Business Policy

Strategic Mgmt and Business Policy

16) Research indicates that companies undertaking cost-cutting programs are four times more likely than others to cut costs again, typically by reducing staff. Answer: TRUE Diff: 2 Page Ref: 308 Topic: Staffing 17) To successfully downsize, companies must invest in the remaining employees. Answer: TRUE Diff: 2 Page Ref: 309 Topic: Staffing 18) To improve organizational learning, many multinational corporations are providing their managers with international assignments as long as five years. Answer: TRUE Diff: 1 Page Ref: 310 Topic: Staffing 19) Research indicates that a multinational corporation performs at a higher level when its CEO has international experience. Answer: TRUE Diff: 2 Page Ref: 310 Topic: Staffing 20) European multinational corporations seldom use people with an international orientation to staff their management positions. Answer: FALSE Diff: 1 Page Ref: 310 Topic: Staffing 21) Implementation involves leading through coaching people to use their abilities and skills most effectively and efficiently to achieve organizational objectives. Answer: TRUE Diff: 2 Page Ref: 311 Topic: Leading 22) Because an organization's culture can exert a powerful influence on the behavior of all employees, it can strongly affect a company's ability to shift its strategic direction. Answer: TRUE Diff: 2 Page Ref: 311 Topic: Leading 23) Corporate culture does not necessarily have to support the strategy of the firm. Answer: FALSE Diff: 2 Page Ref: 312 Topic: Leading 3 Copyright © 2012 Pearson Education, Inc. 24) Communication is the key to the effective management of change. Answer: TRUE Diff: 1 Page Ref: 314 Topic: Leading AACSB: Communication 25) Assimilation involves the relatively balanced give-and-take of culture and managerial practices between the merger practices. Answer: FALSE Diff: 2 Page Ref: 315 Topic: Leading 26) When Boeing created a separate unit to house the newly acquired operations of McDonnell- Douglas, they were managing the different cultures through separation. Answer: TRUE Diff: 2 Page Ref: 316 Topic: Leading AACSB: Analytic Skills 27) Integration involves the disintegration of one company's culture resulting from unwanted and extreme pressure from the other to impose its culture and practices. Answer: FALSE Diff: 2 Page Ref: 316 Topic: Leading 28) An action plan states what actions are going to be taken, by whom, during what time frame, and with what expected results. Answer: TRUE Diff: 1 Page Ref: 316 Topic: Leading 29) One component of an effective action plan is the determination of the expected financial and physical consequences of each action. Answer: TRUE Diff: 2 Page Ref: 317 Topic: Leading 30) TQM links organizational objectives and the behavior of individuals. Answer: FALSE Diff: 1 Page Ref: 318 Topic: Leading 31) TQM is an operational philosophy committed to customer satisfaction and continuous improvement. Answer: TRUE Diff: 2 Page Ref: 318 Topic: Leading 4 Copyright © 2012 Pearson Education, Inc.

BPL | 5101 | Strategic Mgmt and Business Policy | lecture notes | 16) Research indicates that co

72) Inventory turnover and asset turnover are both examples of which type of financial ratio? A) liquidity ratio B) profitability ratio C) activity ratio D) leverage ratio E) revenue ratio Answer: C Diff: 2 Page Ref: 368 Topic: Financial Analysis: A Place to Begin 73) Fixed asset turnover is what type of financial ratio? A) liquidity ratio B) profitability ratio C) activity ratio D) leverage ratio E) revenue ratio Answer: C Diff: 2 Page Ref: 368 Topic: Financial Analysis: A Place to Begin 74) Which two basic statements provide most of the financial data needed for analysis? A) statement of retained earnings and income statement B) sources and uses of working capital and the balance sheet C) non-operating gains and losses and statement of financial position D) historical income statement and balance sheet E) statement of financial position and statement of owner's equity Answer: D Diff: 1 Page Ref: 369 Topic: Financial Analysis: A Place to Begin 75) Which financial indicator is calculated by the ratio of market price per share to earnings per share? A) return on investment B) price/earnings ratio C) return on equity D) dividend yield on common stock E) dividend payout ratio Answer: B Diff: 2 Page Ref: 369 Topic: Financial Analysis: A Place to Begin 15 Copyright © 2012 Pearson Education, Inc. 76) Which financial indicator is calculated by the ratio of annual dividends per share to annual earnings per share? A) dividend payout ratio B) dividend yield on common stock C) price/earnings ratio D) return on investment E) return on equity Answer: A Diff: 2 Page Ref: 369 Topic: Financial Analysis: A Place to Begin 77) Which financial ratio indicates the percentage of profit that is paid out as dividends? A) return on equity B) dividend payout ratio C) dividend yield on common stock D) price/earnings ratio E) debt to asset ratio Answer: B Diff: 1 Page Ref: 369 Topic: Financial Analysis: A Place to Begin 78) Which financial indicator is calculated by the ratio of annual dividends per share to current market price per share? A) return on equity B) dividend payout ratio C) dividend yield on common stock D) price/earnings ratio E) debt to equity ratio Answer: C Diff: 2 Page Ref: 369 Topic: Financial Analysis: A Place to Begin 79) Which financial ratio indicates the dividend rate of return to common shareholders at the current market price? A) return on equity B) dividend yield on common stock C) price/earnings ratio D) dividend payout ratio E) earnings per share Answer: B Diff: 2 Page Ref: 369 Topic: Financial Analysis: A Place to Begin 16 Copyright © 2012 Pearson Education, Inc.

BPL | 5101 | Strategic Mgmt and Business Policy | lecture notes | 72) Inventory turnover and ass

iii To my family, Margie and Taylor; my parents, Bill and Mary Dess; and Walter Descovich –Greg To my lovely wife, Vicki, and my students and colleagues –Tom To my family, Helaine, Rachel, and Jacob –Alan To my wonderful wife, Gaelen; my children, Megan and AJ; and my parents, Gene and Jane –Gerry DEDICATION dedication iv Gregory G. Dess is the Andrew R. Cecil Endowed Chair in Management at the University of Texas at Dallas. His primary research interests are in strategic management, organization–environment relationships, and knowledge management. He has published numerous articles on these subjects in both academic and practitioner- oriented journals. He also serves on the editorial boards of a wide range of practitioner-oriented and academic journals. In August 2000, he was inducted into the Academy of Management Journal ’s Hall of Fame as one of its charter members. Professor Dess has conducted executive programs in the United States, Europe, Africa, Hong Kong, and Australia. During 1994 he was a Fulbright Scholar in Oporto, Portugal. In 2009, he received an honorary doctorate from the University of Bern (Switzerland). He received his PhD in Business Administration from the University of Washington (Seattle) and a BIE degree from Georgia Tech. G. T. (Tom) Lumpkin is the Chris J. Witting Chair and Professor of Entrepreneurship at Syracuse University in New York. Prior to joining the faculty at Syracuse, Tom was the Kent Hance Regents Endowed Chair and Professor of Entrepreneurship at Texas Tech University. His research interests include entrepreneurial orientation, opportunity recognition, strategy-making processes, social entrepreneurship, and innovative forms of organizing work. He has published numerous research articles in journals such as Strategic Management Journal, Academy of Management Journal, Academy of Management Review, Journal of Business Venturing, and Entrepreneurship: Theory and Practice. He is a member of the editorial review boards of Strategic Entrepreneurship Journal, Entrepreneurship Theory & Practice, and the Journal of Business Venturing. He received his PhD in management from the University of Texas at Arlington and MBA from the University of Southern California. ABOUT THE AUTHORS about the authors v Alan B. Eisner is Professor of Management and Department Chair, Management and Management Science Department, at the Lubin School of Business, Pace University. He received his PhD in management from the Stern School of Business, New York University. His primary research interests are in strategic management, technology management, organizational learning, and managerial decision making. He has published research articles and cases in journals such as Advances in Strategic Management, International Journal of Electronic Commerce, International Journal of Technology Management, American Business Review, Journal of Behavioral and Applied Management, and Journal of the International Academy for Case Studies. He is the former Associate Editor of the Case Association’s peer reviewed journal, The CASE Journal. Gerry McNamara is a Professor of Management at Michigan State University. He received his PhD from the Carlson School of Management at the University of Minnesota. His research focuses on strategic decision making, organizational risk taking, and mergers and acquisitions. His research has been published in numerous journals, including the Academy of Management Journal, Strategic Management Journal, Organization Science, Organizational Behavior and Human Decision Processes, Journal of Management, and Journal of International Business Studies. His research on mergers and acquisitions has been abstracted in the New York Times, Bloomberg Businessweek, The Economist, and Financial Week. He is currently an Associate Editor for the Academy of Management Journal.

