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Strategic Management-Chapter 9

Most strategists believe that an organization’s well-being depends on evaluation of the strategic-management process.
True
Adequate and timely feedback is important to effective strategy evaluation.
true
Too much emphasis on evaluating strategies may be expensive and counterproductive.
True
Strategy evaluation should have a long-run focus and avoid a short-run focus.
False
According to Richard Rumelt, consonance and consistency are mostly based on a firm’s external assessment.
False
According to Rumelt, consistency and feasibility are largely based on a firm’s internal assessment.
True
Consistency, distinctiveness, advantage, and feasibility are Richard Rumelt’s four criteria for evaluating a strategy.
False
Strategy evaluation is becoming increasingly easier with the passage of time, given technological advances.
False
The decreasing time span for which planning can be done with any degree of certainty is a reason strategy evaluation is more difficult today.
True
Strategies may be inconsistent if policy problems and issues continue to be brought to the top for resolution.
True
Competitive advantages normally are the result of superiority in one of three areas: feasibility, consistency, or consonance.
False
Regardless of the size of the organization, a certain amount of “management by wandering around” at all levels is essential to effective strategy evaluation.
True
Evaluating strategies on a continuous rather than on a periodic basis allows benchmarks of progress to be established and more effectively monitored.
true
It is most effective to conduct strategy evaluation annually, at the end of the fiscal year.
False
Changes in the organization’s management, marketing, finance and accounting, production and operations, research and development (R&D), and management information systems (MIS) strengths and weaknesses should all be the focus of a revised EFE matrix in strategy evaluation.
False
In strategy evaluation, a revised IFE matrix should indicate how effective a firm’s strategies have been in response to key opportunities and threats.
False
Strengths, weaknesses, opportunities, cost and threats should continually be monitored for change because it is not really a question of whether these factors will change, but rather when they will change and in what ways.
True
When measuring organizational performance, you need to compare expected results to actual results.
True
Criteria for evaluating strategies should be measurable and easily verifiable.
True
Financial ratios are rarely used as criteria to evaluate strategies.
False
Measuring organizational performance includes comparing expected results to actual results, investigating deviations from plans, evaluating individual performance, and examining progress being made toward meeting stated objectives.
True
Intuitive judgments are almost always involved in deriving quantitative criteria.
True
Most quantitative evaluation criteria are geared to long-term objectives rather than annual objectives.
False
Measuring organizational performance requires making changes to reposition a firm competitively for the future.
False
Taking corrective actions does not necessarily mean that existing strategies will be abandoned, or even that new strategies must be formulated.
True
Corrective action in strategy evaluation is necessary to keep an organization on track toward achieving stated objectives.
True
Alvin Toffler argues that environments are becoming so dynamic and complex that they threaten people and organizations with future shock, in his thought-provoking books entitled Future Shock and The Third Wave.
True
Future shock occurs when the nature, type, and speed of changes overpower an individual’s or organization’s ability and capacity to adapt.
True
According to research, participation in strategy-evaluation activities is one of the best ways to overcome individuals’ resistance to change.
True
The form of a Balanced Scorecard does not vary for different organizations or industries.
False
The Balanced Scorecard approach deals with the question, “How satisfied are the firm’s customers?”
True
Each year, Fortune publishes strategy-evaluation research on both the United States and other countries.
True
Yahoo was one of the firms most admired in its industry according to Fortune’s 2012 evaluation
False
Strategy-evaluation activities must be meaningful, that is, they should specifically relate to a firm’s objectives.
True
Timely approximate information is generally more desirable as a basis for strategy evaluation than accurate information that does not depict the present.
true
The test of an effective evaluation system is its complexity.
false
Small organizations require a more elaborate and detailed strategy-evaluation system because they are still evolving.
false
There is no one ideal strategy-evaluation system for all organizations.
true
Contingency plans are alternative plans that can be put into effect if certain key events do not occur as expected.
true
Organizations should prepare contingency plans just for unfavorable events.
False
Strategists should try to cover all bases by planning for all possible contingencies.
false
Contingency plans should be as simple as possible.
true
Alternative strategies not selected for implementation should be discarded, as they have a tendency to contaminate the contingency plans.
false
Identifying both good and bad events that could jeopardize strategies is the first step of effective contingency planning.
true
A frequently used tool in strategy evaluation is the audit.
true
The U.S. Chamber of Commerce is against the accounting switch from GAAP to IFRS, saying it will cause cross-border commerce to decline.
false
Public accounting firms usually avoid strategy-evaluation services.
false
The accounting switch from GAAP to IFRS in the U.S. is going to cost businesses millions of dollars in fees and upgraded software systems and training.
true
Believing it will make it easier for investors to compare firms across countries and make it easier to raise capital globally, most large accounting firms and multinational firms favor the switch to IFRS.
true
The U.S. Chamber of Commerce supports the change from GAAP to IFRS, saying it will help the U.S. compete in the world economy.
true
IFRS standards comprise 25,000 pages, whereas GAAP standards comprise 5,000 pages.
false
Most executives believe that some strategic information should remain confidential to top managers.
true
Increased education and diversity of the workforce at all levels are reasons why the top-down approach should be favored in organizations.
false
Which of these is a basic activity of strategy evaluation?
