Deck 8: Strategy Formulation: Functional Strategy and Strategic Choice

Question 1

An example of the use of the leader R&D functional strategy to achieve a differentiation competitive advantage is Nike Inc.

Answer 1

True

Question 2

Equity financing is preferred for unrelated diversification while debt financing is preferred for related diversification.

Answer 2

False

Question 3

In a leveraged buyout, the acquired company, in effect, pays for its own acquisition.

Answer 3

True

Question 4

Penetration pricing attempts to hasten market development and offers the pioneer the opportunity to use the experience curve to gain market share with a low price and dominate the industry.

Question 5

Research indicates that the use of work teams leads to decreased quality and productivity as well as lower employee satisfaction and commitment as a result of less accountability.

Question 6

A product development strategy deals with pricing, selling, and distributing a product.

Question 7

A financial strategy examines the financial implications of corporate and business-level strategic options and identifies the best financial course of action.

Question 8

When Colgate-Palmolive and Unilever take a successful product that they marketed in one part of the world and market it elsewhere, they are following a market development strategy.

Question 9

The automobile industry is currently experimenting with the strategy of mass customization in which pre-assembled sub-assemblies are delivered as they are needed to a company's assembly line workers.

Question 10

Church & Dwight uses the line extension strategy when they put the Arm & Hammer name on various new food products.

Question 11

Logistics strategy deals with the flow of products into and out of the manufacturing process.

Question 12

Each business unit has its own set of departments, each with its own functional strategy.

Question 13

The orientation of the functional strategy is dictated by its parent business unit's strategy.

Question 14

An operations strategy determines how and where a product or service is to be manufactured, the level of vertical integration in the production process, the deployment of physical resources, and relationships with suppliers.

Question 15

The importance of sole sourcing was supported by Deming to obtain high supplier quality.

Question 16

When the Kellogg Company changed to a push strategy, they spent more money on consumer advertising designed to build brand awareness so that shoppers will ask for the products.

Question 17

The continuous improvement system was developed by Deming.

Question 18

Two suppliers are the sole suppliers of two different parts, but they are also backup suppliers for each other's parts in parallel sourcing.

Question 19

Using a market development strategy, a company can capture a larger share of an existing market for current products or develop new markets for current products.

Question 20

The use of the Internet to market goods directly to the customer allows a company to use dynamic pricing.

Question 21

The real-options approach is used by Chevron for bidding on petroleum reserves.

Question 22

Outsourcing is the alternative to vertical integration.

Question 23

Which type of pricing takes advantage of the demand curve while the product is still novel and competitors are few to increase profits?

A) demand pricing
B) skim pricing
C) competitive pricing
D) penetration pricing
E) loss-leader pricing

Question 24

A strategy's compatibility with the corporate culture has little likelihood of impacting its success.

Question 25

There is mounting evidence that when an organization is facing a dynamic environment, the best strategic decisions are arrived at through consensus when everyone agrees on one alternative.

Question 26

"The customer is always right" is an example of a policy in Nordstrom's.

Question 27

When Smith & Wesson puts its name on others' products like men's cologne, it is using which marketing strategy?

A) demand pricing
B) brand pricing
C) brand extension
D) penetration extension
E) demand extension

Question 28

The follow-the-moon management philosophy allows project team members living in one country to pass their work to team members in another country in which the workday is just beginning.

Question 29

When a company spends a large amount of money on trade promotion in order to gain or hold shelf space in retail outlets, a company is using a ________ strategy.

A) pull
B) push
C) financial
D) dedicated line
E) dynamic pricing

Question 30

Corporate scenarios are pro forma balance sheets and income statements that forecast the effect each alternative strategy and its various programs will likely have on division and corporate return on investment.

Question 31

The key to outsourcing is to purchase from outside only those activities that are not key to the company's distinctive competencies.

Question 32

Which strategy is developed to pull together the various activities and competencies of each department so that corporate and business unit performance improves and resource productivity is maximized?

A) business strategy
B) competitive strategy
C) generic strategy
D) enterprise strategy
E) functional strategy

Question 33

Some executives show a self-serving tendency to attribute the firm's problems not to their own poor decisions, but to environmental events out of their control such as government policies or a poor economic climate.

Question 34

The pricing, selling, and distributing of a product is referred to as a(n) ________ strategy.

A) functional
B) marketing
C) operations
D) financial
E) human resource management

Question 35

The attractiveness of a strategic alternative is affected by its perceived compatibility with the key stakeholders in a corporation's task environment.

Question 36

Even the most attractive strategic alternative might not be selected if it is contrary to the needs and desires of important top managers.

Question 37

The type of marketing strategy in which a company captures a larger share of an existing market for current products through market saturation or market penetration or develops new markets for current products is called

A) market development.
B) push strategy.
C) product development.
D) pull strategy.
E) skimming the cream.

Question 38

A company may use which of the following trade promotions to "pull" their products through the distribution system?

A) discounts
B) in-store special offers
C) advertising allowances
D) coupons
E) consumer advertising

Question 39

Fujitsu demonstrated a strategy to avoid when it imitated IBM's strategy focused on mainframes in 1990.

Question 40

Risk in strategic management is only the probability that the strategy will be effective.

Question 41

A flexible manufacturing system is

A) one-of-a-kind production using skilled labor.
B) highly automated assembly lines making one mass-produced product using little human labor.
C) a grouping of parts into manufacturing families to produce a wide variety of mass-produced items.
D) a process utilizing the just-in-time (JIT) method of manufacturing.
E) standardization of components with each machine functioning like a job shop, but is positioned in the same order as the parts are processed.

Question 42

If a company wishes to be a technological follower and also pursue a differentiation strategy, the appropriate R&D strategy would be to

A) adapt the product or delivery system more closely to buyer needs by learning from the leader's experience.
B) value activities by learning from the leader's experience.
C) avoid R&D costs through imitation.
D) create low-cost ways of performing value activities.
E) innovate in other activities to increase buyer value.

Question 43

When components are standardized and each machine functions like a job shop but is positioned in the same order as the parts are processed, this setup is known as

A) mass customization.
B) connected line batch flow.
C) connected job flow.
D) mass batch flow.
E) mass job flow.

Question 44

Which of the following is NOT a goal of financial strategies?

A) Examine the financial implication of corporate and business level strategic options and identify the best financial course of action.
B) Provide the corporation with the appropriate financial structure and funds to achieve its overall objectives.
C) Institute a new product development plan to generate profit gain market share.
D) Provide competitive advantage through a lower cost of funds and a flexible ability to raise capital to support a business strategy.
E) Attempt to maximize the financial value of the firm.

Question 45

All of the following are benefits for a company to raising its debt levels EXCEPT

A) deterrent to takeover by other firms.
B) improvement in productivity.
C) improvement in cash flows.
D) force management to focus on core businesses.
E) improvement in strategic options.

Question 46

A company which imitates the products of competitors is referred to as a

A) technological follower.
B) technological opportunist.
C) technological leader.
D) technological manufacturer.
E) technological entrepreneur.

Question 47

A company which pioneers an innovation is called a

A) technological follower.
B) technological opportunist.
C) technological leader.
D) technological manufacturer.
E) technological entrepreneur.

Question 48

Continuous improvement is an operations concept developed by Deming and perfected by firms in

A) the United States.
B) Sweden.
C) Japan.
D) Germany.
E) Canada.

Question 49

The strategy that deals with product and process innovation and improvement is known as a(n) ________ strategy.

A) marketing
B) R&D
C) operations
D) financial
E) human resource management

Question 50

If a company wishes to be a technological leader and also maintain a cost advantage, the appropriate R&D strategy would be to

A) increase the cost of the product.
B) lower the cost of the product or value activities by learning from the leader's experience.
C) avoid R&D costs through imitation.
D) create low-cost ways of performing value activities.
E) innovate in other activities to increase buyer value.

Question 51

As it relates to operations, AMT stands for

A) Automated Manufacturing Technology.
B) Advanced Manufacturing Technology.
C) Asymptotic Manufacturing Technology.
D) Advanced Monotone Technology.
E) Automated Manufacturing Technician.

Question 52

When Intel opened four small-scale research facilities adjacent to universities to promote the cross-pollination of ideas, they were using which approach to R&D?

A) open innovation
B) differentiation
C) technology scouts
D) continuous improvement
E) technological leadership

Question 53

Leveraged buyouts are also sometimes referred to as

A) leveraged bargains.
B) management buyouts.
C) management bargains.
D) coordinated buyouts.
E) debt buyouts.

Question 54

A popular financial strategy in which a company is acquired in a transaction financed largely by debt and eventually paid with money generated from the acquired company's operations or by sale of its assets is

A) illegal in most countries.
B) a good way to build a core competency.
C) an application of the capital asset pricing model.
D) the leveraged buyout.
E) an example of internal financing.

Question 55

According to Porter, to achieve a differentiation competitive strategy by following the functional strategy of technological leadership, a business unit should

A) pioneer the lowest-cost product design.
B) innovate in other activities to increase buyer value.
C) avoid R&D costs through imitation.
D) create low-cost ways of performing value activities.
E) be the first firm down the learning curve.

Question 56

According to Porter, to achieve a cost advantage by following the functional strategy of technological followership, a business unit should

A) pioneer the lowest-cost product design.
B) innovate in other activities to increase buyer value.
C) avoid R&D costs through imitation.
D) create low-cost ways of performing value activities.
E) be the first firm down the learning curve.

Question 57

When a company exchanges 200 shares of stock worth $20 each for 100 shares worth $40 each, they are using

A) tracking stock.
B) holding stock.
C) an LBO.
D) reverse stock split.
E) split stock.

Question 58

When a company determines how and where a product or service is to be manufactured, the level of vertical integration in the production process, the deployment of physical resources, and relationships with suppliers, the company is developing its ________ strategy.

