Business Policy
Midterm Exam
Course Introduction
Business Policy is a capstone course that integrates knowledge from various functional areas such as marketing, finance, operations, and human resources to help students develop strategic decision-making skills. The course explores the formulation, implementation, and evaluation of organizational strategies with an emphasis on analysis of external environments, internal capabilities, and competitive positioning. Through case studies, group projects, and simulations, students learn to assess corporate governance, ethical considerations, and global trends, preparing them to navigate complex business challenges and contribute to the long-term success of organizations.
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Strategic Management Concepts BRV 1st Edition by
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Page 2
Jeffrey H. Dyer
Chapter 1: What Is Business Strategy?
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Q1) Explain the significance of internal analysis.
Answer: Internal analysis focuses on the company itself.Internal analysis completes the SWOT (Strengths, Weaknesses, Opportunities, and Threats) by focusing on strengths and weaknesses.More formally, internal analysis involves an analysis of the company's set of resources and capabilities that can be deployed-or should be developed-to deliver unique value to customers.
In the 1980s, the resource-based view of the firm, also known as the resource-based model, was developed to explain why some firms outperform other firms within the same industry.
Firms that do not have the resources and capabilities that are necessary to implement the strategies they are contemplating, may need to improve, change, or possibly create them in order to offer unique value to their customers.This is where resource allocation becomes an important dimension of strategy.Once a company decides how it hopes to offer unique value, it must allocate the resources necessary to build those resources or capabilities.
Q2) A company's primary purpose that often specifies the business or businesses in which the firm intends to compete -or the customers it intends to serve-refers to its
Answer: mission
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Chapter 2: Analysis of the External Environment: Opportunities and Threats
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Q1) Satchels Corp.has been in the retail bag business for 10 years.It has created unique value and attained brand loyalty from its customers.Recently, a new bag company started up in the same area as Satchels.In order to retain the reputation that it has established and avoid competition with the new company, Satchels introduced a new line of fashion bags, conducted a sale, and also increased its advertising.This made it difficult for the new company to gain profits.This scenario best illustrates _____.
A) forward integration
B) barriers to exit
C) barriers to entry
D) backward integration
Answer: C
Q2) Which of the following statements is true about rivalry?
A) It is an expensive method that treats other companies amicably.
B) It helps increase losses for an organization to a large extent.
C) It is a force that is best avoided in an industry to increase profits.
D) It is an important driving force to increase profitability.
Answer: D
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Chapter 3: Internal Analysis: Strengths, Weaknesses, and Competitive Advantage
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Q1) Kevin, the General Manager at KlockWorks Inc., wants to assess the true worth of his company.Kevin wants to know the amount of profits accrued by the company, its strengths and weaknesses, and how far ahead is the company compared to its rivals.In order to conduct the research, he does an online search, studies the annual reports, the audits, and pays a visit to a local library.Which of the following types of data gathering techniques for company diamond analysis is being illustrated in the scenario?
A) Observation
B) Interviews
C) Archival data
D) Focus groups
Answer: C
Q2) Which of the following is true of a tangible resource?
A) It is an economically valuable asset such as brands and patents.
B) It has a physical presence such as land, machinery, and cash.
C) It includes employee and management skills and talents.
D) It includes organizational assets like knowledge and reputation.
Answer: B
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Chapter 4: Cost Advantage
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Q1) Lavender Inc., a computer manufacturing company, sells its products at costs that are lesser than its competitors as it wishes to gain profits in order to cover more of the competitive market.The company follows this method as it has high unit volumes.The scenario best illustrates the _____.
A) acquisition strategy
B) cost-management strategy
C) pricing strategy
D) investment strategy
Q2) Mercury Corp., a startup company, is sure that it will achieve a steep curve of 75 percent as it is selling a unique product that has not been introduced into the market before.The company is confident that this product will be sold at a fast rate due to two reasons: the product is a necessity in every home and it is a break-through solution.Mercury sees this product as helping the company grow at a fast pace.Which of the following strategies has Mercury Corp.adopted?
A) The growth/investment strategy
B) The pricing strategy
C) The cost-management strategy
D) The acquisition strategy
Q3) When do economies of scope come into existence?
