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    Tb07 Tb07 Document Transcript

    • CHAPTER 7: PLANNING AND STRATEGY Test Correlation Table Question Types/Level of Difficulty LEARNING OBJECTIVES Easy Moderate Difficult 1. Explain the importance of the TF — 1, 2, 3 4, 5 planning function. MC 1, 2 3 4, 5 ES — 1 — 2. Describe the core components of TF 6, 7, 12 8, 10, 11 9, 13 strategic and tactical planning. MC 6, 8, 9, 12, 14, 7, 13, 15, 18, 19, 10, 11, 28, 30 16, 17, 24, 25, 20, 21, 22, 23, 27, 29 26, 31 ES — 2 3 3. Discuss the effects of degree of TF 14, 16 — 15 diversification on planning. MC 35, 37, 38, 40 32, 34, 36, 41, 33, 39, 42, 43 44 ES — 4 — 4. Describe the three basic levels of TF — 17, 18, 19, 20, 21 strategy and planning. 22, 23, 24 MC 45, 47, 50, 52, 49, 51, 59, 60, 46, 48, 53, 55, 54, 58, 62, 63, 64, 69 56, 57, 61, 66, 70 65, 67, 68 ES — — 5 5. State the eight primary tasks of TF 28 25, 26, 29 27 the planning process. MC 71, 72, 73, 81, 75, 76, 79, 80, 74, 77, 78, 86, 82, 83, 88, 90, 84, 85, 87, 89, 91, 94, 95, 98 92, 99 93, 96, 97, 100 ES — 6 7 6. Explain the generic competitive TF 30, 32, 33 31 — strategies model. MC 101, 102, 104, 103, 106 105 107 ES — 8 — 167
    • CHAPTER 7: PLANNING AND STRATEGY True/False Questions Learning Objective 1 1. Johnson & Johnson considers their first responsibility to be making a sound profit for stockholders. ANSWER: F, Knowledge, Moderate, p. 178 2. When planning is done properly, it fosters organization-wide learning, including the discovery of key problems, opportunities, and new strategies. ANSWER: T, Knowledge, Moderate, p. 179 3. Planning is defined as identifying organizational controls and developing ways to implement them. ANSWER: F, Knowledge, Moderate, pp. 178–179 4. The ability to plan by an individual, team, or organization is embedded in four of the six managerial competencies. ANSWER: F, Knowledge, Difficult, pp. 178–179 5. Johnson & Johnson’s organization wide planning involves the principle of decentralized management. ANSWER: T, Knowledge, Difficult, p. 179 Learning Objective 2 6. Strategic planning is the process of diagnosing the organization’s environments, deciding on a mission and vision, developing overall goals, creating and selecting general strategies, and allocating resources. ANSWER: T, Knowledge, Easy, p. 179 7. Most large organizations use contingency planning for unexpected, major and quick changes in the environment that will have a significant impact on the organization and that will require an immediate response. ANSWER: T, Knowledge, Easy, p. 179 8. Dell Computer’s mission statement includes: “To add value to our communities through diversity, environmental, and citizenship initiatives.” ANSWER: F, Knowledge, Difficult, p. 181 9. Goals must be expressed quantitatively, not qualitatively. ANSWER: F, Knowledge, Difficult, p. 181 168
    • CHAPTER 7: PLANNING AND STRATEGY 10. A firm’s mission expresses its fundamental aspirations and purpose. ANSWER: F, Knowledge, Moderate, p. 181 11. The strategies of an organization are what it is committed to achieving. ANSWER: F, Knowledge, Moderate, p. 182 12. When an organization allocates resources, it divides money, people, facilities and equipment, land, and other resources among various current and new business opportunities, functions, projects, and tasks. ANSWER: T, Knowledge, Easy, p. 183 13. Tactical planning is the process of making detailed decisions about what to do, who will do it, and how to do it, with a time horizon of four years or more. ANSWER: F, Knowledge, Difficult, p. 183 Learning Objective 3 14. The variety of goods and/or services produced and the number of different markets served constitutes an organization’s level of diversification. ANSWER: T, Knowledge, Easy, p. 183 15. A firm’s diversification level may be in the form of single business, dominant business, relative business, or nonrelative business. ANSWER: F, Knowledge, Difficult, p. 186 16. An unrelated-business firm provides diverse products to many different markets. ANSWER: T, Knowledge, Easy, p. 186 Learning Objective 4 17. Corporate-level planning and strategy guides the overall direction of firms having more than one line of business. ANSWER: T, Knowledge, Moderate, p. 187 18. Top corporate managers do not determine the role of each separate business within the organization, lower level managers do that. ANSWER: F, Knowledge, Moderate, p. 188 169
    • CHAPTER 7: PLANNING AND STRATEGY 19. When a company enters the businesses of its customers in order to get closer to their ultimate (end user) customers, this is known as forward integration. ANSWER: T, Knowledge, Moderate, p. 189 20. The five common corporate-level growth strategies are: forward integration, backward integration, horizontal integration, vertical integration, and convergent integration. ANSWER: F, Knowledge, Moderate, p. 189 21. Concentric diversification is an alternative to traditional forms of backward, forward, and horizontal integration. ANSWER: F, Knowledge, Difficult, p. 189 22. Conglomerate diversification is the act of adding unrelated goods or services to a firm’s line of businesses. ANSWER: T, Knowledge, Moderate, p. 190 23. The corporate-level strategy refers to the resources allocated and actions taken to achieve desired goals in serving a specific market with a