Deck 13: Strategic Planning and Control

Question 1

A value chain is a set of logically sequenced, value adding activities that convert input resources into products or services in a manner consistent with the chosen business strategy.

Answer 1

True

Question 2

Critical success factors are performance measures that must "go right" for an organization to implement its strategy successfully and achieve its mission.

Answer 2

True

Question 3

It is typically best for a firm to outsource or form strategic alliances with outside suppliers to perform those value activities in which it does not have a unique advantage.

Answer 3

True

Question 4

In the development stage of a product's life cycle we expect sales revenue only sufficient to cover costs.

Question 5

Firms following the cost leadership strategy intensively scrutinize costs, starting once the product is finished to after the customer purchases the product.

Question 6

Product life cycle analysis emphasizes that the objective is to maximize profitability of a product in its early stages to sustain it over the later stages of the cycle.

Question 7

Firms following Kaizen Strategy couple their strategy with market power to raise significant barriers to potential entrants thereby preserving their market share and long-term profitability.

Question 8

The value chain should never extend beyond the boundaries of the firm.

Question 9

Once a firm chooses critical success factors, little importance is placed on setting targets and monitoring progress.

Question 10

Target costing is particularly effective for products with well-defined and discrete features because it helps in making proper tradeoffs among price, quality and functionality with respect to each product feature.

Question 11

Strategic critical success factors are short-term, industry-specific measures that can be used to measure customer satisfaction.

Question 12

Product costs do not play as critical a role in pricing as the market's perception of the value differentiation.

Question 13

The primary reason ROI is by itself not enough to communicate strategy is that it only reflects the effect of components of the income statement.

Question 14

In the introduction and growth stage of a product's life cycle profitability typically begins slow and picks up as the scale of marketing and production goes up.

Question 15

With differentiation strategy, innovation is more important than cost control.

Question 16

Product life cycle is an important element of a business strategy because it determines the rate at which companies have to develop and introduce new products to compete effectively.

Question 17

Firms following a value differentiation strategy focus on continuous improvement and customer satisfaction.

Question 18

To build and preserve a significant market share in any competitive market, a firm must offer a unique value proposition, the key source of customer value, to its target market.

Question 19

One characteristic of a critical success factor is that it is readily quantifiable.

Question 20

The activity-based approach to configuring the value chain is useful for both value differentiation and cost leadership strategies.

Question 21

Which of the following is not an example of an activity included in the category of service activities? a. Market research.
B) Customer support.
C) Warranty work.
D) Maintenance at the customer site.
E) All of the above are examples of service activities.

Question 22

Value engineering is an organized effort directed at assessing the value that the target market attaches to each engineered feature of the product, and stressing only those that are valued the most.

Question 23

Under differentiation strategy, a firm evaluates activities based on how they enhance the success of a business strategy. Which of the following is such an activity? a. Product research and development.
B) Generation of new ideas.
C) Systematic cost reduction initiatives.
D) A and
B) e. A and
C)

Question 24

The first step in target costing is to compute the allowable cost of the product.

Question 25

Which of the following is not a characteristic of firms following the strategy of cost leadership? a. Exploit economies of scale.
B) Institute tight cost controls.
C) Adopt organization-wide policies of cost minimization.
D) Focus on innovation more than cost control.
E) All of the above are characteristics of firms following the strategy of cost leadership.

Question 26

Which of the following is not a competitive force firms should consider when formulating a business model? a. Intensity of competition.
B) Barriers to new entrants.
C) Threats from substitute products.
D) Bargaining power of suppliers.
E) All of the above are competitive forces firms should consider.

Question 27

Which of the following is not one of the generic categories in the value chain of primary activities for manufacturing? a. Production operations.
B) Inspection.
C) Marketing and sales.
D) After-sales service.
E) All of the above are generic categories in the value chain.

Question 28

Which of the following considerations does not influence the formulation of a successful business strategy? a. Verifiability.
B) Sustainability.
C) Competitive landscape.
D) Core competencies and capabilities.
E) All of the above are considerations that influence the formulation of a successful strategy.

Question 29

A firm using target costing obtains the allowable cost by subtracting the targeted profit margin from the expected price point.

Question 30

The life cycle of a product depends on all the following except: a. Nature of the product.
B) Nature of the industry.
C) Level of competition in the industry.
D) Rate at which technology is changing.
E) All of the above are factors affecting the life cycle of a product.

Question 31

If a firm determines that it is not possible to produce a product under the allowable cost, the best course of action is always to abandon the product.

Question 32

The balanced scorecard stresses the importance of linking long-term performance measures to the firm's strategy and for linking the various measures in the organizational perspectives.

Question 33

Firms following a value differentiation strategy stay ahead of competition by: a. Being quicker to develop and market the next generation of products.
B) Finding innovative ways to improve their business processes and cut costs.
C) Providing their target customer base a unique experience with their products and services.
D) A and C only.
E) A, B and
C)

Question 34

The balanced scorecard uses only financial measures to evaluate short-term versus long-term objectives, past outcomes versus futures outcomes, and external versus internal factors.

Question 35

Firms following the low-cost-producer strategy constantly seek process innovations to reduce costs and increase efficiencies.

Question 36

In target costing, functional analysis involves assessing the value that the target market attaches to each function or feature of the product, and stressing only those functions that are valued the most.

Question 37

An example of a "hard" measure when using a balanced scorecard approach is asset turnover.

