MEM Strategic Management 4 — Questions and Answers
Question 1: A company faces a 'prisoner's dilemma' in competitive strategy when:
- It must choose between two equally profitable product lines
- Both firms would be better off cooperating, but self-interest drives them to compete destructively (Correct answer)
- The government mandates antitrust compliance across the industry
- It must decide whether to exit a declining market segment
Correct answer: Both firms would be better off cooperating, but self-interest drives them to compete destructively
The prisoner's dilemma illustrates how rational self-interest leads competing firms to mutually destructive outcomes when cooperation would benefit both.
Question 2: The primary purpose of scenario planning in strategic management is to:
- Produce a single most-likely forecast of future market conditions
- Prepare the organization to respond to multiple plausible future environments (Correct answer)
- Allocate annual capital budgets across business units
- Evaluate individual employee performance against strategic objectives
Correct answer: Prepare the organization to respond to multiple plausible future environments
Scenario planning develops distinct narratives of possible futures so that strategies remain robust across a range of conditions, not just the expected case.
Question 3: In the BCG Growth-Share Matrix, a business unit classified as a 'dog' is characterized by:
- High market growth and high relative market share
- Low market growth and low relative market share (Correct answer)
- High market growth and low relative market share
- Low market growth and high relative market share
Correct answer: Low market growth and low relative market share
Dogs have low growth and low share, generating minimal cash and offering little strategic opportunity, making divestiture a common recommendation.
Question 4: Strategic leadership in engineering firms requires balancing 'exploitation' and 'exploration.' These terms respectively refer to:
- Market expansion and product development
- Improving existing operations and pursuing new innovations (Correct answer)
- Financial auditing and business development activities
- Customer retention and new customer acquisition
Correct answer: Improving existing operations and pursuing new innovations
Exploitation refines and extends current competencies for near-term performance, while exploration develops new capabilities for future competitiveness.
Question 5: Which of the following BEST describes a 'corporate parenting advantage'?
- A parent company's ability to add more value to its business units than any other owner could (Correct answer)
- A holding company's tax structure that minimizes intercompany transfer pricing
- The legal protections a parent firm provides to subsidiaries in litigation
- A conglomerate's diversified revenue streams that reduce earnings volatility
Correct answer: A parent company's ability to add more value to its business units than any other owner could
Corporate parenting advantage exists when headquarters adds more value to its portfolio businesses—through resources, capabilities, or coordination—than alternative owners would.
Question 6: An engineering firm's 'dynamic capabilities' are best described as its ability to:
- Execute standard operating procedures efficiently at scale
- Sense opportunities, seize them, and reconfigure resources as the environment changes (Correct answer)
- Maintain low overhead costs during economic downturns
- Negotiate favorable long-term contracts with key suppliers
Correct answer: Sense opportunities, seize them, and reconfigure resources as the environment changes
Dynamic capabilities, as defined by Teece, Pisano, and Shuen, enable firms to build, integrate, and reconfigure competencies to address rapidly changing environments.
Question 7: A competitor analysis using a 'war gaming' approach differs from standard competitor profiling because it:
- Relies exclusively on publicly available financial disclosures
- Simulates how competitors will react to your strategic moves in real time (Correct answer)
- Focuses on supply chain vulnerability rather than market position
- Uses regression analysis to predict competitor pricing
Correct answer: Simulates how competitors will react to your strategic moves in real time
War gaming role-plays competitor responses to test strategic decisions under realistic adversarial conditions before committing resources.
MEM Strategic Management 4
A company faces a 'prisoner's dilemma' in competitive strategy when: