Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
78. Which of the following is correct with respect to R&D?
a. R&D focuses on physical products, not services.
b. Pure, or basic, R&D involves focusing specifically on how a technological innovation can be put to
use to make products that can be sold in the marketplace.
c. Applied R&D involves improving knowledge in an area without regard to how it might be useful in
the marketplace.
d. R&D intensity refers to R&D spending as a percentage of a company’s sales revenues.
e. All of these statements are correct.
Difficulty: 3 Page-Reference: 49
Question ID: 02-1-78 Skill: Comprehension
Objective: 2.3
79. R&D spending in Canada is about ____ percent of GDP, while in countries like the U.S. and
Japan, the figure is about ____ percent of GDP.
a. less than 1 percent; 1.5-2.0 percent
b. 2 percent; 1 percent
c. 3 percent; 6 percent
d. 5 percent; 5 percent
e. 10 percent; 15 percent
Difficulty: 3 Page-Reference: 49
Question ID: 02-1-79 Skill: Knowledge
Objective: 2.3
80. ________ is the time (from beginning to end) that it takes a firm to accomplish some recurring
activity or function.
a. Vertical integration
b. Processing time
c. Downtime
d. Span of control
e. Cycle time
Difficulty: 3 Page-Reference: 51
Question ID: 02-1-80 Skill: Knowledge
Objective: 2.3
81. ________ is a large-scale information system for organizing and managing a firm’s processes
across product line, departments, and geographic locations.
a. Outsourcing
b. Viral marketing
c. Vertical integration
d. Business process management
e. Enterprise resource planning
Difficulty: 1 Page-Reference: 52
Question ID: 02-1-81 Skill: Knowledge
Objective: 2.3
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
82. A(n) ________ system integrates back-office and front-office processes.
a. viral marketing
b. outsourcing
c. application process management
d. vertical integration
e. enterprise resource planning
Difficulty: 2 Page-Reference: 52
Question ID: 02-1-82 Skill: Knowledge
Objective: 2.3
83. ________ systems integrate human resource, data analysis, sales and marketing, customer
service, supply chain, accounting and finance, and manufacturing systems.
a. Enterprise resource planning
b. Vertical integration
c. Decision support
d. Expert
e. Organizational integration
Difficulty: 2 Page-Reference: 52
Question ID: 02-1-83 Skill: Knowledge
Objective: 2.3
84. The political-legal environment describes
a. the relationship between business and government.
b. the customs, values, attitudes, and demographic characteristics of the society in which an
organization functions.
c. the intensity of the competition in an industry.
d. the relationship between international and domestic corporations.
e. the relationship between government and unions.
Difficulty: 2 Page-Reference: 54
Question ID: 02-1-84 Skill: Comprehension
Objective: 2.4
85. The Canadian government has so far blocked bank mergers because
a. shareholders oppose the idea.
b. there is fear that competition would be reduced and customers would be harmed.
c. the Prime Minister does not like any mergers.
d. the banks are not yet profitable enough to merge.
e. none of the statements are accurate.
Difficulty: 2 Page-Reference: 54
Question ID: 02-1-85 Skill: Comprehension
Objective: 2.4
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
86. The socio-cultural environment describes
a. the relationship between government and unions.
b. the relationship between business and government.
c. the relationship between international and domestic corporations.
d. the customs, values, attitudes, and demographic characteristics of the society in which an
organization functions.
e. the intensity of the competition in an industry.
Difficulty: 2 Page-Reference: 56
Question ID: 02-1-86 Skill: Comprehension
Objective: 2.5
87. Which of the following is not an example of a factor in the socio-cultural environment?
a. Prepackaged chili is more popular in southwestern U.S. states than in the U.S. northeast.
b. Consumers in China perceive bicycles primarily as a mode of transportation, while consumers in
Canada perceive bicycles as recreational items.
c. Companies are more likely to set up foreign operations in countries with stable political and
economic systems.
d. McDonald’s has added salads and other low-fat foods to its menu.
e. Many people in the Middle East are unwilling to work in food service operations.
