Cuestionario: Strategic Management Fundamentals — 24 preguntas

1. What best describes strategy in a firm?

A. A legal framework for responding to regulation and compliance

B. A short-term budget designed to reduce immediate expenses

C. A set of daily tasks used to keep routine operations running

D. A long-term direction that shows where the firm wants to go and how it plans to succeed

Answer: (D)

Explicación

Strategy is the firm’s long-term direction, combining where it wants to go with how it plans to succeed over time. Daily routine tasks are operational decisions, not strategy.

2. Why is strategy important for a firm?

A. It replaces the need for all operational decisions

B. It guides major choices that affect future performance and market standing

C. It focuses mainly on technical problem-solving in the short term

D. It ensures competitors cannot imitate any business activity

Answer: (B)

Explicación

Strategy matters because it shapes major multi-year choices that influence future performance and position in the market. It is not the same as short-term technical problem-solving.

3. How does operational effectiveness differ from strategy?

A. It defines the company’s overall scope across markets and businesses

B. It selects the right goals for the organization to pursue

C. It improves how activities are performed today without changing long-term positioning

D. It determines which industries the firm should enter next

Answer: (C)

Explicación

Operational effectiveness is about doing the same activities better in the present, while strategy is about long-term positioning. It can improve performance, but it does not by itself define future competitive position.

4. Which statement best captures the relationship between operational effectiveness and sustainable advantage?

A. Operational improvements can be copied quickly, so they usually do not create lasting advantage alone

B. Operational improvements automatically become a long-term barrier to imitation

C. Operational effectiveness mainly refers to choosing the right strategic goals

D. Operational effectiveness is the same thing as competitive parity

Answer: (A)

Explicación

Competitors can often copy operational improvements quickly, so operational effectiveness alone rarely creates sustainable competitive advantage. The other options confuse operations with strategy or competitive outcomes.

5. What is competitive advantage?

A. A short-term boost in sales caused by lower prices

B. Superior firm performance that persists over time relative to rivals in the same market

C. A situation where all firms in a market perform at the same level

D. Any improvement in productivity inside the firm regardless of competitors

Answer: (B)

Explicación

Competitive advantage is relative and enduring performance above rivals in the same market. It is not simply internal productivity or a temporary sales increase.

6. Which strategic level explains how a firm competes in a specific market?

A. Corporate strategy

B. Business strategy

C. Operational scheduling

D. Functional strategy

Answer: (B)

Explicación

Business strategy is the level concerned with competition in a specific market. Corporate strategy sets overall scope, while functional strategy supports the higher-level choices.

7. Which element is most closely associated with a strategy statement?

A. The daily work schedule for employees

B. The number of suppliers used in procurement

C. The legal status of the business entity

D. The firm’s goals, scope, and capabilities

Answer: (D)

Explicación

A strategy statement links what the organization wants to achieve, where it will compete, and what capabilities it relies on. It is broader than day-to-day scheduling or procurement choices.

8. What does corporate strategy primarily define?

A. How a finance department manages daily expenses

B. The overall scope of the firm across businesses and markets

C. How a single product competes in one local market

D. How employees complete routine tasks more efficiently

Answer: (B)

Explicación

Corporate strategy defines the firm’s overall scope, including the businesses and markets it chooses to operate in. Competition within one market belongs to business strategy.

9. What is the main purpose of external analysis?

A. To evaluate only the firm’s internal accounting controls

B. To determine employee promotion criteria

C. To study the environment and competitors in order to identify opportunities and threats

D. To replace strategic planning with daily monitoring

Answer: (C)

Explicación

External analysis examines the environment and competitors to reveal opportunities and threats that shape strategy. It is not limited to internal controls or staffing decisions.

10. What are strategic groups?

A. Departments inside a company that report to the same manager

B. Markets where all competitors use identical pricing

C. Firms that operate in unrelated industries but share financing sources

D. Clusters of firms in the same industry that pursue similar strategies

Answer: (D)

Explicación

Strategic groups are sets of firms within an industry that follow similar strategic approaches, which helps explain performance differences. They are not internal departments or unrelated firms.

11. What does PESTEL analysis examine?

A. Profit, Expansion, Strategy, Technology, Export, and Logistics

B. Product, Entry, Supply, Trade, Exchange, and Location factors

C. Price, Efficiency, Structure, Timing, Equity, and Labor issues

D. Political, Economic, Social, Technological, Environmental, and Legal forces

Answer: (D)

Explicación

PESTEL is a framework for scanning six major external force categories: political, economic, social, technological, environmental, and legal. It is used to anticipate changes that may affect strategy.

12. What is the Strategy Clock used for?

A. Positioning firms by price and perceived value to identify competitive positions and risks

B. Classifying industries by legal structure and ownership

C. Measuring employee satisfaction across departments

D. Ranking firms by total asset size and debt ratio

Answer: (A)

Explicación

The Strategy Clock links price and perceived value to show where a firm sits competitively, including risks such as being stuck in the middle. It is a positioning model, not a financial ranking tool.

