TEST BANK for Strategic Management & Business Policy 16th Global Edition by Hoffman,Bamford,Wheelan

TEST BANK

TEST BANK

PART 1: INTRODUCTION TO STRATEGIC MANAGEMENT AND BUSINESS POLICY Chapter 1. Basic Concepts of Strategic Management Chapter 2. Corporate Governance Chapter 3. Social Responsibility & Ethics in Strategic Management

PART 2: SCANNING THE ENVIRONMENT Chapter 4. Environmental Scanning & Industry Analysis Chapter 5. Organizational Analysis & Competitive Advantage

PART 3: STRATEGY FORMULATION Chapter 6. Business Strategy Chapter 7. Corporate Strategy Chapter 8. Functional Strategy & Strategic Choice

PART 4: STRATEGY IMPLEMENTATION & EVALUATION Chapter 9. Global Strategy Chapter 10. Organizing & Structure Chapter 11. Staffing & Directing Chapter 12. Evaluation & Re-Assessment

PART 5: INTRODUCTION TO CASE ANALYSIS Chapter 13. Suggestions for Case Analysis

Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 1 Basic Concepts of Strategic Management 1) What was strategic management originally called?

A) Business policy B) Planning C) Marketing strategy D) Short-term planning E) Operational planning Answer: A Difficulty: Easy Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 2) Research suggests that strategic management evolves through four sequential phases in corporations. The first phase is A) externally oriented planning.

B)b asic financial planning.

C)i nternally oriented planning.

D) forecast-based planning.

E) strategic management.

Answer: B Difficulty: Easy Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 3) The time horizon involved with regard to forecast-based planning is usually A) one year.

B)o ne quarter.

C)t hree to five years.

D) less than one month.

E) five to ten years.

Answer: C Difficulty: Easy Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 4) A difference between basic financial planning and forecast-based planning is A) the time horizon is shorter in forecast-based planning.

B)f orecast-based planning incorporates environmental data and extrapolates current trends.

C)b asic financial planning utilizes consultants with sophisticated techniques.

D) basic financial planning utilizes scenarios and contingency strategies.

E) basic financial planning relies heavily on input from lower levels in the organization.

Answer: B Difficulty: Moderate Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Analytical thinking 1 .

5) Top-down planning that emphasizes formal strategy formulation and leaves the implementation issues to lower management levels is known as A) forecast-based planning.

B) externally oriented planning.

C) strategic management.

D) basic financial planning.

E) none of the above.

Answer: B Difficulty: Moderate Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 6) In the final phase of strategic management, strategic information is available to A) people throughout the organization.

B) the top management responsible for decision-making.

C) middle management.

D) operational personnel.

E) only those responsible for implementing the strategy.

Answer: A Difficulty: Moderate Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 7) In a survey of 50 corporations, which of the following was rated as one of the three top benefits of strategic management?

A) Clearer sense of strategic direction for the firm B) Higher levels of employee motivation C) Higher levels of job satisfaction D) Improved productivity E) Lower employee turnover Answer: A Difficulty: Moderate Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 8) When an organization is involved in formal strategic planning, which is not one of the strategic questions that an organization generally may ask itself?

A) Where is the organization now?

B) Are we on target to hit our financial objectives next year?

C) If no changes are made, where will the organization be in one year?

D) If the evaluation is negative, what specific actions should management take?

E) If no changes are made, where will the organization be in 10 years?

Answer: B Difficulty: Moderate Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Analytical thinking 2 .

9) In the Bain & Company survey of executives from more than 70 countries, which of the following was the number one tool used by decision makers?

A) Customer relationship management B)S trategic planning C) Marketing planning D) Financial management E) Budgeting Answer: B Difficulty: Challenging Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 10) Strategic planning within a small organization A) may be informal and irregular.

B) must be elaborate to allow for future growth.

C) should always be formalized and explicitly stated.

D) should be done by the president only.

E) is unnecessary and a waste of time.

Answer: A Difficulty: Moderate Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 11) Strategic planning in a large firm A) should be informal to allow complete understanding by the many participants.

B) should be instigated only from the main corporate office.

C) should be accomplished quickly to decrease the likelihood of it becoming outdated.

D) should encourage a clear delineation between top management and lower-level managers.

E) should be a formalized and sophisticated system.

Answer: E Difficulty: Moderate Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 12) Strategic management is the set of managerial decisions that help determine the long-term performance of a corporation.

Answer: TRUE Difficulty: Easy Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 13) As annual budgets become less useful at stimulating long-term success, managers attempt to propose five-year plans.

Answer: TRUE Difficulty: Easy Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 3 .

14) One of the benefits of strategic management is a clearer sense of strategic direction for the firm.

Answer: TRUE Difficulty: Moderate Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Analytical thinking 15) To be effective, strategic management must be a formal process.

Answer: FALSE Difficulty: Challenging Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Analytical thinking 16) How does basic financial planning differ from forecast-based planning?

Answer: The two differ in terms of the time horizons involved. While the time horizon for basic financial planning is usually a year, it is typically three to five years for forecast-based planning.

In addition, basic financial planning relies almost entirely on information generated internally, while forecast-based planning uses both internal and external information.

Difficulty: Moderate Learning Obj.: 1.1: Discuss the benefits of strategic management AACSB: Application of knowledge 17) The integrated internationalization of markets and corporations is called A) normalization.

B) economic integration.

C) globalization.

D) nationalization.

E) regionalization.

Answer: C Difficulty: Easy Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 18) The term used to describe new products, services, methods, and organizational approaches that allow businesses to achieve extraordinary returns is A) ROI. B) innovation.

C) competitive advantage.

D) sustainability.

E) profit maximization.

Answer: B Difficulty: Moderate Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 4 .

19) The agreement between El Salvador, Guatemala, Honduras, Nicaragua, Costa Rica, and the United States is called A) EU. B) ASEAN. C) NAFTA. D) Mercosur.

E) CAFTA. Answer: E Difficulty: Moderate Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 20) Members of the European Union (EU) include all of the following EXCEPT A) Ireland.

B) the United Kingdom.

C) Belgium.

D) France.

E) Slovakia.

Answer: B Difficulty: Easy Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 21) Argentina is part of which trade alliance?

A) ASEAN B) Mercosur C) EU D) NAFTA E) CAFTA Answer: B Difficulty: Easy Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge

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22) The currency used to integrate the monetary systems of the European Union (EU) is called the A) peso.

B) dollar.

C) euro.

D) franc.

E) pound.

Answer: C Difficulty: Easy Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 23) The triple bottom line refers to which of the following responsibilities of an organization?

A) Responsibilities in the conservation of water, air, and oil B) Responsibilities in impacting footprints, finance, and environment C) Responsibilities with respect to the physical environment, traditional profit/loss, and air D) Traditional profit/loss, social responsibility, and environmental responsibility E) Traditional social responsibility, responsibility to people, and to ethics Answer: D Difficulty: Challenging Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 24) During the worldwide Covid-19 pandemic, supply lines that were tightly managed for minimal stock-on-hand unraveled as the world went into repeated lockdowns and then surges of consumer demand. This is an example of the downside of A) containerization.

B)i nternationalization.

C) globalization.

D) localization.

E) regionalization.

Answer: C Difficulty: Moderate Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 25) Certified B Corporations are businesses that meet certain social and environmental performance measures, along with public transparency aimed at creating a balance of profitability and sustainability.

Answer: TRUE Difficulty: Moderate Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 6 .

26) Jobs, knowledge, and capital are now able to move across borders with far greater speed and far less friction than was possible only a few years ago.

Answer: TRUE Difficulty: Moderate Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Analytical thinking 27) One member of the European Union (EU) is the United Kingdom.

Answer: FALSE Difficulty: Moderate Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 28) The goal of NAFTA is to improve trade among Canada, the United States, and Mexico.

Answer: TRUE Difficulty: Moderate Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 29) The triple bottom line is a term used to describe a business's sustainability.

Answer: TRUE Difficulty: Moderate Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 30) Innovation is the machine that generates business opportunities in the market.

Answer: TRUE Difficulty: Moderate Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 31) A Gallup study reported that companies that focused on business sustainability had 3.9 times the EPS growth rates as compared to organizations that did not focus on business sustainability.

Answer: TRUE Difficulty: Challenging Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge

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32) Briefly describe the concept of the triple bottom line and its role in sustainability.

Answer: In 1994, John Elkington came up with the term, "triple bottom line" to describe a business's sustainability. Triple bottom line suggests that businesses prepare and report on three separate bottom lines in their annual report: • The traditional profit and loss that reports on financial performance.

• A people account that looks at the social responsibility of the organization.

• A planet account that identifies the organization's environmental responsibility.

Difficulty: Moderate Learning Obj.: 1.2: Explain how globalization, innovation, and environmental sustainability influence strategic management AACSB: Application of knowledge 33) Which theory proposes that once an organization is successfully established in a particular environmental niche, it is unable to adapt to changing conditions?

A) Population ecology B) Institution C) Citizenship D) Strategic choice E) Organizational learning Answer: A Difficulty: Moderate Learning Obj.: 1.3: Discuss the differences between the theories of organizations AACSB: Application of knowledge 34) The theory that proposes organizations can and do adapt to changing conditions by imitating other successful organizations is known as A) population ecology.

B) institution theory.

C) citizenship theory.

D) strategic theory.

E) sample theory.

Answer: B Difficulty: Moderate Learning Obj.: 1.3: Discuss the differences between the theories of organizations AACSB: Application of knowledge

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35) The theory that proposes that organizations adjust defensively to a changing environment and use knowledge offensively to improve the fit between themselves and their environment is known as A) population ecology theory.

B) institution theory.

C) the strategic choice perspective.

D) organizational learning theory.

E) organizational citizenship theory.

Answer: D Difficulty: Moderate Learning Obj.: 1.3: Discuss the differences between the theories of organizations AACSB: Application of knowledge 36) Organizational learning theory proposes that organizations can and do adapt to changing conditions by imitating other successful organizations.

Answer: FALSE Difficulty: Easy Learning Obj.: 1.3: Discuss the differences between the theories of organizations AACSB: Application of knowledge 37) When Apple cuts into the sales of its own offerings with periodic introduction of new products, it is demonstrating A) strategy implementation.

B) chaos formulation.

C) contingency management.

D) logical incrementalism.

E) strategic flexibility.

Answer: E Difficulty: Moderate Learning Obj.: 1.4: Discuss the activities where learning organizations excel AACSB: Application of knowledge 38) An organization skilled at creating, acquiring, and transferring knowledge, aimed at modifying its behavior to reflect new knowledge and insights is a(n) A) learning organization.

B) strategically managed corporation.

C) innovative organization.

D) hypercompetitive competitor.

E) entrepreneurial firm.

Answer: A Difficulty: Easy Learning Obj.: 1.4: Discuss the activities where learning organizations excel AACSB: Application of knowledge

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39) All of the following reflect activities of a learning organization EXCEPT A) experimenting with new approaches.

B) learning from its own experiences and past history.

C) solving problems systematically.

D) alienating competitors in the industry.

E) transferring knowledge quickly and efficiently throughout the organization.

Answer: D Difficulty: Moderate Learning Obj.: 1.4: Discuss the activities where learning organizations excel AACSB: Application of knowledge 40) According to Alfred Chandler, what type of industries are defined by "paths of learning" in which organizational strengths derive from learned capabilities?

A) Consumer products B) Automotive C) High-technology D) Infrastructure E) Personal services Answer: C Difficulty: Challenging Learning Obj.: 1.4: Discuss the activities where learning organizations excel AACSB: Application of knowledge 41) Strategic rigidity is the ability to shift from one dominant strategy to another.

Answer: FALSE Difficulty: Easy Learning Obj.: 1.4: Discuss the activities where learning organizations excel AACSB: Application of knowledge 42) A learning organization is skilled at solving problems systematically.

Answer: TRUE Difficulty: Moderate Learning Obj.: 1.4: Discuss the activities where learning organizations excel AACSB: Application of knowledge 43) Explain briefly the concept of strategic flexibility and how it relates to the idea of a learning organization.

Answer: To compete successfully in a dynamic, complex environment, an organization must develop strategic flexibility, the ability to shift from one dominant strategy to another. In order to enhance its strategic flexibility, an organization has to make a long-term commitment to the development and nurturing of critical resources and capabilities. In addition, the organization should become adept at creating, acquiring, and transferring knowledge aimed at modifying its behavior to reflect new knowledge and insights — in other words, become a learning organization.

Difficulty: Moderate Learning Obj.: 1.4: Discuss the activities where learning organizations excel AACSB: Application of knowledge 10 .

44) Which one of the following is not one of the basic elements of the strategic management process?

A) Strategy formulation B) Strategy implementation C) Statistical process control D) Evaluation and re-assessment E) Environmental analysis Answer: C Difficulty: Easy Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 45) SWOT is a part of the ________ component of the strategic management process.

A) environmental analysis B) business strategy C) functional strategy D) strategy formulation E) strategy implementation Answer: A Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 46) The S in SWOT stands for A) strategies.

B) scanning.

C) strengths.

D) societal.

E) sociocultural.

Answer: C Difficulty: Easy Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 47) A firm's task environment is also called its A) internal environment.

B) technical environment.

C) terminal environment.

D) industry.

E) customers.

Answer: D Difficulty: Easy Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge

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48) The variables structure, culture, and resources pertain to the A) external environment.

B) internal environment.

C) sociocultural forces.

D) task environment.

E) societal environment.

Answer: B Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 49) The task environment A) includes those elements or groups within an organization's industry.

B) encompasses the physical working areas of the organization.

C) is an accounting of the many jobs within an organization.

D) is an advisory committee to top-management.

E) includes general forces that only indirectly affect an organization's activities.

Answer: A Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 50) Which one of the following is included in the firm's internal environment?

A) Competitors B) Economic forces C) Resources D) Governments E) Special interest groups Answer: C Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 51) Key ________ in the internal environment form a set of core competencies that the organization can use to gain competitive advantage.

A) opportunities B) trends C) weaknesses D) strengths E) threats Answer: D Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge

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52) The Strategic Management Model presents the following process for strategy formulation: A) Objectives — Policies — Strategies — Mission.

B) Mission — Policies — Strategies — Objectives.

C) Policies — Mission — Strategies — Objectives.

D) Policies — Strategies — Objectives — Mission.

E) Mission — Objectives — Strategies — Policies.

Answer: E Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Analytical thinking 53) The process of investigation, analysis, and structured decision making that provides an organization with the criteria for attaining a competitive advantage is known as A) strategy formulation.

B) strategy implementation.

C) strategy control.

D) strategic analysis.

E) strategy evaluation.

Answer: A Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 54) The corporate mission is best described by which one of the following?

A) A description of the activities carried out by the organization B) The purpose or reason for the corporation's existence C) A description of top management's responsibilities D) A statement of corporate objectives E) A statement of what the organization would like to become Answer: B Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 55) Which one of the following is an example of a mission with a narrow scope?

A) Transportation (vs. railroads) B) Computers (vs. office equipment) C) Health care (vs. hospitals) D) Real estate (vs. apartments) E) Telecommunications (vs. television) Answer: B Difficulty: Challenging Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Analytical thinking

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56) Mission describes what the organization is now, while ________ describe(s) what the organization would like to become.

A) planning B) vision C) budgeting D) decisions E) strategizing Answer: B Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 57) Which of the following is an example of a mission statement?

A) Diversify product line to appeal to more people B) Increase sales by ten percent over last year C) Pay highest salaries to keep high quality employees D) Develop and sell quality appliances worldwide E) Divide a sales region into a group of sales districts Answer: D Difficulty: Challenging Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 58) A goal differs from an objective because a goal A) is open-ended.

B) is quantified.

C) specifies measurable results.

D) is clearly specified.

E) provides a time horizon.

Answer: A Difficulty: Challenging Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Analytical thinking 59) Which of the following is an example of an objective?

A) To diversify product line to appeal to more people B) To increase sales by ten percent over last year C) To pay highest salaries to keep high quality employees D) To develop and sell quality appliances worldwide E) To divide a sales region into a group of sales districts Answer: B Difficulty: Challenging Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge

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60) The categories of stability, growth, and retrenchment fit what type of strategy?

A) Corporate B) Business C) Functional D) Operational E) Tactical Answer: A Difficulty: Challenging Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 61) The type of strategy, which describes a company's overall direction in terms of its general attitude toward growth and the management of its various businesses is A) functional.

B) operational.

C) business.

D) product.

E) corporate.

Answer: E Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 62) The type of strategy, which emphasizes the improvement of the competitive position of a corporation's products or services in a particular industry or market segment served by a business unit is A) functional.

B) operational.

C) business.

D) environmental.

E) corporate.

Answer: C Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 63) The type of strategy, which achieves corporate and business unit objectives and strategies by maximizing resource productivity is A) functional.

B) operational.

C) business.

D) product.

E) corporate.

Answer: A Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 15 .

64) A large business has three levels in its hierarchy of strategy: A) Corporate — Business — Functional.

B) Environmental — Corporate — Functional.

C) Environmental — Enterprise — Corporate.

D) Business — Divisional — Functional.

E) Industry — Corporate — Divisional.

Answer: A Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 65) In the hierarchy of strategies, functional strategies support ________ strategies.

A) corporate B) tactical C) business D) master E) organizational Answer: C Difficulty: Easy Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Analytical thinking 66) Which of the following is an example of a policy?

A) Diversify product line to appeal to more people.

B) Increase sales by ten percent over last year.

C) Only acquire companies of 75 employees or more; 75 percent must be engineers.

D) Develop and sell quality appliances worldwide.

E) Diversify from retailing into delivery.

Answer: C Difficulty: Challenging Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 67) The process by which strategies and policies are put into action through the development of programs, budgets, and procedures is A) strategy formulation.

B) strategy control.

C) strategy implementation.

D) strategy development.

E) strategy evaluation.

Answer: C Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge

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68) Which of the following makes a strategy action oriented?

A) Mission B) Vision C) Goal D) Program E) Objective Answer: D Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 69) Which of the following is an example of a program?

A) Diversify product line to appeal to more people B) Increase sales by ten percent over last year C) Must be "number one" wherever we compete D) Develop and sell quality appliances worldwide E) Reduce final assembly time to three days by having suppliers build plan sections Answer: E Difficulty: Challenging Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 70) A program or tactic is A) a detailed cost statement in terms of dollars.

B) a system of sequential steps.

C) a statement of the activities needed to support a strategy.

D) the process by which strategies and policies are put into action.

E) none of the above.

Answer: C Difficulty: Easy Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 71) Which is not true of the budgetary function?

A) It is used in planning and control.

B) It serves as a detailed plan of strategy in action.

C) Only one budget is necessary to capture all programs.

D) It details the impact on the firm's future financial situation.

E) It is used as a means of measuring success based on certain criteria.

Answer: C Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Analytical thinking

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72) Home Depot changed the way it restocked shelves and priced products to reduce clogging in aisles. This is an example of a A) program.

B) budget.

C) procedure.

D) policy.

E) control.

Answer: C Difficulty: Challenging Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Analytical thinking 73) Which of the following is the final major element of strategic management?

A) Goal setting B) Strategy formulation C) Internal analysis D) External analysis E) Evaluation and re-assessment Answer: E Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 74) A set of sequential steps or techniques that describe in detail how a particular task or job is to be done is referred to as A) a standard operating procedure.

B) a systems operating procedure.

C) a standard operating program.

D) a standard outside procedure.

E) a systems operating plan.

Answer: A Difficulty: Easy Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 75) A hierarchy of strategy emphasizes the need for the three levels of strategy to complement and support one another.

Answer: TRUE Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge

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76) The external environment includes the variables within the organization itself that are within the short-run control of top management.

Answer: FALSE Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 77) A broad mission statement may limit the scope of a firm's activities in terms of the product or service offered.

Answer: FALSE Difficulty: Challenging Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Analytical thinking 78) An example of an objective is "increased profitability," while an example of a goal is "to increase the firm's profitability in 2023 by 15 percent over 2022."

Answer: FALSE Difficulty: Challenging Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 79) A strategy maximizes competitive advantage and minimizes competitive disadvantage.

Answer: TRUE Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 80) Business strategy addresses stability, growth, and retrenchment.

Answer: FALSE Difficulty: Easy Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 81) An example of functional strategy is Staples', the U.S. office supply chain, attempts to differentiate its retail stores from its competitors by adding services such as copying and UPS shipping.

Answer: FALSE Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 82) Strategy implementation is a nesting of one strategy within another so that they complement and support one another.

Answer: FALSE Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 19 .

83) A budget is a statement of a corporation's programs in terms of dollars.

Answer: TRUE Difficulty: Easy Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 84) Performance results are monitored at the strategy formulation phase of the strategic management process.

Answer: FALSE Difficulty: Moderate Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 85) Briefly explain the differences between business and functional strategy.

Answer: The goal of business strategy, which occurs at the business unit or product level is to improve the competitive position of an organization's products or services in the specific industry or market segment served by that business unit. In contrast, functional strategies focus on each functional area maximizing resource productivity to achieve corporate and business unit objectives. Functional strategies support business strategies.

Difficulty: Challenging Learning Obj.: 1.5: Describe the basic model of strategic management and its components AACSB: Application of knowledge 86) Research done by Henry Mintzberg suggests that strategy formulation A) is typically an irregular and a discontinuous process.

B) should be followed unswervingly to ensure success of the plan.

C) is a process to which organizations find they must make significant yearly changes.

D) should be reviewed after a specific interval of time to make sure it is still applicable.

E) is merely a checklist of actions following a logical process.

Answer: A Difficulty: Moderate Learning Obj.: 1.6: Identify some common triggering events that act as stimuli for strategic change AACSB: Analytical thinking

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87) The phenomenon that describes large organizations as evolving through relatively long periods of stability punctuated by relatively short bursts of fundamental change (revolutionary change) is known as A) revolution.

B) equilibrium.

C) punctuated equilibrium.

D) logical incrementalism.

E) discontinuity.

Answer: C Difficulty: Moderate Learning Obj.: 1.6: Identify some common triggering events that act as stimuli for strategic change AACSB: Application of knowledge 88) Which of the following is not one of the four discontinuities listed in the text that is the stimulus for a change in strategy?

A) Intervention by the organization's bank B) Annual strategic planning conference C) Threat of a takeover D) New CEO E) Awareness by management of decreased profitability Answer: B Difficulty: Moderate Learning Obj.: 1.6: Identify some common triggering events that act as stimuli for strategic change AACSB: Application of knowledge 89) When outcomes do not meet expectations, such as sales and profits are no longer increasing or may even be falling, it is referred to as a(n) A) strategic inflection point.

B) performance gap.

C) budgetary failure.

D) pricing issue.

E) operational failure.

Answer: B Difficulty: Moderate Learning Obj.: 1.6: Identify some common triggering events that act as stimuli for strategic change AACSB: Analytical thinking

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90) Which of the following statements is not true of a strategic inflection point?

A) The term was coined by Andy Grove, past CEO of Intel Corporation.

B) This represents what happens to a business when a major change takes place due to the introduction of new technology.

C) This represents what happens to a business when a major change takes place due to a change in customers' values or a change in customers' preferences.

D) This represents what happens to a business when a major change takes place due to a different regulatory environment.

E) A new CEO is an example of a strategic inflection point.

Answer: E Difficulty: Challenging Learning Obj.: 1.6: Identify some common triggering events that act as stimuli for strategic change AACSB: Application of knowledge 91) Henry Mintzberg discovered that strategic formulation is a regular, continuous process.

Answer: FALSE Difficulty: Moderate Learning Obj.: 1.6: Identify some common triggering events that act as stimuli for strategic change AACSB: Application of knowledge 92) A performance gap is what happens to a business when a major change takes place due to the introduction of new technologies, a different regulatory environment, a change in customers' values, or a change in customers' preferences.

Answer: FALSE Difficulty: Challenging Learning Obj.: 1.6: Identify some common triggering events that act as stimuli for strategic change AACSB: Application of knowledge 93) What is a strategic inflection point? List some possible examples.

Answer: A strategic inflection point is a triggering event or a discontinuity. It happens to a business when a major change takes place due to the introduction of new technologies, a different regulatory environment, a change in customers' values, or a change in customers' preferences.

Difficulty: Challenging Learning Obj.: 1.6: Identify some common triggering events that act as stimuli for strategic change AACSB: Application of knowledge

22 .

94) Which of the following is not a characteristic of strategic decisions as mentioned in the text?

A) Directive B) Consequential C) Rare D) Continuous E) Future-oriented Answer: D Difficulty: Easy Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Application of knowledge 95) Which characteristic of strategic decisions addresses the fact that such decisions set precedents for lesser decisions and future actions throughout an organization?

A) Rare B) Long-term C) Consequential D) Directive E) Resource outlay Answer: D Difficulty: Moderate Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Analytical thinking 96) Which of the following is not one of Mintzberg and Quinn's four approaches to strategic decision making?

A) Entrepreneurial B) Adaptive C) Planning D) Logical incrementalism E) Reactive Answer: E Difficulty: Moderate Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Application of knowledge 97) Tesla and SpaceX, founded by Elon Musk and reflecting his vision, are examples of which mode of strategic decision-making?

A) Adaptive B) Entrepreneurial C) Logical incrementalism D) Planning E) Customer relationship management Answer: B Difficulty: Challenging Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Analytical thinking 23 .

98) What characterizes the planning mode of strategy formulation?

A) Top management believes that the environment is a force to be used and controlled.

B) It assumes the environment is too complex to be completely comprehended.

C) It involves the systematic gathering of appropriate information for situation analysis, the generation of feasible alternative strategies, and the rational selection of the most appropriate strategy.

D) Rather than utilizing a proactive search for new opportunities, it only has the opportunity for reactive behavior.

E) It is based on vision and large-picture strategy.

Answer: C Difficulty: Moderate Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Analytical thinking 99) Which of the following modes of strategic decision making is sometimes referred to as "muddling through?"

A) Adaptive B) Entrepreneurial C) Logical incrementalism D) Planning E) Budgeting Answer: A Difficulty: Challenging Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Application of knowledge 100) The mode of strategic decision-making typical of most universities, many large hospitals, a large number of governmental agencies, and a surprising number of large organizations is A) adaptive.

B) entrepreneurial.

C) logical incrementalism.

D) planning.

E) reactive.

Answer: A Difficulty: Challenging Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Application of knowledge

24 .

101) The mode of strategy formulation used when top management has a reasonably clear idea of the corporation's mission and objectives, but chooses to use "an interactive process in which the organization probes the future, experiments, and learns from a series of partial (incremental) commitments rather than through global formulations of total strategies" is called A) planning mode.

B) logical incrementalism.

C) entrepreneurial mode.

D) adaptive mode.

E) strategic mode.

Answer: B Difficulty: Moderate Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Application of knowledge 102) Which approach to decision-making is most useful when the environment is changing rapidly and when it is important to build consensus and develop needed resources before committing the entire corporation to a specific strategy?

A) Planning mode B) Entrepreneurial mode C) Logical incrementalism D) Adaptive mode E) Strategic flexibility mode Answer: C Difficulty: Challenging Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Analytical thinking 103) A tactical decision is rare, consequential, and directive.

Answer: FALSE Difficulty: Moderate Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Application of knowledge 104) Mintzberg's entrepreneurial mode is sometimes referred to as "muddling through" since this decision-making mode tends to be more reactive than proactive in the search for new opportunities.

Answer: FALSE Difficulty: Challenging Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Application of knowledge 105) The planning mode is a useful decision-making mode when the environment is rapidly changing and when it is important to build consensus to a specific strategy.

Answer: FALSE Difficulty: Challenging Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Analytical thinking 25 .

106) Explain briefly logical incrementalism as a strategic decision-making mode.

Answer: Quinn added a fourth mode — logical incrementalism — to Mintzberg's three modes.

It is a synthesis of the planning, adaptive, and to a lesser extent the entrepreneurial modes. Here, although the mission and objectives are set, the strategy is allowed to emerge out of debate, discussion, and experimentation. This approach is useful when the environment is changing rapidly and when it is important to build consensus and develop needed resources before committing an entire corporation to a specific strategy.

Difficulty: Moderate Learning Obj.: 1.7: Explain strategic decision-making modes AACSB: Application of knowledge 107) A checklist of questions, by area or issue, that enables a systematic analysis to be made of various corporate functions and activities is referred to as a(n) A) scenario.

B) portfolio.

C) strategic audit.

D) social responsibility audit.

E) SOP. Answer: C Difficulty: Easy Learning Obj.: 1.8: Use the strategic audit as a method of analyzing corporate functions and activities AACSB: Application of knowledge 108) A strategic audit is an all-inclusive process.

Answer: FALSE Difficulty: Easy Learning Obj.: 1.8: Use the strategic audit as a method of analyzing corporate functions and activities AACSB: Application of knowledge 109) There are areas of an organization's operations that are not impacted by its strategy.

Answer: FALSE Difficulty: Easy Learning Obj.: 1.9: Explain the employment opportunities in Strategic Management AACSB: Application of knowledge 110) The responsibility of a business development group is to research and recommend new directions for the organization.

Answer: TRUE Difficulty: Easy Learning Obj.: 1.9: Explain the employment opportunities in Strategic Management AACSB: Application of knowledge

26 .

111) Which of the following is not a clear employment path that relies on the study of strategic management?

A) Business development B) Consulting C) Copywriting D) Mergers and acquisitions (M&A) E) Business analysis Answer: C Difficulty: Easy Learning Obj.: 1.9: Explain the employment opportunities in Strategic Management AACSB: Application of knowledge 112) In an organization, the ________ group is traditionally charged with developing and reporting on the Strategic Plan for the organization.

A) business analysis B) mergers and acquisitions (M&A) C) strategy D) budgeting E) board of directors Answer: C Difficulty: Easy Learning Obj.: 1.9: Explain the employment opportunities in Strategic Management AACSB: Application of knowledge

27 .

Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 2 Corporate Governance 1) The board of directors has an obligation to A) lend credence to the decisions of the executive committee.

B) make strategic decisions for the corporation.

C) act as representatives for public identification.

D) approve all decisions that might affect the long-term performance of the corporation.

E) insulate the corporation from legal judgments because management actually makes the decisions.

Answer: D Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Analytical thinking 2) The relationship among the board of directors, top management, and shareholders in determining the direction and performance of the corporation is referred to as A) corporate synergy.

B) corporate management.

C) corporate governance.

D) corporate strategy.

E) corporate responsibility.

Answer: C Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 3) The requirements of a board of directors vary significantly by country and by state; however, there is a developing consensus as to what the major responsibilities should be. Which of the following is not one of the responsibilities?

A) Effective board leadership including the processes, makeup and output of the board B) Strategy of the organization C) Risk vs. initiative and the overall risk profile of the organization D) Becoming directly involved in managerial decisions E) Sustainability Answer: D Difficulty: Challenging Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Analytical thinking

1 .

4) Which of the following statements is not true regarding the board of directors?

A) The board is charged by law to act with due care.

B) If a director or the board as a whole fails to act with due care and, as a result, the corporation is in some way harmed, the careless director or directors can be held personally liable for the harm done.

C) Director liability insurance is often needed to attract people to become members of boards.

D) Directors must be aware of the needs of various constituent groups to balance all their interests.

E) More than half of all publicly traded companies in the United States are incorporated in New York, requiring that the corporation be managed in accordance with NY state laws.

Answer: E Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Analytical thinking 5) More than ________ of outside directors surveyed said that they had been named as part of a lawsuit against the corporation.

A) 40% B) 50% C) 60% D) 70% E) 80% Answer: A Difficulty: Challenging Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 6) A board is charged by law to act with A) codetermination.

B) affiliation.

C) cumulative voting.

D) accountability.

E) due care.

Answer: E Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge

2 .

7) Which of the following is not a task of the board of directors in strategic management?

A) To monitor B) To implement C) To influence D) To initiate E) To evaluate Answer: B Difficulty: Easy Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 8) In the continuum of board of directors, phantom level boards typically A) have no degree of involvement.

B) take leading roles in establishing and modifying the company mission, objectives, and strategy.

C) are involved in a limited degree of key decision-making.

D) are held to a greater degree of legal responsibility.

E) experience more financial success than less involved boards.

Answer: A Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Analytical thinking 9) A highly involved board does all of the following EXCEPT A) tends to be very active.

B) provides advice when necessary.

C) keeps management alert.

D) takes their tasks of initiating and determining strategy very seriously.

E) manage the everyday operations of the organization.

Answer: E Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Analytical thinking

3 .

10) The ________ boards typically never initiate or determine strategy unless a crisis occurs.

A) rubber stamp B) active participation C) catalyst D) nominal participation E) minimal review Answer: A Difficulty: Easy Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 11) Which type of boards are the most active in the board of directors' continuum?

A) Phantom B) Rubber stamp C) Minimal review D) Catalyst E) Active participation Answer: D Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 12) What percentage of public corporations have periodic board meetings devoted primarily to the review of overall strategy?

A) 24% B) 34% C) 44% D) 64% E) 74% Answer: E Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge

4 .

13) When a board of directors is involved to a limited degree in the performance or review of selected key decisions, indicators, or programs of management, the degree of involvement is referred to as A) rubber stamp.

B) nominal participation.

C) active participation.

D) minimal review.

E) phantom.

Answer: B Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Analytical thinking 14) A board is charged by law to make strategic decisions for the corporation.

Answer: FALSE Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 15) The term "corporate governance" refers to the relationship among the board of directors, top management, and the shareholders in determining the direction and performance of the corporation.

Answer: TRUE Difficulty: Easy Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 16) In terms of the degree of involvement in strategic management, the phantom board is the most active.

Answer: FALSE Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 17) Succession planning for the board and top management team is one of the five responsibilities of the board of directors.

Answer: TRUE Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge

5 .

18) Those directors who fail to act with due care and allow the corporation to be harmed may be held personally liable.

Answer: TRUE Difficulty: Challenging Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 19) Law and standards defining the responsibilities of boards of directors are uniform throughout the world.

Answer: FALSE Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 20) The lowest degree of involvement for a board of directors is the catalyst level of interaction.

Answer: FALSE Difficulty: Easy Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 21) A board can delineate a corporation's mission and specify strategic options to its management.

Answer: TRUE Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 22) What are the roles of the board in strategic management?

Answer: The role of the board of directors in strategic management is to carry out three basic tasks: 1. It should bring to management's attention developments from inside and outside the corporation that may have been overlooked. This is the monitoring role.

2. It evaluates and influences management's proposals, decisions, and actions.

3. It can delineate a corporation's mission and specific strategic options to its management. This is the initiation and determination role.

Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge

6 .

23) Explain the continuum of board involvement.

Answer: The board of directors' continuum reflects the degree of involvement (from high to low) in the strategic management process. Boards can range from phantom boards with no real involvement to catalyst boards with a very high degree of involvement. Passive phantom or rubber stamp boards typically never initiate or determine strategy unless a crisis occurs.

Nominal participation reflects a board involved to a limited degree in the performance or review of selected key decisions, indicators, or programs of management. An active board approves, questions, and makes final decisions on mission, strategy, policies, and objectives. It also has active board committees and performs fiscal and management audits. The catalyst board takes the leading role in establishing and modifying the mission, objectives, strategy, and policies. It also has a very active strategy committee.

Difficulty: Moderate Learning Obj.: 2.1: Describe the role and responsibilities of the board of directors in corporate governance AACSB: Application of knowledge 24) Outside directors are defined as A) those individuals who scan the external environment.

B) individuals on the board who are not employed by the board's corporation.

C) those individuals with public relations responsibilities.

D) board members who are also officers or executives employed by the corporation.

E) individuals who organize and coordinate politically focused activities.

Answer: B Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 25) According to ________ theory, ________ directors tend to identify with the corporation and its success.

A) agency; inside B) corporate governance; inside C) stewardship; inside D) corporate governance; affiliated E) stewardship; outside Answer: C Difficulty: Challenging Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge

7 .

26) The board of directors in a typical small U.S. corporation has ________ members.

A) 1-2 B) 6-7 C) 4-5 D) 8-9 E) 10-11 Answer: C Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 27) The percentage of directors of small, publicly held U.S. corporations who are outsiders is approximately ________ members.

A) 2-3 B) 1-2 C) 3-4 D) 6-7 E) 8 or above Answer: B Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 28) The theory which states that problems arise in corporations because top management no longer is willing to bear the brunt of their decisions unless they own a substantial amount of stock in the corporation is called A) stewardship theory.

B) agency theory.

C) interlocking management theory.

D) strategic leadership theory.

E) ownership theory.

Answer: B Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Analytical thinking

8 .

29) Research on family businesses has found that boards with a larger number of ________ tended to have better corporate governance and better performance than boards with fewer ________.

A) outsiders; outsiders B) insiders; insiders C) family members; non-family members D) outsiders; insiders E) insiders; outsiders Answer: A Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Ethical understanding and reasoning 30) A survey of corporate directors found that 44% served on ________ board(s).

A) 2 or more B) 6-7 C) 9 D) 12 E) only 1 Answer: A Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 31) Board members who are not employed by the corporation, but handle the legal or insurance needs of the firm and are thus not true "outsiders," are what kind of directors?

A) Affiliated directors B) Family directors C) Retired directors D) Management directors E) Interlocked directors Answer: A Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 32) Sixty-six percent of the outstanding stock in the largest U.S. and UK corporations is now owned by A) family directors.

B) affiliated directors.

C) institutional investors.

D) retired directors.

E) management directors.

Answer: C Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 9 .

33) ________ theory argues that senior executives over time tend to view the corporation as an extension of themselves.

A) Population ecology B)M otivation C) Stewardship D) Agency E) Goal setting Answer: C Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 34) An agency problem can occur when A) the desires and objectives of the owners and agents conflict.

B) there is too much oversight.

C) the owners and agents share the same attitudes toward risk.

D) executives select risky strategies because they fear losing their jobs if the strategy fails.

E) there is a dual role for the CEO and chair of the board.

Answer: A Difficulty: Challenging Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Analytical thinking 35) Which of the following regions is the most globalized region of the world in terms of boards of directors with most companies having one or more non-national directors?

A) Asia B) Middle East C) North American D) Pacific Rim E) Europe Answer: E Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 36) A 2018 Deloitte study of the board makeup of the Fortune 500 found that people of color held ________ of the corporate board of directors seats.

A) 4.8% B) 20.23% C) 50.09% D) 33.25% E) 19.5% Answer: E Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Diverse and multicultural work environments 10 .

37) According to the Spencer Stuart executive recruiting firm, ________ of U.S. boards had an international director.

A) 6% B) 26% C) 33% D) 78% E) 96% Answer: C Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Diverse and multicultural work environments 38) The vast majority of inside directors are from all of the following EXCEPT A) lower-level operating employee.

B) president of the corporation.

C) vice-president of operational units.

D) chief executive officer.

E) vice-president of functional units.

Answer: A Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 39) Codetermination A) is the process by which both management and the board establish corporate strategic management.

B) is the inclusion of a corporation's workers on its board.

C) occurs when one or more individuals on one board also serve on other boards.

D) is present when all board members are also employed by the corporation.

E) occurs when minority shareholders concentrate their votes.

Answer: B Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 40) Which country pioneered the use of worker participation on corporate boards?

A) England B) France C) Sweden D) Japan E) Germany Answer: E Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge

11 .

41) Under what circumstances does a DIRECT interlocking directorate exist?

A) When both management and the board establish corporate strategic management B) When a corporation's employees are included on its board C) Occurs when two firms share a director or when an executive of one firm sits on the board of a second firm D) When all board members are also employed by the corporation E) When two corporations have directors who serve on the board of a third firm Answer: C Difficulty: Challenging Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Analytical thinking 42) Under what circumstances does an INDIRECT interlocking directorate exist?

A) When both management and the board establish corporate strategic management B) When a corporation's employees are included on its board C) When one or more individuals on one board also serve on a board of a second firm D) When all board members are also employed by the corporation E) When two corporations have directors who serve on the board of a third firm Answer: E Difficulty: Challenging Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Analytical thinking 43) The U.S. Clayton Act and the Banking Act of 1933 A) promote interlocking directorates by U.S. companies to foster better communications and working relationships.

B) prohibit acts or contracts tending to create a monopoly.

C) prevent unfair practices in interstate commerce.

D) promote racial parity on the board of directors.

E) prohibit interlocking directorates by U.S. companies competing in the same industry.

Answer: E Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 44) What percentage of the 1000 largest U.S. firms shared at least one board member?

A) 45 B) 20 C) 5 D) 14 E) 30 Answer: B Difficulty: Challenging Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Analytical thinking

12 .

45) The function of a nominating committee is to A) find board members who have compatible viewpoints with management.

B) find outside board members for election by the stockholders.

C) search for internal employees who would provide valuable insight into the working operations of the corporation.

D) search for candidates who could bring prestige to the board.

E) find inside board members for election by the stockholders.

Answer: B Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 46) In Europe, ________ percent of boards use nominating committees to identify potential directors.

A) 60 B) 30 C) 50 D) 87 E) 97 Answer: A Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 47) A staggered board A) increases the chances of a hostile takeover.

B) has only a portion of the board stand for election each year.

C) makes it easier for shareholders to curb a CEO's power.

D) is seen in less than 50% of U.S. boards.

E) provides little continuity.

Answer: B Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Analytical thinking 48) All of the following reflect survey findings of the reasons for which individuals serve on a board EXCEPT A) notoriety/prestige.

B) interested in the business.

C) make a difference.

D) willing to always agree with executive decisions.

E) stay active in the business community.

Answer: D Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 13 .

49) ________ percent of U.S. boards have staggered boards.

A) 45 B) 63 C) 28 D) 37 E) 17 Answer: B Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 50) What percent of S&P 500 boards now have truly independent chairs?

A) Less than 10% B) Approximately 30% C) Approximately 50% D) Approximately 75% E) Over 90% Answer: B Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 51) A lead director creates a balance in power when the CEO is also A) the largest stockholder.

B) the Chair of the Board.

C) a board member.

D) the corporation's founder.

E) the chief financial officer (CFO).

Answer: B Difficulty: Challenging Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 52) All of the following are true of the dual chair/CEO position EXCEPT A) it is being increasingly criticized because of the potential for conflict of interest.

B) it endangers the ability to properly oversee top management.

C) it is separated by law in Germany, the Netherlands, and Finland.

D) it is more popular in American corporations than firms in the United Kingdom.

E) firms with a dual chair/CEO role have significantly better stock performance.

Answer: E Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge

14 .

53) In which of the following countries is the combination of CEO and Chair roles (where one person takes on both roles) not banned by law?

A) The Netherlands B) The United States C) Finland D) South Africa E) Germany Answer: B Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 54) According to the text, which of the following is not a typical standing committee of boards of directors?

