True / False
1. 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
b. False
2. 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
3. Selection of an insider as a new CEO indicates a firm’s desire to encourage innovation and strategic change.
a. True
b. False
4. 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
5. 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
6. 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
7. 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
8. Internal labor markets consist of the career opportunities for managers within the firm for which they currently
work.
a. True
b. False
9. 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
10. 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
11. The Chapter 12 Strategic Focus reports on recent surveys which found that about 90 percent of boards of
corporations had a succession plan for their CEOs.
a. True
b. False
12. 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.
a. True
b. False
13. 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
14. 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
15. Strategic control focuses on the content of strategic actions rather than their outcomes.
a. True
b. False
16. The more heterogeneous and the larger the top management team, the easier it is to implement strategy effectively.
a. True
b. False
17. 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
18. As the dynamics of competition accelerate, people are perhaps the only truly sustainable source of competitive
advantage.
a. True
b. False
19. Transformational leadership is the most effective strategic leadership style.
a. True
b. False
20. The balanced scorecard’s perspective on learning and growth is intended to improve the firm’s ability to innovate.
a. True
b. False
21. 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
22. The CEO is the individual with primary responsibility for effective strategic leadership within an organization.
a. True
b. False
23. Competitive aggressiveness, proactiveness, risk aversion, innovativeness, and autonomy are the five dimensions
characterizing the entrepreneurial mind-set.
a. True
b. False
24. 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
25. 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
26. 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
27. 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
28. The strategic direction of a firm usually focuses on the coming 3 to 5 years.
a. True
b. False
29. 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
30. An emphasis on strategic controls encourages managers to be risk averse.
a. True
b. False
31. Members with substantive expertise in the firm’s core functions and businesses aids the effectiveness of the top
management team.
a. True
b. False
32. The firm’s core ideology motivates the firm’s employees through the company‘s heritage.
a. True
b. False
33. 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
34. The most critical ability of a strategic leader is the ability to attract and then manage human capital.
a. True
b. False
35. 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
36. GM‘s newest CEO, Dan Akerson, is 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
37. 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
38. Strategic leadership is the ability to anticipate, envision, maintain flexibility, and empower others to create strategic
change as necessary.
a. True
b. False
39. Typically, a vice president would NOT be considered to hold a high enough position to be included in the top
management team of an organization.
a. True
b. False
40. 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
41. 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
42. 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
b. False
43. Incremental changes to a firm’s culture can be used to implement strategies effectively.
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. 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
46. The balanced scorecard focuses on both financial and non-financial controls.
a. True
b. False
47. Top management team members and CEOs who have long tenure on the team and in the organization have greater
influence in board decisions.
a. True
b. False
48. 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
Subjective Short Answer
Case Scenario 1: The Walt Disney Company
The Walt Disney Company was founded as a cartoon studio in 1923 by Walt Disney and his brother Roy with a
$500 loan from an uncle. In the early 1920s, cartoonist Walt Disney visited New York to pitch his idea for a cartoon
rabbit called Waldo. During that trip, through a complicated series of events, Disney lost the rights to develop
Waldo. On the train–ride back to California he spoke with his wife about the importance of coming home with some
alternative character. “I can’t come back to our office and tell them I’ve lost Waldo,” he bemoaned. This hardship
inspired Disney to develop a new character, Mickey Mouse, and release the world’s first fully- synchronized sound
cartoon, “Steamboat Willie” (starring, of course, Mickey Mouse). Disney’s creative genius was now coupled with a
fierce instinct to protect and control his creative output. Never again would he lose “Waldo.” Consequently, the Walt
Disney Company was pushed by Walt to tirelessly create timeless and universal entertainment, consistently innovate
and take risks to deliver that entertainment, stress a vision of being the provider of choice of quality family
entertainment, and maintain rigorous control over the quality of customers’ experiences with Disney products and its
image. Such a personal passion for control led the Walt Disney Company into theme parks because Disney did not
want Mickey’s reputation sullied by the dirty, cheap theme parks that littered the land during those days. All films
had to be new and of the highest quality animation (taking a minimum of five years to create, including hand-painted
backgrounds); sequel films were not tolerated. Walt’s vision and risk taking
propensity led him in the early 1960s to buy 43,000 acres in Florida (now Walt Disney World), betting the
company’s future on a high-risk, uncertain venture. Amidst such a flurry of activity, Walt Disney died just before
Christmas 1966, and the company was literally stopped dead in its tracks. Walt Disney‘s blueprint was being
followed to the letter, but no further (Walt Disney World opened in 1971). No “new” creations were undertaken
until 1982, when the company finally launched such businesses as the Disney Channel, Touchstone, and their home
video business. Had it not been for the appointment of Michael Eisner as Disney’s new CEO in 1984, the company
would likely not have survived its perilous financial situation and stifled creativity. Eisner returned the company to
its roots of family entertainment and values of quality, fairness, creativity, entrepreneurialism, and teamwork.
