Multiple Choice Questions: Business Strategy

Chapter 08 - Business Strategy
Chapter 08
Business Strategy
Multiple Choice Questions
1. (p. 215) The two most prominent sources of competitive advantage for a business are:
A. Integration and coordination
B. Cost and differentiation
C. People and products
D. Products and services
Difficulty: Medium
Learning Objective: 1
2. (p. 215) Which of the following are often referred to as generic strategies?
A. Cost leadership and differentiation
B. Market leadership and differentiation
C. Cost leadership and product pricing
D. Differentiation and value chain analysis
Difficulty: Medium
3. (p. 216) Which of these refers to business strategies that seek to establish long-term
competitive advantages by emphasizing and perfecting value chain activities that can be
achieved at costs substantially below what competitors are able to match on a sustained
basis?
A. Differentiation strategies
B. Grand strategies
C. Low-cost strategies
D. Speed-based strategies
Difficulty: Easy
8-1
4. (p. 218) Which of the following is NOT a skill or a resource that fosters cost leadership?
A. Strong downstream partners
B. Process engineering skills
C. Low-cost distribution system
D. Sustained capital investment and access to capital
Difficulty: Medium
5. (p. 218) Organizational requirements to support and sustain cost leadership are:
A. Subjective measurements and incentives
B. Tradition of closeness to key customers
C. Frequent, detained control reports
D. Some personnel skilled in sales and operations
Difficulty: Medium
6. (p. 218) Common resource, skills and organizational requirements to support an "overall cost
leadership" generic strategy include all but:
A. Sustained access to capital
B. Subjective measurement and incentives instead of quantitative measures
C. Process engineering skills
D. Tight cost control
Difficulty: Medium
8-2
7. (p. 219) Which one of the following is NOT a key risk associated with a cost leadership
oriented business strategy?
A. Many cost-saving activates are easily duplicated
B. Cost differences seldom decline over time
C. Exclusive cost leadership can become a trap
D. Obsessive cost cutting can shrink other competitive advantages involving key product
attributes
Difficulty: Medium
8. (p. 219) __________ requires that the business have substantial advantages that allow it to
provide buyers with something uniquely valuable to them.
A. Cost strategy
B. Integration
C. Differentiation
D. Speed-based strategy
Difficulty: Easy
9. (p. 220) Which of the following is NOT a skill or a resource that fosters differentiation?
A. Process engineering skills
B. Strong cooperation for channels
C. Product engineering
D. Creative talent and flair
Difficulty: Medium
8-3
10. (p. 220) Skills and resources that foster differentiation are:
A. Strong marketing skills
B. Sustained capital investment and access to capital
C. Minimal investment in product engineering and basic research
D. Products designed for ease of delivery
Difficulty: Medium
11. (p. 220) Common resources, skills and organizational requirements to support a
"differentiation" generic strategy include all but:
A. Strong marketing abilities
B. Product engineering
C. Strong coordination among R&D, product development and marketing
D. Low-cost distribution system
Difficulty: Medium
12. (p. 220) Organizational requirements to support and sustain differentiation activities include
which of these?
A. Frequent, detailed control reports
B. Structured organization and responsibilities
C. Tradition of closeness to key customers
D. Incentives based on meeting strict, quantitative targets
Difficulty: Hard
13. (p. 221) A key risk associated with a differentiation strategy is:
A. Many cost saving activities are easily duplicated
B. The cost difference between low cost competitors & the differentiated business is too high
C. Obsessive cost cutting can shrink other competitive advantages
D. Cost differences often decline over time
Difficulty: Medium
8-4
14. (p. 222) Business strategies built around functional capabilities and activities that allow the
company to meet customer needs more rapidly than its main competitors are referred to as
__________ strategies.
A. Speed-based
B. Cost
C. Differentiation
D. Integration
Difficulty: Easy
15. (p. 224) All of the following are skills or resources that foster rapid response (speed)
EXCEPT:
A. Process engineering skills
B. Excellent inbound and outbound logistics
C. High level of automation
D. Creative talent and flair
Difficulty: Medium
16. (p. 224) Organizational requirements to support and sustain rapid response activities include
which of these?
A. Strong delegation to operating personnel
B. Subjective measurements and incentives
C. Amenities to attract highly skilled labor and creative people
D. Frequent, detained control reports
Difficulty: Hard
8-5
17. (p. 224) Speed-based competitive advantage can be created around all of these activities
EXCEPT:
A. Customer responsiveness
B. Product development cycles
C. Information sharing and technology
D. Brand loyalty
Difficulty: Hard
18. (p. 224) The extent to which a business concentrates on a narrowly defined market, it is
called a(n) __________ strategy.
A. Integration
B. Market focus
C. Formula facility
D. Tightly managed decentralization
Difficulty: Easy
19. (p. 226) An industry that has growing sales across all the companies in the industry based on
growing demand for the relatively new products, technologies and/or services made available
by the firms participating in this industry is called a(n) _______ industry.
A. Mature
B. Emerging
C. Focus
D. Low-cost
Difficulty: Easy
8-6
20. (p. 226) Business strategies in emerging industries must be concerned with which of the
following characteristics?
A. Proprietary technology in the pioneering firms with moderate to high amounts of
competitive uncertainty
B. Low initial costs with hefty cost increases through time
C. Many entry barriers
D. Easy to obtain raw materials
Difficulty: Hard
21. (p. 226) From the standpoint of strategy formulation, the essential characteristics of an
emerging industry is that
A. There are no "rules of the game"
B. It is highly regulated industry
C. The industry lifecycle essentially jumps from introduction directly to decline
D. There are way too many entry barriers
Difficulty: Medium
22. (p. 228) Which of these is NOT a stage of industry evolution?

A. Decline
B. Growth
C. Merge
D. Introduction
Difficulty: Medium
8-7
23. (p. 228) Production operations' capabilities to improve product and reduce costs and ability
to share or reduce capacity is associated with which of the strategies of industry growth?
A. Growth
B. Decline
C. Introduction
D. Maturity
Difficulty: Hard
24. (p. 228) Which of these represent marketing capabilities at the growth stage of industry
evolution?
A. Skills in aggressively promoting products to new markets and holding existing markets and
pricing flexibility
B. Ability to establish brand recognition, find niche, reduce price, solidity strong distribution
relations and develop new channels
C. Cost effective means of efficient access to selected channels and markets and strong
customer loyalty or dependence
D. Resources/skills to create widespread awareness and find acceptance from customers;
advantageous access to distribution
Difficulty: Hard
25. (p. 228) Which of these represent marketing capabilities at the decline state of industry
evolution?
A. Skills in aggressively promoting products to new markets and holding existing markets and
pricing flexibility
B. Ability to establish brand recognition, find niche, reduce price, solidity strong distribution
relations and develop new channels
C. Cost effective means of efficient access to selected channels and markets and strong
customer loyalty or dependence
D. Resources/skills to create widespread awareness and find acceptance from customers;
advantageous access to distribution
Difficulty: Hard
8-8
26. (p. 228) Ability to expand capacity effectively, limit number of designs and develop
standards represents the introduction stage of industry evolution for which function?
A. Production operations
B. Marketing
C. Finance
D. R & D
Difficulty: Medium
27. (p. 228) Resources to support high net cash overflow and initial losses and ability to use
leverage effectively represent finance area's capability at which stage of industry evolution?
A. Growth
B. Introduction
C. Decline
D. Maturity
Difficulty: Medium
28. (p. 228) Ability to reuse or liquidate unneeded equipment; advantage in cost facilities;
control system accuracy; and streamlined management control represent decline stage of
industry evolution for which functional area?
A. Marketing
B. Production operations
C. Finance
D. Engineering and R&D
Difficulty: Hard
8-9
29. (p. 228) Existence of an ability to add skilled personnel motivated and loyal workforce
represent personnel capabilities at which stage of the industry evolution?
A. Maturity
B. Decline
C. Introduction
D. Growth
Difficulty: Hard
30. (p. 228) Which of these personnel capabilities match the maturity stage of the industry
evolution?
A. Capacity to reduce and relocate personnel
B. Ability to cost effectively, reduce workforce, increase efficiency
C. Flexibility in staffing and training new management
D. Existence of an ability to add skilled personnel; motivated and loyal workforce
Difficulty: Hard
31. (p. 228) Skill in quality and new feature development; ability to start developing successor
product represent engineering and R&D capabilities at which stage of the industry evolution?
A. Decline
B. Introduction
C. Growth
D. Maturity
Difficulty: Hard
8-10
32. (p. 228) Ability to reduce costs, develop variants and differentiate products represent the
maturity stage of industry evolution capabilities which functional area?
A. Engineering and R&D
B. Marketing
C. Production operations
D. Personnel
Difficulty: Hard
33. (p. 228) Which key functional area is critical at the introduction stage of industry evolution
and which strategy should be focused on?
A. Production; successor products
B. Engineering; market penetration
C. Sales; consumer loyalty and market share
D. Finance; maximum investment recovery
Difficulty: Hard
34. (p. 228) Which key functional area and which strategy focus are critical at the growth stage
of industry evolution?
Difficulty: Hard
8-11
35. (p. 228) Which key functional area and which strategy focus are critical at the maturity stage
of industry evolution?
Difficulty: Hard
36. (p. 228) Which key functional area and which strategy focus are critical at the decline stage
of the industry evolution?
A. Engineering; market penetration
B. Sales; consumer loyalty and market share
C. Production; successor products
Difficulty: Hard
37. (p. 228) For success in emerging industry setting, business strategies require which of these
features?
A. Ability to rapidly improve product qualities and performance features
B. Ability to differentiate the firm's products from competitors entering the market
C. Emphasis on process innovation that permits low-cost product design, manufacturing
methods and distribution synergy
D. Gradually harvest the business
Difficulty: Medium
8-12
38. (p. 228) Business strategies require all of these EXCEPT which feature for success in
emerging industry setting?
A. Shape the industry's structure
B. Rapidly improve product quality
C. Strong product design skills
D. Forecast future competitors
Difficulty: Medium
39. (p. 228) For success in growth industries, business strategies require which of these
features?
Difficulty: Medium
40. (p. 228) Business strategies require all of these EXCEPT which feature for success in
growing industries?
A. Establish strong brand recognition
B. Scale up to meet increasing demand
C. Differentiate the firm's products
D. Horizontal integration
Difficulty: Medium
8-13
41. (p. 228) Strategies used by firms competing in markets where the growth rate of that market
from year to year had reached or is close to zero are called ________ industry strategies.
A. Mature
B. Growth
C. Emerging
D. Declining
Difficulty: Easy
42. (p. 229) For success in mature industries, business strategies require which of these features?
Difficulty: Medium
43. (p. 229) Business strategies require all of these features EXCEPT which one for success in
mature industries?
A. Harvest the business
B. Emphasis on cost reduction
C. Product line pruning
Difficulty: Medium
8-14
44. (p. 230) Business strategies in maturing industries should avoid all of these pitfalls EXCEPT
which one?
A. Avoid sacrificing market share too quickly
B. Make a clear choice among three generic strategies and avoid the middle-ground approach
C. Avoid waiting too long to respond to price reductions
D. Avoid horizontal integration to acquire rival firms
Difficulty: Medium
45. (p. 231) __________ industries are those that make products or services for which demand is
growing slower than demand in the economy as a whole.
A. Mature
B. Declining
C. Growth
D. Emerging
Difficulty: Easy
46. (p. 231) Firms in a declining industry should choose strategies that emphasize all but which
one of the following themes?
A. Focus on growing segments
B. Emphasize price cutting and promotion investment to drive out weaker competitors
C. Emphasize product innovation and quality improvement
D. Emphasize production and distribution efficiency
Difficulty: Hard
8-15
47. (p. 231) A fragmented industry is one in which:

A. Foreign firms have almost equal market shares on domestic firms
B. One firm strongly influences the industry's outcomes
C. No firm has a significant market share
D. Competitors have been beaten down by regulations
Difficulty: Medium
48. (p. 231) Businesses in fragmented industries can compete using all of these strategies
EXCEPT
A. "Formula" facilities
B. Tightly managed decentralization
C. "Harvesting" the business
D. Specialization
Difficulty: Medium
49. (p. 231) When a business introduces standardized, efficient, low-cost facilities at multiple
locations it can be described as following which of these strategies?
A. "Formula" facilities
B. Specialization
C. Tightly managed decentralization
D. Harvesting the business
Difficulty: Medium
50. (p. 232) Focus strategies in fragmented industries can be pursued through:
A. A wide range of services to a single market area
B. A narrow range of products
C. Handling broad types of orders from small to very large
D. Serving the customers at a national level
Difficulty: Medium
8-16
51. (p. 232) Industries in which competition crosses national borders are called a(n) __________
industry.
A. Emerging
B. Growth
C. Global
D. Fragmented
Difficulty: Easy
52. (p. 233) ________ is targeting a particular segment of the industry for competition on a
worldwide basis.
A. Licensing
B. National focus strategy
C. Global focus strategy
D. Protected niche strategy
Difficulty: Hard
53. (p. 232) Which of these is NOT a basic option that can/should be used to pursue global
market coverage?
A. Licensing
B. Harvesting the business
C. Maintaining a domestic production base and exporting
D. Establishing foreign-based plants and distribution
Difficulty: Medium
8-17
54. (p. 233) Targeting a particular segment of the industry for competition on a worldwide basis
refers to
A. Broad-line global competition
B. Protected niche strategy
C. National focus strategy
D. Global focus strategy
Difficulty: Medium
55. (p. 233) Seeking out countries in which governmental restraints exclude or inhibit global
competitors or allow concessions or both, that are advantages to localized firms refers to
A. Broad-line global competition
B. Protected niche strategy
C. National focus strategy
D. Global focus strategy
Difficulty: Medium
56. (p. 234) Acquisition of firms that supply inputs such as raw materials is referred to as
A. Conglomerate diversification
B. Horizontal integration
C. Retrenchment
D. Vertical integration
Difficulty: Easy
8-18
57. (p. 234) Quadrant I of the Grand Strategy Selection Matrix suggests which of these strategies
when the basic idea underlying the matrix is the choice of an internal or external emphasis for
growth or profitability?
A. Horizontal integration
B. Conglomerate diversification
C. Market development
D. Retrenchment
Difficulty: Medium
58. (p. 234) Quadrant II of the Grand Strategy Selection Matrix suggests which of these
strategies when the basic idea underlying the matrix is the choice of an internal or external
emphasis for growth or profitability?
B. Conglomerate diversification
C. Market development
D. Retrenchment
Difficulty: Medium
59. (p. 235) Acquiring or entering businesses unrelated to a firm's current technologies, markets
or products is referred to as
C. Retrenchment
Difficulty: Easy
8-19
60. (p. 235) Which of these refers to cutting back on products, markets, operations because the
firm's overall competitive and financial situation cannot support commitments needed to
sustain or build its operations?
B. Concentrated growth
C. Retrenchment
Difficulty: Medium
61. (p. 235) ________ offers the best possibility for recouping the firm's investment.
A. Liquidation
B. Divestiture
C. Turnaround
D. Retrenchment
Difficulty: Medium
62. (p. 235) The sale of a firm or a major component refers to

A. Retrenchment
B. Divestiture
C. Liquidation
D. Conglomerate diversification
Difficulty: Easy
8-20
63. (p. 234) The most common approach in Quadrant III of the Grand Strategy Selection Matrix,
when the basic idea underlying the matrix is the choice of an internal or external emphasis for
growth or profitability is
A. Concentrated growth
B. Horizontal growth
C. Divestiture
Difficulty: Medium
64. (p. 234) Quadrant IV of the Grand Strategy Selection Matrix suggests which of these
strategies?
A. Vertical integration
B. Turnaround
C. Product development
Difficulty: Medium
65. (p. 235) Selling present products to customers in related marketing areas by adding channels
of distribution is called
A. Market development
B. Vertical integration
C. Turnaround strategy
Difficulty: Easy
8-21
66. (p. 236) Which of these strategies are suggested by the first quadrant of the Grand Strategy
Cluster?
C. Concentric diversification
D. Joint ventures
Difficulty: Medium
67. (p. 236) Quadrant II of the Grand Strategy Cluster suggests which of these strategies?
C. Concentric diversification
D. Joint ventures
Difficulty: Medium
68. (p. 236) A strategy that seeks to reap the initially high profits associated with customer
acceptance of new or greatly improved product refers to
A. Joint ventures
C. Innovation
Difficulty: Easy
8-22
69. (p. 237) Growth through the acquisition of one or more similar firms operating at the same
stage of the production marketing chain refers to
A. Product development
B. Joint ventures
C. Conglomerate diversification
Difficulty: Easy
70. (p. 237) Which of these refers to acquisition of businesses that are related to the acquiring
firm in terms of technology, markets or products?
A. Concentric diversification
C. Conglomerate diversification
D. Divestiture
Difficulty: Medium
Essay Questions
71. Evaluate a business's cost leadership opportunities using skills, resources and
organizational requirements.
See discussion in the section "Evaluating Cost Leadership Opportunities" on pages 216-219.
8-23
72. Define differentiation. Evaluate a business's differentiation opportunities using skills,

