I cannot guarantee that my previous tests will be of any assistance to you, should you opt to use them as a study guide. While the content of the course changes little and the tests here will test your knowledge of content, I do teach all my courses differently every semester. Materials and readings may not be the same each semester. I also NEVER give the same test. Tests are constructed only after I have taught the material, so that I understand what I have attempted to communicate. I also try to test to my learning objectives to which I refer you for preparation of a test.

BELOW ARE THE TESTS FROM THE LAST TIME I TAUGHT MGT499. FOR FALL 2000 THE COMPREHENSIVE FINAL TEST IS "TEST 4":

Students have asked for more tests with answers for study practice. For those students, here is a project I started but never finished. It's an interactive self-test for study. I haven't had time to do a quality check on the items and answers, but it should be pretty solid. I think you can figure it out. Good luck! New Interactive Practice Test.

TEST #1

This test is scored at 100 and is 5% of your final grade for the course. The value of each item is indicated.

1. At Spring Break you return home. Your 17 year old nephew, still trying to decide if she will go to Hampton University as a business major, looks up from the Hampton University catalog to ask: “What is ‘Business Policy and Strategy?’”

Well.. what is it? I would like you to briefly describe/define “strategic management”, as might be understood by a high school student--so, avoid “business jargon” and abstract concepts in your answer: (15 pts.)

ANSWER:

An acceptable answer may take several forms, but must address content -- what is “strategic management?”

The subject’s content includes:

competition - but, gaining a business comparative advantage -- it’s about “winning” in business;

business environments -- forces, like the economy, that managers can’t control but must react to

business competencies -- building an organization that can “win”

You may focus on formal or informal (traditional and “new) conceptualizations:

It’s about developing a “plan” by which a business competes. OR

It’s about creatively

2. In 1987 Howard Schultz and a group of investors bought the Seattle stores known as Starbucks in the belief that contemporary American lifestyles were compatible with an “up-scale” coffee house - a market niche that was populated largely by small independent restraunts. Starbucks grew quickly from 11 stores to 900 stores nationwide. But, growth requires profits which are re-invested in the business.

In 1995 an active anti-Starbucks movement developed across much of the country. Protesters circulated leaflets that Starbucks contracted Guatemalan coffee pickers at $.02 a pound only to resell the product at $8.00 a pound.

Pretend that you have the task to write a news response to counter the growing number of protesters outside Starbucks stores.

A. Briefly, what would be your response (No longer than a short paragraph):(5 pts.)

B. This response is most consistent with which ethical framework: (5 pts) ________

a. self interest

b. social group relativism

c. cultural or legal relativism

d. utilitarianism

e. deontology or Kant’s categorical imperative

C. Explain why your response is consistent with this ethical framework? (5 pts.)

D. As a protester concerned with exploitive labor practices abroad by American corporations, what would you do in response to this news release (See your response in A)? (5 pts.)

3. Agency Theory addresses a problem of the modern firm. Explain the agency problem and explain how it can be resolved: [10 pts.]

Agency Problem: (5 pts.)

Resolution: (5 pts.)

Below is information from Fortune 500, a few years ago. Using the information provided, answer questions 4 through 7.

METALS Firm	Sales in Million $	Return on Equity ( % Profitability)	PHARMACEUTICALS Firm	Sales in Million $	Return on Equity (% Profitability)
ALCOA	9,056	-	JOHNSON & JOHNSON	14,138	32
REYNOLDS METALS	5,269	-	BRISTOL-MYERS SQUIBB	11,413	33
BETHLEHEM STEEL	4,323	-	MERCK	10,498	22
LTV	4,163	799	ABBOTT LABORATORIES	8,408	38
INLAND STEEL INDUSTRIES	3,888	-	Total Industry	93,266	22
Total Industry	54,191	3
FURNITURE INDUSTRY Firm	Sales in Million $	Return on Equity (%Profitability)	MOTOR VEHICLES AND PARTS Firm	Sales in Million $	Return on Equity (%Profitability)
INTERCO	1,657	13	GENERAL MOTORS	133,622	44
LEGGETT & PLATT	1,527	17	FORD MOTORS	108,521	16
HERMAN MILLER	856	8	CHRYSLER	43,600	-
HON INDUSTRIES	780	25	TRW	7,948	13
Total Industry	6,909	10	Total Industry	330,677	10

4. Examining all four industries above, which firm among all the firms has the largest market share? (10pts.)

5. Among the four industries which is the most profitable for firms - as measured by ROE? Using Porter’s 5 Forces, what is your theory why this industry is highly profitable? (10 pts.)

