ESSENTIALS OF STRATEGIC MANAGEMENT, 3RD EDITION
CHAPTER 1
The Strategy-Making Process
Name: __________________________ Date: _____________
1. T F A strategy can be defined as a set of related actions that managers take to increase their
company's performance relative to rivals.
ANS: True PTS: 1 REF: 2
NAT: AACSB Analytic | AACSB Strategy
2. T F If a company's strategy does result in superior performance, it is said to have a
competitive advantage.
ANS: True PTS: 1 REF: 2
NAT: AACSB Analytic | AACSB Strategy
3. T F Superior performance is typically thought of in terms of one company's profitability
relative to that of other companies in the same or a similar kind of business or industry.
ANS: True PTS: 1 REF: 2
NAT: AACSB Analytic | AACSB Strategy
4. T F The more efficient a company is, the higher are its profitability and return on invested
capital.
ANS: True PTS: 1 REF: 2
NAT: AACSB Analytic | AACSB Strategy
5. T F Capital means the sum of money invested in the company, that is, stockholders' equity
plus debt owed to creditors.
ANS: True PTS: 1 REF: 2
NAT: AACSB Analytic | AACSB Strategy
6. T F A company is said to have a competitive advantage over its rivals when its profitability
is greater than the average profitability for all firms in its industry.
ANS: True PTS: 1 REF: 4
NAT: AACSB Analytic | AACSB Strategy
7. T F A company is said to have a sustained competitive advantage when it is able to maintain
above-average profitability for at least two quarters.
, ANS: False PTS: 1 REF: 4
NAT: AACSB Analytic | AACSB Strategy
8. T F Managers are the lynch pin in the strategy-making process.
ANS: True PTS: 1 REF: 5
NAT: AACSB Analytic | AACSB Strategy
9. T F General managers bear responsibility for specific departments within the company.
ANS: False PTS: 1 REF: 5
NAT: AACSB Analytic | AACSB Leadership Principles
10. T F Functional managers bear responsibility for the overall performance of the company or
one of its major self-contained subunits or divisions.
ANS: False PTS: 1 REF: 5
NAT: AACSB Analytic | AACSB Leadership Principles
11. T F A multi-divisional company is a company that competes in several different businesses
and has created a separate, self-contained division to manage each of them.
ANS: True PTS: 1 REF: 5
NAT: AACSB Analytic | AACSB Strategy
12. T F Corporate-level managers provide a link between the people who oversee the strategic
development of a firm and those who own it (the shareholders).
ANS: True PTS: 1 REF: 6
NAT: AACSB Analytic | AACSB Leadership Principles
13. T F The corporate-level of management consists of the chief executive officer (CEO), other
senior executives, the board of directors, and corporate staff.
ANS: True PTS: 1 REF: 6
NAT: AACSB Analytic | AACSB Leadership Principles
14. T F Corporate-level managers, and particularly the CEO, can be viewed as the agents of the
shareholders.
ANS: True PTS: 1 REF: 6
NAT: AACSB Analytic | AACSB Leadership Principles
15. T F A business unit is a self-contained division (with its own functions - for example,
finance, purchasing, production, and marketing departments) that provides a product or
service for a particular market.
ANS: True PTS: 1 REF: 6
NAT: AACSB Analytic | AACSB Strategy
,16. T F The formal strategic planning process has four main steps.
ANS: False PTS: 1 REF: 7
NAT: AACSB Analytic | AACSB Strategy
17. T F The CEO is a company's principal general manager.
ANS: True PTS: 1 REF: 6
NAT: AACSB Analytic | AACSB Leadership Principles
18. T F The task of analyzing the organization's external and internal environment and then
selecting appropriate strategies is known as strategy implementation.
ANS: False PTS: 1 REF: 8
NAT: AACSB Analytic | AACSB Strategy
19. T F Strategy formulation involves putting the strategies (or plan) into action.
ANS: False PTS: 1 REF: 8
NAT: AACSB Analytic | AACSB Strategy
20. T F The first component of the strategic management process is crafting the organization's
mission statement, which provides the framework or context within which strategies are
formulated.
ANS: True PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
21. T F Some organizations use an annual strategic planning process as input into the
budgetary process for the coming year.
ANS: True PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
22. T F A mission statement has five main components.
ANS: False PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
, 23. T F The third component of the strategic management planning process, serves to pinpoint
the strengths and weaknesses of the organization.
ANS: True PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
24. T F The essential purpose of the external analysis is to identify strategic opportunities and
threats in the organization's operating environment that will affect how it pursues its mission.
ANS: True PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
25. T F The comparison of strategy, weaknesses, operations, and threats is normally referred to
as a SWOT analysis.
ANS: False PTS: 1 REF: 10
NAT: AACSB Analytic | AACSB Strategy
26. T F Analyzing the industry environment requires an assessment of the competitive
structure of the company's industry, including the competitive position of the company and
its major rivals.
ANS: True PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
27. T F Managers compare and contrast the various alternative possible strategies against each
other with respect to their ability to achieve a competitive advantage.
ANS: True PTS: 1 REF: 10
NAT: AACSB Analytic | AACSB Strategy
28. T F The central purpose of a SWOT analysis is to identify strategies which create a
company-specific business model that best aligns or matches the company’s resources and
capabilities to its environment.
ANS: True PTS: 1 REF: 10
NAT: AACSB Analytic | AACSB Strategy
29. T F A global strategy addresses how to expand operations outside the home country to grow
and prosper in a world where competitive advantage is determined at a global level.
ANS: True PTS: 1 REF: 10
NAT: AACSB Analytic | AACSB Strategy
30. T F Strategy implementation involves taking actions at the functional, business and
corporate level to execute a strategic plan.
