Chapter 4: Foundations of Planning

1. All managers plan in some way, either formally or informally. Answer: True FalseDiff: 1 Page Ref: 110 Objective: 4.1

2. Informal plans are not recognized to be an effective form of planning. Answer: True FalseDiff: 2 Page Ref: 110 Objective: 4.1

3. At some point, all managers create formal plans. Answer: True FalseDiff: 2 Page Ref: 110 Objective: 4.1

4. Planning provides direction to managers and nonmanagers alike. Answer: True FalseDiff: 1 Page Ref: 110 Objective: 4.1

5. A key function of planning is to create goals. Answer: True FalseDiff: 2 Page Ref: 110 Objective: 4.1

6. Informal planning typically works better in large organizations. Answer: True FalseDiff: 2 Page Ref: 110 Objective: 4.1

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 FalseDiff: 2 Page Ref: 110 Objective: 4.1

8. Planning rarely improves teamwork and cooperation among employees. Answer: True FalseDiff: 2 Page Ref: 110 Objective: 4.1

9. An organization that fails to plan will find it hard to assess progress. Answer: True False

Diff: 2 Page Ref: 110 Objective: 4.1

10. A major argument against formal plans is that they can't replace intuition and creativity. Answer: True FalseDiff: 2 Page Ref: 111 Objective: 4.1

11. Formal planning can increase creativity in an organization. Answer: True FalseDiff: 2 Page Ref: 111 Objective: 4.1

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: True FalseDiff: 2 Page Ref: 111 Objective: 4.1

13. A major strength of formal planning is that it reinforces past successes and incorporates them into the future. Answer: True FalseDiff: 2 Page Ref: 111 Objective: 4.1

14. A major strength of formal planning is that it makes an organization rigid. Answer: True FalseDiff: 2 Page Ref: 112 Objective: 4.1

15. A major strength of formal planning is that it generally correlates with higher profits. Answer: True FalseDiff: 2 Page Ref: 112 Objective: 4.1

16. Successful planning depends more on what managers plan than the quality of their planning. Answer: True FalseDiff: 2 Page Ref: 112 Objective: 4.1

17. Research indicates that organizations that don't use formal planning always outperform organizations that do use formal planning. Answer: True FalseDiff: 2 Page Ref: 112 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 FalseDiff: 2 Page Ref: 112 Objective: 4.3

19. The first step in the strategic management process is analyzing the external environment. Answer: True FalseDiff: 2 Page Ref: 113 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 FalseDiff: 2 Page Ref: 114 Objective: 4.3

21. An external analysis will identify the threats to a company's well-being, but not opportunities for success. Answer: True FalseDiff: 2 Page Ref: 114 Objective: 4.3

22. Core competencies include an organization's major capabilities and its resources. Answer: True FalseDiff: 2 Page Ref: 114 Objective: 4.3

23. Capabilities are "what" an organization has; resources are "how" it uses what it has. Answer: True FalseDiff: 2 Page Ref: 114 Objective: 4.3

24. SWOT analysis includes the identification of an organization's strengths, weaknesses, opportunities, and threats. Answer: True FalseDiff: 1 Page Ref: 111 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 FalseDiff: 2 Page Ref: 113-115 Objective: 4.3

26. A corporate strategy may be a growth strategy, a stability strategy, or a renewal strategy. Answer: True False

Diff: 2 Page Ref: 116 Objective: 4.3

27. A diversification strategy focuses on a company becoming its own supplier of inputs. Answer: True FalseDiff: 2 Page Ref: 116 Objective: 4.3

28. A company with a stability strategy will plan to dramatically increase market share in a highly competitive market. Answer: True FalseDiff: 2 Page Ref: 116 Objective: 4.3

29. The most drastic renewal strategy an organization can carry out is a retrenchment strategy. Answer: True FalseDiff: 2 Page Ref: 117 Objective: 4.3

30. "Build a better mousetrap" is a way of describing a competitive advantage. Answer: True FalseDiff: 2 Page Ref: 117 Objective: 4.3

