Business Strategy
Exam Practice Tests
Course Introduction
Business Strategy explores the formulation, implementation, and evaluation of strategies that enable organizations to achieve competitive advantage and long-term success. The course examines foundational frameworks, such as SWOT analysis and Porters Five Forces, alongside contemporary approaches to strategic management in both domestic and global contexts. Through case studies, simulations, and practical assignments, students learn to analyze internal and external environments, assess resources and capabilities, and make evidence-based decisions. Emphasis is placed on strategic thinking, innovation, adaptation to change, and ethical considerations in strategic planning.
Recommended Textbook
Strategic Management Theory and Cases An Integrated Approach 12th Edition by Charles
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W. L.
Chapter 1: Strategic Leadership: Managing the
Strategy-Making Process for Competitive Advantage
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Sample Questions
Q1) Which of the following statements is true about competitive advantage?
A) It is unaffected by the strategies taken by the company.
B) It is considered to be sustained when it lasts for three months.
C) It exists only when the company's profitability is greater than the ten highest grossing firms in the world.
D) It exists only when the company's profitability is greater than the average profitability and profit growth of its rivals.
E) It is seldom affected by the business model of the company.
Answer: D
Q2) The first component of the strategic management process is:
A) crafting the organization's mission statement.
B) coming up with a damage control plan.
C) analyzing the macroenvironment.
D) determining the firm's employee turnover rate.
E) deciding on a fit between the organization's strengths and weaknesses and the environment's opportunities and threats.
Answer: A
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Chapter 2: External Analysis: The Identification of Opportunities and Threats
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Sample Questions
Q1) Which of the following statements is true about potential competitors in an industry?
A) They threaten the profitability of established companies.
B) They are usually encouraged by established companies.
C) They find it easier to enter an industry when the entry barriers are high.
D) They find it easier to enter an industry when established companies have economies of scale.
E) They usually have an absolute cost advantage over established companies.
Answer: A
Q2) In Porter's competitive forces framework, the stronger the five forces, the ability of established companies to raise prices and earn greater profits becomes more limited.
A)True
B)False
Answer: True
Q3) Government deregulation of telephone service lowered the barriers to entry and lowered industry profit rates.
A)True
B)False
Answer: True
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Chapter 3: Internal Analysis: Resources and Competitive Advantage
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Sample Questions
Q1) The building blocks of competitive advantage are efficiency, quality, innovation and customer responsiveness.
A)True
B)False
Answer: True
Q2) Resources can be considered valuable if they enable a company to create a strong demand for its products or if it reduces the costs of producing its products.
A)True
B)False
Answer: True
Q3) A company's profitability depends on the value customers place on the company's products and a company's ability to reduce its production costs.
A)True
B)False
Answer: True
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Chapter 4: Building Competitive Advantage Through Functional-Level Strategies
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Sample Questions
Q1) Customer focus in a function of only the lower levels of an organization.
A)True
B)False
Q2) Close integration between research and development (R&D), production and marketing can help a company avoid innovation failures.
A)True
B)False
Q3) In spite of definite customer demand, new products often fail due to:
A) faster cycle time.
B) low customer defection rate.
C) poor commercialization.
D) increased response time.
E) scramble to gain first-mover advantage.
Q4) All else being equal, if a company moves down the experience curve faster than its rivals, it should realize a lower cost structure.
A)True
B)False
Q5) Discuss why superior efficiency is important and the many ways that different parts of the organization can help achieve it.
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Chapter 5: Business-Level Strategy
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Sample Questions
Q1) A company has a competitive advantage if it can increase costs relative to rivals.
A)True
B)False
Q2) The main difference between companies following a broad low-cost strategy and those following a focus low-cost strategy is in the:
A) standardized market price.
B) industry life cycle stage.
C) degree of market segmentation.
D) age of the market.
E) market trajectory.
Q3) Which of the following generic business-level strategies is based on the intent to lower costs so that a company can lower prices and still make a profit?
A) Broad low-cost strategy
B) Price differentiation strategy
C) Broad differentiation strategy
D) Focused differentiation strategy
E) Focused low-cost strategy
Q4) Define the generic business-level strategies companies pursue.
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Chapter 6: Business-Level Strategy and the Industry Environment
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Q1) A market growth factor that explains customers' perceptions of a new product as better at satisfying their needs than the product it replaces is called:
A) complexity
B) relative advantage
C) compatibility
D) trialability
E) observability
Q2) A_____ strategy aims to help a company grow in a declining industry by picking up the market share of companies that are leaving the industry.
A) divestment
B) harvest
C) price signaling
D) leadership
E) capacity control
Q3) Both innovators and early adopters are customers in the market while the industry is in its embryonic stage.
