6-1
Chapter 06 Planning, Strategy, and Competitive Advantage Answer
Key
True / False Questions
1.
A good plan specifies not only which goals and strategies an organization is committed to
but is also accountable for putting the strategies into action to attain the goals.
TRUE
A good plan specifies not only which goals and strategies an organization is committed to
but also who bears the responsibility for putting the strategies into action to attain the
goals. When managers know they will be held accountable for attaining a goal, they are
motivated to do their best to make sure the goal is achieved.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
2.
The corporate-level plan outlines the specific methods a division, a business unit, or an
organization will use to compete effectively against its rivals in an industry.
FALSE
The corporate-level plan contains top management’s decisions concerning the
organization’s mission and goals, overall (corporate-level) strategy, and structure.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
3.
An intermediate-term plan has a time horizon between five and ten years.
FALSE
Long-term plans have a time horizon of five years or more; intermediate–term plans have a
time horizon between one and five years; and short-term plans have a time horizon of one
year or less.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
4.
A written set of instructions that describes the series of actions that a manager should
take in a specific situation is called an SOP of an organization.
TRUE
A standing operating procedure is a written instruction describing the exact series of
actions that should be followed in a specific situation. For example, an organization may
have a standing plan about ethical behavior by employees.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
5.
Strategy formulation begins with managers systematically analyzing the factors inside an
organization and outside in the global environment that affect the organization’s ability to
meet its goals now and in the future.
TRUE
In strategy formulation, managers work to develop the set of strategies that will allow an
organization to accomplish its mission and achieve its goals. Strategy formulation begins
with managers systematically analyzing the factors or forces inside an organization and
outside in the global environment that affect the organization’s ability to meet its goals
now and in the future.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Topic: Strategic Planning
6.
Scenario planning is often used to strengthen SWOT analysis.
TRUE
Scenario planning is often used to strengthen SWOT analysis.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
7.
Managers of Matrix Ltd. attempted to give the organization a competitive advantage by
driving the production costs to as low a level as possible. We can say that the organization
is pursuing a differentiation strategy.
FALSE
With a low-cost strategy, managers try to gain a competitive advantage by focusing the
energy of all the organization’s functions on driving the company’s costs down below the
costs of its industry rivals. With a differentiation strategy, managers try to gain a
competitive advantage by focusing all the energies of the organization’s functions on
distinguishing the organization’s products from those of competitors on one or more
important dimensions.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
8.
According to Michael Porter’s theory, it is possible for managers to pursue both a low-cost
strategy and a differentiation strategy at the same time.
FALSE
According to Porter’s theory, managers cannot simultaneously pursue both a low-cost
strategy and a differentiation strategy.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-02 Differentiate between the main types of strategies, and explain how they give an organization a
competitive advantage that may lead to superior performance.
Topic: Strategic Planning
9.
Managers pursuing a focused differentiation strategy serve just one or a few segments of
the market and aim to make their organization the most differentiated company serving
that segment.
TRUE
Managers pursuing a focused low-cost strategy serve one or a few segments of the overall
market and aim to make their organization the lowest-cost company serving that segment.
By contrast, managers pursuing a focused differentiation strategy serve just one or a few
segments of the market and aim to make their organization the most differentiated
company serving that segment.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
10.
When a company is successful in pursuing the strategy of concentration on a single
industry, it uses its divisional skills to develop new products or expand its locations.
TRUE
When a company is successful in pursuing the strategy of concentration on a single
industry, it uses its functional skills to develop new kinds of products, or it expands the
number of locations in which it uses those skills.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are
used to strengthen a company’s business-level strategy and competitive advantage.
Topic: Corporate-Level Strategy
11.
Synergy is obtained by apportioning financial resources among divisions to increase
financial returns or spread risks among different businesses.
FALSE
Portfolio strategy is apportioning financial resources among divisions to increase financial
returns or spread risks among different businesses, much as individual investors do with
their own portfolios.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are
used to strengthen a company’s business-level strategy and competitive advantage.
Topic: Corporate-Level Strategy
12.
With a multidomestic strategy, managers decide to sell the same product with the same
marketing approach in all of the countries in which the product is sold.
FALSE
When managers decide to customize products and marketing strategies to specific
national conditions, they adopt a multidomestic strategy.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are
used to strengthen a company’s business-level strategy and competitive advantage.
Topic: Corporate-Level Strategy
13.
A strategic alliance can take the form of a written contract between two or more
companies to exchange resources, or it can result in the creation of a new organization.
TRUE
A strategic alliance can take the form of a written contract between two or more
companies to exchange resources, or it can result in the creation of a new organization.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are
used to strengthen a company’s business-level strategy and competitive advantage.
Topic: Corporate-Level Strategy
14.
An organization’s level of involvement abroad decreases in a joint venture because the
alliance rarely involves capital investment to produce goods or services outside the home
country.
FALSE
An organization’s level of involvement abroad increases in a joint venture because the
alliance normally involves a capital investment in production facilities abroad in order to
produce goods or services outside the home country.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-03 Differentiate between the main types of corporate-level strategies, and explain how they are
used to strengthen a company’s business-level strategy and competitive advantage.
Topic: Corporate-Level Strategy
15.
The plan for implementing a new strategy requires the development of new functional
strategies.
TRUE
The plan for implementing a new strategy requires the development of new functional
strategies, the redesign of an organization’s structure, and the development of new control
systems; it might also require a new program to change an organization’s culture.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-04 Describe the vital role managers play in implementing strategies to achieve an organization’s
mission and goals.
Multiple Choice Questions
16.
The cluster of decisions that managers make to assist an organization to achieve its goals
is known as ________.
A.
strategy
B.
scenario planning
C.
D.
needs assessment
A strategy is a cluster of related managerial decisions and actions to help an organization
attain one of its goals.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
17.
A broad declaration of the organization’s overriding purpose, which is intended to identify
the organization’s products and customer base, as well as to differentiate the organization
from its competitors, is known as a ________ statement.
A.
functional-level
B.
mission
C.
formulated strategy
D.
positioning
A mission statement is a broad declaration of an organization’s overriding purpose, what it
is seeking to achieve from its activities; this statement is also intended to identify what is
unique or important about its products to its employees and customers as well as to
distinguish or differentiate the organization in some ways from its competitors.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
18.
When only one central, guiding plan is put into operation to achieve an organizational goal,
the organization is experiencing ________.
A.
accuracy
B.
flexibility
C.
unity
D.
continuity
Unity means that at any one time only one central, guiding plan is put into operation to
achieve an organizational goal; more than one plan to achieve a goal would cause
confusion and disorder.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
19.
An ongoing process in which managers build and refine previous plans and continually
modify plans at all levels, corporate, business, and functional, so that they fit together into
one broad framework, is known as ________.
A.
continuity
B.
flexibility
C.
accuracy
D.
unity
Continuity means that planning is an ongoing process in which managers build and refine
previous plans and continually modify plans at all levels, corporate, business, and
functional, so that they fit together into one broad framework.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
20.
Managers should attempt to collect and use all available information in the organization’s
planning process. This emphasizes the _______ aspect of planning.
A.
unity
B.
flexibility
C.
continuity
D.
accuracy
Accuracy means that managers need to make every attempt to collect and utilize all
available information at their disposal in the planning process.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
21.
Another name for the business level of the organization is the _______ level.
A.
functional
B.
department
C.
corporate
D.
divisional
In large organizations planning usually takes place at three levels of management:
corporate, business or division, and department or functional.
AACSB: Analytical Thinking
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
22.
The level of an organization that contains the organization’s marketing department, R&D
department, and human resources department is the ________ level.
A.
functional
B.
first-line
C.
corporate
D.
business
Of the three levels of management, below the business level is the department or
functional level. Each division has its own set of functions or departments, such as
manufacturing, marketing, human resource management (HRM), and research and
development (R&D).
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
23.
The plan of an organization that contains top management’s decisions about the
organization’s mission, goals, strategy, and structure is an example of a ________-level
plan.
A.
corporate
B.
divisional
C.
functional
D.
business
The corporate-level plan contains top management’s decisions concerning the
organization’s mission and goals, overall (corporate-level) strategy, and structure.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
24.
SynVens, a major retail chain in Hungary, is planning to diversify. It plans to enter the
textiles industry and aims to be first or second in market share in this industry in five
years. This is an example of a ________-level plan strategy.
A.
business
B.
corporate
C.
functional
D.
divisional
Corporate-level strategy specifies in which industries and national markets an
organization intends to compete and why. One of the goals stated in SynVens’ corporate–
level plan is that SynVens should be first or second in market share in every industry in
which it competes.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
25.
The industries and national markets an organization intends to compete in and the
reasons why are specified in a company’s _______-level strategy.
A.
divisional
B.
departmental
C.
functional
D.
corporate
A corporate-level plan contains top management’s decisions concerning the organization’s
mission and goals, overall (corporate-level) strategy, and structure. Corporate-level
strategy specifies in which industries and national markets an organization intends to
compete and why.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 1 Easy
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
26.
DE, Ltd., sets a goal that every product line of the company should be either first or
second in its industry in market share. This would be an example of a ______________-level
strategy.
A.
corporate
B.
divisional
C.
functional
D.
business
Corporate-level strategy specifies in which industries and national markets an
organization intends to compete and why. One of the goals stated in DE, Ltd. corporate–
level plan is that DE, Ltd. should be first or second in market share in every industry in
which it competes.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 2 Medium
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning
27.
Managers at Ferwn Pvt., Ltd., which is number two in market share in the local sports
equipment manufacturing industry, develop strategies to take over the number-one spot.
This is an example of a _______-level strategy.
A.
corporate
B.
top-management
C.
functional
D.
business
Business-level strategy outlines the specific methods a division, a business unit, or an
organization will use to compete effectively against its rivals in an industry.
AACSB: Reflective Thinking
Accessibility: Keyboard Navigation
Blooms: Apply
Difficulty: 3 Hard
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.
Topic: Strategic Planning