Strategic Operations Management - Answer Key

Key 1. An example of a strategic operations management decision is the choice of where to locate. TRUE Location decisions are strategic in nature. 2. An example of an operational operations management decision is inventory level management. TRUE Inventory management is an operational decision. 3. Government statistics are a good source of data about productivity trends in the service sector. FALSE The service sector is often omitted in government statistics. 4. An example of a tactical operations management decision is determining employment levels. TRUE Staffing is an ongoing, tactical decision. 5. Productivity is defined as the ratio of output to input. TRUE Divide outputs by inputs to get productivity. 6. Productivity is defined as the ratio of input to output. FALSE Productivity is the ratio of outputs to inputs. 7. Competitiveness relates to the profitability of an organization in the marketplace. FALSE Competitiveness relates to how effectively an organization meets the wants and needs of customers relative to other organizations that offer similar goods or services. 8. If people would only work harder, productivity would increase. FALSE Working harder can actually reduce productivity in some cases. 9. Tracking productivity measures over time enables managers to judge organizational performance and decide where improvements are needed. TRUE Productivity trends direct attention toward problems and opportunities. 10. Productivity is directly related to the ability of an organization to compete. TRUE A more productive organization is a more competitive organization. 11. A characteristic that was once an order winner may become an order qualifier, and vice versa. TRUE Order qualifiers and order winners are shaped by the environment. 12. Outsourcing tends to improve quality but at the cost of lowered productivity. FALSE Outsourcing can lead to both quality and productivity improvements. 13. Productivity tends to be only a very minor factor in an organization's ability to compete. FALSE An organization's ability to compete is directly affected by its productivity. 14. An organization that is twice as productive as its competitor will be twice as profitable. FALSE Productivity advantages don't necessarily translate into profitability advantages. 15. National productivity is determined by averaging the productivity measures of various companies or industries. FALSE National productivity is determined by dividing inputs by outputs across a national economy; averaging industry measures would lead to a distorted estimate. 16. Wage and salary increases that are not accompanied by productivity increases tend to exert inflationary pressures on a nation's economy. TRUE True increases in standards of living come about through productivity improvements. 17. Global competition really only applies to multi-national organizations. FALSE Domestic-only organizations experience competition from organizations in other countries. 18. A business that is rated highly by its customers for service quality will tend to be more profitable than a business that is rated poorly. TRUE Service quality is a powerful tool for improving profitability. 19. Services often don't fit simple yield measurements. TRUE Comparing one service output to another is difficult to do accurately. 20. A mission statement should provide a guide for the formulation of strategies for the organization. TRUE Strategy-making is constrained by the mission statement. 21. The hierarchy and sequence of planning and decision-making is: mission, organizational strategy, tactics, and operational decisions. TRUE Mission is at the highest level of the hierarchy, while operation decisions are at the lowest. 22. Strategy includes both organizational and functional strategies. TRUE Organizational strategies shape functional strategies. 23. Organizational strategy should be determined without considering the realities of functional area strengths and weaknesses since they can be changed to meet our strategy. FALSE Functional strengths and weaknesses serve as the building blocks of organizational strategy. 24. Mission statements should be as specific as possible regarding exactly how they will be accomplished. FALSE Mission statements are very long-term and should provide enough room to accommodate major changes in direction. 25. Improving efficiency will guarantee a similar improvement in productivity. FALSE Efficiency is narrower than productivity. 26. As long as we match a competitor on quality and price we will gain market share. FALSE We usually have to better a competitor to win market share. 27. Environmental scanning is a search for events or trends that present either threats or opportunities to the organization. TRUE These events or trends should be taken into account when strategy is being formulated. 28. Standardization has the advantage of reducing variability. TRUE Standardization leads to reduced variability. 29. Traditional strategies of business organizations have tended to emphasize cost minimization or product differentiation. TRUE Time- and quality-based strategies are more recent developments. 30. The majority of our textbook deals with tactical operations that support established functional strategies. TRUE 31. Quality-based strategies focus on customer satisfaction by ensuring that each product is carefully and thoroughly inspected prior to delivery to prevent sending out bad product. FALSE Quality strategies are based on avoiding quality problems. 32. Time-based strategies focus on reducing the time required to accomplish certain activities, such as new product development or delivery to the customer. TRUE Being first to market or responding quickest to customer wants can be attractive strategies. 33. Functional strategies should be designed to directly support a firm's mission. FALSE Functional strategies should support organizational strategy. 34. Companies are required to use environmental scanning because of both federal and state regulations regarding environmental pollution control. FALSE Companies are not required to use scanning, but not using scanning is risky. 35. The Balanced Scorecard is an attractive tool to use in the formation of strategy. FALSE The Balanced Scorecard is used for the implementation of strategy. 36. One major shortcoming of the Balanced Scorecard is that it doesn't tend to take into account sustainability issues. TRUE Companies need to be aware of the impact they are having in these areas and respond accordingly. 37. Competitiveness doesn't include: A. Productivity B. Effectiveness C. Profitability D. Operations Strategy E. Operations Management A company can be competitive relative to similar companies and still be unprofitable if the competitive environment is inherently unprofitable. 38. Product design and choice of location are examples of _______ decisions. A. strategic B. tactical C. operational D. customer focused E. design These decisions are made high in the hierarchy. 39. Scheduling personnel is an example of an operations management: A. mission implementation B. operational decision C. organizational strategy D. functional strategy E. tactical decision Staffing level decisions are made low in the hierarchy. 40. Productivity is expressed as: A. output plus input B. output minus input C. output times input D. output divided by input E. input divided by output Productivity is the ratio of outputs to inputs. 41. In the 1970's and 1980's in the USA, organizations concentrated on: A. operations strategies B. improving quality C. marketing and financial strategies D. revising mission statements E. environmental issues This led to U.S. firms being not very competitive with regard to their operations. 42. In the past, a significant reason why U.S. productivity was the highest in the world was high: A. agricultural productivity B. manufacturing productivity C. labor productivity D. savings productivity E. governmental productivity This freed up resources for productivity improvements in a wide variety of non-agricultural sectors. 43. Which of the following is not a factor that affects productivity? A. computer viruses B. design of the workspace C. use of the Internet D. standardizing processes E. wireless cellular phones These don't lead to fundamental changes in operations. 44. Which of these factors affects productivity? A. methods and technology B. workers C. management D. a and b only E. all of the above All of these affect productivity. 45. Which of the following is not a key step toward improving productivity? A. developing productivity measures for all operations B. improving the bottleneck operations C. establishing reasonable goals for improvement D. considering incentives to reward workers E. converting bond debt to stock ownership A firm's productivity is independent of its capital structure. 46. For an organization to grow its market share, it must: A. advertise using multimedia B. lower prices C. exceed minimum standards of acceptability for its products or services D. establish an internet website E. broaden its mission statement Only by exceeding standards can an organization grow its market share. 47. The ratio of good output to quantity of raw material input is called A. non-defective productivity B. process yield C. worker quality measurement D. total quality productivity E. quantity/quality ratio This is sometimes a useful productivity measure in service industries. 48. The fundamental purpose for the existence of any organization is described by its: A. policies B. procedures C. corporate charter D. mission statement E. bylaws A mission statement is the organization's attempt to justify its existence. 49. A productivity increase in one operation that doesn't improve overall productivity of the business isn't A. worthwhile B. trivial C. competence-destroying D. an order winner E. an order qualifier Only system-wide productivity improvement makes the organization more productive. 50. Value added can be calculated by: A. average productivity gains over time B. inputs divided by the outputs C. outputs divided by the inputs D. input plus output divided by two E. outputs minus inputs Value added represents the change in value of the original inputs. 51. Which of the following is true? A. Corporate strategy is shaped by functional strategies. B. Corporate mission is shaped by corporate strategy. C. Functional strategies are shaped by corporate strategy. D. External conditions are shaped by corporate mission. E. Corporate mission is shaped by functional strategies. Corporate strategy shapes strategies at lower levels. 52. Core competencies in organizations generally relate to: A. cost B. quality C. time D. flexibility E. all of the above These are all representative of core competencies. 53. Which of the following is considered to be a cause of poor U.S. global competitiveness? A. the tendency to view labor as a cost factor to be minimized B. decision-making based on short-term horizons C. weaknesses in technological practice D. powerful trading partners E. all of the above A number of factors can negatively shape a country's competitiveness. 54. Which of the following is not typically considered a cure for poor competitiveness? A. remove communications barriers within organizations B. minimize attention to the operations function C. put less emphasis on short-term financial results D. recognize labor as a valuable asset and act to develop it E. improve quality Operations is a prime area for improving competitiveness. 55. Time-based approaches of business organizations focus on reducing the time to accomplish certain necessary activities. Time reductions seldom apply to: A. product/service design time B. processing time C. delivery time D. response time for complaints E. internal audits Internal audits have little to do with core value-adding efforts. 56. The external elements of SWOT analysis are: A. strengths and weaknesses B. strengths and threats C. opportunities and threats D. weaknesses and opportunities E. strengths and opportunities Opportunities and threats relate to the organization and its external environment. 