strategy

Question 1

Competitive advantage is considered sustainable when:

A. The company earns more than the average competitor for one quarter
B. It is achieved through marketing strategies alone
C. It is maintained over a prolonged period of time
D. It leads to immediate revenue gains

Answer 1

C

Question 2

Which of the following is NOT one of the three elements of a good strategy?

A. A diagnosis of the competitive challenge
B. A grandiose statement of success
C. A guiding policy to address the challenge
D. A set of coherent actions to implement the policy

Answer 2

B

Question 3

Which of the following is an example of strategic commitment?

A. Posting a mission statement on a website
B. Short-term cost-cutting
C. A multi-billion dollar investment in global battery factories
D. Benchmarking against competitors

Answer 3

C

Question 4

According to the Upper Echelons Theory, organizational outcomes reflect:

A. Economic forecasts
B. Regulatory environments
C. Values of the top management team
D. Employee satisfaction scores

Answer 4

C

Question 5

What does the AFI Strategy Framework stand for?

Answer 5

Analysis, Formulation, Implementation

Question 6

Which of the following statements about strategy is TRUE?

A. Operational effectiveness is the same as strategy
B. Strategy involves creating and capturing value through trade-offs
C. Strategy is about being all things to all people
D. Grand goals like “being number one” are effective strategies

Answer 6

B

Question 7

What type of vision statement allows companies to adapt more easily to changing environments?

A. Product-oriented
B. Internal-oriented
C. Customer-oriented
D. Shareholder-oriented

Answer 7

C

Question 8

The stakeholder impact analysis framework includes all of the following steps EXCEPT:

A. Identify stakeholders
B. Ignore conflicting interests
C. Evaluate stakeholder claims
D. Address stakeholder concerns

Answer 8

B

Question 9

What are the three key elements of a good strategy?

Answer 9

A diagnosis of the competitive challenge

A guiding policy to address the challenge

A set of coherent actions to implement the policy

Question 10

Define sustainable competitive advantage.

Answer 10

A sustainable competitive advantage occurs when a firm consistently outperforms its competitors or industry average over a prolonged period.

Question 11

What is the purpose of the AFI Strategy Framework?

Answer 11

The AFI Framework helps leaders analyze the firm’s environment, formulate strategies, and implement them effectively to gain and sustain competitive advantage.

Question 12

Differentiate between product-oriented and customer-oriented vision statements.

Answer 12

Product-oriented visions focus on the product or service offered (e.g., “we make cameras”), while customer-oriented visions focus on satisfying customer needs (e.g., “we capture and share memories”).

Question 13

According to the Upper Echelons Theory, how do top managers influence a firm’s strategy?

Answer 13

Top managers’ experiences, values, and interpretations of the world influence strategic decisions and outcomes, as organizations reflect their leaders’ characteristics.

Question 14

What is the role of strategic leadership in the strategy process?

Answer 14

Strategic leaders shape vision, mission, and values, allocate resources, make key decisions, and inspire others to pursue organizational goals effectively.

Question 15

What is stakeholder strategy, and why is it important?

Answer 15

Stakeholder strategy involves managing relationships with internal and external stakeholders to create joint value and ensure long-term success and legitimacy.

Question 16

Explain the Red Queen effect in business strategy.

Answer 16

The Red Queen effect refers to firms constantly improving and adapting just to maintain their position relative to competitors, without gaining a competitive edge.

Question 17

What is Creating Shared Value (CSV), and how does it differ from Corporate Social Responsibility (CSR)?

Answer 17

CSV is a strategic approach that integrates social and environmental goals into a firm’s core strategy to create both economic and societal value. Unlike CSR, which is often reactive and PR-driven, CSV is proactive and rooted in competitive advantage by aligning business success with societal progress

Question 18

What are the three standard dimensions used to assess competitive advantage?

Answer 18

Accounting metrics

Shareholder value creation

Economic value creation​

Question 19

How does the concept of economic value creation relate to competitive advantage?

Answer 19

A firm achieves competitive advantage when it creates more economic value than its rivals. Economic value is calculated as the difference between what a customer is willing to pay (V) and the firm’s cost to produce it (C), or (V − C).

Question 20

What is a business-level strategy, and what questions does it aim to answer?

Answer 20

Business-level strategy outlines goal-directed actions to gain competitive advantage in a single product market. It answers the questions:

Who are the customers?

What are their needs?

Why do we want to satisfy them?

How will we satisfy them?​

Question 21

Define strategic position and explain its importance.

Answer 21

A strategic position reflects a firm’s profile based on value creation and cost. It determines the firm’s ability to generate economic value and influences how effectively it can sustain competitive advantage.

Question 22

What are value drivers in a differentiation strategy?

Answer 22

Value drivers are factors that increase the perceived value of a product or service, allowing firms to charge premium prices. Common drivers include product features, customer service, brand image, and complements​

Question 23

Why might a firm get “stuck in the middle” when trying to implement both cost leadership and differentiation strategies?

Answer 23

Firms attempting both strategies without a clear focus may face conflicting operational goals and strategic trade-offs, leading to inefficiencies and a diluted value proposition. This lack of clarity can result in poor performance compared to focused rivals.

Question 24

What is the goal of a cost-leadership strategy?

Answer 24

To reduce a firm’s cost below that of competitors while offering acceptable value, thereby achieving a competitive advantage by optimising the value chain and maintaining cost discipline​

Question 25

What are the four main cost drivers in a cost-leadership strategy?

Answer 25

1. Cost of input factors 2. Economies of scale 3. Learning curve effects 4. Experience curve effects

Question 26

What is a Blue Ocean Strategy?

