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Indicate whether the statement is true or false.
1. A prospector strategy works best when a business operates in an environment with relatively little uncertainty and risk
and high stability.
a.
True
b.
False
2. A cost leadership strategy allows a firm to charge the highest possible prices for its products.
a.
True
b.
False
3. The top management team of a company includes the chief operating officer (COO) of the company.
a.
True
b.
False
4. A key challenge for HR managers with firms using a retrenchment strategy is recruiting and training the large numbers
of qualified employees.
a.
True
b.
False
5. In the context of organization design, the functional design is used when an organization has implemented a strategy of
unrelated diversification.
a.
True
b.
False
6. An agency problem occurs when there is a conflict of interest between the managers and the shareholders.
a.
True
b.
False
7. Corporate strategies deal with how a firm will compete in each market where it conducts business.
a.
True
b.
False
8. If an organization uses a differentiation strategy, performance management must be focused on recognizing and
rewarding performance leading to improved quality.
a.
True
b.
False
9. A company that adopts a stability strategy plans to expand into new products or markets and intends to manage them by
adopting the strategies used for managing its current businesses.
a.
True
b.
False
10. The top management team of a firm needs to consult with the human resource management (HRM) team before
deciding to pursue a growth strategy.
a.
True
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b.
False
Indicate the answer choice that best completes the statement or answers the question.
11. In the context of a turnaround strategy, the role of human resource managers is to:
a.
help optimize the transition process for displaced workers through outplacement counseling.
b.
decide how to retain existing employees when the firm cannot offer salary increases or promotions.
c.
look for new avenues for geographic and brand expansion of the firm.
d.
recruit employees based on intuition rather than using systematic selection techniques.
12. In the context of the adaptation model, HR managers in firms that pursue the analyzer strategy are most likely to:
a.
recruit employees who like working with specific guidelines in a stable environment.
b.
retain stable employees who exhibit high levels of commitment and loyalty to the firm.
c.
recruit and retain entrepreneurial employees who are highly flexible and more dedicated to their craft or
profession than to the organization itself.
d.
recruit and retain employees who might be moderately entrepreneurial and flexible but who will also be quite
dedicated and loyal to the organization.
13. Which of the following terms refers to the relatively stable set of psychological attributes or traits that distinguish one
person from another?
a.
Personality
b.
Attitude
c.
Motivation
d.
Reinforcement
14. In the context of M-form organizations, the primary function of the corporate-level HR department is to:
a.
facilitate synergy across businesses.
b.
help the top management in constructing basic functional departments.
c.
motivate employees to attain organizational goals.
d.
gain a sustained competitive advantage over competitors.
15. Employees are potentially an excellent source of competitive advantage for an organization because:
a.
they cannot refuse to follow the commands of the top executives of the organization.
b.
they are difficult to copy or replace.
c.
they formulate the organization’s purpose and mission statement.
d.
they cannot be hired by the competitors of the organization.
16. Which of the following strategies is frequently used by organizations after a period of retrenchment?
a.
Related diversification
b.
Unrelated diversification
c.
A stability strategy
d.
A turnaround strategy
17. In the context of the strategic alternatives of the adaptation model, which of the following strategies is assumed to
work best when a business operates in an environment with relatively little uncertainty and risk and a high degree of
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stability?
a.
A defender strategy
b.
The prospector strategy
c.
The analyzer strategy
d.
A turnaround strategy
18. Which of the following statements is true of a mission statement?
a.
It specifies the basic reason for the existence of an organization.
b.
It attempts to identify the weaknesses of an organization and the threats that it is likely to face.
c.
It often provides subtle cues about the importance that an organization places on its human resources.
d.
It always signals an organization’s true priorities.
19. A company that attempts to develop an image or reputation for its product or service that sets the company apart from
its competitors most likely uses a _____.
a.
diversification strategy
b.
differentiation strategy
c.
stability strategy
d.
defender strategy
20. Regardless of the specific organization design, in recent years many firms have been:
a.
taking a hierarchical approach to organizational control.
b.
increasing the number of levels of management.
c.
increasing bureaucracy.
d.
moving toward becoming flat organizations.
21. If we examine fundamental human resource management (HRM) practices, it seems reasonable to suggest that:
a.
it is enough to hire a competitor’s employees to gain significant competitive advantage.
b.
HRM teams do not play a significant role in firms using a growth strategy.
c.
using systematic selection techniques is better than hiring based on intuition.
d.
chief executive officers are the true owners of modern corporations—not the stockholders.
22. In the context of the adaptation model, which of the following is a strategic alternative that managers can select to
match their organization’s strategy with the basic conditions of their organization’s environment?
a.
The defender strategy
b.
The focus strategy
c.
