Tb07

CHAPTER 7: PLANNING AND STRATEGY

Test Correlation Table Question Types/Level of Difficulty

LEARNING OBJECTIVES Easy Moderate Difficult

1. Explain the importance of the planning function.

TF — 1, 2, 3 4, 5

MC 1, 2 3 4, 5

ES — 1 —

2. Describe the core components of strategic and tactical planning.

TF 6, 7, 12 8, 10, 11 9, 13

MC 6, 8, 9, 12, 14, 16, 17, 24, 25,

27, 29

7, 13, 15, 18, 19, 20, 21, 22, 23,

26, 31

10, 11, 28, 30

ES — 2 3

3. Discuss the effects of degree of diversification on planning.

TF 14, 16 — 15

MC 35, 37, 38, 40 32, 34, 36, 41, 44

33, 39, 42, 43

ES — 4 —

4. Describe the three basic levels of strategy and planning.

TF — 17, 18, 19, 20, 22, 23, 24

21

MC 45, 47, 50, 52, 54, 58, 62, 63,

65, 67, 68

49, 51, 59, 60, 64, 69

46, 48, 53, 55, 56, 57, 61, 66,

70

ES — — 5

5. State the eight primary tasks of the planning process.

TF 28 25, 26, 29 27

MC 71, 72, 73, 81, 82, 83, 88, 90,

92, 99

75, 76, 79, 80, 84, 85, 87, 89, 93, 96, 97, 100

74, 77, 78, 86, 91, 94, 95, 98

ES — 6 7

6. Explain the generic competitive strategies model.

TF 30, 32, 33 31 —

MC 101, 102, 104, 107

103, 106 105

ES — 8 —

167


True/False Questions

Learning Objective 1

1. Johnson & Johnson considers their first responsibility to be making a sound profit for stockholders.

ANSWER: F, Knowledge, Moderate, p. 178

2. When planning is done properly, it fosters organization-wide learning, including the discovery of key problems, opportunities, and new strategies.

ANSWER: T, Knowledge, Moderate, p. 179

3. Planning is defined as identifying organizational controls and developing ways to implement them.

ANSWER: F, Knowledge, Moderate, pp. 178–179

4. The ability to plan by an individual, team, or organization is embedded in four of the six managerial competencies.

ANSWER: F, Knowledge, Difficult, pp. 178–179

5. Johnson & Johnson’s organization wide planning involves the principle of decentralized management.

ANSWER: T, Knowledge, Difficult, p. 179


6. Strategic planning is the process of diagnosing the organization’s environments, deciding on a mission and vision, developing overall goals, creating and selecting general strategies, and allocating resources.

ANSWER: T, Knowledge, Easy, p. 179

7. Most large organizations use contingency planning for unexpected, major and quick changes in the environment that will have a significant impact on the organization and that will require an immediate response.


8. Dell Computer’s mission statement includes: “To add value to our communities through diversity, environmental, and citizenship initiatives.”

ANSWER: F, Knowledge, Difficult, p. 181

9. Goals must be expressed quantitatively, not qualitatively.

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10. A firm’s mission expresses its fundamental aspirations and purpose.


11. The strategies of an organization are what it is committed to achieving.


12. When an organization allocates resources, it divides money, people, facilities and equipment, land, and other resources among various current and new business opportunities, functions, projects, and tasks.


13. Tactical planning is the process of making detailed decisions about what to do, who will do it, and how to do it, with a time horizon of four years or more.



14. The variety of goods and/or services produced and the number of different markets served constitutes an organization’s level of diversification.


15. A firm’s diversification level may be in the form of single business, dominant business, relative business, or nonrelative business.


16. An unrelated-business firm provides diverse products to many different markets.



17. Corporate-level planning and strategy guides the overall direction of firms having more than one line of business.


18. Top corporate managers do not determine the role of each separate business within the organization, lower level managers do that.


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19. When a company enters the businesses of its customers in order to get closer to their ultimate (end user) customers, this is known as forward integration.


