategy?
A. Differentiation.
B. Overall cost leadership.
C. Differentiation focus.
D. Stuck-in-the middle.
A
44. (p. 171) High product differentiation is generally accompanied by
A. higher market share.
B. decreased emphasis on competition based on price.
C. higher profit margins and lower costs.
D. significant economies of scale.
B
45. (p. 171) Which of the following is FALSE regarding how a differentiation strategy can help a firm to improve its competitive position vis-à-vis Porter's five forces?
A. By increasing a firm's margins, it avoids the need for a low cost position.
B. It helps a firm to deal with supplier power and reduces buyer power since buyers lack comparable alternatives.
C. Supplier power is increased because suppliers will be able to charge higher prices for their inputs.
D. Firms will enjoy high customer loyalty, thus experiencing less threat from substitutes than its competitors.
C
46. (p. 171) A differentiation strategy enables a business to address the five competitive forces by
A. lessening competitive rivalry by distinguishing itself.
B. having brand-loyal customers become more sensitive to prices.
C. increasing economies of scale.
D. serving a broader market segment.
A
47. (p. 172-174) All of the following are potential pitfalls of a differentiation strategy EXCEPT:
A. uniqueness that is not valuable.
B. too high a price premium.
C. all rivals share a common input or raw material.
D. perceptions of differentiation may vary between buyers and sellers.
C
48. (p. 174) Which statement regarding competitive advantages is true?
A. If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.
B. With an overall cost leadership strategy, firms need not be concerned with parity on differentiation.
C. In the long run, a business with one or more competitive advantages is probably destined to earn normal profits.
D. Attaining multiple types of competitive advantage is a recipe for failure.
A
49. (p. 174-175) A narrow market focus is to a differentiation-based strategy as a
A. broadly-defined target market is to a cost leadership strategy.
B. growth market is to a differentiation-based strategy.
C. growth market is to a cost-based strategy.
D. technological innovation is to a cost-based strategy.
A
50. (p. 174) A firm following a focus strategy
A. must focus on governmental regulations.
B. must focus on a market segment or group of segments.
C. must focus on the rising cost of inputs.
D. must avoid entering international markets.
B
51. (p. 175-176) All of the following are potential pitfalls of a focus strategy EXCEPT
A. erosion of cost advantages within the narrow segment.
B. all rivals share a common input or raw material.
C. even product and service offerings that are highly focused are subject to competition from new entrants and from imitation.
D. focusers can become too focused to satisfy buyer needs.
B
52. (p. 163) Research has consistently shown that firms that achieve both cost leadership and differentiation advantages tend to perform
A. at about the same level as firms that achieve either cost or differentiation advantages.
B. about the same as firms that are "stuck-in-the-middle."
C. lower than firms that achieve differentiation advantages but higher than firms that achieve cost advantages.
D. higher than firms that achieve either a cost or a differentiation advantage.
D
53. (p. 176-178) The text discusses three approaches to combining overall cost leadership and differentiation competitive advantages. These are the following EXCEPT
A. automated and flexible manufacturing systems.
B. exploiting the profit pool concept for competitive advantage.
C. coordinating the "extended" value chain by way of information technology.
D. deriving benefits from highly focused and high technology markets.
D
54. (p. 177) A __________ can be defined as the total profits in an industry at all points along the industry's value chain.
A. profit maximizer
B. revenue enhancer
C. profit pool
D. profit outsourcing
C
56. (p. 183) Which of the following is NOT one of the ways the Internet is lowering transaction costs?
A. eliminating supply chain intermediaries
B. evaluating employee performance
C. minimizing office expenses
D. reducing business travel
B
57. (p. 183) Dell Computer has an online ordering system that allows consumers to configure their own computers before Dell builds them. This capability is an example of
A. electronic data interchange.
B. knowledge management.
C. collaborative design.
D. mass customization.
D
58. (p. 183) Which of the following methods of implementing a differentiation strategy has been greatly enhanced because of Internet technologies?
A. celebrity endorsements
B. prestige packaging
C. exceptional service
D. mass customization
D
59. (p. 184) Which of the following phrases best completes this sentence: Because of the Internet, firms that use a focus strategy have new opportunities to
A. respond quickly to customer requests.
B. provide more services and features.
C. access markets less expensively.
D. access niche markets in a highly specialized fashion.
D
60. (p. 185) One of the reasons the Internet is eroding sustainable competitive advantages is
A. incumbent firms are entering market segments that they previously considered to be too small.
B. nearly all competitors will have greater access to tools for managing costs making it hard for any one to achieve an advantage.
C. differentiators have been able to preserve the unique advantages that have always been the hallmark of their success.
D. firms are ignoring opportunities to offer high-end services in niche markets.
B
61. (p. 187) Which of these statements regarding the industry life cycle is correct?
A. Part of the power of the market life cycle is its ability to serve as a short-run forecasting device.
B. Trends suggested by the market life cycle model are generally not reversible or repeatable.
C. It has important implications for a firm's generic strategies, functional areas, value-creating activities, and overall objectives.
D. It points out the need to maintain a differentiation advantage and a low cost advantage simultaneously.
C
62. (p. 187) Which of the following statements about the introduction stage of the market life cycle is TRUE?
A. It produces relatively large, positive cash flows.
B. Strong brand recognition seldom serves as an important switching cost.
C. Market share gains by pioneers are usually easily sustained for many years.
D. Products or services offered by pioneers may be perceived as differentiated simply because they are new.
D
63. (p. 187) In the __________ stage of the industry life cycle, the emphasis on product design is very high, the intensity of competition is low, and the market growth rate is low.
A. introduction
B. growth
C. maturity
D. decline
A
64. (p. 189) The growth stage of the industry life cycle is characterized by
A. "in-kind" competition (from the same type of product).
B. premium pricing.
C. a growing trend to compete on the basis of price.
D. retaliation by competitors whose customers are stolen.
A
65. (p. 188) In the __________ stage of the industry life cycle, there are many segments, competition is very intense, and the emphasis on process design is high.
A. introduction
B. growth
C. maturity
D. decline
C
66. (p. 189) In a given market, key technology no longer has patent protection, experience is not an advantage, and there is a growing need to compete on price. What stage of its life cycle is the market in?
A. introduction
B. growth
C. maturity
D. decline
C
67. (p. 189) A market that mainly competes on the basis of price and has stagnant growth is characteristic of what life cycle stage?
A. introduction
B. growth
C. maturity
D. decline
C
68. (p. 189) As markets mature,
A. costs continue to increase.
B. application for patents increase.
C. differentiation opportunities increase.
D. there is increasing emphasis on efficiency.
D
69. (p. 189) The size of pricing and differentiation advantages between competitors decreases in which stage of the market life cycle?
A. introduction
B. growth
C. maturity
D. decline
C
70. (p. 189) Which of the following is most often true of mature markets?
A. Some competitors enjoy a significant operating advantage due to increasing experience effects.
B. The market supports premium pricing, which attracts additional competitors.
C. Advantages that cannot be duplicated by other competitors are difficult to achieve.
D. The magnitude of pricing differences and product differentiation is larger than in the growth stage.
C
71. (p. 191) In the __________ stage of the industry life cycle, there are few segments, the emphasis on process design is low, and the major functional areas of concern are general management and finance.
A. introduction
B. growth
C. maturity
D. decline
D
72. (p. 191) The most likely time to pursue a harvest strategy is in a situation of
A. high growth.
B. strong competitive advantage.
C. mergers and acquisitions.
D. decline in the market life cycle.
D
73. (p. 192) During the decline stage of the industry life cycle, __________ refers to obtaining as much profit as possible and requires that costs be decreased quickly.
