Foundations of Planning (Q 116-155)

116) ________ are important because they provide the standards against which all organizational accomplishments are measured. A) Goals B) Guidelines C) Models D) Rules Answer: A Explanation: A) Goals are more than just something for an organization to shoot for. Goals are also a metric by which an organization can measure success. Without stating goals, an organization has no way of judging how successful it is. This makes goals the correct response and rules out guidelines, models, and rules because none of these choices provide standards by which organizational progress can be measured. 117) In traditional goal setting, these individuals set goals. A) top managers B) middle and low-level managers C) middle managers D) managers and employees Answer: A Explanation: A) The traditional hierarchical organizational model has top managers setting goals and having the goals flow down to lower organizational levels. This makes top managers the correct response and eliminates the other choices because they do not exclusively identify top managers as the decision makers. 118) In traditional goal setting, as they work their way from top management to employees, goals are likely to ________. A) become more clear B) be more rigorously followed C) be unchanged D) become less clear Answer: D Explanation: D) As they filter down from level to level, goals get repeatedly reinterpreted and distorted, making the choice regarding becoming less clear the correct response and eliminating becoming more clear and being unchanged. Being more rigorously followed is also incorrect because there is no evidence to show that goals are more likely to be followed at lower levels of an organization than at higher levels. 119) In a means-ends chain, a goal at a lower level ________. A) is the bridge to a goal at the next higher level B) is attained only after higher level goals are fulfilled C) is separate from the goal at the next higher level D) is ignored if goals at higher levels are attained Answer: A Explanation: A) A means-ends chain links goals at higher levels to goals below. For example, in a means-ends chain a goal at a high level cannot be considered accomplished until goals below it have been fulfilled first. This links goals at different levels and makes them less subject to degradation and distortion as they pass through organizational hierarchy. This means that the bridge to a goal at the next higher level is the correct response, ruling out the choices regarding a goal being separate and being ignored because they describe situations in which goals are not linked. The choice regarding being attained only after higher-level goals are fulfilled shows linked goals, but their order is reversed—in a means-ends chain, the lower-level goals are fulfilled first. 120) In management by objectives (MBO), goals ________. A) must be easily accomplished B) are jointly determined by employees and managers C) are determined by top management D) are developed by employees Answer: B Explanation: B) The key to goals set by an MBO arrangement is that goals are not handed down from management to employees. Instead, employees participate in goal-setting, thus insuring a more equitable result and more accountability for all sides of the process, especially the employees. MBO goals are not exclusively developed by managers or employees, making both of those choices incorrect. MBO goals are not required to be easily accomplished, making that choice incorrect. 121) In addition to being made by by both managers and employees, MBO goals must be ________. A) non-specific and open-ended with regard to time B) specific and open-ended with regard to time C) specific and include an explicit time limit D) non-specific and include no time limit Answer: C Explanation: C) To eliminate ambiguity and misunderstanding, MBO goals are required to be specific and include a time limit. That way parties can't come back later and say that they weren't warned with regard to what exactly was expected. This makes the choice regarding being specific and including an explicit time limit the correct response and eliminates the other three choices because they are either non-specific or open-ended with regard to time. 122) MBO programs are usually successful largely because they ________. A) give employees a sense of ownership of goals B) free managers from the responsibility of setting goals C) give managers a sense of ownership of goals D) free employees from responsibility if goals are not met Answer: A Explanation: A) MBO goals do not free managers from the task of goal setting or give them any special sense of goal ownership, since in traditional situations managers alone set goals. MBO goals make employees more, not less responsible. What MBO goals clearly do accomplish is to make employees more accountable and responsible for goals, giving them a sense of ownership of goals. This makes giving employees a sense of ownership the correct response. 123) Which goal setting sequence is correct for the following steps? 1. Evaluate resources. 2. Identify goals. 3. Review the mission and job tasks. 4. Communicate goals. 5. Link rewards to goals. 6. Build feedback mechanisms. A) 1, 2, 4, 6, 3, 5 B) 4, 2, 5, 3, 1, 6 C) 3, 4, 2, 6, 5, 1 D) 3, 1, 2, 4, 6, 5 Answer: D Explanation: D) Only the correct choice (3, 1, 2, 4, 6, 5) gives the correct sequence: Mission, Resources, Identify goals, Communicate goals, Feedback, Link. 124) The breadth of a plan refers to ________ concerns. A) long-term versus short-term B) strategic versus tactical C) specific versus directional D) single use versus standing Answer: B Explanation: B) Breadth does not refer to how specific, long term, or repeatable a plan is, but rather whether it is tactical or strategic, making that the correct response. Strategic plans address overall organizational goals. Tactical plans provide details of how those strategic goals can be achieved. 