CH6 - Strategy Formulation MCQs PDF

CH6 - Strategy Formulation (MCQs) Multiple-Choice Questions (MCQs) Situational Analysis: SWOT Approach (Page 1-2) 1. Which of the following best describes the primary goal of situational analysis in strategy formulation? ① Identifying a corporation’s distinctive competencies and available...

CH6 - Strategy Formulation (MCQs) Multiple-Choice Questions (MCQs) Situational Analysis: SWOT Approach (Page 1-2) 1. Which of the following best describes the primary goal of situational analysis in strategy formulation? ① Identifying a corporation’s distinctive competencies and available market opportunities. ② Maximizing pro t by reducing competition. ③ Creating a new mission statement that aligns with nancial goals. ④ Developing marketing strategies for immediate product launches. 2. What is the formula for Strategic Alternative (SA) in SWOT analysis? ① SA = (S + W) / O ② SA = S - W / O ③ SA = O / (S - W) ④ SA = O × (S + W) 3. A propitious niche is best described as: ① A market segment with the highest number of competitors. ② A market need that ts a rm’s strengths so well that competitors are unlikely to challenge it. ③ A segment where rms can establish high entry barriers. ④ A short-term opportunity for a rm to launch a new product. 4. Which of the following is a correct interpretation of a “strategic sweet spot”? ① A temporary market opportunity that rms must capitalize on before competitors enter. ② A long-term sustainable competitive advantage that prevents all competition. fi fi fi fi fi fi fi  ③ A market segment where rms can charge the highest prices. ④ A segment that rms should avoid due to high risk. Review of Mission and Objectives (Page 3-4) 5. Which of the following was the key issue with Yahoo’s early 2000s mission statement? ① It was too speci c, limiting the company’s growth potential. ② It was too broad and did not clarify the company’s primary focus. ③ It was focused solely on revenue growth. ④ It lacked a competitive di erentiation strategy. 6. Which example best illustrates a con ict between an objective and strategy? ① Objective: Reduce production costs by 15%; Strategy: Implement cost- e cient supply chain practices. ② Objective: Increase market share by 20% in one year; Strategy: O er steep discounts. ③ Objective: Expand globally; Strategy: Increase local advertising. ④ Objective: Improve brand loyalty; Strategy: Launch new products. 7. What was the impact of Boeing shifting its primary objective from “being the largest” to “being the most pro table”? ① It led to increased competition with Airbus on price. ② Boeing stopped investing in long-term innovation. ③ The company abandoned its commitment to maintaining excess manufacturing capacity. ④ Boeing focused more on increasing production speed rather than cost-cutting. Business Strategies – Porter’s Competitive Strategies (Page 5-6) 8. Which of the following best de nes a lower-cost strategy? ① O ering a product that is unique in quality, service, or features. ffi ff fi fi fi fi ff fi fl ff  ② Designing, producing, and marketing a product more e ciently than competitors. ③ Providing premium services to create brand loyalty. ④ Expanding into multiple markets to increase revenue streams. 9. Which company is an example of cost leadership strategy? ① BMW ② McDonald’s ③ Apple ④ Nike 10. Which of the following best describes di erentiation strategy? ① Providing unique and superior value to buyers through design, quality, or service. ② O ering the lowest-priced product in the industry. ③ Expanding into untapped markets before competitors. ④ Copying successful competitors’ strategies. Business Strategies – Competitive Risks & Industry Structure (Page 7-8) 11. According to Porter, what happens if a company fails to establish a clear competitive strategy? ① The company will likely achieve above-average pro tability. ② It will be “stuck in the middle” with no competitive advantage. ③ The company will dominate a niche market. ④ It will create new barriers to entry for competitors. 12. Which of the following statements about hypercompetition is TRUE? ① Firms compete based solely on cost and quality inde nitely. ② Sustainable competitive advantage is impossible in hypercompetitive markets. ③ Entry barriers remain constant in hypercompetitive industries. ④ Companies should avoid innovation in hypercompetitive markets. ff fi fi ffi ff  Business Strategies – O ensive & Defensive Tactics (Page 9-10) 13. Which o ensive strategy involves attacking a competitor directly by matching them in every aspect, from price to promotion? ① Flanking maneuver ② Bypass attack ③ Frontal assault ④ Guerrilla warfare 14. What is the primary goal of a bypass attack in business strategy? ① Attacking a competitor’s weak market segments. ② Introducing a product that makes the competitor’s product unnecessary. ③ Gradually encircling the competitor’s market. ④ Conducting small, surprise market attacks. 15. Which of the following is NOT a defensive tactic? ① Raising structural barriers. ② Increasing expected retaliation. ③ O ering a lower price than all competitors. ④ Lowering the inducement for attack. Business Strategies – Cooperative Strategies (Page 11-12) 16. Which of the following is NOT a key factor that enables collusion between competitors? ① Small number of identi able competitors. ② High frequency of small sales orders. ③ Constantly changing industry culture. ④ High entry barriers to prevent new competitors. ff ff fi ff 17. Which of the following is NOT a common reason for forming strategic alliances? ① To learn new capabilities. ② To reduce political risk. ③ To eliminate all competition in an industry. ④ To obtain access to speci c markets. Industry Structure and Competitive Strategy (Page 9-10) 18. Which of the following best describes a fragmented industry? ① An industry dominated by a few large rms that control most of the market. ② An industry where a few rms compete through collusion. ③ An industry composed of many small rms, none of which dominate the market. ④ An industry characterized by high entry barriers and stable market leaders. 19. Which of the following is a key characteristic of a consolidated industry? ① Numerous small competitors with low market share. ② A few large rms that dominate the market. ③ Highly unstable pricing with constant price wars. ④ A lack of competitive strategy among rms. 20. What is a strategic rollup? ① A gradual process where one company acquires multiple smaller rms to consolidate an industry. ② A defensive tactic to prevent competitors from entering the market. ③ A marketing technique used to increase brand awareness. ④ A government policy to control monopolistic practices. Hypercompetition and Competitive Advantage Sustainability (Page 10-11) fi fi fi fi fi fi fi  21. Which of the following is NOT a characteristic of hypercompetition? ① Firms constantly trying to erode each other’s advantages. ② Sustainable competitive advantage is di cult to maintain. ③ Market leaders maintain long-term stability without disruption. ④ Firms must continually innovate to stay ahead. 22. What is the second stage of competition in hypercompetitive industries? ① Firms initially compete on cost and quality. ② Competitors move into untapped markets. ③ Firms raise entry barriers to prevent new competitors. ④ Companies develop cost-cutting strategies to reduce operational expenses. 23. Why is sustainable competitive advantage di cult in hypercompetitive markets? ① Competitors constantly innovate and imitate successful strategies. ② Customer loyalty prevents market shifts. ③ Companies rely on long-term strategies rather than short-term adaptability. ④ Regulatory policies prevent companies from changing strategies frequently. O ensive and Defensive Competitive Strategies (Page 11-12) 24. Which of the following o ensive strategies involves attacking a competitor’s weak points in the market? ① Frontal assault ② Flanking maneuver ③ Guerrilla warfare ④ Bypass attack 25. What is the main purpose of a defensive strategy in business competition? ① To expand aggressively into new markets. ② To protect the rm’s market position from competitors. ③ To increase market share by attacking competitors directly. ④ To develop new products that replace existing ones. ff fi ff ffi ffi  26. Which of the following is NOT a common defensive tactic? ① Raising structural barriers. ② Lowering the inducement for attack. ③ Increasing expected retaliation. ④ Ignoring competitor actions and focusing on internal growth. Cooperative Strategies (Page 12-13) 27. Which of the following is a key condition that allows collusion to occur among competitors? ① A large number of rms with diverse cost structures. ② A small number of identi able competitors with similar costs. ③ A constantly changing industry structure with unpredictable demand. ④ Low barriers to entry that encourage new competitors to join the market. 28. What is the primary reason companies form strategic alliances? ① To completely eliminate competition from the market. ② To gain access to new capabilities, markets, or reduce nancial risk. ③ To consolidate their operations and merge into a single entity. ④ To avoid government regulations that prevent monopolistic behavior. 29. Which of the following is NOT a reason for forming a strategic alliance? ① To obtain access to speci c markets. ② To learn new capabilities. ③ To increase operational complexity without a clear goal. ④ To reduce nancial and political risk. Porter’s Competitive Strategies (Page 14-15) fi fi fi fi fi  30. What is the primary goal of Porter’s competitive strategies? ① To increase a rm’s competitive position by lowering prices only. ② To help rms establish a sustainable competitive advantage through cost leadership or di erentiation. ③ To force competitors out of the market by creating monopolistic conditions. ④ To focus solely on operational e ciency instead of market positioning. 