Test bank of fred r david – strategic management, 13th edition ch11

Exam Name _ TRUE/FALSE Write 'T' if the statement is true and 'F' if the statement is false 1) Most strategists believe that an organization's wellbeing depends on evaluation of the strategicmanagement process 1) _ 2) Adequate, timely feedback is important to effective strategy evaluation 2) _ 3) Too much emphasis on evaluating strategies may be expensive and counterproductive 3) _ 4) Strategy evaluation should have a long-run focus and avoid a short-run focus 4) _ 5) According to Richard Rumelt, consonance and consistency are based on a firm's external assessment 5) _ 6) According to Rumelt, consistency and feasibility are largely based on a firm's internal assessment 6) _ 7) Consistency, distinctiveness, advantage and feasibility are Richard Rumelt's four criteria for evaluating a strategy 7) _ 8) Strategy evaluation is becoming increasingly easier with the passage of time, given the technological advances 8) _ 9) The decreasing time span for which planning can be done with any degree of certainty is a reason why strategy evaluation is more difficult today 9) _ 10) Strategies may be inconsistent if policy problems and issues continue to be brought to the top for resolution 10) 11) Competitive advantages are normally the result of superiority in one of three areas feasibility, consistency, or consonance 11) 12) Regardless of the size of the organization, a certain amount of management by wandering around at all levels is essential to effective strategy evaluation 12) 13) Because large companies have more at stake, it is more important for them to conduct strategy evaluation than it is for small companies 13) 14) The end of the fiscal year is the best time to a strategy evaluation 14) 15) Changes in the organization's management, marketing, finance, R&D and CIS strengths and weaknesses should all be the focus of a revised EFE matrix in strategy evaluation 15) 16) In strategy evaluation, a revised IFE matrix should indicate how effective a firm's strategies have been in response to key opportunities and threats 16) 17) Strengths, weaknesses, opportunities and threats should continually be monitored for change, because it is less a question of whether these factors will change but rather when they will change and in what ways 17) 18) When taking corrective action, you need to compare expected results to actual results 18) 19) Criteria for evaluating strategies should be measurable and easily verifiable 19) 20) Specific financial ratios are rarely used criteria to evaluate strategies 20) 21) Measuring organizational performance includes comparing expected results to actual results, investigating deviations from plans, evaluating individual performance and examining progress being made toward meeting stated objectives 21) 22) Intuitive judgments are almost always involved in deriving quantitative criteria 22) 23) Most quantitative evaluation criteria are geared to long-term objectives rather than annual objectives 23) 24) Measuring organizational performance requires making changes to reposition a firm competitively for the future 24) 25) Taking corrective action does not necessarily mean that existing strategies will be abandoned, or even that new strategies must be formulated 25) 26) Corrective action in strategy evaluation is necessary to keep an organization on track toward achieving stated objectives 26) 27) In his books entitled Future Shock and The Third Wave, Alvin Toffler argued that environments are becoming so dynamic and complex that they threaten people and organizations with future shock 27) 28) Future shock occurs when the type and speed of changes overpower an individual or organization's ability and capacity to adapt 28) 29) According to research, participation in strategy-evaluation activities is one of the best ways to overcome individuals' resistance to change 29) 30) The basic form of a Balanced Scorecard is the same for all organizations and industries 30) 31) The Balanced Scorecard approach deals with the question, "How satisfied are the firm's customers." 31) 32) Strategy-evaluation activities must be meaningful, that is, they should specifically relate to a firm's objectives 32) 33) Timely approximate information is generally more desirable as a basis for strategy evaluation than accurate information that does not depict the present 33) 34) The test of an effective evaluation system is its usefulness and complexity 34) 35) Small organizations require a more elaborate and detailed strategy-evaluation system because they are still evolving 35) 36) There is no one ideal strategy-evaluation system for all organizations 36) 37) Contingency plans are alternative plans that can be put into effect if certain key events not occur as expected 37) 38) Organizations should prepare contingency plans only for unfavorable events 38) 39) Strategies should try to cover all bases by planning for all possible contingencies 39) 40) Contingency plans should be as simple as possible 40) 41) Alternative strategies not selected for implementation should be discarded, as they have a tendency to contaminate the contingency plans 