MBA 701 Final Exam Study Guide | Questions and Answers |
2026 Update | 100% Correct - LSUS. - 97 Questions and Answers
Already Graded A+ Premium Exam Tested And Verified
Subject Area Strategic Management and Business Policy
Description This comprehensive final examination covers the core concepts of strategic
management including environmental analysis, strategy formulation,
implementation, and control. Emphasizes the application of analytical frameworks
such as Porter's Five Forces, VRIO, Balanced Scorecard, and corporate
governance structures to real-world business scenarios.
Expected Grade A+
Total Questions 97
Duration 3 hours
Learning Outcomes 1. Analyze industry profitability using Porter's Five Forces framework.
2. Evaluate firm resources and capabilities using the VRIO framework.
3. Design performance measurement systems using the Balanced Scorecard.
4. Assess corporate governance structures and their impact on strategic
decision-making.
5. Formulate business-level strategies and evaluate their competitive implications.
Accreditation AACSB accredited, aligned with rigorous US graduate business standards.
Page 1
,1. In an industry with high switching costs, limited product differentiation, and
multiple equally sized competitors, which of the following is most likely true?
Answer: Buyer power is low because customers face significant costs to change
suppliers.
High switching costs reduce buyer power because customers incur substantial costs to
switch, making them less likely to negotiate aggressively. The scenario describes high
switching costs and limited differentiation, so D is correct. Option C is false because
high switching costs reduce rivalry only if customers are locked in, but the presence of
multiple equally sized competitors can still drive intense rivalry. A is incorrect because
high switching costs reduce threat of substitutes, not increase it. B is not necessarily
true without information on supplier concentration.
2. A firm's patented technology is rare, costly to imitate, and the organization is
structured to exploit it. However, the technology is not valuable in the current
market. According to the VRIO framework, this resource provides:
Answer: Competitive disadvantage.
For a resource to provide competitive advantage, it must be valuable, rare, costly to
imitate, and the firm must be organized to capture value. Here, the resource fails the
value test, meaning it does not enable the firm to exploit opportunities or neutralize
threats. Thus, it is a weakness and leads to competitive disadvantage. Options A, B, and
C all require value, so they are incorrect.
3. When implementing a differentiation strategy, which of the following balanced
scorecard measures is most likely to be a leading indicator of financial performance?
Answer: Customer satisfaction index.
In a differentiation strategy, unique value creation leads to customer loyalty and
willingness to pay premium prices. Customer satisfaction is a leading indicator that
drives future sales and profitability. ROI is a lagging indicator. On-time deliveries
relate to operational efficiency, which is more critical for cost leadership. Employee
turnover is a learning and growth measure that may indirectly affect performance but
is not directly a leading indicator of financial success in differentiation.
Page 2
,4. A firm's board of directors has a majority of inside directors, and the CEO also
serves as board chair. According to agency theory, this structure is most likely to
lead to:
Answer: Increased CEO entrenchment and potential for value-destroying
decisions.
Agency theory suggests that separation of CEO and chair roles, and a majority of
independent directors, reduce the potential for self-serving behavior by management.
The described structure concentrates power, enabling CEO entrenchment and decisions
that may not maximize shareholder value. Option A is a stewardship theory argument,
not agency. B is plausible but agency theory emphasizes conflict of interest, not
information flow. D is false because independent directors are in the minority.
5. A firm planning to enter a new market where customers value low prices above all
else and there are few ways to differentiate. Which business-level strategy is most
appropriate?
Answer: Cost leadership.
Cost leadership targets a broad market with low-cost products, suitable when
customers are price-sensitive and differentiation is difficult. Focused cost leadership
targets a narrow segment; the scenario does not indicate a narrow segment.
Differentiation strategies are inappropriate because customers primarily value low
prices. Thus, broad cost leadership is best.
6. A car manufacturer acquires a steel supplier to ensure consistent quality and
reduce transaction costs. This decision is an example of:
Answer: Backward vertical integration.
