Ch 1 &2 Fall 2008

Student: ___________________________________________________________________________

1. A company's strategy concerns

A. its market focus and plans for offering a more appealing product than rivals.
B. how it plans to make money in its chosen business.
C. management's action plan for running the business and conducting operations—its commitment to pursue a
particular set of actions in growing the business, staking out a market position, attracting and pleasing
customers, competing successfully, conducting operations, and achieving targeted objectives.
D. the long-term direction that management believes the company should pursue.
E. whether it is employing an aggressive offense to gain market share or a conservative defense to protect its
market position.

2. In crafting a company's strategy,

A. management's biggest challenge is how closely to mimic the strategies of successful companies in the
industry.
B. managers have comparatively little freedom in choosing the hows of strategy.
C. managers are wise not to decide on concrete courses of action in order to preserve maximum strategic
flexibility.
D. managers need to come up with some distinctive "aha" element to the strategy that draws in customers and
produces a competitive edge over rivals.
E. managers are well-advised to be risk-averse and develop a "conservative" strategy—"dare-to-be-different"
strategies rarely are successful.

3. A company achieves sustainable competitive advantage when

A. it has a profitable business model.

B. an attractive number of buyers have a lasting preference for its products or services as compared to the
offerings of competitors.
C. it is able to maximize shareholder wealth.
D. it is consistently able to achieve both its strategic and financial objectives.
E. its strategy and its business model are well-matched and in sync.
4. A company's strategy evolves over time as a consequence of

A. the need to keep strategy in step with changing market conditions and changing customer needs and
expectations.
B. the proactive efforts of company managers to fine-tune and improve one or more pieces of the strategy.
C. the need to abandon some strategy features that are no longer working well.
D. the need to respond to the newly-initiated actions and competitive moves of rival firms.
E. All of these.

5. It is normal for a company's strategy to end up being

A. a blend of offensive actions on the part of managers to improve the company's profitability and defensive
moves to counteract changing market conditions.
B. a combination of conservative moves to protect the company's market share and somewhat more risky
initiatives to set the company's product offering apart from rivals.
C. a close imitation of the strategy employed by the recognized industry leader.
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. more a product of clever entrepreneurship than of efforts to clearly set a company's product/service offering
apart from the offerings of rivals.

6. A company whose strategy has shady or unethical elements

A. stands a good chance that its unethical behavior will go undetected and unnoticed.
B. is automatically barred by the Securities and Exchange Commission from filing annual reports and having its
stock publicly traded.
C. risks being temporarily embarrassed if its actions are discovered and publicized by the media—but as long as
this risk is tolerable, company managers are well advised to pursue whatever unethical or unsavory actions they
believe the company can get away with (especially if such actions enhance company profitability and financial
performance).
D. puts the reputation of the company and its top executives at risk and may even jeopardize the company's
long-term well-being and survival, especially if it is required to pay out considerable sums of money to settle
punitive lawsuits and compensate customers, employees, shareholders, suppliers, rival companies and any
others for the injuries they have suffered.
E. risks only being required to "cease and desist" if governmental authorities determine that its strategic actions
constitute "unfair competition."
7. A company's business model

A. details the ethical and socially responsible nature of the company's strategy.
B. is management's storyline for how the strategy will result in achieving the targeted strategic objectives.
C. zeros in on how and why the business will generate revenues sufficient to cover costs and produce attractive
profits and return on investment.
D. explains how it intends to achieve high profit margins.
E. sets forth the actions and approaches that it will employ to achieve market leadership.

8. The difference between a company's strategy and a company's business model is that

A. a company's strategy is management's game plan for achieving strategic objectives while its business model
is management's game plan for achieving financial objectives.
B. the strategy concerns how to compete successfully and the business model concerns how to operate
efficiently.
C. a company's strategy is management's game plan for realizing the strategic vision whereas a company's
business model is the game plan for accomplishing the business purpose or mission.
D. strategy relates broadly to a company's competitive moves and business approaches (which may or may not
lead to profitability) while its business model relates to whether the revenues and costs flowing from the
strategy demonstrate that the business is viable from the standpoint of being able to earn satisfactory profits and
returns on investment.
E. a company's strategy concerns how to please customers while its business model concerns how to please
shareholders.

9. A winning strategy is one that

A. results in a company becoming the dominant market leader.

B. produces exceptionally high levels of customer satisfaction and is both ethical and highly profitable.
C. fits the company's internal and external situations, builds sustainable competitive advantage, and improves
company performance.
D. is ethical, socially responsible, and profitable.
E. builds shareholder value, passes the completeness test, and passes the customer satisfaction test.

10. Which one of the following questions can be used to test the merits of one strategy over another and
distinguish a winning strategy from a mediocre or losing strategy?

A. How good is the company's business model?

B. How well does the strategy fit the company's situation?
C. Does the company have low prices in comparison to rivals?
D. Is the company putting too little emphasis on behaving in an ethical and socially responsible manner?
E. Is the company a technology leader?
11. Crafting and executing strategy are top-priority managerial tasks because

A. working their way through the tasks of crafting and executing strategy helps top executives create tight fits
between a company's strategic vision and business model.
B. all company personnel, and especially senior executives, need to know the answer to "who are we, what do
we do, and where are we headed?"
C. there is a compelling need for managers to proactively shape how the company's business will be conducted
and because a strategy-focused enterprise is more likely to be a stronger bottom-line performer than a company
whose management views strategy as secondary and puts its priorities elsewhere.
D. without clear guidance as to what the company's business model and strategic intent are, managerial
decision-making is likely to be rudderless.
E. how well executives perform these tasks are the key determinants of executive compensation.

12. The most trustworthy signs of a well-managed company are

A. the eagerness with which executives set stretch financial and strategic objectives and develop an ambitious
strategic vision.
B. aggressive pursuit of new opportunities and a willingness to change the company's business model whenever
circumstances warrant.
C. good strategy-making combined with good strategy execution.
D. a visionary mission statement and a willingness to pursue offensive strategies rather than defensive
strategies.
E. a profitable business model and a balanced scorecard approach to measuring the company's performance.

13. Which of the following is an integral part of the managerial process of crafting and executing strategy?

A. Developing a proven business model

B. Setting objectives and using them as yardsticks for measuring the company's performance and progress
C. Deciding how much of the company's resources to employ in the pursuit of sustainable competitive
advantage
D. Communicating the company's mission and purpose to all employees
E. Deciding on the company's strategic intent

14. A company's strategic vision

A. is management's story line for how it plans to implement and execute a profitable business model.
B. sets forth what business the company is presently in and why it uses particular operating practices in trying to
please customers.
C. delineates management's aspirations for the business, providing a panoramic view of "where we are going"
and a convincing rationale for why this makes good business sense.
D. defines "who we are and what we do."
E. spells out a company's strategic intent, its strategic and financial objectives, and the business approaches and
operating practices that will underpin its efforts to achieve sustainable competitive advantage.
15. Which of the following are characteristics of an effectively-worded strategic vision statement?

A. Graphic, directional, and focused

B. Challenging, competitive, and "set in concrete"
C. Balanced, responsible, and rational
D. Realistic, customer-focused, and market-driven
E. Achievable, profitable, and ethical

16. A company's mission statement typically addresses which of the following questions?

A. "Who are we and what do we do?"

B. "What objectives and level of performance do we want to achieve?"
C. "Where are we going and what should our strategy be?"
D. "What approach should we take to achieve sustainable competitive advantage?"
E. "What business model should we employ to achieve our objectives and our vision?"

