Testbank of fundamental of management 7e by robin ch 04

Fundamentals of Management, 7e (Robbins/DeCenzo/Coulter) Chapter Foundations of Planning 1) All managers plan in some way, either formally or informally Answer: TRUE Explanation: Planning has been identified as the primary management function, indicating that it is the activity that managers concern themselves with most Diff: Page Ref: 84 Objective: 4.1 2) Informal plans are not recognized to be an effective form of planning Answer: FALSE Explanation: Informal plans can be highly effective and highly appropriate for some organizations, especially those that are small in size As organizations increase in size, the need for formal planning tends to increase Diff: Page Ref: 84 Objective: 4.1 3) At some point, all managers create formal plans Answer: FALSE Explanation: Many managers, especially those who are part of small organizations, not ever resort to making systematic formal plans Diff: Page Ref: 84 Objective: 4.1 4) Planning provides direction to managers and nonmanagers alike Answer: TRUE Explanation: Part of the function of planning is to let everyone in the organization know what the future holds, so planning is very important because it informs nonmanagers of what to expect and how to prepare for the future Diff: Page Ref: 84 Objective: 4.1 5) A key function of planning is to create goals Answer: TRUE Explanation: Creating goals is one of four major reasons that managers plans The other three major functions of planning are to reduce uncertainty, reduce waste, and set goals and standards Diff: Page Ref: 84 AACSB: Analytic Skills Objective: 4.1 6) Informal planning typically works better in large organizations Answer: FALSE Explanation: Informal planning is generally adequate only for small organizations in which a single individual or small group can keep the plans to themselves Once the organization grows to a larger size, it becomes necessary for many people to have access to the organization's plans —and that almost always requires formal planning Diff: Page Ref: 84 Objective: 4.1 Copyright © 2011 Pearson Education, Inc 7) The four reasons that organizations plan is to provide direction, set standards, minimize waste, and reduce uncertainty and the impact of change Answer: TRUE Explanation: Direction tells organization members where the organization is going with respect to goals and objectives Standards identify the goals of the organization Minimizing waste and redundancy makes the organization efficient Reducing the impact of change makes the organization more able to avoid the damage that change can bring on and to take advantage of the opportunities that changes often presents Diff: Page Ref: 84 Objective: 4.1 8) Planning rarely improves teamwork and cooperation among employees Answer: FALSE Explanation: In fact, teamwork and cooperation are two things that planning often helps most The better the plans are, the more coordinated the organization's efforts tend to be Diff: Page Ref: 84 Objective: 4.1 9) An organization that fails to plan will find it hard to assess progress Answer: TRUE Explanation: Goals and standards developed in the planning process give the organization something to compare its performance against Without clearly identified goals and standards, an organization has no idea of how to judge whether or not it has succeeded or failed Diff: Page Ref: 84 AACSB: Analytic Skills Objective: 4.1 10) A major argument against formal plans is that they can't replace intuition and creativity Answer: TRUE Explanation: Formal plans typically cannot avoid being more rigid than informal plans, leaving less room for using intuition, spontaneity, and creativity Diff: Page Ref: 85 Objective: 4.1 11) Formal planning can increase creativity in an organization Answer: TRUE Explanation: If done well, formal plans can enhance, rather than stifle creativity The key is for the formal plans to be flexible enough to allow creativity to be employed Diff: Page Ref: 85 AACSB: Analytic Skills Objective: 4.1 Copyright © 2011 Pearson Education, Inc 12) Managers who make formal plans are more likely to help an organization "break the mold" and carry out truly groundbreaking work that redefines an entire industry Answer: FALSE Explanation: Formal plans tend to focus on existing opportunities in the current climate rather than the opportunities of the future that are as yet unimagined Therefore, formal plans are likely to impede, rather than promote, truly groundbreaking work Diff: Page Ref: 85 AACSB: Analytic Skills Objective: 4.1 13) A major strength of formal planning is that it reinforces past successes and incorporates them into the future Answer: FALSE Explanation: Focusing on past successes is a weakness, not a strength of formal planning Formal plans tend to fixate on what worked well in the past, not what might work well in the changed circumstances of the future Diff: Page Ref: 85 AACSB: Analytic Skills Objective: 4.1 14) A major strength of formal planning is that it makes an organization rigid Answer: FALSE Explanation: Rigidity is a weakness of formal planning Formal planning can lock an organization into a preset sequence of events that might not be able to cope with changing conditions and circumstances Diff: Page Ref: 86 Objective: 4.1 15) A major strength of formal planning is that it generally correlates with higher profits Answer: TRUE Explanation: Studies show that organizations that use formal planning generally have higher profits than those that don't use formal planning Diff: Page Ref: 86 Objective: 4.1 16) Successful planning depends more on what managers plan than the quality of their planning Answer: FALSE Explanation: Evidence shows that organizations often fail not because they focused their planning efforts on the wrong things, but rather that the quality of their planning was deficient Diff: Page Ref: 86 AACSB: Analytic Skills Objective: 4.1 Copyright © 2011 Pearson Education, Inc 17) Research indicates that organizations that don't use formal planning always outperform organizations that use formal planning Answer: FALSE Explanation: To the contrary, evidence from studies shows that planning organizations generally outperform non-planning organizations Diff: Page Ref: 86 Objective: 4.1 18) Strategic