Chapter 07

Long-Term Objectives and Strategies

  

Multiple Choice Questions
 

1. (p. 179) Objectives should be suited to the broad aims of the organization which are expressed in the statement of the company: 
A. Profile
B. Mission
C. Philosophy
D. Goals

 

Difficulty: Medium
Learning Objective: 1
 

2. (p. 179) The function of objectives is: 
A. To provide a specific statement of the desires of the firm
B. To deal with profitability, growth and survival without specific targets or time frames
C. To provide specific benchmarks for evaluating the company’s progress in achieving its aims
D. To enhance stock market optimism

 

Difficulty: Easy
Learning Objective: 1
 

3. (p. 179) Which of the following are intended to provide benchmarks for the evaluation of the company’s progress in achieving its aim? 
A. Mission
B. Long-term objectives
C. Grand strategies
D. Business policies

 

Difficulty: Easy
Learning Objective: 1
 

 

4. (p. 179) Grand strategies provide a comprehensive general approach to guide the organization’s: 
A. Major actions designed to accomplish long-term objectives
B. Major actions designed to accomplish short-term objectives
C. Operational actions designed to accomplish short-term objectives
D. Operational actions designed to accomplish intermediate term objectives

 

Difficulty: Easy
Learning Objective: 1
 

5. (p. 179-180) Which of the following is NOT a commonly pursued long-term objective as described in the text? 
A. Profitability
B. Public responsibility
C. Efficiency
D. Productivity

 

Difficulty: Easy
Learning Objective: 1
 

6. (p. 179-180) To achieve long-term prosperity, strategic planners commonly establish objectives in which of the following? 
A. Profitability, employee relations and public responsibility
B. Acceptability
C. Flexibility
D. Joint ventures only

 

Difficulty: Medium
Learning Objective: 1
 

 

7. (p. 180) To achieve long-term prosperity, strategic managers commonly establish long-term objectives in seven areas. Which of the following describes one of these areas? 
A. Technological leadership
B. Technological innovation
C. Social change
D. Marketing

 

Difficulty: Medium
Learning Objective: 1
 

8. (p. 180) Competitive position as a measure of corporate success is typically measured as: 
A. The input-output relationship of the company
B. The earnings per share of the company
C. The company’s relative dominance in the marketplace
D. The firm’s stock value

 

Difficulty: Medium
Learning Objective: 1
 

9. (p. 180) Larger firms often establish an objective by which to gauge their comparative ability for growth and profitability. This is often stated in terms of: 
A. Competitive product line
B. Competitive position
C. Product innovation
D. Competitive edge

 

Difficulty: Medium
Learning Objective: 1
 

 

10. (p. 180) Establishing objectives for minority training is an example of which type of long-term objective? 
A. Competitive position
B. Employee development
C. Public responsibility
D. Productivity

 

Difficulty: Hard
Learning Objective: 1
 

11. (p. 180) Safety programs, employee stock option plans and worker representation on management committees are all commonly directed toward achieving which type of long-term objectives? 
A. Employee relations
B. Public responsibility
C. Employee development
D. Competitive position

 

Difficulty: Medium
Learning Objective: 1
 

12. (p. 181) Which of the following does NOT describe a good objective? 
A. Flexible
B. Acceptable
C. Marketable
D. Achievable

 

Difficulty: Easy
Learning Objective: 2
 

 

13. (p. 181) Flexibility is usually increased at the expense of: 
A. Reliability
B. Timeliness
C. Specificity
D. Mobility

 

Difficulty: Medium
Learning Objective: 2
 

14. (p. 181) Which of the following is NOT a fundamental criterion for a long-term objective? 
A. Acceptable
B. Sustainable
C. Measurable
D. Suitable

 

Difficulty: Easy
Learning Objective: 2
 

15. (p. 181) Which of the following qualities of an objective improves its chances of being attained? 
A. Timeliness
B. Flexibility
C. Cost efficiency
D. Ground breaking

 

Difficulty: Hard
Learning Objective: 2
 

16. (p. 182) “To achieve our vision, how will we sustain our ability to change and improve?” is part of which perspective in the Balanced Scorecard? 
A. Financial
B. Customer
C. Learning and growth
D. Internal business process

 

Difficulty: Hard
Learning Objective: 2
 

 

17. (p. 182) Which one of the following is NOT a perspective found in the Balanced Scorecard? 
A. Stakeholder performance
B. Financial performance
C. Customer knowledge
D. Learning and growth

 

Difficulty: Easy
Learning Objective: 2
 

18. (p. 183) Which of the following is a generic strategy developed by Michael Porter? 
A. Market development
B. Differentiation
C. Liquidation
D. Innovation

 

Difficulty: Medium
Learning Objective: 3
 

19. (p. 183) A properly constructed Balanced Scorecard is balanced between: 
A. Short and long-term measures
B. Stakeholder financial measures
C. Organizational and stakeholder performance perspectives
D. Pricing and packaging of the firm’s products

 

Difficulty: Medium
Learning Objective: 2
 

20. (p. 183) Striving to create and market unique products for varied customer groups is called: 
A. Cost leadership
B. Differentiation
C. Focus
D. Concentrated growth

 

Difficulty: Medium
Learning Objective: 3
 

 

21. (p. 184) Intense supervision of labor is a commonly required skill for which one of Michael Porter generic strategies? 
A. Differentiation
B. Market development
C. Product development
D. Overall cost leadership

 

Difficulty: Hard
Learning Objective: 3
 

22. (p. 185) Which of the following is NOT a value discipline? 
A. Operational excellence
B. Cost leadership
C. Customer intimacy
D. Product leadership

 

Difficulty: Medium
Learning Objective: 4
 

23. (p. 188) Which of the grand strategies is typically lowest in risk? 
A. Horizontal integration
B. Concentrated growth
C. Market development
D. Divestiture

 

Difficulty: Easy
Learning Objective: 5
 

24. (p. 188) Firms that focus on a specific product and market combination are utilizing a _______ strategy. 
A. Concentrated growth
B. Turnaround
C. Innovation
D. Product development

 

Difficulty: Easy
Learning Objective: 5
 

 

25. (p. 187) Grand strategies are designed to accomplish which of the following? 
A. Short-term objectives
B. Long-term goals
C. Short-term goals
D. Long-term objectives

 

Difficulty: Easy
Learning Objective: 5
 

26. (p. 187) Grand strategies are often called: 
A. Corporate strategies
B. Coordinate strategies
C. Master strategies
D. Directed action

 

Difficulty: Medium
Learning Objective: 5
 

27. (p. 188) The grand strategy in which the firm directs its resources to the profitable growth of a single product, in a single market and with a single technology is termed: 
A. Product development
B. Market development
C. Concentrated growth
D. Vertical integration

 

Difficulty: Easy
Learning Objective: 5
 

28. (p. 190) Under stable conditions, concentrated growth is characterized as: 
A. Higher risk
B. Lower risk
C. Increasing resource needs
D. Increasing costs

 

Difficulty: Medium
Learning Objective: 5
 

 

29. (p. 190) Under changing conditions, concentrated growth is characterized as: 
A. Higher risk
B. Lower risk
C. Decreasing resource needs
D. Lowering revenues

 

Difficulty: Medium
Learning Objective: 5
 

30. (p. 190) Typical risks facing the firm that follow a concentrated growth strategy include: 
A. Riskier in stable conditions
B. Extra funds required
C. Faltering markets
D. Defining a broad market correctly

 

Difficulty: Medium
Learning Objective: 5
 

31. (p. 191) Marketing present products, often with only cosmetic modification, to customers in related market areas describes: 
A. Diversification
B. Concentrated growth
C. Product development
D. Market development

 

Difficulty: Easy
Learning Objective: 5
 

32. (p. 192) Concentration encompasses increasing present customer rate of usage. This includes: 
A. Increasing size of purchase
B. Pricing up or down
C. Developing quality variations
D. Marketing in new channels

 

Difficulty: Hard
Learning Objective: 5
 

 

33. (p. 192) Specific options under the concentration grand strategy include which of the following? 
A. Opening additional geographic markets
B. Increasing present customer’s rate of usage
C. Developing new products
D. Selling to a differentiated customer

 

Difficulty: Medium
Learning Objective: 5
 

34. (p. 191) The grand strategy commonly ranked second in low risk and cost is: 
A. Market development
B. Vertical integration
C. Joint venture
D. Concentrated growth

 

Difficulty: Medium
Learning Objective: 5
 

35. (p. 192) Market development encompasses attracting other market segments. This includes: 
A. Increasing promotional effort
B. Including trial use
C. Advertising in other media
D. Opening more branches in the same city

