Strategic Management: Chapter 12

A heterogeneous top management team is composed of individuals with a. different functional backgrounds, experience, and education. b. similar commitments to the organization's core ideology and culture. c. a high level of education and industry expertise. d. long tenure in the organization who have held various functional positions.

A

An organization's ____ is composed of the key individuals who are responsible for selecting and implementing the firm's strategies. a. top management team b. board of directors c. keiretsu d. governance circle

A

Billy Kroghmen is the son of a very prominent Fortune 500 CEO. Billy has had troubles. He failed out of multiple colleges, universities, and correspondence schools. He finally received his undergraduate degree from a university with only a post office box for an address. He then enrolled in the school's combined graduate accounting and law school programs, graduating with honor with degrees in both areas. After graduation, he twice failed both the CPA and bar exams, managing to set record low scores on the ethics portions of both. Despite these academic setbacks, Billy's career now seems to be thriving. He has been appointed to a number of "blue ribbon" government committees, is on the board of directors of two corporations and one prestigious not-for-profit organization. In at least one instance, a donor credited Billy with the idea for making a large contribution to the not-for-profit. Widespread speculation is that his career advancement is based largely on social relationships through friends and family. We would classify Billy as ____ on ____ capital, and ____ on ____ capital. a. high; social; low; human b. high; human; high; social c. high; human; low; social d. none of these are correct.

A

Christina is evaluating Maximum Brands as an investment opportunity. She is very concerned about future financial performance by Maximum Brands. Christina does not believe that the CEO can act as a steward. Christina will probably be most concerned if a. there is CEO duality. b. many of the members of the board of directors are outsiders. c. the positions of chairman of the board and CEO are held by different persons. d. there is an independent board leadership structure.

A

Firms needing to change their strategies should a. create more heterogeneous top management teams. b. focus on their core customer base. c. implement transformational leadership. d. emphasize the training and development of internal managerial talent.

A

The CEO/chairman of PharmaPacifica was recently killed in an airplane crash. This tragedy has thrown PharmaPacifica into turmoil as there is no one in the organization qualified to step into the former CEO's shoes. This is an example of a. a failure of succession management. b. managerial hubris. c. the risk inherent in CEO duality. d. excessive reliance on the internal managerial labor market.

A

The ability to attract and manage ____ may be the most important skill a strategic leader must have. a. human capital b. financial resources c. responses to competitors' actions d. investment strategies

A

The firm of Bergeron has existed for hundreds of years, having made exquisite clocks and watches. In its advertising it refers to clocks the firm made for such past royalty as Marie Antoinette and the Czars of Russia. Employees are constantly reminded of the firm's rich history and its long tradition of excellence of design and execution. Bergeron is motivating its employees through its a. core ideology. b. envisioned future. c. organizational culture. d. business strategy.

A

The more heterogeneous the top management team, the a. more difficult it will be for the team to implement strategies. b. more likely it is that the team will be cohesive. c. less innovative the team's decisions will tend to be. d. less diverse the team membership will be.

A

When the top management team is homogeneous and a new CEO is selected from inside the firm, it is a. unlikely that the current strategy will change. b. likely that product innovation will continue. c. likely there will be a change in strategy. d. unlikely the new CEO will have a long tenure.

A

Which of the following is NOT a benefit to the firm using the internal labor market to select a new CEO? a. Internal hiring results in an increased level of innovation. b. Insiders are familiar with the firm's products, markets, technologies, and operating procedures. c. Use of the internal labor market reduces turnover among existing employees. d. Insiders are more familiar with a firm's operating procedures.

A

All of the following are external environmental sources that affect managerial discretion EXCEPT a. industry structure. b. corporate culture. c. market growth rate. d. potential for product differentiation.

B

An example of the external labor market is the situation where a. an assessment center operated by an external consulting firm evaluates company managers for promotion potential. b. a new vice president of marketing is hired from a competitor. c. the senior vice president of finance is promoted to CEO. d. a vice president of human resources is sent to a university executive MBA program for professional development.

