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MGT603 Strategic Management Final Term Solved Paper 2010 - Strategic Management

MGT603 Final Term Solved Paper 2010 - Strategic anagement Spring 2010

Solved by vuZs Team
Aniqa Malik , Zubair Hussain , Eemaan Khan & Mehreen Humayun
www.vuzs.net
Time: 120 min
 Marks = 69

 

MGT603 - Strategic Management - Q. No. 1    ( M - 1 )    .

Which method of determining a firm’s net worth can be numerically expressed as: Market price of the firm’s stock* Average net income for the past five years Annual earnings per share

 

Sum of equity and earnings method

Price-earnings ratio method

Long-term asset method

Outstanding shares method

Price-earnings ratio method: To use this method, divide the market price of the firm's common stock by the annual earnings per share and multiply this number by the firm's average net income for the past five years.

 

MGT603 - Strategic Management - Q. No. 2    ( M - 1 )    .

 Which of the following is an example of a narrow mission?

 

We sell packaged pineapples

The firm deals in beverages

Stationery is our product

Company manufactures food items

 Narrow mission also identifies our mission but it restrict in terms of:

1. Product and services offered

2. Technology used

3. Market served

4. Opportunity of growth 

 

MGT603 - Strategic Management - Q. No. 3    ( M - 1 )    .

 Which of the following business actions is NOT considered to be unethical?

 

Poor product or service safety

Using non-union labor in a union shop

Misleading advertising

Too expensive products 

Some business actions always considered to be unethical include misleading advertising or labeling, causing environmental harm, poor product or service safety, padding expense accounts, insider trading, dumping banned or flawed products. In foreign markets, lack of equal opportunities for women and minorities, overpricing, hostile takeovers, moving jobs overseas, and using nonunion labor in a union shop.

    

MGT603 - Strategic Management - Q. No. 4    ( M - 1 )    .

Political variables have a significant effect on which one of the following?

 

Formulation and implementation of strategy

Formulation and evaluation of a strategy

Implementation and evaluation of a strategy

Formulation, implementation and evaluation of a strategy

Impact of political variables: Formulation of Strategies, Implementation of Strategies. 

 

MGT603 - Strategic Management - Q. No. 5    ( M - 1 )    .

 Which of the following is one of the Political, Governmental & Legal factors?

 

Ethical concerns

Traffic congestion

Lobbying activities

Average level of education

  Political, Governmental, and Legal Forces

Key opportunities & key threats:

• Antitrust legislation (Microsoft)

• Tax rates

• Lobbying efforts

• Patent laws

 

MGT603 - Strategic Management - Q. No. 6    ( M - 1 )    .

The XYZ Company wants to know the major favorable situations that exist in its environment. Essentially, the company wants to gain understanding of what?

 

Strengths

Weaknesses

Threats

Opportunities

   

MGT603 - Strategic Management - Q. No. 7    ( M - 1 )    .

  Keeping strategies secret from employees and stakeholders can do all of the following EXCEPT:

 

Provide competitive advantage to competitors

Hinder employee and stakeholder communication

Reduces employee and stakeholder understanding

Minimize employee and stakeholder commitment

   

MGT603 - Strategic Management - Q. No. 8    ( M - 1 )    .

Sana has spent a day in a session where the future of her company was discussed. The people involved were trying to determine what the role of their company was as the 21st century approaches. Goals were then developed based upon their vision of the company's mission. Sana spent her day on which of the following process?

 

Planning

Organizing

Leading

Controlling

   

MGT603 - Strategic Management - Q. No. 9    ( M - 1 )    .

Opportunity analysis is one of the basic functions of which one of the following?

 

Computer information systems

Marketing

Production/operations

Research and development

There are seven basic functions of marketing:

(1) Customer analysis,

(2) Selling products/services,

(3) Pricing,

(4) Opportunity analysis.

 

MGT603 - Strategic Management - Q. No. 10    ( M - 1 )    .

Which of the following term describes “the merging of two or more businesses at the same level of production in some formal, legal relationship”?