A) Reviewing the underlying bases of current strategies
B) Comparing expected results with actual results
C) Taking corrective actions
D) Choices B and C only
E) All of the above
E) All of the above
Too much emphasis on evaluating strategies
A) may be expensive and counterproductive.
B) is not possible – the more emphasis the better.
C) is good for morale, as employees like being closely evaluated.
D) is always advised if the firm can afford it.
E) is worse than too little or no evaluation.
A) may be expensive and counterproductive.
What is the cornerstone of effective strategy evaluation?
A) Adequate and timely feedback
B) Quality and quantity of managers
C) Smaller ratio of top- to lower-level management
D) Evaluation preceding implementation stage
E) Punitive corrective actions
A) Adequate and timely feedback
All of these are Richard Rumelt’s criteria to evaluate a strategy EXCEPT
A) advantage.
B) consistency.
C) feasibility.
D) distinctiveness.
E) consonance.
D) distinctiveness.
With the passage of time strategy evaluation is becoming
A) increasingly difficult.
B) much simpler.
C) very convenient.
D) an unnecessary activity.
E) less important.
A) increasingly difficult.
All of the following are reasons strategy evaluation is more difficult today EXCEPT
A) a dramatic increase in the environment’s complexity.
B) the increasing number of variables.
C) the increase in the number of both domestic and world events affecting organizations.
D) the increasing time span for which planning can be done with any degree of certainty.
E) the rapid rate of obsolescence of even the best plans.
D) the increasing time span for which planning can be done with any degree of certainty.
Which of the following is NOT a reason for the increasing difficulty of evaluating strategies?
A) Product life cycles are longer.
B) Domestic and world economies are less stable.
C) Product development cycles are shorter.
D) Technological advancement is more rapid.
E) Change is occurring more frequently.
A) Product life cycles are longer.
Success today
A) guarantees success tomorrow.
B) is no guarantee of success tomorrow.
C) should lull a firm into complacency.
D) is all that really matters.
E) none of the above.
B) is no guarantee of success tomorrow.
According to Rumelt, the final broad test of strategy is its
A) advantage.
B) feasibility.
C) consonance.
D) consistency.
E) distinctiveness.
B) feasibility.
Competitive advantage normally is the result of superiority in resources, skills, or
A) employees.
B) position.
C) consistency.
D) feasibility.
E) governance.
B) position.
What term refers to the need for strategists to examine sets of trends, as well as individual trends, in evaluating strategies?
A) Consistency
B) Consonance
C) Synergy
D) Feasibility
E) Advantage
B) Consonance
Rumelt’s criteria of consonance refers to the need for strategists to examine
A) inconsistent goals.
B) sets of trends.
C) impractical objectives.
D) competitive advantages.
E) the costs associated with particular strategies.
B) sets of trends.
If success for one organizational department means failure for another department, then strategies may be
A) synergistic.
B) advantageous.
C) trendy.
D) feasible.
E) inconsistent.
E) inconsistent.
Modern organizational realities demand that employees demonstrate greater
A) flexibility.
B) innovation.
C) creativity.
D) initiative.
E) all of the above
E) all of the above
Strategy-evaluation activities should ideally be performed
A) just on a periodic basis.
B) only at the onset of a problem.
C) on a continuous basis.
D) solely upon completion of major projects.
E) annually only.
C) on a continuous basis.
Corrective actions are almost always ________ except when external and internal factors have not significantly changed and the firm is progressing satisfactorily toward achieving stated objectives.
A) unnecessary
B) needed
C) undesirable
D) prohibitively expensive
E) futile
B) needed
If you discover during the course of strategy evaluation that major changes have occurred in the firm’s internal strategic position, you should
A) continue on the present strategic course.
B) wait until the next quarter to see if things revert.
C) take corrective actions.
D) follow the original strategic plan.
E) none of the above
C) take corrective actions.
A revised ________ should focus on changes in the organization’s management, marketing, finance and accounting, production and operations, research and development (R&D), and management information systems (MIS) strengths and weaknesses.
A) mission
B) IFE matrix
C) vision
D) EFE matrix
E) EPM matrix
B) IFE matrix
A revised ________ should indicate how effective a firm’s strategies have been in response to key opportunities and threats.
A) IFE matrix
B) mission
C) EFE matrix
D) vision
E) CPM matrix
C) EFE matrix
Which of the following is NOT included in measuring organizational performance?