Difficulty: 3 Page-Reference: 56
Question ID: 02-1-87 Skill: Comprehension
Objective: 2.5
88. Ethical conduct and social responsibility are critical elements of which environment?
a. Global
b. Political-legal
c. Industry
d. Socio-cultural
e. Economic
Difficulty: 2 Page-Reference: 56
Question ID: 02-1-88 Skill: Comprehension
Objective: 2.5
89. If casinos notice an increase in business due to the fact that many people no longer regard
gambling as wrong, this demonstrates a change in the ________ dimension of the external environment.
a. socio-cultural
b. technological
c. global
d. political-legal
e. economic
Difficulty: 2 Page-Reference: 56–57
Question ID: 02-1-89 Skill: Comprehension
Objective: 2.5
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
90. The major cigarette companies have been experiencing a decline in sales due to the overall
decrease in smoking across Canada in recent years. These companies are being affected by which
dimension of their external environment?
a. Technological
b. Global
c. Business
d. Socio-cultural
e. Economic
Difficulty: 2 Page-Reference: 56–57
Question ID: 02-1-90 Skill: Comprehension
Objective: 2.5
91. Which of the following is correct with respect to Porter’s Five Forces model?
a. Rivalry among existing firms is the most important element in the model.
b. When there are many substitute products available, the industry is less competitive.
c. When there are only a few suppliers in an industry, buyers have less power.
d. When substitute products are available, suppliers have more power.
e. All of these statements are correct.
Difficulty: 2 Page-Reference: 59
Question ID: 02-1-91 Skill: Comprehension
Objective: 2.5
92. Which of the factors in Porter’s five forces model is generally seen as most important?
a. Threat of potential entrants
b. Rivalry among existing competitors
c. Threat of substitutes
d. Suppliers
e. None of these
Difficulty: 2 Page-Reference: 58–60
Question ID: 02-1-92 Skill: Knowledge
Objective: 2.6
93. When Microsoft introduced Encarta, it caused the sale of hard copy encyclopedias sold by
Encyclopedia Britannica to drop sharply. This is an example of which of Porter’s five forces?
a. Rivalry among existing competitors
b. Threat of potential entrants
c. Suppliers
d. Buyers
e. Substitutes
Difficulty: 2 Page-Reference: 58
Question ID: 02-1-93 Skill: Comprehension
Objective: 2.6
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
94. Porter’s five forces model includes all of the following except
a. substitutes.
b. threat of potential entrants.
c. buyers.
d. suppliers.
e. threat of replacement products.
Difficulty: 1 Page-Reference: 58–60
Question ID: 02-1-94 Skill: Knowledge
Objective: 2.6
95. Most successful firms are getting leaner by focusing on their ________, which are the skills and
resources with which they compete best and create the most value for owners.
a. viral marketing
b. core competencies
c. processes
d. business process management
e. political-legal environment
Difficulty: 1 Page-Reference: 60
Question ID: 02-1-95 Skill: Knowledge
Objective: 2.6
96. Which of the following is the best definition of outsourcing?
a. Any activity that adds value to some input by transforming it into an output for an internal or
external customer
b. An approach by which firms move away from department-oriented organization and toward
process-oriented team structures that cut across old departmental boundaries
c. The strategy of paying suppliers and distributors to perform certain business processes or to
provide needed materials and resources
d. The strategy of using the internet and word-of–mouth marketing to spread product information
e. The strategy of owning the means by which an organization produces goods or services
Difficulty: 2 Page-Reference: 60
Question ID: 02-1-96 Skill: Comprehension
Objective: 2.6
97. An approach that moves from a department orientation to a process-team orientation is called
a. process improvement.
b. business process management.
c. six sigma.
d. outsourcing.
e. virtual restructuring.
Difficulty: 2 Page-Reference: 61
Question ID: 02-1-97 Skill: Comprehension
Objective: 2.6
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
98. Many firms use ________ to provide cafeteria operations for their customers.
a. enterprise management
b. disruption management
c. outsourcing
d. core competencies
e. vertical integration
Difficulty: 2 Page-Reference: 60
Question ID: 02-1-98 Skill: Knowledge
Objective: 2.6
99. Martin, the CEO of a Canadian company that emphasizes social responsibility, observes that
there are disadvantages associated with the company’s planned increase in globalizing its production.
What disadvantage is Martin most likely thinking about?
a. Large job losses in Canada.
b. Greater disparities in living standards.
c. Reducing trade barriers between countries.
d. Job losses in developing markets.
e. Increased foreign competition.
