Question 1. The principal driver(s) of shareholder value is (are)

A) profitability.
B) profit growth.
C) market share.
D) profitability and profit growth.
E) all of the above.

Question 2. Which of the following is the organization's principal general manager?

A) Board of directors
B) Division head
C) CFO
D) CEO
E) Controller

Question 3. Within a diversified company, the responsibilities of corporate-level strategic managers include

A) translating the corporate mission statement into concrete strategies for individual business units.
B) closely supervising the formulation of strategies at the functional level that support the company's business- and corporate-level strategies.
C) allocating resources to functions within business units.
D) overseeing the development of strategies for the total organization and allocating resources among its different business areas.
E) identifying and establishing relationships with supplier firms.

Question 4. Profit growth is best measured

A) by the increase in shareholder value.
B) by the return on investment.
C) month by month.
D) over time.
E) by increases in liquidity.

Question 5. Functional managers

A) are responsible for the specific business functions or operations that constitute a company or one of its divisions.
B) look at the overall picture of a corporation.
C) have no strategic role.
D) formulate generic strategies.
E) execute business-level decisions.

Question 6. The first step in the strategic management process is

A) defining the mission and major goals of the organization.
B) analyzing the macroenvironment.
C) analyzing the industry environment.
D) determining the firm's strengths and weaknesses.
E) deciding on a fit between the organization's strengths and weaknesses and the environment's opportunities and threats.

Question 7. Maximizing shareholder value is

A) a byproduct of a company's cost reduction programs.
B) not generally a viable goal for a company.
C) not the responsibility of a company's managers.
D) the ultimate goal of profit-making companies.
E) not required to attract risk capital.

Question 8. Aaron planned to cut prices at his bicycle shop, but when a competing shop began to offer free repairs, Aaron decided to copy them. Aaron's new strategy (offer free repairs) is an example of a(n)

A) mistake.
B) emergent strategy.
C) deliberate strategy.
D) intended strategy.
E) unrealized strategy.

Question 9. When considering emergent strategies, it is important for a firm's managers to

A) ensure that the chosen strategies are the result of deliberate plans.
B) ignore strategies that are not the result of a formal planning process.
C) evaluate each one carefully, using only those that show the most promise.
D) substitute emergent strategies for formal plans whenever possible.
E) develop the emergent strategies themselves.

Question 10. The scenario approach to strategic planning involves

A) devising strategies for coping with a number of different possible future states of the world.
B) homing in on a single prediction of future demand conditions using an iterative planning process.
C) functional managers setting key corporate objectives.
D) using computers to build virtual worlds for top-level managers.
E) making planning the exclusive domain of top-level managers.

Question 11. A sustained competitive advantage

A) enables a company to maintain above-average projects for a number of years.
B) cannot be maintained for more than three years.
C) is seldom possible in today's highly competitive environment.
D) typically arises out of unforeseen economic events.
E) A and D.

Question 12. Which of the following cognitive biases occurs when decisionmakers commit even more resources if they receive feedback that the project is failing?

A) Prior hypothesis bias
B) Reasoning by analogy
C) Illusion of control
D) Escalating commitment
E) Representativeness

Question 13. Which of the following cognitive biases refers to the fact that decisionmakers who have strong prior beliefs about the relationship between two variables tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong?

A) Prior hypothesis bias
B) Reasoning by analogy
C) Illusion of control
D) Escalating commitment
E) Representativeness

Question 14. Feelings of personal responsibility for a project are most likely to lead to

A) prior hypothesis biases.
B) escalating commitment.
C) reasoning by analogy.
D) representativeness.
E) groupthink.

Question 15. Groupthink occurs when a group of decisionmakers

A) engages in a brainstorming session designed to produce strategic options.
B) deliberately attempts to bring critical information to bear on the strategic decision process.
C) coalesces around commitment to a person or a policy for emotional rather than rational reasons.
D) uses a devil's advocate approach to question strategic assumptions.
E) is composed of experts in the decision they are facing.

Question 16. Which of the following is not a characteristic of well-constructed goals?

A) They are precise and measurable.
B) They are the result of a group decision process.
C) They specify a time period.
D) They are challenging but realistic.
E) They address critical issues.

Question 17. A group of firms all make writing implements-pens, pencils, and markers. This group should be referred to as a(n)

A) substitute.
B) market segment.
C) sector.
D) supplier.
E) industry.

Question 18. An industry can be defined as a group of

A) companies offering products or services that are close substitutes for each other.
B) twenty or more companies offering products or services that are close substitutes for each other.
C) companies.
D) companies that offer dissimilar products or services.
E) companies that offer products or services to dissimilar customers.

Question 19. Which of the following is not one of Porter's five forces, as proposed in his original model?

A) Threat of complementors
B) Bargaining power of suppliers
C) Rivalry among established companies
D) Threat of new entrants
E) Threat of market changes

Question 20. Which of the following is not a barrier to entry?

