MGMT Test Prep 2

A synonym for the word satisfice is maximize. A) True B) False

(False)

Informal plans are not recognized to be an effective form of planning. A) True B) False

(False)

3 units of programmed decisions

1. procedures 2. policies 3. rules

____ false parallel of current events to other events, something that is not occurring here

A representation bias

Over reliance on the first piece of information when making a decision

Anchoring Effect

When vividness / recentness distorts our perception.

Availability Bias

____occurs when decision makers value only the most recent events that are relevant to the situation

Availability bias

Flexible, general guidelines are also known as _______.

Directional Plans

We select an alternative because it" - delivers more immediate benefits -delays the cost paid

Immediate Gratification Bias

A unique, non-recurring decision that requires a custom made solution

Non programmed

A guideline for making decisions

Policies

__ a set of interrelated sequential steps to resolve a problem.

Procedures

we accept the solution that is 'good enough"

Satisfice

____ Problems that are new, unusual and for which information is ambiguous or incomplete

Unstructured

Repetitive, use a routine approach for handling structured problems

programmed

An increase commitment to a prior decision despite evidence that it may have been the wrong decision

Escalation of Commitment

Rationalization of facts that don't support assumptions Pressure on those who question group decision members seek to avoid deviating from group consensus

Groupthink

When Yahoo acquired Tumblr in 2013, this was an example of a __________ strategy through _________.

Growth - Diversification

Seeking out or believing only that information which confirms past judgements, choices, discounting those that contradict

Confirmation Bias

An explicit statement that tells employees what can and cannot be done

Rules

Choosing only that which fits our bias (cheery picking)

Selective perception Bias

____blaming the situation on outside influences

Self- serving bias

plans that are clearly defined and leave no room for interpretation.

Specif plans

3 Conditions that affect decision making

1. Certainty (know all outcomes) 2. Risk (we are informed but not totally informed) 3. Uncertainty (Guessing and when we guess, we guess wrong)

____ comes from doing things differently than competitors or doing the same things better than competitors

Competitive Advantage

Planing for how the organization will compete

Competitive Strategy

Choices are: logical, consistent, made to maximize value

Rational Decision Making

Organizations in real trouble may adopt this kind of corporate strategy.

Renewal

A key function of planning is to create goals. A) True B) False

(True)

Which of the following is LEAST likely to be a decision criterion for a high-performance bicycle buyer who cares primarily about performance? A) Warranty B) Gear mechanism C) Frame composition D) Brake assembly

(A) A buyer who is looking for performance would care how sturdy and light the frame was and how efficient the gears and brakes were. The warranty does not directly affect performance so it would be least likely to be a decision criterion for the bike buyer.

What is a heuristic? A) a shortcut or rule of thumb that is used for decision making B) a complicated and systematic method of decision making C) a purely intuitive method of decision making D) a totally unreliable method of decision making

(A) A heuristic is a rule of thumb that allows a decision maker to focus on a few key variables in the process. Heuristics can be useful, so they are not totally unreliable. Heuristics are simple, making a complicated and systematic method of decision making incorrect. Heuristics can be partly intuitive, but they can also be highly rational, making a purely intuitive method incorrect.

Planning gives organizations a way to deal with change that ________. A) reduces uncertainty B) reduces certainty C) eliminates all uncertainty D) increases ambiguity

(A) A key function of planning is to help organizations deal with uncertainty, making the choice regarding reducing uncertainty the correct response. Uncertainty unfortunately cannot be completely eliminated, so that is not the correct response here. Both "reduce certainty" and "increase ambiguity" are tantamount to increasing, rather than decreasing, uncertainty, so they are incorrect responses.

Following the directions to put together an elliptical exercise machine is an example of which way to solve a problem? A) Procedure B) Rule C) General Practice D) Policy

(A) If you could put together the machine with a single action, you would be following a rule. However, assembly is an entire process of following individual instructions, so it is a procedure, not a rule. A policy would require much more interpretation of the situation than simply following instructions.

Studies of performance in organizations that plan have reached ________ with respect to the benefits of formal planning. A) generally positive conclusions B) somewhat negative conclusions C) extremely negative conclusions D) no conclusion

(A) Studies have shown that formal planning usually results in higher profits and general financial and organizational success, making "generally positive conclusions" the correct response. Both choices regarding negative conclusions can be ruled out because they indicate negative, rather than positive, outcomes for formal planning. The choice indicating "no conclusion" can be ruled out because it fails to indicate a positive outcome for formal planning.