Difficulty: 2 Page-Reference: 60
Question ID: 02-1-99 Skill: Analysis
Objective: 2.6
100. Which of the following best describes viral marketing?
a. The strategy of paying suppliers and distributors to perform certain business processes or to
provide needed materials and resources
b. An approach by which firms move away from department-oriented organization and toward
process-oriented team structures that cut across old departmental boundaries
c. The strategy of owning the means by which an organization produces goods or services
d. Any activity that adds value to some input by transforming it into an output for an internal or
external customer
e. The strategy of using the internet and word-of-mouth marketing to spread product information
Difficulty: 2 Page-Reference: 61
Question ID: 02-1-100 Skill: Comprehension
Objective: 2.6
101. ________ uses games, contests, chat rooms, and bulletin boards to encourage potential
customers to try out products and tell other people about them.
a. Relationship marketing
b. Business process management
c. Enterprise planning
d. Vertical integration
e. Viral marketing
Difficulty: 2 Page-Reference: 61
Question ID: 02-1-101 Skill: Comprehension
Objective: 2.6
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
102. Which of the following best describes business process management?
a. An approach by which firms move away from department-oriented organization and toward
process-oriented team structures that cut across old departmental boundaries
b. The strategy of paying suppliers and distributors to perform certain business processes or to
provide needed materials and resources
c. Any activity that adds value to some input by transforming it into an output for an internal or
external customer
d. The strategy of using the internet and word-of-mouth marketing to spread product information
e. The strategy of owning the means by which an organization produces goods or services
Difficulty: 2 Page-Reference: 61
Question ID: 02-1-102 Skill: Comprehension
Objective: 2.6
103. The most successful firms are getting leaner by focusing on their core competencies, but these
new business models call for ________.
a. environmental management
b. unprecedented coordination
c. new corporate boundaries
d. unprecedented funds
e. none of these are correct
Difficulty: 1 Page-Reference: 60
Question ID: 02-1-103 Skill: Knowledge
Objective: 2.6
104. The Organic Trade Association partnered with Free Range Graphics to produce a 5-minute on-
line spoof of the latest Star Wars movie. The film was then passed around the internet by consumers who
favour organic foods. This is an example of
a. a strategic alliance.
b. viral marketing.
c. outsourcing.
d. business process management.
e. none of these.
Difficulty: 1 Page-Reference: 61
Question ID: 02-1-104 Skill: Comprehension
Objective: 2.6
105. ________ is the approach by which firms move away from department-oriented organizations
and toward process-oriented team structures.
a. Business process management
b. Team management
c. Viral marketing
d. Departmentalization
e. None of these
Difficulty: 2 Page-Reference: 61
Question ID: 02-1-105 Skill: Knowledge
Objective: 2.6
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
106. Which of the following is the best definition of vertical merger?
a. A strategy in which one of the companies in the merger is a supplier or customer of the other
b. An approach by which firms move away from department-oriented organization and toward
process-oriented team structures that cut across old departmental boundaries
c. The strategy of using the internet and word–of–mouth marketing to spread product information
d. Any activity that adds value to some input by transforming it into an output for an internal or
external customer
e. The strategy of paying suppliers and distributors to perform certain business processes or to
provide needed materials and resources
Difficulty: 2 Page-Reference: 62
Question ID: 02-1-106 Skill: Comprehension
Objective: 2.7
107. A(n) ________ is a merger to two firms that have previously had a buyer-seller relationship.
a. hostile take over
b. conglomerate merger
c. friendly take over
d. vertical merger
e. enterprise merger
Difficulty: 1 Page-Reference: 62
Question ID: 02-1-107 Skill: Knowledge
Objective: 2.7
108. Brown Inc. cuts and packages paper for photocopiers and printers. It merges with Yellow Inc. (a
paper mill) in order to reduce the risk of a paper shortage. This is an example of a
a. poison pill merger.
b. enterprise merger.
c. friendly takeover bid.
d. hostile takeover.
e. vertical merger.
Difficulty: 2 Page-Reference: 62
Question ID: 02-1-108 Skill: Comprehension
Objective: 2.7
109. An acquisition takes place when
a. two firms who previously have been buyer and seller merge.
b. two firms join together to form a new entity.
c. one firm consolidates with another.
d. one firm simply buys another.
e. management adopts a defence to make its firm less attractive.
Difficulty: 2 Page-Reference: 61
Question ID: 02-1-109 Skill: Comprehension
Objective: 2.7
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
110. When one company sells part of its existing business operations to another company, this is
called
a. outsourcing.
b. intense competition.
c. a spinoff.
d. a divestiture.
e. a strategic alliance.
Difficulty: 2 Page-Reference: 63
Question ID: 02-1-110 Skill: Knowledge
Objective: 2.7
111. When Kraft Foods bought Cadbury, this was an example of __________, but when Molson
combined with Adolph Coors, this was an example of __________.
a. a hostile takeover; friendly takeover
b. an acquisition; a horizontal merger
c. a merger; an acquisition
d. a poison pill; a divestiture
e. a spinoff; a divestiture
Difficulty: 3 Page-Reference: 61–62
Question ID: 02-1-111 Skill: Comprehension
Objective: 2.7
112. If Shirley’s Subs Inc. purchased Tony’s Car Repair Inc., this would be an example of
a. a horizontal merger.
b. a conglomerate merger.
c. a spinoff.
d. a vertical merger.
e. a divestiture.