31. Innovation and super-high quality are typically the keys to a cost-leadership strategy. Answer: True FalseDiff: 2 Page Ref: 118 Objective: 4.3

32. A focus strategy seeks to appeal to a narrow segment of a market. Answer: True FalseDiff: 2 Page Ref: 118 Objective: 4.3

33. Customer service cannot be considered a strategic weapon for an organization. Answer: True FalseDiff: 2 Page Ref: 119 Objective: 4.3

34. Southwest Airlines studied race car pit crews as an example of benchmarking. Answer: True FalseDiff: 2 Page Ref: 121 Objective: 4.3

35. Goals are documents that outline how plans are to be carried out.

Answer:

True

False

Diff: 1 Page Ref: 121 Objective: 4.4

36. Traditional goal setting requires top managers to set goals that are carried out by the organizational levels below. Answer: True FalseDiff: 2 Page Ref: 122 Objective: 4.4

37. The key to MBO, or management by objectives, is that managers and subordinates mutually agree on goals. Answer: True FalseDiff: 2 Page Ref: 123 Objective: 4.4

38. Goals typically should be reserved for managers only. Goals should not be shared with subordinates. Answer: True FalseDiff: 2 Page Ref: 124 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: True FalseDiff: 2 Page Ref: 125 Objective: 4.4

40. A six-month plan qualifies as a short-term plan. Answer: True FalseDiff: 2 Page Ref: 125 Objective: 4.4

41. Directional plans leave no room for interpretation. Answer: True FalseDiff: 2 Page Ref: 125 Objective: 4.4

42. In general, upper-level managers focus on tactical or operational planning. Answer: True FalseDiff: 2 Page Ref: 126 Objective: 4.4

43. Buying a competitor's product for evaluation is a form of environmental scanning. Answer: True FalseDiff: 2 Page Ref: 130 Objective: 4.4

44. Which of the following is NOT a function of planning? A) defining goals B) settling disputes between employees C) coordinating organizational activities D) identifying a strategy for attaining goals Answer:Diff: 2 Page Ref: 110 Objective: 4.1

45. Planning is concerned with ________. A) neither ends nor means B) means only C) ends only D) both ends and means Answer:Diff: 1 Page Ref: 110 Objective: 4.1

46. In informal planning, goals are usually ________ shared with others in the organization. A) unwritten, but much is B) written, but little is C) unwritten and little is D) written and much is Answer:Diff: 2 Page Ref: 110 Objective: 4.1

47. Informal planning is ________. A) general and usually lacks continuity B) performed exclusively by middle managers C) always performed at the lowest organizational level D) more specific than formal planning Answer:Diff: 2 Page Ref: 110 Objective: 4.1

48. In formal planning, ________. A) very broad general goals are developed B) goals may be written or unwritten C) to maximize flexibility, specific goals are never spelled out D) specific goals covering a period of years are defined Answer:Diff: 2 Page Ref: 110 Objective: 4.1

49. Which of the following is NOT a reason for managers to plan? A) to establish goals

B) to deal with change C) to establish responsibility for mistakes D) to give direction to an organization Answer:Diff: 2 Page Ref: 110 Objective: 4.1

50. Planning gives organizations direction that primarily helps them ________. A) improve their image in the business community B) improve morale of all employees C) improve teamwork and coordinate activities D) improve morale of middle managers Answer:Diff: 2 Page Ref: 110 Objective: 4.1

51. Planning gives organizations a way to deal with change that ________. A) reduces uncertainty B) reduces certainty C) increases ambiguity D) eliminates all uncertainty Answer:Diff: 2 Page Ref: 110 Objective: 4.1

52. Organizations that don't formally plan may be more likely to have ________. A) legal problems B) a single department carrying out all company functions C) multiple departments performing the same task D) corrupt managers Answer:Diff: 2 Page Ref: 110 Objective: 4.1

