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Answer Key
1. False
2. True
3. False
4. True
5. True
6. True
7. True
8. False
9. True
10. True
11. True
12. False
13. True
14. False
15. True
16. False
17. True
18. False
19. True
20. True
21. True
22. False
23. True
24. True
25. True
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26. False
27. True
28. False
29. True
30. True
31. False
32. True
33. True
34. False
35. True
36. True
37. True
38. True
39. True
40. True
41. True
42. True
43. True
44. True
45. False
46. False
47. True
48. False
49. b
50. b
51. b
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52. a
53. a
54. a
55. d
56. c
57. a
58. c
59. a
60. a
61. b
62. d
63. a
64. a
65. b
66. d
67. d
68. c
69. a
70. b
71. c
72. a
73. b
74. d
76. c
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77. d
78. c
79. d
80. a
81. a
82. d
83. a
84. c
85. c
86. c
87. c
88. a
89. c
90. c
91. b
92. a
93. d
94. c
95. d
96. d
97. c
98. d
99. c
100. d
101. c
102. c
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103. d
104. a
105. a
106. a
107. c
108. b
109. d
110. d
111. d
112. Internal labor markets represent the opportunities for employees to take managerial positions (including the position
of CEO) within a firm. The external labor market is the collection of career opportunities for managers in firms outside of
strategy than external CEOs. It is important to note that the source of the CEO (from the internal or external labor market)
and the top management team’s composition interact to affect the likelihood of strategic change. If a firm hires a new
internal CEO and has a homogeneous top management team, it is unlikely that the firm’s strategy will change. If the firm
employs a new internal CEO but has a heterogeneous top management team, it will probably continue the current strategy,
but innovation will be encouraged. If the top management team is homogeneous, but an external CEO is chosen, the
situation will be ambiguous. Finally, if the top management team is heterogeneous and an external CEO is chosen,
strategic change is likely.
113. The top management team is composed of the key managers in the organization who are responsible for selecting
and implementing the firm’s strategy. Typically, the top management team includes all officers of the firm (defined by the
title of vice president or above) and/or those who serve as a member of the Board of Directors. Team characteristics have
been shown to affect the strategy of the organization. A heterogeneous top management team is composed of individuals
with varied functional backgrounds, experiences, and education. A homogeneous team’s members are similar to one
another in characteristics and experiences. A heterogeneous team is more likely to formulate an effective strategy because
of its varied expertise and knowledge. Additionally, heterogeneous top management teams have been shown to positively
affect performance. In particular, heterogeneous teams positively affect innovation and strategic change in firms. But,
heterogeneous teams are less cohesive than homogeneous teams because of communication difficulties, and it is more
difficult for heterogeneous teams to implement strategies. Consequently, a heterogeneous top management team must be
managed effectively to use the diversity in a positive way.
114. Organizational culture is the set of ideologies, symbols, and core values that is shared throughout the organization
and that influences the way the firm conducts its business. An organization’s culture can be a source of competitive
advantage. It is more difficult to change a firm’s culture than to sustain it. But effective strategic leadership recognizes
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3. The underlying premise of the balanced scorecard is that firms jeopardize their future performance possibilities when
strategic controls are emphasized at the expense of financial controls.
a.
True
b.
False
4. In the past, companies had a preference for insiders to fill top-level management positions because of the desire for
continuity and a continuing commitment to the firm’s current vision, mission, and chosen strategies.
a.
True
b.
False
5. Because of the current changing competitive landscape and varying levels of performance, an increasing number of
Boards of Directors are turning to insiders to succeed CEOs.
a.
True
b.
False
6. The most critical ability of a strategic leader is the ability to attract and then manage human capital.
a.
True
b.
False
7. The decision-making discretion of top-level managers is determined partly by external environmental factors such as
the industry structure, the industry’s rate of growth, and the degree to which products can be differentiated.
a.
True
b.
False
8. The Chapter 12 Strategic Focus reports on recent successes of NBC News, Nokia, and Standard Charter because of the
top managers’ decisions.
a.
True
b.