17. Breaking down resistance to a new strategic vision typically requires that top management

A. institute a balanced scorecard approach to measuring company performance, with the "balance" including a
mixture of old performance measures (that company personnel are familiar and comfortable with) and new
performance measures (that indicate the progress being made in achieving the new vision).
B. keep company personnel well-informed about forthcoming changes in the company's strategy.
C. frequently reiterate the basis for the new direction at company gatherings, address employee concerns and
fears head-on, try to lift the spirits of employees, and provide updates and progress reports as events unfold
(particularly information that confirms the wisdom of the new direction).
D. move promptly to update the company's business model and hold meetings with company personnel to
explain the merits of the new business model.
E. raise wages and salaries to win the support of company personnel for the company's new direction.

18. When there's an order of magnitude change in a company's environment that dramatically alters its
prospects and mandates radical revision of its strategic course, the company is said to have encountered

A. an opportunity to pursue a new strategic vision.

B. a strategic inflection point.
C. a strategic roadblock.
D. a new strategic opportunity.
E. a fork in the road that gives the company an opening to change to a different business model.
19. A company needs financial objectives

A. to spur company personnel to help the company overtake key competitors on such important measures as net
profit margins and return on investment.
B. because adequate profitability and financial strength is critical to effective pursuit of its strategic vision, as
well as to its long-term health and ultimate survival—weak earnings and a weak balance sheet alarm
shareholders and creditors and put executives' jobs at risk.
C. to indicate to employees whether the emphasis should be on earnings per share or return on investment or
return on assets or positive cash flow.
D. to convince shareholders that top management is acting in their interests.
E. to counterbalance its pursuit of strategic objectives and have a balanced scorecard for judging the caliber of
its overall performance.

20. Strategic objectives

A. are more essential in achieving a company's strategic vision than are financial objectives.
B. are generally less important than financial objectives.
C. are more difficult to achieve and harder to measure than financial objectives.
D. relate to strengthening a company's overall business and competitive position.
E. help managers track an organization's true progress better than do financial objectives.

21. A company needs performance targets or objectives

A. for its operations as a whole and also for each of its separate businesses, product lines, functional
departments, and individual work units.
B. because they give the company clear-cut strategic intent.
C. in order to unify the company's strategic vision and business model.
D. to help guide managers in deciding what strategic path to take in the event that a strategic inflection point is
encountered.
E. in order to prevent lower-level organizational units from establishing their own objectives.

22. A company's overall strategy

A. is really a collection of strategic initiatives and actions devised by managers and key employees up and down
the whole organizational hierarchy.
B. is subject to being changed much less frequently than either its objectives or its mission statement and thus
serves as the base of its strategy-making pyramid.
C. should be based on a flexible strategic vision and strategic intent.
D. is customarily reviewed and approved level-by-level by the company board of directors.
E. determines whether its strategic intent is proactive or reactive.
23. In a diversified company, the strategy-making hierarchy consists of

A. corporate strategy and a group of business strategies (one for each line of business the corporation has
diversified into).
B. corporate or managerial strategy, a set of business strategies, and divisional strategies within each business.
C. business strategies, functional strategies, and operating strategies.
D. corporate strategy, business strategies, functional strategies, and operating strategies.
E. its diversification strategy, its line of business strategies, and its operating strategies.

24. Business strategy concerns

A. the actions and approaches crafted by management to produce successful performance in one specific line of
business.
B. what set of businesses to be in and why.
C. selecting a business model to use in pursuing business objectives.
D. selecting a set of stretch financial and strategic objectives for a particular line of business.
E. choosing the most appropriate strategic intent for a specific line of business.

25. A company's strategy is not at full power until

A. the company's board of directors eliminates any conflicts and inconsistencies in the missions, objectives, and
strategies of all the company's various organizational units.
B. the CEO and other senior executives review the entire strategy piece by piece and make any needed
adjustments in those strategy pieces which are not in sync.
C. its many pieces are united and fit together like a jigsaw puzzle.
D. managers at different organizational levels have devised whatever strategies for their areas that they believe
will work best.
E. all functional departments are using the same functional strategy and all operating units are employing
identical operating strategies.