53. One effect of planning on managers is that it forces them to ________. A) fear change B) work to prevent change C) ignore any change that doesn't directly affect them D) anticipate and consider the effect of change Answer:Diff: 2 Page Ref: 110 Objective: 4.1

54. Managers who fail to plan may ________. A) stimulate change B) be positively affected by change C) be adversely affected by change D) take advantage of change

Answer:Diff: 2 Page Ref: 110 Objective: 4.1

55. Which of the following is a frequently cited criticism of formal planning? A) Formal planning works well only for smaller companies. B) Plans take too long to create. C) Plans lock organizations into rigid goals and timetables. D) Plans create resentment within different levels of the organization. Answer:Diff: 3 Page Ref: 111 Objective: 4.1

56. One criticism of formal planning is that it focuses on how to beat the competition rather than how to ________. A) balance the organization's budget B) focus on new opportunities C) have cordial relationships with the competition D) cooperate with the competition Answer:Diff: 2 Page Ref: 111 Objective: 4.1

57. Failing to discard successful plans from the past is likely to lead to ________. A) more success because conditions are unlikely to change in the future B) failure because conditions are likely to change in the future C) failure because of the low quality of the plans D) success because of the high quality of the plans Answer:Diff: 3 Page Ref: 111 Objective: 4.1

58. Studies of performance in organizations that plan have reached ________ with respect to the benefits of formal planning. A) no conclusion B) generally positive conclusions C) somewhat negative conclusions D) extremely negative conclusions Answer:Diff: 2 Page Ref: 112 Objective: 4.1

59. Studies of planning show that the key to successful planning is to make sure that the plans ________. A) are not shared with employees B) cover every possible detail C) are high in quality and insight D) are exceedingly simple to follow Answer

Diff: 3 Page Ref: 112 Objective: 4.1

60. In studies in which high-quality formal planning did not lead to higher performance, ________ usually the culprit. A) demanding employees were B) stubborn ownership was C) unforeseen events or conditions were D) lack of communication was Answer:Diff: 2 Page Ref: 112 Objective: 4.1

61. Formal planning typically leads to which of the following? A) tension between different management levels B) higher sales, but lower profits C) lower productivity D) higher profits Answer:Diff: 1 Page Ref: 112 Objective: 4.1

62. The first step in the six-step strategic management process is to ________. A) identify the organization's mission B) identify strategies to reach the organization's goals C) analyze the opportunities the organization has D) analyze the organization's strengths and weaknesses Answer:Diff: 2 Page Ref: 113 Objective: 4.2

63. The first three steps of the strategic management process involve ________ strategies. A) evaluating B) planning C) implementing D) identifying Answer:Diff: 2 Page Ref: 113 Objective: 4.2

64. A mission statement includes identification of an organization's ________. A) strengths and weaknesses B) assets and resources C) products and basic philosophy D) resources and strengths Answer:Diff: 2 Page Ref: 114 Objective: 4.2

65. A mission statement does NOT include which of the following? A) strategy for success B) the company's basic beliefs C) why the company is in business and what it hopes to accomplish D) the customers of a company Answer:Diff: 2 Page Ref: 114 Objective: 4.2

66. An external analysis, the second step of the strategic management process, helps identify ________. A) the long-term goals for a company B) the products that a company makes C) a company's opportunities and threats D) a company's concern for its employees Answer:Diff: 2 Page Ref: 114 Objective: 4.2

67. An internal analysis, the third step of the strategic management process, helps identify ________. A) opportunities and possibilities B) values and philosophy C) opportunities and threats D) resources and capabilities Answer:Diff: 2 Page Ref: 114 Objective: 4.2

68. Which term refers to an organization's capital, workers, and patents? A) capabilities B) abilities C) core competencies D) resources Answer:Diff: 2 Page Ref: 114 Objective: 4.2

69. An organization's resources identify ________. A) where the organization operates B) when the organization operates C) what the organization has D) how the organization gets things done Answer:Diff: 2 Page Ref: 114 Objective: 4.2

70. An organization's capabilities identify ________. A) what the organization can do

B) assets that the organization can rely on C) who the organization is D) what the organization has Answer:Diff: 2 Page Ref: 114 Objective: 4.2

71. Together, an organization's resources and core competencies make up which of the following? A) core philosophy B) fundamental beliefs C) competitive weapons D) core assets Answer:Diff: 2 Page Ref: 114 Objective: 4.2

72. SWOT analysis identifies and analyzes an organization's ________. A) human resource assets B) long-term goals C) strategy for competing in the market D) strengths, weaknesses, opportunities, and threats Answer:Diff: 2 Page Ref: 114 Objective: 4.2

73. SWOT analysis combines ________. A) a company's mission with its goals B) profit with productivity C) external and internal analyses D) a company's philosophy with its ethics Answer:Diff: 2 Page Ref: 114 Objective: 4.2

74. Once SWOT analysis is complete, managers ________ to address the issues that came up during the analysis. A) evaluate strategies B) formulate strategies C) implement strategies D) eliminate strategies Answer:Diff: 2 Page Ref: 115 Objective: 4.2

75. Which of the following do managers NOT typically use to formulate strategies? A) find ways to protect the organization from external threats B) find ways to rule out existing organizational opportunities C) find ways to exploit the organization's strengths D) find ways to correct organizational weaknesses

Answer:Diff: 2 Page Ref: 115 Objective: 4.2

76. The three different types of strategies that managers implement are ________. A) long-term, short-term, public B) corporate, private, functional C) corporate, competitive, functional D) competitive, non-competitive, corporate Answer:Diff: 1 Page Ref: 115 Objective: 4.2

77. A corporate strategy focuses primarily on ________. A) an organization's weaknesses B) an organization's strengths C) an organization's mission D) an organization's people Answer:Diff: 2 Page Ref: 115 Objective: 4.2

78. Which of the following make up the three main types of corporate strategies? A) growth, retrenchment, renewal B) renewal, retrenchment, diversification C) growth, stability, renewal D) growth, vertical integration, horizontal integration Answer:Diff: 1 Page Ref: 116 Objective: 4.2

79. Growth strategies include ________. A) vertical integration, horizontal integration, lateral integration, horizontal concentration B) diversification, concentration, integration, stabilization C) integration, allocation, horizontal diversification, vertical diversification D) vertical integration, horizontal integration, concentration, diversification Answer:Diff: 1 Page Ref: 116 Objective: 4.2

80. General Mills expanding its line so that it sells several different types of Cheerios is an example of which of the following? A) diversification B) vertical integration C) concentration D) horizontal integration Answer:Diff: 3 Page Ref: 116 Objective: 4.2

81. A salad dressing company that buys a large olive grove to provide olive oil is practicing which of the following? A) horizontal integration B) concentration C) forward vertical integration D) backward vertical integration Answer:Diff: 3 Page Ref: 116 Objective: 4.2

82. A sneaker company creating its own stores where it sells only its own brand is an example of which of the following? A) reverse vertical integration B) forward vertical integration C) backward horizontal integration D) forward horizontal integration Answer:Diff: 3 Page Ref: 116 Objective: 4.2

83. In forward vertical integration, a company becomes its own ________, while in backward integration the company is its own ________. A) distributor; monitor B) supplier; distributor C) supplier; customer D) distributor; supplier Answer:Diff: 2 Page Ref: 116 Objective: 4.2

84. Two movie studios combining to form one larger studio is an example of which of the following? A) diversification B) forward vertical integration C) backward vertical integration D) horizontal integration Answer:Diff: 2 Page Ref: 116 Objective: 4.2

85. The U.S. Federal Trade Commission monitors horizontal integration carefully to make sure that consumers aren't harmed by which of the following? A) decreased competition B) too much competition C) deceptive ads D) increased competition Answer:Diff: 2 Page Ref: 116