41) 42) Identifying both beneficial and unfavorable events that could possibly derail the strategy or strategies is the first step of effective contingency planning 42) 43) Independent auditors, government auditors and IRS auditors are the three groups of people who perform audits 43) 44) Independent auditors are basically CPAs who provide their services to organizations for a fee 44) 45) Public accounting firms usually avoid strategy evaluation services 45) 46) The Middle East is considered to be one of the regions most vulnerable to climate change impact because of its water scarcity 46) 47) Arab countries in sub-Saharan Africa are particularly vulnerable to the risk of environmental changes due to global warming 47) 48) Public accounting firms, especially foreign ones operating mostly in the GCC area, often have a consulting arm that provides strategy-evaluation services 48) 49) Moving environmental affairs from the line side of the organization to the staff side is required when instituting an environmental audit 49) 50) The strategic management process should be completely open because participation and openness enhance understanding, commitment, and communication within the firm 50) 51) Increased education and diversity of the workforce at all levels are reasons why the top-down approach should be favored in organizations 51) MULTIPLE CHOICE Choose the one alternative that best completes the statement or answers the question 52) Which of these is/are a basic activity of strategy evaluation? 52) A) both B and C B) Taking corrective actions C) Reviewing the underlying internal and external factors that represent the bases of current strategies D) all of the above E) Measuring organizational performance 53) The purpose of strategy evaluation is to 53) A) alert management to problems or potential problems B) increase the budget annually C) evaluate employees' performance D) make budget changes E) improve R&D programs 54) What is the cornerstone of effective strategy evaluation? 54) A) Quality and quantity of managers B) Adequate and timely feedback C) Evaluation preceding implementation stage D) Smaller ratio of top- to lower-level management E) Taking corrective actions 55) All of these are Richard Rumelt's criteria to evaluate a strategy except 55) A) consistency B) consonance C) distinctiveness D) feasibility E) advantage 56) What is happening to strategy evaluation with the passage of time? 56) A) It is becoming increasingly difficult B) It is becoming an unnecessary activity C) It is becoming less important D) It is becoming very convenient E) It is becoming much simpler 57) All of the following are reasons strategy evaluation is more difficult today except 57) A) the rapid rate of obsolescence of even the best plans B) the decreasing difficulty of predicting the future with accuracy C) the increasing number of variables D) a dramatic increase in the environment's complexity E) the increase in the number of both domestic and world events affecting organizations 58) Which of the following is not a reason for the increasing difficulty of evaluating strategies? 58) A) Product development cycles are longer than ever B) Product life cycles are longer today than ever C) Domestic and world economies are less stable than ever D) Change is occurring more frequently than ever E) Technological advancement is more rapid 59) What aims to balance long term with short term concerns, financial with non-financial concerns, and internal with external concerns? 85) A) Contingency planning B) Measuring performance C) Reviewing Bases of Strategy D) Taking corrective action E) The Balanced Scorecard approach 86) In the important publication used to evaluate a firm's strategy, the Fortune 50 includes all of the following except 86) A) the top retailers B) the top banks C) the top transportation companies D) the top utilities E) the top hospitals 87) What is not a characteristic of an effective evaluation system? 87) A) Meaningful B) Economical C) Timely D) Information-oriented E) Providing a true picture of what is happening 88) Controls need to be rather than 88) A) universal; diverse B) cultural; political C) measurable; timely D) qualitative; quantitative E) action oriented; information oriented 89) The strategy-evaluation process should foster 89) A) profit centers B) mutual understanding C) corporate culture D) contingency plans E) implementation 90) What factor determines the final design of a firm's strategy-evaluation and control system? 90) A) Threats B) The organization's characteristics C) The competition's characteristics D) Opportunities E) External characteristics 91) Familiarity with local environments usually makes gathering and evaluating information much easier for organizations than for ones 91) A) small; large B) for-profit; non-profit C) large; small D) non-profit; for-profit E) foreign; domestic 92) What activity is defined as having alternative plans that can be put into effect if certain key events not occur as expected? 