Test bank of fred r david – strategic management, 13th edition ch09

Exam Name _ TRUE/FALSE Write 'T' if the statement is true and 'F' if the statement is false 1) Less than percent of formulated strategies are successfully implemented 1) _ 2) Given that most information on individuals is available online, the extent to which companies can track individuals' movements on the Internet is not a marketing issue of great concern to consumers today 2) _ 3) Market penetration can be defined as the subdividing of a market into distinct subsets of customers according to needs and buying habits 3) _ 4) The marketing mix component factors are product, place, promotion, price and people 4) _ 5) With market segmentation, a firm can better operate with limited resources 5) _ 6) The most common bases for segmenting markets are geographic and demographic 6) _ 7) Segmentation often reveals that large, random fluctuations in demand actually consist of several small, predictable, and manageable patterns 7) _ 8) Segmenting industrial markets is generally simpler and easier than segmenting consumer markets 8) _ 9) Generally, market segmentation is followed by a market diversification strategy 9) _ 10) After segmenting markets so that a firm can target particular customer groups, the next step is to find out what customer groups want and expect 10) 11) In general, the Internet makes market segmentation easier 11) 12) Multidimensional scaling involves examining three or more criteria simultaneously in a product-positioning analysis 12) 13) A firm can usually serve two or more market segments with the same strategy 13) 14) It is acceptable for firms to create expectations that exceed the service that can or will be offered, if it will attract customers 14) 15) Return on assets is the most widely used technique for determining whether debt, stock, or a combination of debt and stock is the best alternative for raising capital to implement strategies 15) 16) Besides net profit from operations and the sale of assets, the two basic sources of funds for an ongoing enterprise are debt and equity 16) 17) In low earning periods, too much debt in the capital structure of an organization can endanger stockholders' returns and jeopardize company survival 17) 18) Additional capital is often required for successful strategy implementation 18) 19) An EPS/EBIT chart can be constructed to determine the breakeven point, where one financing alternative becomes more attractive than another 19) 20) A reason for concern over the dilution of company stock is a possible hostile takeover 20) 21) When additional debt is issued to finance implementation of strategy, both ownership and control of the enterprise are diluted 21) 22) In times of depressed stock prices, stock issuances often prove to be the most suitable alternative for obtaining capital 22) 23) A projected financial analysis can be used to forecast the impact of various implementation decisions 23) 24) When performing pro forma financial analyses, the balance sheet should be prepared before the income statement 24) 25) The percentage-of-sales method should be used for computing the cost of goods sold and additional expense items in projected income statements 25) 26) The cash account is used as a plug figure in pro forma balance sheets 26) 27) The Sarbanes-Oxley Act of 2002 has eliminated the problem of firms inflating their financial projections, so stakeholders need not worry about the financial projections of different companies 27) 28) A financial budget is a document that details how funds will be obtained and spent for a specified period of time 28) 29) Limiting an organization's expenditures is the primary purpose of financial budgets 29) 30) The most common type of financial budget is the capital budget 30) 31) Although cash budgets can be a useful financial tool, publicly held companies are not required to complete them 31) 32) A limitation of financial budgets is that they can hide inefficiencies, if they are based solely on precedent rather than on periodic evaluation of circumstances and standards 32) 33) All the methods for determining a business' worth can be grouped into three basic approaches what a firm owns, what a firm earns, and what a firm spends 33) 34) A conservative rule of thumb for estimating a business' worth is that it is 10 times the firm's most current annual profit 34) 35) A recommended approach for determining a firm's worth is to base the analysis on the selling price of a similar company 35) 36) To determine the price-earnings ratio, divide the market price of the firm's annual earnings per share by the common stock, and multiply this number by the firm's average net income for the past 10 years 36) 37) Goodwill is the estimated values associated with a name brand 37) 38) The costs of paying lawyers, accountants, and underwriters when engaging in initial public offerings (IPO) is substatially higher in the Arab world than in the Western world 38) 39) It is generally not recommended for companies with less than $10 million in sales to go public 39) 40) In general, there are very little costs associated with going public 40) 41) Buying off the outstanding shares of your company from the open market to make the company private is what going public means 41) 42) If the rate of market growth and technical progress is fast and there are few barriers to possible new entrants, then in-house R&D is the preferred solution 42) 43) According to research, the most successful organizations use a research and development strategy that ties internal strengths to external opportunities and is linked with corporate objectives 43) 44) R&D policies can enhance strategy implementation efforts to emphasize product or process improvements 44) 45) A major effort in R&D may be very risky if technology is changing rapidly and the market is growing slowly 45) 46) One R&D strategy is to be an innovative imitator of successful products 46) 47) A current trend in R&D management involves the lifting of the veil of secrecy whereby firms, even major competitors, are joining forces to develop new products 47) 48) The process of strategic management is facilitated immensely in firms that have an effective information system 48) 49) Increased costs are a disadvantage of a good information system 49) 50) With information technology, in some cases it is possible to away with the workplace by allowing employees to work at home or anywhere, anytime 50) MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question 51) What percent of strategies formulated are successfully implemented? 51) A) More than 80 percent B) Less than 10 percent C) Approximately 66 percent D) About 30 percent E) Between 40 to 60 percent 52) What level of management is directly affected by strategy implementation? 52) A) Sales managers B) Project managers C) Division managers D) Plant managers E) all of these 53) All of the following are examples of marketing decisions that require policies except 53) A) to use heavy, light, or no TV advertising B) to advertise online or not C) to offer a complete or limited warranty D) to use exclusive dealerships or multiple channels of distribution E) to be a market leader or follower 54) Which two variables are of central importance to strategy implementation? 54) A) Competition and collaboration B) Product development and market development C) Marketing penetration and competition D) Diversification and budgeting E) Market segmentation and product positioning 55) Subdividing a market into distinct subsets of customers according to their needs and the way they buy and use a product or service is 55) A) positioning B) market segregation C) market segmentation D) product diversification E) market penetration 56) Why is market segmentation an important variable in strategy implementation? 56) A) Mass production, mass distribution and mass advertising are not always required B) All company strategies require increased sales through new markets and products C) It allows a firm to operate with limited resources D) Market segmentation decisions directly affect marketing mix variables E) all of the above 57) Which of the following variables are not directly affected by market segmentation? 57) A) Promotion B) Process C) Product D) Price E) Place 58) Why is market segmentation an important variable in the strategy-implementation process? 58) Which element in the projected income statement cannot be forecasted using the percentage-of-sales method? 79) A) Administrative expense B) Interest expense C) Cost of goods sold D) Selling expense E) All of these items are forecasted using the percentage-of-sales method 80) Retained earnings is obtained by subtracting 80) A) interest expense from EBT B) taxes from EBIT C) any dividends from net income D) net income from EBIT E) EBIT from CGS 81) In projected financial statements, what account is used as a plug figure? 81) A) Cash B) Stockholders' equity C) Retained earnings D) Fixed assets E) Long-term liabilities 82) Which of these is the most common type of budgeting time frame? 82) A) Daily B) Annual C) Every decade D) Quarterly E) Monthly 83) If a firm incurs a loss during a particular year, or if the firm had positive net income but paid out dividends more than the net income, its retained earnings for that year will most likely be 83) A) a large positive number B) impossible to determine from this information C) a negative number D) zero E) a low positive number 84) What is the most common type of financial budget? 84) A) Flexible B) Cash C) Sales D) Factory E) Profits 85) Who has mandated that every publicly held company in the United States must issue an annual cash-flow statement in addition to the usual financial reports? 85) A) FASB B) OPEC C) Congress D) SEC E) FCC 86) How should financial budgets be thought of? 86) A) A tool for limiting expenditures B) A method for obtaining the most productive and profitable use of an organization's resources C) A method for rationing the profits from the past year D) A tool for forecasting future profits E) A method for determining who should receive the largest pay raise 87) What is a limitation of using financial budgets? 87) A) They are sometimes used as instruments of tyranny B) They can become a substitute for objectives C) They can hide inefficiencies if done only on precedent D) They can be so detailed that they are cumbersome and expensive E) all of the above 88) Which of the following methods is not accepted for determining a business' worth? 