Retrenchment
d.
Unrelated diversification
23. Which of the following occurs when an organization finds that its current operations are not effective, and major
changes, such as rightsizing, are usually needed to rectify the problem?
a.
A diversification strategy
b.
A turnaround strategy
c.
A growth strategy
d.
A stability strategy
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24. A cost leadership strategy is one that:
a.
allows a company to charge the lowest possible prices for its products.
b.
focuses on hiring experienced employees who may remain with the company for a long time.
c.
has reward systems based on quality rather than on the quantity of output.
d.
focuses on maximizing the overall costs as much as possible.
25. Sandra is the chief operating officer of a fast-moving consumer goods (FMCG) company. She is responsible for the
overall strategic operation of the company and for communicating the company’s vision to the employees. In this case,
Sandra is most likely to be part of the:
a.
technical team of the company.
b.
labor union of the company.
c.
top management team of the company.
d.
employee association of the company.
26. Labor relations is the process of dealing with employees who are represented by _____.
a.
a task force
b.
the board of directors of the firm
c.
the government
d.
a union
27. In the context of the adaptation model, HR managers in organizations using a defender strategy are most likely to
recruit and retain:
a.
employees who are highly skilled in their job irrespective of their commitment to the organization.
b.
stable employees who exhibit high levels of commitment and loyalty to the organization.
c.
entrepreneurial employees who are highly flexible and more dedicated to their craft or profession than to the
organization itself.
d.
employees who might be moderately entrepreneurial and flexible but who will also be quite dedicated and
loyal to the organization.
28. Which of the following is a difference between the functional design and the divisional design of organizations?
a.
The functional design is used by large corporations, whereas the divisional design is used by small and new
organizations.
b.
The functional design looks similar to the H-form design, whereas the divisional design looks similar to the U-
form design.
c.
In the functional design, senior management usually provides coordination across departments, whereas in the
divisional design, coordination is usually decentralized down to the various operating companies.
d.
In the functional design, each business unit within a firm has its own human resource department, whereas in
the divisional design, a firm has a single corporate-level human resource department to manage all human
resource activities.
29. Which of the following is the set of forces that causes people to behave in certain ways?
a.
Altruism
b.
Motivation
c.
Personality
d.
Attitude
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30. Widget Corp. is often known for its motto “Don’t put all your eggs in one basket.” Over the course of the past 15
years, the company has acquired a wide array of firms, which operate in different markets that are not associated with
each other. In the context of corporate strategies, it is evident that Widget Corp. has adopted a(n) _____.
a.
related diversification strategy
b.
differentiation strategy
c.
analyzer strategy
d.
unrelated diversification strategy
31. Which of the following statements is true of flat organizations?
a.
They are highly bureaucratic.
b.
They rely heavily on teamwork.
c.
They are more rigid than vertical organizations.
d.
They cannot adapt easily to changing environments.
32. The set of values that helps an organization’s members understand what the organization stands for, how it
accomplishes what it wants to accomplish, and what it considers important is called the organization’s _____.
a.
profile
b.
purpose
c.
culture
d.
design
33. The group of senior executives responsible for the overall strategic operation of a firm is called the firm’s _____.
a.
labor union
b.
trusteeship council
c.
top management team
d.
human resource department
34. Which of the following statements is true of the corporate strategy of an organization?
a.
It addresses how the organization will manage its operations.
b.
It should be closely tied to the human resource management practices within the organization.
c.
It deals with how the organization will compete in each market where it conducts business.
d.
It should provide guidelines about how the organization will manage its human resources.
35. Anyx Inc., an electronics firm, manufactures home appliances as well as automobile engines. It also owns and
operates an insurance firm and a software development firm. Which of the following strategies does Anyx Inc. use?
a.
The diversification strategy
b.
The turnaround strategy
c.
The retrenchment strategy
d.
The stability strategy
36. When an organization adopts a turnaround strategy, its HR managers need to be involved in:
a.
recruiting entrepreneurial employees who are highly flexible and ambitious.
b.
retaining the existing employees when the firm cannot offer any advancement opportunities.
c.
decreasing the size of the organization’s workforce.
d.
rotating managers across various businesses of the corporation.
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37. In the context of human resource management, companies can establish a competitive advantage by:
a.
hiring the right people and training them to be effective.
b.
implementing a hierarchical management scheme.
c.
adopting a centralized approach to organizational control.
d.
focusing solely on their external environment.
38. In the context of the adaptation model, which of the following strategies works best when the business environment is
dynamic and growing and has considerable uncertainty and risk?
a.
A defender strategy
b.
The prospector strategy
c.
The analyzer strategy
d.
A retrenchment strategy
39. Which of the following individuals would a company that uses a defender strategy prefer to retain the most?
a.
Ron, a sales manager, who is one of the oldest employees of the company and is highly dedicated to his job
b.
Marlene, a senior accountant, who seldom adheres to company policies but is good at her work
c.
Tyler, a creative writer, who is very passionate about his work and prefers taking calculated artistic risks
d.
Lena, a receptionist, who is friendly and approachable but keeps changing jobs
40. In the context of the adaptation model, which of the following is a strategic alternative that is seen as a strategic failure
and is not held up as a model that any firm should emulate?
a.
The defender
b.
The prospector
c.
The analyzer
d.
The reactor
41. In the context of the adaptation model, which of the following is a similarity between an organization using the
defender strategy and an organization using the focus strategy?
a.
Both focus on diversifying their products and services.
b.
Both ignore the environment in which their businesses operate.
c.
Both target a specific segment of the market for their products or services.
d.
Both work best in conditions of high uncertainty and risk.
42. Which of the following individuals would a company that uses the prospector strategy prefer to retain the most?
a.
Shawn, a sales manager, who makes sure that his team members never exceed the budget allotted to them
b.
Marla, a senior accountant, who is very loyal to the organization but is rigid in her approach to work
c.
Thomas, a creative writer, who is very passionate about his work and prefers taking artistic risks to meet the
changing industry needs
d.
Maria, a receptionist, who is exceptionally good at her work but is overqualified for the job and has come to
dislike it
43. Wedding Bells, a company founded in 1910, is the market leader in the bridal gown industry in the United States. It
sells bridal gowns and caters only to this niche market segment. It has never diversified its product line to other garments
or any other business. It concentrates exclusively on guarding its position in the bridal gown market. In the context of
business strategies, which of the following strategies does Wedding Bells follow?
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a.
The defender strategy
b.
The analyzer strategy
c.
The prospector strategy
d.
The reactor strategy
44. When a fast-moving consumer goods (FMCG) company faced bankruptcy, the company decided to encourage its
employees to contribute their ideas toward organizational development and growth. The organization also asked its human
resource team to assess the employees’ levels of commitment toward organizational effectiveness. To improve the FMCG
company’s organizational performance, it is evident that the company most likely used _____.
a.
self-directed work teams
b.
attitude surveys
c.
job enrichment
d.
job embeddedness
45. Which of the following is a critical component that affects how strategies are formulated and how they are
implemented?
a.
Performance management
b.
Unionization
c.
Staffing
d.
Salary structure
46. Identify an organizational design that looks similar to the H-form design except that the businesses are closely related
to one another.
a.
The functional design
b.
The unitary-form design
c.
The conglomerate design
d.
The divisional design
47. The role of the board of directors in an organization is to:
a.
hire successful employees from competitors’ firms to gain advantage in the market.
b.
encourage a monoculture among employees throughout the organization and create an ethnocentric internal
work environment.
c.
hire employees based on intuition rather than using systematic selection techniques.
d.
monitor the actions of the top management team to ensure that stockholders’ interests are protected.
48. A company can shield itself from the adverse effects of business cycles, unexpected competition, and other economic
fluctuations while operating several unique businesses in different markets by using _____.
a.
a retrenchment strategy
b.
unrelated diversification
c.
a differentiation strategy
d.
related diversification
49. Which of the following tend to have many rules and formal procedures that might limit a firm’s ability to formulate an
ideal strategy?
a.
Psychological contracts
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b.
Unionized firms
c.
Organizational citizenship behaviors
d.
Self-directed work teams
50. Which of the following statements is true of the union in an organization?
a.
Unionized firms tend to have fewer rules than nonunionized firms.
b.
Labor unions in the United States are more concerned with social issues than they are in most other countries.
c.
It can play an important role in formulating and implementing the human resource strategy of the organization.
d.
It cannot facilitate strategic changes in the organization.
51. Which of the following is a human resource management (HRM) practice that can lead to improved firm
performance?
a.
Having self-directed work teams
b.
Having pay secrecy and pay compression policies
c.
Using pay inversion to motivate employees
d.
Conducting informal performance appraisals
52. According to the adaptation model of business strategy, which of the following strategies is most appropriate in
relatively stable conditions with a moderate degree of uncertainty and risk?
a.
The reactor strategy
b.
The prospector strategy
c.
The analyzer strategy
d.
The defender strategy
53. Identify one popular approach to business strategy where a business seeks ways to become accustomed to its
environment.
a.
Related diversification
b.
Retrenchment
c.
The identity model
d.
The adaptation model
54. Which of the following statements best defines a stability strategy?
a.
It is adopted by a company that plans to stay in its current businesses and intends to manage them as they are
already being managed.
b.
