Chap 8

Chapter 8
Strategy Formulation and Implementation

True/False Questions
1.
Because of Nintendos errors in strategy, they have fallen from number one to number three
in the video game industry.
Answer: True
2.
Page: 268
Type: F
Level: 1
Page: 269
Type: F
Level: 2
Page: 269
Type: F
Level: 3
Page: 269
Type: F
Level: 1
Page: 270
Type: F
Divestiture means selling of a business unit for the cash value of the assets, thus terminating
its existence.
Answer: False
9.
Level: 2
Stability is also referred to as a pause strategy.

Answer: True
8.
Type: F
There are four categories of grand strategies: growth, stability, retrenchment and
diversification.
Answer: False
7.
Page: 268
Development of new products is part of an organization's external growth strategy.

Answer: False
6.
Level: 2
The general plan of major action by which an organization intends to achieve its long-term
goals is called business-level strategy.
Answer: False
5.
Type: F
Top mangers and chief executives have the final responsibility for strategic planning rests.
Answer: True
4.
Page: 267
Given the need for massive infusion of cash, only large multinationals are concerned with
strategy.
Answer: False
3.
Level: 2
Level: 1
Page: 271
Type: F
When K-Mart laid off thousands of people and closed over 100 stores, it was following a
Chapter Eight * Strategy Formulation and Implementation
Test Bank * Page 212
retrenchment strategy.
Answer: True
10.
18.
Type: F
Level: 1
Page: 271
Type: F
Level: 2
Page: 272
Type: F
Level: 2
Page: 272
Type: F
Level: 1
Page: 273
Type: F
Level: 2
Page: 274
Type: F
Just-for-You, Inc.'s ability to market its products better than its competitors is an example of
its core competence.
Answer: True
Level: 2
Page: 274
Type: A
The interaction of Production and Sales working together to produce profit greater than the
total of both working separately is an example of synergy.
Answer: True
19.
Page: 271
The essence of formulating strategy is choosing how the organization will be identical to its
key competitors in the industry.
Answer: False
17.
Level: 2
A transnational strategy seeks to achieve both global integration and national responsiveness.
Answer: True
16.
Type: A
A multidomestic strategy standardizes global products/advertising strategies.

Answer: False
15.
Page: 271
With a multidomestic strategy, a company will achieve the globalization or standardization of

marketing and production approaches.
Answer: False
14.
Level: 2
Globalization refers to the world-wide standardization of product design and advertising.

Answer: True
13.
Type: A
Approximately 83 percent of all acquisitions, according to research, are later divested.

Answer: False
12.
Page: 271
Tools 4 All, a department store, sold all of its inventories at 80 percent off and permanently
closed its doors. This is referred to as liquidation.
Answer: True
11.
Level: 3
level: 3
Page: 275
Type: A
Value refers to the combination of benefits received and costs paid by the customer.
Answer: True
Level: 1
Page: 275
Type: F

20.
Business, corporate, and global are the three levels of strategy.

Answer: False
21.
Level: 2
Page: 276
Type: F
Level: 1
Page: 278
Type: F
Level: 2
Page: 278
Type: F
Level: 2
Page: 278
Type: F
Level: 1
Page: 278
Type: F
Level: 3
Page: 279
Type: A
Threats are characteristics of the internal environment that may prevent the organization from
achieving its strategic goals.
Answer: False
30.
Type: F
For General Electric, a strong financial base, combined with an excellent reputation with
creditors and the equity market, is with a significant strength to include in its SWOT analysis.
Answer: True
29.
Page: 276
SWOT analysis includes a review of the internal threats and opportunities.

Answer: False
28.
Level: 2
Situation analysis typically includes a search for SWOT--situation without threats.

Answer: False
27.
Type: F
The administration and execution of the strategic plan is strategy implementation.

Answer: True
26.
Page: 275
Strategy implementation involves the planning and decision making that lead to the
establishment of the firms goals.
Answer: False
25.
Level: 1
Strategic decisions at the business level concern amount of advertising, direction and extent
of R & D, product changes, new product development, equipment and facilities, and
expansion or contraction of product lines.
Answer: True
24.
Type: F
"How do we compete?" question concerns functional-level strategy.

Answer: False
23.
Page: 275
Corporate-level strategy pertains to the organization as a whole.

Answer: True
22.
Level: 2
Level: 2
Page: 279
Type: F
Portfolio strategy pertains to the mix of business units and product lines that fit together in a
logical way to provide synergy and competitive advantage for the corporation.
Answer: True
31.
Level: 2
Page: 282
Type: F
Level: 1
Page: 283
Type: F
Level: 1
Page: 283
Type: F
Level: 2
Page: 285
Type: F
Level: 1
Page: 287
Type: F
Level: 2
Page: 289
Type: F
Structural design typically begins with the organizational chart.

