Case Scenario 3: Zachary, Wesley & Partners.
Zachary, Wesley & Partners (ZW&P) is a leveraged buyout (LBO) firm that specializes in friendly buyouts of mid-
sized U.S. retailing and manufacturing firms. ZW&P shuns turnarounds and hostile takeovers; its typical deals
retain the existing management team and provide extensive funding for what is perceived to be an already sound
strategy. It focuses on this type of firm because the partners have good contacts in retailing and manufacturing and
they are typically able to avoid bidding wars when the LBO is negotiated. The firm has been immensely profitable
over the years, in part due to the very extensive and selective due diligence process used to winnow down the list
of prospective targets. Fewer than one out of one hundred candidates are even approached, and only a fraction of
these passes further screens in the LBO negotiations. The resulting profitability has, in turn, given ZW&P a strong
reputation in the financial community for successful deals, and among managers for being able to put together
needed financing with good business plans.
57. (Refer to Case Scenario 3). What are this firm’s core resources and capabilities?
58. (Refer to Case Scenario 3). ZW&P’s core resources are its financial and technological resources.
59. (Refer to Case Scenario 3). Effectively managing ZW&P’s portfolio of resources (in particular its human and social
capital resources) may be its most important strategic leadership task.
60. (Refer to Case Scenario 3). Where are these core resources likely to be located in the firm?
61. (Refer to Case Scenario 3). What factors may threaten the ability of ZW&P’s resources and capabilities to
generate continued success?
Multiple Choice
62. 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.
63. In the balanced scorecard framework,
climate that supports change and innovation.
a. learning and growth
b. financial
c. operational
d. innovational
controls are used to assess the organization’s success in creating a
64. 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.
65. 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.
66. 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.
67. 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.
68. 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.
69. The most effective leadership style is leadership.
a. pragmatic
b. charismatic
c. inspirational
d. transformational
70. 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.
71. 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.
72. 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
73. 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.
74. 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.
75. 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
76. 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.
77. 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.
78. 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.
79. 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.
80. 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
81. 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.
82. 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.
83. 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
84. 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.
85. 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 make.
d. more difficult it becomes to make effective executive decisions.
86. 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.
87. 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.
88. 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.
89. All of the following are correct about the status of CEO succession (Chapter 12 Strategic Focus) EXCEPT
a. there is considerable CEO turnover in North American and European firms hence the need for succession
plans.
b. IBM has a succession plan for CEO Sam Palmisano.
c. most formal succession plans call for the use of executive search firms.
d. over 90 percent of firms have succession plans.
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 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.
92. 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.
93. Strategic control focuses on the
strategic actions.
a. revenues; costs
of strategic actions, whereas financial controls focus on the _____ of
b. long-term financial outcomes; short-term financial performance
c. content; outcomes
d. outcomes; content
94. 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.
95. 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.
96. 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.
97. 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.
98. 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.
99. 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.