Difficulty: 1 Page-Reference: 62
Question ID: 02-1-112 Skill: Comprehension
Objective: 2.7
113. If Toyota Motors purchased Ruscombe Muffler, a small retail muffler business, the purchase
would be
a. a horizontal merger.
b. a conglomerate merger.
c. a spinoff.
d. a vertical merger.
e. a divestiture.
Difficulty: 2 Page-Reference: 62
Question ID: 02-1-113 Skill: Comprehension
Objective: 2.7
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
114. Company A and Company F have been in direct competition for years selling four-ply tissue
paper. Recently, an announcement was made of a merger between the two companies. This would be a
_______.
a. reverse merger
b. joint venture
c. vertical merger
d. friendly takeover
e. horizontal merger
Difficulty: 2 Page-Reference: 62
Question ID: 02-1-114 Skill: Comprehension
Objective: 2.7
115. Stone Inc. has just been through a friendly takeover. This means that
a. two firms in completely unrelated businesses merge.
b. two firms agree to join together.
c. the acquired company welcomes the acquisition because it may need cash or other benefits which
it believes will be available from the other firm.
d. the organization will buy back their own stock from an investor who threatened a hostile takeover.
e. the two firms were direct competitors before the merger and now will not compete with each other
after the merger.
Difficulty: 2 Page-Reference: 63
Question ID: 02-1-115 Skill: Comprehension
Objective: 2.7
116. BSX Inc. gave shareholders the right to purchase company stock at a 50 percent discount if a
group without approval of BSX’s board of directors acquired more than 20 percent of the company’s
shares. This is an example of
a. a stock buyback.
b. a conglomerate merger.
c. greenmail.
d. a poison pill.
e. a vertical merger.
Difficulty: 1 Page-Reference: 63
Question ID: 02-1-116 Skill: Comprehension
Objective: 2.7
117. PepsiCo created a new corporation called Tricon Global Restaurants (now called Yum! Brands
Inc.) which included Pizza Hut, KFC, and Taco Bell. This is an example of a(n)
a. hostile takeover.
b. acquisition.
c. spinoff.
d. merger.
e. divestiture.
Difficulty: 2 Page-Reference: 63
Question ID: 02-1-117 Skill: Comprehension
Objective: 2.7
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
118. The primary objective of an ESOP is to
a. keep management from making bad decisions.
b. protect against takeovers.
c. prevent worker strikes.
d. provide workers with financial security.
e. motivate workers to work harder.
Difficulty: 2 Page-Reference: 63
Question ID: 02-1-118 Skill: Comprehension
Objective: 2.7
119. Regarding employee-owned corporations, the survey by Western Compensation & Benefits
found that
a. employee-owned corporations have been concentrated in the forest products sector.
b. the majority of companies that have adopted ESOPs have experienced improvements in both sales
and profits.
c. the popularity of employee-owned corporations is decreasing.
d. it was originally thought that ESOPs would give employees an increased sense of belonging in the
company, but that has not happened.
e. all of the statements are accurate.
Difficulty: 3 Page-Reference: 63
Question ID: 02-1-119 Skill: Knowledge
Objective: 2.7
1. The external environment has a limited impact on the success or failure of most organizations.
a. True
b. False
Difficulty: 2 Page-Reference: 38
Question ID: 02-2-120 Skill: Knowledge
Objective: 2.1
2. While no single firm can control the environment, managers should not simply react to change; they
should be proactive and at least try to influence their environment.
a. True
b. False
Difficulty: 2 Page-Reference: 38
Question ID: 02-2-121 Skill: Knowledge
Objective: 2.1
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
3. Traditionally, organizational boundaries were formerly clear-cut and easy to identify, but they are
becoming increasingly complicated.
a. True
b. False
Difficulty: 1 Page-Reference: 38
Question ID: 02-2-122 Skill: Knowledge
Objective: 2.1
4. Prevailing economic conditions will affect the performance of almost every business.
a. True
b. False
Difficulty: 1 Page-Reference: 39
Question ID: 02-2-123 Skill: Comprehension
Objective: 2.2
5. With proper management by government, the ups and downs in the business cycle can be avoided.
a. True
b. False
Difficulty: 1 Page-Reference: 40
Question ID: 02-2-124 Skill: Comprehension
Objective: 2.2
6. Today, approximately 10 percent of the Canadian population works in agriculture.
a. True
b. False
Difficulty: 2 Page-Reference: 39
Question ID: 02-2-125 Skill: Knowledge
Objective: 2.2
7. An increase in aggregate output will typically result in a recession.
a. True
b. False
Difficulty: 2 Page-Reference: 41
Question ID: 02-2-126 Skill: Comprehension
Objective: 2.2
8. Profits from a Canadian-owned automobile factory in Brazil are included Brazil’s GNP, but not its
GDP.
