Business Policy
Exam Answer Key
Course Introduction
Business Policy is a capstone management course that explores the formulation, implementation, and evaluation of organizational strategies to achieve long-term objectives. Students analyze internal and external environments, assess competitive dynamics, and integrate knowledge from various business disciplines to address real-world challenges facing organizations. The course emphasizes decision-making at the senior management level, covering topics such as strategic analysis, corporate governance, ethics, and policy development, preparing students to think critically and act strategically in complex business contexts.
Recommended Textbook
Crafting and Executing Strategy Concepts and Readings 20th Edition by Arthur Thompson
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Page 2
Chapter 1: What Is Strategy and Why Is It Important
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Sample Questions
Q1) Which of the following companies would have the LEAST bargaining power with its suppliers?
A) A company that is involved in mass production of goods to cater its expanding customer base
B) A company that actively caters to a broad price-sensitive customer base
C) A company that generates high quality product components from easily available raw materials for a broad customer base
D) A company whose products are highly popular and easily available across most supermarkets
E) A company that offers high-cost specialized products that could be used only by customers of a certain age group
Answer: E
Q2) How can one tell a winning strategy from a strategy that is mediocre or a loser?
Answer: The mark of a winning strategy is strong company performance.Two kinds of performance indicators tell the most about the caliber of a company's strategy: (1)competitive strength and market standing and (2)profitability and financial strength.Above-average financial performance or gains in market share,competitive position,or profitability are signs of a winning strategy.
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Chapter
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Sample Questions
Q1) A sound,well-communicated strategic vision matters,and the related payoffs occur in several respects,EXCEPT in connection with:
A) reducing the risks of rudderless decision-making.
B) helping the organization prepare for the future.
C) avoiding strategic inflection points and management's reaction in aligning decision choices.
D) helping to crystallize top management's own view about the firm's long-term direction.
E) providing a tool for winning the support of organizational members for internal changes that will help make the vision a reality.
Answer: C
Q2) The achievement of financial objectives tends to be a lagging indicator of a company's performance,while the achievement of strategic objectives tends to be a leading indicator of a company's future financial performance.True or false? Support and explain your answer.
A)True
B)False
Answer: True
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Chapter 3: Evaluating a Companys External Environment
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Sample Questions
Q1) Collaborative relationships between particular sellers and buyers in an industry can represent a source of strong competitive pressure when:
A) virtually all buyers have strong brand attachments and are highly brand loyal.
B) demand for the product is growing rapidly.
C) sales are made to buyer groups with either strong bargaining power or high sensitivity.
D) sellers are racing to add the latest and greatest performance features so as to attract the patronage of important or prestigious buyers.
E) buyers are very quality conscious.
Answer: C
Q2) Which of the following can aid industries in identifying key success factors?
A) Global distribution capabilities
B) Crucial product attributes and service characteristics
C) Low distribution costs
D) Accurate filling of buyer orders
E) Short delivery time capability
Answer: B
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Chapter 4: Evaluating a Companys Resources, Capabilities,and Competitiveness
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Sample Questions
Q1) Which of the following is NOT an example of an external threat to a company's future profitability?
A) The lack of a distinctive competence
B) New legislation that entails burdensome and costly government regulations
C) Slowdowns in market growth
D) More intense competitive pressures
E) The introduction of restrictive trade policies in countries where the company does business
Q2) A useful way to identify a company's resources is to view them as:
A) divided into two main categories, tangible and intangible.
B) productive inputs or competitive assets, except human assets and intellectual capital, which are considered capabilities or competencies.
C) physical resources, such as the company's brand, image, and reputation assets.
D) an inventory or a collection of the firm's strengths, weaknesses, opportunities, and threats.
E) intangible resources such as patents, copyrights, and technological processes.
Q3) Why do a company's core competencies matter in crafting strategy?
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Page 6
Chapter 5: The Five Generic Competitive Strategies
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Q1) Explain how the marketing emphasis of a low-cost provider differs from the marketing emphasis of a best-cost provider.
Q2) Describe the two basic cost-reducing approaches a company can take to become a low-cost provider in its industry.
Q3) The culture of a company can be a cost-efficient value chain activity because it can:
A) allow for safeguarding internalized operating benefits.
B) distinguish a company's capacity integration efforts.
C) spur worker pride in productivity and continuous improvement.
D) foster quality technological enhancements.
E) increase a company's bargaining power with suppliers.
Q4) What market conditions and circumstances make a low-cost provider strategy attractive? What are the pitfalls in pursuing a low-cost provider strategy? What can go wrong?
Q5) One of the big dangers in crafting a competitive strategy is that managers,torn between the pros and cons of the various generic strategies,will opt for "stuck in the middle" strategies that represent compromises between lower costs and greater differentiation and between broad and narrow market appeal.True or false? Explain your answer.
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Chapter 6: Strengthening a Companys Competitive Position
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Q1) In which of the following instances is being a first-mover NOT particularly advantageous?
A) When moving first with a preemptive strike makes imitation difficult or unlikely
B) When first-time buyers remain strongly loyal to pioneering firms in making repeat purchases
C) When early commitments to new technologies, types of components, or emerging distribution channels produce an absolute cost advantage over rivals
D) When markets are slow to accept the innovative product offering of a first-mover, and fast followers possess sufficient resources and marketing muscle to overtake a first mover
E) When being a pioneer helps build a firm's image and reputation with buyers
Q2) Instead of entering into an alliance or partnership,Smith Limited opts to merge with Design Limited.What are the reasons for preferring a merger to an alliance or partnership? Explain the other organizational mechanisms that are also preferable to alliances.
Q3) What are the advantages of strategic alliances and collaborative partnerships with key suppliers?
Q4) Identify and explain at least two drawbacks to forming a strategic alliance.
Page 8
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Chapter 7: Strategies for Competing in International Markets
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Q1) A European-based company that makes all of its goods at a plant in Brazil and then exports the Brazilian-made goods to country markets in many different parts of the world:
A) is competitively disadvantaged when the euro declines in value against the Brazilian real.
B) is competitively disadvantaged when the Brazilian real declines in value against the currencies of the countries to which the Brazilian-made goods are being exported.
C) becomes less competitive in foreign markets when the Brazilian real gains in value against the currencies of the countries to which the Brazilian-made goods are being exported.
D) is competitively advantaged when the euro appreciates in value against the Brazilian real.
E) has no interest in whether the euro grows stronger or weaker versus the Brazilian real unless its chief competitors are other companies located in countries whose currency is also the euro.
Q2) Explain how exchange rate fluctuations pose a risk to manufacturing companies that rely upon an export strategy to compete in foreign markets.
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Page 9
Chapter 8: Corporate Strategy
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Q1) What is the relevance of quantitatively measuring the competitive strength of each business in a diversified company's business portfolio and determining which business units are strongest and weakest?
Q2) Explain the relevance of the following as they relate to building shareholder value via diversification:
a.the industry attractiveness test
b.the cost-of-entry test
c.the better-off test
Q3) Which of the following is a diversified business with one major "core" business and a collection of small related or unrelated businesses?
A) A broadly diversified enterprise
B) A narrowly diversified enterprise
C) A multi-business enterprise
D) A high compensation/low risk enterprise
E) A dominant business enterprise
Q4) Discuss the pros and cons of a strategy of unrelated diversification.
Q5) What is meant by the term strategic fit? What are the advantages of pursuing strategic fit and matchups in choosing which industries to diversify into?
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Chapter 9: Ethics, Corporate Social Responsibility,
Environmental-Sustainability, and Strategy
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Q1) Which of the following is true of the school of ethical universalism?
A) There are ethical principles that set forth the traits and behaviors considered virtuous and that a good person is supposed to believe in and display.
B) They are ethical principles embodied in international law that all societies and countries are obliged practice.
C) All societies and countries apply essentially the very same set of universally defined ethical principles of right and wrong in judging the ethical correctness of business behavior.
D) It is mandatory that the standards of what's ethical and what's unethical be applied universally to all businesses in all countries irrespective of local business traditions and local business norms.
E) The standards of what constitutes ethical and unethical behavior in business situations are partly universal, but in the main are governed by local business norms.
Q2) Ethical relativism equates to multiple sets of ethical standards.True or false? Explain your answer.
A)True
B)False
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Chapter 10: Building an Organization Capable of Good Strategy Execution
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Q1) Identify and briefly discuss the three common approaches to building core competencies and competitive capabilities.
Q2) Ultimate responsibility for seeing that a strategy is executed successfully primarily falls upon the shoulders of:
A) a company's chief executive officer, its chief operating officer, and the heads of major units (business divisions, functional departments, and key operating units).
B) first-line supervisors who have the day-to-day responsibility of seeing that key value chain activities are done properly.
C) the company's board of directors because board members are the final authority in overseeing and conducting daily operations.
D) a company's whole management team-each manager is responsible for attending to what needs to be done in his/her respective area of authority and thus should be held accountable for the strategy's success or failure.
E) all company personnel because all employees are active participants in the strategy execution process and the caliber of their actions have a huge impact on the ultimate outcome.
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Chapter 11: Managing Internal Operations
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Sample Questions
Q1) Total quality management (TQM)emphasizes all of the following EXCEPT which?
A) 100 percent accuracy in performing tasks
B) Continuous improvement in all phases of operations
C) Adoption of industry standard operating practices
D) Benchmarking and total customer satisfaction
E) Empowerment of employees and team-based work design
Q2) Six Sigma's DMADV process of define,measure,analyze,design,and verify is a particularly good vehicle for:
A) improving performance when there are small variations in how well an activity is performed. If there are wide variations, then the Six Sigma DMVSI process has to be used.
B) achieving 100 percent control over how a task is performed and eliminating 100 percent of the variability in how a task is performed.
C) improving performance when there are wide variations in how well an activity is performed.
D) developing new processes or products at Six Sigma quality levels.
E) improving customer satisfaction, whereas Six Sigma improves manufacturing processes.
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Page 13
Chapter 12: Corporate Culture and Leadership
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Q1) What is the role of managerial leadership in changing a problem corporate culture?
Q2) A strongly implanted culture provides a huge assist in executing strategy because company managers can use the traditions,beliefs,values,common bonds,or behavioral norms:
A) as levers to mobilize commitment to executing the chosen strategy.
B) as reinforcement for convincing staff that the strategy is sound and molded in tradition.
C) to ensure the staff will embrace the new strategy like they have in the past.
D) to manipulate jobholders into thinking traditions are important.
E) as disciplinary measures in making the employees perform better and achieve targets.
Q3) Companies with multinational operations and/or newly acquired businesses typically have:
A) strong cultures.
B) multiple cultures (or subcultures) rather than a single culture.
C) weak cultures.
D) adaptive cultures.
E) low-performance cultures.
Q4) What are the distinctive features of high-performance corporate cultures?
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