A) Comparing results to competitors’ expectations
B) Examining progress being made toward meeting stated objectives
C) Investigating deviations from plans
D) Evaluating individual performance
E) Comparing expected results to actual results
A) Comparing results to competitors’ expectations
Which of the following is a corrective action a company might take to correct unfavorable variances?
A) Divesting a division
B) Revising objectives
C) Raising capital with stock or debt
D) Allocating resources differently
E) All of the above
E) All of the above
Quantitative criteria commonly used to evaluate strategies are
A) cash budgets.
B) Balanced Scorecards.
C) Capital Asset Pricing Models.
D) financial ratios.
E) present value analyses.
D) financial ratios.
Which of these is a potential problem associated with using only quantitative criteria for selecting strategies?
A) Most quantitative criteria are geared to long-term objectives rather than annual objectives.
B) Different accounting methods can provide different results on many quantitative criteria.
C) Intuitive judgments are never used in deriving quantitative criteria.
D) Quantitative criteria include human factors that may be underlying causes of declining performance.
E) Quantitative criteria are not able to compare the firm’s performance over different period of time.
B) Different accounting methods can provide different results on many quantitative criteria.
Also important in evaluating strategies are ________ criteria, like high absenteeism and turnover rates, or low employee satisfaction.
A) numerical
B) qualitative
C) quantitative
D) accounting
E) financial
B) qualitative
Financial ratios are used to compare a firm’s performance over different time periods, to compare the firm’s performance to industry averages, and to compare a firm’s performance with
A) overall business standards.
B) projected goals.
C) the performance of suppliers.
D) non-financial ratios.
E) the performance of competitors.
E) the performance of competitors.
Most quantitative criteria are geared to ________ objectives rather than ________ objectives.
A) top-management; employee
B) short-term; annual
C) annual; long-term
D) environmental; community
E) long-term; short-term
C) annual; long-term
What corrective actions might a firm take during strategy evaluation?
A) Revise the business mission
B) Issue stock
C) Revise objectives
D) Sell a division
E) All of the above
E) All of the above
According to author Alvin Toffler, what occurs when the nature, types, and speed of changes overpower an individual’s or organization’s ability and capacity to adapt?
A) Corporate insecurity
B) Corrective actions
C) Future shock
D) Corporate agility
E) Projected performance
C) Future shock
Corrective actions should always
A) strengthen an organization’s competitive position in its industry.
B) streamline asset holdings.
C) have no risk.
D) involve abandoning existing strategies.
E) all of the above
A) strengthen an organization’s competitive position in its industry.
Research suggests that which of the following is one of the best ways to overcome individuals’ resistance to change in strategy evaluation?
A) Participation
B) Command-and-control
C) Laissez-faire system
D) Rational argument
E) Emotional reactions
A) Participation
According to researchers, all of the following encourage individuals to accept change EXCEPT
A) having a cognitive understanding of the changes.
B) having a sense of control over the situation.
C) having an awareness that necessary actions are going to be taken to implement change.
D) participating in strategy-evaluation activities.
E) being overpowered by the nature, types, and speed of changes.
E) being overpowered by the nature, types, and speed of changes.
Corrective action should do all of the following EXCEPT
A) capitalize upon internal strengths.
B) avoid external opportunities.
C) avoid external threats.
D) improve internal weaknesses.
E) strengthen an organization’s competitive position.
B) avoid external opportunities.
Which of the following is NOT one of the four perspectives from which the Balanced Scorecard allows firms to evaluate strategies?
A) Social responsibility
B) Financial performance
C) Customer knowledge
D) Internal business processes
E) Learning and growth
A) Social responsibility
What aims to balance long-term with short-term concerns, financial with nonfinancial concerns, and internal with external concerns?
A) Contingency planning
B) The Balanced Scorecard approach
C) Taking corrective action
D) Benchmarking
E) Consonance
B) The Balanced Scorecard approach
The Fortune 50 includes all of the following EXCEPT
A) the largest retailers.
B) the largest transportation companies.
C) the largest utilities.
D) the largest banks.
E) the largest hospitals.
E) the largest hospitals.
Which of the following is NOT a key attribute that serves as one of the evaluative criteria for Fortune’s “America’s Most Admired Companies”?
A) People management
B) Innovativeness
C) Financial soundness
D) Amount of physical resources
E) Social responsibility
D) Amount of physical resources
The strategy-evaluation process should
A) dominate decisions.
B) be complex.
C) be cumbersome.
D) foster mutual understanding and trust.
E) be restrictive.
D) foster mutual understanding and trust.
Controls need to be ________ rather than ________.
A) action-oriented; information-oriented
B) cultural; political
C) qualitative; quantitative
D) measurable; timely
E) universal; diverse
A) action-oriented; information-oriented
The strategy-evaluation process should foster
A) mutual understanding.
B) doubt.
C) corporate culture.