resources and organizational requirements. What potential risks managers must take into
account as they evaluate the differentiation based advantages?
See discussion in the section "Evaluating Differentiation Opportunities" on pages 219-221.
73. Speed-based competitive advantages can be creates around what types of activities?
Explain.
See discussion in the section "Evaluating Speed as a Competitive Advantage" on pages 222224.
74. Describe the different stages of industry evolution. Identify the key functional areas and
strategy focus of each stage.
See exhibit 8-7 on pages 228-229.
75. Define emerging industries. Describe the features of business strategies required for
success in this industry.
See discussion in the section "Competitive Advantage and Strategic Choice in Emerging
Industries" on pages 226-227.
8-24
76. Differentiate between the strategic choices for businesses in growing industry and mature
industry.
See discussion on the two topics on pages 227-231.
77. Define declining industry. What strategic choices do the firms in this industry have?
Explain.
See discussion in the section "Competitive Advantages and Strategic Choices in Declining
Industries" on page 231.
78. Define fragment industries. What ways businesses in this industry can pursue strategies?
Explain.
See discussion in the section "Competitive Advantage in Fragmented Industries" on pages
231-232.
79. Briefly describe the Grand Strategy Selection Matrix. What strategies are recommended in
each quadrant? Explain.
See discussion in the section "Grand Strategy Selection Matrix" on pages 234-236.
8-25
80. Explain the model of Grand Strategy Clusters.

See the discussion in the section "Model of Grand Strategy Clusters" on pages 236-238.
8-26

Multiple Choice Questions: Business Strategy

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Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

22. (p. 228) Which of these is NOT a stage of industry evolution?

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

47. (p. 231) A fragmented industry is one in which:

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

62. (p. 235) The sale of a firm or a major component refers to

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

72. Define differentiation. Evaluate a business's differentiation opportunities using skills,

Chapter 08 - Business Strategy

Chapter 08 - Business Strategy

80. Explain the model of Grand Strategy Clusters.

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