A) Audit committee B) Compensation committee C) Executive committee D) Nominating committee E) Public relations committee Answer: E Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 55) Outside directors are sometimes called management directors.

Answer: FALSE Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 56) Stewardship theory states that problems arise in corporations because the agents (top management) are not willing to bear responsibility for their decisions unless they own a substantial amount of stock in the corporation.

Answer: FALSE Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 57) Agency theory suggests that the majority of a board needs to be from outside the firm.

Answer: TRUE Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge

15 .

58) Stewardship theory proposes insiders (senior leadership) tend to identify with the corporation and its success.

Answer: TRUE Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 59) Outsiders tend to be more objective and critical of corporate activities.

Answer: TRUE Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Analytical thinking 60) The majority of inside directors are the chief executive officer and either the chief operating officer or the chief financial officer of the corporation.

Answer: TRUE Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 61) Codetermination has been used in Germany since the 1950s, but has not been used in the United States.

Answer: FALSE Difficulty: Easy Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 62) An indirect interlocking directorate occurs when two corporations have directors who also serve on the board of a third firm.

Answer: TRUE Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 63) Interlocking directorates are a useful method for gaining both inside information about an uncertain environment and objective expertise about potential strategies and tactics. They are, however, increasingly frowned upon because of the possibility of collusion.

Answer: TRUE Difficulty: Challenging Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Analytical thinking

16 .

64) The practice of using nominating committees to identify potential directors is more common in Europe than in the United States.

Answer: FALSE Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 65) An argument in favor of staggered boards is that they make it more difficult for concerned shareholders to curb a CEO's power.

Answer: FALSE Difficulty: Challenging Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 66) As of 2018, approximately 50% of the S&P 500 boards had split the role of chair and CEO. Answer: TRUE Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 67) The combined chair/CEO position is being increasingly criticized because of the potential for conflict of interest.

Answer: TRUE Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 68) In agency theory, how is conflict of interest different from moral hazard?

Answer: Agency theory states that problems arise in corporations because the agents (top management) are not willing to bear responsibility for their decisions unless they own a substantial amount of stock in the corporation. A conflict of interest arises when the desires or objectives of the owners and the agents conflict. In contrast, moral hazard refers to the situation where it is difficult or expensive for the owners to verify what the agents are actually doing.

Difficulty: Challenging Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge 69) Explain the difference between a direct and indirect interlocking directorate.

Answer: A direct interlocking directorate occurs when two firms share a director or when an executive of one firm sits on the board of a second firm. An indirect interlock occurs when two corporations have directors who also serve on the board of a third firm.

Difficulty: Challenging Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Application of knowledge

17 .

70) What is the role of a lead director on a board?

Answer: In boards where the CEO and Chair positions are combined, a recommendation is that the outside directors elect a lead director. This person is consulted by the CEO/Chair regarding board affairs and coordinates the annual evaluation of the CEO. A lead director creates a balance in power when the CEO is also the Chair of the board.

Difficulty: Moderate Learning Obj.: 2.2: Explain how the composition of a board can affect its operation AACSB: Analytical thinking 71) Individuals who report incidents of questionable accounting or auditing in corporations are called A) stakeholders.

B) whistleblowers.

C) auditors.

D) shareholders.

E) directors.

Answer: B Difficulty: Moderate Learning Obj.: 2.3: Describe the impact of the Sarbanes-Oxley Act on corporate governance in the United States AACSB: Ethical understanding and reasoning 72) The Sarbanes-Oxley Act was designed to protect A) retired workers from losing their pensions.

B) CEOs from losing their golden parachutes.

C) CEO salary increases.

D) shareholders from the excesses and failed oversight of firms.

E) corporations from misguided whistleblowers.

Answer: D Difficulty: Moderate Learning Obj.: 2.3: Describe the impact of the Sarbanes-Oxley Act on corporate governance in the United States AACSB: Ethical understanding and reasoning 73) The Sarbanes-Oxley Act requires that a company disclose A) the number of insiders on their PR committee.

B) whether it has an outside director who is a "financial expert" serving on the audit committee.

C) the CEO's pay.

D) the CFO's pay.

E) the COO's pay Answer: B Difficulty: Moderate Learning Obj.: 2.3: Describe the impact of the Sarbanes-Oxley Act on corporate governance in the United States AACSB: Ethical understanding and reasoning

18 .

74) Which of the following is not one of the four major issues examined by the S&P Corporate Governance Scoring System?

A) Ownership structure and influence B) Research and development initiatives C) Financial stakeholder rights and relations D) Financial transparency and information disclosures E) Board structure and processes Answer: B Difficulty: Moderate Learning Obj.: 2.3: Describe the impact of the Sarbanes-Oxley Act on corporate governance in the United States AACSB: Ethical understanding and reasoning 75) Minority shareholders have virtually no power in A) large publicly owned corporations.

B) controlled corporations.

C) small publicly owned corporations.

D) technology corporations.

E) most publicly owned corporations.

Answer: B Difficulty: Moderate Learning Obj.: 2.3: Describe the impact of the Sarbanes-Oxley Act on corporate governance in the United States AACSB: Application of knowledge 76) The main purpose of the Sarbanes-Oxley Act was to protect the legal liabilities of directors in publicly owned corporations.

Answer: FALSE Difficulty: Moderate Learning Obj.: 2.3: Describe the impact of the Sarbanes-Oxley Act on corporate governance in the United States AACSB: Application of knowledge 77) Independent research using generally accepted measures of S&P's Corporate Governance Scoring System revealed that moving from the poorest to the best-governed categories had no effect on a firm's likelihood of receiving an investment-grade credit rating.

Answer: FALSE Difficulty: Moderate Learning Obj.: 2.3: Describe the impact of the Sarbanes-Oxley Act on corporate governance in the United States AACSB: Application of knowledge

19 .

78) Briefly describe what a "controlled company" is and its corporate governance implications.

Answer: A number of corporations are concerned that various requirements to improve corporate governance will constrain top management's ability to effectively manage the company. One approach to sidestepping new governance requirements is to become a "controlled company." This is a corporation in which an individual group or another company controls more than 50% of the voting shares. Such a firm is exempt from the requirements by the New York Stock Exchange and NASDAQ that a majority of the board and all members of key board committees be independent outsiders. In controlled companies, minority shareholders have virtually no power.

Difficulty: Challenging Learning Obj.: 2.3: Describe the impact of the Sarbanes-Oxley Act on corporate governance in the United States AACSB: Ethical understanding and reasoning 79) Which of the following is not a trend in corporate governance expected to continue?

A) Institutional investors are becoming active on boards.

B) Boards are getting more involved in shaping company strategy.

C) Boards are getting larger.

D) Shareholders are demanding directors and top managers own more than token amounts of stock in the corporation.

E) Outside directors are taking charge of annual CEO evaluations.

Answer: C Difficulty: Moderate Learning Obj.: 2.4: Discuss trends in corporate governance AACSB: Application of knowledge 80) A ________ is a term that refers to a dramatic event that empowers the current owners which will take place upon receiving an unwanted attempt at acquisition.

A) merger B) poison pill C) capitulation D) takeover E) greenmail Answer: B Difficulty: Moderate Learning Obj.: 2.4: Discuss trends in corporate governance AACSB: Application of knowledge 81) One trend in corporate governance is that corporate boards are getting bigger.

Answer: FALSE Difficulty: Easy Learning Obj.: 2.4: Discuss trends in corporate governance AACSB: Application of knowledge

20 .

82) Identify and briefly describe any three recent trends in corporate governance.

Answer: One trend in corporate governance is that institutional investors (such as pension funds and mutual funds) are becoming active on boards and are putting increasing pressure on top management to improve corporate performance. A second trend is the demand from shareholders that directors and top managers own more than token amounts of stock in the corporation, in other words, to have more skin in the game. Finally, society, in the form of special interest groups, increasingly expects boards of directors to balance the economic goal of profitability with the social needs of society.

Difficulty: Moderate Learning Obj.: 2.4: Discuss trends in corporate governance AACSB: Application of knowledge 83) A large-scale research study that used more than 1500 companies with large market capitalization found that A) there is a negative correlation between CEO pay and company performance.

B) there is a positive correlation between CEO pay and company performance.

C) there is no correlation in the large companies studied between CEO pay and company performance.

D) CEO pay packages were rejected by 90% of shareholders.

E) most compensation systems were aligned with the interests of shareholders.

Answer: A Difficulty: Challenging Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Analytical thinking 84) ________ is when the confidence of executive leaders blinds them to information that is contrary to a decided course of action.

A) Overconfidence B) Lethargy C) Cognitive dissonance D) Hubris.

E) Agency problems Answer: D Difficulty: Challenging Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Analytical thinking

21 .

85) ________ leadership is the directing of activities toward the accomplishment of corporate objectives.

A) Operational B) Functional C) Executive D) Autocratic E) Democratic Answer: C Difficulty: Easy Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 86) Leaders who provide change and movement in an organization by providing a vision for that change are called A) transactional leaders.

B) transformational leaders.

C) functional leaders.

D) organizational leaders.

E) top leaders.

Answer: B Difficulty: Moderate Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 87) A strategic vision is a description of what the company A) has done in the past.

B) is doing currently.

C) is capable of becoming.

D) is doing in the marketplace.

E) is doing to be profitable.

Answer: C Difficulty: Easy Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge

22 .

88) Individuals such as Thasunda Brown Duckett at TIAA and Anita Roddick at The Body Shop who energized their companies and provided change and movement by providing a vision for that change are known as A) transformational leaders.

B) strategic implementers.

C) strategists.

D) corporate governors.

E) directors.

Answer: A Difficulty: Easy Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 89) Which of the following is not a key characteristic of transformational executive leaders?

A) The CEO presents a role for others to identify with and to follow.

B) The CEO communicates high performance standards for all employees.

C) The CEO demonstrates confidence in the employees' abilities to meet the expressed high standards.

D) The CEO energizes the board to formulate strategy.

E) The CEO articulates a strategic vision for the corporation.

Answer: D Difficulty: Moderate Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 90) According to the research, in stable environments, the most appropriate type of planning for multidivisional corporations is A) top-down strategic planning.

B) bottom-up strategic planning.

C) horizontal strategic planning.

D) concurrent strategic planning.

E) composite strategic planning.

Answer: B Difficulty: Moderate Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Analytical thinking

23 .

91) According to a survey of 156 large corporations, in what percentage of the firms were strategies first proposed in business units and then sent to headquarters for approval?

A) 10% B) 36% C) 50% D) 66% E) 96% Answer: D Difficulty: Easy Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 92) In what became clear was a mistake, Carly Fiorina used the power of her office and her considerable influence with a relatively weak board of directors to push through the Compaq Computer acquisition over the objections of the founders family and many significant shareholders. In this instance, Carly Fiorina is an example of a(n) A) transformational leader.

B) overconfident leader.

C) transactional leader.

D) successful leader.

E) functional leader.

Answer: B Difficulty: Moderate Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 93) Top management responsibilities, especially those of the CEO, involve getting things accomplished through and with others in order to meet the corporate objectives.

Answer: TRUE Difficulty: Challenging Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 94) Top management's enthusiasm (or lack of it) about the corporation tends to be contagious.

Answer: TRUE Difficulty: Easy Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge

24 .

95) Transformational leaders transform organizations from market leaders in one industry to market leadership in another.

Answer: FALSE Difficulty: Moderate Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 96) The negative side of confident executive leaders is that their very confidence may lead to hubris, in which their confidence blinds them to information that is contrary to a decided course of action.

Answer: TRUE Difficulty: Challenging Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 97) Jeff Bezos, CEO of Amazon, uses the S team (senior management) to engage in continuous strategic planning.

Answer: TRUE Difficulty: Moderate Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 98) Usually, the strategic planning staff is charged with supporting only top management in the strategic planning process.

Answer: FALSE Difficulty: Moderate Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 99) What are the key characteristics of transformational leaders?

Answer: Transformational leaders are those who provide change and movement in an organization by providing a vision for that change. They exhibit three key characteristics. The first is that they articulate a strategic vision for the corporation. They do this by envisioning the company not as it currently is but as it can become. The second is that they present a role for others to identify with and to follow. They empathize with followers and set an example in terms of behavior, dress, and actions. Finally, transformational leaders communicate high-performance standards and also show confidence in the followers' ability to meet these standards. They achieve this by empowering followers by raising their beliefs in their own capabilities.

Difficulty: Moderate Learning Obj.: 2.5: Explain how executive leadership is an important part of strategic management AACSB: Application of knowledge 25 .

Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 3 Social Responsibility and Ethics in Strategic Management 1) The concept that proposes corporations have responsibilities to society that extend beyond making a profit is known as A) flexible responsibility.

B) social responsibility.

C) social flexibility.

D) managerial responsibility.

E) profit maximization.

Answer: B Difficulty: Easy Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 2) Which one of the following argued against the concept of social responsibility as a function of business?

A) William J. Byron B) Milton Friedman C) Archie Carroll D) Steve Jobs E) Elon Musk Answer: B Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 3) Who said "maximizing profits is like maximizing food" and that maximization of profits cannot be the primary obligation of business?

A) Adam Smith B) Edward Freeman C) Archie Carroll D) William J. Byron E) Milton Friedman Answer: D Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Application of knowledge

1 .

4) Economist Milton Friedman has argued that a business's only responsibility is to A) maximize profits and stay within the rules of the game.

B) sustain its market share.

C) promote the welfare of society.

D) satisfy its employees.

E) satisfy its customers.

Answer: A Difficulty: Easy Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Application of knowledge 5) According to Archie Carroll, the responsibility that management of a business organization has to produce goods and services of value to society so that the firm may repay its creditors and stockholders is called A) legal responsibilities.

B) ethical responsibilities.

C) economic responsibilities.

D) financial responsibilities.

E) discretionary responsibilities.

Answer: C Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Application of knowledge 6) Society generally expects firms to work with the employees and the community in planning for layoffs, even though no law may require this. According to Archie Carroll, this is an example of an organization's A) legal responsibilities.

B) ethical responsibilities.

C) financial responsibilities.

D) economic responsibilities.

E) discretionary responsibilities.

Answer: B Difficulty: Easy Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Application of knowledge

2 .

7) According to Archie Carroll, an organization's philanthropic contributions would be an example of A) legal responsibilities.

B) ethical responsibilities.

C) financial responsibilities.

D) economic responsibilities.

E) discretionary responsibilities.

Answer: E Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 8) The term "social responsibility," according to Archie Carroll, can be viewed as a combination of an A) organization's ethical and discretionary responsibilities.

B) organization's legal and ethical responsibilities.

C) organization's economic and ethical responsibilities.

D) organization's financial and economic responsibilities.

E) organization's legal and discretionary responsibilities.

Answer: A Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 9) Which of the following is the correct order of priority of Archie Carroll's four responsibilities?

A) Legal, economic, ethical, and discretionary B) Legal, ethical, discretionary, and economic C) Economic, legal, ethical, and discretionary D) Economic, ethical, discretionary, and legal E) Ethical, economic, legal, and discretionary Answer: C Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning

3 .

10) A company providing day-care centers is an example of which of Archie Carroll's responsibilities?

A) Economic B) Legal C) Justice D) Ethical E) Discretionary Answer: E Difficulty: Challenging Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Application of knowledge 11) Training the hard-core unemployed is an example of which of Archie Carroll's responsibilities?

A) Economic B) Legal C) Justice D) Ethical E) Discretionary Answer: E Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Application of knowledge 12) Milton Friedman's position on social responsibility A) proposes that a lack of social responsibility results in increased government regulations.

B) appears to be losing traction with business executives.

C) suggests that a lack of social responsibility reduces a firm's efficiency.

D) explains why firms are using their socially responsible actions for competitive advantage.

E) mirrors Carroll's position.

Answer: B Difficulty: Challenging Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning

4 .

13) The goodwill of key stakeholders is called A) economic capital.

B) market capital.

C) social capital.

D) discretionary capital.

E) ethical capital.

Answer: C Difficulty: Challenging Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 14) Being socially responsible A) does not influence a company's overall reputation.

B) has opened doors in local communities.

C) cannot enhance consumers' perceptions of the firm.

D) has a negative effect on the firm's financial performance.

E) cannot be balanced with profit maximization.

Answer: B Difficulty: Challenging Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 15) Which of the following is not one of the examples provided as an organizational benefit received from being socially responsible?

A) They can attract outstanding employees who prefer working for a socially responsible firm.

B) They are more likely to be welcomed into a foreign country.

C) They are more likely to attract capital infusions from investors who view reputable companies as desirable long-term investments.

D) They are guaranteed to maximize resource productivity and reduce the average payback period of investment.

E) Their environmental concerns may enable them to charge premium prices and gain brand loyalty.

Answer: D Difficulty: Challenging Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning

5 .

16) Which one of the following is not one of Archie Carroll's four responsibilities for business organizations?

A) Economic B) Market C) Legal D) Ethical E) Discretionary Answer: B Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 17) The concept of social responsibility proposes that a corporation has responsibilities to society that extend beyond making a profit.

Answer: TRUE Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 18) Friedman referred to profit maximization as a "fundamentally subversive doctrine."

Answer: FALSE Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 19) Archie Carroll contends that the primary goal of business is profit maximization.

Answer: FALSE Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 20) Archie Carroll proposes that managers in companies have four responsibilities: economic, legal, ethical, and discretionary.

Answer: TRUE Difficulty: Challenging Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning

6 .

21) According to Carroll, discretionary responsibilities are defined by governments in laws that management is expected to obey.

Answer: FALSE Difficulty: Easy Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 22) The difference between ethical and discretionary responsibilities is that few people expect an organization to fulfill ethical responsibilities.

Answer: FALSE Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 23) According to Archie Carroll, discretionary responsibilities are purely voluntary obligations a corporation assumes.

Answer: TRUE Difficulty: Easy Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 24) The goodwill of key stakeholders is called social capital.

Answer: TRUE Difficulty: Easy Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 25) A study concerning social responsibility indicates that socially responsible firms are more likely to be welcomed into another country.

Answer: TRUE Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning

7 .

26) In Archie Carroll's list of responsibilities of a business organization's management, how are ethical responsibilities different from discretionary responsibilities?

Answer: Archie Carroll regards ethical responsibilities as following the generally held beliefs about behavior in a society. One example of this concerns employee layoffs. Society generally expects firms to work with the employees and the community in planning for layoffs, even though no laws require this. In contrast, discretionary responsibilities are the purely voluntary obligations a corporation assumes. Examples of discretionary responsibilities are a company's philanthropic contributions and training the hard-core unemployed.

Difficulty: Moderate Learning Obj.: 3.1: Discuss the relationship between social responsibility and corporate performance AACSB: Ethical understanding and reasoning 27) An overarching strategy that explicitly articulates the firm's ethical relationship with its stakeholders is a(n) A) enterprise strategy.

B) corporate strategy.

C) market strategy.

D) functional strategy.

E) strategic audit.

Answer: A Difficulty: Moderate Learning Obj.: 3.2: Explain the concept of sustainability AACSB: Ethical understanding and reasoning 28) A corporation's task environment includes a large number of groups with interest in a business organization's activities. These groups are referred to as A) stakeholders.

B) stockholders.

C) organizers.

D) environmentalists.

E) competitors.

Answer: A Difficulty: Moderate Learning Obj.: 3.2: Explain the concept of sustainability AACSB: Analytical thinking 29) The Dow Jones Sustainability Index includes A) environmental, economic, and quality factors.

B) industry, environmental, and economic factors.

C) environmental, economic, and social factors.

D) ethical, economic, and social factors.

E) environmental, ethical, and quality factors.

Answer: C Difficulty: Moderate Learning Obj.: 3.2: Explain the concept of sustainability AACSB: Ethical understanding and reasoning 8 .

30) In order for a business to be sustainable, it must satisfy all of Carroll's responsibilities, including its economic, legal, ethical, and A) market responsibilities.

B) legal financial responsibilities.

C) stockholder responsibilities.

D) discretionary responsibilities.

E) competitive responsibilities.

Answer: D Difficulty: Moderate Learning Obj.: 3.2: Explain the concept of sustainability AACSB: Analytical thinking 31) The broader concept of sustainability is closely aligned with Milton Friedman's view of profit maximization.

Answer: FALSE Difficulty: Easy Learning Obj.: 3.2: Explain the concept of sustainability AACSB: Ethical understanding and reasoning 32) Stakeholders are all groups with interest in a business organization's activities.

Answer: TRUE Difficulty: Easy Learning Obj.: 3.2: Explain the concept of sustainability AACSB: Application of knowledge 33) In any one strategic decision, the interests of one stakeholder group seldom conflict with another.

Answer: FALSE Difficulty: Easy Learning Obj.: 3.2: Explain the concept of sustainability AACSB: Analytical thinking 34) Who are stakeholders? Why do they matter to a corporation?

Answer: A corporation's task environment includes a large number of groups with interest in a business organization's activities. They are called stakeholders because they affect or are affected by the achievement of the firm's objectives. They matter to a corporation because in any one strategic decision, the interests of one stakeholder group can conflict with those of another. This means that the corporation may need to craft an enterprise strategy — an overarching strategy that explicitly articulates the firm's ethical relationship with its stakeholders.

Difficulty: Moderate Learning Obj.: 3.2: Explain the concept of sustainability AACSB: Ethical understanding and reasoning

9 .

35) The final step in stakeholder analysis is to A) identify primary stakeholders.

B) monitor what all the stakeholders want.

C) identify the stakeholders with an indirect stake in the corporation.

D) estimate the effect on each stakeholder group from any particular strategic decision.

E) identify the influence of each stakeholder group.

Answer: D Difficulty: Easy Learning Obj.: 3.3: Conduct a stakeholder analysis AACSB: Application of knowledge 36) All of the following are considered primary stakeholders EXCEPT A) customers.

B) governments.

C) employees.

D) shareholders.

E) creditors.

Answer: B Difficulty: Moderate Learning Obj.: 3.3: Conduct a stakeholder analysis AACSB: Application of knowledge 37) All of the following are considered secondary stakeholders EXCEPT A) governments.

B) suppliers.

C) competitors.

D) trade associations.

E) activists.

Answer: B Difficulty: Moderate Learning Obj.: 3.3: Conduct a stakeholder analysis AACSB: Application of knowledge

10 .

38) Which of the following statements is not true concerning secondary stakeholders?

A) Secondary stakeholders are those who have only an indirect stake in the corporation, but who are affected by corporate activities.

B) Secondary stakeholders may include non-governmental organizations (like Greenpeace) and trade associations.

C) Because the corporation's relationship with each of these stakeholders is usually not covered by any written or verbal agreement, there is room for misunderstanding.

D) Aside from competitors, secondary stakeholders are not usually monitored by the corporation in any systematic fashion.

E) Secondary stakeholders have sufficient bargaining power to directly affect the corporation's activities.

Answer: E Difficulty: Moderate Learning Obj.: 3.3: Conduct a stakeholder analysis AACSB: Analytical thinking 39) In which step of stakeholder analysis are secondary stakeholders identified?

A) First B) Second C) Third D) Fourth E) Fifth Answer: B Difficulty: Moderate Learning Obj.: 3.3: Conduct a stakeholder analysis AACSB: Ethical understanding and reasoning 40) The final step in stakeholder analysis is to estimate the effect on each stakeholder group from any particular strategic decision.

Answer: TRUE Difficulty: Easy Learning Obj.: 3.3: Conduct a stakeholder analysis AACSB: Application of knowledge 41) Secondary stakeholders have a direct connection with the corporation and have sufficient bargaining to directly affect corporate activities.

Answer: FALSE Difficulty: Easy Learning Obj.: 3.3: Conduct a stakeholder analysis AACSB: Application of knowledge 42) A nongovernmental organization such as Greenpeace is typically a secondary stakeholder.

Answer: TRUE Difficulty: Moderate Learning Obj.: 3.3: Conduct a stakeholder analysis AACSB: Application of knowledge 11 .

43) In stakeholder analysis, how are primary stakeholders different from secondary stakeholders?

Answer: Stakeholder analysis is the identification and evaluation of corporate stakeholders.

Primary stakeholders are those who have a direct connection with the corporation and who have sufficient bargaining power to affect corporate activities directly. Primary stakeholders include customers, employees, suppliers, shareholders, and creditors. Secondary stakeholders are those who have only an indirect stake in the corporation, but who are also affected by corporate activities. These include nongovernmental organizations (NGOs), activists, local communities, trade associations, competitors, and governments.

Difficulty: Easy Learning Obj.: 3.3: Conduct a stakeholder analysis AACSB: Ethical understanding and reasoning 44) The ________ has been measuring the state of ethics in organizations since 2007.

A) Annenberg Public Policy Center B) Kauffman Foundation C) Gates Foundation D) The Ethics Resource Center E) U.S. Government Answer: D Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Application of knowledge 45) According to a 2018 survey by The Ethics Resource Center, what percentage of U.S. employees surveyed said that they had witnessed misconduct at work in the past 12 months?

A) 20 B) 25 C) 30 D) 35 E) 40 Answer: C Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Application of knowledge 46) As opposed to rule-based countries, relationship-based countries tend to A) be more transparent and have a higher degree of corruption.

B) be more transparent and have a lower degree of corruption.

C) be less transparent and have a lower degree of corruption.

D) be less transparent and have a higher degree of corruption.

E) have the same transparency and same degree of corruption.

Answer: D Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning

12 .

47) Of the six values measured by the Allport-Vernon-Lindzey Study of Values test, executives from Japan, Korea, India, and Australia consistently score highest on ________ values and lowest on ________ values.

A) religious and theoretical; economic and social B) religious and economic; political and social C) economic and political; social and religious D) social and religious; aesthetic and political E) religious; economic Answer: C Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Application of knowledge 48) Relationship-based governance A) is generally found in developed nations.

B) relies on publicly verifiable information.

C) has an infrastructure to provide and monitor information.

D) is inherently transparent.

E) requires an investment in time and money to build relationships.

Answer: E Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 49) Which of the following is the most common reason given by surveyed executives for bending the rules to attain their objectives?

A) Organizational performance required it B) Rules were too rigid C) No one will know D) No oversight E) Rules are different for executives than staff Answer: A Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 50) Which of the following countries, according to a U.S. News report is considered least transparent?

A) Denmark B) Canada C) Germany D) Serbia E) Netherlands Answer: D Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 13 .

51) Some people claim that morality is relative to some personal, social, or cultural standard and that there is no method for deciding whether one decision is better than another. This is called A) ethical relativity.

B) moral philosophy.

C) comparative ethics.

D) cultural imperialism.

E) moral relativism.

Answer: E Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 52) The adage, "Everyone's doing it" exhibits which of the following types of moral relativism?

A) Naive relativism B) Cultural relativism C) Role relativism D) Social group relativism E) Organizational relativism Answer: D Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 53) All of the following are one of the four types of moral relativism EXCEPT A) naive relativism.

B) role relativism.

C) principled relativism.

D) social group relativism.

E) cultural relativism.

Answer: C Difficulty: Easy Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 54) Naive relativism is based on the belief that A) morality is relative to a particular culture.

B) all moral decisions are deeply personal and that each person should be allowed to interpret situations and act according to personal moral values.

C) social roles carry with them certain obligations.

D) morality is simply a matter of following the norms of an individual's peer group.

E) a decision is legitimate if it is common practice.

Answer: B Difficulty: Easy Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning

14 .

55) "When in Rome, do as the Romans do" reflects which type of moral relativism?

A) Naive relativism B) Role relativism C) Principled relativism D) Cultural relativism E) Social group relativism Answer: D Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Analytical thinking 56) In 2018, The Ethics Resource Center found that of the employees who had witnessed misconduct at work ________ percent had reported it.

A) 95 B) 84 C) 82 D) 76 E) 69 Answer: D Difficulty: Easy Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 57) ________ relativism is based on the belief that all moral decisions are deeply personal and that individuals have the right to run their own lives and so each person should be allowed to interpret situations and act according to personal moral values.

A) Naive B) Role C) Principled D) Cultural E) Social group Answer: A Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 58) A real danger in embracing the ________ relativism view is that the person may incorrectly believe that a certain action is commonly accepted practice in an industry when it is not.

A) social group B) principled C) naive D) role E) cultural Answer: A Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 15 .

59) According to Kohlberg, the first level of moral development, characterized by concern for self, is called A) principled.

B) conventional.

C) essential.

D) preconventional.

E) fundamental.

Answer: D Difficulty: Easy Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 60) According to Kohlberg, the second level of moral development, characterized by considerations of society's laws and norms, is called A) principled.

B) essential.

C) conventional.

D) preconventional.

E) fundamental.

Answer: C Difficulty: Easy Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 61) According to Kohlberg, the third level of moral development, characterized by a person's adherence to an internal moral code, is called A) principled.

B) conventional.

C) essential.

D) preconventional.

E) fundamental.

Answer: A Difficulty: Easy Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 62) According to Kohlberg, what stage of moral development do fewer than 20% of U.S. adults occupy?

A) Principled stage B) Conventional stage C) Essential stage D) Preconventional stage E) Fundamental stage Answer: A Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 16 .

63) A code of ethics is important to clarify company expectations of employee conduct in various situations and to A) reduce the burden on the judicial system.

B) make it clear that the company expects its people to recognize the ethical dimensions in decision and actions.

C) promote a high level of societal norms.

D) encourage individuals to strive for good citizenship and corporations to contribute positively to society.

E) minimize the possibility of mandatory regulations.

Answer: B Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 64) In support of whistle-blowers, the U.S. False Claims Act gives whistle-blowers what percentage of any damages recovered in cases where the government is defrauded?

A) 1-3% B) 15-30% C) 25-45% D) 50-60% E) 60-75% Answer: B Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Application of knowledge 65) Approximately what percentage of U.S. business corporations have codes of ethics?

A) 90 B) 70 C) 50 D) 30 E) 10 Answer: C Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Application of knowledge

17 .

66) According to a survey by the Open Compliance and Ethics Group, which of the following companies has a strong moral culture?

A) The Walt Disney Company B) Apple C) Netflix D) General Motors E) Levi Strauss Answer: E Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 67) Developed nations tend to have relationship-based governance.

Answer: FALSE Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 68) Cultural norms and values seldom guide ethical behavior in business.

Answer: FALSE Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 69) Of the three most common reasons cited by executives representing diverse national and multinational corporations for bending the rules to attain their objectives, one is ambiguous or out of date rules.

Answer: TRUE Difficulty: Easy Learning Obj.: 3.4: Explain why people may act unethically AACSB: Application of knowledge 70) Relationship-based countries tend to be less transparent and have a higher degree of corruption than do rule-based countries.

Answer: TRUE Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 71) The statement, "When in Rome, do as the Romans do," reflects the essence of social group relativism.

Answer: FALSE Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Analytical thinking

18 .

72) Kohlberg's preconventional level is characterized by consideration of society's laws and norms.

Answer: FALSE Difficulty: Easy Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 73) Moral relativism could enable a person to justify almost any sort of decision or action, so long as it is not declared illegal.

Answer: TRUE Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 74) According to Kohlberg's levels of moral development, the preconventional level is characterized by a concern for self.

Answer: TRUE Difficulty: Easy Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 75) Kohlberg places fewer than 20 percent of U.S. adults in the principled level of development.

Answer: TRUE Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 76) A code of ethics is a useful way to promote ethical behavior.

Answer: TRUE Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 77) Research indicates that when faced with a question of ethics, managers tend to ignore codes of ethics and try to solve their dilemma on their own.

Answer: TRUE Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 78) A code of ethics clarifies company expectations of employee conduct in various situations.

Answer: TRUE Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning

19 .

79) How does a country's governance system impact ethical behavior?

Answer: There is no worldwide standard of conduct for businesspeople. Cultural norms and values vary between countries. Some of these differences may derive from whether a country's governance system is rule-based or relationship-based. Relationship-based countries (typically developing nations) tend to be less transparent and have a higher degree of corruption than do rule-based countries (typically developed nations).

Difficulty: Moderate Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 80) What is moral relativism? What are the four types of moral relativism?

Answer: Moral relativism claims that morality is relative to some personal, social, or cultural standard and that there is no method for deciding whether one decision is better than another.

Moral relativism could enable a person to justify almost any sort of decision or action, so long as it is not declared illegal. The four types of moral relativism are naïve relativism, role relativism, social group relativism, and cultural relativism.

Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 81) Briefly describe what codes of ethics are and how they are useful.

Answer: A code of ethics specifies how an organization expects its employees to behave while on the job. Developing a code of ethics can be a useful way to promote ethical behavior. Given that most people are at Kohlberg's conventional level of moral development, an external code of conduct as exemplified by a code of ethics helps in justifying actions. A code of ethics (1) clarifies company expectations of employee conduct in various situations and (2) makes clear that the company expects its people to recognize the ethical dimensions in decisions and actions.

Difficulty: Challenging Learning Obj.: 3.4: Explain why people may act unethically AACSB: Ethical understanding and reasoning 82) Ethics is defined as A) formal codes that permit or forbid certain behaviors.

B) a general rule of conduct of personal behavior, based on religious or philosophical grounds.

C) consensually accepted standards of behavior for an occupation, trade, or profession.

D) imposing one's morality upon another.

E) voluntary obligations assumed by an individual or organization.

Answer: C Difficulty: Easy Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning

20 .

83) Which of the following approaches to ethical behavior proposes that actions and plans should be judged by their consequences?

A) Utilitarian B) Collective rights C) Justice D) Individual rights E) Egalitarian Answer: A Difficulty: Easy Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 84) According to Cavanagh, the question, "does it optimize the satisfaction of all stakeholders?" addresses which aspect of ethical problem solving?

A) Utility B) Equity C) Rights D) Justice E) Legitimacy Answer: A Difficulty: Challenging Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 85) Morality is defined as A) formal codes that permit or forbid certain behaviors.

B) a general rule of conduct of personal behavior, based on religious or philosophical grounds.

C) consensually accepted standards of behavior for an occupation, trade, or profession.

D) imposing one's morality upon another.

E) voluntary obligations assumed by an individual or organization.

Answer: B Difficulty: Easy Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning

21 .

86) Law is defined as A) formal codes that permit or forbid certain behaviors and may or may not enforce ethics or morality.

B) a general rule of conduct of personal behavior, based on religious or philosophical grounds.

C) consensually accepted standards of behavior for an occupation, trade, or profession.

D) imposing one's morality upon another.

E) voluntary obligations assumed by an individual or organization.

Answer: A Difficulty: Moderate Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 87) The approach to ethical behavior which proposes that actions and plans should be judged by their consequences, thus producing the greatest benefit to society with the least harm or the lowest cost is called A) individual rights approach.

B) mercantilism approach.

C) utilitarian approach.

D) justice approach.

E) moral imperialism approach.

Answer: C Difficulty: Moderate Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 88) The approach to ethical behavior which proposes that human beings have certain fundamental rights that should be respected in all decisions, thus avoiding interfering with the rights of others is called A) individual rights approach.

B) mercantilism approach.

C) utilitarian approach.

D) justice approach.

E) moral imperialism approach.

Answer: A Difficulty: Easy Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning

22 .

89) According to the utilitarian approach, CEOs give priority to the stakeholders who have the most A) money and largest holdings.

B) legitimacy and the best PR. C) power, legitimacy, and urgency.

D) stability and legitimacy.

E) utility and power.

Answer: C Difficulty: Challenging Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 90) According to the utilitarian approach, stakeholders who have the most demand for immediate attention have A) power.

B) legitimacy.

C) urgency.

D) utility.

E) stability.

Answer: C Difficulty: Easy Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 91) The approach to ethical behavior, which proposes that decision makers be equitable, fair, and impartial in the distribution of costs and benefits to individuals and groups is called A) individual rights approach.

B) mercantilism approach.

C) utilitarian approach.

D) justice approach.

E) moral imperialism approach.

Answer: D Difficulty: Moderate Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning

23 .

92) According to the utilitarian approach, stakeholders who have the ability to affect the company have A) agency.

B) stability.

C) power.

D) legitimacy.

E) urgency.

Answer: C Difficulty: Challenging Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 93) Which approach to ethical behavior can encourage selfish behavior when a person defines a personal need or want as a "right"?

A) Utilitarian B) Individual rights C) Justice approach D) Categorical imperative E) Moral relativism Answer: B Difficulty: Challenging Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 94) The principle that liberty should be equal for all persons is called A) compensatory justice.

B) fairness.

C) relevant justice.

D) distributive justice.

E) legitimacy.

Answer: B Difficulty: Moderate Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning

24 .

95) The principle, which proposes that punishment should be determined on a proportional basis to the offense is called A) compensatory justice.

B) retributive justice.

C) relevant justice.

D) distributive justice.

E) punitive justice.

Answer: B Difficulty: Easy Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 96) The principle, which argues that wrongs should be restituted in proportion to the offense suffered is called A) compensatory justice.

B) retributive justice.

C) relevant justice.

D) distributive justice.

E) punitive justice.

Answer: A Difficulty: Easy Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 97) Issues in affirmative action such as reverse discrimination are examples of conflicts between distributive and A) punitive justice.

B) retributive justice.

C) compensatory justice.

D) egalitarian justice.

E) retaliatory justice.

Answer: C Difficulty: Challenging Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Analytical thinking

25 .

98) According to Cavanagh, using the ________ criterion, to determine if padding an expense account is ethical or not, one would ask if it optimizes the satisfactions of all stakeholders.

A) morality B) utility C) rights D) justice E) relativism Answer: B Difficulty: Moderate Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 99) Immanuel Kant's principles to guide actions are also called A) organizational guidelines.

B) codes of ethics.

C) standard operating procedures.

D) categorical imperatives.

E) foundational values.

Answer: D Difficulty: Moderate Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 100) Morality refers to formal codes that permit or forbid certain behaviors.

Answer: FALSE Difficulty: Challenging Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 101) A problem with the individual rights approach to ethics is the difficulty in defining fundamental rights.

Answer: TRUE Difficulty: Moderate Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Analytical thinking

26 .

102) Using Cavanagh's rights approach, the VP allowed to fly first class might argue that they are owed this type of reward for the extra strain that an international trip puts on personal relationships or work performance.

Answer: TRUE Difficulty: Moderate Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning 103) Discuss the justice approach to ethical behavior.

Answer: The justice approach to ethical behavior proposes that decision makers be equitable, fair, and impartial in the distribution of costs and benefits to individuals and groups. The approach follows the principles of distributive justice and fairness. In addition, the approach can also include the concepts of retributive justice and compensatory justice. As an example, affirmation action issues such as reverse discrimination illustrate the conflicts between distributive and compensatory justice.

Difficulty: Challenging Learning Obj.: 3.5: Describe different views of ethics according to the utilitarian, individual rights, and justice approaches AACSB: Ethical understanding and reasoning

27 .

Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 4 Environmental Analysis and Industry Analysis 1) The combination of the degree of complexity and the degree of change existing in an organization's external environment is/are called A) strategic factors.

B) strategic issues.

C) environmental uncertainty.

D) strategic fit.

E) scenarios.

Answer: C Difficulty: Easy Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge 2) According to the text, one reason environmental uncertainty is an opportunity to strategic managers is because A) it is not a costly and time-consuming process.

B) it creates a new playing field in which creativity and innovation can play a major part in strategic decisions.

C) it forces the strategic manager to be more stable.

D) it helps their ability to develop long-range plans and make strategic decisions.

E) there are many controllable variables.

Answer: B Difficulty: Moderate Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Analytical thinking 3) Which of the following is not descriptive of external environmental analysis?

A) Used as a tool to ensure a corporation's long-term health B) Used to monitor, evaluate, and disseminate information relevant to the organizational development of strategy C) Used to identify major stockholders D) Used as a tool for corporations to avoid strategic surprise E) Used to determine a firm's competitive advantage Answer: C Difficulty: Moderate Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge

1 .

4) The overarching term encompassing the monitoring, evaluation, and dissemination of information relevant to the organizational development of strategy is called A) strategic planning.

B) environmental analysis.

C) long-term planning.

D) strategic analysis.

E) stakeholder analysis.

Answer: B Difficulty: Easy Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge 5) Which of the following is not an element of the organization's task environment?

A) Local communities B) Trade associations C) Governments D) Technological developments E) Special-interest groups Answer: D Difficulty: Easy Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Analytical thinking 6) The ________ environment includes physical resources, wildlife, and climate that are an inherent part of existence on Earth.

A) task B) natural C) internal D) societal E) controllable Answer: B Difficulty: Moderate Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge

2 .

7) Which of the following is not a major force in the societal environment?

A) Political-legal forces B) Labor forces C) Economic forces D) Technological forces E) Sociocultural forces Answer: B Difficulty: Easy Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge 8) Industry analysis refers to an in-depth examination of key factors within a corporation's task environment.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge 9) Internalities are costs not included in a business firm's accounting system, but felt by others.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Reflective thinking 10) Environmental analysis is an overarching term encompassing the monitoring, evaluation, and dissemination of information relevant to the organizational development of strategy.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge 11) A corporation uses environmental analysis to avoid strategic surprise and ensure long-term health.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge

3 .

12) Economic forces regulate the values, mores, and customs of society.

Answer: FALSE Difficulty: Easy Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge 13) The societal environment includes the economic, technological, political-legal, and sociocultural forces.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge 14) A corporation's task environment is typically focused on the industry within which the firm operates.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge 15) Political-legal forces are those that regulate the exchange of materials, money, energy, and information.

Answer: FALSE Difficulty: Easy Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Analytical thinking 16) Today's organizations must scan the natural environment for factors that might previously have been taken for granted.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Analytical thinking

4 .

17) Describe briefly the concept of externalities.

Answer: Until the 20th century, the natural environment was generally perceived by businesspeople to be a given — something to exploit, not conserve. It was viewed as a resource — something that could be bought, sold, or sometimes shared. Side effects, such as pollution, were considered to be externalities, costs not included in a business firm's accounting system, but felt by others. Eventually these externalities were identified by governments, which passed regulations to force business corporations to deal with the side effects of their activities.

Difficulty: Easy Learning Obj.: 4.1: List the aspects of an organization's environment that can influence its longterm decisions AACSB: Application of knowledge 18) Growth rate of the population and consumer activism are examples of variables that fall under the ________ dimension in the societal environment.

A) technological B) sociocultural C) economic D) ecological E) political-legal Answer: B Difficulty: Moderate Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Analytical thinking 19) Which societal force includes unionization trends?

A) Political-legal forces B) Labor forces C) Economic forces D) Technological forces E) Sociocultural forces Answer: E Difficulty: Moderate Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge

5 .