highly interrelated set of goods and/or services. ANSWER: F, Knowledge, Moderate, p. 191 24. The vertical integration strategy refers to the interrelated actions and resource commitments established for operations, marketing, human resources, finance, legal services, accounting, and the organization’s other functional areas. ANSWER: F, Knowledge, Moderate, p. 192 Learning Objective 5 25. In practice, managers and team involved in business-level planning often jump back and forth between the eight tasks in the planning process. They may even skip phases as they develop their plans. ANSWER: T, Knowledge, Moderate, p. 193 26. Task 1 of the planning process involves diagnosing the firm’s opportunities and threats. ANSWER: F, Knowledge, Moderate, p. 193 27. The situations that tend to make suppliers more powerful are similar to those that make customers more powerful. ANSWER: T, Knowledge, Difficult, p. 195 170
    • CHAPTER 7: PLANNING AND STRATEGY 28. A company’s core competencies are the strengths that make it distinctive and more competitive by providing goods or services that have unique value to customers. ANSWER: T, Knowledge, Easy, p. 195 29. A market penetration strategy involves seeking new and different markets for current products. ANSWER: F, Knowledge, Moderate, p. 196 Learning Objective 6 30. The product differentiation strategy is dominant in much of the automobile industry. ANSWER: T, Knowledge, Easy, p. 200 31. A framework that describes strategies that all types of organizations can use is a Universal Model. ANSWER: F, Knowledge, Moderate, p. 199 32. Malone Hardware seeks to offer its customers lower prices than any other hardware store in town. Jones is following the focus strategy. ANSWER: F, Application, Easy, pp. 200–201 33. The Cotton District Grill has a strategy that involves competing in a specific restaurant niche by serving the unique needs of certain customers. The Grill is following a product differentiation strategy. ANSWER: F, Application, Easy, p. 200 Multiple Choice Questions Preview 1. The strategic business model of Johnson & Johnson is broadly based in __________. a. household products b. human health care c. boat engines and equipment d. consumer needs ANSWER: B, Knowledge, Easy, p. 178 171
    • CHAPTER 7: PLANNING AND STRATEGY Learning Objective 1 The Planning Function 2. Which of the following is not something that successful planning should assist the organization to accomplish? a. discovering future opportunities b. anticipating and avoiding future problems c. developing courses of action d. Successful planning should assist the organization in accomplishing all of the above. ANSWER: D, Knowledge, Easy, p. 179 3. The most basic managerial function is __________. a. organizing b. planning c. directing d. leading ANSWER: B, Knowledge, Moderate, p. 178 4. Planning should improve the odds of achieving an organization’s goals by _________. a. creating desirable change b. improving productivity c. maintaining organizational stability d. all of the above ANSWER: D, Knowledge, Difficult, p. 179 5. William Weldon, CEO of Johnson & Johnson says, “Our decentralized management system gives us a __________.” a. method to accurately appraise profitability for each business unit b. greater opportunity to recognize local talent c. sense of ownership in local markets d. completely different approach for each market ANSWER: C, Knowledge, Difficult, p. 179 Learning Objective 2 Two Types of Planning 6. The process of diagnosing the organization’s environments, deciding on a mission and vision, developing overall goals, creating and selecting general strategies, and allocating resources is _________. a. strategic planning b. tactical planning c. strategic control d. operational planning ANSWER: A, Knowledge, Easy, p. 179 7. Strategic planning involves developing and analyzing all of the following except __________. 172
    • CHAPTER 7: PLANNING AND STRATEGY a. mission b. daily operational goals c. the internal environment d. the external environment ANSWER: B, Knowledge, Moderate, p. 179 8. Preparation for unexpected, major, and quick changes in the environment is called __________ planning. a. cascade b. contingency c. tactical d. DFD (design for deployment) ANSWER: B, Knowledge, Easy, p. 179 9. __________ had a contingency communication plan that worked well after the September 11 attacks, but they have now additionally routed their telecommunications channels through multiple access points. a. Verizon b. The New York Stock Exchange c. The Bank of New York d. American Airlines ANSWER: C, Knowledge, Easy, p. 180 10. The Bank of New York has established an “active-active” business model which uses __________. a. multiple sites for identical functions b. cross training of less critical functions c. greater geographic diversity across the country d. all of the above ANSWER: A, Knowledge, Difficult, p. 180 11. Generally, no more than _____ potentially critical events should be emphasized in contingency planning. a. 2 b. 5 c. 9 d. 12 ANSWER: B, Knowledge, Difficult, p. 179 12. An organization’s purpose or reason for existing is known as a _________. a. mission b. rationale c. scenario d. strategy ANSWER: A, Knowledge, Easy, p. 181 13. Which of the following questions is not often answered in a mission statement? a. What business are we in? 173