Objective: 4.2

86. When Google purchased YouTube, a company that featured different, but related products, Google was engaging in which of the following? A) backward vertical integration B) concentration C) diversification D) forward vertical integration Answer:Diff: 2 Page Ref: 116 Objective: 4.2

87. Two companies that both sell fine time pieces combine. What are they doing? A) integrating vertically, because they both sell the same products B) diversifying, because they both sell the same products C) backward vertical integration, because they are sharing distribution D) integrating horizontally, because they both sell similar products Answer:Diff: 3 Page Ref: 116 Objective: 4.2

88. A company whose goal is to retain its ideal size and market share is employing which kind of strategy? A) stability B) renewal C) non-corporate D) growth Answer:Diff: 2 Page Ref: 116 Objective: 4.2

89. Troubled companies seek ________ to address serious problems. A) vertical and horizontal strategies B) corporate strategies C) renewal strategies D) competitive strategies Answer:Diff: 2 Page Ref: 117 Objective: 4.2

90. To address limited, short-term problems a company is most likely to employ a ________ strategy. A) turnaround B) self-critical C) doomsday D) retrenchment Answer:Diff: 2 Page Ref: 117 Objective: 4.2

91. A company that is on the verge of collapse or bankruptcy might employ this strategy. A) retrenchment B) turnaround C) hunker down D) incremental improvement Answer:Diff: 2 Page Ref: 116 Objective: 4.2

92. Remedies that all renewal strategies employ include which of the following? A) hiring efficiency experts B) new ad campaigns C) cutting costs D) emulating competitors Answer:Diff: 2 Page Ref: 117 Objective: 4.2

93. The ________ strategy occupies the level below the corporate strategy. A) business unit B) functional C) performance D) competitive Answer:Diff: 1 Page Ref: 115, 117 Objective: 4.2

94. A diversified corporation is likely to have ________. A) thousands of competitive strategies B) no more than two competitive strategies C) a single competitive strategy D) multiple competitive strategies Answer:Diff: 2 Page Ref: 117 Objective: 4.2

95. The thing that makes your product special is known as your ________. A) competitive advantage B) assets C) destruction device D) competitive strength Answer:Diff: 2 Page Ref: 117 Objective: 4.2

96. Competitive advantages for a high-prestige, premium coffee franchise like Starbucks are likely to include all of the following EXCEPT ________.

A) high quality B) pleasant venues C) well-trained employees D) lowest prices Answer:Diff: 3 Page Ref: 117 Objective: 4.2

97. A cost leadership competitive strategy focuses on which of the following? A) luxury B) elegant design C) efficiency D) innovation Answer:Diff: 2 Page Ref: 118 Objective: 4.2

98. Which of the following would you expect to find in a clothing store that follows a cost leadership strategy? A) state-of-the-art design B) pampered, personalized service C) only finest, most expensive materials D) basic, no frills, practical items Answer:Diff: 2 Page Ref: 118 Objective: 4.2

99. A company with a differentiation strategy focuses on making its products or services ________. A) unique and special B) familiar C) similar to its competitors D) affordable Answer:Diff: 2 Page Ref: 118 Objective: 4.2

100. A differentiation strategy ________. A) must focus on price B) can focus on value, but not service C) usually focuses on price D) can focus on a brand image Answer:Diff: 2 Page Ref: 118 Objective: 4.2

101. A company that looks for a niche in the market is following which strategy? A) differentiation B) turnaround C) cost leadership

D) focus Answer:Diff: 2 Page Ref: 118 Objective: 4.2

102. Which of the following describes a company that is following a focus strategy? A) a software company that makes financial products for accountants only B) a software company that makes a wide variety of games and financial products C) a software company that makes games for a wide audience D) a software company that makes financial products for accountants, consumers, and businesses Answer:Diff: 3 Page Ref: 118 Objective: 4.2

103. According to Michael Porter, a company with good products that has no clear competitive advantage is said to be ________. A) in the wheelhouse B) perfectly positioned C) stuck in the middle D) outside of the box Answer:Diff: 2 Page Ref: 118 Objective: 4.2

104. Most successful companies find that ________ a competitive advantage is almost as difficult as developing a competitive advantage. A) eliminating B) modifying C) sustaining D) assessing Answer:Diff: 2 Page Ref: 119 Objective: 4.2

105. All of the following are threats to a sustainable, long-term competitive advantage EXCEPT ________. A) market stability B) evolution of the industry C) new technology in the industry D) market instabilities and disturbances Answer:Diff: 2 Page Ref: 118-119 Objective: 4.2

106. To gain a sustainable competitive advantage, a pharmaceutical company might ________. A) secure exclusive rights to produce a drug B) set high prices for its products C) produce as many generic drugs as possible D) market aggressively

Answer: ADiff: 3 Page Ref: 119 Objective: 4.2

107. A company's strategic weapon is any product, service, or other attribute it has that ________. A) identifies problems that the company has B) gives it an edge over its competitors C) identifies the potential of employees D) helps diversify the company Answer:Diff: 2 Page Ref: 119 Objective: 4.2

108. To create a competitive advantage that is sustainable, a company can begin by focusing on quality, then ________ A) make sure quality doesn't decline at too rapid a pace B) change its entire product line frequently C) slowly diminish quality and raise the prices of its products D) make incremental improvements to keep quality levels high Answer:Diff: 3 Page Ref: 119 Objective: 4.2

109. This term describes an electric shaver company that carefully observes its competitor's production line to look for ways to improve its own manufacturing process. A) benchmarking B) reverse marketing C) quality engineering D) trademarking Answer:Diff: 2 Page Ref: 120 Objective: 4.2

110. Which of the following best defines plans? A) documents that define goals B) documents that describe how goals will be met C) documents that identify company problems D) documents that identify how goals from the past were met Answer:Diff: 2 Page Ref: 121 Objective: 4.3

111. Which of the following best defines goals? A) likely outcomes for the future B) desired outcomes for the future C) short-term targets D) unlikely outcomes for the future Answer:

Diff: 1 Page Ref: 121 Objective: 4.3

112. In reality, all organizations have ________. A) the same single goal B) the same goals C) a single goal D) multiple goals Answer:Diff: 2 Page Ref: 121 Objective: 4.3

113. In most cases, strategic goals include ________. A) some financial objectives B) all objectives, both financial and non-financial C) all financial objectives D) all objectives that are not financial Answer:Diff: 2 Page Ref: 121 Objective: 4.3

114. Which of the following is an example of a strategic goal for a professional baseball team? A) to increase television revenues over the next 5 years B) to average over 90 wins a year for the next 5 years C) to increase attendance by 5 percent over the next three years D) to decrease payroll by 20 million over the next 2 years Answer:Diff: 2 Page Ref: 121 Objective: 4.3

115. An organization's real goals and priorities are best revealed by ________. A) its statements to the press B) its actions in the marketplace C) its mission statement D) its official stated goals Answer:Diff: 2 Page Ref: 122 Objective: 4.3

116. ________ are important because they provide the standards against which all organizational accomplishments are measured. A) Guidelines B) Models C) Rules D) Goals Answer:Diff: 2 Page Ref: 122 Objective: 4.3

117. In traditional goal setting, these individuals set goals. A) middle managers B) top managers C) middle and low-level managers D) managers and employees Answer:Diff: 2 Page Ref: 122 Objective: 4.3

118. In traditional goal setting, as they work their way from top management to employees, goals are likely to ________. A) be more rigorously followed B) become more clear C) be unchanged D) become less clear Answer:Diff: 2 Page Ref: 123 Objective: 4.3

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 ignored if goals at higher levels are attained D) is separate from the goal at the next higher level Answer:Diff: 3 Page Ref: 123 Objective: 4.3

120. In management by objectives (MBO), goals ________. A) must be easily accomplished B) are determined by top management C) are developed by employees D) are jointly determined by employees and managers Answer:Diff: 2 Page Ref: 123-124 Objective: 4.3