475 CH 1

Between 2005 and 2011, Blue Drinks, a multinational beverage corporation, increased its return on investment from $5 million to $25 million. The company was able to do this by expanding its product line to include a wider variety of flavors. The $20 million increase in its return on investment between 2005 and 2011 can be referred to as which of the following? a. Shareholder value b. Dividend payment c. Profit growth d. Profitability turnover e. Risk capital

Profit growth

Which of these principal factors helps increase shareholder value? a. profitability. b. risk factors. c. low brand awareness. d. government regulations. e. high production costs.

Profitability

The comparison of strengths, weaknesses, opportunities, and threats is normally referred to as a SWOT analysis. a. True b. False

True

The feedback loop in the model of the strategic management process indicates that the process is ongoing; it never ends. a. True b. False

True

The great virtue of scenario planning is that managers must think outside of the box to anticipate what they might do in different situations. a. True b. False

True

The planning model suggests that a company's strategies are the result of a plan from a highly structured process orchestrated by top management. a. True b. False

True

The profit growth of a company can be measured by the increase in net profit over time. a. True b. False

True

The values of a company state how managers and employees should conduct themselves. a. True b. False

True

Well-constructed goals provide a means by which the performance of managers can be evaluated. a. True b. False

True

Scenario planning is a technique for coping with the problem of: a. uncertainty. b. planning equilibrium. c. bottom-up planning. d. strategic fit. e. cognitive bias.

Uncertainty

Edward Wrapp's ideas about the astuteness of power suggest that successful strategic managers: a. act as members of a coalition or as its democratic leaders rather than as dictators. b. usually have little control over resources that are important to the organization. c. maintain tight control over as many decisions as possible by demanding complete obedience. d. publicly commit themselves to bold strategic agendas whether or not they are rational. e. recognize the futility of pursuing planned strategies.

Act as members of a coalition or as its democratic leaders rather than as dictators

Strategy formulation refers to the: a. task of executing corporate- and business-level plans. b. process by which strategies are put into action. c. design of organizational structures and control systems. d. implementation of emergent strategies. e. analyzing an organization's external and internal environment and then the process of selecting an appropriate strategy.

Analyzing an organization's external and internal environment and then the process of selecting an appropriate strategy

More people seem to fear a snake bite than a dog bite, and yet statistically one is more likely to be bitten by a dog than by a snake. This is because people tend to estimate the probability of an outcome based on how easy the outcome is to imagine. This represents which of the following cognitive biases? a. Escalating commitment b. Hypothesis bias c. Availability error d. Representativeness e. Illusion of control

Availability error

Which of the following is the organization's principal general manager? a. Line manager b. Marketing division head c. CFO d. CEO e. Sales manager

CEO

Systematic errors in the decision-making process are most often caused by: a. inadequate information. b. information overload. c. cognitive biases of decision makers. d. poor data collection procedures. e. the devil's advocacy method.

Cognitive biases of decision makers

Mike, the CEO of a retail chain, wanted to keep costs low. To set an example for others, he drove his own car and furnished his office with plain, metal desks. In this case, Mike was displaying: a. commitment. b. ego. c. astute use of power. d. devil's advocacy. e. autocratic leadership.

Commitment

Which of the following dimensions is encompassed by a company's business model? a. Configuring resources b. Avoiding focus on acquiring new customers c. Reducing emphasis on product quality d. Maintaining high costs e. Restricting growth

Configuring resources

The first component of the strategic management process is: a. crafting the organization's mission statement. b. coming up with a damage control plan. c. analyzing the macroenvironment. d. determining the firm's employee turnover rate. e. deciding on a fit between the organization's strengths and weaknesses and the environment's opportunities and threats.

Crafting the organization's mission statement

Roza Munoz oversees the overall operations of Maxwell Coffee House which is one of the divisions of Kraft Foods Company. Roza is also responsible for the overall performance of the business division. Which of the following is not likely to be one of Roza's responsibilities? a. Turning corporate-level strategy into action b. Defining Kraft Food's mission statement c. Deciding how to compete in the coffee industry d. Supervising functional-level managers e. Developing a business-level strategy

Defining Kraft Food's mission statement

A company's mission: a. describes the marketing strategies the company intends to use to sell its products. b. outlines the manner in which employees and managers should conduct themselves. c. defines the manner in which strategies will be developed and goals achieved. d. describes what the company does. e. describes the benefits offered to the shareholders.

Describes what the company does

A component of strategy implementation is: a. designing the best organization structure, culture, and control systems to put a strategy into action. b. providing the number and kind of periodic reports that must be submitted by functional-level managers. c. defining the goals and objectives of the organizations. d. answering the question, "What is our business?" e. eliminating the feedback loop.

Designing the best organization structure, culture and control systems to put a strategy into action

The scenario approach to strategic planning involves: a. devising plans for coping with a number of different possible future states of the world. b. designing the best organization structure and the best culture and control systems to put a chosen strategy into action. c. functional managers setting key corporate objectives. d. anticipating the reoccurrence of problems that were previously encountered and designing solutions accordingly. e. designing plans for problems that the company believes it will most certainly face in the near future.

Devising plans for coping with a number of different possible future states of the world

Ralph is a well-liked manager at Aries Inc. He eloquently communicates the goals of the organization and has been successful in making the organization's vision part of its culture. Which of the following characteristics of good strategic leaders can be observed in Ralph? a. Authoritarian leadership b. Devil's advocacy c. Eloquence d. Inconsistency e. Empathy

Eloquence

Beta Corp., a gaming software company, recently launched a new game. The target audience identified by the company was the age group of 12-18 years. The advertising and marketing strategies were designed exclusively to target this age group. However, sales data revealed individuals who belong to the age bracket 18-25 years were the ones who actually bought the game. The managers at Beta Corp. decided to redesign their marketing strategies to position the game as something that people of all ages would enjoy. The company's decision to modify its product positioning demonstrates: a. downsizing strategy. b. emergent strategy. c. deliberate strategy. d. concurrency control

Emergent strategy

Karen, a manager at Libra Inc, had noticed that her subordinates were experiencing a lot of stress. After conducting a meeting with her subordinates, Karen realized that they were extremely overworked and intimidated by close deadlines. Determined to reduce their stress, she introduced a new process that eliminated time-consuming activities and gave them more flexibility for work timelines. This action taken by Karen demonstrates which of the following aspects of emotional intelligence? a. Availability error b. Self-awareness c. Self-regulation d. Motivation e. Empathy

Empathy

Feelings of personal responsibility for a project are most likely to lead to: a. prior hypothesis biases. b. escalating commitment. c. reasoning by analogy. d. representativeness. e. ivory tower planning.

Escalating commitment

Which of the following cognitive biases occurs when decision-makers allocate even more resources to a project after they receive feedback that the project is failing? a. Prior hypothesis bias b. Reasoning by analogy c. Illusion of control d. Escalating commitment e. Representativeness

Escalating commitment

Which of the following is not a characteristic of emotional intelligence? a. Self-awareness b. Self-regulation c. Escalating commitment d. Empathy e. Social skills

Escalating commitment

Emergent strategies arise from within the company as a result of prior planning. a. True b. False

False

One of the factors that distinguish organizations in the nonprofit sector from profit-making businesses is the lack of a need for strategic management. a. True b. False

False

Research finds that leaders who exhibit a high degree of emotional intelligence tend to be significantly less effective than those who do not. a. True b. False

False

Rules of thumb, or heuristics, always help to avoid severe and systematic errors in the decision-making process. a. True b. False

False

The concepts vision and mission can be used interchangeably. a. True b. False

False

The final component of the strategic management process is crafting the organization's mission statement, which provides the framework or context within which strategies are formulated. a. True b. False

False

The mission of a company lays out some desired future state and articulates what the company would like to achieve. a. True b. False

False

To increase shareholder value, managers must try to venture into new markets whether the results are profitable or not. a. True b. False

False

Philip oversees the processes of the research and development department of his company. He is responsible for all of the activities and tasks undertaken by the department. In the context of strategic management, Philip is most likely to be a _____. a. corporate-level general manager b. functional manager c. managing director d. CEO e. business development manager

Functional manager

Daryl works for Delta Corp. He is involved in all of the important decision-making processes of the company and is also responsible for the overall performance of the company. In the context of strategic management, Daryl is most likely to be a _____. a. line manager b. functional manager c. general manager d. production supervisor e. project manager

General manager

In the context of strategic management of a company, _____ have profit-and-loss responsibility for a product, a business, or the company as a whole. a. line managers b. functional managers c. general managers d. government regulators e. marketing managers

General managers

Devil's advocacy: a. involves generating a plan and a counter-plan that reflects plausible conflicting courses of action. b. is an example of ivory tower planning. c. hides the possible perils of a recommended course of action. d. involves generating a plan, and a critical analysis of that plan. e. includes downplaying the problems that could result from implementing a particular plan .

Involves generating a plan and a critical analysis of that plan

Which of the following statements is true about competitive advantage? a. It is unaffected by the strategies taken by the company. b. It is considered to be sustained when it lasts for three months. c. It exists only when the company's profitability is greater than the ten highest grossing firms in the world. d. It exists only when the company's profitability is greater than the average profitability and profit growth of its rivals. e. It is seldom affected by the business model of the company.

It exists only when the company's profitability is greater than the average profitability and profit growth of its rivals

Which of the following statements is true about a SWOT analysis? a. It does not encompass the analysis of an organization's external environment. b. It essentially results in the generation of a single strategy that deals with one particular internal function of an organization. c. It does not encompass functional-level strategies directed at improving the effectiveness of operations within a company. d. It essentially produces strategies that are incongruent with each other. e. It is a methodology for choosing between competing business models.

It is a methodology for choosing between competing business models

Which of the following statements is true about strategic leadership? a. It is the primary responsibility of the functional managers of an organization. b. It does not take into account the task of maximizing shareholder value. c. It is involved with making decisions regarding how to create a competitive advantage. d. It is a concept that does not apply to multidivisional companies with several business units. e. It is essentially about supervising workers at a manufacturing unit of an organization.

It is involved with making decisions regarding how to create a competitive advantage

Which of the following statements is true about the feedback loop in the context of strategy implementation? a. It provides managers with input for the next round of strategy formulation and implementation. b. It emerges within an organization without prior planning, and in response to unforeseen circumstances. c. It cannot reveal whether or not a business model is working. d. It carries information from corporate level managers to functional level managers. e. It indicates that the strategy implementation process has ended.

It provides managers with input for the next round of strategy formulation and implementation

Which of the following best defines shareholder value? a. It refers to the returns that shareholders earn from purchasing shares in a company. b. It refers to the capital invested in a company by the shareholders. c. It refers to the efforts taken by a company to sell its shares to prospective shareholders. d. It refers to the efforts taken by a company to buy back its shares from its shareholders. e. It refers to the non-monetary benefits that a company provides to its shareholders.

It refers to the returns that shareholders earn from purchasing shares in a company

Which of the following is not a cognitive bias? a. Escalating commitment b. Reasoning by analogy c. Ivory tower thinking d. Representativeness e. Illusion of control

Ivory tower thinking

In a typical scenario planning exercise: a. managers entirely depend on employee feedback. b. managers try to come up with alternative plans after a business model has failed. c. managers formulate plans based on 'what-if' situations about the future. d. managers do a 'postmortem' to understand what went wrong with a strategy. e. the corporate-level management sets targets for functional-level managers.

Managers formulate plans based on 'what-if" situations about the future

Holly owns a landscape company and is thinking about expanding her services to include outdoor water features (waterfalls, streams, ponds). If, before making this decision, she looks at the experience of similar firms that have added outdoor water features, she is employing: a. cognitive bias. b. illusion of control. c. devil's advocacy. d. outside view. e. dialectic inquiry.

Outside view

Good strategic leaders: a. possess a willingness to delegate and empower subordinates. b. control all facets of decision-making. c. make decisions without consulting others. d. ensure uniformity of purpose through the authoritarian exercise of power. e. are usually inconsistent in their approach.

Possess a willingness to delegate and empower subordinates

Which of the following cognitive biases refers to the fact that decision makers who have strong pre-existing beliefs about the relationship between two variables tend to make decisions on the basis of these beliefs, even when presented with evidence that their beliefs are wrong? a. Prior hypothesis bias b. Reasoning by analogy c. Illusion of control d. Escalating commitment e. Representativeness

Prior hypothesis bias

Strategic leadership is concerned with how to most effectively manage a company's strategy-making process to create competitive advantage. a. True b. False

True

Within a diversified company, the responsibilities of corporate-level strategic managers include: a. supervising production at the manufacturing units of the company. b. compiling sales reports, company costs, employee productivity and calculating the employee turnover rate. c. responding to employee complaints on a daily basis. d. providing leadership for the entire organization and allocating resources among its different business areas. e. maintaining records of transactions with suppliers.

