Test Prep Test Prep Certifications BUSINESS-ENVIRONMENT-AND-CONCEPTS Questions & Answers

• Question 231:

  Anson Industries, a vertically integrated producer and retailer of high end audio visual equipment has mapped out its overall business process as beginning with product development followed by product testing then raw materials purchasing then manufacturing and assembly, and, finally, sales and service. Finance staff at Anson Industries are trying to evaluate the efficiency and the effectiveness of each process and the relationship between each process. This evaluation is often referred to as:

  A. Process improvement.

  B. Continuous quality improvement.

  C. Value chain analysis.

  D. Benchmarking.

  Correct Answer: C

  Choice "c" is correct. The process of developing macro level flow charts of business processes that

  produce products or services and then identifying the value added by each process is referred to as value

  chain analysis.

  Choice "a" is incorrect. Process improvement represents the results of total quality management efforts.

  Choice "b" is incorrect. Continuous quality improvement represents an unswerving focus on customer

  satisfaction and quality, not necessarily the specific steps associated with value chain analysis.

  Choice "d" is incorrect. Benchmarking relates to determining best practices and, often, using those

  practices as standards.

• Question 232:

  A market with many independent firms, low barriers to entry, and product differentiation is best classified as:

  A. A natural monopoly.

  B. Monopolistic competition.

  C. An oligopoly.

  D. Pure competition.

  Correct Answer: B

  Choice "b" is correct. A market with many independent firms, low barriers to entry, and product differentiation is best classified as monopolistic competition. There are few barriers to entry and firms exert some influence over price in such a market. Best examples are brand name consumer products. Choice "a" is incorrect. A natural monopoly exists when economic and technical conditions permit only one efficient supplier. Choice "c" is incorrect. The presence of only one company indicates a monopoly; the presence of a few companies would indicate an oligopoly. Choice "d" is incorrect. Market conditions characterizing pure competition include homogeneous, not differentiated, products.

• Question 233:

  Strategy is a broad term that usually means the selection of overall objectives. Strategic analysis would generally exclude the:

  A. Trends that will affect the entity's markets.

  B. Target product mix and production schedule to be maintained during the year.

  C. Forms of organizational structure that would best serve the entity.

  D. Best ways to invest in research, design, production, distribution, marketing, and administrative activities.

  Correct Answer: B

  Choice "b" is correct. Target product mix and production scheduling would be operational plans.

  Strategy is much more general and conceptual.

  Choices "a", "c", and "d" are incorrect, which are parts of strategy.

• Question 234:

  Which one of the following management considerations is usually addressed first in strategic planning?

  A. Overall goals of the firm.

  B. Organizational structure.

  C. Recent annual budgets.

  D. Being an industry leader.

  Correct Answer: A

  Choice "a" is correct. Setting the overall goals of the firm is usually the starting point in strategic planning. Choice "b" is incorrect. The organizational structure will be partially determined by the goals of the firm. Choice "c" is incorrect. Recent annual budgets may be reviewed as an aid in planning, but they are not the first consideration in strategic planning. In fact, they often are ignored. Choice "d" is incorrect. Being an industry leader may be or become a goal of the firm, but that would be determined during the strategic planning process.

• Question 235:

  All of the following are characteristics of the strategic planning process, except the:

  A. Emphasis on both the short and long run.

  B. Review of the attributes and behavior of the organization's competition.

  C. Analysis and review of departmental budgets.

  D. Analysis of consumer demand.

  Correct Answer: C

  Choice "c" is correct. Analysis and review of departmental budgets is not a part of the strategic planning

  process. Budgets are operational and much more specific than the things that are part of strategic

  planning.

