Ch01 PDF

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CHAPTER 01
BASIC CONCEPTS IN STRATEGIC MANAGEMENT
True/False
1.
Strategic management is one decision that determines the short-term performance of a
corporation.
Answer: F
With externally oriented planning, plans are developed by heavily involving the input of managers
from lower levels.
Answer: F
(p.2)
2.
(p.3)
3.
One of the benefits of strategic management is a clearer sense of vision for the firm.
Answer: T
(p.4)
4.
Globalization is the internationalization of markets and corporations.
Answer: T
(p.5)
5.
Electronic commerce is the use of the Internet to conduct business transactions.
Answer: T
(p.5)
6.
One member of the European Union (EU) is Chile.
Answer: F
(p.6)
7.
The goal of NAFTA is complete integration with regard to trade.
Answer: F
(p.6)
8.
Chile may be a part of NAFTA and Mercosur.
Answer: F
(p.6)
9.
The rise of the Internet has not had much impact on the nature of competition.
Answer: F
(p.7)
10.
Knowledge is viewed as a competitive advantage.
Answer: T
(p.7)
11.
Population ecology is a theory that proposes organizations can and do adapt to change by
imitating other successful organizations.
Answer: F
With organizational learning theory, knowledge is used as a way to hedge a changing
environment.
Answer: T
(p.7)
12.
(p.8)
13.
Strategic flexibility is the ability to shift from one dominant strategy to another.
Answer: T
(p.8)
14.
One tenet of the learning organization is to maintain stability.
Answer: F
(p.8)
15.
The internal environment includes the variables of opportunities and threats.
Answer: F
(p.10)
16.
Objectives are the end result of planned activity.
Answer: T
(p.12)
103
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17.
Corporate strategy occurs at the business unit or product level.
Answer: F
(p.13)
18.
A hierarchy is a group of strategy types by level in the organization.
Answer: T
(p.13)
19.
A budget is a statement of a corporations programs in terms of dollars.
Answer: T
(p.15)
20.
Performance is evaluated at the strategy formulation phase of the strategic management process.
Answer: F
(p.16)
Multiple Choice
21.
Strategic management differs from business policy through its heavier emphasis on
a.
b.
c.
d.
e.
22.
23.
25.
(p.3)
one year.
one quarter.
more than five years.
less than one month.
more than three years.
The difference between basic financial planning and forecast-based planning is

a.
b.
c.
d.
e.
(p.3)
externally-oriented planning.
basic financial planning.
internally-oriented planning.
forecast-based planning.
strategic management.
The time horizon involved with regard to basic financial planning is usually
a.
b.
c.
d.
e.
(p.2)
is an integrative orientation from the organization's perspective.

looks at the managerial decisions.
reviews the long-run performance of the corporation.
examines environmental opportunities and constraints.
investigates competitive actions and responses.
Research suggests that strategic management evolves through four sequential phases in
corporations. The first phase is
a.
b.
c.
d.
e.
24.
formulating general guidelines.

scanning the internal environment.
efficient utilization of assets.
scanning the external environment.
historical concerns.
In contrast to strategic management, the primary focus of business policy

a.
b.
c.
d.
e.
(p.2)
the time horizon with each phase.

forecast-based planning incorporates internal and external information.
basic financial planning utilizes consultants.
basic financial planning utilizes scenarios.
both a and b are correct.
104
(p.3)
105
26.
Top-down planning that emphasizes formal strategy formulation and leaves the implementation
issues to lower management levels is known as
a.
b.
c.
d.
e.
27.
28.
30.
31.
(p.4)
may be informal and irregular.

must be elaborate to allow for future growth.
should always be formalized and explicitly stated.
should be done by the president only.
is unnecessary and a waste of time.
Strategic planning in a multidivisional corporation

a.
b.
c.
d.
e.
(p.4)
Where is the organization now?