Providing leadership for the entire organization and allocating resources among its different business areas

_____ refers to the investment that shareholders make in a company that cannot be recovered if the company fails and goes bankrupt. a. Profitability b. Shareholder value c. Debt d. Risk capital e. Dividend payments

Risk capital

Rebecca, a manager, was very annoyed after noticing several negligent errors in a critical report. However, while talking to the subordinate who created the report, Rebecca was calm and composed; she did not act impulsively and lose her temper. Which of the following aspects of emotional intelligence is illustrated in this scenario? a. Self-awareness b. Self-regulation c. Motivation d. Empathy e. Social skills

Self-regulation

A company, at its inception, states that its goal is "to provide the best customer service possible." Which of the following best describes this objective? a. The company's emergent strategy b. The company's corporate structure c. The company's HR strategy d. The company's mission statement e. The company's damage control plan

The company's mission statement

Which of the following statements is true about functional-level managers? a. They oversee the operation of an entire company or division. b. Their sphere of responsibility is generally confined to one organizational activity. c. Their activities and roles have no importance in realizing the strategic goals of an organization. d. They provide a link between the people who oversee the strategic development of a firm and those who own the firm. e. They occupy the apex of decision-making within an organization.

Their sphere of responsibility is generally confined to one organizational activity

Which of the following statements is true about emergent strategies? a. They are essentially the strategies that arise from the feedback loops. b. They are also influenced by the kind of culture that the organization's structure and control systems foster. c. They are the strategies that require the least amount of evaluation and strategic thinking from the managers. d. They cannot be combined with the intended strategies of an organization. e. They are the product of formal top-down planning mechanisms.

They are also influenced by the kind of culture that the organization's structure and control systems foster

Which of the following is not a characteristic of well-constructed goals? a. They provide a means by which the performance of managers can be evaluated. b. They are lengthy and wordy. c. They specify a time period. d. They are challenging but realistic. e. They address critical issues.

They are lengthy and wordy

Which of the following statements is true about nonprofit organizations? a. They compete with each other for resources. b. Their ultimate aim is to maximize shareholder value in order to attract risk capital. c. Their managers do not need to develop careful strategies, because making a profit is not the organization's goal. d. They do not have to worry about exceeding budgets. e. They seldom set any performance goals like profit-making organizations do.

They compete with each other for resources

A SWOT analysis is implemented to fine-tune strategies. a. True b. False

True

A business model is managers' conception of how the set of strategies their company pursues should mesh together into a congruent whole, thus enabling the company to gain a competitive advantage and achieve superior profitability and profit growth. a. True b. False

True

A firm obtains competitive advantage when its strategy results in superior performance compared to its competitors. a. True b. False

True

A strategy can be defined as a set of related actions that managers take to increase their company's performance. a. True b. False

True

Emergent strategies are the unplanned responses to unforeseen circumstances. a. True b. False

True

General managers bear responsibility for the overall performance of the company or for one of its major selfcontained subunits or divisions. a. True b. False

True

In practice, the strategies of most organizations are probably a combination of the intended and emergent strategies. a. True b. False

True

Mintzberg maintains that emergent strategies are often successful and may be more appropriate than intended strategies. a. True b. False

True

ROIC is a measure of how efficiently and effectively managers use the capital at their disposal to produce profitability. a. True b. False

True

The CEO is a company's principal general manager. a. True b. False

True

An important first step in the process of formulating a company's mission is to answer the question: a. What is our budget for advertising? b. What are the government regulations that are most likely to impact our business? c. What is our business? d. How do we persuade shareholders to provide risk capital? e. How many employees should we hire?

What is our business?

Jeffrey Pfeffer believes that a manager's power comes from his or her: a. ability to prioritize the well-being of the company over personal well-being. b. ability to be emphatic and understanding of the feelings and emotions of subordinates. c. control over important organizational resources. d. ability to cut overhead costs. e. personal rapport with the senior management.

control over important organizational resources