MBA 705 LSUS MCLAUGHLIN EXAM 1 ACTUAL EXAM 290
ACTUAL QUESTIONS AND CORRECT ANSWER WITH
RATIONALE ALREADY GRADED A+ NEW
This comprehensive 290-question practice exam is designed for Dr. Erin
McLaughlin's MBA 705 course at LSUS, covering strategic management
theory and application. Each question presents a key concept or scenario with
four multiple-choice options, followed by the correct answer and a detailed
rationale. The content spans the full strategic management process, including
external and internal analysis, strategy formulation, implementation, and
control. Topics include Porter's Five Forces, resource-based theory, corporate
governance, organizational structure, functional strategies, industry life
cycles, competitive dynamics, financial analysis, and crisis management. The
rationales reinforce understanding of why each answer is correct and why
alternatives are not, making this an essential tool for exam preparation and
mastery of strategic management principles.
1 Which of the following is NOT a characteristic of strategic decisions?
A) They are long-term in nature.
B) They involve choices.
C) They do not involve trade-offs.
D) All of the above are characteristics of strategic decisions.
Correct Answer: C
Rationale: Strategic decisions are based on comprehensive analysis and are long-
term and future-oriented. They involve choices, and although win-win outcomes
are possible, most strategic decisions involve trade-offs, at least in the short run .
2 The strategy originally planned by top management is known as the:
A) Grand strategy
B) Realized strategy
C) Emergent strategy
D) Intended strategy
Correct Answer: D
,Rationale: The intended strategy is the original plan formulated by top
management. This is distinct from the realized strategy, which is the strategy that
actually takes effect .
3 In the Strategic Management Process, strategies are formulated after which step?
A) Implementation of the strategy
B) Control of the strategy
C) The assessment of internal strengths and weaknesses
D) None of the above
Correct Answer: C
Rationale: Strategy formulation occurs after internal and external analyses are
conducted, which includes assessing internal strengths and weaknesses, and before
implementation and strategic control .
4 What is a firm's ability to enjoy strategic benefits over an extended period of time
called?
A) Competitive advantage
B) Comparative advantage
C) Sustained competitive advantage
D) Strategic management
Correct Answer: C
Rationale: A sustained competitive advantage allows a company to maintain
above-average profitability and strategic benefits for a number of years, which is
the primary goal of strategic management .
5 Resource-Based Theory views performance primarily as a function of:
A) Industry structure
B) A firm's ability to utilize its resources
C) The bargaining power of buyers
D) Environmental forces
Correct Answer: B
Rationale: Resource-Based Theory emphasizes internal resources and capabilities
as the main drivers of firm performance and competitive advantage, in contrast to
Industrial Organization theory which focuses on external industry structure .
6 For a firm's resources to contribute to a sustained competitive advantage, they
should be:
A) Valuable and rare
B) Not subject to perfect imitation
C) Without strategically relevant substitutes
,D) All of the above
Correct Answer: D
Rationale: For sustained competitive advantage, resources must be valuable, rare,
imperfectly imitable, and lack strategically equivalent substitutes, as defined by the
VRIO framework .
7 Industrial Organization (IO) theory is based on which premise?
A) Firm performance is most closely associated with industry structure.
B) Firm performance is based on internal resource utilization.
C) The best fit with the environment leads to profitability.
D) Diversification is the only path to growth.
Correct Answer: A
Rationale: Industrial Organization theory, a branch of microeconomics, posits that
the structure of the industry (e.g., competitive intensity, barriers to entry) is the
primary determinant of a firm's profitability .
8 Contingency Theory suggests that the most profitable firms are likely to:
A) Have the most valuable resources.
B) Operate in the least competitive industries.
C) Develop the best fit with their environment.
D) Focus solely on cost leadership.
Correct Answer: C
Rationale: Contingency theory represents a middle ground, proposing that
organizational performance is the joint outcome of environmental forces and the
firm's strategic actions, meaning the best strategy depends on the specific situation
.
9 What is the collective term for the board of directors, institutional investors, and
blockholders who monitor firm strategies?
A) The top management team
B) Corporate governance
C) The strategic management process
D) Stakeholders
Correct Answer: B
Rationale: Corporate governance refers to the system of rules, practices, and
processes by which a firm is directed and controlled, involving the board,
institutional investors, and large shareholders to ensure effective management .
10 A situation in which an individual holds both the CEO and Chair of the Board
title is called:
, A) CEO duality
B) A blockholder
C) A strategic leadership
D) A principal-agent problem
Correct Answer: A
Rationale: CEO duality exists when one person holds both positions, which can
represent a conflict of interest as the CEO may influence the board's oversight of
their own performance .
11 The Sarbanes-Oxley Act of 2002 was designed to:
A) Deregulate the financial industry.
B) Create more detailed reporting requirements for public companies.
C) Lower corporate tax rates.
D) Reduce the power of the board of directors.
Correct Answer: B
Rationale: The Sarbanes-Oxley Act was enacted to improve corporate governance
and financial reporting, requiring CEOs and CFOs to certify reports and restricting
audit committee membership to outsiders .
12 What is the reason for an organization's existence, broadly defining its purpose
and scope?
A) Strategy
B) Vision
C) Mission
D) Goal
Correct Answer: C
Rationale: The mission statement is a broadly defined but enduring statement of
purpose that identifies the scope of an organization's operations and its offerings to
its various stakeholders .
13 The economic mechanism by which a business hopes to sell its goods and
generate a profit is its:
A) Strategy
B) Competitive advantage
C) Business model
D) Marketing plan
Correct Answer: C
Rationale: The business model explains how the organization seeks to earn a profit
by selling its goods. Progressive firms often devise innovative business models that
extract revenue from sources not identified by competitors .
