STRATEGIC MANAGEMENT Chapter 4, The Internal Assessment

financing decision

A basic function of finance; determines the best capital structure for the firm and includes examining various methods by which the firm can raise capital (for example, by issuing stock, increasing debt, selling assets, or using a combination of these approaches).

capital budgeting

A basic function of finance; the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization.

controlling

A basic function of management; includes all of those activities undertaken to ensure that actual operations conform to planned operations.

organizing

A basic function of management; the process of arranging duties and responsibilities in a coherent manner in order to determine who does what and who reports to whom.

planning

A basic function of management; the process of deciding ahead of time strategies to be pursued and actions to be taken in the future.

pricing

A basic function of marketing; determining the appropriate value for products and services to be charged to customers, given associated costs and competitor's prices. Five major stakeholders affect pricing decisions: 1. consumers 2. governments 3. suppliers 4. distributors 5. competitors.

selling

A basic function of marketing; includes activities such as advertising, sales promotion, publicity, personal selling, sales force management, customer relations, and dealer relations.

product and service planning

A basic function of marketing; includes activities such as test marketing; product and brand positioning; devising warranties; packaging; determining product options, features, style, and quality; deleting old products; and providing for customer service.

distinctive competencies

A firm's strengths that cannot be easily matched or imitated by competitors.

variable costs (VC)

A key variable in breakeven analysis; includes costs such as labor and materials.

fixed costs (FC)

A key variable in breakeven analysis; includes costs such as plant, equipment, stores, advertising, and land.

dividend decisions

A basic function of finance; concerns issues such as the percentage of earnings paid to stockholders, the stability of dividends paid over time, and the repurchase or issuance of stock.

motivating

A basic function of management; the process of influencing and leading people to accomplish specific objectives.

According to Roger Schroeder, which basic function within production and operations deals with aggregate planning and scheduling? A) Capacity B) Inventory C) Workforce D) Process E) Quality

A) Capacity

________ can reveal the demographic characteristics of an organization's customers. A) Customer profiling B) Test marketing C) Market development D) The vision statement E) Telemarketing

A) Customer profiling

Which of the following does the text call an up-front investment in success? A) Planning B) Organizing C) Motivating D) Staffing E) Controlling

A) Planning

One aspect of ads recently is that they A) take more direct aim at competitors. B) do not mention competitors. C) allude to competitors in a positive light. D) are less combative. E) none of the above

A) take more direct aim at competitors.

All of the following are basic functions of marketing EXCEPT A) value chain analysis. B) customer analysis. C) product and service planning. D) pricing. E) distribution.

A) value chain analysis.

Life-directing attitudes that serve as behavioral guidelines are called A) values. B) rites. C) beliefs. D) metaphors. E) legends.

A) values.

investment decision

Also called capital budgeting; a basic function of finance; the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization.

personnel management

Also called human resource management; a basic function of management; includes activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, as well as managing union relations.

If total fixed costs are $10,000, variable costs per unit are $5, and the price per unit is $15, what is the breakeven quantity? A) 500 B) 667 C) 1,000 D) 2,000 E) 5,000

C) 1,000

What category of ratios includes return on total assets and return on stockholders' equity? A) Leverage B) Activity C) Profitability D) Growth E) Liquidity

C) Profitability

Staffing involves all of these activities EXCEPT A) recruiting. B) transferring. C) analyzing customers. D) managing union relations. E) training and developing.

C) analyzing customers.

All of the following are basic duties of management EXCEPT A) staffing. B) planning. C) consolidating. D) organizing. E) motivating.

C) consolidating.

Selling includes all of these marketing activities EXCEPT A) advertising. B) dealer relations. C) customer analysis. D) publicity. E) sales promotion.

C) customer analysis.

The three all-encompassing internal resource categories used in the resource-based view are physical resources, human resources, and A) financial resources. B) shareholder resources. C) organizational resources. D) non-renewable resources. E) technological resources.

C) organizational resources.

Distribution includes A) customer analysis. B) pricing. C) warehousing. D) advertising. E) test marketing.

C) warehousing.

What marketing function includes test marketing? A) Selling products and services B) Pricing C) Customer analysis D) Product and service planning E) Distribution

D) Product and service planning

________ management deals with inputs, transformations, and outputs that vary across industries and markets. A) Marketing B) Financial C) Research and development D) Production and operations E) Information systems

D) Production and operations

In most industries, the major costs of producing a product or service are incurred within A) marketing. B) management. C) research and development. D) operations. E) management information systems.

D) operations.

A standardized set of behaviors used to manage anxieties is called a A) folktale. B) rite. C) metaphor. D) ritual. E) value.

D) ritual.

Any object, act, event, quality, or relation used to convey meaning is known as a A) myth. B) rite. C) value. D) symbol. E) metaphor.

D) symbol.

information

Data that has been evaluated, filtered, condensed, analyzed, and organized for a specific purpose, problem, individual, or time.

data

Raw facts and figures; "data" becomes "information" only when they are evaluated, filtered, condensed, analyzed, and organized for a specific purpose, problem, individual, or time.

Which function of management includes all of those activities undertaken to ensure actual operations conform to planned operations? A) Planning B) Organizing C) Motivating D) Staffing E) Controlling

E) Controlling

What category of ratios measures how effectively a firm can maintain its economic position in the growth of the economy and industry? A) Profitability B) Liquidity C) Leverage D) Activity E) Growth

E) Growth

Synergy A) is the 2 + 2 = 5 effect. B) can result in powerful competitive advantages. C) can be developed by an organization through planning. D) exists when everyone pulls together as a team that knows what it wants to achieve. E) all of the above

E) all of the above

customer analysis

Examination and evaluation of consumer needs, desires, and wants; involves administering customer surveys, analyzing consumer information, evaluating market positioning strategies, developing customer profiles, and determining optimal market segmentation strategies. Customers

cultural products

Include values, beliefs, rites, rituals, ceremonies, myths, stories, legends, sagas, language, metaphors, symbols, heroes, and heroines. These products are levers that strategists can use to influence and direct strategy formulation, implementation, and evaluation activities.

staffing

Includes activities such a recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees.

activity ratios

Inventory turnover and average collection period measure how effectively a firm is using its resources. -Inventory turnover -Fixed assets turnover -Total assets turnover -Accounts receivable turnover -Average collection period

synergy

The 1 + 1 = 3 effect; when everyone pulls together as a team, the results can exceed individuals working separately.

liquidity ratios

The current ratio and quick ratio measure a firm's ability to meet short-term cash obligations. -Current ratio -Quick (or acid-test) ratio

leverage ratios

The debt-to-equity ratio and debt-to-total assets ratio measure the extent to which a firm has been financed by debt. -Debt-to-total-assets ratio -Debt-to-equity ratio -Long-term debt-to-equity ratio -Times-interest-earned (or coverage) ratio

capacity utilization

The extent to which a manufacturing plant's output reaches its potential output; the higher the capacity utilization the better, because otherwise equipment may sit idle.

internal audit

The process of gathering and assimilating information about the firm's management, marketing, finance/accounting, production/operations, R&D, and MIS operations. The purpose is to identify/evaluate/prioritize a firm's strengths and weaknesses.

distribution

The process of getting goods and services to market; includes warehousing, distribution channels, distribution coverage, retail site locations, sales territories, inventory levels and location, transportation carriers, wholesaling, and retailing.

value chain analysis (VCA)

The process whereby a firm determines the costs associated with organizational activities from purchasing raw materials to manufacturing product(s) to marketing those products, and compares these costs to rival firms using benchmarking.

profitability ratios

The profit margin ratio and return on investment ratio measure the profitability of a firm's operations. -on sales and investment. -Gross profit margin -Operating profit margin -Net profit margin -Return on total assets (ROA) -Return on stockholders' equity (ROE) -Earnings per share (EPS) -Price-earnings ratio

breakeven (BE) point

The quantity of units that a firm must sell in order for its total revenues (TR) to equal its total costs (TC).

marketing research

The systematic gathering, recording, and analyzing of data about problems/practices/issues related to the marketing of goods and services.

benchmarking

A management technique associated with value chain analysis, whereby a firm compares itself on a wide variety of performance-related criteria against the best firms in the industry, thus establishing standards of excellence. An analytical tool used to determine how a firm's value chain activities compare to rival firms in order to better gain and sustain competitive advantages.

organizational culture

A pattern of behavior developed by an organization over time as it learns to cope with its problem of external adaptation and internal integration, and that has worked well enough to be considered valid and to be taught to new members as the correct way to perceive, think, and feel in the firm.

internal factor evaluation (IFE) matrix

A strategy-formulation tool that summarizes and evaluates a firm's major strengths and weaknesses in the functional areas of a business, and provides a basis for identifying and evaluating relationships among those areas.

management information system (MIS)

A system that gathers, assimilates, and evaluates external and internal information to facilitate decision-making.

core competence

A value chain activity that a firm performs especially well.

Who does a planning horizon of two to five years apply to? A) Top-level management B) General management C) Middle-level management D) Lower-level management E) All levels of management

A) Top-level management

The IFE Matrix should be ________ in multidivisional firms. A) constructed for each division B) all-inclusive C) constructed only for the major divisions D) developed before the EFE Matrix E) revised monthly

A) constructed for each division

Organizational resources include all of the following EXCEPT A) employee training. B) firm structure. C) planning processes. D) information systems. E) copyrights.

A) employee training.

The ________ decision is the allocation and reallocation of capital and resources to projects, products, assets, and divisions of an organization. A) investment B) dividend C) financing D) restructuring E) benchmark

A) investment

Opportunity analysis is one of the basic functions of A) marketing. B) finance/accounting. C) computer information systems. D) production/operations E) research and development.

A) marketing.

The Robinson-Patman Act affects a company's A) pricing. B) product/service planning. C) customer analysis. D) marketing research. E) distribution.

A) pricing.

Metaphors are A) several rites connected together. B) shorthand of words used to capture a vision or to reinforce old or new values. C) narratives based on true events. D) fictional stories. E) any objects, acts, events, qualities, or relations used to convey meaning.

B) shorthand of words used to capture a vision or to reinforce old or new values.

The process whereby a firm determines the costs associated with organizational activities from purchasing raw materials to manufacturing products to marketing those products is called A) the resource-based approach. B) value chain analysis. C) strategic cost analysis. D) the internal factor evaluation matrix. E) cost-benefit analysis.

B) value chain analysis.

Who should perform an internal audit? A) A private auditing firm B) The organization's accounting department C) Representative managers and employees from throughout the firm D) A small team of top-level managers E) The chief executive officer

C) Representative managers and employees from throughout the firm

functions of management

Consist of five basic activities: planning, organizing, motivating, staffing, and controlling.

production/operations function

Consists of all those activities that transform inputs into goods and services; including issues such as inventory control and capacity utilization. Business consists of all those activities that transform inputs into goods and services. Five functions or decision areas: 1. process 2. capacity 3. inventory 4. workforce 5. quality

Which of the following is NOT a key question that can reveal internal strengths and weaknesses of the marketing department? A) Does the firm have an effective sales organization? B) Is our product quality good? C) Are markets segmented effectively? D) Are the firm's products and services priced appropriately? E) Does the firm have good liquidity?

E) Does the firm have good liquidity?

Which ratio is calculated by dividing profits before interest and taxes by total interest charges? A) Inventory turnover B) Fixed assets turnover C) Total assets turnover D) Debt-to-equity ratio E) Times-interest-earned ratio

E) Times-interest-earned ratio

An effective information management system ________ information in such a way that it answers important operating and strategic questions. A) collects B) codes C) stores D) synthesizes E) all of the above

E) all of the above

The initial step to implementing value chain analysis is A) attaching a cost to each discrete activity. B) establishing costs in terms of time. C) establishing costs in terms of money. D) converting the cost data into information by looking for competitive cost strengths and weaknesses. E) dividing a firm's operations into specific activities or business processes.

E) dividing a firm's operations into specific activities or business processes.

functions of finance/accounting

The basic activities performed by finance managers; consists of three decisions: the investment decision, the financing decision, and the dividend decision.

functions of marketing

The basic activities performed by marketing managers, including (1) customer analysis, (2) selling products/services, (3) product and service planning, (4) pricing, (5) distribution, (6) marketing research, and (7) opportunity analysis.

Which of the following are NOT mentioned as an example of cultural products? A) Rites B) Emotions C) Rituals D) Sagas E) Symbols

B) Emotions

What category of ratios measures a firm's ability to meet maturing short-term obligations? A) Profitability B) Liquidity C) Leverage D) Activity E) Growth

B) Liquidity

Which of the following is the process of influencing people to accomplish specific objectives? A) Staffing B) Motivating C) Planning D) Controlling E) Organizing

B) Motivating

Which function of management includes areas such as job design, job specifications, job analysis, and unity of command? A) Planning B) Organizing C) Motivating D) Staffing E) Controlling

B) Organizing

Which function of management is concerned with span of control and chain of command? A) Planning B) Organizing C) Controlling D) Staffing E) Motivating

B) Organizing

What is the essential bridge between the present and the future that increases the likelihood of achieving desired results? A) Motivating B) Planning C) Controlling D) Staffing E) Organizing

B) Planning

What is the term for a historical narrative describing the unique accomplishments of a group and its leaders? A) Rite B) Saga C) Story D) Myth E) Folktale

B) Saga

A firm's strengths that cannot be easily matched or imitated by competitors are called A) internal audits. B) distinctive competencies. C) external audits. D) interrelated properties. E) internal properties.

B) distinctive competencies.

The times-interest-earned ratio would be classified as a(n) A) activity ratio. B) leverage ratio. C) profitability ratio. D) liquidity ratio. E) growth ratio.

B) leverage ratio.

All of the following are key questions that can reveal internal strengths and weaknesses in the management department EXCEPT A) Is the organization's structure appropriate? B) Are reward and control mechanisms effective? C) Are the organization's products positioned well against competing products? D) Does the firm use strategic-management concepts? E) Do managers delegate authority well?

C) Are the organization's products positioned well against competing products?

Which ratio would be considered an activity ratio? A) Debt-to-equity B) Net profit margin C) Average collection period D) Earnings per share E) Current ratio

C) Average collection period

________ become(s) ________ only when evaluated, filtered, condensed, analyzed, and organized for a specific purpose, problem, individual, or time. A) Information; data B) Information; material C) Data; information D) Data; competitive advantages E) Competitive advantages; material

C) Data; information

________ exemplifies the complexity of relationships among the functional areas of business. A) Government auditing B) External auditing C) Financial ratio analysis D) Environmental scanning E) Distribution strategy

C) Financial ratio analysis

________ is a commonly used approach to determine R&D budget allocations. A) Financing as many project proposals as possible B) Using a percentage-of-sales method C) Budgeting for R&D about what competitors spend D) Deciding how many successful new products are needed E) All of the above

E) All of the above

________, perhaps the most important word in management, is a major component in motivation. A) Forecasting B) Organizational structure C) Recruiting D) Management development E) Communication

E) Communication

human resource management

Also called personnel management; a basic function of management; includes activities such as recruiting, interviewing, testing, selecting, orienting, training, developing, caring for, evaluating, rewarding, disciplining, promoting, transferring, demoting, and dismissing employees, as well as managing union relations.

cost/benefit analysis

An activity that involves assessing the costs, benefits, and risks associated with marketing decisions. Three steps are required to perform this: (1) compute the total costs associated with a decision, (2) estimate the total benefits from the decision, and (3) compare the total costs with the total benefits.

test marketing

An activity to determine ahead of time whether a certain product or service or selling approach will be cost effective; also used to forecast future sales of new products.

resource-based view (RBV)

An approach that suggests internal resources to be more important for a firm than external factors in achieving and sustaining competitive advantage.

Which of the three finance and accounting decisions concerns determining the best capital structure for the firm and includes examining various methods by which the firm can raise capital? A) Investment B) Dividend C) Financing D) Capital budgeting E) Implementation

C) Financing

________ ties all business functions together and provides the basis for all managerial decisions. A) Management B) Marketing C) Information D) Technology E) Workforce

C) Information

Which of the following is the first step in developing an IFE Matrix? A) Determining the organization's structure B) Summing the weighted scores for each variable C) Listing key internal strengths and weaknesses D) Identifying the organization's functions of business E) Assigning a weight to each factor

C) Listing key internal strengths and weaknesses

Which management function includes breaking tasks into jobs, combining jobs to form departments, and delegating authority? A) Motivating B) Staffing C) Organizing D) Controlling E) Planning

C) Organizing

The first step in the controlling function of management is to A) take corrective actions. B) restrict the number of breaks employees take. C) evaluate expense reports. D) establish performance standards. E) measure individual and organizational performance.

D) establish performance standards.

Empirical indicators of resources are: being rare, hard to imitate, or A) expensive. B) inexpensive. C) easily substitutable. D) not easily substitutable. E) inefficient.

D) not easily substitutable.

A pattern of behavior developed by an organization as it learns to cope with its problems of external adaptation and internal integration, and that has worked well enough to be considered valid and to be taught to new members as the correct way to perceive, think, and feel is called A) dysfunctional behavior. B) groupthink. C) behavior modification. D) organizational culture. E) internal audit effect.

D) organizational culture.

growth ratios

Measures such as the percent increase/decrease in revenue or profit from one period to the next are important comparisons. -economy and industry. -Sales -Net income -Earnings per share -Dividends per share

communication

Perhaps the most important word in strategic management, because gathering, assimilating, and evaluating information in an interactive, effective manner can lead to enhanced understanding and commitment so vital in strategic planning.

financial ratio analysis

Quantitative calculations that reveal the financial condition of a firm and exemplify the complexity of relationships among the functional areas of business. For example, a declining return on investment or profit margin ratio could be the result of ineffective marketing, poor management policies, research and development errors, or a weak management information system. Ratios are usually compared to industry averages, or to prior time periods, or to rival firms. Exemplifies the complexity of relationships among the functional areas of business.

empirical indicators

Refers to three characteristics of resources (rare, hard to imitate, not easily substitutable) that enable a firm to gain and sustain competitive advantage. These three characteristics of resources enable a firm to implement strategies that improve its efficiency and effectiveness and lead to a sustainable competitive advantage.

research and development (R&D)

Spending money to develop new and improved products and services.