Backward vertical integration occurs when a firm acquires a supplier earlier in the
value chain. Here, the car manufacturer acquires a steel supplier (a raw material
provider), which is backward. Horizontal integration would be acquiring a competitor.
Forward integration would be acquiring a distributor or retailer. Related
diversification involves entering a different but related industry, not vertical integration
along the same value chain.
Page 3
, 7. Two firms form a strategic alliance to jointly develop a new technology. To
minimize governance costs while still accessing each other's proprietary knowledge,
which governance form is most appropriate?
Answer: Equity alliance with a joint venture.
When accessing proprietary knowledge, a joint venture (equity alliance) aligns
incentives through shared ownership and provides governance mechanisms to protect
intellectual property while pooling resources. Nonequity alliances (B) have lower
governance costs but offer less protection for tacit knowledge. Acquisitions (C) impose
high integration costs and may destroy the acquired firm's innovative culture. Informal
agreements (D) lack safeguards and are vulnerable to opportunism.
8. According to the CAGE distance framework, which of the following differences
would most likely impede trade between two countries?
Answer: Different languages and religious beliefs.
The CAGE framework identifies cultural, administrative, geographic, and economic
distances. Cultural distance (language, religion) directly affects communication, trust,
and business practices, often creating significant barriers. Economic distance (B) affects
demand but can be an opportunity for trade. Similar legal systems (C) reduce distance,
not impede. Geographic distance (D) is a barrier, but cultural differences can be more
profound and harder to overcome, especially for consumer goods or services. Option A
captures both cultural and administrative elements.
9. A startup introduces a low-cost product that initially underperforms existing
solutions but gradually improves, eventually displacing incumbents. This pattern is
best described as:
Answer: Disruptive innovation.
Disruptive innovation typically starts with a lower-performance, cheaper product that
appeals to a niche market, then improves to disrupt the mainstream. Sustaining
innovations improve existing products for current customers. Architectural innovation
reconfigures existing components. Radical innovation is a breakthrough that is entirely
new. The described pattern matches Christensen's theory of disruptive innovation.
Page 4
2026 Update | 100% Correct - LSUS. - 97 Questions and Answers
Already Graded A+ Premium Exam Tested And Verified
Subject Area Strategic Management and Business Policy
Description This comprehensive final examination covers the core concepts of strategic
management including environmental analysis, strategy formulation,
implementation, and control. Emphasizes the application of analytical frameworks
such as Porter's Five Forces, VRIO, Balanced Scorecard, and corporate
governance structures to real-world business scenarios.
Expected Grade A+
Total Questions 97
Duration 3 hours
Learning Outcomes 1. Analyze industry profitability using Porter's Five Forces framework.
2. Evaluate firm resources and capabilities using the VRIO framework.
3. Design performance measurement systems using the Balanced Scorecard.
4. Assess corporate governance structures and their impact on strategic
decision-making.
5. Formulate business-level strategies and evaluate their competitive implications.
Accreditation AACSB accredited, aligned with rigorous US graduate business standards.
Page 1
,1. In an industry with high switching costs, limited product differentiation, and
multiple equally sized competitors, which of the following is most likely true?
Answer: Buyer power is low because customers face significant costs to change
suppliers.
High switching costs reduce buyer power because customers incur substantial costs to
switch, making them less likely to negotiate aggressively. The scenario describes high
switching costs and limited differentiation, so D is correct. Option C is false because
high switching costs reduce rivalry only if customers are locked in, but the presence of
multiple equally sized competitors can still drive intense rivalry. A is incorrect because
high switching costs reduce threat of substitutes, not increase it. B is not necessarily
true without information on supplier concentration.
2. A firm's patented technology is rare, costly to imitate, and the organization is
structured to exploit it. However, the technology is not valuable in the current
market. According to the VRIO framework, this resource provides:
Answer: Competitive disadvantage.
For a resource to provide competitive advantage, it must be valuable, rare, costly to
imitate, and the firm must be organized to capture value. Here, the resource fails the
value test, meaning it does not enable the firm to exploit opportunities or neutralize
threats. Thus, it is a weakness and leads to competitive disadvantage. Options A, B, and
C all require value, so they are incorrect.