B

Monahegan Plasma Company is facing a performance downturn and realizes that a major rethinking of its strategy is in order. Under these circumstances, Monahegan Plasma would benefit from a a. internal CEO with short tenure. b. external CEO with a heterogeneous top management team. c. dual CEO/chairperson with a homogenous top management team. d. CEO with long tenure who has a strong sense of hubris.

B

Normally, the more involved a board of directors is in shaping the firm's strategic direction, the a. more balanced the organization is. b. higher the corporation's performance is. c. more rapidly executive decisions can be make. d. more difficult it becomes to make effective executive decisions.

B

Omicron Artificial Intelligence has a core competency of being able to respond quickly to competitors' actions and to opportunities in the marketplace. This is an example of competitive a. agility. b. speed. c. flexibility. d. responsiveness.

B

The board of directors for TundraPro, Inc., is searching for a new CEO. The firm is in need of new direction after suffering several years of declining performance and increasingly demoralized management and employees. The board has decided it needs a CEO who can be a transformational leader. To this specific end, the board needs to identify applicants who have a. high levels of honesty, trustworthiness, and integrity. b. high emotional intelligence. c. excellent analytical skills. d. low tolerance for ambiguity.

B

The effective development and management of the firm's ____ may be its only sustainable competitive advantage. a. capital base b. human capital c. technology d. organizational culture

B

Which of the following factors most encourages stability in a firm's strategy? a. A new CEO hired from outside the firm but within the industry. b. Internal CEO succession and a homogeneous top management team. c. External CEO succession and a heterogeneous top management team. d. A new CEO hired from outside the industry.

B

Which of the following is NOT one of the five dimensions thought to characterize an employee's entrepreneurial mind-set? a. autonomy b. reactivity c. risk taking d. innovativeness

B

____ capital increases cooperation among individuals inside and outside the firm. a. Human b. Social c. Visionary d. Cultural

B

A CEO gains power from all of the following circumstances EXCEPT a. when many of the outside directors are appointed by the CEO. b. when the CEO is also the chairman of the board. c. when tenure of the top management team is shorter than the tenure of the board. d. the fact that inside board members report to the CEO.

C

A CEO's breadth of knowledge base is constrained by a. his or her relationship with the board of directors. b. whether he or she is also the chairperson of the board of directors. c. his or her long tenure with the firm. d. the level of social capital in the firm.

C

A characteristic of the manager that may affect managerial discretion is his/her a. amount of industry experience. b. level of education. c. tolerance for ambiguity. d. length of tenure.

C

Determining the strategic direction of a firm involves a. implementation of a balanced scorecard. b. developing an entrepreneurial mind-set. c. specifying the vision and the strategy to achieve that vision over time. d. exploiting and maintaining core competencies.

C

Exploiting and maintaining core competencies is part of the key strategic leadership action "Effectively Managing the Firm's Resource Portfolio." Which of the following is most important for developing and using core competencies? a. extensive financial assets. b. transformational leadership. c. high-quality human capital. d. an ethical organizational culture.

C

Faced with declining enrollment and increased competition from not-for-profit organizations offering inexpensive art courses for new hobbyists, the for-profit Delta Academy of Art has steadfastly stayed true to its mission of offering high-quality classical art instruction for both beginners and advanced artists at high tuition. Delta has been noted for the excellence of its artistic training for decades. This is an example of a. competitive agility. b. lack of an envisioned future. c. competence becoming a liability. d. failure to have a clear core ideology.

C

GE performed exceptionally well under Jack Welch, the former CEO of GE. Jeffery Immelt, the current CEO, has made changes to the firm's corporate-level strategy and structure. These changes were necessary because the competitive landscape had shifted significantly. Immelt's actions resulted in a. a smooth transition to the new organizational strategy because of the organizational slack generated by Jack Welch. b. replacement of the entire top management team because once individuals commit to a core ideology and an envisioned future, they are unlikely to change. c. some resistance by organizational stakeholders who are accustomed to Jack Welch and the high performance which he brought to GE. d. acceptance by GE's stakeholders as Immelt inherited the "iconic aura" surrounding Jack Welch.