 

Backward integration

Horizontal integration

Market penetration

Market development

Horizontal integration: a term describing the merging of two or more businesses at the same level of production in some formal, legal relationship.

 

MGT603 - Strategic Management - Q. No. 11    ( M - 1 )    .

“Ghulam Nabi, a farmer sells his crops at the local market rather than to a distribution center”. This action of Ghulam Nabi comes under which of the following?

 

Backward integration

Product development

Forward integration

Horizontal integration

 Forward integration involves gaining ownership or increased control over distributors or retailers.

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MGT603 - Strategic Management - Q. No. 12    ( M - 1 )    .

Where usage rate of present customers of the company can be increased significantly and the current markets are not saturated, which strategy would be effective for the company to follow?

 

Market Penetration

Product Development

Market Development

Retrenchment

Guidelines when market penetration may be an especially effective strategy are:

  • Current markets not saturated
  • Usage rate of present customers can be increased significantly
  • Market shares of competitors declining while total industry sales increasing 

 

MGT603 - Strategic Management - Q. No. 13    ( M - 1 )    .

Product development involves going in the direction of which one of the following?


Present products to present markets

Present products to new markets

   New products to present markets

      ? New products to new markets

Product development: New products to present markets.

 

MGT603 - Strategic Management - Q. No. 14    ( M - 1 )    .

All of the following would be considered an Opportunity to a business EXCEPT which one of the following?

 

Removal of international trade barriers

Emergence of unfulfilled customer need

Emergence of substitute products

Loosening of regulations

   

MGT603 - Strategic Management - Q. No. 15    ( M - 1 )    .

A & Ammar is the sole manufacturer of leather goods in Pakistan. This year, government has lowered tax rates for this industry. There is a possibility that new companies will enter the market to avail this opportunity. Lowering the tax rates will present which of the following to A & Ammar?

 

 Strength

 Weakness

 Opportunity

 Threat

   

MGT603 - Strategic Management - Q. No. 16    ( M - 1 )    .

Which of the following are the two internal dimensions represented on the axes of the SPACE Matrix?

 

Environmental stability and industry strength

Industry strength and competitive advantage

Competitive advantage and financial strength

Financial strength and environmental stability

SPACE Matrix represents two internal dimensions financial strength [FS] and competitive advantage.

 

MGT603 - Strategic Management - Q. No. 17    ( M - 1 )    .

ABC Corporation can have competitive advantage over its competitor by taking all of the following actions EXCEPT:

 

By increasing product quality

By having debt to equity ratio=1

By altering product life cycle

By increasing customer base

   

MGT603 - Strategic Management - Q. No. 18    ( M - 1 )    .

 All of the following are the limitations of BCG Matrix EXCEPT:

 

It is one-dimensional to view every business as a star, cash cow, dog or question mark

BCG can not be developed if a firm has at least less than three years data

The businesses that fall in the centre of BCG matrix can not be classified

Other variables such as size of market and competitive advantages are not considered

Limitations of BCG Matrix:

 1. Viewing every business as a star, cash cow, dog, or question mark is overly simplistic.

2. Many businesses fall right in the middle of the BCG matrix and thus are not easily classified.

3. The BCG matrix does not reflect whether or not various divisions or their industries are growing over time.

4. Other variables besides relative market share position and industry growth rate in sales are important in making strategic decisions about various divisions

 

MGT603 - Strategic Management - Q. No. 19    ( M - 1 )    .

 According to the Grand Strategy Matrix, which strategy is recommended for a firm with rapid market growth and a strong competitive position?

 

  ? Market penetration

  ? Conglomerate diversification

  ? Joint venture

  ? Retrenchment

 The quadrant one of the Grand Strategy Matrix is meant for those firms which are in a strong competitive position and flourishing with rapid market growth. Concentration on current markets reveals the adoption of strategies such as market penetration and market development and likewise concentration on current products calls for adoption of product development strategy. 

 

MGT603 - Strategic Management - Q. No. 20    ( M - 1 )    .

"The business has a strong competitive position but is in a slow-growth industry. Further, the business typically has high cash flow levels and limited internal growth needs.” The statement refers which of the following?

 

The firm falling in Quadrant I of Grand Strategy Matrix

The firm falling in Quadrant II of Grand Strategy Matrix

The firm falling in Quadrant III of Grand Strategy Matrix

The firm falling in Quadrant IV of Grand Strategy Matrix

Slow market growth: Quadrant IV businesses have a strong competitive position but are in a slow-growth industry.

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 MGT603 - Strategic Management - Q. No. 21    ( M - 1 )    .

Which of the following is a Functional level objective?

 

Achieving return on investment of at least 15%

Aiming to achieve a market share of 10%

Attaining operating profit of over Rs.10 million

Increase earnings per share by at least 10% every

Examples of functional marketing objectives” might include: We aim to achieve a market share of 10% 

 

MGT603 - Strategic Management - Q. No. 22    ( M - 1 )    .

Which one of the followings is NOT a major factor that commonly forbids effective resource allocation?  

 

Organizational politics

      ? Vague strategy targets

Long run financial criteria

Lack of sufficient knowledge

A number of factors commonly prohibit effective resource allocation, including an overprotection of resources, too great an emphasis on short-run financial criteria, organizational politics, vague strategy targets, a reluctance to take risks, and a lack of sufficient knowledge.

 

MGT603 - Strategic Management - Q. No. 23    ( M - 1 )    .

  “Holding a meeting at which conflicting parties present their views and work through the differences”. The statement best describes which of the conflict resolving mood?

 

Confrontation

Resistance

Diffusion

Avoidance

   

MGT603 - Strategic Management - Q. No. 24    ( M - 1 )    .

 Restructuring is also known as:

 

Up-sizing

Delayering

Diversifying

Integrating

Restructuring—also called downsizing, rightsizing, or delayering 

   

MGT603 - Strategic Management - Q. No. 25    ( M - 1 )    .

  Which term is most often concerned primarily with shareholder well-being rather than employee well-being?

 

Benchmarking

Reengineering

E-engineering

Restructuring

Restructuring is concerned primarily with shareholder well-being rather than employee well-being. 

 

MGT603 - Strategic Management - Q. No. 26    ( M - 1 )    .

 “All the employees of Operations department have received 15 % of increased profits over a historical standard or targeted profits.” Which of the following best describes the statement?

 

Profit sharing

Bonus

Gain sharing

Piece-work plan

Gain Sharing: To drive performance of an organization by promoting awareness, alignment, teamwork, communication and involvement. The plan commonly applies to a single facility, site, or stand-alone organization. Gains are generated only by improved performance over a predetermined base level of performance. Gain sharing is viewed as a pay-for-performance initiative.

 

MGT603 - Strategic Management - Q. No. 27    ( M - 1 )    .

What is the most widely used technique for determining the best combination of debt and stock?

 

Earnings per share

Return on stockholders' equity

Debt-to-equity ratio

Capital budgeting

Earnings per Share/Earnings before Interest and Taxes (EPS/EBIT) analysis 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. 

   

MGT603 - Strategic Management - Q. No. 28    ( M - 1 )    .

Which one of the following statement is TRUE about EBIT (Earnings Before Interest and Taxes)?

 

It is calculated as revenue minus depreciation and interest expenses

   It is calculated as revenue minus expenses excluding tax and interest

It is calculated as revenue minus cost of goods sold and sales taxes

It is calculated as revenues minus selling and administrative expenses

EBIT An indicator of a company's profitability, calculated as revenue minus expenses, excluding tax and interest.

 

MGT603 - Strategic Management - Q. No. 29    ( M - 1 )    .

 Which alternative becomes more attractive financing technique when cost of capital is high?

 

Debt financing

Combination financing

Raising equity

Borrowing

   

MGT603 - Strategic Management - Q. No. 30    ( M - 1 )    .

 Integrative, intensive, and diversification strategies are often implemented by which one of the followings?

 

Liquidating firms

Acquiring firms

Venturing firms

Small firms

Evaluating the worth of a business is central to strategy implementation because Integrative, intensive, and diversification strategies are often implemented by acquiring other firms.

 

MGT603 - Strategic Management - Q. No. 31    ( M - 1 )    .

 All of the following tasks are performed by R&D employees and managers EXCEPT:

 

Transferring complex technology

Adapting processes to local markets

Adjusting process to local raw materials

Make sure the availability of resource

 R&D employees and managers perform tasks that include

1. Transferring complex technology,

2. Adjusting processes to local raw materials,

3. Adapting processes to local markets,

4. Altering products to particular tastes and specifications.

 

MGT603 - Strategic Management - Q. No. 32    ( M - 1 )    .

 Which one of the following is not a rivalry determinant of Porter’s model?

 

Differentiation of inputs

Industry growth

Diversity of competitors

Switching costs

Reference Amna Khan

Rivalry Determinants
• Industry growth
• Fixed (or storage) costs/value added
• Intermittent over capacity
• Product differences
• Brand identity
• Switching costs
• Diversity of competitors

 MGT603 - Strategic Management - Q. No. 33    ( M - 1 )    .

 Which one of the following is NOT considered as a difficulty in evaluation of strategies?

 

Increase in environment’s complexity

Difficulty predicting future with accuracy

Decreasing number of variables

Rate of obsolescence of plans

Difficulty in strategy evaluation:

1. Increase in environment’s complexity

2. Difficulty predicting future with accuracy

3. Increasing number of variables

4. Rate of obsolescence of plans

    

MGT603 - Strategic Management - Q. No. 34    ( M - 1 )    .

 Strategy evaluation is based on which of the following?

 

Quantitative and empirical criteria

Empirical and qualitative criteria

Qualitative and objective criteria

Qualitative and quantitative criteria

Strategy evaluation is based on both quantitative and qualitative criteria.

 

MGT603 - Strategic Management - Q. No. 35    ( M - 1 )    .

What is typical problem associated with using quantitative criteria for evaluating strategies?

 

Most qualitative criteria are geared to long-term objectives rather than annual objectives

Different accounting methods can provide different results on many quantitative criteria

Intuitive judgments are never involved in deriving quantitative criteria

Qualitative data to be evaluated for measuring performance is often not available

There are some potential problems associated with using quantitative criteria for evaluating strategies. 

First, most quantitative criteria are geared to annual objectives rather than long-term objectives.

Also, different accounting methods can provide different results on many quantitative criteria.

Third, intuitive judgments are almost always involved in deriving quantitative criteria. 

 

MGT603 - Strategic Management - Q. No. 36    ( M - 1 )    .

 A good evaluation system must posses various qualities. Which of the following is not a characteristic of a good strategy evaluation system?

 

Strategy-evaluation activities must be economical

Strategy-evaluation activities should be meaningful

Strategy-evaluation activities should dominate the decisions

Strategy-evaluation activities should provide timely information

Strategy-evaluation activities possess the following:

  • Mustbe economical.
  • Too much information can be just as bad as too little information.
  • Too many controls can do more harm than good.
  • Shouldbe meaningful;
  • They should specifically relate to a firm's objectives.
  • Should provide managers with useful information about tasks.
  • Should providetimely information.

 

MGT603 - Strategic Management - Q. No. 37    ( M - 1 )    .

The product design, packaging, product disposal and corporate rewards should reflect which of the following?

 

Product quality consideration

Union consideration

Environmental consideration

Customer consideration

Product design, manufacturing, transportation, customer use, packaging, product disposal, and corporate rewards and sanctions should reflect environmental considerations.

 

MGT603 - Strategic Management - Q. No. 38    ( M - 1 )    .

 Financial benefits of strategic management include all of the following EXCEPT:

 

Progression in profitability

Improvement in employee productivity

Expansion in the sales of business

Enhancement in productivity

Financial benefits:

  • Improved productivity
  • Improved sales
  • Improved profitability

 

MGT603 - Strategic Management - Q. No. 39    ( M - 1 )    .

 Which one of the following is a reason for NOT choosing profits in BCG matrix than relative market share?