A. maintaining
B. harvesting
C. exiting
D. consolidating
B
74. (p. 193) Research shows that the following are all strategies used by firms engaged in successful turnarounds EXCEPT
A. asset and cost surgery.
B. selective product and market pruning.
C. global expansion.
D. piecemeal productivity improvements.
C
75. (p. 193) Piecemeal productivity improvements during a turnaround typically does NOT involve
A. business process reengineering.
B. increased capacity utilization.
C. benchmarking.
D. expansion of a firm's product market scope.
D
31. (p. 201) Corporate-level strategy addresses two related issues:
A. how to compete in a given business; the application of technology.
B. what businesses to compete in; how these businesses can achieve synergy.
C. how to integrate primary activities; increase shareholder wealth.
D. how to improve a firm's infrastructure; how to maintain ethical behavior.
B
32. (p. 204) Individual investors are dependent upon the corporation's managers to
A. diversify the stockholder's investments in order to reduce risk.
B. add value to their investments in a way that the stockholders could not accomplish on their own.
C. achieve risk reduction at a lower cost than stockholders could obtain on their own.
D. maximize short-term returns in the form of dividends.
B
34. (p. 206) Philip Morris bought Miller Brewing and used its marketing expertise to improve Miller's market share. This justification for diversification is best described as
A. utilizing common infrastructures.
B. capitalizing on core competencies.
C. reducing corporate risk.
D. using portfolio analysis.
B
35. (p. 205) The corporate office of Cooper Industries adds value to its acquired businesses by performing such activities as auditing their manufacturing operations, improving their accounting activities, and centralizing union negotiations. This is an example of
A. achieving economies of scope through related diversification.
B. achieving market power through related diversification.
C. attaining the benefits of horizontal integration.
D. attaining the benefits of parenting through unrelated diversification.
D
36. (p. 206) __________ reflect(s) the collective learning in organizations such as how to coordinate production skills, integrate multiple streams of technologies, and market and merchandise diverse products and services.
A. Primary value chain activities
B. Culture
C. Core competencies
D. Horizontal integration
C
37. (p. 206-207) For a core competence to be a viable basis for the corporation strengthening a new business unit, there are three requirements. Which one of the following is not one of these requirements?
A. The competence must help the business gain strength relative to its competition.
B. The new business must be similar to existing businesses to benefit from a core competence.
C. The collection of competencies should be unique, so that they cannot be easily imitated.
D. The new business must have an established large market share.
D
38. (p. 207) Sharing core competencies is one of the primary potential advantages of diversification. In order for diversification to be most successful, it is important that
A. the similarity required for sharing core competencies must be in the value chain, not in the product.
B. the products use similar distribution channels.
C. the target market is the same, even if the products are very different.
D. the methods of production are the same.
A
39. (p. 208) When management uses common production facilities or purchasing procedures to distribute different but related products, they are
A. building on core competencies.
B. sharing activities.
C. achieving process gains.
D. using portfolio analysis.
B
40. (p. 210)
Shaw Industries, a giant carpet manufacturer, increases its control over raw materials by producing much of its own polypropylene fiber, a key input into its manufacturing process. This is an example of

A. leveraging core competencies.
B. sharing activities.
C. vertical integration.
D. pooled negotiating power.
C
41. (p. 212) The risks of vertical integration include all of the following EXCEPT
A. costs and expenses associated with increased overhead and capital expenditures.
B. lack of control over valuable assets.
C. problems associated with unbalanced capacities along the value chain.
D. additional administrative costs associated with managing a more complex set of activities.
B
42. (p. 212) Unbalanced capacities that limit cost savings, difficulties in combining specializations, and reduced flexibility are disadvantages associated with
A. strategic alliances.
B. divestment.
C. vertical integration.
D. horizontal integration.
C
43. (p. 213) A firm should consider vertical integration when