88) A) What the firm's return on investment has been B) What the firm will bring in the market C) What the firm earns D) What the firm owns E) All of the above are accepted 89) Which of the following is/are not included in net worth? 89) A) Fixed assets B) Retained earnings C) Common stock D) Additional paid-in-capital E) All of these are included in net worth 90) Which method of determining a firm's net worth divides the market price of the firm's stock by the annual earnings per share, and multiplies the result by the firm's average net income for the past five years? 90) A) Current ratio method B) Long-term asset method C) Outstanding shares method D) Price-earnings ratio method E) Debt/equity method 91) What best describes how much a company is worth? 91) A) It is static B) It is the result of explicit accounting standards C) An exact science D) It is known only to the firm's accountants E) An educated guess 92) The Financial Accounting Standard Board (FASB) Rule 142 deals with 92) A) improving marketing policies B) hacking issues in MIS C) goodwill D) how firms conduct R & D E) illegal inflation of financial projections 93) What is the best definition of goodwill? 93) A) Value associated with benefits from environmental programs B) Premiums paid for acquisition C) Excess of current assets over liabilities D) Value attached to the firm's reputation E) Excess of assets over liabilities 94) If an initial stock issuance is at or under $1 million, what is the average total cost paid to lawyers, accountants and underwriters? 94) A) percent B) 10 percent C) percent D) 25 percent E) 40 percent 95) R&D employees and managers perform all of the following tasks except 95) A) alternating products to particular tastes and specifications B) researching resource availability C) adapting processes to local markets D) transferring complex technology E) adjusting process to local raw materials 96) Which of the following is not a major approach to R&D? 96) A) To be a pioneer B) To be an innovative imitator C) To be a low-cost producer by mass-producing products similar to but less expensive than products recently introduced D) All of the above are major approaches to R&D E) To be a liquidator 97) As competition increases and Arab companies engage in alliance and merger and acquisition activities, is expected take off in the Arab world 97) A) R&D B) EPS/EBIT analysis C) ANF D) all of the above E) MIS 98) A good information system can allow a firm to 98) A) reduce costs B) increase customers C) increase productivity D) gain competitive advantage E) reduce turnover ESSAY Write your answer in the space provided or on a separate sheet of paper 99) Name five examples of marketing decisions that may require policies 100) Although there are many marketing variables that impact the success or failure of strategy-implementation efforts, two variables are central to the process What are these variables? Discuss why they are so important 101) What are the marketing-mix component factors? Give some examples of each 102) What are the five steps required for effective product positioning? Give an example of a productpositioning matrix for an organization of your choice 103) Name five examples of finance/accounting decisions that may require policies 104) Describe the considerations for EPS/EBIT analysis 105) Explain how to perform a projected financial analysis 106) Identify and describe three approaches for determining a business' worth 107) Explain the important issues involved in deciding whether a private firm should consider becoming a public firm Include cost estimates, advantages and disadvantages 108) Discuss the guidelines to be used to determine whether a firm should conduct R&D internally or externally 109) List and describe the three major R&D approaches for implementing strategies 1) FALSE 2) FALSE 3) FALSE 4) FALSE 5) TRUE 6) TRUE 7) TRUE 8) FALSE 9) FALSE 10) TRUE 11) TRUE 12) TRUE 13) FALSE 14) FALSE 15) FALSE 16) TRUE 17) TRUE 18) TRUE 19) TRUE 20) TRUE 21) FALSE 22) FALSE 23) TRUE 24) FALSE 25) TRUE 26) TRUE 27) FALSE 28) TRUE 29) FALSE 30) FALSE 31) FALSE 32) TRUE 33) FALSE 34) FALSE 35) FALSE 36) FALSE 37) FALSE 38) FALSE 39) TRUE 40) FALSE 41) FALSE 42) FALSE 43) TRUE 44) TRUE 45) TRUE 46) TRUE 47) TRUE 48) TRUE 49) FALSE 50) TRUE 51) B 52) E 53) E 54) E 55) C 56) E 57) B 58) A 59) C 60) E 61) D 62) B 63) B 64) D 65) B 66) A 67) A 68) B 69) C 70) E 71) E 72) D 73) C 74) D 75) D 76) E 77) D 78) D 79) B 80) C 81) A 82) B 83) C 84) B 85) A 86) B 87) E 88) A 89) A 90) D 91) E 92) C 93) B 94) D 95) B 96) E 97) A 98) A 99) Student answers may vary Possible answers include 1) to use exclusive dealerships or multiple channels of distribution; 2) to use heavy, light, or no TV advertising; 3) to limit (or not) the share of business done with a single customer; 4) to be a price leader or a price follower; 5) to offer a complete or limited warranty; 6) to reward salespeople based on straight salary, straight commission, or a combination salary/commission; 7) to advertise online or not 100) Two variables of central importance to strategy implementation are market segmentation and product positioning Segmentation is