13. What does the Resource-Based View argue is the main source of competitive advantage?

A. Industry growth rates alone

B. Lower prices than every competitor

C. A firm’s internal resources and capabilities

D. Government regulation in the market

Answer: (C)

Explicación

RBV says advantage mainly comes from what the firm has and can do internally, rather than from industry forces alone. Resources and capabilities are therefore central.

14. According to VRIO, what must a resource also have after being valuable and rare to support sustained advantage?

A. It must create immediate profits in the first year

B. It must be larger than competitors’ resources in every case

C. It must be located in a foreign market

D. It must be hard to imitate and the firm must be organized to capture value

Answer: (D)

Explicación

VRIO asks whether a resource is valuable, rare, costly to imitate, and organized for value capture. Without imitability barriers and organization, advantage is unlikely to last.

15. What does benchmarking do?

A. Matches a firm’s prices to government standards

B. Replaces strategic analysis with employee training

C. Compares a firm’s performance with competitors or best-in-class organizations to identify gaps

D. Measures only internal production volumes

Answer: (C)

Explicación

Benchmarking reveals performance gaps by comparing the firm with rivals or best-in-class performers. This helps identify improvement opportunities.

16. What does the TOWS matrix mainly do?

A. Ranks products by market share and growth

B. Measures internal capabilities without external input

C. Identifies only threats and ignores strengths

D. Turns SWOT factors into possible strategic options for decision-making

Answer: (D)

Explicación

TOWS goes beyond describing strengths, weaknesses, opportunities, and threats by using them to generate strategic options. SWOT itself is more diagnostic.

17. What does strategic management process focus on at the corporate level?

A. Only the selection of advertising messages

B. Long-term choices about where to compete and how to organize activities to create value

C. Daily production scheduling and task allocation

D. Only the financial audit of subsidiaries

Answer: (B)

Explicación

The strategic management process is about long-term corporate choices on where to compete and how to organize value-creating activities. It is broader than scheduling or auditing.

18. What is a strategic business unit (SBU)?

A. A single employee role responsible for one task

B. A temporary project team with no budget

C. A legal contract between suppliers and customers

D. A semi-autonomous business entity managed with its own objectives, resources, and competitive scope

Answer: (D)

Explicación

An SBU is a semi-autonomous unit with its own goals, resources, and competitive scope. It is not just a team or contract.

19. What is the main risk of a hybrid strategy or being stuck in the middle?

A. The firm may fail to deliver a clear cost or differentiation position

B. The firm will always achieve the lowest costs in the market

C. The firm will automatically gain monopoly power

D. The firm cannot offer any product variety

Answer: (A)

Explicación

A hybrid position can be risky when the firm does not clearly stand out on cost or differentiation, leaving it stuck in the middle. That weak positioning is the central concern.

20. What is economies of scope?

A. A legal benefit obtained through international expansion

B. A market share bonus created by advertising alone

C. Cost advantages from making one product in very large volume only

D. Cost advantages from producing multiple goods or services together by sharing resources and capabilities

Answer: (D)

Explicación

Economies of scope come from shared inputs or capabilities across different activities, making joint production cheaper than separate production. That differs from economies of scale.

21. What is the key logic behind outsourcing?

A. Increasing internal supervision of all processes

B. Expanding control over every upstream and downstream stage

C. Delegating certain activities to external suppliers instead of performing them internally

D. Combining all business units into a single hierarchy

Answer: (C)

Explicación

Outsourcing means using external suppliers to perform activities the firm does not do internally. It often improves flexibility but can reduce control.

22. When can the corporate parent create value?

A. When it adds more bureaucracy to every business unit

B. When it sets strategic direction, enables cooperation among SBUs, and supports weak performance

C. When it hides the financial results of units from managers

D. When it subsidizes failing units at the expense of stronger ones

Answer: (B)

Explicación

The corporate parent creates value by clarifying vision, encouraging cooperation, centralizing useful support, and correcting weak performance. Excess bureaucracy or poor subsidies can destroy value instead.

23. In the BCG matrix, which type of business unit has high growth and high relative market share?

A. A Question Mark

B. A Star

C. A Dog

D. A Cash Cow

Answer: (B)

Explicación

Stars combine high market growth with high relative market share, so they usually need major investment but can generate strong future returns. Cash Cows have low growth, not high growth.

24. What is the recommended action for a Question Mark in the BCG matrix?

A. Increase market share or divest

B. Liquidate immediately in every case

C. Maintain without investing

D. Harvest cash aggressively and ignore growth

Answer: (A)

Explicación

Question Marks are high-growth but low-share businesses, so the firm must decide whether to invest to gain share or exit. They are not steady cash generators like Cash Cows.