Management

Fundamentals of Management, 10e, Global Edition (Robbins)
Chapter 5 Foundations of Planning
1) Which of the following is NOT a function of planning?

A) defining goals
B) identifying a strategy for attaining goals
C) settling disputes between employees
D) coordinating organizational activities
Answer: C
Explanation: Defining goals, identifying strategies for attaining goals, and coordinating
organizational activities are all recognized functions of planning, whether it is formal or
informal, so these choices are incorrect. Settling disputes is not something that can be planned
for, since most disputes are spontaneous and can occur at any time over any issue. This means
that settling disputes is not a function of planning, therefore making that the correct response.
Diff: 2
LO: 5.1: Discuss the nature and purposes of planning.
2) Planning is concerned with ________.

A) both ends and means
B) ends only
C) means only
D) neither ends nor means
Answer: A
Explanation: Planning is concerned with goals or ends, as well as how those goals are reached,
or means. Therefore, the choice indicating "both ends and means" is the correct response and all
of the other responses are incorrect.
Diff: 1
3) In informal planning, goals are usually ________ shared with others in the organization.
A) written, but little is
B) unwritten, and little is
C) written, and much is
D) unwritten, but much is
Answer: B
Explanation: A key difference between formal and informal planning is that informal planning
rarely involves recording the plans in written form. Informal planners also typically keep their
plans to themselves or share them with few others. Together, these factors make the choice
indicating "unwritten and much" the correct response. The two choices indicating "written" can
be immediately ruled out because informal plans are not written. "Unwritten, but much is" can be
ruled out because little is shared with informal plans.
Diff: 2
4) Informal planning is ________.
A) always performed at the lowest organizational level
B) general and usually lacks continuity
C) performed exclusively by middle managers
D) more specific than formal planning
Answer: B
Explanation: Informal plans typically are not specific and are performed by leaders or owners
rather than by middle managers or individuals on the lowest organizational level, ruling out all of
these choices. This leaves the correct response, as it correctly states that informal plans are
usually nonspecific and lacking in continuity.
Diff: 2
5) In formal planning, ________.

A) specific goals covering a period of years are defined
B) to maximize flexibility, specific goals are never spelled out
C) very broad general goals are developed
D) goals may be written or unwritten
Answer: A
Explanation: Formal planning requires written, not unwritten, plans and specific, rather than
general, goals. Since only the choice regarding specific goals covering a period of years
identifies specific goals, it is the correct response.
Diff: 2
6) Which of the following is NOT a reason for managers to plan?

A) to give direction to an organization
B) to deal with change
C) to establish goals
D) to establish responsibility for mistakes
Answer: D
Explanation: Planning provides an organization with direction, goals, and a way to deal with
change. Since all of these choices are reasons for a manager to plan, they can be ruled out as the
correct response for this question. Blaming people for mistakes is not a function of planning, so
establishing responsibility for mistakes is the correct response for this question.
Diff: 2
7) Planning gives organizations direction that primarily helps them ________.
A) improve teamwork and coordinate activities
B) improve their image in the business community
C) improve morale of middle managers
D) improve morale of all employees
Answer: A
Explanation: Direction provides a common path for all employees in an organization, thus
helping employees work together in a coordinated, cooperative effort. This makes improving
teamwork and coordinating activities the correct response since it mentions teamwork and
coordination. Planning is not concerned with organizational morale or image, so all of those
choices can be ruled out as correct responses.
Diff: 2
8) Planning gives organizations a way to deal with change that ________.

A) eliminates all uncertainty
B) reduces uncertainty
C) reduces certainty
D) increases ambiguity
Answer: B
Explanation: A key function of planning is to help organizations deal with uncertainty, making
the choice regarding reducing uncertainty the correct response. Uncertainty unfortunately cannot
be completely eliminated, so that is not the correct response here. Both "reduce certainty" and
"increase ambiguity" are tantamount to increasing, rather than decreasing, uncertainty, so they
are incorrect responses.
Diff: 2
9) Organizations that don't formally plan may be more likely to have ________.
A) corrupt managers
B) legal problems
C) multiple departments performing the same task
D) a single department carrying out all company functions
Answer: C
Explanation: A major advantage to formal planning is that it reduces redundancy. That means
that organizations that don't carry out formal plans would be more likely to have more than one
department carrying out the same task, making that the correct response. Formal planning has
little effect on corruption or legal problems, so those choices can be ruled out. A single
department carrying out all company functions is essentially the opposite of redundancy, so it too
can be ruled out.
Diff: 2
10) One effect of planning on managers is that it forces them to ________.
A) fear change
B) anticipate and consider the effect of change
C) work to prevent change
D) ignore any change that doesn't directly affect them
Answer: B
Explanation: A major benefit of planning is that it forces managers to think systematically about
the future. Rather than fear change, try to prevent change, or ignore change, planning requires
managers to think constructively about change and its consequences.
Diff: 2
11) Managers who fail to plan may ________.