125) The specificity of a plan refers to ________ concerns. A) long-term versus short-term B) strategic versus tactical C) specific versus directional D) single use versus standing Answer: C Explanation: C) Specificity does not refer to the duration, goals, or repeatability of a plan. Rather, specificity addresses how flexible plans are, making specific versus directional the correct response. Specific plans are inflexible and leave little or no room for interpretation or modification. Directional plans are flexible and can be modified if the situation warrants. 126) Strategic plans address ________. A) overall organizational goals B) goals for a single branch of the organization C) how overall goals are to be achieved D) how a single goal is to be achieved Answer: A Explanation: A) Strategic plans have the broadest overall scope, addressing the larger, more general issues and goals that an organization has. This makes overall organizational goals the correct response and eliminates the other three choices because they all refer to more narrow objectives. 127) Tactical plans are operational plans that identify ________. A) overall organizational goals B) how overall goals are to be achieved C) the mission of an organization D) specific goals for accomplishing a specific objective Answer: B Explanation: B) Tactical plans do not address an organization's mission or its larger, overall goals. The focus of tactical plans is always how goals are to be achieved rather than specific goals themselves. This rules out specific goals and makes the choice regarding how overall goals are to be achieved the correct response. 128) A politician whose ultimate goal is to get elected is planning campaign ads for TV. In planning the ads, the politician is functioning at a ________ level. A) strategic B) long-term C) tactical D) directional Answer: C Explanation: C) In this situation the politician's overall strategic goal is to get elected. His immediate goal is to plan effective TV ads. Since he is working on his immediate goal, the politician is functioning on a tactical, rather than a strategic level, making tactical the correct response. 129) Which of the following defines the time frame of a long-term plan? A) over seven years B) over three years C) under three years D) over one year Answer: B Explanation: B) In the past, long-term plans were defined as plans that were seven years or longer in duration. This definition has been replaced by a new time duration that requires a long-term plan to be any plan that covers a time frame of over three years. This makes over three years the correct response and eliminates all other choices. 130) Directional plans ________. A) leave no room for interpretation B) are flexible general guidelines C) are difficult to modify D) must be short-term plans Answer: B Explanation: B) The key to directional plans is flexibility, making "flexible general guidelines" the correct response. Flexible plans cannot: be hard to modify, leave no room for interpretation, or be focused only on short-term goals. This rules out all of the preceding choices and confirms that flexible general guidelines is the correct response. 131) Standing plans typically can be used ________. A) only once B) only in conjunction with specific, long-term plans C) twice at most D) repeatedly Answer: D Explanation: D) Standing plans are not confined to being used only once, twice, or exclusively in conjunction with specific long-term plans. The key to a standing plan is that it is repeatable. This indicates that "repeatedly" is clearly the correct response for this question. 132) Top managers, for the most part, focus on this type of planning. A) operational B) strategic C) tactical D) short term Answer: B Explanation: B) Tactical, short-term, or operational planning are typically reserved for lower-level or mid-level managers. Strategic planning is typically done by top managers, making "strategic" the correct response. 133) The more uncertain a situation is, the more ________ plans must be. A) unspecific B) long term C) flexible D) short term Answer: C Explanation: C) In a situation of high uncertainty, both flexibility and specificity are important. A plan must be specific, but also flexible so it can be changed if the situation requires it. These requirements make flexible the correct response and eliminate unspecific. Uncertainty has no bearing on whether a plan is long or short term, so these choices can be eliminated. 134) The commitment concept states that plans should ________. A) always stake out a longer time period than is estimated B) always stake out a shorter time period than is estimated C) stake out a time period that is neither too long nor too short D) not include time periods because they are too confining Answer: C Explanation: C) The commitment concept states that plans should extend to meet any commitments that they directly or indirectly specify. For example, a plan to finance only the construction of a bridge, but not its upkeep and maintenance, fails to meet its basic time commitment. The preceding ideas identify staking out a time period that is neither too long nor too short as the correct response. Staking out too long, too short, or no time periods all fail to meet time commitments and are therefore incorrect responses. 