6. Which industry’s products are the least differentiated. What is the implication for profitability? (5 pts.)

The data at the top show the relatonship between GDP (tabled data at the bottom) and the interest rate, measured by the Federal Funds Rate and the Prime interest rate.

Using this information, answer questions 1 through 3, below.

7. In which year was there an economic recession? (10 pts. ____________________________________

8. In response to recession what would be the expected response of the Federal Reserve Board? (5 pts.)

____________________________________________________________________________________

9. Why is this action of the Federal Reserve Board important to a business person, as evidenced in the graph? (10 pts.) ________________________________________

10. Cite one other economic indicator (other than the ones illustrated or used above) and describe the expected direction of this indicator during the inflationary period in the business cycle. (10 pts.)

Economic Indicator: Direction under conditions of inflation:

TEST #2

Below are multiple choice questions that are intended to evaluate your comprehension of the readings and lectures. The emphasis is on Porters’s 5 Forces, but other concepts are tested. Each item is worth 4 points for a total value of 100 points.

By 1938 the structure of the U.S. airline industry was established. Gov­ernment regulation of fares permitted little competition, except in non-price areas - size of passenger seats, meals, and appearance of cabin attendants. The Airline Deregulation Act of 1978 changed this. Large airlines adjusted their routes; regional airlines (Delta, U.S. Air) moved into national markets; new, maverick firms entered the competition (People Express, Southwest, World, Braniff). As competition became fierce on dense airline routes, some of larger firms reduced prices to a level below actual cost of operation to protect profitable markets. By 1986 most of the new airline companies either failed or were merged. Remaining competitors increased ticket prices. By 1989 airline ticket prices had increased by 20%. The industry moved again toward concentra­tion. In the 1990’s price wars re-emerged in the industry as dominant airlines now competed for a larger market share.

1. The airlines’ strategy in the 1990’s to set ticket prices at, or below, competitive prices to protect a market is an example of:

A. Buyer Power B. Barrier to entry C. Asset Specificity D. Strategic Groups

2. Airline company failures and mergers by 1986 illustrate which market force at work:

A. Barriers to entry B. Rivalry C. Differentiation D. Threat of substitutes

3. The history of the American automobile industry is one of proliferation of firms, followed by consolidation. In the past thirty years we have seen the departure from the market of foreign companies such as Alfa Romeo and Peugeot. More recently, U.S. firms have embarked on major mergers and acquisitions. Ford Motor Company makes vehicles under the Aston Martin, Ford, Jaguar, Lincoln, and Mercury brands. The company also has stakes in foreign-based automakers, including an interest giving it effective control of Japanese automaker Mazda. In addition, it is buying Volvo's car brand and automaking operations. General Motors (GM) remains the world's #1 manufacturer of cars and trucks, including the Buick, Cadillac, Chevrolet, GMC, Oldsmobile, Pontiac, and Saturn brands. GM produces cars for foreign companies Holden, Opel, Isuzu, and Saab. DaimlerChrysler, the world's #3 carmaker in sales and #5 in number of cars sold, was formed by the $37 billion acquisition of Chrysler by Germany's Daimler-Benz in 1998. These actions by car manufactures are evidence of changes in which of Porter’s 5 Forces?

A. Increased rivalry as competitors’ market shares increase and profits increase.

B. Growth in world demand signaling a renewed growth at what was believed to be the mature stage of the industry.

C. Decreased rivalry as the number of firms decline in a mature industry.

D. Intensified power of buyers as car makers respond to changing demand and increased appropriation of value by global customers.

4. The men’s ready to wear clothing industry is dominated by firms such as Hartmarx, Oxford Industries, Phillips-Van Heusen, and Salant. Hartmarx is the US's #1 maker of men's and women’s tailored suits (Hart Schaffner & Marx, Hickey-Freeman, Austin Reed, Bobby Jones, Jack Nicklaus, and Tommy Hilfiger). Oxford Industries is a leading US maker of private-label clothing, primarily for men. and produces apparel under licenses from Tommy Hilfiger, Nautica, Geoffrey Beene, Polo Ralph Lauren, and Oscar de la Renta. Phillips-Van Heusen is the top US dress shirt maker and sells clothes and shoes for men, women, and children under its Van Heusen, Bass, Izod, and Gant brands, as well as names licensed from Donna Karan, Etienne Aigner, and Geoffrey Beene, and private labels. Salant is focusing on its Perry Ellis menswear business, but also produces John Henry dress shirts and the Manhattan and Lady Manhattan lines.

