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Business Strategy MCQs

Partial ownership by a foreign company in a domestic firm describes which international mode of entry?

exporting
foreign direct investment
strategic alliances
licensing

Which of the following is a risk (or potential pitfall) of cost leadership?

Cost cutting may lead to the loss of desirable features.
Cost differences increase as the market matures.
Producers are more able to withstand increases in suppliers' cost.
Attempts to stay ahead of the competition may lead to gold plating.

Which of the following is a risk (or potential pitfall) of a differentiation strategy?

Too high a price premium.
The opportunity for revenue growth through brand extensions.
Uniqueness that is not easily imitated.
A lack of parity on differentiation.

Primary value chain activities that involve the effective layout of receiving dock operations (inbound logistics) and support value chain activities t...

differentiation
differentiation focus
overall cost leadership
stuck-in-the-middle

High product differentiation is generally accompanied by

higher market share.
significant economies of scale.
decreased emphasis on competition based on price.
higher profit margins and lower costs.

Generally, the products of a company pursuing an overall cost leadership strategy will likely

incorporate a good basic design with few frills, have acceptable quality, and offer a limited number of models/styles to select from.
include many product variations and wide selection and be of average or better quality than products of rival firms.
be customized to fit the specialized needs of the company's target group of customers
emphasize a few chosen differentiating features to help set off its image with buyers.

The major avenues for achieving a cost advantage over rivals include

being a first-mover in adopting the latest state-of-the-art technologies, especially those relating to the Internet, digital technologies, and e-commerce.
outsourcing high-cost activities to cost-efficient vendors.
focusing on the firmâ€™s value chain to eliminate or bypass some cost-producing activities and/or out-managing rivals in the efficiency with which value chain activities are performed
pursuing both backward and forward integration so as to maximize scale economies and gain full control of the cost-drivers across the entire industry value chain.

Which statement regarding competitive advantages is true?

Attaining multiple types of competitive advantage is a recipe for failure.
In the long run, a business with one or more competitive advantages is probably destined to earn normal profits.
If several competitors pursue similar differentiation tactics, they may all be perceived as equals in the mind of the consumer.
With an overall cost leadership strategy, firms need not be concerned with parity on differentiation.

The primary aim of strategic management at the business level is

maximizing differentiation of products and/or services.
achieving competitive advantage(s) in a specific product market.
achieving a low cost position.
maximizing risk-return tradeoffs through diversification.

Which of the following is false regarding how a differentiation strategy can help a firm to improve its competitive position vis-Ã -vis Porter'...

It tends to reduce buyer power because buyers often lack comparable alternatives.
Supplier power is increased because suppliers will be able to charge higher prices for their inputs.
By increasing a firm's margins, it avoids the need for a low cost position.
Firms will enjoy high customer loyalty, thereby experiencing less threat from substitutes than its competitors.

A differentiation strategy enables a business to address the five competitive forces by

increasing economies of scale.
reducing competitive rivalry by distancing itself from rivals.
serving a broader market segment.
having brand-loyal customers become more sensitive to prices.

The increased efficiency resulting from the combination of two firms within a single corporate organization is _____.

conglomerate diversification
not feasible
the corporate profile
synergy

Corporate-level strategy addresses two related issues:

what businesses to compete in; how these businesses can achieve synergy.
how to integrate primary activities; increase shareholder wealth.
how to improve a firm's infrastructure; how to maintain ethical behavior.
how to compete in a given business; the application of technology.

__________ reflect(s) the collective learning in organizations such as how to coordinate production skills, integrate multiple streams of technologies...

Horizontal integration
Primary value chain activities
Culture
Core competencies

Economies of scope are cost reductions

That firms experience from multiple operations in a variety of related industries
That firms experience from spreading fixed costs over a larger number of units produced
That firms experience from learning
Resulting from reduced regulatory enforcement

Two broad bases of synergy associated with creating value through related diversification are

Differentiation and focus
Corporate parenting and restructuring
Economies of scope and market power
Exporting and licensing

A firm whose corporate-level synergies are based on the ability to transfer knowledge developed in one business to another line of business is creatin...

Pooled negotiating power
Sharing activities
Leveraging core competencies
Vertical integration

Shaw Industries, a giant carpet manufacturer, increases its control over raw materials by producing much of its own polypropylene fiber, a key input i...

vertical integration.
leveraging core competencies.
pooled negotiating power.
sharing activities.

For a core competence to be a viable basis for the corporation strengthening a new business unit, there are three requirements. Which one of the follo...

The collection of competencies should be unique, so that they cannot be easily imitated.
The competence must help the business gain strength relative to its competition.
The new business must have an established large market share.
The new business must be similar to existing businesses to benefit from a core competence.

When a firm expands by acquiring one of its suppliers, it is engaging in

Forward integration.
Conglomerate diversification.
Focus differentiation.
Backward integration.

