BBM Degree in Business Management Strategy 4 — Questions and Answers
Question 1: A company experiencing 'strategic drift' is characterized by:
- Rapidly pivoting its strategy in response to every competitor move
- Incrementally adapting its strategy in ways that fail to keep pace with environmental change (Correct answer)
- Deliberately entering adjacent markets to reduce reliance on one industry
- Overextending its resources through too many simultaneous acquisitions
Correct answer: Incrementally adapting its strategy in ways that fail to keep pace with environmental change
Strategic drift occurs when a company's strategy gradually falls out of alignment with its environment due to slow, incremental changes that collectively lag behind external shifts.
Question 2: The primary purpose of a balanced scorecard in strategic management is to:
- Evaluate employee performance for annual bonuses
- Translate strategy into a set of financial and non-financial performance measures (Correct answer)
- Balance the firm's short-term and long-term debt obligations
- Allocate budgets equally across all business units
Correct answer: Translate strategy into a set of financial and non-financial performance measures
The balanced scorecard, developed by Kaplan and Norton, aligns organizational activities with strategy by measuring performance across financial, customer, internal process, and learning perspectives.
Question 3: Which of the following is an example of related diversification?
- An airline company acquiring a hotel chain
- A software company acquiring a cybersecurity firm (Correct answer)
- A food manufacturer acquiring a clothing retailer
- A bank purchasing a steel manufacturing company
Correct answer: A software company acquiring a cybersecurity firm
Related diversification involves entering industries that share strategic fit with existing businesses, such as similar technologies, customers, or distribution channels.
Question 4: In strategic management, 'emergent strategy' differs from 'deliberate strategy' in that it:
- Is developed exclusively by top management through formal planning
- Arises from patterns in decisions made without prior intentions or formal plans (Correct answer)
- Requires significant capital investment before implementation
- Is always more successful than planned strategic approaches
Correct answer: Arises from patterns in decisions made without prior intentions or formal plans
Emergent strategies, as described by Mintzberg, develop organically from organizational actions and decisions rather than from formal strategic planning processes.
Question 5: A company with a high degree of vertical integration would most likely:
- Outsource most of its production to third-party manufacturers
- Own and control multiple stages of its supply chain from raw materials to distribution (Correct answer)
- Focus solely on one product category across multiple markets
- Expand internationally through licensing agreements
Correct answer: Own and control multiple stages of its supply chain from raw materials to distribution
Vertical integration means owning multiple links in the supply chain (upstream suppliers and/or downstream distributors), reducing dependence on external parties.
Question 6: Which of the following best represents a 'turnaround strategy'?
- Expanding into new markets to accelerate growth
- Implementing cost cuts and divestitures to restore a declining firm's profitability (Correct answer)
- Acquiring competitors to consolidate market share
- Investing heavily in R&D to develop breakthrough products
Correct answer: Implementing cost cuts and divestitures to restore a declining firm's profitability
A turnaround strategy aims to reverse a company's declining performance through actions such as cost reduction, asset divestiture, and refocusing on core profitable activities.
Question 7: The 'value chain' concept, introduced by Michael Porter, is used to:
- Map the flow of goods through a company's distribution network
- Identify the activities through which a firm creates value and gains competitive advantage (Correct answer)
- Calculate the net present value of strategic investments
- Assess the social value a company contributes to its community
Correct answer: Identify the activities through which a firm creates value and gains competitive advantage
Porter's value chain disaggregates a firm into primary activities (inbound logistics, operations, outbound logistics, marketing, service) and support activities to identify sources of competitive advantage.
BBM Degree in Business Management Strategy 4
A company experiencing 'strategic drift' is characterized by: