Management Policy
Test Questions
Course Introduction
Management Policy is a capstone course that focuses on the formulation, implementation, and evaluation of strategies to achieve organizational objectives. It examines the principles and processes involved in strategic management, including environmental analysis, internal capability assessment, competitive strategy, and corporate governance. The course encourages students to apply analytical frameworks and decision-making tools to real-world business scenarios, integrating knowledge from various functional areas such as marketing, finance, operations, and human resources. Through case studies and group projects, students develop the ability to think critically about complex management challenges and craft effective policies that align with organizational goals in a dynamic business environment.
Recommended Textbook
Strategic Management 4th Edition by Frank
Rothaermel
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Page 2
Chapter 1: What Is Strategy
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Sample Questions
Q1) How is competitive advantage different from competitive parity?
Answer: A firm that achieves superior performance relative to other competitors in the same industry or the industry average has a competitive advantage. To gain a competitive advantage, a firm needs to provide either goods or services consumers value more highly than those of its competitors at a comparable cost, or goods or services similar to the competitors' at a lower cost. Should two or more firms perform at the same level, they have competitive parity.
Q2) A firm is said to gain a competitive advantage when it can
A) exceed its own previous performances.
B) provide products similar to its competitors, but at lower prices.
C) perform at the same level as that of its competitors.
D) minimize the difference between value creation and cost.
Answer: B
Q3) What are customer-oriented vision statements? Explain with the help of an example.
Answer: Student answers may vary.
A customer-oriented vision defines a business in terms of providing solutions to customer needs. For example, "We are in the business of providing solutions to professional communication needs."
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Chapter 2: Strategic Leadership: Managing the Strategy Process
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Sample Questions
Q1) The distribution department at Golden Grains Wheat Company has decided to adopt the FIFO (first in, first out) method of inventory to dispatch its bags of wheat. Which of the following strategies does this scenario best illustrate?
A) functional strategy
B) corporate strategy
C) master strategy
D) business strategy
Answer: A
Q2) The first step in stakeholder impact analysis involves
A) formulating a stakeholder strategy to balance the different needs of various stakeholders.
B) identifying the opportunities and threats the stakeholders present.
C) describing the economic, legal, ethical, and philanthropic responsibilities of the firm toward society.
D) identifying the stakeholders that currently have, or potentially can have, a material effect on a company.
Answer: D
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Chapter 3: External Analysis: Industry Structure,
Competitive Forces, and Strategic Groups
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Q1) In 2008, BlackBerry's market cap peaked at $75 billion. By 2017 this valuation had fallen more than 90 percent, to $3.9 billion. BlackBerry fell victim to two important PESTEL factors in its external environment: sociocultural and technological. How did technology contribute to BlackBerry's decline?
A) BlackBerry failed to offer strong security features for its device.
B) BlackBerry failed to change its device into one that could perform multiple tasks effectively.
C) BlackBerry failed to adapt to a groundswell that involved workers bringing mobile devices to work.
D) BlackBerry failed to produce an efficient emailing system using a keyboard.
Answer: B
Q2) Kirsten, a manager, is writing an analysis of her employer's current and possible future revenues. Which of the following could she identify as an economic factor in her firm's external general environment?
A) the government regulations and laws in the country in which the firm exists
B) the stage of the business cycle that the country is in
C) the values and norms prevalent in the society in which the firm operates
D) the bargaining power of the firm's suppliers and buyers
Answer: B
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Chapter 4: Internal Analysis: Resources, Capabilities, and Core Competencies
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Sample Questions
Q1) Keen Beans, a leading coffee roaster, anticipated that the prices of coffee beans from Costa Rica, where its main suppliers were located, would double in less than three years. This would significantly affect Keen Beans' profit margins. Thus, Keen Beans decided to develop a new partnership with a supplier in Indonesia. As predicted, the price of Costa Rican coffee beans increased twofold. Because the price of Indonesian coffee beans was much lower, Keen Beans was able to maintain its profit margins in turbulent times. Which of the following isolating mechanisms does this scenario best illustrate?
