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70. Which of the following factors most encourages stability in a firm’s strategy?
a.
A new CEO hired from outside the firm but within the industry
b.
Internal CEO succession and a homogeneous top management team
c.
External CEO succession and a heterogeneous top management team
d.
A new CEO hired from outside the industry
71. The top management team is composed of the:
a.
heterogeneous group of advisors selected by the CEO.
b.
CEO and chairperson of the Board.
c.
key individuals who are responsible for selecting and implementing a firm’s strategy.
d.
officers listed in a firm’s annual report and the Board of Directors.
72. Which of the following is NOT a benefit to the firm using the internal labor market to select a new CEO?
a.
Internal hiring results in an increased level of innovation.
b.
Insiders are familiar with the firm’s products, markets, technologies, and operating procedures.
c.
Use of the internal labor market reduces turnover among existing employees.
d.
Insiders are more familiar with a firm’s operating procedures.
73. Omicron Artificial Intelligence is able to respond quickly to competitors’ actions and to opportunities in the
marketplace. This is an example of:
a.
agility.
b.
a core competency.
c.
flexibility.
d.
responsiveness.
74. CEO duality refers to:
a.
firms where there is both a president and a CEO.
b.
CEOs who sit on the Board of Directors of other firms.
c.
CEOs who hold office in more than one company.
d.
the situation where the CEO is also chairperson of the Doard of Directors.
75. The top management team at Ingenuity, Inc., has assigned a team of scientists to a multi-year project to investigate the
viability of growing large amounts of fur from cloned cells of minks and foxes to produce no-kill fur products for coats
and other clothing items. This idea would satisfy all the dimensions of the entrepreneurial orientation EXCEPT:
a.
innovativeness.
b.
risk taking.
c.
proactiveness.
d.
competitive autonomy.
76. Four perspectives are integrated to form the balanced scorecard framework. The financial perspective focuses on the
view of the firm by the:
a.
customer.
b.
employee.
c.
shareholder.
d.
general society.
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77. Two key strategic leadership actions include:
a.
monitoring the hiring of key employees and focusing on growth but not learning initiatives.
b.
designing and then implementing the balanced scorecard.
c.
setting appropriate financial targets and establishing an effective business level synergy.
d.
determining strategic direction and establishing balanced organizational controls.
78. A characteristic of the manager that may affect managerial discretion is his/her:
a.
amount of industry experience.
b.
level of education.
c.
tolerance for ambiguity.
d.
length of tenure.
79. Competitive aggressiveness describes a firm’s:
a.
tendency to engage in new ideas and creative processes.
b.
willingness to allow employees to take actions free of organizational constraints.
c.
ability to be a leader in the marketplace.
d.
propensity to take actions that allow it to outperform rivals consistently and substantially.
80. Faced with declining enrollment and increased competition from not-for-profit organizations offering inexpensive art
courses for new hobbyists, the for-profit Delta Academy of Art has steadfastly stayed true to its mission of offering high-
quality classical art instruction for both beginners and advanced artists at high tuition. Delta has been noted for the
excellence of its artistic training for decades. This is an example of:
a.
adhesion to the status quo.
b.
lack of an envisioned future.
c.
competence becoming a liability.
d.
failure to have a clear core ideology.
81. The firm of Bergeron has existed for hundreds of years, having made exquisite clocks and watches. In its advertising it
refers to clocks the firm made for such past royalty as Marie Antoinette and the Czars of Russia. Employees are constantly
reminded of the firm’s rich history and its long tradition of excellence of design and execution. Bergeron is motivating its
employees through its:
a.
core ideology.
b.
envisioned future.
c.
organizational culture.
d.
business strategy.
82. Clarita Cosmetics is confronting a decline in sales due largely to a general economic downturn. The top management
team is debating whether to lay off employees. In the debate, the following statements are made. Which of the statements
is FALSE?
a.
If Clarita Cosmetics lays off a large number of employees, there will be a significant loss of human capital that
will cause further downturns in the firm’s performance.
b.
A moderate-sized layoff at Clarita Cosmetics will probably improve firm performance.
c.
If Clarita Cosmetics restructures, it ought to increase investments in training and development.
d.