A. the competitive situation is highly volatile.
B. customer needs are evolving.
C. the firm's suppliers willingly cooperate with the firm.
D. the firm's suppliers of raw materials are often unable to maintain quality standards.
D
44. (p. 214) It may be advantageous to vertically integrate when

A. lower transaction costs and improved coordination are vital and achievable through vertical integration.
B. the minimum efficient scales of two corporations are different.
C. flexibility is reduced, providing a more stationary position in the competitive environment.
D. various segregated specializations will be combined.
A
45. (p. 213) Transaction costs include all of the following costs EXCEPT
A. search costs.
B. negotiating costs.
C. monitoring costs.
D. agency costs.
D
46. (p. 214) Vertical integration is attractive when
A. transaction costs are higher than internal administrative costs.
B. internal administrative costs are higher than transaction costs.
C. transaction costs and internal administrative costs are equal.
D. search costs are higher than monitoring costs.
A
47. (p. 214-215) __________ is when a firm's corporate office helps subsidiaries make wise choices in their own acquisitions, divestures, and new ventures.
A. Parenting
B. Restructuring
C. Leveraging core competencies
D. Increasing market power
A
48. (p. 215) __________ is when a firm tries to find and acquire either poorly performing firms with unrealized potential or firms in industries on the threshold of significant, positive change.
A. Parenting
B. Restructuring
C. Leveraging core competencies
D. Sharing activities
B
49. (p. 215) According to the text, corporate restructuring includes
A. capital restructuring, asset restructuring, and technology restructuring.
B. global diversification, capital restructuring, and asset restructuring.
C. management restructuring, financial restructuring, and procurement restructuring.
D. capital restructuring, asset restructuring, and management restructuring.
D
50. (p. 216) Portfolio management matrices are applied to what level of strategy?
A. Departmental level
B. Business level
C. Corporate level
D. International level
C
51. (p. 217) When using a BCG matrix, a business that currently holds a large market share in a rapidly growing market and that has minimal or negative cash flow would be known as a
A. cow.
B. dog.
C. problem child.
D. star.
D
52. (p. 217) In the BCG (Boston Consulting Group) Matrix, a business that has a low market share in an industry characterized by high market growth is termed a
A. star.
B. question mark.
C. cash cow.
D. dog.
B
53. (p. 219) Portfolio management frameworks (e.g., BCG matrix) share which of the following characteristics?
A. Grid dimensions are based on external environments and internal capabilities/market positions.
B. Businesses are plotted on a 3-dimensional grid.
C. Position in the matrix suggests a need for, or ability to share, infrastructures or build on core competences.
D. They are most helpful in helping businesses develop types of competitive advantage.
A
54. (p. 217) A "cash cow," referred to in the Boston Consulting Group Portfolio management technique, refers to a business that has
A. low market growth and relatively high market share.
B. relatively low market share and low market growth.
C. relatively low market share and high market growth.
D. high market growth and relatively high market share.
A
55. (p. 217) In managing a firm's portfolio, the BCG matrix would suggest that
A. "dogs" should be invested in to increase market share and become cash cows.
B. "stars" are in low growth markets and can provide excess cash to fund other opportunities.
C. "question marks" can represent future "stars" if their market share is increased.
D. "cash cows" require substantial cash outlays to maintain market share.
C
56. (p. 217) In the Boston Consulting Group's (BCG) Growth Share Matrix, the suggested strategy for "stars" is to
A. milk them to finance other businesses.
B. invest large sums to gain a good market share.
C. not invest in them and to shift cash flow to other businesses.
D. maintain position and after the market growth slows use the business to provide cash flow.
D
57. (p. 218) All of the following are limitations (or downsides) of the BCG (Boston Consulting Group) matrix EXCEPT