False
9. The advantages of long tenure (firm-specific human and social capital, knowledge, and power) seem to outweigh the
disadvantages of rigidity and maintaining the status quo.
a.
True
b.
False
10. The balanced scorecard focuses on both financial and non-financial controls.
a.
True
b.
False
11. Criteria such as asset utilization improvements and changes in employee turnover rates are part of the internal business
processes perspective of the balanced scorecard.
a.
True
b.
False
12. For 15 years, Edward was a compensation specialist at a mid–sized firm. He was laid off when the firm experienced
financial setbacks. Edward has decided to open his own business as a compensation consultant to small firms. He can
expect that his main source of human capital will be a bank line of credit.
a.
True
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b.
False
13. The firm’s core ideology motivates the firm’s employees through the company’s heritage.
a.
True
b.
False
14. Organizational culture is a complex set of ideologies, symbols, and core values that are shared throughout the firm, but
its development is so subtle and poorly understood that top managers cannot influence its content.
a.
True
b.
False
15. Strategic leaders are most likely to integrate ethical values into their decisions when the company has explicit ethics
codes that are integrated into the business through extensive ethics training.
a.
True
b.
False
16. Competitive aggressiveness, proactiveness, risk aversion, innovativeness, and autonomy are the five dimensions
characterizing the entrepreneurial mind-set.
a.
True
b.
False
17. In addition to determining new strategic initiatives, top-level managers also develop the appropriate organizational
structure and reward systems of a firm.
a.
True
b.
False
18. An emphasis on strategic controls encourages managers to be risk averse.
a.
True
b.
False
19. Strategic control focuses on the content of strategic actions rather than their outcomes.
a.
True
b.
False
20. As the dynamics of competition accelerate, people are perhaps the only truly sustainable source of competitive
advantage.
a.
True
b.
False
21. The CEO is the individual with primary responsibility for effective strategic leadership within an organization.
a.
True
b.
False
22. Financial controls provide feedback about the outcomes of the firm’s past actions and predictions about the results of
the firm’s future actions.
a.
True
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b.
False
23. Rewarding those who use proper channels and procedures to report observed wrongdoings is an example of an action
that should be taken by a strategic leader to develop an ethical organizational culture.
a.
True
b.
False
24. Internal labor markets consist of the career opportunities for managers within the firm for which they currently work.
a.
True
b.
False
25. The CEO of YorkMark, Inc., has an exceptional amount of power in the organization. It is likely the Board of
Directors is composed of sympathetic outside members and insiders who report to the CEO.
a.
True
b.
False
26. The more homogeneous a top management team, the more likely those managers will be innovative and willing to
pursue strategic change.
a.
True
b.
False
27. Employees usually have a strong preference for firms to use the internal managerial labor market when selecting top
management team members and the CEO.
a.
True
b.
False
28. Selection of an insider as a new CEO indicates a firm’s desire to encourage innovation and strategic change.
a.
True
b.
False
29. Strategic leadership is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic
change as necessary.
a.
True
b.
False
30. Including talent from both the internal and external labor markets increases the likelihood that the firm will be able to
form an effective top management team.
a.
True
b.
False
31. To influence employees’ judgment and behavior, ethical practices must shape the firm’s decision-making process, but
should be a peripheral part of organizational culture.
a.
True
b.
False
32. Firm size, firm age, the executive’s tolerance for ambiguity, and his or her commitment to strategic outcomes are all
factors that may affect managerial discretion.
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a.
True
b.
False
33. Effectively managing the firm’s resource portfolio (financial, human, social, and organizational capital) may be the
most important strategic leadership task.
a.
True
b.
False
34. Compared to homogeneous top management teams, heterogeneous top management teams with an internally
promoted CEO are more likely to change their firm’s strategies when necessary and to support innovation.
a.
True
b.
False
35. Incremental changes to a firm’s culture can be used to implement strategies effectively.
a.
True
b.
False
36. The balanced scorecard’s perspective on learning and growth is intended to improve the firm’s ability to innovate.
a.
True
b.
False
37. Members with substantive expertise in the firm’s core functions and businesses aid the effectiveness of the top
management team.
a.