important because it is a key to matching supply and demand, which is one of the thorniest problems in customer service Segmentation often reveals that large, random fluctuations in demand actually consist of several small, predictable and manageable patterns Product positioning is important because it is a severe mistake to assume the firm knows what customers want and expect Many firms have become successful by filling the gap between what customers and producers see as good service What the customer believes is good service is paramount, not what the producer believes service should be Positioning entails developing schematic representations that reflect how a firm's products or services compare to competitors' on dimensions most important to success in the industry 101) The marketing-mix component factors consist of product, place, promotion and price Please refer to Table 9-1 on page 294 for examples of each factor 102) There are five steps required for effective product positioning; as follows 1) select key criteria that effectively differentiate products or services in the industry; 2) diagram a two-dimensional productpositioning map with specified criteria on each axis; 3) plot major competitors' products or services in the resultant four-quadrant matrix; 4) identify areas in the positioning map where the company's products or services could be most competitive in the given target market and look for niches; and 5) develop a marketing plan to position the company's products or services appropriately Student examples of product-positioning matrices will vary 103) Possible answers include 1) to raise capital with short-term debt, long-term debt, preferred stock, or common stock; 2) to lease or buy fixed assets; 3) to determine an appropriate dividend payout ratio; 4) to use LIFO, FIFO, or a market-value accounting approach; 5) to extend the time of accounts receivable; 6) to establish a certain percentage discount on accounts within a specified period of time; 7) to determine the amount of cash that should be kept on hand 104) There are four considerations for EPS/EBIT analysis 1) profit levels may be higher for stock or debt alternatives when EPS levels are lower; 2) flexibility; 3) dilution of ownership can be an overriding concern in closely held corporations, in which stock issuances affect the decision-making power of majority stockholders; and 4) timing in relation to movements of stock prices, interest rates and bond prices becomes important 105) The steps to performing a projected financial analysis are as follows 1) prepare the projected income statement before the balance sheet, and start by forecasting sales as accurately as possible; 2) use the percentage-of-sales method to project CGS and the expense items in the income statement; 3) calculate the projected net income; 4) subtract from the net income any dividends to be paid and add the remaining net income to Retained Earnings; 5) project the balance sheet items, beginning with retained earnings and then forecasting stockholders' equity, long-term liabilities, total liabilities, total assets, fixed assets and current assets – in that order; and 6) list comments on the projected statements 106) The three approaches for determining a business' worth are what a firm owns, what a firm earns and what a firm will bring in the market Please see the discussion on page 311 under "Evaluating the Worth of a Business" for descriptions of each approach 107) Please refer to the entire discussion on page 315 under Deciding Whether to Go Public for this answer 108) First, if the rate of technological progress is slow, the rate of market growth is moderate, and there are significant barriers to possible new entrants, then in-house R&D is the preferred solution Second, if technology is changing rapidly, and the market is growing slowly, then a major in-house effort in R&D may be risky Third, if technology is changing slowly but the market is growing quickly, there generally is not enough time for in-house development Finally, if both technological progress and market growth are fast, R&D expertise should be obtained through acquisition of a well-established firm in the industry 109) The three major R&D approaches for implementing strategies are 1) to be the first firm to market new technological products; 2) to be an innovative imitator of successful products, thus minimizing the risks and costs of start-up; and 3) to be a low-cost producer by mass-producing products that are similar to but less expensive than products that have been recently introduced See pages 316-317 under R&D Issues for descriptions of each approach ... and profitable use of an organization's resources C) A method for rationing the profits from the past year D) A tool for forecasting future profits E) A method for determining who should receive... If the rate of market growth and technical progress is fast and there are few barriers to possible new entrants, then in-house R& D is the preferred solution 42) 43) According to research, the... to offer a complete or limited warranty D) to use exclusive dealerships or multiple channels of distribution E) to be a market leader or follower 54) Which two variables are of central importance