Strategic Management Exam Success 2025: In-Depth Study Guide and Question Explanations

A firm’s dividend decision primarily concerns which of the following? A. Determining the best capital structure B. The percentage of earnings paid to stockholders C. The transformation of inputs into outputs D. Benchmarking competitor practices B. The percentage of earnings paid to stockholders Rationale: Dividend decisions deal with payout policies, stability, and repurchase/issuance of stock. A is financing, C is production/operations, and D relates to competitiveness evaluation. The breakeven point is defined as: A. The level of sales needed to generate maximum profits B. The point where marginal cost equals marginal revenue C. The number of units where total revenues equal total costs D. The price at which supply equals demand C. The number of units where total revenues equal total costs Rationale: Breakeven focuses on covering all fixed and variable costs. A is about profit maximization, B about economic theory, and D about equilibrium, not breakeven. Which strategy involves gaining ownership or increased control over distributors or retailers? A. Backward integration B. Horizontal integration C. Forward integration D. Market development C. Forward integration Rationale: Forward integration moves toward customers/distributors. Backward targets suppliers, horizontal means controlling competitors, and market development involves new geographic markets. Which of the following is an intensive strategy? A. Liquidation B. Market penetration C. Horizontal integration D. Related diversification B. Market penetration Rationale: Intensive strategies = market penetration, market development, product development. A is defensive, C is integrative, and D is diversification. In the SPACE matrix, the defensive quadrant suggests: A. Aggressive use of internal strengths B. Staying close to core competencies C. Retrenchment and liquidation strategies D. Product development and market penetration C. Retrenchment and liquidation strategies Rationale: Defensive quadrant (lower-left) means correcting weaknesses and avoiding threats. A = aggressive quadrant, B = conservative, D = competitive. Which of the following is an example of related diversification? A. A clothing brand adding a line of perfumes B. A food chain purchasing a steel manufacturing firm C. A company selling off one of its divisions D. A business exiting operations and selling assets A. A clothing brand adding a line of perfumes Rationale: Perfume relates to fashion (related diversification). B is unrelated diversification, C is divestiture, D is liquidation. The BCG matrix quadrant called “Stars” represents: A. Low market share, high growth B. High market share, high growth C. High market share, low growth D. Low market share, low growth B. High market share, high growth Rationale: Stars are strong market leaders in fast-growing industries. A = Question Marks, C = Cash Cows, D = Dogs. Which of the following strategies falls under defensive strategies? A. Related diversification B. Market penetration C. Retrenchment D. Forward integration C. Retrenchment Rationale: Defensive strategies are retrenchment, divestiture, and liquidation. The others are offensive or growth-oriented strategies. Which of the following best describes benchmarking? A. Setting quantitative financial goals B. Evaluating competitors’ best practices to improve performance C. Determining breakeven points in production D. Developing a new product line to increase sales B. Evaluating competitors’ best practices to improve performance Rationale: Benchmarking compares value chain activities with rivals. A = objectives, C = breakeven, D = product development. The Boston Consulting Group (BCG) matrix helps managers: A. Determine appropriate financing structures B. Compare a firm’s divisions based on market growth and share C. Decide dividend payout ratios D. Identify the firm’s internal and external weaknesses B. Compare a firm’s divisions based on market growth and share Rationale: The BCG matrix is a portfolio analysis tool (Stars, Cash Cows, Dogs, Question Marks). A = financing, C = dividend decision, D = IFE matrix. The low-cost leadership strategy focuses on: A. Offering unique products to price-insensitive customers B. Producing standardized products at the lowest per-unit cost C. Providing niche products with loaded features at high price D. Focusing on customer service regardless of cost B. Producing standardized products at the lowest per-unit cost Rationale: Low-cost = cost efficiency for price-sensitive customers. A joint venture is defined as: A. One firm acquiring another B. Two or more firms forming a temporary partnership to exploit an opportunity C. A hostile takeover attempt D. A nonprofit partnership between institutions B. Two or more firms forming a temporary partnership to exploit an opportunity Rationale: JV = shared equity, temporary arrangement. A hostile takeover occurs when: A. Both firms agree on the merger B. Shareholders approve a buyout using borrowed funds C. Acquisition is opposed by one party D. A firm partners with competitors for mutual advantage C. Acquisition is opposed by one party Rationale: Hostile = not mutually desired. A = friendly merger, B = LBO, D = cooperative. First-mover advantage refers to: A. Benefits gained from entering a market before competitors B. Copying competitors’ products with improvements C. Reducing costs by outsourcing D. Liquidating assets to avoid competition A. Benefits gained from entering a market before competitors Rationale: First-mover = innovation edge. B = fast-follower, C = BPO, D = defensive. Business process outsourcing (BPO) typically involves: A. Outsourcing payroll, HR, accounting, or IT operations B. Selling assets for their tangible worth C. Merging with competitors D. Diversifying into unrelated industries A. Outsourcing payroll, HR, accounting, or IT operations Rationale: BPO = outsourcing functional processes. Which tool summarizes and evaluates the major strengths and weaknesses of a business? A. SWOT matrix B. IFE matrix C. SPACE matrix D. BCG matrix B. IFE matrix Rationale: IFE = internal strengths and weaknesses. SWOT = broader internal/external. SPACE & BCG = positioning. The SWOT matrix is used to: A. Match internal and external factors to develop strategies B. Compare firms in the same industry C. Set dividend payout policies D. Measure breakeven sales units A. Match internal and external factors to develop strategies Rationale: SWOT aligns strengths/weaknesses with opportunities/threats. In the SPACE matrix, the aggressive quadrant (upper-right) suggests: A. Retrenchment and liquidation B. Staying close to core competencies C. Integration and diversification strategies D. Harvest or divest strategies