217

SAMPLE COMPREHENSIVE EXAM

CHAPTERS 6 - 9
True/False
1.

Good intuitive judgment is always needed to determine appropriate weights and

ratings in the input stage matrices.
Ans: T

2.

Both IE and BCG Matrices are called portfolio matrices.

Ans: T

3.

Page: 307

A projected financial analysis can be used to forecast the impact of various

implementation decisions.
Ans: T

8.

Page: 275

Market penetration can be defined as the subdividing of a market into distinct

subsets of customers according to needs and buying habits.
Ans: F

7.

Page: 269

The most complex of all designs is a matrix structure.

Ans: T

6.

Page: 262

Conflict of any kind is avoidable in organizations.

Ans: F

5.

Page: 233

Strategy formulation is the managing of forces during the action, whereas strategy
implementation is the positioning of forces before the action.
Ans: F

4.

Page: 220

Page: 318

A recommended approach for determining a firms worth is to base the analysis on

the selling price of a similar company.
Ans: T

Page: 322

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9.

Because large companies have more at stake, it is more important for large
organizations to conduct strategy evaluation than small companies.
Ans: F

10.

Page: 339

The strategic management process should be completely open because

participation and openness enhance understanding, commitment, and
communication within the firm.
Ans T:

Page 354

Multiple Choice
11.

Which stage in the strategy-formulation framework focuses on generating feasible

alternative strategies?
a.
Input
b.
Output
c.
Decision
d.
Throughput
e.
Matching
Ans: e

12.

Which strategy formulation technique reveals the relative attractiveness of

alternative strategies and thus provides an objective basis for selecting specific
strategies?
a.
SWOT
b.
SPACE
c.
QSPM
d.
IFE
e.
CPM
Ans: c

13.

Page: 219

Page: 219

Which section of the SWOT Matrix involves matching internal strengths with
external opportunities?
a.
The WT cell
b.
The SW cell
c.
The WO cell
d.
The ST cell
e.
The SO cell
Ans: e

Page: 221

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14.

The two internal dimensions represented on the axes of the SPACE Matrix are
_____.
a.
environmental stability and industry strength
b.
industry strength and internationalization
c.
internationalization and competitive advantage
d.
competitive advantage and financial strength
e.
financial strength and environmental stability
Ans: d

15.

An organization that has a low relative market share position and competes in a
slow-growth industry is referred to as a _____.
a.
dog
b.
question mark
c.
star
d.
cash cow
e.
cowboy
Ans: a

16.

Page: 231

For companies located in Quadrant III of the Grand Strategy Matrix, the first
strategy recommended is _____.
a.
extensive cost and asset reduction
b.
asset expansion
c.
employee expansion
d.
immediate liquidation of assets
e.
divestiture
Ans: a

17.

Page: 225

Page: 238

Through which tactic is it possible to achieve similar results using different means
or paths?
a.
Generalization
b.
Satisficing
c.
Focus on higher-order issues
d.
Equifinality
e.
Specialization
Ans: d

Page: 246

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18.

What are guidelines, methods, procedures, rules, forms and administrative

practices known as?
a.
Long-term objectives
b.
Policies
c.
Annual objectives
d.
Strategies
e.
Goals
Ans: b

19.

Which approach for managing and resolving conflict involves exchanging

members of conflicting parties of that each can gain an appreciation of the others
point of view?
a.
Avoidance
b.
Resistance
c.
Compliance
d.
Diffusion
e.
Confrontation
Ans: e

20.

Page 269-270

Which approach for managing and resolving conflict involves playing down
differences between conflicting parties while accentuating similarities and
common interests?
a.
Avoidance
b.
Resistance
c.
Compliance
d.
Diffusion
e.
Confrontation
Ans: d

21.

Page: 266

Page 269-270

What type of organizational structure do most small businesses follow?

a.
Divisional structure by product
b.
Functional structure
c.
Divisional structure by customer
d.
Process type structure
e.
Matrix structure
Ans: b

Page: 271

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22.

A divisional structure by geographic area is most appropriate when _____.

a.
organizations have similar branch facilities located in widely dispersed areas
b.
an organization offers only a limited number of products or services
c.
strict control and attention to product lines are needed
d.
an organization has many skilled managers
e.
the firm serves one geographic area
Ans: a

23.

What action involves reconfiguring or redesigning work, jobs and processes for
the purpose of improving costs, quality, service and speed?
a.
Restructuring
b.
Downsizing
c.
Reengineering
d.
Delayering
e.
Benchmarking
Ans: c

24.

Page: 280

A change strategy that attempts to convince people the change is to their personal
advantage is _____.
a.
diffusion
b.
force
c.
educative
d.
rational
e.
compromise
Ans: d

25.

Page: 273

Page: 283-284

Which strategy could be best defined as an effective, multi-method technique of

studying and altering a firms culture?
a.
Benchmarking
b.
Delivering
c.
Triangulation
d.
Process management
e.
Educative change strategy
Ans: c

Page: 287

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26.

Which two variables are of central importance to strategy implementation?

a.
Diversification and budgeting.
b.
Marketing penetration and competition.
c.
Competition and collaboration.
d.
Product development and market development.
e.
Market segmentation and product positioning.
Ans: e

27.

Which variable would be considered part of the product element of the marketing
mix?
a.
Advertising
b.
Packaging
c.
Payment terms
d.
Inventory levels and location
e.
Publicity
Ans: b

28.

Page 308

Multidimensional scaling is used to determine _____.

a.
the size of a new building
b.
the size of a new department
c.
the amount of high-tech equipment a firm needs
d.
product positioning
e.
market segmentation
Ans: d

29.

Page: 307

Page: 311

What is the most widely used technique for determining the best combination of
debt and stock?
a.
Debt-to-stock ratio
b.
Earnings per share/earnings before interest and tax analysis
c.
Gross profit analysis
d.
Capital asset pricing model
e.
Present value analysis
Ans: b

Page: 313

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30.

After completing an EPS/EBIT analysis, what conclusions would you make if the
debt line is above the stock line throughout the range of EBIT on the graph?
a.
Debt appears to be the best financing alternative.
b.
Stock would be the best financing alternative.
c.
A combination of debt and stock is probably the best financial alternative.
d.
Dividends must be considered before conclusions can be made.
e.
The company should be privately owned.
Ans: a

31.

The first step in preparing a projected statements is to _____.

a.
prepare the projected balance sheet
b.
take an inventory of goods
c.
estimate increases in debt
d.
prepare the projected income statement
e.
calculate the projected net income
Ans: d

32.

Page: 318

Which method of determining a firms net worth divides the market price of the
firms stock by the annual earnings per share and multiplies this number by the
firms average net income for the past five years?
a.
Debt/equity method
b.
Current ratio method
c.
Price-earnings ratio method
d.
Long-term asset method
e.
Outstanding shares method
Ans: c

33.

Page: 313

Page: 322

The attitude of U.S. firms toward research and development is best described by
which of the following?
a.
The veil of secrecy is being lifted, resulting in more collaboration.
b.
Firms are more cutthroat than ever and less cooperative with each other.
c.
Firms are less interested in working with universities.
d.
Firms are spending less in total research and development expenditures.
e.
Firms are less involved with research consortia than ever.
Ans: a

Page: 327

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34.

The purpose of strategy evaluation is to _____.

a.
increase the budget annually
b.
alert management to problems or potential problems
c.
make budget changes
d.
evaluate employees performance
e.
improve R&D programs
Ans: b

35.

What is important because organizations face dynamic environments in which key

external and internal factors often change quickly and dramatically?
a.
Strategy formulation
b.
Strategy evaluation
c.
Strategy simplification
d.
Strategy modification
e.
Strategy implementation
Ans: b

36.

Page: 337

In evaluating strategies, which one of Rumelts criteria for evaluating strategies,

refers to the need for strategists to examine sets of trends?
a.
Consistency
b.
Consonance
c.
Feasibility
d.
Advantage
e.
Empowerment
Ans: b

37.

Page: 336

Page: 338

Strategy evaluation is based on _____.

a.
empirical data
b.
qualitative criteria
c.
objective data
d.
qualitative and quantitative criteria
e.
intuition
Ans: d

Page: 343

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38.

What is the best way to overcome individuals resistance to change in strategy

evaluation?
a.
Participation
b.
Command-and-control
c.
Laissez-faire system
d.
Rational argument
e.
Emotional reactions
Ans: a

39.

What factor determines the final design of a firms strategy-evaluation and control
system?
a.
Opportunities
b.
Threats
c.
External characteristics
d.
The organizations characteristics
e.
The competitions characteristics
Ans: d

40.

Page: 344

Page: 349

What permits quick response to change, prevents panic in crisis situations, and
makes managers more adaptable?
a.
Auditing
b.
Implementing a balanced scorecard
c.
Contingency planning
d.
Taking corrective actions
e.
Measuring performance
Ans: c

Page: 351

Essay Questions
41.

Explain the benefits and limitations of developing a Boston Consulting Group

Matrix.
The BCG Matrix has one major benefit: draws attention to the cash flow, investment
characteristics and needs of an organizations various divisions.
The BCG Matrix has some limitations: 1) Viewing every business as either a star,
cash cow, dog or question mark is an oversimplification; many businesses fall right
in the middle of the BCG Matrix and thus are not easily classified, 2) the BCG
Matrix does not reflect whether or not various divisions or their industries are
growing over time; that is, the matrix has no temporal qualities, but rather it is a
snapshot of an organization as any given point in time; and 3) other variables besides

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relative market share position and industry growth rate in sales are important in
making strategic decisions about various divisions.
Page: 232
42.

Describe the tactics that have been used by politicians that can also aid strategists.
EquifinalityIt is often possible to achieve similar results using different means
or paths. Strategists should recognize that achieving a successful outcome is more
important than imposing the method of achieving it. It may be possible to
generate new alternatives that give equal results but with far greater potential for
gaining commitment.
SatisfyingAchieving satisfactory results with an acceptable strategy is far better
than failing to achieve optimal results with an unpopular strategy.
GeneralizationShifting focus from specific issues to more general ones may
increase strategists options for gaining organizational commitment.
Focus on Higher-Order IssuesBy raising an issue to a higher level, many
short-term interests can be postponed in favor of long-term interests. For instance,
by focusing on issues of survival, the auto and steel industries were able to
persuade unions to make concessions on wage increases.
Provide Political Access on Important IssuesStrategy and policy decisions
with significant negative consequences for middle managers will motivate
intervention behavior from them. If middle managers do not have an opportunity
to take a position on such decisions in appropriate political forums, they are
capable of successfully resisting the decisions after they are made. Providing such
political access provides strategists with information that otherwise might not be
available and that could be useful in managing intervention behavior.
Page 246

43.

There are three major approaches for minimizing and resolving conflict in an
organization. Define these three approaches and give an example of each.
Various approaches for managing and resolving conflict can be classified into three
categories: avoidance, diffusion and confrontation. Avoidance includes such actions
as ignoring the problem in hopes the conflict will resolve itself, or physically
separating the conflicting individuals. Diffusion can include playing down
differences between conflicting parties while accentuating similarities and common
interests, compromising so there is neither a clear winner nor loser, resorting to
majority rule, appealing to a higher authority, or redesigning present positions.
Confrontation is exemplified by exchanging members of conflicting parties so each
can gain an appreciation of the others point of view, or holding a meeting at which
conflicting parties present their views and work through their differences.

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Student answers will vary on the examples given for each approach.
Page: 269-270
44.

There are four basic ways a divisionally structured firm could be organized. What
are these four ways? Give an example of each.
The four basic ways a divisionally structured firm could be organized are 1) by
geographic area. An example of this would be any organization with similar branch
facilities located in widely dispersed areas; 2) by product or service. Huffy is an
example of divisional structure by product; 3) by customer. Book publishing
companies often organize their activities around customer groups as college,
secondary schools and private commercial schools; and 4) by process. An example
of this is a manufacturing business organized into six divisions: electrical work,
glass cutting, welding, grinding, painting and foundry work. Each division would be
responsible for generating revenues and profits.
Page: 273-274

45.

Compare and contrast restructuring and reengineering.

Restructuring involves reducing the size of the firm in terms of number of
employees, number of divisions or units and number of hierarchical levels in the
firms organizational structure. Restructuring is concerned primarily with
shareholder well-being rather than employee well-being.
In contrast, reengineering is concerned more with employee and customer wellbeing than shareholder well-being. Reengineering involves reconfiguring or
redesigning work, jobs and processes for the purpose of improving cost, quality,
service and speed. Whereas restructuring is concerned with eliminating or
establishing, shrinking or enlarging, and moving organizational departments and
divisions, the focus of reengineering is changing the way work is actually carried
out. Reengineering is characterized by many tactical decisions, whereas
restructuring is characterized by strategic decisions.
Page: 255-257

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46.

What are the five steps required for effective product positioning? Give an
example of a product-positioning matrix for an organization of your choice.
There are five steps required for effective product positioning. These five steps are
as follows: (1) select key criteria that effectively differentiate products or services in
the industry, (2) diagram a two-dimensional product-positioning map with specified
criteria on each axis, (3) plot major competitors products or services in the resultant
four-quadrant matrix, (4) identify areas in the positioning map where the companys
products or services could be most competitive in the given target market and look
for niches and (5) develop a marketing plan to position the companys products or
services appropriately.
Student examples of product-positioning matrices will vary.
Page: 311

47.

Explain how to perform a projected financial analysis.

The steps to performing a projected financial analysis are as follows: (1) prepare the
projected income statement before the balance sheet and start by forecasting sales as
accurately as possible; (2) use the percentage-of-sales method to project CGS and
the expense items in the income statement; (3) calculate the projected net income;
(4) subtract from the net income any dividends to be paid and add the remaining net
income to Retained Earnings; (5) project the balance sheet items, beginning with
retained earnings and then forecasting stockholders equity, long-term liabilities,
total liabilities, total assets, fixed assets and current assetsin that order; and (6) list
comments on the projected statements.
Page: 318-320

48.

What are the most commonly used quantitative criteria to evaluate strategies?
Give several examples of these criteria.
Quantitative criteria commonly used to evaluate strategies are financial ratios,
which strategists use to make three critical comparisons: (1) comparing the firms
performance over different time periods, (2) comparing the firms performance to
that of competitors and (3) comparing the firms performance to industry
averages. Some particularly useful key financial ratios used as criteria for strategy
evaluation are: (1) ROI, (2) ROE, (3) profit margin, (4) market share, (5) debt to
equity, (6) earnings per share, (7) sales growth and (8) asset growth.
Page: 342-343

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49.

Describe the seven-step process of effective contingency planning in strategy

evaluation.
The suggested seven-step process of effective contingency planning is as follows:
(1) Identify both beneficial and unfavorable events that could possibly derail the
strategy or strategies; (2) specify trigger points and calculate about when
contingent events are likely to occur; (3) assess the impact of each contingent
event; (4) develop contingency plans; (5) assess the counter impact of each
contingency plan; (6) determine early warning signals for key contingent events
and monitor them; and (7) for contingent events with reliable early warning
signals, develop advance action plans to take advantage of the available lead time.
Page: 351-352

50.

Discuss the three challenges that strategists face today.

The three challenges that strategists face today are 1) deciding whether the
process of strategic management should be more of an art or a science; 2)
deciding whether strategies should be visible or hidden from stakeholders; or 3)
deciding whether the process should be more top-down or bottom-up in the firm.
Page: 353-355