ACTUAL QUESTIONS AND CORRECT ANSWER WITH
RATIONALE ALREADY GRADED A+ NEW
This comprehensive 290-question practice exam is designed for Dr. Erin
McLaughlin's MBA 705 course at LSUS, covering strategic management
theory and application. Each question presents a key concept or scenario with
four multiple-choice options, followed by the correct answer and a detailed
rationale. The content spans the full strategic management process, including
external and internal analysis, strategy formulation, implementation, and
control. Topics include Porter's Five Forces, resource-based theory, corporate
governance, organizational structure, functional strategies, industry life
cycles, competitive dynamics, financial analysis, and crisis management. The
rationales reinforce understanding of why each answer is correct and why
alternatives are not, making this an essential tool for exam preparation and
mastery of strategic management principles.
1 Which of the following is NOT a characteristic of strategic decisions?
A) They are long-term in nature.
B) They involve choices.
C) They do not involve trade-offs.
D) All of the above are characteristics of strategic decisions.
Correct Answer: C
Rationale: Strategic decisions are based on comprehensive analysis and are long-
term and future-oriented. They involve choices, and although win-win outcomes
are possible, most strategic decisions involve trade-offs, at least in the short run .
2 The strategy originally planned by top management is known as the:
A) Grand strategy
B) Realized strategy
C) Emergent strategy
D) Intended strategy
Correct Answer: D
,Rationale: The intended strategy is the original plan formulated by top
management. This is distinct from the realized strategy, which is the strategy that
actually takes effect .
3 In the Strategic Management Process, strategies are formulated after which step?
A) Implementation of the strategy
B) Control of the strategy
C) The assessment of internal strengths and weaknesses
D) None of the above
Correct Answer: C
Rationale: Strategy formulation occurs after internal and external analyses are
conducted, which includes assessing internal strengths and weaknesses, and before
implementation and strategic control .
4 What is a firm's ability to enjoy strategic benefits over an extended period of time
called?
A) Competitive advantage
B) Comparative advantage
C) Sustained competitive advantage
D) Strategic management
Correct Answer: C
Rationale: A sustained competitive advantage allows a company to maintain
above-average profitability and strategic benefits for a number of years, which is
the primary goal of strategic management .
5 Resource-Based Theory views performance primarily as a function of:
A) Industry structure
B) A firm's ability to utilize its resources
C) The bargaining power of buyers
D) Environmental forces
Correct Answer: B
Rationale: Resource-Based Theory emphasizes internal resources and capabilities
as the main drivers of firm performance and competitive advantage, in contrast to
Industrial Organization theory which focuses on external industry structure .
6 For a firm's resources to contribute to a sustained competitive advantage, they
should be:
A) Valuable and rare
B) Not subject to perfect imitation
C) Without strategically relevant substitutes
,D) All of the above
Correct Answer: D
Rationale: For sustained competitive advantage, resources must be valuable, rare,
imperfectly imitable, and lack strategically equivalent substitutes, as defined by the
VRIO framework .
7 Industrial Organization (IO) theory is based on which premise?
A) Firm performance is most closely associated with industry structure.
B) Firm performance is based on internal resource utilization.
C) The best fit with the environment leads to profitability.
D) Diversification is the only path to growth.
Correct Answer: A
Rationale: Industrial Organization theory, a branch of microeconomics, posits that
the structure of the industry (e.g., competitive intensity, barriers to entry) is the
primary determinant of a firm's profitability .
8 Contingency Theory suggests that the most profitable firms are likely to:
A) Have the most valuable resources.
B) Operate in the least competitive industries.
C) Develop the best fit with their environment.
D) Focus solely on cost leadership.
Correct Answer: C
Rationale: Contingency theory represents a middle ground, proposing that
organizational performance is the joint outcome of environmental forces and the
firm's strategic actions, meaning the best strategy depends on the specific situation
.
9 What is the collective term for the board of directors, institutional investors, and
blockholders who monitor firm strategies?
A) The top management team
B) Corporate governance
C) The strategic management process
D) Stakeholders
Correct Answer: B
Rationale: Corporate governance refers to the system of rules, practices, and
processes by which a firm is directed and controlled, involving the board,
institutional investors, and large shareholders to ensure effective management .
10 A situation in which an individual holds both the CEO and Chair of the Board
title is called:
, A) CEO duality
B) A blockholder
C) A strategic leadership
D) A principal-agent problem
Correct Answer: A
Rationale: CEO duality exists when one person holds both positions, which can
represent a conflict of interest as the CEO may influence the board's oversight of
their own performance .
11 The Sarbanes-Oxley Act of 2002 was designed to:
A) Deregulate the financial industry.
B) Create more detailed reporting requirements for public companies.
C) Lower corporate tax rates.
D) Reduce the power of the board of directors.
Correct Answer: B
Rationale: The Sarbanes-Oxley Act was enacted to improve corporate governance
and financial reporting, requiring CEOs and CFOs to certify reports and restricting
audit committee membership to outsiders .
12 What is the reason for an organization's existence, broadly defining its purpose
and scope?
A) Strategy
B) Vision
C) Mission
D) Goal
Correct Answer: C
Rationale: The mission statement is a broadly defined but enduring statement of
purpose that identifies the scope of an organization's operations and its offerings to
its various stakeholders .
13 The economic mechanism by which a business hopes to sell its goods and
generate a profit is its:
A) Strategy
B) Competitive advantage
C) Business model
D) Marketing plan
Correct Answer: C
Rationale: The business model explains how the organization seeks to earn a profit
by selling its goods. Progressive firms often devise innovative business models that
extract revenue from sources not identified by competitors .