20) Which of the following is not one of the eight current sociocultural trends mentioned in the text?

A) Increasing environmental awareness.

B) Expanding seniors' market.

C) Decline of the mass market.

D) Wage/price controls.

E) Impact of millennials.

Answer: D Difficulty: Moderate Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge 21) Which is the largest age group of the current generations in the U.S.?

A) Baby Boomers B) Generation Z C) Silent Generation D) Generation X E) Generation Y Answer: B Difficulty: Easy Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge 22) The effects of climate change on companies can be grouped into six categories of risks.

Which of the following is not one of them?

A) Regulatory risk B) Social risk C) Supply chain risk D) Product and technology risk E) Reputational risk Answer: B Difficulty: Easy Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge

6 .

23) When strategic managers have a willingness to reject unfamiliar as well as negative information it is referred to as A) strategic paralysis.

B) corporate inertia.

C) management indifference.

D) strategic myopia.

E) corporate apathy.

Answer: D Difficulty: Moderate Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge 24) Those born between 1981 and 1996 are called A) baby boomers.

B) millennials.

C) generation X. D) generation Z. E) in-betweeners.

Answer: B Difficulty: Challenging Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge 25) The transferring of profits from a foreign subsidiary to a corporation's headquarters is known as repatriation of profits.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge 26) An example of an economic variable in the societal environment is unionization.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Analytical thinking 27) The growing health consciousness is an example of a political-legal force.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Analytical thinking 7 .

28) One of the sociocultural variables in the societal environment is the rate of family formation.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Analytical thinking 29) Demographic trends are part of the sociocultural aspect of the societal environment.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge 30) A multinational corporation is a company with significant assets and activities in multiple countries.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge 31) The term "Generation X" refers to those born between 1965 and 1980.

Answer: TRUE Difficulty: Challenging Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge 32) Strategic myopia is the willingness to reject unfamiliar as well as negative information.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge 33) Booz & Company found that companies that are most successful at avoiding surprises had a well-defined system that integrated planning, budgeting, and business reviews.

Answer: TRUE Difficulty: Challenging Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge

8 .

34) List eight current sociocultural trends in the United States that are transforming North America and the world.

Answer: Eight current sociocultural trends in the United States that are transforming North America and the world are as follows: 1. Increasing environmental awareness 2. Growing health consciousness 3. Expanding seniors market 4. Impact of Millennials 5. Decline of the mass market 6. Changing pace and location of life 7. Changing household composition 8. Increasing diversity of workforce and markets Difficulty: Moderate Learning Obj.: 4.2: Identify the aspects of an organization's environment that are most strategically important AACSB: Application of knowledge 35) According to Porter, seeing clothing firms such as Under Armour enter the athletic shoe industry would reflect a A) medium bargaining power of suppliers.

B) low threat of substitutes.

C) medium bargaining power of buyers.

D) high threat of potential entrants.

E) low competitive intensity.

Answer: D Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 36) Industry analysis is primarily concerned with a corporation's A) societal environment.

B) task environment.

C) sociocultural environment.

D) economic environment.

E) internal environment.

Answer: B Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Application of knowledge

9 .

37) A(n) ________ is a group of firms that produces a similar product or service.

A) market B) trade association C) industry D) union E) conglomerate Answer: C Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 38) In addition to Porter's Five Forces, another force added in the text is A) bargaining power of unions.

B) other stakeholders.

C) threat of prospects.

D) threat of shareholders.

E) bargaining strength of employees.

Answer: B Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Application of knowledge 39) Which of the following is not a force identified in the five forces approach to industry analysis?

A) Threat of new entrants B) Rivalry among existing firms C) The bargaining power of stakeholders D) Threat of substitutes E) Bargaining power of buyers Answer: C Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking

10 .

40) According to the five forces approach to industry analysis, a strong or high force is likely to reduce profits and can be regarded as a(n) A) benefit.

B) opportunity.

C) advantage.

D) threat.

E) risk.

Answer: D Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 41) According to the five forces approach to industry analysis, a low force can enable the company to earn greater profits and can be regarded as a(n) A) benefit.

B) opportunity.

C) advantage.

D) threat.

E) risk.

Answer: B Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 42) The five forces approach to industry analysis describes the threat of new entrants. Which of the following is not descriptive of the "threat of new entrants"?

A) Depends on the presence of entry barriers B) Has a desire to gain market share C) Depends on the reaction of existing competitors D) Does not impact industry attractiveness E) Brings new capacity and substantial resources Answer: D Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking

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43) Which barrier to entry do corporations such as General Mills use to force new entrants to spend heavily to overcome existing customer loyalty?

A) Rivalry among existing firms B) Switching costs C) Capital requirements D) Product differentiation E) Access to distribution channels Answer: D Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 44) Which of the following is not an entry barrier per the five forces approach to industry analysis?

A) Economies of scale B) Diversity of rivals C) Cost disadvantages independent of size D) Capital requirements E) Product differentiation Answer: B Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 45) Which barrier to entry was demonstrated by Microsoft's development of the first widely adopted operating system (MS-DOS) for the IBM-type personal computer that gave it a significant competitive advantage over potential competitors?

A) Government policy B) Access to distribution channels C) Cost disadvantages independent of size D) Capital requirements E) Economies of scale Answer: C Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking

12 .

46) Costco was able to gain a significant cost advantage over any new rival in its ability to procure and distribute products because of A) capital requirements.

B) product differentiation.

C) switching costs.

D) economies of scale.

E) access to distribution.

Answer: D Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 47) Which of the following is not descriptive of intense rivalry among firms?

A) Slow industry growth B) High fixed costs C) High exit barriers D) Few competitors or competitors that are roughly equal in size and power E) Product offerings that are highly differentiated Answer: E Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 48) Which of the following is not descriptive of the threat of substitute products or services?

A) Substitute products appear to be different but satisfy the same need as another product.

B) If the cost of switching is low, substitutes may have a strong effect on an industry.

C) Identifying substitutes is relatively easy since they look similar.

D) Possible substitute products or services may not appear to be easily substitutable.

E) Substitutes limit the potential returns of an industry.

Answer: C Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking

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49) A sugar company that is worried that consumers may buy artificial sweetener instead of sugar is concerned about the A) threat of new entrants.

B) rivalry among existing firms.

C) threat of substitute products.

D) bargaining power of suppliers.

E) bargaining power of buyers.

Answer: C Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 50) Which of the following is not descriptive of a high level of bargaining powers of buyers?

A) A buyer purchases a large proportion of the seller's product or service.

B) Alternative suppliers are plentiful because of standardization of the product.

C) The purchased product represents a high percentage of buyer's costs.

D) The buyer buys a large proportion of the seller's product or service.

E) A buyer earns high profits and is very insensitive to costs and service differences.

Answer: E Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 51) When Tesla considers making its own batteries, a battery manufacturer would be concerned with the A) bargaining power of suppliers.

B) bargaining power of buyers.

C) rivalry among existing competitors.

D) threat of substitutes.

E) threat of new entrants.

Answer: B Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking

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52) Which of the following is not descriptive of a high level of bargaining power of suppliers?

A) Substitutes are readily available.

B) The product or service is unique.

C) The supplier industry is dominated by a few companies, but it sells to many.

D) The purchasing industry buys only a small portion of the supplier group's goods and services.

E) Suppliers are able to integrate forward and compete directly with their present customers.

Answer: A Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 53) Per the five forces approach to industry analysis, a substitute for Diet Coke would be A) Diet Pepsi.

B) Mountain Dew. C) RC Cola.

D) bottled water.

E) Dr. Pepper.

Answer: D Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 54) A company or an industry whose product works well with a firm's product and without which the product would lose much of its value is considered to be a(n) A) complementor.

B) oligopoly.

C) strategic group.

D) industry leader.

E) staggered company.

Answer: A Difficulty: Easy Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Application of knowledge

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55) A relationship that illustrates the term "complementor" is the one between A) Microsoft and Intel.

B) General Motors and Ford.

C) Hewlett Packard and Compaq.

D) Gateway and Dell.

E) America Online and CompuServe.

Answer: A Difficulty: Easy Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 56) An industry is a group of firms producing a similar product or service.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Application of knowledge 57) According to Michael Porter, the weaker each of the competitive forces, the more limited companies are in their ability to raise prices and earn greater profits.

Answer: FALSE Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 58) According to Michael Porter, a high force can be regarded as an opportunity because it is likely to increase profits.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 59) An entry barrier is an obstruction that makes it difficult for a company to enter an industry.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Application of knowledge

16 .

60) One of the possible barriers to entry is the diversity of rivals in the industry.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 61) The need to invest huge financial resources in manufacturing facilities in order to produce large commercial airplanes creates a significant barrier to entry to any competitor for Boeing and Airbus.

Answer: TRUE Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking 62) Governments can do little to erect barriers to entry in an industry.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Application of knowledge 63) Stevia can serve as a product substitute for sugar satisfying the same need.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Application of knowledge 64) A buyer may be powerful when it earns high profits and thus it is not sensitive to costs and service differences.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Analytical thinking

17 .

65) How does the five forces approach to industry analysis explain the ability of an organization to be profitable?

Answer: Michael Porter, one of the early writers on competitive strategy, suggested than an industry could be examined as a set of "forces" that impact the ability of the organization to be profitable. In carefully analyzing its industry, an organization must assess the importance to its success of five forces: threat of new entrants, rivalry among existing firms, threat of substitutes, bargaining power of buyers, and bargaining power of suppliers. The stronger each of these forces is, the more limited companies are in their ability to raise prices and earn greater profits.

Difficulty: Challenging Learning Obj.: 4.3: Conduct an industry analysis to explain the competitive forces that influence the intensity of rivalry within an industry AACSB: Application of knowledge 66) The strength of each of the driving forces of industry competition varies according to the A) effectiveness of the strategic planning.

B) stage of industry evolution.

C) capital requirements.

D) changes in the political environment.

E) amount of government regulation.

Answer: B Difficulty: Challenging Learning Obj.: 4.4: Discuss how industry maturity affects industry competitive forces AACSB: Analytical thinking 67) In a fragmented industry A) no firm has large market share.

B) prices increase as new competitors enter the market.

C) economies of scale are rarely used to reduce costs.

D) companies avoid integration to further reduce costs.

E) the experience curve is ineffective in reducing costs.

Answer: A Difficulty: Challenging Learning Obj.: 4.4: Discuss how industry maturity affects industry competitive forces AACSB: Analytical thinking 68) Which of the following was an industry with the highest concentration in 2021?

A) Banking B) Apparel C) Footwear D) Credit unions E) Consumer products Answer: C Difficulty: Challenging Learning Obj.: 4.4: Discuss how industry maturity affects industry competitive forces AACSB: Analytical thinking

18 .

69) An industry dominated by a few large firms, all of which struggle with product differentiation, is known as A) multi-domestic.

B) consolidated.

C) global.

D) indigenous.

E) worldwide.

Answer: B Difficulty: Moderate Learning Obj.: 4.4: Discuss how industry maturity affects industry competitive forces AACSB: Application of knowledge 70) A fragmented industry is one where each firm serves only a small piece of the total market in competition with others.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.4: Discuss how industry maturity affects industry competitive forces AACSB: Analytical thinking 71) Distinguish between a fragmented and consolidated industry.

Answer: A fragmented industry has no firm with a large market share and each firm serves only a small piece of the total market in competition with others. As new competitors enter the industry, prices drop as a result of competition.

A consolidated industry is dominated by a few large firms, each of which struggles to differentiate its products from the competition. The footwear, healthcare services, and entertainment industries are examples of mature, consolidated industries each controlled by a few large competitors.

Difficulty: Moderate Learning Obj.: 4.4: Discuss how industry maturity affects industry competitive forces AACSB: Application of knowledge 72) In categorizing international industries, which type is a collection of essentially domestic industries, such as retailing and insurance?

A) Consortium industry B) Global industry C) Indigenous industry D) Multidomestic industry E) Worldwide industry Answer: D Difficulty: Moderate Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Application of knowledge

19 .

73) In categorizing international industries, the type where MNCs, operating worldwide, make only small adjustments for country-specific circumstances are called A) consortium industry.

B) global industry.

C) indigenous industry.

D) multidomestic industry.

E) worldwide industry.

Answer: B Difficulty: Moderate Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Application of knowledge 74) Which of the following is an example of an industry in which companies manufacture and sell the same products, with only minor adjustments made for individual countries around the world?

A) Retailing B) Banking C) Tires D) Insurance E) Health care Answer: C Difficulty: Challenging Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Analytical thinking 75) Two factors tend to determine whether an industry will be primarily multidomestic or primarily global. One of the factors is pressure for coordination within the MNCs operating in that industry. The other factor is A) the pressure for local responsiveness on the part of individual country markets.

B) the power of the local country governments to restrict MNC actions.

C) the need for brand management in the various MNCs operating within that industry.

D) the importance of differentiating with integrating mechanisms in regional cooperatives.

E) the likelihood of terrorist activity impacting that industry.

Answer: A Difficulty: Challenging Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Application of knowledge

20 .

76) When the pressure for coordination is strong and the pressure for local responsiveness is weak for multinational corporations within a particular industry, the industry will tend to become A) global.

B) consolidated.

C) multi-domestic.

D) risky.

E) indigenous.

Answer: A Difficulty: Challenging Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Analytical thinking 77) When the pressure for local responsiveness is strong and the pressure for coordination is weak for multi-national corporations in an industry, the industry will tend to become A) global.

B) consolidated.

C) multi-domestic.

D) risky.

E) indigenous.

Answer: C Difficulty: Challenging Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Analytical thinking 78) The dynamic tension between the pressure for coordination and the pressure for ________ is contained in the often heard saying, that can be paraphrased as "Think globally but act provincially" A) internationalization B) regionalization C) local responsiveness D) increased profitability E) decreasing costs Answer: C Difficulty: Easy Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Application of knowledge

21 .

79) A(n) ________ is a set of business units or firms that "pursue similar strategies with similar resources."

A) strategic group B) industry C) trade union D) strategic business unit E) conglomerate Answer: A Difficulty: Easy Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Application of knowledge 80) According to Miles and Snow, which strategic orientation is demonstrated by companies that have a limited product line and focuses on improving the efficiency of their existing operations?

A) Initiators B) Reactors C) Analyzers D) Prospectors E) Defenders Answer: E Difficulty: Moderate Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Analytical thinking 81) BASF is an example of a company that operates in many different product areas in which some are stable and the others variable. According to Miles and Snow, BASF is a(n) A) initiator.

B) reactor.

C) analyzer.

D) prospector.

E) defender.

Answer: C Difficulty: Moderate Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Analytical thinking

22 .

82) According to Miles and Snow, Frito-Lay's emphasis on new product development makes it an example of a(n) A) initiator.

B) reactor.

C) analyzer.

D) prospector.

E) defender.

Answer: D Difficulty: Moderate Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Analytical thinking 83) According to Miles and Snow, many of the major U.S. airlines have reflected which strategic orientation?

A) Initiators B) Reactors C) Analyzers D) Prospectors E) Defenders Answer: B Difficulty: Moderate Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Application of knowledge 84) To succeed in a hypercompetitive industry, in order to sustain their competitive advantage, companies must be willing to A) cut prices below marginal costs.

B) pursue market share instead of profits.

C) operate in the ethical gray zone.

D) cannibalize their successful product lines.

E) reduce spending on research and development.

Answer: D Difficulty: Challenging Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Analytical thinking

23 .

85) The largest industrial corporations in the world in terms of sales revenue are, for the most part, MNCs operating in global industries.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Application of knowledge 86) The only factor used to determine whether an industry will be primarily multi-domestic or primarily global is the pressure for local responsiveness.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Analytical thinking 87) Although McDonald's and Olive Garden are part of the restaurant industry, they belong to different strategic groups.

Answer: TRUE Difficulty: Challenging Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Analytical thinking 88) According to Miles and Snow, prospectors are companies with a limited product line that focus on improving the efficiency of their existing operations.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Analytical thinking 89) In hypercompetitive industries, companies must be willing to cannibalize their own products in order to sustain their competitive advantage.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Analytical thinking

24 .

90) What are strategic groups? Why is studying them useful?

Answer: A strategic group is a set of business units or firms that "pursue similar strategies with similar resources." Categorizing firms in any one industry into a set of strategic groups is very useful as a way of better understanding the competitive environment. Research shows that some strategic groups in the same industry are more profitable than others. In addition, companies or business units belonging to a particular strategic group within the same industry tend to be strong rivals and tend to be more similar to each other than to competitors in other strategic groups within the same industry.

Difficulty: Challenging Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Application of knowledge 91) Describe the four strategic types of the Miles and Snow typology.

Answer: According to Miles and Snow, there are four general types of firms based on their general strategic orientation. Defenders are companies with a limited product line that focus on improving the efficiency of their existing operations. Prospectors are companies with fairly broad product lines that focus on product innovation and market opportunities. Analyzers are corporations that operate in at least two different product-market areas, one stable and one variable. Reactors are corporations that lack a consistent strategy-structure-culture relationship.

Difficulty: Moderate Learning Obj.: 4.5: Categorize international industries based on their pressures for coordination and local responsiveness AACSB: Application of knowledge 92) A table which summarizes the key success factors within a particular industry is called a(n) A) EFAS Table.

B) IFAS Table.

C) organizational matrix.

D) TOWS Matrix.

E) industry matrix.

Answer: E Difficulty: Easy Learning Obj.: 4.6: Identify key success factors and develop an industry matrix AACSB: Application of knowledge 93) Those variables that can affect significantly the overall competitive positions of companies within any particular industry are known as A) external strategic factors.

B) internal strategic factors.

C) matrix factors.

D) key success factors.

E) industry scenario.

Answer: D Difficulty: Easy Learning Obj.: 4.6: Identify key success factors and develop an industry matrix AACSB: Application of knowledge 25 .

94) Key success factors seldom vary from industry to industry.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.6: Identify key success factors and develop an industry matrix AACSB: Analytical thinking 95) Key success factors are sometimes referred to as key performance indicators.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.6: Identify key success factors and develop an industry matrix AACSB: Application of knowledge 96) A formal program of gathering information on a company's competitors is referred to as A) statistical modeling.

B) competitive intelligence.

C) competitive strategy.

D) quantitative forecasting.

E) qualitative matrix.

Answer: B Difficulty: Easy Learning Obj.: 4.7: Construct strategic group maps to assess the competitive positions of firms in an industry AACSB: Application of knowledge 97) Which of the following is not true in regards to competitive intelligence?

A) The Economic Espionage Act makes it illegal to steal any material that a business has taken "reasonable efforts" to keep secret.

B) The Society of Competitive Intelligence Professionals urges strategists to stay within the law and to act ethically when searching for information.

C) The Society of Competitive Intelligence Professionals states that illegal activities are foolish because the vast majority of worthwhile competitive intelligence is available publicly via annual reports, websites, and libraries.

D) A number of firms hire consultants with questionable reputations who do what is necessary to get information when the selected methods do not meet SCIP ethical standards or are illegal.

E) The competitive intelligence function is always housed in its own unit within organizations.

Answer: E Difficulty: Challenging Learning Obj.: 4.7: Construct strategic group maps to assess the competitive positions of firms in an industry AACSB: Analytical thinking

26 .

98) The primary activity of a competitive intelligence unit is to A) monitor competitors.

B) engage in corporate espionage.

C) survey stakeholders.

D) determine industry R&D statistics.

E) reverse engineer competitors' products.

Answer: A Difficulty: Easy Learning Obj.: 4.7: Construct strategic group maps to assess the competitive positions of firms in an industry AACSB: Application of knowledge 99) Competitive intelligence is a formal program of gathering information on a company's competitors.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.7: Construct strategic group maps to assess the competitive positions of firms in an industry AACSB: Application of knowledge 100) Business intelligence is one of the fastest growing fields within strategic management.

Answer: TRUE Difficulty: Easy Learning Obj.: 4.7: Construct strategic group maps to assess the competitive positions of firms in an industry AACSB: Application of knowledge 101) The Nielsen Co. is an example of an outside organization providing a firm with competitive intelligence.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.7: Construct strategic group maps to assess the competitive positions of firms in an industry AACSB: Analytical thinking 102) To combat the increasing theft of company secrets, the U.S. government passed the Economic Espionage Act in 1996.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.7: Construct strategic group maps to assess the competitive positions of firms in an industry AACSB: Application of knowledge

27 .

103) Define competitive intelligence.

Answer: Competitive intelligence is a formal program of gathering information on a company's competitors. Often called business intelligence, it is one of the fastest growing fields within strategic management. Most companies use outside organizations (such as A.C. Nielsen Co.) to provide them with environmental data. The Internet provides the quickest means to obtain data.

Some companies choose to use industrial espionage or other intelligence-gathering techniques to get their information straight from their competitors.

Difficulty: Moderate Learning Obj.: 4.7: Construct strategic group maps to assess the competitive positions of firms in an industry AACSB: Application of knowledge 104) In forecasting, ________ is the extension of present trends into the future.

A) generalization B) summation C) aggregation D) extrapolation E) attribution Answer: D Difficulty: Moderate Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge 105) A study of nearly 500 of the world's largest corporations indicated that over 70% used ________ either occasionally or frequently for forecasting.

A) statistical modeling B) scenario-writing C) Delphi technique D) brainstorming E) trend extrapolation Answer: E Difficulty: Easy Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge 106) ________ rests on the assumption that the world is reasonably consistent and changes slowly in the short run.

A) Statistical modeling B) Scenario-writing C) The Delphi technique D) Brainstorming E) Extrapolation Answer: E Difficulty: Easy Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge 28 .

107) Trend extrapolation is A) the process of converting intuition and hunches into reality.

B) the extension of present trends into the future.

C) the process of asking some authorities in the area to make an "informed guess" about the future.

D) given a large amount of historical data on certain interrelated factors, one attempts to conceptualize alternative futures.

E) detecting faulty underlying assumptions before forecasting errors can occur.

Answer: B Difficulty: Moderate Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge 108) A non-quantitative approach to forecasting that requires simply the presence of people with some knowledge of the situation in order to concept out the future is called A) simulations.

B) the Delphi technique.

C) brainstorming.

D) signal monitoring.

E) scenarios.

Answer: C Difficulty: Moderate Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge 109) One ground rule necessary for effective brainstorming is A) scrutinize each idea generated.

B) propose ideas without mentally screening them.

C) calculating future earnings of each idea.

D) critique each idea for rationality.

E) forecast the success of each idea.

Answer: B Difficulty: Moderate Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Analytical thinking 110) Econometric methods are used in which quantitative forecasting technique?

A) The Delphi technique B) Statistical modeling C) Brainstorming D) Trend-impact analysis E) Morphological analysis Answer: B Difficulty: Easy Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge 29 .

111) Which type of forecasting technique is enabled by easy access to the Internet?

A) Statistical modeling B) Simulations C) Prediction markets D) Expert opinion E) Brainstorming Answer: C Difficulty: Easy Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge 112) Which company originated scenario writing, the most widely used forecasting technique after trend extrapolation?

A) Unilever B) British Petroleum C) Royal Dutch Shell D) General Motors E) Ford Motor Company Answer: C Difficulty: Easy Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge 113) Brainstorming is a quantitative forecasting approach.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Analytical thinking 114) Extrapolation rests on the assumption that the world is relatively dynamic and changes quickly in the short run.

Answer: FALSE Difficulty: Moderate Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge 115) In the Delphi Technique of forecasting, separate experts independently assess the likelihoods of specified events.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge

30 .

116) In scenario writing, scenarios are usually broken down into four groups that run the gamut from a continuation of the current state to a complete disruption of the business.

Answer: TRUE Difficulty: Moderate Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge 117) Discuss the most commonly practiced form of forecasting.

Answer: Trend extrapolation is the most widely practiced form of forecasting with over 70% of the world's largest firms using this technique either occasionally or frequently. Extrapolation is the extension of present trends into the future. It rests on the assumption that the world is reasonably consistent and changes slowly in the short run. Time-series methods are approaches of this type: they attempt to carry a series of historical events forward into the future. The basic problem with extrapolation is that a historical trend is based on a series of patterns or relationships among so many different variables that a change in any one can drastically alter the future direction of the trend. As a rule of thumb, the further back into the past you can find relevant data supporting the trend, the more confidence you can have in the prediction.

Difficulty: Challenging Learning Obj.: 4.8: Develop an industry scenario as a forecasting technique AACSB: Application of knowledge 118) One way of analyzing the environment to identify opportunities and threats is by doing a(n) A) operational audit.

B) strategic audit.

C) stakeholder analysis.

D) financial audit.

E) internal audit.

Answer: B Difficulty: Easy Learning Obj.: 4.9: Use publicly available information to conduct competitive intelligence AACSB: Application of knowledge 119) In the EFAS Table, the indicator of how well a particular company is responding to current and expected factors in its external environment is characterized by the A) IFAS score.

B) industry matrix.

C) total weighted score.

D) SWOT score.

E) SFAS score.

Answer: C Difficulty: Challenging Learning Obj.: 4.10: Construct an EFAS table that summarizes external environmental factors AACSB: Application of knowledge

31 .

Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 5 Organizational Analysis and Competitive Advantage 1) Which of the following is an example of an intangible resource?

A) Land B) Building C) Furniture D) Reputation E) Truck Answer: D Difficulty: Easy Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 2) Which of the following is not one of the four question areas Barney proposes in his VRIO framework used to evaluate a firm's competencies?

A) Organization B) Durability C) Rareness D) Valuable E) Imitability Answer: B Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 3) With regard to a competency, when a company determines that only one other competitor or preferably no competitors possess it, Barney refers to this issue as A) value.

B) rareness.

C) imitability.

D) organization.

E) durability.

Answer: B Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Analytical thinking

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4) According to Barney's VRIO framework, the firm's exploitation of a competency pertains to A) value.

B) rareness.

C) imitability.

D) organization.

E) durability.

Answer: D Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 5) An organization's ability to exploit its resources is referred to as its A) business expertise.

B) capabilities.

C) core competencies.

D) critical success factors.

E) key performance factors.

Answer: B Difficulty: Easy Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 6) Avon Products' expertise in door-to-door selling is an example of A) resources.

B) distinctive competencies.

C) core competencies.

D) critical success factors.

E) key performance factors.

Answer: C Difficulty: Challenging Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Analytical thinking

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7) When a company's unique resources and/or core competencies are superior to those of competitors, these are known as A) resources.

B) distinctive competencies.

C) core competencies.

D) critical success factors.

E) key performance factors.

Answer: B Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 8) Which of the following statements is true concerning clusters?

A) The desire to build or upgrade a core competency is one reason why entrepreneurial and other fast-growing firms often tend to locate close to their competitors.

B) Clusters are geographically dispersed companies operating within the same industry.

C) The United States does not have any clusters; they are all located in Europe.

D) According to Porter, clusters provide barriers to the access of employees, suppliers, and specialized information.

E) Employees from competitive firms in a cluster are not permitted to socialize with one another.

Answer: A Difficulty: Challenging Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Analytical thinking 9) A winemaker in Chile finds it difficult to duplicate a Napa Valley winery's key resource of talent. This is an example of A) transferability.

B) transparency.

C) replicability.

D) tacit knowledge.

E) explicit knowledge.

Answer: A Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Analytical thinking

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10) The rate at which others can duplicate or effectively substitute a firm's underlying resources, capabilities, or core competencies is called A) replicability.

B) transparency.

C) imitability.

D) durability.

E) transferability.

Answer: C Difficulty: Easy Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 11) In order for a resource/capability to be ________, it must allow the organization to (1) charge more for its offerings than competitors do for theirs, (2) have a lower cost structure than those of the competitors, or (3) convince customers to pass the competitors and come to your organization because you have this resource/capability.

A) durable B) replicable C) valuable.

D) imitable E) transferable Answer: C Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 12) The speed with which other firms can understand the relationship of resources and capabilities supporting a successful firm's strategy is called A) imitability.

B) reverse engineering.

C) transferability.

D) transparency.

E) durability.

Answer: D Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge

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13) The ability of competitors to use duplicated resources and capabilities to imitate the other firm's success is called A) imitability.

B) durability.

C) transferability.

D) transparency.

E) replicability.

Answer: E Difficulty: Easy Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 14) Knowledge that can be easily articulated and communicated is known as A) tacit knowledge.

B) explicit knowledge.

C) imitable knowledge.

D) transferable knowledge.

E) durable knowledge.

Answer: B Difficulty: Easy Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 15) ________ is knowledge that is not easily communicated because it is deeply rooted in employee experience or in an organization's culture.

A) Tacit knowledge B) Explicit knowledge C) Imitable knowledge D) Transferable knowledge E) Durable knowledge Answer: A Difficulty: Challenging Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Analytical thinking

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16) ________ is more valuable and more likely to lead to a sustainable competitive knowledge than ________ because it is much harder for competitors to imitate.

A) Tacit knowledge; explicit knowledge B) Explicit knowledge; marketing knowledge C) Imitable knowledge; explicit knowledge D) Transferable knowledge; tacit knowledge E) Durable knowledge; tacit knowledge Answer: A Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 17) Competencies are the organization's assets and are the basic building blocks of the organization.

Answer: FALSE Difficulty: Easy Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 18) An organization's accumulated employee knowledge is an example of an intangible resource.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 19) Capabilities refer to an organization's ability to exploit its resources.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 20) New product development would be a core competency if it goes beyond one division.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge

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21) For many decades General Electric was well known for its distinctive competency in management development.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 22) A strength that over time matures and becomes a weakness is called a core rigidity.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Analytical thinking 23) An example of a cluster in the United States is clean energy in Colorado.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Analytical thinking 24) The attempt to hire brand managers away from P&G to learn how to duplicate the firm's brand management success is a competitor's attempt to address replicability.

Answer: TRUE Difficulty: Challenging Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Analytical thinking 25) Imitability is the rate at which others can duplicate or effectively substitute a firm's underlying resources, capabilities, or core competencies.

Answer: TRUE Difficulty: Easy Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 26) A core competency can be easily imitated to the extent that it is transparent, transferable, and durable.

Answer: FALSE Difficulty: Challenging Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge

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27) Replicability is the speed with which other firms can understand the relationship of resources and capabilities supporting a successful firm's strategy.

Answer: FALSE Difficulty: Moderate Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 28) Transferability is the ability of competitors to use duplicated resources and capabilities to imitate the other firm's success.

Answer: FALSE Difficulty: Easy Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge 29) Explicit knowledge is harder than tacit knowledge for competitors to imitate.

Answer: FALSE Difficulty: Easy Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Analytical thinking 30) With respect to imitation in the VRIO framework, how is transparency different from transferability?

Answer: In terms of imitation, transferability is the speed with which other firms can understand the relationship of resources and capabilities supporting a successful firm's strategy.

The sheer complexity of changing the many elements through which Tesla manages to maintain a lead in electric cars is an example of transparency. In contrast, transferability is the ability of competitors to gather the resources and capabilities necessary to support a competitive challenge.

A Chilean winemaker may not have access to the same kind of talent that is available to a French winery.

Difficulty: Challenging Learning Obj.: 5.1: Apply the resource-based view of the firm and the VRIO framework to determine core and distinctive competencies AACSB: Application of knowledge

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31) The business model used by KIA Motors in offering a low-priced product to the mass market is the A) efficiency model.

B) advertising model.

C) customer solutions model.

D) entrepreneurial model.

E) profit pyramid model.

Answer: A Difficulty: Challenging Learning Obj.: 5.2: Explain company business models and how they can be imitated AACSB: Analytical thinking 32) Which of the following types of business models is a consulting model?

A) Profit pyramid model B) Advertising model C) Customer solutions model D) Efficiency model E) Entrepreneurial model Answer: C Difficulty: Challenging Learning Obj.: 5.2: Explain company business models and how they can be imitated AACSB: Analytical thinking 33) The business model used by Gillette in selling razors and razor blades is the A) profit pyramid model.

B) advertising model.

C) customer solutions model.

D) efficiency model.

E) multicomponent system/installed base model.

Answer: E Difficulty: Challenging Learning Obj.: 5.2: Explain company business models and how they can be imitated AACSB: Analytical thinking 34) A company's method for making money in the current business environment is called its A) financial model.

B) business model.

C) resource model.

D) capabilities model.

E) market model.

Answer: B Difficulty: Challenging Learning Obj.: 5.2: Explain company business models and how they can be imitated AACSB: Analytical thinking

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35) eBay and Amazon.com have successfully used the efficiency model by acting as an intermediary to connect multiple sellers to multiple buyers.

Answer: FALSE Difficulty: Challenging Learning Obj.: 5.2: Explain company business models and how they can be imitated AACSB: Analytical thinking 36) A linked set of value-creating activities beginning with basic raw materials provided by suppliers and ending with distributors getting the final goods into the hands of the ultimate consumer is called a A) value chain.

B) continuum of sustainability.

C) strategic capability.

D) fully integrated activity set.

E) strategic group.

Answer: A Difficulty: Moderate Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Application of knowledge 37) The part of an industry's value chain where its greatest expertise and capabilities lie, its core competencies, is called the company's A) functional crossroads.

B) center of gravity.

C) dynamic equilibrium.

D) R&D intensity.

E) economy of scope.

Answer: B Difficulty: Moderate Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Application of knowledge 38) Which of the following is not a primary activity of the value chain?

A) Raw materials handling B) Installation C) Repair D) Purchasing E) Warehousing Answer: D Difficulty: Moderate Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Analytical thinking

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39) Which of the following is not a support activity of the value chain?

A) Procurement B) Technology development C) Human resource management D) Marketing and sales E) Strategic planning Answer: D Difficulty: Moderate Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Analytical thinking 40) According to Porter, a manufacturing firm's primary activities usually begin with A) operations.

B) outbound logistics.

C) inbound logistics.

D) marketing and sales.

E) customer service.

Answer: C Difficulty: Moderate Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Analytical thinking 41) The second step in value chain analysis is to A) identify the legal ramifications and responsibilities of their product or service.

B) examine the "linkages" within each product's value chain.

C) confirm that all variables have been included and taken into consideration.

D) ensure that quality management is adequately addressed.

E) examine the potential synergies among the corporation's product or business units.

Answer: B Difficulty: Challenging Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Application of knowledge 42) When the value chains of two separate products or services share activities, such as the same manufacturing facilities, in order to reduce costs, this is an example of A) economies of scope.

B) economies of scale.

C) economies of integration.

D) economies of learning.

E) outsourcing.

Answer: A Difficulty: Moderate Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Analytical thinking

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43) The value chains of most industries can be split into two segments, upstream and downstream.

Answer: TRUE Difficulty: Easy Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Application of knowledge 44) A company's center of gravity is the part of the value chain where its greatest expertise and core competencies lie.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Application of knowledge 45) A company's center of gravity is usually the point at which the company started.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Application of knowledge 46) According to Porter, a manufacturing firm's primary activities usually begin with marketing and sales.

Answer: FALSE Difficulty: Moderate Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Analytical thinking 47) When a company uses the same manufacturing facility for two separate products, this is an example of economy of scope.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Application of knowledge

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48) Discuss primary and support activities in a value chain.

Answer: Porter proposed that a corporation's value chain is comprised of primary and support activities. Primary activities include inbound logistics (raw material handling and warehousing), operations (machining, assembling, and testing), outbound logistics (warehousing and distribution of finished goods), marketing and sales (advertising, promotion, pricing and channel relations) and service (installation, repair and parts). The support activities include firm infrastructure (general management, accounting, finance, and strategic planning), human resource management (recruiting, training and development), technology development (R&D), product and process improvement, and procurement (purchasing of raw materials, machines, and supplies). The systematic examination of individual value activities can lead to a better understanding of a corporation's strengths and weaknesses. According to Porter, "Differences among competitor value chains are a key source of competitive advantage."

Difficulty: Challenging Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Application of knowledge 49) Briefly describe what an industry value chain is and its role in strategy.

Answer: A value chain is a linked set of value-creating activities that begin with basic raw materials coming from suppliers and ending with distributors getting the final goods into the hands of the ultimate consumer. The value chains of most industries can be split into two segments, upstream and downstream. As an example, in the petroleum industry, upstream refers to oil exploration, drilling, and moving the crude oil to the refinery, and downstream refers to refining the oil plus transporting and marketing gasoline and refined oil to distributors and gas station retailers. This is useful for strategy purposes because an industry value chain can be analyzed in terms of the profit margin available at any point along the value chain.

Difficulty: Challenging Learning Obj.: 5.3: Use value chain to assess the activities of an industry and of an organization AACSB: Application of knowledge 50) Structure follows A) strategy.

B) style.

C) rules.

D) policy.

E) culture.

Answer: A Difficulty: Challenging Learning Obj.: 5.4: Explain why different organizational structures are utilized in business AACSB: Analytical thinking

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51) Which of the following best describes a simple structure?

A) Work is divided into subunits on the basis of such functions as manufacturing, marketing, finance, and human resources.

B) This is most appropriate for large corporations with many product lines in several related industries, with employees acting as functional specialists attempting to gain synergy among divisional activities.

C) This is most appropriate for small, entrepreneur-dominated companies with one or two product lines that operate in a small niche market, with employees acting as jacks-of-all trades.

D) Employees have two or more superiors, a project manager and a functional manager.

E) This is most appropriate for large corporations with many product lines in several unrelated industries, with employees acting as functional specialists but with no attempt at gaining synergy among the divisions.

Answer: C Difficulty: Moderate Learning Obj.: 5.4: Explain why different organizational structures are utilized in business AACSB: Application of knowledge 52) Which one of the following is a variant of the divisional structure?

A) Functional structure B) Conglomerate structure C) Matrix structure D) Simple structure E) Network structure Answer: B Difficulty: Challenging Learning Obj.: 5.4: Explain why different organizational structures are utilized in business AACSB: Analytical thinking 53) Which one of the following best describes a conglomerate structure?

A) Work is divided into subunits on the basis of such functions as manufacturing, marketing, finance, and human resources.

B) This is most appropriate for large corporations with many product lines in several related industries, with employees acting as functional specialists attempting to gain synergy among divisional activities.

C) This is most appropriate for small, entrepreneur-dominated companies with one or two product lines that operate in a small niche market, with employees acting as jack-of-all trades.

D) Employees have two or more superiors, a project manager and a functional manager.

E) This is appropriate for a large corporation with many product lines in several unrelated industries.

Answer: E Difficulty: Moderate Learning Obj.: 5.4: Explain why different organizational structures are utilized in business AACSB: Analytical thinking

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54) A simple structure is appropriate for a medium-sized firm with several product lines in one industry.

Answer: FALSE Difficulty: Easy Learning Obj.: 5.4: Explain why different organizational structures are utilized in business AACSB: Application of knowledge 55) Strategic business units (SBUs) are a modification of the divisional structure.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.4: Explain why different organizational structures are utilized in business AACSB: Application of knowledge 56) What is the relationship between structure and strategy?

Answer: Structure follows strategy. Once a strategy is decided upon, the senior leadership team needs to evaluate the current structure. If the structure does not easily support a strategy under consideration, top management must decide whether the proposed strategy is feasible or whether the structure should be changed potentially to a more complicated structure such as a matrix or a network. Generally speaking, each structure tends to support some corporate strategies better than others.

Difficulty: Moderate Learning Obj.: 5.4: Explain why different organizational structures are utilized in business AACSB: Application of knowledge 57) ________ is the collection of beliefs, expectations, and values learned and shared by an organization's members and transmitted from one generation of employees to another.

A) Corporate strategy B) Corporate culture C) Organizational mission D) Organization vision E) Business model Answer: B Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking

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58) What are the two distinct attributes of corporate culture?

A) Differentiation and integration B) Durability and imitability C) Concern for people and concern for task D) Intensity and integration E) Amount of complexity and tolerance of change Answer: D Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 59) What attribute of corporate culture is the extent to which units throughout an organization share a common culture?

A) Integration B) Strength C) Intensity D) Coordination E) Unity Answer: A Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 60) Which of the following is a function of corporate culture?

A) It encourages a laissez faire set of attitudes.

B) It encourages flexibility and thus constant change.

C) It conveys a sense of identity for employees.

D) It generates creative approaches to new situations.

E) It focuses employee commitment on their careers.

Answer: C Difficulty: Challenging Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge

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61) Which of the following is not a function of corporate culture?

A) It conveys a sense of identity for employees.

B) It adds to the stability of the organization as a social system.

C) It helps generate employee commitment to something greater than themselves.

D) It keeps people guessing about what to do next.

E) It serves as a frame of reference for employees to use as a guide for appropriate behavior.

Answer: D Difficulty: Challenging Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 62) ________ is the culture's breadth.

A) Cultural intensity B) Cultural diversification C) Cultural integration D) Cultural strategy E) Cultural prerogative Answer: C Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 63) ________ deals with the question, "Who are our customers?"

A) Market position B) Product life cycle C) Market segmentation D) Marketing mix E) Marketing leverage Answer: A Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge

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64) The particular combination of key variables (product, place, promotion, and price) under an organization's control that can be used to affect demand and to potentially gain competitive advantage is called A) marketing position.

B) product life cycle.

C) market segmentation.

D) marketing mix.

E) marketing leverage.

Answer: D Difficulty: Easy Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 65) An example of the place variable of the marketing mix is A) advertising.

B) discounts.

C) inventory.

D) services.

E) quality.

Answer: C Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 66) A graph showing time plotted against the sales of a product as it moves from introduction through growth and maturity to decline is called the A) marketing position.

B) product life cycle.

C) market segmentation.

D) marketing mix.

E) marketing leverage.

Answer: B Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge

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67) Which of the following statements is not true concerning a corporate reputation?

A) It is a widely held perception of a company by the general public.

B) A good corporate reputation can be a strategic resource.

C) There is a positive relationship between corporate reputation and financial performance.

D) Reputation tends to be long lasting and hard for others to duplicate.

E) Research shows no positive relationship between corporate reputation and financial performance.

Answer: E Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 68) In capital budgeting, which of the following is an example of a hurdle rate?

A) Impact on cash flow B) Impact on capital structure C) Time to break-even point D) Time to full capacity E) Time to desired revenue Answer: C Difficulty: Challenging Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 69) The ratio of total debt to total assets is known as A) budgeting leverage.

B) capital finance.

C) capital budgeting.

D) financial leverage.

E) financial budgeting.

Answer: D Difficulty: Easy Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge

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70) Which of the following is not a responsibility of a research and development manager?

A) Choosing among alternative new technologies to use within the organization.

B) Developing methods of embodying the new technology in new products and processes.

C) Deploying resources so that the new technology can be successfully implemented.

D) Taking the design and operationalizing the plan into mass production.

