Test bank of fred r david – strategic management, 13th edition ch06

Horizontal integration is seeking ownership or increased control over competitors... Gaining ownership or increased control over distributors or retailers is called forward integration s

Name _

TRUE/FALSE Write 'T' if the statement is true and 'F' if the statement is false

1)

Long-term objectives represent the results expected from pursuing certain strategies 1)

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2)

Objectives provide direction and allow for organizational synergy 2)

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3)

Strategic objectives include those associated with growth in revenues, growth in earnings, higher dividends, larger profit margins and improved cash flow

3)

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4)

Strategic objectives include larger market share, quicker on-time delivery than rivals, quicker market times than rivals, lower costs than rivals, and wider geographic coverage than rivals

design-to-4)

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5)

"If it ain't broke, don't fix it" refers to managing by crisis 5)

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6)

The overall aim of the Balanced Scorecard is to balance financial objectives with strategic objectives 6)

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7)

Since a combination strategy is not risky, many organizations pursue a combination of two or more strategies simultaneously

7)

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8)

Horizontal integration is seeking ownership or increased control over competitors 8)

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9)

Divestiture is selling all of a company's assets, in parts, for their tangible worth 9)

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10)

A chief executive officer is located in the divisional level of a large firm 10)

11)

Gaining ownership or increased control over distributors or retailers is called forward integration strategy 11)

12)

Franchising is an effective means of implementing forward integration 12)

13)

A growing trend is for franchisers to buy out their part of the business from their franchisees 13)

14)

McDonalds currently owns more than 50 percent of its restaurants 14)

15)

Forward integration strategy is especially effective when the availability of quality distributors is so limited

as to offer a competitive advantage to those firms that integrate forward

15)

16)

A strategy of seeking ownership or increased control of a firm's suppliers is backward integration 16)

17)

If a firm's present suppliers are expensive and unreliable in meeting the firm's need for parts, components

or raw materials, the firm should pursue a horizontal integration strategy

17)

18)

Horizontal integration is an appropriate strategy when the competitors of an organization are doing poorly 18)

19)

Market penetration, market development, product development and joint venture are intensive strategies 19)

20)

When the correlation between dollar sales and dollar marketing expenditures has historically been low, market penetration is an appropriate strategy

20)

21)

Market development includes introducing present products into new geographic areas 21)

22)

An appropriate strategy when an organization has excess production capacity is market development 22)

23)

Orascom Telecom and Etisalat both seek to dominate the international market while searching for opportunities in other regions, especially in Africa and Asia

23)

24)

Product development is a strategy that seeks increased sales by improving or modifying present products

or services

24)

25)

Product development is an appropriate strategy when an organization has successful products that are in the maturity stage of their life cycle

25)

26)

Instead of extending the life cycle of existing products through modification and improvement, innovative strategies make existing products obsolete

26)

27)

Innovative strategy requires investing a small amount of capital in R&D and changing the company culture

to one that supports creativity and talent

27)

28)

There are four basic types of diversification concentric, conglomerate, forward and backward 28)

29)

Most companies favor related diversification strategies in order to exploit the common use of a well-known brand name

29)

30)

The related diversification strategy is effective when an organization has a weak management team 30)

31)

Almarai's takeover of companies that are not part of their primary dairy business is an example of related diversification

31)

32)

Unrelated diversification is an appropriate strategy when an organization's present channels of distributioncan be used to market the new products to current customers

32)

33)

The Libyan Investment Authority's involvement in industries such as oil, travel, banking, and telecommunication is a good example of related diversification

33)

34)

Unrelated diversification may be an especially effective strategy when an organization's basic industry is experiencing increasing annual sales and profits

34)

35)

Retrenchment and turnaround are the same strategy 35)

36)

Although bankruptcy can be an effective type of retrenchment strategy, it does not allow firms to avoid major debt obligations and to void union contracts

36)

37)

Chapter 7 bankruptcy is a liquidation procedure used only when a firm sees no hope of being able to operate successfully or to obtain necessary creditor agreement

37)

38)

Chapter 9 bankruptcy applies to municipalities 38)

39)

According to statistics from the American Bankruptcy Institute, Chapter 11 bankruptcy filings in the U.S increased from 43,694 in 1980 to 60,837 in 2009

39)

40)

Chapter 13 bankruptcy is similar to Chapter 11, but available only to large corporations 40)

41)

Divestiture is the selling of land a firm owns 41)

42)

Divestiture has become a popular strategy to enable firms to focus on their core business and become more diversified

42)

43)

Liquidation is often appropriate when retrenchment and divestiture have failed 43)

44)

According to Porter, strategies allow organizations to gain competitive advantage from three different bases cost leadership, differentiation and integration

44)

45)

For consumers who are price sensitive, cost leadership emphasizes producing standardized products at very low per-unit cost

45)

46)

A best-value strategy offers products or services to a wide range of customers at the lowest price on the market

46)

47)

A low-cost focus strategy offers products or services to a small range of customers at the lowest price available on the market

47)

48)

Al Faisaliah Hotel would be a good example of a firm seeking the best-value focus strategy 48)

49)

A cost leadership strategy can be especially effective when most buyers use the product in the same way 49)

50)

A differentiation strategy can only be achieved with a large target market 50)

51)

Gaining a differentiation advantage is a primary reason for pursuing forward, backward, and horizontal integration strategies

51)

52)

The most effective differentiation bases are those that are hard or expensive for rivals to duplicate 52)

53)

A low cost focus strategy can be especially attractive when the target market niche is small 53)

54)

A differentiation strategy can be especially attractive when the industry has many different niches and segments, thereby allowing a focuser to pick a competitively attractive niche suited to its own resources 54)

55)

In a turbulent, high-velocity market, a lead-change strategy is best whenever the firm has the resources to pursue this approach

55)

56)

Cooperative arrangements and joint ventures between competitors are becoming increasingly popular 56)

57)

Joint ventures tend to fail when the managers who are required to collaborate daily in operating the venture are not involved in forming or shaping the venture

57)

58)

Divestiture would be an appropriate strategy when a need exists to introduce a new technology quickly 58)

59)

An acquisition occurs when a large organization purchases a smaller one or vice versa 59)

60)

When an acquisition or merger is not desired by both parties, it is called a takeover or a hostile takeover 60)

61)

In the Arab world, hostile takeovers are common due to the current nature of social and business networking, which appears to favour hostile attitudes

61)

62)

Out of the wordld's 300 largest private equity firms in 2010, sixty were from the Arab world 62)

63)

A leveraged buyout occurs when a firm's management and other private investors use borrowed funds to buy out the firm's shareholders

63)

64)

First mover advantages refers to the benefits a firm may achieve by entering a new market or developing

a new product or service prior to rival firms

64)

65)

Companies are avoiding outsourcing more and more because it is more expensive than traditional methodsand it does not allow a firm to concentrate on core competencies

65)

66)

India commands over 60 percent of all backoffice outsourcing 66)

67)

In the Arab world, the non-profit sector is not as common and active as it is in Western countries 67)

68)

Strategists in governmental organizations operate with far more strategic autonomy than their counterparts in private firms

68)

69)

According to varous sources, 95 percent of all businesses in the Arab region are family firms 69)

70)

All sizes and types of organizations can utilize and benefit from strategic-management concepts and techniques

70)

71)

Research shows strategic management in small firms is more formal than in large firms, but large firms that engage in strategic management outperform those that do not

Long-term objectives are needed at which level(s) in an organization? 72)

A)

Divisional

B)

Functional

C)

Corporate

D)

all of these

E)

none of these 73)

Financial objectives involve all of the following except

73)

A)

higher dividends

B)

greater return on investment

C)

larger market share

D)

a rising stock price

E)

growth in revenues 74)

What principle is based on the belief that the true measure of a really good strategist is the ability to solve problems?

74)

A)

Managing by subjectives

B)

Managing by extrapolation

C)

Managing by objectives

D)

Managing by crisis

E)

Managing by hope 75)

What principle is built on the idea that there is no general plan for which way to go and what to do? 75)

A)

Managing by extrapolation

B)

Managing by crisis

C)

Managing by subjectives

D)

Managing by objectives

E)

Managing by hope 76)

All of the following are important factors in the Balanced Scorecard except

76)

A)

business ethics

B)

employee morale

C)

customer service

D)

stockholder equity

E)

product quality 77)

Which level of strategy is most likely not present in small firms?

77)

A)

Functional

B)

Divisional

C)

Operational

D)

Corporate/company

E)

All of these are present in small firms 78)

Aramco's ownership of Saudi Petroleum International, which specializes in scheduling, loading, storage, transportation and delivery of crude oil, is an example of which type of strategy?

78)

A)

Unrelated diversification

B)

Related diversification

C)

Backward integration

D)

Horizontal integration

E)

Forward integration 79)

The sale of Global Investment House of Kuwait 's stakes in Salam Bank to Techtronic Industries is an example of which type of strategy?

79)

A)

Liquidation

B)

Related diversification

C)

Retrenchment

D)

Unrelated diversification

E)

Divestiture 80)

Egypt-based Fresh Electric Co assembles gas stoves and water heaters in Georgia, for export to Azerbaijanand Armenia This is an example of which type of strategy?

80)

A)

Product development

B)

Forward integration

C)

Market development

D)

Horizontal integration

E)

Backward integration 81)

Which of the following is most likely not included in the functional level of a small company?

81)

A)

Finance

B)

R & D

C)

Human resource managers

D)

Marketing

E)

Department managers 82)

Forward and backward integration strategies are sometimes collectively referred to as which of these strategies?

82)

A)

Horizontal integration

B)

Vertical integration

C)

Diversification

D)

Stuck-in-the-middle

E)

Hierarchical integration 83)

Websites which sell products directly to consumers are examples of which type of strategy? 83)

A)

Backward integration

B)

Conglomerate diversification

C)

Product development

D)

Horizontal integration

E)

Forward integration 84)

What percentage of McDonald's restaurants are actually owned by the McDonald's corporation? 84)

A)

Which of these strategies is effective when the number of suppliers is small and the number of competitors

is large?

85)

A)

Backward integration

B)

Concentric diversification

C)

Conglomerate diversification

D)

Forward integration

E)

Horizontal diversification 86)

Backward integration is effective in all of these except

86)

A)

when an organization has both capital and human resources to manage the new business of supplying its own raw materials

B)

when present suppliers have high profit margins

C)

when an organization competes in an industry that is growing rapidly

D)

when the advantage of stable prices are not important

E)

when an organization needs to acquire a needed resource quickly 87)

What refers to a strategy of seeking ownership of or increased control over a firm's competitors? 87)

A)

Backward integration

B)

Conglomerate diversification

C)

Horizontal integration

D)

Forward integration

E)

Concentric diversification 88)

In which situation would horizontal integration be an especially effective strategy? 88)

A)

When decreased economies of scale provide major competitive advantages

B)

When an organization competes in a slowing industry

C)

When competitors are succeeding due to managerial expertise or having particular resources an organization possesses

D)

When an organization has neither the capital nor human talent needed to successfully manage an expanded organization

E)

When an organization can gain monopolistic characteristics in a particular area or region without being challenged by the federal government for "tending substantially" to reduce competition

89)

Which strategy seeks to increase market share of present products or services in present markets through greater marketing efforts?

89)

A)

Market penetration

B)

Market development

C)

Backward integration

D)

Forward integration

E)

Product development 90)

When a domestic company first begins to export to India, it is an example of 90)

A)

concentric diversification

B)

backward integration

C)

market development

D)

horizontal integration

E)

forward integration 91)

Which strategy generally entails large research and development expenditures? 91)

A)

Retrenchment

B)

Divestiture

C)

Product development

D)

Forward integration

E)

Market penetration 92)

All of the following situations are conducive to market development except

92)

A)

when an organization has excess production capacity

B)

when an organization is very successful at what it does

C)

when new untapped or unsaturated markets exist

D)

when an organization competes in a high-growth industry

E)