True
b.
False
38. When the new CEO is from inside the firm and a heterogeneous top management team is in place, the strategy may
not change, but innovation is likely to continue.
a.
True
b.
False
39. The training of future strategic leaders yields a competitive advantage for a firm, in part because knowledge and skills
are necessary for successful execution of strategy.
a.
True
b.
False
40. External social capital is increasingly critical to firm success as few if any companies have all the resources to
successfully compete against their rivals.
a.
True
b.
False
41. The firm’s envisioned future encourages employees to stretch beyond their expectations of accomplishment and
requires significant change and progress to be realized.
a.
True
b.
False
42. Top management team members and CEOs who have long tenure on the team and in the organization have greater
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influence in Board decisions.
a.
True
b.
False
43. GM’s previous CEO, Dan Akerson, was building new capabilities in technology development and marketing,
especially in customer service. This is an example of a CEO developing capabilities into core competencies.
a.
True
b.
False
44. A CEO may gain power by holding the titles of both CEO and Chairman of the Board.
a.
True
b.
False
45. When a new CEO is selected from outside the firm, a change of strategy is likely, especially if the top management
team is homogenous and highly cohesive.
a.
True
b.
False
46. The more heterogeneous and the larger the top management team, the easier it is to implement strategy effectively.
a.
True
b.
False
47. The strategic direction of a firm usually focuses on the coming 3 to 5 years.
a.
True
b.
False
48. The experience that results from long tenure in a firm is known to extend the breadth of an executive’s knowledge
base.
a.
True
b.
False
Indicate the answer choice that best completes the statement or answers the question.
49. Which of the following is NOT one of the five dimensions thought to characterize an employee’s entrepreneurial
mind-set?
a.
Autonomy
b.
Reactivity
c.
Risk taking
d.
Innovativeness
50. Monahegan Plasma Company is facing a performance downturn and realizes that a major rethinking of its strategy is
in order. Under these circumstances, Monahegan Plasma would benefit from a(n):
a.
internal CEO with short tenure.
b.
external CEO with a heterogeneous top management team.
c.
dual CEO/chairperson with a homogenous top management team.
d.
CEO with long tenure who has a strong sense of hubris.
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51. An example of the external labor market is the situation where:
a.
an assessment center operated by an external consulting firm evaluates company managers for promotion
potential.
b.
a new vice president of marketing is hired from a competitor.
c.
the senior vice president of finance is promoted to CEO.
d.
a vice president of human resources is sent to a university executive MBA program for professional
development.
52. The premise of the balanced scorecard is that firms jeopardize future performance possibilities when they:
a.
overemphasize financial controls and neglect strategic controls.
b.
overemphasize strategic control and neglect financial controls.
c.
overemphasize strategic and financial controls and neglect ethical controls.
d.
neglect short-term controls of all kinds in favor of long-term strategic controls.
53. Actions that effective strategic leaders can take to develop an ethical organizational culture include all of the following
EXCEPT:
a.
relying on the fundamental goodness of individuals.
b.
using reward systems that recognize acts of courage.
c.
communicating goals that describe the firm’s ethical standards.
d.
creating a work environment where individuals are treated with dignity.
54. The ability to attract and manage ____ may be the most important skill a strategic leader must have.
a.
human capital
b.
financial resources
c.
responses to competitors’ actions
d.
investment strategies
55. Executive headhunters have approached Charles about taking the position of senior vice president of marketing for a
well-known company. Although this company has been highly successful since 1995, Charles has heard persistent rumors
of overly aggressive marketing tactics, questionable reporting of sales data, and an atmosphere of intolerance of criticism.
The CEO is a powerful and charismatic individual, who built the company from a small regional firm to an international
powerhouse in only a decade. The other top managers have been hand-picked by the CEO, as have a number of the
members of the Board of Directors. The salary for this position is very high and includes generous stock options. It would
be a major step up in Charles’s career and would position him to move to CEO of another company in the future. Charles
has prided himself on his high moral values and is viewed as an exceptionally ethical person by his peers. What should
Charles do?
a.