Which three conditions do decision makers face? A) certainty, risk, uncertainty B) risk, high risk, low risk C) certainty, uncertainty, confidence D) certainty, risk, high risk

(A) The choice indicating "certainty, risk, and uncertainty" represents the correct choice, citing the three recognized conditions that decision makers face. "Certainty, uncertainty, confidence" is eliminated because confidence is not a recognized decision-making condition. Similarly, the other two choices are wrong because "risk" is the only recognized decision-making category-"high risk" and "low risk" are not recognized.

A manager is considering purchasing new computers for her department, and is spending time assessing the computers her department has now. What stage is she in? A) identification of a problem B) identification of decision criteria C) development of alternatives D) implementation of an alternative

(A) The first thing the manager needs to do is identify the problem. More specifically, she needs to determine whether she actually has a problem or not. If the computers her department now has are performing satisfactorily, she may decide that she doesn't have a problem and doesn't need to purchase new computers. The other choices—identifying criteria, developing alternatives, or implementing an alternative—all come later in the process, after the manager has determined what her problem is.

A company with a differentiation strategy focuses on making its products or services ____________. A) unique and special B) similar to its competitors C) familiar D) affordable

(A) The key to a differentiation strategy is for the company to somehow make itself or its products distinct from all of its competitors. This distinction may reside in a product, service, or brand image that sets the company apart from others in the market. These factors make "unique and special" the correct response. Being familiar, similar to competitors, or affordable would have little value to a company that uses a differentiation strategy as none of these qualities makes its products different or distinguished.

One legislator sees decreased tax revenue as the key problem in the budget. A second legislator sees increased spending as the problem. Each of these legislators has a(n) ________. A) self-serving bias B) framing bias C) representation bias D) availability bias

(B) A representation bias is a false parallel of current events to other events, something that is not occurring here. A self-serving bias, blaming the situation on outside influences, is also not relevant to this situation. Availability bias occurs when decision makers value only the most recent events that are relevant to the situation, also not occurring here. What is occurring is that the legislators are framing the problem in different ways. This framing results in them coming to very different conclusions about how to solve the problem.

Which of the following is an example of an unstructured problem? A) Finding the list price of different copy machines. B) Choosing the best wardrobe for an executive. C) Comparing gas mileage for different car models D) Measuring pollution levels at a power plant.

(B) An unstructured problem requires judgment and discrimination among options in a situation in which not all information is available. Only "choosing the best wardrobe for an executive" fits this description, as choosing a wardrobe is a subjective act that can be accomplished in many different ways. The other choices—finding prices, comparing mileage, and measuring pollution—are straightforward and do not include this ambiguous, subjective element, so they are incorrect responses.

Group decision making typically increases the legitimacy of a decision because the decision was made _____________. A) over a long period of time B) democratically C) by experts D) primarily by the group leader

(B) It is hard to argue that a decision that was decided in a democratic manner is not legitimate, making "democratically" the correct response. The period of time in which a decision was made does not increase its legitimacy. Group decisions are not likely to be made by experts, so that is not a correct response. Finally, a group decision by a group in which all members were not equally empowered would tend to have less, rather than more, legitimacy.

What does it mean for a decision maker to maximize value? A) To make the decision to be as clear and logical as possible. B) To make the achievement of goals as likely as possible. C) To waste as little time and energy as possible. D) To make decision making as simple as possible.

(B) Maximizing value is a question of achieving goals. When a decision maker maximizes value, he or she makes the decision that is most likely to achieve his or her goal. Being clear and logical, efficient, or simple are worthy goals for a decision maker, but they do not define maximizing value so they are incorrect responses for this question.

Competitive advantages for a high-prestige, premium coffee franchise like Starbucks are likely to include all of the following EXCEPT ________. A) pleasant venues B) lowest prices C) well-trained employees D) high quality

(B) Starbuck's as a premium alternative in the marketplace may offer high-quality coffee, pleasant store fronts, and well-trained employees. However, as a high-prestige choice, the least likely thing for Starbucks to offer would be lowest prices, making that the correct response. Low prices might actually harm the high-prestige image that Starbucks tries to project. Note that for some other, nonpremium company, low prices may indeed comprise a competitive advantage.

Tactical plans are operational plans that identify _________. A) overall organizational goals B) how overall goals are to be achieved C) the mission of an organization D) specific goals for accomplishing a specific objective

(B) Tactical plans do not address an organization's mission or its larger, overall goals. The focus of tactical plans is always how goals are to be achieved rather than specific goals themselves. This rules out specific goals and makes the choice regarding how overall goals are to be achieved the correct response.

An external analysis, the second step of the strategic management process, helps identify ________. A) the long-term goals of a company B) a company's opportunities and threats C) the products that a company makes D) a company's concern for its employees

(B) The focus of an external analysis is to locate the organization's place in the external business environment, analyzing the competition that the organization faces, the opportunities it might take advantage of, and the things that threaten the organization, making "opportunities and threats" the correct response. Long-term goals, product descriptions, and company policy toward its workers have nothing to do with analyzing the external environment, so those choices are ruled out.

Which of the following is NOT assumed in a rational decision? A) value is maximized B) most alternatives and consequences are known C) a clear and specific goal D) a clear and unambiguous problem

(B) The ideal rational decision will feature a clear and specific goal, a problem that is clear and unambiguous, and value that is maximized. This ideal decision would also require that all, not just many, alternatives and consequences would be known.

Programmed decisions draw heavily on which of the following? A) past solutions that were unsuccessful B) past solutions that were successful C) innovative, new solutions D) mistakes made in the past

(B) Though programmed decisions draw on the past, they do not focus on mistakes but rather emulate prior solutions that worked and were successful. "Innovative, new solutions" is incorrect because programmed decisions are not at all innovative but instead rely on tried and true methods of problem solving.

A company whose goal is to retain its ideal size and market share is employing which kind of strategy? A) noncorporate B) renewal C) stability D) growth

(C) A corporate strategy that does not explicitly seek growth is termed a stability strategy, making "stability" the correct response and "growth" incorrect. A renewal strategy would require the company to be in some kind of trouble, so that is not the right answer here. The remaining choice is also not correct because stability clearly is a corporate, not a noncorporate, strategy.

To identify a problem, a manager ________. A) looks for unhappy customers B) uses intuition to see that things don't look right C) compares the current state of affairs with some standard or goal D) compares one set of standards or goals to a second set of standards or goals

(C) A manager compares what she or he has now to some standard or goal to identify a problem. The standard or goal may represent some level of performance from the past, or it could be an as yet unreached level that the manager thinks can be attained. Looking for unhappy customers or using intuition to see when things don't look right may be ways to identify problems but they are not general problem identification methods. Finally, comparing one set of standards or goals to a second set is incorrect because a problem is always identified by comparing an actual state to a standard or goal, not one set of standards or goals to another.

Which of the following is NOT a common decision-making error or bias? A) Sunk costs B) Randomness C) Forest for the trees D) Overconfidence bias

(C) All of the choices listed are common decision-making errors and biases except "forest for the trees." Sunk costs refers to managers who fixate on past costs rather than future consequences. Randomness occurs when managers see patterns and trends that do not exist. Overconfidence bias occurs when managers overestimate their own strengths and skills.

A corporate strategy focuses primarily on ________. A) an organization's strengths B) an organization's weaknesses C) an organization's mission D) an organization's people

(C) An organization's mission is the primary focus of a corporate strategy, making that the correct response. Strengths, weaknesses, and the people of the organization will certainly be incorporated into the overall corporate strategy, but on their own none of these items represent its primary focus.

Which of the following is NOT a function of planning? A) defining goals B) coordinating organizational activities C) settling disputes between employees D) identifying a strategy for attaining goals

(C) Defining goals, identifying strategies for attaining goals, and coordinating organizational activities are all recognized functions of planning, whether it is formal or informal, so these choices are incorrect. Settling disputes is not something that can be planned for, since most disputes are spontaneous and can occur at any time over any issue. This means that settling disputes is not a function of planning, therefore making that the correct response.

Planning is concerned with ________. A) neither ends nor means B) means only C) ends only D) both ends and means

(D) Planning is concerned with goals or ends, as well as how those goals are reached, or means. Therefore, the choice indicating "both ends and means" is the correct response and all of the other responses are incorrect.

Which of the following is a primary characteristic of groupthink? A) failure to reach consensus within a group B) conflict among group members C) complete conformity among group members D) candidness and openness within a group

(C) Groupthink is the tendency of group members to conceal their real views and conform to avoid controversy, so it is best described by the choice that highlights conformity. Conflict or candidness among group members would not be evident in groupthink-in fact, the opposite of these conditions would be likely to prevail: total accord and a lack of openness. Finally, a group that suffered from groupthink would likely reach consensus easier than other groups, making "failure to reach consensus within a group" an incorrect response.