A)True
B)False
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Chapter 7: Strategy and Technology
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Q1) Which of the following statements is true about marginal costs in high-technology industries?
A) They are invariably higher than fixed costs.
B) They are the costs that customers need to bear in order to adopt a new technology.
C) They include the costs of packaging and product distribution.
D) They are extremely high in software-making companies.
E) They do not exist if the product is sold by a sales force directly to end-users.
Q2) Switching costs, in the context of technology industries, refer to the costs that:
A) industries have to incur in order to adhere to technical standards.
B) companies have to incur to switch from one business model to another.
C) customers need to bear to abandon an established standard and adopt a new standard.
D) industries need to bear in order to abandon old technology and get license for a new technology.
E) companies need to bear to create product differentiation when they are locked inside an industry.
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Chapter 8: Strategy in the Global Environment
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Q1) Which of the following ideas is a localization strategy is based on?
A) There is a convergence in the tastes of consumers in different nations of the world.
B) There are substantial economies of scale to be realized from centralizing global production.
C) Consumer tastes and preferences differ among national markets.
D) There are cost advantages associated with manufacturing a standard product for global consumption.
E) Competitive strategy should be centralized at the world head office.
Q2) Which of the following statements is true about transnational strategy?
A) It gives little emphasis to cost reduction and achieving scale economies.
B) It makes little sense when the pressures for local responsiveness are intense.
C) It is an easy one to pursue because it places minimal demands on the company.
D) It fosters a flow of competencies between different subsidiaries in the company's global network of operations.
E) It is adopted by companies that produce standardized goods that do not require product differentiation.
Q3) List and briefly describe each of the four basic global strategies.
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Chapter 9: Corporate-Level Strategy: Horizontal Integration,
Vertical Integration, and Strategic Outsourcing
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Q1) Competitive bidding makes suppliers reluctant to make investments that tie them closely to their trading partners.
A)True
B)False
Q2) Vertical integration is based on a company entering only those industries that:
A) are involved in the distribution of products.
B) are considered as potential competitors.
C) are involved in sourcing raw materials.
D) are not in any way related to the company's current business operation.
E) add value to its core products.
Q3) How can strategic outsourcing strengthen a company's business model and increase its profitability?
Q4) Strategic alliances and outsourcing are two alternatives to vertical integration. What are the advantages and disadvantages of each compared to vertical integration? What can managers do to eliminate or reduce the risks?
Q5) Vertical integration can strengthen a company's differentiation business-level strategy and competitive advantage.
A)True
B)False
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Chapter 10: Corporate-Level Strategy: Related and Unrelated
Diversification
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Q1) Miller Brewing, which was acquired by Philip Morris, was related to the parent company's tobacco business because it was possible to create important marketing commonalities: both beer and tobacco are mass market consumer goods in which brand positioning, advertising, and product development skills are crucial to create successful new products. This is an example of which of the following?
A) Transferring competencies
B) Leveraging competencies
C) General organizational competencies
D) Economies of scope
E) Organizational design skills
Q2) A company can increase the probability of success of an internal venture by constructing efficient scale manufacturing facilities ahead of demand.
A)True
B)False
Q3) A company's top managers do not need to have entrepreneurial capabilities for diversification to increase profitability.
A)True
B)False
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Chapter 11: Corporate Performance, Governance, and Business Ethics
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Q1) Stockholders receive a return on their investment in a company's stock from dividend payments and capital appreciation.
A)True
B)False
Q2) Gemini Corp. is a large automobile manufacturer that has contracts with several suppliers. To gain more benefits from an upholstery supplier, Gemini Corp. unilaterally changed the contract and pressurized the supplier to lower its prices. Which of the following concepts is illustrated in this scenario?
A) Opportunistic exploitation
B) On-the-job consumption
C) Agency strategy
D) Greenmail
E) Self-dealing
Q3) An agency relationship continues throughout the hierarchy within a company.
A)True
B)False
Q4) Consider a national chain of company-owned fast-food restaurants. For this firm, list the important stakeholders. Then describe how each stakeholder group can affect the firm's profitability.
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Chapter 12: Implementing Strategy Through Organization
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Q1) At LittleHippo, an online retail company, the work environment is playful. Employees often get their pictures taken wearing silly wigs and masks. This atmosphere is part of the company's:
A) organizational density.
B) organizational structure.
C) organizational culture.
D) strategic control systems.
E) competitive environment.
Q2) Effective organizational design can allow a company to obtain a competitive advantage, but it has no impact on profitability.
A)True
B)False
Q3) Which form of control would you most likely find in a voluntary or charity organization?
A) Bureaucratic control through rules and procedures
B) Control through norms and values
C) Financial control through accurate financial statements
D) Output control, since it is the cheapest
E) Incentive systems to motivate employees
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