Testbank of fundamental of management 7e by robin ch 04

17 Research indicates that organizations that don't use formal planning always outperform organizations that do use formal planning.AACSB: Analytic Skills Objective: 4.3 19 The first ste

Fundamentals of Management, 7e (Robbins/DeCenzo/Coulter)

Chapter 4 Foundations of Planning

1) All managers plan in some way, either formally or informally

Answer: TRUE

Explanation: Planning has been identified as the primary management function, indicating that it

is the activity that managers concern themselves with most

Diff: 1 Page Ref: 84

Objective: 4.1

2) Informal plans are not recognized to be an effective form of planning

Answer: FALSE

Explanation: Informal plans can be highly effective and highly appropriate for some

organizations, especially those that are small in size As organizations increase in size, the need for formal planning tends to increase

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AACSB: Analytic Skills

to a larger size, it becomes necessary for many people to have access to the organization's plans

—and that almost always requires formal planning

7) The four reasons that organizations plan is to provide direction, set standards, minimize waste,and reduce uncertainty and the impact of change.

Answer: TRUE

Explanation: Direction tells organization members where the organization is going with respect

to goals and objectives Standards identify the goals of the organization Minimizing waste and redundancy makes the organization efficient Reducing the impact of change makes the

organization more able to avoid the damage that change can bring on and to take advantage of the opportunities that changes often presents

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AACSB: Analytic Skills

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Objective: 4.1

12) Managers who make formal plans are more likely to help an organization "break the mold" and carry out truly groundbreaking work that redefines an entire industry.

Answer: FALSE

Explanation: Formal plans tend to focus on existing opportunities in the current climate rather than the opportunities of the future that are as yet unimagined Therefore, formal plans are likely

to impede, rather than promote, truly groundbreaking work

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AACSB: Analytic Skills

Objective: 4.1

14) A major strength of formal planning is that it makes an organization rigid

Answer: FALSE

Explanation: Rigidity is a weakness of formal planning Formal planning can lock an

organization into a preset sequence of events that might not be able to cope with changing conditions and circumstances

Diff: 2 Page Ref: 86

Explanation: Evidence shows that organizations often fail not because they focused their

planning efforts on the wrong things, but rather that the quality of their planning was deficient.Diff: 2 Page Ref: 86

AACSB: Analytic Skills

Objective: 4.1

17) Research indicates that organizations that don't use formal planning always outperform organizations that do use formal planning.

AACSB: Analytic Skills

Objective: 4.3

19) The first step in the strategic management process is analyzing the external environment.Answer: FALSE

Explanation: The first step in the strategic management process is for the organization to

identify its goals, mission, and strategies Only then can it move on to start analyzing its external situation

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Explanation: An external analysis, the second step in the strategic management process,

involves not just identifying threats to an organization, but also finding opportunities that the organization can take advantage of

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AACSB: Analytic Skills

Objective: 4.3

22) Core competencies include an organization's major capabilities and its resources.

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AACSB: Analytic Skills

25) The final three steps in the strategic management process involve the creation and

implementation of strategies for realizing organizational goals

Answer: TRUE

Explanation: The last three steps in the strategic management process are: formulating

strategies, implementing strategies, and evaluating results Together, these steps create and carry out strategies that help an organization attain its goals and objectives

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28) A company with a stability strategy will plan to dramatically increase market share in a highly competitive market.

Explanation: Having a competitive advantage means that an organization has some kind of edge

on its competition with respect to price, quality, the product itself, or some other characteristic.Diff: 2 Page Ref: 91

Objective: 4.3

31) Innovation and super-high quality are typically the keys to a cost-leadership strategy

Answer: FALSE

Explanation: Efficiency, rather than innovation or quality, is the key to a cost-leadership strategy

in which a company has lower prices than its competitors

Diff: 2 Page Ref: 92

Objective: 4.3

32) A focus strategy seeks to appeal to a narrow segment of a market

Answer: TRUE

Explanation: An example of a focus strategy is a super premium ice cream that tries to appeal to

a narrow, but important segment of the market

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Objective: 4.3

34) Southwest Airlines studied race car pit crews as an example of benchmarking.

Answer: TRUE

Explanation: Benchmarking involves learning practices from other organizations that can be applied to your own organization, so learning maintenance speed from race car crews definitely qualifies as benchmarking

Diff: 2 Page Ref: 95

36) Traditional goal setting requires top managers to set goals that are carried out by the

organizational levels below

Answer: TRUE

Explanation: Traditional goals are set by top managers and distributed to the levels below traditional goal setting can be accomplished by others in the organization who are not necessarily

Non-at the top of the pyramid

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40) A six-month plan qualifies as a short-term plan.

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AACSB: Analytic Skills

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Objective: 4.4

44) Which of the following is NOT a function of planning?

A) defining goals

B) identifying a strategy for attaining goals

C) settling disputes between employees

D) coordinating organizational activities

Objective: 4.1

45) Planning is concerned with .

A) both ends and means

B) ends only

C) means only

D) neither ends nor means

Answer: A

Explanation: A) Planning is concerned with goals or ends, as well as how those goals are

reached, or means Therefore, the choice indicating both ends and means is the correct response and all of the other responses are incorrect

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Objective: 4.1

46) In informal planning, goals are usually shared with others in the organization.A) written, but little is

B) unwritten and little is

C) written and much is

D) unwritten, but much is

Answer: B

Explanation: B) A key difference between formal and informal planning is that informal

planning rarely involves recording the plans in written form Informal planners also typically keep their plans to themselves, or share them with few others Together, these factors make the choice indicating "unwritten and much" is the correct response The two choices indicating

"written" can be immediately ruled out because informal plans are not written "Unwritten but much is" can be ruled out because little is shared with informal plans

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Objective: 4.1

47) Informal planning is

A) always performed at the lowest organizational level

B) general and usually lacks continuity

C) performed exclusively by middle managers

D) more specific than formal planning

Answer: B

Explanation: B) Informal plans are typically not specific and performed by leaders or owners rather than by middle managers or individuals on the lowest organizational level, ruling out all ofthese choices This leaves the correct response, as it correctly states that informal plans are usually non-specific and lacking in continuity

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Objective: 4.1

48) In formal planning, .

A) specific goals covering a period of years are defined

B) to maximize flexibility, specific goals are never spelled out

C) very broad general goals are developed

D) goals may be written or unwritten

Answer: A

Explanation: A) Formal planning requires written, not unwritten plans and specific, rather than general goals Since only the choice regarding specific goals covering a period of years identifiesspecific goals, it is the correct response

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Objective: 4.1

49) Which of the following is NOT a reason for managers to plan?

A) to give direction to an organization

B) to deal with change

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AACSB: Ethical Understanding and Reasoning Abilities

Objective: 4.1

50) Planning gives organizations direction that primarily helps them

A) improve teamwork and coordinate activities

B) improve their image in the business community

C) improve morale of middle managers

D) improve morale of all employees

Answer: A

Explanation: A) Direction provides a common path for all employees in an organization, thus helping employees work together in a coordinated, cooperative effort This makes improving teamwork and coordinating activities the correct response since it mentions teamwork and coordination Planning is not concerned with organizational morale or image so all of those choices can be ruled out as correct responses

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Objective: 4.1

51) Planning gives organizations a way to deal with change that .

A) eliminates all uncertainty

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Objective: 4.1

52) Organizations that don't formally plan may be more likely to have

A) corrupt managers

B) legal problems

C) multiple departments performing the same task

D) a single department carrying out all company functions

Answer: C

Explanation: C) A major advantage to formal planning is that it reduces redundancy That meansthat organizations that don't carry out formal plans would be more likely to have more than one department carrying out the same task, making that the correct response Formal planning has little effect on corruption or legal problems so those choices can be ruled out A single

department carrying out all company functions is essentially the opposite of redundancy so it too can be ruled out

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AACSB: Analytic Skills

Objective: 4.1

53) One effect of planning on managers is that it forces them to

A) fear change

B) anticipate and consider the effect of change

C) work to prevent change

D) ignore any change that doesn't directly affect them

Answer: B

Explanation: B) A major benefit of planning is that it forces managers to think systematically about the future Rather than fear change, try to prevent change, or ignore change, planning requires managers to think constructively about change and its consequences

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Objective: 4.1

54) Managers who fail to plan may .

A) take advantage of change

B) stimulate change

C) be positively affected by change

D) be adversely affected by change

Answer: D

Explanation: D) Change can be disruptive and even destructive in the best of circumstances, so managers who fail to plan thoughtfully are likely to suffer negative consequences of change, making "being adversely affected" the correct response Without planning, managers are likely to

be surprised by change, making it highly unlikely that they would be able to benefit or in any way be positively affected by the change—making these choices incorrect There is no

connection between planning and stimulating change so "stimulating change" would also be an incorrect response for this question

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AACSB: Analytic Skills

Objective: 4.1

55) Which of the following is a frequently cited criticism of formal planning?

