Question 1

When Gallo purchased a company that makes wine bottles, it was involved in ________.
A) horizontal integration
B) backward vertical integration
C) forward vertical integration
D) upward integration

Accepted Answer

Purchasing a supplier of raw materials is backward vertical integration. Vertical integration is a corporate-level strategy in which a company expands its business operations either backward into a new industry that produces inputs for the company's products (backward vertical integration) or forward into a new industry that uses, distributes, or sells the company's products (forward vertical integration).

Question 2

Coca-Cola spends an enormous amount of money on advertising to distinguish, and create a unique image for, their products. Coca-Cola is pursuing a ________ strategy.
A) diversification
B) focused low-cost
C) differentiation
D) low-cost

Accepted Answer

With a differentiation strategy, managers try to gain a competitive advantage by focusing all the energies of the organization's departments or functions on distinguishing the organization's products from those of competitors on one or more important dimensions, such as product design, quality, or after-sales service and support. Coca-Cola pursues a strategy of differentiation. It spends enormous amounts of money on advertising to differentiate, and create a unique image for, its products.

Question 3

An advantage of the differentiation strategy is ________.
A) less expensive new products
B) higher level of employee skills
C) reduced turnover of employees
D) greater barriers to entry

Accepted Answer

Differentiation makes industry entry difficult because new companies have no brand name to help them compete and customers do not perceive other products to be close substitutes, so this also allows for premium pricing and results in high profits.

Question 4

Ace Real Estate conducted a SWOT analysis, and their managers believe that this year's local market growth will be slower than in the past. The predicted slow market growth is a(n) ________.
A) strength
B) weakness
C) opportunity
D) threat

Accepted Answer

SWOT analysis is a planning exercise in which managers identify internal organizational strengths (S) and weaknesses (W) and external environmental opportunities (O) and threats (T). Based on a SWOT analysis, managers at the different levels of the organization select the corporate, business, and functional strategies to best position the organization to achieve its mission and goals. Slower market growth is an external, negative factor, and therefore a potential threat.Refer to Table 6.1

Question 5

BIC, makers of ballpoint pens and razors, concentrates on making its products less expensive than its rivals. BIC is pursuing a _______ strategy.
A) focused differentiation
B) diversification
C) differentiation
D) low-cost

Accepted Answer

With a low-cost strategy, managers try to gain a competitive advantage by focusing the energy of all the organization's departments or functions on driving the company's costs down below the costs of its industry rivals. BIC pursues a low-cost strategy; it offers customers razor blades priced lower than Gillette's and ballpoint pens less expensive than those offered by Cross or Waterman.

Question 6

When TechnoSol Ltd. designed a corporate-level strategy, which includes expanding its operations into a new type of business for the organization, TechnoSol was pursuing a(n) _______ strategy.
A) concentration on a single business
B) international expansion
C) vertical integration
D) diversification

Accepted Answer

Diversification is the corporate-level strategy of expanding a company's business operations into a new industry in order to produce new kinds of valuable goods or services.

Question 7

Concentration on a single industry, vertical integration, diversification, and international expansion are principal strategies of a ________ level of an organization.
A) functional
B) department
C) corporate
D) business

Accepted Answer

The principal corporate-level strategies that managers use to help a company grow and keep it at the top of its industry, or to help it retrench and reorganize to stop its decline, are (1) concentration on a single industry, (2) vertical integration, (3) diversification, and (4) international expansion.

Question 8

When PepsiCo purchased Frito-Lay and expanded its operations into the snack-food business, it was pursuing a ________ strategy.
A) vertical integration
B) market penetration
C) diversification
D) market development

Accepted Answer

Diversification is the corporate-level strategy of expanding a company's business operations into a new industry in order to produce new kinds of valuable goods or services. Example includes PepsiCo's diversification into the snack-food business with the purchase of Frito-Lay.