management is the act of figuring out how an organization will compete in the marketplace and attract loyal customers Answer: TRUE Explanation: Strategic management involves developing an organization's strategies Those strategies involve making plans for how an organization will business and achieve its goals Diff: Page Ref: 86 AACSB: Analytic Skills Objective: 4.3 19) The first step in the strategic management process is analyzing the external environment Answer: FALSE Explanation: The first step in the strategic management process is for the organization to identify its goals, mission, and strategies Only then can it move on to start analyzing its external situation Diff: Page Ref: 87 Objective: 4.3 20) A mission statement for a kayak manufacturer might be: To make the highest-quality kayaks and sell them at a competitive price Answer: TRUE Explanation: A mission statement defines what the organization is in business to This statement clearly states why the kayak company is in business Diff: Page Ref: 88 Objective: 4.3 21) An external analysis will identify the threats to a company's well-being, but not opportunities for success Answer: FALSE Explanation: An external analysis, the second step in the strategic management process, involves not just identifying threats to an organization, but also finding opportunities that the organization can take advantage of Diff: Page Ref: 88 AACSB: Analytic Skills Objective: 4.3 Copyright © 2011 Pearson Education, Inc 22) Core competencies include an organization's major capabilities and its resources Answer: FALSE Explanation: Core competencies include the capabilities of an organizational—its skills and abilities only—not its resources Diff: Page Ref: 88 Objective: 4.3 23) Capabilities are "what" an organization has; resources are "how" it uses what it has Answer: FALSE Explanation: The statement has it reversed Capabilities are what an organizational can do; resources are strengths and assets that it has Diff: Page Ref: 88 AACSB: Analytic Skills Objective: 4.3 24) SWOT analysis includes the identification of an organization's strengths, weaknesses, opportunities, and threats Answer: TRUE Explanation: The term SWOT is an acronym for strengths, weaknesses, opportunities, and threats Diff: Page Ref: 85 Objective: 4.3 25) The final three steps in the strategic management process involve the creation and implementation of strategies for realizing organizational goals Answer: TRUE Explanation: The last three steps in the strategic management process are: formulating strategies, implementing strategies, and evaluating results Together, these steps create and carry out strategies that help an organization attain its goals and objectives Diff: Page Ref: 87-89 Objective: 4.3 26) A corporate strategy may be a growth strategy, a stability strategy, or a renewal strategy Answer: TRUE Explanation: The three major corporate strategies are growth strategies that focus on expansion, stability strategies that focus on maintaining position, and renewal strategies that focus on fixing problems Diff: Page Ref: 90 Objective: 4.3 27) A diversification strategy focuses on a company becoming its own supplier of inputs Answer: FALSE Explanation: A company becoming its own supplier describes backward vertical integration, not diversification Diff: Page Ref: 90 Objective: 4.3 Copyright © 2011 Pearson Education, Inc 28) A company with a stability strategy will plan to dramatically increase market share in a highly competitive market Answer: FALSE Explanation: A stability strategy would tend to focus on maintaining existing market share, rather than increasing market share Diff: Page Ref: 90 Objective: 4.3 29) The most drastic renewal strategy an organization can carry out is a retrenchment strategy Answer: FALSE Explanation: Retrenchment is less drastic than a turnaround strategy, in which a company takes extreme steps to remake itself Diff: Page Ref: 91 Objective: 4.3 30) "Build a better mousetrap" is a way of describing a competitive advantage Answer: TRUE Explanation: Having a competitive advantage means that an organization has some kind of edge on its competition with respect to price, quality, the product itself, or some other characteristic Diff: Page Ref: 91 Objective: 4.3 31) Innovation and super-high quality are typically the keys to a cost-leadership strategy Answer: FALSE Explanation: Efficiency, rather than innovation or quality, is the key to a cost-leadership strategy in which a company has lower prices than its competitors Diff: Page Ref: 92 Objective: 4.3 32) A focus strategy seeks to appeal to a narrow segment of a market Answer: TRUE Explanation: An example of a focus strategy is a super premium ice cream that tries to appeal to a narrow, but important segment of the market Diff: Page Ref: 92 Objective: 4.3 33) Customer service cannot be considered a strategic weapon for an organization Answer: FALSE Explanation: Anything that a company has or does that gives it an edge on its competition qualifies as a strategic weapon Since customer service can serve as such an edge, it can be considered a strategic weapon Diff: Page Ref: 93 Objective: 4.3 Copyright © 2011 Pearson Education, Inc 34) Southwest Airlines studied race car pit crews as an example of benchmarking Answer: TRUE Explanation: Benchmarking involves learning practices from other organizations that can be applied to your own organization, so learning maintenance speed from race car crews definitely qualifies as benchmarking Diff: Page Ref: 95 Objective: 4.3 35) Goals are documents that outline how plans are to be carried out Answer: FALSE Explanation: Goals are desired targets or outcomes, not outlines of how plans are to be carried out Diff: Page Ref: 95 Objective: 4.4 36) Traditional goal setting requires top managers to set goals that are carried out by the organizational levels below Answer: TRUE Explanation: Traditional goals are set by top managers and distributed to the levels below Nontraditional goal setting can be accomplished by others in the organization who are not necessarily at the top of the pyramid Diff: Page Ref: 96 Objective: 4.4 37) The key to MBO, or management by objectives, is that managers and subordinates mutually agree on goals Answer: TRUE Explanation: MBO includes both managers and subordinates in the process of setting goals With subordinates participating in the process, the likelihood of misunderstanding and resentment is reduced Diff: Page Ref: 97 Objective: 4.4 38) Goals typically should be reserved for managers only Goals should not be shared with subordinates Answer: FALSE Explanation: Ideally, goals should be shared with any and all employees who have a need to know what those goals are Diff: Page Ref: 98 Objective: 4.4 39) Long-term plans used to refer to plans that covered a period of over three years, but now it refers to any time period over one year Answer: FALSE Explanation: Long-term plans in fact used to refer to plans that covered periods of over seven years Now long-term plans cover a time period of three years or more Diff: Page Ref: 99 Objective: 4.4 Copyright © 2011 Pearson Education, Inc 40) A six-month plan qualifies as a short-term plan Answer: TRUE Explanation: Short-term plans are defined as plans of one year or less, so a six-month plan qualifies as a short-term plan Diff: Page Ref: 99 Objective: 4.4 41) Directional plans leave no room for interpretation Answer: FALSE Explanation: Directional plans are designed to be flexible so they have more, not less room for interpretation than specific plans Diff: Page Ref: 99 Objective: 4.4 42) In general, upper-level managers focus on tactical or operational planning Answer: FALSE Explanation: Upper-level managers usually focus on strategic plans, while lower-level managers take care of operational planning Diff: Page Ref: 100 AACSB: Analytic Skills Objective: 4.4 43) Buying a competitor's product for evaluation is a form of environmental scanning Answer: TRUE Explanation: Environmental scanning involves surveying the competitive environment to detect emerging trends Buying a competitor's product would help an organization understand its environment, so it would qualify as environmental scanning Diff: Page Ref: 104 Objective: 4.4 44) Which of the following is NOT a function of planning? A) defining goals B) identifying a strategy for attaining goals C) settling disputes between employees D) coordinating organizational activities Answer: C Explanation: C) Defining goals, identifying strategies for attaining goals, and coordinating organizational activities are all recognized functions of planning, whether it is formal or informal, so these choices are incorrect Settling disputes is not something that can be planned for, since most disputes are spontaneous and can occur at any time over any issue This means that settling disputes is not a function of planning, therefore making that the correct response Diff: Page Ref: 84 Objective: 4.1 Copyright © 2011 Pearson Education, Inc 45) Planning is concerned with A) both ends and means B) ends only C) means only D) neither ends nor means Answer: A Explanation: A) Planning is concerned with goals or ends, as well as how those goals are reached, or means Therefore, the choice indicating both ends and means is the correct response and all of the other responses are incorrect Diff: Page Ref: 84 Objective: 4.1 46) In informal planning, goals are usually shared with others in the organization A) written, but little is B) unwritten and little is C) written and much is D) unwritten, but much is Answer: B Explanation: B) A key difference between formal and informal planning is that informal planning rarely involves recording the plans in written form Informal planners also typically keep their plans to themselves, or share them with few others Together, these factors make the choice indicating "unwritten and much" is the correct response The two choices indicating "written" can be immediately ruled out because informal plans are not written "Unwritten but much is" can be ruled out because little is shared with informal plans Diff: Page Ref: 84 Objective: 4.1 47) Informal planning is A) always performed at the lowest organizational level B) general and usually lacks continuity C) performed exclusively by middle managers D) more specific than formal planning Answer: B Explanation: B) Informal plans are typically not specific and performed by leaders or owners rather than by middle managers or individuals on the lowest organizational level, ruling out all of these choices This leaves the correct response, as it correctly states that informal plans are usually non-specific and lacking in continuity Diff: Page Ref: 84 Objective: 4.1 Copyright © 2011 Pearson Education, Inc 48) In formal planning, A) specific goals covering a period of years are defined B) to maximize flexibility, specific goals are never spelled out C) very broad general goals are developed D) goals may be written or unwritten Answer: A Explanation: A) Formal planning requires written, not unwritten plans and specific, rather than general goals Since only the choice regarding specific goals covering a period of years identifies specific goals, it is the correct response Diff: Page Ref: 84 Objective: 4.1 49) Which of the following is NOT a reason for managers to plan? A) to give direction to an organization B) to deal with change C) to establish goals D) to establish responsibility for mistakes Answer: D Explanation: D) Planning provides an organization with direction, goals, and a way to deal with change Since all of these choices are reasons for a manager to plan, they can be ruled out as the correct response for this question Blaming people for mistakes is not a function of planning so establishing responsibility for mistakes is the correct response for this question Diff: Page Ref: 84 AACSB: Ethical Understanding and Reasoning Abilities Objective: 4.1 50) Planning gives organizations direction that primarily helps them A) improve teamwork and coordinate activities B) improve their image in the business community C) improve morale of middle managers D) improve morale of all employees Answer: A Explanation: A) Direction provides a common path for all employees in an organization, thus helping employees work together in a coordinated, cooperative effort This makes improving teamwork and coordinating activities the correct response since it mentions teamwork and coordination Planning is not concerned with organizational morale or image so all of those choices can be ruled out as correct responses Diff: Page Ref: 84 Objective: 4.1 10 Copyright © 2011 Pearson Education, Inc 116) are important because they provide the standards against which all organizational accomplishments are measured A) Goals B) Guidelines C) Models D) Rules Answer: A Explanation: A) Goals are more than just something for an organization to shoot for Goals are also a metric by which an organization can measure success Without stating goals, an organization has no way of judging how successful it is This makes goals the correct response and rules out guidelines, models, and rules because none of these choices provide standards by which organizational progress can be measured Diff: Page Ref: 96 AACSB: Analytic Skills Objective: 4.3 117) In traditional goal setting, these individuals set goals A) top managers B) middle and low-level managers C) middle managers D) managers and employees Answer: A Explanation: A) The traditional hierarchical organizational model has top managers setting goals and having the goals flow down to lower organizational levels This makes top managers the correct response and eliminates the other choices because they not exclusively identify top managers as the decision makers Diff: Page Ref: 96 Objective: 4.3 118) In traditional goal setting, as they work their way from top management to employees, goals are likely to A) become more clear B) be more rigorously followed C) be unchanged D) become less clear Answer: D Explanation: D) As they filter down from level to level, goals get repeatedly reinterpreted and distorted, making the choice regarding becoming less clear the correct response and eliminating becoming more clear and being unchanged Being more rigorously followed is also incorrect because there is no evidence to show that goals are more likely to be followed at lower levels of an organization than at higher levels Diff: Page Ref: 97 AACSB: Analytic Skills Objective: 4.3 33 Copyright © 2011 Pearson Education, Inc 119) In a means-ends chain, a goal at a lower level A) is the bridge to a goal at the next higher level B) is attained only after higher level goals are fulfilled C) is separate from the goal at the next higher level D) is ignored if goals at higher levels are attained Answer: A Explanation: A) A means-ends chain links goals at higher levels to goals below For example, in a means-ends chain a goal at a high level cannot be considered accomplished until goals below it have been fulfilled first This links goals at different levels and makes them less subject to degradation and distortion as they pass through organizational hierarchy This means that the bridge to a goal at the next higher level is the correct response, ruling out the choices regarding a goal being separate and being ignored because they describe situations in which goals are not linked The choice regarding being attained only after higher-level goals are fulfilled shows linked goals, but their order is reversed—in a means-ends chain, the lower-level goals are fulfilled first Diff: Page Ref: 97 AACSB: Analytic Skills Objective: 4.3 120) In management by objectives (MBO), goals A) must be easily accomplished B) are jointly determined by employees and managers C) are determined by top management D) are developed by employees Answer: B Explanation: B) The key to goals set by an MBO arrangement is that goals are not handed down from management to employees Instead, employees participate in goal-setting, thus insuring a more equitable result and more accountability for all sides of the process, especially the employees MBO goals are not exclusively developed by managers or employees, making both of those choices incorrect MBO goals are not required to be easily accomplished, making that choice incorrect Diff: Page Ref: 97-98 Objective: 4.3 121) In addition to being made by by both managers and employees, MBO goals must be A) non-specific and open-ended with regard to time B) specific and open-ended with regard to time C) specific and include an explicit time limit D) non-specific and include no time limit Answer: C Explanation: C) To eliminate ambiguity and misunderstanding, MBO goals are required to be specific and include a time limit That way parties can't come back later and say that they weren't warned with regard to what exactly was expected This makes the choice regarding being specific and including an explicit time limit the correct response and eliminates the other three choices because they are either non-specific or open-ended with regard to time Diff: Page Ref: 97-98 Objective: 4.3 34 Copyright © 2011 Pearson Education, Inc 122) MBO programs are usually successful largely because they A) give employees a sense of ownership of goals B) free managers from the responsibility of setting goals C) give managers a sense of ownership of goals D) free employees from responsibility if goals are not met Answer: A Explanation: A) MBO goals not free managers from the task of goal setting or give them any special sense of goal ownership, since in traditional situations managers alone set goals MBO goals make employees more, not less responsible What MBO goals clearly accomplish is to make employees more accountable and responsible for goals, giving them a sense of ownership of goals This makes giving employees a sense of ownership the correct response Diff: Page Ref: 97-98 Objective: 4.3 123) Which goal setting sequence is correct for the following steps? Evaluate resources Identify goals Review the mission and job tasks Communicate goals Link rewards to goals Build feedback mechanisms A) 1, 2, 4, 6, 3, B) 4, 2, 5, 3, 1, C) 3, 4, 2, 6, 5, D) 3, 1, 2, 4, 6, Answer: D Explanation: D) Only the correct choice (3, 1, 2, 4, 6, 5) gives the correct sequence: Mission, Resources, Identify goals, Communicate goals, Feedback, Link Diff: Page Ref: 98 AACSB: Analytic Skills Objective: 4.3 124) The breadth of a plan refers to concerns A) long-term versus short-term B) strategic versus tactical C) specific versus directional D) single use versus standing Answer: B Explanation: B) Breadth does not refer to how specific, long term, or repeatable a plan is, but rather whether it is tactical or strategic, making that the correct response Strategic plans address overall organizational goals Tactical plans provide details of how those strategic goals can be achieved Diff: Page Ref: 99 Objective: 4.3 35 Copyright © 2011 Pearson Education, Inc 125) The specificity of a plan refers to concerns A) long-term versus short-term B) strategic versus tactical C) specific versus directional D) single use versus standing Answer: C Explanation: C) Specificity does not refer to the duration, goals, or repeatability of a plan Rather, specificity addresses how flexible plans are, making specific versus directional the correct response Specific plans are inflexible and leave little or no room for interpretation or modification Directional plans are flexible and can be modified if the situation warrants Diff: Page Ref: 99 Objective: 4.3 126) Strategic plans address A) overall organizational goals B) goals for a single branch of the organization C) how overall goals are to be achieved D) how a single goal is to be achieved Answer: A Explanation: A) Strategic plans have the broadest overall scope, addressing the larger, more general issues and goals that an organization has This makes overall organizational goals the correct response and eliminates the other three choices because they all refer to more narrow objectives Diff: Page Ref: 99 Objective: 4.3 127) Tactical plans are operational plans that identify A) overall organizational goals B) how overall goals are to be achieved C) the mission of an organization D) specific goals for accomplishing a specific objective Answer: B Explanation: B) Tactical plans not address an organization's mission or its larger, overall goals The focus of tactical plans is always how goals are to be achieved rather than specific goals themselves This rules out specific goals and makes the choice regarding how overall goals are to be achieved the correct response Diff: Page Ref: 99 Objective: 4.3 36 Copyright © 2011 Pearson Education, Inc 128) A politician whose ultimate goal is to get elected is planning campaign ads for TV In planning the ads, the politician is functioning at a level A) strategic B) long-term C) tactical D) directional Answer: C Explanation: C) In this situation the politician's overall strategic goal is to get elected His immediate goal is to plan effective TV ads Since he is working on his immediate goal, the politician is functioning on a tactical, rather than a strategic level, making tactical the correct response Diff: Page Ref: 99 AACSB: Analytic Skills Objective: 4.3 129) Which of the following defines the time frame of a long-term plan? A) over seven years B) over three years C) under three years D) over one year Answer: B Explanation: B) In the past, long-term plans were defined as plans that were seven years or longer in duration This definition has been replaced by a new time duration that requires a longterm plan to be any plan that covers a time frame of over three years This makes over three years the correct response and eliminates all other choices Diff: Page Ref: 99 Objective: 4.3 130) Directional plans A) leave no room for interpretation B) are flexible general guidelines C) are difficult to modify D) must be short-term plans Answer: B Explanation: B) The key to directional plans is flexibility, making "flexible general guidelines" the correct response Flexible plans cannot: be hard to modify, leave no room for interpretation, or be focused only on short-term goals This rules out all of the preceding choices and confirms that flexible general guidelines is the correct response Diff: Page Ref: 99 Objective: 4.3 37 Copyright © 2011 Pearson Education, Inc 131) Standing plans typically can be used A) only once B) only in conjunction with specific, long-term plans C) twice at most D) repeatedly Answer: D Explanation: D) Standing plans are not confined to being used only once, twice, or exclusively in conjunction with specific long-term plans The key to a standing plan is that it is repeatable This indicates that "repeatedly" is clearly the correct response for this question Diff: Page Ref: 100 Objective: 4.3 132) Top managers, for the most part, focus on this type of planning A) operational B) strategic C) tactical D) short term Answer: B Explanation: B) Tactical, short-term, or operational planning are typically reserved for lowerlevel or mid-level managers Strategic planning is typically done by top managers, making "strategic" the correct response Diff: Page Ref: 100 Objective: 4.3 133) The more uncertain a situation is, the more plans must be A) unspecific B) long term C) flexible D) short term Answer: C Explanation: C) In a situation of high uncertainty, both flexibility and specificity are important A plan must be specific, but also flexible so it can be changed if the situation requires it These requirements make flexible the correct response and eliminate unspecific Uncertainty has no bearing on whether a plan is long or short term, so these choices can be eliminated Diff: Page Ref: 100 Objective: 4.3 38 Copyright © 2011 Pearson Education, Inc 134) The commitment concept states that plans should A) always stake out a longer time period than is estimated B) always stake out a shorter time period than is estimated C) stake out a time period that is neither too long nor too short D) not include time periods because they are too confining Answer: C Explanation: C) The commitment concept states that plans should extend to meet any commitments that they directly or indirectly specify For example, a plan to finance only the construction of a bridge, but not its upkeep and maintenance, fails to meet its basic time commitment The preceding ideas identify staking out a time period that is neither too long nor too short as the correct response Staking out too long, too short, or no time periods all fail to meet time commitments and are therefore incorrect responses Diff: Page Ref: 100 AACSB: Analytic Skills Objective: 4.3 135) Most managers feel that formal, top-down plans created by corporate planning departments are A) very useful B) usually unsatisfactory C) indispensible D) excellent Answer: B Explanation: B) Rather than find plans created by specialized corporate planning departments useful, indispensible, or excellent, a survey shows that over 75 percent of managers were dissatisfied with formal planning department plans, making "usually unsatisfactory" the correct response Diff: Page Ref: 102 Objective: 4.3 136) In the twenty-first century, managers increasingly need to consider their plans as A) highly explicit recipes that must be scrupulously followed B) a vague philosophy that should not interfere with actions C) flexible road maps with destinations that may change D) rigid road maps with a single destination Answer: C Explanation: C) In the unstable, fast-changing business environment of today, managers value flexibility over other qualities They not see plans as explicit recipes or rigid road maps Though flexibility is key, managers not want to go too far and get plans that are vague, so a vague philosophy can also be eliminated In the end, managers see plans as road maps that are flexible because they allow paths and even final destinations to change if the situation requires it Diff: Page Ref: 103 AACSB: Reflective Thinking Objective: 4.4 39 Copyright © 2011 Pearson Education, Inc 137) A cell phone company might ask managers to some environmental scanning of blogs that deal with electronics as a way to A) obtain new customers B) identify emerging trends C) obtain new advertisers D) identify potential rivals Answer: B Explanation: B) The purpose of environmental scanning is not to obtain customers, advertisers, or competitors, but rather to get a feel for the business environment that an organization functions in and detect emerging trends in its industry This makes "identifying emerging trends" the correct response Diff: Page Ref: 104 Objective: 4.4 138) Which of the following is NOT something that a company would be likely to as a part of a competitive intelligence program? A) buy competitors' products B) attend trade shows C) have employees evaluate competing products D) buy stock in a competitor's company Answer: D Explanation: D) A company would be likely to buy competing products, attend trade shows, or assess rival products as a part of a competitive intelligence program It would not, however, buy stock in a rival company because the purchase would not provide any insight into the company's competitor Since the company would not be likely to this, "buying stock in a competitor's company" is the correct response Diff: Page Ref: 104 Objective: 4.4 40 Copyright © 2011 Pearson Education, Inc Taco Rocket (Scenario) Imagine that you are the president of Taco Rocket, a new and successful chain of Mexican fastfood restaurants The success you have experienced in the last years has you thinking of what to with the business next Should you expand the business at the current rate? Open new and different restaurants? What? 139) Up to now your success has been based on selling high-quality tacos and burritos at a price that others can't match Your business is pursuing which of Porter's strategies? A) differentiation strategy B) cost leadership strategy C) competitive advantage strategy D) focus strategy Answer: B Explanation: B) A focus strategy would have Taco Rocket trying to appeal to a narrow segment of the market, something that it clearly is not doing A differentiation strategy would have Taco Rocket trying to make tacos that were superior in some way to all competitors, again something that it is not attempting to What Taco Rocket is doing is selling good quality food at low prices, so it is using a cost leadership strategy A competitive advantage strategy is not one of Porter's recognized categories, so it is an incorrect response for this question Diff: Page Ref: 92 AACSB: Analytic Skills Objective: 4.2 140) You are thinking of buying a tortilla factory in a nearby state This action would be an example of A) forward vertical integration B) horizontal integration C) backward vertical integration D) forward diversification Answer: C Explanation: C) Buying a tortilla factory is an attempt by the company to be its own supplier This is an example of backward vertical integration Forward vertical integration would involve some aspect of distribution rather than supply, so that choice is incorrect The remaining choices (horizontal integration and forward diversification) describe situations in which the company is not trying to become its own supplier, so both choices are incorrect Diff: Page Ref: 90 AACSB: Analytic Skills Objective: 4.2 41 Copyright © 2011 Pearson Education, Inc 141) Recently, Taco Rocket has considered buying a local competitor and the two would combine under the Taco Rocket name This is an example of which of the following? A) stability B) vertical integration C) horizontal integration D) diversification Answer: C Explanation: C) When a company combines with a competitor, it is integrating horizontally When a company purchases a company from another industry, it is diversifying In this case, Taco Rocket is integrating horizontally because it is combining with a rival, not a company in another industry This makes horizontal integration the correct response and rules out diversification Stability can be ruled out because it is not a key factor in this situation Diff: Page Ref: 90 AACSB: Analytic Skills Objective: 4.2 142) For a limited time, Taco Rocket is thinking of coming out with a new Fifth Degree Burrito that is so hot it "burns a hole in the plate." Catering to the small segment of the market that likes super-hot food is an example of a A) focus strategy B) cost leader strategy C) long-term strategy D) differentiation strategy Answer: A Explanation: A) Taco Rocket is not trying to have the lowest cost in this example, or create an ultra-premium product to differentiate itself from competitors The product is clearly not a longterm strategy because it is being offered for a "limited time." What Taco Rocket is doing is trying to serve a very narrow segment of the market—people who like super-hot food In doing this, Taco Rocket is using a focus strategy Diff: Page Ref: 90 AACSB: Analytic Skills Objective: 4.2 42 Copyright © 2011 Pearson Education, Inc 143) In a short essay, define planning and compare formal and informal planning as they are used in various organizations Answer: Planning involves defining the organization's goals, establishing an overall strategy for achieving those goals, and developing a system to implement that strategy Planning is concerned with both ends and means All managers engage in some form of planning whether it is formal or informal In informal planning, little or nothing is written down and there is little or no sharing of goals with others within the organization This type of planning is often done in small businesses where the ownermanager has a vision of where he or she wants the business to go and how to get there In formal planning, goals and plans covering a specific period of time are developed These goals and plans are written and shared with organizational members Specific programs exist in formal planning to achieve planning goals; that is, managers clearly define the path they want to take and the actions they will carry out to reach their goals Diff: Page Ref: 84-85 AACSB: Analytic Skills Objective: 4.1 144) In a short essay, list and discuss two reasons for planning Answer: Planning establishes coordinated effort It gives direction to managers and nonmanagers alike When employees know where the organization is going and what they must contribute to reach goals, they can focus their individual and collective efforts to accomplish those goals Without planning, departments and individuals might end up working at crosspurposes, preventing the organization from moving efficiently toward its goals Planning reduces uncertainty by forcing managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses to change Even though planning can't eliminate change, managers plan in order to anticipate changes and develop the most effective response to them Diff: Page Ref: 84-85 AACSB: Analytic Skills Objective: 4.1 145) In a short essay, list and discuss two additional reasons that justify the need for planning Answer: Planning reduces overlapping and wasteful activities When work activities are coordinated around established plans, waste and redundancy can be minimized Furthermore, when means and ends are made clear through planning, inefficiencies often become obvious and can be easily corrected or eliminated Planning establishes goals or standards that are used in controlling If managers are unsure of what they are trying to accomplish, they will be unable to determine whether or not they have been successful In planning, goals and standards are clearly developed and stated Then actual performance can be compared against the goals and corrective action is taken, if necessary Without the goals identified in a planning process, there is no way for an organization to assess its own progress Diff: Page Ref: 84-85 AACSB: Analytic Skills Objective: 4.1 43 Copyright © 2011 Pearson Education, Inc 146) In a short essay, identify criticisms of formal planning Answer: One of the main arguments directed at formal planning is that it is rigid and can lock an organization into specific goals and timetables that must be achieved, no matter how circumstances may change Another criticism of plans is that they cannot replace intuition and creativity, and in many cases are said to stifle these qualities Many people advise planners to try to take intuition and creativity into account when they formulate their plans, so their plans will enhance rather than undermine these qualities A third criticism of planning is that it often fixates on the current business climate, not on how the climate might change in the future This can result in plans that are short-sighted and limited Rather than look for new opportunities, managers keep trying to perfect what they did in the past Finally, plans often focus too much on successes of the past, forcing a company to stick to triedand-true methods of operating rather than forging into new areas and blazing new trails Diff: Page Ref: 85 AACSB: Analytic Skills Objective: 4.1 147) In a short essay, compare strategic plans and tactical plans Answer: Strategic plans are plans that apply to the entire organization, establish the organization's overall goals, and seek to position the organization in terms of the overall business environment Plans that specify the details of how the overall goals are to be achieved are called tactical or operational plans Tactical plans tend to cover a shorter time frame and a more narrow view of an organization than strategic plans Where strategic plans focus on identifying goals, tactical plans focus on how to reach those goals Diff: Page Ref: 99 AACSB: Analytic Skills Objective: 4.3 148) In a short essay, compare specific plans and directional plans Answer: Specific plans are plans that are clearly defined and that leave no room for interpretation There is little room for ambiguity or misunderstanding with a specific plan The drawbacks of specific plans are that they can be rigid and often require a measure of predictability that in many cases does not exist When uncertainty is high and managers must be able to respond to unexpected changes, directional plans are preferable Directional plans are flexible plans that set out general guidelines but don't lock managers into overly specific goals or courses of action However, the flexibility inherent in directional plans must be weighed against the loss of clarity provided by specific plans Diff: Page Ref: 99 AACSB: Analytic Skills Objective: 4.3 44 Copyright © 2011 Pearson Education, Inc 149) In a short essay, define and discuss management by objectives (MBO) Answer: Management by objectives (MBO) is a system in which specific performance goals are jointly determined by employees and their managers MBO requires that progress toward accomplishing these goals be periodically reviewed, and rewards allocated on the basis of this progress Rather than using goals exclusively as controls, MBO uses them to motivate employees as well Management by objectives consists of four elements: goal specificity, participative decision making, requiring an explicit time period, and performance feedback MBO's appeal lies in its focus on employees working to accomplish goals they have had a hand in determining Diff: Page Ref: 97-98 AACSB: Analytic Skills Objective: 4.3 150) In a short essay, describe the first two steps in the strategic management process Answer: The first step in the strategic management process is to identify the organization's current mission, goals, and strategies Defining the organization's mission forces managers to identify what it is in business to Knowing the company's current goals gives managers a basis for assessing whether those goals need to be changed The second step involves an external analysis Managers need to know, for instance, what the competition is doing and how the current business environment is likely to affect the company After analyzing the environment, managers need to assess what they have learned in terms of opportunities that the organization can exploit, and threats that it must counteract or buffer against Diff: Page Ref: 88-89 AACSB: Analytic Skills Objective: 4.2 151) In a short essay, describe the final four steps in the strategic management process Answer: The third step in the strategic management process involves an internal analysis, which provides important information about an organization's specific resources and capabilities After completing an internal analysis, managers can then complete a SWOT analysis The SWOT analysis combines information from this step and the previous step in the process to formally identify an organization's strengths, weaknesses, opportunities, and threats The fourth step in the strategic management process is to put all of the information gathered together and use it to formulate strategies for putting the organization on the right track for the future As managers formulate strategies, they have to consider the realities of the external environment and their available resources and capabilities and design strategies that will help the organization reach its goals After strategies are formulated, they must be implemented A strategy is only as good as its implementation The final step in the strategic management process is evaluating results How effective have the strategies been? Have they helped the organization reach its goals? What adjustments, if any, are necessary? Diff: Page Ref: 88-89 AACSB: Analytic Skills Objective: 4.2 45 Copyright © 2011 Pearson Education, Inc 152) In a short essay, discuss environmental scanning and competitive intelligence Answer: Managers in both small and large organizations use environmental scanning, which is the screening of large amounts of information, to anticipate and interpret trends and changes in the business environment Extensive environmental scanning is likely to reveal issues, trends, and concerns that could affect an organization's current and planned activities One of the fastest growing areas of environmental scanning is competitive intelligence Competitive intelligence is a process by which organizations gather information about their competitors and get answers to questions such as: Who are they? What are they doing? How will what they're doing affect us? Competitive intelligence doesn't have to involve spying Advertisements, promotional materials, press releases, reports filed with government agencies, annual reports, want ads, newspaper reports, and industry studies are all examples of readily accessible sources of information for competitive intelligence Many firms also regularly purchase and analyze competitors' products to learn about new technical innovations Diff: Page Ref: 104 AACSB: Analytic Skills Objective: 4.4 153) In a short essay, discuss the cost leadership strategy according to Michael Porter Answer: When an organization sets out to be the lowest-cost player in its industry, it is following a cost leadership strategy A low-cost leader aggressively searches out efficiencies in production, marketing, and other areas of operation Overhead is kept to a minimum, and the firm does everything it can to cut costs Although low-cost leaders don't place a lot of emphasis on "frills," the product or service being sold must be perceived as comparable in quality to that offered by rivals or at least be acceptable to buyers Examples of companies that have used the low-cost leader strategy include Wal-Mart and Southwest Airlines Diff: Page Ref: 92 AACSB: Analytic Skills Objective: 4.2 154) In a short essay, discuss Porter's differentiation strategy Answer: When a company seeks to offer unique products that are seen as truly special by customers, it is following a differentiation strategy Ways in which companies differentiate themselves might include exceptionally high quality, extraordinary service, innovative design, technological capability, or an unusually positive brand image The key to this competitive strategy is that whatever product or service attribute is chosen for differentiation must set the firm apart from its competitors and be significant enough to justify a price premium that exceeds the cost of differentiation Many highly successful businesses can be identified as examples of the differentiation strategy: L.L Bean (customer service), Intel (higherquality chip technology), Maytag (reliability), and Mary Kay Cosmetics (distribution) Diff: Page Ref: 92 AACSB: Analytic Skills Objective: 4.2 46 Copyright © 2011 Pearson Education, Inc 155) In a short essay, discuss Porter's focus strategy Answer: A company pursues a focus strategy when it concentrates on a narrow product or segment of the market The goal of a focus strategy is to fill a niche in the market A niche can be based on product, type of buyer, distribution channel, or geographical location of buyers Research suggests that the focus strategy may be the most effective choice for small businesses because they typically not have the economies of scale or internal resources to successfully pursue one of the other two strategies Stouffer used a focus strategy with its Lean Cuisine line to reach affluent, sophisticated, calorie-conscious customers who wanted convenient but high quality products Diff: Page Ref: 92 AACSB: Analytic Skills Objective: 4.2 47 Copyright © 2011 Pearson Education, Inc ... strategies hierarchy chart (Exhibit 4-4, page 89), the top of the hierarchy is occupied by corporate strategies, the second level by competitive strategies, and the third level by functional strategies... 4.1 53) One effect of planning on managers is that it forces them to A) fear change B) anticipate and consider the effect of change C) work to prevent change D) ignore any change that doesn't... change C) be positively affected by change D) be adversely affected by change Answer: D Explanation: D) Change can be disruptive and even destructive in the best of circumstances, so managers who