E) Suggesting and implementing a company's technological strategy in light of its corporate objectives and policies.

Answer: D Difficulty: Challenging Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 71) The process of taking a new technology from the laboratory to the marketplace is called A) economies of scope versus operating leverage.

B) the R&D mix.

C) technological competence.

D) technology transfer.

E) technology discontinuity.

Answer: D Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 72) When scientists concentrate on quality control and the development of design specifications and improved production equipment, it is referred to as A) basic R&D. B) product R&D. C) engineering R&D. D) life cycle R&D. E) R&D mix.

Answer: C Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge

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73) The displacement of one technology by another, as shown by two S-shaped curves on a graph, is referred to as A) economies of scope versus operating leverage.

B) technology transfer.

C) the R&D mix.

D) technological discontinuity.

E) a disjunctive learning or experience curve.

Answer: D Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 74) Which of the following is not a part of an organization's R&D mix?

A) Basic R&D B) Market R&D C) Product R&D D) Engineering R&D E) Process R&D Answer: B Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 75) In Christensen's book, The Innovator's Dilemma, he explains that established market leaders are typically reluctant to move in a timely manner to a new technology. This reluctance to switch technologies is because the resource allocation process in most companies gives priority to those projects with the greatest likelihood of generating a A) good return of investment.

B) high net present value.

C) significant cost reduction.

D) reduction in total operating expenses.

E) lowered time spent during technology implementation.

Answer: A Difficulty: Challenging Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking

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76) According to the text, the primary task of the operations manager is to A) make sure all the products or services are producing maximum revenue.

B) develop and operate a system that will produce the required number of products or services with a certain quality, at a given cost, within an allotted time.

C) make sure the process has a high quality control.

D) ensure that the process is manufactured or delivered as efficiently as possible.

E) interface with the other functional departments to coordinate their operations in avoiding duplication of effort.

Answer: B Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 77) Which of the following terms best describes a system in which items are normally processed sequentially, but the work and sequence of the process vary?

A) Continuous system B) Debt capacity C) Chronological processing D) Operating leverage E) Intermittent system Answer: E Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 78) An auto body repair shop is an example of which approach to manufacturing?

A) Continuous system B) Debt capacity C) Sequential processing D) Progressive system E) Intermittent system Answer: E Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking

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79) ________ is the impact of a specific change in sales volume on net operating income.

A) Continuous system B) Chronological processing C) Debt capacity D) Operating leverage E) Intermittent system Answer: D Difficulty: Easy Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 80) ________ suggests that unit production costs decline by some fixed percent each time the total accumulated volume of production in units doubles.

A) The experience curve B) The R&D mix C) Technological competence D) Economy of scale E) Economy of scope Answer: A Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 81) Which one of the following is not descriptive of the experience curve?

A) It is very useful because it is consistent for all organizations within a particular industry.

B) It is used to estimate the production cost of a product produced by newly introduced techniques or processes.

C) The experience curve varies by industry and is based on many variables.

D) The concept was first applied in the airframe industry.

E) It shows that production costs decline by some fixed percentage as production in units doubles.

Answer: A Difficulty: Challenging Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking

23 .

82) ________ refers to when unit costs are reduced by making large numbers of the same product.

A) Economies of scope B) Economies of scale C) Customization D) Flexible manufacturing E) Economies of time Answer: B Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 83) The primary task of the manager of human resources is to A) increase the productivity of employees.

B) ensure that the organization is not unionized.

C) improve the match between individuals and jobs.

D) provide a meaningful work experience for employees.

E) ensure that employees are promoted at regular intervals.

Answer: C Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 84) ________ are ones in which a group of people work together without a supervisor to plan, coordinate, and evaluate their own work.

A) Virtual work teams B) Cross-functional work teams C) Autonomous work teams D) Task forces E) Continuous work teams Answer: C Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking

24 .

85) In a process called ________, the once-isolated specialists now work side-by-side and compare notes constantly in an effort to design cost-effective products with features customers want.

A) simultaneous strategy B) participatory planning C) jointly designed objectives D) concurrent engineering E) cooperative design Answer: D Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 86) Which one of the following is not a challenge presented by the use of virtual teams?

A) Communication B) Tracking productivity C) Issues of employee trust D) Sustaining the corporate culture E) Increased employee cost Answer: E Difficulty: Challenging Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 87) Which of the following is not one of the four methods to improve the corporation's quality of work life?

A) Improve the work environment B) Introduce participative problem solving C) Improve the responsiveness of management D) Introduce innovative reward systems E) Restructuring work Answer: C Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge

25 .

88) DEI is the acronym for A) Demographics, Economics, and Identity.

B) Diversity, Equity & Inclusion.

C) Developing Exclusive Insiders.

D) Diversity, Equanimity, and Identity.

E) Demographics, Equity, and Identity.

Answer: B Difficulty: Easy Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 89) The PRIMARY task of the manager of information systems/technology is to A) prevent unlawful usage of the information from the system.

B) make sure the information contained in the system is up-to-date and accurate.

C) monitor the input of information into the information system.

D) design and manage the flow of information in a corporation to improve productivity and decision-making while protecting the organization from data breaches.

E) ensure that only those who have authorized permission have access to the information system.

Answer: D Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 90) Corporate culture gives a company a sense of identity.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 91) When employees across the organization hold the same cultural values and norms, this demonstrates a high level of cultural integration.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 92) Corporate structure gives a company a sense of identity.

Answer: FALSE Difficulty: Easy Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 26 .

93) Market segmentation deals with the question, "Who are our customers?"

Answer: FALSE Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 94) The product life cycle enables a marketing manager to examine the marketing mix of a particular product or group of products in terms of its position in its life cycle.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 95) Research is inconclusive on the relationship between corporate reputation and financial performance.

Answer: FALSE Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 96) Research indicates that greater leverage has a positive impact on performance for firms in stable environments, but a negative impact for firms in dynamic environments.

Answer: TRUE Difficulty: Challenging Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 97) A brand is a name given to a company's product that embodies all of the characteristics of that item in the mind of the consumer.

Answer: TRUE Difficulty: Easy Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 98) Product R&D is also known as engineering R&D. Answer: FALSE Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking

27 .

99) It is generally accepted that process R&D normally dominates the early stages of a product's life cycle, whereas product R&D becomes especially important in the later stages.

Answer: FALSE Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 100) Historically, competitive leadership in a market changes hands as one technology nears the end of its S-curve.

Answer: TRUE Difficulty: Easy Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 101) An example of a continuous system is an auto body repair shop.

Answer: FALSE Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 102) Continuous manufacturing systems reap benefits from economies of scale.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 103) Flexible manufacturing permits the low-volume output of custom-tailored products at relatively low unit costs through economies of scope.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking 104) Self-managing work teams are ones in which a group of people work together without a supervisor to plan, coordinate, and evaluate their own work.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Analytical thinking

28 .

105) To increase flexibility, avoid layoffs, and reduce labor costs, organizations are using more contingent workers.

Answer: TRUE Difficulty: Easy Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 106) An organization's information system can be a strength or a weakness in multiple areas of strategic management.

Answer: TRUE Difficulty: Easy Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 107) What is corporate culture and what are the two distinct attributes of culture?

Answer: Corporate culture is the collection of beliefs, expectations, and values learned and shared by a corporation's members and transmitted from one generation of employees to another.

Corporate culture has two distinct attributes — intensity and integration. Cultural intensity is the degree to which members of a unit accept the norms, values, or other culture content associated with the unit. This shows the culture's depth. Cultural integration is the extent to which units throughout an organization share a common culture. This is the culture's breadth.

Difficulty: Moderate Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 108) What is R&D intensity?

Answer: A company's R&D intensity is the firm's spending on R&D as a percentage of sales revenue. This is a principal means of gaining market share in global competition. This amount often varies by industry.

Difficulty: Easy Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge

29 .

109) Distinguish between continuous and intermittent manufacturing systems, providing examples of each.

Answer: Manufacturing can be intermittent or continuous. In intermittent systems (job shops), the item is normally processed sequentially, but the work and sequence of the process vary. An example is an auto body repair shop. Continuous systems are those laid out as lines on which products can be continuously assembled or processed. A firm using continuous systems invests heavily in fixed investments such as automated processes and highly sophisticated machinery.

Continuous systems reap benefits from economies of scale. An example is an automobile assembly line.

Difficulty: Challenging Learning Obj.: 5.5: Assess a company's corporate culture and how it might affect a proposed strategy AACSB: Application of knowledge 110) The Internal Factor Analysis Summary Table (IFAS Table) is one way to organize the internal factors into generally accepted categories of strengths and weaknesses as well as to analyze how well a particular company's management is responding to these specific factors in light of the perceived importance of these factors to the company.

Answer: TRUE Difficulty: Moderate Learning Obj.: 5.6: Construct an IFAS Table that summarizes internal factors AACSB: Analytical thinking

30 .

Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 6 Strategy Formulation: Business Strategy 1) ________ is concerned with developing a corporation's mission, objectives, strategies, and policies.

A) Environmental analysis B) Position analysis C) Strategy formulation D) Objective analysis E) Situation analysis Answer: C Difficulty: Easy Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Analytical thinking 2) One desired outcome of analyzing strategic factors is identifying niches where an organization can use its ________ to take advantage of a particular market opportunity.

A) differentiating capabilities B) distinctive competencies C) situational proficiency D) core competencies E) distinctive characteristics Answer: D Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Analytical thinking 3) An acronym for the assessment of the external and internal environments of the business corporation in the process of strategy formulation/strategic planning is A) PET. B) MBO. C) SWOT. D) SBU. E) ROI. Answer: C Difficulty: Easy Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Application of knowledge

1 .

4) The S in SWOT represents A) strategy.

B) social.

C) strengths.

D) stakeholders.

E) shareholders.

Answer: C Difficulty: Easy Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Application of knowledge 5) The text authors note that an opportunity by itself has no real value unless a company has the ________ to take advantage of that opportunity.

A) capacity B) vision C) mission D) goal E) courage Answer: A Difficulty: Challenging Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Application of knowledge 6) All of the following reflect criticisms of the SWOT analysis EXCEPT A) it is simply the opinions of those filling out the boxes.

B) virtually everything that is a strength is also a weakness.

C) it provides a rational link to strategy implementation.

D) virtually everything that is an opportunity is also a threat.

E) there is no validated evaluation approach.

Answer: C Difficulty: Challenging Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Analytical thinking

2 .

7) In the development of an SFAS matrix, the first step is to A) enter the ratings of how the company's management is responding to each of the strategic factors.

B) calculate the weighted scores.

C) list the most important EFAS and IFAS items.

D) indicate short-term goals for the duration.

E) enter the weights for all of the internal factors.

Answer: C Difficulty: Challenging Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Application of knowledge 8) A niche is ________ to the extent that it currently is just large enough for one firm to satisfy its demand.

A) strategic B) propitious C) common D) small E) addressable Answer: B Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Application of knowledge 9) According to the text, unique market opportunities that are available for only a particular time are called A) situational occasions.

B) critical openings.

C) strategy implementation.

D) strategic windows.

E) trigger points.

Answer: D Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Application of knowledge

3 .

10) One company that has successfully found a propitious niche is A) Coca-Cola.

B) Dow Jones and Company.

C) Frank J. Zamboni & Company.

D) Walmart.

E) The Walt Disney Company.

Answer: C Difficulty: Challenging Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Analytical thinking 11) The matrix that summarizes an organization's strategic factors by combining the external factors from the EFAS Table with the internal factors from the IFAS Table is called a(n) A) Total Weighted Score.

B) SWOT Matrix.

C) SFAS Matrix.

D) TOWS Matrix.

E) Issues Priority Matrix.

Answer: C Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Application of knowledge 12) In a SFAS Matrix, A) all strategic factors are weighted equally.

B) the number of strategic factors can become unmanageable.

C) the same criticisms found in the SWOT Matrix are replicated.

D) a factor may be listed as both a strength and a weakness.

E) only internal strategic factors are included.

Answer: D Difficulty: Challenging Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Analytical thinking 13) SWOT as a means of conceptualizing and presenting strategy can be quite effective.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Application of knowledge

4 .

14) A niche is a need in the marketplace that is currently satisfied.

Answer: FALSE Difficulty: Challenging Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Analytical thinking 15) SWOT was developed in the late 1990s.

Answer: FALSE Difficulty: Easy Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Application of knowledge 16) Populating a SWOT chart, by itself, is just the start of a strategic analysis.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Analytical thinking 17) The goal of strategy is to find an extremely favorable niche so well suited to the firm's competitive advantages that other organizations are not likely to challenge or dislodge it.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Analytical thinking 18) The first firm through a strategic window can occupy an extremely favorable niche and discourage competition (if the firm has the required internal strengths).

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Analytical thinking 19) One company that has successfully found a propitious niche is Frank J. Zamboni & Company, the manufacturer of the machines that smooth the ice at ice skating rinks.

Answer: TRUE Difficulty: Challenging Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Analytical thinking 5 .

20) Niches stay the same over time.

Answer: FALSE Difficulty: Moderate Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Analytical thinking 21) The SFAS Matrix summarizes an organization's strategic factors by combining the external factors from the EFAS Table with the internal factors from the IFAS Table.

Answer: TRUE Difficulty: Challenging Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Application of knowledge 22) What is a niche? What is its strategic importance?

Answer: A niche is a need in the marketplace that is currently unsatisfied. One desired outcome of analyzing strategic factors is identifying niches where an organization can use its core competencies to take advantage of a particular market opportunity. The goal is to find a propitious or an extremely favorable niche that is so well suited to the firm's competitive advantages that other organizations are not likely to challenge or dislodge it. A niche is propitious to the extent that it currently is just large enough for one firm to satisfy its demand.

After a firm has found and filled that niche, it is generally not worth a potential competitor's time or money to also go after the same niche.

Difficulty: Challenging Learning Obj.: 6.1: Utilize the SFAS matrix to examine business strategy and a SWOT diagram for presentation AACSB: Application of knowledge 23) One of the first steps in good strategy design should be crafting the ________ for the organization.

A) SWOT analysis B) PESTEL analysis C) structure D) mission statement E) financial plan Answer: D Difficulty: Challenging Learning Obj.: 6.2: Develop a mission statement that addresses the five elements of good design AACSB: Analytical thinking

6 .

24) An effective mission statement not only needs to be specific to that organization; it must enable a common thread to highlight and focus the energy of everyone in the organization in the direction that the top management team believes is best for the business.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.2: Develop a mission statement that addresses the five elements of good design AACSB: Application of knowledge 25) One of the advantages of SWOT is that virtually everything that is a strength is also a weakness.

Answer: FALSE Difficulty: Easy Learning Obj.: 6.2: Develop a mission statement that addresses the five elements of good design AACSB: Application of knowledge 26) Why is a mission statement important for strategy?

Answer: One of the first steps in good strategy design should be crafting the mission statement for the organization. This is because a mission statement has a unique ability to focus the efforts of every employee in the company. This happens only if the mission statement is well designed and is implemented with a singular focus. An effective mission statement not only needs to be specific to that organization, it must enable a common thread to highlight and focus the energy of everyone in the organization in the direction that the top management team believes is best for the business.

Difficulty: Moderate Learning Obj.: 6.2: Develop a mission statement that addresses the five elements of good design AACSB: Application of knowledge 27) Business strategy can be competitive and/or A) functional.

B) corporate.

C) cooperative.

D) traditional.

E) general.

Answer: C Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge

7 .

28) Business strategy focuses on A) ensuring that the company maintains the existing market share that it has historically enjoyed.

B) improving the competitive position of a company's products or services within the specific industry or market segment served.

C) providing adequate shareholders' return on investment.

D) preventing the competition from gaining a competitive edge by undermining their marketing plan.

E) recovering the competitive lead by using all available resources that the company can provide.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 29) Just as ________ strategy asks what industry(ies) the company should be in, ________ strategy asks how the company or its units should compete or cooperate in each industry.

A) corporate; competitive B) functional; divisional C) competitive; cooperative D) corporate; business.

E) divisional; competitive Answer: D Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 30) Which of the following is not cited as one of the questions that development of a competitive strategy should raise?

A) Should we compete on the basis of lower cost?

B) Should we compete head-to-head with major competitors?

C) Should we differentiate our products or services on some basis other than cost?

D) Should we compete by garnering political support of influential leaders?

E) Should we compete in a niche market that we can satisfy which is superior to that of the competition?

Answer: D Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking

8 .

31) According to Porter, the generic competitive strategy that reflects the ability of the company or a business unit to design, produce, and market a comparable product more efficiently than its competitors is called A) competitive scope.

B) differentiation.

C) cost leadership.

D) diversification.

E) focus.

Answer: C Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 32) What are the three generic competitive strategies that Porter promotes as the means for outperforming other corporations in a particular industry?

A) Competitive scope, differentiation, and focus B) Diversification, concentration, and competitive scope C) Cost, competitive scope, and focus D) Concentration, cost leadership, and differentiation E) Cost leadership, differentiation, and focus Answer: E Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 33) According to Porter, the generic competitive strategy that reflects the ability to provide unique and superior value to a wide set of buyers in terms of product quality, special features, or after-sale service is called A) competitive scope.

B) differentiation.

C) focus.

D) diversification.

E) cost leadership.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge

9 .

34) According to Porter, the term that applies to the breadth of a company's or business unit's target market is called A) competitive scope.

B)d ifferentiation.

C) focus.

D) diversification.

E) cost leadership.

Answer: A Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 35) Taco Bell, as a fast-food restaurant chain, is an example of a company following which of Porter's competitive strategies?

A) Differentiation B) Cost leadership C) Differentiation focus D) Competitive advantage E) Cost focus Answer: B Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 36) In using ________, the company or business unit seeks a cost advantage in its target segment.

A) cost leadership B) differentiation C) cost focus D) competitive scope E) diversification Answer: C Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 37) Which of Porter's competitive strategies is exemplified by companies such as HP, Enterprise, and Aldi?

A) Differentiation B) Cost leadership C) Differentiation focus D) Competitive advantage E) Cost focus Answer: B Difficulty: Moderate 10 .

Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 38) In manufacturing toilet paper for grocery store chains (and avoiding competing directly against Charmin), Potlach has followed which of Porter's generic competitive strategies?

A) Differentiation B) Cost leadership C) Differentiation focus D) Competitive advantage E) Cost focus Answer: E Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 39) OrphageniX, a small biotech firm, avoids head-to-head competition with large pharmaceutical companies by developing drugs to target "orphan" diseases, those that are rare and often life threatening but do not have effective treatment options. This is an example of which of Porter's generic strategies?

A) Differentiation B) Cost leadership C) Differentiation focus D) Competitive advantage E) Cost focus Answer: C Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 40) In which of Porter's competitive strategies can companies or business units may (if they choose to) charge a premium?

A) Segmentation focus B) Cost leadership C) Differentiation D) Competitive advantage E) Cost focus Answer: C Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking

11 .

41) When a company is concerned that the higher price it charges for its perceived competitive advantages is too far above the price of the competition that it impacts sales, the company is likely addressing a risk of following which competitive strategy?

A) Cost leadership B) Focus C) Stuck-in-the-middle D) Differentiation E) Competitive scope Answer: D Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 42) A(n) ________ strategy passes on increased cost to buyers.

A) corporate B) cost leadership C) functional D) differentiation E) operational Answer: D Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 43) Which strategy is Midamar Corporation, a distributor of halal foods, following if it provides a unique and superior value in a narrow market?

A) Differentiation focus B) Cost leadership C) Differentiation D) Cost focus E) Stuck in the middle Answer: A Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 44) According to Porter, a business unit in a competitive marketplace with no generic competitive strategy is A) achieving synergy.

B) practicing innovative leadership.

C) stuck in the middle.

D) not goal directed.

E) last in line.

Answer: C Difficulty: Easy 12 .

Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 45) Most entrepreneurial ventures follow A) differentiation strategies.

B) focus strategies.

C) no strategies.

D) cost leadership strategies.

E) stuck in the middle strategies.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 46) Nickelodeon is a cable channel for children. Which of Porter's strategies is this company following?

A) Differentiation focus B) Cost leadership C) Stuck in the middle D) Differentiation E) Cost focus Answer: A Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 47) Ryanair competes successfully in the airline industry using which of Porter's competitive strategies?

A) Differentiation focus B) Stuck in the middle C) Cost leadership D) Differentiation E) Cost focus Answer: C Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 48) Sandwich shops, dry cleaners, and nail salons are examples of a(n) ________ industry where many small- and medium-sized local companies compete for relatively small shares of the total market.

A) united B) fragmented C) consolidated D) isolated E) integrated 13 .

Answer: B Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 49) As an industry matures while overcoming fragmentation and becomes dominated by a small number of large companies, it tends to become a(n) A) united industry.

B) fragmented industry.

C) consolidated industry.

D) isolated industry.

E) integrated industry.

Answer: C Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 50) The method used by GlyEco Inc. in the anti-freeze recycling industry to quickly consolidate a fragmented industry can be referred to as a A) merger.

B) strategic rollup.

C) cost strategy.

D) differentiation strategy.

E) focus strategy.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 51) When industries become ________, they tend to go through escalating stages of competition.

A) stable B) organized C) fragmented D) hypercompetitive E) monopolistic Answer: D Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 52) The book Hypercompetition was written by A) Porter.

B) D'Aveni.

C) Mintzberg.

D) Maslow.

E) Drucker.

14 .

Answer: B Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 53) According to D'Aveni, as industries become hypercompetitive, there is no such thing as A) profits.

B) market share.

C) a sustainable competitive advantage.

D) a business strategy.

E) strategic leadership.

Answer: C Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 54) According to D'Aveni's book, Hypercompetition, which of the following statements is true?

A) Except for a few stable industries, strategy initiatives do not provide sustainable competitive advantage.

B) Hypercompetition is rare.

C) It is enough to gain competitive advantage by being the lowest cost competitor.

D) The theory of hypercompetition is not supported by any research.

E) The American home appliance industry was immune to hypercompetition.

Answer: A Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 55) In which type of industry are buyers typically more sophisticated and demand a certain level of quality for price paid?

A) Fragmented B) Niche C) Consolidated D) Focused E) Unstable Answer: C Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 56) Research suggests that a differentiation strategy is more likely to generate higher profits than a lower cost strategy because differentiation creates A) a better entry barrier.

B) a better exit barrier.

C) a better niche market.

15 .

D) a more sustainable competitive advantage.

E) no clear long-term strategy.

Answer: A Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 57) Which of Porter's competitive strategies lowers customers' price sensitivity?

A) Cost leadership B) Differentiation C) Strategic rollup D) Cost focus E) Stuck in the middle Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 58) Competitive scope is A) the breadth of the company's target market.

B) a business strategy.

C) the common thread found in the firm's mission statement.

D) the foundation of the choice between cost leadership and differentiation strategies.

E) an element of the marketing mix.

Answer: A Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 59) Which of Porter's competitive strategies is likely to predominate in a fragmented industry?

A) Cost leadership B) Differentiation C) Focus D) Stuck in the middle E) Cooperative Answer: C Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 60) K-Mart tried to unsuccessfully imitate both Walmart's low-cost strategy and Target's quality differentiation strategy and ended up being A) an integrator.

B) a consolidator.

C) stuck in the middle.

16 .

D) a prospector.

E) a strategic rollup.

Answer: C Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 61) Which of the following is a legal type of cooperative strategy?

A) Collusion B) Strategic rollup C) Strategic alliance D) Confrontation E) Concentration Answer: C Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 62) ________ collusion is firms cooperating indirectly through an informal system of signals.

A) Explicit B) Focused C) Tacit D) Niche E) Signaling Answer: C Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 63) When firms follow each other's lead to reduce the level of competition such as what General Electric and Westinghouse, two major competitors, did in steam turbines, it is referred to as A) explicit collusion.

B) a strategic alliance.

C) a mutual service consortium.

D) conscious parallelism.

E) partnering.

Answer: D Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 64) A secret salary cap for the 2010 season was the contention in a 2012 collusion lawsuit filed against A) Major League Baseball.

B) the National Football League.

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C) Major League Soccer.

D) the National Basketball Association.

E) the National Hockey League.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 65) Explicit collusion A) involves direct communication and negotiation among competing firms.

B) involves indirect cooperation through an informal system of signals.

C) is seen with conscious parallelism as practiced by GE and Westinghouse in the pricing of turbine engines.

D) is not illegal in most countries.

E) is likely to be successful if costs are similar among firms.

Answer: A Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 66) Collusion A) may be explicit or tacit.

B) may be tacit and therefore legal.

C) is rarely practiced by competing firms.

D) cannot occur without direct communication among firms.

E) is a popular competitive strategy.

Answer: A Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 67) The active cooperation of firms within an industry to reduce output and raise prices to get around the normal law of supply and demand is referred to as A) a strategic alliance.

B) collusion.

C) a strategic roll up.

D) a merger.

E) licensing.

Answer: B Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 68) Strategic alliances and collusion are two general types of A) functional strategies.

B) competitive strategies.

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C) cooperative strategies.

D) market strategies.

E) corporate strategies.

Answer: C Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 69) Aggressive construction of efficient-scale facilities is associated with which of the following competitive strategies proposed by Porter?

A) Focused differentiation B) Differentiation C) Cost leadership D) Vertical growth E) Concentration Answer: C Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 70) In which of the competitive strategies proposed by Porter does buyer loyalty act as an entry barrier?

A) Cost leadership B) Differentiation C) Cost leadership focus D) Concentration E) Collusion Answer: B Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Reflective thinking 71) Aggressive construction of efficient-scale facilities and avoidance of marginal customer accounts are commonly required skills and resources for which of Porter's generic competitive strategies?

A) Cost leadership B) Differentiation C) Cost leadership focus D) Differentiation focus E) Collusion Answer: A Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Reflective thinking

19 .

72) In which of Porter's generic competitive strategies does buyer loyalty serves as an entry barrier?

A) Cost leadership B) Differentiation C) Cost leadership focus D) Stuck in the middle E) Collusion Answer: B Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Reflective thinking 73) A ________'s high market share means that it will have high bargaining power relative to its suppliers because it buys in large quantities.

A) cost leader B) differentiator C) prospector D) focused player E) colluder Answer: A Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Reflective thinking 74) Cost leaders embrace marginal customer accounts.

Answer: FALSE Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 75) Business strategy focuses on improving the competitive position of a company's or business unit's products or services within the specific industry or market segment that the company or business unit serves.

Answer: TRUE Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 76) Differentiation is the ability of a company or business unit to design, produce, and market a comparable product more efficiently than its competitors.

Answer: FALSE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 20 .

77) Because of its lower costs, the cost leader is able to charge a lower price for its products than its competitors and still make a satisfactory profit.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 78) An example of a company following a cost focus strategy is Potlach Corporation, which makes house brands of toilet paper for Albertson's, Jewel and other grocery store chains.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 79) In cost leadership, increased costs can usually be passed on to the buyers.

Answer: FALSE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 80) A company that is stuck in the middle of the competitive marketplace has no competitive advantage and is doomed to achieve nothing better than average performance.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 81) Although Porter agrees that it is possible for a company to achieve low cost and differentiation simultaneously, he suggests that no company has been able to achieve this.

Answer: FALSE Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 82) Adopting guerrilla warfare tactics, successful entrepreneurial ventures often go after opportunities in market niches too small to justify retaliation from the market leaders.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 83) The strategic rollup was developed in the mid-1990s as an efficient way to quickly consolidate a fragmented industry with the resulting large firm creating economies of scale.

Answer: TRUE 21 .

Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 84) Unlike conventional mergers and acquisitions, rollups involve large numbers of firms.

Answer: TRUE Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 85) According to D'Aveni, before hypercompetition, strategic initiatives provided competitive advantage for many years, perhaps for decades.

Answer: TRUE Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 86) The ability to market a comparable product or service more efficiently than competitors is the one skill not required in a cost leadership strategy.

Answer: FALSE Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 87) Avoidance of marginal customer accounts is an organizational requirement for a cost leadership strategy.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 88) The only way to gain competitive advantage within an industry is to use a competitive strategy.

Answer: FALSE Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Analytical thinking 89) All types of cooperative strategies are legal throughout the world.

Answer: FALSE Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 90) The two general types of cooperative strategies are collusion and strategic alliances.

Answer: TRUE 22 .

Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 91) In explicit collusion, there is no direct communication among competing firms.

Answer: FALSE Difficulty: Challenging Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 92) Collusion is the active cooperation of firms within an industry to reduce output and raise prices in order to get around the normal economic law of supply and demand.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 93) In Porter's generic competitive strategies, how is cost leadership different from differentiation?

Answer: Cost leadership is the ability of a company or a business unit to design, produce, and market a comparable product or service more efficiently than its competitors. Because of its lower costs, the cost leader is able to charge a lower price for its products than its competitors and still make a satisfactory profit. In contrast, differentiation is the ability of a company to provide unique and superior value to the buyer. Differentiation may include areas such as product quality, special features, or after-sale service. If they choose to, differentiators may charge a premium.

Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 94) What is a strategic rollup?

Answer: In a fragmented industry, typically there are many small- and medium-sized local companies competing for relatively small shares of the total market. The strategic rollup, which unlike conventional mergers and acquisitions involve large numbers of firms, was developed in the mid-1990s as an efficient way to quickly consolidate a fragmented industry. Here, with the aid of money from venture capitalists and private equity firms, a single company acquires hundreds of owner-operated small businesses and as a result gets economies of scale and can not only hire more sophisticated managers but also apply best practices across all areas of marketing and operations.

Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 95) What is the impact of hypercompetition on competitive advantage?

Answer: Hypercompetition reflects the increasing difficulty of sustaining a competitive 23 .

advantage over time. As a result of this erosion of competitive advantage, companies must constantly work to improve their advantage. Firms must constantly seek new ways to lower costs and add value to their products and services.

Difficulty: Easy Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 96) How is tacit collusion different from explicit collusion?

Answer: Collusion, along with strategic alliances are the two general types of cooperative strategies. Collusion is the active cooperation of firms within an industry to reduce output and raise prices in order to get around the normal economic law of supply and demand. Explicit collusion is where firms cooperate through direct communication and negotiation. On the other hand, tacit collusion is where firms cooperate indirectly through an informal system of signals.

Collusion is generally illegal.

Difficulty: Moderate Learning Obj.: 6.3: Explain the competitive and cooperative strategies available to corporations AACSB: Application of knowledge 97) In 2015, General Motors formed an alliance with the car sharing service Lyft to A) obtain or learn new capabilities.

B) obtain access to specific markets.

C) reduce financial risk.

D) reduce political risk.

E) preserve autonomy.

Answer: A Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 98) To gain access to China while ensuring a positive relationship with the often-restrictive Chinese government, Maytag formed a joint venture with the Chinese appliance maker RSD to A) obtain or learn new capabilities.

B) reduce financial risk.

C) reduce political risk.

D) reduce functional risk.

E) preserve autonomy.

Answer: C Difficulty: Challenging Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 99) To create a short-medium range missile defense system that was very expensive and risky to develop, Lockheed Martin, Diehl Defence, and Saab formed a A) joint venture.

B) licensing agreement.

C) value chain partnership.

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D) tacit collusion venture.

E) mutual service consortium.

Answer: E Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 100) Yum! Brands used ________ to establish its KFC, Pizza Hut, Taco Bell, Long John Silver's, and A&W Restaurants throughout the world.

A) joint ventures B) licensing C) value-chain partnerships D) mutual service consortia E) direct investments Answer: B Difficulty: Challenging Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking 101) ________ are extremely popular in international undertakings because of financial and political-legal constraints.

A) Joint ventures B) Direct investments C) Mutual service consortia D) Value-chain partnerships E) Differentiation strategies Answer: A Difficulty: Challenging Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 102) Which of the following is not a reason companies or business units may form a strategic alliance?

A) To obtain access to specific markets B) To reduce financial risk C) To reduce political risk D) To set prices in the industry E) To learn new capabilities Answer: D Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking

25 .

103) The kind of strategic alliance in which there is a partnership of similar companies in similar industries who pool their resources to gain a benefit that is too expensive to develop alone, such as access to advanced technology, is the A) joint venture.

B) licensing agreement.

C) value-chain partnership.

D) mutual service consortia.

E) holding company.

Answer: D Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 104) Which of the following is not a disadvantage of joint ventures?

A) Loss of control B) Probability of being accused of collusion C) Lower profits D) Likely transfer of technological advantage to the partner E) Probability of conflicts with partners Answer: B Difficulty: Challenging Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 105) The kind of strategic alliance in which a company forms a strong and close long-term relationship for mutual advantage with a key supplier or distributor is the A) joint venture.

B) licensing agreement.

C) value-chain partnership.

D) mutual service consortia.

E) holding company.

Answer: C Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 106) Which of the following is not considered a strategic alliance success factor?

A) Have a clear strategic purpose.

B) Operate with short-term time horizon.

C) Agree on an exit strategy for when the partners' objectives are achieved or the partnership fails.

D) Minimize conflicts among the partners by clarifying the objectives.

E) Identify likely partnering risks and deal with them when the alliance is formed.

Answer: B Difficulty: Moderate 26 .

Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking 107) Alliances do not take less financial resources than do acquisitions or going it alone and are not easier to exit if necessary.

Answer: FALSE Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking 108) All forms of strategic alliances involve uncertainty.

Answer: TRUE Difficulty: Challenging Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking 109) A licensing arrangement is an agreement in which the licensing firm grants rights to another firm in another country or market to produce and/or sell a product.

Answer: TRUE Difficulty: Easy Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 110) A value chain partnership is a loose alliance with several distributors for the short term.

Answer: FALSE Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge 111) One success factor to a strategic alliance is the ability to identify likely partnering risks and deal with them when the alliance is formed.

Answer: TRUE Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Analytical thinking 112) What is a strategic alliance? Are strategic alliances always successful?

Answer: A strategic alliance is a long-term cooperative arrangement between two or more independent firms or business units that engage in business activities for mutual economic gain.

A firm may form a strategic alliance to obtain or learn new capabilities, to obtain access to specific markets, to reduce financial risk, or to reduce political risk. Over time, conflicts over objectives and control often develop among partners. For these and other reasons, around half of all alliances (including international alliances) perform unsatisfactorily. However, many alliances do increase profitability of the members and have a positive effect on firm value.

Difficulty: Moderate Learning Obj.: 6.4: Identify the types of strategic alliances 27 .

AACSB: Application of knowledge 113) Discuss the types of alliances that businesses can engage in.

Answer: The types of alliances that businesses can engage in include a mutual service consortium, a joint venture, a licensing arrangement, and a value-chain partnership. A mutual service consortium is a partnership of similar companies in similar industries that pool their resources to gain a benefit that is too expensive to develop alone. A joint venture is a "cooperative business activity, formed by two or more separate organizations for strategic purposes, that creates an independent business entity and allocates ownership, operational responsibilities, and financial risks and rewards to each member, while preserving their separate identity/autonomy." A licensing arrangement is an agreement in which the licensing firm grants rights to another firm in another country or market to produce and/or sell a product. The licensee pays compensation to the licensing firm in return for technical expertise. A value-chain partnership is a strong and close alliance in which one company or unit forms a long-term arrangement with a key supplier or distributor for mutual advantage.

Difficulty: Challenging Learning Obj.: 6.4: Identify the types of strategic alliances AACSB: Application of knowledge

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Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 7 Strategy Formulation: Corporate Strategy 1) Which strategy specifies the firm's directional strategy, portfolio analysis, and parenting strategy?

A) Corporate B) Functional C) Divisional D) Organizational E) Business Answer: A Difficulty: Easy Learning Obj.: 7.1: Explain the three key issues that corporate strategy addresses AACSB: Application of knowledge 2) Which aspect of corporate strategy deals with the firm's overall orientation toward growth?

A) Portfolio analysis B) Directional strategy C) Corporate parenting D) Cooperative strategy E) Functional strategy Answer: B Difficulty: Easy Learning Obj.: 7.1: Explain the three key issues that corporate strategy addresses AACSB: Application of knowledge 3) Which aspect of corporate strategy deals with the manner in which the firm coordinates activities and builds corporate synergies through resource sharing and development?

A) Portfolio analysis B) Directional strategy C) Parenting strategy D) Cooperative strategy E) Functional strategy Answer: C Difficulty: Easy Learning Obj.: 7.1: Explain the three key issues that corporate strategy addresses AACSB: Application of knowledge 4) Corporate strategy deals primarily with the choice of direction for the firm as a whole and the management of its business or product portfolio.

Answer: TRUE Difficulty: Easy Learning Obj.: 7.1: Explain the three key issues that corporate strategy addresses AACSB: Application of knowledge

1 .

5) Corporate parenting deals with the firm's overall orientation toward growth, stability, or retrenchment.

Answer: FALSE Difficulty: Moderate Learning Obj.: 7.1: Explain the three key issues that corporate strategy addresses AACSB: Application of knowledge 6) In a large multiple-business company, functional strategy is concerned with managing various product lines and business units for maximum value.

Answer: FALSE Difficulty: Moderate Learning Obj.: 7.1: Explain the three key issues that corporate strategy addresses AACSB: Analytical thinking 7) What is corporate strategy and what are the three key issues that corporate strategy addresses?

Answer: Corporate strategy is primarily about the choice of direction for a firm as a whole and the management of its business or product portfolio. It deals with three key issues: 1. The firm's overall orientation toward growth, stability, and retrenchment (directional strategy).

2. The industries or markets in which the firm competes through its products and business units (portfolio analysis).

3. The manner in which management coordinates activities and transfers resources and cultivates capabilities among product lines and business units (parenting strategy).

Difficulty: Moderate Learning Obj.: 7.1: Explain the three key issues that corporate strategy addresses AACSB: Application of knowledge 8) Which one of the following directional strategies is most frequently used in corporations?

A) Stability B) Consolidation C) Growth D) Retrenchment E) Divestment Answer: C Difficulty: Easy Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge

2 .

9) Which external growth strategy involves two or more corporations joining in a stock exchange and from which only one corporation survives?

A) Merger B) Strategic alliance C) Diversification D) Acquisition E) Concentration Answer: A Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 10) Which of the following strategies was being used when Heinz and Kraft Foods formed Kraft Heinz Company?

A) Merger B) Strategic alliance C) Diversification D) Acquisition E) Concentration Answer: A Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 11) Which external growth strategy was demonstrated in the 2015 Duke Energy and Piedmont Natural Gas transaction?

A) Merger B) Strategic alliance C) Diversification D) Concentration E) Acquisition Answer: E Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking

3 .

12) Which of the following is not a reason why the growth strategy is so desirable?

A) There are more opportunities for advancement and promotion.

B) A corporation that experiences successful growth is thought of positively by the marketplace and potential investors.

C) A large and growth-oriented corporation has more clout and influence.

D) Growth based on increasing market demand may mask flaws in a company.

E) A large and growing firm attracts more acquisition offers.

Answer: E Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 13) The most logical growth strategy for a company with current product lines with real growth potential in a growing industry is A) concentration.

B) conglomerate integration.

C) concentric diversification.

D) stability.

E) retrenchment.

Answer: A Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 14) Cisco Systems', a maker of Internet hardware, decision to purchase Scientific-Atlanta Inc., a maker of set-top boxes for television programs and movies-on-demand is called A) vertical growth.

B) tapered integration.

C) horizontal integration.

D) external vertical integration.

E) quasi-integration.

Answer: A Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking

4 .

15) Vertical growth can be achieved by A) taking over a function previously supplied by a former employer.

B) taking over a function previously provided by a supplier or by a distributor.

C) acquiring a company of similar objective.

D) selling a company encumbered with debt.

E) expanding to countries with strong trade alliances.

Answer: B Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 16) The purchase of the supplier Carroll's Foods for its hog-growing facilities by Smithfield Foods, the world's largest pork processor, is an example of A) forward integration.

B) horizontal integration.

C) backward integration.

D) transferred integration.

E) mass integration.

Answer: C Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 17) The purchase of Kinko's in order to provide store-front package drop-off and delivery services for the small-business market by FedEx is an example of A) forward integration.

B) horizontal integration.

C) backward integration.

D) transferred integration.

E) mass integration.

Answer: A Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking

5 .

18) A disadvantage of backward integration is that it A) creates entry barriers.

B) improves coordination of activities.

C) could decrease a corporation's flexibility.

D) is less profitable than forward integration.

E) avoids time consuming tasks.

Answer: C Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 19) ________ proposes that vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying goods on the open market becomes too great.

A) Population theory B) Institution theory C) Agency theory D) Transaction cost economics E) Transaction growth theory Answer: D Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 20) In many cases, ________ integration is more profitable than ________ integration.

A) forward; backward B) vertical; backward C) backward; vertical D) backward; forward E) mass; forward Answer: D Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking

6 .

21) Sherwin-Williams Company not only manufactures paint, but also sells it in its own chain of 3,000 retail stores. This is an example of A) full integration.

B) taper integration.

C) mass integration.

D) economical integration.

E) strategic integration.

Answer: A Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 22) Although Apple had 511 of its own retail stores in 48 different countries in 2021, a majority of the company's sales continued to be through national chains such as Best Buy, various cell phone providers, and independent local and regional dealers. This is an example of A) full integration.

B) long-term contracts.

C) backwards integration.

D) taper integration.

E) quasi integration.

Answer: D Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 23) A firm's expansion into other geographic locations and/or increasing the range of products and services offered to current markets is called A) forward vertical growth.

B) diversification.

C) backward vertical growth.

D) captive company strategy.

E) horizontal growth.

Answer: E Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge

7 .

24) Which strategy did Delta choose when it acquired Northwest Airlines to obtain access to Northwest's Asian markets?

A) A retrenchment strategy using horizontal integration through internal means B) A horizontal integration strategy C) A stability strategy using concentric diversification D) A growth strategy using vertical integration through external means E) A retrenchment strategy using a concentration method Answer: B Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 25) When Coca Cola Enterprises contracted with Capgemini to provide accounting and financial services, which strategy was Coca Cola Enterprises using?

A) Horizontal growth B) Backward integration C) Outsourcing D) Retrenchment E) Diversification Answer: C Difficulty: Easy Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 26) Toro grew internally in North America by using its current manufacturing processes and distributors to make and market snow blowers in addition to lawn mowers. Toro is pursuing growth through A) concentration.

B) horizontal growth.

C) concentric diversification.

D) vertical growth.

E) conglomerate diversification.

Answer: C Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge

8 .

27) If CSX Corporation, a railroad-dominated transportation company, considered purchasing Texas Gas Resources, a natural gas transmission business, this is an example of A) concentration.

B) horizontal growth.

C) concentric diversification.

D) vertical growth.

E) conglomerate diversification.