A) Economies of scale
B) Brand loyalty
C) Absolute cost advantages
D) High customer bargaining power
E) High customer switching costs

Question 21. If economies of scale are an industry's primary entry barrier, a new entrant's major risk is

A) its inability to access labor and materials.
B) the inferior quality of its products.
C) its inability to match the innovation of the established firm.
D) its inability to produce in sufficient volume to match the cost advantages of established producers.
E) its inability to get buyers to switch to its product.

Question 22. As a barrier to new entry, absolute cost advantages can be based on

A) continuous advertising of brand and company names.
B) high product quality, service-oriented innovations, and good after-sales service.
C) cost reductions that arise from the mass production of standardized output.
D) the unique ability of established companies to spread fixed costs over a large volume.
E) control over low-cost inputs required for production, be they labor, materials, equipment, or management skills.

Question 23. The extent of rivalry among established companies is lowest when

A) the industry's product is a commodity.
B) demand is growing rapidly.
C) exit barriers are substantial.
D) the industry is entering a decline stage.
E) the industry is dominated by a small number of large companies.

Question 24. The risk of a price war is greatest in which of the following circumstances?

A) A high-growth industry
B) An industry characterized by falling demand, high exit barriers, and excess productive capacity
C) An industry characterized by a commodity-type product, strong demand, and low exit barriers
D) A mature industry during an economic upturn
E) An industry characterized by tacit price agreements

Question 25. The bargaining power of an industry's suppliers is greater when

A) the supply industry is fragmented.
B) switching costs are high.
C) the industry buys in large quantities.
D) many substitutes are available.
E) firms in the industry can threaten backward vertical integration.

Question 26. Sales of complementors' products tend to

A) increase sales of the industry's product.
B) decrease sales of the industry's product.
C) have no effect on sales of the industry's product.
D) increase sales of substitute products.
E) decrease sales of substitute products.

Question 27. Economies of scale may arise from

A) cost reductions gained through mass production.
B) discounts on bulk purchases of raw material inputs and component parts.
C) advantages gained by spreading production costs over a large production volume.
D) cost savings associated with spreading marketing and advertising costs over a large volume of output.
E) all of the above.

Question 28. Members of a strategic group

A) compete directly with members of other strategic groups.
B) are affected by Porter's five competitive forces to the same degree that members of other strategic groups are affected.
C) follow a business model that is similar to that pursued by other companies in the group.
D) earn the same rate of return.
E) move easily to other groups as desired.

Question 29. A market segment is a group of

A) customers within a market that can be different from each other on the basis of their distinct attributes and specific demands.
B) companies that produce similar goods or services.
C) customers within a market that purchase goods or services in similar quantities.
D) customers within a market that have similar levels of profitability.
E) none of the above.

Question 30. Switching costs may arise when

A) changing from one computer system to another.
B) substitute products are available at a lower unit cost.
C) when there are a large number of interchangeable products.
D) products are commodity-like in nature.
E) all of the above.

Question 31. Common exit barriers include

A) investments in specific assets.
B) emotional attachments to an industry.
C) high fixed costs associated with leaving the industry.
D) bankruptcy regulations.
E) all of the above.

Question 32. Entry barriers in the embryonic stage are frequently based on

A) brand loyalty.
B) economies of scale.
C) absolute cost advantages.
D) economies of scope.
E) technological know-how.

Question 33. Growth industries

A) typically suffer from high mobility barriers.
B) tend to be characterized by weak rivalry.
C) have high rivalry among established companies.
D) increase prices because customers are more aware of the industry's product.
E) provide economies of scale to existing companies.

Question 34. An industry's buyers have high bargaining power when

A) buyers purchase in large quantities.
B) switching costs are low.
C) it is economically feasible for buyers to purchase inputs from several companies at once.
D) buyers can threaten to enter an industry and produce the product themselves.
E) all of the above.

Question 35. Demand reaches total saturation in the ___________ stage of the industry life cycle.

A) embryonic
B) growth
C) shakeout
D) maturity
E) decline

Question 36. The threat from new entrants is greatest in the _________ stage of the industry life cycle.

A) embryonic
B) growth
C) shakeout
D) maturity
E) decline

Question 37. Which of the following is not one of the factors in the economic forces of the macroenvironment?

A) Interest rates
B) Inflation
C) Regulation
D) Currency exchange rates
E) Economic growth rate

Question 38. Suppliers in an industry are most powerful when

A) there are few substitutes for the product suppliers sell.
B) switching costs are low.
C) companies in the industry can threaten to enter the suppliers' industry.
D) substitute products are readily available.
E) all of the above.

Question 39. Beverage makers are finding that water sales are increasing due to consumers' preferences for healthy drinks. Which part of the macroenvironment does this represent?

A) Economic forces
B) Demographic forces
C) Embryonic forces
D) Political forces
E) Social forces

Question 40. Eventually most industries enter a decline stage where

A) growth becomes negative.
B) rivalry among established companies usually decreases.
C) competitive pressures abate.
D) excess capacity declines.
E) demand continues to hold steady.