A) intellectual property protection
B) causal ambiguity
C) time compression diseconomies
D) better expectations of future resource value
Q2) According to the resource-based view, a firm that differentiates itself from its competitors through its personalized approach to customer service is likely to sustain its competitive advantage for a long time.
A)True
B)False
Q3) Describe causal ambiguity and provide an example of how it can act as a barrier against imitation of a firm's valuable resources.
Page 6
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Chapter 5: Competitive Advantage, Firm Performance, and Business Models
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Q1) Unplug Wireless is a cellular service provider that charges its customers $1 for three hours of talk time. So, if a customer's talk time for a month is 60 hours, the company charges him or her $20 at the end of the month. Which of the following business models does this best illustrate?
A) razor-razor-blade
B) subscription-based
C) pay-as-you-go
D) freemium
Q2) A defining characteristic of the pay-as-you-go business model is that the A) users pay for only the services they consume.
B) users pay for access to a product or service whether they use it during the payment term or not.
C) initial product is often sold at a loss in order to drive demand for complementary goods.
D) the basic features of a service are provided free of charge, but the user must pay for premium services.
Q3) Accounting data focus mainly on tangible assets, which are no longer the most important. Elaborate on this statement.
Q4) How does consumer demand affect fixed costs and variable costs?
Page 7
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Chapter 6: Business Strategy: Differentiation, Cost
Leadership, and Blue Oceans
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Q1) When Simple Semiconductors was operating at the minimum efficient scale of 10,000-12,000 units per month, the firm's cost per unit was $45. However, when the output level was increased beyond 12,000 units, the cost per unit increased to $47. This increase was attributed to the wear-and-tear of the machinery, and complexities of managing and coordinating. What is this phenomenon known as?
A) minimum efficient scale
B) diseconomies of scale
C) experience curve effect
D) learning-curve effect
Q2) Which of the following sources of differential appeal is least effective in helping a firm sustain its advantage?
A) reputation for innovation
B) reputation for quality
C) superior customer experience
D) observable product features
Q3) What are the pricing options available to a firm following a differentiation strategy?
Q4) Explain blue ocean strategy with the help of an example.
Q5) When a firm pursues differentiation strategy, what does it focus on?
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Chapter 7: Business Strategy: Innovation, Entrepreneurship, and Platforms
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Q1) It is important for a firm to win over the early majority section of the market to ensure the commercial success of an innovation because they A) are driven by technology concerns rather than the practicality of a new product. B) influence the purchase decisions of early adopters.
C) enter into the market in large numbers, creating a herding effect.
D) have the highest purchasing power when compared to the other customer segments.
Q2) What happens during the shakeout stage of the industry life cycle?
Q3) The pace of innovation has slowed in the 21st century. A)True
B)False
Q4) Briefly discuss the four strategic options firms have during the decline stage of the industry life cycle.
Q5) How is process innovation different from product innovation?
Q6) Describe network effects and their potential to help or hurt a platform business.
Q7) Define entrepreneurship. Who are entrepreneurs?
Q8) Briefly discuss the steps in the innovation process.
Page 9
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Chapter 8: Corporate Strategy: Vertical Integration and Diversification
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Sample Questions
Q1) Win Goods Inc. is a large multinational conglomerate. As a single business unit, the company's stock price is estimated to be $200. However, by adding the actual market stock prices of each of its individual business units, the stock price of the company as one unit would be $300. What is Win Goods experiencing in this scenario?
A) diversification discount
B) learning-curve effects
C) experience-curve effects
D) economies of scale
Q2) Mondo Tacos, a fast food restaurant, operates through a business model in which individuals can buy the rights to set up Mondo Taco stores and sell the company's food in return for a lump sum fee at the beginning of the contract and a percentage of revenues every month. The owners of the stores have to offer a menu approved by the company's headquarters and also maintain consistent customer service as expected in its flagship store. Which of the following alternatives to integration does this best illustrate?