Answer: True
40.
Type: F
Joint Venture represents the ultimate in collaborative relationships.

Answer: False
39.
Page: 282
Organizations with a focus strategy concentrate on a specific regional market or buyer

group.
Answer: True
38.
Level: 1
Differentiation, cost leadership, and focus are three of Porter's competitive strategies.
Answer: True
37.
Type: F
The bargaining power of the government, according to Porter, is one of the five competitive
forces affecting an organization's competitive environment.
Answer: False
36.
Page: 281
One of Porter's five competitive forces is bargaining power of customers.

Answer: False
35.
Level: 1
In BCG Matrix, the circle size represents the relative profit made by each business in the
companys portfolio.
Answer: False
34.
Type: F
According to the BCG Matrix, the question mark exists in a new, rapidly growing industry
but has only a small market share.
Answer: True
33.
Page: 280
The BCG (Boston Consulting Group) matrix evaluates SBUs with respect to their business
growth rate and geographical location.
Answer: False
32.
Level: 1
Level: 1
Page: 293
Type: F
Effective implementation is not a necessity if the strategies are truly creative.

Answer: False
Level: 2
Page: 296
Type: F

Multiple Choice Questions

1.
The set of decisions and actions used to formulate and implement strategies that will provide
a competitively superior fit between the organization and its environment so as to achieve
organizational goals is known as
a.
b.
c.
d.
e.
strategy formulation.
strategic planning.
strategic management.
strategy implementation.
strategy evaluation.
Answer: c
2.
Level: 1
The mission statement

The grand strategy
A strategic plan
The organizational vision
Competitive plan
Answer: b
Level: 1
Page: 269
Type: F
Dobson Corporation is continually seeking out new markets and products, and is always on
the lookout for acquisition candidates. Dobson is pursuing a grand strategy of
a.
b.
c.
d.
e.
stability.
retrenchment.
growth.
liquidation.
divestiture.
Answer: c
4.
Type: F
Which of these refers to the overall plan of action for the organization?
a.
b.
c.
d.
e.
3.
Page: 268
Level: 2
Page: 269
Type: A
The acquisition of businesses that are related to current product lines or that takes the
corporation into new areas is referred to as
a.
b.
c.
d.
e.
retrenchment.
diversification.
liquidation.
cash cow.
internal growth.
Answer: b
Level: 2
Page: 269
Type: F

5.
Diversification is usually associated with the grand strategy of

a.
b.
c.
d.
e.
stability.
retrenchment.
internal growth.
external growth.
divestiture.
Answer: d
6.
Level: 2
stability.
retrenchment.
internal growth.
external growth.
cash cow.
Answer: c
Level: 2
Type: A
growth.
stability.
divestiture.
liquidation.
external growth.
Answer: b
Level: 2
Page: 270
Type: A
When the organization goes through a period of forced decline by either shrinking current
business units or selling off or liquidating entire businesses, it is called
a.
b.
c.
d.
e.
retrenchment.
growth.
cash cow.
multidomestic.
stability.
Answer: a
9.
Page: 269
The management of Mugs, Inc. decided on growing slowly and in a controlled fashion. This
is consistent with the grand strategy of
a.
b.
c.
d.
e.
8.
Type: F
Toy Trains, Inc. just introduced a new line of trains. This action is consistent with the grand
strategy of
a.
b.
c.
d.
e.
7.
Page: 269
Level: 1
Page: 270
Type: F
As part of a liquidation strategy, Rose International would

a.
b.
c.
look to acquire similar organization.

attempt to grow in a controlled manner.
sell off part of its business.
d.
e.
develop new products.

market its products aggressively.
Answer: c
10.
Level: 3
Diversification
Transnational strategy
Synergy
Divestiture
Liquidation
Answer: e
Level: 1
Level: 1
Divestiture is a type of a
a.
b.
c.
d.
e.
Page: 271
Type: F
strategy.
growth
global
retrenchment
stability
diversification
Answer: c
Level: 1
Page: 271
Type: F
If ABC International has standardized its product line throughout the world it is pursuing a
a.
b.
c.
d.
e.
multidomestic strategy.
diversity strategy.
globalization strategy.
liquidation strategy.
Answer: d
14.
Type: F
Diversification
Synergy
Divestiture
Liquidation
Answer: d
13.
Page: 271
Which of these involves the selling off of businesses that no longer seem central to the
corporation?
a.
b.
c.
d.
e.
12.
Type: A
means selling off a business unit for the cash value of the assets, thus
terminating its existence.
a.
b.
c.
d.
e.
11.
Page: 271
Level: 2
Page: 271
Type: A
The assumption that a single global market exists would lead to a

a.
b.
c.
d.
e.
globalization strategy.
diversity strategy.
domestic strategy.
liquidation strategy.
Answer: a
15.
Level: 1
Page: 272
Type: F
A strategy that combines global coordination to attain efficiency with flexibility to meet
specific needs in various countries is referred to as a
a.
b.
c.
d.
e.
domestic strategy.
global strategy.
transnational strategy.
region design strategy.
Answer: c
Level: 1
Page: 273
Type: F
The plan of action that prescribes resource allocation and other activities for dealing with the
environment and helping the organization attain its goals is known as a(n)
a.
b.
c.
d.
e.
goal.
objective.
mission.
vision.
strategy.
Answer: e
18.
Type: F
Domestic strategy
Global strategy
Multidomestic strategy
Market design strategy
Answer: d
17.
Page: 271
Which of these refers to the modification of product design and advertising strategies to suit
the specific needs of individual countries?
a.
b.
c.
d.
e.
16.
Level: 2
Level: 2
Page: 273
Type: F
A ______ is a business activity that an organization does especially well relative to its
competition is known as
a.
b.
c.
strategy
synergy
cash cow
d.
e.
core competence
multidomestic
Answer: d
19.
Page: 275
Type: F
functional-level strategy.
internal growth strategy.
multi-domestic strategy.
corporate-level strategy.
business-level strategy.
Answer: d
Level: 3
Page: 275
Type: A
Which of these can be defined as the combination of benefits received and costs paid by the
customer?
a.
b.
c.
d.
e.
Organizational benefits
Value
Cost-benefit diversity
Synergy
Core competence
Answer: b
Level: 1
Page: 275
Type: F
When Philip-Morris, the tobacco giant, bought Kraft, Inc., it was pursuing a
a.
b.
c.
d.
e.
Answer: a
23.
Level: 1
When AT&T decided to buy Media One, a cable company, it was pursuing a
a.
b.
c.
d.
e.
22.
Type: F
core competence.
synergy.
value creation.
Answer: b
21.
Page: 274
The condition that exists when the organization's parts interact to produce a joint effect that
is greater than the sum of the parts acting alone is known as
a.
b.
c.
d.
e.
20.
Level: 1
Level: 2
Page: 275
Type: A
______ pertains to the organization as a whole.

a.
b.
c.
d.
e.
Business-level strategy
Functional-level strategy
Corporate-level strategy
Operational-level strategy
Competitive-level strategy
Answer: c
24.
Level: 2
Page: 275
Type: A
A corporate-level strategy is concerned with the question

a.
b.
c.
d.
e.
what business are we in?

how do we compete?
how do we support our chosen strategy?
where do we market our products?
should we promote from within?
Answer: a
Level: 2
Page: 275
Type: F
When Coca-Cola introduced Surge, a new citrus soft-drink, it was pursuing a

a.
b.
c.
d.
e.
multi-domestic strategy.
Answer: e
27.
Type: F
growth strategy.
stability strategy.
Answer: a
26.
Page: 275
Sears' decision to sell off much of its financial services division is an example of a
a.
b.
c.
d.
e.
25.
Level: 1
Level: 3
Page: 276
Type: A
Ford's decision to completely redesign its Ford Taurus can be classified as a

a.
b.
c.
d.
e.
corporate level strategy.

business level strategy.
functional level strategy.
stability strategy.
Answer: b
Level: 2
Page: 276
Type: A

28.
Decisions regarding the proper amount of advertising for a particular good or service are
related to
a.
b.
c.
d.
e.
corporate-level strategies.
functional-level strategies.
tactical-level strategies.
business-level strategies.
retrenchment strategies.
Answer: d
29.
Level: 2
Page: 276
Type: F
Which of these questions is central to a functional-level strategy?

a.
b.
c.
d.
e.
What business are we in?

How do we compete?
How do we support our chosen strategy?
What business do we buy?
Where to market our products?
Answer: c
Level: 1
Page: 277
Type: F
30.
Which of these refers to the use of managerial tools to direct resources toward the
achievement of strategic goals?
a.
b.
c.
d.
e.
Strategy formulation
Strategy coordination
Strategy implementation
Strategy control
Strategy planning
Answer: c
31.
Page: 278
Type: F
The planning and decision making that lead to the establishment of the organization's goals
and of a specific strategic plan is known as
a.
b.
c.
d.
e.
strategy formulation.
strategy implementation.
strategy coordination.
strategy control.
SWOT.
Answer: a
32.
Level: 2
Level: 2
Page: 278
Type: F
Which of these typically includes a search for SWOT that affect organizational performance?
a.
Strengths and weaknesses

b.
c.
d.
e.
Opportunities and threats

Situational analysis
External environment analysis
Cultural analysis
Answer: c
33.
Level: 2
Page: 278
Type: A
Techniques used to monitor external environments include

a.
b.
c.
d.
e.
hiring scanning organizations.

hiring the competition's employees
government reports.
buying competitors' garbage.
all of the above.
Answer: e
Level: 2
Page: 278
Type: F
Plum Plastics has extremely creative employees who, in the opinion of the organization, keep
the company ahead of the competition. The creativity of these employees would be classified
as
a.
b.
c.
d.
e.
an internal weakness.
an external opportunity.
an external strength.
an internal strength.
a neutral factor.
Answer: d
36.
Type: F
conduct an external wage survey.

search for the strengths, weaknesses, opportunities, and threats that impact his firm.
choose a grand strategy for his firm.
do a cost/benefit analysis.
develop a mission.
Answer: b
35.
Page: 278
Barney has been assigned to conduct a situation analysis for his organization, Lets Share,
Inc. As part of this assignment, Barney will
a.
b.
c.
d.
e.
34.
Level: 2
Level: 2
Page: 279
Type: A
Where does the information about opportunities and threats comes from?
a.
b.
c.
d.
e.
An analysis of the organization's internal environment

A department by department study of the organization
Scanning the external environments
Employee grievances
Financial ratios of the organization
Answer: c
37.
Level: 2
an external opportunity.
an internal strength.
an external threat.
an external weakness.
a congressional chaos.
Answer: c
Type: A
Level: 2
Page: 280
Type: F
How business units and product lines fit together in a logical way is the essence of
a.
b.
c.
d.
e.
portfolio strategy.
competitive strategy.
financial strategy.
functional strategy.
Answer: b
Level: 2
Page: 280
Type: F
The BCG matrix organizes along which of the following dimensions?

a.
b.
c.
d.
e.
Market share and profit

Sales and market share
Business growth rate and market share
Business growth rate and profit
Sales and profits
Answer: c
41.
Page: 280
Marketing
Finance
Management
Production
R&D
Answer: e
40.
Level: 2
According to your text, which of the following is a particular strength of Kraft Foods?
a.
b.
c.
d.
e.
39.
Type: F
Drain Well, Inc. is particularly concerned about pending legislation in Congress that would
further regulate their organization. This legislation would be classified as
a.
b.
c.
d.
e.
38.
Page: 279
Level: 2
Page: 281
Type: F
Click Once, Inc. has a number of strategic business units. Their hand-held computer unit has
a large market share in this rapidly growing industry. Their hand-held computer business
would be classified as
a.
b.
c.
d.
e.
a dog.
a star.
a question mark.
a cash cow.
stuck in the middle.
Answer: b
42.
Level: 2
Page: 282
Type: F
large market share in a rapidly growing industry.

large market share in a slow growth industry.
small market share in a rapidly growing industry.
small share of a slow growth market.
moderate market share in a slow growth industry.
Answer: a
Level: 2
Page: 282
Type: F
Which of the following portfolio categories is made up of poor performers who command
only a small share of a slow growth market?
a.
b.
c.
d.
e.
Star
Cash cow
Question mark
Dog
Cat
Answer: d
45.
Type: A
It generates tremendous profits in a rapidly growing industry.

It has a small market share in a rapidly growing industry.
It has a small market share in a slow growth industry.
It has a large market share in a slow growth industry.
It is generally a dead business that should be divested.
Answer: d
The star has a
a.
b.
c.
d.
e.
44.
Page: 281
Which of these is true about the cash cow?

a.
b.
c.
d.
e.
43.
Level: 2
Level: 1
Page: 282
Type: F
The question mark has a

a.
b.
c.
d.
e.
large market share in a rapidly growing industry.

large market share in a slow growth industry.
small market share in a rapidly growing industry.
small share of a slow growth market.
moderate market share in a slow growth industry.
Answer: c
Level: 2
Page: 282
Type: F

46.
Which of these is true about the dog division?

a.
b.
c.
d.
e.
It has a large market share in a rapidly growing industry.

It has a large market share in a slow growth industry.
It has a small market share in a rapidly growing industry.
It has a small share of a slow growth market.
It has a moderate market share in a rapidly growing industry.
Answer: d
47.
Level: 2
Level: 2
Page: 282
Type: F
Barriers to entry are related to which competitive force?

a.
b.
c.
d.
e.
Rivalry among competitors

Potential new entrants
Threat of substitute products
Bargaining power of buyers
Bargaining power of suppliers
Answer: b
Level: 2
Page: 283
Type: F
All of the following are Porter's competitive forces EXCEPT

a.
b.
c.
d.
e.
differentiation.
bargaining power of buyers.
bargaining power of suppliers.
threat of substitute products.
potential new entrants.
Answer: a
50.
are in the personal
dogs
question marks
stars
cash cows
none of the above
Answer: b
59.
Type: F
Gillette operates numerous strategic business units. Most of its

care division.
a.
b.
c.
d.
e.
48.
Page: 282
Level: 2
Page: 283
Type: F
The
strategy involves an attempt to distinguish the firm's products or services from
others in the industry.
a.
b.
c.
d.
cost leadership
differentiation
focus
internal growth
e.
liquidation
Answer: b
51.
Level: 2
Focus
Globalization
Overall cost leadership
Differentiation
Liquidation
Answer: d
Level: 2
Type: F
Cost leadership
Differentiation
Focus
Internal growth
Liquidation
Answer: a
Level: 2
Page: 286
Type: F
The human resource department at Tykes Tricycles is implementing a number of functional

level strategies. These strategies include focusing on ways to retain and develop a stable
work force and ways to improve efficiency in the organization. These functional-level
strategies are consistent with which of the following strategies?
a.
b.
c.
d.
e.
Overall cost leadership

Differentiation
New product development
New market development
Divestiture
Answer: a
54.
Page: 285
Which strategy involves seeking efficient facilities, cutting costs and using tight cost controls
to be more efficient than competitors?
a.
b.
c.
d.
e.
53.
Type: F
Which strategy can be profitable for an organization when customers are loyal and willing to
pay high prices?
a.
b.
c.
d.
e.
52.
Page: 285
With a
group.
a.
b.
c.
d.
e.
Level: 2
Page: 286
Type: A
strategy, the organization concentrates on a specific regional market or buyer

cost leadership
differentiation
focus
internal growth
liquidation
Answer: c
55.
Page: 287
Type: A
acquisitions.
joint ventures.
strategic business partnering.
mergers.
preferred supplier arrangements.
Answer: b
Level: 1
Page: 289
Type: F
When DuPont and Xerox cooperated to create a separate entity called DX Imaging, Inc., it
implemented which of these cooperative strategies?
a.
b.
c.
d.
e.
Acquisitions
Joint ventures
Strategic business partnering
Mergers
Preferred supplier arrangements
Answer: b
Level: 3
Page: 289
Type: A
Cotton Creations is expecting to introduce new products that will experience rapid growth.
Which of the following functional-level strategies should they ignore?
a.
b.
c.
d.
e.
Test marketing
Consumer product trials
Cost reduction
Advertising campaigns
All of the above should be ignored.
Answer: c
59.
Level: 2
Separate entities created with two or more active firms as sponsors are called
a.
b.
c.
d.
e.
58.
Type: F
focus
differentiation
overall cost leadership
multidomestic
universal strategy
Answer: a
57.
Page: 287
Mingles, Inc. concentrates its efforts on its target market of 18 to 25 year olds. It is using a
strategy.
a.
b.
c.
d.
e.
56.
Level: 2
Level: 3
Some people argue that

management.
Page: 290
Type: A
is the most difficult and most important part of strategic

a.
b.
c.
d.
e.
SWOT analysis
strategic formation
strategic implementation
strategic analysis
strategy evaluation
Answer: c
60.
Level: 1
Page: 292
Type: F
As a way of implementing their differentiation strategy which emphasizes quality, 123

Corporation decided to switch from an assembly line manufacturing system to a system based
on work teams. This is an example of which of the dimensions used for implementing
strategy?
a.
b.
c.
d.
e.
Leadership
Structural design
Human resources
Information systems
Control systems
Answer: b
Level: 3
Page: 293
Type: A
To encourage employees to find ways to cut costs, and thus achieve their strategic goal of
overall cost leadership, Delta Dreamforce introduced a pay-for-performance system. This is
an example of which of the dimensions used for implementing strategy?
a.
b.
c.
d.
e.
Information and control systems

Human resources
Leadership
Structural design
SWOT
Answer: a
63.
Type: F
Leadership
Structural design
Human resources
Information and control systems
Compensation
Answer: a
62.
Page: 291
Persuasion, motivation, and changes in cultures and values are examples of which of the
dimensions used to implement strategy?
a.
b.
c.
d.
e.
61.
Level: 2
The
a.
b.
Level: 2
Page: 293
of implementing a strategy is
Type: A
when a company goes global.
cost, less
difficulty, lessened
c.
d.
e.
difficulty, increased
ease, increased
success, increased
Answer: c
Level: 2
Page: 294
Type: F
Scenario Questions
ScenarioDarla Davidson
Darla Davidson was an executive with Digital Industries, a leading manufacturer of color televisions.
She recognized that the color television market in the late 1970's was facing significant challenges.
After two decades of highly successful development and marketing, the sales of color televisions had
slowed and replacing older color television sets largely created her market.
1.
Using the logic of the BCG grid, Darla should recognize that her strategic business unit was
in which quadrant?
a.
b.
c.
d.
e.
Star
Cash Cow
Question Mark
Dog
None of the above
Answer: b
2.
The strategy that the BCG matrix suggests that Darla should take for this SBU is
a.
b.
c.
d.
e.
3.
Type: A
invest and grow.

liquidate while still profitable.
ask her astrologer for advice.
keep the SBU healthy and use its excess earnings to invest in other SBU's.
divestiture.
Answer: d
Type: A
Which one of the following is not one of the competitive forces that Porter recommends that
Darla should recognize?
a.
b.
c.
d.
e.
Potential new entrants

Bargaining power of buyers
Threat of substitute products
Bargaining power of suppliers
All of the above are competitive forces.
Answer: e
Type: A
ScenarioQT.com
Faced with rapidly growing business, Quick Trade, Inc., a global brokerage company with the largest
market share, recently announced that they have established an on-line stock investment and trading
subsidiary, QT.com, where investors can trade stocks at the lowest rates in the industry. The .com
subsidiary has less than one percent market share but it faces a very high business growth rate. In the
brokerage industry the competition is fierce and all players are cutting their on-line commission rates.
1.
Quick Trades traditional brokerage business could be classified as a

a.
b.
c.
d.
e.
cash cow.
dog.
star.
question mark.
stuck in the middle business.
Answer: c
2.
Type: A
QT.com subsidiary for Quick Trade can be classified as a

a.
cash cow.
b.
dog.
c.
star.
d.
question mark.
e.
stuck in the middle business.
Answer: d
3.
Type: A
If Quick Trades traditional brokerage business were to face a declining business growth, it
may need to be reclassified as a
a.
b.
c.
d.
e.
cash cow.
dog.
star.
question mark.
dead business.
Answer: a
4.
Type: A
Quick Trade is following which strategy, according to Porter, through the .com subsidiary?
a.
b.
c.
d.
e.
Stability
Cost leadership
Focus
Differentiation
Retrenchment
Answer: b
Type: A
Short-Answer Questions
1.
is the set of decisions and actions used to formulate and implement strategies that
will provide a competitively superior fit between the organization and its environment so
as to achieve organizational goals.
Answer: Strategic management
2.
A(n) _______ is the general plan of major action by which an organization intends to
achieve its long-term goals.
Answer: grand strategy
3.
Page: 269
The acquisition of business that are related to current product lines or that take the
corporation into new areas is called ______.
Answer: diversification
5.
Page: 270
Terminating the existence of a business unit by selling it off for the cash value of its assets
is known as _______.
Answer: liquidation
8.
Page: 270
______ means that the organization goes through a period of forced decline by either
shrinking current business units or selling of or liquidating entire businesses.
Answer: Retrenchment
7.
Page: 269
Stability is sometimes called ______.

Answer: pause strategy
6.
Page: 269
______ can be promoted internally by investing in expansion or externally by acquiring

additional business divisions.
Answer: Growth
4.
Page: 268
Page: 271
The standardization of product design and advertising strategies throughout the world is
called
.
Answer: globalization
Page: 271

9.
List the three global corporate strategies.

Answer: Globalization strategy, transnational strategy, and multidomestic strategy.
Page: 272
10.
When an organization chooses a(n) _______ strategy, it means that business decisions
such as product design are made on a country-by-country basis.
Answer: multidomestic
11.
A
strategy seeks to achieve both global integration and national
responsiveness.
Answer: transnational
12.
Page: 273
A business activity that an organization does particularly well relative to its competition is
known as a(n) _______.
Answer: core competence
14.
Page: 275
The question What business are we in? concerns

Answer: corporate-level
16.
strategy.
Page: 277
The question How do we support the business-level competitive strategy? concerns

strategy.
Answer: functional-level
18.
strategy.
Page: 275
The question How do we compete? concerns

Answer: business-level
17.
Page: 274
When organizational parts interact to produce a joint effect that is greater than the sum of
the parts acting alone,
occurs.
Answer: synergy
15.
Page: 272
The plan of action that prescribes resource allocation and other activities for dealing with
the environment and helping the organization attain its goals is called a
.
Answer: strategy
13.
Page: 272
Page 277
includes the planning and decision making that lead to the establishment of
the firm's goals and the development of a specific strategic plan.
Answer: Strategy formulation
Page: 278

19.
The use of managerial and organizational tools to direct resources toward accomplishing
strategic results is known as _______.
Answer: strategy implementation
20.
Page: 278
List the four components of a situation analysis.

Answer: A situation analysis includes a search for SWOT -- strengths, weaknesses,
opportunities, and threats.
Page: 278
21.
_______ is a type of corporate-level strategy that pertains to the organization's mix of

strategic business units.
Answer: Portfolio strategy
22.
In the BCG matrix, the star has a _______ market share in a rapidly growing industry.
Answer: large
23.
Page: 281
In the BCG matrix, the dog has ______ market share and ______ business growth rate.
Answer: low, low
24.
Page: 280
Page: 281
List Porter's competitive forces.

Answer:
Potential new entrants, bargaining power of buyers, bargaining power of suppliers, threat
of substitute products, and rivalry among competitors.
Page: 283
25.
The
strategy involves an attempt to distinguish the firm's products or services
from others in the industry.
Answer: differentiation
26.
With a
strategy, the organization aggressively seeks efficient facilities, pursues
cost reductions, and uses tight cost controls to produce products more efficiently than
competitors.
Answer: cost leadership
27.
Page: 285
With a
buyer group.
Page: 286
strategy, the organization concentrates on a specific regional market or

Answer: focus
28.
Page: 287
______ strategies are when companies join with other organizations to promote
innovation, expand markets, and pursue joint goals.
Answer: Partnership Page: 288
29.
The ______ is driving and supporting the move toward partnership thinking.
Answer: Internet
30.
Page: 288
______ and ______ represent the ultimate step in collaborative relationships.

Answer: Mergers, acquisitions
31.
______ involves regularly making difficult decisions about doing things in a way that
supports rather than undermines the organizations chosen strategy.
Answer: Implementation
32.
Page: 291
The ability to influence people to adopt the new behaviors needed for strategy
implementation is called ______.
Answer: leadership
33.
Page: 289
Page: 292
Reward systems, pay incentives, budgets for allocating resources, information technology
systems, and organizations rules, policies, and procedures are included in ______.
Answer: information and control systems
Page: 293
Essay Questions
1.
Briefly explain the three grand strategies for domestic operations.

ANSWER:
The three grand strategies are growth, stability, and retrenchment. Growth is promoted
internally by investing in expansion or externally by acquiring additional business divisions.
Internal growth often involves developing new or modified products. Stability is achieved
by the company remaining the same size or growing slowly in a controlled fashion.
Stability is often accompanied by a focus on efficiency. Retrenchment is the strategy of
shrinking current business units or selling off or liquidating entire businesses.
Retrenchment is often a response to a significant decrease in the demand for the
company's products.
Level: 2
2.
Page: 269-270
Name and describe the three types of global strategies.

ANSWER:
The three types of global strategies are globalization, multidomestic, and transnational.
Globalization means that a companys product design and advertising strategies are
standardized throughout the world. This approach is based on the assumption that a
single global market exists for many consumer and industrial products. The theory is that
people everywhere want to buy the same products and live the same way. Multidomestic
strategies believe that competition in each country is handled independently of industry
competition in other countries. Thus, marketing, advertising, and product design is
encouraged to be modified and adapted to the specific needs of each country the company
is present in. Many companies reject the idea of a single global market. Transnational
strategies seek to achieve both global integration and national responsiveness. A true
transnational strategy is difficult to achieve, because one goal requires close global
coordination while the other goal required local flexibility. However, many industries are
finding that, although increased competition means they must achieve global efficiency,
growing pressure to meet local needs demands national responsiveness.
Level: 2
3.
Page: 271-273
Compare and contrast the three levels of strategy in an organization.

ANSWER:
There are three levels of strategy in an organization: corporate-level, business-level, and
functional-level. Corporate-level strategies involve the whole organization. This level of
strategy is most concerned with answering the question: "What business are we in?" These
types of decisions often involve issues of growth, retrenchment, and/or joint ventures.
Business-level strategies are concerned with the question "How do we compete?" They
focus on how the individual business unit competes within its industry. They may involve
such issues as advertising, product changes, and new-product development. Functionallevel strategies are concerned with the question of "How do we support the business-level
strategy?" Involving all of the organization's major functions, these types of strategies link
the functional unit with the strategic business unit.
Level: 2
4.
Page: 275-277
In order for companies to remain competitive, their strategies must focus on three things.
Describe these three focuses.
ANSWER:
The three focuses are core competences, synergy, and value creation. Core competence is
something the organization does very well in comparison to its competitors. A core
competence represents a competitive advantage because the company acquires expertise

that competitors do not have. Synergy occurs when organizational parts interact to
produce a joint effect that is greater than the sum of the parts acting alone. The
organization may attain a special advantage with respect to cost, market power,
technology, or management skill. Value creation should be at the heart of strategy. Value
is the combination of benefits received and costs paid by the customer. Managers help
their companies create value by devising strategies that exploit core competencies and
attain synergy.
Level: 2
5.
Page: 273-275
Differentiate between strategy formulation and strategy implementation.

ANSWER:
Strategy formulation includes the planning and decision making that lead to the
establishment of the firms goals and the development of a specific strategic plan. Also, it
includes assessing the external environment and internal problems and integrating the
results into goals and strategies. Strategy implementation uses managerial and
organizational tools to direct resources toward accomplishing strategic results.
Level: 2
6.
Page: 278
Briefly describe the Boston Consulting Group matrix, including its dimensions, quadrants,
and strategic recommendations.
ANSWER:
The two dimensions of the matrix are business growth rate and market share. When
growth is high and share is high, the SBU has the best situation and is called a star. When
growth is low and share is high, the SBU is known as a cash cow. When growth is high
but share is low, the SBU is a question mark. In the fourth quadrant, growth and share are
both low. This is the worst situation, and the SBU is a dog. The strategic
recommendations are: (1) invest in stars; (2) milk the cash cow; (3) invest in question
marks to create stars or divest the question marks; and (4) divest the dogs.
Level: 3
7.
Page: 281-282
Briefly discuss Porter's three competitive strategies.