A) take advantage of change
B) stimulate change
C) be positively affected by change
D) be adversely affected by change
Answer: D
Explanation: Change can be disruptive and even destructive in the best of circumstances, so
managers who fail to plan thoughtfully are likely to suffer negative consequences of change,
making "be adversely affected" the correct response. Without planning, managers are likely to be
surprised by change, making it highly unlikely that they would be able to benefit or in any way
be positively affected by the change–making these choices incorrect. There is no connection
between planning and stimulating change, so "stimulate change" would also be an incorrect
response for this question.
Diff: 2
12) Which of the following is a frequently cited criticism of formal planning?

A) Plans lock organizations into rigid goals and timetables.
B) Plans take too long to create.
C) Plans create resentment within different levels of the organization.
D) Formal planning works well only for smaller companies.
Answer: A
Explanation: Planning works better for larger rather than smaller companies. Few serious
complaints are ever voiced that planning is too time consuming or that it creates discord, making
these responses incorrect. What planning does do is lock organizations into commitments that are
sometimes overly confining or destructive, making that the correct response.
Diff: 3
13) One criticism of formal planning is that it focuses on how to beat the competition rather than
how to ________.
A) have cordial relationships with the competition
B) focus on new opportunities
C) balance the organization's budget
D) cooperate with the competition
Answer: B
Explanation: Critics of planning do not complain that planning focuses too much on
organizational budgets or too-close relationships of an organization with its rivals. Critics do
complain that organizations that put too much emphasis on planning end up being small-minded
and myopic as they spend all of their energy trying to beat the competition rather than in being
innovative and creating whole new products or industries. This makes "focus on new
opportunities" the correct response.
Diff: 2
14) Failing to discard successful plans from the past is likely to lead to ________.
A) more success because conditions are unlikely to change in the future
B) failure because conditions are likely to change in the future
C) success because of the high quality of the plans
D) failure because of the low quality of the plans
Answer: B
Explanation: The trouble with focusing too much on successes of the past is that it is rare that
these successes can be duplicated in the changed circumstances of the future. So organizations
that rigidly stick to a tried-and-true success formula can get "burned" when conditions change.
This makes "failure because conditions are likely to change" the correct response and eliminates
the other choices.
Diff: 3
15) Studies of performance in organizations that plan have reached ________ with respect
to the benefits of formal planning.
A) somewhat negative conclusions
B) no conclusion
C) extremely negative conclusions
D) generally positive conclusions
Answer: D
Explanation: Studies have shown that formal planning usually results in higher profits and
general financial and organizational success, making "generally positive conclusions" the correct
response. Both choices regarding negative conclusions can be ruled out because they indicate
negative, rather than positive, outcomes for formal planning. The choice indicating "no
conclusion" can be ruled out because it fails to indicate a positive outcome for formal planning.
Diff: 2
16) Studies of planning show that the key to successful planning is to make sure that the plans
________.
A) cover every possible detail
B) are high in quality and insight
C) are exceedingly simple to follow
D) are not shared with employees
Answer: B
Explanation: Success in planning seems to hinge more on the quality of the planning itself rather
than the subject of the planning. A company may focus its plans on all of the right topics, but
unless those plans are systematic, comprehensive, and high in insight, they will not provide
successful direction for the organization. These factors make the choice indicating "high in
quality and insight" the correct response. Whether or not details are covered, plans are easy to
follow, or plans are shared extensively matter less than the quality of the plans themselves.
Diff: 3
17) In studies in which formal planning did not lead to higher performance, ________ usually
the culprit.
A) unforeseen events in the environment were
B) demanding employees were
C) stubborn ownership was
D) lack of communication was
Answer: A
Explanation: Even the best plans can be foiled by unforeseen events, such as economic
disruptions or political turmoil–meaning that "unforeseen events in the environment" is the
correct response for this question. Plans can only take into account known events of the past,
they can't anticipate unknown future events, especially highly unlikely future events. When it
comes to spoiling plans, such things as demanding employees, stubborn owners, or poor
communication are minor factors compared to important outside events, so these choices are all
incorrect responses.
Diff: 2
18) Formal planning typically leads to which of the following?