    • CHAPTER 7: PLANNING AND STRATEGY b. Who are we? c. What are we about? d. How will we achieve our goals? ANSWER: D, Knowledge, Moderate, p. 181 14. A mission statement is meaningful only if it acts as a __________ for guiding strategic decisions and achieving an organization’s long-term goals. a. strategic plan b. unifying force c. tactical plan d. vision ANSWER: B, Knowledge, Easy, p. 181 15. A(n) __________ should encourage the organization’s members to think and act strategically—not just once a year but every day. a. operational tactic b. HRM statement c. contingency plan d. mission statement ANSWER: D, Knowledge, Moderate, p. 181 16. A __________ expresses an organization’s fundamental aspirations and purpose, usually be appealing to its members’ hearts and minds. a. strategy b. mission c. vision d. plan ANSWER: C, Knowledge, Easy, p. 181 17. A vision statement adds _________ to a mission statement if it lacks one. a. “strategy” b. “soul” c. “mind” d. “body” ANSWER: B, Knowledge, Easy, p. 181 18. Dell Computers’ vision is to __________. a. lead the Internet economy b. sell the most computers c. bring value to communities d. become a global innovator ANSWER: C, Knowledge, Moderate, p. 181 174
    • CHAPTER 7: PLANNING AND STRATEGY 19. An organization’s __________ represent what it is committed to achieving. a. tactical plans b. strategic controls c. feedback systems d. goals ANSWER: D, Knowledge, Moderate, p. 181 20. Goals may be expressed __________. a. qualitatively b. quantitatively c. covertly d. both a and b are correct ANSWER: D, Knowledge, Moderate, p. 181 21. Which of the following is not a goal of Johnson & Johnson discussed in the text? a. achieve double-digit revenue growth per year b. reduce carbon dioxide emissions c. create injury-free workplaces d. improve quality of life for customers ANSWER: A, Knowledge, Moderate, p. 181 22. The major courses of action that an organization takes to achieve its goals are called __________. a. contingency plans b. tactical plans c. operational plans d. strategies ANSWER: D, Knowledge, Moderate, p. 182 23. A key challenge for organizations is to develop ___________ that are(is) at least partially unique relative to competitors or to pursue strategies similar to those of competitors but in different ways. a. goals b. a vision c. plans d. strategies ANSWER: D, Knowledge, Moderate, p. 182 24. The allocation of __________ is (are) considered a function of resource allocation. a. money b. people c. facilities d. all of the above ANSWER: D, Knowledge, Easy, p. 183 175
    • CHAPTER 7: PLANNING AND STRATEGY 25. The earmarking of money, through budgets, for various uses is known as __________. a. tactical planning b. resource allocation c. cost-based accounting d. deployment ANSWER: B, Knowledge, Easy, p. 183 26. John Wayne Productions has decided to increase the number of Western-theme movies that it produces each year. To accomplish this goal, the company has increased its payroll budget and hired additional actors. John Wayne Productions has engaged in __________. a. resource allocation b. resource-based costing c. resource planning d. resource execution ANSWER: A, Application, Moderate, p. 183 27. The process of making concrete decisions about what to do, who will do it, and how to do it—within a time horizon of one year or less—is known as __________. a. resource allocation b. tactical planning c. contingency planning d. right-sizing ANSWER: B, Knowledge, Easy, p. 183 28. Tactical planning involves all of the following steps except __________. a. developing budgets for each department b. developing budgets for each project c. deciding on courses of action for diversification d. developing quantitative goals ANSWER: C, Knowledge, Difficult, p. 183 29. Departmental managers and employee teams develop tactical plans to anticipate or cope with the actions of __________. a. competitors b. other departments c. customers d. all of the above ANSWER: D, Knowledge, Easy, p. 183 176
    • CHAPTER 7: PLANNING AND STRATEGY 30. Dell Computer’s ability to __________, and tailor products and services accordingly, is the key to having the lowest cost and most effective customer service. a. control the market b. segment the market c. respond to the market d. sell direct to the public ANSWER: B, Knowledge, Difficult, p. 182 31. Which of the following is not one of the four interrelated competitive strategies developed by Dell Computer? a. speed to market b. superior customer service c. early exploitation of the Internet d. All of the above are among the four interrelated competitive strategies. ANSWER: D, Knowledge, Moderate, pp. 182–183 Learning Objective 3 Degree of Diversification and Planning 32. __________ refers to the variety of goods and/or services produced by an organization and the number of different markets it serves. a. Adaptation b. Strategy c. Diversification d. Functionality ANSWER: C, Knowledge, Moderate, p. 183 33. Which of the following is not one of the questions managers should consider when trying to identify the potential risks and opportunities of diversification? a. What can we do better than other firms if we enter a new market? b. What strategic resources are needed to succeed in the new market? c. Will we be simply a player in the new market or will we emerge a winner? d. What will this diversification move save in costs? ANSWER: D, Knowledge, Difficult, pp. 184–185 34. Ruben Alvarez is interested in diversification as a means of understanding levels of strategy and planning. A firm’s diversification level may be all of the following except a __________-business firm. a. single b. dominant c. related d. vertical ANSWER: D, Knowledge, Moderate, p. 186 177
    • CHAPTER 7: PLANNING AND STRATEGY 35. A firm that provides a limited number of goods or services to one segment of a particular market is known as a(n) __________-business firm. a. unrelated b. related c. dominant d. single ANSWER: D, Knowledge, Easy, p. 186 36. Southwest Airlines provides one type of transportation service to travelers. This is known as a(n) __________-business firm. a. single b. dominant c. related d. integrated ANSWER: A, Application, Moderate, p. 186 37. A firm that serves various segments of a particular market is known as a(n) __________-business firm. a. single b. dominant c. related d. unrelated ANSWER: B, Knowledge, Easy, p. 186 38. A firm that provides a variety of similar goods and/or services is known as a(n) __________-business firm. a. single b. dominant c. related d. unrelated ANSWER: C, Knowledge, Easy, p. 186 39. The divisions of Foley Brothers Limited generally operate in the same or similar markets, use similar technologies, share common distribution channels and benefit from common strategic assets. Foley Brothers is a(n) __________-business firm. a. single b. dominant c. related d. concentric ANSWER: C, Application, Difficult, p. 186 178
    • CHAPTER 7: PLANNING AND STRATEGY 40. A firm that provides diverse products (goods and/or services) to many different markets is known as a(n) __________-business firm. a. single b. dominant c. related d. unrelated ANSWER: D, Knowledge, Easy, p. 186 41. __________ is a firm that consists of distinct companies that have little or no relation to each other in terms of goods, services, or customers served. a. A megabusiness b. A limited partnership c. A conglomerate d. A holding company ANSWER: C, Knowledge, Moderate, p. 186 42. Many North American firms have backed away from conglomerate diversification by selling off __________. a. unrelated businesses b. related businesses c. dominant businesses d. none of the above ANSWER: A. Knowledge, Difficult, p. 186 43. GE needs board of directors members to do all of the following except __________. a. represent diverse industries b. be critical of the company c. have greater involvement in the company d. approve financial strategies ANSWER: A, Knowledge, Difficult, p. 187 44. GE implemented functional documents to fully comply with Sarbanes-Oxley legislation, as well as their own vision of __________. a. environmental protection b. corporate governance c. diversity in the workforce d. homeland security ANSWER: B, Knowledge, Moderate, p. 187 179
    • CHAPTER 7: PLANNING AND STRATEGY Learning Objective 4 Levels of Strategy and Planning 45. __________-level planning and strategy guides the overall direction of firms having more than one line of business. a. Functional b. Business c. Corporate d. Diversification ANSWER: C, Knowledge, Easy, p. 187 46. Corporate strategies focus on all of the following except __________. a. the types of businesses the firm wants to engage in b. ways to acquire or divest businesses c. allocation of resources among the businesses d. ways to develop corporate energy ANSWER: D, Knowledge, Difficult, pp. 187–188 47. A(n) __________ is a division or subsidiary of a firm that provides a distinct product or service and often has its own mission and goals. a. functional-business unit (FBU) b. integrative-business unit (IBU) c. tactical-business unit (TBU) d. strategic-business unit (SBU) ANSWER: D, Knowledge, Easy, p. 188 48. Which of the following statements is not true concerning SBUs? a. An SBU may have a well-defined set of customers. b. An SBU may cover a specific geographic area. c. An SBU is usually evaluated on the basis of its own income statement. d. Corporate-level managers develop the plans and strategies for each SBU. ANSWER: D, Knowledge, Difficult, pp. 188–189 49. __________ is not a common growth strategy. a. Backward integration b. Forward integration c. Matrix diversification d. Conglomerate diversification ANSWER: C, Knowledge, Moderate, pp. 189–190 180
    • CHAPTER 7: PLANNING AND STRATEGY 50. __________ occurs when a company enters the business of its suppliers, usually to control component quality, on-time delivery, or stable prices. a. Forward integration b. Backward integration c. Horizontal integration d. Concentric diversification ANSWER: B, Knowledge, Easy, p. 189 51. Community Gas and Electric provides utilities for three counties. The company recently started drilling its own gas wells in order to gain control over price and availability of product for its pipelines. C. G. & E. is following a strategy of __________. a. forward integration b. backward integration c. horizontal integration d. conglomerate diversification ANSWER: B, Application, Moderate, p. 189 52. When a company enters the businesses of its customers, it is involved in __________. a. forward integration b. backward integration c. horizontal integration d. concentric diversification ANSWER: A, Knowledge, Easy, p. 189 53. Harris Ranch, a cattle ranch and commercial feedlot operation located along Interstate Highway 5 in California, opened a restaurant to serve its high quality beef to travelers. This decision characterizes __________ integration. a. forward b. backward c. horizontal d. conglomerate ANSWER: A, Application, Difficult, p. 189 54. __________ integration occurs when a company acquires a competitor to consolidate and extend its market share. a. Forward b. Backward c. Horizontal d. Conglomerate ANSWER: C, Knowledge, Easy, p. 189 181
    • CHAPTER 7: PLANNING AND STRATEGY 55. Intercontinental Printing, Inc. is growing by purchasing established printing companies. Intercontinental is following a strategy of __________. a. forward integration b. backward integration c. horizontal integration d. conglomerate diversification ANSWER: C, Application, Difficult, p. 189 56. The _________ strategy is an alternative to traditional forms of backward, forward, and horizontal integration. a. related b. benchmarking c. unrelated d. alliance ANSWER: D, Knowledge, Difficult, p. 189 57. The Harbert Corporation owns a valuable piece of commercial real estate. JWA, Inc. has extensive experience in developing and operating shopping centers. They form a joint venture, called Mall Associates, to develop Harbert’s site. Mall Associates is an example of a(n) __________ strategy. a. backward integration b. horizontal integration c. forward integration d. alliance ANSWER: D, Application, Difficult, p. 189 58. When a firm acquires or starts a business related to the firm’s existing business in terms of technology, markets, or products, it has engaged in __________ diversification. a. horizontal b. concentric c. backward d. forward ANSWER: B, Knowledge, Easy, p. 190 59. All of the following are examples of concentric diversification, or related diversification, except __________. a. a general set of customers b. incompatible managerial skills c. overlapping distribution channels d. similar technology ANSWER: B, Knowledge, Moderate, p. 190 182
    • CHAPTER 7: PLANNING AND STRATEGY 60. The merger between America Online (AOL) and Time Warner was viewed by top management as a form of ______________ diversification. a. forward b. backward c. horizontal d. concentric ANSWER: D, Application, Moderate, p. 190 61. Lakewood, Inc. is a real estate company. It recently acquired companies operating in the floral, tire, and athletic equipment industries. Lakewood is using a __________ strategy. a. conglomerate b. related diversification c. concentric diversification d. dominant business firm ANSWER: A, Application, Difficult, p. 190 62. __________ diversification occurs when a firm adds unrelated goods or services to its line of business. a. Concentric b. Conglomerate c. Horizontal d. Backward ANSWER: B, Knowledge, Easy, p. 190 63. __________ strategy refers to the resources allocated and actions taken to achieve desired goals in serving a specific market with a highly interrelated set of goods and/or services. a. Forward integration b. Single-business c. Horizontal integration d. Business-level ANSWER: D, Knowledge, Easy, p. 191 64. Which of the following questions is not one that management must address when planning and formulating strategies that focus on customers? a. Who will be served? b. What customer needs will be satisfied? c. How will customers’ needs be satisfied? d. How will our technology needs change? ANSWER: D, Knowledge, Moderate, p. 191 183
    • CHAPTER 7: PLANNING AND STRATEGY 65. Warren Buffett’s strategy with Berkshire Hathaway can be characterized as __________. a. concentric b. conglomerate c. backward d. forward ANSWER: B, Knowledge, Easy, pp. 190–191 66. Warren Buffett’s unique success with Berkshire Hathaway is characterized by all of the following comments on the way he manages his operations except: a. ”To be a winner, work with a winner.” b. ”Our actions are based on long-term interests rather than short-term, expedient solutions.” c. ”My job is to stay out of their way and allocate whatever excess capital their businesses generate.” d. ”I regularly hand bats to many of the heaviest hitters in American business.” ANSWER: B, Knowledge, Difficult, pp. 190–191 67. __________ strategies specify how the firm will develop and utilize its production capabilities to support the firm’s business-level strategies. a. Operations b. Business-level c. Marketing d. Functional-level ANSWER: A, Knowledge, Easy, p. 192 68. A __________ strategy refers to the actions and resource commitments established for operations, marketing, human resources, finance, legal services, accounting, and the organization’s other functional areas. a. corporate-level b. business-level c. functional-level d. comprehensive-level ANSWER: C, Knowledge, Easy, p. 192 69. Functional-level plans and strategies should be designed to __________ business-level strategies and plans. a. overshadow b. support c. compensate for d. compete with ANSWER: B, Knowledge, Moderate, p. 192 184
    • CHAPTER 7: PLANNING AND STRATEGY 70. The Dodge Trucks Division of DaimlerChrysler has a business-level strategy based on quality. This requires that Ron Fielder, a Dodge Division manager, develop strong relationships with suppliers who can consistently provide high quality inputs. Ron is responsible for one of DaimlerChrysler’s __________ strategies. a. operations b. functional-level c. business-level d. integration ANSWER: B, Application, Difficult, p. 192 Learning Objective 5 Tasks of Planning 71. There are _____ primary tasks in the business-level planning process. a. 3 b. 5 c. 8 d. 12 ANSWER: C, Knowledge, Easy, p. 193 72. The first task in the strategic planning process is to begin to develop an organization’s __________. a. tactical plans b. strategic plans c. new weaknesses d. mission and goals ANSWER: D, Knowledge, Easy, pp. 193–194 73. Karen Cox is involved in the strategic planning process for her Web development company. She is presently pondering such questions as: What business are we in? and What results do we want to achieve?” Which task in the business-level planning process is Karen completing? a. Task 1 b. Task 2 c. Task 3 d. Task 4 ANSWER: A, Application, Easy, pp. 193–194 74. Which of the following environmental force(s) can represent significant threats or opportunities for an organization? a. competitors b. financial resources c. technological capabilities d. all of the above ANSWER: A, Knowledge, Difficult, p. 194 185
    • CHAPTER 7: PLANNING AND STRATEGY 75. Michael Porter designed a framework to diagnose competitive forces confronting a firm at any particular time. These forces include all of the following except __________. a. transformational bargaining power b. customer bargaining power c. supplier bargaining power d. threat of substitute products ANSWER: A, Knowledge, Moderate, pp. 194–195 76. __________ is often a response to high profits earned by established firms and/or rapid growth in an industry. a. The entry of new competitors b. The increased rivalry among competitors c. The increased bargaining power of suppliers d. The increased bargaining power of customers ANSWER: A, Knowledge, Moderate, p. 194 77. Many automakers and dealers have introduced special financing and rebate programs and have extended the length of coverage of their warranties. This demonstrates __________. a. the threat of new competitors b. customer bargaining power c. supplier bargaining power d. the threat of substitute goods or services ANSWER: B, Application, Difficult, p. 195 78. The Newton Controls Manufacturing Corporation has eliminated certain features of their products without losing customers. This action best represents __________. a. a threat of new competitors b. decreased supplier bargaining power c. increased supplier bargaining power d. an increase in rivalry among existing firms ANSWER: C, Application, Difficult, p. 195 79. One of Southwest Airlines’ goals is to get consumers to fly on trips of about 100 to 700 miles instead of driving. Southwest is focusing on __________. a. identifying the threat of new competitors b. establishing customer bargaining power c. establishing supplier bargaining power d. establishing a substitute good or service ANSWER: D, Application, Moderate, p. 195 186
    • CHAPTER 7: PLANNING AND STRATEGY 80. __________ limit(s) the price that firms in a particular industry can charge for their products without risking a loss in sales. a. Substitutes b. Rivalry among firms c. New entrants d. Competitors ANSWER: A, Knowledge, Moderate, p. 195 81. Russell Athletic sells apparel to a __________ customer base: old, young, Asian, Hispanic, and African American. a. profitable b. low income c. diverse d. eccentric ANSWER: C, Knowledge, Easy, p. 195 82. Core organizational competencies represent __________. a. strengths b. weakness c. opportunities d. threats ANSWER: A, Knowledge, Easy, p. 195 83. The strengths that make an organization distinctive and more competitive by providing goods or services that have unique value its customers are known as __________ competencies. a. tactical b. financial c. core d. market-based ANSWER: C, Knowledge, Easy, p. 195 84. Nathan Cochran is a consultant with Steinbach Consulting. He is designing a basic framework for diagnosing the strengths and weaknesses of organizations. __________ is (are) not considered one of these components. a. Human resource skills b. Ability to adapt c. Customers d. Managerial depth ANSWER: C, Application, Moderate, p. 195 187
    • CHAPTER 7: PLANNING AND STRATEGY 85. From a business level perspective, ___________ fall(s) into three broad categories: superior technological know-how, reliable processes, and close relationships with external stakeholders. a. core competencies b. tactical planning c. strategic planning d. bargaining power of suppliers ANSWER: A, Knowledge, Moderate, p. 195 86. Most organizations find that assessing their __________ is easier than assessing their __________. a. weaknesses; strengths b. strengths; weaknesses c. opportunities; threats d. threats; opportunities ANSWER: B, Knowledge, Difficult, p. 196 87. Which of the following is not a basic growth strategy common to business-level planning and strategy? a. market penetration b. market development c. alliance development d. product development ANSWER: C, Knowledge, Moderate, pp. 196–197 88. The __________ strategy involves seeking growth in current markets with current products. a. market penetration b. market development c. market alliance d. market venture ANSWER: A, Knowledge, Easy, p. 196 89. AT&T reduced its residential long distance rates to attract new customers. AT&T is using the __________ strategy. a. market venture b. market import c. market alliance d. market penetration ANSWER: D, Application, Moderate, pp. 196–197 188
    • CHAPTER 7: PLANNING AND STRATEGY 90. The __________ strategy involves seeking new markets for current products. a. market penetration b. market development c. market alliance d. market venture ANSWER: B, Knowledge, Easy, p. 197 91. Which of the following is not one of the principal ways to implement a market development strategy? a. enter new geographic markets b. develop new uses for current facilities c. develop new uses for current products d. All of the above are principal ways to implement a market development strategy. ANSWER: D, Knowledge, Difficult, p. 197 92. The __________ strategy involves developing new or improved goods or services for current markets. a. product penetration b. product reengineering c. market alliance d. product development ANSWER: D, Knowledge, Easy, p. 197 93. Samsung has introduced a steady new line of cellular phones. Samsung is following a __________ strategy. a. product amalgamation b. product reengineering c. market alliance d. product development ANSWER: D, Application, Moderate, p. 197 94. A strategic plan contains all of the following except __________. a. organizational mission and goals b. strategies for obtaining and utilizing the necessary technological, marketing, financial, and human resources to achieve the stated goals c. strategies for benchmarking d. strategies for developing and utilizing organizational and employee competencies ANSWER: C, Knowledge, Difficult, p. 198 95. The personal banker job at First American was changed to start handling walk-in traffic and trying to sell additional banking products. This was a result of __________. a. human resource management b. diversification c. strategic planning d. tactical planning ANSWER: D, Knowledge, Difficult, p. 198 189
    • CHAPTER 7: PLANNING AND STRATEGY 96. The purpose of __________ is to help implement __________. a. tactical plans; strategic plans b. strategic plans; tactical plans c. business strategies; corporate strategies d. corporate strategies; business strategies ANSWER: A, Knowledge, Moderate, p. 198 97. Middle and first-line managers and employee teams normally base tactical plans on the organization’s __________ plan. a. cultural b. staff c. diversification d. strategic ANSWER: D, Knowledge, Moderate, p. 198 98. Cameraworld.com sells quality camera and related products online and via telephone. The firm recently implemented a __________ plan to improve its order fulfillment and shipping system. Specifically, their warehouse was reorganized so that frequently ordered items were moved closest to the packing and shipping stations, and rarely ordered items were moved to the back of the warehouse. a. business-level b. strategic c. tactical d. diversification ANSWER: C, Application, Difficult, p. 198 99. Strategic and tactical planning must be accompanied by __________ to ensure the plans are implemented as intended and to evaluate the results of those results. a. controls b. the accounting function c. time constraints d. the information systems function ANSWER: A, Knowledge, Easy, pp. 198–199 100. Tony Mahoney realizes that the forces affecting organizations are constantly changing. Hence he sees __________ as a continuing and ongoing process. a. business-level strategy b. planning c. corporate-level strategy d. employee training ANSWER: B, Application, Moderate, p. 199 190
    • CHAPTER 7: PLANNING AND STRATEGY Learning Objective 6 Generic Competitive Strategies Model 101. The generic strategies model consists of _____ basic business-level strategies that can be applied to a variety of organizations in diverse industries. a. 2 b. 3 c. 4 d. none, because it is a corporate-level model ANSWER: C, Knowledge, Easy, p. 199 102. The __________ strategy emphasizes competing with all other firms in the industry by offering a product that customers perceive to be unique. a. differentiation b. cost leadership c. industry leadership d. concentric ANSWER: A, Knowledge, Easy, p. 199 103. Which of the following is not an example of a differentiation strategy? a. Mercedes-Benz—unique brand image b. BMW—innovative product design c. Lexus—customer service d. Wal-Mart—cost competitiveness ANSWER: D, Application, Moderate, p. 200 104. The __________ strategy emphasizes competing in the industry by providing a product at a price as low as or lower than competitors. a. differentiation b. cost leadership c. multidomestic d. diversification ANSWER: B, Knowledge, Easy, pp. 200–201 105. __________ is (are) associated with a cost leadership strategy. a. Utilizing facilities or equipment that yield high economies of scale b. Constantly striving to reduce per unit overhead, manufacturing, marketing, and follow-up service costs c. Minimizing labor-intensive personal services and sales forces d. All of the above ANSWER: D, Knowledge, Difficult, p. 200 191
    • CHAPTER 7: PLANNING AND STRATEGY 106. Delta Fried Catfish Restaurant opened in Freeport, Maine to serve the needs of a small segment of the population that prefers fried catfish to steamed lobster. Delta Fried Catfish is following a _________ strategy. a. broad b. narrow c. focused cost leadership d. specialized ANSWER: C, Application, Moderate, p. 201 107. The __________ strategy involves competing in a specific industry niche by serving the unique needs of certain customers or a specific geographic market. a. focused cost leadership b. narrow c. broad d. specialized ANSWER: A, Knowledge, Easy, p. 201 Essay Questions Learning Objective 1 1. How should planning should assist leaders and managers? a. Discovering new opportunities. b. Anticipating and avoiding future problems. c. Developing effective courses of action (strategies and tactics). d. Comprehending the uncertainties and risks with various options. Moderate, p. 179 Learning Objective 2 2. Describe the strategic planning process. a. Strategic planning is the process of diagnosing the organization’s external and internal environments. b. Strategic planning is the process of deciding on a vision and mission. c. Strategic planning is the process of developing overall goals. d. Strategic planning is the process of creating and selecting general strategies. e. Strategic planning is the process of allocating resources to achieve the organization’s goals. Moderate, p. 179 192
    • CHAPTER 7: PLANNING AND STRATEGY 3. Describe the tactical planning process. Tactical planning is the process of making detailed decisions about what do to, who will do it, and how to do it. Tactical planning normally involves a time horizon of one year or less. Middle and first-line managers and teams often are heavily involved in tactical planning. The tactical planning process generally includes: a. choosing specific goals and the means of implementing the organization’s strategic plan. b. deciding on courses of action for improving current operations. c. developing budgets for each department, division and project. Difficult, p. 183 Learning Objective 3 4. List and define the various degrees of diversification. a. A single-business firm provides a limited number of goods or services to one segment of a particular market. b. A dominant-business firm serves various segments of a particular market. c. A related-businesses firm provides a variety of similar goods and/or services. d. An unrelated-business firm provides diverse products (goods and/or services) to many different markets. Moderate, pp. 185–187 Learning Objective 4 5. Describe three of the five common corporate-level growth strategies. a. Forward integration occurs when a company enters the businesses of its customers, moving it closer to the ultimate consumer. b. Backward integration occurs when a company enters the businesses of its suppliers, usually to control component quality, on-time delivery, or stable prices. This approach is sometimes called an upstream strategy. c. Horizontal integration occurs when a company acquires a competitor to consolidate and extend its market share. d. Concentric diversification, sometimes called related diversification, occurs when a firm acquires or starts a business related to the firm’s existing business in terms of technology, markets, or products. e. Conglomerate diversification occurs when a firm adds unrelated goods or services to its line of businesses. Difficult, pp. 189–190 193
    • CHAPTER 7: PLANNING AND STRATEGY Learning Objective 5 6. Describe the relationship of strategy to tactics, and the ways in which First American Corporation (FAC) implemented tactical plans related to their new “customer intimate” strategy. Tactical plans are intended to help implement strategic plans. In order to become strategically more “customer intimate”, FAC decided to focus on three market segments – consumer, small, and midsize businesses. Tactically they first expanded the job of customer service representatives to handle routine tasks such as change of address that had previously been the responsibility of personal bankers. Personal bankers were then given the role of greeting and sales to walk-in customers. The bank’s most valuable customers were shifted to the responsibility of customer relationship managers who have strong relationship skills. Finally, the investment specialists were given an expanded set of investment products in a move toward becoming a full financial services company. Moderate, p. 198 7. What are four of the eight tasks of the strategic planning process? a. Develop the vision, mission, and goals b. Diagnose threats and opportunities c. Diagnose strengths and weaknesses d. Develop strategies e. Prepare strategic plan f. Prepare tactical plans g. Control and diagnose results h. Continue planning Difficult, pp. 193–199 Learning Objective 6 8. Explain the generic competitive strategies model. The generic competitive strategies model provides a framework of four basic business- level strategies for a variety of organizations in diverse industries. These four strategies include the following: a. The differentiation strategy involves competing by offering goods or services that customers perceive to be unique in ways that are important to them. b. The focused differentiation strategy involves competing in a specific niche by serving the unique needs of certain customers or a specific geographic market. c. The cost leadership strategy means competing by providing goods or services at a price as low as or lower than competitors’ prices. d. The focused cost leadership strategy refers to competing in a specific customer or geographic niche by providing goods or services at a price as low or lower than competitors’ prices. Moderate, pp. 199–201 194