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BusinessNow Video Case

Part II - Planning

Chapter 3 Foundations of Planning

Chapter Three: Foundations of Planning

True/False

1.Planning is concerned with defining an organizations goals and objectives and how to integrate and coordinate activities.

(True; Easy; p. 88)

2.In informal planning, the organization's objectives are rarely verbalized.

(True; Moderate; p. 88)

3.Planning is exactly what is needed in order to more effectively manage a chaotic environment.


4.Without planning, there can be no effective control.


5.In informal planning, the organization's objectives are written down and communicated to employees.

(False; Moderate; p. 88)

6.Planning minimizes waste and redundancy.

(True; Easy; p. 89)

7.Uncertainty and change produce a need for more effective planning in todays business environment.


8.Planning can completely replace the need for intuition and creativity.


9.Strategic plans describe how an organizations overall objectives are to be achieved.

(False; Easy; p. 92)

10.Short-term plans describe how an organizations overall objectives are to be achieved.


11.Long term plans describe what an organization plans to do within the next two to three years.


12.Well-thought out formal plans eliminate the need to rely on intuition and creativity. Apple Computer is a prime example of this concept.


13.Organizations with formal plans will always outperform those organizations without formal plans.

(False; Challenging; p. 91)

14.Tactical plans form a basis for strategic plans.


15.It appears that specific plans are always preferable to directional, or loosely guided plans, because specific plans have clearly defined objectives.

(True; Easy; p. 93)

16.Standing plans are flexible plans, with clearly defined objectives and that leave no room for misinterpretation.


17.The objectives in MBO should be concise statements of financial accomplishments.


18.MBO uses goals to control employees.


19. Feedback favorably affects performance.


20.An organization's objectives and strategies define its purpose.


21.Identifying the scope of an organization's products or services will force it to define its mission.


22.In order to fulfill the grand strategy, managers will seek to position their units so that they can gain a relative advantage over their competition.

(True; Challenging; p. 105)

23.Porter's three competitive strategies are cost-leadership, price-leadership, and niche.


24.A project is an example of a single-use plan.


25.SWOT analysis determines the primary threats and opportunities an organization faces.

(True; Easy; p. 102)

26.A SWOT analysis consists of four key steps.


27.The grand strategies are growth, differentiation, stability, and combination strategies.


28.A differentiation strategy is a strategy that an organization follows when it wants to establish a competitive advantage in a narrow market segment.


29.A combination strategy is a strategy that an organization follows when it wants to be unique in its industry within a broad market segment.


30.Reducing the size, scope or number operational units usually in a declining environment is known as reengineering.


31.Reducing the size, scope or number operational units usually in a declining environment is known as a retrenchment strategy.

(True; Challenging; p.104)

32.How do we overcome the challenge of scanning a global business environment? One way is for management to subscribe to news services that review newspapers and books from around the globe and provide summaries to client companies.


33.Strengths that represent unique skills or resources that can determine an organization's competitive edge are called its core competency.


34.A strong culture may act as a significant barrier to acceptance of change.


35.SWOT stands for strengths, weaknesses, opportunities, and threats. The S and W refer to the strengths and weaknesses of the current and future economy.


36.The typical growth strategies include direct expansion, new product development, quality improvement, or diversifyingmerging with or acquiring other firms.


37.The evidence suggests organizations should have formal plans.

(True; Easy; p. 89)

38.Organizations with formal plans will always outperform those organizations without formal plans.


39.Directional plans provide focus, but do not lock managers into specific objectives or specific courses of action.


Multiple Choice Questions

40.The _____ of RJ Nabisco is to meet the needs of consumers through innovative marketing and manufacturing of healthful, good-tasting products that contribute to a healthy lifestyle and consumer well-being around the world, yielding above-average returns over time and for our shareholders.

a

seq NL_1_ \r 0 \h . tactical plan

b

seq NL_1_ \r 0 \h . mission

c

seq NL_1_ \r 0 \h . strategic plan

d

seq NL_1_ \r 0 \h . environmental plan

(B; Easy; 99)

41.Which of the following is not included in the definition of planning?

a.Define the organizations objectives or goals.

b.Establish an overall strategy for achieving these objectives or goals.

c.Allocate resources and develop a chain of communication.

d.Develop a hierarchy of plans to integrate and coordinate activities.

(c; Moderate; p. 88)

42.When objectives are not written down or rarely verbalized, and the planning is general and lacks continuity, which of the following types of planning is used?

a.environmental planning

b.economic planning

c.informal planning

d.formal planning


43.When planning involves specific objectives (covering a period of years) that are then written down and made available to organization members with specific action programs for achieving the goal, which of the following types of planning was used?

a.environmental planning

b.economic planning

c.informal planning

d.formal planning

(d; Moderate; p. 88)

44.In what order should plans be developed?

a seq NL_1_ \r 0 \h . Mission, operational, strategic, and tactical

b seq NL_1_ \r 0 \h . Strategic, tactical, mission, and operational

c seq NL_1_ \r 0 \h . Mission, tactical, strategic, and operational

d seq NL_1_ \r 0 \h . seq NL_1_ \r 0 \h Mission, strategic, tactical, and operational


45._____ clarifies the consequences of actions managers might take in response to continual change.

a.Controlling

b.Organizing

c.Leading

d.Planning


46.Which of the following is an argument against formal planning?

a.Planning focuses on the future.

b.Planning may create rigidity.

c.Planning replaces creativity.

d.Planning ignores prior successes.

(b; Moderate; pp. 89-90)

47.Once a plan is established, it should always be

a.followed.

b.changed.

c.flexible.

d.long term.


48.The organizational formality of Apple Computer ultimately led to

a.a successful organization.

b.hampered creativity.

c.increased vision.

d.increased market share.

(b; Challenging; p. 90)

49.Which of following is not one of the reasons why managers should engage in planning as that was stated in the text?

a. Planning reduces cost.

b. Planning minimizes waste and redundancy.

c. Planning provides direction.

d. Planning facilitates control.

(a; Moderate; p. 89)

50.Which of the following is not an argument that has been made against formal planning?

a. cannot be developed for a dynamic environment

b. cannot replace creativity and intuition

c. takes too much time and staff resources

d. focuses mostly on todays competition

(c; Moderate pp. 89-90)

51._____ plans specify the details of how an organization or business will achieve its

objectives.

a. Strategic

b. Tactical

c. Long-term

d. Operational

(b; Moderate; p. 92)

52.Planning can

a. provide guidance and direction.

b. minimize waste and redundancy.

c. provide standards to facilitate control

d. seq NL_1_ \r 0 \h All of the above.


53.Successful plans may provide

a.a false sense of security.

b.only success.

c.increased awareness of the environment.

d.increased awareness of change.

(a; Challenging; p. 91)

54.In those organizations where formal planning did not lead to higher performance, the culprit was which of the following?

a.competition

b.marketing plan

c.management

d.environment


55.Plans that apply to the entire organization, establish the organization's overall objectives, and seek to position the organization in terms of its environment are called _____ plans.

a.operational

b.tactical

c.strategic

d.single-use


56._____ plans are differentiated by their breadth.

a.Directional and specific

b.Single use and standing

c.Strategic and tactical

d.Long-term and short-term


57.Which of the following is not a popular way to describe plans?

a.breadth

b.time frame

c.specificity

d.environmental focus


58._____ specify how overall objectives are to be achieved.

a.Operational plans

b.Tactical plans

c.Strategic plans

d.Single-use plans


59.Tactical and strategic plans differ in all of the following ways except

a.time frame.

b.scope.

c.known set of organizational objectives.

d.environmental effects.


60.Which of the following is an argument against formal planning?

a. Planning focuses on the past.

b. Planning may create rigidity.

c. Planning cannot replace creativity.

d. All of the above.


61.Strategic plans include

a.the formulation of objectives.

b.financial information.

c.participation from all levels.

d.benchmarking.


62._________ plans have the broadest organizational focus and the longest time frame.

a. Tactical

b. Strategic

c. Directional

d. Operational


63.The greater the uncertainty, the more plans should be of the _____ variety.

a.long-term

b.short-term

c.intermediate in length

d.rigid


64.When uncertainty is high and management must maintain flexibility, which of the following types of plans are preferable?

a.long-term plans

b.no plans

c.directional plans

d.specific plans


65.Which type of plan is used to meet a particular or unique situation?

a.tactical plan

b.operational plan

c.single-use plan

d.standing plan

(c; Easy; p. 94)

66._____ plans have clearly defined objectives.

a.Directional

b.Flexible

c.Specific

d.Standing


67.At Quest Diagnostics, a Medical Blood Testing Company, every test must be performed in exactly the same way to meet Federal Health and Regulatory Guidelines. The plans for conducting these tests are called _________ plans

a. tactical

b. strategic

c. standing

d. project


68.MBO links objectives at one level to which of the following?

a.top management

b.middle management

c.first-line management

d.the next level


69.MBO makes objectives _____ by devising a process in which they cascade down through the organization.

a.operational

b.realistic

c.strategic

d.directional

(a; Easy; p. 94)

70.Which of the following is not a step in objective setting?

a.Specify deadlines.

b.Allow the employee to actively participate.

c.Link rewards to effort.

d.Prioritize goals.

(c; Challenging; p. 97)

71.When Maria Murdock assists her employees with setting objectives, she establishes specific and challenging goals for each key task. Which of the following would she not advise employees to do?

a.Specify the target for the employee to hit.

b.Specify the goal when the employee cannot think of anything.

c.Specify the deadlines for each goal.

d.Identify the level of performance expected of each employee.


72.Each MBO objective must have

a.a percentage change specified.

b.a concise time period.

c.a reference to quality.

d.a specified dollar amount.


73.What types of goals produce higher levels of output?

a.goals of moderate difficulty

b.generalized goals such as "do your best"

c.specific, hard goals

d.easy goals


74.MBO advocates participative goal setting. Research comparing participative set and assigned goals on performance

a.shows consistently higher performance with participatively set goals.

b.shows consistently lower performance with participatively set goals.

c.has not shown any strong or consistent relationships.

d.has been biased by the researchers.


75.Which of the following is not an ingredient in MBO programs?

a.goal specificity

b.participative decision making

c.performance feedback

d.general time period


76.Managers can overcome the criticisms of management by objectives by

a.ensuring that employees have multiple goals.

b.treating MBO as a single-event activity.

c.punishing employees who fail to achieve goals.

d.rewarding employees for setting easy goals.


77.Managers should treat MBO as an ongoing activity, which means that goals should be regularly reviewed and _____.

a.rewarded

b.scrapped

c.updated

d.delegated


78.The Director of Marketing at Warner Publications sends out a broad, flexible plan that sets out the guidelines and targets for sales every year. This plan is called a _____________ plan.

a. tactical

b. strategic

c. directional

d. standing


79.A project plan is an example of a(n)________plan.

a. tactical

b. operational

c. standing

d. single-use

(d; Challenging; p. 94)

80.Which of the following is not a component of the MBO process?

a. Objectives are determined jointly by subordinates and supervisor

b. Progress towards objectives is reviewed every three months.

c. Employees are given ratings based on reaching specific targets

d. Rewards are based on progress towards achieving objectives.


81.Which of the following is not one of the steps to follow in setting objectives for employees?

a. Encourage active employee participation.

b. Link rewards to achievement of goals.

c. Establish a specific and accurate measurement system.

d. Prioritize goals in terms of importance and difficulty.


82.Studies have supported the premise that companies that plan strategically

a.have no better financial measurements than those without plans.

b.have better financial measurements than those without plans.

c.have more satisfied employees than those without plans.

d.have less satisfied employees than those without plans.


83.Which of the following is a nine-step process that involves strategic planning, implementation, and evaluation?

a.decision-making process

b.strategic management process

c.tactical management process

d.long-range planning process


84.In which step of the strategic management process does an organization find out what its competition is doing, what legislation is pending, and what customers desire?

a.Step 1: identify the organization's current mission, objectives, and strategies.

b.Step 2: analyze the environment.

c.Step 3: identify opportunities and threats.

d.Step 4: analyze the organization's resources.

(b; Moderate; p. 99; Ex. 3-5)

85.The owner of a chain of supermarkets sets a goal of opening up ten new stores in new locations within the next six years. This is a _______ plan?

a. short-range

b. standing

c. long range

d. directional


86.In environmental SWOT analysis, the external organizational position is analyzed according to its

a seq NL_1_ \r 0 \h . strengths and weaknesses.

b seq NL_1_ \r 0 \h . opportunities and weaknesses.

c seq NL_1_ \r 0 \h . strengths and threats.

d seq NL_1_ \r 0 \h . opportunities and threats.


87.The starting point in strategic management process is usually

a seq NL_1_ \r 0 \h . analyzing current mission, strategies and objectives.

b seq NL_1_ \r 0 \h . identifying opportunities and threats.

c seq NL_1_ \r 0 \h . conducting an environmental scan.

d seq NL_1_ \r 0 \h . identifying opportunities and weaknesses.


88.The importance of environmental scanning (outside of national security agencies) was first recognized by firms in the _____ industry.

a.television

b.advertising

c.computer

d.life insurance


89.A fast growing area of environmental scanning is

a.competitive intelligence.

b.human resource planning.

c.global positioning.

d.demographic analysis.

(a; Easy; p. 100)

90.In conducting a SWOT analysis, a companys ____________ are examined by questions about internal resources and skills possessed by the company.

a. competencies

b. strengths

c. capabilities

d. opportunities


91.Krispy Kreme has a distribution network that allows fresh doughnuts to be transported to convenience stores, and supermarkets. Krispy Kreme outlets before dawn so that consumers can enjoy them. This is a unique source of competitive advantage for Krispy Kreme known as a(n)_________.

a seq NL_1_ \r 0 \h . organizational strength

b seq NL_1_ \r 0 \h . core competency

c seq NL_1_ \r 0 \h . organizational capability

d seq NL_1_ \r 0 \h . strategic opportunity


92.After analyzing and learning about the environment, management needs to evaluate opportunities and threats. Opportunities are

a.internal resources.

b.unmet needs.

c.positive external environmental factors.

d.internal competitive strategies.


93.Which of the following is not true about strong organizational culture?

a.It is difficult for management to convey to new employees the organization's core

competency.

b.It may act as a barrier to change.

c.Almost all employees have a clear understanding of what the organization is about.

d.It is difficult to change.


94.Which of the following is not one of the grand strategies?

a.growth

b.stability

c.retrenchment

d.cost-leadership


95.Tim's Company is analyzing the technology that allows it to produce wireless communication equipment for less money. This technological breakthrough for Tim's Company is which of the following?

a.strength

b.weakness

c.opportunity

d.threat


96.When Northwest Airlines began serving its own in-flight meals, which of the following strategies was it pursuing?

a.growth

b.stability

c.retrenchment

d.combination


97.Larry's Company is in the process of buying a smaller competitor and incorporating that company's resources into his business. This is an example of which of the following types of strategies?

a.merger

b.stability

c.retrenchment

d.acquisition


98.The fact that The Nordstrom Company has a very strong culture that embraces service and customer satisfaction makes it also difficult to create change; this is an example of the fact that culture can be ____________.

a. a source of competitive advantage

b. critical resource

c. a core competency

d. Both a strength and a weakness.


99.NUCOR is so efficient in its steel production and casting processes that it is the only U.S. steel producer that regularly exports its products directly to Japan. This is an example of NUCORs

a seq NL_1_ \r 0 \h . organizational capability.

b seq NL_1_ \r 0 \h . strategic opportunities.

c seq NL_1_ \r 0 \h . core competency.

d seq NL_1_ \r 0 \h . competitive advantage.


100.There are many healthcare products manufacturers. Forrest Labs Drug Company manufactures only personal hygiene products. It markets such products deodorant, body powder, body creams, and exfoliates. Because it only stocks body care and personal hygiene products, it is using a(n) _____ strategy.

a seq NL_1_ \r 0 \h . prospecting

b seq NL_1_ \r 0 \h . emergent

c seq NL_1_ \r 0 \h . focus

d seq NL_1_ \r 0 \h . cost leadership


101.Strategy formulation involves__________.

a seq NL_1_ \r 0 \h . developing and evaluating a set of alternative strategies

b seq NL_1_ \r 0 \h . evaluating a set of alternative strategies and selecting the best for each level

c seq NL_1_ \r 0 \h . selecting a strategy that will increase the level of operations

d seq NL_1_ \r 0 \h . completing a SWOT analysis seq NL_1_ \r 0 \h


102._____ occurs when Navistar a large shipping company buys smaller tugboat operations in several major ports and incorporates them into their operations.

a. A merger

b. An acquisition

c. A combination strategy

d. A growth strategy


103.Growth through direct expansion involves increasing company size, revenues, operations, or _____.

a. assets

b. workforce

c. profits

d. foreign subsidiaries


104.Stacy's Company continues to offer the same quality beauty products it has for the last 10 years. The company is successful and has no current plans for change. Which of the following types of strategies is it employing?

a.growth

b.stability

c.retrenchment

d.combination


105.Susan's Ceramics is expanding the size of its unfinished products while decreasing the amount of firing and finishing of products it does. This is known as which of the following strategies?

a.growth

b.stability

c.retrenchment

d.combination


106.Michael Porter proposed that management must select a(n) _____, which will give its unit a distinct advantage by capitalizing on the strengths of the organization and the industry it is in.

a.growth opportunity

b.competitive strategy

c.organizational chart

d.vision


107.A company that states that its product is reliable, even to the extent of never needing a service call, such as Maytag, is practicing which of the following competitive strategies?

a.cost-leadership strategy

b.differentiation strategy

c.focus strategy

d.retrenchment strategy


108.A candy store that places its expensive chocolates only in fine hotels and restaurants frequented by the very rich is using which of the following competitive advantage strategies?



c.focus strategy



109.Lila's Luscious Lips produces a cherry flavored lipstick and is targeting the "teen" girl who is between 12 and 14 years old. The strategy pursued is

a.cost leadership.

bdifferentiation.

c.focus.

d.segmentation.


110.Porter's term for an organization that cannot use one of his three strategies is

a.derailed.

b.on a limb.

c.noncompeting.

d.stuck in the middle.


111.Companies achieving ISO 14000 certification have demonstrated that they are

a.cost efficient.

b.in compliance with human resource laws.

c.environmentally responsible.

d.good corporate citizens.


112.The premise behind _____ is to design in quality as the product is being made.

a.six sigma

b.TQM

c.reengineering

d.benchmarking


113.All of the following involve increasing a companies size, markets, assets, or products except a(n) ________________.

a. merger

b. acquisition

c. retrenchment

d. growth

(c; Easy; p. 104)

114.The HUMMER television ads frequently show the companys SUVs being driven under very challenging off-road conditions and over difficult terrain in order to impress consumers with how well built the vehicles are and to create the impression that the HUMMER Volvos are among the most rugged cars on the market. What type of competitive business strategy is Hummer using?

a seq NL_1_ \r 0 \h . Focus

b. seq NL_1_ \r 0 \h Overall cost leadership

c seq NL_1_ \r 0 \h . Differentiation

d seq NL_1_ \r 0 \h . Growth


115.Rochester Big and Tall is a small chain of clothing retailers that sell exclusively only to men. Its quality materials, variety of styles and range of prices, and _____ strategy create a competitive advantage for the chain.

a seq NL_1_ \r 0 \h . differentiation

b seq NL_1_ \r 0 \h . overall cost leadership

c seq NL_1_ \r 0 \h . focus

d seq NL_1_ \r 0 \h . combination

(c; Easy; p. 105)

116.Which of the following is not one of the steps in the Six Sigma 12-Step Process?

a. Define performance standards.

b. Redesign work processes.

c. Establish current process capability.

d. Identify sources of variation.

(b; Challenging; p. 108; Ex. 3-7)

117.Entenmanns Baking Company produces cakes, pies, and other prepared foods. It is one of the largest producers of baked goods in the Northeastern United states yet, it spends less than $2000.00 a year on advertising, and sells its product in large supermarkets and grocery stores for 1/2-1/3 the cost of its competitors. This company pursues a(n) _____ strategy.

a seq NL_1_ \r 0 \h .combination

b seq NL_1_ \r 0 \h .overall cost leadership

c seq NL_1_ \r 0 \h .focus

d seq NL_1_ \r 0 \h .differentiation


118.The quality philosophy that focuses on the input side of the production process is

a.TQM.

b.six sigma.

c.reengineering.

d.benchmarking.


119.Peter Drucker, a well-known management author, believes that entrepreneurs can find opportunities in _____.

a. the unexpected

b. the incongruous

c. the process need

d. All of the above.

(d; Challenging; pp. 110-111)

120._____ is a process by which individuals pursue opportunities, fulfilling needs and wants through innovation, without regard to the resources they currently control.

a.Small business ownership

b.Innovative Management 2000

c.Entrepreneurship

d.Privatization

(c; Easy; p. 109)

Scenario-Based Questions

Application of MBO

Kay was excited. She had just returned from a manager's retreat where MBO had been discussed. This had never been used in her organization before, and she was enthusiastic about implementing the program in her department. She received the OK from her manager, the division head, who vaguely remembered having heard of the program several years earlier. Kay looked over the handout she had received. She was still somewhat confused on who was to choose the goals for the employees. However, she knew that the goals once chosen needed to be specific and have explicit time periods attached. Even though there was a lot of work to do in order to implement the program, Kay was excited. She knew this would prove to be beneficial to the organization.

121.Who should develop the employee goals for the MBO program?

a.Kay

b.Kay's manager

c.employees

d.Kay and the employees

(d; Easy; p. 94)

122.Which of the following is a well-written objective to be used in MBO?

a.increase productivity

b.increase sales

c.decrease department costs by 8% over the next six months

d.decrease personnel costs


123.In order for MBO to work most effectively in Kay's department, which level of support does she still need to receive?

a.first-line managers

b.middle managers

c.top managers

d.She does not need the support of management.


124.Kay knew that the research showed that MBO allows which of the following?

a.increased employee performance

b.decreased employee performance

c.increased profits

d.increased sales


125.Kay knew she wanted her employees to view the objectives as which of the following?

a.floors

b.ceilings

c.unobtainable in order to encourage stretching

d.challenging and yet unrealistic


126.Kay did not want her employees to see MBO as setting _____, which might limit their thinking and achievements.

a. floors

b. ceilings

c. unobtainable goals

d. themselves up for failure


Application of SWOT Analysis

Terry had been told to reexamine the strategic niche their company held in the cosmetic industry. Top management did not want the company caught unaware of any changes occurring. Terry began reviewing a list of factors in his mind. There had been some negative publicity lately due to cosmetic testing on animals. The animals were well treated, but they were used to test new products. Positively, sales industry-wide was up 10%. Women were buying more cosmetics in general, which was nothing but good for the company. Another positive factor was their personnel. They had good people working in the company, particularly in research and development. The only other negative Terry could find was that the advertising campaign that was begun last year had not shown the results they had hoped for. Something needed to be done in that department. Terry began to compile his report.

127.In formulating the companys report which analysis of the following would be included in an environmental scan?

a. current business strategies and objectives

b. strengths and weaknesses

c. opportunities and threats

d. weaknesses and threats


128.Which analysis would assist Terry to identify a strategic niche that the company could exploit?

a.SWOT analysis

b.MBO

c.MBWA

d.SWAT analysis

(a; Easy; p. 102)

129.The negative publicity due to the testing of cosmetics on animals would be classified as which of the following?

a.weakness

b.strength

c.threat

d.opportunity


130.The fact that sales are up 10% industry-wide because women are buying more cosmetics would be which of the following?

a.weakness

b.strength

c.threat

d.opportunity


131.The quality of the company's personnel would be classified as which of the following?

a.weakness

b.strength

c.threat

d.opportunity

(b; Moderate; p. 1-2)

132.The failure of the advertising campaign would be classified as which of the following?

a.weakness

b.strength

c.threat

d.opportunity


133.Having a good research and development department is a real _____ for the company.

a. asset

b. strength

c. money maker

d. opportunity


Application of Porter's Competitive Strategy

Stacie sighed. Her general manager had just left after giving her the latest assignmentreaddress the competitive advantage of their company. By Friday's meeting, Stacie was to have developed three differing strategies the business could use in order to maintain its competitive advantage. Its computer business was slowly losing market share to its competitors, and everyone realized something needed to be done. Stacie glanced through the article by Michael Porter that her manager had left with her. According to Porter, there were three differing types of strategies they could choose from. Stacie began wondering if there was a way they could make their computers cheaper, which would allow them to then sell at a lower price. If they could reduce price by $100 a machine, they would be the industry leaders in price. Stacie wondered if they could find any lower-priced suppliers for the more expensive parts of their computers. She knew that their computers appealed particularly to small business owners due in part to price. They were able to offer the lower price because their computers were not as powerful or fast as some machines, but did contain the necessary word processing, database, and spreadsheet capabilities necessary for a typical small business owner. The lack of frills with the solid three program capabilities, plus their known reputation for quality had worked for them in the past. Stacie wondered if perhaps they needed to look at a smaller segment of the market, maybe small businesses with large accounts receivables that would fully utilize their specific database. She knew that would cut their market by 1/8 but maybe achieving a definite market niche would help. Stacie began compiling her report for Friday's meeting.

134.The source of competitive advantage that makes the focused strategy possible by creating unique features for a growing market segment is referred to as a

a. core capability.

b. strategic resource.

c. core competency.

d. strategic opportunity.


135.As the market for larger desktop computers was replaced by smaller portable hand-held models, there has been a decline in sales of traditional models regardless of how much the price is reduced. At this point, what type of strategy should be pursued by Staceys group?

a. cost-leadership strategy

b. differentiation strategy

c. focus strategy

d. retrenchment strategy


136.The competitive advantage focusing on a lower price would be a

a.cost-leadership strategy.

b.differentiation strategy.

c.focus strategy.

d.retrenchment strategy.

(a; Easy; p. 105)

137.The competitive advantage based upon their known reputation among small business owners for a computer with few frills, but the capabilities of performing word processing, databases, and spreadsheets would be known as a

a.cost-leadership strategy.

b.differentiation strategy.

c.focus strategy.

d.retrenchment strategy.


138.The competitive advantage based upon developing the market of small businesses that had a specific need for a database with the capability for a large accounts receivable billing, would be which of the following?



c.focus strategy



139.The long-term success of any competitive strategy Stacie develops requires that the advantage be which of the following?

a.profitable

b.similar to the strategy used by the competition

c.sustainable

d.dissimilar to the strategy used by the competition


140.Stacie knew that in order to keep its competitive advantage, her company would have to do which of the following?

a.remain profitable

b.lower price

c.take constant action

d.hire new management


141.Stacie knew that the strategy management would depend on the organizations _____ and its competitors _____.

a. weaknesses; strengths

b. opportunities; threats

c. strengths; threats

d. strengths; weaknesses


Short Discussion Questions

142.Discuss the difference between strategy formulation and implementation.

(Moderate; pp. 105-106)

Strategy formulation involves the development and evaluation of alternative strategies. Strategy implementation means selecting a set of strategies at a given level and providing the resources, plans and actions to capitalize on the opportunities available in the environment.

143.What is the difference between short term and long-term planning?

(Easy; p. 93)

Short-term plans cover less than one year.

Long-term plans extend beyond five years

With respect to the degree of variability, the greater the uncertainty, the more plans should be of the short-term variety.

144. Discuss the difference between strengths and opportunities in relation to competitive advantage.


Which strategy management chooses depends on the organizations strengths

and its competitors weaknesses. The organization should put its strength where the competition isnt. Success, then, depends on selecting the right strategy, the one that fits the complete picture of the organization and the industry of which it is a part. In so doing, organizations can gain the most favorable competitive advantage.

An increasing number of organizations are applying quality practices to build a competitive advantage. To the degree that an organization can satisfy a customers need for quality, it can differentiate itself from the competition and attract and hold a loyal customer base. Moreover, constant improvement in the quality and reliability of an organizations products or services can result in a competitive advantage others cannot steal. Product innovations, for example, offer little opportunity for sustained competitive advantage. Why? Because usually they can be quickly copied by rivals. But incremental improvement is something that becomes an integrated part of an organizations operations and can develop into a considerable cumulative advantage.

145.Discuss two benefits of planning and two arguments against formal planning in an organization.

Benefitsprovide direction, reduce the impact of change, and minimize waste and redundancy.

Arguments againstmay create rigidity, cannot be used in a dynamic environment, and cannot replace creativity and intuition.

(Moderate; pp. 89-91

146.What is the difference between strategic plans and tactical plans?

Strategiclong term; drive the organization's efforts to achieve its goals; and serve as the basis for tactical plans.

Tacticaloperational; shorter time frame; and more specific.

(Easy; p. 92)

147.Describe these characteristics of planning: breadth, time frame, specificity, and frequency of use.

Breadth refers to strategic versus tactical. Time frame deals with long-term versus short-term. Specificity describes directional versus specific. Frequency tells us if it is a single-use or standing plan.

(Moderate; p. 92)

148.What is environmental scanning?

Screening large amounts of information to detect emerging trends and create a set of scenarios; competitive intelligence is one of the largest growing areas of environmental scanning.

(Easy; p. 100)

149.Explain benchmarking, ISO 9000, and six sigma.

Benchmarkingsearching for best practices among competitors.

ISO 9000independent auditors attest to an organization's meeting quality standards defined by the International Organization for Standardization.

Six sigmaphilosophy of management that seeks to "design in" quality as a product is being made.


150.What factors regularly sit on the top of most lists that profile the entrepreneurial personality?

Entrepreneurs have a high need for achievement, believe strongly that they can control their own destinies, and take only moderate risks.

(Easy; pp. 110-111)

Medium Length Discussion Questions

151. Describe SWOT analysis and explain how it is used.

SWOT analysis is a strategic planning tool that brings together and analyzes the organizations internal Strengths, Weaknesses, and external Opportunities, and Threats, in order to identify a strategic niche that can be exploited. It is used to reassesses the organizations mission, strategies, plans and objectives. In a strategic analysis, environmental analysis is conducted to identify Opportunities, which are positive external environmental factors. Threats are negative ones. Then plans are developed to exploit opportunities and minimize threats. Next, the manager evaluates the organizations strengths--Strengths (strategic) are internal resources or things that the organization does well. These strengths can be used to build competitive advantage. When an organization lacks certain resources or skills, or identifies activities the firm does not do well, these are called weaknesses. The organization needs to minimize the impact of weaknesses.


152.Compare and contrast the following: strategic plans, tactical plans, specific plans and directional plans.

Strategic planscover an extensive time period, cover broad issues, and include the formulation of objectives.

Tactical planscover shorter time periods, focus on specifics, and assume objectives are known.

Directional plansprovide a general direction of where the company is headed, not the specifics of how to get there.


153.Explain in detail who is to determine the objectives in MBO and why.

Objectives are jointly determined by employees and their bosses so that the goals established are participatively set, which frequently will lead to higher employee performance. Goals should cascade down throughout the organization using this approach.

(Moderate; p. 94)

154.What are the four ingredients common to MBO programs?

The four ingredients are goal specificity, participative decision making, an explicit time period, and performance feedback.

(Easy; p. 96)

155.How can you set employee objectives in MBO?

Setting objectives is a skill that every manager needs to perfect. You can better facilitate this process by following these guidelines: 1) identify an employees key job tasks, 2) establish specific and challenging goals for each key task, 3) allow the employee to actively participate, 4) prioritize goals, 5) build in feedback mechanisms to assess goal progress, and 6) link rewards to goal attainment.

(Challenging; p. 97)

Comprehensive Essays

156.Describe Porters Model and explain how a manager would use it to develop a strategy to achieve competitive advantage.

Michael Porter of Harvards Graduate School of Business has developed a strategic framework. Porters competitive strategy framework has generic competitive strategies.

His underlying principle is that no firm can successfully perform at an above-average profitability level by trying to be all things to all people. Competitive advantage is achieved by fitting or tailoring the right strategy to the specific business or industry or competitive situation.

According to Porter, management must select a competitive strategy that will give it a distinct advantage by capitalizing on the strengths of the organization and the industry it is in.

He has identified three generic strategies: cost-leadership, differentiation, and focus strategies.

The low-cost producer in its industry is following a cost-leadership strategy. Success requires that the organization be the cost leader; the product or service being offered must be perceived as comparable to rivals, or at least acceptable to buyers.

A differentiation strategy is followed when a firm seeks to be unique in its industry in ways that are widely valued by buyers. It might emphasize high quality, extraordinary service, innovative design, technological capability, or an unusually positive brand image. The focus strategy aims at a cost advantage (cost focus) or differentiation advantage (differentiation focus) in a narrow segment. The goal is to exploit opportunities in a narrow segment of a market.


157.How is competitive intelligence useful?

It seeks basic information about competitors, such as who they are, what they are doing, and how will their actions affect our company. This information helps an organization to make crucial decisions. Specific data on an industry and associated organizations is important and easily available. Databases and trade shows provide a wealth of information. The Internet and buying competitors products for examination can be splendid sources of information.


158.Describe SWOT analysis and how it is used in today's business.

Analyzing a business in relationship to its internal strengths and weaknesses, as well as looking at external opportunities and threats in order to find a competitive niche to exploit. Strengths are internal resources or things the organization does well. Weaknesses are resources that the organization lacks or activities the firm does not do well. Opportunities are positive external environmental factors, while threats are negative ones.

(Moderate; p. 102)

159.Choose two grand strategies and describe those strategies, giving an example of each.

Growthincreasing the level of operations.

Stabilitymaking no significant change.

Retrenchmentreducing the size or variety of operations.

Combinationusing two or more grand strategies at the same time.


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