FINALTERM EXAMINATION
Spring 2010
MGT603- Strategic Management (Session - 3)
Time: 90 min
Marks: 69
Question No: 1 ( Marks: 1 ) - Please choose one
Concentric Diversification involves heading towards which of the following?
► Adding new, but related, products or services
► Adding new, unrelated products or services
► Regrouping through cost and asset reduction
► Adding unrelated products or services for new customers
Example: National Westminister Bank PLC in Britain buys the leading British insurance company, Legal & General Group PLC..(Page no.80)
Question No: 2 ( Marks: 1 ) - Please choose one
Which of the following is often considered the first step in strategic planning?
► Devising a mission statement
► Developing a vision statement
► Setting annual objectives
► Formulating set of strategies
Question No: 3 ( Marks: 1 ) - Please choose one
Which of the following can be considered as a factor of internal strengths and weaknesses of an organization?
► Technological changes
► Production/operations
► Demographics
► Competitive trends
Question No: 4 ( Marks: 1 ) - Please choose one
Long-term objectives includes all of the following except:
► Measurable
► Reasonable
► Varying
► Consistent
Ref: The Nature of Long-Term Objectives
Objectives should be quantitative, measurable, realistic, understandable, challenging, hierarchical,
obtainable, and congruent among organizational units..(Page No.09)
Question No: 5 ( Marks: 1 ) - Please choose one
All of the following statements are true about a firm’s mission statement EXCEPT:
► A mission statement directly contributes positively to financial performance
► A mission statement does not directly contribute positively to financial performance
► A mission statement should not provide useful criteria for selecting among alternative strategies
► Primary reason to develop a mission statement is not to attract the customers
Question No: 6 ( Marks: 1 ) - Please choose one
According to ‘Peter Drucker’, what is the prime task of strategic management?
► To develop the vision of the business
► Effectively evaluate the strategies
► To think through the overall mission of a business
► Develop alternative set of strategies
Question No: 7 ( Marks: 1 ) - Please choose one
“A complex set of basic underlying assumptions and deeply held beliefs shared by all members of the group and drive in important ways the behavior of individuals in the organizational context” is known as:
► Internal audit
► Organizational culture
► Internal assessment
► Organizational strategy
Question No: 8 ( Marks: 1 ) - Please choose one
Which of these is the allocation and reallocation of capital and resources to projects, products, assets and divisions of an organization?
► Investment decision
► Financing decisions
► Restructuring decisions
► Strategic decision
Ref: The investment decision, also called capital budgeting, is the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization. (Page No.64)
Question No: 9 ( Marks: 1 ) - Please choose one
Amir, a sole proprietor, uses the information system to ask the question; “What if the prices will decrease by 16% in the next year?” Which of the following functions the information system is performing for Amir?
► Functional support role
► Decisional support role
► Managerial support role
► Analytical supporting role
Ref: The business decision-making support function goes one step further. It becomes an integral part -- even a vital part -- of decision -making. It allows users to ask very powerful "What if…?" questions: What if we increase the price by 5%? What if we increase price by 10%?(Page No.73)
Question No: 10 ( Marks: 1 ) - Please choose one
Which of the following is sometimes referred as “the mystery approach to decision making, when subordinates are left to figure out what is happening and why”?
► Managing by hope
► Managing by extrapolation
► Managing by crisis
► Managing by subjectives
Ref: Managing by Subjective—built on the idea that there is no general plan for which way to go and what to do; just do the best you can to accomplish what you think should be done. In short, "Do
your own thing, the best way you know how" (sometimes referred to as the mystery approach to decision making because subordinates are left to figure out what is happening and why).(Page no.79)
Question No: 11 ( Marks: 1 ) - Please choose one
The purpose of an external audit is to prepare a list of which of the following?
► Opportunities and weaknesses
► Threats and strengths
► Opportunities and threats
► Strengths and weaknesses
Question No: 12 ( Marks: 1 ) - Please choose one
Defensive strategies include all of the following EXCEPT:
► Retrenchment
► Acquisition
► Divestiture
► Liquidation
Question No: 13 ( Marks: 1 ) - Please choose one
Smoothies Tire & Rubber Co. is selling its North American tire business to Avinza International, is an example of which type of strategy?
► Related diversification
► Retrenchment
► Divestiture
► Liquidation
Ref: Selling a division or part of an organization is called divestiture. Divestiture often is used to raise capital for further strategic acquisitions or investments. Divestiture can be part of an overall retrenchment strategy to rid an organization of businesses that are unprofitable, that require too much capital, or that do not fit well with the firm's other activities.
Question No: 14 ( Marks: 1 ) - Please choose one
Which stage of the “Strategy Formulation Framework” includes an External Factor Evaluation Matrix and a Competitive Profile Matrix?