92) A) Corporate agility B) Strategy evaluation C) Contingency planning D) Scenario planning E) Forecasting 93) Which of the following statements about contingency plans is not true? 93) A) Contingency plans should be developed for favorable and unfavorable events B) Develop contingency plans for all contingent events C) Contingency plans minimize the impact of potential threats D) Only high-priority areas require the insurance of contingency plans E) Contingency plans should be as simple as possible 94) What permits quick response to change, prevents panic in crisis situations, and makes managers more adaptable? 94) A) Taking corrective actions B) Measuring performance C) Contingency planning D) Auditing E) Implementing a balanced scorecard 95) What term refers to a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria, and communicating the results to interested users? 95) A) R&D B) Innovation C) Accounting D) Strategic Management E) Auditing 96) Climate models are projecting hotter, drier, and less predictable climates, resulting in a significant drop in water run-off in most of the Middle East and North Africa by 96) A) 2040 B) 2060 C) 2050 D) 2030 E) 2020 97) By 2050, the water run-off in the Middle East and North Africa region is predicted to drop by percent 97) A) 20 to 30 B) 30 to 40 10 to 20 C) D) less than 10 E) 50 98) Which type of auditors are specifically responsible for safeguarding the assets of a company? 98) A) Research auditors B) Government auditors C) Internal auditors D) External auditors E) Independent auditors 99) Product design, manufacturing, transportation, customer use, packaging, product disposal and corporate rewards should reflect considerations to develop constructive relations with employees, consumers, suppliers and distributors 99) A) profit B) customer C) environmental D) top-management E) union 100) Most strategy literature advocates that strategic management is 100) _ A) more of a science than an art B) based on intuition rather than analysis C) based on analysis rather than research D) more of an art than a science E) based on creativity rather than intuition 101) All of the following are reasons to be completely open with the strategy process except 101) _ A) investors, creditors and other stakeholders have greater basis for supporting a firm that is open B) openness limits rival firms from imitating or duplicating the firm's strategies C) participation and openness enhances understanding, commitment and communication within the firm D) visibility promotes democracy whereas secrecy promotes autocracy E) managers, employees and other stakeholders can readily contribute to the process 102) Which of the following is not a reason why some firms prefer to conduct strategic-planning in secret? 102) _ A) Participants in a visible strategy process become more attractive to rival firms, who may lure them away B) It limits criticism, second-guessing and hindsight C) Dissemination of a firm's strategies may translate into competitive intelligence for rival firms D) It enhances understanding, commitment and communication within the firm E) Secrecy limits rival firms from imitating or duplicating the firm's strategies ESSAY Write your answer in the space provided or on a separate sheet of paper 103) Explain why strategy evaluation can be a complex and sensitive undertaking 104) Discuss some of the reasons why strategy evaluation is becoming increasingly difficult with the passage of time 105) Compare and contrast two of Rumelt's four criteria for evaluating strategies 106) Describe each of the activities that comprise strategy evaluation 107) What are the most commonly used quantitative criteria to evaluate strategies? Give several examples of these criteria 108) Discuss the different perspectives and concerns of the Balanced Scorecard 109) Identify some important guidelines for effective strategic management 110) Describe the seven-step process of effective contingency planning in strategy evaluation 111) Individuals who perform audits can be divided into three groups Identify these three groups and give an example of each 112) Discuss climate change in the Arab World 1) TRUE 2) TRUE 3) TRUE 4) FALSE 5) FALSE 6) TRUE 7) FALSE 8) FALSE 9) TRUE 10) TRUE 11) FALSE 12) TRUE 13) FALSE 14) FALSE 15) FALSE 16) FALSE 17) TRUE 18) FALSE 19) TRUE 20) FALSE 21) TRUE 22) TRUE 23) FALSE 24) FALSE 25) TRUE 26) TRUE 27) TRUE 28) TRUE 29) TRUE 30) FALSE 31) TRUE 32) TRUE 33) TRUE 34) FALSE 35) FALSE 36) TRUE 37) TRUE 38) FALSE 39) FALSE 40) TRUE 41) FALSE 42) TRUE 43) FALSE 44) TRUE 45) FALSE 46) TRUE 47) TRUE 48) TRUE 49) FALSE 50) TRUE 51) FALSE 52) D 53) A 54) B 55) C 56) A 57) B 58) B 59) B 60) B 61) A 62) E 63) C 64) A 65) C 66) C 67) D 68) E 69) C 70) D 71) A 72) D 73) A 74) E 75) B 76) A 77) A 78) E 79) D 80) A 81) A 82) B 83) B 84) E 85) E 86) E 87) D 88) E 89) B 90) B 91) A 92) C 93) B 94) C 95) E 96) C 97) A 98) C 99) C 100) A 101) B 102) D 103) Strategy can be a complex and sensitive undertaking because too much emphasis on evaluating strategies may be expensive and counterproductive No one likes to be evaluated too closely! The more managers attempt to evaluate the behavior of others, the less control they have Yet too little or no evaluation can create even worse problems Strategy evaluation is essential to ensure stated objectives