LESSON 1 MIDTERMS

Question 1

represent the results expected from pursuing
certain strategies. They are an important measure
of managerial performance.

Answer 1

Long-term objectives

Question 2

represent the actions to be taken to accomplish long-term
objectives.

Answer 2

Strategies

Question 3

The time frame for objectives and strategies should be
consistent, usually from 2 to 7 years. T OR F

Answer 3

FALSE (5 YEARS)

Question 4

are commonly stated in terms such as growth in assets,
growth in sales, profitability, market share, degree and nature of
diversification, degree and nature of vertical integration, earnings per
share, and social responsibility

Answer 4

Objectives

Question 5

Strategies provide a basis for consistent decision making by managers whose values and attitudes differ. T or F

Answer 5

FALSE (OBJECTIVES)

Question 6

8 Desired Characteristics of Objectives

Answer 6

1. Quantitative
2. Measurable
3. Realistic
4. Understandable
5. Challenging
6. Hierarchical
7. Obtainable
8. Congruent across departments

Question 7

include those associated with growth in revenues,
growth in earnings, higher dividends, larger profit margins, greater return on
investment, higher earnings per share, a rising stock price, improved cash
flow, and so on

Answer 7

Financial objectives

Question 8

include things such as a larger market share, quicker on-
time delivery than rivals, shorter design-to-market times than rivals, lower
costs than rivals, higher product quality than rivals, wider geographic
coverage than rivals, achieving technological leadership, consistently getting
new or improved products to market ahead of rivals, and so on.

Answer 8

Strategic objectives

Question 9

Adheres to the principle “If it ain’t
broke, don’t fix it.” The idea is to keep on doing the same things in the
same ways because things are going well.

Answer 9

Managing by Extrapolation

Question 10

Based on the belief that the true measure of a
really good strategist is the ability to solve problems.

Answer 10

Managing by Crisis

Question 11

Built on the idea that there is no general
plan for which way to go and what to do; just do the best you can to
accomplish what you think should be done. In short, “Do your own
thing, the best way you know how” (sometimes referred to as the
mystery approach to decision making because subordinates are left to
figure out what is happening and why)

Answer 11

Managing by Subjectives

Question 12

Based on the fact that the future is laden with
great uncertainty and that if we try and do not succeed, then we
hope our second (or third) attempt will succeed.

Answer 12

Managing by Hope

Question 13

Alternative strategies that an enterprise could pursue can be categorized
into 11 actions

Answer 13

• forward integration
• backward integration
• horizontal integration
• market penetration
• market development
• product development
• related diversification
• unrelated diversification
• Retrenchment
• Divestiture
• liquidation

Question 14

a combination strategy can be exceptionally
safe if carried too far. T or F

Answer 14

FALSE

Question 15

In large firms, there are actually four levels of strategies

Answer 15

corporate,
divisional, functional, and operational.

Question 16

in small firms, there are three levels of strategies

Answer 16

company, functional, and operational.

Question 17

collectively referred to as vertical integration.

Answer 17

Forward integration and backward integration

Question 18

allow a firm to gain control over
distributors and suppliers.

Answer 18

Vertical integration strategies

Question 19

refers to gaining ownership and/or control
over competitors

Answer 19

Horizontal integration

Question 20

involves gaining ownership or increased control
over distributors or retailers.

Answer 20

Forward integration

Question 21

require intensive efforts if a firm’s competitive position with existing
products is to improve.

Answer 21

Intensive Strategies

Question 22

seeks to increase market share for
present products or services in present markets through greater
marketing efforts. This strategy is widely used alone and in
combination with other strategies.

Answer 22

market penetration

Question 23

involves introducing present products or
services into new geographic areas.

Answer 23

Market development

Question 24

is a strategy that seeks increased sales by
improving or modifying present products or services.It usually entails large research and development
expenditures.

Answer 24

Product development

Question 25

The two general types of diversification strategies

Answer 25

related diversification and unrelated diversification.

Question 26

Businesses are said to be related when their value chains possess competitively valuable cross-business strategic fits; businesses are said to be unrelated when their value chains. T OR F

Answer 26

TRUE

Question 27

strategy in which a company expands its business operations into industries or markets that have little to no meaningful connection or synergy with its existing businesses.

Answer 27

Unrelated Diversification

Question 28

strategy in which a company expands its business operations into new industries or markets that are closely related to its existing business activities.

Answer 28

Related Diversification

Question 29

occurs when an organization regroups through cost and asset reduction to reverse declining sales and profits.

Answer 29

Retrenchment

Question 30

can allow a firm to avoid major debt obligations and to void union contracts

Answer 30

Bankruptcy

Question 31

Selling a division or part of an organization is called? It is often used to raise capital for further strategic acquisitions or investments.

Answer 31

divestiture

Question 32

Selling all of a company’s assets, in parts, for their tangible worth is called? It is also a recognition of defeat and consequently can be an emotionally difficult strategy.

Answer 32

liquidation

Question 33

According to Porter, strategies allow organizations to gain competitive advantage from three different bases:

Answer 33

cost leadership, differentiation, and focus.

Question 34

He invented the Five Generic Strategies

Answer 34

Michael Porter

Question 35

emphasizes producing standardized products at a low per-unit cost for consumers who are price sensitive

Answer 35

Cost leadership

Question 36

offers products or services to a wide range of customers at the lowest price available on the market.

Answer 36

low-cost strategy

Question 37

that offers products or ser- vices to a wide range of customers at the best price-value available on the market

Answer 37

best-value strategy

Question 38

low-cost strategy aims to offer customers a range of products or services at the lowest price available compared to a rival’s products with similar attributes. T or F

Answer 38

FALSE (best-value strategy)

Question 39

a strategy aimed at producing products and services considered unique to the industry and directed at consumers who are relatively price insensitive.

Answer 39

differentiation

Question 40

It means producing products and services that fulfill the needs of small groups of consumers.

Answer 40

Focus

Question 41

offers products or services to a small range (niche group) of customers at the lowest price available on the market.

Answer 41

low- cost focus strategy

Question 42

offers products or services to a small range of customers at the best price-value available on the market.

Answer 42

best-value focus strategy

Question 43

low- cost focus strategy aims to offer a niche group of customers the products or services that meet their tastes and requirements better than rivals’ products do. T OR F

Answer 43

FALSE (best-value focus strategy)

Question 44

Larger firms with greater access to resources typically compete on a cost leadership or differentiation basis, whereas smaller firms often compete on a focus basis. T OR F

Answer 44

TRUE

Question 45

imply different organizational arrangements, control procedures, and incentive systems.

Answer 45

Michael Porter’s Five Generic Strategies

Question 46

is a popular strategy that occurs when two or more companies form a temporary partnership or consortium for the purpose of capitalizing on some opportunity.

Answer 46

Joint venture

Question 47

two commonly used ways to pursue strategies.

Answer 47

Merger and acquisition

Question 48

occurs when two organizations of about equal size unite to form one enterprise.

Answer 48

merger

Question 49

occurs when a large organization purchases (acquires) a smaller firm or vice versa

Answer 49

acquisition

Question 50

If a merger or acquisition is not desired by both parties, it is called a?

Answer 50

hostile takeover

Question 51

is to buy firms at a low price and sell them later at a high price, arguably just good business

Answer 51

Private-Equity Acquisitions

Question 52

refer to the benefits a firm may achieve by entering a new market or developing a new product or service prior to rival firms.

Answer 52

First mover advantages

Question 53

when a firm can easily copy or imitate the lead firm’s products or services.

Answer 53

slow mover (also called fast follower or late mover)

Question 54

involves companies hiring other companies to take over various parts of their functional operations, such as human resources, information systems, payroll, accounting, customer service, and even marketing

Answer 54

Outsourcing

Question 55

is the new term that refers to U.S. companies planning to move some of their manufacturing back to the United States.

Answer 55

Reshoring

Question 56

Access lower wages in foreign countries.

Answer 56

Cost savings

Question 57

Focus resources on developing the core business rather than being distracted by other functions

Answer 57

Focus on core business

Question 58

Outsourcing changes the balance of fixed costs to variable costs by moving the firm more to variable costs. Outsourcing also makes variable costs more predictable.

Answer 58

Cost restructuring

Question 59

Improve quality by contracting out various business functions to specialists.

Answer 59

Improve quality

Question 60

Gain access to intellectual property and wider experience and knowledge.

Answer 60

Knowledge

Question 61

Gain access to services within a legally binding contract with financial penalties and legal redress. This is not the case with services performed internally.

Answer 61

Contract

Question 62

Gain access to operational best practice that would be too difficult or time consuming to develop in-house.

Answer 62

Operational expertise

Question 63

Gain access to a larger talent pool and a sustainable source of skills, especially science and engineering.

Answer 63

Access to talent

Question 64

Use an outsourcing agreement as a catalyst for major change that cannot be achieved alone.

Answer 64

Catalyst for change

Question 65

Use external knowledge to supplement limited in-house capacity for product innovation.

Answer 65

Enhance capacity for innovation

Question 66

Accelerate development or production of a product through additional capability brought by the supplier.

Answer 66

Reduce time to market

Question 67

Manage risk by partnering with an outside firm.

Answer 67

Risk management

Question 68

Capitalize on tax incentives to locate manufacturing plants to avoid high taxes in various countries.

Answer 68

Tax benefit