A) crowdsourcing
B) credit rationing
C) franchising
D) bootstrapping
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Chapter 9: Corporate Strategy: Strategic Alliances, Mergers, and Acquisitions
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Sample Questions
Q1) Why did Quaker Oats Company's acquisition of Snapple fail?
A) intercompany competitiveness
B) managerial hubris
C) stockholder revolt
D) unstable market conditions
Q2) How did the recent horizontal integration in the U.S. airline industry provide benefits to the surviving carriers?
A) by facilitating excess capacity in the industry
B) by preventing mergers from taking place
C) by lowering competitive intensity in the industry overall
D) by increasing the threat of entry in the industry
Q3) How does horizontal integration help firms increase differentiation?
Q4) A company that wants to enter a new geographic market within China or Saudi Arabia should avoid joint ventures with companies that are based in that country. Partnering with a foreign entity props up that entity's business rather than weakening it through competition.
A)True
B)False
Q5) Elaborate on the real-options perspective.
Page 11
Q6) How do strategic alliances help firms gain access to complementary assets?
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Chapter 10: Global Strategy: Competing Around the World
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Q1) Which of the following modes of entering a foreign market allows for the lowest level of control?
A) greenfield ventures
B) exporting
C) joint ventures
D) acquisitions
Q2) Bejukistan Laboratories Inc. has a national competitive advantage in the pharmaceutical industry. This means that the country
A) is a world leader in the pharmaceutical industry.
B) has nationalized the pharmaceutical industry.
C) has low levels of competition, providing other multinational companies with an opportunity to take over the pharmaceutical industry.
D) is a potential foreign market for multinational pharmaceutical companies to sell their products.
Q3) What is the engine behind globalization? Provide a real-world example.
Q4) Discuss the disadvantages of international expansion for firms, particularly in regard to intellectual property. Substantiate with an example from your reading assignment or from your own experience.
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Chapter 11: Organizational Design: Structure, Culture, and Control
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Sample Questions
Q1) Which of the following is a disadvantage of a functional strategy?
A) It frequently lacks the tools required to pursue a cost-leadership strategy.
B) It does not facilitate rich communication between members of the same department.
C) It cannot effectively address a higher level of diversification.
D) It does not allow organizations to be flexible or innovative.
Q2) Firms with a flat structure and a low degree of specialization tend to foster innovation better than firms with a tall structure and high degree of specialization.
A)True
B)False
Q3) Mona sets up a business consulting firm in which the employees are motivated because they find their work interesting and creative. She carefully hires workers who fit well with their assigned tasks. Also, she clearly defines the results expected of each worker, but allows the workers to determine the means to these results. Which of the following best describes Mona's business?
A) a firm that relies on high input controls to tap into intrinsic motivation
B) a firm that relies on high input controls to tap into extrinsic motivation
C) a firm that relies on high output controls to tap into intrinsic motivation
D) a firm that relies on high output controls to tap into extrinsic motivation
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Chapter 12: Corporate Governance and Business Ethics
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Q1) How can top management foster ethical behavior in employees? Provide an example that you have read about or that comes from your own experience.
Q2) Jaronda founded Diamond Communications Inc. in 1993. Ten years later, the company went public. Despite Jaronda's death in 2005, the company reported a 75 percent increase in revenue in 2006. Which of the following characteristics of a publicly traded company does this scenario best exemplify?
A) transferability of investor ownership
B) legal personality
C) limited liability for investors
D) separation of legal ownership and management control
Q3) Describe moral hazard with an example.
Q4) Dinesh is a senior manager at a large, publicly traded corporation. He has access to insider information about the company profits, losses, mergers, and acquisitions. It is legally and ethically acceptable for him to have this information as long as he does not use it to buy or sell stocks and does not tell others to buy or sell stocks.
A)True
B)False
Q5) How does a leveraged buyout affect a public company?
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