Question 9

PepsiCo purchased KFC so that it could replace Coke products with Pepsi products in KFC restaurants. This is an example of a _________ strategy.
A) horizontal integration
B) vertical integration
C) low-cost
D) global

Accepted Answer

Purchasing outlets that sell the company's products makes it forward vertical integration. Vertical integration is a corporate-level strategy in which a company expands its business operations either backward into a new industry that produces inputs for the company's products (backward vertical integration) or forward into a new industry that uses, distributes, or sells the company's products (forward vertical integration).

Question 10

The Stonehedge Bayonet Company aims at a market of hunters, and they try to keep prices lower than competition. Stonehedge is pursuing a ________ strategy.
A) low-cost
B) differentiation
C) focused low-cost
D) focused differentiation

Accepted Answer

Companies pursuing a focused low-cost strategy serve one or a few segments of the overall market and aim to make their organization the lowest-cost company serving that segment.

Question 11

While managers at ABC Manufacturing were conducting a SWOT analysis, they concluded that their product line is obsolete and narrow. Their product line would be categorized as a(n) ________.
A) strength
B) weakness
C) opportunity
D) threat

Accepted Answer

SWOT analysis is a planning exercise in which managers identify internal organizational strengths (S) and weaknesses (W) and external environmental opportunities (O) and threats (T). Based on a SWOT analysis, managers at the different levels of the organization select the corporate, business, and functional strategies to best position the organization to achieve its mission and goals. An obsolete, narrow product line is an internal, negative factor, and therefore a potential weakness.Refer to Table 6.1

Question 12

Two divisions of a company decide to use the same manufacturing facilities to capitalize on the organization's excess capacity and to reduce the fixed costs assigned by corporate headquarters. This is an example of ________.
A) concentration on a single business
B) international expansion
C) focused differentiation strategy
D) synergy

Accepted Answer

Synergy is obtained when the value created by two divisions cooperating is greater than the value that would be created if the two divisions operated separately and independently. Two or more of the divisions of a diversified company can utilize the same manufacturing facilities, distribution channels, or advertising campaigns-that is, share functional activities. Each division has to invest fewer resources in a shared functional activity than it would have to invest if it performed the functional activity by itself.

Question 13

Arrow Corp. attempts to gain a competitive advantage by driving down its production costs per unit below those of its competitors. Arrow is pursuing a(n) _______ strategy.
A) focused differentiation
B) low-cost
C) related diversification
D) unrelated diversification

Accepted Answer

With a low-cost strategy, managers try to gain a competitive advantage by focusing the energy of all the organization's departments or functions on driving the company's costs down below the costs of its industry rivals.

Question 14

When General Electric Company expanded its operations by acquiring NBC television, this was an illustration of ________.
A) vertical integration
B) diversification
C) market penetration
D) a low-cost strategy

Accepted Answer

Diversification is the corporate-level strategy of expanding a company's business operations into a new industry in order to produce new kinds of valuable goods or services.

Question 15

An organization attempts to succeed by distinguishing its products from those of the competition; this is a(n) _______ strategy.
A) differentiation
B) low-cost
C) related diversification
D) unrelated diversification

Accepted Answer

With a differentiation strategy, managers try to gain a competitive advantage by focusing all the energies of the organization's departments or functions on distinguishing the organization's products from those of competitors on one or more important dimensions, such as product design, quality, or after-sales service and support.

Question 16

Firestone Tire and Rubber Company set up a chain of Firestone retail stores to sell its tires to American consumers. This is an example of ________.
A) forward vertical integration
B) global strategy
C) focused differentiation strategy
D) multidomestic strategy

Accepted Answer

Setting up stores that sell the company's own products makes it forward vertical integration. Vertical integration is a corporate-level strategy in which a company expands its business operations either backward into a new industry that produces inputs for the company's products (backward vertical integration) or forward into a new industry that uses, distributes, or sells the company's products (forward vertical integration).

Question 17

The corporate-level strategy that becomes appropriate when managers see the need to reduce the size of their organizations to increase performance is ________.
A) vertical integration
B) international expansion
C) market development
D) concentration on a single industry

Accepted Answer

Concentration on a single industry becomes an appropriate corporate-level strategy when managers see the need to reduce the size of their organizations to increase performance.

Question 18

BMW produces cars exclusively for high-income customers. BMW is pursuing a ________ strategy.
A) focused differentiation
B) focused low-cost
C) diversification
D) low-cost

Accepted Answer

Focused differentiation strategy helps organizations serve just one or a few segments of the market and aim to make their organization the most differentiated company serving that segment. BMW, for example, pursues a focused differentiation strategy, producing cars exclusively for higher-income customers.

Question 19

Firestone Tire and Rubber Company purchases rubber plantations in Africa so that it will have a source of supply for its tire manufacturing plants in Akron, Ohio. This is an example of a _______ strategy.
A) forward vertical integration
B) global
C) diversification
D) backward vertical integration

Accepted Answer

Purchasing firms that produce inputs for the company's products is backward vertical integration. Vertical integration is a corporate-level strategy in which a company expands its business operations either backward into a new industry that produces inputs for the company's products (backward vertical integration) or forward into a new industry that uses, distributes, or sells the company's products (forward vertical integration).

Question 20

An organization purchases one of its suppliers in order to obtain access to the raw materials it needs for its production. The organization is using a(n) _______ corporate-level strategy.
A) international expansion
B) vertical integration
C) diversification
D) market development

Accepted Answer

Vertical integration is a corporate-level strategy in which a company expands its business operations either backward into a new industry that produces inputs for the company's products (backward vertical integration) or forward into a new industry that uses, distributes, or sells the company's products (forward vertical integration).

Quiz 6: Planning, Strategy, and Competitive Advantage

When Gallo purchased a company that makes wine bottles, it was involved in ________.

Coca-Cola spends an enormous amount of money on advertising to distinguish, and create a unique image for, their products. Coca-Cola is pursuing a ________ strategy.

An advantage of the differentiation strategy is ________.

Ace Real Estate conducted a SWOT analysis, and their managers believe that this year's local market growth will be slower than in the past. The predicted slow market growth is a(n) ________.

BIC, makers of ballpoint pens and razors, concentrates on making its products less expensive than its rivals. BIC is pursuing a _______ strategy.

When TechnoSol Ltd. designed a corporate-level strategy, which includes expanding its operations into a new type of business for the organization, TechnoSol was pursuing a(n) _______ strategy.

Concentration on a single industry, vertical integration, diversification, and international expansion are principal strategies of a ________ level of an organization.

When PepsiCo purchased Frito-Lay and expanded its operations into the snack-food business, it was pursuing a ________ strategy.

PepsiCo purchased KFC so that it could replace Coke products with Pepsi products in KFC restaurants. This is an example of a _________ strategy.

The Stonehedge Bayonet Company aims at a market of hunters, and they try to keep prices lower than competition. Stonehedge is pursuing a ________ strategy.

While managers at ABC Manufacturing were conducting a SWOT analysis, they concluded that their product line is obsolete and narrow. Their product line would be categorized as a(n) ________.

Two divisions of a company decide to use the same manufacturing facilities to capitalize on the organization's excess capacity and to reduce the fixed costs assigned by corporate headquarters. This is an example of ________.

Arrow Corp. attempts to gain a competitive advantage by driving down its production costs per unit below those of its competitors. Arrow is pursuing a(n) _______ strategy.

When General Electric Company expanded its operations by acquiring NBC television, this was an illustration of ________.

An organization attempts to succeed by distinguishing its products from those of the competition; this is a(n) _______ strategy.

Firestone Tire and Rubber Company set up a chain of Firestone retail stores to sell its tires to American consumers. This is an example of ________.

The corporate-level strategy that becomes appropriate when managers see the need to reduce the size of their organizations to increase performance is ________.

BMW produces cars exclusively for high-income customers. BMW is pursuing a ________ strategy.

Firestone Tire and Rubber Company purchases rubber plantations in Africa so that it will have a source of supply for its tire manufacturing plants in Akron, Ohio. This is an example of a _______ strategy.

An organization purchases one of its suppliers in order to obtain access to the raw materials it needs for its production. The organization is using a(n) _______ corporate-level strategy.