Answer 26

A strategy that combines differentiation and cost leadership through value innovation, enabling a firm to unlock new, uncontested market space and create a leap in customer value​

Question 27

What are the four actions in the Blue Ocean Strategy framework?

Answer 27

1. Eliminate factors the industry takes for granted 2. Reduce factors below industry standard 3. Raise factors above industry standard 4. Create factors the industry has never offered​

Question 28

What are the key risks of a Blue Ocean Strategy?

Answer 28

Difficulty in reconciling trade-offs between cost and differentiation, risk of imitation by competitors, and potential to become “stuck in the middle” if value innovation is not achieved.

Question 29

What is the principal-agent problem in corporate governance?

Answer 29

It arises when the interests of principals (shareholders) diverge from those of agents (managers), leading to conflicts in decision-making and potential inefficiency​

Question 30

How do internal governance mechanisms help reduce agency problems?

Answer 30

Through strategic control and reward systems, such as input controls (budgets, SOPs) and output controls (performance targets), which align manager actions with shareholder interests

Question 31

How do business strategies interact with Porter’s Five Forces?

Answer 31

Differentiation defends against rivalry by building brand loyalty and reducing substitution. Cost leadership protects against price-based competition and supplier/buyer bargaining power. Each strategy must also manage risks like imitation and trade-offs between cost and value

Question 32

What is the principal-agent problem and how can it be mitigated?

Answer 32

It arises when agents (managers) have different goals than principals (owners/shareholders). It can be mitigated through internal governance mechanisms like strategic controls, reward systems, and board oversight

Question 33

What are the benefits and risks of mergers and acquisitions (M&As)?

Answer 33

Benefits: Access to new markets, faster innovation, cost/revenue synergies Risks: Overpaying, integration challenges, culture clashes, failure to realise synergies

Question 34

How do strategic alliances differ in structure, and what makes them successful?

Answer 34

Alliance types include: - Non-equity alliances (low commitment, e.g. licensing) - Equity alliances (partial ownership) - Joint ventures (new, jointly owned entities) Success depends on trust, compatibility, clear governance, and continuous learning​

Question 35

What is the Build-Borrow-Buy framework in corporate growth strategy?

Answer 35

- Build: Develop resources internally - Borrow: Access resources via alliances - Buy: Acquire firms when close integration is necessary The choice depends on relevance, tradability, and required integration level​

Question 36

Which of the following is NOT one of the four actions in the Blue Ocean Strategy framework? A. Eliminate B. Reduce C. Accelerate D. Create

Answer 36

C

Question 37

Which internal governance mechanism aligns managerial actions with shareholder interests? A. Flat organizational structure B. Output control systems C. Non-equity partnerships D. Corporate social responsibility programs

Answer 37

B

Question 38

Which of the following is NOT a main cost driver in a cost-leadership strategy? A. Cost of input factors B. Brand differentiation C. Economies of scale D. Learning-curve effects

Answer 38

B

Question 39

Which type of strategic alliance involves the creation of a new, jointly owned independent entity? A. Non-equity alliance B. Equity alliance C. Joint venture D. Licensing agreement

Answer 39

C

Question 40

Strategic commitments typically involve: A. Short-term decisions with flexible outcomes B. Minimal investment to test markets C. Substantial resources and long-term consequences D. Temporary partnerships

Answer 40

C

Question 41

What does the 'borrow' option in the Build-Borrow-Buy framework refer to? A. Hiring external consultants B. Forming strategic alliances to access needed resources C. Outsourcing non-core functions D. Applying for business loans

Answer 41

B

Question 42

Which business-level strategy is best suited to protect against buyer power in Porter’s Five Forces model? A. Cost leadership B. Product expansion C. Geographic diversification D. Focus strategy

Answer 42

A

Question 43

What is a common risk of mergers and acquisitions (M&As)? A. Too little brand recognition B. Failing to achieve expected synergies C. Loss of low-skilled labor D. Excessive decentralisation

Answer 43

B

Question 44

The principal-agent problem arises due to: A. Managers pursuing shareholder value above all B. Alignment of incentives between shareholders and employees C. Diverging interests between managers and shareholders D. Too much shareholder control

Answer 44

C

Question 45

What is the primary objective of a Blue Ocean Strategy? A. To outperform rivals in existing markets B. To increase market share through price cuts C. To create and capture new demand in uncontested market space D. To reduce cost through outsourcing

Answer 45

C

Question 46

Which of the following best describes a Red Ocean market? A. An untapped market space with no competition B. A market where firms compete by creating new demand C. A known market space with intense competition D. A market dominated by monopolies

Answer 46

C

Question 47

Which phase of the alliance lifecycle involves choosing the governance structure? A. Post-formation management B. Design and governance C. Trust-building D. Strategic alignment

Answer 47

B

Question 48

What is a key success factor in managing a strategic alliance? A. Frequent contract renegotiations B. Government regulation C. Trust and compatibility between partners D. Competing in the same market

Answer 48

C

Question 49

Which is a managerial motive for engaging in M&A that may not benefit shareholders? A. Synergy creation B. Empire-building by the CEO C. Access to new markets D. Gaining unique capabilities

Answer 49

B

Question 50

What is adverse selection in the context of corporate governance? A. Hiring managers without a performance record B. Managers misusing shareholder funds C. Choosing managers based on inaccurate or incomplete information D. Employees leaking sensitive data

Answer 50

C

Question 51

Which of the following is an external governance mechanism? A. Board of directors B. Strategic control systems C. Financial analysts and auditors D. Employee surveys

Answer 51

C