A) Plans lock organizations into rigid goals and timetables

B) Plans take too long to create

C) Plans create resentment within different levels of the organization

D) Formal planning works well only for smaller companies

Answer: A

Explanation: A) Planning works better for larger rather than smaller companies Few serious complaints are ever voiced that planning is too time-consuming or that it creates discord, makingthese responses incorrect What planning does do is lock organizations into commitments that aresometimes overly confining or destructive, making that the correct response

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Objective: 4.1

56) One criticism of formal planning is that it focuses on how to beat the competition rather than how to

A) have cordial relationships with the competition

B) focus on new opportunities

C) balance the organization's budget

D) cooperate with the competition

Answer: B

Explanation: B) Critics of planning do not complain that planning focuses too much on

organizational budgets or too-close relationships of an organization with its rivals Critics do complain that organizations that put too much emphasis on planning end up being small-minded and myopic as they spend all of their energy trying to beat the competition rather than in being innovative and creating whole new products or industries This makes "focus on new

opportunities" the correct response

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Objective: 4.1

57) Failing to discard successful plans from the past is likely to lead to

A) more success because conditions are unlikely to change in the future

B) failure because conditions are likely to change in the future

C) success because of the high quality of the plans

D) failure because of the low quality of the plans

Answer: B

Explanation: B) The trouble with focusing too much on successes of the past is that it is rare thatthese successes can be duplicated in the changed circumstances of the future So organizations that rigidly stick to a tried-and-true success formula can get "burned" when conditions change This makes "failure because conditions are likely to change" the correct response and eliminates the other choices

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C) extremely negative conclusions

D) generally positive conclusions

Answer: D

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

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Objective: 4.1

59) Studies of planning show that the key to successful planning is to make sure that the plans

A) cover every possible detail

B) are high in quality and insight

C) are exceedingly simple to follow

D) are not shared with employees

Answer: B

Explanation: B) Success in planning seems to hinge more on the quality of the planning itself rather than the the subject of the planning A company may focus its plans on all of the right topics, but unless those plans are systematic, comprehensive, and high in insight, they will not provide successful direction for the organization These factors make the choice indicating "high

in quality and insight" the correct response Whether or not details are covered, plans are easy to follow, or plans are shared extensively matter less than the quality of the plans themselves.Diff: 3 Page Ref: 86

AACSB: Analytic Skills

Objective: 4.1

60) In studies in which high-quality formal planning did not lead to higher performance,

usually the culprit

A) unforeseen events or conditions were

B) demanding employees were

C) stubborn ownership was

D) lack of communication was

Answer: A

Explanation: A) Even the best plans can be foiled by unforeseen events, such as economic disruptions or political turmoil—meaning that "unforeseen events or conditions" is the correct response for this question Plans can only take into account known events of the past, they can't anticipate unknown future events, especially highly unlikely future events When it comes to spoiling plans, such things as demanding employees, stubborn owners, or poor communication are minor factors compared to important outside events, so these choices are all incorrect

responses

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Objective: 4.1

61) Formal planning typically leads to which of the following?

A) higher profits

B) lower productivity

C) higher sales, but lower profits

D) tension between different management levels

Answer: A

Explanation: A) Studies show a positive correlation between formal planning and profits along with other economic indicators, making "higher profits" the correct response Lower productivityand lower profits both show a negative correlation between planning and economic success, so those choices can be ruled out There is no evidence that planning results in tension of any kind,

so that choice can also be ruled out

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Objective: 4.1

62) The first step in the six-step strategic management process is to

A) analyze the organization's strengths and weaknesses

B) identify the organization's mission

C) identify strategies to reach the organization's goals

D) analyze the opportunities the organization has

Answer: B

Explanation: B) Identifying the organization's mission is the first step in the strategic

management process, making that the correct response Analysis of strengths and weaknesses, and opportunities are all part of the second and third SWOT analysis steps of the process, while identification of strategies would be included in the fourth step, formulate strategies

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Objective: 4.2

63) The first three steps of the strategic management process involve strategies.A) planning

B) implementing

C) evaluating

D) identifying

Answer: A

Explanation: A) The first three steps of the process include stating the mission of the

organization, followed by an analysis of its position (strengths, weaknesses, etc.) in the

marketplace These first three steps are planning strategies, rather than the implementation (step 5), evaluation (step 6), or identification (step 4) strategies, making planning the correct answer.Diff: 2 Page Ref: 87

Objective: 4.2

64) A mission statement includes identification of an organization's

A) strengths and weaknesses

B) products and basic philosophy

C) assets and resources

D) resources and strengths

Answer: B

Explanation: B) Finding the organization's strengths, weaknesses, assets, and resources are all part of an internal analysis, so the choices indicating strengths and weaknesses, assets and resources, and resources and strengths can all be ruled out because they include one or more of those items That leaves products and basic philosophy as the correct response, as it correctly identifies that a mission statement should include a description of an organization's products as well as a summary of its basic philosophy

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Objective: 4.2

65) A mission statement does NOT include which of the following?

A) the customers of a company

B) strategy for success

C) why the company is in business and what it hopes to accomplish

D) the company's basic beliefs

Answer: B

Explanation: B) A mission statement should identify an organization's customers, its core

philosophy and beliefs, and its basic purpose, so these choices can be eliminated as possible correct responses The one item listed that should not be part of a mission statement is strategy for success—the organization's mission has nothing to do with its strategy The strategy is something that will be determined by the strategic management process

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Objective: 4.2

66) An external analysis, the second step of the strategic management process, helps identify .

A) the products that a company makes

B) the long-term goals for a company

C) a company's opportunities and threats

D) a company's concern for its employees

Answer: C

Explanation: C) The focus of an external analysis is to locate the organization's place in the external business environment, analyzing the competition that the organization faces, the

opportunities it might take advantage of, and the things that threaten the organization, making

"opportunities and threats" the correct response Long-term goals, product descriptions, and company policy toward its workers have nothing to with analyzing the external environment, so those choices are ruled out

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Objective: 4.2

67) An internal analysis, the third step of the strategic management process, helps identify

A) opportunities and threats

B) resources and capabilities

C) opportunities and possibilities

D) values and philosophy

Answer: B

Explanation: B) An organization's values and philosophy are part of its mission statement, not

an internal analysis, which rules out that choice as a correct response Finding opportunities is part of an external, not an internal analysis, which eliminates the choices regarding opportunities

as correct responses The internal analysis should identify resources (a company's physical, financial, and human assets) and capabilities (a company's skills and abilities) making "resourcesand capabilities" the correct response

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Explanation: A) An organization's workers, patents, and financial capital are all types of assets,

or resources that the organization has, making resources the correct response Items such as financial capital do not qualify as capabilities, abilities, or core competencies because they are tangible goods, not abstract abilities

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Objective: 4.2

69) An organization's resources identify .

A) how the organization gets things done

B) where the organization operates

C) when the organization operates

D) what the organization has

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Objective: 4.2

70) An organization's capabilities identify

A) what the organization has

B) who the organization is

C) assets that the organization can rely on

D) what the organization can do

Answer: D

Explanation: D) In informal terms, an organization's resources identify what the organization has, while its capabilities refer to what it does What the organization has, who it is, or what its assets are all refer to what the organization has, so they are all resources, not capabilities What the organization can do is a capability, so that is the correct response here

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description of an organization's products as well as a summary of its basic philosophy

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Objective: 4.2

72) SWOT analysis identifies and analyzes an organization's .

A) strengths, weaknesses, opportunities, and threats

B) strategy for competing in the market

C) human resource assets

D) long-term goals

Answer: A

Explanation: A) The term SWOT is an acronym for strengths, weaknesses, opportunities, and threats, making that the correct response and eliminating the other choices as possible correct answers

Diff: 2 Page Ref: 88

Objective: 4.2

73) SWOT analysis combines

A) a company's mission with its goals

B) external and internal analyses

C) a company's philosophy with its ethics

D) profit with productivity

Answer: B

Explanation: B) An external analysis identifies threats to an organization and opportunities that

it has An internal analysis identifies strengths and weaknesses of the organization Together, these two analyses make up the SWOT items—strengths, weaknesses, opportunities, and threats, making external and internal analyses the correct response SWOT analysis has nothing to do with mission or company philosophy, making these choices incorrect SWOT does not address profit or productivity, which rules out that choice

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Elimination of strategies might be considered a minor part of strategy formulation, but it

certainly is not the objective of a SWOT analysis

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Objective: 4.2

75) Which of the following do managers NOT typically use to formulate strategies?

A) find ways to exploit the organization's strengths

B) find ways to protect the organization from external threats

C) find ways to rule out existing organizational opportunities

D) find ways to correct organizational weaknesses

Answer: C

Explanation: C) The incorrect choices all identify strategies that might emerge from a SWOT analysis—to exploit organizational strengths, correct weaknesses, and protect against threats, so they can all be ruled out as correct responses The one thing that organizations would not

typically do is rule out possible opportunities—instead the organization would be looking to exploit those opportunities, making "finding ways to rule out existing opportunities" the correct response

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Objective: 4.2

76) The three different types of strategies that managers implement are

A) corporate, private, functional

B) corporate, competitive, functional

C) long-term, short-term, public

D) competitive, non-competitive, corporate

78) Which of the following make up the three main types of corporate strategies?

A) growth, vertical integration, horizontal integration

B) growth, retrenchment, renewal

C) renewal, retrenchment, diversification

D) growth, stability, renewal

Answer: D

Explanation: D) The three basic corporate strategies are termed growth, stability, and renewal,

making that the correct response The choice indicating growth, vertical integration, and

horizontal integration includes only growth strategies so it can be eliminated Both of the

remaining choices leave out at least one major corporate strategy and include at least two forms

of renewal, making these choices redundant and incorrect

Diff: 1 Page Ref: 90

Objective: 4.2

79) Growth strategies include

A) diversification, concentration, integration, stabilization

B) vertical integration, horizontal integration, concentration, diversification

C) vertical integration, horizontal integration, lateral integration, horizontal concentration

D) integration, allocation, horizontal diversification, vertical diversification

Answer: B

Explanation: B) The choice indicating vertical integration, horizontal integration, concentration, and diversification is the only choice that lists all four types of growth strategy, so it is the correct response The other choices all fail to include all four items and substitute at least one erroneous item

Diff: 1 Page Ref: 90

Explanation: A) When a company focuses its attention on a single product or line of products, it

is employing concentration as a strategy, making that the correct response Integration and diversification are forms of growth by either expanding the control a company has over its operations or combining with other companies—neither of which is being done by General Millshere

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AACSB: Analytic Skills

Objective: 4.2

81) A salad dressing company that buys a large olive grove to provide olive oil is practicing which of the following?

A) concentration

B) forward vertical integration

C) backward vertical integration

D) horizontal integration

Answer: C

Explanation: C) Buying an olive grove is an example of a company trying to become its own

supplier, which is termed backward vertical integration Forward vertical integration involves a

company seizing control of its distribution, not its suppliers, so that is not a correct response Horizontal integration involves combining with competitors, something that is not being done here, so that is incorrect Finally, concentration is incorrect because concentration requires a company to expand on a product or line of products

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AACSB: Analytic Skills

Objective: 4.2

82) A sneaker company creating its own stores where it sells only its own brand is an example ofwhich of the following?

A) forward vertical integration

B) backward horizontal integration

C) forward horizontal integration

D) reverse vertical integration

Answer: A

Explanation: A) The company is taking control of its distribution here, which is an example of forward vertical integration, making that the correct response Backward horizontal integration isincorrect because it would entail taking control of supply, not distribution Forward horizontal integration would have the company combining with competitors, something that is not being done here, making that choice incorrect Finally, reverse vertical integration is not a recognized strategy

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AACSB: Analytic Skills

AACSB: Analytic Skills

Objective: 4.2

84) Two movie studios combining to form one larger studio is an example of which of the following?

A) forward vertical integration

B) horizontal integration

C) backward vertical integration

D) diversification

Answer: B

Explanation: B) Each movie studio is combining with a competitor, a clear example of

horizontal integration, making that the correct response Since each company is neither taking control of supply nor distribution, both forms of vertical integration can be eliminated as correct responses Horizontal integration differs from diversification in that in diversification the

company doesn't combine with competitors but rather makes purchases of supporting industries Clearly, the studios are combining with competitors here, making horizontal integration correct and diversification incorrect

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AACSB: Analytic Skills

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AACSB: Analytic Skills

Objective: 4.2

86) When Google purchased YouTube, a company that featured different, but related products, Google was engaging in which of the following?

A) concentration

B) forward vertical integration

C) backward vertical integration

D) diversification

Answer: D

Explanation: D) Google was clearly not focusing on existing products, taking control of

distribution or supply so those choices can be ruled out as correct responses What Google was doing was buying a company that it can use to complement or support its existing products YouTube makes Google a more diversified product, so the purchase is an example of

diversification, making that the correct response

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AACSB: Analytic Skills

Objective: 4.2

87) Two companies that both sell fine time pieces combine What are they doing?

A) diversifying, because they both sell the same products

B) integrating vertically, because they both sell the same products

C) backward vertical integration, because they are sharing distribution

D) integrating horizontally, because they both sell similar products

AACSB: Analytic Skills

Diff: 2 Page Ref: 90

AACSB: Analytic Skills

Objective: 4.2