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### Tb07

1. 1. 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
2. 2. 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
5. 5. 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
6. 6. 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
8. 8. 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
9. 9. 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
10. 10. 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
11. 11. 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
12. 12. 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
13. 13. 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
15. 15. 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
16. 16. 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