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Chapter 5: Differentiation Advantage
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Q1) Ochre Inc.manufactures accessories such as belts, bags, and shoes.It produces the basic models of all these items on large scale.However, customers can customize these products by choosing embellishments of their choice, such as zippers, straps, and buckles.Ochre's manufacturing process best exemplifies _____.
A) mass optimization
B) mass customization
C) mass consumerism
D) mass production
Q2) Tracie, the CEO of Boney's Inc., wanted to analyze what customers think of their products.She began her survey by finding out how her customers become aware of their needs, how they find the products, how they purchase products, and how the products are serviced or repaired.These steps are part of:
A) mapping the consumption chain.
B) studying the value chain.
C) studying the production cycle.
D) mapping the supply chain.
Q3) What are the three ways in which product features can be offered for the purpose of differentiation?
Q4) Explain product differentiation.
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Chapter 6: Corporate Strategy
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Q1) Elegant Meals Inc., a company that owns a chain of restaurants, sells dinnerware to its customers who fancy them.Since their restaurants are known for their interior designs, they also sell home décor products.By selling these products, Elegant Meals Inc.caters to a(n) _____.
A) entertainment market
B) capital market
C) adjacent market
D) global market
Q2) Jupiter LLC is a manufacturer of leather items.The board of directors of Jupiter realized that it is better to produce handbags and shoes together rather than in two separate factories.This way, the company can reduce its production costs.This scenario best illustrates a(n) _____.
A) related-linked diversification
B) unrelated diversification
C) economy of scope
D) economy of scale
Q3) A firm earning more than 95 percent of the revenues from a single line of business is known as a _____.
Q4) What is a greenfield entry? When should a company use it?
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Chapter 7: Vertical Integration and Outsourcing
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Q1) What is the main difference between a company that is vertically integrated and a company that is vertically specialized?
Q2) Vertical integration can be best defined as:
A) breaking a large process into smaller tasks that require specialized knowledge.
B) bringing business processes or activities previously conducted by outside companies in-house.
C) a graphic representation of the relationship between cost per unit of a product and its scale of production.
D) the sequence of all activities that are performed by a firm to turn raw materials into a finished product.
Q3) In the context of coordination, what is modular interdependence?
Q4) In the context of vertical integration, when is flexibility most valuable?
Q5) Which of the following statements is a characteristic of subcontractors?
A) They are responsible for bringing in key functions to regulate a company.
B) They have to assign and coordinate various projects of a company.
C) They have 10 percent share in the profits accrued by a company.
D) They create made-to-order contributions for a company.
Q6) What are the disadvantages to outsourcing?
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Chapter 8: Strategic Alliances
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Q1) Teal Inc., forms a strategic alliance with White Corp.In their contract, they specify how governance issues, operating issues, and termination issues would be resolved.Which of the following is likely to be covered under the clause that deals with governance issues?
A) What performance is expected by Teal and White from each other
B) How intellectual property will be shared by Teal and White
C) Under which circumstances Teal or White can exit the alliance
D) How profits will be split between Teal and White
Q2) Sepia Inc., a fertilizer company, needs permission to test its new products on plantations owned by an agro-based industry.In return, the company is willing to pay a percentage of revenue to the agro-based industry.In this case, which of the following contractual alliances should be adopted by Sepia?
A) A licensing agreement
B) A supply agreement
C) A distribution agreement
D) An input agreement
Q3) What are the ways in which strategic partners can build trust in alliance relationships?
Q4) What are the different types of nonequity alliances?
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Chapter 9: International Strategy
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Q1) Which of the following statements is true about a firm that adopts a global strategy?
A) It tailors its products and operations to individual markets.
B) It focuses on customer needs and preferences rather than standardization.
C) It focuses on economies of scale and leveraging firm capabilities.
D) It uses a different strategy in each of the countries where it competes.
Q2) Karl Jahaz Corp., an automobile company, has many business units across the globe.Although the company has reached saturation in the domestic market, it continues to generate substantial revenue by selling its old-model, light commercial vehicles in a few countries.In this case, which of the following is achieved by the globalization of the company?
A) Extension of product's life cycle
B) Deduction of production costs
C) Higher profits by lowering prices
D) Greater economies of scale
Q3) Explain the ways to manage variation and successfully pursue a multidomestic strategy.
Q4) _____ is the need to tailor an organization's products, marketing, and distribution strategies to the local customers in a foreign country.
