Deck 8: Strategy Formulation: Functional Strategy and Strategic Choice

Question 1

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

Answer 1

True

Question 2

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.

Answer 2

False

Question 3

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.

Answer 3

False

Question 4

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

Question 5

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 6

Sara Lee Corporation uses the line extension strategy when they put the Sara Lee name on various new food products.

Question 7

Research indicates that the use of work teams leads to increased quality and productivity as well as higher employee satisfaction and commitment.

Question 8

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

Question 9

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

Question 10

Using a market development strategy, a company can develop new products for existing markets or develop new products for new markets.

Question 11

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

Question 12

In a leveraged buy-out, the acquired company, in effect, pays for its own acquisition.

Question 13

The continuous improvement system was developed in China.

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

An example of the use of the leader R&D functional strategy to achieve a low-cost competitive advantage is Dean Foods Company.

Question 16

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

Question 17

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 18

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

Question 19

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

Question 20

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

Question 21

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

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

Question 22

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

Question 23

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

Question 24

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

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

Question 25

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 work day is just beginning.

Question 26

If the strategy is incompatible with the corporate culture, the likelihood of its success is very low.

Question 27

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)lengthening
D)knot
E)hold

Question 28

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 29

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 30

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 31

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 32

Chevron uses the real-options approach for bidding on petroleum reserves.

Question 33

Risk is composed not only of the probability that the strategy will be effective, but also of the amount of assets the corporation must allocate to that strategy and the length of time the assets will be unavailable for other uses.

Question 34

Outsourcing is the reverse of vertical integration.

Question 35

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

Question 36

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)line extension
D)penetration extension
E)demand extension

Question 37

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 38

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

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

Question 39

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

Question 40

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

Question 41

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 42

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

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

Question 43

A flexible manufacturing system is defined by the text as

A)one-of-a-kind production using skilled labor.
B)highly automated assembly lines making one mass-produced product using little human labor.
C)the grouping of parts into manufacturing families to produce a wide variety of mass-produced items.
D)a process utilizing the just-in-time (JI
T)method of manufacturing.

Question 44

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 45

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 46

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)R&D
C)operations
D)financial
E)human resource management

Question 47

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 potential.
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 48

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 49

A popular financial strategy in which a company is acquired in a transaction financed largely by debt ∙ eventually paid off 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 50

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)increase in shareholder value.

Question 51

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 52

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 53

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 54

Leveraged buyouts are also referred to as

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

Question 55

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

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

Question 56

Continuous improvement is an operations concept developed in

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

Question 57

When a company exchanges 100 shares of stock worth $10 each for 50 shares worth $20 each, they are using

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

Question 58

A company which pioneers an innovation is called a(n)

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

Question 59

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

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

Question 60

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 61

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 62

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 63

According to an American Management Association survey, the most heavily outsourced activities were

A)manufacturing and marketing.
B)customer service and sales.
C)finance and manufacturing.
D)R&D and customer service.
E)general and administrative.

Question 64

A recent trend in information systems strategy 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

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 66

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.

Question 67

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 68

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

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

Question 69

A company which has previously found great success pioneering an extremely successful product that is presently trying to turn another "long-shot" into a likely 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 70

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 71

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 72

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 73

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 74

The purchasing strategy in which the purchasing company orders a particular part from several vendors is

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

Question 75

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 76

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

A)the prospects of ensuring profitable return on investment.
B)the specific strategic factors developed in the S.W.O.T. 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 77

A company which enters into a spirited battle for market share by cutting prices and offering special deals 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 78

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 79

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 company differentiate themselves.
E)all of the above

Question 80

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

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