Answer: E Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 28) Which strategy might be the most likely when management realizes that the current industry is unattractive and that the firm lacks outstanding skills that it could easily transfer to related products or services in other industries?

A) Concentration B) Horizontal growth C) Concentric diversification D) Vertical growth E) Conglomerate diversification Answer: E Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 29) With conglomerate diversification, the focus is on A) product and market synergy.

B) sound investment and value-oriented management.

C) employee wellbeing and satisfaction.

D) similar product and geographic offerings.

E) market and industry demand.

Answer: B Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge

9 .

30) Once a ________ completes an IPO (initial public offering), it acquires an existing private company, effectively allowing it to become a public company without all the costs, regulations, road shows, and controls that a traditional approach to going public requires.

A) controlled company B) conglomerate C) SPAC D) private equity company E) venture capital Answer: C Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 31) Studies reveal that over one-half to two-thirds of acquisitions are failures primarily because A) the premiums paid were too high for the firm to earn their cost of capital.

B) due diligence was not conducted.

C) the premiums were too high to finance and resulted in bankruptcy.

D) there were unresolved management conflicts.

E) there was a clash of management philosophies.

Answer: A Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 32) Which family of corporate strategies is very popular with small business owners who have found a niche and are happy with their success and the manageable size of their firms?

A) Stability strategies B) Cooperative strategies C) Growth strategies D) Retrenchment strategies E) Competitive strategies Answer: A Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking

10 .

33) Which strategy is considered a timeout?

A) Pause/proceed-with-caution B) Concentration C) Contraction D) Rebirth E) Captive company Answer: A Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 34) Which strategy is doing nothing new in a worsening situation but instead to act as though the company's problems are only temporary?

A) Profit strategy B) No-change strategy C) Turnaround strategy D) Concentration strategy E) Captive company strategy Answer: A Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 35) In which phase of a turnaround strategy does the firm attempt to "stop the bleeding" with a general, across-the-board cutback in size and costs?

A) Contraction B) Consolidation C) Captive company D) Rebirth E) Divestment Answer: A Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge

11 .

36) When Whirlpool sold off Maytag's Hoover vacuum cleaner unit after Whirlpool purchased Maytag, it was following which retrenchment strategy?

A) Divestment B) Leveraged buyout C) Contraction D) Captive company E) Liquidation Answer: A Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 37) ________ seeks to perpetuate a firm while ________ terminates the firm.

A) Bankruptcy; liquidation B) Captive company; bankruptcy C) Bankruptcy; contraction D) Rebirth; bankruptcy E) Liquidation; sell off Answer: A Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 38) Research comparing concentric with conglomerate diversification concludes that A) conglomerate diversification is always less profitable than concentric diversification.

B) concentric diversification is always less profitable than conglomerate diversification.

C) the relationship between relatedness and performance follows an inverted U-shaped curve.

D) neither concentric nor conglomerate diversification are ever profitable.

E) for optimum effectiveness both conglomerate and concentric diversification should be utilized in tandem.

Answer: C Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking

12 .

39) The controversy surrounding external versus internal growth finds A) external growth appears to be superior financially to internal growth.

B) internal growth appears to be superior financially to external growth.

C) there appears to be no financial advantage to either.

D) acquisitions have a lower survival rate than new internally generated business ventures.

E) strategic alliances are superior to both.

Answer: B Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 40) The stability strategy is appropriate for all of the following circumstances EXCEPT A) useful in the short-run but can be dangerous if followed too long.

B) most appropriate for reasonably successful corporations in a reasonably predictable environment.

C) when a firm is continuing its current activities without a significant change in direction.

D) appropriate when the industry is in decline.

E) popular with small business owners who have found a niche and are happy with their success.

Answer: D Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 41) Which strategy was Dell pursuing in 2013 when it decided to "go private" to avoid as a public company as it tried to re-configure the organization?

A) Horizontal integration strategy B) No change strategy C) Retrenchment strategy D) Pause/proceed with caution strategy E) Profit strategy Answer: D Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking

13 .

42) Which strategy is most appropriate for a company in an industry in which the future is expected to continue as an extension of the present?

A) Horizontal integration strategy B) No change strategy C) Retrenchment strategy D) Pause/proceed with caution strategy E) Profit strategy Answer: B Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 43) Turnaround strategies are sometimes referred to as A) profit strategy.

B) liquidation.

C) transformation.

D) no-change strategy.

E) pause/proceed-with-caution strategy.

Answer: C Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 44) NetApp's strategy of contraction, consolidation, and rebirth is an example of a(n) A) merger.

B) liquidation.

C) integration.

D) divestment.

E) turnaround.

Answer: E Difficulty: Easy Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge

14 .

45) Which strategy involves giving up independence in exchange for security?

A) Captive company strategy B) Turnaround strategy C) Retrenchment strategy D) Profit strategy E) Stability strategy Answer: A Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 46) In which strategy does management hope that another company will have the necessary resources and determination to return the company to profitability?

A) Sell-out B) Captive company C) Liquidation D) Bankruptcy E) Profit Answer: A Difficulty: Easy Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 47) Which strategy allows the business to continue operating under court supervision?

A) Liquidation B) Chapter 11 bankruptcy C) Chapter 7 bankruptcy D) Divestment E) Consolidation Answer: B Difficulty: Easy Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge

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48) Which strategy did Payless Shoe Stores use in 2019 when it converted its retail stores to cash?

A) Liquidation B) Bankruptcy C) Diversification D) Divestment E) Consolidation Answer: A Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 49) Which one of the following is not a characteristic of a firm that has chosen a captive company strategy?

A) It is most appropriate for a company with a strong competitive position in a growing industry.

B) The firm reduces its functional activities to reduce costs.

C) The firm gains a certainty of sales and production in return for becoming heavily dependent upon another firm for at least 75% of its sales.

D) One of its customers makes up a large percentage of the company's sales and wants the company to keep operating as its supplier.

E) Management desperately seeks an "angel" to guarantee the company's continued existence.

Answer: A Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Reflective thinking 50) The most widely pursued corporate directional strategies are those designed to achieve stability.

Answer: FALSE Difficulty: Easy Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 51) A merger is a transaction involving two or more corporations in which stock is exchanged, but from which only one corporation survives.

Answer: TRUE Difficulty: Easy Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge

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52) The two basic growth strategies are concentration and strategic alliances.

Answer: FALSE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 53) An example of backward integration is Apple, a manufacturer of electronic products, opening its own retail stores.

Answer: FALSE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 54) Vertical integration is the degree to which a firm operates vertically in multiple locations on an industry's value chain from extracting raw materials to manufacturing to retailing.

Answer: TRUE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 55) Forward integration is often more profitable than backward integration.

Answer: FALSE Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 56) Sherwin-Williams is an example of a fully integrated firm because it manufactures paint and sells it through its own chain of 3,000 retail stores.

Answer: TRUE Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 57) With quasi integration, a firm internally makes less than half of its key supplies and buys the rest from outside suppliers.

Answer: FALSE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge

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58) An example of forward quasi-integration would be a large pharmaceutical firm that acquires part interest in a drugstore chain in order to guarantee that its drugs have access to the distribution channel.

Answer: TRUE Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 59) An exclusive long-term contract is considered vertical integration.

Answer: TRUE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 60) Horizontal growth can be achieved by expanding the firm's products into other geographic locations and/or by increasing the range of products and services offered to current markets.

Answer: TRUE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 61) Vertical integration is always more efficient than contracting for goods and services in the marketplace.

Answer: FALSE Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 62) A company's degree of vertical integration can range from total ownership of the value chain needed to make and sell a product to no ownership at all.

Answer: TRUE Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 63) Horizontal growth is achieved through internal development and not external means.

Answer: FALSE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 18 .

64) Organizational slack refers to unused resources.

Answer: TRUE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 65) The two basic diversification strategies are vertical and horizontal integration.

Answer: FALSE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 66) Strategic managers who adopt a concentric diversification strategy are primarily concerned with financial considerations of cash flow or risk reduction.

Answer: FALSE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 67) Concentric diversification is growth into related businesses but may be a very appropriate corporate strategy when a firm has a strong competitive position but industry attractiveness is low.

Answer: TRUE Difficulty: Easy Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 68) Conglomerate diversification is diversifying into an industry unrelated to its current one.

Answer: TRUE Difficulty: Easy Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 69) Unrelated diversification is a good strategy for a firm when its core capability is its own management systems.

Answer: TRUE Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking

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70) The stability strategies are really a lack of any strategy.

Answer: FALSE Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 71) Stability strategies can be very useful in the short run, but they can be dangerous if followed for too long.

Answer: TRUE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 72) When NetApp announced plans to cut 12% of its employees as part of a huge, US$400 million cost cutting move, it was addressing the contraction phase of the turnaround strategy.

Answer: TRUE Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 73) What questions must be addressed when a corporation decides its orientation toward growth?

Answer: A corporation must decide its orientation toward growth by asking the following three questions: 1. Should we expand, cut back, or continue our operations unchanged?

2. Should we concentrate our activities within our current industry, or should we diversify into other industries?

3. If we want to grow and expand nationally and/or globally, should we do so through internal development or through external acquisitions, mergers, or strategic alliances?

Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge

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74) How does transaction cost economics explain vertical integration?

Answer: Transaction cost economics proposes that vertical integration is more efficient than contracting for goods and services in the marketplace when the transaction costs of buying goods on the open market become too great. When highly vertically integrated firms become excessively large and bureaucratic, however, the costs of managing the internal transactions may become greater than simply purchasing the needed goods externally — thus justifying outsourcing over vertical integration. This is why vertical integration and outsourcing are situation specific.

Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 75) Discuss the two basic growth strategies.

Answer: The two basic growth strategies are concentration on the current or innovative product line(s) in one industry and diversification into other product lines or other industries. If a company's product lines have real growth potential, concentration of resources on those product lines makes sense as a strategy for growth. Companies begin thinking about diversification when their growth has plateaued and opportunities for growth in the original business have been depleted.

Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 76) Discuss the differences among full integration, taper integration, and quasi-integration.

Answer: A firm's level of vertical integration can range from total ownership of the value chain to no ownership at all. Under full integration, a firm itself makes all of its key supplies and completely controls its distributors. With taper integration, a firm itself produces less than half of its requirements and buys the rest from outside suppliers. This is also known as concurrent sourcing. Under quasi-integration, a firm does not make any of its key supplies, but instead buys most of its requirements from outside suppliers that are under its partial control.

Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking

21 .

77) Discuss the more popular stability strategies.

Answer: The more popular stability strategies include the pause-proceed with caution, nochange, and profit strategies. A pause-proceed with caution strategy is, in effect, a timeout–an opportunity to rest before continuing a growth or retrenchment strategy. It is a deliberate attempt to make only incremental improvements until the particular environmental situation changes. A no-change strategy is a decision to do nothing new–a choice to continue current operations and policies for the foreseeable future. This strategy's success depends on a lack of significant change in a firm's situation. A profit strategy is a decision to do nothing new in a worsening situation but instead to act as though the company's problems are only temporary. This strategy is useful only to help a company get through a temporary difficulty.

Difficulty: Moderate Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Application of knowledge 78) How is bankruptcy different from liquidation?

Answer: Bankruptcy and liquidation are both retrenchment strategies. Bankruptcy involves giving up management of the firm to the courts in return for some settlement of the corporation's obligations. Top management hopes that once the courts decides the claims on the company, the company will be stronger and better able to compete in a more attractive industry. In contrast to bankruptcy, which seeks to perpetuate a corporation, liquidation is the termination of the firm.

When the industry is unattractive and the company is too weak to be sold as a going concern, management may choose to convert as many saleable assets as possible to cash, which is often distributed to the shareholders after all obligations are paid.

Difficulty: Challenging Learning Obj.: 7.2: Apply the directional strategies of growth, stability, and retrenchment to the organizational environment in which they work best AACSB: Analytical thinking 79) In ________, top management views its top product lines and business units as a series of investments from which it expects a profitable return.

A) PIMS B) segmentation analysis C) portfolio analysis D) industry analysis E) diversification study Answer: C Difficulty: Moderate Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge

22 .

80) In the Boston Consulting Group's Growth-Share Matrix, a relative market share above 1.0 belongs to the A) average performer.

B) loss leader.

C) smallest competitor.

D) most profitable competitor.

E) market leader.

Answer: E Difficulty: Moderate Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge 81) According to the Growth Share Matrix of the Boston Consulting Group, a product line or unit having a relative competitive position less than 1.0 is a A) dog.

B) cash cow.

C) star.

D) white knight.

E) fish.

Answer: A Difficulty: Moderate Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge 82) According to the BCG Growth-Share Matrix, which of the following are "milked" for cash?

A) Cash cows B) Loss leaders C) Dogs D) Question marks E) Stars Answer: E Difficulty: Easy Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge

23 .

83) According to the BCG Growth-Share Matrix, expenses such as advertising and R&D are reduced for A) cash cows.

B) loss leaders.

C) wild cards.

D) question marks.

E) stars.

Answer: A Difficulty: Easy Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge 84) According to the BCG Growth-Share Matrix, those products with low market share in an unattractive industry that do not have the potential to bring in much cash are called A) cash cows.

B) lost leaders.

C) dogs.

D) question marks.

E) stars.

Answer: C Difficulty: Easy Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge 85) According to the BCG Growth-Share Matrix, the key to success with this model is A) effective management.

B) competitive positioning.

C) innovative initiative.

D) industry growth.

E) market leadership.

Answer: E Difficulty: Moderate Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge

24 .

86) Which of the following is not one of the limitations of the BCG Growth-Share Matrix?

A) It is quite complicated.

B) The link between market share and profitability is questionable.

C) Growth rate is only one aspect of industry attractiveness.

D) Market share is only one aspect of overall competitive position.

E) Product lines or business units are considered only in relation to one competitor, the market leader.

Answer: A Difficulty: Challenging Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Analytical thinking 87) Underlying the BCG Growth-Share Matrix is the concept of the A) product life cycle.

B) industry life cycle.

C) market size.

D) experience curve.

E) industry profitability.

Answer: D Difficulty: Moderate Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Analytical thinking 88) Apple's iPhone is the market leader in the fast growing smartphone market. According to the BCG Growth-Share matrix, it would be classified as a A) question mark.

B) cash cow.

C) star.

D) dog.

E) wildcard.

Answer: C Difficulty: Challenging Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge

25 .

89) One of the limitations of using a portfolio analysis technique like the Growth Share Matrix by the Boston Consulting Group is that its value-laden terms such as cash cows and dog can lead to A) increased investments.

B) above average profitability.

C) self-fulfilling prophecies.

D) using externally sourced funds.

E) excessive debt.

Answer: C Difficulty: Easy Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge 90) Which of the following is not one of the advantages of portfolio analysis?

A) Its graphic depiction facilitates communication.

B) It provides the basis for impartial objectivity from which to make decisions.

C) It encourages top management to evaluate each of the corporation's businesses individually.

D) It raises the issue of cash-flow availability for use in expansion and growth.

E) It stimulates the use of externally oriented data to supplement management's judgment.

Answer: B Difficulty: Challenging Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Analytical thinking 91) Which of the following is not one of the limitations of portfolio analysis?

A) It contains value-laden terminology that can lead to self-fulfilling prophecies.

B) Defining product/market segments is difficult.

C) It relies too heavily on objective judgments.

D) It suggests the use of standard strategies that can miss opportunities or be impractical.

E) It provides an illusion of scientific rigor.

Answer: C Difficulty: Challenging Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Analytical thinking 92) The Boston Consulting Group Growth-Share Matrix is based on industry growth rate and relative market share of each product line or business unit.

Answer: TRUE Difficulty: Moderate Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge

26 .

93) According to the BCG Growth-Share Matrix, cash cows are market share leaders typically at the growth stage of their product life cycle and are usually able to generate enough cash to maintain their high share of the market.

Answer: FALSE Difficulty: Moderate Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge 94) According to the BCG Growth-Share Matrix, dogs have low market share.

Answer: TRUE Difficulty: Moderate Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge 95) According to the BCG Growth-Share Matrix, question marks are also known as "wildcats."

Answer: TRUE Difficulty: Moderate Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge 96) A limitation of the BCG Growth-Share Matrix is that market share is only one aspect of overall competitive position.

Answer: TRUE Difficulty: Moderate Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Analytical thinking 97) One limitation of portfolio analysis is that it raises the issue of cash-flow availability for use in expansion and growth.

Answer: FALSE Difficulty: Easy Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Analytical thinking

27 .

98) What are the advantages of portfolio analysis?

Answer: Portfolio analysis is commonly used in strategy formulation because it offers the following four advantages: 1. It encourages top management to evaluate each of the corporation's businesses individually and to set objectives and allocate resources for each.

2. It stimulates the use of externally oriented data to supplement management's judgment.

3. It raises the issue of cash-flow availability for use in expansion and growth.

4. Its graphic depiction facilitates communication.

Difficulty: Easy Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge 99) Describe the four categories of the BCG Growth-Share Matrix.

Answer: The four categories of the BCG Growth-Share Matrix are question marks, stars, cash cows, and dogs. Question marks are new products with the potential for success, but they need a lot of cash for development. Stars are market leaders typically at the peak of their product life cycle and are usually able to generate enough cash to maintain their high share of the market and contribute to the company's profits. Cash cows typically bring in far more money than is needed to maintain their market share. In this declining stage of their life cycle, these products are "milked" for cash that will be invested in new question marks. Dogs have low market share and do not have the potential to bring in much cash because they are in unattractive industries. Dogs should be either sold off or managed carefully for the small amount of cash they can generate.

Difficulty: Moderate Learning Obj.: 7.3: Apply portfolio analysis to guide decisions in companies with multiple products and businesses AACSB: Application of knowledge 100) ________ views a corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units.

A) Multi-point competition B) Strategic advantage C) Corporate parenting D) Portfolio analysis E) Screening analysis Answer: C Difficulty: Moderate Learning Obj.: 7.4: Develop a parenting strategy for a multiple-business corporation AACSB: Application of knowledge

28 .

101) Corporate parenting generates corporate strategy by focusing on A) the core competencies of the parent corporation and on the value created from the relationship between the parent and its units.

B) the cash flow among its business units.

C) whether a business unit should be growing, stabilizing, or retrenching.

D) acquiring distinctive competencies in the marketplace.

E) differentiating its activities into separate units and integrating these activities through complex integrating mechanisms.

Answer: A Difficulty: Easy Learning Obj.: 7.4: Develop a parenting strategy for a multiple-business corporation AACSB: Analytical thinking 102) According to the text, what percentage of a company's market value is derived from its intangible assets — the organization's knowledge and capabilities?

A) 25 B) 35 C) 50 D) 75 E) 90 Answer: D Difficulty: Moderate Learning Obj.: 7.4: Develop a parenting strategy for a multiple-business corporation AACSB: Application of knowledge 103) As corporations become global competitors and expand into more markets through strategic alliances, multipoint competition is likely A) to remain unchanged.

B) to become even more prevalent.

C) to become less prevalent going forward.

D) to become non-existent.

E) to eliminate the use of horizontal strategies.

Answer: B Difficulty: Moderate Learning Obj.: 7.4: Develop a parenting strategy for a multiple-business corporation AACSB: Analytical thinking

29 .

104) A corporate strategy that cuts across divisional boundaries to build synergy across business units and to improve the competitive position of one or more business units is called A) vertical strategy.

B) horizontal strategy.

C) hierarchical strategy.

D) portfolio strategy.

E) pyramid strategy.

Answer: B Difficulty: Moderate Learning Obj.: 7.4: Develop a parenting strategy for a multiple-business corporation AACSB: Application of knowledge 105) When P&G, Kimberly-Clark, and Scott Paper compete with each other in varying combinations of consumer paper products, they are said to be engaging in A) oligopolistic competition.

B) strategic competition.

C) multipoint competition.

D) laissez-faire competition.

E) horizontal competition.

Answer: C Difficulty: Moderate Learning Obj.: 7.4: Develop a parenting strategy for a multiple-business corporation AACSB: Analytical thinking 106) Portfolio analysis views the corporation in terms of resources and capabilities that can be used to build business unit value as well as generate synergies across business units.

Answer: FALSE Difficulty: Easy Learning Obj.: 7.4: Develop a parenting strategy for a multiple-business corporation AACSB: Analytical thinking 107) In multipoint competition, large multi-business corporations compete against other large multi-business firms in a number of markets.

Answer: TRUE Difficulty: Moderate Learning Obj.: 7.4: Develop a parenting strategy for a multiple-business corporation AACSB: Application of knowledge 108) Define corporate parenting.

Answer: Corporate parenting views the corporation regarding resources and capabilities that can be used to build business unit value as well as generate synergies across business units.

Corporate parenting generates corporate strategy by focusing on the core competencies of the parent corporation and the value created from the relationship between the parent and its businesses.

Difficulty: Easy Learning Obj.: 7.4: Develop a parenting strategy for a multiple-business corporation AACSB: Application of knowledge 30 .

Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 8 Strategy Formulation: Functional Strategy and Strategic Choice 1) In which strategy does a company or unit develop new products for existing markets or develop new products for new markets?

A) Business strategy B) Competitive strategy C) Product development strategy D) Market development strategy E) Functional strategy Answer: C Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 2) The pricing, selling, and distributing of a product is referred to as a(n) ________ strategy.

A) functional B) marketing C) operations D) financial E) human resource management Answer: B Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 3) The type of marketing strategy that is closely tied to the competitive advantages of the product or service in which a company captures a larger share of an existing market for current products through market saturation or market penetration or develops new uses and/or markets for current products is called A) market development.

B) push strategy.

C) product development.

D) pull strategy.

E) skimming the cream.

Answer: A Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

1 .

4) When Aston-martin puts its name on others' products, like upscale residences in Miami as well as numerous designers with custom car interiors, it is using which marketing strategy?

A) Demand pricing B) Brand pricing C) Brand extension D) Penetration extension E) Demand extension Answer: C Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 5) A company may use which of the following trade promotions to "pull" their products through the distribution system?

A) Discounts B) In-store special offers C) Advertising allowances D) Coupons E) Consumer advertising Answer: E Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 6) Trade promotions including discounts, in-store special offers, and advertising allowances are examples of ________ strategies.

A) pull B) push C) financial D) dedicated line E) dynamic pricing Answer: B Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

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7) Which type of pricing takes advantage of the demand curve while the product is still novel and competitors are few to increase profits?

A) Demand pricing B) Skim pricing C) Competitive pricing D) Penetration pricing E) Dynamic pricing Answer: B Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 8) Which type of pricing is where prices vary frequently based on demand, market segment, and product availability?

A) Demand pricing B) Competitive pricing C) Skim pricing D) Penetration pricing E) Dynamic pricing Answer: E Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 9) Which of the following is not a goal of financial strategies?

A) Examine the financial implication of corporate and business-level strategic options and identify the best financial course of action.

B) Provide the corporation with the appropriate financial structure and funds to achieve its overall objectives.

C) Institute a new product development plan to generate profit gain market share.

D) Provide competitive advantage through a lower cost of funds and a flexible ability to raise capital to support a business strategy.

E) Attempt to maximize the financial value of the firm.

Answer: C Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking

3 .

10) All of the following are benefits for a company to raising its debt levels EXCEPT A) deter takeover attempts by other firms.

B) improve productivity.

C) improve cash flows.

D) force management to focus on core businesses.

E) improve strategic options available.

Answer: E Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 11) A popular financial strategy in which a company is acquired in a transaction financed largely by debt and eventually paid with money generated from the acquired company's operations or by sale of its assets is A) illegal in most countries.

B) a good way to build a core competency.

C) an application of the capital asset pricing model.

D) the leveraged buyout.

E) an example of internal financing.

Answer: D Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 12) Management Buy Outs are a type of A) leveraged bargains.

B) leveraged buyouts.

C) management bargains.

D) coordinated buyouts.

E) debt buyouts.

Answer: B Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

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13) When a company exchanges 100 shares of stock worth $40 each for 200 shares worth $20 each, they are using A) tracking stock.

B) holding stock.

C) a leveraged buyout.

D) reverse stock split.

E) forward stock split.

Answer: E Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 14) Which of the following is believed to increase earnings per share, typically increase a firm's stock price and make unwanted takeover attempts more difficult?

A) Tracking stocks B) Stock buybacks C) Reverse stock splits D) Holding stocks E) Treasury stocks Answer: B Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 15) A company that pioneers an innovation is called a A) technological follower.

B) technological opportunist.

C) technological leader.

D) technological manufacturer.

E) technological entrepreneur.

Answer: C Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

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16) Dean Foods Company, maker of such brands as Dairy Pure, Land O'Lakes, and TruMoo, achieves a low-cost competitive advantage by being a A) technological follower.

B) technological opportunist.

C) technological leader.

D) technological manufacturer.

E) technological entrepreneur.

Answer: A Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 17) When Walmart and other toy manufacturers and retailers use idea brokers to scout for new toy ideas, they are using which approach to R&D? A) Open innovation B) Differentiation C) Technology touting D) Continuous improvement E) Technology leadership Answer: A Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 18) P&G decreed that the company would search outside their organization for promising innovations. To achieve this, the company used A) technology scouts.

B) a technological follower strategy.

C) open sourcing.

D) outsourcing.

E) offshoring.

Answer: A Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking

6 .

19) The approach in which preassembled subassemblies are delivered as they are needed to a company's assembly-line workers, who quickly piece them together into a finished product is called A) mass customization.

B) modular manufacturing.

C) a connected line batch flow.

D) open innovation.

E) a push marketing strategy.

Answer: B Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 20) When a firm uses alliances and connections with corporate, government, academic labs, and consumers to develop new products and processes, its approach to R&D is called A) insular innovation.

B) low-cost innovation.

C) modular innovation.

D) open innovation.

E) market innovation.

Answer: D Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 21) The practice of large firms such as IBM and Microsoft to purchase minority stakes in relatively new high-tech entrepreneurial ventures that need capital to continue operation is their approach to A) technology development.

B) open innovation.

C) cost leadership.

D) differentiation.

E) marketing.

Answer: A Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking

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22) When a company determines how and where a product or service is to be manufactured, the level of vertical integration in the production process, the deployment of physical resources, and relationships with suppliers, the company is developing its ________ strategy.

A) marketing B) operations C) R&D D) financial E) human resource management Answer: B Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 23) A ________ is one-of-a-kind production using skilled labor.

A) connected line batch flow B) flexible manufacturing system C) job shop D) just-in-time (JIT) method of manufacturing E) modular manufacturing system Answer: C Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 24) When components are standardized and each machine functions like a job shop but is positioned in the same order as the parts are processed, this setup is known as A) mass customization.

B) connected line batch flow.

C) connected job flow.

D) mass batch flow.

E) mass job flow.

Answer: B Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

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25) When there are highly automated assembly lines making one mass-produced product using little human labor, this setup is called A) dedicated transfer lines.

B) connected line batch flow.

C) connected job flow.

D) mass batch lines.

E) mass job flow.

Answer: A Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 26) As it relates to operations, CAD stands for A) corporate advertising design.

B) computer-added design.

C) company assisted development D) computer-assisted design.

E) computer-automated design.

Answer: D Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 27) W. Edwards Deming developed the ________ system that was perfected by Japanese firms.

A) computer-assisted design B) computer-assisted manufacturing C) continuous improvement D) job shop E) dedicated transfer lines Answer: C Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

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28) The increasing need for flexibility and quick responsiveness as exemplified by the ability to have items delivered quickly and directly to your door demonstrates which aspect of the business model?

A) Continuous improvement B) Mass production C) Job shop D) Mass customization E) Just-in-time Answer: D Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 29) When a company deals with obtaining raw materials, parts, and supplies needed to perform the operations function, the company is developing its ________ strategy.

A) operations B) purchasing C) R&D D) financial E) human resource management Answer: B Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 30) The basic purchasing choices are multiple, sole, and A) corporate sourcing.

B) transactional sourcing.

C) just-in-time sourcing.

D) backup sourcing.

E) parallel sourcing.

Answer: E Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking

10 .

31) Which type of sourcing was recommended by W. Edwards Deming as the only manageable way to obtain high supplier quality?

A) Multiple sourcing B) Outsourcing C) Sole sourcing D) Parallel sourcing E) Market sourcing Answer: C Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 32) The purchasing strategy in which two suppliers are the sole suppliers of different parts, but are also the backup suppliers for each other's parts is A) sole sourcing.

B) multiple sourcing.

C) just-in-time sourcing.

D) backup sourcing.

E) parallel sourcing.

Answer: E Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 33) To gain logistical synergies across business units, corporations began A) centralizing logistics in the headquarters group.

B) downsizing the logistics function.

C) forming logistical partnerships.

D) computerization.

E) containerized shipping.

Answer: A Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

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34) The flow of products into and out of the manufacturing process is a factor when developing a(n) ________ strategy.

A) marketing B) logistics C) operations D) financial E) human resource management Answer: B Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 35) Companies such as Georgia-Pacific, Marriott, and Union Carbide view the logistics function as an important way to ________, to add value, and to reduce costs.

A) be cost leaders B) differentiate themselves from the competition C) be market followers D) outsource E) downsize Answer: B Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 36) DuPont is an example of a company that demonstrated having a diverse workforce A) can be a competitive advantage.

B) can lower productivity.

C) can be an effective logistics strategy.

D) can hinder quality.

E) hinders growth.

Answer: A Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

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37) The practice in which project team members living in one country can pass their work to team members in another country in which the workday is just beginning is called A) computerized workflow.

B) automated customer service.

C) follow-the-sun management.

D) contiguous shifts.

E) outsourcing.

Answer: C Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 38) What strategy was FedEx using when it first provided its customers with PowerShip computer software to store addresses, print shipping labels, and track package locations?

A) Marketing B) Operations C) Corporate D) Information technology E) Just-in-time Answer: D Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Reflective thinking 39) Church & Dwight uses the market development strategy when they put the Arm & Hammer name on various new food products.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 40) The importance of parallel sourcing was supported by Deming to obtain high supplier quality.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

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41) The orientation of the functional strategy is dictated by its parent business unit's strategy.

Answer: TRUE Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 42) Each business unit has its own set of departments, each with its own functional strategy.

Answer: TRUE Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 43) A marketing strategy deals with pricing, selling, and distributing a product.

Answer: TRUE Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 44) Using a product development strategy, a company can capture a larger share of an existing market for current products or develop new markets for current products.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 45) When Colgate-Palmolive and Unilever take a successful product that they marketed in one part of the world and market it elsewhere, they are following a market development strategy.

Answer: TRUE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 46) A company, such as Church & Dwight, follows the market development strategy of developing new uses and/or markets for current products such as for its successful product: Arm & Hammer brand baking soda.

Answer: TRUE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking

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47) A high level of advertising is a key part of the push strategy.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 48) Dynamic pricing is a practice in which prices vary frequently based upon demand, market segment, and product availability.

Answer: TRUE Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 49) The use of the Internet and various forms of social media to market goods directly to the customer allows a company to use dynamic pricing.

Answer: TRUE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 50) A financial strategy can provide competitive advantage through a lower cost of funds.

Answer: TRUE Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 51) Equity financing is preferred for unrelated diversification while debt financing is preferred for related diversification.

Answer: FALSE Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 52) In a merger, the acquired company, in effect, pays for its own acquisition.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

15 .

53) An example of the use of the leader R&D functional strategy to achieve a differentiation competitive advantage is Dean Foods Company, maker of such brands as Dairy Pure, Land O'Lakes, and TruMoo. Answer: FALSE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 54) An operations strategy determines how and where a product or service is to be manufactured, the level of vertical integration in the production process, the deployment of physical resources, and relationships with suppliers.

Answer: TRUE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 55) The flexible manufacturing system was developed by Deming.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 56) The automobile industry is currently experimenting with the strategy of mass customization in which pre-assembled sub-assemblies are delivered as they are needed to a company's assembly line workers.

Answer: FALSE Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 57) The basic purchasing choices are multiple, sole, and parallel sourcing.

Answer: TRUE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

16 .

58) Two suppliers are the sole suppliers of two different parts, but they are also backup suppliers for each other's parts in parallel sourcing.

Answer: TRUE Difficulty: Challenging Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 59) Operations strategy deals with the flow of products into and out of the manufacturing process.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 60) Research indicates that the use of work teams leads to decreased quality and productivity as well as lower employee satisfaction and commitment as a result of less accountability.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 61) Follow-the-sun management is a practice in which project team members living in one country can pass their work to team members in another country in which the workday is just beginning.

Answer: TRUE Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 62) What is a functional strategy?

Answer: Functional strategy is the approach a functional area takes to achieve corporate and business unit objectives and strategies by maximizing resource productivity. It is concerned with developing and nurturing a distinctive competence to provide a company or business unit with a competitive advantage. Each business unit has its own set of departments, each with its own functional strategy.

Difficulty: Easy Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

17 .

63) Distinguish between skim and penetration pricing.

Answer: Skim pricing offers the new- product pioneer the opportunity to "skim the cream" from the top of the demand curve with a high price while the product is novel and competitors are few. In contrast, penetration pricing attempts to hasten market development and offers the market pioneer the opportunity to use the experience curve to gain market share with a lower price and then dominate the industry.

Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 64) What are leveraged buyouts?

Answer: In a leveraged buyout (LBO), a company is acquired in a transaction financed largely by debt, usually obtained from a third party, such as an insurance company or an investment banker. Ultimately, the debt is supposed to be paid with money generated from the acquired company's operations or by sales of its assets. The acquired company, in effect, pays for its own acquisition along with substantial management fees paid to the private equity firm.

Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge 65) What is open innovation?

Answer: Open innovation (OI) is a R&D approach in which a firm uses alliances and connections with corporate, government, and academic labs, and consumers to develop new products and processes. OI has been widely accepted and applied to a wide variety of companies.

As an example, Intel opened four small-scale research facilities adjacent to universities to promote the cross-pollination of ideas.

Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Analytical thinking 66) What is parallel sourcing and how does it work?

Answer: The basic purchasing choices are multiple, sole, and parallel sourcing. In parallel sourcing, two suppliers are the sole suppliers of two different parts, but they are also backup suppliers for each other's parts. If one vendor cannot supply all of its parts on time, the other vendor is asked to make up the difference.

Difficulty: Moderate Learning Obj.: 8.1: Discuss the impact that the various types of functional strategies have on the achievement of organizational goals and objectives AACSB: Application of knowledge

18 .

67) Purchasing a product or service externally that had been previously provided internally is called A) vertical integration.

B) horizontal integration.

C) transaction costing.

D) outsourcing.

E) geographic integration.

Answer: D Difficulty: Easy Learning Obj.: 8.2: Explain which activities and functions are appropriate to outsource/offshore in order to gain or strengthen competitive advantage AACSB: Application of knowledge 68) ________ is the outsourcing of an activity or a function to a wholly owned company or an independent provider in another country.

A) Vertical integration B) Horizontal integration C) Offshoring D) Logistics E) Geographic integration Answer: C Difficulty: Challenging Learning Obj.: 8.2: Explain which activities and functions are appropriate to outsource/offshore in order to gain or strengthen competitive advantage AACSB: Analytical thinking 69) Outsourcing is the reverse of A) purchasing.

B) logistics.

C) vertical integration.

D) horizontal integration.

E) geographic integration.

Answer: C Difficulty: Moderate Learning Obj.: 8.2: Explain which activities and functions are appropriate to outsource/offshore in order to gain or strengthen competitive advantage AACSB: Application of knowledge

19 .

70) Which of the following is not one of the major outsourcing errors that should be avoided?

A) Failure to keep core activities in-house B) Selecting the wrong vendor C) Writing a poor contract D) Micromanaging the outsourced activity to maintain control E) Overlooking personnel issues Answer: D Difficulty: Moderate Learning Obj.: 8.2: Explain which activities and functions are appropriate to outsource/offshore in order to gain or strengthen competitive advantage AACSB: Application of knowledge 71) The key to outsourcing is to purchase from the outside only those activities that A) are not key to the company's distinctive competencies.

B) are very expensive.

C) provide the company competitive advantage.

D) are provided by an important supplier.

E) are not very expensive.

Answer: A Difficulty: Moderate Learning Obj.: 8.2: Explain which activities and functions are appropriate to outsource/offshore in order to gain or strengthen competitive advantage AACSB: Analytical thinking 72) Offshoring is the reverse of vertical integration.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.2: Explain which activities and functions are appropriate to outsource/offshore in order to gain or strengthen competitive advantage AACSB: Reflective thinking 73) Outsourcing is purchasing a product or service externally that had been previously provided internally.

Answer: TRUE Difficulty: Moderate Learning Obj.: 8.2: Explain which activities and functions are appropriate to outsource/offshore in order to gain or strengthen competitive advantage AACSB: Analytical thinking 74) The key to outsourcing is to purchase from outside only those activities that are not key to the company's distinctive competencies.

Answer: TRUE Difficulty: Moderate Learning Obj.: 8.2: Explain which activities and functions are appropriate to outsource/offshore in order to gain or strengthen competitive advantage AACSB: Application of knowledge 20 .

75) What is outsourcing? How is it different from offshoring?

Answer: Outsourcing is purchasing from someone else a product or service that had been previously provided internally. It is the reverse of vertical integration. Outsourcing is becoming an increasingly important part of strategic decision-making and an important way to increase efficiency and often quality. In contrast, offshoring is the outsourcing of an activity or a function to a wholly owned company or an independent provider in another country. Offshoring is a simple reality of business operations that has been supported by advances in information and communication technologies, the development of stable, secure, and high-speed data transmission systems, and logistical advances like containerized shipping.

Difficulty: Challenging Learning Obj.: 8.2: Explain which activities and functions are appropriate to outsource/offshore in order to gain or strengthen competitive advantage AACSB: Application of knowledge 76) After succeeding in instant photography, Polaroid's decision to try for another "long shot" in investing to develop an "instant" movie camera would be an example of which strategy to avoid?

A) Follow the leader B) Hit another home run C) Market-share race D) Do everything E) Losing hand Answer: B Difficulty: Moderate Learning Obj.: 8.3: List and explain the strategies to avoid AACSB: Analytical thinking 77) A company that keeps up by imitating a leading company's strategy while ignoring its own strengths and weaknesses is an example of which strategy to avoid?

A) Follow the leader B) Hit another home run C) Market-share race D) Do everything E) Losing hand Answer: A Difficulty: Moderate Learning Obj.: 8.3: List and explain the strategies to avoid AACSB: Analytical thinking

21 .

78) Since the deregulation of the airline industry, major airlines have entered into a spirited battle for customers by cutting prices and offering special deals. This is an example of which strategy to avoid?

A) Follow the leader B) Hit another home run C) Market-share race D) Do everything E) Losing hand Answer: C Difficulty: Moderate Learning Obj.: 8.3: List and explain the strategies to avoid AACSB: Analytical thinking 79) RIM's experience with the Blackberry phone where they failed to accept how new entrants had changed the industry is an example of which strategy to avoid?

A) Follow the leader B) Hit another home run C) Market-share race D) Do everything E) Losing hand Answer: E Difficulty: Moderate Learning Obj.: 8.3: List and explain the strategies to avoid AACSB: Analytical thinking 80) A company which, when faced with several interesting opportunities, tends to leap at all of them, would be an example of which strategy to avoid?

A) Follow the leader B) Hit another home run C) Market-share race D) Do everything E) Losing hand Answer: D Difficulty: Moderate Learning Obj.: 8.3: List and explain the strategies to avoid AACSB: Application of knowledge 81) IBM demonstrated a follow-the-leader strategy when it imitated Fujitsu Ltd.'s strategy focused on mainframes in 1990.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.3: List and explain the strategies to avoid AACSB: Analytical thinking

22 .

82) With the help of an example, explain why a market-share race strategy is one to avoid.

Answer: Entering into a spirited battle with another firm for increased market share might increase sales revenue, but that increase will probably be more than offset by increases in advertising, promotion, R&D, and manufacturing costs. While examples may vary, there is one from the airlines industry. Since the U.S. deregulation of airlines, price wars and rate specials have contributed to the bankruptcies of many major airlines, such as Eastern, Pan American, TWA, and the consolidation of virtually every major airline into just four major players.

Difficulty: Challenging Learning Obj.: 8.3: List and explain the strategies to avoid AACSB: Application of knowledge 83) Pro forma means A) historical past.

B) estimated future.

C) legal.

D) market based.

E) operational.

Answer: B Difficulty: Challenging Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 84) ________ are pro forma (estimated future) balance sheets and income statements that forecast the effect each alternative strategy and its various programs will likely have on division and corporate return on investment.

A) Decision trees B) SWOT analysis C) Industry scenarios D) Corporate scenarios E) Capital Asset Pricing Models Answer: D Difficulty: Easy Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Application of knowledge 85) The first step in constructing a corporate scenario is to A) develop a common-sized financial statement.

B) construct detailed pro forma financial statements.

C) decide upon how much risk management is willing to accept.

D) analyze the societal environment.

E) use industry scenarios to develop a set of assumptions about the task environment.

Answer: E Difficulty: Easy Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Application of knowledge

23 .

86) Which of the following is included in corporate scenarios?

A) Market analysis B) Balance sheet C) Production planning report D) Budgets E) Customer surveys Answer: B Difficulty: Challenging Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 87) Risk is composed not only of the probability that the strategy will be effective but also the amount of assets the organization must allocate to that strategy and A) the quality of the assets.

B) the length of time the assets will be unavailable for other uses.

C) the amount of time management is willing to spend on the project.

D) the number of companies in the marketplace.

E) the ability of management to raise capital.

Answer: B Difficulty: Challenging Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 88) The ________ approach to evaluating alternatives under conditions of high environmental uncertainty breaks the investment into stages.

A) net present value B) real-options C) stakeholder priority matrix D) risk assessment E) hurdle rate Answer: B Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 89) Lobbying, coalition building, and advocacy advertising are commonly used A) marketing strategies.

B) risk strategies.

C) human resource management strategies.

D) political strategies.

E) logistics strategies.

Answer: D Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking

24 .

90) Which one of the following is not one of the questions that management should raise in their attempt to assess the importance to the corporation of stakeholders' concerns?

A) Which stakeholder group should be represented on the board of directors?

B) How will this decision affect each stakeholder?

C) How much of what the stakeholders want are they likely to get under a certain alternative?

D) What are the stakeholders likely to do if they don't get what they want?

E) What is the probability that the stakeholders will follow through on their demand?

Answer: A Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 91) Which of the following is not a commonly used political strategy?

A) Constituency building B) Political action committee contributions C) Advocacy advertising D) Lobbying E) Charitable donations Answer: E Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 92) The plan to bring stakeholders into agreement with a corporation's actions is called a A) cooperative strategy.

B) political strategy.

C) competitive strategy.

D) marketing strategy.

E) profit strategy.

Answer: B Difficulty: Easy Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Application of knowledge 93) If there is little fit between a strategic alternative under consideration and the corporate culture, which of the following is one of management's options to consider?

A) Ignore the culture by implementing the strategic alternative.

B) Manage around the culture and stick to the implementation plan.

C) Try to change the structure to fit the strategy.

D) Change the strategy to fit the culture.

E) Change the marketing plan to fit the strategy.

Answer: D Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking

25 .

94) Which of the following reflects the impact of industry backgrounds on strategic choices?

A) Executives from other industries tend to make riskier decisions.

B) Executives with strong ties within an industry tend to choose strategies commonly used in that industry.

C) Executives from other industries tend to downsize as a first choice.

D) Executives with strong ties within an industry tend to make riskier decisions.

E) Executives from other industries tend to emphasize ROI. Answer: B Difficulty: Challenging Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Application of knowledge 95) The evaluation of alternative strategies and selection of the best alternative is referred to as A) alternative generation.

B) strategic implementation.

C) strategic choice.

D) strategic selection.

E) evaluation.

Answer: C Difficulty: Easy Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Application of knowledge 96) To avoid the consensus trap, which technique assigns a group or individual to identify potential pitfalls and problems with a proposed alternative strategy in a formal presentation?

A) Devil's advocate B) Sloan's judgment C) Sales presentation D) Dialectical inquiry E) Scenario construction Answer: A Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Application of knowledge 97) To avoid the consensus trap, which technique involving presenting two conflicting views (the thesis and the antithesis) presented in a debate format can be traced back to Plato and Aristotle?

A) Devil's advocate B) Sloan's judgment C) Sales presentation D) Dialectical inquiry E) Scenario construction Answer: D Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 26 .

98) Once the best strategic alternative is selected, the broad guidelines for its implementation are then defined by A) trade-offs.

B) policies.

C) procedures.

D) resource allocation.

E) strategic options.

Answer: B Difficulty: Easy Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Application of knowledge 99) According to Paul Nutt, a decision-making authority, what percent of decisions made by managers are failures?

A) 10% B) 25% C) 50% D) 75% E) 90% Answer: C Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Application of knowledge 100) The attractiveness of a particular strategic alternative is fully a function of the amount of risk it entails.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 101) Corporate scenarios are pro forma balance sheets and income statements that forecast the effect each alternative strategy and its various programs will likely have on division and corporate return on investment.

Answer: TRUE Difficulty: Easy Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Application of knowledge 102) Risk is composed not only of the probability that the strategy will be effective but also of the amount of assets the corporation must allocate to that strategy and the length of time the assets will be unavailable for other uses.

Answer: TRUE Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Application of knowledge 27 .

103) According to the real-options approach, when the future is highly uncertain, it pays to have a broad range of options open.

Answer: TRUE Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 104) The attractiveness of a strategic alternative is affected by its perceived compatibility with the key stakeholders in a corporation's task environment.

Answer: TRUE Difficulty: Easy Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 105) A strategy's compatibility with the corporate culture has little likelihood of impacting its success.

Answer: FALSE Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 106) Even the most attractive strategic alternative might not be selected if it is contrary to the needs and desires of important top managers.

Answer: TRUE Difficulty: Easy Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 107) Some executives show a self-serving tendency to attribute the firm's problems not to their own poor decisions, but to environmental events out of their control such as government policies or a poor economic climate.

Answer: TRUE Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 108) There is mounting evidence that when an organization is facing a dynamic environment, the best strategic decisions are arrived at through consensus when everyone agrees on one alternative.

Answer: FALSE Difficulty: Challenging Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking

28 .

109) "The customer is always right" is an example of a policy in Nordstrom's.

Answer: TRUE Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 110) What is the real-options approach?

Answer: The real-options theory is an approach to evaluating alternatives under conditions of high environmental uncertainty. According to the real-options approach, when the future is highly uncertain, it pays to have a broad range of options open. This contrasts with the net present value (NPV) approach that boils everything down to one scenario. The real-options approach breaks the investment into stages. Management allocates a small amount of funding to initiate multiple projects, monitors their development, and then cancels the projects that aren't successful and funds those that are doing well.

Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Application of knowledge 111) In evaluating a strategic alternative, if there is little fit with the company's culture, what are management's options?

Answer: In evaluating a strategic alternative, management must consider corporate culture pressures and assess the strategy's compatibility with the corporate culture. If there is little fit, management must decide if it should take a chance on ignoring the culture, manage around the culture and change the implementation plan, try to change the culture to fit the strategy, or change the strategy to fit the culture.

Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking 112) In a dynamic environment, using consensus to arrive at a strategic decision is not recommended. Why? What two techniques can strategic managers use to avoid the consensus trap?

Answer: The best decisions involve a certain amount of heated disagreement, and even conflict.

Many diverse opinions are presented, participants trust in one another's abilities and competencies, and conflict is task-oriented, not personal. Two techniques to help strategic managers avoid the consensus trap are the devil's advocate and dialectical inquiry. A devil's advocate is assigned to identify potential pitfalls and problems with a proposed alternative strategy in a formal presentation. The dialectical inquiry involves combining two conflicting views–the thesis and the antithesis–into a synthesis. It requires that two proposals using different assumptions be generated for each alternative strategy under consideration.

Difficulty: Moderate Learning Obj.: 8.4: Construct corporate scenarios to evaluate strategic options AACSB: Analytical thinking

29 .

Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 9 Strategy Implementation: Global Strategy 1) The sum total of the activities that an organization takes in order to compete in markets outside its home country is called A) exporting.

B) market entry.

C) global strategy.

D) globalization.

E) multi-domestic strategy.

Answer: C Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking 2) An MNC uses which international strategy for entering a foreign market by associating itself with a firm in the host country or a government agency in that country to combine resources and expertise needed for the development of a new product or technologies?

A) Licensing B) Joint ventures C) Production sharing D) Exporting E) Acquisitions Answer: B Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking 3) One benefit of a U.S. company entering a joint venture with an international firm is that it A) reduces the risks of expropriation by host country officials.

B) enhances the policy of the host country's takeover of the firm.

C) promotes skepticism among other countries not involved in the merger.

D) encourages competitors to work with the company.

E) increases revenues by 20%.

Answer: A Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking

1 .

4) An MNC uses which international strategy for entering a foreign market when it purchases another company already operating in that area?

A) Joint ventures B) Acquisitions C) Green-field development D) Production sharing E) BOT Answer: B Difficulty: Easy Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking 5) As an option for international entry, BOT stands for A) Build On Trust.

B) Build, Operate, Transfer.

C) Buy, Offer, Transact.

D) Buy On Trust.

E) Build On Turnkey.

Answer: B Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 6) Which of the following is not one of the popular options for international entry?

A) Joint ventures B) Acquisitions C) Green-field development D) Market sharing E) BOT Answer: D Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge

2 .

7) ________ offer(s) a means through which a corporation can use some of its personnel to assist a firm in a host country for a specified fee and period of time.

A) Joint ventures B) Acquisitions C) Management contracts D) Production sharing E) BOT Answer: C Difficulty: Challenging Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking 8) Research suggests that ________ are more successful in international undertakings than are strategic alliances.

A) minority subsidiaries B) joint ventures C) equity ventures D) partially owned subsidiaries E) wholly owned subsidiaries Answer: E Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking 9) In international dealings, green-field development is A) a way in which an MNC may contract with a foreign government or local firm to trade raw materials for certain resources belonging to the MNC. B) a way in which an MNC can take total control of operations by acquiring a firm already established in the host country.

C) when a company chooses to build its own manufacturing plant and distribution system.

D) when an MNC has a large amount of management talent available and chooses to use its personnel to assist a firm in a host country for a specified fee and period of time.

E) contracting for construction of operating facilities in exchange for a fee.

Answer: C Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking

3 .

10) An MNC uses which international strategy for entering a foreign market by combining the higher labor skills and technology available in the developed countries with the lower cost labor available in the developing countries?

A) Licensing B) Joint ventures C) Production sharing D) Exporting E) Acquisitions Answer: C Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking 11) Fiat building an auto plant in Togliatti, Russia, for the Soviet Union in the late 1960s to produce an older model of Fiat under the brand name of Lada is an example of which international entry strategy option?

A) Exporting B) Franchising C) Turnkey operations D) BOT E) Production sharing Answer: C Difficulty: Challenging Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking 12) Management contracts are used in international dealings A) as a way in which an MNC may contract with a foreign government or local firm to trade raw materials for certain resources belonging to the MNC. B) as a way in which an MNC can take total control of operations by either starting a business from scratch or acquiring a firm already established in the host country.

C) when a corporation chooses to build a facility from scratch allowing it the freedom to design the plant, choose suppliers, and hire a workforce.

D) when an MNC has a large amount of management talent available and chooses to use its personnel to assist a firm in a host country for a specified fee and period of time.

E) when an MNC typically contracts for construction of operating facilities in exchange for a fee.

Answer: D Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking

4 .

13) Research indicates that shareholders reward companies that grow faster outside of the United States.

Answer: TRUE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 14) Licensing grants rights to another company to open a retail store using the franchiser's name and operating system.

Answer: FALSE Difficulty: Easy Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 15) A good way to minimize risk and experiment with a specific product is exporting.

Answer: TRUE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 16) Exporting is an especially useful strategy if the trademark or brand name is well known but the firm does not have the funds to finance its entering the country directly.

Answer: FALSE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 17) A joint venture enables a firm to enter a country that restricts foreign ownership.

Answer: TRUE Difficulty: Challenging Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking 18) Forming a joint venture between a foreign corporation and a domestic company has been one of the most popular strategies used to enter a new country.

Answer: TRUE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge

5 .

19) Research suggests that joint ventures are more successful in international undertakings than are wholly owned subsidiaries.

Answer: FALSE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 20) If a company doesn't want to purchase another company's problems along with its assets, it may choose green-field development.

Answer: TRUE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Analytical thinking 21) In international markets, government restrictions on ownership can usually discourage joint ventures.

Answer: FALSE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 22) Turnkey operations are typically contracts for the construction of operating facilities in exchange for a fee.

Answer: TRUE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 23) Green-field development is usually a far more complicated and expensive operation than acquisition.

Answer: TRUE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 24) The term production sharing was coined by Peter Drucker.

Answer: TRUE Difficulty: Easy Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 6 .

25) Turnkey operation is often called outsourcing.

Answer: FALSE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 26) Management contracts sometimes occur when a host government expropriates part or all of a foreign-owned company's holdings in its country.

Answer: TRUE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 27) The BOT concept is a variation of the turnkey operation.

Answer: TRUE Difficulty: Moderate Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 28) How is turnkey operation different from BOT? Answer: Both turnkey operations and BOT, that stands for Build, Operate, Transfer, are two modes of international market entry. Turnkey operations are typically contracts for the construction of operating facilities in exchange for a fee. The facilities are transferred to the host country or firm when they are complete. BOT is a variation of the turnkey operation. Instead of turning the facility over to the host country when completed, the company operates the facility for a fixed period of time during which it earns back its investment, and makes a profit. It then turns the facility over to the government at little or no cost to the host country.

Difficulty: Challenging Learning Obj.: 9.1: Describe the means of entry by which an organization can do business in another country AACSB: Application of knowledge 29) A highly developed international company with a deep involvement throughout the world, plus a worldwide perspective in its management and decision-making is called a(n) A) international corporation.

B) multidomestic corporation.

C) multinational corporation.

D) global corporation.

E) Stage IV corporation.

Answer: C Difficulty: Moderate Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge 7 .

30) The MNC's approach where each country's industry is essentially separate from the same industry in other countries is called A) global.

B) international.

C) multidomestic.

D) transnational.

E) integrated.

Answer: C Difficulty: Moderate Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge 31) The MNC's approach where each country is a part of one worldwide industry is called A) global.

B) international.

C) multidomestic.

D) transnational.

E) multi-regional.

Answer: A Difficulty: Moderate Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge 32) The global MNC faces the dual challenge of achieving scale economies through standardization while at the same time responding to A) increased competition.

B) local customer differences.

C) higher prices.

D) global economics.

E) increased shipping expenses.

Answer: B Difficulty: Moderate Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge

8 .

33) What is the key to the successful implementation of strategic alliances?

A) The selection of an appropriate country B) The timing of the entry C) The selection of the local partner D) The size of the local partner firm E) The political environment of the country Answer: C Difficulty: Moderate Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge 34) A prior relationship with an alliance partner helps to develop A) a level of trust.

B) a larger profit.

C) a stronger contractual agreement.

D) less need on negotiations.

E) fewer personnel.

Answer: A Difficulty: Moderate Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge 35) According to research, what type of partner is favored by firms when forming new alliances?

A) Entrepreneurial firms B) Firms in alliances with multiple other firms C) Small organizations D) Past partners E) Large organizations Answer: D Difficulty: Easy Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge 36) Which of the following is not true of the drivers for strategic fit between alliance partners?

A) The alliance must be important to both partners, especially to top management.

B) Partners must be mutually dependent for achieving clear and realistic objectives.

C) The alliance need not be accepted by key stakeholders.

D) Partners contribute key strengths but protect core competencies.

E) Joint activities must have added value for customers and the partners.

Answer: C Difficulty: Challenging Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Analytical thinking 9 .

37) An international company is a highly developed company with a deep involvement throughout the world, plus a worldwide perspective in its management and decision-making.

Answer: FALSE Difficulty: Easy Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge 38) For a multinational corporation (MNC) to be considered global, it must manage its worldwide operations as if they were totally independent.

Answer: FALSE Difficulty: Challenging Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge 39) The only challenge the global multinational corporation faces is achieving scale economies through standardization.

Answer: FALSE Difficulty: Moderate Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge 40) A key driver for strategic fit between international alliance partners is that the alliance must be accepted by key stakeholders.

Answer: TRUE Difficulty: Easy Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge 41) A key driver for strategic fit between international alliance partners is that both partners must contribute core competencies.

Answer: FALSE Difficulty: Challenging Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge

10 .

42) Discuss the key drivers for strategic fit between international alliance partners.

Answer: Key drivers for strategic fit between international alliance partners include the following. Partners must agree on fundamental values and have a shared vision about the potential for joint value creation. Alliance strategy must be derived from business, corporate and functional strategy. The alliance must be important to both partners. And these partners must be mutually dependent for achieving clear and realistic objectives. Joint activities must have added value for customers and the partners. Key stakeholders must also accept the alliance. And partners must contribute key strengths to the alliance but protect core competencies.

Difficulty: Moderate Learning Obj.: 9.2: Explain the elements of International Strategic Alliances that lead to success AACSB: Application of knowledge 43) What is the activity that occurs in Stage 5 of international development?

A) The company invests in production facilities in key countries.

B) The company exports, but trade is minor and handled by an export department.

C) The company establishes its own export division with sales offices in other countries.

D) The company operates in a global industry and establishes worldwide human resources, R&D, and financing strategies thereby denationalizing its operations.

E) The company establishes local operating divisions in host countries to better serve individual country markets.

Answer: D Difficulty: Moderate Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Application of knowledge 44) At which stage of international development is the company primarily domestic with an international division?

A) Stage 1 B) Stage 2 C) Stage 3 D) Stage 4 E) Stage 5 Answer: C Difficulty: Moderate Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Application of knowledge

11 .

45) Exporting some of its products through local dealers and distributors in foreign countries occurs in which stage of international development?

A) Stage 1 B) Stage 2 C) Stage 3 D) Stage 4 E) Stage 5 Answer: A Difficulty: Moderate Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Application of knowledge 46) The impact on the firm's structure is minimal in which stage of international development?

A) Stage 1 B) Stage 2 C) Stage 3 D) Stage 4 E) Stage 5 Answer: A Difficulty: Easy Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Application of knowledge 47) Eden Brewery, a UK microbrewery, joined a trade mission organized by UK Trade and Investment, after Eden identified Japan as a potential market for its craft beer. If, while there, Eden met with distributors and outlets interested in importing the beer to Japan, at what stage of international development is Eden in?

A) Stage 1 B) Stage 2 C) Stage 3 D) Stage 4 E) Stage 5 Answer: A Difficulty: Moderate Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Application of knowledge 48) The firm becomes a full-fledged MNC in which stage of international development?

A) Stage 1 B) Stage 2 C) Stage 3 D) Stage 4 E) Stage 5 Answer: D Difficulty: Moderate Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Application of knowledge 12 .

49) At what stage of international development does a company establish a local operating division or company in one or more host countries, but manages operations in each country separately as if each is a domestic company?

A) Stage 1 B) Stage 2 C) Stage 3 D) Stage 4 E) Stage 5 Answer: D Difficulty: Moderate Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Application of knowledge 50) Which of the following is not true of the stages of international development?

A) Corporations operating internationally tend to evolve through five common stages.

B) Stage 1 of international development is the domestic company.

C) In Stage 4 of international development, the company adds an international division with responsibility for most of the business functions conducted in other countries.

D) In Stage 2 of international development, the firm is a domestic company with an export division.

E) In Stage 5 of international development, all managers are responsible for dealing with international as well as domestic issues.

Answer: C Difficulty: Challenging Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Analytical thinking 51) The research findings on the stages of international development suggest A) some support for the stages of international development, but not necessarily the sequence of stages.

B) no support for the stages of international development.

C) widespread support for the sequence of stages.

D) firms cannot skip stages of the development sequence.

E) all divisions of a corporation must be at the same stage of development at the same time.

Answer: A Difficulty: Challenging Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Analytical thinking 52) The first stage of international development is the domestic company with an export division.

Answer: FALSE Difficulty: Easy Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Application of knowledge

13 .

53) In Stage 3 (primarily domestic company with international division), a company is called a full-fledged MNC. Answer: FALSE Difficulty: Moderate Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Application of knowledge 54) Research provides some support for stages of international development, but it does not necessarily support the sequence of five stages.

Answer: TRUE Difficulty: Moderate Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Application of knowledge 55) Discuss what happens to a company in the final stage of international development.

Answer: There are five stages of international development that starts with a domestic company that exports through local dealers and distributors in the foreign country. In the fifth and final stage, the multinational corporation (MNC) has a global emphasis. Here, the MNC has worldwide human resources, R&D, and financing strategies. Typically operating in a global industry, the MNC denationalizes its operations and plans product design, manufacturing, and marketing around worldwide considerations. Global considerations now dominate organizational design.

Difficulty: Challenging Learning Obj.: 9.3: Discuss the stages of International Development AACSB: Application of knowledge 56) Employees who are sent by their company to work abroad are called A) internationals.

B) expats.

C) nomads.

D) globals.

E) glocals.

Answer: B Difficulty: Easy Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge

14 .

57) Which one of the following is not one of the dangers of using primarily foreign nationals to staff managerial positions in subsidiaries?

A) The increased likelihood of sub optimization (the local subsidiary ignores the needs of the larger parent corporation) B) Difficulty for the MNC to meet long-term, worldwide objectives C) The ability for communication and coordination becomes increasingly difficult D) Promotes anger and jealousy within the nationalistic host government E) Problems in coordinating activities of several international subsidiaries leads to problems in operating in a global industry Answer: D Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Analytical thinking 58) The percentage of expatriate managers returning early because of job dissatisfaction or difficulties in adjusting to a foreign country is A) 6% or less.

B) between 20% and 45%.

C) between 50% and 70%.

D) between 75% and 85%.

E) greater than 90%.

Answer: B Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 59) Of those expatriate managers who stayed for the duration of their assignment, approximately what percent did not perform as well as expected?

A) 6% or less B) 25% C) 33% D) 75% E) greater than 90% Answer: C Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge

15 .

60) What percent of midsize and larger companies expatriate their employees?

A) 10% B) 25% C) 40% D) 60% E) 80% Answer: E Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 61) The process of sending employees on international assignments by their firms is known as A) repatriation.

B) expatriation.

C) internationalization.

D) globalization.

E) localization.

Answer: B Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 62) The reasons cited for a large percent of expats sent abroad who return home early are A) failure to learn the language and difficult job responsibilities.

B) difficulties adjusting to the culture and the language.

C) job dissatisfaction or difficulties adjusting to a foreign country.

D) job dissatisfaction and lack of technical skills.

E) lack of technical skills and inability to fulfill job responsibilities.

Answer: C Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge

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63) According to The Economist, over three-quarters of companies report spending ________ times an expat's annual salary on a typical assignment.

A) 1-2 B) 2-3 C) 3-4 D) 4-5 E) 5-6 Answer: B Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 64) Only ________ of human resource managers have ever worked abroad, so most have little understanding of a global assignment's unique personal and professional challenges and thus fail to develop the training necessary for such an assignment.

A) 11% B) 21% C) 51% D) 41% E) 31% Answer: A Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 65) Most human resource managers fail to develop the training necessary for international assignments because A) most have not worked abroad themselves and have little understanding of the unique challenges of these positions.

B) most think this training is unnecessary.

C) the financial resources are not available.

D) the time is too limited for extensive training to be delivered before the assignment.

E) cultural training resources and experts are not available to the firm.

Answer: A Difficulty: Challenging Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge

17 .

66) The vast majority of companies select employees for an international assignment based on their A) language skills.

B) ability to adapt.

C) cultural sensitivity.

D) technical expertise.

E) position in the organization.

Answer: D Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 67) To improve organizational learning, many MNCs are providing their managers with international assignments lasting as long as A) a full year.

B) two years.

C) three years.

D) four years.

E) five years.

Answer: E Difficulty: Challenging Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Analytical thinking 68) The likelihood that an expat will return home early is increased by A) the perceived lack of organizational support for international assignments.

B) the emphasis on cultural training.

C) an inability to speak the language.

D) interpersonal conflicts with host country employees.

E) a lack of fit with the technical skills of the job.

Answer: A Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge

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69) Which of the following is not a recommendation to improve the entire expat process?

A) Keep reasons for international assignments broad.

B) Assign mentors in both the home country and the host country.

C) Develop a means of maintaining open, frequent communication throughout the process.

D) Design a plan for repatriation.

E) Develop an approach for sharing the international experience within the company.

Answer: A Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 70) When should an organization begin communication to discuss the repatriation process?

A) When the expat accepts the assignment B) 6 months prior to the end of the assignment C) When the expat returns home D) 6 months after the expat returns home E) When the expat arrives at the foreign assignment Answer: B Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 71) When designing a plan for repatriation, A) communication should begin as soon as the manager returns home.

B) it should always include details of the next international assignment.

C) the employee should be involved in how he or she would like to incorporate the skills learned at the home office.

D) little of the experience should be shared during the assignment.

E) the plan should be generic enough to apply to all expatriates.

Answer: C Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Analytical thinking

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72) To placate nationalistic governments and to better attune management practices to the host country's culture, Uber tends to hire A) general managers with local experience.

B) home country managers.

C) managers with general international experience, but not from the host country.

D) fewer local managers.

E) headquarters-based managers.

Answer: A Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 73) The danger in using primarily foreign nationals to staff managerial positions in subsidiaries is the increased likelihood of sub optimization, where A) the local subsidiary ignoring the needs of the larger parent company.

B) the parent company ignoring the needs of the local subsidiary.

C) the parent company failing to hire local managers.

D) the local subsidiary being staffed by all expatriates.

E) the ease of the MNC in meeting its worldwide objectives.

Answer: A Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Analytical thinking 74) Electrolux's (a Swedish company) French director in its Singapore factory is an example of a A) host country national.

B) home country national.

C) third-country national.

D) repatriate.

E) regional employee.

Answer: C Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Analytical thinking

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75) Research reveals that corporations using ________ teams, whose members have international experience and communicate frequently with overseas managers, have greater product development capabilities than others.

A) domestic B) cross-cultural C) functional D) product E) expat Answer: B Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Analytical thinking 76) To improve organizational learning, many multinational corporations are providing their managers with international assignments that last as long as five years.

Answer: TRUE Difficulty: Easy Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 77) Research indicates that corporations using home country teams, who communicate frequently with overseas managers, have greater product development capabilities.

Answer: FALSE Difficulty: Challenging Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 78) Cross border commuters are known as third-country nationals.

Answer: FALSE Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 79) The danger in using primarily expatriates to staff managerial positions in foreign subsidiaries is the increased likelihood of sub optimization.

Answer: FALSE Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge

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80) To a local national in an MNC subsidiary, the corporation as a whole can be an abstraction.

Answer: TRUE Difficulty: Easy Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 81) Using third-party nationals is a widespread practice among European firms.

Answer: TRUE Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 82) A British employee of a British firm working in China is a third-party national.

Answer: FALSE Difficulty: Easy Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 83) What should an MNC do with respect to repatriation to improve the entire expatriation process?

Answer: An expatriate (or expat) is an employee who is sent to work abroad. Given the high failure rates in expatriate assignments, an organization has to work to improve its expatriation process. One factor is to design a plan for repatriation (the employee coming home at the end of the assignment). Communication should begin six months before the end of the assignment to discuss the process. The employee should outline the top skills, qualifications, and insights achieved during the assignment and express how they should be incorporated at the home office (or in some cases on the next assignment).

Difficulty: Moderate Learning Obj.: 9.4: Explain how companies can improve their staffing efforts as they expand beyond their home country AACSB: Application of knowledge 84) A limitation of ROI as a measure of international performance is that A) it is a single comprehensive figure examining only one facet of the firm.

B) it provides disincentive to use existing assets efficiently.

C) it provides an incentive to acquire new assets.

D) it is very sensitive to depreciation policy.

E) it does not provide the basis for common comparison.

Answer: E Difficulty: Challenging Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Analytical thinking 22 .

85) A study of 79 MNCs revealed that international transfer pricing from one country unit to another is primarily used to A) evaluate performance.

B) minimize taxes.

C) control imports.

D) improve communication.

E) move corporate headquarters.

Answer: B Difficulty: Challenging Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 86) Which of the following is not a way to repatriate profits from the foreign subsidiary to the parent company?

A) Dividends B) Royalties C) Transfer pricing D) Global funding E) Management fees Answer: D Difficulty: Challenging Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 87) What kind of control should an MNC use on its foreign units?

A) Loose B) Tight C) Financial D) Corporate E) Global Answer: A Difficulty: Challenging Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Analytical thinking

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88) In terms of measurement of performance, a global MNC should use what type of controls over its foreign units?

A) Loose B) Tight C) Market D) Product E) Geographical Answer: B Difficulty: Challenging Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Analytical thinking 89) Which measure was cited as the most important measure for international performance evaluation?

A) Rate of return B) ROI C) Budget analysis D) ROE E) Stock price Answer: A Difficulty: Moderate Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 90) The three most widely used techniques for international performance evaluation are A) ROI, budget analysis, and historical comparisons.

B) ROI, ROE, and stock price.

C) ROE, stock price, and rate of return.

D) rate of return, ROE, and budget analysis.

E) ROE, ROI, and interest rate.

Answer: A Difficulty: Moderate Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge

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91) What percent of corporate officers report using the same evaluation techniques for foreign and domestic operations?

A) 95% B) 80% C) 65% D) 50% E) 25% Answer: A Difficulty: Moderate Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 92) The London-based International Accounting Standards Board developed International Financial Reporting Standards (IFRS) to A) harmonize international accounting practices.

B) address transfer pricing.

C) replace GAAP. D) enforce FASB standards.

E) standardize worldwide expatriate assignments.

Answer: A Difficulty: Moderate Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 93) Which of the following countries has the lowest corporate tax rate?

A) United States B) Japan C) India D) Bahrain E) South Korea Answer: D Difficulty: Moderate Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge

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94) Transferring profits from the foreign subsidiary to the parent company is called ________ of profits.

A) expatriation B) internationalization C) globalization D) localization E) repatriation Answer: E Difficulty: Moderate Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 95) In one study, 95% of the corporate officers interviewed stated that they use different evaluation techniques for foreign and domestic operations.

Answer: FALSE Difficulty: Moderate Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 96) A study of 79 MNCs revealed that international transfer pricing from one country unit to another is primarily used not to evaluate performance but to minimize taxes.

Answer: TRUE Difficulty: Challenging Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 97) Among the most important barriers to international trade are the different standards for products and services.

Answer: TRUE Difficulty: Easy Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 98) An MNC should use tight controls on its foreign units, but a global MNC needs loose controls over its many units.

Answer: FALSE Difficulty: Challenging Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge

26 .

99) Corporate tax rates tend to be relatively stable from country to country.

Answer: FALSE Difficulty: Easy Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 100) Foreign units of MNCs are evaluated more as investment or profit centers.

Answer: FALSE Difficulty: Moderate Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 101) The three categories of standards in international trade for products and services are safety/environmental, energy efficiency, and testing procedures.

Answer: TRUE Difficulty: Moderate Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge 102) Which types of controls are recommended for a global MNC versus a multi-domestic MNC? Answer: It is recommended that the control systems used by a global MNC be different from those used by a multi-domestic MNC. An MNC should use loose controls on its foreign units.

The management of each geographic unit should be given considerable operational latitude, but it should be expected to meet some performance targets. It is recommended that top management emphasize budgets and non-financial measures of performance. Multiple measures should be used to differentiate between the worth of the subsidiary and the performance of its management.

A global MNC needs tight controls over its many units. Its key operational decisions must be centralized. Foreign units are evaluated more as cost centers, revenue centers, or expense centers than as investment or profit centers.

Difficulty: Moderate Learning Obj.: 9.5: Discuss the unique issues related to Measuring Organizational performance that are presented with the administration of a truly international company AACSB: Application of knowledge

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Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 10 Strategy Implementation: Organizing and Structure 1) The sum total of the activities and choices required for the execution of a strategic plan is known as A) strategic formulation.

B) environmental scanning.

C) strategy implementation.

D) evaluation and control.

E) strategic development.

Answer: C Difficulty: Easy Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Application of knowledge 2) ________ and strategy implementation should be considered two sides of the same coin.

A) Goal setting B) External analysis C) Strategic control D) Strategy formulation E) Market analysis Answer: D Difficulty: Moderate Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Analytical thinking 3) A survey of 93 Fortune 500 firms found ten major problems that over half of the group experienced when they attempted to implement a strategic change. Which of the following is not one of the implementation problems?

A) Ineffective coordination of activities B) Uncontrollable external environmental factors created problems C) Time allocated for implementation was adequate, but was used inappropriately D) Poor definition of key implementation tasks and activities E) Crises that distracted attention away from implementation Answer: C Difficulty: Challenging Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Analytical thinking

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4) According to research, what percentage of companies fail to achieve the goals of an M&A event?

A) 27 B) 62 C) 71 D) 83 E) 91 Answer: D Difficulty: Easy Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Application of knowledge 5) One of the goals of effective strategy implementation is to get as many employees as possible into a "Zone of ________ "where they not only understand but accept the changes at the organization.

A) Contemplation B) Cognizance C) Acceptance D) Approval E) Commitment Answer: C Difficulty: Moderate Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Analytical thinking 6) Strategy formulation is the process by which objectives, strategies, and policies are put into action through the development of programs and tactics, budgets, and procedures.

Answer: FALSE Difficulty: Easy Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Application of knowledge 7) Implementation is the key part of strategic management.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Application of knowledge 8) Mergers and acquisitions are generally interchangeable terms.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Application of knowledge

2 .

9) According to a survey of 93 Fortune 500 firms, the most frequently cited problem with implementing a strategic change is that implementation took more time than originally planned.

Answer: TRUE Difficulty: Challenging Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Application of knowledge 10) Those who implement strategy are the same as those who formulate it.

Answer: FALSE Difficulty: Moderate Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Application of knowledge 11) Unless changes in mission, objectives, strategies, and policies and their importance to the company are communicated clearly to every person in the organization, there can be a lot of resistance and foot-dragging.

Answer: TRUE Difficulty: Challenging Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Application of knowledge 12) What is the "Zone of Acceptance" and why is it important in strategy implementation?

Answer: Many of the people in the organization who are most crucial to successful strategy implementation probably had little to do with the development of the corporate and even business strategy. Therefore, they might be entirely ignorant of the vast amount of data and work that went into the formulation process. This is because, unless changes in mission, objectives, strategies, and policies and their importance to the company are communicated clearly to every person in the organization, there can be a lot of resistance and foot-dragging. One of the goals of effective strategy implementation is to get as many employees as possible into a "Zone of Acceptance" where they not only understand but accept the changes at the organization.

Difficulty: Moderate Learning Obj.: 10.1: Describe the major issues that impact successful strategy implementation AACSB: Analytical thinking 13) In strategy implementation, the purpose of a ________ is to make the strategy actionoriented.

A) program B) guideline C) budget D) course of action E) procedure Answer: A Difficulty: Easy Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Application of knowledge 3 .

14) Most corporate headquarters have ________ programs in effect at any one time.

A) 5-10 B) 10-30 C) 2-9 D) 30-50 E) 60-70 Answer: B Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 15) The term used in strategic implementation that detail the various activities that must be carried out to complete a corporation's programs and tactical plans is a A) task.

B) guideline.

C) budget.

D) course of action.

E) procedure.

Answer: E Difficulty: Easy Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Application of knowledge 16) When the return on investment for each division of a corporation is greater than what the return would be if each division were an independent business, that corporation is said to have achieved A) synergy.

B) a leveraged buyout.

C) its hurdle rate.

D) the status of a true conglomerate.

E) Stage III. Answer: A Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking

4 .

17) Which form of synergy was demonstrated when P&G purchased Gillette to combine P&G's awareness of the needs of the female consumer with Gillette's awareness of the needs of the male consumer?

A) Shared tangible resources B) Shared know-how C) Coordinated strategies D) Economies of scale E) New business creation Answer: B Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 18) Federated Department Stores acquired Macy's and the May Company to gain purchasing economies for all of its stores. According to Goold and Campbell, the synergistic effect here is known as A) pooled negotiating power.

B) shared know-how.

C) coordinated strategies.

D) economies of scale or scope.

E) new business creation.

Answer: A Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 19) According to Goold and Campbell, which of the following is not one of the forms that synergy can take?

A) Shared know-how B) Coordinated strategies C) Value chain creation D) Pooled negotiating power E) Economies of scale or scope Answer: C Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking

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20) When Texas Instruments avoided competing directly with Intel by developing microprocessors for consumer electronics, cell phones, and medical devices instead of computers, they were using the offensive tactic known as a(n) A) flanking maneuver.

B) frontal assault.

C) encirclement.

D) bypass attack.

E) guerilla attack.

Answer: A Difficulty: Challenging Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 21) Which of the following offensive tactics is where, instead of a continual and extensive resource-expensive attack on a competitor, a firm or a business chooses to "hit and run" by the use of small, intermittent assaults on different market segments held by the competitor?

A) Flanking maneuver B) Frontal assault C) Encirclement D) Bypass attack E) Guerilla attack Answer: E Difficulty: Challenging Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 22) What kind of a defensive tactic is Coca-Cola using when it offers unprofitable noncarbonated beverages to keep competitors off store shelves?

A) Raising structural barriers B) Increasing expected retaliation C) Lowering the inducement for attack D) Encircling the competition E) Using a flanking maneuver Answer: A Difficulty: Challenging Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking

6 .

23) The type of defensive tactic which reduces a challenger's expectations of future profits in the industry is called A) guerilla warfare.

B) lowering the inducement for attack.

C) encirclement.

D) raising structural barriers.

E) increasing expected retaliation.

Answer: B Difficulty: Challenging Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 24) Which of the following is not an offensive tactic?

A) Frontal assault B) Flanking maneuver C) Guerilla warfare D) Raising structural barriers E) Encirclement Answer: D Difficulty: Challenging Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 25) Which offensive market location tactic is being used when a company attempts to cut the market out from under the established defender by offering a new type of product that makes the competitor's product unnecessary?

A) Flanking maneuver B) Bypass attack C) Encirclement D) Guerrilla warfare E) Frontal assault Answer: B Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking

7 .

26) Which offensive market location tactic is being used when a company goes head to head with its competitor matching in every category from price to promotion to distribution channel?

A) Flanking maneuver B) Bypass attack C) Encirclement D) Guerrilla warfare E) Frontal assault Answer: E Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 27) Which offensive market location tactic is used when, rather than going straight for a competitor's position of strength, a firm attacks a part of the market where the competitor is weak?

A) Flanking maneuver B) Bypass attack C) Encirclement D) Guerrilla warfare E) Frontal assault Answer: A Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 28) Which defensive tactic is used when management strongly defends any erosion of market share by drastically cutting prices or matching a challenger's promotion through a policy of accepting any price-reduction coupons for a competitor's product?

A) Lower the inducement for attack B) Bypass attack C) Increase expected retaliation D) Flanking maneuver E) Raise structural barriers Answer: C Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking

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29) What is the last real check a firm has on the feasibility of its selected strategy?

A) Budget planning B) Standard operating procedure development C) Exit strategy development D) Program development and execution E) Tactic developments Answer: A Difficulty: Easy Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Application of knowledge 30) The first company to manufacture and sell a new product or service is referred to as the first mover.

Answer: TRUE Difficulty: Easy Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Application of knowledge 31) The purpose of strategy formulation is to make the strategy action-oriented.

Answer: FALSE Difficulty: Easy Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Application of knowledge 32) After programs and tactical plans have been developed, the budget process begins.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Application of knowledge 33) Budgets typically detail the various activities that must be carried out to complete a corporation's programs.

Answer: FALSE Difficulty: Easy Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Application of knowledge

9 .

34) Once in place, procedures seldom have to be updated to reflect changes in technology or strategy.

Answer: FALSE Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 35) One of the goals to be achieved in strategy implementation is alignment between and among functions and business units.

Answer: TRUE Difficulty: Challenging Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Application of knowledge 36) Microsoft was a successful first mover with its Windows operating system and a successful late mover with its Internet Explorer.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 37) Guerilla warfare is characterized by the use of small, intermittent assaults on different market segments held by a competitor.

Answer: TRUE Difficulty: Easy Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 38) A market location tactic deals with when a company implements a strategy.

Answer: FALSE Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Application of knowledge 39) A defensive market location tactic usually takes place in the firm's own current market position.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Application of knowledge 10 .

40) What is a market location tactic? What forms does it take?

Answer: A market location tactic deals with where a company implements a strategy. A company or a business unit can implement a competitive strategy either offensively or defensively. An offensive tactic usually takes place in an established competitor's market location. In contrast, a defensive tactic usually takes place in the firm's own current market position as a defense against possible attack by a rival. According to Porter, defensive tactics aim to lower the probability of attack, divert attacks to less threatening avenues, or lessen the intensity of an attack.

Difficulty: Challenging Learning Obj.: 10.2: Explain how you would develop programs, budgets, and procedures to implement strategic change AACSB: Analytical thinking 41) Alfred Chandler, known for his study of large American corporations, concluded that A) organic structure is best for firms in a changing environment.

B) mechanistic structure is best for firms in a changing environment.

C) structure follows strategy.

D) strategy follows structure.

E) strategic business units are the key to effective decentralization.

Answer: C Difficulty: Easy Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 42) According to Chandler and others, strategy, ________, and the environment need to be closely aligned, otherwise, organizational performance will suffer.

A) management B) operations C) structure D) goals E) hierarchy Answer: C Difficulty: Challenging Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking

11 .

43) At which stage of corporate development is its extreme reliance on the entrepreneur to decide general strategies as well as detailed procedures its greatest weakness?

A) Stage I. B) Stage II. C) Stage III. D) Stage IV. E) Stage V. Answer: A Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 44) Objectives that are personal and subjective and are typified by an entrepreneurial spirit describe what stage of corporate development?

A) Stage I company B) Stage II company C) Stage III company D) Stage IV company E) Stage V company Answer: A Difficulty: Easy Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 45) At which stage of corporate development is the entrepreneur replaced by a team of managers who have functional specialization?

A) Stage I. B) Stage II. C) Stage III. D) Stage IV. E) Stage V. Answer: B Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking

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46) In a Stage I company, if the entrepreneur falters, the company usually flounders. This is labeled by Greiner as a crisis of A) autonomy.

B) confidence.

C) clarity.

D) differentiation.

E) leadership.

Answer: E Difficulty: Easy Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 47) In Stage II of corporate development, when the people managing diversified product lines in a functionally structured corporation need more decision-making freedom than top management is willing to delegate to them, there is a crisis of A) autonomy.

B) confidence.

C) clarity.

D) differentiation.

E) leadership.

Answer: A Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 48) In which stage of corporate development is a crisis of control likely to happen?

A) Stage I B) Stage II C) Stage III D) Stage IV E) Stage V Answer: C Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking

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49) A candidate for a fourth stage in corporate development is the A) conglomerate structure.

B) functional structure.

C) divisional structure.

D) network structure.

E) hybrid structure.

Answer: D Difficulty: Challenging Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 50) An internal block preventing a corporation from moving from one stage to another is A) unfavorable economic conditions.

B) labor shortages.

C) lack of market growth.

D) adverse market conditions.

E) lack of resources.

Answer: E Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 51) A popular strategy in Stage III in the organizational life cycle is A) concentration in a niche.

B) horizontal growth.

C) concentric diversification.

D) vertical growth.

E) retrenchment.

Answer: C Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Application of knowledge 52) Stage V in the organizational life cycle is the A) birth stage.

B) growth stage.

C) maturity stage.

D) decline stage.

E) death stage.

Answer: E Difficulty: Easy Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Application of knowledge 14 .

53) During Stage II of the organizational life cycle, the structure most likely to be implemented is A) entrepreneur-dominated.

B) functional management.

C) decentralization into profit or investment centers.

D) structural surgery.

E) dismemberment of structure.

Answer: B Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 54) During Stage II of the organizational life cycle, the popular strategy(ies) is(are) A) concentration in a niche.

B) horizontal and vertical growth.

C) liquidation or bankruptcy.

D) concentric and conglomerate diversification.

E) profit strategy followed by retrenchment.

Answer: B Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 55) What is the additional phase in the organizational life cycle that may occur sometime during the maturity or decline stages?

A) Pause phase B) Acquisition phase C) Plateau phase D) Temporal displacement phase E) Revival phase Answer: E Difficulty: Easy Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking

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56) The crisis likely to occur in Stage IV of corporate development is A) a crisis of autonomy.

B) a crisis of confidence.

C) a crisis of clarity.

D) a differentiation crisis.

E) a red tape crisis.

Answer: E Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 57) Stage IV of corporate development could involve a pressure-cooker crisis.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 58) Any change in corporate strategy is very likely to require some sort of change in the way an organization is structured and in the kind of skills needed in particular positions.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 59) According to Alfred Chandler, strategy follows structure.

Answer: FALSE Difficulty: Easy Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Application of knowledge 60) One of Alfred Chandler's conclusions was that organizations follow a pattern of development from one kind of structural arrangement to another as they expand.

Answer: TRUE Difficulty: Challenging Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking

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61) Firms in the same industry seldom organize themselves in similar ways.

Answer: FALSE Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 62) The first stage of corporate development is the simple structure.

Answer: TRUE Difficulty: Easy Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Application of knowledge 63) The greatest weakness of a Stage I corporation is its extreme reliance on the entrepreneur to decide general strategies as well as detailed procedures.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 64) The greatest weakness of a Stage II corporation is that all its eggs are in one basket.

Answer: TRUE Difficulty: Challenging Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 65) A crisis of leadership may develop in the Stage III divisional structure.

Answer: FALSE Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 66) Stage III (Divisional Structure) is the point when the entrepreneur is replaced by a team of managers who have functional specialization.

Answer: FALSE Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Application of knowledge

17 .

67) In Stage IV, the use of SBUs may result in a red tape crisis in which the corporation has grown too large and complex to be managed through formal programs, and rigid systems and procedures take precedence over problem solving.

Answer: TRUE Difficulty: Challenging Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 68) In the stages of corporate development, a control crisis is one in which employees in collaborative organizations will eventually grow emotionally and physically exhausted from the intensity of teamwork and the heavy pressure for innovative solutions.

Answer: FALSE Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 69) Asking "What would Walt have done" at Disney years after his death could present blocks to needed change.

Answer: TRUE Difficulty: Challenging Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 70) Decentralization into profit or investment centers occurs in the second stage of the organizational life cycle.

Answer: FALSE Difficulty: Easy Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Application of knowledge 71) The corporation's life cycle can be extended by managerial and product innovation.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Application of knowledge

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72) Discuss Chandler's conclusion concerning strategy.

Answer: Chandler concluded that structure follows strategy–that is, changes in corporate strategy lead to changes in organizational structure. He also concluded that organizations follow a pattern of development from one kind of structural arrangement to another as they expand.

According to Chandler, these structural changes occur because the old structure, having been pushed too far, has caused inefficiencies that have become too obviously detrimental to bear.

Chandler, therefore, proposed the following as the sequence of what occurs: 1. New strategy is created.

2. New administrative problems emerge.

3. Economic performance declines.

4. New appropriate structure is created.

5. Economic performance rises.

Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking 73) What are the four stages of corporate development?

Answer: There are four stages of corporate development. Stage I is typified by the entrepreneur, who founds the company to promote an idea. This is a simple structure. Stage II is the functional structure. This is the point when the entrepreneur is replaced by a team of managers who have functional specialization. Stage III is typified by the corporation's managing diverse product lines in numerous industries; it decentralizes the decision-making authority. This is the divisional structure. Stage IV is beyond SBUs. The matrix and the network are two possible candidates for a fourth stage in corporate development–a stage that not only emphasizes horizontal over vertical connections between people and groups, but also organizes work around temporary projects in which sophisticated information systems support collaborative activities.

Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Application of knowledge 74) In terms of organizational life cycles, is movement from Growth to Maturity to Decline and finally to Death always inevitable?

Answer: The movement (in terms of organizational life cycles) from Growth to Death does not have to be inevitable. A Revival phase may occur sometime during the Maturity or Decline stages. The corporation's life cycle can be extended by managerial and product innovations.

Developing new combinations of existing resources to introduce new products or acquiring new resources through acquisitions can enable firms with declining performance to regain growth–so long as the action is valuable and difficult to imitate. This often occurs during the implementation of a turnaround strategy.

Difficulty: Moderate Learning Obj.: 10.3: List the stages of corporate development and the structure that characterizes each stage AACSB: Analytical thinking

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75) Which of the following is not a basic type of organizational structure?

A) Market structure B) Simple structure C) Conglomerate structure D) Divisional structure E) Functional structure Answer: A Difficulty: Easy Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Application of knowledge 76) Which of the following is not descriptive of the matrix structure?

A) People from functional units are often assigned on a temporary basis to product units.

B) Although employees often work on one or more product units, they maintain only one direct supervisor.

C) The matrix structure is very useful when the external environment is very uncertain.

D) The matrix structure can produce conflicts revolving around duties, authority, and resource allocation.

E) The matrix structure was developed to combine the stability of functional structure with the flexibility of the product form.

Answer: B Difficulty: Challenging Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Analytical thinking 77) What structure is typically found in a matrix structure's "home" (engineering, manufacturing, or sales) department?

A) Simple B) Functional C) Divisional D) Conglomerate E) Geographic Answer: B Difficulty: Challenging Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Analytical thinking

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78) There are three distinct phases in the development of a matrix structure. Which phase occurs when both the functional and product structures become permanent in a true dual-authority structure?

A) Temporary cross-functional task forces B) True dual-authority structure C) Product/brand management D) Immature matrix E) Mature matrix Answer: E Difficulty: Challenging Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Analytical thinking 79) Which structure is characterized by its virtual elimination of in-house business functions?

A) Strategic business units B) Functional structure C) Network structure D) Divisional structure E) Matrix structure Answer: C Difficulty: Easy Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Application of knowledge 80) Which structure is often called a virtual organization?

A) Strategic business units B) Functional structure C) Divisional structure D) Network structure E) Matrix structure Answer: D Difficulty: Easy Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Application of knowledge

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81) Which of the following structures provides an organization with increased flexibility and adaptability to cope with rapid technological change and shifting patterns of international trade and competition?

A) Functional structure B) Divisional structure C) Network structure D) Product structure E) Process structure Answer: C Difficulty: Challenging Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Analytical thinking 82) An organization that is composed of cells that can operate alone but that can interact with other cells to produce a more potent and competent business mechanism is referred to as a(n) A) reengineered organization.

B) virtual organization.

C) modular organization.

D) network organization.

E) ongoing organization.

Answer: C Difficulty: Moderate Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Application of knowledge 83) The matrix structure is a combination of the simple and divisional structures.

Answer: FALSE Difficulty: Moderate Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Analytical thinking 84) When using a network structure, many corporate activities are outsourced.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Application of knowledge

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85) The network structure becomes most useful when the environment of a firm is stable and is expected to remain so.

Answer: FALSE Difficulty: Moderate Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Analytical thinking 86) What is the matrix structure? What are the three conditions which usually exist when the matrix structure is found?

Answer: In matrix structures, functional and product forms are combined simultaneously at the same level of the organization. Pioneered in the aerospace industry, the matrix structure was developed to combine the stability of the functional structure with the flexibility of the product form. The matrix structure is very useful when the external environment (especially its technological and market aspects) is very complex and changeable. It does, however, produce conflicts revolving around duties, authority, and resource allocation. To the extent that the goals to be achieved are vague and the technology used is poorly understood, a continuous battle for power between product and functional managers is likely.

The matrix structure is often found in an organization or within an SBU when the following three conditions exist: 1. Ideas need to be cross-fertilized across projects or products.

2. Resources are scarce.

3. Abilities to process information and to make decisions need to be improved.

Difficulty: Moderate Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Application of knowledge 87) Discuss the cellular/modular organization.

Answer: A cellular/modular organization is composed of cells (self-managing teams, autonomous business units, etc.) which can operate alone but which can interact with other cells to produce a more potent and competent business mechanism. This combination of independence and interdependence allows the cellular organizational form to generate and share the knowledge and expertise needed to produce continuous innovation.

Difficulty: Moderate Learning Obj.: 10.4: Explain how matrix, network and modular structures are used to implement strategy AACSB: Application of knowledge

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88) ________ refers to the study of individual tasks in an attempt to make them more relevant to the company and to the employee(s).

A) Job rotation B) Job design C) Job enrichment D) Job enlargement E) Job relocation Answer: B Difficulty: Moderate Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking 89) The radical redesign of business processes to achieve major gains in cost, service, or time is called A) total quality management.

B) reengineering.

C) management by objectives.

D) action planning.

E) statistical process control.

Answer: B Difficulty: Easy Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Application of knowledge 90) Which of the following is not a principle of reengineering identified by Michael Hammer?

A) Puts the decision point where the work is performed B) Organizes around tasks, not outcomes C) Treats geographically dispersed resources as though they were centralized D) Links parallel activities E) Captures information once at the source Answer: B Difficulty: Moderate Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking

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91) ________ is an analytical method for achieving near-perfect results on a production line.

A) Reengineering B) Six Sigma C) Job enlargement D) Just-in-time E) Flexible manufacturing Answer: B Difficulty: Easy Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking 92) Which of the following is not a step in the Six Sigma process?

A) Define a process where results are poorer than average.

B) Measure the process to determine exact current performance.

C) Analyze the information to pinpoint where things are going wrong.

D) Solve the issue by analyzing the choices.

E) Improve the process and eliminate the error.

Answer: D Difficulty: Easy Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Application of knowledge 93) The movement of workers through several jobs to increase variety is referred to as A) job combination.

B) job rotation.

C) job enrichment.

D) job enlargement.

E) job motivation.

Answer: B Difficulty: Easy Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Application of knowledge

25 .

94) The job design technique that combines tasks to give a worker more of the same type of duties to perform is known as A) job combination.

B) job rotation.

C) job enrichment.

D) job enlargement.

E) job motivation.

Answer: D Difficulty: Easy Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Application of knowledge 95) How does job rotation combat the adverse consequences of task specialization?

A) By altering the work to provide the worker with more control over activities B) By moving workers through several jobs, thereby exposing them to increased task variety C) By combining different tasks, thereby giving them more responsibilities D) By giving the worker more autonomy through alterations in the job E) By forming natural work units to provide the worker with more responsibility Answer: B Difficulty: Challenging Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking 96) In an attempt to "think globally, act locally," companies are decentralizing operations that are culturally oriented and closest to the customers such as A) marketing.

B) R&D. C) finance.

D) information systems.

E) accounting.

Answer: A Difficulty: Moderate Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking

26 .

97) As industries move from being multidomestic to being more globally integrated, MNCs are increasingly switching from the geographic-area structure to the A) matrix structure.

B) network structure.

C) product-group structure.

D) international structure.

E) functional structure.

Answer: C Difficulty: Moderate Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking 98) Which type of structure was used by Nestle to tailor products to regional differences and to achieve regional coordination?

A) Geographic-area structure B) Network structure C) Product-group structure D) International structure E) Functional structure Answer: A Difficulty: Challenging Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking 99) Which type of structure enables a corporation to decentralize decision making to the local subsidiaries?

A) Geographic-area structure B) Product-group structure C) Network structure D) Matrix structure E) Functional structure Answer: A Difficulty: Moderate Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking

27 .

100) MNCs tend to structure themselves either along product groups or A) geographic areas.

B) markets.

C) processes.

D) functions.

E) strategic business units.

Answer: A Difficulty: Moderate Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking 101) The geographic-area structure allows the company to introduce and manage a similar line of products around the world.

Answer: FALSE Difficulty: Moderate Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking 102) As industries move from being multi-domestic to more globally integrated, multi-national corporations are increasingly switching from the matrix to the divisional structure.

Answer: FALSE Difficulty: Challenging Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking 103) Capturing information once and at the source is one of the principles of reengineering suggested by Michael Hammer.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Application of knowledge 104) Studies of the performance of reengineering programs show clear, consistent, and overwhelming evidence of success and improved productivity.

Answer: FALSE Difficulty: Easy Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Application of knowledge

28 .

105) The final step in the Six Sigma process is to establish controls to prevent future defects from occurring.

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Application of knowledge 106) Rather than attempting to fix existing problems through minor adjustments and the finetuning of existing processes, the key to reengineering is to ask, "If this were a new company, how would we run this place?"

Answer: TRUE Difficulty: Moderate Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Application of knowledge 107) Reengineering appears to be most useful to changing an entire organization.

Answer: FALSE Difficulty: Moderate Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Analytical thinking 108) What is job design? What role does it play in strategy implementation?

Answer: Job design refers to the study of individual tasks in an attempt to make them more relevant to the company and to the employee(s). To minimize some of the adverse consequences of job specialization, corporations have turned to new job design techniques such as job enlargement (combining tasks to give a worker more of the same type of duties to perform), job rotation (combining tasks to give a worker more of the same type of duties to perform), job rotation (moving workers through several jobs to increase variety), job characteristics (using task characteristics to improve employee motivation), and job enrichment (altering the jobs by giving the worker more autonomy and control over activities). Job design plays a role in strategy implementation because it is not enough if the company's overall structure is redesigned to fit the strategy, it also involves redesigning the way jobs are done.

Difficulty: Challenging Learning Obj.: 10.5: Discuss the issues related to centralization versus decentralization in structuring organizations AACSB: Application of knowledge

29 .

Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 11 Strategy Implementation: Staffing and Directing 1) The hiring of new people with new skills, firing of people with inappropriate or substandard skills, and/or training existing employees to learn new skills are included in the process of A) training.

B) staffing.

C) structuring.

D) operating.

E) financing.

Answer: B Difficulty: Easy Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 2) All of the following reflect characteristics of a successful integration manager EXCEPT A) a deep knowledge of the acquiring company.

B) a flexible management style.

C) an ability to work in cross-functional project teams.

D) a propensity to hire like-minded people.

E) a willingness to work independently.

Answer: D Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 3) What percentage of an acquired company's top management team either quit or is asked to leave five years after the acquisition?

A) 25 B) 35 C) 48 D) 55 E) 61 Answer: E Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking

1 .

4) The market for corporate training is expected to grow to US ________ billion by 2023 from just under US$9.3 billion in 2018.

A) $12.3 B) $14.8 C) $16.2 D) $19.6 E) $24.9 Answer: D Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 5) Staffing requirements should follow a change in A) time.

B) strategy.

C) profitability.

D) growth.

E) age.

Answer: B Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 6) Which of the following statements is not true concerning the career life cycle for top executives?

A) During the early years of executives' tenures, they tend to experiment extensively with product lines to learn about their business.

B) It is possible that a current CEO may not be appropriate to implement a new strategy.

C) The harvest stage occurs when executives' accumulated knowledge allows them to reduce experimentation and increase performance.

D) There is an inverted U-shaped relationship between top executive tenure and the firm's financial performance.

E) The length of time spent in each stage is relatively stable for all CEOs. Answer: E Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking

2 .

7) Which type of chief executive officer with a great deal of experience in that particular industry would be appropriate for a corporation following a concentration strategy emphasizing vertical or horizontal growth?

A) Professional liquidator B) Dynamic industry expert C) Turnaround specialist D) Analytical portfolio manager E) Cautious profit planner Answer: B Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 8) Which type of chief executive officer who is highly knowledgeable in other industries and can manage diverse product lines would be appropriate for a corporation following a diversification strategy?

A) Professional liquidator B) Dynamic industry expert C) Turnaround specialist D) Analytical portfolio manager E) Cautious profit planner Answer: D Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 9) Which type of chief executive officer is a person with a conservative style, a production or an engineering background, and experienced in controlling budgets, capital expenditures, inventories, and standardization procedures?

A) Professional liquidator B) Dynamic industry expert C) Turnaround specialist D) Analytical portfolio manager E) Cautious profit planner Answer: E Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking

3 .

10) What type of firm would be best matched by a CEO with accounting/finance, manufacturing/production, and general management experience?

A) Successful prospectors B) Analyzers C) Reactors D) High-performance defenders E) Stuck-in-the-middle prospectors Answer: D Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 11) Founders of firms tend to have functional backgrounds in technological specialties, whereas successors tend to have backgrounds in A) research/engineering and general management.

B) accounting/finance, manufacturing/production, and general management.

C) marketing and administration.

D) human resources and strategy.

E) purchasing and logistics.

Answer: C Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 12) At Procter & Gamble, an analyzer firm, the route to the CEO's position has traditionally been through A) research/engineering and general management.

B) accounting/finance, manufacturing/production, and general management.

C) brand management.

D) human resources and strategy.

E) purchasing and logistics.

Answer: C Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 13) What did a study of 173 firms over a 25-year period reveal about CEOs of successful corporations, especially when the past CEO's strategy continued to be successful?

A) They tended to have less loyalty than former CEOs, switching companies at a faster pace.

B) They tended to have the same functional specialization as the former CEO. C) They tended to be more aggressive in their risk-taking than former CEOs. D) They tended to rely more on skills developed through group decision-making.

E) They tended to be turnaround specialists.

Answer: B Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 4 .

14) What was the average tenure of a chief executive of a large U.S. company in 2021?

A) 15 years B) Nearly 10 years C) Just under 5 years D) About 2 years E) Around 8 years Answer: C Difficulty: Easy Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 15) What proportion of all major corporations worldwide replace their CEO at least once in a five-year period?

A) Half B) One-fourth C) Two-thirds D) One-third E) One-fifth Answer: C Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 16) One study reported the percentage of senior executives that left a firm after a new CEO took office was ________ when the new CEO was an insider and ________ when the new CEO was an outsider.

A) 35; 10 B) 20; 34 C) 30; 30 D) 20; 10 E) 40; 20 Answer: B Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 17) What percent of the CEOs selected to run S&P 500 companies in 2020 were insiders?

A) 17 B) 25 C) 58 D) 71 E) 80 Answer: D Difficulty: Easy Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 5 .

18) Which one of the following is not one of the activities and techniques typically used in an assessment center to evaluate a person's suitability for advancement?

A) Leaderless group discussions B) Management games C) In-basket exercises D) IQ tests E) Case analyses Answer: D Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 19) Assessment centers have generally been able to accurately predict subsequent A) job satisfaction.

B) job performance and career success.

C) organizational commitment.

D) organizational attachment.

E) management longevity.

Answer: B Difficulty: Easy Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 20) Which of the following is used in many large corporations to ensure that employees are gaining the appropriate mix of experiences to prepare them for future responsibilities?

A) Job design B) Job specialization C) Job rotation D) Job enlargement E) Job enrichment Answer: C Difficulty: Easy Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Reflective thinking 21) ________ refers to the planned elimination of positions or jobs.

A) Outsourcing B) Offshoring C) Onshoring D) Downsizing E) Insourcing Answer: D Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking

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22) Downsizing is often used to implement a(n) ________ strategy.

A) retrenchment B) growth C) stability D) hold E) integration Answer: A Difficulty: Easy Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 23) Which of the following is not a guideline proposed for successful downsizing?

A) Contract out work that others can do cheaper.

B) Plan for long-run efficiencies.

C) Make across-the-board cuts.

D) Communicate the reasons for actions.

E) Invest in the remaining employees.

Answer: C Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 24) An analytical portfolio manager is someone with an analytical mind who is highly knowledgeable in other industries and can manage diverse product lines.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 25) Staffing requirements should follow a change in strategy.

Answer: TRUE Difficulty: Easy Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 26) Research indicates that a multinational corporation performs at a higher level when its CEO has international experience.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking

7 .

27) Research reveals that executives with an internal locus of control are more effective in regulated industries than are executives with an external locus of control.

Answer: FALSE Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Diverse and multicultural work environments 28) Staffing issues can involve hiring new people with new skills, firing people with inappropriate or substandard skills, and/or training existing employees to learn new skills.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 29) There is an inverted U-shaped relationship between top executive tenure and the firm's financial performance.

Answer: TRUE Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 30) Training and development can be especially important for organizations implementing an overall low cost or differentiation strategy, but not for those in retrenchment.

Answer: FALSE Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 31) It is possible that a current CEO may not be appropriate to implement the firm's new strategy.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 32) A corporation following a stability strategy would probably not want a person with a conservative style, production or engineering background, and experience with controlling budgets, capital expenditures, inventories, and standardization procedures — a cautious profit planner.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking

8 .

33) IHOP's CEO, Julia Stewart, built a reputation as a turnaround specialist.

Answer: TRUE Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 34) A professional liquidator was the executive type called in to Pier 1, when the company sold its intellectual property and other online assets.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 35) Chandler proposed that the most appropriate CEO for a firm remains constant as the company proceeds through its life cycle.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 36) Analyzer firms tend to have CEOs with a marketing/sales background.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 37) Executive succession is the process of replacing any manager.

Answer: FALSE Difficulty: Easy Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 38) Succession planning has become the most important topic discussed by boards of directors.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 39) The average tenure of outsider CEOs was significantly less than for insider CEOs. Answer: TRUE Difficulty: Easy Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge

9 .

40) Firms in trouble seldom choose outsiders to lead them.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 41) Downsizing is sometimes called "rightsizing" or "resizing."

Answer: TRUE Difficulty: Easy Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 42) Companies that pursue related diversification strategies through internal development make greater use of interdivisional transfers of people than do companies that grow through unrelated acquisitions.

Answer: TRUE Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 43) A good retrenchment strategy can be implemented well in terms of organizing, but poorly in terms of staffing.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Analytical thinking 44) Research indicates that companies undertaking cost-cutting programs are less likely than others to cut costs again.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 45) Research shows that when companies use downsizing as part of a larger restructuring program to narrow company focus, they enjoy better performance.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 46) To successfully downsize, the recommendation is to make across-the-board cuts to maintain fairness.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 10 .

47) When downsizing, it is important to plan only for immediate efficiencies.

Answer: FALSE Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 48) Why is it important to match the manager to the strategy?

Answer: Executive characteristics influence strategic outcomes for a corporation. It is possible that a current CEO may not be appropriate to implement a new strategy. Research indicates that there may be a career life cycle for top executives. During the early years of executives' tenure, for example, they tend to experiment intensively with product lines to learn about their business.

This is their learning stage. Later, their accumulated knowledge allows them to reduce experimentation and increase performance. This is their harvest stage. They enter a decline stage in their later years, when they reduce experimentation still further, and performance declines.

Thus, there is an inverted U-shaped relationship between top executive tenure and the firm's financial performance.

Difficulty: Challenging Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 49) What is executive succession? Discuss the hiring of insiders versus outsiders.

Answer: Executive succession is the process of replacing a key top manager. Succession planning has become the most important topic discussed by boards of directors. Prosperous firms tend to look outside for CEO candidates only if they have no obvious internal candidates. Hiring an outsider to be a CEO is a risky gamble. CEOs from the outside tend to introduce significant change and high turnover among the current management. Firms in trouble overwhelmingly choose outsiders to lead them. Boards realize that the best way to force a change in strategy is to hire a new CEO with no connections to the current strategy.

Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge

11 .

50) What are some of the approaches a company can take to identify and prepare its people for important positions?

Answer: A company can identify and prepare its people in several ways. One approach is to establish a sound performance appraisal system to identify good performers with promotion potential. The human resource system should also be examined to be sure that diverse people are hired, promoted, and provided training opportunities. Some large organizations are using assessment centers to evaluate a person's suitability for an advanced position. They use special interviews, management games, in-basket exercises, leaderless group discussions, case analyses, decision-making exercises, and oral presentation to assess the potential of employees for specific positions. Assessment centers have generally been able to accurately predict subsequent job performance and career success. Job rotation is also used by many large corporations to ensure that employees are gaining the appropriate mix of experiences to prepare them for future responsibilities. Rotating people among divisions is one way that the corporation can improve the level of organizational learning.

Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 51) What problems are encountered in retrenchment?

Answer: Downsizing, which refers to the planned elimination of positions or jobs, is a program often used to implement retrenchment strategies. Because the financial community is likely to react favorably to announcements of downsizing from a company in difficulty, such a program may provide some short-term benefits such as raising the company's stock price. However, if not done properly, downsizing may result in less, rather than more, productivity. For example, downsizing can seriously damage the learning capacity of organizations. A good retrenchment strategy can thus be implemented well in terms of organizing but poorly in terms of staffing. A situation can develop in which retrenchment feeds on itself and acts to further weaken instead of strengthening the company.

Difficulty: Moderate Learning Obj.: 11.1: Explain the link between strategy and staffing decisions AACSB: Application of knowledge 52) Which of the following is not true of corporate culture?

A) Corporate culture has a strong tendency to resist change.

B) Corporate culture can strongly affect an organization's ability to shift its strategic direction.

C) A problem for a strong culture is that a change in mission is not likely to be successful if it is in opposition to the accepted corporate culture.

D) Corporate culture often rests on preserving stable relationships.

E) Corporate culture has little influence on the behavior of the firm's employees.

Answer: E Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking

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53) Corporate ________ has a strong tendency to resist change because its very reason for existence often rests on preserving stable relationships and patterns of behavior.

A) culture B) planning C) staffing D) strategy E) profitability Answer: A Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking 54) Which of the following is not one of the questions used to assess strategy-culture compatibility?

A) Is the proposed strategy compatible with the company's current culture?

B) Can the culture be easily modified to make it more compatible with the new strategy?

C) Is management willing and able to make major organizational changes, and accept probable delays and a likely increase in costs?

D) Is management still committed to implementing the strategy?

E) Is there a better-matched CEO to implement this strategy?

Answer: E Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking 55) Which of the following is not a characteristic of companies in which major cultural changes have successfully taken place?

A) The CEO and other top managers had a strategic vision of what the company could become and communicated that vision to employees at all levels.

B) The current performance was never compared to that of its competition.

C) The vision was translated into the key elements necessary to accomplish that vision.

D) Communication of the key vision elements was done through contests.

E) Communication of the key vision elements was done through monetary rewards.

Answer: B Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking

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56) A survey of over 1,400 M&A professions found that 43% of M&A transactions experienced ________ that the deals were scrapped, delayed, or repriced significantly.

A) issues in selecting an appropriate CEO B) such serious cultural issues C) issues in paying for the transaction D) issues in laying off employees E) such serious location issues Answer: B Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge 57) Which method of managing two cultures preserves the separate cultures of both firms in the resulting culture?

A) Consolidation B) Integration C) Separation D) Deculturation E) Assimilation Answer: B Difficulty: Challenging Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge 58) When managing corporate culture, the first question management must ask is A) what the change in strategy means to the corporate culture.

B) whether a change in culture is needed.

C) whether an attempt to change the culture is worth the likely costs.

D) whether it is possible to manage around the culture.

E) whether stakeholders will be impacted.

Answer: A Difficulty: Challenging Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking 59) Where did Home Depot CEO Robert Nardelli work before attempting to change the organizational culture at the company?

A) IBM B) GE C) 3M D) Microsoft E) Apple Answer: B Difficulty: Challenging Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge 14 .

60) Per McKinsey & Company's survey of 3,199 worldwide executives, what was key to companies that successfully transformed themselves?

A) Planning B) Operationalization C) Evaluation D) Staffing E) Communication and involvement Answer: E Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge 61) In managing cultural change through communication, which of the following statements is not true?

A) The CEO communicates the strategic vision of what the company could become.

B) If the vision is difficult, the CEO immediately terminates the goal.

C) The vision is translated into objective, well-defined goals with appropriate incentives and recognition aides.

D) The CEO communicates to all employees where the organization stands in relation to the competition and its outlook on the future.

E) The CEO constantly updates the workforce as to the progress of the company in achieving those elements identified as important in attaining the vision.

Answer: B Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking 62) Which one of the following is not one of the four general methods of managing two different cultures?

A) Separation B) Deculturation C) Integration D) Assimilation E) Segmentation Answer: E Difficulty: Easy Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge

15 .

63) Which method of managing disparate cultures makes no strong imposition of cultural change on either company?

A) Separation B) Deculturation C) Integration D) Assimilation E) Segmentation Answer: C Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking 64) When Renault purchased a controlling interest in Japan's Nissan Motor Company to form one successful auto group from two with particular sensitivity to Nissan's culture, which approach to managing culture was employed?

A) Separation B) Integration C) Deculturation D) Assimilation E) Segmentation Answer: B Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking 65) Which method of managing disparate cultures did Maytag Company use when it acquired Admiral, where Admiral's employees were willing to accept the dominance of Maytag's strong quality-oriented culture?

A) Separation B) Deculturation C) Integration D) Assimilation E) Segmentation Answer: D Difficulty: Easy Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge

16 .

66) When Boeing acquired McDonnel-Douglas, known for its expertise in military aircraft and missiles, Boeing kept it structurally separate, without cultural exchange. In doing this, Boeing used the ________ method of managing disparate cultures.

A) separation B) deculturation C) integration D) assimilation E) segmentation Answer: A Difficulty: Easy Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking 67) ________ involves the disintegration of one company's culture resulting from unwanted and extreme pressure from the other to impose its culture and practices.

A) Separation B) Deculturation C) Integration D) Assimilation E) Segmentation Answer: B Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking 68) In managing disparate cultures, ________ involves the domination of one organization over the other.

A) integration B) separation C) deculturation D) assimilation E) segmentation Answer: D Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking

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69) When AT&T acquired NCR Corporation, the NCR managers were replaced with an AT&T management team and forced to make several changes that eventually led to poor results. Which management strategy was employed in terms of culture?

A) Integration B) Separation C) Deculturation D) Assimilation E) Segmentation Answer: C Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking 70) Corporate culture does not necessarily have to support the mission of the firm.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking 71) Corporate culture has a strong tendency to resist change because its very reason for existence often rests on preserving stable relationships and patterns of behavior.

Answer: TRUE Difficulty: Easy Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge 72) A key job of management involves managing corporate culture.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge 73) While an organization's culture can exert a powerful influence on the behavior of all employees, it can seldom affect a company's ability to shift its strategic direction.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge 74) Unless strategy is in complete agreement with the culture, any significant change in strategy should be followed by a modification of the organization's culture.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge

18 .

75) When implementing a new strategy, a company should take the time to assess strategyculture compatibility.

Answer: TRUE Difficulty: Easy Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge 76) Segmentation is one of the four general methods of managing two different cultures.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge 77) When Boeing created a separate unit to house the newly acquired operations of McDonnellDouglas, they were managing the different cultures through deculturation, the most common method of dealing with two different cultures.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Analytical thinking 78) Deculturation involves the disintegration of one company's culture resulting from unwanted and extreme pressure from the other to impose its culture and practices.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge 79) What is the relationship between strategy and culture? What questions would you ask regarding a corporation's culture?

Answer: There is no one best organizational culture. An optimal culture is one that best supports the mission and strategy of the operation. This means that corporate culture should support the strategy. When implementing a new strategy, a company should take the time to assess the strategy-culture compatibility. The following four questions are important with respect to the strategy-culture relationship: • Is the proposed strategy compatible with the company's current culture?

• Can the culture be easily modified to make it more compatible with the new strategy?

• Is management willing and able to make major organizational changes and accept probable delays and a likely increase in costs?

• Is management still committed to implementing the strategy?

Difficulty: Moderate Learning Obj.: 11.2: Discuss how leaders manage corporate culture AACSB: Application of knowledge

19 .

80) The strategy implementation tool used to determine what actions are going to be taken, by whom, during what time frame, and with what expected results is called a(n) A) mission statement.

B) action plan.

C) MBO. D) TQM. E) succession plan.

Answer: B Difficulty: Easy Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 81) Strategic goals can be accomplished through defining an action plan. Which one of the following is not one of the components that make up an action plan?

A) The specific actions to be taken to make the program operational B) The dates to begin and end each action C) Person responsible for carrying out each action D) Where the action will be done E) Contingency plans Answer: D Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 82) Action plans are important for several reasons. Which one of the following is not one of these reasons?

A) If the action plan is implemented properly, it ensures that the strategy will be a success.

B) It serves as a link between strategy formulation and evaluation and control.

C) The action plan specifies what needs to be done differently from the way operations are currently carried out.

D) During the evaluation and control process, an action plan helps in the appraisal of the performance and identifying remedial actions needed.

E) Motivation may be improved with the assignment of specific responsibility.

Answer: A Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Analytical thinking

20 .

83) ________ is a technique that encourages participative decision making through shared goal setting at all organizational levels and performance assessment based on the achievement of stated objectives.

A) Market Buy-Out B) Mergers, Buy-outs, and Options C) Multi-national Business Organization D) Manufacturing Backlog Order E) Management By Objectives Answer: E Difficulty: Easy Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 84) When did MBO originate?

A) The 2010s B) The 1980s C) The 1950s D) The 1960s E) The 1970s Answer: C Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Analytical thinking 85) Which of the following is not descriptive of the purpose of MBO? A) MBO provides an opportunity for the corporation to connect the objectives of people at each level to those at the next higher level.

B) MBO operates independently and requires very little supervision or administration.

C) The goals at each level ideally contribute directly towards overall organizational objectives.

D) MBO provides a potential method of integrating the physical, financial and human resource plans of an organization as it relates to the goals of the individual.

E) MBO ties the corporate, business, and functional objectives together along with the strategies used to achieve them.

Answer: B Difficulty: Challenging Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Analytical thinking

21 .

86) ________ is an operational philosophy committed to customer satisfaction and continuous improvement.

A) Management By Objectives B) Enterprise Resource Planning C) Six Sigma D) Total Quality Management E) Strategic planning Answer: D Difficulty: Easy Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 87) Which of the following is not one of TQM's objectives?

A) Improve quality B) Lower costs C) Increased alignment of employee goals with management's objectives D) Increase employee participation E) Improve customer satisfaction Answer: C Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 88) A rule of ________ is that you only improve what you measure.

A) ERP B) MBO C) TQM D) SWOT E) MRP Answer: C Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge

22 .

89) TQM is committed to A) quality/excellence.

B) improved communication.

C) culture compatibility.

D) mass customization.

E) modular manufacturing.

Answer: A Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 90) Many ________ principles have been incorporated into the ISO 9000 series of standards and certifications.

A) MRP B) MBO C) AMT D) TQM E) CDRH Answer: D Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 91) Inspecting for quality in TQM emphasizes A) improving the process to prevent errors.

B) identifying ways to cut costs.

C) avoiding the use of quality teams.

D) changing work relationships.

E) avoiding measurement.

Answer: A Difficulty: Easy Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge

23 .

92) Which of the following emphasizes prevention, not correction?

A) TQM B) Strategic planning C) MBO D) Market research E) ERP Answer: A Difficulty: Easy Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 93) After a program has been selected to implement a particular strategy, a(n) ________ should be developed to put the program in place.

A) objective B) action plan C) goal D) contingency plan E) procedure Answer: B Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Analytical thinking 94) The principles of ________ are a part of self-managing work teams and quality circles.

A) MBO B) strategic planning C) SWOT analysis D) ERP E) market research Answer: A Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Analytical thinking

24 .

95) Which of the following acts to tie together corporate, business, and functional objectives, as well as the strategies developed to achieve them?

A) MBO B) ERP C) TQM D) Six Sigma E) SWOT Answer: A Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 96) Which of the following links organizational objectives and the behavior of individuals?

A) TQM B) SWOT C) ERP D) MRP E) MBO Answer: E Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 97) A benefit of ________ is that it can reduce the amount of internal politics operating within a large corporation.

A) strategic planning B) market research C) MBO D) Six Sigma E) operational planning Answer: C Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Analytical thinking

25 .

98) According to TQM, which of the following are the cause of defects in quality?

A) Budgets B) Faulty processes C) poorly motivated employees D) Managers E) Supervisors Answer: B Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Analytical thinking 99) Which of the following emphasizes improving the process to prevent errors and deficiencies?

A) TQM B) ERP C) MBO D) SWOT E) MRP Answer: A Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Analytical thinking 100) An action plan states what actions are going to be taken, by whom, during what time frame, and with what expected results.

Answer: TRUE Difficulty: Easy Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 101) TQM serves as a link between strategy formulation and evaluation and control.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 102) MBO links organizational objectives and the behavior of individuals.

Answer: TRUE Difficulty: Easy Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Analytical thinking

26 .

103) TQM is an operational philosophy committed to customer satisfaction and continuous improvement.

Answer: TRUE Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Analytical thinking 104) One objective of TQM is better, less variable quality of the product and service.

Answer: TRUE Difficulty: Easy Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 105) A drawback of MBO is that it increases the amount of internal politics operating within a large organization.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Analytical thinking 106) A rule of TQM is that you only improve what you can.

Answer: FALSE Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 107) The emphasis of TQM is correction, not prevention.

Answer: FALSE Difficulty: Easy Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge

27 .

108) What information should an action plan include?

Answer: An action plan should include the following information: • Specific actions to be taken to make the program operational.

• Dates to begin and end each action.

• Person (identified by name and title) responsible for carrying out each action.

• Person responsible for monitoring the timeliness and effectiveness of each action.

• Expected financial and physical consequences of each action.

• Contingency plans.

Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 109) What is MBO and what are its benefits?

Answer: Management by Objectives (MBO) is a technique that encourages participative decision making through shared goal setting at all organizational levels and performance assessment based on the achievement of stated objectives. MBO links organizational objectives and the behavior of individuals. Because it is a system that links plans with performance, it is a powerful implementation technique.

One of the real benefits of MBO is that it can reduce the amount of internal politics operating within a large corporation. People are less likely to jockey for position if the company's mission and objectives are clear and they know that the reward system is based not on game playing, but on achieving clearly communicated measurable objectives.

Difficulty: Moderate Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 110) What is TQM and what are its essential ingredients?

Answer: Total Quality Management (TQM) is an operational philosophy committed to customer satisfaction and continuous improvement. TQM is committed to quality/excellence and to being the best in all functions. Because TQM aims to reduce costs and improve quality, it can be used as a program to implement an overall low-cost or a differentiation business strategy.

Many TQM principles have been incorporated into the ISO 9000 series of standards and certifications. While TQM is focused upon employee participation, refinement, and improvement, the ISO standards are tied to the reporting and data analysis of the process. The two can go hand-in-hand.

TQM's essential ingredients are: • An intense focus on customer satisfaction.

• Internal as well as external customers.

• Accurate measurement of every critical variable in a company's operations.

• Continuous improvement of products and services.

• New work relationships based on trust and teamwork.

Difficulty: Challenging Learning Obj.: 11.3: Utilize an action planning framework to implement an organization's MBO and TQM initiatives AACSB: Application of knowledge 28 .

Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 12 Evaluation and Re-assessment 1) Which one of the following is not a part of the evaluation and control of performance?

A) Establish corporate strategies.

B) Determine what to measure.

C) Establish standards for performance.

D) Measure actual performance.

E) Take corrective actions.

Answer: A Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 2) If performance data and activity reports indicate undesirable performance as a result of inappropriate use of the strategic management process, operational managers must A) immediately notify the board of directors.

B) change the strategic management model.

C) know about it so that they can correct the employee activity.

D) allow sufficient time to pass to verify if it is the process or just the usage that is the problem.

E) check the performance data to ensure their accuracy and take two more measurements.

Answer: C Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 3) Evaluation and control information consists of performance data and A) budgets.

B) plans.

C) activity reports.

D) goals.

E) objectives.

Answer: C Difficulty: Easy Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge

1 .

4) Which type of control measures variables that influence future profitability?

A) Steering control B) Activity control C) Behavior control D) Output control E) Influencing control Answer: A Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 5) Which of the following ratios measures cost of goods sold in comparison to the average value of inventories?

A) Profitability B) Inventory turnover C) Current D) Quick E) Leverage Answer: B Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 6) Which type of control specifies how something is to be done through policies, rules, standard operating procedures, and orders from a superior?

A) Tactical control B) Strategic control C) Output control D) Behavior control E) Functional control Answer: D Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking

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7) Which type of control emphasizes resources, such as knowledge, skills, abilities, values, and motives of employees?

A) Tactical control B) Strategic control C) Output control D) Input control E) Behavior control Answer: D Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 8) The ISO 9000 and 14000 Standards Series as a way to objectively document a company's high level of quality operations and environmental assurance are examples of A) tactical control.

B) strategic control.

C) output control.

D) functional control.

E) behavior control.

Answer: E Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 9) All of the following are examples of behavior controls EXCEPT A) monitoring employees to ensure they are behaving according to company guidelines.

B) monitoring employees' workspace usage.

C) biometric monitoring.

D) monitoring employee movement.

E) sales quotas.

Answer: E Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge

3 .

10) All of the following are examples of output controls EXCEPT A) sales quotas.

B) specific cost reduction objectives.

C) profit objectives.

D) getting to work on time.

E) surveys of customer satisfaction.

Answer: D Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 11) What percent of U.S. employers monitored employee movement, texts in internal messaging systems, and workspace usage, as well as used biometric monitoring as reported in a 2018 study?

A) 0% B) 17% C) 30% D) 47% E) 57% Answer: E Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 12) Corporations will emphasize output controls when they are following a strategy of A) concentric diversification.

B) conglomerate diversification.

C) retrenchment.

D) divestment.

E) vertical integration.

Answer: B Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking

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13) Corporations will emphasize all types of controls (output, input, and behavior) when they are following a strategy of A) conglomerate diversification.

B) concentric diversification.

C) retrenchment.

D) divestment.

E) vertical integration.

Answer: B Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 14) Which of the following refers to an accounting method for allocating indirect and fixed costs to individual products or product lines based on the value-added activities going into that product?

A) Total quality management B) Value-chain analysis C) Activity-based costing D) MBO E) Benchmarking Answer: C Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 15) ________ is a corporate-wide, integrated process to manage the uncertainties that could negatively or positively influence the achievement of the corporation's objectives.

A) ISO 14000 Series B) Input controls C) Activity-based costing D) Enterprise Risk Management E) Market Value Added Answer: D Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge

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16) Which is the MOST commonly used measure of corporate performance (in terms of profit)?

A) EPS B) ROE C) DPS D) ROI E) ROVA Answer: D Difficulty: Easy Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 17) The measure that is a result of dividing net income before taxes by the total amount invested in the company (typically measured by total assets) is called A) Repatriation of investments.

B) Return on interest.

C) Repatriation of interest.

D) Return on investment.

E) Return of internationals.

Answer: D Difficulty: Easy Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 18) The measure which involves dividing net earnings by the amount of common stock is called A) ROI. B) ROE. C) gross margin.

D) net income.

E) earnings per share.

Answer: E Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking

6 .

19) One of the limitations of ROI is that while it gives the impression of objectivity and precision, it can be easily A) manipulated.

B) communicated.

C) computed.

D) understood.

E) used.

Answer: A Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 20) The amount of money a new owner can take out of the firm without harming the business is known as A) leveraged buyout.

B) operating cash flow.

C) free cash flow.

D) dividends.

E) shareholder measure.

Answer: C Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 21) Because of the belief that accounting-based numbers such as ROI, ROE, and EPS are not reliable indicators of a corporation's economic value, which method of corporate performance and strategic management effectiveness is now preferred?

A) Shareholder value B) Basic earning power C) Price/earnings ratio D) Profit margin on sales E) Return on assets Answer: A Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking

7 .

22) Shareholder value can be defined as the present value of the anticipated future stream of cash flows from the business plus A) the anticipated tax savings.

B) projected dividends.

C) the projected reduction in debt.

D) the value of the company if liquidated.

E) the growth in future profits.

Answer: D Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 23) The difference between the after-tax operating income and the total annual cost of capital for the business is A) ROI. B) EPS. C) ROE. D) EVA. E) MVA. Answer: D Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 24) The cost of capital A) is the interest paid on borrowings.

B) is the expected future dividend payments.

C) combines the cost of debt and equity.

D) is the tax savings from the interest on borrowings.

E) is the opportunity cost of investing in alternate projects.

Answer: C Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking

8 .

25) Which of the following is the present value of future EVA? A) ROI B) EPS C) ROE D) Operating cash flow E) MVA Answer: E Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 26) Economic Value Added (EVA) is a method for allocating direct and fixed costs to individual products.

Answer: FALSE Difficulty: Easy Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 27) Customer satisfaction is an example of steering control.

Answer: TRUE Difficulty: Easy Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 28) Evaluation and control information consists only of performance data.

Answer: FALSE Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 29) One of the obstacles to effective control is the difficulty in developing appropriate measures of important activities and outputs.

Answer: TRUE Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge

9 .

30) ROI and EPS tell us what happened after the fact, not what is happening or what will happen.

Answer: TRUE Difficulty: Easy Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 31) One example of a steering control used by retail stores is the inventory turnover ratio, which shows how hard an investment in inventory is working.

Answer: TRUE Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 32) Output controls specify how something is to be done through policies, rules, standard operating procedures, and orders from a superior.

Answer: FALSE Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 33) Biometric monitoring of employees is an example of a behavior control.

Answer: TRUE Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 34) Corporations following the strategy of concentric diversification tend to emphasize output controls.

Answer: FALSE Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 35) Activity-based costing (ABC) is very useful in constructing a value-chain analysis of a firm's activities for making outsourcing decisions.

Answer: TRUE Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge

10 .

36) Activity-based costing (ABC) accounting allows accountants to charge costs more accurately than the traditional method because it allocates overhead far more precisely.

Answer: TRUE Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 37) Enterprise risk management is being adopted because of the increasing amount of environmental uncertainty that can affect an entire corporation.

Answer: TRUE Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 38) The advantage of ROI is that it cannot be manipulated.

Answer: FALSE Difficulty: Easy Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 39) Earnings per share (EPS) can have several different but equally acceptable values, depending on the principle selected for its computation.

Answer: TRUE Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 40) Operating cash flow is a narrow measure of a company's funds.

Answer: FALSE Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 41) Stickiness and eyeballs are two non-financial performance measures used by Internet business ventures.

Answer: TRUE Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking

11 .

42) The cost of capital combines the cost of debt and equity.

Answer: TRUE Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Analytical thinking 43) EVA is the present value of future MVA. Answer: FALSE Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 44) What are steering controls?

Answer: Measures such as ROI and EPS tell us what happened after the fact, not what is happening or what will happen. A firm needs to develop measures that predict likely profitability. These are called steering controls because they measure variables that influence future profitability. An example of a steering control used by retail stores is the inventory turnover ratio (cost of goods sold divided by the average value of its inventories). This measure shows how hard an investment in inventory is working; the higher the ratio, the better.

Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 45) Distinguish between behavior and output controls. Provide examples of each.

Answer: Behavior controls specify how something is to be done through policies, rules, standard operating procedures, and orders from a superior. Output controls specify what is to be accomplished by focusing on the result of the behaviors through the use of objectives and performance targets or milestones. An example of a behavior control is a policy on arriving to work on time. An example of an output control is a sales quota.

Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge

12 .

46) What is Activity-based costing (ABC)?

Answer: Activity-based costing (ABC) is an accounting method for allocating indirect and fixed costs to individual products or product lines based on the value-added activities going into that product. This accounting method is very useful in constructing a value-chain analysis of a firm's activities for making outsourcing decisions. ABC accounting allows accountants to charge costs more accurately than the traditional accounting method because it allocates overhead far more precisely.

Difficulty: Moderate Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 47) What EVA? Why is it preferred by some over traditional outcome measures?

Answer: Economic value added (EVA) has become an extremely popular shareholder value method of measuring corporate and divisional performance and may be on its way to replacing ROI as the standard performance measure. EVA measures the difference between the prestrategy and post-strategy value for the business. EVA is after-tax operating income minus the total annual cost of capital. The cost of capital combines the cost of debt and equity. Studies have found that companies using EVA outperform their median competitor by an average of 8.43% of total return annually.

Difficulty: Challenging Learning Obj.: 12.1: Explain how various types of measures and controls are utilized to properly assess performance including activity-based costing, ERM, ROI, and EVA AACSB: Application of knowledge 48) The balanced scorecard combines steering controls with ________ controls.

A) functional B) input C) business D) output E) industrial Answer: D Difficulty: Moderate Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Analytical thinking

13 .

49) The balanced scorecard approach to evaluation and control assigns to each goal/objective in an area one or more measures that are each essential for achieving a desired strategic option.

These measures are called A) critical success factors.

B) strategic factors.

C) key performance measures.

D) behavioral measures.

E) responsibility centers.

Answer: C Difficulty: Moderate Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Analytical thinking 50) Which of the following is not an area covered in the CEO feedback instrument?

A) Company performance.

B) Leadership of the organization.

C) Relationship with shareholders.

D) Team building and management succession.

E) Leadership of external constituencies.

Answer: C Difficulty: Challenging Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Analytical thinking 51) ________ centers are used to isolate a unit so it can be evaluated separately from the rest of the corporation.

A) Investment B) Revenue C) Responsibility D) Profit E) Expense Answer: C Difficulty: Moderate Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Analytical thinking

14 .

52) What responsibility center is judged for effectiveness rather than efficiency?

A) Investment center B) Revenue center C) Standard cost center D) Profit center E) Expense center Answer: B Difficulty: Moderate Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Application of knowledge 53) ________ expenses are costs that can be calculated.

A) Discretionary B) Standard C) Engineered D) Allocated E) Absorbed Answer: C Difficulty: Moderate Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Application of knowledge 54) ________ expenses are costs that can be only estimated.

A) Discretionary B) Standard C) Engineered D) Absorbed E) Incurred Answer: A Difficulty: Challenging Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Application of knowledge 55) Which of the following measures resources?

A) Production B) Revenues C) Expenditures D) Outcomes E) Sales Answer: C Difficulty: Moderate Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Application of knowledge 15 .

56) Return on investment (ROI) is the most widely used measure of performance in what responsibility center?

A) Revenue center B) Expense center C) Investment center D) Profit center E) Standard cost center Answer: C Difficulty: Moderate Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Application of knowledge 57) A multidivisional corporation like the Virgin Group would tend to use what type of responsibility center?

A) Expense center B) Investment center C) Profit center D) Standard cost center E) Revenue center Answer: B Difficulty: Challenging Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Analytical thinking 58) The balanced scorecard combines steering controls with output controls.

Answer: TRUE Difficulty: Moderate Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Application of knowledge 59) The balanced scorecard is very popular with companies.

Answer: FALSE Difficulty: Easy Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Application of knowledge 60) The revenue center is measured in terms of efficiency.

Answer: FALSE Difficulty: Moderate Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Application of knowledge 16 .

61) Multidivisional corporations tend to emphasize investment centers.

Answer: TRUE Difficulty: Moderate Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Application of knowledge 62) What is transfer pricing?

Answer: Transfer pricing is when a company's manufacturing department "sells" its output to the sales department. This is commonly used in vertically integrated corporations and can work well when a price can be easily determined for a designated amount of product. Transfer pricing is being increasingly scrutinized by tax authorities around the world. A 2021 global survey reported that transfer pricing was the most important and most complex tax issue. Transfer pricing was also ranked as the most complex area of tax legislation.

Difficulty: Moderate Learning Obj.: 12.2: Develop a balanced scorecard to examine key performance measures of a company AACSB: Application of knowledge 63) The continual process of measuring products, services, and practices against the toughest competitors or those companies recognized as industry leaders is A) total quality management.

B) benchmarking.

C) action planning.

D) reengineering.

E) management by objectives.

Answer: B Difficulty: Easy Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Application of knowledge 64) Which of the following is not one of the steps followed in the benchmarking process?

A) Develop tactical programs for closing performance gaps.

B) Implement tactical programs, measure the results, and compare the results with those of the best-in-class company.

C) Implement activity-based costing.

D) Identify the area or process to be examined.

E) Calculate the differences among the company's performance measurements and those of the best-in-class company and determine why the differences exist.

Answer: C Difficulty: Moderate Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Analytical thinking

17 .

65) What rank did benchmarking get in the Bain & Company survey of tools used?

A) First B) Second C) Third D) Fourth E) Fifth Answer: C Difficulty: Easy Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Application of knowledge 66) An odd twist to benchmarking in the arena of international trade is A) counterfeiting/piracy.

B) repatriation of profits.

C) freakonomics.

D) RFID. E) transfer pricing.

Answer: A Difficulty: Easy Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Application of knowledge 67) The concept that involves openly learning how others do something better than one's own company so that the company can not only imitate, but perhaps even improve upon its techniques is A) benchmarking.

B) ERP. C) RFID. D) TQM. E) MBO. Answer: A Difficulty: Easy Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Application of knowledge 68) The worldwide cost of digital piracy in the movie industry in a 2022 survey was estimated to be approximately A) $3-$5 billion.

B) $30-$40 billion.

C) $40-$98 billion.

D) $63-$101 billion.

E) over $200 billion.

Answer: C Difficulty: Moderate Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Application of knowledge 18 .

69) According to the Business Software Alliance, what percentage of software on personal computers worldwide is pirated?

A) 11% B) 37% C) 52% D) 65% E) 91% Answer: B Difficulty: Moderate Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Application of knowledge 70) Benchmarking has been decreasing in popularity as companies emphasize uniqueness.

Answer: FALSE Difficulty: Easy Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Analytical thinking 71) Benchmarking is based on the concept that it makes no sense to reinvent something that someone else is already using.

Answer: TRUE Difficulty: Easy Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Application of knowledge 72) Poorer performing companies tend to view benchmarks as achievable.

Answer: FALSE Difficulty: Moderate Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Application of knowledge 73) Benchmarking has been found to produce the best results in companies that are already well managed.

Answer: TRUE Difficulty: Challenging Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Analytical thinking

19 .

74) Discuss the benchmarking process.

Answer: Benchmarking is "the continual process of measuring products, services, and practices against the toughest competitors or those companies recognized as industry leaders." The benchmarking process usually involves the following steps: 1. Identify the area or process to be examined.

2. Find behavioral and output measures of the area or process and obtain measurements.

3. Select an accessible set of competitors and best-in-class companies against which to benchmark.

4. Calculate the differences among the company's performance measurements and those of the best in class and determine why the differences exist.

5. Develop tactical programs for closing performance gaps.

6. Implement the programs and then compare the resulting new measurements with those of the best-in-class companies.

Difficulty: Moderate Learning Obj.: 12.3: Apply the benchmarking process to a function or an activity AACSB: Application of knowledge 75) Which of the following companies originated the ERP concept?

A) SAP AG B) BMW C) Oracle D) Xerox E) Motorola Answer: A Difficulty: Easy Learning Obj.: 12.4: Explain how strategic information systems are being utilized to support specific strategies AACSB: Application of knowledge 76) Which of the following unites all of a company's major business activities within a single family of software modules?

A) ERP B) SAP C) GDP D) TQM E) ISO 9000 Answer: A Difficulty: Challenging Learning Obj.: 12.4: Explain how strategic information systems are being utilized to support specific strategies AACSB: Application of knowledge

20 .

77) Which of the following is a major provider of ERP software?

A) Microsoft B) Adobe C) Google D) Sage E) Infosys Answer: D Difficulty: Moderate Learning Obj.: 12.4: Explain how strategic information systems are being utilized to support specific strategies AACSB: Application of knowledge 78) The system that provides instant access to critical information to everyone in the organization, from the CEO to the factory floor worker is known as A) enterprise resource planning.

B) enterprise strategic planning.

C) market research planning.

D) united resource planning.

E) united strategic planning.

Answer: A Difficulty: Easy Learning Obj.: 12.4: Explain how strategic information systems are being utilized to support specific strategies AACSB: Application of knowledge 79) Which of the following is not a reason ERP could fail?

A) Insufficient tailoring of the software to fit the company B) Inadequate training C) Simplicity of system D) Insufficient implementation support E) Demands a high level of standardization Answer: C Difficulty: Moderate Learning Obj.: 12.4: Explain how strategic information systems are being utilized to support specific strategies AACSB: Application of knowledge

21 .

80) RFID A) is radio frequency identification.

B) replaces cell phones.

C) replaces wireless barcodes.

D) has not currently been widely implemented.

E) is not permitted by government contractors.

Answer: A Difficulty: Challenging Learning Obj.: 12.4: Explain how strategic information systems are being utilized to support specific strategies AACSB: Application of knowledge 81) RFID unites all of a company's major business activities, from order processing to production, within a single family of software modules.

Answer: FALSE Difficulty: Challenging Learning Obj.: 12.4: Explain how strategic information systems are being utilized to support specific strategies AACSB: Application of knowledge 82) ERP is an electronic tagging technology used to improve supply-chain efficiency in a number of companies.

Answer: FALSE Difficulty: Easy Learning Obj.: 12.4: Explain how strategic information systems are being utilized to support specific strategies AACSB: Application of knowledge 83) The U.S. Department of Defense began requiring their largest suppliers to incorporate RFID tags in their goods in 2003.

Answer: TRUE Difficulty: Moderate Learning Obj.: 12.4: Explain how strategic information systems are being utilized to support specific strategies AACSB: Information Technology 84) ERP software provides instant access to critical information to everyone in the organization from the CEO to the factory floor worker.

Answer: TRUE Difficulty: Moderate Learning Obj.: 12.4: Explain how strategic information systems are being utilized to support specific strategies AACSB: Information Technology

22 .

85) What is ERP? Why would it not fit every company?

Answer: ERP is enterprise resource planning. ERP unites all of a company's major business activities from order processing to production within a single family of software modules. The system provides instant access to critical information to everyone in the organization from the CEO to the factory floor worker. While extremely popular, ERP may not fit every company, however. The systems are extremely complicated and demand a high level of standardization throughout an organization. Its demanding nature often forces companies to change the way they do business.

Difficulty: Moderate Learning Obj.: 12.4: Explain how strategic information systems are being utilized to support specific strategies AACSB: Application of knowledge 86) Which of the following is not one of the reasons many executives do not conduct long-run performance evaluations, preferring to focus primarily on short-run performance?

A) They do not realize their importance.

B) They are not personally evaluated on a long-term basis.

C) They believe short-run results are the most important.

D) They do not have the time to make a long-run analysis.

E) They do not believe in strategic planning.

Answer: E Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 87) ________ is the confusion of means with ends.

A) Economic rationality B) Minimal acceptable behavior C) Goal displacement D) Closed system thinking E) Machiavellianism Answer: C Difficulty: Easy Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Application of knowledge

23 .

88) Which of the following refers to the phenomenon of pursuing substitute activities that do not lead to goal accomplishment because the wrong activities are being rewarded?

A) Economic rationality B) Minimal acceptable behavior C) Machiavellianism D) Behavior substitution E) Game theory Answer: D Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 89) The U.S. Navy quip, "What you inspect (or reward) is what you get" reflects A) behavior substitution.

B) suboptimization.

C) output control.

D) ERP. E) none of the above.

Answer: A Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 90) Which company experienced a tarnished reputation and scandal after experiencing behavior substitution when employees altered their behavior on the job to fit the reward system?

A) Wells Fargo B) J.C. Penney C) Neiman Marcus D) Citibank E) Macy's Answer: A Difficulty: Challenging Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Application of knowledge

24 .

91) Suboptimization occurs when A) a division or functional unit views itself as a separate entity and refuses to cooperate with other divisions or units to the detriment of the organization as a whole.

B) there is a failure to produce at or near full capacity.

C) individuals are placed into positions not suited to their abilities.

D) managers tend to focus more of their attention on those aspects which are measurable than on those which are not.

E) managers concentrate too much on short-term performance objectives.

Answer: A Difficulty: Easy Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Application of knowledge 92) If marketing attains its goal at the expense of rising production costs for the manufacturing department, the end result of marketing's achievements and manufacturing's cost increases reflects A) behavior substitution.

B) suboptimization.

C) resource allocation.

D) resource optimization.

E) strategy optimization.

Answer: B Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 93) Which of the following is not a guideline for proper control?

A) Control should involve only a minimum amount of information needed to give a reliable picture of events.

B) Long-term as well as short-term controls should be used.

C) Controls should be timely so that corrective actions can be taken before it is too late.

D) Controls should measure all activities in order to be comprehensive.

E) Controls should emphasize the reward of meeting or exceeding standards rather than punishment for failing to meet standards.

Answer: D Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Application of knowledge

25 .

94) The 80/20 rule relates to which of the following guidelines for proper control?

A) Control should involve only a minimum amount of information.

B) Long-term as well as short-term controls should be used.

C) Controls should be timely so that corrective actions can be taken before it is too late.

D) Controls should measure all activities in order to be comprehensive.

E) Controls should emphasize the reward of meeting or exceeding standards rather than punishment for failing to meet standards.

Answer: A Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Application of knowledge 95) Which of the following methods is particularly appropriate for measuring and rewarding the performance of top SBU managers and group-level executives when performance factors and their importance vary from one SBU to another?

A) Return on investment B) Year-end bonuses C) Long-term evaluation method D) Weighted-factor method E) Strategic-funds method Answer: D Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Application of knowledge 96) What was the average CEO pay package in 2020?

A) $5.7 million B) $11.7 million C) $13.9 million D) $23.1 million E) $37.2 million Answer: C Difficulty: Easy Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Application of knowledge

26 .

97) The typical emphasis on stock prices makes the ________ to aligning incentives more applicable to top management than to business unit managers.

A) strategic-funds method B) segmentation method C) long-term evaluation method D) individual evaluation method E) weighted-factor method Answer: C Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 98) A survey of 600 business units found that compensation programs emphasizing bonuses and other incentives were most used in those units emphasizing A) stability strategies.

B) retrenchment strategies.

C) cooperative strategies.

D) international strategies.

E) growth strategies.

Answer: E Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Application of knowledge 99) What method compensates managers for achieving objectives set over a multiyear period?

A) Return on investment B) Long-term evaluation method C) Zero base budgeting D) Weighted-factor method E) Return on assets Answer: B Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking

27 .

100) The ________ encourages executives to look at developmental expenses as being different from expenses required for current operations.

A) strategic-funds method B) segmentation method C) long-term evaluation method D) individual evaluation method E) weighted-factor method Answer: A Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 101) In 2020, the compensation of s the CEOs of S&P 500 companies was how many times more than that of the median employee?

A) 113 B) 221 C) 351 D) 424 E) 514 Answer: C Difficulty: Easy Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 102) If a company wants to ensure that a manager of a developing unit is appropriately evaluated on the basis of market share growth and product development and not on ROI or cash flow, which method of matching rewards to the accomplishment of strategic objectives should it use?

A) Strategic-funds method B) Segmentation method C) Long-term evaluation method D) Individual evaluation method E) Weighted-factor method Answer: A Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking

28 .

103) When a company offered its CEO 250,000 performance share units tied to performance targets achieved over five years, it was using which method of matching rewards to the accomplishment of strategic objectives?

A) Strategic-funds method B) Segmentation method C) Long-term evaluation method D) Individual evaluation method E) Weighted-factor method Answer: C Difficulty: Challenging Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 104) A low growth but strong SBU is called a A) star.

B) cash cow.

C) dog.

D) question mark.

E) problem child.

Answer: B Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Application of knowledge 105) A high-performing SBU is called a A) star.

B) cash cow.

C) dog.

D) question mark.

E) problem child.

Answer: A Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 106) The measurement of performance is a crucial part of evaluation and control.

Answer: TRUE Difficulty: Challenging Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking

29 .

107) Many accounting-based measures, such as EPS and ROI, encourage a short-term orientation in which managers consider only current tactical or operational issues and ignore long-term strategic ones.

Answer: TRUE Difficulty: Easy Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 108) The long-term evaluation method encourages executives to look at developmental expenses as being different from expenses required for current operations.

Answer: FALSE Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 109) The use of timely, quantifiable standards guarantees good performance.

Answer: FALSE Difficulty: Easy Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 110) People tend to substitute behaviors that are recognized and rewarded for those behaviors that are ignored, without regard to their contribution to goal accomplishment.

Answer: TRUE Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 111) Suboptimization refers to the phenomenon of a unit optimizing its goal accomplishment to the detriment of the organization as a whole.

Answer: TRUE Difficulty: Challenging Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 112) According to the 80/20 rule, companies should monitor the 20% of the factors that determine 80% of the results.

Answer: TRUE Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Application of knowledge 30 .

113) The long-term evaluation method encourages executives to analyze the long-term implications of present operations on the strategy they have adopted and the operational impact of a strategy on the corporate mission.

Answer: FALSE Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Analytical thinking 114) What is suboptimization and why is it an issue?

Answer: Suboptimization is a type of goal displacement, where there is confusion between means and ends. It refers to the phenomenon of a unit optimizing its goal accomplishment to the detriment of the organization as a whole. The emphasis in large corporations on developing separate responsibility centers can create some problems for the corporation as a whole. For example, the competition between divisions (or units) to achieve a high ROI can result in one division's refusal to share its new technology or work process improvements.

Difficulty: Moderate Learning Obj.: 12.5: Discuss the issues with measuring organizational performance and how organizations can establish proper controls to achieve objectives AACSB: Application of knowledge

31 .

Strategic Management and Business Policy, 16e, Global Edition (Wheelen) Chapter 13 Suggestions for Case Analysis 1) What has been one of the more popular methods of practicing strategy?

A) Lecture B) Case analysis C) Team teaching D) Group presentations E) Student teaching Answer: B Difficulty: Easy Learning Obj.: 13.1: Explain the issues involved in researching a case situation AACSB: Application of knowledge 2) The case method offers the opportunity to move from a narrow, specialized view that emphasizes functional techniques to a broader, less precise analysis of the overall organization.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.1: Explain the issues involved in researching a case situation AACSB: Analytical thinking 3) Most of the big consulting companies use case analysis as one of the primary means for selecting candidates.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.1: Explain the issues involved in researching a case situation AACSB: Application of knowledge 4) The case method provides the opportunity to move from a broader, less precise analysis of the overall corporation to a narrow, specialized view that emphasizes functional techniques.

Answer: FALSE Difficulty: Easy Learning Obj.: 13.1: Explain the issues involved in researching a case situation AACSB: Analytical thinking 5) Cases present actual business situations and enable you to examine both successful and unsuccessful organizations.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.1: Explain the issues involved in researching a case situation AACSB: Analytical thinking

1 .

6) In case analysis, you might be asked to critically analyze a situation in which a manager had to make a decision of long-term importance.

Answer: TRUE Difficulty: Easy Learning Obj.: 13.1: Explain the issues involved in researching a case situation AACSB: Analytical thinking 7) What is the main purpose of conducting outside research into the environmental setting of the case?

A) It allows students to identify how the company addressed the problem.

B) It provides a learning experience on library usage, which is helpful in all courses.

C) It gives a realistic background of the industry during a specified period.

D) It gives you clues as to what the organization should be doing in the future.

E) It furnishes large amounts of data–both pertinent and extraneous.

Answer: C Difficulty: Moderate Learning Obj.: 13.2: Analyze financial statements using ratio analysis, common-size statements, Z-values and economic measures AACSB: Application of knowledge 8) According to the text, what information can be obtained by accessing the SEC's EDGAR database?

A) Corporate annual reports and 10-K forms B) Press releases C) Product specifications D) Research and development trends E) Information about graduate school Answer: A Difficulty: Easy Learning Obj.: 13.2: Analyze financial statements using ratio analysis, common-size statements, Z-values and economic measures AACSB: Application of knowledge 9) In ________ one can find detailed information about a company's financial condition not usually available in an annual report.

A) news releases B) product specification reports C) corporate history documents D) public relations documents E) 10-K forms Answer: E Difficulty: Moderate Learning Obj.: 13.2: Analyze financial statements using ratio analysis, common-size statements, Z-values and economic measures AACSB: Application of knowledge

2 .

10) All of the following are true of annual reports EXCEPT A) 80% of portfolio managers use annual reports when making decisions.

B) annual reports contain income statements and balance sheets.

C) annual reports contain cash flow statements.

D) annual reports contain all the information found in the 10-K form.

E) annual reports contain notes to the financial statements indicating why certain actions were taken.

Answer: D Difficulty: Easy Learning Obj.: 13.2: Analyze financial statements using ratio analysis, common-size statements, Z-values and economic measures AACSB: Application of knowledge 11) According to the text, what percentage of security analysts use annual reports when making decisions?

A) 20% B) 35% C) 50% D) 60% E) 75% Answer: E Difficulty: Moderate Learning Obj.: 13.2: Analyze financial statements using ratio analysis, common-size statements, Z-values and economic measures AACSB: Application of knowledge 12) Which of the following is a source for detailed information on members of a company's board of directors?

A) SEC 15-A forms B) News releases C) Magazine articles D) SEC 14-A forms E) Product specification reports Answer: D Difficulty: Moderate Learning Obj.: 13.2: Analyze financial statements using ratio analysis, common-size statements, Z-values and economic measures AACSB: Application of knowledge 13) When preparing a case analysis, you should always undertake outside research and go beyond the decision date of the case.

Answer: FALSE Difficulty: Easy Learning Obj.: 13.1: Explain the issues involved in researching a case situation AACSB: Analytical thinking

3 .

14) SEC 10-K forms include quarterly financial reports.

Answer: FALSE Difficulty: Easy Learning Obj.: 13.1: Explain the issues involved in researching a case situation AACSB: Analytical thinking 15) SEC 10-K forms include detailed information not usually available in an annual report.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.1: Explain the issues involved in researching a case situation AACSB: Application of knowledge 16) In addition to income statements and balance sheets, the SEC 10-K forms also include cash flow statements.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.2: Analyze financial statements using ratio analysis, common-size statements, Z-values and economic measures AACSB: Analytical thinking 17) Unless instructed otherwise, you should not restrict yourself only to the information and timing of when the case was written and undertake outside research about the environmental setting.

Answer: TRUE Difficulty: Easy Learning Obj.: 13.2: Analyze financial statements using ratio analysis, common-size statements, Z-values and economic measures AACSB: Analytical thinking 18) SEC 14-A forms include quarterly financial reports.

Answer: FALSE Difficulty: Moderate Learning Obj.: 13.2: Analyze financial statements using ratio analysis, common-size statements, Z-values and economic measures AACSB: Analytical thinking 19) According to the Yankelovich Partners survey firm, four out of ten portfolio managers and 25 percent of security analysts use annual reports when making decisions.

Answer: FALSE Difficulty: Moderate Learning Obj.: 13.2: Analyze financial statements using ratio analysis, common-size statements, Z-values and economic measures AACSB: Application of knowledge

4 .

20) SEC 10-K forms are the same as company annual reports.

Answer: FALSE Difficulty: Moderate Learning Obj.: 13.2: Analyze financial statements using ratio analysis, common-size statements, Z-values and economic measures AACSB: Analytical thinking 21) The calculation of ratios from financial data is referred to as A) SWOT analysis.

B) ratio analysis.

C) receivables analysis.

D) integration analysis.

E) diversification analysis.

Answer: B Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 22) Which of the following is not one of the categories of important financial ratios that are mentioned in the text to help assess an organization's overall financial situation?

A) Leverage ratios B) Liquidity ratios C) Market ratios D) Activity ratios E) Profitability ratios Answer: C Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 23) What financial ratio serves as a short-term indicator of the company's ability to pay its shortterm liabilities from its short-term assets?

A) Quick ratio B) Current ratio C) Cash ratio D) Strategic ratio E) Inventory ratio Answer: B Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

5 .

24) Which of the following ratios is also known as the acid test ratio?

A) Quick ratio B) Current ratio C) Cash ratio D) Strategic ratio E) Inventory ratio Answer: A Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 25) Which financial ratio shows how much of the current obligations can be paid from cash or near-cash assets?

A) Quick ratio B) Current ratio C) Cash ratio D) Strategic ratio E) Inventory ratio Answer: C Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 26) All of the following represent liquidity ratios EXCEPT A) cash ratio.

B) inventory to net working capital.

C) quick ratio.

D) gross profit margin.

E) current ratio.

Answer: D Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking

6 .

27) Which financial ratio indicates how much after-tax profit is generated by each dollar of sales?

A) Return on investment B) Return on equity C) Gross profit margin D) Net profit margin E) Inventory to net working capital Answer: D Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 28) Which financial ratio measures the rate of return on the book value of shareholders' total investment in the company?

A) Return on investment B) Return on equity C) Gross profit margin D) Net profit margin E) Earnings per share Answer: B Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 29) Which of the following financial ratios is expressed in dollars per share?

A) Return on investment B) Return on equity C) Gross profit margin D) Earnings per share E) Net profit margin Answer: D Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

7 .

30) Which of the following financial ratios is a measure of management's efficiency?

A) Return on investment B) Return on equity C) Earnings per share D) Gross profit margin E) Net profit margin Answer: A Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 31) Which category of ratios does inventory turnover fall under?

A) Liquidity ratios B) Profitability ratios C) Activity ratios D) Leverage ratios E) Market ratios Answer: C Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 32) Which of the following financial ratios is not a profitability ratio?

A) Net profit margin B) Gross profit margin C) Asset turnover D) ROE E) ROI Answer: C Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

8 .

33) Which financial indicator measures the number of one day's worth of inventory that a company has on hand at any given time?

A) Days of cash B) Days of inventory C) Average collection period D) Fixed asset turnover E) Inventory turnover Answer: B Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 34) "Inventory to net working capital" is an example of a(n) A) leverage ratio.

B) liquidity ratio.

C) activity ratio.

D) asset management ratio.

E) profitability ratio.

Answer: B Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 35) "Days of cash" is an example of a(n) A) leverage ratio.

B) liquidity ratio C) activity ratio.

D) asset management ratio.

E) profitability ratio.

Answer: C Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

9 .

36) Which of the following is an example of an activity ratio?

A) Inventory to net working capital ratio B) Current liabilities to equity ratio C) Accounts receivable turnover ratio D) Asset management ratio E) Acid test ratio Answer: C Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 37) Accounts payable period is what type of financial ratio?

A) Liquidity ratio B) Profitability ratio C) Activity ratio D) Leverage ratio E) Revenue ratio Answer: C Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 38) Return on investment A) is an activity ratio.

B) shows how much after-tax profits are generated by each dollar of sales.

C) is referred to by the acronym ROI. D) measures the rate of return on the book value of shareholders' total investment in the company.

E) is a leverage ratio.

Answer: C Difficulty: Challenging Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

10 .

39) The Removing inventory from current assets changes the current ratio to the A) profitability ratio.

B) EPS. C) quick ratio.

D) asset turnover ratio.

E) activity ratio.

Answer: C Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 40) Unlike the cash ratio, the inventory turnover ratio falls in the category of ________ ratios.

A) liquidity B) market C) leverage D) activity E) profitability Answer: D Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 41) Which financial ratio measures the utilization of the company's assets such as plant and equipment?

A) Days of inventory B) Asset turnover C) Inventory turnover D) Fixed asset turnover E) Average collection period Answer: D Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

11 .

42) Which financial ratio indicates the average length of time in days that the company takes to pay its credit purchases?

A) Days of inventory B) Fixed asset turnover C) Days of cash D) Accounts payable period E) Inventory turnover Answer: D Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 43) Which financial ratio measures the utilization of fixed assets?

A) Days of fixed assets B) Asset turnover C) Average collection period D) Fixed asset turnover E) Inventory turnover Answer: D Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 44) The fixed asset turnover ratio measures the ratio of ________ to fixed assets.

A) cost of goods sold B) sales C) profits D) cash E) inventory Answer: B Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

12 .

45) The accounts receivable turnover ratio is usually expressed as A) days.

B) a percentage.

C) a decimal.

D) times.

E) years.

Answer: C Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 46) Which of the following ratios indicates the ability of a company to meet its annual interest costs?

A) Times interest earned ratio B) Liquidity ratio C) Debt-to-assets ratio D) Asset management ratio E) Debt-to-equity ratio Answer: A Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 47) Which financial ratio measures the funds provided by creditors versus the funds provided by owners?

A) Debt-to-asset ratio B) Debt-to-equity ratio C) Long-term debt to capital structure ratio D) Times interest earned ratio E) Current liabilities to equity ratio Answer: B Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

13 .

48) Which of the following financial ratios is expressed as a decimal?

A) Debt-to-asset ratio B) Debt-to-equity ratio C) Times interest earned D) Long-term debt to capital structure E) Average collection period Answer: C Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 49) How is the debt-to-assets ratio expressed?

A) Decimal B) Days C) Times D) Percentage E) Years Answer: D Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 50) All of the following ratios reflect leverage ratios EXCEPT A) debt-to-asset ratio.

B) times interest earned.

C) coverage of fixed charges.

D) price/earnings ratio.

E) debt-to-equity ratio.

Answer: D Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking

14 .

51) Which financial indicator shows how much the investor is willing to pay for each dollar of earnings?

A) Debt-to-asset ratio B) Price/earnings ratio C) Coverage of fixed charges D) Debt-to-equity ratio E) Times interest earned Answer: B Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 52) Average collection period and asset turnover are both examples of which type of financial ratio?

A) Liquidity ratio B) Profitability ratio C) Activity ratio D) Leverage ratio E) Revenue ratio Answer: C Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 53) Accounts receivable turnover is what type of financial ratio?

A) Liquidity ratio B) Profitability ratio C) Leverage ratio D) Activity ratio E) Revenue ratio Answer: D Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking

15 .

54) Which two basic statements provide most of the financial data needed for analysis?

A) Statement of retained earnings and income statement B) Sources and uses of working capital and the balance sheet C) Non-operating gains and losses and statement of financial position D) Historical income statement and balance sheet E) Statement of financial position and statement of owner's equity Answer: D Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 55) Which financial indicator is calculated by the ratio of annual dividends per share to annual earnings per share?

A) Return on investment B) Price/earnings ratio C) Return on equity D) Dividend yield on common stock E) Dividend payout ratio Answer: E Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 56) Which financial indicator is calculated by the ratio of net profit after taxes to shareholders' equity?

A) Dividend payout ratio B) Dividend yield on common stock C) Price/earnings ratio D) Return on investment E) Return on equity Answer: E Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking

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57) Which financial ratio indicates the percentage of profit that is paid out as dividends?

A) Return on equity B) Dividend payout ratio C) Dividend yield on common stock D) Price/earnings ratio E) Debt-to-asset ratio Answer: B Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 58) Which financial indicator is calculated by the ratio of annual dividends per share to current market price per share?

A) Return on equity B) Dividend payout ratio C) Dividend yield on common stock D) Price/earnings ratio E) Debt-to-equity ratio Answer: C Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 59) How is the dividend yield on common stock ratio expressed?

A) Days B) Percentage C) Times D) Decimal E) Years Answer: B Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking

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60) Which method enables the acquiring company to disregard the premium it paid for the other firm?

A) The breakout method B) The sum-of-the-parts method C) The summing up method D) The pooling method E) The "purchase" method Answer: D Difficulty: Challenging Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 61) Which of the following represents 100% in the common-size income statement?

A) Net profits B) Cost of goods sold C) Net sales D) Total operating expenses E) Net income Answer: C Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 62) Which of the following represents 100% in the common-size balance sheet?

A) Total current liabilities B) Total current assets C) Total liabilities D) Total stockholders' equity E) Total assets Answer: E Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking

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63) The ________ formula calculates the likelihood of a firm going bankrupt by combining five ratios and weighting them according to their importance to a corporation's financial strength.

A) return on investment B) CAPM C) index of sustainable growth D) operating cash flow E) Z-value Answer: E Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 64) The Altman's Z-value Bankruptcy Formula uses ________ ratios and weights them according to their importance to a corporation's financial strength.

A) 2 B) 3 C) 4 D) 5 E) 6 Answer: D Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 65) All of the following ratios are used in the calculation of a company's Z-value EXCEPT A) Working capital/total assets.

B) Retained earnings/total assets.

C) Current assets/current liabilities.

D) Market value of equity/total liabilities.

E) Sales/total assets.

Answer: C Difficulty: Challenging Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking

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66) What is the Altman Z model's level of accuracy in predicting corporate bankruptcies?

A) 45% B) 94% C) 27% D) 74% E) 67% Answer: B Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 67) At what Z-value level is a firm considered in serious trouble?

A) Below 1.81 B) Above 1.81 C) Greater than 5.0 D) Between 2.2 and 3.1 E) Between 3.2 and 4.1 Answer: A Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 68) The index that indicates how much of the growth rate of sales can be sustained by internally generated funds is called A) the return on investment.

B) the CAPM. C) the index of sustainable growth.

D) operating cash flow.

E) the Z-value.

Answer: C Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking

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69) What benefit does converting sales and profits to constant dollars in times of inflation offer when analyzing a case?

A) It is helpful in predicting the future potential of the organization.

B) It contributes to determining the risk factors when computing the Z-value.

C) It shows the true performance of the corporation adjusted for inflation to make them comparable over years.

D) It is easier for the financial analyst to judge the effectiveness of management's decisionmaking.

E) It provides a method that is familiar and easy to understand.

Answer: C Difficulty: Challenging Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 70) To adjust for general inflation in the United States, what index does the text suggest?

A) Dow-Jones Industrial Average B) New York Stock Exchange Index C) Wilshire 5000 Equity Index D) Consumer Price Index E) NASDAQ Series Answer: D Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 71) ________ dollars are dollars adjusted for inflation to make them comparable over various years.

A) Consumer B) Constant C) Current D) Real E) Earning Answer: B Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

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72) ________ is used worldwide and measures the total output of goods and services within a country's borders.

A) CPI B) Prime interest rate C) GDP D) Z-Value E) The Index of sustainable growth Answer: C Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 73) Which of the following is not true of case analysis?

A) Case discussion focuses on critical analysis.

B) A solution is satisfactory if it resolves important problems and if it is likely to be implemented successfully.

C) Case analysis helps build analytic and decision-making skills.

D) A solution is satisfactory if it reflects what the company actually did.

E) Case discussion focuses on logical development of thought.

Answer: D Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 74) Ratio analysis is helpful in assessing the company's overall situation and pinpointing some problem areas.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 75) Ratios are only useful for firms of a certain size.

Answer: FALSE Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 76) The quick ratio is also known as the acid test ratio.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 22 .

77) The current ratio measures the company's ability to pay off short-term obligations from current assets, excluding inventories.

Answer: FALSE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 78) Key liquidity ratios include the current ratio, quick ratio, and inventory to net working capital ratio.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 79) The debt-to-asset ratio measures the extent to which borrowed funds have been used to finance the company's assets.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 80) The cash ratio is expressed in days.

Answer: FALSE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 81) When conducting a financial analysis, select and discuss those financial ratios that have an impact on the company's problems.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 82) A typical financial analysis would compare the firm under study with industry standards.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

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83) A typical financial analysis of a firm would include a study of the operating statements for five or so years.

Answer: TRUE Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 84) In a common-size income statement, net income represents 100%.

Answer: FALSE Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 85) In a common-size balance sheet, total assets represent 100%.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 86) The Altman Z model is an index of sustainable growth.

Answer: FALSE Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 87) The Z-value formula combines five ratios by weighting them according to their importance to a corporation's financial strength.

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 88) A Z-value score below 1.81 indicates a healthy firm.

Answer: FALSE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

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89) The index of sustainable growth is useful to learn whether a company embarking on a growth strategy will need to take on debt to fund this growth.

Answer: TRUE Difficulty: Challenging Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 90) One way to adjust for inflation in the United States is to use the Consumer Price Index (CPI).

Answer: TRUE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 91) Adjusting for inflation is especially important for companies operating in emerging economies.

Answer: TRUE Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 92) The federal interest rate is the rate of interest banks charge on their lowest risk loans.

Answer: FALSE Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 93) The gross domestic product (GDP) is used only in the United States to measure the total output of goods and services within the country's borders.

Answer: FALSE Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 94) The amount of change from one year to the next in CPI indicates how much that country's economy is growing.

Answer: FALSE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

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95) In case analysis, how the company actually dealt with the case problem is the most important part of the solution.

Answer: FALSE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 96) Inventory to net working capital is an activity ratio.

Answer: FALSE Difficulty: Easy Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 97) The debt-to-asset ratio measures the funds provided by creditors versus the funds provided by owners.

Answer: FALSE Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 98) It is recommended that a financial analysis include a comparison of trends in one category with trends in related categories.

Answer: TRUE Difficulty: Challenging Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Analytical thinking 99) What is ratio analysis and why is it important?

Answer: Ratio analysis is the calculation of ratios from the financial statements. It is done to identify possible financial issues. A review of key financial ratios can help assess a company's overall situation and pinpoint some problem areas. Ratios are useful regardless of firm size and enable comparing a company's ratios with industry averages. The four common categories of ratios are liquidity ratios, profitability ratios, activity ratios, and leverage ratios.

Difficulty: Challenging Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

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100) In performing a basic financial analysis, what five steps should be taken?

Answer: At a minimum, in performing a basic financial analysis, the following five steps should be taken.

1. Scrutinize historical income statements and balance sheets.

2. Compare historical statements over time.

3. Calculate changes that occur in individual categories from year to year.

4. Determine the change as a percentage (as well as an absolute amount).

5. Adjust for inflation if that was a significant factor.

Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 101) What are common-size statements?

Answer: Common-size statements are income statements and balance sheets in which the dollar figures have been converted into percentages. These statements are used to identify trends in each of the categories. To get a proper picture, however, you need to make comparisons with industry data, if available, to see whether fluctuations are merely reflecting industry-wide trends.

Common size statements are especially helpful in developing scenarios and pro forma statements because they provide a series of historical relationships from which you can estimate the future with your scenario assumptions for each year.

Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge 102) What is the Z-value?

Answer: If the corporation being studied appears to be in poor financial condition, Altman's Bankruptcy formula should be used to calculate its likelihood of going bankrupt. The Z-value formula combines five ratios by weighting them according to their importance to a corporation's financial strength. Scores below 1.81 indicate significant credit problems, whereas a score above 3.0 indicates a healthy firm. Scores between 1.81 and 3.0 indicate question marks.

Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

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103) What is the index of sustainable growth and why is it important?

Answer: The index of sustainable growth is useful to learn whether a company embarking on a growth strategy will need to take on debt to fund this growth. The index indicates how much of the growth rate of sales can be sustained by internally generated funds. If the planned growth cannot be sustained by internally generated funds, external capital will be needed to fund the growth unless management is able to find efficiencies, decrease dividends, increase the debtequity ratio, or reduce assets through renting or leasing arrangements.

Difficulty: Moderate Learning Obj.: 13.3: Employ the strategic audit as a method of organizing and analyzing case information AACSB: Application of knowledge

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