 

It carries less information than just cash flow

It shows where the brand is positioned against competitors

It indicates where it might be likely to go in the future

It shows what type of marketing activities to be performed

The reason for choosing relative market share, rather than just profits, is that it carries more information than just cash flow.

 

MGT603 - Strategic Management - Q. No. 40    ( M - 1 )    .

“A desired future state that the organization attempts to realize”. Identify the term relevant to the given statement.

 

Goal

Strategy

Policy

Procedure

A goal is a desired future state that the organization attempts to realize.

 

MGT603 - Strategic Management - Q. No. 41    ( M - 1 )    .

 Which of the following statements best defines “stage 1” of the strategy-formulation framework?

 

It summarizes the basic input information needed to formulate strategies

It focuses on generating feasible alternative strategies

It involves a single technique

It is based on assumptions

Input Stage, Stage 1 summarizes the basic input information needed to formulate strategies. 

  

MGT603 - Strategic Management - Q. No. 42    ( M - 1 )    .

 What type of strategies would you recommend when a firm’s SPACE Matrix directional vector has the coordinates (+1, +5)?

 

Aggressive

Conservative

Competitive

Defensive

    

MGT603 - Strategic Management - Q. No. 43    ( M - 1 )    .

  “Establishing annual objectives” refers to which of the following activities?

 

It is a top-level activity

It is a centralized activity

It is a decentralized activity

It is a centralized-decentralized activity

Establishing annual objectives is a decentralized activity that directly involves all managers in an organization.   

 

MGT603 - Strategic Management - Q. No. 44    ( M - 1 )    .

 Which pay strategy is Not a form of incentive compensation?

 

Bonus system

Hourly wage

Gain sharing

Profit sharing

 

MGT603 - Strategic Management - Q. No. 45    ( M - 1 )    .

 Which of the following is NOT a rule of thumb when using product positioning as a strategy-implementation tool?

 

“Don’t squat between segments”

“Look for the hole or vacant niche”

“Try to serve more than one segment with the same strategy”

“Don’t position yourself in the middle of the map”

Some rules of thumb for using product positioning as a strategy-implementation tool are the following:

Look for the hole or vacant niche.

Don’t squat between segments.

Don’t serve two segments with the same strategy.

Don’t position yourself in the middle of the map.

 

MGT603 - Strategic Management - Q. No. 46    ( M - 1 )    .

 Identify which of the following are mostly based on a firm's internal assessment according to Richard Rumelt.

 

Consistency and consonance

Consonance and advantage

Advantage and feasibility

Feasibility and consistency

 

MGT603 - Strategic Management - Q. No. 47    ( M - 1 )    .

 Which of the following statements is TRUE if success for one organizational department means failure for another department?

 

Strategies may be synergistic

Strategies may be advantageous

Strategies may be inconsonant

Strategies may be inconsistent

If success for one organizational department means failure for another department, then strategies may be inconsistent.

 

MGT603 - Strategic Management - Q. No. 48    ( M - 1 )    .

 All of the following are the qualitative questions for evaluating strategies identified by Seymour Tilles EXCEPT:

 

Is the strategy internally consistent?

Is the strategy having an appropriate return on investment?

Is the strategy consistent with the environment?

Is the strategy appropriate in view of available resources?

Seymour Tilles identified six qualitative questions that are useful in evaluating strategies:

1. Is the strategy internally consistent?

2. Is the strategy consistent with the environment?

3. Is the strategy appropriate in view of available resources? 

 

MGT603 - Strategic Management - Q. No. 49    ( M - 3 )

What is the significance of Production department in an organization?

   

Answer:

 

Production department plays a crucial role for implementing organization strategy. Production-concerned decisions on plant location, plant size, , product design, choice of equipment, size of inventory, inventory control, quality control, cost control, use of standards, shipping and packaging, and technological innovation, job specialization, employee training, equipment and resource utilization. All these factors place an important impact on success and failure of the strategy.

 

MGT603 - Strategic Management - Q. No. 50    ( M - 3 )

Auditors who perform audit can be divided into three groups? Identify and define each of them.