A layoff will increase the slack at Clarita Cosmetics and allow the firm to absorb the increased number of
errors employees may make until they learn their new tasks.
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83. Billy Kroghmen is the son of a very prominent Fortune 500 CEO. Billy has had troubles. He failed out of multiple
colleges, universities, and correspondence schools. He finally received his undergraduate degree from a university with
only a post office box for an address. He then enrolled in the school’s combined graduate accounting and law school
programs, graduating with honor with degrees in both areas. After graduation, he twice failed both the CPA and bar
exams, managing to set record low scores on the ethics portions of both. Despite these academic setbacks, Billy’s career
now seems to be thriving. He has been appointed to a number of “blue ribbon” government committees, is on the Board of
Directors of two corporations and one prestigious not-for-profit organization. In at least one instance, a donor credited
Billy with the idea for making a large contribution to the not-for-profit. Widespread speculation is that his career
advancement is based largely on social relationships through friends and family. We would classify Billy as ____ on ____
capital, and ____ on ____ capital.
a.
high; social; low; human
b.
high; human; high; social
c.
high; human; low; social
d.
None of these options are correct.
84. The Board of Directors for TundraPro, Inc., is searching for a new CEO. The firm is in need of new direction after
suffering several years of declining performance and increasingly demoralized management and employees. The Board
has decided it needs a CEO who can be a transformational leader. To this specific end, the Board needs to identify
applicants who have
a.
high levels of honesty, trustworthiness, and integrity.
b.
high emotional intelligence.
c.
Both A and B are correct.
d.
low tolerance for ambiguity.
85. Strategic control focuses on the ________ of strategic actions, whereas financial controls focus on the _____ of
strategic actions.
a.
revenues; costs
b.
long-term financial outcomes; short-term financial performance
c.
content; outcomes
d.
outcomes; content
86. Which of the following is NOT associated with heterogeneous top management teams?
a.
Higher firm performance
b.
Innovation and strategic change
c.
Diminished debate among top managers
d.
Better strategic decisions
87. Which of the following is NOT a factor that determines the amount of a manager’s decision discretion?
a.
Characteristics of the manager
b.
Characteristics of the organization
c.
Cohesiveness of the Board of Directors
d.
The external environmental
88. ____ provide information about the results of past actions, but do not communicate the drivers of the firm’s future
performance.
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a.
Financial controls
b.
Accounting information systems
c.
Policies and procedures
d.
Strategic feedback systems
89. Which of the statements about CEO duality is FALSE?
a.
CEO duality is associated with high CEO power.
b.
CEO duality has been blamed for slow response to change by the organization.
c.
CEO duality is relatively rare in the U.S. except in large Fortune 500 firms.
d.
If the CEO acts a steward, CEO duality facilitates effective decisions and actions.
90. The ____ is a framework firms can use to verify that they have established both strategic and financial controls to
assess their performance.
a.
managerial model
b.
holistic control system
c.
balanced scorecard
d.
internal auditing system
91. The effective development and management of the firm’s ____ may be its only sustainable competitive advantage.
a.
capital base
b.
human capital
c.
technology
d.
organizational culture
92. The CEO/chairman of PharmaPacifica was recently killed in an airplane crash. This tragedy has thrown
PharmaPacifica into turmoil as there is no one in the organization qualified to step into the former CEO’s shoes. This is an
example of:
a.
a failure of succession management.
b.
managerial hubris.
c.
the risk inherent in CEO duality.
d.
excessive reliance on the internal managerial labor market.
93. Which of the following statements is TRUE regarding effective organizational cultures?
a.
Once a corporate culture is developed, strategic leaders can focus on other activities.
b.
A strategy that is historically new for a firm should be implemented by incremental changes in the
organization’s culture.
c.
A central task of strategic leaders is to revise the corporate culture on an annual basis after analyzing the
changes occurring in the competitive environment.
d.
Organizational culture can be a source of competitive advantage because it influences employee behavior and
how the firm’s conducts its business.
94. The CEO of Icon Image Associates wishes to radically change the corporate culture of the firm. She knows that she
must convince others at Icon Image of the necessity for the culture change and gain their active support. The CEO knows
that the key players in energizing the culture change and fostering alignment with the new strategic vision are:
a.
the members of the Board of Directors.