C

The CEO of Icon Image Associates wishes to radically change the corporate culture of the firm. She knows that she must convince others at Icon Image of the necessity for the culture change and gain their active support. The CEO knows that the key players in energizing the culture change and fostering alignment with the new strategic vision are a. the members of the board of directors. b. top management team members. c. the CEO, top managers, and middle managers. d. rank-and-file employees.

C

The primary responsibility for effective strategic leadership of the organization rests with the a. board of directors. b. top management team. c. CEO. d. stakeholders.

C

The top management team is composed of the a. heterogeneous group of advisors selected by the CEO. b. CEO and chairperson of the board. c. key individuals who are responsible for selecting and implementing a firm's strategy. d. officers listed in a firm's annual report and the board of directors.

C

To successfully implement a firm's strategy, the workforce must be viewed as a a. variable cost. b. depreciating asset. c. resource to be maximized. d. renewable asset.

C

Which of the following is NOT a factor that determines the amount of a manager's decision discretion? a. characteristics of the manager b. characteristics of the organization c. cohesiveness of the board of directors d. the external environmental

C

Which of the following is NOT associated with heterogeneous top management teams? a. higher firm performance b. innovation and strategic change c. diminished debate among top managers d. better strategic decisions

C

Which of the statements about CEO duality is FALSE? a. CEO duality is associated with high CEO power. b. CEO duality has been blamed for slow response to change by the organization. c. CEO duality is relatively rare in the U.S. except in large Fortune 500 firms. d. If the CEO acts a steward, CEO duality facilitates effective decisions and actions.

C

CEO duality refers to a. firms where there is both a president and a CEO. b. CEOs who sit on the board of directors of other firms. c. CEOs who hold office in more than one company. d. the situation where the CEO is also chairperson of the board of directors.

D

Clarita Cosmetics is confronting a decline in sales due largely to a general economic downturn. The top management team is debating whether to lay off employees. In the debate, the following statements are made. Which of the statements is FALSE? a. If Clarita Cosmetics lays off a large number of employees, there will be a significant loss of human capital that will cause further downturns in the firm's performance. b. A moderate-sized layoff at Clarita Cosmetics will probably improve firm performance. c. If Clarita Cosmetics restructures, it ought to increase investments in training and development. d. A layoff will increase the slack at Clarita Cosmetics and allow the firm to absorb the increased number of errors employees may make until they learn their new tasks.

D

Executive headhunters have approached Charles about taking the position of senior vice president of marketing for a well-known company. Although this company has been highly successful since 1995, Charles has heard persistent rumors of overly aggressive marketing tactics, questionable reporting of sales data, and an atmosphere of intolerance of criticism. The CEO is a powerful and charismatic individual, who built the company from a small regional firm to an international powerhouse in only a decade. The other top managers have been hand-picked by the CEO, as have a number of the members of the board of directors. The salary for this position is very high and includes generous stock options. It would be a major step up in Charles's career and would position him to move to CEO of another company in the future. Charles has prided himself on his high moral values and is viewed as an exceptionally ethical person by his peers. What should Charles do? a. Charles should take the job because he can effect real change in the culture of the organization, and take advantage of the personal financial and career opportunities. b. Charles should realize that personal moral values and the realities of the corporate world differ in both quality and degree. Consequently, he can take a job in an ethically borderline company without tainting his personal moral standing. c. Charles should not rely on rumors to dissuade him from making an advantageous career decision. d. Charles should not take the job because the culture of the organization is set by the CEO and other top managers. He would have little influence on the organizational culture as one of many top managers.

D

Human capital refers to a. the net present value of the future competencies of the workforce. b. the amount of money purchasers of the firm would pay for the continuing employment of the present workforce. c. the value-added that the firm's workforce contributes to each product produced or service rendered. d. knowledge and skills of the firm's work force.

D

Recently, Sony selected Sir Howard Stringer as CEO. Sir Howard is not Japanese and he was not a Sony employee before his selection. Which of the following statements is FALSE? a. Sony's top management team will be more heterogeneous with the addition of Sir Howard. b. Sir Howard will have a broader perspective of the firm and its competitive environment than would a Sony insider. c. If Sony's top management team is homogeneous, Sir Howard's future impact on Sony's strategy is ambiguous. d. The decision-making process on Sony's top management team will be smoother and faster with the addition of Sir Howard.