ANS: True PTS: 1 REF: 10
CHAPTER 1
The Strategy-Making Process
Name: __________________________ Date: _____________
1. T F A strategy can be defined as a set of related actions that managers take to increase their
company's performance relative to rivals.
ANS: True PTS: 1 REF: 2
NAT: AACSB Analytic | AACSB Strategy
2. T F If a company's strategy does result in superior performance, it is said to have a
competitive advantage.
ANS: True PTS: 1 REF: 2
NAT: AACSB Analytic | AACSB Strategy
3. T F Superior performance is typically thought of in terms of one company's profitability
relative to that of other companies in the same or a similar kind of business or industry.
ANS: True PTS: 1 REF: 2
NAT: AACSB Analytic | AACSB Strategy
4. T F The more efficient a company is, the higher are its profitability and return on invested
capital.
ANS: True PTS: 1 REF: 2
NAT: AACSB Analytic | AACSB Strategy
5. T F Capital means the sum of money invested in the company, that is, stockholders' equity
plus debt owed to creditors.
ANS: True PTS: 1 REF: 2
NAT: AACSB Analytic | AACSB Strategy
6. T F A company is said to have a competitive advantage over its rivals when its profitability
is greater than the average profitability for all firms in its industry.
ANS: True PTS: 1 REF: 4
NAT: AACSB Analytic | AACSB Strategy
7. T F A company is said to have a sustained competitive advantage when it is able to maintain
above-average profitability for at least two quarters.
, ANS: False PTS: 1 REF: 4
NAT: AACSB Analytic | AACSB Strategy
8. T F Managers are the lynch pin in the strategy-making process.
ANS: True PTS: 1 REF: 5
NAT: AACSB Analytic | AACSB Strategy
9. T F General managers bear responsibility for specific departments within the company.
ANS: False PTS: 1 REF: 5
NAT: AACSB Analytic | AACSB Leadership Principles
10. T F Functional managers bear responsibility for the overall performance of the company or
one of its major self-contained subunits or divisions.
ANS: False PTS: 1 REF: 5
NAT: AACSB Analytic | AACSB Leadership Principles
11. T F A multi-divisional company is a company that competes in several different businesses
and has created a separate, self-contained division to manage each of them.
ANS: True PTS: 1 REF: 5
NAT: AACSB Analytic | AACSB Strategy
12. T F Corporate-level managers provide a link between the people who oversee the strategic
development of a firm and those who own it (the shareholders).
ANS: True PTS: 1 REF: 6
NAT: AACSB Analytic | AACSB Leadership Principles
13. T F The corporate-level of management consists of the chief executive officer (CEO), other
senior executives, the board of directors, and corporate staff.
ANS: True PTS: 1 REF: 6
NAT: AACSB Analytic | AACSB Leadership Principles
14. T F Corporate-level managers, and particularly the CEO, can be viewed as the agents of the
shareholders.
ANS: True PTS: 1 REF: 6
NAT: AACSB Analytic | AACSB Leadership Principles
15. T F A business unit is a self-contained division (with its own functions - for example,
finance, purchasing, production, and marketing departments) that provides a product or
service for a particular market.
ANS: True PTS: 1 REF: 6
NAT: AACSB Analytic | AACSB Strategy
,16. T F The formal strategic planning process has four main steps.
ANS: False PTS: 1 REF: 7
NAT: AACSB Analytic | AACSB Strategy
17. T F The CEO is a company's principal general manager.
ANS: True PTS: 1 REF: 6
NAT: AACSB Analytic | AACSB Leadership Principles
18. T F The task of analyzing the organization's external and internal environment and then
selecting appropriate strategies is known as strategy implementation.
ANS: False PTS: 1 REF: 8
NAT: AACSB Analytic | AACSB Strategy
19. T F Strategy formulation involves putting the strategies (or plan) into action.
ANS: False PTS: 1 REF: 8
NAT: AACSB Analytic | AACSB Strategy
20. T F The first component of the strategic management process is crafting the organization's
mission statement, which provides the framework or context within which strategies are
formulated.
ANS: True PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
21. T F Some organizations use an annual strategic planning process as input into the
budgetary process for the coming year.
ANS: True PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
22. T F A mission statement has five main components.
ANS: False PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
, 23. T F The third component of the strategic management planning process, serves to pinpoint
the strengths and weaknesses of the organization.
ANS: True PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
24. T F The essential purpose of the external analysis is to identify strategic opportunities and
threats in the organization's operating environment that will affect how it pursues its mission.
ANS: True PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
25. T F The comparison of strategy, weaknesses, operations, and threats is normally referred to
as a SWOT analysis.
ANS: False PTS: 1 REF: 10
NAT: AACSB Analytic | AACSB Strategy
26. T F Analyzing the industry environment requires an assessment of the competitive
structure of the company's industry, including the competitive position of the company and
its major rivals.
ANS: True PTS: 1 REF: 9
NAT: AACSB Analytic | AACSB Strategy
27. T F Managers compare and contrast the various alternative possible strategies against each
other with respect to their ability to achieve a competitive advantage.
ANS: True PTS: 1 REF: 10
NAT: AACSB Analytic | AACSB Strategy
28. T F The central purpose of a SWOT analysis is to identify strategies which create a
company-specific business model that best aligns or matches the company’s resources and
capabilities to its environment.
ANS: True PTS: 1 REF: 10
NAT: AACSB Analytic | AACSB Strategy
29. T F A global strategy addresses how to expand operations outside the home country to grow
and prosper in a world where competitive advantage is determined at a global level.
ANS: True PTS: 1 REF: 10
NAT: AACSB Analytic | AACSB Strategy
30. T F Strategy implementation involves taking actions at the functional, business and
corporate level to execute a strategic plan.
ANS: True PTS: 1 REF: 10