How can functional and operational areas be improved?
If no changes are made, where will the organization be in one year?
If the evaluation is negative, what specific actions should management take?
If no changes are made, where will the organization be in 10 years?
Strategic planning within a small organization

a.
b.
c.
d.
e.
(p.4)
clearer sense of vision for the firm.

sharper focus on what is strategically important.
higher levels of job satisfaction.
improved understanding of a rapidly changing environment.
none of the above
When an organization is evaluating its strategic position, which is NOT one of the strategic
questions that an organization must ask itself?
a.
b.
c.
d.
e.
(p.3)
people throughout the organization.

the top management responsible for decision making.
middle management.
operational personnel.
none of the above
In a survey of 50 corporations, all of the following were rated as benefits of strategic management
EXCEPT
a.
b.
c.
d.
e.
29.
forecast-based planning.
externally-oriented planning.
strategic management.
basic financial planning.
none of the above
Under the phase of strategic management, strategic information is available to

a.
b.
c.
d.
e.
(p.3)
should be informal to allow complete understanding by the many participants.

should be instigated only from the main corporate office.
should be accomplished quickly to decrease the likelihood of it becoming outdated.
should encourage a clear delineation between top management and lower-level managers.
should be a formalized and sophisticated system.
106
(p.4)
32.
The lesson learned by Maytag Corporation in 1978 was that

a.
b.
c.
d.
f.
33.
34.
(p.5)
economies of scale.
higher production costs.
increased union negotiations.
increased taxes.
additional human resource training.
The regional trade association composed of Argentina, Brazil, Uruguay, and Paraguay is called
a.
b.
c.
d.
e.
(p.6)
Argentina.
Malaysia.
Belgium.
France.
Both c and d are correct.
37. One of the countries to become a member of the European Union by 2006 is
a.
b.
c.
d.
e.
(p.6)
EU.
ASEAN.
NAFTA.
Mercosur.
ABUP.
36. Members of the European Union (EU) include

a.
b.
c.
d.
e.
(p.5)
normalization.
economic integration.
globalization.
nationalization.
regionalization.
One of the benefits of globalization is

a.
b.
c.
d.
e.
35.
if it's not broken, don't fix it.

to diversify too widely is dangerous.
its existing product line was satisfactory.
its existing product line was NOT satisfactory.
it should specialize in the field it knew best.
The internationalization of markets and corporations is called

a.
b.
c.
d.
e.
(p.4)
Cyprus.
Greece.
Lithuania.
Turkey.
Portugal.
107
(p.6)
38.
Canada, the United States, and Mexico are affiliated with the trade alliance
a.
b.
c.
d.
e.
ASEAN.
Mercosur.
EU.
NAFTA.
NUSFTA.
39. NAFTA was launched during the year

a.
b.
c.
d.
e.
40.
(p.6)
1994.
1990.
1992.
1993.
2000.
In order to qualify for duty-free status, goods sold in the NAFTA trade alliance must have _____
North American content.
a.
b.
c.
d.
42.
44.
(p.6)
Mercusa.
Mercosul.
Mercasa.
Mercosur.
none of the above
One country that has been extended a free-trade agreement by Mercosur is

a.
b.
c.
d.
e.
(p.6)
Cuba.
Chile.
Uruguay.
El Salvador.
Brazil.
43. Mercosur is referred to as _____ in Portuguese.

a.
b.
c.
d.
e.
(p.6)
peso.
dollar.
euro.
eurosha.
none of the above.
One country being considered for NAFTA membership and Mercosur affiliation is
a.
b.
c.
d.
e.
(p.6)
50.5%
62.5%
70.5%
72.5%
41. The currency of the European Union (EU) is called the

a.
b.
c.
d.
e.
(p.6)
China.
the United States.
Mexico.
Bolivia.
Great Britain.
108
(p.6)
45.
The breaking down of traditional distribution channels is referred to as

a.
b.
c.
d.
e.
46.
47.
49.
50.
51.
(p.8)
learning
adapting
stagnant
innovative
none of the above
The ability of a corporation to shift from one dominant strategy to another is called
a.
b.
c.
(p.7)
Institution
Strategic choice
Population
Organizational learning
Organizational change
Creating, acquiring, and transferring knowledge are characteristics of a(n) _____ organization.
a.
b.
c.
d.
e.
(p.8)
population
institution
strategic choice
organizational learning
organizational citizenship
_____ theory proposes an established organization can suffer from inertia.