D

The CEO of CLEO, Inc., in all her communications to employees consistently refers to her dream of CLEO becoming the company of choice for employee assistance programs. She keeps this theme uppermost and it is reflected in the firm's motto, the title of its Web newsletter, and even on the company t-shirts and mugs. This is an example of the firm's a. core ideology. b. organizational culture. c. strategy. d. envisioned future.

D

The failure of organizations to use the pool of managerial talents held by women can best be termed a. deliberate policy of discrimination. b. lack of assertiveness by women managers. c. managerial isolation from social trends. d. an opportunity cost for firms.

D

The goal of investing in human capital is to a. increase the number of employees in the firm. b. reduce organizational slack. c. maximize current productivity per employee. d. develop a workforce capable of continuous learning.

D

The most effective leadership style is ____ leadership. a. pragmatic b. charismatic c. inspirational d. transformational

D

The top management team at Ingenuity, Inc., has assigned a team of scientists to a multi-year project to investigate the viability of growing large amounts of fur from cloned cells of minks and foxes to produce no-kill fur products for coats and other clothing items. This idea would satisfy all the dimensions of the entrepreneurial orientation EXCEPT a. innovativeness. b. risk taking. c. proactiveness. d. competitive autonomy.

D

Two key strategic leadership actions include a. monitoring the hiring of key employees and focusing on growth but not learning initiatives. b. designing and then implementing the balanced scorecard. c. setting appropriate financial targets and establishing an effective business level synergy. d. determining strategic direction and establishing balanced organizational controls.

D

Which key strategic leadership action plays a key role in influencing how the firm conducts its business and regulates and controls employees' behavior? a. Effectively Managing the Firm's Resource Portfolio. b. Determining Strategic Direction. c. Regulating and Controlling Employees. d. Sustaining an Effective Organizational Culture.

D

Which of the following is NOT related to a CEO having long tenure in his or her position? a. more effective strategic control b. greater influence on board decisions c. more limited perspective d. a broader knowledge base

D

Which of the following statements is TRUE regarding effective organizational cultures? a. Once a corporate culture is developed, strategic leaders can focus on other activities. b. A strategy that is historically new for a firm should be implemented by incremental changes in the organization's culture. c. A central task of strategic leaders is to revise the corporate culture on an annual basis after analyzing the changes occurring in the competitive environment. d. Organizational culture can be a source of competitive advantage because it influences employee behavior and how the firm's conducts its business.

D

Which of the following will increase the probability that a lower-level manager will become a successful strategic leader? a. appointing many outside board members. b. increasing the firm's sales. c. increasing the homogeneity of the top management team. d. training and development programs.

D

An emphasis on strategic controls encourages managers to be risk averse.

F

Competitive aggressiveness, proactiveness, risk aversion, innovativeness, and autonomy are the five dimensions characterizing the entrepreneurial mind-set.

F

Evidence suggests that women are a qualified source of talent as strategic leaders that have been fully utilized especially given the current competitive landscape.

F

Financial controls provide feedback about the outcomes of the firm's past actions and predictions about the results of the firm's future actions.

F

For 15 years, Edward was a compensation specialist at a mid-sized firm. He was laid off when the firm experienced financial setbacks. Edward has decided to open his own business as a compensation consultant to small firms. He can expect that his main source of human capital will be a bank line of credit.

F

GM's newest CEO, Dan Akerson, is building new capabilities in technology development and marketing, especially in customer service. This is an example of a CEO developing a dynamic capability as part of the key leadership action " Developing Human Capital and Social Capital."

F

Organizational culture is a complex set of ideologies, symbols, and core values that are shared throughout the firm, but its development is so subtle and poorly understood that top managers cannot influence its content.

F

Selection of an insider as a new CEO indicates a firm's desire to encourage innovation and strategic change.

F

The experience that results from long tenure in a firm is known to extend the breadth of an executive's knowledge base.

F

The more heterogeneous and the larger the top management team, the easier it is to implement strategy effectively.

F

The more homogeneous a top management team, the more likely those managers will be innovative and willing to pursue strategic change.