135) Most managers feel that formal, top-down plans created by corporate planning departments are ________. A) very useful B) usually unsatisfactory C) indispensible D) excellent Answer: B Explanation: B) Rather than find plans created by specialized corporate planning departments useful, indispensible, or excellent, a survey shows that over 75 percent of managers were dissatisfied with formal planning department plans, making "usually unsatisfactory" the correct 136) In the twenty-first century, managers increasingly need to consider their plans as ________. A) highly explicit recipes that must be scrupulously followed B) a vague philosophy that should not interfere with actions C) flexible road maps with destinations that may change D) rigid road maps with a single destination Answer: C Explanation: C) In the unstable, fast-changing business environment of today, managers value flexibility over other qualities. They do not see plans as explicit recipes or rigid road maps. Though flexibility is key, managers do not want to go too far and get plans that are vague, so a vague philosophy can also be eliminated. In the end, managers see plans as road maps that are flexible because they allow paths and even final destinations to change if the situation requires it. 137) A cell phone company might ask managers to do some environmental scanning of blogs that deal with electronics as a way to ________. A) obtain new customers B) identify emerging trends C) obtain new advertisers D) identify potential rivals Answer: B Explanation: B) The purpose of environmental scanning is not to obtain customers, advertisers, or competitors, but rather to get a feel for the business environment that an organization functions in and detect emerging trends in its industry. This makes "identifying emerging trends" the correct response. 138) Which of the following is NOT something that a company would be likely to do as a part of a competitive intelligence program? A) buy competitors' products B) attend trade shows C) have employees evaluate competing products D) buy stock in a competitor's company Answer: D Explanation: D) A company would be likely to buy competing products, attend trade shows, or assess rival products as a part of a competitive intelligence program. It would not, however, buy stock in a rival company because the purchase would not provide any insight into the company's competitor. Since the company would not be likely to do this, "buying stock in a competitor's company" is the correct response. Taco Rocket (Scenario) Imagine that you are the president of Taco Rocket, a new and successful chain of 8 Mexican fastfood restaurants. The success you have experienced in the last 5 years has you thinking of what to do with the business next. Should you expand the business at the current rate? Open new and different restaurants? What? 139) Up to now your success has been based on selling high-quality tacos and burritos at a price that others can't match. Your business is pursuing which of Porter's strategies? A) differentiation strategy B) cost leadership strategy C) competitive advantage strategy D) focus strategy Answer: B Explanation: B) A focus strategy would have Taco Rocket trying to appeal to a narrow segment of the market, something that it clearly is not doing. A differentiation strategy would have Taco Rocket trying to make tacos that were superior in some way to all competitors, again something that it is not attempting to do. What Taco Rocket is doing is selling good quality food at low prices, so it is using a cost leadership strategy. A competitive advantage strategy is not one of Porter's recognized categories, so it is an incorrect response for this question. 140) You are thinking of buying a tortilla factory in a nearby state. This action would be an example of ________. A) forward vertical integration B) horizontal integration C) backward vertical integration D) forward diversification Answer: C Explanation: C) Buying a tortilla factory is an attempt by the company to be its own supplier. This is an example of backward vertical integration. Forward vertical integration would involve some aspect of distribution rather than supply, so that choice is incorrect. The remaining choices (horizontal integration and forward diversification) describe situations in which the company is not trying to become its own supplier, so both choices are incorrect. 141) Recently, Taco Rocket has considered buying a local competitor and the two would combine under the Taco Rocket name. This is an example of which of the following? A) stability B) vertical integration C) horizontal integration D) diversification Answer: C Explanation: C) When a company combines with a competitor, it is integrating horizontally. When a company purchases a company from another industry, it is diversifying. In this case, Taco Rocket is integrating horizontally because it is combining with a rival, not a company in another industry. This makes horizontal integration the correct response and rules out diversification. Stability can be ruled out because it is not a key factor in this situation. 142) For a limited time, Taco Rocket is thinking of coming out with a new Fifth Degree Burrito that is so hot it "burns a hole in the plate." Catering to the small segment of the market that likes super-hot food is an example of a ________. A) focus strategy B) cost leader strategy C) long-term strategy D) differentiation strategy Answer: A Explanation: A) Taco Rocket is not trying to have the lowest cost in this example, or create an ultra-premium product to differentiate itself from competitors. The product is clearly not a longterm strategy because it is being offered for a "limited time." What Taco Rocket is doing is trying to serve a very narrow segment of the market—people who like super-hot food. In doing this, Taco Rocket is using a focus strategy. 