The first step in the six-step strategic management process is to ________. A) analyze the opportunities the organization has B) identify strategies to reach the organization's goals C) identify the organization's mission D) analyze the organization's strengths and weaknesses

(C) Identifying the organization's mission is the first step in the strategic management process, making that the correct response. Analysis of strengths, weaknesses, and opportunities are all part of the second and third SWOT analysis steps of the process, while identification of strategies would be included in the fourth step, formulate strategies.

The more uncertain a situation is, the more _______ plans must be. A) unspecific B) long term C) flexible D) short term

(C) In a situation of high uncertainty, both flexibility and specificity are important. A plan must be specific but also flexible so it can be changed if the situation requires it. These requirements make "flexible" the correct response and eliminate "unspecific." Uncertainty has no bearing on whether a plan is long or short term, so these choices can be eliminated.

A scientist cites two studies that show a positive effect for a drug while ignoring five other studies that show a negative effect. Which error or bias is she committing? A) Hindsight B) Anchoring effect C) Confirmation bias D) Self-serving bias

(C) The scientist is "cherry picking" data that supports her position and ignoring conflicting data. She is guilty of confirmation bias, seeing only what confirms her preconceived notions. Hindsight would require her to look back on events and claim that they were predictable, something that is not relevant here. Neither is self-serving, blaming outcomes on outside factors rather than taking responsibility for your own errors. Finally, the anchoring effect describes an individual who fails to adjust to incoming information, again not something that the scientist is doing in this situation.

If a car buyer knows the inventory dealer price of the same car at different dealerships, he is operating under what type of decision-making situation? A) Risk B) Uncertainty C) Certainty D) Factual

(C) The situation described is one of certainty because all outcomes and alternatives are known. Risk would require that the individual needs to make estimates, while uncertainty would mean that the individual would have no confidence in his or her estimation ability for the situation. "Factual" is not a correct choice because it is not a recognized decision-making condition.

Once SWOT analysis is complete, managers ________ to address the issues that came up during the analysis. A) eliminate strategies B) implement strategies C) formulate strategies D) evaluate strategies

(C) he ultimate goal of a SWOT analysis is to come up with strategies that will use an organization's strengths to take advantage of opportunities, defend against threats, and shore up weaknesses, making "formulating strategies" the correct response. Implementation and evaluation of the strategies will come later in the process, making these choices incorrect. Elimination of strategies might be considered a minor part of strategy formulation, but it certainly is not the objective of a SWOT analysis.

Which of the following would you expect to find in a clothing store that follows a cost leadership strategy? A) Only the finest, most expensive materials. B) Pampered, personalized service. C) State-of-the-art design. D) Basic, no frills, practical items

(D) A company that uses a cost leadership strategy would tend to forego expensive materials, specialized service, and high-tech design and instead focus on practicality. This makes the choice indicating basic, no frills, practical items the correct response, as products for a cost leadership company would most likely be of the "no frills" category.

Structured problems are ________. A) ambiguous B) undefined and vague C) incomplete D) clear and straightforward

(D) A structured problem involves a clear, unambiguous, well-defined situation in which all information is provided. The essence of a structured problem is that it is straightforward and complete.

In traditional goal setting, as they work their way from top management to employees, goals are likely to _____________. A) become more clear B) be more rigorously followed C) be unchanged D) become less clear

(D) As they filter down from level to level, goals repeatedly get reinterpreted and distorted, making the choice regarding becoming less clear the correct response and eliminating "become more clear" and "be unchanged." "Be more rigorously followed" is also incorrect because there is no evidence to show that goals are more likely to be followed at lower levels of an organization than at higher levels.

A manager can faithfully execute the decision-making process but still end up with nothing of value if ________. A) he fails to correctly identify the steps of the process B) he fails to assign number values to different criteria C) he solves the problem inefficiently D) he fails to identify the correct problem

(D) Assigning number values to decision criteria may often be helpful in the decision-making process, but they are not required for a successful outcome. Solving the problem inefficiently may not be ideal, but it is not without value. Identifying the steps of the process has little to do with the success of the process. That leaves failing to identify the correct problem-it does no good to solve a problem if it is the wrong problem. Solving the wrong problem has no benefit for the organization or its goals.

In forward vertical integration, a company becomes its own ________, while in backward vertical integration, the company is its own ________. A) distributor; monitor B) supplier; customer C) supplier; distributor D) distributor; supplier

(D) Forward vertical integration involves a company taking control of distribution, while in backward vertical integration, a company takes control of its suppliers. This makes the choice indicating "distributor; supplier" the correct response and eliminates all other responses.

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

(D) Planning works better for larger rather than smaller companies. Few serious complaints are ever voiced that planning is too time consuming or that it creates discord, making these responses incorrect. What planning does do is lock organizations into commitments that are sometimes overly confining or destructive, making that the correct response.

A judge consults guidelines before handing down an award for damages in a legal case. What kind of decision making is she doing? A) programmed B) following a procedure C) following a rule D) following a policy

(D) The judge needs to interpret the situation, so she is following a policy. A rule is much too simple and confined for this kind of decision. The decision is clearly unprogrammed. Finally, the judge must take all kinds of subjective and human elements into account for the case, so "a procedure" is an incorrect choice.

Which of the following is NOT a reason why managers often resort to using heuristics? A) They seem to eliminate complexity. B) They seem to eliminate ambiguity. C) They save time. D) They thoroughly explain all alternatives.

(D) The one thing that a heuristic does not do is explore all alternatives for solving a problem. Instead, a heuristic looks at only a small part of the problem and uses key features to arrive at a decision and avoid a complete examination of the options. Heuristics often do successfully seem to make complicated, ambiguous situations easier to understand and deal with, so eliminating complexity and ambiguity are not correct answers. Without a doubt, heuristics save time, which eliminates "saving time" as the correct answer.

The final step of the decision-making process is to implement the alternative that has been selected. A) True B) False

(False) Implementation of the best alternative is the second-to-last step in the process. The final step of the process is to appraise the result of the decision to see if it solved the problem.

A decision criterion defines factors that are relevant in a decision. A) True B) False

(True)

Maximizing value means a decision will have the best possible outcome for the parties involved. A) True B) False

(True)

SWOT analysis includes the identification of an organization's strengths, weaknesses, opportunities, and threats. A) True B) False

(True)

The expression "throwing good money after bad" is an example of an escalation of commitment. A) True B) False

(True)

3 types of competitive strategies

1. Cost leadership (Lowest cost) 2. Differentiation (unique products that are high quality, extraordinary service, technological performance) 3. Focus ( the scope at which the firm will compete 1. diff focus or 2. cost focus)

3 factors that affect choice of plans

1. what level of the org 2. what level of the environmental uncertainty 3. what time frame?

Comparing firm performance to that of other firms.

Benchmarking

Rarley have all the information needed, even if we do, we cannot process it all This view of decision making assumes that there are limits on how much an individual can know

Bounded Rationality

The three levels of organizational strategy.

Corporate Competitive Functional Corporate strategy is top-level organization-wide strategy. Corporate strategy says what business the organization is in and what it wants to do in those businesses. Corporate strategies include: Growth (expanding the business) through... Concentration: focusing on the core business Diversification: expanding into new businesses Vertical integration: absorbing either suppliers (backward) or distributors (forward) into the organization. Horizontal integration: absorbing industry competitors into the organization. Stability Maintaining the status quo Renewal Retrenchment: short run strategy for address immediate and relatively minor problems. Turnaround: an extensive strategy for addressing major problems that usually includes cost reductions and restructuring. Competitive strategy is how the organization will compete in the businesses identified by corporate strategy. Competitive strategies include: Cost leadership: competing by having the lowest costs in the industry Differentiation: competing by having products that are uniquely valued by customers Focus strategy: competing in a narrow segment of the market through either cost leadership or differentiation

Rules of thumb or judgmental "short-cuts" that simply decision making

Heuristics

The two types of integration strategy.

Horizontal&Vertical

Making decisions based on experience, feelings, judgement

Intuitive Decision making

The belief that we know more than we do

Overconfidence Bias

What are the 8 steps to decision making

Step 1: Problem Identification Step 2: Criteria Identification Step 3: Weight Allocation Step 4: Development of Alternatives Step 5: Analysis of Alternatives Step 6: Selection of Alternative Step 7: Implementation Step 8: Evaluation

Organizational-level goals for everything but finances.

Strategic goals

establish overall objectives, position firm in terms of environment, drive orgs effort to achieve its goals

Strategic plans

SWOT stands for this:

Strengths Weaknesses Opportunities Threats

____ Problems that are straight forward, familiar, and easily defined

Structured problems

Outperforming rivals over the long term

Sustained competitive advantage is simply: doing better than your competitors over an extended period of time.

specify the details of how to achieve the overall objectives in specific contexts

Tactical plans

When meeting lower-level goals helps fulfill higher-level goals.

The Means-End Chain is a view of goal setting that assumes the satisfying of lower level goals contributes to the satisfying of goals by the next higher unit.

Taking credit for the firm's successes and blaming others for its failures

self-serving bias