49. (Refer to Case Scenario 1). To what extent had the Walt Disney Company become a reflection of Walt up to the
time that he died in 1966?
50. (Refer to Case Scenario 1). The Walt Disney Company had a plan for succession in the event of the death of Walt
Disney. When Walt died before Christmas 1966, the new CEO continued Walt’s dream and created innovations
that allowed Disney to continue along its path to success with very little interruption.
51. (Refer to Case Scenario 1). What value-creating legacy did Walt Disney leave to the Walt Disney Company?
52. (Refer to Case Scenario 1). Why do you think the Walt Disney Company had so much difficulty being innovative in
the decades following Walt’s death?
Case Scenario 2: Yepsen Timber Farms, Inc.
Yepsen Timber Farms, Inc., (YTF) was started around 1933 by Danish immigrants. The firm‘s primary operations
were timber harvesting on several thousand acres in Oregon acquired in part under the Homestead Act, and in part
through direct purchase. The firm was founded, initially as a partnership, between brothers Mogens and John (Jack)
Yepsen. The Yepson brothers were among the first four graduates at Oregon Agricultural College (now Oregon
State University), worked for the forest service and private industry in Oregon for a number of years, then quit their
respective jobs to manage the forest they had been developing for a number of years. While timber is considered a
low-tech type business, Mogens and Jack were very innovative from the standpoint that they established “tree
farms,” that is, harvesting then replanting acreage so that it would yield timber on a sustainable basis. At the time,
and in certain parts of the world to this day, timber lands were typically “clear cut” where all the trees were stripped
from a property, then the timber harvester simply moved to another parcel. This practice left thousands of acres
barren, and often damaged valuable animal habitats and watershed. The brothers also introduced hybrid Pine and
Douglas Fir trees that grew considerably faster than the native forest stock. These factors allowed them to grow
trees that would be ready for market in 25 years, about half the time of that required to grow native trees. The
brothers‘ idea about regeneration, care for the environment, and hybridization defined the YTF business. Never
would land be harvested faster than it could replenish itself, or in a manner that threatened habitats or watersheds.
Eventually, Mogens and Jack passed on and their only surviving children, Marjorie, Mary Jane, Burton, and Betty
inherited the property. Two of these heirs took a strong interest in further building the portfolio of Oregon
properties, and also converted the holdings to an S-Corp. to allow for the distribution of ownership and earnings to
their own children. Under their guidance, YTF was tremendously successful and garnered much community
acclaim for its sustainable farming practices. Now, the four siblings are in their 70s and few of their children have
expressed much interest in managing the extensive portfolio of timber holdings. Among those that have expressed
an interest, some are very knowledgeable about forestry, while others have a track record of incompetence and
self-promotion. At the same time, ownership is now spread among some 40 children, nieces, nephews, and
grandchildren of the four siblings. Many of these individuals‘ only interest in YTF is the annual dividend check they
receive.
53. (Refer to Case Scenario 2). What culture did Mogens and Jack nurture in YTF?
54. (Refer to Case Scenario 2). How important is this culture to the future success of YTF?
55. (Refer to Case Scenario 2). One of the Chapter 12 Key Leadership Actions that stands out in the Case Scenario is
“Sustaining an Effective Organizational Culture.” Both founding brothers Mogens and Jack infused a culture of
innovation and sustainability. As the firm grew, however, and ownership became spread among 40 family members,
that culture became diluted. This case shows that organization culture cannot be a source of competitive advantage
as organizations grow.
56. (Refer to Case Scenario 2). What must be done to continue the viability of YTF as a sustainable timber farm?