► Matching
► Decision
► Input
► All of the given options
Ref: Stage 1 of the formulation framework consists of the EFE Matrix, the IFE Matrix, and the Competitive Profile Matrix. Called the Input Stage.(Page No.97)
Question No: 15 ( Marks: 1 ) - Please choose one
Which one of the followings is a sign of strength in a company's competitive position?
► A website with extensive information about the company and its product line
► Annual R&D and advertising expenditures greater than Rs.10 million
► A strongly differentiated product, a strong or rising market share
► A debt-to-asset ratio below 0.50 and a positive net cash flow and higher EPS
Question No: 16 ( Marks: 1 ) - Please choose one
Firm with its SPACE matrix vector in conservative quadrant should peruse all of the following strategies EXCEPT:
► Market penetration
► Product development
► Market development
► Divestiture
Ref: Quadrant 2 is known as conservative quadrant. In this quadrant, following strategies can be followed:
Quadrant II
Market development
Market penetration
Product development
Horizontal integration
Divestiture
Liquidation (Page no.107)
Question No: 17 ( Marks: 1 ) - Please choose one
All of the following would be considered while judging the financial strength of an organization EXCEPT:
► Increase in revenues
► Market share
► Return on Investment
► Cash flow statement
Ref: Determining financial strengths and weaknesses key to strategy formulation
Investment decision (Capital budgeting)
Financing decision
Dividend decision
Market share cannot be determined by above 3 decisions.
Question No: 18 ( Marks: 1 ) - Please choose one
What type of strategies would you recommend when a firm’s SPACE Matrix directional vector has the coordinates (-4, -4)?
► Aggressive
► Conservative
► Competitive
► Defensive
Question No: 19 ( Marks: 1 ) - Please choose one
All of the following are the limitations of BCG Matrix excepT:
► It is one-dimensional to view every business as a star, cash cow, dog or question mark
► BCG can not be developed if a firm has at least less than three years data
► The businesses that fall in the centre of BCG matrix can not be classified
► Other variables such as size of market and competitive advantages are not considered
Ref: Limitations
1. Viewing every business as a star, cash cow, dog, or question mark is overly simplistic.
2. Many businesses fall right in the middle of the BCG matrix and thus are not easily classified.
3. The BCG matrix does not reflect whether or not various divisions or their industries are growing
over time.
4. Other variables besides relative market share position and industry growth rate in sales are important in making strategic decisions about various divisions.
Question No: 20 ( Marks: 1 ) - Please choose one
Which one of the following is NOT a major region of IE matrix?
► Grow and build
► Grow and maintain
► Hold and maintain
► Harvest or divest
Ref: IE Matrix divided into three major regions.
Grow and build – Cells I, II, or IV
Hold and maintain – Cells III, V, or VII
Harvest or divest – Cells VI, VIII, or IX
Question No: 21 ( Marks: 1 ) - Please choose one
Which of the following strategy should be perused first by the Irtiza Insurance Company as it is located in Quadrant III of the Grand Strategy Matrix?
► Diversification
► Liquidation
► Retrenchment
► Divestiture
Ref: In quadrant III strategies should be followed in following sequence:
Quadrant III
Retrenchment
Concentric diversification
Horizontal diversification
Conglomerate diversification
Liquidation
Question No: 22 ( Marks: 1 ) - Please choose one
According to the Grand Strategy Matrix, in which quadrant organizations have a strong competitive position but are in a slow-growth industry?
► I
► II
► III
► IV
Ref: See table on page 107.
Question No: 23 ( Marks: 1 ) - Please choose one
Which of the following is TRUE about weights assigned in QSPM?
► This refers to preference assigned to the internal and external factors
► This refers to relative importance of the internal and external factors
► This refers to the insignificance of the internal and external factors
► This refers to the relative size of the internal and external factors
Ref: The weight assigned to a given factor indicates the relative importance of the factor to being successful in the firm's industry .(Page No.75)
Question No: 24 ( Marks: 1 ) - Please choose one
Which of the following is a Functional level objective?
► Achieving return on investment of at least 15%
► Aiming to achieve a market share of 10%
► Attaining operating profit of over Rs.10 million
► Increase earnings per share by at least 10% every
Ref: (2) Functional level Objective
E.g. specific objectives for marketing activities
Examples of functional marketing objectives” might include:
• We aim to build customer database of at least 250,000 households within the next 12 months
• We aim to achieve a market share of 10%
• We aim to achieve 75% customer awareness of our brand in our target markets
Both corporate and functional objectives need to conform to the commonly used SMART criteria.(Page no.113)
Question No: 25 ( Marks: 1 ) - Please choose one
All of the following are the examples of promotion decision EXCEPT:
► Personal selling
► Volume discounts
► Public relations
► Advertising
Marketing communication decisions include:
• Promotional strategy (push, pull, etc.)
• Advertising
• Personal selling & sales force
• Sales promotions
• Public relations & publicity
• Marketing communications budget (Page no.133)
Question No: 26 ( Marks: 1 ) - Please choose one
Which alternative becomes more attractive financing technique when cost of capital is high?
► Debt financing
► Combination financing
► Raising equity
► Borrowing
Question No: 27 ( Marks: 1 ) - Please choose one
Which of the following is the first step in preparing a pro forma financial analysis?
► Prepare the projected balance sheet
► Perform EPS/EBIT analysis
► Calculate the projected net income
► Prepare the projected income statement
There are six steps in performing pro forma financial analysis:
1. Prepare income statement before balance sheet (forecast sales)
2. Use percentage-of-sales method to project CGS and expenses
3. Calculate projected net income
4. Subtract dividends to be paid from Net Income and add remaining to Retained Earnings
5. Project balance sheet times beginning with retained earnings
6. List comments (remarks) on projected statements.
Question No: 28 ( Marks: 1 ) - Please choose one
What is a central strategy-implementation technique that allows an organization to examine the expected results of various actions and approaches?
► Financial budgeting
► TOWS analysis
► Projected financial statement
► External analysis
Question No: 29 ( Marks: 1 ) - Please choose one
In preparing projected statements, to project cost of goods sold and the expense items in the income statement, which of the following is recommended?
► Use the net worth method
► EPS/EBIT analysis
► Use percentage-of-sales method
► Use price-earnings ratio method
Question No: 30 ( Marks: 1 ) - Please choose one
Integrative, intensive, and diversification strategies are often implemented by which one of the followings?
► Liquidating firms
► Acquiring firms
► Venturing firms
► Small firms
Ref: Evaluating the worth of a business is central to strategy implementation because integrative, intensive, and diversification strategies are often implemented by acquiring other firms. Other strategies, such as retrenchment and divestiture, may result in the sale of a division of an organization or of the firm itself.(Page No.139)
Question No: 31 ( Marks: 1 ) - Please choose one
At least how many approaches are used for the implementation of strategy?
► Two
► Three
► Four
► Five
Question No: 32 ( Marks: 1 ) - Please choose one
Managerial disorder and strategic deviation will appear if there is power struggle and conflicts among the departments of organization. The situation negates which one of the Rumelt’s criteria?
► Consistency
► Consonance
► Feasibility
► Advantage
Ref: Consistency: Strategy should not present inconsistent goals and policies.
• Conflict and interdepartmental bickering symptomatic of managerial disorder and strategic inconsistency
Question No: 33 ( Marks: 1 ) - Please choose one
While evaluating a strategy, corrective actions are almost always needed except:
► When external and internal factors have not significantly changed
► When the firm is not progressing satisfactorily toward objectives
► When the firm has not achieved the stated organizational goals
► When there are differences between desired results and achieved results
Question No: 34 ( Marks: 1 ) - Please choose one
All of the following are the examples of service activity of Porter’s supply chain model EXCEPT:
► Customer support
► Packaging
► Repair services
► Installation
Ref: Service. The activities that maintain and enhance the product's value, including: customer
support, repair services, installation, training, spare parts management, upgrading, etc.
Question No: 35 ( Marks: 1 ) - Please choose one
All of the following are primary activities of Porter’s supply chain model EXCEPT:
► Marketing and Sales
► Outbound Logistics
► Firm Infrastructure
► Inbound Logistics
Rationale: Firm Infrastructure is included in support activities.(Page no.147)
Question No: 36 ( Marks: 1 ) - Please choose one
Which of the following statement is TRUE about Inbound Logistics?
► It includes receiving, storing, inventory control & transportation planning
► It includes machining, packaging, assembly, equipment maintenance & testing
► It includes activities required to deliver the finished product to the customers' end
► It includes the activities that maintain and enhance the product's value
Question No: 37 ( Marks: 1 ) - Please choose one
A revised EFE Matrix should focus on which of the following?
► Changes in the organization's management, marketing R & D, computer information system and environment.
► Marketing, finance/accounting, production/operations, R&D and computer information systems strengths and weaknesses.
► Effectiveness of a firm's strategies in response to key opportunities and threats.
► Effectiveness of an organization’s strategy in pursuing the competitive goals and managerial actions.
Question No: 38 ( Marks: 1 ) - Please choose one
The product design, packaging, product disposal and corporate rewards should reflect which of the following?
► Product quality consideration
► Union consideration
► Environmental consideration
► Customer consideration
Ref: The Environmental Audit
For an increasing number of firms, overseeing environmental affairs is no longer a technical function
performed by specialists; it rather has become an important strategic-management concern. Product
design, manufacturing, transportation, customer use, packaging, product disposal, and corporate rewards and sanctions should reflect environmental considerations.(Page no.156)
Question No: 39 ( Marks: 1 ) - Please choose one
Which of the following is TRUE about Vision statement of a company?
► It defines the customers
► It concentrates on future
► It identifies critical processes
► It informs about the desired level of performance
Question No: 40 ( Marks: 1 ) - Please choose one
Alternative strategy is decided in decision stage of Strategy-Formulation Framework. Which matrix is used in this stage to serve this purpose?
► BCG Matrix
► SPACE Matrix
► IE Matrix
► QSPM Matrix
Ref: The Quantitative Strategic Planning Matrix (QSPM)
The last stage of strategy formulation is decision stage. In this stage it is decided that which way is most appropriate or which alternative strategy should be select. This stage contains QSPM that is only tool for objective evaluation of alternative strategies. (Page no.110)
Question No: 41 ( Marks: 1 ) - Please choose one
Input stage of strategy formulation framework includes developing which of the following set of matrices?
► IFE, EFE and QSPM matrix
► IFE, IE and BCG matrix
► IFE, CPM and EFE matrix
► EFE, IE and CPM matrix
Ref: Stage 1 of the formulation framework consists of the EFE Matrix, the IFE Matrix, and the Competitive Profile Matrix. Called the Input Stage.(Page No.97)
Question No: 42 ( Marks: 1 ) - Please choose one
Identify a case when a firm should adopt aggressive strategies.
► If a firm’s directional vector is located in upper-right quadrant of a SPACE matrix
► If a firm’s directional vector is located in upper-left quadrant of a SPACE matrix
► If a firm’s directional vector is located in lower-right quadrant of a SPACE matrix
► If a firm’s directional vector is located in lower-left quadrant of a SPACE matrix
Question No: 43 ( Marks: 1 ) - Please choose one
Firms located in which quadrant of the Grand Strategy Matrix are in an excellent strategic position?
► I
► II
► III
► IV
Rationale: Firms located in quadrant I enjoys rapid market growth and strong competitive position. See table on page 107.
Question No: 44 ( Marks: 1 ) - Please choose one
Which of the following is the best divisional structure when a few major customers are of paramount importance and many different services are provided to these customers?
► By geographic area
► By customer
► By product
► By process
Ref: This structure allows an organization to cater effectively to the requirements of clearly defined customer groups. For example, book publishing companies often organize their activities around customer groups such as colleges, secondary schools, and private commercial schools.(Page no.119)
Question No: 45 ( Marks: 1 ) - Please choose one
How can an ESOP empower employees?
► It empowers employees to work as owners
► It empowers employees to make financial plan
► It empowers employees to assess customer’s needs
► It empowers employees to give training to other workers
Ref: an employee stock ownership plan (ESOP), are corporations owned in whole or in part by their employees. Employees are usually given a share of the corporation after a certain length of employment or they can buy shares at any time.(Page no.128)
Question No: 46 ( Marks: 1 ) - Please choose one
All of the following steps are required in product positioning EXCEPT:
► Select key criteria that effectively differentiate products or services in the industry
► Position your firm in the middle of the map
► Plot major competitors’ products or services in the resultant matrix
► Identify areas in the positioning map where the company’s products or services could be most competitive in the given target market
Ref: The following steps are required in product positioning:
1. Select key criteria that effectively differentiate products or services in the industry.
2. Diagram a two-dimensional product-positioning map with specified criteria on each axis.
3. Plot major competitors' products or services in the resultant four-quadrant matrix.
4. Identify areas in the positioning map where the company's products or services could be most
competitive in the given target market. Look for vacant areas (niches).
5. Develop a marketing plan to position the company's products or services appropriately.
Question No: 47 ( Marks: 1 ) - Please choose one
Some potential problems associated with using quantitative criteria for evaluating strategies include all of the following EXCEPT:
► Most quantitative criteria are geared to annual objectives rather than long-term objectives
► These ratios use qualitative data for evaluating strategies which often is not available
► Different accounting methods can provide different results on many quantitative criteria
► Intuitive judgments are almost always involved in deriving quantitative criteria
Rationale: Ratios always use quantitative data for evaluation which is often not available.
Question No: 48 ( Marks: 1 ) - Please choose one
Which of the following is MOST appropriate about financial ratios?
► Compare a firm’s performance with competitors
► Compare a firm’s performance with suppliers
► Compare a firm’s performance with non-financial ratios
► Compare a firm’s performance with business standards
Ref: Quantitative criteria commonly used to evaluate strategies are financial ratios, which strategists use to make three critical comparisons: (1) comparing the firm's performance over different time periods, (2) comparing the firm's performance to competitors', and (3) comparing the firm's performance to industry averages..(Page no.151)
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