The efficiencies or cost savings that firms may realize from multiple operations in related industries, or businesses, are called

Economies of scale
Diseconomies of scale
Economies of scope
Financial economies

An example of __________ occurs when a firm changes its corporate portfolio by acquiring firms and reconfiguring their assets.

Parenting
Leveraging core competencies
Restructuring
Sharing activities

According to the text, corporate restructuring includes

capital restructuring, asset restructuring, and management restructuring.
global diversification, capital restructuring, and asset restructuring.
management restructuring, financial restructuring, and procurement restructuring.
capital restructuring, asset restructuring, and technology restructuring.

An example of __________ occurs when a firm's corporate office helps subsidiaries make wise choices in their own acquisitions, divestures, and ne...

Parenting
Restructuring
Increasing market power
Leveraging core competencies

Whereas synergies realized from related diversification come from ___ relationships, synergies realized from unrelated diversification come from _...

hierarchical, horizontal
horizontal; tangible
horizontal; hierarchical
vertical; intangible

_____ is/are most closely associated with creating synergies through unrelated diversification

Leveraging core competencies
Pooled negotiating power
Corporate parenting and restructuring
Sharing activities

Vertical integration is attractive when

search costs are higher than monitoring costs.
internal administrative costs are higher than transaction costs.
transaction costs are higher than internal administrative costs.
transaction costs and internal administrative costs are equal

A firm should consider vertical integration when

the competitive situation is highly volatile.
the firmâ€™s suppliers of raw materials are often unable to maintain quality standards.
customer needs are evolving.
the firm's suppliers willingly cooperate with the firm.

Transaction costs include all of the following costs except

search costs.
monitoring costs.
agency costs.
negotiating costs.

It may be advantageous to vertically integrate when

the minimum efficient scales of two corporations are different.
various segregated specializations will be combined.
lower transaction costs and improved coordination are vital and achievable through vertical integration.
flexibility is reduced, providing a more stationary position in the competitive environment.

The risks of vertical integration include all of the following except

costs and expenses associated with increased overhead and capital expenditures.
problems associated with unbalanced capacities along the value chain.
additional administrative costs associated with managing a more complex set of activities.
lack of control over valuable assets.

Recent trends that might lead managers of multinational corporations (MNCs) to adopt a more decentralized strategy for their operations would include ...

fluctuating exchange rates.
consumers around the world are increasingly willing to trade off idiosyncratic preferences in product features for lower price.
customersâ€™ needs, interests, and tastes are becoming increasingly homogenized or similar.
flexible manufacturing trends have allowed a decline in the minimum volume required to reach acceptable levels of production efficiency.

Gillette's worldwide success with its Sensor razor demonstrates

the values of establishing joint ventures with several multinational corporations.
that a global marketing effort can sometimes be successful.
the usefulness of a multidomestic strategy.
the importance of merging global and multidomestic strategies.

Pressures to "reduce costs" require that

a company should not trade idiosyncratic preferences in product features for higher economic returns.
a company must pursue what is economically beneficial to the company including maximizing economies of scale and learning curve effects.
the manager should follow a multidomestic strategy to maximize the economic benefits to the company.
the company needs to supplement the local foreign economy in a manner specified by the local government.

In order to realize the strongest competitive advantage, firms engaged in worldwide competition must

ensure that all business units follow a strategy strictly tailored to their respective locations.
pursue a strategy that combines the uniformity of a global strategy and the specificity of a multidomestic strategy in order to achieve optimal results.
attempt to use the strategy that was most successful in their home country.
require that all of their various business units follow the same strategy regardless of location.

The sales of Boeing's commercial aircraft and Microsoft's operating systems in many countries enable these companies to benefit from

optimizing the location for many activities in their value chain.
reducing their exposure to currency risks.
economies of scale.
higher prices in their domestic markets.

A foreign company contracting with a firm residing and operating in the host country (foreign market) to produce and/or distribute its goods describes...

strategic alliances
exporting
foreign direct investment
licensing

__________ are most appropriate where a firm already has the appropriate knowledge and capabilities that it can leverage rather easily through multipl...

Wholly owned subsidiaries
Strategic alliances
Joint ventures
Licensing agreements

Fees that a multinational receives from a foreign licensee in return for its use of intellectual property (trademark, patent, trade secret, technology...

royalties.
dividends.
intra-corporate inflows.
transfer prices.

Elements of a multidomestic strategy may facilitate the competitive advantage of cost leadership by

economies of scale gained through centralized production of standardized products.
decreased duplication of inventories which are often involved in having multiple plants producing similar products.
flexibility in adjusting to local laws and customs.
decreased shipping and transportation costs inherent in local production.