D) complexity.
E) division.
A) mutual understanding.
Which of the following is true regarding the design of a firm’s strategy-evaluation system?
A) There is a one-size-fits-all system that works for all companies.
B) It does not need to take into account the organization’s size.
C) The management style of a firm has no bearing on the design.
D) It should be determined based on the unique characteristics of a company.
E) There is one ideal system.
D) It should be determined based on the unique characteristics of a company.
________ organizations require more elaborate and detailed strategy-evaluation systems than ________ ones because it is more difficult to coordinate efforts among different divisions and functional areas.
A) Non-profit; for-profit
B) For-profit; non-profit
C) Large; small
D) Small; large
E) Foreign; domestic
C) Large; small
________ plans can be defined as alternative plans that can be put into effect if certain key events do not occur as expected.
A) Agile
B) Scenario
C) Evaluation
D) Contingency
E) Forecast
D) Contingency
Which of the following statements about contingency plans is NOT true?
A) Contingency plans should be as simple as possible.
B) Only high-priority areas require the insurance of contingency plans.
C) Contingency plans should be developed for favorable and unfavorable events.
D) Strategists should plan for all possible contingencies.
E) Contingency plans minimize the impact of potential threats.
D) Strategists should plan for all possible contingencies.
What has been shown to permit quick response to change, prevent panic in crisis situations, and make managers more adaptable?
A) Auditing
B) Implementing a Balanced Scorecard
C) Contingency planning
D) Taking corrective actions
E) Measuring performance
C) Contingency planning
What term is defined as “a systematic process of objectively obtaining and evaluating evidence regarding assertions about economic actions and events to ascertain the degree of correspondence between these assertions and established criteria, and communicating the results to interested users”?
A) Auditing
B) Innovation
C) R&D
D) Strategic Management
E) Financial ratios
A) Auditing
International financial reporting standards (IFRS) comprise approximately ________ pages.
A) 1,000
B) 5,000
C) 10,000
D) 25,000
E) 100,000
B) 5,000
Already the European Union and 113 nations including Australia, Mexico, and Canada have ________ IFRS rules.
A) adopted and then abandoned the use of
B) been prohibited from adopting
C) spoken out publicly against the adoption of
D) revised the standard version of the
E) adopted or soon plan to use
E) adopted or soon plan to use
With regard to the visible or hidden issue, most executives agree that
A) the SEC should regulate whether or not companies make their strategic information visible.
B) some strategic information should remain confidential to top managers.
C) a company has gone too far when it takes steps to ensure that strategic information is not disseminated beyond “the inner circle.”
D) the potential benefit of improved employee and stakeholder motivation and input is not worth the risk of rival firms easily knowing and exploiting a firm’s strategies.
E) keeping strategies secret from employees and stakeholder will likely improve communication, understanding, and commitment.
B) some strategic information should remain confidential to top managers.
A particularly important twenty-first-century challenge facing all strategists today is
A) deciding whether the process should be more an art or a science.
B) deciding whether strategies should be visible or hidden from stakeholders.
C) deciding whether the process should be more top-down or bottom-up in their firm.
D) all of the above
E) none of the above
D) all of the above
Increased education and diversity of the workforce at all levels are reasons why
A) the top-down approach is preferred.
B) the bottom-up approach is untenable.
C) only top executives have the experience and acumen to make strategy decisions.
D) middle- and lower-level managers, and even nonmanagers, should be involved in the strategic planning process.
E) the horizontal approach is the most pragmatic choice.
D) middle- and lower-level managers, and even nonmanagers, should be involved in the strategic planning process.
Most strategy literature advocates that strategic management is
A) more of a science than an art.
B) more of an art than a science.
C) based on analysis rather than research.
D) based on intuition rather than analysis.
E) based on creativity rather than intuition.
A) more of a science than an art.
All of the following are reasons to be completely open as opposed to secretive with the strategy process EXCEPT
A) Managers, employees and other stakeholders can readily contribute to the process.
B) Stakeholders have greater basis for understanding and committing to a firm that is open.
C) All levels of today’s workforce exhibit increased education and diversity, making such contributions valuable.
D) Participation and openness enhance understanding, commitment and communication within the firm.
E) Openness limits rival firms from imitating or duplicating the firm’s strategies.
E) Openness limits rival firms from imitating or duplicating the firm’s strategies.
Mintzberg’s notion of “crafting” strategies
A) is consistent with the view that strategic management is more a science than an art.
B) contends that firms need to assess their environments, do research, evaluate alternatives, analyze, and then choose a course of action.
C) suggests that strategic decision making be based primarily on holistic thinking, intuition, creativity, and imagination.
D) reject strategies that result from subjective imagination in favor of objective analysis.
E) insists on formality.
C) suggests that strategic decision making be based primarily on holistic thinking, intuition, creativity, and imagination.

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