143) In a short essay, define planning and compare formal and informal planning as they are used in various organizations. Answer: Planning involves defining the organization's goals, establishing an overall strategy for achieving those goals, and developing a system to implement that strategy. Planning is concerned with both ends and means. All managers engage in some form of planning whether it is formal or informal. In informal planning, little or nothing is written down and there is little or no sharing of goals with others within the organization. This type of planning is often done in small businesses where the ownermanager has a vision of where he or she wants the business to go and how to get there. In formal planning, goals and plans covering a specific period of time are developed. These goals and plans are written and shared with organizational members. Specific programs exist in formal planning to achieve planning goals; that is, managers clearly define the path they want to take and the actions they will carry out to reach their goals. 144) In a short essay, list and discuss two reasons for planning. Answer: Planning establishes coordinated effort. It gives direction to managers and nonmanagers alike. When employees know where the organization is going and what they must contribute to reach goals, they can focus their individual and collective efforts to accomplish those goals. Without planning, departments and individuals might end up working at cross-purposes, preventing the organization from moving efficiently toward its goals. Planning reduces uncertainty by forcing managers to look ahead, anticipate change, consider the impact of change, and develop appropriate responses to change. Even though planning can't eliminate change, managers plan in order to anticipate changes and develop the most effective response to them. 145) In a short essay, list and discuss two additional reasons that justify the need for planning. Answer: Planning reduces overlapping and wasteful activities. When work activities are coordinated around established plans, waste and redundancy can be minimized. Furthermore, when means and ends are made clear through planning, inefficiencies often become obvious and can be easily corrected or eliminated. Planning establishes goals or standards that are used in controlling. If managers are unsure of what they are trying to accomplish, they will be unable to determine whether or not they have been successful. In planning, goals and standards are clearly developed and stated. Then actual performance can be compared against the goals and corrective action is taken, if necessary. Without the goals identified in a planning process, there is no way for an organization to assess its own progress. 146) In a short essay, identify criticisms of formal planning. Answer: One of the main arguments directed at formal planning is that it is rigid and can lock an organization into specific goals and timetables that must be achieved, no matter how circumstances may change. Another criticism of plans is that they cannot replace intuition and creativity, and in many cases are said to stifle these qualities. Many people advise planners to try to take intuition and creativity into account when they formulate their plans, so their plans will enhance rather than undermine these qualities. A third criticism of planning is that it often fixates on the current business climate, not on how the climate might change in the future. This can result in plans that are short-sighted and limited. Rather than look for new opportunities, managers keep trying to perfect what they did in the past. Finally, plans often focus too much on successes of the past, forcing a company to stick to triedand-true methods of operating rather than forging into new areas and blazing new trails. 147) In a short essay, compare strategic plans and tactical plans. Answer: Strategic plans are plans that apply to the entire organization, establish the organization's overall goals, and seek to position the organization in terms of the overall business environment. Plans that specify the details of how the overall goals are to be achieved are called tactical or operational plans. Tactical plans tend to cover a shorter time frame and a more narrow view of an organization than strategic plans. Where strategic plans focus on identifying goals, tactical plans focus on how to reach those goals. 148) In a short essay, compare specific plans and directional plans. Answer: Specific plans are plans that are clearly defined and that leave no room for interpretation. There is little room for ambiguity or misunderstanding with a specific plan. The drawbacks of specific plans are that they can be rigid and often require a measure of predictability that in many cases does not exist. When uncertainty is high and managers must be able to respond to unexpected changes, directional plans are preferable. Directional plans are flexible plans that set out general guidelines but don't lock managers into overly specific goals or courses of action. However, the flexibility inherent in directional plans must be weighed against the loss of clarity provided by specific plans. 