Essentials of Planning Study Guide
CHAPTER 4—ESSENTIALS OF PLANNING MULTIPLE CHOICE 1. Planning is a. a complex and comprehensive process involving interrelated stages. b. organizing, implementing, and controlling. c. finding the best person for a job. d. communicating effectively with stakeholders. 2. Strategic plans are designed to a. implement operational plans. b. establish day-by-day procedures. c. shape the destiny of the firm. d. carrying out the functions of management. 3. The purpose of tactical planning is to a. establish a general purpose for the organization. b. translate strategic plans into specific goals and plans for organizational units. . tell entry level workers what to do on a daily basis. d. compensate for past mistakes. 4. Branch manager Hector establishes recycling goals for his branch to support the company’s strategic goal of being a good environmental partner. What is Hector doing? a. tactical planning b. strategic planning c. long-range planning d. vision formulation 5. A study of CEO failure indicated that 70 percent of the time their failures were attributed to a. poorly developed plans. b. poor execution, not poor planning. c. over-ambitious plans. d. lack of adequate cost controls. 6.
A manager controls the plan when he or she a. creates a vision statement. b. creates a mission statement. c. establishes a budget to pay for the action plan. d. checks to see how well goals are being attained. 7. A contingency plan is implemented if the a. strategic plan is too modest. b. control processes do not work. c. original plan cannot be implemented. d. action plan succeeds. 8. Which one of the following is a component of true business strategy? a. a high level of operational effectiveness b. a set of activities common to other firms c. giving customers trade-offs d. aving quite different activities to make similar products for different markets 9. A key difference between a vision and a mission is that a. b. c. d. the mission relates more to today’s realities. a mission is set farther into the future. a vision does not deal with products or services. a vision deals more with operations. 10. A recommended procedure for formulating strategy is for top-level managers to a. form a small committee to do most of the work. b. gather inputs from large numbers of people. c. perform the task themselves during a retreat. d. base strategy on fixing customer complaints. 1. The purpose of the strategic inventory is to help the manager a. size up the environment accurately. b. determine how much inventory is on hand. c. involve workers at all levels in formulating strategy. d. develop operating plans. 12. Which one of the following strategies should be classified as a business-level strategy? a. strategic alliances b. diversification of goods and services c. product differentiation d. sticking to core competencies 13. The purpose of a SWOT analysis is to assess a. strengths, weaknesses, opportunities, and threats. b. strategy, weaknesses, options, and time. . satisfactions, worst options, and trade-offs. d. successes, winners, and ominous threats. 14. Which one of the following is not one of the five competitive forces that business strategists are supposed to take into account? a. competition among business units within the firm b. the power of customers to affect pricing and reduce profit margins c. the threat of similar or substitute products d. the power of suppliers to influence the company’s pricing 15. The firm’s purpose and where it fits into the world is identified by the a. strategy. b. policy. c. mission. d. objective. 16.
McDonald’s states that it would like “to satisfy the world’s appetite for good food, well-served, at a price people can afford. ” The preceding reflects McDonald’s a. cost-leadership strategy. b. mission. c. annual goal statement. d. advertising campaign. 17. Krispy Kreme donuts, a well-known donut retailer (but much smaller than Dunkin Donuts), most likely emphasizes which one of the following business strategies? a. cost leadership b. product differentiation c. strategic alliances d. high speed 18. When two pharmaceutical firms get together to market a drug, their strategy is referred to as a. igh speed. b. cost leadership. c. product differentiation. d. a strategic alliance. 19. Suppose that Starbucks opens a nation-wide chain of carwashes, called Starbucks Car Wash. After two years, the executive team sells of the car washes, and invests the cash back into building more Starbucks stores. The strategy illustrated is referred to as a. high speed. b. sticking to core competencies. c. product diversification. d. a strategic alliance. 20. A functional strategy for becoming and remaining a successful organization is to a. form a strategic alliance. b. ind and retain competent people. c. get to market faster than others. d. export products. 21. Assume that Motorola developed a cell and camera phone so small it comes with a strap to wear on the wrist like a watch. Which strategy does this product launch most likely fit? a. cost leadership b. product differentiation c. focus d. high speed 22. Save-A-Lot has become one of the most successful grocery chains by serving the poor and offering low prices. This is an example of a. focus strategy. b. premium pricing. c. product differentiation d. cost leadership 23.
Policies serve as guidelines to action a. that still allow for some interpretation. b. that must be followed quite strictly. c. for workers below the top-management level. d. mostly in the areas of finance and human resources. 24. Management by objectives (MBO) includes a. reviewing group members’ proposals. b. creating action plans to achieve objectives. c. establishing unit objectives. d. all of the choices. 25. Part of Domino’s Pizza’s original success was based on getting pizzas delivered more quickly than competitors. This strategy is called a. strategic planning b. cost leadership c. ocus. d. high speed TRUE/FALSE 1. T The first step in the planning process is defining the present situation. 2. T In planning, measuring external threats is part of defining the present situation. 3. F The major thrust of business strategy is to achieve a high level of operational effectiveness and efficiency. 4. T An exit strategy might be part of the contingency plan. 5. T A firm’s strategy is a master plan for achieving its goals and objectives. 6. T A major aspect of the nature of business strategy is to choose a unique set of activities to deliver a unique value. 7.
T The mission of the Grand Union supermarket chain is probably to provide food, beverages, and related merchandise (all of high quality) to the general public. 8. T The purpose of crowdcasting is to obtain widespread input into the development of business strategy. 9. T To bring about a successful SWOT analysis, it is important to be clear about what you are doing and why. 10. T Firms must constantly change in order to be aligned with their key environments. 11. T The major purpose of the strategic inventory is to help the manager size up the competition, the customers, and the technology necessary to compete effectively. 2. T Corporate-level strategy is concerned with the total direction of the enterprise and the selection of specific businesses. 13. F A SWOT analysis is often used to decide upon which weapons and tactics will be used to deal with a corporate crisis such as a contaminated food product. 14. T One of the five competitive forces is the power of customers to affect pricing and reduce profit margins. 15. F Corporate-level strategy helps answer the question, “Which businesses should we enter? ” 16. F One of the competitive forces identified by Michael Porter is the power of charities to extract money from a corporation. 7. F The experience of General Motors in diversifying into financial services illustrates how sticking to core competencies is the most effective business strategy. 18. F The Rolls Royce and Mercedes Benz automobiles are examples of a cost leadership strategy. 19. F Nike and Apple get together to produce a soccer ball that plays tunes when in motion, illustrating a functional-level business strategy. 20. T An example of the business strategy of sticking to core competencies is for a company like Papa John’s Pizza to concentrate on selling pizza and related food and beverage items to the public. 1. T A medical products firm specializes in the manufacture of prosthetic arms and legs, thereby illustrating a focus strategy. 22. T A rule is a specific course of action or conduct that must be followed;. 23. T Operational planning often focuses on the short term. 24. T An MBO program involves people setting many objectives for themselves. 25. F In management by objectives, the objectives start at the bottom of the organization and move upward. ESSAY 1. Explain the nature of business strategy, including its four major components.
Use a real or hypothetical company in at least two places in your answer. ANS: A strategy is an integrated overall concept and plan of how the organization will achieve its goals and objectives. According to Porter, business strategy has four components: Strategy involves more than operational effectiveness; Strategy rests on unique activities (Southwest Airlines’activities focus on low-cost, convenient service); A sustainable strategic position requires trade-offs (Dollar General has low prices but lacks an inviting store atmosphere); and Fit drives both competitive advantage and sustainability.
PTS: 1 DIF: M REF: pp. 123-125 NAT: AACSB: Reflective Thinking, Strategy 2. Several laptops were stolen from an office by a group of people pretending to be part of the cleaning company. Every laptop stolen contained sensitive client data. After the theft, all clients had to be notified that their personal information may have been compromised. The breach of security prompted 25 percent of the company’s clients to close their accounts. 1. What are policies and rules? 2. Could policies and rules have prevented this situation? Explain ANS: 1.
Policies are general guidelines to follow when making decisions and taking action; they are plans. A rule is a specific course of action or conduct that must be followed; it is the simplest type of plan. Ideally, each rule fits a strategic plan. 2. If the company had policies and rules on how computer ID and passwords should be stored, and how laptops should be secured, these problems would most likely have been avoided. PTS: 1 DIF: D REF: pp. 140-141 NAT: AACSB: Technology, Information Technology 3. Write a memo to managers in your company, explaining an MBO program that your company intends to implement.
ANS: An MBO program involves sequential steps: Establishing organizational goals; Establishing unit objectives; Reviewing group members’ proposals; Negotiating or agreeing; Creating action plans to achieve objectives; and Reviewing performance. PTS: 1 DIF: M REF: p. 143 NAT: AACSB: Reflective Thinking, HRM 4. Using the planning model, how would you plan an event for 500 people. ANS: The steps of the planning model include: 1. Define the situation (a birthday); 2. Establish the goals and objectives (good food, good music, good setting, 500 friends); 3.
Analyze the environment in terms of aids and barriers to goals and objectives (aids: many people to help, ballroom with a nice atmosphere available–barriers: high costs); 4. Develop action plans to reach goals and objectives (list calls to be made to florist, restaurant, musicians); 5. Develop budgets (establish cost per person for food and beverage, cost for centerpieces, cost for musicians); 6. Implement the plans (reserve the ballroom, musicians, send out invitations); 7. Control the plans (oversee the food service, the music, the seating. ) PTS: 1 DIF: M REF: p. 119 NAT: AACSB: Reflective Thinking, Strategy