Appreciation of the U.S dollar will have the following impact on McDonald's:

more transfer of ingredients from the U.S to branches abroad to take advantage of the higher dollar.
lower profits, because foreign profits will be reduced when measured in dollars.
lower sales abroad because foreign customers cannot afford McDonalds' products.
no impact at all

Industries in which proportionally more value is added in activities are more likely to benefit from a strategy.

upstream; global
downstream; global
manufacturing; multidomestic
upstream; multidomestic

Which of the following types of international firms are most likely to benefit from a global strategy as opposed to a multidomestic strategy?

Firms in industries that have much value added in research and design or manufacturing.
Firms that compete in industries in which consumer preferences vary substantially in each country.
Firms in industries that have value added by sales and marketing departments.
Firms in industries that are expanding very rapidly.

Pressures to "reduce costs" require that

the manager should follow a multidomestic strategy to maximize the economic benefits to the company.
the company needs to supplement the local foreign economy in a manner specified by the local government.
a company must pursue what is economically beneficial to the company including maximizing economies of scale and learning curve effects.
a company should not trade idiosyncratic preferences in product features for higher economic returns.

Which of the following is a disadvantage of a transnational strategy?

Less ability to realize cost savings through scale economies.
Single locations may lead to higher tariffs and transportation costs.
Limited ability to adapt to local markets.
Unique managerial challenges in fostering knowledge transfer.

Many U.S. multinational companies set up maquiladora operations south of the US-Mexico border primarily

to sell products into the growing Mexican market.
to take advantage of the low cost of labor.
as part of US government-initiated measures to discourage illegal immigration.
to take advantage of the lower tax rates in Mexico.

A foreign company contracting with a firm residing and operating in the host country (foreign market) to produce and/or distribute its goods describes...

licensing
exporting
strategic alliances
foreign direct investment

Fees that a multinational receives from a foreign licensee in return for its use of intellectual property (trademark, patent, trade secret, technology...

dividends.
intra-corporate inflows.
royalties.
transfer prices.

Elements of a multidomestic strategy may facilitate the competitive advantage of cost leadership by

economies of scale gained through centralized production of standardized products.
flexibility in adjusting to local laws and customs.
decreased shipping and transportation costs inherent in local production.
decreased duplication of inventories which are often involved in having multiple plants producing similar products.

Appreciation of the U.S dollar will have the following impact on McDonald's:

more transfer of ingredients from the U.S to branches abroad to take advantage of the higher dollar.
lower sales abroad because foreign customers cannot afford McDonalds' products.
lower profits, because foreign profits will be reduced when measured in dollars.
no impact at all

In the strategy formulation phase of the strategic management process, what are the different levels of strategy?

Industry, organizational and international level
Micro, meso and macro level
Individual, national and international level
Business, corporate and international level

Business-level strategies detail commitments and actions taken to provide value to customers and gain competitive advantage by exploiting core compete...

the selection of industries in which the firm will compete.
specific product markets.
primary value chain activities.
particular geographic locations.

An interior decorator has moved his business from Los Angeles to St. Paul, Minnesota, because his spouse's company transferred her to St. Paul. T...

The decorator does not understand that customer needs are neither right nor wrong, good nor bad.
The decorator has no core competencies that will transfer to his new geographic market.
The decorator should choose a strategy of cost-leadership in this environment.
The decorator is highly affiliated with the new target market and understands how he can create value for it.

A firm successfully implementing a differentiation strategy would expect

customers to be sensitive to price increases.
to charge premium prices.
customers to perceive the product as standard.
to have high levels of power over suppliers.

Blind taste-tests have shown that the taste of premium-priced vodkas and inexpensive vodkas are indistinguishable even to regular drinkers of vodka. B...

the perception of uniqueness being important to firms following the differentiation strategy.
the importance of high-quality raw materials when using the differentiation strategy.
the risk of product imitation by competitors.
the danger counterfeiting holds for firms pursuing the differentiation strategy.

All of the following are considered generic business-level strategies EXCEPT

product diversification.
cost leadership.
focused differentiation.
integrated cost leadership/differentiation.

As the television industry has changed in the last few decades from just three major networks to a multiplicity of networks, one of the major aspects ...

broader competitive scope
narrower competitive scope
increased use of primary activities to capture value
increased use of support activities to capture value

The term "conglomerates" refers to firms using the ____ diversification strategy.

unrelated
related constrained
related linked
global

Corporate Level Strategy Involves

Between 70% and 95% of revenues from a single business unit
What businesses should the corporation be in?How should the corporate office manage the array of business units?
> 95% of revenues from a single business unit
How to create value as a whole for the company

Hutchison Whampoa Limited (HWL) has businesses in ports and related services, telecommunications, property and hotels, retail and manufacturing, and e...

dominant business
related constrained
related linked
unrelated

An office management firm has developed a system for efficiently organizing small medical and dental practices both through proprietary software and t...

achieve economies of scope.
implement vertical integration.
achieve financial economies through an unrelated acquisition.
acquire specialized talent from the veterinary management company.

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Business Strategy MCQs