BPL | 5100 | Business Policy | lecture notes | iii To my family  Margie and T

16) The automobile industry is currently experimenting with the strategy of mass customization in which pre-assembled sub-assemblies are delivered as they are needed to a company's assembly line workers. Answer: FALSE Diff: 3 Page Ref: 243 Topic: Functional Strategy 17) The importance of sole sourcing was supported by Michael Porter to obtain high supplier quality. Answer: FALSE Diff: 2 Page Ref: 244 Topic: Functional Strategy 18) Two suppliers are the sole suppliers of two different parts, but they are also backup suppliers for each others parts in parallel sourcing. Answer: TRUE Diff: 3 Page Ref: 245 Topic: Functional Strategy 19) Logistics strategy deals with the flow of products into and out of the manufacturing process. Answer: TRUE Diff: 2 Page Ref: 246 Topic: Functional Strategy 20) Research indicates that the use of work teams leads to increased quality and productivity as well as higher employee satisfaction and commitment. Answer: TRUE Diff: 2 Page Ref: 246 Topic: Functional Strategy 21) The follow-the-moon management philosophy allows project team members living in one country to pass their work to team members in another country in which the work day is just beginning. Answer: FALSE Diff: 1 Page Ref: 247 Topic: Functional Strategy 22) Outsourcing is the reverse of vertical integration. Answer: FALSE Diff: 2 Page Ref: 247 Topic: The Sourcing Decision: Location of Functions AACSB: Reflective Thinking 3 Copyright © 2012 Pearson Education, Inc. 23) The key to outsourcing is to purchase from outside only those activities that are not key to the company's distinctive competencies. Answer: TRUE Diff: 2 Page Ref: 249 Topic: The Sourcing Decision: Location of Functions 24) Fujitsu demonstrated a strategy to avoid when it imitated IBM's strategy in 1990. Answer: TRUE Diff: 2 Page Ref: 250 Topic: Strategies to Avoid 25) Corporate scenarios are pro forma balance sheets and income statements that forecast the effect each alternative strategy and its various programs will likely have on division and corporate return on investment. Answer: TRUE Diff: 1 Page Ref: 251 Topic: Strategic Choice: Selecting the Best Strategy 26) Risk is composed not only of the probability that the strategy will be effective, but also of the amount of assets the corporation must allocate to that strategy and the length of time the assets will be unavailable for other uses. Answer: TRUE Diff: 2 Page Ref: 253 Topic: Strategic Choice: Selecting the Best Strategy 27) Chevron uses the real-options approach for bidding on petroleum reserves. Answer: TRUE Diff: 2 Page Ref: 254 Topic: Strategic Choice: Selecting the Best Strategy AACSB: Reflective Thinking 28) The attractiveness of a strategic alternative is seldom affected by its perceived compatibility with the key stakeholders in a corporation's task environment. Answer: FALSE Diff: 1 Page Ref: 254 Topic: Strategic Choice: Selecting the Best Strategy 29) If the strategy is incompatible with the corporate culture, the likelihood of its success is very low. Answer: TRUE Diff: 2 Page Ref: 255 Topic: Strategic Choice: Selecting the Best Strategy 30) Even the most attractive strategic alternative might not be selected if it is contrary to the needs and desires of important top managers. Answer: TRUE Diff: 1 Page Ref: 256 Topic: Strategic Choice: Selecting the Best Strategy 4 Copyright © 2012 Pearson Education, Inc.

BPL | 5101 | Strategic Mgmt and Business Policy | lecture notes | 16) The automobile industry is

Strategic Management & Business Policy, 13e (Wheelen/Hunger) Chapter 7 Strategy Formulation: Corporate Strategy 1) Corporate strategy deals primarily with the choice of direction for the firm as a whole and the management of its business or product portfolio. Answer: TRUE Diff: 1 Page Ref: 206 Topic: Corporate Strategy 2) Corporate parenting is the coordination of cash flow among units. Answer: FALSE Diff: 2 Page Ref: 206 Topic: Corporate Strategy 3) The most widely pursued corporate directional strategies are those designed to achieve growth. Answer: TRUE Diff: 1 Page Ref: 207 Topic: Directional Strategy 4) A merger is a transaction involving two or more corporations in which stock is exchanged, but from which only one corporation survives. Answer: TRUE Diff: 1 Page Ref: 207 Topic: Directional Strategy 5) The two basic growth strategies are concentration and strategic alliances. Answer: FALSE Diff: 2 Page Ref: 207 Topic: Directional Strategy 6) Vertical integration is going backward on an industry's value chain. Answer: FALSE Diff: 2 Page Ref: 128 Topic: Directional Strategy 7) Vertical integration is the degree to which a firm operates vertically in multiple locations on an industry's value chain from extracting raw materials to manufacturing to retailing. Answer: TRUE Diff: 2 Page Ref: 208 Topic: Directional Strategy 8) Forward integration is often more profitable than backward integration. Answer: FALSE Diff: 3 Page Ref: 209 Topic: Directional Strategy 1 Copyright © 2012 Pearson Education, Inc. 9) BP Amoco and Royal Dutch Shell are examples of fully integrated firms because they internally make 100% of their key supplies and completely control their distributors. Answer: TRUE Diff: 3 Page Ref: 209 Topic: Directional Strategy AACSB: Reflective Thinking 10) With taper integration, a firm internally makes 100% of its key supplies and completely control its distributors. Answer: FALSE Diff: 2 Page Ref: 20 Topic: Directional Strategy 11) An example of forward quasi-integration would be a large pharmaceutical firm that acquires part interest in a drugstore chain in order to guarantee that its drugs have access to the distribution channel. Answer: TRUE Diff: 3 Page Ref: 209-210 Topic: Directional Strategy AACSB: Analytic Skills 12) A long-term contract is considered vertical integration. Answer: FALSE Diff: 1 Page Ref: 210169 Topic: Directional Strategy 13) Horizontal growth can be achieved by expanding the firm's products into other geographic locations and/or by increasing the range of products and services offered to current markets. Answer: TRUE Diff: 2 Page Ref: 211 Topic: Directional Strategy 14) Exporting grants rights to another company to open a retail store using the franchiser's name and operating system. Answer: FALSE Diff: 1 Page Ref: 211 Topic: Directional Strategy 15) Forming a joint venture between a foreign corporation and a domestic company is the most popular strategy used to enter a new country. Answer: TRUE Diff: 2 Page Ref: 211 Topic: Directional Strategy 2 Copyright © 2012 Pearson Education, Inc.

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