20. The five common corporate-level growth strategies are: forward integration, backward integration, horizontal integration, vertical integration, and convergent integration.


21. Concentric diversification is an alternative to traditional forms of backward, forward, and horizontal integration.


22. Conglomerate diversification is the act of adding unrelated goods or services to a firm’s line of businesses.


23. The corporate-level strategy refers to the resources allocated and actions taken to achieve desired goals in serving a specific market with a highly interrelated set of goods and/or services.


24. The vertical integration strategy refers to the interrelated actions and resource commitments established for operations, marketing, human resources, finance, legal services, accounting, and the organization’s other functional areas.



25. In practice, managers and team involved in business-level planning often jump back and forth between the eight tasks in the planning process. They may even skip phases as they develop their plans.


26. Task 1 of the planning process involves diagnosing the firm’s opportunities and threats.


27. The situations that tend to make suppliers more powerful are similar to those that make customers more powerful.

ANSWER: T, Knowledge, Difficult, p. 195

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28. A company’s core competencies are the strengths that make it distinctive and more competitive by providing goods or services that have unique value to customers.


29. A market penetration strategy involves seeking new and different markets for current products.



30. The product differentiation strategy is dominant in much of the automobile industry.


31. A framework that describes strategies that all types of organizations can use is a Universal Model.


32. Malone Hardware seeks to offer its customers lower prices than any other hardware store in town. Jones is following the focus strategy.

ANSWER: F, Application, Easy, pp. 200–201

33. The Cotton District Grill has a strategy that involves competing in a specific restaurant niche by serving the unique needs of certain customers. The Grill is following a product differentiation strategy.

ANSWER: F, Application, Easy, p. 200

Multiple Choice Questions

Preview1. The strategic business model of Johnson & Johnson is broadly based in __________.

a. household productsb. human health carec. boat engines and equipmentd. consumer needs

ANSWER: B, Knowledge, Easy, p. 178

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The Planning Function2. Which of the following is not something that successful planning should assist the

organization to accomplish?a. discovering future opportunitiesb. anticipating and avoiding future problemsc. developing courses of actiond. Successful planning should assist the organization in accomplishing all of the above.

ANSWER: D, Knowledge, Easy, p. 179

3. The most basic managerial function is __________.a. organizing b. planning c. directingd. leading

ANSWER: B, Knowledge, Moderate, p. 178

4. Planning should improve the odds of achieving an organization’s goals by _________.a. creating desirable changeb. improving productivityc. maintaining organizational stabilityd. all of the above

ANSWER: D, Knowledge, Difficult, p. 179

5. William Weldon, CEO of Johnson & Johnson says, “Our decentralized management system gives us a __________.”a. method to accurately appraise profitability for each business unitb. greater opportunity to recognize local talentc. sense of ownership in local marketsd. completely different approach for each market

ANSWER: C, Knowledge, Difficult, p. 179


Two Types of Planning6. The process of diagnosing the organization’s environments, deciding on a mission and

vision, developing overall goals, creating and selecting general strategies, and allocating resources is _________.a. strategic planning b. tactical planning c. strategic controld. operational planning

ANSWER: A, Knowledge, Easy, p. 179

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7. Strategic planning involves developing and analyzing all of the following except __________.a. mission b. daily operational goals c. the internal environmentd. the external environment


8. Preparation for unexpected, major, and quick changes in the environment is called __________ planning.a. cascade b. contingency c. tacticald. DFD (design for deployment)


9. __________ had a contingency communication plan that worked well after the September 11 attacks, but they have now additionally routed their telecommunications channels through multiple access points.a. Verizonb. The New York Stock Exchangec. The Bank of New Yorkd. American Airlines

ANSWER: C, Knowledge, Easy, p. 180

10. The Bank of New York has established an “active-active” business model which uses __________.a. multiple sites for identical functionsb. cross training of less critical functionsc. greater geographic diversity across the countryd. all of the above

ANSWER: A, Knowledge, Difficult, p. 180

11. Generally, no more than _____ potentially critical events should be emphasized in contingency planning.a. 2 b. 5 c. 9d. 12

ANSWER: B, Knowledge, Difficult, p. 179

12. An organization’s purpose or reason for existing is known as a _________.a. mission b. rationalec. scenario d. strategy

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13. Which of the following questions is not often answered in a mission statement?a. What business are we in?b. Who are we?c. What are we about?d. How will we achieve our goals?

ANSWER: D, Knowledge, Moderate, p. 181

14. A mission statement is meaningful only if it acts as a __________ for guiding strategic decisions and achieving an organization’s long-term goals.a. strategic planb. unifying forcec. tactical pland. vision


15. A(n) __________ should encourage the organization’s members to think and act strategically—not just once a year but every day.a. operational tactic b. HRM statement c. contingency pland. mission statement


16. A __________ expresses an organization’s fundamental aspirations and purpose, usually be appealing to its members’ hearts and minds.a. strategyb. missionc. visiond. plan


17. A vision statement adds _________ to a mission statement if it lacks one.a. “strategy”b. “soul”c. “mind”d. “body”


18. Dell Computers’ vision is to __________.a. lead the Internet economyb. sell the most computersc. bring value to communitiesd. become a global innovator

ANSWER: C, Knowledge, Moderate, p. 181

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19. An organization’s __________ represent what it is committed to achieving.a. tactical plans b. strategic controls c. feedback systemsd. goals


20. Goals may be expressed __________.a. qualitatively b. quantitatively c. covertlyd. both a and b are correct


21. Which of the following is not a goal of Johnson & Johnson discussed in the text?a. achieve double-digit revenue growth per yearb. reduce carbon dioxide emissionsc. create injury-free workplacesd. improve quality of life for customers

ANSWER: A, Knowledge, Moderate, p. 181

22. The major courses of action that an organization takes to achieve its goals are called __________.a. contingency plans b. tactical plans c. operational plansd. strategies


23. A key challenge for organizations is to develop ___________ that are(is) at least partially unique relative to competitors or to pursue strategies similar to those of competitors but in different ways.a. goalsb. a visionc. plansd. strategies


24. The allocation of __________ is (are) considered a function of resource allocation.a. money b. peoplec. facilitiesd. all of the above


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25. The earmarking of money, through budgets, for various uses is known as __________.a. tactical planningb. resource allocation c. cost-based accountingd. deployment


26. John Wayne Productions has decided to increase the number of Western-theme movies that it produces each year. To accomplish this goal, the company has increased its payroll budget and hired additional actors. John Wayne Productions has engaged in __________.a. resource allocationb. resource-based costingc. resource planningd. resource execution

ANSWER: A, Application, Moderate, p. 183

27. The process of making concrete decisions about what to do, who will do it, and how to do it—within a time horizon of one year or less—is known as __________.a. resource allocationb. tactical planning c. contingency planningd. right-sizing


28. Tactical planning involves all of the following steps except __________.a. developing budgets for each departmentb. developing budgets for each projectc. deciding on courses of action for diversificationd. developing quantitative goals


29. Departmental managers and employee teams develop tactical plans to anticipate or cope with the actions of __________.a. competitorsb. other departmentsc. customersd. all of the above


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30. Dell Computer’s ability to __________, and tailor products and services accordingly, is the key to having the lowest cost and most effective customer service.a. control the marketb. segment the marketc. respond to the marketd. sell direct to the public


31. Which of the following is not one of the four interrelated competitive strategies developed by Dell Computer?a. speed to marketb. superior customer servicec. early exploitation of the Internetd. All of the above are among the four interrelated competitive strategies.

ANSWER: D, Knowledge, Moderate, pp. 182–183


Degree of Diversification and Planning32. __________ refers to the variety of goods and/or services produced by an organization

and the number of different markets it serves.a. Adaptationb. Strategy c. Diversificationd. Functionality


33. Which of the following is not one of the questions managers should consider when trying to identify the potential risks and opportunities of diversification?a. What can we do better than other firms if we enter a new market?b. What strategic resources are needed to succeed in the new market?c. Will we be simply a player in the new market or will we emerge a winner?d. What will this diversification move save in costs?

ANSWER: D, Knowledge, Difficult, pp. 184–185

34. Ruben Alvarez is interested in diversification as a means of understanding levels of strategy and planning. A firm’s diversification level may be all of the following except a __________-business firm.a. single b. dominantc. relatedd. vertical


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35. A firm that provides a limited number of goods or services to one segment of a particular market is known as a(n) __________-business firm.a. unrelatedb. related c. dominantd. single


36. Southwest Airlines provides one type of transportation service to travelers. This is known as a(n) __________-business firm.a. single b. dominantc. relatedd. integrated

ANSWER: A, Application, Moderate, p. 186

37. A firm that serves various segments of a particular market is known as a(n) __________-business firm.a. single b. dominantc. relatedd. unrelated


38. A firm that provides a variety of similar goods and/or services is known as a(n) __________-business firm.a. single b. dominant c. relatedd. unrelated


39. The divisions of Foley Brothers Limited generally operate in the same or similar markets, use similar technologies, share common distribution channels and benefit from common strategic assets. Foley Brothers is a(n) __________-business firm.a. single b. dominantc. relatedd. concentric

ANSWER: C, Application, Difficult, p. 186

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40. A firm that provides diverse products (goods and/or services) to many different markets is known as a(n) __________-business firm.a. singleb. dominant c. relatedd. unrelated


41. __________ is a firm that consists of distinct companies that have little or no relation to each other in terms of goods, services, or customers served.a. A megabusinessb. A limited partnershipc. A conglomerated. A holding company


42. Many North American firms have backed away from conglomerate diversification by selling off __________.a. unrelated businessesb. related businessesc. dominant businessesd. none of the above

ANSWER: A. Knowledge, Difficult, p. 186

43. GE needs board of directors members to do all of the following except __________.a. represent diverse industriesb. be critical of the companyc. have greater involvement in the companyd. approve financial strategies


44. GE implemented functional documents to fully comply with Sarbanes-Oxley legislation, as well as their own vision of __________. a. environmental protectionb. corporate governancec. diversity in the workforced. homeland security


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Levels of Strategy and Planning45. __________-level planning and strategy guides the overall direction of firms having

more than one line of business.a. Functionalb. Business c. Corporated. Diversification


46. Corporate strategies focus on all of the following except __________.a. the types of businesses the firm wants to engage inb. ways to acquire or divest businessesc. allocation of resources among the businessesd. ways to develop corporate energy


47. A(n) __________ is a division or subsidiary of a firm that provides a distinct product or service and often has its own mission and goals.a. functional-business unit (FBU)b. integrative-business unit (IBU)c. tactical-business unit (TBU)d. strategic-business unit (SBU)


48. Which of the following statements is not true concerning SBUs?a. An SBU may have a well-defined set of customers.b. An SBU may cover a specific geographic area.c. An SBU is usually evaluated on the basis of its own income statement.d. Corporate-level managers develop the plans and strategies for each SBU.


49. __________ is not a common growth strategy.a. Backward integration b. Forward integration c. Matrix diversificationd. Conglomerate diversification

ANSWER: C, Knowledge, Moderate, pp. 189–190

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50. __________ occurs when a company enters the business of its suppliers, usually to control component quality, on-time delivery, or stable prices.a. Forward integration b. Backward integrationc. Horizontal integrationd. Concentric diversification


51. Community Gas and Electric provides utilities for three counties. The company recently started drilling its own gas wells in order to gain control over price and availability of product for its pipelines. C. G. & E. is following a strategy of __________.a. forward integration b. backward integration c. horizontal integrationd. conglomerate diversification

ANSWER: B, Application, Moderate, p. 189

52. When a company enters the businesses of its customers, it is involved in __________.a. forward integration b. backward integration c. horizontal integrationd. concentric diversification


53. Harris Ranch, a cattle ranch and commercial feedlot operation located along Interstate Highway 5 in California, opened a restaurant to serve its high quality beef to travelers. This decision characterizes __________ integration.a. forward b. backwardc. horizontald. conglomerate

ANSWER: A, Application, Difficult, p. 189

54. __________ integration occurs when a company acquires a competitor to consolidate and extend its market share.a. Forward b. Backwardc. Horizontald. Conglomerate


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55. Intercontinental Printing, Inc. is growing by purchasing established printing companies. Intercontinental is following a strategy of __________.a. forward integration b. backward integration c. horizontal integrationd. conglomerate diversification


56. The _________ strategy is an alternative to traditional forms of backward, forward, and horizontal integration.a. related b. benchmarkingc. unrelatedd. alliance


57. The Harbert Corporation owns a valuable piece of commercial real estate. JWA, Inc. has extensive experience in developing and operating shopping centers. They form a joint venture, called Mall Associates, to develop Harbert’s site. Mall Associates is an example of a(n) __________ strategy.a. backward integrationb. horizontal integrationc. forward integrationd. alliance

ANSWER: D, Application, Difficult, p. 189

58. When a firm acquires or starts a business related to the firm’s existing business in terms of technology, markets, or products, it has engaged in __________ diversification.a. horizontalb. concentricc. backwardd. forward


59. All of the following are examples of concentric diversification, or related diversification, except __________.a. a general set of customers b. incompatible managerial skillsc. overlapping distribution channelsd. similar technology


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60. The merger between America Online (AOL) and Time Warner was viewed by top management as a form of ______________ diversification.a. forward b. backwardc. horizontald. concentric

ANSWER: D, Application, Moderate, p. 190

61. Lakewood, Inc. is a real estate company. It recently acquired companies operating in the floral, tire, and athletic equipment industries. Lakewood is using a __________ strategy.a. conglomerateb. related diversification c. concentric diversificationd. dominant business firm

ANSWER: A, Application, Difficult, p. 190

62. __________ diversification occurs when a firm adds unrelated goods or services to its line of business.a. Concentricb. Conglomeratec. Horizontald. Backward


63. __________ strategy refers to the resources allocated and actions taken to achieve desired goals in serving a specific market with a highly interrelated set of goods and/or services. a. Forward integration b. Single-businessc. Horizontal integrationd. Business-level


64. Which of the following questions is not one that management must address when planning and formulating strategies that focus on customers?a. Who will be served?b. What customer needs will be satisfied?c. How will customers’ needs be satisfied?d. How will our technology needs change?


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65. Warren Buffett’s strategy with Berkshire Hathaway can be characterized as __________.a. concentricb. conglomeratec. backwardd. forward

ANSWER: B, Knowledge, Easy, pp. 190–191

66. Warren Buffett’s unique success with Berkshire Hathaway is characterized by all of the following comments on the way he manages his operations except:a. ”To be a winner, work with a winner.”b. ”Our actions are based on long-term interests rather than short-term, expedient

solutions.”c. ”My job is to stay out of their way and allocate whatever excess capital their

businesses generate.”d. ”I regularly hand bats to many of the heaviest hitters in American business.”

ANSWER: B, Knowledge, Difficult, pp. 190–191

67. __________ strategies specify how the firm will develop and utilize its production capabilities to support the firm’s business-level strategies. a. Operationsb. Business-levelc. Marketingd. Functional-level


68. A __________ strategy refers to the actions and resource commitments established for operations, marketing, human resources, finance, legal services, accounting, and the organization’s other functional areas.a. corporate-level b. business-level c. functional-leveld. comprehensive-level


69. Functional-level plans and strategies should be designed to __________ business-level strategies and plans.a. overshadowb. supportc. compensate ford. compete with


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70. The Dodge Trucks Division of DaimlerChrysler has a business-level strategy based on quality. This requires that Ron Fielder, a Dodge Division manager, develop strong relationships with suppliers who can consistently provide high quality inputs. Ron is responsible for one of DaimlerChrysler’s __________ strategies.a. operationsb. functional-levelc. business-leveld. integration

ANSWER: B, Application, Difficult, p. 192


Tasks of Planning 71. There are _____ primary tasks in the business-level planning process.

a. 3 b. 5c. 8d. 12


72. The first task in the strategic planning process is to begin to develop an organization’s __________.a. tactical plansb. strategic plansc. new weaknessesd. mission and goals

ANSWER: D, Knowledge, Easy, pp. 193–194

73. Karen Cox is involved in the strategic planning process for her Web development company. She is presently pondering such questions as: What business are we in? and What results do we want to achieve?” Which task in the business-level planning process is Karen completing?a. Task 1b. Task 2c. Task 3d. Task 4

ANSWER: A, Application, Easy, pp. 193–194

74. Which of the following environmental force(s) can represent significant threats or opportunities for an organization?a. competitorsb. financial resourcesc. technological capabilitiesd. all of the above


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75. Michael Porter designed a framework to diagnose competitive forces confronting a firm at any particular time. These forces include all of the following except __________.a. transformational bargaining powerb. customer bargaining powerc. supplier bargaining powerd. threat of substitute products

ANSWER: A, Knowledge, Moderate, pp. 194–195

76. __________ is often a response to high profits earned by established firms and/or rapid growth in an industry.a. The entry of new competitorsb. The increased rivalry among competitorsc. The increased bargaining power of suppliersd. The increased bargaining power of customers


77. Many automakers and dealers have introduced special financing and rebate programs and have extended the length of coverage of their warranties. This demonstrates __________.a. the threat of new competitorsb. customer bargaining powerc. supplier bargaining powerd. the threat of substitute goods or services

ANSWER: B, Application, Difficult, p. 195

78. The Newton Controls Manufacturing Corporation has eliminated certain features of their products without losing customers. This action best represents __________.a. a threat of new competitorsb. decreased supplier bargaining powerc. increased supplier bargaining powerd. an increase in rivalry among existing firms


79. One of Southwest Airlines’ goals is to get consumers to fly on trips of about 100 to 700 miles instead of driving. Southwest is focusing on __________.a. identifying the threat of new competitorsb. establishing customer bargaining powerc. establishing supplier bargaining powerd. establishing a substitute good or service


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80. __________ limit(s) the price that firms in a particular industry can charge for their products without risking a loss in sales.a. Substitutesb. Rivalry among firmsc. New entrantsd. Competitors


81. Russell Athletic sells apparel to a __________ customer base: old, young, Asian, Hispanic, and African American.a. profitableb. low incomec. diversed. eccentric


82. Core organizational competencies represent __________.a. strengthsb. weaknessc. opportunitiesd. threats


83. The strengths that make an organization distinctive and more competitive by providing goods or services that have unique value its customers are known as __________ competencies.a. tacticalb. financialc. core d. market-based


84. Nathan Cochran is a consultant with Steinbach Consulting. He is designing a basic framework for diagnosing the strengths and weaknesses of organizations. __________ is (are) not considered one of these components.a. Human resource skillsb. Ability to adapt c. Customersd. Managerial depth

ANSWER: C, Application, Moderate, p. 195

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85. From a business level perspective, ___________ fall(s) into three broad categories: superior technological know-how, reliable processes, and close relationships with external stakeholders.a. core competenciesb. tactical planningc. strategic planningd. bargaining power of suppliers


86. Most organizations find that assessing their __________ is easier than assessing their __________.a. weaknesses; strengthsb. strengths; weaknesses c. opportunities; threatsd. threats; opportunities


87. Which of the following is not a basic growth strategy common to business-level planning and strategy?a. market penetration b. market development c. alliance developmentd. product development

ANSWER: C, Knowledge, Moderate, pp. 196–197

88. The __________ strategy involves seeking growth in current markets with current products.a. market penetration b. market development c. market allianced. market venture


89. AT&T reduced its residential long distance rates to attract new customers. AT&T is using the __________ strategy.a. market venture b. market importc. market allianced. market penetration

ANSWER: D, Application, Moderate, pp. 196–197

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90. The __________ strategy involves seeking new markets for current products.a. market penetration b. market development c. market allianced. market venture


91. Which of the following is not one of the principal ways to implement a market development strategy?a. enter new geographic marketsb. develop new uses for current facilitiesc. develop new uses for current productsd. All of the above are principal ways to implement a market development strategy.


92. The __________ strategy involves developing new or improved goods or services for current markets.a. product penetration b. product reengineering c. market allianced. product development


93. Samsung has introduced a steady new line of cellular phones. Samsung is following a __________ strategy.a. product amalgamation b. product reengineering c. market allianced. product development


94. A strategic plan contains all of the following except __________.a. organizational mission and goalsb. strategies for obtaining and utilizing the necessary technological, marketing,

financial, and human resources to achieve the stated goalsc. strategies for benchmarkingd. strategies for developing and utilizing organizational and employee competencies


95. The personal banker job at First American was changed to start handling walk-in traffic and trying to sell additional banking products. This was a result of __________.a. human resource managementb. diversificationc. strategic planningd. tactical planning

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96. The purpose of __________ is to help implement __________.a. tactical plans; strategic plansb. strategic plans; tactical plansc. business strategies; corporate strategiesd. corporate strategies; business strategies


97. Middle and first-line managers and employee teams normally base tactical plans on the organization’s __________ plan.a. culturalb. staff c. diversificationd. strategic


98. Cameraworld.com sells quality camera and related products online and via telephone. The firm recently implemented a __________ plan to improve its order fulfillment and shipping system. Specifically, their warehouse was reorganized so that frequently ordered items were moved closest to the packing and shipping stations, and rarely ordered items were moved to the back of the warehouse. a. business-levelb. strategic c. tacticald. diversification


99. Strategic and tactical planning must be accompanied by __________ to ensure the plans are implemented as intended and to evaluate the results of those results.a. controlsb. the accounting functionc. time constraintsd. the information systems function

ANSWER: A, Knowledge, Easy, pp. 198–199

100. Tony Mahoney realizes that the forces affecting organizations are constantly changing. Hence he sees __________ as a continuing and ongoing process.a. business-level strategyb. planning c. corporate-level strategyd. employee training

ANSWER: B, Application, Moderate, p. 199

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Generic Competitive Strategies Model101. The generic strategies model consists of _____ basic business-level strategies that can

be applied to a variety of organizations in diverse industries.a. 2b. 3c. 4d. none, because it is a corporate-level model


102. The __________ strategy emphasizes competing with all other firms in the industry by offering a product that customers perceive to be unique.a. differentiationb. cost leadership c. industry leadershipd. concentric


103. Which of the following is not an example of a differentiation strategy?a. Mercedes-Benz—unique brand imageb. BMW—innovative product designc. Lexus—customer serviced. Wal-Mart—cost competitiveness


104. The __________ strategy emphasizes competing in the industry by providing a product at a price as low as or lower than competitors.a. differentiationb. cost leadershipc. multidomesticd. diversification

ANSWER: B, Knowledge, Easy, pp. 200–201

105. __________ is (are) associated with a cost leadership strategy.a. Utilizing facilities or equipment that yield high economies of scaleb. Constantly striving to reduce per unit overhead, manufacturing, marketing, and

follow-up service costsc. Minimizing labor-intensive personal services and sales forcesd. All of the above


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106. Delta Fried Catfish Restaurant opened in Freeport, Maine to serve the needs of a small segment of the population that prefers fried catfish to steamed lobster. Delta Fried Catfish is following a _________ strategy.a. broad b. narrowc. focused cost leadershipd. specialized

ANSWER: C, Application, Moderate, p. 201

107. The __________ strategy involves competing in a specific industry niche by serving the unique needs of certain customers or a specific geographic market.a. focused cost leadershipb. narrowc. broadd. specialized


Essay Questions


1. How should planning should assist leaders and managers?

a. Discovering new opportunities.b. Anticipating and avoiding future problems.c. Developing effective courses of action (strategies and tactics).d. Comprehending the uncertainties and risks with various options.

Moderate, p. 179


2. Describe the strategic planning process.

a. Strategic planning is the process of diagnosing the organization’s external and internal environments.

b. Strategic planning is the process of deciding on a vision and mission.c. Strategic planning is the process of developing overall goals.d. Strategic planning is the process of creating and selecting general strategies.e. Strategic planning is the process of allocating resources to achieve the

organization’s goals.

Moderate, p. 179

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3. Describe the tactical planning process.

Tactical planning is the process of making detailed decisions about what do to, who will do it, and how to do it. Tactical planning normally involves a time horizon of one year or less. Middle and first-line managers and teams often are heavily involved in tactical planning. The tactical planning process generally includes:a. choosing specific goals and the means of implementing the organization’s strategic

plan.b. deciding on courses of action for improving current operations.c. developing budgets for each department, division and project.

Difficult, p. 183


4. List and define the various degrees of diversification.

a. A single-business firm provides a limited number of goods or services to one segment of a particular market.

b. A dominant-business firm serves various segments of a particular market.c. A related-businesses firm provides a variety of similar goods and/or services.d. An unrelated-business firm provides diverse products (goods and/or services) to

many different markets.

Moderate, pp. 185–187


5. Describe three of the five common corporate-level growth strategies.

a. Forward integration occurs when a company enters the businesses of its customers, moving it closer to the ultimate consumer.

b. Backward integration occurs when a company enters the businesses of its suppliers, usually to control component quality, on-time delivery, or stable prices. This approach is sometimes called an upstream strategy.

c. Horizontal integration occurs when a company acquires a competitor to consolidate and extend its market share.

d. Concentric diversification, sometimes called related diversification, occurs when a firm acquires or starts a business related to the firm’s existing business in terms of technology, markets, or products.

e. Conglomerate diversification occurs when a firm adds unrelated goods or services to its line of businesses.

Difficult, pp. 189–190

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6. Describe the relationship of strategy to tactics, and the ways in which First American Corporation (FAC) implemented tactical plans related to their new “customer intimate” strategy.

Tactical plans are intended to help implement strategic plans. In order to become strategically more “customer intimate”, FAC decided to focus on three market segments – consumer, small, and midsize businesses. Tactically they first expanded the job of customer service representatives to handle routine tasks such as change of address that had previously been the responsibility of personal bankers. Personal bankers were then given the role of greeting and sales to walk-in customers. The bank’s most valuable customers were shifted to the responsibility of customer relationship managers who have strong relationship skills. Finally, the investment specialists were given an expanded set of investment products in a move toward becoming a full financial services company.

Moderate, p. 198

7. What are four of the eight tasks of the strategic planning process?

a. Develop the vision, mission, and goalsb. Diagnose threats and opportunitiesc. Diagnose strengths and weaknessesd. Develop strategiese. Prepare strategic planf. Prepare tactical plansg. Control and diagnose resultsh. Continue planning

Difficult, pp. 193–199


8. Explain the generic competitive strategies model.

The generic competitive strategies model provides a framework of four basic business-level strategies for a variety of organizations in diverse industries. These four strategies include the following:

a. The differentiation strategy involves competing by offering goods or services that customers perceive to be unique in ways that are important to them.

b. The focused differentiation strategy involves competing in a specific niche by serving the unique needs of certain customers or a specific geographic market.

c. The cost leadership strategy means competing by providing goods or services at a price as low as or lower than competitors’ prices.

d. The focused cost leadership strategy refers to competing in a specific customer or geographic niche by providing goods or services at a price as low or lower than competitors’ prices.

Moderate, pp. 199–201

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Date post:	16-May-2015
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