The industry is in trouble. Hartmarx net income growth is -42.1%. Oxford Industries reported a growth of 25.5%. Phillips-Van Heusen lost $66 million last year. Salant is restructuring under Chapter 11.

Many analysts attribute financial difficulty to the industry’s inability to lock in distribution channels. Large department store chains and other major clothing retailers use their purchasing clout to buy ready to wear garments from producers at the lowest possible price - changing venders from season to season to extract favorable supply costs. The analysts attribute low profitability in the ready to wear industry to which of Porter’s forces:

A. Buyer power of retail stores B. A maturing industry

C. Low intensity of rivalry D. Low barriers to entry into industry

5. The car rental industry is dominated by names such as Hertz, Avis, Republic, Enterprise, and Budget. Most of these firms specialize with a specific car manufacturer. Only Ford Motor Company has a major ownership position in a car rental firm, owning 81% of Hertz, the #1 car rental firm in the US. Using industry analysis, which industry force would be important to Ford Motor Company in it decision to forward vertically integrate into the car rental business?

A. Rivalry B. Power of Supplier C. Power of Buyer D. Barrier to Entry

6. There is not much innovation to making hot sauce. The hot red pepper originally imported from Mexico is grown in Louisiana and Texas. The pepper is ground and vinegar is added to make a “spicy” addition to foods. While many companies manufacture this product, one company dominates - Tobasco. Its name is synonymous with the hot sauce. The company’s success is attributed to its early entry in developing the product and to its distinctively shaped, small bottle. The bottle’s design came from the fact that the company’s founder needing bottles to market the sauce, collected discarded perfume bottles. Despite the low technology required to manufacture hot sauce and the well known recipe, potential entrants are thwarted in building market share simply because the “Tobasco” brand is so well established. TOBASCO’s competitive advantage is attributed to which barrier to entry?

A. Economies of scale B. Product differentiation

C. Switching costs D. Access to distribution channels

To manufacture paper, moisture is extracted from wood pulp, leaving cellulose fibers which is turned into paper. Wood is about 90 percent water. The drying process uses considerable energy and requires a large investment in equipment. It is efficient to have the water extraction and paper manufacturing plants close together. Otherwise, one firm would have to extract the water and make a large dry roll of pulp that would have to be transported to the another firm owning the paper plant. There, the paper-making firm would add water to the dry roll so it could be feed into the paper-making machines. The water would then be extracted again, at added expense. Although these two processes: water extraction from wood pulp and paper making, could be owned by two different companies the practice is that one company owns both processes. This enables one manager to control the coordination of the input of wood pulp (supply) into the making of paper (demand).

Moisture extraction and paper-making processes are “capital intensive” (meaning, the technology requires more plant and equipment investment than it requires labor). In producing uncoated paper that is used in printing, a firm expanding from 60,000 to 120,000 tons of paper production will cut its fixed capital costs by 28 percent per ton of paper. Labor costs are also cut when production is increased. The same 60,000 to 120,000 increase in production results in a labor reduction of 32 percent. Because of the technology of paper making and because of the relationship of costs to increases in production, the paper industry is dominated by a few large firms, International Paper, Georgia-Pacific, and Weyerhaeuser.

7. The ability to control the coordination of the input of wood pulp (supply) into the making of paper (demand) illustrates:

A. Product Differentiation B. Economy of Scale

C. Life Cycle D. Vertical Integration

8. A paper manufacturing firm expanding from 60,000 to 120,000 tons of production cutting fixed capital costs and achieving a 32% reduction in labor costs illustrates what:

A. Vertical Integration B. Economy of Scale

C. Diversification D. Overall Cost Leadership

9. In a diet conscious America “sugar substitutes” are big business. Monsanto Chemical Works acquired G.D. Searle, a pharmaceutical company that held the patent to aspartame. This product was then marketed by Monsanto as “Nutrasweet”, an artificial sweetener. For almost two decades Monsanto held the patent for aspartame and was the only major manufacturer. Because Monsanto was the only producer of aspartame, it was able to require companies, like Coca-Cola and Pepsi, soft drink beverages that use the artificial sweetener, to prominently display “Nutrasweet” on their labels.

An analyst for the soft drink beverage industry using Porter’s framework for strategy formulation would view the influence of Monsanto as:

A. Power of Buyers B. Power of Suppliers

C. Threat of Substitutes D. Threat of Potential Entrants

10. The next evolution in the home entertainment delivery industry is just beginning to be defined. Since the commercialization of radio and television, the primary delivery route has been the airways. Home entertainment originated from large corporations, such as NBC, CBS, ABC, and more recently Fox and was delivered through local distributors, such as local TV and radio stations. With the advent of cable, national cable firms such as TCI and Time Warner Cable and many regional cable firms have displaced the airways and created opportunities for more elaborate linkages with multiple entertainment producers. Recently, the telephones have entered the home entertainment distribution market, having demonstrated success with telephone delivery of sports and cinematic specials through pay-for- view TV. To counter the threat from telephone companies, cable companies are gearing up to provide PC connections and telephone services. Still, in the mix is the use of airways for home education. However, the future of airway transmission seems to be increased use of satellites that connect direct to homes through small satellite dishes, instead of the once familiar TV antenna. Satellite and microwave transmissions also are entering the fray over telephone communications, as mobile phones become as common as the home based “land wire” telephone and laptop PC’s advertise mobile phone modem connections.

The “land line” delivery system of the telephone, the cable delivery system, and the satellite delivery system are all home entertainment delivery industries that compete for our telephone, modem, TV, and radio connections. In Porter’s 5 Forces what should be the effect of this inter-industry competition?

A. The Power of Suppliers is diminished by the proliferation of channels of distribution.

B. The increased rivalry should lead to price competition with over capacity.

C. The increased Threats of Substitutes should hold prices in check across industries.

D. Increased economies of scale in distribution should lower prices.

11. In 1935 only 30% of the beer sold was packaged in cans or bottles, most was sold in kegs to taverns. Soft drinks historically have been mostly sold in returnable glass bottles (Coca-Cola introduced its contoured bottle designed by C.J. Root Glass Company in 1916). By the 1960’s a number of alternative packaging containers became available: non-returnable glass bottles, steel, and aluminum. In an attempt to capture a larger share of the beverage container market, in 1976 Cork Crown and Seal, a major manufacturer of glass bottles, working with the steel industry introduced an inexpensive two-piece steel can. In 1978 Miller Beer, the number two beer producer, announced a major test of aluminum cans against steel cans. The next year Miller declared its intention to switch exclusively to aluminum cans. Miller Beer’s publicized decision, plus a growing recognition of an advantage in recycling aluminum cans hastened the use of aluminum cans throughout the beverage industries, and a decline in the use of non-returnable glass and steel containers.

Manufacturers of aluminum containers illustrate which of Porter’s five competitive forces affecting Crown Cork and Seal

A. Power of Buyers B. Power of Suppliers

C. Threat of Substitutes D. Barriers to Potential Entrants

The General Merchandising Industry, Fortune 1998
Company	Revenues $Millions	Profits $Millions	Profits as % Revenues
1 Wal-Mart Stores	119,299	3,526	11
2 Sears Roebuck	41,296	1,188	17
3 KMart	32,183	249	18
4 JC Penney	30,546	566	15
5 Dayton Hudson	27,757	751	13
TOTAL INDUSTRY	324,203	8,517

12. Using the data to the right, the Market share of Wal-Mart is about:

A. 47%

B. 37%

="Times New Roman">C. 11%

D. Cannot be calculated from the available data.

13. An experience curve probably exists in a industry if:

A. Profits in the industry are higher than expected by rivarly.

B. Larger firms with greater production capability exhibit lower unit costs.

C. The industry is mature.

D. Market share is corollated with profitability.

14. According to Porter there are only three generic strategies because:

"Times New Roman">A. There are only three ways to defend against the five forces.

B. The strategies of firms converge on successful strategic actions, of which three dominate as survival modalities.

C. While the “Star”, “Cash Cow”, “Question Mark” strategies are viable, the “Dog” is a non-viable strategy.

D. There are more than three generic strategies. There is a corresponding strategy for each of the five forces.

15. Rivalry is greatest during which life cycle stage:

A. Embryonic B. Growth C. Maturity D. Decline


16. An I.P.O. is:

A. A type of barrier to entry in which the customer assumes higher costs by switching product.

B. A market in which barriers to entry are high; exit barriers are low.

C. Capitalization through stock issuance.

D. Inside director of the board who is also the corporate Personnel Officer.


17. Which of the following is not a generic strategy:

A. Profit Maximization B. Differentiation

C. Niche D. Overall Cost Leadership


18. While Porter stresses industry analysis and generic strategies, the new resource dependency view emphasizes that firms compete on the basis of a “core competency”. The major strategic problem with a core competency is that:

A. It is difficult to protect from imitation.

B. It is difficult to identify what a “core competency” is.

C. Resources must be developed to support core competencies.

D. Patents no longer protect core competencies.


19. Investors in Newport News Shipyard have been offered $38/share for their stock that has been trading near $28. The bidder to own the shipyard is General Dynamics which also own major competitor shipyard. There is a rumor that General Dynamics will buy and close the Newport News shipyard. A stakeholder perspective on the decision to sell the shipyard to General Dynamics would consider:

A. Only the financial gain to the investor, as business is about profit maximization.

B. The social and economic benefit to the nation as a whole, including the utility of consolidating economies of scale at one shipyard.

