73.
Why is planning considered an important process for managers?
A.
It gives a sense of direction and purpose.
B.
It ensures only top-level managers make decisions.
C.
It creates a time horizon for different planning levels.
D.
It identifies which markets to enter or avoid.
Planning is necessary to give the organization a sense of direction and purpose. By stating
which organizational goals and strategies are important, a plan keeps managers on track
so they use the resources under their control efficiently and effectively.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
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
74.
Which of the following qualities of an effective plan allows for alterations if the situation
changes?
A.
B.
Unity
C.
Flexibility
D.
Accuracy
Despite the need for continuity and accuracy, Fayol emphasized that the planning process
should be flexible enough so plans can be altered and changed if the situation changes;
managers must not be bound to a static plan.
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
75.
The planning and strategy making necessary to increase the efficiency and effectiveness
of a particular function are the responsibility of a ________.
A.
divisional manager
B.
CEO
C.
corporate office
D.
functional manager
Each division’s functional managers are responsible for the planning and strategy making
necessary to increase the efficiency and effectiveness of their particular function.
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
76.
The decision of a company to invest in state–of-the-art European production facilities is
an example of a ________-level strategy.
A.
division
B.
business
C.
corporate
D.
functional
Functional managers’ decisions pertain to the goals that they propose to pursue to help
the division attain its business-level goals.
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
77.
Which of the following is most likely to require a short-term plan?
A.
Corporate mission
B.
Business strategies
C.
Functional goals
D.
Divisional structure
Typically, corporate– and business-level goals and strategies require long– and
intermediate-term plans, and functional-level goals and strategies require intermediate–
and short-term plans.
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
78.
What is the plan of action for a business-level strategy based on SWOT analysis?
A.
To maximize an organization’s ability to create value
B.
To take advantage of favorable opportunities
C.
To choose industries and countries to invest in
D.
To improve task-specific activities within the organization
Business-level strategy is a plan of action to take advantage of favorable opportunities
and find ways to counter threats so as to compete effectively in an industry.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
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
79.
What happens when there are only a few large customers in the market?
A.
They keep changing their tastes, fads, and fashions.
B.
They drive down the price of the output through bargaining.
C.
They tend to be referred to as “stuck in the middle.”
D.
They start concentrating on a single industry.
If only a few large customers are available to buy an industry’s output, they can bargain to
drive down the price of that output. As a result, industry producers make lower profits.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Understand
Difficulty: 2 Medium
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
80.
A company that is serving only a few market segments has most likely adopted a ________
strategy.
A.
focused differentiation
B.
low cost
C.
risk taking
D.
portfolio
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.
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
81.
The reason managers pursue vertical integration is that it ________.
A.
provides stable environmental conditions
B.
improves flexibility in operations
C.
increases sales overall
D.
strengthens competitive advantage
The reason managers pursue vertical integration is that it allows them either to add value
to their products by making them special or unique or to lower the costs of making and
selling them.
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
82.
Apportioning financial resources among divisions to increase financial returns or spread
risks among different businesses is called a ________ strategy.
A.
global
B.
divisional
C.
functional
D.
portfolio
One reason for pursuing unrelated diversification is that purchasing businesses in
different industries lets managers engage in a portfolio strategy, which 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
83.
A backward vertical integration occurs when a company expands into a new industry
________.
A.
that helps create a competitive advantage
B.
that produces inputs for the company’s products
C.
that is not related to the current business in any way
D.
that uses or distributes the company’s products
Vertical integration is a corporate-level strategy in which a company expands its business
operations either backward into a new industry that produces inputs for the company’s
products (backward vertical integration) or forward into a new industry that uses,
distributes, or sells the company’s products (forward vertical integration).
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
84.
What is the major advantage of a multidomestic strategy?
A.
The ability to gain market share or charge higher prices for customized product
offerings and marketing approaches to local conditions
B.
The significant cost savings associated with not having to customize products and
marketing approaches to different national conditions
C.
The high-quality skills of foreign manufacturers and the specialized knowledge of
foreign managers about the needs of local customers
D.
The reduced level of risk owing to the managers’ full control over all aspects of their
foreign subsidiary’s operations
The major advantage of a multidomestic strategy is that by customizing product offerings
and marketing approaches to local conditions, managers may be able to gain market share
or charge higher prices for their products.
AACSB: Analytical Thinking
Accessibility: Keyboard Navigation
Blooms: Remember
Difficulty: 2 Medium
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
85.
A strategic alliance among two or more companies that agree to jointly establish and
share the ownership of a new business is called a ________.
A.
joint venture
B.
franchise
C.
portfolio management
D.
wholly owned foreign subsidiary
A joint venture is a strategic alliance among two or more companies that agree to jointly
establish and share the ownership of a new business.
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
Essay Questions
86.
In general, business planning involves three distinct steps. Discuss these three steps.
In most organizations, planning is a three-step activity.
• The first step is determining the organization’s mission and goals. A mission statement is
a broad declaration of an organization’s overriding purpose, what it is seeking to achieve
from its activities; this statement also identifies what is unique or important about its
products to its employees and customers; finally it distinguishes or differentiates the
organization in some ways from its competitors.
• The second step is formulating strategy. Managers analyze the organization’s current
situation and then conceive and develop the strategies necessary to attain the
organization’s mission and goals.
• The third step is implementing strategy. Managers decide how to allocate the resources
and responsibilities required to implement the strategies among people and groups within
the organization.
AACSB: Analytical Thinking
Blooms: Understand
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
87.
Give the four major reasons why planning is important.
Planning is important for four main reasons:
• Planning is necessary to give the organization a sense of direction and purpose. A plan
states what goals an organization is trying to achieve and what strategies it intends to use
to achieve them. A plan keeps managers on track so they use the resources under their
control efficiently and effectively.
• Planning is a useful way of getting managers to participate in decision making about the
appropriate goals and strategies for an organization. Effective planning gives all managers
the opportunity to participate in decision making.
• A plan helps coordinate managers of the different functions and divisions of an
organization to ensure that they all pull in the same direction and work to achieve its
desired future state.
• A plan can be used as a device for controlling managers within an organization. A good
plan specifies not only which goals and strategies the 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.
88.
Explain briefly the three levels and three steps in the planning and strategy-making
process. Also mention how they are linked with each other.
In large organizations planning usually takes place at three levels of management:
corporate, business or division, and department or functional.
• The corporate-level plan contains top management’s decisions concerning the
organization’s mission and goals, overall strategy, and structure. Corporate-level strategy
linked to its division’s business-level plan, which, in turn, is linked to the corporate plan.
AACSB: Reflective Thinking
Blooms: Understand
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
89.
Business plans differ in the time horizons that they cover. Discuss the three major types of
business plans in terms of their intended duration and explain why all three of these types
of plans are important to a business.
Plans differ in their time horizons, the periods of time over which they are intended to
apply or endure. Managers usually distinguish among the following:
• Long-term plans have a time horizon of five years or more. Typically corporate and
business-level goals and strategies require long-term plans.
• Intermediate-term plans have a time horizon between one and five years. Corporate and
business level goals require intermediate-term plans. Functional-level goals and strategies
also require intermediate-term plans.
• Short-term plans have a time horizon of one year or less. Functional-level goals and
strategies require short-term plans.
AACSB: Analytical Thinking
Blooms: Understand
Difficulty: 2 Medium
Learning Objective: 06-01 Identify the three main steps of the planning process, and explain the relationship between
planning and strategy.