31. Which of the following is a key characteristic of a cost leadership strategy? ① O ering premium features that di erentiate the product. ② Targeting a niche market with unique services. ③ Producing and selling at a lower cost than competitors while maintaining acceptable quality. ④ Relying on high marketing expenditures to build brand awareness. 32. Di erentiation strategy relies on which of the following factors? ① O ering the lowest possible price to undercut competitors. ② Providing unique value through product design, brand image, or customer service. ③ Reducing costs in supply chain management. ④ Expanding production capacity to increase output. Cost Leadership vs. Di erentiation Strategy (Page 16-17) 33. What is a major risk of using a cost leadership strategy? ① It may lead to a lack of customer loyalty and vulnerability to price wars. ② It requires signi cant capital investment in branding. ③ It eliminates the need for supply chain optimization. ④ It reduces the ability of rms to invest in product quality improvements. 34. Why does di erentiation strategy create a competitive advantage? ① It prevents competitors from entering the market due to high cost structures. ② It increases customer loyalty by o ering superior perceived value. ff ff ff fi ff fi fi ff fi ff ffi ff ff  ③ It allows rms to avoid direct competition entirely. ④ It makes companies immune to economic downturns. 35. Which of the following companies is an example of successful di erentiation? ① McDonald’s ② Southwest Airlines ③ Apple ④ Walmart Cost Focus vs. Di erentiation Focus Strategies (Page 18-19) 36. What is the primary distinction between cost focus and di erentiation focus? ① Cost focus targets broad market segments, while di erentiation focus targets niche markets. ② Cost focus emphasizes operational e ciency, while di erentiation focus emphasizes premium branding. ③ Cost focus targets niche markets by o ering lower prices, whereas di erentiation focus targets niche markets with unique value. ④ Cost focus and di erentiation focus are the same strategies with di erent marketing approaches. 37. A company that seeks a cost advantage in a speci c market segment rather than an entire industry is following which strategy? ① Cost leadership ② Cost focus ③ Di erentiation ④ Market penetration 38. Which of the following represents a di erentiation focus strategy? ① A luxury watch brand emphasizing craftsmanship and exclusivity. ② A discount retailer reducing costs across multiple product lines. ③ A technology company o ering lower-priced products to compete with larger rms. fi ff ff ff fi ff ff ff ff ffi ff ff ff ff ff fi  ④ A manufacturer focusing on cost-cutting through supply chain optimization. Competitive Risks in Business Strategies (Page 20-21) 39. Which of the following is a major risk of Porter’s cost leadership strategy? ① Competitors may imitate cost-cutting measures, reducing price advantages. ② Firms may be unable to maintain quality while reducing costs. ③ Buyers may become more price-sensitive, reducing brand loyalty. ④ All of the above. 40. What happens when a rm is “stuck in the middle” according to Porter? ① The rm fails to achieve either cost leadership or di erentiation, leading to competitive disadvantage. ② The rm dominates multiple market segments but lacks a strong competitive position. ③ The rm focuses too much on international expansion rather than local markets. ④ The rm has successfully implemented both cost leadership and di erentiation simultaneously. 41. How do rms in hypercompetitive industries avoid becoming “stuck in the middle”? ① By continually evolving their competitive strategies to adapt to market conditions. ② By maintaining a single focus on cost reduction without di erentiation. ③ By avoiding innovation and relying solely on existing market advantages. ④ By ignoring competitors’ strategic shifts and staying with one long-term plan. Industry Evolution & Competitive Strategies (Page 22-23) 42. Which of the following best describes how rms compete in hypercompetitive industries? ① Firms initially compete on cost and quality but later move into untapped markets and raise entry barriers. ff fi fi fi fi fi fi ff ff fi  ② Firms maintain long-term stability by avoiding price reductions. ③ Companies form strategic alliances to create monopolies and eliminate competition. ④ Firms focus on cost-cutting measures to maintain short-term pro tability. 43. Which is the nal stage of competition in hypercompetitive industries? ① Firms enter price wars that result in market failure. ② Competitors raise entry barriers to discourage new market entrants. ③ The industry reaches a monopolistic state with no further competition. ④ The government intervenes to regulate all competitive activities. 44. What is a key characteristic of rms in highly dynamic competitive environments? ① They must continuously innovate to maintain a competitive edge. ② They rely on static long-term strategies that remain unchanged. ③ They focus solely on cost reduction without product di erentiation. ④ They avoid entering new markets to minimize risk. fi fi ff fi