C. The competing interests of Newport News community, the workers, investors, and the government’s interests,

D. The interests of General Dynamics management in developing and sustaining competitive dominance in the industry.


20. The strategy of most major American corporations with multiple markets and multiple products is:

A. Diversification B. Differentiation

C. Overall Cost Leadership D. Profit Maximization


21. In assessing industry rivalry which of the following is least important:

A. Market shares of firms B. Number of firms

C. History of rivalry D. Profits of the largest firm


22. Porter’s Five Forces (Industry Analysis) is used for:

A. Assessing how attractive an industry is

B. Determining market failures so as to restore competitive market conditions

C. Assessing stock investment strategies

D. Evaluating the value chain within a business


23. Of the following, which firm is most probably a take-over or acquisition target?

A. A firm whose Market Value > Book Value.

B. A firm whose Market Value = Book Value

C. A firm whose Market Value < Book Value

D. A firm whose profitability is high.

24. An inside Director is:

A. An inside trader in the company’s stocks

B. A commonstock holder and member of the board of directors

C. A company officer, investor, and member of the board of directors

D. An investor in preferred stocks

25. Unemployment typically rises when:

A. The federal funds rate is raised. B. GDP declines.

C. CPI rises. D. Prime rate decreases.

TEST #3: This is the Test and Answer Key For this test, you are required to work independently for 10 minutes without notes or other support-- after 10 minutes, you may work in group and use any materials you require. The test is 5 % of your course grade. Diversification Strategies To test you on diversification strategy before the final exam, see if you can demonstrate mastery by analysis of the following case: BET Holdings is a media company that targets primarily black consumers. Its #1 business is Black Entertainment Television Cable Network (BET), which reaches about 55 million households. BET operates four other cable channels, including the BET Action Pay-Per-View service (subscription movies). It owns romance novel publisher Arabesque, publishes two national magazines (Emerge and BET Weekend), and has acquired a third (Heart & Soul). BET has interests in clothing, restaurants, and financial services. Founder and CEO Robert Johnson owns about 65% of the company; cable company AT&T Broadband & Internet Services (formerly TCI), owns the rest. Top competitors are Time Warner, Viacom, and Walt Disney. BET Holdings is a privately held company. With 1998 revenues of $175million and employs 500 people. What is the strategy of BET Holdings? (10 points) Answer: BET Holdings is a diversified firm. The core competence is market specialization with (mostly) complementary products. By focusing on African-Americans and media-entertainment BET has built a related products strategy. Can you identify any synergy across businesses? Explain. (15 points) Answer: By focusing on the African American market BET is able to gain an efficiency (synergy) through the cross-marketing and promotion of BET products. Using the BCG Matrix One of the most celebrated cases in the American history of mergers and acquisitions is the attempted takeover of Martin Marietta by Bendix. In 1982 Bendix’s chairman William M. Agee announced that Bendix, a cash rich company, would seek to expand its business by an acquisition of Martin Marietta. Bendix desired to expand its aerospace business through external growth. Martin Marietta successfully defended against the acquisition attempt by Bendix using, what is now called, the “pac man” defense, Martin Marietta skillfully attracted other companies to help defend against Bendix. The firms that came to Martin Marietta’s defense were called “white knights” in the business press. After months of offers and counter offers by Bendix to buy Martin Marietta’s stocks, Martin Marietta went on the offensive and bought controlling interest in Bendix. Martin Marietta’s acquisition of Bendix resulted in the breakup of Bendix’s businesses. Agee, CEO of Bendix, of course, lost his job. The Bendix Corporation was number 86 on the Fortune 500 in 1982. Its portfolio of businesses was: Product Divisions Composition of Revenues Estimated Sales Illustrative Products Industrial Tools 18% $790,000,000 Machine tools and accessories Aerospace-Parts 33% 1,449,000,000 Brakes, wheels, radar, communications