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b.
top management team members.
c.
the CEO, top managers, and middle managers.
d.
rank-and-file employees.
95. Which key strategic leadership action plays a key role in influencing how the firm conducts its business and regulates
and controls employees’ behavior?
a.
Effectively Managing the Firm’s Resource Portfolio.
b.
Determining Strategic Direction.
c.
Regulating and Controlling Employees.
d.
Sustaining an Effective Organizational Culture.
96. The Enron employee who reported the financial manipulations at the company to her superiors can be considered to
have engaged in:
a.
managerial opportunism.
b.
white-collar crime.
c.
vindictive disloyalty.
d.
an act of courage.
97. Exploiting and maintaining core competencies is part of the key strategic leadership action “Effectively Managing the
Firm’s Resource Portfolio.” Which of the following is most important for developing and using core competencies?
a.
Extensive financial assets
b.
Transformational leadership
c.
High-quality human capital
d.
An ethical organizational culture
98. The most effective leadership style is ____ leadership.
a.
pragmatic
b.
charismatic
c.
inspirational
d.
transformational
99. A CEO’s breadth of knowledge base is constrained by:
a.
his or her relationship with the Board of Directors.
b.
whether he or she is also the chairperson of the Board of Directors.
c.
his or her long tenure with the firm.
d.
the level of social capital in the firm.
100. The CEO of CLEO, Inc., in all her communications to employees consistently refers to her dream of CLEO
becoming the company of choice for employee assistance programs. She keeps this theme uppermost and it is reflected in
the firm’s motto, the title of its Web newsletter, and even on the company t-shirts and mugs. This is an example of the
firm’s:
a.
core ideology.
b.
organizational culture.
c.
strategy.
d.
envisioned future.
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101. The primary responsibility for effective strategic leadership of the organization rests with the:
a.
Board of Directors.
b.
top management team.
c.
CEO.
d.
stakeholders.
102. Shaping and reinforcing a new organizational culture requires all of the following EXCEPT:
a.
effective communication.
b.
effective performance appraisals.
c.
adherence to the firm’s traditional core values.
d.
an appropriate reward system.
103. Research shows that ____________ is the most effective means of ensuring that employees comply with the firm’s
ethical requirements.
a.
a written code of ethics
b.
a statement in the firm’s mission statement
c.
a speech on ethics by the CEO of the company
d.
a value-based culture
104. Organizational controls provide:
a.
the parameters within which strategies are to be implemented.
b.
goals and objectives that must be achieved.
c.
information on action steps to be taken to implement the corporate strategy.
d.
managers with guidelines on how to treat employees.
105. An organization’s ____ is composed of the key individuals who are responsible for selecting and implementing the
firm’s strategies.
a.
top management team
b.
Board of Directors
c.
keiretsu
d.
governance circle
106. When the top management team is homogeneous and a new CEO is selected from inside the firm, it is:
a.
unlikely that the current strategy will change.
b.
likely that product innovation will continue.
c.
likely there will be a change in strategy.
d.
unlikely the new CEO will have a long tenure.
107. Criteria for reevaluating internal business processes using the balanced scorecard include all of the following
EXCEPT:
a.
asset utilization improvements.
b.
improvements in employee morale.
c.
increases in employee skills.
d.
changes in turnover rates.
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108. ____ capital increases cooperation among individuals inside and outside the firm.
a.
Human
b.
Social
c.
Visionary
d.
Cultural
109. Human capital refers to:
a.
the net present value of the future competencies of the workforce.
b.
the amount of money purchasers of the firm would pay for the continuing employment of the present
workforce.
c.
the value-added that the firm’s workforce contributes to each product produced or service rendered.
d.
knowledge and skills of the firm’s work force.
110. The goal of investing in human capital is to:
a.
increase the number of employees in the firm.
b.
reduce organizational slack.
c.
maximize current productivity per employee.
d.
develop a workforce capable of continuous learning.
111. Managerial actions that support development of an ethical organizational culture include all of the following
EXCEPT:
a.
establishing a code of conduct.
b.
disseminating the code of conduct to all stakeholders to inform them of the firm’s ethical standards and
practices.
c.
creating a work environment in which people are treated with dignity.
d.
disciplining whistle-blowers.