3. When implementing a differentiation strategy, which of the following balanced
scorecard measures is most likely to be a leading indicator of financial performance?
Answer: Customer satisfaction index.
In a differentiation strategy, unique value creation leads to customer loyalty and
willingness to pay premium prices. Customer satisfaction is a leading indicator that
drives future sales and profitability. ROI is a lagging indicator. On-time deliveries
relate to operational efficiency, which is more critical for cost leadership. Employee
turnover is a learning and growth measure that may indirectly affect performance but
is not directly a leading indicator of financial success in differentiation.
Page 2
,4. A firm's board of directors has a majority of inside directors, and the CEO also
serves as board chair. According to agency theory, this structure is most likely to
lead to:
Answer: Increased CEO entrenchment and potential for value-destroying
decisions.
Agency theory suggests that separation of CEO and chair roles, and a majority of
independent directors, reduce the potential for self-serving behavior by management.
The described structure concentrates power, enabling CEO entrenchment and decisions
that may not maximize shareholder value. Option A is a stewardship theory argument,
not agency. B is plausible but agency theory emphasizes conflict of interest, not
information flow. D is false because independent directors are in the minority.
5. A firm planning to enter a new market where customers value low prices above all
else and there are few ways to differentiate. Which business-level strategy is most
appropriate?
Answer: Cost leadership.
Cost leadership targets a broad market with low-cost products, suitable when
customers are price-sensitive and differentiation is difficult. Focused cost leadership
targets a narrow segment; the scenario does not indicate a narrow segment.
Differentiation strategies are inappropriate because customers primarily value low
prices. Thus, broad cost leadership is best.
6. A car manufacturer acquires a steel supplier to ensure consistent quality and
reduce transaction costs. This decision is an example of:
Answer: Backward vertical integration.
Backward vertical integration occurs when a firm acquires a supplier earlier in the
value chain. Here, the car manufacturer acquires a steel supplier (a raw material
provider), which is backward. Horizontal integration would be acquiring a competitor.
Forward integration would be acquiring a distributor or retailer. Related
diversification involves entering a different but related industry, not vertical integration
along the same value chain.
Page 3
, 7. Two firms form a strategic alliance to jointly develop a new technology. To
minimize governance costs while still accessing each other's proprietary knowledge,
which governance form is most appropriate?
Answer: Equity alliance with a joint venture.
When accessing proprietary knowledge, a joint venture (equity alliance) aligns
incentives through shared ownership and provides governance mechanisms to protect
intellectual property while pooling resources. Nonequity alliances (B) have lower
governance costs but offer less protection for tacit knowledge. Acquisitions (C) impose
high integration costs and may destroy the acquired firm's innovative culture. Informal
agreements (D) lack safeguards and are vulnerable to opportunism.
8. According to the CAGE distance framework, which of the following differences
would most likely impede trade between two countries?
Answer: Different languages and religious beliefs.
The CAGE framework identifies cultural, administrative, geographic, and economic
distances. Cultural distance (language, religion) directly affects communication, trust,
and business practices, often creating significant barriers. Economic distance (B) affects
demand but can be an opportunity for trade. Similar legal systems (C) reduce distance,
not impede. Geographic distance (D) is a barrier, but cultural differences can be more
profound and harder to overcome, especially for consumer goods or services. Option A
captures both cultural and administrative elements.
9. A startup introduces a low-cost product that initially underperforms existing
solutions but gradually improves, eventually displacing incumbents. This pattern is
best described as:
Answer: Disruptive innovation.
Disruptive innovation typically starts with a lower-performance, cheaper product that
appeals to a niche market, then improves to disrupt the mainstream. Sustaining
innovations improve existing products for current customers. Architectural innovation
reconfigures existing components. Radical innovation is a breakthrough that is entirely
new. The described pattern matches Christensen's theory of disruptive innovation.
Page 4