a.
b.
c.
d.
e.
(p.7)
population ecology.
institution theory.
citizenship theory.
strategic theory.
sample theory.
The ability of an organization to reshape its environment is described by _____ theory.

a.
b.
c.
d.
e.
(p.7)
the transformation of companies.

changing competition.
shift of power to the consumer.
changes in market access and branding.
protectionist borders.
The theory that proposes organizations can and do adapt to changing conditions by imitating other
successful organizations is known as
a.
b.
c.
d.
e.
48.
disintermediation.
intermediation.
disintegration.
intermediary.
disengagement.
All of the following reflect trends due to the rise of the Internet EXCEPT
a.
b.
c.
d.
e.
(p.7)
strategy implementation.
chaos formulation.
contingency management.
109
(p.8)
d.
e.
52.
An organization skilled at creating, acquiring, and transferring knowledge, and at modifying its
behavior to reflect new knowledge and insights is a(an)
a.
b.
c.
d.
e.
53.
55.
56.
57.
(p.9)
strategies.
scanning.
strengths.
societal.
none of these
The T in S.W.O.T. stands for

a.
b.
c.
d.
e.
(p.9)
trust.
technical.
terminal.
threats.
task.
The monitoring, evaluating, and disseminating of information from the external and internal
environments to key people within the corporation is referred to as
a.
b.
c.
d.
e.
(p.9)
strategy formulation
strategy implementation
statistical process control
evaluation and control
environmental scanning
The S in S.W.O.T. stands for

a.
b.
c.
d.
e.
(p.8)
experimenting with new approaches.

learning from its own experiences and past history.
solving problems systematically.
alienating competitors in the industry.
transferring knowledge quickly and efficiently.
Strategic management is that set of managerial decisions and actions that determine the long-run
performance of a corporation. Which one of the following is NOT included in the strategic
management process?
a.
b.
c.
d.
e.
(p.8)
learning organization.
strategically managed corporation.
educational institution.
hypercompetitive competitor.
entrepreneurial firm.
All of the following reflect activities of a learning organization EXCEPT

a.
b.
c.
d.
e.
54.
logical incrementalism.
strategic flexibility.
environmental scanning.
external scanning.
internal scanning.
environmental opportunity scanning.
none of the above
110
(p.9)
58.
The variables structure, culture, and resources pertain to the _____ environment.
a.
b.
c.
d.
e.
59.
60.
external
internal
coincidental
strategic
none of the above
The development of long-range plans for the effective management of environmental

opportunities and threats is known as
a.
b.
c.
d.
e.
(p.10)
(p.10)
strategy formulation.
strategy control.
strategy development.
strategy evaluation.
The Strategic Management Model presents the following process of strategy formulation:
(p.10)
a.
b.
c.
d.
e.
61.
Objectives -- Policies -- Strategies -- Mission.

Mission -- Policies -- Strategies -- Objectives.
Policies -- Mission -- Strategies -- Objectives.
Policies -- Strategies -- Objectives -- Mission.
Mission -- Objectives -- Strategies -- Policies.
Strategy Implementation in the Strategic Management Model occurs in the following order:
(p.10)
a.
b.
c.
d.
e.
62.
The task environment

a.
b.
c.
d.
e.
63.
(p.10)
includes those elements or groups within an organization's industry.

encompasses the physical working areas of the organization.
is an accounting of the many jobs within an organization.
is an advisory committee to top-management.
includes general forces that only indirectly affect an organization's activities.
Which one of the following is included in the firm's societal environment?

a.
b.
c.
d.
e.
64.
Procedures -- Budgets -- Programs.

Programs -- Budgets -- Procedures.
Budgets -- Programs -- Procedures.
Programs -- Procedures -- Budgets.
Budgets -- Procedures -- Programs.
competitors
economic forces
resources
governments
special interest groups
Which one of the following is included in the firm's task environment?

a.
b.
c.
d.
(p.10)
technological factors
sociocultural factors
economic factors
stockholders
111
(p.10)
e.
65.
Which one of the following is included in the firm's internal environment?

a.
b.
c.
d.
e.
66.
(p.12)
Diversify product line to appeal to more people.

Increase sales by 10% over last year.
Pay highest salaries to keep high quality employees.
Develop and sell quality appliances worldwide.
Divide a sales region into a group of sales districts.
(p.12)
is open-ended.
is quantified.
specifies measurable results.
is clearly specified.
provides a time horizon.
Which one of the following is an example of an objective?

a.
b.
(p.12)
should have a different mission statement for each subsidiary division.

should be less formally stated to allow for growth.
should set the organization apart from its competitors.
should state long-range plans for management.
should describe the organization's S.W.O.T.
A goal differs from an objective because it

a.
b.
c.
d.
e.
71.
transportation (vs railroads)

computers (vs office equipment)
health care (vs hospitals)
real estate (vs apartments)
telecommunications (vs television)
Which of the following is an example of a mission?

a.
b.
c.
d.
e.
70.
A description of the activities carried out by the organization.

The purpose or reason for the corporation's existence.
A description of top management's responsibilities.
A statement of corporate objectives.
The philosophy of the founder.
The organization's corporate mission statement

a.
b.
c.
d.
e.
69.
(p.10)
Which one of the following is an example of a narrow scope? (p.12)

a.
b.
c.
d.
e.
68.
(p.10)
resources
political-legal forces
customers
economic forces
stockholders
The corporate mission is best described by which one of the following?

a.
b.
c.
d.
e.
67.
none of these
improve company reputation

company survival
112
(p.12)
c.
d.
e.
72.
Which of the following is an example of an objective?

a.
b.
c.
d.
e.
73.
75.
76.
77.
(p.13)
functional.
operational.
business.
environmental.
corporate.
The type of strategy which achieves corporate and business unit objectives and strategies by
emphasizing resource productivity is
a.
b.
c.
d.
e.
(p.13)
functional.
operational.
business.
environmental.
corporate.
The type of strategy which emphasizes the improvement of the competitive position of a
corporation's products or services in a particular industry or market segment served by a business
unit is
a.
b.
c.
d.
e.
(p.13)

The type of strategy which describes a company's overall direction in terms of its general attitude
toward growth and the management of its various businesses and product lines is
a.
b.
c.
d.
e.
(p.11)
states what the organization would like to become.

indicates the reason for the organizations existence.
explains past failures and successes.
proposes ways to improve profitability.
promotes the companys social responsibility.
Which of the following is an example of a strategy?

a.
b.
c.
d.
e.
(p.12)

A mission statement differs from a vision statement because a vision statement

a.
b.
c.
d.
e.
74.
increase profits
market leadership
raise ROI by 10% next year
functional.
operational.
business.
environmental.
corporate.
113
(p.13)
78.
A large, multidivisional business has three levels in its hierarchy of strategy:

a.
b.
c.
d.
e.
79.
e.
80.
84.
(p.15)
strategy formulation.
strategy control.
strategy development.
strategy evaluation.
(p.15)
performance evaluation
budgets
programs
procedures
none of these
Which of the following is an example of a program?

a.
b.
c.
d.
e.
(p.14)

Which of the following is NOT a part of strategy implementation?

a.
b.
c.
d.
e.
83.
the purpose or reason for a corporation's existence.

a statement of activities or steps needed to accomplish a single-use plan.
a broad guideline for making decisions.
a comprehensive master plan stating how a corporation will achieve its mission and
objectives.
a statement of a corporation's programs in dollar terms.
The process by which strategies and policies are put into action through the development of
programs, budgets, and procedures is
a.
b.
c.
d.
e.
82.
(p.14)
Which of the following is an example of a policy?

a.
b.
c.
d.
e.
81.
Corporate -- Business -- Functional.

Environmental -- Corporate -- Functional.
Environmental -- Enterprise -- Corporate.
Business -- Divisional -- Functional.
Industry -- Corporate -- Divisional.
As defined in this course, a policy is

a.
b.
c.
d.
(p.13)
(p.15)

A budget is a statement of a corporation's programs in dollar terms. Which is NOT true of the
budgetary function?
114
(p.15)
a.
b.
c.
d.
e.
85.
A return on investment is sometimes referred to as

a.
b.
c.
d.
e.
86.
88.
89.
Strategy.
Strength.
Standard
Scanning.
Systems.
(p.15)
a standard operating procedure.

a systems operating procedure.
a standard operating program.
a standard outside procedure.
a systems operating plan.
The end result of activities is known as

a.
b.
c.
d.
e.
(p.16)
generating feedback to decision makers.

monitoring corporate activities and performance.
stimulating a review of the corporation's strategic management.
pinpointing problem areas.
is the primary concern of top management.
A set of sequential steps or techniques that describe in detail how a particular task or job is to be
done is referred to as
a.
b.
c.
d.
e.
90.
(p.15)
As a part of the strategic management process, evaluation and control is concerned with all of the
following, EXCEPT
a.
b.
c.
d.
e.
(p.15)
planning budgets.
pro forma financial statements.
simultaneous planning.
pro forma budgets.
formatted financial statements.
The S in SOP stands for

a.
b.
c.
d.
e.
(p.15)
return on assets.
hurdle rate.
passing rate.
program rate.
None of the above
One means of forecasting a firms financial future can be accomplished through

a.
b.
c.
d.
e.
87.
Used in planning and control.

Serves as a detailed plan of strategy in action.
Only one budget is necessary for all programs.
Details the impact on the firm's future financial situation.
Used as a means of measuring success based on a certain criteria.
(p.16)
a plan.
performance.
perseverance.
synopsis.
preference.
115
91.
Performance is measured by
a.
b.
c.
d.
e.
92.
95.
96.
(p.17)
should cause management to question their objectives, strategies, and policies.

is not an indicator of problems if it only happens once.
is only the concern of top management because they set the original strategies.
should cause management to look only within the organization to determine the problem.
should signal the immediate revamp of the firm's strategic policy.
Which of the following is NOT a characteristic of strategic decisions as mentioned in the text?
a.
b.
c.
d.
e.
(p.18)
directive
consequential
none of these
continuous
rare
Strategic decisions which set precedents for lesser decisions and future actions throughout the
organization are referred to as
a.
b.
c.
d.
e.
(p.17)
intervention by the organization's bank

annual strategic planning conference
change in ownership of the organization
new CEO
awareness by management of decreased profitability
The existence of a performance gap

a.
b.
c.
d.
e.
(p.16)
is typically an irregular and a discontinuous process.

should be followed unswervingly to ensure success of the plan.
that organizations find they must make significant yearly changes.
should review after specific interval of time to make sure it is still applicable.
is merely a checklist of actions following a logical process.
Which of the following is NOT one the four triggering events listed in the text that are the
stimulus for a strategic change?
a.
b.
c.
d.
e.
94.
profits.
return on investment.
revenues.
return on assets.
All of the above
Research done by Henry Mintzberg suggests that strategy formulation

a.
b.
c.
d.
e.
93.
(p.16)
directive.
rare.
consequential.
motivational.
inexpensive.
116
(p.18)
97.
According to Mintzberg, the entrepreneurial mode of strategy formulation

a.
b.
c.
d.
e.
98.
d.
e.
99.
(p.19)
planning mode.
logical incrementalism.
entrepreneurial mode.
adaptive mode.
strategic mode.
The strategic decision making process is an eight-step approach to decision-making and is most
useful when operating in the
a.
b.
c.
d.
e.
(p.19)
Top management believes that the environment is a force to be used and controlled.
Assumes the environment is too complex to be completely comprehended.
Assumes that systematic scanning and analysis of the environment can provide the
knowledge necessary to influence the environment to the corporation's advantage.
Rather than utilizing a proactive search for new opportunities, it only has the opportunity
for reactive behavior.
Based on vision and large-picture strategy.
The mode of strategy formulation used when top management has a reasonably clear idea of the
corporation's mission and objectives, but it chooses to develop a series of tentative or partial
strategies instead of developing full-blown strategies is called
a.
b.
c.
d.
e.
100.
is characterized by reactive solutions to existing problems.

assumes major responsibilities for strategy formulation.
is focused on opportunities seen by one person.
includes the proactive search for new opportunities and reactive solutions to existing
problems.
assumes the environment is unresponsive to input.
What characterizes the planning mode of strategy formulation?

a.
b.
c.
(p.18)
adaptive mode.
entrepreneurial mode.
planning mode.
incremental mode.
a la mode.
117
(p.19)

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To download more slides, ebook, solutions and test bank, visit http://downloadslide.blogspot.

The difference between basic financial planning and forecast-based planning is

is an integrative orientation from the organization's perspective.

formulating general guidelines.

In contrast to strategic management, the primary focus of business policy

the time horizon with each phase.

may be informal and irregular.

Strategic planning in a multidivisional corporation

Where is the organization now?

Strategic planning within a small organization

clearer sense of vision for the firm.

people throughout the organization.

Under the phase of strategic management, strategic information is available to

should be informal to allow complete understanding by the many participants.

The lesson learned by Maytag Corporation in 1978 was that

36. Members of the European Union (EU) include

One of the benefits of globalization is

if it's not broken, don't fix it.

The internationalization of markets and corporations is called

39. NAFTA was launched during the year

One country that has been extended a free-trade agreement by Mercosur is

43. Mercosur is referred to as _____ in Portuguese.

41. The currency of the European Union (EU) is called the

The breaking down of traditional distribution channels is referred to as

_____ theory proposes an established organization can suffer from inertia.

The ability of an organization to reshape its environment is described by _____ theory.

the transformation of companies.

The T in S.W.O.T. stands for

The S in S.W.O.T. stands for

experimenting with new approaches.

All of the following reflect activities of a learning organization EXCEPT

The development of long-range plans for the effective management of environmental

Objectives -- Policies -- Strategies -- Mission.

The task environment

includes those elements or groups within an organization's industry.

Which one of the following is included in the firm's societal environment?

Procedures -- Budgets -- Programs.

Which one of the following is included in the firm's task environment?

Which one of the following is included in the firm's internal environment?

Diversify product line to appeal to more people.

Which one of the following is an example of an objective?

should have a different mission statement for each subsidiary division.

A goal differs from an objective because it

transportation (vs railroads)

Which of the following is an example of a mission?

A description of the activities carried out by the organization.

The organization's corporate mission statement

Which one of the following is an example of a narrow scope? (p.12)

The corporate mission is best described by which one of the following?

improve company reputation

Which of the following is an example of an objective?

Diversify product line to appeal to more people.

states what the organization would like to become.

Which of the following is an example of a strategy?

Diversify product line to appeal to more people.

A mission statement differs from a vision statement because a vision statement

A large, multidivisional business has three levels in its hierarchy of strategy:

Which of the following is an example of a program?

Diversify product line to appeal to more people.

Which of the following is NOT a part of strategy implementation?

the purpose or reason for a corporation's existence.

Which of the following is an example of a policy?

Corporate -- Business -- Functional.