  Choices "a", "b", and "d" are incorrect. All of these are part of the strategic planning process:

  A. Emphasis on both the short and long run.

  B. A review of competition.

  D. Analysis of consumer demand.

• Question 236:

  Strategic planning, as practiced by most modern organizations, includes all of the following, except:

  A. Top-level management participation.

  B. Strategies that will help in achieving long-range goals.

  C. Analysis of the current month's actual variances from budget.

  D. Identification of long-term key variables including external influences.

  Correct Answer: C

  Choice "c" is correct. Analysis of the current month's actual variances from budget is not a part of strategic

  planning. It is too short-term and looks at the past. Strategic planning has a long-term focus and is forward-

  looking.

  Strategic planning includes:

  A. Top-level management participation.

  B. Strategies that will help in achieving long-range goals.

  D. Identification of long-term key variables including external influences.

• Question 237:

  The key difference between strategic goals and tactical goals is that tactical goals are:

  A. Usually attainable.

  B. Developed by top management.

  C. Concerned with issues other than profit.

  D. Short-term in nature.

  Correct Answer: D

  Choice "d" is correct. Tactical goals are the means for attaining strategic goals and are short-term in

  nature. Strategic goals are overall objectives and relatively long-term.

  Choice "a" is incorrect. Both strategic and tactical goals are usually attainable.

  Choice "b" is incorrect. Development of all goals are best accomplished with the involvement of employees

  at all levels.

  Choice "c" is incorrect. Tactical goals are the means for achieving strategic goals. Both are concerned with

  profit and other issues.

• Question 238:

  Which of the following statements regarding competitive advantage is not true?

  A. The two major forms of competitive advantage are product differentiation and cost leadership.

  B. If the manufacturing costs of a firm are less than those of close rivals, then the firm has a competitive market advantage.

  C. Cost leadership advantage may be the best be obtained by a firm when a firm builds market shares or matches the price of its rivals.

  D. Differentiation advantage may best be obtained by a firm when a firm builds market share or increases its price.

  Correct Answer: B

  Choice "b" is the proper choice, as it is not a true statement. Simply because the manufacturing costs of a firm are less than those of close rivals, this does not necessarily mean that the firm has a competitive market advantage. Only if TOTAL costs to a firm are less than those of close rivals will a firm have a competitive market advantage. Choices "a", "c", and "d" are incorrect, as they are all true statements.

• Question 239:

  In which stage of supply chain management will the firm's management turn its attention to consolidation of the various departments that make up operations in order to solve the firm's problems, with a focus on customer service?

  A. Cross-functional teams.

  B. Integrated enterprise.

  C. Extended supply chain.

  D. Supply chain communities.

  Correct Answer: A

  Choice "a" is correct. In the cross-functional teams stage of supply chain management, the firm's management will turn its attention to consolidation of the various departments that make up operations in order to solve the firm's problems, and the focus will be on customer service. Choice "b" is incorrect. In the integrated enterprise stage of supply chain management, the firm's management will move away from simple consolidation of its operations to an internally-integrated supply chain, which all work together towards the main business issue of the cost of customer service. Choice "c" is incorrect. In the extended supply chain stage of supply chain management, integration moves external to the firm to involve those outside the firm who are able to work as a unified team in an attempt to obtain slow, profitable growth. Choice "d" is incorrect. In the supply chain communities stage of supply chain management, the extended supply chain forms a single competitive entity with a synchronized supply chain and a complex system of networks.

• Question 240:

  Which of the following is not considered a factor that increases the bargaining power of the customer?

  A. Much information is available to the customer to compare and contrast features of all products on the market.

  B. One group of customers makes up a large volume of the firm's business.

  C. Strategic alliances have been formed with suppliers and other firms.

  D. Several alternate suppliers (sellers) of the product exist.

  Correct Answer: C

  Choice "c" is correct. When strategic alliances exist between a supplier and other firms that is a situation,

  which increases the bargaining power of the suppliers. Choices "a", "b", and "d" are incorrect because they

  all are factors that increase the bargaining power of the customer, which are:

  ?Customers make up a large volume of a firm's business.

  ?There is much information available to customers.

  ?The buyers have low switching costs.

  ?There are a high number of alternate suppliers (sellers) of the product.