149) In a short essay, define and discuss management by objectives (MBO). Answer: Management by objectives (MBO) is a system in which specific performance goals are jointly determined by employees and their managers. MBO requires that progress toward accomplishing these goals be periodically reviewed, and rewards allocated on the basis of this progress. Rather than using goals exclusively as controls, MBO uses them to motivate employees as well. Management by objectives consists of four elements: goal specificity, participative decision making, requiring an explicit time period, and performance feedback. MBO's appeal lies in its 150) In a short essay, describe the first two steps in the strategic management process. Answer: The first step in the strategic management process is to identify the organization's current mission, goals, and strategies. Defining the organization's mission forces managers to identify what it is in business to do. Knowing the company's current goals gives managers a basis for assessing whether those goals need to be changed. The second step involves an external analysis. Managers need to know, for instance, what the competition is doing and how the current business environment is likely to affect the company. After analyzing the environment, managers need to assess what they have learned in terms of opportunities that the organization can exploit, and threats that it must counteract or buffer against. 151) In a short essay, describe the final four steps in the strategic management process. Answer: The third step in the strategic management process involves an internal analysis, which provides important information about an organization's specific resources and capabilities. After completing an internal analysis, managers can then complete a SWOT analysis. The SWOT analysis combines information from this step and the previous step in the process to formally identify an organization's strengths, weaknesses, opportunities, and threats. The fourth step in the strategic management process is to put all of the information gathered together and use it to formulate strategies for putting the organization on the right track for the future. As managers formulate strategies, they have to consider the realities of the external environment and their available resources and capabilities and design strategies that will help the organization reach its goals. After strategies are formulated, they must be implemented. A strategy is only as good as its implementation. The final step in the strategic management process is evaluating results. How effective have the strategies been? Have they helped the organization reach its goals? What adjustments, if any, are necessary? 152) In a short essay, discuss environmental scanning and competitive intelligence. Answer: Managers in both small and large organizations use environmental scanning, which is the screening of large amounts of information, to anticipate and interpret trends and changes in the business environment. Extensive environmental scanning is likely to reveal issues, trends, and concerns that could affect an organization's current and planned activities. One of the fastest growing areas of environmental scanning is competitive intelligence. Competitive intelligence is a process by which organizations gather information about their competitors and get answers to questions such as: Who are they? What are they doing? How will what they're doing affect us? Competitive intelligence doesn't have to involve spying. Advertisements, promotional materials, press releases, reports filed with government agencies, annual reports, want ads, newspaper reports, and industry studies are all examples of readily accessible sources of information for competitive intelligence. Many firms also regularly purchase and analyze competitors' products to learn about new technical innovations. 153) In a short essay, discuss the cost leadership strategy according to Michael Porter. Answer: When an organization sets out to be the lowest-cost player in its industry, it is following a cost leadership strategy. A low-cost leader aggressively searches out efficiencies in production, marketing, and other areas of operation. Overhead is kept to a minimum, and the firm does everything it can to cut costs. Although low-cost leaders don't place a lot of emphasis on "frills," the product or service being sold must be perceived as comparable in quality to that offered by rivals or at least be acceptable to buyers. Examples of companies that have used the low-cost leader strategy include Wal-Mart and Southwest Airlines. 154) In a short essay, discuss Porter's differentiation strategy. Answer: When a company seeks to offer unique products that are seen as truly special by customers, it is following a differentiation strategy. Ways in which companies differentiate themselves might include exceptionally high quality, extraordinary service, innovative design, technological capability, or an unusually positive brand image. The key to this competitive strategy is that whatever product or service attribute is chosen for differentiation must set the firm apart from its competitors and be significant enough to justify a price premium that exceeds the cost of differentiation. Many highly successful businesses can be identified as examples of the differentiation strategy: L.L. Bean (customer service), Intel (higherquality chip technology), Maytag (reliability), and Mary Kay Cosmetics (distribution). 155) In a short essay, discuss Porter's focus strategy. Answer: A company pursues a focus strategy when it concentrates on a narrow product or segment of the market. The goal of a focus strategy is to fill a niche in the market. A niche can be based on product, type of buyer, distribution channel, or geographical location of buyers. Research suggests that the focus strategy may be the most effective choice for small businesses because they typically do not have the economies of scale or internal resources to successfully pursue one of the other two strategies. Stouffer used a focus strategy with its Lean Cuisine line to reach affluent, sophisticated, calorie-conscious customers who wanted convenient but high quality products.