A. every business cannot be accurately measured and compared on the two dimensions.
B. it views each business as a stand-alone entity and ignores the potential for synergies across businesses.
C. it takes a dynamic view of competition which can lead to overly complex analyses.
D. while easy to comprehend, the BCG matrix can lead to some troublesome and overly simplistic prescriptions.
C
58. (p. 220) The three primary means by which a firm can diversify are:

A. mergers and acquisitions; joint ventures and strategic alliances; internal development.
B. mergers and acquisitions; differentiation; overall cost leadership.
C. joint ventures and strategic alliances; integration of value chain activities; acquiring human capital.
D. mergers and acquisitions; internal development; differentiation.
A
59. (p. 223-224) The downsides or limitations of mergers and acquisitions include all of the following EXCEPT:
A. expensive premiums that are frequently paid to acquire a business.
B. difficulties in integrating the activities and resources of the acquired firm into a corporation's on-going operations.
C. it is a slow means to enter new markets and acquire skills and competences.
D. there can be many cultural issues that can doom an otherwise promising acquisition.
C
60. (p. 225) Divesting businesses can accomplish many different objectives, including
A. enabling managers to focus their efforts more directly on the firm's core businesses.
B. providing the firm with more resources to spend on more attractive alternatives.
C. raising cash to help fund existing businesses.
D. all of these.
D
61. (p. 227) A company offering local telecommunications service combines resources with an international company that manufactures digital switching equipment to research a new type of telecommunications technology. This is an example of
A. joint diversification.
B. strategic alliance.
C. divestment.
D. global integration.
B
62. (p. 226) Cooperative relationships such as __________ have the potential advantages such as entering new markets, reducing manufacturing (or other) costs in the value chain, and developing and diffusing new technologies.
A. joint ventures
B. mergers and acquisitions
C. strategic alliances
D. both joint ventures and strategic alliances
D
63. (p. 228) All of the following are guidelines for managing strategic alliances EXCEPT
A. establishing a clear understanding between partners.
B. relying primarily on a contract to make the joint venture work.
C. not shortchanging your partner.
D. working hard to ensure a collaborative relationship between partners.
B
64. (p. 228) Which of the following statements regarding internal development as a means of diversification is FALSE?
A. Many companies use internal development to extend their product lines or add to their service offerings.
B. An advantage of internal development is that it is generally faster than other means of diversification and firms can benefit from speed in developing new products and services.
C. The firm is able to capture the wealth created without having to "share the wealth" with alliance partners.
D. Firms can often develop products or services at a lower cost if they rely on their own resources instead of external funding.
B
65. (p. 228) __________ may be time consuming and, therefore, firms may forfeit the benefits of speed that growth through __________ and __________ can provide.
A. Strategic alliances; joint ventures; internal development
B. Internal development; mergers; acquisitions
C. Strategic alliances; mergers; joint ventures
D. Mergers; internal development; strategic alliances
B
66. (p. 229)
According to Michael Porter: "There's a tremendous allure to __________. It's the big play, the dramatic gesture. With one stroke of the pen you can add billions to size, get a front page story, and create excitement in markets."

A. strategic alliances and joint ventures
B. mergers and acquisitions
C. internal development
D. differentiation strategies
B
67. (p. 232) An antitakeover tactic called (a) __________ is when a firm offers to buy shares of their stock from a company (or individual) planning to acquire their firm at a higher price than the unfriendly company paid for it.
A. golden parachute
B. greenmail
C. poison pill
D. scorched earth
B
68. (p. 232) An antitakeover tactic in which existing shareholders have the option to buy additional shares of stock at a discount to the current market price is called
A. greenmail.
B. a poison pill.
C. a golden parachute.
D. scorched earth.
B
69. (p. 232) The term "golden parachutes" refers to
A. a clause requiring that huge dividend payments be made upon takeover.
B. financial inducements offered by a threatened firm to stop a hostile suitor from acquiring it.
C. managers of a firm involved in a hostile takeover approaching a third party about making the acquisition.
D. pay given to executives fired because of a takeover.
D
70. (p. 232) Antitakeover tactics include all of the following EXCEPT
A. greenmail.
B. golden parachutes.
C. golden handcuffs.
D. poison pills.
C