are being achieved 104) Possible answers include domestic and world economies were more stable in years past; both product life cycles and product development cycles were longer; technological advancement was slower; change occurred less frequently; there were fewer competitors; foreign companies were weak; and there were more regulated industries Other reasons include a dramatic increase in the environment's complexity; the increasing number of variables; the rapid rate of obsolescence of even the best plans; the increase in the number of both domestic and world events affecting organizations; and the decreasing time span for which planning can be done with any degree of certainty 105) Rumelt's four criteria for evaluating strategies are consistency, consonance, feasibility and advantage Students should take their answers from Table 11-1 on page 351, which provides descriptions of each 106) The activities that comprise strategy evaluation are 1) reviewing bases of an organization's strategy, 2) measuring organizational performance and 3) taking corrective actions Please refer to pages 355-358 for descriptions of each activity 107) Quantitative criteria commonly used to evaluate strategies are financial ratios, which strategists use to make three critical comparisons 1) comparing the firm's performance over different time periods, 2) comparing the firm's performance to that of competitors and 3) comparing the firm's performance to industry averages Some particularly useful key financial ratios used as criteria for strategy evaluation are 1) ROI, 2) ROE, 3) profit margin, 4) market share, 5) debt to equity, 6) earnings per share, 7) sales growth and 8) asset growth 108) The Balanced Scorecard is a process that allows firms to evaluate strategies from four perspectives financial performance, customer knowledge, internal business processes, and learning and growth It aims to balance long-term concerns with short-term concerns, financial with non-financial concerns, and internal with external concerns It should answer the following questions How well is the firm improving and creating value along measures such as innovation, technological leadership, product quality, operational process efficiencies, and so on? How well is the firm sustaining and even improving upon its core competencies and competitive advantages? How satisfied are the firm’s customers? 109) Please refer to the entire discussion on pages 361-362 under Characteristics of an Effective Evaluation System 110) The suggested seven-step process of effective contingency planning is as follows 1) identify both beneficial and unfavorable events that could possibly derail the strategy or strategies; 2) specify trigger points and calculate when contingent events are likely to occur; 3) assess the impact of each contingent event; 4) develop contingency plans; 5) assess the counter impact of each contingency plan; 6) determine early warning signals for key contingent events and monitor them; and 7) for contingent events with reliable early warning signals, develop advance action plans to take advantage of the available lead time 111) People who perform audits can be divided into three groups independent auditors, government auditors and internal auditors An example of an independent auditor is the CPA at Arthur Andersen public accounting firm The National Audit Court and the Central Autiting Organization are examples of government auditors in the Arab world Employees within an organization who are responsible for safeguarding company assets, for assessing the efficiency of company operations and for ensuring the generally accepted business procedures are examples of internal auditors 112) The Middle East and North Africa is considered one of the most vulnerable regions to climate change The 2007 Intergovernmental Panel on Climate Change (IPCC) report estimates an increase in temperature in the Middle East and North Africa up to degrees Celsius in the next fifteen to twenty years, and over degrees Celsius by the end of the century The projected higher temperature and reduced precipitation is expected to have a combined effect that will increase the likelihood of droughts The vulnerability of the region to climate change is aggravated by the significant dependence on climate-sensitive agriculture, the concentration of population and economic activity in flood-prone urban coastal zones, and the presence of conflict-ridden areas where climateinduced resource scarcity could escalate violence and political instability even beyond the region's boundaries ... Financial ratios are used to compare a firm's performance over different time periods, compare the firm's performance to industry averages, and compare a firm's performance with 76) A) the performance... performance of competitors B) overall business standards C) the performance of international firms D) the performance of suppliers E) non-financial ratios 77) Most quantitative criteria are geared to... aspects of the present strategic course B) copy the actions of major competitors C) add additional funds to the present strategic plan D) continue on the present strategic course E) take corrective