a. True
b. False
Difficulty: 2 Page-Reference: 41–42
Question ID: 02-2-127 Skill: Comprehension
Objective: 2.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
9. Bellan Corp. is a Canadian-owned company that has a manufacturing plant in Germany. Bellan’s
profits are included in Canadian GNP, but not GDP.
a. True
b. False
Difficulty: 2 Page-Reference: 41–42
Question ID: 02-2-128 Skill: Comprehension
Objective: 2.2
10. GDP includes the total value of goods and services produced within a given period by a national
economy through domestic factors of production.
a. True
b. False
Difficulty: 1 Page-Reference: 41
Question ID: 02-2-129 Skill: Knowledge
Objective: 2.2
11. GNP is the total value of all goods and services produced by a national economy within a given
period, regardless of where the factors of production are located.
a. True
b. False
Difficulty: 1 Page-Reference: 42
Question ID: 02-2-130 Skill: Knowledge
Objective: 2.2
12. GNP is the preferred method of calculating national income and output.
a. True
b. False
Difficulty: 2 Page-Reference: 42
Question ID: 02-2-131 Skill: Knowledge
Objective: 2.2
13. The real growth rate of the Canadian economic system is the growth rate of GDP adjusted for
inflation and changes in the value of a country’s currency.
a. True
b. False
Difficulty: 2 Page-Reference: 42
Question ID: 02-2-132 Skill: Comprehension
Objective: 2.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
14. Canada’s GDP in 2010 was approximately $6.4 trillion.
a. True
b. False
Difficulty: 1 Page-Reference: 41
Question ID: 02-2-133 Skill: Knowledge
Objective: 2.2
15. Per capita GDP is calculated by dividing GDP by the total population.
a. True
b. False
Difficulty: 2 Page-Reference: 43
Question ID: 02-2-134 Skill: Application
Objective: 2.2
16. Canada’s per capita GDP is less than that of several countries, including the U.S., Luxembourg,
Norway, Switzerland, and Denmark.
a. True
b. False
Difficulty: 2 Page-Reference: 43
Question ID: 02-2-135 Skill: Knowledge
Objective: 2.2
17. Nominal GDP is more important than real GDP.
a. True
b. False
Difficulty: 1 Page-Reference: 43
Question ID: 02-2-136 Skill: Comprehension
Objective: 2.2
18. Low inflation will allow a company like McDonald’s to increase the prices it charges consumers.
a. True
b. False
Difficulty: 2 Page-Reference: 45
Question ID: 02-2-137 Skill: Comprehension
Objective: 2.2
19. Purchasing power parity is a principle that states exchange rates are set so that the prices of
similar products in different countries are about the same.
a. True
b. False
Difficulty: 1 Page-Reference: 43
Question ID: 02-2-138 Skill: Knowledge
Objective: 2.2
Business, Eighth Canadian Edition Griffin, Ebert, Starke, Dracopoulos, Lang
Chapter 2—Understanding the Environments of Business
20. The purchasing power parity idea gives us a better sense of the standards of living across the
globe.
a. True
b. False
Difficulty: 2 Page-Reference: 43
Question ID: 02-2-139 Skill: Comprehension
Objective: 2.2
21. The purchasing power parity concept is interesting, but it doesn’t give us much of an idea about
what people can actually buy with the financial resources allocated to them by their economic system.
a. True
b. False
Difficulty: 2 Page-Reference: 43
Question ID: 02-2-140 Skill: Application
Objective: 2.2
22. If productivity increases, prices to consumers will tend to increase as well.
a. True
b. False
Difficulty: 2 Page-Reference: 43
Question ID: 02-2-141 Skill: Comprehension
Objective: 2.2
23. The standard of living in a country improves mainly through increases in the money supply.
a. True
b. False
Difficulty: 1 Page-Reference: 41
Question ID: 02-2-142 Skill: Comprehension
Objective: 2.2
24. If France’s exports exceed its imports, France has a positive balance of trade.
a. True
b. False
Difficulty: 2 Page-Reference: 43–44
Question ID: 02-2-143 Skill: Comprehension
Objective: 2.2
25. Canada’s annual deficits during the past few years have been in the $100 billion range.
a. True
b. False
Difficulty: 2 Page-Reference: 44
Question ID: 02-2-144 Skill: Knowledge