ANSWER:
Porter identified three competitive strategies: differentiation, cost leadership, and focus. A
differentiation strategy involves the organization attempting to distinguish its product or
service from those of its competition. Advertising, product features, and customer service
are some of the ways an organization can successfully differentiate. A cost leadership
strategy is based on the organization achieving a low-cost position relative to the
competition. A company may achieve a cost leadership through the operation of efficient
facilities, cutting costs, or maintaining tight cost control. When a company uses a
differentiation or a cost leadership strategy in a particular market or buyer group, they are
employing a focus strategy. This strategy allows the organization to concentrate on a
narrow market niche.
Level: 2
8.
Page: 285-287
Briefly describe the different cooperative strategies using the continuum of cooperative
strategies.
ANSWER:
Please refer to exhibit 8-8 in the text. The different cooperative strategies are preferred
supplier arrangements, strategic business partnering, joint venture, mergers, and
acquisitions.
Level: 2
9.
Pages: 289
When a company goes global, it is difficult to implement strategies. Explain.

ANSWER:
In the international arena, flexibility and superb communication are considered mandatory
leadership skills. Also, managers must design a structure for the organization that will
achieve the desired level of global integration and local responsiveness, as well as, have
the ability to merge successfully with foreign cultures. Information and control systems
must fit the needs and incentives within local cultures. Recruitment, training, transfer,
promotion, and layoff of international human resources create an array of problems not
confronted in North America. Labor laws, guaranteed jobs, and cultural traditions of
keeping unproductive employees on the job provide special problems for strategy and
implementation.
Level: 3
10.
Page: 294
Describe how a strategy can be put into action.

ANSWER:
Please refer to exhibit 8-9The tools include leadership, structural design, human
resources, and information and control systems.
Level: 3
Page: 291, 292-294


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Chapter 8

Strategy Formulation and Implementation

Stability is also referred to as a pause strategy.

Development of new products is part of an organization's external growth strategy.

A multidomestic strategy standardizes global products/advertising strategies.

With a multidomestic strategy, a company will achieve the globalization or standardization of

Globalization refers to the world-wide standardization of product design and advertising.

Approximately 83 percent of all acquisitions, according to research, are later divested.

Chapter Eight * Strategy Formulation and Implementation

Business, corporate, and global are the three levels of strategy.

SWOT analysis includes a review of the internal threats and opportunities.

Situation analysis typically includes a search for SWOT--situation without threats.

The administration and execution of the strategic plan is strategy implementation.

"How do we compete?" question concerns functional-level strategy.

Corporate-level strategy pertains to the organization as a whole.

Structural design typically begins with the organizational chart.

Joint Venture represents the ultimate in collaborative relationships.

Organizations with a focus strategy concentrate on a specific regional market or buyer

One of Porter's five competitive forces is bargaining power of customers.

Effective implementation is not a necessity if the strategies are truly creative.

Chapter Eight * Strategy Formulation and Implementation

Multiple Choice Questions

The mission statement

Chapter Eight * Strategy Formulation and Implementation

Diversification is usually associated with the grand strategy of

As part of a liquidation strategy, Rose International would

look to acquire similar organization.

develop new products.

The assumption that a single global market exists would lead to a

______ pertains to the organization as a whole.

A corporate-level strategy is concerned with the question

what business are we in?

When Coca-Cola introduced Surge, a new citrus soft-drink, it was pursuing a

Ford's decision to completely redesign its Ford Taurus can be classified as a

corporate level strategy.

Chapter Eight * Strategy Formulation and Implementation

Which of these questions is central to a functional-level strategy?

What business are we in?

Strengths and weaknesses

Opportunities and threats

Techniques used to monitor external environments include

hiring scanning organizations.

conduct an external wage survey.

An analysis of the organization's internal environment

The BCG matrix organizes along which of the following dimensions?

Market share and profit

large market share in a rapidly growing industry.

It generates tremendous profits in a rapidly growing industry.

Which of these is true about the cash cow?

The question mark has a

large market share in a rapidly growing industry.

Chapter Eight * Strategy Formulation and Implementation

Which of these is true about the dog division?

It has a large market share in a rapidly growing industry.

Barriers to entry are related to which competitive force?

Rivalry among competitors

All of the following are Porter's competitive forces EXCEPT

are in the personal

Gillette operates numerous strategic business units. Most of its

The human resource department at Tykes Tricycles is implementing a number of functional

Overall cost leadership

strategy, the organization concentrates on a specific regional market or buyer

and represent the ultimate step in collaborative relationships.