F

The underlying premise of the balanced scorecard is that firms jeopardize their future performance possibilities when strategic controls are emphasized at the expense of financial controls.

F

To influence employees' judgment and behavior, ethical practices must shape the firm's decision-making process, but should be a peripheral part of organizational culture.

F

Typically, a vice president would NOT be considered to hold a high enough position to be included in the top management team of an organization.

F

When a new CEO is selected from outside the firm, a change of strategy is likely, especially if the top management team is homogenous and highly cohesive.

F

A CEO may gain power by holding the titles of both CEO and Chairman of the Board.

T

A firm's ability to act in a variety of competitively relevant ways is termed competitive agility.

T

As the dynamics of competition accelerate, people are perhaps the only truly sustainable source of competitive advantage.

T

Because of the challenges top executives face, they often are more effective when they operate as top management teams.

T

Because of the current changing competitive landscape and varying levels of performance, an increasing number of boards of directors are turning to insiders to succeed CEOs.

T

Board members with substantive expertise in the firm's core functions and businesses aids the effectiveness of the top management team.

T

Compared to homogeneous top management teams, heterogeneous top management teams are more likely to change their firm's strategies when necessary and to support innovation.

T

Criteria such as asset utilization improvements and changes in employee turnover rates are part of the internal business processes perspective of the balanced scorecard.

T

Effectively managing the firm's resource portfolio (financial, human, social, and organizational capital) may be the most important strategic leadership task.

T

Employees usually have a strong preference for firms to use the internal managerial labor market when selecting top management team members and the CEO.

T

External environmental factors that may affect managerial discretion include industry structure, rate of market growth, and degree to which products an be differentiated.

T

External social capital is increasingly critical to firm success as few if any companies have all the resources to successfully compete against their rivals.

T

Firm size, firm age, the executive's tolerance for ambiguity, and his or her commitment to strategic outcomes are all factors that may affect managerial discretion.

T

In addition to determining new strategic initiatives, top-level managers also develop the appropriate organizational structure and reward systems of a firm.

T

In the past, companies had a preference for insiders to fill top-level management positions because of the desire for continuity and a continuing commitment to the firm's current vision, mission, and chosen strategies.

T

Including talent from both the internal and external labor markets increases the likelihood that the firm will be able to form an effective top management team.

T

Incremental changes to a firm's culture can be used to implement strategies effectively.

T

Internal labor markets consist of the career opportunities for managers within the firm for which they currently work.

T

Rewarding those who use proper channels and procedures to report observed wrongdoings is an example of an action that should be taken by a strategic leader to develop an ethical organizational culture.

T

Strategic control focuses on the content of strategic actions rather than their outcomes.

T

Strategic leaders are most likely to integrate ethical values into their decisions when the company has explicit ethics codes which are integrated into the business through extensive ethics training.

T

Strategic leadership is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic change as necessary.

T

The CEO is the individual with primary responsibility for effective strategic leadership within an organization.

T

The CEO of YorkMark, Inc., has an exceptional amount of power in the organization. It is likely the board of directors is composed of sympathetic outside members and insiders who report to the CEO.

T

The advantages of long tenure (firm-specific human and social capital, knowledge, and power) seem to outweigh the disadvantages of rigidity and maintaining the status quo.

T

The balanced scorecard focuses on both financial and non-financial controls.

T

The balanced scorecard's perspective on learning and growth is intended to improve the firm's ability to innovate.

T

The decision making discretion of top-level managers is determined partly by external environmental factors such as the industry structure, the industry's rate of growth, and the degree to which products can be differentiated.

T

The firm's core ideology motivates the firm's employees through the company's heritage.

T

The most critical ability of a strategic leader is the ability to attract and then manage human capital.

T

The strategic direction of a firm usually focuses on the coming three to five years.

T

The training of future strategic leaders yields a competitive advantage for a firm, in part because knowledge and skills are necessary for successful execution of strategy.

T

Top management team members and CEOs who have long tenure on the team and in the organization have greater influence in board decisions.

T

Transformational leadership is the most effective strategic leadership style.

T

When the new CEO is from inside the firm and a heterogeneous top management team is in place, the strategy may not change, but innovation is likely to continue.

T