A) marketing
B) operations
C) R&D
D) financial
E) human resource management

Question 59

When there are highly automated assembly lines making one mass-produced product using little human labor, this setup is called

A) dedicated transfer lines.
B) connected line batch flow.
C) connected job flow.
D) mass batch lines.
E) mass job flow.

Question 60

Which type of pricing attempts to hasten market development and offers the pioneer the opportunity to utilize the experience curve to gain market share with a low price and dominate the industry?

A) demand pricing
B) competitive pricing
C) skim pricing
D) penetration pricing
E) loss-leader pricing

Question 61

A company which keeps up by imitating a leading company's strategy while ignoring its own strengths and weaknesses is an example of which strategy to avoid?

A) follow the leader
B) hit another home run
C) arms race
D) do everything
E) losing hand

Question 62

When a company deals with obtaining raw materials, parts, and supplies needed to perform the operations function, the company is developing its ________ strategy.

A) operations
B) purchasing
C) R&D
D) financial
E) human resource management

Question 63

The key to outsourcing is to purchase from the outside only those activities that

A) are not key to the company's distinctive competence.
B) are very expensive.
C) provide the company competitive advantage.
D) are provided by an important supplier.
E) are not very expensive.

Question 64

A recent trend in information systems strategy used by multinational corporations is

A) computerizing accounting.
B) automating customer service.
C) practicing follow-the-sun management.
D) replacing Fortran with Cobol in order to boost productivity.
E) replacing mainframe computers with robots.

Question 65

Which of the following is NOT one of the major outsourcing errors that should be avoided?

A) failure to keep core activities inhouse
B) selecting the wrong vendor
C) writing a poor contract
D) micromanaging the outsourced activity to maintain control
E) overlooking personnel issues

Question 66

Since the deregulation of the airline industry, major airlines have entered into a spirited battle for market share by cutting prices and offering special deals. This is an example of which strategy to avoid?

A) follow the leader
B) hit another home run
C) arms race
D) do everything
E) losing hand

Question 67

When considering acceptable alternative strategies, the most important criterion is the capability of the proposed strategy to deal with

A) the prospects of ensuring profitable return on investment.
B) the specific strategic factors developed in the SWOT analysis.
C) defining the competitive environment in which the firm is competing.
D) the future long-term prospects of the industry.
E) governmental regulations and requirements placed on the industry.

Question 68

Purchasing a product or service from an outside contractor that had been previously provided internally is called

A) vertical integration.
B) horizontal integration.
C) transaction costing.
D) outsourcing.
E) geographic integration.

Question 69

When Dell Computer's customers use the Internet to design their own computers, this demonstrates which manufacturing strategy?

A) continuous improvement
B) mass production
C) job shop
D) mass customization
E) just-in-time

Question 70

A study of 30 firms revealed that outsourcing can lead to a ________ percent reduction in costs.

A) 3
B) 9
C) 20
D) 30
E) 50

Question 71

Three trends are evident in logistics: outsourcing, the use of the Internet, and

A) centralization.
B) downsizing.
C) logistical partnerships.
D) computerization.
E) containerized shipping.

Question 72

Many companies have found that outsourcing logistics

A) helps centralize logistics.
B) reduces costs and improves delivery time.
C) is an effective business-level strategy.
D) helps the companies differentiate themselves.
E) all of the above

Question 73

A company which has previously found great success pioneering an extremely successful product that is presently trying to turn another "long-shot" into a success would be an example of which strategy to avoid?

A) follow the leader
B) hit another home run
C) arms race
D) do everything
E) losing hand

Question 74

The flow of products into and out of the manufacturing process is a factor when developing a(n) ________ strategy.

A) marketing
B) logistics
C) operations
D) financial
E) human resource management

Question 75

A company which has invested so heavily in a particular strategy that it will not consider a change in this strategy even if it is not successful, would be an example of which strategy to avoid?

A) follow the leader
B) hit another home run
C) arms race
D) do everything
E) losing hand

Question 76

Avon is an example of a company that demonstrated having a diverse workforce

A) can be a competitive advantage.
B) can lower productivity.
C) can be an effective IT strategy.
D) can hinder quality.
E) hinders growth.

Question 77

The purchasing strategy used by an automobile manufacturer when it orders seats for a specific car model from several vendors is

A) sole sourcing.
B) multiple sourcing.
C) just-in-time sourcing.
D) backup sourcing.
E) parallel sourcing.

Question 78

The concept of ________ was taken one step further in JITII, in which vendor sales representatives usually have desks next to the purchasing company's factory floor, attend production status meetings, visit the R&D lab, and analyze the purchasing company's sales forecasts.

A) multiple sourcing
B) outsourcing
C) sole sourcing
D) parallel sourcing
E) all of the above

Question 79

According to a 2012 survey by Deloitte Consulting, the most popular outsourced activity was

A) marketing.
B) sales.
C) finance.
D) R&D.
E) information technology.

Question 80

The purchasing strategy in which two suppliers are the sole suppliers of different parts, but are also the backup suppliers for each other's parts is

A) sole sourcing.
B) multiple sourcing.
C) just-in-time sourcing.
D) backup sourcing.
E) parallel sourcing.