It is used by companies that are adding new products, product lines, or businesses to their existing core
products, product lines, or businesses.
c.
It occurs when an organization finds that its current operations are not effective.
d.
It can be pursued externally through mergers, joint ventures, and the acquisition of other businesses.
55. Which of the following strategies is used when an organization tries to target a specific segment of the marketplace for
its products or services?
a.
The prospector strategy
b.
The focus strategy
c.
The analyzer strategy
d.
The reactor strategy
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56. Straps Inc. is a leading manufacturer of high-end watches. It is renowned for its reliability and quality and enjoys a
monopoly in its home market. It has now adopted a differentiation strategy to expand its business into neighboring
countries. Which of the following human resource strategies should Straps Inc. follow to maintain the same momentum in
the new markets?
a.
It should exclusively focus on marketing to people from the business industry.
b.
It should hire workers who can provide exemplary customer service.
c.
It should keep the size of its workforce small to increase efficiency.
d.
It should hire employees on short-term contracts.
57. Identify a human resource management (HRM) practice that can lead to improved firm performance.
a.
Continuous training
b.
Pay secrecy
c.
Pay inversion
d.
Job embeddedness
58. One form of organization design used by many small or new organizations is the _____.
a.
functional design
b.
M-form design
c.
H-form design
d.
divisional design
59. Ross Brand Inc., a multinational corporation, began its operations with three businesses in the frozen food industry.
Since its inception, the company has acquired other fast-food companies. Which type of organization design would be
most appropriate for Ross Brand Inc.’s strategy?
a.
The contemporary design
b.
The U-form design
c.
The M-form design
d.
The conglomerate design
60. Which of the following strategies is used by companies that are adding new products, product lines, or businesses to
their existing core products, product lines, or businesses?
a.
A diversification strategy
b.
A differentiation strategy
c.
A retrenchment strategy
d.
A stability strategy
61. Briefly explain the influence of an organization’s purpose and mission on its human resource practices.
62. Briefly explain the impact of an organization’s culture on the formulation of its human resource strategies.
63. Compare related and unrelated diversification.
64. Describe the factors that affect human resource (HR) strategy formulation.
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65. How would an organization conduct an evaluation of its human resource (HR) function?
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52. c
53. d
54. a
55. b
56. b
57. a
58. a
59. c
60. a
61. Answers will vary. An organization’s purpose and mission are among the most fundamental contextual forces that
define the strategic context of human resource management. An organization’s purpose is its basic reason for existence.
The purpose of a business is to earn profit for its owners, the purpose of a university is to discover and disseminate new
knowledge, and the purpose of a museum is to preserve artifacts and historical relics. An organization’s mission is how its
managers have decided to fulfill its purpose. A mission statement specifies how the organization intends to manage itself
so that it can pursue the fulfillment of its purpose most effectively. A mission statement attempts to specify the unique
characteristics and strengths of an organization and identifies the scope of the business’s operations in particular products
and markets. Mission statements often provide subtle cues about the importance that the organization places on its human
resources. Although mission statements make a public commitment to some course of action (such as valuing human
resources), we must recognize that, in some cases, the language of a mission statement is intended to placate a group of
stakeholders, such as employees, rather than to signal an organization’s true priorities. See 4-1: The Competitive
Environment for Human Resource Management
62. Answers will vary. The culture of an organization affects how it formulates and implements its human resource
strategy. An organization’s culture refers to the set of values that helps its members understand what the organization
stands for, how it does things, and what it considers important. Culture is a complex and amorphous concept that defies
objective measurement or evaluation. Nevertheless, it is the foundation of an organization’s internal environment and thus
plays a major role in shaping managerial behavior and is a strong element in how the organization manages its human
resources. Human resource managers may find that, depending on the circumstances, corporate culture may either
facilitate or impede their work. If the firm has a strong and well-understood culture that seems attractive to people, then
recruiting qualified applicants is often easier. Finally, managing culture is important for the success of corporate mergers
and acquisitions. The ability to integrate two cultures—in fact, to form a new unique corporate culture and identity for the
merged organization—is critical for the overall success of any merger or acquisition and is the role of the human resource
management area. See 4-3: Human Resource Strategy Formulation
63. Answers will vary. A corporation that uses the diversification strategy usually makes the decision to own and operate
several different businesses. The various businesses owned by a corporation are usually related to one another in some
way, a strategy called related diversification. The basic underlying assumption for using this strategy is that the
corporation can achieve synergy among the various businesses it owns. This type of organization often adopts a policy of
rotating managers across the various businesses so that they develop an overall managerial perspective on the whole firm.
The related aspects of the businesses presumably make such cross-business transfers easier. Because the markets for each
business are similar, the firm can develop relatively uniform procedures for selection, compensation, training, and so
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