Certified Management Accountant Strategic Management 2 — Questions and Answers
Question 1: Which of the following best describes a 'blue ocean strategy'?
- Competing aggressively in existing market spaces
- Creating uncontested market space by making competition irrelevant (Correct answer)
- Focusing on cost leadership in mature industries
- Pursuing differentiation in high-competition markets
Correct answer: Creating uncontested market space by making competition irrelevant
Blue ocean strategy, developed by Kim and Mauborgne, involves creating new demand in uncontested market spaces rather than competing in existing 'red oceans.'
Question 2: In a BCG Growth-Share Matrix, a business unit with LOW market share in a HIGH growth market is classified as a:
- Star
- Cash Cow
- Question Mark (Correct answer)
- Dog
Correct answer: Question Mark
Question Marks (also called Problem Children) have low market share in high-growth markets and require significant investment decisions.
Question 3: Which strategy involves a firm producing a wide range of products to reduce risk through diversification into related businesses?
- Horizontal integration
- Vertical integration
- Concentric diversification (Correct answer)
- Conglomerate diversification
Correct answer: Concentric diversification
Concentric diversification involves expanding into businesses related to the firm's core competencies or technology, sharing synergies across product lines.
Question 4: A company that acquires its supplier to control raw material costs is pursuing:
- Forward vertical integration
- Backward vertical integration (Correct answer)
- Horizontal integration
- Concentric diversification
Correct answer: Backward vertical integration
Backward vertical integration occurs when a firm acquires or develops businesses that supply its inputs, moving upstream in the value chain.
Question 5: The concept of 'strategic fit' in corporate strategy refers to:
- Matching executive compensation to firm performance
- Aligning business unit strategies with corporate-level goals and synergies (Correct answer)
- Ensuring products fit customer needs
- Balancing short-term and long-term financial goals
Correct answer: Aligning business unit strategies with corporate-level goals and synergies
Strategic fit describes how well a business unit's activities and resources align with and reinforce the parent company's overall strategy and other units.
Question 6: Which of Porter's generic strategies focuses on serving a narrow market segment with either low cost or differentiation?
- Cost leadership
- Differentiation
- Focus (Correct answer)
- Integration
Correct answer: Focus
Porter's Focus strategy targets a specific market niche, using either cost focus or differentiation focus to serve that segment better than broader competitors.
Question 7: A firm's 'distinctive competence' is best described as:
- A legal patent that prevents competitors from copying products
- A unique strength that competitors cannot easily replicate and that provides competitive advantage (Correct answer)
- The ability to produce goods at the lowest cost in the industry
- Superior distribution channels compared to industry peers
Correct answer: A unique strength that competitors cannot easily replicate and that provides competitive advantage
Distinctive competence refers to activities a firm performs uniquely well relative to rivals, forming the basis for sustainable competitive advantage.
Certified Management Accountant Strategic Management 2
Which of the following best describes a 'blue ocean strategy'?