   

Answer:

People who perform audits can be divided into three groups: independent auditors, government auditors, and internal auditors.

Independent auditors: These are certified public accountants (CPAs) that provide their services to organizations for a fee; they examine the financial statements of an organization to determine whether they have been prepared according to generally accepted accounting principles (GAAP) and whether they fairly represent the activities of the firm. Independent auditors use a set of standards called generally accepted auditing standards (GAAS). Public accounting firms often have a consulting arm that provides strategy-evaluation services.

 

Government auditors: Two government agencies, the General Accounting Office (GAO) and the Internal Revenue Service (IRS), employ government auditors responsible for making sure that organizations comply with federal laws, statutes, and policies. GAO and IRS auditors can audit any public or private organization.

 

Internal auditors: These groups of auditors are employees within an organization who are responsible for safeguarding company assets, for assessing the efficiency of company operations, and for ensuring that generally accepted business procedures are practiced.

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MGT603 - Strategic Management - Q. No. 51    ( M - 5 )

Discuss the activities that can help an organization to reduce cost.

   

Answer:

 

Activities that help Organization to reduce cost:

 

Cost Leadership Strategies:

This strategy emphasizes efficiency. By producing high volumes of standardized products, the firm hopes to take advantage of economies of scale and experience curve effects. The product is often a basic no-frills product that is produced at a relatively low cost and made available to a very large customer base. Maintaining this strategy requires a continuous search for cost reductions in all aspects of the business. The associated distribution strategy is to obtain the most extensive distribution possible. Promotional strategy often involves trying to make a virtue out of low cost product features. To be successful, this strategy usually requires a considerable market share advantage or preferential access to raw materials, components, labor, or some other important input. Without one or more of these advantages, the strategy can easily be mimicked by competitors.

 

Successful implementation also benefits from:

 

  • Process engineering skills
  • Products designed for ease of manufacture
  • Sustained access to inexpensive capital
  • Close supervision of labor
  • Tight cost control
  • Incentives based on quantitative targets
  • Market of many price-sensitive buyers
  • Few ways of achieving product differentiation
  • Buyers not sensitive to brand differences
  • Large number of buyers with bargaining power
  • Pursued in conjunction with differentiation
  • Economies or diseconomies of scale
  • Capacity utilization achieved
  • Linkages with suppliers and distributors

 

Just in time (JIT) production approaches have withstood the test of time. JIT significantly reduces the costs of implementing strategies.

MGT603 - Strategic Management - Q. No. 52    ( M - 5 )

 QSPM requires intuitive judgments and educated assumptions. Discuss.

  

 Answer:

 

QSPM

 

The QSPM is not without some limitations.

First, it always requires intuitive judgments and educated assumptions. The ratings and attractiveness scores require judgmental decisions, even though they should be based on objective information.

 

Discussion among strategists, managers, and employees throughout the strategy formulation process, including development of a QSPM, is constructive and improves strategic decisions.

 

Constructive discussion during strategy analysis and choice may arise because of genuine differences of interpretation of information and varying opinions. Another limitation of the QSPM is that it can be only as good as the prerequisite.

 

Limitations:


1. Requires intuitive judgments and educated assumptions. 
2. Only as good as the prerequisite inputs. 
3. Only strategies within a given set are evaluated relative to each other.

 

 

MGT603 - Strategic Management - Q. No. 53    ( M - 5 )

 Finance or accounting plays an important role in successful strategy implementation process. You are required to give some of the examples of finance/accounting decisions that may require policies.

 

Answer:

 

 Finance & Accounting:

 

Some examples of decisions that may require finance/accounting policies are:

1. To raise the amount of capital by issuing shares or obtaining a debt from external parties.

2. To enhance the inventory turn over level

3. To make or buy fixed assets.

4. To extend the time of accounts receivable.

5. To establish a certain percentage discount on accounts within a specified period of time.

6. To determine the amount of cash that should be kept on hand

7. To determine an appropriate dividend payout ratio.

8. To use LIFO, FIFO

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