Business Strategy
Exam Review
Course Introduction
Business Strategy explores the principles and frameworks that guide organizations in formulating, implementing, and evaluating strategies to achieve competitive advantage and long-term success. The course examines both internal and external environmental factors affecting strategic decision-making, such as industry structure, resources, capabilities, and stakeholder expectations. Through the analysis of real-world cases and strategic models, students develop skills in critical thinking, problem-solving, and leadership while learning to identify opportunities and threats, craft clear objectives, and allocate resources effectively within diverse business environments.
Recommended Textbook Strategic Management and Competitive Advantage 6th Edition by Jay B. Barney
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Chapter 1: What Is Strategy and the Strategic Management Process
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Sample Questions
Q1) Which ratio signals a greater risk of bankruptcy as it increases?
A)debt to equity
B)quick ratio
C)debt to assets
D)cash flow per share
Answer: C
Q2) Firms with strategies that are unlikely to be a source of competitive advantage will rarely provide the same career opportunities as firms with strategies that do generate such advantages.
A)True
B)False
Answer: True
Q3) Firms whose mission statement is central to all they do are known as missionary firms.
A)True
B)False
Answer: False
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Page 3
Chapter 2: Evaluating a Firms External Environment
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Sample Questions
Q1) Firms that have either recently begun operations in an industry or that threaten to begin operations in an industry soon are considered to be ________ in the five forces framework.
A)barriers to entry
B)new competitors
C)suppliers
D)buyers
Answer: B
Q2) Overall,the average level of performance in an industry is likely to be highest when
A)the threat level of all five forces is high.
B)the threat level of rivalry and substitutes is low,but the threat level of suppliers,buyers and new entrants is high.
C)the threat level of rivalry,substitutes and new entrants is high,but the threat level of buyers and supplies is low.
D)the threat level of all five forces is low.
Answer: D
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4
Chapter 3: Evaluating a Firms Internal Capabilities
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Sample Questions
Q1) The budgeting and reporting activities that Bates uses are examples of
A)informal management controls.
B)formal reporting structures.
C)formal management controls.
D)primary value chain activities.
Answer: C
Q2) When tacit cooperation has the effect of reducing supply and increasing prices,it is known as tacit collusion.
A)True
B)False
Answer: True
Q3) Any actions a firm takes that have the effect of reducing the level of rivalry in an industry that also do not require firms in an industry to directly communicate or negotiate with each other can be thought of as
A)tacit cooperation.
B)tacit collusion.
C)explicit collusion.
D)competitive parity.
Answer: B
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Page 5
Chapter 4: Cost Leadership
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Sample Questions
Q1) Corporate level strategies are actions firms take to gain competitive advantages in a single market or industry.
A)True
B)False
Q2) Which of the following statements is accurate?
A)In general,economies of scale are relatively easy-to-duplicate bases of cost leadership,but diseconomies of scale are not.
B)In general,diseconomies of scale are relatively easy-to-duplicate bases of cost leadership,but economies of scale are not.
C)In general,neither economies of scale nor economies are relatively easy-to-duplicate bases of cost leadership.
D)In general,both economies of scale and diseconomies of scale are relatively easy-to-duplicate bases of cost leadership.
Q3) Cost leadership,flexibility,collusion,and product differentiation are so widely recognized that they are often called generic business strategies.
A)True
B)False
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6
Chapter 5: Product Differentiation
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Sample Questions
Q1) While product features,by themselves,are usually not a source of sustained competitive advantage,they can be a source of a temporary competitive advantage.
A)True
B)False
Q2) While firms often alter the ________ of their products or services in order to implement a product-differentiation strategy,the existence of product differentiation,in the end,is always a matter of ________.
A)customer perceptions; objective properties
B)objective properties; price
C)customer perceptions; price
D)objective properties; customer perception
Q3) Product features as a basis for product differentiation are generally not easy to duplicate.
A)True
B)False
Q4) The physical location of a firm cannot be a source of product differentiation.
A)True
B)False
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Chapter 6: Flexibility and Real Options
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Sample Questions
Q1) A firm building a plant with the ability to add capacity at low cost is an example of the option to ________.
A)defer
B)grow
C)contract
D)abandon
Q2) In 2019,if Lisa Monroe decides that the market uncertainty for Seymour Semiconductors has reduced considerably while the high technological uncertainty continues,she should move the company to using ________ options.
A)staged
B)positioning
C)stepping-stone
D)scouting
Q3) To see if valuing an investment as a real option creates any extra value for a firm,it is necessary to establish a ________.
A)timeline
B)benchmark
C)ceiling
D)floor
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Page 8
Chapter 7: Collusion
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Sample Questions
Q1) ________ collusion exists when firms cooperate in reducing competition,but engage in no face to face negotiations to do so.
A)Explicit
B)Strategic
C)Intra-industry
D)Tacit
Q2) According to Cournot cheating,assuming little or no product differentiation among a small number of firms,if one firm decides to cheat on a collusive agreement by reducing its prices,others will as well and,in the long run,firms in this industry will earn no economic profits.
A)True
B)False
Q3) One of the most significant organizational issues facing tacitly colluding firms concerns the ________.
A)reputation of the firm
B)efficiency of their operations
C)financial viability of their products
D)effect on their employees
Q4) How does signaling relate to collusion?
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Chapter 8: Vertical Integration
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Sample Questions
Q1) If TerraLoc wanted to expand into selling its GPS units through company-owned retail stores,this would be an example of ________.
A)forward vertical integration
B)backward vertical integration
C)opportunism
D)a joint venture
Q2) If Digipics were to agree to spend a significant amount of money to establish a new assembly line for a large client,PicPro,that has unique needs that would make this assembly line largely useless for any other customer,the funds Digipics spent in establishing this line would be an example of
A)forward vertical integration.
B)backward vertical integration.
C)a transaction-specific investment.
D)opportunism.
Q3) Strategic alliances are the major substitute for vertical integration.
A)True
B)False
Q4) Define vertical integration and differentiate between forward vertical integration and backward vertical integration.
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Chapter 9: Corporate Diversification
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Sample Questions
Q1) The analysis of firms pursuing a strategy of ________ is logically equivalent to the analysis of business-level strategies.
A)unrelated diversification
B)related-linked diversification
C)related-constrained diversification
D)limited corporate diversification
Q2) Substitutes for exploiting economies of scope in diversification include
A)growing and developing independent businesses within a diversified firm and vertical integration.
B)vertical integration and strategic alliances.
C)growing and developing independent businesses within a diversified firm and strategic alliances.
D)strategic alliances and multipoint competition.
Q3) Employee compensation is an example of costly-to-duplicate economies of scope.
A)True
B)False
Q4) Identify and distinguish between the five different levels of diversification discussed in Chapter 7.
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Chapter 10: Organizing to Implement Corporate
Diversification
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Sample Questions
Q1) Which organizational structure is SpandoCorp using?
A)U-form
B)matrix
C)M-form
D)functional
Q2) Which of the following is a weakness of using a hurdle rate as a standard of evaluating the performance of a division?
A)The process is time-consuming.
B)The process is fraught with political intrigue.
C)This approach lets other firms determine what is and what is not excellent performance for a division within a diversified firm.
D)The use of such a single standard ignores important differences in performance that might exist across divisions.
Q3) Supervision of the board of directors in its monitoring role is the responsibility of
A)the CEO.
B)the chairman of the board.
C)the chief operating officer.
D)the president.
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Chapter 11: Strategic Alliances
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Sample Questions
Q1) The rarity of strategic alliances depends solely on the number of competing firms that have already implemented an alliance.
A)True
B)False
Q2) Often both parties in a failed alliance accuse each other of A)adverse selection.
B)tacit collusion.
C)moral hazard.
D)holdup.
Q3) When there is low uncertainty about the future value of an exchange,an alliance will be preferred to going it alone.
A)True
B)False
Q4) What is the connection between strategic alliances and real options?
Q5) Network industries are characterized by A)increasing diseconomies of scale.
B)increasing returns to scale.
C)decreasing returns to scale.
D)decreasing economies of scale.
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Chapter 12: Mergers and Acquisitions
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Sample Questions
Q1) A ________ is a compensation arrangement between a firm and its senior management team that promises these individuals substantial cash payment if their firm is acquired and they lose their jobs in the process.
A)white knight agreement
B)greenmail agreement
C)shark repellent
D)golden parachute
Q2) Identify and differentiate between the five different FTC categories of mergers and acquisitions.
Q3) ________ is (are)a maneuver in which a target firm's management purchases any of the target firm's stock owned by a bidder and does so for a price that is greater than the current market value of that stock.
A)Standstill agreements
B)Poison pills
C)Shark repellents
D)Greenmail
Q4) A firm engages in an acquisition when it purchases a second firm.
A)True
B)False
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