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Chapter 10: Innovative Strategies That Change the Nature of Competition
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Q1) Inks Corp.is a manufacturer of pens.It creates a new product called HYPERLINK "http://en.wikipedia.org/wiki/Quink" \o "Quink" Quink, a quick-drying ink pen that does not require the use of blotting paper.It creates this product by building on its established knowledge of the properties of ink and the mechanisms of a pen.Which of the following innovations is being exemplified in this case?
A) A revolutionary innovation
B) An incremental innovation
C) A radical innovation
D) A subversive innovation
Q2) _____ refers to Professor Rich's argument that competitive intensity has increased, and that periods of competitive advantage have decreased.
A) Hypercompetition
B) Mass customization
C) Third-party competition
D) Standardization
Q3) Explain mass customization with an example.
Q4) What is a business model? Briefly explain the revenue model.
Q5) Creating new demand in an uncontested market space is called the _____.
Q6) What are low-end disruptive innovations? Explain with an example.
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Chapter 11: Competitive Strategy
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Q1) Copper Enterprises manufactures industrial machinery.It decides to identify the characteristics of a new firm that offers the same products as Copper.In order to assess how it might respond in the face of rival actions, Copper must develop a(n) _____.
A) organizational chart
B) structural graph
C) strategic application
D) competitor response profile
Q2) Alex, the CEO of a manufacturing company, is asked by the board if he will consider switching strategic groups.However, Alex thinks it might not be advisable.Which of the following statements strengthens Alex's belief?
A) Marketers will be more able to identify rivals if they switch to another strategic group.
B) The customers of his company are not brand conscious and loyal.
C) His company has tough competition from firms outside their strategic group.
D) His company has rigid systems, which have been in place for many years
Q3) In game theory, a set of actions that are always played no matter what a rival chooses to do is referred to as the _____.
Q4) Briefly describe the Nash equilibrium.
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Chapter 12: Implementing Strategy
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Q1) Janice is the sales head at a dairy exporting firm.She spends much of her time interacting with people from various cultural backgrounds.The competitive and risk-taking attitude of Janice is different from those in more conservative work areas.In the context of the 7 S model of organizational alignment, which of the following is being exemplified in this case?
A) Structure
B) Strategy
C) Skills
D) Style
Q2) A tool that measures four broad areas of organizational performance which are financial results, customer goals, internal business processes, and learning and growth is called the _____.
Q3) In the context of the 7 S model of organizational alignment, _____ refers to the plan, process, and related activities that create and sustain a competitive advantage for a firm in its target markets.
Q4) _____ begins when leaders recognize and publicly admit that the current situation is not producing acceptable or adequate results.
Q5) What are the eight steps to successful change?
Q6) Write a note on the structure of the 7 S model of organizational alignment.
Page 14
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Chapter 13: Corporate Governance and Ethics
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Q1) A(n) _____ is a legal structure for organizing a business where the organization is a distinct and separate entity from its owners.
A) general partnership
B) proprietorship
C) corporation
D) limited partnership
Q2) Describe how style can help a company create a climate where ethical behavior becomes the expected norm.
Q3) Chang, the founder of a multinational corporation, believes that his business should mainly focus on the benefit of those people who own its stock.In this scenario, he most likely follows _____, a model of business management.
A) stakeholder model
B) shareholder primacy
C) customer value
D) stakeholder value
Q4) _____ are those values that define for an individual, group, or society things that are morally right or wrong.
Q5) Briefly describe agency problems.How can they destroy value in an organization?
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Chapter 14: Strategy and Society
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Q1) Foodoid Inc., a fast food restaurant, enters into a tie-up with SimplyBake Inc., a bakery chain, to procure croissants, garlic loafs, and other essential food ingredients.In the context of the value net model, SimplyBake assumes the role of a(n) _____.
A) principal investor
B) competitor
C) complementor
D) franchisor
Q2) Walter Inc., an engineering firm, follows stringent rules related to safety such as wearing helmets, sporting safety goggles, and dust masks while working on-site.In this scenario, which of the following responsibilities is fulfilled by Walter?
A) Hybrid responsibility
B) Ethical responsibility
C) Philanthropic responsibility
D) Economic responsibility
Q3) _____ refers to a social entrepreneur who creates something new through the combination of diverse and different elements.
Q4) Discuss the four roles played by stakeholders in the value net.
Q5) Differentiate between institutional change and capacity building.
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