Charles should take the job because he can effect real change in the culture of the organization, and take
advantage of the personal financial and career opportunities.
b.
Charles should realize that personal moral values and the realities of the corporate world differ in both quality
and degree. Consequently, he can take a job in an ethically borderline company without tainting his personal
moral standing.
c.
Charles should not rely on rumors to dissuade him from making an advantageous career decision.
d.
Charles should not take the job because the culture of the organization is set by the CEO and other top
managers. He would have little influence on the organizational culture as one of many top managers.
56. A CEO gains power from all of the following circumstances EXCEPT:
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a.
when many of the outside directors are appointed by the CEO.
b.
when the CEO is also the chairman of the Board.
c.
when tenure of the top management team is shorter than the tenure of the Board.
d.
the fact that inside Board members report to the CEO.
57. A heterogeneous top management team is composed of individuals with:
a.
different functional backgrounds, experience, and education.
b.
similar commitments to the organization’s core ideology and culture.
c.
a high level of education and industry expertise.
d.
long tenure in the organization who have held various functional positions.
58. Determining the strategic direction of a firm involves:
a.
implementation of a balanced scorecard.
b.
developing an entrepreneurial mind set.
c.
specifying the vision and the strategy to achieve that vision over time.
d.
exploiting and maintaining core competencies.
59. Which of the following is NOT one of the four perspectives in the balanced scorecard framework?
a.
entrepreneurial
b.
financial
c.
customer
d.
learning and growth
60. In the balanced scorecard framework, ____ controls are used to assess the organization’s success in creating a climate
that supports change and innovation.
a.
learning and growth
b.
financial
c.
operational
d.
innovational
61. Normally, the more involved a Board of Directors is in shaping the firm’s strategic direction, the:
a.
more balanced the organization is.
b.
higher the corporation’s performance is.
c.
more rapidly executive decisions can be made.
d.
more difficult it becomes to make effective executive decisions.
62. Sony previously selected Sir Howard Stringer as CEO. Sir Howard was not Japanese and he was not a Sony employee
before his selection. Which of the following statements is FALSE?
a.
Sony’s top management team will be more heterogeneous with the addition of Sir Howard.
b.
Sir Howard will have a broader perspective of the firm and its competitive environment than would a Sony
insider.
c.
If Sony’s top management team is homogeneous, Sir Howard’s future impact on Sony’s strategy is ambiguous.
d.
The decision-making process on Sony’s top management team will be smoother and faster with the addition of
Sir Howard.
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63. The more heterogeneous the top management team, the:
a.
more difficult it will be for the team to implement strategies.
b.
more likely it is that the team will be cohesive.
c.
less innovative the team’s decisions will tend to be.
d.
less diverse the team membership will be.
64. Christina is evaluating Maximum Brands as an investment opportunity. She is very concerned about future financial
performance by Maximum Brands. Christina does not believe that the CEO can act as a steward. Christina will probably
be most concerned if:
a.
there is CEO duality.
b.
many of the members of the Board of Directors are outsiders.
c.
the positions of chairman of the Board and CEO are held by different persons.
d.
there is an independent Board leadership structure.
65. All of the following are external environmental sources that affect managerial discretion EXCEPT:
a.
industry structure.
b.
corporate culture.
c.
market growth rate.
d.
potential for product differentiation.
66. Which of the following will increase the probability that a lower-level manager will become a successful strategic
leader?
a.
Appointing many outside Board members.
b.
Increasing the firm’s sales.
c.
Increasing the homogeneity of the top management team.
d.
Training and development programs.
67. Which of the following is NOT related to a CEO having long tenure in his or her position?
a.
More effective strategic control
b.
Greater influence on board decisions
c.
More limited perspective
d.
A broader knowledge base
68. To successfully implement a firm’s strategy, the workforce must be viewed as a:
a.
variable cost.
b.
depreciating asset.
c.
resource to be maximized.
d.
renewable asset.
69. Firms needing to change their strategies should:
a.
create more heterogeneous top management teams.
b.
focus on their core customer base.
c.
implement transformational leadership.
d.
emphasize the training and development of internal managerial talent.