Question 38

Which of the following is not an example of an activity included in the category of inbound logistics? a. Inventory control of input materials.
B) Purchasing.
C) Inspection.
D) Machine setup.
E) All of the above are examples of inbound logistics.

Question 39

Which of the following is not an example of an activity included in the category of marketing and sales activities? a. Advertising.
B) Customer support.
C) Pricing.
D) Market research.
E) All of the above are examples of marketing and sales activities.

Question 40

There is no sense in achieving customer satisfaction and improving business process if these actions do not translate into financial returns for the company's owners.

Question 41

Which of the following is a management action during the declining stage of a product? a. Ensure maximal efficiencies.
B) Identify and implement cost reduction initiatives.
C) Aggressive pricing.
D) Increase capacity utilization.
E) All of the above are management actions during the declining stage.

Question 42

Which of the following is not a step in most target costing systems? a. Set standard costs for the proposed product.
B) Compute the allowable cost of the product.
C) Compare the expected product cost with the allowable cost.
D) Review product launch.
E) All of the above are steps in most target costing systems.

Question 43

Which of the following is not a deficiency of financial measures? a. Financial measures often reflect the aggregate performance of the entire company or division.
B) Financial measures do not provide information needed in a timely manner to take immediate and on-the-spot corrective actions.
C) Financial measures do not provide specific information about potential areas of concern.
D) Financial measures are generally subjectively assessed.
E) All of the above are deficiencies of financial measures.

Question 44

Which of the following is not a characteristic of strategic critical success factors (CSF)? a. Strategic CSFs are long-term measures.
B) Strategic CSFs focus on the efficiency with which an organization is utilizing its resources.
C) Strategic CSFs are firm-specific.
D) Strategic CSFs help companies monitor the success of their unique corporate and business strategies.
E) All of the above are characteristics of strategic CSFs.

Question 45

In a balanced scorecard system, which of the following is not a performance measurement dimension? a. Short-term and long-term objectives.
B) "Hard" objective and "short" subjective measures of performance.
C) Past outcomes and forward looking measures of performance.
D) External and internal measures of performance.
E) All of the above are dimensions of performance measurement under a balanced scorecard approach.

Question 46

Which of the following is not a characteristic that describes functional analysis? a. Assess the value that the target market attaches to each function or feature of the product.
B) Direct effort at achieving essential product functions at the lowest life-cycle cost consistent with required performance, quality, reliability, and safety.
C) Stress only those functions that are valued the most.
D) Determine if it is possible to combine or eliminate some product functions without losing much from the customer's perspective.
E) All of the above are characteristics that describe functional analysis.

Question 47

In many industries, a large fraction of total product-life cycle costs become committed at the: a. Research stage.
B) Development stage.
C) Introduction and growth stage.
D) Maturity stage.
E) Decline stage.

Question 48

Which of the following is not a direct measure of customer perceptions? a. Sales growth.
B) Customer satisfaction.
C) The number of customer complaints.
D) Market share.
E) All of the above are direct measures of customer perceptions.

Question 49

Which of the following is not an alternative if the expected product cost is higher than the allowable cost? a. Identify cost reduction goals at various operation/activities.
B) Functional analysis.
C) Value engineering.
D) Increase volume of sales.
E) All of the above are alternatives.

Question 50

Balancing all the dimensions to design an effective corporate scorecard system is challenging because: a. It requires free and frank communication.
B) It requires a clear strategic vision on the part of senior executives.
C) It requires organization-wide buy into the chosen set of measures.
D) All of the above.
E) None of the above.

Question 51

Critical success factors are also known as: a. Key performance indicators.
B) Outcome indicators.
C) "Go right" measures.
D) Industry-related measures.
E) None of the above.

Question 52

Texun Electronics manufactures scientific calculators. The product life of a calculator is four years. Each model typically offers similar features. Texun targets and average profit margin of 10% of its expected revenue over the life cycle. It does not expect its manufacturing cost to vary materially over the four-year life. Estimated volumes and unit price of model TE75 over its expected life is given below: Applying the target costing model, the allowable unit cost of TE75 is: a. $150.77
B) $58.98
C) $65.53
D) $63.75
E) $45

Question 53

Which of the following is not a characteristic of a good critical success factor? a. Simple and easy to understand.
B) Linked to strategy.
C) Subjective in nature.
D) Easy to monitor.
E) All of the above are characteristics of a good critical success factor.

Question 54

Which of the following is not a component of a balanced scorecard? a. Financial perspective.
B) Technology perspective.
C) Customer perspective.
D) Internal business perspective.
E) All of the above are components of a balanced scorecard.

Question 55

Which of the following is not a key activity in the introduction and growth stage of a product? a. Marketing and distribution.
B) Promotion.
C) Test marketing.
D) Improve production efficiencies.
E) All of the above are key activities in the introduction and growth stage.

Question 56

Which of the following is a characteristic of operational critical success factors (CSF)? a. Operational CSFs are short-term measures.
B) Operational CSFs focus on the efficiency with which an organization is utilizing its resources.
C) Operations CSFs may be financial or non-financial.
D) All of the above are characteristics of operational CSFs.
E) None of the above are characteristics of operational CSFs.

Question 57

Which of the following is the profitability expectation during the maturity stage of a product? a. Maximum revenue/minimum cost of operations.
B) No profit/ net cash outflow.
C) Declining revenues/declining profit.
D) Maximum revenue generation/maximum cost of operations.
E) Revenue/low profits.