112. Discuss how the managerial succession process and the composition of the top management team interact to affect
strategy.
113. What is a top management team, and how does it affect a firm’s performance and its abilities to innovate and design
and implement effective strategic changes?
114. What is organizational culture? What must strategic leaders do to develop and sustain an effective organizational
culture?
115. What are organizational controls? Why are strategic controls and financial controls important aspects of the strategic
management process?
116. As a strategic leader, what actions could you take to establish and emphasize ethical practices in your firm?
117. Define human capital and its importance to the firm’s success.
118. What is strategic leadership, who has primary responsibility for strategic leadership, and what are the five key
strategic leadership actions?
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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
55. d
56. c
58. c
59. a
61. b
62. d
64. a
65. b
68. c
71. c
72. a
74. d
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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
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
the one for which they currently work. CEOs may be selected from internal or external candidates. Internal CEO selection
is preferred by employees and by those who wish the firm to continue in its present strategies. External CEO succession is
considered a sign that the Board of Directors wants change. Internal CEOs are less likely to seek change in the firm’s
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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systems that reward behaviors reflecting the new core values. Change occurs only when it is actively supported by the
CEO, other top managers, and middle management.
115. Organizational controls are the formal, information-based procedures used by managers to maintain or alter patterns
in organizational activities. Controls provide the parameters within which strategies are to be implemented, as well as
forming guidelines for corrective actions when adjustments are required. There are two main types of controls: financial
and strategic. Financial controls focus on short-term financial outcomes. Strategic controls focus on the content of
strategic actions. Financial controls give feedback about the outcomes of past actions. Strategic controls focus on the
drivers of the firm’s future performance. Emphasizing either financial or strategic controls has important implications for
the strategic management process. For example, emphasizing financial controls often produces more short-term and risk-
averse managerial actions because financial outcomes may be caused by events beyond the managers’ direct control. In
contrast, strategic control encourages lower-level managers to make decisions that incorporate moderate and acceptable
levels of risk because outcomes are shared between the business-level executives making strategic proposals and the
corporate-level executives evaluating them.
116. Ethical practices should be institutionalized within the organization by being an integral part of the organizational
culture. Sustaining an effective organizational culture is one of the key leadership actions and one aspect of an effective
culture is that it promotes ethical behavior in the organization. Strategic leaders also develop explicit codes of conduct and
provide ethics training to disseminate those codes. Examples of specific actions taken by strategic leaders to develop an
ethical organizational culture include: (1) establishing and communicating specific goals to describe the firm’s ethical
standards (e.g., developing and disseminating a code of conduct), (2) continuously revising and updating the code of
conduct, based on inputs from people throughout the firm and from other stakeholders (e.g., customers and suppliers), (3)
disseminating the code of conduct to all stakeholders to inform them of the firm’s ethical standards and practices, (4)
developing and implementing methods and procedures to use in achieving the firm’s ethical standards (e.g., use of internal
auditing practices that are consistent with the standards), (5) creating and using explicit reward systems that recognize acts
of courage (e.g., rewarding those who use proper channels and procedures to report observed wrongdoing), and (6)
creating a work environment in which all people are treated with dignity.
117. Human capital represents the knowledge and skills of the firm’s entire workforce. Effective strategic leaders view
human capital as a capital resource that requires investment rather than as a cost to be minimized. It is thought that people
are the organization’s only truly sustainable source of competitive advantage. So, effective human resource management
practices are necessary to successfully select and use people to attain the firm’s goals. Not only must future leaders be
trained, but the entire workforce must be able to learn continuously to build skills and knowledge that lead toward
innovation. Layoffs can be disastrous because they strip skills and knowledge from the firm, leaving remaining employees
unable to perform their tasks effectively.
118. Strategic leadership is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic
change. The CEO has primary responsibility for strategic leadership, which is shared with the Board of Directors, the top
management team and divisional general managers. The five key strategic leadership actions are: determining a strategic
direction, effectively managing the firm’s resource portfolio, sustaining an effective organizational culture, emphasizing
ethical practices, and establishing balanced organizational controls.