 

Difficulty: Medium
Learning Objective: 5
 

36. (p. 192) Specific approaches to the grand strategy of market development include which of the following? 
A. Entering additional channels of distribution
B. Attracting competitors’ customers
C. Reducing prices
D. Attracting current non-users

 

Difficulty: Medium
Learning Objective: 5
 

 

37. (p. 192) Attracting competitors’ customers encompasses: 
A. Decreasing promotional efforts
B. Establishing sharper brand similarities
C. Initiating price cuts
D. Increasing purchase size

 

Difficulty: Medium
Learning Objective: 5
 

38. (p. 192) Methods to develop new product features include: 
A. Inverse
B. Modify
C. Review
D. Retreat

 

Difficulty: Medium
Learning Objective: 5
 

39. (p. 192) _______ strategy allows firms to leverage some of their traditional strengths by identifying new uses of existing products and by finding new demographic or psycho graphic markets. 
A. Innovation
B. Product development
C. Market development
D. Horizontal integration

 

Difficulty: Medium
Learning Objective: 5
 

40. (p. 193) A “new and improved” product describes: 
A. Diversification
B. Concentrated growth
C. Product development
D. Market development

 

Difficulty: Medium
Learning Objective: 5
 

 

41. (p. 193) Improving the way a detergent smells is an example of: 
A. Market expansion
B. Product development
C. Product innovation
D. Product extinction

 

Difficulty: Medium
Learning Objective: 5
 

42. (p. 194) Creating a new-product life cycle is the underlying philosophy of a grand strategy of: 
A. Product development
B. Innovation
C. Horizontal integration
D. Market development

 

Difficulty: Medium
Learning Objective: 5
 

43. (p. 194) Few innovative ideas prove to be profitable because of: 
A. Low development costs
B. Low pre-marketing costs
C. High research costs
D. High post-marketing costs

 

Difficulty: Medium
Learning Objective: 5
 

44. (p. 195) The acquisition of one or more businesses operating at the same stage of the production-marketing chain is an example of: 
A. Market development
B. Product development
C. Innovation
D. Horizontal integration

 

Difficulty: Easy
Learning Objective: 5
 

 

45. (p.195) When the long-term strategy of a firm is based on growth through the acquisition of one or more similar businesses operating at the same stage of the production-marketing chain, this is called: 
A. Vertical integration
B. Conglomeration
C. Horizontal integration
D. Liquidation

 

Difficulty: Easy
Learning Objective: 5
 

46. (p. 197) If a textile producer acquires a shirt manufacturer, this is called: 
A. Vertical horizontal integration
B. Backward horizontal integration
C. Backward vertical integration
D. Forward vertical integration

 

Difficulty: Medium
Learning Objective: 5
 

47. (p. 195) If Cola Creations acquires Seltzer Spirit Co., this merger would describe what type of strategy? 
A. Joint venture
B. Horizontal integration
C. Vertical integration
D. Divestiture

 

Difficulty: Medium
Learning Objective: 5
 

 

48. (p. 195) The grand strategy that provides access to new markets for a company while at the same time eliminating competitors is termed: 
A. Concentric diversification
B. Horizontal integration
C. Vertical integration
D. Conglomerate diversification

 

Difficulty: Easy
Learning Objective: 5
 

49. (p. 197) If a shirt manufacturer acquires a textile manufacturer, this strategy is called: 
A. Backward vertical integration
B. Diversification
C. Joint venture
D. Horizontal integration

 

Difficulty: Medium
Learning Objective: 5
 

50. (p. 198) Motivations of acquiring firms include: 
A. Decreased stock price
B. Increased market share
C. Different debt/equity ratio
D. Decreased P/E ratio

 

Difficulty: Hard
Learning Objective: 5
 

51. (p.197) The grand strategy involving the acquisition of businesses that serve as a customer for the firm’s outputs, such as warehouses for finished products is called: 
A. Backward concentric diversification
B. Pooled horizontal integration
C. Forward vertical integration
D. Sequential horizontal integration

 

Difficulty: Easy
Learning Objective: 5
 

 

52. (p. 197) The grand strategy involving the acquisition of businesses that supply the firm with inputs such as raw materials is termed: 
A. Forward concentric diversification
B. Sequential horizontal integration
C. Backward vertical integration
D. Retrenchment

 

Difficulty: Easy
Learning Objective: 5
 

53. (p. 197) If a donut corporation acquires a flour company, this strategy would be called: 
A. Vertical integration
B. Diversification
C. Conglomeration
D. Joint venture

 

Difficulty: Medium
Learning Objective: 5
 

54. (p. 197) If a shirt manufacturer acquired a chain of men’s clothing outlets, this would be an example of: 
A. Forward integration
B. Backward integration
C. Horizontal integration
D. Conglomerate diversification

 

Difficulty: Medium
Learning Objective: 5
 

 

55. (p. 198) When the principal or sole consideration of the acquiring firm is the profit pattern of the venture, the grand strategy is usually one of: 
A. Innovation
B. Horizontal integration
C. Concentric diversification
D. Conglomerate diversification

 

Difficulty: Easy
Learning Objective: 5
 

56. (p. 198) Conglomerate diversification is concerned primarily with: 
A. Stock appreciation
B. Product development
C. Market synergy
D. Financial returns

 

Difficulty: Medium
Learning Objective: 5
 

57. (p. 198) If a firm plans to acquire a business because it represents the most promising investment opportunity available, the grand strategy is: 
A. Conglomerate diversification
B. Joint venture
C. Concentric diversification
D. Liquidation

 

Difficulty: Medium
Learning Objective: 5
 

 

58. (p. 198) When diversification involves additions of a business related to the firm in terms of technology, markets or products, it involves: 
A. Concentrated growth
B. Horizontal integration
C. Concentric diversification
D. Vertical diversification

 

Difficulty: Medium
Learning Objective: 5
 

59. (p. 198) With this type of grand strategy, the new businesses selected possess a high degree of compatibility with the current business: 
A. Conglomerate diversification
B. Concentric diversification
C. Joint venture
D. Divestiture

 

Difficulty: Medium
Learning Objective: 5
 

60. (p. 199) A spin-off usually indicates: 
A. Integration
B. Diversification
C. Joint venture
D. Retrenchment

 

Difficulty: Hard
Learning Objective: 5
 

61. (p. 199) The motivations of acquiring firms using diversification strategy include: 
A. Steadying the growth rate of the firm
B. Decreasing productivity
C. Increasing stock value of the firm
D. Gaining shareholders

 

Difficulty: Medium
Learning Objective: 5
 

 

62. (p. 199) Concentric diversification may be undertaken as a grand strategy because the acquiring firm wishes to: 
A. Acquire an investment opportunity
B. Sell off unneeded assets quickly
C. Balance or fill out its product line
D. Trim its product line

 

Difficulty: Medium
Learning Objective: 5
 

63. (p. 200) According to researchers, the grand strategies of retrenchment/turnaround are most often accomplished in extreme circumstances through which of the following? 
A. Cost reductions
B. Asset reductions
C. Changes in top management
D. Diversification

 

Difficulty: Medium
Learning Objective: 5
 

64. (p. 199) The type of strategy typically accomplished either by cost reduction and/or asset reduction is known as: 
A. Market development
B. Innovation
C. Liquidation
D. Turnaround

 

Difficulty: Easy
Learning Objective: 5
 

 

65. (p. 199) Retrenchment is typically accomplished through: 
A. Asset reduction
B. Profit reduction
C. Cost reduction
D. Revenue enhancement

 

Difficulty: Medium
Learning Objective: 5
 

66. (p. 203) When the grand strategy is liquidation, the business is: 
A. Typically sold in parts
B. Sold as a going concern
C. Sold for “good will” value
D. Leased with the option to repurchase

 

Difficulty: Medium
Learning Objective: 5
 

67. (p. 201) The grand strategy that involves the sale of a business or major business component is called: 
A. Divestiture
B. Integration
C. Diversification
D. Liquidation

 

Difficulty: Easy
Learning Objective: 5
 

68. (p. 203) If a business is sold for its tangible asset value, the strategy is one of: 
A. Divestiture
B. Conglomeration
C. Liquidation
D. Diversification

 

Difficulty: Easy
Learning Objective: 5
 

 

69. (p. 201) The second phase of the turnaround process is called: 
A. Recovery response
B. Turnaround
C. Retrenchment
D. Divestiture

 

Difficulty: Medium
Learning Objective: 5
 

70. (p. 203) As a long-term strategy, this minimizes the loss to all stockholders of the firm: 
A. Concentrated growth
B. Divestiture
C. Turnaround
D. Liquidation