Automotive Division 49% 2,152,000,000 Fram brakes, Autolite spark plugs Other Less than 1% 22,000,000 Electrical connectors, cables Bendix Corporation Total Sales = $4,393,000,000 A Diversified Corporation Martin Marietta was number 108 on the Fortune 500 in 1982. Its portfolio of businesses was: Product Divisions Composition of Revenues Estimated Sales Illustrative Products Aerospace-Systems 58% $1,910,520,000 Space systems, launch vehicles, missiles Aluminum 19% 625,860,000 Aluminum ingots, sheets, plates Chemicals 8% 263,520,000 Dyes, organic and industrial chemicals Cement 6% 197,640,000 Portland and mason cement Aggregates 5% 164,700,000 Crushed stone and gravel for construction Data Systems 3% 98,820,000 DoD & NASA contracts in data management Instruments Less Than 1% 32,940,000 Electronic devices Martin Marietta Total Sales = $3,294,000,000 A Diversified Corporation Industry Data, 1982 1982 Sales (in Million $) Industry Growth Rate Rival Leader in Market Market Leader’s Est. Sales, 1982 Aerospace-Parts 10,193 15.2% Allied $3,450,000,000 Aerospace-Systems 10,219 22.2% United Technologies 2,500,000,000 Aggregates 555 10% Vulcan Materials Co. 200,000,000 Aluminum 25,463 6% ALCOA 3,800,000,000 Automotive Parts 36,293 14% GM-Allison 8,500,000,000 Cement 3,542 4.5%     Chemicals 38,157 6.8% DuPont 790,000,000 Data Systems N.A. N.A.     Industrial Tools 2,895 -47% Dresser Industries 525,000,000 Instruments 6,094 5% Raytheon Corp. 3,254,000,000 N.B. : Data are, in part, fabricated for demonstration purposes only. Economic Data, 1982 Million $ Growth Rate Gross Domestic Product 3,149,600 8.1% Below, demonstrate your ability to use and interpret the BCG Matrix approach for strategy in diversified corporations. Use the data provided above for 1982. Company to analyze is: Bendix Martin Marietta (The instructor will announce one.) 1. Label the horizontal and vertical axes of the matrix with the measures used for each axis. (10 points) Answer: This is a 2-factor analysis: Relative Market Share & Market Growth Rate, here Economy Growth Rate because SBU’s are in different industries. 2. Indicate the value of the mid-point of each axis. (10 points) Answer: Relative Market Share is set at “1” to demark market leader or less than market leader. Growth rate here is change in GDP = 8.1% 3. Correctly label the “High” and “Low” positions of the vertical and horizontal axes. (5 points) Answer: The horizontal axis is counter-intuitive. “HI” is left, :LOW” is right. From Henderson’s (founder of BCG) book it is clear that he desired to show a life-cycle development of the SBU from Dog-Question Mark-Star-Cash Cow, but this does not explain why he reversed the measure of Relative Market Share. He did, and, so, we are stuck with the reversed axis measure. 4. Position the two largest SBU’s (Product Divisions) of the company in the matrix by representing each as a circle. In drawing each SBU in the matrix represent the relative contribution of each SBU to the corporation by approximating the size of the circles. (10 points) 5. Classify each SBU according to its position in the matrix and indicate the corresponding BCG strategy, below: (15 points) Strategic Business Unit BCG Classification? BCG Strategy Largest SBU is: Bendix: Aerospace-Systems Martin Marietta: Aerospace-Parts Question Mark Question Mark Divest/Invest Divest/Invest Second Largest SBU is: Bendix: Aluminum Martin Marietta: Automotive Parts Question Mark Dog Divest/Invest Divest 6. How was the BCG Matrix intended as a strategic management tool (What does it do?)? (10 points) Answer: This is a strategic management tool for diversified corporations. Strategy is viewed as investment decisisons to establish a “balanced portfolio” in which a Cash Cow supports the development of Stars and Question Marks. 7. Why is it not a good strategic tool? (Weaknesses or problems?)(15 points) Answer: A. The underlying theory that market share and profitability are correlated through the existence of an experience curve is not applicable to all industries. B. Business has experience using the BCG matrix-- it did not work very well. Firms reduced performance by divesting key businesses following this tool. C. A two factor model may work for some few business decisions, but investment and divestment decisions are more complex than this tool assumes. For example, a key supplier SBU under vertical integration would be sold off-- although strategically needed to support the core enterprise. DRAW THE BCG MATRIX HERE: