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The Nature of Strategic Management External opportunities; external threats

__________ help an organization gather, analyze, and organize Internal weaknesses; external opportunities
The term _________ is used to refer to strategy formulation, information. Internal strengths; internal weaknesses
implementation, and evaluation, with _________referring only to Ethics officers
strategy formulation. Operatives Strategic management can be defined as the art and science of
strategic planning; strategic management Lobbyists formulating, implementing, and evaluating cross-functional
assessment; planning Strategists decisions that enable an organization to achieve its objectives.
strategic management; strategic planning True
management cycle; brainstorming A disadvantage of international operations is:
foreign operations can allow firms to establish low-cost production The action stage of strategic management is called strategy
Which of these requires a firm to establish annual objectives, facilities in locations close to raw materials and/or cheap labor. formulation.
devise policies, and allocate resources? economies of scale can be achieved from operation in global False
Strategy formulation rather than solely domestic markets.
Strategy implementation competitors in foreign markets may not exist. Three fundamental strategy evaluation activities are reviewing
Strategy manipulation language, culture, and value systems differ among countries, external and internal factors, measuring performance, and taking
Strategy evaluation causing communication barriers and problems managing corrective actions.
people. True
The rationale for periodically conducting strategic-management _________ are especially critical for successful strategy
meetings away from the work site is to encourage more implementation. Strategies can be defined as specific results that an organization
_____________ and ____________ among participants. Interpersonal skills seeks to achieve in pursuing its basic mission.
feedback; rigidity Technical plans False
creativity; candor Long-range plans Strategies are the means by which long-term objectives will be
confidence; self-interest Short-range plans achieved.
strategy evaluation; candor
9. All of these are pitfalls an organization should avoid in strategic Reasons for poor or no strategic planning on part of firms include
Anything that a firm does especially well compared to rival firms is planning except: overconfidence, too expensive, suspicion, and laziness.
referred to as: using strategic planning to gain control over decisions and True
competitive advantage. resources.
comparative advantage. failing to involve key employees in all phases of planning. Objectives are an organization's statements that answer the
an external opportunity. hastily moving from mission development to strategy formulation. question "what do we want to become?"
opportunity cost. using plans as a standard for measuring performance. False
An organization can pursue any and/or all strategies that
Both military and business organizations do all of the following ____________ and __________ refer to economic, social, potentially could benefit the firm.
except: cultural, demographic, environmental, political, legal, False
use of the element of surprise. governmental, technological, and competitive trends and events No organization can pursue all the strategies that potentially could
aim "to gain competitive advantage." that could significantly benefit or harm an organization in the benefit the firm.
use the assumption of conflict to develop strategies. future.
use their own strengths to exploit competitors' weaknesses. Internal strengths; external threats Communication is an act of strengthening employees' sense of
effectiveness by encouraging them to participate in decision 5. It is predicted that, by 2025, over 18% of the population in the b. Implementation
making and to exercise initiative and imagination, and rewarding United States will be over 65 years old. c. Evaluation
them for doing so. Ans: T Page 88 d. Feedback
False e. Goal-setting
Empowerment is the act of strengthening employees' sense of 6. The first step for using Porter’s Five-Forces Model is to
effectiveness by encouraging and rewarding them to participate in evaluate the relative strength of each competitive force. 13. Anything that a firm does especially well compared to rival
decision making and exercise initiative and imagination. Ans: F Page 101 firms is referred to as _____.
a. competitive advantage
Strategic management must be a self-reflective learning process. 7. Metaphors are handed-down narratives of some wonderful b. comparative advantage
True event that is based on history but has been embellished with c. opportunity cost
fictional detail. d. sustainable advantage
One pitfall to avoid in strategic planning is top management Ans: F Page 127 e. an external opportunity
making many intuitive decisions that conflict with formal planning.
True 8. Benchmarking is an analytical tool used to determine whether a 14. The trends in newspaper circulation in the United States
firm’s value chain activities are competitive compared to rivals. provide support for which statement?
Sample Comprehensive Exam Ans: T Page 157 a. Sustainable competitive advantage is easy to maintain.
Chapters 1 – 5 b. Several firms can have similar competitive advantages.
True/False 9. Since a combination strategy is not risky, many organizations c. Some products are relatively immune to changes in the external
pursue a combination of two or more strategies simultaneously. environment
1. A vision statement answers the question, “What is our Ans: F Page: 171 d. Most competitive advantages are hard to sustain
business?,” whereas a mission statement answers, “What do we e. Competition is generally good for companies and consumers
want to become?” 10. Most companies favor related diversification strategies in
Ans: F Page: 10-11 order to exploit common use of a well-known brand name. 15. In which phase of strategic management are annual objectives
Ans: T Page 180 especially important?
2. The changes that occurred at Disney after Robert Iger took over a. Formulation
as CEO exemplifies the fact that more and more organizations are b. Control
centralizing the strategic-management process. Multiple Choice c. Evaluation
Ans: F Page: 16 11. What can be defined as the art and science of formulating, d. Implementation
implementing and evaluating cross-functional decisions that e. Management
3. In multidivisional organizations, each division should develop a enable an organization to achieve its objectives?
mission statement independent of the parent company. a. Strategy formulation 16. Principles of conduct that guide decision-making are known as
Ans: F Page: 63 b. Strategy evaluation _____.
c. Strategy implementation a. human rights
4. According to Vern McGinnis, to be effective, all a mission d. Strategic management b. the Constitution
statement need to do is define what the organization is and what e. Strategic leading c. business ethics
the organization aspired to be. d. nonprofit organization policies
Ans: F Page: 63 12. During what stage of strategic management are a firm’s e. social responsibility requirements
specific internal strengths and weaknesses determined?
a. Formulation
17. Which of these basic questions should a vision statement e. Japan
answer? 22. Which of these examples of a mission statement’s focus area
a. What is our business? is not effective? 27. The term that refers to the EU’s effort to end competitive tax
b. Who are our employees? a. AT&T focuses on communication rather than telephones. breaks among member countries is _____.
c. Why do we exist? b. Exxon/Mobil focuses on oil and gas rather than energy. a. double taxation
d. What do we want to become? c. Union Pacific focuses on transportation rather than railroads. b. taxation bias
e. Who are our competitors? d. Universal Studios focuses on entertainment rather than movies. c. equity taxation
e. Starbucks focuses on the café experience rather than coffee. d. tax reconciliation
18. What is the first step in the comprehensive strategic- e. tax harmonization
management model? 23. Which type of trend is exemplified by the increasing numbers
a. Developing vision and mission statements of two-income households in America? 28. According to Porter, what is usually the most powerful of the
b. Performing external audits a. Social five competitive forces?
c. Performing internal audits b. Economic a. Potential development of substitute products
d. Measuring and evaluating performance c. Cultural b. Bargaining power of suppliers
e. Establishing long-term objectives d. Technological c. Bargaining power of consumers
e. Historical d. Rivalry among competing firms
19. According to the comprehensive strategic-management e. Potential entry of new competitors
model, which step needs to be completed immediately following 24. In general, what happens to American goods in overseas
the establishment of long-term objectives? markets when there is a strong dollar? 29. A standardized, detailed set of techniques and behaviors that
a. Developing vision and mission statements a. Less expensive manage anxieties, but seldom produce intended, technical
b. Performing external audits b. More attractive consequences of practical results are called _____.
c. Performing internal audits c. Cheaper a. folktales
d. Generating, evaluating, and selecting strategies d. More expensive b. rites
e. Measuring and evaluating performance e. Desirable c. metaphors
d. rituals
20. What is the best time to develop a mission statement? 25. It is predicted that the United States will have how many racial e. values
a. Before a business is opened or ethnic majorities by the year 2075?
b. When the firm is successful a. None 30. What are historical narratives describing the unique
c. When the firm is in financial trouble b. One accomplishments of a group and its leaders, usually in heroic
d. When the firm is in legal trouble c. Two terms?
e. When the firm encounters competition d. Three a. Rites
e. Five b. Sagas
21. A proactive environmental policy is likely to lead to _____. c. Stories
a. higher cleanup costs 26. Who is the largest exporter to the United States? d. Myths
b. conservation of energy a. Mexico e. Folktales
c. reduced customer loyalty b. China
d. numerous liability suits c. Canada 31. Which function of management includes areas such as job
e. higher medical costs d. United Kingdom design, job specification, job analysis and unity of command?
a. Planning e. Unrelated diversification b. Best-value
b. Organizing c. Low-cost focus
c. Motivating 36. Advanced Medical Optics using acquisitions to obtain all d. Best-value focus
d. Staffing medical aspects of eye care, from laser surgery to contacts to e. Differentiation
e. Controlling implants for all ages is an example of which type of strategy?
a. Forward integration 40. Which strategy would be most appropriate when the distinctive
32. Which of the following is the process of influencing people to b. Backward integration competencies of two or more firms complement each other
accomplish specific objectives? c. Horizontal integration especially well?
a. Staffing d. Market development a. Conglomerate diversification
b. Motivating e. Product development b. Divestiture
c. Planning c. Joint venture
d. Controlling 37. In which situation would horizontal integration be an especially d. Retrenchment
e. Organizing effective strategy? e. Integration
a. When an organization can gain monopolistic
33. Which decision concerns determining the best capital characteristics in a particular area or region without being
structure for the firm and includes examining various methods by challenged by the federal government for “tending 59.The term “environment” includes all of the following except:
which the firm can raise capital? substantially” to reduce competition. a.air.
a. Investment b. When an organization competes in a slowing industry. b.water.
b. Dividends c. When decreased economies of scale provide major competitive c.firms.
c. Financing advantages. d.natural resources.
d. Capital budgeting d. When an organization has neither the capital nor human talent e.fauna.
e. Implementation needed to successfully manage an expanded organization. Ans: c Page: 4
e. When competitors are succeeding due to managerial expertise
34. What category of ratios measures how effectively a firm can or having particular resources an organization possesses. 60. The one factor that has most significantly impacted the nature
maintain its economic position in the growth of the economy and and core of buying and selling in nearly all industries has been
industry? 38. Win-Dixie closing one-third of its stores and eliminating 22,000 a.the Internet.
a. Profitability jobs in an attempt to emerge from bankruptcy would be an b.political borders.
b. Liquidity example of _____. c.corporate greed.
c. Leverage a. divestiture d.customer and employee focus.
d. Activity b. backward integration e.the government.
e. Growth c. liquidation Ans: a Page: 4
d. retrenchment
35. Budget Rent-a-Car opening car rental shops in Wal-Mart e. forward integration What Is Strategic Management?
stores is an example of which type of strategy? 61. What can be defined as the art and science of formulating,
a. Forward integration 39. According to Porter, which strategy offers products or services implementing and evaluating cross-functional decisions that
b. Backward integration to a small range of customers at the lowest price available on the enable an organization to achieve its objectives?
c. Horizontal integration market? a.Strategy formulation
d. Related diversification a. Low-cost b.Strategy evaluation
c.Strategy implementation e.Competitive advantage a.It represents the marginal factor in decision-making.
d.Strategic management Ans: c Page: 6 b.It represents a minor factor in decision-making integrated with
e. Strategic leading analysis.
Ans: d Page: 5 66. What types of skills are especially critical for successful c.It should be coupled with analysis in decision-making.
strategy implementation? d.It is better than analysis in decision-making.
62. ____________ is used to refer to strategic formulation, a.Interpersonal e.It is management by ignorance.
implementation and evaluation, with ______________ referring b.Marketing Ans: c Page: 7
only to strategic formulation. c.Technical
a.Strategic planning; strategic management d.Conceptual 71. _________ and _________ are external forces transforming
b.Strategic planning; strategic processing e.Thinking business and society today.
c.Strategic management; strategic planning Ans: a Page: 6 a.E-commerce; strategy
d.Strategic management; strategic processing b.E-commerce; globalization
e.Strategic implementation; strategic focus 67. Which phase of strategic management is called the action c.Strategy; globalization
Ans: c Page: 5 phase? d.Corporate culture; stakeholders
a.Strategy formulation e.Stakeholders; strategy
63. During what stage of strategic management are a firm’s b.Strategy implementation Ans: b Page: 8
specific internal strengths and weaknesses determined? c.Strategy evaluation
a.Formulation d.Allocating resources 72. Anything that a firm does especially well compared to rival
b.Implementation e.Measuring performance firms is referred to as:
c.Evaluation Ans: b Page: 6 a.competitive advantage.
d.Feedback b.comparative advantage.
e.Goal-setting 68. __________ is not a strategy-implementation activity. c.opportunity cost.
Ans: a Page: 5 a.Taking corrective actions d.sustainable advantage.
b.Establishing annual objectives external opportunity.
64. An important activity in __________ is taking corrective action. c.Devising policies Ans: a Page: 8
a.strategy evaluation d.Allocating resources
b.strategy implementation e.Motivating employees
c.strategy formulation Ans: a Page: 6 Key Terms in Strategic Management

d.strategy leadership 73. The trends in newspaper circulation in the United States

e.all of the above 69. Strategy evaluation is necessary because provide support for which statement?

Ans: a Page: 6 a.internal and external factors are constantly changing. a.Sustainable competitive advantage is easy to maintain.

b.the SEC requires strategy evaluation. b.Several firms can have similar competitive advantages.

65. What step in the strategic development process involves c.competitors change their strategies. c.Some products are relatively immune to changes in the external

mobilizing employees and managers to put strategies into action? d.the IRS requires strategy evaluation. environment

a.Formulating strategy e.firms have limited resources. d.Most competitive advantages are hard to sustain

b.Strategy evaluation Ans: a Page: 6 e.Competition is generally good for companies and consumers

c.Implementing strategy Ans: d Page 9

d.Strategic advantage 70. Which statement best describes intuition?

74. Which individuals are most responsible for the success and
failure of an organization? e.key functions in strategy exploitation. 83. __________ can best be described as short-term in nature.
a.Strategists Ans: a Page: 12 a.Mission statements
b.Financial planners b.Tenure
c.Personnel directors 79. Specific results an organization seeks to achieve in pursuing c.Annual objectives
d.Stakeholders its basic mission are: d.Strategies
e.Human resource managers a.strategies e.Management
Ans: a Page: 10 b.rules Ans: c Page: 13
75. The first step in strategic planning is generally: d.policies 84. In which phase of strategic management are annual objectives
a.Developing a vision statement e.mission especially important?
b.Establishing goals and objectives Ans: c Page: 13 a.formulation
c.Making a profit b.control
d.Developing a mission statement 80. Internal __________ are activities in an organization that are c.evaluation
e.Determining opportunities and threats performed especially well. d.implementation
Ans: a Page: 10 a.opportunities
b.competencies Ans: d Page: 13
76. What are enduring statements of purpose that distinguish one c.strengths
business from other similar firms? 85. What are guides to decision making?
a.policies e.factors a.laws
b.mission statements Ans: c Page: 13 b.rules
c.objectives c.policies
d.rules 81. What are the means by which long-term objectives will be d.procedures
e.employee conduct guidelines achieved? e.goals
Ans: b Page: 10 a.strategies. Ans: c Page: 13
77. The largest company in the world is: c.weaknesses.
a.Honda Motor d.policies.
b.ING Group e.opportunities. The Strategic-Management Model

c.Wal-Mart Ans: a Page: 13 86. The strategic-management process

d.Ford Motor Company a.occurs once a year.

e.Royal Dutch/Shell Group 82. Long-term objectives should be all of the following except: a sequential process.

Ans: d Page: 10 a.measurable. a continuous process.

b.continually changing. d.applies mostly to companies with sales greater than $100

78. Usually, external opportunities and threats are: c.reasonable. million.

a.uncontrollable by a single organization. d.challenging. e.applies mostly to small businesses

b.controlled by governments. e.consistent. Ans: c Page: 13

c.not as important as internal strengths and weaknesses. Ans: b Page: 13

d.key functions in strategy implementation. 87. Which of the following is not included in the strategic
management model?
a.Measure and evaluate performance. organizations? Pitfalls in Doing Strategic Planning
b.Perform internal research to identify customers. a.increased formalization of the strategic management process 95. All of these are pitfalls an organization should avoid in
c.Establish long-term objectives. b.increased structuring of strategic management strategic planning except:
d.Implement strategies. c.increased decentralizing of strategic management a.using plans as a standard for measuring performance.
e.Develop mission and vision statements. d.increased emphasis on strategic planning b.using strategic planning to gain control over decisions and
Ans: b Page: 14 e.increased central planning of the strategic management process resources.
Ans: c Page 16 c.failing to involve key employees in all phases of planning.
Benefits of Strategic Management d.too hastily moving from mission development to strategy
88. Strategic management enables an organization to 92. According to research, organizations using strategic formulation.
__________, instead of companies just responding to threats in management are __________ than those that do not. e.being so formal in planning that flexibility and creativity are
their business environment. a.more profitable stifled. proactive b.more complex Ans: a Page: 19
b.determine when the threat will subside c.less profitable
c.avoid the threats d.less static 96. What is not a pitfall an organization should avoid in strategic
d.defeat their competitors e.less complex planning?
e.foresee into the future Ans: a Page: 17 a.Failing to communicate the plan to employees
Ans: a Page: 16 b.Involving all managers rather than delegating planning to a
93. According to Greenley, strategic management offers all of “planner”
89. The act of strengthening employees’ sense of effectiveness by these benefits except that c.Top managers not actively supporting the strategic planning
encouraging and rewarding them to participate in decision-making provides an objective view of management problems. process
and exercise initiative and imagination is referred to as: creates a framework for internal communication among d.Doing strategic planning only to satisfy accreditation or
a.Authoritarianism personnel. regulatory requirements
b.Proaction encourages a favorable attitude toward change. Ans: b Page: 19
c.Empowerment maximizes the effects of adverse conditions and changes.
d.Transformation gives a degree of discipline and formality to the management 97. Which of the following statements is false?
e.Delegation of a business. a.Open-mindedness is an important guideline for effective
Ans: c Page: 16 Ans: d Page: 17- 18 strategic management.
b.Strategic management must become a self-perpetuating
90. How do line managers become “owners” of the strategy? socialist mechanism. attending top manager meetings Why Some Firms Do No Strategic Planning c.No organization has unlimited resources. gathering information about competitors 94. What is not a reason given for poor or no strategic planning in d.Strategic decisions require trade-offs. involvement in the strategic-management process organizations? e.Strategic management must be a self-reflective learning becoming a shareholder of the firm a.Wasting of time process. buying off top managers b.Being content with success Ans: b Page: 20
Ans: c Page: 16 c.Fire-fighting
d.Poor reward structure

91. The changes that occurred when Robert Iger took over the e.Trust of management Business Ethics and Strategic Management

reigns at Disney, demonstrate which current trend in Ans: e Page: 18-19

98. Principles of conduct that guide decision-making are known as
a.human rights. b.using nonunion labor in a union shop operations across national borders.
b.the Constitution. c.dumping flawed products in a foreign market a.Domestic firms ethics. d.insider trading b.Multinational corporations
d.nonprofit organization policies. e.all of the above c.Parent companies responsibility requirements. Ans: e Page: 25 d.Government-backed companies
Ans: c Page: 20 e.Franchises
103.Ethical standards come out of __________ in a final analysis. Ans: b Page: 28
99. A (n) ____________ can provide a basis on which policies can a.government
be devised to guide daily decisions and behavior at the work site. b.competitors 107.A(n) __________ refers to a firm investing in international
a.list of guidelines c.history and heritage operations, while the _________ is the country where that
b.policy for safety d.stakeholder analysis business is conducted. statement involvement a.parent company; host country
d.code of business ethics Ans: c Page: 25 b.home country; parent company
e.annual objective c.parent country; host company
Ans: d Page: 23 Comparing Business and Military Strategy company; home country
104.A strong __________ heritage underlies the study of strategic e.exporting company; importing company
100.Because they must take the __________ of the firm, management. Ans: a Page: 28
strategists’ salaries are high compared to those of other a.military
individuals in the organization. b.government 108.The greatest advantage of international operations is:
a.moral risks c.political a.Reduced tariffs and taxes risks b.Spreading economic risks over a wider number of markets
c.environmental risks e.cultural c.Access to global technology, culture and business practices
d. societal criticism Ans: a Page: 25 d.Gaining new customers
e. employee criticism e.Less-intense competition
Ans: a Page: 23 105.Military strategy is based on an assumption of __________, Ans: d Page: 28
whereas business strategy is based on an assumption of
101.What can be created by ethics training and an ethics culture? __________. 109.All of these are potential disadvantages of an international
a.Competitive responsibility a.conflict; cooperation operation except:
b.Competitive advantage b.conflict; competition a.overestimated weaknesses and underestimated strengths of
c.Strategic advantage c.cooperation; conflict competitors.
d.Employee cooperation d.competition; conflict b.differing languages, cultures and value systems.
e.Comparative advantage e.cooperation; competition c.reduced tariffs and taxes.
Ans: c Page: 25 Ans: b Page: 26 d.complexity due to a multiple monetary system.
e.all of these are potential disadvantages.
102.Which of these business actions is (are) always considered to Ans: c Page: 29
be unethical? The Nature of Global Competition

a.poor product or service safety 106.____________ are organizations that conduct business