 

Difficulty: Hard
Learning Objective: 5
 

71. (p. 204) When a firm attempts to persuade its creditors to temporarily freeze their claims while it undertakes to reorganize and rebuild its operations more profitably, this form of bankruptcy is called: 
A. Reorganization bankruptcy
B. Liquidation bankruptcy
C. Partial bankruptcy
D. Organizational bankruptcy

 

Difficulty: Medium
Learning Objective: 5
 

72. (p. 203) Which is considered the least attractive grand strategy? 
A. Joint venture
B. Liquidation
C. Concentrated growth
D. Divestiture

 

Difficulty: Easy
Learning Objective: 5
 

 

73. (p. 203) When a firm agrees to a complete distribution of its assets to creditors, most of whom will receive a small fraction of the amount that they are owed, this form of bankruptcy is called a: 
A. Reorganization bankruptcy
B. Liquidation bankruptcy
C. Partial bankruptcy
D. Organizational bankruptcy

 

Difficulty: Medium
Learning Objective: 5
 

74. (p. 204) Which of the following types of bankruptcies provides the firm with a conditional second chance? 
A. Liquidation bankruptcy
B. Total bankruptcy
C. Organizational bankruptcy
D. Reorganization bankruptcy

 

Difficulty: Medium
Learning Objective: 5
 

75. (p. 203) More than 75 percent of financially desperate firms file for a: 
A. Reorganization bankruptcy
B. Partial bankruptcy
C. Liquidation bankruptcy
D. Chapter 12 bankruptcy

 

Difficulty: Medium
Learning Objective: 5
 

 

76. (p. 204) Chapter 11 of the Bankruptcy Code deals with: 
A. Reorganization
B. Liquidation
C. A second chance
D. A conditional second chance

 

Difficulty: Medium
Learning Objective: 5
 

77. (p. 204) Which kind of bankruptcy provides time and protection to the debtor firm? 
A. Chapter 5 bankruptcy
B. Chapter 7 bankruptcy
C. Chapter 11 bankruptcy
D. Chapter 12 bankruptcy

 

Difficulty: Medium
Learning Objective: 5
 

78. (p. 206) When companies lack a necessary component for success in a particular environment, they may participate in types of joint ventures which include: 
A. Leasing
B. Strategic alliance
C. Joint ownership
D. Divestiture

 

Difficulty: Easy
Learning Objective: 5
 

 

79. (p. 206) Occasionally, two or more capable companies lack a necessary component for success in a particular competitive environment. The optimal strategy in such a case would be: 
A. Concentric integration
B. Diversification
C. Conglomerate diversification
D. Joint venture

 

Difficulty: Medium
Learning Objective: 5
 

80. (p. 208) _______ is partnerships that exist for a defined period during which partners contribute their skills and expertise to a cooperative project. 
A. Licensing agreements
B. Franchising agreements
C. Export agreements
D. Strategic alliances

 

Difficulty: Medium
Learning Objective: 5
 

81. (p. 208) Strategic alliances are distinguished from joint ventures because: 
A. Joint ventures do not work in global situations
B. Joint ventures are synonymous with licensing agreements
C. Alliances never transfer property rights from U.S. licensors to foreign licensees for strategic alliance
D. There are no equity positions taken in strategic alliances

 

Difficulty: Medium
Learning Objective: 5
 

 

82. (p. 208) Consortia are: 
A. Licensing agreements that exchange equity positions
B. Joint ventures
C. Decreasing costs but not risks
D. Large interlocking relationships between businesses of an industry

 

Difficulty: Easy
Learning Objective: 5
 

83. (p. 209) Strategic choice decision making leads to the selection of long-term objectives and grand strategies. This process is: 
A. Sequential
B. Random
C. Simultaneous
D. Closed

 

Difficulty: Medium
Learning Objective: 6
 

84. (p. 208) A chaebol: 
A. Is like a keiretsu except financed through government banking groups
B. Is run by the owners
C. Is financed through stock or bond sources
D. Is found in Viet Nam

 

Difficulty: Easy
Learning Objective: 5
 

85. (p. 209) A Japanese keiretsu: 
A. Involves no more than 10 firms
B. Is joined around a trading company or bank
C. Does not minimize risks of competition
D. Is a licensing agreement

 

Difficulty: Easy
Learning Objective: 5