57. In an assembly operation at a furniture factory, six employees assembled an average of 450 standard dining chairs per 5-day week. What is the labor productivity of this operation? A. 90 chairs/worker/day B. 20 chairs/worker/day C. 15 chairs/worker/day D. 75 chairs/worker/day E. none of the above Divide the output of 450 chairs by the inputs of 30 worker-days. 58. Which of the following is not a reason for poor performance of our organization in the marketplace? A. placing too much emphasis on product/service design and too little on process design B. failing to take into account customer wants and needs C. putting too much emphasis on short-term financial performance D. taking advantage of strengths/opportunities, and recognizing competitive threats E. none of the above Taking advantage of strengths/opportunities and recognizing competitive threats would enable good performance. 59. The manager of a carpet store is trying to determine the best installation crew size. He has tried various crew sizes with the results shown below. Based on productivity, what crew size do you recommend? A. 2 B. 3 C. 4 Crews of two workers are most productive. 60. Which of the following is not a key factor of competitiveness? A. price B. product differentiation C. flexibility D. after-sale service E. size of organization Competitiveness often has nothing to do with organization size. 61. Gourmet Pretzels bakes soft pretzels on an assembly line. It currently bakes 800 pretzels each 8-hour shift. If the production is increased to 1,200 pretzels each shift, then productivity will have increased by: A. 50% B. 33% C. 25% D. 67% Divide the difference in productivity by the original productivity. 62. The weekly output of a fabrication process is shown below together with data for labor and material inputs. Standard selling price is $125 per unit. Overhead is charged weekly at the rate of $1,500 plus .5 times direct labor cost. Assume a 40-hour week and an hourly wage of $16. Material cost is $10 per foot. What is the average multifactor productivity? A. 1.463 B. 1.457 C. 1.431 Calculate multifactor productivity for each week, then average the two. 63. The Balanced Scorecard is a useful tool for helping managers translate their strategy into action in the following areas: A. Sustainability; Flexibility; Efficiency; Technology B. Customers; Financial; Internal Business Processes; Learning and Growth C. Customization; Standardization; Efficiency; Effectiveness D. The Environment; The Community; Suppliers; Other Stakeholders E. Strategy; Tactics; Productivity; Profitability These are the four core areas addressed by the Balanced Scorecard. 64. A firm pursuing a strategy based on customization and variety will tend to structure and manage its supply chain to accommodate more _____________ than a firm pursuing a strategy based on low-cost and high-volume. A. Variation B. Streamlined flow C. Quality D. Capacity E. Productivity Customization and variety lead to variation that must be accommodated. 65. Unique attributes of firms that give them a competitive edge are called ______________. A. Functional strategies B. Balanced scorecards C. Supply chains D. Core competencies E. Sustainable initiatives Core competencies can be translated into competitive advantage. 66. Years ago in the overnight delivery business, providing package tracking capability gave some firms a competitive advantage. Now, all firms must offer this capability simply to be in this line of business. This is an example of ______________ becoming ____________ over time. A. Tactical implications; strategic B. Strategic implications; tactical C. Order winners; order qualifiers D. Profitability factors; productivity factors E. Order qualifiers; order winners What is an order qualifier and what is an order winner changes over time. 67. For firms competing in worldwide markets, conducting __________________ is more complex, since what works in one country or region might not work in another. A. Productivity analysis B. Environmental analysis C. Strategy implementation D. Sustainability analysis E. Growth forecasting Environmental analysis takes into account the relevant factors in the environment; there are more of these if there are more markets to consider. 68. Increasing the service offered to the customer makes it more difficult to compete on the basis of ______. A. order qualifiers B. customization C. quality D. price E. flexibility 69. ___________ is generally used to facilitate an organization strategy that emphasizes low cost. A. Speed to market B. Flexibility C. Customization D. Sustainability E. None of the above All of these would actually lead to higher costs. 70. Which of the following factors would tend to reduce productivity? A. improvements in workplace safety B. reductions in labor turnover C. more inexperienced workers D. reductions in the scrap rate E. none of the above More inexperienced workers tend to be less productive. 71. Suppose a country's productivity last year was 84. If this country's productivity growth rate of 5% is to be maintained, this means that this year's productivity will have to be _______. A. 88.2 B. 79.8 C. 82.8 D. 78.9 E. 4.2 Multiply 84 by 1.05 and then subtract 84 from this product. 72. The weekly output of a production process is shown below, together with data for labor and material inputs. The standard inventory value of the output is $125 per unit. Overhead is charged weekly at the rate of $1500 plus .5 times direct labor cost. Assume a 40-hour week and an hourly wage of $16. Material cost is $10 per running foot. What is the average multi-factor productivity for this process? Feedback: Calculate the weekly multi-factor productivities and then average. 73. A company has introduced a process improvement that reduces processing time for each unit, so that output is increased by 25% with less material, but one additional worker required. Under the old process, five workers could produce 60 units per hour. Labor costs are $12/hour, and material input was previously $16/unit. For the new process, material is now $10/unit. Overhead is charged at 1.6 times direct labor cost. Finished units sell for $31 each. What increase in productivity is associated with the process improvement? Feedback: Divide the improvement in productivity by the productivity before the change. Multiply this ratio for the percent increase.