A) higher profits
B) lower productivity
C) higher sales, but lower profits
D) tension between different management levels
Answer: A
Explanation: Studies show a positive correlation between formal planning and profits along with
other economic indicators, making "higher profits" the correct response. Lower productivity and
lower profits both show a negative correlation between planning and economic success, so those
choices can be ruled out. There is no evidence that planning results in tension of any kind, so that
choice can also be ruled out.
Diff: 1
19) All managers plan in some way, either formally or informally.
Answer: TRUE
Explanation: Planning has been identified as the primary management function, indicating that it
is the activity that managers concern themselves with most.
Diff: 1
20) Informal plans are not recognized as true organizational plans and are rarely carried out by
managers.
Answer: FALSE
Explanation: Informal plans can be highly effective and highly appropriate for some
organizations, especially those that are small in size. As organizations increase in size, the need
for formal planning tends to increase.
Diff: 2
21) At some point, all managers create formal plans.

Answer: FALSE
Explanation: Many managers, especially those who are part of small organizations, do not ever
resort to making systematic formal plans.
Diff: 2
22) Planning provides direction to managers and nonmanagers alike.

Answer: TRUE
Explanation: Part of the function of planning is to let everyone in the organization know what
the future holds, so planning is very important because it informs nonmanagers of what to expect
and how to prepare for the future.
Diff: 1
23) A key function of planning is to create goals.

Answer: TRUE
Explanation: Creating goals is one of four major reasons that managers plan. The other three
major functions of planning are to reduce uncertainty, reduce waste, and set goals and standards.
Diff: 2
24) Informal planning typically works better in large organizations.

Answer: FALSE
Explanation: Informal planning is generally adequate only for small organizations in which a
single individual or small group can keep the plans to themselves. Once the organization grows
to a larger size, it becomes necessary for many people to have access to the organization's plans–
and that almost always requires formal planning.
Diff: 2
25) The four reasons that organizations plan are to establish coordinated effort, set standards,
minimize waste, and reduce uncertainty and the impact of change.
Answer: TRUE
Explanation: Direction tells organization members where the organization is going with respect
to goals and objectives. Standards identify the goals of the organization. Minimizing waste and
redundancy makes the organization efficient. Reducing the impact of change makes the
organization more able to avoid the damage that change can bring on and to take advantage of
the opportunities that changes often present.
Diff: 2
26) Planning rarely improves teamwork and cooperation among employees.

Answer: FALSE
Explanation: In fact, teamwork and cooperation are two things that planning often helps most.
The better the plans are, the more coordinated the organization's efforts tend to be.
Diff: 2
27) An organization that fails to plan will find it hard to assess progress.
Answer: TRUE
Explanation: Goals and standards developed in the planning process give the organization
something to compare its performance against. Without clearly identified goals and standards, an
organization has no idea of how to judge whether it has succeeded or failed.
Diff: 2
28) A major argument against formal plans is that they can't replace intuition and creativity.
Answer: T
Explanation: Formal plans typically cannot avoid being more rigid than informal plans, leaving
less room for using intuition, spontaneity, and creativity.
Diff: 2
29) Formal planning can enhance creativity in an organization.

Answer: TRUE
Explanation: If done well, formal plans can enhance, rather than stifle, creativity. The key is for
the formal plans to be flexible enough to allow creativity to be employed.
Diff: 2
30) A criticism of formal planning is that it focuses too much on groundbreaking visions and
deals with ideas that are too innovative to work.
Answer: FALSE
Explanation: Formal plans tend to focus on existing opportunities in the current climate rather
than the opportunities of the future that are as yet unimagined. Therefore, formal plans are likely
to impede, rather than promote, truly groundbreaking work.
Diff: 2
31) A major strength of formal planning is that it reinforces past successes and incorporates them
into the future.
Answer: FALSE
Explanation: Focusing on past successes is a weakness, not a strength, of formal planning.
Formal plans tend to fixate on what worked well in the past, not what might work well in the
changed circumstances of the future.
Diff: 2
32) A major strength of formal planning is that it gives an organization rigidity.

Answer: FALSE
Explanation: Rigidity is a weakness of formal planning. Formal planning can lock an
organization into a preset sequence of events that might not be able to cope with changing
conditions and circumstances.
Diff: 2
33) A major strength of formal planning is that it generally correlates with higher profits.
Answer: TRUE
Explanation: Studies show that organizations that use formal planning generally have higher
profits than those that don't use formal planning.
Diff: 2
34) Successful planning depends more on whether managers plan than on the quality of their
planning.
Answer: FALSE
Explanation: Evidence shows that organizations often fail not because they focused their
planning efforts on the wrong things but because the quality of their planning was deficient.
Diff: 2
35) Research indicates that organizations that don't use formal planning always outperform
organizations that do use formal planning.
Answer: FALSE
Explanation: To the contrary, evidence from studies shows that planning organizations generally
outperform nonplanning organizations.
Diff: 2
36) 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 owner-
manager 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.
Diff: 3
AACSB: Application of knowledge
37) In a short essay, list and discuss two reasons for planning.
Answer: (any two of the following)
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.
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.
Diff: 2
38) 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 tried-
and-true methods of operating rather than forging into new areas and blazing new trails.
Diff: 3
39) The first step in the six-step strategic management process is to ________.
A) analyze the organization's strengths and weaknesses
B) identify the organization's mission
C) identify feasible strategies
D) analyze the opportunities the organization has
Answer: B
Explanation: Identifying the organization's mission is the first step in the strategic management
process, making that the correct response. Analysis of strengths, weaknesses, and opportunities
are all part of the second and third SWOT analysis steps of the process, while identification of
strategies would be included in the fourth step, formulate strategies.
Diff: 2
LO: 5.2: Explain what managers do in the strategic management process.
40) The first three steps of the strategic management process involve ________ strategies.
A) planning
B) implementing
C) evaluating
D) identifying
Answer: A
Explanation: The first three steps of the process include stating the mission of the organization,
followed by an analysis of its position (strengths, weaknesses, etc.) in the marketplace. These
first three steps are planning strategies, rather than implementation (step 5), evaluation (step 6),
or identification (step 4) strategies, making "planning" the correct answer.
Diff: 2
41) A mission statement includes identification of an organization's ________.
A) strengths and weaknesses
B) purpose and basic philosophy
C) assets and resources
D) resources and strengths
Answer: B
Explanation: Finding the organization's strengths, weaknesses, assets, and resources are all part
of an internal analysis, so the choices indicating "strengths and weaknesses," "assets and
resources," and "resources and strengths" can be ruled out because they include one or more of
those items. That leaves "purpose and basic philosophy" as the correct response, as it correctly
identifies that a mission statement should include a description of an organization's purpose as
well as a summary of its basic philosophy.
Diff: 2
42) A mission statement does NOT include which of the following?

A) the customers of a company
B) major competitors
C) why the company is in business and what it hopes to accomplish
D) the company's basic beliefs
Answer: B
Explanation: A mission statement should identify an organization's customers, its core
philosophy and beliefs, and its basic purpose, so these choices can be eliminated as possible
correct responses. The organization's competitors are not part of the organization's basic goals.
Diff: 2
43) An external analysis, the second step of the strategic management process, helps identify
________.
A) the products that a company makes
B) the long-term goals of a company
C) a company's opportunities and threats
D) a company's concern for its employees
Answer: C
Explanation: The focus of an external analysis is to locate the organization's place in the external
business environment, analyzing the competition that the organization faces, the opportunities it
might take advantage of, and the things that threaten the organization, making "opportunities and
threats" the correct response. Long-term goals, product descriptions, and company policy toward
its workers have nothing to do with analyzing the external environment, so those choices are
ruled out.
Diff: 2
44) An internal analysis, the third step of the strategic management process helps identify
________.
A) opportunities and threats
B) resources and capabilities
C) opportunities and possibilities
D) values and philosophy
Answer: B
Explanation: An organization's values and philosophy are part of its mission statement, not an
internal analysis, which rules out that choice as a correct response. Finding opportunities is part
of an external, not an internal, analysis, which eliminates the choices regarding opportunities as
correct responses. The internal analysis should identify resources (a company's physical,
financial, and human assets) and capabilities (a company's skills and abilities), making
"resources and capabilities" the correct response.
Diff: 2
45) Which term refers to an organization's capital, workers, and patents?

A) resources
B) capabilities
C) abilities
D) core competencies
Answer: A
Explanation: An organization's workers, patents, and financial capital are all types of assets, or
resources that the organization has, making "resources" the correct response. Items such as
financial capital do not qualify as capabilities, abilities, or core competencies because they are
tangible goods, not abstract abilities.
Diff: 2
46) An organization's resources identify ________.

A) how the organization gets things done
B) where the organization operates
C) when the organization operates
D) what the organization has
Answer: D
Explanation: In informal terms, an organization's resources identify what the organization has,
while its capabilities refer to what it does. This means that how, where, or when the organization
operates qualify as capabilities, so they can be ruled out as correct responses for this question.
Resources are generally tangible assets, while capabilities refer to skills and abilities, making
"what the organization has" the correct response.
Diff: 2
47) An organization's capabilities identify ________.
A) what the organization knows
B) who the organization is
C) assets that the organization can rely on
D) what the organization can do
Answer: D
Explanation: In informal terms, an organization's resources identify what the organization has,
while its capabilities refer to what it does. What the organization has, who it is, or what its assets
are refer to what the organization has, so they are all resources, not capabilities. What the
organization can do is a capability, so that is the correct response here.
Diff: 2
48) Together, an organization's resources and core competencies make up which of the
following?
A) core philosophy
B) competitive weapons
C) core assets
D) fundamental beliefs
Answer: B
Explanation: Finding the organization's strengths, weaknesses, assets, and resources are all part
of an internal analysis, so "core philosophy," "core assets," and "fundamental beliefs" can be
ruled out because they include one or more of those items. That leaves "competitive weapons" as
the correct response, as it correctly identifies that a mission statement should include a
description of an organization's products as well as a summary of its basic philosophy.
Diff: 2
49) SWOT analysis identifies and analyzes an organization's ________.

A) strengths, weaknesses, opportunities, and threats
B) strategy for competing in the market
C) human resource assets
D) long-term goals
Answer: A
Explanation: The term SWOT is an acronym for strengths, weaknesses, opportunities, and
threats, making that the correct response and eliminating the other choices as possible correct
answers.
Diff: 2
50) SWOT analysis combines ________.
A) a company's mission with its goals
B) external and internal analyses
C) a company's philosophy with its ethics
D) profit with productivity
Answer: B
Explanation: An external analysis identifies threats to an organization and opportunities that it
has. An internal analysis identifies strengths and weaknesses of the organization. Together, these
two analyses make up the SWOT items–strengths, weaknesses, opportunities, and threats,
making "external and internal analyses" the correct response. SWOT analysis has nothing to do
with mission or company philosophy, making these choices incorrect. SWOT does not address
profit or productivity, which rules out that choice.
Diff: 2
51) Once SWOT analysis is complete, managers ________ to address the issues that came up
during the analysis.
A) formulate strategies
B) implement strategies
C) evaluate strategies
D) eliminate strategies
Answer: A
Explanation: The ultimate goal of a SWOT analysis is to come up with strategies that will use an
organization's strengths to take advantage of opportunities, defend against threats, and shore up
weaknesses, making "formulating strategies" the correct response. Implementation and
evaluation of the strategies will come later in the process, making these choices incorrect.
Elimination of strategies might be considered a minor part of strategy formulation, but it
certainly is not the objective of a SWOT analysis.
Diff: 2
AACSB: Analytical thinking
52) Which of the following do managers NOT typically use to formulate strategies?
A) finding ways to exploit the organization's strengths
B) finding ways to protect the organization from external threats
C) finding ways to rule out existing organizational opportunities
D) finding ways to correct organizational weaknesses
Answer: C
Explanation: The incorrect choices all identify strategies that might emerge from a SWOT
analysis–to exploit organizational strengths, correct weaknesses, and protect against threats, so
they can all be ruled out as correct responses. The one thing that organizations would not
typically do is rule out possible opportunities–instead the organization would be looking to
exploit those opportunities, making "finding ways to rule out existing organizational
opportunities" the correct response.
Diff: 2
53) The three different types of strategies that managers implement are ________.
A) corporate, private, functional
B) corporate, competitive, functional
C) long-term, short-term, public
D) competitive, noncompetitive, corporate
Answer: B
Explanation: Organizations typically choose corporate, competitive, or functional strategies,
making that the correct response. Corporate strategies function on the largest scale,
encompassing the entire corporation. Competitive strategies concentrate on strategic business
units of a corporation. Functional strategies specialize even more, focusing on individual
corporate departments.
Diff: 1
54) A corporate strategy focuses primarily on ________.

A) an organization's mission
B) an organization's strengths
C) an organization's weaknesses
D) an organization's people
Answer: A
Explanation: An organization's mission is the primary focus of a corporate strategy, making that
the correct response. Strengths, weaknesses, and the people of the organization will certainly be
incorporated into the overall corporate strategy, but on their own none of these items represent its
primary focus.
Diff: 2
55) Which of the following makes up the three main types of corporate strategies?
A) growth, vertical integration, horizontal integration
B) growth, retrenchment, renewal
C) renewal, retrenchment, diversification
D) growth, stability, renewal
Answer: D
Explanation: The three basic corporate strategies are termed growth, stability, and renewal,
making that the correct response. The choice indicating "growth, vertical integration, and
horizontal integration" includes only growth strategies, so it can be eliminated. Both of the
remaining choices leave out at least one major corporate strategy and include at least two forms
of renewal, making these choices redundant and incorrect.
Diff: 1
56) Growth strategies include ________.
A) diversification, concentration, integration, stabilization
B) vertical integration, horizontal integration, concentration, diversification
C) vertical integration, horizontal integration, lateral integration, horizontal concentration
D) integration, renewal, horizontal diversification, vertical diversification
Answer: B
Explanation: The choice indicating "vertical integration, horizontal integration, concentration,
and diversification" is the only choice that lists all four types of growth strategy, so it is the
correct response. The other choices fail to include all four items and substitute at least one
erroneous item.
Diff: 1
57) General Mills expanding its line so that it sells several different types of Cheerios is an
example of which of the following?
A) concentration
B) horizontal integration
C) vertical integration
D) diversification
Answer: A
Explanation: When a company focuses its attention on a single product or line of products, it is
employing concentration as a strategy, making that the correct response. Integration and
diversification are forms of growth by either expanding the control a company has over its
operations or combining with other companies–neither of which is being done by General Mills
here.
Diff: 3
58) A salad dressing company that buys a large olive grove to produce olive oil is practicing
which of the following?
A) concentration
B) forward vertical integration
C) backward vertical integration
D) horizontal integration
Answer: C
Explanation: Buying an olive grove is an example of a company trying to become its own
supplier, which is termed backward vertical integration. Forward vertical integration involves a
company seizing control of its distribution, not its suppliers, so that is not a correct response.
Horizontal integration involves combining with competitors, something that is not being done
here, so that is incorrect. Finally, "concentration" is incorrect because concentration requires a
company to expand on a product or line of products.
Diff: 3
59) A sneaker company creating its own stores where it sells only its own brand is an example of
which of the following?
A) forward vertical integration
B) backward horizontal integration
C) forward horizontal integration
D) reverse vertical integration
Answer: A
Explanation: The company is taking control of its distribution here, which is an example of
forward vertical integration, making that the correct response. "Backward horizontal integration"
is incorrect because it would entail taking control of supply, not distribution. Forward horizontal
integration would have the company combining with competitors, something that is not being
done here, making that choice incorrect. Finally, reverse vertical integration is not a recognized
strategy.
Diff: 3
60) In forward vertical integration, a company becomes its own ________, while in backward
vertical integration, the company is its own ________.
A) supplier; distributor
B) supplier; customer
C) distributor; monitor
D) distributor; supplier
Answer: D
Explanation: Forward vertical integration involves a company taking control of distribution,
while in backward vertical integration, a company takes control of its suppliers. This makes the
choice indicating "distributor; supplier" the correct response and eliminates all other responses.
Diff: 2
AACSB: Analytical thinking
61) Two movie studios combining to form one larger studio is an example of which of the
following?
A) forward vertical integration
B) horizontal integration
D) diversification
Answer: B
Explanation: Each movie studio is combining with a competitor, a clear example of horizontal
integration, making that the correct response. Since neither company is taking control of supply
or distribution, both forms of vertical integration can be eliminated as correct responses.
Horizontal integration differs from diversification in that in diversification the company doesn't
combine with competitors but rather makes purchases of supporting industries. Clearly, the
studios are combining with competitors here, making "horizontal integration" correct and
"diversification" incorrect.
Diff: 2
62) When Google purchased YouTube, a company that featured different, but related products,
Google was engaging in which of the following?
A) concentration
B) forward vertical integration
D) diversification
Answer: D
Explanation: Google was clearly not focusing on existing products, taking control of distribution
or supply, so those choices can be ruled out as correct responses. What Google was doing was
buying a company that it can use to complement or support its existing products. YouTube
makes Google a more diversified product, so the purchase is an example of diversification,
making that the correct response.
Diff: 2
63) Two companies that both sell fine timepieces combine. What are they doing?
A) diversifying, because they both sell the same products
B) integrating vertically, because they both sell the same products
C) integrating vertically in a backward direction, because they are sharing distribution
D) integrating horizontally, because they both sell similar products
Answer: D
Explanation: The merger has nothing to do with controlling supply or distribution, so both
vertical integration and backward vertical integration can be eliminated as correct responses.
Diversification would require one of the companies to purchase an unrelated company that
somehow supports or complements its business, but both companies sell the exact same
products, so diversification is not occurring. Instead, the merging of two companies that have the
same product is an example of horizontal integration, making that the correct response.
Diff: 3
64) A company whose goal is to retain its ideal size and market share is employing which kind of
strategy?
A) noncorporate
B) growth
C) renewal
D) stability
Answer: D
Explanation: A corporate strategy that does not explicitly seek growth is termed a stability
strategy, making "stability" the correct response and "growth" incorrect. A renewal strategy
would require the company to be in some kind of trouble, so that is not the right answer here.
The remaining choice is also not correct because stability clearly is a corporate, not a
noncorporate, strategy.
Diff: 2
65) Troubled companies seek ________ to address serious problems.
A) competitive strategies
B) corporate strategies
C) vertical and horizontal strategies
D) renewal strategies
Answer: D
Explanation: The strategies that specialize in fixing troubled organizations are termed renewal
strategies, making that the correct response. Competitive, corporate, vertical, and horizontal
strategies do not specialize in troubled organizations, so they are incorrect responses.
Diff: 2
66) To address limited, short-term problems, a company is most likely to employ a ________
strategy.
A) retrenchment
B) turnaround
C) doomsday
D) self-critical
Answer: A
Explanation: When the problems of a troubled organization are limited, a retrenchment strategy
is typically employed, which helps cut costs and stabilize the company so it can compete
successfully, making "retrenchment" the correct response. When problems are more drastic, a
turnaround strategy is employed. Doomsday and self-critical approaches are not recognized
renewal strategies, so these choices are incorrect.
Diff: 2
67) A company that is on the verge of collapse or bankruptcy might employ this strategy.
A) retrenchment
B) incremental improvement
C) turnaround
D) hunker down
Answer: C
Explanation: When a company finds itself in truly dire conditions, it goes beyond incremental
improvement, "hunkering" down to try to wait out its troubles, or retrenchment. Instead, it
employs a turnaround strategy, making that the correct response. A turnaround strategy is a full-
fledged reorganization of the entire corporation, making it the most serious remedy for corporate
woes.
Diff: 2
68) Remedies that all renewal strategies employ include which of the following?
A) hiring efficiency experts
B) new ad campaigns
C) emulating competitors
D) cutting costs
Answer: D
Explanation: New ad campaigns, efficiency experts, or studying the competition are all possible,
but not essential, elements of a renewal strategy. The only recognized essential element of a
renewal strategy is to cut costs, making that the correct response.
Diff: 2
69) The ________ strategy occupies the level below the corporate strategy.
A) business unit
B) competitive
C) functional
D) performance
Answer: B
Explanation: On an organizational strategies hierarchy chart similar to what is shown in the
chapter reading, the top of the hierarchy is occupied by corporate strategies, the second level by
competitive strategies, and the third level by functional strategies. This makes "competitive" the
correct response and eliminates "functional." "Business unit" and "performance" do not identify
recognized corporate strategies, so they are incorrect responses for this question.
Diff: 1
70) A diversified corporation is likely to have ________.

A) multiple competitive strategies
B) a single competitive strategy
C) no more than two competitive strategies
D) thousands of competitive strategies
Answer: A
Explanation: A single competitive strategy might exist for a small company that has only one
line of business. A large, diversified organization will consist of multiple businesses, so it will
have multiple competitive strategies, making that the correct response and ruling out the choices
indicating a single or no more than two competitive strategies. It is unlikely that an organization
would have thousands of different lines of business, so it would be equally unlikely to have
thousands of competitive strategies, ruling out that choice.
Diff: 2
71) The thing that makes your product special is known as your ________.
A) assets
B) destruction device
C) competitive advantage
D) core device
Answer: C
Explanation: A competitive advantage is something that one organization has that other
organizations cannot offer. A competitive advantage can be a product, service, or some other
quality that sets the organization apart. A company may use its assets or strengths to develop a
competitive advantage, but weapons or strengths themselves do not constitute the advantage.
"Destruction device" and "core device" can be ruled out because they are not recognized terms.
Diff: 2
72) Competitive advantages for a high-prestige, premium coffee franchise like Starbucks are
likely to include all of the following EXCEPT ________.
A) high quality
B) lowest prices
C) well-trained employees
D) pleasant venues
Answer: B
Explanation: Starbuck's as a premium alternative in the marketplace may offer high-quality
coffee, pleasant store fronts, and well-trained employees. However, as a high-prestige choice, the
least likely thing for Starbucks to offer would be lowest prices, making that the correct response.
Low prices might actually harm the high-prestige image that Starbucks tries to project. Note that
for some other, nonpremium company, low prices may indeed comprise a competitive
advantage.
Diff: 3
73) A cost leadership competitive strategy focuses on which of the following?

A) efficiency
B) innovation
C) elegant design
D) luxury
Answer: A
Explanation: A company with a cost leadership strategy is the pacesetter for prices in its
competitive market. In order to get the lowest prices, a company typically will eschew elegant
design, innovative products, and luxury in favor of efficiency. This makes "efficiency" the
correct response.
Diff: 2
74) Which of the following would you expect to find in a clothing store that follows a cost
leadership strategy?
A) only the finest, most expensive materials
B) pampered, personalized service
C) state-of-the-art design
D) basic, no frills, practical items
Answer: D
Explanation: A company that uses a cost leadership strategy would tend to forego expensive
materials, specialized service, and high-tech design and instead focus on practicality. This makes
the choice indicating basic, no frills, practical items the correct response, as products for a cost
leadership company would most likely be of the "no frills" category.
Diff: 2
75) A company with a differentiation strategy focuses on making its products or services
________.
A) unique and special
B) similar to its competitors
C) familiar
D) affordable
Answer: A
Explanation: The key to a differentiation strategy is for the company to somehow make itself or
its products distinct from all of its competitors. This distinction may reside in a product, service,
or brand image that sets the company apart from others in the market. These factors make
"unique and special" the correct response. Being familiar, similar to competitors, or affordable
would have little value to a company that uses a differentiation strategy as none of these qualities
makes its products different or distinguished.
Diff: 2
77) A differentiation strategy ________.

A) usually focuses on price
B) must focus on price
C) can focus on a brand image
D) can focus on value, but not service
Answer: C
Explanation: A company with a differentiation strategy tries to make its products and services
distinct and different, so price would not typically be part of the approach. Service can function
as something that differentiates the company, so the choice indicating "focus on value, but not
service" cannot be a correct response. Surprisingly, brand image can be the determining factor
for a differentiation strategy. Though hard to establish, once it exists, a unique and special brand
name can distinguish a company from all of its competitors.
Diff: 2
78) A company that looks for a niche in the market is following which strategy?
A) cost leadership
B) differentiation
C) focus
D) turnaround
Answer: C
Explanation: The key to a focus strategy is for a company not to try to appeal to a broad market,
but rather to find a narrow niche in the market and serve it with something extraordinary and
special. This makes "focus" the correct response and eliminates "differentiation" and "cost
leadership" as possible correct responses because both try to appeal to broad audiences. A
turnaround strategy is a corporate rather than a competitive strategy, so that choice is not correct.
Diff: 2
79) Which of the following describes a company that is following a focus strategy?
A) a software company that makes a wide variety of games and financial products
B) a software company that makes games for a wide audience
C) a software company that makes financial products for accountants, consumers, and businesses
D) a software company that makes financial products for accountants only
Answer: D
Explanation: The correct answer for this question is the choice that describes a product that
serves the narrowest and most specialized audience. The two choices regarding a wide variety of
games and a wide audience identify broad audiences, so they are incorrect. The choice regarding
making financial products for accountants among others and the choice regarding making
financial products for accountants only refer to making only financial products, whereas the
company serving only accountants serves a more narrow market segment, so it is the correct
response.
Diff: 3
80) According to Michael Porter, a company with good products that has no clear competitive
advantage is said to be ________.
A) perfectly positioned
B) stuck in the middle
C) in the wheelhouse
D) outside of the box
Answer: B
Explanation: Porter's phrase "stuck in the middle" describes a company that has no clear edge
over its competitors, so "stuck in the middle" is the correct response for this question. A
company may be efficient, innovative, and produce high-quality products, but if it cannot
establish some kind of significant advantage over its rivals, it will remain "stuck."
Diff: 2

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Fundamentals of Management, 10e, Global Edition (Robbins)

Chapter 5 Foundations of Planning

1) Which of the following is NOT a function of planning?

2) Planning is concerned with ________.

5) In formal planning, ________.

6) Which of the following is NOT a reason for managers to plan?

8) Planning gives organizations a way to deal with change that ________.

11) Managers who fail to plan may ________.

12) Which of the following is a frequently cited criticism of formal planning?

18) Formal planning typically leads to which of the following?

21) At some point, all managers create formal plans.

22) Planning provides direction to managers and nonmanagers alike.

23) A key function of planning is to create goals.

24) Informal planning typically works better in large organizations.

26) Planning rarely improves teamwork and cooperation among employees.

29) Formal planning can enhance creativity in an organization.

32) A major strength of formal planning is that it gives an organization rigidity.

Answer: (any two of the following)

42) A mission statement does NOT include which of the following?

45) Which term refers to an organization's capital, workers, and patents?

46) An organization's resources identify ________.

49) SWOT analysis identifies and analyzes an organization's ________.

54) A corporate strategy focuses primarily on ________.

70) A diversified corporation is likely to have ________.

73) A cost leadership competitive strategy focuses on which of the following?

77) A differentiation strategy ________.

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